Los Altos resident Mark Schena has been indicted on charges of securities fraud and conspiracy to commit health-care fraud for allegedly misleading investors and the medical community on behalf of biotechnology company Arrayit Corp.
According to documents unsealed earlier this month, Schena, Arrayit’s CEO, was responsible for making false claims to investors about the efficacy of the company’s allergy – and later
COVID-19 – testing technology and for efforts to manipulate the company’s stock price.
Arrayit offered microarray blood testing first for food and environmental allergens before purporting to expand to COVID and other test types. Schena told Fox 2 in a segment that Arrayit could test for approximately 125 allergens with only four to five drops of blood and turn the results around in 24-48 hours.
“One finger stick, it’s just that simple,” Schena said on-air.
Schena’s indictment paints a more complicated picture. According to court documents, around 2015, the company began “deceiving purchasers and sellers of Arrayit’s securities, and the market at large about the performance of Arrayit’s business, Arrayit’s financial condition” and “the nature and composition of Arrayit’s products.”
Also outlined in the indictment is a list of false claims made by Schena and the company, often on the company’s social media pages, aiming to paint a picture of a successful and influential biotechnology firm. For example, in 2018, the company falsely claimed that it had entered into an agreement to provide allergy tests to Sutter Health via doctors in the Sutter Health-affiliated Palo Alto Medical Foundation.
According to findings from the U.S. District Court for the Northern District of California, Schena secured and maintained lab certifications from state and federal agencies while paying bribes to secure patient samples to receive payment from Medicare, Medicaid and private insurance companies, regardless of whether the tests were medically necessary.
In total, Arrayit submitted approximately $69 million in claims for allergy tests that were “obtained through illegal kickbacks and bribes, medically unnecessary, ineligible for reimbursement, and/or not provided as represented,” the indictment alleges.
When the pandemic hit, Schena allegedly used his existing allergy test scheme to further enrich himself and the company. The charges claim Schena obtained orders for COVID tests before Arrayit’s test had been developed or approved.
If convicted on the charges of health-care and securities fraud, Schena could be subject to 10 years imprisonment and a $5 million fine and 20 years imprisonment and a $5 million fine, respectively.
Jason Nielsen, one of Arrayit’s stock traders, pleaded guilty to securities fraud last week. Nielsen admitted to placing orders for the company’s stock that he had no intention of completing to artificially inflate Arrayit’s stock price.
The claims against Schena echo those made against Elizabeth Holmes of Theranos, which misrepresented its blood-testing technology and resulted in her January conviction on criminal fraud charges.
Schena’s trial is scheduled to begin July 26.
