Cigar lounge co-owned by state agency director received pandemic grants from that agency

A cigar lounge whose majority owner is Tony Goins, the director of the Nebraska Department of Economic Development, received two “stabilization” grants from that agency during the COVID-19 pandemic.

They came in the form of two $12,000 small business stabilization grants, part of $330 million worth of similar loans distributed by the DED that came from federal CARES Act funds.

Goins, who has reported a 51% stake in the Capital Cigar Lounge in south Lincoln, did not immediately return a phone call and text message seeking comment Tuesday afternoon. His business partner, however, maintained Goins played no part in seeking the funds.

The revelation provides a new wrinkle to concerns raised in a Nebraska Examiner story last week about the relationship between the agency director and his private business.

A spokeswoman for Gov. Jim Pillen, who reappointed Goins to his post in November, said Tuesday evening the governor “takes these reports extremely seriously and expects the utmost integrity from all members of his cabinet.”

“We are evaluating the situation and will have further communication as soon as possible,” said the spokeswoman, Laura Strimple.

State law prohibits state agency directors from earning profit from another business, except for service on a corporation board. The law also bans officials from taking action or making a decision that results in financial benefit to themselves, an immediate family member or a “business with which he or she is associated.”

No conflict of interest statement filed

If state officials feel they have a conflict or potential conflict, they are required to file a formal conflict of interest statement with the Nebraska Accountability and Disclosure Commission. An official with that agency confirmed Tuesday that Goins had not filed such a statement.

Goins’ business partner in the cigar lounge, Austin Hillis, told the Examiner on Friday that the business had never sought or received funds from Goins’ state agency.

But on Tuesday, a DED spokeswoman confirmed that Midwest Leaf LLC, the entity that operates the cigar bar, had received two $12,000 grants from Coronavirus Relief Funds, one on July 24, 2020, and another Dec. 8, 2020. The funds — which did not have to be repaid — were intended for restaurants and bars “in industries hit hardest by COVID-19.

Hillis, on Tuesday, clarified that he had not remembered the DED grants when asked last week.

‘Zero involvement’

He insisted that Goins had “zero involvement” in seeking the pandemic funds.

“Tony and I don’t talk about state matters. So I don’t get any sort of heads up,” Hillis said, about applying for such aid.

Goins, who has served as state economic development director since 2019, had not officially acknowledged his ownership stake in the cigar lounge until earlier this year, when someone sent a letter to the NADC saying Goins had not listed it on the “statement of financial interest” required of government officials. After being contacted by the accountability commission, Goins filed an amended report, acknowledging his 51% ownership and stating that the lounge paid the $1,187 monthly lease payment on a company SUV that he drives.

He told the Examiner last week that he doesn’t take any profit from the lounge and isn’t using his state position to steer business to the establishment.

Dozens of his state emails, obtained through a public records request, revealed that he was setting up meetings with business groups and visiting dignitaries at Capital Cigar. The emails also indicated an instance in which he promoted a political campaign event at the bar using his official state email — a violation of state law — and used his state account to promote events at the lounge and to seek a new job.

Avoiding appearance of conflicts

Was it a conflict of interest for Goins’ lounge to obtain a grant from the state?

John Bartle, dean of the College of Public Affairs and Community Service at the University of Nebraska at Omaha, said he was not an expert on state law and couldn’t tell whether this was a conflict but that, generally, officials need to avoid any appearance of a conflict of interest.

“If there is a potential conflict of interest, it’s important to disclose that and be open about that,” Bartle said. “There are situations where there might be concerns about something.”

He added that he is obliged to disclose any outside consulting work he does to acknowledge any potential conflict.

To be sure, Midwest Leaf, which was formed in 2018, was not unlike other lounges in the state during the pandemic. They had to close indoor spaces for a time and try to make a living off take-out orders and deliveries.

Hundreds of grants processed

Kate Ellingson, a spokeswoman for the Department of Economic Development, said applications for the small business stabilization grants were handled via computer. If a business’s application met certain criteria, and its identification could be confirmed, it was issued checks, she said — no committee or DED official made the decisions.

The idea, Ellingson said, was to get the funds out as quickly as possible to avoid adverse economic impacts.

She said that DED processed 6,365 grants and that a similar amount was processed after the program was turned over to a consultant, Deloitte & Touche.

When Hillis was asked if it was appropriate to obtain a financial grant from an agency headed by his partner, he said it wasn’t inappropriate.

“Should I be disqualified from obtaining a loan available to every other small business?” he said. “I don’t think that’s correct.”

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