Obama Champions Middle Class While Ignoring Billions in Corporate Contracting Fraud

Press Release

Obama Champions Middle Class While Ignoring Billions in Corporate Contracting Fraud

December 8, 2011

Petaluma, Calif. – In a speech Tuesday, President Obama addressed the plight of the U.S. middle class and called on Congress to pass provisions of his jobs package. Yet the President has ignored the simplest, most cost-effective solution to create middle class jobs, which is to direct existing federal spending to the nation’s 28 million small businesses, where more than 90 percent of net new jobs are created.

Since taking office, the Obama administration has awarded hundreds of billions of dollars in federal contracts to large corporations but classified those contracts as allocations to small businesses. This misreporting of federal spending allows the government to appear as if it is nearing its 23 percent small business federal contracting goal, mandated by the Small Business Act.

Since 2003, a series of federal investigations have found that hundreds of billions of federal contract dollars are diverted away from the nation’s chief job creators to some of the largest companies worldwide. The Small Business Administration Office of Inspector General has named the problem a top management challenge every year since 2005.

During his 2008 presidential campaign, Barack Obama stated, “It is time to end the diversion of federal small business contracts to corporate giants.” Yet his administration has remained silent on the issue for the past three years.

According to the U.S. Census Bureau, America’s 28 million small businesses create 90 percent of net new jobs. Small businesses are responsible for half of GDP, half the private sector workforce and 90 percent of all U.S. exports. In April 2010, Senator Mary Landrieu (D-LA), the Chair of the Committee on Small Business and Entrepreneurship estimated that, “increasing contracts to small businesses by just 1 percent,” would create more than 100,000 new jobs. Based on U.S. Census Bureau data and Senator Landrieu’s estimation, the ASBL estimates that ending the diversion of federal small business contracts to large, multinational corporations would create millions of jobs. 

Georgia Congressman Hank Johnson introduced legislation this year titled The Fairness and Transparency in Contracting Act that would finally prevent the government from counting contracts awarded to large corporation as small business contacts.



Feared gridlock aftermath: Less help for small business


Feared gridlock aftermath: Less help for small business

By Cathy McKitrick
Salt Lake Tribune
December 1, 2011

Although politicians share broad consensus about how important small businesses are to the economic recovery, potential congressional spending cuts could impact the agency that helps these businesses take root and expand in Utah and elsewhere.

 Last month, 21 business groups approached lawmakers on behalf of the U.S. Small Business Administration, seeking increased funding and restoration of the incentives the agency was able to offer in early 2011, which fueled a brief run of record-level lending.

 One small-business advocate — Lloyd Chapman, founder and president of the advocacy group, the American Small Business League — wrote in a recent Huffington Post blog about his concerns that spending cuts tied to Washington’s political gridlock could spell doom for the little guy.

 According to U.S. Census data and the SBA’s Office of Advocacy, small businesses create more than 90 percent of net new jobs nationwide, while generating more than half of the country’s gross domestic product and 90 percent of its exports.

 However, with the political heft that corporations can wield with lawmakers to protect their interests, Chapman fears that deficit reduction plans coming out of Congress will either reduce the SBA’s budget or eliminate the small agency altogether.

 For 2012, the agency is asking for $985 million, less than its budget in the 1980s, Chapman noted.

 For his part, Utah GOP congressman Jason Chaffetz said that although he’s heard nothing about eliminating the SBA, he would be open to discussions about reorganization that would eliminate inefficiencies.

 "We’re $15 trillion in debt," Chaffetz said, "so there better be some changes."

Established in 1953, the SBA helps small businesses with an array of services, ranging from financing and entrepreneurial training to procurement of government contracts. The agency also represents small-business concerns at the legislative level in an effort to preserve free, competitive enterprise.

 For Salt Lake City resident Joni Loyola, her SBA loan meant the difference between stagnation and growth. In late 2010, she contacted John Holt at Salt Lake City’s Celtic Bank, who guided her through the process. Celtic Bank is one of many financial institutions in Utah who handle SBA loans.

 Loyola used the financing to purchase space to expand her Sugar House hair salon from 750 square feet to 2,000 square feet and from four stations to eight, also adding a skin-care room.

