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.”
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 separate criminal indictments filed last year against three former executives — fired President Jerry Ruzicka, Chief Financial Officer Scott Nelson and human resources executive Larry Miller — the government said that the restricted stock transaction was conducted without the knowledge or permission of Starkey’s majority owner, Bill Austin.
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.
The allegations against Longtain are the latest legal troubles for several former high-ranking executives at Starkey, one of the biggest players in the hearing aid industry.
The normally quiet Eden Prairie-based company abruptly fired Ruzicka, Nelson, Miller and several other employees in fall 2015.
In September 2016, Ruzicka, Miller and Nelson were indicted on fraud, embezzlement and money laundering charges along with two Starkey associates for their alleged role in the restricted stock scheme, improper bonuses, fake commissions or other illegal business dealings.
All the defendants have pleaded not guilty.
Last month, authorities added felony tax evasion to charges against Ruzicka and Nelson.
Several civil cases accusing Starkey of wrongful termination also have been working their way through the courts.
Star Tribune staff writer Tom Meersman contributed to this article.