CEO Indicted for Defrauding Investors Out of More than $116 Million in COVID-19 Test Scheme
CEO Indicted for Defrauding Investors Out of More than $116 Million in COVID-19 Test Scheme
United States / National – On May 31, 2022, the U.S. Department of Justice announced that an indictment was returned by a federal grand jury charging the former chief executive officer of a publicly-traded healthcare company (referred to in the indictment as Company-1) with two counts of securities fraud for his alleged participation in a scheme to mislead investors about Company-1’s procurement of COVID-19 rapid test kits in the early days of the COVID-19 pandemic.
Marc Schessel, 62, of Greenwich, Connecticut, allegedly caused Company-1 to issue multiple public statements claiming that Company-1 was buying and reselling at least 48 million COVID-19 test kits, despite knowing that such statements were false and misleading. Schessel, in particular, executed a supply agreement with an Australian company (the Supply Company) in early April 2020 to obtain two million COVID-19 test kits per week for six months beginning April 24, 2020. The agreement was based on the Supply Company’s representations that it had permission from the U.S. Food and Drug Administration (FDA) to distribute COVID-19 tests in the United States and was already doing so. Concurrently, Schessel received a purchase order from a US-based company that planned to purchase two million COVID-19 test kits from Company-1 on a weekly basis.
Despite learning new information on or about April 11, 2020, that called into question whether the Supply Company had COVID-19 tests to sell to Company-1 that could be distributed in the United States, Schessel prompted Company-1 to issue a press release on April 13, 2020, announcing the purchase of 48 million COVID-19 rapid test kits. Following this press release, Schessel received additional information that called Company-1’s arrangements for the COVID-19 test kits into question. Despite learning facts that cast serious doubt on the status of the COVID-19 test kit deals, Schessel confirmed the status and terms of those arrangements on numerous occasions between April 13, 2020, and April 17, 2020.
Following these announcements, the share price of Company-1 increased by over 400%, rising from around $2.25 to an intraday high of $14.88. Investors lost at least $116 million as a result of this scheme.
“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.”
“As alleged in the indictment, Marc 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,” said U.S. Attorney Philip R. Sellinger for the District of New Jersey. “His alleged fraud cost investors millions of dollars in losses.”
“It is unacceptable to fraudulently capitalize on a national health emergency,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI, in tandem with our law enforcement partners, will continue to investigate anyone who undermines public safety and will bring those who commit fraud to justice.”
Schessel faces two counts of securities fraud. If convicted, he faces a maximum sentence of 45 years in prison. A federal district court judge will impose a sentence based on the United States Sentencing Guidelines and other statutory factors.
The case is being investigated by the FBI’s Newark Division in New Jersey.
The case is being prosecuted by Acting Principal Assistant Chief Justin Weitz, Trial Attorneys Lucy Jennings and Spencer Ryan of the Criminal Division’s Fraud Section, and Assistant U.S. Attorneys Lauren Repole and Sean Sherman for the District of New Jersey.
The Fraud Section uses the Victim Notification System (VNS) to notify victims of case information and updates. Victims with questions should contact the Fraud Section’s Victim Assistance Unit by calling 1-888-549-3945 or emailing [email protected]. For more information on victims’ rights, go to: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.
An indictment is just an allegation, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in court.
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