    [Senate Hearing 117-329]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-329

        A NEW START: OPPORTUNITIES AND BARRIERS TO ENTREPRENEURSHIP FOR
              RETURNING CITIZENS AND JUSTICE IMPACTED INDIVIDUALS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP

                                     OF THE

                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION
                                   __________

                                 JULY 27, 2022
                                   __________

          Printed for the use of the Committee on Small Business and
                                Entrepreneurship

                    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE

    48-249                    WASHINGTON : 2023

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                        ONE HUNDRED SEVENTEENTH CONGRESS

                                  ----------

                     BENJAMIN L. CARDIN, Maryland, Chairman
                      RAND PAUL, Kentucky, Ranking Member
    MARIA CANTWELL, Washington           MARCO RUBIO, Florida
    JEANNE SHAHEEN, New Hampshire        JAMES E. RISCH, Idaho
    EDWARD J. MARKEY, Massachusetts      TIM SCOTT, South Carolina
    CORY A. BOOKER, New Jersey           JONI ERNST, Iowa
    CHRISTOPHER A. COONS, Delaware       JAMES M. INHOFE, Oklahoma
    MAZIE HIRONO, Hawaii                 TODD YOUNG, Indiana
    TAMMY DUCKWORTH, Illinois            JOHN KENNEDY, Louisiana
    JACKY ROSEN, Nevada                  JOSH HAWLEY, Missouri
    JOHN HICKENLOOPER, Colorado          ROGER MARSHALL, Kansas
                     Sean Moore, Democratic Staff Director
                  William Henderson, Republican Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                          Witness Prepared Statements
                                    Panel 1

                                                                       Page
    Mr. Coss Marte, CEO & Founder, CONBODY, New York, NY.............     4
    Mr. Dan Caudill, Partner & Chief Operating Officer, Caudill Seed,
      Louisville, KY.................................................    10
    Dr. Damon Phillips, Robert Steinberg Professor, Professor of
      Management, Wharton School of Business, University of
      Pennsylvania, Philadelphia, PA.................................    15
    Mr. Rob Perez, Co-Owner, DV8 Kitchen, Lexington, KY..............    23

                            Questions for the Record

    Mr. Coss Marte, Responses to questions submitted by Senator Coons
      and Senator Hirono.............................................    42
    Mr. Dan Caudill, Responses to questions submitted by Senator
      Hirono.........................................................    44
    Dr. Damon Phillips, Responses to questions submitted by Senator
      Coons and Senator Hirono.......................................    45
    Mr. Rob Perez, Response to question submitted by Senator Coons...    52

        A NEW START: OPPORTUNITIES AND BARRIERS TO ENTREPRENEURSHIP FOR
              RETURNING CITIZENS AND JUSTICE IMPACTED INDIVIDUALS

                                  ----------

                            WEDNESDAY, JULY 27, 2022

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:30 p.m., in
    Room 428A, Russell Senate Office Building, Hon. Ben Cardin,
    Chairman of the Committee, presiding.
        Present: Senators Cardin, Shaheen, Booker, Rosen,
    Hickenlooper, Paul, Ernst, Young, Hawley, and Marshall.

                  OPENING STATEMENT OF CHAIRMAN CARDIN

        Chairman Cardin. Good afternoon. The Committee on Small
    Business and Entrepreneurship will come to order. Our hearing
    today will deal with new start opportunities and barriers to
    entrepreneurship for returning citizens and justice-impacted
    individuals.
        I want to welcome all of our witnesses today. I think we
    have a very distinguished panel, many of whom have experienced
    firsthand the challenges of re-entry into society and economic
    opportunities, all of whom have worked in this area. So we
    have, I think, four excellent witnesses that can help us deal
    with today's subject, and we welcome each of you.
        Today's hearing will give the Small Business Committee an
    opportunity to discuss the ways in which the Federal Government
    can harness the power of entrepreneurship to help returning
    citizens and justice-impacted individuals re-enter their
    community and build successful lives for themselves and their
    families. In recent years, Congress has taken steps to correct
    the over-policing and unfair sentencing that failed to
    meaningfully reduce crime and instead has separated families
    and communities.
        I am very proud to cast my vote for the landmark First Step
    Act, which was a monumental step forward in our effort to right
    past wrongs and restore justice to America's criminal justice
    system. I am also proud that one of the Senators that was key
    to the passage of the First Step Act, Senator Cory Booker, is a
    member of this Committee and is equally committed to creating a
    pathway to entrepreneurship for justice-impacted individuals. I
    note that my staff worked very closely with his staff on
    today's hearing, and I am grateful for his leadership on this
    important issue.
        By now we are all aware of the stigma and discrimination
    that returning citizens and justice-impacted individuals face
    in the job market. There are more than 70 million Americans who
    have a history of involvement with the criminal justice system,
    and studies show that these individuals are 50 percent less
    likely to receive a callback or a job offer after an interview.
    So for many justice-impacted individuals, entrepreneurship is
    becoming an increasingly common pathway to earn a living.
        One of our witnesses here today, Coss Marte, will share
    with us his reasons for pursuing entrepreneurship. Mr. Marte, I
    am interested in learning about the difficulties you faced in
    the job market after you were released and your prospects on
    the way in which entrepreneurship provides you a better path
    forward to deal with economic opportunity.
        It is critical that we recognize the significant role of
    entrepreneurship for justice-impacted individuals as well as
    the inherent benefit for themselves and their communities.
    Justice-impacted entrepreneurs are less likely to recidivate
    and are more likely to employ other justice-impacted
    individuals, which produces a multiplier effect.
        Justice-impacted entrepreneurs are succeeding in spite of
    the many barriers that they continue to face on the path to
    business ownership, including inadequate access to capital as
    well as limited opportunities for business mentorship,
    training, and entrepreneurship development. And because
    minorities, especially Black Americans, have been over-policed
    and incarcerated for decades, these barriers are compounded by
    the continued decrimination that limits minority entrepreneurs.
        I am inspired to see that there are already lending
    institutions and community organizations working to address
    these challenges. In my hometown of Baltimore, for example,
    Baltimore Community Lending, a CDFI, specializes in providing
    capital to returning citizens.
        But community organizations and CDFIs cannot do this work
    alone. It will take the concerted efforts of the Federal
    Government, grassroots organizations, and lenders to
    substantially provide support for these entrepreneurs. That is
    why in the coming weeks I will be reintroducing the New Start
    Act. My bill will grow the capacity of organizations on the
    ground already administering entrepreneurial development
    assistance and training to returning citizens by providing them
    with grants. These grants will increase an organization's
    capacity and lead to justice-impacted entrepreneurs being
    connected with lenders like Baltimore Community Lending, who
    participate in the SBA microloan program. I am grateful to the
    Biden administration, who also shares this commitment.
        In April, the SBA announced that it was eliminating the
    criminal records restrictions that prevented entrepreneurs with
    a past conviction from receiving loans through the Community
    Advantage Pilot Program. This change is a welcome first step,
    and it is my hope that we can work together to open up access
    to SBA's other loan programs as well, including the 7(a) and
    504 programs.
        We must also examine what we can do to ensure the SBA's
    resource partners have robust tools and resources to meet the
    unique needs of returning citizens. We are already seeing how
    some centers are playing an important role in providing
    entrepreneurial training and business development. This is not
    a partisan issue. In fact, I have worked in a bipartisan manner
    in the past to ensure the SBA relief programs were made
    available to justice-impacted business owners.
        After the Trump administration initially blocked justice-
    impacted entrepreneurs from receiving PPP loans in April of
    2020, Republican Senator Rob Portman and I sent a letter to the
    administration urging them to reverse course. Weeks later, in
    June 2020, Senators Portman, Booker, Lankford, and I introduced
    legislation to prevent decrimination against justice-impacted
    entrepreneurs in the PPP program.
        I believe that we can work together. This is an area where
    we can change the lives of many and meaningfully empower entire
    communities. I recognize this is not an easy task, but it is a
    critical one.
        I am hopeful that this hearing will identify additional
    areas where we can come together in a bipartisan consensus on
    how to address these problems and produce meaningful change for
    the more than 70 million Americans with a criminal history.
        I want to thank again our witnesses for being here today
    and their work and leadership in this area. I am looking
    forward to hearing your insight and recommendations on what
    Congress must do to empower individuals to have these
    opportunities.
        With that let me yield to the Ranking Member, Senator Paul.

