MiMedx Execs Convicted In SDNY's 1st Virus-Era Fraud Trial

By Pete Brush
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Law360 (November 19, 2020, 12:03 PM EST) -- A Manhattan jury convicted two former MiMedx Group Inc. executives Thursday in an alleged fraud scheme, capping the Southern District of New York's first white-collar fraud trial since the onset of the COVID-19 pandemic, an experience one juror described as "still court" with "plenty of Purell."

The seven-woman, five-man jury's late-morning verdict came after deliberations over four days in a trial before U.S. District Judge Jed S. Rakoff that opened Oct. 26. Former CEO Parker "Pete" Petit was convicted on a securities fraud count and acquitted on a conspiracy count, while former President William Taylor was convicted on a conspiracy count and acquitted on a fraud count.

The Manhattan U.S. attorney's office says the two men falsely reported $9.5 million of revenue in 2015 via secret deals with four MiMedx business partners to boost the human-tissue therapeutics seller's stock — 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, according to prosecutors.

Petit and Taylor have strenuously denied the allegations. Their lawyers argue the feds painted normal business conduct in a sinister light, and they have indicated they will appeal.

"We are pleased that the jury acquitted Mr. Taylor of securities fraud. We are of course disappointed in the verdict on the conspiracy count, but Mr. Taylor fully intends to seek to have the verdict overturned," Taylor's lawyer William Burck told Law360.

The securities fraud count carries a maximum sentence of 20 years, while the conspiracy count carries a maximum of five years — although the case is unlikely to generate a maximum sentence for either man.

Judge Rakoff set a Feb. 23 sentencing date for Petit and a Feb. 24 sentencing date for Taylor.

MiMedx has already 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.

During the course of the ex-execs' trial, MiMedx was relisted on the NASDAQ stock exchange. It trades with more than $700 million of market capitalization.

In an afternoon statement, acting Manhattan U.S. Attorney Audrey Strauss said the defendants were found guilty of duping the U.S. Securities and Exchange Commission, which regulates publicly traded companies, as well as auditors and investors.

"Now they await sentencing for their crimes," she said.

Held in a Lower Manhattan courtroom refitted for virus safety, Petit and Taylor's trial marked a successful return by the Southern District to lengthy white-collar fraud trials after a mid-March lockdown triggered by soaring rates of virus transmission across New York City and state. The trial stretched nearly four weeks but no virus cases were said to have stemmed from it as of Thursday, according to people who watched it throughout.

Before excusing jurors, Judge Rakoff said they did a "terrific job," especially under the socially distanced circumstances.

"These are not the easiest of times, but you were riveted to the facts," he said.

On his way out of the courthouse, one juror told Law360 that, overall, the experience was largely unchanged.

"It was still court. I still felt like I was in court," said the Manhattan temp worker, who gave his name as Lance and declined to give a last name.

"There was plenty of Purell. We had to sit far apart. It was basically an extension of the city's COVID policies," he added.

No additional jury trials are scheduled in Manhattan federal court this year.

Counsel for Petit did not immediately return requests for comment.

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 U.S. 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 Marygrace Murphy.

Update: This story has been updated throughout with additional detail and comment.

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

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