The longtime owner of Tolland’s Electric Blue strip club pleaded guilty Wednesday in New Haven federal court to tax fraud, money laundering and promoting prostitution.
Kenneth Denning, 69, of Holland, Massachusetts, admitted he and his employees facilitated commercial sex transactions at the club, concealed nearly $3 million in cash receipts from the IRS over three years and fraudulently obtained a $149,900 federal pandemic relief loan by hiding the nature of the business, federal authorities said.
Denning ran the Electric Blue through Denning Enterprises, a holding company nominally owned by his wife but controlled by him, from the 1990s until the club was sold in January 2025, authorities said.
According to court documents, dancers were required to pay shift fees of up to $50 and were encouraged to engage in commercial sex transactions with customers in semi-private and private rooms, including a lap dance room, VIP rooms and Champagne rooms.
Customers paid the club cash to use the rooms, then negotiated separate payments directly with the dancers, which often ran into the hundreds of dollars.
Employees referred to the cash haul as “Kenny’s money,” tucking it into envelopes labeled with its source and locking it in a safe in Denning’s office. The money paid business expenses and bankrolled Denning’s personal spending, including casino trips. On Feb. 23, 2023, he deposited roughly $21,700 in cash at Mohegan Sun for gambling, authorities said.
Denning and his bookkeeper handed the club’s tax preparer spreadsheets that intentionally left out the off-the-books receipts. When investigators seized $45,421 from the office safe in March 2023, documents found with the cash showed about $39,751 of it had been collected over the previous two weeks. Extrapolating from that snapshot, federal authorities estimated Denning and his employees hid nearly $3 million in taxable receipts across 2020, 2021 and 2022.
Denning also admitted defrauding the federal government to collect pandemic aid. In applying for an Economic Injury Disaster Loan through the U.S. Small Business Administration in 2020, he falsely certified that the Electric Blue did not “present live performances of a prurient sexual nature” and described the business as an eating and drinking establishment. After the club received $149,900 in loan funding that July, Denning almost immediately transferred $20,000 into his personal bank account, authorities said.
He pleaded guilty to one count each of conspiracy to use an interstate facility to promote prostitution, conspiracy to defraud the IRS and conspiracy to commit money laundering, plus two counts of engaging in a monetary transaction in property derived from unlawful activity. The money laundering count carries a maximum of 20 years in prison, the monetary transaction counts carry up to 10 years each, and the conspiracy counts carry up to five years.
As part of the plea, Denning agreed to pay $550,000 in restitution to the IRS and $150,000 to the SBA. He also agreed to forfeit the $45,421 seized from the club and $1,047 taken from his home when he was arrested in May 2024.
Denning was indicted in May 2024 alongside the club’s manager and bookkeeper, Joshua Baker of Willimantic, and its bouncer, William Mayo of Manchester. The original indictment alleged Mayo, who was primarily responsible for hiring dancers, employed workers who were not legally authorized to live or work in the United States.
Denning is free on a $250,000 bond. A sentencing date has not been set.
The case was investigated by Homeland Security Investigations, the IRS Criminal Investigation Division, the Connecticut State Police, the Connecticut Department of Consumer Protection’s Liquor Control Division and the Massachusetts State Police, with assistance from the Willimantic and Manchester police departments.
