A biopharma company run by one of Georgia’s most successful and politically-connected businessmen showered gifts on three Department of Veterans Affairs workers, leading them to commit health care fraud by stocking the company’s products, a federal indictment alleges.
While no one working for Parker "Pete" Petit's MiMedx Group has been criminally accused, the charges have raised more questions about the company's business practices and financial arrangements with medical providers.
MiMedx, based in Marietta, sells regenerative injections and wound coverings derived from human placental tissue. Revenue last year topped $300 million, and more than half of the company’s 900 employees are based in Georgia.
But facing allegations of flooding Veterans Affairs hospitals with the products, the company has fallen under scrutiny from both the U.S. Department of Justice and the U.S. Securities and Exchange Commission and it faces class-action lawsuits.
Petit, MiMedx’s chairman and CEO, blames a campaign of misinformation by short sellers — “wealthy thieves,” he calls them — working on behalf of hedge funds to drive his stock values down. He says the allegations in the indictment handed down in South Carolina this week involve the dealings of just one sales representative who MiMedx fired a year and a half ago. The indictment, however, says that the three women “cultivated relationships” with representatives and company officials in the plural.
The ongoing controversies have nevertheless dinged his professional reputation. Petit served as Donald Trump’s campaign finance chairman in Georgia during the 2016 presidential campaign. He’s a friend and major donor to both U.S. Sen. Johnny Isakson and former Secretary of Health and Human Services Tom Price. A major educational philanthropist, he donated $10 million to Georgia State University’s athletic program last year and now the new football field is named for him.
Following news of the indictment handed down Tuesday, MiMedx shares plummeted 20 percent but recovered to close the day on Wednesday down 7.5 percent.
“I don’t worry too much about my reputation,” said Petit, who is 78. “When you get my age, you’ve lived a good portion of your life, and you’ve done things the way you thought they ought to be done.
“What I do worry about is what these people have done to my shareholders,” he said. “These are small investors, many of them, who have lost a lot of money for no reason at all other than the thievery of these particular groups and how they operate.”
But his critics view the indictment as a sign that the feds are digging deeper into MiMedx’s sales tactics — evidenced by the fact that the indictment identifies the company.
Marc Cohodes, a California short seller who runs a website called PetiteParkerTheBarker.com, said he believes the federal government is building a wide-ranging criminal case against the company and its employees. “I think this is first of many, many, many shoes to drop,” he said.
According to the federal charges, podiatrist Marcela Dolores Farrer, physical therapist Carol Guardiola and nurse practitioner Donna Becker accepted various inducements from MiMedx. In return, the three women, who worked at VA facilities in Columbia and Greenville, S.C., “caused the excessive use of MiMedx products on VA patients,” the indictment alleges.
The arrangements date as far back as 2012. Farrer, the podiatrist, is accused of using a vendor’s beach house, giving three presentations on behalf of the company to increase sales to VA facilities, receiving $12,200 in payments and purchasing company stock, the charges say.
Becker, the nurse, received gift cards, meals and $19,898 for speaking engagements, the indictment says, and her daughter used the beach house. By accepting the speaking roles, Becker and Farrer “became employees, agents, or independent contractors of MiMedx,” the feds allege.
Guardiola, the physical therapist, is accused of using MiMedx’s graft material despite the VA having no consignment agreement with the VA at the time for storage, transfer and use of the product. The indictment says she also received meals and other gratuities from a company representative.
All three were charged with conspiring to defraud the U.S. government and with participating in federal acts in which they have a financial interest. Farrer and Becker also were charged with accepting bribes.
Farrer did not return messages from The Atlanta Journal-Constitution, and the other two defendants couldn’t be reached.
In a written statement, the company said “it is important to note that MiMedx was not indicted.
“On occasion, MiMedx engages providers to perform services on its behalf, such as providing scientific and clinical education presentations,” the statement said. “Where the company engages providers for services, the company’s policy is to pay the providers consistent with the fair market value of the services.”
Company policy also requires that speakers have approval from their institutions to speak on MiMedx’s behalf, the statement said. Petit said MiMedx officials also would have signed off on the compensation for speaking engagements.
Petit declined to name the sales rep who worked with the South Carolina workers, citing legal concerns. When the company found out what the representative was doing, he said it took the information to the VA’s Office of Inspector General.
“We’ve been very forthcoming when we feel like our sales reps or sales managers have violated a federal regulation,” he said. “In this particular case, we terminated an employee, a sales employee, responsible for that particular facility about a year and a half ago. So it’s not like we are uninvolved here.”
Petit said that out of a force of some 425 salespeople, he’s fired about 10 people over the years for unscrupulous dealings. He currently has his company under an independent investigation by the auditing firm KPMG and law firm King & Spalding, looking for any wrongdoing by “rogue” salespeople.
MiMedx has been embroiled in a separate controversy involving payments to health care professionals. Under the federal Physician Payments Sunshine Act, companies that make drugs, medical devices, biologics or medical supplies are required to file annual reports to the government on payments they make to physicians, podiatrists and others.
The Wall Street Journal reported earlier this year that the company has made payments to more than 20 physicians but has not filed any reports.
MiMedx has claimed it's not covered by the law because its products are tissues, not drugs. The Food and Drug Administration asserted five years ago that some of its products qualify as drugs and biologicals and were being sold without proper FDA approval.
Petit said his company negotiated with the FDA and has agreed to start investigational new drug trials on its product called AmnioFix Injectable. Once the product is approved, he said, the company will fall under the Physician Payments Sunshine Act and will comply.
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