 "I always thought I would rent," Loyola said. "So it was a dream come true when I could buy the building and create my own style."

Those personal touches includes the custom stainless-steel cabinets that grace her new and improved J. Loyola Hair Studio. After operating her own salon for 15 years, Loyola said her business doubled in the past year because of the expansion and upgrades.

Loyola described herself as a "big-time fan" of the SBA and recommends its resources, adding that if it were diminished she "would feel very badly for all the small businesses that wouldn’t have the opportunity I had."

 Although the SBA’s future is unpredictable, its leaders prefer to forge ahead.

 "We don’t yet know what to anticipate as far as funding," said Region 8 Administrator Dan Hannaher. "Certainly there won’t be a lot of additional dollars flowing to agencies, but most in Congress recognize SBA’s value in strengthening economic development in every state."

 Appointed by President Barack Obama, Hannaher has overseen Region 8 — Utah, Colorado, Montana, North Dakota, South Dakota and Wyoming — since August 2009. Key pieces of legislation have helped the SBA do its job, Hannaher said, include the stimulus boost from the 2009 American Recovery and Reinvestment Act and the Small Business Jobs Act of 2010, which allowed the waiving of loan fees through the end of that year. Hannaher also pointed to recent legislation that granted tax credits to businesses that hire unemployed military veterans.

 Hannaher said he is keeping an eye on pending jobs legislation and also on whether the payroll tax break will be left to expire at the end of this month.

 "Unless Congress acts again, every employee in this country will have higher taxes come 2012," Hannaher said, leaving most households with $1,000 to $1,500 less in annual take-home pay.

 According to Stan Nakano, district director for Utah’s SBA office, 2011 was a banner year for lending. In 2009, 2,248 loans were approved, totaling $303 million; in 2010 that number fell to 1,678 loans and $279 million. The recent fiscal year ending in September logged fewer loans — 1,561 — but $435 million in total dollars.

 "The average loan was larger," Nakano said, attributing that to the $5 million cap allowed under the American Recovery and Reinvestment Act.

 Steve Price, deputy director for Utah’s SBA office, has worked with the agency for 26 years, surviving several election cycles and policy changes. Two decades ago, his office employed 30 people, Price said, noting that staffing has shrunk to 11. Nationwide the agency employs fewer than 3,000 people and makes up a tenth of one percent of the federal budget, Price added.

 "With new procedures and automation, we can accomplish more with less," Price said. "Obviously things change, and any changes in funding affects our delivery. The biggest fear is the unknown."

 In Chaffetz’s way of thinking, every agency should be scrutinized. "Everyone claims they’re too small to make a difference, but if you can’t watch your pennies, its hard to make a difference in dollars."

How soon such decisions may come remains an unsettling question in itself.

Marty Carpenter, communications director for the Salt Lake Chamber, touted Utah’s better-than-average rate of job creation but lamented the congressional supercommittee’s recent failure to address deficit and debt issues as a "missed opportunity."

 "When our national leaders fail to address our economic issues," Carpenter said, "it hurts right where it counts — in confidence."

 Howard Headlee, president of the Utah Bankers Association, voiced support for SBA programs as "critical to the economic recovery," while echoing Carpenter’s frustration.

"I think everyone is concerned about what exactly Congress might do or might not do next," Headlee said. "Their lack of ability to work together hurts the economy."

Last Chance to Tell Obama to Keep Minority Business Program

Press Release

Last Chance to Tell Obama to Keep Minority Business Program

November 8, 2011

Petaluma, Calif. – The following is a statement by the American Small Business League:

Today is the final day to comment on proposed changes to the Federal Acquisition Regulation (FAR) that will eliminate one of the most important contracting programs for minority-owned small businesses. Minority business owners can submit comments via the Federal Register.

Friday, September 9 the Obama administration announced plans to end a federal program that established a five percent minority-owned small business federal contracting goal for the Department of Defense, NASA and the U.S. Coast Guard. The proposal deletes several mechanisms of help for minority-owned small businesses from the FAR without providing a new effort to help qualified businesses.

