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VOLUME 1 PAGES 1 - 200 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE CLINTON REILLY, ) ) PLAINTIFF, ) ) VS. ) NO. C 00-0119 VRW ) THE HEARST CORPORATION, ) ET AL., ) ) DEFENDANTS. ) ____________________________) SAN FRANCISCO, CALIFORNIA MONDAY, MAY 1, 2000 TRANSCRIPT OF PROCEEDINGS APPEARANCES: FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM ONE EMBARCADERO CENTER, SUITE 4000 SAN FRANCISCO, CALIFORNIA 94111 BY: JOSEPH M. ALIOTO ANGELINA ALIOTO ATTORNEYS AT LAW SHULMAN, WALCOTT & SHULMAN, P.A. 121 WEST FRANKLIN AVENUE MINNEAPOLIS, MINNESOTA 55404 BY: DANIEL R. SHULMAN JAMES HILBERT ATTORNEYS AT LAW (APPEARANCES CONTINUED ON FOLLOWING PAGE) REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR JUDITH N. THOMSEN, CSR, RMR, FCRR OFFICIAL REPORTERS, USDC COMPUTERIZED TRANSCRIPTION BY ECLIPSE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 2 1 APPEARANCES: (CONTINUED) 2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR 3 SAN FRANCISCO, CALIFORNIA 94111 BY: GARY L. HALLING 4 THOMAS D. NEVINS ATTORNEYS AT LAW 5 BAKER & HOSTETLER LLP 6 1050 CONNECTICUT AVE., N.W. SUITE 1100 7 WASHINGTON, D.C. 20036 BY: GERALD A. CONNELL 8 ATTORNEY AT LAW 9 FOR DEFENDANT LATHAM & WATKINS CHRONICLE PUBLISHING 505 MONTGOMERY STREET 10 COMPANY: SUITE 1900 SAN FRANCISCO, CALIFORNIA 94111 11 BY: PETER K. HUSTON J. THOMAS ROSCH 12 GREGORY P. LINDSTROM ATTORNEYS AT LAW 13 FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN 14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800 SAN FRANCISCO, CALIFORNIA 94111 15 BY: DAVID M. BALABANIAN CHRISTOPHER B. HOCKETT 16 ATTORNEYS AT LAW 17 18 19 20 21 22 23 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 3 1 I N D E X 2 PAGE VOL. 3 OPENING STATEMENT BY MR. ALIOTO 5 1 4 OPENING STATEMENT BY MR. HALLING 20 1 5 PLAINTIFF'S WITNESSES PAGE VOL. 6 7 WHITE, TIMOTHY O. DIRECT EXAMINATION BY MR. ALIOTO 55 1 8 9 E X H I B I T S 10 PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL. 11 P-70 52 1 12 P-71 52 1 76 158 1 13 78 160 1 P-79 52 1 14 P-80 52 1 P-86 52 1 15 16 17 18 19 20 21 22 23 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 4 1 MONDAY - MAY 1, 2000 11:05 A.M. 2 3 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY 4 VERSUS THE HEARST CORPORATION, ET AL., FOR A COURT TRIAL. 5 COUNSEL, PLEASE STEP FORWARD AND STATE YOUR 6 APPEARANCES FOR THE RECORD. 7 MR. ALIOTO: MAY IT PLEASE, YOUR HONOR. JOSEPH M. 8 ALIOTO FOR THE PLAINTIFF. 9 MR. SHULMAN: DANIEL SHULMAN FOR THE PLAINTIFF. 10 MR. HILBERT: JAMES HILBERT FOR THE PLAINTIFF. 11 MS. ALIOTO-GRACE: ANGELINA ALIOTO-GRACE FOR THE 12 PLAINTIFF. 13 MR. HALLING: GARY HALLING FOR THE HEARST 14 CORPORATION. 15 MR. CONNELL: GERALD CONNELL FOR THE HEARST 16 CORPORATION. 17 MR. BALABANIAN: DAVID BALABANIAN FOR INTERVENOR 18 EXIN LLC. 19 MR. HOCKETT: CHRIS HOCKETT FOR INTERVENOR EXIN. 20 MR. ROSCH: MAY IT PLEASE THE COURT, TOM ROSCH, 21 GREGORY LINDSTROM AND PETER HUSTON FOR THE CHRONICLE PUBLISHING 22 COMPANY. AT THIS TIME I WOULD LIKE TO TELL THE COURT THAT OUR 23 CORPORATE REPRESENTATIVE WILL BE MR. JOHN SIAS WHO IS SITTING 24 IN THE BACK. 25 THE COURT: VERY WELL. GOOD MORNING, COUNSEL. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 5 1 ALL: GOOD MORNING, YOUR HONOR. 2 THE COURT: THERE'S AN OLD ADAGE IN THIS BUSINESS 3 THAT A BAD DEALT SETTLEMENT IS BETTER THAN A GOOD TRIAL. WE'VE 4 HAD AN EFFORT THIS MORNING AT AN ATTEMPT TO SETTLE THIS CASE. 5 THAT HAS NOT SUCCEEDED. SO WITH THAT PREFACE, I'M LOOKING 6 FORWARD TO AN EXCEPTIONALLY GOOD TRIAL. 7 (LAUGHTER) 8 THE COURT: AND WITH THESE LAWYERS, I'M SURE WE'RE 9 GOING TO HAVE IT. 10 NOW, I'VE INDICATED THAT ALTHOUGH THIS IS A COURT 11 TRIAL AND CONSEQUENTLY OPENING STATEMENTS ARE NOT AS NECESSARY 12 AS THEY SOMETIMES ARE IN A JURY TRIAL, I WOULD ENTERTAIN SOME 13 OPENING STATEMENTS, BRIEF ONES, 15 MINUTES, AND THAT WILL 14 PROBABLY TAKE US RIGHT ABOUT TO THE NOON HOUR OR THEREABOUTS. 15 SO, MR. ALIOTO, WOULD YOU LIKE TO LEAD OFF FOR THE 16 PLAINTIFFS? 17 MR. ALIOTO: THANK YOU, YOUR HONOR. 18 OPENING STATEMENT 19 MR. ALIOTO: MAY IT PLEASE THE COURT, THIS IS AN 20 ACTION, AS THE COURT IS AWARE, BROUGHT UNDER SECTION 16 OF THE 21 CLAYTON ANTITRUST ACT CHARGING VIOLATIONS OF SECTION 7 OF THE 22 CLAYTON ANTITRUST ACT AND SECTIONS 1 AND 2 OF THE SHERMAN 23 ANTITRUST ACT. 24 IT IS THE POSITION OF THE PLAINTIFF IN THIS CASE 25 THAT SHOULD THE COURT GRANT A PERMANENT INJUNCTION PROHIBITING JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 6 OPENING STATEMENT \ ALIOTO 1 THE HEARST CORPORATION FROM ACQUIRING THE CHRONICLE, THAT THE 2 PURPOSES OF BOTH THE NEWSPAPER PRESERVATION ACT AND THE 3 ANTITRUST LAWS WILL BE PRESERVED; NAMELY, THAT IN THE NEWSPAPER 4 PRESERVATION ACT, THAT TWO VOICES, TWO COMPETING NEWSPAPERS, 5 WILL BE PRESERVED AND UNDER THE ANTITRUST LAWS, THE COMPETITION 6 ALSO WILL BE PRESERVED. 7 THE PARTIES, AS THE COURT IS AWARE, IS THE HEARST 8 CORPORATION, A MULTI-BILLION DOLLAR INTERNATIONAL CORPORATION, 9 OWNING APPROXIMATELY, IN THE NEWSPAPER AREA, APPROXIMATELY 13 10 NEWSPAPERS, ONE OF WHICH IS THE SAN FRANCISCO EXAMINER WHICH, 11 BY THE WAY, WAS THE VERY FIRST PAPER THAT LAUNCHED THE HEARST 12 CORPORATION WHEN IT WAS TAKEN OVER BY WILLIAM RANDOLPH HEARST 13 IN 1887. 14 THE OTHER DEFENDANT -- 15 THE COURT: WHY DOES MR. REILLY HAVE AN INTEREST IN 16 THIS COMPETITION? 17 MR. ALIOTO: HE IS A SUBSCRIBER AND A CONSUMER AND 18 THE ANTITRUST LAWS ARE DESIGNED TO AID AND HELP AND PROVIDE FOR 19 AND GUARANTEE TO CONSUMERS AND SUBSCRIBERS IN THIS CASE THE 20 BENEFITS OF COMPETITION AND IN CONJUNCTION WITH THE NEWSPAPER 21 PRESERVATION ACT THE COMPETITION OF IDEAS AS WELL. 22 THE COURT: ARE YOU TELLING ME THAT ANY SUBSCRIBER 23 TO THE EXAMINER OR TO THE CHRONICLE CAN BE BRINGING THIS 24 LAWSUIT? 25 MR. ALIOTO: YES, I AM, YOUR HONOR. AND AS THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 7 OPENING STATEMENT \ ALIOTO 1 JUSTICE DEPARTMENT ITSELF SAID, THAT, INCORRECTLY AS I THINK 2 THE EVIDENCE IS GOING TO SHOW, THAT THEY DROPPED OUT OF THE 3 ISSUE ON THE GROUND THAT THEY FELT THAT CONSUMERS, SUBSCRIBERS 4 AND ADVERTISERS WERE NOW GOING TO HAVE THE BENEFITS OF 5 COMPETITION FOR THE FIRST TIME IN 35 YEARS. 6 THE COURT: WHAT IS IT IN THE ANTITRUST LAWS THAT 7 AFFORDS TO A SUBSCRIBER OF A NEWSPAPER STANDING TO BRING AN 8 ACTION ATTACKING THE BUSINESS ARRANGEMENTS BY WHICH THAT 9 PUBLICATION IS PRODUCED? 10 MR. ALIOTO: IT IS SECTION 16 OF THE CLAYTON 11 ANTITRUST ACT, WHICH IS THE INJUNCTION STATUTE ALLOWING ANY 12 TIME THERE'S A THREATENED INJURY, HARM OR DAMAGE -- 13 THE COURT: HOW DOES THAT RELATE TO MR. REILLY'S 14 ALLEGED STANDING AS A SUBSCRIBER? 15 MR. ALIOTO: BECAUSE AS A SUBSCRIBER OF A NEWSPAPER, 16 HE WOULD BE A SUBSCRIBER TO BOTH NEWSPAPERS. AS THE COURT MAY 17 OR MAY NOT BE AWARE, UNDER THE JOA, IN THIS VERY CASE, UNDER 18 SECTION 3.15(G), THE PARTIES ARE GIVEN THE POWER AND THE 19 RESPONSIBILITY TO SET SUBSCRIBER RATES AND TO SET ADVERTISING 20 RATES. AND ANY SUBSCRIBER OR ADVERTISER HAS STANDING BY REASON 21 OF THAT COMPETITION; AND THAT THE PREVENTION OF COMPETITION, 22 ESPECIALLY COMPETITION NOT ONLY JUST NOW BUT IN THE FUTURE, 23 AFTER 2005, IS SOMETHING THAT A SUBSCRIBER OR ADVERTISER HAS AN 24 INTEREST IN. 25 FOR EXAMPLE, IN THE EXHIBIT OF MAY 4, 1999, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 8 OPENING STATEMENT \ ALIOTO 1 COMMISSIONED BY THE CHRONICLE, THEY DID AN ANALYSIS IN WHICH IT 2 WAS FOUND THAT WHEN THE TWO PAPERS BEGAN TO COMPETE IN 2005, 3 THAT THE ADVERTISING AND SUBSCRIPTION RATES AND CIRCULATION 4 RATES WOULD BE GOING DOWN IN THE RANGE OF 15 TO 20 PERCENT. 5 HOWEVER, IF THEY WERE ABLE TO JUST HAVE ONE 6 SURVIVING NEWSPAPER, WHICH BOTH OF THEM PLOTTED TO DO, THE 7 ADVERTISING AND SUBSCRIPTION RATES WOULD INCREASE 20 PERCENT. 8 IN ADDITION TO THAT, IF THERE WERE COMPETITION, 9 ACCORDING TO THEIR OWN DOCUMENT, THEY WOULD HAVE TO PUT UP 10 $125 MILLION FOR NEW PRESS PLANTS, WHICH THEY THINK THAT THEY 11 WOULD HAVE TO DO TO INNOVATE IN ORDER TO BE COMPETITIVE TO 12 SERVE THE SUBSCRIBERS AND THE ADVERTISERS, AN AMOUNT WHICH THEY 13 WOULD NOT HAVE TO PUT UP IF THEY DID NOT DO THAT. 14 THE COURT: THIS DEALS WITH INJURY TO POTENTIAL 15 ADVERTISERS? 16 MR. ALIOTO: ALSO. SUBSCRIBERS ARE HURT -- ANY 17 PURCHASER IN A SITUATION LIKE THIS WHERE THERE'S A POTENTIAL 18 FOR EITHER PAYING HIGHER PRICES, AS THEY ADMIT WILL HAPPEN, OR 19 BEING DEPRIVED IN THE SENSE OF A NATIONAL NEWSPAPER IN THE 20 NEWSPAPER PRESERVATION ACT, THAT A PERSON WHO DOES THAT IS 21 INJURED, AND WE CITED THOSE CASES TO YOUR HONOR. THE FIRST 22 PURCHASER CASE I GUESS YOU WOULD SAY WHERE A PERSON, A VERY 23 SMALL PERSON, LIKE A SUBSCRIBER WAS INJURED WAS THE SONETONE 24 CASE, WHICH WE GAVE TO YOUR HONOR. 25 THE -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 9 OPENING STATEMENT \ ALIOTO 1 THE COURT: IS MR. REILLY AN ADVERTISER IN EITHER OF 2 THESE PAPERS? 3 MR. ALIOTO: HE IS A POTENTIAL ADVERTISER. HE DID 4 NOT PERSONALLY ADVERTISE. ACCORDING TO -- AS WE SAID IN THE 5 TRIAL BRIEFS, SOME OF HIS OTHER COMPANIES WERE MAJOR 6 ADVERTISERS, BUT HE HAS -- 7 THE COURT: THEY'RE NOT -- 8 MR. ALIOTO: NO, THEY'RE NOT. HE HAS A POTENTIAL -- 9 HE IS SUING AS A SUBSCRIBER AND POTENTIAL ADVERTISER. 10 THE COURT: HE RUNS A CONSULTING BUSINESS? 11 MR. ALIOTO: NO, HE DOES NOT, YOUR HONOR. HE IS A 12 REAL ESTATE INVESTOR. HE HASN'T BEEN A POLITICAL CONSULTANT 13 FOR MANY, MANY YEARS. I DON'T REMEMBER HOW MANY. HE HAS BEEN 14 A REAL ESTATE INVESTOR, YOUR HONOR, AND HE OWNS REAL ESTATE AND 15 MANAGES REAL ESTATE IN DOWNTOWN SAN FRANCISCO. 16 THE COURT: AND THAT MAKES HIM A POTENTIAL 17 ADVERTISER? 18 MR. ALIOTO: YES, IT DOES, YOUR HONOR. 19 THE COURT: WHAT'S THE EFFECT OF THE NEWSPAPER 20 PRESERVATION ACT PROVISIONS INSOFAR AS THEY RELATE TO REILLY'S 21 STANDING? 22 MR. ALIOTO: WELL, I THINK THAT ONE OF THE MAIN 23 REASONS IS THAT THE ONLY REASON THAT ANY NEWSPAPER WOULD HAVE 24 THE ABILITY TO GET INTO A JOINT OPERATING AGREEMENT WHERE, BY 25 THE WAY, THEY'RE SUPPOSED TO BE SETTING THEIR OWN PRICES JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 10 OPENING STATEMENT \ ALIOTO 1 INDIVIDUALLY, THE IDEA IS, IS THAT THEY WOULD CONTINUE FOR AT 2 LEAST THE LIFE OF THE JOA. THAT'S WHAT THEY WERE GIVEN. 3 IN THIS CASE THE JOA WAS ENTERED INTO IN OCTOBER OF 4 1964. THE EFFECTIVE DATE WAS JANUARY OF '65, STARTING IN 5 JANUARY. IT WAS SUPPOSED TO ORIGINALLY GO FOR 30 YEARS, WHICH 6 WAS UNTIL JANUARY OF 1995. 7 AT THAT CONCLUSION EITHER ONE OF THEM COULD EXTEND 8 IT ANOTHER 10 YEARS. HEARST ITSELF WAS THE ONE WHO EXTENDED IT 9 FROM '95 TO 2005. 10 THE COURT: BUT THAT MIGHT BE A COMMITMENT BETWEEN 11 THE JOINT OPERATORS AND THE DEPARTMENT OF JUSTICE, BUT HERE THE 12 DEPARTMENT OF JUSTICE HAS SIGNED OFF ON THE TRANSACTION THAT IS 13 BEFORE THE COURT. 14 MR. ALIOTO: WELL, THERE'S TWO THINGS ABOUT THAT. 15 IT'S -- 16 THE COURT: SO WHAT IS MR. REILLY'S STANDING TO 17 ATTACK WHAT MAY BE A COVENANT THAT EXISTS BETWEEN THE 18 DEPARTMENT OF JUSTICE AND THE JOINT OPERATORS? 19 MR. ALIOTO: THERE'S NO COVENANT BETWEEN THE 20 DEPARTMENT OF JUSTICE AND THE JOINT OPERATORS. THIS IS A 21 COVENANT WITH THE -- 22 THE COURT: ISN'T THAT WHAT YOU'RE SAYING? ISN'T 23 WHAT YOU'RE SAYING IS -- 24 MR. ALIOTO: NO. 25 THE COURT: -- THAT THEY AGREED TO THIS JOINT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 11 OPENING STATEMENT \ ALIOTO 1 OPERATING AGREEMENT WITH ITS VARIOUS TERMS AND PROVISIONS, 2 INCLUDING THE TERMINATION PROVISIONS, AND THEY'RE BOUND TO 3 STICK TO THAT JOINT OPERATING AGREEMENT UNTIL SUCH TIME AS THE 4 DEPARTMENT SAYS OTHERWISE? 5 MR. ALIOTO: THEY ARE -- THIS IS A COVENANT BETWEEN 6 THEM AND THE PEOPLE, YOUR HONOR, AND THE PEOPLE ARE 7 SUBSCRIBERS. AND THIS COVENANT IS A SPECIAL GRANT BY CONGRESS. 8 THERE'S NO SPECIAL GRANT TO THE DEPARTMENT. IT IS A SPECIAL 9 GRANT BY CONGRESS. 10 THE COURT: WELL, I SUSPECT THE DEPARTMENT WOULD 11 THINK THAT IT'S THE PEOPLE'S REPRESENTATIVE HERE. 12 MR. ALIOTO: IT MAY OR MAY NOT BE. IT'S OBVIOUSLY 13 NOT IN THIS CASE BECAUSE WHEN THEY DECIDED TO TAKE OFF, THEY 14 BELIEVED, YOUR HONOR, THAT THERE WERE GOING TO BE TWO COMPETING 15 NEWSPAPERS; AND I THINK THAT WHAT THE EVIDENCE IS GOING TO SHOW 16 IS THAT THAT'S NOT CORRECT. 17 WE DO WANT TO MAKE SURE, THOUGH, THAT THE COURT 18 UNDERSTANDS THAT IT IS HEARST ITSELF WHO DECIDED TO EXTEND THE 19 AGREEMENT. HAVING DONE THAT, TO GO TO 2005, THEY NOW WANT TO 20 NULLIFY THE AGREEMENT AT LEAST FIVE YEARS OR SO BEFORE THE 21 TIME. 22 THE COURT: BUT ISN'T THE HARMED PARTY THERE THE 23 CHRONICLE? 24 MR. ALIOTO: PARDON ME? 25 THE COURT: ISN'T THE PARTY THAT IS HARMED BY THAT, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 12 OPENING STATEMENT \ ALIOTO 1 IF THERE'S SOMETHING WRONG WITH HEARST EXTENDING THE AGREEMENT, 2 ISN'T THE PARTY HARMED THE CHRONICLE? 