Adult entertainment clubs agree to pay $354,176 to resolve allegations related to pandemic loan eligibility

BUFFALO, N.Y. - U.S. Attorney Michael DiGiacomo announced today that two locations of Mustang Salley's Spirit and Grill, 5111 Genesee Street, Inc., and 414 W Ridge Rd, Inc., have agreed to pay $354,176 to resolve allegations arising under the False Claims Act (FCA), that the clubs fraudulently obtained funding through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs, through the U.S. Small Business Administration (SBA), for which they were not eligible. This action is part of the Trump Administration's Task Force to Eliminate Fraud.

Under SBA rules, "Businesses which: (1) Present live performances of a prurient sexual nature; or (2) Derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature," are not eligible to receive funding through the EIDL program or PPP." Although the clubs were adult-entertainment businesses that presented nude and semi-nude erotic dancing, they certified in their PPP and EIDL applications that they were eligible to receive funding, and as a result received $177,088 in 2020 and 2021. The United States alleged, that the clubs violated the FCA by falsely certifying their eligibility for funding.

The civil settlement also resolves pending civil forfeiture litigation in the United States District Court for the Western District of New York, captioned United States v. One 2017 Bentley Mulsanne, 23-cv-941-JLS. In that action, the United States was seeking the forfeiture of a vehicle that it contends was proceeds of and traceable to the clubs' PPP and/or EIDL proceeds.

"PPP and EIDL funds were meant for eligible businesses to help them through the depths of the Covid pandemic," stated U.S. Attorney DiGiacomo. "This settlement demonstrates my office's commitment to ensuring that taxpayer funds are used for the purposes they were intended and by the businesses for which they were intended."

On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (Fraud Division). The Fraud Division is laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department's work to combat fraud supports President Trump's Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.

The case was investigated by the United States Secret Service, Buffalo Field Office, under the direction of Special Agent in Charge Charles T. Perras, the Internal Revenue Service, Criminal Investigation Division, under the direction of Special Agent-in-Charge Harry T. Chavis, Jr., and the United States Attorney's Office.

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