City reconsidering small-business policies in wake of Sonag scandal

Milwaukee officials on Wednesday said they may tighten the rules governing a program that gives small businesses a bidding edge after an indicted contractor was able to keep its city-issued certification.

Both Brian Ganos, owner of Sonag, and an accountant are accused of carrying out a scheme that bilked the government of more than $200 million over the course of 12 years by exploiting programs that give a bidding advantage to companies owned by women, minorities and veterans.

Although Sonag was indicted in early April following an FBI raid of its offices in 2016, the company still retains its Small Business Enterprise designation from the city. That certification, which gives Sonag a leg up when bidding against rival companies, doesn’t expire until April 2020.

Nikki Purvis, director of Milwaukee’s Office of Small Business Development, told members of Milwaukee’s Community and Economic Development Committee on Wednesday that Sonag was able to retain its bidding advantage after appealing her office’s attempt to revoke the certification following the FBI raid. Her office was only able to pull the certification of a Sonag-linked company, Nuvo Construction.

As for Sonag itself, its successful appeal of the office’s decision is a sign that Milwaukee’s rules governing its SBE program should be revised, Alderman Russell Stamper said.

“If you get indicted by the federal government, that is grounds enough,” Stamper said. “I don’t see why we have to appeal.”

Meanwhile, Purvis  and Assistant City Attorney Kathy Block said they were unsure about how much work Sonag Construction and its affiliates might have won from the city of Milwaukee by improperly taking advantage of the city’s SBE designation.

“Unfortunately there are some businesses that have engaged in fraudulent activity,” Purvis said. “Most of the businesses, they really are working hard to provide economic activity to the community. It really is disheartening when you have a situation of this magnitude that puts a negative light on our certification program and small businesses as a whole.”

Another Sonag-linked company, Pagasa Construction, is also registered as a Disadvantaged Business Enterprise—a designation administered by Milwaukee County, according to Wisconsin Department of Transportation records.

Sonag and its affiliated companies have worked on various prominent building projects in recent years, including a massive concrete pour at the Northwestern Mutual tower.

The government’s indictment accuses Ganos of setting up a series of companies under figurehead owners to qualify for programs set up to help women-, minority- and veteran-owned businesses. Although these owners ostensibly controlled companies like Nuvo Construction and C3T, they actually had little to do with those businesses, which were instead controlled by Ganos.

Ganos and his accountant, Mark Spindler, of Menomonee Falls, now face a 22-count indictment that includes charges of money laundering and fraud. Four of his associates have meanwhile agreed to plead guilty to charges arising from the investigation.

Last week, James E. Hubbell, 50, of Sussex and Jorge Lopez, 57, of Worthington, Minnesota, agreed to plead guilty to fraud charges for their roles as the false owners of companies set up by Ganos. Telemachos Agoudemos, 43, of Big Bend, also agreed to plead guilty to a charge of lying to federal investigators.

In early April, Nicholas Rivecca Sr., 68, of Hartland, also agreed to plead guilty to charges of conspiring to defraud the US government for his role as the false executive of a Ganos-controlled company.