Grammy Group’s Chairman Becomes Object of Scrutiny

The leadership of the Grammy organization came under new pressure Monday as the trustees of its influential Nashville chapter raised questions about potential conflicts of interest on the part of the nonprofit group’s chairman, Phil Ramone.

Among the conflicts causing concern in the chapter, according to sources, are Ramone’s close association with Grammy chief C. Michael Greene, whose management was examined recently in a series of articles in The Times.

Ramone, for example, produced a recording of Greene’s music that sources say Greene offered to record executives during meetings over Grammy matters. Ramone is also the president of N2K Encoded Music, whose Music Boulevard division is the official Internet retailer of the Grammys.

The views of the Nashville trustees are regarded as important because the chapter, representing the capital of country music, is among the oldest and most vocal of the academy’s 12 regional chapters. Last year, the Nashville trustees called for an investigation of sexual harassment charges against Greene; the investigation, overseen by two lawyers with other ties to the academy, cleared Greene.

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On Monday, the Nashville trustees questioned whether Ramone’s ties to Greene have prevented him from effectively investigating allegations on behalf of the board of the National Academy of Recording Arts & Sciences. While the Nashville trustees are not expected to ask Ramone to step down from his unpaid job as chairman, sources said they may oppose his renomination or support another candidate at the upcoming annual board meeting on May 11 in Miami.

The questions could undermine Ramone’s most recent attempts to defuse the controversy. On March 16, the Academy’s executive committee produced a report to the board over Ramone’s signature criticizing The Times’ articles and giving Greene and his staff a “unanimous vote of confidence.”

The report called The Times’ conclusions “intentionally distorted” and “substantially inaccurate,” and included an analysis by the Washington accounting firm of Tate & Tryon.

Tate & Tryon was hired by the law firm of Paul, Hastings, Janofsky & Walker, which Greene and Ramone hired on behalf of the academy to challenge the allegations in The Times’ stories.

Greene and Ramone referred all questions on these and other matters to Charles B. Ortner of Paul Hastings.

On Friday, Ortner said that neither he nor his clients would respond to any more questions from The Times, contending that they “cannot rely on future articles being objective, accurate, balanced and fair,” and that the queries constituted “pure harassment.” Ortner also declined to respond to The Times’ requests for copies of the most recent annual audited financial reports for the academy and its two charitable foundations.

It’s unusual for a nonprofit group to withhold such information from the public, according to the National Charities Information Bureau, an 80-year-old independent group that evaluates public charities for their adherence to standards of integrity and accuracy in financial statements.

Philanthropy guidelines established by the charity bureau, regarded as a leading watchdog of nonprofit organizations, state that all charities should supply on request complete financial statements and fully disclose all economic resources.

The Times last month disclosed that Greene and NARAS have consistently overstated the scale of the organization’s philanthropic activities. Among other things, the articles noted that MusiCares, one of NARAS’ two charities, spends less than 10% of its total income on direct financial assistance to indigent, unemployed and infirm persons in the music industry--its principal charitable purpose.

In 1995-96, the most recent fiscal year for which public figures are available, the charity collected $1.61 million in revenue (not including investment income and interest on savings) and spent $148,341--or 9.2% of that revenue--on direct musicians’ assistance.

By contrast, the sum spent on fund-raising, including the cost of its annual “person-of-the-year” fund-raising dinner and other “special events and activities,” was $717,644. The organization ended up with a surplus that year of $345,773, which it added to a surplus fund that at the time was already $2 million. (In an earlier story The Times incorrectly stated that the surplus was $393,000.)

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In his report for the executive committee, Tate & Tryon accountant David Duren said The Times’ 10% figure was incorrect. He argues that the real percentage spent on charitable purposes was 67%. This figure included the $148,341 paid out in musicians’ assistance, $123,000 in “grants” to other organizations, $121,000 in staff salaries and other office expenses, and $345,000 designated as a “set aside” from surplus “for what we understand to be a future treatment facility.”

But after analyzing MusiCares’ tax forms, Matthew Landy, vice president of the charity bureau, characterized The Times’ examination of the charity’s direct assistance grants to indigent musicians as “accurate.” Landy concluded that the Tate & Tryon study overstates and mischaracterizes NARAS charitable efforts. Neither Landy nor the charity bureau was paid by The Times for the analysis.

Landy said Tate & Tryon’s inclusion of the “set aside” for the “future treatment facility” as part of MusiCares’ current charitable spending is “specious.”

“This is some form of creative accounting,” Landy said in an interview. “Surpluses by definition are unspent funds. To assert that $393,720 figure [in assistance, staff salaries and office expenses] combined with the $345,000 in unspent funds represents their real level of spending, as was done in the Tate & Tryon report, is ludicrous.”

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Landy also questioned the accuracy of a MusiCares tax return stating that it distributed $123,000 in “grants” to other philanthropies in 1995-96. The Times has learned that at least $37,500 of that sum was actually a loan, and has already been repaid to MusiCares.

The money went to the Musicians Assistance Program, a Hollywood-based independent organization that assists musicians with drug and alcohol treatment. Sources said MusiCares transferred the money to the Musicians Assistance Program on the understanding that it would be repaid from the proceeds of a joint fund-raiser. No such fund-raiser ever took place, sources say, and the loan was repaid in cash last year.

Nevertheless, in public statements Greene has consistently characterized the sum as a “grant” or permanent donation. As recently as Feb. 23, during MusiCares’ annual “person of the year” fund-raising dinner in New York, he was quoted as calling the sum a “grant,” although by then it already had been repaid.

The sum also was listed as a “grant” on MusiCares’ federal tax return, which was prepared by the accounting firm of Deloitte & Touche. Because repayment was anticipated, MusiCares may be required under federal rules to refile the tax return to correct the entry.

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It also raises the question of whether Deloitte & Touche was fully aware of the terms of the transaction at the time it prepared the tax return and certified MusiCares’ financial statements as accurate. A spokesman for Deloitte did not return calls seeking comment.

There are questions about other grants doled out in MusiCares’ name in recent years.

In 1994-95, for example, the charity donated a total of $94,516 to the George Bush Presidential Library Foundation and the Barbara Bush Foundation for Family Literacy. That nearly matches the entire $109,228 in individual grants distributed by MusiCares the same year to indigent, unemployed and infirm musicians.

A spokesman for the Bush Library Foundation said the money represented the proceeds of a Nashville benefit concert given in honor of the Bushes’ 50th wedding anniversary that was organized and managed by MusiCares.

Ortner and representatives from the academy declined to explain what the Bush Presidential Library has to do with MusiCares’ chartered mission of helping needy individuals in the music community.

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