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Security Fraud Trial of MiMedx Starts With Saudi Contract Timing of Revenue and Prostate

By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - ESPN

SDNY COURTHOUSE, Oct 26 –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:

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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