[Congressional Record (Bound Edition), Volume 147 (2001), Part 16]
[House]
[Pages 22906-22910]
[From the U.S. Government Publishing Office, www.gpo.gov]



        SMALL BUSINESS INVESTMENT COMPANY AMENDMENTS ACT OF 2001

  Mr. MANZULLO. Mr. Speaker, I ask unanimous consent to take from the 
Speaker's table the Senate bill (S. 1196) to amend the Small Business 
Investment Act of 1958, and for other purposes, and ask for its 
immediate consideration in the House.
  The Clerk read the title of the Senate bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  Ms. VELAZQUEZ. Mr. Speaker, reserving the right to object, and I do 
not intend to object, I ask the gentleman from Illinois (Mr. Manzullo) 
to explain his request.
  Mr. MANZULLO. Mr. Speaker, will the gentlewoman yield?
  Ms. VELAZQUEZ. I yield to the gentleman from Illinois.
  Mr. MANZULLO. Mr. Speaker, the purpose is so that the 7(a) program 
and the 504 program, it will reduce fees in both those programs 
effective on October of next year; but the overall bill is important 
because it continues the SBIC programs going.


                                Small Business Administration,

                                Washington, DC, November 14, 2001.
     Hon. Donald A. Manzullo,
     Chairman, Committee on Small Business, House of 
         Representatives, Rayburn House Office Building, 
         Washington, DC.
       Dear Mr. Chairman: Congress will soon pass H.R. 2500, 
     Departments of Commerce, Justice, and State, the Judiciary 
     and Related Agencies Appropriations Act, 2002. As you know, 
     under the terms of the Continuing Resolution, upon enactment 
     of H.R. 2500 its provisions will immediately take effect. 
     That enactment will have a significant impact upon the Small 
     Business Investment Company (SBIC) participating securities 
     program.
       Under H.R. 2500, there is no subsidy budget authority 
     available for the participating securities program. The 
     Committee on Appropriations removed that funding in 
     anticipation of legislation from the Committee on Small 
     Business to enhance the fee structure of the participating 
     securities program. Those legislative changes would result in 
     a zero subsidy rate for the participating securities program. 
     This legislation was part of the Administration's budget 
     submission to the Congress and is supported by the SBIC 
     industry. Unfortunately, the authorizing language has not yet 
     passed the Congress.
       Absent the authorizing language the Small Business 
     Administration will be unable to make future commitments for 
     participating securities leverage until the authorizing 
     language is passed. I fear that such disruption will have a 
     chilling effect upon private sector participation in the SBIC 
     program. There are currently 30 participating securities 
     license applicants awaiting approval backed by approximately 
     $600 million dollars in capital. This capital, enhanced by 
     SBA's leverage, represents a significant potential investment 
     in America's small businesses, an investment that could be 
     negatively affected by the uncertainty of a suspension.
       Mr. Chairman, the SBIC participating securities program has 
     invested billions of dollars in small businesses and created 
     thousands of jobs, and has the potential to create so many 
     more. I urge you and your colleagues to work quickly to pass 
     the requisite legislation to raise the fee structure in the 
     participating securities program by 37.6 basis points and 
     prevent the suspension of the program. The SBA stands ready 
     to work with you on this legislation and help keep this 
     program working for small business.
           Sincerely,
                                                Hector V. Barreto,
                                                    Administrator.

  Ms. VELAZQUEZ. Mr. Speaker, further reserving the right to object, I 
rise in support of the amendment. Earlier this week, the Commerce, 
Justice and State bill sent to the President failed to provide any 
funding for the Small Business Investment Company program, which will 
force its complete shutdown.
  The SBIC program has been a real partner in helping America's small 
businesses grow both in times of economic prosperity and in times of 
economic slowdown. SBICs have assisted

[[Page 22907]]

