MiMedx Group, the embattled medical-instruments company in Marietta, has agreed to pay $3.5 million to settle a lawsuit that alleges former executives’ actions resulted in financial losses by its shareholders.
The $3.5 million will cover attorneys’ fees and expenses, and a $3,000 payment to each of seven named plaintiffs. MiMedx also agreed to reform its corporate governance. The full cost of the settlement will be covered by insurance, MiMedx said in a Thursday regulatory filing.
The company faces a number of other suits and investigations.
Parker Petit, the founder and former chairman and CEO of MiMedx, and other defendants also agreed to the settlement, but it’s not clear if they will contribute toward the payments.
Dan Laney, an attorney for Petit, could not be reached.
A spokeswoman for MiMedx, in response to an AJC inquiry, said all pending shareholder derivative lawsuits against the company will be dismissed if the court approves the settlement.
U.S. District Court Judge William Ray this month gave preliminary approval to the settlement. A hearing on final approval is scheduled for Dec. 21.
The lawsuit stems from actions that took place under Petit. He was accused of creating secret deals with the Department of Veterans Affairs, the Department of Defense and Saudi Arabia’s government-run medical facilities to falsely inflate revenue.
Shareholders claim the fraud and mismanagement under Petit’s leadership resulted in the company being forced to restate its financial results, depressing its stock price.
Petit and 16 others named in the shareholders’ lawsuit denied the allegations, but said they agreed to settle “to eliminate the uncertainty, burden, and expense of further protracted litigation,” according to the proposed settlement.
MiMedx, which makes materials used in wound-care products, and Petit face other lawsuits and federal probes, according to its most-recent quarterly report. It’s already resolved some cases; earlier this year it paid $6.5 million to resolve allegations that it knowingly provided false pricing information to the Veterans Affairs department.
Ongoing cases include a class-action securities case in federal court in Atlanta, two whistleblower cases, a defamation lawsuit and a trade-secret dispute.
In the active investigations, federal prosecutors in New York are probing the company’s accounting practices; and federal prosecutors are examining MiMedx’s financial relationships with doctors at a Veterans Administration hospital. The company said it’s cooperating with all the investigations.
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