Recovery sought in multi-million-dollar fraud case
Two homes along Canandaigua Lake – worth more than $1 million each – may be seized by the federal government if defendants in a criminal matter are convicted and cannot replace money they are alleged to have stolen.
The homes belong to co-founders of 5LINX, a Henrietta-based marketing company, who were recently indicted by a federal grand jury. Charged with a single count of conspiracy to commit wire fraud are Craig Jerabeck of Rochester, Jason Guck of Penfield and Jeb Tyler of Victor, who are accused of diverting more than $11 million from investors and their former company into their personal bank accounts between May 2009 and May 2015.
Specifically, Tyler is accused of fraudulently gaining $4 million, while Jerabeck and Guck allegedly gained $3.6 million each.
Included with the indictment, filed June 20 in federal court in Rochester by Assistant U.S. Attorney Craig R. Gestring, is a forfeiture allegation seeking any property gained in respect to the alleged fraud if the men are convicted. If there is not enough in their various investment and bank accounts, federal prosecutors will seek a judgment for money from various accounts and the real property at 4385 County Road 16, Canandaigua (Guck's home), and 90 East Lake Road, Middlesex (Jerabeck's).
The properties, according to realtor.com, have an estimated value of more than $1 million each. The Middlesex property is listed for sale at $1.75 million at realtor.com and zillow.com by Mary Jerabeck, a licensed real estate salesperson with the Pittsford office of RealtyUSA.
5LINX is a multilevel marketing company whose representatives are independent contractors selling and marketing a variety of products and services. Each sales representative increases earnings by recruiting other sales reps, earning from them and their recruits.
Jerabeck, Guck and Tyler are accused of scheming to defraud investors Trillium Lakefront Partners III, and Shalam Investment Co. by falsifying records and taking unauthorized cash payments from 5LINX.
The investors and 5LINX agreed to a purchase deal in June 2006 that included a stockholder's agreement defining certain conditions, rights and obligation. One of the terms limited compensation to the defendants and required approval by the board of directors for any bonus payments, which were tied to performance and financial goals.
Between 2009 and 2015, it is alleged Tyler, Guck and Jerabeck created fake independent contractors as part of their direct sales team, set up independent contractor accounts under multiple company names they controlled individually or together, and used the shell companies to conceal their control of funds.
The defendants allegedly used an Oregon-based global payment company to coordinate payments between 5LINX and the fake contractors and then diverted money into their own personal accounts or onto debit cards, instead of funds going into the company's main account to increase its cash flow, according to the indictment.
The indictment says independent contract and bank accounts included names like IAT, for “it's about time;” GOFY, “go F yourself;” Mirage Development Corp.; and YaYa Holdings Corp.
“The scheme generated multiple financial wire transactions and additional financial electronic transfers between 5LINX and bank accounts and debit cards owned individually and collectively by the defendants,” Gestring says in the indictment. “The scheme caused false financial reports to be routinely generated and disclosed to the investors by the defendants, both individually and collectively by way of wire transmissions such as email, text message and conference calls.”
Gestring says the investors relied on the false financial reports to make major financial decisions over multiple years, including forgiving debt owed by 5LINX, defrauding them of at least $4 million.
If convicted, the U.S. Attorney's Office for the Western District of New York is calling for Tyler, Jerabeck and Guck to forfeit fraudulently obtained sums totaling $11.2 million. If the money is not available, a judgment will be entered against certain accounts and already seized sums, along with the property.
In addition, each defendant faces up to 20 years in federal prison and $250,000 fines.