Former Outcome Health executive Ashik Desai entered the first guilty plea Monday in an alleged $1 billion fraud scheme at the once high-flying Chicago-based company.
A federal prosecutor said Desai is cooperating with the government’s investigation.
Hours later, Brad Purdy, another former executive, pleaded not guilty to criminal charges for his alleged role in the scheme.
The two, along with former CEO Rishi Shah and former president Shradha Agarwal, who are set to appear in court next week, face a combined 26 counts of fraud. The most serious charges carry up to 30 years in prison if convicted.
Outcome installs screens in doctor’s offices and waiting rooms that combine health information with drug advertising. The company gained widespread attention in 2017 when it secured funding from big-name investors and rose to a valuation of about $5.5 billion, a number unmatched among Chicago tech companies.
The charges allege the former executives ran a massive fraud scheme that brought in $487.5 million in financing, a $110 million loan and a $375 million loan, amounting to nearly $1 billion. The indictment also alleges the executives lied to clients and billed them millions of dollars for ads that never ran.
“When I was at Outcome Health, there were practices going on there that were wrong,” Desai said during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”
Desai, now 26, served as Outcome’s executive vice president of business growth and analytics. He was charged with felony wire fraud last month. Assistant U.S. Attorney Matthew Madden told Judge Thomas M. Durkin that Desai is cooperating with the investigation.
The losses to Outcome’s pharmaceutical clients attributed to Desai’s actions were allegedly between $250 million and $500 million, Madden said in court.
The maximum prison term for the charges against Desai, if convicted, is 20 years. If he continues to cooperate, the recommended sentence would be for no more than 10 years, Madden said.
Sentencing isn’t expected until after Shah, Agarwal and Purdy’s trials.
Purdy, now 30, held various roles including chief financial officer and chief operating officer until he left Outcome in early 2018. He is charged with six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution.
Theodore Poulos, an attorney representing Purdy, said Monday afternoon that Purdy acted in good faith during his time at Outcome.
“Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.”
Desai and Purdy were both released on condition of bond after their separate court appearances, and surrendered their passports.
Desai started as a summer intern at Outcome in 2012, when he was still a college student, and was later hired full time, according to a document Madden read in court Monday morning. He was placed on leave in 2017 and later resigned.
He lives in Philadelphia and is pursuing a master’s in business administration.
Purdy, who appeared in front of Magistrate Judge Jeffrey Cummings Monday afternoon, lives in San Francisco.
Two employees who worked under Desai, Kathryn Choi and Oliver Han, were charged last month with felony conspiracy to commit wire fraud in a criminal information.
Choi, 29, and Han, 29, pleaded not guilty last week in federal court in Chicago, and were released on condition of bond. The maximum term of imprisonment for the charge is five years if convicted.
Former CEO Shah, now 33, and former president Agarwal, now 34, are set to appear in court Dec. 16.
Twitter @AllyMarotti
