Star-power charity inspires envy, questions

Last week, they met with former President Bill Clinton. Two weeks ago, they filmed a segment for ABC's "Extreme Makeover: Home Edition" and then flew to Mexico to receive the country's top civilian honor for their charitable missions.

Over the summer, they hosted a charity gala that brought a head-turning array of celebrities to RiverCentre in St. Paul, including Clinton, Sharon and Ozzy Osbourne, Muhammad Ali and Steve Martin.

How did a Minnesota hearing-aid entrepreneur and his wife end up flying in these circles?

Such is the star-studded world of Bill and Tani Austin, leaders of the Starkey Hearing Foundation.

Austin, CEO of Eden Prairie-based Starkey Laboratories, has forged a charity unlike any other in Minnesota. His mission: to give children around the world "the gift of hearing." Using Starkey Foundation funds to buy his own company's hearing aids for children and tapping celebrity endorsements, hundreds of volunteers and his significant personal wealth to backfill expenses, Starkey has built a nationally known nonprofit with publicity prowess unparalleled in the state.

This summer's gala alone generated a record $7 million, close to the total of $9 million in revenues the foundation reported for all of 2009.

Yet within Minnesota, the Austins are among the state's least-known philanthropists.

"They [Starkey] are thought of as an enigma," said Rich Cowles, executive director of the Minnesota Charities Review Council. "They swim in different circles."

Local charity watchdogs question some of the Starkey Foundation's practices, which, although legal, are different from most corporate foundations.

Austin, 68, who careens between his CEO role at the nation's largest hearing-aid company and his unabashed promotion of the foundation, says he never set out to create a typical foundation that gives away grants and lets other people do the work. He's a hands-on philanthropist, a nationally recognized audiology expert who personally leads every hearing- aid giveaway and works directly with patients. "I abhor inefficiency," he explains.

"This is something we can give to the world, and that motivates me," Austin says. "This is my art that I can share."

Offbeat philanthropy

Austin had contributed to a 2006 episode featuring deaf parents. ABC staff contacted Austin after deciding to revamp the school for the deaf, he said.

The students, who typically would be sent to Disneyland or another hot spot, instead flew to Starkey Labs for five days of hearing-aid fittings and fun. The foundation picked up the tab.

Young girls were photographed with deaf celebrities such as former Miss America Heather Whitestone McCallum and actress Marlee Matlin. All students and staff were given state-of-the-art hearing aids.

In the midst of it all towered Austin, a serious man with thick white hair wearing a white lab coat. A working-class kid from Oregon who moved to Minnesota after high school, he purchased Starkey Labs in 1970 for about $13,000 and transformed it into a privately held, multinational giant worth an estimated $800 million today, according to the Austins.

From the beginning, Austin said, he helped ordinary people get hearing aids. He was particularly moved by the plight of hearing-impaired children in developing nations who were considered mentally retarded or more. Said Austin: "To live with something that is fixable ... is terrible."

Plastic ear molds for former President Gerald Ford, actor Paul Newman and others are in storage boxes "somewhere," said Austin, joking. "I have a lot of ears."

Many of those famous clients support the foundation, said Tani Austin, who is the foundation's secretary.

Matlin said entertainers give their time and money to the foundation because Austin restored their hearing and because they relate to the foundation's work.

"I'm a fan of the product," she said, relaxing in Tani Austin's office during the "Extreme Makeover" filming.

"But it's part of a package. They give back."

"You have taken someone by the hand, and you can see they can't hear anything," recalled Taylor. "You yell. They can't hear. Then [after fitting them with hearing aids] you say something like 'Mama.' All of a sudden, their eyes just dart to your face. They hear something!"

Where the money goes

Austin describes himself as the foundation's "angel," who delivers financial help when needed.

But tax filings show neither he nor Starkey Labs are the primary funders. Most of the $9 million it reported in 2009 came from that glittering gala and other private donations.

The charity's single biggest expense -- $4.4 million in 2009 and $16.5 million in the past four years -- has been the purchase of Starkey hearing aids and batteries, the IRS forms show. Under most circumstances, such a financial transaction would be barred if it were a private, corporate foundation. But it's legal for a public charity, nonprofit experts say.

Austin's international and U.S. mission trips accounted for the foundation's next biggest expense, costing $3.1 million in 2009 -- but bringing in $1.3 million in donations. Even the mission trips can have celebrity tie-ins. Last year, for example, Austin gave away 100 hearing aids at a California event linked to the Frank Sinatra Starkey Hearing Foundation Celebrity Invitational Golf Tournament.

The final major expense, $1.9 million last year, was for Hear Now, a program that helps low-income U.S. residents get hearing aids. IRS filings show it generated $870,000 in donations.

Grants to celebrities

Only a fraction of the Starkey Foundation's grants directly support the hearing impaired. But it awarded more than $6 million over the past four years to dozens of charities linked to celebrities or their financial backers, IRS records show.

In the past four years, the Elton John Foundation has received nearly $1.2 million. The Federated (Insurance) Foundation in Owatonna received $790,000. Singer Garth Brooks' Teammates for Kids Foundation received $745,000 -- plus another $745,000 in 2005 alone. The Horatio Alger Jr. Foundation received $200,000 in 2008. The Grammy Foundation got $300,000 last year.

Tani Austin said many groups receiving money have helped Starkey's philanthropic efforts. "We help each other," she said. Bill Austin added: "Hearing is one thing. But life has complex issues.... We try to respect good causes that help people in special ways."

It's not uncommon for nonprofits working with celebrities to donate money to the celebrities' charities in lieu of a payment, Cowles said. But the foundation should be "transparent" about where donations go, he said.

"If they say they give the gift of hearing, why are they spending so much of the organization's funds on things that seem to have little to do with their mission?" Cowles asked.

Mary Hartnett, executive director of the Commission of Deaf, DeafBlind and Hard of Hearing Minnesotans, said she's called the foundation several times to ask about grant applications for local hearing charities, but was told it didn't give away grants.

This year, Hartnett decided to try to attend the gala so she could meet the Austins. But when she called the foundation to ask if she could get a discount on the $1,500 gala tickets, the person who answered the phone said no, she said.

Bill Austin, however, said the foundation would consider grant applications from such groups. IRS records show the foundation has given smaller grants to hearing-impaired groups over the years.

Last summer, the association asked the foundation to help sponsor its 125th anniversary celebration, said Lane-Outlaw. It's still awaiting a response, she said.

The Austins' gaze remains mainly fixed beyond U.S. borders, where Austin believes the need for hearing devices is acute. They plan to collaborate with the Clinton Global Initiative to reach even more children. The Austins flew to New York to attend the initiative's annual conference last week.

They've also set a new goal for giving. After donating about 500,000 hearing aids over the past decade, they hope to donate 100,000 hearing aids a year for the next 10 years.

"I could have sold my company and retired a long time ago," Austin said. "But how many cars can I drive, steaks can I eat? This is what gives my life meaning."