WASHINGTON Aug 29 A U.S. judge sentenced the
former chief executive of surgical device maker ArthroCare to 20
years in prison and its finance chief to 10 years after a jury
convicted the pair of orchestrating a $750 million securities
fraud scheme, the U.S. Department of Justice said on Friday.
A federal judge in Austin, Texas, sentenced former CEO
Michael Baker to 20 years, and former CFO Michael Gluk to 10
years. The government had request a 30-year prison term for
Baker and 20 years for Gluk.
Two other ArthroCare executives who had pleaded guilty to
felonies in 2013 and cooperated in the government's
investigation, were also sentenced on Friday to five or more
years in prison.
"Earlier today, in federal court in Austin, Texas, we
witnessed the culmination of an epic tale of greed," said
Marshall Miller, a senior official in the Justice Department's
The top executives were found guilty of inflating sales and
revenue figures for the company through end-of-quarter deals
with some of the company's distributors between 2005 through
Earlier this year the Austin-based company agreed to pay a
$30 million penalty and enter into a deferred prosecution
agreement to resolve a six-year investigation into the
In February, Britain's Smith & Nephew agreed to buy
ArthroCare for $1.7 billion to use its expertise in treating
shoulder joint injuries to build its sports medicine business.
One of the cooperators, John Raffle, was sentenced to 80
months in prison. The other, David Applegate was sentenced to 60
months, the Justice Department said. Both had worked as senior
vice presidents of the company.
The executives had engaged in a scheme to ship products to
distributors based on Wall Street analyst forecast rather than
actual orders, and to park the products at distributors at the
end of the quarter in order to meet or exceed earnings
forecasts, prosecutors said.
Distributors agreed to accept the shipments in exchange for
cash commissions, the ability to return the products and other
incentives, prosecutors said.
(Reporting by Aruna Viswanatha; Editing by Sandra Maler)