SAN DIEGO–A former executive officer from a local biotechnology company pleaded guilty in federal court to conspiracy to commit securities fraud.
United States Attorney Laura E. Duffy Wednesday filed a criminal charge against Elizabeth A. Dragon, Ph.D., a former senior vice president for research and development at Sequenom, Inc., a publicly-traded biotechnology company headquartered in San Diego.
Dr. Dragon pled guilty to a single count of conspiracy to commit securities fraud before United States Magistrate Judge Barbara L. Major. Dr. Dragon’s guilty plea is subject to final acceptance by United States District Court Judge William Q. Hayes.
During her guilty plea, Dr. Dragon admitted that between 2008 and 2009 she participated in a conspiracy to defraud Sequenom’s shareholders through the dissemination of false and misleading information about a Down syndrome screening test under development at the company.
Dr. Dragon admitted that she and others caused Sequenom to issue press releases and various statements to investors and others falsely claiming that the Down syndrome test had been evaluated in “blinded” studies – that is, that the scientists conducting the tests did not know the actual outcomes. In fact, as Dr. Dragon admitted, the tests were not “blinded” because scientists either knew the outcomes before testing the samples, or had been directed to change their initial results so that the final results matched the true outcomes. Dr. Dragon also acknowledged she and others caused Sequenom to falsely claim that the test’s reliability and accuracy were nearly perfect. Dr. Dragon further admitted that she personally gave such false and misleading information about the test to investors, analysts and others during meetings in Vancouver, New York, and San Diego.
Dr. Dragon admitted that these false and misleading statements were designed to inflate and sustain the price of Sequenom’s stock. On April 29, 2009, after the close of the market, Sequenom announced a substantial delay in the commercial release of the Down syndrome test and an internal investigation due to “employee mishandling of R&D test data and results.” The following day, Sequenom’s stock price dropped by more than 75%.
Dragon will next appear in court on August 30 before United States District Court Judge William Q. Hayes for final acceptance of the plea and sentencing.
