Escoe/Bliss Communication, No. SDBA-126 (February 17, 2000)
Docket No. SDBA-99-09-03-17

                REDACTED COPY FOR PUBLIC RELEASE

                    UNITED STATES OF AMERICA
                  SMALL BUSINESS ADMINISTRATION
                 OFFICE OF HEARINGS AND APPEALS
                        WASHINGTON, D.C.

                              )   
IN THE MATTER OF:             )   
                              )   Docket No. SDBA-99-09-03-17
Escoe/Bliss Communication     )   
                              )   Decided:  February 17, 2000
     Petitioner               )
                              )

                           APPEARANCES

                    Adrienne Escoe, President
                    Escoe/Bliss Communication

                      David P. Babkow, Esq.
              For the Small Business Administration
                                
                             DIGEST

An  individual whose personal financial statement reflects a  net
worth in excess of $750,000, excluding ownership interest in  the
applicant  firm and equity in the primary personal residence,  is
not economically disadvantaged.

                        INITIAL DECISION
                                
                                
HOLLEMAN, Administrative Judge:

                          Jurisdiction

     This appeal petition is decided under the Small Business Act
of  1958, 15 U.S.C. Sections 631 et seq., and 13 C.F.R. Parts 124
and 134 (1999).

                             Issues

     Whether  an  individual whose personal  financial  statement
reflects  a net worth in excess of $750,000, excluding  ownership
interest in the applicant firm and equity in the primary personal
residence, is economically disadvantaged.
                                
                   A.   Procedural Background
                                
      On  April 29, 1999, Escoe/Bliss Communications (Petitioner)
applied for certification as a Small Disadvantaged Business (SDB)
with  the  Small  Business Administration (SBA  or  Agency).   13
C.F.R.  Section 134.1008(a)(1999).  On July 20, 1999, the  Acting
Associate   Administrator   for  Small   Disadvantaged   Business
Certification and Eligibility (AA/SDBCE) denied certification.

      Petitioner  filed an Appeal Petition with  this  Office  on
September 3, 1999.  Petitioner sought to submit new evidence with
its  Petition.   On  September 7, 1999, the Administrative  Judge
issued  a  Notice  and  Deficiency Order ordering  Petitioner  to
correct specific deficiencies in its Appeal Petition by September
22nd.  On September 17, 1999, Petitioner complied with the Order.

     On  October 19, 1999, also in compliance with the Order, SBA
timely  filed  the Administrative Record (AR), together  with  an
Answer  to  the  Appeal Petition.  SBA withheld portions  of  two
documents  from  the  AR, claiming the deliberative  process  and
attorney-client privileges.  Petitioner did not object  to  SBA's
claims  of  privilege.  On November 9, 1999,  the  Administrative
Judge  approved SBA's claims of privilege and denied Petitioner's
request that he consider new evidence on appeal.

                     B.  The SDB Application

     Petitioner is a California corporation founded in 1994.  Its
primary Standard Industrial Classification code is 8748, Business
Consulting   Services,   Not   Elsewhere   Classified,   with   a
corresponding  $5 million average annual receipts size  standard.
Dr.  Adrienne Escoe, the individual on whom Petitioner based  its
claim of eligibility, is the firm's founder, President, and  sole
shareholder.

      Dr.  Escoe's  narrative  statement  describing  her  social
disadvantage  does  not address disadvantage  in  her  education.
Tabs   D,   G.    She  does  assert  she  was  denied  employment
opportunities because she is a woman.  Specifically, she  asserts
she  experienced  job  discrimination  while  working  at  Hughes
Aircraft   from   1987  to  1994.   Dr.  Escoe  further   asserts
Petitioner's business has suffered because a woman owns and  runs
the  firm:   both  Federal agencies and private firms  failed  to
select  Petitioner as a prime contractor for  that  reason.   Dr.
Escoe  provides the names and some addresses or telephone numbers
for  a  number  of  individuals who, she says,  can  confirm  her
account.

      Dr. Escoe's personal financial statement lists her personal
net  worth as $XXXX.  It does not list her ownership interest  in
Petitioner, but does include her personal residence, with a value
of $XXXX and a mortgage balance of $XXXX.  Tab J.

                C.  The AA/SDBCE's Determination

      The  AA/SDBCE denied Petitioner's application  because  she
determined  Dr.  Escoe  was  neither  socially  nor  economically
disadvantaged.  First, Petitioner presented no evidence Dr. Escoe
had   experienced   disadvantage  in  her   education.    Second,
Petitioner's claims concerning Dr. Escoe's employment  at  Hughes
Aircraft  did  not show how any disparate treatment affected  her
entry  into the business world.  To the contrary, the  fact  that
she   achieved  a  management  position  showed  Hughes  did  not
discriminate  against her.  Third, Petitioner's business  history
did  not  show discrimination, because its revenue grew  by  over
300% in the past year.  Finally, the AA/SDBCE concluded Dr. Escoe
was not economically disadvantaged because her net worth exceeded
$750,000.

