Jan 7 ArthroCare Corp said it signed an
agreement with the U.S. Department of Justice to resolve a
six-year long investigation regarding allegations of securities
and related fraud committed under a previous management team.
Under a deferred prosecution agreement, ArthroCare will pay
a $30 million fine and maintain a compliance program meeting
certain criteria over a 24-month period.
A deferred prosecution agreement allows a company to avoid
possible criminal charges by fulfilling certain conditions that
will eventually lead to the dismissal of the case.
Shares of ArthroCare, a maker of surgical devices, rose 11
percent to $45 in extended trading. They closed at $40.58 on the
Nasdaq on Tuesday.
Jefferies & Co analyst Raj Denhoy said the resolution of the
investigation with just a fine and no ongoing scrutiny was seen
as a positive outcome.
Denhoy said the Austin, Texas-based company, by clearing its
final legal hurdle, had also made itself more attractive to
The DOJ had in July charged former Chief Executive Michael
Baker and ex-Chief Financial Officer Michael Gluk with a $400
million scheme to defraud investors by inflating the company's
Prosecutors had claimed the company, inflated earnings by
shipping extra products to its distributors at the end of
financial quarters, even though the shipments were not for
actual orders, so ArthroCare could count the shipments as sales
and meet earnings forecasts.