small business owners by investing over $15 billion in long-term debt 
and equity capital to more than 90,000 small businesses and by 
investing more than $600 million to businesses in low- and moderate-
income areas. The SBICs have given such Fortune 500 companies as Intel, 
Federal Express, AOL, and Staples the tools they need to succeed and to 
become today's industry leaders.
  In an effort to keep the program operating, S. 1196 will increase the 
fees to make up for the lack of appropriated funds, but an increase in 
program fees will rule out the SBIC as an option for many small 
businesses across this country.
  A way to ensure lending options for this Nation's small businesses is 
to adopt the amendment under consideration. The amendment will reduce 
the costs of the 7(a) program which will allow for greater access to 
capital that small businesses, especially start-ups and those in low-
income areas, need to continue serving as the engine of this economy.
  I urge its adoption.
  Mr. MANZULLO. Mr. Speaker, I rise in support of S. 1196, the Small 
Business Investment Company Amendments Act of 2001. This is a fairly 
straightforward bill--it will keep venture capital flowing to small 
businesses during this critical time in our nation's economic recovery. 
Right now, there are 30 participating securities license applicants 
awaiting approval of this bill, with $600 million private equity 
capital at stake.
  In 1958, Congress created the SBIC program to assist small business 
owners in locating investment capital. The problems are still the same 
as they were 40 years ago, which are magnified by the collapse of many 
``dot.coms,'' the general economic slowdown, and the tragic events of 
September 11th. However, with other sources of private venture capital 
drying up, the SBIC program is becoming more and more critically 
important.
  Last year, SBIC financed 4,600 venture capital deals, investing $5.6 
billion in fast-growing small businesses. Since 1996, investing by 
SBIC-licensed firms accounted for about half of all venture capital 
deals made in the United States. Since its inception, the SBIC program 
has also returned $700 million directly to the U.S. Treasury. 
Indirectly, the SBIC program has generated millions of dollars in 
corporate tax revenue from companies as diverse as Federal Express, 
Apple Computer, Intel Corporation, America Online, Callaway Golf, and 
the Outback Steakhouse. They all had their start with an infusion of 
venture capital from SBIC-licensed firms.
  The main purpose of S. 1196 is to adjust the fees charged to 
Participating Security SBICs from 1.0 percent to 1.38 percent. This 
change is necessary because both the President and Congress have agreed 
to eliminate funding for this program. The FY '02 Commerce/Justice/
State Appropriations bill (H.R. 2500), which passed both bodies earlier 
this week, contained no funding for the Participating Securities SBIC 
program. The Debentures SBIC program already operates at zero cost to 
the taxpayer. If the President signs H.R. 2500 without any funding or 
and S. 1196, with a fee increase, does not reach his desk, then the 
SBIC Participating Securities program terminates. According to a letter 
I received from the SBA Administrator, Hector Barreto, which I include 
for the record, there are currently 30 participating securities license 
applicants awaiting approval backed by approximately $600 million 
dollars in capital. If S. 1196 does not pass, these and all future 
small business investment opportunities through the SBIC program would 
vanish.
  H.R. 2500 also contains increased program levels for the SBIC 
program. S. 1196 is needed to accommodate the anticipated increased 
demand for venture capital financing as the private sector has 
withdrawn from the marketplace. The SBIC program serves best as a 
counter cyclical program--it is particularly needed during a downturn 
in our economy.
  The other provisions in S. 1196 affecting the SBIC program strengthen 
the oversight and authority of the SBA to take action against bad 
actors within the program, promoting the integrity of the program, and 
streamline its operation.
  The House amendments to S. 1196 modestly lower the fees in the other 
main access to capital programs of the SBA--the 7(a) General Business 
loan program and the 504 Certified Development Company (CDC) program. 
In 1995, Congress increased the fees in the programs to lower the cost 
to the taxpayer. Since then, the Office of Management and Budget (OMB), 
the Congressional Budget Office (CBO), and the General Accounting 
Office (GAO) have all agreed that small business borrowers and lenders 
have paid in far too much fees to keep the program operating at no cost 
to the taxpayer. In fact, CBO estimates that participants in the 7(a) 
program alone have overpaid the U.S. Treasury in terms of higher fees 
to the tune of $1.258 billion over the past nine years.
  These amendments are a small beginning to rectify this problem. The 
fee changes include lowering the fees on 7(a) loans from between 
$150,000 to $250,000 to two percent. For all loans above $250,000, the 
fees would be three percent. This amendment eliminates the 3.5 percent 
fee on loans above $700,000. The annual fee would drop in half from 
0.25 percent to 0.50 percent. In addition, 504 fees would be reduced in 
terms of both the upfront and on-going fee for the entire life of the 
loan.
  It should be made clear that fee reductions contained in the House 
amendments to S. 1196 are applicable only after October 1, 2002--at the 
beginning of the next fiscal year. Thus, there should be no 
interruption in the level of service offered small business borrowers 
and lenders during this fiscal year. Also, these changes are subject to 
appropriations, which I am optimistic will be addressed when OMB makes 
its promised changes to the subsidy rate calculation model.
  Mr. Speaker, I rise in support of S. 1196 as amended, and I urge my 
colleagues to support these needed changes to these programs.
  Ms. Velazquez. Mr. Speaker, I withdraw my reservation of objection.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  There was no objection.
  The Clerk read the Senate bill, as follows:

                                S. 1196

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Investment 
     Company Amendments Act of 2001''.

     SEC. 2. SUBSIDY FEES.

       (a) In General.--Section 303 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 683) is amended--
       (1) in subsection (b)--
       (A) by striking ``of not more than 1 percent per year'';
       (B) by inserting ``which amount may not exceed 1.38 percent 
     per year, and'' before ``which shall be paid''; and
       (C) by striking ``September 30, 2000'' and inserting 
     ``September 30, 2001''; and
       (2) in subsection (g)(2)--
       (A) by striking ``of not more than 1 percent per year'';
       (B) by inserting ``which amount may not exceed 1.38 percent 
     per year, and'' before ``which shall be paid''; and
       (C) by striking ``September 30, 2000'' and inserting 
     ``September 30, 2001''.
       (b) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 2001.

