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June 23, 1999, Wednesday, Home Edition

SECTION: Business; Part C; Page 1; Financial Desk

LENGTH: 938 words

HEADLINE: COMPANY TOWN;
HATCH, UNION IN HARMONY ON BANKRUPTCY REFORM BILL

BYLINE: JUSTIN PRITCHARD, SPECIAL TO THE TIMES

DATELINE: WASHINGTON

BODY:
The union representing some of the recording industry's biggest stars won key changes in a bankruptcy reform bill by finding just the right person to approach Utah Sen. Orrin G. Hatch--Motown legend Gladys Knight.

The powerful Republican chairman of the Senate Judiciary Committee is not a pro-union lawmaker. He is, however, a budding songwriter who has penned hundreds of patriotic and religious lyrics.

Enter Knight, who could sing the blues about toiling in the music business. She also could sing one or two of Hatch's own songs. Indeed, Knight released an album last week with two songs he wrote--one, "Many Different Roads," is the title track. In the process, the two have become friends. They also share the Mormon faith.

Hatch's committee has jurisdiction over a proposed overhaul of the bankruptcy code that would make it more difficult for debtors to wipe out their red ink. The bill also had become a battleground between recording artists and their record labels over the use of bankruptcy laws by stars seeking to cancel their long-term recording contracts.

Knight's message of struggle was just what the American Federation of Television and Radio Artists wanted Hatch to hear as the union lobbied against the bankruptcy bill.

"It's just a matter of how Washington works," observed AFTRA lobbyist Margaret Cone, who asked Knight to contact Hatch. "You have to have the chairman on your side."

Ultimately, Hatch instructed the artists and the recording industry to negotiate. And the compromise, which effectively eliminated the contested provision, has AFTRA elated.

The story of how the recording artists' union tapped the unlikely connection between Knight and Hatch to wrest changes in arcane legislative fine print is only one twist in the long campaign to rewrite the nation's bankruptcy laws. Special interests, from debt counselors to pastors worried about church collection plates, have jockeyed for advantage.

The recording industry was no exception. Lobbyists for the Recording Industry Assn. of America convinced House lawmakers last year that performers were exploiting bankruptcy law to annul contracts with increasing frequency.

If a record company invests heavily in developing potential stars-to-be, the RIAA argued, the companies should reap some of the reward when their efforts pay off.

In recent years, stars such as Toni Braxton and R&B group TLC have used the "fresh start" of bankruptcy to get out of contracts signed before platinum albums enhanced their market value. Freed of their obligations, they could seek a better deal with a new label.

Though Knight herself never filed for bankruptcy, her 1997 autobiography criticized Motown Records--the early career label where Knight and her Pips struck gold--for what she considered exploitative management.

So AFTRA's lobbyist contacted Knight and asked her to make the artists' case. Hatch said it was actually Knight's son and manager, Jimmy Newman, who presented the arguments. Neither Knight nor Newman could be reached for comment.

The pitch from Newman, whom Hatch describes as "like a son to me," struck a chord.

"He mentioned how difficult it was for his mother," Hatch said in an interview. "He told a pretty compelling story as to how bad she was treated. But that was his side of it."

Although he has written hundreds of tunes over the last few years, composing during a boring congressional hearing or while traveling, Hatch is still a relative newcomer to the music industry. Until recently, his experience with record companies was restricted to their lobbyists in the halls of Congress.

"I have friends in every aspect of that business," Hatch said in an interview. " But I have to say that I do lean towards the creative people. Without incentives for creativity, we wouldn't have some of the beautiful things in this world."

Last fall, the House and Senate had passed different bankruptcy bills and were settling the discrepancies in conference. House lawmakers were pushing language that Rep. Bill McCollum (R-Fla.) inserted for the RIAA.

Once Hatch was involved, Senate GOP staff instructed the recording industry and artists to settle the issue. A compromise provision was then inserted into the Senate bill. However, that bill died at the end of the last Congress.

This spring, House and Senate committees bypassed last fall's struggle and chose instead to add to their respective bills (HR 833 and SB 625) the compromise Hatch helped fashion.

The original RIAA language singled out recording artists by insisting on proof that artists file bankruptcy strictly because they are broke. The final compromise simply lets a bankruptcy judge consider "the financial need for such contract rejection" during the filing process.

That wording appears unlikely to restrict future bankruptcy filings by artists, according to several bankruptcy law analysts.

Said Hatch: "I just said it's got to be fair. Don't give one side an advantage over the other."

Several months before Newman discussed the bankruptcy issue with Hatch, Knight had said she would record two of the lawmaker's songs on a forthcoming gospel album.

The title tune, "Many Different Roads," is Hatch's paean to Mother Teresa and Princess Diana. Knight's rendition adds a tribute of her own to her late mother.

While Hatch is thrilled to have his songs on Knight's collection of inspirational music, he doesn't stand to profit from the recording. An aide said Hatch donates proceeds of his songwriting efforts to Utah charities.

*

Pritchard writes for Legi-Slate News Service in Washington.

LOAD-DATE: June 23, 1999