Here's how much Outcome Health's founder spent fighting fraud charges

Outcome Health co-founder Rishi Shah spent more than $6 million on defense attorneys to fight federal fraud charges, but he wanted to spend much more.

That’s why he deserves a new trial, he says in a new court filing. It’s a curious, convoluted argument that underscores how far the millionaire startup founder is going to hang onto his money and his freedom for as long as he can.

Related: Outcome Health founder still spends lavishly despite asset freeze, feds say

Here’s how it goes:

Before Shah was convicted in April on more than a dozen charges of fraud, the government froze about $31 million in assets he had received when his company raised more than a half-billion dollars from lenders and venture capitalists in 2016 and 2017.

By the time he was indicted in 2019, much of the money had been invested in his own venture-capital fund as well as other investment funds. But Shah’s attorneys showed that the government improperly froze some investments that had been made prior to the fraud but now are worth about $5 million. 

Shah, along with Outcome Health co-founder and co-defendant Shradha Agarwal, had attempted to get some of those assets unfrozen several years before trial. They claimed they didn’t have enough money for the estimated $14 million that their attorneys at the time estimated it would cost to defend them in a monthlong criminal trial.

U.S. District Judge Thomas Durkin denied their request at the time, and the assets remained frozen; Shah and Agarwal hired different attorneys.

Shah claims that not having that untainted money available then to hire the attorneys he wanted violated his Sixth Amendment right to counsel. His new attorney says the fraud charges should be dismissed or he should be granted a new trial.

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“Mr. Shah has not only spent millions on substitute counsel, but that counsel also made an unfathomable number of strategic decisions that steered Mr. Shah’s case to where it is today,” Shah’s new attorney, Richard Finneran, said in a filing this week.

“Witnesses have been examined at trial, documents have been produced and defenses have been raised (or abandoned). Whether Mr. Shah’s counsel of choice would have made the same choices is unknowable — and in any event, those bells cannot be unrung. Dismissal is, no doubt, a drastic remedy. But that is what the law requires.”

Not surprisingly, prosecutors disagree. They argue that Shah had evidence of what had been seized prior to trial, and he should have challenged it before he was convicted. They also say he had other funds available that would have allowed him to hire the firm he originally chose.

Agarwal also is seeking a dismissal or new trial on the same grounds. Her court filings indicate she spent more than $2.2 million in attorney fees. It's not clear how much money might have been improperly frozen, but she and Shah had many of the same investments.

Their requests are a long shot, and Durkin likely will rule on them before sentencing hearings, which tentatively are set for next month. Their requests are not formal appeals, but routine post-trial motions filed with the trial judge.

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Shah, Agarwal and fellow former executive Brad Purdy face up to 30 years in prison for their roles in defrauding investors, lenders and pharmaceutical companies that paid Outcome Health to advertise on its network of TVs and tablets in doctors’ offices.

The company charged those customers for advertising it did not deliver, which inflated its financials that lenders and investors relied upon. Outcome Health was valued at more than $5 billion when the fraud was exposed by The Wall Street Journal nearly six years ago. The company never fully recovered and merged two years ago with rival PatientPoint. Investors, such as Google and Goldman Sachs, testified at trial that the value of their investments has been largely written off or completely wiped out.

This story first appeared in Crain's Chicago Business.