Vidostream | News, sport and opinion from the Vidostream's US edition

https://vidostream.com

How rich musicians billed American taxpayers for luxury hotels, shopping sprees, and million-dollar bonuses

Celina Pereira for BI

Celina Pereira for BI

Many musicians struggled during the pandemic. Lil Wayne wasn't one of them. He sold master recordings from his record label's artists for more than $100 million. He was pardoned for felony gun possession in a last-minute action by then-President Donald Trump. He purchased a $15.4 million mansion in the mountains of Los Angeles.

And, as a Business Insider investigation found, he received an $8.9 million grant from a little-known pandemic-relief program that he used to cover more than two years' worth of spending on luxury hotel stays, designer clothes, and travel to and from nightclub appearances around the country.

The rapper, whose real name is Dwayne Carter Jr., spent more than $1.3 million from the grant on private-jet flights and over $460,000 on clothes and accessories, many of them from high-end brands like Gucci and Balenciaga. He billed taxpayers more than $175,000 for expenses related to a music festival promoting his marijuana brand, GKUA, including clothing for artists associated with his record label.

He also used grant money to cover nearly $15,000 worth of flights and luxury hotel rooms for women whose connection to Lil Wayne's touring operation was unclear, including a waitress at a Hooters-type restaurant and a porn actress.

 

Headline: Lil Wayne

 

On New Year's Eve 2021, he was scheduled to perform at a concert in Coachella, California.

But shortly before his set was scheduled to start, a concert employee announced that the rapper would be unable to perform "because of the wind and the flights." The crowd booed. (Wind gusts of 20 to 30 mph were reported in Southern California that night, but data from Flightradar24 indicates four other private jets flew the exact route Lil Wayne was scheduled to fly.)

Instead, posts on Instagram suggest he partied that night at a club on Sunset Boulevard with the rapper 2 Chainz.

For expenses related to the concert he never performed, Lil Wayne billed taxpayers nearly $88,000.

 

 

Lil Wayne's publicists didn't respond to numerous requests for comment on detailed questions. Reached by text, Lil Wayne made a sexually explicit overture to a reporter and did not respond to questions.

'An abuse of federal resources'

The money came from a program called the Shuttered Venue Operators Grant. Signed into law by Trump in 2020 and championed by lawmakers including Sen. Chuck Schumer, it was established as a lifeline for struggling independent venues and arts groups during the pandemic.

But pop stars used the program as a piggy bank to keep the party going, reporting by Business Insider shows.

The stars' spending took place against a backdrop of massive pandemic-relief fraud. The Paycheck Protection Program and Economic Injury Disaster Loans gave out as much as $200 billion in suspected false claims, losses that combined with false unemployment-benefit claims amount to what the FBI has called the largest fraud in history. Compared with those better-known programs, the Shuttered Venue Operators Grant had relatively strict eligibility requirements.

Still, accounting firms and money managers soon realized their stadium-filling musician clients might be eligible for grant money via their loan-out companies — corporate entities used to handle the business of touring. Grants awarded to clients of one high-powered entertainment-business-management firm, NKSFB, totaled at least $207 million, BI previously reported. NKSFB itself collected more than $7 million by helping its clients obtain the grants.

NKSFB's managing partner, Mickey Segal, didn't respond to requests for comment. The firm's lawyer Bryan Freedman said NKSFB doesn't comment on its clients' finances.

Grantees received up to $10 million that they could spend on certain "ordinary and necessary" expenses for their entertainment businesses. They had to make a good-faith statement to the Small Business Administration, which oversaw the program, that the grant was necessary to support the loan-out company's "ongoing operations" and show that the company's revenue had fallen by at least 25% between one quarter of 2019 and the same quarter of 2020.

In a statement, the SBA said it followed the law. But the law directed the SBA to examine revenue, not assets. Musicians with huge bank accounts and multiple mansions were still eligible for the awards as long as their loan-out company's revenue had declined.

Thousands of pages of accounting documents reviewed by Business Insider reveal, for the first time, how some wealthy musicians — including Chris Brown, the DJ Marshmello, and members of Alice in Chains — spent grants they received through the program.

The documents include detailed records explaining how celebrity musicians spent their grants, as well as correspondence between their accountants and the SBA. Business Insider has verified the authenticity of the documents.

They reveal how artists directed millions in taxpayer funds not toward touring crew members, but instead toward their own bank accounts, luxury purchases, and entertainment expenses — often while sitting on substantial wealth from other business ventures.

One top government-accountability expert said some of the spending Business Insider identified was questionable — but stopped short of saying it was fraudulent.

"At a minimum, it smells," said David Walker, a former comptroller general of the United States. "Whether it's legal or not is up to a lawyer or ultimately to a court. But it sure smells."

