It’s now up to jurors to decide if two former Starkey executives and two of their business associates embezzled $20 million in stock, bonuses and commissions from the Eden Prairie-based hearing aid maker.
Closing arguments in the complicated trial took all of Friday, with the defense painting Starkey owner Bill Austin as a billionaire egomaniac who spun a tale of woe and convinced prosecutors it was true as a final act of revenge against former company President Jerry Ruzicka, one of the defendants.
Prosecutors said it was the defendants who told the tall tales and conspired behind Austin’s back to steal money from him and the company, which is the largest U.S. maker of hearing aids.
Defendants Ruzicka, former Starkey human resources chief Larry Miller and business associates W. Jeff Taylor and Larry T. Hagen all have different attorneys, who each pleaded his case to jurors. The four defendants have all pleaded not guilty.
The jurors listened intently and took notes throughout the final arguments. After six weeks of complex testimony and the review of hundreds of e-mails and thousands of pages of evidence, the 12 jurors and four alternates will return Monday morning to receive instructions from U.S. District Court Chief Judge John Tunheim and then begin deliberating.
Assistant U.S. Attorney Lola Velazquez-Aguilu told jurors the evidence proved that Ruzicka hid his ownership stake in five businesses and served as “the glue” that led at least five others to defraud Starkey, Austin and/or a hearing aid parts supplier named Sonion U.S.
“The evidence in this case supports a verdict of guilt beyond a reasonable doubt,” Velazquez-Aguilu said.
She said contracts were hidden and backdated, signatures were forged, payroll records deleted and profit-and-loss statements altered — all to profit the four defendants and at least two others who pleaded guilty in the case. Those men, former Starkey finance chief Scott Nelson and former company executive Jeff Longtain, testified on behalf of the prosecution.
Velazquez-Aguilu said e-mails showed that Ruzicka and Taylor, the former president of Sonion U.S., each tried to conceal from co-workers that the two of them owned an interest in companies that Starkey and Sonion did business with.
In some e-mails, Ruzicka and Taylor referred to themselves in the third person using words such as “shareholders” or “vendors” when referring to their companies Archer Acoustics, Archer Consulting, Claris and Soundpoint. The government has charged that Ruzicka, Taylor and Hagen, the Claris president, created the companies to secretly discount contracts and then split the proceeds among themselves. Ruzicka and Taylor, the prosecution said, netted $7.6 million from the contracts and Hagen about $180,000.
The three used some of the proceeds to form an investment company called FBD Investments, which Taylor said on the stand was used to buy an old Rolls-Royce, property in Arizona and investments in other companies.
Velazquez-Aguilu told jurors Friday that Austin was the victim who had been wronged. She said jurors should not be distracted by the defendants trying to pull attention away from their alleged crimes by accusing Austin of being a tax cheat and fostering a culture where sexual harassment was tolerated.
The biggest charge accuses Ruzicka, Nelson and Longtain of secretly transferring a 51 percent stake in Starkey subsidiary Northland Hearing, worth $15 million, from Austin to themselves. The prosecution claims the men in 2013 sold their restricted stock and hid the proceeds from Austin.
Ruzicka’s attorney, John Conard, told jurors that there “was no fraud” and that Austin knew all along about the Archer companies, Claris and Soundpoint and about the transfer and sale of Northland Hearing Center stock. The information was clearly posted in Starkey’s tax filings, reports from independent auditors and reports filed with the commerce departments in 42 states, he said. Ruzicka “documented every single penny and recorded it” in multiple places, Conard told the jury.
In several reports, he said, Ruzicka even documented his own phone number and home address, making it clear there was no intent to deceive.
Prosecutors had a different take. They told jurors that Ruzicka had Nelson change financial records so he could receive a bonus in excess of $200,000 one year.
Other fraudulent bonuses, Velazquez-Aguilu said, included $88,000 Miller arranged to pay himself and then deleted from annual payroll reports given to Austin.
The defense contends that Austin knew or should have known about them.
Miller’s attorney, Paul Engh, said the $88,000 bonus in question and a $310,000 pension promise were part of Miller’s employment contract and legal. Further, the payments were to reward Miller for his work arranging financial settlements with female employees who were sexually harassed by Austin’s stepson and current Starkey President Brandon Sawalich.
Austin has denied the allegations against him and his stepson. However, defense attorneys pointed out that several statements Austin made on the stand were contradicted by FBI agents and other prosecution witnesses.
Tunheim struck two of the discrepancies from the court record this week. He said in a ruling that Austin had perjured himself in one of the instances, but decided not to include the perjury charge in jury instructions.
Hagen’s attorney, Kevin Short, said prosecutors should never have believed Austin’s claim that he is a victim of fraud.
“What in the world was this government thinking to pretend that this man is not a liar? It makes the guys who were selling the emperor new clothes look honest,” Short told jurors in his closing argument. “The crafty Mr. Austin … is a despicable man.”