Early 2021 was a affluent time for Austin Richard Put up, higher referred to as the “Sunflower” singer Put up Malone.
Whereas a lot of his entertainment-industry colleagues struggled to pay lease below the pandemic-era lockdowns that decimated reside music within the US, Put up 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 Might, 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 pastime,” Put up’s consultant advised town’s planning fee.
However later that 12 months, a company managed by Put up efficiently utilized for a $10 million grant from a taxpayer-funded federal program meant to offer “emergency help” to assist struggling arts teams get well 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. Not like the Paycheck Safety Program, which many venues did not qualify for, the Shuttered Venue program was a grant, not a mortgage. Certified candidates had been eligible for as much as $10 million with no obligation to repay it.
“SVOG was there to avoid wasting 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 suffering from ineffective oversight and loopholes that allowed a number of the largest names within the music {industry} to get large payouts, an Insider investigation discovered.
R&B artist Chris Brown bought $10 million. Rapper Lil Wayne bought $8.9 million. Nineties rockers The Smashing Pumpkins bought $8.6 million. Nickelback — sure, Nickelback — obtained $2 million.
All advised, Insider recognized dozens of firms and limited-liability firms managed by high-profile musical artists that obtained 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 firms scored thousands and thousands 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 employees at indie venues and small phases — not arena-filling musicians.
Sen. Chuck Schumer, one of many lawmakers who sponsored what was then referred to as the “Save Our Phases” invoice, advised his constituents the cash could be used for “impartial reside venue operators, impartial film theaters, and cultural establishments resembling reside performing arts organizations and museums,” in response to 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 12 months’s @RecordingAcad #GRAMMYsontheHill!
My love for music runs deep.
That is why I made it my mission to move the Save Our Phases Act, and I will sustain the work to help the music and efficiency {industry}. pic.twitter.com/z1OCg22RAU
— Chuck Schumer (@SenSchumer) April 27, 2023
Tons of of musicians and different performing artists signed an open letter to Congress asking them to help “neighborhood impartial venues” the place a lot of them had gotten their begins.
A few of those self same artists managed firms that went on to obtain multimillion-dollar payouts from this system, together with the electronic-music celebrity Steve Aoki ($9.9 million) and the “Really feel It Nonetheless” crooners Portugal. The Man ($2.25 million).
The Shuttered Venue program “helped save 1000’s 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 number of the artists’ companies Insider analyzed would match into that class. For example, Aoki’s company, DJ Child Millionaire Touring Inc., advised 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 a indication that funds to big-name artists broke the regulation. Although the laws was focused at “reside performing arts group operators,” an SBA consultant confirmed to Insider that artists themselves had been included inside its scope.
The federal government remains to be figuring out simply how a lot pandemic-era support 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 Harm Catastrophe Loans, which paid out about $400 billion, had a fair larger fee of potential fraud, in response to the report: one-third. Fraudsters blew the cash on issues like sports activities vehicles, luxurious purses, and gold bars, the inspector basic discovered.
The SBA has disputed these findings, and touted its oversight of the Shuttered Venue program particularly as wildly profitable. The company estimates that lower than 1% of grants disbursed by way of SVOG had been fraudulent, it mentioned in a report final month.
Business sources contacted by Insider defended the Shuttered Venue program by declaring that many artists usually contract with tons of of sound and lighting technicians, costumers, drivers, safety personnel, and different contractors after they put collectively a tour. All these contractors had been out of labor through the lockdowns, the sources mentioned, and artists making use of for grants may have used the cash to assist maintain them afloat.
Digital music celebrity Steve Aoki requested Congress for cash to avoid wasting small phases. Then an organization he controls bought a $9.9 million grant from this system. Greg Doherty / Contributor / Getty Photos
However there was no requirement that they spend the cash that manner. The grant cash was meant as substitute for misplaced income, and recipients may spend it on issues like present mortgage funds, taxes, and payroll — together with paying themselves.
The shortage of spending controls created alternatives for impropriety, in response to the SBA’s inspector basic and sources reached by Insider.
For one, candidates wanted to get the SBA’s approval on an in depth finances to obtain a grant and to submit documentation displaying how the cash was ultimately spent. (The company denied Insider’s requests below the Freedom of Data Act for information displaying how the artists spent the cash, citing an exemption for confidential enterprise information.)
However after that they had the cash, recipients had been permitted to shift it round to completely different licensed makes use of, the inspector basic famous in a report final 12 months. It referred to as the observe “regarding” and out of line with how the SBA administers different grants.
Furthermore, firms that contract with artists to help excursions had been themselves eligible to obtain SVOG funding, elevating questions on whether or not some firms had been paid from artists’ grants whereas additionally receiving grants themselves. For example, two of the most important sound-system suppliers for touring, Eighth Day Sound and Clair International — which merged in 2020 — every obtained $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 data, 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 because the merger. However he was stunned when an Insider reporter shared the names of a number of the artists whose firms obtained grant cash. Different stars like Bonnie Raitt and Justin Bieber paid their manufacturing crews from their very own pockets when the pandemic canceled their live shows, Arko famous.
There have been few limits on how the cash could possibly be spent. The grants could not be used straight for some issues, like shopping for actual property or making political donations. However below SBA pointers, the grants could possibly be used to pay “proprietor compensation,” an quantity the company capped at regardless of the proprietor earned in 2019. In different phrases, Put up Malone or the members of Nickelback may have used no less than some grant cash to pay themselves straight with out violating this system’s guidelines. (There isn’t a proof that they did so.)
