The feds asked for a 30-year sentence for former CEO Michael Baker and a 20-year sentence for former CFO Michael Gluk, saying that the pair showed no remorse for running a scheme that cost investors up to $960 million. Prosecutors further asked for $25 million total in restitution from both men as well as a 5-year term of supervised release following their prison terms.
"Michael Baker, President and Chief Executive Officer of ArthroCare Corporation and Michael Gluk, ArthroCare’s Chief Financial Officer, perpetrated a multi-year fraud scheme that caused hundreds of millions of dollars in losses and nearly took down an Austin-based publicly-traded company with more than 1000 employees," lawyers for the U.S. government said a sentencing memorandum. "Perhaps most tellingly, at the time of the filing of this memorandum, neither Baker nor Gluk have shown the slightest bit of remorse for the terrible harm their actions caused to ArthroCare’s investors and employees. Instead, they continue to focus entirely on minimization, obfuscation, and finger-pointing."
Prosecutors added that Baker and Gluk had lied under oath and attempted to thwart the SEC’s investigation.
Original estimates put the cost of Baker and Gluk’s actions at around $400 million, but prosecutors said that number is far short of that damage the pair did. The feds put the damage in the range of $756-$958 million, Law360.com reported.
Federal prosecutors indicted Baker and Gluk last year on 17 counts of conspiracy to commit fraud for their alleged roles in running a scheme designed to defraud investors. Each was charged with a single count of conspiracy to commit wire and securities fraud, 11 counts of wire fraud and 2 counts of securities fraud; Baker was also tagged with 3 counts of making false statements for allegedly lying to the SEC during its probe of the case.
Baker and Gluk were the latest ex-ArthroCare executives to be indicted in the case. In May 2013, ex-executive David Applegate pleaded guilty to the fraud charger; later that month former co-worker John Raffle denied his involvement but later changed his plea to guilty.
After their convictions, Baker and Gluk asked Judge Sam Sparks of the U.S. District Court for Western Texas to grant their motions for acquittal (Baker also asked for a new trial). Sparks declined, ruling that neither defendant showed that the testimony and evidence in the trial was not credible.
Early this year ArthroCare, which was acquired for $1.7 billion by Smith & Nephew (FTSE:SN, NYSE:SNN), agreed to pay a $30 million fine and enter a deferred prosecution deal to settle its part in the fraud case.