Superseding Indictment — United States v. Mark Schena, Northern District of California (Document 53)
Summary
A superseding grand jury indictment filed May 18, 2021 as Document 53 in United States v. Mark Schena, Case No. CR 20-00425-EJD, in the U.S. District Court for the Northern District of California, San Jose Division. It charges conspiracy to commit health care fraud and wire fraud under 18 U.S.C. § 1349, health care fraud under 18 U.S.C. § 1347, conspiracy to pay illegal kickbacks under 18 U.S.C. § 371, payment of illegal kickbacks under 18 U.S.C. § 220 and securities fraud, with criminal forfeiture. It alleges that from in or around 2015 through in or around 2020 Schena, President of Arrayit Corporation, deceived investors about Arrayit's business and deceived Medicare, Medicaid, TRICARE and commercial insurers about insurance claims. The penalty sheet ends with COUNTS SEVEN THROUGH NINE, securities fraud.
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“Superseding Indictment — United States v. Mark Schena, Northern District of California (Document 53).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/indictment-no-5-20-cr-00425-dkt-53-n-d-cal-b0abb45e9c/
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CR 20-00425-EJD
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 1 of 19
FILED
United States District Court May 18 2021
FOR THE
SUSANY. SOONG
NORTHERN DISTRICT OF CALIFORNIA CLERK, U.S. DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO
VENUE: SAN JOSE
UNITED STATES OF AMERICA,
V.
MARK SCHENA,
DEFENDANT(S).
SUPERSEDING INDICTMENT
18 U.S.C. §§ 1349 - Conspiracy to Commit Health Care Fraud
18 U.S.C. § 1347 – Health Care Fraud
18 U.S.C. § 371 – Conspiracy to Pay Illegal Kickbacks
18 U.S.C. § 220 – Payment of Illegal Kickbacks
15 U.S.C. §§ 78j & 78ff;
17 C.F.R. 240.10b-5 – Securities Fraud;
18 U.S.C. §§ 981(a)(1)(C) & 982(a) & 28 U.S.C.
§ 2461 – Criminal Forfeiture
A true bill.
/s/ Foreperson of the Grand Jury
Foreman
18th
Filed in open court this __________ day of
May, 2021
_________________________________.
____________________________________________
Clerk
____________________________________________
No Process
Bail, $ _____________
Hon. Thomas S. Hixson, U.S. Magistrate Judge
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 2 of 19
FILED
1 STEPHANIE HINDS (CABN 154284)
Acting United States Attorney May 18 2021
2
HALLIE HOFFMAN (CABN 210020) SUSANY. SOONG
3
Chief, Criminal Division CLERK, U.S. DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
WILLIAM FRENTZEN (LABN 24421)
5 Assistant United States Attorney SAN FRANCISCO
6 DANIEL KAHN (NYBN 4196413)
Acting Chief
7 U.S. Department of Justice, Fraud Section
8 JACOB FOSTER (CABN 250785)
JUSTIN WEITZ (NYBN 5027966)
9 Assistant Chiefs
U.S. Department of Justice, Fraud Section
10 950 Pennsylvania Avenue NW
Washington, DC 20005
11
12
13 UNITED STATES DISTRICT COURT
14 NORTHERN DISTRICT OF CALIFORNIA
15 SAN JOSE DIVISION
16 UNITED STATES OF AMERICA, ) Case No. CR 20-00425-EJD
)
17 Plaintiff, ) VIOLATIONS: 18 U.S.C. § 1349 –
) Conspiracy to Commit Health Care Fraud and
18 v. ) Wire Fraud; 18 U.S.C. § 1347 – Health Care
) Fraud; 18 U.S.C. § 371 – Conspiracy to Pay
19 MARK SCHENA, ) Illegal Kickbacks; 18 U.S.C. § 220 – Payment
) of Illegal Kickbacks; 15 U.S.C. §§ 78j & 78ff;
20 Defendant. ) 17 C.F.R. 240.10b-5 – Securities Fraud; 18
) U.S.C. §§ 981(a)(1)(C) & 982(a) & 28 U.S.C.
21 ) § 2461 – Criminal Forfeiture
)
SAN JOSE VENUE FILED UNDER SEAL
22
23 SUPERSEDING I N D I C T M E N T
24 The Grand Jury charges:
25 Introductory Allegations
26
27
28
SUPERSEDING INDICTMENT 1
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 3 of 19
1 1. The defendant Mark Schena (“SCHENA”) resided in the Northern District of California
2 and served as the President of Arrayit Corporation (“Arrayit”). Schena described himself as the “Father
3 of Microarray Technology.”
4 2. Arrayit was a publicly traded medical technology company incorporated in Nevada, and
5 based in Sunnyvale, California. Arrayit described itself as “a world leader in microarray technology
6 empowering researchers and doctors in the life sciences, wellness and healthcare testing markets.” Arrayit
7 was a participating provider in the Medicare, Medicaid, TRICARE, and other health care benefit
8 programs, and submitted or caused the submission of claims to Medicare, Medicaid, TRICARE, and other
9 health care benefit programs.
