Death of an Insider: R&D Chief Passes Before She Can Testify in Stock Fraud Case

Last Updated Mar 25, 2011 6:15 PM EDT

Elizabeth Dragon, the former R&D chief of Sequenom (SQNM) who was cooperating with the SEC in a securities fraud investigation of the Down Syndrome testing company, died on Feb. 26. She died of natural causes, according to her attorney, Robert Gooding, who declined to comment further. Her death, which hasn't been reported, is mentioned in note in Sequenom's annual report, filed on March 9.

Dragon's passing is another turn in the twisted tale of Sequenom and its near implosion in 2009, when the company was forced to announce that the data it compiled for its T21 Down Syndrome test was bogus. If San Diego-based Sequenom could bring a non-invasive prenatal test for Down Syndrome to market it would likely be a blockbuster: Every pregnant woman would want to take it. The data scandal forced the company to start its research from scratch.

Dragon pled guilty in June 2010 to lying to investors about the quality of Sequenom's data -- thus keeping the price of its stock artificially high -- and was to have been sentenced on July 30 this year. Dragon CEO Harry Stylli, CFO Paul Hawran and vp/commercial development Steve Owings all resigned from the company. Three other employees were fired. Each has denied wrongdoing.

Dragon's sentencing was pushed back after she struck a deal with the SEC to help the agency investigate other wrongdoing at Sequenom. In a recent filing in the case, prosecutors indicated that they may have been preparing Dragon for trial testimony. Dragon's attorney filed a routine change-of-address form as recently as Feb. 7.

It is not known what Dragon told the SEC about Sequenom, which has never fully explained what happened to its data in 2009. Sequenom remains under investigation by the SEC and the Department of Justice. Nor is it known whether the SEC can continue its investigation without Dragon's testimony. A call to the SEC lawyer in charge of the case was not immediately returned. SEC senior trial counsel John Bulgozdy declined to comment.

Since the probe started, the SEC has charged a Sequenom patent agent employed in the company's general counsel office with tipping off his brother and others on two occasions, allowing them to trade Sequenom and the stock of a company it acquired, ahead of the news. Former VP Owings has been accused in a civil suit of insider trading. He sold $365,967 of Sequenom stock a month before the announcement that its data was corrupted by "employee mishandling," according to SEC filings. And CFO Hawran sued the company for defamation.

Related:

Comments

CBSN Live

pop-out
Live Video

Market Data

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Market News

Stock Watchlist