SBA should speak up in defense of real small businesses

Press Release

SBA should speak up in defense of real small businesses

By William Hixson
The Hill
March 25, 2013

It’s hard to disagree with former Sen. Blanche Lincoln’s belief that small and large businesses alike can mutually benefit from a decrease in regulatory burdens. However, when accessing just who is truly advocating for small businesses, we must always take a second look.

Year after year, the SBA’s Office of Inspector General (OIG) has named the diversion of small business contracts to large corporations as the top management challenge facing the SBA. In 2005, the OIG’s report 5-15 stated this problem as “one of the most important challenges facing the Small Business Administration and the entire Federal Government.”

If the SBA’s Office of Advocacy’s intentions are to help small businesses, why do they remain silent about this issue? Why do they focus on lending and regulation when some of the largest corporations in the world are receiving contracts intended for small businesses? Each year Coca-Cola, Verizon, General Electric, Pepsi and countless other Fortune 500 firms each receive millions of dollars in small business contracts. The SBA Office of Advocacy does absolutely nothing to address this problem and Sen. Lincoln’s group, the National Federation of Independent Business (NFIB), won’t even acknowledge the issue.



As the chairwoman of the NFIB’s Small Businesses for Sensible Regulations Coalition, Sen. Lincoln represents a group that calls itself “the voice of small business.” However, in February Politico reported that Sen. Lincoln was hired by Walmart as an outside consultant. In addition, reports have recently exposed the NFIB for lobbying for large corporate interests that counter the interests of small businesses.

So while Sen. Lincoln defends the intentions of the SBA, why don’t we look at her intentions? As she preaches her support for small businesses, just know she receives a paycheck from Walmart. Lincoln, the NFIB and the SBA’s Office of Advocacy are a bunch of wolves in sheep’s clothing.

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Security Contractors Plead Guilty To Illegally Obtaining $31 Million From Contracts Intended For Disadvantaged Small Businesses


Security Contractors Plead Guilty To Illegally Obtaining $31 Million From Contracts Intended For Disadvantaged Small Businesses
March 18, 2013

Executives at two Arlington-based businesses have pleaded guilty to fraudulently obtaining more than $31 million in government contract payments that should have gone to disadvantaged small businesses.

The guilty pleas were announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and NASA Inspector General Paul K. Martin.

“These executives used their knowledge and experience to abuse a program created to ensure minority small business owners could compete for government contracts,” said U.S. Attorney MacBride. “They not only illegally obtained millions from the United States, they also victimized legitimate minority owners who didn’t get the bids.”

“Keith Hedman and his co-conspirators fraudulently obtained valuable government contracts intended for minority-owned small businesses, and pocketed millions of dollars for themselves,” said Acting Assistant Attorney General Raman. “They abused an important government program, and will now face the consequences.”

“This investigation confirmed that these executives repeatedly took actions that gave them a fraudulent advantage in the contracting process,” said NASA Inspector General Martin. “I commend the outstanding efforts of our agents and our law enforcement partners involved in this case in protecting the integrity of the 8(a) program.”

According to court documents, Keith Hedman, 53, of Arlington, Va., formed an Arlington-based security service consulting company in approximately 2001. Hedman formed the company, listed as Company A in court filings, with an African-American woman who was listed as its president and CEO to enable the company to participate in the Small Business Administration’s (SBA) Section 8(a) program, which enables certain small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses. In 2001, Hedman’s company received approval to participate in the 8(a) program on the basis of the African-American president and CEO’s listed role, but when she left the company in 2003, Hedman became its sole owner and the company was no longer 8(a)-eligible.

Hedman admitted that in 2003 he created a shell company, listed as Company B in court records, to ensure he could continue to gain access to 8(a) contracting preferences for which Company A was not qualified. Prior to applying for the shell company’s 8(a) status, Hedman selected an employee, Dawn Hamilton, 48, of Brownsville, Md., to serve as a figurehead owner based on her Portuguese heritage and history of social disadvantage, when in reality the new company would be managed by Hedman and senior leadership at Company A. To deceive the SBA, they falsely claimed that Hamilton formed and founded the company and that she was the only member of the company’s management. They continued to mislead the SBA through 2012, even lying to the SBA to overcome a protest filed by another company accusing Hedman’s former company and the shell company of being inappropriately affiliated.

From Company B’s creation through February 2012, Hedman – not Hamilton – exercised ultimate decision-making authority and control over the company by controlling its finances, allocation of personnel and government contracting activities. Hedman nonetheless maintained the impression that Hamilton was leading the company, including through forgeries of signatures by Hamilton to documents she had not seen or drafted. Hedman also retained ultimate control over the shell business’s bank accounts throughout its existence. In 2011, Hedman withdrew $1 million in cash from Company B’s accounts and gave the funds in cash to Hamilton and three other co-conspirators. In total, Hedman and Hamilton secured through the shell company more than $31 million in government contract payments, which generated more than $6 million in salary and payments for the conspirators that they were not entitled to receive.

In addition, Hedman admitted that he agreed to pay a $50,000 bribe through the shell business to a U.S. government contracting official for the official’s help in securing contracts for Company B.

Hedman and Hamilton pleaded guilty on March 13 and March 15, 2013, respectively, in U.S. District Court for the Eastern District of Virginia to major government fraud and face a maximum penalty of 10 years in prison and a multimillion-dollar fine for that charge. Hedman also pleaded guilty to conspiracy to commit bribery, which carries a maximum penalty of five years in prison. Hedman agreed to forfeit more than $6.3 million, and Hamilton agreed to forfeit more than $1.2 million. Hedman is scheduled to be sentenced on June 21, 2013, before U.S. District Judge Gerald Bruce Lee. Hamilton’s sentencing is scheduled for June 21, 2013, before U.S. District Judge T. S. Ellis, III.

