Former CEO and Former CFO of ArthroCare Corp. Charged with Allegedly Orchestrating a $400 Million Securities Fraud Scheme

July 17, 2013

The U.S. Department of Justice’s Office of Public Affairs on July 17, 2013 released the following:

“The former chief executive officer and former chief financial officer of ArthroCare Corp., a publicly traded medical device company based in Austin, Texas, were charged for their alleged leading roles in a $400 million scheme to defraud the company’s shareholders and members of the investing public by falsely inflating ArthroCare’s earnings by tens of millions of dollars, announced Acting Assistant Attorney Mythili Raman of the Department of Justice’s Criminal Division and U.S. Attorney Robert Pitman of the Western District of Texas.

A 17-count indictment was unsealed today in the U.S. District Court for the Western District of Texas against Michael Baker, the former chief executive officer and director of ArthroCare, and Michael Gluk, the former chief financial officer of ArthroCare. Both defendants surrendered to authorities this morning.

The indictment, which was returned on July 16, 2013, charges Baker and Gluk with one count of conspiracy to commit wire and securities fraud, 11 counts of wire fraud, and two counts of securities fraud; it charges Baker alone with three counts of false statements. The indictment also seeks forfeiture of assets held by Baker and Gluk.

“Truthful corporate earnings reports are critical to the soundness of our financial system,” said Acting Assistant Attorney General Raman. “Today’s indictment alleges that those at the top of ArthroCare deceived investors and regulators by manipulating the company’s reports to inflate its stock, ultimately causing hundreds of millions in losses in shareholder value. The Criminal Division will continue to aggressively pursue corporate executives who undermine our financial markets for personal gain.”

According to the indictment, from at least December 2005 through December 2008, Baker, Gluk and other senior executives and employees of ArthroCare allegedly falsely inflated ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving several of ArthroCare’s distributors. According to court documents, Baker, Gluk and other ArthroCare employees determined the type and amount of product to be shipped to distributors based on ArthroCare’s need to meet Wall Street analyst forecasts, rather than distributors’ actual orders. Baker, Gluk and others then allegedly caused ArthroCare to “park” millions of dollars worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter. ArthroCare would then report these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

The indictment alleges that ArthroCare’s distributors agreed to accept shipment of millions of dollars of product in exchange for substantial, upfront cash commissions, extended payment terms and the ability to return product, as well as other special conditions, allowing ArthroCare to falsely inflate its revenue by tens of millions of dollars.

Baker, Gluk and others allegedly used DiscoCare, a privately owned Delaware corporation, as one of the distributors to cover shortfalls in ArthroCare’s revenue. According to the indictment, at Baker and Gluk’s direction, ArthroCare shipped product to DiscoCare that far exceeded DiscoCare’s needs.

In addition, Baker, Gluk and others allegedly lied to investors and analysts about ArthroCare’s relationships with its distributors, including its largest distributor, DiscoCare. According to the indictment, Baker and Gluk caused ArthroCare to acquire DiscoCare specifically to conceal from the investing public the nature and financial significance of ArthroCare’s relationship with DiscoCare.

The indictment further alleges that when Baker was deposed by the U.S. Securities and Exchange Commission about the DiscoCare relationship in November 2009, he lied again on multiple occasions.

According to court documents, between December 2005 and December 2008, ArthroCare’s shareholders held more than 25 million shares of ArthroCare stock. On July 21, 2008, after ArthroCare announced publicly that it would be restating its previously reported financial results from the third quarter 2006 through the first quarter 2008 to reflect the results of an internal investigation, the price of ArthroCare shares dropped from $40.03 to $23.21 per share. The drop in ArthroCare’s share price caused an immediate loss in shareholder value of more than $400 million.

If convicted, Baker and Gluk would face a maximum prison sentence of 25 years for the conspiracy charge, 20 years for each count of wire fraud, and 25 years for each securities fraud count. Baker faces five years for each count of false statements.

