Early 2021 was a affluent time for Austin Richard Submit, higher generally known as the “Sunflower” singer Submit Malone.
Whereas a lot of his entertainment-industry colleagues struggled to pay lease beneath the pandemic-era lockdowns that decimated dwell music within the US, Submit purchased a 9,000-square-foot ski chalet in Park Metropolis, Utah, which had been listed for $11.5 million, in an all-cash transaction that February.
By Could, he’d purchased an industrial house in a Salt Lake Metropolis suburb that had been listed for $1.45 million. There, he opened a industrial forge to craft knives and swords, “as a passion,” Submit’s consultant informed town’s planning fee.
However later that yr, a company managed by Submit efficiently utilized for a $10 million grant from a taxpayer-funded federal program meant to offer “emergency help” to assist struggling arts teams recuperate from the pandemic.
This system, the Shuttered Venue Operators Grant, was a lifeline for the live-entertainment enterprise. Administered by the Small Enterprise Administration, it doled out $14.5 billion to establishments like film theaters, ballets, operas, expertise brokers, performing-arts venues, and museums. In contrast to the Paycheck Safety Program, which many venues did not qualify for, the Shuttered Venue program was a grant, not a mortgage. Certified candidates have been eligible for as much as $10 million with no obligation to repay it.
“SVOG was there to save lots of us, and to hold us by way of,” mentioned Meredith Lynsey Schade, who was managing an off-off-Broadway theater firm when the pandemic hit.
However the Shuttered Venue program was additionally tormented by ineffective oversight and loopholes that allowed a few of the greatest names within the music {industry} to get big payouts, an Insider investigation discovered.
R&B artist Chris Brown received $10 million. Rapper Lil Wayne received $8.9 million. Nineties rockers The Smashing Pumpkins received $8.6 million. Nickelback — sure, Nickelback — acquired $2 million.
All informed, Insider recognized dozens of companies and limited-liability corporations managed by high-profile musical artists that acquired grants by way of this system. A single financial-management agency in Los Angeles efficiently submitted grants on behalf of 97 artists, venues, and managers, amounting to greater than 1 / 4 of a billion {dollars} in grant payouts, Insider’s evaluation discovered, together with greater than $200 million for big-name artists alone.
Did your favourite musician get an enormous federal payout?
Insider recognized dozens of big-name musical artists whose touring corporations scored tens of millions of {dollars} in federal grants through the pandemic.
Supply: Small Enterprise Administration
Publicly, the invoice that created the Shuttered Venues grant was marketed as supporting behind-the-scenes staff at indie venues and small levels — not arena-filling musicians.
Sen. Chuck Schumer, one of many lawmakers who sponsored what was then generally known as the “Save Our Levels” invoice, informed his constituents the cash can be used for “unbiased dwell venue operators, unbiased film theaters, and cultural establishments akin to dwell performing arts organizations and museums,” in keeping with a press launch. At a star-studded ceremony in April, Schumer was honored by the Recording Academy, the group behind the Grammys, for passing the invoice. A spokesperson for Schumer declined to remark.
I used to be so honored to be acknowledged at this yr’s @RecordingAcad #GRAMMYsontheHill!
My love for music runs deep.
That is why I made it my mission to cross the Save Our Levels Act, and I will sustain the work to help the music and efficiency {industry}. pic.twitter.com/z1OCg22RAU
— Chuck Schumer (@SenSchumer) April 27, 2023
Lots of of musicians and different performing artists signed an open letter to Congress asking them to help “neighborhood unbiased venues” the place a lot of them had gotten their begins.
A few of those self same artists managed corporations that went on to obtain multimillion-dollar payouts from this system, together with the electronic-music famous person Steve Aoki ($9.9 million) and the “Really feel It Nonetheless” crooners Portugal. The Man ($2.25 million).
The Shuttered Venue program “helped save hundreds of leisure venues and operators throughout the nation through the COVID-19 pandemic,” an SBA spokesperson mentioned in an announcement. Practically half the grant cash went to companies with fewer than 5 full-time staff, “the smallest of small companies,” the spokesperson added.
However a few of the artists’ companies Insider analyzed would match into that class. As an illustration, Aoki’s company, DJ Child Millionaire Touring Inc., informed the federal government it had simply 4 full-time staff on its software for a $71,000 PPP mortgage.
An absence of controls
There isn’t any indication that funds to big-name artists broke the regulation. Although the laws was focused at “dwell performing arts group operators,” an SBA consultant confirmed to Insider that artists themselves have been included inside its scope.
