Concert Promoter Fined; 2 Executives Get Prison Terms They Had Pleaded Guilty To Cheating The Stones, Madonna And Bowie.

Posted: April 27, 1993

A federal judge yesterday fined Electric Factory Concerts Inc. $450,000 and sentenced two company officials to prison for cheating the government, the stagehands union and some of the biggest names in rock music out of about $1.5 million.

It was a sentence that a company lawyer warned could endanger the company's survival.

Although the firm has made $1.5 million in restitution to all of its victims - including the Rolling Stones, Madonna, David Bowie and Paul McCartney - U.S. District Judge William H. Yohn Jr. stressed the importance of a strong sentence to deter others in the music industry.

Yohn noted that entertainment promotion runs largely on cash: Promoters and groups split the gate receipts in a settlement after a concert. Nevertheless, Yohn added, "there are many other cash businesses in this country where taxes are paid every day."

Allen Spivak, 54, of Bryn Mawr, part-owner and vice president of Electric Factory Concerts, was sentenced to one year - six months in prison and six under electronically monitored house arrest - and fined $100,000. He will be on supervised release for three years when he leaves prison.

Sidney Payne, company production manager, was sentenced to two months in prison and two months of house arrest and fined $30,000. During his three years of supervised release, Payne, 51, of Havertown, must perform 200 hours of community service involving youths and working against drug and alcohol abuse. Payne testified that a benefit of his prosecution was that it resulted in his sobriety after 20 years of drug and alcohol abuse.

Both men made brief apologies. In sentencing the pair, Yohn departed significantly from the stiffer sentences recommended under the federal sentencing guidelines in recognition, he said, of their cooperation with federal prosecutors and substantial charity work by the firm and Spivak.

After the hearing, Electric Factory Concerts president Larry Magid declined to comment on the company's future. "Who knows?" he said. "Today is a different day from the one before. We've survived a lot of things . . . but this is not an appropriate time to talk about it."

The firm's attorney, Richard M. Meltzer, had told Yohn that the company was ''mortgaged to the hilt" to pay the restitution, and that its financial prospects were "dim." Meltzer said any fine of more than $250,000 payable over five years could be financially devastating.

Meltzer said he did not believe the prosecution would hurt Electric Factory Concerts' future relations with the performers. Indeed, several have since put on concerts the firm has promoted. Meltzer submitted to the judge letters from managers from all the victims indicating a willingness to work again with the company.

Rather, Meltzer argued that the company's future was affected by a lack of concert tours this year and the prosecution-related revocation by the New Jersey Casino Control Commission of its license to promote shows in Atlantic City casinos.

More important, he added, Spivak's absence during his prison term would rob the company of its primary expertise in producing theatrical shows, the firm's most profitable operation last year.

Electric Factory Concerts, which has brought musicians to the city for a quarter-century, and the two company officials were charged by the U.S. Attorney's Office in July with one count of mail fraud and one count of violating the federal Taft-Hartley Act, which prohibits payments to union officials except for work performed. Spivak was also charged with two counts of tax evasion.

The company and the two men pleaded guilty in September.

Basically, the charges involved a scheme between 1987 and 1990 in which the two men overcharged 12 concert acts a total of $943,758 by padding expenses. They also were charged with failing to pay the government $478,000 in payroll withholding taxes for stagehands who were paid in cash and failing to pay $115,682 in pension contributions to Local 8 of the International Alliance of Theatrical and Stage Employees.

The Taft-Hartley violation involved the illegal payment of $14,953 to Francis O'Shea, a former Local 8 president. O'Shea, who cooperated with prosecutors in the continuing probe of the entertainment industry, was sentenced last April to four months in prison and fined $2,000.

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