Aim Construction and Contracting Corporation, No. MSB-593 (November 21, 1997).
Docket No. MSBE-97-5-13-11
                                                                 
                                
                    UNITED STATES OF AMERICA
                  SMALL BUSINESS ADMINISTRATION
                 OFFICE OF HEARINGS AND APPEALS
                        WASHINGTON, D.C.
                                

_______________________________
                               )
IN THE MATTER OF:              )   Docket No. MSBE-97-5-13-11
                               )
Aim  Construction and          )   Decided:   November 21, 1997
Contracting Corporation        )
______________________________ )

                           APPEARANCES
                                
Edward  V.  Collins,  Esq.,  McElroy,  Deutsch  &  Mulvaney,  for
Petitioner Aim Construction and Contracting Corporation.

Audrey  Liebross,  Esq., John T. Spotila,  Esq.,  for  Respondent
Small Business Administration.

                             DIGEST

By  admitting in an 8(a) application that his ability to  compete
in  the free enterprise system has not been impaired, the SBA can
reasonably  conclude that the applicant is not  economically  dis
advantaged.   The SBA need not have gone further to  examine  the
factors that it generally uses to determine whether there  is  an
impaired ability to compete in the free enterprise system.

Based upon the evidence in the record, the SBA was reasonable  in
its  conclusion  that the applicant concern did not  prove  by  a
preponderance  of  the  evidence  that  the  individual  claiming
disadvantage  unconditionally owns 51% of the  applicant's  stock
because  the  stock  certificates and corporate  records  do  not
establish such ownership.

A  nondisadvantaged  individual, who  is  a  shareholder  in  the
applicant  concern,  may  not have  more  than  a  10%  ownership
interest in another firm in the same or similar line of business.

                         FINAL DECISION
                                
ARKOW, Administrative Law Judge:

      Petitioner  Aim  Construction and  Contracting  Corporation
(Aim)  challenges  a  decision by the Respondent  Small  Business
Administration (SBA) denying it entry into the 8(a) pro-gram  [1]
because the individual upon whom eligibility is based, Mr.  Iqbal
Ahmad,  is  not economically disadvantaged and does not  own  and
control  Aim.  Aim contends the SBA's determination is arbitrary,
capricious, and contrary to law.  I find Aim's contentions to  be
without merit.

                          Jurisdiction
                                
      Jurisdiction  to decide this appeal is proper.   15  U.S.C.
Section  637(a)(9); 13 C.F.R. parts 124 and 134.  The appeal  was
timely filed on May 9, 1997.  13 C.F.R. Sections 124.210(b),  and
134.202(a).

                              Issue

      Whether  the  action of the SBA in denying Aim Construction
and  Contracting  Corporation entry  into  the  8(a)  program  is
arbitrary,   capricious,  or  contrary   to   law.    15   U.S.C.
Section 637(a)(9)(C), 13 C.F.R. Section 124.210(h)(1).
                                
                              Facts

      Aim, a construction company, applied for admission into the
8(a)  program on May 21, 1996.  Aim claimed that Mr. Iqbal  Ahmad
is  socially and economically disadvantaged.  It also claimed Mr.
Ahmad  owns  and  controls  Aim.  Mr. Ahmad  is  presumed  to  be
socially  disadvantaged  because  he  is  a  Subcontinent   Asian
American. [2]

     
     The   SBA  denied  the  application  on  December  6,  1996.
Administrative Record (AR) at Ex. 4.  On January  20,  1997,  Aim
requested  that  the  SBA  reconsider its  denial  and  presented
evidence  to support its request.  AR at Ex. 3.  The  SBA  denied
the  reconsideration request on March 26, 1997.  There were  four
grounds  for  the denial.  First, Mr. Ahmad was not  economically
disadvantaged  because  he  stated in  his  Personal  Eligibility
Statement  (SBA  Form 1010A) that his ability to compete  in  the
free  enterprise system has not been impaired due  to  diminished
capital  and credit opportunities, as compared to others  in  the
same  or similar line of business and competitive market who  are
not  socially  disadvantaged; Mr. Ahmad's total  personal  assets
amounted   to   $1,679,589;  and  Aim  compared  favorably   with
nondisadvantaged  firms in the same or similar line  of  business
based  upon a comparison of key financial ratios as reflected  by
the 1996 Robert Morris and Associates industry standards.  AR  at
Ex.  1.   The  SBA used Standard Industrial Classification  (SIC)
code 1542 as the basis for its comparison.  AR at Ex. 2.

