The 7th U.S. Circuit Court of Appeals has upheld the fraud convictions of Rishi Shah and Shradha Agarwal, the former co-founder and CEO and former co-founder and president of Chicago health-tech company Outcome Health, closing out nearly all of the legal fallout from one of the city's most spectacular startup collapses. Shah and Agarwal had remained free while their appeal proceeded, but the ruling affirms a jury's 2023 verdict that found them guilty on 19 and 15 counts of fraud, respectively.
According to the Chicago Tribune, the appeals court found that evidence at trial showed Shah and Agarwal knew Outcome Health could not deliver on the advertising it was selling to pharmaceutical companies, yet continued pursuing contracts and financing based on projected inventory figures. The panel ruled that this knowledge supported an intent to defraud, according to the same report. Outcome Health installed televisions and tablets in doctors' offices and waiting rooms as part of its business model, selling drugmakers advertising space on those screens.
How the Scheme Worked
Prosecutors alleged that Shah, Agarwal and former Chief Operating Officer and Chief Financial Officer Brad Purdy lied about the number of doctors' offices actually running Outcome content, using false office-screen and tablet numbers to overcharge drug companies for advertising, per the Tribune's account of the 2023 case. The Department of Justice has said the ad-manipulation scheme resulted in at least $45 million in overbilled advertising services to pharmaceutical clients between 2011 and 2017, targeting major drugmakers including Pfizer, Sanofi, Novo Nordisk and Bristol-Myers Squibb.
The bloated figures were not just used to overcharge advertisers. Shah, Agarwal and Purdy also relied on inflated revenue figures to pursue external financing, and by leaning on overstated 2015 and 2016 financial statements, Outcome Health secured $110 million in debt financing in April 2016, $375 million more that December, and $487.5 million in equity funding in early 2017, according to Constantine Cannon. That capital raising allowed Shah and Agarwal to extract tens of millions of dollars in personal dividend payouts, the firm's account of the case states. Altogether, prosecutors say the company raised nearly $1 billion from lenders and investors under false pretenses.
A Chicago Unicorn's Rapid Rise
Outcome Health began small. The company was founded in Chicago in 2006 under the name ContextMedia LLC by Shah and Agarwal while they were students at Northwestern University, and it didn't rebrand as Outcome Health until January 2017, after acquiring rival AccentHealth, according to the U.S. Department of Justice. It grew from just 16 employees in 2011 to more than 500 by 2017. Investors eventually included units of Goldman Sachs and Google, as well as a fund co-founded by Illinois Gov. JB Pritzker.
At its peak in mid-2017, the company had a reported valuation of more than $5 billion after raising over $500 million in a single funding round — the largest single venture capital investment in Chicago since Groupon raised $950 million in 2011, according to Wikipedia's summary of the company's history. It was a stunning valuation for a company that had started as a college project putting digital health screens in waiting rooms.
The Wall Street Journal Exposé and Trial
The scheme first became public in October 2017, when a Wall Street Journal investigation detailed allegations that Outcome Health was manipulating ad-performance metrics and screen deployment figures. A former Outcome analyst had contacted the Journal and alleged that the company misled pharmaceutical companies and inflated its data, per the Tribune's reporting. That reporting set off internal investigations that eventually led to federal indictments.
The criminal trial against Shah, Agarwal and Purdy lasted 10 weeks in 2023, ending with the jury's convictions on multiple counts of fraud for each defendant. Purdy was convicted alongside them but did not join their appeal to the 7th Circuit, and he was later sentenced by U.S. District Judge Thomas Durkin to two years and three months in prison, per the U.S. Department of Justice. Former Chief Growth Officer Ashik Desai, who pleaded guilty to wire fraud and served as the prosecution's central witness against his former superiors, was sentenced to seven months in prison in September 2024, according to Telehealth and Telecare Aware.
Sentencing and the Asset Freeze Dispute
At Shah's sentencing hearing in June 2024, federal prosecutors sought a 15-year prison term and characterized him as the driving force behind the scheme, but the court imposed a lighter 7.5-year sentence along with three years of supervised release, according to Courthouse News. Agarwal was sentenced to three years of confinement at a halfway house.
On appeal, Shah and Agarwal argued that the government had improperly frozen too many of their assets before trial, preventing them from hiring their preferred trial lawyers. Court documents show the government itself admitted some of the frozen money was unconnected to the fraud. The 7th Circuit described the pretrial asset freeze as complicated and troubling, but ultimately ruled that the lower court had correctly found Shah and Agarwal had enough information to challenge the freeze before trial began.
Richard Finneran, Shah's attorney and a partner with Bryan Cave Leighton Paisner, said his client's defense was harmed by what he called the government's illegal restraint of funds, and indicated he would seek further review from the Supreme Court if necessary, per the Tribune. An attorney for Agarwal was not immediately reachable Friday afternoon, the paper reported.
What Became of Outcome Health
The company itself outlived the scandal in a different form. Following the executive departures, Outcome Health combined with competitor PatientPoint in March 2021 to form PatientPoint Health Technologies, headquartered in Cincinnati under PatientPoint's leadership, according to a PR Newswire announcement of the merger. The deal folded Outcome Health's network of doctor-office screens into PatientPoint's broader patient engagement platform.
Separate from the criminal case, the U.S. Securities and Exchange Commission filed a parallel civil fraud lawsuit in November 2019 against Shah, Agarwal, Purdy and Desai, seeking permanent injunctions, civil penalties and officer-and-director bars, according to the Securities and Exchange Commission. With the 7th Circuit's affirmation of the criminal convictions, the case stands as one of the largest corporate fraud prosecutions to come out of Chicago's tech sector, a stark coda to a company once held up as proof the city could produce a health-tech unicorn.