An indictment is merely a charge, and the defendants are presumed innocent until proven guilty.

This case was investigated by the FBI’s Austin office. The case is being prosecuted by Deputy Chief Benjamin D. Singer and Trial Attorneys Henry P. Van Dyck and William Chang of the Criminal Division’s Fraud Section. The Department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Florida Husband and Wife Indicted by a Federal Grand Jury Alleging Federal Tax Crimes

May 16, 2013

The U.S. Department of Justice Office of Public Affairs on May 16, 2013 released the following:

Doctors Maintained Offshore Bank Accounts at UBS and Other Foreign Banks That Concealed Income and Assets from the IRS

Drs. David Leon Fredrick and Patricia Lynn Hough, of Englewood, Fla., were indicted by a federal grand jury in Fort Myers, Fla., for conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, the Department of Justice and IRS announced today.

According to the indictment, Fredrick and Hough, married doctors, served on the Board of Directors of two Caribbean-based medical schools – one located on Saba, Netherlands Antilles, and one located on Nevis, West Indies. Fredrick had an ownership interest in the medical school on Nevis until 2007, when both medical schools were sold.

The indictment alleges that Fredrick and Hough conspired with each other and with Beda Singenberger, a citizen and resident of Switzerland who is under indictment in the Southern District of New York, and a UBS banker to defraud the IRS. They carried out the conspiracy by creating and using nominee entities and undeclared bank accounts in their names and the names of the nominee entities at UBS and other foreign banks to conceal assets and income from the IRS, including the sale of real estate associated with the medical school on Saba and shares they owned in the medical school on Nevis. The real estate was sold for more than $33 million, all of which was deposited into one of their undeclared accounts in the name of a nominee entity.

It is further alleged in the indictment that Fredrick and Hough used emails, telephone and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. It is alleged that Fredrick and Hough caused funds from the medical schools’ undeclared accounts to be transferred to undeclared accounts in their individual names or in the names of nominee entities. Fredrick and Hough then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina and a condominium in Sarasota, Fla. Fredrick also transferred more than $1 million to his relatives.

Fredrick and Hough were also charged with four counts of filing false tax returns for 2005, 2006, 2007 and 2008. The indictment alleges that Fredrick and Hough filed false tax returns which substantially understated their total income and failed, on Schedule B, Parts I and III, to report that they had an interest in or signature or other authority over bank, securities or other financial accounts located in foreign countries. U. S. citizens, resident aliens and legal permanent residents of the United States have an obligation to report to the IRS on the Schedule B of a U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained. U. S. citizens and residents also have an obligation to report all income earned from foreign bank accounts on their tax returns.

A trial date has not been scheduled. An indictment is merely an accusation, and every defendant is presumed innocent unless and until proven guilty.

The conspiracy charge carries a maximum potential penalty of five years in prison and a $250,000 fine. The false return charges each carry a maximum potential penalty of three years in prison and a $250,000 fine.

This case is being prosecuted by Trial Attorney Caryn Finley of the Justice Department’s Tax Division and was investigated by IRS – Criminal Investigation.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Seven People Indicted for Alleged Possession of Cocaine with Intent to Distribute

August 9, 2012

The Federal Bureau of Investigation (FBI) on August 9, 2012 released the following:

“MINNEAPOLIS—A federal indictment unsealed yesterday charged seven individuals with one count of conspiracy to possess with intent to distribute cocaine and crack cocaine. Heriberto Sanchez, age 24; Musaaleh Waheed Muhammad, age 35; William Elijah Carter, age 27; Rossco Antonio Ross, age 34; Charles Eric Jackson, Jr., age 44; Gregory Leroy Carter, age 25; and Travis Sentell Peeler, age 32, were charged with possessing five kilograms or more of cocaine and 280 grams or more of crack cocaine with the intent to distribute them. Carter was also charged with one count of carrying a firearm during a drug trafficking crime. The indictment, which was filed on July 23, 2012, was unsealed following the defendants’ initial appearance in federal court.

