Information - United States v. Shibley companion docket PPP fraud case (2021-11-22)

Source document: Information - United States v. Shibley companion docket PPP fraud case (2021-11-22); document type: Verbatim trial transcript, 144 pages.

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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
Proceedings stenographically reported and transcript produced with computer-aided technology
November 18, 2021 - 558
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON AT SEATTLE
________________________________________________________________
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UNITED STATES OF AMERICA,
Plaintiff,
v.
ERIC SHIBLEY,
Defendant.

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CR20-00174
SEATTLE, WASHINGTON
November 18, 2021 -
9:00 A.M.
TRIAL - DAY 4
________________________________________________________________
VERBATIM REPORT OF PROCEEDINGS
BEFORE THE HONORABLE JOHN C. COUGHENOUR
UNITED STATES DISTRICT JUDGE
________________________________________________________________
APPEARANCES:
For the Plaintiff:
Brian Werner
Assistant United States Attorney
700 Stewart Street, Suite 5220
Seattle, WA  98101
Laura Connelly
U.S. Department of Justice
Criminal Division
1400 New York Avenue N.W., RM 10100
Washington, D.C. 20530
For the Defendant:
Michael Nance
Attorney at Law
P.O. Box 11278
Bainbridge Island, WA 98110
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 1 of 144

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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 559
EXAMINATION INDEX
 EXAMINATION OF
     PAGE
ERIC SHIBLEY
CROSS-EXAMINATION
BY MR. WERNER
560
REDIRECT EXAMINATION
BY MR. NANCE
618
RECROSS-EXAMINATION
BY MR. WERNER
620
EXHIBIT INDEX
 EXHIBITS ADMITTED
               PAGE
98
590
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 560
THE COURT:  Ready for the jury?
MR. WERNER:  Your Honor, the government would like to
renew its request to admit evidence of Mr. Shibley's license
being revoked by the State of Washington, based on his testimony
at the end of the day yesterday.
THE COURT:  I'm going to deny the motion.  I think it's
of very marginal probative value, and the prejudice under 403
outweighs what marginal probative value exists.
I understand from Mr. Gabe, Mr. Nance, that you're agreeable
to the forfeiture issue, depending upon the verdict?
MR. NANCE:  Be decided by the court?
THE COURT:  Yeah.
MR. NANCE:  If there's a verdict the wrong way.
THE COURT:  All right.  Thank you.  So bring in the
jury.
(The following occurred in the presence of the jury.)
THE COURT:  Please be seated.
ERIC SHIBLEY,
previously sworn, resumed and testified as follows:
CROSS-EXAMINATION
BY MR. WERNER:
Q
Hello.
A
Hello.
Q
Mr. Shibley, yesterday we talked about how you moved to the
United States from Bangladesh.  Do you recall that?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 3 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 561
A
Yes.
Q
And you became licensed as a doctor in the United States,
correct?
A
Yes.
Q
You also became a citizen of the United States, correct?
A
Yes.
Q
Today, I'm going to ask you some questions about your PPP and
EIDL applications.  Okay?
A
Yes.
Q
I want to show you what's been admitted as Government's
Exhibit 205.
Mr. Shibley, this is the first page of Government's 205 on
the screen.  Do you see that?
A
Yes.
Q
I'm going to ask Mr. Arnold to go to the second page.
Do you see the second page?
A
Yes.
Q
Mr. Shibley, you sent in all of the applications that are on
this exhibit, correct?
A
I believe so.
Q
You filled out the applications online, correct?
A
I believe so.
Q
And you hit "send" to the bank, correct?
A
Yes.
Q
Okay.  And on each of one of these applications, you
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 562
certified that the information was true and accurate, correct?
A
Yes.
Q
Okay.  And your testimony yesterday was that the information
on these applications was true and accurate?
A
Yes.
Q
And the reason you know, or the reason you testified that
everything is correct on these applications, is because you
filled it out, right?
A
Yes.
Q
Could we look at page 3 of this exhibit, please?
Do you see page 3 of the exhibit, with the EIDL applications?
A
Yes.
Q
And, Mr. Shibley, you completed all 13 of these EIDL
applications, correct?
A
Yes.
Q
And you submitted them to the SBA, correct?
A
Correct.
Q
And it's your testimony that everything on these EIDL
applications was true and correct?
A
Yes.
Q
And the reason you're saying that is because you filled them
out, correct?
A
Correct.
Q
Let's go to Exhibit 3, please, page 1.  Could we do the top
half, please?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 563
Mr. Shibley, this is a PPP application for a business called
Dituri Construction, correct?
A
Correct.
Q
And this is a PPP application that you filled out, correct?
A
Correct.
Q
That you signed as true and accurate?
A
Yes.
Q
And the average monthly payroll that you put on this form is
$392,000, correct?
A
Yes.
Q
Was that the average -- is it your testimony that the average
monthly payroll for a business called Dituri Construction was
$392,000?
A
Yes.
Q
Let's look at Exhibit 4.  Mr. Shibley, do you see Exhibit 4?
A
Yes.
Q
This is a PPP application for the same business, Dituri
Construction, right?
A
Right.
Q
And you filled out this application?
A
Yes.
Q
You certified that it was true and accurate?
A
Yes.
Q
And you listed monthly payroll of Dituri Construction, on
this application, as $225,400, correct?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 564
A
Correct.
Q
Was that true and accurate?
A
Yes.
Q
Let's look at the date of this application, the $225,400
application.  Could we go to the second page, please?  Third
page, please.
Mr. Shibley, you said that the monthly payroll of Dituri
Construction was $225,400 on April 30th, 2020, correct?
A
Correct.
Q
Let's go back to Exhibit 3, page 1.
And, again, this is another PPP application for Dituri
Construction, with an average monthly payroll of $392,000.  Could
we go to the signature page on this one, Mr. Arnold?
And you signed this on May 2nd, 2020, correct?
A
Correct.
Q
And it's your testimony that both of these applications are
true and correct?
A
Correct.
Q
It's the same business, right?
A
Yes.
Q
The same number of employees on both applications?
A
It seems like.
Q
And you didn't only fill out two different application forms,
you also put in two different Form 941s, correct?
A
Correct.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 565
Q
Those also had the two different monthly payrolls, correct?
A
Correct.
Q
And, again, is it your testimony that both were true and
accurate?
A
Yes.
Q
This is the PPP -- let's go to Exhibit 1, please, Mr. Arnold,
page 5.  Start with -- I'm sorry, start with Exhibit 1, page 1.
It's a PPP application for the A Team Holdings, do you
remember this?
A
Yes.
Q
You signed this application indicating that everything was
true and correct?
A
Yes.
Q
And you indicated that the A Team Holdings had 48 employees?
A
Yes.
Q
And you signed on page 6 of this application?
A
Yes.
Q
April 15th, 2020.  Correct?
A
Correct.
Q
And you filled out an EIDL application for the same business,
A Team Holdings, right?
A
Yes.
Q
Let's go to -- let's go to Exhibit 39.  We should do the
top -- there.  Could we get a little more, please, Mr. Arnold, so
we can see the date?  There we go.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 566
And this is Exhibit 39.  Correct, Mr. Shibley?
A
Correct.
Q
A Team Holdings.  The same business, right?
A
Yes.
Q
And this application was filled out on March 31st, 2020?
A
Correct.
Q
And if we go to the bottom quarter of the page, please, how
many employees did you say it had, on line 33?
A
Four.
Q
And that's different than how many employees you said on the
PPP application, right?
A
Yes.
Q
But is it your testimony that this statement you made to the
SBA on March 31st, 2020, is true and correct?
A
Correct.
Q
You were served with a subpoena on June 10th, 2020.  Do you
recall that?
A
Yes.
Q
And you testified yesterday that you remember that day.
A
I remember that day, yes.
Q
The subpoenas asked for information about your businesses,
correct?
A
Correct.
Q
They asked for payroll records, right?
A
Right.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 567
Q
They asked for lists of employees, right?
A
Right.
Q
And you responded to that subpoena, correct?
A
Correct.
Q
And you gave the documents that have been admitted in this
court as Exhibit 225, right?
A
Right.
Q
But this response didn't contain any employee names, did it?
A
It did not.
Q
Didn't contain any payroll records, did it?
A
It did not.
Q
It didn't contain any time sheets?
A
It did not.
Q
And the subpoenas also asked for receipts, to see how much
your businesses were making, right?
A
Yes.
Q
And you didn't provide any receipts?
A
I did not.
Q
You didn't provide any invoices for your company?
A
I did not.
Q
Because those documents didn't exist, right?
A
No.
Q
The documents -- again, you did not provide invoices?
Correct?
A
Yes.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 568
Q
Because you didn't create invoices for these companies.
A
I am not the person who does that.
Q
Right.  You don't create invoices for the company, Dituri
Construction?
A
Are you asking personally?
Q
I'm asking -- yes.  I'm asking, did Dituri Construction
produce invoices?
A
Yes.  It does.
Q
It does produce invoices?
A
Yeah.
Q
And SS1 LLC creates invoices?
A
Yes.
Q
And you did not -- but you did not turn them over, in
response to the subpoena?
A
I did not.
Q
You did not?
A
Yes.
Q
You responded to the subpoena, correct?
A
Yeah.  I had to.
Q
You had to.  And you were required to produce invoices.
A
It's -- certain laws apply on that.  Like, I had to research
the United States Code behind it.
Q
You responded to the subpoena through your attorney, correct?
A
Yes.
Q
Your attorney actually responded on your behalf, right?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 569
A
Right.
Q
So the attorney would be in charge of -- if there was any
laws that prevented responding?
A
Of course.
Q
So you didn't -- again, you didn't produce any employee names
for the business Dituri Construction, right?
A
Right.
Q
Because you didn't -- because you didn't keep those employee
names, right?
A
Me, or my business?  I mean --
Q
Your business.  I'm asking about the business.  The business
didn't keep those names?
A
No.  They did keep those names.
Q
But didn't turn them over as part of the subpoena response?
A
Didn't turn them over, because -- okay.  Didn't turn them
over, yes.
Q
Didn't turn them over -- because, again, you failed to turn
them over.
A
I chose not to.
Q
You chose not to turn them over.
So is it now your testimony, Mr. Shibley, that you had
payroll records for Dituri Construction and SS1 LLC?
A
Yes.
Q
You had payroll records?
A
I'm trying to understand.  Are you asking me, as a person?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 570
Q
Yes.  I'm asking you, yes.  I'm asking you as a person,
Mr. Shibley.
A
Personally?
Q
Yes.
A
I, personally, do not keep these records.
Q
Your business keeps the records?
A
My business does.
Q
And you -- but you are who's in charge of your business.
A
I'm the business owner.  So it has to be me, in charge.
Q
Right.  Did you testify yesterday that there's a military
hierarchy in your business?
A
Yes.
Q
Who's at the top of that hierarchy?
A
Me.
Q
Who got served with these subpoenas?
A
Me.
Q
And who responded to these subpoenas?
A
Me.
Q
Who failed to produce these so-called payroll records?
A
I don't think I failed to produce anything that I was
required to produce, according to your subpoena.
Q
Your testimony is that you had about 150 different employees,
prior to the pandemic; is that right?
A
Yes.
Q
And you didn't turn in those -- you didn't turn in payroll
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 571
records for those employees?
A
I did not.  And there's good reason behind it.
Q
Did you contact the site managers after you received these
subpoenas, and -- did you contact the site managers?
A
I was in contact with them, yes.
Q
Did they turn in -- did they give you the records of the
names?
A
They don't -- it doesn't go through me.  If I have the
opportunity to explain how it happens.
Q
Is there someone -- I would like to ask the questions.  But
are you testifying that there is someone between the site manager
and you in this hierarchy; is that your testimony?
A
Yes.
Q
Is that a supervisor?  What's the name of that position?
A
No.  It's the professional who deals with that, the
bookkeepers, CPAs, accountants.  They handle this.
Q
And you contacted your bookkeepers to get their response to
this subpoena?
A
Of course I did.
Q
This is what they provided?
A
They -- I contacted my attorney as well.
Q
Tell me -- don't say what you said to your attorney.
A
Okay.
Q
That would be improper.  But what I'm asking about is the
bookkeepers.  You're in charge of the bookkeepers, correct?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 572
A
Yes.  I contacted them, yes.
Q
This is what you got back; is that right?
A
No.  That's not what I got back.  No.
Q
So why did you -- is it your testimony that you withheld
payroll records in response to the subpoena?
A
I did not withheld.  I was of the understanding, according to
the advice that I got, that that paper that you served me did not
call for what was existing at the time in my possession.  What I
mean by that is, I'm only required to produce things that I
possess at the time available, existing documents that I possess.
If I'm not the record custodian of something, I believe that
you're essentially barking up the wrong tree, you have to
subpoena the accountant, which I don't think that happened.
Q
So another thing that was in there that was requested in
these subpoenas was a list of accountants.  Do you remember that?
A
Yes.
Q
You turned over a correspondence with Mario Davis.  Do you
remember that?
A
I think so.
Q
But you didn't turn over the list of these accountants.
That's not in this Exhibit 225, is it?  No one other than Mario
Davis is in this subpoena return, Exhibit 225.
A
Yeah, Mario was in the process of filing all the taxes at the
time.
Q
Not on June 10th, but afterwards, you contacted Mr. Davis,
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 573
right?
A
I believe so, yeah.
Q
So again, the subpoenas were addressed to your businesses?
A
Yes.
Q
You are in charge of your businesses?
A
Yes.
Q
The bookkeepers work for you?
A
Yes.
Q
And if they had records, it was your responsibility to get
them?
A
If I'm legally required to do so.
Q
So your testimony has been that you had 150 employees,
correct, before the pandemic?
A
It's give and take.  I think the accurate number would be 52
or 56.  I'm not sure what the correct number was there.
Q
You mean 152 or 156?
A
Yes.
Q
Okay.  But, again, we agree that there are no payroll records
in this subpoena response?
A
Nothing was provided in response to the subpoena that was
drafted.
Q
Okay.  And, again, these 152 to 156 employees had $1 million
in payroll a month, prior to the pandemic.  That's your
testimony, correct?
A
Prior to the pandemic, yes.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 574
Q
You talked a little bit yesterday about how you got there,
about how you arrived at that million-dollar number.  You said
that your workers are paid $40 an hour, correct?
A
I did a very, very gross calculation.  That number is just an
average, and for the purpose of kind of giving an idea.  It's
not -- I'm not saying that everybody got $40 an hour.  That's not
how it works.  People have different skills, different rates.
There is some people are -- there is differences.  It's not like
everybody $40 an hour.
Q
So your testimony is that some people made more and some
people made less?
A
Yes.
Q
But you said most of your workers made $40 an hour; is that
fair?
A
I'm speaking average amount.  I just picked up a number
yesterday.  That's how I was explaining.  I was asked to ask -- I
was asked to explain a number.  So I was doing my best to explain
it.
Q
And you explained it by saying that $40 an hour, times 160
hours a month --
A
Yes.
Q
-- comes up with about $6,400 for a month?
A
Times 156, is a million.
Q
Right.
A
Yes.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 575
Q
So that's -- that's how you came up with the payroll in this
case.  That's how you support the million dollars, right?
A
That's not how the number came.
Q
That's not how the number came?
A
That was the explanation yesterday, while I'm sitting here,
without the background documents, the payroll journals and actual
tables.  That's all -- that's the extremely simplified
explanation.  I cannot be saying that that's, like, pinpoint.
Q
Well, those applications are pinpoint, that's your testimony,
right?  Those applications are accurate, those PPP applications?
A
Yeah.  Those are accurate.
Q
Forty-nine employees for Dituri Construction?
A
There is 49.
Q
Absolutely accurate?
A
Absolutely.
Q
$225,000 in payroll a month on April 30th, right?  Yes or no?
Yes?
A
Yes.
Q
$392,000 in payroll on May 2nd, right?
A
Yes.
Q
Okay.  But, again, none of those employee names, none of
those 49 employees names are in this subpoena response, right?
A
Yes.
Q
The number is 48 employees for A Team Holdings, correct?
A
Yes.
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 18 of 144

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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 576
Q
A monthly payroll, again, of almost $400,000 a month?
A
Yes.
Q
No payroll records in this -- in Exhibit 225, correct?
A
No payroll records were provided to you at the time, yes.
Q
These PPP applications contained tax forms, right?
A
Yes.
Q
And you filled out those tax forms, right?
A
I filled out those tax forms?
Q
Yeah.
Well, let's show you one.  Exhibit 5, page 7.  Can we get the
whole thing in, please, Mr. Arnold?
This is a form W-3 provided to Harvest Finance for SS1 LLC.
Do you see that, Mr. Shibley?
A
Yes.
Q
You filled out this document, correct?
A
Not personally.
Q
Whose signature is there?
A
My signature.
Q
Let's -- but your testimony is someone else filled out this
document?
A
Yes.
Q
How many total -- can you look at this?  How many number of
forms W-2?
A
Forty-one.
Q
Who put that number there?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 19 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 577
A
Bookkeeper.
Q
Bookkeeper?
A
Yes.
Q
Who turned over the forms W-2 to the IRS?
A
The tax professional is supposed to do that.  I don't know if
it happened or not.
Q
But you do, because the IRS has no records of any W-2s.
A
Yes, it got reviewed.  Yes.
Q
So your testimony, Mr. Shibley, is that somebody else filled
out this form?
A
Yes.
Q
And somebody else was responsible for sending 41 forms W-2 to
the IRS?
A
Yes.
Q
And somebody else reported that SS1 LLC paid out $538,000 in
wages in 2019?
A
Yes.
Q
Somebody else said that social security tax and Medicare
taxes was withheld from those wages?
A
Yes.
Q
Why would someone say, that when you told us yesterday that
you pay your employees in cash?  I'm sorry, strike that.
You pay your employees in cash, correct?
A
Yes.
Q
And you don't withhold Medicare tax, right?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 20 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 578
A
I -- I don't withheld Medicare?  That's not right.
Q
When you pay an employee, you hold back the taxes that belong
to the government; is that right?
A
Yes.
Q
And you submit those taxes to the IRS?
A
That's the way it works.
Q
But the IRS did not receive money from these businesses, did
not receive Medicare, social security tax?
A
Various reasons behind it.
Q
So, again, your testimony is that this money was, in fact,
withheld?
A
Yes.
Q
But the money was not paid to the IRS?
A
Yes.
Q
And your testimony is that it's true that SS1 LLC paid out
$538,000 in 2019?
A
Yes.
Q
On the dot?
A
On the dot means, like -- I have to rely on what's in the
paper.  I mean, I don't crunch those numbers.  I don't plug those
numbers in the form.  I do not calculate these.  The calculations
are done by bookkeepers, and a CPA firm.
Q
Who signed this?  You signed this?
A
I signed it.
Q
Let's go to Exhibit 8, page 7, please.
