Starkey Hearing Technologies says company is crime victim, but offers few details

Starkey Hearing Technologies officials said this week that the company is not under investigation by federal officials for criminal wrongdoing but is instead a victim of a possible crime.

The Eden Prairie-based hearing aid maker, which fired several top executives in September, provided no information on what the crime was or who may have committed it. Scott Neilson, Starkey's attorney, did not say if any current employees are being investigated.

"As the alleged victim of criminal activity, Starkey continues to cooperate with federal law enforcement," said Neilson, who is with the law firm Henson & Efron. "The [Department of Justice] has requested that Starkey avoid providing any details about the conduct of certain former executives or the nature of the investigation, because to do so could impede the investigation and interfere with the enforcement of federal criminal law. Starkey is respecting that request."

Few details of the investigation are known. Federal Bureau of Investigation agents, Internal Revenue Service representatives and other law enforcement in November questioned several of the fired employees and raided the home of Jerry Ruzicka, Starkey's fired president. The FBI also took records from the home of Scott Nelson, the fired chief financial officer.

No indictments have been filed to date, and the FBI said it could not comment on ongoing investigations, including who is the target or what the alleged crime is. None of the fired executives have offered any details, either.

Ruzicka's attorney, Marshall Tanick, said his client did nothing wrong and also was awaiting information on what the FBI is investigating. Nelson's attorney did not return calls seeking comment. Attorneys representing other fired Starkey executives said their clients did nothing wrong.

Neilson, the company's attorney, said that in the wake of the firings, the company's operations are "effectively being driven by qualified members of our leadership team." Bill Austin, the company's founder and chairman, has taken back over day-to-day reins, reassuming the role of president.

Lisa Richards, vice president of sales and customer relations, said Thursday in a statement that the investigation and other legal proceedings have had no negative impact on how the company functions.

"Bolstered by strong sales, Q4 is on track to be a record quarter and will contribute to fiscal 2015 as one of our most successful years," Richards said. "We are projecting that revenues and market share will be even better in 2016. Our continued success is a testament to our leadership team and our 4,800 employees."

Starkey would not confirm the number of workers fired. Nor would officials say if more might be fired. But officials said 80 workers have been hired since September.

Michael Useem, a management professor at the University of Pennsylvania's Wharton School, said there are many possibilities for what might have prompted the firings, including personal conflicts.

Another possibility is that Austin "was not part of a unholy conspiracy but learned about it and so has cleaned house," he said. "And in cleaning house, there is an argument that you have to do a wholesale cleaning because you just don't know who has been touched by this [alleged wrongdoing]."

Useem noted that when Tyco International's chief executive and chief financial officer were both sent to prison for raiding the corporate coffers for personal use, new CEO Ed Breen terminated 290 of the top 300 executives.

"As a matter of public record, Breen said he just didn't know how deep the improprieties had run," Useem said. "And he didn't have time to do the forensic investigation required to know [who was good or bad]. In the meantime, he had the attorney general saying, 'You have to clean house or the company will be indicted.' "

Keith Guggenberger, who was fired as senior vice president of operations, has filed an unlawful termination and defamation suit against Starkey. He claims that Austin grew to detest Ruzicka after the fired president refused to promote Austin's stepson, Brandon Sawalich, and then started to plan for a new company. Guggenberger claims neither are reasons to invalidate his contract with the company.

In a hearing on Thursday related to the lawsuit, Guggenberger's attorney, Mark Briol, asked a judge to compel Starkey to enter into discovery anything the company or its employees told federal authorities regarding his client and other fired executives. The judge took the request under advisement.

Dee DePass • 612-673-7725