Leading Republicans are calling on the Pentagon to suspend no-bid contracts through the Small Business Program for socially and economically disadvantaged businesses, pointing to a scandal in which Native Hawaiian defense contractor Christopher Dawson is accused of cheating for personal gain.
Sen. Joni Ernst, chair of the Senate Small Business Committee, sent a letter to Defense Secretary Pete Hegseth this week calling contracts awarded through the Small Business Administration’s 8(a) program a “magnet for fraud.”
She specifically cited Dawson’s downtown Honolulu office being raided by federal agents in 2023 as part of an embezzlement investigation. Mr. Ernst was particularly concerned that Mr. Dawson’s companies continued to receive defense contracts while under investigation, including one of Mr. Dawson’s companies, Dawson MCG, being paid $3.4 million in bounties by the Navy days after federal agents broke into his office to seize cell phones and computers of employees. Civil Beat and ProPublica published detailed articles Wednesday about the allegations against Dawson and the SBA’s actions, and Civil Beat had earlier reported on the Justice Department’s investigation into him.
“I am troubled that a company that is under active federal investigation continues to receive high-value, no-bid contracts from the Department of Defense despite federal action expressing serious concerns about the company’s ‘good character,’ a mandatory qualification standard for 8(a) participants,” wrote Ernst, the Iowa representative.
Mr. Ernst cited a Civil Beat report in which the Justice Department accused Mr. Dawson and other executives of abusing the 8(a) program by using shell companies, direct company transfers, and “blank invoices” to line their own pockets and buy luxury homes in Hawaii and Florida. He also spent lavishly on private jets, Porsches and poured millions into his favorite hobby, polo, according to SBA records obtained by Civil Beat and ProPublica.
Prosecutors said in court documents that the total amount of funds diverted to one of Dawson’s shell companies between 2015 and 2021 was $17 million, nearly double the amount transferred to Dawson’s nonprofit Hawaiian Native Corporation for the benefit of Native Hawaiians.
It troubles me that companies that are under active federal investigation continue to receive large no-bid contracts from the Department of Defense.
Letter from Sen. Joni Ernst to Secretary of Defense Pete Hegseth
The SBA said it could not comment directly on the Dawson case due to the ongoing investigation, but said it “welcomes the cooperation of all agencies in efforts to prevent fraud and abuse within the 8(a) program.” The agency is conducting an audit of the program and “looks forward to identifying bad actors, holding them accountable, and restoring a contracting program built on merit rather than an arbitrary DEI agenda.”
The 8(a) program was born in the civil rights era and was designed to help executives from historically disadvantaged groups, including racial and ethnic minorities, win federal contracts with limited or no competition.
Dawson used the special privileges granted to him through the program to build an empire, owning a series of companies that won more than $2 billion in contracts through Hawaiian Native Corp. His company has performed a wide range of work for the government, from recovering unexploded ordnance in the Arizona desert to preparing cemeteries for military burials on Oahu.
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However, these agreements had pitfalls. He was supposed to use the profits to uplift Native Hawaiians. Federal prosecutors now suggest in court records that he broke that promise.
Dawson was fired from his company and died by suicide in December 2024, but prosecutors are pursuing an asset forfeiture case against four properties he allegedly purchased with stolen funds. The Justice Department continues to pursue criminal investigations into other suspects, according to court records.
Mr. Ernst asked Mr. Hegseth to “investigate the Dawson MCG contract and other 8(a) awards to the company for possible wrongdoing.” He said he wants the Pentagon’s review to include 8(a) contracts awarded to other subsidiaries of Hawaiian Native Corporation operating under the Dawson name.
Christopher Dawson (right) after an Army polo match held at Fort Shafter, Hawaii in 2012 to commemorate the Army’s 237th anniversary.Defense Video Information Distribution Service
Hawaiian Native Corporation and Dawson officials responded to Ernst’s letter with their own letter to Hegseth, saying the federal investigation did not target Hawaiian Native Corporation or its companies, but rather specific former employees. They said the senator’s findings are “completely incorrect” and that Hawaiian Native Corporation and its companies are “cooperating fully with both the Department of Justice and the SBA to address any issues identified by either agency in its investigation.”
“It is important to note that HNC and its portfolio of operating companies have a strong track record as federal contractors, and we have received no indication otherwise from any law enforcement or regulatory agency,” the letter states.
Dawson wasn’t Ernst’s only concern. In the letter, she urged Hegseth to more thoroughly investigate all 8(a) no-bid and set-aside agreements entered into by his agency dating back to fiscal year 2020 for violations of the law and SBA regulations.
Mr. Ernst sent similar letters to 21 other federal agencies, each containing an example of an 8(a) contract that senators found problematic.
In a letter to Transportation Secretary Sean Duffy, she blamed Echelon Services LLC, a company owned by the Hawaii Pacific Foundation. The company, like the Hawaiian Native Corporation, is a Native Hawaiian organization and is required under SBA rules to use company profits to support Native Hawaiians.
Ernst accused the foundation of having two different companies doing the same type of work for the government while participating in the 8(a) program, which she said could violate SBA rules.
Janine DeFreeze, president and CEO of the Hawaii Pacific Foundation, disputed Ernst’s claims, saying SBA rules allow these companies to do the same work as long as they are part of a joint venture.
“I can also confirm that there was no communication from any senator’s office or committee office prior to receiving the letter,” DeFreeze said.
Ernst’s letter is part of a broader Republican-led effort to end the diversity, equity, and inclusion efforts that are at the heart of the 8(a) program.
In June, Kelly Loeffler, who was nominated by President Donald Trump to lead the SBA, announced a full-scale audit of the program after the executives of two 8(a) companies pleaded guilty to federal charges for participating in a $550 million bribery scheme involving U.S. Agency for International Development contract employees.
And in October, she launched an investigation into Susanville Indian Rancheria and one of its companies, ATI Government Solutions, after right-wing political activist James O’Keefe released undercover footage purporting to show company employees admitting to using the 8(a) program to win contracts and pass them on to other companies.
Small Business Administration Secretary Kelly Loeffler at an October press conference.Aaron Schwartz/Sipa, Associated Press
In announcing his investigation into X, Loeffler attacked the program currently in charge of running it. “Like all government programs rooted in DEI, the 8(a) program is rife with scandal and fraud,” she said. Two days later, Loeffler again told X that she had suspended federal contracts with ATI Government Solutions and three of its executives.
ATI did not respond to calls and messages seeking comment.
The Treasury Department followed up on its own concerns about the company in November, launching an audit of $9 billion worth of preferential contract contracts. The investigation will examine potential abuses of the 8(a) program, the Treasury Department announced. And just last week, Loeffler ordered all 8(a) participants to submit detailed financial statements to the agency. Otherwise, you risk losing your contractual benefits.
Ernst and others are seeking to hold the Biden administration accountable, with the senator saying in a letter that the former president’s goal of expanding federal contracting opportunities for minority business owners has set the stage for potential fraud and abuse.
At the same time, she acknowledged that Program 8(a)’s flaws, including “sloppy oversight and weak enforcement actions,” have “sounded alarm bells for decades.”
But Linda McMahon, who served as SBA administrator during President Trump’s first term, praised Dawson and his companies during a Senate oversight hearing in 2019, saying, “They’re attracting so many businesses and supporting so many businesses.” McMahon, currently the education secretary, did not respond to a request for comment.
