MCA Target of Record Firm’s Suit : New Jersey Company Claims Fraud, Racketeering Scheme

A small New Jersey record company specializing in so-called rap music filed a lawsuit in U.S. District Court in Newark on Tuesday charging that it was defrauded and forced into near-bankruptcy in a racketeering scheme engineered by executives of MCA Records and reputed organized crime figure Salvatore J. Pisello.

Englewood-based Sugar Hill Records claims in the civil suit that executives of Los Angeles-based MCA and its distribution arm, MCA Distributing Corp., conspired with Pisello to take control of Sugar Hill and force the company to sell, at a greatly deflated price, its interest in the Checker/Chess/Cadet catalogue of old rock ‘n’ roll master recordings. This was done, the suit says, through “concerted participation in fraudulent, illegal and corrupt activities” in violation of the Racketeer-Influenced and Corrupt Organizations Act.

After November, 1983

According to the suit, after taking over the manufacturing and distribution of Sugar Hill in November, 1983, MCA executives and Pisello conspired “to create fraudulent transactions which could then be charged against income otherwise due and payable to Sugar Hill.”

The transactions include false “returns” of recordings supposedly sent back by independent distributors that MCA then charged against Sugar Hill’s account, the preparation and mailing of “fraudulent accounting reports” to Sugar Hill and the unauthorized “secret sale” of Sugar Hill’s inventory as cutouts, or discontinued records, the suit charges.

As a result of these transactions, the suit says, Sugar Hill was placed in a financial crisis, was “compelled to sell its principal asset”--the Checker/Chess catalogue--to MCA Records for “less than its fair market value” and was “ultimately forced to seek relief under Chapter 11 of the Bankruptcy Code.”

Sugar Hill’s suit asks for triple damages totaling $240 million. Named in the suit--in addition to Pisello, MCA Records and MCA Distributing--are MCA Distributing President John Burns and a handful of record and tape manufacturers and distributors that Sugar Hill claims participated in the “fraudulent returns” scheme.

Alan Susman, outside counsel for MCA Inc., said the company had no comment since it had not yet seen Sugar Hill’s complaint. Pisello is currently serving a two-year prison sentence for income tax evasion. He’s been identified in documents filed in federal court here as a “high-ranking member of the Carlo Gambino crime family.”

In a telephone interview from the federal penitentiary in Lompoc, Calif., Pisello denied that he had done anything wrong in his dealings with MCA and Sugar Hill. “I was just a middleman for the sale of records,” he said.

Pisello was involved in a number of transactions with MCA Records between 1983 and 1985--deals that are currently the focus of a Los Angeles grand jury investigation. According to MCA, Pisello was instrumental in arranging the November, 1983, distribution agreement between MCA and Sugar Hill and the August, 1985, sale of the Checker/Chess/Cadet catalogue to MCA.

Sugar Hill claims that it was supposed to be paid $1.7 million in cash for the catalogue, plus a loan of $1.3 million that was to be recouped by MCA from future earnings on the sale of Checker/Chess recordings overseas.

According to the suit, however, “due to the manipulation of (Sugar Hill’s) account,” the company received only $481,000.

MCA has stated that Pisello functioned in the deals as a representative of Sugar Hill. However, Sugar Hill claims in its suit that Pisello was acting as an agent of MCA.

Business Harmed

In an interview, Sugar Hill’s Joe Robinson said that as a result of MCA’s linking of Pisello to his company, “nobody in the record business will deal with us because they think we are connected to the Mafia. This has hurt my business to the point that my family and myself are looking for some bread to put on the table,” he said.

Robinson claims that Pisello approached him about a possible MCA distribution deal in October, 1983. “My lawyer, Joe Zynczak, had tried to get a distribution deal with MCA three months before, and they turned us down,” Robinson said.

“I told Pisello that we’d already been turned down, but he said he was sure he could get the deal, so I said, ‘Be my guest.’ “Next thing I know, he showed up at my house here in New Jersey with a letter from (then-MCA Records Executive Vice President) Myron Roth structuring the deal. At that point, I hadn’t met anyone from MCA and had never set foot in Universal City,” Robinson said.

Zynczak told The Times that the distribution agreement that was finally negotiated with MCA was “basically the same” as the one MCA refused before Pisello’s involvement.