Spitzer's news put EMI out of tune

SHARES in EMI dived 7p to 213 1/2p today on reports that it and the other three big record companies are to be subpoenaed by crusading New York Attorney General Eliot Spitzer.

The scourge of investment banks and insurance brokers, Spitzer's office wants details of contracts and payments made to pluggers - independent middlemen used to promote a record with radio stations.

The practice was common in the 1980s and 1990s but began to die out when US radio was deregulated in 1996. Analysts believe total payments from EMI, Sony BMG, Vivendi Universal and Warner Brothers now amount to less than £100m a year. EMI, headed by Eric Nicoli, declined to comment until it was able to clarify matters with its New York offices.

Plugging is not illegal in the US. But payola, which involves direct payments to the radio stations, is.

Spitzer has taken on the record giants twice before, resulting in a win and a score draw. Early this year, the majors had to agree to return $50m (£27m) of unpaid royalties to artists, including David Bowie and Dolly Parton.

In 2002, they agreed to pay $67.4m and distribute $75.7m of free CDs to charities despite denying Spitzer's allegations of price fixing.

Former US Securities and Exchange Commission chairman Arthur Levitt has said allegations about insurance industry practices, made by Spitzer, could result in the biggest financial scandal ever.