United States District Court, E.D. Wisconsin
ORDER ADOPTING RECOMMENDATION (DKT. NO. 90), DENYING
DEFENDANT SONAG'S MOTION TO DISMISS (DOC. NO. 36) AND
DENYING DEFENDANT GANOS'S MOTION TO DISMISS (DOC. NO.
PAMELA PEPPER, UNITED STATES DISTRICT JUDGE
Sonag, Inc. moved to dismiss Counts One (conspiracy to engage
in mail and wire fraud) and Fourteen (conspiracy to engage in
money laundering) of the superseding indictment under Rule
12(b)(3)(B). Dkt. No. 36. Sonag argues that, as a
solely-owned corporation, it cannot conspire with anyone if
its sole owner, co-defendant Brian Ganos, did not do so.
Id. at 1. Ganos moved to dismiss Count Fourteen,
asserting that he could not conspire with his solely-owned
corporation, Sonag. Dkt. No. 38. Magistrate Judge David Jones
has recommended that the court deny the motions because the
superseding indictment alleges that Ganos and Sonag each
conspired with at least one other person or entity. Dkt. No.
90. The defendants have objected to that recommendation. Dkt.
Nos. 96, 99. The court adopts the recommendation and denies
the motions to dismiss.
superseding indictment alleges that between June 2004 and
August 2016, Ganos was the sole owner and president of Sonag
Co., a construction company. Dkt. No. 25 at ¶11. He also
was “the purported” CEO and treasurer of a
company called Sonag Ready Mix, LLC; Sonag (owned by Ganos)
owned 50% of Sonag Ready Mix. Id. Nuvo Construction
Co., Inc. was a construction company that “purported to
provide ready-mix concrete.” Id. at ¶16.
A person referred to as “J.L.” was
“Nuvo's nominal president and 85% owner, ”
and the superseding indictment alleges that Ganos
“purported to own only 15% of Nuvo and to serve only as
its vice president.” Id. According to the
superseding indictment, the Small Business Administration had
certified Nuvo as a Small Disadvantaged Business, and it was
certified by Milwaukee County as a disadvantaged business
enterprise to provide ready-mix concrete. Id. Mark
Spindler co-owned an accounting firm that “performed
outside accounting services for Ganos-affiliated companies,
including Sonag Company, Nuvo Construction Company, Inc.,
C3T, Inc. and Sonag Ready Mix.” Id. at
¶12. (The superseding indictment identifies C3T as
another construction company; an individual identified as
“T.A.” was C3T's “purported president
and majority owner, ” and was certified under the
Department of Veterans Affairs' Service-Disabled Veteran
Small Business program. Id. at ¶17.)
One of the superseding indictment alleges that, in violation
of 18 U.S.C. §1349, Ganos, Spindler, Sonag Co. and Nuvo
conspired with each other to commit mail and wire fraud (18
U.S.C. §§1341 and 1343). Id. at ¶2.
It alleges that they conspired
to operate companies with straw owners who qualified as a
socially and economically disadvantaged individual or as a
service-disabled veteran, but who did not actually control
the companies. The conspirators then fraudulently obtained
small business program certifications as to the status of the
companies and used those certifications to obtain over $200
million in federal, state, and local contract payments to
which they were not entitled.
Id. Count One describes the straw owners (including
“J.L.” and “T.A.”), as well as the
small business certification programs, processes and
requirements. Those details help one understand how the
conspiracy allegedly worked but are not necessary to
understand the defendants' arguments for dismissal.
