John Diedrich

Milwaukee Journal Sentinel

Federal agents are investigating a scheme in which several Milwaukee-area businesses are suspected of landing $268 million in government contracts by fraudulently claiming they are owned by minorities and military veterans, according to a search warrant filed in federal court in Milwaukee late Friday.

The companies received “set-aside” contracts to do work for U.S. Department of Veterans Affairs, the Army and other government agencies under federal programs intended to help disadvantaged companies, but the firms in question were not actually owned or operated by the people listed on the contracts, the warrant said.

Federal agents raided the businesses near N. 55th St. and W. Florist Ave. Wednesday. The FBI, which conducted the raid along with several other agencies, would only say the case involved allegations of fraud against the government.

But a 48-page affidavit for a federal search warrant lays out a complex fraud scheme involving a web of interconnected companies set up with phony minority and veteran owners to snag lucrative contracts.

No criminal charges have been filed and federal prosecutors would not comment on the case, which is ongoing. Calls to all of those named in the search warrant were not returned as of late Friday. The search is related to the crimes of major fraud against the government, conspiracy, making false statements, money laundering among other offenses.

The companies involved include Nuvo Construction, C3T, Pagasa Construction, Sonag Company and an accounting firm that did work for all four firms, LJM Accounting Services. The warrant also allowed agents to search the Menomonee Falls home office of Lori Michaud, owner of the accounting firm.

According to the warrant:

At the center of the alleged fraud are Brian Lee Ganos and James Edward Hubbell. Ganos, who is Hispanic, ran Sonag from 1994 to 2003 as a qualified minority business owner. But that status dissolved after nine years under the program's rules.

Ganos and Hubbell, who continued to run Sonag, recruited other individuals who would pose as heads of several companies to secure the set-aside contracts. They enlisted Jorge Lopez and Odessa Millan to become the purported head of Nuvo and Pagasa, respectively, and Telemachos Agoudemos to pose as the president of C3T.

“In reality, however, Ganos and Hubbell controlled Nuvo, Pagasa and C3T which allowed Ganos and Hubbell to financially benefit from contracts that Sonag was not eligible to receive,” wrote Special Agent Suzanne Humeniak of the Veterans Affairs Office of the Inspector General.

Michaud, the accountant who had been employed by Sonag, started working for all four companies, moving large amounts of money between the companies.

Federal investigators have been examining the relationship among the companies and whether there was fraud occurring for several years. In 2014, a former longtime employee approached federal agents and described the fake ownership created for the various companies.

The employee said Lopez, who supposedly was in charge of Nuvo, moved to Minnesota in 2004 and was not involved in the company. Records gathered by agents showed Lopez was living and working in Worthington, Minn.

Money was moved among the companies and in two instances, the companies purchased homes. In 2009, Nuvo bought a home in Muskego for $392,000, which was adjacent to Ganos’ lakefront home.

In 2010, C3T purchased a townhouse in Muskego for $150,000 and three days later sold it to Ganos’ son and daughter-in-law for $130,000. Hubbell signed the bank and property documents. According to mortgage records, Ganos “gifted” his son and daughter-in-law $22,000 toward the property sale.

Later that year, another company that lost out on a bid to C3T filed a complaint saying the ownership was a sham. In response, Agoudemos and Ganos signed letters saying Ganos did not control C3T. But records show nearly $500,000 flowed into Ganos’ company, Sonag, the previous year.

In 2012, the FBI interviewed Ganos and others. Ganos claimed he had no interest in C3T other than being its landlord. But records showed $2.3 million flowed from C3T to Ganos’ company, Sonag, the year before.

The companies also channeled money to another Ganos’ firm, Trinity Marketing Services, incorporated in Wyoming. Records from that company show spending on personal items such as cosmetic surgery and payments to a trailer company, Harley-Davidson dealer, casino, water ski club, lodge and for cash withdrawals.

In 2009, a Milwaukee Journal Sentinel investigation into possible misuse of federal stimulus money found C3T listed 24 jobs retained for projects on which no work had begun. The company got more than $7 million for five contracts, including replacing the roof and fire-alarm systems at the Zablocki Veterans Affairs Medical Center in Milwaukee. Hubbell, identified as C3T vice president, said the number represented a projection of full-time jobs retained for the duration of the projects.