Rishi Shah  ,an Indian-American entrepreneur has been sentenced to seven and a half years in prison for masterminding a billion-dollar advertising scam.

The fraudulent scheme duped prominent investors including Goldman Sachs Group Inc, Google parent Alphabet Inc, and Illinois Governor JB Pritzker’s venture capital firm.

Shah, one of the founders of Outcome Health, was convicted on numerous charges of fraud and money laundering in April 2023, along with his fellow company co-founders Shradha Agarwal and Brad Purdy.

 

According to Principal Deputy Assistant Attorney General Nicole M. Argentieri, who heads the Criminal Division of the United States Justice Department, the former executives of Outcome deceived various parties including clients, auditors, lenders, and investors over an extended period.

Argentieri emphasized that the sentences given should act as a strong reminder that engaging in deceptive practices, such as ‘faking it until you make it,’ is unacceptable in any business setting, whether it be a technology start-up or an established corporation. She further stated that misrepresenting revenue figures to attract customers or secure financing constitutes fraud, and the Criminal Division is dedicated to ensuring that companies and their executives are held responsible for their actions.

WHO IS RISHI SHAH

Rishi Shah, the founder of Outcome Health, a health technology start-up based in Chicago, is known for providing advertorials on televisions in doctors’ offices across the United States. He also sells advertising space on their devices to clients, primarily pharmaceutical companies.

A 2017 Forbes article mentioned that Shah was raised in Oak Brook, a suburb of Chicago, and is the son of an Indian immigrant doctor. In addition to his role at Outcome Health, Shah serves as the chairman and Managing Director of JumpStart Ventures.

He is an alumnus of Harvard and Northwestern universities. Shah met Shradha Agarwal, the president and co-founder of Outcome Health, while studying at Northwestern University. Together, they founded a company called ‘ContextMedia’ in 2006, which later evolved into Outcome Health in 2016 following the acquisition of AccentHealth.

ALLEGATIONS AGAINST RISHI SHAH

The allegations against Rishi Shah, as reported by Bloomberg, led prosecutors to seek a 15-year sentence, accusing him of being the mastermind behind a wide range of deceitful actions towards clients, lenders, investors, and an audit firm.

 

Shah and his colleagues were accused in November 2019 of participating in a fraudulent scheme that targeted the company’s clients, lenders, and investors, and involved approximately $1 billion in fraudulently obtained funds.

On April 11, 2023, Shah and two other Outcome Health executives were convicted and found guilty of multiple counts of fraud. Shah was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud, and two counts of money laundering. As a result, Shah was sentenced to 7.5 years in prison.

 

EARLY  LIFE OF RISHI SHAH

Rishi Shah, born in 1986 in Oak Brook, Illinois, is the son of Sonal Shah and Dr. Upendra Shah, an endocrinologist. He attended Hinsdale Central High School and Northwestern University before leaving to pursue a career in business.

CAREER OF RISHI SHAH

• Shah, along with his classmates Derek Moeller and Shradha Agarwal, developed a business plan for ContextMedia at Northwestern in 2006.
• The plan aimed to distribute health educational content to doctors’ offices and waiting rooms, with ad revenue from pharmaceutical companies as the main source of monetization.
• As CEO, Shah led ContextMedia to a revenue growth of 2,965% from 2010 to 2015, reaching $63.5 million and ranking the company as the 6th fastest-growing private company in Chicago in 2016. In 2017, ContextMedia rebranded itself as Outcome Health.
• In May 2017, Outcome Health secured over $500 million from investors, led by Goldman Sachs, CapitalG, and Pritzker Group, at a valuation of $5.6 billion. This funding round was the largest since Groupon’s $950 million round in 2011. Forbes estimated Shah’s net worth at $3.6 billion in 2017, based on his 80% stake in Outcome Health.
• However, in November 2017, investors in Outcome Health sued the company, Shah, and Agarwal, alleging fraud and breach of contract. This came after a Wall Street Journal investigation in October 2017, which claimed that Outcome Health had misled advertisers with manipulated information.
• In January 2018, Outcome Health announced that the lawsuit had been settled, with the founders reinvesting $159 million of their $225 million investment dividends back into the company. As part of the settlement, Shah resigned as Chairman and CEO.

 

The report mentioned that he, along with two other Outcome executives, one of whom is also of Indian American descent, were found guilty on more than 12 counts of fraud and money laundering charges by a federal jury last year.

According to the report, the sentence was handed down last week by Chicago US District Judge Thomas Durkin, as stated in a July 1 announcement by the United States Attorney’s Office. The three individuals facing charges were named as co-founder and former CEO Shah, co-founder and former President Shradha Agarwal (38), and former chief operating officer and chief financial officer of Outcome Brad Purdy .