10 3. Shares of Arrayit stock were traded “over the counter” (OTC) using the ticker symbol
11 “ARYC.” As a security traded OTC, individuals, entities, and other investors were able to buy or sell
12 Arrayit shares.
13 Arrayit’s Communications with Investors
14 4. Since 2015, Arrayit communicated with investors using a number of methods and means.
15 Arrayit ceased filing formal quarterly reports (Form 10-Qs) with the Securities and Exchange Commission
16 (“SEC”) in 2015, but continued to communicate with investors using press releases, email, and Twitter, a
17 social media platform accessible to the public. SCHENA was the primary person at Arrayit responsible
18 for communicating with investors.
19 5. Arrayit opened its Twitter account in 2009, and until approximately mid-2019, SCHENA
20 posted frequently on a Twitter account identified with the username @arrayit.
21 6. SCHENA would often bunch Arrayit tweets together, so that Arrayit posted multiple tweets
22 per day. Many of SCHENA’s tweets adopted a journalistic tone, noting that Arrayit sales teams were
23 “report[ing]” on a topic of interest related to the company, and used stock photos unconnected to Arrayit’s
24 actual business.
25 The Medicare, Medicaid, and TRICARE Programs
26 7. The Medicare program (“Medicare”) was a federally-funded health care program that
27 provided benefits to persons who were at least 65 years old or disabled. Medicare was administered by
28
SUPERSEDING INDICTMENT 2
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 4 of 19
1 the Centers for Medicare and Medicaid Services (“CMS”), a federal agency under the United States
2 Department of Health and Human Services (“HHS”).
3 8. The Medicaid program (“Medicaid”) was jointly funded by the federal and state
4 governments and was a program that provided health care benefits to certain low-income individuals and
5 families in states. Medicaid was administered by CMS and various state agencies.
6 9. The United States Department of Defense, through the Defense Health Agency,
7 administered the TRICARE program (“TRICARE”), which was a comprehensive health care insurance
8 program that provided health care benefits to United States military personnel, retirees, and their families.
9 10. Medicare, Medicaid, and TRICARE were each a “Federal health care program” as defined
10 in Title 42, United States Code, Section 1320a-7b(f), and a “health care benefit program” as defined in
11 Title 18, United States Code, Section 24(b).
12 11. Individuals who received benefits under Medicare, Medicaid, and TRICARE were referred
13 to as “beneficiaries.”
14 12. Diagnostic testing laboratories, physicians, clinics, and other health care providers, all of
15 which provided services to beneficiaries, were able to apply for and obtain a “provider number.” A health
16 care provider that received a provider number was able to file claims with Medicare, Medicaid, and
17 TRICARE to obtain reimbursement for services provided to beneficiaries.
18 13. To participate in Medicare, Medicaid, and TRICARE, providers were required to submit
19 an application in which the providers agreed to abide by the policies and procedures, rules, and regulations
20 governing reimbursement. To receive funds, enrolled providers, together with their authorized agents,
21 employees, and contractors, were required to abide by all provisions of the Social Security Act, the
22 regulations promulgated under the Act, and applicable policies, procedures, rules, and regulations issued
23 by CMS, relevant state and federal agencies, and authorized agents and contractors. Health care providers
24 were given and provided with access to manuals and services bulletins that described proper billing
25 procedures and billing rules and regulations.
26 14. A health care provider who was assigned a PIN and provided services to beneficiaries was
27 able to submit claims for reimbursement that included the PIN assigned to that medical provider.
28 Payments were often made directly to a provider of the goods or services, rather than to a beneficiary.
SUPERSEDING INDICTMENT 3
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 5 of 19
1 This payment occurred when the provider submitted the claim for payment, either directly or through a
2 billing company.
3 15. Medicare, Medicaid, and TRICARE regulations required health care providers to maintain
4 complete and accurate patient medical records reflecting the medical assessment and diagnoses of their
5 patients, as well as records that documented actual treatment of the patients to whom services were
6 provided and for whom claims for payment were submitted by the physician. Medicare, Medicaid, and
7 TRICARE required complete and accurate patient medical records so that Medicare, Medicaid, and
8 TRICARE would be able to verify that the services were provided as described on the claim form. These
9 records were required to be sufficient to permit Medicare, Medicaid, or TRICARE, or their contractors,
10 to review the appropriateness of payments made to the health care provider.
11 16. Medicare, Medicaid, and TRICARE paid for claims only if the items or services were
12 medically reasonable, medically necessary for the treatment or diagnosis of the patient’s illness or injury,
13 documented, and actually provided as represented to Medicare, Medicaid, and TRICARE. Medicare,
14 Medicaid, and TRICARE would not pay for items or services that were procured through kickbacks and
15 bribes.
16 Commercial Insurance Plans
17 17. Commercial insurance plans were provided by private health insurance companies
18 (“Commercial Insurers”) that offered individual and group health benefit plans under which individuals
19 could obtain coverage for health care items and services. Individuals who received benefits from
20 Commercial Insurers were referred to as “members.”
21 18. Each of the Commercial Insurers was a “health care benefit program” as defined in Title
22 18, United States Code, Section 24(b) and Title 18, United States Code, Section 220(e)(3).
