July 12, 2024 – A federal district court did not err when it declined to credit a defendant’s acceptance of responsibility after he spent most of his allocution shifting blame and complaining about the prosecution, the U.S. Court of Appeals for the Seventh Circuit has held in United States v. Shibilski, No. 23-1410 (June 10, 2024).
In 2011, Tom Drake, founder of 5R Processors Ltd. (5R), hired Kevin Shibilski as a consultant to help the company attract new operating capital. 5R recycled electronic equipment.
Shibilski had worked mostly in the public sector and didn’t have much business experience. Shibilski eventually bought 5R from Drake, and in 2013 Shibilski became the company’s CEO and CFO.
In 2014, 5R stopped paying employment taxes to the Internal Revenue Service (IRS) and the Wisconsin Department of Revenue (DOR). The company used the money that should have gone to cover those taxes to plug the gaps in its cashflow.
The nonpayment of taxes aroused the interest of IRS and DOR, and the agencies began investigating 5R. In September 2020, a federal grand jury returned a 10-count indictment against Shibilski.
The indictment charged Shibilski with environmental and wire-fraud crimes, and conspiracy to defraud the U.S. for the alleged failure to pay payroll taxes to the IRS.
Plea Deal
Shibilski eventually agreed to plead guilty to one felony count of willful failure to pay employee taxes in violation of 26 U.S.C. section 7202.
Jeff M. Brown , Willamette Univ. School of Law 1997, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by
email or by phone at (608) 250-6126.
In exchange for Shibilski’s plea, the government agreed to dismiss the other charges.
Additionally, the government agreed to recommend that Shibilski receive credit for accepting responsibility under section 3E1.1(a) of the federal sentencing guidelines, conditioned on his accepting responsibility.
The plea agreement listed only a portion of the unpaid tax, $197,458. Shibilski took responsibility for that amount as part of the factual basis for his plea.
Objections to Sentence
The pre-sentence report (PSR) included the total amount of unpaid tax – $858,051.
Shibilski objected to the calculation of relevant conduct in the PSR. He insisted that he hadn’t been in control of 5R’s financial operations, and therefore shouldn’t be held responsible for the total amount of unpaid tax.
The district court scheduled a two-day sentencing hearing to address Shibilski’s objections.
The court extended the first day’s hearing after Shibilski’s attorney repeatedly engaged in irrelevant and duplicative lines of questioning.
On the second day, Shibilski testified for an hour.
Shibilski spent most of his allocution complaining about the prosecution, blaming his co-defendants, minimizing his role in the criminal scheme, and claiming he was a victim of character assassination.
No Credit
The circuit court rejected Shibilski’s objections and found that he was responsible for the entire amount of unpaid tax, based on the clear evidence that he’d controlled 5R’s financial operations during the relevant period.
The government used that evidence as the basis to withdraw its recommendation to reduce the level of Shibilski’s offense under section 3E1.1(a).
The circuit court ruled that Shibilski wasn’t entitled to credit for his accepting responsibility, notwithstanding his guilty plea. As a result of that ruling, the advisory imprisonment range under the sentencing guidelines was 33 to 41 months.
The circuit court weighed the sentencing factors listed in 18 U.S.C. section 3553(a), and sentenced Shibilski to 33 months in prison.
Shibilski appealed.
Misunderstanding of Rule
On appeal, Shibilski argued that the district court had erred by:
violating Rule 32(i)(4)(A)(i), by restricting his attorney’s presentation of the evidence;
wrongly denying him credit for accepting responsibility under section 3E1.1(a); and
failing to meaningfully address the sentencing factors under 18 U.S.C. section 3553(a).
Writing for a three-judge panel, Chief Judge Diane Sykes concluded that Shibilski’s first argument was based on a misunderstanding of Rule 32(i)(4)(A)(i).
She pointed out that the rule requires only that a court “provide the defendant’s attorney an opportunity to speak on the defendant’s behalf.”
The circuit court had met that requirement, Chief Judge Sykes concluded, by giving Shibilski’s attorney plenty of time to present an argument about Shibilski’s sentence.
“The judge did nothing to curtail or cut off counsel’s opportunity to speak on Shibilski’s behalf,” Sykes wrote. “The record conclusively refutes any argument to the contrary.”
Judge Sykes also pointed out that Rule 32(i)(2) allows a judge to permit a party to introduce evidence on objections to a PSR but doesn’t require it.
“Controlling the scope of witness testimony and setting reasonable time limits, as the judge did here, is perfectly consistent with the court’s exercise of this discretionary authority,” Sykes wrote.
No Error in Denying Credit
Regarding Shibilski’s argument about being denied credit, Chief Judge Sykes explained that under Seventh Circuit precedent, a defendant’s attempt to downplay his involvement in an offense is enough to deny a sentence reduction for accepting responsibility, even if he pleads guilty.
Sykes also noted that: 1) Shibilski bore the burden of proving by a preponderance of the evidence that he qualified for an adjustment under section 3E1.1(a); and 2) the district court’s finding on that point was entitled to great deference.
Judge Sykes concluded that the appeals court had no basis to overturn the district court’s section 3E1.1(a) ruling.
“Shibilski’s own words – both from the witness stand and in his allocution statement – confirm that the judge had ample reason to deny credit for acceptance of responsibly,” Sykes wrote.
Judge Properly Considered Factors
Shibilski argued that the district court hadn’t meaningfully considered his lack of criminal history, his public service, the fact he was a caregiver for his mother, and the sentences handed down to other defendants convicted under 26 U.S.C. section 7202.
But Chief Judge Sykes explained that in applying 18 U.S.C. section 3553(a), a district court wasn’t required to tick off each sentencing factor, and she concluded that the district court had considered the mitigating factors put forward by Shibilski.
“The judge thoughtfully considered the section 3553(a) factors and Shibilski’s arguments in mitigation, and his explanation for the within-Guidelines sentence was clearly sufficient,” Sykes wrote.
