Lack of Oversight in SBA Program May Take Millions Away From Native Hawaiians — ProPublica

At a congressional oversight listening to in 2019, Linda McMahon, then head of the Small Enterprise Administration, lavished reward on a Native Hawaiian protection contractor as a shining instance of a federal program designed to uplift Indigenous individuals.

Christopher Dawson and his corporations had gained a whole bunch of thousands and thousands of {dollars} in no-bid authorities contracts by means of the SBA based mostly on the promise that his income would primarily be used to assist Native Hawaiians by, partially, selling the tradition, constructing properties and supporting orphaned kids.

“Oh my goodness,” McMahon gushed to senators. “They carry so many companies in and help so many companies.” She added she wished to “work extra intently with them as a result of they appear to have such an ideal footprint.”

Two months earlier than the listening to, nevertheless, a former worker had met with federal investigators and filed a whistleblower lawsuit accusing Dawson and executives of dishonest the SBA’s 8(a) program. That program, which dates to the Sixties, was designed to assist enterprise homeowners from traditionally deprived teams, together with racial and ethnic minorities, to win federal contracts. For Native American tribes, Alaska Native companies and sure Native Hawaiian nonprofits, equivalent to Dawson’s Hawaiian Native Corp., the chance comes with no cap on the dimensions of these no-bid contracts.

Inner firm data and different paperwork within the SBA’s possession would later present simply how a lot Dawson had indulged. There have been non-public jets and Porsches, luxurious properties in Hawaii and Florida, memberships to non-public social golf equipment, and an almost $1 million annual wage. Dawson additionally funneled thousands and thousands into polo, investing in a beachfront horse farm on Oahu’s famed North Shore and a horse breeding operation in Argentina.

Justice Division prosecutors would ultimately describe Dawson’s actions as a part of a “fraud scheme and embezzlement,” one which victimized the individuals he was speculated to be serving to.

The SBA has recognized for years about its failures in policing its enterprise growth program. Audits and investigations by the Authorities Accountability Workplace and the SBA inspector common over the previous twenty years have discovered a scarcity of oversight by the company, and in 2019, simply months after McMahon’s testimony, the GAO once more cited the company for “persistent weaknesses.” McMahon didn’t reply to a request for remark.

Controversies have included massive companies utilizing Indigenous companies to entry massive contracts, authorities officers accepting bribes to steer no-bid awards, and white contractors pretending to be Native to win federal work. Congressional lawmakers have launched their very own inquiries into this system, saying at completely different occasions that it was rife with waste, fraud and abuse. Federal prosecutors, too, have pursued quite a few felony circumstances, together with a $30 million bribery scandal that investigators described as one of many “most brazen corruption schemes within the historical past of federal contracting.” 4 males later pleaded responsible in that case.

But as was the case with Dawson, the SBA has usually been sluggish to behave and carried out little to make significant reforms. The company didn’t reply to detailed questions from Honolulu Civil Beat and ProPublica.

The allegations focusing on Dawson are the primary main controversy the place the founding father of a Native Hawaiian group is at its middle, and it comes as President Donald Trump’s second administration has begun auditing the 8(a) program, with officers saying it’s suffering from “rampant fraud.”

Robin Danner, a outstanding determine within the Native Hawaiian group who was an early advocate for increasing no-bid contracting privileges to Native Hawaiians by means of the 8(a) program, has cautioned for years concerning the potential for abuse in this system and now worries about its future.

“It’s a handful of individuals making thousands and thousands of {dollars} off the backs of our individuals and our struggling,” Danner mentioned, referring to the historic plight of Native Hawaiians. “What they’re giving again is pennies.”

But even after allegations of wrongdoing started to floor, Dawson’s corporations, working underneath the model DAWSON and together with a set of protection, development and environmental companies, pulled down greater than $500 million in new and present contract funds on no-bid work starting from cybersecurity operations at an air base in Qatar to plowing snow in Colorado.

It wasn’t till the summer time of 2023 that federal brokers raided the Hawaiian Native Corp. and DAWSON firm workplaces in Honolulu, seizing computer systems and cellphones; staff had been advised to go residence and the workplaces had been closed. 5 months later, Justice Division prosecutors took steps to grab 4 of Dawson’s properties that prosecutors mentioned had been purchased utilizing cash he stole from Native Hawaiians.

