Tolland Strip Club Owner Pleads Guilty

KENNETH DENNING, 69, of Holland, Massachusetts, pleaded guilty today in New Haven federal court to offenses stemming from his operation of the Electric Blue, a strip club in Tolland, Connecticut, where he and his employees promoted and facilitated prostitution.

According to court documents and statements made in court, Denning owned and oversaw the operation of the Electric Blue, which employed dancers who performed nude dances and lap dances for customers. The Electric Blue was owned by "Denning Enterprises," a holding company nominally owned by Denning's wife but controlled by Denning, from the 1990's until it was sold in January 2025.

Denning and his employees typically required dancers to pay a "house fee" of up to $50 each shift, and dancers were encouraged to engage in commercial sex transactions with customers in private and semi-private rooms, including a "lap dance room," "VIP rooms" and "Champagne rooms." Customers, who had paid a cash cover charge to enter the Electric Blue, paid the club a fee, typically in cash, to use one of the private rooms, and then negotiated an additional fee directly with the dancer. The dancers kept these negotiated fees, which often were hundreds of dollars.

Club employees collected the cash received by the club, placed the cash in envelopes noting the source of the cash, and then placed the envelopes in a safe in Denning's office. They referred to this cash as "Kenny's money," and used this money to pay business expenses and fund Denning's personal expenditures, including trips to casinos where Denning spent large sums of money. As an example, on February 23, 2023, Denning deposited approximately $21,700 in cash at the Mohegan Sun Casino for gambling purposes.

Denning and his bookkeeper provided spreadsheets of the Electric Blue's purported income to the club's tax return preparer that purposefully omitted "Kenny's money." On March 16, 2023, investigators seized $45,421 in cash from a safe inside Denning's office at the Electric Blue. Documentation found with the cash indicated that approximately $39,751 of the cash represented "Kenny's money" that was collected between March 2 and March 15, 2023. Based upon an extrapolation analysis of this two-week period, investigators calculated that Denning and employees caused nearly $3 million in material taxable business receipts not to be reported to the IRS for the 2020, 2021, and 2022 tax years.

In March 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act provided emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the distribution of Economic Injury Disaster Loans ("EIDLs"), through the U.S. Small Business Administration ("SBA"), which provided working capital to eligible small businesses to meet operating expenses. Denning applied for and received an EIDL loan during the pandemic by falsely certifying that the business did not "present live performances of a prurient sexual nature." On the EIDL application, Denning characterized the Electric Blue's business activity as "Eating & Drinking Places." In July 2020, the Electric Blue received $149,900 in EIDL funding. Denning almost immediately transferred $20,000 of those funds from the Electric Blue's business bank account into his personal bank account.

Denning pleaded guilty to one count of conspiracy to use an interstate facility to promote or facilitate prostitution, which carries a maximum term of imprisonment of five years; one count of conspiracy to defraud the IRS, which carries a maximum term of imprisonment of five years; one count of conspiracy to commit money laundering, which carries a maximum term of imprisonment of 20 years; and two counts of engaging in a monetary transaction in property derived from unlawful activity, which carries a maximum term of imprisonment of 10 years on each count.

Denning has agreed to pay restitution of $550,000 to the IRS and $150,000 to the SBA. He also has agreed to forfeit the $45,421 in cash seized from the Electric Blue in March 2023, and $1,047 seized from his residence when he was arrested on May 15, 2024.

Denning is released on a $250,000 bond pending sentencing, which is not scheduled.

This matter has been investigated by Homeland Security Investigations (HSI), the Internal Revenue Service - Criminal Investigation Division, the Connecticut State Police, the Connecticut Department of Consumer Protection - Liquor Control Division, and the Massachusetts State Police, with the assistance of the Willimantic Police Department and the Manchester Police Department. The case is being prosecuted by Assistant U.S. Attorneys Robert S. Dearington and Alexis L. Beyerlein.

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.