| Securities Fraud Trial of
MiMedx Continues As VP With Immunity Cites
Saudi Deal Emails
By Matthew
Russell Lee, Patreon
BBC
- Guardian
UK - Honduras
- ESPN
SDNY COURTHOUSE,
Oct 28 –William Taylor and
Parker H. Petit were charged
with conspiracy to commit
securities fraud with respect
to MiMedx.
On October 5 U.S.
District Court for the
Southern District of New York
Judge Jed S. Rakoff held a
pre-trial proceeding. Inner
City Press covered it, below.
On October 26, the trial
began, and Inner City Press
live tweeted it, here
andbelow.
Day
3, Oct 28: Day 3 -
controller Anderson still on
the stand, now cross by
William Weinreb for Taylor
Weinreb: Mr.
Anderson, you testified that
customers were paying later
than provided for under the
purchase order, correct?
Anderson: Correct. Weinreb:
Customers whose revenue has
been recognized upon shipment?
AUSA: Objection! Judge Rakoff:
Overruled.
Judge Rakoff
returns from a sidebar and
himself asks Anderson a
question: Did this cause you
to look further into the
situation? Anderson: Yes.
Judge Rakoff: The objection is
sustained. Followed by another
objection, based on vagueness.
[This could take a while]
Weinreb: Do you
remember MiMedx general
counsel Lexi Hayden (sp) being
there, taking notes? AUSA:
Objection! Judge Rakoff:
Sustained. Weinreb: Was
someone taking notes? A: Yes
Q: Was it Lexi Hayden? A: Yes.
[Cured]
Now we're onto
the Saudi deal: First Medical,
payments conditioned on tender
by Saudi minister of health.
Weinreb asked about "right of
return" - [not what's usually
meant in Saudi by right of
return]
Still re-direct of MiMedx
controller Anderson AUSA: You
were asked by defense lawyers
about your conversation with
the audit committee? Anderson:
Yes. AUSA: ... I'm done. Judge
Rakoff: Any re-cross?
Weinreb: Who was
taking notes? Let me show your
a document Judge Rakoff to
jurors: These documents can be
used to refresh a witness'
recollection, but the notes
are not evidence. Weinreb:
Look at page 12, down to the
words 'it sounds'... no
further questions. Judge
Rakoff: Lunch break for an
hour.
[The next witness
in #MiMedx trial, who will
begin at 2 pm, has just been
given an immunity deal. And,
apparently Parker Petit's
lawyer has something she wants
to bring up to Judge Rakoff at
1:45 pm, before this next
witness' direct examination.]
The witness with
immunity was a VP at #MiMedx.
He is describing Monday
morning meetings about revenue
and meeting guidance, attended
by Petit, Taylor, the 3 EVPs
and VPs at the witness' level.
AUSA: Top line revenue?
Witness: Total sales added up.
...So in
this email, Mr. Petit says,
Typical analysis, no
leadership. AUSA: So Mr.
Carlton, these are your text
messages? Carlton: Yes. AUSA:
What does P.O. mean? Carlton:
Purchase order.
Judge Rakoff is
telling the parties, "with
apologies," to clear out - he
has another matter in 5
minutes.
Day
2, Oct 27: Judge
Rakoff is reviewing again
Juror #4's prostate, &
another juror who didn't say
she lives in Queens (not in
the Southern District)....
They're back from
sidebar - Judge Rakoff tells
Juror #4 is is "an excellent
juror," so just raise his hand
when he needs to go to
bathroom. He responds: He
can't hold it on the train
down from the Bronx. Judge
Rakoff: Let's see how it goes
today.
Judge Rakoff: We
have all the jurors except
Alternate Number Two. Defense
Lawyer: We are all getting
tested for COVID, we are
working in a pod. Can I pass
documents to my pod-mate?
Judge Rakoff: Partners don't
know anything about documents,
so sure.
AUSA: The
defendant has a website about
the allegations. We ask that
the jurors be told not to look
online. And that Mr. Petit
lost a son to cancer, we
understand the defense does
not intend to raise it. But we
will be putting in his SEC
testimony...
OK,
Alternate Juror 2 has arrived,
and the direct examination of
MiMedx accountant continues.
To be continued
MiMedx
redux: Witness: When I met Mr.
Petit, I was not concerned I'd
be fired at that time. Q: They
why'd you send the email?
Witness: I was uncomfortable
with the revenue recognition.
Q: You told
Mr. Petit you didn't think it
was about his integrity?
Witness: Correct. I wasn't
aware of any facts that hadn't
been disclosed to me. Now with
jury out to lunch, the lawyers
are again discussing Juror
#4's prostate. Both sides
agree to strike him. Judge
Rakoff agrees. Judge Rakoff:
Sidebars should be in the
robing room because everyone
can hear them when we do them
here, due to social distance
Lunch break
is over, and Judge Rakoff asks
if he has to deal with
multi-colored exhibit list
now. No, AUSA says, not given
what the defense has said
about the length of cross.
