Former Starkey Executive Pleads Guilty To Tax Evasion

Acting United States Attorney Gregory G. Brooker announced the guilty plea of JEFFREY LEE LONGTAIN, 58, for filing a false tax return. LONGTAIN, who was charged on March 1, 2017, by felony information, pleaded guilty before U.S. District Chief Judge John R. Tunheim in Minneapolis, Minn.

According to the defendant’s guilty plea, from 2006 until his termination in 2015, LONGTAIN was the Chief Operating Officer and President of Northland Hearing Centers, Inc. (“Northland”), a subsidiary of Starkey Laboratories (“Starkey”) that was responsible for acquiring and managing retail hearing aid facilities. During this time, LONGTAIN reported to Starkey’s President, Jerome Ruzicka, and worked closely with Starkey’s Chief Financial Officer, Scott Nelson.

According to the defendant’s guilty plea and documents filed in court, in 2002, Starkey’s principal owner, William Austin, created Northland US, LLC for the purpose of acquiring and operating retail hearing aid establishments. In 2006, without Austin’s knowledge, Ruzicka and Nelson surreptitiously transferred Northland LLC’s assets to a new entity they controlled, Northland Hearing Centers, Inc. They forged Austin’s signature to complete the transfer of assets, later awarded themselves restricted stock, and ultimately paid themselves and LONGTAIN approximately $15 million in exchange for terminating the restricted stock grants.

According to the defendant’s guilty plea and documents filed in court, in 2014, when Ruzicka, Nelson and LONGTAIN realized they had not taken enough money to cover their entire tax obligations, took additional money from the company. LONGTAIN told Nelson that he needed $115,000 to cover his additional tax payments. In reality, LONGTAIN only needed $85,000 but asked for the higher amount so he could keep $30,000 for himself. Nelson and LONGTAIN disguised the $115,000 payment as a loan but, as LONGTAIN knew, the payment was income that should have been reported on his 2014 tax returns.

According to the defendant’s guilty plea and documents filed in court, between 2010 and 2015, LONGTAIN purposely failed to report money that he received from Starkey and Northland, as well as several companies that provided services to Starkey and Northland, as income on his tax returns. For example, Audiometrix, LLC and Socio, LLC, two companies that provided services to Starkey and/or Northland, made payments totaling approximately $182,915 to or on behalf of LONGTAIN. Approximately $77,315 of the total amount was paid directly to LONGTAIN and $105,600 was paid to Oregon Golf Club to offset LONGTAIN’S golf club dues and fees. LONGTAIN knew that receipt of these payments was a conflict of interest given his position at Northland. To avoid paying additional taxes, LONGTAIN purposely concealed the golf club payments from his tax preparer.

This case is the result of an investigation conducted by the FBI, Criminal Investigation Division of the IRS, and the United States Postal Inspection Service.

This case is being prosecuted by Assistant United States Attorneys Lola Velazquez-Aguilu and Benjamin Langner.

Defendant Information:

JEFFREY LEE LONGTAIN, 58

West Linn, Ore.

Convicted:

• Making and Subscribing a False Return, 1 count

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United States Attorney’s Office, District of Minnesota: (612) 664-5600