                   OPENING STATEMENT OF SENATOR PAUL

        Senator Paul. Today we have two exceptional Kentuckians who
    recognized a problem in their local communities and, rather
    than wait for government to come along, Dan Caudill and Rob
    Perez took action themselves.
        Dan Caudill is the owner of Caudill Seed, a regional seed
    and supply distribution celebrating its 75th year of family
    ownership this August. I visited Dan's business. I have seen
    the passion he has for helping returning citizens as they
    become productive and law-abiding members of society. His
    partnerships with Volunteers of America and Healing Place to
    employ individuals coming out of the criminal justice system
    and rehabilitation programs is laudable.
        Dan is joined by Rob Perez. Rob Perez and his wife Diane
    are co-owners of DV8 Kitchen in Lexington. Rob firmly believes
    in providing a second chance to those in the early stages of
    post-incarceration life. As a second-chance employer, DV8
    Kitchen does transformative work for returning citizens. I was
    pleased to visit their kitchen and see what an excellent
    example DV8 provides.
        Returning citizens in Kentucky and all around the country
    are eager and willing to be productive members of society, but
    they are faced with unique economic challenges following their
    incarceration. Whether it is on the basis of stereotype or
    stigma, Dan and Rob know how difficult it is for returning
    citizens to become economically independent.
        Dan and Rob have stepped up to put their money where their
    mouth is. Returning citizens need stable jobs. They need the
    direct and specialized support only their local communities can
    provide. Without employment opportunities like those provided
    by Caudill Seed and DV8 Kitchen, many individuals would
    continue in a cycle of incarceration, drug addiction, and
    poverty. We can do better, we have to do better, and I am proud
    to see Kentuckians leading the way on all fronts.
        Chairman Cardin. Let me thank Senator Paul, and let me
    welcome Dr. Phillips and Mr. Perez. Senator Paul has, I think,
    given you all the proper introduction.
        I mentioned Mr. Coss Marte in my opening statement. He is
    currently CEO and Founder of CONBODY, a prison-style bootcamp
    that has trained over 70,000 clients and has employed over 50
    justice-impacted individuals to teach fitness class.
        In 2009, Mr. Marte was sentenced to jail as a leader of a
    multimillion-dollar drug operation in New York City. In 2017,
    four years after his release, Mr. Marte launched CONBODY,
    inspired by his fitness journey while in prison.
        And we are also pleased to have Dr. Damon Phillips, a
    resident of Maryland. That gives you the priority in this
    Committee anyway, when I am Chairman. He is the Robert
    Steinberg Professor of the University of Pennsylvania Wharton
    School and Annenberg School for Communications. He is also a
    Senior Research Scholar with the Tamer Center at Columbia
    Business School, where he was a full professor from 2011 to
    2021. Dr. Phillips is an expert in labor markets and
    entrepreneurships with a focus on entrepreneurship by people
    from marginalized communities.
        We will start with Mr. Marte.

           STATEMENT OF COSS MARTE, CEO AND FOUNDER, CONBODY

        Mr. Marte. Chairman Cardin, Ranking Member Paul, and
    members of the Committee, I really appreciate you inviting me
    to share my journey as a small business owner with a criminal
    record. I am born and raised in the Lower East Side of New York
    City where, as a child, there were limited opportunities to
    succeed legally. The individuals that I saw succeed were
    usually the drug dealers that stood on the corner, and wore big
    chains and rode in luxury vehicles. As a kid, schoolteachers
    would ask me, ``What do you want to be when you grow up?'' and
    I would tell them I wanted to be rich.
        I wanted to be rich so badly because my mom immigrated from
    the Dominican Republic with limited resources and six months
    pregnant with me. I grew up in a heavily drug-infested
    neighborhood at the time and I hated the fact that my mom
    denied me things because she had no money.
        This led me to the streets at a very early age where I
    began selling drugs and eventually created a multimillion-
    dollar drug empire, and by the age of 19 I was making over $2
    million a year. But this all ended when I was arrested by the
    DEA and ended up being sentenced to seven years in prison.
        As I entered the prison system I developed a workout
    routine that saved my life. I lost over 70 pounds in just six
    months doctors told me I could die in prison from a heart
    attack because of my cholesterol levels. I then helped over 20
    inmates lose over 1,000 pounds combined, and this led me to
    develop a business plan while I was sitting in solitary
    confinement, and the idea launched as CONBODY, a prison-style
    bootcamp that hires formerly incarcerated individuals to teach
    fitness classes. Today we have trained over 70,000 people
    worldwide.
        As I came home from my prison sentence I was released with
    $40, a bus ticket, and this net bag with my business plan.
    However, I was faced with many barriers such as insurance, real
    estate, capital, and policy regulations against hiring
    employees who have been formerly incarcerated. Even finding a
    job was difficult as I was denied over 100 times because of my
    past.
        Thanks to programs like Defy Ventures, who believe that
    formerly incarcerated individuals have the entrepreneurial
    skills to start their own businesses, I was able to navigate
    the resources of running a small business.
        However, even with the help of Defy, I was rejected
    business insurance multiple times. I was even quoted an absurd
    rate of $30,000 a month to launch my small business because of
    my criminal record.
        Then capital came into play as banks had those questions in
    their applications: ``Have ever been convicted of a criminal
    record?'' I literally sold my collection of over 300 pairs of
    Jordan sneakers to use as my start-up capital to start my
    business. In addition, real estate locations rejected me
    because of the same factors. It took me three years of showing
    up every single day, twice a day, through rain, sleet, and snow
    to train my clients in a public park.
        It was truly not an easy task, but I was fortunate enough
    to catch the ear of a landlord who owned a Buddhist Temple, who
    let me rent their basement to operate my small business, where
    we were able to create a safe space for myself and my employees
    who all have been incarcerated in the system. We truly thought
    it was going to be a safe haven for my employees who have gone
    through so many biases in the workforce due to their past
    criminal record, but we were faced with fraternizing, a rule
    that is stated in parole and probation, where formerly
    incarcerated individuals are not allowed to be in the same
    place at any given time. Our goal was to create a space where
    our employees had each other's back and made sure that we would
    never go back into the system, which has worked so far.
        However, fraternizing has blocked us from employing some
    formerly incarcerated individuals due to their parole and
    probation officers denying them from working with us. For
    example, we had one individual who was about to be violated on
    parole and sentenced to two years in prison for working with
    us, but thankfully enough we were able to create a petition
    with our community and clients and employees to prevent him
    from going back inside. We also brought this issue up to the
    regional supervisors in the parole system to stop one of our
    employees from being reincarcerated because he was working with
    us. Our efforts worked and were able to get him out of the
    situation, but today there are so many individuals that come
    out of the system that face this issue but do not have a
    community that can support them through these barriers.
        I have been a strong advocate for criminal justice reform
    for the last nine-plus years, and I am a true believer that if
    given the tools that we need we can show that we cannot only
    bring recidivism rates down but demonstrate that we can really
    tap untapped talent in the entrepreneurial space.
        According to the Harvard Political Review currently our
    national recidivism rate is 76 percent, but if we employ our
    returning citizens the recidivism and give them a second chance
    it drops down automatically to 31 percent. And the stat that I
    am proudest of at CONBODY is that we have a zero recidivism
    rate. No one has gone back into the prison system.
        I believe what New York State is doing in the cannabis
    space is a great example of innovation in the business world.
    By giving first licenses to people that have been justice
    impacted by the war on drugs in the cannabis space. I believe
    this is a great example that we could follow, that not only
    could help our communities but our economy as well. For
    example, I have recently launched a company called CONBUD, a
    potential dispensary in New York State, where we will be hiring
    formerly incarcerated individuals to work with us and will give
    back portions of the proceeds to community members that have
    been affected by the war on drugs.
        I would like to end by leaving you with these questions.
    What if you were judged for the worst thing you have ever done
    for the rest of your life? Or what if you were known for taking
    those negative situations and turning them into a legacy that
    can impact our future? What would you want to choose?
        Thank you so much for your time and I look forward to your
    questions and answers.
        [The prepared statement of Mr. Marte follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Well thank you very much for your
    testimony, and thank you for being here. We hear numbers, but
    when we see an individual that has gone through this it is very
    powerful. So thank you very much for your attendance here
    today.
        Mr. Marte. I appreciate it.
        Chairman Cardin. Mr. Caudill.

