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New Investigation Uncovers More Fraud in SBA Managed Programs

August 9, 2010

Petaluma, Calif. – The U.S. Government Accountability Office (U.S. GAO) has released another investigation in a long series of investigations which have uncovered widespread fraud and abuse in federal programs managed by the Small Business Administration (SBA).  (http://www.gao.gov/new.items/d10920t.pdf)  

In its latest investigation, the GAO conducted a supplemental review of the SBA’s Historically Underutilized Business Zone (HUBZone) program and found that the SBA failed to identify companies attempting to register for the program using blatantly fraudulent information.  As part of its investigation, the GAO was able to successfully register three bogus companies for participation in the program using such false business locations as the Alamo in Texas, a public storage facility in Florida, and a city hall in Texas, according to the report.

This latest investigation stands as another example of a complete lack of oversight over small business programs by the SBA.

Since 2003, more than 25 federal investigations by the GAO, the SBA Office of Inspector General (SBA IG) and Inspectors General for federal agencies like the U.S. Department of Interior (DOI) have all found a complete lack of oversight in SBA administered small business programs. (http://www.asbl.com/documentlibrary.html)  

In one such investigation conducted by the GAO into the veteran owned small business contracting program, the agency reported, “By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud or abusing the intent of the SDVOSB program." (http://www.gao.gov/new.items/d10108.pdf)

To date, the Obama Administration has failed to adopt any legislation or policy to halt the abuses.  The American Small Business League (ASBL) has estimated that every year more than $100 billion in federal small business contracts are diverted to Fortune 500 firms and other large businesses.

According to the most recent information released by the Obama Administration, some of the firms that have received small business contracts include Lockheed Martin, Textron, Boeing, Raytheon, Dell Computer, Thales Communications, British Aerospace (BAE), Ssangyong Corporation headquartered in South Korea, and Italian firm Finmeccanica SpA. (http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)  

“Despite the fact that small businesses create nearly 100 percent of net new jobs, they have received virtually none of the stimulus money and the Obama Administration has turned a blind eye to billions of dollars in fraud in small business programs,” ASBL President Lloyd Chapman said.  “If President Obama is serious about wanting to stimulate the economy, he needs to stop these abuses by passing H.R. 2568, the Fairness and Transparency in Contracting Act.”


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