Radio Chain Hit With Payola Lawsuit

March 8, 2006 — -- New York Attorney General Eliot Spitzer filed a lawsuit today against one of the country's biggest radio conglomerates, alleging the company accepted gifts and other payments in exchange for putting songs by Jessica Simpson, Avril Lavigne and other artists on the air.

Details of Spitzer's investigation of radio station owners were first reported last month on "Primetime" and ABCNEWS.COM.

The suit, filed in State Supreme Court in Manhattan, alleges that Entercom Communications of Bala Cynwyd, Pa., sought and accepted payments from record labels and independent promoters to increase air time and chart position for various artists, including Simpson, Lavigne and Liz Phair.

Paying to play records on the radio -- payola -- seems as old as the recording industry itself, but now it's not just the low-level disc jockeys under investigation; it's record companies and conglomerates that own hundreds of the nation's radio stations. Entercom owns and operates 105 radio stations, including seven stations in Buffalo and four in Rochester.

Last year, Spitzer obtained settlements from two major record labels, Sony BMG and Warner Music Group, to stop certain promotional practices and to pay fines, but Entercom is the first radio company to be sued as part of the investigation. The suit seeks an end to the illegal practices, reforms to ensure that air play is determined by artistic merit and popularity, and appropriate fines and penalties.

"By accepting secret payments in exchange for air time, Entercom compromised its radio programming and violated state and federal laws," Spitzer said in a statement. "What makes this case especially egregious is the extent to which senior management viewed control of the airways as an opportunity to garner illegal payments from record labels."

A spokesman for Entercom today issued this statement: "Entercom is a company that believes in playing by the rules and does so. We have firm policies prohibiting payola and requiring compliance with the federal sponsor identification rules, and we enforce them. We have cooperated fully with the attorney general's office in this investigation. Now that the attorney general has filed this civil action, we are confident that the issues will be fully and fairly resolved by the court."

The lawsuit cites evidence that Entercom executives were closely involved in allegedly illegal practices. In various documents and e-mails cited in the complaint, Entercom executives discussed strategies for supplementing radio station budgets with payments from independent promoters and record companies.

In an e-mail to an Entercom executive, a station manager described how he preferred to deal with record companies instead of independent promoters because the record companies were more generous:

"As of this date I choose not to work with an 'indie.' My program director Dave Universal is vehemently opposed to working with an indie.....Dave generates $90,000+ in record company annually for WKSE. I receive a weekly update of adds and dollars from Dave ....Forcing Dave to work with an indie at this time is the wrong move."