Outcome Health employees worried if company was a Ponzi scheme

A former Outcome Health employee said he heard rumblings from co-workers who were worried that the company was a Ponzi scheme before the company's public downfall began.

Jason Ketchum said rumors were circulating outside the company, too.

Catch up: Outcome Health founders fraud trial to start next week

"A job candidate asked, 'I heard there's fraud at Outcome Health. Is there fraud at Outcome Health?' " he testified today during the trial of the company's former leaders Rishi Shah, Shradha Agarwal and Brad Purdy.

Ketchum said he tried to put the potential hire at ease: "I told them about an incident that I had with a client where there was an underdelivery and it was resolved."

Outcome Health was a darling of Chicago's startup scene, growing to more than 500 employees in May 2017, when it raised nearly $500 million from investors such as Goldman Sachs, Pritzker Group Venture Capital and Google.

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A few months later, allegations surfaced publicly that Outcome Health had charged pharmaceutical companies for more advertising than it delivered and inflated the prescription results associated with those ads. Shah, Agarwal and Purdy soon left the company and were charged with fraud in 2019. They have pleaded not guilty.

Ketchum, who received immunity from federal prosecution to testify, joined the company in 2011, when it was called ContextMedia. He described for jurors how he participated in overinflating the number of TV screens the company had in doctors' offices, which is at the heart of the fraud case against his former bosses.

Defense attorneys are making the case that Shah and Agarwal were making good-faith estimates of a fast-growing network for advertising deals that were signed months in advance.

In using projections rather than actual data about its inventory, Ketchum was involved early in something that prosecutors hope to prove became standard operating procedure, as Outcome Health grew from $15 million in revenue to $130 million between 2013 and 2016 by lining up the world's largest pharmaceutical companies—including AbbVie, AstraZeneca, GlaxoSmithKline (now known as GSK)—as customers.

Ketchum said his primary job was to work with doctors' offices on getting television screens installed and providing content for them, and he wasn't involved in helping sales teams for very long after he was hired. Although Ketchum said he had qualms about misleading customers, he stayed at the company for another five years. "When I heard allegations of fraud . . . it makes you question what you did earlier," he said. "I tried to rationalize some of that behavior."

This story first appeared in Crain's Chicago Business.