The federal government continues to be figuring out simply how a lot pandemic-era help went to fraudulent claims. In June, the SBA inspector basic launched a report contending that 8% of the loans disbursed by the Paycheck Safety Program, which pumped about $800 billion into the US financial system through the lockdowns, might need been fraudulent. The company’s Financial Damage Catastrophe Loans, which paid out about $400 billion, had an excellent larger charge of potential fraud, in keeping with the report: one-third. Fraudsters blew the cash on issues like sports activities automobiles, luxurious purses, and gold bars, the inspector basic discovered.
The SBA has disputed these findings, and touted its oversight of the Shuttered Venue program specifically as wildly profitable. The company estimates that lower than 1% of grants disbursed by way of SVOG have been fraudulent, it mentioned in a report final month.
Business sources contacted by Insider defended the Shuttered Venue program by stating that many artists usually contract with lots of of sound and lighting technicians, costumers, drivers, safety personnel, and different contractors once they put collectively a tour. All these contractors have been out of labor through the lockdowns, the sources mentioned, and artists making use of for grants might have used the cash to assist hold them afloat.
Digital music famous person Steve Aoki requested Congress for cash to save lots of small levels. Then an organization he controls received a $9.9 million grant from this system. Greg Doherty / Contributor / Getty Photographs
However there was no requirement that they spend the cash that method. The grant cash was meant as alternative for misplaced income, and recipients might spend it on issues like present mortgage funds, taxes, and payroll — together with paying themselves.
The dearth of spending controls created alternatives for impropriety, in keeping with the SBA’s inspector basic and sources reached by Insider.
For one, candidates wanted to get the SBA’s approval on an in depth price range to obtain a grant and to submit documentation displaying how the cash was finally spent. (The company denied Insider’s requests beneath the Freedom of Info Act for information displaying how the artists spent the cash, citing an exemption for confidential enterprise information.)
However after they’d the cash, recipients have been permitted to shift it round to completely different licensed makes use of, the inspector basic famous in a report final yr. It referred to as the apply “regarding” and out of line with how the SBA administers different grants.
Furthermore, corporations that contract with artists to help excursions have been themselves eligible to obtain SVOG funding, elevating questions on whether or not some corporations have been paid from artists’ grants whereas additionally receiving grants themselves. As an illustration, two of the most important sound-system suppliers for touring, Eighth Day Sound and Clair International — which merged in 2020 — every acquired $10 million grants.
Insider contacted greater than 60 grant recipients, together with Clair and Eighth Day, in addition to the entire artists named on this article, to ask how they spent their grants. None of them shared detailed info, and most didn’t reply.
Eighth Day’s president, Tom Arko, mentioned he had no perception into how Eighth Day used the grant cash as a result of Clair International has dealt with its funds for the reason that merger. However he was shocked when an Insider reporter shared the names of a few of the artists whose corporations acquired grant cash. Different stars like Bonnie Raitt and Justin Bieber paid their manufacturing crews from their very own pockets when the pandemic canceled their concert events, Arko famous.
There have been few limits on how the cash may very well be spent. The grants could not be used instantly for some issues, like shopping for actual property or making political donations. However beneath SBA pointers, the grants may very well be used to pay “proprietor compensation,” an quantity the company capped at regardless of the proprietor earned in 2019. In different phrases, Submit Malone or the members of Nickelback might have used a minimum of some grant cash to pay themselves instantly with out violating this system’s guidelines. (There isn’t any proof that they did so.)
And artists weren’t the one ones free to get in on the motion: The SBA informed Insider that grant recipients might pay the attorneys, managers, and accountants who ready their functions no matter was “abnormal and obligatory” — a determine as excessive as 15%, in keeping with the grievance in a single lawsuit. In contrast, the Paycheck Safety Program capped such charges, which it referred to as “agent charges,” at 1% for PPP loans.
Enterprise managers, expertise brokers, and others surrounding the artists additionally cashed in instantly. Two corporations owned by Submit Malone’s comanagers, Austin Rosen and Dre London, acquired grants totaling practically $20 million in 2021. Rosen, for one, did not look like hurting for cash: In 2021 and 2022, he spent $25 million to assemble a Miami Seashore property. (Insider discovered no proof that both man paid themselves.)
Two entities partly owned by the legendary expertise supervisor Irving Azoff, whose agency’s shoppers embody The Eagles, Lizzo, Harry Kinds, and Gwen Stefani, collectively received $17.5 million from this system.
