Jerome Ruzicka, 62, was sentenced today in United States
District Court in Minneapolis by Chief Judge John R. Tunheim to 84 months of
federal prison. Ruzicka and co-defendant W. Jeffery Taylor, 57, were convicted
on March 3, 2018, of charges related to stealing more than $15 million from the
Eden Prairie-based Starkey Laboratories, Inc. (Starkey) and its principal owner
William F. Austin, as well as one of Starkey’s suppliers, Sonion. Chief Judge
John R. Tunheim presided over the trial, which lasted nearly eight weeks, in
Minneapolis, Minnesota.
Taylor and defendants, Jeffery Longtain, 59, and Scott A.
Nelson, 60, will be sentenced on December 20, 2018, by Chief Judge John Tunheim
for their roles in the fraud scheme. Longtain pleaded guilty on April 20, 2017,
to a criminal information charging him with one count of making and subscribing
a false return. Nelson pleaded guilty on December 19, 2017, to a criminal
information charging him with one count of conspiracy.
United States Attorney Erica H. MacDonald, announcing the
sentencing, said, “The defendant served as the President of Starkey
Laboratories and had the confidence and trust of the company’s owner and its
employees. Mr. Ruzicka abused that trust when he stole millions of dollars
through a brash and complex fraud scheme. The sentence imposed today marks the
end to a long and meticulous investigation and trial.”
"It is unfortunate that Ruzicka misused his position of
trust over a period of years to steal millions from a company that does so much
to give the gift of hearing to so many people in need," said Special Agent
in Charge Jill Sanborn of the FBI Minneapolis Division. "Corporate fraud
has far-reaching negative effects on so many institutions and individuals and
that's why the FBI continues to work tirelessly with our criminal justice
partners to detect corporate fraud and hold those responsible to account for
their crimes."
“IRS Criminal Investigation, along with the U.S. Attorney’s
Office and other law enforcement agencies, will continue to investigate
individuals who misuse their position of trust and authority within their
corporations. As all financial transactions leave a trail, IRS Criminal
Investigation special agents used their accounting skills and expertise to
analyze the complex financial transactions made by the defendant. The
sentencing of this individual should serve as a deterrent to those who might
contemplate similar fraudulent actions,” stated Special Agent in Charge Gabriel
Grchan of the IRS Criminal Investigation Chicago Field Office.
"Today's sentence illustrates that regardless of your
economic status, financial fraud on any level is still a crime, and criminals
will be held accountable for their actions. Postal Inspectors will continue to
protect the integrity of the U.S. Postal Service and aggressively investigate
those cases where the U.S. Mails are used to defraud individuals and businesses
of money and property," said Lesley Allison, (Acting) Postal Inspector in
Charge for the Twin Cities Field Office, Denver Division.
As proven at trial, between 2006 and September 2015, Ruzicka
and Taylor worked together to embezzle and misappropriate money and business
opportunities belonging to Starkey and Sonion, a major supplier of hearing aid
components to Starkey. The defendants, using their leadership positions,
deployed various tactics to steal from Starkey, including controlling a
complicated web of sham companies and dummy entities, surreptitiously awarding
themselves restricted stock in Starkey’s retail affiliate, and embezzling money
from the company by causing payments to be made by Starkey for the benefit of
the defendants and others.
For example, as proven at trial, Ruzicka and Taylor
controlled a sham entity, Archer Acoustics. Taylor falsely represented to
Sonion this entity was a Starkey affiliate, thereby securing Starkey’s
discounted pricing on hearing-aid components for Archer Acoustics. The defendants
obtained at least $600,000 in profits, commissions, and rebates by fraudulently
leveraging Starkey’s purchasing power for their own benefit.
Another facet of this scheme related to Starkey’s retail
affiliate, Northland Hearing Centers. The purpose of Northland was to acquire
and operate retail hearing aid establishments. In 2013, after awarding
themselves restricted stock in Northland, Ruzicka and Nelson paid themselves
and Longtain approximately $15 million in exchange for terminating the restricted
stock grants.
As proven at trial, in 2014, Ruzicka additionally embezzled
$200,000 from Starkey under the guise of “officer’s insurance.” He used those
funds to pay his state and federal personal income taxes. Ruzicka also stole a
2011 Jaguar automobile that Starkey purchased for Ruzicka’s use at a cost of
$119,188.77. Starkey paid the fees, insurance premiums, and other costs
associated with the automobile. Nevertheless, in July 2015, Ruzicka transferred
ownership of the car from Starkey to himself by signing the title as both
representative of the seller and also as the buyer. He did not pay Starkey for
the vehicle, nor was it reported as a taxable benefit.
When some details of the scheme were discovered in September
2015, Ruzicka was terminated by Starkey.
This case was the result of an investigation conducted by
the FBI, Criminal Investigation Division of the IRS, and the United States
Postal Inspection Service.
Assistant United States Attorneys Benjamin Langner and Surya
Saxena, and former Assistant United States Attorney Lola Velazquez-Aguilu
prosecuted the case.
Defendant Information:
JEROME C. RUZICKA, 61
Plymouth, Minn.
Convicted:
Mail fraud, 4
counts
Wire fraud, 3
counts
Tax fraud, 1 count
Sentenced:
84 months
imprisonment
1 year supervised
release
Court will issue a
restitution order
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