             STATEMENT OF DAN CAUDILL, OWNER, CAUDILL SEED

        Mr. Caudill. Thank you for having me here. My name is Dan
    Caudill and I am Chief Operating Officer of Caudill Seed
    Company. I and four other partners own the business, and I am
    one of the directors.
        Caudill Seed Company was established in 1947 by my father.
    It is a family business. It is a diversified agricultural
    production company that produces a lot of agricultural products
    for planting purposes, for reclamation purposes, as well as
    purposes for human consumption, et cetera.
        Caudill Seed Company, beginning with my father, has had a
    long history of not discriminating against people who might
    have had arrest records or convictions, but had a desire to
    straighten up their lives and obtain gainful employment. So
    this really began with my father.
        Caudill Seed Company has been involved in a lot of numerous
    nonprofit agencies there in the state of Kentucky, in
    Louisville, such as the Healing Place, Volunteers of America,
    and Talbot House, and a number of other projects. And through
    that we learned the need to have gainful employment after
    people completed programs to treat their addiction or other
    problems that they had. So we offered employment to these
    people.
        We also work with Dismas Charities. They are local, right
    next to our business actually. And we found little difference
    between the people that we hired out of these programs and,
    quote, ``the normal population'' that did not have an arrest
    record or a conviction. Our success rate with these people was
    about the same.
        What we did notice is that these employees were much more
    loyal and dedicated employees after they had been there awhile,
    and they were anxious to move up through the ranks, into
    management positions.
        Today I am proud to say we have 148 total people working in
    our company, in different divisions, and nearly 50 right now
    are all second-chance employees. Some of these employees have
    been with us for many, many years and others only a few months.
    We normally start them off at a livable wage of about $15 an
    hour with benefits that include health insurance, dental,
    vision, profit-sharing, 401(k), year-end bonuses, based on the
    profitability of the company.
        Caudill Seed Company has been involved with regular
    volunteer work at these nonprofits throughout our community, so
    we are well known for hiring these individuals within our
    company, especially from the Volunteers of America and the
    Healing Place.
        One thing I find interesting, which is worth bringing up
    here, is in the 1970s and 1980s, in the company--I began in
    about 1982--we would not have access to the information on
    background checks, and it was a pain in the tail to get
    background checks. We had to hire an attorney. The attorney had
    to go to the county clerk's office to find background records
    on these individuals, and if they lived in numerous places you
    had to hire an attorney or someone that could go in and get
    these records. And we only did that with the county people and
    people that handled cash.
        Anyway, today the world has changed. With the explosion of
    the information technology now, anybody that wants to know a
    complete background on somebody can spend $9.99 on the internet
    and get this information. And, of course, there are many
    subscription agencies that you can subscribe to for regular
    background checks, that will pull up all public records on any
    individual--every stop sign you ever ran, every misdemeanor
    that you were ever charged with, even arrests but not
    convictions are on these reports, as well as any property you
    have bought, any cars you own. All the public information is
    there, such as LexisNexis and so on.
        Today, from my work at in the nonprofit side of this thing
    and knowing these people, this information is being used to
    increase the amount of discrimination that people are running
    into out there, not just in employment but, as you said, to
    rent apartments or to rent property or to even see a doctor
    today. The doctors are running background checks on patients to
    make sure they are not recovering addicts, because they are
    liable for oxycontin and so on.
        So anyway, my thought on this thing is that, really, what
    we need to do is deal more with reversing the stigma concerning
    prior criminal records and so on, rather than sinking a bunch
    of money into new programs, the government running things, to
    try to make changes, when the problem is stigma. It is led by
    the Federal Government, followed by state, county, city
    governments, and the major corporations across the country.
        With that I see I am out of time, so thank you.
        [The prepared statement of Mr. Caudill follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Well, I thank you very much for your
    testimony but also for your commitment, longstanding commitment
    to recognize the value of workers and giving chance to those
    that needed a second chance. So thank you very much for
    everything you have done.
        Dr. Phillips.

    STATEMENT OF DAMON PHILLIPS, PH.D., ROBERT STEINBERG PROFESSOR
       OF MANAGEMENT, WHARTON SCHOOL OF BUSINESS, UNIVERSITY OF
                              PENNSYLVANIA

        Mr. Phillips. Chairman Cardin, Ranking Member Paul, and
    distinguished members of the Committee, and my fellow
    panelists, good afternoon and thank you for this opportunity to
    speak on this topic.
        I am a tenured professor at Wharton Business School and I
    previously held tenured positions at Columbia University and
    the University of Chicago. In 2016, I founded a program at
    Columbia called ReEntry Acceleration Program--REAP is what we
    call it. Through REAP, MBA students go inside prisons and teach
    business skills, including entrepreneurship. I am currently
    working on bringing a similar program to Wharton.
        This work on REAP is rooted in research that I conduct with
    my collaborator, Dr. Kylie Hwang. This research, in addition to
    other recent scholarship by Hwang will be the focus of the rest
    of my testimony.
        Dr. Hwang and I are motivated by the fact that this
    recidivism number that Coss Marte mentioned and the numbers
    that we were working at the time are two-thirds of returning
    citizens are re-incarcerated within three years of re-entry.
    And research has shown over the past 20 years that one of the
    key reasons is high unemployment, and that is related to the
    challenge of stigma, that you mentioned.
        Hwang and I study entrepreneurship, where returning
    citizens circumvent employment barriers by becoming
    entrepreneurs. We have three key findings.
        The first is that we found that someone coming out of
    prison is more likely to start a business than someone who has
    never been to prison. A key reason why is that employment
    discrimination makes it painfully difficult for returning
    citizens to find work.
        Second, we found that returning citizens earned more as
    entrepreneurs compared to what they earned as employees. And
    third, we found that having a job certainly reduces recidivism,
    but in our analysis returning citizen entrepreneurs have even
    lower recidivism rates. As a final note on our research, most
    of our findings were more pronounced for Black returning
    citizens.
        Our research shines a light on positive outcomes, but
    returning citizens face significant barriers that make it
    difficult to reach their full potential as entrepreneurs. In
    particular, we can think about three types of barriers:
    financial, human capital, and social capital.
        For financial capital we typically think when you are
    starting a business that there a lot of diverse ways of getting
    funding. It can be your personal funds, family and friends,
    credit cards, bank loans, government funds. Yet these resources
    have been traditionally unavailable to justice-impacted
    individuals.
        So one area where government can help overcoming these
    barriers is by continuing to reduce or remove restrictions on
    government loans, as Chairman Cardin noted, adjustments to the
    PPP loans, the Community Advantage Program. A second suggestion
    that have for improving access to financial capital is to
    consider tax incentives for investing in justice-impacted
    entrepreneurs.
        Second, there are these human capital barriers, and this
    has to do a lot with training and getting skills to run a
    business, but really, skills, as well, to be a great employee.
    Some of us pick up these skills in school. Some of us pick up
    these skills in a career. But justice-impacted individuals are
    rarely hired for the kind of jobs that teach them these skills
    that you would need to start a business.
        To help overcome this barrier, government can create and
    expand avenues for entrepreneurial training and other support
    services, including supporting in-prison opportunities for
    business training. One example might be the Aspire
    Entrepreneurship Initiative. It is in the St. Louis area. It is
    a partnership between the SBA and the Kellogg Foundation to
    provide loans but also entrepreneurship education. I would also
    recommend supporting successful prison entrepreneurship
    programs such as the Prison Entrepreneurship Program out of
    Texas, the Resilience Education of Virginia, Columbia
    University's REAP Program, and Georgetown University's Pivot
    Program.
        The last barrier I will speak on is social capital. By that
    I mean business connections. Most returning citizens lack these
    kinds of connections even before they were incarcerated, and
    being incarcerated amplifies that problem.
        So strengthening and expanding many of the types of
    programs to help with connections could be done by the same
    types of initiatives that are already underway with the
    programs I mentioned out of Texas, Virginia, Columbia,
    Georgetown, and others. Part of the reason is a lot of these
    programs combine providing funds with also helping with
    mentorship and connections or providing education with helping
    with establishing other business connections.
        One of the things that I would advocate is supporting the
    kind of programs that exist either through partnerships like
    the SBA has done, but bolstering these programs that have some
    success but need to scale that particular success around
    entrepreneurship training.
        Thank you again for inviting me and especially for talking
    on this important topic. The returns in terms of the time and
    investment you spend on this, it helps individuals but is also
    helps communities and society. So thank you very much.
        [The prepared statement of Mr. Phillips follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Dr. Phillips, thank you for your
    testimony. We appreciate the specific recommendations that you
    make. That makes our job a little bit easier.
        Mr. Perez.

