* A gigantic downfall…
Rishi Shah, a 31-year-old college dropout, who co-founded a healthcare media company, became the richest Indian in America with a personal worth of $3.6 billion, for all of a few weeks. His fortune evaporated almost overnight amidst allegations that his company had fudged data and misled advertisers.
Shah’s Chicago-based Outcome Health delivers pharmaceutical advertising to patients on tablets and screens placed in physician’s offices. He became the 206th richest American in the Forbes 400 list after his company raised $500 million based on a valuation of $5 billion in May from Goldman Sachs, Google’s parent Alphabet and the Pritzker Group Venture Capital. […]
The Wall Street Journal alleged that the company exaggerated the number of screens installed in physician offices, inflated data on ad performance and manipulated third-party analyses showing the effectiveness of its ads.
Shah and Outcome Health are now being sued by investors, most of its premium advertisers have fled, the company has laid off a third of its workforce and abandoned its lease of a premium downtown Chicago building for its new headquarters.
* And the alleged scam apparently took the local venture capital world by surprise…
When asked about what surprised them this year, VCs pointed to Outcome Health’s difficulties. After raising more than $500 million in May, the company now faces allegations reported in a Wall Street Journal story this fall that they misled advertisers by manipulating data and inflating the performance of ads. As a result, some of Outcome’s investors are now suing the company for fraud, and in November, the company cut its staff by more than a third.
* And now…
The state has suspended a tax credit agreement with Outcome Health — worth an estimated $6.1 million over a decade — in the wake of allegations that the tech company misled investors and advertisers.
The agreement was part of the EDGE program, short for Economic Development for a Growing Economy, which provides tax breaks for companies that promise to create jobs in Illinois. Outcome Health entered into its EDGE agreement in November 2016, when it was still known as ContextMedia, with a requirement to add at least 175 new full-time jobs in 2017 and 2018. […]
In November, big-name investors sued the company, CEO Rishi Shah and President Shradha Agarwal, alleging fraud as the company secured $487.5 million in funding and rose to a valuation of about $5.5 billion.
The investors — including units of Goldman Sachs and Google and a fund co-founded by Illinois gubernatorial candidate J.B. Pritzker — have filed court documents indicating they have received subpoenas from the Justice Department.
“Anytime that a company gets into legal trouble, almost always when the Department of Justice opens an investigation, we just suspend them for safety precautions, simply protecting taxpayer money,” said Jacquelyn Reineke, a spokeswoman for the Illinois Department of Commerce and Economic Opportunity.
Outcome Health has not collected any of its credits yet, Reineke said.
What a complete mess.
…Adding… From a flack…
I’m reaching out to request an important correction to your post “Illinois pulls EDGE credit for spiraling company after investors (including Pritzker) are subpoenaed.” My firm works with Outcome Health and there are a couple of issues I’m hoping we can clear up. Please let me know ASAP when these issues can be fixed.
This section is incorrect: “Most of its premium advertisers have fled”
Most of the company’s advertisers (including the largest) remain active. In addition, the provider network has been fully retained. Outcome Health is still the largest content network with over 95% of all content partners. Please delete this from the article.
Please also include Outcome Health’s statement, attributed to an Outcome Health spokesperson, that was included in the Chicago Tribune and Chicago Business Journal articles on the subject of the EDGE Tax Credit story:
“Outcome Health remains committed to improving healthcare outcomes for patients, creating technologies, and driving innovation in Chicago. The company is well-positioned for success with its customers, is signing-up new customers, and is committed to the ongoing expansion of its network of more than 145,000 devices at medical offices around the country.”