Biolysis Weekly Issue 1
Marc Cohodes - The Man Who Took Down Parker H. Petit and the MiMedx Fraud (MDXG)
Before I get started with what I am going to share, I would like to point out that I am merely expressing my personal opinions, displaying facts, and exercising my First Amendment right, bestowed to all Americans. The sources, from which much of this information is derived, will be embedded in the underlined words found in this newsletter, giving due credit to the original source’s authors and publishers.
“Congress shall make no law…or prohibiting the free exercise thereof; or abridging freedom of speech, or of the press…” (U.S. Const. amend. I).
Let’s get started…
Without a shadow of a doubt, what got me first entranced with the biopharmaceutical/biotechnology equities market, was in 2018, while following the story of Marc Cohodes, the FBI, a U.S. Senator, and former CEO Parker Petit of MiMedx (NYSE: MDXG – $1.27 Billion).
If you don’t know who Marc Cohodes is (pictured below), let me get you up to speed. Marc has been one of the world’s finest short sellers, for a number of decades. He has been dubbed many names over the years, including “Warren Buffet’s Mosquito”, and the “Chicken Farmer”. The latter nickname stems from the fact his current residence is Alder Lane Farm, in Cotati, CA. Marc had previously raised chickens on his farm turned equestrian sanctuary and horse boarding stable. After running a $1.5 Billion hedge fund (Copper River), 2008 proved to be calamitous for his firm. Controversy arose, when Goldman Sach’s suddenly raised margin collateral requirements on many of his fund’s positions. In spite of all of this, as the old adage goes – “Once a champion always a champion”. Despite not formally being a part of the industry anymore, Marc still maintains a high level of relevancy, through his unmatched private investigative work, Twitter followership, and industry prowess.
If you have ever listened to Marc’s periscopes on Twitter @AlderLaneeggs — which I highly recommend — it just might cure your insomnia and lull you to sleep. You would imagine him to be an extremely mild-mannered individual, with a dash of color and spice, when he uses his inimitable, iconic phraseology, such as, “Rat bastard”, “Ass hats”, “Clowns”, “Smash n’ grabbers”, and much more that I’ll leave unsaid (Let’s keep this PG-13 shall we?). Make no mistake though, Cohodes is one nasty, sleeping giant; and not someone to be messed with — ever. This has been made evident throughout his career, since 1982, especially in his handling of the MiMedx fraud.
![Marc Cohodes on Twitter: "BREAKING; Alder Lane Farms has acquired 3 Bronze Busts of Serial Fraudster Parker H Petite. Terms of Acquisition is undisclosed but is Accretive To Earnings immediately. Trading is](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fc292ae52-5b70-4344-b5a8-ba98817740ef_1536x2048.jpeg "Marc Cohodes on Twitter: "BREAKING; Alder Lane Farms has acquired 3 Bronze Busts of Serial Fraudster Parker H Petite. Terms of Acquisition is undisclosed but is Accretive To Earnings immediately. Trading is")
MiMedx (MDXG) Story
MiMedx is a biotechnology company based out of Marrieta, GA, focused in the area of regenerative medicine. Approximately 4-5 years ago, discrepancies in their P&Ls, alongside insider whistleblowers came to surface. “Channel stuffing” was the scuttlebutt being spread around. If you are unaware of what this practice is, it is a highly deceptive process when management falsely augments and inflates financials, prior to reporting periods. This is done by pushing excess products down distribution lines. Often, retailers are simply incapable of selling all products, and this is done to fraudulently meet short-term revenue targets. Another commonly used term for this is “trade loading”.
Marc, being the unabashed truth-seeker he is, blasted MiMedx’s CEO Parker Petit in front of the public, during a healthcare conference held by J.P. Morgan. In the most hilarious fashion, Parker refused to shake Marc’s hand initially, which prompted Marc to sit down next to him — to which the conversation went like this (According to Real Vision Finance and STAT Senior Writer Adam Feuerstein):
“MARC COHODES: Hello, Parker.
PARKER PETIT: It's sort of my pleasure.
MARC COHODES: Here, I'll come up and shake hands with you.
PARKER PETIT: Well, I'm not tall enough to shake hands with you.
MARC COHODES: You're not, but you can — here, I'll sit down next to you.
PARKER PETIT: All right.
MARC COHODES: Hello, Chris. Parker, I'm right here, OK?
PARKER PETIT: I don't really want you here.
MARC COHODES (Commentary): Even when I kneeled down on my knees I was taller than him. So I shake his hand, and then we start getting into it about his accounting and his thing, and he was all wigged out. And other people started picking up questions on it. And I knew some people in the room, and they knew some of the issues that should be brought up like share-based compensation, which didn't add, and when are you going to file your financials and your auditor and why don't you have an independent investigation? And he said something like, being the head of a public company, I have rules and laws I have to abide to. He says if I don't tell the truth or I lie in my documents, I can go to jail. Well, that's where you should go, and that's where you're going to end up, Parker, because you have lied. You're a serial liar.”
