back to article It's 2019 so, of course, there's alleged ad fraud to the tune of $1bn in tech pushed to doctors

Four execs from a US medical tech upstart have been charged with bilking investors to the tune of more than $1bn. Outcome Health's co-founder Rishi Shah, its former president Shradha Agarwal, ex-CFO Brad Purdy, and Ashik Desai, who used to be veep of sales, are accused of cooking the company's books – specifically, pump up its …

  1. Doctor Syntax Silver badge

    "This allowed Outcome to both overcharge advertisers for campaigns"

    OK, I get this, they're in the advertising industry.

    But why should overcharging advertising be cheating the advertising company's investors? They should have received the dividends. Something doesn't quite link up here.

    1. diodesign (Written by Reg staff) Silver badge

      Just read the next part of the sentence

      "inflated the business's reported revenues"

      If you, allegedly, juice up the ad numbers, in terms of ads served and revenue collected, you give investors an inaccurate picture of the business's performance, fooling them into shoveling money into a startup that isn't doing as well as it claimed.

      Also investors don't take a dividend at this stage: it's not a public company.

      I'll make it clearer for you.

      C.

    2. katrinab Silver badge

      They paid more for the shares than they were worth, as those are based on projected future revenues.

      1. W.S.Gosset Silver badge

        Couple that with special pre-IPO provisions for founders/early investors to "release" part of their equity back to them in cash in the event of valuation achieving specified milestones. Not standard, but does happen.

        So a new round of investors comes in, the amount they pay for the %equity they get implies the Valuation (v= $cashpaid / %eq), and the founders can get their cash if the valuation-trigger is passed. So they can get cash out by bullshitting to pump up the valuation.

  2. Kevin McMurtrie Silver badge

    Party like it's 1999

    I worked at PointCast when it was exploring this around the year 1997. The numbers didn't work back then even though it was a unique way to reach viewers and grossly inflated ad reporting was about to come into fashion. There must be a new generation of suckers believing that highly invasive advertising works.

    1. phuzz Silver badge

      Re: Party like it's 1999

      "a new generation of suckers believing that highly invasive advertising works."

      As far as I can tell, advertising doesn't work on marketing types any better than anyone else (that is to say, it doesn't really do much at all), so I can only assume that they must think that all of their customers are naive fools.

  3. Anonymous Coward
    Anonymous Coward

    There are no good guys in this story...

    From the upstart execs at Outcome Health to the advertisers to the pharmaceutical companies to the doctors that allowed the crap in their waiting rooms and offices.

    My question is: Why only prosecute the exec's at Outcome Health?

    1. Jimmy2Cows Silver badge

      Re: There are no good guys in this story...

      Welcome to the capitalist West. Distasteful as the other parties' actions may be, at this point it's only Outcome Health's actions that appear illegal.

  4. iron Silver badge

    "The charges announced today demonstrate that lies and deception cannot serve as the basis for any company, including start-up companies, to falsely grow revenue for additional capital and private gain."

    Tell that to Uber.

  5. Claverhouse Silver badge
    Mushroom

    Standard M.O.

    This allowed Outcome to rip off advertisers – by charging them for ad views that never happened – and artificially inflate its reported revenues, making it fraudulently more appealing to potential investors than it really ought to be, according to court documents. The investors listed in the indictment include three unnamed venture capital firms and six banks.

    Aren't Advertisers created to be fleeced ?

  6. TrumpSlurp the Troll Silver badge
    Paris Hilton

    One point I haven't seen explained

    Execs take massive dividend payments out of company.

    Execs pay substantial tax on dividends.

    Court decides payments were fraudulent and orders restitution.

    Do the execs pay back gross or net?

    Does the Government return the tax, or hang onto it?

    Logically when the income is revoked the tax is no longer due and is refunded to be part of the restitution. However logic does not always apply.

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