SAN FRANCISCO –A federal grand jury handed down a superseding indictment against the president of California-based medical technology company Arrayit Corporation, Mark Schena, in connection with the submission of over $70 million in false and fraudulent claims for allergy and COVID-19 testing. Additionally, a criminal information was filed against each of Paul Haje, Arrayit’s Vice President of Marketing, and Marc Jablonski, president of an Arizona-based marketing organization, in related schemes. The new charges are part of coordinated law enforcement actions filed in seven federal districts throughout the United States in response to alleged health care fraud schemes that are said to have exploited the COVID-19 pandemic. The U.S. Department of Justice estimates that over $143 million in false billings were generated in connection with these cases. A press release issued by the U.S. Department of Justice summarizing the nationwide coordinated law enforcement actions can be found here.
The charges in the superseding indictment and informations filed in the Northern District of California were announced by Acting United States Attorney Stephanie M. Hinds; FBI Special agent in Charge Craig D. Fair; Acting Assistant Attorney General Nicholas L. McQuaid of the Department of Justice’s Criminal Division; Special Agent in Charge Steven J. Ryan for the Office of Inspector General of the U.S. Department of Health and Human Services; Inspector in Charge Delany De Leon-Colon of the U.S. Postal Inspection Service (USPIS) – Criminal Investigations Group; Special Agent in Charge Kim R. Lampkins of the Veterans Affairs Office of Inspector General (VA OIG); and Special Agent in Charge Bryan D. Denny, Defense Criminal Investigative Service, Western Field Office.
According to the superseding indictment and additional documents previously filed in the case, beginning 2015 and continuing to February 2020, Schena, 58, of Los Altos, Calif., engaged in a scheme to defraud Arrayit’s investors and the public by, among other things, overstating Arrayit’s status and influence and by artificially increasing and maintaining the share price of Arrayit securities. Schena and others allegedly paid kickbacks and bribes to recruiters and doctors 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. Documents filed in the case allege Schena touted Arrayit as the “only laboratory in the world that offers” revolutionary “microarray technology” allowing Arrayit 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. Schena stated that it was simple to develop a test for COVID-19 because the switch from testing for allergies to testing for COVID-19 was “like a pastry chef” who switches from selling “strawberry pies” to selling “rhubarb and strawberry pies.” 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.
The superseding indictment bolsters previous charges filed against Schena by adding new counts of health care fraud and conspiracy allegations. Specifically, the superseding indictment alleges Schena conspired with others to pay kickbacks, administer fraudulent and unnecessary testing, and to make false and fraudulent statements about the existence, regulatory status, and accuracy of an Arrayit COVID-19 test. According to the superseding indictment, the conspiracy allegedly sought to induce the ordering of the Arrayit COVID-19 test and to bundle, i.e., require combination with, the COVID-19 test and Arrayit’s medically unnecessary allergy test. The COVID-19 test results were not provided in a timely fashion and were not reliable in detecting COVID-19.
The information filed against Haje alleges he conspired with Schena to solicit and pay kickbacks and bribes in return for services such as ordering allergy testing for beneficiaries and inducing the referral of members. In addition, the information alleges Haje caused the submission of fraudulent claims to insurers including Medicare, Medicaid, TRICARE, and commercial insurers as well as diverted the proceeds of the illegal kickback scheme for his personal use and benefit as well as to further the illegal kickback conspiracy.
Similarly, the information filed against Jablonski, the president of an Arizona-based marketing organization, alleges he conspired to defraud the United States and agreed to pay and receive illegal health care kickbacks. Specifically, the information alleges Jablonski solicited and received kickbacks and bribes from Schena in exchange for arranging for medical practitioners to collect blood samples and order allergy testing for beneficiaries and members to be conducted by Arrayit. The information also alleges Jablonski paid illegal kickbacks and bribes to other marketers and that he illegally maximized the amount of claims for reimbursement Arrayit would send to insurers by causing medical practitioners to order unnecessary and otherwise improper allergy testing by Arrayit.
Superseding indictments and criminal informations contain allegations only and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The superseding indictment charges Schena with conspiracy to commit health care fraud and wire fraud, in violation of 18 U.S.C. § 1349; health care fraud, in violation of 18 U.S.C. § 1347; conspiracy to pay illegal kickback, in violation of 18 U.S.C. § 371; payment of illegal kickbacks, in violation of 18 U.S.C. § 220; and securities fraud, in violation of 15 U.S.C. §§ 78j & 78ff and 17 C.F.R. 240.10b-5. Haje and Jablonski are both charged with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371. Haje also is charged with conspiracy to commit health care fraud, in violation of 18 U.S.C. § 1349. If convicted, the defendants face the following statutory maximum sentences:
The court also may order additional terms of supervised release, fines, forfeitures, and restitution, however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
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 at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing Victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.
Assistant U.S. Attorney William Frentzen of the Northern District of California, Acting Principal Assistant Chief Justin Weitz of the Market Integrity and Major Fraud Unit of the Fraud Section, and Assistant Chief Jacob Foster of the National Rapid Response Strike Force are prosecuting the case. This case was investigated by HHS-OIG’s San Francisco Regional Office and Detroit Regional Office, USPIS, the FBI, VA-OIG and DCIS. The department appreciates the assistance of the Securities and Exchange Commission.
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