SBA Executive Covered Up Billions In Fraud and Abuse, According to the American Small Business League

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

Since 2003, a consistent flow of federal investigations have been released which have found the Small Business Administration (SBA) has allowed billions of dollars in federal small business contracts to be diverted to Fortune 500 firms. (https://www.asbl.com/documentlibrary.html) 

Several of the investigations found large businesses had committed fraud in the form of "vendor deception" and "false certifications" to illegally take billions of dollars in federal small business contracts. (https://www.asbl.com/documents/eagkeeye_report%202002.pdf; http://www.sba.gov/IG/05-16.pdf) 

Most of the nation's largest newspapers and television networks such as ABC, CBS and CNN have covered the story. (ABC, https://www.asbl.com/abc_evening_news.wmv; CBS, https://www.asbl.com/cbs.wmv; CNN, https://www.asbl.com/showmedia.php?id=1170) 

Despite irrefutable evidence indicating that Fortune 500 firms were receiving thousands of federal small business contracts, SBA Press Office Director Mike Stamler launched an aggressive campaign to cover up the fraud and abuse, and stop any media coverage on the issue.

Stamler assailed any journalist who dared to tell the story of the SBA's involvement in the widespread abuses. A number of journalists reported receiving Stamler's profanity riddled emails on a regular basis.  After receiving one of Stamler's profanity laced communications, the Long Island Business Journal (LIBJ) posted an article on its blog titled, "Expletives the SBA's Forte." (http://libizblog.wordpress.com/2008/02/22/expletives-the-sbas-forte/) 

The SBA's own Office of Inspector General has released several scathing reports describing the rampant fraud and abuse as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today…" (http://www.sba.gov/IG/05-15.pdf) 

Stamler responded by intensifying his campaign to intimidate journalists into dropping the story, and by launching a campaign to convince the public that the staggering abuses in small business contracting programs were nothing more than a "myth." (https://www.asbl.com/documents/sbamythvfact.pdf) 
 
Lloyd Chapman, President of the American Small Business League (ASBL), prompted the initial U.S. Government Accountability Office (GAO) investigation into fraud and abuse in SBA contracting programs. Additionally, Chapman has won a series of Freedom of Information Act (FOIA) lawsuits against the SBA forcing the agency to release thousands of pages of documents, which prove Fortune 500 firms were receiving billions of dollars in federal small business contracts.

After several journalists complained to the ASBL that Stamler had libeled and slandered Chapman, the ASBL requested Stamler's e-mails and phone records under FOIA.

The SBA has refused to release Stamler's phone records, and the ASBL has filed suit in United States District Court, Northern District of California. The ASBL plans to file an additional suit against the SBA to obtain all of Stamler's e-mails in preparation for a suit against Stamler and the SBA for libel and slander. (https://www.asbl.com/documents/20090312complaint.pdf)

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Petaluma, Calif. – No problem facing the Small Business Administration has been the subject of more federal investigations and more media attention than the diversion of federal small business contracts to Fortune 500 firms. The American Small Business League (ASBL) has estimated that every year more than $100 billion in federal small business contracts are diverted from legitimate small businesses to some of the largest corporations in the United States and Europe.

Since U.S. Census Bureau statistics show that firms with less than 20 employees create more than 97 percent of all new jobs in America, bringing an end to the diversion of billions of dollars in federal small business contracts to "corporate giants" should be the first order of business for incoming SBA Administrator Karen Gordon Mills.

In March of 2005, the SBA Office of Inspector General (OIG) released Report 5-15 which stated, "One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards." (http://www.sba.gov/IG/05-15.pdf)  

Every major newspaper in the country has written about the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 firms and thousands of other large businesses in the United States, and even Europe. (https://www.asbl.com/documentlibrary.html) 

ABC, CBS and CNN have aired investigative stories, which found corporate giants such as Rolls Royce, Wal Mart, Microsoft, Xerox, Sherwin-Williams, John Deere, Raytheon, General Dynamics and British Aerospace (BAE) had been the actual recipients of federal small business contracts. (ABC, https://www.asbl.com/abc_evening_news.wmv; CBS, https://www.asbl.com/cbs.wmv; CNN, https://www.asbl.com/showmedia.php?id=1170) 

In February of 2008, President Obama recognized the gravity of the issue when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants." (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php) 

As a first order of business at the SBA, Karen Mills should immediately remove all Fortune 500 firms, large businesses and their subsidiaries from any and all government databases of firms claiming status as small businesses.  This would once and for all bring an end to the "miscoding" that has plagued the SBA for the last eight years.

Next, a warning should be placed on the government's Central Contractor Registration (CCR) Database warning all government suppliers that misrepresenting a firms status as a small business to illegally receive federal small business contracts is a felony under section 16(d) of the Small Business Act, which carries a penalty of up to 10 years in prison and a $500,000 fine per occurrence.