             STATEMENT OF ROB PEREZ, CO-OWNER, DV8 KITCHEN

        Mr. Perez. Chairman Cardin, Ranking Member Paul, and
    members of the Committee, I am Rob Perez, and along with my
    wife Diane, own DV8 Kitchen. DV8 is a restaurant and a bakery
    company in Lexington, Kentucky, who employs people that are in
    early stages of recovery from substance use disorder and the
    formerly incarcerated.
        Before I tell you all the reasons why DV8 is awesome, I
    think I have to probably tell you how I originally thought it
    was a terrible idea.
        Let me be clear: I am a businessman with a long career in
    the restaurant industry, and as in any small business, you
    know, my focus is turning a profit. When my wife approached me
    with the idea of using a restaurant to help people, I was not
    interested.
        Previously, over the course of eight years, we had employed
    60 people with a past. Each candidate would admit to their
    mistakes, claim to be clean, and unfortunately we would lose
    them within two weeks. I had done the math. Nearly $800 of
    training expense per person times 60 people, that is nearly
    $50,000. I told my wife no to this idea.
        Diane did not give up. She had done her own math. See, we
    had lost 10 people, 10 employees to fatal overdoses in the same
    8 years, so she was heartbroken, and she did not really care
    about the cost.
        While I still was not on board, she decided to schedule a
    ride-along with a policeman in an unmarked car on a Friday
    afternoon. I witnessed something during that ride that changed
    me forever. Why would a person sell themselves for $5?
    Ultimately, this was the question Diane had been desperate to
    answer, and now it was keeping me up at night.
        Diane suggested that on the path of poor choices there are
    sober moments and motivations that people want to become
    employed. We came to believe people need the support of a
    recovery community as well as the purpose of a job.
        We did not have any of the answers, so we did what any sane
    person would do--we opened up this restaurant but we did not
    know what we were going to do or how we were going to do it. We
    figured we would figure it out along the way.
        In August 2017, DV8 Kitchen was born. I still had one
    condition, that it had to be profitable.
        We developed a menu, hired employees, prepared for opening
    day, and excitedly opened the doors, but it was an epic fail.
    We had no idea how to validate that our employees were in a
    recovery program, how to motivate them, and our customers were
    basically afraid of us.
        Over the next couple of months, we took a long, hard look
    at what we were doing and we wanted to learn from our mistakes.
    We found two big things.
        One, you do not need to be a social worker to employ people
    with a past. However, you can have experts on your team. People
    with a past do need more than a job to be successful. They need
    housing, therapy, and some case workers. We forged
    relationships with residential living facilities. These centers
    validated that our employees are staying in their program and
    they supported them so they could arrive at work at DV8 each
    day on time.
        Secondly, you do not need to lower your standards to employ
    people with a past. In fact, we think you should raise it. So
    many of our people shared one thing, and that was shame. It was
    both a cause of their substance abuse and the result of it. We
    realized that work was an absolute perfect place to build them
    up. We decided to set a higher standard, not only are our
    people capable of meeting it, but they also needed to see that
    they could.
        Today we work with a group of people most people deem
    ``unemployable,'' and together have created two successful
    restaurants and a wholesale bakery. Turnover is low, profits
    are good and YELP named DV8 Kitchen one of the top 40
    restaurants in all of America for 2 out of the last 3 years.
        But now I kind of want more, not really for me but for our
    people. We have a nurse, an engineer, and a college professor
    that are working in a restaurant in Lexington. I am thrilled to
    have them, but they have skills which really could be put to
    better use in other businesses.
        Sadly, just like me, too many businesspeople think someone
    with a past is legally too risky, expensive, and a waste of
    time. Our results suggest otherwise, and so do I. You see, I am
    not just a small business owner but I am a recovering addict,
    with 31 years sober.
        Here is what I want you to know. I am not the exception,
    and neither is DV8. People in recovery can be excellent in the
    workplace. What if every American small business rethought HR
    and employed one person with a past? Based on my experience,
    small businesses can make a huge impact on recidivism. Contrary
    to what some people think, free enterprise can save the world.
        Thank you for allowing me to testify, and we look forward
    to your questions.
        [The prepared statement of Mr. Perez follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Well, Mr. Perez, first of all
    congratulations on running a successful business. You, like
    many of us, succeed because of the person we married. Thank you
    for following your wife's advice. We appreciate that very much.
    [Laughter.]
        Chairman Cardin. We have had maybe a dozen hearings this
    year, probably a little more than that. To me, this has been
    the most impressive panel we have had all year, so thank you,
    all four of you, for your contributions to this subject.
        Let me start off with Mr. Marte. If I understand your
    testimony, it is challenging for a returning citizen to get all
    the pieces together to start a business, because you have got
    to get financing, you have got to get a lease on a property,
    people have to do business with you, et cetera. But it is even
    more difficult to find an employer that will hire you. So as
    difficult as it is for path to entrepreneurship, it is even
    more difficult for employment, and chances of success seem to
    be greater with entrepreneurship than employment. Am I reading
    you correctly in that regard?
        Mr. Marte. Well, I do not know if the chance of success at
    all varies for, you know, variables and different reasons of
    that person returning back into society, but for my instance I
    had previously felt like I ran an entrepreneurial business. The
    only difference was that I did not pay taxes back in the day,
    and now I do.
        And so I really believe that all I needed was that pathway
    and guidance of like programs like Defy Ventures, different
    nonprofit organizations that I took advantage of, to utilize
    those resources and build those connections and relate my
    stories and break down those barriers and really start
    utilizing everybody that wanted to really help me, because
    there are people that want to help. They just do not know how
    to. And I feel like when we have these nonprofits that bring
    individuals that want to figure out how to--like yourself, how
    do you want to help, you know. And so we put these two
    different communities in one different room and listen to each
    other, you know, like what we are doing today.
        For me, yes, I believe entrepreneur was the right path, not
    for everybody, and you know the stats of people running their
    own businesses. I mean, it is really hard. It is like playing
    baseball. You know, most people fail at hitting a ball. But for
    me it was pretty much out of desperation that I made it happen.
        Chairman Cardin. And you still had the challenge of
    fraternizing. Is that still an issue in regard to parole
    compliance? Is that still an issue in New York?
        Mr. Marte. Yeah, for certain instances. I mean, I built a
    great relationship with parole and probation, but there are
    people that are coming out. For example, I had an individual
    that wanted to work with us from work release. So in a work
    release program individuals go in and out of prison every day.
    So they go out to try to find a job, we interviewed someone,
    they went back to tell their counselor or whoever they speak to
    back in the system, and they said, ``No, you cannot work with
    other people that have criminal records.'' And there is that,
    stated in those criteria, so that hopefully we could get that
    out of there, you know, that policy.
        Chairman Cardin. Dr. Phillips, thank you for your
    suggestions. We have done a lot of late to try to make
    educational opportunities available while an individual is in
    prison, and we have broken down some of the barriers, including
    post-secondary education. I do not believe we have done much in
    regard to entrepreneurial education, so think that is a
    suggestion that we need to look at.
        I am just interested in your observations as to where the
    SBA could play a stronger role in helping returning citizens.
    We have eligibility for programs today but it is not throughout
    the entire SBA portfolio. We have resource partners, but they
    do their own priorities and there is really no resource partner
    directly associated with returning citizens.
        So where could the SBA play a stronger role in trying to
    remove some of these barriers?
        Mr. Phillips. So thanks for the question, Chairman. I
    agree. I would say also one of the challenges is because it is
    sort of patchwork, when you are on the other side it gets
    confusing to know whether SBA, this particular program applies
    to you or not. And a lot of the people who try very hard to
    figure that out just get lost in the process.
        So I will start there, that one of the challenges is doing
    our best to communicate when there is a program, that that
    program is available and what the criteria are. Even with the
    PPP, when it came out there was a lot of confusion around
    whether someone actually did qualify, and you needed sometimes
    intermediaries who were knowledgeable about the loan in order
    to help with that.
        So all of that, for me, means SBA, partnering and finding
    good organizations to partner with. It is true that there is
    not a lot of entrepreneurship training or business training
    within prisons, but because of the work that you and others
    have done, the infrastructure is there to do that.
        I am in a business school. This is what we teach. There are
    other business schools around the country that are amazing at
