U.S. Indicts 3 on Music ‘Payola,’ Fraud Charges

In a major case that could send shock waves through the music industry, a federal grand jury Thursday issued a 51-count indictment against Joseph Isgro of Glendale, who was once one of the nation’s leading independent record promoters.

Isgro was named in a host of charges, including racketeering, conspiracy to defraud Columbia Records, making undisclosed “payola” payments to radio stations, mail fraud, filing false tax returns, conspiracy to distribute cocaine and conspiracy to impede the Internal Revenue Service.

Also indicted Thursday were Raymond Anderson, 49, of Pacific Palisades, a former executive of Columbia Records, and Jeffrey Monka, 31, of Agoura Hills, a former business associate of Isgro. They were charged with conspiracy and engaging in a scheme to defraud Columbia Records through a series of kickbacks and the use of the U.S. mails for illegal activity.

Isgro, 42, turned himself in to federal authorities Thursday afternoon and was released on $500,000 bail.

If convicted of all the charges, Isgro faces 200 years in prison and $1.4 million in fines. Monka faces a maximum sentence of 23 years and $1.3 million in fines. Anderson faces up to 20 years and $13,000 in fines.

In announcing the indictment, U.S. Atty. Gary A. Feess stressed “an indictment is only a charge and is not evidence of guilt.” Isgro is expected to plead not guilty when he is formally arraigned on Monday.

“The indictment is unjustified and unfounded,” said Donald M. Re, Isgro’s attorney. “There has been no criminal wrongdoing. Mr. Isgro is anxious to fight these charges. He is a well-established figure in the music industry.”

Monka was arrested Thursday and U.S. Magistrate Volney V. Brown ordered him released on $100,000 bail. Anderson has told federal authorities that he will turn himself in today, according to Drew S. Pitt, an attorney with the Justice Department’s organized crime strike force and one of the prosecutors on the case. Anderson did not return calls seeking comment.

Thursday’s indictment culminates a long investigation that began in 1986, when members of the Los Angeles Police Department’s Organized Crime Intelligence Division came to the strike force and recommended that Isgro be investigated.

Isgro has been the center of a controversy over the use of independent promoters in the record business since February, 1986, when an NBC News telecast alleged that he was linked to the Mafia and suspected payola practices in the record industry.

Industry critics asserted that the big record companies used independent promoters as a way of insulating themselves from the often grimy business of obtaining radio air play for their records.

By the mid-1980s, the major record companies were spending between $60 million and $80 million a year on independent promotion, according to industry estimates. Those expenditures plummeted, however, after the NBC report alleged that a group of powerful independent promoters were buying air play by providing radio programmers with cash, cocaine and prostitutes. Within days after the telecast--titled “The New Payola”--every major record company announced that it was suspending the use of independent promotion. This action, in effect, put an estimated 200 promoters around the country out of business.

Files Antitrust Suit

Isgro responded by filing a $25-million antitrust suit against the industry’s trade group and every major company except CBS Records, charging that the defendants had conspired to boycott the independents in order to drive down the cost of promotion. Several of the major record companies settled with him out of court. In 1988, U.S. District Judge Consuelo B. Marshall dismissed Isgro’s charges against MCA Records and the Warner Communications record labels.

The indictment alleges that Isgro made “payola” payments in the form of money and cocaine to various personnel of radio station KIQQ in Los Angeles, KYNO and KMGX in Fresno, KAMZ in El Paso, Tex., and other radio stations with which he was promoting records for Columbia Records, MCA Records, Warner Bros. Records, RCA Records and Polygram Records.

The indictment alleges that Isgro paid out at least $70,000 in an attempt to secure air time for clients’ records. It does not state how much cocaine was involved in the payoffs. The indictment alleges that some of the cocaine was sent to radio station officials in Federal Express packages.

An MCA spokesman declined to comment on the indictment. Officials from all the other record companies and the radio stations mentioned in the indictment declined to return calls seeking comment.

One former federal prosecutor said he was “pleased” that the government had taken action against Isgro. However, the lawyer said he believed that the record companies knew of Isgro’s activities and that some of their officials should have been charged, too.

If Isgro goes to trial, industry observers believe he might make allegations against record companies and their officials that potentially could be quite damaging. “If he goes down, he’ll take people down with him,” said an expert on the record promotion business, who spoke on the condition that he would not be named.

All of the record companies have steadfastly maintained during the lengthy grand jury investigation that they had no knowledge of any illegal conduct by independent promoters. At one point, a ranking official of MCA wrote a letter to a ranking official at CBS Records urging CBS to join other companies in pushing their trade group, the Recording Industry Assn. of America, to launch their own investigation of independent promotion practices.

RICO Indictment

Isgro was also indicted under the Racketeer Influenced and Corrupt Organizations Act, known as RICO. The indictment alleges that Isgro, through his record promotion businesses, engaged in a pattern of racketeering activity that included the payment of kickbacks to Anderson, who was a Columbia Records executive when the payments were made.

Monka was charged along with Isgro of conspiracy to defraud the IRS by creating a sham corporation, Star Promotions Inc., through which Isgro exchanged corporate checks for cash. The indictment alleges that Isgro used the cash for improper payments to radio station managers, music directors and radio station employees and for illegal kickbacks to record company executives.

Earlier this year, two of Isgro’s former associates, Ralph Tashjian and William Craig, pleaded guilty to payola-related charges. The two men had been indicted in February, 1988. At that time, then-U.S. Atty. Robert Bonner called it the nation’s most significant payola case since the early 1970s. Craig and Tashjian had been accused in an eight-count indictment of making illegal payments totaling nearly $300,000 to nine program directors in the South and West between 1980 and 1986.

None of the recipients of the bribes were indicted in that case. And none of the recipients of the payoffs described in Thursday’s indictment were indicted.

Justice Department attorney Pitt declined to comment on the significance of the case. “All our cases are significant,” he said.

The case was developed through investigation by the Los Angeles Police Department and several Los Angeles IRS agents.