WASHINGTON – The U.S. Small Business Administration and Diamond Ventures, LLC, an Atlanta-based venture capitalist firm, have reached an agreement to settle Diamond Ventures’ pending lawsuit against the SBA: Diamond Ventures v. Karen Mills, No. 03-1449 (GK) (D.D.C. filed June 30, 2003). For the past seven years, the two parties have been engaged in unprecedented litigation to address claims of discrimination under the Equal Credit Opportunity Act regarding the SBA’s administration of the Small Business Investment Company (“SBIC”) program. Tydings attorneys Franklin Lee and William Heyman represented plaintiff Diamond Ventures, LLC in this lawsuit. Among the issues raised in Diamond’s complaint were allegations that some of SBA’s criteria for licensing Small Business Investment Companies were inherently discriminatory and adversely impacted prospective SBIC firms that were owned and managed by African Americans. SBA’s lengthy track record of a dismally low dollar volume of investments in minority-owned businesses through its SBIC program has also been a repeated subject of Congressional hearings.
Following a ruling in March by D.C. Federal District Court Judge Kessler denying SBA’s Motion for Summary Judgment, a trial date was set by the judge for February 17, 2011. The parties then entered into a sustained period of mediation and settlement discussions that ultimately led to this settlement agreement on November 22, 2010. The lawsuit is being formally dismissed today by joint stipulation of the parties. Through this agreement, the parties have now determined to set aside their differences and to move forward together towards a greater public good in providing enhanced access to capital for significantly underserved segments of the small business community.
Both parties have expressed happiness that the litigation is now behind them. “SBA is very focused upon continuing and improving its outreach to underserved markets,” said Sarah Lipscomb, SBA’s General Counsel. “The Small Business Investment Company (SBIC) program provided over $1.5 billion in financing support for small businesses last year. SBA is committed to ensuring that emerging markets have access to the necessary growth capital to help small businesses grow and create jobs."
C. Earl Peek, Managing Partner for Diamond Ventures added, “by placing Diamond Ventures squarely on the path towards becoming an SBIC, the SBA has taken a giant step towards making a significant impact in those minority businesses and low and moderate income communities that have heretofore been most underserved by traditional venture capital firms. With our targeted focus, Diamond will demonstrate to the broader financial markets once again that sound business investments in predominantly minority communities generate great economic growth, profits, and jobs just as in any other community.” Syncom, a leading venture capital firm focused on growth stage investments in emerging and underserved segments of the media and communications industry since 1977, has also joined forces with Diamond Ventures in providing technical support and strategic advice in furtherance of this ground-breaking effort.
Under the terms of the settlement, SBA has evaluated Diamond Ventures’ revised business plan and management team and has determined that it is qualified to proceed in the formal SBIC licensing application process. SBA has issued a “greenlight’ letter to Diamond authorizing it to approach potential investors for commitments of regulatory capital required under the program. The settlement agreement also provides for some monetary support from SBA in furtherance of a streamlined formal SBIC licensing application process that Diamond intends to complete promptly after raising the requisite regulatory capital.
“Diamond Ventures enthusiastically looks forward to fully participating in the SBIC program and the achievement of our mission and vision to provide needed growth through capital investments in emerging markets and in small and medium-sized businesses,” said Peek. Franklin Lee, lead attorney for Diamond Ventures, LLC, and partner with Baltimore-based law firm, Tydings, added, “We believe that the settlement of this groundbreaking litigation signals a new era for enhanced access to capital for underserved minority business markets. This is not only a good day for our client, Diamond Ventures, and for the Small Business Administration; it is a great day for small businesses and minority communities throughout America.”
CONTACT: Franklin M. Lee.