When the SBA ultimately took motion in early 2024, it was within the type of a letter threatening to droop or terminate the Hawaiian Native Corp. and DAWSON corporations from this system. Within the letter, Donna Peebles, an administrator overseeing the 8(a) program, mentioned the SBA had proof, together with an audit presentation, tax data, bank card statements and different paperwork, some relationship again to 2015, displaying funds paying for luxurious automobile leases, mortgages on non-public residences, stays at extravagant motels and an opulent journey to Dubai. Greater than $1.6 million went to Dawson’s North Shore polo farm.

Peebles alleged that Dawson additionally diverted $25,000 per 30 days to Hawaii Polo Life, describing it in data as a subcontractor although it was really his private model, which included a line of luxurious athleisure put on.

The amount of cash pulled out of the businesses for Dawson’s use in simply 5 years far exceeded what the Hawaiian Native Corp. gave again over 10, Peebles wrote, and was the “antithesis of the … program’s intent” and a “gross breach of belief.”

The Hawaiian Native Corp. and DAWSON corporations mentioned in written statements that they’ve been cooperating with the DOJ and dealing with the SBA on reforms. They mentioned that the investigation centered on particular person workers and doesn’t allege felony actions by Hawaiian Native Corp. or the DAWSON working corporations. Neither company, the assertion mentioned, has “ever issued a discovering of any wrongdoing” by the Hawaiian Native Corp. or its corporations.

Nearly instantly after Dawson grew to become the goal of the felony investigation, the businesses mentioned they took “swift motion” to droop after which fireplace him.

It was a blow from which he would by no means get better.

Dawson’s household would later inform Honolulu law enforcement officials that after he was minimize off, he mentioned he was apprehensive about working out of cash. He confronted six-figure tax money owed, rising authorized charges and prices associated to his polo horses.

As Christmas 2024 neared, he mentioned the federal investigation on the household’s residence within the Nuuanu Valley, telling certainly one of his sisters that he felt like he was in “no-man’s-land.”

The subsequent morning, he was discovered off a close-by climbing path, the place he had died by suicide.

Program in Want of “Tailor-made Oversight”

Dawson got here from a well-heeled household with deep political connections. He was the son of a Canadian businessman, and his mom, Beadie Kanahele Dawson, was a Native Hawaiian activist and lawyer. They lived in a historic villa and owned a contracting agency that centered on environmental remediation.

As an grownup, Dawson started working the household firm. He additionally dabbled in politics, together with making a bid for the state Home and giving political contributions to lawmakers, most notably U.S. Sen. Dan Inouye, then the state’s strongest politician.

Native American tribes and Alaska Native companies already had federal contracting benefits by means of the 8(a) program. The intention was that in change for entry to the biggest no-bid contracts, they might use firm income to help their individuals and supply different advantages, equivalent to dividends, scholarships and burial help.

Alaska Natives, specifically, had made good use of those privileges and by the early 2000s had been profitable a whole bunch of thousands and thousands of {dollars} in federal contracts. Dawson and his mom wished in, so that they made the 5,000-mile pilgrimage from Hawaii to Washington, D.C., to foyer Inouye.

For Inouye, the SBA program was a approach to proper the wrongs Native Hawaiians endured after U.S.-backed plantation homeowners overthrew their kingdom in 1893, stripping them of their political sovereignty and 1.8 million acres of land. For the Dawsons, it wasn’t nearly fairness; it was about defending their turf from Alaska Native companies.

Beadie Dawson recalled in an oral historical past years later that Alaska Natives had advised her and different Native Hawaiian contractors that the one method their companies would succeed could be by working for the Alaskans.

“My son and I made a decision that wasn’t going to occur,” she mentioned.

However in attempting to open up entry to Native Hawaiians, Inouye confronted an issue. Native Hawaiians didn’t have a federally acknowledged tribe or tribal authorities that would direct how firm income would circulation again into the group and that will be accountable to its members. To get round that, Inouye and the SBA adopted a system that will permit non-public nonprofits, generally known as Native Hawaiian Organizations, to behave as stand-ins. Even then they had been handled in a different way from their tribal and Alaska Native friends in that the contracting benefits the 8(a) program offered them, together with entry to no-bid awards of limitless measurement, solely utilized to protection contracts.

Across the similar time NHOs had been discovering their footing, the SBA was coming underneath scrutiny for failures of oversight in Alaska.

