Public Citizen report: Small businesses ‘slighted’

By Lloyd Chapman The Hill May 27, 2015

Public Citizen released an investigative report on May 6 titled “Slighted” with a subtitle, “Accounting Tricks Create False Impressions That Small Businesses Are Getting Their Share of Federal Procurement Money, and the Political Factors That Might Be at Play.”

The investigative report, prompted by research done by my American Small Business League (ASBL), was based on hours of interviews I did with Public Citizen Research Director Taylor Lincoln.

The report was so embarrassing to the Obama administration they cancelled a White House event that was scheduled for Friday, May 8th, the last day of National Small Business Week. The event was to be led by Small Business Administration Administrator Maria Contreras-Sweet, and was to be attended by several members of President Obama’s cabinet and other senior executives of the administration.

If it had not been for the humiliating Public Citizen report, I believe the Obama administration would have announced a record volume of federal contracts had been awarded to small businesses. The Obama administration’s response to the Public Citizen report was likely compounded by press releases I released on May 7th and May 8th predicting the small business contracting numbers released by the SBA would, as usual, be fabricated and inflated with billions in contracts to corporate giants.

Articles such as “It’s time for SBA to get real about small business contracting numbers” by the Washington Business Journal, “Advocacy Group Accuses SBA of Misapplying Law on Small Business Set-Asides” by GovExec and “Small Business Administration Uses Variety of Accounting Tricks To Give Contracts For Small Business To Big Business” by AllGov only added insult to injury for the Obama administration.

Public Citizen politely describes the rampant diversion of federal small business contracts to corporate giants for over 15 years with a plethora of carefully selected synonyms for fraud. They described the obviously deliberate and intentional abuses as a “phenomenon, errors, inaccurate government data, misreporting, errors by the government, incorrect reporting, some contractors may misrepresent or erroneously calculate their size, misapplication of small business rules, does not appear to have a basis in law, did not meet the requirements to qualify as small business, inflated, do not necessarily present a true picture, significant anomalies, dereliction in complying with requests, short changed, inflate the reported share, errors that categorize large business as small and errors, anomalies and exceptions.”

The Public Citizen investigative report omitted the Small Business Administration’s mathematically and statistically impossible excuse that for over 15 years Fortune 500 firms continued to receive federal small business contracts accidentally through a wide range of random errors such as “miscoding, computer glitches and simple human error.

Of course it’s ludicrous, completely unbelievable and obviously impossible that such a wide array of supposed random mistakes, errors, anomalies and inaccurate government data always seems to cheat American small businesses, inflate government small business contracting data and divert hundreds of billions in federal small business contracts to Fortune 500 firms and thousands of large businesses around the world.

The undeniable truth is that every year for over 15 years the percentage and volume of federal contracts awarded to small businesses has been willfully, intentionally and skillfully fabricated and falsified with the full knowledge and consent of the White House, Congress, the SBA and every federal agency in government.

I am growing weary of being labeled a conspiracy nut for exposing the very fraud and abuse uncovered by the Public Citizen investigative report.

I have lost track of the number of federal investigations and investigative reports in the mainstream media that have exposed the fact the federal government’s small business contracting numbers are falsified and many of the largest corporate giants on earth are the actual recipients of federal small business contracts.

How many more years are the American people expected to put up with the lies and absurd excuses that Fortune 500 firms continue to receive federal small business contracts year after year as a result of miscoding and anomalies?

I say it’s time for Congress to end the blatant fraud and abuse in federal small business contracting programs and insure the Small Business Act that mandates small businesses receive a minimum of 23 percent of all federal contracts is followed.

If Congress refuses to take appropriate action to finally halt the rampant fraud and abuse in federal small business contracting programs it will send a clear message to the American people. It will demonstrate that the money, power and influence of the corporate giants that are being allowed to hijack billions in federal small business contracts take precedence over the best interests of the middle class and the 28 million small businesses where most American’s are employed.

It’s time to end the blatant fraud and abuse in federal small business contracting programs that has gone on for over 15 years or admit our government is run by Fortune 500 firms, or as the Washington media likes to describe it, “broken.

Congress should back GAO investigation into small business contracting fraud

By Lloyd Chapman The Hill May 5, 2015

California Rep. Janice Hahn (D) has drafted an amendment to H.R. 1481 that would call for a new GAO investigation into fraud and abuses in federal small business contracting programs. In a March 25 hearing, Hahn questioned whether the 23 percent of all federal contracts the SBA claimed were awarded to small businesses actually went to legitimate small businesses based on research done by my staff at the American Small Business League. She referenced firms such as Disney, Apple, Chevron, and Bank of America have been the actual recipients of federal contracts in FY2011 and FY2012 that the SBA claimed had been awarded to small businesses.

