California Attorney General Examining Complaints About Recording Academy
California Attorney General Xavier Becerra has received several complaints about the Recording Academy's governance structure and his office is now taking a closer look at the Grammys organization…
California Attorney General Xavier Becerra has received several complaints about the Recording Academy’s governance structure and his office is now taking a closer look at the Grammys organization, multiple sources tell Billboard.
Becerra’s office has not formally launched an investigation, but ever since the Recording Academy’s chief executive Deborah Dugan was put on administrative leave on Jan. 16 after just five months on the job, the state attorney general’s office has received several complaints regarding the organization’s board of trustees, the power of the academy’s executive committee and their approval of expenditures of millions of dollars in legal fees to two powerful law firms, as well its handling of a rape investigation of its former president and CEO Neil Portnow. Portnow vehemently denied the rape charge, calling it “false and outrageous” after it first aired in a filing by Dugan with the Equal Employment Opportunity Commission.
Officials with the Recording Academy say they are unaware of any investigation, telling Billboard “we have not been contacted about any such review by the Attorney General or any other agency.”
The complaints filed with the attorney general’s office also urge Becerra to look into the Recording Academy’s large expenditures, including $770,000 designated for hospitality at an event in September 2016 at the Four Seasons in Westlake Village. The timing coincides with the Recording Academy’s annual Grammy screening committee meetings, which took place at the Four Seasons in 2016 because the usual host hotel, the Beverly Hilton, was under renovation. The screenings involve more than 200 people and are usually split between two hotels.
“We are a nonprofit and allocate our precious resources judiciously. The expenditures in question were for an annual Trustees meeting and that year’s Grammy Awards category screening and nominations review process, which involve several hundred people from the music community in a series of meetings taking place across 10 days in September and November. It was in line with what we normally spend for the process. The only difference in 2016 was that we conducted all the activities at one hotel, rather than two, due to logistical issues,” a statement from the Recording Academy reads.
The state’s inquiry comes as the Recording Academy pursues an investigation of its own into issues cited in Dugan’s allegations of voting irregularities in the nomination process, sexual harassment and conflicts of interest within the board of trustees.
Dugan said the internal investigation has already been compromised because the investigator retained by the academy was “recommended and handpicked by” Proskauer Rose, LLP, the firm cited in Dugan’s Jan. 21 Equal Employment Opportunity Commission filing for billing the academy $906,691 in 2017 and $829,034 in 2015.
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Becerra has the authority to investigate any organization doing business in California, though enforcement is complicated by jurisdictional issues. The academy’s non-profit status is designated by the Internal Revenue Service and is typically enforced at the federal level, but Becerra does have jurisdiction over non-profits through the state’s Charitable Trust Section of the California Department of Justice.
The Recording Academy is organized as a 501(c)6, a designation often used by business associations like chambers of commerce, real estate groups and sports leagues including the NHL and the PGA. The Academy is incorporated in Delaware and records show it files its annual report with Delaware’s Division of Corporations, so if Becerra were to take legal action against the Academy or its board of trustees, he would likely have to file suit in Delaware court.
“[The jurisdiction issue] gives both sides leverage and shows how each might posture in potential settlement talks” explained California attorney Michael Seville with the San Francisco firm Seville Briggs, who has represented clients in both state and federal investigations. While the Recording Academy could force a suit into a different state, Becerra could argue that the principal business is in California, most of its employees live and work in the state and the annual Grammy Awards took place in Los Angeles nine times in the past ten years.
A spokesperson for Becerra’s office says that the department doesn’t comment on and neither confirms nor denies the existence of ongoing investigations. It’s possible that Becerra’s office could investigate and privately reach a settlement with the Recording Academy, which it would not need to publicly disclose. A spokesperson for the Recording Academy did not provide a statement to Billboard.
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Since being elected to office in 2018, Becerra has taken several non-profit groups to court for fraud and financial mismanagement. In May he sued the charity Aid for Starving Children for deceptive solicitations that allegedly earned its administrators $6.2 million between 2011 and 2018. He’s also sued the National Cancer Coalition and Giving Children Hope over charges of deceptive reporting of gift-in-kind donations. In 2018 he won a nearly $9 million judgment against the operators of a charity for wounded veterans which allegedly pocketed millions of dollars in donations for personal use. That investigation began after the attorney general’s office received complaints about one of the charity’s raffles.