Black Venture Capital Firm Files Action Against SBA for Discrimination in SBIC Venture Capital Program -- Inspector General Finds Bias and Separate Treatment in Recent Report --

SBA has not licensed a black firm in its $20 Billion SBIC program, since 1994. No more than 10 Women, Asian, Hispanic,and Native Indian firms have received more than licenses as a group, and only 5% of the program's impact in the $20 Billion invested by 450 firms. A scathing Inspector General Report finds numerous errors supporting Diamond Ventures Action for Discrimination and Institutional Racism in SBA's SBIC Program. Diamond's Action may change program operations in Congress.

ATLANTA (PRWEB) May 3, 2003 -- Diamond Ventures, an Atlanta-based venture capital firm with a majority black management, today announced that it filed an action in the SBA Office of Hearings and Appeals in a 17 page petition filed against the Washington, D.C.-based Small Business Administration for bias in its selection process and prejudice in its application policies and procedures regarding the firms application and African-American applicants overall.

   The Inspector General's Report, issued publicly in April, showed that SBAs decision to deny Diamond Ventures application was not accomplished according to existing SBA procedures and criteria". The Inspector General found several instances of separate treatment and SBA officials failing to follow it polices with examples such as SBA issuing guidelines after applicant submission", and used general guidance" at the time of the submission of the application which appeared to be more rigid when applied to Diamond. The report goes further to note that SBA raised concerns" in the denial letter, that later proved to be false after brief explanation, but were never mentioned to the applicant during the review process. The full report is at http://www.sba.gov/IG/audits.html.

Diamond Ventures, which has a management team with more than 70 years collective experience as entrepreneurs and in business finance and management initially applied to the SBAs Investment Division for a venture capital license in January 2002.

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Diamond Ventures Accuses SBA of Bias in its Application Process/page 2

When you read an independent report that states The Division used criteria that had not previously been a formal part of the evaluation process", it causes me to shudder at the overt racism and segregation embodied in a program and conducted by a federal agency serving all Americans", said C. Earl Peek, Managing Partner of Diamond.

In a February 2003 letter from Jeff Pierson, Associate Administrator for the SBAs Investment Division, to Diamond Ventures, the firm was informed that its application was denied. Specifically, Piersons letter stated that the SBAs investment committee had declined the firms application because it lacked, qualifications, ability to operate a Small Business Investment Company (SBIC), and it had a series of disparate investment strategies."

In response to the SBAs assessment, C. Earl Peek, managing partner of Diamond today said, Our management team has demonstrated a solid track record in financings and private investments directly correlated to its venture capital application. We have collective experience exceeding 30 years in venture capital alone, with 1,000 related financings with more than 50 investments that averaged a return in excess of 400%. We find it both inexplicable and disturbing that the SBA has approved firms with similar management team profiles with investment return track records substantially less than Diamonds management team." SBICs have averaged a 9.28% return for the last 15 years, per SBA reports.

Diamond Ventures leadership also cited a September 2000 SBA Inspector General Report on the organizations activities with women and minorities which stated that, None of the data for women or minority firms was reliable because it was incomplete and unverifiable."

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Diamond Ventures Accuses SBA of Bias in its Application Process/page 3

The SBAs web site shows that only six states get 50% of all SBA SBIC dollars and that there have been none licensed in Georgia in more than 8 years. Additionally, the SBA has licensed almost 450 firms and none were majority black firms, and less than 5% of the firms in total are majority Hispanic, Asian, Native Indian, and Women managed. With funds provided by the SBA, those 450 firms invested approximately $20 billion in the last eight years with only $209 million of $4.5 billion in fiscal year 2002 going to all minorities and less than 5% of the entire amount to all minorities in the same period.

Diamond Ventures focus is on investing in inner city, underserved, and rural areas, whose firms are traditionally neglected by all venture capitalists firms.
Two of Diamonds black partners have a combined 27 years completing financings with a similar Debenture Finance SBA program that well suits them to manage a venture capital firm with a similar focus, said Peek.

No matter what the outcome is regarding Diamond Ventures, SBA will need to address the serious disparity and availability of financing to minorities and women and in inner-city, underserved and rural areas," Peek added.

Diamond Ventures is an Atlanta-based firm that specializes in investing and financing inner city businesses, real estate and commercial properties. Its partners collectively have more than 70 years experience in venture capital.

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Photo Caption: C. Earl Peek and Lonnie A. Saboor with Former Senior Vice-President Roger Bower of RBC Tucker Federal after its first commitment to the venture fund.