CEO Charged in Rapid COVID-19 Test Scam

Decision Diagnostics’ stock soared 1,500% in less than two months on allegedly false claims of a 15-second COVID-19 test.


The US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have charged the CEO of a California-based medical device company for allegedly leading a scheme to defraud investors out of millions of dollars by falsely claiming his company created a 15-second rapid COVID-19 test.

Decision Diagnostics Inc. (DECN) CEO Keith Berman has been charged by the DOJ with one count of securities fraud and one count of making false statements, while the SEC has charged Berman and his firm with violating antifraud provisions of the securities laws.

“During this unprecedented time, when the need for truthful disclosures concerning COVID-19 tests is of vital importance, Decision Diagnostics and its CEO allegedly misled investors by claiming to have made a working test device when all they had was an idea that had not materialized into a product,” Stephanie Avakian, director of the SEC’s Division of Enforcement, said in a statement.  

According to the indictment, Berman and his firm were “experiencing financial difficulties” early this year and, in an email, he described his personal situation as “perilous.” But in March, he allegedly decided to use the coronavirus pandemic to increase the company’s value, saying in an email that “we need a new story and this coronavirus through impedance is the story that will allow me to raise millions.”

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That story allegedly was a fabricated COVID-19 test that not only worked super fast, but also provided a probability statistic that purportedly allowed users to determine the likelihood of a false positive or negative. The indictment alleges that Berman falsely claimed in press releases that Decision Diagnostics had developed a rapid test to detect COVID-19 in a finger prick sample of blood in just 15 seconds. However, Berman allegedly “well knew” the test hadn’t been created.

“Berman used the COVID-19 pandemic as an opportunity to capitalize on the public health crisis,” according to the indictment. “It was the purpose of the scheme for Berman to artificially increase and maintain the share price of DECN securities to enrich himself through access to additional corporate funds and compensation.”

Berman also allegedly told investors that the US Food and Drug Administration (FDA) was close to approving Decision Diagnostics’ request for emergency use authorization of the new COVID-19 test, despite knowing this wasn’t true.

In late April, the SEC suspended trading in shares of Decision Diagnostics over questions regarding the accuracy of information in the company’s press releases regarding COVID-19. Between early March and the trading suspension, the price of Decision Diagnostics’ stock had soared by more than 1,500%.

“All DECN actually had at the time of Berman’s statements was a theoretical concept that had not yet materialized into a product,” the SEC said in its complaint. “And without a product, Berman knew that DECN could not meet the FDA’s emergency use authorization testing requirements. These misstatements led to surges in the price and trading volume of DECN.”

Berman is also accused of using an alias to post false and misleading positive statements about the company to investors on internet message boards, as well as to refute allegations of fraud and to threaten potential whistleblowers with civil or criminal sanctions. Under the alias, Berman projected that demand for Decision Diagnostics’ test would be “close to 3 billion [test] kits” and claimed that the company was “in the forefront no matter how loud the naysayers are.”

The SEC is seeking a court order permanently enjoining Decision Diagnostics and Berman from directly or indirectly violating those provisions and ordering them to pay civil penalties.

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Opinion: Active Ownership and Fund-Level Reporting Are Key to Combating Greenwashing

Sarah Bratton Hughes, head of sustainability, North America, at Schroders, says it’s imperative to increase transparency and standardize reporting for ESG investments.


Data has revealed that institutional investors have increasingly overcome the idea that sustainable investing and returns are mutually exclusive. However, more adoption brings additional challenges.

Greenwashing is an ongoing concern for institutional investors looking to incorporate sustainable investing into their portfolios. With environmental, social, and governance (ESG) and sustainable-labeled products increasing exponentially over the past few years, the options can be overwhelming, and it’s difficult to determine whether a product is really meeting the return and sustainable criteria the investor is looking to achieve.

In fact, roughly 60% of North American investors felt greenwashing—or a lack of clear, agreed upon, sustainable investment definitions—was the most significant obstacle when trying to invest sustainably, according to data from Schroders’ annual study, which surveys more than 650 institutional investors, including 179 from North America.