     Second,  Aim  is  not  51% owned by the individual  claiming
disadvantage-Mr.   Ahmad.   The  record   shows:    a   purported
"Certificate  of  Amendment  of the  Incorporation"  to  increase
authorized  shares from 200 to 400, which is not evidenced  by  a
filing  with  the  State  of  New  York;  the  reverse  side   of
Certificate Number 1 for 200 shares issued to Ms. Patricia  Ahmad
has  not  been  properly executed for transfer; and  the  capital
section  of  Aim's  October 31, 1996 CPA-prepared  balance  sheet
records 300 issued and outstanding shares, contradicting  all  of
the other information provided.  AR at Ex. 1.

     Third,  Aim  did  not provide sufficient  evidence  that  it
amended  the  portion of Article III, Section 1 of  its  by-laws,
which  requires that the number of directors shall equal the  num
ber  of  shareholders; there are two shareholders, and  only  one
director elected.  Id.
     
     Fourth,  Aim  did not provide sufficient evidence  that  Ms.
Patricia Ahmad, a nondisadvantaged 51% owner of Aim, is no longer
the  majority owner of Aim Construction Corporation, a  different
firm, which is in the same line of business as Aim, the applicant
firm.  Id.
     
     Aim  was incorporated in the State of New York on March  18,
1994.   The corporation's Certificate of Incorporation and  state
filing  receipt state there are 200 shares of no par value stock.
AR at Ex. 8.  Article VI of Aim's by-laws provides:
     
     All  certificates  [of  stock] shall  be  consecutively
     numbered  and the name of the person owning the  shares
     represented thereby, his residence, with the number  of
     such shares and the date of issue, shall be entered  on
     the  Corporation's books.  All certificates surrendered
     shall be cancelled and no new certificates issued until
     the  former certificates for the same number of  shares
     shall  have been surrendered and cancelled,  except  as
     provided for herein.
     
     . . . .
     
     [T]ransfers of stock shall be made only upon the  books
     of  the  Corporation  .  .  . upon  the  surrender  and
     cancellation  of  the certificate or  certificates  for
     such  shares properly endorsed and the payment  of  all
     taxes due thereon. . . .
     
AR at Ex. 8.

      Stock  Certificate Number 1, representing 200  shares,  was
issued in the name of Patricia Salim Ahmad on April 18, 1994.  On
the  reverse  side  of  the certificate is an  endorsement  which
purports   to  sell,  assign,  and  transfer  the  shares.    The
endorsement is signed by Patricia S. Ahmad but does  not  bear  a
date,  is not witnessed, does not enumerate the number of  shares
to  be transferred, and does not identify the transferee by name.
[3] AR at Ex. 9.  See Appendix A.  Aim's stock register lists Ms.
Ahmad  as  the holder of 200 shares of stock issued on April  18,
1994, and represented by Certificate Number 1.  The register does
not  indicate that those shares were ever transferred.  Id.   See
Appendix  B.   Further,  the page reserved  for  cancelled  stock
certificates shows the original issue to Ms. Patricia Salim Ahmad
but  does  not reflect that the shares were ever transferred,  or
that Certificate Number 1 was ever surrendered to Aim, or that  a
new  certificate  was  issued to another  individual.   Id.   See
Appendix  C.  The stock register also shows that Mr. Iqbal  Ahmad
was  issued  Certificate Number 3, representing  100  shares,  on
September  14,  1994.   Similarly the  stock  register  does  not
indicate  that those shares were ever transferred. [4]  Id.   See
Appendices B & D.

                     Position of the Parties
                                
       First,   Aim  contends  that  Mr.  Ahmad  is  economically
disadvantaged, and that the SBA's conclusion to the  contrary  is
arbitrary  and capricious because it ignored facts  contained  in
documents  supporting  that conclusion submitted  by  Mr.  Ahmad.
Second, Aim contends that  Mr.  Ahmad  owns 100% of Aim because he
owns  100%  of  its issued  and  outstanding  shares, and that  the
SBA's  focus  on authorized shares, rather than on issued and
outstanding  shares, led to the arbitrary and capricious conclusion
that Mr. Ahmad did not own 51% of Aim.