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 21 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 579
Mr. Shibley, this is another form W-3 for one of your
businesses, right?
A
Right.
Q
And you signed this form?
A
Yes.
Q
And this form indicates that six W-2s were sent?
A
Yes.
Q
And this form indicates that social security tax and Medicare
tax were withheld?
A
Yes.
Q
This form is filled out April 24th.  That's 2020, right?
A
I believe so, yes, it should be.
Q
And you completed this form; isn't that right?
A
I signed it.  I didn't do this form.
Q
Someone else made this -- put the numbers in this form; is
that your testimony?
A
Yes.
Q
Someone else put the date 202020 in there?
A
I believe so.
Q
And this isn't filed with the IRS, is it?
A
That is what I know now, yes.
Q
Let's look at Exhibit 5, page 5.  If we can just do the top
half, please, Mr. Arnold.
Now, this is a Form 941 for 2020, for SS1 LLC.  Do you see
this, Mr. Shibley?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 22 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 580
A
Yes.
Q
And this claims that SS1 LLC has 41 employees, right?
A
Right.
Q
$656,000 in wages, correct?
A
Correct.
Q
And this form was completed by you?
A
No.
Q
Well, let's look at the second page.  Let's blow out the
bottom.
Who signed this form?
A
Me.  I signed.
Q
And who dated this form?
A
I dated it.
Q
That's your phone number?
A
Yes.
Q
And the paid preparer section down here, do you see that?
A
Yes.
Q
That's blank, right?
A
Yes.
Q
But, again, I'm going to ask you one more time.  Did you
prepare this Form 941?
A
No.
Q
Are the numbers in the Form 941, 41 employees, $656,000 in
payroll, are those numbers true and accurate?
A
To the best of my knowledge, yes.
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 23 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 581
Q
And the money due to the IRS, you never paid that money over
to the IRS, right?
A
I believe it's not paid.
Q
You didn't even file this form with the IRS, right?
A
I don't file.  I have no way to file those, personally.
Q
You told the banks that you had filed these forms, didn't
you?
A
No.  Never.
Q
Well, you are trying to make the banks think that you filed
these forms.
A
Never.  I told the bank, every time -- and you have recorded
statement from undercover agents -- I told them very clearly,
these are not filed.
Q
Let's look at Exhibit 53, please.  Let's look at that top
e-mail, please.
This is an e-mail that you sent.  Right, Mr. Shibley?
A
Yes.
Q
And you sent it to BECU, correct?
A
Correct.
Q
And you wrote, "I corrected the PPP application to change the
loan amount, based on the actual numbers in tax filings, which is
attached."  Do you see that?
A
Yeah.
Q
You're telling the bank that the tax filing that is attached
to this e-mail as part of Exhibit 53, you are telling them that
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 24 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 582
that's filed?
A
I'm not telling them that it's filed, it's a vocabulary
issue.
THE COURT REPORTER:  I'm sorry?
THE WITNESS:  Vocabulary issue.
Q
Vocabulary issue.  Are you saying it's a "vocabulary issue"?
A
Sorry for my accent.
I'm not saying that those are filed in this statement.
Q
You are calling it a tax filing.
A
I'm calling it something -- I could have called it five other
things.
Q
But you chose to call it a tax filing, correct?
A
Correct.  Yes.  But I did not mean that I filed those forms
by saying that.
Q
You didn't write in this e-mail that you did not file those
forms, those forms weren't filed, correct?  That's not in this
e-mail.
A
Of course not.  I don't say it, yes.
MR. NANCE:  Objection, Your Honor.  The e-mail says what
it says.
THE COURT:  Overruled.
Q
You did not write in this e-mail that that Form 941 was not
filed?
A
I --
Q
Correct?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 25 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 583
A
Yes.  Correct.
Q
Because you were trying to deceive BECU, weren't you?
A
Absolutely not.
Q
You told them a half-truth, wouldn't you say?
A
No.
Q
The whole point of these tax forms being sent to the bank was
to make it look like your companies were filing taxes -- taxes
with the IRS, right?
A
I never tried to make it look like anything.  I called them.
I was in contact with them.  They called me.  I made it clear,
every time they asked me about filings, I told them these are not
filed.
Q
You told BECU they weren't filed, in this e-mail?
A
I never -- I don't recall ever talking with a live person,
because this application didn't go anywhere, obviously.  There
was no -- the way it works is that you --
Q
Is it -- Mr. Shibley, is it your testimony that you were
truthful and honest in all your dealings with the banks and
lenders in this case?
A
Absolutely.
Q
Do you recall sending an e-mail to Harvest, with ten employee
names for SS1 LLC?
A
Yes.
Q
And Harvest Finance is the SS1 loan for $820,000, right?
A
Right.
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 26 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 584
Q
Let's look at Exhibit 48, page 3.
And this is the e-mail, Exhibit 48, page 3, this is the
e-mail that you sent to Harvest, correct?
A
Yes.
Q
So is it your testimony that these ten people worked for SS1
LLC?
A
Yes.
Q
That's your SS1 LLC crew?
A
They worked on the ground, yes, at the time.
Q
Let's look at Exhibit 50, page 1.  You also sent in a list of
employee names to Celtic Bank.  Do you remember?
A
Yes.
Q
And these are the names you sent in to Celtic Bank, correct?
A
Correct.
Q
And for Celtic Bank, that was a loan for Dituri Construction,
right?
A
Right.
Q
$563,500, right?
A
Right.
Q
You sent in the same names, didn't you?
A
I did.
Q
Is it your testimony that these names that are in Exhibit 50,
that they worked for the Dituri Construction?
A
Yes.
Q
They're a part of that crew?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 27 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 585
A
They're interchangeable.
Q
Mr. Shibley, you told us yesterday that your crews are
separate, didn't you?
A
Yes.  They're separate.  However, the bookkeeper decides who
is belonging to which company.  And I, at that time -- this
happened in the same day.  These two e-mails, if you look at the
time, is the same day, probably in the same hour.  And --
Q
But it's -- so your testimony is that these are employees of
Dituri Construction and employees of SS1 LLC?
A
See, I'm trying to clarify.  I'm not double counting the
employees here.
Q
Mr. Shibley, you don't have employees, do you?
A
That's not true.  I have employees.  I had -- you keep saying
nothing exists.
Q
Mr. Shibley, again, it's your testimony that you did not
deceive Celtic Bank by this e-mail; is that correct?
A
Absolutely did not deceive Celtic, or any other bank.
Q
So this loan, this $563,500 loan, Mr. Shibley, that's the
same money that you went into the Tukwila branch to try to
withdraw from BECU, correct?
A
Yes.
Q
That's when you told Mr. Mondala -- or later you told Mr.
Mondala that the reason you needed to withdraw it in cash was
because your employees don't have social security numbers, right?
Yes or no, that's what you told him?
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 28 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 586
A
It's a mischaracterization -- mischaracterization of what I
told him.
Q
Did you talk to Mr. Mondala?
A
Yes.
Q
And did you tell Mr. Mondala you wanted to withdraw it in
cash?
A
Yes.
Q
And did you tell Mr. Mondala you wanted to withdraw it in
cash to pay your employees?
A
Yes.
Q
And did you say that the reason you needed to withdraw it in
cash is because your employees don't have social security
numbers?
A
That is not the primary reason.
Q
Did you say that the reason -- did you say that a reason you
wanted to withdraw the money in cash, is because your employees
don't have social security numbers?
A
I don't think that's how it came out, no.  That's not how it
came out.
Q
So there's a different reason -- you are testifying now
there's a different reason -- or, I'm sorry, you are testifying
now that you didn't say that to Mr. Mondala?
A
I say that in a different conversation, not in the
perspective of what -- how you are presenting it.
Q
Okay.  Because you are here -- because you see what I'm
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 29 of 144

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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 587
driving at.  You see here that you are offering social security
numbers for supposed Dituri Construction employees?
A
Yeah.
Q
You see how that's inconsistent with what you told Mr.
Mondala, right?
A
It is not inconsistent.  Mr. Mondala and I spoke, had a brief
conversation.  And in the conversation, at some point, during the
conversation, there was a question about social security numbers.
And I say that it's hard to track those things, and --
Q
But it wasn't hard to track here, because when you thought
you were going to get the money, you came up with social security
numbers, right?
A
I came up with -- I was asked to provide a couple of names.
Q
Right.  And the reason you did it is because you thought you
were going to get this $563,000, right?
A
I was already told that the money would be there tomorrow.
Q
Once you gave these names, right?
A
I was under the impression that they're sending the money the
next day, anyway.
Q
Once you gave the names?
A
I'm not sure whether it was contingent on that.  I talked to
them around 12 -- noon that day.
Q
Well, the money -- you didn't have the money at this point in
time, right?  They wouldn't give it to you.
A
No.  That was not the situation.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 588
Q
They wouldn't let -- BECU wouldn't let you withdraw that
money in cash, right?
A
Would not let me withdraw that money in cash?
Q
Mr. Shibley, you'll say different things about your
businesses at different times, won't you?
A
I do not say different things.  I'm saying that BECU --
Q
Mr. Shibley, did you apply for unemployment with the State of
Washington?
A
There was a CARES Act payment for businesses at the time.
Q
You initially applied for state -- with the state, though,
correct?
A
There was a funding approved for non-employees,
self-employed, and business owners at the time, for under CARES
Act.  I believe that that was a short funding.  And that
Washington State Employment Security Department was in charge of
disbursing it.  It was not their money, as far as I know.
Q
Right.  Right.  You listened to the testimony earlier --
A
Yes.
Q
-- during this trial.
But initially your application was processed to see whether
or not the state would give you money.  Do you recall that?
A
I do not try to take state money, it is federal money.
Q
You did take federal money, correct?  You got pandemic
unemployment assistance, right?
A
Yes.  That was part of the CARES Act, yes.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 589
Q
You told -- in connection with that application, you said you
were laid off from your job at the doctor's office, right?
A
The question, the way it was asked, are you working or not?
At that time I could not run anything, I was under the order to
stop working, by the Governor.
Q
Call up the bottom of page -- actually, let's look at the
whole page here.  It has been admitted as Government's
Exhibit 87.
These are the business records of Employment Security.  And
in these records, Mr. Shibley, you listed that you were laid off
from Eric Shibley MD, and you are on a leave of absence from ES1
LLC.  Do you see that?
A
The answer to the question depends on the question itself.
If you ask me if I'm working or not, what it really means, at
that time my office was closed.
Q
Mr. Shibley, I'm going to show you what's been marked, but
not admitted, as Exhibit 98.  Do you see that there, Mr. Shibley?
A
Yes.
Q
Look at the second page, please.
Did you sign this document, Mr. Shibley?
A
I believe so.
Q
Did you send it in to the Employment Security Department?
A
Yes.
MR. WERNER:  Offer Exhibit 98.
MR. NANCE:  No objection.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 590
THE COURT:  Admitted.
(Exhibit No. 98 admitted.)
Q
Can we go to page 1, please?
Mr. Shibley, this is a document that you sent in to the
Employment Security Department, correct?
A
Correct.
Q
And your signature is on the second page?
A
Correct.
Q
And you -- thank you.
And you're reporting here, to the Employment Security
Department, that you worked 680 hours the first quarter of 2020,
right?
A
I believe that's what was reported here.
Q
And that was a magic number with Employment Security, right,
that's what you made you qualify for benefits?
A
680 was the cutoff, yes.
Q
Right.  You are reporting $20,500 in wages, correct?
A
That's what I see reported, yes.
Q
You filled that out, right?
A
Oh, yeah.  This one is mine.
Q
And you said that the wages will be reported to the State of
Washington?  Right here.
A
Yeah.  That's what I said, yes.
Q
But you didn't do that, did you?
A
The people who does this reporting is not me.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 591
Q
So the answer is, no?
A
I personally didn't do it.
Q
You didn't do it?
A
No.
Q
So, Mr. Shibley, you didn't report any employee -- you didn't
turn over any employee names, in response to the subpoena.  But
you have shown us Exhibit A-1 with some driver's licenses,
identification cards.  Do you remember looking at that yesterday?
A
Yes.
Q
And let's call up Exhibit A-1, maybe page 2 in our system.
Let's go to page 2, please.  And let's go to page 3.  I'm sorry,
I should publish this.  So this is what's been admitted as
Exhibit A-1.  Let's go up to page 2, in our system.  I think it's
on the first page of the exhibit.  Go down to page 3, please.
Page 4.
Is it your testimony that every person with a driver's
license in Exhibit A-1, that they were your employee?
A
I believe so.
Q
I understood your testimony to be that you took pictures of
these licenses.  You took these pictures, right?
A
These licenses -- these pictures were found in one of my cell
phones.
Q
And you took these pictures?
A
It has to be me, yes.
Q
Is it your testimony that you collect a driver's license from
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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 592
every employee?
A
Yes, I do.
Q
And there are about how many driver's licenses in Exhibit
A-1?
A
I believe I gave you 40 names out of that driver's licenses
that could be --
Q
No, Mr. Shibley, you didn't provide any of this in
response --
A
I'm still replying.
The driver's license was provided -- I didn't count, I mean,
if you count --
Q
Well, that's fair, Mr. Shibley.  This isn't a math test.
These pictures -- some of these pictures were actually taken
after the charges in this case; isn't that right?
A
Could be.  I don't recall.
Q
Let's look at the next page, please, Mr. Arnold.
This picture, in particular, this picture was actually taken
in August, correct?  August 2020.
A
I do not have a way to verify when.
Q
Is there anything that would refresh your recollection?  If I
showed you the picture in native format, would that help you
refresh your recollection, this was taken August 21st, 2020?
A
I know the person.  But I have no way to remember exactly
which date I took the pictures.
Q
But do you agree that some of these pictures were taken after
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 593
the charges in this case?
A
It could be, yes.
Q
Are you saying some of these pictures were taken before the
charges in this case?
A
I really have no idea of the date and time of the pictures.
Q
Let's go to the next page, please.  And the next page.  It
should stop there.
Is the reason you took these -- the reason you took these
pictures, is because these people were tenants, right?  Isn't
that the reason you took these pictures?
A
No.
Q
Are any of these people your tenants?
A
The person in front, he's not.
Q
Were any of the people in the pictures, tenants?
A
I'm trying to recall whose picture was there.
Q
Did you take pictures of the driver's licenses of your
tenants?
A
Yes.  Sometimes I did, yes.  These are not tenants' pictures.
I have to look at all of this and go one-by-one and make sure.
Q
Let's -- actually, let's take it back up.  Let's go to
page 9.
A
This one is not a tenant.
Q
Okay.
A
This is not.
Q
Let's go to the second-to-last page in the exhibit.  Let's go
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 594
up -- I'm sorry, up two more.  Let's try page 20, please.  The
page right up there.  Yes.  That one.
Do you see that picture?
A
Yes.
Q
Mr. Shibley, this is not a picture of a driver's license,
correct?
A
Of course not.
Q
These are pictures -- it's a picture that you took?
A
It's -- yeah.  I believe I'm taking the picture.
Q
And, again, is this part of your process of taking pictures
of your employees?
A
No.  It's just a funny selfie.
Q
Right.  Because these gentlemen in the picture are not your
employees, correct?
A
They did work for me, and my company.
Q
They did some rehab work.  You hired them to do rehab work on
your property?
A
They did a lot of work.
Q
You hired them to do rehab work on your property, correct?
A
They did.  They did.  They worked in properties that was not
my property as well.
Q
And that's true, right, because they work for a company
called Exact Electric, right?  Do you see that on their shirts?
A
Yeah.  Sure.
Q
That's who they worked for?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 595
A
That's the shirt that he's wearing.  I believe he used to
work for them.  He probably still does.
Q
This gentlemen over here on our left as well, correct?
A
I don't know that if he's an Exact.
Q
Do you see the hat he's hearing?
A
What I know is that he's related to this guy.  But I don't
know that if -- the first guy, I know that he worked at some
point for Exact.  The other two guys, I was never aware that they
worked for Exact.
Q
You can take it down now.
Your testimony is, again, that your average employee made
$6,400 a month?
A
It was a very average number picked up yesterday to explain a
number.
Q
$6,400 a month would be more than $70,000 a year, correct?
A
Yes.
Q
But that's not -- you didn't tell your accountant, Mr. Davis,
that you're paying your employees $70,000 a year, did you?
A
I did.
Q
You told him that you were paying your employees $8,000 a
year?
A
I talked with him many times.  I texted him day after day.
Q
Well, let's look at the e-mail.  You sent an e-mail, right?
A
Yeah.  I saw that e-mail yesterday.  Yes.
Q
Let's look at that.  It's Exhibit 225, page 273.  If we could
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 596
blow up the "from" "to" and the first paragraph, please.
This is an e-mail from you, correct?
A
Correct.
Q
To Mario Davis, your accountant, correct?
A
Correct.
Q
And this is after you were served with a subpoena, correct?
A
Correct.
Q
You knew about the federal investigation at this time,
correct?
A
Of course.
Q
And in the bottom four sentences, if you can call out that
where it says, "Due to their transient nature..."  Can you call
out that a little bit more, please?
You told him that most of your employees received between
$8,000 to $12,000 in salary, correct?
A
The way it was worded.
Q
First -- first, you did say that, correct?
A
That's what it says on its face, yes.
Q
And that's different than what you said yesterday.  You said
your employees were making $6,000 a month.
A
There's variation among -- it doesn't match -- one person
doesn't match another person.
Q
But you are telling Mr. Davis, "Most of my employees," that's
what you are saying in this e-mail, correct?
A
Yeah.  Many of them work in one quarter, do not work other
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 597
quarters.  Some of them probably just work seven days and never
showed up in their life.  Some of them worked for two years.
Some of them worked for one year.  They all vary.
Q
Right.  But your testimony has been that these businesses
had -- at the time you applied for these applications -- you had
150 employees on salary, correct?
A
Yes.
Q
And you were paying a payroll of a million dollars, right?
A
Yes.
Q
And these -- these employees, there were no payroll records
for these employees, in the response?
A
There is payroll records, but I didn't give it to you.
Q
The reason you're telling -- you complete the sentence and
you say, "... my understanding is no income tax withholding was
necessary."  Do you see that?
A
My understanding, based on the legislation at the time, was
in process.  There's multiple.
Q
You don't mention legislation.  You say, "Because they are
all below 13K a year, my understanding is no income tax
withholding was necessary," right?
A
My understanding, what I knew --
Q
Sorry, just answer my question first, please.  Did you write
this?
A
I did.
Q
Was your understanding -- I'm sorry, this e-mail is from you,
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 598
right, Mr. Shibley?
A
Yes.
Q
Not any bookkeeper?
A
No.
Q
That's you that's saying that.
A
I'm talking, yes.
Q
And you are explaining to your accountant, who you just
started a relationship with -- this is a new accountant, correct?
