The president of a Silicon Valley medical technology company was charged Tuesday with misleading investors by falsely claiming the company had developed a government-approved blood test for the new coronavirus — the first criminal securities fraud prosecution related to the COVID-19 pandemic, federal officials said.
Mark Schena, the president of Arrayit Corporation, was charged with one count of securities fraud and one count of conspiracy to commit health care fraud after authorities said his company billed Medicare $69 million for coronavirus and unnecessary allergy tests.
Schena did not immediately return a message seeking comment.
Schena, 57, touted that the company based in Sunnyvale had the only laboratory in the world that offered “revolutionary microarray technology” that allowed it to test for allergies and the coronavirus with the same finger-stick test kit, prosecutors said.
Beginning in 2018 and through February 2020, Schena and other employees paid bribes to recruiters and doctors to run an allergy screening test for 120 allergens ranging from stinging insects to food allergens on every patient, authorities said.
As the coronavirus pandemic began to escalate, Schena, of Los Altos, instructed patient recruiters and clinics to add its test for the coronavirus, prosecutors said.
He also is accused of publishing false claims on social media and in company emails to investors about Arrayit’s ability to provide accurate, fast, reliable and cheap coronavirus tests in compliance with state and federal regulations.
Schena told investigators he thought developing a test for the coronavirus based on his allergy test would be simple, “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.”
Arrayit never disclosed that the Food and Drug Administration informed it on April 17 that its COVID-19 test was not at an acceptable level of performance, federal prosecutors said.
The company also claimed partnerships with Fortune 500 companies, government agencies and public institutions, without disclosing they were either trivial or did not exist, federal prosecutors said.
Arrayit’s stock price more than doubled by mid-March, even as the stock market was crashing, according to court documents.
“The allure of cheap reliable alternatives to today’s standard blood tests panels has captured the imagination of the health care industry, making such alternatives a prime subject for fraudsters,” said U.S. Attorney David L. Anderson of the Northern District of California.