Attorney General Andrew M. Cuomo today announced that his office has intervened to stop a Rochester-based payroll company that defrauded hundreds of area businesses out of millions of dollars through an elaborate scheme where the owner kept money intended for taxes, using it instead for business and personal expenses.
As part of the filing of a lawsuit, Cuomo obtained a court order freezing the assets of Paybooks, Inc. and its president, Jeffrey Sykes of Lime Kiln Road in Wayland. The order also appoints a receiver to operate the company and determine customer tax liability. An investigation by the Attorney General found that Sykes used his customers' money for personal and operating expenses when he should have been forwarding to governmental agencies as payroll tax payments. In total, Paybooks currently owes in excess of $2 million in late taxes, plus interest and penalties. The Attorney General's lawsuit against Sykes and Paybooks seeks restitution for customers and penalties to the state, as well as to bar the company from doing business in New York State.
"Paybooks built its business on lies at the expense of hundreds of Rochester area businesses," said Attorney General Andrew Cuomo. "All too often the company used its customers' money as a personal piggybank, scamming businesses out of millions of dollars to bankroll the owners personal expenditures. Today my Office has shut down this illegal operation and is fighting to recover lost money for businesses across the region."
Paybooks, Inc., located at 595 Blossom Road in Rochester, provides payroll services to approximately 1,100 small businesses (with between 6-7 employees) in the greater Rochester area. According to its marketing literature, Paybooks assures "our clients of accurate and timely payrolls each and every pay period…. No more missed deadlines and possible tax penalties." However, the Attorney General's Office received several complaints in May 2009 from business owners regarding Paybooks' failure to file federal and state withholdings and unemployment taxes, with some unpaid taxes dating back to the Third Quarter of 2008.
Cuomo's investigation revealed that Paybooks illegally conducted business under a plan devised by Sykes to pay operating and personal expenses out of the money collected from the customers, and then pay the various taxing entities out of "new money" being withdrawn from the accounts of other customers. Similar to a Ponzi scheme, over time, the "new money" was not sufficient to cover the taxes when they were due, so Sykes intentionally failed to make payments on behalf of hundreds of customers or paid the authorities late, resulting in the assessment of interest and penalties against their customers. In an effort to cover up the scheme and keep his customers, Sykes routinely misrepresented to customers the status of tax payments, the cause of the late payments and the health of the business.
The investigation determined that Paybooks used the customers' money to pay overhead expenses while creating insurmountable debt. Sykes also routinely paid his personal expenses and took large cash withdrawals out of the business accounts that contained money intended to pay customers taxes.
Attorney General Cuomo's lawsuit seeks to permanently bar Paybooks from the payroll business in New York State, obtain full restitution for eligible consumers and a civil penalty of $5,000 for each instance of a deceptive act. The Attorney Generals Office obtained a temporary restraining order freezing Sykes' personal assets and records. The court order also appoints a temporary receiver to oversee the business.
Attorney General Cuomo urges any consumers or business owners who believe they may have been defrauded by Sykes or Paybooks to contact his Rochester Regional Office at 585-546-7430. Cuomo's Office has also set up a Web page dedicated to the Paybooks case: www.oag.state.ny.us/features/paybooks/about.html.
As part of the filing of a lawsuit, Cuomo obtained a court order freezing the assets of Paybooks, Inc. and its president, Jeffrey Sykes of Lime Kiln Road in Wayland. The order also appoints a receiver to operate the company and determine customer tax liability. An investigation by the Attorney General found that Sykes used his customers' money for personal and operating expenses when he should have been forwarding to governmental agencies as payroll tax payments. In total, Paybooks currently owes in excess of $2 million in late taxes, plus interest and penalties. The Attorney General's lawsuit against Sykes and Paybooks seeks restitution for customers and penalties to the state, as well as to bar the company from doing business in New York State.
"Paybooks built its business on lies at the expense of hundreds of Rochester area businesses," said Attorney General Andrew Cuomo. "All too often the company used its customers' money as a personal piggybank, scamming businesses out of millions of dollars to bankroll the owners personal expenditures. Today my Office has shut down this illegal operation and is fighting to recover lost money for businesses across the region."
Paybooks, Inc., located at 595 Blossom Road in Rochester, provides payroll services to approximately 1,100 small businesses (with between 6-7 employees) in the greater Rochester area. According to its marketing literature, Paybooks assures "our clients of accurate and timely payrolls each and every pay period…. No more missed deadlines and possible tax penalties." However, the Attorney General's Office received several complaints in May 2009 from business owners regarding Paybooks' failure to file federal and state withholdings and unemployment taxes, with some unpaid taxes dating back to the Third Quarter of 2008.
Cuomo's investigation revealed that Paybooks illegally conducted business under a plan devised by Sykes to pay operating and personal expenses out of the money collected from the customers, and then pay the various taxing entities out of "new money" being withdrawn from the accounts of other customers. Similar to a Ponzi scheme, over time, the "new money" was not sufficient to cover the taxes when they were due, so Sykes intentionally failed to make payments on behalf of hundreds of customers or paid the authorities late, resulting in the assessment of interest and penalties against their customers. In an effort to cover up the scheme and keep his customers, Sykes routinely misrepresented to customers the status of tax payments, the cause of the late payments and the health of the business.
The investigation determined that Paybooks used the customers' money to pay overhead expenses while creating insurmountable debt. Sykes also routinely paid his personal expenses and took large cash withdrawals out of the business accounts that contained money intended to pay customers taxes.
Attorney General Cuomo's lawsuit seeks to permanently bar Paybooks from the payroll business in New York State, obtain full restitution for eligible consumers and a civil penalty of $5,000 for each instance of a deceptive act. The Attorney Generals Office obtained a temporary restraining order freezing Sykes' personal assets and records. The court order also appoints a temporary receiver to oversee the business.
Attorney General Cuomo urges any consumers or business owners who believe they may have been defrauded by Sykes or Paybooks to contact his Rochester Regional Office at 585-546-7430. Cuomo's Office has also set up a Web page dedicated to the Paybooks case: www.oag.state.ny.us/features/paybooks/about.html.
Comments
Post a Comment