A
Very new.
Q
You're explaining to him, here is why I don't have any taxes
filed, right?  You are giving -- you are explaining that to him,
right?
A
This is a really small part of my communication with him.
Q
And, again, that's different than what you are telling the
banks.  You are telling the banks, 48 employees, $400,000 in
payroll a month.
A
That is not different at all.
Q
All right.
A
I had a conversation with him multiple times.
Q
All right.
A
Text messages.  There's many other e-mails.  There is other
people involved in between us.
Q
This is the e-mail that you provided, on Exhibit 225?
A
Okay.
Q
Correct?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 599
A
Yeah.
Q
Your testimony yesterday, Mr. Shibley, was that prior to the
pandemic, you were paying your employees $1 million a month in
payroll, correct?
A
Yes.
Q
Let's look -- and you were paying that payroll in cash,
correct?
A
Yes.
Q
Let's look at Exhibit 208, page 20.
I understood -- you testified that you agree with this chart,
correct?  This chart, 208, 20 compares payroll to the money
that's in your bank account, right?
A
I testified this whole thing, I don't agree with one word of
it.
Q
Well, you agree that there's $151,000 in your bank account,
right, in this timeframe?
A
If he was given all the bank statements, and he's a CPA, he
did the --
Q
You agree that the payroll, that you said on your PPP
applications, in this six-month timeframe, was more than
$4 million, right?
A
That number really came out of his hat.
Q
Well, he cites on the bottom here what the payroll numbers
are from.  And you told -- you told the banks that you were
paying in SS1 LLC, almost $400,000 a month in payroll, right?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 600
A
I think it was less than that.
Q
You told the banks that you were, that you had paid them --
300 -- $328,000; is that right?
A
I think something like 328 --
Q
I think that's right.  And that payroll was for the first
quarter of 2020, right?
A
Yes.
Q
And the third quarter -- I'm sorry, the fourth quarter of
2019?
A
Yes.
Q
And that adds up.  You also said that you paid Dituri
Construction $392,000 for the first quarter of 2020, right?
A
Yes.
Q
And you also said you were paying the A Team Holdings about
$384,000 for the first quarter of 2020, right?
A
Right.
Q
And the third quarter -- and the fourth quarter of 2019,
right?
A
Right.
Q
Right.  So, again, that's how we get -- and there's other
businesses too, right?
A
Yes.  There's --
Q
That's how we got to $4 million, right, Mr. Shibley?
A
I --
Q
You don't think so?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 601
A
The $4 million is blown out of -- it's not a real number.
Q
Well, that's my question.  You are anticipating my question.
Is this a real number?  Did you really pay this much money in
cash to your employees?
A
This number, the way he calculated it, is not what really my
filings show.
Q
Well, let's talk, then, about your testimony.  Your testimony
is that you paid -- you were paying -- let's take January 2020,
for example.  Okay?
A
Yes.
Q
That month before the pandemic, you were paying a million
dollars across your businesses; is that right?
A
Yes.
Q
And that was in cash?
A
Yes.
Q
And you would agree that you did not have that kind of money
going through your bank accounts at that time?
A
Correct.
Q
It's your testimony that not only were you paying out your
employees in cash, you were receiving income in cash as well,
right?
A
Exactly, yes.
Q
You were receiving enough income to make a 10 percent profit
each month, right?
A
Average.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 602
Q
So that means you weren't just receiving a million dollars a
month, you were receiving about $1.1 million a month, right?
A
That would be a true estimate, yes.
Q
And that extra $100,000, that's your money, that's your
profit, right?
A
That's what I'm taking home, yes.
Q
But that money didn't go to your bank account.  That money
doesn't show up in your bank accounts?
A
No.
Q
You have bank accounts, right, Mr. Shibley?
A
Of course I do.  I have expenses, too.
Q
Your testimony is that your businesses were receiving
$1.1 million a month for construction jobs, right?
A
Yes.
Q
Again, in cash?
A
Yes.
Q
And you didn't provide any receipts or ledgers that show how
much of this cash was coming in, correct?
A
I did not give it to you, yes.
Q
But you are going to tell us -- but you testified that you
were doing a lot of jobs, right, to make that much money?
A
A lot, yes.
Q
You told us yesterday that you could do a furnace job for
about $2,000.  Do you remember that?
A
Yes.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 603
Q
And so to make $1.1 million a month, you would have to do 550
furnace jobs, right?
A
That is completely unrealistic.
Q
It's unrealistic to do 550 jobs a month, isn't it?  You agree
with that, right?
A
That's not how it happened.
Q
So you would do a furnace job -- you testified yesterday that
you would do a furnace job for $2,000, right?
A
I can.
Q
And is that an average job for you, $2,000?
A
For a furnace replacement?
Q
No.  Just an average job for these construction companies.
Is your testimony that's $2,000?
A
No.
Q
Does it average $5,000?
A
It varies widely.
Q
Does it average $10,000?
A
How could I give you a number on that.  It can be a couple of
hundred thousand, one job.
Q
You could give me -- you could have given me a number on
this.  Your testimony is that you -- is that you have -- you must
have at least -- you must have at least hundreds of jobs a month.
To make $1.1 million in cash, you hundreds --
A
I have jobs -- more jobs than I can do.  And I have jobs
lined up in the pipeline.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 604
Q
Hundreds, right?
A
If I really look into my network, I can pick 100 jobs, yes.
Easy.
Q
I mean, you can't be charging -- you told us yesterday that
you provide cheap labor, right?
A
I do.
Q
So these aren't expensive jobs, are they?
A
These are expensive, depending on who you go to.  If you are
going to Evergreen Concrete and ask them to cut concrete, they're
going to charge you $2,600 just to cut it, without any garbage
cleanup.
If you call me, I'm going to give you an estimate.  I'm going
to install the window.  I will cut the concrete.  I will clean
out the garbage.
Q
Sorry for interrupting.  Is that your job, Mr. Shibley?  Are
you the one who gives estimates?
A
No, not personally.  I'm talking about my business.
Q
Your business.
Mr. Shibley, so however many -- so all of these jobs that
were cash, you are getting hundreds of jobs a month with
cash-paying customers, right?
A
Yes.
Q
Yesterday we looked at Exhibit A-3, correct?  Put that up,
please.
Do you remember Exhibit A-3?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 605
A
I do.
Q
It's about 45 pages, right?
A
Yes.
Q
And you're not -- you didn't testify that each picture
represents a different job, right?  That's not your testimony.
A
No, that's not what I said.
Q
Because some of these pictures are the same job, right?
A
Yeah.  Definitely, yes.
Q
Let's look at page 36, please.  And then let's look at
page 37.
Those are the same job, right?
A
It appears to be, yes.
Q
Let's look at 41, and then 42.
Again, that's the same job, right?
A
It appears to be the same location.
Q
And let's go to 43, and 44, and 45.
Those are -- all those three pictures were all the same job?
A
Yeah.  It appears to be the same place, yes.
Q
Right.
And let's look at A-4.  These are exterior pictures of jobs.
Right, Mr. Shibley?
A
Yes.
Q
And there are 22 pictures in this exhibit, right?
A
Right.
Q
But most of these pictures are the houses you own, right?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 606
A
Yes.
Q
The houses that David Madrid had visited?  Right?
A
I do not know how many times he visited these places.
Q
Okay.  But this first house, that's the property on Donovan
Street, right?
A
Yes.
Q
And the second picture, that's your medical -- that was your
medical building, right?
A
Yes.
Q
And the third picture, that's the Des Moines Way South -- Des
Moines Way South property?
A
Correct.
Q
And let's go to five, please.  This is also the Des Moines
Way South?
A
Correct.
Q
Six.  Des Moines Way South?
A
Yes.
Q
Seven.  Des Moines Way South?
A
I believe so.
Q
Eight.  Donovan?
A
I believe so.
Q
And more -- how about we go to 15, please.
It's the backyard of the Des Moines Way?
A
Yes.
Q
When you talked about levelling it, you were talking about
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 607
your own house, right?
A
Yeah.  Yeah.
Q
And let's go to page 18.  This is your Fifth Avenue South
property, right?
A
Yes.
Q
Nineteen is also that property?
A
Yes.
Q
And 20?
A
Yes.
Q
So these aren't pictures of contractor jobs, these are
pictures of you working on your own properties, right?
A
Right.
Q
These pictures aren't part of the 550 jobs a month, right?
A
No.  That's not -- can you rephrase it?  Say again.
Q
When you --
MR. NANCE:  You know, I think that question
mischaracterizes his earlier testimony.
THE COURT:  Sustained.
Q
Mr. Shibley, when you testified about the contractor jobs
that your companies have, you aren't including the jobs at your
own property, right?
A
I'm not including my properties there, no.
Q
All right.  Because you own these properties, right?
A
Yes.
Q
And you didn't pay yourself?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 608
A
I didn't pay myself, yes.
Q
All right.
So, again, it's your testimony that your crews are doing
hundreds of jobs a month, correct?
A
Correct.
Q
For cash?
A
Correct.
Q
Without a contractor license?
A
That's not correct.
Q
You testified yesterday that you never had a contractor
license?
A
I'm not a contractor.
Q
Your businesses don't have contractor licenses, right?
A
My businesses are not contractors.  They're businesses.
Q
And you testified yesterday that you won't accept checks from
homeowners.  Do you remember that testimony?
A
It's not the way it works with the homeowners.  The whole
situation is different.  The setting is cash.
Q
You said yesterday you can't ever remember accepting a check
for a construction job?
A
That is true.
Q
And that's why there's no -- according to you -- that's why
there's no checks for construction jobs in your bank accounts?
A
Exactly.
Q
Exactly.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 609
Isn't the real reason you don't have checks from homeowners
in your bank accounts, is because you don't have a construction
business?
A
That's not true.
Q
You are testifying, again, you had hundreds of jobs a month,
but you hid all of that from David Madrid?
A
I hid something?  David Madrid is not my friend.  I mean, why
would I --
Q
David Madrid didn't know about your construction business?
A
Of course not.
Q
David Madrid is a real estate agent, right?  He could have
referred your business --
A
He's the shadiest character that I know of.
Q
So back to you, Mr. Shibley, and your $1 million in payroll,
in cash.  Let's go back to Exhibit 208, page 20.
So we talked about how you didn't produce any ledgers, in
your response to the subpoena.  But there are two pages in
Exhibit A-1, the last two pages of Exhibit A-1 -- if we could
look at those.
Do you see these on the screen, Mr. Shibley?
A
Yes.
Q
These are records that you testified yesterday that you kept,
right?
A
Came out of my cell phone.
Q
These are records that you kept for paying people for working
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 610
on your house, right?
A
At some time I took these pictures.  And I didn't delete it
for some reason, I don't know.  It ended up staying there.  And
one of my cell phones was -- I was able to save, out of all my
belongings.  And it got shipped to my attorney.
Q
These are the -- again, I can't -- I don't want you to talk
about what you discussed with your attorney.  But these are
records that reflect payments to employees, correct?  Page 20 and
page 21?
A
It does reflect that --
Q
Payment -- I'm sorry, I misspoke.  Payment to individuals who
did work on your houses, right?
A
They definitely worked, and they got paid.  And they're just
saying that they are paid for their work, yes.
Q
Right.  And, again -- but you didn't keep these types of
records for Dituri Construction, did you?
A
I have detailed payment history for each of the workers, for
Dituri.
Q
But, again, served with a subpoena, remember?
A
Yes.
Q
Memorable day?
A
Yes.
Q
No payroll records, right?
A
I didn't give it to you.
Q
Let's go to your testimony, then.  Let's talk about your
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 611
testimony.
Your testimony is that you paid $1 million in cash a month to
these workers, correct?
A
Correct.
Q
And you handed it to them; is that right?  That's how it has
to go, someone handed them the money?
A
Someone.  It's not personally me all the time.
Q
It was personally you who tried to personally withdraw the
$560,000 from Celtic Bank in cash, right?
A
Who else would do that --
Q
I'm sorry?
A
-- besides me, from the bank.
Q
And you testified yesterday that you moved that money from
your checking account to your savings account.  Do you remember
that?
A
So that the money doesn't get mishandled, yes.
Q
You didn't want that money to stay in your checking account,
because you were worried that your wallet could fall out, right?
A
That's one of the scenarios.  There's many other ways.
Q
Well, the one you talked about yesterday was you were worried
about your wallet falling out and someone getting your debit
card, right?
A
If someone gets my debit card, they can access my checking
account, and a large amount of money can be stolen.
Q
Right.  And you testified yesterday, when you were talking
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 612
about this, you said, "Just imagine the population that I'm
dealing with."
A
Yes.
Q
Isn't that what you said?
A
Yes.  Yes.
Q
And you are talking about your workers, right?
A
I know thousands and thousands of people.
Q
And you said that your business had millions of dollars in
cash that was being handed out at these job sites?
A
Yes.
Q
But you're testifying that you were afraid to bring your
wallet, you couldn't lose your wallet at one of these sites; is
that your testimony?
A
I would prefer not to have my wallet stolen, because it's
inconvenient to go to all of these locations.  I guess you got 53
accounts yesterday.  If my wallet is stolen, it has my driver's
license, bank cards, and who knows what.
Q
You were afraid of losing -- you testified you couldn't even
leave your wallet at one of these sites, that's how scared you
were to be there?
A
I would not leave my wallet anywhere, unattended.  I mean, it
doesn't matter if it's a worksite, or a bus station, or wherever.
Q
You were talking about your properties, right?
A
It could be my bedroom.  And I would not be just leaving it
like that.  I'm more careful than that.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 613
Q
Besides paying employees in cash, you also paid expenses in
cash, correct?
A
Correct.
Q
Let's look at A-2.  Do you remember testifying about A-2
yesterday?
A
Yes.
Q
There are more than 300 pages in this exhibit, correct?
A
Correct.
Q
And is your testimony that A-2 shows that you paid expenses
in cash?
A
That's not cash.  This is -- this goes through a bank card.
Q
Well, the first one is a cash -- is a picture of a cash
purchase, correct?
A
Let me see.  I don't have my eyeglasses, so I may have missed
it.
Q
Could you blow that up there?
A
It says, "Cash, $20."
Q
Okay.  And let's look at page 90, please, Mr. Arnold.
This is cash also.  Right, Mr. Shibley?
A
Yes.
THE COURT:  Let me see counsel at sidebar.
(Off-the-record sidebar.)
THE COURT:  You folks can stand up and stretch if you
would like.
Q
Mr. Shibley, I believe you did confirm earlier that most of
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 614
these purchases are made with a Visa card, correct?
A
I believe so.
Q
Okay.
A
If you want to know how it came, I can explain.
Q
There are a lot of duplicates in this exhibit, aren't there?
A
I really -- I'm sitting in federal prison right now.  I have
no way to confirm this.
Q
Let's look at page 102, that's 4.97.  And page 104.  Those
are the same, the ones -- the two we just looked at; is that
right?
A
It appears to be, yes.  You are correct.
Q
And there are lots of these duplicates in this packet, aren't
there?
A
There could be -- I only had 30 seconds to go through it, two
days ago.
Q
Just one -- just two more small points about this.  Page 8.
Page 8 is a customer invoice, and the total is $114.53, correct?
A
Correct.
Q
Invoice ending in 975, right?
A
Right.
Q
And these invoices are then duplicated later in the exhibit
as well, right?  I will show you page 130.  This is a $114.53
purchase, correct?
A
Correct.
Q
ID ending in 975, right?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 615
A
Right.
Q
We can take that -- go back to the first page, please,
Mr. Arnold.
All of A-2 -- all of these pages here, the name Dituri
Construction is not on any of these receipts, right?
A
Yeah, you're right.  Why would there be the Dituri name here?
Q
SS1 isn't on any of these receipts, right?
A
I don't think the receipt has a provision for that.
Q
A Team Holdings is not on these receipts?
A
There is no business's name in this receipt.
Q
You didn't have a contractor license on file with Home Depot,
did you?
A
I do not carry a contractor license.
Q
These receipts for A-2, these are purchases you made when you
were working on rehabbing your own properties, right?
A
I do not know the time -- the timing of this receipt shows
what time?  Let me see.
Q
Let's look at page 104.  I think that might draw us right
to --
A
That is not -- no.  This is not when I was rehabbing any of
my houses.
Q
The job says "515."  That's the address of your Donovan
property; isn't it?
A
That is not -- that is code name.
Q
Is that coincidence that 515 is on this receipt?
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 616
A
It's not a -- it is a code that I use.
Q
Let's go to page 105.  That also has 515 for your Donovan
property.
A
It is a code.
Q
Let's go to page 106.
It says 10080.  That's the address of your Des Moines
property, right?
A
That is not the address.
Q
That is not the address?
A
That is not.  That's the code number that I use.
Q
So let's go back to the front page, please.  These receipts
are things you bought to rehab your properties?
A
No.
Q
No.  Some of these receipts are things that you bought to
rehab your property?
A
Doesn't appear to be.  The timing is last quarter of, I think
November 2019.  That's not when I rehabbed any of these houses.
Q
The -- there are $40,000 worth of expenses covered in here;
is that right?
A
Could be.  Yes.
Q
Your testimony is these are for something other than your
properties?
A
The timing says that, yes.
Q
So, again, 515 doesn't relate to Donovan?
A
No.
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ERIC SHIBLEY - Cross (Werner)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 617
Q
108 doesn't relate to Des Moines Way South?
A
No.
Q
You were rehabbing properties, right?  You were rehabbing
those three properties, right?
A
2018.
Q
In 2019?
A
No.
Q
And in 2020?
A
No.
Q
And when you rehab a property, you don't make money until you
sell the property, right?
A
The selling depends on when I decide to sell.
Q
And you never sold those three properties, did you,
Mr. Shibley?
A
As of today -- I have an offer today.  I didn't like the
offer.  I said that I'm not going to do it.
Q
All these pictures, all these receipts, they're evidence that
you were flipping houses, right?
A
This receipts are -- has nothing to do with me flipping
houses.
Q
You were trying to rehab those houses, right?
A
Not now.
Q
Before, prior to this case, you were trying to rehab those
houses, right?
A
Four years ago.
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ERIC SHIBLEY - Redirect (Nance)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 618
Q
You were trying to -- and you had people working on those
houses?
A
Four years ago.
Q
And David Madrid went to those houses and saw people working
on those houses in 2018?
A
I really do not have a date.
Q
And in 2019, David Madrid went to those houses, right?
A
I had a big --
Q
Yes or no.  Did David Madrid go to those houses in 2019?
A
I don't know where he goes.
Q
You are trying to flip houses and use that evidence to back
up a million dollars in payroll?
A
Absolutely not.  Your timing is off.
Q
That's exactly what you were trying to do.
MR. WERNER:  No further questions.
THE COURT:  Redirect?
MR. NANCE:  Is the court contemplating a --
THE COURT:  At 10:45.
