SEC Charges Biotech Company and Executives With Accounting Fraud
Washington, D.C.--(Newsfile Corp. - November 26, 2019) - The Securities and Exchange Commission today charged Georgia-based biotech company MiMedx Group Inc. and three former top executives with defrauding investors by misstating the company’s revenue and attempting to cover up their misconduct. MiMedx has agreed to a settlement to resolve the claims.
The SEC alleges that from 2013 to 2017, MiMedx prematurely recognized revenue from sales to MiMedx’s distributors and exaggerated MiMedx’s revenue growth. According to the SEC’s complaint, MiMedx improperly recognized revenue because its former CEO Parker H. “Pete” Petit and former COO William C. Taylor 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. Petit, Taylor, and former CFO Michael J. Senken allegedly covered up their scheme for years, even after MiMedx’s former controller raised concerns about MiMedx’s accounting for specific distributor transactions. The SEC also alleges that Petit, Taylor, and Senken all misled MiMedx’s outside auditors, members of MiMedx’s Audit Committee, and outside lawyers who inquired about these transactions.
“As alleged in our complaint, MiMedx’s former executives misled investors about the growth of MiMedx’s revenues and then repeatedly concealed their fraud,” said Kurt Gottschall, Director of the SEC’s Denver Regional Office. “This action reflects our commitment to holding issuers and their senior officers accountable for failing to provide accurate financial statements to the investing public, while the settlement with MiMedx gives appropriate credit for the company’s later remediation and cooperation.”
The SEC’s complaint, filed today in the Southern District of New York, charges all defendants with violating the antifraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC also charged Petit, Taylor, and Senken with lying to MiMedx’s outside auditors. Without admitting or denying the allegations, MiMedx has agreed to a settlement and to pay a $1.5 million penalty. The settlement is subject to court approval. The complaint seeks permanent injunctions, disgorgement plus interest, penalties, and officer-and-director bars against Petit, Taylor and Senken, and clawback of bonuses and other incentive-related compensation paid to Petit and Senken during the alleged fraud.
The SEC’s investigation was conducted by Kevin Comeau, Ty Cottrill, and Anne Romero with assistance from Judy Bizu of the Denver office. The case was supervised by Laura Metcalfe. The litigation will be led by Steve McKenna and Mark Williams and supervised by Gregory Kasper. The SEC appreciates the cooperation of the U.S. Attorney’s Office for the Southern District of New York.