CHICAGO - Outcome Health and its former executives, Rishi Shah and Shradha Agarwal, were shining stars in Chicago's tech scene.
There were plans to put the company's name on a skyscraper. A fund co-founded by J.B. Pritzker and units of Goldman Sachs and Google made investments in the company. Shah was the youngest newcomer to the Forbes 400 list of the richest Americans in 2017, ranked No. 206 with a net worth of $3.6 billion.
Now, the former CEO and the former president, along with two other executives, face criminal charges for their alleged roles in a nearly $1 billion fraud scheme at the company, which installs screens and tablets in doctor's offices and waiting rooms that run pharmaceutical ads and educational content.
A criminal indictment unsealed Monday in U.S. District Court charges the four with a combined 26 counts of fraud. The most serious charges carry up to 30 years in prison if convicted.
The charges allege the former executives ran a massive fraud scheme that brought in $487.5 million in financing, a $110 million loan and a $375 million loan, amounting to nearly $1 billion. The indictment also alleges the executives lied to clients and billed them millions of dollars for ads that never ran.
Also charged Monday was Brad Purdy, who held various roles including chief financial officer and chief operating officer until he left Outcome Health in early 2018. Criminal charges were filed last week against the fourth former executive, Ashik Desai, and two of his subordinates.
In separate statements Monday, attorneys representing Agarwal, Shah and Purdy said their clients denied the charges. An attorney representing Desai declined to comment.
Outcome Health was founded in 2006 as ContextMedia, when Shah, now 33, and Agarwal, now 34, were students at Northwestern University. Pharmaceutical companies pay Outcome Health to run the ads and other content on the screens.
The company became a local success story, and Shah and Agarwal mentored other Chicago entrepreneurs and invested in startups. Outcome gained widespread attention in 2017 when it secured funding from big-name investors and rose to a valuation of about $5.5 billion, a number unmatched among Chicago tech companies.
Shah made the Forbes 400 list as a 31-year-old that same year. It also, according to the indictment, is when the alleged yearslong scheme began to unravel.
Between about 2011 and 2017, Shah, Agarwal, Purdy and Desai allegedly lied to clients; falsely inflated engagement metrics; inflated revenue on Outcome's financial statements; and used those inflated statements to obtain the loans and financing, according to the indictment.
In October 2017, The Wall Street Journal reported that some of the company's employees provided inflated data to pharmaceutical companies. The Journal said its review found nothing to implicate top executives' involvement in allegedly misleading advertisers.
The indictment unsealed Monday, however, alleges that Shah, Agarwal, Purdy and Desai concealed the scheme by ignoring whistleblowers who raised concerns about the fraud and hiding information from auditors, among other allegations.
The indictment details an example from 2015, when an analyst allegedly raised concerns to Agarwal over Outcome's practice of selling advertising inventory it did not have.
"Agarwal responded by saying that Outcome threw 'smoke bombs' (so) that others could not see what was happening behind the smoke, and that everything would be fixed by the time the smoke cleared," the indictment states.
Christina Egan, an attorney representing Agarwal, issued a statement denying the allegations.
"To be clear, Shradha never committed fraud and never participated in any conspiracy," Egan said. "To the contrary, Shradha was committed to transparency and integrity at Outcome Health. She will fight to protect her good name in court."
An attorney representing Shah, William Burck, also issued a statement denying the allegations.
"Mr. Shah did not commit these offenses and denies the Government's charges against him. He is being scapegoated for the wrongdoing of others who have cut deals with the Government to reduce their own exposure," Burck said in the statement. "Mr. Shah will plead not guilty to these charges because he is, in fact, not guilty of any of them. He looks forward to his day in court and the opportunity to clear his name."
Theodore Poulos, an attorney representing Purdy, 30, said in a statement that the charges against Purdy "are false and misguided."
Separately, the Securities and Exchange Commission on Monday added Shah, Agarwal and Purdy to a civil complaint filed last week that charged Desai with fraud in raising the roughly $487 million in financing.
The SEC seeks the return of allegedly ill-gotten gains, plus interest and penalties. The criminal indictment seeks the forfeiture of any property and money derived from proceeds traceable to the alleged offenses.
As of Monday afternoon, Shah remained a board member of the Chicagoland Entrepreneurial Center, the parent of Chicago's marquee tech hub, 1871, which was co-founded by Pritzker in 2012.
When Desai, 26, was charged with felony wire fraud earlier this month, the charges were filed in a criminal information, a charging document that in a felony case typically indicates that a defendant has waived indictment and has agreed to plead guilty.
Two employees who worked under Desai, Kathryn Choi and Oliver Han, also were charged earlier this month with felony conspiracy to commit wire fraud in a criminal information. Court appearances for Desai, Choi and Han are scheduled for next week.
The new charges follow a tumultuous couple of years for the company.
Soon after The Wall Street Journal's report in 2017, units of Goldman Sachs and Google and the fund co-founded by Pritzker sued Outcome, Shah and Agarwal, alleging the company misled advertisers and investors about the company's performance.
There was additional fallout. Outcome offered employee buyouts and called off plans to move to a huge new Chicago headquarters. Hospitals that had installed the screens backed away from the company.
Outcome settled allegations of fraud leveled by its investors in January 2018, and Shah and Agarwal stepped down from daily operations. Six months later, they resigned from their board positions. They no longer have any stake in the company.
Last month in a settlement with the Justice Department, Outcome agreed to pay $70 million to pharmaceutical clients victimized by the alleged scheme. Outcome's current CEO Matt McNally said at the time that Outcome was "thrilled to resolve this matter."
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