Jeffrey Longtain, former COO and president of Starkey Hearing Technologies’ Oregon-based subsidiary Northland Hearing Center, has pleaded guilty to tax evasion, according to US Attorney’s Office-District of Minnesota and a news article in the April 21, 2017 Minneapolis Star-Tribune. Longtain, who was fired from Starkey in September 2015, admitted to not reporting $105,600 in income from 2010-2015. He also admitted to receiving money through the allegedly fraudulent actions of former Starkey President Jerry Ruzicka and former CFO Scott Nelson in what is said to be a complicated scheme involving the transfer of Northland stock, with combined amounts totaling as much as $8.2 million in 2013.
Longtain has reportedly signed a plea agreement that will have him forfeit $2.3 million of Northland stock and pay $697,327 in restitution to Starkey. He faces a maximum of 3 years in jail and up to $100,000 in fines, but is expected to receive leniency for his cooperation with the government and his agreement to testify against other former Starkey executives.
According to an April 20 news release from the US Attorney’s Office, District of Minnesota, Ruzicka and Nelson transferred Northland LLC’s assets to a new entity they controlled, Northland Hearing Centers Inc, without Starkey CEO and Founder Bill Austin’s knowledge. They allegedly 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 Longtain’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, they took additional money from the company. Longtain reportedly told Nelson that he needed $115,000 to cover his additional tax payments, but in reality only needed $85,000, keeping $30,000 for himself. Nelson and Longtain disguised the $115,000 payment as a loan, but as Longtain reportedly knew, the payment was income that should have been reported on his 2014 tax returns.
The court documents also state that Longtain purposely failed to report money he received from Starkey and Northland between 2010 and 2015, as well as several companies that provided services to Starkey and Northland, as taxable income. 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 him and $105,600 was paid to Oregon Golf Club to offset Longtain’s golf club dues and fees. The US Attorney’s Office says Longtain knew that receipt of these payments was a conflict of interest given his position at Northland and avoided paying additional taxes by purposely concealed the golf club payments from his tax preparer.
The case is the result of an investigation conducted by the FBI, Criminal Investigation Division of the IRS, and the US Postal Inspection Service.
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