The founders of Outcome Health were charged by a federal grand jury with a fraud scheme to overbill clients and deceive investors.
Rishi Shah and Shradha Agarwal are named in the 26-count complaint unsealed today, along with Brad Purdy, former chief financial officer, and a senior vice president, Ashik Desai. Federal authorities also seek forfeiture of unspecified property resulting from a multiyear scheme. Read the complaint below.
In a statement from her attorneys, Agarwal said she "never committed fraud and never participated in any conspiracy. To the contrary, Shradha was committed to transparency and integrity at Outcome Health. She will fight to protect her good name in court."
Shah's attorneys said in a statement he "did not commit these offenses and denies the government's charges against him. He is being scapegoated for the wrongdoing of others who have cut deals with the government to reduce their own exposure. Mr. Shah will plead not guilty to these charges because he is, in fact, not guilty of any of them. He looks forward to his day in court and the opportunity to clear his name."
The charges, unsealed today, are the culmination of a two-year scandal that hobbled Outcome Health, formerly called ContextMedia, one of Chicago's most high-profile startups.
Shah is charged with six counts of mail fraud, 12 counts of wire fraud and two counts each of bank fraud and money laundering. Agarwal is charged with six counts of mail fraud, nine counts of wire fraud and two counts of bank fraud. Purdy is charged with six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making a false statement to a bank. Desai is charged with one count of wire fraud.
Things began to unravel two years ago, when the Wall Street Journal first reported Outcome had to repay pharmaceutical company customers for advertising that was purchased but didn't run on the company's network of television screens in doctors' offices. Crain's first reported that a federal grand jury was investigating the case.
Shah and Agarwal were forced out of the company, which is trying to rebuild its business.
If convicted, Shah, Agarwal and Purdy could be sentenced to as many as 30 years in prison. Desai faces up to 20 years.
If they obtain convictions, federal authorities also plan to seize any property the defendants gained, particularly money that went to Jumpstart Ventures, a venture fund run by Shah, Agarwal and Purdy.
"The deception alleged to have been committed by the defendants tricked clients into paying for advertising it failed to deliver and served to falsely inflate the value of Outcome Health," said Assistant U.S. Attorney Brian Hayes said in a statement. "Our office will continue to investigate and hold accountable those who perpetrate fraud schemes."
This article originally appeared in Crain's Chicago Business