Co-founders of Rochester company charged in $4 million fraud scheme
Rochester, N.Y. (WHAM) - Three executives of a Rochester-based marketing company have been charged with wire fraud in a multi-million dollar scheme.
Prosecutors said Craig Jerabeck, 56, of Rochester, Jeb Tyler, 44, of Penfield, and Jason Guck, 42, of Victor were arrested. Each was charged with wire fraud and conspiracy.
The investigation centers around the three defendants, who were co-founders of the company 5Linx. Starting in 2001, Jerabeck served as president and CEO, while Guck and Tyler were vice presidents at the company.
Jerabeck left in 2015; Guck and Tyler were still with the company as of Thursday.
Due to a stockholder's agreement and purchase agreement set up in 2006, compensation for the three defendants was limited, along with any bonus payments. Anything beyond that cap required approval by the Board of Directors.
Starting in 2009, Jerabeck, Tyler, and Guck set up fake shell companies and added them as contractors to be paid through their direct sales team. Those accounts diverted money from 5Linx into their own personal bank accounts or debit cards to circumvent the agreements.
The diverting of funds lasted until at least May 15, 2015.
Jerabeck, Tyler, and Guck withheld the information about the three running the fake shell companies - independently and together - from investors. As a result, inaccurate corporate financial documents were issued which significantly understated the company’s available cash.
Investors used those statements to make decisions about their investments with 5Linx during that time. Prosecutors say as much as $4 million was lost by investors over that time period.
"It's done with people who already trust you, in many cases. Or think that you're a smart business guy. This guy will do well for them." said Alan Ziegler, president of the Rochester Business Ethics Foundation. "But I say to everybody, don't do trust then verify; verify then trust because too many people are skating around the edges."
Jerabeck, Tyler and Guck each face up to 20 years in prison and a fine of $250,000 if convicted.
All three appeared in federal court Thursday morning and were released on conditions.
Jerabeck, Tyler, and Guck are due back in court for a status hearing on May 5 at 9:30 a.m.