MiMedx Loses Offer To Get $ 40.2 Million Restitution From Ex-CEO, COO
(Reuters) – Biotech company MiMedx Group Inc lost an offer to get $ 40.2 million restitution from its former managing director and chief operating officer after being convicted of conspiring to defraud investors by inflating the company’s income.
U.S. District Judge Jed Rakoff in Manhattan ruled on Sunday that the Marietta, Ga.-Based company was not entitled to restitution because it had not been the victim of former CEO Parker Petit’s scheme and from former COO William Taylor.
“The accused’s criminal actions were part of their employment and were aimed at benefiting MiMedx,” Rakoff wrote. “Thus, MiMedx could have been – but ultimately was not – criminally charged because of the behavior of the defendants.”
MiMedx, who is represented by David Rody of Sidley Austin, said in a statement that “the next steps are still being determined.”
William Weinreb of Quinn Emanuel Urquhart & Sullivan, an attorney for Taylor, declined to comment, as did a spokesperson for the United States Attorney’s Office for the Southern District of New York, who pursued the case and supported the return request by MiMedx.
Alexandra Shapiro of Shapiro Arato Bach, an attorney for Petit, did not immediately respond to a request for comment.
Petit and Taylor were convicted in November of securities fraud and conspiracy, respectively, following the first white-collar criminal trial to begin in the Manhattan Federal Courthouse since the start of the COVID pandemic -19. In February, Rakoff sentenced the two to one year in prison, ordering Petit to pay a fine of $ 1 million and Taylor to pay a fine of $ 250,000.
Prosecutors alleged that in 2015, Petit and Taylor used bogus consulting deals and other means to inflate MiMedx’s reported income by around $ 9.5 million to make it appear that the company, which sells biologics, including skin grafts and amniotic fluid, had reached its target public revenues. Defendants’ attorneys argued that all transactions were legitimate and only affected when the income was made.
MiMedx argued that she was the victim of the crime because she was forced to advance tens of millions of dollars in legal fees to lawyers for the two executives.
Rakoff, however, said federal criminal restitution laws – the mandatory victim restitution law and the victim and witness protection law – do not extend to the securities fraud conviction of Petit. .
Even though he had the authority, Rakoff said, he couldn’t order restitution from either of the accused because MiMedx was not a victim. He rejected the company’s argument that Petit and Taylor withheld their actions from others within the company, writing that this did not protect the company from liability under the superior response principle, which argues that a company is generally responsible for the actions of its agents.
The move comes after three of the defense companies involved in the case sued MiMedx last month, saying she still owed millions in fees.
The case is USA v. Petit et al, US District Court, Southern District of New York, No 1: 19-cr-00850.
For the government: US assistant lawyers Edward Imperatore, Scott Hartman and Daniel Tracer
For MiMedx: David Rody from Sidley Austin
For Little: Alexandra Shapiro by Shapiro Arato Bach
For Taylor: William Weinreb of Quinn Emanuel Urquhart & Sullivan (NOTE: This story has been updated with responses from MiMedx and Taylor’s advice.)