A federal jury in Texas last week handed former ArthroCare CEO Michael Baker another loss in his second trial over an alleged $750 million fraud scheme, after a federal appeals court last year overturned his first conviction.
Baker and ex-ArthroCare CFO Michael Gluk were convicted in June 2014 on charges that they ran a scheme to generate false revenue numbers 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.
Although Baker was sentenced to 20 years in prison and Gluk drew a 10-year term, the U.S. Court of Appeals for the 5th Circuit overturned the convictions in January 2016 and ordered new trials. Earlier this month Gluk pleaded guilty to a single count of conspiracy to commit wire fraud and securities fraud.
Baker’s trial, which began in late July, ended August 18 when the jury in the U.S. District Court for Western Texas convicted him on 12 of the 15 counts against him, according to court documents. The jury found Baker guilty of one count of wire & securities fraud; seven counts of wire fraud; two counts of securities fraud; and two counts of false statements. Baker was found not guilty on two of the wire fraud counts and one count of the false statement charges, according to the documents.
ArthroCare, which was acquired for $1.7 billion by Smith & Nephew (NYSE:SNN) in May 2014, agreed to pay a $30 million fine and enter a deferred prosecution deal to settle its part in the fraud.