[HN Gopher] Former executives of Outcome Health convicted in $1B...
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Former executives of Outcome Health convicted in $1B corporate
fraud scheme
Author : gshakir
Score : 112 points
Date : 2023-04-12 12:21 UTC (10 hours ago)
(HTM) web link (www.justice.gov)
(TXT) w3m dump (www.justice.gov)
| 1vuio0pswjnm7 wrote:
| "Following the widely publicized prosecution of Theranos Inc.
| founder Elizabeth Holmes, the Outcome Health trial was another
| example of the government taking on what prosecutors in the trial
| called the technology world's "fake-it-till-you-make-it"
| culture."
|
| https://www.wsj.com/amp/articles/former-outcome-health-execu...
| neom wrote:
| I always like looking these folks up on youtube to see if they
| have any interviews, this guy did talk for Chicago Techweek, and
| his story starts remarkably similar to another tech dude who was
| recently charged with fraud... goes something like this:
|
| (when I was 12) I found some discrepancy in the price of a
| security, so I wrote a simple program that traded on the
| discrepancy.
|
| https://www.youtube.com/watch?v=GPBoIyA11TI
|
| Also this one is amusing given the context "you win if you're not
| afraid to break rules and do things the way they're best done in
| the new reality"
|
| https://www.youtube.com/watch?v=wAOa-4vnFWg
| quarterdime wrote:
| Great videos. First video, about 22:50: "and we had a new
| challenge, OK? For the last three or four years our, our
| distribution has run sold out. So anytime we go and get a sale
| and we go and create inventory, we know it's going to be
| bought."
|
| Meanwhile, from the DOJ release: "According to evidence
| presented at trial, Shah, Agarwal, and Purdy sold advertising
| inventory the company did not have to Outcome's clients, then
| under-delivered on its advertising campaigns. Despite these
| under-deliveries, the company still invoiced its clients as if
| it had delivered in full."
|
| Wow.
| skeeter2020 wrote:
| The thing I noticed was that everyone convicted or pleading
| guilty was from the soft, BS parts of the company. How come none
| of the Engineers ever get rich in these schemes? What are we
| doing wrong?
| Taylor_OD wrote:
| To be fair, a lot of engs made a lot of money writing code for
| this company. They were a huge ruby employer for many years.
| Lots of careers built off of working at Outcome Health.
| rchaud wrote:
| Engineers are just people paid to code. If you're not a
| decision-maker, or a dealmaker bringing in business and
| financing, your compensation will reflect that.
| [deleted]
| gvb wrote:
| _How come none of the Engineers ever get rich in these
| schemes?_
|
| "These schemes" were fraud. It is better, and wiser, to eschew
| fraudulent riches and stay out of jail.
| rqtwteye wrote:
| Even if they hadn't committed fraud I am happy that they are in
| problems. The article says they were selling TVs to hospitals to
| display ads. The last thing we need is more ads and I hope every
| company that tries to push ads into new spaces will go bankrupt.
| mistrial9 wrote:
| a fast talking Eastern European in Berkeley and his female
| security expert companion, got pretty far with funding and
| social position for enacting this business model.. making the
| rounds at the Berkeley incubator next to the BART station about
| seven years ago?. IIR the pitch was to hospitals directly as
| clients. Security for the data streams, plus the money
| transfers, quickly took over the bandwidth. No one close to the
| effort questioned the crystal-clear intent to make as much
| money as possible for the founders and those that chose to do
| business with them, it seemed. No idea where they are now --
| McMansions all around, probably.
| nradov wrote:
| Well there's a blast from the past. Many years ago I worked with
| the startup company that eventually evolved into Outcome Health.
| Back then many doctors' offices still lacked broadband Internet
| access, especially in rural areas. The business model was to
| provide free satellite Internet service to doctors by installing
| a rooftop dish antenna connected to a kiosk in the waiting room.
| Revenue came from selling video ads displayed on the kiosk screen
| (mostly prescription drugs) along with looped healthcare videos
| from CNN.
|
| That aspect of the business eventually failed. Some doctors
| really liked it (the CNN educational content was legitimately
| pretty good and kept waiting patients from getting bored), but
| overall it was too expensive to deploy the hardware and
| geosynchronous satellite Internet service is always slow. As
| availability of other forms of broadband Internet access improved
| the satellite service opportunity evaporated. Back at that time I
| wasn't aware of any fraud, just a failed business model.
| yalogin wrote:
| They screwed up by defrauding the investors, I don't think they
| would have gotten caught if they simply stuck to defrauding their
| clients.
|
| I would ask the community here how common this kind of fraud is.