The SBA said it "implemented industry-leading fraud controls."

Sen. Gary Peters, the chair of the Committee on Homeland Security and Governmental Affairs, said celebrity musicians' use of Shuttered Venue grants was "an abuse of federal resources." Business Insider's findings, he added, demonstrate "the need for continued oversight of pandemic-relief programs."

Pandemic relief was intended to help businesses and workers in need, the senator said — "not super wealthy celebrities."

An $80,000 birthday party

Lil Wayne wasn't the only one to engage in questionable grant spending. Chris Brown spent his grant on a big paycheck — and a big party. Of the $10 million grant Brown's company CBE Touring received, $5.1 million went to Brown personally. He also billed taxpayers nearly $80,000 for his 33rd birthday party.

 

The blowout, held in a luxe Los Angeles event space, featured a $3,650 LED dance floor and "atmosphere models" — nude women in body paint — who cost $2,100, according to expense reports and a blog post by the party planner. The bill included more than $29,000 for hookahs, bottle service, "nitrogen ice cream," and damages involving burn holes to rented couches.

While the grant was meant to support live entertainment, Brown also charged $24,000 to the grant for the cost of driving his tour bus from the US to Tulum, Mexico, and back in fall 2020 during a monthlong stay for him and his entourage in the resort town, where he did not perform. He spent several days in Tulum filming a video with Jack Harlow for a joint track, but it's not clear if the rest of the trip was for business or pleasure. And more than $179,000 of the grant went toward a celebrity basketball tournament broadcast on YouTube, including a $20,000 payment to the Indianapolis Colts tight end Mo Alie-Cox, who played on Brown's basketball team.

 

 

Brown, his attorneys, and managers did not respond to requests for comment. Representatives for Harlow and Alie-Cox also didn't respond to requests for comment.

Others also paid themselves, taking advantage of an SVOG spending category that Business Insider drew attention to last year: "owner compensation."

The SBA's guidance said artists could use grants paid to their loan-out company to pay themselves as long as the check was no bigger than it was in 2019.

Marshmello, whose real name is Christopher Comstock, received a $9.9 million grant. More than a year later, when the SBA asked for proof of where it went, his business manager Steven Macauley, of NKSFB, responded by saying all the money went into Comstock's pocket.

"Because the beneficiary received 2019 Officer Draws/Salary from 365 Touring International, Inc. in excess of the SVOG Grant Award, we therefore, expensed the entire Grant balance to Payroll," Macauley wrote in an April 2023 letter seen by Business Insider.

In other words, because Comstock made more than $9.9 million from touring in 2019, he was able to award himself the entire grant. In doing so, Comstock paid himself more than any other musician who received grant money.

Comstock's publicists and his manager didn't reply to requests for comment, nor did Macauley.

Artists often paid themselves far more than they paid anyone else involved in putting on their live shows.

Steve Aoki's loan-out company, DJ Kid Millionaire Touring, used $2.4 million in grant money on payroll costs, of which $1.9 million was officer pay. Aoki is the company's only officer. Aoki's publicists didn't respond to requests for comment.

Three of the four members of the rock band Shinedown split at least $2.5 million of their $8.3 million grant. On top of those distributions, Shinedown's four members paid themselves more than $100,000 each out of the roughly $1.2 million of the grant that was allocated to payroll.

The band's 15 touring-production workers, meanwhile, received a combined $650,000 of the grant money — less than a single member of the band got. Publicists for the band didn't respond to requests for comment.

Records seen by BI show that a good chunk of the $7.7 million grant to Sremm Touring, the loan-out company for the hip-hop duo Rae Sremmurd, was paid to the rappers Slim Jxmmi and Swae Lee, whose real names are Aaquil Brown and Khalif Brown. The duo's manager, lawyer, and publicists didn't respond to requests for comment.

On March 23, 2022, records show, the Alice in Chains singer and guitarist Jerry Cantrell took in $1.4 million as an "SVOG distribution." The band's drummer, Sean Kinney, received the same amount, and its bassist, Mike Inez, booked half that sum, about $682,000.

In all, $3.4 million of the $4.1 million the grant allotted for payroll went to the three musicians at the top.

Like other grant applicants, AIC Entertainment — the three band members' touring business — had to tell the government only that the money was "necessary." But the month before they took their grant payments, the band members recorded about $48 million in income from selling the copyrights on their catalog. They made hundreds of thousands of dollars more from merchandise sales and other profit distributions in 2022.

The band spent some money to pay its staff. It paid hundreds of thousands of dollars to sound-equipment-rental firms, videographers, and managers. But the precarious nature of working in the live-entertainment business didn't change for some of its employees. Scott Dachroeden, a guitar tech and tour photographer who had worked with the band for years, received a cancer diagnosis in late 2022. The band, which records show did not spend grant money on benefits like health insurance, circulated a GoFundMe page on Twitter.