23 19. Commercial Insurers often made payments directly to laboratories and other providers,
24 rather than to members who received the health care benefits, items, and services.
25 20. To obtain payment for treatment or services provided to a member, laboratories and other
26 providers were required to submit itemized claim forms to the member’s commercial insurance plan. The
27 claim forms were typically submitted electronically. The claim form required certain important
28 information, including: the member’s name and identification number; a description of the health care
SUPERSEDING INDICTMENT 4
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 6 of 19
1 benefit, item, or service that was provided or supplied to the member; the billing codes for the benefit,
2 item, or service; the date upon which the benefit, item, or service was provided or supplied to the member;
3 and the name of the referring physician or other provider, as well as the applicable identification number
4 for the referring physician or provider.
5 21. When a provider submitted a claim to Commercial Insurers, the provider certified that the
6 contents of the form were true, correct, complete, and that the form was prepared in compliance with
7 applicable laws and regulations. The provider also certified that the items or services being billed were
8 medically necessary and were in fact provided as billed.
9 Diagnostic Testing
10 22. CMS regulated all laboratory testing (except research) performed on humans in the United
11 States through the Clinical Laboratory Improvement Amendments (CLIA). All clinical laboratories
12 seeking reimbursement were required to be properly certified by CLIA and state regulatory agencies.
13 23. Examples of clinical laboratory testing included the following:
14 a. Allergy testing: Allergy referred to conditions in which immune responses to
15 environmental antigens caused tissue inflammation and organ dysfunction. Allergy testing was performed
16 to determine immunologic sensitivity or reaction to antigens for the purpose of identifying the cause of
17 the allergic state.
18 b. COVID-19 antibody testing: COVID-19 antibody testing was a test for antibodies
19 in the blood to determine whether an individual was previously infected with the novel coronavirus disease
20 2019, commonly referred to as “COVID-19.” COVID-19 antibody testing would not reliably diagnose a
21 current COVID-19 infection.
22 24. Medicare did not cover diagnostic testing, including allergy and COVID-19 antibody
23 testing, that was “not reasonable and necessary for the diagnosis or treatment of illness or injury or to
24 improve the functioning of a malformed body member.” Title 42, United States Code, Section
25 1395y(a)(1)(A). Except for certain statutory exceptions, Medicare did not cover “examinations
26 performed for a purpose other than treatment or diagnosis of a specific illness, symptoms, complaint or
27 injury.” Title 42, Code of Federal Regulations, Section 411.15(a)(1).
28
SUPERSEDING INDICTMENT 5
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 7 of 19
1 25. If diagnostic testing was necessary for the diagnosis or treatment of illness or injury or to
2 improve the functioning of a malformed body member, Medicare imposed additional requirements before
3 covering the testing. Title 42, Code of Federal Regulations, Section 410.32(a) provided, “All diagnostic
4 x-ray tests, diagnostic laboratory tests, and other diagnostic tests must be ordered by the physician who is
5 treating the beneficiary, that is, the physician who furnishes a consultation or treats a beneficiary for a
6 specific medical problem and who uses the results in the management of the beneficiary’s specific medical
7 problem[,]” and “[t]ests not ordered by the physician who is treating the beneficiary are not reasonable
8 and necessary.” Title 42, United States Code, Section 1395l(h)(5) provided that payments from Medicare
9 for covered clinical diagnostic laboratory tests may be made only to “the person or entity which performed
10 or supervised the performance of such test.”
11 26. Medicare, through its contractors, and Commercial Insurers set forth rules and regulations
12 regarding the circumstances in which allergy testing was reasonable and necessary. One type of allergy
13 testing was “in vivo,” which correlated the performance and evaluation of selective cutaneous and mucous
14 membrane tests (commonly referred to as “skin tests”) with the patient’s history, physical examination,
15 and other observations. Another type of allergy testing was a test for allergy hypersensitivity “in vitro”
16 (commonly referred to as “blood tests”), which measured allergen-specific serum IgE. Percutaneous skin
17 testing was the test of choice in most clinical situations where immediate hypersensitivity reactions were
18 suspected. Overall, skin testing was quick, safe, and cost-effective.
19 27. Under certain limited conditions, in vitro testing was medically necessary. Quantitative
20 (measuring the amount of sensitivity) in vitro allergen specific IgE testing was medically necessary under
21 conditions where skin testing was not possible or was not reliable. Examples of indications for in vitro
22 testing would include patients with severe dermatographism, ichthyosis, or generalized eczema. In vitro
23 testing is significantly more expensive than skin testing.
24 28. It would not be medically necessary to test all patients for the same number of allergens.
25 The number of allergens that are tested for was required to be judicious and related to the history, physical
26 findings, and clinical judgment specific to each individual.
