The investigation that led to the downfall of Outcome Health started with a single email after the company made headlines with a blockbuster deal that valued it at more than $5 billion.
The company, which was previously called Context Media, raised nearly a half-billion dollars from an investor group that included Goldman Sachs, Democratic Illinois Gov. J.B. Pritzker’s former venture fund, Google and Laurene Powell Jobs. The funding elevated the profile of the company and its young founders, putting a target on their backs.
“I had seen an article about it,” David Ma, a former analyst at the company, testified Monday before the U.S. District Court for the Northern District of Illinois in Chicago. “In my opinion, they didn’t deserve the funding they’d received because it was all built on a lie."
On the day the deal was announced in May 2017, he contacted a Wall Street Journal reporter who had written about the funding. “If you are interested, I have some additional information on Outcome Health that I’d be willing to share (the-less-than-rosy-stuff, if you’re open to hearing it),” Ma’s email said.
About five months later, the paper published a story that the company had overbilled some of the pharmaceutical companies that bought ads on TVs and tablet computers running in doctors’ offices. Two years later, co-founders Rishi Shah and Shradha Agarwal, along with former Chief Operating Officer Brad Purdy, were charged with multiple counts of fraud.
Ma, who was in graduate school at Stanford University when he blew the whistle, joined Outcome Health in 2014 after a brief stint at consulting firm Boston Consulting Group. Like Shah, Agarwal and Purdy, he was a young Northwestern University graduate.
He is a key government witness in the third week of a trial that’s expected to last three months. Ma has calmly and methodically detailed for jurors how he was intimately involved with the actions at Outcome Health that resulted in the charges that it committed fraud against customers, lenders and investors.
Defense attorneys were quick to point out that Ma received immunity from prosecution and has applied to receive a cut of any monetary sanctions against the founders collected by the Securities and Exchange Commission under its whistleblower program. In addition to the criminal charges, Shah, Agarwal and Purdy face a civil suit by the SEC. They deny the allegations.
"You were looking to cash in?" asked Purdy's lead attorney, Ted Poulos.
Ma, who first took the stand last week, responded calmly: "I don’t think that’s true."
He has described in detail how he helped inflate numbers and provide inaccurate lists of doctors’ offices that resulted in customers being billed improperly. A central theme of the fraud charges is that Outcome Health executives had for years knowingly sold more television screens than it had to pharmaceutical companies such as AbbVie and Pfizer.
“My job was to use my skills in analytics and numbers to deceive, lie and withhold information from customers for the company’s gain,” Ma said.
Although it took years for the first allegations of widespread fraud to surface publicly, there were earlier signs of trouble internally, Ma testified. He described how one customer demanded an audit after it was given a list of addresses where ads were supposed to be playing. But its salespeople showed up to discover competitors’ ads running.
In a message to a colleague, Ma said, “I live in constant fear of an audit.”
Ma testified that inventory was inflated beyond already-optimistic growth projections and performance measurements were made up — and that executives knew it. He spoke of a conversation with Agarwal, addressing the topic of overselling inventory. Ma said she responded: "'We throw smoke bombs' to clean up our operations later."
The testimony echoed the prosecution’s opening statement, in which it played a video of Shah describing in an interview how the company got started, by convincing doctors’ offices and advertisers to sign up for a product that didn’t yet exist. The defense says the fraud was the work of a rogue employee, Ashik Desai, who has pleaded guilty to wire fraud and agreed to cooperate with prosecutors.