Congratulations! Your HUBZone biz is certified

Investigators for the Government Accountability Office fooled the Small Business Administration by applying for certification for four fake companies under SBA’s Historically Underutilized Business Zone program. SBA approved the applications in short order.

Fictitious application 1: A virtual office
Investigators leased virtual office services from a suite located in a HUBZone for $250 a month and gave this address as the company’s principal location.

The terms of the lease allowed the investigators to schedule use of the office space for 16 hours a month and have mail delivered there. Their HUBZone application also said the bogus firm employed two people, one of whom lived in a HUBZone.

Two business days after submitting the application, an SBA official sent an e-mail message requesting a copy of the lease for the principal office’s location and proof of the employee’s residency.

Investigators created the necessary documentation by using publicly available hardware and software and faxed copies to SBA. The agency requested additional documentation related to utility payments and canceled checks.

SBA officials requested no further information and certified the firm three weeks later.

Fictitious application 2: A $24 mailbox
This faux firm’s principal office was a mailbox in a HUBZone and leased for less than $24 a month.

The application claimed the firm had nine employees, four of whom lived in a HUBZone. SBA requested clarification regarding a discrepancy in the application information, but officials made no further contact.
Four weeks after GAO investigators submitted the fictitious application, SBA certified the fictional firm to participate in the HUBZone program.

Fictitious application 3: Starbucks coffee shop
For the principal office address, investigators used a Starbucks coffee shop in a HUBZone. They also wrote that the firm employed two people, one of whom lived in the zone.

SBA did not request any supporting documentation or explanation. Investigators received HUBZone certification two weeks later.

Fictitious application 4: A $10 mailbox
Investigators used the address for a mailbox located in a HUBZone for the principal office. They paid less than $10 a month in rent.

In their application, the investigators said two of the three employees who worked for the bogus firm lived in a HUBZone. SBA requested clarification regarding a discrepancy in the application information, but made no further contact.

The agency certified the invented firm about five weeks later.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Fri, Aug 6, 2010 SB Govman

There will always be fraud and abuse. I see it in my command all the time as well as conflict of interest. What the command does about it? Fosters the practice by preparing "special" instructions. Four firms out of how many applicants were fraudulent? The SBA is understaffed and their travel budget is close to nothing (for the troops). In order to alleviate fraud and abuse, SBA representatives should physically visit the locations. Cost a few bucks? Sure but considering how much we will save in the long run it’s a rather small investment.

Sat, Apr 24, 2010 Jan http://www.BusinessPlanMaster.com

Holey cow, I've been encouraging businesses to sign up as minority owned businesses for a long time. I know that funding for these businesses has never reached the levels it should,but I had no idea that fakery was so prevalent. On the other side, women owned businesses are often required to submit affidavits and tax returns and all kinds of corporate documentation, and have in reviewed and stored in some anonymous place. I for one have refused to do this. I will gladly testify to being a female who runs a business, but my tax returns are private.

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