MINNEAPOLIS, MINNESOTA — The trial continues for former executives of Starkey Hearing Technologies on charges of fraud and embezzlement. As HHTM readers will recall, Starkey’s longtime former president Jerry Ruzicka, chief financial officer Scott Nelson and vice president of human resources Larry Miller, were all fired in September 2015 by Starkey’s founder and CEO, Bill Austin.
Federal prosecutors allege that, among other charges, Ruzicka “orchestrated a scheme” to steal more than $20 million from Starkey between 2006 and 2015.
Ruzicka has been accused of paying himself, Nelson and the COO of a Starkey subsidiary, Jeffrey Longtain, $15 million in restricted stock from a subsidiary company without Austin’s approval. Separately Ruzicka and two business associates, Lawrence Hagen (a former Starkey employee) and Jeffrey Taylor (the president of a hearing aid component manufacturer, Sonion) have been accused of setting up fake companies to receive consulting fees from Starkey totaling at least $600,000.
Executives Head to Trial
Ruzicka, Miller, Hagen and Taylor, via their attorneys, have denied all charges filed against them. Nelson, the former CFO, pleaded guilty on Dec. 19 to one charge of conspiracy, with the others heading to trial in the US district court of Minnesota.
Longtain is not a defendant in the current case, but he was charged with tax evasion in March 2017 and pleaded guilty in April.
January 26, 2018: Longtain Takes the Stand
On Friday, January 26, the trial of former Starkey executives focused on the phony commissions received by Jeff Longtain, the one-time president of Starkey’s Northland Hearing Centers subsidiary. Longtain, having already plead guilty to tax evasion with the stock grant fraud, was testifying against former Starkey president Jerry Ruzicka.
The trial is on hiatus next week, due to Super Bowl festivities in Minneapolis. For a full account of Friday’s trial see Dee DePass’s account in the Minneapolis Star Tribune here.
January 24, 2018: Defense Paints a Different Picture of Events
On Tuesday January 24, it was the defense team’s turn to offer a much different version of events in the fraud trial of former Starkey president Jerry Ruzicka and three other fired executives. All four are accused of embezzling $20 million in stock and other bonuses, commissions from Starkey. They have pleaded not guilty in U.S. District Court in Minneapolis.
Prior to Tuesday, the prosecutors have produced hundreds of documents to prove that the defendants made the transactions without Starkey owner Bill Austin’s knowledge and then covered them up. However, on January 24th it was the defense attorneys turn to try and convince the jury that something completely different was happening. Defense attorneys told jurors that the government’s allegations about sham companies, faked commissions and millions in unauthorized bonuses and stock sales were false, because Austin knew and approved all financial transactions or gave Ruzicka permission to act accordingly.
Click here for more details.
January 22, 2018: Altered Reports Center of Monday’s Testimony
The federal case against former Starkey executives took yet another turn on Monday, January 22nd as the prosecutors alleged former president Jerry Ruzicka, former human resources head Larry Miller and business associates W. Jeffrey Taylor and Larry Hagen falsified annual bonuses, restricted stock and a car transfer.
Special Agent Brian Kinney showed jurors loads of e-mails in which the payroll reports ultimately sent to Bill Austin for review were allegedly altered by Ruzicka, Miller or Nelson. The altered reports either reduced or completely eliminated bonuses that were paid to the former executives between 2006 and 2015.
Prosecutors also pointed out to jurors how the bonuses on the reports sent to Austin year after year were dramatically under-reported and misrepresented what was actually on the company’s original payroll reports. The four defendants, who have pleaded not guilty, contend that Austin knew and approved of the financial transactions in question.
For a full recap of Monday’s trials, see the Star Tribune’s coverage.
January 19, 2018: Starkey IT Managers Testify
Robert Duchscher, Starkey’s chief information technology officer, and another Storkey IT manager testified on Thursday, January 18 at trial of former Starkey executives. Both say they received the surprise of their careers’ in 2015 when they were ordered by CEO Bill Austin to search co-workers’ computers. Click here to learn details of the testimony.
January 18, 2018: Contentious Start to Trial of Former Starkey Executives
On Wednesday, January 17, federal prosecutors began by laying the foundation for a case they describe as a “massive and long-running” fraud scheme, aimed at embezzling from the hearing aid manufacturer. Prosecutors argued that Ruzicka, abused his power by stealing from the company and its employees.
Ruzicka’s attorney countered during opening statements, saying that his client did not commit fraud and helped save the company from bankruptcy. After opening statements from the other three defendants’ lawyers, the prosecutors, led by Assistant U.S. Attorney Benjamin Langner, called two Starkey employees to testify. Both explained they had conversations about Ruzicka leaving the company in the summer of 2015. Ruzicka was fired in September of that year by Starkey.
For a full account, see the details here.
Post-publication update: Starkey Hearing Technologies’ former president, Jerry Ruzicka, was found guilty on March 8, 2018 in the $20 million federal fraud trial. In a split decision, W. Jeff Taylor, former president of Sonion was also found guilty in 3 of 16 counts against him, while Larry Miller and Larry Hagen were found not guilty. Read the latest details on the verdict here.
*image courtesy Star Tribune