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.
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.
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!"
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 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.
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."
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.
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.
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.
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.
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.
> 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 $950 million in its fifth funding round.
Private capital investment + healthcare = bad combo
This seems to be an adtech company specializing in a vertical (healthcare). They do not have anything to do with the caring of the health of humans. Apologies if you didn't imply that.
Raising almost a billion US$ 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.
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.
"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."
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?
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.
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.
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.
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.
PragmaticPulp|2 years ago
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.
gnatman|2 years ago
https://www.wsj.com/articles/outcome-a-hot-tech-startup-misl...
kerblang|2 years ago
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!"
Jeema101|2 years ago
I've since found another doctor.
neom|2 years ago
(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|2 years ago
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.
nradov|2 years ago
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.
boeingUH60|2 years ago
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...
throwway120385|2 years ago
rchaud|2 years ago
pinkfairy10|2 years ago
rqtwteye|2 years ago
mistrial9|2 years ago
game_the0ry|2 years ago
> 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|2 years ago
rchaud|2 years ago
throwawaylinux|2 years ago
Pushing drugs and procedures and insurance on people you know are already sick and probably desperate is peak ad-tech.
nradov|2 years ago
https://www.crunchbase.com/organization/outcomehealth/compan...
focusedone|2 years ago
yalogin|2 years ago
I would ask the community here how common this kind of fraud is. Do companies inflate their ad display numbers or ad engagement numbers?
1vuio0pswjnm7|2 years ago
https://www.wsj.com/amp/articles/former-outcome-health-execu...
skeeter2020|2 years ago
rchaud|2 years ago
AlwaysRock|2 years ago
gvb|2 years ago
"These schemes" were fraud. It is better, and wiser, to eschew fraudulent riches and stay out of jail.
unknown|2 years ago
[deleted]
AlwaysRock|2 years ago
paulpauper|2 years ago
damn. they better hope Elon Musk invents life extension or something ..that is a loooong time. Excessive even.
sidewndr46|2 years ago
paulpauper|2 years ago
>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.