MiMedx Denied $40 Million Restitution Sought In Fraud Case (1)

MiMedx Group Inc. failed to recover more than $40 million in legal fees and other costs following the conviction of two former executives for scheming to inflate the medical device maker’s revenue.

The company had asked U.S. District JudgeJed S. Rakoff to order former chief executive officer Parker H. Petit and ex-chief operating officer William Taylor to pay $40.2 million in restitution, including tens of millions of dollars it advanced to their lawyers to defend them in the case. On Sunday, Rakoff rejected the request, saying he had no legal authority to do so and that MiMedx itself could have faced prosecution and therefore wasn’t a victim.

“The defendants’ criminal actions were within the scope of their employment and designed to benefit MiMedx,” Rakoff wrote in his ruling. “Although they were undoubtedly also motivated by personal financial gain,” it was through a benefit to the company that they expected to profit, he wrote.

The case remains an open legal matter and the next steps are being determined, MiMedX said in a statement.

Read More: CEO Who Blamed His Cancer on Short Sellers Gets a Year in Prison

Petit ran MiMedx for almost a decade before stepping down as CEO and chairman in July 2018 following external and internal investigations of the company’s sales tactics and government contracts. Taylor resigned at the same time. They were convicted in November 2020 after one of the first post-pandemic jury trials in federal court in Manhattan. Petit was ordered to spend a year and a day in prison and pay a $1 million fine, while Taylor was sentenced to 12 months behind bars and a $250,000 fine.

In a separate case, MiMedx sued Petit and Taylor in state court in Florida in January seeking to recoup millions of dollars in legal fees and costs the company advanced to pay for their defense. Petit and Taylor said in a response to the suit that they were entitled to be compensated for legal costs under agreements with the company.

The case is U.S. v. Petit, 19-cr-850, U.S. District Court, Southern District of New York (Manhattan.)

(Updates with company comment)

To contact the reporter on this story:
Chris Dolmetsch in Federal Court in Manhattan at cdolmetsch@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Peter Jeffrey, Joe Schneider

© 2021 Bloomberg L.P. All rights reserved. Used with permission.