Gary Craig

@gcraig1

One of the pitches 5LINX Enterprises makes to its would-be salespeople is, "Live a better life."

The premise of the promise is this: By becoming a cog in the 5LINX network marketing machine, you can accumulate wealth if you sell products and get many others to sell products.

However, federal authorities allege that the people who were truly building themselves a better life, illegally amassing millions while cheating investors and 5LINX employees, were the original partners in the Rochester-area company.

On Thursday federal prosecutors charged the three former partners in the company — Craig Jerabeck, 56, Jason Guck, 42, and Jeb Tyler, 44 — with illegally diverting more than $4 million of company money into their own pockets. The amount of looted money could be as much as $11 million, FBI Special Agent Kristin Gibson said in an affidavit.

5LINX has built a reputation in the local business community as one of the region's fastest growing companies, but its business model — an Amway-type approach to sales of everything from nutritional supplements to wireless security systems — was far from the traditional local high-tech or manufacturing success story.

Guck and Tyler are still vice-presidents at the company. Jerabeck is no longer with 5LINX.

"Jerabeck, Tyler, and Guck engaged in a scheme to defraud investors by causing millions of dollars to be diverted from 5LINX into their own personal bank accounts or onto their debit cards without the knowledge or approval of the investors," Assistant U.S. Attorney Craig Gestring stated in a news release.

Court papers claim that 5LINX has been financially struggling of late. The Democrat and Chronicle reported in January 2016 on a lawsuit filed by 5LINX against Jerabeck, claiming he had breached a contract by enticing a number of company employees to join him in a new venture.

That lawsuit raised questions about 5LINX's financial well-being. Jerabeck alleged in court papers that Tyler and Guck were inflating the company's success to entice investors.

The two “were attempting to secure additional financing for the company through the provision of a false number … to prospective lenders and investors and pressuring me to participate in their misconduct,” Jerabeck said in an affidavit.

On Thursday morning, the three were arrested at their homes, as revealed by their courtroom attire — a mix of sweatpants, shorts, and sweatshirts. Attorney Matthew Parrinello, who represents Tyler, questioned after court why the FBI didn't allow the three to simply turn themselves in.

The three have known of the investigation for months and have attorneys who have represented them along the way, Parrinello said.

In court, U.S. Magistrate Judge Jonathan Feldman ordered the three to turn in passports and firearms. He set a bond of $100,000 apiece for the three. Feldman noted that each of the three has "substantial assets."

Parrinello said the defense attorneys are awaiting thousands of pages of evidence from prosecutors to better understand the specific criminal allegations. The three had employment contracts that may have allowed them flexibility in how they were compensated, he said.

The affidavit from FBI Special Agent Gibson alleges that the accused:

• Established shell companies to illegally divert company revenues to themselves.

• Funneled bonuses to themselves illegally.

• Covertly received "millions of dollars in additional compensation without the investors knowledge or permission."

The three are scheduled to return to court May 5.

GCRAIG@Gannett.com

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