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COMPANY TOWN | THE BIZ

Grammy Group's Chairman Becomes Object of Scrutiny

April 07, 1998|CHUCK PHILIPS and MICHAEL A HILTZIK

The leadership of the Grammy organization came under new pressure Monday as the trustees of its influential Nashville chapter raised questions about potential conflicts of interest on the part of the nonprofit group's chairman, Phil Ramone.

Among the conflicts causing concern in the chapter, according to sources, are Ramone's close association with Grammy chief C. Michael Greene, whose management was examined recently in a series of articles in The Times.

Ramone, for example, produced a recording of Greene's music that sources say Greene offered to record executives during meetings over Grammy matters. Ramone is also the president of N2K Encoded Music, whose Music Boulevard division is the official Internet retailer of the Grammys.

The views of the Nashville trustees are regarded as important because the chapter, representing the capital of country music, is among the oldest and most vocal of the academy's 12 regional chapters. Last year, the Nashville trustees called for an investigation of sexual harassment charges against Greene; the investigation, overseen by two lawyers with other ties to the academy, cleared Greene.

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On Monday, the Nashville trustees questioned whether Ramone's ties to Greene have prevented him from effectively investigating allegations on behalf of the board of the National Academy of Recording Arts & Sciences. While the Nashville trustees are not expected to ask Ramone to step down from his unpaid job as chairman, sources said they may oppose his renomination or support another candidate at the upcoming annual board meeting on May 11 in Miami.

The questions could undermine Ramone's most recent attempts to defuse the controversy. On March 16, the Academy's executive committee produced a report to the board over Ramone's signature criticizing The Times' articles and giving Greene and his staff a "unanimous vote of confidence."

The report called The Times' conclusions "intentionally distorted" and "substantially inaccurate," and included an analysis by the Washington accounting firm of Tate & Tryon.

Tate & Tryon was hired by the law firm of Paul, Hastings, Janofsky & Walker, which Greene and Ramone hired on behalf of the academy to challenge the allegations in The Times' stories.

Greene and Ramone referred all questions on these and other matters to Charles B. Ortner of Paul Hastings.

On Friday, Ortner said that neither he nor his clients would respond to any more questions from The Times, contending that they "cannot rely on future articles being objective, accurate, balanced and fair," and that the queries constituted "pure harassment." Ortner also declined to respond to The Times' requests for copies of the most recent annual audited financial reports for the academy and its two charitable foundations.

It's unusual for a nonprofit group to withhold such information from the public, according to the National Charities Information Bureau, an 80-year-old independent group that evaluates public charities for their adherence to standards of integrity and accuracy in financial statements.

Philanthropy guidelines established by the charity bureau, regarded as a leading watchdog of nonprofit organizations, state that all charities should supply on request complete financial statements and fully disclose all economic resources.

The Times last month disclosed that Greene and NARAS have consistently overstated the scale of the organization's philanthropic activities. Among other things, the articles noted that MusiCares, one of NARAS' two charities, spends less than 10% of its total income on direct financial assistance to indigent, unemployed and infirm persons in the music industry--its principal charitable purpose.

In 1995-96, the most recent fiscal year for which public figures are available, the charity collected $1.61 million in revenue (not including investment income and interest on savings) and spent $148,341--or 9.2% of that revenue--on direct musicians' assistance.

By contrast, the sum spent on fund-raising, including the cost of its annual "person-of-the-year" fund-raising dinner and other "special events and activities," was $717,644. The organization ended up with a surplus that year of $345,773, which it added to a surplus fund that at the time was already $2 million. (In an earlier story The Times incorrectly stated that the surplus was $393,000.)

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In his report for the executive committee, Tate & Tryon accountant David Duren said The Times' 10% figure was incorrect. He argues that the real percentage spent on charitable purposes was 67%. This figure included the $148,341 paid out in musicians' assistance, $123,000 in "grants" to other organizations, $121,000 in staff salaries and other office expenses, and $345,000 designated as a "set aside" from surplus "for what we understand to be a future treatment facility."

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