Senator: SBA may have engaged in illegal lobbying

A statement circulated by a California small business group earlier this week has ignited a controversy over a Senate subcommittee hearing on the effectiveness of the Small Business Administration scheduled for next week.

The small business group claimed that the hearing signals a move toward abolishing the agency. But the senator planning the hearing called that statement misleading and said SBA officials may have engaged in illegal attempts to lobby against the oversight event. The office of Sen. Tom Coburn, R-Okla., chairman of the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, issued a statement saying it had "received indications that officials from the SBA itself may be engaging in lobbying activities against this hearing. Federal law (31 U.S.C. 1352) clearly prohibits federal agencies from using taxpayer funds to engage in lobbying activities intended to influence Congress directly or coordinated with intermediaries."

SBA spokesman Mike Stamler denied the agency's involvement in such activity. He said agency officials will testify at the April 6 event on the "positive effect SBA programs have" in helping small businesses and "about the efficient use the agency makes of taxpayer dollars."

But John Hart, a spokesman for Coburn, said the senator's office received confirmation of the lobbying effort from Oklahomans who were contacted by SBA employees in an attempt to put political pressure on the senator. Hart said Coburn has evidence of these actions, but declined to share it, citing a need to protect the identity of the individuals who provided the information.

A tentative witness list for the hearing, provided by Hart, includes SBA Administrator Hector Barreto, William Shear of the Government Accountability Office, Southern Illinois University professor Jonathan Bean, former small business owner John Pointer and Veronique De Rugy, an adjunct scholar at the American Enterprise Institute.

It's the participation of De Rugy that has angered the American Small Business League, a Petaluma, Calif., group formed in 2002 to promote policies that help firms with fewer than 100 employees. De Rugy has advocated the abolition of the SBA and the elimination of small businesses set-asides in government contracting.

In an interview with Government Executive, De Rugy confirmed that she is in favor of eliminating the SBA and small business set-asides, but said she believes that lower taxes and fewer regulations would create an environment where small businesses can flourish.

"If they read what I wrote, there's no way they could say that I am anti-small business," De Rugy said. "I propose an alternative to SBA."

Lloyd Chapman, president of the California group, said the invitation to De Rugy is an indication that Coburn is out to shut down the SBA.

Chapman said he learned about the hearing from friends who work in Congress, not SBA officials.

Coburn's office, which had yet to announce the hearing when Chapman's group circulated the message denouncing it, maintained that the statement includes "a false and deliberate distortion" of the purpose.

The group's statement was titled: "Oklahoma Senator Calls for Hearing to Abolish Small Business Programs."

"It is dishonest and unethical for a business organization that represents the very community that should care most about the effectiveness of the SBA to mischaracterize the nature of a congressional hearing," Coburn said. "If the ASBL believes the SBA represents the pinnacle of economic perfection and efficiency … then they should be confident that their perspective will be vindicated."