Disabled Navy Veteran Sues Small Business Administration Over Racially Discriminatory Contracting Program

By Matthew Vadum
Matthew Vadum
Matthew Vadum
Matthew Vadum is an award-winning investigative journalist and a recognized expert in left-wing activism.
January 25, 2023Updated: January 30, 2023

A disabled Navy veteran who owns a small business is suing the U.S. Small Business Administration (SBA) in federal court over a contracting program that excludes nonminorities from participating.

Marty Hierholzer filed suit (pdf) recently in the U.S. District Court for the Eastern District of Virginia against the SBA, claiming that his constitutional rights were violated.

Hierholzer’s father served 26 years in the U.S. Navy—he was at Pearl Harbor during the World War II attack. Hierholzer joined the Navy out of high school and became a Navy deep-sea diver. By 2002, he had retired after 22 years of service, with honors, the rank of master chief diver, and service-related disabilities.

Commercial divers have an occupational fatality rate that’s 40 times the national average for other professions. Not surprisingly, Hierholzer suffered injuries to his knees, lower back, and shoulders and has decreased mobility. He has hearing loss and tinnitus. Veterans Affairs rated him 60 percent disabled, according to the legal complaint.

Hierholzer decided to go into business serving those who still serve. For four years, he sold diving supplies for a government defense contractor. Then in 2006, he founded MJL Enterprises, a small business that employs 20 people and contracts with federal agencies to provide office supplies, maintenance products, and equipment to Veterans Affairs (VA) hospitals and military facilities.

Hierholzer qualified for a VA program for disabled veteran-owned businesses and then turned to the SBA for its 8(a) program that sets aside federal contracts for economically and socially disadvantaged small businesses.

But the program’s definition of socially disadvantaged stresses race, preferring black and Hispanic applicants, not white individuals such as Hierholzer, and his 8(a) application was rejected. He applied again and was again rejected. His appeals were denied.

Wen Fa, a senior attorney at the Sacramento-based Pacific Legal Foundation, a national public interest law firm, said the case is “not only about racial discrimination but also about the unfettered discretion of agencies to create arbitrary racial groups without any sort of express guidance from Congress.”

The way the SBA determines social advantage “is by race,” the lawyer told The Epoch Times in an interview.

“Members of minority groups are presumed socially disadvantaged, while nonminority individuals who own businesses are presumed to be not socially disadvantaged,” he said.

Hierholzer routinely applies for contracts with the SBA, and he’s awarded some of those contracts, Fa said.

“The problem is the Small Business Administration sets aside certain contracts only for socially and economically disadvantaged businesses, so he’s not even eligible to be awarded those contracts,” the attorney said.

“It’s not a minority-owned business, and therefore, he doesn’t qualify for the special dispensations of the section 8(a) program.”

Hierholzer told The Epoch Times in a separate interview that he’s taking action because the SBA unfairly discriminated against him and his business.

The SBA advertises that the program is for preferred minority groups, but “it also clearly advertises that it’s for disabled individuals,” he said.

“So on the basis of my service disabled ratings … we applied for it several times and were denied several times,” Hierholzer said.

When the SBA turned the application down, “they acknowledged the disabilities, but they said that the disability did not subjectively in their mind prove any type of disadvantage, social disadvantage.”

Hierholzer said he was “optimistic that the lawsuit will bring attention to the struggle of service-disabled veterans and wounded warriors who have served their country … [and] are told by the Small Business Administration that there is a program that will help them get their businesses started and thrive that they are eligible for.”

“And then, when the service-disabled veterans and wounded warriors apply for this program, the Small Business Administration does not give them the consideration they advertise that they will give them,” he said.

Representatives for the SBA didn’t respond by press time to a request by The Epoch Times for comment.

Correction: An earlier version of this story incorrectly stated that the SBA turned down Hierholzer’s application for a program that benefits service-disabled veteran-owned small businesses. In fact, he qualified for the program. The Epoch Times regrets the error.

Matthew Vadum
Matthew Vadum is an award-winning investigative journalist and a recognized expert in left-wing activism.