     SEC. 3. CONFLICTS OF INTEREST.

       Section 312 of the Small Business Investment Act of 1958 
     (15 U.S.C. 687d) is amended by striking ``(including 
     disclosure in the locality most directly affected by the 
     transaction)''.

     SEC. 4. PENALTIES FOR FALSE STATEMENTS.

       (a) Criminal Penalties.--Section 1014 of title 18, United 
     States Code, is amended by inserting ``, as defined in 
     section 103 of the Small Business Investment Act of 1958 (15 
     U.S.C. 662), or the Small Business Administration in 
     connection with any provision of that Act'' after ``small 
     business investment company''.
       (b) Civil Penalties.--Section 951 of the Financial 
     Institutions Reform, Recovery, and Enforcement Act of 1989 
     (12 U.S.C. 1833a) is amended--
       (1) by redesignating subsections (d) through (g) as 
     subsections (e) through (h), respectively; and
       (2) in subsection (c)--
       (A) in paragraph (1), by striking ``or'' at the end;
       (B) in paragraph (2)--
       (i) by striking ``1341;'' and inserting ``1341''; and
       (ii) by striking ``institution.'' and inserting 
     ``institution; or'';
       (C) by inserting immediately after paragraph (2) the 
     following:
       ``(3) section 16(a) of the Small Business Act (15 U.S.C. 
     645(a)).''; and
       (D) by striking ``This section shall'' and inserting the 
     following:
       ``(d) Effective Date.--This section shall''.

     SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

       Section 313 of the Small Business Investment Act of 1958 
     (15 U.S.C. 687e) is amended to read as follows:

     ``SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

       ``(a) Definition of `Management Official'.--In this 
     section, the term `management official' means an officer, 
     director, general partner, manager, employee, agent,

[[Page 22908]]

     or other participant in the management or conduct of the 
     affairs of a licensee.
       ``(b) Removal of Management Officials.--
       ``(1) Notice of removal.--The Administrator may serve upon 
     any management official a written notice of its intention to 
     remove that management official whenever, in the opinion of 
     the Administrator--
       ``(A) such management official--
       ``(i) has willfully and knowingly committed any substantial 
     violation of--

       ``(I) this Act;
       ``(II) any regulation issued under this Act; or
       ``(III) a cease-and-desist order which has become final; or

