Strip clubs and lobbyists sue US government for access to coronavirus bailout money

Small businesses engaged in many specialised sectors have found they have been shut out of stimulus package

Oliver O'Connell
New York
Thursday 16 April 2020 21:16 BST
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Three separate lawsuits have been filed against the US government to try and access federal coronavirus stimulus funds.

The owners of two strip clubs, Little Darlings in Flint, Michigan, and Silk Exotic Gentlemen’s Clubs in Milwaukee and Middleton, Wisconsin, are suing the Small Business Administration (SBA) because they are unable to get loans from the $2trn CARES Act bill passed by Congress.

A third lawsuit against the SBA was brought by the American Association of Political Consultants and Ridder/Braden Inc, a Colorado-based political firm.

Most small businesses are eligible for loans of up to $10m under the $349bn paycheck protection program (PPP), which is intended to cover employee wages during the coronavirus pandemic.

However, small businesses engaged in a number of specialised sectors have found that they have been shut out of the programme. These include lenders, life insurance companies, those involved in gambling, certain types of nonprofits and private membership clubs, businesses that promote or teach religion, and companies that present live performances of a sexual nature or that sell pornography.

The political consultants have not applied for loans as they are also ineligible. In their suit they write: “The government does not have a legitimate interest during this global pandemic in preventing small businesses from obtaining much needed cash to cover payroll and health insurance for their employees just because these small businesses exercise fundamental constitutional rights.”

CNN reports Rick Ridder, a partner in the Colorado consulting firm, as saying that it is ironic how political consultants and lobbyists have been shut out from access to the federal funding package agreed by Congress.

“Everybody wanted a piece of the action, but it turns out the lobbyists didn't take care of themselves,” he notes.

The strip clubs have been shuttered since the middle of March when their respective states issued stay-at-home orders. Each applied for stimulus loans from the SBA, but they were either denied or they believe that they will be.

The terminology that excludes them is that they “present live performances of a prurient sexual nature.”

The Wisconsin clubs argue in their filing that their performances are not prurient, are non-obscene, appeal to “healthy human interests and desires” and are in “full compliance with the numerous licences and permits.”

The lawsuits are still in early stages, but it does not look like funding would be coming anytime soon even if the suits were successful.

On Thursday the PPP ran out of funds leaving millions of small businesses in financial limbo.

The SBA said it is currently “unable to accept new applications … based on the available appropriations funding.”

Before the program ground to a halt, approximately 1.6 million businesses were approved for loans on a first-come-first-served basis. It is estimated that there are 30 million small businesses in the country.

The fourth stimulus package, which will include more money for small businesses, is currently being negotiated, but it is unlikely to be agreed until towards the end of the month.

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