3 MR. ALIOTO: THE HARM IS THE POTENTIAL THAT THE 4 NEWSPAPER PRESERVATION ACT AND THE ANTITRUST LAWS CAN AND WILL 5 BE VIOLATED UNLESS THE HEARST CORPORATION IS PREVENTED FROM 6 PURCHASING THE CHRONICLE. 7 THERE'S ONLY GOING TO BE ONE PAPER. THE NEWSPAPER 8 PRESERVATION ACT IS SPECIFICALLY DESIGNED FOR ANOTHER PURPOSE. 9 THE ANTITRUST LAWS ARE DESIGNED FOR ANOTHER PURPOSE. THEY WILL 10 DEFEAT BOTH STATUTES HERE. 11 CONTINUING, IF IT PLEASE YOUR HONOR, IS THAT 12 CONTINUALLY THEY ARE MAKING, AS A MATTER OF FACT, AND WHEN WE 13 PUT THE JOINT OPERATING AGREEMENT INTO EVIDENCE, WE WANT TO BE 14 SURE THAT WE UNDERSTAND SOMETHING, THAT THERE HAS BEEN A 15 POSITION THAT HAS BEEN CHANGING CONSTANTLY BY THE HEARST 16 CORPORATION, AND IT WON'T BE SUPPORTED BY THE EVIDENCE. 17 THE FIRST POSITION BY THE HEARST CORPORATION WAS 18 THAT BEFORE 1999, THAT THERE WAS A POSITION THAT THE EXAMINER 19 WILL REMAIN IN THE MARKET. ALL THE WAY UP TO THE CHAIRMAN OF 20 THE BOARD STATED TO THE CHRONICLE AGAIN AND AGAIN THAT, "AFTER 21 THIS JOA, WE'RE GOING TO BE IN THE MARKET AND WE'RE GOING TO BE 22 IN IT UNTIL THE END." 23 AS SOON AS THEY MADE THE AGREEMENT WITH THE 24 CHRONICLE TO BUY THE CHRONICLE, THEY CHANGED THEIR TUNE AND 25 THEY BEGIN TO SAY TO THE JUSTICE DEPARTMENT, AND THEY FILED JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 13 OPENING STATEMENT \ ALIOTO 1 THEIR PAPERS WITH THE JUSTICE DEPARTMENT, THAT THE EXAMINER WAS 2 GOING TO BE A FAILING COMPANY ANYWAY AND, THEREFORE, THEY 3 SHOULD BE ALLOWED TO BUY OR CREATE A MONOPOLY IN THIS MARKET. 4 THAT WASN'T WORKING, AND THEN OTHER PERSONS, 5 INCLUDING THIS CASE, REILLY, FILED A COMPLAINT, AND THE 6 DEPARTMENT -- AND HEARST CORPORATION CHANGED IT AGAIN, AND THEY 7 MADE AN ARRANGEMENT WITH THE PAN ASIAN GROUP, AND THEN THEY 8 MADE REPRESENTATIONS TO THE COURT, "WELL, NOW THE OTHER PAPER 9 WILL SUCCEED." AND THEY MADE THE REPRESENTATION TO THE DOJ AND 10 THE DOJ COMES TO THE COURT AND SAYS, "WELL, NOW FOR THE FIRST 11 TIME IN 35 YEARS THE CONSUMERS IN SAN FRANCISCO ARE GOING TO 12 HAVE TWO COMPETING NEWSPAPERS." 13 AND WHEN THAT DIDN'T WORK AND THE COURT ISSUED THE 14 INJUNCTION, THEY'VE NOW SWITCHED BACK AND SAID THAT THE 15 EXAMINER IS A FAILING COMPANY ANYWAY AND IT DOESN'T MAKE ANY 16 SENSE. 17 WE'RE GOING TO PUT INTO EVIDENCE, YOUR HONOR, THE 18 INCOME STATEMENTS OF THE SAN FRANCISCO EXAMINER SHOWING THAT 19 THEY HAVE MADE SUBSTANTIAL MONEY UNDER THE JOA, AND THAT THEY 20 ANTICIPATE, BEGINNING IN 2000 AND GOING THROUGH TO 2005, 21 ESCALATING FROM OVER $22 MILLION A YEAR NET PROFIT UP TO 25 AND 22 BEYOND. 23 SO THAT THERE'S NO QUESTION IN THIS RECORD AND NO 24 ONE HAS EVER MADE ANY SUGGESTION WHATSOEVER THAT THE EXAMINER 25 OR ONE OF THESE PAPERS IS A FAILING PAPER. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 14 OPENING STATEMENT \ ALIOTO 1 IN ADDITION TO THAT, THE EXECUTIVES OF BOTH 2 COMPANIES HAVE TESTIFIED THAT IF YOU ATTEMPTED TO MAKE AN 3 ANALYSIS OF THE CONTRIBUTIONS OF THE EXAMINER AND THE CHRONICLE 4 IN AN EFFORT TO DETERMINE WHICH WAS CONTRIBUTING WHAT AMOUNT TO 5 PROFITS OR IF ONE WERE A LOSER AND ONE WERE NOT, BOTH WILL BE 6 TESTIFYING, YOUR HONOR, THAT THAT WOULD BE AN IMPOSSIBLE TASK. 7 IN ORDER TO ATTEMPT TO TRY AND RECTIFY THEIR 8 SITUATION OF GETTING INTO A -- TRYING TO BUY THEIR MAIN 9 COMPETITOR, THEY HAVE ATTEMPTED TO MAKE A SALE TO THE PAN ASIAN 10 GROUP. THE PAN ASIAN SALE IS NOT ONLY SIMPLY DOOMED TO 11 FAILURE, AS WE HAVE POINTED OUT, BUT ALSO THERE ARE INCENTIVES 12 IN IT THAT ARE DESIGNED BY THE HEARST CORPORATION FOR THE 13 PURPOSE OF ENSURING THAT IT WILL IN FACT BE A FAILURE. 14 THE SUBSIDY, BY WAY OF EXAMPLE UNDER THE AGREEMENT, 15 THE EVIDENCE WILL SHOW, WILL BE UP TO $25 MILLION OF 16 REIMBURSABLE EXPENSES. HOWEVER, IF THE PAN ASIAN GROUP ONLY 17 SPENDS $15 MILLION, WHICH IS NOT EVEN ENOUGH REALLY TO BUY 18 NEWSPRINT, THE PAPER THAT THE PAPER IS PRINTED ON, IF THEY ONLY 19 SPEND $15 MILLION, THEN THE REMAINING $10 MILLION THEY ARE 20 ENTITLED UNDER THEIR AGREEMENT WITH HEARST TO KEEP AND TO 21 POCKET HALF OF THAT, WHICH IS $5 MILLION. 22 THAT'S EACH YEAR. THAT MEANS THAT EACH YEAR THEIR 23 INCENTIVE IS TO NOT SPEND ON THE PAPER; AND IF THEY DON'T SPEND 24 ON THE PAPER, THEY'RE REWARDED WITH A 5-MILLION-DOLLAR GIFT 25 WHICH, BY THE WAY, THE EVIDENCE WILL SHOW IS MORE THAN THEIR JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 15 OPENING STATEMENT \ ALIOTO 1 INDIVIDUAL PAPER, THE INDEPENDENT, HAS MADE OVER, AT LEAST FROM 2 THE FIGURES THAT WE HAVE FROM TESTIMONY, IT'S AT LEAST FIVE 3 TIMES THE AMOUNT OF WHAT THAT PAPER WOULD MAKE IN A YEAR. 4 IN ADDITION, WHEN THEY EVEN WENT UP TO THE 5 $15 MILLION, THE DISINCENTIVE ALSO ALLOWED THAT THE PUBLISHER 6 OF THAT PAPER WOULD BE ABLE TO BE PAID $500,000 AND AN 7 ADDITIONAL $500,000. THAT'S INCLUDED IN THE 15. 8 SO IF THEY TAKE THAT DEAL, THEY CAN COME OUT WITH AT 9 LEAST $6 MILLION. THAT AMOUNT IS MORE THAN -- THE AMOUNT FOR 10 THAT SALARY IS MORE THAN WHAT THE EXAMINER -- WHAT HEARST PAYS 11 THEIR OWN PUBLISHER AND WHAT THE SAN FRANCISCO NEWSPAPER AGENCY 12 PAYS ITS PRESIDENT. 13 THAT MEANS, SIR, THAT UNDER THE EVIDENCE THAT WE 14 HAVE, THAT THAT CAN'T HAPPEN; THAT IT WON'T -- THERE WON'T BE 15 TWO COMPETING NEWSPAPERS. 16 WE WERE ABLE TO GET AN ESTIMATE AS TO WHAT THEIR 17 PARTICULAR BUDGETS ARE GOING TO BE; AND, REMARKABLY PERHAPS BUT 18 FACTUALLY, IS THAT THEIR BUDGETS WILL COME OUT TO $15 MILLION, 19 WHICH MEANS THAT IF THEY FOLLOW THEIR OWN BUDGET, THEY WILL NOT 20 ONLY BE ABLE TO PAY THE $500,000 SALARY, BUT THEY WILL ALSO BE 21 PAID $5 MILLION THAT THEY CAN DO WHATEVER THEY WANT WITH. 22 IN ADDITION, EVEN IF IT WERE $25 MILLION DEVOTED TO 23 ANOTHER NEWSPAPER, THE COURT -- THE EVIDENCE WILL BE, YOUR 24 HONOR, THAT WE WILL BRING IN EXPERT AFTER EXPERT, INCLUDING 25 THEIR OWN EXPERTS, WHO SAY THAT THERE IS NO WAY, NO CHANCE THAT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 16 OPENING STATEMENT \ ALIOTO 1 THAT AMOUNT OF MONEY WOULD EVER BE ABLE TO SUPPORT A COMPETING 2 NEWSPAPER. IT SIMPLY WON'T HAPPEN. 3 IN ADDITION TO THAT, WE WOULD POINT OUT, YOUR HONOR, 4 THAT THE COMPETITION ITSELF, IN LOOKING DOWN FOR THE 5 COMPETITION, WE HAVE A NUMBER OF SITUATIONS THAT WE WILL BE 6 PRESENTING TO THE COURT IN WHICH NOT ONLY DO THEY SAY THAT IF 7 THEY ARE REQUIRED TO COMPETE, THAT THEY WILL COMPETE, BOTH OF 8 THEM TAKING THE POSITION THAT THEY WILL COMPETE, BUT THAT IF 9 THEY DO, THE RATES THEY CHARGE THE PEOPLE, FOR SUBSCRIBERS AND 10 FOR ADVERTISERS, WILL BE SIGNIFICANTLY LOWER, AND THAT THEY 11 WILL BE FORCED TO HIRE MORE AND MORE PERSONS AND REPORTERS. 12 THEY'RE GOING TO HAVE TO UPGRADE THEIR NEWSPAPERS AND THEY'RE 13 GOING TO HAVE TO INCREASE THEIR PRODUCTION. THEY THINK AND 14 THEY'RE ESTIMATING SPENDING AT LEAST 125 MILLION, MORE THAN 15 THAT, ON JUST THE PRESSES ALONE. 16 IN ADDITION TO THAT, WE WOULD POINT OUT TO THE COURT 17 THAT THE EVIDENCE IS GOING TO BE THAT THE TWO CHIEF EXECUTIVE 18 OFFICERS OF THESE NEWSPAPERS, THE SAN FRANCISCO CHRONICLE AND 19 THE SAN FRANCISCO EXAMINER, HAVE BEEN AND WERE CONTINUOUSLY 20 MEETING, ESPECIALLY NOT ONLY BEFORE 1999 BUT ESPECIALLY IN 21 1999. 22 THE STATED PURPOSE OF -- WHEN THE EXECUTIVE CAME TO 23 THE SAN FRANCISCO EXAMINER, HIS PURPOSE WAS TO GET THE PAPER 24 READY TO BE ABLE TO COMPETE IN 2005. BOTH PAPERS WERE 25 ATTEMPTING TO GET READY TO COMPETE WHEN THE JOA FINALLY WAS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 17 OPENING STATEMENT \ ALIOTO 1 OVER. 2 THE COURT: THIS IS MR. SIAS YOU'RE REFERRING TO? 3 MR. ALIOTO: MR. SIAS AND -- BUT PRINCIPALLY MR. 4 WHITE AND THE CHAIRMAN OF THE BOARD, BY WAY OF EXAMPLE, YOUR 5 HONOR, THE CHAIRMAN OF THE BOARD OF THE WHOLE HEARST 6 CORPORATION, MR. BENNACK WHO WILL ALSO BE HERE, HE WILL BE 7 WRITING AN INTEROFFICE MEMORANDUM TO HIS OWN FOLKS AND HE IS 8 SAYING THAT HE TOLD HIM, IN REFERENCE TO THE CHRONICLE, THAT HE 9 TOLD MR. SIAS OF THE CHRONICLE THAT, "WE," MEANING THE HEARST 10 CORPORATION, "WERE CERTAINLY GOING TO TAKE THE STEPS WE BELIEVE 11 NECESSARY TO PREPARE OURSELVES FOR THE RESUMPTION OF A 12 FULLY-COMPETITIVE SITUATION POST-2005 PERIOD, THE TIME PERIOD." 13 THAT'S FROM THE HEAD. 14 NOW, WHAT HAD HAPPENED IS, IS THAT A CERTAIN 15 CIRCUMSTANCE OCCURRED IN 1999. THEY HAD A JOINT PROMOTION. 16 THERE WILL BE ABOUT FIVE MINUTES -- TWO MINUTES? 17 OKAY, TWO MINUTES. 18 IN THAT EFFORT, WHAT THE SAN FRANCISCO NEWSPAPER 19 AGENCY DID WAS THEY ALLOWED A SUBSCRIBER OF THE CHRONICLE TO 20 GET A COPY OF THE EXAMINER FOR FREE. THEY ALSO ALLOWED A 21 SUBSCRIBER OF THE EXAMINER TO GET A CHRONICLE FOR FREE. 22 IN THAT PROGRAM THE EXAMINER SPECIFICALLY OBJECTED 23 TO IT -- I MEAN, THE CHRONICLE SPECIFICALLY OBJECTED TO IT, AND 24 THEY OBJECTED TO IT. THE CHRONICLE SAYS, "YOU ARE USING MY 25 PAPER WHERE I HAVE A SUBSCRIBER AND YOU'RE GOING TO GIVE MY JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 18 OPENING STATEMENT \ ALIOTO 1 SUBSCRIBER A FREE EXAMINER." AND THEY SAID, "I HAVE THE 2 EXCLUSIVE RIGHT OVER THE PRICES ACCORDING TO THE JOA, SECTION 3 3.15(G) AND THAT I SET THE PRICES FOR THAT." 4 AND THE EXAMINER WROTE BACK, MR. WHITE WROTE BACK 5 AND SAID, "WHAT YOU ARE TRYING TO DO, BECAUSE THIS INCREASES 6 OUR CIRCULATION, WHAT YOU ARE TRYING TO DO IS INJURE US BEFORE 7 WE BEGIN TO COMPETE IN 2005." AND MR. WHITE CHARGES THE 8 CHRONICLE WITH VIOLATING NOT ONLY THE JOINT OPERATING AGREEMENT 9 BUT VIOLATING THE ANTITRUST LAWS AS WELL. 10 THE COURT: WELL, ARE YOU SUGGESTING THAT 11 NOTWITHSTANDING THE JOINT OPERATING AGREEMENT THERE IS 12 COMPETITION BETWEEN, ECONOMIC COMPETITION BETWEEN THE CHRONICLE 13 AND THE EXAMINER? 14 MR. ALIOTO: I AM STATING THAT THE RECORD IS THAT 15 THEY, IN FACT, DO COMPETE; AND, FOR EXAMPLE, ON STREET SALES 16 THERE ARE DIFFERENT PRICES FOR THE EXAMINER AND THE CHRONICLE. 17 THEY DON'T FIX THE PRICE. FOR ADVERTISING AND FOR CIRCULATION, 18 OTHER SUBSCRIPTIONS IT CHANGES. FOR EXAMPLE, THE CHRONICLE 19 WILL CHARGE 50 CENTS HERE IN SAN FRANCISCO. IF IT GOES OUT, IT 20 WILL CHARGE YOU EVEN LESS BECAUSE THERE'S MORE -- I GUESS MORE 21 COMPETITION THERE. 22 BUT THE EVIDENCE WILL BE THAT THEY TAKE THE POSITION 23 THAT THEY CAN INDEPENDENTLY SET THESE PRICES AND THAT THE JOA 24 SPECIFICALLY GRANTS THAT. BUT THERE'S GOING TO ALSO BE 25 EVIDENCE THAT THEY DO, IN FACT, TAKE THE ADVICE OF THE AGENCY, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 19 OPENING STATEMENT \ ALIOTO 1 BUT -- 2 THE COURT: IS THIS REALLY ANYTHING DIFFERENT FROM 3 PRODUCT DIFFERENTIATION THAT EXISTS WHEN A COMPANY PRODUCES 4 MORE THAN ONE PRODUCT? FOR EXAMPLE, THE PRODUCT 5 DIFFERENTIATION BETWEEN A FORD CAR AND A MERCURY CAR PRODUCED 6 BY THE SAME COMPANY? THEY'RE PRICED DIFFERENTLY. THEY HAVE 7 SOMEWHAT DIFFERENT FEATURES, BUT BASICALLY IT'S SIMPLY PRODUCT 8 DIFFERENTIATION AS A WAY OF CAPTURING A DIFFERENT MARKET THAT 9 THE OTHER PRODUCT COULD NOT CAPTURE. ISN'T THAT WHAT'S GOING 10 ON HERE? 11 MR. ALIOTO: I WILL TELL YOU THIS: THAT TO THE 12 EXTENT THAT ANYONE IS GOING TO COMPETE LIKE THAT WILL BE GONE 13 IF THIS COURT ALLOWS HEARST TO DO THIS -- TO BUY THE CHRONICLE. 14 TO THE EXTENT THAT THERE'S ANY EFFORT TO ENTICE OTHER PEOPLE, 15 OTHER IDEAS AND BRING PEOPLE INTO A DIFFERENT PRODUCT, THAT 16 WILL BE GONE, YOUR HONOR. 17 THE COURT: ALL RIGHT. BUT HOW IS THAT 18 ANTICOMPETITIVE? WHAT YOU'RE SAYING IS THAT THE JOINT 19 OPERATING AGREEMENT IS A MORE EFFICIENT MONOPOLIST THAN THE 20 MONOPOLIST THAT WOULD RESULT IF THE JOINT OPERATING AGREEMENT 21 KILLS OFF ONE OF THE TWO PRODUCTS THAT IT SELLS? 22 MR. ALIOTO: NO, YOUR HONOR. THE JOINT OPERATING 23 AGREEMENT IS HIGHLY PROFITABLE FOR BOTH OF THESE FOLKS, AND 24 THEY'VE BEEN DOING NOTHING BUT MAKING MONEY; AND THEY'RE 25 INTENDING TO MAKE MUCH MORE MONEY THAN THEY'VE EVER MADE UP TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 20 OPENING STATEMENT \ ALIOTO 1 2005. NOTWITHSTANDING ANYTHING THEY'VE SAID TO THIS COURT OR 2 IN THE PAPERS OR ELSEWHERE, THE DOCUMENTS ARE GOING TO SHOW 3 THAT THEY'RE MAKING SUBSTANTIAL AMOUNTS OF MONEY. 4 WHAT THEY'RE WORRIED ABOUT WAS THAT IN 2005 THEY'D 5 HAVE TO COMPETE. THE JOINT OPERATING AGREEMENT IS OVER. AND 6 HEARST, MR. TIMOTHY WHITE, CHARGES THE CHRONICLE WITH VIOLATING 7 THE ANTITRUST LAWS BY ATTEMPTING TO HURT IT IN PREPARATION FOR 8 2005. BUT BOTH OF THEM DISCUSS WITH EACH OTHER WHAT IS GOING 9 TO HAPPEN IN 2005; NAMELY, THEY CALL IT, THEY DESCRIBE IT "THE 10 WAR" AND THEY MEAN -- AND BY THAT THEY MEAN THAT THEY EVEN SAY 11 THAT THEY'RE GOING TO HAVE TO LOWER THE PRICES AND START 12 COMPETING, AND THAT'S GOING TO HURT THEM. 13 SO THEY'VE GOT TO DO SOMETHING ELSE AND THE 14 SOMETHING ELSE IS ONE OF THEM HAS TO BUY THE OTHER. AND THAT'S 15 WHAT THEY'VE DECIDED TO DO. AND THEN TO TRY TO BREAK AWAY FROM 16 THAT AND TRY TO GLOSS IT, THEY'VE TRIED TO COME UP WITH THIS 17 SUBSEQUENT AGREEMENT WITH THE PAN ASIAN GROUP WHICH THE 18 EVIDENCE IS GOING TO BE ALMOST UNDISPUTED AS -- WELL, WE'VE 19 DESCRIBED IT AS A SHAM. IT IS CERTAINLY -- IT IS CERTAINLY 20 THAT. 21 THE COURT: VERY WELL. THANK YOU, MR. ALIOTO. 