Prior to joining MiMedx, Parker Petit had been a part of Matria Healthcare, where more controversy loomed over qui tam claims, which were filed upon their subsidiary Diabetes Self Care, Inc. The SEC filing on this can be found here. Inevitably, Matria Healthcare was responsible for the payout of a major Medicare fraud settlement and was eventually bought out. Parker ‘Pete’ Petit, on the other hand, slipped through the cracks.
Since 2017, petiteparkerthebarker.com has been reporting much of the minutia of details regarding MiMedx, Parker Petit, and the former COO William Taylor (who was equally culpable in the aforementioned fraud). Ironically, numerous defamatory articles have come forth, in an attempt to diminish Marc’s claims on Petit. One such article was written by Bloomberg’s opinion-writer Joe Nocera, in an article titled, “Short Seller Marc Cohodes Goes Too Far in MiMedx Campaign”.
Author’s Note: If someone is exposing bad companies that are practicing poor corporate governance, resulting in the potential harm to consumers, it is NEVER going too far, Joe Nocera…
Let’s quickly summarize the timeline of events in the MiMedx Fraud, from petiteparkethebarker.com:
(August 2013), MDXG releases a disclosure in their 10-K, regarding the FDA and their micronized allograft product:
“On August 28, 2013, the FDA issued an Untitled Letter alleging that the Company’s micronized allografts do not meet the criteria for regulation solely under Section 361 of the Public Health Service Act and that, as a result, the Company would need a biologics license to lawfully market those micronized products (the “Untitled Letter”). Since the issuance of the Untitled Letter, the Company has been in discussions with the FDA to communicate its disagreement with the FDA’s assertion that the Company’s micronized allografts are more than minimally manipulated. To date, the FDA has not changed its position that the Company’s micronized products are not eligible for marketing solely under Section 361 of the Public Health Service Act. The Company continues to market its micronized products but is also pursuing the Biologics License Application (“BLA”) process for certain of its micronized products.”
Despite, the initial FDA non-approval, MiMedx still had a 36 month grace period where they could still market and sell their tissue/wound healing product (micronized allografts), albeit unethically.
MiMedx had been making grandiose claims, stating their products was more superior to others in the market (despite the lack of FDA required clinical trials to prove so).
(December 2014 — September 2016), MDXG relays communication with the FDA, through draft guidance, back and forth, on properly labeling their allograft product, for marketing purposes.
2014, MiMedx wants the FDA to consider the product as a Minimally Manipulated Human Cells, and Tissue-based Product (HCT/P).
2015, MiMedx also pursues draft guidance on Homologous Use of Human Cells, and Cellular Tissue-Based Products.
2016, MiMedx puts forth multiple statements, with a negative undertone, on the cost and time incurrence the entire process will take, on gaining proper FDA approval (e.g., CTs, IND, BLA, PMA).
(November 2017), More controversy arises on MDXG, as questions arise on how they will continue to market their allograft product(s): EpiFix (Human Amnion/Chorion Membrane — dHACM), Amniofix, Amniofix Injectible etc.
(November 2017), U.S. District Court, Northern Illinois Eastern Division, MiMedx Group, Inc. vs. Michael Fox.
Fox claims Whistleblower retaliation, under the Dodd-Frank W.S. Reform and the Consumer Protection Act (CPA)
Fox was a former Vice President of MiMedx and top performing sales manager, who was demoted for having a conscience and failing to continue with MiMedx’s unethical sails tactics (channel stuffing).
Sadly, one of the victims to channel stuffing became the VA Healthcare system, “with over $10 Million of MiMedx products, that were never bought/requested”.
Balance sheets at this time are starting to show imbalances, exemplary of unethical business tactics (e.g., Village Podiatry’s claims).
“What Village Podiatry is saying is absolutely how Mimedx operated. Consignment inventory was sent in, reps would run the insurance verification, the product was applied, reps would work will the billers to ensure it was coded and billed correctly, we’d check the eob when it came back to ensure it was fully reimbursed. Only at that point did we enter the implant information into Salesforce, which generated the invoice, which had the 30-day payment terms. If the insurance denied payment, the reps would just change the consignment product to “no charge evaluation” [i.e. SG&A expense] units so the doctor and patient weren’t out the money. We were told by managers that this was legal because as long as the insurance company didn’t reimburse the product, it wasn’t fraud.”
(January 2018), Marc Cohodes addresses Parker Petit and Co., at a JP Morgan Conference held in San Francisco, regarding faulty financials and insider emails/information, on MiMedx’s fraudulent behavior (see above for transcript).
(January 2018), Questions arise on 3 million restricted shares offered since 2016, and who the recipients were, as the 10-K uses highly ambiguous language.
