A securities class action lawsuit has been commenced in the United States District Court for the Southern District of New York.The complaint alleges that defendants made false and misleading statements and failed to disclose that the Company was in violation of federal regulations by engaging in improper marketing and sales practices.
The lawsuit charges that the Company failed to disclose that it violated federal regulations by engaging in improper marketing and sales practices. Specifically, the complaint alleges that, despite the Company's statements that it "must comply with various federal and state anti-kickback, self-referral, false claims and similar laws," the MiMedx senior management routinely engaged in illegal sales practices, such as demanding that MiMedx Sales Mangers add extra products to open purchase orders, to boost sales.
On December 31, 2014, MiMedx announced the receipt of a civil subpoena from the Office of Inspector General of the U.S. Department of Health and Human Services in connection with an investigation of the Company's sales and marketing activities.
The shares MiMedx Group climbed lately after announcing that the Department of Justice (DOJ) declined to intervene in the qui tam action against the company at this time.
A qui tam action is a type of a civil lawsuit filed by a whistleblower under the False Claims Act. Under the law, a whistleblower will be rewarded if his or her qui tam case recovers funds for the government.
According to MiMedx, the qui tam case prompted the Department of Health and Human Services, Office of Inspector General (OIG) to issue more subpoena to the company a few months ago.
MiMedx Chairman and CEO Parker Petit said, "We are pleased that the government has declined at this time, to intervene in the qui tam action. We appreciate the expediency, professionalism and thoroughness with which the OIG conducted its investigation."
The main issue is " at this time " - this means that the negative scenario is possible and therefore short sellers to keep track of MiMedx share's prices and ongoing news , because the stock price may go down very easily within a short period , the moment the government will intervene .
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.