Federal judge: Starkey owner Bill Austin gave false testimony

A federal judge ruled Tuesday that Starkey Laboratories owner Bill Austin perjured himself at least once in his testimony during a $20 million embezzlement case against two of his former executives and two business associates.

U.S. District Court Judge John Tunheim ruled the government knew that Austin perjured himself, identifying one instance in which either Austin or an FBI agent gave false statements and another in which he said the government should have known Austin was not telling the truth.

"The court, therefore, concludes that the government must identify all instances — including, but not limited to, the two identified by the court — in which it knows that a government witness perjured himself or herself," said Tunheim, chief judge of the U.S. District Court in Minneapolis, in a ruling given to attorneys. "Because only the government knows which statements are false, the government should move to strike such statements from the record in front of the jury."

Prosecutors told Tunheim they respectfully disagreed with his decision and would submit additional case law and arguments to the court asking that he reconsider and allow the jury to determine credibility of the statements.

The false statement allegations were part of a surprise motion filed Monday asking Tunheim to acquit Jerry Ruzicka, former president of Eden Prairie-based Starkey, the largest U.S. hearing aid manufacturer. Ruzicka's attorney, John Conard, said in the motion that the government had not adequately proved its case.

By late Monday evening, the three other defendants had joined Conard's motion.

Ruzicka, Starkey's former human resources chief Larry Miller and business associates W. Jeff Taylor and Larry T. Hagen are accused of funneling money from Starkey through a series of fraudulent stock transfers, bonuses, commissions and other means from 2006 to 2015. The four men have pleaded not guilty.

Tunheim on Tuesday refused to dismiss the case, saying the prosecution had provided enough evidence for the case to move forward.

The prosecution rested its case Monday after a month of witness testimonies and thousands of pages of documents that were entered into evidence. In a surprise move, Ruzicka and Miller abruptly rested their cases Monday as well, without calling any witnesses.

The case continued Tuesday, with Taylor taking the stand in his own defense.

The testimony in question, regarding the perjury allegations against Austin, had to do with whether he truthfully testified that he had not shredded payroll documents and if he had correctly stated the circumstances and timeline regarding Ruzicka's employment contract.

In the first instance, Austin and Federal Bureau of Investigation special agent Brian Kinney gave contradictory statements under oath. Kinney said that during a formal interview with Austin, the Starkey owner said he shredded descending payroll reports — which list employees and their pay, ranked from the highest to lowest salaries — after reviewing them. Kinney had used this information for a search warrant to further investigate the case.

Under questioning from the prosecution, Austin said he "never shredded anything" and did not recall telling Kinney that. Austin also said he always put the documents in the recycling bin, even those containing confidential information.

Tunheim said the prosecution should know that either Kinney or Austin gave a false statement. He added that "whether Austin destroys documents is a contentious factual issue that was explored throughout this case. This statement is directly relevant to that issue."

As far as Ruzicka's contract, Austin testified that Ruzicka discussed his employment contract with Austin, then wrote it up and brought it back for a signature on one given day. Austin said Ruzicka did the same with an addendum wherein Austin agreed to pay Ruzicka 10 percent of Starkey's worth in the event that Austin died or sold the company.

However, during subsequent investigations, FBI special agent Matt Snell said he recovered correspondence between Starkey's corporate counsel and outside counsel that show both that Ruzicka did not draft his own employment contract and that the transaction did not take place in one day's time.

"This is not a mere failure to recall who drafted the amendment to the contract and when," Tunheim said. "Austin testified at length and in great detail about the creation of this amended contract. Documentary evidence — as testified to by Snell — establishes that it is impossible for Austin's story to be true."

Starkey spokesman Jon Austin said: "We respectfully disagree with the court's order. … Mr. Austin was on the witness stand for three days and was asked about many, many events that occurred over 50 years. He is confident that he testified truthfully at all times and to the best of his ability and we are confident that the jury will determine what the truth is."

On Tuesday afternoon, Taylor took the stand and insisted all of his consulting agreements, commissions and other payments from Starkey were legitimate.

Taylor, who was the president of the parts supplier Sonion U.S. until his firing in November 2015, is accused of working with Ruzicka and Hagen to create sham companies that issued more than $7.7 million worth of fraudulent commissions, rebates and discount pricing.

After presenting decades of employment contracts and commission agreements, Taylor told the court that he received commissions from Starkey plus employment perks from Sonion because of the millions in new business he was able to bring to both companies. Sonion began making hearing aid transducers for Starkey in 2006, which helped Starkey lower its prices and created an alternative to a competitor that had previously monopolized the market, he said.

Closing arguments are expected later this week.

Dee DePass • 612-673-7725