When Sony BMG Music Entertainment, the nation's second-largest record company, settled with New York Atty. Gen. Eliot Spitzer in July and agreed to pay $10 million for engaging in "pay-for-play" practices, Spitzer said such corruption reached "the very top of the industry."
Documents released by Spitzer charged that bribing radio programmers with plasma TVs, vacations and laptop computers in exchange for airplay was not only commonplace at Sony BMG, but also had "been tolerated and facilitated by senior executives."
Investigators identified one such executive by title: the executive vice president of promotion at Sony Music's Columbia Records. Spitzer stopped short of naming names.
But an inquiry by The Times has found that Spitzer was told that the trail led to two of the company's highest-ranking executives and some of the most powerful men in music: the Columbia vice president, Charlie Walk, and his boss, Sony Music Label Group U.S. Chief Executive Don Ienner.
Two sources interviewed by The Times said they'd told Spitzer's investigators that Ienner and Walk tolerated and condoned pay-for-play, which is generically referred to as "payola." A third source with firsthand knowledge of the investigation confirmed this.
In response to questions from The Times, Paul Gardephe, a lawyer who negotiated with Spitzer on behalf of Sony BMG, said in a statement: "There is absolutely no evidence that Ienner or Walk knew of any payola activities. If the attorney general's office had such proof, the settlement would have been dramatically different."
A spokesman for Sony BMG said: "After a long, in-depth investigation by the attorney general's office, this whole matter was resolved months ago. It's unfortunate that malicious gossip and false allegations by anonymous sources are now being used to damage the reputations of good and honest people."
Through their lawyers, Ienner and Walk declined to answer questions for this article. Attorneys for both men denied that either one condoned or participated in pay-for-play.
Sony BMG agreed to settle with Spitzer without affirming or denying his allegations, but acknowledged in settlement documents that "some of its employees pursued improper promotion practices."
However, according to three former Sony BMG executives and a fourth source with firsthand knowledge of the investigation, in the months leading up to the settlement, investigators made clear to representatives of Sony BMG that evidence showed that Ienner and Walk knew about pay-for-play.
Two sources said that documents collected by Spitzer indicated that Ienner and Walk were aware of and condoned pay-for-play. The source with firsthand knowledge of the investigation, who has seen the documents, also said the same thing.
Two sources also said that Spitzer's investigators would have named Ienner, Walk and other Sony BMG executives in the body of a complaint if one were brought against the company -- not as individual defendants, but as managers who knew about pay-for-play. The source with firsthand knowledge of the investigation confirmed this.
When Sony BMG decided to settle, Spitzer's office agreed to the company's request that documents released by the attorney general not name any Sony BMG employees.
Ienner and Walk are two of the most powerful people in the music industry.
Ienner oversees one of the world's largest music organizations and has been instrumental in building the careers of stars such as Mariah Carey and Lauryn Hill.
Until last week, Walk, a longtime Ienner lieutenant, had managed the promotion departments where Spitzer found evidence that Sony BMG had improperly given radio programmers a Las Vegas trip.
On Friday, Sony Music announced that Ienner had made promotions, including making Walk president of Epic Records, another of its divisions.
The men oversee labels that shipped more than $1 billion worth of albums last year by artists such as Bruce Springsteen, Aerosmith, the Dixie Chicks and Beyonce Knowles.
In all, The Times interviewed seven former and current associates of Ienner and Walk who confirmed what sources say Spitzer's investigators had discovered. These sources -- two current and five former Sony Music or Sony BMG employees -- said that during the last decade they observed conversations in which one or both men acknowledged or condoned exchanging improper gifts for increased airplay of certain songs.
All seven sources worked alongside Ienner and Walk when the executives were in their current positions or in previous leadership roles at Sony-owned Columbia Records. Two of those sources left the company after clashing with Ienner or Walk; four sources describe themselves as friends of one or both executives.
Many people interviewed for this article requested anonymity because they feared incriminating themselves or jeopardizing their jobs within the insular music industry.
All seven sources echoed Spitzer's depiction of Sony Music as a place where pay-for-play was a prevalent practice that was discreetly discussed.
The message was veiled, but clear. As one source put it, when conversations regarding pay-for-play arose, "Donnie would tell you: 'Do whatever it takes. Get the song played.' "
Other former colleagues disagreed. Tony Anderson worked with Ienner at Arista Records in the 1980s and at Columbia Records in the mid-1990s.
Pay-for-play "is the kind of thing that Don was not a fan of nor supportive of," Anderson said. "When people would discuss improper practices, I'd hear him say, 'You must be out of your mind. We're not doing those kinds of things.' "
Representatives of Spitzer's office would not discuss their investigation, nor why neither Ienner nor Walk were charged. When asked at a July news conference why his investigators did not name any Sony BMG executives, Spitzer said his staff focused on improving corporate practices rather than targeting specific individuals.
