Rishi Shah, the Indian-American co-founder of Outcome Health, has been sentenced to seven and a half years in prison by a US court for his involvement in a ₹8,300 crore ($1 billion) fraud scheme. This scandal impacted high-profile investors such as Goldman Sachs Group Inc., Alphabet Inc., and Illinois Governor JB Pritzker’s venture capital firm. US District Judge Thomas Durkin delivered the verdict, marking the conclusion of one of the most significant corporate fraud cases in recent memory.
According to Bloomberg, Shah conceived Outcome Health, originally called Context Media Health, during his university days. The company, founded in 2006, aimed to revolutionize medical advertising by installing televisions in doctors’ offices to broadcast health-related ads. Co-founder Shradha Agrawal joined Shah, and the company saw exponential growth in valuation, aiming to bridge communication gaps between patients and healthcare providers through innovative ad placements.
By the mid-2010s, Outcome Health had become a major player in the tech and healthcare sectors, attracting significant investments. The company’s integration of advanced technology with traditional healthcare marketing drew in substantial funding and clientele, propelling Shah to prominence in Chicago’s corporate world.
However, behind the scenes, Outcome Health was built on deceit. Prosecutors revealed that Shah, Agrawal, and CFO Brad Purdy perpetrated a massive fraud against investors, clients, and lenders by misrepresenting the company’s operational and financial status. The core of the fraud involved selling more advertising inventory than the company could deliver and fabricating data to mask the discrepancies.
The fraud misled clients, including pharmaceutical giant Novo Nordisk A/S, about the company’s network size and advertising reach. This false information and fraudulent data suggested explosive revenue growth, enticing further investments.
Shah indulged in a lavish lifestyle funded by inflated ad sales and investor money, including exotic trips, private jets, yachts, and purchasing a $10 million home. In 2016, his net worth was estimated at over $4 billion, inflated by deceptive accounting practices.
The fraud began to unravel in 2017 following an exposé by the Wall Street Journal. Subsequently, investors such as Goldman Sachs, Alphabet, and Governor Pritzker’s firm sued Outcome Health, alleging fraud in the company’s $487.5 million fundraising that year. This fundraiser yielded a $225 million dividend for Shah and Agrawal but left investors with a grossly overvalued stake in a collapsing company.
Shah was indicted on multiple counts of fraud and money laundering and was convicted in April 2023, alongside Agrawal and Purdy. While prosecutors sought 15 years for Shah and 10 years for his co-conspirators, Judge Durkin sentenced Agrawal to three years in a halfway house and Purdy to two years and three months in prison. Additionally, the US Securities and Exchange Commission has filed a civil action against Shah, Agrawal, Purdy, and former chief growth officer Ashik Desai, who, along with other Outcome employees, had already pleaded guilty.
At his sentencing, a remorseful Shah, in poor health, accepted responsibility for his actions. He acknowledged his failure to properly manage Outcome Health’s rapid expansion and the deceptive corporate culture he had fostered. He expressed shame and embarrassment for the misconduct that led to the company’s downfall, stating, “The culture I created permitted people on my team to think it was okay to create false data in response to a client question.”
