- The Washington Times - Wednesday, June 17, 2020

A group of business owners caught up in the criminal justice system sued the Trump administration this week over its policy not to disburse funds for small businesses during the COVID-19 shutdown to companies owned by people facing charges or with prior convictions.

They said the Small Business Administration is violating federal law by excluding people with prior criminal records from funds that Congress appropriated to help businesses stay afloat during the economic downturn caused by the pandemic.

Specifically, they argued the Small Business Administration is violating the Administrative Procedure Act since the exclusion wasn’t authorized by Congress in the CARES Act, which appropriated the COVID-19 funds.

The 39-page complaint, filed Tuesday in federal court in Maryland, also noted that minority-owned businesses have been disproportionately impacted by the policy.

“Due to systemic racism in the criminal-legal system, the criminal-record exclusions fall hardest on minority business owners and workers,” argued the American Civil Liberties Union, which is representing the plaintiffs.

“Black Americans are 3.6 times more likely than white people to be arrested for marijuana, despite similar usage rates. Black Americans are incarcerated at more than five times the rate of white people; one-third of Black American men have a felony conviction. Data suggest that of all U.S. business owners, 2% of white business owners, 15% of Black business owners, and 10% of Latinx business owners have been incarcerated at some point in their lives,” the complaint read.

The COVID-19 shutdowns affected 41% of black-owned businesses and 32% of Hispanic ones, according to the court filing.

Carol Wilkerson, a spokesperson for the Small Business Administration, said the agency has no comment on the lawsuit.

The plaintiffs likely will have a difficult time getting their lawsuit heard, since the CARES Act gives broad discretion to the SBA on rule-making authority and how to implement the program, said William Yeatman, a research fellow with the Cato Institute.

“It’s very possible the courts could close their doors,” he told The Washington Times.

Sekwarn Merritt, who owns Lightning Electric, is one of the plaintiffs who was denied funds for his business due to being on parole for a 2012 drug conviction.

John Garland, another plaintiff involved in the litigation, was denied funds for his business FastsignsBethpage Inc., due to a pending misdemeanor charge, and after having served roughly 15 years in prison between 1987 and 2003.

They’re asking the court to declare the criminal record exclusion unlawful.

The Department of Treasury and Small Business Administration updated its rule last week, changing how recently a criminal record history must be from five years to one year for people with non-financial felonies. For financial felonies like bribery, embezzlement, and fraud, the look-back period remains five years.

But people having faced convictions, guilty pleas, or are on probation or parole during that time would still be disqualified.

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