MiMedx Group, a developer and marketer of regenerative and therapeutic biologics, has appointed Mark Graves as chief compliance officer. The company also is conducting a formal search to fill the newly established positions of chief accounting officer and internal auditor, amid an ongoing investigation into accounting violations.
"We are implementing plans to improve our corporate compliance practices in order to ensure our company adheres to policies with the highest integrity, ethics and legal standards," said David Coles, MiMedx interim chief executive officer.
Graves will be responsible for providing direction and oversight of MiMedx's compliance program, including the company's regulatory and legal compliance matters related to its risk management, sales operations, and financial reporting. He will report to executive vice president and interim chief financial offficer Ed Borkowski on a day-to-day basis. He will also report directly to the newly formed ethics and compliance committee of the board of directors.
Graves brings more than 20 years of pharmaceutical and biotech industry experience to MiMedx, ranging from compliance and sales management to government affairs. He most recently was the U.S. leader for the global patient experience and value function in the neurology division of UCB, a biopharmaceutical company.
From 2011-2015, he was UCB's deputy compliance officer, involved in all aspects of compliance, including the implementation and management of the company's corporate integrity agreement. Prior to that, Graves was senior director in the office of ethics and compliance for the pharmaceutical products division of Abbott Laboratories, as well as deputy ethics and compliance officer for Takeda Pharmaceuticals North America and TAP Pharmaceutical Products. Prior to his pharmaceutical and biotech career, he practiced labor and employment law.
Accounting violations probe
On March 1, 2017, MiMedx disclosed in an annual filing that the audit committee engaged outside counsel to conduct an investigation after two former employees filed a lawsuit in December 2016 alleging, among other matters, fraudulent business practices related to revenue recognition. In that annual report, the company further disclosed material weakness in its internal controls related to tax accounting for fiscal year 2016.
That same day, the company issued a press release stating that the audit commitee completed its investigation and found no merit regarding allegations of wrongdoing that were made by two former employees against the company: "The audit committee's investigation determined that the company has appropriately recognized revenue and found no credible evidence to indicate that any changes to the company's previously issued financial statements are necessary in light of the former employees' allegations."
That same month, the Securities and Exchange Commission requested a summary of the company's internal investigative findings. MiMedx provided a publicly redacted summary to the SEC in an April 18, 2017, letter invoking a confidential treatment request pursuant to SEC Rule 83. In an unusual move, MiMedx in that letter requested that the redacted portions "be maintained in confidence, and not be made part of any public record and not be disclosed to any person (other than the staff)."
MiMedx's accounting troubles accelerated on June 7, 2018, when the company announced that the audit committee, with concurrence from management of the company, concluded that its previously issued consolidated financial statements relating to each of the fiscal years ended Dec. 31, 2012, 2013, 2014, 2015, and 2016 and each of the interim periods ended March 31, June 30, and Sept. 30, 2017 should be restated.
"The determination of the need to restate was based on investigation results to date, which have primarily been focused on the accounting treatment afforded to such sales and distribution practices for two distributors for which certain implicit arrangements modified the explicit terms of the contracts, impacting revenue recognition during specified periods," the company stated.
Now, the company and its audit committee are working to clean up its mistakes and improve its accounting and internal control practices. As part of this initiative, as announced by the company on June 7, 2018, the MiMedx board established an ethics and compliance committee, which includes independent directors Luis Aguilar and Neil Yeston, M.D.
The MiMedx board on July 2, 2018, announced the resignation of Parker Petit as the company's chairman of the board and CEO. MiMedx also announced that William Taylor resigned as president and chief operating officer and as a member of the MiMedx board.
"These resignations, which follow the recent departures of the company's chief financial officer and corporate controller and treasurer, are based on the board of directors' business judgment regarding the company's leadership and direction, and arise, in part, from information the audit committee has identified through its previously announced independent investigation," the company stated. "This investigation is ongoing and there may be other actions taken based, at least in part, on information from the investigation."
The MiMedx board namedCharles Evans, previously the lead independent director, as board chairman of the board. Evans has been a member of the MiMedx board since September 2012 and has more than 40 years of experience in the health care industry.