Federal prosecutors have brought charges against a Los Altos man for alleged securities and health care fraud related to his COVID-19 and allergy testing company, according to a complaint in the Northern District of California.
Mark Schena, 57, is the president of the Sunnyvale-based Arrayit Corporation, which allegedly paid kickbacks and bribes to both recruiters and doctors from 2018 to 2020 to conduct allergy tests using Arrayit’s products on patients regardless of their medical necessity.
Arrayit allegedly claimed to both potential investors and medical professionals that the company’s “microarray technology” could screen for roughly 120 allergens with a drop of blood roughly 250,000 times smaller than the minute amount touted by the now-defunct health technology company Theranos.
“The allure of cheap, reliable alternatives to today’s standard blood test panels has captured the imagination of the health care industry, making such alternatives a prime subject for fraudsters,” U.S. Attorney for the Northern District of California David Anderson said in a statement. “The scheme described in the complaint, in which the defendant allegedly leveraged this allure by appending the fear of the COVID-19 pandemic, amounts to a cynical multi-million-dollar hoax.”
Once the COVID-19 pandemic began in March 2020, Arrayit also allegedly made false claims about its ability to test for COVID accurately, reliably and cheaply, according to the complaint, which was unsealed last week.
Schena has been charged with one count of securities fraud and one count of conspiracy to commit health care fraud. According to the complaint, Arrayit submitted more than $69 million in false claims for allergy and COVID testing.
According to the U.S. Department of Justice, the charges brought against Schena represent the first pandemic-related securities fraud charge federal prosecutors have pursued.
“This defendant allegedly defrauded Medicare through illegal kickbacks and bribes, and then turned to exploiting the pandemic by fraudulently promoting an unproven COVID-19 test to the market,” said Brian Benczkowski, an assistant attorney general with the Justice Departments’s Criminal Division.
According to the complaint, Schena compared Arrayit’s switch from testing for allergens to testing for COVID to a baker who converts from selling “strawberry pies” to selling “rhubarb and strawberry pies.”
The company’s stock price surged in March 2020, but Schena and other executives with Arrayit allegedly failed to disclose accurate data about how accurately it could test for COVID, according to federal prosecutors.
People with information about potential COVID-related fraud or attempted fraud are encouraged to contact the Justice Department’s National Center for Disaster Fraud at (866) 720-5721 or by visiting https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.