News by SB Informer

NAACP Joins Discrimination Lawsuit Against SBA Leading Advocacy Organizations Support Litigation

SBA Under Attack For Failure to License Minorities; Turns over Key Data in Federal Lawsuit.

SB Informer
Friday, January 19, 2007; 01:18 AM

The NAACP and a prominent consumer advocacy group will formally join as advisors and monitor litigation in the case of an African American venture capitalist partnership that is suing the U.S. Small Business Administration for discriminatory practices in the SBA's Small Business Investment Corporation (SBIC) program. That program is designed to augment capital provided by private partnerships for small businesses.

Diamond Ventures, an Atlanta-based partnership, filed a $100 Million discrimination lawsuit against the SBA in 2003 (U.S. District Court Case # 03-1449-Gladys Kessler, Judge), claiming the SBA improperly denied its application for an SBIC license and subjected Diamond to unusual standards. The agency's Inspector General reported that, in Diamond's case, the SBA violated its own regulations for assessing the application.

"Study after study finds access to capital is the number one issue in the development of minority and women owned businesses. The root of this is a lack of qualified managers systematically excluded from the very programs designed to invest in and lend to this group," said Dennis Hayes, General Counsel for the NAACP. "It's a new paradigm shaped by the ability to finance businesses and create wealth," Bruce Gordon, president of the NAACP, noted. When two people have more business wealth than a nation of 30 million, something is wrong with making capital meet opportunity, and result in wealth creation, Gordon further stated, referring to Microsoft founder Bill Gates and Oracle Corporation co-founder and CEO Larry Ellison.

The National Community Reinvestment Coalition (NCRC) joined the suit as experts and advisors this week on Diamond's behalf.

"Access to capital and credit is a basic right," said Reginald Ritcher, senior vice president of the NCRC. "NCRC has sued banks and various financial institutions for discrimination, redlining, and unfair treatment of minorities and women. We support Diamond and will consult with its attorneys in analyzing data key to the case."

Since filing its suit against the SBA, Diamond has won a series of district court decisions, including a request for SBA's records on SBIC applications and licensure practices, particularly for minority applicants. Diamond's attorneys will begin analysis this week of the documents of firms that applied and were licensed by SBA.

The agency has similarly shrugged off calls for compliance by both Sen. John Kerry, D-Mass., the new chairman of the Senate Small Business Committee, and Sen. Orrin Hatch, R-Utah, a member of the Senate Finance Committee.

In a February 2006 letter to SBA Administrator Hector Baretto, Kerry attacked the abysmal distribution of dollars to minority and women owned firms, citing his "disappointment" at the continuing trend. Hatch asked former Administrator Baretto to address the "concerns...beyond the pursuit of litigation." Allegedly, Baretto largely ignored both senators and SBA's new administrator has not responded to the inquiries.

SBA was ordered by the U.S. Appeals Court to turn over all of the applications to Diamond's attorneys. This key data will likely confirm SBA's exclusion of minority firms from managing licensees that invest in minorities and women, said Joshua Rose, Diamond's legal counsel.

Diamond Ventures' long-term goal is to join efforts with other firms to finance inner-city, underserved, and women and minority-managed firms that parallel the success of firms such as FedEx, Intel, and others financed by the SBIC program.

Former Congressman Parren Mitchell of Maryland led the way in creating opportunity for minority and disadvantaged businesses when he formed the Minority Business Legal Defense and Education Fund (MBELDF) in 1976.

"The cause and need for capital is so vital that in my 16 years of legal advocacy, I see no position to support more worthily than to break the hold on capital held by SBA and its Small Business Investment Company venture capital program that has little to no representation by minorities and women," noted Anthony Robinson, president of MBELDF.

 Feedback   Submit Article