Paul Chancey is the subject of administrative proceedings the SEC filed on Tuesday to determine whether the agency should order him to cease and / or pay a civil fine for improper business conduct. Chancey, a partner at Cherry Bekaert since 2006, was the senior partner responsible for audits and interim reviews of MiMedx’s financial statements from the first quarter of 2013 to at least the second quarter of 2017, according to the SEC order.
MiMedx and three of its former senior executives were accused of defrauding investors by misrepresenting company income and trying to cover up their fault in November 2019. MiMedx agreed to pay a civil fine of 1.5 million dollars to settle the case.
As Senior Engagement Partner, Chancey was “responsible for the conduct of audits, including planning, overseeing team members, and ensuring compliance with Public Company Accounting Oversight Board (PCAOB) standards). The SEC explained. He allegedly failed in this role by ignoring evidence that MiMedx inappropriately recorded revenue from a consignment agreement with one of its largest distributors in its 2015 and 2016 financial statements.
Instead, Chancey “erroneously relied on misrepresentation by MiMedx executives that revenue recognition was appropriate,” the SEC said. This happened despite a former MiMedx controller reporting the nature of transaction logging for the 2015 audit. Chancey’s actions violated PCAOB standards for acting with professional care and obtaining evidence sufficient audits and caused Cherry Bekaert to violate SX regulations by certifying MiMedx’s fraudulent financial statements, according to the SEC.
MiMedx will later restate its 2015 and 2016 financial statements.
The SEC will conduct a public hearing reviewing its findings and Chancey’s response to the allegations before determining whether corrective action is appropriate in the matter.