"He has no health insurance and now cannot work to pay his bills," the page said. The band's lead singer said on Facebook that Alice in Chains helped out behind the scenes, but a person familiar with the situation said that Dachroeden didn't get much, if any, money from the band during the pandemic and that after his diagnosis, the band connected Dachroeden with a charity that helps with medical bills. Dachroeden died soon after his diagnosis.

Alice in Chain's publicists and manager didn't respond to requests for comment.

Supporting 'middle-class people'

The Shuttered Venue Operators Grant program was pitched to Americans as a way to ensure that arts groups would still exist after the pandemic.

In an interview with James Corden on "The Late Late Show," Chuck Schumer cast it as a way to protect "middle-class people" and "young artists" while pandemic restrictions forced closures.

Grant money would "keep these folks going" so that "these live venues will be out there bigger and better than ever" after the restrictions lift, Schumer said. Schumer's press office and chief of staff didn't respond to comment requests.

 

Chuck Schumer accepts a Grammy on the Hill
In 2023, Sen. Chuck Schumer received a Grammy on the Hill for his work on the Shuttered Venue Operators Grant. "I believe in the power of the music industry," he said at the awards event. "I will always, always fight, tooth and nail, Brooklyn style, for you." Paul Morigi/Getty Images

 

Ultimately, more than 13,000 arts groups received grants, including some who say they wouldn't still exist otherwise.

"When the shutdowns happened, it was existential. Immediate crisis," said Brandy Hotchner, the founder of Arizona Actors Academy, an acting school in Phoenix. The grant of less than $120,000 the group received, she said, "utterly saved us."

Musicians weren't explicitly categorized as eligible — and initially, the SBA interpreted the law to mean that artists' loan-out companies couldn't qualify for the grant either.

By mid-December 2021, for reasons BI was unable to determine, the agency had reversed that decision, according to an internal memo seen by Business Insider, which cleared the way for federal funding to flow to wealthy artists. The SBA didn't respond to a question about why it reversed itself.

The business-management firm NKSFB also made millions from the program.

 

Partners at the firm initially believed that their celebrity clients didn't qualify for the grants. At least one partner feared that applying could be perjury, and another, Rob Salzman, thought the whole thing was "bullshit," a court document said.

Later, in an interview with Billboard magazine as part of its list of "Top Business Managers," Salzman said that applying for the grants was an example of the firm's "outside-the-box" thinking.

The change of heart led to a big payday. Court documents show the firm made at least $7.5 million in fees on the grants. Salzman didn't respond to requests for comment.

"NKSFB, one of the most respected business management firms in the world, does not comment on its clients' financial information," said Freedman, the firm's lawyer. "Based on the uninformed questions that BI has asked, it is clear it has little to no understanding on this subject."

Other white-collar professionals also outearned techs and roadies. Lawyers at the celebrity-favorite firms Greenberg Traurig and Grubman Shire Meiselas & Sacks received up to 5% of their clients' grants. Brown's manager took 7% of his grant, and Shinedown's managers received 20% of theirs. A spokesperson for Greenberg Traurig didn't answer questions about the firm's actions. Partners at Grubman Shire didn't respond to emails or phone calls.

Over $2.1 million of Lil Wayne's grant paid off a debt to a former manager, Cortez Bryant. Another $300,000 went to a former accountant, and his manager at the time, Mack Maine, whose real name is Jermaine Preyan, took $1.7 million. All told, roughly $5.3 million went to managers, accountants, and attorneys as fees and commissions — more than 13 times the amount Lil Wayne paid the drummer, sound techs, and other contractors who helped put on his live shows.

Bryant and Preyan didn't respond to requests for comment.

 

Lil Wayne performing
Lil Wayne used federal funds to buy clothes for himself and several of his associates to wear at a music festival promoting his marijuana brand, GKUA. Business Insider reported in March that the SBA didn't question his claim that he ran a drug-free workplace, even though he often smokes weed onstage. Rich Fury/Getty Images

 

A music-industry insider who learned from Business Insider about NKSFB's wave of grant applications said he was stunned the Small Business Administration approved them.

"It never crossed my mind that we should be trying to get this money for my artists," said the insider, an artist manager who was involved in lobbying lawmakers to pass the legislation and who asked not to be named because of the issue's sensitivity.

"I was in countless conversations," he said. "No one ever discussed artists collecting this money. It never came up."

Hotchner, the acting-school founder, said she was "speechless" upon learning about Business Insider's reporting on how celebrity musicians spent their grants. Though the amount of money sent to pop stars is small relative to the overall amount of money disbursed through the grant program, she said she worried it would taint the public's perception of government support for the arts — support that's still needed.

