Two former executives from America’s largest hearing aid manufacturer, Starkey Hearing Technologies, are set to go on trial this week in Minneapolis on charges of fraud and embezzlement.
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 billionaire founder and CEO Bill Austin. Ruzicka and Miller filed wrongful termination lawsuits within months of being fired. Those suits were put on hold after the U.S. attorney’s office of Minnesota, where the company is headquartered, indicted the pair along with Nelson and two other former business associates on Sept. 21, 2016. Federal prosecutors allege that, among other charges, Ruzicka “orchestrated a scheme” to steal more than $20 million from Starkey between 2006 and 2015.
Among the litany of charges, Ruzicka has been accused of paying himself, Nelson and the COO of a Starkey subsidiary, Jeffrey Longtain, $15 million in restricted stock from that subsidiary 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, of which Starkey was a customer) have been accused of setting up fake companies to receive consulting fees from Starkey totaling at least $600,000. Ruzicka, Miller, Hagen and Taylor, via their attorneys, denied all charges filed against them. Ruzicka’s attorney, John Conard, stated in an email, “Jerry Ruzicka is absolutely innocent. Starkey was his life’s work. He is proud of the team’s accomplishments during his time there.” Nelson, the former CFO, pleaded guilty on Dec. 19 to one charge of conspiracy, but the other four are set to go to trial in the U.S. district court of Minnesota. Longtain is not a defendant in the upcoming case, but he was charged with tax evasion in March 2017 and pleaded guilty in April.
Ruzicka’s attorney is ready for a fight. He has already countered those charges with others leveled at CEO Austin. His attorney alleges in court filings that Austin told Ruzicka that he was allowed to issue shares to himself, Nelson and another employee named Jeffrey Longtain, that Austin had given Ruzicka permission to sign his name on documents, and that Austin knew about the other three companies Ruzicka was involved in.
“The suggestion by Mr. Ruzicka’s criminal defense lawyer that Bill Austin knew of, or approved, the theft and embezzlement schemes described in the indictment is nonsensical, especially when two individuals accused of conspiring with Mr. Ruzicka have already admitted their guilt,” a spokesman for Starkey stated in an email, referring to Nelson and Longtain. “Our focus, however, remains on the future and the ongoing—and growing—opportunity to serve people around the world. We’re proud of the company Bill Austin and the approximately 5,000 Starkey employees have built over the last five decades.”
Austin, 75, bought Starkey Labs for $13,000 in 1970. It’s annual revenues have grown from $6 million in 1975 to an estimated $650 million today, making it the largest hearing aid manufacturer in the U.S. The company’s hearing aids have been worn by everyone from Ronald Reagan to Pope John Paul II to Warren Buffett. Austin joined the FORBES 400 ranks as a billionaire in 2014; FORBES currently estimates his net worth at $1.6 billion. According to federal prosecutors, Austin stepped back from running Starkey in 2006 to focus on his hearing foundation leaving Ruzicka in charge of the day-to-day operations. (Ruzicka’s attorney disputes this, stating in an email: “Austin manifested complete delegation of his authority long before 2006.”) Starkey now has an estimated 10% market share of global hearing aid sales and is one of the six largest hearing aid manufacturers in world.