     Third, Aim asserts that the SBA's conclusion that the number
of   directors  of  Aim  is  inconsistent  with  the  number   of
shareholders  is  arbitrary and capricious because  the  evidence
establishes that Aim amended its by-laws on December 27, 1996, to
reduce the number of directors to one, consistent with the number
of   shareholders-one.   Finally,  Aim  argues  that,  for  these
reasons,  Aim  is  eligible  for the  8(a)  program.   The  SBA's
determination   denying   Aim's  admission   is   arbitrary   and
capricious.

     The SBA contends it correctly denied Aim's 8(a) application.
It  asserts  it  reasonably determined that  Mr.  Ahmad  was  not
economically   disadvantaged,  that  Mr.   Ahmad   did   not   un
conditionally own 51% of Aim's stock, and that Ms. Patricia Ahmad
is  the  majority shareholder of a company in the same or similar
line  of business as Aim.  For these reasons, the SBA argues that
it   reasonably  determined  that  Aim  failed  to  satisfy   the
requirements for admission into the 8(a) program.
                                
                           Discussion
                                
                                I
                      Economic Disadvantage
                                
      Among  the requirements for admission into the 8(a) program
is  that  the  socially  disadvantaged owners  of  the  applicant
concern also must be economically disadvantaged.  See  13  C.F.R.
Sections 124.101, 124.106.  Economically disadvantaged individuals are:

     socially  disadvantaged individuals  whose  ability  to
     compete in the free enterprise system has been impaired
     due  to diminished capital and credit opportunities  as
     compared  to  others  in the same or  similar  line  of
     business  who are not socially disadvantaged, and  such
     diminished  opportunities have precluded or are  likely
     to   preclude   such   individuals  from   successfully
     competing in the open market.

13 C.F.R. Section 124.106(a)(1)(i).

     In assessing economic disadvantage, the SBA examines factors
that  fall  into  three  general categories:   (1)  the  personal
financial  condition  of  each individual claiming  disadvantaged
status, including that individual's access to credit and capital;
(2) the financial condition of the applicant concern; and (3) the
applicant  concern's  access  to credit,  capital,  and  markets.
13  C.F.R. Section 124.106(a)(2).  Here, there are three economic
disadvantage  issues.  First, whether Mr. Ahmad's total  personal
assets  preclude a finding of economic disadvantage.   13  C.F.R.
Section 124.106(a)(2)(i).  Second, whether a comparison of  Aim's
business  financial  condition to other  firms  in  the  same  or
similar line of business would preclude a finding that Mr.  Ahmad
is economically disadvantaged.   13 C.F.R. Section 124.106(a)(2)(ii).
Third, whether Mr. Ahmad's ability to compete  in the free enterprise
system has been impaired  due  to diminished  capital and credit
opportunities,  when  compared  to those  who  are  not socially
disadvantaged.  13  C.F.R.  Section 124.106(a)(1)(i).
     
     The  SBA concluded that, because Mr. Ahmad's personal assets
totaled  $1,679,589, he was not economically disadvantaged.   Aim
asserts  that  the SBA's calculation of Mr. Ahmad's total  assets
was  arbitrary  because  it  ignored  facts  which  bear  on  the
calculation and would support a finding of economic disadvantage.
Specifically,  Aim  argues  that  the  SBA  counted  Mr.  Ahmad's
residence and equity in Aim as assets, and failed to consider the
residential  mortgages, the firm's notes  payable,  or  that  the
market  value of a small company such as Aim should  be  reduced.
Appeal Petition at 4.  This assertion is without merit because it
erroneously  attempts  to equate the total personal  assets  test
with the net worth test. [5]

      The  calculation  of personal assets  is  distinct  from  a
calculation  of personal net worth.  The Small Business  Act  and
the regulations recognize the differences between "net worth" and
"total assets," and require the SBA to consider both factors when
evaluating  an  individual's economic  disadvantage.   15  U.S.C.
Section  637(a)(6)(A) ("In determining the degree  of  diminished
credit  and  capital opportunities the [SBA] shall consider,  but
not  be  limited  to, the assets and net worth of  such  socially
disadvantaged   individual.")   (emphasis   added);   13   C.F.R.
Section  124.106(a)(2)(i) ("The specific factors to be considered
include  .  .  .  total fair market value of all assets  and  the
individual's personal net worth.") (emphasis added).

