Marietta company’s former CEO had whistleblowers targeted, report says

Marietta-based MiMedx Group is a biopharma company. ALYSSA POINTER/ALYSSA.POINTER@AJC.COM
Marietta-based MiMedx Group is a biopharma company. ALYSSA POINTER/ALYSSA.POINTER@AJC.COM

The former chief executive of Marietta-based MiMedx Group disregarded rules and set up a secret surveillance system to spy on employees and target whistleblowers, according to an investigation by the company’s audit committee.

Former chairman and CEO Parker “Pete” Petit and some other leaders “made material misstatements and omissions” to the board of directors of the publicly traded wound-care company, as well as to outside auditors and the Securities and Exchange Commission, according to a MiMedx press release summing up the investigation. The inquiry concluded that Petit at one point “falsely testified under oath during a deposition when discussing the Company’s largest distributor.”

Petit and another former MiMedx official “engaged in a pattern of taking action against employees who raised concerns about the company’s practices,” said the release issued late Thursday.

“Mr. Petit directed an internal investigation dubbed ‘Project Snow White’ that sought to uncover wrongdoing committed by such employees, rather than the merits of their allegations. As part of this, a secret video surveillance system was installed to record interviews and employee discussions without their knowledge or consent. All this was done in an effort to discredit whistleblowers or find some wrongdoing to justify re-assignment, discipline or even termination.”

Petit told The Atlanta Journal-Constitution on Friday, “I’m very disappointed with the misinformation — frankly, lies — that the company published in its press release. We will do our talking after the shareholder meeting on June 17.”

A veteran biotech entrepreneur, Petit resigned his job as CEO and chairman last year and has been waging a battle to convince shareholders to return him to MiMedx's board.

MiMedx has been rocked by months of turmoil as questions surfaced about whether the company had improperly reported financial results for years during Petit’s tenure. The company, now under new leadership, has said it will need to restate years of reporting.

Media reports also raised questions about Sen. Johnny Isakson's role in contacting federal agencies in support of MiMedix and Petit, a campaign donor to Isakson, R-Georgia. Petit also was the 2016 campaign finance chairman in Georgia for Donald Trump during his run for the presidency.

Former employees claim MiMedx participated in improper sales practices, including alleged over-shipping of products to U.S. Department of Veterans Affairs hospitals. The company has faced scrutiny by the VA, the Department of Justice, the SEC and the Food and Drug Administration.

The company’s audit committee embarked on its own investigation with the assistance of law firm King & Spalding and audit and advisory firm KPMG. The process, according to MiMedx, included witness interviews and reviewing more than 1.5 million documents, “over 2,750 hours of video derived from a secret video surveillance system” and phone recordings “captured without the consent of all conversation participants.”

The investigation found there was “conduct that appears to have been designed to manipulate” revenue reporting including shipping products not needed by a customer, according to a company release.

The report also concluded that Petit and another top official “emphasized short-term business goals over compliance and ethics.”