The president of a California company called Arrayit has been arrested on fraud charges for allegedly misleading investors and paying for patient referrals for the company's blood tests for allergy and COVID-19 detection.
Mark Schena was arrested on charges that he and Arrayit allegedly misled investors, manipulated the company's stock price, and conspired to commit healthcare fraud by submitting over $69 million in fraudulent claims for allergy and COVID-19 tests. The arrest was announced in a June 9 press statement by the U.S. Attorney's Office for the Northern District of California.
Schena and Arrayit claimed that the Sunnyvale, CA, company had developed a blood test based on "microarray technology" capable of diagnosing to up to 120 allergens by analyzing a drop of blood that is 250,000 times smaller than the technology touted by Theranos, the Silicon Valley company that collapsed in scandal in 2018.
Arrayit began offering the allergy tests in February 2018, and for the next two years allegedly paid kickbacks and bribes to doctors and recruiters for patient referrals to its allergy screening service. The company claimed to be the only lab in the world that offered the technology, and "made numerous representations to potential investors" about the company's allergy test revenues, financial condition, and future prospects, according to the U.S. Attorney's Office.
In March 2020, Arrayit began to pivot to address the COVID-19 pandemic, according to federal investigators. Schena and others at the company "made false claims concerning Arrayit's ability to provide accurate, fast, reliable, and cheap COVID-19 tests," investigators said. Schena allegedly claimed it was easy for the company to switch from allergy testing to COVID-19 tests, comparing the move to a pastry chef switching from selling strawberry pies to selling strawberry and rhubarb pies, according to the U.S. Attorney's Office press statement.
Arrayit's stock price doubled in mid-March, but Schena and others did not disclose that there were concerns about the validity of data produced by the company and the accuracy of its COVID-19 test, investigators said.
Investigators are charging Schena with defrauding Medicare by allegedly paying illegal kickbacks and bribes, and then "exploiting the pandemic by fraudulently promoting an unproven COVID-19 test to the market," according to the statement. He faces one count of securities fraud and one count of conspiracy to commit healthcare fraud.