Tolland Strip Club Owner Gets Prison Time In Federal Tax, Prostitution Case

TOLLAND, CT — The former owner of the notorious Electric Blue strip club in Tolland has been ordered to a federal prison.

Kenneth Denning, 69, of Holland, MA, was sentenced Tuesday by U.S. District Judge Victor A. Bolden in New Haven to 16 months of imprisonment and three years of supervised release for offenses stemming from his operation of the club known locally as "The Blue." Prosecutors said he and his employees promoted and facilitated prostitution at the club.

According to court documents and statements made in court, Denning owned and oversaw the operation of The Blue, which employed dancers who performed nude routines on stage and private and semi-private lap dances for customers. The dancers typically came in from various states and stayed at area economy hotels.

The Electric Blue was owned by "Denning Enterprises," a holding company nominally owned by Denning's wife but controlled by Denning, from the 1990s until it was sold in January 2025.

According to case records, Denning and his employees typically required dancers to pay what was called a "house fee" of up to $50 each shift, and dancers were encouraged to engage in commercial sex transactions with customers in the private and semi-private rooms, including a "lap dance room" and "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, according to case records.

The dancers kept the negotiated fees, which often were hundreds of dollars, according to case records.

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, according to case records. 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, according to case records.

As an example, on Feb. 23, 2023, Denning deposited approximately $21,700 in cash at the Mohegan Sun Casino for gambling purposes, case records show.

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," prosecutors said.

On March 16, 2023, investigators during a raid 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, case records show.

Based upon an extrapolation analysis of that 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, according to case and law enforcement records.

In March 2020, the Coronavirus Aid, Relief, and Economic Security or 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, 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," according to case records. On the EIDL application, Denning characterized the Electric Blue's business activity as "Eating & Drinking Places," according to case records.

The Blue was not exactly known for an extensive food menu.

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, case and law enforcement records show.

Denning was arrested on May 15, 2024. On May 19, 2026, he pleaded guilty to one count of conspiracy to use an interstate facility to promote or facilitate prostitution, one count of conspiracy to defraud the IRS, one count of conspiracy to commit money laundering, and two counts of engaging in a monetary transaction in property derived from unlawful activity.

Judge Bolden ordered Denning to pay restitution of $549,999 to the IRS and $150,000 to the SBA. Denning also agreed to forfeit $1,525,842, including the $45,421 seized from the Electric Blue in March 2023, and $1,047 seized from his residence at the time of his arrest.

Denning, who is released on a $250,000 bond, is required to report to prison on Nov. 17.

This matter has been investigated by Homeland Security Investigations, 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.