Update: On Wednesday, according to an article in the March 1 Minneapolis Star Tribune by Dee DePass, Judge Tunheim ruled that Bill Austin had not perjured himself when speaking about the shredding of payroll documents. The judge concluded that there had been a misunderstanding by FBI special agent Brian Kinney about Austin’s statement to the federal prosecutors, and that he would not instruct jurors about the alleged perjury. However, he struck the statements—including those about the creation of Ruzicka’s employment contract—from the trial record.

Starkey Hearing Technologies founder and CEO Bill Austin and the federal prosecutors representing Starkey provided contradictory testimony about whether Austin shredded payroll documents and how former company president Jerry Ruzicka’s work contract was created, according to US District Judge John Tunheim. Tunheim ordered the government prosecution—which is charging Ruzicka and former Starkey human resources manager Larry Miller, former Sonion VP of sales Jeff Taylor, and MicroTech founder Larry Hagen with embezzlement and fraud—to identify all instances in which the prosecution “knows that a government witness perjured himself or herself…[and] strike such statements from the record in front of the jury.” The prosecution asked the judge to reconsider and instead allow the jury to weigh the evidence for themselves, as detailed in an article by Dee DePass in the February 28 Minneapolis Star Tribune.

The defendants have been charged with and have pleaded not guilty to transferring restricted stock, creating sham companies, and collecting over $20 million in fake invoices, bonuses, and commissions in what has been described as a complicated and sophisticated scheme. In turn, the defense has submitted evidence that Austin had been updated on the activities being litigated, and contend that he gave blanket approval for Ruzicka to run the company and even sign Austin’s name on documents—but that he became angry once he suspected Ruzicka was starting up a “hearables” company and recruiting Starkey employees.

In a surprise turn of events on Monday, Ruzicka’s lawyer, John Conard, filed a motion asking Tunheim to dismiss the case because the government had not adequately shown criminal behavior by his client. Lawyers for the three other defendants also joined the motion. On Tuesday, the judge refused the request for dismissal, saying the government had submitted enough evidence to continue the trial.

The perjury allegations centered around discrepancies in testimony by FBI special agent Brian Kinney and Austin. Under oath, Kinney said that Austin had told him payroll documents were reviewed by Austin and then shredded in descending order, from highest to lowest salaries. Ultimately, Kinney used this information to obtain a search warrant. Austin, however, testified in court that he never shredded anything. Austin also testified that Ruzicka’s salary contract was written by Ruzicka during a one-day period, with another day for an addendum that provided Ruzicka with 10% of Starkey’s worth in the event Austin died or sold the company. However, later details made it clear that this account was untrue and could not have been the result of a “mere failure of recall,” according to Tunheim.

In a statement from Starkey spokesperson Jon Austin (no relation to Bill Austin), the company wrote, “Mr Austin was on the witness stand for three days and was asked by about many, many events that occurred over 50 years. He is confident that he testified truthfully at all times and to the best of his ability and we are confident that the jury will determine what the truth is.”

Defense paints unflattering picture of company. Starkey is the world’s only privately held global hearing aid company that has a board of directors consisting of just one person: founder Bill Austin. As such, Starkey was a target for the defense which brought to light several unflattering details about the company, contending that they are integral to the case and the reputability of the prosecution’s witnesses.

A February 22 article by the Star Tribune’s DePass describes testimony last week from Starkey former CFO Scott Nelson, who pleaded guilty to one count of conspiracy to commit fraud and is now cooperating with government prosecutors. Under cross-examination, Nelson told the court that current Starkey president Brandon Sawalich, who is also Austin’s stepson, was viewed as a liability within the company due to his extravagant lifestyle and affairs with Starkey employees, one of which led to a “six-figure” settlement. When asked if Sawalich was viewed within Starkey as a “serial harasser of women employees,” Nelson replied yes, according to the article. Nelson also said Starkey paid for Sawalich’s use of the company jet, many personal purchases, renovations and services at his home, and a lavish 40th birthday party at the Mount Vernon Museum, the historic home of George Washington. Also revealed were $200,000-$250,000 monthly payments ($2-2.5 million annually) to an account called Deering18 which is allegedly controlled by Sawalich.

As noted, Starkey is a privately held company, and the federal prosecutors protested that this information has nothing to do with the case; however, Judge Tunheim had previously ruled that personal information about Austin and Starkey executives was relevant to the trial.

Company spokesperson Jon Austin wrote, “From the beginning of the case, the criminal defendants have made it clear that their strategy is to distract from the fraud and conspiracy charges against them by trying to defame and demean Mr Austin and his family through unfounded and unsubstantiated rumors, half-truths, and outright lies.”

Closing arguments in the trial are expected this week.

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