27 The Scheme to Defraud
28 29. Beginning in or around 2015, and continuing through in or around 2020, SCHENA,
SUPERSEDING INDICTMENT 6
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 8 of 19
1 together with others known and unknown to the Grand Jury, engaged in a fraudulent scheme to obtain
2 money and property by: (a) deceiving purchasers and sellers of Arrayit’s securities, and the market at-
3 large, about the performance of Arrayit’s business, Arrayit’s financial condition, the nature and
4 composition of Arrayit’s products, Arrayit’s sales, revenues, and expenses, and Arrayit’s prospects for
5 growth; and (b) deceiving Medicare, Medicaid, TRICARE, and Commercial Insurers about insurance
6 claims that SCHENA and his co-conspirators caused to be submitted to Medicare, Medicaid, TRICARE,
7 and Commercial Insurers.
8 30. The purposes of the scheme to defraud were, among other things: (a) to promote Arrayit
9 and SCHENA online and in public by overstating its status and influence; (b) to enrich SCHENA and
10 Arrayit by increasing the company’s value and receiving additional revenue from Medicare, Medicaid,
11 TRICARE, and the Commercial Insurers; and (c) to artificially increase and maintain the share price of
12 Arrayit securities to, among other things, make Arrayit attractive to potential purchasers.
13 31. It was a part of the scheme that SCHENA and others used a variety of manners and means,
14 including, among others:
15 a. Failing to provide investors and the SEC with accurate financial statements and
16 reports of Arrayit’s financial condition;
17 b. Concealing Arrayit’s financial condition by falsely promising that the public
18 release of Arrayit’s financial statements was imminent;
19 c. Making false and misleading statements to investors about the performance of
20 Arrayit’s business, Arrayit’s financial condition, the nature and composition of Arrayit’s products,
21 Arrayit’s sales, revenues, and expenses, and Arrayit’s prospects for growth;
22 d. Making false and misleading statements to investors about the proliferation of
23 Arrayit’s proprietary allergy testing, and about “deals” and other agreements to spread Arrayit’s
24 proprietary allergy testing;
25 e. Making false and misleading statements to investors about Arrayit’s plans to list on
26 the NASDAQ stock exchange;
27 f. Making false and misleading statements to investors about Arrayit’s capability to
28 test for COVID-19, the accuracy of Arrayit’s COVID-19 test, the status of its regulatory approval, and the
SUPERSEDING INDICTMENT 7
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 9 of 19
1 proliferation of Arrayit’s COVID-19 testing technology;
2 g. Manipulating the price of Arrayit stock through stock transfers and trading activity,
3 and concealing securities transactions made in furtherance of the scheme;
4 h. Conspiring to defraud Medicare, Medicaid, TRICARE, and the Commercial
5 Insurers, as discussed in greater detail in paragraphs 36 through 49; and
6 i. Concealing from investors, through false and misleading statements and omissions
7 of material fact, Arrayit’s scheme to defraud Medicare, Medicaid, TRICARE, and the Commercial
8 Insurers, and to illegally profit from the proceeds of illegal health care kickbacks and bribes.
9 32. It was further a part of the scheme to defraud that SCHENA and others took the following
10 actions, among others:
11 a. On or about November 19, 2018, SCHENA issued a press release falsely stating
12 that pursuant to “an allergy testing agreement,” Arrayit “is providing its proprietary microarray-based
13 finger stick allergy testing services to Sutter Health via doctors in the Sutter Health-affiliated Palo Alto
14 Medical Foundation,” Sutter Health, “one of the nation’s largest healthcare networks,” reports “total
15 patient service revenues of $12,000,000,000 annually.”
16 b. On or about August 8, 2019, SCHENA posted from the Arrayit Twitter account
17 that “Arrayit clinical team commences $240,000,000 test kit manufacturing run to build inventory for our
18 rapidly expanding physician-ordered finger stick allergy testing services empowering clinic network
19 doctors to identify, manage and treat allergy and asthma.” This false and misleading tweet was
20 subsequently repeated elsewhere, including on social media and investor-focused message boards.
21 c. In early 2020, as COVID-19 began to spread around the world, SCHENA and
22 Arrayit began promoting a test for COVID-19 through its website. SCHENA attempted to exploit the
23 pandemic by claiming that Arrayit could test dried blood samples for both allergens and COVID-19, and
24 instructing its patient recruiters and clinics to add on or bundle Arrayit’s allergy test and COVID-19 test
25 regardless of medical necessity.
26 d. Between on or about March 19, 2020, and on or about March 21, 2020, SCHENA
27 sent an email to dozens of investors who had inquired about the COVID-19 test. SCHENA’s email stated:
28 “Dear Valued Customer, We received more than 50,000 requests for our finger stick blood test for SARS-
SUPERSEDING INDICTMENT 8
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 10 of 19
1 CoV-2, the virus that causes coronavirus disease 2019 (COVID-19). Our team is coordinating with local,
2 state and federal agencies and with our distributors to make this test available to as many patients as
3 possible on an expedited timeline. Please consult our website and press releases for updates. Best regards,
4 Arrayit Corporation.” These false statements were subsequently amplified on social media and reposted
5 on investor-focused message boards.
6 COUNT ONE: (18 U.S.C. § 1349 – Conspiracy to Commit Health Care Fraud and Wire Fraud)
7 33. The factual allegations in Paragraphs 1 through 32 are re-alleged and incorporated by
8 reference as if fully set forth herein.
