Saturday night at Club Cobra in North Hollywood, a drag queen dressed as Miley Cyrus lip-synced to “Zombie” by The Cranberries, with Halloween decorations and disco balls hanging from the ceiling. Muscular go-go dancers gyrated in a cloud of rainbow fog while patrons grooved to hits by Selena and Bad Bunny.
It wasn't easy for the popular Latin LGBTQ+ nightclub to rebuild at this level of live entertainment after being virtually shut down for business due to the COVID-19 pandemic.
The public health crisis closed the operation for 18 months and left its owners hundreds of thousands of dollars in debt. To make matters worse, the U.S. Small Business Administration has repeatedly rejected Club Cobra's applications for COVID-19 relief money, alleging that the establishment provided services of a “vulgar sexual nature.”
For Club Cobra owner Marty Sokol, 56, the lack of government support has been frustrating and surprising.
“We're good people in this town,” Sokol said over the phone. “We are the place where you celebrate your birthday party. We're the place you bring your stuff to. …This is beyond insulting.” (Tia is Spanish for aunt.)
Sokol is one of several business owners who say they were improperly denied money from the Shuttered Venue Operators Grant program, which the federal government provided to arts and entertainment venues and promoters devastated by the pandemic in 2021. Started to provide financial assistance up to $10 million.
Some have taken legal action against the SBA. And although courts have sided with business owners at various points, Sokol and others are still fighting for financial assistance.
“We really felt wronged,” Sokol said. “If it weren't for our community, there would be no way we would have survived.”
The matter is not limited to night clubs. The Times also spoke to a North Carolina-based movie theater chain and a Tennessee concert promoter who have struggled to secure grants. Major cases – including a dispute over $10 million in grant money between the SBA and the exhibition basketball team Harlem Globetrotters – have drawn attention to the problems. (The court dismissed the Globetrotters' complaint against the SBA last October.)
According to a report from Business Insider, the SBA has also been investigated for awarding more than $200 million in SVOGs to companies with rich and famous owners like Post Malone, Chris Brown and Lil Wayne, while withholding aid for others. Is.
“The ubiquitous complaint is that the SBA's decision-making process lacks transparency,” said James Samtaro, a partner at Miami law firm Pryor Cashman, who has represented entertainment businesses in other SVOG cases.
“What [critics have] Essentially that said it's very subjective. …It is unevenly implemented, and the SBA has – intentionally or otherwise – created a hierarchy as to who is more entitled to receive grant money.
The SBA declined to comment, saying it “does not comment on pending litigation.”
The SVOG controversy is a reminder of the lingering consequences of COVID-19, years after the pandemic first wreaked havoc on the economy and judicial system. Just as the entertainment business was disrupted by the global health crisis, so were the courts, Samtaro said, adding to the usual boring situation.
“Nobody applies to these types of cases, even if you are dealing with companies virtually [whose] “A lot of lifelines could be in jeopardy,” Sammataro said.
Club Cobra has been serving drinks, DJ sets and live performances to the local LGBTQ+ community for over a decade. Its sister establishment, Club Chico in Montebello, is approaching its 25th anniversary.
During the COVID-19 shutdown, Sokol and his team kept their business alive by streaming socially distant drag and go-go shows on the subscription platform OnlyFans. The income was not enough to get Club Cobra out of debt, so Sokol applied for a $486,762 grant in April 2021.
When the SBA rejected Club Cobra's application, Sokol appealed.
After some prodding, Sokol received an SBA email on November 3, 2021 informing him that Sokol's application was rejected “at least in part” because Club Cobra “presented live performances of a sexually explicit nature.” “or received meaningful revenue through the sale of products or services, or the presentation of any depiction or display of a sexually explicit nature in official materials in connection with the SVOG program, as grounds for SBA disqualification.” Emphasizes discretion.
The SBA took issue with images of Club Cobra dancers posing in “sexualized-looking” poses and “revealing” outfits posted on the business's social media platforms. It also disapproved of the virtual drag and go-go shows that Club Cobra streamed on OnlyFans, calling them “erotic dance shows”.
Sokol accused Club Cobra of arbitrarily and capriciously denying grant money while awarding SVOG awards to similar establishments around Los Angeles – such as LGBTQ+ nightclub Reload Entertainment at Cahuenga and Los Globos in Silver Lake – A case was filed. The SBA argued that it had conducted informal reviews of other establishments and determined that additional “reasonable review” was not necessary.
Sokol demanded that the U.S. District Court in DC force the SBA to reconsider its application. The court concluded that the SBA “failed to provide a rational analysis of why these similarly situated competitors were treated differently.”
Sokol said it was painful to see that other nightclubs received emergency aid, while Club Cobra was denied money it could have used to pay for renovations, outstanding rent payments and other obligations.
“Seeing them rebuild so easily, we had no complaints with them,” Sokol said. “We just wanted equal treatment.”
In December 2022, the SBA again vetoed Sokol's application, this time providing an analysis of five “alleged competitors” and explaining why they were eligible for the grant. The SBA argued that, for the most part, those establishments did not regularly post suggestive images or present live performances of an erotic nature.
Sokol filed another motion for summary judgment in May 2024. The court has not responded yet.
Another business in dispute with the SBA is Golden Ticket Cinemas, a North Carolina-based theater chain. ,
John Bloemke, president of Golden Ticket Cinemas, opened its fifth and sixth locations when COVID-19 ravaged the entertainment industry
Bloemke was able to secure grants for most of its locations, but not for two locations located in DuBois, PA and Rapid City, S.D. After Bloemke challenged the SBA's move to close those theaters, the government agency Offered the business owner about $500,000 — less than the nearly $2.8 million he had asked for.
Bloemke filed complaints accusing the SBA of shortchanging Golden Ticket Cinemas and then failing to distribute those funds.
The SBA countered that Golden Ticket Cinemas was not eligible for the full SVOG amount requested because those locations had allegedly been in operation longer than Bloemke reported.
The court agreed with the SBA's position that it was not legally obligated to distribute the funds. However, it also concluded that the agency's reasoning for awarding a significantly lower amount was flawed and ordered the SBA to reevaluate the application.
According to Bloemke, the SBA has not yet paid attention to the court's decision.
“It was very disappointing,” Bloemke said. “I mean, we have a nine-plex that's only operating five screens because we're still trying to get our heads above water a little bit with some of these things.”
Meanwhile, in Nashville, Justin Roddick is still trying to get grants for his company, Concert Investor, which produces tours for emerging musicians. Over the past 12 years, Concert Investor has helped launch the careers of artists like Twenty One Pilots, Little Big Town, Kelsea Ballerini, and others.
When acts stopped touring during the pandemic, Roddick's business suffered.
“After a year of COVID, we found we had no other option but to completely restart,” Roddick said. “So when I heard about the grant, I was very excited.”
Roddick soon became disillusioned. Their request for approximately $5 million was rejected several times, with the SBA deciding that Concert Investor did not control enough aspects of its productions to “meet the definition of a performing arts organization operator.”
The Concert Investor team alleged that the SBA erroneously changed the definition and moved the goal posts after the fact.
Initially, the court ruled in favor of the SBA. But an appeals court overturned that decision in May 2024.
According to Patrick Corcoran, a representative of the businesses, the SBA was given a deadline of December 11 to submit a new decision. Depending on how the agency responds, Roddick may have to wait for the next Ballerini or Twenty One Pilots to come along and revive his touring business.
“Paying into the system and believing that it works a certain way… and then taking no action is devastating,” Roddick said. “It's kind of surreal to me.”