The Securities and Exchange Commission today sued two former executives at an Austin, Texas-based surgical products manufacturer to recover bonus compensation and stock sale profits they received during an accounting fraud at the company.

 According to the SEC’s complaint filed in federal court in Austin, former ArthroCare Corporation CEO Michael A. Baker and former CFO Michael Gluk are not charged with personal misconduct, but they are still required under Section 304 of the Sarbanes-Oxley Act to reimburse ArthroCare for bonuses and stock profits that they received after the company filed fraudulent financial statements during 2006, 2007, and the first quarter of 2008.

"Clawback of incentive compensation and stock sale profits as authorized under the Sarbanes-Oxley Act is yet another reason for CEOs and CFOs to be vigilant in preventing misconduct and requiring that companies comply with financial reporting obligations," said Robert Khuzami, Director of the SEC’s Division of Enforcement.

The SEC brought a settled enforcement action against ArthroCare in February 2011, and in July charged former ArthroCare executives John Raffle and David Applegate with perpetrating a fraudulent scheme to overstate ArthroCare’s revenues and earnings.

Section 304 of the Sarbanes-Oxley Act provides for reimbursement by some senior corporate executives of certain compensation and stock sale profits received while their companies were in material non-compliance with financial reporting requirements due to misconduct. The "clawback" provision can include an individual who has not been personally charged with the underlying misconduct or alleged to have otherwise violated the federal securities laws.