Silicon Valley tech CEO sentenced to 8 years in prison following COVID and allergy test fraud scandal
The former CEO of a Silicon Valley-based tech company was sentenced to eight years in prison after lied about his company’s ability to test for COVID-19 — in a manner similar to the claims that landed former Theranos CEO Elizabeth Holmes behind bars, according to federal prosecutors.
While heading up the Arrayit Corporation, Los Altos resident Mark Schena, 60, defrauded investors through his claims that he created a “revolutionary technology” by inventing medical tests that could diagnose virtually any disease through a single drop of the patient’s blood. Schena’s sentence was announced in a news release from Ismail Ramsey, the U.S. Attorney for the Northern District of California.
Prosecutors said Schena and his publicists falsely told investors that he was the “father of microarray technology,” that he was on the shortlist for a Nobel Peace Prize and that his company could be valued at $4.5 billion.
Schena was unsuccessful in an attempt to develop a COVID test once the pandemic hit, but continued to market his test as one in an attempt to avoid bankruptcy.
Prosecutors said that Schena falsely announced his company had created a COVID test in early 2020. He told federal agents that producing COVID tests was a simple task to switch from testing for allergies to the virus because it was like a pastry chef switching from baking “strawberry pies” to “rhubarb and strawberry pies.”
The Food and Drug Administration informed Schena that Arrayit’s COVID test was “not accurate enough” to receive emergency authorization to use in the early days of the pandemic — a fact that he hid from investors and test users. Schena also led a misleading marketing campaign falsely claiming that Dr. Anthony Fauci, then-Director of the National Institute of Allergy and Infectious Diseases, mandated that patients testing for COVID be tested for allergies at the same time.
“A Silicon Valley executive exploited the pandemic for profit, ultimately endangering patients with unproven COVID-19 tests,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division.
Prosecutors also said that Schena misled investors and the public throughout the pandemic. He never revealed that Arrayit was on the verge of bankruptcy, and fraudulently displayed the company’s laboratory as “busy and high-tech” to potential investors.
Schena often put out news releases and social media statements claiming that his company had partnered with other companies, government entities and public institutions like a children’s hospital and large health-care providers. According to prosecutors, he claimed that those entities signed lucrative deals to use Arrayit COVID tests, when in reality, those deals never existed, or were minor.
Another deceptive marketing plan involved Arrayit’s allergy tests. The company claimed its tests were highly accurate in diagnosing allergies, when in fact, they weren’t diagnosis tests to begin with, prosecutors said.
In a health care scheme, Schena ordered that all patients be tested for 120 different allergens, even when there was no medical need to do so. He then submitted claims to Medicare and private health insurance companies for the unnecessary tests. With that money, he paid kickbacks to marketers.
In all, Schena submitted about $77 million worth of claims for his COVID and allergy tests. As part of his sentencing, Schena was ordered to pay $24 million in restitution. He was convicted in Sept. 2022.
“Mr. Schena’s sentencing is a fitting resolution that holds him accountable for a multimillion-dollar fraudulent scheme driven purely by greed and devoid of fiscal responsibility or concern for the patients that would ultimately use his nearly useless products,” said Director Kelly P. Mayo of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service.
Schena’s fraudulent claim about diagnosing diseases from a single drop of patient blood was similar to that of disgraced Stanford dropout Elizabeth Holmes, who is currently serving an 11-year sentence in a Texas prison after being convicted of defrauding investors.