                     D.  The Appeal Petition

      On  appeal,  Petitioner asserts for  the  first  time  that
Dr.  Escoe  was  educationally  disadvantaged,  because  American
society  discouraged her, through educational bias and a lack  of
role  models,  from seeking a business education;  and  that  her
choice  of  a teaching career delayed by 18 years her entry  into
the  business world.  Petitioner also asserts it demonstrated Dr.
Escoe's social disadvantage because she encountered cultural bias
as  a  woman, specifically the discrimination Dr. Escoe  suffered
while   working  at  Hughes.   Petitioner  asserts   Petitioner's
revenues increased 300%, because of Dr. Escoe's hard work and the
income generated by her personal savings.  Petitioner asserts the
AA/SDBCE  discriminated  against her  because  she  financed  her
business with savings instead of credit.

     Petitioner asserts Dr. Escoe incorrectly calculated her  net
worth  on  the  application, because she  mistakenly  stated  her
business equity was $0.  Instead, she should have calculated  her
net worth based on an equation that includes her business equity,
adjusting her net worth to $XXXX.  Further, because her net worth
includes contributions from her former husband made during  their
marriage,  her  real  net worth is $XXXX.   Petitioner  does  not
include  with  the  Appeal Petition either the  calculations  Dr.
Escoe  used  to  obtain  these  figures  or  a  revised  personal
financial statement.

                     E. The Agency Response

      SBA  asserts  it  has  established the AA/SDBCE  reasonably
concluded  Petitioner did not establish Dr.  Escoe  was  socially
disadvantaged.  First, Petitioner failed to address  Dr.  Escoe's
education.   Second, it asserts Petitioner's evidence,  that  Dr.
Escoe  suffered  discrimination in employment  and  her  business
history,    was   inadequate,   inconsistent,   and   conclusory.
Petitioner  failed  to document any of the alleged  instances  of
discrimination  with any statements, sworn or  unsworn  from  the
individuals   whose  names  it  provided.   Instead,   Petitioner
submitted memoranda and performance evaluations which praised Dr.
Escoe's work, and thus evidences no discrimination.  In addition,
Dr.  Escoe  admits Hughes promoted her at the time it  originally
had  promised.  Further, Petitioner's business history has  shown
no  discriminatory  impact because its  revenues  have  increased
substantially.

      SBA  further  asserts the AA/SDBCE correctly concluded  Dr.
Escoe  was  not economically disadvantaged because her net  worth
exceeded  the  regulation's upper limit.   Finally,  Petitioner's
assertion,  that her net worth should be calculated  differently,
is new evidence the Administrative Judge cannot consider. [1]

                         II.  DISCUSSION
                                
     Petitioner  filed its Appeal Petition within 45  days  after
SBA  served  its  denial of the SDB application  and,  thus,  the
appeal is timely.  13 C.F.R. Sections 134.202(a), 134.204(e)(2).
     
     A  firm  applying for SDB certification must demonstrate  it
meets    the   regulatory   eligibility   criteria   (13   C.F.R.
Section 124.1002(b)), among others, that one or more socially and
economically   disadvantaged   individuals   own    (13    C.F.R.
Section     124.1002(b)(2))    and     control     (13     C.F.R.
Section 124.1002(b)(e)) the firm.  In determining whether a  firm
meets   these   ownership,  control,  and  social  and   economic
disadvantage  criteria, the AA/SDBCE applies  the  same  criteria
long  used  for the 8(a) program.  13 C.F.R. Section 124.1002(a);
Matter  of  Trisha Koch & Assocs., SBA No. SDBA-113 at 4  (1999).
The  Agency  must  examine the relevant  data  and  articulate  a
satisfactory  explanation for its action, including  a  "rational
connection between the facts found and the choice made."   Matter
of  IRECOR, Inc., No. SDBA-104, at 5 (1999) (citing Motor Vehicle
Mfrs.  Ass'n of the United States, Inc. v. State Farm Mut.  Auto.
Ins.  Co., 463 U.S. 29, 43 (1983) (citing Burlington Truck Lines,
Inc. v. United States, 371 U.S. 156, 168 (1962)).

     In   considering  an  Appeal  Petition,  OHA   reviews   the
AA/SDBCE's  determination.  OHA's standard of review  is  whether
the   record   demonstrates  the  determination  was  "arbitrary,
capricious,     or     contrary    to    law."      13     C.F.R.
Section  124.1008(f)(3)(ii).   The  scope  of  review  under  the
"arbitrary  and  capricious" standard is narrow, and  OHA  cannot
substitute its judgment for that of the Agency.  Matter  of  Aero
CNC,  Inc.,  No. 106 at 7 (1999).  OHA must consider whether  the
AA/SDBCE's  determination was based on  a  consideration  of  the
relevant  factors  and whether there has been a  clear  error  of
judgment.  IRECOR, supra at 5 (citing Bowman Transportation, Inc.
v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285 (1974)).

