(KRON) — The president of a Silicon Valley-based medical technology company was sentenced on Wednesday to eight years in prison and ordered to pay $24 million in restitution for using a global pandemic to fuel a “massive fraud,” according to the U.S. Attorney’s Office.
Mark Schena, 60, of Los Altos, used his company, Arrayit Corporation, to defraud investors and submit $77 million in claims for COVID-19 and allergy testing, prosecutors said. A federal jury convicted Schena on Sept. 6, 2022, in San Jose.
“Schena engaged in a scheme to defraud Arrayit’s investors by claiming that he had invented a revolutionary technology to test for virtually any disease using a single drop of blood from a finger stick sample,” federal prosecutors wrote.
Schena’s fraud scheme mirrors a similar fraud made by disgraced Theranos founder Elizabeth Holmes. Holmes, who was convicted of fraud and is currently in federal prison, was a rising star in Silicon Valley when she claimed Theranos’ blood testing technology could work with just a few drops of blood.
In meetings with investors, Schena and his publicist claimed that Schena was the “father of microarray technology” and that he was on the shortlist for the Nobel Prize, according to the U.S. Attorney’s Office. Schena also falsely represented to investors that Arrayit could be valued at $4.5 billion. But like Theranos, Arrayit was on the verge of bankruptcy.
“Schena put profit over public safety. He used the global pandemic as a backdrop to fuel a kickback scheme and a massive fraud upon investors and people searching for better health care during a time of great uncertainty,” said U.S. Attorney for the Northern District of California Ismail Ramsey.
“Even in times of national crisis, our office will ensure that Silicon Valley remains a place where innovation and ingenuity – and not fraud and deceit – fuel vibrant markets for investors and inventors,” Ramsey said.
“A Silicon Valley executive exploited the pandemic for profit, ultimately endangering patients with unproven COVID-19 tests,” said Assistant Attorney General Nicole Argentieri of the Justice Department’s Criminal Division. “The Department of Justice is committed to protecting the people of this nation by investigating and prosecuting those who put public health at risk and use global emergencies to line their own pockets.”
In early 2020, Schena falsely announced that Arrayit “had a test for COVID-19,” prosecutors said. Schena told federal agents that it was simple to develop a test for COVID because the switch from testing for allergies to testing for COVID was like a pastry chef who switches from selling strawberry pies to selling rhubarb and strawberry pies, prosecutors said.
Eric Shen of the U.S. Postal Inspection Service said, “In this case, Mark Schena and the Arrayit Corporation were already involved in deceiving the public before the COVID-19 pandemic hit. When the pandemic hit, the company then attempted to develop a COVID-19 antibody test but were unsuccessful.”
Director Kelly Mayo of the Department of Defense Office of Inspector General said Arrayit’s products were “nearly useless.”
According to the U.S. Attorney’s Office, Schena lulled investors who were concerned that the company might be a “scam” by engaging in television appearances and filming videos that fraudulently portrayed the laboratory as busy and high-tech. Schena also issued false press releases and public statements on social media that Arrayit had entered into lucrative partnerships with companies, government agencies, and public institutions.
Schena also orchestrated an illegal kickback and healthcare fraud scheme that involved submitting fraudulent claims to Medicare and private insurance.
“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 … concern for the patients that would ultimately use his nearly useless products,” Mayo said.
Schena concealed from investors and patients that the FDA had informed him that the Arrayit test was not accurate, according to prosecutors.
If you believe you were a victim who invested in Arrayit or took a COVID-19 test prepared or marketed by Arrayit, go to the DOJ’s website to file a claim.
Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 888-549-3945 or by emailing Victimassistance.firstname.lastname@example.org.