Grammy Charity to Lose Part of Funding

The music industry has decided to redirect a large portion of its annual charitable contribution from the Grammy organization to Musicians’ Assistance Program, a tiny Hollywood-based charity that has had greater success in helping artists tackle substance abuse problems.

The action follows months of behind-the-scenes wrangling, pitting the struggling Hollywood charity against Grammy chief C. Michael Greene, one of the most powerful and controversial figures in the record business. Greene runs the National Academy of Recording Arts & Sciences, the organization that decides which acts receive coveted performance slots on the annual Grammy telecast, which airs Wednesday.

Last week, Greene tried to convince representatives from MAP and the major record companies to disband the rival charity and merge it into the academy’s MusiCares arm--a move that would allow Greene to retain control of the funding.

“[Michael Greene] wants to fold MAP into MusiCares and make us disappear,” MAP head Buddy Arnold said in a Feb. 15 memo obtained by The Times. “It was, and is, obvious that Michael wants to homogenize MAP, assimilate it, and take away its life, its essence.”

On Friday the Recording Industry Assn. of America, which represents the nation’s five largest music corporations, assured Arnold that hundreds of thousands of dollars in contributions once earmarked for the academy would be shifted to MAP.

Arnold declined to comment Friday.

Greene, who is scheduled to host the annual MusiCares fund-raising dinner tonight, also declined to be interviewed for this story. The academy declined to comment on questions submitted in writing.

Greene has faced questions about his management of the Grammy organization since the publication of several articles in The Times two years ago. The articles disclosed that Greene is the highest-paid executive of a nonprofit organization in the country and that the Grammy organization has consistently overstated the scale of its philanthropic activities.

Following publication of those articles, the Internal Revenue Service and the Justice Department began investigating Greene. Sources said federal agents are reviewing documents and have interviewed individuals connected to the Grammy organization as recently as last week.

According to the latest tax forms, the not-for-profit academy paid Greene nearly $1.3 million in salary, benefits and bonus--a total compensation that handily outstripped the heads of the nation’s top universities, museums and other entertainment industry trade groups. His job perquisites include a leased Mercedes-Benz sedan and an annual membership in the Bel-Air Country Club.

In an interview last month in Hits magazine, Greene scoffed at those who contend he makes too much money.

“I’m probably the most underpaid person in relation to what I do in the context of the record industry,” he said in the Jan. 21 interview. “The only way I know how to do this job is to be aggressive and entrepreneurial while still being aware of our tax-exemption status. We’re doing some great work, and if I’m going to stay in this position, then I’ve got to be paid.”

Greene’s $1.3-million compensation package covered a year in which the academy’s MusiCares charity spent only 10 cents of every dollar it earned in revenue on grants to needy individuals--its primary charitable purpose. For the year ended July 31, 1998, the charity recorded about $2.35 million in income and spent $236,834, or just 10%, on direct grants to needy individuals, according to its public tax return.

The Grammy organization has yet to file returns for the year ending July 31, 1999.

Greene receives his salary as chief executive of the academy and acts as unpaid head of each of the organization’s charities.

By contrast, MAP spent twice that much assisting musicians even though it took in less than half the income that MusiCares did. MAP, which is highly regarded in medical circles for its treatment program, recorded $934,757 in income and spent $520,213 assisting artists in need, according to tax records.

Arnold, who runs the charity with a small staff out of a cramped office in the Hollywood musicians union, earns $98,500 a year as MAP’s chief executive.

Greene first offered Arnold a job in August, shortly after Greene was notified the music industry intended to give MAP half of the proceeds of a Grammy anthology album that has provided millions of dollars annually in revenue for the academy.

The world’s five largest record companies contribute songs to the Grammy nominees album, for which the artists and labels earn next to nothing. Companies and recording artists participate primarily because they are told that all proceeds from the project go directly to charity.

In fact, the millions of dollars generated by the project have been paid directly to the academy, which decides how much to dole out to its two charities, the NARAS Foundation and MusiCares. According to the most current tax filing available, the academy gave about $2.53 million from the recording to the NARAS Foundation in 1997, but then charged it $517,967 for use of the Grammy trademark and $202,790 more for administrative services and facilities.

Arnold rebuffed Greene’s August offer, sources said, telling Greene that he preferred to continue running MAP as an independent operation. Sources close to Arnold and Greene say the two executives have completely different management styles and would have a difficult time working together.

Under Greene’s management, the academy has had a high employee turnover rate--particularly at the management level of MusiCares, which has run through six executive directors over the past eight years. MusiCares has been operating without a leader since last fall when its last director and top social worker left the charity.

Six weeks ago, the record industry again informed Greene that he must share half of the profit from the 2000 Grammy anthology with MAP, sources said. After several weeks of negotiations, representatives for the industry told Greene that he must share 25% of the proceeds from this year’s anthology with MAP and 50% in future years.

On Jan. 25, Greene proposed to Arnold that MAP become the substance abuse treatment arm ofMusiCares, sources said. At the meeting, Greene promised that MAP would retain its autonomy housed in quarters apart from NARAS’ Santa Monica headquarters, sources said.

But a week later, according to sources, Greene reversed the terms of the deal. This time, Greene told Arnold that he would have to dissolve MAP, move to the Grammy headquarters and report directly to Greene, sources said.

Arnold objected.

“We do not want to see this organization, created with care and selflessness to meet a need that was, and still is, apparent to just go away, disappear in a flick of Michael’s ego,” Arnold said in the Feb. 15 memo.

At tonight’s MusiCares dinner, Greene is expected to announce the groundbreaking of Encore Hall, a residence and convalescent facility for elderly and indigent musicians. The academy is expected to finance the facility’s construction by tapping into MusiCares’ multimillion-dollar war chest of unspent funds.

The launching of Encore Hall follows the creation of two new for-profit divisions inside the academy called RAE (Recording Academy Enterprises) and RAMP (Recording Academy Media Productions), sources said. RAMP is expected to charge clients, including MusiCares and the NARAS Foundation, to produce videos for archival and promotional purposes, sources said.