updated 12/27/2006 2:29:55 PM ET 2006-12-27T19:29:55

Entercom Communications Corp., one the nation’s largest broadcasters, will pay $4.25 million to end Attorney General Eliot Spitzer’s investigation of gifts — or “payola” — given by record companies in exchange for air play, Spitzer said Wednesday.

A lawsuit filed by Spitzer’s office in March claimed Entercom solicited payments from record labels and traded air time for promotional items, personal trips and other gifts.

Spitzer, the governor-elect, also charged that Entercom took payments from record labels to play their songs on the overnight programs “CD Preview” and “CD Challenge” in order to manipulate the music charts.

The attorney general’s investigation focused on Entercom’s activities from 1999 to 2006, spokesman Brad Maione said.

Payola is the term coined in the 1950s when early rock music was hit with scandal. It is a combination of the words “pay” and “Victrola,” the old wind-up record player.

Entercom, based in Bala Cynwyd, Pa., will make a $3.5 million payment to fund music education and appreciation programs and pay $750,000 in costs to the state, Spitzer’s office said.

“In the interests of the company, our employees and our shareholders, we have chosen to resolve this matter immediately and without extensive and costly litigation,” the company said in a statement. “The court did not find any liability, nor are we admitting liability with this settlement. Rather, we are taking the opportunity to put the investigation behind us and move forward.”

Under the settlement approved in state Supreme Court in Manhattan, the company will not take payments or other gifts from record labels in exchange for airplay and will ban all payments to independent promoters who pass along funds from record companies, hire a compliance officer to monitor promotion practices and put in place an internal system to detect any abuses.

Entercom owns and operates 105 radio stations nationwide, including 11 in the Buffalo and Rochester markets.

Spitzer’s payola investigation has so far led to settlements with the four major record companies — SonyBMG Music Entertainment, Warner Music Group Corp., UMG Recording Inc. and EMI Music North America — and CBS Radio Inc.

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