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- The US government gave more than $14 billion in Shuttered Venue Operators Grants.
- One firm, NKSFB, helped its clients, including wealthy musicians, tap more than $200 million.
- Court records show the firm worried about "perjury" and negative blowback before going ahead.
A major Los Angeles accounting firm that caters to music stars was privately worried that its artists could be breaking the law by applying for millions of dollars in pandemic-era grants from the Small Business Administration, court records show.
Congress created the Shuttered Venue Operators Grant in 2021 to help theaters and indie music venues stay in business during the pandemic lockdowns. As the name implies, the grants — which were not required to be paid back — were intended for theater owners, performing-arts companies, promoters, producers, and other behind-the-scenes businesses that had no money coming in.
A 2023 Business Insider investigation found that dozens of wealthy musicians used ineffective oversight and loopholes in the law to line their pockets. Post Malone, Chris Brown, Nickelback, and other artists got millions in taxpayer money even as some of them spent lavishly on homes and other acquisitions (in Post Malone's case, he spent more than $1 million on a hobbyist's sword-forging studio shortly before receiving $10 million in grants). Lil Wayne and others submitted signed certifications that they maintained drug-free workplaces, a requirement to get federal grants, despite being open about their enthusiasm for weed and psychedelic drugs.
The SBA insisted that such grants were legal, an argument echoed by industry sources. But newly released emails and affidavits obtained by BI show that behind the scenes, many of the people applying for SVOG funds on behalf of wealthy artists worried for months that the artists didn't actually qualify. And at least one artist — the Canadian American crooner Paul Anka — turned down the advice of a consultant to apply for a grant because he said it felt wrong.
The newly public court records, part of a lawsuit over a consultant's claims that he is entitled to a piece of the grants, reveal how word of the program traveled. Some staff at NKSFB, an accounting and wealth-management firm that eventually helped bring in more than $200 million from SVOG applications, were initially hesitant to submit applications for their clients' touring companies.
David Hickok, a business manager, wrote in an affidavit that despite murmurs within the industry that artists were cashing in, within his division of the firm, "we came to a consensus that applying for SVOG grants on behalf of musicians' touring entities was too risky."
"The SVOG guidelines did not specifically mention touring entities as an eligible category, and our primary concern was that the client might receive the award and then later have to return it after an audit initiated by the SBA," Hickok wrote.
Several people at NKSFB were worried that their clients would face bad publicity if they sought a grant or that the government could try to claw the money back.
"The information about awarded grants was public, so not only would this put a financial burden on the client, but it could also harm the client's reputation," Hickok wrote. "If NKSFB, as a fiduciary, advised its clients to apply for a grant for which they would ultimately be found ineligible, that would result in negative consequences for our clients, and could also expose NKSFB to liability."
In a June 2021 email, Bessy Wong, an NKSFB partner, told the firm's managing partner, Mickey Segal, that she told Anka that Segal was of the opinion that "he could be committing perjury by filing for the government grant when he wasn't entitled to the funds."
But NKSFB was under pressure from clients who claimed the practice was widespread. "All the top acts are doing it," the talent manager for Suicideboys, Kyle Leunissen, wrote in a July 27, 2021, email. Federal records show that the hip-hop duo's touring company got $3.6 million in August that year. In October, Billboard reported that Suicideboys signed a "strong eight-figure deal" with a distributor. Leunissen didn't reply to an email seeking comment.
Accountants at the firm were also made aware of industry efforts to pressure the SBA, including through Congress, to interpret the law broadly.
"Law is not meant to be interpreted on intent but on language," Michael Strickland, a lawyer who owns the concert-lighting business Bandit Lites, said in an April 2021 email sent to others in the industry. "The more emails you send, the harder it is for the SBA to exclude sectors based on 'intent.'"
Strickland told BI he pushed for focusing aid on those most in need. "I got into a long-term, very lengthy, very in-depth conversation with all of the people behind Save Our Stages, saying we need to make sure this goes to the most needy people," he said.
But once the law was passed, Strickland said he focused on helping as many people get money as possible. He was frank about the program's shortcomings: "They met the letter of the law — and it was written wide open," he told BI. "I know a bunch of folks that bought jet cards. There was nothing in there that said you had to pay people."
Strickland added that the problem went beyond wealthy recipients: "Forget the people who have money: There was a lot of abuse."
According to Hickok's affidavit, the turning point for NKSFB came in late August 2021, just two days before the deadline to file an SVOG application. At a meeting, he wrote, they concluded the larger risk was being fired or perhaps even sued if they didn't give their clients the grants versus whatever the risks were of applying for them. The overwhelming majority of clients chose to apply, Hickok said.
One who didn't: Paul Anka. According to an email, he ended up telling NKSFB to pull the application, figuring he was being fed "BS" by a consultant.
