by Ben Vernia | October 4th, 2017
On October 3, the Department of Justice announced that three Buffalo, New York area contractors have agreed to pay more than $3 million to settle a whistleblower’s allegations that the companies defrauded the government by using a shell According to DOJ’s press release:
Alden, New York-based contractors, Zoladz Construction Company Inc. (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz of Darien, New York, and David Lyons of Grand Island, New York, have agreed to pay the United States more than $3 million to settle allegations that they violated the False Claims Act by improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned (SDVO) small businesses, the Justice Department announced today.
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To qualify as a SDVO small business, a service-disabled veteran must own and control the company. The United States alleged that Zoladz recruited a service-disabled veteran to serve as a figurehead for Arsenal, which purported to be a legitimate SDVO small business but which was, in fact, managed and controlled by Zoladz and Lyons, neither of whom is a service-disabled veteran. The United States alleged that Arsenal was a sham company that had scant employees of its own and instead relied on Alliance and ZCCI employees to function. After receiving numerous SDVO small business contracts, Arsenal is alleged to have subcontracted nearly all of the work under the contracts to Alliance, which was owned by Zoladz and Lyons, and ZCCI, which was owned by Zoladz. Neither Alliance nor ZCCI were eligible to participate in SDVO small business contracting programs. Zoladz and Lyons are alleged to have carried out their scheme by, among other things, making or causing false statements to be made to the U.S. Department of Veterans’ Affairs (VA) regarding Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirements.
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The government announced that the whistleblower, a corporate entity called “Western New York Foundation for Fair Contracting, Inc.”, will receive $450,000 (a 15% relator’s share).
