WASHINGTON, D.C. (PRWEB) February 16, 2006
Best known for its loan programs and disaster relief, the U.S. Small Business Administration has long operated the Small Business Investment Company program, a venture capital fund that has underwritten the start-ups of some of the country's most successful companies, including Federal Express, Outback Steakhouse, Callaway Golf, and Intel. SBIC licensees are able to use SBA's leverage of $2 for every $1 a firm raises to invest in new and expanding businesses.
Apparently, however, SBA intends to reserve SBIC funds for companies run by white males, judging from the agency's persistent denial of minority applicants and its continued defiance of federal court orders to disclose documentation of its licensing practices and licensees.
SBA has fought vigorously against revealing application profile data or applications on its 500 licensed firms, which a federal court ordered to be released in April 2005 in connection with a $100 million discrimination lawsuit filed in 2003 by Diamond Ventures, an Atlanta based firm (Diamond Ventures, LLC v Hector Baretto-Case # 03-1449GK). In 2002, the SBA refused to license Diamond's managers to operate a venture capital firm to invest in inner city, underserved, rural areas with a focus on women and minorities.
“SBA has not devoted a fair share of the SBIC program to qualified African-American enterprises and licensing qualified firms like Diamond is likely to help solve that problem”, said Joshua Rose, Senior Attorney of D.C. based Rose and Rose, LP and Diamond’s attorney. Is SBA hiding something? Court records show that SBA was denied a motion to conceal the data from Diamond’s Partners three times in 2005 and that they have delayed the disclosure to Diamond’s Partners for more than 15 months. Court records indicate SBA has targeted C. Peek, one of Diamond's founders who is black, as a person who should not examine the records with Diamond's legal counsel even under seal before the court. "It’s amazing", said L. Saboor, another of Diamond’s black partners. In an April 2005 ruling, District Court Judge Gladys Kessler said " the defendant's fears about competitive harm and fear of public disclosure are unfounded." Kessler has denied their request to conceal the information from Peek and Diamond three times.
SBA's intransigence is especially curious since its own public data on its Web site and in public reports to the President and Congress show that less than 5% of SBIC funds go to women-owned, Black, Asian, and Hispanic firms. While in violation of the District Court order, SBA told the U.S. Appeals Court in recent filings (Case number 05-5258) that the "District Court set no deadline for production of the (applications and licensees) and none have been produced." Yet, District Court Gladys Kessler clearly stated that the applications were to be turned over by late April.
Notably, the Bush Administration is on record as advocating minority business development and advances this theme in its key platforms. SBA therefore is not only disobeying the federal courts - a serious enough transgression - but has repudiated the White House it serves. If the agency is guilty of discriminatory practices, as Diamond alleges, then SBA should move immediately correct the disparities rather than maintain a stubborn, defiant, secretive stance.
Diamond, whose partners have a long and solid track record as financiers, are focusing on business development in Atlanta and other inner city, underserved areas that are predominantly African American or which have large minority populations.
Indeed, the SBA Inspector General found serious fault with the agency's review and consideration of Diamond's application prior to the case being filed, concluding that SBA managers did not use appropriate policies, procedures and criteria in processing Diamond's application or even in rejecting it.
In its lawsuit, Diamond Ventures maintains that "SBA has arbitrarily, capriciously, with ill will and upon racial and a discriminatory basis concluded that key members of the management team lacked the necessary skills to manage a SBIC by not reviewing their managerial credibility and background fully on the same and similar basis as others who were approved and licensed in the same period who had the same or similar qualifications with firms clearly denoted.."
"Diamond Ventures' long-term goal is to join efforts with other firms to finance inner-city, underserved, and women and minority-managed firms that parallel the success of firms such as FedEx, Intel, and others that have all were financed by SBA's SBIC program," said Joshua Rose, Diamond's attorney.
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