The proposed changes are the result of a 2008 court case that ruled certain federal programs benefitting minority-owned small businesses unconstitutional. Noted federal contracting expert professor Charles Tiefer has written an opinion on the proposed changes, which can be read here. He states, “It is a broad purge. The proposed regulations take an axe to the concept of a high-visibility program implementing a high-visibility goal.”

The American Small Business League (ASBL) has been campaigning in recent months to block the proposed change to the FAR and has received support from several organizations, including the National Black Chamber of Commerce. Approximately 35 percent of the U.S. population is made up of ethnic minorities. Almost six million businesses are minority-owned. The ASBL estimates that if the policy is implemented, minority-owned small businesses could lose billions of dollars in federal contracts annually, which could lead to the loss of millions of jobs.

This shocking move comes at a time when unemployment has hit minority groups especially hard. According the U.S. Department of Labor, the jobless figure for African Americans is 15.1 percent and 11.4 among Hispanics.

“It is unbelievable that, during one of the worst economic downturns in U.S. history, the Obama administration would allow vital programs that help create jobs for minorities to fall,” said ASBL President Lloyd Chapman. “Minority business owners need to tell the administration that we need these programs.”


Fraud and Loopholes Deliver Small-Business Contracts to Big Firms


Fraud and Loopholes Deliver Small-Business Contracts to Big Firms

New York Times
November 1, 2011

It’s been a busy season for combating fraud in government contracts for small business, for prosecutors enforcing the law as well as the legislators trying to improve it. But for both, it appears to be an uphill battle.

In June, the federal government charged two men with creating a fake small business to win a $100 million Defense Department contract. Two months later, a businessman pleaded guilty to obtaining to false citizenship papers, which he used to get a security clearance from the Department of Defense so that he could receive preferential small-business contracts.

In October, one man pleaded guilty to a scheme in which he and a partner vouched for the small-business status of each other’s company. That, in turn, led the Justice Department to uncover an alleged ring of bribery and kickbacks centered at Eyak Technology, or EyakTek, nominally a small business based in Virginia with a $1 billion contract to provide information and security technology to government agencies. An indictment announced on Oct. 4 claims that the company’s contracting director conspired with officials in the Army Corps of Engineers to steer federal purchases to an unnamed subcontractor. That subcontractor then inflated its bills — by $20 million, according to the indictment — and used part of the proceeds to pay off the Eyak and Army Corps officials.

The federal government is the world’s largest buyer of goods and service, and it is supposed to make sure that 23 percent of those purchases go to small businesses. In the case of economically disadvantaged businesses, government agencies can often set aside contracts and award them without putting them up for a competitive bid. The government perennially misses those goals, but most observers believe that the amount of small-business contracts the government does report masks a share that have in fact been diverted to larger companies. Fraud is an important, though unquantified, culprit.

Observers say government officials in charge of procurement are often too busy to look closely at a company’s small-business credentials. But the Small Business Administration’s inspector general, Peggy E. Gustafson, testifying in a Congressional hearing last week, said that her agency often did not effectively oversee the contracting programs and did not aggressively pursue companies that misrepresented themselves as small. The S.B.A., Ms. Gustafson said in her prepared statement, “needs to change its culture so that employees understand that their mission includes not only assisting small businesses but also ensuring accountability and integrity to prevent fraudulent and improper actions from depriving procurement opportunities for legitimate firms.”

Ms. Gustafson also said that despite the recent legal victories, seeking justice in a courtroom was difficult because a company that fraudulently identifies itself as small in order to win a federal contract usually fulfills the contract. “Without an associated and definable loss to the government, criminal prosecutors are sometimes reluctant to pursue action against these companies, or if they do pursue them, may only be able to obtain limited sentences,” she said.

That is not the case in the EyakTek case, where the government allegedly paid for the conspirators’ BMWs, first-class airfares and Cartier watches. But while the company itself was not implicated in wrongdoing — charges were only brought against its head of contracting — the allegations surrounding EyakTek raised other troubling questions about small-business contracting, because the company had a legally sanctioned leg up in the competition for small-business contracts. Eyak is what’s known as an Alaska Native Corporation, and with that designation, it is able to compete for contracts set aside for companies that participate in the S.B.A.’s 8(a) program. This is a program intended to help small, disadvantaged businesses — particularly those owned by minorities — by providing business training coupled with opportunities for no-bid contracts set aside just for them.