REDIRECT EXAMINATION
BY MR. NANCE:
Q
So, Mr. Shibley, can you just touch on the degree to which
your businesses fluctuated?
A
Greatly fluctuated, yes.
Q
Well, tell us how that happened.
A
Well, the way it happens is -- so, some quarters I'm picking
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ERIC SHIBLEY - Redirect (Nance)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 619
up big jobs.  Some quarters I'm doing something small or maybe
some quarters I did nothing.  There are four quarters every year.
They never are the same.  Things never are permanent.  Everything
changes.  Time-to-time, week-to-week, sometimes day-to-day.
Q
Okay.
A
And also it depends on what I choose to do, what's going on
with my workers, what's going on with the country, society.
Everything comes into play.
Q
Let me ask you just briefly about -- you were asked about
records that you produced or failed to produce.  Do you recall
those questions?
A
Yes.
Q
Was there a distinction, in your mind, about existing records
and records that had not yet been created?
A
Exactly.  So the way it works, and the way I understood at
the time when I was given the paper, that I personally looked at
the -- you know, I was concerned about it.  I consulted my
attorney.  The keyword there was "existent" or "nonexistent."
And whether I possessed that personally or not.  I'm -- if a
document is -- who is the record custodian of the document?  If a
record custodian of a document is an accountant, and he didn't
get served with the subpoena, that paper doesn't come out.
Q
All right.  Let me ask you this, Mr. Shibley:  The
receipts -- you were asked several questions about the Home Depot
receipts, or the receipts in Exhibit A-2.
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ERIC SHIBLEY - Redirect (Nance)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 620
A
Yes.
Q
The big stack of exhibits.
A
I believe that --
Q
I'm just giving you the reference, I'm about to ask you the
question.
A
Yes.
Q
Okay.  You know that A-2 was that large stack of exhibits --
A
More than --
Q
-- of expenses?
A
More than 400 receipts there that you retrieved from one of
my e-mails.
Q
Okay.  Were there other expenses for which you do not have
receipts?
A
Definitely, yes.  This is a drop in the bucket.  Basically
doesn't present the whole picture at all.
MR. NANCE:  Thank you very much.  That's all.
THE COURT:  All right.  Any recross?
RECROSS-EXAMINATION
BY MR. WERNER:
Q
Can you call up Exhibit A-2, page 52, please?
This is a receipt with your name on it, correct?
A
It appears to be, yes.
Q
The job description is "Donovan," right?
A
It appears to be.
Q
And, again, you owned a property on Donovan Street, correct?
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ERIC SHIBLEY - Redirect (Nance)
Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 621
Yes or no?
A
Yes, I do.
Q
Okay.  And this is a receipt from January of 2020 for
merchandise that you bought to flip the Donovan house, correct?
A
I don't believe the Donovan house was getting any work done
at that time, no.
MR. WERNER:  Nothing further.
THE COURT:  All right.  You may step down.
You may step down.
THE WITNESS:  Oh.
MR. NANCE:  Your Honor, the only -- we have no further
witnesses.  And there's one open matter that maybe we should
address at sidebar.
THE COURT:  All right.  Well, no.  I'm going to let the
jury go out for a morning recess.  We have some legal matters we
have to discuss also, so it may be more than 15 minutes.
(The following occurred outside the presence of the jury.)
MR. NANCE:  I filed this a day or two ago.  It was a
request for judicial notice on the issue of lender fees.
THE COURT:  I haven't seen that.
MR. NANCE:  Okay.  It was -- I believe it should have
made the ECF yesterday.  I mean, I can --
THE COURT:  Do you have a copy of it?
MR. NANCE:  Electronically only.  But I could probably
pull it up.
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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 622
THE COURT:  We can print it out.  Mr. Nance, we can
print it out.
MR. NANCE:  Okay.  Did you get it?
THE COURT:  Yes.
MR. NANCE:  You do have it.  All right.
MS. CONNELLY:  Your Honor, may the government be heard
on the judicial --
THE COURT:  Yes.
MS. CONNELLY:  The government would object to the court
taking judicial notice of this fact.  The fact was established
through the witness.  It's already in evidence.  It's through --
Adam Seery testified to this on his cross-examination with
Mr. Nance.
Beyond that, I think it's entirely irrelevant what the
lenders were paid, which is based on the court's ruling on that
issue pretrial, on our motion in limine.
MR. NANCE:  A couple of things.  It is true that
Mr. Seery testified to it.  And it's also true that --
THE COURT:  Was his testimony different than what you
are asking?
MR. NANCE:  His testimony was very similar.  However,
there was a slight conflict in testimony.  The SBA
representative, Ms. Zelaya, testified it was simply 1 percent,
which is -- it's true for large loans, but it's not true for the
bulk of the loans.  So there's a bit of a conflict.  And there's
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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 623
really no dispute about what the actual law is.  It's right in
the CFR, the administrative code.
MS. CONNELLY:  Your Honor, I just think that if the
defense is going to be arguing about lender fees in closing, and
that that somehow is a defense to this case, we would object to
that.  And that seems to be where we're headed with this judicial
notice.  I think it gives it more weight than it should have.
THE COURT:  The objection is overruled.  It will be
permitted.
MR. NANCE:  Thank you.
THE COURT:  Does the government have any problems with
the proposed instructions?
MS. CONNELLY:  No, we do not, Your Honor.
MR. WERNER:  Your Honor, can I just -- real briefly.  I
want to make -- there's a bracketed section.
THE COURT:  Oh, yes.  What number is that?
MR. WERNER:  And I don't think any evidence was admitted
for a limited purpose.
THE COURT:  I think that's true.
What number is that?
MR. WERNER:  That is, I think -- I'm sorry.
THE COURT:  Yeah.  That's No. 7.
MR. WERNER:  Seven.
THE COURT:  We will change that to strike the bracketed
portion.
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Nickoline Drury, RMR, CRR - Federal Court Reporter - (206)370-8508 - 700 Stewart Street, Suite 17205, Seattle, WA  98101
November 18, 2021 - 624
MR. WERNER:  I also believe that Instruction No. 15 is
not appropriate here.  That's charts and summaries not admitted
into evidence.  I don't believe that anything was used for
demonstrative purposes.
THE COURT:  I think that's true.
Mr. Nance, do you agree with that?
MR. NANCE:  I agree with that.  Yes, Your Honor.
THE COURT:  All right.  We will strike No. 15.
MR. WERNER:  I think -- sorry, Your Honor.
Nothing further.
THE COURT:  Okay.  Mr. Nance, do you have any
exceptions?
MR. NANCE:  I'm kind of whipping through this.  I have a
standard exception to the reasonable doubt instruction.  I
realize what you have given is the model instruction.
THE COURT:  And I understand your exception.
MR. NANCE:  Well, you have seen the difference; "should
convict" rather than it "has a duty to convict."
THE COURT:  I'm not going to change that.
MR. NANCE:  Okay.
None others jump to mind.  Let me see.  One moment, here.
We had asked for a good-faith instruction.
THE COURT:  I understand the exception.  I'm not going
to give it.
MR. NANCE:  All right.  I think that sums it up.
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THE COURT:  Okay.  All right.  Then let's take
15 minutes.  Then I will instruct.  And then we will go right
into argument.
MR. NANCE:  Your Honor, I would like to just make a
record, a Rule 29 record --
THE COURT:  Sure --
MR. NANCE:  -- just to say we want to object to the lack
of a prima facie showing.
THE COURT:  All right.  And the motion is denied.
MR. NANCE:  And we're going immediately into argument
afterwards?
THE COURT:  Yes.
How much time are you going to need?
MS. CONNELLY:  One hour, please.
THE COURT:  And you?
MR. NANCE:  Not that long.
THE COURT:  All right.
MR. NANCE:  Maybe half an hour.
THE COURT:  All right.  I'm not going to limit you, but
an hour seems a little excessive.
MS. CONNELLY:  I will try and cut it down.
THE COURT:  All right.  We will be in recess for
15 minutes.
THE CLERK:  All rise.  Court is in recess.
(Recess.)
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THE COURT:  Are you ready for the jury?
MS. CONNELLY:  Yes, Your Honor.
THE COURT:  All right.  Bring them in.
(The following occurred in the presence of the jury.)
THE COURT:  Please be seated.
So, folks, in just a moment I'm going to deliver the court's
instructions on the law.  Copies of these instructions will be
given to each of you, so you don't have to take notes on the
instructions.  But do listen carefully to what I have to say.
Members of the jury, now that you have heard all the
evidence, it is my duty to instruct you on the law that applies
to this case.  Copies of these instructions will be available for
each of you in the jury room for you to consult.
It is your duty to weigh and to evaluate all the evidence
received in the case, and in that process to decide the facts.
It is also your duty to apply the law as I give it to you, to the
facts as you find them, whether you agree with the law or not.
You must decide the case solely on the evidence and the law.  Do
not allow personal likes or dislikes, sympathy, prejudice, fear,
or public opinion to influence you.
You should also not be influenced by any person's race,
color, religious beliefs, national ancestry, sexual orientation,
gender identity, gender, or economic circumstances.
Also, do not allow yourself to be influenced by personal
likes or dislikes, sympathy, prejudice, fear, public opinion, or
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biases, including unconscious biases.  Unconscious biases are
stereotypes, attitudes or preferences that people may consciously
reject, but may be expressed without conscious awareness, control
or intention.  You will recall that you took an oath promising to
do so at the beginning of the case.
You must follow all these instructions and not single out
some and ignore others.  They are all important.  Please do not
read into these instructions, or into anything I may have said or
done, any suggestion as to what verdict you should return.  That
is a matter entirely up to you.
The indictment is not evidence.  The defendant has pled not
guilty to the charges.  The defendant is presumed to be innocent,
unless and until the government proves the defendant guilty
beyond a reasonable doubt.  In addition, the defendant does not
have to testify or present any evidence.  The defendant does not
have to prove innocence.  The government has the burden of proof
of proving every element of the charges, beyond a reasonable
doubt.  The defendant has testified.  You should treat his
testimony just as you would the testimony of any other witness.
Proof beyond a reasonable doubt is proof that leaves you
firmly convinced the defendant is guilty.  It is not required
that the government prove guilt beyond all possible doubt.
A reasonable doubt is a doubt based upon reason and common
sense, and is not based purely on speculation.  It may arise from
a careful and impartial consideration of all the evidence, or
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from lack of evidence.  If, after a careful and impartial
consideration of all the evidence, you are not convinced beyond a
reasonable doubt that the defendant is guilty, it is your duty to
find the defendant not guilty.
On the other hand, if, after a careful and impartial
consideration of all the evidence, you are convinced beyond a
reasonable doubt that the defendant is guilty, it is your duty to
find the defendant guilty.
The evidence you are to consider in deciding what the facts
are, consists of the sworn testimony of any witness, the exhibits
received into evidence, and any facts to which the parties have
agreed.  The parties have agreed to certain facts that have been
stated to you.  Those facts are now conclusively established.
In reaching your verdict, you may consider only the testimony
and exhibits received in evidence.  The following things are not
evidence, and you may not consider them in deciding what the
facts are.
First, questions, statements, objections and arguments by the
lawyers are not evidence.  The lawyers are not witnesses.
Although you must consider a lawyer's questions to understand the
answers of a witness, the lawyer's questions are not evidence.
Similarly, what the lawyers have said in their opening
statements, closing arguments, and at other times, is intended to
help you interpret the evidence, but it is not evidence.  If the
facts as you remember them differ from the way the lawyers state
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them, your memory of them controls.
Second, any testimony that I have excluded, stricken, or
instructed you to disregard is not evidence.
And third, anything you may have seen or heard when the court
was not in session is not evidence.  You are to decide the case
solely on the evidence received at the trial.
Evidence may be direct or circumstantial evidence.  Direct
evidence is direct proof of a fact, such as testimony by a
witness about what that witness personally saw or heard or did.
Circumstantial evidence is indirect evidence.  That is, it is
proof of one or more facts from which you can find another fact.
You are to consider both direct and circumstantial evidence.
Either can be used to prove any fact.  The law makes no
distinction between the weight to be given to either direct or
circumstantial evidence.  It is for you to decide how much weight
to give to any evidence.
In deciding the facts in this case, you may have to decide
which testimony to believe and which testimony not to believe.
You may believe everything a witness says, or part of it, or none
of it.  In considering the testimony of any witness, you may take
into account the opportunity and ability of the witness to see,
or hear, or know the things testified to; the witness's memory;
the witness's manner while testifying; the witness's interest in
the outcome of the case, if any; the witness's biases or
prejudice, if any; whether other evidence contradicted the
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witness's testimony; the reasonableness of the witness's
testimony, in light of all the evidence, and any other factors
that bear on believability.
Sometimes a witness may say something that is not consistent
with something else he or she said.  Sometimes different
witnesses will give different versions of what happened.  People
often forget things or make mistakes in what they remember.
Also, two people may see the same event but remember it
differently.  You may consider these differences, but do not
decide the testimony is untrue, just because it differs from
other testimony.
However, if you decide that a witness has deliberately
testified untruthfully about something important, you may choose
not to believe anything that witness said.
On the other hand, if you think the witness testified
untruthfully about some things, but told the truth about others,
you may accept the part that you think is true and ignore the
rest.
The weight of the evidence as to a fact does not necessarily
depend on the number of witnesses who testify.  What is important
is how believable the witnesses were and how much weight you
think their testimony deserves.
You are here only to determine whether the defendant is
guilty or not guilty of the charges in the indictment.  The
defendant is not on trial for any conduct or offense not charged
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in the indictment.  A separate crime is charged against the
defendant in each count.  You must decide each count separately.
Your verdict on one count should not control your verdict on any
other count.
You have heard testimony that the defendant made a statement.
It is for you to decide whether the defendant made the statement,
and if so, how much weight to give to it.  In making those
decisions, you should consider all the evidence about the
statement, including the circumstances under which the defendant
may have made it.
You have heard testimony about an uncover agent who was
involved in the government's investigation in this case.  Law
enforcement officials may engage in stealth and deception, such
as the use of undercover agents, in order to investigate criminal
activities.  Undercover agents may use false names and
appearances.
Certain charts and summaries have been admitted into
evidence.  Charts and summaries are only as good as the
underlying supporting material.  You should, therefore, give them
only such weight as you think the underlying material deserves.
The defendant is charged in Counts 1 through 7 of the
indictment with wire fraud, in violation of Section 1343 of Title
18 of the United States Code.  For the defendant to be found
guilty of that charge, the government must prove each of the
following elements beyond a reasonable doubt:
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First, the defendant knowingly devised a scheme or plan to
defraud, or a scheme or plan for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises.  Deceitful statements or half-truths may constitute
false or fraudulent representations.
Second, the statements made or facts omitted as part of this
scheme, were material; that is, they had a natural tendency to
influence or were capable of influencing a person to part with
money or property.
Third, the defendant acted with the intent to defraud, that
is, the intent to deceive and cheat.
And fourth, the defendant used or caused to be used an
interstate wire communication to carry out or attempt to carry
out an essential part of the scheme.
In determining whether a scheme to defraud exists, you may
consider not only the defendant's words and statements, but also
the circumstances in which they are used as a whole.  A wiring is
caused when one knows that a wire will be used in the ordinary
course of business, or when one can reasonably foresee such use.
It need not have been reasonably foreseeable to the defendant
that the wire communication would be interstate in nature.
Rather, it must have been reasonably foreseeable to the defendant
that some wire communication would occur in furtherance of the
scheme; and an interstate wire communication must have actually
occurred in furtherance of the scheme.
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The defendant is charged in Counts 8 through 10 of the
indictment with bank fraud, in violation of Section 1344(2) of
Title 18 of the United States Code.
For the defendant to be found guilty of that charge, the
government must prove each of the following elements beyond a
reasonable doubt:
First, the defendant knowingly carried out a scheme or plan
to obtain money or property from the financial institution, by
making false statements or promises.
Second, the defendant knew that the statements or promises
were false.
Third, the statements or promises were material; that is,
they had a natural tendency to influence, or were capable of
influencing a financial institution to depart with money or
property.
Fourth, the defendant acted with the intent to defraud.
And fifth, the financial institution was federally insured.
The defendant is charged in Counts 11 through 15 of the
indictment with money laundering, in violation of Section 1957,
Title 18 of the United States Code.
For the defendant to be found guilty of that charge, the
government must prove each of the following elements beyond a
reasonable doubt:
First, the defendant knowingly engaged or attempted to engage
in a monetary transaction.
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Second, the defendant knew the transaction involved
criminally derived property.
Third, the property had a value greater than $10,000.
Fourth, the property was, in fact, derived from wire fraud or
bank fraud, as alleged in Counts 1 through 10 of the indictment.
And fifth, the transaction occurred in the United States.
The term "monetary transaction" means the deposit,
withdrawal, transfer or exchange in or affecting interstate
commerce, of funds, or a monetary instrument by, through, or to a
financial institution.
The term "financial institution" means a federally insured
bank or any credit union, as alleged in the indictment.
The term "criminally derived property" means any property
constituting or derived from the proceeds of a criminal offense.
The government must prove that the defendant knew that the
property involved in the monetary transaction constituted or was
derived from proceeds obtained by some criminal offense.
The government does not have to prove that the defendant knew
the precise nature of that criminal offense, or knew the property
involved in a transaction represented the proceeds of wire fraud
or a bank fraud, as alleged in Counts 1 through 10 of the
indictment.
Although the government must prove that, of the property at
issue, more than $10,000 was criminally derived, the government
does not have to prove that all the property at issue was
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criminally derived.
An act is done knowingly if the defendant is aware of the act
and does not act through ignorance, mistake or accident.  The
government is not required to prove that the defendant knew that
his acts or omissions were unlawful.
You may consider evidence of the defendant's words, acts or
omissions, along with all the other evidence, in deciding whether
the defendant acted knowingly.
An intent to defraud is an intent to deceive and cheat.
A defendant may be found guilty of the crimes charged, even
if the defendant did not personally commit the acts constituted
in the crime, if the defendant willfully caused an act to be
done, that if directly performed by him would be an offense
against the United States.
A defendant who puts in motion or causes the commission of an
indispensable element of an offense, may be found guilty as if he
had committed this offense himself.
With regard to Instruction No. 20, an act is done willfully
if it was undertaken with bad purpose and with knowledge that the
conduct is unlawful.
The indictment charges that the offenses alleged in Counts
1 through 15 were committed on or about a certain date.  Although
it is necessary that the government prove beyond a reasonable
doubt that the offense was committed on a date reasonably near
the date alleged in Counts 1 through 15 of the indictment, it is
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not necessary for the government to prove that the offense was
committed precisely on the date charged.
When you begin your deliberations, elect one member of the
jury as your foreperson, who will preside over the deliberations
and speak for you here in court.  You will then discuss the case
with your fellow jurors, to reach agreement, if you can do so.