    this. And so I believe partnering with people who are expert in
    these particular areas can yield some positive benefits.
        Chairman Cardin. Thank you. I do want to point out that
    Senator Portman and I worked together to expand the eligibility
    under the Work Opportunity Tax Credit to returning citizens'
    employment so they are eligible. So we have made some
    modifications, but it is by program by program rather than
    comprehensive. And unless you had the support from a resource
    entity, whether it is the SBA or one of our partners, it is
    tough to figure out where you are eligible and where you are
    not eligible, and the subtleties in regard to getting that
    help.
        Senator Paul.
        Senator Paul. Well, I agree with the Chairman. I think this
    is a great hearing and a good time to hear things that are
    working and things that are changing and evolving. I think we
    still have a long way to go, but I think that there are good
    things happening as far as giving people second chances.
        Dan Caudill, you mentioned in your testimony that the
    stigma and the ongoing discrimination against these individuals
    is led by the Federal Government and their hiring practices.
    Then you mentioned also state, city, and county government. Are
    there people that you are coming across that have tried to get
    employment in either Federal Government or city government who
    are still having difficulty because of their criminal past?
        Mr. Caudill. Yes, from the people I have talked to, yes.
    And unless things have changed pretty significantly I believe
    that is still the case today. They did have a campaign not to
    check the box in Jefferson County and in Louisville for a
    while, but my understanding is that it is still extremely
    difficult to get state or Federal jobs with a prior conviction.
        Senator Paul. Anybody else have a comment on that or any
    awareness of either prohibitions or problems with Federal
    employment, with records? Okay.
        Mr. Perez, I, like the Chairman, am glad that Diane had
    such a great influence in your life and got you to open the
    restaurant. I have been there and I have seen the employees,
    and it is uplifting, really, to see the smiles on the faces and
    the people who are excited to be there at work. It is not every
    restaurant you go in that every worker in there is excited to
    be there, but they do seem to be excited to be there.
        I am one who is a big believer that our self-esteem comes
    from work. No matter who you are, that is how you get your
    self-esteem. You cannot be anybody unless you really do
    something. It does not matter exactly what it is. It can be a
    range of things. But doing something is who we are. So I was
    pretty impressed with meeting the employees that you are giving
    these second chances to.
        You mentioned that you have a nurse and an engineer and a
    college professor, and I am, like you, glad that they are able
    to work, but their full self-esteem has to really come from
    doing more. Are you aware of any kind of connection to like a
    consortium of information of people who would hire, like
    engineers or nurses? Is there some sort of way to connect them,
    that you are aware of, other than just word of mouth, of
    finding somebody in the area that might hire an engineer, or do
    you have any insight as to any way to try to conquer that
    problem?
        Mr. Perez. Yeah. So if we speak about just the engineer, I
    worked pretty hard with this young man after he was employed
    with us for a year and a half, and we needed an internship. I
    called ten people and I got one interview, and that one
    interview felt that it was not safe enough for insurance
    purposes, he claimed, or because, at the end of the day, he was
    going to have to do a background check and he did not think
    that it would make it through all of his HR policies and
    procedures.
        Senator Paul. You know, there are a lot of groups that deal
    with criminal justice reform and second chances. I know you are
    aware of them. You and I are both aware of them. Dan is too. I
    am wondering if maybe setting up some sort of nationwide, like
    a LinkedIn, something where you would be able to share
    information with people might be a way to connect people.
        I do know that, for example, and do not know if this would
    help your industry, that Koch Industries has been a leader in
    this, in nationwide, not only in giving tens of millions of
    dollars to the criminal justice movement but also, you know,
    putting their policy where their money is as well and hiring
    people. Now that might not be in Lexington, but they have got
    stuff all over the world. I mean, it is a big company and that
    might be a possibility for him or her.
        Mr. Perez. Yes.
        Senator Paul. But I do not know if that is something on the
    hiring aspect, Mr. Chairman, that we might look into or have
    our staffs look into, if there are any Federal impediments to
    hiring, you know, as far as second chances. That is something
    that maybe you and I could look at together, and perhaps if
    there are any Federal impediments that are still there that
    could be removed as far as hiring.
        Chairman Cardin. I think it is an excellent suggestion and
    I think we will have our staffs follow up on that.
        Senator Paul. Thank you.
        Chairman Cardin. Senator Shaheen.
        Senator Shaheen. Thank you, Mr. Chairman, and thank you to
    each of you for being here today.
        Dr. Phillips, I want to start with you because you talked
    about your research showing that entrepreneurship is something
    that is more prevalent among the previously incarcerated than
    the general population. Are there any particular types of
    businesses or areas of interest that you see among previously
    incarcerated?
        Mr. Phillips. Yes, there are some patterns. They usually
    are industries or settings where you do not need much capital
    to get launched, and they are also industries that have
    historically been more open to employment. So food service
    would be one, for example, you might find, or you might find in
    construction, as well, as long as it is not the areas of
    construction that are going to require a lot of upfront. So it
    could be things that build off the trades if it is in a state
    that does not have licensing restrictions around trades. So
    those are the things where you see people start.
        There are two ways that I think about it. One is people are
    going to those opportunities. It does not mean that is the
    business they want to start, though. It just means that they
    want to be an entrepreneur.
        Senator Shaheen. That is where they wind up.
        Mr. Phillips. That is where they wind up because that is
    where you can become an entrepreneur and be productive in a way
    that matches your own abilities.
        Senator Shaheen. So thinking about the capital aspect,
    which is something that SBA could certainly be helpful with,
    might make a difference, I assume, Mr. Marte, that would have
    been very helpful to you had there been an SBA availability for
    previously incarcerated to be able to get capital as you were
    starting your business.
        Mr. Marte. Absolutely, and I have gone to Federal banks and
    sat down with them, and I filled out those applications and was
    denied. You know, this is close to ten years ago when criminal
    justice was not, you know, excuse my language, a sexy topic.
    You know, nobody really cared. But now I appreciate everybody
    putting their word in here and putting in the effort to make
    this thing happen.
        Senator Shaheen. Thank you. Mr. Perez, New Hampshire has a
    pretty sizeable hospitality industry, hospitality and tourism,
    and one of the concerns I hear everywhere I go is that they
    cannot find workers. And we also have been very much affected
    by the opioid epidemic and have a lot of folks who are former
    misusers of substances. So as you think about your experience,
    what would you say to business owners in New Hampshire and
    across the country who are looking for workers, about the
    opportunities that exist both with people who have a history of
    substance misuse but also previously incarcerated? What have
    you found that works and what kind of advice would you give to
    people?
        Mr. Perez. I would tell them that our experience showed
    this. We have three restaurants in Lexington that we cannot
    staff that does not have the second-chance motto that we have
    at the other two restaurants we have. We are fully staffed,
    have been fully staffed since the day that we opened in 2017,
    with folks that are in a second-chance position. I have to tell
    you, the motivation level, the commitment, and the dedication
    to high standards and effort at our second-chance restaurants
    far exceed the folks at the regular for-profit restaurants that
    we have.
        Senator Shaheen. So how do you respond to people who say,
    ``Well, you are not going to be able to count on these workers.
    They are not going to be dependable. They are not going to
    always show up,'' which is a common problem, as we know, with
    the workforce in some employment sectors, in general. For
    example, we have friends who have a restaurant, a seasonal
    restaurant, and they periodically have problems with people not
    showing up when they are supposed to be there to do their jobs.
    How do you answer that concern that people might have?
        Mr. Perez. I am just like every other businessperson. I
    want to predict I am going to have success and profit. So the
    way that we have attacked that is we hire folks with an
    employment contract. We say, hey, look, your interviewing
    process is continuing to go on. We source people only that are
    in recovery centers. We tell them that if they allow us,
    through a medical release of information, to share with us that
    they are in the program, that they are in safe housing, and
    that they are being tested each week, and they good on all
    three cases, we will keep on employing them. We have them sign
    a contract saying that they will adhere to the recovery
    program, and if they do they have gainful employment with good
    effort standards and relationships. And if they do not, then it
    is our option to let them go.
        And we have found the difference is crazy difference. I
    mean, we were losing people after two weeks. Our average tenure
    for 60 people was two weeks. Once we installed this, now we
