PETALUMA, Calif., Feb. 12, 2015/PRNewswire-USNewswire/ -- The Small Business Administration (SBA) has finalized a new rule that Congress included in the 2013National Defense Authorization Act titled, "safe harbor from fraudpenalties."  The new rule will allow large businesses thatmisrepresent themselves as small businesses to illegallyreceive federal small business contracts to avoid all prosecution andpenalties by simply claiming they "acted in good faith."

Prior to the implementation of the "safe harbor from fraudpenalties" policy, large businesses that misrepresented their subsidiariesas small businesses to hijack federal small business contracts could facesevere penalties.

Under Section 16(d) of the Small Business Act, any firm thatmisrepresents itself as a small business to receive federal small businesscontracts could face up to 10 years in prison or fines of up to $500,000 per occurrence.

The new "safe harbor from fraud penalties" essentiallyrepeals any penalties for small business contracting fraud.

Every year since 2005, the SBA Office of inspector General hasreported the diversion of federal small business contracts to large businesses asthe number one problem at the SBA.

In 2005, the SBA Inspector General released Report5-15 that stated, "One of the most important challenges facing theSmall Business Administration (SBA) and the entire Federal Government today isthat large businesses are receiving small business procurement awards andagencies are receiving credit for these awards."

President Obama recognized the magnitude of the fraud in federal smallbusiness contracting programs during his first campaign for the White House. In2008, he released the statement, "It is time toend the diversion of federal small business contracts to corporate giants."

The American Small Business League (ASBL) has been the onlynational small business advocacy organization to publiclyoppose the diversion of federal small business contracts to large businessesand the "safe harbor from fraud penalties" policy.

The ASBL launched a national campaign to oppose the "safeharbor from fraud penalties" rule that included a barrage of blogs andpress releases. The ASBL also conducted a survey of 2000 Chambers of Commerceacross the country that found over 97 percent of the respondents opposed the policy.

Because of the overwhelming national opposition to the SBA's"safe harbor from fraud penalties" policy, the SBA's Final Rule haschanged the text from when it was first proposed in June of 2014 to now say "limitationsof liability from fraud penalties."

"The fact that Congress has refused to pass any legislationto stop the rampant fraud that has been uncovered in federal small businessprograms, but instead, adopt legislation to protect fraudulent companies is aprime example of everything that is foul and corrupt in the federalgovernment," stated Chapman.

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