Former CEO Indicted for Misleading Investors About COVID-19 Rapid Test Kits

Source: RLS Media

The former CEO of a publicly traded health care company was charged with securities fraud in connection with his alleged participation in a scheme to mislead investors about the company’s procurement of COVID-19 rapid test kits in the early days of the pandemic.

According to officials, Marc Schessel, 62, of Greenwich, Connecticut, is charged by indictment with securities fraud. “As alleged in the indictment, Schessel exploited the scarcity of COVID-19 tests at the outset of the pandemic to defraud investors and artificially increase his company’s stock price,” U.S. Attorney Philip R. Sellinger said. “His alleged fraud cost investors millions of dollars in losses.”

“Schessel allegedly took advantage of the COVID-19 crisis as an opportunity to scam investors and manipulate the market,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “Today’s indictment reinforces our commitment to rooting out schemes that have exploited the pandemic and holding accountable those who have prioritized greed during an unprecedented public health emergency.”

According to documents filed in this case and statements made in court, Schessel caused his company to issue multiple public statements claiming that it was buying and reselling at least 48 million COVID-19 test kits, despite knowing that such statements were false and misleading.

In early April 2020, Schessel executed a supply agreement with an Australian company to obtain 2 million COVID-19 test kits per week for six months, beginning on April 24, 2020. The agreement was based on the Australian company’s representations that it had the appropriate permissions from the U.S. Food and Drug Administration (FDA) and was already distributing COVID-19 tests.

But Contemporaneously, Schessel received a purchase order from a U.S.-based company that planned to purchase the weekly shipments of 2 million COVID-19 test kits from Schessel’s health care company.

Despite learning new information on April 11, 2020 that called into question whether the Australian company had COVID-19 tests to sell to Schessel’s company that could be distributed in the United States, Schessel caused his company to issue a press release on April 13, 2020, in which it announced the purchase order for 48 million COVID-19 rapid test kits.

Following this press release, Schessel received additional information that further called into question his company’s arrangements for the COVID-19 test kits.

Despite learning facts that cast significant doubt on the status of the COVID-19 test kit deals, Schessel repeatedly confirmed the status and terms of those arrangements on numerous occasions between April 13, 2020, and April 17, 2020. In the wake of the April 13 announcement, the health care company’s share price surged, rising by over 400 percent from approximately $2.25 per share to an intraday high of $14.88. per share.

As a result of this scheme, investors lost at least $116 million.

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