Your verdict, whether guilty or not guilty, must be unanimous.
Each of you must decide the case for yourself.  But you should do
so only after you have considered all the evidence, discussed it
fully with the other jurors, and listened to the views of your
fellow jurors.
Do not be afraid to change your opinion, if the discussion
persuades you that you should.  But do not come to a decision,
simply because other jurors think it is right.  It is important
that you attempt to reach a unanimous verdict, but, of course,
only if each of you can do so, after having made your own
conscientious decision.  Do not change an honest belief about the
weight and effect of the evidence, simply to reach a verdict.
Perform these duties fairly and impartially.  Do not allow
personal likes or dislikes, sympathy, prejudice, fear, or public
opinion to influence you.
You should also not be influenced by any person's race,
color, religious beliefs, national ancestry, sexual orientation,
gender identity, gender, or economic circumstances.
Also, do not allow yourself to be influenced by personal
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likes or dislikes, sympathy, prejudice, fear, public opinion, or
biases, including unconscious biases.
Unconscious biases are stereotypes, attitudes or preferences
that people may consciously reject, but may be expressed without
conscious awareness, control or intention.
It is your duty, as jurors, to consult with one another, and
to deliberate with one another with a view towards reaching an
agreement if you can do so.  During your deliberations, you
should not hesitate to examine your own views -- or re-examine
your own views, and change your opinion, if you become persuaded
that it is wrong.
Some of you have taken notes during the trial.  Whether or
not you took notes, you should rely on your own memory of what
was said.  Notes are only to assist your memory.  You should not
be overly influenced by your notes or those of your fellow
jurors.
The punishment provided by law for this crime is for the
Court to decide.  You may not consider punishment in deciding
whether the government has proved its case against the defendant,
beyond a reasonable doubt.
A verdict form has been prepared for you.  After you have
reached a unanimous agreement on a verdict, your foreperson
should complete the verdict form, according to your
deliberations, sign and date it, and advise the court that you're
ready to return to the courtroom.
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If it becomes necessary, during your deliberations, to
communicate with me, you may send a note, through the clerk,
signed by any one or more of you.  No member of the jury should
ever attempt to communicate with me, except by a signed writing.
And I will respond to the jury concerning the case, only in
writing or here in open court.
If you send out a question, I will consult with the lawyers
before answering it, which may take some time.  You may continue
your deliberations while waiting for the answer to any question.
Remember, that you are not to tell anyone, including me, how the
jury stands, numerically or otherwise, on any question submitted
to you, including the question of the guilt of the defendant,
until after you have reached a unanimous verdict or been
discharged.
All right.  Ms. Connelly.
MS. CONNELLY:  May it please the court.  This case is
about the defendant's decision to perpetuate a massive fraud at a
time of national crisis.
Just over 18 months ago, the COVID-19 pandemic shut down our
country.  Businesses were told to close their doors.  People were
told to stay home.  And workers were laid off.  In the face of
this, the government moved quickly to establish pandemic relief
programs for suffering people and businesses.
The PPP and EIDL programs were designed to get money out
quickly, in the face of this diaster.  The funds were meant to be
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a lifeline to small businesses and their employees.  They were
meant to keep small businesses open and employees on the payroll.
In sum, they were meant to help small business owners and their
employees survive.
And in order to do so quickly, in order to get money to the
people who needed it most, these programs relied on people to
tell the truth.  The defendant, Eric Shibley, chose not to tell
the truth.
Instead, he decided to lie, and to line his pockets with
COVID relief money.  Eric Shibley submitted 26 fraudulent PPP
applications, and 13 fraudulent EIDL applications.  He received
over $2.8 million in taxpayer money.  He then tried to hide his
ill-gotten proceeds, by taking them out in cash.  And he was
successful in getting over $200,000 in cash.
We're not here today because Eric Shibley made a one-time
mistake, or made a small misstatement on loan paperwork, or is
bad at recordkeeping.  We're here today because Eric Shibley
chose to submit application, after application, after
application, containing lie, after lie, after lie.  He lied about
having employees.  He lied about the salaries that he paid those
employees.  And he lied about having paid payroll taxes on those
employees.
He submitted fake tax forms, with every application that he
submitted to the PPP lenders.  And he did all of this for one
purpose:  To steal money from pandemic relief programs that were
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meant to help legitimate small businesses and legitimate
employees.
Over the last few days, you have seen the evidence.  And it
shows that the defendant is guilty.  And now time for Eric
Shibley to be held accountable for his actions.  It is Eric
Shibley's actions and choices that bring us to this courtroom
today.
Eric Shibley is here today, having been charged with seven
counts of wire fraud, three counts of bank fraud, and five counts
of money laundering.  Judge Coughenour has instructed you as to
the elements of those charges.  He's instructed you what the
government needs to do to prove its case.
And now I'm going to walk you through all 15 of those counts,
and you will see how the evidence that we've presented to you
over the last few days at trial, proves beyond a reasonable doubt
each and every one of those elements.
But as we go through the evidence, I ask that you keep two
important things in mind:  First, when you consider a piece of
evidence, don't do it in isolation.  And what I mean by that is,
please consider each piece of evidence in the context of all the
other evidence that you have seen and heard in this case.  We
haven't shown you every loan document or every bank record, but
it's all in evidence.  You will be able to see it when you go
back to the jury room.  We're just highlighting certain loan
applications and certain bank records to help tell the story.
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But when you start deliberating, step back and look at the
big picture here.  None of this was about one bad loan, or one
small mistake.  None of this was done by accident.  And none of
this was a mistake.
Second, and most importantly, use your common sense when you
are evaluating the evidence and the testimony in this case.
Members of the jury, when you walk into a federal courthouse, you
don't have to check your common sense at the door.  You don't
have to leave your experiences and your intuition and your
instincts, when you walk through security.  So if you do those
two things, you will know that beyond a reasonable doubt, that
Eric Shibley is guilty for every count for which he's been
charged.
My presentation today has three parts.  First, we're going to
go through the scheme, which shows that Eric Shibley was engaged
in a scheme to defraud, and the material lies that he told SBA
and the lenders to take their money.
Second, we're going to review the evidence that shows that
Eric Shibley knew he was lying, that he had what Judge Coughenour
has told you, is the intent to defraud.
And, finally, I'm going to go through the elements of each of
the counts in the indictment, and show how the evidence ties into
all of them.
I'm going to use a slide deck as I speak with you, which is
simply meant to summarize the evidence.  These slides I show you
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are not going to be going back with you, but the exhibits and the
evidence will.
My slides are going to have exhibit numbers on them.  So you
should write them down, and take them back with you into the jury
room to help you deliberate.
So let's turn to first topic that I'm going to cover with
you, which is Mr. Shibley's scheme to defraud.  As Judge
Coughenour has explained to you, both the wire fraud and the bank
fraud counts require that the defendant has engaged in a scheme
to defraud.
Having a scheme simply means that there was a plan or a
course of action, that was designed to -- that was intended to
deceive and cheat people.
You're now well aware of Mr. Shibley's scheme.  The scheme
was to lie to lenders, and lie to the SBA, in order to receive
pandemic relief money.  How can you tell it's one big scheme?
Because the lies are all similar, across the lies to the SBA and
the PPP lenders.
You have heard the evidence of the three main lies that
Mr. Shibley told the PPP lenders, and that they all mattered.
Because if he had told the truth, he would not have received
nearly $3 million in COVID relief money.
He made up the numbers that he paid in payroll.  He made up
the number of employees that he had.  And he lied about having
paid payroll taxes on those employees.
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And then you saw similar lies on Mr. Shibley's EIDL
applications, where he made up his gross revenue figures, for the
twelve months prior to January 31, 2020.  And then he continued
to lie about his number of employees on all of those
applications.
The numbers on Mr. Shibley's PPP and EIDL applications are,
quite simply, made up.  They are pulled from thin air.  And how
do you know this?  Because businesses, real businesses, with real
employees, leave a paper trail.  A real business has federal tax
records.  A real business has state tax records.  A real business
has bank records showing activity, paying employees.  And if all
else fails, at the very least, the business itself has records.
And you have seen that there's no paper trail for any of
Mr. Shibley's businesses, because they were not really businesses
with real employees.  And they were definitely not the businesses
that he told the SBA and the lenders that they were.
The first place we looked in our search for Mr. Shibley's
businesses, was with the IRS.  And, remember, you heard from Mr.
Hernandez, that the IRS had no records of any of the businesses
that Mr. Shibley claimed to have.  And Mr. Hernandez walked you
through some of the W-3s and the 941s that were filed with these
applications.  And he told you that not one of them had been
filed with the IRS.  And that means that all of the tax forms
that Mr. Shibley submitted with his applications, they were
fakes.  Mr. Shibley never paid payroll taxes on his entities,
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despite his representations to the SBA and the lenders otherwise.
You also heard from witnesses from the Washington State
Department of Revenue and the Washington Employment Security
Department.  Jeff Hillers told you, of the Washington Department
of Revenue, told you that most of the Shibley entities never
reported any revenue.  Only Mr. Shibley's medical practice had
reported some revenue.  But it was so little, that he rarely had
to pay any sort of state tax.
And Mr. Hillers also told you that DOR had no records for
Dituri Construction, SS1, or A Team Holdings.  And also, that
there were no contractor's licenses for any of those companies
with the state.
Then Cynthia Cole, of the Washington Employment Security
Department, told you that not one of the Shibley entities had
paid state payroll or unemployment taxes in 2019 and 2020.  Not
Dituri Construction.  Not SS1.  Not the A Team Holdings.  Not
Seattle's Finest Cannabis.  And not ES1 or Shibley Medical.
In fact, the only records that the Employment Security
Department found in its search of Eric Shibley and the Shibley
entities, showed that Mr. Shibley, himself, was receiving
pandemic unemployment assistance, or PUA, another CARES Act
program at the time.
And, again, this tells you that Mr. Shibley was well aware of
how to file paperwork and file his taxes, when he, himself, could
get money.
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We then looked for evidence of these businesses in
Mr. Shibley's 59 bank accounts.  The bank records for these
entities did not show anything supporting the numbers in these
loan applications.
You heard testimony from Michael Petron, the accountant who
reviewed all of the bank records in this case, for the time
period right before Mr. Shibley applied for these loans.  And he
told you that for the period between October 2019 and March 2020,
only -- or, I'm sorry, between January 2019 and March 2020, only
$570,000 of new money came into those accounts.  And he showed
you how that compared to Mr. Shibley's statements on his loan
applications, claiming over $4 million of revenue -- or of
payroll, for that same period.
It simply doesn't square that a person can pay $1 million of
payroll a month, yet there is no record of it in the bank
accounts, at all.  You can't pay salaries without revenue or
money coming in.  You don't have to be an accountant, like Mr.
Petron, to understand that concept.  There's no payroll without
revenue.  It's common sense.
And remember what Mr. Petron told you about the accounts
individually?  You had Dituri Construction, which didn't even
have a bank account until it applied for a PPP loan.  You had
SS1, which, again, did not have a bank account until after
applying for PPP loans.  You had the A Team Holdings, which only
had a minimal amount of new money flowing through the accounts,
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prior to the time of these loan applications.  You had Seattle's
Finest Cannabis, with no bank account, yet again.  And then you
had ES1 and the medical practice, which did have some money
flowing through it.  But, again, not enough to cover the payroll
obligations that Mr. Shibley was claiming.
And remember also, Mr. Shibley -- or, Mr. Petron did the math
on what the annual salary would be for each employee, if
Mr. Shibley's loan numbers were actually correct.  And at its
lowest, each of his employees would be making $73,000 a year.  At
its highest, they would be making over $95,000 a year.  And Mr.
Petron concluded, by showing you all of the accounts combined,
and he came to a very simple conclusion.  There is nothing in
these accounts supporting the payroll numbers that Mr. Shibley
stated on his applications.
Finally, you saw the stipulation in this case.  In response
to a grand jury subpoena for records, all of these entities, all
of these alleged small businesses, produced certain records.  And
you are going to have the records back there in the jury room
with you.  And you should look through them.  You are going to
see that there's not a single thing in those records that shows a
list of employees, not a single thing in those records that shows
payroll being paid, not a single thing to support the ludicrous
numbers that Mr. Shibley came up with on these loan applications.
That's because those numbers just aren't true.
All that Mr. Shibley was able to produce was an e-mail to his
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accountant, to one of his bookkeepers, Mario Davis, where he
tells Mr. Davis that his employees are actually only paid between
$8,000 and $12,000 a year.  And even that has nothing supporting
it, except Mr. Shibley's own words.
And even taking it as true, it's a far cry from the $73,000
or $95,000 annually, that Mr. Shibley was claiming to pay his
employees on these loan applications.
Use your common sense, members of the jury.  A business that
is paying $1 million a month in payroll, $12 million a year,
annually, in payroll, does not operate without leaving any
evidence of it.  It's just not possible.  And that's what we have
in this case.  Not a shred of evidence that the businesses are
operating as Mr. Shibley claimed they were.
And then we can look at the loan applications themselves to
see more of the lies.  Remember, the loan applications are
littered with inconsistencies.  There were so many lies, that
Mr. Shibley couldn't keep up with them.  It's hard to keep track
of your lies, when you tell as many as Mr. Shibley did.
Just to highlight some of the more egregious examples.  We
had Dituri Construction, which had not one, not two, but three
different loan applications, with three different numbers.  Look
at these when you are back in the jury room.  Take them in.
And to top it off, the applications were supported by two
different 941s.  They're both signed by Mr. Shibley.  And you are
going to see this, with his changing applications, the supporting
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documentation changed too.
For the A Team Holdings, you had an EIDL application and a
PPP application that were wildly inconsistent with each other.
On March 31st, he applied for an EIDL, claiming to have $180,000
in gross revenue and four employees.  And in the two weeks
between when he applied for his EIDL and his PPP, somehow his
businesses expanded to 48 employees.
Mr. Shibley went so far as to change the name of Seattle's
Finest Cannabis, after he was denied the PPP and EIDL loans.  But
not only that, in his PPP applications, like in Government's
Exhibit 2, he has -- claims to have six employees.  And then, by
April, and then June, he has between four and six new employees
on his EIDL applications.
And to top it off, in his EIDL applications, Mr. Shibley's
gross revenues more than doubled.  The ES1 applications,
Mr. Shibley changed his business type, after being denied as a
real estate developer, in Government's Exhibit 33.  But not to be
deterred, you see in Government's Exhibit 32, he reapplies and
just calls himself a construction contractor now.  Because his
business is not actually established.  His business is whatever
it needs to be to get him COVID relief money.
Special Agent Moran testified extensively, walking you
through these loan applications.  You are going to have the
summary charts that she showed you, back in the jury room with
you, and you are going to be able to see all of these
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inconsistencies for yourself.
And when you look at these inconsistencies, again, take a
step back, look at the big picture.  We don't sit here today
because of a mistake or a typo.  We sit here today because of the
concerted scheme to steal COVID relief money.  Mr. Shibley just
didn't lie once, he didn't lie twice, he lied over and over and
over again.
And then when Mr. Shibley learned that his scheme was about
to be uncovered, that the lenders had questions about the loans
that had been funded, Mr. Shibley made another desperate attempt
to conceal the fact that his businesses had no real employees,
that he had lied.  After his loans with Celtic and Harvest were
recalled, he provided both lenders with fake and fraudulent
employee lists.  And those lists contain more lies, in an attempt
to get the PPP money back in his accounts.
First, the lists were nearly identical.  By the time he
provided names to Harvest, you see three names being added.  But
the first seven are the same for both.  And just think about
that.  Mr. Shibley is claiming to have two separate businesses
with two separate crews.  And they each have over 40 salaried
employees.  But in response to our request for employee names and
identification, he supplied the two banks, for two different
loans, with the exact same names.  This is the best he could come
up with, even when pressed for specifics about his employees.
This is the best he could come up with, even when motivated to
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get the money back.
But the problems with these lists don't stop at -- or don't
stop at the fact that they match.  You saw the records from the
Washington State Employment Security Department.  And none of the
employees listed by Mr. Shibley worked for him, according to
Washington State ESD.
Mr. Shibley did not pay state unemployment taxes on any one
of these employees.  He did not pay them a salary.  He did not
pay payroll taxes on them.  He did not withhold taxes from them.
They, quite simply, were not his employees.
And you heard even more about two of the names on both of
these lists, that do not and could not have ever been employed by
Mr. Shibley.  You heard from Ms. Velotta, who told you that she
had never heard of and certainly never worked for Mr. Shibley.
She also told you how, after she was approached by the FBI, she
looked up Mr. Shibley's phone number and gave him a call.  After
saying hello and identifying himself, Mr. Shibley quickly hung up
on her, after she told him who she was.  He told her to stop
bothering him.
Think about that.  Mr. Shibley has just used Ms. Velotta 's
name in order to get PPP money.  Ms. Velotta spoke to Mr. Shibley
and identified herself as one of his supposed employees, and an
employee name that he used to apply for loans; and he immediately
hung up on her.  That shows you he knew he used a fake name when
he sent this e-mail.
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You also saw the death certificate for Sam Morgan.  Sam
Morgan died in 1987.  And you heard from Special Agent Moran that
the investigative team only found one Sam Morgan, with the last
four digits 3218 of his social security number.  And that Sam
Morgan died in Pennsylvania, 30 years ago.
Mr. Shibley used Lisa Velotta and Sam Morgan to further his
scheme.  He didn't care if they were his employees.  He didn't
even care if they were alive.  The submission of these names to
Celtic and Harvest was yet another lie in Mr. Shibley's web,
another way that he used lies to defraud and to make money for
himself.
Let's talk a little bit about materiality.  And in Judge
Coughenour's instructions, you heard him say "material" a few
times.  As Judge Coughenour said, "material" just means that it
influenced or was capable of influencing someone's decision.  Did
it matter?  Could it have mattered?  That's what you need to ask
yourself, when thinking about Mr. Shibley's lies.
There's a lot of evidence that Mr. Shibley's lies mattered to
the SBA and the lenders.  Starting with the SBA loan application
form itself, which is Government's Exhibit 40, the loan
application tells you that these statements were material.  And
that's also true of the EIDL applications.  We see this
certification at the end of every single EIDL application.  And
when Mr. Shibley signed the PPP and EIDL applications, he
certified that all of the information contained therein was true
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and correct.  This was so important to the SBA in the PPP and
EIDL programs, that these certifications appeared over and over
and over again.  And the they also appeared on the loan notes
themselves.  You saw these certifications appear.  If we remember
the Celtic Bank loan, as an example, in Government's Exhibit 4.
And on one of the EIDL loans, in Government's Exhibit 27.
And there was a reason that the truthfulness of the
applicants was so important in these programs.  Kandace Zelaya
and Kathleen Littwin told you about it.  These programs didn't
ask for the normal level of documentation.  And that was because
the country was in a crisis.  The government was trying to get
money out as quickly as possible.