     Property  excluded from "net worth" calculations is included
in  "total  assets" calculations.  Matter of Pride  Technologies,
Inc.,  SBA  No.  557 (1996).  Pride held that the SBA  reasonably
found the individual not economically disadvantaged, despite  his
low  personal  net  worth, because his personal  assets  of  $4.1
million  were  excessive.  Id. at 10.  In   SRS  Technologies  v.
United States, 843 F. Supp. 740, 747 (D.D.C. 1994) the court held
the  SBA properly found that an individual's total assets of $4.6
million precluded economic disadvantage, despite low personal net
worth.

      A  finding  that  Mr. Ahmad's total assets were  $1,679,589
cannot, by itself, lead to the conclusion that Mr. Ahmad  is  not
economically disadvantaged.  The SBA must explain why it  reached
its  conclusion  that  such  an amount  precludes  a  finding  of
economic disadvantage.  For example, the SBA did not compare  Mr.
Ahmad's  total assets with those of other entrepreneurs or  other
American taxpayers to determine if they are excessive.  Also, Mr.
Ahmad's total assets are far below the amounts previously held to
be  excessive.  See Pride, SBA No. 557 at 10 ($4.1 million);  SRS
Technologies,  843  F. Supp. at 747 ($4.6  million).   Absent  an
explanation  of  why total assets of $1,679,589 led  the  SBA  to
conclude that Mr. Ahmad was not economically disadvantaged, there
is   no  rational  connection  between  that  finding  and   that
conclusion.  Matter of Tower Communications, SBA No.  587  (1997)
(holding  that  the  SBA  must  explain  why  total  assets   are
indicative  of the individual's lack of economic disadvantage;  a
finding  that  total assets amounted to $1,260,971  alone  cannot
lead  to  a  conclusion that an individual  is  not  economically
disadvantaged).  Accordingly, the SBA's evaluation of Mr. Ahmad's
total assets is arbitrary and capricious.

      The SBA's comparison of Aim with other firms in the same or
similar   line  of  business  also  fails  to  comply  with   the
requirements   of  13  C.F.R.  Section  124.106(a)(2)(ii).    The
regulations  define "same or similar line of  business"  as  "all
business  activities within the same two-digit 'Major  Group'  of
the  Standard Industrial Classification (SIC) System."  13 C.F.R.
Section 124.100.  Here, the SBA incorrectly used Aim's four-digit
SIC  code,  1542,  rather  than  the  two-digit  Major  Group  of
industries  found in the SIC Manual.  Thus, the SBA compared  Aim
with  the  wrong class of similar firms.  This defective analysis
of  Aim's  business financial condition is arbitrary, capricious,
and contrary to law. [6] Pride, SBA No. 557 at 7; Matter of Super
Solutions Corporation, SBA No. 461 at 15 (1994).

      Despite the SBA's improper assessment of Mr. Ahmad's  total
personal  assets  and Aim's business financial  condition,  other
evidence  in the record establishes Mr. Ahmad's lack of  economic
disadvantage.   It  is  significant  that  Mr.  Ahmad,   on   two
occasions, responded "No" to the following statement on his  8(a)
application (SBA Form 1010A):
     
     ECONOMIC DISADVANTAGE
     
     Because  of  racial  and/or  ethnic  prejudice,  and/or
     cultural  bias,  my  ability to  compete  in  the  free
     enterprise  system has been impaired due to  diminished
     capital and credit opportunities as compared to  others
     in   the  same  business  area  who  are  not  socially
     disadvantaged.   (Same business area  in  this  context
     means same line of business and same competitive market
     area).

AR at Ex. 3 and 10.

      Mr.  Ahmad  first  responded "No"  on  Aim's  initial  8(a)
application  (SBA Form 1010A).  AR at Ex. 10.  The  SBA,  in  its
initial  denial of that submission, advised Aim that one  of  the
reasons it concluded Mr. Ahmad was not economically disadvantaged
was  because  of the "No" response.  AR at Ex. 4.  Yet  in  Aim's
request for reconsideration, it submitted a revised Form 1010A in
which  Mr.  Ahmad, for a second time, answered "No" to  the  same
statement.   AR  at Ex. 3.  Further, nothing in  the  AR  or  the
Appeal Petition indicates that Mr. Ahmad retracted the statement,
modified  the response in any way, or claimed that  there  was  a
misunderstanding  of  the  statement's import.   The  inescapable
conclusion  is Mr. Ahmad meant what he said-that his  ability  to
compete  in the free enterprise system has not been impaired  due
to diminished capital and credit opportunities because of racial,
ethnic, or cultural prejudice.

