ROCHESTER, N.Y. - Acting U.S. Attorney James P. Kennedy, Jr. announced today that a federal grand jury has returned a 37-count superseding indictment charging former 5LINX owners Craig Jerabeck, 56, of Rochester, NY; Jeb Tyler, 44, of Penfield, NY; and Jason Guck, 42, of Victor, NY, with 29 counts of wire fraud and one count of conspiracy to commit wire fraud, each count punishable by up to 20 years in prison and a fine of $250,000. The superseding indictment also contains six counts of money laundering and one count of conspiracy to commit money laundering, each count punishable by up to 10 years in prison and a fine of $250,000.
Assistant U.S. Attorneys Craig R. Gestring and Richard A. Resnick, who are handling the prosecution, stated that according to the superseding indictment and a previously filed indictment, the defendants, in 2001, started 5LINX Enterprise, Inc. (5LINX), a multi-level marketing company headquartered in Rochester. 5LINX offered utility and telecommunications services, health insurance, nutritional supplements, and business services using independent representatives to sell products and services, and to recruit additional representatives. Jerabeck was President and Chief Executive Officer, Guck was Vice President and Secretary, and Tyler was Vice President of 5LINX.
In June 2006 and July 2006, the defendants sold 5LINX stock for $5,500,000 to three investment companies, Trillium Lakefront Partners III, L.P.; Trillium Lakefront Partners III, NY L.P.; and Shalam Investment Co., L.L.C. (collectively known as "the Investors"). From 2009 to 2014, during the time that the Investors owned a substantial stake in 5LINX, the defendants caused 5LINX, without the knowledge or approval of the Investors, fraudulently to pay approximately $13,235,582 to the defendants. Specifically, the defendants created fictitious independent representatives and caused them to be paid more than $11,700,000 by making it appear that the representatives had provided services to 5LINX. The money paid to the fictitious representatives eventually was transferred into the defendants’ bank accounts or onto debit cards for the defendants’ personal use.
Further, the defendants fraudulently caused a vendor, for whom 5LINX was selling and distributing products, to pay the defendants directly approximately $2,300,000 that 5LINX should have received.
The approximately $13,235,582 fraudulently paid to the defendants caused false financial statements and reports regarding the financial condition of 5LINX to be prepared. The Investors relied on those statements and reports when making financial decisions affecting the company. One such decision occurred in January 2014. The Investors agreed to sell their ownership stake in 5LINX back to 5LINX. As part of the sale price, the Investors agreed to receive three promissory notes totaling $10,000,000, rather than requiring the full sale price in cash. If the Investors known about the diverted funds, then they would have sold their ownership stake for more money and taken the full sale price in cash rather than accept promissory notes, which turned out to be worthless.
Prior to receiving the fraudulent obtained funds, the defendants transferred the funds through various fictitious companies and entities in order to conceal their ownership of the funds. The superseding indictment alleges that those transfers constituted money laundering.
The defendants no longer own the company.
The superseding indictment is the culmination of an investigation by Special Agents of the Federal Bureau of Investigations, under the direction of Special Agent-in-Charge Adam S. Cohen.
The fact that a defendant has been charged with a crime is merely an accusation, and the defendants are presumed innocent until and unless proven guilty.
Source: U.S. Department of Justice, Office of the United States Attorneys
