BREAKING: Starkey Probe That Resulted in Execs Embezzlement Indictments Originated With Betrayal

BREAKING: Starkey Probe That Resulted in Execs Embezzlement Indictments Originated With Betrayal

The picture from the Starkey swamp is becoming somewhat clearer now that the 29 search warrants against the fired executives have been unsealed, as the story of clashing egos is unfolding. However, we need help with one key piece of the puzzle, as we’ll explain shortly.

Bill Clinton and Bill Austin fit a patient with hearing aids at a mission in Zambia in August 2013. Photo: Starkey Hearing Foundation

From the Minneapolis Star-Tribune:

The scandal that continues to rock Starkey Hearing Technologies started with a small betrayal.

In July 2015, an employee at the nation’s largest hearing aid manufacturer was approached by the outgoing president with a proposal: Come work at his new firm. But instead of joining the still-secret venture, which would compete with Starkey, the employee went to Starkey owner Bill Austin and spilled the beans, according to federal investigative records.

Something smells here, and we at The Hearing Blog need help: Although we find the alleged embezzlement to finance a Starkey competitor by Ruzicka & his cohorts interesting, we believe this is a smokescreen, which is separate from the FBI & IRS money laundering probe involving the Starkey Hearing Foundation. Back in the early September 2015 timeframe we received an anonymous tip, which we reported on September 25th when we received confirmation a week earlier from law enforcement sources — And we note, this was before Austin brought in the FBI in October 2015 to investigate Ruzicka & the others. We wrote at the time:

However, we found it curious Bill Austin also said, “We can’t comment due to an ongoing investigation. There are no issues that affect our company and it’s business as usual.” Now, why would he say that?

The answer appeared in our Inbox via an anonymous proxy to mask the IP address:

I work in [position redacted] for Starkey. I have been with the company for many years [start year redacted]. I would like to keep my information anonymous.

When Bill Austin says there is an investigation, what he is saying is that Starkey and the Starkey Foundation are being investigated by both the FBI and IRS for money laundering, but Bill Austin is making it seem like the fired executives are being investigated which is not the case.

Bill Austin has been doing a lot of dealings with various prominent Foundations in Africa and these large money dealings (in the millions of dollars) have come under the scanner of the IRS and FBI. Bill Austin and his wife Tani Austin are the main subjects of the investigation.

A few months ago, we had to stay back over the weekend and delete thousands of emails from our Exchange servers. We were told this was being done to save costs so we wouldn’t need to buy more servers but it seemed like they were trying to cover up stuff. [Emphasis added: Ed.]

[This person gave a bit too much identifying information so we redacted and lightly edited the original.]
We need your help in connecting the dots:

What we don’t know is exactly when the Starkey e-mail purge occurred: Was it in the same March 2015 time frame when the Clinton home-brew server was uncovered? Along these lines, were the deleted e-mails connected to the Clinton machine?

You can reach me via e-mail here.

Continuing in the Star-Tribune:

That confession kicked off an aggressive internal investigation that allegedly uncovered even greater secrets and ultimately resulted in the firing of company president Jerry Ruzicka, a purge of employees loyal to him and criminal indictments of Ruzicka and two other Starkey executives.

Ruzicka and other defendants have pleaded not guilty to the charges, which include allegations that Ruzicka used his position to embezzle more than $13 million through fraudulent stock transactions, unearned commissions and fake consulting fees. Ruzicka’s attorney, John Conard, questioned the tactics used by Starkey’s investigators and maintains his client acted legally.

The controversy has been a major distraction for Starkey, which is now embroiled in several lawsuits involving former employees who have accused Austin and his stepson, Starkey executive Brandon Sawalich, of improper and illegal business practices. Industry analysts say the investigation and resulting publicity have made the company vulnerable to its competitors, which are trying to boost their market share in the highly competitive business.

“You don’t want to be associated with fraud — even if you’re a victim,” said Minneapolis attorney Chris Madel, a former federal prosecutor.

A Starkey spokesman said Austin felt compelled to act.

“Anyone who thinks the company and Mr. Austin should have ‘kept quiet’ when they uncovered evidence that more than $30 million was stolen obviously does not know all of the facts and does not know Mr. Austin,” said Jon Austin, who is not related to the owner. “If crimes of this nature have been committed, those responsible should be prosecuted, not rewarded with a financial settlement that allows them to go away quietly.”

In the summer of 2015, with his retirement from Starkey just a few months away, Ruzicka was trying to put together a new company called My Hearing Direct.

Though the new business would compete against Starkey, Ruzicka believed he was within his rights to discuss the venture with other Starkey employees because his 10-year employment contract did not bar him from engaging in such activities, court records show.

Austin saw things differently. As soon as he got wind of Ruzicka’s plans, he brought in a team of outside attorneys from Minneapolis firm Henson & Efron to find out if he could shut down the venture and prevent his longtime president from leaving with valued employees.

But the scope of the probe quickly widened. The firm discovered a $15 million stock deal. Federal investigators allege that Ruzicka and two co-workers sold their stake in a Starkey subsidiary back to the company — even though Austin already owned the business.

The discovery was a key turning point, according to one source familiar with the investigation.

“Once we saw that, we decided to start looking into everything,” said the source, who asked not to be identified.

But expanding the probe required more muscle. Henson & Efron decided to bring in WayPoint Inc., a go-to firm in the Twin Cities for companies that suspect employee misconduct. Founded in 2004, WayPoint’s 19-member investigative team includes eight former FBI agents and four former criminal investigators from other federal agencies. The company charges “well over” $100 per hour for its services, according to former FBI agent Dennis Sackreiter, WayPoint’s co-owner.

At any given time, Sackreiter said, his agency had six to eight investigators at Starkey’s headquarters in Eden Prairie, interviewing employees and poring over thousands of internal documents.
By the end of October, WayPoint investigators had uncovered evidence that Ruzicka and other Starkey employees may have committed crimes while working at Starkey, according to federal records. Bill Austin had to decide what to do with the findings.

WayPoint’s recommendation was to turn the case over to federal authorities, and Austin agreed.

Conard, Ruzicka’s criminal lawyer, noted that WayPoint’s investigators were able to use the same tactics they employed while working for the FBI without worrying about protecting people from incriminating themselves or their friends.

“They can destroy recordings and other evidence at any point until the decision to involve the federal government is made,” Conard said.

In an affidavit attached to a search warrant in the Starkey case, FBI agent Brian Kinney repeatedly cited Waypoint’s evidence, noting that he is “familiar with the investigators” and “know them to be credible and reliable.”

The balance of the story is here; and the story on the search warrants is here~

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About the author

Dan Schwartz

Electrical Engineer, via Georgia Tech

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