The former head of e-scrap company 5R Processors pleaded guilty to failing to pay taxes as part of a plea bargain in which prosecutors dropped CRT-related hazardous waste and wire fraud charges.
Kevin Shibilski, 61, former CEO of 5R Processors, on May 16 pleaded guilty to one felony count of failing to pay taxes to the IRS.
Based in Ladysmith, Wis., 5R had multiple locations in Wisconsin and a facility in Tennessee. Its customers included large institutions and businesses, as well as manufacturers participating in take-back programs. The company failed and left nearly 10 million pounds of CRTs and other materials in storage.
According to a charging document, Shibilski withheld federal taxes from wages of employees working at Pure Extractions Inc. and Wisconsin Logistics Solutions LCC, two companies Shibilski created to handle 5R’s operations, but he willfully failed to pay the money to the IRS. The time period was about June 2014 to June 2016, and the total amount unpaid to the IRS was over $197,000.
Shibilski told an IRS officer in March 2015 he was trying to work with a bank to get financing to settle the IRS claims, and that the company hadn’t been able to pay because it wasn’t making a profit, according to a plea deal he reached with the U.S. Attorney’s Office on April 7.
As part of the deal, Shibilski agreed to plead guilty to the tax charge, pay restitution to the IRS and help fund cleanups. For cleanup payments, he agreed to pay $100,000 to the Wisconsin Department of Natural Resources and $100,000 to Knoxville, Tenn. company Paint Oak LLC.
In exchange, prosecutors dropped one charge of storing and disposing of hazardous waste (CRT glass) without a permit and eight counts of wire fraud (a grand jury alleged he accepted payments to recycled CRT glass and issued certificates of recycling but actually stored the glass, constituting fraud). In addition, a grand jury indictment originally accused him of failing to pay over $850,000 in taxes to the IRS.
E-Scrap News reported last year that the Tennessee landlord paid over $1 million to remove CRT materials from that property, and officials estimated the Wisconsin cleanups would cost about $2 million. The Wisconsin DNR hasn’t started the cleanups in that state yet.
On the charge of failing to pay taxes to the IRS, the maximum penalty is five years in prison and a $250,000 fine. Sentencing is scheduled for Sept. 13, 2022. The plea bargain doesn’t require prosecutors to suggest to the court a particular sentencing recommendation.
The case is in U.S. District Court for the Western District of Wisconsin.
Fourth former leader to agree to plead guilty
Three other former 5R leaders have already either agreed to plead guilty or pleaded guilty and went to prison.
In November 2020, James Moss, former president of the company, was sentenced to 18 months in prison after pleading guilty to hazardous waste and tax charges. Moss, 63, is currently at a residential re-entry facility in Chicago with a scheduled release date of Sept. 5, 2022.
In January 2021, Bonnie Dennee, who worked in multiple management positions at the company, was sentenced to five months in prison after pleading guilty to a hazardous waste charge. Dennee, 68, was released on Aug. 31, 2021.
Thomas Drake, who founded 5R in 1988, reached an agreement in January 2020 to plead guilty to a hazardous waste charge, but the U.S. Attorney’s Office in March 2021 dismissed all charges against him because he suffered from dementia and wasn’t competent to assist in his defense. He died April 15, 2021, at the age of 81.
Shibilski in July 2020 filed a civil lawsuit in federal court against Dennee, Drake, Moss and others, alleging they defrauded him. The judge dismissed that lawsuit in February 2021.
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