Petit Fined $1 Million and Sentenced to 12 Months in Jail
Parker “Pete” Petit, the former chief executive officer of MiMedx Group, Inc. (MiMedx), a biomedical company based in Marietta, Georgia, was found guilty of securities fraud, but he isn’t going down without a fight.
Petit, a larger-than-life person, has started and sold many medical companies. According to his own website he is a “visionary healthcare executive, he has a history of developing companies from their emerging stages and leading them to maturity and significant stature in their respective markets.” At Georgia Tech, he helped fund the biotechnology building which has his name as well as the science center building which also has his name.
OTW has been covering the never-ending story of Petit and MiMedx since the initial allegations of channel stuffing and fraudulent billing against MiMedx. For OTW’s initial coverage, see “MiMedx Reeling Under Fraud Allegations.”
Since the initial coverage, Petit has found himself the defendant in both criminal and civil lawsuits. The civil matters were put mostly on pause while the criminal lawsuit was proceeding.
In November 2019, the United States of America filed an indictment in federal court against Petit and former MiMedx Chief Operating Officer William Taylor. The Indictment in this case charged both men with two counts. Count one charged a conspiracy to commit securities fraud, make false filings with the Securities and Exchange Commission (SEC), and improperly influence the conduct of audits. Count two charged substantive securities fraud. Both men were arrested.
In an initial press release, U.S. Attorney Geoffrey S. Berman said, “As alleged, Parker Petit and William Taylor deceived the SEC, auditors, and the investing public by repeatedly misrepresenting the financial condition of a publicly traded company. They allegedly conspired, through secret agreements and financial inducements with four distributors, to misstate sales revenue.”
In November 2020, following a four-week trial, the jury reached its verdict in the matter. The jury found Petit not guilty on count one, the charge of conspiracy to commit securities fraud, make false filings with the SEC, and/or mislead MiMedx’s auditors. On count two, the charge of securities fraud, the jury found Petit guilty.
Conversely, the jury found Taylor not guilty on count two, the charge of securities fraud and guilty on count one.
Acting U.S. Attorney Audrey Strauss said in a press release, “As the jury found, Parker Petit and William Taylor employed secret agreements and corrupt financial inducements with four distributors to materially misstate the quarterly and annual sales revenue of MiMedx. In the process, they deceived the SEC, auditors, and the investing public, repeatedly misrepresenting the financial condition of their publicly traded company.”
At first glance, it appears that the story of Petit and MiMedx may be reaching its final chapters. However, it does not appear that Petit will go down without a fight. In January 2021, Petit filed a motion for a judgment of acquittal or, in the alternative, for a new trial. In February 2021, the judge denied Petit’s motion for a judgment of acquittal and, in the alternative, for a new trial.
Petit’s Sentencing Letter
Petit’s advocacy continued into sentencing as well. In a 15-page sentencing letter to the judge, Petit candidly discussed his childhood, personal convictions, bladder cancer, request for community service, and his forced retirement. He opens by disclosing that initially he “requested a pardon from the President very late in his process, and it was denied. I [Petit] did that because my cancer [bladder] had returned after almost one year, and I [Petit] was fearful of what effects incarceration would have on my cancer.”
He also claims that he had not intended to commit fraud, stating in part: “I believe that if Bill Taylor and I had testified at our trial, we would have conveyed the fact that, regardless of what transactions took place with these four distributors in the latter part of 2015, there was no intent to commit accounting or securities fraud. There were no motivating factors for us to commit fraud because the very small amount of extra bonus pay based on revenue was certainly inconsequential relative to the huge implications for executives engaging in fraudulent activities. I must accept responsibility for all corporate activities in this area because I signed, along with our two financial executives, the company’s financial statements. However, I had no idea that any of our activities could ever be viewed as accounting or securities fraud. There was no scienter in our activities, although after having viewed some of the emails from sales personnel down the chain of command, I could see where an inexperienced skeptic might allege intent whereas experienced business managers would not.”
While Petit maintained his stance that he had no fraudulent intent, sentencing did proceed. In February 2021, a Skype sentencing was held and the judgment was imposed. The judge sentenced Petit to 12 months jail, recommending incarceration in the Federal Medical Center at Lexington, Kentucky, or the Federal Medical Center at Butner, North Carolina. Petit will have to surrender for service of his sentence on or before September 21, 2021. He was also fined $1 million. The determination of restitution was deferred until May 21, 2021.
Taylor was similarly sentenced to 12 months jail, with a $250,000 fine.
Even with the criminal sentence, the saga will continue because on March 8, 2021, Petit filed his notice of appeal.
Other Legal Woes
The United States of America isn’t the only entity wanting a piece of Petit. In November 2019, the SEC filed a complaint in federal court against Petit, Taylor, and former MiMedx CFO Michael Senken. It charged them with engaging in a "wide-ranging fraud" and misstating "millions of dollars of revenue" in SEC filings. For OTW’s initial coverage of the litigation see, “Pete Petit and Bill Taylor Charged With Fraud.”
According to the SEC’s initial press release, the SEC seeks "permanent injunctions, disgorgement plus interest, penalties, 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.”
In March 2020, the court entered a stipulation and order staying discovery in the matter, pending resolution of the above discussed criminal action. The parties agreed to meet and confer regarding the discovery schedule after the judgment was entered in the criminal case. Currently, there is nothing indicating that the parties have set a discovery schedule. However, with the November 2020 judgment and February 2021 sentencing wrapped up, it should only be a matter of time before the litigation proceeds.
Another pending legal matter arises from a federal securities class action. According to the complaint, it was brought on behalf of all investors who purchased or otherwise acquired MiMedx “common stock between March 7, 2013 through February 19, 2018.” The action was brought for violations of the Securities Exchange Act.
In May 2020, Petit and Taylor filed a motion to dismiss for failure to state a claim. However, the litigation in this matter was stayed as the parties tried to reach a resolution through mediation. In December 2020, the parties participated in mediation, but a settlement was not reached.
It appears that this matter is starting to move forward. In February 2021, the court heard oral arguments via Zoom on the pending motions to dismiss. It stated that it will rule on the motions to dismiss by the end of March.
The Battles Ahead
Petit faces continued battles as he moves forward, including his appeal and other pending litigation. Will the next few months write the final chapter in the Petit saga or open new chapters in his litigation battle? Stay tuned.