SEC Charges Former Top Executives of Healthcare Advertising Company with $487 Million Fraud

Litigation Release No. 24675 / November 25, 2019

Securities and Exchange Commission v. Rishi Shah, Shradha Agarwal, Brad Purdy and Ashik Desai, 19-cv-07528 (N.D. Ill. filed November 25, 2019)

The Securities and Exchange Commission today amended a complaint to charge four former executives of Outcome Health, a private healthcare advertising company, with fraud in raising nearly half a billion dollars by falsely portraying the company as an overwhelming success to investors, clients, and auditors.

The SEC's amended complaint alleges that Outcome Health's former executives, CEO Rishi Shah, President Shradha Agarwal, CFO Brad Purdy, and Executive VP Ashik Desai, engaged in a fraudulent scheme to misrepresent the company's business successes while raising hundreds of millions of dollars from unsuspecting investors. Outcome Health charges pharmaceutical company clients to display ads in doctors' offices, and the amended complaint alleges the defendants were aware of or engaged in a scheme to bill clients and recognize revenue for ads it never ran. The amended complaint also alleges that Outcome Health manipulated third-party studies to conceal problems delivering ads and make them appear more effective than they were. Outcome Health is alleged to have overstated its revenue in its audited financial statements for 2015 and 2016 by at least $14.3 million and $30 million, respectively, while raising approximately $487 million from a private offering to investors who relied on the false financial statements and false representations about the company's growth. Nearly half of the funds raised went to Shah and Agarwal, Outcome Health's co-founders.

In a parallel action, the U.S. Attorney's Office for the Northern District of Illinois and Fraud Section of the Department of Justice announced criminal charges against Shah, Agarwal, Purdy and Desai as well as two employees who are not named in the SEC's action.

The SEC's amended complaint, filed in federal court in Chicago, charges the defendants with violating the antifraud provisions of the federal securities laws. The SEC seeks return of allegedly ill-gotten gains plus interest, penalties, injunctive relief and officer and director bars.

The SEC's investigation was conducted by Jedediah Forkner, Tracy Lo, Ann Tushaus and Joshua Wagoner of the Chicago Regional Office under the supervision of Steven Klawans. The litigation will be led by Timothy Leiman. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of Illinois, the Department of Justice, Fraud Section, Criminal Division, the Federal Bureau of Investigation's Chicago Division and the Federal Deposit Insurance Corporation's Office of Inspector General.