Ex-Justice Dept. Attorney to Join Bertelsmann

Germany-based media conglomerate Bertelsmann said it has hired Joel Klein, the former Justice Department attorney who led the government’s antitrust case against Microsoft Corp., to run its U.S. corporate services unit.

As chief executive of the Bertelsmann unit responsible for tax, audit and legal affairs, Klein is expected to advise the firm as it pursues a potential merger with EMI Group and attempts to transform Napster, the free file-swapping service, into a subscription-based venture.

The 54-year-old lawyer will report to Chairman Thomas Middelhoff. He won’t hold a seat on Bertelsmann’s board of directors or directly oversee the company’s entertainment divisions, but corporate executives are hungry for his expertise. He will join the firm today.

Bertlesmann approached EMI with an offer to combine the two conglomerates in November. If the deal is formally proposed, it will face significant regulatory hurdles--EMI and Time Warner in October abandoned their plan to join forces to avoid rejection of the proposal by the European Commission.

Bertelsmann is trying to structure the deal to overcome EC concern that reducing the number of record conglomerates from five to four would hurt consumers.

AOL Time Warner Co-Chief Operating Officer Richard Parsons formally gave up on the idea Wednesday, saying, “In this regulatory environment--as attractive as a transaction as it was--we can’t figure out a way to get it done right now.”

In addition to scrutiny over the EMI deal, Bertelsmann--along with the world’s other major music companies--faces a European Commission probe into CD price fixing.

The move follows the appointment of former television executive Rolf Schmidt-Holtz to run the media giant’s music division. Schmidt-Holtz was named to the job after the departures in November of Chief Executive Strauss Zelnick and Chairman Michael Dornemann, who were forced out in a power struggle and replaced by BMG veteran Rudi Gassner. Gassner died of a heart attack in December.