An Alden company used a figurehead to qualify for contracts set aside for disabled veteran-owned small businesses and on Tuesday agreed to pay $3 million to settle a whistleblower's lawsuit, according to federal prosecutors.
The monetary settlement ends a civil suit that accused Zoladz Construction Company, Arsenal Contracting LLC and Alliance Contracting, all of Alden, of recruiting a service-disabled veteran to serve as a front for Arsenal, a sham company controlled by two other individuals.
Those two men, John Zoladz of Darien and David Lyons of Grand Island, also were named in the suit and in the agreement settling allegations that they violated the federal False Claims Act. Neither Zoladz nor Lyons is a service-disabled veteran.
The government, in its suit, claimed Arsenal was a front company that had few employees of its own and relied almost exclusively on Zoladz Construction and Alliance to operate.
“Every time an ineligible contractor knowingly pursues and obtains such set-aside contracts, they are cheating American taxpayers at the expense of service-disabled veterans," said acting Assistant Attorney General Chad A. Readler in a statement.
A woman answering the phone at Zoladz said the company would not comment.
The scheme that Zoladz and Lyons carried out included false statements regarding Arsenal's qualifications for the small business program to the U.S. Department of Veterans’ Affairs.
"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," said acting U.S. Attorney James P. Kennedy.
The settlement also resolves a whistleblower lawsuit filed in 2011 by the Western New York Foundation for Fair Contracting, a labor-management group acting as watchdog on public contracts.
Under the settlement, the foundation will receive $450,000.
“The contracting companies and principals allowed greed to corrupt a federal process intended to benefit service-disabled, veteran-owned small businesses,” said Special Agent in Charge Adam S. Cohen of FBI Buffalo Field Office.
The settlement is the result of investigation by the FBI, Assistant U.S. Attorney Kathleen A. Lynch, the VA Office of Inspector General and the Small Business Administrations's Office of Inspector General.