NASHVILLE, Tenn. (WTVF) — Taxpayer money went into the bank accounts of a Nashville swingers club that was forced to close by the COVID-19 pandemic, a NewsChannel 5 investigation discovered.
That money, paid to Menages Inc., was part of the hundreds of hundreds of millions of dollars given to Tennessee businesses affected by the COVID shutdowns.
“So this is where our money’s going!” exclaimed House Democratic Caucus leader Rep. Vincent Dixie of Nashville when NewsChannel 5 shared our findings.
Related story: TN no-bid COVID spending spree hits half a billion dollars
What happened inside Menages is, for the most part, best left to the imagination.
The downtown Nashville swingers club advertised “fantasy rooms, semi-private and private play rooms” -- a place where, according to one of its ads, you could “party like a porn star.”
But when COVID crashed the party, Menages lined up for the taxpayer handouts.
According to state data, Menages tapped into Tennessee Gov. Bill Lee’s Supplemental Employer Recovery Grant (SERG) program, pocketing at least $30,000.
(You can see the full list of SERG recipients in the table below.)
Do you have information on any questionable grant recipients? Email: investigate@newschannel5.com
A spokesperson for the Tennessee Department of Finance and Administration said small-business recipients had to show actual losses related to the pandemic, certifying that they were not engaged in illegal activity.
Menages got another $40,000 from the Paycheck Protection Program (PPP), data from the federal Small Business Administration shows.
In fact, it's possible that the swingers club benefited from even more of your money.
Out of $2.3 billion that the state of Tennessee got directly from the federal government, the Lee administration says $882 million went for economic and pandemic relief for various industries.
Included was a program designed to help businesses hurt by the shutdown in April 2020.
The Tennessee Business Relief Program shelled out $200 million, but the Lee administration says who got that money is confidential because it’s based on the companies’ tax filings.
Dixie's reaction?
“We definitely need more accountability. It's upsetting, it's appalling. The governor needs to fix this."
And tracking the money is likely to become even more challenging with the next round of stimulus money that the state’s top fiscal watchdog is anticipating.
"It's billions and billions of dollars coming to Tennessee," said state Comptroller Jason Mumpower.
Estimates have varied over how much Tennessee will receive under the American Rescue Plan.
Tennessee, by one estimate, is scheduled to get more than $3.7 billion in state aid in the next round of stimulus funding. Local governments are set to get $2.5 billion -- for a total of $6.2 billion.
"It's just a ton of money -- so much money that the legislature this past session had to change the law to allow banks more time to be able to deposit the money," Mumpower added.
"I mean, there's so much money, it's too much for the banks."
Mumpower is especiallly concerned that local governments might inadvertently use that money in ways that are not allowed, then be forced to pay the money back using local tax dollars.
"We are trying to help make sure that communities don't purposefully get into trouble, but I worry about those communities that accidentally get into trouble."
NewsChannel 5 Investigates asked, "Do you worry about fraud?"
"I don't worry about fraud," the comptroller answered, "because I know fraud's going to occur.
"But what I want to do is make sure that we are there in the audit process to do our best to find the fraud…. to show people that if they steal money in Tennessee, somebody is going to be looking over your shoulder, somebody is going to be looking for accountability."
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The spokesperson for the Tennessee Department of Finance and Administration provided the following description of how the Supplemental Employer Recovery Grant program was administered:
The state required businesses to show that they had a loss of income or other business expenses related to the pandemic – and the amount of documentation we required from each applicant to prove financial loss was extensive.
The eligibility criteria for the SERG grants included:
- As of August 31, 2020, must be a Domestic Business in the State of Tennessee or a business formed in another state that primarily operates in Tennessee with at least one physical location in Tennessee.
- Businesses could not be a subsidiary of a business with consolidated annual revenues in excess of $10 million.
- Registration with the Secretary of State, registered with the Department of Revenue, or files a federal Schedule C as of August 31, 2020.
- Operational since April 1, 2020, with the exception of temporary closures due to COVID-19 and able to show that the business had been in operation for that time period.
- Proof of economic hardship due to COVID-19 related interruption of business or eligible direct business expenses due to COVID-19.
- No illegal activity per local, state or federal laws or regulations, with federal compliance taking precedence over local or state compliance.
- Businesses must not exist for the purpose of advancing partisan or other political activities, such as directly lobbying federal or state officials.
- Must be a for-profit entity or a 501(c)(3) or 501(c)(19) not-for-profit entity.
- Must not have already received the maximum award under the Supplemental Employer Recovery Grant Program.
- Extensive financial information was also required.