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MCA Sued by N.J. Distributor of 'Cut-Outs'

March 21, 1986|Wm. KNOEDELSEDER Jr. | Times Staff Writer

NEW YORK — A New Jersey distributor of so-called cut-out records filed a lawsuit in U.S. District Court in Philadelphia on Thursday, claiming that it had been defrauded by MCA Records in a racketeering scheme.

Trenton-based Scorpio Music claimed in the civil suit that in late 1984 officers of the Los Angeles-based record company conspired to entice Scorpio to advance $350,000 in cash for 1 million cut-outs, or out-of-date MCA recordings, and then illegally converted the money to their own use, thereby defrauding Scorpio and MCA Records' parent, entertainment giant MCA Inc.

Scorpio claims it received only a small portion of the records that it ordered and was refunded only $150,000 of the original payment.

Under the provisions of the Racketeer-Influenced and Corrupt Organizations Act, Scorpio's suit asks for triple damages totaling $45 million. Among the MCA officers named in the suit are Irving Azoff, MCA Records president; Myron Roth, executive vice president, and Zach Horowitz, senior vice president of business and legal affairs, along with Salvatore James Pisello, who has been identified in federal court documents here as an alleged "high-ranking soldier in the Carlo Gambino crime family."

Scorpio claims that Pisello and Ranji Bedi, who owns a small Los Angeles cut-out distributorship called Betaco Enterprises, acted as agents for the record company in several cut-out sales in 1984 and that MCA Records set up a special account on MCA's books, "Pisello/Betaco," under which the fraudulent scheme was carried out.

Allegations Denied

In a statement, Larry Solters, MCA Records senior vice president, said the allegations are "made up of scurrilous allegations, lies and innuendo." He added: "Scorpio's misuse of the legal system and the media to attack MCA and its employees will not deter us in pursuing our legal rights."

MCA had denied most of Scorpio's allegations in an apparently preemptive lawsuit filed in U.S. District Court in Los Angeles on Tuesday, claiming that Scorpio had manufactured and distributed counterfeit recordings by some of MCA's top-selling artists. In a statement Wednesday disclosing its lawsuit, MCA also said that Scorpio has "maliciously threatened us with a frivolous lawsuit."

Scorpio attorney Dennis Eisman denied Wednesday that Scorpio had ever manufactured or "knowingly distributed" MCA counterfeits. "Whatever he sold, he got from them," Eisman said.

Eisman said Scorpio President John Gervasoni has voluntarily given his version of events to grand juries in Los Angeles and Newark, N.J. Those investigations are two of three looking into suspected Mafia infiltration of segments of the record business, particularly the cut-out market. A federal grand jury in New York is also investigating.

According to authorities, Pisello is a target of all three investigations, along with Morris Levy, president of New York-based Roulette Records. Levy and Pisello were apparently partners as middlemen in another 1984 sale of 5 million MCA cut-outs to a Philadelphia-area cut-out distributor called Out of the Past Inc.

As previously reported by The Times, Out of the Past owner John LaMonte has entered the federal witness protection program and is cooperating with authorities in New York and Los Angeles. LaMonte has told authorities and The Times that after receiving 60 truckloads of cut-outs, he complained to Levy and Pisello--in a meeting in Roulette's New York offices--that he had not received the records he'd ordered but rather had been shipped worthless records by MCA. Consequently, LaMonte refused to make continued payments to Levy and Pisello through a New York company, Consultants for World Records.

Several weeks after the Roulette meeting, LaMonte was beaten up, apparently, authorities believe, because of his continued refusal to pay for the cut-outs.

No Prior Knowledge

In its suit, Scorpio claims that the "co-conspirators" used the beating of LaMonte "as an example to keep victims such as Scorpio from going to authorities."

MCA has previously denied that it had any prior knowledge of Pisello's alleged organized crime ties. The company also denied in its lawsuit against Scorpio that Pisello had ever acted as an agent for MCA. The company claims that it merely sold cut-outs to Pisello and had no involvement in whatever happened subsequently.

As previously reported, MCA corporate internal auditors last May prepared a nine-page report for the company's board detailing its dealings with Pisello. The report, a copy of which was obtained by The Times, does not mention Scorpio, but it does state that, in late 1984, Pisello "arranged a sale of cut-outs records by MCA to Betaco."

The MCA internal audit report says that Betaco paid MCA $200,000 in advance for the cut-outs but that the company was unable to ship the full order and subsequently refunded the full amount to Betaco and accepted a check for $52,000 from Pisello for 140,000 records that were shipped.

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