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5Linx founder Craig Jerabeck sentenced to 14 months for fraud, false tax returns

Gary Craig
Democrat and Chronicle
Craig Jerabeck, pictured here, leaving federal court after an earlier hearing.

A federal judge Thursday sentenced 5Linx founder Craig Jerabeck to 14 months in prison, saying that Jerabeck's role in a $2.3 million defrauding of an investor was motivated by greed.

"It's clear as night follows day, Mr. Jerabeck, that you put your interest in money here ahead of your interest in the corporation," U.S. District Judge David Larimer told Jerabeck.

Still, the sentence was significantly shorter than that recommended by federal sentencing guidelines, which are not mandatory for a judge to follow. The guidelines recommended 41 to 51 months.

Larimer noted that Jerabeck, 57, had admitted his crimes in a plea — a plea that likely prompted two other 5Linx founders and co-conspirators, Jeb Tyler and Jason Guck, to also plead guilty. Jerabeck cooperated with authorities after his May plea of guilty.

Tyler and Guck are scheduled to be sentenced later this month.

Larimer also pointed out the financial hit that the three will face. They have admitted to defrauding an investor out of $2.3 million, and must pay that money back. Jerabeck has already forfeited a 6,900-square-foot home on Canandaigua Lake.

Jerabeck and his attorney, James Nobles, had asked for a sentence of probation, but Larimer said that prison time is warranted for the crime and as a message to other white-collar criminals.

"You don't just get a pass," Larimer said. "You don't just give back what was taken."

5Linx, a so-called multi-level marketing company like Mary Kay Cosmetics, was once a financial success in Rochester, and one of the region's fastest-growing companies. Among the products sold through the years were health supplements, Internet-based TV services, and coffee.

From 2006 to 2012 the company's paid workforce, separate from its sales representatives, ballooned from 34 to 270 in Monroe County.

In the mid-2000s 5Linx entered into an investment agreement with two firms that set salaries for the three founders — Jerabeck's would reach $350,000 — but greatly restricted them from access to company revenue beyond the salaries.

However, the three illegally pocketed about $2.3 million from a Florida vendor selling 5Linx products, including identity theft protection. Jerabeck also admitted to filing a false tax return that cost the government about $118,000. He also must repay that money.

In a statement to the judge, Jerabeck admitted that the frenetic growth of the company in its early years, and the money that came with it, may have been more than he could handle.

"Things got out of control, including my moral compass," he said.

Before sentencing, friends and relatives family members of Jerabeck's wrote Larimer, portraying Jerabeck as a man with a strong work ethic who was active in many charities. 

"Those letters represent what I will call the best version of me," Jerabeck said. "Over the last 20 months (since the arrest) I have endeavored to be that person again."

Larimer mentioned civic awards and commendations Jerabeck received through his career.

"All those awards you received over the years must seem pretty hollow now," the judge said,

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