And every single lender witness who came in here and
testified, told you that the truthfulness of applicants matters.
They all told you the same thing.  They would not have loaned PPP
money to a business that lied about their payroll.  They would
not have loaned PPP money to a business that lied about their
number of employees.  They would not have loaned PPP money to
businesses that submitted inaccurate or fake supporting
documentation.  And they would not have loaned forgivable PPP
money to someone who lied about their probation status.
All of the lender witnesses told you that this was material.
Remember, John Mosier, Adam Seery, Nissen Liddiard, David
Haagsma, and then finally Kandace Zelaya, told you that from the
SBA's perspective, the truthfulness of the applicants mattered.
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Everyone is in agreement.  These schemes, these lies, they
mattered a lot.
And, of course, they did.  It's common sense.  The point of
these programs was to help real businesses, real employees, real
people suffering from what COVID was doing to small business.  It
wasn't to help fake companies, shell entities, or people like
Mr. Shibley, who stole names and submitted false documents.
Finally, when you consider materiality, look at Mr. Shibley's
own actions.  They clearly tell you that this mattered.  If these
lies were not material, why did Mr. Shibley lie over and over and
over again?  Why not tell the lenders that he didn't have a 155
salaried employees?  Why not tell the lenders that the tax forms
weren't filed?  Why not tell the lenders that he had an all-cash
business, with no records?  Why not tell the lenders that he
hadn't paid his taxes?
Mr. Shibley didn't tell the lenders any of these things,
because if he had, he knew he wouldn't get the money.  He knew it
mattered.  He knew he had to submit fake tax forms to get the
loan, so he created some.  He knew he had to have employees to
get the loan, so he made them up.  He knew he could get more
money with the more payroll he claimed, so he came up with
preposterous figures.  You know it was material, because of
Mr. Shibley's own actions.
Let's turn to part two of my presentation, which focuses on
the evidence that shows that Eric Shibley knew he was lying to
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the lenders or that he had fraudulent intent.
THE COURT:  Let's take a moment and let the jury stand
up and stretch.
(Stretch break.)
THE COURT:  Okay.
MS. CONNELLY:  Okay.
So intent.  Judge Coughenour has instructed you about
knowledge, about intent to defraud.  So how do you figure out
Eric Shibley's intent?  Well, we can't get inside Eric Shibley's
head.  We can look at his words and actions to figure out what
his intention was, what his goals were for the scheme.
One way to figure out Eric Shibley's intent would be to look
at the evidence, and keep an important point in mind.  Guilty
people lie.  They cover things up.  And the most compelling
evidence of Mr. Shibley's intent are the lies.  And in this case,
the lies that Eric Shibley told the lenders and to the SBA were
to defraud them of their and taxpayer money.
We have already been through so many of the lies, I won't
harp on them here.  But when thinking about Mr. Shibley's intent,
an important thing to look at is his conduct after he realized
that some of the PPP funds had been recalled by the lenders and
seized by the government.
On May 27th, 2020 -- as of May 27th, 2020, Mr. Shibley knows
that people are onto him.  He may not know everything, or
understand all the facts, but he knows that his lies are going to
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be exposed.  And at that point, he decided to push forward.  He
chose to double down on his scheme.  He chose to continue lying.
And his first move was to provide fake lists of employee
names to Celtic and Harvest, which we have already gone through.
But he had an insurance policy, if that didn't work out for him.
He simultaneously decided to grab as much cash as he could,
before the other PPP and EIDL funds were seized.  You saw he
heard about the federal case in Government's Exhibit 47.  And
then you heard that he ran to Navy Federal Credit Union, the next
day, to take out $50,000 in PPP proceeds, in cash.  Why did he do
that?  You know, members of the jury.  He did that because he
knew the jig was up.
You also saw that he applied for two EIDL loans in the name
of Dituri and SS1, on June 7th of 2020.  And then they were
funded on June 19th of 2020.  And he immediately moved the money
to different accounts.  And then on June 22nd, he goes to Verity
Credit Union, and tries to take out a good portion of that money
in cashier's checks.  Not just one cashier's check.  He got seven
different cashier's check, each for $20,000.  You saw this in Mr.
Petron's summary charts, in Government's Exhibit 209.
This was an effort to move the money and keep it away from
law enforcement, who he knew was onto him.  He was not going to
make the same mistake twice.  He was not going to let the federal
government seize his money again.
And you know that at least one of those cashier's checks made
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its way into a Navy Federal Credit Union account in the name of
ES1 LLC.  And you also know that the plan didn't really work out
for him.  The government was able to seize most of the money,
despite his best efforts.  But think about that behavior, when
you start thinking about Mr. Shibley's intent.  As I said before,
guilty people lie.  They try to cover up.
And someone who legitimately needed and got these loans to
keep their employees employed, would be trying to correct the
issue at this point.  They would be concerned about their
employees.  They wouldn't be engaged in a cash-grab, running from
bank to bank in an attempt to hide proceeds from the government.
You saw the e-mail to Harvest, noting that the federal
government had seized his money.  You saw the bank records
showing the cash withdrawals, after this point.  And you heard
from Special Agent Moran about how she and other agents were
following Mr. Shibley at this point, where he went from bank to
bank to bank.
That's why it's so important that you use your common sense
when you evaluate the evidence in this case.  It's your common
sense that will help you determine whether Eric Shibley's
conduct, during the course of this scheme, is consistent with
someone who is running six legitimate businesses, with a million
dollars of payroll a month, to over 150 employees, but was just
behind on his taxes, or bad at his paperwork.  Or whether it's
consistent with someone who was engaged in a fraudulent
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cash-grab, and was trying to cover it up.
And what your common sense tells you is that Eric Shibley
didn't have anywhere close to 150 employees.  He actually had
zero employees that he was paying salaries to.  And he had zero
employees that he was paying payroll taxes for.  And in order to
qualify for one of these forgivable loans, he had to have real
employees.  It said it on the form, over and over and over again.
It's the reason he was required to submit a 941 with each of the
applications.  Your common sense tells you, if he really believed
he was entitled to this money, he would have provided real
documentation to the SBA and to the lenders.  He would have
provided real employee names, when asked.
I want to take a few moments and just address Mr. Shibley's
testimony.  Mr. Shibley said a lot of things during his testimony
yesterday, and today.  Just because Mr. Shibley says something,
doesn't make it so.  Evaluate his testimony critically.  The
government has presented you with ample evidence of the
inconsistencies in the loan documents, the fact that there is no
evidence of federal payroll taxes, or state payroll taxes, the
fact that there's nothing in the bank accounts to support the
numbers that Mr. Shibley provided on these loan applications.
And the fact that none of Mr. Shibley's claimed employees
actually worked for him, according to the state.
Mr. Shibley claims he has 155 employees and over $1 million
in payroll, and $1 million in revenue each month.  But there's
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just no documentary evidence of that.  Mr. Shibley has opened 59
different bank accounts, yet he apparently cannot be bothered to
use them.  Why, then, does he not have any books or records of
these businesses?  You know why.  Because he had these businesses
in name only.  He had three properties he was flipping "for
cheap," as he said over and over in his testimony.  He was not a
real estate mogul paying $1 million a month to 155 employees.
And you heard from Mr. Shibley that his workers were
primarily homeless and down on their luck.  The term he used for
where they lived was "shanties" or "under the bridge."  But
remember this chart from Mike Petron.  If we accept Mr. Shibley's
loan application numbers as true, he would be paying each
employee a minimum of $73,000 a year, or a maximum of $95,000 a
year.  How does this square together?  It doesn't.  155 people
who are making an average of $95,000 a year, are not all going to
be living in shanties.
The government presented you evidence of what Mr. Shibley's
business really was.  Mr. Shibley had some rental properties and
workers at those properties.  David Madrid told you about those
properties.  David Madrid told you that he never saw Mr. Shibley
give anyone any cash, and Mr. Shibley told David Madrid that he
paid his workers in rent and some food to eat.  The fact that
Mr. Shibley had some sort of house-flipping business using cheap
labor doesn't excuse the fact that he lied to the SBA or the
lenders in this case.  He lied to them repeatedly about having
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real employees, making real salaries and receiving real benefits
to obtain forgivable government loans.  Mr. Shibley represented
on each loan that he had -- every time he submitted an
application saying this, he lied.  Mr. Shibley had some workers
for his own properties.  He did not have employees.
Turning to the third and final part of my presentation, I'm
just going to go through the elements of each count of the
indictment and show you how the evidence matches those elements.
I'm going to go through one by one and explain how the evidence
I've just summarized fits in the elements of the counts.  There's
overlap because we have already been through the scheme and
intent and materiality in great detail.  The evidence that shows
the existence of the scheme and the materiality of the scheme and
the defendant's intent is going to be similar from count to
count.  But as the judge has instructed you, consider each count
separately when you are deliberating.
Eric Shibley is charged with wire fraud, bank fraud, and
money laundering.  Counts 1 through 7 charge the defendant with
wire fraud, which requires four elements.  First, that the
defendant knowingly devised a scheme or plan to defraud by means
of false or fraudulent pretenses; second, that the statements
made or facts omitted as part of the scheme were material; third,
that the defendant acted with the intent to defraud; and, fourth,
that the defendant used or caused to be used an interstate wire
communication to carry out an essential part of the scheme.
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So turning to Count 1, this relates to the documents we have
seen time and time again in Government's Exhibit 1.  It's the
electronic transmission of the loan note with false certification
to Ready Capital on April 23rd, 2020, in the name of the A Team
Holdings.
First, the scheme to defraud.  We have already discussed this
in great detail, the scheme and the lies involved.  Second, that
the lies were material.  Again, we've already discussed this in
great detail.  There's plenty of evidence of false statements and
concealment in the scheme.  Think about how many false statements
we saw in the loan applications about the defendant's employees
and payroll and payroll taxes.  Third, that the defendant acted
with the intent to defraud.  Again, we have covered it, so I'm
not going to cover it again.  And, finally, that the wire
traveled in interstate commerce.  You know that Mr. Shibley sent
this from his house in Washington State because of the DocuSign
certificate that is attached with IP address information.  And,
then, John Moshier, the Ready Capital witness, told you that
Ready Capital servers were based in New Jersey and that PPP notes
would be received in those servers.  And you also know that Eric
Shibley was in Washington State for the entirety of the scheme
because of the IP address information and the bank records that
Special Agent Moran testified to.
Turning to Count 2, this relates to the documents that we
have looked at in Government's Exhibit 2.  It's the electronic
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transmission of the fraudulent PPP application to TCF Bank in the
name of Seattle's Finest Cannabis.  Again, the scheme to defraud
we have covered, as we have also covered the materiality of the
lies.  Intent to defraud, we also have covered.  So we're left
with that the wire traveled in interstate commerce.  This is,
again, easy.  You know that Mr. Shibley was in Washington State
for the entirety of his scheme.  And Dave Haagsma of TCF Bank,
now Huntington Bank, told you that loan applications would have
been received and reviewed by employees in Minnesota, Michigan,
or Ohio.  So, again, you have an interstate wire.
Moving on to Counts 3 and 4, which I would like to discuss
together because they are both Dituri Construction applications
that we have looked at in Government's Exhibits 3 and 4, and
they're illuminating because of the inconsistencies between the
two, which I know that we have discussed at length at this point.
Count 3 relates to the documents that we looked at in
Government's Exhibit 3, and Count 4 relates to Government's
Exhibit 4.  And looking at them, you see that the two loans seek
very different amounts and are supported by two entirely
different tax forms.  And for both of those counts, we have
covered the scheme to defraud, the material lies, and that
Mr. Shibley had the intent to defraud when he engaged in the
scheme.
But for Dituri, also remember that you saw that purchase
agreement from May 2020 that Mr. Shibley provided in response to
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the grand jury subpoena.  Mr. Shibley purchased an ownership
interest in Dituri Construction in May of 2020 for $10.  Think
about that.  This is a business that was supposedly paying out
payroll of over $400,000 a month, yet it was only worth $10?  It
just doesn't add up.
The last element for both of these counts is, again, that the
wires traveled in interstate commerce.  And this is, again, easy
because Mr. Shibley was based in Washington State for the
entirety of his scheme.  For Count 3, John Mosier told you that
Ready Capital didn't have servers in Washington and it would have
been received in New Jersey, just as in Count 1.  And for
Count 4, Nissen Liddiard told you that Celtic Bank servers were
in Utah and that they didn't have servers in Washington.  So for
both of these, you again have an interstate wire.
Turning to Count 5, which relates to the documents we looked
at in Government's Exhibit 5 -- or 5 and 46, it's the electronic
transmission of the loan note to Harvest for SS1 on May 5th.  And
as with the other counts, we have covered the scheme, we have
covered materiality, and we've covered that he had the intent to
defraud.  The last element of Count 5 is that the wire traveled
in interstate commerce, which is again easy, because Mr. Shibley
sent the loan note in an e-mail from Washington State where he
was based, and Adam Seery told you that Harvest received e-mails
in California where it is based.  So, again, you have the
interstate wire.
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Moving to Count 6, which is related to Government's
Exhibit 27, this is the fraudulent EIDL application on June 7th,
2020, in the name of Dituri Construction LLC.  And, again, we
have covered all the elements here, but on this wire in
particular, remember -- actually, I apologize.  But turning to
the last element of Count 6, you know that the wire traveled in
interstate commerce because Kathleen Littwin told you that this
loan application was sent to a server in West Des Moines Iowa.
She knew that because of the date of the loan application and the
application number.
Turning to Count 7, which relates to government's Exhibit 28,
this is the fraudulent EIDL application on June 7th, 2020, in the
name of SS1.  On the SS1 EIDL application remember that
Mr. Shibley submits a second EIDL application, just a week later
claiming $200,000 less in gross revenues for the year before.
And remember that on this application, which was submitted on the
same day as the Dituri application submitted in Count 6, they
have the same exact gross revenues and cost of goods.
The last element, again, for Count 7 is easy.  You know that
the wire traveled in interstate commerce because Kathleen Littwin
told you that this would have been received in West Des Moines,
Iowa.
All of the wires that we have walked through in Counts 1
through 7 were used to carry out a part of the scheme.  They were
all essential parts of the scheme because the false application
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or the loan notes that Mr. Shibley submitted were to get money
out of the lenders and the SBA.
Moving to the bank fraud counts that Mr. Shibley is charged
with in Counts 8 through 10, bank fraud requires five elements.
First, that the defendant, again, knowingly carried out a scheme
or plan to obtain money or property from a financial institution
by making false statements or promises; second, that the
defendant knew that the false statements or promises were
false -- that the statements or promises were false; third, that
the statements or promises were material; fourth, that the
defendant acted with the intent to defraud; and, fifth, that the
financial institution was federally insured.
Count 8 is the exact same submission we just looked at in
Count 2.  It is the electronic transmission of the fraudulent PPP
application to TCF Bank in the name of Seattle's Finest Cannabis.
And you know that TCF Bank was federally insured because you saw
the FDIC certificate in Government's Exhibit 213 and you heard
Mr. Haagsma testify to that.
Count 9 is the electronic transmission of the loan note with
the false certification to Customers Bank in the name of the A
Team Holdings.
THE COURT:  Counsel, let's deal with that after lunch.
MS. CONNELLY:  Okay.
THE COURT:  We will take the noon recess until one
o'clock.  Your lunches should be delivered to you shortly, if
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they're not already in there.  We will be in recess.
(Recessed.)
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AFTERNOON SESSION
THE COURT:  Are you ready for the jury?
MS. CONNELLY:  Yes, Your Honor.
THE COURT:  All right.  Bring them in.
Please be seated.
(The following occurred in the presence of the jury.)
THE COURT:  All right.
MS. CONNELLY:  So just to orient us to where we were
before we had to head to lunch, we have been reviewing the counts
of the indictment that you are going to be reviewing when you get
back to the jury room.  And we have gone through the wire fraud
counts, which is Counts 1 through 7, and we're now at the bank
fraud counts, which are Counts 8 through 10.
And we left on Count 9, which is the electronic transmission
of a loan note with false certifications to Customers Bank, in
the name of the A Team Holdings on April 30th of 2020.  And
remember that this is the same loan application that was sent to
Ready Capital that is the basis of Count 1.
John Moshier told that you Ready Capital and Customers Bank
had an agreement, namely that Ready Capital would receive and
approve the loans, and then Customers Bank would fund the loans.
And after Ready Capital approved the loan, it would send the loan
note in the name of Customers Bank to the borrowers.  And, again,
Customers Bank, as you see on the screen, is FDIC insured.  You
saw the FDIC insured certificate in Government's Exhibit 212.
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Count 10 is the exact same submission, again, that we went
through in Count 4.  It, again, related to the documents we
looked at in Government's Exhibit 4.  It's the electronic
transmission of the PPP application to Celtic Bank in the name of
Dituri Construction.  There's no doubt here that Celtic Bank was
federally insured.  You saw Nissen Liddiard testify to that fact.
Then you also saw the FDIC certificate in Government's 211.
As to the final five counts of the indictment, Eric Shibley
has been charged with money laundering.  Which you heard from
Judge Coughenour to mean that, one, the defendant knowingly
engaged or attempted to engage in a monetary transaction; two,
the defendant knew the transaction involved criminally derived
property; three, that the property had a value of greater than
$10,000; four, that the property was, in fact, derived from the
wire fraud or bank fraud, that we went through in Counts 1
through 10; and five, that the transaction occurred in the United
States.
The five transactions that Eric Shibley was charged for, for
money laundering, are as follows:
You have Count 11, which is the transfer of $960,000
Customers Bank PPP loan, that was provided to the A Team Holdings
from one Wells Fargo account on 5/4, to another Wells Fargo
account on 5/4.
You have Count 12, which is the transfer of the Celtic Bank
loan of $563,500, on May 6th, 2020, between two BECU accounts.
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Count 13 is the transfer of the $820,000 Harvest PPP loan
that was provided to SS1.  Again, from one BECU account to
another, on May 19th, of 2020.
Count 14 is actually just an extension was Count 11.  It
again relates to the $960,000 Customers Bank loan that went into
the Wells Fargo accounts.  And then when Mr. Shibley removed the
$150,000 in cash on May 26th of 2020.  That is the basis of
Count 14.
And finally, Count 15 is the deposit of a $20,000 cashier's
check, made up of EIDL proceeds, to a Navy Federal Credit Union
account in the name of ES1 LLC.
The evidence you have seen throughout this trial supports all
five of those money laundering charges.  You know that Eric
Shibley engaged in these transactions, because you have seen the
bank records.  And you can go back and look at the bank records
in the jury room.  You have seen he took money out in cash, he
moved money between accounts, and he obtained cashier's checks.
