Chicago, Illinois - ContextMedia Health LLC, which operates under the trade name Outcome Health (Outcome), a digital provider of medical information and advertising in doctors’ offices, has agreed to a resolution with the Department of Justice by which it will pay $70 million to victims of a fraud scheme that targeted its clients, lenders and investors.
Outcome, a privately held company headquartered in Chicago, Illinois, admitted in resolution documents that from 2012 to 2017, former executives and employees of the company perpetrated a scheme to defraud its clients—most of which were pharmaceutical companies—by selling advertising inventory that it did not have.
“Outcome Health deceived its lenders and investors, and overbilled its clients, by fraudulently misrepresenting both the quality and quantity of its advertising services and concealing those misrepresentations from auditors,” said Principal Deputy Assistant Attorney General John P. Cronan. “Today’s resolution demonstrates the Criminal Division’s unyielding commitment to making whole victims of fraud.”
“Outcome’s payment of $70 million is an appropriate resolution for the corporate entity given the misconduct of executives and employees acting on its behalf,” said Assistant U.S. Attorney Brian Hayes, Chief of the Criminal Division for the Northern District of Illinois. “This resolution demonstrates that there are significant consequences for businesses whose executives and employees engage in fraud.”
“For five years, employees of Outcome Health purposely failed to deliver on advertising campaigns and engaged in a pattern of misrepresentations to conceal their fraud,” said Special Agent in Charge Emmerson Buie Jr. of the FBI’s Chicago Field Office. “This resolution demonstrates the FBI’s commitment to working with its prosecutorial and investigative partners to ensure that justice is done.”
“Today’s agreement holds a healthcare technology company accountable for systematically committing fraudulent business practices for financial gain over many years,” said Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation’s Office of Inspector General (FDIC-OIG). “The FDIC-OIG is committed to investigating such corporate corruption which harms lending institutions, investors, customers, and competitors. We remain dedicated to working with our law enforcement partners to investigate those who commit such misconduct.”
Outcome admitted that as a result of its practice of selling clients inventory it did not have, it under-delivered on its advertising campaigns. Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full. To conceal the under-deliveries, Outcome employees at the time falsified affidavits and proofs of performance to make it appear the company was delivering advertising content to the number of screens in its clients’ contracts. Outcome executives and employees during that time also inflated patient engagement metrics regarding how frequently patients engaged with Outcome’s devices. Furthermore, an executive at the time altered a number of studies presented to clients to make it appear that the campaigns were more effective than they actually were, Outcome admitted.
Outcome further admitted that its under-delivery on advertising campaigns resulted in a material overstatement of its revenue for the years 2015 and 2016. The company’s outside auditor signed off on the 2015 and 2016 revenue numbers because executives and employees at the time fabricated data to conceal the under-deliveries from the auditor. Outcome used the inflated revenue figures in its 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017, it admitted.
The Department and Outcome entered into a non-prosecution agreement (NPA) to resolve this matter. Outcome’s obligations under the agreement will have a term of three years, unless the term is modified by the government. Under the terms of the NPA, Outcome and its current parent company, Outcome Health LLC (Outcome Parent), committed to compensating the pharmaceutical client victims in the amount of $70 million, approximately $65.5 million of which has already been made through a combination of cash payments and in-kind services, and to set aside an additional $4.5 million to compensate any additional pharmaceutical clients who have not yet been made whole. The NPA does not require Outcome and Outcome Parent to provide compensation to lenders and investors who were victims of Outcome’s scheme, however, because many of those lenders and investors are now the companies’ new owners. Under the terms of the NPA, Outcome and Outcome Parent also agreed to cooperate with the government’s ongoing investigation of individuals, to report evidence or allegations of U.S. federal law to the Department, and to enhance their existing compliance program and internal controls, where necessary and appropriate, to ensure they are designed to detect and deter violations of U.S. federal law.
The Department reached this resolution based on a number of factors, including Outcome and Outcome Parent’s ongoing cooperation with the United States and for taking extensive remedial measures. For example, Outcome no longer employs the executives or employees who were involved in the wrongdoing, and Outcome and Outcome Parent made significant improvements to address and improve the reliability of reporting on advertising campaign delivery, including hiring third parties to audit all of their advertising campaigns.
The FBI and FDIC-OIG are investigating the case. Assistant Chief William E. Johnston and Trial Attorney Kyle C. Hankey of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Matthew F. Madden of the Northern District of Illinois are prosecuting the case.