Finally, Administrator Mills should ask President Obama to issue an executive order immediately directing all federal agencies and all prime contractors to stop reporting awards to publicly traded firms as small business awards. The Small Business Act clearly defines a small business as "independently owned." Publicly traded firms are certainly not small businesses, and do not qualify as "independently owned."

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Petaluma, Calif. – Head of litigation for the Small Business Administration (SBA) Eric Benderson, denied the SBA actually lost a federal court case filed by the American Small Business League (ASBL).

Since the federal court ruled in favor of the ASBL, Mr. Benderson's statements in an article by Pamela A. MacLean for The National Law Journal  (http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1202429063119) appeared contradictory and inconsistent with the facts and rulings of the case. In regard to ASBL President Lloyd Chapman's legal victory against the SBA, Mr. Benderson stated Mr. Chapman "didn't prevail and he got the information."

Mr. Benderson went on to make another statement that seemed contradictory when he said, "We won the case and decided not to appeal." Mr. Benderson failed to explain why or how the SBA appealed a case to the 9th Circuit Court of Appeals that they supposedly won and then subsequently dropped their appeal.

The ASBL originally filed suit in Federal District Court in San Francisco after the SBA refused to comply with a Freedom of Information Act request for the names of Fortune 500 firms that received billions of dollars in federal small business contracts for fiscal years (FY) 2005 and 2006.

In September of 2008, U.S. District Judge Marilyn Patel issued a ruling in favor of the ASBL and denied the SBA's claim that they did not have the information the ASBL was requesting. Judge Patel stated, "The court finds curious the SBA's argument that it does not 'control' the very information it needs to carry out its duties and functions." (www.asbl.com/documents/26-2.pdf)

Even though the SBA is required by statute to manage federal small business contracting data, SBA Press Office Director Michael Stamler claimed, "They sued us for the records but it is not our data."

Since 2003 over a dozen federal investigations have been released that found billions in federal small business contracts were diverted to Fortune 500 firms and thousands of large businesses. Major newspapers and television networks such as ABC, CBS and CNN covered the story. (https://www.asbl.com/showmedia.php?id=1170)

Michael Stamler and Eric Benderson have been accused by the ASBL of attempting to hide billions of dollars in fraud and abuse in SBA managed programs with a series of press releases that referred to the widely reported abuses as a "myth".

President Obama agreed with the ASBL in recognizing the magnitude of the problems at the SBA in February of 2008 when he stated, "It is time to end the diversion of federal small business contracts to corporate giants." (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php)

Petaluma, Calif. - As predicted by the American Small Business League (ASBL), President Barack Obama failed to make any reference of his plans to fix existing federal programs designed to direct federal infrastructure spending to America's 27 million small businesses during his address to Congress and the nation Tuesday night.

Top economic experts like Dr. Laura Tyson and Carly Fiorina have both acknowledged that directing federal infrastructure funds to small businesses would be the most effective way to stimulate our nation's failing economy and create jobs.  Tyson is the former Chair of the U.S. President's Council of Economic Advisers during the Clinton Administration and is currently an economic adviser to President Obama. Fiorina is the former CEO of Hewlett-Packard and a former McCain campaign economic advisor.

According to the latest statistics from the U.S. Census Bureau, 98 percent of all American firms have less than 100 employees, 90 percent of all firms in the U.S. have less than 20 employees and those firms are responsible for over 97 percent of all new jobs in America. (http://www.inc.com/news/articles/200708/data.html)

The stimulus bill signed last week by President Obama was designed primarily to create and preserve jobs. Yet not one line of the bill contains specific language to direct any of the stimulus bill's spending to the 98 percent of American firms that create over 97 percent of all new jobs.

In the absence of legislative language to specifically direct the billions of dollars in stimulus bill spending to small businesses, over 90 percent of all prime contracts from the stimulus bill will likely go to the top 2 percent of U.S. firms. This would seem to run contrary to the bill's stated mission of creating jobs.

Congress realized the vital role played by American small businesses when the Small Business Act was passed in 1953. Existing federal law, based on the Small Business Act, stipulates that a minimum of 23 percent of all federal contracts and subcontracts be awarded to small businesses.  The federal government is not meeting its goal of 23 percent and is inflating its small business contracting numbers by including contracts to some of the largest corporations in the world.

Since 2003, more than 15 federal investigations have been released which have uncovered the wholesale diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 corporations, their subsidiaries and other clearly large firms. (https://www.asbl.com/documentlibrary.html) ABC, CBS and CNN have aired stories on the investigations. (ABC, https://www.asbl.com/abc_evening_news.wmv; CBS, https://www.asbl.com/cbs.wmv; CNN, https://www.asbl.com/showmedia.php?id=1170)

"Dr. Laura Tyson needs to explain to President Obama, that if you want to stimulate the economy and create new jobs you have to direct federal infrastructure spending to the small businesses that create 97 percent of new jobs," ASBL President Lloyd Chapman said.

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