Former Starkey President Ruzicka sentenced to 7 years in prison

Fired Starkey President Jerry Ruzicka was sentenced Wednesday to seven years in prison for embezzling more than $18.9 million from Starkey Laboratories.

"I think in many respects you are a good person," U.S. District Judge John Tunheim said as Ruzicka stood in a Minneapolis federal courtroom on Wednesday. "You helped a lot of people, and in many ways you are responsible for Starkey's success over the years because of your leadership. But obviously things went too far, and we have to respect the jury's decision."

Tunheim said the sentence, which also includes a year of probation and fines and restitution, "was sufficient, but not more than what is necessary."

The sentence was considerably less than the 15 to 20 years sought by prosecutors, who said on Wednesday that Ruzicka, 62, had not shown remorse for his crimes against the Eden Prairie-based company, which is the largest hearing aid manufacturer in the country.

Ruzicka's attorney said he was thankful the judge opted for the lesser sentence, but added he will seek an appeal.

"The jury rejected the vast majority of the accusations in this case," said John Conard. Several requests by Conard for a new trial have been denied.

Ruzicka — who worked at Starkey for 38 years and was president from 1998 until he was fired in 2015 — was stoic throughout the court proceedings as his wife and adult children looked on. When asked by the judge whether he had anything to say to the court, Ruzicka said no.

Ruzicka's attorney told the court that dozens of friends, mentees and business associates had filed letters with the court asking for leniency with regard to the sentencing.

Ruzicka is to report to prison March 11.

Wednesday's sentencing hearing — the first of four expected in this criminal case — begins the final chapter of a saga that has been three years in the making.

Ruzicka, who has now sold his Plymouth house, was convicted in March by a federal jury on eight counts of wire, mail and tax fraud.

The charges involved theft of $15.5 million of restricted stock from Starkey subsidiary Northland Hearing. The stock had belonged to Starkey owner Bill Austin.

Ruzicka also was convicted of filing a false 2014 tax return; stealing his 2011 company Jaguar; devising $1.9 million in hidden bonuses for himself and others; and creating sham companies to collect hundreds of thousands of dollars in fake commissions, fees or discounts from Starkey and its supplier, Sonion.

Tunheim said Wednesday that he reduced the fraud losses associated with one of the sham company allegations from $7 million to $60,000. That decision was made after reviewing the jury's acquittal on a separate conspiracy charge and after reviewing conflicting evidence from the trial, which ran from January to March.

"The evidence goes both ways," Tunheim said. "I simply find it would not be fair given the significant number of acquittals" Ruzicka received on other conspiracy charges associated with that fraud charge.

Even with the adjustment, Ruzicka is still responsible for Starkey and Sonion suffering nearly $19 million in losses, the judge said.

U.S. Attorney Erica MacDonald said in a statement that as president of Starkey, Ruzicka abused the trust of Austin and employees "when he stole millions of dollars through a brash and complex fraud scheme."

The "long and meticulous investigation" involved the U.S. Attorney's Office, the Federal Bureau of Investigation, the Internal Revenue Service and the U.S. Postal Service, she said.

The investigation also led to charges against Ruzicka's business associate, W. Jeff Taylor, president of Sonion at the time. Taylor's sentencing hearing had been scheduled for Wednesday but was moved to Thursday.

Prosecutors have asked Tunheim to send Taylor to prison for seven to nine years. Taylor was convicted in March on three fraud charges associated with the sham commissions and fees.

The sentencing hearings of two co-defendants who pleaded guilty — former Starkey chief financial officer Scott A. Nelson and former Northland Hearing subsidiary president Jeff Longtain — also are scheduled for Thursday.

Both Nelson and Longtain cooperated with federal prosecutors during the trial. They are accused of participating in and profiting from the illegal transfer of Northland Hearing restricted stock from Austin to Ruzicka and themselves.

"With the sentencing [Wednesday] and others to come, we are thankful to be nearing the conclusion of this matter," said Thomas Ting, Starkey's general counsel. "We are continuing to focus on the bright future of our business."

Conard in court Wednesday requested that Ruzicka be assigned to the Federal Prison Camp in Duluth so he could be near family. Tunheim said he was agreeable, either with an assignment to Duluth or as close to there as possible.

Dee DePass • 612-673-7725