That’s what some are saying, referring to Jerry DelColliano’s Inside Music Media findings re: Cumulus’ “scheme” in conjunction with Clear Channel’s Katz rep firm to engage ad agencies like Universal McCann into making massive radio buys across the Cumulus platform in return for alleged kickbacks in additional discounts.
Jerry says these so-called “exchanges” are allegedly tantamount to rewarding the agency and not sharing the rebate with the client.
His latest column, “Cumulus Flirting With Legal Disaster,” included some comments Cumulus COO John Dickey and EVP/COO Jon Pinch made to us on the matter:
Carl Marcucci the very able reporter of Radio Business Report asks John Dickey to respond and the “other brother” said:
“We have an IA team (internal audit) that works hard long hours to ensure that our standards and practices are followed. That all being said I read what you sent me below and I can’t make any sense out of his babble. Again, another example of made-up nonsensical dribble.”
Sounds like he’s got nothing to hide, right? Especially if it’s only nonsensical dribble.
Jon Pinch, EVP/COO also wanted his ink in RBR by saying that everyone is doing this “nonsensical dribble”: “This is simply a share deal that started with the large TV companies over a decade ago. Large clients ask for bonus weight in exchange for additional share. It’s being done by all the large radio groups with various agencies and quite frankly, Cumulus was one of the last to jump on board. Nothing more complicated than that… and probably not understood by a blogger who hasn’t been in the business for 30 years.”
Are Cumulus and CC flirting with legal disaster?
Here’s what we’ve heard from sources: These practices—if not recognized as business as usual and completely legal—could trigger a RICO violation. They could represent a potential criminal conspiracy. It could be determined that Cumulus and CC, via Katz, are misleading stockholders (there was a class action lawsuit from Cumulus stockholders nearly a decade ago). It also puts them in jeopardy from lawsuits from agencies and advertisers.
The FCC may also be interested. If accurate and the client is not made aware of it, Cumulus, Katz and CC Media and any other ad agencies involved may be engaging in fraudulent billing. This could be grounds for license revocations, especially if it is done throughout the companies and was known to top management.
Cumulus COO John Dickey could not be reached at deadline.
RBR-TVBR observation: It’s possible that FCC and SEC inquiries have been made on this news. If what Jon Pinch said is indeed standard practice and clients are aware of it, there probably isn’t much that will happen other than these inquiries. It could be much ado about nothing.