A former high-ranking employee of the Starkey Hearing Foundation has filed a wrongful termination lawsuit, claiming she was fired after raising questions about the number of devices the organization gives away to charity and other business practices.
Fired Starkey Hearing Foundation worker files whistleblower suit alleging wrongdoing
The suit claims the former high-ranking employee was fired for raising questions about the organization overstating the number of devices it gives away. The foundation denies the allegations.
December 23, 2015 at 6:15PM
Maria Vanessa Boys Smith said she alerted executives at the highest levels of the Starkey Hearing Foundation — including co-founder Tani Austin and President Richard Brown — about improprieties that included exaggerations in the number of free hearing aids given on charity missions, not using the most qualified medical providers and conflicts of interest.
Starkey Hearing Foundation denies the allegations and "will vigorously defend against the lawsuit," said Starkey's Los Angeles-based attorney, Elena R. Baca.
Boys Smith, who filed the whistleblower lawsuit Friday in California, worked for more than two years in a number of director-level positions at the Starkey Hearing Foundation's Los Angeles office, until she was terminated April 10. She also is suing Starkey Laboratories Inc. because her last two positions were funded by the Minnesota hearing aid maker.
The action comes amid continuing turmoil for Starkey. The private company based in Eden Prairie has since September fired at least 20 executives, managers and executive assistants, many of whom have since been questioned by the Federal Bureau of Investigation or the Internal Revenue Service. Few details are known about the nature of the investigation, but Starkey has said the company is the victim of a crime.
Bill Austin founded the company in 1967 and still has a 91 percent stake. Starkey controls about 17 percent of global hearing aid sales. Austin and his wife, Tani, in 1984 launched the nonprofit Starkey Hearing Foundation, which by law is required to operate as a separate entity.
Family members are closely aligned with both the business and foundation, with Tani Austin's sons, Brandon and Steven Sawalich, having served as executives of the foundation. Brandon Sawalich is now a senior vice president of the company.
According to Boys Smith's lawsuit, the Starkey Foundation claimed it had given away an estimated 175,000 hearing aids in 2014. Boys Smith said in the lawsuit it "would be lucky" to have fitted 100,000. The suit called the alleged discrepancy a fraudulent "gross overestimate" that could have jeopardized the foundation's nonprofit status, as well as its partnership with the Clinton Global Initiative. Starkey has pledged to the Clinton initiative that it will give away more than 1 million hearing aids by the end of the decade.
The Starkey Foundation also routinely engaged in conflicts of interest with the private corporation, the lawsuit claims, calling the process for identifying international patients for free care "deeply flawed."
In numerous countries, the foundation relied on Starkey retailers as foundation "partners" to select the patients, the lawsuit said. Many of the retailers would "upsell" patients to newer hearing aid models or sell other products and services to benefit the company, the suit contends.
Such practices between the private corporation and foundation would "regularly cross the line in blurring the operations," the suit alleged, and Boys Smith herself saw her job duties and paycheck move between the foundation and the corporation.
Brown, who also serves as Starkey Foundation's board chairman, was critical of Boys Smith for "stepping out of line" after she told him of discrepancies between the number of hearing aids the foundation claimed on its IRS forms and the donations it reported to the Clinton Global Initiative, the lawsuit said. However, he asked for a full report on the situation.
Brown fired her as director of sustainability a few weeks later, during a regularly scheduled meeting in Minnesota, Boys Smith said in the lawsuit. However, he also said it was not "for performance reasons" and he would offer her a reference.
Starkey Hearing Technologies would not say last week if any current employees are under federal investigation. Since September, the FBI and IRS have searched the homes of Starkey's fired president, Jerry Ruzicka, and its fired chief financial officer, Scott Nelson, and have questioned several other fired employees.
No indictments have been issued, and the FBI will not discuss the ongoing investigation.
One of the fired executives, Keith Guggenberger, former senior vice president of operations, has filed a wrongful termination and defamation lawsuit against the company. In the complaint, he claims that one reason for the executives' firings was Ruzicka's refusal to promote Brandon Sawalich. The lawsuit also maintains that Ruzicka was planning to start a new company.
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