MiMedx Group Inc. said that an investigation by its audit committee found "extensive misconduct" by its former top executives related to matters of certain sales and distribution practices, among others.
The Marietta, Ga.-based biopharmaceutical company said that an investigation found evidence that Parker Petit, former Chairman and CEO; William Taylor, former president, COO and board member; Michael Senken, former CFO and principal accounting officer; and John Cranston, former vice president, corporate controller and treasurer engaged in "material wrongdoing."
The audit committee of the company's board of directors had hired King & Spalding LLP as counsel, who were assisted by KPMG LLP, in February 2018 to help in the investigation.
MiMedx said the executives' course of dealing with the company's largest distributor since at least early 2016 was against the terms of the contract, which impacted the company's revenue from the distributor. This also led to improper revenue recognition under GAAP rules.
The company said that the former executive's conduct "appears to have been designed to manipulate timing and recognition of revenue," among other things.
MiMedx added that the executives also made material misstatements and omissions to key stakeholders, such as the board, external auditors, and the SEC. In March 2018, the company disclosed that it was under investigation by the U.S. Justice Department and the SEC regarding its sales and distribution practices.
In September 2018, MiMedx had said that it was recouping bonuses from the four senior executives who were terminated for alleged wrongdoing. The company would also recover compensation previously paid to the former executives.
The company noted in its May 23 press release that it had mentioned previously that its financial statements for the years 2012 to 2016, along with its reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017, and Sept. 30, 2017, would need to be restated.
MiMedx added that the investigation also looked into allegations that whether anti-kickback laws may have been violated by the company in its relationships with various physicians, customers and distributors.
The company said the investigation report identified certain customer accounts that present potential compliance risks and warrant additional review. MiMedx noted that it will work to determine the legal risk, including whether any loss contingencies should be recognized or disclosed under GAAP.
In addition, MiMedx said that to improve its "overall business culture" it had undertaken several new appointments over the past year, which included appointing Timothy Wright as CEO and Charles Evans as Chairman, among others.
Commenting on the investigation, Evans said: "The investigation uncovered evidence of material wrongdoing on the part of the company's prior senior management team. The board continues to partner with management to ensure that MiMedx operates at the highest levels of ethics, transparency and compliance."
He added that MiMedx was focused on executing its long-range strategic plan and achieving ethical and sustainable growth in a renewed culture of compliance.