A Milwaukee-area construction firm and its officials are accused of cheating the federal government out of more than $200 million by exploiting a program set up to help minority- and disabled-veteran-owned contractors.
U.S. Attorney Matthew Krueger announced on Tuesday that a federal grand jury had returned a 22-count indictment against Brian L. Ganos, 57, of Muskego; the construction company he oversees, Sonag Co. Inc.; and Mark F. Spindler, 57, a Menominee Falls-based accountant. Both face decades in prison and hundreds of thousands of dollars worth of fines.
Nicholas Rivecca Sr., 68, of Hartland, also pleaded guilty in a related case to charges of conspiring to defraud the US government. His LinkedIn profile identifies him as president of Sonag Ready Mix.
“These charges send a clear message to firms that seek public funds,” Krueger said in a release. “Cheating will not be tolerated. Lying to regulators is a serious crime. And attempts to obstruct investigations will be prosecuted vigorously.”
Ganos’ lawyers, Dean Strang and Stephen Hurley, could not be reached immediately for comment. A message left with Brian Fahl, an attorney for Spindler, was not immediately returned.
Ganos, Spindler and Sonag are accused in a money-laundering and fraud scheme alleged to have bilked the federal government of more than $200 million in contracts over the course of 12 years. The investigation is ongoing, documents filed in federal court show.
The indictment accuses Ganos and Spindler of founding companies and appointing minorities or veterans as owners to qualify for set-asides offered by the U.S. Department of Veterans Affairs, Milwaukee and other agencies through Disadvantaged Business Enterprise programs.
Despite the apparent separate ownership, the companies were in fact controlled by Sonag, according to the indictment.
Sonag used the DBE program to win contracts on prominent building projects like the new Milwaukee Bucks arena and Northwestern Mutual tower. The indictment alleges Ganos set up three companies with three fraudulent owners to win local and federal contracts.
- Nuvo Construction Co. Inc. was misrepresented to be majority-owned but was in fact controlled by an owner identified only by initials in the indictment. This misrepresentation was carried out to make the company qualify as a Small Disadvantaged Business for the U.S. Small Business Administration and as a Disadvantaged Business Enterprise for Milwaukee County. The owner, however, worked full time for a different company in Minnesota and did not control Nuvo.
- C3T Inc. was set up to be verified as a Service-Disabled Veteran-Owned Small Business. The listed owner had no involvement in the company for “long stretches of time,” according to the indictment.
- Pagasa Construction Co. Inc. was set up to obtain a Small Disadvantaged Business certification from the SBA. Its listed owner relied on Sonag officials to organize Pagasa.
Through his company, Ganos is also alleged to have laundered money from federal contracts received by Nuvo and C3T, placing the money into accounts he controlled. The indictment charges him with three counts of money laundering and seven counts of spending money from those transactions, including one related to his purchase of a 2014 Chevy Corvette Stingray convertible.
Anthony Murdock, an attorney at the Milwaukee-based firm Murdock Law, said many contract-fraud cases involve strained contractors who believe they must do something desperate to stay profitable.
The accusations against Sonag are big enough, he said, that the company was likely shutting out competitors who could have legitimately qualified for DBE benefits.
“It’s an unfortunate type of reality,” Murdock said. “The extent of this (case) is eye-popping numbers. The damage can be serious for victims.”
Ganos and his companies came under scrutiny from local and federal officials at least four times between 2006 and 2012, according to the indictment. Additionally, the indictment accuses Ganos and Spindler of intentionally concealing the scheme and lying to investigators.
Milwaukee County officials in June 2006 asked if Nuvo Construction was really providing cement without help from Sonag Ready Mix. Ganos told them that the companies were not linked, and the county allowed Nuvo to retain its status as a DBE.
Ganos and others responded to further inquiries by Milwaukee County and the Wisconsin Department of Transportation in 2010 by providing faulty documents purporting to show that Nuvo paid Sonag Ready mix for use of a concrete-mixing plant.
In August 2016, federal agents raided the companies’ Milwaukee offices and the home office of Lori J. Michaud, owner of LJM Accounting Services, who worked with the companies involved in the probe.
A forfeiture notice in the indictment suggests that the government is now trying to seize two properties: a condo in Winter Park, Colo., and a property at 5500-5510 W. Florist Ave. in Milwaukee, which houses offices and warehouses used by Sonag, Nuvo, C3T and Pagasa. The government is also seeking to recover more than $2.2 million in cash seized from two bank accounts and the Corvette.
“The egregious fraud scheme … denied eligible service-disabled, veteran-owned small business and other disadvantaged small businesses opportunities to prosper and grow their businesses,” said Talmadge Gaylor, Small Business Administration Office of the Inspector General central region special agent-in-charge, in a release. “Federal contracts set aside for eligible service-disabled, veteran-owned and other disadvantaged small businesses are intended to grow these businesses and expand the nation’s economic base.”
Editor’s note: This article has been corrected to provide the correct spelling of Brian L. Ganos’ first name. The spelling of Menomonee Falls has also been corrected.Follow @natebeck9