Ex-ArthroCare Official Pleads Guilty to Securities Fraud

A former ArthroCare Corp. (ARTC) senior executive pleaded guilty for his role in a $400 million scheme to defraud investors in the maker of surgical products.

John Raffle, 45, former senior vice president of Strategic Business Units at Austin, Texas-based ArthroCare, pleaded guilty in June to one count of conspiracy to commit securities, mail and wire fraud and two counts of making false statements. His plea was unsealed yesterday, the U.S. Justice Department said.

Raffle, who was in charge of the company’s sales and marketing staff, “admitted that he and other co-conspirators falsely inflated ArthroCare’s sales and revenue through end-of-quarter transactions involving ArthroCare’s distributors,” the department said today in a statement. He faces a maximum of five years in prison for each count, the government said.

ArthroCare’s former chief executive officer, Michael Baker, and a former chief financial officer, Michael Gluk, were indicted last week on charges that they falsely inflated revenue, starting at least by December 2005 and continuing through December 2008.

“Mr. Baker did nothing wrong,” his attorney, Jay Pomerantz of Fenwick & West LLP, said last week in an e-mailed statement. “We are confident that a jury will conclude that Mr. Baker is innocent.”

Jason Lewis, Gluk’s attorney, didn’t immediately return a call for comment today. Gluk is scheduled to be arraigned July 25 in federal court in Austin, according to court documents.

A fourth former executive, David Applegate, pleaded guilty in May to two counts of fraud.

The case is U.S. v. Raffle, 12-cr-00314, 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

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