Inclement Weather, the Holidays, and Catching Up on Bills Not Valid Excuses for SDVOSB’s Failure to Update CVE Office on Change in Ownership; CVE Appeal of Gruene Shredding, LLC, SBA No. CVE-220-A

Appeal of CVE decision terminating the status of an SDVOSB is denied. The CVE office terminated in part because the SDVOSB failed to notify the agency of a change in ownership. The company claimed it was unable to notify because of bad weather, the holidays, and the need to catch up on bills. OHA found that CVE does not need to consider these extenuating circumstances as part of the termination decision.

Background

The VA’s CVE Office verified Gruene Shredding as an SDVOSB in 2019. As part of a re-verification review in 2021, CVE learned that Gruene had a change in ownership. Where the company had been 100% owned by one service-disabled veteran, it was now owned by three parties. CVE issued a Notice of Proposed Cancellation of status to Gruene.

Greune responded to the notice and acknowledged the change in ownership. Gruene conceded that it had not promptly informed CVE of the change due to the need to catch up on some bills and inclement weather.

But CVE found additional problems with Gruene’s response. Specifically, it now appeared that Gruene had more than one managing member, and that some of the managers were not service-disabled veterans. Gruene sent a second notice of cancellation. Gruene didn’t respond to the notice. CVE canceled the company’s SDVOSB status because the company failed to respond to the second notice and failed to timely notify CVE of a change in ownership.

Legal Analysis 

Gruene appealed to the SBA’s Office of Hearings and Appeals. Gruene argued that CVE should have known, based on its response to the first notice of cancellation, that the company was actually managed by a service-disabled veteran. OHA rejected this argument, noting that the operating agreement Gruene submitted in response to the first notice indicated that all the members—not just the service-disabled veteran owner—were managing members.

Gruene also alleged the CVE ignored the extenuating circumstances— inclement weather, the holidays, the need to pay bills—that delayed its response to the first notice. OHA reasoned that extenuating circumstances are not a factor that CVE had to consider in making termination decisions.

Gruene is represented by Damon A. Goff. The government is represented by John B. Perkins of the Center for Verification and Evaluation of the Department of Veterans Affairs.

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