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Illinois suspends tech company's agreement for tax breaks

The state has suspended a tax credit agreement with Outcome Health – worth an estimated $6.1 million over a decade – in the wake of allegations that the tech company misled investors and advertisers.

The agreement was part of the EDGE program, short for Economic Development for a Growing Economy, which provides tax breaks for companies that promise to create jobs in Illinois. Outcome Health entered into its EDGE agreement in November 2016, when it was still known as ContextMedia, with a requirement to add at least 175 new full-time jobs in 2017 and 2018.

Outcome Health, which has been considered a star on Chicago’s tech scene, places screens in doctor’s offices that run educational content about health topics and advertisements from drug companies.

In October, The Wall Street Journal reported Outcome Health employees allegedly had misled advertising clients regarding their ads’ performance.

In November, big-name investors sued the company, CEO Rishi Shah and President Shradha Agarwal, alleging fraud as the company secured $487.5 million in funding and rose to a valuation of about $5.5 billion.

The investors – including units of Goldman Sachs and Google and a fund co-founded by Illinois gubernatorial candidate J.B. Pritzker – have filed court documents indicating they have received subpoenas from the Justice Department.

“Anytime that a company gets into legal trouble, almost always when the Department of Justice opens an investigation, we just suspend them for safety precautions, simply protecting taxpayer money,” said Jacquelyn Reineke, a spokeswoman for the Illinois Department of Commerce and Economic Opportunity.

Outcome Health has not collected any of its credits yet, Reineke said.

Outcome Health spokesman John Eddy said in a statement Tuesday that the company “remains committed to improving health care outcomes for patients, creating technologies, and driving innovation in Chicago.”

“The company is well-positioned for success with its customers, is signing up new customers, and is committed to the ongoing expansion of its network of more than 145,000 devices at medical offices around the country,” Eddy said.

The company wouldn’t be eligible for any tax credits until achieving investment and job creation requirements, and the agreement allows up to 2 years for it to hit those targets.

Under the EDGE program, companies lose credits for time spent under suspension.

The company sought the agreement for business development at 515 N. State St., where it signed a lease on 394,000 square feet of space set to become its new Chicago headquarters. The deal was one of the largest office leases signed in Chicago in recent years. Outcome Health had planned to put its name on the building and add 2,000 employees after it moved from a space that was a fraction of the size.

After the Wall Street Journal report in October, pharmaceutical advertisers pulled tens of millions of dollars in ads from the company, and some hospitals have backed away. More than one-third of Outcome Health’s 535 employees took a voluntary buyout in November.

Late last month, Outcome Health called off plans to move into the State Street space.


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