22 MR. ALIOTO: THANK YOU, YOUR HONOR. 23 THE COURT: MR. HALLING? 24 OPENING STATEMENT 25 MR. HALLING: IF IT PLEASE THE COURT, WE FILED A JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 21 OPENING STATEMENT \ HALLING 1 MEMORANDUM IN SUPPORT OF A MOTION TO DISMISS THIS CASE BASED ON 2 LACK OF STANDING. WE WILL TAKE THAT UP AT THE COURT'S 3 CONVENIENCE. I WOULD JUST NOTE THAT THERE ARE NO FACTS IN 4 DISPUTE HERE ON THAT MOTION, THAT YOU HEARD MR. ALIOTO SAY THAT 5 WE HAVE A POTENTIAL ADVERTISER HERE. THERE ARE MILLIONS OF 6 POTENTIAL ADVERTISERS. EVERYONE IS A POTENTIAL ADVERTISER. 7 SECOND, MR. REILLY IS A READER. THERE ARE 500,000 8 READERS, AND HE CAN'T ARTICULATE ANY ECONOMIC INJURY THAT HE'S 9 BEEN THREATENED WITH UNDER SECTION 16 OF THE CLAYTON ACT. 10 AND YOU ASKED -- 11 THE COURT: WELL -- GO AHEAD. 12 MR. HALLING: YOU ASKED MR. ALIOTO ABOUT THE 13 NEWSPAPER PRESERVATION ACT AND ITS RELATIONSHIP TO STANDING. 14 IT HAS NO RELATIONSHIP BECAUSE UNDER SECTION 16 OF THE CLAYTON 15 ACT, YOU CAN ONLY BRING A SUIT TO ENFORCE THE ANTITRUST LAWS. 16 THIS IS NOT AN ANTITRUST LAW AS DEFINED IN SECTION 1 OF THE 17 CLAYTON ACT. 18 THE COURT: BUT ISN'T THE NEWSPAPER PRESERVATION ACT 19 A GLOSS ON THE CLAYTON ACT? 20 MR. HALLING: NO, IT'S NOT. THE CLAYTON ACT IS VERY 21 CLEAR WHAT IS AN AMENDMENT AND WHAT'S AN ANTITRUST LAW, AND 22 THIS IS NOT AN ANTITRUST LAW. 23 WHAT THIS IS, IS AN EXEMPTION THAT'S A VOLUNTARY 24 EXEMPTION THAT PEOPLE CAN APPLY FOR. THEY DON'T HAVE TO. 25 THAT'S ALL IT IS. IT'S NO CAUSE OF ACTION THAT ACCRUES BECAUSE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 22 OPENING STATEMENT \ HALLING 1 OF ITS EXISTENCE. IT'S SIMPLY AN EXEMPTION THE PARTIES CAN 2 SEEK IF THEY WISH. 3 THE COURT: BUT IS AN EXEMPTION WHICH EXPRESSES A 4 CONGRESSIONAL POLICY FAVOR A DEVICE THAT WOULD OTHERWISE BE 5 ILLEGAL THAT PERMITS THE EXISTENCE IN THE COMMUNITY OF MORE 6 THAN ONE EDITORIAL VOICE, AND ISN'T THAT SOMETHING WHICH 7 INFORMS THE COURT'S DECISION WHEN THE CLAYTON ACT APPLIES IN 8 THE NEWSPAPER BUSINESS? 9 MR. HALLING: NOT REALLY, YOUR HONOR. IF THIS WERE 10 A CASE -- 11 THE COURT: NOT REALLY, BUT DOESN'T IT? 12 MR. HALLING: NO, IT REALLY DOESN'T. 13 THE COURT: WHY NOT? 14 MR. HALLING: WHAT THE NEWSPAPER PRESERVATION ACT 15 IS, IS IT'S AN EXEMPTION FROM THE ANTITRUST LAWS; AND IF THIS 16 WERE AN APPLICATION TO APPROVE A JOINT OPERATING AGREEMENT OR 17 REVIEW OF THE ATTORNEY GENERAL'S APPROVAL OF SUCH AN 18 ARRANGEMENT, THEN THAT POLICY WOULD BE RELEVANT. 19 CONGRESS HAS EXPRESSED THE POLICY OF THIS COUNTRY, 20 AND AS HAS THE U.S. SUPREME COURT REPEATEDLY, COMPETITION, 21 ECONOMIC COMPETITION IS THE OVERWHELMING POLICY. IT'S BEEN 22 CALLED THE MAGNA CARTA OF OUR FREE ENTERPRISE SYSTEM. 23 THE COURT: BUT AS YOU POINT OUT, THE NEWSPAPER 24 PRESERVATION ACT CARVES OUT AN EXEMPTION FROM THAT MAGNA CARTA 25 OF ECONOMIC COMPETITION AND SAYS, "BUT, WAIT A MINUTE. WHEN IT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 23 OPENING STATEMENT \ HALLING 1 COMES TO NEWSPAPERS, WE WANT A LITTLE LESS COMPETITION SO THAT 2 WE CAN MAINTAIN SOME EDITORIAL DIVERSITY." AND DOESN'T THAT 3 POLICY CLEARLY ARTICULATED IN THE NEWSPAPER PRESERVATION ACT 4 HAVE TO INFORM A COURT'S DECISION WHEN IT APPLIES THE CLAYTON 5 ACT TO NEWSPAPER PUBLISHERS? 6 MR. HALLING: WELL, YOUR HONOR, WE STARTED WITH THE 7 QUESTION OF STANDING, AND SECTION 16 OF THE CLAYTON ACT COULD 8 NOT BE CLEARER. YOU CAN ONLY USE THAT STATUTE IF YOU ARE 9 ENFORCING ONE OF THE ENUMERATED STATUTES. THIS IS NOT ONE OF 10 THEM, SO I DON'T THINK THAT ARGUMENT WOULD WORK. YOU CAN'T 11 TAKE THE NEWSPAPER PRESERVATION ACT AS AN EXEMPTION AND TURN IT 12 INTO AN ANTITRUST LAW. THERE'S NO BASIS FOR THAT. 13 NOW, IN LISTENING TO MR. ALIOTO, I AM STRUCK BY HOW 14 MUCH WE AGREE ON HERE. THERE ARE SOME THINGS, IMPORTANT 15 THINGS, WE DISAGREE ON; BUT IT SEEMS THAT EVERYONE IN THIS CASE 16 AGREES THAT THE EXAMINER IS A FAILING BUSINESS, THAT IT IS NOT 17 VIABLE AS IT'S CURRENTLY CONSTITUTED. 18 AND WHAT FOLLOWS FROM THAT? IF THAT'S THE CASE, 19 THEN A -- 20 THE COURT: THAT REALLY ISN'T YOUR POSITION; IS IT, 21 MR. HALLING? INDEED, YOU'VE HAD SEVERAL POSITIONS IN THIS 22 LITIGATION, OR YOUR CLIENT HAS. FIRST, YOU CONTEND THE 23 EXAMINER IS A FAILING NEWSPAPER, CANNOT BE RESUSCITATED, IT 24 MIGHT AS WELL BE BURIED AS A MATTER OF PUBLIC SANITATION. 25 THEN YOU CAME IN WAVING THE LETTER FROM THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 24 OPENING STATEMENT \ HALLING 1 ASSISTANT ATTORNEY GENERAL AND SAYING, "NOW WE STRUCK THIS DEAL 2 WITH THE FANG GROUP AND SUDDENLY THE EXAMINER CAN SURVIVE AND 3 CAN COMPETE AND WE CAN FOR THE FIRST TIME IN 35 YEARS RESTORE 4 ECONOMIC AND FULL EDITORIAL COMPETITION IN THIS MARKET." 5 AND NOW YOU'RE SAYING SOMETHING DIFFERENT. YOU'RE 6 SAYING, "WELL, THE EXAMINER CAN SURVIVE BUT NOT THE EXAMINER AS 7 WE KNOW AND LOVE IT. IT'S GOING TO BE SOMETHING DIFFERENT." 8 SO -- 9 MR. HALLING: IT'S CORRECT, YOUR HONOR, THAT THE 10 EXAMINER AS A METROPOLITAN DAILY NEWSPAPER CANNOT -- 11 THE COURT: I SUPPOSE THE VIRTUE IN THIS IS IF YOU 12 TAKE ENOUGH POSITIONS, ONE OF THEM IS BOUND TO BE RIGHT AT SOME 13 POINT. 14 (LAUGHTER) 15 MR. HALLING: WELL, YOUR HONOR, ACTUALLY OUR 16 POSITIONS ARE ENTIRELY CONSISTENT. BECAUSE THE EXAMINER AS A 17 METROPOLITAN DAILY NEWSPAPER, WHICH IS WHAT IT IS, IT'S WHAT 18 IT'S ALWAYS BEEN, IT WAS FAILING OR IN SERIOUS TROUBLE WHEN IT 19 ENTERED THE JOINT OPERATING AGREEMENT IN 1965, IT'S MUCH WORSE 20 OFF TODAY, IT'S NOT SURPRISING THAT IT CAN'T SURVIVE 21 INDEPENDENTLY. 22 HOWEVER, IF THAT'S THE CASE, THAT MEANS THAT THE 23 HEARST CORPORATION COULD PURCHASE THE CHRONICLE AND SIMPLY SHUT 24 IT DOWN, IT COULD IF THEY CHOSE GIVE IT AWAY; AND IN THIS 25 SITUATION, IF THEY CAN SHUT IT DOWN OR GIVE IT AWAY, THEY JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 25 OPENING STATEMENT \ HALLING 1 CERTAINLY CAN GIVE IT TO SOMEONE AND PROVIDE A SUBSIDY. 2 HAVING DONE THAT, THEY ARE INCREASING, TO SOME 3 EXTENT, COMPETITION. THEY ARE CERTAINLY PRESERVING AN 4 EDITORIAL VOICE IN SAN FRANCISCO. I DON'T THINK THERE'S ANY 5 QUESTION THAT MR. FANG'S EDITORIAL VOICE WILL BE HEARD LOUD AND 6 CLEAR. THAT IS SOMETHING THAT IS NOT NECESSARY UNDER THE 7 ANTITRUST LAWS BECAUSE THE ANALYSIS IS IF IT'S A FAILING 8 BUSINESS, IT CAN BE CLOSED; AND WE CAN'T BE CRITICIZED FOR 9 DOING SOMETHING THAT PRESERVES AN EDITORIAL VOICE AND AT LEAST 10 TO AN EXTENT INCREASES COMPETITION. 11 BUT THAT BRINGS US TO A KEY CONCEPT IN THIS CASE IN 12 KEEPING STRAIGHT THE EVIDENCE AND UNDERSTANDING IT, WHICH IS 13 THAT THE CHRONICLE AND THE EXAMINER ARE METROPOLITAN DAILY 14 NEWSPAPERS. THEY COMPETE OUTSIDE OF SAN FRANCISCO. IN FACT, 15 THE VAST MAJORITY OR A LARGE PORTION OF THE CHRONICLE'S 16 CIRCULATION IS OUTSIDE THE CITY. THE EXAMINER ALSO HAS A LARGE 17 PERCENTAGE OF CIRCULATION OUTSIDE THE CITY IN MARIN COUNTY AND 18 SO FORTH. 19 THEY APPEAL TO REGIONAL ADVERTISERS. FOR EXAMPLE, 20 NORDSTROM HAS A STORE IN MARIN. THEY HAVE A STORE IN WALNUT 21 CREEK, A STORE IN THE CITY. THEY'RE INTERESTED IN THE 22 METROPOLITAN PAPER. A METROPOLITAN PAPER HAS FULL COVERAGE OF 23 NATIONAL AFFAIRS, OF SPORTS, LOCAL AFFAIRS. THAT'S THE KIND OF 24 PRODUCT THE EXAMINER WAS IN 1965 AND THAT'S WHAT IT STILL IS 25 TODAY. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 26 OPENING STATEMENT \ HALLING 1 THE PRODUCT THAT MR. FANG IS GOING TO PUBLISH IS NOT 2 A METROPOLITAN DAILY NEWSPAPER BECAUSE THAT WOULDN'T BE 3 POSSIBLE. EVERYONE AGREES ON THAT. 4 THE COURT: DOES THE PAPER ENVISIONED BY MR. FANG 5 COMPETE IN THE SAME MARKET WITH THE EXAMINER AND CHRONICLE? 6 MR. HALLING: THE PAPER COMPETES TO AN EXTENT FOR 7 CERTAIN TYPES OF ADVERTISING, BUT I THINK IN A BROAD ANTITRUST 8 SENSE, IF THAT'S WHAT YOU MEAN, THE MARKET IS THE METROPOLITAN 9 DAILY NEWSPAPER BUSINESS WHICH IN AND OF ITSELF FACES 10 COMPETITION FROM OTHER MEDIA AS WELL; BUT THAT'S THE MARKET 11 THAT THE CHRONICLE IS IN, THE EXAMINER IS IN. IT'S WHAT THE 12 MERCURY NEWS IS IN. 13 THE EVIDENCE WILL SHOW -- 14 THE COURT: MY QUESTION IS WHETHER THE CONTEMPLATED 15 FANG PRODUCT COMPETES IN THE METROPOLITAN NEWSPAPER MARKET. 16 MR. HALLING: IT DOESN'T COMPETE IN THAT MARKET. IN 17 THAT MARKET. 18 THE COURT: THE ANSWER I GATHER IS NO? 19 MR. HALLING: NOT IN THAT MARKET, WHICH IS WHY THE 20 EXAMINER CAN BE CLOSED AS A FAILING METROPOLITAN DAILY 21 NEWSPAPER AND THE FACT THAT MR. FANG -- REMEMBER, MR. FANG IS 22 RECEIVING A 66-MILLION-DOLLAR SUBSIDY. AND I BELIEVE THE 23 EVIDENCE WILL SHOW HE WOULDN'T TAKE THIS PAPER WITHOUT THAT 24 SUBSIDY; AND, INDEED, IF THERE'S ANY QUESTION ON THIS, AND I 25 REALLY DON'T THINK THIS IS IN DISPUTE THAT THIS IS NOT A VIABLE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 27 OPENING STATEMENT \ HALLING 1 BUSINESS, IF THERE'S ANY QUESTION ABOUT THAT, IT WAS LAID TO 2 REST BY OUR SALES EFFORT. 3 HEARST HIRED A NATIONAL MEDIA BROKER, CONTACTED 4 EVERY MAJOR NATIONAL NEWSPAPER CHAIN IN THE COUNTRY, BUYERS 5 SUCH AS PAUL ALLEN, ONE OF THE FOUNDERS OF MICROSOFT, PEOPLE 6 WHO HAVE LOTS OF MONEY. EVERYONE IN THE COUNTRY THEY COULD 7 CONTACT WAS ASKED TO BID ON THIS PAPER. NO ONE WANTED TO BUY 8 IT. NO ONE WOULD EVEN TAKE IT FOR FREE. 9 THE MARKETPLACE HAS SPOKEN. THIS IS NOT A VIABLE 10 BUSINESS. 11 NOW, MR. ALIOTO SPENT SOME TIME TRYING TO CONVINCE 12 THE COURT THAT THERE MIGHT BE SOME COMPETITION WITHIN THE JOA. 13 THAT'S NOT ACCURATE. THE PARTIES HAVE AN EXEMPTION TO FIX 14 PRICES AND SET RATES, AND THAT'S WHAT THEY'VE BEEN DOING. 15 THERE ARE -- THE AGENCY FORMULATES RATES. THEY 16 ARE -- FOR ADVERTISING RATES, ALMOST ALL RATES ARE JOINTLY -- 17 THEY'RE A COMBINATION RATE WHERE IF THE ADVERTISER WANTS THE 18 CHRONICLE, FOR VERY LITTLE EXTRA IT GETS THE EXAMINER. THOSE 19 RATES ARE PROPOSED. BOTH SIDES DO, UNDER THE LANGUAGE OF THE 20 CONTRACT, REVIEW AND THEN AGREE; BUT IN PRACTICE, THERE IS NO 21 COMPETITION. IT'S EXACTLY AS YOUR HONOR SAID. IT'S 22 DIFFERENTIATED PRODUCTS DECIDING HOW BEST TO PRESENT THEM TO 23 THE MARKETPLACE. 24 NOW, MR. ALIOTO SAID SOME THINGS ABOUT THE 25 NEGOTIATIONS BETWEEN THE PARTIES THAT I WOULD LIKE TO SET JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 28 OPENING STATEMENT \ HALLING 1 STRAIGHT. THE JOA IS A VERY INEFFICIENT ECONOMIC ENTERPRISE. 2 IT HAS A HIGH-COST STRUCTURE. IT HAS SPLIT MANAGEMENT IN TERMS 3 OF A 50-50 OWNERSHIP. IT HAS HISTORICALLY NOT DONE VERY WELL. 4 DURING THE PERIOD 1988 TO 1993, I BELIEVE THE 5 EVIDENCE WILL SHOW THAT BOTH PAPERS LOST MONEY, AND YOU HAVE TO 6 UNDERSTAND WHAT THAT MEANS IN THE CONTEXT OF THE JOA. 7 THE JOA INVOLVES AN ACCUMULATION OF REVENUES, 8 CIRCULATION AND ADVERTISING. THE AGENCY TAKES OFF ITS 9 EXPENSES, AND WHAT'S LEFT IS CALLED THE NET EXCESS. THAT'S NOT 10 A PROFIT. 11 OUT OF THAT NET EXCESS, WHICH IS SPLIT 50-50, EACH 12 NEWSPAPER HAS TO PAY ITS SHARE OF CAPITAL EXPENDITURES AND ALSO 13 ITS EDITORIAL COSTS. 14 THE COURT: AND THOSE CAPITAL EXPENDITURES ARE SET 15 BY THE NEWSPAPER AGENCY, I GATHER. 16 MR. HALLING: NO -- WELL, SUBSTANTIAL CAPITAL 17 EXPENDITURES ARE NOT SET THAT WAY. 18 THE COURT: I'M SORRY, I INTERRUPTED YOU AND I 19 DIDN'T HEAR YOUR ANSWER. 20 MR. HALLING: THEY ARE NOT SET THAT WAY. 21 THE COURT: ALL RIGHT. 22 MR. HALLING: MAJOR CAPITAL EXPENDITURES MUST BE 23 APPROVED BY THE PRINCIPALS AND THEY'RE ON THE PRINCIPALS' 24 BOOKS. SO WHEN YOU GET THE NET EXCESS, THAT'S NOT A PROFIT. 25 YOU STILL HAVE TO PAY YOUR ENTIRE EDITORIAL DEPARTMENT, CAPITAL JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 29 OPENING STATEMENT \ HALLING 1 EXPENDITURES, AND YOU HAVE TO PAY SOME ADMINISTRATIVE EXPENSES. 2 THE COURT: YOU SAID SHARE OF CAPITAL EXPENDITURES. 3 I ASSUME YOU MEANT CAPITAL EXPENDITURES BY THE NEWSPAPER AGENCY 4 THE TAB FOR WHICH WAS SPLIT BETWEEN THE TWO JOINT OPERATORS. 5 MR. HALLING: THAT'S CORRECT. AND THE ASSETS ARE ON 6 THE BOOKS OF THE PRINCIPALS NOT THE AGENCY. THE MAJOR ASSETS 7 SUCH AS THE PRINTING PRESSES, DEPRECIATION IS TAKEN BY THE 8 PRINCIPALS; AND SO THE NET EXCESS DOES NOT -- IT SIMPLY DOESN'T 9 INCLUDE THE MONEY THAT HAS TO BE SPENT ON CAPITAL EXPENDITURES 10 NOR EDITORIAL. 11 SO DURING THE PERIOD 1988 TO 1993 THE EVIDENCE WILL 12 SHOW BOTH NEWSPAPERS, EVEN WHEN THEY GOT THE NET EXCESS, IT 13 WASN'T ENOUGH. THE JOA WAS LOSING MONEY IN A REAL SENSE FOR 14 BOTH PAPERS. PLUS ON A CASH-FLOW BASIS, THEY WERE OVER A 15 HUNDRED MILLION DOLLARS NEGATIVE ON CASH FLOW FROM '88 TO '93. 16 THAT LED TO SOME CONSTERNATION, AS YOU CAN IMAGINE. 