This wouldn't surprise me. In Japan they had a show called
Asayan, which was exactly the same idea as AI and in fact AI probably just ripped off the show's elements, not that idol/talent shows were really a new thing, which was basically found to be completely fixed by the yakuza. Of course in Japan the entire music industry is controlled by organized crime; I don't think it's really like that in America anymore but I could be wrong.
Over there the actual quality of music is secondary to things like image and personality, which can be said about the US as well but not nearly to the same extent. Besides all the national TV publicity, the idea behind a rigged audition is that because people everywhere think that someone who won a "fair competition" must be talented, they can basically push almost anyone through with a cute face and give them a huge aura of legitimacy. The example everybody talks about from this show, and probably the reason why it was canceled, is
Ami Suzuki, who was/is so bad vocally (far worse than anything I have seen on AI other than joke rounds, makes Sanjaya look like Sinatra) that she never could have advanced in a fair competition. After winning and putting out a couple of #1's due to working with the greatest dance/pop producer in the history of music, Tetsuya Komuro, she tried to sue to get out of her contract because she wasn't being paid and her agency was evading taxes, which led to the rigging stuff coming out in trials and her eventual blacklisting from the music industry there.
So this stuff definitely does go on and while in America there isn't the massive media-government-organized crime collusion to make a scam and coverup like this seem likely it is still possible.