"I will never forget how hard-fought-for this funding was," she said. "It's such a disappointment."

'Shut up, sit down. Process the file.'

Soon after Congress created the program, lawmakers began pressing the Small Business Administration to get money out the door. By mid-June 2021, more than 200 members of Congress had signed two separate letters demanding the agency disburse the funds expeditiously, saying arts organizations could go out of business without immediate relief.

The SBA said congressional pressure "was not the driving factor" behind changes that sped up the grant process and merely "coincided" with changes it was already making.

The agency hoped to balance a quick release of funds with a desire to protect against large-scale fraud that had plagued other pandemic programs. Its compromise was to relax some anti-fraud controls on the front end of the grant process, a report from the SBA's inspector general said. Instead, it planned to verify whether the grantees were actually eligible and how the money was spent after distributing the grants. In its response to the inspector general's report, the agency said it disagreed with the conclusion that changes to how it evaluated applications amounted to "weakened" fraud controls.

The approach had mixed results. The Government Accountability Office said that it submitted three phony applications to the program and that all three were rejected. But some of the eight current and former SBA workers who spoke to Business Insider said they felt the agency was too permissive and ignored or misinterpreted relevant rules — for example, allowing grantees to spend federal funds on thousands of dollars' worth of alcohol.

"They were just trying to get money out. If it was fraudulent, if it was not eligible — whatever," a person who worked on the grants said. They asked not to be named because they feared retaliation, but their identity is known to Business Insider.

The SBA's inspector general criticized the agency's decision to spot problems after the recipients already spent the money, saying it "does not provide sufficient fraud prevention and comes at a point when funds are potentially unrecoverable." Some SBA employees said that as the program began to wind down, they were pressured to certify recipients' compliance with program rules rather than dig through detailed records of their spending.

The SBA said in September it had recouped $43 million worth of the grants — an amount that hadn't increased since July. It's not clear how the agency recovered that money. While the SBA has a team to recover wrongfully awarded grants, an organizational chart suggests that as of late September it hadn't assigned any staff to it. Documents obtained in a public-records request said $6 billion worth of grants remain under review for compliance with program rules.

The SBA said "some" of the grants Business Insider mentioned in its reporting "remain open due to ongoing third-party audits that the Agency is resolving." The agency spokesperson didn't respond to questions about recoupment and didn't respond to a follow-up question asking which grants remain unresolved.

Four people who worked on the program said they tried to raise concerns about grantees' eligibility and spending to supervisors, to no avail. "I was never so disappointed in my fellow man than in that program," one of the people said. "The graft was unbelievable."

Two of those people said they were frustrated the agency wasn't doing more to investigate possible misspending and recover funds.

"Everybody kept saying shut up, sit down. Process the file," said a current SBA employee who asked not to be named because they're not authorized to speak to the press.

This person said that while some issues stemmed from the dwindling number of SVOG employees drowning in documentation, other problems arose because of the way the program was administered. "It was our fault because we threw this thing together in five seconds," they said.

An SBA spokesperson defended its processes. "By design, the vast majority of processing staff did not have access to the complete results of fraud checks and, therefore, are not positioned to comment on the internal review process or its outcomes," the spokesperson said in an email.

"Where credible evidence suggests funds were misspent or a grantee misrepresented their expenditures to SBA, the agency's robust fraud and waste oversight structure reviewed such allegations," the spokesperson said. "When substantiated, SBA and its law enforcement partners vigorously prosecute suspected wrongdoing. As a matter of policy, the SBA cannot comment on specific investigations or law enforcement action, whether planned or ongoing."

Meanwhile, the government has recovered at least some money from one musician.

As pandemic restrictions faded, Chris Brown returned to performing. In early 2022, he announced a 27-stop nationwide tour and launched a variety of side projects, including a novelty cereal called Breezy's Cosmic Crunch and an NFT collection.

While the Small Business Administration was disbursing money to Brown's touring company, federal and state tax authorities were becoming very interested in his finances.

In early 2021, the IRS notified Brown that he owed $3.2 million in unpaid taxes. In 2022, the IRS determined that Brown owed an additional $2.2 million, while California's Franchise Tax Board found that Brown hadn't paid $1.3 million in state taxes.

He settled these debts in April last year — but not before American taxpayers had unwittingly paid $80,000 for his birthday party.

Have a tip? Know more? Reach Jack Newsham via email (jnewsham@businessinsider.com) or via Signal (+1-314-971-1627). Do not use a work device.

Author: Jack Newsham and Katherine Long

Source: Business Insider:::

We are using cookies to give you the best experience on our website. By continuing to browse, you are agreeing to our Cookie Policy.
You did not use the site, Click here to remain logged. Timeout: 60 second