17 WE KNOW, AND THE EVIDENCE WILL SHOW, THAT ON AN INCREMENTAL 18 BASIS THE AGENCY WOULD BE -- THE JOA WOULD BE BETTER OFF SIMPLY 19 CLOSING THE EXAMINER BECAUSE THE REVENUES IT CONTRIBUTES ARE 20 SUBSTANTIALLY LESS THAN ITS COSTS. IT WOULD BE A SOLID 21 ECONOMIC DECISION TO CLOSE IT DOWN. 22 IN FACT, MR. REILLY'S EXPERT, MR. WEAVER, LOOKED AT 23 THE SAME QUESTION AND AGREED. HE SAID IT WOULD BE 30 TO 24 $50 MILLION. THE AGENCY OR THE JOA WOULD BE 30 TO $50 MILLION 25 BETTER OFF IF THEY SIMPLY CLOSED THE EXAMINER. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 30 OPENING STATEMENT \ HALLING 1 THE COURT: COULD THE JOINT OPERATING AGREEMENT DO 2 THAT? 3 MR. HALLING: IT WOULD NEED TO BE AN AMENDMENT TO DO 4 THAT BECAUSE IT'S NOT PROVIDED FOR NOW. 5 THE COURT: AND WOULD THAT AMENDMENT HAVE TO GO 6 BEFORE THE ASSISTANT ATTORNEY GENERAL? SINCE THIS IS A 7 PREEXISTING JOINT OPERATING AGREEMENT, IT DOES NOT FALL UNDER 8 SECTION (B) OF 1803. 9 MR. HALLING: WELL -- 10 THE COURT: ONE PERSON TALKING AT A TIME. 11 IT WOULDN'T -- IT WOULD BE REVIEWED NOT UNDER 12 1803(B) OR IT WOULD BE REVIEWED UNDER 1803(B)? 13 MR. HALLING: IF I UNDERSTAND THE QUESTION, YOUR 14 HONOR, I DON'T BELIEVE IT WOULD BE REVIEWED UNDER EITHER. 15 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 16 17 18 19 20 21 22 23 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 31 OPENING STATEMENT \ HALLING 1 THE COURT: WOULD IT BE REVIEWED UNDER SECTION 7? 2 MR. HALLING: I BELIEVE SO. IN OTHER WORDS, IT 3 WOULDN'T BE THE LESSER OF THE TWO FAILING COMPANY STANDARDS 4 UNDER SECTION 1803. IT WOULD BE THE CITIZEN PUBLISHING 5 STANDARD. 6 THE COURT: OKAY. 7 MR. HALLING: WHICH, BY THE WAY, IS EXACTLY WHAT 8 PROFESSOR BAXTER SAID IN THE ST. LOUIS MATTER AND WHAT THE 9 DEPARTMENT OF JUSTICE SAID SUBSEQUENTLY IN THE FRANKLIN, 10 PENNSYLVANIA MATTER. YOU LOOK OUTSIDE -- WHEN YOU WANT TO DO A 11 MERGER LIKE WE ARE DOING HERE, YOU LOOK TO THE VIABILITY OF THE 12 JUNIOR PAPER OUTSIDE THE JOA AND, IF IT PASSES THE CITIZEN 13 PUBLISHING TEST FOR A FAILING ENTERPRISE, THEN THE ACQUISITION 14 IS ALL RIGHT. 15 THAT IS EXACTLY WHAT WE ARE DOING HERE, AND THERE IS 16 REALLY NOT A FACTUAL DISPUTE THAT THAT'S A FAILING ENTERPRISE 17 UNDER THAT STANDARD. 18 THE COURT: ALL RIGHT. 19 MR. HALLING: I HAVE JUST ONE OTHER -- 20 THE COURT: ONE MORE. 21 MR. HALLING: IF I COULD JUST FOLLOW UP. 22 THE -- BECAUSE OF THESE LOSSES THAT WERE BEING 23 INCURRED IN '88 TO '93, THE PROBLEM WITH THE EXAMINER AND ITS 24 LACK OF INCREMENTAL DISTRIBUTION, THE PARTIES BEGAN A SERIES OF 25 NEGOTIATIONS. AND THOSE NEGOTIATIONS INCLUDED A PROPOSAL TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 32 OPENING STATEMENT \ HALLING 1 SHUT DOWN THE EXAMINER, WHICH MADE PERFECT SENSE. THE MATTERS 2 WENT BACK AND FORTH UNTIL 1998, WHEN IN OCTOBER MR. SIAS WROTE 3 TO HEARST AND SAID, "THIS IS OVER. THESE NEGOTIATIONS ARE 4 OVER." 5 THE COURT: THIS IS WHEN, IN '88? 6 MR. HALLING: IN OCTOBER OF '98. THE NEGOTIATIONS 7 ARE AT AN END. WE CAN'T AGREE. 8 AND HEARST RESPONDED BY A STRATEGY OF TRYING TO GET 9 CHRONICLE BACK TO THE BARGAINING TABLE. YOU WILL HEAR EVIDENCE 10 ABOUT -- ABOUT THAT PROCESS. I BELIEVE, MR. ALIOTO REFERRED 11 YOU TO A LETTER THAT MR. WHITE SIGNED BUT WAS REALLY WRITTEN IN 12 NEW YORK, AS PART OF THIS STRATEGY. 13 AND THAT WAS -- THE CONTEXT OF IT WAS TO GET THE 14 CHRONICLE BACK TO THE BARGAINING TABLE. 15 AND IN THAT RESPECT YOU WILL HEAR FROM MR. BAXTER, 16 THE PRESIDENT OF THE HEARST CORPORATION, WHO IS THE ONE WHO CAN 17 EXPLAIN AND ARTICULATE BEST HEARST'S INTENTIONS. YOU HEARD 18 MR. ALIOTO SAY THERE WOULD BE COMPETITION IN 2005. THERE IS 19 NOT GOING TO BE ANY EVIDENCE THAT THERE IS ANY CREDIBLE PLAN OR 20 THOUGHT ON HEARST'S PART THAT THAT WOULD OCCUR. THEY WERE 21 SIMPLY TRYING TO NEGOTIATE -- 22 THE COURT: WELL, ARE YOU SAYING THAT IF HEARST IS 23 UNABLE TO CLOSE THIS DEAL, HEARST IS NOT GOING TO BE IN THE 24 MARKET AFTER 2005? 25 MR. HALLING: IT MAY BE IN THE MARKET IN ONE WAY OR JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 33 OPENING STATEMENT \ HALLING 1 ANOTHER. IT MAY BE IN THE MARKET ELECTRONICALLY. IT MAY BE IN 2 THE MARKET BY ACQUIRING THE CHRONICLE. 3 THE COURT: IT'S NOT GOING TO BE IN THE NEWSPAPER, I 4 TAKE IT. 5 MR. HALLING: I AM SAYING THE EVIDENCE WILL SHOW 6 THAT IT WOULD BE RUINOUS TO SPEND THE MONEY THAT IT WOULD TAKE 7 TO TAKE A JUNIOR NEWSPAPER WITH A FOUR-TO-ONE CIRCULATION 8 DISADVANTAGE, A METROPOLITAN DAILY, AND TURN THAT AROUND. THE 9 ECONOMICS OF THIS BUSINESS, WHICH YOU WILL HEAR FROM OUR 10 EXPERT, DR. ROSSE, WHO IS A STANFORD ECONOMICS PROFESSOR, ALSO 11 THE PRESIDENT OF THE FREEDOM NEWSPAPER CHAIN -- THAT KIND OF 12 COMPETITION WHEN IT'S THAT FAR OUT OF WACK WILL NOT OCCUR. 13 THE COURT: THEN WHY IS THERE THIS DIFFERENTIAL, IF 14 THAT'S WHAT THE EVIDENCE WILL BE, THAT MR. SIAS SPOKE OF IN HIS 15 DECLARATION BETWEEN WHAT THE CHRONICLE COULD COMMAND SOLD TO A 16 THIRD PARTY IN THE JOINT OPERATING AGREEMENT AND THE PRICE 17 WHICH HEARST IS WILLING TO PAY? 18 I BELIEVE MR. SIAS' TESTIMONY IN HIS DECLARATION WAS 19 THAT IN HIS VIEW THE CHRONICLE COULD COMMAND A PRICE OF 400 TO 20 $500 MILLION IF SOLD TO A THIRD PARTY WITH THE OBLIGATION TO 21 STAY IN THE JOINT OPERATING AGREEMENT UNTIL ITS TERMINATION IN 22 2005. WHEREAS, OF COURSE, THE CHRONICLE IS RECEIVING 23 $660 MILLION IN THIS DEAL WITH HEARST. 24 IF WHAT YOU ARE SAYING IS TRUE, WHY DOESN'T IT PAY A 25 THIRD PARTY TO COME IN AND BUY THE CHRONICLE WITHIN THE JOINT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 34 OPENING STATEMENT \ HALLING 1 OPERATING AGREEMENT AND WAIT UNTIL 2005 AND THEN TAKE OVER AND 2 BE THE SOLE SURVIVING NEWSPAPER IN SAN FRANCISCO? 3 MR. HALLING: WELL, YOUR HONOR, THERE ARE SEVERAL 4 ASPECTS OF THAT. 5 FIRST OF ALL, HEARST HAS A RIGHT OF FIRST REFUSAL. 6 SO SOMEONE COULD NOT JUST COME IN AND BUY THE CHRONICLE WITHOUT 7 HEARST BEING ABLE TO MATCH IT. 8 BUT YOU HAVE TO UNDERSTAND BOTH -- 9 THE COURT: BUT IF WHAT YOU ARE SAYING IS TRUE, 10 WOULDN'T IT PAY SOMEONE TO COME IN AND MATCH HEARST'S OFFER OR 11 PERHAPS BETTER? 12 MR. HALLING: WELL, YOU ALSO SAW A DECLARATION FROM 13 THE CHRONICLE ON THE PRELIMINARY INJUNCTION SAYING THAT THEY 14 ARE NOT MAKING ANY MONEY NOW. THEY ARE NOT MAKING MONEY IN 15 THIS JOA. SO WHOEVER TAKES ON THIS JOA TO TAKE THEIR POSITION 16 WOULD HAVE TO RUN THE CHRONICLE NEWSROOM, WHICH IS VERY LARGE 17 AND VERY SUBSTANTIAL. IT'S A HIGH-QUALITY, METROPOLITAN DAILY 18 OPERATION. THEY WOULD HAVE TO PAY FOR THAT. AT THE SAME TIME 19 WHEN THEY GET THE NET EXCESS TO SPLIT, THEY ONLY GET HALF OF 20 IT. 21 THE COURT: BUT WHAT I UNDERSTAND YOU TO BE SAYING 22 IS THAT, NONETHELESS, THERE IS A POT OF GOLD AT THE END OF THE 23 RAINBOW, OR AT LEAST AT THE END OF 2005. 24 MR. HALLING: I DIDN'T SAY THAT AT ALL. HEARST -- 25 THE QUESTION IS WHETHER -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 35 OPENING STATEMENT \ HALLING 1 THE COURT: BUT YOU SAID THAT THE EXAMINER COULD NOT 2 SURVIVE IN 2005 AS A VIABLE COMPETITOR. THEREFORE, THE 3 CHRONICLE IS GOING TO BE THE SOLE REMAINING METROPOLITAN 4 NEWSPAPER IN THIS MARKET. 5 MR. HALLING: UNLESS HEARST ENGAGES IN IRRATIONAL 6 COMPETITION AND IT SPENDS HUNDREDS OF MILLIONS OF DOLLARS. 7 LET ME READ YOU RIGHT ON THAT POINT WHAT MR. BENNACK 8 SAID IN HIS DEPOSITION WHEN ASKED ESSENTIALLY THAT QUESTION: 9 "Q. FROM MR. ALIOTO: THEN FINALLY DID YOU 10 EVER CONSIDER SPENDING THE 660 MILLION ON 11 REINVIGORATING THE EXAMINER? 12 "A. NO, BECAUSE I DIDN'T THINK IT WOULD BE 13 MONEY WELL SPENT. I THINK IT WOULD BE IN 14 VIOLATION OF MY FIDUCIARY OBLIGATIONS TO DO 15 THAT. 16 "Q. WHY? WHY DO YOU THINK IF YOU PUT 660 17 MILLION INTO IT IT WOULD BE LOST? 18 "A. YOU WOULD HAVE HAD HUGE LOSSES DURING 19 THAT PERIOD OF TIME AND WHETHER YOU WOULD EVER 20 BE ABLE TO RECOVER THAT KIND OF AN INVESTMENT 21 AFTER THAT SORT OF LONG AND DIFFICULT BATTLE, I 22 CAN'T PUT A NUMBER OR EVEN ANSWER THE QUESTION. 23 "Q. IS THERE A NUMBER THAT YOU WOULD -- IF 24 YOU SPENT IT YOU WOULD PREVAIL AGAINST THE 25 SENIOR NEWSPAPER? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 36 OPENING STATEMENT \ HALLING 1 "A. ALL I CAN TELL YOU IS NO ONE HAS FOUND 2 THAT FORMULA YET. THE ECONOMICS OF NEWSPAPER 3 PUBLISHING IN AMERICA PRETTY MUCH SAY THERE MAY 4 NOT BE AN AMOUNT OF MONEY THAT YOU CAN SPEND TO 5 DO IT. I HAVE NO CONFIDENCE TODAY THAT WE COULD 6 SPEND ENOUGH MONEY TO ESTABLISH THE EXAMINER TO 7 PREVAIL OVER THE CHRONICLE AND COMPETE WITH 8 KNIGHT RIDDER AND SINGLETON AND THE 20 OTHER 9 NEWSPAPERS THAT ARE IN THE REGION. IT'S A BAD 10 BET AND I COULD NOT IN GOOD CONSCIENCE USE MY 11 SHAREHOLDERS' MONEY TO MAKE THAT BET." 12 SO WHEN HE SAYS THE EVIDENCE WILL SHOW THAT HEARST 13 WAS GOING TO ENGAGE IN COMPETITION IN 2005, HE IS TALKING ABOUT 14 A NEGOTIATING POSTURE. WE ARE TALKING ABOUT SENDING A MESSAGE 15 TO THE CHRONICLE THAT HEARST OWNS HALF THE ASSETS. WE ARE NOT 16 GOING AWAY. AND THAT LEADS TO THE NEGOTIATIONS WHICH 17 ULTIMATELY END IN THIS DEAL, WHICH IS THE ONLY RATIONAL 18 ECONOMIC WAY FOR THIS TO PROCEED. IT'S LIKE A BAD MARRIAGE. 19 IT'S TIME TO END IT. IT'S NOT ECONOMIC. IT'S NOT EFFICIENT. 20 THE COURT: THANK YOU, MR. HALLING. 21 MR. -- LET'S HEAR FROM MR. ROSCH FIRST. 22 MR. ROSCH: YOUR HONOR, I AM GOING TO RESERVE. 23 THE COURT: VERY WELL. 24 MR. BALABANIAN? 25 MR. BALABANIAN: MAY IT PLEASE THE COURT. LET ME JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 37 OPENING STATEMENT / BALABANIAN 1 RIGHT AT THE OUTSET ADDRESS TWO MISCONCEPTIONS WHICH I FEAR 2 MR. ALIOTO'S COMMENTS MAY HAVE ENGENDERED. 3 THE COURT: WE WILL SEE ABOUT THAT. 4 MR. BALABANIAN: WHETHER THEY ARE ENGENDERED OR 5 WHETHER I HAVE ADDRESSED IT. WE WILL SEE. 6 THE COURT: UNDOUBTEDLY BOTH. 7 MR. BALABANIAN: YOUR HONOR, THE AGREEMENT UNDER 8 WHICH MY CLIENT IS ACQUIRING THE EXAMINER PROVIDES NO PERVERSE 9 INCENTIVE TO MAKE IT FAIL. QUITE THE CONTRARY. THERE IS A 10 PROVISION THAT MR. ALIOTO DID NOT MENTION IN WHICH MY CLIENTS 11 WOULD KEEP 100 PERCENT OF ALL REVENUES OBTAINED FROM THE PAPER. 12 THIS GIVES A MAXIMUM INCENTIVE TO INCREASE CIRCULATION, TO 13 INCREASE ADVERTISING REVENUES AND TO MAKE A SUCCESS OF IT. 14 AND INDEED, OF COURSE, THERE IS ALSO THE OVERARCHING 15 INCENTIVE THEY HAVE OF EMERGING FROM THIS PROCESS WITH A 16 SUCCESSFUL NEWSPAPER AND NOT A FAILURE, WHICH MR. ALIOTO 17 PREDICTS. SO THE CHARACTERIZATION OF THE CONTRACT AS ONE THAT 18 OFFERS PERVERSE INCENTIVES OF FAILURE IS SIMPLY UPSIDE-DOWN. 19 SECOND, I WANT TO ADDRESS THIS MYTH OF THE MILLION 20 DOLLAR SALARY AND BONUS OF WHICH MR. ALIOTO HAS SUCH MERRIMENT 21 IN THE PRESS. 22 FIRST LET ME SAY THIS IS NOT ANY -- THERE IS NO FREE 23 MONEY HERE. ANY MONEY PAID IN SALARY TO MR. FANG OR ANYONE 24 ELSE COMES OUT OF MONEY THAT IS AVAILABLE TO THE FANGS TO 25 OPERATE THE PAPER. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 38 OPENING STATEMENT / BALABANIAN 1 BUT, IN ANY EVENT, THIS MILLION DOLLAR FIGURE IS A 2 COMPLETE FICTION. 3 I THINK MR. ALIOTO IS CONFUSING A $500,000 CAP 4 IMPOSED BY HEARST IN THE AGREEMENT AND TOTAL COMPENSATION TO 5 THE FANG FAMILY FOR THE FIGURE THAT IS IN FACT GOING TO BE PAID 6 IN SALARY. NEITHER THE SALARY NOR ANY OTHER PAYMENT TO THE 7 FAMILY WILL APPROACH THAT CAP, AND IT IS, IN ANY EVENT, MONEY 8 THAT WOULD COME OUT OF THEIR OWN BUSINESS. I THINK THIS NOTION 9 IS JUST A DISTRACTION. 10 MR. ALIOTO SAYS THAT THE FANGS' ACQUISITION OF THE 11 EXAMINER WOULD BE A SHAM. HIS POINT SEEMS TO BE THAT DESPITE 12 THEIR GOOD INTENTIONS AND SINCERITY -- WHICH I DID NOT HEAR HIM 13 QUESTION -- INDEED, DESPITE THEIR EXTENSIVE EXPERIENCE IN 14 PUBLISHING, THE FANGS ARE SIMPLY MISTAKEN IN THINKING THAT THEY 15 CAN SUCCESSFULLY OPERATE THE EXAMINER. 16 YOUR HONOR, THERE ARE THREE REASONS WHY MR. -- WHY 17 MR. REILLY AND MR. ALIOTO AND NOT THE FANGS WERE MISTAKEN ABOUT 18 THE REALISM OF THEIR PLANS FOR THE EXAMINER. 19 FIRST IS THEIR TRACK RECORD, THE FANGS' TRACK 20 RECORD, IN REVISING DECLINING FAILED PUBLICATIONS. 21 SECOND IS THE HISTORY OF THE NEGOTIATIONS OF THE 22 PRESENT AGREEMENT, WHICH THE EVIDENCE WILL SHOW WERE VIGOROUSLY 23 AND ENTIRELY AT ARM'S LENGTH. 24 THIRD, YOUR HONOR, ARE THE DETAILED PLANS WHICH 25 MR. FANG AND HIS HIGHLY QUALIFIED ADVISERS HAVE MADE FOR THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 39 OPENING STATEMENT / BALABANIAN 1 NEW EXAMINER, PLANS WHICH LED THE DEPARTMENT OF JUSTICE AFTER 2 EXTENSIVE EXAMINATION, WHICH INCLUDED PHYSICAL INSPECTION OF 3 HIS FACILITIES AND INDEED A WHOLE DAY OF GRILLING IN WASHINGTON 4 BY A ROOM FULL OF LAWYERS, ATTORNEYS, ECONOMISTS, AT THE END OF 5 THAT THE DEPARTMENT OF JUSTICE CONCLUDED THAT MR. FANG'S 6 ACQUISITION OF THE EXAMINER WOULD NOT JUST MAINTAIN COMPETITION 7 BUT WOULD BRING OUR CITY COMPETITION IT HAS NOT SEEN IN 35 8 YEARS. 9 THE COURT: BUT ISN'T THAT DIFFERENT FROM WHAT 10 MR. HALLING HAS SAID? 11 MR. BALABANIAN: I DON'T BELIEVE IT IS, YOUR HONOR. 12 THE COURT: HE SAYS THE EXAMINER IN ITS PRESENT FORM 13 CANNOT POSSIBLY SURVIVE. AND WHAT MR. FANG CONTEMPLATES IS A 14 DIFFERENT KIND OF NEWSPAPER. 