       ``(ii) has willfully and knowingly committed or engaged in 
     any act, omission, or practice which constitutes a 
     substantial breach of a fiduciary duty of that person as a 
     management official; and
       ``(B) the violation or breach of fiduciary duty is one 
     involving personal dishonesty on the part of such management 
     official.
       ``(2) Contents of notice.--A notice of intention to remove 
     a management official, as provided in paragraph (1), shall 
     contain a statement of the facts constituting grounds 
     therefor, and shall fix a time and place at which a hearing 
     will be held thereon.
       ``(3) Hearings.--
       ``(A) Timing.--A hearing described in paragraph (2) shall 
     be fixed for a date not earlier than 30 days nor later than 
     60 days after the date of service of notice of the hearing, 
     unless an earlier or a later date is set by the Administrator 
     at the request of--
       ``(i) the management official, and for good cause shown; or
       ``(ii) the Attorney General of the United States.
       ``(B) Consent.--Unless the management official shall appear 
     at a hearing described in this paragraph in person or by a 
     duly authorized representative, that management official 
     shall be deemed to have consented to the issuance of an order 
     of removal under paragraph (1).
       ``(4) Issuance of order of removal.--
       ``(A) In general.--In the event of consent under paragraph 
     (3)(B), or if upon the record made at a hearing described in 
     this subsection, the Administrator finds that any of the 
     grounds specified in the notice of removal has been 
     established, the Administrator may issue such orders of 
     removal from office as the Administrator deems appropriate.
       ``(B) Effectiveness.--An order under subparagraph (A) 
     shall--
       ``(i) become effective at the expiration of 30 days after 
     the date of service upon the subject licensee and the 
     management official concerned (except in the case of an order 
     issued upon consent as described in paragraph (3)(B), which 
     shall become effective at the time specified in such order); 
     and
       ``(ii) remain effective and enforceable, except to such 
     extent as it is stayed, modified, terminated, or set aside by 
     action of the Administrator or a reviewing court in 
     accordance with this section.
       ``(c) Authority to Suspend or Prohibit Participation.--
       ``(1) In general.--The Administrator may, if the 
     Administrator deems it necessary for the protection of the 
     licensee or the interests of the Administration, suspend from 
     office or prohibit from further participation in any manner 
     in the management or conduct of the affairs of the licensee, 
     or both, any management official referred to in subsection 
     (b)(1), by written notice to such effect served upon the 
     management official.
       ``(2) Effectiveness.--A suspension or prohibition under 
     paragraph (1)--
       ``(A) shall become effective upon service of notice under 
     paragraph (1); and
       ``(B) unless stayed by a court in proceedings authorized by 
     paragraph (3), shall remain in effect--
       ``(i) pending the completion of the administrative 
     proceedings pursuant to a notice of intention to remove 
     served under subsection (b); and
       ``(ii) until such time as the Administrator shall dismiss 
     the charges specified in the notice, or, if an order of 
     removal or prohibition is issued against the management 
     official, until the effective date of any such order.
       ``(3) Judicial review.--Not later than 10 days after any 
     management official has been suspended from office or 
     prohibited from participation in the management or conduct of 
     the affairs of a licensee, or both, under paragraph (1), that 
     management official may apply to the United States district 
     court for the judicial district in which the home office of 
     the licensee is located, or the United States District Court 
     for the District of Columbia, for a stay of the suspension or 
     prohibition pending the completion of the administrative 
     proceedings pursuant to a notice of intent to remove served 
     upon the management official under subsection (b), and such 
     court shall have jurisdiction to stay such action.
       ``(d) Authority To Suspend on Criminal Charges.--
       ``(1) In general.--Whenever a management official is 
     charged in any information, indictment, or complaint 
     authorized by a United States attorney, with the commission 
     of or participation in a felony involving dishonesty or 
     breach of trust, the Administrator may, by written notice 
     served upon that management official, suspend that management 
     official from office or prohibit that management official 
     from further participation in any manner in the management or 
     conduct of the affairs of the licensee, or both.
       ``(2) Effectiveness.--A suspension or prohibition under 
     paragraph (1) shall remain in effect until the subject 
     information, indictment, or complaint is finally disposed of, 
     or until terminated by the Administrator.
       ``(3) Authority upon conviction.--If a judgment of 
     conviction with respect to an offense described in paragraph 
     (1) is entered against a management official, then at such 
     time as the judgment is not subject to further appellate 
     review, the Administrator may issue and serve upon the 
     management official an order removing that management 
     official, which removal shall become effective upon service 
     of a copy of the order upon the licensee.
       ``(4) Authority upon dismissal or other disposition.--A 
     finding of not guilty or other disposition of charges 
     described in paragraph (1) shall not preclude the 
     Administrator from thereafter instituting proceedings to 
     suspend or remove the management official from office, or to 
     prohibit the management official from participation in the 
     management or conduct of the affairs of the licensee, or 
     both, pursuant to subsection (b) or (c).
       ``(e) Notification to Licensees.--Copies of each notice 
     required to be served on a management official under this 
     section shall also be served upon the interested licensee.
       ``(f) Procedural Provisions; Judicial Review.--
       ``(1) Hearing venue.--Any hearing provided for in this 
     section shall be--
       ``(A) held in the Federal judicial district or in the 
     territory in which the principal office of the licensee is 
     located, unless the party afforded the hearing consents to 
     another place; and
       ``(B) conducted in accordance with the provisions of 
     chapter 5 of title 5, United States Code.
       ``(2) Issuance of orders.--After a hearing provided for in 
     this section, and not later than 90 days after the 
     Administrator has notified the parties that the case has been 
     submitted for final decision, the Administrator shall render 
     a decision in the matter (which shall include findings of 
     fact upon which its decision is predicated), and shall issue 
     and cause to be served upon each party to the proceeding an 
     order or orders consistent with the provisions of this 
     section.
       ``(3) Authority to modify orders.--The Administrator may 
     modify, terminate, or set aside any order issued under this 
     section--
       ``(A) at any time, upon such notice, and in such manner as 
     the Administrator deems proper, unless a petition for review 
     is timely filed in a court of appeals of the United States, 
     as provided in paragraph (4)(B), and thereafter until the 
     record in the proceeding has been filed in accordance with 
     paragraph (4)(C); and
       ``(B) upon such filing of the record, with permission of 
     the court.
       ``(4) Judicial review.--
       ``(A) In general.--Judicial review of an order issued under 
     this section shall be exclusively as provided in this 
     subsection.
       ``(B) Petition for review.--Any party to a hearing provided 
     for in this section may obtain a review of any order issued 
     pursuant to paragraph (2) (other than an order issued with 
     the consent of the management official concerned, or an order 
     issued under subsection (d)), by filing in the court of 
     appeals of the United States for the circuit in which the 
     principal office of the licensee is located, or in the United 
     States Court of Appeals for the District of Columbia Circuit, 
     not later than 30 days after the date of service of such 
     order, a written petition praying that the order of the 
     Administrator be modified, terminated, or set aside.
       ``(C) Notification to administration.--A copy of a petition 
     filed under subparagraph (B) shall be forthwith transmitted 
     by the clerk of the court to the Administrator, and thereupon 
     the Administrator shall file in the court the record in the 
     proceeding, as provided in section 2112 of title 28, United 
     States Code.
       ``(D) Court jurisdiction.--Upon the filing of a petition 
     under subparagraph (A)--
       ``(i) the court shall have jurisdiction, which, upon the 
     filing of the record under subparagraph (C), shall be 
     exclusive, to affirm, modify, terminate, or set aside, in 
     whole or in part, the order of the Administrator, except as 
     provided in the last sentence of paragraph (3)(B);
       ``(ii) review of such proceedings shall be had as provided 
     in chapter 7 of title 5, United States Code; and
       ``(iii) the judgment and decree of the court shall be 
     final, except that the judgment and decree shall be subject 
     to review by the Supreme Court of the United States upon 
     certiorari, as provided in section 1254 of title 28, United 
     States Code.
       ``(E) Judicial review not a stay.--The commencement of 
     proceedings for judicial review under this paragraph shall 
     not, unless specifically ordered by the court, operate as a 
     stay of any order issued by the Administrator under this 
     section.''.

