Ex-Billionaire Gets 7 1/2-Year Sentence for Defrauding Investors Goldman, Google

(Bloomberg) - A former jet-setting Chicago billionaire was sentenced to seven and a half years in prison for a $1 billion fraud at an advertising startup that included investors such as Goldman Sachs Group Inc., Google parent Alphabet Inc. and Illinois Governor JB Pritzker’s venture capital firm.

Rishi Shah, 38, the co-founder of Outcome Health, which provided ads on TVs in doctors’ offices, was convicted of more than a dozen fraud and money laundering charges by a federal jury last year. He and two other Outcome executives were sentenced last week in Chicago by US District Judge Thomas Durkin, the US Attorney’s Office said in a statement Monday.

Prosecutors had sought a 15-year sentence, describing Shah as the “driving force behind a dizzying array of lies to clients, lenders, investors and an audit firm.” He and the other executives were accused of lying to pharmaceutical company clients and taking money for ads that were never placed, and then misrepresenting the health of the company to investors.

Before the fraud was revealed in a 2017 Wall Street Journal article, Shah was a budding star in Democratic circles. Shah got the idea for Outcome — then known as Context Media Health — in 2006 while he was a student at Northwestern University just north of Chicago, and the company’s rapid rise over the next decade boosted his public profile. Then-Mayor Rahm Emanuel declared at a company press conference, “as Outcome goes, so goes Chicago.”

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But Outcome’s claims of exponential revenue growth were driven by fraud, as the company sold more ads than it could broadcast and lied to clients like pharmaceutical giant Novo Nordisk A/S about the size of its network of TVs in doctors’ offices, according to prosecutors and securities regulators.

The company’s surge in cash from ad sales and financings allowed Shah to extract hundreds of millions of dollars from Outcome to live a lavish lifestyle, with weekend trips on private yachts and jets as well as a $10 million home, the government said. After raising more money from lenders and investors based on bogus financial statements in 2016, Shah’s net worth was reported at more than $4 billion, prosecutors said.

“Outcome’s former executives deceived their clients, their auditor, their lenders, and their investors for years,” Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, said in the statement. “Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business.”

Shah told the judge last week in a prepared statement that he was “ashamed and embarrassed” by his failure to properly manage the company’s aggressive push for growth, which led to “a number of fatal mistakes” that included not tracking the delivery of ads paid for by clients.

“The culture I created permissioned people on my team to think it was okay to create false data in response to client questions,” he said in the statement, which was filed with the court.

Shah was convicted in April 2023 along with Outcome President and co-founder Shradha Agarwal and Chief Financial Officer Brad Purdy. Prosecutors had sought 10-year sentences for Agarwal, 38, and Purdy, 35. But Durkin sentenced Agarwal to three years in a half-way house and Purdy got two years and three months in prison.

A group of funds, including those owned by Goldman, Alphabet and Pritzker, were among the investors that sued Outcome in 2017, claiming fraud tied to a $487.5 million fundraising that year that led to a $225 million dividend pocketed by Shah and Agarwal.

In addition, the US Securities and Exchange Commission sued Shah, Agarwal, Purdy and former chief growth officer Ashik Desai, claiming they used false financial statements to raise cash. Desai and two other Outcome employees pleaded guilty to charges before the criminal trial against the company’s top executives.

The criminal case is US v. Shah, 19-cr-00864, US District Court, Northern District of Illinois (Chicago).

By Steve Stroth


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