Level business playing field for women and minorities
Last summer, I was sentenced to 54 months in prison for submitting false financial statements to the federal government in my application to become a Paycheck Protection Program (PPP) lender in 2020. On Jan. 19, I began serving my sentence. I make no excuses about my crime. It was the biggest mistake of my life, and I will suffer the consequences through my time in prison and the impact on my family as a result.
But if any greater good comes from what I did, I hope it is to expose a long- standing issue that is likely to get worse: the lack of financing options for small businesses owned by people of color. With the Supreme Court’s recent decision regarding college admissions, the very programs that have attempted to level the playing field for women and minority businesses are under threat. Those of us who have spent our careers fighting for better economic pathways for disadvantaged business owners must prevent these programs from suffering the same fate as affirmative action.
Minority-owned businesses have a massive impact on the economy, accounting for approximately 2.2 million direct and indirect jobs across the United States. But studies show Black and Hispanic-owned firms applying for loans are rejected more often and are less likely to receive the full amount for which they are applying compared to their white counterparts.
The pandemic exacerbated this problem. The U.S. government’s $1 trillion Payroll Protection Program was designed to keep businesses afloat and people employed, and the government took steps to make the loans flow as fast as possible.
But minority-owned businesses were once again shut out. According to a 2021 Small Business Credit Survey by the Federal Reserve Banks, Black-owned firms were five times more likely to be denied the PPP funding as white-owned firms. While the Black-owned hair salon on Main Street couldn’t get a traditional bank’s attention, companies like the Los
Angeles Lakers and Shake Shack were receiving millions of dollars in PPP loans. This was not necessarily the SBA’s fault, but it was the reality.
In the summer of 2020, the Small Business Administration recognized the problem and changed course. That’s when I committed my crime.
Facing pressure, the SBA sought lenders like mine with track records of lending to small minority owned companies. At first, I applied as a technology partner for the National Minority Supplier Development Council. When the SBA denied their application, the agency asked my firm, MBE Capital, to apply instead. Responding to SBA’s request, I submitted false financial statements to win approval. The worst explanation for what I did is greed. The best is that I felt this would be an extension of what I have done my whole career, helping disadvantaged companies survive a crisis. The truth is probably a combination of the two.
But despite my crime, after receiving approval, my company did exactly what it was asked to do. We lent over a billion dollars to more than 38,000 small businesses and even turned down 72,000 loans that did not meet our standards. We made banks like Chase, Bank of America, Citibank, Carver Bank, Lendio, Crowdz and Equitrust over $34 million in partner fees. I didn’t victimize small businesses or steal a dime of taxpayer funding. My crime was submitting false information about my company to the Federal government and for this, I take full responsibility.
PPP was built on a foundation of inequity and exacerbated a cycle in which disadvantaged businesses were left behind. Yes, it was rife with fraud, and the justice system will do its job in prosecuting individuals who stole the funds or lied to become a lender like I did. However, justice is not confined to issues of crime and punishment. A truly just society would ensure the same economic opportunities for every person.
But following the Supreme Court’s ruling on affirmative action, we have already seen conservative attorneys general target Diversity Equity and Inclusion efforts at Fortune 100 companies. The next target will likely be set asides for minority-owned construction contractors, or non-bank financing programs for disadvantaged businesses. This is a dangerous trend and we must take steps through legislation, elections and activism to fight it. I hope that after I have paid my debt to society, I can prove myself to be part of the solution as I endeavored to be for decades prior.