"The first effort is to change the way business is done," he said.
Legal experts said it would have been difficult for Spitzer to win convictions of individual Sony BMG executives.
"These things seldom go to trial because they are so hard to prove," said Harry Cole, a communications attorney who has argued before the U.S. Supreme Court.
The only Sony BMG executive fired in the wake of the investigation, Joel Klaiman, was accused of asking a San Diego radio programmer to provide a false name and social security number in exchange for a television.
Through his attorney, Klaiman denied the allegations.
Last month, Warner Music Group became the second music company to settle pay-for-play claims with Spitzer, agreeing to pay a $5-million fine.
Spitzer continues to investigate the two other major record companies -- Universal Music Group and EMI Group -- as well as the country's largest radio corporations, including Clear Channel Communications Inc. and Infinity Broadcasting Corp.
Pay-for-play has been practiced in the music industry since the 1930s, with some disc jockeys accepting cash, drugs or prostitutes in exchange for airplay.
The bribes discovered by Spitzer were more genteel: merchandise, airplane tickets and electronics. But the goal was the same.
Spitzer launched his investigation of Sony BMG under multiple New York laws, including commercial bribery, false advertising and deceptive practices statutes.
In a letter to The Times, Sony BMG asserted that trading things of value for airplay was not in and of itself payola.
Sony BMG general counsel and Executive Vice President Daniel Mandil wrote that although "providing things of value for a contest giveaway in exchange for airplay is now prohibited at Sony BMG -- and has been since early in the attorney general's inquiry -- it does not constitute payola. Providing financial support to a radio station itself in exchange for airplay, a practice also now prohibited by the company's guidelines, also does not constitute payola."
But according to Spitzer's settlement, unless Sony BMG received the consent of station owners or management, trading goods and financial support for airplay may constitute commercial bribery.
In his settlement documents, Spitzer details that under New York's commercial bribery law, "it is a misdemeanor for anyone to confer (or offer to confer) a benefit upon another party with the intent to influence the recipient's conduct regarding the business affairs of the recipient's employer, without the employer's consent."
Spitzer's settlement labels as "bribes" the gifts, trips and listener giveaways Sony BMG gave to radio programmers and radio stations in exchange for airplay of songs.
However, Spitzer formally alleges that the company violated two civil laws and does not charge that Sony BMG committed commercial bribery.
"It's common for Spitzer to exclude criminal charges in exchange for a settlement," said Elkan Abramowitz, a New York lawyer who has negotiated with him.
In a statement, Gardephe, Sony BMG's outside counsel, disagreed, saying the attorney general's office "does not negotiate away criminal charges for individuals in exchange for corporate settlements."
Spitzer does offer evidence that employees of both Clear Channel and Infinity received improper gifts from Sony BMG in exchange for airplay. Clear Channel has since fired at least two employees who were named in the Sony BMG settlement document.
Representatives of Clear Channel and Infinity said their corporations' policies prohibited employees from consenting to the exchange of gifts for airplay. Infinity's policies have explicitly prohibited any exchanges since at least 1995, a company spokeswoman said. Clear Channel allows exchanges only if approved by station management and disclosed on-air.
Four sources said that Sony BMG executives knew or should have known of Clear Channel's and Infinity's policies because the radio companies regularly communicated them to record labels. But these sources said Ienner and Walk nonetheless condoned their promotion executives trading goods for airplay when they knew it would not be disclosed on-air, and without receiving the consent of the station's managers or owners.
"Station management never knew," said one executive who worked with Ienner and Walk when both men were at Columbia Records. "Are you crazy? We would never tell them."
On the Warpath
In 1989, when Ienner became president of Columbia Records at 36, he was the youngest person to head the label. Within a handful of years, he built the struggling company into the industry's No. 1 hit machine and developed a reputation as a fierce competitor.
In a 2001 interview with The Times, Ienner likened his promotion strategy sessions to what he called "war meetings. We devise a plan of attack where we figure out ... how bloody we expect the battles to be." He added, "I hate to lose."
But according to seven sources, that competitive zeal made him look the other way when it came to pay-for-play -- both at Columbia Records and, since 2003, at the label's parent company, Sony Music Label Group U.S.
In interviews with The Times, one source said that he told Spitzer's investigators that in the last two years, Ienner was periodically informed of promotional activities, including when Sony employees gave radio programmers under-the-table presents to increase airplay -- or "spins" -- of specific songs. The source with firsthand knowledge of the investigation confirmed this.
Three of the sources who are current or past employees of Sony Music or Sony BMG confirmed that Ienner was told of pay-for-play during that period.
"It's not something anyone runs at the mouth about," said a person who worked alongside Ienner. But "this thing was pervasive and rampant. It was standard business practice."
