The CEO of a now-bankrupt medical technology supplier has been charged for a second time with crimes connected to the development of a “non-functional piece of plastic” implanted in patients to keep up the appearance of profitability.
Laura Tyler Perryman, founder and CEO of Stimwave, was yesterday charged by the US Securities and Exchange commission with defrauding investors to the tune of $41 million by allegedly making false and misleading statements about her company’s peripheral nerve stimulation devices.
“We allege that Perryman touted a supposedly innovative medical pain-relief device while concealing that a primary component of the device was fake and that patients were unwittingly undergoing unnecessary surgeries to implant the non-functional component into their bodies,” said SEC San Francisco regional director Monique Winkler.
And here we thought fake blood tests were bad.
As advertised, Stimwave’s StimQ PNS System was supposed to treat chronic pain using an implanted electrode array and receiver that stimulated peripheral nerves, along with an externally worn battery pack that wirelessly transmitted electrical signals to the implants.
Shortly after hitting the market in 2017, however, doctors began informing Stimwave of a problem: The receiver, which had a copper wire at its core, was too long to implant in smaller patients and tight spaces, and its copper core meant it couldn’t be cut down to improve fit.
The device, which was sold to doctors for between $16,000 and $21,000 depending on options, largely depended on the installation of all three components to be profitable for Stimwave. Doctors, likewise, were unlikely to receive much in the way of Medicaid reimbursement for a partially installed device, meaning sales were likely to crater if the company didn’t find a way to improve the product.
“Perryman understood that doctors’ concerns over the size of the Functional Receiver threatened Stimwave’s ability to maintain its existing pricing for the PNS Device,” the SEC alleged. Instead of working to create a smaller functional receiver, however, “Perryman directed Stimwave employees to create the Fake Receiver, which was smaller than the Functional Receiver and could be trimmed down even further because it was solely a piece of plastic.”
The facts of the case were already settled last year after the US Attorney for the Southern District of New York (SDNY) convinced Perryman and Stimwave to accept responsibility and admit to the facts of the case, along with coughing up $10m. Those records were sealed until March of this year, after Stimwave had gone bankrupt.
Perryman resigned as CEO of Stimwave in 2019.
Of course, as disgraced Theranos founder Elizabeth Holmes has proved, you can’t get away with such malfeasance when millions of investor dollars are on the line, which is why the SEC has stepped in – not because doctors and patients were defrauded into placing fake implants.
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Per the SEC complaint, Stimwave held a Series D funding round between April 2018 and July 2019, after the fake lead had been introduced. During that time, Perryman mislead investors by not only claiming that the device had been fully cleared by the US Food and Drug Administration (the fake receiver was never even submitted for clearance), but also that the StimQ PNS device “was the only effective peripheral nerve stimulation device on the market,” while Perryman knew part of it was fake.
The SEC is seeking to permanently enjoin Perryman from being able to sell securities and prohibiting her from serving on the board or as an officer of any company that sells securities. The SEC is also asking for additional monetary penalties to be levied against her.
The SEC said the SDNY has also filed a superseding indictment against Perryman adding criminal securities fraud charges to its previously settled allegations of conspiracy to commit health care fraud and wire fraud, but that indictment wasn’t immediately available, and the SDNY AG’s office didn’t immediately provide us with a copy.
“Investors are entitled to know material information about the products of the companies in which they invest. The SEC is committed to holding bad actors accountable,” Winkler said. ®
