The former president of a now-defunct Rusk County electronic recycling company was sentenced in federal court, Friday, after pleading guilty to illegally storing and transporting hazardous waste and conspiring to avoid paying more than $850,000 in withheld employee federal income taxes to the IRS.
James Moss, 61, was sentenced on Nov. 20 by U.S. District Judge William M. Conley to 18 months in federal prison for conspiring to store and transport hazardous waste without required permits and manifests, in violation of the Resource Conservation and Recovery Act, and with conspiring to evade the payment of employment taxes and income taxes to the IRS. Moss pleaded guilty to these charges on Sept. 1.
Moss worked for 5R Processors Ltd. (5R) based in Ladysmith, which was a Wisconsin-based corporation involved in recycling electronic equipment, appliances, and other assets. According to the information, 5R operated numerous facilities and warehouses including in Ladysmith, Glen Flora, Catawba and West Bend and in Morristown, Tenn.
Moss started at 5R in January 2007 and became its President in 2010. As President of 5R, Moss was responsible for managing all plant operations, including shipping, receiving, trucking, sales, de-manufacturing, warehousing, accounting, and payroll.
From 2011 to 2016, Moss and others, conspired to store hazardous waste such as broken and crushed CRT glass that contained lead at unpermitted facilities in Catawba and Glen Flora and in Morristown, Tenn.. They also conspired to transport the hazardous waste without a required manifest and conceal the violations from state regulators in Wisconsin and Tennessee, as well as auditors with R2, a nationwide recycling certification program.
At his plea hearing, Moss admitted to attempting to conceal the illegal storage and transport of the crushed leaded glass by various means, including changing the date labels on the containers, hiding the containers by putting them inside semi-trailers and locking the trailer doors, moving the containers to the back of the warehouse and stacking other pallets in front of them, making it impossible for regulators to see the boxes or inspect them, storing the containers at a warehouse on Artisan Drive in Glen Flora known as the “Sunshine Building and not disclosing the existence of this warehouse or its contents to state regulators or R2 auditors, storing the containers at 5R’s plant in Morristown, Tenn., in two warehouse spaces that did not have electricity or power and which were referred to by 5R employees as the “dark side” and the “dark-dark side” and providing state regulators with inaccurate inventory and shipping records for the leaded glass.
Moss also pleaded guilty to a conspiracy with others to defraud the IRS in the collection of employment taxes and income taxes for 5R and two other related companies, Wisconsin Logistic Solutions (WLS) and Pure Extractions. Moss and others failed to truthfully account for and pay over to the IRS all of the federal income taxes withheld from employees and FICA taxes due and owing to the United States for 5R, WLS and Pure Extractions, totaling $858,101.
At sentencing, Conley told Moss that his conduct is inexplicable given Moss’s upbringing and life history prior to working at 5R. The judge noted that Moss rationalized his criminal conduct by deluding himself that it was O.K. because it was the only way to keep himself and other members in the community employed, but that Moss understood what he was doing was wrong, year after year.
Conley praised Moss for doing the right thing and cooperating with the government to help explain and unravel the criminal conspiracy, but added Moss still needed to pay a price.
The judge added, “I hope this sentence delivers the message of the severity of your conduct and the debt you must pay to society.”
The charges against Moss were the result of an investigation conducted by the Wisconsin Department of Natural Resources, Bureau of Law Enforcement; the U.S. Environmental Protection Agency, Criminal Investigation Division; and IRS Criminal Investigation. The prosecution of the case has been handled by Assistant U.S. Attorney Daniel J. Graber.
Moss’ sentencing follows a federal court indictment returned by a grand jury in September that alleges illegal storage and disposal of hazardous waste by another former CEO of a defunct Rusk County electronics recycling company, multiple counts of wire fraud and a conspiracy to evade paying employment taxes.
Kevin Shibilski, 59, Merrill, is charged in a 19-page indictment with storing and disposing of hazardous waste without a permit, in his capacity as the Chief Executive Officer of 5R Processors, Ltd., a Wisconsin company involved in the recycling of electronic waste from corporate and institutional clients and from manufacturers that participate in a Manufacture-Take-Back program. The document alleges Shibilski illegally stored and disposed of broken and crushed glass from cathode ray tubes that was hazardous due to lead-toxicity at facilities in Wisconsin and Tennessee.
