A Los Gatos man has been arrested and faces possible prison time for allegedly taking advantage of the ongoing coronavirus pandemic by submitting millions of dollars in fake insurance claims.
Mark Schena is the 57-year-old president of Arrayit Corporation, a medical technology company based in Sunnyvale that does allergy testing.
According to a criminal complaint unsealed Tuesday, Schena claimed his company had developed a fast, cheap coronavirus test using the same pinprick blood samples it used to test for allergies. That supposed news sent the company’s stock soaring. The FDA ultimately told the company its coronavirus test didn’t pass muster and the SEC temporarily suspended trading, yet Schena didn’t disclose the news to investors or customers.
Schena allegedly said it was simple to develop a coronavirus test, comparing switching from allergy testing to coronavirus testing to a pastry chef pivoting from strawberry pies to rhubarb and strawberry pies.
As he was marketing the coronavirus test, Schena allegedly directed patient recruiters and clinics to bundle Arrayit’s much more expensive allergy test with its COVID-19 test, regardless of whether it was medically necessary. That furthered a pre-existing scheme, prosecutors said.
Under that scheme, the company allegedly submitted fake or unnecessary allergy test claims to Medicare by paying illegal kickbacks and bribes to doctors and recruiters. At least one physician has agreed to plead guilty to one count of conspiracy to commit health care fraud.
“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 David Anderson of the Northern District of California 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.”
In total, the complaint alleges, the company submitted more than $69 million in false claims for testing. Schena faces one count of securities fraud and one count of conspiracy to commit health care fraud.
The case is the first instance of criminal securities fraud prosecution related to the COVID-19 pandemic brought by the Justice Department.
Arrayit did not immediately respond to a request for comment.
“Investigating COVID-19 fraud scams billed to federal health programs – such as those charged here – are a top priority for our agency,” Special Agent in Charge Steven Ryan for the Office of Inspector General of the U.S. Department of Health and Human Services said in a statement. “The ongoing public health crisis has spawned a rash of fraudulent schemes; therefore, we will continue working with law enforcement partners to protect beneficiaries, programs and taxpayers.”