A whistleblower lawsuit has led to a recovery of more than $3 million from three New York construction contractors and their owners that allegedly misled the U.S. government to obtain lucrative contracts for which they were not qualified.
According to the whistleblower complaint, Zoldaz Construction Company, Alliance Contracting, Arsenal Contracting of Alden, New York, and owners John Zoldaz and David Lyons secured federal construction contracts reserved for service-disabled, veteran-owned small businesses.
The complaint claims they obtained the contracts by duping the Small Business Administration (SBA) and the U.S. Department of Veterans’ Affairs (VA) into believing they were legitimate candidates for the contracts when they actually lacked the qualifications, the U.S. Department of Justice (DOJ) said. Thus any work the defendants billed the government for amounted to a submission of false claims.
To qualify as an SDVO small business, a service-disabled veteran must own and control the company. The whistleblower complaint alleged that Mr. Zoladz recruited a service-disabled veteran to serve as a figurehead for Arsenal, which purported to be a legitimate SDVO small business when it actually was established, managed and controlled by Mr. Zoladz and Mr. Lyons.
Neither of the men is a service-disabled veteran.
U.S. prosecutors investigated the whistleblower’s False Claims Act allegations and chose to intervene in the case, effectively taking over the litigation. The U.S. alleged that Arsenal was a sham company that had no true employees of its own, relying instead on Alliance and Zoldaz Construction to function.
After receiving numerous SDVO small business contracts, Arsenal subcontracted nearly all of the work to Alliance, which was jointly owned by Mr. Zoldaz and Mr. Lyons, and to Zoldaz Construction.
Because they were not qualified for the contracts, Mr. Zoladz and Mr. Lyons carried out their scheme by making false statements to the VA about Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirement, the U.S. Department of Justice claimed.
“Contracts are set aside for service-disabled veteran-owned small businesses so to afford veterans with service-connected disabilities the opportunity to participate in federal contracting and gain valuable experience to help them compete for future economic opportunities,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “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.”
Under the False Claims Act, whistleblowers whose qui tam lawsuits result in a recovery are entitled to receive up to 25 percent of the total amount recovered, or as much 30 percent if the government declines to intervene. The whistleblower in this case will receive about $450,000.