     SEC. 6. REDUCTION OF FEES.

       (a) Two-Year Reduction of Section 7(a) Fees.--

[[Page 22909]]

       (1) Guarantee fees.--Section 7(a)(18) of the Small Business 
     Act (15 U.S.C. 636(a)(18)) is amended by adding at the end 
     the following:
       ``(C) Two-year reduction in fees.--With respect to loans 
     approved during the 2-year period beginning on October 1, 
     2002, the guarantee fee under subparagraph (A) shall be as 
     follows:
       ``(i) A guarantee fee equal to 2 percent of the deferred 
     participation share of a total loan amount that is not more 
     than $250,000.
       ``(ii) A guarantee fee equal to 3 percent of the deferred 
     participation share of a total loan amount that is more than 
     $250,000.''.
       (2) Annual fees.--Section 7(a)(23)(A) of the Small Business 
     Act (15 U.S.C. 636(a)(23)(A)) is amended by adding at the end 
     the following: ``With respect to loans approved during the 2-
     year period beginning on October 1, 2002, the annual fee 
     assessed and collected under the preceding sentence shall be 
     in an amount equal to 0.25 percent of the outstanding balance 
     of the deferred participation share of the loan.''.
       (b) Reduction of Section 504 Fees.--Section 503 of the 
     Small Business Investment Act of 1958 (15 U.S.C. 697) is 
     amended--
       (1) in subsection (b)(7)(A)--
       (A) by redesignating clauses (i) and (ii) as subclauses (I) 
     and (II), respectively, and moving the margins 2 ems to the 
     right;
       (B) by striking ``not exceed the lesser'' and inserting 
     ``not exceed--
       ``(i) the lesser''; and
       (C) by adding at the end the following:
       ``(ii) 50 percent of the amount established under clause 
     (i) in the case of a loan made during the 2-year period 
     beginning on October 1, 2002, for the life of the loan; 
     and''; and
       (2) by adding at the end the following:
       ``(i) Two-Year Waiver of Fees.--The Administration may not 
     assess or collect any up front guarantee fee with respect to 
     loans made under this title during the 2-year period 
     beginning on October 1, 2002.''.
       (c) Budgetary Treatment of Loans and Financings.--
     Assistance made available under any loan made or approved by 
     the Small Business Administration under section 7(a) of the 
     Small Business Act (15 U.S.C. 636(a)) or financings made 
     under title III or V of the Small Business Investment Act of 
     1958 (15 U.S.C. 697a), during the 2-year period beginning on 
     October 1, 2002, shall be treated as separate programs of the 
     Small Business Administration for purposes of the Federal 
     Credit Reform Act of 1990 only.
       (d) Use of Funds.--The amendments made by this section 
     shall be effective only to the extent that funds are made 
     available under appropriations Acts, which funds shall be 
     utilized by the Administrator to offset the cost (as such 
     term is defined in section 502 of the Federal Credit Reform 
     Act of 1990) of such amendments.
       (e) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 2002.


    Amendment in the Nature of a Substitute Offered by Mr. Manzullo

  Mr. MANZULLO. Mr. Speaker, I offer an amendment in the nature of a 
substitute.
  The Clerk read as follows:

       Amendment in the nature of a substitute offered by Mr. 
     Manzullo:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Investment 
     Company Amendments Act of 2001''.

     SEC. 2. SUBSIDY FEES.

       (a) In General.--Section 303 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 683) is amended--
       (1) in subsection (b)--
       (A) by striking ``of not more than 1 percent per year'';
       (B) by inserting ``which amount may not exceed 1.38 percent 
     per year, and'' before ``which shall be paid''; and
       (C) by striking ``September 30, 2000'' and inserting 
     ``September 30, 2001''; and
       (2) in subsection (g)(2)--
       (A) by striking ``of not more than 1 percent per year'';
       (B) by inserting ``which amount may not exceed 1.38 percent 
     per year, and'' before ``which shall be paid''; and
       (C) by striking ``September 30, 2000'' and inserting 
     ``September 30, 2001''.
       (b) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 2001.

