Risk & Compliance

Former Endocare Execs Indicted

Allegedly ''concocted bogus sales and repeatedly overstated company revenues to analysts, investors, auditors and the Securities and Exchange Commi...
Dave CookApril 10, 2007

A federal grand jury has indicted two former executives of medical-device company Endocare, chairman and CEO Paul W. Mikus and CFO and COO John V. Cracchiolo, for an alleged fraud that cost investors at least $200 million.

According to the U.S. Attorney’s Office for the Central District of California, Mikus and Cracchiolo “concocted bogus sales and repeatedly overstated company revenues to analysts, investors, auditors and the Securities and Exchange Commission.” The SEC filed parallel civil charges against the two men last August.

The 27-count indictment charges them with multiple counts of wire fraud as well as securities fraud, falsely certifying financial reports, providing false statements in SEC filings, and lying to accountants. Mikus and Cracchiolo face a sentence of 430 years in prison and $21.75 million in fines if convicted of all charges. They have agreed to surrender themselves to federal authorities later this month.

Mikus and Cracchiolo inflated revenues through a series of sham transactions, according to prosecutors, and by failing to disclose developments such as the return of customer checks for insufficient funds. They also allegedly overstated Endocare’s past and projected revenue and fraudulently reported to shareholders and analysts the manner in which the company recognized revenue.

The two men resigned from the company in 2003, according to the Los Angeles Times.

A spokesman for Endocare offered no comment; attorneys for Mikus and Cracchiolo could not immediately be reached for comment.