Fourteen of the superseding indictment charges Ganos and
Sonag with conspiring to launder money. Id. at 15,
¶¶45-46. It says that between 2007 and August 2016,
Ganos and Sonag conspired with each other “and with
other persons and entities known and unknown to the Grand
Jury, including L.M. and Ganos-controlled entities Sonag I,
LLC and Trinity Marketing Services, Inc.” to
knowingly conduct and attempt to conduct financial
transactions affecting interstate commerce and foreign
commerce, which transactions involved the proceeds of
specified unlawful activity, that is, mail fraud and wire
fraud in violation of Title 18, United States Code, Section
1341 and 1343, knowing that the transactions were designed in
whole or in part to conceal and disguise the nature,
location, source, ownership, and control of the proceeds of
specified unlawful activity, and knowing that, while
conducting and attempting to conduct such financial
transactions, the property involved in the financial
transactions represented the proceeds of some form of
unlawful activity, in violation of Title 18, United States
Code, Section 1956(a)(1)(B)(i).
Id. at ¶46. The count describes the mechanics
of the alleged conspiracy; paragraph 48 states that
“Ganos conspired with L.M. and Sonag Company to engage
in the types of financial transactions described” in
the count. Id. at ¶48. Again, the details of
the transactions alleged in Count Fourteen are not necessary
to understand Ganos's motion.
The Arguments in the Motions
asserted that, as a matter of law, “a solely-owned
corporation cannot conspire separably from its owner.”
Dkt. No. 36 at 3. It argued that “the acts and
agreements of the owner are the acts and agreements of the
corporation and are the only way in which the solely-owned
corporation, itself a legal fiction at all only by statute,
can act or agree, when the owner holds all shares of the
the straightforward nature of this argument, Sonag filed a
fourteen-page brief in support of the motion. Dkt. No. 37.
After explaining that the superseding indictment does not
allege that Sonag committed any substantive offenses,
id. at 2-4, the brief devotes six pages to tracing
the development of the law of conspiracy, starting in England
in the late thirteenth and early fourteenth centuries and
moving through its growing popularity in the early twentieth
century United States to the doctrine of intra-corporate
conspiracies in the “modern era.” Id. at
4-10. While conceding that an intra-corporate conspiracy is
possible in criminal cases, Sonag argued that an
intra-corporate conspiracy “requires two or more agents
of the corporation, not just one.” Id. at 10
(citing United States v. Hughes Aircraft Co., Inc.,
20 F.3d 974, 979 (9th Cir. 1994); United States v.
Sain, 141 F.3d 463, 474-75 (3d Cir. 1998); United
States v. Hartley, 678 F.2d 961, 970-972 (11th Cir.
1982), cert. denied, 459 U.S. 1170 (1983)). Sonag
[w]ithout at least one other mind in accord, there is no
“agreement” in any coherent sense at all; there
is only a bad idea hiding between two ears. That idea may die
or remain inert. Only if two or more people share it, affirm
it mutually, does the risk arise that the inertia or second
thoughts of one will not stop action of the other, or that
each will be emboldened by a sense of shared mission.
Id. at 7.
reached the heart of his argument on the penultimate page of
the brief. It asserted that, while Brian Ganos “may
remain a defendant in Count 1, ” because the
superseding indictment charged him with conspiracy with
Spindler (an individual) and Nuvo (a corporate entity),
“as a matter of law, Sonag could not have conspired
separately with anyone.” Id. at 13. Thus,
Sonag asserted, the court must dismiss Count One “as to
Sonag.” Id. It argued that the court must
dismiss Count Fourteen entirely, because “Sonag and
Ganos are the only two named defendants in that count and the
superseding indictment suggests nobody else with whom they
legally could have conspired.” Id. It said
that “[a] single formulaic reference to ‘other
persons and entities known and unknown to the Grand Jury'
does not cut it.” Id.
relying on Sonag's brief, was concise. Dkt. No. 38. He
asserted simply that Count Fourteen accuses him of conspiring
with his own, solely-owned corporation, and that “[a]
single owner and his corporation cannot conspire with each
other.” Id. at 3 (case citations omitted).
The Government's Response
government responded that rather than standing for the
proposition that a solely-owned corporation was incapable of
conspiring, the cases the defendants had cited stood for
“the much narrower proposition that a solely-owned
corporation cannot conspire solely with its owner .
