Defense attorney grills key witness in Outcome Health case

Rishi Shah’s defense attorney is painting the government’s star witness, Ashik Desai, as someone whose inexperience and ambition led him to commit fraud and sell out his former Outcome Health bosses to save his own skin.

Desai, who spent last week testifying for federal prosecutors, now is on the hot seat, being cross-examined by attorneys for Shah, Outcome Health co-founder Shradha Agarwal and former Chief Operating Officer Brad Purdy, who are on trial for fraud.

John Hueston, a former Enron prosecutor who represents Shah, has portrayed Desai as a 20-something wunderkind who went from intern to senior executive overnight, committed fraud by lying to customers and panicked when it was discovered, then cut a deal with federal prosecutors. 

Related: Star witness testifies against Outcome Health founders in fraud trial

Desai is key to the government’s effort to prove Shah, Agarwal and Purdy knowingly defrauded the drug companies that advertised on Outcome Health’s network of TV screens and tablet computers in doctors’ offices.

Like most witnesses who cut plea deals, Desai’s involvement in the alleged crime presents credibility challenges. Desai pleaded guilty to one count of fraud and agreed to testify in exchange for a recommendation by prosecutors for a maximum sentence of 10 years. 

In May 2017, Outcome Health made headlines by raising $488 million in deal that valued it at more than $5 billion, one of the highest amounts ever for a Chicago startup. Things soon began to unravel after allegations by The Wall Street Journal that the company misled customers and investors. Desai, who was named in the article, was put on administrative leave before the story broke. He spoke to the FBI for the first time a year later. 

“You could go to prison for a long time,” Hueston said, estimating the maximum sentence at about 25 years. “The only way out for you was to make a case against others.”

Desai, who received his MBA from the Wharton School of Business while waiting for the case to go to trial, challenged Hueston, saying, “No, it was to tell the truth.”

Hueston attempted to portray Desai as the ringleader of a group of analysts who inflated numbers and otherwise misled advertisers at his direction because he wanted to advance his own career rather than tell the truth to his bosses and risk disappointing them.

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Desai interned at the health care-advertising startup in the summer of 2012 and was hired full time a year later at a $90,000 salary. Within months, he was head of sales, making $200,000. Three years after he was hired, Desai was making $500,000.

At the center of the case are allegations that Outcome Health sold more screens than it had, inflating so-called list matches of doctors’ offices that pharmaceutical companies such as AbbVie wanted to advertise in, without telling its customers.

Hueston asked Desai if there were any emails from Shah explicitly telling him to inflate numbers. Desai acknowledged there were none, but he resisted the notion that he acted alone, saying he learned the business practices through interaction and observation.  

However, Desai admitted making up numbers on return-on-investment calculations sent to clients and falsifying affidavits verifying that ads had run. When Desai acknowledged altering screenshots of ads taken with his phone, rather than going to doctors’ offices, Hueston accused him of “taking shortcuts” in what became a familiar refrain during two days of cross-examination.

Hueston attempted to portray Shah as being kept in the dark about the problems by Desai. One of the challenges for prosecutors is that while Desai has described a pervasive problem of overselling and underdelivering the number of screens for advertisers, he has repeatedly said he cooked up phony numbers on the effectiveness of advertising by himself.

Attorneys for Agarwal and Purdy no doubt will continue to hammer on that point during cross-examination that is expected to last the rest of the week.

This story first appeared in Crain's Chicago Business.