Law360 (February 11, 2021, 6:59 PM EST) -- A California biotech company and its CEO have agreed to settle a U.S. Securities and Exchange Commission suit alleging that they lied to investors about the development of a blood test for the coronavirus.
In documents filed Thursday in federal court in San Jose, Arrayit Corp. and its Chief Executive Rene Schena agreed to accept final judgment in the matter without admitting to or denying the SEC's claims that they misled investors about both the COVID-19 blood test and financial documents they earlier failed to file.
In addition to the proposed judgment terms applied to both defendants, the CEO's agreement also states that she can't run a public company for three years. She'll also pay a $50,000 civil penalty in connection with the allegations.
The consent agreements were filed on the same day the SEC filed its suit against the pair, claiming they're liable for pandemic-related misstatements that drove the company's trading price up in the dark, early days of the virus' spread across the U.S.
In its complaint, the SEC noted that it suspended trading of Arrayit's shares between April 14, 2020, and April 27, 2020, in connection with the alleged coronavirus-related misrepresentations. It also noted that Rene Schena's husband, Mark Schena, the company's president and chief science officer, already faces both SEC and Justice Department allegations in connection with the alleged blood test mischaracterizations. Both the SEC and the DOJ cases against Mark Schena are ongoing.
According to the SEC, Mark Schena started telling prospective investors the company had a COVID-19 blood test before the company had even ordered the reagents it would need to make a blood test. Mark Schena also jumped the gun by telling investors the Arrayit blood test was pending emergency approval.
Mark Schena also sent out an email falsely claiming the company had gotten more than 50,000 requests for its finger stick blood test, and that it was "coordinating with local, state and federal agencies" to get the tests out to the public, according to the SEC.
Mark Schena also allegedly played a role in a Medicare fraud scheme in which two doctors, Julie Taguchi and Madan Mohan, aided in bundling coronavirus tests with Arrayit's allergy tests, according to federal prosecutors. Both Taguchi and Mohan have entered guilty pleas in their respective criminal cases.
Another individual, Arrayit investor Jason C. Nielsen, faces SEC allegations that he ran a pump-and-dump scheme in the company's shares in connection with hundreds of online posts that allegedly included false claims about the company's blood tests.
Representatives for the parties to the instant suit didn't immediately respond to requests for comment Thursday.
The SEC is represented in-house by Erin E. Schneider, Monique C. Winkler, Jason H. Lee, John K. Han, Susan F. Lamarca and Fitzann R. Reid.
Rene Schena and Arrayit are represented by Jason R. Pickholz of the Pickholz Law Offices LLC.
The case is Securities and Exchange Commission v. Arrayit Corp. et al., case number 5:21-cv-01053, in the U.S. District Court for the Northern District of California.
The cases against Mark Schena are USA v. Schena, case number 5:20-cr-00425, and Securities and Exchange Commission v. Schena, case number 5:20-cv-06717, the case against Nielsen is Securities and Exchange Commission v. Nielsen, case number 5:20-cv-03788, and the cases against the two doctors are USA v. Taguchi, case number 5:20-cr-00229, and USA v. Mohan, case number 5:20-cr-00439, all in the U.S. District Court for the Northern District of California.
--Additional reporting by Rachel O'Brien and Lauren Berg. Editing by Stephen Berg.
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