The nation's fourth-largest radio company, Entercom Communications Corp., traded airtime for gifts and payments in a payola scam that included formalized programs to sell airplay to record labels, according to a suit filed Wednesday by New York Atty. Gen. Eliot Spitzer.
The suit's most serious allegations focus on Entercom's "CD Preview" and "CD Challenge" programs, in which radio executives allegedly solicited payments to improve a song's position on national airtime charts.
In one e-mail released by Spitzer, Entercom's vice president of programming, Pat Paxton, wrote to a colleague: "A quick lesson on how CD Preview works: Record companies buy the program to better their chart position.... It generates millions of dollars for Entercom that is found money."
Spitzer's suit comes as Entercom and at least two other radio companies have communicated with the Federal Communications Commission about settling an investigation into payola practices, sources familiar with the talks said.
Representatives of Clear Channel Communications Inc., the nation's largest radio station owner, Citadel Broadcasting Corp. and Entercom have been in contact with representatives of the FCC's enforcement division to discuss pay-for-play investigations, said those sources, who did not want to be named for fear of derailing a potential settlement. The sources said some FCC officials had hinted at a willingness to quickly resolve the agency's inquiry.
But that haste has some observers worried that a speedy resolution could lessen the effect of Spitzer's investigations.
"We need to shine more sunlight on the corruption in how radio stations choose songs," said Don Rose, president of the American Assn. of Independent Music. "An agreement behind closed doors between the FCC and the big radio companies is exactly the opposite of that."
Representatives from the FCC's enforcement division, Clear Channel and Citadel declined to comment.
An Entercom statement said the company was cooperating with the New York attorney general's office and had policies prohibiting payola.
The differing approaches of Spitzer's office and the FCC reflect a disagreement over how radio pay-for-play should be handled. Spitzer's investigations have resulted in publicly disclosed settlements and suits. The FCC, by comparison, has opted for a behind-closed-doors approach and has yet to announce any major findings, sanctions or settlements.
In February, Spitzer subpoenaed nine of the nation's largest radio companies, including Entercom, Clear Channel and Citadel, to investigate claims that major record labels had paid radio executives in exchange for playing certain songs.
Wednesday's suit, filed in New York Supreme Court, alleges that Entercom, the Bala Cynwyd, Pa., company that owns and operates 105 radio stations nationwide, traded airtime for gifts, promotional items and personal trips, as well as solicited and accepted payments from record labels to play songs by such artists as Avril Lavigne, Liz Phair and Jessica Simpson.
"Entercom has instituted corporate programs, supported and directed by its most senior management, that have amounted to little more than the direct sale of airplay on Entercom stations for the purpose of manipulating the music charts," the lawsuit alleges.
In a statement, Spitzer said that "senior management viewed control of the airways as an opportunity to garner illegal payments from record labels."
Under federal and New York law, it is illegal for a radio station to accept anything of value in exchange for airplay unless listeners are informed of the trade.
Spitzer also made public 66 pages of e-mails and other documents that allegedly detail Entercom's payola programs. Among them are internal Entercom forms that Spitzer said indicated how goods were traded for airplay. On one form, an employee scrawled that "750 + 1 Sony Playstation" was received, noting that the cash and gift were related to Jennifer Lopez.
In another document, an Entercom program director sent an e-mail to an executive at Epic Records, discussing airplay of the band B2K.
"I'll give you B2K early -- and a Guaranteed spot in rotation next week for 1500," the e-mail reads. The Epic executive responded with an offer of $2,500 for airplay of B2K and "Kelly" -- presumably the pop star Kelly Clarkson, an artist who records on the RCA label.
In July, Spitzer settled a payola investigation with Sony BMG Music Entertainment, the parent company of Epic and RCA. The company paid a $10-million fine and promised to discontinue certain practices.
In the wake of that settlement, the attorney general shared the documents he had collected with investigators at the FCC, which soon announced that it was scrutinizing payola scams at hundreds of radio stations. One FCC commissioner, Jonathan Adelstein, called it potentially "the most widespread and flagrant violation of any FCC rules in the history of American broadcasting."
But since then, the FCC has been largely quiet on the issue. The agency launched a payola investigation of an Entercom station in Niagara Falls, N.Y., more than a year ago but has not announced any results.
FCC insiders said Spitzer's investigators, frustrated by the agency's inaction, had stopped sharing documents with them.
Spitzer told ABC News last month, "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."
Spitzer reiterated that critique Wednesday, telling a reporter with the Associated Press, "The FCC must come to life on this issue. Maybe their ears are clogged, I don't know."