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Former billionaire gets 7.5-year sentence for defrauding Goldman and Google | World News
By Steve Stroth
A former Chicago commuter billionaire was sentenced to seven and a half years in prison for a $1 billion fraud at an advertising startup that included investors including Goldman Sachs Group Inc., Google parent Alphabet Inc. and Illinois Gov. J.B. Pritzker’s venture capital firm.
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Rishi Shah, 38, the co-founder of Outcome Health, which provided TV ads to doctors’ offices, was convicted of more than a dozen counts of fraud and money laundering by a federal jury last year. He and two other Outcome executives were sentenced last week in Chicago by U.S. District Judge Thomas Durkin, the U.S. Attorney’s Office said in a statement Monday.
Prosecutors had sought a 15-year sentence, describing Shah as the “driving force behind a dizzying series of lies to clients, creditors, investors and an auditing firm.” He and the other executives were accused of lying to drug company clients and taking money for ads that were never placed, and then misrepresenting the company’s health to investors.
Before the fraud was exposed in a 2017 Wall Street Journal article, Shah was a rising star in Democratic circles. Shah came up with the idea for Outcome — then known as Context Media Health — in 2006 while he was a student at Northwestern University, north of Chicago, and the company’s rapid rise over the next decade boosted its public profile. Then-Mayor Rahm Emanuel declared at a company news conference, “As Outcome goes, so goes Chicago.”
Oversold ads
But Outcome’s claims of exponential revenue growth were fueled by fraud, as the company sold more ads than it could carry and lied to clients including 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 cash-rich ad sales and financing allowed Shah to extract hundreds of millions of dollars from Outcome to live a lavish lifestyle, with weekend getaways on yachts and private jets, as well as a $10 million home, the government said. After raising more money from lenders and investors based on false financial statements in 2016, Shah’s net worth was reported at more than $4 billion, prosecutors said.
“Former Outcome executives deceived their customers, their auditors, their creditors, 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 company.”
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 to grow, which led to “a series of fatal errors” that included failing to track the delivery of ads paid for by customers.
“The culture I created allowed people on my team to think it was acceptable to create false data in response to customer inquiries,” he said in the declaration, which was filed in court.
Shah was convicted in April 2023 along with Outcome CEO 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 halfway 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, alleging fraud tied to a $487.5 million fundraising that year that led to a $225 million dividend pocketed by Shah and Agarwal.
Additionally, the U.S. Securities and Exchange Commission has sued Shah, Agarwal, Purdy and former chief growth officer Ashik Desai, alleging they used false financial statements to raise money. Desai and two other Outcome employees pleaded guilty to the charges ahead of a criminal trial against the company’s top executives.
The criminal case is U.S. v. Shah, 19-cr-00864, U.S. District Court, Northern District of Illinois (Chicago).