In seeking more time for his new attorney, Bill Burck of Quinn Emanuel Urquhart & Sullivan in Washington, D.C., another of Shah’s attorneys said in a court filing that “the guidelines proposed by the government would recommend that Mr. Shah be sentenced to a term of life in prison.
“The serious nature of the offenses of which Mr. Shah was convicted require thorough preparation for sentencing, including the hiring and preparation of an expert witness.”
Shah, 37, originally was set to be sentenced Oct. 13, and Agarwal was scheduled to be sentenced Oct. 27, followed by Purdy on Nov. 3. All three dates were extended into December. The government hasn't yet responded to Shah's request for more time.
It's the latest twist in the saga of one of the largest and most high-profile fraud cases in Chicago business. And it's another sign that Shah, a wealthy tech entrepreneur, isn't willing to surrender his money or freedom without a fight. Outcome Health is one of several high-profile fraud cases to result from the bull market for tech startups, including Theranos and FTX, whose founder, Sam Bankman-Fried, was convicted last week.
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Shah, Agarwal and Purdy were senior executives at Outcome Health, a Chicago startup that charged pharmaceutical companies millions of dollars to advertise on its network of television and computer screens in doctors' offices. They overcharged the companies for ads that never ran.
The scheme was exposed by The Wall Street Journal in 2017, shortly after the company raised nearly $500 million from investors that included Goldman Sachs, a Chicago venture-capital fund founded by Gov. J.B. Pritzker, Google’s venture-capital arm and an investment fund headed by Steve Jobs’ widow, Laurene Powell Jobs.
The government charged Shah, Agarwal and Purdy with fraud for overbilling the advertisers, a move that inflated the financials that investors relied upon to value the company. Ashik Desai, a top sales executive who admitted to defrauding the advertisers, testified against the others, who were convicted in April after a 10-week trial.
Shah parted ways with his trial attorneys after he was convicted, and has sought a new trial and fought the government’s request to seize the frozen assets, which grew substantially during a surge in startup valuations while he was awaiting trial.
He has since recovered $13.4 million in assets, mostly stakes in venture-capital and private-equity funds, some of which turned out to be improperly frozen by the government because a portion of some investments was made by Outcome co-founders Shah and Agarwal before the period in which the fraud occurred.
Armed with new money, Shah hired Burck to handle his sentencing. Burck, a former White House lawyer who became highly sought-after for white-collar defense work, originally was hired to represent Shah after the indictment four years ago.
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But Burck withdrew in 2020 when U.S. District Judge Thomas Durkin declined to allow Shah and Agarwal access to $10 million that was frozen by the government, which said the money was ill-gotten gains from their crimes.
Burck and Agarwal’s original counsel, McGuireWoods, wanted $14 million for their combined defense and withdrew when the defendants couldn’t come up with the money.
After they were convicted, Shah hired a new attorney, Richard Finneran of Bryan Cave Leighton Paisner, who argued that the government had improperly frozen some assets, which prevented his client and Agarwal from hiring the lawyers they wanted, violating their Sixth Amendment rights. Durkin has yet to rule on that claim.
A key consideration in Shah’s sentencing will be amount of money that investors, customers and lenders lost, because it impacts the potential prison term he could receive. Shah’s attorneys already have argued that lenders and investors were partially repaid through a civil settlement with the founders and the merger of Outcome Health with rival PatientPoint. Those are among the questions Durkin will have to resolve when he sentences Shah.
This story first appeared in Crain's Chicago Business.