And artists weren’t the one ones free to get in on the motion: The SBA advised Insider that grant recipients may pay the legal professionals, managers, and accountants who ready their purposes no matter was “odd and essential” — a determine as excessive as 15%, in response to the criticism in a single lawsuit. Against this, 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 straight. Two firms owned by Put up Malone’s comanagers, Austin Rosen and Dre London, obtained 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 Seaside property. (Insider discovered no proof that both man paid themselves.)
Two entities partly owned by the legendary expertise supervisor Irving Azoff, whose agency’s purchasers embrace The Eagles, Lizzo, Harry Kinds, and Gwen Stefani, collectively bought $17.5 million from this system.
Music mogul Irving Azoff, pictured right here with Gwen Stefani eventually 12 months’s Rock and Roll Corridor of Fame induction ceremony. Two entities he partly owns bought $17.5 million. Kevin Mazur/Getty Photos for The Rock and Roll Corridor of Fame
Marty Singer, a lawyer for Azoff, advised 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 dwelling he owns.
“Irving Azoff didn’t profit personally,” he mentioned. “My shopper would not want SVOG cash to purchase a home.”
Publicly traded firms had been ineligible for grant cash, however the live performance powerhouse Dwell Nation nonetheless was in a position to profit from Shuttered Venue funding as a slew of its subsidiaries had been bolstered by grant cash, The Washington Put up reported.
In an announcement, a consultant for Dwell Nation mentioned the corporate has no capability to manage whether or not its subsidiaries entry support packages, 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 completely 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 purposes being denied, in contrast with a 3% denial fee 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 purposes that its on-line portal crashed and was offline for 2 weeks. Some small-business homeowners had been advised that the SBA had denied them funding as a result of the company believed they had been useless.
Candidates went to nice lengths to qualify for SVOG funds, scrounging up ground plans and advertising supplies and amending years of tax returns to revise their NAICS codes, in response to 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 couple of phony tax paperwork, court docket 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 metallic band Korn obtained practically $5.3 million in taxpayer-funded grant cash. Daniel Knighton/Getty Photos
The SBA’s inspector basic has raised questions on this system’s oversight, discovering in a report final 12 months that the “SBA didn’t comply with elementary 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 obtained a $4.9 million grant was really eligible for under $3 million, however the company did not take any steps to get well the $1.9 million in overpayments.
In a response to the inspector basic’s report, the SBA contested these findings, saying each awards had been justified. “The SBA has strong compliance management processes in place to make sure funds had been utilized in accordance with congressional statute, together with ongoing monitoring packages 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 a further audit of the grant program, which it expects to launch this 12 months.
‘Outdoors-the-box’ advisors
Inside 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 response to an Insider evaluation of the SBA’s grant-recipient database.
That agency, NKSFB, counts a number of the largest names within the music {industry} as purchasers, together with Put up Malone, Marshmello, Aoki, Godsmack, and Korn. It performed up its success with Shuttered Venue grants: One accomplice bragged to Billboard that they helped purchasers discover “outside-the-box” funding streams like SVOG.
One firm obtained by far essentially the most grants for reside performers
The agency started making use of for Shuttered Venue grants on behalf of its artists beginning in July 2021, in response to 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 purchasers — for a 15% fee — solely to have NKSFB steal his concept. NKSFB denied the allegations; the case is pending.
A veteran NKSFB supervisor, Michael Oppenheim, was initially skeptical that his purchasers would qualify for the grant, in response to the lawsuit. However after Chief advised Oppenheim he’d already submitted an software on behalf of an unnamed jazz musician, Oppenheim determined to provide the thought a strive, the lawsuit mentioned.
Inside weeks, NKSFB had submitted purposes on behalf of “dozens” of its “in style mainstream artist and band purchasers,” in response to the swimsuit. Below SBA guidelines, the agency could be permitted to take a lower of every grant.
NKSFB purchasers bought practically 10% of the full grants awarded to performing arts organizations
One enterprise supervisor advised Insider his purchasers started to “aggressively” press for SVOG cash as soon as phrase of NKSFB’s technique bought round. The enterprise supervisor mentioned he did not suppose artists or managers certified, and went to a distinguished lawyer, who agreed.
“If you happen to have 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 accomplice Mickey Segal declined to remark, citing a company coverage of not discussing shopper issues. Oppenheim died in April.
NKSFB bought its purchasers extra money than the standard grant recipient
‘Evaluating wounds’
Schade, the theater-company supervisor, who says she’s the kind of individual to “all the time do my homework,” heard concerning 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 purposes and funneling data 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 response to a evaluation of the greater than 13,000 grant recipients printed on the SBA’s web site.
Grant officers scrutinized candidates minutely, candidates advised Insider, asking them to submit live performance posters and contracts from earlier excursions to show that they had been reliable 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 1000’s 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 advised 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 guage well-known musicians that had obtained cash by way of the grant program.
Performing arts teams suffered below pandemic lockdowns. Broadway exhibits had been canceled for greater than a 12 months. For a lot of, the SVOG funds got here as a lifeline. Alexi Rosenfeld/Getty Photos
“Evaluating wounds through the pandemic will not be a wholesome approach to strategy issues,” Schade mentioned. Greater acts have extra bills, she added.
“We are able to, 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 in a position to buy a $2.1 million four-bedroom lake home exterior Dallas utilizing money.
However his firm, Gary Osier Presents, wasn’t fairly as lucky. It utilized for a $10 million SVOG grant, which it obtained in July 2021. The corporate had beforehand obtained 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 below 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 shortly.
“The SVOG program is exclusive, with essential 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 had been, he didn’t reply.