A
year ago, I was sitting next to my hus-
band, Ken, in a federal courthouse in
Austin, Texas. I was there that day to be
sentenced, along with 3
co-defendants, for my role in a channel-
stuffing scheme that caused ArthroCare to falsely inflate
its revenue by tens of millions of dollars (see "How
Channel-Stuffing Works" on page 28). At the core of the
scheme, ArthroCare "parked" mounds of the company's
devices at key distributors for all 3 of its main business
units to meet Wall Street forecasts. It was an elaborate
ruse: While some of the shipments to these distributors
were legitimate, most were not.
Yet ArthroCare informed investors that it had actually
sold the parked product.
I had pleaded guilty 15 months earlier to one count of
conspiracy to commit securities fraud and one count of
making false statements. My attorney thought a sentence
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A U G U S T 2 0 1 5 | O U T P A T I E N TS U R G E R Y. N E T
Breaking
Bad
The pressure to meet Wall Street expectations blinded
a medical device executive to participate in an elaborate
channel-stuffing scheme to defraud investors. David Applegate,
currently serving a 5-year sentence for accounting fraud at
Taft Correctional Institute in California, comes clean.
David Applegate
