Investors sue Outcome Health for alleged fraud, breach of contract: 6 things to know

A group of investors sued Outcome Health and its two founders Nov. 7, alleging the Chicago-based tech and advertising startup engaged in fraud and breach of contract, The Wall Street Journal reports.

Here are six things to know about the lawsuit.

1. The lawsuit, filed in New York State Supreme Court in New York County, follows an Oct. 13 The Wall Street Journal investigation that alleged a subset of employees at Outcome Health manipulated pricing and sales information to mislead pharmaceutical advertisers.

2. The investors, who collectively invested almost $500 million in Outcome Health about eight months ago, include Goldman Sachs Group's asset management arm, Alphabet's CapitalG unit, Norwest Venture Partners and Laurene Powell Jobs' investment arm Emerson Collective Investments.

3. The investors said they requested access to Outcome Health's data and "discovered manipulations consistent with those reported by The Wall Street Journal," according to the lawsuit. The lawsuit also claims the company's founders "either knew of, or recklessly disregarded" the alleged data manipulation.

4. The lawsuit claims Outcome Health provided false data and financial reports prior to the equity investors' $487.5 million investment. The investors also claim they are entitled to reclaim their respective investments, and that the $225 million placed in a separate account for the founders should be frozen.

5. In initial The Wall Street Journal investigation, Outcome Health officials noted an independent counsel would review the allegations of information manipulation. Lanny Davis, a lawyer on behalf of Outcome Health, said the company put three employees on paid leave during the review.

"The company strongly denies the practice of misreporting of campaign information," Mr. Davis told The Wall Street Journal. "The company's policy is to accurately report information to every customer on every program."

6. In an emailed statement to Becker's Hospital Review, Outcome Health co-founders Rishi Shah and Shradha Agarwal said, "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."

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