Former CFO and other members of healthcare advertising firm charged with $ 487 million fraud
- Brad Purdy, former CFO of Outcome Health, fraudulently raised nearly half a billion dollars by falsely portraying the company as a crushing success, the United States Securities and Exchange Commission (SEC) accused On Monday.
- Have also been billed CEO Rishi Shah, Chairman Shradha Agarwal and Executive Vice Chairman Ashik Desai.
- Separately, the United States Attorney’s Office for the Northern District of Illinois and the Fraud Section of the United States Department of Justice announced criminal charges against these leaders and two others.
Outcome Health instructs clients of pharmaceutical companies to display advertisements in doctors’ offices.
Purdy and the others engaged in a scheme to bill customers and account for revenue from ads their company never ran, according to the SEC.
The company also manipulated third-party studies to hide ad serving issues and make them appear more effective than they were.
In its financial statements, the company overestimated revenues 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 false financial statements and false statements about the growth of the company, the SEC said.
“Purdy oversaw Outcome’s accounting, was aware of the massive ad run failures, and knew that Outcome recognized revenue from ads that never ran,” the SEC said in its complaint.
In short, he knew – or recklessly ignored – that Outcome’s financial statements were materially false because they reflected income that Outcome had not earned. He also knew – or recklessly ignored – that the data returned on investment sent to investors were bogus (because they do not reflect Outcome’s massive and ubiquitous delivery failures). Yet Purdy did nothing to correct the financial statements before providing them to investors, the income figures repeated. artificially inflated for fiscal 2015 and 2016 in face-to-face meetings with potential investors, and sent 28 ROI reports to investors (when they knew – or recklessly ignored – that ROI data had been manipulated) ”, indicates the complaint.
According to the complaint, nearly half of the funds raised went to Shah and Agarwal, the co-founders of Outcome Health.
“We accuse these executives of defrauding investors out of hundreds of millions – and the co-founders lined their pockets – with blatant lies about the company’s financial and business performance,” said Steven Peikin, co-director of the SEC’s Division of Enforcement.
The SEC filed the lawsuit in Chicago federal court. He accuses the defendants of violating the anti-fraud provisions of federal securities laws. The SEC requests reimbursement of the money collected, with interest, penalties and injunctive relief. It also seeks to prohibit Purdy, Agarwal and Shah from serving as officers of a company that is federally regulated under the Securities Exchange Act.