Law360 (November 16, 2020, 7:22 PM EST) -- A Manhattan jury on Monday deliberated fraud charges against two former MiMedx Group Inc. executives accused of cheating investors, after a three-week criminal trial in the Southern District of New York that so far has successfully managed the dangers posed by the COVID-19 pandemic.
After getting legal instructions from U.S. District Judge Jed S. Rakoff, jurors deliberated fraud and conspiracy counts against former CEO Parker "Pete" Petit and former president William Taylor for about four hours in the afternoon before heading home. The jury is scheduled to resume deliberations Tuesday after a trial that opened Oct. 26, marking the Southern District's first foray back into white collar criminal fraud trials since the onset of the virus in mid-March.
The Manhattan U.S. attorney's office says the two men falsely booked revenue in 2015 via secret deals with MiMedx business partners to boost the human tissue therapeutics seller's stock value — and their take-home pay. Petit held $38 million of stock and earned $1 million in pay that year, while Taylor sold $2 million of stock and was paid $850,000, prosecutors say.
"They lined their own pockets with hundreds of thousands of dollars in cash, and millions of dollars of MiMedx stock that they hadn't earned and didn't deserve," prosecutor Scott Hartman told the jury during closing arguments late last week.
Petit engineered a $200,000 bribe to one vendor to induce him to buy $1 million of MiMedx product, and used family trust funds to make a loan to another vendor to induce him to purchase $4 million of product, the feds say. Taylor sent secret emails to yet another to seal a big order, they say.
Petit and Taylor, who decided against taking the witness stand last week, deny the allegations. Their lawyers say the feds are painting normal business conduct in a sinister light. Recognizing revenue from vendors at the time a contract is signed is standard industry practice, they told the jury.
"It's called accrual-based accounting, and there is absolutely nothing wrong with it," Petit's lawyer Matthew Menchel argued.
Payments styled bribes and illegal loans by the feds were just part of an effort by Petit and Taylor to support trusted sellers of their products — human-tissue therapeutics used to treat ailments like diabetic sores, their lawyers argued.
"At bottom, every decision that Bill Taylor made was a good faith business decision," Taylor's lawyer William Burck told the jury last week.
The government got the last word Monday during its rebuttal. Prosecutor Edward Imperatore dismissed the defense stance as "idiotic word games" and said witnesses and documents prove the two defendants engaged in illegal deals and lied repeatedly so that they could profit from fake revenue.
However the jury comes out, the three-week trial showed that — at the current moment at least — the Southern District is capable of holding lengthy trials while mitigating the risk of the deadly virus.
Three alternate jurors were excused over the course of the trial, leaving one in reserve as of Monday, but nobody was excused for virus-related reasons. The deliberating jurors are working in a large, empty courtroom while maintaining safety protocols.
Among those who took notice of the conditions under which the jury was doing its work was Menchel, one of Petit's lawyers, who thanked them for their service during closing arguments last week.
"I think under these circumstances, given where we are in the world, it's even more extraordinary than is normal," he said.
MiMedx has settled with the U.S. Department of Justice over its legacy accounting practices and is driving toward a deal with private plaintiffs in Georgia federal court, where a Dec. 21 hearing is scheduled before Atlanta U.S. District Judge William M. Ray II.
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.
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