As Alaska Native companies gained extra contracts, significantly after 9/11, members of Congress known as for an investigation. In 2005, one GOP lawmaker famous, “This could possibly be turning right into a rip-off due to the sole-source nature of those contracts.”

The next 12 months the Authorities Accountability Workplace issued its first report discovering that the 8(a) program, as utilized to Native teams, wanted “tailored oversight.” It discovered that the SBA was ill-equipped to deal with the complexities of the rising program partially because of poor staffing and shoddy information assortment. Auditors famous that the SBA couldn’t present the GAO with dependable information on revenues or how these funds had been spent.

By then a number of the first indicators of fear about unhealthy actors within the Native Hawaiian program had been starting to emerge. In 2007, Inouye’s chief of employees warned him in a memo that some NHO founders, together with Dawson’s mom, feared a few of their friends “actually do not know what they’re doing” and had fashioned their very own commerce group to assist police themselves.

“We can not afford to have just a few ill-informed or ill-motivated NHOs to screw it up for everyone,” the staffer wrote.

Each few years the SBA 8(a) program noticed a brand new scandal, together with a 2008 revelation that two Alaska Native companies agreed to funnel greater than $23 million to non-Native corporations and information reviews in 2010 by The Washington Post and ProPublica displaying that Alaska Native shareholders acquired short while non-Native contractors took large payouts.

The SBA responded by requiring members to self-report annually how they had been giving again to their communities. However the company declared these reviews confidential, leaving no alternative for outdoor scrutiny. Info can also be restricted as a result of NHOs usually are not required to file public disclosures and lots of don’t reveal complete data voluntarily.

The general public normally solely hears about NHO giveback efforts when an organization promotes them both by itself web sites or in press releases. Considered one of Chris Dawson’s most recognizable contributions to Native Hawaiians was a 30-second radio spot on Hawaii Public Radio generally known as the Hawaiian Phrase of the Day, which was listed on the Hawaiian Native Corp.’s web site underneath the heading “Group Impression.” The corporate additionally sponsored the printed of the Merrie Monarch hula competitors on the Massive Island and helped pay the electrical payments at Iolani Palace, a historic Honolulu landmark that when served because the official residence for the rulers of the Hawaiian Kingdom.

Such voluntary reviews ought to be met with skepticism, in line with Colin Kippen, a Native Hawaiian lawyer who labored to arrange the NHO program within the early 2000s.

“Anecdotal proof is no matter a part of the elephant you contact as a blind man,” Kippen mentioned. “You might get misled.”

Polo, a Porsche and a Personal Jet

One set of expenditures that caught the attention of federal investigators and SBA officers was Dawson’s funding in polo.

Polo was a decadeslong obsession for Dawson and one which he related to his Native Hawaiian heritage. He was keen on speaking about polo’s arrival in the islands during the 1880s when British naval officers challenged native residents to a match whereas King Kalakaua nonetheless reigned over the dominion. However he additionally tied it again to the islands’ paniolo, or cowboy, tradition that itself was imported to the islands from Mexico within the 1800s.

He boasted on varied web sites, together with his personal, about his rising stature within the sport and the way it benefitted Native Hawaiians. As one web site declared: “Chris is devoted to supporting the Native Hawaiian group by means of philanthropy, his enterprise enterprises, and his work to show Hawaiian historical past and tradition by means of the lens of polo.”

A few of Dawson’s spending on polo started round 2015 when SBA data present he began diverting $1.6 million into Anuenue Farms Hawaii, his oceanfront polo coaching and horse using steady on the North Shore. The SBA mentioned inside accounting data confirmed he usually would label these transfers as funds for advertising and marketing and branding.

By 2019, funds paperwork present, he began paying Hawaii Polo Life $25,000 a month as a subcontractor to the Hawaiian Native Corp. The cash was paid by means of certainly one of Dawson’s private companies that federal prosecutors later described as a shell firm that didn’t present any items or companies to the nonprofit or its subsidiaries. Across the similar time, Dawson was internet hosting swanky polo tournaments within the islands and sponsoring a number of the high polo gamers on this planet, together with a ladies’s staff that will go on to win a number of nationwide championships.

Finally he would accomplice with Argentinian polo star Adolfo Cambiaso, one of many best to ever play the sport, to start out the horse breeding operation in Argentina the place he deliberate to clone a number of the sport’s high specimens.

