ArthroCare CFO Quits Over Accounting Issues

Medical device maker ArthroCare Corp., which develops, manufactures and markets products based on Coblation technology, said finance chief Michael Gluk resigned after an audit committee found improper accounting transactions, sending its shares crashing 71%, to an all-time low last week.

The Austin, TX-based company expanded the periods covered by its previously announced financial restatements and pulled its estimates on the impact of the restatements. It also withdrew its revenue estimate for the second quarter of this year.

“This is a bit unprecedented. Restating all the numbers and making it go further back in all the businesses is a significant concern,” Canaccord Adams analyst William Plovanic said.

ArthroCare, which had said in July it would restate results for 2006, 2007 and the latest first quarter, added that the review suggests the company had deficiencies in its internal control.

It also pointed to additional items that require the restatement to include years ended Dec. 31, 2000, through 2005, on top of the previously announced periods.

The fact that investors can no longer rely on the financial data of several years, coupled with the sense that they have been misled by the company for so long, has put the credibility of the company on the line, analysts said.

“It’s a black hole right now. Eight years of financials that we have been looking at are useless. So my financial model is useless, and the valuation out there is useless,” BMO Capital Markets analyst Joanne Wuensch said.

The review is not yet complete, according to ArthroCare, but two other officers resigned as a result of the review, it said.

Gluk had joined the company in December 2004 as vice president of finance and administration. He previously served in a number of controllership, treasury, and business-development positions at General Motors.