15 MR. BALABANIAN: I WILL BE ADDRESSING THAT. THERE 16 ARE PROFOUND DIFFERENCES. THERE ARE COST SAVINGS THAT WILL BE 17 ACHIEVED. 18 INTERESTINGLY, YOUR HONOR, MOST OF THE COST SAVINGS 19 WE PROJECT COME FROM TAKING MEASURES WHICH MR. REILLY'S OWN 20 EXPERTS HAVE COUNSELED. IN ADDITION -- AND THIS CANNOT BE 21 OVERLOOKED -- MR. FANG WILL BE RECEIVING A $66 MILLION SUBSIDY 22 IN ADDITION TO TRANSITIONAL SERVICES. 23 MAKE NO MISTAKE ABOUT IT, YOUR HONOR, THERE WOULD BE 24 NO TRANSACTION WITHOUT THAT SUBSIDY. I BELIEVE THAT THAT 25 RECONCILES THE POSITIONS. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 40 OPENING STATEMENT / BALABANIAN 1 BUT, IN ANY EVENT, THAT IS NOT MY BURDEN HERE TODAY. 2 MY BURDEN IS TO DEMONSTRATE TO THE COURT -- 3 THE COURT: WELL, IF ALL IT TAKES IS TO SAVE THE 4 EXAMINER $66 MILLION, THEN CAN IT REALLY BE CONSIDERED A 5 FAILING NEWSPAPER? 6 MR. BALABANIAN: THAT'S NOT MY TOPIC TO ADDRESS, 7 YOUR HONOR. I AM HERE TO DEMONSTRATE, I HOPE TO THE COURT'S 8 SATISFACTION, THAT THE FANGS HAVE THE MEANS AND THE ABILITY TO 9 ACHIEVE JUST WHAT THE JUSTICE DEPARTMENT SAID THAT THEY COULD, 10 AND THAT'S REALLY ALL WE NEED TO SHOW. 11 IN FACT, YOUR HONOR, WITH RESPECT TO -- I DON'T 12 THINK IT'S INCUMBENT UPON US TO SHOW THAT THE ACQUISITION OF 13 THE EXAMINER BY THE FANGS WILL ENHANCE OR CREATE COMPETITION. 14 THE CHARTER OF THIS COURT UNDER THE APPLICABLE LAWS 15 IS TO PREVENT TRANSACTIONS WHICH THREATEN TO CREATE A MONOPOLY, 16 NOT TO MANDATE OR TRY TO FASHION TRANSACTIONS INTO -- 17 THE COURT: BUT ISN'T THE TROUBLE WITH YOUR POSITION 18 SIMPLY THIS? IF THE DIFFERENCE BETWEEN A FAILING NEWSPAPER AND 19 A NEWSPAPER THAT IS VIABLE IS $66 MILLION, THEN THE EXAMINER 20 CANNOT BE CONSIDERED A FAILING NEWSPAPER AND EITHER UNDER 21 PROFESSOR BAXTER'S ST. LOUIS TEST OR UNDER PROVISIONAL 22 SECTION 7 ANALYSIS THIS TRANSACTION WON'T PAST MUSTER. 23 MR. BALABANIAN: WELL, YOUR HONOR, I DON'T BELIEVE 24 THAT THE ONLY WAY WHICH IT CAN PASS MUSTER IS IF IT'S 25 DEMONSTRATED THAT THE NEWSPAPER IS A FAILING ONE. IF THE NET JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 41 OPENING STATEMENT / BALABANIAN 1 EFFECT OF THESE TRANSACTIONS IS TO ENHANCE -- 2 THE COURT: THAT IS DIFFERENT FROM MR. HALLING'S 3 POSITION. 4 MR. BALABANIAN: I AM TAKING NO POSITION ON THAT. 5 HE IS FAR MORE FAMILIAR WITH THE ECONOMICS AND THE PROSPECTS OF 6 THE EXAMINER -- 7 THE COURT: BUT HASN'T YOUR ENTRANCE OR THE ENTRANCE 8 OF YOUR CLIENTS INTO THIS TRANSACTION THROWN A MONKEY WRENCH, 9 AS IT WERE, INTO THE LEGAL POSITION THAT HEARST HAS TO 10 MAINTAIN? 11 MR. BALABANIAN: I THINK MR. HALLING HAS TO SPEAK 12 FOR THE HEARST LEGAL POSITION. 13 MY POSITION IS A VERY SIMPLE ONE: WE ARE DEAD 14 SERIOUS ABOUT MAKING THIS PAPER WORK. WE HAVE THE MEANS TO DO 15 SO. WE HAVE A PLAN, WHICH I WILL OUTLINE TO THE COURT, AND WE 16 KNOW THAT IT WILL WORK. 17 I THINK THAT IF THE NET EFFECT OF THESE TRANSACTIONS 18 IS TO ENHANCE COMPETITION OR EVEN TO MAINTAIN IT -- BECAUSE, AS 19 I SAY, I THINK OUR ONLY BURDEN IN THIS CASE IS TO DEMONSTRATE 20 TO THE COURT'S SATISFACTION THAT THERE WILL NOT -- THAT WHEN 21 ALL IS SAID AND DONE, A MONOPOLY WILL NOT HAVE BEEN CREATED IN 22 OUR CITY. 23 THE COURT: LET'S LOOK AT EDITORIAL COMPETITION. 24 THE PRODUCT WHICH THE FANGS INTEND TO PUT OUT IS NOT, ACCORDING 25 TO MR. HALLING AND, I GATHER, THE EVIDENCE WILL CONFIRM, A JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 42 OPENING STATEMENT / BALABANIAN 1 METROPOLITAN DAILY NEWSPAPER OF GENERAL CIRCULATION. IT'S 2 GOING TO BE A NICHE PRODUCT. 3 MR. BALABANIAN: WELL -- 4 THE COURT: NOW, DOES THAT ENHANCE EDITORIAL 5 COMPETITION OF THE KIND CONTEMPLATED BY THE NEWSPAPER 6 PRESERVATION ACT? WASN'T THE NOTION OF THE NEWSPAPER 7 PRESERVATION ACT AND, THEREFORE, THE APPROVAL OF THE JOINT 8 OPERATING AGREEMENT, THAT WHILE THE BUSINESS INTERESTS OF THESE 9 TWO DAILY METROPOLITAN PAPERS WOULD BE COMBINED, AT LEAST THERE 10 WOULD BE AN EDITORIAL VOICE THAT COMPETES IN THAT MARKET? 11 BUT THAT'S NOT GOING TO BE THE SITUATION WITH THE 12 NEW EXAMINER OR THE FANG EXAMINER. 13 MR. BALABANIAN: IT DEFINITELY WILL, YOUR HONOR. 14 THE COURT: HOW? 15 MR. BALABANIAN: THE ECONOMIES THAT ARE 16 CONTEMPLATED -- AND I WANT TO REVIEW THEM WITH THE COURT AND 17 THE EVIDENCE WILL CONFIRM THEM -- RELATE TO DROPPING CERTAIN 18 CIRCULATION IN OUTLYING COMMUNITIES WHICH IS UNECONOMICAL AND 19 FOCUSING THE OPERATIONS ON SAN FRANCISCO, SAN MATEO COUNTY AND 20 POSSIBLY MARIN. 21 I WILL NOTE THAT THESE ARE PRECISELY THE MEASURES 22 WHICH PLAINTIFF'S EXPERTS HAVE ADVOCATED AS NECESSARY TO MAKE 23 THE PAPER -- 24 THE COURT: BUT IF YOU ARE KNOCKING OUT COMPETITION 25 IN SOME AREAS, YOU HAVE GOT TO ENHANCE COMPETITION IN OTHER JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 43 OPENING STATEMENT / BALABANIAN 1 AREAS TO OVERCOME WHAT YOU'RE LOSING. 2 MR. BALABANIAN: AND THAT'S EXACTLY WHAT WILL OCCUR. 3 MR. FANG CONTEMPLATES AND EXPECTS THAT THE EFFECT OF THE 4 IMPROVING COVERAGE IN SAN FRANCISCO AND MOVING THE PAPER TO THE 5 MORNING SLOT WILL INDEED RESULT IN NET INCREASE IN READERSHIP. 6 THE PAPER WILL BE A FULL COVERAGE PAPER WITH 7 NATIONAL/INTERNATIONAL NEWS. IT WILL FOCUS, HOWEVER, ON THE 8 BAY AREA. IT WILL BE -- WE WILL GIVE THE COURT EXAMPLES OF 9 SUCH PAPERS AS THEY EXIST IN OTHER CITIES. IT WILL BE A 10 GENUINE SECOND VOICE IN OUR CITY AND NOT ONLY PROVIDE ECONOMIC 11 COMPETITION, WHICH, AS THE JUSTICE DEPARTMENT STATED HAS NOT 12 EXISTED -- 13 THE COURT: WELL, IF ALL IT REQUIRES TO ACHIEVE 14 THAT, MR. BALABANIAN, IS $66 MILLION, IN THIS DAY AND AGE I 15 SHOULD THINK THERE WOULD BE LOTS OF PEOPLE COMING FORWARD WITH 16 THE MONEY IN ORDER TO DO THAT. 17 MR. BALABANIAN: I GATHER, YOUR HONOR, THERE WERE 18 NOT. I UNDERSTAND -- AND I WAS NOT PRIVY TO WHAT WAS GOING ON 19 ON THE OTHER SIDE OF THE SCREEN. BUT I UNDERSTAND AFTER 20 LENGTHY ATTEMPT TO FIND BUYERS, THERE WERE VERY, VERY FEW. 21 THESE TERMS WERE NEGOTIATED AT ARM'S LENGTH. THEY WOULD HAVE 22 OBVIOUSLY BEEN HAPPY TO HAVE MORE MONEY. THE AMOUNT THAT WAS 23 OBTAINED IS THE AMOUNT THAT MR. FANG BELIEVES THAT WILL ENABLE 24 HIM TO SUCCEED WITH A PRODUCT THAT COMPETES DIRECTLY IN SAN 25 FRANCISCO, A BETTER PAPER, A PAPER -- THE COURT ASKED JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 44 OPENING STATEMENT / BALABANIAN 1 MR. HALLING WHETHER THE NEW EXAMINER WILL COMPETE. THE ANSWER 2 TO THAT IS ABSOLUTELY. IT WILL COMPETE IN SAN FRANCISCO FOR 3 READERS. 4 THE COURT: BUT ISN'T IT A FACT THAT IT WILL NOT 5 COMPETE IN THE SAME MARKET THAT ITS COMPETITION IS NOT THE 6 CHRONICLE, IS NOT THE EXAMINER AS PRESENTLY CONSTITUTED, NOT 7 THE SAN JOSE MERCURY BUT ARE THESE ALTERNATIVE NEWSPAPERS? 8 MR. BALABANIAN: ABSOLUTELY NOT, YOUR HONOR. 9 THE COURT: THESE FREE DISTRIBUTION NEWSPAPERS, AND 10 THAT'S A DIFFERENT MARKET. 11 MR. BALABANIAN: IT WILL NOT BE A FREE DISTRIBUTION 12 NEWSPAPER. THE INDEPENDENTS WILL CONTINUE UNCHANGED IN THE 13 FREE DISTRIBUTION MARKET. THE EXAMINER IS A NEW PAPER. IT 14 WILL COMPETE HEAD TO HEAD WITH THE CHRONICLE. IT'S A PAID 15 SUBSCRIPTION NEWSPAPER, THE HOME DELIVERY. THERE WILL BE RACK 16 SALES. THEY WILL COMPETE FOR ADVERTISERS. THEY WILL COMPETE 17 FOR CUSTOMERS. 18 THE ONLY CHANGE IN COVERAGE, AS I SAY, IS A 19 GEOGRAPHIC ADJUSTMENT WHICH PLAINTIFF ITSELF ACKNOWLEDGES AND 20 INDEED ADVOCATES AS BEING DESIRABLE AS A WAY OF MAKING THE 21 PAPER MORE FOCUSED. 22 THE COURT: WELL, IF THAT'S ALL THERE IS TO IT, WHY 23 CAN'T HEARST DO THAT IN THE CURRENT OPERATION AND WHY WOULDN'T 24 HEARST HAVE IN FACT DONE IT SOME TIME AGO? 25 MR. BALABANIAN: I CAN'T SPEAK -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 45 OPENING STATEMENT / BALABANIAN 1 THE COURT: WHY WOULDN'T IT BE IN THE INTERESTS OF 2 BOTH HEARST AND THE CHRONICLE TO MAKE EXACTLY THOSE SAME 3 ADJUSTMENTS? 4 MR. BALABANIAN: YOUR HONOR, ALL I CAN TELL THE 5 COURT IS THAT MR. FANG CAN MAKE THESE THINGS HAPPEN. THERE ARE 6 REASONS WHY PERHAPS THEY CANNOT OCCUR AT HEARST. MR. FANG 7 OPERATES A VERY LEAN ORGANIZATION. HE HAS THE BENEFIT OF 8 EXISTING PUBLICATIONS, AND THERE ARE VERY SUBSTANTIAL SYNERGIES 9 AND ECONOMICS THAT WE WILL BE DESCRIBING TO THE COURT THAT HE 10 CAN ACHIEVE BY COMBINING PRODUCTION, CIRCULATION AND 11 DISTRIBUTION -- NOT EDITORIAL. I WANT TO EMPHASIZE, YOUR 12 HONOR, THAT THIS WILL BE AN ENTIRELY NEW PRODUCT. ANY NOTION 13 THAT THIS IS SIMPLY GOING TO BE A REINCARNATION OF AN 14 INDEPENDENT OR ANOTHER FREE NEWSPAPER IS COMPLETELY MISTAKEN. 15 INDEED, THE DREAM OF THE FANGS HAS LONG BEEN TO OWN 16 A DAILY NEWSPAPER SO THAT THEY CAN OFFER THE KIND OF 17 COVERAGE-BREAKING NEWS, THE KIND OF COVERAGE OF SPORTS, 18 CULTURAL EVENTS WHICH ONLY A DAILY NEWSPAPER CAN OFFER. IT'S 19 SIMPLY NOT POSSIBLE FOR A PAPER WHICH PUBLISHES ON THE CYCLE OF 20 THE FANGS' PAPER, THE CURRENT PAPER, TO COVER THOSE THINGS. WE 21 ARE TALKING ABOUT A COMPLETELY DIFFERENT NEWSPAPER. WE ARE 22 TALKING ABOUT A PAPER WHICH WE THINK CAN SUCCEED BY MOVING TO 23 THE MORNING SLOT, BY USING NEW TECHNOLOGY, BY ACHIEVING THE 24 SYNERGIES WITH THE FANGS' CURRENT PUBLICATIONS AND, MOST 25 IMPORTANTLY, OR AT LEAST AS IMPORTANTLY, BY TAKING ADVANTAGE OF JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 46 OPENING STATEMENT / BALABANIAN 1 THIS TRANSITIONAL COST REIMBURSEMENT. 2 I THINK, YOUR HONOR, THAT ALL WE NEED TO DEMONSTRATE 3 IS AT THE END OF THE DAY, WHEN THESE TRANSACTIONS HAVE TAKEN 4 PLACE, NOT ONLY WILL THERE -- THERE WILL BE NO DIMINUTION IN 5 COMPETITION. I DON'T THINK IT'S INCUMBENT UPON US TO SHOW WHAT 6 THE JUSTICE DEPARTMENT FOUND, THAT IN FACT THERE WILL BE AN 7 ENHANCEMENT OF COMPETITION. BUT INSTEAD THE JOA WITH ITS FIXED 8 PRICES AND SET RATES, WE WILL HAVE TRUE ECONOMIC COMPETITION IN 9 THE ADVERTISER MARKET. 10 I THINK ALSO I CAN SAY WITH SOME CONFIDENCE, YOUR 11 HONOR -- I SUSPECT THE COURT IS FAMILIAR WITH THE MUSCULAR 12 JOURNALISM AT WHICH THE FANGS HAVE PRACTICED IN THE PAST -- 13 THERE WILL BE NO DIMINUTION OF EDITORIAL COMPETITION IN THIS 14 CITY. 15 WHAT WE OFFER TO THE CITY IS THE BRIGHT PROSPECT OF 16 THE NEW, EXCITING, DAILY NEWSPAPER GOING HEAD TO HEAD WITH THE 17 CHRONICLE FOR ITS CUSTOMERS, FOR ADVERTISERS, GOING HEAD TO 18 HEAD WITH THE CHRONICLE IN IT COVERAGE OF LOCAL NEWS, SPORTS, 19 CULTURAL EVENTS -- THE FULL RANGE OF SUBJECTS THAT ARE OF 20 INTEREST TO THE PEOPLE OF SAN FRANCISCO WHILE NOT FOR GOING 21 NATIONAL AND INTERNATIONAL COVERAGE, WHICH, AS IS EXPECTED, 22 WILL BE HANDLED IN PART BY TAKING ADVANTAGE OF SOME OF THE NEW 23 TECHNOLOGIES WHICH ARE AVAILABLE. 24 I WANT TO DISPEL AS CLEARLY AS I CAN FROM THE 25 COURT'S MIND ANY NOTION THAT THIS IS A NICHE PRODUCT -- THAT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 47 OPENING STATEMENT / BALABANIAN 1 THE FANGS SINCERELY INTEND -- AND I DID NOT HEAR THEIR 2 SINCERELY QUESTIONED IN MR. ALIOTO'S PRESENTATION, ONLY THEIR 3 JUDGMENT IN BELIEVING THAT IN FACT THEY CAN MAKE IT WORK. 4 YOUR HONOR, THE FANGS TOOK THE SAN FRANCISCO 5 INDEPENDENT, WHICH HAD A CIRCULATION OF 40,000 -- IT NOW HAS A 6 CIRCULATION TEN TIMES THAT. THEY TOOK A GROUP OF PENINSULA 7 PAPERS THAT HAD FAILED AND MADE THEM SUCCESSES. 8 THEY HAVE SUCCEEDED WHERE MANY HAVE FAILED. ALL 9 THEY ASK FROM THIS COURT IS AN OPPORTUNITY TO MAKE A SUCCESS OF 10 THE EXAMINER, TO BRING THEIR ENERGY, THEIR IMAGINATION, TO -- 11 TO FRUITION FOR WHICH THEY HAVE LONG DREAMED, OF OWNING A DAILY 12 NEWSPAPER WHICH CAN ACCOMPLISH THINGS THAT THEY CANNOT POSSIBLY 13 ACCOMPLISH IN THEIR EXISTING -- WITH THEIR EXISTING PAPER. 14 THAT PAPER WILL BE CONTINUED, AS I SAY. IT WILL NOT DISAPPEAR. 15 THEY HAVE BEEN -- THEIR PLANS HAVE BEEN EXTENSIVELY SCRUTINIZED 16 IN WAYS WHICH I SUSPECT EVEN THIS TRIAL WILL NOT PERMIT BY THE 17 DEPARTMENT OF JUSTICE, WHICH CONCLUDED, AS THE COURT IS WELL 18 AWARE, THAT THE COMBINATION OF THESE TRANSACTIONS IS NOT ONLY 19 NOT NON-COMPETITIVE, IT IS PRO-COMPETITIVE AND WILL BRING OUR 20 CITY COMPETITION IT HAS NOT YET ENJOYED. 21 YOUR HONOR, WITH ALL RESPECT WE SIMPLY ASK THE COURT 22 TO PRESERVE THE BRIGHT PROSPECT OF A NEW, FULLY COMPETITIVE, 23 DAILY NEWSPAPER IN SAN FRANCISCO WHICH DOES NOT NOW EXIST. AND 24 WE RESPECTFULLY ASK IT TO RESIST THE INVITATION TO ENLIST ITS 25 PROCESSES IN WHAT WE BELIEVE IS THE SHABBY CAUSE FOR WHICH THIS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 48 OPENING STATEMENT / BALABANIAN 1 ACTION IS BEING BROUGHT. 2 THANK YOU, YOUR HONOR. 3 THE COURT: VERY WELL. THANK YOU, MR. BALABANIAN. 4 COUNSEL, WE ARE READY FOR THE FIRST WITNESS. 5 WE HAVE BEEN GOING, ALTHOUGH NOT IN COURT SESSION, 6 FOR QUITE SOME TIME WITH SETTLEMENT DISCUSSIONS BEFORE WE BEGAN 7 IN COURT. I WOULD BE INCLINED, MR. ALIOTO, TO TAKE OUR LUNCH 8 BREAK NOW TO GIVE YOU A CHANCE TO CATCH YOUR BREATH AND 9 ORGANIZE YOUR FIRST WITNESS AND THEN START YOUR FIRST WITNESS 10 AFTER LUNCH. BUT I WILL BE GUIDED BY YOUR AVAILABILITY AND 11 THAT -- THAT OF YOUR WITNESS. 