BUFFALO — A Darien business owner is among those set to pay more than $3 million to settle False Claims Act allegations.

The group includes Zoladz Construction Company Inc.; Arsenal Contracting LLC; and Alliance Contracting LLC, all of Alden.

It also includes two owners — John Zoladz of Darien and David Lyons of Grand Island.

The payment settles allegations they improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned small businesses, according to the federal Justice Department.

“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 in a statement. “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.”

To qualify as a SDVO small business, a service-disabled veteran must own and control the company.

The Justice Department 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.

Arsenal was allegedly 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 allegedly carried out their scheme by —among other things — making or causing false statements to be made to the U.S. Department of Veterans’ Affairs regarding Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirements.

“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 in a news release. “The FBI and our partners will continue to identify and investigate companies and individuals who target these types of programs for personal gain.”