Latin Grammy Fund-Raising Puts Spotlight on Academy

Over the last decade, C. Michael Greene has built a mighty power base as head of the National Academy of Recording Arts & Sciences, the not-for-profit group that stages the annual Grammy Awards show.

The once-struggling musician drives a Mercedes-Benz, enjoys a membership at the Bel-Air Country Club and makes $1.3 million a year--all at the expense of the academy and its charitable arms.

Now Greene is inaugurating a new branch of the academy, enhancing his public image and raising even more funds for his empire. Tonight, Greene will launch the first Latin Grammy Awards show on CBS, courtesy of his latest venture: the Latin Academy of Recording Arts & Sciences.

By expanding his nonprofit empire into the Spanish-speaking world, Greene hopes to generate new revenue streams from broadcast license fees and Latin-oriented fund-raisers, like Monday’s “Person of the Year” dinner held at the Beverly Hilton Hotel. The proceeds from that $25,000-a-table benefit will not go to charity--as is the convention in the entertainment industry--but into the coffers of the Latin academy, which Greene controls.

Several Spanish-music executives who declined to be identified complained about being inundated with misleading solicitation pitches for Monday’s fund-raiser and voiced concerns about how the money would be spent. The invitation promised that “a portion of the proceeds from the tribute would benefit the Latin academy’s educational outreach and human services programs.”

The potential donors were particularly irritated to learn that the Latin academy did not even operate charitable “educational outreach and human services” programs. The event’s ticket-reservation form included a tiny disclaimer at the bottom of the page that reads: “Support is not tax-deductible as a charitable contribution.”

Grammy spokesman Adam Sandler said the donations are not tax-deductible as charitable contributions because the money is not going to charity.

“One hundred percent of the money goes to the Latin academy,” Sandler said, noting that donations may be deductible as a business expense. “A portion of the proceeds from Monday’s dinner will be used to fund inner-city educational outreach initiatives that reach out to kids. We might also use the money to establish outreach efforts in other countries, say, for instance, if we open an office in Mexico or some other country.”

So far, the Latin academy consists of eight employees, most of whom work at the Santa Monica-based Grammy headquarters--the same building that houses a handful of other nonprofit and for-profit Grammy affiliated corporations run by Greene. Greene receives his salary as chief executive of the recording academy and acts as unpaid head of each of the organization’s charities and other nonprofit groups.

Greene’s flair for innovative fund-raising attracted the scrutiny of the federal government, which for two years has been poring over the organization’s tax records as well as Greene’s personal finances, government sources say.

Over the years, Greene has faced questions about his management style, particularly since a series of articles published in The Times disclosed that Greene is the highest-paid nonprofit group executive in the country and that the Grammy organization has consistently overstated the scale of its philanthropic activities. Nevertheless, Greene’s career as a nonprofit chief appears to be thriving.

Greene has parlayed his control over the coveted performance slots on the annual Grammy telecast--worldwide exposure potentially worth millions of dollars in album sales--into a seemingly untouchable status within the recording industry, according to record executives.

The academy’s 36-member board not only has supported its chief executive throughout, but voted Greene a raise, estimated to boost his total compensation package, Grammy sources say, to about $1.6 million. Critics contend Greene has been allowed to stack the board with aging industry veterans willing to rubber-stamp his requests.

Greene is “cunning, manipulative and, above all, a total control freak,” said Tamiko Jones, a former Grammy trustee who is writing a tell-all book called “Inside the Grammys.”

Greene declined to be interviewed for this report.

Grammy spokesman Sandler said the academy board is independent.

“I disagree with the notion that the board is stacked with Mr. Greene’s friends and cronies,” Sandler said. “There are a number of trustees who from time to time disagree with Mr. Greene and they are free to voice their opinions.”

These concerns come at a time when the pop side of the industry has distanced itself from the academy’s charitable programs.

The nation’s biggest record companies already are redirecting a large portion of their annual charitable contribution from the academy to the Musicians’ Assistance Program, a tiny charity that has had success in helping artists tackle substance-abuse problems. The program, called MAP, spends less money on overhead and has had greater success helping addicts than the academy’s programs have had.

Greene was told by the Recording Industry Assn. of America in February that MAP is to get 25% of the profit from the Grammy anthology CD, a collection of songs donated by artists and labels. Previous anthologies have provided millions of dollars to the academy. The new policy represents an erosion of funds, and power, from Greene’s empire.

The story of the academy’s handling of a $300,000 check illustrates what critics perceive as Greene’s stubborn and controlling nature.

On May 31, a $300,000 check from RCA Records, the distributor of this year’s Grammy anthology, that was written to MAP mistakenly ended up in the hands of Greene’s staff, according to internal academy memos. The funds were the portion of the 2000 Grammy anthology the industry had pledged to MAP.

At first, Greene and Grammy executive Rob Senn simply refused to give MAP the money the program was entitled to. Then on June 16, Greene told MAP he could not “legally” release the check unless MAP submitted a report on how the “donation” would be spent plus three years of tax records and other documents, according to academy memos. By June 21, Greene had lowered his demands, suggesting that the academy might be willing to release $100,000 of the money, subject to certain “royalty” regulations, the academy memos say.

It is the academy’s policy--unlike that of other nonprofit organizations--to extract a steep 18% royalty fee from any trademark project that includes the Grammy logo. It took nearly a month of lobbying by top music executives before Greene and other Grammy officials agreed to relinquish the check--without receiving the documents or the royalty fees, the memos show.

A Grammy spokesman said the organization agreed to release the funds “once we got our answers” from MAP officials.

In October, the chiefs of the nation’s five biggest record corporations will meet to draft a new contract for the Grammy anthology collection. Several industry sources said the new contract would give 50% of the proceeds from upcoming anthology CDs to MAP, cutting the academy’s portion to 50% from 75%.

These back-room dealings follow a lengthy probe by the criminal investigative unit of the Internal Revenue Service and the Justice Department of Greene’s personal finances, according to several federal law enforcement sources. No charges were filed at the probe’s conclusion in April, but government sources said that the IRS continues to review Grammy records for possible tax violations, and that Greene could still face civil penalties.

Law enforcement sources say the IRS is conducting a civil audit of the academy and its charitable arms. The discovery of legal violations in audits of nonprofit groups could result in the revocation of tax-exempt status.

Grammy spokesman Sandler said Greene and the academy have not been made aware of any government investigation or audit. “The government has not informed Mr. Greene that he is the subject of any investigation, [nor] does he believe there would be any basis for imposing penalties,” Sandler said.

According to the latest available tax forms, the nonprofit academy paid Greene nearly $1.3 million in salary, benefits and bonus in 1998--a total compensation that handily outstri