12 MR. ALIOTO: THAT'S FINE, YOUR HONOR. 13 THE COURT: ALL RIGHT. 14 MR. BALABANIAN: YOUR HONOR, WE DO HAVE A FEW 15 MOTIONS THAT I BELIEVE ARE PENDING. I DON'T KNOW WHAT IS THE 16 COURT'S WISH AS TO WHEN TO HEAR THEM. 17 THE COURT: WELL, LET'S SEE, YOU HAVE, I THINK, TWO 18 MOTIONS IN LIMINE, IS IT? 19 MR. BALABANIAN: YES, YOUR HONOR. 20 MR. ROSCH: YES, YOUR HONOR. THIS IS TOM ROSCH. 21 AND I DID WANT TO LET THE COURT KNOW THAT THERE ARE GOING TO BE 22 SEVERAL OTHER OBJECTIONS TO EVIDENCE. ONE OF THEM WILL BE TO 23 DR. COMANOR'S TESTIMONY WITH RESPECT TO THE LAW. HE IS AN 24 ECONOMIST. 25 THE COURT: WHO IS THE FIRST WITNESS GOING TO BE? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 49 1 MR. ALIOTO: MR. WHITE, YOUR HONOR. AND THEN AFTER 2 MR. WHITE, MR. SIAS. MR. -- PROFESSOR COMANOR WILL NOT BE ON 3 UNTIL WEDNESDAY. 4 THE COURT: WHY DON'T WE TAKE THIS UP AT THE END OF 5 THE DAY? WE HAVE MR. SIAS, MR. WHITE. 6 MR. ALIOTO: AND THEN MR. ASHER. 7 THE COURT: AND THEN MR. ASHER. AND THEN CAN WE NOT 8 TAKE THIS UP LATER? 9 MR. ROSCH: OF COURSE, YOUR HONOR. I JUST WANTED IN 10 ACCORDANCE WITH YOUR RULES TO LET YOU KNOW THAT WE ARE GOING TO 11 BE -- IN FACT, WE WILL BE LODGING AN IN LIMINE MOTION WITH 12 RESPECT TO THIS FIRST THING TOMORROW. AND WE WILL BE PROBABLY 13 FILING AT SOME POINT A MOTION TO STRIKE PARTS OF DR. COMANOR'S 14 TESTIMONY ON DAUBERT GROUNDS, AS WELL. 15 THE COURT: ALL RIGHT. 16 MR. ROSCH: BUT I JUST WANTED TO LET THE COURT KNOW 17 THAT THESE WERE COMING DOWN THE PIKE. 18 THE COURT: VERY WELL. 19 MR. ROSCH: THANK YOU. 20 THE COURT: I APPRECIATE THAT. 21 BUT WE HAVE THESE WITNESSES SUCH AS MR. ASHER AND 22 MR. SIAS AND -- 23 MR. ALIOTO: MR. WHITE. 24 THE COURT: MR. WHITE. 25 MR. ALIOTO: YES, SIR. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 50 1 THE COURT: ALL OF WHOM HAVE MANY OTHER 2 RESPONSIBILITIES THAN SIMPLY SITTING IN THIS COURTROOM. AND SO 3 WE WANT TO FACILITATE THE PRESENTATION OF TESTIMONY BY THOSE 4 WITNESSES. 5 BUT IF IT IS MORE CONVENIENT TO TAKE OUR BREAK NOW 6 RATHER THAN AFTER THE FIRST WITNESS, THAT MIGHT BE THE MOST 7 EFFICIENT WAY TO PROCEED. 8 MR. ALIOTO: THAT'S FINE, YOUR HONOR. 9 THE COURT: LET'S RESUME, THEN, COUNSEL, AT 1:15 OR 10 1:30? WHAT'S YOUR PLEASURE? 11 MR. ALIOTO: WHATEVER PLEASES YOUR HONOR. 12 THE COURT: WELL, ALL RIGHT. WHY DON'T WE -- WHY 13 DON'T WE RESUME AT 1:30 AND THEN YOU CAN HAVE MR. WHITE AS YOUR 14 FIRST WITNESS. 15 MR. ALIOTO: YES, SIR. 16 THE COURT: ALL RIGHT. 17 (LUNCH RECESS TAKEN AT 12:10 P.M.) 18 19 20 21 22 23 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 51 1 AFTERNOON SESSION 1:35 P.M. 2 3 THE COURT: VERY WELL, MR. ALIOTO, CALL YOUR FIRST 4 WITNESS. 5 MR. ALIOTO: IF IT PLEASE THE COURT, BEFORE WE CALL 6 A WITNESS, WE WOULD REQUEST THAT WE PREPARED A DOCUMENT THAT 7 HAS A LIST OF THE DIFFERENT EXHIBITS THAT AT LEAST REILLY AND 8 THE CHRONICLE AND HEARST HAVE AGREED TO, AND THEN WE'LL SUBMIT 9 IT TO EXIN, AND THEN THEY CAN TAKE A LOOK AND SEE IF THERE'S 10 ANY PROBLEM WITH THESE EXHIBITS. AND WE WOULD AGREE THAT ALL 11 OF THESE EXHIBITS WOULD BE ADMISSIBLE INTO EVIDENCE. 12 THE COURT: ALL RIGHT. DO YOU HAVE SOMETHING FOR ME 13 OR IS THIS SOMETHING YOU NEED TO EXCHANGE WITH THE OTHER SIDE? 14 MR. ALIOTO: WE WANT TO FILE IT ACTUALLY. 15 MR. HALLING: YOUR HONOR, WHAT WE HAVE IS A COURT 16 EXHIBIT REFLECTING AGREEMENT BETWEEN THE PLAINTIFF AND HEARST 17 AND CHRONICLE AND LARGELY AGREEMENT FROM MR. BALABANIAN. IT'S 18 OVER A HUNDRED EXHIBITS THAT CAN BE RECEIVED IN EVIDENCE. 19 THERE ARE ONLY A FEW I BELIEVE THAT THERE'S ANY QUESTIONS 20 ABOUT. PLAINTIFF AND HEARST AND CHRONICLE AGREE THAT ALL OF 21 THESE CAN BE RECEIVED. 22 WE'D LIKE TO MAKE IT COURT'S EXHIBIT 1, OTHERWISE WE 23 HAVE TO READ A HUNDRED SOME EXHIBITS INTO THE RECORD. 24 THE COURT: MAY I SEE WHAT YOU'RE LOOKING AT? 25 MR. NEVINS: YOUR HONOR, THIS IS TOM NEVINS. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 52 1 THERE'S ALSO A SECOND LETTER WHERE WE REACHED A FURTHER 2 AGREEMENT BETWEEN THE PLAINTIFF AND HEARST. 3 THE COURT: I SEE. YOU SIMPLY WANT THE RECORD TO 4 NOTE THAT THE EXHIBITS THAT ARE DENOTED IN ATTACHMENT A AND 5 MR. NEVIN'S APRIL 28TH LETTER TO MR. SHULMAN ARE ENTERED BY 6 STIPULATION; CORRECT? 7 MR. NEVINS: THAT'S CORRECT, YOUR HONOR. 8 THE COURT: AND, IN ADDITION, THE LETTER SAYS FIVE 9 EXHIBITS NOTED IN SHULMAN'S APRIL 30 LETTER TO NEVINS ARE ALSO 10 ADMITTED BY STIPULATION; CORRECT? 11 MR. NEVINS: THAT'S CORRECT, YOUR HONOR. 12 THE COURT: FIVE OR -- 13 MR. SHULMAN: THERE'S ONE YOU DIDN'T AGREE TO. 14 THE COURT: I BELIEVE THERE ARE FIVE; ARE THERE NOT? 15 MR. NEVINS: EXHIBIT P-32 IS NOT AGREED TO. THE 16 OTHER ONES LISTED ON THAT SECOND LETTER ARE STIPULATED TO, YOUR 17 HONOR. 18 THE COURT: ALL RIGHT. SO THAT WILL BE P-70, P-71 19 AND P-79, P-80 AND P-86 ARE ADMITTED BY STIPULATION; CORRECT? 20 MR. SHULMAN: YES, YOUR HONOR. 21 THE COURT: BUT NOT P-32. 22 MR. NEVINS: RIGHT. 23 (PLAINTIFF'S EXHIBITS 70, 71, 79, 80, 24 86 RECEIVED IN EVIDENCE) 25 /// JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 53 1 MR. HOCKETT: YOUR HONOR, CHRIS HOCKETT FOR 2 INTERVENOR AND DEFENDANT EXIN. 3 THAT'S TRUE AS BETWEEN THE HEARST AND PLAINTIFF. WE 4 HAVE HAD THE CHANCE TO REVIEW THE SAME LIST AND WE WILL 5 STIPULATE TO THE ADMISSIBILITY OF ALL THE PROPOSED EXHIBITS ON 6 THE LIST WITH THE EXCEPTION OF EXHIBITS 107 THROUGH 109, WHICH 7 PERTAIN TO A SAN MATEO COUNTY RENT DISPUTE THAT HAS NOTHING TO 8 DO WITH THIS ACTION, AND -- 9 THE COURT: THAT'S P-107? 10 MR. HOCKETT: P-107 THROUGH 109. 11 THE COURT: ALL RIGHT. 12 MR. HOCKETT: AND THEN P-101 THROUGH 105 WE WOULD 13 STIPULATE TO THE ADMISSIBILITY SUBJECT TO OUR MOTION IN LIMINE 14 WHICH GOES TO THE CONFIDENTIALITY OF SOME OF THE BUSINESS 15 INFORMATION CONTAINED IN THOSE DOCUMENTS. I DON'T BELIEVE THAT 16 ANY OF THOSE DOCUMENTS, THAT IS 101 TO 105, RELATE AT ALL TO 17 MR. WHITE'S TESTIMONY OR, FOR THAT MATTER, ANY OTHER WITNESS 18 SCHEDULED FOR TODAY. SO WE CAN RESERVE, AS THE COURT PROPOSED 19 THE ARGUMENT ON THE MOTION IN LIMINE, UNTIL LATER TODAY. 20 THE COURT: VERY WELL. THANK YOU, MR. HOCKETT. 21 MR. HUSTON: YOUR HONOR, PETER HUSTON ON BEHALF OF 22 THE CHRONICLE. 23 WE ARE ABLE TO STIPULATE TO A VAST NUMBER OF THE 24 EXHIBITS ON THIS LIST. THERE ARE A FEW WITH WHICH WE'RE GOING 25 TO RESERVE RELEVANCE OBJECTIONS TO THERE ARE ALONG THE LINES OF JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 54 1 WHAT MR. ROSCH BROUGHT UP BEFORE THE BREAK. 2 IT'S MY UNDERSTANDING THAT PLAINTIFF'S COUNSEL HAVE 3 STIPULATED TO THE ADMISSIBILITY OF ALL OF THE CHRONICLE'S 4 EXHIBITS. 5 MR. SHULMAN: CORRECT. 6 MR. HOCKETT: AND WHILE WE'RE AT IT, YOUR HONOR, THE 7 PLAINTIFF HAS STIPULATED TO ALL OF INTERVENOR'S EXHIBITS EXCEPT 8 THOSE NUMBERED 84, 111, 133, 134 AND 135. 9 MR. SHULMAN: THAT'S CORRECT. 10 (PAUSE IN PROCEEDINGS.) 11 THE COURT: VERY WELL. 12 MR. HOCKETT: THANK YOU, YOUR HONOR. 13 THE COURT: NOW, READY WITH THE FIRST WITNESS, 14 MR. ALIOTO? 15 MR. ALIOTO: I AM, YOUR HONOR. THANK YOU. 16 THE COURT: VERY WELL. PLEASE CALL YOUR FIRST 17 WITNESS. 18 MR. ALIOTO: MAY IT PLEASE THE COURT, THE PLAINTIFFS 19 WOULD CALL TO THE STAND MR. TIMOTHY WHITE. 20 THE CLERK: PLEASE RAISE YOUR RIGHT HAND TO BE 21 SWORN. 22 TIMOTHY O. WHITE, 23 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN, 24 TESTIFIED AS FOLLOWS: 25 THE CLERK: THANK YOU. PLEASE BE SEATED. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 55 WHITE - DIRECT / ALIOTO 1 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST FOR 2 THE RECORD. 3 THE WITNESS: TIMOTHY, MIDDLE INITIAL O, LAST NAME 4 WHITE, W-H-I-T-E. 5 DIRECT EXAMINATION 6 BY MR. ALIOTO: 7 Q. YOU ARE THE EDITOR AND THE PUBLISHER OF THE SAN FRANCISCO 8 EXAMINER? 9 A. CORRECT. 10 Q. AND YOU HAVE BEEN SINCE JANUARY OF 1999? 11 A. CORRECT. 12 Q. PRIOR TO THAT TIME, YOU SERVED, AS I UNDERSTAND IT, AS 13 PUBLISHER OF THE HEARST PAPER IN ALBANY, NEW YORK? 14 A. THAT'S RIGHT. 15 Q. AND THAT WAS THE TIMES UNION? 16 A. YES. 17 Q. WHEN YOU CAME TO SAN FRANCISCO TO SERVE AS THE PUBLISHER 18 AND EDITOR OF THE SAN FRANCISCO EXAMINER, WHO WAS IT THAT 19 OFFERED YOU THAT JOB? 20 A. GEORGE IRISH. 21 Q. AT THE TIME THAT YOU CAME HERE, DID YOU FAMILIARIZE 22 YOURSELF WITH WHAT'S BEEN DESCRIBED AS THE JOINT OPERATING 23 AGREEMENT BETWEEN THE TWO NEWSPAPERS? 24 A. I READ THAT ONCE ON THE WAY OUT HERE, YES. 25 Q. WHEN YOU SAY "ON THE WAY OUT HERE," OUT FROM NEW YORK? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 56 WHITE - DIRECT / ALIOTO 1 A. YES. 2 Q. THE PAPER THAT YOU WERE A PUBLISHER OF IN ALBANY, THAT WAS 3 NOT A JOINT OPERATING ARRANGEMENT OR AGREEMENT TYPE PAPER; IS 4 THAT RIGHT? 5 A. THAT'S ACCURATE. 6 Q. ALL RIGHT. LET ME HAND YOU WHAT IS NOW IN EVIDENCE BY 7 AGREEMENT AS EXHIBIT 1. EXHIBIT 1 IS THE JOINT OPERATING 8 AGREEMENT BETWEEN THE CHRONICLE PUBLISHING COMPANY AND THE THEN 9 NAMED HEARST PUBLISHING COMPANY. IT HAS A DATE OF OCTOBER 23, 10 1964, AND IT HAS ON PAGE 48 AN EFFECTIVE DATE OF JANUARY 4, 11 1965. 12 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 13 THE COURT: YES, YOU MAY. 14 BY MR. ALIOTO: 15 Q. IS THAT A COPY OF THE JOINT OPERATING AGREEMENT THAT YOU 16 FAMILIARIZED YOURSELF WITH WHEN YOU WERE COMING OUT FROM NEW 17 YORK? 18 A. (WITNESS EXAMINES DOCUMENT.) THERE'S MORE HERE THAN WHAT 19 I FAMILIARIZED MYSELF WITH. 20 Q. WHAT PORTIONS DID YOU FAMILIARIZE YOURSELF WITH? UP TO 21 PAGE -- UP TO JUST THE FIRST PART? 22 A. YEAH, THE FIRST PART. 23 Q. UP TO PAGE 50? 24 A. THAT'S ACCURATE. WELL, LET'S SEE... YES, UP TO PAGE 50. 25 Q. ALL RIGHT. NOW, WAS IT YOUR UNDERSTANDING UNDER THIS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 57 WHITE - DIRECT / ALIOTO 1 AGREEMENT -- WAS IT YOUR UNDERSTANDING UNDER THIS AGREEMENT 2 THAT BOTH THE CHRONICLE AND THE EXAMINER HAD THE POWER AND THE 3 RESPONSIBILITY TO SET THE RATES FOR ADVERTISING AND 4 CIRCULATION? 5 A. I KNOW THAT'S WHAT THE LANGUAGE SAID. I HAD BEEN TOLD 6 THAT IN PRACTICE THE AGENCY, SINCE THE OVERWHELMING -- 7 VIRTUALLY ALL OF THE ADVERTISING SALES WERE IN COMBO, IN 8 COMBINATION WITH THE TWO PAPERS, THAT BASICALLY THE AGENCY 9 PROPOSED RATES AND THE TWO PRINCIPALS APPROVED. 10 Q. WHO TOLD YOU THAT? 11 A. GEORGE IRISH. 12 Q. AND MR. IRISH IS IN CHARGE OF THE NEWSPAPER DIVISION OF 13 THE HEARST CORPORATION IN NEW YORK; IS THAT RIGHT? 14 A. THAT'S CORRECT. 15 Q. BY THE WAY, THERE ARE APPROXIMATELY 12 HEARST NEWSPAPERS 16 THROUGHOUT THE COUNTRY? 17 A. 12 IS THE CORRECT NUMBER, YES. 18 Q. AND IN ADDITION TO NEWSPAPERS, THE HEARST CORPORATION HAS 19 OTHER INTERESTS IN MAGAZINES AND OTHER MEDIA, CABLE, THINGS 20 LIKE THAT; IS THAT RIGHT? 21 A. YES. 22 Q. AND MR. IRISH IS IN CHARGE OF THAT SECTION WITH REGARD TO 23 NEWSPAPERS? 24 A. THAT'S CORRECT. 25 Q. AND -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 58 WHITE - DIRECT / ALIOTO 1 THE COURT: WAS THE PAPER IN ALBANY, NEW YORK, THAT 2 YOU WERE PUBLISHER OF A HEARST NEWSPAPER? 3 THE WITNESS: YES, IT WAS AND IS. 4 BY MR. ALIOTO: 5 Q. OKAY. NOW, I WANT TO DIRECT YOUR ATTENTION -- I WANT TO 6 DIRECT YOUR ATTENTION TO PAGE 1 OF THE AGREEMENT, AND THESE ARE 7 THE WITNESS PAGES. THEN IF YOU'LL GO TO PAGE 2 AND IF YOU'LL 8 TAKE A LOOK AT THE LAST WHEREAS. 9 A. (WITNESS EXAMINES DOCUMENT.) PAGE 2, THE LAST WHEREAS? 10 Q. YES. PAGE 2, YES. 11 A. YEAH. 12 Q. I DON'T KNOW HOW YOU GET CLOSER ON THIS, BUT IT'S PAGE 2. 13 AND IF YOU LOOK AT THE LAST WHEREAS, YOU CAN SEE IT STATES, 14 QUOTE: 15 "WHEREAS, CHRONICLE AND HEARST WILL HAVE 16 COMPLETE CONTROL OVER THE ADVERTISING RATES AND 17 CIRCULATION PRICES RELATING TO THE RESPECTIVE 18 DAILY MORNING AND AFTERNOON NEWSPAPERS OPERATED 19 BY THEM." 20 DO YOU SEE THAT? 21 A. YES. 22 Q. BUT IT'S YOUR TESTIMONY THAT YOU WERE ADVISED THAT THAT'S 23 NOT THE WAY IT ACTUALLY WOULD WORK; IS THAT RIGHT? 24 A. WELL, I ACTUALLY INTERPRETED THAT WHEREAS TO MEAN THAT THE 25 PRINCIPALS WOULD RETAIN CONTROL AND THAT THE AGENCY COULDN'T GO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 59 WHITE - DIRECT / ALIOTO 1 OFF COMPLETELY ON ITS OWN WITHOUT THE APPROVAL OF THE 2 PRINCIPALS. 3 Q. WELL, IN ADDITION TO CONTROL, YOU UNDERSTOOD YOU HAD THE 4 RESPONSIBILITY; ISN'T THAT TRUE? 5 A. YES. 6 Q. OKAY. SO YOU UNDERSTOOD THAT THE NEWSPAPERS HAD NOT ONLY 7 THE AUTHORITY BUT THE RESPONSIBILITY TO SET THE RATES FOR 8 CIRCULATION AND FOR ADVERTISING FOR EACH OF THEIR RESPECTIVE 9 PAPERS? 10 A. WELL, IT WAS -- I THINK WHERE I PART COMPANY WITH THAT IS 11 FOR EACH OF THE RESPECTIVE PAPERS. FOR THE TWO PAPERS 12 COMBINED, YES. IT REQUIRED JOINT APPROVAL TO APPROVE THE 13 AGENCY'S RECOMMENDATION. 14 Q. WOULD YOU LOOK, PLEASE, AT PAGE 35 OF EXHIBIT 1 NOW IN 15 EVIDENCE, THE JOA AGREEMENT AND AT THE VERY TOP OF THE PAGE AT 16 PAGE 35? 