Ex-ArthroCare Executives Win Reversals of Fraud Convictions

  • Appeals court faults judge over rulings on evidence at trial
  • Jury was allowed to hear salacious details of medical misdeeds

Two former ArthroCare Corp. executives won reversals of their convictions in a $750 million securities fraud scheme after an appeals court found flaws in the judge’s handling of their trial.

Michael Baker, ex-chief executive officer, and Michael Gluk, former finance chief, of the Texas medical device company were serving 20-year and 10-year prison terms, respectively, after being convicted in 2014 of running an illegal “stuffing” scheme.

Unsold ArthroCare products were parked on customers’ balance sheets to inflate quarterly earnings, before the goods were returned for credit after the financial reporting deadline passed, prosecutors said. When the five-year accounting fraud was revealed in stages in 2008, shares plunged from $40.03 in July to $5.92 in December of that year.

The appeals court said Monday the trial judge mistakenly let prosecutors tell jurors salacious details about the medical misdeeds of the defendants’ alleged co-conspirators, who pleaded guilty. The judge also prevented the jury from seeing reports by federal securities regulators and corporate investigators that downplayed Baker’s and Gluk’s involvement in and knowledge of the scheme, according to the ruling by the U.S. Court of Appeals in New Orleans.

The case is U.S. v. Gluk, 14-51012, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

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