Music mogul Irving Azoff, pictured right here with Gwen Stefani eventually yr’s Rock and Roll Corridor of Fame induction ceremony. Two entities he partly owns received $17.5 million. Kevin Mazur/Getty Photographs for The Rock and Roll Corridor of Fame
Marty Singer, a lawyer for Azoff, informed Insider that the businesses complied with the SVOG program’s guidelines and that Azoff himself was not in want of any bailout funds.
A pandemic-era asset buy seems to help Singer’s description of Azoff’s monetary place. In November 2021, Azoff bought a $21.5 million Beverly Hills property adjoining one other house he owns.
“Irving Azoff didn’t profit personally,” he mentioned. “My shopper does not want SVOG cash to purchase a home.”
Publicly traded corporations have been ineligible for grant cash, however the live performance powerhouse Dwell Nation nonetheless was capable of profit from Shuttered Venue funding as a slew of its subsidiaries have been bolstered by grant cash, The Washington Submit reported.
In an announcement, a consultant for Dwell Nation mentioned the corporate has no skill to manage whether or not its subsidiaries entry help applications, including that the subsidiaries used “each useful resource legally obtainable to them to help their staff by way of this disaster, which was not solely their proper but in addition a wholly comprehensible and human factor to do.”
A $496,000 overpayment
In the meantime, smaller and fewer celebrated organizations struggled to entry Shuttered Venue funding. Many candidates discovered it troublesome to navigate the SBA’s necessities, which contributed to 30% of functions being denied, in contrast with a 3% denial charge for Paycheck Safety Program funds. The proprietor of a New Orleans escape-room firm complained to The Intercept in 2021 that the SBA was creating “winners and losers in the identical {industry} due to the arbitrariness of the awards.”
The company was initially so unprepared for the onslaught of functions that its on-line portal crashed and was offline for 2 weeks. Some small-business house owners have been informed that the SBA had denied them funding as a result of the company believed they have been useless.
Candidates went to nice lengths to qualify for SVOG funds, scrounging up flooring plans and advertising and marketing supplies and amending years of tax returns to revise their NAICS codes, in keeping with lawsuits and a music-industry accountant who spoke with Insider. However for others, the method was far simpler. Andre Lorquet, a Florida man, looted $3.8 million from SVOG with a number of phony tax paperwork, courtroom information say. He used a few of it to purchase a Lamborghini. (Lorquet pleaded responsible to identification theft and cash laundering in January.)
An organization managed by the members of the steel band Korn acquired practically $5.3 million in taxpayer-funded grant cash. Daniel Knighton/Getty Photographs
The SBA’s inspector basic has raised questions on this system’s oversight, discovering in a report final yr that the “SBA didn’t comply with basic grant administration controls meant to guard taxpayer funds.”
In a single case the inspector basic reviewed, an software for $55,000 resulted in a $551,000 grant — a $496,000 overpayment. In one other occasion, an SBA worker concluded {that a} recipient who had initially acquired a $4.9 million grant was truly eligible for under $3 million, however the company did not take any steps to recuperate the $1.9 million in overpayments.
In a response to the inspector basic’s report, the SBA contested these findings, saying each awards have been justified. “The SBA has sturdy compliance management processes in place to make sure funds have been utilized in accordance with congressional statute, together with ongoing monitoring applications and audit opinions, and refers any suspicions of fraud to federal regulation enforcement,” an company spokesperson mentioned in an announcement to Insider.
The inspector basic is conducting an extra audit of the grant program, which it expects to launch this yr.
‘Outdoors-the-box’ advisors
Throughout the music {industry}, although, one asset-management agency alone helped unlock greater than $260 million in taxpayer cash for simply 97 artists, venues, and managers, in keeping with an Insider assessment of the SBA’s grant-recipient database.
That agency, NKSFB, counts a few of the greatest names within the music {industry} as shoppers, together with Submit Malone, Marshmello, Aoki, Godsmack, and Korn. It performed up its success with Shuttered Venue grants: One associate bragged to Billboard that they helped shoppers discover “outside-the-box” funding streams like SVOG.
One firm obtained by far essentially the most grants for dwell performers
The agency started making use of for Shuttered Venue grants on behalf of its artists beginning in July 2021, in keeping with a lawsuit filed in opposition to NKSFB by Laurence Chief, a rival enterprise supervisor who claimed he pitched the agency on the thought of getting grants for his or her shoppers — for a 15% fee — solely to have NKSFB steal his thought. NKSFB denied the allegations; the case is pending.
A veteran NKSFB supervisor, Michael Oppenheim, was initially skeptical that his shoppers would qualify for the grant, in keeping with the lawsuit. However after Chief informed Oppenheim he’d already submitted an software on behalf of an unnamed jazz musician, Oppenheim determined to offer the thought a attempt, the lawsuit mentioned.
