Former ArthroCare (NSDQ:ARTC) executive John Raffle changed his plea to guilty last month, admitting to charges that he took part in a scheme to artificially inflate ARTC stock prices by misleading investors.
Raffle had pleaded not guilty in May, but changed his plea last month, according to the U.S. Justice Dept., which said the plea was unsealed July 22.
Raffle, the Austin, Texas-based company’s former senior VP of strategic business units, was accused of playing a part in a fraud scheme to boost ATRC shares ahead of quarterly earnings releases between 2006 and the first quarter of 2008.
Raffle and another ex-ArthroCare exec, David Applegate, 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.
Applegate pleaded guilty to federal charges that he helped run the scheme, which eventually defrauded investors in the medical device company of some $400 million. He pleaded guilty 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.
Raffle, 45, admitted to charges of conspiracy to commit securities, mail and wire fraud and 2 false statements violations, according to a press release. He was the senior vice president of strategic business units at ArthroCare, overseeing all sales and marketing staff.
"Raffle admitted that he and other co-conspirators falsely inflated ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving ArthroCare’s distributors and that he and other co-conspirators," according to the release. "As part of his plea, Raffle agreed that his conduct and the conduct of his co-conspirators caused more than $400 million in losses to shareholders."
He faces a maximum sentence of 5 years in prison for each charge; a sentencing hearing has not been scheduled yet.
Last week the feds indicted the former CEO and CFO of ArthroCare, Michael Baker and Michael Gluk, respectively, on 17 counts of conspiracy to commit fraud for their alleged roles in the scheme.