Furthermore, you know, and Eric Shibley knew, that the money
that he was moving was derived from wire and bank fraud proceeds,
because you can see it in the bank records.  And you heard from
Mr. Petron and Special Agent Moran that these did, in fact, come
from PPP and EIDL funds.  And you know that all of these
transactions occurred in the United States, because Mr. Shibley
was in Washington State for the entirety of his scheme.
Thus, each and every element of the money laundering charges
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has been satisfied.
Members of the jury, I'm nearly done, but I wanted to leave
you with some parting thoughts before I sit down.  I know there's
a lot of evidence and there are a lot of details to go through in
this case.  And when I sit down, Mr. Nance is going to have the
opportunity to speak to you, and then I'm going to speak to you
one last time.  And I ask that you -- as you listen to Mr. Nance
with the same attention that you have given me, that you ask
yourself, are the things he tells you in evidence?  Do they make
sense?  Do they fit in with what the witnesses have told you in
this case?
Make sure you continue to focus on the evidence.  Because
nothing that I say, or nothing that Mr. Nance says, whether in
opening statement, or closing arguments, or in the questions to
the witnesses, is actually evidence.  The documents, the
testimony that you have heard in this case, that's the evidence,
and that's what you should be focusing on.
But really when it comes down to it, this case is very
simple.  If it walks like a duck, if it quacks like a duck, then
it's a duck.  And so when you see Eric Shibley submitting loan
after loan after loan, containing lie after lie after lie, each
with new and different numbers, trust your instinct, trust your
judgment, and trust what you see.  Because if it looks like a
fraud, and it acts like a fraud, then, members of the jury, it's
a fraud.
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And in this case Eric Shibley, he lied to get money that was
not meant for him.  He lied to get money that he was not entitled
to.  He took advantage of an unprecedented crisis to line his own
pockets.  And he wound up getting $2.8 million in taxpayer money.
So find him guilty.  Thank you.
THE COURT:  All right.  Mr. Nance.
MR. NANCE:  May it please the court, counsel, ladies and
gentlemen of the jury.
In the opening I told you that this case was about a sloppy,
chaotic business with missing payrolls and missing documentation,
that the government has mistaken for bank fraud, wire fraud.  I
would suggest and submit that the evidence has borne that out.
Eric Shibley made a lot of mistakes in how he conducted his
business and how he attended to his tax reporting and his
obligations and how he applied for loans.  But the evidence has
not shown that he intended to defraud anybody.  And you should
acquit him of those charges.
What it has shown is a proud, ambitious man trying to fit, in
his own way, into American culture.  First, as simply a new
immigrant to America, struggling to learn English.  Then as a
doctor in a very demanding profession.  Finally, as a player, in
the hot Seattle housing market.
Eric Shibley is an intelligent man on many levels, but not
wise to the many ways of the business world.  When the PPP
program came along, he jumped at the opportunity without fully
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appreciating the importance of the paperwork he filed in support
of the applications and without a real understanding that the
business activities were heavily under-documented.
Now, you've seen some of the exhibits that we offered into
the case, everything from IDs of folks that worked for him as
employees, a number of exhibits pertaining to expenses, and
actually some photographs of actual work activity, interior and
exterior construction.  And as Mr. Shibley himself told you, this
was a tiny, tiny fraction of the total activity.  These were just
simply items that we were able to put together to show you.
Yes, there is a large underground economy out there, there's
no question about that, involving mostly all-cash transactions.
It's convenient, oftentimes.  It's economic.  And it affords some
privacy.  But there's real drawbacks to it, too.  It's harder,
much harder to get credit.  Without a paper trail, it's much
harder to prove that you actually paid for something.  And this
case has been a big illustration of that point.
The government wants to make this case open-and-shut by
saying that Mr. Shibley's bank records don't support his claims
of dozens of employees and a large payroll.  And, largely, we
agree that the bank records don't support that, that proposition.
That was the whole thesis of the testimony of Mr. Petron, Michael
Petron, the expensive financial consultant who testified on the
subject.
The bank records do not support his claim of a large payroll.
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But if he's dealing largely in cash, being paid in cash, paying
people in cash, people for expenses in cash, you wouldn't expect
the bank records to verify that much.
Mr. Petron, actually I asked him directly about some of this,
is a very much by-the-book kind of guy; everything is in its
place, his forms are filed, probably on time.  He's got heavy
documentation.  And he's probably current on his taxes.
Eric Shibley is the polar opposite.  He is not a play-
by-the-book kind of guy.  Things are out of place.  All the forms
aren't filed.  He's behind on his taxes.  It's just the way it
is.
Now, the elements of the case, of the thing -- Ms. Connelly
has been through this, but they're set forth -- the primary
charges are wire fraud and bank fraud.  And, of course, the money
laundering is based on that.  So if you go back to the elemental
charges, the fraud charges, the instructions and elements of
those are found in Instructions 15 and 16 in your packet.  Both
require a scheme or plan to take money by false statements.  The
statements have to be material, in that they have to have a
natural tendency to influence someone to part with money.  And
the person has to act with the intent to defraud, to deceive and
to cheat.
The government has not proven all of these elements beyond a
reasonable doubt.  Their job has been made more difficult by the
circumstances in the way that the PPP program was designed.  It
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was rushed out the door, in late March 2020, in the wake of the
pandemic crisis.  It was widely promoted.  Almost overnight, the
business community was hard hit, was flattened by the pandemic.
The same community was inundated with offers of seemingly free
government money.
Almost any business, anywhere in the country, with employees,
smaller businesses, less than 500 employees, were eligible.  Most
were impacted by the COVID problem, and so virtually any
business, every business with employees, was eligible.  They
could apply, they could use the money to pay workers.  There were
other expenses they could use it for, interest and utilities, and
have the loan, under certain conditions, forgiven outright, over
time.
But for the lenders, it was a gold mine.  The government
would pay them a handsome fee, of as much as 5 percent on the
face value, face amount of the loan, and guaranteed it.  If the
borrower repaid the loan on time, the lender made interest on the
loan and kept the fee.  If the borrower defaulted on the loan,
the lender was reimbursed by the SBA, and kept the funding fee.
If the loan was forgiven, which was the goal by many of the
borrowers, the lender was repaid the amount of the loan by the
SBA, and guess what, they kept the funding fee.
This was a tails-I-win-heads-you-lose sort of situation.  No
lose, risk-free opportunity for the lenders.
Ms. Zelaya, Kandace Zelaya told us -- of the SBA, told us
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that the SBA did not participate in the screening of the PPP
borrowers, nor did it monitor what the borrowers did with the
money, and did not require what the lenders monitor what was done
with the money.  Is it any wonder that there was a feeding frenzy
by the banks and the lenders to get on this gravy train.
John Moshier of Ready Capital acknowledged that, within weeks
of the passage of the CARES Act, his lending service had far too
many approved PPP loans to even fund them, and he had to farm
them out.  Mr. Seery, Adam Seery said his bank, Harvest Bank, had
to shut down all other lending at the time to deal with the glut
of PPP loans.  He called it a high-volume program.
There was another 38 -- let's see if I have this right --
there were 5,200 loans, I believe they funded, and 3,800 did not
get funded, not because the program ran out of money, not because
the applicants were rejected, but because they ran out of time.
They couldn't get to them fast enough.  They couldn't process the
loans fast enough.
Meanwhile, over at Celtic Banking, over half their business
was PPP lending, according to Nissen Liddiard, one of the
witnesses here.  Mr. Seery, of Harvard Bank -- Harvest Bank, gave
us the real reason.  The real reason for the bank stampede was to
do this lending.  There was a 5 percent upfront lending fee, paid
by the SBA to the lender, on loans up to $350,000; 3 percent on
larger loans, up to $2 million; and 1 percent on loans above $2
million.
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From this testimony, the testimony alone from this trial, we
know that Harvard -- I keep saying Harvard -- Harvest, Harvest
loaned $1.2 billion under the PPP program.  Its average loan size
was $200,000, according to the testimony, meaning it fell into
the 5 percent fee category.  If you do the math, that's about
$60 million in fees that Harvest made, just on this one program,
the 5,200 PPP applications.  Celtic Bank loaned over a billion
dollars last year.  It would have earned a similar amount.
TCF Bank, according to Dave Haagsma, its representative, did
twice that business, about $2 billion.  And then the only other
figure we got really was from Mr. Moshier, Ready Capital, who
said they processed 100,000 -- 100,000 PPP applications.
There was no meaningful verification process.  Mr. Moshier
told us what is already obvious.  It was far easier to qualify
for a PPP loan than it was a traditional loan, a conventional
loan; it was self-verifying, subject to less scrutiny, and it was
guaranteed.
He went further and said that his bank did not verify whether
borrowers were delinquent on taxes; it didn't matter to him.  In
reality, nothing much mattered to these lenders except processing
applications and taking the loan fees.
And, of course, all of these bankers were put on the spot.
They bring them in and they ask them if it mattered, if it
mattered what the applicants put on the applications.  What were
they supposed to say?  If they said it really didn't matter, they
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might be kicked out of the program.
Why does it matter in this case?  Well, it matters because it
goes to a critical element of a fraud prosecution.  The
government has to show that representations in PPP applications
were materially false.  They had to have a natural tendency to
influence or be capable of influencing a person to part with the
money.
The materiality and element is for you, the jury, to decide
that it has to be proven beyond a reasonable doubt.  But consider
that these bankers were motivated not so much by civic concern
and wanting do the right thing, as they were to join this gravy
train of a funding frenzy.  And in the environment of spring
2020, they may not have really cared about the fine print on the
funding applications they received.
The same is true for the odd language in the SBA form used in
the applications that appeared to restrict persons who were on
misdemeanor probation.  You will recall some of the early
testimony about that.  Even the SBA doesn't think that's material
now.  In the face of a lawsuit last year, accusing it of
overreaching its authority, it reconsidered its position and
agreed to revise the standard form that now allows misdemeanor
probationers, people like Mr. Shibley, who apparently was in that
position, to apply for loans.
The SBA may still say the original question on the form he
used concerning his misdemeanor status, probation status, was
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important; but its actions belie that.  You can bet that none of
the bankers gave it a second thought.  In the real-world, in the
business world, it wasn't material to them.  You could acquit
Mr. Shibley on that basis alone.
The other major point, the major element that is in question,
is the intent to defraud.  The instructions tell you that intent
to defraud is shown if one moves or acts to deceive and cheat.
And the evidence is, at best, ambiguous on that.  Mr. Shibley
denied it vehemently, of course.  You heard him directly.  He
told you his story.  He didn't have to testify, by the way.  He
had the right to remain silent.  He had a constitutional right to
remain silent.  And he chose to waive that right, subject himself
to a full cross-examination, and tell you his story.
And he told you about the highs, and some of the lows.  He
told you what he did, and he told you why he did it.  You know,
there was some chaos in his life, in his business.  I think
that's not any big secret.  But that doesn't make it criminal.
There's other things he did that cast doubt on any fraudulent
intent.
You know, a number of times I called up that Form 941 that
the government has repeatedly referred to as a part of the
applications.  The 941 is just the employer's quarterly report of
payroll.  And it was on that that many of these loans, maybe all
of them, were based.  But the 941 form itself, in fact all of
them that were submitted with his name on it, had a number of
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employees, a payroll amount, and a tax obligation that was
immediately due, or even past due, that was apparently unpaid.
Because the deposit area was a big fat zero.
So if he's going to -- if he's going to run a fraud, why
wouldn't he just say he paid the taxes.  I mean, why openly
acknowledge that you owe all of this money?  That's a deterrent
to being lent to.
The other -- one of the other things that he did, and this
was presented through the government's -- one of their witnesses,
Mr. Mondala, who talked about the phone call.  There were two
phone calls that he had with Mr. Shibley.  And Mr. Shibley, in
the phone calls, openly acknowledges:  Yeah, I'm calling about
getting this money.  I want to make this cash withdrawal.  And
he's asked:  Why do you need all of this cash?  Well, first of
all, it's in his name, he's applied for it, it's been granted.
So it's his money.
And he's quite candid about what he needs it for.  When he's
asked about it from Mr. Mondala, he needs the cash, he needs it
to pay employees.  Why does he need it to pay the employees?
That's what the employees expect.  That's what they want.  Some
of them, maybe a lot of them, don't have social security numbers.
I asked Mr. Mondala:  Well, what problems would that present?
Would a person with no social security number, and not any ID,
would that be a problem with cashing a check?  Yeah, of course it
would.
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It's also -- you know, if you're down and out with nothing,
no ID, no -- no means of really establishing your identity, and
you have to resort to a payday check cashing outfit, they're
going to take a big percentage of the money.  So that was what
was behind that.
The other thing that would have been unusual for a fraudster
to talk about was to sort of voluntarily talk about these
additional funds coming in.  There's another large PPP loan
proceed, $800,000, that's due within days at the same bank.
Mr. Shibley tells him:  Yeah, I'm planning to take that out, too,
in cash.  Yeah.
So I just think if he were -- if he were planning -- if you
are really planning a fraud, you don't -- you are not that open,
that candid, with a bank security person.
Also, Mr. Shibley never hid who he was.  He was always really
in the same place.  His phone number is on all of these
applications.  He could be found.  Mr. Mondala found him by
calling the number on the application.  He's at one location.
He's easily found.  He was available.  Nothing prevented folks
from coming out to meet him in person, or to going to the work
sites.
This is -- there's another way to look at this.  Isn't this
full set of circumstances also consistent with a man who is maybe
trying to find his way?  Maybe he's lost at sea.  You can think
of your own metaphor.  But if you flash back on his background,
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he's a proud individual.  He grew up in a really poor country.
And he achieved what, for a lot of folks there, would be an
impossible dream.  He made it to medical school.  I mean, that's
enormously prestigious.  He gets to medical school.  And then he
gets to go to America.  He gets -- that's one in 10,000 over
there.  That's very unusual.  He's the pride of his family.
And he's probably used to succeeding, at every level.  We
heard he was a good student.  I don't doubt it for a second.
He comes to America, and suddenly he's at ground zero, again.
He doesn't even speak the language.  And so he's got to start
there.  He does learn the language.  He apparently becomes a
naturalized USA citizen.  Gets back on his feet.  Wants to take a
run at doing medicine here.  Gets the credentials.  I'm sure it
wasn't easy.  He did it.
But then he's into it for a while, and darn if he's not
knocked back off his feet again.  He doesn't -- this isn't
working for him.  He is -- he's got issues within the profession.
You heard some of the problems.  It's bureaucratic, it's
overbearing.  He doesn't agree with the philosophy of a lot that
he sees in American medicine.  Some of us may agree with that or
disagree with that.  But that's the way he perceived it.  He
thinks it's too expensive, he thinks it's too directed toward,
you know, making money, rather than actually helping people,
which is what he thought he was getting into it to do.
And so he's withdrawing or trying to kind of put some
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distance there.  And he, on the side, begins lurching into this
other field that he, frankly, doesn't know that much about.  Real
estate.  He knows something.  He's smart, but this is a field
that he's not really that versed in, and he's using what he has.
I mean, the other major supports in his life have kind of fallen
away.  He's lurching into real estate.  He's using what he has at
his disposal.  He's got an old client base.  He's got lots of
contacts.  He knows, obviously the people, the life, the world,
that these former patients come from, as a down-and-out world.
That's where he goes to, because that's where he feels
comfortable working.  And he uses the network.  And he starts
doing what he's doing.
Now, he may not know the -- know the business, fully.  He
probably didn't understand tax issues, tax ramifications, tax
obligations.  Probably didn't understand formal payroll
operations.  Still probably trying to adjust to the culture,
probably doing a somewhat passable job at covering over.  But
there's stuff there that is still at issue, I'm sure.
Somewhere along the way he starts paying someone, probably to
help him get his bookkeeping together.  Frankly, it sounds like a
little half baked, like maybe it wasn't fully up to full
standards.  He's getting something done, but yet he doesn't
really have stuff that he can produce in the moment.  He doesn't
have anything that he can actually give to the government.  He
doesn't have anything really that he can bring in here and show
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you.
This was a -- yeah, this is simply a chaotic situation.  I
mean, he's trying to make it what it -- the best it can be.  But
there's no getting around this.  There are no written payroll
records that are available.  And there was not a smooth flow of
money into and out of accounts that can document the various
things that we have been talking about.
And then the pandemic hits.  The pandemic hits.  And there's
more chaos.  Mr. Shibley is a strong, creative individual, but
he's flattened by this as well.  A lot of businesses are.  He
sees the PPP as a lifeline.  This is a way that -- this may be
something here.  It was an opportunity.  And he acted because he
thought he was eligible to act.  He did what he did.  This might
be a way to save himself, to save his businesses, and keep the
ragtag operation alive and maybe give it new life.  It was not
perfect by any means, it's not pretty, but it's not criminal.
Eric Shibley is presumed innocent.  All defendants are
presumed innocent.  This is a criminal case, and there are very
high stakes for him.  The government has charged him with these
crimes, these fraud crimes.  Obviously, guilt by accusation,
guilt by indictment, is not evidence, it's not the test.  The
government easily believes everybody it charges is guilty, but
that's not the test.  It doesn't matter what the government
thinks; what matters in the end is what you think.
The test is whether, at the end of the day, it's proven its
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case beyond a reasonable doubt and overcome his presumption of
innocence.  The presumption of innocence, it's like a shield that
protects us all from arbitrary government action and having all
the forces of the government array against you.  It's how you
might feel if you or a member of your family were accused of a
crime.  You would probably greet that with some degree of
skepticism and say that you have got to show me, you have got to
prove this.  The presumption of innocence remains in full force
and effect until it's overcome by proof beyond a reasonable
doubt.  And even then, it's only overcome when you say it's over.
You have got the power to acquit.  Mr. Shibley can never be
guilty unless and until you say so.
The burden of proof in this case is on the government because
of its vast power, its money, its resources.  It's chosen to
unleash the full federal law enforcement apparatus in this case.
In fact, I'm not sure I can remember another case where so many
different federal law enforcement agencies have all come down on
one man in one case.  In this case, I mean, you could just tick
them off.  There's the FBI, the nation's premier law enforcement
agency; there's the IRS; there's the Department of Homeland
Security; there's the Office of Inspector General.  And they have
got different divisions, as I understand it.  One works with the
Federal Deposit Insurance Corporation that's involved here; of
course, the SBA, Small Business Administration, has an Office of
Inspector General; and then the Department of HHS, I think that's
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Health and Human Services, if I'm not mistaken, but it has an
investigative wing of that as well.  They have all been involved
in this and working on this.  And then, of course, there's two
talented AUSAs here, Assistant U.S. Attorneys, Ms. Connelly and
Mr. Werner.  So they have really thrown the book at Mr. Shibley.