The last GAO investigation into the diversion of federal small business contracts to corporate giants began in 2002 and was also based on information I provided.

It’s now been over twelve years since that last GAO investigation that found over 5,300 large businesses were receiving federal small business contracts.

In 2005, the SBA Office of Inspector General released Report 5-15 that stated, “One of the most important challenges facing the Small Business Administration (SBA) and the entire federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”

At the same time they released Report 5-16 that found large businesses had made “false certifications” and “improper small business self-certifications” to illegally received federal small business contracts.

President Obama even acknowledged the seriousness of the problem in 2008 when he released the statement, “It is time to end the diversion of federal small business contracts to corporate giants.

There are three issues the GAO needs to expose that will end the rampant abuses in federal small business programs. The first is “miscoding, computer glitches, anomalies and simple human errors.” Every year since 2003 when the findings of the first GAO investigation were released the SBA has claimed random errors they generally refer to, as “miscoding” is one of the reasons why federal contracts to fortune 500 end up being reported as small business contracts. This supposed “miscoding” dramatically inflates the volume and percentage of federal contracts that are reported as gong to small business and makes it look like the federal government has reached or come very close to reaching the 23 percent small business-contracting goal. Clearly the “miscoding” is willful and intentional and anything but random. The GAO needs to put an end to this practice by the SBA and all federal agencies once and for all.

The second reason federal small business contracts are diverted to fortune 500 firms is what the SBA referrers to as the five-year rule. In a recent House Small Business Committee hearing, SBA Administrator Maria Contreras-Sweet used the five-year rule excuse to explain why Fortune 500 firms like Northrop Grumman, Raytheon and Chevron have been included in the SBA’s small business contracting statistics. The SBA’s five-year rule is inconsistent and in direct violation with the Small Business Act.  The SBA Inspector General has referred to this policy as “flaws in the system.” I think another way to describe it would be “illegal” or possibly even fraud. Regardless, it needs to be stopped immediately.

The last policy the SBA uses is their “exclusionary rule.” Like their five-year rule, this policy also has no basis in law and is in blatant violating of the Small Business Act. The Small Business Act clearly states small businesses shall receive a minimum of 23 percent of the total value of all federal contract awards and does not allow the SBA to exclude any government contracts in calculating the percentage awards. It’s one of the most efficient and effective economic stimulus programs ever passed by Congress.

However, in FY 2013, the SBA used a total eligible dollar figure of just $355 billion to come up with their 23.39 percent number. Professor Charles Tiefer issued an opinion that stated the real total federal acquisition spending should have been closer to one trillion dollars. The SBA’s exclusionary rule is obviously used to misrepresent the true percentage of federal contracts awarded to legitimate small business. The GAO needs to expose this fact and end this policy once and for all.

Virtually every major newspaper in the country has covered the rampant fraud and abuse in small business contracting programs. It has also been the subject of over a dozen investigative reports in the media by ABC, CBS, NBC, CNN, MSNBC, CNBC, Fox News and RTTV.

Ending fraud and abuse in federal small business contracting programs is one of the most significant steps Congress can take to help stimulate the middle class economy, create jobs and address the growing income inequality that threatens the economic future of millions of middle class American families.

It’s time for Congress to back a new GAO investigation into fraud, abuse, loopholes and the blatant mismanagement that has cheated middle class small businesses out of billions and end the charade of miscoding, anomalies and computer glitches and the illegality of the exclusionary rule and the five-year rule once and for all.

US government vs. small business

By Lloyd Chapman The Hill December 15, 2014

Think how insane it would be for the United States to send troops to fight in a foreign country and then send in a second group of troops to fight the first group of troops.

That’s a perfect example of what happens in government in all federal programs to assist the 28 million small businesses where most Americans work.

According to the most recent data from the U.S. Census Bureau, 98 percent of firms in America have less than 100 employees and 89 percent have less than 20 employees. Small businesses are responsible for over 90 percent of the net new jobs, over 50 percent of the private sector work force, over 50 percent of the Gross Domestic Product (GDP) and over 90 percent of all U.S. exporters.

