Health

Results of Health Fraud Trial Begins in Chicago


Shah, wearing a charcoal suit; Agarwal, wearing a light gray blazer; and Purdy, dressed in a gray suit, listened as the lawyers offered different explanations for their actions. All three have pleaded not guilty to charges that carry a maximum prison sentence of 30 years if they are convicted.

The result was one of the most successful startups in Chicago, growing to 500 employees, putting its name on a downtown office tower, and raising nearly $500 million from investors. investors such as Goldman Sachs, the venture capital fund formerly of Governor JB Pritzker, Google and others. Its success began to unravel five years ago, when The Wall Street Journal first wrote that the company had misled customers about the ads it sold.

Kyle Hankey, a Justice Department prosecutor, told jurors the case was about “ambition, greed and fraud.”

“The core of it is lying to make money,” he said. “It’s about the lies of aspiring young entrepreneurs to take their companies to the next level.”

Outcome Health provided free TVs and tablets to physician’s offices as a source of patient education information and sold advertising on those screens to pharmaceutical companies, including AbbVie.

In a 2014 “Founders’ Story” interview with Chicago entrepreneurs, an audio recording played to jurors today, Shah described the delicate dance required early on to convince get doctors to sign up for TVs that the company doesn’t have and take drugs manufacturers to place ads on an unbuilt network.

“I call it a smoke bomb,” he says in the recording. “We threw a smoke bomb into the room. It is very important to do this. We do both at the same time. . . .If not, it’s cheating. You’re selling something you don’t have.”

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Hankey said the smoke never really cleared, saying the defendants “lied to customers to get big deals, they lied to collect money, and lied to cover it all up.”

Shah’s attorney, Jon Hueston, has a different explanation, blaming another Outcome Health executive, Ashik Desai, who pleaded guilty to fraud in 2020 and agreed to cooperate with prosecutors . Hueston immediately began bringing up the main subject of the defense: that Desai admitted to falsifying the results of some metrics reported to advertisers but did not tell Shah or others about him. what are we doing.

“The true story in this case is about a scam carried out by Ashik Desai that shattered Mr. Shah’s dream of building a great company,” which Hueston calls the “American Dream.” He said that Shah “poured everything he had into a company he built from scratch.”

Hueston said Shah’s behavior was not criminal. “His fatal mistake was placing too much trust and responsibility in an employee who would betray him. Did Mr. Shah make mistakes in judgment, make mistakes and trust people he shouldn’t have? Correct. He did not commit fraud.”

Agarwal’s attorney, Alex Lowder, also blamed Desai for the scam. He said Agarwal, despite his title as president, was primarily engaged in marketing, rather than sales or finance, which have been central to the fraud allegations.

Purdy’s attorney, Ted Poulos, also blamed Desai and other managers. Then he painted a picture of young executives clinging to a rocket ship.

“What these kids have done is remarkable,” he said. “They are dealing with Goldman Sachs, Google, Pritzker (the Corporation), Pfizer, dealing with the masters of the universe as young, inexperienced entrepreneurs. Huge investment companies are salivating to get a piece of this company.”

This story first appeared in Crain’s Chicago Business.

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