Rep. Jim Hagedorn presses Small Business Administration after alleged discrimination in restaurant aid

EXCLUSIVE – Rep. Jim Hagedorn, ranking member of the House Subcommittee on the Underserved, Agricultural and Rural Business Development, pushed the Small Business Administration for answers about an allegedly discriminatory restaurant relief fund in a letter on Tuesday.

"The Restaurant Revitalization Fund launched by SBA in May shut out thousands of American small businesses from receiving aid simply because they are not viewed as a ‘priority’ by the current administration. Now more than ever, SBA’s programs are crucial to the success of American small businesses and should be open to all entrepreneurs in need, not just those that fall under a certain group or category," Hagedorn told Fox News. "To be clear, saving spots for business owners that have certain racial, economic or social qualities is reverse discrimination and un-American."

SBA GRANTS FOR RESTAURANTS OWNED BY WOMEN, MINORITIES HALTED BY NEW LAWSUIT

Hagedorn, a Minnesota Republican, demanded information about how SBA plans to alter programs in the wake of President Biden's Executive Order 13985, titled "Advancing Racial Equity and Support for Underserved Communities Through the Federal Government."

"The SBA's programs are absolutely vital to entrepreneurs, and must be open to all entrepreneurs without separating applicants into preferred categories, special classifications and prioritized groups," Hagedorn wrote to SBA Administrator Isabel Guzman. "These programs can mean a small business' success or failure, and should not hold places for some with certain racial, social or economic qualities but not others."

"Although this Executive Order claims a noble purpose and purports to mandate equity in federal government decisions, its effect may be just the opposite – in fact mandating legal preferences for certain classes of individuals and essentially instituting reverse discrimination," Hagedorn wrote.

Hagedorn's requests included "any and all memoranda" related to possible changes to SBA's programs, policies and procedures under Executive Order 13985.

The distribution of pandemic relief money to more than 2,900 restaurant businesses owned by women, veterans and disadvantaged people was halted last week following lawsuits by several White business owners. 

Restaurants in Tennessee and Texas alleged discrimination by the Restaurant Revitalization Fund, part of President Biden's American Rescue Plan. The program – which has delivered about $27 billion in relief funds to more than 100,000 restaurants – included a three-week period in May during which the SBA prioritized processing and funding requests from minority-owned businesses. 

A conservative legal group founded by Stephen Miller and Mark Meadows, aides to former president Donald Trump, filed a lawsuit in Texas on behalf of the owners of the restaurant Blessed Cajuns, arguing the Biden administration's attempt to prioritize aid based on gender and race is unconstitutional, according to Reuters.

A preliminary injunction issued by a court in Texas states that the SBA may continue approving funds for non-priority applicants, but cannot give aid to 2,965 "priority" applicants.

"The SBA is not able to pay 2,965 priority applicants – including yourself – who were previously approved and notified of their approval," the agency said in a letter to affected applicants, a copy of which was obtained by Nation's Restaurant News. "The SBA will not pay these claims because the legal conclusions in these court rulings would preclude payment." 

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A separate lawsuit was brought forward by the Wisconsin Institute for Law & Liberty on behalf of Jake's Bar and Grill in Harriman, Tennessee, which is owned by Antonio Vitolo. 

"Given the limited pot of funds, this puts White male applicants at significant risk that, by the time their applications are processed, the money will be gone," Vitolo, who is White, argued in the lawsuit.

The fund launched May 3, and for the first 21 days, was only open to applicants from women, individuals who are economically or socially disadvantaged, and veterans. By May 15, the SBA said it had received 147,000 applications from "priority" businesses seeking $29 billion in relief funds.

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"While we cannot comment on the specifics of the litigation, it is the north star of the U.S. Small Business Administration to assist underserved small businesses, and we’ll continue to do so," an SBA spokesperson said in a statement. "We remain committed to doing everything we can to support disadvantaged businesses in getting the help they need to recover from this historic pandemic and restore livelihoods." 

FOX Business' inquiry to SBA was not returned at the time of publication.

Fox News' Kelly Laco and FOX Business' Megan Henney contributed to this report.