Find the Red Queen: COMIDA, 5Linx & Trillium

Following a story broken here by the Water Buffalo Press the Rochester blogs have been abuzz lately with talk of COMIDA's questionable investment in the Henrietta based company 5Linx. The history can be reviewed in the Water Buffalo Press archives, what follows is a summation of information gathered so far by the Press and its sources -

County Executive Maggie Brooks held a press conference last week to announce COMIDA benefits tied to a project involving expansion plans for 5Linx. The press conference, as well as some reporting on the event, was misleading as 5Linx seemed to be the sole beneficiary of the benefits. In actuality the incentives were passed along to LeFrois, the development company building the office park expansion, the second such incentive they have received on the property according to an official with Monroe County.

Unconfirmed reports suggest that 5Linx heads may have felt "pressured' by the owner/developer but these sources wish to remain anonymous and statements were unclear as to the type of pressure applied.

Rochesterturning.com refers to high-ranking 5Linx officials with former government ties, this is likely a reference to William Faucette Jr., former Chief of Staff under Rochester Mayor Bill Johnson and founder of the 5Linx Millionares Club. Faucette is likely the individual who has posted to this blog under the user name positive1. There is no information that suggests Faucette used his ties to improperly influence the funding process, but his ability to set up tours of 5Linx facilities for local bloggers covering the issue raise questions about his relationship with the 5Linx founders and how strictly the company adheres to the restrictions placed on businesses employing the MLM structure.

5Linx received COMIDA incentives in October on the purchase of VoIP equipment, the very same equipment that is billed as their breakthrough in the telecom industry and the same equipment that was likely distributed down through the 5Linx network of independent sales representatives for a profit.

5Linx was also the beneficiary of equity from a branch of the Trillium Group in Pittsford that oversees the investment of funds drawn from the New York State Common Retirement Fund. Funds directed by the office of the Comptroller are reinvested in businesses, these investments range from two to five million dollars. The direction of state funds by a private firm is questionable as there is no way for the taxpayer/voter to hold the decisionmakers responsible, however the practice is common across the state and is the sixth such investment by this branch of Trillium.

The legitimacy of the 5Linx business model is questionable, as is any that employs the MLM structure, but concerns are only multiplied by 5Linx founder Craig Jerabeck's questionable dispute with Verizon that resulted in the downfall of his former company @Wireless and the fact that neither 5Linx nor GlobaLinx is recognized in the membership of the Direct Selling Association whose membership includes companies like Avon and Cutco. Additionally, quotes from Jerabeck regarding the cost of operating a business in New York state and references to North and South Carolina suggest 5Linx was considering relocation; in which case 5Linx likely misrepresented their intentions to secure funding from Trillium, as I would hope Trillium is not in the practice of investing New York state tax dollars in companies who plan to relocate.

While none of these activities or funding initiatives are outside the realm of law the return on the investment for the New York state taxpayer remains to be seen. In all 5Linx has promised to create over 150 jobs in return for the incentives they have received, time will tell if they live up to their end of the deal. The numbers, however, do not illustrate a benefit to our area. Quotes from Maggie Brooks cite the investment of $6 million in the community from the 5Linx expansion, but the combined COMIDA incentives added to the possible $5 million investment by the Trillium Group, drawn from the New York State Retirement Fund, totals over $6 million in funding and tax breaks returned to the company. All this equals a net loss for our community. In the coming days the Water Buffalo Press will attempt to discern what guidlines, if any, exist for the receipt of funding from COMIDA and Trillium. We will also highlight COMIDA funding recipients as many, like LeFrois Inc., have received mulitple grants over the past two years.

The Water Buffalo Press will continue to monitor the project's progress and report as neccesary -