Two Indian-origin executives of a Chicago-based start-up, Outcome Health, have been convicted by a federal jury in the US for running a massive corporate fraud scheme that targeted the company’s clients, lenders, and investors. After a 10-week-long trial, the jurors found Rishi Shah, the co-founder and former CEO, guilty on 19 of 22 counts, Shradha Agarwal, the co-founder and former president, guilty on 15 of 17 counts, and Brad Purdy, the former chief operating officer, guilty on 13 of 15 counts, as reported by PTI.
The defendants, Shah, Agarwal, and Purdy could potentially receive a maximum penalty of 30 years imprisonment for each count of bank fraud and 20 years imprisonment for each count of wire and mail fraud. Shah could face a maximum penalty of 10 years imprisonment for each count of money laundering. A sentencing hearing will be scheduled for them at a later date.
Outcome Health had set up electronic devices in medical offices across the US and sold advertising space on those devices to clients, most pharmaceutical companies. However, Shah, Agarwal, and Purdy sold advertising inventory that the company did not have and did not deliver the promised advertising campaigns. Despite this, they still invoiced clients as if they had delivered in full, the court found.
A spokesperson for Shah said in a statement: “Today’s verdict deeply saddens Mr Shah, and he will exhaust every avenue to overturn this result”.
According to court findings, the trio deceived clients and others to cover up the under-deliveries and make it appear as if the company had delivered the content to the number of screens in the clients’ contracts. This fraudulent activity led to the overstatement of the company’s revenue for 2015 and 2016, and investors and lenders were also defrauded.
Shah, Agarwal, and Purdy used inflated revenue figures in the company’s audited financial statements for 2015 and 2016 to secure financing. They raised USD 110 million in debt financing in April 2016, USD 375 million in debt financing in December 2016, and USD 487.5 million in equity financing in early 2017. The trio deceived investors and lenders to hide their ongoing failure to deliver advertising campaigns for clients.
Theodore Poulos, an attorney for Purdy said in a statement: “We are profoundly disappointed with the jury’s verdict in this complex and nuanced case, particularly given the plethora of evidence adduced at trial, which showed that certain critical information was intentionally withheld from Brad Purdy.”
The USD 110 million debt financing resulted in a USD 30.2 million dividend to Shah and a USD 7.5 million dividend to Agarwal. The USD 487.5 million in equity financing resulted in a USD 225 million dividend to Shah and Agarwal.
Source: PTI
