Home
News
CARBONDALE, Colorado — The nonprofit Carbondale Council on Arts and Humanities is on the hook for $12,000 in past due payroll taxes amid a fraud investigation into the private Rochester, N.Y.-based payroll service CCAH has been using for several years.
New York Attorney General Andrew Cuomo filed a lawsuit last month against Paybooks Inc. after an investigation revealed that the company's president, Jeffrey Sykes, allegedly defrauded millions of dollars from his payroll services clients.
The alleged fraud is similar to a Ponzi scheme, such as the one that resulted in the recent conviction of former Wall Street investor Bernard Madoff, according to investigators.
Paybooks' website, www.paybooks.com, automatically links to a message on the New York Office of the Attorney General website detailing the allegations.
Sykes was arrested in late June and is accused of defrauding hundreds of businesses out of more than $2 million, spending money intended for state and federal income tax payments on his own business and personal expenses.
Most of the 1,100 or so business clients Paybooks served are located in the greater Rochester area. A handful, including CCAH, were from out of state.
“We were already set up to have them to do our payroll work when I came here [in April 2005],” CCAH Executive Director Ro Mead said. “We only found out recently that December [2008] was the last time they paid any payroll taxes for us.”
A delinquency notice from the state of Colorado indicating that CCAH's first quarter payroll taxes were past due was soon followed by a delay in CCAH staff receiving their paychecks earlier this month.
That's when Mead said they went to Paybooks' website only to discover the AG's note regarding the investigation.
The AG obtained a court order freezing the assets and records of both Paybooks and Sykes personally, while restitution for the amount defrauded plus $5,000 in penalties is sought for each of the victims.
“In the meantime, we're liable for the taxes that haven't been paid,” Mead said. “It's really, really upsetting. It's costing us $12,000, after they already deducted the $6,000 for the first quarter.”
Mead said CCAH will not cancel any programs as a result of the unanticipated extra expense, and staff will not be affected.
“But it will mean less money for programs,” she said. “We only hope and pray that Mountain Fair is a bang-up success this year.”
The three-day music and arts festival, slated for July 24-26 in Sopris Park, is the single biggest fundraiser for CCAH, bringing in about $65,000 annually.
“We could not survive without Mountain Fair,” Mead said.
The New York AG's Office said it began receiving complaints from Rochester businesses in May regarding Paybooks' failure to file federal and state withholdings and unemployment taxes. Some unpaid taxes dated back to the third quarter of 2008, according to the AG's statement.
“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,” the statement read.
“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.”
Any other consumers or business owners who believe they may have been defrauded by Paybooks is urged to call the AG's regional office at (585) 546-7430.
jstroud@postindependent.com
New York Attorney General Andrew Cuomo filed a lawsuit last month against Paybooks Inc. after an investigation revealed that the company's president, Jeffrey Sykes, allegedly defrauded millions of dollars from his payroll services clients.
The alleged fraud is similar to a Ponzi scheme, such as the one that resulted in the recent conviction of former Wall Street investor Bernard Madoff, according to investigators.
Paybooks' website, www.paybooks.com, automatically links to a message on the New York Office of the Attorney General website detailing the allegations.
Sykes was arrested in late June and is accused of defrauding hundreds of businesses out of more than $2 million, spending money intended for state and federal income tax payments on his own business and personal expenses.
Most of the 1,100 or so business clients Paybooks served are located in the greater Rochester area. A handful, including CCAH, were from out of state.
“We were already set up to have them to do our payroll work when I came here [in April 2005],” CCAH Executive Director Ro Mead said. “We only found out recently that December [2008] was the last time they paid any payroll taxes for us.”
A delinquency notice from the state of Colorado indicating that CCAH's first quarter payroll taxes were past due was soon followed by a delay in CCAH staff receiving their paychecks earlier this month.
That's when Mead said they went to Paybooks' website only to discover the AG's note regarding the investigation.
The AG obtained a court order freezing the assets and records of both Paybooks and Sykes personally, while restitution for the amount defrauded plus $5,000 in penalties is sought for each of the victims.
“In the meantime, we're liable for the taxes that haven't been paid,” Mead said. “It's really, really upsetting. It's costing us $12,000, after they already deducted the $6,000 for the first quarter.”
Mead said CCAH will not cancel any programs as a result of the unanticipated extra expense, and staff will not be affected.
“But it will mean less money for programs,” she said. “We only hope and pray that Mountain Fair is a bang-up success this year.”
The three-day music and arts festival, slated for July 24-26 in Sopris Park, is the single biggest fundraiser for CCAH, bringing in about $65,000 annually.
“We could not survive without Mountain Fair,” Mead said.
The New York AG's Office said it began receiving complaints from Rochester businesses in May regarding Paybooks' failure to file federal and state withholdings and unemployment taxes. Some unpaid taxes dated back to the third quarter of 2008, according to the AG's statement.
“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,” the statement read.
“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.”
Any other consumers or business owners who believe they may have been defrauded by Paybooks is urged to call the AG's regional office at (585) 546-7430.
jstroud@postindependent.com
