Ex-Arthrocare exec pleads guilty to stock fraud scheme

May 10, 2013 by Brad Perriello

David Applegate, the former senior vice president for ArthroCare's spinal business, pleads guilty to federal charges that he helped run a $400 million scheme to defraud investors.

Ex-Arthrocare exec pleads guilty to stock fraud scheme

Ex-ArthroCare (NSDQ:ARTC) executive David Applegate pleaded guilty this week to federal charges that he helped run a scheme that eventually defrauded investors in the medical device company of some $400 million.

Applegate, 54, pleaded to 1 count of conspiracy to commit securities, mail & wire fraud and another count of making false statements, for regulatory filings made with the SEC containing faked quarterly and annual sales figures.

Applegate and another ex-ArthroCare exec, John Raffle, were arrested last summer and charged by the U.S. Justice Dept. with wire fraud and making false statements in connection with the alleged scheme to artificially inflate ArthroCare's share price by rigging its sales figures, according to court documents.

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The feds accused Applegate and Raffle of generating false revenue numbers designed to meet internal and external forecasts by dumping inventory, first with a distributor called DiscoCare and eventually via free shipments to end-users. ArthroCare was DiscoCare's only client until it acquired DiscoCare in December 2007, according to the documents.

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