Indian-American Man’s Rs 8,300 Crore Fraud Scheme Shakes Top US Investors

The truth began to unravel in 2017 when a media investigation exposed the fraudulent activities.

Rishi Shah, an Indian-American businessman and former billionaire cofounder of Outcome Health, has been sentenced to seven and a half years in prison by a US court. The case involves a Rs 8,300 crore ($1 billion) fraud scheme that affected major investors like Goldman Sachs Group Inc., Google parent Alphabet Inc., and Illinois Governor JB Pritzker’s venture capital firm. US District Judge Thomas Durkin delivered the verdict, concluding one of the largest corporate fraud cases in recent history.

According to a Bloomberg report, Outcome Health was conceived by Mr. Shah during his university days. Initially called Context Media Health, the company was founded in 2006 with the aim of revolutionizing medical advertising by installing televisions in doctors’ offices to show health ads targeted at patients. Mr. Shah was joined by his co-founder Shradha Agrawal, and the company saw rapid growth in valuation, aiming to bridge the communication gap between patients and healthcare providers through innovative ad placements.

By the mid-2010s, Outcome Health had become a significant player in the tech and healthcare investment sectors. The idea of integrating advanced technology into traditional healthcare marketing attracted high-profile investors. During its rapid rise, Outcome secured substantial funds and clients, making Mr. Shah a rising star in Chicago’s corporate scene.

Lies and Deceit

However, behind the success, Outcome Health was built on deceit. Prosecutors revealed that Mr. Shah, 38, along with Ms. Agrawal and another defendant, chief financial officer Brad Purdy, engaged in a massive fraud scheme against investors, clients, and lenders by misrepresenting the company’s operational and financial health. The core of the fraud involved selling more advertising inventory than Outcome Health could deliver and fabricating data to cover up the shortfall.

The company misled pharmaceutical giant Novo Nordisk A/S and other clients about its network size and ad reach. False information and fraudulent data created an illusion of exponential revenue growth, attracting further investment and financial support.

Mr. Shah enjoyed a lavish lifestyle funded by the inflated ad sales and investor financing. Reports highlighted his extravagant spending, including exotic trips on private jets and yachts, and the purchase of a $10 million home. In 2016, Mr. Shah’s net worth was estimated at over $4 billion, inflated by deceptive accounting practices.

The facade began to crumble in 2017 when a Wall Street Journal investigation exposed the fraudulent activities.

Subsequently, a group of investors, including Goldman Sachs, Alphabet, and Governor Pritzker’s firm, filed lawsuits against Outcome Health, accusing the company of fraud in its $487.5 million fundraising earlier that year. The fundraiser had resulted in a $225 million dividend for Mr. Shah and Ms. Agrawal but left investors with a grossly overvalued stake in a company on the brink of collapse.

Legal Consequences

Mr. Shah was indicted on more than a dozen counts of fraud and money laundering and was convicted on these charges in April 2023. He was joined by Ms. Agrawal and Mr. Purdy. While prosecutors sought 15 years for Mr. Shah and 10 years for his co-conspirators, District Judge Durkin’s final rulings varied, including a three-year sentence for Ms. Agrawal in a halfway house and a two-year and three-month prison sentence for Mr. Purdy. In addition to the criminal case, the US Securities and Exchange Commission has filed a civil action against Mr. Shah, Ms. Agrawal, Mr. Purdy, and former chief growth officer Ashik Desai. Mr. Desai and other Outcome employees had already pleaded guilty before the jury trial.

Public Apology

Mr. Shah, in poor health, expressed remorse and accepted responsibility at his sentencing. In a prepared statement, he acknowledged his failure to ensure proper management of Outcome Health’s aggressive expansion and creating a corporate culture that encouraged deceptive practices. He admitted he was “ashamed and embarrassed” by the misconduct that led to the company’s downfall.

“The culture I created allowed my team to think it was acceptable to create false data in response to a client question,” he confessed.