WASHINGTON, D.C.—Ever since the Small Business Administration's (SBA) Paycheck Protection Program (PPP) began in early April, its administrators have tried to keep adult companies out of the loop—and they succeeded so well that several gentlemen's clubs and others have had to resort to lawsuits to try to vindicate their legal right to such funds. But thanks to a veritable army of First Amendment attorneys, federal judges have been issuing orders to the SBA and the banks that are distributing the SBA loan funds that the attempt to brand adult businesses as being of a "prurient sexual nature" and therefore deny them the loans is unconstitutional, and that the adult businesses' loan applications—notably those filed in Milwaukee, Wisconsin and Flint, Michigan—should be looked upon as equally valid as those of any other business.
Just one problem, though: the Wisconsin wins were put on hold on May 4 by the Seventh Circuit Court of Appeals in order to allow government attorneys to file motions to overturn District Court Judge Lynn Adelman's ruling, and there's been no action in that case since that day. And although no similar action has yet been taken by any appellate court in the Michigan case, the judge who has been handling that case, Judge Matthew F. Leitman, today issued an order allowing the government an additional 36 hours to implement his prior ruling or to file a motion with the Sixth Circuit Court of Appeals for a stay of his entire order.
In other words, adult companies getting their legal rights upheld by the SBA is going nowhere fast. That fact, coupled with the fact that the SBA is again quickly running out of funds for its Paycheck Protection Program (as well as the somewhat related Emergency EIDL Grants), might make one wonder where all that cash—originally $359 billion, with another $310 billion approved in late April—is going?
Among those doing the wondering are The New York Times, The Washington Post, Bloomberg News, Dow Jones & Company, and investigative news site ProPublica, and together, they've filed a lawsuit against the SBA seeking to have the agency honor their requests under the Freedom of Information Act (FOIA) to open its books and reveal just who's getting all of that money—and to do so reasonably quickly.
"While the SBA has not yet disclosed which companies have received loans under its COVID-related assistance programs, press reports have identified certain PPP loan recipients, leading to questions over whether that program is functioning as originally intended," the plaintiffs argue in their lawsuit. "Plaintiffs submitted these FOIA requests and sought expedited processing of them because of the public interest in contemporaneously monitoring the disbursement of billions of taxpayer dollars through expansive federal initiatives—most notably the new Paycheck Protection Program—during this period of unprecedented financial and social disruption, and because the SBA has until now routinely provided such information about businesses that take out SBA loans."
As journalist Hailey Konnath of Law360.com noted (subscription required), "FOIA requires that an agency respond within 20 working days of receiving a request, providing the scope of the documents that the agency will produce or withhold. But the SBA has provided only 'boilerplate responses' stating that at some point in the future, it hopes to turn its efforts to providing that information to the public, per the suit. The agency has provided no concrete indication of what data that will be or when that will be, the outlets said.
"To date, the SBA has not produced any records responsive to any of the plaintiffs' FOIA requests," the media organizations said in their suit, adding that it also hasn't informed any of them as to the scope of the records that the agency will produce or withhold.
"The Small Business Administration has disbursed hundreds of billions of dollars through PPP and the Economic Injury Disaster Loan program during the COVID-19 crisis, but it has refused to disclose who is receiving the funds and in what amounts," Kris Coratti Kelly, a spokesperson for The Washington Post, told Law360.
"The public has an urgent right and need to know how it is being spent, and whether it is being directed to those most in need," said ProPublica general counsel Jeremy Kutner.
The media are particularly worried about whether the PPP funds are actually going to small businesses, what with reports having surfaced that large companies such as the Shake Shack chain, the Ruth's Chris Steakhouse chain, luxury cruise operator Lindblad Expeditions and the Los Angeles Lakers basketball team have applied for and received large grants, though some have returned those funds after receiving extensive publicity, as noted in the lawsuit.
AVN has looked into the issue of who's receiving small business loans, and has discovered that several other large companies, including the Nathan's Famous hot dog chain, the Ritz Carlton, Braemar Hotels & Resorts and Ashford Hospitality Trust hotel chains, and coal mining company American Resources have received them—and then there's the loans to Rhino Resource Partners of Lexington, KY and Hallador Energy, whose executives have served in the Trump White House.
According to NBCNews.com, "At least 15 companies that reported receiving money under the program have stock market values of at least $100 million, according to a report from Morgan Stanley."
Simply put, the list goes on and on—even as adult businesses across the country are reaching the verge of extinction through lack of funds to pay salaries, rents, mortgages and other necessary expenses.
Moreover, Assistant Attorney General Brian Benczkowski, who runs the Justice Department’s criminal division, has been looking into who has been applying for the PPP loans, and stated that, "There are unfortunately businesses that are sending in loan applications for large amounts of money that are overstating their payroll costs, overstating the number of employees they’ve had, overstating the nature of their business."
It's a bad problem that's getting worse by the day—but one which might be partly if not wholly alleviated if the media organizations' lawsuit succeeds. At worst, it'll let the public know who's getting government favors and funding to which they're not entitled.
