Less than one month after a Wall Street Journal article drew attention to Outcome Health employees who allegedly misled pharma advertisers about advertising data and performance, some major advertisers have stopped doing business with the company.
Outcome Health installs screens in doctors’ offices with educational healthcare content and generates revenue from advertising, particularly from pharma companies. CEO Rishi Shah said in a statement that it is reviewing more than 250 ad campaigns that ran on its network this year, and plans to turn files over to a third-party auditor for independent verification, according to The Chicago Tribune.
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Now some equity investors who took part in a $500 million Series A round for the company earlier this year are suing Outcome Health. A complaint filed in New York State Supreme Court alleges that the cofounders CEO Rishi Shah and President Shradha Agarwal and the company misled them with false data and financial reports. The lawsuit calls for Shah, Agarwal and Outcome Health to return their investments in exchange for tendering their shares.
Among those investors are funds managed by an investment unit of Goldman Sachs Group Inc., Google parent Alphabet Inc., and Pritzker Group Venture Capital.
Of the funds raised in the Series A, $225 million was to be given to Shah and Agarwal, according to the suit. That portion was to be held in a subsidiary of Outcome Holdings called Gravitas. But the complaint alleges that Shah took steps to move funds, and it asks the court to order that those funds remain available.
Shah and Agarwal, issued the following statement on the topic of the lawsuit in an email from a spokesman:
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“We want to use the capital we would be entitled to take out personally instead for the benefit of the business, to further capitalize Outcome Health based on our confidence and commitment to the company and its mission. We have been completely transparent with employees, customers and investors, and always operated with complete integrity. The equity investors led by Goldman Sachs are misusing the court system to advance their own short-term, self-interest of winning an advantage over debt-holders — all to the detriment of the business, its employees and customers.”
Earlier this year to address some of the issues raised in The Wall Street Journal story, the company hired Winston & Strawn’s Executive Chairman Dan Webb to review concerns raised about the past conduct of certain employees. Shah noted at the time that if the company learns that a customer was misled, it will share that promptly with the customer and remedy the situation immediately.
Shah also told The Wall Street Journal in an email that it has had growing pains “as every high growth company does” as it’s scaled from 4,000 to 40,000 doctors’ offices.
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