Another sour note causes Epic problem for label

Just two days after Charlie Walk was named president of Epic Records, the Los Angeles Times has uncovered evidence that suggests Walk and his boss, Don Ienner, were aware of payola practices at Sony Music’s Columbia Records.

The Times story was based on seven current and former Sony BMG executives, who are quoted anonymously but who all agree pay-for-play was “prevalent” yet “discreetly discussed.” The article is a rare case of the L.A. Times relying solely on anonymous sources.

On Sunday, sources conflicted as to the veracity of the Times’ findings.

Sony Music had no comment. Two execs with knowledge of the investigation, told Daily Variety that neither Ienner’s or Walk’s name appeared in any of Spitzer’s reports.

Another source suggested Ienner could become a fall guy.

Sony BMG Music was fined $10 million in July in the wake of an investigation by the office of New York attorney general Eliot Spitzer. Sony Music responded by dismissing a radio promotions executive and agreeing to hire a compliance officer.

Spitzer’s report did not name names, but titles of execs were released, and several documents indicated Walk, who was formerly executive VP of creative marketing & promotion for Columbia Records Group, was involved firsthand with the pay-for-play practices in radio.

The Times article said Spitzer’s investigators had been told Ienner and Walk “tolerated and condoned pay-for-play.” Basing their conclusion on former Sony Music promotions employees, some of whom shared anecdotes and evidence with Spitzer, the Times stated that Spitzer’s office agreed to not reveal names in exchange for a settlement.

Attorneys for Sony BMG and the execs said there is no evidence that Ienner or Walk knew about the payola activities. Walk’s lawyer, in the Times report, said an email potentially implicating his client was misinterpreted.

Less than two months ago, the Times updated its “Code of Ethics,” which stated “Sources should never be permitted to use the shield of anonymity to voice speculation or to make ad hominem attacks.” The newspaper did quote one exec by name, Tony Anderson, who said Ienner did not condone payola practices.

Ienner has overseen Columbia Records since 1989, and while making the label an annual leader in market share, he has developed a reputation for being a fierce competitor. The label, which has a roster including Beyonce, Bob Dylan, John Mayer and System of a Down, is known for supporting artists over the long haul, although the promotional plug has been pulled on some releases almost as soon as the discs hits retailer’s shelves.

Sony BMG has had a tough fourth quarter. Revelations that Sony Music was putting XCP spyware on frontline CDs angered consumers and has led to lawsuits, including one filed by the state of Texas just before Thanksgiving.

The immediate target was Sony BMG chief Andy Lack, who was already in Bertelsmann’s line of fire. The B of the BMG side has expressed concerns about renewing his deal early next year, especially in the wake of the end-of-’05 departure of Michael Smellie, the No. 2 in Sony BMG.

The allegations in the Times were printed just days after Ienner made significant shifts in the ranks at Sony Music’s labels. Ienner, chief executive officer of Sony Music Label Group U.S., handed his president title to Michele Anthony, who is also chief operating officer of the group. She and Ienner will oversee the management and operations of the Sony Music Label Group and will also work with the management teams at Columbia Records Group, Epic Records, Sony Music Nashville and Sony Urban Music.

Epic Records prexy Steve Barnett was named chairman of Columbia Records Group, replacing Will Botwin, who ankled after being on the job for 10 months. Walk took Barnett’s job.

Lisa Ellis was upped to president of Sony Urban Music, from general manager; Tom Donnarumma was named general manager of Columbia Records; and Alan Price was tapped senior vice president of finance and operations for Sony Music Label Group U.S.

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