response was to circle the wagons. The company's law firm conduct-
ed an internal investigation. Also, during this quarter, NASDAQ
announced it was investigating ArthroCare. Although I did a lot of the
research for the presentation, I wasn't involved in the development of
the presentation or the presentation itself. Apparently it went well,
though, as NASDAQ announced the investigation was closed.
At this point, it looked like things might settle down a bit, but Citron
and thestreet.com kept piling on with additional revelations. While their
reports often contained factual errors, generally they were accurate.
During the second quarter, the company was trying to sell itself and
was in the process of closing a deal. I've been told that in the 11
th
hour, an anonymous party sent a huge package of information to the
headquarters of PwC. My understanding is that this package con-
tained all of the Citron postings along with supporting documentation.
PwC called a halt to the transaction to sell ArthroCare in order to
investigate. We believed that the sender of the package to PwC and
the provider of the information to Citron was an employee of the auto
insurance company that was on the receiving end of the biggest share
of the SpineWand PI settlement cases.
This triggered another investigation, which culminated in a board
meeting. At this meeting, the board decided to issue a press release stat-
ing that it had no confidence in the financial results of the company
from Q4'05 through Q1'08. Senior management, including me, were pres-
ent at this off-site meeting and the decision was disclosed to us. I was in
total shock when I heard it. My initial thought was, "This is all my fault."
I was the one who introduced DiscoCare to the company. I was devas-
tated. That night, my boss and I were sitting together with our respective
spouses/partners, discussing the day's events and I recall Ken saying,
"You guys had better hire attorneys ASAP." Of course, he was absolutely
right.
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