Paybooks owner Sykes pleads guilty to tax fraud

Michael Zeigler • Staff writer • June 9, 2010

Payroll company owner Jeffrey A. Sykes admitted today that he committed fraud by failing to forward hundreds of thousands of dollars owed by his clients to state tax authorities.

Sykes, 49, pleaded guilty to second-degree criminal tax fraud and second-degree grand larceny, in exchange for a prison term of no more than three to nine years and restitution of $387,496 to the state Department of Taxation and Finance.
Monroe County Court Judge Frank P. Geraci Jr. promised the sentence after Sykes turned down an earlier offer by the District Attorney’s Office to plead guilty in exchange for a prison term of five to 15 years, the maximum allowed.
Sykes, of Wayland, Steuben County, was sole officer of now-defunct Paybooks Inc. of Rochester (New York), which had 1,100 clients, including nonprofit, charitable and volunteer organizations.
He was arrested in June 2009 after the state Attorney General’s Office alleged that he defrauded customers of more than $2 million by using their money, which was intended to pay taxes, for personal and business expenses.
In a civil proceeding last month, a state Supreme Court justice ordered Sykes and his company to set aside $2 million for restitution to the clients he defrauded, as well as a civil penalty of $200,000 and $2,000 in court costs.
The ruling also permanently banned Sykes and his company from the payroll-processing business.
Sykes faces the possibility of federal charges.
Geraci adjourned his sentencing on the state charges until Aug. 25 to see if the federal charges could be resolved first.
Paybooks was started in 1985 and provided payroll services to small- to mid-sized employers. It handled about $55 million in payrolls annually.
But Sykes told investigators that his business didn’t turn a profit from the beginning because his fees didn’t cover his overhead. He said he borrowed from his clients’ money to cover his costs, but his debt grew to be unmanageable.