UPDATE: A Tainted Picture of MSP Provider Compulinx Emerges

One day after the arraignment of its CEO on identity theft and fraud charges, work at MSP firm Compulinx has come to a sudden halt, and Terrence Chalk's claims of a robust business with an international clientele and a growing bottom line are looking more and more like smoke and mirrors.

Former business associates of Chalk say claims that Compulinx had hundreds of customers with data hosted on a massive IT infrastructure of 300 servers and 40 TB of storage in four data centers is nothing more than urban legend.

"[Chalk] got very politically connected, and he made a lot of promises that resulted in an image that he walked on water. But the bottom line is, he had one cabinet in our facility, that was it," says Christopher Furey, CEO of Savvy Networks in Tarrytown, N.Y. "The other three data centers don't exist."

Furey, who served with Chalk on a number of boards, including the Westchester Information Technology Cluster, says his company was forced to discontinue Compulinx collocation services on July 4, 2006, after a series of bounced checks. Furey says Compulinx tried to remove its equipment when outstanding charges could no longer be paid by check or credit card. The matter was ultimately settled for cash, he says.

As for claims that Compulinx employed some 50 people, Furey, who has hired some former workers from his White Plains, N.Y., competitor, calls that claim "patently ridiculous."

"There's about six people left working there [at Compulinx]," Furey says.

While more questions than answers remain about the fate of what may be just the remnants of Compulinx in the wake of the criminal investigation, a picture is emerging of a company that has been in financial trouble for months -- and of a CEO with creative ideas about how to circumvent financing difficulties.

Federal law enforcement officials Tuesday raided the White Plains, N.Y., home of Chalk, Compulinx's CEO, and arrested the well-known Westchester County businessman with charges of stealing the identities of his employees in order to secure fraudulent loans, lines of credit and credit cards. Chalk, 44, was arraigned in federal court Wednesday along with his nephew, Damon T. Chalk, 35, on charges related to submitting some $1 million worth of credit applications using the names and personal information -- names, addresses and social-security numbers -- of Compulinx employees.

Since the arraignment, the Compulinx Web site has gone dark and phones at the White Plains company have gone unanswered. Numerous messages left on the Compulinx Services Center voicemail have not been returned.

The U.S. Attorney's office in White Plains, which is handling the case, has not determined what will happen to Chalk's business assets and would not comment on whether the Chalks had compromised customer data at the same time they are accused of misappropriating employee information, according to Yusill Scribner, spokesperson for the agency. Calls to the FBI field office that handled the investigation were not immediately returned.

The Chalks' own attorney, Mayo Bartlett of White Plains, says he hadn't spoken to his clients about the potential technology fallout for Compulinx's clients, adding that he hopes the Compulinx business could continue uninterrupted. Messages left on Terrence Chalk's voicemail seeking comment on the future of the company were not returned.

NEXT: Stories of Compulinx's "credit problems" emerge.

While the wait for answers for current Compulinx customers continues, a new view of a troubled MSP company has begun to surface. A representative for a major technology distributor who asked not to be identified says it had stopped doing business with Compulinx because of "credit problems."

On the popular Internet complaint site Rip-Off Report.com, a former Compulinx employee posted a detailed message describing how she was hired by the company, but never paid.

"On July 17, 2006, Compulinx hired me as a Business Solution Analyst," wrote the poster, who called herself "Luz" from New York City. "I was notified by the company's payroll secretary that the company hired me on big financial problems status. I was interviewed three times and not a word was said to me about the company having financial problems. This means that the company took part in an employee scam in which I never got paid."

Chalk, himself, responded to the complaint, saying, in part, that the missing paycheck was the result of accounting issues, that a Department of Labor investigation spawned by the matter was found in Compulinx's favor, and that the ex-employee lied on her resume.

"We have been in business for over 16 years and were awarded the [Westchester Business Council] 2006 Hall of Fame Award earlier this year," Chalk wrote. "This is a lifetime achievement award and doesn't go to 'scam artists' or companies with 'financial problems.' I think this employee would have known that if she spent more time striving to take the high road and further her career instead of attempting to reverse 16-plus years of business and community service."

If Chalk's vociferous defense rings a bit hollow in the wake of his arrest, other parts of his business history indicate a man driven to success in the technology industry, even if unorthodox methods were required.

At a CMP XChange conference in St. Louis earlier this year, Chalk sat on a panel to discuss financing solutions in the managed services space. Chalk used the platform to urge VARs to "lean on the credit worthiness of your customers" in the form of leasing to solve any cash-flow problems in the managed services environment. Crafting a financial solution to go with managed services is as important as the technology, he added.

That attitude pervaded the organization at Compulinx. At the same CMP XChange event, Gary Bennett, vice president of strategic relationships at Compulinx, said financing the managed services model was top of mind.

"The biggest issue for me is in the managed services arena, how we can communicate to the HPs and Ingram Micros of the world financing solutions down to the end users," he said. "They are providing a lot of hardware, but as far as getting ways to purchase commodities back to the end user, it's a problem."

Prior to founding Compulinx, which he shepherded from its inception to a reported $10 million in annual revenue and 50 employees in 16 years, native Long Islander Terrence Chalk worked at defense subcontractor Dayton T. Brown in Bohemia, N.Y., and taught PC repair and networking part time at Long Island's SUNY Farmingdale, according to published reports.

Dissatisfied with a middle manager's role and convinced he could succeed as an entrepreneur, Chalk quit his $92,000 a year job and launched the business that would become Compulinx in West Sayville, N.Y. He amassed an impressive list of clients for a one-man, home-based business. According to the Westchester County Business Journal, which published several glowing profiles of Chalk, the fledgling company signed on Pfizer, Tropicana, Newsday and Scudder for special IT projects.

The WCBJ reported last year that Compulinx was expecting exponential growth after Chalk claimed to have inked a deal with a "large, multibillion-dollar global financial services company [with] almost 40,000 users."

The five- to seven-year contract had Chalk making plans to add 10,000 square feet to the company's White Plains headquarters and 100 more workers, according to the report.

In addition to the identity theft charges, Chalk is also charged with racking up more than $100,000 in unauthorized credit-card charges. If convicted, he faces 165 years in prison and $5.5 million in fines, prosecutors say. His nephew faces a maximum sentence of 35 years imprisonment and $1.25 million in fines.