5Linx - Legit or MLM Scam?

5Linx Gets Second Grant From COMIDA

The Democrat & Chronicle reported yesterday that COMIDA (which stands for the County of Monroe Industrial Development Agency and will be the subject of a story to come later here on the Water Buffalo Press) awarded a $600,000 grant to 5Link, a "telecom" provider based in Henrietta. The Henrietta Blog of the D&C praised the company for brining hi-tech jobs to the area, over 130 of them as reported. As I posted on the Henrietta Blog yesterday:

5Linx uses a business strategy called "MLM" or "Multi Level Marketing" to sell their "products;" what this essentially translates to is a Pyramid structure that recruits people to invest in a startup much like Tupperware or Cutco knives. They do not even sell their own products, they resell things like cell phone service and satellite tv. Much like the Fast Ferry founders and Maplestar, they receive millions in government funding and tax breaks under the guise that they will add "hundreds of jobs" only to see the C-level employees pocket the profits and split town. 5Linx currently employs 30 people and we are to believe they will add 130 in the next year through a work at home pyramid structure that forces their "employees" to recruit others? Neither COMIDA, nor Monroe County, nor the D&C, nor this so-called blogger have done their research and that is why our region continues to get swindled by moneymen who make big promises. Ever seen the Simpsons episode where the town decides to buy the monorail? - that's Monroe County and Rochester. Mark it down, 5Linx will never create that many jobs and despite what Maggie Brooks says in her photo "pat myself on the back for doing nothing" op this is not a company our area should brag about.
1/17/2007 4:55 PM

Another blogger, known as alocalbusinessman, posted that he has attempted to contact the HR department of 5Linx only to continually be routed into voicemails. Wouldn't a company poised to take on a massive undertaking such as the hiring of over 130 people at least need an HR department in place to oversee and train the employees?
But let's just say that 5Linx is legit and is as succesful as their C-levels would like us to believe, why then would they be in need of such a sizable grant from the government (the second such grant they have received)? One might answer to pay for the cost of the massive facility they are building in Henrietta, however, the building of the site was announced before the grant was received. By any measure, should our tax dollars be going to businesses so succesful that they expect better than 100% growth in the near future? Certainly a business so succesful would understand if we used 600,000 taxpayer dollars on something like education or our economically depressed City instead of a big fancy call center in a suburb that has no trouble attracting companies.

One of 5Linx claim to fame is the issue of Inc. 500 that names it as one of the fastest growing companies in America (based on projected hires that haven't happened yet), but even the magazine is skeptical about the methods employed by the company:

"What it does - Sells VoIP services and video phones to consumers and businesses through multilevel marketing. Why it's growing - The multilevel marketing model is designed to produce fast revenue growth. It also, of course, produces controversy in many cases. In 5Linx's case, CEO Craig Jerabeck says strong consumer interest in VoIP helps 5Linx sign up the direct sales representatives it needs to recruit."

There merits have come under the pretense of video-phone sales but an exploration of their website reveals that the basis of their business is the resale of cell phones, Dish TV and medical benefits cards. Last time I checked medical benefits didn't fit under the category of 'telecom.'

More to come -