      Mr.  Ahmad's responses are admissions that his  ability  to
compete  in  the  free enterprise system has not  been  impaired.
Further,  they are voluntary admissions against his own interest.
Accordingly, it was appropriate for the SBA both to  accord  them
great  weight  in  assessing whether Mr.  Ahmad  is  economically
disadvantaged, and to use them as a basis for concluding that Mr.
Ahmad is not economically disadvantaged.

      The  regulations make clear that the 8(a)  program  is  not
intended  for individuals who have not experienced, or  who  have
overcome  impediments to obtaining access to  financing,  markets
and   resources.   13  C.F.R.  Section  124.106(a)(1)(ii).   This
expression of the 8(a) program's intent excludes persons who have
not  experienced diminished credit and capital opportunities. See
Matter  of Shashikant P. Savla, d/b/a Kabil Associates,  SBA  No.
375 at 15 (1991).
     
     The  statement on the SBA Form 1010A mirrors the  definition
of  economic  disadvantage  in the regulations.   See  13  C.F.R.
Section  124.106(a)(1)(i).  By admitting in his 8(a)  application
that his ability to compete in the free enterprise system has not
been impaired, the SBA can reasonably conclude that Mr. Ahmad  is
not  economically  disadvantaged.  The SBA  need  not  have  gone
further  to examine the factors that it uses to determine whether
there  is  an impaired ability to compete in the free  enterprise
system.

      The  burden is upon Aim to establish by a preponderance  of
the  evidence  that  Mr.  Ahmad  is  economically  disadvantaged.
Matter of Advanced Engineering Associates, Inc., SBA No. 382 at 9
(1991).  Aim failed to meet that burden, and the SBA's conclusion
that Mr. Ahmad was not economically disadvantaged is a reasonable
one.

      Even though the SBA acted arbitrarily and capriciously with
respect  to  its assessment of Mr. Ahmad's total personal  assets
and  Aim's business financial condition, its conclusion that  Mr.
Ahmad  is  not  economically disadvantaged  nonetheless  must  be
upheld  because the SBA properly reached its ultimate  conclusion
that Mr. Ahmad is not economically disadvantaged.  See Pride, SBA
No. 557 at 7.

                               II
                            Ownership
                                
      Before  an applicant may be admitted into the 8(a) program,
it  must establish that it is at least 51% unconditionally  owned
by   a   socially  and  economically  disadvantaged   individual.
13  C.F.R. Section 124.103.  In the case of a corporate applicant
such  as  Aim, "51 percent of each class of voting stock  and  51
percent of the aggregate of all outstanding shares of stock  must
be   unconditionally  owned"  by  a  socially  and   economically
disadvantaged individual.  13 C.F.R. Section 124.103(b).

      The  SBA  concluded that Aim did not establish Mr.  Ahmad's
unconditional ownership of at least 51% of the applicant concern.
This  conclusion was based, in part, on Stock Certificate  Number
1.   The certificate shows the shares were issued to Ms. Patricia
Ahmad, the certificate was never properly and completely endorsed
over  to  Mr. Ahmad, and Aim's stock register does not  show  any
transfer  of  Ms.  Ahmad's shares to Mr. Ahmad.  See  Appendices.
Even though the purported endorsement on the stock certificate is
signed  by  Ms.  Ahmad and contains Mr. Ahmad's  social  security
number,  it  is not witnessed, does not contain the name  of  the
transferee,  and  does  not state the  number  of  shares  to  be
transferred.   These  deficiencies  coupled  with  the  lack   of
evidence  of  an  effective transfer on the stock  register,  the
absence  of  a completed stock transfer page for the certificate,
and the lack of evidence that the certificate was cancelled and a
new  certificate issued to Mr. Ahmad, all cast doubt  on  whether
there was an effective transfer.

