United States v. Ruzicka

• Citation: 988 F.3d 997
• Decision Date: 16 February 2021
• Docket Number: No. 19-2122,19-2122
• Parties: UNITED STATES of America Plaintiff - Appellee v. Jerome C. RUZICKA Defendant - Appellant
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

988 F.3d 997

UNITED STATES of America Plaintiff - Appellee

v.Jerome C. RUZICKA Defendant - Appellant

No. 19-2122

United States Court of Appeals, Eighth Circuit.

Submitted: October 23, 2020

Filed: February 16, 2021

Rehearing and Rehearing En Banc Denied March 25, 2021

Craig Raymond Baune, David Genrich, Assistant U.S. Attorneys, U.S. Attorney's Office, District of Minnesota, Minneapolis, MN, for Plaintiff - Appellee.

John Charles Conard, Conard & Nelson, Minneapolis, MN, JaneAnne Murray, Murray Law, LLC, Minneapolis, MN, Jerome C. Ruzicka, Pro Se, Maple Grove, MN, for Defendant - Appellant.

Before SMITH, Chief Judge, LOKEN and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge

A jury found Jerome C. Ruzicka guilty on four counts of mail fraud, three counts of wire fraud, and one count of tax fraud. See 18 U.S.C. §§ 1341, 1343 ; 26 U.S.C. § 7206(1). The district court¹ denied Ruzicka's motions for judgment of acquittal and for a new trial. Ruzicka appeals, raising Napue, Brady , Jencks Act, and sufficiency-of-the-evidence challenges to his convictions and disputing the district court's fraud-loss calculation for purposes of sentencing and restitution. We affirm.

I.

Ruzicka was president of Starkey Laboratories, a corporation that sells hearing aids. In 2006, Ruzicka and fellow Starkey executive Scott Nelson formed Northland Hearing Centers, Inc., to handle Starkey's acquisitions of hearing-aid retail businesses. Starkey received 49 percent ownership of Northland, with the remaining 51 percent divided among Ruzicka, Nelson, and a third Starkey executive named Jeffrey Longtain. Under a "Restricted Stock Agreement," Ruzicka's, Nelson's, and Longtain's stock would not vest until 2016. This date coincided with the termination of Ruzicka's employment agreement with Starkey and with Ruzicka's planned retirement date. If Ruzicka left or was fired by Starkey before 2016, then he would forfeit his share. The same was true of Nelson and Longtain.

The Restricted Stock Agreement was in tension with Northland's "Shareholder Agreement," which provided for a 90 percent equity payout upon an employee's voluntary departure and a 75 percent equity payout upon an employee's involuntary departure. Michael Grimes, the lawyer who drafted both documents, testified at trial that although "experts and lawyers in good faith could disagree about the[ir] interaction," his understanding was that "the restricted stock agreement controls."

In 2013, Ruzicka, Nelson, and Longtain began to cause Starkey, through Northland, to pay them a total of $15,528,724.95 to buy out their stock early and cover their estimated tax liability on the transactions. Nelson was allegedly using the money to finance a condominium to carry on an affair. Although there were tax advantages to recording the transactions on Starkey's books, Nelson added Ruzicka and himself to Northland's payroll for one week so that they could record the transactions on Northland's books instead (Longtain was already on Northland's payroll). This kept the transactions hidden from Starkey's chief executive officer, William Austin. Later, when Austin requested a report related to Northland, Ruzicka instructed Nelson to delete the stock buyouts from the report.

Although Ruzicka, Nelson, and Longtain had arranged for Northland to cover their estimated tax liability for the buyouts, their tax liability turned out to be higher than estimated. So, they caused Starkey to transfer them additional funds to cover the balance, attaching promissory notes to at least some of the transfers so that they could claim that the transfers constituted loans rather than taxable income. Despite the characterization of the transfers as "loans," Longtain testified at trial that his understanding was that he was never "going to have to pay [his loan] back." Ruzicka, Nelson, and Longtain recorded the transfers as life-insurance expenses to prevent them from appearing on Starkey's and Northland's payroll reports.

Separately, Ruzicka embarked on two ventures with Jeff Taylor, vice president of sales at Sonion, a supplier of hearing-aid components. Ruzicka and Taylor co-owned a pair of entities called "Archer Acoustics" and "Archer Consulting." By misrepresenting to Sonion that Archer Acoustics was a Starkey affiliate, Taylor secured a discount from Sonion on hearing-aid components, which Ruzicka and Taylor resold for a profit. Meanwhile, Ruzicka approved payments from Starkey to Archer Consulting for sham services. He and Taylor then distributed the payments to themselves by various means, including by check through the mail.