9 34. Beginning in or around 2018, and continuing through in or around June 2020, in the
10 Northern District of California and elsewhere, the defendant,
11 MARK SCHENA,
12 did willfully, that is, with the intent to further the objects of the conspiracy, and knowingly combine,
13 conspire, confederate, and agree with others known and unknown to the Grand Jury to commit certain
14 offenses against the United States, to wit:
15 a. to execute a scheme and artifice to defraud health care benefit programs affecting
16 commerce, as defined in Title 18, United States Code, Section 24(b), that is, Medicare, Medicaid,
17 TRICARE, and the Commercial Insurers, and to obtain by means of materially false and fraudulent
18 pretenses, representations and promises, money and property owned by, and under the custody and control
19 of, said health care benefit programs, in connection with the delivery of and payment for health care
20 benefits, items, and services, in violation of Title 18, United States Code, Section 1347.
21 b. by devising a scheme and artifice to defraud as to a material matter and to obtain
22 money by means of materially false and fraudulent pretenses, representations, and promises, and for the
23 purpose of executing the scheme and artifice, to knowingly transmit and cause to be transmitted by means
24 of wire communication in interstate and foreign commerce, certain writings, signs, signals, pictures or
25 sounds, in violation of Title 18, United States Code, Section 1343.
26 Purpose of the Conspiracy
27
35. It was a purpose of the conspiracy for SCHENA and his co-conspirators to unlawfully
28
SUPERSEDING INDICTMENT 9
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 11 of 19
1 enrich themselves by: (a) submitting or causing the submission of false and fraudulent claims by interstate
2 wire to Medicare, Medicaid, TRICARE, and the Commercial Insurers for services that were (i) procured
3 by the payment of kickbacks and bribes; (ii) medically unnecessary; (iii) not eligible for reimbursement;
4 and/or (iv) not provided as represented; (b) concealing the submission of false and fraudulent claims to
5 Medicare, Medicaid, TRICARE, and the Commercial Insurers, and the receipt and transfer of the proceeds
6 from the fraud; and (c) diverting proceeds of the fraud for their personal use and benefit, and to further
7 the conspiracy.
8 Manner and Means
9 36. SCHENA and his co-conspirators used the following manner and means, among others, to
10 accomplish the object and purpose of the conspiracy.
11 37. In or around May 2018, SCHENA and others announced that Arrayit had developed
12 revolutionary new technology that allowed Arrayit to test for exposure to 120 common food and
13 environmental allergens with only a single drop of blood from a finger stick sample.
14 38. SCHENA and others would apply for and maintain various laboratory certifications from
15 state and federal agencies, including from CLIA, that were necessary for Arrayit to legally conduct testing
16 and submit claims to Medicare, Medicaid, TRICARE, and Commercial Insurers.
17 39. SCHENA and others would submit or cause the submission of false and fraudulent
18 attestations and other documents to state and federal regulators, including CLIA, that falsely certified the
19 identity, roles, and responsibilities of Arrayit’s laboratory director and other personnel, and concealed
20 SCHENA’s roles and responsibilities.
21 40. SCHENA and others would submit and cause the submission of false and fraudulent
22 enrollment applications on behalf of Arrayit to Medicare, Medicaid, TRICARE, and Commercial Insurers,
23 in which Arrayit certified that payment of claims was conditioned upon the underlying claims complying
24 with the federal anti-kickback statute, the applicable laws, regulations, and program instructions, and that
25 Arrayit would not knowingly present or cause to be presented false or fraudulent claims.
26 41. SCHENA and others paid and caused the offer and payment of illegal kickbacks and bribes
27 to other individuals and purported marketing companies in exchange for blood samples collected from
28 patients and orders for allergy testing from health care providers, all of which were used to support false
SUPERSEDING INDICTMENT 10
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 12 of 19
1 and fraudulent claims that were submitted by Arrayit and others to Medicare, Medicaid, TRICARE, and
2 Commercial Insurers.
3 42. SCHENA and others distributed false and fraudulent marketing material and other
4 documents that misrepresented the medical necessity of Arrayit’s allergy test and Arrayit’s ability to
5 provide accurate, fast, and reliable allergy test results that would be medically necessary and reasonable
6 in the treatment of the patient.
7 43. SCHENA and others caused Arrayit to test for 120 allergens regardless of the medical
8 necessity, availability of the less expensive skin tests, reasonableness, rules against ordering the same test
9 for each patient, or use of such testing in the treatment of each patient, in order to maximize the amount
10 billed to Medicare, Medicaid, TRICARE, and the Commercial Insurers and allow SCHENA and others to
11 issue positive financial projections for Arrayit that were deceptively based off the amount billed by
12 Arrayit.
13 44. As the effects of the COVID-19 pandemic began to be felt in the United States and many
14 patients faced difficulty obtaining access to COVID-19 testing, SCHENA and others used the COVID-19
15 pandemic as an opportunity to expand the pre-existing allergy test scheme and to capitalize on a national
16 emergency for their own financial gain by offering COVID-19 testing and bundling the COVID-19 test
17 with, i.e., requiring combination with, Arrayit’s more expensive allergy testing, which did not identify or
18 treat COVID-19.