The indictment also charges Shibilski with eight counts of wire fraud by taking in over $5.76 million from clients but failing to recycle more than 8.3 million pounds of their crushed glass from cathode ray tubes that had lead in them and instead stockpiling it at 5R Processors’ warehouses in Wisconsin and Tennessee. The final count in the indictment alleges Shibilski conspired to defraud the United States by the nonpayment and evasion of more than $850,000 in employment and income taxes for 5R Processors and its nominee entities.
The indictment states Shibilski between about March 2013 and September 2020, “Knowingly stored and disposed of hazardous waste, and aided and abetted the storage and disposal of hazardous waste, to wit: broken and crushed CRT glass that was hazardous due to lead-toxicity, at unpermitted facilities in West Bend, Wisconsin, Glen Flora, Wisconsin, and Morristown, Tennessee.”
The indictment states Shibilski between about March 2013 and June 2016, “Knowingly, and with the intent to defraud, devised and participated in a scheme to defraud institutional recycling customers and Manufacturer Take Back (MTB) clients, and to obtain money and property by means of materially false and fraudulent pretenses, representations, promises, and by concealment of material facts.”
In related cases, Thomas Drake, 80, Jasper, Ga.; James Moss, 61, Ladysmith and Bonnie Dennee, 66, Phillips, who all held positions with 5R Processors, were charged with conspiring to store and transport hazardous waste without the required permits. Moss also has been charged with conspiring to evade the payment of employment taxes and income taxes to the Internal Revenue Service. Drake, Moss, and Dennee have entered into plea agreements with the U.S. Moss pleaded guilty on Sept. 1, and his sentencing is scheduled for Nov. 13. Plea hearings for Drake and Dennee have yet to take place.
Dennee has filed a waiver to her right to prosecution by indictment and consent to prosecution by information. Drake has filed a motion for a competency exam.
Also in federal court, Shibilski has filed a civil fraud and conspiracy suit against Drake, Moss and Dennee and former 5R Processors bookkeeper, Michele McCrea. The lawsuit also identifies Ladysmith Federal Savings & Loan and former Ladysmith Federal CEO Scott Von Haden as active participants in an alleged fraud scam.
5R Processors was a Wisconsin-based corporation involved in recycling, including the reconditioning, refurbishing, remarketing, de-manufacturing, and end-of-life processing of electronic equipment, appliances and other assets. The name 5R” stood for RECYLE all materials through state of the art end-of-life processing; REUSE parts and components; RECLAIM all materials used to manufacture electronic equipment through de-manufacturing processes; REENGINEER electronic and other equipment in preparations for re-entrance into the marketplace and REDUCE the amount of toxic materials entering landfills globally.
5R accepted used electronics such as computers and televisions from commercial and public entities in exchange for a fee, and represented to customers that those materials would be recycled or disposed of in accordance with state and federal laws. 5R’s customers included large corporate and institutional clients who sent their electronic waste (e-waste) to 5R for proper recycling and manufacturers of electronics that participated in the manufacture-take-back (MTB) program and paid to have e-waste properly recycled.
5R used a de-manufacturing technique whereby electronic equipment was taken apart manually and the parts sorted into commodities which then could be resold. For example, cathode ray tubes in computer monitors and televisions were broken down and the glass separated between “clean glass” that was sold as a commodity and “dirty glass” or “funnel glass” that had lead in it. The leaded CRT glass was crushed and loaded into gaylord boxes for shipment to downstream vendors that were allowed to handle the CRT glass. Before the advent of flat screen TVs and monitors, crushed CRT glass had value as a recyclable item and could be sold to vendors. However, once the newer screen technology came online, CRTs lost all value and 5R had to pay money to downstream vendors to dispose of the leaded CRT glass.
5R operated numerous facilities and warehouses in Wisconsin and Tennessee, among other places, including Wisconsin sites at 600 Gates Avenue, Ladysmith, 515 Fritz Avenue, Ladysmith, 103 W. 3rd Street, Ladysmith, N4421 County Highway I, Catawba, N5779 White Street, Glen Flora, W3620 Artisan Drive, Glen Flora and 133 Oak Street, West Bend and in Tennessee at 4991 Enka Highway, Morristown.