Osiris Therapeutics Charged With Accounting Fraud
On November 2, 2017, the Securities and Exchange Commission (“SEC”) charged Osiris Therapeutics, a Maryland-based biotech company, and four former top executives with prioritizing revenue growth over lawful accounting and misleading investors in the process.
The SEC alleges that Osiris Therapeutics routinely overstated company performance and issued fraudulent financial statements for a period of nearly two years. According to the SEC’s complaint, the company improperly recognized revenue using artificially inflated prices, backdated documents to recognize revenue in earlier periods, and prematurely recognized revenue upon delivery of products to be held on consignment. Osiris Therapeutics and its executives also allegedly used pricing data that they knew was false and attempted to book revenue on a fictitious transaction, among other accounting improprieties.The SEC’s complaint charges Osiris Therapeutics and four executives who led the company during the alleged period of accounting fraud from 2014 to 2015: chief executive officer Lode B. Debrabandere, chief financial officers Philip R. Jacoby Jr. and Gregory I. Law, and chief business officer Bobby Dwayne Montgomery. The complaint alleges that OsirisTherapeutics, Debrabandere, Jacoby, and Law violated the antifraud provisions of the securities laws in Section 17 (a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also alleges that Osiris Therapeutics violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a11, and 13a-13 thereunder, and that Debrabandere, Jacoby, and Law aided and abetted or acted as a control person for Osiris Therapeutics’ violations of these provisions and the antifraud provisions. Additionally, the complaint alleges that Debrabandere, Jacoby, and Law directly violated Exchange Act Section 13(b)(5) and Rules 13a-14, 13b2-1, and 13b2-2 thereunder. Finally, the complaint alleges that Montgomery aided and abetted Osiris Therapeutics’ violations of the antifraud provisions and directly violated Exchange Act Section 13(b)(5) and Rules 13b2-1 and 13b2-2. The SEC’s complaint seeks disgorgement of ill-gotten gains plus interest and penalties along with officer-and-director bars.
Osiris Therapeutics agreed to settle the charges without admitting or denying the allegations and must pay a $1.5 million penalty. The litigation continues against the four executives.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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