     SEC. 3. CONFLICTS OF INTEREST.

       Section 312 of the Small Business Investment Act of 1958 
     (15 U.S.C. 687d) is amended by striking ``(including 
     disclosure in the locality most directly affected by the 
     transaction)''.

     SEC. 4. PENALTIES FOR FALSE STATEMENTS.

       (a) Criminal Penalties.--Section 1014 of title 18, United 
     States Code, is amended by inserting ``, as defined in 
     section 103 of the Small Business Investment Act of 1958 (15 
     U.S.C. 662), or the Small Business Administration in 
     connection with any provision of that Act'' after ``small 
     business investment company''.
       (b) Civil Penalties.--Section 951 of the Financial 
     Institutions Reform, Recovery, and Enforcement Act of 1989 
     (12 U.S.C. 1833a) is amended--
       (1) by redesignating subsections (d) through (g) as 
     subsections (e) through (h), respectively; and
       (2) in subsection (c)--
       (A) in paragraph (1), by striking ``or'' at the end;
       (B) in paragraph (2)--
       (i) by striking ``1341;'' and inserting ``1341''; and
       (ii) by striking ``institution.'' and inserting 
     ``institution; or'';
       (C) by inserting immediately after paragraph (2) the 
     following:
       ``(3) section 16(a) of the Small Business Act (15 U.S.C. 
     645(a)).''; and
       (D) by striking ``This section shall'' and inserting the 
     following:
       ``(d) Effective Date.--This section shall''.

     SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

       Section 313 of the Small Business Investment Act of 1958 
     (15 U.S.C. 687e) is amended to read as follows:

     ``SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

       ``(a) Definition of `Management Official'.--In this 
     section, the term `management official' means an officer, 
     director, general partner, manager, employee, agent, or other 
     participant in the management or conduct of the affairs of a 
     licensee.
       ``(b) Removal of Management Officials.--
       ``(1) Notice of removal.--The Administrator may serve upon 
     any management official a written notice of its intention to 
     remove that management official whenever, in the opinion of 
     the Administrator--
       ``(A) such management official--
       ``(i) has willfully and knowingly committed any substantial 
     violation of--

       ``(I) this Act;
       ``(II) any regulation issued under this Act; or
       ``(III) a cease-and-desist order which has become final; or

       ``(ii) has willfully and knowingly committed or engaged in 
     any act, omission, or practice which constitutes a 
     substantial breach of a fiduciary duty of that person as a 
     management official; and
       ``(B) the violation or breach of fiduciary duty is one 
     involving personal dishonesty on the part of such management 
     official.
       ``(2) Contents of notice.--A notice of intention to remove 
     a management official, as provided in paragraph (1), shall 
     contain a statement of the facts constituting grounds 
     therefor, and shall fix a time and place at which a hearing 
     will be held thereon.
       ``(3) Hearings.--
       ``(A) Timing.--A hearing described in paragraph (2) shall 
     be fixed for a date not earlier than 30 days nor later than 
     60 days after the date of service of notice of the hearing, 
     unless an earlier or a later date is set by the Administrator 
     at the request of--
       ``(i) the management official, and for good cause shown; or
       ``(ii) the Attorney General of the United States.
       ``(B) Consent.--Unless the management official shall appear 
     at a hearing described in this paragraph in person or by a 
     duly authorized representative, that management official 
     shall be deemed to have consented to the issuance of an order 
     of removal under paragraph (1).
       ``(4) Issuance of order of removal.--
       ``(A) In general.--In the event of consent under paragraph 
     (3)(B), or if upon the record made at a hearing described in 
     this subsection, the Administrator finds that any of the 
     grounds specified in the notice of removal has been 
     established, the Administrator may issue such orders of 
     removal from office as the Administrator deems appropriate.
       ``(B) Effectiveness.--An order under subparagraph (A) 
     shall--
       ``(i) become effective at the expiration of 30 days after 
     the date of service upon the subject licensee and the 
     management official concerned (except in the case of an order 
     issued upon consent as described in paragraph (3)(B), which 
     shall become effective at the time specified in such order); 
     and
       ``(ii) remain effective and enforceable, except to such 
     extent as it is stayed, modified, terminated, or set aside by 
     action of the Administrator or a reviewing court in 
     accordance with this section.
       ``(c) Authority to Suspend or Prohibit Participation.--
       ``(1) In general.--The Administrator may, if the 
     Administrator deems it necessary for the protection of the 
     licensee or the interests of the Administration, suspend from 
     office or prohibit from further participation in any manner 
     in the management or conduct of the affairs of the licensee, 
     or both, any management official referred to in subsection 
     (b)(1), by written notice to such effect served upon the 
     management official.
       ``(2) Effectiveness.--A suspension or prohibition under 
     paragraph (1)--
       ``(A) shall become effective upon service of notice under 
     paragraph (1); and
       ``(B) unless stayed by a court in proceedings authorized by 
     paragraph (3), shall remain in effect--
       ``(i) pending the completion of the administrative 
     proceedings pursuant to a notice of intention to remove 
     served under subsection (b); and
       ``(ii) until such time as the Administrator shall dismiss 
     the charges specified in the notice, or, if an order of 
     removal or prohibition is issued against the management 
     official, until the effective date of any such order.
       ``(3) Judicial review.--Not later than 10 days after any 
     management official has been suspended from office or 
     prohibited from participation in the management or conduct of 
     the affairs of a licensee, or both, under paragraph (1),

