On Tuesday, the Department of Justice announced a settlement of over $3 million with New-York-based contractors Zoladz Construction Company Inc. (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), as well as two of their owners, John Zoladz and David Lyons, to resolve allegations that they violated the False Claims Act by falsely procuring federal contracts designated for service-disabled veteran-owned (SDVO) small businesses.
The government learned of the fraud through a whistleblower-initiated lawsuit under the qui tam provisions of the False Claims Act. The whistleblower will receive $450,000 as a result of the settlement.
Only small business owned and operated by service-disabled veterans are eligible to receive SDVO set-aside contracts. The government alleged that ZCCI recruited a service-disabled veteran to serve as the purported owner and manager of Arsenal, which was merely a front for securing SDVO set-aside contracts. Arsenal then subcontracted nearly all of the work under those SDVO contracts to Alliance and ZCCI. In furtherance of this scheme, the owners allegedly made false representations to the U.S. Department of Veterans Affairs regarding Arsenal’s eligibility for SDVO contracts.
“Detecting and discontinuing fraud, waste, and abuse committed by those who do business with the government remains a core function performed in this Office,” said Acting U.S. Attorney James P. Kennedy, Jr. for the Western District of New York in a press release issued by DOJ. “That function, however, takes on additional significance when the target of the fraud is a program designed for the benefit of the heroes among us—our disabled veterans. Although this investigation did not uncover sufficient evidence to establish criminal liability by these entities and individuals, the multi-million dollar civil judgment ensures that those involved pay a heavy price for their decision to divert to themselves resources intended for the benefit of those who have made supreme sacrifices on behalf of all.”
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