17 A. (WITNESS EXAMINES DOCUMENT.) GOT IT. 18 Q. AND AT THE TOP OF THE PAGE OF 35 -- IT STARTS ON 34, ONE 19 SENTENCE, IT BEGINS AND GOES AS FOLLOWS, QUOTE: 20 " CHRONICLE AND HEARST WILL HAVE AUTHORITY 21 OVER AND RESPONSIBILITY FOR DETERMINING THE 22 ADVERTISING RATES AND CIRCULATION PRICES, 23 INCLUDING BUT NOT LIMITED TO TERMS AND 24 CONDITIONS RELATING TO SUCH RATES AND PRICES OF 25 THEIR RESPECTIVE DAILY NEWSPAPERS, AND SUCH JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 60 WHITE - DIRECT / ALIOTO 1 DETERMINATION SHALL NOT BE SUBJECT TO 2 ARBITRATION." 3 DO YOU SEE THAT? 4 A. YES, I DO. 5 Q. DOES THAT NOW -- IN LOOKING AT THAT, YOU KNOW NOW THAT THE 6 JOA ACTUALLY REFERS TO "THEIR RESPECTIVE DAILY NEWSPAPERS"; 7 CORRECT? 8 A. IT WOULD CERTAINLY APPEAR TO SAY THAT. 9 Q. WELL, IT DOES SAY THAT; DOES IT NOT? 10 A. IT DOES SAY THAT. 11 Q. OKAY. SO THAT AT THAT TIME, THEN, AT THAT TIME, 12 NOTWITHSTANDING THAT LANGUAGE, IT WAS YOUR UNDERSTANDING THAT 13 IT WAS SOMETHING THAT WAS GOING TO BE SUGGESTED BY THE AGENCY, 14 PRICES AND RATES WOULD BE SUGGESTED BY THE AGENCY; IS THAT IT? 15 A. THAT IS. THAT IS MY UNDERSTANDING. 16 Q. AND HOW LONG -- AND WHAT IS YOUR UNDERSTANDING AS TO HOW 17 LONG THAT HAS HAPPENED? 18 A. WELL, ARRIVING IN JANUARY, '99, WHAT, ROUGHLY 34 YEARS 19 INTO THIS AGREEMENT, MY UNDERSTANDING WAS THAT THAT'S THE WAY 20 THINGS HAD BEEN DONE FOR A LONG TIME MOST OF THE 34 YEARS. 21 Q. NOW, YOU UNDERSTOOD ALSO, DID YOU NOT, THAT IF THE 22 CHRONICLE WANTED TO TELL YOU WHAT RATE YOU WERE GOING TO CHARGE 23 FOR YOUR ADVERTISING, YOU DIDN'T HAVE TO AGREE WITH THEM? 24 A. I DID UNDERSTAND THAT, YES. 25 Q. AND YOU ALSO UNDERSTOOD THAT IF YOU TOLD THE CHRONICLE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 61 WHITE - DIRECT / ALIOTO 1 WHAT RATE YOU WERE GOING TO CHARGE FOR YOUR ADVERTISING -- I 2 MEAN, WHAT RATE THAT THEY WERE GOING TO CHARGE FOR THEIR 3 ADVERTISING, YOU COULDN'T DO ANYTHING ABOUT THAT EITHER? 4 A. I UNDERSTOOD THAT. 5 Q. AND YOU UNDERSTOOD THAT THAT HAPPENED -- THAT APPLIED NOT 6 ONLY TO RATES FOR ADVERTISING BUT ALSO FOR RATES FOR 7 CIRCULATION? 8 A. THAT'S CORRECT. 9 Q. AND THE CIRCULATION WOULD INCLUDE BOTH HOME DELIVERY 10 PRICES AND PRICES FOR THE NEWSPAPER ON THE STAND? 11 A. CORRECT. 12 Q. NOW, YOU CALL THE PAPERS ON THE STAND STREET SALES OR -- 13 A. NO. MORE BROADLY SINGLE COPY, ALL SINGLE COPY SALES. 14 Q. SINGLE COPY SALES. 15 A. YES. 16 Q. ALL RIGHT. NOW, DID YOU ALSO UNDERSTAND, UNDER THE JOINT 17 OPERATING AGREEMENT, THAT THE SAN FRANCISCO AGENCY WAS AN 18 OPERATION OR AGENCY, AN INDEPENDENT COMPANY OF THE CHRONICLE 19 AND THE EXAMINER? 20 A. JOINTLY OWNED BY THE BOTH OF THEM, RIGHT. 21 Q. IT'S INDEPENDENT BUT JOINTLY OWNED BY BOTH? 22 A. UH-HUH. 23 Q. OKAY. 24 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR? 25 THE COURT: VERY WELL. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 62 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. ALL RIGHT. LET'S DRAW THIS JUST FOR ONE MINUTE. I'M 3 GOING TO PUT UP HERE ON THE TOP LEFT "SAN FRANCISCO CHRON" AND 4 ON TOP RIGHT "SAN FRANCISCO EXAMINER." 5 AND SO IT WAS YOUR UNDERSTANDING THAT THEY JOINTLY 6 OWNED WHAT'S CALLED THE SAN FRANCISCO -- THE SAN FRANCISCO 7 NEWSPAPER AGENCY; IS THAT RIGHT? 8 A. CORRECT. 9 Q. NOW, THE FUNCTION OF THE SAN FRANCISCO NEWSPAPER AGENCY 10 WAS TO TAKE CARE OF CIRCULATION; IS THAT RIGHT? 11 A. THAT'S CORRECT. 12 Q. AND IT WAS ALSO SUPPOSED TO TAKE CARE OF DISTRIBUTION; IS 13 THAT RIGHT? 14 A. CORRECT. 15 Q. THEY RAN THE PRESSES? 16 A. CORRECT. 17 Q. OKAY. AFTER THEY -- ALL THE INCOME THAT WOULD COME INTO 18 ANY OF THE PAPERS WOULD HAVE TO COME JUST FROM TWO SOURCES; IS 19 THAT RIGHT? 20 A. I'M NOT SURE I UNDERSTAND THE QUESTION. 21 Q. INCOME INTO THE PAPERS WOULD COME, LET'S SAY 99 PERCENT, 22 FROM ADVERTISING OR FROM SUBSCRIBERS; IS THAT RIGHT? 23 A. CORRECT, OKAY. 24 Q. THOSE ARE THE TWO SOURCES OF INCOME? 25 A. RIGHT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 63 WHITE - DIRECT / ALIOTO 1 Q. AND THE SAN FRANCISCO NEWSPAPER AGENCY WOULD TAKE THAT 2 MONEY IN FOR BOTH PAPERS; IS THAT RIGHT? 3 A. THAT'S ACCURATE. 4 Q. AND THEN AFTER THEY TOOK THE MONEY IN FOR BOTH PAPERS, 5 THEN THEY WOULD TAKE CARE OF THE CIRCULATION, THE EXPENSES FOR 6 CIRCULATION, DISTRIBUTION, THINGS LIKE THAT; IS THAT RIGHT? 7 A. CORRECT. 8 Q. THEN AFTER THEY DEDUCTED THOSE COSTS FROM THAT INCOME THAT 9 THEY RECEIVED ON BEHALF OF BOTH THE PAPERS, WHAT DID THEY DO 10 WITH THE MONEY? 11 A. THE REMAINDER WAS REFERRED TO AS THE NET EXCESS. IT WOULD 12 BE SPLIT 50-50 ACCORDING TO THE 50 PERCENT OWNERSHIP SHARES OF 13 EACH PARTNER. 14 Q. OKAY. SO THAT THE END PRODUCT -- YOU CALL IT THE NET 15 WHAT? 16 A. EXCESS. 17 Q. AND BY THAT YOU MEAN THE REMAINING PORTION OF THE REVENUE 18 LESS THE EXPENSES OF RUNNING THE PRESSES, CIRCULATION, 19 DISTRIBUTION, EVERYTHING ELSE? 20 A. CORRECT. 21 Q. AND THEN THIS NET EXCESS, WHATEVER IT IS, WILL BE DIVIDED 22 50-50 TO THE EXAMINER -- 50 GOES TO THE EXAMINER AND 50 TO THE 23 CHRONICLE; CORRECT? 24 A. CORRECT. 25 Q. AND IS THAT SO REGARDLESS OF WHETHER OR NOT ONE OR THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 64 WHITE - DIRECT / ALIOTO 1 OTHER PAPER MAY BE MORE RESPONSIBLE FOR OR BRING IN MORE 2 REVENUE? 3 A. YES. 4 Q. SO IT MAY BE THAT THE CHRONICLE MIGHT BRING IN MORE 5 REVENUE THAN THE EXAMINER BUT NOTWITHSTANDING THAT, AT THE END 6 WHEN IT COMES TO THE NET EXCESS, IT'S A 50-50 DEAL; IS THAT 7 RIGHT? 8 A. THAT IS RIGHT. 9 Q. NOW, BY REASON OF THAT, CAN YOU DETERMINE WHETHER OR NOT 10 THE CHRONICLE MADE A PROFIT IN ANY PARTICULAR YEAR JUST ON ITS 11 OWN WITHOUT REGARD TO ANYTHING FROM THE EXAMINER? 12 MR. HALLING: OBJECTION, VAGUE AND AMBIGUOUS. 13 THE COURT: OVERRULED. 14 THE WITNESS: SO THE QUESTION -- I'M SORRY, WOULD 15 YOU REPEAT THE QUESTION? CAN I DETERMINE? 16 BY MR. ALIOTO: 17 Q. IS THERE ANY WAY TO DETERMINE THAT THE SAN FRANCISCO 18 CHRONICLE MADE MONEY ON ITS OWN, WITHOUT REGARD TO ANY REVENUES 19 FROM THE EXAMINER OR WITHOUT REGARD TO ANY EXPENSES WITH REGARD 20 TO THE EXAMINER, JUST THE CHRONICLE ALONE? 21 A. IS THERE ANY WAY I CAN DETERMINE THAT SITTING HERE? 22 Q. YES. YES. 23 A. NO. 24 Q. CAN YOU DETERMINE AS THE PUBLISHER OF THE EXAMINER, CAN 25 YOU DETERMINE WHETHER THE EXAMINER IS PROFITABLE OR NOT ON ITS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 65 WHITE - DIRECT / ALIOTO 1 OWN? 2 A. ON ITS OWN SITTING HERE, NOT LIKELY. 3 Q. NOW, AFTER THE NET EXCESS IS SPLIT 50-50, THEN IS IT 4 CORRECT THAT THE CHRONICLE AND THE EXAMINER THEN HAVE THEIR OWN 5 SO-CALLED EDITORIAL COSTS? 6 A. THAT'S RIGHT. 7 Q. AND IF YOU WOULD STATE TO THE COURT WHAT AN EDITORIAL COST 8 IS. 9 A. WELL, IT'S THE COST OF NEWSROOM FULL OF REPORTERS, COPY 10 EDITORS, PHOTOGRAPHERS, AND AS WELL AS THE EDITORIAL DEPARTMENT 11 ITSELF, A LIBRARY AND IN THIS CASE A VERY SMALL ACCOUNTING 12 FUNCTION. 13 Q. OKAY. 14 A. IT COVERS ALL THAT. 15 Q. OKAY. SO THEN AFTER YOU DEDUCT THESE EDITORIAL COSTS, 16 BOTH SIDES, THEN WHATEVER IS LEFT OVER IS THE PROFIT; IS THAT 17 RIGHT? 18 A. YES, THAT'S RIGHT. 19 Q. OKAY. SO THAT THE SAN FRANCISCO NEWSPAPER AGENCY HAS 20 NOTHING TO DO WITH THE EDITORIAL COSTS; IS THAT RIGHT? 21 A. CORRECT. 22 Q. ALL RIGHT. AND YOU DON'T GET YOUR PROFIT ULTIMATELY UNTIL 23 AFTER YOU DEDUCT YOUR EDITORIAL COSTS FROM WHATEVER YOUR 50-50 24 SPLIT IS; IS THAT RIGHT? 25 A. CORRECT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 66 WHITE - DIRECT / ALIOTO 1 Q. NOW, IN 1999, THE LAST FULL YEAR, WHAT WAS THE NET EXCESS? 2 WHAT WAS YOUR 50 PERCENT OF THE NET EXCESS? 3 A. IN 1999, 50 PERCENT. 4 Q. YOUR FIRST FULL YEAR AS THE PUBLISHER OF THE EXAMINER. 5 A. RIGHT. IT WAS APPROXIMATELY 40 -- ABOUT 40 MILLION. 6 Q. ABOUT $40 MILLION. SO, IN OTHER WORDS, THE NET EXCESS 7 MUST HAVE BEEN $80 MILLION, YOU GOT 40 AND THE CHRONICLE GOT 8 40; IS THAT IT? 9 A. CORRECT. 10 Q. AND THEN FROM THAT 40 YOU WOULD DEDUCT YOUR EDITORIAL 11 COSTS. WHAT WERE YOUR EDITORIAL COSTS IN 1999? 12 A. ABOUT 17 MILLION, EDITORIAL -- ALL THOSE -- ALL THOSE 13 COSTS I DESCRIBED TAKEN TOGETHER. 14 Q. WAS HOW MUCH? 15 A. ABOUT 17. 16 Q. OKAY. SO THAT YOU HAD A PROFIT LAST YEAR OF APPROXIMATELY 17 $23 MILLION OR SO; IS THAT RIGHT? 18 A. WELL, WE HAD WHAT WE REFERRED TO INTERNALLY IN HEARST AS A 19 NET INCOME BEFORE A NUMBER OF CORPORATE CHARGES THAT WE DON'T 20 CARRY HERE. 21 Q. OKAY. SO, IN OTHER WORDS, BUT THE OPERATING -- LET'S CALL 22 IT THEN THE NET PROFIT, MORE LIKE AN OPERATING PROFIT, AND THEN 23 THERE'S OTHER CORPORATE DEDUCTIONS THAT THE COMPANY MAKES? 24 A. RIGHT, PRETAX. 25 Q. OKAY. BUT THOSE RELATED TO THE PAPER IS THAT YOU MADE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 67 WHITE - DIRECT / ALIOTO 1 ABOUT $23 MILLION AND THEN YOU TAKE OFF THESE OTHER COSTS; IS 2 THAT IT? 3 A. CORRECT. 4 Q. AND SO WHAT DID YOU FINALLY END UP WITH? ABOUT 5 20 MILLION? 6 A. WELL, I DON'T SEE ANYTHING BEYOND THAT. 23 MILLION IS 7 WHERE MY RESPONSIBILITY STOPS. 8 Q. OKAY. NOW, IS IT YOUR UNDERSTANDING THAT THE PAPER, PRIOR 9 TO THE TIME THAT YOU BECAME THE PUBLISHER IN 1999, THAT THE 10 EXAMINER MADE A PROFIT? 11 A. AT LEAST FOR A FEW YEARS, YES. 12 Q. IT MADE A PROFIT OF OVER $20 MILLION. DOES THAT ACCORD 13 WITH YOUR UNDERSTANDING? 14 A. I BELIEVE THAT'S THE NUMBER FOR '98. PRIOR TO THAT, I 15 BELIEVE SOMETHING LOWER THAN THAT. I'M NOT SURE OF THE 16 NUMBERS. 17 Q. LET ME SHOW YOU A DOCUMENT WHICH IS MARKED AS NOW IN 18 EVIDENCE AS EXHIBIT 93. EXHIBIT 93 IS A DOCUMENT DATED 19 SEPTEMBER 23, 1999. IT PURPORTS TO BE A DOCUMENT THAT 20 SUMMARIZES THE FINANCIAL PROJECTIONS FOR THE SAN FRANCISCO 21 EXAMINER AND THE SAN FRANCISCO NEWS AGENCY FOR YEARS 2003. 22 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 23 THE COURT: VERY WELL. 24 BY MR. ALIOTO: 25 Q. TAKING A LOOK AT WHAT IS NOW 93 IN EVIDENCE, THAT IS -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 68 WHITE - DIRECT / ALIOTO 1 YOU ARE FAMILIAR WITH THAT DOCUMENT; ARE YOU NOT? YOU'VE SEEN 2 IT BEFORE? 3 A. (WITNESS EXAMINES DOCUMENT.) YES, I'VE SEEN THIS. 4 Q. OKAY. NOW, THIS STATES -- THIS IS -- IF YOU'LL LOOK ON 5 THE FRONT PAGE, IT IS HEARST NEWSPAPERS. IT'S A MEMORANDUM 6 HEARST NEWSPAPERS, AND THEN YOU SEE THE SIGNATURE OF GEORGE 7 IRISH; DO YOU NOT? 8 A. YES. 9 Q. AND YOU DO RECOGNIZE THAT AS HIS SIGNATURE? 10 A. YES. 11 Q. ALL RIGHT. AND IF YOU WOULD TURN TO PAGE 3 OF THE 12 DOCUMENT, AND IN PARTICULAR THERE IS A COLUMN IN THE MIDDLE 13 ENTITLED -- PAGE 3, NOT 2. PAGE 3. 14 A. NO, I'VE GOT 3. 15 Q. OKAY, YOU GOT IT. 16 AND IN THE MIDDLE OF THE DOCUMENT IT SAYS "NET 17 PROFIT." DO YOU SEE THAT? 18 A. YES. 19 Q. AND IT HAS IT FOR '98 AND '99. DO YOU SEE THAT? 20 A. YES. 21 Q. OKAY. NOW, FOR '98 IT SHOWS A NET PROFIT OF $22 MILLION 22 AND IN '99 A PROFIT OF 20 AND A HALF MILLION DOLLARS. DO YOU 23 SEE THAT? 24 A. YES, I DO. 25 Q. NOW, THEN IT TENDS TO PROJECT WHAT THE ANTICIPATED PROFIT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 69 WHITE - DIRECT / ALIOTO 1 OF THE EXAMINER IS GOING TO BE FOR 2000, 2001, 2002 AND 2003. 2 DO YOU SEE THAT? 3 A. YES. 4 Q. AND YOU SEE THAT IN 20 -- IN 2000 THE PROFIT IS 5 21 MILLION; IN 2001, THE PROFIT IS 22.8 MILLION; IN 2002 THE 6 PROFIT PROJECTED IS 22-POINT -- 23.3 MILLION; AND IN 2003 THE 7 PROFIT IS PROJECTED AT 25 MILLION? DO YOU SEE THAT? 8 A. I DO. 9 Q. DID ANYONE REPRESENT -- DID ANYONE, SINCE YOU'VE BEEN THE 10 PUBLISHER OF THE SAN FRANCISCO EXAMINER, EVER REPRESENT TO YOU 11 THAT THESE NUMBERS OR NUMBERS VERY SIMILAR, IN THIS RANGE, THE 12 20 TO 25 MILLION, WERE INACCURATE? 13 A. NO, THEY DID NOT. 14 Q. DID YOU MAKE $25 MILLION WHEN YOU WERE THE PUBLISHER OF 15 THE PAPER IN ALBANY? 16 A. CLOSE, BUT NOT. 17 Q. DID THE PAPER IN ALBANY FOLD? 18 A. NO. THE PAPER IN ALBANY ALSO DIDN'T HAVE A HUGE PARTNER. 19 MR. ALIOTO: I'LL MOVE TO STRIKE THAT LAST RESPONSE, 20 YOUR HONOR, AS BEING NONRESPONSIVE TO THE QUESTION. 21 THE COURT: IS THE ANSWER THE ALBANY PAPER DID NOT 22 HAVE A HUGE PARTNER? 23 THE WITNESS: CORRECT. 24 MR. ALIOTO: ALL RIGHT, YOUR HONOR, NEVER MIND. 25 I'LL WITHDRAW IT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 70 WHITE - DIRECT / ALIOTO 1 Q. AT THE TIME -- SHORTLY AFTER THE TIME THAT YOU BECAME THE 2 PUBLISHER OF THE EXAMINER, THE SAN FRANCISCO EXAMINER, WERE YOU 3 MADE AWARE OF A COMBINATION ADVERTISING PROGRAM OR PROMOTION 4 THAT WAS BEING PUT ON BY THE SAN FRANCISCO NEWSPAPER AGENCY ON 5 BEHALF OF BOTH THE CHRONICLE AND THE EXAMINER? 6 A. YES. 7 Q. AND DID YOU UNDERSTAND THAT PROGRAM WAS THAT 8 REPRESENTED -- THAT SUBSCRIBERS OF THE CHRONICLE WOULD BE 9 CALLED UP AND OFFERED A COPY OF THE EXAMINER? 10 A. CORRECT. 11 Q. AND DID YOU UNDERSTAND THAT SUBSCRIBERS OF THE EXAMINER 12 WERE CALLED UP AND OFFERED A FREE SUBSCRIPTION TO THE 13 CHRONICLE? 14 A. YES. 15 Q. AND DID YOU ALSO UNDERSTAND THAT EVEN THOUGH YOU WERE -- 16 EVEN THOUGH SAN FRANCISCO -- EVEN THOUGH SUBSCRIBERS THAT HAD 17 THE SAN FRANCISCO CHRONICLE, EVEN THOUGH THEY WERE GIVEN A FREE 18 SUBSCRIPTION TO THE EXAMINER, THAT THE EXAMINER WOULD COUNT 19 THAT AS PART OF THEIR CIRCULATION? 