Four former executives and two former employees of Outcome Health (Outcome), a Chicago-based health technology start-up company founded in 2006, were charged for their alleged roles in a fraud scheme that targeted the company’s clients, lenders and investors, and involved approximately $1 billion in fraudulently obtained funds.

Charged in a superseding indictment filed in the Northern District of Illinois and unsealed today are:

Rishi Shah, 33, of Chicago, Illinois, the co-founder and CEO of Outcome Health, which was known as ContextMedia prior to January 2017;

Shradha Agarwal, 34, of Chicago, the president of Outcome Health, who was branded as a co-founder;

Brad Purdy, 30, of San Francisco, California, the chief operating officer and chief financial officer; and

Ashik Desai, 26, of Philadelphia, Pennsylvania, the executive vice president of business operations and, more recently, the chief growth officer of Outcome.

Charged in an information filed in the same district are:

Kathryn Choi, 29, of New York, New York, a senior analyst; and

Oliver Han, 29, of Chicago, an analyst.

An initial appearance and arraignment for Shah, Agarwal and Purdy in federal court in Chicago have not yet been scheduled. An initial appearance and arraignment for Desai are set for Dec. 3, 2019, at 10:00 a.m., before U.S. District Judge Thomas M. Durkin.

An initial appearance and arraignment for Choi and Han are set for Dec. 5, 2019, at 1:30 p.m., before U.S. Magistrate Judge Jeffrey Gilbert.

“Outcome’s former executives and employees allegedly deceived lenders, investors, and their own auditors by falsely representing revenue for additional profit,” said Principal Deputy Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division. “The charges announced today demonstrate that lies and deception cannot serve as the basis for any company, including start-up companies, to falsely grow revenue for additional capital and private gain.”

“The deception alleged to have been committed by the defendants tricked clients into paying for advertising it failed to deliver and served to falsely inflate the value of Outcome Health,” said Assistant U.S. Attorney Brian Hayes, Chief of the Criminal Division for the Northern District of Illinois. “Our office will continue to investigate and hold accountable those who perpetrate fraud schemes.”

“These charges demonstrate that the FBI and its partners will hold businesses accountable for their misconduct,” said Deputy Special Agent in Charge Larry L. Lapp of the FBI’s Chicago Field Office.

“The defendants were charged with allegedly over-inflating the company’s revenue figures in order to fraudulently obtain loans from banks,” said Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation’s Office of Inspector General (FDIC-OIG). “This scheme was orchestrated by former leaders of the organization who personally benefitted from hundreds of millions of dollars. We are committed to working with our law enforcement partners to investigate individuals involved in the crime and to preserve the integrity of the banking system.”

As alleged in the superseding indictment and information, from 2011 to 2017, the former executives and employees of Outcome, a digital provider of medical information and advertising in doctors’ offices, sold tens of millions of dollars of advertising inventory that did not exist. This allegedly resulted in inflated financial statements that the former executives used to raise nearly $1 billion in debt and equity financing in 2016 and 2017. Shah, Agarwal and Purdy are each charged with various counts of mail fraud, wire fraud and bank fraud. Purdy is also charged with one count of false statements to a financial institution, and Shah is also charged with two counts of transactions in criminal proceeds. Desai is charged with one count of wire fraud. Choi and Han are each charged with one count of conspiracy to commit wire fraud.

According to the allegations, the former executives and employees perpetrated a fraudulent scheme by selling clients—most of whom were pharmaceutical companies—advertising inventory the company did not have and then under-delivering on its advertising campaigns. Despite these under-deliveries, the company allegedly still invoiced its clients as if it had delivered in full. To conceal the under-deliveries, the former executives and employees allegedly falsified affidavits and proofs of performance to make it appear the company was delivering advertising content to the number of screens in its clients’ contracts, and also inflated patient engagement metrics regarding how frequently patients engaged with Outcome’s tablets. Furthermore, Desai allegedly altered a number of studies presented to clients to make it appear that the campaigns were more effective than they actually were.

The charging documents also allege that the under-delivery resulted in a material overstatement of Outcome’s revenue for the years 2015 and 2016. The company’s outside auditor signed off on the 2015 and 2016 revenue numbers because Purdy, Desai, Choi and Han allegedly fabricated data to conceal the under-deliveries from the auditor. Shah, Purdy and Agarwal then allegedly used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016 and $487.5 million in equity financing in early 2017. The $110 million debt financing allegedly resulted in a $30.2 million dividend to Shah and a $7.5 million dividend to Agarwal; the $487.5 million equity financing allegedly resulted in a $225 million dividend to Shah and Agarwal.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The FBI and FDIC-OIG are investigating the case. Assistant Chief William E. Johnston and Trial Attorney Kyle C. Hankey of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Matthew F. Madden of the Northern District of Illinois are prosecuting the case. Daniel Olinghouse of the Criminal Division’s Money Laundering and Asset Recovery Section has assisted with forfeiture matters.

The U.S. Securities and Exchange Commission provided assistance in this case.