The government has enormous power.  They have summoned law
enforcement, they have summoned private citizens -- we have seen
it here; Mr. Madrid, David Madrid, was brought in, Lisa Velotta
was brought in -- the government's combed through bank records
with a fine-tooth comb, and at least, in one instance, it used an
undercover police officer to make a deceptive phone call to
Mr. Shibley.  Instruction 13 says the law allows that, but we,
the defense, can't do that.  We can't do that.  That would be
probably a crime for us to do that, to record.  We can be
deceptive, I suppose, on the phone, but if we recorded something
unbeknownst to the person we're calling, that's criminal in this
state.  The defense can't make deceptive phone calls.  We do have
subpoena power, but the government not only has that; they have
the power to haul people before a grand jury, interrogate them at
length under oath, in secrecy, and on threat of contempt if they
don't talk.  People usually just agree and talk to them.  The
defense can't make people talk to them.  We can't obtain search
warrants; the government can.  We can't seize accounts; the
government can.  In fact, they did in this case.  We don't have a
badge to flash.  We can't haul people -- I think I have said
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that.  We can't do it.
We simply, the defense, can't investigate this case the way
the government can and has done, and it impacts the way that we
prepare for trial and actually conduct a trial.  If we can't talk
to witnesses in advance, it's more difficult for us to anticipate
how they might -- how things might play out.  Of course, the
government, on the other hand, has the resources, they have got
the tools, the police, the labs, the technicians, the forensic
experts.  They have got a lot of things that the defense simply
does not have.  Eric Shibley has a court-appointed lawyer and a
paralegal.  He lacks the resources to investigate and prepare the
way the government can and has.
So the burden of proof, a very long-winded way of talking
about it, but the burden of proof is placed fully on the
government because it helps level the playing field just a little
bit.
Now, the seriousness of the charges are all the more reason
that the burden of proof remain with the government because the
consequences of Eric Shibley being convicted, they're very
serious for him.  The burden of proof is properly on the
government's shoulders here.  So if something is missing in the
case, ask yourself:  Whose burden has it been to produce it?
Then there's reasonable doubt.  Instruction No. 4 talks about
reasonable doubt.  Basically, it's based on reason and common
sense.  Our own life experiences, though, and common sense, tell
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us that most things in life are not black and white; there's a
gray area in there.  The same is true in criminal law.  It's not
all innocence/all guilt.  There's a gray area in between, and
it's reasonable doubt.
Eric Shibley may well be fully innocent for the reasons I
have outlined, but you don't have to make that finding, you don't
have to give him a certificate of innocence to fully acquit him.
Because in between guilt and innocence, there's reasonable doubt.
And because of what's at stake here, Eric Shibley's ability to
walk out of this courtroom a free man unless the government
extinguishes every single reason to doubt, the gray area is
enough to acquit.  And you should acquit for ambiguity, for
uncertainty.  Reasonable doubt is any reason to doubt.  It's any
doubt with a reason.
Mr. Shibley, Eric Shibley, is not guilty of fraud or money
laundering because the evidence does not support those charges.
He did not intend to cheat anyone of anything; he's not guilty
and should be acquitted.
Now, you've invested a lot of time hearing this case, but
remember that you sit in a very privileged position.  As a
criminal juror, you are part of a justice system that is the
marvel of the free world.  The criminal jury is one of the
greatest protectors of personal liberty ever contrived and it's
one of the great cornerstones of our democracy.  It's enshrined
in the Bill of Rights, in our Constitution.
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As the jury, you twelve people represent all the people from
whom all legitimate government is derived.  You are the last line
of protection against ill-considered and overbearing actions by
the government.  And you, the jury, serve as the final check on
excessive government power.  You have both an awesome
responsibility and a magnificent opportunity to do justice -- to
do justice, to do right.  As the jury in your case, you're all
that stands between the government with its vast resources and
this man on trial for his liberty.  Our system wisely invests
you, the jury, with virtually absolute and final authority as the
fact finder.  No authority anywhere, not this court, not any
appellate court, can ever alter your decision to acquit Eric
Shibley and set him forever free.  You, and you alone, hold the
key to his liberty and you should use it.
THE COURT:  All right.  Rebuttal.
MS. CONNELLY:  May it please the court.  The defendant's
entire case rests on a fantasy world where he really does have
150 employees, he really does have to pay regular wages, he
really is a real estate mogul who's developing properties and
flipping house after house after house.  And he's just behind on
his paperwork, he's just not the most organized, his bookkeepers
and site managers couldn't get his records together, they
couldn't get the names of the employees together.  And, members
of the jury, this is just a fantasy because, if it were true,
someone would have found some evidence of the six companies
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paying a million dollars a month in payroll to over 150
employees.  But no one did, not the IRS, not the Washington State
agencies, not Mr. Petron, who reviewed bank accounts, and, most
importantly, in response to the grand jury subpoenas, not even
the businesses themselves could find any records.  They couldn't
produce a shred of evidence that they had paid a million dollars
a month in payroll to over 150 employees.  They couldn't even
produce the names of the bookkeepers that are allegedly running
these fantasy books that Mr. Shibley testified actually do exist.
They couldn't find the names of the site managers who collect the
names of the imaginary employees on these multiple sites that
Mr. Shibley is running.  No one saw these fantasy businesses and
the businesses didn't produce any records because they are just
that, they are a fantasy, and they didn't exist.
I want to talk briefly about Mr. Nance's statements about the
PPP and EIDL programs and the PPP lenders in particular.  The PPP
and EIDL programs may have been imperfect, but remember what they
were in response to.  They were in response to a crisis, they
were in response to an emergency.  And so maybe, with the benefit
of hindsight, we could come up with a better program, we could
figure out how to do this differently.  But the CARES Act is not
on trial, the SBA is not on trial, the PPP lenders are not on
trial, and the marketing department of the PPP lenders are
certainly not on trial.  Mr. Shibley is on trial.  He's the one
who submitted 39 fraudulent applications, and the fact that the
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loan process may have been condensed or there wasn't as much
documentation required is not a defense to Mr. Shibley's repeated
lies to the SBA and to the lenders.
The fact that the lenders made a processing fee is not a
defense to the fact that Mr. Shibley provided fake tax forms and
lied repeatedly when asked about the state of his businesses.
Whatever motivation the lenders may have had does not change
Mr. Shibley's lies in this case.
Mr. Nance also talked to you about reasonable doubt.  And
that's an instruction that you can look at, as Mr. Nance noted,
and it's Instruction No. 4.  Member of the jury, proof beyond a
reasonable doubt is not proof beyond all doubt; it's not complete
certainty.  The government embraces its burden in this case, and
we submit to you that we have proved beyond a reasonable doubt
all of the elements of this case.  We have done that through the
testimony of all of the witnesses you have heard and all of the
documents that you are going to take back to the jury room with
you and review on your own.  But keep in mind that proof beyond a
reasonable doubt is not proof beyond all doubt.
And also, as you think about this, think about whether the
story that Mr. Shibley told you is reasonable.  Let's just
explore the scenario that Mr. Shibley has presented us with
through his testimony.  He told us that he's running multiple
successful construction and real estate businesses where he's
taking in both a million dollars a month in revenue and also
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paying out a million dollars a month in payroll.  And on top of
that, he has a 10 percent profit margin, which means he is
pocketing $100,000 a month.  By my math, that means he's taking
in $1.2 million in profit every year on these companies.  And all
of that is apparently operating outside of his 59 bank accounts.
None of it can be seen in the bank accounts.  He has 59 bank
accounts that have some activity, 59 bank accounts in the names
of some of these businesses, or in all of these businesses, but,
apparently, the bank accounts aren't actually for his actual
businesses.  And they're also not for his profits, because
Mr. Petron told you he doesn't see $1.2 million coming into those
bank accounts.  So all of this money is flowing through
Mr. Shibley's hands in cash.
And yet, remember when he testified, he talked about how,
when the PPP money came into his checking account, he had to
immediately move it over to a saving account, and that was
apparently because he testified that the checking account would
be too easy to access if he dropped his wallet at one of his
construction sites.  And he told you to just imagine the
population that he was dealing with to explain why he couldn't
have this PPP money in his checking accounts.  But think about
that:  Mr. Shibley is apparently walking around all these
construction sites, handling a million dollars in cash a month,
taking it in, paying it back out with no problem, but a checking
account is apparently not secure enough for Mr. Shibley.
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But even if you believe all of that, that there is this
fantasy business operating outside of Mr. Shibley's 59 bank
accounts, and in the world where a checking account is not secure
but having a million dollars a month in cash is, outside of the
bank accounts, it doesn't change the fact that Mr. Shibley
repeatedly lied to the SBA.  It doesn't change the fact that
every 941 he filed on these applications was not filed with the
IRS; it doesn't change the fact that he had never paid payroll
taxes; it doesn't change the fact that his applications don't
even match; and it doesn't change the fact that he was on
probation.
Even living in the world that Mr. Shibley has concocted, he
has still lied repeatedly to the SBA in order to get forgivable
COVID relief loans.  And those lies mattered.  There are no
innocent explanations for a scheme involving the submission of 39
PPP and EIDL applications containing false statements,
misrepresentations, and inconsistencies.  Mr. Shibley made up the
numbers for these businesses and he submitted fake 941s, and he
did this to engage in a cash-grab at a time of emergency.  There
is no evidence that Eric Shibley actually ran six legitimate
businesses that were paying over 150 employees over a million
dollars a month.
What you see is Eric Shibley telling lie after lie.  What you
see is Eric Shibley intentionally bilking pandemic relief
programs out of millions of dollars.  This is not a simple
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mistake or a simple misunderstanding.  This is not a case about
one or two bad loans.  This is a case about 39 fraudulent loan
applications and an attempt to circumvent law enforcement and
take the loans out in cash.  There is no mistake.
Hold him accountable, members of the jury.  Mr. Shibley is
not above the law.  Review the evidence, follow Judge
Coughenour's instructions, and find Eric Shibley guilty.
Thank you.
THE COURT:  All right.  Ladies and gentlemen, I'm going
to ask all of you, except Ms. Marek, to retire to the jury room.
You can commence your deliberations by selecting your jury
foreperson.  The exhibits and jury instructions will be delivered
to you shortly.  So you can go on back to the jury room.
(The following occurred outside the presence of the jury.)
THE COURT:  Ms. Marek, one of the reasons I don't like
to use alternate jurors is what I have to do with you right now,
and that is to deprive you of the opportunity to do the most
interesting part of service as a juror.  I still can't excuse
you because if we lose one or more jurors, we may have to call
upon you.  So that means that until we call you and tell you that
there has been a verdict, you still must not talk about the case
or do any research about it, don't let anybody talk to you about
it, don't read, listen, or watch anything about it.
As soon as there's a verdict, we will call you and let you
know, and at that point you will be released.  Thank you so much
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for your willingness to serve.
Counsel, remain available and on short notice, and we will
see what happens.  We will be in recess.
THE CLERK:  Please rise.  Court is in recess.
(Recessed.)
(The following occurred outside the presence of the jury.)
THE COURT:  Please be seated.
We have a question from the jury that reads as follows, "Your
Honor, we would like clarification on the law regarding money
laundering.  Is the definition in the packet complete, or may we
have a greater definition?" signed Tim or Erin O'Brien.
Your thoughts?
MR. WERNER:  Your Honor, I believe the jury should be
referred to the instructions as they exist.
THE COURT:  Mr. Nance?
MR. NANCE:  That's my inclination.  Let me just take a
look.
I mean, this is the standard Ninth Circuit instruction.
THE COURT:  Yeah.  I think I have to tell them that they
have to rely upon the instruction.
MR. NANCE:  I think so too.
THE COURT:  Okay.
I also propose to tell them, without disclosing how they
stand, do they think they are going to need to return tomorrow.
Any problem with that?
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MR. NANCE:  I think that's okay.
(The following occurred in the presence of the jury.)
THE COURT:  Please be seated, folks.
So I received your question which reads, "Your Honor, we
would like clarification on the law regarding money laundering.
Is the definition in the packet complete, or may we have a
greater definition?"
I'm sorry.  I couldn't read it.  Is it Erin, or Tim O'Brien?
JUROR NO. 9:  Erin, yes.
THE COURT:  Erin O'Brien.
The answer to your question is:  You must rely upon the
instructions as delivered to you.
I need to ask you another question.  Without disclosing how
you stand, do you think you're going to need to return tomorrow?
JUROR NO. 9:  I don't believe so, if we have a little
leeway for staying past 4:00.
THE COURT:  All right.  Go ahead.  You can return to the
jury room.
(The following occurred outside the presence of the jury.)
THE COURT:  We will be in recess.
(Recessed.)
THE COURT:  Counsel, the jury has indicated they have a
verdict.
Let's bring them out.
(The following occurred in the presence of the jury.)
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THE COURT:  Please be seated, folks.
Will the foreperson of the jury please rise?
Has the jury reached a verdict?
JUROR NO. 9:  We have.
THE COURT:  Will you hand it to the clerk?
PROSPECTIVE JUROR NO. 9:  (Complied with the court's
request.)
THE COURT:  The verdict is proper in form.
Will the defendant rise and face the jury?
The clerk will read the verdict.
THE CLERK:  The United States District Court, Western
District of Washington at Seattle, the United States of America,
Plaintiff, versus Eric Shibley, Defendant, Case No. CR20-174-JCC,
Verdict Form.
We, the jury, unanimously find the following:
Count 1, wire fraud:  Electronic transmission of A Team
Holdings LCC loan note to Ready Capital on or about April 23,
2020.
As to Count 1, we find the defendant, Eric Shibley, guilty.
Count 2, wire fraud:  Electronic transmission of Seattle's
Finest Cannabis LLC PPP application to TCF Bank on or about
April 25th, 2020.
As to Count 2, we find the defendant, Eric Shibley, guilty.
Count 3, wire fraud:  Electronic transmission of Dituri
Construction LLC PPP application to Ready Capital on or about May
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2nd, 2020.
As to Count 3, we find the defendant, Eric Shibley, guilty.
Count 4, wire fraud:  Electronic transmission of Dituri
Construction LLC PPP application to Celtic Bank on or about
May 4th, 2020.
As to Count 4, we find the defendant, Eric Shibley, guilty.
Count 5, wire fraud:  Electronic transmission of SS1 LLC loan
note to Harvest Small Business Finance on or about May 5, 2020.
As to Count 5, we find the defendant, Eric Shibley, guilty.
Count 6, wire fraud:  Electronic transmission of Dituri
Construction LLC EIDL application to SBA on or about June 7th,
2020.
As to Count 6, we find the defendant, Eric Shibley, guilty.
Count 7, wire fraud:  Electronic transmission of SS1 LLC EIDL
application to SBA on or about June 7, 2020.
As to Count 7, we find the defendant, Eric Shibley, guilty.
Count 8, bank fraud:  Submission of Seattle's Finest Cannabis
LLC PPP application to TCF Bank on or about April 25, 2020.
As to Count 8, we find the defendant, Eric Shibley, guilty.
Count 9, bank fraud:  Submission of A Team Holdings LLC loan
note to Customers Bank on or about April 30, 2020.
As to Count 9, we find the defendant, Eric Shibley, guilty.
Count 10, bank fraud:  Submission of Dituri Construction LLC
PPP application to Celtic Bank on or about May 4, 2020.
As to Count 10, we find the defendant, Eric Shibley, guilty.
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Count 11, money laundering:  Transfer of $960,000 from Wells
Fargo account ending in 9116 to the name of A Team Holdings
LLC -- in the name of A Team Holdings LLC to Wells Fargo account
ending in 3536 in the name of A Team Holdings LLC on or about
May 4, 2020.
As to Count 11, we find the defendant, Eric Shibley, guilty.
Count 12, money laundering:  Transfer of $563,500 from BECU
account ending in 7277 in the name of Dituri Construction LLC to
BECU account ending in 7219 in the name of Dituri Construction
LLC on or about May 6th, 2020.
As to Count 12, we find the defendant, Eric Shibley, guilty.
Count 13, money laundering:  Transfer of $820,000 from BECU
account ending in 9724 in the name of SS1 LLC to BECU account
ending in 9683 in the name of SS1 LLC on or about May 19, 2020.
As to Count 13, we find the defendant, Eric Shibley, guilty.
Count 14, money laundering:  Withdrawal of $150,000 from
Wells Fargo account ending in 3536 in the name of A Team Holdings
LLC on or about May 26th, 2020.
As to Count 14, we find the defendant, Eric Shibley, guilty.
Count 15, money laundering:  Deposit of $20,000 cashier's
check from Verity Credit Union into Navy Federal Credit Union
account ending in 4507 in the name of ES1 LLC on or about
June 22nd, 2020.
As to Count 15, we find the defendant, Eric Shibley, guilty.
Dated this 18th day of November 2021, signed "Foreperson of
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the Jury."
THE COURT:  Counsel, do either of you wish to have the
jury polled?
MR. WERNER:  Not from the government, Your Honor.
MR. NANCE:  We request it, please.
THE COURT:  All right.
Ladies and gentlemen, I'm going to ask each of you two
questions.  The first question will be:  Is this your individual
verdict?  And the answer to that question will be "Yes," if you
voted for it in all respects as read by the clerk, and "No," if
not.
The second question will be:  Is this the verdict of the
jury?  The answer to that question will be "Yes," if all twelve
of you voted in favor of the verdict as read by the clerk in all
respects; "No," if not.
JURY POLLING
BY THE COURT:
Q
Juror No. 1, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 2, is this your individual verdict?
A
Yes, Your Honor.
Q
Is it the verdict of the jury?
A
Yes.
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Q
Juror No. 3, is this your individual verdict?
A
Yes, Your Honor.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 4, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 5, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 6, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 7, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 8, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 9, is this your individual verdict?
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A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 10, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
Juror No. 11, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
Q
And, Juror No. 12, is this your individual verdict?
A
Yes.
Q
Is it the verdict of the jury?
A
Yes.
THE COURT:  Is there any reason I should not discharge
the jury?
MR. WERNER:  No, Your Honor.
MR. NANCE:  No reason.
THE COURT:  All right.  Give me a sentencing date and
time.
THE CLERK:  February the 22nd, 2022, at 9:00 a.m.
THE COURT:  All right.  Ladies and gentlemen, you are
excused to report to the jury clerk on the first floor.  If you
want, you are invited to come back into chambers for a few
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minutes.  You don't have to if you don't want to.  If you want to
get on and get home, I will understand, but if you want to come
back, I would be happy to chat with you, all right?
We will be in recess.
THE CLERK:  All rise.  Court is in recess.
(Adjourned.)

C E R T I F I C A T E
     I, Nickoline M. Drury, RMR, CRR, Court Reporter for the
United States District Court in the Western District of
Washington at Seattle, do certify that the foregoing is a correct
transcript, to the best of my ability, from the record of
proceedings in the above-entitled matter.
/s/ Nickoline Drury

Nickoline Drury
Case 2:20-cr-00174-JCC     Document 133     Filed 11/22/21     Page 144 of 144

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