In the 1970s, Congress made Alaska Native Corporations a special class of 8(a) business. Unlike most businesses in the program, the Alaskan companies are not subject to a limit to the size of a no-bid contract. And while a typical 8(a) business must be managed by someone who meets the program’s definition of disadvantaged, that’s not the case with Alaska Native Corporations, which  tend to recruit executives with broad and deep ties across government agencies and pay handsomely for their experience.

These features have made Alaska Native Corporations very popular with government bureaucrats because they offer an easy way to meet small-business quotas. In 2009, according to the S.B.A.’s inspector general, Alaskan firms took in 26 percent of total 8(a) contract dollars. EyakTek and other subsidiaries of the Eyak Corporation together took in at least $338 million, according to a search of the federal contracting records performed by the American Small Business League, which lobbies for integrity in small-business contracting. (If a native company gets too big to participate in the program, the parent corporation can simply create a new company — another advantage not afforded other program participants.)

Any effort to change the rules for Alaskan companies is likely to meet stiff resistance in Congress. (Alaska’s representative, Don Young, is the second-ranked Republican in the House in terms of seniority and the sixth most senior of all representatives.)

Surprisingly, even trying to pass legislation to curb fraud is more difficult than one might expect. In her testimony, Ms. Gustafson proposed measures to make it easier to prosecute fraud and stiffen penalties for conviction, in part by defining a loss to the government as equal to the size of the contract.

A bill containing these provisions has passed the Senate, but Rep. Sam Graves, the chairman of the House Small Business Committee, faulted the Senate bill for, among other things, not including an exemption for honest errors. “The small-business affiliation rules are complex and are not intuitive, so I’m hesitant to potentially trigger jail time for companies that make a mistake,” he said in an interview with VetLikeMe, a newsletter for business owners who are wounded veterans, “although I agree that we need to more vigorously enforce the certification rules.” The House has not yet taken up the Senate bill.

Mr. Graves also expressed skepticism about a separate House bill, introduced last month, that would exclude the subsidiaries of publicly traded companies from the definition of a small-business contractor. The law already requires that recipients of small-business contracts must be independently owned and operated, but a American Small Business League spokesman, Brian Reeder, said a clarification was necessary. “Common sense says that independently owned means not publicly traded,” he said, “yet publicly traded companies and their subsidiaries receive contracts that government agencies put towards their small business goals.”

The bill was introduced by Rep. Hank Johnson, a Georgia Democrat, with support from 16 other Democrats. No Republicans sponsored the legislation, and Mr. Graves, the Small Business Committee chairman, opposes the bill “because it places further restrictions on how a small business can be organized and the source of its investment,” said a spokesman, Darrell Jordan. “At a time of record unemployment, Chairman Graves wants to support measures that help small businesses grow.”

Opposition to Mr. Johnson’s measure isn’t strictly partisan. The Georgia congressman introduced an identical bill last year, while Democrats were in charge. It died in committee.

Affirmative Action Under Assault


Affirmative Action Under Assault

By Linn Washington Jr.
Philadelphia Tribune
November 1, 2011

Former President Bill Clinton adopted a mend-it-don’t-end-it posture toward affirmative action in 1995, refusing to placate white conservatives at war with this equity initiative even if it cost him votes.

According to an alarming column by National Black Chamber of Commerce president/CEO Harry Alford published in The Philadelphia Tribune recently, the affirmative action posture of America’s first president of clear African ancestry apparently is: pretend-it-to-end-it.

Alford says federal contracting with Black-owned firms experienced drastic reductions during the Obama years and now “instead of exhausting all avenues to improve the amount of Black contracting, this administration is taking formal action to end all” minority contracting initiatives.

Although Alford didn’t say it, Obama backing away from fighting for affirmative action is yet another instance of this president’s placate-enemies approach to governance that again leave the interests of his core Black constituency out in the cold.

