A federal judge will likely sentence former Outcome Health CEO Rishi Shah on Wednesday, after spending Tuesday hearing arguments and testimony about how much money clients and investors lost because of fraud at the company.
Shah was convicted of fraud after a 10-week-long trial last year. His sentencing hearing began Tuesday, with government prosecutors asking U.S. District Judge Thomas Durkin to sentence Shah to 15 years in prison.
Part of the reason they want him sentenced to 15 years is because they said Outcome’s investors lost more than $400 million because of fraud at the company — an assertion Shah’s attorneys challenged.
Outcome’s business was placing TV screens and tablets in doctors’ offices and waiting rooms, and then charging pharmaceutical companies to run ads on those screens. Government prosecutors, however, said during the trial that Outcome lied about the numbers of screens it had in offices, overcharging pharmaceutical companies for ads and inflating revenue figures, which were then used to secure loans and investments.
The severity of Shah’s sentence could depend, in part, on how much money investors actually lost as part of the scheme.
Shah’s attorney Richard Finneran said investors didn’t actually lose any money because of the fraud, partly because of the way their investments were structured and partly because of a 2018 settlement Outcome reached with investors and lenders after the fraud was revealed in a 2017 Wall Street Journal article.
“The investors got a good deal in this settlement,” Finneran told the judge Tuesday. They “improved their position by $26.6 million. The investors have been made whole and then some.” An expert testified Tuesday in support of the defense.
Government prosecutor Kyle Hankey, meanwhile, argued that Goldman Sachs’ investment in Outcome ultimately ended up being worth just 10% of what the investor originally paid, and that other investors likely suffered similar fates.
By the afternoon, Durkin said he wouldn’t likely set Shah’s sentence based on investor losses as high as those claimed by the government because prosecutors didn’t have specific numbers showing what investors other than Goldman Sachs lost.
Two other former Outcome executives, co-founder and President Shradha Agarwal, and former Chief Operating Officer and Chief Financial Officer Brad Purdy, were also found guilty of fraud during the same trial last year, and are also scheduled to be sentenced this week. The government has asked that Agarwal and Purdy be sentenced to 10 years each.
Durkin, however, expressed concern Tuesday over Agarwal’s potential imprisonment. Her attorneys have submitted declarations from experts saying that because Agarwal is not a U.S. citizen she would not likely be able to go to a minimum security prison, and would instead have to go to a prison with a higher level of security.
The judge said he finds it “incredible and disturbing” that someone who is legally in the U.S. and has lived here for more than 20 years “is going to be placed in a much more difficult environment” than typical white-collar criminals. He asked government prosecutors to look into the issue, and said that if she really can only go to a higher-level security prison, “It will affect my sentence.” Agarwal and Purdy are also scheduled to be sentenced this week.
