Silicon Valley medical tech president convicted of fraud

President of medical technology company convicted of participating in $77 million COVID-19 and allergy testing scheme

On September 1, 2022, the president of Arrayit Corporation, a Silicon Valley medical technology company, was convicted by a federal jury of his involvement in a scheme involving the submission of over $77 million in false claims for COVID-19 and allergy testing .

According to court documents and trial evidence, the defendant engaged in a scheme to defraud the company’s investors by claiming to have invented a new technology that would be able to use just a few drops of blood to test for some disease. Evidence from the trial showed that the defendant misrepresented the company’s valuation to investors, claiming that the company could be valued at $4.5 billion based on assumed revenues of $80 million per year.

Trial evidence also showed that the defendant failed to provide financial disclosures required by the SEC and also concealed from investors that Arrayit was close to bankruptcy. The evidence further showed that the defendant solicited investors by holding private meetings and issuing press releases and tweets that falsely stated that the company had partnered with certain companies, public institutions or government agencies and fraudulently claimed that such entities have agreed to use company technology.

Defendant also allegedly engaged in a health care fraud scheme by paying kickbacks to vendors for blood samples from patients and then submitting fraudulent claims to Medicare and private insurance companies for unnecessary allergy testing. Arrayit allegedly performed allergy screening tests on each patient for 120 different allergens, regardless of medical necessity, and then the defendant falsely claimed that the company’s allergy testing kit was highly accurate in diagnosing allergies, when in fact not a diagnostic test. Evidence at trial showed that the company charged more per Medicare patient for allergy blood tests than any other laboratory in the United States, and charged some commercial insurers more than $10,000 per test.

At the beginning of the COVID-19 pandemic, when there was reduced demand for Arrayit’s allergy testing business, the defendant announced that the company “had a test for COVID-19” based on the company’s blood testing technology, even though the company still has not developed such a test. Defendant then falsely advertised that Dr. Anthony Fauci and other government officials mandated simultaneous testing for COVID-19 and allergies and required patients receiving the company’s COVID-19 test to also test for allergies. The defendant also falsely claimed that the company’s COVID-19 test was more accurate than a PCR test when the Food and Drug Administration notified it that the company’s test was not accurate enough to receive emergency use authorization for use in United States.

Defendant was convicted of one count of conspiracy to commit health care fraud and one count of conspiracy to commit wire fraud, two counts of health care fraud, one count of conspiracy to pay bribes, two counts of conspiracy to pay bribes, and three counts of securities fraud . He is scheduled to be sentenced in January 2023 and could face up to 20 years in prison on the conspiracy to commit health care fraud and conspiracy to commit wire fraud charges; 10 years in prison for each health fraud count; five years in prison for conspiracy to pay bribes; 10 years in prison for each payment of bribes; and 20 years in prison for each count of securities fraud.

The DOJ press release can be found here.

Former Puerto Rico lawmaker sentenced to 57 months in prison for bribery and kickback scheme

On September 7, 2022, a former Puerto Rico lawmaker was sentenced to 57 months in prison and ordered to pay $190,000 in restitution for participating in a bribery and kickback scheme. In March, the lawmaker pleaded guilty to federal bribery charges in the Puerto Rico District.

The lawmaker was elected to the Puerto Rico House of Representatives in 2016. He hired two people to work in his legislative office and, according to court documents, each of the individuals paid biweekly bribes to the lawmaker ranging from $500 to $1,300 from 2017 to 2020 in exchange for their work and wages.

In statements made with their pleas, the lawmaker and his staff acknowledged that the bribes were typically paid in cash in envelopes that the individuals provided to the lawmaker at the Capital Building in Old San Juan. One of the individuals admitted that bribes were occasionally paid through a mobile money transfer application.

The individuals, who worked in the legislative office, are due to be sentenced later this month.

The DOJ press release can be found here.

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