Former ArthroCare exec pleads guilty in $400M fraud case

An ex-ArthroCare ($ARTC) executive pleaded guilty to charges involving a $400 million securities fraud case barely a week after the devicemaker's ex-CEO and CFO were formally indicted in the same scheme.

John Raffle, ArthroCare's former senior vice president of strategic business units, pleaded guilty to conspiracy to commit securities, mail and wire fraud and two false statement violations, according to a U.S. Department of Justice announcement. A sentencing date hasn't been scheduled yet, but Raffle faces a maximum of 5 years in prison for each charge, the FBI said. Prosecutors initially hit him with a wider assortment of charges for his role in a scheme they allege involved falsely inflating the company's earnings from December 2005 through December 2008.

Raffle admitted to working with other executives at ArthroCare to send devices to distributors beyond what they ordered, and then reporting those shipments as sales in order to meet earnings forecasts, illegally boosting their earnings forecasts.

Raffle and David Applegate, the former senior vice president of the company's spinal division, were charged with using the Delaware distributor DiscoCare as a major pawn in the scheme, reporting sales of $37 million to the company when the actual cash payments came in under $50,000, the FBI said after the initial charges were announced. What's more, both were charged with getting ArthroCare to buy DiscoCare to conceal what they did.

Separately, Applegate agreed to a plea deal in May, the FBI said.

Earlier this month, former ArthroCare CEO Michael Baker and Ex-CFO Michael Gluk were charged in a multiple indictment in the same case. Current ArthroCare executives have said they are cooperating with the Department of Justice, and the company in 2011 paid $74 million to settle a series of class-action securities suits against it relating to the investigation.

- read the release

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