19 45. SCHENA and others obtained fraudulent orders for allergy and COVID-19 testing by
20 making false and fraudulent statements, directly and indirectly, to health care providers, patients, and
21 others concerning Arrayit’s ability to provide accurate, fast, and reliable COVID-19 testing in compliance
22 with applicable state and federal regulations, and the purported need to bundle the COVID-19 test with
23 Arrayit’s allergy test, while concealing that, at various times, the Arrayit COVID-19 test had not been
24 developed, validated, produced, received the requisite regulatory authorization, or able to return timely
25 COVID-19 results as represented.
26 46. SCHENA and others entered into sham contracts and agreements, and created and
27 maintained false and fraudulent invoices and other documents, in order to conceal and disguise the illegal
28 kickbacks and bribes, as well as that the testing was not provided as billed to Medicare, Medicaid,
SUPERSEDING INDICTMENT 11
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 13 of 19
1 TRICARE, and the Commercial Insurers, including concealing the ordering physician, medical clinic,
2 and/or laboratory that actually conducted the testing.
3 47. SCHENA and others caused Arrayit to submit approximately $69 million in claims by
4 interstate wire to Medicare, Medicaid, TRICARE, and the Commercial Insurers for allergy tests that were
5 obtained through illegal kickbacks and bribes, medically unnecessary, ineligible for reimbursement,
6 and/or not provided as represented.
7 In violation of Title 18, United States Code, Section 1349.
8 COUNTS TWO THROUGH THREE: (18 U.S.C. § 1347 and 18 U.S.C. § 2 – Health Care Fraud)
9 48. The allegations in Paragraphs 1 through 32 and 36 through 47 are realleged and
10 incorporated as if fully set forth here.
11 49. On or about the dates set forth below, in the Northern District of California and elsewhere,
12 the defendant,
13 MARK SCHENA,
14 did knowingly and willfully execute, and attempt to execute, a scheme and artifice to defraud health care
15 benefit programs as to a material matter and to obtain by means of materially false and fraudulent
16 pretenses, representations, and promises, and by concealment of material facts, money and property owned
17 by, and under the custody and control of, those health care benefit programs, all of the preceding in
18 connection with the delivery of, and payment for, health care benefits, items, and services:
19 APPROXIMATE
SERVICES
APPROXIMATE
COUNT INSURED INSURER DATE OF AMOUNT
BILLED
20 SERVICE BILLED
21 2 W.W. Meritain Health 5/1/20 Allergy testing $5,293.28
22
23 3 T.M. Medicare 5/13/20 Allergy testing $5,293.28
24
Each count a separate offense, in violation of Title 18, United States Code, Sections 1347 and 2.
25
COUNT FOUR: (18 U.S.C. § 371 – Conspiracy to Pay Kickbacks)
26
50. The allegations in Paragraphs 1 through 32 are realleged and incorporated as if fully set
27
forth here.
28
SUPERSEDING INDICTMENT 12
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 14 of 19
1 51. From in or around 2017, and continuing through in or around June 2020, in the Northern
2 District of California and elsewhere, the defendant,
3 MARK SCHENA,
4 did willfully, that is, with the intent to further the objects of the conspiracy, and knowingly combine,
5 conspire, confederate, and agree with others, known and unknown to the grand jury, to commit certain
6 offenses against the United States, that is: to violate Title 18, United States Code, Section 220(a)(2)(A),
7 by offering and paying remuneration (including any kickback, bribe, or rebate) directly or indirectly,
8 overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory, with respect
9 to services covered by a health care benefit program in and affecting interstate commerce.
10 Purpose of the Conspiracy
11 52. It was a purpose of the conspiracy for SCHENA and his co-conspirators to unlawfully
12 enrich themselves by: (a) offering and paying kickbacks and bribes to induce the referral of members to
13 Arrayit; (b) submitting or causing the submission of false and fraudulent claims to the Commercial
14 Insurers for services that were procured by the payment of kickbacks and bribes; (c) concealing and
15 causing the concealment of the submission of the kickbacks and bribes; and (c) diverting kickbacks and
16 bribes, and the proceeds of the scheme, for their personal use and benefit, and to further the conspiracy.
17 Manner and Means
18 53. The allegations in Paragraphs 37 through 47 are realleged and incorporated as if fully set
19 forth here.
20 Overt Acts
21 54. In furtherance of the conspiracy, and to accomplish its objects and purpose, at least one of
22 the co-conspirators committed and caused to be committed, in the Northern District of California and
23 elsewhere, at least one of the following overt acts, among others:
24 55. On or about December 16, 2019, MARK SCHENA and others caused illegal kickback and
25 bribe, in the approximate amount of $19,289.74, to be paid to Marketer-1 in exchange for the referral of
26 individuals to Arrayit.