    employ only folks with a past, and now we have 11 months, our
    average tenure, in a place where we are trying to get them to
    the business that they originally came from. But it is crazy
    the difference in just using the leverage of a job, that most
    people cannot get in their position, giving them a good wage,
    and using that to keep them in recovery. Just the leverage of
    the job does it.
        Senator Shaheen. And you think the contract has something
    to do with it too, the fact that you engage somebody personally
    in that contract for their future?
        Mr. Perez. I do believe that. I think the underlying thing
    is that we are forcing them to evaluate the root cause of why
    they might be undependable, why they might not have high effort
    and high relationships in a workplace, and that is with a
    recovery program, where we validate that folks are clean,
    because we have access to their test results. We do not want
    the details. Either it is good or it is not. We want yes or no.
        And we start off with a contract that is a second-chance
    employment contract based on the fact that they do not have
    really much job history, they do not have a recommendation. And
    so we, in turn, do this, and it is amazing the results. I
    cannot even tell you how crazy it is. It is something I did not
    know. But again, it all has to do with trying to predict
    success in business.
        Senator Shaheen. I am out of time, Mr. Chairman, but can I
    ask Mr. Marte if he would respond to that as well? Because as
    somebody who has been there and who is working with previously
    incarcerated people, what is it that you think keeps them
    coming back, responding in the way that they do?
        Mr. Marte. I believe loyalty is the number one factor. Like
    loyalty was number one on the streets, and when you hear about
    a contract being signed it is like this is my word, I am not
    going to break it, and I am going to full force, and I am going
    to be committed to this.
        My retention rate at CONBODY is four years. I cannot get
    them out of there. They come in and they want to stay there
    forever. And when I first hired somebody coming out of the
    system I did not know how to deal with their other barriers in
    terms of housing, clothing, funding, you know, those
    individuals that had no place to live. So I literally had four
    air mattresses in the studio. I had to deflate the air
    mattresses at 6 a.m. so we could start classes at 6:30 a.m.
        So it was things that I did not project that I was going to
    deal with, but they understood, like hey, if you have got my
    back, I have got your back. Loyalty was number one and it is
    still seen today.
        Senator Shaheen. Thank you all very much.
        Chairman Cardin. Senator Hickenlooper.
        Senator Hickenlooper. Thank you, Mr. Chair, and I want to
    thank all of you for being here.
        Several years ago, when I was governor of Colorado, I went
    through the DEFY program and did a lot of the process where you
    build relationships with people that were mostly doing hard
    time. And it was breathtaking. The power that was there was
    potential.
        Dr. Phillips, I have got two questions. One is, in your
    studies have you seen a difference in age, where if someone is
    a little bit older are they going to do better with a job when
    they first get out? And then the second question is, with the
    record low-level nonviolent drug offenses, if you just have a
    record for some low-level offense you have a hard time getting
    capital, a hard time getting a loan, start a business. And we
    certainly worked for and applauded this, SBA's decision to
    remove barriers to eligibility based on irrelevant criminal
    history records, both for the 7(a) program, the microloan
    program, the 504 program. What other adjustments should the SBA
    be doing to ensure the qualified, formerly incarcerated
    individuals can access these programs?
        Mr. Phillips. So thank you, Senator, for the question. I
    guess a couple of things. First, in terms of the age, most of
    the research that I am familiar with certainly says that, no
    surprise, older people are more mature, and you have a lot of
    people who have been incarcerated for mistakes and things they
    did when they were young--18, 19, 20--and maturity has an
    effect. So someone who is returning to society at age 30, you
    do see a stronger effect. Also, studies show that people with
    children have lower recidivism as well, that connection and I
    think the maturity that comes with that.
        Senator Hickenlooper. Before you go to the next question,
    let me ask Mr. Marte, because you hired a lot of people. Are
    young, recently released, incarcerated individuals higher risk,
    do you think?
        Mr. Marte. Yeah, I think somebody that is younger than 23
    years old is not fully developed and has not experienced. I
    have individuals that committed murder, and, you know, we look
    at nonviolent offenders as like, oh, they deserve a second
    chance. But I have seen the people that have done 25 years, 27
    years, for we think the worst crime ever, you know, are the
    best employees, you know, the most loyal individuals. I have
    got one female that 22 years, went in at 16, came out at 38.
    She has been with us for six years, and you would never think
    that she did something super wrong. But she is the happiest
    person and will greet you with a smile every single time you
    walk in.
        Senator Hickenlooper. Right. Mr. Phillips, let me go back
    to the next question. What else can the SBA be doing?
        Mr. Phillips. So I think those programs you mentioned are
    actually on the right track. I am very supportive of those
    initiatives. I think two things. One, more initiatives that
    involve partnership with organizations that are on the ground
    and actively doing the work so that things are not just loans
    but they are also education. There are also connections. You
    know, those three barriers of finance, human capital and
    training, and connections.
        So in addition to the loan programs, partnering with
    organizations that help out with those other buckets, so it is
    a more robust change that happens, that is what I would
    advocate. So in addition to those programs, finding ways of
    linking them to others.
        I would say, too, in the business school we spend a lot of
    time trying to talk to employers to convince them, and we are
    very good at generating numbers, as it turns out. And numbers
    do part of it, but I just wanted, as a comment, the personal
    stories. If SBA can also organize things like this, where it is
    just people talking about, as employers, going through this,
    that, in our experience, has been at least if not more powerful
    than us putting statistics. I have and I can provide numbers of
    lower turnover----
        Senator Hickenlooper. Sure, but it is not the same.
        Mr. Phillips. It is not the same.
        Senator Hickenlooper. And you are right. That is another
    way that the SBA could partner with some of these organizations
    doing it.
        I am out of time, but Mr. Perez, my brother had a bakery
    for many years and they had occasion to hire--some of the
    employees had been formerly incarcerated. And that sense of
    loyalty that you all have kind of addressed is very powerful in
    and of itself.
        Anyway, I appreciate, again, all of you for being here, and
    I am out of time. I yield back.
        Chairman Cardin. Senator Rosen.
        Senator Rosen. Thank you, Chairman Cardin and Ranking
    Member Paul. This is a really important hearing, and I just
    thank you for everything that you are doing and your caring
    about your community, your neighbor. Uplifting people is very
    important. So I want to build on what people have been talking
    about here and some of the things, we talk about loyalty, I
    want to talk about mentorship, because how do you bring people
    back, some of the things that you are talking through.
        You know, over the past few years, in my home state of
    Nevada we have seen a big jump in startups. But even with that
    surge, potential entrepreneurs, they just do not have easy
    access to the information. It is complicated. It is hard to
    find--permitting, SBA loans, a lot of the things we are talking
    about. So I think mentorship is one way to maybe help new
    entrepreneurs, startup business, to fill this knowledge gap.
        The Small Business Administration did establish the All
    Small Mentor-Protege to develop protege firms to help all kinds
    of folks through mentor-provided business development
    assistance. You have been there. People have been there before.
    You know what the opportunities and challenges are.
        Dr. Phillips, maybe you just want to elaborate a little bit
    on how the mentorship programs, led by seasoned entrepreneurs
    like those we have here and others around the country, can
    really help build that trust and loyalty with other formerly
    incarcerated individuals, build up that community.
        Mr. Phillips. Thank you, Senator. I think that is an
    excellent idea. Right now it just happens informally and sort
    of, you know, if I run into someone who wants to start a
    fitness business I would say, ``Oh, do you know Coss Marte? You
    should get in touch with him.'' It is not systematic at all,
    but the programs you are talking about could be successful.
        There are already programs that are--let's say the local
    Chamber of Commerce will have a program where retired
    entrepreneurs can give feedback. So what I am wondering is,
    maybe there is an infrastructure into these like that, to also
    just build on--it is already people who are showing up and very
    excited to provide mentoring, maybe attaching that to the sort
    of initiative that you proposed. But I think it is an excellent
    idea.
        Senator Rosen. So we need to be sure that we find a way to
    robustly build this out, because the opportunity is there. We
    just have to kind of help build the infrastructure to do that.
        Mr. Phillips. Yes.
        Senator Rosen. And speaking about infrastructure and how
    you are mentoring others, I wonder if any of you have any
    thoughts about registered apprenticeship programs. In my state
    of Nevada we have, I think, around 90 registered apprenticeship
    programs. People earn while they learn. They graduate debt-
    free. They are in labor and industry, and we are trying to even
