Minding Small Business

Tom Kleppe, head of the Small Business Administration, does not fit the cautious mold of the Washington bureaucrat. A self-made North Dakota business success (Glass Wax), he keeps a pair of six guns mounted on an office wall, wears electric blue shirts with dazzling horseshoe cufflinks, speaks bluntly -and is now taking some perhaps inevitable lumps. Kleppe's most recent troubles began when he went to Congress to ask for an expansion of SB A lending authority from $4.3 billion to $6.6 billion. He ran into a barrage of allegations that suggested an embarrassing range of SBA malfeasance, from political exploitation of the agency to bribery and kickbacks.

Much testimony before the House Subcommittee on Small Business was heard in closed session; one subject probed was a Senate Watergate Committee report that William Marumoto, an official of the Committee to Re-Elect the President, arranged placement of $1,483,000 in SBA grants in order to influence Mexican-American votes for Nixon's reelection. Publicly, the subcommittee revealed that Thomas Regan, head of the SBA office in Richmond, approved a loan to a local entrepreneur, Joseph C. Palumbo. Eleven days earlier, Regan, 44, had married Palumbo's sister. Subcommittee Member Henry Gonzalez, a Texas Democrat, says that congressional investigators are looking into a series of leads that point to possible kickbacks from borrowers, loans made to borrowers in bankruptcy, and loans made before completion of credit or criminal-record checks. One committee source guesses that in Richmond alone the SBA is stuck with more than $4 million in bad debts.

Kleppe blasted back that the Congressmen were indulging in "McCarthy-ism," and he can indeed point to some real accomplishments by the agency. Under his tenure, the SBA has encouraged local lenders to make high-risk loans backed by a 90% federal guarantee; four times as many such loans were made during the last fiscal year as in 1972. Most have been worthy and highly visible loans to grateful small businessmen who constitute no minor political constituency. Mindful of such factors, the House subcommittee last week decided after all to recommend that the agency's funding authority be expanded to the requested $6.6 billion level-but only for six months. After that, Kleppe will have to come back and answer some more hard questions.

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