Why would a rock manager resign at the moment when his band was about to cash in on the most lucrative recording contract of its career?
That was the question buzzing through the music industry last month when Jefferson Holt abruptly stepped down as manager of R.E.M., the superstar rock quartet that just completed the last album on its Warner Bros. Records contract and is poised to become the hottest free agent in the music business.
Sources say that Holt was asked to leave after members of the group investigated allegations that he sexually harassed a female employee at R.E.M.'s tiny Athens, Ga., office.
The 42-year-old manager officially left the R.E.M. organization last week after receiving a hefty severance package, according to several sources close to the band.
In a phone interview Thursday, Holt denied he had ever sexually harassed anyone and said the decision to part with R.E.M. was mutual.
"I've agreed to keep the terms of my agreement with R.E.M. confidential," Holt said Thursday. "However, 15 years is a long time, and as time passed, our friendships have changed. I think we found as time passed that we have less and less in common. I've become more interested in other things in life and wanted to spend more time pursuing those interests. I'm happier than I have been in a long time."
Representatives for R.E.M. refused to comment but released a statement Thursday that said the band and Holt terminated their relationship by mutual agreement. According to the statement: "The reasons for this decision and terms of the termination are private and confidential, and no further discussion of these matters will be made by any of the parties."
The alleged incident at R.E.M.'s headquarters is the highest-profile example of alleged sexual harassment in the pop world since a scandal at Geffen Records rocked the record industry in 1991.
The fact that the latest allegations of sexual harassment surfaced inside the office of R.E.M.--long considered one of the nation's most liberal and politically correct rock groups--is surprising to many in the industry.
Formed in 1980, R.E.M. consists of guitarist Peter Buck, 39, singer Michael Stipe, 36, bassist Mike Mills, 37, and drummer Bill Berry, also 37. The band, which has sold more than 30 million albums and won four Grammy awards, is regularly praised by rock critics for its uncompromising artistic integrity.
Since the day R.E.M. burst onto the college club scene 16 years ago, the quartet has been a proponent of political activism, encouraging voter registration and helping to raise funds for environmental, feminist and human rights causes. R.E.M. avoided many of the trappings of stardom by remaining based in Athens, a small college town about 70 miles east of Atlanta, where the band operates a small office with just six employees.
R.E.M. met Holt in 1981 when he was working in a record store in North Carolina and booking concerts on the side. Holt soon moved to Athens to work as a tour manager for the band and quickly took over the role of artist manager.
Over the last 16 years, Holt developed a close relationship with the quartet and is credited with helping transform R.E.M. from an underground act into international superstars. Indeed, he was considered such a vital element of the organization that R.E.M.--in a most unusual move--even shared a portion of its royalties with him.
Holt was also highly regarded and well liked by executives and competitors throughout the rock industry.
Band members were shocked when a female employee complained four months ago about Holt's alleged behavior, one source said.
The employee did not file a lawsuit or register a claim with the Equal Employment Opportunity Commission, but complained to the band that Holt had verbally harassed her with lewd remarks and demanded sexual favors, sources said.
Band members questioned Holt, who denied the allegations, and then spent about three months investigating the complaints, sources said. In May, the band called a meeting and asked Holt to leave the organization, sources said.
Female record company employees interviewed Thursday applauded the band's handling of the matter.
"I commend R.E.M. for the thorough way in which they dealt with this," said Penny Muck, a former secretary whose lawsuit five years ago against Geffen Records triggered an industrywide debate about sexual harassment. "The example set by R.E.M. will only continue to help empower all employees throughout the industry."
Few complaints have surfaced recently at the six major record corporations, where tough policies were instituted to crack down on sexual harassment after a 1991 article in The Times disclosed that misconduct had been lodged against several top recording executives.
Women working in the industry alleged this week that there is still a problem with sexual harassment at some talent agencies and in some sectors of the concert business.
R.E.M., whose "New Adventures in Hi-Fi" album is due out in September, has no plans to replace Holt in the near future.
For the time being, management duties have been turned over to the band's longtime attorney, Bertis Downs. The quartet is expected to sign one of the biggest deal in pop history before the end of the year.