$750M fraud scheme leads to prison sentences for former ArthroCare execs

Two former ArthroCare executives received prison sentences for their involvement in a $750 million securities fraud scheme, according to the Department of Justice.

Michael Baker, former CEO of ArthroCare — a surgical device, instrument and implant manufacturer based in Austin, Texas — was sentenced to serve 20 years in prison, and Michael Gluk, former CFO, was sentenced to serve 10 years in prison, convicted of wire fraud, securities fraud and conspiracy to commit wire and securities fraud.

From 2005 to 2009, Mr. Baker and Mr. Gluk, along with two other executives, falsely inflated sales and revenue by shipping products to distributors based on the company's need to meet analyst forecasts instead of distributors' orders. The company then reported the shipments as sales in its quarterly and annual filings, boosting reported sales and earnings forecasts.

Some distributors agreed to accept the shipments, sometimes upwards of millions of dollars of excess inventory, for "lucrative concessions from ArthroCare, such as upfront cash commissions, extended payment terms and the ability to return products," according to the DOJ.

In addition to their prison sentences, Mr. Baker and Mr. Gluk were sentenced to five years of supervised release and must forfeit their profits from the scheme, totaling more than $22 million, according to the release.

"This scheme of betrayal and deceit was carried out by the defendants without regard to the deep-reaching and irreparable harm their actions caused to thousands of victims, here in Texas, and throughout the United States," said Christopher Combs, FBI special agent in charge.

More articles on healthcare fraud:

Ohio cardiologist charged with causing unnecessary heart surgeries as part of fraud scheme
10 largest False Claims, Stark Law and Anti-Kickback settlements of 2014
Identifying fraud in a mountain of Medicare data is an endless pursuit for agents

Copyright © 2023 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars