Two executives may have to return their bonuses and equity-based
compensation despite having dodged personal securities fraud liability, a
federal judge ruled.
ArthroCare CEO Michael Baker and CFO Michael Gluk presided over the medical device maker and signed the filings that enabled two senior vice presidents to defraud investors of $400 million, according to the Securities and Exchange Commission.
John Raffle and David Applegate, the former vice presidents, were arrested in August and charged with one count of conspiracy to commit wire, mail and securities fraud; four counts of wire fraud; eight counts of mail fraud; and three counts of securities fraud. Though the criminal case remains pending, a civil suit led to agreed judgments for the SEC.
Though the SEC did not charge Baker and Gluk in the ArthroCare securities scam, the commission sued for reimbursement of the cash bonuses, incentives and equity-based compensation that they received.
The Sarbanes-Oxley Act allows the SEC to seek such reimbursement from the corporate officers on behalf of ArthroCare, the commission claims.
U.S. District Judge Sam Sparks refused to dismiss the action against the officers on Tuesday.
"For reasons best known to the SEC, the commission has been historically reluctant to utilize § 304 in the ten years since Sarbanes-Oxley was enacted," Sparks wrote. "However, a sword does not cease to be a sword, even though it may languish in the scabbard, and likewise, federal agencies have discretion in when and how to carry out regulatory enforcement actions."
Read more: http://www.courthousenews.com/2012/11/14/52259.htm
ArthroCare CEO Michael Baker and CFO Michael Gluk presided over the medical device maker and signed the filings that enabled two senior vice presidents to defraud investors of $400 million, according to the Securities and Exchange Commission.
John Raffle and David Applegate, the former vice presidents, were arrested in August and charged with one count of conspiracy to commit wire, mail and securities fraud; four counts of wire fraud; eight counts of mail fraud; and three counts of securities fraud. Though the criminal case remains pending, a civil suit led to agreed judgments for the SEC.
Though the SEC did not charge Baker and Gluk in the ArthroCare securities scam, the commission sued for reimbursement of the cash bonuses, incentives and equity-based compensation that they received.
The Sarbanes-Oxley Act allows the SEC to seek such reimbursement from the corporate officers on behalf of ArthroCare, the commission claims.
U.S. District Judge Sam Sparks refused to dismiss the action against the officers on Tuesday.
"For reasons best known to the SEC, the commission has been historically reluctant to utilize § 304 in the ten years since Sarbanes-Oxley was enacted," Sparks wrote. "However, a sword does not cease to be a sword, even though it may languish in the scabbard, and likewise, federal agencies have discretion in when and how to carry out regulatory enforcement actions."
Read more: http://www.courthousenews.com/2012/11/14/52259.htm
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