    bring them into cybersecurity, all kinds of things.
        And so how do you think maybe the SBA could partner,
    enhance our apprenticeship programs that really work well
    around this country, to bring those individuals, help them,
    lift them up to get perhaps a trade, if you will? Does anybody
    have any comments in thinking about how we might use the
    registered apprenticeship programs that we have?
        Mr. Marte. Yes. So I actually started an apprenticeship
    program called Second Chance Studios, a nonprofit that helps
    formerly incarcerated individuals get into the media space. And
    what we have seen is that, you know, there are a lot of
    programs out there for formerly incarcerated individuals but
    none of them are giving them a check, and that is the first
    thing you need. Like when I was speaking in my testimony, all I
    was released with was $40. You know, what am I going to do with
    $40? The first thing I did, I went to McDonald's at my bus
    stop, and then the next $20 I took a Metro card and then I am
    left with $10 in my pocket. What is next?
        So what I did was go into different organizations to help
    me get small internships, do small little jobs that I could get
    a couple of bucks in my pocket. But what I created was an
    apprenticeship program not only just to work in the back of the
    kitchen or do manual labor jobs. What we did was get into the
    media space, which is growing significantly. And we got
    individuals that graduated the program to work at MTV now, to
    work in these bigger industries like Vice and companies of that
    nature.
        Senator Rosen. So maybe the small business, the mentorship,
    the protege program can work with some of our registered
    apprenticeship programs in many industries. Maybe that is a
    natural partnership going forward.
        Mr. Marte, I want to talk a little bit about the
    information. You had to find all these different places to go
    to get information, and you were really entrepreneurial to
    figure all that out and create what you did. What do you think
    Congress can do to alleviate information, the access, the
    challenges--centralize it, find a way for people to find those
    resources right away, not wait until they have $1 in their
    pocket?
        Mr. Marte. I think getting to the media that speaks to the
    individuals that have been incarcerated, going inside the
    prison system, giving this information. Literally, the
    transitional programs, when I had to write a resume before I
    was released, all they give you was lined paper and a number 2
    pencil, and they expect you to go with a resume that is written
    to go into a job interview that way, with no computers. There
    is no internet inside. So let's start on the inside.
        And your feedback on mentorship, without mentors that have
    been serial entrepreneurs at ran businesses, I would not be in
    the position I am in right now. Like there is one individual
    called Michael Rothman who, you know, pretty much every week,
    Friday morning, 7 a.m., we met. And he gave me homework. I did
    my homework and I went back to him. And so setting up
    individuals that really care that are retired or, you know, are
    really successful, that want to give back, it is a great
    example to give back.
        Senator Rosen. Thank you. My time is up too, but thank you
    all again.
        Chairman Cardin. Senator Booker was one of those that
    helped us plan for this hearing, who has made reentry a
    priority not only here in the Small Business Committee but in
    many areas in the United States Senate. Senator Booker, thank
    you very much.
        Senator Booker. I want to thank both the Chairman, first of
    all, for your cooperation and your leadership in this space. It
    has been extraordinary and you have been a great partner. And I
    want to thank the Ranking Member as well. Since I got to the
    United States Senate, this is an area he has brought a lot of
    common sense and a lot of partnership as well.
        Gentlemen, I am so excited to see you, and especially the
    three folks out there that are getting folks hired. When I
    started in New Jersey, the first-ever municipal Office of
    Reentry, we started finding a lot of patterns but also having a
    lot of frustrations with all the barriers that men and women
    coming home were facing, getting sort of rapid attachment to
    work, finding someplace to just live for a night. I was so
    desperate that I lived in a two-family home as mayor, and I
    would let just guys crash there as we tried, with our agency,
    to put people back to work.
        And so there is a lot that has been documented here, I am
    sure, and gone over, and I do not need to go over it all, the
    benefits to society in helping people get rapid attachment to
    work, helping people deal with a lot of the challenges that
    often create that slippery slope.
        There are 40,000 collateral consequences, according to the
    American Bar Association, if you have a criminal record, 40,000
    things you cannot do that most Americans often take for
    granted. And so my hope is this Committee, which has a great
    bipartisan sensibility about themselves, can start doing even
    more to removing these artificial barriers. And I would love to
    maybe get some examples of these from you and maybe some advice
    for this Committee about what could we be doing to deal with
    it.
        During the pandemic I was stunned--and again, we had
    bipartisan help fixing it--that the PPP loans were very
    artificially excluding people that had been incarcerated within
    five years. It did not reflect other areas within our
    government but it was just arbitrary and unfortunately uneven
    in its impact.
        And so, Professor, I do not know if there is anything, Dr.
    Phillips, that you might be able to point to right now. I do
    not care what space it is, whether it is in access to capital
    or credit worthiness, of things that this Committee might
    attack to really help a class of people that have higher rates
    than average Americans for starting businesses, often because
    of the urgency for it, because they just cannot get hired. But
    I do not know if there was anything that you would advise us,
    hey, if this Committee attacked this in a bipartisan way you
    could remove another barrier that would save government money
    in the long run, lower crime in the long run because people
    would not recidivate, but also help expand our economy.
        Mr. Phillips. Thank you, Senator, and also thank you for
    your work in New York. I spend a lot of time in New York so I
    am familiar with the great work that you did there. So thanks
    for that question.
        What I want to say is similar to before, and it sort of
    links to the overall concept. In my mind, entrepreneurship and
    employment are linked, and sometimes we organize them in
    different ways, but they are very much linked. Entrepreneurs
    hire employees. Employees then become entrepreneurs. The two
    are linked.
        One of the things that I think can be very helpful is
    helping provide information and education in prison as early as
    possible. One of the challenges, there are too many things to
    combat. I mean, there are too many things to keep in mind, and
    what we find is then if you try to add on that entrepreneurship
    training or here are some opportunities, people are just so
    overwhelmed they cannot take advantage of all the things that,
    you know, everyone put a whole lot of hard work to put forward.
        In prison, a lot of times people are idle, unfortunately,
    but there are ways of spending that time productively. We have
    the advancement that have been done lately and also including
    the Pell grant. So I think that is a place to tackled. And I
    think it can be captured as both entrepreneurship and
    employment skills. I do not see these two as distinct. I think
    they can be captured and taught to people early on.
        The students we teach inside prison are amazing. They are
    dedicated. Our MBA students are sometimes embarrassed by how
    devoted these students are, and question their own devotion to
    their own education. They are groups of people who could really
    take advantage.
        So focusing on that area, getting those opportunities,
    information about loans, other things, as early as possible,
    that is what I would think.
        Senator Booker. Anybody else want to add, in the last 30
    seconds or so?
        Mr. Perez. Yeah. I would just maybe suggest that instead of
    worrying about a specific program, how can we open it up to
    everybody? For example, if the SBA loan, on the PPP loan
    automatically excludes someone with a past in the last five
    years, they would throw out that application. Do not even fill
    it out. But I am suggesting that PPP applications should just
    be like an interview. If someone has a past, they should have
    an opportunity to explain what they are doing to change their
    life.
        And I am telling you that that is going to help the greater
    good. Instead of a single program we have 20 percent of our
    population that is in a second-chance position. We have got to
    open up the funnel. We keep on putting it down to one thing,
    and we need to be able to talk to someone about their past, and
    just like every other opportunity, we are going to ask them the
    question in an interview, or at an SBA loan, what are you doing
    to change? Explain to me what your plan is.
        And I think that is really the crux of this. If we want to
    help the greater good, that is the mentality we have to have,
    not a single program, but open it up for everybody.
        Senator Booker. Thank you. Mr. Chairman, the last thing I
    would say is Mr. Marte might have an athletic program here that
    all the Senators could enroll in perhaps. [Laughter.]
        Senator Booker. I appreciate that, sir. And I would love to
    submit maybe a question for the record to all of you, if you
    could maybe add to that list of some of the common-sense things
    I heard from Mr. Perez and Mr. Phillips, so thank you.
        Chairman Cardin. I think we can benefit from the testimony
    of all four of these witnesses. Thank you.
        Senator Marshall.
        Senator Marshall. Thank you, Mr. Chairman. If somebody else
    has asked you this question, forgive me. Obviously we are all
    running back and forth. But I would be curious, for any of you,
    if you have used any SBA resources to help in hiring recently
    incarcerated individuals.