Another source, who regularly attended meetings with Ienner, said he "would berate you. He would say, 'You are letting everyone down. You know what to do.' We would talk about getting [radio station employees] trips to see upcoming shows, about sending someone a TV."
This source said some of those gifts were kept by programmers for personal use; others were used by stations to aid them in their daily broadcasts.
John Rosenberg, Ienner's attorney, said in a statement: "Mr. Ienner emphatically and categorically denies that he engaged in any unlawful or improper conduct. It is troubling in the extreme that unnamed individuals, who are too cowardly to publicly stand behind their baseless allegations, believe it appropriate to attack Mr. Ienner's reputation. That they are willing to do so speaks volumes about their true motivation and their utter lack of credibility."
Five executives who worked with Ienner when he was president of Columbia Records, from 1989 to 2003, said he was directly involved in overseeing pay-for-play. Three sources confirmed that Spitzer's investigators were told of Ienner's practices while he was at Columbia.
"I've been in rooms where Donnie says, 'Get the records on the radio. Get the envelopes ready,' " said one person who worked as an executive with Ienner at Columbia. "Envelopes" referred to cash and gifts for radio programmers in exchange for airplay, without the station management's consent, the former executive said.
A second person who was also a Sony Music executive during that period said that although Ienner did not refer to envelopes, he told him to exchange gifts with radio programmers for airplay, again without the consent of station higher-ups.
"Donnie created this business. He taught me how to do this," this source said.
Another executive said pay-for-play took different forms.
Ienner "would say, 'I've approved $50,000 this year for that [program director], and when we're developing this baby band, we get nothing. Tell him if we don't get spins, we're cutting his support,' " this source said.
The source added that the $50,000 in support might include electronics for a programmer's personal use, valuable gifts for DJs to give away on-air and services such as flying in bands to play at concerts free of charge. These exchanges were not disclosed on-air, said the source, though some exchanges had the consent of station management.
Spitzer called these promotional practices "equally deceptive." Such "promotional support" exerts "the same influence over the stations' airplay decisions as when a bribe goes directly into a station employee's pocket," he said in the Sony BMG settlement document.
Spitzer's settlement also states that in September 2001, when Ienner headed Columbia Records, "a senior staff meeting was called at Columbia to address the problem posed by the compensation Columbia was giving to indies."
"Indies" are the independent promoters that Spitzer said Sony BMG hired to implement the company's pay-for-play strategy.
Burt Baumgartner, a Columbia Records veteran who worked under Ienner in the mid-1990s, said he did not recall his boss explicitly directing improper gifts to programmers. But the expectation was there, he said.
"I would sign off on it," said Baumgartner, now executive vice president of MusicBiz, a music industry website. "There was always a buffer. But [Ienner] always knew how these relationships worked. He knew how much was getting spent. Every staff member gave stuff away."
In 2003, when Sony Music reorganized and Ienner was promoted to his current position as chief of U.S. operations, he tapped Walk to serve as Columbia Records' executive vice president of creative marketing and promotion.
Walk started at Sony in 1987 as a promoter, pitching songs to radio stations. He rose through Columbia's ranks, helping turn such artists as John Mayer into stars.
Several sources -- former Sony Music executives and people outside the company -- said Walk directly took part in exchanging gifts for radio airplay. Two sources who asked not to be named said they told Spitzer's investigators what they knew about Walk's role. That was confirmed by the source with firsthand knowledge of the investigation.
Buffalo, N.Y., radio programmer David Universal said in an interview that Walk told him another Columbia executive would provide gifts in exchange for playing specific songs. That executive came through with plane tickets, Universal said, but they were not disclosed to station management nor to listeners over the air. Universal also alleged that Walk personally gave him limo rides and tickets for baseball games, although he said Walk did not attach strings to those presents.
Universal's employer, WKSE, fired him in January for violating station rules against taking gifts.
In a letter to The Times, Walk's attorney, Martin Singer, wrote: "It is an absolute lie to say that my client promised Mr. Universal, or anyone else, gifts as quid pro quo for airplay."
Spitzer's investigation also found that Walk was directly involved in pay-for-play.
According to Spitzer's settlement document, in an internal e-mail sent in October 2004, a Columbia executive told an employee that radio stations would need to make airplay commitments before he would authorize the band Switchfoot to perform at their Christmas shows.
Spitzer did not name the executive who was "[s]eeking to ensure that these shows would generate significant airplay commitments," but did give his title: executive vice president of promotion.
That executive is Walk, Walk's attorney acknowledged. But Singer said that Spitzer misinterpreted the e-mail. Walk, he said, was merely asking whether the radio station was already playing Switchfoot songs in order to determine whether listeners would be familiar with the band. He was not requesting an exchange of airplay for the band's appearance, Singer said.