Northwestern surgeon’s ex-biz partner charged with defrauding medical device business they launched
Mark Alan Schwartz and Northwestern University chief of plastic surgery Dr. Gregory Dumanian formed 2 companies to develop the surgeon’s invention for the market. On Tuesday, Schwartz pleaded not guilty to federal charges.
About a decade ago, a Northwestern University surgeon and his longtime friend, working as partners, set up a company to market the doctor’s potentially lucrative medical invention.
The device, called Duramesh, is used to repair muscles, tendons and ligaments. It won U.S. Food and Drug Administration approval earlier this year.
But now Dr. Gregory Dumanian and Mark Alan Schwartz are now adversaries in a lawsuit. And Schwartz faces new federal charges accusing him of defrauding the companies they started together.
Schwartz and Dumanian were friends for more than 20 years, according to court records.
Dumanian, 61, is chief of plastic surgery at Northwestern University’s Feinberg School of Medicine. He specializes in abdominal wall surgery, including tummy tucks and hernia repair. In 2001, he created a procedure that’s performed around the world for amputee pain, according to a university profile of him.
Schwartz, 61, is a lawyer and a graduate of the University of Illinois medical school, records show.
Because Dumanian is a Northwestern employee, the school owns the patent for his Duramesh invention. In 2012, though, he and Schwartz formed Advanced Suture, Inc., and the university agreed to let the company sell the invention, with Northwestern getting royalties from future sales.
In 2015, Dumanian and Schwartz created a new corporate structure. Mesh Suture, Inc., that would raise capital, sell the Duramesh device and pay royalties to Advance Suture, which would pass along royalties to Northwestern. Mesh Suture raised more than $10 million from almost 50 investors to pay for its efforts to get FDA approval for the invention’s use.
By 2019, though, the two old friends were at odds. Dumanian filed a still-pending federal lawsuit against Schwartz that year, accusing him of trying to steal ownership of Mesh Suture.
Now, a federal grand jury in Chicago has indicted Schwartz on fraud charges. The indictment, filed Dec. 8, says he led a “multiyear campaign” to take over the Duramesh-related companies and their assets and reward himself and his family through fraud, identity theft and a “series of opaque stock transactions.”
In court Tuesday, Schwartz pleaded not guilty and was released from custody while awaiting trial.
Schwartz is accused of transferring $324,000 from Mesh Suture to his personal bank accounts in March 2019 and falsely stating the money came from an approved company loan.
He drained the company of more than $3.9 million after Dumanian fired him as chief executive officer of Mesh Suture in August 2019, according to the indictment. Schwartz is accused of holding the money “hostage” until Dumanian agreed to restore him as CEO and give him full control of the company.
Dumanian says the “emergency” deal is invalid because he was coerced into approving it.
In a court filing in the civil case, Schwartz has denied wrongdoing, said Dumanian was “paranoid” and that his trust was “limited only to members of his own family.”
Schwartz lives in Puerto Rico, according to Mark Flessner, his lawyer. Records and Dumanian’s lawsuit show Schwartz also owned a mountainside home in a wealthy enclave near Vail, Colorado.
In addition to his partnership with Dumanian, Schwartz’s law firm represented a company that bought liens on properties, often for small sums, and charged owners thousands of dollars in fees to prevent foreclosure in Washington, D.C., and elsewhere, the Washington Post reported in 2013.
In 2019, the tax-lien business “ceased to exist,” and Schwartz began to have “cash-flow problems,” according to the Chicago lawsuit.
Schwartz is licensed to practice law in Illinois. In 2000, the Illinois Attorney Registration and Disciplinary Commission reprimanded him over what it said was a misleading letter he sent to doctors, offering to represent them in medical malpractice cases.
Contributing: Jon Seidel