MiMedx Whistleblower, Represented by Halunen Law, Speaks Out

MINNEAPOLIS--(BUSINESS WIRE)-- Mike Fox, a client of Halunen Law, was a successful executive for MiMedx, a biopharmaceutical company that manufactures and sells regenerative and therapeutic biologics. Fox contends that his fortunes turned, however, when he challenged MiMedx and refused to participate in what he believed to be an illegal revenue recognition scheme. MiMedx fired and sued Fox and Fox then filed counterclaims alleging various forms of retaliation (N.D. Ill. 1:16-cv-11715).

Fox was one of the first sales executives MiMedx hired, and he worked for the company for more than four years, during which time he was a top-performer. However, Fox alleges that he and some of his colleagues discovered that MiMedx had implemented an unlawful “channel stuffing” scheme. “Channel stuffing” occurs when a company sends retailers in its distribution system more product than they have ordered and then recognizes the revenue in its financial statements before that revenue has been realized and earned. This makes a company look more profitable than it actually is.

Fox claimed that, in order to effectuate its scheme, MiMedx senior management officials directed the company’s sales force, including Fox, to increase the amount of product shipped to, and placed, on the shelves of Veterans Administration Hospitals throughout the United States at the end of the sales quarter. Fox contends that he objected to this and refused to participate, resulting in his demotion.

In 2016, after two other MiMedx employees reported suspected illegal conduct to MiMedx, Fox contends that former MiMedx CEO Pete Petit called a meeting where he allegedly promised that those employees would suffer professional and financial repercussions for blowing the whistle on MiMedx. In late December 2016, MiMedx fired Fox, and sued him in federal court that same day. MiMedx claimed that Fox had sold non-MiMedx products while in its employ, in violation of his employment agreement. However, Fox never sold any non-MiMedx products while working for the Company.

In his countersuit, Fox alleged that in addition to terminating his employment and filing a lawsuit against him, MiMedx retroactively reduced his wages (dropping his six-figure salary to the state minimum wage of just over $8 per hour), challenged his unemployment claim, and interfered with his subsequent employment. In his countersuit, Fox contends that MiMedx’s conduct and the allegations it levied against him was part of a retaliatory campaign to discredit, punish, and silence whistleblowers. He further contends that MiMedx subjected him to retaliation for refusal to participate in its channel stuffing scheme, and that its actions have not only damaged his professional reputation, but have also forced him to the brink of financial ruin as a result of having to litigate against this corporate goliath for the last 22 months.

As Fox has explained:

“I helped build MiMedx and many of my friends still work there. I want them to be successful, but I cannot remain quiet as MiMedx perverts the judicial process and uses it as a tool to spread lies about me. MiMedx filed this lawsuit to keep me quiet. They might bankrupt me, but I won’t be silenced. MiMedx started the fight, but I will finish it. The truth will be told.”

In the time after Fox’s countersuit was filed, MiMedx has been forced to withdraw (and will have to restate) financial statements it filed with the SEC (2012-2017),¹ and four of its top former executives – CEO Pete Petit, President William Taylor, Principal Accounting Officer Michael Senken, and Corporate Comptroller John Cranston – have been terminated for cause.² MiMedx is also under investigation by the Justice Department and the SEC to determine “whether it inappropriately booked sales of products that hadn’t been ordered, a practice known as channel stuffing.”³ On November 7, 2018, MiMedx announced that the Nasdaq Stock market would delist its shares and suspend trading in the stock effective Thursday, November 8, 2018.⁴

About Halunen Law
With offices in Minneapolis and Chicago, Halunen Law is a national law firm that offers experienced legal representation to employees, consumers and whistleblowers across the country.

¹ https://www.reuters.com/article/us-mimedx-group/mimedx-to-restate-financial-statements-replaces-cfo-idUSKCN1J31AP
² https://www.wsj.com/articles/former-mimedx-execs-to-give-up-compensation-after-investigation-1537489623
³ https://www.bloomberg.com/news/articles/2018-02-26/u-s-is-said-to-probe-mimedx-s-federal-contracts-accounting
⁴ https://www.wsj.com/articles/nasdaq-to-delist-mimedx-amid-financial-probe-1541615342

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