Former MiMedx CEO and COO are convicted on fraud, conspiracy charges
The MiMedx saga — which has included a months-long investigation, FBI involvement and allegations that the company fraudulently boosted its sales — has resulted in the conviction of two former executives. But it isn’t quite over yet.
Former CEO Parker “Pete” Petit and former COO William Taylor have been convicted on a securities fraud count and a conspiracy count, respectively, in the Southern District Court of New York. The Manhattan US attorney’s office accused the men of falsely reporting $9.5 million of revenue in 2015 to boost the company’s stock and fill their own piggy banks, per a Law360 report.
But the defendants have denied the accusations, and say they plan on appealing the verdict. Petit was acquitted on a conspiracy count, while Taylor was acquitted on a fraud count.
“We are pleased that the jury acquitted Mr. Taylor of securities fraud. We are of course disappointed in the verdict on the conspiracy count, but Mr. Taylor fully intends to seek to have the verdict overturned,” Taylor’s lawyer William Burck told Law360.
MiMedx $MDXG, which produces surgical and tissue-graft products for veterans and military hospitals, ran into trouble back in February of 2018, when the FBI showed up at the door of Marc Cohodes. The vocal short seller had insulted the company and Petit in hundreds of tweets. After FBI agents ordered Cohodes to stop, his lawyer went to the US Department of Justice with a complaint.
The DOJ seemed to be already investigating MiMedx’s sales and distribution practices. The company faced lawsuits brought by ex-employees who accused it of fraudulently boosting sales. And it spent several years challenging the FDA on whether its products met regulatory standards.
MiMedx said it was conducting an internal investigation in February of 2018, and that it would restate its financial statements going back six years. It parted ways with Petit and Taylor and slashed 24% of its workforce to start a “new chapter.” By November, it delisted from Nasdaq.
The internal investigation, conducted by King & Spalding with KPMG as an auditor, turned up a slew of accusations, including that MiMedx made material misstatements and omissions about its deals, that Petit lied under oath when discussing its largest distributor, and that the company’s actions were “designed to manipulate the timing and recognition of revenue.”
The company’s shares, which once traded at a high of $16.75, closed at $6.79 apiece on Thursday.
What comes next for the former execs? Petit is scheduled for sentencing on Feb 23, and Taylor is due back the following day. Petit could be looking at up to 20 years for the securities fraud count, while Taylor’s conspiracy count could land him up to 5 years.
A correction has been made to reflect that Petit was acquitted on a conspiracy count, not a securities fraud count.