The investigation that led to Outcome Health’s demise began with a single email after the company made headlines with a blockbuster deal worth more than $5 billion.
The company, formerly known as Context Media, has raised nearly half a billion dollars from a group of investors including Goldman Sachs, the former venture capital fund of Illinois Governor JB Pritzker, Google and Laurene Powell Jobs. The grant has enhanced the reputation of the company and its young founders, putting goals on their backs.
“I saw an article about it,” David Ma, a former analyst for the company, testified Monday before the United States District Court for the Northern District of Illinois in Chicago. “In my opinion, they don’t deserve the funding they’ve received because it’s all built on lies.”
On the day the deal was announced in May 2017, he contacted a Wall Street Journal reporter who had written about the grant. “If you’re interested, I have some additional Health Results that I’m willing to share (less rosy stuff, if you’re willing to hear it),” Ma’s email reads.
About five months later, the newspaper ran a story that the company had overcharged several pharmaceutical companies that had bought ads on TVs and tablets that ran in doctors’ offices. Two years later, co-founders Rishi Shah and Shradha Agarwal, along with former CEO Brad Purdy, were charged with multiple counts of fraud.
Ma, who was in graduate school at Stanford University when he blew the whistle, joined Outcome Health in 2014 after a brief stint at the Boston Consulting Group. Like Shah, Agarwal, and Purdy, he’s a young Northwestern University graduate.
He is a key government witness in the third week of the trial, which is expected to last three months. Ma calmly and methodically detailed to jurors how he was closely involved in the actions at Outcome Health that led to allegations that the company committed fraud. customers, lenders and investors.
Defense attorneys were quick to point out that Ma had been granted immunity from prosecution and had filed to curtail any monetary sanctions on founders collected by the Securities and Exchange Commission under their whistleblower program. In addition to the criminal charges, Shah, Agarwal and Purdy face an SEC civil lawsuit. They deny the allegations.
“Are you looking to withdraw money?” Ask Purdy’s lead attorney, Ted Poulos.
Ma, who first spoke up last week, replied calmly: “I don’t think that’s true.”
He detailed how he helped inflate the numbers and provided inaccurate lists of doctor’s offices, which resulted in customers being charged invalid fees. The main subject of the fraud allegations is that Outcome Health executives have for years knowingly sold more television screens than they have to pharmaceutical companies like AbbVie and Pfizer.
“My job is to use my analytical and numerical skills to deceive, lie and withhold information from clients for the benefit of the company,” Ma said.
Although it took years for the first allegations of widespread fraud to emerge publicly, before that there were signs of trouble internally, Ma testified. He described how one customer requested a test after they were given a list of addresses where an ad was supposed to play. But its salesman showed up to spot a competitor’s ad running.
In a text message to a colleague, Ma said: “I’ve always lived in fear of an audit.”
Ma testified that inventory was inflated beyond the already optimistic growth projections and performance measurements were made — and executives knew it. He talks about his conversation with Agarwal, which touches on the topic of overselling inventory. Ma said she replied, “‘We throw smoke bombs’ to clean up our operations later.”
The testimony echoed the prosecution’s opening statement, which played a video Shah describing in an interview how the company started, by persuading doctors’ offices and advertisers to sign up for a product does not exist. The defense said the scam was the work of a fraud agent, Ashik Desai, who pleaded guilty to wire fraud and agreed to cooperate with prosecutors.
