Silicon Valley Executive Charged In Alleged COVID-19 Testing Scam

SAN FRANCISCO, CA – A Los Gatos medical technology executive has been charged by federal prosecutors for his alleged role in the first COVID-19-related criminal securities fraud case brought by the Department of Justice, the agency said Tuesday in a news release.

Mark Schena, the 57-year-old president of Sunnyvale-based Arrayit Corporation, is accused of participating in schemes to mislead investors, manipulate the company’s stock price and conspiring to commit health care fraud in connection with the submission of over $69 million in false and fraudulent claims for allergy and COVID-19 testing, prosecutors said.

An affidavit in support of the complaint said Schena claimed Arrayit is the “only laboratory in the world that offers” revolutionary “microarray technology” that allows it to test for allergy and COVID-19 based on a drop of blood that is 250,000 times smaller than the technology touted by Theranos, the Silicon Valley company whose blood testing fraud scheme was the subject of HBO documentary.

“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 Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.

“Working together with our law enforcement partners, the Criminal Division is committed to safeguarding the integrity of the Medicare system and protecting the investing public from securities scams.”

Schena and others paid kickbacks and bribes to recruiters and doctors more than a year before the new coronavirus outbreak began to run an allergy screening test for 120 allergens (including things ranging from stinging insects to food allergens) on every patient regardless of medical necessity, and then made numerous misrepresentations to potential investors about Arrayit’s allergy test sales, financial condition, and its future prospects, prosecutors allege.

Schena and others issued press releases and tweeted about partnerships with Fortune 500 companies, government agencies and public institutions, without disclosing that such partnerships either did not exist or were of "de minimis value," prosecutors said.

As the COVID-19 crisis began to escalate in March 2020, Schena and others made false claims concerning Arrayit’s ability to provide accurate, fast, reliable and cheap COVID-19 tests in compliance with state and federal regulations, and made numerous misrepresentations to potential investors about the COVID-19 tests and Arrayit’s future prospects for COVID-19 testing.
Schena stated that repurposing allergy testing to test for COVID-19 was “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.”

Arrayit’s stock price doubled in mid-March, but Schena and others never disclosed that there were questions about the validity of its data and the accuracy of its COVID-19 test.

“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.

“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.”

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form.