(February 2018), Marc Cohodes’s residence has an unwelcome visit from Parker Petit’s FBI lackeys, without a warrant. Cohodes was not the subject of an official FBI investigation, and the “FBI officials” refused to leave the premise until Marc and his wife, Aurora, had to call the sheriff. On top of all of this, Marc was trying to spend quality time with his good friend (who had cancer), when this unwelcomed visit occurred. This made things all-the-more personal for Marc, in bringing Parker Petit down.
(February 2018), The SEC and other federal agencies are notified by Cohodes and others, and an audit follows shortly after. Previous financial audits of MiMedx had been done by a controversial firm, Cherry Bekaert, prior to Ersnt & Young’s audits of financials. MiMedx’s “Death Spiral” begins.
(March 2018), MiMedx finally, publicly announces current ongoing investigations being done by the SEC and Department of Justice (DOJ).
(April 2018), U.S. District Court, District of Maryland, Osiris Therapeutics vs. MiMedx Group, Inc. , Osiris Therapeutics sues MDXG.
(July 2018), U.S. Department of Labor, Thomas Tierney vs. MiMedx Group, Inc. (18 USC. 1514A Complaint). Former internal management/employees begin lawsuits against MiMedx Group, Inc.
(November 2018), Nasdaq Stock Market announces its intention to delist MDXG shares and suspend trading. Share prices drop to $1.15, by mid December, 2018. This announcement can be found here.
(December 2018), It is revealed by The Wall Street Journal, that former Georgia Senator Johnny Isakson (R) called for FBI — San Francisco Division, to spook Marc Cohodes into ending his investigation on MiMedx and Parker Petit. He also played a intervening role in MiMedx’s ability to stockpile millions of dollars worth of medical products, within the VA healthcare system. According to the WSJ:
“David Shapiro, a former U.S. Attorney for San Francisco who is Mr. Cohodes’s lawyer, said: “What has been disclosed looks like the misuse of power and influence by Isakson and Petit and violations of the FBI’s own policies regarding free speech.” He said comments made by Mr. Cohodes were neither intended nor likely “to incite imminent lawless action,” two tests for action against the exercise of free speech in the FBI Domestic Investigations and Operations Guide. Mr. Shapiro, in a letter dated Dec. 10, has asked the FBI to investigate its actions.”
(October 2020), MiMedx announces relisting in Nasdaq, after executives are fired and new management is hired. This announcement can be found here.
(November 2020), Former MiMedx CEO Parker H. “Pete” Petit and former COO William Taylor are found guilty of accounting and securities fraud, consisting of numerous bribes and wrongful executive decisions shielded by secrecy and poor corporate governance. According to the United State’s Attorney’s Office, Southern District of New York:
“PARKER H. “PETE” PETIT, 81, was convicted of one count of securities fraud, and WILLIAM TAYLOR, 52, was convicted of one count of conspiracy to commit securities fraud, make false filings with the SEC, and mislead the conduct of audits. The securities fraud count carries a maximum sentence of 20 years in prison, and the conspiracy count carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the Court.”
(February 2021), Parker Petit and William Taylor are sentenced by U.S. District Judge Jed Rakoff, to a $1 million fine and 1 year in federal prison — a provocative slap on the wrist. Judge Rakoff cites Petit’s health and his former “good deeds” (whatever they might be):
“Mr. Petit did indeed intentionally, knowingly and willingly commit securities fraud. This is much less than I would have given, but for his health, age and good deeds…”
(July 2021), An article comes forth, on the SEC mulling over pursuing of charges on a CPA partner, Paul Chancey, of Cherry Bekeart. Chancey was responsible for much of the financial auditing of MiMedx, prior to Ernst & Young and the re-audited financial reporting for the years 2012-2016. Chancey was the lead figure in MiMedx’s financial reporting from 2013-2017. The SEC is set to schedule a date for a public hearing in this matter soon.
Concluding Statements
I am a strong believer in second chances. Unfortunately, Wall Street is not as forgiving as I am. It seems, ever since the pandemic induced market crash of early 2020, just about every stock with a pulse (including MDXG, surprisingly) has surged. MiMedx has tried its best distancing itself from its former management and woes in corporate governance. However, new investigative revelations, indictments, and articles keep allowing for its dirty laundry to resurface. For now, I would like to see discernable changes from the company’s executives — especially CEO Timothy Wright — and not superficial platitudes, exhibiting remorse over the company’s history and positive outlooks for the future growth of the company. On August 4, 2021, 8:30 AM EDT, MiMedx is set to hold its Q2 Operating and Financial Results Conference Call here. It may behoove any potential investors to tune in and listen, before making any hasty decisions. Sharks are still swarming the water with this one, waiting for the slightest scent of blood from MiMedx. Tread carefully. From here on out, MDXG will need to be on its toes, and its best behavior, in order to earn my vote of confidence. But for now, if you do not like controversy, stay far away.
Great writeup and great insights on the topic!