Outcome Health analysts plead guilty, cooperate with Federal prosecutors

January 29, 2020 | by

Two financial analysts who worked at Outcome Health and reported to former EVP of business operations/chief growth officer Ashik Desai, changed their ‘not guilty’ pleas to ‘guilty’ earlier this month. Kathryn Choi and Oliver Han were charged with wire fraud by Federal prosecutors. As part of their guilty plea, they will cooperate with prosecutors, as did their former boss Mr. Desai.

As reported in our earlier articles, Ms. Choi and Mr. Han are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. While the charges they face carry a maximum penalty of five years, their cooperation may lead to far lighter sentences.

Their change of plea was rather predictable, given that two fairly young and junior staffers faced Federal charges in a classic squeeze play to obtain further information on the big fish, former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executive Brad Purdy (COO/CFO), who face real prison time and large financial penalties. All three have pleaded not guilty.

Outcome Health’s principals are charged with 26 criminal charges of fraud in their funding raises of over $1 bn from 2011 to 2017. Advertisers were defrauded for ads which never ran in medical audiences and third-party studies were manipulated to enhance their results. The indictment details deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices. 

Chicago Tribune, Crain’s Chicago Business. Earlier TTA articles: 3 Dec, 12 Dec, 17 Dec

“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ.

December 12, 2019 | by

Perhaps the smartest move, under really, truly bad circumstances. Ashik Desai, the former executive vice president of business operations/chief growth officer of point-of-care health information/advertising company Outcome Health, ‘copped a plea’ this past Monday to felony wire fraud charges. According to the Chicago Tribune, Assistant US Attorney Matthew Madden told Judge Thomas M. Durkin of the Northern District of Illinois Federal Court in Chicago that Mr. Desai is cooperating with the investigation. “When I was at Outcome Health, there were practices going on there that were wrong,” Mr. Desai said, understatedly, during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”

According to the article and other sources (WTTW), Mr. Desai is only 26; he started at Outcome as an intern when it was still Context Media and departed in 2017. With continued cooperation, the prosecution is recommending only 10 years in prison, half of what a conviction might bring at the statutory maximum of 20 years. He was released on bond and surrendered his passport.

The multiple and most serious charges in the indictment are for the two founders, Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their early 30s. These are criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017, deceiving their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery performance.

On Monday 9 December, Mr. Purdy pleaded not guilty to six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution. His counsel, not unexpectedly but amusingly for those of us who are experienced in the corporate pecking order and what exactly a CFO is responsible for, stated: “Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.” Mr. Purdy also was released on bond and surrendered his passport.

Two of those underlings, Kathryn Choi and Oliver Han, pleaded not guilty on Thursday 5 December to their respective charges of wire fraud. They face five years maximum if convicted. In this Editor’s opinion, they were indicted to bring forth additional information to buttress the major charges on Mr. Desai and the three top executives. As ‘small fry’ with at most a little profit sharing, they are sideshows–easy to pressure. They may truly spill the beans if they and their counsel sense that things are going badly–if they have any more beans to spill. 

Mr. Shah and Ms. Agarwal are scheduled to appear in court next Monday, 16 December. They have previously stated that they will plead not guilty (FiercePharma). Flight risk is undoubtedly a concern for the prosecution regarding Ms. Agarwal. According to this Refinery29  interview from 2017, Ms. Agarwal is an Indian citizen and, while a long-time legal resident, not a naturalized American. Mr. Shah was born in the US. This cautionary Tale of the Unicorn, told in the Chicago Way, warns us all to be careful of what we see, are asked to do, sign on to–and sign off on.