Federal prosecutors expect to have enough evidence by January to prosecute at least two major Latin music radio programmers for taking illegal bribes from Fonovisa, the independent Latin pop/norteņo music label, sources have confirmed. The ongoing investigation has also expanded to include other Latin music programmers and major urban music labels which may have bought off programmers to obtain airplay.

Prosecutors from the Department of Justice, the U.S. Attorney's Office and the Internal Revenue Service are analyzing financial records and corroborating testimony about two radio programmers who allegedly accepted cash payments from Fonovisa. Fonovisa's promotions department, under the direction of Jesus Gilberto Moreno, distributed more than $1 million in bribes to programmers in 1997, a practice that occurred for several years, according to a source close to the investigation. Two weeks ago, Moreno plead guilty to one count of payola, a federal misdemeanor which prohibits unreported cash payments and gifts to radio station personnel. Moreno paid a $50,000 fine and will serve 2 years' probation, according to a Los Angeles Times article that broke the story last week.

Prosecutors were able to trace Moreno's cash payments to programmers by first examining phony invoices created by Fonovisa executives. Outside parties paid these invoices to Fonovisa with cash, which was used for bribes handed out in parking lots. Based on company lists and interviews with Fonovisa personnel, who cooperated in the investigation in exchange for immunity, prosecutors determined which radio station programmers were allegedly paid. Now they are scrutinizing programmers' bank deposit records to see how much they allegedly received, and how often, a source said.

The phony invoice method was only one technique Fonovisa used to create cash to pay bribes. The company also produced promotional CDs and sold them to distributors at a discount for cash. A large underground distribution system for promotional CDs, which are cut-outs, and new non-cut-out CDs has developed in the United States over the last three decades. Like the money from phony invoices, the cash from these sales was used to pay kickbacks to programmers, who allegedly added songs to station playlists.

Now that prosecutors can follow the money trail from Fonovisa, they may find other Latin music radio programmers who took bribes, a source said. Investigators are also looking into anecdotes that major urban labels have committed payola, and they are beginning to amass more concrete evidence in this area. Many top-selling urban labels are owned by media conglomerates, which could be liable if their holdings are involved in illegal payoffs.

Since 1960, when the prohibition of payola became a federal statute, record labels and radio stations have cut increasingly sophisticated deals to avoid the narrowly defined law. Besides Fonovisa, investigators are looking at other labels which may have illegally provided free concerts, interviews and appearances by artists in exchange for airplay. But the payola statute does not address these types of aggressive marketing ''pay-ins'' when radio stations report them to the Federal Communications Commission. Promotional radio spins and pay-to-play deals can be legal, according to U.S. Attorney's Office.

Investigators did not start with a blank slate in the Fonovisa investigation. Fonovisa's parent company Grupo Televisa discovered possible payola in Fonovisa's promotions department, audited the company, then reported possible shady dealings to the Department of Justice with the hope that it would get a lighter sentence. Self-reporting, which prosecutors say is not uncommon, worked in this case--Fonovisa was not found guilty of payola, but of felony tax evasion, which brought a $700,000 fine. And in exchange for revealing Fonovisa's tax evasion to prosecutors, Fonovisa president Guillermo Santiso avoided payola charges and jail time and received a $200,000 fine and two years' probation for tax evasion. Now that the employees have disclosed essential information about how cash was illegally obtained and named the payees, prosecutors can use that as leverage against the radio programmers and encourage them to cooperate in exchange for lighter sentences.

Critics claim that this type of quid pro quo--reducing sentences in exchange for cooperation--is too permissive. But prosecutors point out that each payola conviction can equal up to one year of federal jail time, so if a radio programmer took monthly bribes for two years, for example, the programmer could be sentenced to 24 years. Prosecutors also say that the fines are stiff, and programmers committing payola have separate felony tax evasion charges to deal with.

According to one Department of Justice prosecutor, ''We think the sentences were not lenient, but were appropriate, and reflected the circumstances of the case.''

NEXT WEEK: Anatomy of a Payola Investigation