Defendants in $20 million Starkey fraud case finish testimony

The federal $20 million embezzlement trial involving former executives of Starkey Laboratories and their business associates is inching its way to a close, with the jury on Wednesday hearing final defense testimony.

Closing arguments are expected to begin on Friday.

U.S. District Court Judge John Tunheim decided that two statements he highlighted in a Tuesday ruling, in which he found that Starkey owner Bill Austin had perjured himself, would be struck from the official trial record. However, he said he would not instruct the jury about the perjury allegations.

Tunheim made the decision after calling two FBI agents back to the stand to be questioned about their initial testimony in a fraud case against Starkey's former President Jerry Ruzicka, former human resources manager Larry Miller and former business associates Jeff Taylor and Larry T. Hagen. The case accuses the men of embezzling $20 million in stock, bonuses, commissions and rebates from Eden Prairie­-based Starkey, the largest U.S. hearing aid maker, and its key parts supplier, Sonion U.S.

Tunheim's concerns regarding perjury stem from two statements that Austin made on the stand that contradicted FBI evidence. The judge concluded that in one instance, Austin did not perjure himself. Instead, the judge found that FBI special agent Brian Kinney misunderstood Austin in an interview, leading to contradicting testimony during the trial about whether Austin shredded confidential payroll documents.

However, Tunheim reiterated his belief that Austin was untruthful on the witness stand when describing the circumstances surrounding Ruzicka's employment contract and an addendum to that contract. Austin had said Ruzicka discussed with him what would be in the contract, then went back and wrote it up and brought it back for a signature within one day. He said the same thing happened with the addendum.

The FBI, however, had e-mails between attorneys for Starkey that contradict Austin's account.

Defense attorneys had originally brought up the inconsistencies in a motion asking Tunheim to acquit their clients, and they argued the judge should tell the jury about the perjury.

Also Wednesday, Taylor testified for a second day in his own defense. After his testimony, he rested his case. Co-defendant Larry Hagen also rested his case after deciding not to testify.

Under questioning from his attorney, Bill Mauzy, Taylor testified that he did conceal a series of contracts, commissions and profits from Starkey and Sonion. But Taylor, former president of Sonion, said they were concealed for legitimate reasons, not to defraud the two companies.

Taylor said he and Ruzicka formed a 50/50 partnership in a company called Archer Acoustics in order to win new business for both Sonion and Starkey. The plan involved giving discounts that were normally reserved for Starkey's larger customers to new and smaller hearing aid companies in exchange for new contracts.

Taylor told the court that the pricing deal had to be kept secret from other Sonion customers in order to prevent a tsunami of "me too" discount requests. He said routing the transactions through Archer was the easiest way to do that.

But Taylor said the idea of theft was "absolutely not" true.