Former Starkey Exec Longtain Charged With Tax Evasion; Ruzicka Alleges Austin’s Bizarre Behavior

Former Starkey Exec Longtain Charged With Tax Evasion; Ruzicka Alleges Austin’s Bizarre Behavior

Fun Times this week in the Starkey Swamp: New court filings allege Bill Austin told workers that after he shot a deer dead, the animal asked him, “Why did you shoot me?” and asked him not to do it again; and that he told employees that he was visited by angels who “told him what to do with his business dealings.” Those angels, Ruzicka’s filing said, told Austin he would die on Nov. 11, 2011, but later “reappeared in the nick of time and gave him a reprieve.” Also, former Northland Hearing Centers CEO Jeffrey Longtain was charged under an “information” court report (instead of a criminal indictment) with felony tax evasion, signaling that Longtain could be coöperating with authorities and may eventually plead guilty.

Coming Soon to The Hearing Blog: Ortel’s First (and so far only) Lawstriking again.

We have two related stories gurgling to the Eden Prairie swamp surface, so we’ll lead off with the fun one first in the Star-Tribune:

The ousted and indicted former president of Starkey Hearing Technologies is firing back at owner Bill Austin with allegations that Austin committed sophisticated tax fraud and told employees of interactions with angels and a dead deer.

The allegations come in the latest round of filings in the federal criminal case against Jerry Ruzicka, who is charged in connection with a $20 million embezzlement scheme.

Starkey issued a statement calling the latest allegations “scurrilous, unfounded or false.”

The filings also ask for disclosure of all audio and video recordings of certain employee meetings where Austin’s behavior could be in question.

At one meeting, Austin allegedly told workers that after he shot a deer dead, the animal asked him, “Why did you shoot me?” and asked him not to do it again.

Photo credit: Jim Gehrz, Minneapolis Star Tribune

The filings also said Austin told employees that he was visited by angels who “told him what to do with his business dealings.” Those angels, the filing said, told Austin he would die on Nov. 11, 2011, but later “reappeared in the nick of time and gave him a reprieve.”
[:] Ruzicka also alleges in the filing that Austin “begged” him to stay on at Starkey and to take the new role of CEO, with Sawalich as president, instead of leaving the company when his employment contract expired in 2016.

The company, however, has repeatedly said that Austin started investigating Ruzicka’s conduct and that of other employees after he was told Ruzicka was forming a new company that would compete with Starkey.

The filings are the latest chapter in the drama surrounding the once quiet and still well-respected Eden Prairie hearing aid maker. In September 2015, Austin abruptly fired Starkey’s top four executives, two executive secretaries and about 15 managers. Intense finger-pointing followed, with wrongdoing alleged on both ends and wrongful firing and whistle blower lawsuits filed.

A year later, federal authorities charged Ruzicka, two other fired executives and two suppliers with embezzling more than $20 million from Starkey via the use of dummy companies, fraudulently transferred restricted stock plus secret bonuses and insurance policies all allegedly issued without the knowledge of Austin.
[:] Ruzicka’s lawyers allege in the court filings that Austin launched false allegations against Ruzicka to hide his own bad or illegal behavior.

The filings allege that Austin executed a “sophisticated tax fraud” that allowed Austin to have a luxury mansion at his disposal at no personal cost and to receive rent from Starkey on that home. Ruzicka’s defense team is asking that the company be made to release all related tax records. (more)

In a separate action, it appears former Northland Hearing Centers’ CEO Jeffrey Longtain is about to flip for Federal prosecutors:

Another shoe dropped this week in the $15 million Starkey Laboratories embezzlement case, as the U.S. attorney filed a tax evasion charge against another former executive.

The government late Wednesday charged Jeffrey Lee Longtain with one count of filing a false tax return, making him the sixth person charged in the case. The charge was outlined in a felony information court filing that described a series of complicated schemes that allegedly resulted in Longtain receiving Starkey money improperly and then underreporting that income to the IRS from 2010 through 2015.

The criminal charge authorities ultimately leveled against Longtain had to do with a single false tax return Longtain filed for calendar-year 2014, which stated adjusted gross income of $502,576 when it was really $652,826, the court document said.

Attorneys for Longtain could not be reached for comment.

The fact that the government filed the charge under an “information” court report, instead of a criminal indictment, could signal that Longtain is cooperating with authorities and may eventually plead guilty.

“Clearly the nature of the filing is that it’s very likely that there is a plea agreement that is likely to result,” said Ed Magarian, a Minneapolis partner with the law firm Dorsey & Whitney who specializes in white collar criminal defense. He is not involved in the Starkey case. “And usually part of a plea agreement is cooperation with the government.”

Jeffrey Longtain

Photo courtesy LinkedIn

From 2006 until his firing in 2015, Longtain was the chief operating officer and president of a Starkey affiliate called Northland Hearing Centers, based in Oregon. In Wednesday’s filing, the government accused Longtain of receiving but not reporting to the IRS $105,600 between 2010 and 2015 in the form of personal golf membership fees paid by Starkey suppliers Audiometrix LLC and Socio LLC.

“Longtain understood it was a conflict of interest for him to receive the payments, given his position at Northland,” wrote U.S. Attorney Andrew Luger.

The criminal filing also accused Longtain of arranging to receive $115,000 from Starkey to cover tax liabilities associated with what the government said was an early and fraudulent termination of Northland restricted stock worth $15 million.

The 2013 stock transaction ultimately resulted in Longtain and two other executives splitting $8.2 million in cash and arranging to pay the IRS another $7 million for tax liabilities.
[:] In Wednesday’s information document, the government said that Longtain received the $115,000 from Nelson via electronic transfer in March 2014, and that the payment was made to look like it was a loan so that Longtain did not have to report the income to the IRS.

“As Longtain knew, the $115,000 payment that Nelson caused Starkey to make to Longtain was not a real loan, but rather a disguised payment and should have been reported as income on Longtain’s 2014 tax return. The defendant did not inform his tax preparer about this payment and thereby purposely and knowingly concealed income from his tax preparer that should have been reported on his 2014 return,” the court document said. (more)

Bootnotes:

You’ll notice we frequently reference Wall Street financial investigative journalist and retired Newport Value Partners hedge fund manager Charles K Ortel: He is the gentleman who uncovered the GE Financial scandal in 2007 as they were “cooking the books” to the tune of hundreds of billions of dollars, by forensically reconstructing their financial statements, resulting in a $50 million fine in 2010. For the last 2½ years, Chaz has performed a deep dive into the Clinton Foundation public filings, and significantly, Foundation counterparties, of which Starkey Hearing Foundation is one due to their membership since 2011.

Here is Chaz in August 2009 explaining the GE accounting fraud on Bloomberg TV:

▬▬► Confidential tips welcome via e-mail at Dan@Snip.Net, via messaging us on Facebook, or via our friend Kathleen Willey’s Safesite Tip Line for A Scandal A Day, and they will forward it to us.

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About the author

Dan Schwartz

Electrical Engineer, via Georgia Tech

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