Black firm succeeds in advancing case against SBA for discrimination in SBIC program. SBA has not licensed a black firm in eight years out of 500 licensees. It has less than 2% minority licensees of all minority groups. The program has never been sucessfually challenged. SBA provides almost $5 Billion in financing annually
ATLANTA, GA (PRWEB) June 24, 2004 -- Diamond Ventures LLC, an Atlanta-based venture capital firm with a majority black management, gained a major milestone in its discrimination lawsuit against the U.S. Small Business Administration (SBA) in the U. S. District Court of Washington, D.C. The SBA, asserting that it is not subject to discrimination laws, was denied its request for dismissal on all counts by District Court Judge Gladys Kessler. Kessler simultaneously set forth a schedule that would lead to a trial date this fall.
My partners and I are absolutely elated by the judges decision and also believe that the courts refusal to dismiss our lawsuit confirms that our case has merit; there is strong evidence to support our assertion that the SBA systematically demonstrates racial bias in its selection process," said C. Earl Peek, managing partner of Atlanta-based Diamond Ventures LLC. We want to improve the flow of capital to underserved markets; we believe we can improve that with a minority managed firm serving those markets, Peek elaborated.
The SBA doesnt have any majority black management teams licensed amongst its nearly 500 approved teams. In the lawsuit, which was filed last year, Peek alleges bias in the SBAs selection process and prejudice in its application policies.
The SBAs Inspector General found more than 10 instances of bias in Diamonds application to be licensed, which supports the merit of Diamonds discrimination-based lawsuit. The absence of black led firms among SBIC licensees leads me to believe that Diamond's experience is part of a systemic bias that has excluded black led firms from the $25 billion SBIC program", noted Josh Rose, Diamonds legal counsel.
Peek, further addressing the merits of the case, said, The SBA hasnt licensed any Small Business Investment Companies (SBICs) with a majority black management and only two firms have any management interest held by blacks. Less than five percent of the total existing 500 SBICs are Black, Hispanic, Women, Native Indian, or Asians."
Harry Haskins, deputy associate administrator of the SBA said, The number (of minorities) is not as high as we would like it to be."
For example, Diamond Ventures, which has a management team with more than 70 years of combined experience has outlined to SBA that it had completed over 1,000 financings, including 50 investments with a return of over 400%. Other SBICs have averaged a 9.28% return for the last 15 years, per SBA reports.
Minority-managed firms have a successful track record. A study was recently completed by Dr. Timothy Bates and others- Minorities in Venture Capital-A New Wave in American Business, funded by the Kauffman Foundation. Dr. Bates studied 24 venture funds nationally and found that minority focused venture funds are successful with a median rate of return of 19.5%. Oddly, the report had no SBICs in the survey.
In February 2003 Jeff Pierson, Associate Administrator for the SBAs 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 Diamonds investment philosophy of investing in Blacks, Asians, Women, Hispanics, and Native Indians. Peek noted, Those statements are a pretext for discrimination."
Diamond Ventures long-term goal is to join efforts with other firms to finance inner-city, underserved, and minority-managed firms that parallel the success of firms such as FedEx, Intel, and others that have all were financed by SBAs SBIC program, said Peek.
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CONTACT:
C. Earl Peek
(404) 371-4200 (Office)
(404) 285-6661 (Cell)
epeek@diamondventuresllc.com
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