Inside weeks, NKSFB had submitted functions on behalf of “dozens” of its “widespread mainstream artist and band shoppers,” in keeping with the swimsuit. Underneath SBA guidelines, the agency can be permitted to take a reduce of every grant.
NKSFB shoppers received practically 10% of the whole grants awarded to performing arts organizations
One enterprise supervisor informed Insider his shoppers started to “aggressively” press for SVOG cash as soon as phrase of NKSFB’s technique received round. The enterprise supervisor mentioned he did not assume artists or managers certified, and went to a outstanding lawyer, who agreed.
“In case you take a look at the title of this system, it is the ‘Shuttered Venue Operator Grant,'” the supervisor mentioned. “Nowhere in there do you hear ‘performer’ or ‘artist’ or any of that.”
NKSFB’s managing associate Mickey Segal declined to remark, citing a company coverage of not discussing shopper issues. Oppenheim died in April.
NKSFB received its shoppers extra money than the standard grant recipient
‘Evaluating wounds’
Schade, the theater-company supervisor, who says she’s the kind of particular person to “all the time do my homework,” heard in regards to the invoice that will create the Shuttered Venue Operators Grant in early 2021 and threw herself into studying its intricacies. She turned one thing of an SBA whisperer to small and midsize arts teams making use of for the grant, reviewing functions and funneling info from the SBA to a 2,500-member Fb group. Their questions finally turned so overwhelming that she employed an assistant to assist her tackle them, she mentioned.
A lot of the cash disbursed by way of the grant program went to symphony orchestras, theatrical teams — together with all 5 touring productions of “Hamilton,” the Oregon Shakespeare Pageant, and the magician David Copperfield — live performance halls, zoos, aquariums, and small community-arts organizations, in keeping with a assessment of the greater than 13,000 grant recipients revealed on the SBA’s web site.
Grant officers scrutinized candidates minutely, candidates informed Insider, asking them to submit live performance posters and contracts from earlier excursions to show that they have been reputable performers.
Some recipients say it is unfair to critique this system in hindsight. On the time it went into impact, pandemic shutdowns had battered the performing-arts {industry}, leaving tens of hundreds of actors, musicians, stagehands, ushers, safety guards, lighting and sound technicians, costumers, and set designers out of labor. Managers and brokers, who take fee funds from artists’ income, additionally noticed their supply of earnings dry up because the pandemic canceled excursions, three music {industry} managers informed Insider.
Although she was an up-close witness to the struggles of small arts organizations through the pandemic, Schade mentioned she was in no place to evaluate well-known musicians that had acquired cash by way of the grant program.
Performing arts teams suffered beneath pandemic lockdowns. Broadway exhibits have been canceled for greater than a yr. For a lot of, the SVOG funds got here as a lifeline. Alexi Rosenfeld/Getty Photographs
“Evaluating wounds through the pandemic just isn’t a wholesome method to method issues,” Schade mentioned. Greater acts have extra bills, she added.
“We will, now, look again three years later and say there wasn’t sufficient oversight,” she mentioned. “However the actuality is that when there is a fireplace that is burning you go searching and attempt to put that fireside out.”
The difficulties of the pandemic, although, clearly didn’t have an effect on the entire grant recipients equally.
Gary Osier, a reserving agent whose firm represents dozens of acts together with ZZ High, Foreigner, and 98 Levels, seems to have weathered the pandemic with out a lot monetary misery. In November 2021, because the Delta variant raged all through the nation, he was capable of buy a $2.1 million four-bedroom lake home outdoors Dallas utilizing money.
However his firm, Gary Osier Presents, wasn’t fairly as lucky. It utilized for a $10 million SVOG grant, which it acquired in July 2021. The corporate had beforehand acquired a PPP mortgage of $127,000; its software mentioned it had one worker on the time.
The grant got here at a time when the SBA was beneath stress to do extra to assist the touring {industry}. Only a month earlier, 55 senators had despatched the company a letter urging it to disburse the SVOG funds extra rapidly.
“The SVOG program is exclusive, with obligatory restrictions in-built to make sure taxpayer funding goes solely to eligible candidates in want,” they wrote. “Bureaucratic course of can’t stand in the way in which of getting these desperately wanted funds out the door.”
In an announcement, Osier mentioned his firm “totally complied with all auditing and monitoring necessities of the SVOG program, together with use of grant funding” and “put the grant funds to work solely for the critically essential functions for which the SVOG program was designed.”
When requested what these functions have been, he didn’t reply.