[[Page 22910]]

     that management official may apply to the United States 
     district court for the judicial district in which the home 
     office of the licensee is located, or the United States 
     District Court for the District of Columbia, for a stay of 
     the suspension or prohibition pending the completion of the 
     administrative proceedings pursuant to a notice of intent to 
     remove served upon the management official under subsection 
     (b), and such court shall have jurisdiction to stay such 
     action.
       ``(d) Authority To Suspend on Criminal Charges.--
       ``(1) In general.--Whenever a management official is 
     charged in any information, indictment, or complaint 
     authorized by a United States attorney, with the commission 
     of or participation in a felony involving dishonesty or 
     breach of trust, the Administrator may, by written notice 
     served upon that management official, suspend that management 
     official from office or prohibit that management official 
     from further participation in any manner in the management or 
     conduct of the affairs of the licensee, or both.
       ``(2) Effectiveness.--A suspension or prohibition under 
     paragraph (1) shall remain in effect until the subject 
     information, indictment, or complaint is finally disposed of, 
     or until terminated by the Administrator.
       ``(3) Authority upon conviction.--If a judgment of 
     conviction with respect to an offense described in paragraph 
     (1) is entered against a management official, then at such 
     time as the judgment is not subject to further appellate 
     review, the Administrator may issue and serve upon the 
     management official an order removing that management 
     official, which removal shall become effective upon service 
     of a copy of the order upon the licensee.
       ``(4) Authority upon dismissal or other disposition.--A 
     finding of not guilty or other disposition of charges 
     described in paragraph (1) shall not preclude the 
     Administrator from thereafter instituting proceedings to 
     suspend or remove the management official from office, or to 
     prohibit the management official from participation in the 
     management or conduct of the affairs of the licensee, or 
     both, pursuant to subsection (b) or (c).
       ``(e) Notification to Licensees.--Copies of each notice 
     required to be served on a management official under this 
     section shall also be served upon the interested licensee.
       ``(f) Procedural Provisions; Judicial Review.--
       ``(1) Hearing venue.--Any hearing provided for in this 
     section shall be--
       ``(A) held in the Federal judicial district or in the 
     territory in which the principal office of the licensee is 
     located, unless the party afforded the hearing consents to 
     another place; and
       ``(B) conducted in accordance with the provisions of 
     chapter 5 of title 5, United States Code.
       ``(2) Issuance of orders.--After a hearing provided for in 
     this section, and not later than 90 days after the 
     Administrator has notified the parties that the case has been 
     submitted for final decision, the Administrator shall render 
     a decision in the matter (which shall include findings of 
     fact upon which its decision is predicated), and shall issue 
     and cause to be served upon each party to the proceeding an 
     order or orders consistent with the provisions of this 
     section.
       ``(3) Authority to modify orders.--The Administrator may 
     modify, terminate, or set aside any order issued under this 
     section--
       ``(A) at any time, upon such notice, and in such manner as 
     the Administrator deems proper, unless a petition for review 
     is timely filed in a court of appeals of the United States, 
     as provided in paragraph (4)(B), and thereafter until the 
     record in the proceeding has been filed in accordance with 
     paragraph (4)(C); and
       ``(B) upon such filing of the record, with permission of 
     the court.
       ``(4) Judicial review.--
       ``(A) In general.--Judicial review of an order issued under 
     this section shall be exclusively as provided in this 
     subsection.
       ``(B) Petition for review.--Any party to a hearing provided 
     for in this section may obtain a review of any order issued 
     pursuant to paragraph (2) (other than an order issued with 
     the consent of the management official concerned, or an order 
     issued under subsection (d)), by filing in the court of 
     appeals of the United States for the circuit in which the 
     principal office of the licensee is located, or in the United 
     States Court of Appeals for the District of Columbia Circuit, 
     not later than 30 days after the date of service of such 
     order, a written petition praying that the order of the 
     Administrator be modified, terminated, or set aside.
       ``(C) Notification to administration.--A copy of a petition 
     filed under subparagraph (B) shall be forthwith transmitted 
     by the clerk of the court to the Administrator, and thereupon 
     the Administrator shall file in the court the record in the 
     proceeding, as provided in section 2112 of title 28, United 
     States Code.
       ``(D) Court jurisdiction.--Upon the filing of a petition 
     under subparagraph (A)--
       ``(i) the court shall have jurisdiction, which, upon the 
     filing of the record under subparagraph (C), shall be 
     exclusive, to affirm, modify, terminate, or set aside, in 
     whole or in part, the order of the Administrator, except as 
     provided in the last sentence of paragraph (3)(B);
       ``(ii) review of such proceedings shall be had as provided 
     in chapter 7 of title 5, United States Code; and
       ``(iii) the judgment and decree of the court shall be 
     final, except that the judgment and decree shall be subject 
     to review by the Supreme Court of the United States upon 
     certiorari, as provided in section 1254 of title 28, United 
     States Code.
       ``(E) Judicial review not a stay.--The commencement of 
     proceedings for judicial review under this paragraph shall 
     not, unless specifically ordered by the court, operate as a 
     stay of any order issued by the Administrator under this 
     section.''.

