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Healthcare Execs Charged in $1Bn Fraud Scheme

Six former executives and employees of a US healthcare start-up have been charged with running a fraud scheme that’s said to have made them $1bn.

The men — who include the co-founder, president, COO/CFO and EVP of business operations — worked for a tech firm called Outcome Health which provides digital medical information and advertising in doctors’ offices.

It’s alleged they sold tens of millions of dollars of advertising inventory that did not exist, inflating the company’s financials so that they were able to raise nearly $1 billion in financing in 2016 and 2017.

Co-founder and CEO Rishi Shah, 33, of Chicago, Illinois; co-founder and president, Shradha Agarwal, 34, of Chicago; and COO Brad Purdy, 30, of San Francisco, are charged with various counts of mail fraud, wire fraud and bank fraud. 

Senior analyst Kathryn Choi, 29, of New York, and analyst Oliver Han, 29, of Chicago, are each charged with one count of conspiracy to commit wire fraud.

According to the Department of Justice, the group sold pharmaceuticals clients ad inventory that they didn’t have, and under-delivered on ad campaigns, before falsifying performance data and patient engagement metrics.

It’s also alleged that several of those indicted falsified data shared with auditors, which led to the latter approving over-inflated revenue figures for 2015 and 2016.

This enabled them to raise $110m in debt financing in April 2016, $375m in December 2016 and nearly $488m in early 2017, with Shah and Agarwal allegedly splitting dividends of nearly $263m between them.

“Outcome’s former executives and employees allegedly deceived lenders, investors, and their own auditors by falsely representing revenue for additional profit,” said principal deputy assistant attorney general John Cronan of the Justice Department’s Criminal Division. 

“The charges announced today demonstrate that lies and deception cannot serve as the basis for any company, including start-up companies, to falsely grow revenue for additional capital and private gain.”

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