L.A. nightclub, other businesses allegedly denied COVID aid

Two men holding hands and dancing with each other in a crowded nightclub

Oct. 29, 2024 3 AM PT

A nightclub based in Los Angeles, a movie theater chain based in North Carolina and a concert promoter based in Tennessee were all denied COVID-19 relief money by the Small Business Administration.
They are among numerous businesses that have sued the SBA for allegedly mishandling their applications for Shuttered Venue Operators Grants.
The U.S. government launched the SVOG program in April 2021 to provide financial aid to arts and entertainment venues and promoters decimated by the pandemic. The program’s rollout has drawn plenty of criticism.

On a Saturday night at North Hollywood’s Club Cobra, a drag queen dressed as Miley Cyrus lip-synced to “Zombie” by the Cranberries, with Halloween decor and disco balls dangling from the ceiling. Muscular go-go dancers grooved in a cloud of rainbow fog while patrons vibed to hits by Selena and Bad Bunny.

It wasn’t easy for the popular Latin LGBTQ+ nightclub to rebuild to this level of live entertainment after nearly going out of business because of the COVID-19 pandemic.

The public health crisis shut the operation down for 18 months and left its owners hundreds of thousands of dollars in debt. Making matters worse, the U.S. Small Business Administration has repeatedly denied Club Cobra’s application for COVID-19 relief money, alleging that the establishment offered services of a “prurient sexual nature.”

For Marty Sokol, 56, owner of Club Cobra, the lack of government assistance has been frustrating and surprising.

“We’re the good guys in this town,” Sokol said by phone. “We’re the place you have your birthday party at. We’re the place you bring your tía to. ... It’s beyond insulting.” (Tía is Spanish for aunt.)

Sokol is one of multiple business owners who say they were unjustly denied money from the Shuttered Venue Operators Grant program, launched by the federal government in 2021 to provide financial support of up to $10 million to arts and entertainment venues and promoters decimated by the pandemic.

Some have taken legal action against the SBA. And though the courts have sided at various points with the business owners, Sokol and others are still fighting for financial aid.

“We really feel wronged,” Sokol said. “If it wasn’t for our community, there’d be no way we would have survived.”

The issue isn’t limited to nightclubs. The Times also spoke with a North Carolina-based movie theater chain and a Tennessee concert promoter that have struggled to secure grants. Prominent cases — including a dispute between the SBA and exhibition basketball team the Harlem Globetrotters over $10 million in grant money — have drawn attention to the problems. (The court dismissed the Globetrotters’ complaint against the SBA last October.)

The SBA has also drawn scrutiny for awarding more than $200 million in SVOGs to companies with rich and famous owners — such as Post Malone, Chris Brown and Lil Wayne — while withholding assistance for others, according to a report by Business Insider.

“The overarching complaint has been there is a lack of transparency in the SBA’s decision-making process,” said James Sammataro, a Miami-based partner at law firm Pryor Cashman who has represented entertainment businesses in other SVOG cases.

“What [critics have] essentially said is it’s too subjective. ... It’s applied unevenly, and the SBA has — intentionally or otherwise — created a hierarchy of who is more entitled to receive the grant money.”

The SBA declined to comment, saying it “does not provide comment on pending litigation.”

The SVOG controversy serves as a reminder of the lingering consequences of COVID-19 years after the pandemic first wreaked havoc on the economy and judicial system. Just as entertainment businesses were disrupted by the global health crisis, so too were the courts, Sammataro said, compounding the typical tedium.

“There’s no expedition that’s applied to these types of cases, even though you’re literally dealing with companies [whose] very lifeline may be on the line,” Sammataro said.

A man, wearing glasses and a pinstripe suit, posing in three different positions with a crowd of people dancing behind him.

Club Cobra has been serving drinks, DJ sets and live performances to the local LGBTQ+ community for more than a decade. Its sister establishment, Club Chico in Montebello, is coming up on its 25th anniversary.

During the COVID-19 shutdowns, Sokol and his team kept their business alive by streaming a socially distanced drag and go-go show on the subscription platform OnlyFans. Proceeds weren’t enough to dig 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 Nov. 3, 2021 explaining that Sokol’s application was denied “at least in part” because Club Cobra “presented live performances of a prurient sexual nature” or derives meaningful revenue “through sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature.” In official materials regarding the SVOG program, the SBA outlines prurience as grounds for disqualification.

