On November 25, 2019, the Securities and Exchange Commission amended a complaint to charge four former executives of Outcome Health, a private healthcare advertising company, with fraud in raising nearly half a billion dollars by falsely portraying the company as an overwhelming success to investors, clients, and auditors.
SEC Charges Rishi Shah, Shradha Agarwal, Brad Purdy, Ashik Desai,and Outcome Health
The SEC’s amended complaint alleges that Outcome Health’s former executives, CEO Rishi Shah, President Shradha Agarwal, CFO Brad Purdy, and Executive VP Ashik Desai, engaged in a fraudulent scheme to misrepresent the company’s business successes while raising hundreds of millions of dollars from unsuspecting investors. Outcome Health charges pharmaceutical company clients to display ads in doctors’ offices, and the amended complaint alleges the defendants were aware of or engaged in a scheme to bill clients and recognize revenue for ads it never ran. The amended complaint also alleges that Outcome Health manipulated third-party studies to conceal problems delivering ads and make them appear more effective than they were. Outcome Health is alleged to have overstated its revenue 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 the false financial statements and false representations about the company’s growth. Nearly half of the funds raised went to Shah and Agarwal, Outcome Health’s co-founders.
“Today’s action seeks to hold Outcome Health’s most senior executives accountable for an alleged massive fraud,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “We charge that these C-suite officers defrauded investors out of hundreds of millions — and the co-founders lined their own pockets— through blatant lies about the company’s financial and business performance.”
In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois and Fraud Section of the Department of Justice announced criminal charges against Shah, Agarwal, Purdy and Desai as well as two employees who are not named in the SEC’s action.
The SEC’s amended complaint, filed in federal court in Chicago, charges the defendants with violating the antifraud provisions of the federal securities laws. The SEC seeks return of allegedly ill-gotten gains plus interest, penalties, injunctive relief and officer and director bars.
Cases like these are why it’s very important to have good lawyers. You cannot mislead investors in your company’s filings or offerings. Here at Hamilton & Associates Law Group we ensure that our clients are following regulations and guide them into safely representing their company. We ensure that our clients follow the law, and we do our best to help them have the most successful fundraising possible.
If you are going to offer and sell securities, or go public using an SEC registration statement you will need the assistance of an experienced securities lawyer to guide you through the registration process and ensure all required disclosures are made.
This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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