Following an investigation, Ruzicka was fired in 2015 and indicted in September 2016 along with Nelson, Taylor, and two other defendants (Longtain was charged separately). The details of the indictment, including Nelson's affair, made the news the same month. In March 2017, the Government conducted a reverse proffer² with Nelson during which it referred to his affair while summarizing the evidence against him. Nine months later, Nelson pleaded guilty. It appears that the Government neither disclosed the occurrence of the reverse proffer to Ruzicka nor provided him with a report authored by FBI Agent Brian Kinney that memorialized the meeting but contained no statements made by Nelson. Both Nelson and Agent Kinney testified against Ruzicka at trial.

At trial, the defendants accused the Government of violating Napue v. Illinois , 360 U.S. 264, 79 S.Ct. 1173, 3 L.Ed.2d 1217 (1959), by knowingly submitting perjured testimony to the jury. In a midtrial, written order (" Napue Order"), the district court agreed with the defendants on two of their accusations. The first involved Austin's statement that he did not shred certain documents; the second involved Austin's testimony that he believed that Ruzicka had drafted a certain contract in a single day. The district court found that both statements were false and that the Government should have known they were false because they conflicted with the testimony of other Government witnesses. Ordered by the district court to correct the allegedly false testimony, the Government recalled its other witnesses and had them confirm that Austin's testimony conflicted with theirs. The district court then ordered Austin's statements stricken from the record and concluded that, by correcting the allegedly false testimony, the Government had avoided violating Napue .

After trial, the district court agreed with the defendants regarding a third Napue allegation. The Government had presented evidence that, in 2010, Ruzicka caused Starkey to purchase a company called "SoundPoint Audiology," in which Ruzicka possessed a 27 percent ownership stake, for $850,000. Earlier, however, IRS Agent and Government witness Shannon Korpela had claimed that Starkey had paid $850,000 not for SoundPoint in its entirety but only for SoundPoint's accounts receivable. According to the district court, Agent Korpela's testimony on this point was so "blatantly wrong" that the Government should have known it was false. Nonetheless, the district court concluded that the Napue violation was harmless because Agent Korpela's false testimony was not relevant to any count of conviction.

The jury convicted Ruzicka on eight of twenty-five counts, including two counts of mail fraud (Counts 2 and 3) and one count of wire fraud (Count 10) relating to Northland, one count of mail fraud relating to Archer Consulting (Count 4), and two counts of wire fraud relating to Archer Acoustics (Counts 7 and 19). At sentencing, both for the purposes of calculating Ruzicka's offense level under the advisory sentencing guidelines and for the purposes of restitution, the district court treated the entire $15,528,724.95 that Ruzicka, Nelson, and Longtain had caused Starkey to pay them to buy their Northland stock and cover their estimated tax liability as part of Starkey's loss. The district court sentenced Ruzicka to 84 months’ imprisonment, imposed a fine of $10,000, and issued a restitution order that included the $15,528,724.95 that Ruzicka, Nelson, and Longtain received in the Northland stock transactions. The district court denied Ruzicka's motions for a new trial as well as his renewed motion for judgment of acquittal.

Ruzicka appeals. He argues that Napue, Brady , and Jencks Act violations, either individually or cumulatively, entitle him to a new trial; that insufficient evidence in support of Counts 2, 3, 4, 7, 10, and 19 entitles him to acquittal or a new trial on those counts; and that an error in the district court's fraud-loss calculation requires vacatur of his sentence and the district court's restitution order.

II.

We begin with Ruzicka's Napue claims. Under Napue , the "failure of the prosecutor to correct the testimony of [a] witness which he knew to be false," Napue , 360 U.S. at 265, 79 S.Ct. 1173, or "should have known" to be false, United States v. Martin , 59 F.3d 767, 770 (8th Cir. 1995), constitutes a denial of a defendant's constitutional right to due process, see Napue , 360 U.S. at 265, 79 S.Ct. 1173. A Napue violation requires a new trial on any count of conviction on which the violation could "in any reasonable likelihood have affected the judgment of the jury." Id. at 271, 79 S.Ct. 1173. When evaluating a due process claim such as a Napue claim, "we review the district court's findings of fact for clear error, but we review de novo whether those facts establish a due process defect." United States v. Santos-Pulido , 815 F.3d 443, 445 (8th Cir. 2016) (internal quotation marks and brackets omitted).

Ruzicka alleges numerous Napue violations. First, he points to the two statements made by Austin that the district court identified as potential Napue violations in its Napue Order. The district court agreed that these statements were false and that the Government should have known they were false. But it concluded that the Government avoided any constitutional violation by correcting the false testimony.

Even...