Ex-MiMedx CEO Parker Petit reportedly received a year-long prison sentence after a conviction for a fraud scheme involving the company.
Reuters reported that U.S. District Judge Jed Rakoff in his decision yesterday cited Petit’s age (81 years old), his current diagnosis of bladder cancer and history of charitable work as reasons that the sentence is shorter than it might have been for a fraud scheme involving distributors.
In November 2020, a Manhattan jury rendered verdicts against Petit and former COO William C. Taylor, whom federal prosecutors claimed had entered into undisclosed side arrangements with five distributors. These side arrangements allowed distributors to return product to MiMedx or conditioned distributors’ payment obligations on sales to end-users, the government charged.
As a result, Petit was convicted of securities fraud and Taylor, 52, was convicted of conspiracy to commit securities fraud, to make false statements in SEC filings and to mislead the conduct of audits. When convicted, it was confirmed that the securities fraud count carried a maximum sentence of 20 years in prison, while the conspiracy count carries a five-year maximum.
MiMedx, which makes regenerative and therapeutic biologics using human placental tissue allografts, ousted Petit and Taylor for cause after an independent probe into its revenue recognition forced the company to restate its earnings going back to 2012. The investigation found that Petit and his management team enacted a scheme to commit fraud, retaliating against anyone who questioned their accounting practices and secretly filming their offices.
The Marietta, Ga.-based company was alleged to have misstated revenues and attempted to cover up misconduct from 2013 to 2017, prematurely recognizing revenue from sales to distributors and exaggerating revenue growth. Petit and Taylor covered up the scheme for years, according to the SEC, even after the company’s former controller raised concerns over the accounting scheme. Additional allegations included misleading outside auditors, members of the company’s audit committee and outside lawyers inquiring about the transactions.
Federal prosecutors claimed in the conviction that Petit’s and Taylor’s alleged manipulation of MiMedx’s revenue caused MiMedx to report 2015 annual revenue that was fraudulently inflated by approximately $9.5 million, or about 5%. MiMedx had previously agreed to pay $1.5 million to settle federal charges that it and three former top executives allegedly defrauded investors.
According to the Reuters report, Petit accepted the jury’s verdict but did not believe he had committed a crime in his handling of MiMedx’s finances. The judge said he should serve his sentence at a federal medical facility, to which he’s set to report in September, and also ordered Petit to pay a $1 million fine.