Starkey Laboratories owner Bill Austin was in his element Tuesday.
On the stand for a third day in a federal $20 million fraud case against former company executives and their business associates, he painted himself as someone who morphed from a man of modest means into a billionaire who uses two jets to fly around the world doing work for his Starkey Foundation.
He said he trusted his executive team to run his company — the largest hearing aid manufacturer in the United States — while he helped poor patients overseas and met with U.S. presidents, movie stars and music icons to raise money for the foundation.
He painted a story of a high-drama life — hitting up wealthy friends to raise most of the $1 million in donations given for the foundation as part of a 2011 contest sponsored by President Donald Trump's former "Celebrity Apprentice" television show; a tumultuous relationship with his ex-wife in which he alleged she shot a gun at him; and how his ex-wife won a wrongful termination lawsuit against him and the company in the 1990s. That $62 million judgment shocked him and caused him to borrow money from the late Carl Pohlad.
Austin also testified about a mystical experience in Mexico in which he believes an angel spoke through him. He held the jurors' attention with talk of world travel to provide hearing aids for poor people in China and Africa.
He said he spent most of his time living in hotels around the world rather than his Eden Prairie mansion or the more modest home he claims as his primary residence in Texas.
The defense pushed him on whether he claimed Texas as his official residence to get out of paying Minnesota taxes. Austin said he did not, adding that if Minnesota had a problem with it, the state should be questioning him.
During six hours on the stand and intense questioning from four different defense attorneys, Austin talked more about how he did not always read documents but trusted his executives and counsel to tell him about what they said and then signed the papers.
Austin is CEO and the sole director of Starkey, which is based in Eden Prairie and boasts a roughly $1.7 billion valuation and 4,100 employees.
"I like delegating because I can do much more with a team than I can by myself," he said. "I was pretty trusting. Being wealthy wasn't [a concern] because I didn't think they'd stick their hand in my pocket."
Austin claims the defendants in the case, including former President Jerry Ruzicka, embezzled $20 million from his company through stock sales, bonuses and commissions that were hidden from him and that he did not approve.
The defense argues he indeed saw or should have seen documentation on all the actions.
The defense further argues that Austin gave Ruzicka full authority to run Starkey.
The fraud case stems from an internal Starkey investigation that began in summer 2015, after Austin learned Ruzicka was going to set up his own hearing aid company after his employment contract expired the next year.
The U.S. attorney's office has spent two and a half years compiling a complicated case that alleges Ruzicka and the other defendants tricked Austin or went behind his back to award fraudulent stock deals, bonuses and commissions.
Austin said he had given Ruzicka permission to set salaries and bonuses, but only under a formula he had previously approved. He also told the court that Ruzicka had the authority to approve business deals but had set limits on that authority.
Austin claimed Ruzicka and defendant Larry Miller, former head of human relations at the company, altered papers or hid documents from him regarding the deals in question at the trial.
Ruzicka, Miller and former business associates W. Jeffrey Taylor and Larry T. Hagen, have pleaded not guilty to the federal fraud charges.
Scott Nelson, the former chief financial officer at Starkey, and former subsidiary President Jeffrey Longtain have pleaded guilty to charges in connection with the case.
Austin said that while he enjoyed giving his executives large salaries, what Ruzicka and his team secretly received was excessive and not what he saw on payroll reports.
Key to the federal prosecutors' case is the ownership of and the subsequent stock sale involving Starkey subsidiary Northland Hearing Centers. It also focuses on discounts and commissions given to Archer Acoustics, Archer Consulting and Claris Investments. Those entities are owned by Ruzicka, Taylor and Hagen and were used in deals with the supplier Sonion.
Austin is expected to finish his testimony on Wednesday.
Dee DePass • 612-673-7725