In addition, the following individuals have also pleaded guilty to major fraud or conspiracy to commit major fraud:

David George Lux, 62, of Springfield, Va., pleaded guilty today before U.S. District Judge Leonie M. Brinkema. Lux served as the chief financial officer at Company A from 2007 through February 2012 and performed work for Company B throughout that time while officially on Company A’s payroll. He is scheduled to be sentenced on June 14, 2013, by Judge Brinkema.

Joseph Richards, 51, of Arlington, Va., pleaded guilty on March 14, 2013, before U.S. District Judge Brinkema in the Eastern District of Virginia. Richards served as the chief operating officer and chief of staff for Company A from 2005 through 2008 and then vice president from 2010 through February 2012. He also served as Company B’s chief of staff from 2008 through 2010. According to court documents, Richards performed work for Company B throughout his time at both companies. He is scheduled to be sentenced on June 14, 2013, by Judge Brinkema.

David Sanborn, 60, of Lexington, S.C., pleaded guilty on March 13, 2013, before U.S. District Judge Claude M. Hilton in the Eastern District of Virginia. Sanborn served as vice president at Company A from 2001 through 2009 and the company’s president from 2010 through February 2012. According to court documents, Sanborn performed work for Company B from its inception while on Company A’s payroll. He is scheduled to be sentenced on June 28, 2013, by Judge Hilton.

This case was investigated by the NASA Office of the Inspector General (OIG), the SBA OIG, the Defense Criminal Investigative Service, the General Services Administration OIG and the Department of Homeland Security OIG. Assistant U.S. Attorneys Chad Golder and Ryan Faulconer, a former Trial Attorney for the Criminal Division’s Fraud Section, are prosecuting the case on behalf of the United States.

Small Business Administration Criticized For Backing Big, Corporate Interests


Small Business Administration Criticized For Backing Big, Corporate Interests

By Catherine New
The Huffington Post
March 15, 2013

A watchdog group charged this week that the federal Small Business Administration lobbied on behalf of large corporations, adding to criticism that the agency has been letting its definition of small get very big.

This week, the Center for Progressive Reform, a left-leaning nonprofit research and advocacy group, said the SBA has been using money earmarked for mom-and-pop business owners to lobby for corporate entities instead, the Washington Post reported.

On Thursday, Rena Steinzor, CPR's president, said during a congressional hearing that the SBA's lobbying arm had “consciously diverted its limited, taxpayer-funded resources away from helping truly small businesses.”

Steinzor also called for the government's oversight arm, the Government Accountability Office, to launch an investigation into whether SBA officials had been breaking the law by lobbying against new regulations, like rules about emissions, on behalf of big businesses, including large oil refineries and chemical plants. In one example cited in her testimony, Steinzor said the SBA lobbied to reduce air pollution regulations that were beneficial to the country's fourth-largest utility, the Southern Company.

Steinzor's testimony follows on a scathing report published by her organization in January that attacked the SBA's Office of Advocacy, charging it had "extraordinary authority" over business regulations, especially ones having to do with environmental impacts such as air pollution and contamination.

Another report also released in January from the Center for Effective Government said the SBA frequently heard from representatives of trade groups and lobbyists who represented the interests of big and small businesses alike, The Hill reported.

In an email to the Washington Post Thursday, the director of the SBA's Office of Advocacy said his office had not broken any laws.

But the latest round of criticism adds to a debate over how useful the SBA is for the majority of small businesses. The federal office has been criticized in the past for only offering or guaranteeing loans to a small percentage of businesses.

The agency defines small business in several different ways; for service and retail businesses, receipts cannot exceed more than $21 million per year. For manufacturing companies, the maximum number of employees can range from 500 to 1,500, depending on the type of product, according to the agency.

In her testimony, Steinzor said the SBA's definition of small business allows it "to push for preferential regulatory treatment for relatively large firms that do not conform to any common-sense understanding of what a 'small business' is."

New legislation requires small business contracting


New legislation requires small business contracting

By Paula Burkes
March 5, 2013

Q&A with Carter MerkleNew federal legislation requires contracting with small businessQ: Earlier this year, President Barack Obama recommitted to meeting small business contract goals. What does this mean and how can small businesses take advantage of the federal contracts available?A: When President Obama started his new term, he signed legislation to deliver even more government contracts to small businesses and ensure federal agencies take their annual small-business contracting goals more seriously. This new legislation requires small business contracting performance as part of employee reviews for senior agency officials. Each year, the U.S. government spends $500 billion on private contracts, and 23 percent of those funds are specifically allotted to small businesses. It's a significant piece of the pie that small businesses can pursue with the aid of many free resources and tools.Q: Why have so few small businesses been granted federal contracts in the past?A: Last year marked the 11th consecutive year the federal government missed its goal to grant contracts to small businesses. For small businesses — many with limited resources — the process can seem daunting. The reality is, while the requirements can be extensive (for good reason!), there are resources available to help companies overcome these hurdles and demystify the process.Q: What resources are available for small businesses to navigate the federal procurement process?A: With the support of Microsoft, Braddock Communications has published an online guide for small businesses ( to navigate the procurement process. The guide provides valuable information to allow a small business to compete for government contracts. The Oklahoma Bid Assistance Network (, a complementary local resource, also is available to help coach Oklahoma businesses through the process of securing contracts with federal, state and local governments. Both tools offer support with step-by-step guidelines so small businesses can realize even more success.Q: What prompted Microsoft's involvement in this issue?A: Microsoft has more than 20 million small business customers and recognizes the important role technology plays in the success of these companies. More specifically, given some of the requirements specified by the federal government, Microsoft offers a number of technology solutions as it relates to audits, security, etc.