Rishi Shah and Shradha Agarwal- two Indian-origin co-founders and executives of the Chicago-based health technology startup Outcome Health, were convicted by a federal jury in the US for defrauding the startup’s clients, lenders, and investors.
Former Chief Operating Officer of the startup, Brock Purdy, also faces conviction in the said case. A sentencing hearing will be scheduled for them at a later date.
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Who are Rishi Shah and Shradha Agarwal?
Rishi Shah and Shradha Agarwal were found guilty by jurors after a 10-week-long trial. Shah, the former CEO of the company, has been found guilty on 19 of 22 counts. On the other hand, Agarwal, the former president, was found guilty on 15 of 17 counts, while Purdy, former COO, on 13 of 15 counts.
The charges include mail fraud, wire fraud, and bank fraud, and the trio could now face 30 years for each count of bank fraud, 20 years for each count of mail and wire fraud, and 10 years for each count of money laundering.
Outcome Health worked to first set up screens in medical officers and sold advertising space on them to clients mainly consisting of pharmaceutical companies. The charges state that the trio sold advertising inventory that they did not have and, in spite of not delivering on the advertising campaigns, they invoiced clients as if they have done so. To do so, they forged records to cover up the shortfall in advert delivery.
As a result of their fraudulent activities, the company overstated revenue figures in 2015 and 2016 and used that to secure financing in millions of dollars.
In April 2016, they secured USD 110 million in debt financing. Later in December 2016, they raised an additional USD 375 million in debt financing. In early 2017, the company received USD 487.5 million in equity financing.
