Final Witness for Government Takes Stand in Starkey Trial

Final Witness for Government Takes Stand in Starkey Trial Photo: KSTP/Mike Oakes

February 26, 2018 07:11 PM

The government Thursday attempted to draw a paper trail of emails, tax returns, invoices, transfers and other documents to prove its conspiracy case against two former Starkey Hearing Technology executives and two former business associates.

Day 21 of the federal trial in Minneapolis featured the government's final witness, IRS Special Agent Shannon Korpela, who outlined during testimony many of the thousands of documents she looked into as part of her involvement in the investigation of former Starkey president Jerry Ruzicka, former Starkey human resources manager Larry Miller, and former business associates Larry Hagen and Jeffrey Taylor.

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The men are on trial related to allegations they conspired to steal more than $20 million from Starkey and its principal owner, Bill Austin.

Testimony focused in large part on Ruzicka who, the government alleges, established a company called Soundpoint Audiology with Hagen while Ruzicka was president of Starkey.

Soundpoint owned retail stores that sold Starkey hearing products. Through copies of emails authored by Ruzicka, or including him as a recipient, the government attempted to prove Ruzicka concealed his status as a majority shareholder in Soundpoint.

The government alleges Ruzicka helped facilitate four extensions of lines of credit from Starkey to Soundpoint between 2006 and 2009, totaling more than $3.4 million. And that Ruzicka was involved in asking for marketing support and discounted pricing for Soundpoint without disclosing his involvement in the company.

After Soundpoint was sold to Starkey subsidiary Northland Hearing, the government alleges, Ruzicka earned more than $230,000 on the sale, but committed tax fraud on his 2010 return by claiming he earned $100,000 for his stake as shareholder. 

Further, Korpela testified Ruzicka had an obligation to claim nearly $1.7 million in income losses he took during his time at Soundpoint - which she said was a way to reduce his tax liability - as earnings on his 2010 tax return after the sale of the company.

RELATED: Starkey Laboratories Owner Wraps Up Testimony

Ruzicka's attorney, John Conard, argued that debt held by Soundpoint was owned by Soundpoint and not Ruzicka, because a corporation is a person in the eyes of the law. He asked Korpela whether she knew of a personal guarantee signed by Ruzicka that would claim the debt, to which she answered she did not.

The trial resumes Monday, when the defense is expected to begin calling witnesses after cross-examination of Korpela wraps up.

After U.S. District Judge John Tunheim dismissed the jury Thursday, attorneys for the prosecution indicated they would file a motion seeking to limit the testimony of potential defense witnesses over concerns it could become "unfairly prejudicial" if it focused too much on Austin and his stepson, current Starkey president Brandon Sawalich.

RELATED: Trial Underway For 4 Executives Accused of Fraud Against Starkey Laboratories

Prosecutors said they had received an emailed list of from defense counsel of potential witnesses and summaries of what the witnesses would speak to, but that the summaries weren't detailed.

Prosecutors raised concerns defense would follow questioning that would aim to attack Austin's and Sawalich's character, which they say would be in violation of case rule. 

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Michael Oakes

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