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Ex-ArthroCare CEO Baker Charged With Defrauding Investors

ArthroCare Corp. (ARTC)’s former chief executive officer and former chief financial officer were charged with leading a $400 million scheme to defraud investors in the maker of surgical products.

Ex-CEO Michael Baker and former finance chief Michael Gluk were charged in a 17-count indictment unsealed today in federal court in Austin, Texas. The indictment alleges that Baker, Gluk and other senior executives and employees of Austin, Texas-based ArthroCare falsely inflated revenue, starting at least by December 2005 and continuing through December 2008.

“Those at the top of ArthroCare deceived investors and regulators by manipulating the company’s reports to inflate its stock, ultimately causing hundreds of millions in losses in shareholder value,” Acting Assistant U.S. Attorney General Mythili Raman said in a statement today.

Baker is charged with 14 counts of fraud, including conspiracy, wire and securities fraud, as well as three counts of making false statements to federal regulators. Gluk is charged with one count of conspiracy to commit fraud, 11 counts of wire fraud and two counts of securities fraud. The U.S. also seeks forfeiture of assets by the defendants.

“Mr. Baker did nothing wrong,” his attorney, Jay Pomerantz of Fenwick & West, said in an e-mailed statement. “He properly relied on the advice of ArthroCare’s numerous attorneys, the advice of its independent external auditor, and the representations of his employees and senior managers regarding the matters that the government investigated.”

Baker and Gluk were sued by the U.S. Securities and Exchange Commission last year on similar claims. That case is pending in federal court in Austin. Jason Lewis, Gluk’s lawyer in the SEC case, didn’t immediately return calls seeking comment on the charges.

The criminal case is U.S. v. Baker, 13-cr-00346, U.S. District Court, Western District of Texas (Austin).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net ARTC US <Equity>

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