An Open Letter To MiMedx Director Luis Aguilar

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Dear Mr. Aguilar,

We are writing you to express our belief that the ongoing fraud at MiMedx must be stopped immediately and our opinion that you are uniquely positioned to do so.  You have an important opportunity to use your position as a MiMedx Director to protect your legacy and reputation.

We have great respect for your tenure at the Securities & Exchange Commission and efforts to protect investors and punish corporations for financial fraud. We especially admire your prior advocacy for the SEC’s whistleblower program and agree with your speech titled, “Incentivizing Whistleblowers to Bring Fraud to Light”.  Specifically:

Too often, we see frauds revealed only after the money is gone and investors are tragically harmed. In an attempt to systematically combat this, Congress mandated that the SEC promulgate rules so that whistleblowers would serve as an early warning system to detect fraud. Today, we are putting rules into place to achieve that goal.

This is precisely why we find it so perplexing to observe you standing seemingly idle while MiMedx has deployed a nearly unprecedented campaign of whistleblower retaliation. Dozens of former employees have emerged as whistleblowers to document the pervasive and multi-faceted fraud that is occurring at the company. But instead of being protected, many of these individuals report being terminated or harassed soon after discovering and reporting instances of fraud through internal MiMedx channels.  The company has created a culture of fear by seeking to financially destroy whistleblowers who have spoken publicly by burying them in the costs of litigation and then trying to force them to recant their testimony.  Whistleblowers not currently in litigation with the company have faced intimidation tactics that have left some of these individuals even fearing for their life.

MiMedx has filed frivolous lawsuits against short sellers (including ourselves) and a news organization, the Capitol Forum, for expressing opinions and publicizing facts that contradict management’s narrative.  The company has attempted to discredit journalists from Business Insider, The Wall Street Journal, and Bloomberg who have either questioned the company’s business practices or, most recently, reported the existence of two separate Department of Justice investigations into MiMedx.  Paid MiMedx stock promoters assail and threaten critics in online forums while Mr. Petit appears to have used his political influence to catalyze a warrantless visit by FBI agents to the home of a short seller with instructions to “stop tweeting about Mr. Petit”.

Mr. Petit is using your name and reputation as a currency to legitimize his activities. For example, Petit has repeatedly declared that “we’ve got a former SEC commissioner on our board” to support his claim that there is “no malfeasance” at MiMedx.  When asked by an investor why you joined the MiMedx board despite having no healthcare background, Mr. Petit said “use a little business sense”. We therefore believe that Petit’s representations about you have enticed investors who would otherwise be concerned about the outcome of the SEC’s investigation of MiMedx.

This is particularly problematic because Mr. Petit has repeatedly made false statements to investors. Throughout last year, Mr. Petit pointed to his exoneration by the Audit Committee’s previous investigation which he claimed was conducted by “independent outside counsel”.  But we later learned that this investigation was actually completed by Troutman Sanders, MiMedx’s own securities counsel who also has lengthy ties to Mr. Petit’s previous companies.  Mr. Petit also falsely represented that Ernst & Young had endorsed the company’s accounting practices, with MiMedx declaring that “our big four auditors are with us!” in response to allegations of accounting impropriety and Mr. Petit even claiming that the company’s quarterly financials are audited (they are obviously not). How can the MiMedx board fulfill its fiduciary obligations while letting so many clear falsehoods linger in the marketplace?

Although the company recently delayed the filing of its financials and announced that the Audit Committee will now be conducting a second “do over” investigation, this is insufficient. Mr. Petit’s fraternity little brother, J. Terry Dewberry, remains the Chairman of the Audit Committee.  Mr. Dewberry has been “very close” with Petit for decades and even assisted in the creation and award of a bronze bust of Mr. Petit. The two other members of the audit committee also appear to have personal ties to Mr. Petit that make us concerned about their independence.  Since these individuals already completed one flawed investigation, how can investors possibly trust that the deck is not stacked once again?  For the investigation to have integrity, it must be led by individuals with no prior ties to Petit and his previous companies. We find it particularly troubling that despite your significant qualifications, you are not a member of the MiMedx audit committee and therefore likely not even substantially involved in this investigation.

The present moment represents a critical opportunity for you to extend your legacy of protecting investors and whistleblowers to the private sector.  In a 2014 speech on Corporate governance, you stated that:

Accountability means that actions have consequences.  When corporate governance embodies the principle of accountability…most importantly, [shareholders] know that misconduct will not be tolerated.

We possess evidence of accounting fraud, Medicare fraud, tissue tagging irregularities, anti-kickback violations, undisclosed related party transactions, and the systematic intimidation and harassment of whistleblowers.  We are willing to present this evidence directly to you in detail because we suspect that Mr. Petit may have concealed material facts from you and other Board Members.

Each day that Mr. Petit remains in control of MiMedx, the damages to investors, taxpayers, whistleblowers, and the capital markets grows. We implore you to use your position at MiMedx to end this fraud immediately or, at absolute minimum, stop Mr. Petit from using your hard-earned name and reputation as a currency to legitimize his activities and intimidate whistleblowers.

Sincerely and Respectfully,

Aurelius Value