Discrimination and RadioOne and Lawsuits and Radio and Communications

Payola alleged by radio executive

October 1, 2007

Radio One Indiana's former controller has filed a civil lawsuit against the company charging she was terminated because of her race after she raised concerns about fraud and payola in relation to the company's financial statements.

Denise Redding claims she was fired in July 2006, three months after she reported to Radio One officials that she would not sign off on the company's financial statements because she could not certify that they were valid and accurate.

Redding, who was hired by Radio One in 2002, says in the lawsuit that she told Radio One's local vice president of finance, Deborah Cowen, that she believed Radio One's local general manager, Chuck Williams, had inflated revenue reports resulting in first-quarter revenue that was not accurately reported.

Redding says in the lawsuit that her review of the company's financial records convinced her Williams "may have committed payola violations and actionable fraud."

Redding, who is black, contends that Radio One fired her due to her race and/or gender, a charge the radio company denies. Redding says Williams, who is white, "accorded more favorable treatment to similarly situated employees who are male and/or non-African-American."

Redding says she received positive performance reviews at Radio One until shortly after April 2006, at which time her first-quarter bonus was cut. She says she was fired a few months later purportedly for inadequate performance on an internal Sarbanes-Oxley review.

The Sarbanes-Oxley Act of 2002 is wide-ranging federal legislation that establishes new or enhanced accounting and financial reporting standards for all U.S. public company boards, management and public accounting firms.

Redding claims Williams was equally responsible for any unsuccessful Sarbanes-Oxley review.

Radio One officials deny any wrongdoing. Williams, who joined Radio One as vice president and local general manager in 2005, referred questions to corporate counsel.

"There's no merit to Ms. Redding's allegations, and we believe the litigation process will reveal that," said Brandon Shelton, an attorney with Ogletree Deakins, which represents Radio One.

Maryland-based Radio One, with 60 stations in 19 markets, is the nation's seventh-largest radio broadcasting company and the largest radio broadcasting company that primarily targets black and urban listeners.

Locally, Radio One operates WHHH-FM 96.3, WTLC-FM 106.7, WTLC-AM 1310 and WYJZ-FM 100.9, along with music television station WDNI-TV Channel 65.

Redding's attorney, Kenneth E. Lauter, senior partner with Haskin Lauter LaRue & Gibbons, said he is looking forward to a jury trial.

"Our preference is a jury trial," Lauter said. "We feel we have a good case."

Redding is seeking at least $82,000 in back pay, plus damages for lost benefits and emotional distress, Lauter said. He declined to speculate on what the total damages could be.

If substantiated, the issue of payola could make the lawsuit far more costly than potential damages sought by Redding, industry experts said.

"This issue has been around a long time," said Tom Taylor, executive editor of Radio-Info.com and a longtime radio industry expert. "It really took wing in the 1950s with the emergence of rock 'n' roll and the small, independent record labels that produced the music."

Concerns over payola resurfaced in 2005 when New York Attorney General Eliot Spitzer began investigating whether record companies were using improper promotional practices to win airplay on some of New York's biggest radio stations for their artists' songs.

Emmis Communications Corp. received a subpoena in that case. Emmis officials cooperated with Spitzer's investigation, and no penalties were handed down to the locally based radio company.

Payola usually refers to a practice of a radio station's taking money, merchandise, trips or other favors in exchange for promoting a product on air or playing a record without telling the audience about the relationship.

"There's an obligation for stations to be truth tellers," said Barry Umansky, an attorney and chairman of telecommunications at Ball State University. "People should know who is trying to persuade them. It's a long-standing principle of the Federal Communications Commission, so, if this is proven, it's very serious."

FCC penalties for payola can be stiff, Umansky said, including heavy fines or, in severe cases, license revocation.

Even with the proliferation of the iPod and growth of satellite radio, Taylor said over-the-air commercial radio is still "by far the best way to promote a record or song."

In a 2005 interview with IBJ, Williams said Radio One has strict rules concerning its play lists and has a board composed of program directors, disc jockeys, sales executives and others to select play lists for its Indianapolis stations.

"The corporate guys give line-by-line directives to avoid any improprieties or even appearances of conflict," Williams said in 2005. "We realize this issue can crop up in any market, so it's very tightly controlled."

The connection between Redding's accusations and payola are not made clear in the lawsuit, and attorneys on both sides declined to comment.

Since the case filed in a federal court in Indianapolis is a civil matter, criminal charges won't result unless Federal Communications Commission officials become involved.

Though Lauter said there are no "ongoing" talks between the two sides, he didn't rule out the possibility of an out-of-court settlement.

"I assume there will be settlement discussions at some point," he said.

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