Former Osiris executive agrees to $40K penalty

SEC dismisses charges against ex-chief financial officer in accounting fraud case

“Our client is happy to settle this case on a no-admit, no-deny basis and to move on with his life.”

One former executive of Columbia-based biotechnology firm Osiris Therapeutics agreed to pay a $40,000 fine to settle an accounting fraud case with the U.S. Securities and Exchange Commission, while charges against another former executive were dropped.

Bobby Dwayne Montgomery, the biotechnology company’s former chief business officer, will pay a $40,000 civil penalty, the SEC said. The fine was part of a judgment entered Oct. 8 in U.S. District Court in Baltimore.

The SEC had accused the company and four former executives with misleading investors in 2014 and 2015 by overstating revenue growth and issuing fraudulent financial statements. In a lawsuit filed in November 2017, the SEC alleged Montgomery had booked fictitious revenue and lied to company auditors.

“Our client is happy to settle this case on a noadmit, no- deny basis and to move on with his life,” said Stephen Crimmins, an attorney for Montgomery and a partner at Murphy & McGonigle in Washington.

The SEC dismissed the case against Osiris’ former chief financial officer, Gregory I. Law, on Sept. 23.

“The SEC never should have charged Greg Law,” said Aitan Goelman, an attorney for Law, in an email. “All of the allegations against him in the complaint — every one of them — were untrue.

“We are gratified that the SEC eventually realized their error and made the only decision consistent with the interests of justice by dismissing the case against Greg, but that doesn’t change the fact that they never should have charged Greg in the first place,” Goelman said.

Osiris Therapeutics had said it cooperated with the SEC investigation and settled the suit shortly after it was filed in 2017 without admitting or denying the allegations. The company agreed to pay a $1.5 million penalty. It also restated financial results from 2014 to show a $10 million loss.

Osiris, a specialist in wound care, orthopedics and sports medicine, is known for stem cell-based products such as Grafix, a human tissue treatment for chronic wounds, and Stravix, used as a surgical cover or wrap to repair soft tissue.

Osiris went through a series of new CEOs after facing the fraud charges. It was sold in April for $660 milli on t o Smith & Nephew, a British medical equipment maker, and now operates as a subsidiary of the London-based firm.

Company officials did not respond to requests for comment on the SEC case.

The SEC’s litigation is continuing against former Osiris CEO Lode B. Debrabandere and former Chief Financial Officer Philip R. Jacoby Jr.

Jacoby had pleaded guilty in a separate case in U.S. District Court in Manhattan to one count of making fraudulent statements to auditors in connection with their review of Osiris’ financial filings. He was fined $10,000.