Business Owner, With Over $6 Million in Assets, No Longer Economically Disadvantaged; In the Matter of Caduceus Healthcare, Inc., SBA No. BDPE-578


SBA decisions suspending and terminating concern from the 8(a) Business Development program are affirmed. SBA regulations provide that to be eligible for the 8(a) program, a business owner must have a net worth less than $750,000 and assets less than $6 million. In this case, it was undisputed that the businesses owner had a net worth and assets in excess of those limits.

Caduceus Healthcare Inc. was a participant in SBA’s 8(a) Business Development program for economically disadvantaged businesses. The SBA sent Caduceus a notice of intent to terminate its 8(a) status. The SBA determined that Caduceus’s owner, Carlos Lopez, no longer qualified as economically disadvantaged. His net worth exceeded the $750,000 ceiling for 8(a) eligibility, and his assets exceeded the $6 million eligibility limit. What’s more, SBA found that between 2014 and 2016, Lopez’s average yearly income was more than $350,000 limit. SBA further found that Lopez had made excessive withdrawals from the company for his personal benefit.

Lopez responded to the notice of intent to terminate, arguing that his high net worth and income was an aberration due to some high-value, short term contracts.  SBA was not persuaded; it sent Caduceus of notice of termination. While the appeal period for the notice of termination was pending, Caduceus discussed the possibility of receiving a sole-source contract with the Army. Believing that Caduceus was still marketing itself as an 8(a) business, the SBA suspended Caduceus from the 8(a) program. Caduceus appealed the termination and suspension to SBA’s Office of Hearing and Appeals.

OHA had no problem affirming the termination. SBA’s regulations require that maintain 8(a) eligibility, a business owner’s net worth must be less than $750,000 and their assets must be less than $6 million. Here, it was undisputed that Lopez exceeded those threshholds.

Caduceus argued that SBA had not accurately calculated Lopez’s net worth. It contended that loans and advances made to another company owned by Lopez were made for the benefit of the Caduceus. Thus, the argument continued, Lopez’s equity in that other company should not be counted in his net worth. OHA found no legal authority for excluding these loans from the net worth. What’s more, even if the loans were not counted in Lopez’s net worth, Caduceus was still ineligible because Lopez had over $6 million in assets.

Caduceus also argued that Lopez’s net worth and assets were likely to decrease in the future, but OHA found this meritless. Caduceus had multiple opportunities to show that Lopez’s net worth and assets were within the regulatory limits, but it failed to do so.

Caduceus is represented by LaChandra Pye, its General Counsel and Vice Presdient. The Small Business Administration is represented by Sabrina C. Daly and Mark R. Hagedorn.

SBA – Caduceus Healthcare