According to the indictment, the defendants conspired to possess with intent to distribute cocaine and crack cocaine between March 2009 and March 2012. On February 5, 2012, Carter allegedly possessed a Taurus 9mm pistol in furtherance of a drug trafficking crime.

If convicted, each defendant faces a potential penalty of life in prison. Carter also faces a potential penalty of five years in prison if convicted for carrying a firearm in relation to a drug trafficking crime.

This case is the result of an investigation conducted by the Safe Streets Task Force, with assistance from the Wisconsin State Patrol and the United States Bureau of Alcohol, Tobacco, Firearms, and Explosives. Safe Streets is a FBI-sponsored task force that focuses on combating violent street crime as well as gang and drug trafficking offenses. It is being prosecuted by Assistant U.S. Attorney LeeAnn K. Bell.

An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by a defendant. A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Revealed: US plans to charge WikiLeaks founder Julian Assange

February 28, 2012

The Sydney Morning Herald on February 29, 2012 released the following:

“Revealed: US plans to charge Assange

Philip Dorling

UNITED STATES prosecutors have drawn up secret charges against the WikiLeaks founder, Julian Assange, according to a confidential email obtained from the private US intelligence company Stratfor.

In an internal email to Stratfor analysts on January 26 last year, the vice-president of intelligence, Fred Burton, responded to a media report concerning US investigations targeting WikiLeaks with the comment: ”We have a sealed indictment on Assange.”

He underlined the sensitivity of the information – apparently obtained from a US government source – with warnings to ”Pls [please] protect” and ”Not for pub[lication]”.

Mr Burton is well known as an expert on security and counterterrorism with close ties to the US intelligence and law enforcement agencies. He is the former deputy chief of the counter-terrorism division of the US State Department’s diplomatic security service.

Stratfor, whose headquarters are in Austin, Texas, provides intelligence and analysis to corporate and government subscribers.

On Monday, WikiLeaks began releasing more than 5 million Stratfor emails which it said showed ”how a private intelligence agency works, and how they target individuals for their corporate and government clients”.

The Herald has secured access to the emails through an investigative partnership with WikiLeaks.

The news that US prosecutors drew up a secret indictment against Mr Assange more than 12 months ago comes as the Australian awaits a British Supreme Court decision on his appeal against extradition to Sweden to be questioned in relation to sexual assault allegations.

Mr Assange, who has not been charged with any offence in Sweden, fears extradition to Stockholm will open the way for his extradition to the US on possible espionage or conspiracy charges in retaliation for WikiLeaks’s publication of thousands of leaked US classified military and diplomatic reports.

Last week the US Army Private Bradley Manning was committed to face court martial for 22 alleged offences, including ”aiding the enemy” by leaking classified government documents to WikiLeaks.

In December the Herald revealed Australian diplomatic cables, declassified under freedom of information, confirmed WikiLeaks was the target of a US Justice Department investigation ”unprecedented both in its scale and nature” and suggested that media reports that a secret grand jury had been convened in Alexandria, Virginia, were ”likely true”.

The Australian embassy in Washington reported in December 2010 that the Justice Department was pursuing an ”active and vigorous inquiry into whether Julian Assange can be charged under US law, most likely the 1917 Espionage Act”.

In recent answers to written parliamentary questions from the Greens senator Scott Ludlam, the former foreign affairs minister Kevin Rudd indicated Australia had sought confirmation that a secret grand jury inquiry directed against Mr Assange was under way.

Mr Rudd said ”no formal advice” had been received from US authorities but acknowledged the existence of a ”temporary surrender” mechanism that could allow Mr Assange to be extradited from Sweden to the US. He added that Swedish officials had said Mr Assange’s case would be afforded ”due process”.

The US government has repeatedly declined to confirm or deny any reported details of the WikiLeaks inquiry, beyond the fact that an investigation is being pursued.

The Stratfor emails show that the WikiLeaks publication of hundreds of thousands of US diplomatic cables triggered intense discussion within the ”global intelligence” company.

