MiMedx Group, Marietta, Georgia (Photo: Google)

MiMedx shareholders resoundingly rejected an effort by ousted former chairman and CEO Parker “Pete” Petit to once again helm the battered biotech and wound-treatment company, which is embroiled in litigation claiming mismanagement and fraud cost shareholders hundreds of millions of dollars.

Monday's vote comes in the wake of an unusually sharp attack on Petit and the company's former leadership by MiMedx's current board, which filed a Securities and Exchange Commission report last month accusing former executives of an ongoing pattern of deception and mismanagement, including lying to outside auditors and tapping the phones of some employees.

The SEC filing said Petit and former Chief Operating Officer William Taylor launched a campaign to discredit and fire employees who raised concerns about the company's business practices. That campaigned “focused on potential wrongdoing by these employees, rather than the merits of their allegations,” including the surreptitious recording and video surveillance.

A statement attributed to Petit's lawyer said that the board's audit committee “disgraced itself by issuing false, defamatory, and self-serving 'findings' of misconduct,” according to a release, and ignored the fact that the company “collected virtually every dollar of the approximately $1 billion it reported as revenue during the periods in question.”

Petit blasted the audit committee's “specious and self-serving 'findings,'” and said board members were covering up for their own misdeeds.

But Georgia-based MiMedx said Monday that roughly 80% of the votes favored its slate of three preferred candidates, and also rejected two proposals Petit submitted last year.

A statement from the company hailed the vote as “an unmistakable statement by MiMedx's shareholders that it is time to move beyond the Pete Petit era and to focus again on MiMedx's business and growth opportunities.”

“With such strong support for our new CEO and Board members, we are hopeful that Mr. Petit will stand down from further actions that could distract the company from its mission to serve patients and in turn create value for shareholders,” it said.

In an interview, Petit said the company fought to keep him and the two candidates he supported off the board “since they'd made such an issue that I'm a bad, corrupt individual. And I'm not.”

Pettit said, “I've run companies for more than 30 years with honesty and integrity” and that and his only interest is in seeing MiMedx in the hands of capable management.

“They terminated 13 of the top 18 people who ran this company for years, very successfully,” he said.

The current board members “are not good at what they're doing,” he said. “All I care about is an adequate, experienced board.”

In addition to helping the company move on from explosive allegations of corporate malfeasance that landed it in the crosshairs of SEC and Veterans Affairs investigators and the Department of Justice in 2018, the SEC filing and vote may play into two parallel class actions working their way through the Northern District of Georgia.

Both center on the hundreds of millions of dollars in value MiMedx Group lost after allegations surfaced in 2017 accusing it of fraudulent business practices relating to its revenue reporting. That included claims that it engaged in channel stuffing—or shipping more products to distributors and clients than they've ordered and crediting the revenue before it's paid.

In MiMedx's case, the primary customer were Veterans Administration hospitals that used the company's wound treatments.

MiMedx claimed an internal investigation cleared it of wrongdoing, but it's value plummeted and Petit and other executives were forced out. The company also withdrew all of its financial statements from 2012 until 2018 so they could be restated.

In 2018, several shareholder suits were combined in the Northern District of Georgia naming MiMedx, Petit, Taylor and other former executives and the company's auditing firm, Cherry Bekaert, as defendants responsible for a “torrent of fraudulent practices” at a company whose sales reps were “encouraged and trained by defendants to work loosely and aggressively in a lawless environment they referred to as the 'Wild West.'”

MiMedx investors lost hundreds of  millions of dollars, according to the amended complaint.

A parallel shareholder derivative suit said MiMedx's ousted officers' “faithless actions” resulted in the loss of $1.67 billion in value from January 2018 “to less than $264 million as of January 2019.”

Both suits are pending before Judge William Ray.

Teams of lawyers from Alston & Bird and Sidley Austin are representing MiMedx. A team from Quinn Emanuel Urquhart & Sullivan serves as Petit's counsel.

They did not respond to requests for comment.

In January, Ray appointed the Carpenters pension Fund of Illinois as lead plaintiff in that case. It is represented by Robbins Geller Rudman & Dowd attorneys John Herman and Bailie Heikkinen.

In a short email, Herman said the “rejection of the Petit board nominations is a favorable development for MiMedx shareholders.”

The lawyers for the plaintiffs in the derivative action include Marshall P. Dees of Holzer & Holzer, Michael Fistel, Jr. and William Stone of Powder Springs' Johnson Fistel, and teams from Kessler Topaz Meltzer & Check in Radnor, Penn., and Robbins Arroyo in San Diego. Fistel said there would be no comment on the litigation.