CEO Who Blamed His Cancer on Short Sellers Gets a Year in Prison
(Bloomberg) -- Parker H. Petit, the former MiMedx Group Inc. chief executive officer convicted last year of securities fraud, was sentenced Tuesday to one year in prison.
“Prison time sends a deterrence message that can not be sent by any other punishment,” Judge Jed S. Rakoff said at a hearing in federal court in Manhattan.
Still, given that Petit is 81, suffers from recurring bladder cancer and has done much good throughout his life, “I don’t think that this requires years and years of punishment,” Rakoff said.
For Petit, it’s the end of a business career that spanned more than five decades before it unraveled. He left the medical device company in June 2018 and was indicted a year later, accused of bribing customers, falsely recognizing revenue and lying to the board and auditors.
He was found guilty on one of the two counts he faced, which carried a potential maximum sentence of 20 years. Prosecutors had asked for a “substantial” imprisonment.
Petit’s former deputy, Bill Taylor, was convicted on one count of conspiracy, but acquitted of a second charge. Prosecutors have asked for the maximum five years for Taylor, who’ll be sentenced Wednesday.
Speaking by video link, Petit said he accepted responsibility for the accounting irregularities, but “had no idea” his actions could be seen as fraud. He also criticized the short sellers who had targeted the company, calling their claims “ridiculous and false.”
In a letter to Rakoff dated Feb. 16, he said the shorts and others cost him his career, reputation and perhaps his health.
“My cancer was probably triggered by my frustrations with the illegal short sellers and the investigations that I think went out of control,” he wrote.
In late 2020, Petit hired Matt Schlapp, a prominent conservative activist and lobbyist with strong ties to Donald J. Trump, to lobby for a presidential pardon, according to a federal disclosure form. Petit was finance chairman of the former president’s 2016 Georgia campaign. The effort, which cost Petit $750,000, was unsuccessful.
Petit asked Rakoff to let him avoid prison, saying any time behind bars could amount to a “death sentence” given his medical condition. About two dozen of his family members, friends and former colleagues also sent the judge letters, vouching for his character.
“I know that all crimes require a motive, and I simply do not know what would be the motivation for a successful serial entrepreneur to become a fraudster at the age of 78,” wrote his wife, Janet Petit.
It ‘s a question that’s dogged the former CEO.
Before coming out of retirement in 2011 to take over Marietta, Georgia-based MiMedx, Petit founded and sold several biotech companies, amassing more than $100 million in the process. He owned a seaside mansion in the Florida Panhandle, and his name adorned a biotech research center at the Georgia Institute of Technology and, later, Georgia State University’s football field.
MiMedx, too, seemed like a success story, growing into a $2 billion company. But that rise came on the heels of Petit and Taylor engaging in a scheme to keep up a long streak of beating increasingly aggressive revenue targets, prosecutors said last year.
In 2017, short sellers cast MiMedx’s financials into doubt. Federal investigators circled. The board began an internal probe and the stock plummeted.
In interviews, former MiMedx employees told tales of improper sales practices, illicit payments to doctors and a culture where those who raised concerns were shut down. The board’s probe found Petit had ordered the installation of a video surveillance system that secretly recorded employees to find and undermine whistleblowers.
Petit did not express remorse in his letter or at Tuesday’s hearing. In the letter, he painted himself as a victim of conspiring short sellers and regulators who deliberately turn enforcement into a “witch-hunt.”
He singled out Marc Cohodes, calling him “one of the most corrupt short sellers in the country.” Reached by phone on Monday, Cohodes said he considered exposing wrongdoing at MiMedx as one of his finest achievements.
“He’s the definition of a white-collar criminal,” Cohodes said.
Concluding his letter, Petit said he’d already been “severely penalized” because his 2018 resignation cost him his severance agreement and deferred pay.
In January, MiMedx sued Petit, seeking to scrap its obligation to pay his legal fees and recoup money it has already spent. Petit said that could end up costing him $15 million and push him close to personal bankruptcy. He has yet to formally respond to the suit.
Rakoff said he would have probably sentenced Petit to four years in prison except for the mitigating circumstances and the scant chance the former CEO will commit another crime.
“Nevertheless, prison time must be imposed,” he said.
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