     SEC. 6. REDUCTION OF FEES.

       (a) Two-Year Reduction of Section 7(a) Fees.--
       (1) Guarantee fees.--Section 7(a)(18) of the Small Business 
     Act (15 U.S.C. 636(a)(18)) is amended by adding at the end 
     the following:
       ``(C) Two-year reduction in fees.--With respect to loans 
     approved during the 2-year period beginning on October 1, 
     2002, the guarantee fee under subparagraph (A) shall be as 
     follows:
       ``(i) A guarantee fee equal to 2 percent of the deferred 
     participation share of a total loan amount that is not more 
     than $250,000.
       ``(ii) A guarantee fee equal to 3 percent of the deferred 
     participation share of a total loan amount that is more than 
     $250,000.''.
       (2) Annual fees.--Section 7(a)(23)(A) of the Small Business 
     Act (15 U.S.C. 636(a)(23)(A)) is amended by adding at the end 
     the following: ``With respect to loans approved during the 2-
     year period beginning on October 1, 2002, the annual fee 
     assessed and collected under the preceding sentence shall be 
     in an amount equal to 0.25 percent of the outstanding balance 
     of the deferred participation share of the loan.''.
       (b) Reduction of Section 504 Fees.--Section 503 of the 
     Small Business Investment Act of 1958 (15 U.S.C. 697) is 
     amended--
       (1) in subsection (b)(7)(A)--
       (A) by redesignating clauses (i) and (ii) as subclauses (I) 
     and (II), respectively, and moving the margins 2 ems to the 
     right;
       (B) by striking ``not exceed the lesser'' and inserting 
     ``not exceed--
       ``(i) the lesser''; and
       (C) by adding at the end the following:
       ``(ii) 50 percent of the amount established under clause 
     (i) in the case of a loan made during the 2-year period 
     beginning on October 1, 2002, for the life of the loan; 
     and''; and
       (2) by adding at the end the following:
       ``(i) Two-Year Waiver of Fees.--The Administration may not 
     assess or collect any up front guarantee fee with respect to 
     loans made under this title during the 2-year period 
     beginning on October 1, 2002.''.
       (c) Budgetary Treatment of Loans and Financings.--
     Assistance made available under any loan made or approved by 
     the Small Business Administration under section 7(a) of the 
     Small Business Act (15 U.S.C. 636(a)) or financings made 
     under title III or V of the Small Business Investment Act of 
     1958 (15 U.S.C. 697a), during the 2-year period beginning on 
     October 1, 2002, shall be treated as separate programs of the 
     Small Business Administration for purposes of the Federal 
     Credit Reform Act of 1990 only.
       (d) Use of Funds.--The amendments made by this section 
     shall be effective only to the extent that funds are made 
     available under appropriations Acts, which funds shall be 
     utilized by the Administrator to offset the cost (as such 
     term is defined in section 502 of the Federal Credit Reform 
     Act of 1990) of such amendments.
       (e) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 2002.

  Mr. MANZULLO (during the reading). Mr. Speaker, I ask unanimous 
consent that the amendment be considered as read and printed in the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from Illinois (Mr. Manzullo) 
is recognized for 1 hour.
  Mr. MANZULLO. Mr. Speaker, I yield myself such time as I may consume.
  As I stated, the purpose of the amendment is to decrease the fees of 
the 7(a) program and the 504 program effective October 1 of the year 
2002.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the amendment in the 
nature of a substitute offered by the gentleman from Illinois (Mr. 
Manzullo).
  The amendment in the nature of a substitute was agreed to.
  The Senate bill was ordered to be read a third time, was read the 
third time, and passed, and a motion to reconsider was laid on the 
table.

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