imgres-6ArthroCare Corp., a medical device maker in Austin, has agreed to pay a $30 million fine to settle securities fraud charges.
The settlement resolves “charges that senior executives at the company engaged in a securities fraud scheme that resulted in more than $400 million in shareholder losses,” according to a Federal Bureau of Investigations news release.
“John Raffle and David Applegate, both former senior vice presidents of ArthroCare, previously pleaded guilty to conspiracy to commit securities and wire fraud in connection with the fraud scheme,” according to the release.
Two other former executives, Michael Baker and Michael Gluk are expected to go to trial in May.
The company agreed to cooperate with authorities in its continuing investigation and prosecution. It previously entered into a settlement agreement with its shareholders.
Under the agreement, ArthroCare “admitted that senior executives of the company inflated ArthroCare’s revenue by tens of millions of dollars; concealed the nature and financial significance of ArthroCare’s relationship with its largest distributor, DiscoCare Inc., and other distributors; and used a series of sham transactions to manipulate ArthroCare’s revenue and earnings as reported to investors.”
The charges allege that between 2005 and 2008, the fraud occurred and when Arthrocare restated its earnings, its shareholders lost more than $400 million worth of value in their stock. The price plummeted from $40.03 a share to $23.21 per share.