The SBA took issue with images of Club Cobra dancers in “seemingly sexualized” poses and “revealing” outfits posted on the business’ 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.”

A man in a green hat and a man in a black mesh shirt smiling at each other in a dark club.

Sokol sued, accusing the agency of arbitrarily and capriciously refusing Club Cobra grant money while awarding SVOGs to similar establishments around Los Angeles — such as LGBTQ+ nightclub Reload Entertainment on Cahuenga and Silver Lake’s Los Globos. The SBA argued that it had conducted an informal review of the other establishments and determined that an additional “prurience review” was not necessary.

Sokol demanded that the U.S. district court in D.C. force the SBA to reconsider his application. The court concluded that the SBA failed to provide a “reasoned analysis for why these apparently similarly situated competitors were treated differently.”

Sokol said it was painful to see other nightclubs receive emergency aid while Club Cobra was refused money he could use to cover renovations, outstanding rent payments and other obligations.

“Watching them rebuild with great ease, we didn’t begrudge them,” Sokol said. “We just wanted equal treatment.”

In December 2022, the SBA vetoed Sokol’s application again, this time providing analyses of five “alleged competitors” and why they qualified for grants. The SBA reasoned that, for the most part, those establishments did not regularly post suggestive images or present live performances of a prurient nature.

Sokol filed another motion for summary judgment in May 2024. The court has yet to respond.

A drag queen wearing a blond-and-pink wig, a pink crop top and a pink miniskirt performs onstage under a spotlight.

Another business in contention with the SBA is Golden Ticket Cinemas, a North Carolina-based theater chain. .

Golden Ticket Cinemas President John Bloemeke had opened his fifth and sixth locations when COVID-19 ravaged the entertainment industry

Bloemeke was able to secure grants for most of his locations, but not for two based in DuBois, Pa., and Rapid City, S.D. After Bloemeke challenged the SBA’s move to shun those theaters, the government agency offered the business owner roughly $500,000 — down from the roughly $2.8 million he asked for.

Two shirtless men dancing together in a dark nightclub.

Bloemeke filed complaints accusing the SBA of shortchanging Golden Ticket Cinemas and then failing to disburse those funds.

The SBA countered that Golden Ticket Cinemas wasn’t eligible for the full SVOG amount requested because those locations had allegedly been operational for longer than Bloemeke reported.

The court agreed with the SBA’s position that it was not legally obligated to disburse the funds. However, it also concluded that the agency’s logic for awarding a significantly lower amount was flawed and ordered the SBA to reevaluate the application.

According to Bloemeke, the SBA has yet to heed the court’s ruling.

“It was very frustrating,” Bloemeke said. “I mean, we have a nine-plex that’s only operating five of the screens because we’re still trying to get our head a little bit above water with some of this stuff.”

A muscular male go-go dancer performing at a club in a turquoise speedo with cash tips peeking out of it.

Meanwhile in Nashville, Justin Roddick is still trying to snag a grant for his company, Concert Investor, which produces tours for up-and-coming musicians. Over the past 12 years, Concert Investor has helped launch the careers of Twenty One Pilots, Little Big Town, Kelsea Ballerini and other artists.

When acts stopped touring during the pandemic, Roddick’s business suffered.

“A year after COVID, we found ourselves with no other option other than to completely restart,” Roddick said. “So when I heard about the grant, I was very excited.”

Roddick was soon disillusioned. His request for about $5 million was denied multiple 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.”

A person wearing sunglasses and a halo headband smiles underneath a disco ball and pink lights at a nightclub.

. The Concert Investor team alleged that the SBA unfairly altered the definition and moved the goal posts after the fact.

Initially, the court ruled in favor of the SBA. But an appeals court reversed that ruling in May 2024.

According to Patrick Corcoran, a representative for the businesses, the SBA was given a deadline of Dec. 11 to deliver a new decision. Depending on how the agency responds, Roddick might have to wait for the next Ballerini or Twenty One Pilots to come along and revive his touring business.

“It’s devastating to pay into the system and to believe it works a certain way ... and then to have no action,” Roddick said. “It’s kind of unreal to me.”

A local LGBTQ+ nightclub was denied COVID-19 aid. Its owner is fighting back

More to Read

More From the Los Angeles Times

Most Read in Hollywood Inc.