Small businesses are the irrefutable heart and soul of our national economy. That’s why Congress passed the Small Business Act in 1953. That law established a variety of federal programs to assist small businesses. The largest and most significant of all those programs is the federal law than mandates that a minimum of 23 percent of all federal contracts be awarded to small businesses.

I view that program as one of the most efficient and effective economic stimulus programs in history. What better way to invest 23 percent of federal infrastructure spending than to direct those funds to the small businesses that create over 90 percent of our nation’s net new jobs.

A long series of federal investigations have uncovered the undeniable truth that for over 30 years, the White House, Congress and federal agencies have been involved in a coordinated campaign to dismantle all federal programs to assist American small businesses. The irrefutable examples are too numerous to mention. I will  highlight some of the most blatant examples.

There is only a single small federal agency in Washington to assist small businesses, the Small Business Administration (SBA). The SBA budget is approximately .0015 percent of the Pentagon budget.

For over 30 years presidents and members of Congress have proposed to close the SBA to “streamline government.” Think of the absurdity of closing one of the smallest agencies in government under the pretense of “shrinking government” and “streamlining government” while simultaneously trillions of dollars are unaccounted for at the Pentagon.

Ronald Reagan tried to close the SBA twice during his administration by combining it with the Department of Commerce. Shortly after President Obama was elected I predicted he would try and resurrect Ronald Reagan’s plan to close the SBA by combining it with the Department of Commerce. He proved me right in January of 2012 when he announced his plan to do exactly that. I released a series of press releases and blogs to bring attention to the President’s plan to close the SBA.

Luckily for me, several journalists published stories that agreed with me. Maybe it’s just a coincidence, but after those stories were released, President Obama ceased to mention his plan to combine the SBA with other federal agencies.

Several members of Congress have discussed closing the SBA and proposed legislation to shutter the agency. Oklahoma Senator Tom Coburn held hearings on the topic of closing the SBA. Most recently North Carolina Senator Richard Burr (R) has proposed legislation to close the SBA by combining it with other federal agencies. In a Washington Post article he said combining the SBA with other federal agencies would save “staggering amounts of money every year.”

Burr’s statement seems to defy all reason and logic considering the miniscule SBA budget in comparison to the trillions of dollars that continue to be unaccounted for at the Pentagon. Donald Rumsfeld announced over $2.3 trillion was unaccounted for at the Pentagon the day before 9/11. It has been reported that up to $8.5 trillion have gone unaccounted for at the Pentagon.

Not only has Congress not adopted legislation to end fraud in federal small business programs, they have passed legislation to encourage fraud in small business programs and protect firms that commit fraud. Congress included a provision in the 2013 National Defense Authorization Act that created a “safe harbor from fraud penalties” for firms that are uncovered committing contracting fraud to hijack federal small business contracts.

The most startling fact is that one of the largest opponents of federal programs to assist small businesses is the Small Business Administration.

The SBA Office of Inspector General began reporting rampant fraud in federal small business programs in 1995. At that time the SBA Administrator refused to take any action to address the fraud.

In 2005, the SBA Inspector General released Report 5-15 that stated, “One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal Government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.” Every SBA Inspector General for a decade has reiterated that statement and yet no SBA Administrator has adopted any policies to halt the rampant abuse.

No president and not one member of Congress have written legislation to stop the fraud and abuse in federal small business programs.

After investigating the SBA’s handling of the federal program to award 3 percent of all federal contracts to service-disabled veteran-owned small businesses (SDVOSB), the Government Accountability Office (GAO) essentially accused the SBA of encouraging fraud in GAO Report 10-108 that stated, “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.”

I have saved the best example for last, how the president, Congress and federal agencies have all cooperated to dismantle federal small business programs.

In 1990 the Pentagon adopted the Comprehensive Subcontracting Plan Test Program (CSPTP) under the pretense of “increasing subcontracting opportunities for small businesses.” In reality it did just the opposite. The “Test Program” eliminated all publicly available data that could be used to track a prime contractor’s compliance with their small business subcontracting goals. It also eliminated all penalties prime contractors had previously faced such as “liquidated damages” for failing to comply with their small business subcontracting goals.

Every president and every Congress for 25 years has agreed to allow the Pentagon to continue testing the theory that removing all transparency and penalties on small business subcontracting programs will some how help small businesses. Not surprisingly, the Pentagon has refused to release any data on the CSPTP during the last 25 years.

Both houses of Congress have now voted to renew the CSPTP into its 28th year of testing even though they have never ever seen any reports or data on the program.

