Is The SBA SBIC Program A Racist Institution? Critical Documents From Discrimination Lawsuit Reveal Bias -SBAs $25 Billion Program Lacks Minority Managers and Records of Investments By Black and Minority Managed Firms-

Atlanta based firm, led by blacks, proceeds with discrmination lawsuit against SBA's $25 Billion SBIC program. Lawsuit occurs 10 years after study concluding that SBA treats blacks and minorities seperately from whites in the "regular" SBIC program. Firm reports on key document sturned over in the lawsuit showig bias and seperate treatment.

ATLANTA, GA (PRWEB) September 20, 2004 -- Ten years ago Dr. Timothy Bates authored a study, paid for by SBAs Small Business Investment Company Program (SBIC") program, entitled Is The SBA Racist Institution©. The study took an incisive look at the SBIC program and the glaring deficiencies and bias in administering the companion Minority Enterprise Small Business Investment Company (MESBIC") program. Bates found that 78% of the MESBICs failed largely because of SBAs bias and indifference to the MESBIC program.

Dr. Timothy Bates and Dr. Bradford completed a 2003 study - Minorities in Venture Capital - A New Wave in American Business, funded by the Kauffman Foundation. The authors studied 24 venture funds nationally and found that minority focused venture funds are successful with a median rate of return of 19.5% which exceeded the comparable return on the S&P Index. The study firmly concluded that minority-managed firms have a successful track record.

Then came Diamond Ventures; an applicant to the SBIC program. After being denied twice, the firm complained to the Inspector General that it experienced bias and SBA Program Managers conducted unfair assessments of the teams qualifications.

The Inspector General audited Diamonds application process experience and found numerous instances of bias and unequal treatment in Diamonds application process. The report showed among many things that SBA added requirements to Diamond after the application was submitted...and that SBA was more rigid" in its evaluation of Diamond compared to other applicants. The full report is at www.diamondventuresllc.com.

Diamond filed a discrimination lawsuit in 2003 in the Washington, D.C. District Court and won a June 2004 ruling denying SBAs Motion To Dismiss the lawsuit (Diamond Ventures, LLC V. Hector Baretto and the U.S. SBA Case # 1:03 CV 1449). We were elated to win this hard fought ruling, Said C. Earl Peek, Diamonds Managing Partner." SBA has nearly 500 teams managing SBICs and we expect to prove that less than 5% of the total are Black, Hispanic, Asian, Indian, or Women managed", Peek said further. SBA annual reports show that these groups as a whole regularly receive less than 8% in SBIC funding in total and Blacks get less than 2% each year.

Crucial documents turned over by SBA as part of the lawsuit, show handwritten notes and e-mails by SBA Program Managers identifying the application as weak" more than three months before any detailed review or scoring was performed. One program analysts told C. Earl Peek, Diamonds Managing Partner, early on that his plans were loosey goosey". Despite demonstrating over 70 years of experience in lending and investing to these types of firms, SBA challenged the ability of the team to execute its strategy and wrote that lending and investing in LMI markets is a flawed strategy".

SBA Analyst went as far as saying community impact is not a concern of the SBIC program" despite the express intentions of Congress in the SBIC and New Markets legislation in recent years. Peek said he was appalled" to see SBA comments to answers on Diamonds application. SBA at one point even said parts of its application was gibberish". One Analyst re-computed Diamonds returns on the firms venture capital deals at 37% which far exceeded the typical 9% return of like SBIC firms, but still chose to call the investments total losers".

We were floored to see such vicious mean spirited comments on our application when all we wanted to do was make sure capital reaches Americas most underserved and qualified groups, said Peek". We believe that further investigation will show that the lack of black led firms among SBIC licensees leads to the conclusion, similar to that reached by Dr. Bates a decade earlier, that Diamond's experience is part of a systemic bias that has excluded black led firms from the $25 billion SBIC program", noted Josh Rose, Diamonds legal counsel. Diamond Ventures long-term goal is to provide capital and create successes with minorities similar to those achieved by Staples, FedEx, Outback Steakhouse and others who received early rounds of funding from SBICs.

Media Contact:

C. Earl Peek

404.378-6232 (Office) / 404.285.6661 (Cell)/Fax 404.378-6262

epeek@diamondventuresllc.com

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