WASHINGTON -- The Small Business Administration will investigate allegations by a Republican senator that agency employees illegally lobbied special interest groups to sway the outcome of a congressional inquiry.

Raul Cisneros, the agency's top spokesman, confirmed Thursday that SBA officials have asked their inspector general to see if laws were violated when employees essentially asked interest groups to pressure Sen. Tom Coburn, chairman of a Senate Homeland Security oversight panel. Federal law prohibits agencies from using tax dollars to lobby Congress, either directly or indirectly. Officials who violate the law can be fined as much as $100,000.

"I have seen e-mails from SBA employees to organizations sent seemingly for the purpose of undermining our hearing before it even began. This type of illegal lobbying is unacceptable and will be dealt with accordingly," said Coburn, R-Okla.

One e-mail reviewed by The Associated Press shows that an SBA employee forwarded an e-mail sent by an interest group to Oklahoma businesses, urging them to contact Coburn's office and express support for the beleaguered agency.

"From that hearing he might decide to move forward and draft legislation and try to gain support to abolish the SBA," the e-mail said. "It is disturbing that people are beginning to discuss these options and we would like to prevent these ideas from formulating into a legislative plan of action and future battle."

At the hearing, Coburn said he was confident that agency leaders didn't instigate an e-mail campaign designed to torpedo his inquiry. Still, he said he had questions about the agency's direction.

"If SBA is broken, it's certainly not the small business sector that benefits from maintaining the status quo at the agency, but rather the bankers and big corporations who are currently profiting from SBA," Coburn said. "Congressional hearings should not be pep rallies for business-as-usual. Small businesses deserve better."

The agency, which acts as the lender of last resort for the nation's 24 million small firms, has come under fire for its response to the Sept. 11 terrorist attacks and Gulf Coast hurricanes and its classification of multinational conglomerates as small businesses to meet federal contracting quotas.

SBA chief Hector Barreto defended his agency, saying it has increased loan guarantees to small business from $14 billion to more than $19 billion in the last four years even as its budget shrank. He also said the agency is making headway in lending money to hard-hit Gulf Coast businesses. Over the last six months, he said, the agency has approved more than $7 billion in loans to 100,000 businesses.

Some of the oversight panel's witnesses, however, weren't terribly impressed.

"Honest business owners ... and hard-working taxpayers pay the price for SBA corruption and for its general ineffectiveness as an advocate for small business," said Jonathan Bean, a Southern Illinois University professor who explored a series of SBA scandals in a 2001 book.

Veronique de Rugy, an American Enterprise Institute scholar, advocated doing away with the agency, saying its loan programs "are simply a wasteful, politically motivated subsidy."

While the hearing questioned the effectiveness of the SBA, a key Democrat weighed in on the agency's behalf. Massachusetts Sen. John Kerry, the top Democrat on a Senate panel that oversees small business issues, said the government should continue to invest in small companies.