Apparently this oft-described constitutional law scholar and his supporting cast of Ivy League trained lawyers lack commitment or lack savvy for crafting legal arguments to counter conservative attacks against affirmative action righting historic wrongs.

Independently vetted federal statistics confirm Alford’s contention.

Black-owned businesses have received a paltry 3.5 percent of federal contracts funded through Obama’s vaulted ARRA stimulus approved in 2009, according to continuous stimulus monitoring conducted by the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University.

Further, stimulus contracts sprinkled to Black and Latino firms had low dollar values.

The specific Obama administration initiative igniting Alford’s ire is a proposed policy to eliminate a program establishing a five percent minority-owned small business federal contracting goal for the Department of Defense, NASA and the U.S. Coast Guard.

Alford’s column quoted Lloyd Chapman, president of the American Small Business League, who sees “significant negative” economic impacts on minority-owned small businesses leading to the loss of millions of jobs from this policy shift by the Obama administration.

Chapman wrote it is “difficult to understand why, in the middle of one of the worst economic downturns in U.S. history and when unemployment has hit minority communities especially hard, the Obama administration would end one of the most successful programs to create jobs for minorities.”

On one level Obama has kept a campaign pledge to enact “change” … although this is not the “change” Obama’s solid supporters in the black community envisioned — their “President” killing programs that provided minority owned business with a few crumbs of fairness from the federal economic pie.

It’s easy to forget the noxious fact that duplicity is seemingly an integral element penned in invisible ink into job descriptions for elected office.

Yep, while there’s a short supply of jobs and mortgage foreclosure assistance for those suffering rapes by the forces manipulating America’s economic system apparently there’s no shortage of duplicity among politicians.

Look at the duplicity exhibited by chest-thumping “tough-on-crime” Republicans and Democrats in Pennsylvania’s legislature ignoring repeated requests from the Human Rights Coalition/Fed-Up! and other groups to investigate rampant abuses in the state’s prison system committed by guards.

Those physical/sexual abuses are crimes plus those abuses pick the public pocket because a significant percentage of Pennsylvania’s nearly $2-billion annual prison budget pays prison personnel salaries and benefits.

According to a recent HRC/Fed-Up! statement “While state prisoners in Pennsylvania are being physically, sexually and psychologically abused … the legislature has approved funding for three more prisons … At a time when other states are scaling back their prison populations for public safety and budgetary reasons …”

A vying volume of bi-partisan competitors makes topping the duplicity pile difficult but on the trash heap of ideological intransigence the policies/postures of N.J. Gov. Chris Christie constantly place him in win-place-or-show positions.

Christie’s refusal to appoint non-whites to NJ’s State Supreme Court draws rightful criticisms.

Christie sacked the state’s only Black Supreme Court justice refusing to reappoint John Wallace when his term expired early last year making Republican Governor Christie the first governor in N.J. memory not to reappoint a sitting high court justice.

Christie nominated a female GOP-operative corporate lawyer with no judicial experience to replace Wallace — a nomination held-up by N.J. Democratic Senators.

The state’s only Hispanic justice — Roberto Rivera-Soto — declined reappointment when his term expired last month.

Adding insult to his injurious judicial policies, when N.J.’s body that recommends judges objected to Christie’s mistreatment of Wallace the bombastic Governor replaced that body with all whites/all Republicans.

Christie new crew included a disgraced former Supreme Court Justice who while serving as N.J.’s Attorney General protected racial profiling by State Police and lied about it during legislative testimony.

Christie, countering criticisms of his seeming segregationist posture on Supreme Court nominees, contends that he has an “obligation to put the very best people on the court…”

That “very-best” contention by Christie rubs dung in the face of non-white Republicans because implicit in that posture is an assertion that non-white conservatives lack enough legal smarts to serve on the state Supreme Court Christie desires.

For a supreme example of duplicity (with emphasis on the deceitfulness element of that word’s definition) look no further than extreme conservative U.S. Supreme Court Justice Clarence Thomas who recently celebrated twenty controversial years on America’s highest court.

Democratic Congress members and others demand an investigation into Thomas failing to disclose $1.6 million in earning his wife received from right-wing organizations pushing policies Thomas backs in court rulings.