Former Outcome Health Execs Charged with $487 Million Fraud
On November 25, 2019, the Securities and Exchange Commission (SEC) charged four former executives of the healthcare advertising company Outcome Health with securities fraud for allegedly misrepresenting how well the company was doing in order to raise millions of dollars from investors, including Alphabet Inc., the parent group of Google. CEO Rishi Shah, President Shradha Agarwal, CFO Brad Purdy, and Executive VP Ashik Desai were all charged in the alleged scheme after a two-year investigation by the Department of Justice, according to a November 25, 2019 article in the Wall Street Journal.
Outcome Health places tablets in doctors’ offices, at no charge to the doctors. These tablets provide educational information to patients and run ads for drugs. Pharmaceutical companies, seeking to target doctors, patients, and practice areas directly, pay Outcome Health for this service. Outcome Health claims to create matches between target doctors and target drugs, but in practice, that has not always occurred, according to an October 13, 2017 exposé in the Wall Street Journal, which raised serious questions about the company. According to the Wall Street Journal, from at least 2014 through 2016, Outcome Health sometimes charged pharmaceutical companies for more screens than it had installed—sometimes twice as many.
The alleged fraud did not stop there, however. Outcome Health employees and executives also allegedly provided doctored screenshots to advertisers when requested, changing timestamps, adding physician identification numbers, and even adding Executive VP Ashik Desai’s electronic signature to make the ads look genuine. When it came time to gauge how many consumers were engaging with their ads, the employees allegedly inflated survey responses by artificially increasing the number of survey participants in reports from the health information company QuintilesIMS.
By allegedly charging for services they didn’t provide and altering studies to make their ads seem more effective than were, Outcome Health’s executives were able to artificially inflate the value of the company, misleading investors in the process. According to the SEC’s press release:
Outcome Health is alleged to have overstated its revenue in its audited financial statements for 2015 and 2016 by at least $14.3 million and $30 million, respectively, while raising approximately $487 million from a private offering to investors who relied on the false financial statements and false representations about the company’s growth.
In addition to the SEC’s charges of civil securities fraud, the U.S. Attorney’s Office for the Northern District of Illinois, in conjunction with the Fraud Section of the Department of Justice, criminally charged the four former executives, including CEO Rishi Shah, with mail and wire fraud, as well as bank fraud. Rishi Shah also faces two counts of money laundering.
If you invested in Outcome Health and want to know your options for recovery, contact us for a free consultation. As a potential victim of an alleged financial crime, it is important to have an experienced securities attorney in your corner. Call (877) 238-4175, email firstname.lastname@example.org, or visit www.stopbrokerfraud.com to contact the securities attorneys of Fitapelli Kurta.