27 56. On or about April 17, 2020, MARK SCHENA and others caused an illegal kickback and
28 bribe, in the approximate amount of $6,650.58, to be paid to Marketer-1 in exchange for the referral of
SUPERSEDING INDICTMENT 13
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 15 of 19
1 individuals to Arrayit.
2 In violation of Title 18, United States Code, Section 371.
3 COUNTS FIVE THROUGH SIX: (18 U.S.C. § 220(a)(2)(A) and 18 U.S.C. § 2 – Illegal Kickbacks)
4 57. The allegations in Paragraphs 1 through 32, 36 through 47, and 54 through 56 are realleged
5 and incorporated as if fully set forth here.
6 58. From in or around 2017, and continuing through in or around June 2020, in the Northern
7 District of California and elsewhere, the defendant,
8 MARK SCHENA,
9 did knowingly and willfully offer, pay, and cause to be offered and paid, any remuneration, including any
10 kickback, bribe, and rebate, namely, the payments specified as to each count below, directly and indirectly,
11 overtly and covertly, in cash and in kind, to induce a referral of an individual to a laboratory, that is,
12 Arrayit, with respect to services covered by a health care benefit program, each in and affecting interstate
13 and foreign commerce.
14 COUNT RECIPIENT APPROXIMATE DATE AMOUNT
15
5 Marketer-1 12/16/19 $19,289.74
16
17
6 Marketer-1 4/17/20 $6,650.58
18
19 Each count a separate offense, in violation of Title 18, United States Code, Sections 220(a)(2)(A)
20 and 2.
21 COUNTS SEVEN THROUGH NINE: (15 U.S.C. §§ 78j & 78ff; 17 C.F.R. 240.10b-5; and 18 U.S.C. § 2
22 – Securities Fraud)
23 59. The allegations in Paragraphs 1 through 32 are realleged and incorporated as if fully set
24 forth here.
25 60. On or about the dates set forth below, in the Northern District of California and elsewhere,
26 the defendant,
27 MARK SCHENA,
28 willfully and knowingly, directly and indirectly, by the use of the means and instrumentalities of interstate
SUPERSEDING INDICTMENT 14
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 16 of 19
1 commerce, the mails, and the facilities of national securities exchanges, in connection with the purchase
2 and sale of securities, did use and employ manipulative and deceptive devices and contrivances, and aided
3 and abetted others known and unknown to the grand jury, in violation of Title 15, United States Code,
4 Sections 78j and 78ff, Title 17, Code of Federal Regulations, Sections 240.10b5 and 240.10b5-2, and Title
5 18, United States Code, Section 2, by: (a) employing devices, schemes and artifices to defraud; (b) making,
6 and causing others to make, untrue statements of material facts and omitting to state material facts
7 necessary in order to make the statements made, in the light of the circumstances under which they were
8 made, not misleading; and (c) engaging in acts, practices and courses of business which operated and
9 would operate as a fraud and deceit upon persons; to wit, SCHENA used, and caused others to use, wires
10 and the mails to issue false and misleading statements related to Arrayit securities in the manner, and on
11 or about the dates listed, below:
12 COUNT DATE DESCRIPTION
SCHENA press release about “an allergy testing agreement”
13 SEVEN 11/19/18
with multibillion-dollar company in Palo Alto, California
14 SCHENA tweet about “$240,000,000 test kit manufacturing
EIGHT 8/8/2019
run” disseminated to market
15 SCHENA emails to investors about demand for Arrayit’s
NINE 3/19/20 COVID-19 tests and coordination with government agencies
16
17
Each count a separate offense, in violation of Title 15, United States Code, Sections 78j and 78ff,
18
Title 17, Code of Federal Regulations, Section 240.10b-5, and Title 18, United States Code, Section 2.
19
FORFEITURE ALLEGATION: (18 U.S.C. §§ 981(a)(1)(C) & 982(a) & 28 U.S.C. § 2461 –
20
Criminal Forfeiture)
21
61. The allegations in Paragraphs 1 through 60 are re-alleged and incorporated by reference
22
for the purpose of alleging forfeiture pursuant to Title 18, United States Code, Sections 981(a)(1)(C) and
23
982(a), and Title 28, United States Code, Section 2461(c).
24
62. Upon conviction of any of the offenses alleged in Counts One through Nine, the defendant,
25
MARK SCHENA,
26
shall forfeit to the United States pursuant to Title 18, United States Code, Sections 981(a)(1)(C) and
27
982(a), and Title 28, United States Code, Section 2461, any property, real or personal, which constitutes
28
SUPERSEDING INDICTMENT 15
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 17 of 19
1 or is derived from proceeds traceable to said violations, including but not limited to a sum of money equal
2 to the total proceeds from the commission of said offense.
