CEO in major health-advertising fraud gets 7.5-year prison sentence

CHICAGO—Tech entrepreneur Rishi Shah was sentenced to seven-and-a-half years in prison Wednesday for his part in what prosecutors called a billion-dollar fraud scheme centered on video advertisements in doctors’ offices.

Federal Judge Thomas Durkin said Shah, former chief executive and co-founder of startup Outcome Health, had undermined the integrity of the markets.

“The only deterrence to white-collar crime or any kind of crime is jail," he said. “It’s the only thing that gets people’s attention."

Outcome installed video screens in physicians’ offices and charged pharmaceutical companies such as Novo Nordisk and Bristol-Myers Squibb to run drug ads targeted at patients in the waiting room. Prosecutors said company leaders misled clients, auditors, lenders and investors about how many offices had received the screens, and inflated the supposed effectiveness of its advertising.

The Wall Street Journal revealed the fraud in a 2017 article that cited former employees as well as advertisers. In a court document filed Monday, prosecutors said Shah and former Chief Financial Officer Brad Purdy were fixated on finding the leak, and that Purdy said he was talking to a security company started by “Israeli special forces people."

Prosecutors in 2019 indicted Shah, Purdy and former President Shradha Agarwal, alleging a nearly $1 billion scheme to defraud clients and investors, including Goldman Sachs and an investment firm founded by Illinois Gov. J.B. Pritzker.

A jury last year found Shah, Purdy and Agarwal guilty of numerous criminal counts of wire, mail and bank fraud. A fourth executive, Ashik Desai, served as the government’s chief witness and received a reduced sentence in exchange for his testimony.

Agarwal and Purdy are due to be sentenced later this week.

Prosecutors had sought a 15-year sentence for Shah, arguing he was the fraud’s “driving force," motivated by the desire to become a billionaire. They said he reaped such rewards as a $10 million Chicago home and luxury vacations while snaring junior employees in the scheme and pushing aside those who raised concerns.

“These kinds of corporate fraud schemes have real impacts on people," prosecutor Kyle Hankey said.

Shah’s lawyers said he had already suffered a stained reputation and the loss of most of his wealth. They disputed the financial harm allegedly suffered by investors, lenders and advertisers, and asked that Shah receive a lengthy term of home confinement.

Lawyer William Burck said Shah was driven not by greed but a desire to educate patients, and tried to make things right when he learned of problems.

“He wasn’t about trying to rob people blind," Burck said. “He did everything he could to try to put money back in people’s pockets."

Speaking to the judge, Shah said he regretted his arrogance, overconfidence and mistakes, and was sorry for harming those who trusted him with their money and careers. He asked for leniency so he could rebuild his life with the lessons he had learned.

Durkin said Shah had a comfortable upbringing and wasn’t compelled to commit any crimes.

“You could have been successful without cheating," he said. “This company had a good idea."

Shah is due to surrender himself to authorities in September. His lawyers said he plans to appeal the verdict and sentence.

Write to John Keilman at [email protected] and Rolfe Winkler at [email protected]