In the emails, an Australian Stratfor ”senior watch officer”, Chris Farnham, advocated revoking Mr Assange’s Australian citizenship, adding: ”I don’t care about the other leaks but the ones he has made that potentially damage Australian interests upset me. If I thought I could switch this dickhead off without getting done I don’t think I’d have too much of a problem.”

But Mr Farnham also referred to a conversation with a close family friend who he said knew one of the Swedish women who had made allegations of sexual assault against Mr Assange, and added: ”There is absolutely nothing behind it other than prosecutors that are looking to make a name for themselves.”

While some Stratfor analysts decried what they saw as Mr Assange’s ”clear anti-Americanism”, others welcomed the leaks and debated WikiLeaks’s longer-term impact on secret diplomacy and intelligence.

Stratfor’s director of analysis, Reva Bhalla, observed: ”WikiLeaks itself may struggle to survive but the idea that’s put out there, that anyone with the bandwidth and servers to support such a system can act as a prime outlet of leaks. [People] are obsessed with this kind of stuff. The idea behind it won’t die.”

Stratfor says it will not comment on the emails obtained by WikiLeaks. The US embassy has also declined to comment.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Drug Trafficking Conspiracy Indictment Expanded

January 27, 2012

The Federal Bureau of Investigation (FBI) on January 26, 2012 released the following:

“ANCHORAGE— United States Attorney Karen L. Loeffler announced today, January 26, 2012, that on January 20, 2012, an Anchorage grand jury expanded a previously charged drug trafficking conspiracy involving Kostas Nikolaos Bairamis, Melissa Dawn Cue, BJ Griffith, William Gilbert, and Justin Clayton Ray Lane to charge three additional defendants: Homer resident Timothy Daniel Cissney, age 33; Christopher Sean Kendrick, age 36, from California; and Aaron O’Kito Dyson, aka “Punchy,” age 37, from Washington. The indictment alleges one count of conspiracy to distribute controlled substances, in violation of 21 U.S.C. §§ 846, 841(a)(1), (b)(1)(C).

According to the indictment presented to the court, defendants conspired to distribute oxycodone and methadone between at least June 17, 2010, and October 5, 2010. Bairamis has been convicted of conspiring to distribute methamphetamine during a different time period and has been sentenced to served 11 years on that separate charge. Both Cue and Griffith have been previously indicted by a grand jury in the District of Nevada. Those charges remain pending.

Assistant United States Attorney Kimberly Sayers-Fay, who presented the case to the grand jury, advised that the maximum penalties for conspiring to distribute oxycodone and methadone are 20 years’ imprisonment, a $1,000,000 fine, three years’ supervised release, and a $100 special assessment.

The Federal Bureau of Investigation and Alaska State Troopers conducted the investigation the led to the indictments in this case.

An indictment is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilty beyond a reasonable doubt.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


U.S. Charges 3 Swiss Bankers

January 4, 2012

The New York Times on January 3, 2012 released the following:

By REUTERS

“United States prosecutors charged three Swiss bankers on Tuesday of conspiring with wealthy American taxpayers to hide more than $1.2 billion in assets from tax authorities.

The office of the Manhattan United States attorney said in a statement that the indictment accused the bankers of trying to “capture business lost by UBS A.G. and another large international Swiss bank in the wake of widespread news reports that the Internal Revenue Service was investigating UBS” in 2008 and 2009.

Neither the international Swiss bank nor the other purported co-conspirators were identified by prosecutors.

The three bankers worked as client advisers at a Zurich bank branch and hid certain Swiss bank accounts and the income they had generated, prosecutors said. They did not identify the bank branch.

The indictment filed in United States District Court in New York identified the three bankers as Michael Berlinka, Urs Frei and Roger Keller. It said they all lived in Switzerland. Their lawyers were not immediately known.

If convicted, the bankers face a maximum prison term of five years under the conspiracy charge.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

————————————————————–

To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.