Court docket data present that the DOJ thought-about Dawson’s investments in polo, and specifically his buy of a six-bedroom Florida property subsequent to the nationwide polo grounds, to be indications he had shortcharged Native Hawaiians as a result of monetary data obtained by prosecutors confirmed that he bought the house utilizing $1.3 million he took from certainly one of his 8(a) corporations.

From 2015 to 2020, Dawson’s firm noticed its annual income from federal contracts develop from $72 million to greater than $200 million. By 2019, Dawson was paying himself a $946,500 wage, in line with the SBA’s letter. The company known as the salaries Dawson paid himself throughout that interval “exorbitant.” It discovered he had additionally put aside $2.3 million over three years to pay his bank cards.

Dawson and different executives had allegedly used shell corporations and “hole invoices” to line their very own pockets, in line with the DOJ’s asset forfeiture case. Considered one of these shell corporations, prosecutors mentioned, siphoned off over $17 million between 2015 and 2021 — almost double the quantity given to the Hawaiian Native Corp. for the good thing about Native Hawaiians.

“In brief,” prosecutors wrote, “the investigation revealed Mr. Dawson and his associates abused the SBA 8(a) program to perpetuate a fraud scheme and embezzlement that victimized HNC and Native Hawaiians.”

Dawson’s felony protection lawyer, Michael Purpura, mentioned in an announcement to Civil Beat and ProPublica that Dawson and his corporations had for years filed detailed monetary statements with the company and relied on the recommendation of “absolutely knowledgeable” accountants and attorneys “always and on all points associated to the SBA 8(a) program.”

Blowing the Whistle on “Phantom” Work

Years earlier than the DOJ investigators raided Dawson’s firm, two of his workers witnessed related conduct and filed federal lawsuits detailing their considerations.

Eugene Sellers labored for Dawson for 4 years between 2014 and 2018 and mentioned he was invited to attend certainly one of his polo exhibitions within the islands. Whereas he heard the Hawaiian Phrase of the Day on the native radio and took part within the annual day of service named after Dawson’s mom, Sellers didn’t see a lot by way of significant funding within the Native Hawaiian group, equivalent to the acquisition of ancestral lands or paying for housing.

“It’s just like the previous business,” Sellers mentioned in an interview. “The place’s the meat?”

In 2018, Sellers filed a federal whistleblower lawsuit that foreshadowed most of the accusations contained within the DOJ’s asset forfeiture case. His criticism detailed how aspect corporations had been used to invoice for “phantom” work to get round SBA limits on extreme withdrawals, together with for salaries. There have been suspicious expenditures, too, he alleged, together with season tickets to Dallas Cowboy soccer video games and courtside seats for the San Antonio Spurs.

His criticism additionally pointed to an unexplained cost of $500,000 to a Texas-based firm managed by Dawson and two different high-ranking executives. To Sellers, a retired fraud investigator for the Air Drive, that cost was a “purple flag for an unlawful disbursement,” the lawsuit acknowledged, as a result of it was a spherical quantity and it was going to a aspect firm owned by insiders.

Among the many executives referenced in Sellers’ criticism had been Hawaiian Native Corp. chief monetary officer Bryan Hara and Billy Cress, the DAWSON president and chief working officer. Each would ultimately be accused by the DOJ in court docket data of working with Dawson to divert cash away from Hawaiian Native Corp. and DAWSON corporations.

Tommy Otake, a Honolulu-based felony protection lawyer representing Hara, declined to touch upon the allegations Sellers made in his civil go well with and didn’t reply to requests for touch upon the DOJ allegations. Cress didn’t reply to cellphone calls and emails. Neither Cress nor Hara have been charged with any crimes. In an announcement to Civil Beat and ProPublica, the Hawaiian Native Corp. and DAWSON corporations denied Sellers’ allegations.

Shortly after submitting his lawsuit, Sellers met with federal investigators in San Diego, together with representatives from the DOJ and SBA workplace of inspector common, however mentioned in an interview that nothing ever got here of that assembly. The DOJ and SBA inspector common’s workplace declined to remark.

Three years later, one other senior government at certainly one of Dawson’s 8(a) corporations filed a lawsuit, alleging he was fired after discovering irregularities within the firm’s funds.

Lyan DeSouza alleged that subcontracting companies owned by Dawson executives had been getting paid for “administration and consulting companies” that didn’t exist, main DeSouza to imagine “Dawson was defrauding the Federal Authorities.”

