MCA to Acquire 3 Companies Partly Owned by Azoff

MCA announced Tuesday that it intends to acquire all of the stock in three entertainment-related firms partly owned by MCA Records President Irving Azoff and to sign a new, long-term contract with the record executive.

In acquiring the firms, MCA gets a talent management firm that handles such popular recording artists as Don Henley, Jimmy Buffett, Stevie Nicks and Heart; a small record label whose most successful artists are Dan Fogelberg and Chicago, and a merchandising firm.

The decision to buy out Azoff’s holdings is an endorsement of the record unit executive, said Sidney J. Sheinberg, MCA’s president and chief operating officer, “but it’s also an opportunity to participate in another part of the music business.”

But MCA’s announced return to the talent management business raised some questions about whether it would be a conflict of interest for a record company to manage artists that record for its labels.

The firms to be acquired--in exchange for an undisclosed amount of MCA stock--are Front Line Management, the personal management firm; Full Moon Records, and Facilities Merchandising Inc., which handles novelty vending (T-shirts, caps, etc.) in 25 arenas nationwide.

In a brief interview, Azoff said he owns a majority interest in Front Line and Full Moon and a 25% stake in Facility Merchandising, but he declined to disclose terms of the deal or the length of his new contract.

Azoff initially signed a five-year contract when he joined the company in April, 1983, following a successful 16-year career as an agent and artist manager.

Sheinberg said MCA’s acquisition shouldn’t pose a dilemma for Front Line clients because the personal management firm does not negotiate recording deals. (Such firms generally provide broad-based personal services and financial advice for clients.)

MCA nonetheless sought clearance from the antitrust division of the Justice Department because of a 24-year-old consent decree barring MCA from the talent agency business. MCA lawyers contended that unlike a talent agency, a personal management firm does not actually book appearances.

The antitrust division staff agreed after “very careful and thorough” analysis, said Charles F. Rule, deputy assistant attorney general, in a telephone interview Tuesday.

David Geffen, chairman of Geffen Records and himself a former personal manager, objected strongly to the Front Line deal. “You cannot be in the record business and manage artists on your own label--it’s a conflict of interest.

“How can a manager get the best deal he can for his client if the manager also works for the record company? It’s very disturbing. If it’s legal, it shouldn’t be.”

‘Passive’ Investment

However, attorney John Mason, who represents Olivia Newton-John on the MCA label, said he was “not upset by it.” Mason noted that “traditionally in the record business, it’s the lawyers who do the negotiations with the record companies.”

When Azoff was first hired by MCA, he told The Times that he planned to sever ties with Front Line Management, which he’d formed nine years earlier. Azoff retained his interests, however. In later interviews, he described it as a “passive” investment.

In its yearly proxy statement to shareholders, MCA disclosed that Azoff received $215,000 from his 25% stake in Facility Merchandising and about $70,000 in royalties from MCA subsidiaries during 1984. The royalties were based on Azoff’s representation of certain artists through Front Line and recordings and film deals in which he was involved. MCA said the royalties stem from arrangements struck before Azoff joined MCA.

In 1985, Azoff received about $130,000 in royalties from MCA subsidiaries, according to the most recent MCA proxy statement.

MCA said Warner Bros. Records will continue to manufacture, market and distribute Full Moon products worldwide.

MCA’s endorsement of record chief Azoff comes at a time when the recording industry is under scrutiny by three federal grand juries concerning suspected Mafia infiltration of some segments of the record industry.

The grand jury investigations--in Los Angeles, New York and Newark, N.J.--are looking into MCA’s ties to alleged organized crime figure Salvatore Pisello, who was involved in a series of business deals with MCA in 1983 and 1984. MCA has said that an internal investigation revealed no wrongdoing at the company and that MCA executives had no previous knowledge of Pisello’s alleged organized crime ties.

Times staff writer Kathryn Harris contributed to this story.