     Further,  Aim's by-laws require that the shareholder's  name
be   entered  on  the  corporation's  books.   When  shares   are
transferred, the stock certificate must be surrendered to Aim for
cancellation.  No new certificates may be issued until the former
certificates  for the same number of shares are  surrendered  and
cancelled.   Transfers of stock may be recorded  on  Aim's  books
only  after  the shares have been properly endorsed.   Here,  the
transfer  of Ms. Ahmad's shares failed to comply with  Aim's  by-
laws  regarding the transfer of its shares.  See  AR  at  Ex.  8.
Accordingly, based upon this evidence in the record, the SBA  was
reasonable  in  its  conclusion that  Aim  did  not  prove  by  a
preponderance of the evidence that Mr. Ahmad unconditionally owns
51% of Aim's stock because Aim's stock certificates and corporate
records  do not establish that he owned the shares he claimed  to
be his. [7]
     
                               III
                             Control

      Additionally, a corporate applicant must establish that the
socially and economically disadvantaged owner controls its  board
of  directors.   13 C.F.R. Section 124.104(b).   The  regulations
prohibit  nondisadvantaged  individuals  from  exercising  actual
control or having the power to control the applicant concern  and
from  being  an officer, director, or more than a  10%  owner  or
stockholder  of  another  firm in the same  or  similar  line  of
business   as   the   applicant  concern.   13   C.F.R.   Section
124.104(c)(1), (2).

      When  the  SBA  initially denied Aim's 8(a) application  it
found  that Mr. Ahmad's spouse, Ms. Patricia Ahmad, was  the  51%
owner of Aim Construction Corporation, a firm in the same line of
business  as the applicant concern.  That conclusion is supported
in the record and the SBA provided Aim the opportunity to present
evidence that Aim Construction Corporation was dissolved.  AR  at
Ex.  4.   Subsequently, in its determination on  reconsideration,
the  SBA found that Aim had failed to present sufficient evidence
to  satisfy  the  SBA's concerns regarding Ms.  Patricia  Ahmad's
involvement in Aim Construction Corporation.  AR at Ex. 1.  Thus,
as  it  also  found  that  Ms. Ahmad was  a  shareholder  in  the
applicant  concern, she could not be a shareholder in both  firms
without   violating  the  restriction  imposed   by   13   C.F.R.
Section 124.104(c)(2).

      Aim's  request  for reconsideration of  the  SBA's  initial
denial, however, contains a letter from the law firm representing
Ms.   Patricia  Ahmad  with  respect  to  her  ownership  in  Aim
Construction Corporation.  The letter states: "To the best of our
knowledge, Aim Construction Corp. remains dormant."  AR at Ex. 3,
Section  VI.   The SBA's conclusion, that the evidence  fails  to
support the conclusion that Ms. Ahmad does not have more  than  a
10%  ownership  in Aim Construction Corporation,  is  reasonable.
The fact that the corporation may be dormant begs the question of
whether Ms. Ahmad is still a shareholder of the corporation.  The
regulations   do  not  provide  for  an  exception  for   dormant
corporations.   Because  the corporation  could  lawfully  become
active  again,  the  SBA has a legitimate concern  regarding  Ms.
Ahmad's ownership in it, because it is in same or similar line of
business  as  Aim.  Accordingly, the SBA correctly concluded  Ms.
Ahmad  had more than a 10% ownership interest in Aim Construction
Corporation  and  that, as a shareholder also  in  the  applicant
concern,  her ownership interest violates the restriction  in  13
C.F.R. Section 124.104. [8]

                               IV
                       Standard of Review
                                
      The  determination  of the SBA must be sustained  unless  a
review of the written administrative record demonstrates the  SBA
acted arbitrarily, capriciously, or contrary to law in concluding
Mr.   Ahmad  was  not  economically  disadvantaged  and  did  not
establish   his   requisite  ownership   of   Aim.    13   C.F.R.
Section  124.210(h)(1).  Such a review is  narrow  and  does  not
permit me to substitute my own judgment for that of the SBA.   My
review  must examine whether the SBA considered all of the  facts
presented  as  well as the laws and regulations which  guide  the
decision  making process.  Then, I must determine  whether  there
was  a  clear error of judgment by the SBA in making its decision
before  I  can  find the SBA acted arbitrarily, capriciously,  or
contrary  to  law.  See Motor Vehicle Mfrs. Ass'n of  the  United
States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.  29,  43
(1983).

     A clear error of judgment can be found if the SBA:  fails to
properly apply the law and regulations to the facts of the  case;
fails  to consider an important aspect of the problem; offers  an
explanation  for  its  determination that runs  contrary  to  the
evidence;  or  provides an implausible explanation that  is  more
than a difference in my views and those of the SBA.  In sum,  the
SBA  must  articulate a satisfactory explanation for its  action,
including a rational connection between the facts found  and  its
determination.  See id.