| Do companies inflate their ad display numbers or ad engagement
| numbers?
| sidewndr46 wrote:
| Any jail time for any of them? Until then it's just posturing by
| the Justice department.
| paulpauper wrote:
| did you read the release? How is jail not an option?
|
| >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. Agarwal was convicted of five counts of mail fraud,
| eight counts of wire fraud, and two counts of bank fraud. Purdy
| was convicted on five counts of mail fraud, five counts of wire
| fraud, two counts of bank fraud, and one count of false
| statements to a financial institution. The defendants face a
| maximum penalty of 30 years in prison for each count of bank
| fraud and 20 years in prison for each count of wire fraud and
| mail fraud. Purdy faces a maximum penalty of 30 years in prison
| for the count of false statements to a financial institution.
| Shah faces a maximum penalty of 10 years in prison for each
| count of money laundering. A sentencing hearing will be
| scheduled at a date to be determined. A federal district court
| judge will determine any sentence after considering the U.S.
| Sentencing Guidelines and other statutory factors.
| sidewndr46 wrote:
| "a maximum penalty of 30 years in prison "
|
| it would appear absolutely 0 days behind bars and a solemn
| promise to be a good boy is an option.
| PragmaticPulp wrote:
| They installed displays in medical buildings that sold as space.
| Then they oversold the ad space, billing customers for ads that
| were never displayed from 2011 to 2017 and took investment based
| on the fake numbers.
|
| I wonder how the scheme unraveled. It takes a lot of people to
| cover up a fraud at this scale, so presumably someone noticed and
| reported it?
|
| I really dislike this company. I went to a doctor who had
| advertising tablets installed in every patient room. Getting
| blasted with drugs ads while your doctor is 20 minutes late put
| me over the edge. She was a terrible doctor who tried to
| prescribe a lot of unnecessary products and services that she,
| conveniently, sold through the front desk of her office. The ads
| were a great warning sign that she only cared about extracting as
| much money as possible from patients.
| kerblang wrote:
| I recall seeing a tablet on a stand in an examining room at one
| doctor's office, and the contraption was turned to the wall and
| shut off, and I wondered what that was about - some sort of
| diagnostic doohickey? Should I turn it on and see if it will
| take my pulse? I managed to resist, however. The doctor ignored
| it.
|
| Ooooh - Ads! Of course. Still had to sit there waiting for 20
| minutes. There should be a rule that you get to start playing
| with equipment after waiting 15. "Ah, found the lube! Now we're
| cooking!"
| gnatman wrote:
| The CEO, Rishi Shah, was a major rising star and was profiled
| by the Wall Street Journal in 2017. The journalist on the story
| thought something seemed fishy and started pulling threads,
| leading to an expose published in October of that year.
|
| https://www.wsj.com/articles/outcome-a-hot-tech-startup-misl...
| rchaud wrote:
| Such is the conundrum with the WSJ. The op-ed section is
| beyond parody at this point (see the recent article
| attempting to pin SVB's collapse on 'wokeness'). But at least
| the journalists remain committed to digging into stories.
|
| The Theranos fraud was also discovered by a WSJ journalist
| who wasn't wowed by their ex-Pentagon and Beltway board
| members and puff pieces written about Holmes.
| dekhn wrote:
| Maybe the real journalists from WSJ, NY Times, and the
| Economist could group up and make an actual news journal-
| with no editorials.
| 8ytecoder wrote:
| Yup, I get so mad at WSJ after reading one of their really
| stupid opinion pieces and then their real journalists will
| publish something really good. Almost like an abusive
| relationship. The FT is good but doesn't always dig out the
| dirt like WSJ does (in the US).
| ackbar03 wrote:
| These guys should be awarded. That's fantastic
| boeingUH60 wrote:
| Ironically, WSJ is owned by Rupert Murdoch, who invested
| $100 million in Theranos. According to the famous book, Bad
| Blood, Elizabeth Holmes tried to get Murdoch to kill the
| story but he refused.
| NickC25 wrote:
| Ironic indeed. Surprisingly ethical behavior from Murdoch
| - I wouldn't have expected such a person to take that
| kind of a hit on his $100 million investment.
| stickfigure wrote:
| He paid 50X that for the WSJ in 2007.
| [deleted]
| FireBeyond wrote:
| Forbes 30 Under 30 has a similar issue... I think over the
| last 10-15 years, people featured in that list have been
| convicted or accused of scamming more money than they've
| made, including Elizabeth Holmes, SBF and at least a couple
| more.
| nikcub wrote:
| Charlie Javice of Frank was indicted last week
|
| https://www.theverge.com/2023/4/5/23671000/jpmorgan-frank-
| fr...