Judge Rakoff: Juror 14 wants
off, due to financial
difficulties - daily commute
costs
Judge Rakoff:
Juror 14 does not have a
credit card and can't afford
out of checking account. The
solution, I think, is to see
if she can get paid commuting
funds in advance. Let's bring
in the jury.
[Inner City
Press' sense is that some
jurors during voir dire didn't
understand how long the trial
was going to be, or how boring
(?) or financial / accounting
it would be] Deputy: Jury
entering the courtroom! Judge
Rakoff: Please be seated.
Cross-examination.
Jennifer
Loeb of Freshfields, for Pete
Petit: Mr Anderson, You
understand Mr. Sankin (sp) had
evaluated your concerns you
raised in your email? AUSA:
Objection! Judge Rakoff:
Sustained. Loeb: May we
approach? [Sidebar]
Judge
Rakoff, returning: Ladies and
gentlemen, you may wonder why
we have sidebars. It's so the
lawyers can tell me what they
expect the testimony to be.
Let's proceed. Loeb: Mr.
Sankin told you everyone
disagreed with your concerns?
Anderson:
Correct.
Judge Rakoff is
commending to the lawyers the
US v. Simon case from 1960
("when you were all unborn or
in your knickers") for the
proposition that compliance
with GAAP doesn't mean you
can't be convicted. Judge
Rakoff: How many gov lawyers
are here? 3.
To be continued.
Day 1, Oct 26:
Assistant US Attorney Daniel
Tracer's open statement
explains "revenue.. ladies and
gentlemen, hitting the
guidance was critical to the
defendants. So they cheated
and lied to make sure they met
their guidance. MiMedx sold
skin patches to
distributors...
AUSA Tracer: They
report the revenue before they
get it. They recognized the
revenue as soon as they
shipped. It's allowed but only
if certain requirements are
met. If not met, you can't -
and it's a crime to lie to
auditors.
Now Pete Petit's
lawyer says, When you look at
the world through windows that
are dirty, everything looks
dirty. But this is far from a
typical fraud case. All you'll
see is the sale of real
products, for real money.
Defense lawyer:
Pete Petit is a self made man.
But he is not an accountant.
He came back into business in
2009 to rescue MiMedx. He
probably met the definition of
a workaholic. He pressed the
staff to meet sales goals. He
was tough and demanding.
Now it's Bill
Taylor's lawyer: The US claims
my client, not an accountant,
should go to jail for the
timing of revenue recognition.
They don't even say he got
money on the side. You're
going to be here for a long
time over complex accounting
rules. He's innocent.
NOTE: Taylor's
lawyer is describing a
contract MiMedx had with the
Saudi Arabia government. Inner
City Press' interest in this
trial is even more piqued...
Now on the
witness stand: former
Comptroller of MiMedx, who
came from Lilly. AUSA:
Why did you take the position
if the compensation was lower?
Witness: It fit
where I wanted to go in my
career. I was interviewed by
Pete Petit.
Judge Rakoff is
letting the Petit jury go for
the day at 3:40 (he has a
sentencing scheduled for 4
pm). He asks for a sidebar
with Counsel. "Juror Number 4
wants to inform us of further
information."
The issue
involves bathroom breaks;
Juror 4 says his prostate
condition requires use of
bathroom every 15 minutes
which wasn't done today.
Both sides say, Let's wait and
see.
Judge Rakoff: 30
years ago I was giving a
summation in Alexandria,
Virginia, a juror raised his
hand and asked to go to the
bathroom. Defense asks that
government witnesses not dial
in. OK
At the final
pre-trial conference Judge
Rakoff answered more than 30
questions, ranging from
whether paper exhibits will be
accepted (they are not favored
but will be accepted on
cross-examination) to if the
defense lawyers could bring
food in.
Judge
Rakoff noted that the SDNY
cafeteria is open, and he
doesn't expect lawyers to
bring food into his courtroom.
He said to expect an audio
feed - as it should be,
despite a recent audio-less
sentencing in EDNY, here - but
not a defense lawyer's "war
room" like T-Mobile had in
their antitrust bench trial
last year.
At the end of the
proceeding it emerged that
there may be a request to put
off the whole thing.
Judge
Rakoff said he wouldn't
prejudge it. But Inner City
Press wrote that would not bet
on this motion being granted.
And it was not.
On October 23
Judge Rakoff held another
final pre-trial proceeding. He
mulled sanctions against the
defense lawyers but demurred.
He asked why they wanted a
special table and was told
about a trial consultant.
Judge
Rakoff asked, A lawyer on your
team?
That wasn't
answered, except by reference
to who will be in the "hot
seat." Judge Rakoff said that
the name of any trial or jury
consultant would have to be
disclosed. This wasn't
answered either. Judge Rakoff
predicted picking a jury in an
hour and a half, and said he
or his deputy have pooled 300
juries and have learned that
overly long opening statements
are unhelpful. So the cap is
30 minutes.
The case is US v.
Petit et al., 19-cr-850
(Rakoff)
***
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