The former CEO and co-founder of Outcome Health — once a star of Chicago’s tech scene — was sentenced Wednesday to 7 1/2 years in prison, more than a year after he was convicted of fraud.
Before sentencing Rishi Shah, U.S. District Judge Thomas Durkin told Shah that the fraud was “not a single mistake or impulsive moment out of character.”
“I believe a lot of this was motivated by greed…the dream of becoming a big shot,” Durkin said.
Government prosecutors had asked Durkin to sentence Shah to 15 years in prison, calling him the “architect” of a billion-dollar fraud. The U.S. Probation Office had recommended 8 years in prison, according to a memo filed by Shah’s attorneys, and his attorneys had requested home confinement.
Shah, 38, has already retained former acting US solicitor general Neal Katyal to appeal his conviction. Shah also plans to appeal his conviction.
Shah spoke to the judge before sentencing Wednesday, saying he was “deeply sorry” to those who trusted him with their money and careers.
“In my head and in my heart, I feel enormous responsibility for what happened at Outcome Health,” Shah said.
The conviction Wednesday came about 14 months after a jury found Shah and two other former Outcome executives — co-founder and former president Shradha Agarwal and former COO and CFO Brad Purdy — guilty of fraud. The jury found Shah guilty of 19 of the 22 counts against him.
Agarwal and Purdy are also expected to be sentenced this week.
Shah told the judge Wednesday: “I feel deep remorse for the way my failures have harmed Shradha and Brad. »
Shah and his once-famous Chicago-based company, Outcome, experienced a meteoric rise and an even more dramatic fall. The company, conceived while Shah was a student at Northwestern University, sold advertising to pharmaceutical companies and delivered those ads to televisions and tablets that Outcome installed in doctors’ offices and waiting rooms.
During last year’s trial, government prosecutors alleged that Shah, Agarwal and Purdy lied about the number of doctors’ offices equipped with screens and tablets to broadcast their content. Prosecutors said they then used those false numbers to overcharge drug companies for their ads, and inflated revenue figures used to raise money from investors and secure loans.
Outcome has raised nearly $1 billion from leading lenders and investors. In 2017, Outcome had over 500 employees and was one of Chicago’s most well-known technology companies.
Shah, who owned 80% of Outcome, was named to the Forbes 400 list of richest Americans in 2017, with a net worth of $3.6 billion at the age of 31.
Outcome’s downfall, however, began when a former Outcome analyst contacted the Wall Street Journal, which published an article in 2017 detailing Outcome’s alleged problems. The company lost business, investors sued, and Shah and Agarwal resigned. In 2019, Outcome, as a company, agreed to pay $70 million to pharmaceutical companies to resolve a federal fraud investigation, and Outcome settled with investors and lenders in 2018. The criminal fraud trial last year focused on Outcome’s three top executives as individuals.
During the trial, defense attorneys blamed Outcome’s problems on a fourth former Outcome employee, Ashik Desai. Desai pleaded guilty to one count of wire fraud before trial and said he falsified screenshots and ROI reports without his bosses’ knowledge. Ultimately, the jury did not believe that Desai was solely responsible for the fraud at Outcome.
As part of a deal with the government, Desai could receive a reduced prison sentence for testifying at the trial last year. Desai is expected to be sentenced in September.
Throughout the sentencing hearing Tuesday and Wednesday, Shah’s lawyer, Richard Finneran, argued for a lighter sentence for the former CEO, saying investors, lenders and the customers had not lost as much money as government prosecutors claimed.
“Yes, Outcome failed to perform its services and, therefore, overstated its financials, but Outcome was not a worthless company, as in many white-collar cases,” Shah’s lawyers said in a note of condemnation. “As the government itself acknowledges, almost 80% of Outcome’s revenues were real and not overstated.”
Finneran also argued that Outcome’s institutional investors did not suffer an actual monetary loss and, in fact, benefited financially from a 2018 settlement Outcome reached with the investors. Durkin ultimately decided not to include the investors’ losses in his sentencing, in part because he said government prosecutors did not present enough evidence of those losses for purposes of sentencing. penalty.
William Burck, also Shah’s attorney, told the judge Wednesday that Shah made mistakes in the way he ran Outcome, but that he wasn’t trying to steal from people.
“This wasn’t a person who had 10, 20, 30 years of business experience,” Burck said. “He was a 20-something trying to build something from scratch…and growing quickly, probably too fast for the capabilities he and his colleagues had.”
More than 30 family members, friends and prominent business leaders also wrote letters to the judge supporting Shah before the sentencing, with many praising him for helping other budding Chicago entrepreneurs.
Mark Lawrence, CEO and co-founder of SpotHero, wrote to the judge: “Rishi’s influence on the Chicago entrepreneurial community and beyond was profoundly positive. … His generosity, kindness, and willingness to help others succeed impacted everyone who knew him. He helped shape the careers of countless entrepreneurs and was instrumental in the growth of Chicago’s startup ecosystem.”
George Bousis, founder and CEO of Chicago-based Raise, wrote of Shah: “During the years he was active, I would argue that no one in the city of Chicago did more for the world of business, for startups, to provide services. mentoring entrepreneurs and businesses in which he has invested his time and capital.
Justin Ishbia, founder and managing partner of Chicago-based private equity firm Shore Capital Partners, wrote to the judge that Shah is “a man of principle who has done enormous good for those around him, his community and to its industry. »
Throughout the trial, lawyers repeatedly focused on the line between the growing pains startups often face and fraud.
At Shah’s sentencing, Durkin warned: “To anyone listening, pretending is a fraud.” »
“Entrepreneurs need to know when they have access to capital like you did…you need to be responsible. You can’t skimp on the numbers. You can’t cheat on the numbers.
Shah, Agarwal and Purdy were supposed to be sentenced in fall 2023, but their sentencing hearings were repeatedly postponed, with Shah and Agarwal arguing they were unable to hire their first choice of lawyers for the trial because too much of their money was frozen. before the start of the trial.
Earlier this month, Durkin denied Shah and Agarwal’s motions for a new trial or dismissal of the indictment against them.
Two other Outcome employees, Kathryn Choi, a former senior analyst, and Oliver Han, a former analyst, also pleaded guilty to conspiracy to commit wire fraud. Choi and Han are expected to be sentenced in October.
News Source : www.chicagotribune.com
Gn bussni
