Parker H. “Pete” Petit has spent years waging court battles and a war of words against those accusing his Marietta-based company of fraud.
The MiMedx CEO and chairman called stories about his company inflating revenues by over-shipping medical products “bogus.” He called the short sellers who accused MiMedx of channel stuffing Veterans Affairs hospitals “wealthy thieves” who can get away with lying because they aren’t held to the same standards as corporate executives. He blamed “rogue” sales people for ongoing investigations by federal agencies.
“This is all stuff trumped up to drive the stock price down,” Petit told The Atlanta Journal-Constitution earlier this year.
VIDEO: Previous VA hospital coverage
But his detractors received more validation on Monday. Following further discoveries in the biopharma company’s own ongoing internal investigation, Petit abruptly stepped down, ending his nine-year run leading what Fortune magazine once ranked the fifth-fastest growing public company, ahead of Facebook Inc. and Amazon.com Inc. On Monday, MiMedx stock dropped 38 percent to $3.93 a share.
Petit, 78, has been among metro Atlanta’s business elite for decades, having started his first company, Healthdyne, Inc., in the early 1970s and establishing a track record of turning health industry startups into billion-dollar companies.
Feisty and politically-connected, he served as Donald Trump’s campaign finance chairman in Georgia and has connections to U.S. Sen. Johnny Isakson and former U.S. Secretary of Health and Human Services Tom Price.
With Petit’s departure came another foreboding sign for the company: Replacing Petit as interim CEO will be David Coles, a senior leader at Alvarez & Marsal who specializes in interim management of under-performing businesses. Coles went to work as CFO of Lehman Brothers Holdings Inc. just days before the global financial services firm filed for bankruptcy in 2008.
The hire shows “that they’re on an express train to Chapter 11,” said Jessica Cino, a Georgia State University law school professor and former white collar criminal defense attorney. MiMedx employs roughly 950 people, more than half of them based in Georgia.
Also out at MiMedx is Petit’s right hand man, Bill Taylor, the company’s president and chief operating officer.
‘Heads have to roll’
A news release Monday indicated Petit’s and Taylor’s departures weren’t voluntary, but “are based on the Board of Directors’ business judgment regarding the company’s leadership and direction, and arise, in part, from information the Audit Committee has identified through its previously announced independent investigation.”
Charles Evans, MiMedx’s lead independent director, has been named chairman of the board, and Petit will remain a board member, the news release said. Petit did not respond to messages from AJC on Monday, nor did MiMedx’s spokesman.
Cino, who as a defense attorney specialized in pharmaceutical companies and banks, said the company could be keeping Petit on the board because of a contractual clause or for insurance purposes. It could also be that they didn’t find him culpable in fraud, but rather responsible for a lack of oversight or zero oversight.
“That itself means heads have to roll,” Cino said.
Fortune magazine described MiMedx as “a designer of a kind of modern medical alchemy.’’ The company sells regenerative injections and wound coverings derived from human placental tissue, used in orthopedic treatments and on burn victims, among other uses.
Since former employees have come forward over the past year with allegations of over-shipping to inflate earnings — known as “channel stuffing” — MiMedx has come under scrutiny from federal investigators. Monday’s news release brought up last year’s subpoena from the U.S. Securities and Exchange Commission, and said the company continues to produce documents in response and that the U.S. Department of Justice is working parallel to the SEC.
MiMedx is also entangled in lawsuits with shareholders and ex-employees who sued under whistleblower laws. The ex-empolyees alleged a fraudulent scheme where MiMedx, with Petit’s knowledge, flooded VA hospitals’ shelves with its EpiFix grafts and booked the revenue even though the hospitals hadn’t ordered them.
The company launched its own internal investigation led by auditing firm KPMG and law firm King & Spalding. Meanwhile, the Department of Veterans Affairs became involved, with three South Carolina VA workers indicted earlier this year for allegedly taking inducements from a MiMedx sales representative in exchange for over-using the company’s product on veterans.
A former account executive for MiMedx, Mary Armstrong, called Petit’s resignation “vindication.” She says that two months after she told him and other executives about overcharging, up-charging and over-shipping at dozens of medical facilities in the Dallas-Fort Worth area, the company fired her for poor sales performance.
“The fact that those two, the most prideful men I’ve ever seen in my life, stepped down, goes to show the amount of nefariousness that has gone on at that company,” said Armstrong, who is not part of any litigation with MiMedx. “But there’s still a long way to go. There are still honest whistleblowers out there who are still being attacked by MiMedx.”
Last month, findings in the internal investigation led the company to announce that its financial statements released from 2012-2016 and the first three quarters of 2017 could not be relied on, and that the company would withdraw all previous financial guidance issued for 2018. At that time, MiMedx parted ways with then-Chief Financial Officer Michael Senken and treasurer John Cranston.
Those developments led short seller Mark Cohodes to predict on his website, PetiteParkerTheBarker.com, that Petit would be out as CEO by July 4 and that MiMedx will declare bankruptcy by Labor Day.
After Monday’s resignations, he adjusted the latter forecast to the end of this month.
“When the CEO, the president and the CFO are all gone – this thing’s a bankruptcy,” he said. “It’s a massive fraud. It’s been a massive lie all the way through.”