The U.S. Attorney’s Office, Southern District of New York, said that the former chairman and CEO of Mimedx Group Inc., Pete Petit, was convicted of securities fraud and the former president and COO, Bill Taylor, was convicted of conspiracy to commit securities fraud, to make false filings with the SEC and to mislead the conduct of audits. According to allegations in the indictment and evidence presented at trial, by 2015, it became difficult for Marietta, Ga.-based Mimedx to reach its aggressive revenue targets. Despite GAAP and SEC guidance for how to recognize revenue upon transfer of a product to a stocking distributor, Petit and Taylor engaged in a scheme to falsely recognize revenue in the second through fourth quarters of 2015. Petit and Taylor then caused the advanced wound care company to report fraudulently inflated revenue figures to the investing public, to ensure numbers fell within its publicly announced revenue guidance. Prosecutors said Mimedx reported revenue that was fraudulently inflated by roughly $8.2 million in its 2015 10-K. Features of the scheme included: making a $200,000 sham “consulting” payment as a bribe; recognizing unpaid revenue, including Petit’s adult children using a shell company to loan money intended to pay Mimedx to a distributor; granting the right of return to a distributor in a hidden, back-dated letter; and sending a hidden email stating a distributor could return products, as well as a “cover story” email forwarded to the accounting department that required payment within a fixed period, according to the U.S. Attorney’s Office statement. The two executives are out on bail pending sentencing, scheduled for late February 2021. In early 2018, Mimedx was subject to a U.S. Department of Justice investigation of its sales and marketing practices, including undisclosed payments to doctors. After trading on the OTC Pink Sheets, Mimedx received approval to relist its common stock (NASDAQ:MDXG) and began trading on Nasdaq on Nov. 5, 2020.

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