A leading Republican senator is calling on the Department of Defense to end no-bid arrangements for socially and economically underprivileged businesses, citing a scandal in which Native Hawaiian defense contractor Christopher Dawson was accused of defrauding the government for personal gain.
This week Sen. Joni Ernst, chair of the Senate Small Business Committee, sent a letter to Defense Secretary Pete Hegseth calling contracts awarded through the Small Business Administration’s 8 ( a ) program a “fraud magnet”.
She especially cited Dawson, whose headquarters in Honolulu’s city were taken over by federal agencies in 2023 as part of an embezzlement investigation. Ernst expressed particular concern that Dawson’s businesses continued to receive security contracts while being investigated, including a$ 3.4 million prize from the Navy to one of his companies, Dawson MCG, just days after federal agents seized staff phones and computers. Civil Beat and ProPublica published an in-depth post on Wednesday about the allegations against Dawson and the SBA’s deeds, and Civil Beat earlier reported on the Department of Justice’s investigation into him.
” A company that is currently under active federal investigation and continuing to receive high-dollar, no-bid contracts from the Pentagon despite federal actions indicating major concerns regarding the firm’s” good character,” which is a criterion for 8 ( a ) participants, is troubling,” wrote Ernst, who represents Iowa.
Ernst cited Civil Beat’s report on the DOJ’s allegations that Dawson and other executives abused the 8 ( a ) program by using shell companies, direct company transfers, and “hollow invoices” to pay for their own expenses, including by purchasing expensive homes in Florida and Hawaii. SBA documents obtained by Civil Beat and ProPublica show he was furthermore spending richly on private planes and Bmws and pumping thousands into his favourite pastime, shirt.
In court documents, the prosecution claimed that in total,$ 17 million was diverted into one of Dawson’s shell companies between 2015 and 2021, roughly twice what was sent to the volunteer Hawaiian Native Corp. for the benefit of Native Hawaiians.
A company that is currently the subject of a federal investigation is continuing to award Pentagon-funded, no-bid contracts.
Sen. Joni Ernst in a letter to Defense Secretary Pete Hegseth
The SBA stated that it was unable to directly comment on the Dawson case, citing the ongoing investigation, but that it “welcomes the partnership of all agencies in the effort to stop fraud and abuse within the 8 ( a ) Program.” The organization is currently looking into the program’s performance and said it “looks forward to identifying bad actors, holding them accountable, and restoring a contracting program built on merit rather than arbitrary DEI agendas.”
The 8 ( a ) program was born out of the civil rights era and was designed to help business owners from historically disadvantaged groups, including racial and ethnic minorities, win federal contracts with limited or no competition.
Dawson owned a suite of businesses that have won more than$ 2 billion in contracts, and he had benefited from the special privileges that were given to him through the program. His businesses have done a variety of tasks for the government, from clearing the desert of Arizona for detonated weapons to setting up Oahu’s military burial grounds.
Those contracts, however, came with a catch. He was supposed to support Native Hawaiians with his profits. Federal prosecutors now allege that he broke that promise in court documents.
Dawson was fired by his own company, and he died by suicide in December 2024, but prosecutors are pursuing an asset forfeiture case against four properties they say he purchased with stolen funds. According to court records, the DOJ is also conducting its criminal investigation into additional potential suspects.
Ernst requested Hegseth to “examine for potential fraud” the Dawson MCG contract and other 8 ( a ) awards the company had received. She said she wanted the Pentagon’s review to also include 8 ( a ) contracts awarded to the Hawaiian Native Corp.’s other subsidiaries, which operate under the name DAWSON.
The Hawaiian Native Corp. and DAWSON officials responded to Ernst’s letter by writing directly to Hegseth, stating that the federal investigation focused on specific former employees rather than the Hawaiian Native Corp. or its subsidiaries. They said the senator is” simply incorrect” and that the Hawaiian Native Corp. and its companies have “fully cooperated with both the DOJ and SBA to address issues identified by either agency in their investigations”.
There hasn’t been any suggestion otherwise by any law enforcement or regulatory agency, the letter states, and it is important to note that HNC and its portfolio of operating companies have a strong performance record as a federal government contractor.
Dawson wasn’t Ernst’s only concern. In the letter she urged Hegseth to do a more thorough review of all 8 ( a ) no-bid and set-aside contracts awarded by his agency dating back to fiscal year 2020 to look for any violations of law or SBA rules.
Ernst addressed letters to 21 additional federal agencies, each containing an 8 ( a ) contract example that the senator found problematic.
She criticized Echelon Services LLC, a business owned by the Hawaii Pacific Foundation, as a Native Hawaiian organization that, under SBA regulations, is required to use company profits to support Native Hawaiians.
Ernst accused the foundation of having two different firms performing the same type of work for the government while participating in the 8 ( a ) program, something she said is a potential violation of SBA rules.
The Hawaii Pacific Foundation’s president and CEO, Jeanine DeFries, refuted Ernst’s claims, claiming that SBA regulations allow those businesses to perform the same work as joint ventures.
DeFries added,” We can also confirm that we were not contacted by the senator’s or the committee’s offices prior to receiving the letter.”
Ernst’s letters are part of a broader Republican-led push to end the kind of diversity, equity and inclusion efforts at the heart of the 8 ( a ) program.
After the owners of two 8 ( a ) companies admitted guilt to federal charges of taking part in a$ 50 million bribery scheme involving a contracting officer for the United States Agency for International Development, President Donald Trump’s choice to lead the SBA announced a full-scale audit of the program in June.
After JamesO’Keefe, a right-wing political activist, published undercover footage purporting to show company employees admitting they used the 8 ( a ) program to win contracts and pass them along to other firms, she launched an investigation into the Susanville Indian Rancheria and one of its firms, ATI Government Solutions.
Loeffler attacked the program she’s now charged with running when she announced the investigation on X. The 8 ( a ) Program is rife with grift and fraud, she said, “like every other government program that is rooted in DEI.” Two days later Loeffler again took to X to announce she had suspended ATI Government Solutions and three of its executives from contracting with the federal government.
Calls and messages asking for comment were not answered by ATI.
The Treasury Department launched an audit of$ 9 billion in preference-based contracts in November, an investigation that the agency claimed would examine potential misuse of the 8 ( a ) program in response to its own concerns about the company. And just last week, Loeffler ordered all 8 ( a ) participants to submit detailed financial statements to the agency or risk losing their contracting benefits.
The senator claimed in her letters that the former president’s plan to expand federal contracting opportunities for minority business owners opened the door to potential fraud and abuse. Ernst and others have tried to blame the Biden administration for this.
She also acknowledged that” sloppy oversight and weak enforcement measures” have “raised alarm bells for decades” due to 8 ( a ) program flaws.
Yet Linda McMahon, Trump’s SBA administrator during his first term, praised Dawson and his companies during a 2019 senate oversight hearing, saying” they bring so many businesses in and support so many businesses”. McMahon, who is now the secretary of education, did not respond to a request for comment.
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