I think it’s time for the president, Congress and the Pentagon to understand cheating American small businesses is not patriotic. It weakens or national economy and it is devastating to our national spirit.

It is a prime example of everything the American people despise about their government and everything that must change if our nation is to endure.

Congress Renewed Pentagon Program To Cheat Small Businesses Into 28th Year

By Lloyd Chapman Shadowproof December 15, 2014

President Obama will sign the 2015 National Defense Authorization Act (NDAA) any day now and renew a Pentagon program that has cheated American small businesses out of hundreds of billons if not trillions of dollars in subcontracts for more than a quarter of a century.

The 25-year-old Pentagon Comprehensive Subcontracting Plan Test Program (Test Program) will be renewed into its 28th year of testing into 2017. This program is one of the best examples in history of how blatantly corrupt the federal government actually is.

You have to admire the dedication of those guys at the Pentagon. They have been testing a theory since 1990 that removing all transparency on federal small business subcontracting programs might “increase subcontracting opportunities for small businesses.”  To really try and help small businesses land more federal subcontracts the Pentagon added one more feature to the “Test Program”, all participants are exempt from any penalties for non-compliance.

Any Pentagon prime contractor that participates in the “Test Program” is exempt from any penalties they had previously faced for failing to comply with their federally mandated small business subcontracting goals such as “liquidated damages.

So under the pretense of “increasing subcontracting opportunities for small businesses” the Pentagon has eliminated all penalties for non-compliance and all publicly available documents that could be used to track a prime contractor’s compliance with their small business subcontracting goals.

They have now been testing this theory at the Pentagon for over 25 years and apparently the results are inconclusive because Congress has decided to renew it for three more years. (They should try that theory out at the IRS. Eliminate tax returns and penalties for not paying your taxes and test it for 25 years to see if it increases tax revenue.)

Here is one of the more astounding aspects of this blatant anti-small business scam; no member of Congress has ever seen any reports or data on the “Test Program” since it began in 1990. For more than 25 years the Pentagon has refused to release any data on the program.

Obviously the “Test Program” was not designed to help small businesses. It was developed to create a loophole for Pentagon prime contractors to circumvent federal law mandating small businesses receive a minimum of 23% of all federal contracts. I knew if I could get the reports the prime contractors were submitting it would prove that point. The reports would also prove the Pentagon had violated federal law and lied to Congress about the true volume of subcontracts that had been awarded to small businesses.

I believe the Pentagon has defrauded American small businesses out of well over one trillion dollars in subcontracts and possibly as much as two trillion over the last 25 years.

I decided to challenge the Pentagon’s refusal to release any data on the program. As a test case I requested the most recent report submitted by Sikorsky Aviation Corporation under the Freedom of Information Act. Not surprisingly the Pentagon refused to provide the data.

My goal was to use the data to prove the Pentagon has committed fraud and try and halt the renewal of the “Test Program” by Congress

I filed suite in Federal District Court in San Francisco. On November 23, Federal District Court Judge William Alsup ruled in my favor. He ordered the Pentagon to release the data by December 3rd. I knew they wouldn’t release the data because Congress would be voting to renew the “Test Program” the following week.

I predicted that in a press release that went out on December 3rd.

I was right, my lawyer called me on the morning of December 3rd and told me the Office of Solicitor General had intervened on behalf of the Pentagon and requested a 60-day stay. Judge Alsup had to grant it.

The following week Congress voted to renew the Comprehensive Subcontracting Plan Test Program into its 28th year of testing.

Sikorsky has now contacted my attorney and told him they will also be intervening in the case.

The Pentagon knows that once I get the Sikorsky data, I can the get all the data submitted by all of the participants of the “Test Program”. Current participants include: Boeing, BAE Systems, GE Aviation, General Dynamics, Hamilton Sundstrand Corporation, Harris Corporation, L3 Communications, Lockheed Martin, Northrop Grumman, Pratt & Whitney, Raytheon and Sikorsky.

Here is what all the fuss is about; one number, the percentage of subcontracts Sikorsky awarded to small businesses. So why are the Pentagon, the Solicitor General and Sikorsky so jacked up over this?

Is it because I am a conspiracy nut like the Pentagon would have everyone believe?

Probably not, it looks like my theories are correct and the release of this data will prove the Pentagon has violated multiple federal laws and cheated small businesses out of trillions.

I have found stories on the Internet about other whistleblowers and journalists that obtained information under the Freedom of Information Act that was much less damaging to the federal government than the data I am seeking. They had their homes raided by armed FBI and Homeland Security agents.

Just in case, I went out and had a t-shirt made that I sleep in. It says WHISTLBLOWER, DONT SHOOT ME on the front and back. I thought that would look great in my mug shot.

If it’s not the FBI, something involving the Justice Department or the IRS is probably in my future. Possibly before January 22nd when the Pentagon has to release the data.

On the other hand, I met President Obama, I endorsed him in the primaries and he released a nice statement about the American Small Business League. I worked on his first campaign and he said repeatedly he would have the most transparent Administration in history. Maybe I’ll be getting some type of award for my efforts to expose fraud and corruption at the Pentagon.

I just won a major lawsuit against the Pentagon, when’s my IRS Audit?

By Lloyd Chapman Shadowproof November 26, 2014

I just won a landmark legal victory over the Pentagon yesterday. I’m forcing the Pentagon to release information that will prove they have cheated American small businesses out of hundreds of billions of dollars in federal subcontracts over the last 25 years.

 

Using the Freedom of Information Act (FOIA), I requested the most recent information submitted to the Pentagon’s “sham” Comprehensive Subcontracting Plan Test Program (CSPTP) by one of the Pentagon’s largest prime contractors Sikorsky Aircraft Corporation. The information I requested will clearly indicate the Pentagon is cheating American small businesses out of billions. It will prove they are allowing their largest prime contractors to circumvent federal law that mandates a minimum of 23% of all federal contracts be awarded to small businesses.

This will be the first time in a quarter of a century the American people will be allowed to see how the Pentagon is spending trillions of their tax dollars.

The Pentagon adopted the CSPTP in 1990 under the guise of “increasing subcontracting opportunities for small businesses.” In reality it was designed to do just the opposite. The CSPTP removed all transparency and penalties on small business subcontracting programs for the Pentagons largest prime contractors.

If that’s not insane enough, the Pentagon has been testing this program to cheat small businesses for 25 years. In a shining example of how corrupt our government is, both the House and the Senate have voted to renew the anti-small business CSPTP into its twenty-eighth year of testing.

One of the nations leading experts on federal contracting law, Professor Charles Tiefer, released a legal opinion on the CSPTP that stated, “The program is a sham and its extension will be seriously harmful to vital opportunities for small business to get government contracting work… There is no doubt in my mind the CSPTP has significantly reduced subcontracting opportunities for small businesses. It should not have gotten its 25 years of extension as a never-tested ‘Test Program.’ Let it expire.”

In 2004, the Government Accountability Office (GAO) released the results of an investigation on the CSPTP that stated, “Although the Test Program was started more than 12 years ago, DOD has yet to establish metrics to evaluate the program’s results and effectiveness.”

The Chairman’s Mark of the 2015 National Defense Authorization Bill even stated, “However, after nearly 24 years since the original authorization of the program, the test program has yet to provide evidence that it meets the original stated goal of the program…”

So I’ve won a major Freedom of Information Act case against the Pentagon that will no doubt expose hundreds of billions of dollars in fraud and abuse against small businesses.

Should I expect a letter from the President congratulating me on my legal victory on behalf of the nation’s 28 million small businesses? Will I get an award from the Small Business Administration? Not likely.

What I will get is a massive campaign from the Feds to destroy my reputation and keep me off national television, radio, the internet and block any journalist that tries to write about this case and the last 30 Freedom of Information Act cases I have won against the federal government.

The Feds have even raided the home of a well-known investigative journalist to seize documents obtained under the Freedom of Information Act. I have already called my CPA and told him to prepare for an IRS audit. The IRS is one of the federal governments favorite weapons against whistleblowers and people that are sick and tired of fraud and corruption in our government.

The Obama Administration’s “War On Whistleblowers” has been well documented and exposed in a documentary and in numerous stories in the press. Here is a link to a good example.

Edward Snowden released information that exposed the federal governments campaigns to destroy the reputations of individuals that are successful and outspoken in their criticism of the government.

Glenn Greenwald and others have released stories that expose the specific tactics the Feds use to try and stop critics of the federal government. I have experienced many of those tactics myself.

Let me close with two of my favorite quotes. Thomas Jefferson said, “All tyranny needs to gain a foothold is for people of good conscious to remain silent.”

President John F. Kennedy said, “One person can make a difference, and everyone should try.”