Acting U.S. Attorney Joon H. Kim announced Thursday the former Chief Financial Officer of Osiris Therapeutics, Inc., a Columbia-Maryland pharmaceutical company, pleaded guilty to lying to Osiris’s auditors.
Sixty-five-year-old Philip Jacoby lied to Osiris auditors assessing the financial well being of his company. Osiris specializes in development, marketing and research of regenerative medicine products.
Jacoby was the CFO of Osiris from at least 2008 to 2015. He was responsible for signing the company’s quarterly and yearly financial reports, which are required to be filed with the United State Securities and Exchange Commission.
In approximately 2014, Osiris became focused on its gross revenue growth, even though it was initially a development and research company. The company focused heavily on being able to demonstrate quarter-over-quarter revenue growth.
The Food and Drug Administration informed Osiris that its Ovation product failed to meet regulatory requirements in 2013. Osiris agreed to not sell its Ovation after December 31, 2014.
A distributor for Osiris took possession of about $1.8 million worth of Ovation prior to December 2014. Since the distributor was unable to pay for the entire purchase, Osiris shipped Ovation to the distributor on consignment, under governing the rules that Osiris could not recognize revenue until the distributor had sold the product to the end user, according to court documents.
Osiris took steps to in 2014 to reclassify the consignment product as legitimate sales, so it could meet its revenue estimates.
“Philip Jacoby, the former CFO of a pharmaceutical company, admitted today to lying to auditors conducting an examination of the financial well-being of his company,” Kim said in a statement. Jacoby fabricated documents, made false statements, and asked others to backdate critical transactions in furtherance of his scheme to mislead auditors. For his criminal conduct, which ultimately misled those looking to invest in his publicly traded company, Jacoby faces time in federal prison.”
“In a misguided effort to avoid a restatement of Osiris’s fourth quarter revenue numbers, Philip Jacoby lied about the conversion of $1.1 million dollars of consignment inventory to a final sale, Inspector-in-Charge Philip R. Bartlett said in a statement. He wasn’t so clever when he left a paper trail of evidence Postal Inspectors followed right back to him.”
To read the full release, please click here.