Federal prosecutors contend the overbilling of customers, such as AbbVie and Pfizer, inflated Outcome Health’s financials, which the company then used to raise more than $800 million in debt and venture-capital investment in 2016 and 2017. When allegations of fraud began to surface, it led to a swift downfall of what was one of Chicago’s most high-profile startups.
Desai pleaded guilty to fraud and agreed to testify in exchange for prosecutors recommending he receive no more than 10 years in prison, or about half the maximum term if he was convicted.
The trial is now in its sixth week, nearing the halfway point. There were no smoking guns with Desai receiving explicit instructions from his superiors about committing fraud, although Desai said he had discussed various aspects verbally with Shah and Purdy.
Defense attorneys want to place the blame squarely on Desai, who calmly answered questions during more than a week of cross-examination, occasionally pushing back and mostly sticking to his story.
Shah’s attorney, John Hueston, portrayed his client as a young CEO who was working to fix problems in 2017, when fraud allegations surfaced. “What are we left with? This period of 2014 to 2016, the Desai years . . . where we have admitted lies and fraud. He said there were no documents telling me to lie or do something wrong.”
He said Desai “tried to make a case that’s going to let him walk out this door and avoid a 20-year-plus sentence.”
Not a Modern Healthcare subscriber? Sign up today.
Agarwal’s attorneys, meanwhile, chipped away at one of the key pieces of evidence so far, an e-mail in which she wrote: “any time we’re having a back-and-forth discussion on what data to use, let’s take the (sales) person off the (e-mail) chain. I’ve noticed their confidence level in our data change dramatically when presenting to clients if they believe it’s accurate vs. made-up.”
“They took the statement out of context,” Patrick Blegen, an attorney for Desai, said of prosecutors. “Desai told you nobody was telling me to lie or make up data, just to take people off the chain.”
Agarwal's attorneys attempted to show examples of how Outcome salespeople had gotten confused about survey data and how she arrived at legitimate calculations.
Purdy's lead attorney, Ted Poulos, also took aim at a key piece of government evidence against Purdy, an email from an analyst who worked for Desai regarding how to hide shortfalls in advertising delivery from auditors by falsifying inventories. Poulos said there was no evidence that Purdy responded to the e-mail, forwarded to him by Desai, because he was on vacation.
Desai maintained that he also spoke with Purdy about it, but Poulos produced phone records from Desai and Purdy that didn’t show a call between them at the time in question.
“Phone records don’t lie: People do,” Poulos said. “If anything is absolutely clear, it’s that Ashik Desai is an inveterate liar.”
Although Desai claimed that overbilling clients for inventory was a practice that predated his arrival at the company, he admitted to having decided on his own to falsify key reports to customers on the performance of their advertising and lying about it to Purdy. He admitted evading questions when others began to make allegations that he was changing data reported to clients.
Prosecutors acknowledged the challenges of relying on Desai, who joined the company as an intern, but they told jurors “those lies do not mean he somehow pulled this all off on his own.
“The defense claims Desai was a lone-wolf corporate fraudster, a boy genius who immediately and singlehandedly tricked some of the most sophisticated companies in the world and then hid it all from Outcome’s owners for years. You don’t need to rely on Desai’s testimony alone. Read the emails.”
This story first appeared in Crain's Chicago Business.
