Revere strip club sues government for refusing to forgive emergency pandemic loan

The owners of the Squire in Revere today sued the Small Business Administration over its refusal to forgive one of the two emergency small-business loans the strip club got in the early days of the pandemic.

MFRP Corp. of Salisbury, owned by the DePesa brothers, says that when it applied for a Paycheck Protection loan on April 3, 2020, there were no regulations forbidding loans to strip clubs and that it should not be penalized for a rule the SBA enacted two weeks later barring such loans to businesses that included banks, real-estate developers and businesses providing "prurient sexual material," such as the ""full nude Exotic Dancers, Strippers, and Showgirls" the Squire professes to offer.

The rule went into effect April 15, the same day TD Bank transferred $243,750 in PPP funds to MFRP's account, MFRP says.

To the extent that the CARES Act authorizes the Lender to rely on the applicant's certifications in allowing PPP loans, there were no relevant certifications in Squire's Application or Note regarding SBA Exclusions. Squire never obfuscated the nature of its business and neither the Lender nor any of the certifications included with the Application ever inquired about the nature of Squire's business.

But when MFRP applied to have its loan forgiven, as many recipients did, first TD Bank and then the SBA rejected the application because of all the stripping at the Squire, "the Boston area's premiere adult entertainment ultra club."

MFRP says it shouldn't be penalized like that for a rule that was not in effect when it applied with the understanding it could get the loan forgiven, rather than being forced to repay it.

MFRP says it appealed the denial, but that on Nov. 16, 2023, the SBA rejected the appeal because ecdysiasts were not the sort of workers the program was meant to protect and because the rule against taxpayer help for such prurient performers was in place when MFRP applied.

Effectively, the Lender and SBA induced Squire into applying for a loan, with the promise of forgiveness, issued the loan (indicating to Squire that it was, in fact, eligible for the loan), and then denied forgiveness by asserting that Squire was never eligible to begin with, based on rules that did not go into effect until after the Application was signed.

Basic fairness dictates that the eligibility standards applied at application are the same standards that apply at the forgiveness phase. Having granted the loan to Squire - and with no contention that Squire obfuscated the nature of its business or otherwise made factually incorrect representations in its application - the SBA cannot properly revoke eligibility at the forgiveness phase.

According to SBA records, the Squire's owners got a second PPP loan, of $341,250, on April 28, 2021, through Eastern Bank - but that loan, unlike the first one, was forgiven on July 28, 2022.

Ed note: Yes, ye editor got a PPP loan, and was able to get it forgiven.