In 2019, the former CEO and COO of MiMedx were indicted for allegedly engaging in a fraudulent scheme to inflate the Georgia-based wound care company’s revenue. Roughly a year later, both men have been found guilty on securities fraud charges.
Specifically, former CEO Parker H. “Pete” Petit was convicted of one count of securities fraud, and former COO William Taylor was convicted of one count of conspiracy to commit securities fraud, misleading the conduct of audits, and making false filings with the U.S. Securities and Exchange Commission. Both Petit and Taylor say they plan to appeal the decision.
What the SEC alleged
The charges relate to alleged activity in 2015. According to the government, Petit and Taylor falsely told the public that MiMedx had achieved growth across 17 consecutive quarters spanning from 2011 through 2015. The government claimed that MiMedx’s reported revenue was materially inflated in the second, third and fourth quarters of 2015 and for the full year, with a fraudulent inflation of about $8.2 million in the company’s 2015 10-K.
Petit and Taylor were accused of engaging in a scheme involving secret agreements with four distributors to misstate MiMedx’s quarterly and annual revenue figures. According to the government, Petit and Taylor “deceived the SEC, auditors, and the investing public, repeatedly misrepresenting the financial condition of their publicly-traded company.”
Short sellers raised concerns
In 2017, two short sellers, Viceroy Research and Aurelius Value, published negative articles on MiMedx, accusing the company of channel stuffing. Although it contested the articles’ claims, MiMedx subsequently conducted an audit, and in 2018 the company said that it would have to restate its financial statements from 2012 to 2016 and from part of 2017.
Not long after the short seller reports were published, Petit said, “This has all the markings of a concerted short seller attack by numerous entities attempting to short our stock and profit from fictitious information and innuendos.” However, after the ensuing audit that lasted 15 months, Petit resigned from his role as CEO.
If you or your firm is under investigation for possible SEC violations, do not hesitate to contact a securities law attorney with extensive experience in civil and criminal cases involving these matters. The securities law attorneys at Ford O’Brien represent clients in New York and Nationwide.
Source: BioSpace, “Former MiMedx CEO Parker Petit Found Guilty of Fraud,” Nov. 20, 2020
Source: BioSpace, “MidMedx Responds to Deceptive Short Seller Reports” Sept. 21, 2017