DeSouza additionally mentioned in his criticism that Hara, the chief monetary officer, was “withdrawing massive sums of cash and writing them off as private loans to Mr. Dawson.” When DeSouza raised these considerations, the criticism states, he was fired. The corporate denied the allegations and Hara’s lawyer declined to remark.

Each fits led to confidential settlement agreements in 2020 and 2023.

By 2022, SBA officers proposed reforms that will have required a set share of firm revenues for use as money contributions to Indigenous communities. The SBA additionally thought-about whether or not tribes, Alaska Native companies and NHOs ought to be penalized in the event that they didn’t make “good religion efforts” to observe by means of on their guarantees to assist their individuals.

The proposal, the company defined, got here “in response to an commentary that not all entities seem like allocating an acceptable share of their 8(a) receipts to the communities they serve.”

Dawson and different NHO leaders, together with his sister Lani Dawson Area, who was the president of the Native Hawaiian Group Affiliation, testified that the “one-size-fits-all” method would harm companies with small margins that may not have the ability to afford the giveback percentages the SBA put in place.

They had been a part of a refrain of opposition that finally helped sink the proposal.

Raymond Jardine, a Native Hawaiian contractor who relied on SBA contracting privileges, was among the many few who hoped for extra oversight. Like others, he noticed the excessive potential for misuse of the NHO program. He had additionally seen for himself Dawson’s luxurious spending, significantly on polo, and was apprehensive Dawson could be profiting from the SBA’s free guidelines and lax oversight.

So when he heard in 2023 that federal investigators had been sniffing round Dawson’s corporations and speaking to present and former workers, he determined to name Dawson straight.

Regardless of rumors going across the islands, “he tried to guarantee me that nothing actually was occurring and that my data was not correct,” Jardine mentioned. “I advised him, ‘Chris, the coconut wi-fi isn’t improper.’”

Corruption a “Truth of Life”

As soon as federal brokers walked by means of the door, the Hawaiian Native Corp. and DAWSON firm officers moved shortly to salvage their contracting privileges.

Dawson and his household had been faraway from their positions inside the Hawaiian Native Corp., in line with a joint assertion to ProPublica and Civil Beat from the nonprofit and its corporations. Dawson’s sister Donne Dawson, and his mom, Beadie Dawson, who served with him on the Hawaiian Native Corp. board of administrators, didn’t return a number of calls looking for remark.

The Hawaiian Native Corp. board of administrators was reconstituted to incorporate Andy Winer, a Washington lobbyist who was beforehand chief of employees to Hawaii U.S. Sen. Brian Schatz, the highest Democrat on the Indian Affairs Committee. And the businesses have employed a forensic accountant to the management staff to verify they’re adhering to SBA guidelines.

As well as, the Hawaiian Native Corp. has vowed to be extra clear. For the primary time, it posted an in depth report on its web site displaying how a lot it gave again to Native Hawaiians. The report reveals that in 2024 it offered $3.8 million to numerous Native Hawaiian causes, together with canoe paddling golf equipment, a language immersion middle and a bunch selling the preservation of lua, a Native Hawaiian martial artwork.

In a joint assertion, nonprofit and firm officers mentioned they plan to proceed to take action “although the SBA laws on affect reporting don’t require public posting.”

They’re additionally working to liquidate belongings that Dawson owned in order that the proceeds may be “correctly directed in accordance with SBA 8(a) laws.”

Fairly than minimize the Hawaiian Native Corp. and DAWSON corporations out of this system, the SBA entered into an administrative settlement that firm officers mentioned consists of “enhanced mandates,” though neither aspect offered specifics.

On the similar time, the businesses have continued to win massive, no-bid contracts, together with instantly following the raid, to assist clear up poisonous particles from the Lahaina wildfire burn web site on Maui.

Though present company officers have declined to debate Dawson’s case, John Shoraka, who oversaw the 8(a) program in the course of the Obama administration, mentioned the SBA is just not constructed to catch everybody who’s dishonest the system and that fraud, waste and abuse in authorities contracting is a “truth of life.”

“You’ll be able to’t handle towards the 1% of the unhealthy actors,” he mentioned. He additionally pointed to excessive case masses and quick staffing, which he mentioned can flip oversight into an “train of checking the field.”

Whereas the Trump administration has vowed to audit this system, it has not but introduced any outcomes or proposed reforms.