      After a careful review of the entire written administrative
record,  I  find  the SBA's denial of Aim's 8(a)  application  is
fully supported in the record and is reasonable.  I conclude that
the  SBA's  decision  is  based on the  entire  record,  that  it
considered all of the relevant regulatory and statutory  factors,
and  it made no clear error of judgment.  I further find Aim  has
not  established  its  eligibility for admission  into  the  8(a)
program.   Accordingly, the SBA's decision cannot  be  considered
arbitrary, capricious, or contrary to law. [9]

                           Conclusion

      Respondent  Small  Business Administration's  determination
denying  8(a)  program entry to Petitioner Aim  Construction  and
Contracting Corporation is NOT ARBITRARY, CAPRICIOUS, OR CONTRARY
TO   LAW.    See  15  U.S.C.  Section  637(a)(9)(C);  13   C.F.R.
Section 124.210(h)(1).

       This   is   the  final  decision  of  the  Small  Business
Administration  and is binding upon all parties, including  those
within the employ of the Agency.  15 U.S.C. Section 637(a)(9)(D);
13 C.F.R. Section 124.210(i).

                              ______________________________
                              RICHARD S. ARKOW
                              Administrative Law Judge

_________________________

       [1]  Small Business Act of 1958, Section 8(a), as amended,
15  U.S.C.  Section 637(a); 13 C.F.R. part 124.  The  purpose  of
section  8(a)  is to "promote the business development  of  small
business   concerns  owned  and  controlled   by   socially   and
economically disadvantaged individuals so that such concerns  can
compete  on an equal basis in the American economy."   15  U.S.C.
Section 631(f)(2)(A).
      [2] See 13 C.F.R. Section 124.105(b)(1).
      [3] Mr. Ahmad's social security number is listed in a block
requesting the identifying number of the assignee.
      [4]  The  stock register shows that Certificate Number  2,
representing  100  shares, was issued to Manzoor  Ahmad  also  on
September 14, 1994, but was transferred to Aim on June 30,  1994.
There is no explanation for the discrepancy in the dates shown in
the  register.  The stock certificate was properly endorsed  over
to Aim and was marked cancelled.  AR at Ex. 3.  See Appendices  B
& E.
     [5]  An  applicant's  personal  net  worth  cannot  exceed
$250,000.   In  determining  net  worth  for  purposes  of   8(a)
eligibility,  the  SBA  excludes the ownership  interest  in  the
applicant  concern  and  the  equity  in  his  primary   personal
residence.  13 C.F.R. Section 124.106(a)(2)(i)(B).
     [6]  While  the  SBA provided Aim with the  Robert  Morris
Agency  ratios  for SIC code 1542 to explain its  conclusion,  it
withheld  from  the AR, as privileged, its calculation  of  Aim's
financial  ratios.  Without this information, Aim was  unable  to
contest the accuracy of the SBA's financial conclusions.  Because
I find that the SBA acted arbitrarily, capriciously, and contrary
to law on the issue of Aim's business financial condition, I need
not  decide if any remedial action is necessary.  See  Matter  of
Shashikant  P. Savla, d/b/a Kabil Associates, SBA No.  375  at  9
(1991)  (SBA  included  applicant's ratios in  the  determination
letter).
    [7] It is immaterial whether, under New York law, Mr. Ahmad
was entitled to have the shares transferred to him.  Further,  it
is also immaterial who ultimately is found to be the lawful owner
of  the shares.  What is material to the disposition of this case
is   whether,  under  SBA  regulations,  Aim  established  by   a
preponderance of the evidence that Mr. Ahmad unconditionally owns
51%  of  Aim's shares.  The SBA, in its evaluation of Aim's  8(a)
application,  need  go  no  further than  to  examine  the  stock
certificates and other corporate documents provided  by  Aim,  to
decide  who owns Aim.  These documents provide the best  evidence
of ownership and outweigh any other evidence to the contrary.
   [8]  This  conclusion is premised on the SBA's  conclusion
that  Ms. Ahmad did not effectively divest herself of her  shares
in the applicant concern.
   [9] I have considered the other grounds for appeal and find
them  to  be  without merit.  Because they are  not  decisionally
significant, I have not addressed them in this decision.

                                           Posted: November, 1997