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Purdy, a former chief operating officer of Outcome Health, and co-founders Rishi Shah and Shradha Agarwal are in the 10th week of a fraud trial that could go to a jury Wednesday.
Jurors will be asked to sort through more than 1,500 documents in the case when they decided whether Purdy, Shah and Agarwal are individually guilty of knowingly participating in a fraud scheme that caused the once-high-flying startup to unravel six years ago. Drug companies, such as AbbVie, repeatedly were overbilled for advertising on more TVs and tablet computers than Outcome Health actually had in its network of doctors’ offices, prosecutors say. The overbilling inflated the company’s financials, which investors such as Goldman Sachs and Google relied upon to invest $488 million in the company.
Poulos pointed to an e-mail in which Purdy was informed of significant inventory shortfalls in the number of tablet computers Outcome Health was promising to drug companies that paid to advertise across a network of doctors’ offices. Purdy responded, “If we prioritize properly, we can easily hit our inventory needs.”
Poulos said that was proof Purdy believed the company would meet its goals and fulfill its promises to customers — and proves he didn’t commit fraud.
It’s a complicated case, spanning six years of events, for both sides. Among the challenges facing prosecutors is proving Purdy, Shah and Agarwal each were involved in the fraud scheme, even though they had different roles at the company. Shah was CEO, Agarwal was president and Purdy’s titles included both chief operating officer and chief financial officer.
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All three defense teams have painstakingly attacked by the government’s key witness, former senior executive Ashik Desai, who pleaded guilty and agreed to testify in exchange for a sentencing recommendation from prosecutors that he receive no more than 10 years in prison. Purdy, Shah and Agarwal each face up to 30 years in prison if they’re convicted.
Poulos, like the other defense attorneys in the case, has said Desai came up with the fraud scheme and lied to conceal it from the defendants, meaning that they didn’t knowingly participate in the scheme.
A key piece of evidence against Purdy is an e-mail Desai forwarded to him involving the falsification of data provided to auditors who were verifying whether Outcome Health had delivered on particular contracts. An analyst working for Desai asked how much of an underdelivery they could show in ad campaigns being reviewed by auditors. Desai forwarded the e-mail to Purdy and asked for guidance.
Poulos said Purdy was on vacation when the e-mail was sent. Purdy responded, “Should we jump on the phone here today? I haven’t seen the data so hard for me to understand what exactly is the best way to present it.”
By then, Desai responded, “I think we are okay” and the analyst had sent the revised figures to auditors.
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Desai testified that he spoke with Purdy by phone about altering the figures, deciding that the gaps in inventory that ran as high as 50% should be reduced to less than 10%. But on cross-examination, Poulos produced phone records that didn’t show calls between the two.
“(Prosecutors) made same mistake everybody made about Ashik Desai: They believed him,” Poulos said. “(Desai) tells them about a single call he had with my client. They didn’t check the phone records.”
Poulos also has repeatedly stressed how young and inexperienced Purdy was, another common theme for all three defendants. “What the government’s case boils down to . . . 24-, 25-year-old Brad should have sniffed (the fraud) out and known what was happening.”
This story first appeared in Crain’s Chicago Business.
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