CBS Radio Agrees to Pay $2 Million to Settle Payola Probe

CBS Radio Inc. agreed Thursday to pay $2 million to nonprofit New York music programs to settle an investigation by state officials that some employees received vacation trips, gift cards and merchandise from record labels to play their songs.

The deal marks the first settlement that New York Atty. Gen. Elliot Spitzer has made with a radio conglomerate, and comes amid his office’s sweeping probe into the music industry’s secretive practice of pay-for-play that has often dictated what radio listeners hear.

At least three of the nation’s largest stations are under scrutiny by Spitzer, including Clear Channel Communications Inc. and Citadel Broadcasting Corp.

According to Spitzer’s probe, employees admitted to playing songs that wouldn’t ordinarily have aired while taking handouts from music label executives. Spitzer’s office said that it found the evidence through e-mails and sworn testimony

One radio station in Rochester, N.Y., added Nick Lachey’s “Shut Up” and Smash Mouth’s “You Are My #1” to its playlist in the summer of 2003 in exchange for airplane trips to be used as contest prizes for listeners.

New York-based CBS Radio, which admitted no wrongdoing in the settlement, said in a statement that it had found conduct by two employees to be inconsistent with company policy.

“We believe this outcome is better for our company and our shareholders than protracted litigation,” a spokeswoman said in a statement.

CBS Radio is the third-largest radio conglomerate in the country with 178 stations, including Los Angeles stations KROQ-FM (106.7), KFWB-AM (980), KNX-AM (1070), KRTH-FM (101.1) and KCBS-FM (93.1).

Spitzer’s payola investigation has resulted in settlements with Sony BMG Music Entertainment, Warner Music Group, Universal Music Group and EMI Music North America.

Those settlements have totaled more than $30 million, with Universal paying more than $12 million in fines.

“Our settlement with CBS Radio represents a significant milestone in our effort to reform the music industry for the benefit of the listening public,” said Spitzer, who is running for governor of New York.

Spitzer subpoenaed nine of the nation’s largest radio conglomerates earlier this year. One company, Entercom Communications Corp. became the target of a lawsuit by Spitzer in March when he accused the broadcaster of rampant payola practices. This week, a New York judge denied the radio company’s argument for dismissal.

In April, the Federal Communications Commission launched its own investigation into the payola practices of radio companies, focusing on CBS Radio as well as Clear Channel, Entercom and Citadel. Spitzer had been critical of the commission for not taking a hard enough stance with the companies.

FCC Commissioner Jonathan S. Adelstein applauded the CBS settlement.

“This should provide new fuel to drive the FCC payola investigation to completion,” he said. “Since payola saps the vitality out of radio, this is a win not only for listeners everywhere, but also for the radio industry itself.”

claire.hoffman@latimes.com