Diamond Ventures vs. SBA: David vs. Goliath-like Saga

Diamond Ventures vs. SBA: David vs. Goliath-like Saga

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A racial discrimination lawsuit brought against the U.S. Small Business Administration by Diamond Ventures LLC, a venture capitalist firm, may be nearing its end since its initial 2003 filing.

A federal judge has ruled against the SBA’s filing for dismissal, allowing the case to proceed to trial.

The parties will meet at a hearing April 15; no trial date has yet been set.

Among other statistics, the judge found credible testimony and reports that just two people of 350 licensed managers in the program were African-American managers; the SBA’s own statistics show black owned firms received less than 3 percent of SBA approved financing; and the .49 percent 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.

An SBA spokesman said the agency has no comment on the pending litigation.

These types of cases can typically take eight to 10 years when an agency like the SBA has the funds to continue to fight it, said civil rights attorney Earlene White-Rosenberg of Rose & Rose, P.C., who is not affiliated with the case.

“It seems that the case should now move to the discovery phase,” White-Rosenberg said. “However, I am sure the SBA will appeal the judge’s ruling.”

Speaking generally, she added that discovery could be further prolonged with depositions, motions to compel and “many, many discovery disputes between the parties” or the defendants could settle.

C. Earl Peek, a managing partner and co-founder of Diamond Ventures, is confident that his company is “75 to 80 percent through the process.”

The judge’s ruling is one more step toward a resolution in a case that was delayed by two major events: the SBA’s fight against releasing statistics about its awarding of funds to minorities and Peek’s own battle with a life-threatening illness.

The process has not been easy.

“For the last seven years, we’ve basically been duking it out,” Peek said.

Diamond Ventures filed the lawsuit alleging that discriminatory practices in the SBA’s Small Business Investment Company (SBIC) have adversely impact minority and women-owned businesses after the firm’s own SBIC applications were rejected twice.  Through matching funds requested from the SBA, Diamond Ventures ultimate goal was to spur business development in low-income communities.

“Reviewing the SBA’s decision, we felt an immediate need to file,” Peek recalled.

Diamond Ventures is seeking to recoup lost profits and income calculated between $15 and $16 million that would have resulted from partnerships and investments, he said, in addition to up to $100 million in leverage. Coupled with the firm’s legal fees, damages could exceed more than $100 million if Diamond Ventures wins its case.

SBA would also have to take corrective action if Diamond Ventures is successful, “to fix the program so nobody else would have to go through what I went through,” Peek said.

Correcting the unfair practices is at the center of what has essentially become a David vs. Goliath-like saga.

“It certainly is David vs. Goliath,” Peek said. “Because but for the power of God, faith and favor, we wouldn’t be where we are.”

Though the landmark case is not a class-action lawsuit, Peek said a victory could have class-action implications, which he hopes would catch the attention of the Obama administration and Congress.

“It could have effects on access to capital in ways we may not realize for a while,” he said. “It’s a major opportunity for us to advance the business cause for minorities and women.”

4 COMMENTS

  1. Do your research. Lonnie Saboor, a principal with Diamond Ventures has a checkered lending past with SBA. More than any other person, he was responsible an Atlanta sponsored MSBIC that made loans to retailers in Underground Atlanta. The business owners were inexperienced, untrained and had no concept of customer service. They all failed and as a result, Underground Atlanta has continued to founder. The MSBIC also bellied up.

    • We always appreciate feedback and appreciate your response. However, I’d like to point out that the this post focuses on the lawsuit, its process and possible ramifications. It is not an investigative piece into the practices or partners of Diamond Ventures, LLC.

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