January 5, 2018 / 9:08 PM / a year ago

Ex-ArthroCare CFO gets four years in U.S. prison for fraud scheme

(Reuters) - The former chief financial officer of medical device company ArthroCare Corp was sentenced on Friday to more than four years in prison after pleading guilty to participating in what federal prosecutors called a $750 million securities fraud.

Michael Gluk, 59, was sentenced by U.S. District Judge Sam Sparks in Austin, Texas, after pleading guilty in June to one count of conspiracy to commit wire and securities fraud, the U.S. Justice Department said.

The sentencing came after Gluk in August testified at the trial of former ArthroCare Chief Executive Officer Michael Baker, who was convicted of securities fraud, wire fraud and other charges and sentenced in November to 20 years in prison.

Both men were convicted at a trial in 2014. But a federal appeals court in January 2016 overturned their convictions after finding that evidence was improperly excluded from the trial.

Gluk had been serving a prison sentence of 10 years when the appeals court overturned his conviction. He is expected, as part of his new sentence of 50 months in prison, to receive credit for the 13 months that his lawyers said he had already served.

Sparks ordered Gluk to pay a $50,000 fine and to forfeit $677,804, the Justice Department said. A lawyer for Gluk did not respond to a request for comment.

Prosecutors said Baker and Gluk, along with others, schemed from 2005 to 2009 to prop up ArthroCare’s stock price by artificially inflating sales and revenue through a series of transactions with distributors.

Two other ex-ArthroCare executives, John Raffle and David Applegate, pleaded guilty to felonies in 2013 stemming from their involvement in the scheme. They were sentenced to prison terms of 80 months and 60 months.

ArthroCare agreed in January 2014 to pay a $30 million penalty and enter a deferred prosecution agreement to end a Justice Department probe.

The Austin-based company was acquired later that year by British medical equipment company Smith & Nephew Plc (SN.L) in a $1.7 billion deal.

The case is U.S. v. Baker, et al, U.S. District Court, Western District of Texas, No. 13-cr-346.

Reporting by Nate Raymond in Boston; Editing by Tom Brown

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