| phlipski wrote:
| It would be fascinating to see the full numbers on this
| statement. Almost sounds like an ideal arbitrage
| opportunity - just short the 30 under 30 list and profit!
| eldavido wrote:
| Meredith Perry from uBeam comes to mind
| https://www.vanityfair.com/news/2016/05/another-red-hot-
| tech...
|
| I met this woman through friends of friends. Just kinda
| felt weird, and off.
| ijustwanttovote wrote:
| archive: https://archive.is/Iq0J2
| Jeema101 wrote:
| I had a similar experience at a doctor's office in my city. I
| was actually somewhat shocked to see ads in the actual patient
| room - it was an immediate turn-off.
|
| I've since found another doctor.
| paulpauper wrote:
| _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. Agarwal was convicted of five counts of mail fraud,
| eight counts of wire fraud, and two counts of bank fraud. Purdy
| was convicted on five counts of mail fraud, five counts of wire
| fraud, two counts of bank fraud, and one count of false
| statements to a financial institution. The defendants face a
| maximum penalty of 30 years in prison for each count of bank
| fraud and 20 years in prison for each count of wire fraud and
| mail fraud. Purdy faces a maximum penalty of 30 years in prison
| for the count of false statements to a financial institution.
| Shah faces a maximum penalty of 10 years in prison for each count
| of money laundering. A sentencing hearing will be scheduled at a
| date to be determined. A federal district court judge will
| determine any sentence after considering the U.S. Sentencing
| Guidelines and other statutory factors._
|
| damn. they better hope Elon Musk invents life extension or
| something ..that is a loooong time. Excessive even.
| rchaud wrote:
| Raising almost a billion US$ in 2016? It seems like a lot for
| what boils down to "advertising in doctor's offices". Would be
| interesting to know who the VCs were.
| focusedone wrote:
| I can't begin to comprehend all of the reasons why, but there's
| a _wholelottamoney_ in pharmaceuticals.
| throwawaylinux wrote:
| The pharmaceutical industry alone in the US will be a trillion
| dollar per year business by the end of the decade.
|
| Pushing drugs and procedures and insurance on people you know
| are already sick and probably desperate is peak ad-tech.
| germinalphrase wrote:
| It's certainly peak _something_.
| nradov wrote:
| You can find most VC investments on CrunchBase. In this case
| the most recent funding was primarily from PE rather than VC,
| which is a little different.
|
| https://www.crunchbase.com/organization/outcomehealth/compan...
| game_the0ry wrote:
| From wikipedia:
|
| > Outcome Health is a Chicago-based healthcare technology company
| founded by Rishi Shah. Its registered name is ContextMedia Health
| LLC. It is majority owned by Littlejohn & Co., a private equity
| firm. After its founders were indicted by a federal grand jury on
| multiple charges of fraud and also sued by the SEC, veteran tech
| investor Howard A. Tullman called Outcome "our version of
| Theranos."
|
| > In May 2017, a funding round with Goldman Sachs, CapitalG,
| Pritzker Group, and others invested $600 million in Outcome
| Health, giving it a $5.6 billion valuation. This is the largest
| single funding round in Chicago since Groupon in 2011, when it
| raised $950 million in its fifth funding round.
|
| Private capital investment + healthcare = bad combo
| mavelikara wrote:
| This seems to be an adtech company specializing in a vertical
| (healthcare). They do not have anything to do with the caring
| of the health of humans. Apologies if you didn't imply that.
| Taylor_OD wrote:
| This is the guy who got served and he just said no and fled in
| his suv right?
| boeingUH60 wrote:
| The sole aim of this company was to extract money from
| investors...somehow, they managed to raise $500mn, $159mn of
| which went to the founders for selling secondary shares [1].
|
| I really don't understand people like this. It's far easier to
| build a serially unprofitable business and cash out your
| shares...ask Adam Neumann, Travis Kalanick, and the GoPuff
| founders. Just don't lie to investors, pretend you're building
| something real at least.
|
| 1- https://www.wsj.com/articles/former-outcome-health-
| executive...
| rchaud wrote:
| They went Ozy Media when they should have gone WeWork.
| pinkfairy10 wrote:
| It's easier to commit fraud than start a unicorn tech company.
| How can you not understand that?
| ghaff wrote:
| But you don't go to jail for failing to start a unicorn tech
| company so long as you don't do anything illegal.
| throwway120385 wrote:
| Intellectual Ventures is a good example of this but in the
| hardware space. Products that are perpetually on the cusp of
| release are a good source of funding I guess.
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