     In   order  to  qualify  as  an  economically  disadvantaged
individual,  the  net worth of the individual on  whom  the  firm
bases its eligibility claim must be less than $750,000, excluding
ownership  interest  in  the applicant firm  and  equity  in  the
primary   personal   residence.            13   C.F.R.   Sections
124.1002(c),  124.104(c)(2).   Dr.  Escoe's  personal   financial
statement   lists  her  net  worth  as  $XXXX,  including   cash,
securities, an IRA, and personal property.  Tab J.
     
     The  Administrative  Judge  emphasizes,  however,  that  Dr.
Escoe's  personal financial statement does not list her  interest
in  Petitioner, even though Petitioner's March 31,  1999  balance
sheet  lists  shareholders' equity as $XXXX.  Tab K.   Dr.  Escoe
also  does not include Petitioner on the list of firms  in  which
she  holds  stock.   Therefore, the AA/SDBCE reasonably  did  not
subtract  Dr.  Escoe's equity in Petitioner when calculating  her
net worth.
     
     Further,  Petitioner admits in its Appeal Petition that  Dr.
Escoe  estimated her equity in Petitioner as $0 in  her  personal
financial  statement.  Because the AA/SDBCE in any  event  cannot
consider  her  business equity in computing her net  worth,  this
initial listing was correct.  Petitioner does not explain how the
AA/SDBCE should have calculated her net worth, or how the initial
calculation was in error; it merely asserts a new figure.
     
     Moreover,  Dr.  Escoe's  own  personal  financial  statement
constitutes an admission that she exceeds the personal net  worth
requirements  of the regulation. [2] Specifically, the  statement
lists Dr. Escoe's personal residence, with a value of $XXXX and a
mortgage balance of $XXXX.  After subtracting the resulting  home
equity  of $XXXX the Administrative Judge finds Dr. Escoe  had  a
personal net worth of $XXXX.
     
     Petitioner also erroneously asserts SBA penalized it because
Dr. Escoe chose to finance her business with savings, rather than
credit.  Dr. Escoe's method of financing Petitioner would not  be
reflected  in  her  net worth calculation because,  as  discussed
above, the regulations exclude equity in the applicant firm.   13
C.F.R.   Sections  124.104(c)(2);  124.1002(c).    It   also   is
irrelevant  that  Ms.  Escoe derives  some  of  her  assets  from
transfers  from  her ex-husband; the AA/SDBCE could  not  exclude
those  assets.  The only exclusion of assets from the  net  worth
calculation  authorized  by  the regulations  is  equity  in  the
individual's  home  and  the  applicant  firm.   Id.   Thus,  the
AA/SDBCE's  finding  that she was not economically  disadvantaged
was not arbitrary or capricious. [3]
     
     Accordingly,   the  Administrative  Judge  concludes   SBA's
determination was not arbitrary, capricious or contrary  to  law.
Instead,  SBA  based  it  on  the uncontroverted  facts  and  the
specific   regulatory  requirements.   Because  this   issue   is
dispositive,  the  Administrative Judge  need  not  consider  the
parties'  other arguments. [4] Aero CNC, No. 106 at 8.  When  the
AA/SDBCE  denies  SDB  certification on two or  more  independent
bases,  and at least one is grounded in law or regulation and  is
factually  supported by the record evidence,  the  Administrative
Judge will affirm the determination.  Matter of ID Systems, Inc.,
No. SDBA-114 at 7 (1999).
     
                         III. CONCLUSION
     
     Based  on  the  Administrative Judge's conclusion  that  the
SBA's determination was not arbitrary, capricious or contrary  to
law,   he  AFFIRMS  the  determination,  and  DENIES  the  Appeal
Petition.

     This  is  the initial decision of the SBA.  Absent a request
for review, this decision will become the SBA's final decision 30
days    after   the   date   of   this   decision.    13   C.F.R.
Sections 134.227(b), 134.228(a) (1999).

                              _____________________________
                              CHRISTOPHER HOLLEMAN
                              Administrative Judge

_________________________

      [1] As discussed above, the Administrative Judge's November
9th Order excluded Petitioner's new evidence.

       [2]   Even  if  the Administrative Judge had not  excluded
Petitioner's  proffered evidence that Dr. Escoe's  net  worth  is
only  $XXXX,  or  $XXXX, the proffer merely is a bare  assertion.
Petitioner  offers  no  calculations,  analysis,  or  documentary
evidence to support its assertion that it initially miscalculated
Dr. Escoe's net worth.

       [3]  Petitioner's  admission that  Dr.  Escoe's  financial
personal  statement  did  not  include  her  equity  interest  in
Petitioner  confirms  that the AA/SDBCE  correctly  analyzed  Dr.
Escoe's  net  worth, and was not required to request  to  further
information  from  Petitioner.  Cf. Matter of  G.  Davidson  Co.,
Inc., No. MSB-446 at 19 (1994).

       [4]   The  Administrative Judge thus does  not  reach  the
question of whether the AA/SDBCE was arbitrary and capricious  in
concluding Dr. Escoe was not socially disadvantaged.

                                           Posted: February, 2000