        Okay. Are you aware of any SBA options out there? Okay. I
    am not either.
        What about just in accessing capital? Any businesses using
    the SBA to access capital, to get loans? None of you have tried
    them?
        Mr. Marte [continuing]. The PPP loan, at first I thought I
    did not qualify until they changed and reversed that criterion
    about the time spent.
        Mr. Caudill. We did receive PPP funding.
        Senator Marshall. Okay, which is not meant for new startups
    or new companies or anything, right? Okay.
        We certainly have a strong group of folks, non-government
    entities, committed to the recidivism rate and employing them,
    somehow, some way, in Kansas City, and I am trying to help
    them. How can a Congressman help an employer be connected to
    employees to help this along? You see any congressional offices
    doing a good job with this? I would love to copy them.
    Sometimes it just helping connect people.
        Mr. Caudill. I think the connection, at least in my case,
    with the nonprofit community that was working with recovering
    addicts, alcoholics, former prison inmates, halfway-backed
    programs, and so on. And due to our contact with those people
    they knew that we would hire people with backgrounds, and they
    referred them on to us, and then they would do follow-up.
        Senator Marshall. Okay. In any of your programs is there
    any type of a spiritual component to the issues as well?
        Mr. Perez. Yeah. You know, we have a faith-based attitude
    to our business. It is not a requirement for anybody to do, but
    we subscribe to the 12-step program with everybody that we work
    with, or a similar program, and you get to choose who you God
    is. It is not for us to kind of do it, but we think it is
    important for us, as recovering folks, to contemplate that we
    are not the center of the universe. We are only part of it. And
    so it is an important piece for us, and we try to do it in a
    way that is appropriate for an employer to do it.
        Senator Marshall. Great.
        Mr. Caudill. Yeah, we also have worked the Healing Place,
    which is a faith-based, 12-step program, and here again, with
    halfway-backed programs. We did run into an issue, which was
    kind of interesting. It seems like a new solution to addiction
    problem is suboxone. I was up in Winchester and we went to a
    Kentucky recovery facility, but everyone was on suboxone. And
    so we checked with our insurance company, and due to the
    dangerous equipment we work with--forklifts, tractors, trailers
    and stuff--we could not employ them.
        So primarily the people that we have here have come out of
    programs that were faith-based.
        Senator Marshall. Okay. Anybody else?
        Mr. Phillips. Sorry. This is to the previous question about
    what can Congress do. You got me thinking.
        Senator Marshall. Good.
        Mr. Phillips. One of the things I would recommend is
    championing those employers that are doing second-chance
    hiring. There are still employers that are afraid, that may
    even be hiring but are afraid to let others know, and still
    becoming more legitimate thing to do. And getting attention,
    positive attention for doing it, just like today, can help
    other employers move a little bit closer to hiring.
        Senator Marshall. Great. Okay. Thank you so much. I
    appreciate you all being here. Thank you, Chairman.
        Chairman Cardin. Senator Paul.
        Senator Paul. The discussion of addiction reminded me of
    coming to your place, Dan, and in a small group several of them
    saying, ``Oh yes, I am in Narcotics Anonymous'' and somebody
    saying, ``I am somebody's sponsor.'' And you mentioned also
    that they actually meet and that part of that is part of
    employment, or after hours they do meet there?
        Mr. Caudill [continuing]. A lot of times, and we allow
    them, you know, if they have a bad day or something they can
    leave early, go make a meeting and come back, or whatever. So
    it works out really well. I have got a second-shift supervisor
    that sponsors the entire crew, 100, and he has done a great
    job. He has been there for eight years.
        Senator Paul. And I think that is sort of one thing, me
    learning from listening to you and listening to Rob and others,
    is that, you know, everybody deserves a second chance but not
    everybody is going to take the second chance. You have to be
    doing something. I mean, you know, not every alcoholic is going
    to be a great employee, and not every heroin addict is going to
    be a great employee. They have to be wanting to try to recover.
    And so being in some kind of program, was what Rob was saying,
    requiring them to be in a program.
        And I liked the idea of the contract. It reminded me, I was
    visiting one of the KIPP charter schools down in Nashville, and
    a young girl was just like, you know, brilliant, and going on
    to all these great places. She has probably already graduated
    from college by now. But part of what they told me was that
    they had a contract, and the parents sat down, and they, for
    the children at least, they were responsible that the child was
    going to bring his homework in, and for a child you can see
    that. But somehow accepting that responsibility through the
    contract, which leads to loyalty, but it has to be this two-way
    street, and you have got to, you know, I do not know.
        But I am amazed how many people want to try to get the
    second chance. When we first did expungement in Louisville, an
    attorney gave like $300,000 to help with the fees for it, and
    1,000 people showed up. And to me that did not show that
    everybody wants their record expunged. Not everybody wants a
    second change, but 1,000 people did. And you have selected out,
    for the people who are no longer a drug dealer, why get your
    record expunged if you are a drug dealer? They want legitimate
    jobs, and 1,000 people showed up.
        So I think there is great hope and great momentum going
    forward with this. And the one thing that we will try to work
    on is looking at the Federal employment to see if there are any
    impediments to Federal employment. But then also I think that--
    I will bet you there is some group that may have started this,
    but I want to look in to see if there is some way of having a
    posting for employers, maybe not even just a job but employer
    that is friendly towards hiring people with a second chance.
    And it may be that it would be a national posting. You have to
    go somewhere else if you are an engineer or a nurse.
        But I bet you something like that might be of value,
    because here it is by word of mouth. People know you can go to
    Caudill Seed, and people know about your restaurant. Anyway,
    there might be some way of facilitating that. It might not have
    anything to do with government but there might be a way of
    facilitating the knowledge of who these employers are.
        But thank you all for your testimony, and Thank you, Mr.
    Chairman, for doing this.
        Chairman Cardin. Thank you, Senator Paul.
        Senator Booker, anything further?
        Senator Booker. No, sir, but I would look forward to
    following up and seeing if we can think of some things we can
    work on together to make it easier to access loans. I think the
    idea about doing something maybe with this Committee--I do not
    know how in-person it would be--but also with the Bureau of
    Prisons to talk about something that we could try to do
    together, or a pilot program.
        Because I noticed, from my own personal experience, the
    differences between those prisons in New Jersey that have those
    programs that open people up to basic financial literacy,
    resume writing on computers, the different you give in people
    coming out is pretty extraordinary. And more people than we
    think max out and then are just sort of released with no
    preparation or no arrangements being made if possible. And it
    is just a pathway to having people get in trouble again, and
    they go back right into the environments that often foster the
    criminal activity in the first place, as opposed to having a
    real plan and a real help and a real start.
        So I am very curious about what we can possibly do
    together.
        Chairman Cardin. Thank you, Senator Booker. I do think this
    is an area where we can make progress in this Committee. There
    is strong bipartisan interest in moving forward.
        What this hearing has demonstrated, there is a path
    forward. There is hope. There is a path forward where we can
    provide opportunities for people to succeed in life, and, by
    the way, it is going to be good for our business.
        Mr. Perez, I tell you, I am so impressed by your
    experience, and the same thing with Mr. Marte, so impressed at
    how you have been able to give opportunities to individuals,
    but at the same time you have grown your own business to be a
    successful entity, which is what America is all about. So you
    give us hope that there is a path forward.
        What we need to do is remove the obstacles. That is what
    Senator Paul was saying. If we remove the obstacles, if it is
    in your business interests to hire the best employees, you will
    find a way to do it. But when we put obstacles in the way it
    makes it challenging for the private sector to do what they
    need to do. I agree with Senator Paul on this point. We do not
    always agree on that point, but this one, I think, is right.
        But I also think we can offer incentives, and, Dr.
    Phillips, you talked about some of the incentives, the extra
    costs involved, the risk factors. Those issues I think we can
    offer incentives to help in that regard. So I think we can put
    together a package.
        And Senator Paul, you are absolutely right. The Federal
    Government, in its employment practices, should be an example.
    They should not be a problem. So that is an area I think we
    clearly can work on.
        Again, I want to thank all four of our witnesses for your
    incredible commitment. You are an inspiration to all of us, so
    thank you all very much for being here.
        The Committee record will stay open for two weeks in the
    event members decide to ask questions for the record. We would
    ask that you would promptly reply to those questions. And once
    again, thank you for your testimony, and with the Committee
    will stand adjourned.
        [Whereupon, at 3:54 p.m., the Committee was adjourned.]

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