More Investigations Find Fraud in SBA Managed Programs

FOR IMMEDIATE RELEASE
March 26, 2009

Petaluma, Calif. – On Wednesday, the Government Accountability Office (GAO) released yet another investigation which found widespread fraud in the Small Business Administration's (SBA) HUBZone program. This most recent GAO investigation represents just the latest in a series of federal investigations over the last seven years which have found fraud, abuse, loopholes and a lack of oversight in SBA programs.

Since 2003, approximately 15 federal investigations have found widespread fraud and abuse in federal small business contracting programs administered by the SBA. Several investigations found outright fraud was responsible for large corporations receiving federal small business contracts.

Report 5-16 from the SBA Office of Inspector General (OIG) found that some large businesses had committed fraud to illegally receive federal small business contracts. (http://www.sba.gov/IG/05-16.pdf)

In 2002, the SBA Office of Advocacy released a report which found that "vendor deception" was responsible for large firms receiving small business contracts. (http://www.asbl.com/documents/eagkeeye_report%202002.pdf)

The American Small Business League (ASBL) estimates that the SBA, the Department of Defense and a number of other federal agencies are responsible for the diversion of over $100 billion a year in federal small business contracts to Fortune 500 firms and thousands of other large businesses.

Although the first investigation into small business contracting was the subject of a hearing by the House Committee on Small Businesses in 2003, neither the House, nor the Senate Committee on Small Business and Entrepreneurship have ever proposed legislation to stop large corporations from receiving federal small business contracts.

In Report 5-15, the SBA OIG referred to the diversion of federal small business contracts to large corporations 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)

President Obama recognized the magnitude of the problem during his campaign 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)

"It has been seven years since the first federal investigation into this issue, and yet the SBA still maintains that it is a myth. It is time for the FBI to investigate the SBA’s handling of these matters. As our country slides deeper, and deeper towards the worst economic disaster in its history, it is time for President Obama and Congress to act now, and enact legislation and policy to stop the diversion of government small business contracts to corporate giants," ASBL President Lloyd Chapman said. "It is time for President Obama to do what he said he would do during the campaign, and stop the diversion of federal small business contracts to corporate giants. If President Obama were to address this issue it would do more to create jobs and stimulate the economy than everything else he has done combined."

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