Ex-MiMedx chief operating officer William Taylor was sentenced to one year in prison for his involvement in a fraud scheme.
Taylor’s sentence matches the one handed down to former CEO Parker Petit yesterday. Both were convicted of crimes related to the fraud schemes involving distributors. In addition to his one-year prison term, Taylor will have to pay a $250,000 fine, according to a news release from the U.S. Attorney’s Office in the Southern District of New York.
In November 2020, a Manhattan jury found that Petit, 81, and Taylor, 52, had entered into undisclosed side arrangements with five distributors. These side arrangements allowed distributors to return product to Marietta, Ga.-based MiMedx or conditioned distributors’ payment obligations on sales to end-users, the government charged.
Petit was convicted of securities fraud and Taylor, 52, was convicted of conspiracy to commit securities fraud, to make false statements in SEC filings and to mislead the conduct of audits. Both received one-year sentences despite the securities fraud count for Petit carrying a maximum sentence of 20 years in prison, while the conspiracy count against Taylor could have been up to a five-year maximum.
The two executives were ousted from MiMedx for cause after an independent probe into its revenue recognition forced the company to restate its earnings going back to 2012. The company was alleged to have misstated revenues and attempted to cover up misconduct from 2013 to 2017, prematurely recognizing revenue from sales to distributors and exaggerating revenue growth.
According to the SEC, Petit and Taylor covered up the scheme for years, even after the company’s former controller raised concerns over the accounting scheme. Additional allegations included misleading outside auditors, members of the company’s audit committee and outside lawyers inquiring about the transactions.
Federal prosecutors claimed that Petit’s and Taylor’s alleged manipulation of MiMedx’s revenue caused MiMedx to report 2015 annual revenue that was fraudulently inflated by approximately $9.5 million, or about 5%. MiMedx had previously agreed to pay $1.5 million to settle federal charges that it and three former top executives allegedly defrauded investors.
“William Taylor and his co-defendant used secret agreements and corrupt financial inducements to materially misstate quarterly and annual sales revenue of MiMedx,” Manhattan U.S. Attorney Audrey Strauss said in the release. “They deceived the SEC, auditors, and the investing public. Now Taylor, like Parker Petit yesterday, has been sentenced to prison for his crimes.”