[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
                            
                
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        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:]

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    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:]

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    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:]

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    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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