Fired Starkey executive Scott Nelson pleads guilty to conspiracy

Starkey Laboratories' fired chief financial officer pleaded guilty Tuesday to a single conspiracy charge as part of a plea agreement reached with the U.S. attorney's office.

Scott Arthur Nelson, who was fired from the Eden Prairie-based hearing aid maker in September 2015 and subsequently accused of self-dealing in a $15 million stock scheme, pleaded guilty to the single conspiracy charge as part of a "felony information," in which he waived his right to a formal indictment and jury trial.

Nelson, 58, had previously pleaded not guilty to various charges involving the fraudulent transfer of restricted stock associated with a Starkey subsidiary called Northland Hearing.

In noting Nelson's plea change Tuesday, Judge John R. Tunheim said that Nelson now faces a possible sentence of up to 60 months in jail, plus the forfeiture of up to $2.53 million in ill-gotten stock sale and insurance proceeds.

Tunheim also noted that as part of his plea agreement, Nelson must cooperate with federal authorities with regard to other co-defendants in the Starkey fraud case, notably former Starkey President Jerry Ruzicka and former Starkey human resources manager Larry Miller.

Nelson's sentencing hearing has been delayed, but is expected to be sometime in the near future.

The criminal trial involving Ruzicka, Miller and former Starkey business associates Larry Hagen and Jeff Taylor, is currently scheduled to begin Jan. 16.

A spokesman for Starkey Laboratories — one of the largest hearing aid manufacturers and distributors in the world — said company officials "will continue to follow the case closely."

Nelson is among six co-defendants who were indicted on or after September 2016 for their alleged role in helping to embezzle more than $20 million in funds from the hearing aid manufacturing firm. To date, Nelson and the former president of the Starkey subsidiary Northland Hearing Center, Jeff Longtain, have pleaded guilty.

In the September 2016 indictment, the U.S. attorney's office accused Nelson and Ruzicka of helping to mastermind a $15 million scheme involving the illegal transfer of restricted stock for Northland. The men are charged with taking elaborate steps to help conceal Northland financial reports, executive compensation and taxes from Starkey's majority owner Bill Austin.

In court Tuesday, Nelson admitted that Austin was not informed about how Northland's restricted stock had been transferred and then sold.

In January, the government additionally indicted Nelson and Ruzicka on charges of tax fraud.

Nelson was separately accused of submitting a false corporate tax return on Starkey's behalf for 2013. That falsified return was allegedly used to help cover up parts of the Northland restricted-stock fraud scheme, the superseding indictment said.

Ruzicka's attorney, John Conard, was in court Tuesday to hear Nelson's guilty plea, but declined to comment about how Nelson's plea deal might affect his client.

Ruzicka is not only accused of orchestrating the $15 million Northland restricted-stock setup but also of creating sham companies and participating in related consulting fee and kickback schemes with Taylor and Hagen that netted hundreds of thousands in illegal proceeds and bonuses.

Ruzicka has denied all charges.

The government is seeking to confiscate all questionable bonuses, consulting fees and restricted-stock proceeds received by all co-defendants in the Starkey case. It has made some headway in two plea deals reached to date.

Nelson agreed to forfeit all of his Northland proceeds that were part of Lincoln National Life Insurance policies or kept in Edward Jones investment accounts.

In April, Longtain pleaded guilty to tax evasion and agreed to forfeit about $2.3 million in fraudulently obtained funds, and to testify against other former Starkey executives who have been indicted on multiple charges, including fraud and tax evasion.

Dee DePass • 612-673-7725