By Jonathan Stempel
(Reuters) – Outcome Health, which streams pharmaceutical ads on televisions and computer tablets it installs in doctors’ offices, agreed to pay $70 million to end a U.S. criminal probe into whether it defrauded clients by selling ad inventory it did not have.
In a statement on Wednesday, the U.S. Department of Justice said Chicago-based Outcome entered a three-year non-prosecution agreement where it admitted that former executives and employees overbilled clients, which were mostly pharmaceutical companies, in a scheme that ran from 2012 to 2017.
The Justice Department also said Outcome admitted to overstating revenue, enabling it to raise $972.5 million of equity and debt financing, including from affiliates of Goldman Sachs Group Inc, Google parent Alphabet Inc and Pritzker Group, and obtain a $5 billion valuation by 2017.
“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,” Principal Deputy Assistant Attorney General John Cronan said in a statement.
The Justice Department said the settlement reflected Outcome’s cooperation and “extensive remedial measures,” and that the former executives and employees involved in the wrongdoing had left the company.
It also said $65.5 million of the $70 million has already been paid out, and that Outcome is not required to compensate its lending and investing victims, though many lenders and investors are now among its owners.
Outcome said in May it had sold a majority stake to private equity firm Littlejohn & Co as part of a recapitalization.
Matt McNally, Outcome’s chief executive since June 2018, said the company was pleased to settle.
“Over the past two years, Outcome Health has focused on doing right by our customers,” he said in a statement. “We are a completely new company.”
(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot)