Minority, woman-owned businesses allege federal loan bias

The federal government intentionally discriminated against minority- and woman-owned businesses in its recent distribution of nearly $350 billion in loans to save small companies desperate to survive amid the United States’ pandemic-induced economic freefall, struggling Maryland businesses allege in a lawsuit filed Friday in U.S. District Court in Greenbelt.

The Maryland businesses claim that the U.S. Small Business Administration placed hurdles in the way of minorities and women seeking a share of the federal Paycheck Protection Program to assist companies with fewer than 500 employees.

The SBA “knowingly, intentionally and illegally discriminated against minority owned and woman-owned non-employer businesses,” states the complaint signed by Sean P. Hatley, of Frost Law in Annapolis.

“While many larger businesses were able to rush to their banks to avail themselves of the opportunity to participate, most of the minority- and woman-owned small businesses were never given the opportunity to submit an application for the program before the money ran out,” the complaint adds. “Moreover, to the extent these minority-owned and woman-owned businesses were even able to participate, many of them would receive far less benefit from the program than other businesses.”

The federal government has denied allegations that it intentionally discriminated against minorities and women in the distribution of small-business loans.

The complaint alleges the SBA gave preference to companies with full-time employees and discouraged the many minority- and woman-run sole proprietorships and companies dependent on contractors from applying for the PPP protection. The SBA failed to provide these “nonemployer” companies – “disproportionately owned by minorities and women” — guidance on how their applications would be processed, according to the complaint.

The lawsuit alleges the SBA’s intentional discrimination violated the constitutional right of minority- and woman-owned businesses to equal protection under the law.

The businesses that brought the lawsuit seeking financial compensation are Glitz and Glam Jewelry by LJ, owned by LeTresa Williams, a woman living in Accokeek, and the financial services firm of Alvin Vaughn, a black sole proprietor in Silver Spring.

The Frost firm stated in the complaint that it seeks court permission to add as a class of plaintiffs the “millions of minority- and woman-owned ‘nonemployer’ businesses that have suffered discrimination based on the guidelines set forth by the SBA prohibiting such businesses from applying for the PPP program contemporaneously with their ‘employer’ counterparts.”

Hatley’s co-counsel on the complaint are his Frost Law colleagues Glen E. Frost, Matthew P. Kraeuter and Elizabeth M. Burlington.

The lawsuit is docketed as Infinity Consulting Group LLC d/b/a Glitz and Glam Jewelry by LJ et al. v. U.S. Small Business Administration et al., No. 8:20-cv-00981-GJH.