Past Sequenom Exec Charged with Lying by SEC - TheStreet

Past Sequenom Exec Charged with Lying by SEC

Sequenom's R&D chief manipulated and lied about data pertaining to company's gene test for Down's syndrome, alleges SEC.
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SAN DIEGO (

TheStreet

) --

Sequenom's

(SQNM)

former head of research and development has been charged with making false claims to investors about the company's experimental genetic test for Down's syndrome, according to a complaint filed by the Securities and Exchange Commission Wednesday.

The SEC alleges that Dragon, Sequenom's former vice president for research and development, lied on at least three separate occasions when she told investors and analysts that the company's fetal gene test for Down's was almost 100 percent accurate. In fact, the SEC alleges, Dragon knew Sequenom's test was more seriously flawed.

In April 2009,

Sequenom admitted that data generated for its Down's test had been "mishandled" and was no longer reliable

. The shocking disclosure sent

Sequenom shares plunging

and ultimately forced the company's board of directors to fire CEO Harry Styli and Dragon.

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

In the SEC's complaint, Dragon, a former executive with

Roche

, is alleged to have provided Sequenom scientists working on the experimental Down's test with outcomes of patient samples which allowed the company to manipulate the data in order to produce more accurate results.

"Dragon falsified the number of samples allegedly tested by Sequenom and she lied about how well the test worked, claiming that it produced unambiguous results. In reality, the test results were often difficult to interpret, which is why she needed to 'unblind' the known outcomes to her scientists," the SEC complaint alleges.

Without admitting or denying the SEC's charges, Dragon has consented to a judgment which will permanently bar her from serving as an officer or director of a public company. A court will decide at a later time the financial penalties to be paid by Dragon, according to the SEC.

Sequenom is currently trying to develop a new genetic test for Down's syndrome.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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