SBA Discrimination Suit Proceeds Against SBIC Program - Black Firm Presses For Unprecedented Change
Diamond Ventures, a majority black venture capital firm is suing SBA for discrmination in its SBIC program. SBA has 450 licensees and none are black and less than five are women and minority. The inspector genral found bias in the application process.
ATLANTA , GA (PRWEB) February 10, 2004 -- Black History Month is usually a
chance to celebrate the heritage of Blacks highlighting achievements in every
field of human endeavor. One firm is seeking to make history by being the first
majority black management team to be licensed in SBA’s SBIC
program.
Diamond Ventures, an Atlanta-based venture capital firm with
majority black management, announced that its discrimination lawsuit against the
Small Business Administration in the District Court of Washington, D.C. is
preceding.
The suit filed in August 2003 alleges bias in the SBA
selection process and prejudice in its application policies and procedures
towards minority applicants in the SBIC program. This program licenses
management teams to offer risk capital with private money raised and low cost
funds borrowed from SBA to finance new, existing, and expanding businesses.
District Judge Gladys Kessler recently set a schedule for advancing the
litigation including timetables for discovery of evidence, obtaining witness
testimony, and other key matters. C. Earl Peek, Managing Partner of Diamond,
addressing the merits of the case said “SBA has licensed few firms with minority
management . In total less than 5% of the existing 450 SBIC’s are Black,
Hispanic, Women, Native Indian, or Asians in total.” Harry Haskins, deputy
associate administrator admitted “The number is not as high as we would like it
to be”.
SBA need only look internally to find the answers. SBA funded a
research report in 1994 entitled “Is SBA A Racist Institution”, by Dr. Timothy
Bates. Bates noted that “SBA administered the now defunct Minority Enterprise
Small Business Investment Company Program (“MESBIC”) poorly, requested funding
from Congress at smaller than needed levels to meet its commitment to the
program, frequently changed administrators, implemented legislation to reform
the program and other acts of racism”.
Bated found that from 1970 and
the next 10 years, SBA licensed 141 MESBICS in which 65 had been declared
insolvent by 1994 and forced into liquidation by SBA, 44 abandoned their
charters, and 32 continued to operate at minimum levels with little if any
capital. The 109 MESBICs licensed that went under were 77% of the total program.
Peek said, “This is not the American Dream-it’s a minority
nightmare”.
Bates should know something, he has studied SBA since 1970,
and recently co-authored a report Minorities in Venture Capital-A New Wave in
American Business, funded by the Kauffman Foundation. He studied 24 venture
funds nationally and demonstrated that minority focused venture funds are
successful with a median rate of return of 19.5%. Oddly, the report had no
SBIC’s in the survey. Diamond Ventures, which has a management team with more
than 70 years of combined experience has completed over 1,000 financings
including 50 investments with a return of over 400% while other SBIC’s, per SBA
reports, have averaged a 9.28% return for the last 15 years.
In February
2003 Jeff Pierson, Associate Administrator for the SBA’s Investment Division
denied the application stating that the team lacked “qualifications and ability
to operate a Small Business Investment Company (SBIC) and SBA has “significant
concerns” with Diamond Venture’s investment philosophy of investing in Blacks,
Asians, Women, Hispanics, and Native Indians. Peek noted, “Those statements are
a pretext for discrimination.” Public reports show:
“No matter what the outcome is regarding Diamond Ventures, SBA will need to
address the serious disparity and availability of risk capital financing to
minorities and women and in inner-city, underserved, and rural areas” Peek
added.
Photo Caption: C. Earl Peek and Lonnie A. Saboor (Diamond
Ventures) with Former Senior Vice-President Roger Bower of RBC Tucker Federal
after its first commitment to the venture fund.
Contact
Information:
Earl Peek
(404) 371-4200
(404) 285-6661-Cell
e-mail
protected from spam bots
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Source : http://www.prweb.com/releases/2004/2/prweb103642.htm