Feb. 9, 2006 -- Hundreds of radio stations are under investigation by the Federal Communications Commission in the payola scandal rocking the music industry, ABC has learned.
"The FCC staff is working with voluminous evidence right now. It's a complicated and wide-ranging investigation." FCC Commissioner Jonathan Adelstein told ABC News in an exclusive interview.
"This is potentially the most widespread and flagrant violation of FCC rules in the history of American broadcasting," Adelstein said. "We've never seen evidence of such a systematic betrayal of the responsibility of broadcasters."
Payola -- or pay-for-play -- is a practice seemingly as old as the recording industry itself. In the past the money went to rogue disc jockeys in exchange for increasing the airplay for individual songs and driving those songs to the top of the charts. In the modern version, the money goes to the bottom line of the radio stations and the conglomerates that own them, according to New York Attorney General Eliot Spitzer.
"We have people in suits coming in with documents rather than cash payments under the table to a DJ," Spitzer told ABC News Chief Investigative Correspondent Brian Ross.
Several of the largest radio conglomerates in America -- the corporate owners of FM radio stations across the nation -- are within the scope of the FCC probe, which was triggered by the two year long pay-for-play investigation by Spitzer and was first reported on by ABC News.
A vigorous investigation by the FCC brings federal regulatory clout, and the specter of criminal prosecution by the Justice Department.
Paid to Play Many Top Artists' Songs
In addition to criminal prosecution, any broadcaster in clear violation could face severe sanctions, and in the most blatant cases, the loss of their broadcast licenses, officials involved in the investigation have told ABC.
"I can't believe that radio stations are putting their licenses at risk. It seems to me they thought the FCC was asleep and they shot someone in front of the policeman. The policeman is obligated to act when evidence is so clear," Adelstein said.
Spitzer said record company documents obtained in the investigation of Sony BMG and Warner, both of which have settled with the attorney general, revealed payments for songs that became major hits, including Jennifer Lopez's "I'm Real" and John Mayer's "Daughters."
Other artists whose songs are named in the Spitzer documents include Jessica Simpson, Celine Dion, Maroon 5, Good Charlotte, Franz Ferdinand, Switchfoot, Michelle Branch, and R.E.M. The record companies allegedly paid radio stations to increase airplay of those artists' songs.
That money allegedly came in many forms; directly from the record companies, through "Indie" promoters or in promotional considerations that lowered stations' overheads.
Adelstein said that the New York attorney general has shared mountains of information with the FCC and has identified specific documents and e-mails that seem to clearly implicate some of the companies controlling much music radio in the United States.
"The FCC has received an unbelievable amount of evidence from Attorney General Eliot Spitzer that there appears to be widespread and flagrant violation of FCC rules regarding payola, (including) undisclosed promotions by radio broadcasters. And we need to find out who did it, basically prosecute any violations to the fullest extent of the law," Adelstein said.
Adelstein spoke to ABC News after reading ABC's disclosure of the shift of Spitzer's probe from record companies to broadcasters. He has been in regular contact with Spitzer.
"When anything is aired that is paid for without being disclosed to the public it is a clear violation of FCC rules," he said.
"We have a responsibility to get to the bottom of this … It's important that the FCC does its job and not let the states do it for us," Adelstein added.
Spitzer has been critical of the FCC's approach to the issue of payola.
"I would be the first to acknowledge that I would like to see the FCC more directly involved in addressing what is very clearly a payola scandal that has run rife through the industry. They have failed to do so and we have reached out to them,' said Spitzer.
The FCC originally started a probe into the payola scandal in August 2005, after Spitzer disclosed his investigation of record companies including Warner Music Group, Sony BMG, EMI and Universal. At that time, Adelstein called for the FCC to aggressively investigate. By November 2005 he was calling for the FCC to bring the probe to a swift and satisfactory conclusion. Now he admits the FCC needs to devote more resources to the probe. "We need to devote significant resources [to investigating this aspect] and I'm not sure we are doing that yet," Adelstein added.
"Based on the evidence we have seen some of the radio conglomerates clearly are participating and knowledge of this and orchestration of this came from the very top," Spitzer told ABC.
"Now since it is up to the FCC -- not me -- whether or not to strip them of their licenses. I will leave that decision to the FCC. But certainly the behavior has been unethical, improper, illegal, and a sanction of some severity should be imposed," said Spitzer.
Adelstein told ABC News that "at this stage in the investigation it's not clear what the appropriate sanctions are because we're still looking into it, seeing if there are violations and, if there are, if they are systemic and go to the corporate offices."
Adelstein did say that the potential sanctions could be severe.
"While it's highly unusual for the FCC to pull licenses on first violation, depending on the severity that is one option that is available to us. These are criminal matters as well."
"If we do find evidence of criminal violations its incumbent on us to refer this to the Department of Justice for criminal prosecutions."