Rakoff Opens SDNY Fraud Trial With Dig At Pence On Virus

By Pete Brush
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Law360 (October 26, 2020, 6:16 PM EDT) -- Manhattan U.S. District Judge Jed S. Rakoff presided Monday over the opening of the Southern District of New York's first white-collar fraud trial since the onset of COVID-19 — and he found time before jury selection began to take a swipe at Vice President Mike Pence on virus safety.

A masked-but-cheerful Judge Rakoff spent part of the morning in a socially distanced assembly room picking jurors for the Manhattan U.S. attorney's criminal case against former MiMedx CEO Parker "Pete" Petit and former president William Taylor.

Prosecutors say the two men falsely recognized revenue in 2015, via secret deals with MiMedx business partners, in an effort to placate investors. In a 2015 filing with the U.S. Securities and Exchange Commission, MiMedx fraudulently boosted income by $9.5 million, they say. Petit and Taylor, both of Georgia, strongly deny the feds' conspiracy and securities fraud counts.

For much of the 11 months since the defendants were arrested in November, Rakoff's courthouse has been devoid of trials because of the dangers posed by COVID-19 to jurors and other participants. But with courtrooms now refitted for virus safety and with transmission rates fairly low across Manhattan, trials have resumed for the first time since mid-March.

Petit and Taylor's trial, expected to last about four weeks, is the first of the white-collar criminal variety.

Before starting jury selection on Monday morning, Judge Rakoff coached participants on how the process would unfold with safety in mind. Socially distant jurors are shielded from lawyers and witnesses by clear plastic barriers, capacity in courtrooms is sharply limited and all wear face masks.

To make sure prospective jurors have the opportunity to verify that they do not personally know a defendant or a lawyer, defendants and others briefly don clear masks during the jury-selection process so their faces may be seen in full.

As he instructed attorneys on how and why the clear masks are necessary, Judge Rakoff apologized for the cumbersome process. But he also found time for a barb at the expense of the head of the White House's coronavirus task force.

"[We] have all these details — but I was told by Vice President Pence that we have to follow them," Judge Rakoff said to a round of courtroom laughter.

The Republican vice president and his boss, President Donald Trump, have famously flouted COVID-19 safety protocols, often declining to wear masks and taking a lax approach to social distancing. Judge Rakoff appeared tuned in to weekend news that Pence's chief of staff, Marc Short, has become the latest administration figure to test positive for the virus even as Pence continues campaign travel. The White House declined a request for comment by Law360 Monday.

Judge Rakoff, who is known to choose juries at a lightning-fast speed, then completed a hiccup-free selection of 12 jurors and four alternates, seating them for early afternoon opening arguments.

Addressing the jury from inside of a miked-up plexiglass booth, prosecutor Daniel Tracer then told jurors Petit and Taylor committed crimes of greed.

Petit and Taylor did "secret deals" with distributors who buy MiMedx products — human-tissue therapeutics used to treat ailments like diabetic sores.

Petit went so far as to use $1.5 million from a family trust fund to secretly assist one MiMedx distributor clear a company debt to make it look like dollars were rolling in, Tracer said.

"The defendants weren't doing legitimate business," he said.

Counsel for Petit and Taylor then pushed back, with Petit's lawyer Eric Bruce telling jurors that prosecutors are presenting a case through a lens of "dirt and suspicion," and trying to turn "innocent accounting mistakes" into crimes.

"Just because that is how they see this case doesn't make it true," Bruce said, calling Petit a longtime, hard worker and self-made man who pushed to keep MiMedx financially sound and who was "tough and demanding but fair."

Taylor's lawyer, William Weinreb, said his client had no intention of defrauding investors or anyone else.

"He never believed that he or his company was doing anything wrong," Weinreb said of Taylor.

The trial is expected to feature MiMedx witnesses including a former account who prosecutors say was pushed out after raising "red flags" about the company's accounts. MiMedx has settled with the DOJ and is driving toward a settlement with private plaintiffs in Georgia federal court.

Petit is represented by Eric Bruce, Altin Sila and Jennifer Loeb of Freshfields Bruckhaus Deringer LLP, as well as Amanda Tuminelli and Matthew Menchel of Kobre & Kim LLP.

Taylor is represented by William Weinreb, William Burck, Daniel Koffmann, Michael Carlinsky and Michael Packard of Quinn Emanuel Urquhart & Sullivan LLP.

The government is represented by Daniel Tracer, Edward Imperatore and Scott Hartman of the U.S. Attorney's Office for the Southern District of New York.

The case is USA v. Petit et al., case number 1:19-cr-00850, in the U.S. District Court for the Southern District of New York.

--Editing by Amy Rowe.

For a reprint of this article, please contact reprints@law360.com.

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