Biotech Executive Sentenced to 7 Years in Prison for False Claims About Rapid COVID Test

June 24, 2024
Biotech Executive Sentenced to Seven Years in Prison for False Claims

At the height of the COVID-19 pandemic in 2020, there were countless medical tests developed to diagnose COVID infections. Unfortunately, there were also countless bad actors who tried to take advantage of the boost in government aid for these rushed but lucrative projects. One such offender was the former chief executive of Decision Diagnostics Corporation, who falsely claimed that his company had developed a rapid blood test for COVID-19. In reality, his test did not actually work. In December 2020, Decision Diagnostics Corporation’s CEO was criminally indicted for securities fraud, wire fraud, and obstruction of an official proceeding. He pled guilty in December 2023 and was sentenced to seven (7) years in prison.

Pandemic Fraud – The Covid Diagnostic Scheme of Decision Diagnostics Corporation

Prior to the pandemic, Decision Diagnostics was already facing a difficult financial situation. Internal emails showed that its CEO was looking for a new angle to “raise millions” for the company–and as opportunistic the pandemic proved to serve as a catalyst for financing and the rapid test scheme was the perfect ploy.

As early as February 2020, he falsely claimed he created a blood test that could identify the SARS-COV-2 virus in individuals in fifteen seconds. He submitted twelve official press releases from the company to attract potential investors, which led to an increase in Decision Diagnostics Corporation stock price by 1500% and interest from multiple governmental agencies who needed tests like this exigently distributed.

Decision Diagnostics CEO’s Refusal to Admit the Truth about the Fake Covid Tests

Decision Diagnostics’ former CEO also claimed that the test was on the verge of approval by the Food and Drug Administration (FDA). When these claims were made, the company lacked any proven method for detecting the virus. In fact, ironically, the company did not even have a physical testing device. According to the prosecution, official advisors of the company warned the CEO that the testing kit they were trying to manufacture would not work as Decision Diagnostics had described and quite frankly did not exist.

Instead of being honest, the CEO doubled down by hiring a political consultant to lobby for support. During oral arguments, the government provided evidence showing that the CEO directed these consultants to put pressure on the FDA and Members of Congress by telling them the FDA was “moth-balling” the company’s submission and that it was “stuck in limbo.”

According to an official press release from the Department of Justice, he created a fake online persona to direct investors to write threatening claims to high-level officials at the Securities and Exchange Commission (SEC), including the SEC Chairman. Despite his best efforts, the Decision Diagnostics’ CEO’s actions ultimately led to a loss of $28 million for its investors.

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Department of Justice’s Emphasis on Prosecuting Pandemic Fraud

Decision Diagnostics’ CEO’s sentence is a clear message from federal prosecutors that they intend to punish fraudsters who took advantage of consumer fears during the pandemic. According to the Inspector in Charge of the U.S. Postal Criminal Investigation’s Group: “The defendant…used the chaos of COVID-19 to not only orchestrate a fraudulent scheme that preyed on investors’ uncertainties, but he also ensnared them in a deceitful web of lies with promises of prosperity, then retaliated against his victims when confronted with his bogus claims, demonstrating his callous disregard for others facing financial ruin at his hands…The U.S. Postal Inspection Service, along with our partners, will continue to bring these predatory criminals to justice.”

According to the Department of Justice (DOJ), over 270 actions related to pandemic fraud were resolved that were brought under the False Claims Act in FY 2023. Over $48 million dollars was recovered from fraud related to the Paycheck Protection Program (PPP) fraud  for loans for businesses during the pandemic. Additional cases of alleged healthcare fraud during the pandemic, include a $1.75 million settlement for Morse Life Health System Inc., a Florida-entity overseeing nursing homes and an assisted living facility. In August 2023, the DOJ also announced two new COVID-19 fraud strike forces, which led to 718 enforcement actions being brought for $836 million in COVID-19 fraud. Taken together, these cases are strong indicators that the DOJ has no plans of slowing its efforts to catch and prosecute pandemic-era fraudsters.

False Claims Act in COVID-19 Pandemic Fraud

The False Claims Act (FCA) is a federal statute that allows whistleblowers to expose any fraudulent claims made for federal government funds, including  fraud affecting relief programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) and for programs like Medicare and Medicaid who may have paid for fake diagnostic tests. As such, the FCA has been instrumental in combating COVID-19 pandemic fraud by incentivizing individuals to come forward who have information about systemic fraud. The Act allows the Department of Justice (DOJ) to pursue both civil and criminal penalties against those who submit false claims to the federal government for payment.

Whistleblowers, or “relators,” play a crucial role under the FCA by reporting fraudulent activities. They can file qui tam lawsuits on behalf of the government and are entitled to a portion of the recovered funds, typically between 15% and 30% of the total recovery, as an incentive for their role in uncovering fraud. This financial reward, combined with legal protections against retaliation, encourages individuals to come forward with information of fraud not already publicly known. In the Biotech case there were millions in investor fraud which also could be addressed through the SEC whistleblower program which enable individuals to receive up to 30% of what the government recovers.

Pandemic fraudsters, like PPP loan fraudsters, fake diagnostic tests companies like Decision Diagnostics, faulty Covid masks and other products that the federal government paid for are certain to face their reckoning. The only real decision for insiders of companies like Decision Diagnostics, is to decide to be part of the solution versus concealing the problem and winding up potentially looking at jail time. When framed in that manner, it’s an easy decision, learn your rights to potentially receive a whistleblower reward rather than languish as a defendant in a Covid fraud case.