A top GOP lawmaker is calling on the Department of Defense to pause no-bid contracts through a small-business program for socially and economically disadvantaged companies, noting a scandal in which Native Hawaiian defense contractor Christopher Dawson was accused of cheating it for personal gain.
This week Sen. Joni Ernst, chair of the Senate Small Business Committee, sent a letter to Defense Secretary Pete Hegseth calling contracts awarded through the Small Business Administration’s 8(a) program a “fraud magnet.”
She specifically cited Dawson, whose offices in downtown Honolulu were raided by federal agents in 2023 as part of an embezzlement probe. Ernst was particularly worried that Dawson’s companies continued to receive defense contracts while under investigation, including a $3.4 million award from the Navy to one of his firms, Dawson MCG, just days after federal agents entered his offices to confiscate employee cellphones and computers. Civil Beat and ProPublica published an in-depth article on Wednesday about the allegations against Dawson and the SBA’s actions, and Civil Beat earlier reported on the Department of Justice’s investigation into him.
“I am troubled by a company under active federal investigation continuing to receive high-dollar, no-bid contracts from the Pentagon, despite federal actions indicating major concerns regarding the firm’s ‘good character,’ which is a required eligibility criterion for 8(a) participants,” wrote Ernst, who represents Iowa.
Ernst cited Civil Beat’s reporting about the DOJ accusing Dawson and other executives of abusing the 8(a) program by using shell companies, direct company transfers and “hollow invoices” to line their own pockets, including by purchasing luxury homes in Hawaii and Florida. SBA records obtained by Civil Beat and ProPublica show he was also spending lavishly on private jets and Porsches and pumping millions into his favorite hobby, polo.
Prosecutors said in court documents that, between 2015 and 2021, the total amount of money diverted into one of Dawson’s shell companies was $17 million, nearly double what was sent to Dawson’s nonprofit Hawaiian Native Corp. for the benefit of Native Hawaiians.
I am troubled by a company under active federal investigation continuing to receive high-dollar, no-bid contracts from the Pentagon.
Sen. Joni Ernst in a letter to Defense Secretary Pete Hegseth
The SBA said it could not directly comment on the Dawson case, citing the ongoing investigation, but said it “welcomes the partnership of all agencies in the effort to stop fraud and abuse within the 8(a) Program.” The agency is conducting an audit of the program and said it “looks forward to identifying bad actors, holding them accountable, and restoring a contracting program built on merit instead of arbitrary DEI agendas.”
The 8(a) program was born out of the civil rights era and was designed to help business owners from historically disadvantaged groups, including racial and ethnic minorities, win federal contracts with limited or no competition.
Dawson had built an empire off of the special privileges granted to him through the program, and via the Hawaiian Native Corp. he owned a suite of companies that have won more than $2 billion in contracts. His companies have performed a wide range of work for the government, from sweeping the Arizona desert for unexploded munitions to prepping grave sites for military burials on Oahu.
Those contracts, however, came with a catch. He was supposed to use his profits to uplift Native Hawaiians. Federal prosecutors now suggest in court records that he broke that promise.
Dawson was fired by his own company, and he died by suicide in December 2024, but prosecutors are pursuing an asset forfeiture case against four properties they say he purchased with stolen funds. The DOJ is also continuing its criminal investigation into other possible suspects, according to court records.
Ernst called on Hegseth to “examine for potential fraud” the Dawson MCG contract and other 8(a) awards to the company. She said she wanted the Pentagon’s review to also include 8(a) contracts awarded to the Hawaiian Native Corp.’s other subsidiaries, which operate under the name DAWSON.
The Hawaiian Native Corp. and DAWSON officials responded to Ernst’s letter with their own letter to Hegseth in which they said the federal investigation did not target the Hawaiian Native Corp. or its companies but rather was focused on certain former employees. They said the senator is “simply incorrect” and that the Hawaiian Native Corp. and its companies have “fully cooperated with both the DOJ and SBA to address issues identified by either agency in their investigations.”
“It is important to note that HNC and its portfolio of operating companies have a strong performance record as a federal government contractor, and there has not been any suggestion otherwise by any law enforcement or regulatory agency,” the letter states.
Dawson wasn’t Ernst’s only concern. In the letter she urged Hegseth to do a more thorough review of all 8(a) no-bid and set-aside contracts awarded by his agency dating back to fiscal year 2020 to look for any violations of law or SBA rules.
Ernst sent similar letters to 21 other federal agencies, each one including an example of an 8(a) contract that the senator found problematic.
In her letter to Transportation Secretary Sean Duffy, she called out Echelon Services LLC, a firm owned by the Hawaii Pacific Foundation, which like the Hawaiian Native Corp., is a Native Hawaiian organization that under SBA rules is required to use company profits to support Native Hawaiians.
Ernst accused the foundation of having two different firms performing the same type of work for the government while participating in the 8(a) program, something she said is a potential violation of SBA rules.
Jeanine DeFries, president and CEO of the Hawaii Pacific Foundation, refuted Ernst’s allegations, saying that SBA rules allow those companies to do the same work as long as they are part of a joint venture.
“We can also confirm,” DeFries said, “that we were not contacted by the senator’s or the committee’s offices prior to receiving the letter.”
Ernst’s letters are part of a broader Republican-led push to end the kind of diversity, equity and inclusion efforts at the heart of the 8(a) program.
In June, Kelly Loeffler, President Donald Trump’s pick to lead the SBA, announced a full-scale audit of the program after the owners of two 8(a) firms pleaded guilty to federal charges of taking part in a $550 million bribery scheme involving a U.S. Agency for International Development contracting officer.
Then in October she launched an investigation into the Susanville Indian Rancheria and one of its firms, ATI Government Solutions, after James O’Keefe, a right-wing political activist, published undercover footage purporting to show company employees admitting they used the 8(a) program to win contracts and pass them along to other firms.
When announcing the investigation on X, Loeffler attacked the program she’s now charged with running. “Like every other government program rooted in DEI,” she said, “the 8(a) Program is rife with grift and fraud.” Two days later Loeffler again took to X to announce she had suspended ATI Government Solutions and three of its executives from contracting with the federal government.
ATI did not respond to calls and messages seeking comment.
The Treasury Department followed up in November on its own concerns about the company by initiating an audit of $9 billion in preference-based contracts, an inquiry that the agency said would examine potential misuse of the 8(a) program. And just last week, Loeffler ordered all 8(a) participants to submit detailed financial statements to the agency or risk losing their contracting benefits.
Ernst and others have tried to lay blame on the Biden administration, with the senator saying in her letters that the former president’s goal of expanding federal contracting opportunities for minority business owners set the stage for potential fraud and abuse.
At the same time, she acknowledged that 8(a) program flaws, which include “sloppy oversight and weak enforcement measures,” have “raised alarm bells for decades.”
Yet Linda McMahon, Trump’s SBA administrator during his first term, praised Dawson and his companies during a 2019 senate oversight hearing, saying “they bring so many businesses in and support so many businesses.” McMahon, who is now the secretary of education, did not respond to a request for comment.
