Sunnyvale medical technology executive charged with coronavirus-related fraud

Federal authorities unsealed charges Tuesday against the president of Sunnyvale medical technology company Arrayit, alleging that he attempted to mislead investors and inflate the company stock price with fraudulent claims about the company’s coronavirus testing and other testing capabilities.

The U.S. attorney’s office in San Francisco charged Mark Schena, 57, with one count of securities fraud and one count of conspiracy to commit health care fraud. The charges relate to a scheme that allegedly saw Schena and others submit $69 million in false and fraudulent claims for allergy and coronavirus testing, including $5.9 million in fraudulent charges submitted to the federal Medicare program.

In a statement, federal authorities called the case “the first criminal securities fraud prosecution related to the COVID-19 pandemic that has been brought by the Department of Justice.”

Arrayit did not immediately return calls and emails requesting comment. Calls to the Schena family were also not returned. Mark Schena is married to Arrayit CEO Rene Schena, according to corporate filings.

Federal authorities said the alleged scheme began in 2018 when Mark Schena bribed doctors and others and submitted claims to the federal Medicare program for fraudulent allergy tests, many of which were not medically necessary.

Schena misrepresented Arrayit’s “allergy test sales, financial condition, and its future prospects,” according to an affidavit attached to the criminal complaint signed by U.S. Postal Service inspector Anna Hallstrom.

Schena and others at the company also sent out press releases and were active on social media promoting partnerships with Fortune 500 companies and government agencies and public institutions, “without disclosing that such partnerships either did not exist or were of de minimis value,” federal authorities said.

In March, Schena began to claim the company could also test for the coronavirus in compliance with state and federal regulations, according to federal authorities. Schena and others also misrepresented the company’s coronavirus testing capabilities and prospects to potential investors regarding the tests, they said.

Schena also used the cover of the pandemic to obtain the information of people receiving Medicare benefits to further the allergy testing scheme, according to the affidavit.

“Schena offered an Arrayit COVID-19 test in order to obtain Medicare beneficiary information that then was used to submit false and fraudulent claims for an unrelated and far more expensive allergy test for 120 allergens,” Hallstrom, the postal inspector, said.

The company’s stock price doubled in March from $0.02 to $0.04.