Alongside the investment challenges related to greenwashing, almost half of North American investors (49%) said that a lack of transparency and reported data was restricting their ability to invest sustainably, an increase from 37% a year ago. This is concerning, given the increased attention on the issue and sustainable products available to investors. It is imperative to increase transparency and standardize reporting, so investors do not feel overwhelmed by these growing demands and the amount of sustainability information out there. 

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Such investments are not just a positive change for society and the environment—they also drive returns. Evidence has supported the notion that responsible companies should be more resilient in a downturn and outperform over the cycle. A study conducted by Bank of America showed that, during the spring downturn, the stocks with the highest ESG scores outperformed the broader market.

Companies’ externalities are becoming more important to the long-term sustainability of their business model and durability of earnings. The COVID-19 crisis has only accelerated the urgency on ESG considerations, and calls for corporate behavior to remain under the spotlight have been widespread. Investors are increasingly concerned with how workers are treated, particularly as major gaps in employee protection have been revealed. For example, an increasing number of workers are in casual or “gig” economy roles without benefits such as paid sick leave, health care, or retirement funds. This has created a “new social contract” between companies, their stakeholders, and their communities.

Investors wanting to avoid greenwashing at the manager and company level should pay attention to two key areas: active engagement and fund-level reporting.

Active Engagement

Engagement and voting are increasingly being viewed as important aspects of achieving change, rather than simply divesting. Asset managers and investors have a duty to hold companies accountable and an opportunity to drive positive change, rather than simply choosing to invest elsewhere.

Active engagement is on the rise among institutional investors—according to Schroders’ survey, 61% of North American institutions said active company engagement and stewardship were a key approach to integrating sustainability, up from just 44% a year ago.

Investors said transparent reporting, tangible outcomes, and consistently voting against companies in order to drive change were the three key signs of successful engagement. At the same time, institutional investors are realizing that an exclusionary approach is not the way to enact real change. Those that opted for an exclusionary approach fell to 30% this year from 51% in 2019.

When we engage with companies, we encourage them to think of the long term and consider the costs and benefits they are adding to society. Companies with a long-term outlook are more likely to behave responsibly toward their employees, to redirect capacity to social challenges, and to support ongoing relief efforts. Over time we expect these behaviors to be rewarded (what we call “corporate karma”) by consumers and investors alike. By engaging with companies and using voting rights, investors can ensure companies keep these long-term outlooks and drive sustainable change.

Fund-Level Reporting

Engagement is only a piece of the puzzle—fund-level reporting is also needed to combat some of the greenwashing. As the famous political adage goes: Trust but verify.

Institutional investors need to understand the sustainability profile of their investments as a key dimension of risk and opportunity, as the externalities that companies create are increasingly being passed back onto them in the form of costs, as social pressures and government intervention mount on ESG issues. For example, minimum wage legislation, sugar taxes, gambling restrictions, and carbon prices are all spreading, creating financial expenses for companies in place of previously unaccounted social problems.

Fund-level reporting is not simply claiming to invest sustainably in a firm level, glossy report. It’s meant to actually show investors how their money is being invested sustainably, with tangible evidence. This evidence should include real data, not just case studies. Anyone can create a case study about a sustainability company in the portfolio or tie a product back to the United Nations’ Sustainable Development Goals, but verifiable data will set apart managers who are greenwashing from those who are truly seeking a superior sustainable profile.

What’s Next?

The past year has indicated that the sustainable investing momentum is set to continue, as evidenced by the solid performance of sustainable funds during the COVID-19-related downturn and increased inflows into sustainable assets.

As we enter into a new presidential administration in the US with plans to further regulation of ESG issues, it will become increasingly important for companies to pay attention to and structure their business plans around ESG issues to preserve their bottom line.

As mentioned, consumers are laser-focused on how companies are adding value for all stakeholders and how they are managing their employees as the pandemic hopefully subsides in the new year. Organizations will need to show that they value key issues such as human capital in their organization by providing quality jobs with sufficient compensation, benefits, and opportunities for advancement, as well as demonstrate how their business practices impact the environment.

As sustainable investments continue to rise, greenwashing from companies and managers unfortunately won’t go away, but there are ways to combat it. Active engagement is key to making companies recognize these issues and stay true to their promises to address them, while fund-level reporting can ensure their investments are truly more sustainable.  

Sarah Bratton Hughes is head of sustainability, North America, at Schroders.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.

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