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Former 5Linx owner sentenced on wire fraud, tax charges

STAFF REPORTS


ROCHESTER -- U.S. Attorney James P. Kennedy, Jr. announced today that Craig Jerabeck, 57, of Rochester, NY, who was convicted of conspiracy to commit wire fraud and filing a false tax return, was sentenced to serve 14 months in prison by U.S. District Judge David G. Larimer. The defendant was also ordered to pay $2,310,510 in restitution to victims and $118,628.00 to the Internal Revenue Service.

Assistant U.S. Attorney Richard A. Resnick, who is handling the prosecution of the case, stated that in 2001, the defendant, along with co-defendants Jeb Tyler and Jason Guck, started 5LINX Enterprise, Inc. (5LINX), a multi-level marketing company headquartered in Rochester. The company offered utility and telecommunications services, health insurance, nutritional supplements, and business services. 5LINX utilized 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 also a Vice President. In June 2006 and July 2006, Jerabeck, Tyler and Guck 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").

Between May 2010 and April 2016, 5LINX sold and distributed products for a Florida vendor. As part of his plea agreement, Jarabeck admitted that he, together with Guck and Tyler, personally, and by companies they owned, received approximately $2,310,510 from a Florida vendor, without the knowledge of the 5LINX’s Investors, Board of Directors, or other stockholders. Jerabeck further admitted that he, Guck, and Tyler were each prohibited from receiving such money by their Stockholders Agreements. 5LINX, its investors, as owners between 2006 and January 2014, and as creditors thereafter, and stockholders, were entitled to and should have received the funds instead of Jerabeck, Guck, and Tyler.

In addition, Jerabeck provided false information on his personal tax returns for the years 2011 through 2013, and 2015. The defendant failed to report income he received from 5LINX, and took deductions to which he was not entitled, that is, commissions that were not paid.  The false returns resulted in a tax loss to the Internal Revenue Service of approximately $118,628.

Judge Larimer also ordered the forfeiture of the defendant’s interest in real property at 90 East Lake Road, in Middlesex, NY.

Jeb Tyler and Jason Guck were previously convicted and are scheduled to be sentenced on December 12, 2018, and December 19, 2018, respectively.