Shakeup could put a new spin on Capitol Records; talk grows that front office occupant is about to change.

Executive changes are expected to shake Capitol Records, Inc.'s' cylindrical Hollywood landmark soon.

Record industry observers anticipate Capitol's president and chief executive officer, Hale Milgrim, will be replaced. In a separate move, a new senior position will be created to oversee the West Coast operations of the Capitol and EMI record labels. Joe Smith the retired president and CEO of Capitol-Emi Music left in April but has not been replaced in Hollywood.

The Capitol and EMI labels are subsidiaries of New York based EMI Records Group North America now being headed by Charles Koppelman.

The hottest rumors have swirled around Milgrim the last two weeks. Industry scuttlebutt has Milgrim being supplanted by Gary Gersh, who operates as a high powered independent agent within Geffen Records. His acts include Nirvana and Peter Gabriel.

The Los Angeles Times reported that Gersh is in advanced discussions with Koppelman. Koppelman, based in New York, was promoted to his present post in January and previously was responsible for the SBK, Chrysalis and EMI Records divisions. Milgrim is expected to be offered a new boutique label or a senior marketing post at EMI Records Group North America as a way to settle the final year on his five year contract, the Times reported.

Milgrim hosted a dinner for a dozen journalists on April 29 at Patina, among the best restaurants in the city. He candidly said that although he had a competitive relationship with Koppelman in the past, the two now have a good working relationship and a "partnership." He acknowledged the rumors but said they were not true.

Much of the evening was spent discussing industry trends along with various new Capitol releases coming this summer and fall. Milgrim also discussed Capitol's 20 layoffs earlier in the year, saying difficult business conditions forced the cuts.

Sources say Capitol will pink-slip about 50 employees later this month in the property management, legal and security departments, but Milgrim didn't discuss any future layoffs. An announcement is expected shortly that Larry Jenkins, vice president of media and artists relations, will leave the company this summer to take a similar post with Sony Music in New York.

Milgrim was promoted to chief executive in August 1992 when Smith credited him for helping push the company to two consecutive record sales years and the highest profits in 20 years. During his reign the company has scored with performers Hammer, Bonnie Raitt, Richard Marx, Megadeth, the Beastie Boys and Eric Johnson.

Since the Patina dinner, Gersh's name has surfaced in addition to Peter Lopez's as a possible Milgrim replacement. Sources indicate that Lopez, an attorney who represents acts such as Wilson Phillips and Gerado, is being considered to become chairman/CEO of Capitol/EMI's West Coast operations.

Former chairman Smith retired in April and at the time Koppelman said he would travel frequently to Los Angeles and handle Smith's responsibilities. When Smith retired, he said he found the business less fun and less creative.

Many in the industry interpreted this as reflecting corporate pressure from New York corporate headquarters.

Smith left Capitol April 15 but his retirement was announced months before. Lopez is said to be a close confidante of Koppelman.

Neither Koppelman nor Lopez returned phone calls last week. Koppelman was in South Carolina last week at a conference. Lopez & Gonzales is a Sherman Oaks-based law firm. Milgrim and Gersh were also unavailable for comment.

Although Milgrim is among the most respected Los Angeles-based record executives, his honesty makes him a poor corporate soldier and makes him vulnerable in the wake of Koppelman's promotion, sources said.

"Hale has a great eye for talent but now, with Joe Smith gone, the changes are going down the ranks," said an industry veteran close to the company. "This coup d'etat could take months because they don't want to do it with a big ax. They are trying to be as discreet as possible."

Meanwhile, the rumors of Capitol relocating out of Hollywood for larger and upgraded headquarters in Burbank or on the Westside have subsided. Over the last two years the company has explored moving. A Capitol spokesman said the company is not planning to move.