On August 18, 2017, a federal jury found former CEO of ArthroCare Michael Baker guilty of one count of conspiracy to commit wire fraud and securities fraud, seven counts of wire fraud, two counts of securities fraud and two counts of making false statements.  Baker and his co-conspirators were alleged to have artificially inflated sales and revenue by determining which of their products would meet Wall Street needs, based on analysts’ forecasts, and then “parked” millions of dollars of their medical devices at distribution centers at the end of each financial quarter.  The company reported these shipments as sales at the time of shipment, allowing them to match or surpass anticipated earnings.  In exchange for accepting these shipments, ArthroCare’s distributors received special treatment, including upfront commissions, payment term extensions, and the right to return products.  ArthroCare also used a private Delaware corporation, DiscoCare, as a distributor to cover any revenue shortfalls that arose, sending DiscoCare products far in excess of its needs. Baker’s sentencing date is not yet scheduled. U.S. v. Baker, No. 1:13-cr-00346 (W.D. Tex.).

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