Small Business Administration Facing Federal Injunction to End Corruption and Fraud

PETALUMA, CA--(Marketwired - May 04, 2016) - The American Small Business League (ASBL) has filed for an injunction in Federal District Court in San Francisco against the Small Business Administration to halt illegal policies they believe have defrauded small businesses and small businesses owned by women, minorities and disabled veterans out of hundreds of billions of dollars in government contracts.

The ASBL's injunction is asking the court to halt two specific SBA policies they believe have cheated small businesses out of hundreds of billions in federal contracts.

The Small Business Act states, "The Governmentwide goal for participation by small business concerns shall be established at not less than 23 percent of the total value of all prime contract awards for each fiscal year." Within that category, the goal states 5 percent for women-owned small businesses, 5 percent for minority-owned firms, and 3 percent for disabled veterans.

The SBA has created a policy they call the "exclusionary rule" and "small business eligible dollars" that uses a significantly lower federal acquisition budget number to calculate the percentage of contracts awarded to all categories of small businesses. The ASBL maintains the SBA's exclusionary policy has no basis in the law and has allowed the SBA to defraud small businesses out of billions in federal contracts.

Data from the Congressional Budget Office indicates a total federal budget for fiscal year 2015 of $3.9 trillion and a discretionary spending budget of $1.2 trillion. The ASBL believes $1.2 trillion is the most accurate acquisition budget number that should be used to calculate the volume and percentage of federal contracts awarded to small businesses for FY 2015.

The second SBA policy the ASBL believes is in violation of the Small Business Act is the SBA's "grandfathering rule" or "five-year rule". Using this policy, the SBA reports billions in federal contracts to Fortune 500 firms, their subsidiaries, and hundreds of large businesses around the world as small business contracts. This dramatically inflates the volume of federal contracts that appear to have been awarded to small businesses. The ASBL maintains no provision of the Small Business Act would allow the SBA to report awards to Fortune 500 firms as small business contracts.

Professor Charles Tiefer, one of the nation's leading experts in federal contracting law, issued a legal opinion that agreed with the ASBL's position that the total federal acquisition budget is well over one trillion dollars and that language in the Small Business Act does allow contracts to Fortune 500 firms, or any large businesses, to be reported by the SBA as small business contracts.

Beginning in 2002, a long series of federal investigations and investigative reports from groups such as Public Citizen have challenged the SBA's policy of reporting awards to Fortune 500 firms as small business contracts. ABC, CBS, NBC, CNN, MSNBC, CNBC, Fox News, Fox Business and RTTV have all reported on the abuses.

ASBL President Lloyd Chapman stated, "I am confident the court will find the SBA's policies violate federal law and the SBA has blatantly falsified federal small business contracting data and cheated small businesses out of billions of dollars."