3 63. If, as a result of any act or omission of the defendant, any of said property
4 a. cannot be located upon the exercise of due diligence;
5 b. has been transferred or sold to or deposited with a third person;
6 c. has been placed beyond the jurisdiction of the Court;
7 d. has been substantially diminished in value; or
8 e. has been commingled with other property, which cannot be divided without difficulty;
9 the United States shall be entitled to forfeiture of substitute property, pursuant to Title 21, United States
10 Code, Section 853(p), as incorporated by Title 18, United States Code, Section 982(b)(1), and Title 28,
11 United States Code, Section 2461(c).
12 All pursuant to Title 18, United States Code, Sections 981(a)(1)(C) and 982(a), and Title 28,
13 United States Code, Section 2461.
14 DATED: May 18, 2020 A TRUE BILL
15
16 /s/
________________________________
FOREPERSON
17
18 STEPHANIE HINDS
Acting United States Attorney
19
DANIEL KAHN
20 Acting Chief, Fraud Section
21
/s/
22 _________________________
WILLIAM FRENTZEN
23 Assistant United States Attorney
24
/s/
25 _________________________
JACOB FOSTER
26 JUSTIN WEITZ
Assistant Chiefs
27 Fraud Section, Criminal Division
28
SUPERSEDING INDICTMENT 16
AO 257 (Rev. 6/78) Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 18 of 19
DEFENDANT INFORMATION RELATIVE TO A CRIMINAL ACTION - IN U.S. DISTRICT COURT
BY: COMPLAINT INFORMATION INDICTMENT Name of District Court, and/or Judge/Magistrate Location
SUPERSEDING NORTHERN DISTRICT OF CALIFORNIA
OFFENSE CHARGED
SAN JOSE DIVISION
Please see attached addendum. Petty
Minor DEFENDANT - U.S
Misde- FILED
meanor
MARK SCHENA May 18 2021
Felony
DISTRICT COURT NUMBER SUSANY. SOONG
PENALTY: Please see attached addendum. CLERK, U.S. DISTRICT COURT
CR 20-00425-EJD NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO
DEFENDANT
PROCEEDING IS NOT IN CUSTODY
Has not been arrested, pending outcome this proceeding.
Name of Complaintant Agency, or Person (& Title, if any) 1) If not detained give date any prior
HHS-OIG; FBI; VA-OIG; USPIS; DCIS
summons was served on above charges
person is awaiting trial in another Federal or State Court, 2) Is a Fugitive
give name of court
3) Is on Bail or Release from (show District)
Northern District of California
this person/proceeding is transferred from another district
per (circle one) FRCrp 20, 21, or 40. Show District
IS IN CUSTODY
4) On this charge
this is a reprosecution of
}
charges previously dismissed 5) On another conviction
which were dismissed on motion SHOW Federal State
}
of: DOCKET NO.
6) Awaiting trial on other charges
U.S. ATTORNEY DEFENSE
If answer to (6) is "Yes", show name of institution
this prosecution relates to a
}
Yes If "Yes"
pending case involving this same Has detainer
give date
defendant MAGISTRATE been filed? No filed
}
CASE NO.
prior proceedings or appearance(s) DATE OF
ARREST
Month/Day/Year
before U.S. Magistrate regarding this
20-mj-70721
defendant were recorded under Or... if Arresting Agency & Warrant were not
Month/Day/Year
Name and Office of Person
Furnishing Information on this form STEPHANIE HINDS
DATE TRANSFERRED
TO U.S. CUSTODY
U.S. Attorney Other U.S. Agency
Name of Assistant U.S. This report amends AO 257 previously submitted
Attorney (if assigned) William Frentzen
ADDITIONAL INFORMATION OR COMMENTS
PROCESS:
SUMMONS NO PROCESS* WARRANT Bail Amount:
If Summons, complete following:
Arraignment Initial Appearance * Where defendant previously apprehended on complaint, no new summons or
warrant needed, since Magistrate has scheduled arraignment
Defendant Address:
Date/Time: Before Judge:
Comments:
Case 5:20-cr-00425-EJD Document 53 Filed 05/18/21 Page 19 of 19
Counts and Maximum Penalties:
COUNT ONE: 18 U.S.C. §§ 1349 - Conspiracy to Commit Health Care Fraud
Penalties: Not more than 20 years imprisonment, not more than $250,000 fine, not more
than 3 years supervised release and $100 assessment.
COUNT TWO AND THREE: 18 U.S.C. § 1347 and 18 U.S.C. § 2 – Health Care Fraud
Penalties: Not more than 10 years imprisonment, not more than $5,000,000 fine, not
more than 3 years supervised release and $100 assessment.
COUNT FOUR: 18 U.S.C. § 371 – Conspiracy to Pay Kickbacks
Penalties: Not more than 5 years imprisonment, not more than $250,000 fine, not more
than 3 years supervised release, $100 assessment.
COUNTS FIVE THROUGH SIX: (18 U.S.C. § 220(a)(2)(A) and 18 U.S.C. § 2 – Illegal
Kickbacks
Penalties: Not more than 10 years imprisonment, not more than $200,000 fine, not more
than 3 years supervision, $100 assessment.
COUNTS SEVEN THROUGH NINE: (15 U.S.C. §§ 78j & 78ff; 17 C.F.R. 240.10b-5; and
18 U.S.C. § 2 – Securities Fraud
Penalties: Not more than 20 years imprisonment, not more than $5,000,000 fine, not
more than 3 years supervision, and $100 assessment.
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