. . .” Dkt. No. 57 at 1-2. Dkt. No. 57 at 2. That
proposition, the government asserted, did not require
dismissal of Counts One and Fourteen, because “the
Superseding Indictment alleges a conspiracy that involved
additional human and corporate co-conspirators beyond
Sonag's owner, Ganos.” Id. at 2.
government contended that the defendants based their argument
on a logical fallacy-
(1) Premise: An intra-corporate conspiracy requires two human
individuals acting on behalf of a corporation.
(2) Premise: A corporation can only be guilty of a conspiracy
through an intra-corporate conspiracy.
(3) Conclusion: A solely-owned and solely-controlled
corporation cannot conspire as a matter of law because there
is no way it can form an intra-corporate conspiracy.
Id. at 2 (citation omitted). It argued that the
second premise is false, citing cases recognizing that
solely-owned and operated corporations are capable of
conspiring with other entities or individuals outside the
corporation. Id. The government also disputed the
defendants' assertions that Ganos was the only possible
human who could have worked for, controlled or acted on
behalf of Sonag. Id. at 3.
government pointed out that Count One of the superseding
indictment alleges that Sonag and Ganos conspired with
Spindler, Nuvo Construction Company and unindicted
co-conspirators J.L., J.H. and T.A. Id. at 4-5. It
observed that Count Fourteen alleges that Sonag and Ganos
conspired to engage in money laundering with unindicted
co-conspirator L.M. Id. Finally, the government
noted that, if it does not prove at trial that Sonag
conspired with an individual or entity other than Ganos,
Sonag could move for dismissal at the close of the
government's case-in-chief. Id. at 5.
The Defendants' Replies
reply, Sonag accused the government of “sovereign
sophistry, ” based on its perception that the
government had argued that Sonag-separate from Ganos-could
conspire with others. Dkt. No. 63 at 1. It argued for the
first time that “the attempt to try or to punish both
Sonag and Ganos for the conspiracies alleged in Counts 1 and
14 is an attempt to impose double jeopardy on Ganos.”
Id. at 2. Interestingly, Sonag asserted that
Ganos faces “conviction and punishment twice
on both Counts 1 and 14: once for what he agreed as Brian
Ganos and again for the self-same agreement as Ganos for
Sonag.” Id. While conceding that it
“cannot speak for Ganos here, of course, ” Sonag
pointed out that Ganos had joined Sonag's motion to
dismiss Counts One and Fourteen, and advised Ganos to
“consider an Abney appeal if the
government's effort to try both him and his solely-owned,
solely controlled fictional creature succeeds on these
pretrial motions.” Id. at 10.
also argued that what it characterized as the
government's reasoning-that Sonag could conspire with
outside people and that Ganos could conspire with (possibly
the same) outside people-led to the conclusion that Counts
One and Fourteen are duplicitous, charging two conspiracies
in the same counts. Id. at 11. Sonag also asserted
that “[t]he grand jury here clearly meant to charge
only one conspiracy-one in which Ganos and Sonag, impossibly
as a legal matter here, conspired with each other, ”
and that the government's “effort at mitosis to
create two conspiracies in one count where the grand jury
meant only one” violated the Grand Jury Clause of the
Fifth Amendment. Id. at 12 (citing United States
v. Miller, 471 U.S. 130, 135-45 (1985). Finally, Sonag
accused of the government of postulating a “parade of
horribles, ” a world where individuals could form
solely-owned corporations, use those corporations to commit
fraud, then escape liability because a solely-owned
conspiracy cannot (according to Sonag) conspire. Id.
at 13. Sonag pooh-poohed this postulation, arguing that the
individual owner still could be held liable, as could the
corporation if two or more individuals within the corporation
conspired, and stated that “[t]he government should
cancel plans for this parade.” Id. at 13-14.
reply consisted of a single paragraph, adopting Sonag's
reply and stating that “Ganos and Sonag are not just a
palindrome” but are, in fact and law, the same. Dkt.