Payroll company ordered to pay up

Nick Rees May 5, 2010, 3:19pm


ROCHESTER, N.Y. (Legal Newsline) - New York Attorney General Andrew Cuomo has obtained a judgment for more than $2.2 million against a payroll company based in Rochester that is alleged to have defrauded hundreds of area businesses.

Paybooks, Inc., and its president Jeffrey Sykes, are alleged to have crafted an elaborate scheme that saw Sykes use money intended for taxes on personal expenses.

Approximately 1,100 small businesses in the greater Rochester, N.Y., area used Paybooks for their payroll services. In its marketing literature, the company assures clients of accurate and timely payrolls for each and every pay period and promises that there will be no missed deadlines or tax penalties.

Several complaints from small business owners were received by Cuomo's office in May 2009 that alleged the company had failed to file federal and state withholdings and unemployment taxes. Some unpaid taxes dated to the third quarter of 2008.

Paybooks, Cuomo said, instead used customer cash for personal expenses rather than processing payrolls and preparing taxes. Hundreds of small businesses were left with tax penalties, fines and records that were in a shambles as a result of the defendants' scheme.

Sykes, in an effort to conceal his scheme and keep his customers, misrepresented to customers the status of tax payments, the cause of late payments and the health of the business, Cuomo said.

Under the court order and judgment, issued in the Supreme Court of Monroe County, Paybooks and Sykes are permanently barred from the payroll business and must set aside $2 million for restitution for eligible consumers. The defendants must also pay a $5,000 civil penalty for each instance of a deceptive acts, totaling $200,000, and $2,000 in costs.

The liquidation of the company's assets is being overseen by a court-appointed receiver, who will also see to the distribution of restitution.

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