Kerry Exposes Fraud in Small Business Contracting

Buried Report Proves SBA Knew About Fraud
Monday June 6, 2:41 pm ET

SBA Allowed Big Businesses to Steal Billions in Government Small Business Contracts

PETALUMA, Calif., June 6 /PRNewswire/ -- A recently uncovered 1995 internal investigation from the Small Business Administration Inspector General's office, "Government Contracting Programs: Activities to Enhance Fraud Detection and Deterrence," proves executives at the SBA have known for almost ten years that there was intentional fraud in federal small business contracting programs:

"Over the past few years, the Investigations Division has noted several instances of a particular fraudulent practice: companies that SBA, after sustaining protests against them, had prohibited from representing themselves as small businesses, were continuing to falsely certify themselves as eligible for small business set-aside contracts."

The documents were uncovered by the American Small Business League. ASBL has launched a national campaign to end fraud and other abuses in federal small business contracting programs. ASBL President Lloyd Chapman said, "This report and the most recent investigations by the SBA's own Inspector General clearly show the SBA has known about this rampant fraud for ten years and they have lied to Congress, the media and the public."

Seven separate government and private studies have found billions in US government small business contracts have actually been awarded to some of the largest firms in the world. The SBA has angered members of Congress and the small business community by claiming the staggering diversions of federal small business programs was the result of "computer glitches" and "miscoding."

The Center for Public Integrity found the Pentagon alone had awarded $47 billion in federal small business contracts to some of the nation's largest defense contractors.

SBA Administrator Hector Baretto told the House Committee on Small Business in February the billions in abuses were the result of "data entry errors." Representative Nydia Velasquez of New York accused Baretto of being "dishonest."

The SBA's own Inspector General released three separate reports in February and March (5-14, 5-15, 5-16) that found large firms were still intentionally misrepresenting themselves as small businesses to illegally receive federal small business contracts. An investigation by the SBA Inspector General at the request of Senator John Kerry found the SBA itself had knowingly awarded millions in small business contracts to large businesses.

Kerry accused the Bush Administration of "fostering an atmosphere of fraud and abuse in federal small business contracting programs."

Even though misrepresenting a firm as a small business is a felony under federal law with a ten-year prison term and a $500,000 fine, the SBA has never taken any action against any firm for fraudulently claiming to be a small business.

Critics of the SBA believe the SBA has turned a blind eye to billions in fraud and misrepresentation since it dramatically inflates the government's small business contracting statistics. In March of 2004, the SBA issued a press release claiming it was "a victory for America" that the Bush Administration had reached the Congressionally mandated 23 small-business contracting goal.

The 1995 fraud report and the most recent investigation by the SBA's Inspector General indicate that claim was dramatically overstated.