A prime GOP lawmaker is asking on the Division of Protection to pause no-bid contracts via a small-business program for socially and economically deprived firms, noting a scandal during which Native Hawaiian protection contractor Christopher Dawson was accused of dishonest it for private achieve.
This week Sen. Joni Ernst, chair of the Senate Small Enterprise Committee, despatched a letter to Protection Secretary Pete Hegseth calling contracts awarded via the Small Enterprise Administration’s 8(a) program a “fraud magnet.”
She particularly cited Dawson, whose places of work in downtown Honolulu have been raided by federal brokers in 2023 as a part of an embezzlement probe. Ernst was notably frightened that Dawson’s firms continued to obtain protection contracts whereas below investigation, together with a $3.4 million award from the Navy to one among his corporations, Dawson MCG, simply days after federal brokers entered his places of work to confiscate worker cellphones and computer systems. Civil Beat and ProPublica revealed an in-depth article on Wednesday concerning the allegations in opposition to Dawson and the SBA’s actions, and Civil Beat earlier reported on the Division of Justice’s investigation into him.
“I’m troubled by an organization below lively federal investigation persevering with to obtain high-dollar, no-bid contracts from the Pentagon, regardless of federal actions indicating main issues relating to the agency’s ‘good character,’ which is a required eligibility criterion for 8(a) contributors,” wrote Ernst, who represents Iowa.
Ernst cited Civil Beat’s reporting concerning the DOJ accusing Dawson and different executives of abusing the 8(a) program by utilizing shell firms, direct firm transfers and “hole invoices” to line their very own pockets, together with by buying luxurious houses in Hawaii and Florida. SBA data obtained by Civil Beat and ProPublica present he was additionally spending lavishly on non-public jets and Porsches and pumping hundreds of thousands into his favourite pastime, polo.
Prosecutors stated in court docket paperwork that, between 2015 and 2021, the entire sum of money diverted into one among Dawson’s shell firms was $17 million, almost double what was despatched to Dawson’s nonprofit Hawaiian Native Corp. for the advantage of Native Hawaiians.
I’m troubled by an organization below lively federal investigation persevering with to obtain high-dollar, no-bid contracts from the Pentagon.
Sen. Joni Ernst in a letter to Protection Secretary Pete Hegseth
The SBA stated it couldn’t straight touch upon the Dawson case, citing the continuing investigation, however stated it “welcomes the partnership of all companies within the effort to cease fraud and abuse throughout the 8(a) Program.” The company is conducting an audit of this system and stated it “appears ahead to figuring out dangerous actors, holding them accountable, and restoring a contracting program constructed on benefit as a substitute of arbitrary DEI agendas.”
The 8(a) program was born out of the civil rights period and was designed to assist enterprise house owners from traditionally deprived teams, together with racial and ethnic minorities, win federal contracts with restricted or no competitors.
Dawson had constructed an empire off of the particular privileges granted to him via this system, and by way of the Hawaiian Native Corp. he owned a collection of firms which have received greater than $2 billion in contracts. His firms have carried out a variety of labor for the federal government, from sweeping the Arizona desert for unexploded munitions to prepping grave websites for navy burials on Oahu.
These contracts, nevertheless, got here with a catch. He was supposed to make use of his income to uplift Native Hawaiians. Federal prosecutors now recommend in court docket data that he broke that promise.
Dawson was fired by his personal firm, and he died by suicide in December 2024, however prosecutors are pursuing an asset forfeiture case in opposition to 4 properties they are saying he bought with stolen funds. The DOJ can also be persevering with its legal investigation into different potential suspects, based on court docket data.
Ernst known as on Hegseth to “study for potential fraud” the Dawson MCG contract and different 8(a) awards to the corporate. She stated she wished the Pentagon’s assessment to additionally embody 8(a) contracts awarded to the Hawaiian Native Corp.’s different subsidiaries, which function below the identify DAWSON.
The Hawaiian Native Corp. and DAWSON officers responded to Ernst’s letter with their very own letter to Hegseth during which they stated the federal investigation didn’t goal the Hawaiian Native Corp. or its firms however slightly was targeted on sure former workers. They stated the senator is “merely incorrect” and that the Hawaiian Native Corp. and its firms have “totally cooperated with each the DOJ and SBA to deal with points recognized by both company of their investigations.”
“You will need to be aware that HNC and its portfolio of working firms have a robust efficiency file as a federal authorities contractor, and there has not been any suggestion in any other case by any legislation enforcement or regulatory company,” the letter states.
Dawson wasn’t Ernst’s solely concern. Within the letter she urged Hegseth to do a extra thorough assessment of all 8(a) no-bid and set-aside contracts awarded by his company relationship again to fiscal yr 2020 to search for any violations of legislation or SBA guidelines.
Ernst despatched comparable letters to 21 different federal companies, every one together with an instance of an 8(a) contract that the senator discovered problematic.
In her letter to Transportation Secretary Sean Duffy, she known as out Echelon Companies LLC, a agency owned by the Hawaii Pacific Basis, which just like the Hawaiian Native Corp., is a Native Hawaiian group that below SBA guidelines is required to make use of firm income to help Native Hawaiians.
Ernst accused the muse of getting two completely different corporations performing the identical sort of labor for the federal government whereas taking part within the 8(a) program, one thing she stated is a possible violation of SBA guidelines.
Jeanine DeFries, president and CEO of the Hawaii Pacific Basis, refuted Ernst’s allegations, saying that SBA guidelines permit these firms to do the identical work so long as they’re a part of a three way partnership.
“We will additionally verify,” DeFries stated, “that we weren’t contacted by the senator’s or the committee’s places of work previous to receiving the letter.”
Ernst’s letters are a part of a broader Republican-led push to finish the form of variety, fairness and inclusion efforts on the coronary heart of the 8(a) program.
In June, Kelly Loeffler, President Donald Trump’s decide to steer the SBA, introduced a full-scale audit of this system after the house owners of two 8(a) corporations pleaded responsible to federal expenses of participating in a $550 million bribery scheme involving a U.S. Company for Worldwide Improvement contracting officer.
Then in October she launched an investigation into the Susanville Indian Rancheria and one among its corporations, ATI Authorities Options, after James O’Keefe, a right-wing political activist, revealed undercover footage purporting to point out firm workers admitting they used the 8(a) program to win contracts and move them alongside to different corporations.
When asserting the investigation on X, Loeffler attacked this system she’s now charged with working. “Like each different authorities program rooted in DEI,” she stated, “the 8(a) Program is rife with grift and fraud.” Two days later Loeffler once more took to X to announce she had suspended ATI Authorities Options and three of its executives from contracting with the federal authorities.
ATI didn’t reply to calls and messages in search of remark.
The Treasury Division adopted up in November by itself issues concerning the firm by initiating an audit of $9 billion in preference-based contracts, an inquiry that the company stated would study potential misuse of the 8(a) program. And simply final week, Loeffler ordered all 8(a) contributors to submit detailed monetary statements to the company or threat shedding their contracting advantages.
Ernst and others have tried to put blame on the Biden administration, with the senator saying in her letters that the previous president’s purpose of increasing federal contracting alternatives for minority enterprise house owners set the stage for potential fraud and abuse.
On the identical time, she acknowledged that 8(a) program flaws, which embody “sloppy oversight and weak enforcement measures,” have “raised alarm bells for many years.”
But Linda McMahon, Trump’s SBA administrator throughout his first time period, praised Dawson and his firms throughout a 2019 senate oversight listening to, saying “they carry so many companies in and help so many companies.” McMahon, who’s now the secretary of training, didn’t reply to a request for remark.
