Former Sequenom Official Lied to Investors, U.S. Says

Former Sequenom Official Lied to Investors, U.S. Says (Update3)

By Drew Armstrong

June 2 (Bloomberg) -- Elizabeth A. Dragon, former senior vice president of research and development at Sequenom Inc., pleaded guilty today in federal court to conspiracy to commit securities fraud for lying to investors about the company’s prenatal test for Down syndrome, U.S. officials said.

Dragon admitted to making false claims to investors and analysts about the effectiveness of the San Diego-based company’s test as well as attempting to “inflate and sustain” the price of Sequenom’s shares, said Laura E. Duffy, the U.S. Attorney for the Southern District of California in San Diego, in a statement. Dragon said in a court appearance before U.S. Magistrate Judge Barbara Major that she and others manipulated data to make the Down syndrome test appear more accurate than it was, Duffy said.

Dragon also was accused of lying to investors in a civil complaint filed today in San Diego by the U.S. Securities and Exchange Commission. Dragon settled the claims without admitting or denying wrongdoing and agreed to be barred from serving as an officer or director of a public company, according to the agency’s statement.

“Elizabeth Dragon knew the truth about Sequenom’s Down syndrome test, yet she told the public it was a near-perfect success,” Rosalind Tyson, director of the SEC’s Los Angeles office, said in a statement. “Her actions misled investors with exaggerated information about a significant new product that never materialized.”

Test Delayed

Sequenom said on April 29, 2009, that it would delay the sale of its Down syndrome test, which was designed to use a blood sample from a pregnant woman to look for signs of the syndrome earlier than current techniques. The company’s shares plunged 76 percent the next day.

In June 2009, the company announced an SEC investigation, and, in September, Sequenom said it dismissed Dragon and Chief Executive Officer Harry Stylli and couldn’t rely on the earlier test results.

The SEC said a judge will decide a financial penalty for Dragon. She will be sentenced on the criminal plea on Aug. 30, according to the U.S. Attorney’s Office.

Roman E. Darmer, Dragon’s attorney, failed to return a telephone message left at his office.

Dragon joined Sequenom in May 2006 after 16 years in various positions at Roche Molecular Diagnostics, a unit of Basel, Switzerland-based Roche Holding AG, the world’s largest maker of tumor-fighting drugs.

“At this time the company has no comment to make other than we continue to cooperate fully with the government agencies and their investigations,” said Ian Clements, Sequenom’s senior director of corporate communications, in an e-mail.

Sequenom rose 26 cents, or 4.3 percent, to $6.29 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The shares have fallen 76 percent in the past 12 months.

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net.

via bloomberg.com

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