US contractor prosecuted for $200m “straw man” fraud

A Milwaukee construction firm and its officials have been indicted on charges of cheating the US federal government out of more than $200m over 12 years by exploiting a programme set up to help companies owned by minorities and disabled veterans.

A grand jury charged the company, Sonag, and two of its directors, with a total of 22 charges including conspiracy to commit mail fraud and wire fraud.

According to the Indictment, the conspiracy involved operating construction companies with "straw owners", who qualified as a disadvantaged or former military personnel injured while on service, but who did not actually control their businesses. 

The conspirators then, it is alleged, obtained small business programme certifications to win government-funded contracts to which they were not otherwise entitled. The indictment alleges that "the conspirators enriched themselves, undermined the small business programmes, and deprived honest small businesses of opportunities for work."

The named individuals in the indictment are Brian Ganos, 57, president of Sonag, and accountant Mark Spindler, 56. In a separate but related case, Nicholas Rivecca, 68, president of Sonag Ready Mix, pleaded guilty to conspiring to defraud the US government.

Each of the wire and mail fraud-related charges carries a maximum penalty of 20 years in prison, a $250,000 fine and forfeiture of criminal proceeds.

Matthew Krueger, a US district attorney for the Eastern District of Wisconsin, said: "These charges send a clear message to firms that seek public funds. Cheating will not be tolerated. Lying to regulators is a serious crime. And attempts to obstruct investigations will be prosecuted vigorously."

The indictment says Sonag was involved in setting up three companies whose nominated directors did not run the businesses. These included Nuvo Construction Company, whose ostensible head was chosen to qualify the firm as a small disadvantaged business from the US Small Business Administration, and as a disadvantaged business enterprise (DBE) from Milwaukee County. In reality, the director worked full-time for a different entity in Minnesota and did not control Nuvo.

The indictment in the charge that relates to Rivecca says Nuvo won contracts to supply ready mix concrete that were in fact fulfilled by Sonag Ready Mix.

Another company, C3T, was misrepresented to be majority owned and controlled by a man who qualified it as a service-disabled veteran-owned small business, whereas he had no involvement in the company for "long stretches" of time, it is alleged.

A third firm, Pagasa Construction Company, was misrepresented to be majority owned and controlled by a man who relied on the assistance of conspirators to form it, says the indictment.

The website of Sonag advertises its credentials as a DBE, and says Ganos was named Hispanic businessman of the year.

As part of the indictments, prosecutors have seized three houses, a Corvette Stingray convertible and more than £2.2m from two bank accounts.

Image: Brady Street, Milwaukee (Trizkutt) 

Further reading:

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• US project manager charged with $2.7m fake-invoice fraud