Texas Medtech Executive Admits to Cheating Shareholders Out of $400M | MDDI Medical Device and Diagnostic Industry News

Wow. The headline is a bit misleading, though. The ArthroCare exec, John Raffle, “hid” unsold inventory at a distributor while the company claimed credit for revenues and shipments in order to meet or exceed quarterly revenue and earnings targets. This was a not uncommon practice in the ’80s and ’90s and a number of medical device executives got into similar legal trouble back then. The $400 million is the amount that ArthroCare’s stock dropped in total market capitalization once the news broke. Looks like the ex-CEO and ex-CFO were in on the scam as well as they were recently indicted.

They almost got away with it.The execs acquired the distributor to hide their nefarious deeds but a subsequent internal audit revealed abnormalities and the auditors blew the whistle.

The market is a cruel and unforgiving mistress…

Raffle faces a maximum prison time of five years for his guilty plea.

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