Why Is Federal COVID Relief for Indie Venues Taking So Long? Blame Fraud

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Why Is Federal COVID Relieffor Indie Cinemas and Music Venues Taking So Long? Blame Past Fraudsters

Entertainment lobbyists say extra measures to ensure relief funds go only to those in need have left thousands of venue owners waiting for weeks for aid

More than a month after the Small Business Administration opened applications for a $15 billion grant program to provide relief for movie theaters and other entertainment venues crippled by COVID-19, barely any applicants have received money.

Lobbyists say that concern about fraud is the main reason why. When the Paycheck Protection Program was approved by Congress last year to provide immediate relief to businesses closed by the pandemic, headlines popped up of recipients who used millions in grants to buy luxury items like mansions and supercars. In the early weeks of his presidency, Joe Biden vowed to crack down on such fraud, and the grant program developed for shuttered entertainment venues was designed with that goal in mind.

“In our latest talks with the SBA, we found out that the administration had created the program with the aim to have zero fraud and trained applicant reviewers to look at each grant request with the assumption that there was some sort of fraud there,” said Jackie Brenneman, general counsel for the National Association of Theater Owners (NATO). “Meanwhile, we have thousands of applicants — not just movie theaters we represent but other venues represented by our partners — that needed to get this grant money weeks ago.”

Last week, the Small Business Administration reported that just 90 applicants had been approved for grants out of over 4,600 that requests from organizations claiming financial losses of more than 90% year-over-year due to the pandemic. Of those 90, only a small handful have actually received a grant check in the mail, according to a joint statement released by NATO, the National Independent Venue Association and several other indie venue lobbyists.

This is in spite of the fact that the SBA opened the application site back on April 26 and has a reported team of 400 staffers reviewing applications for approval. So what’s the holdup? Brenneman said that within the immense stack of paperwork that applicants had to provide, there is one form that has been identified as the biggest hurdle: Form 4506-T.

“4506-T is a form that basically says the applicant gives permission to the SBA to ask the Internal Revenue Service for tax return information,” she explained. “It’s meant to allow them to verify that the company is legitimate and that they are being honest about their reported profits and financial losses from the pandemic.”

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The problem is that unlike other forms of fraud protection that the SBA can handle internally, the 4506-T form requires interagency communication with the IRS, which is facing a staff shortage thanks to years of budget cuts forced by Congressional Republicans during talks with the Obama Administration and then later escalated during the Trump Administration.

Venue lobbyists are now asking the SBA to waive the 4506-T requirement so that grant money can get to businesses in need faster. In addition, Brenneman argued that there’s no need for multiple levels of fraud protection as the number of applications received have met the levels projected by lobbyists during discussions with the SBA.

“We have been told that the SBA will ‘pilot’ a program that will phase out the 4506-T, but our members cannot wait for that,” she said.

For both indie movie theaters and music venues, each day without federal funds is a day they fall further behind their multinational competitors with infinitely more resources. While many indie theaters nationwide have struggled to reopen, even with the help of hit films like Paramount’s “A Quiet Place — Part II,” top national chain AMC has seen its stock surge to over $55 per share — which has enabled it to raise raise $230.5 million for key acquisitions in the movie theater sector — including talks to acquire venues operated by the now-shuttered ArcLight Cinemas and Pacific Theatres.

Meanwhile, the National Independent Venue Association warns that music venues without funds to reopen are losing out as musicians from underground acts to major stars like Lady Gaga and John Legend begin to set new concert dates. Meanwhile, the titans of the industry, Live Nation and AEG, have already resumed selling tickets for concerts at their venues.

“The concern needs to shift away from the slight possibility of fraud to the very real possibility that hundreds of businesses that need this money will close,” Brenneman said.

An SBA spokesperson said the agency is continuing to hire more staff to review applications and will provide venue owners with weekly updates on the status of their grant requests. The venue grant program’s structure is also being aligned with those of other grant programs provided by the SBA while staff that worked on the Restaurant Revitalization Fund, which sent grant money to struggling restaurants in a matter of days, will be brought on to help.

“The SBA realizes the critical need to increase processing speed for Shuttered Venues applicants – the current pace of awards is not reflective of the high standards that we strive to meet,” read a statement. “We are committed to doing everything we can to improve funding speed, get Americans the relief they desperately need and open our venues again.”

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Jeremy Fuster