UMG Sued For Fraud

Universal Music Group is being sued for $100 million by two radio promotion companies that claim UMG coerced them into filing false invoices so the label could charge its artists for services never rendered.

National Music Marketing of Los Angeles and Majestic Promotions of Atlanta were hired by UMG to help promote its artists to radio stations, according to Reuters. It is a practice that has raised eyebrows, and New York Attorney General Eliot Spitzer is investigating what has been dubbed “pay-for-play” relationships.

According to the promoters, UMG forced the companies to write incorrect budgets, resulting in artists like Nelly paying costs from his royalties even though the promoters did no work for him.

“What [Universal] was doing was defrauding their artists – some of their biggest artists,” plaintiffs lawyer David Cohen told Reuters. “I’m sure Nelly is not going to be too happy that they were taking money out of his promotion budget to pay for promotions for other artists – money that he had to pay back from his royalties.”

The suit reportedly accuses UMG of racketeering, fraud, trade libel and breach of contract.

The promotion companies claim Universal fired and blacklisted them when they refused to submit the false invoices. National Music is out of business and Majestic is barely surviving, according to Cohen.

Indie promoters have been known to act as middlemen, paying radio stations $100,000-plus annually to get advance notice of their playlists. The promoters then turn around and charge recording companies.

The decades-old practice has been viewed as a way to skirt payola laws that kept record companies from offering DJs money, drugs or other services in return for airplay.