SBA Could Stand Trial in Racial Discrimination Suit

Washington, DC — District Court Judge Kessler, ruled against SBA’s attempt to dismiss Diamond Ventures, LLC’s (Diamond) landmark lawsuit against the Small Business Administration (SBA), setting the stage for SBA to stand trial for discriminatory practices in its Small Business Investment Company (SBIC) program. See case # 03-1449 Diamond Ventures, LLC V Hector Baretto and the United States Small Business Association (District Court of District of Columbia).

The judge’s ruling marks a critical milestone in the suit between the SBA and Diamond. Judge Kessler found credible testimony and reports that the program had only .86% (two persons) of the 350 licensed managers in the program who were African-American managers, that SBA’s own statistics show Black-Owned firms received just 2.55% of SBA approved financings, that .49% of all SBA dollars were to Black-Owned firms illustrating that SBA’s policies for decades have had a disparate discriminatory impact on Blacks and minorities.

“The judge’s ruling opens the door to providing funding to minority and women owned businesses. It will also open doors for other minority and women owned businesses to gain necessary access to capital, as managers with proven skills are approved to participate in the $5 Billion a year program” says C. Earl Peek, Managing Partner of Diamond Ventures, LLC. Industry experts note that the ruling will be helpful to the President and Congress as they grapple with ways to deploy capital to create jobs in underserved communities in the tough economy.

This monumental case against the SBA began in 2003 after Diamond managers applied to and was rejected from the New Markets Venture Capital (NMVC) program and the SBIC program. Court records show that SBA had concealed that Diamond was approved for the NMVC program a year earlier. Judge Kessler also noted that during the lawsuit, “it was also discovered that the Report of the SBA Inspector General, issued March 20, 2003, concluded that ‘the Division’s evaluation of the application (of Diamond) and the decision to deny were not accomplished in accordance with the existing SBA procedures and criteria.” See the full court opinion at www.dcd.uscourts.gov, https://ecf.dcd.uscourts.gov/cgi-bin/Opinions.pl?2010 or www.sbalitigation.com.