Indian-American entrepreneur Rishi Shah, a co-founder and former CEO of Outcome, was sentenced on June 26 to seven years and six months in prison for his role in a fraud scheme that targeted the company’s clients, lenders, and investors and involved approximately $1 billion in fraudulently obtained funds.

According to reports, the fraud scheme hit major investors like Goldman Sachs Group Inc., Google parent Alphabet Inc., and Illinois Governor JB Pritzker's venture capital firm.

Apart from Shah, Shradha Agarwal, a co-founder and former president of Outcome Health (Outcome), a Chicago-based health technology start-up company, was sentenced to three years in a half-way house.

Brad Purdy, 35, the former chief operating officer and chief financial officer of Outcome, was also sentenced to two years and three months in prison.

According to court documents and evidence presented at trial, Outcome, which was founded in 2006 and known as Context Media prior to January 2017, installed television screens and tablets in doctors’ offices across the United States and then sold advertising space on those devices to clients, most of which were pharmaceutical companies, read a statement issued by US Department of Justice.

Shah, Agarwal, and Purdy sold advertising inventory the company did not have to Outcome’s clients and then under-delivered on its advertising campaigns.

Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full.

Shah, Agarwal, and Purdy lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients’ contracts.

Purdy and others at Outcome also inflated metrics that purported to show how frequently patients engaged with Outcome’s tablets installed in doctors’ offices.

According to the trial evidence, the scheme targeting Outcome’s clients began in 2011 and lasted until 2017, and resulted in at least $45 million of overbilled advertising services.

Shah, Agarwal, and Purdy also defrauded Outcome’s lenders and investors. The under-delivery to Outcome’s advertising clients resulted in a material overstatement of Outcome’s revenue for the years 2015 and 2016.

The company’s outside auditor signed off on the 2015 and 2016 revenue numbers because Purdy caused others to fabricate data to conceal the under-deliveries from the auditor.

Shah, Agarwal, and Purdy then used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017.

The $110 million debt financing resulted in a $30.2 million dividend to Shah and a $7.5 million dividend to Agarwal, and the $487.5 million in equity financing resulted in a $225 million dividend that benefited Shah and Agarwal.

A federal jury convicted Shah, Agarwal, and Purdy in April 2023. Shah was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud, and two counts of money laundering.

Agarwal was convicted of five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud. Purdy was convicted of five counts of mail fraud, five counts of wire fraud, two counts of bank fraud, and one count of false statements to a financial institution.

Three other former Outcome employees pleaded guilty prior to trial. Ashik Desai, the former chief growth officer, pleaded guilty to one count of wire fraud.

Kathryn Choi, a former senior analyst, and Oliver Han, a former analyst, both pleaded guilty to conspiracy to commit wire fraud.

Desai will be sentenced on Sept. 20. Choi and Han will be sentenced on Oct. 4 and Oct. 11, respectively.

“Outcome’s former executives deceived their clients, their auditor, their lenders, and their investors for years,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business, whether that company is a technology start-up or a well-established corporation. Lying about your revenue to obtain customers or financing is fraud, plain and simple. The Criminal Division is committing to holding companies and their executives accountable for their misconduct.”