20 A. YES, I DID UNDERSTAND THAT. THAT WAS -- DO YOU WANT TO 21 UNDERSTAND MORE ABOUT THAT, OR DOES THAT -- 22 Q. I'LL BE ASKING YOU. 23 A. ALL RIGHT. 24 Q. AND IN ADDITION TO THAT, ISN'T IT CORRECT THAT CIRCULATION 25 AND THE IMPORTANCE OF THE CIRCULATION NUMBERS IS THAT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 71 WHITE - DIRECT / ALIOTO 1 CIRCULATION HAS A DIRECT IMPACT UPON ADVERTISING? 2 A. CORRECT. 3 Q. SO THAT THE MORE CIRCULATION YOU HAVE, THE BETTER 4 ADVERTISING YOU MIGHT BE ABLE TO GET IF YOU'RE A PAID DAILY 5 NEWSPAPER; IS THAT RIGHT? 6 A. YES. 7 Q. YES, OKAY. 8 AND ISN'T IT ALSO CORRECT THAT BECAUSE YOU'RE PAID, 9 THAT YOUR CIRCULATION NUMBERS ARE TABULATED AND AUDITED BY A 10 COMPANY CALLED ABC? 11 A. CORRECT, AUDIT BUREAU OF CIRCULATION, CORRECT. 12 Q. AND THAT GIVES THE ADVERTISERS THE OPPORTUNITY TO LOOK AT 13 THE CIRCULATION OF A PAPER AND BECAUSE IT'S PAID, THEY KNOW 14 THAT IT CAN BE VERIFIED, THOSE ARE VERIFIED CIRCULATION 15 NUMBERS? 16 A. YEP. YES. 17 Q. NOW, IN THIS PARTICULAR PROGRAM DID YOU UNDERSTAND THAT 18 THE CHRONICLE, MR. SIAS, OBJECTED TO THE PROGRAM? 19 A. YES. 20 Q. AND HE WROTE A LETTER TO MR. STEVEN FALK. MR. STEVEN FALK 21 IS THE PRESIDENT OF THE SAN FRANCISCO NEWSPAPER AGENCY; IS THAT 22 RIGHT? 23 A. THAT'S RIGHT. 24 Q. AND HE SENT A COPY OF THAT LETTER TO YOU; IS THAT RIGHT? 25 A. THAT'S CORRECT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 72 WHITE - DIRECT / ALIOTO 1 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 2 THE COURT: VERY WELL. 3 BY MR. ALIOTO: 4 Q. LET ME SHOW YOU WHAT IS NOW IN EVIDENCE AS EXHIBIT NUMBER 5 111. 6 A. (WITNESS EXAMINES DOCUMENT.) 7 Q. EXHIBIT NUMBER 111, NOW IN EVIDENCE, IS A DOCUMENT DATED 8 MARCH 11, 1999. IT IS DIRECTED TO MR. FALK. IT IS FROM 9 MR. SIAS AND THERE'S A CARBON COPY SENT TO YOU. 10 AND YOU DID IN FACT RECEIVE THIS DOCUMENT ON OR 11 ABOUT THE DATE INDICATED; DIDN'T YOU? 12 A. YES, I DID. 13 Q. BY THE WAY, IS THE PAPER IN ALBANY A MONOPOLY? 14 A. NO, IT IS NOT. 15 Q. WHAT'S THE COMPETING PAPER IN ALBANY? 16 A. THERE IS -- THERE ARE TWO COMPETING PAPERS IN THE METRO 17 AREA, WHICH IS CALLED THE CAPITOL DISTRICT OF NEW YORK. THE 18 TROY RECORD AND THE SCHENECTADY GAZETTE. 19 Q. THOSE ARE IN SUBURBS OUTSIDE OF ALBANY; AREN'T THEY? 20 A. WELL, THEY WOULD NOT AGREE WITH THAT TERMINOLOGY. EACH IS 21 A FREE-STANDING CITY. EACH IS WITHIN 6 TO 11 MILES OF ONE 22 ANOTHER. 23 Q. OKAY. AND THE ADVERTISERS WHO ADVERTISE IN THE TROY -- IN 24 THE PAPER IN TROY DON'T NECESSARILY ADVERTISE IN YOUR PAPER; IS 25 THAT RIGHT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 73 WHITE - DIRECT / ALIOTO 1 A. OCCASIONALLY, THAT'S CORRECT. 2 Q. AND THERE'S ADVERTISERS IN YOUR PAPER THAT DON'T ADVERTISE 3 IN TROY OR SCHENECTADY; ISN'T THAT RIGHT? 4 A. THAT'S RIGHT. 5 Q. IS THERE ANOTHER PAPER IN ALBANY? 6 A. THERE IS NOT. NOT A DAILY. 7 Q. GOING BACK TO EXHIBIT 111, THEN, AFTER YOU RECEIVED THIS 8 LETTER -- AND, BY THE WAY, IF YOU WOULD IDENTIFY MR. SIAS. 9 MR. SIAS IS THE PRESIDENT/CHIEF EXECUTIVE OFFICER, OF THE 10 CHRONICLE? 11 A. THAT'S CORRECT. 12 Q. NOW, AFTER YOU RECEIVED THIS LETTER, DID YOU TALK TO 13 MR. FALK ABOUT IT? 14 A. YES, I DID. 15 Q. AND DID YOU TALK TO HIM BEFORE YOU SENT -- AND DID YOU 16 THEN SEND HIM A LETTER? 17 A. I DID. 18 Q. DID YOU TALK TO HIM BEFORE YOU SENT THE LETTER? 19 A. I DON'T RECALL. 20 Q. ALL RIGHT. LET ME SHOW YOU TWO LETTERS. 21 YOU WROTE TWO LETTERS ON MARCH 12, THE NEXT DAY; IS 22 THAT RIGHT? 23 A. I BELIEVE SO. 24 Q. LET ME SHOW YOU WHAT ARE NOW IN EVIDENCE AS EXHIBITS 112 25 AND 113. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 74 WHITE - DIRECT / ALIOTO 1 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 2 THE COURT: VERY WELL. 3 BY MR. ALIOTO: 4 Q. LET ME HAND YOU WHAT IS NOW PLAINTIFF'S EXHIBIT -- NO, 5 EXHIBIT 112 IN EVIDENCE. THAT'S A LETTER FROM YOU TO MR. FALK 6 ON MARCH THE 12TH, 1999; CORRECT? 7 A. CORRECT. 8 Q. AND LET ME ALSO SHOW YOU EXHIBIT 113, ALSO A LETTER FROM 9 YOU TO MR. FALK, ON THE SAME DAY, MARCH 12, 1999. AGAIN A 10 LETTER FROM YOU; CORRECT? 11 A. (WITNESS EXAMINES DOCUMENT.) CORRECT. 12 Q. AND YOU SENT AND CAUSED THOSE LETTERS TO BE SENT TO 13 MR. FALK ON OR ABOUT THAT DATE; DIDN'T YOU? 14 A. YES. 15 Q. AND YOU SENT A COPY TO MR. SIAS; IS THAT RIGHT? 16 A. (WITNESS EXAMINES DOCUMENTS.) THAT IS CORRECT. 17 Q. AND IN ADDITION TO MR. SIAS, YOU ALSO SENT A COPY OF THE 18 LETTER TO MR. BENNACK WHO'S THE CHAIRMAN OF THE BOARD OF THE 19 ENTIRE HEARST CORPORATION IN NEW YORK; CORRECT? 20 A. HE'S PRESIDENT AND CEO OF THE HEARST CORPORATION. 21 Q. NOT CHAIRMAN OF THE BOARD. THAT'S STILL ONE OF THE 22 HEARSTS; ISN'T THAT RIGHT? 23 A. THAT IS CORRECT. 24 Q. GEORGE, JUNIOR; ISN'T THAT RIGHT? 25 A. GEORGE, JUNIOR, THAT'S RIGHT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 75 WHITE - DIRECT / ALIOTO 1 Q. I WANT TO DIRECT YOUR ATTENTION TO THE FIRST PAGE OF 2 EXHIBIT 113. 3 NOW, MR. SIAS COMPLAINED AND SAID THAT HE HAD THE 4 RIGHT TO SET HIS OWN PRICES AND HE OBJECTED TO THE PROGRAM; 5 ISN'T THAT RIGHT? THAT WAS YOUR UNDERSTANDING? 6 A. YES. 7 Q. AND THEN IN RESPONSE TO THAT YOU WROTE THIS LETTER. AND 8 WAS THIS LETTER REALLY MEANT FOR MR. FALK OR WAS IT MEANT FOR 9 MR. SIAS? 10 A. WELL, IT WAS MEANT FOR MR. FALK. 11 Q. AND THAT IS BECAUSE MR. SIAS OF THE CHRONICLE TOLD 12 MR. FALK TO STOP THE PROGRAM RIGHT AWAY? 13 A. CORRECT. 14 Q. AND YOU WANTED THE PROGRAM TO CONTINUE? 15 A. CORRECT. 16 Q. OKAY. NOW, YOU STATE IN THE SECOND PARAGRAPH OF THE 17 LETTER: 18 "THE PROMOTION WAS AGREED TO BY JOHN SIAS 19 AND LEE GUITTAR IN LATE 1996 OR EARLY 1997 AND 20 IS MEMORIALIZED IN SFNA 1997." 21 AND THEN IT GOES ON. DO YOU SEE THAT? 22 A. YES. 23 Q. SOMEONE TOLD YOU THAT THAT WAS APPROVED BY MR. SIAS AND 24 MR. GUITTAR BEFORE? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 76 WHITE - DIRECT / ALIOTO 1 Q. WHO WAS IT THAT TOLD YOU THAT? 2 A. I'M PRETTY SURE IT WOULD HAVE BEEN STEVE FALK THAT TOLD ME 3 THAT. 4 Q. OKAY. NOW, THEN, THE SECOND SENTENCE STATES, QUOTE: 5 "ACCORDING TO THE LATTER, AS OF OCTOBER 13, 6 1997, THERE WERE 11,947 EXAMINER SUBSCRIPTIONS 7 AND 4,721 CHRONICLE SUBSCRIPTIONS RESULTING FROM 8 THIS PROGRAM." 9 DO YOU SEE THAT? 10 A. YES. 11 Q. OKAY. THAT MEANS THAT, DOES IT NOT, THAT 11,947 12 SUBSCRIBERS OF THE CHRONICLE AGREED TO TAKE THE EXAMINER FOR 13 FREE UNDER THIS PROGRAM? 14 A. YES. 15 Q. AND IT ALSO MEANS THAT 4,721 SUBSCRIBERS OF THE EXAMINER 16 ALSO TOOK ON THE CHRONICLE FOR FREE? 17 A. CORRECT. 18 Q. AND THEN THOSE NUMBERS, AS OF MARCH 1, '99, 1999, WERE 19 10,095 FOR THE EXAMINER AND 5,803 FOR THE CHRONICLE. DO YOU 20 SEE THAT? 21 A. YEP. 22 Q. NOW, YOU SAID THERE THAT THIS ACCOUNTED FOR 16 PERCENT OF 23 THE EXAMINER'S HOME-DELIVERED CIRCULATION. DO YOU SEE THAT? 24 A. YES. 25 Q. WHEN YOU SAY THE HOME CIRCULATION, THE SAN FRANCISCO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 77 WHITE - DIRECT / ALIOTO 1 EXAMINER AT THIS TIME IN 1999, WAS IT MOSTLY -- DID MOST OF ITS 2 SALES COME FROM THE SO-CALLED STREET SALES OR FROM THE 3 HOME-DELIVERY SALES? 4 A. A GREATER PORTION CAME FROM STREET. 5 Q. AND WAS THAT BECAUSE PEOPLE WOULD BE LEAVING WORK AND MORE 6 PEOPLE WOULD BE BUYING THE EXAMINER ON THE STANDS AND ON THE -- 7 AND AT THE STATIONS, BART STATIONS, MUNI STATIONS AND THE REST, 8 ON THEIR WAY HOME? IS THAT THE IDEA? 9 A. YES, THAT'S THE IDEA. 10 Q. OKAY. WHAT PERCENTAGE OF THE EXAMINER WAS HOME DELIVERY 11 IN 1999? 12 A. IT WAS, I BELIEVE, ABOUT 40 PERCENT. 13 Q. SO APPROXIMATELY 60 PERCENT WAS ON THE STREET SALES; 14 CORRECT? 15 A. YES. 16 Q. NOW, IS IT YOUR UNDERSTANDING THAT THE SAN FRANCISCO 17 CHRONICLE IS EXACTLY THE OPPOSITE, THAT THEY HAVE -- THAT MORE 18 OF THEIR SALES ARE HOME DELIVERY RATHER THAN ON THE STREET? 19 A. CORRECT. 20 Q. AND DO YOU HAVE ANY IDEA WHAT THOSE PERCENTAGES ARE? 21 A. I BELIEVE THEY'RE CLOSER TO 80-20, 80 PERCENT HOME 22 DELIVERY AND 20 PERCENT SINGLE COPY. 23 Q. WHAT'S THE SOURCE OF THAT INFORMATION? 24 A. I DON'T RECALL. 25 Q. OKAY. NOW, WHEN YOU SAID HERE THAT UNDER THIS PROGRAM, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 78 WHITE - DIRECT / ALIOTO 1 THIS PROGRAM WAS ACCOUNTING FOR 16 PERCENT OF YOUR HOME 2 DELIVERY, THAT MEANS JUST OF THE HOME DELIVERY NOT OF ALL OF 3 YOUR SALES; CORRECT? 4 A. CORRECT. 5 Q. AND YOU FELT, DID YOU NOT, THAT IF THE CHRONICLE WAS GOING 6 TO OBJECT TO THIS, THAT THAT WAS GOING TO HAVE A SUBSTANTIAL 7 IMPACT UPON THE EXAMINER? IS THAT CORRECT? 8 A. YES. I FELT IT WAS GOING TO HAVE A SUBSTANTIAL IMPACT ON 9 BOTH PAPERS. 10 Q. BUT YOU ALSO -- BUT YOU THOUGHT IT WAS GOING TO HAVE 11 DEFINITELY A SUBSTANTIAL IMPACT ON THE EXAMINER; CORRECT? 12 A. WELL, MY MAIN CONCERN AT THE TIME WAS THIS YEAR'S -- THAT 13 YEAR'S BOTTOM LINE AND SINCE WE'RE HUGELY DEPENDENT, 83 PERCENT 14 OF THE TOTAL REVENUES ARE ADVERTISING AND ALMOST A HUNDRED 15 PERCENT OF THOSE REVENUES ARE COMBO SALES, THERE'S VIRTUALLY NO 16 INDIVIDUAL PAPER ADVERTISING SALES, SO IT'S REALLY THE JOINT 17 NUMBER THAT MATTERS HERE, WHICH I GET ON TO ADDRESS IN THIS 18 LETTER. 19 Q. OKAY. NOW, AT THIS TIME YOU UNDERSTOOD THAT THE JOINT 20 OPERATING AGREEMENT IN ITS ORIGINAL FORM WAS GOING TO -- OR HAD 21 CONCLUDED IN '95 BUT THAT HEARST HAD EXTENDED IT 10 YEARS TO 22 2005; IS THAT RIGHT? 23 A. YES. 24 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR? 25 THE COURT: VERY WELL. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 79 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. OKAY. LET'S LOOK AT THAT JUST FOR ONE SECOND. I'LL PUT 3 ON THE TOP THE JOA AND STARTED IN JANUARY OF '65. DOES THAT 4 ACCORD WITH YOUR RECOLLECTION? 5 A. YES. 6 Q. AND THAT THAT WAS THEN TO GO AT LEAST 30 YEARS TO JANUARY 7 OF '95. IS THAT -- DOES THAT ACCORD WITH YOUR RECOLLECTION AND 8 UNDERSTANDING? 9 A. YES. 10 Q. AND THEN YOU UNDERSTOOD THAT HEARST EXTENDED IT ANOTHER 10 11 YEARS TO JANUARY OF 2005; IS THAT RIGHT? 12 A. YES. 13 Q. AND DID YOU ALSO UNDERSTAND THAT HEARST COULD ONLY EXTEND 14 IT ONCE AND IF IT WERE GOING TO BE EXTENDED AGAIN, IT WOULD 15 HAVE TO BE EXTENDED BY THE CHRONICLE? DID YOU UNDERSTAND THAT? 16 A. YES, I DID. 17 Q. OKAY. SO UNLESS THE CHRONICLE EXTENDED IT ANOTHER 10 18 YEARS -- WE'LL MAKE THOSE DOTS -- TO JANUARY OF 2015, UNLESS 19 THE CHRONICLE DID THAT, THIS JOA WAS GOING TO BE OVER IN 2005; 20 ISN'T THAT RIGHT? 21 A. YES. 22 Q. SO ISN'T IT CORRECT, THEN, IN 1999, WITH REGARD TO THIS 23 PROGRAM, YOU FELT THAT THE CHRONICLE WAS TRYING TO HARM YOU AND 24 PUT YOU IN A BAD SITUATION SO THAT YOU WOULDN'T BE IN AS GOOD A 25 SITUATION AS YOU SHOULD BE WHEN COMPETITION BEGAN HEAD TO HEAD JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 80 WHITE - DIRECT / ALIOTO 1 IN 2005? 2 A. THAT'S CORRECT. 3 Q. AND YOU WERE, IN FACT, GEARING UP TO GO HEAD TO HEAD IN 4 COMPETITION WITH THE CHRONICLE IN 2005; ISN'T THAT RIGHT? 5 A. THAT IS NOT CORRECT. 6 Q. YOU HAD TOLD THE CHRONICLE THAT YOU INTENDED TO GO HEAD TO 7 HEAD WITH THEM -- HEAD TO HEAD COMPETITION WITH THEM AFTER 8 2005; DIDN'T YOU? 9 A. YOU BET. 10 Q. AND SO WHEN YOU SAY "YOU BET," YOU SAID THAT TO THEM 11 ORALLY? 12 A. ORALLY AND IN WRITING. 13 Q. OKAY. AND WHEN YOU SAID IT ORALLY, WHEN YOU SAID IT IN 14 WRITING, TO WHOM DID YOU SAY IT TO? 15 A. TO JOHN SIAS. 16 Q. AND WHEN YOU SAID IT, WAS IT TRUE? 17 A. IT WAS TRUE THAT WE WANTED TO CREATE AS BIG AN IMPRESSION 18 AS WE COULD. 19 Q. I DIDN'T ASK YOU WHETHER YOU WANTED TO CREATE AN 20 IMPRESSION. I ASKED YOU WHEN YOU SAID TO THEM THAT YOU 21 INTENDED TO GO HEAD-TO-HEAD COMPETITION WITH THEM IN 2005, WAS 22 IT TRUE? 23 A. WHETHER -- I REALLY AM NOT IN A POSITION TO SPEAK TO THAT 24 INTENT. IT'S NOT A COMMITMENT THAT I WAS IN A POSITION TO MAKE 25 AT THAT TIME, BUT I'M VERY MUCH LIKE A PHYSICIAN ATTENDING A JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 81 WHITE - DIRECT / ALIOTO 1 DYING PATIENT, I SUPPOSE. I'M GOING TO THROW EVERYTHING I'VE 2 GOT AT TRYING TO SAVE THEM AND I'M NOT GOING TO SIT THERE AND 3 TELL THEM HE'S ON THE WAY OUT. 4 Q. WHEN YOU WERE -- OKAY. 5 WHEN YOU MADE THOSE STATEMENTS TO MR. SIAS IN 6 ORAL -- ORALLY AND IN WRITING, WERE YOU AUTHORIZED TO MAKE 7 THOSE STATEMENTS? 8 A. I WAS AUTHORIZED TO MAKE THOSE STATEMENTS. 9 Q. OKAY. AND WHEN YOU MADE THOSE STATEMENTS THAT YOU WERE 10 AUTHORIZED TO MAKE, WERE THOSE STATEMENTS TRUE? 11 A. WHICH STATEMENTS? 12 Q. THE STATEMENTS THAT YOU INTENDED TO GO HEAD TO HEAD WITH 13 THE CHRONICLE IN 2005? 14 A. IT WAS TRUE THAT I WAS AUTHORIZED TO MAKE THOSE. WHETHER 15 WE COULD DELIVER ON THAT -- I MEAN, I KNEW THE HISTORY OF THE 16 NEWSPAPER BUSINESS AND THE STEADY DECLINE OF SMALLER NEWSPAPERS 17 IN METRO AREAS. I DIDN'T BELIEVE THAT WE COULD GO HEAD TO 18 HEAD. 19 Q. OKAY. ONE MORE TIME. WERE THE STATEMENTS TRUE WHEN YOU 20 TOLD MR. SIAS, AND YOU DID IT ORALLY AND IN WRITING, THAT YOU 21 WERE GOING TO GO HEAD TO HEAD AGAINST THE CHRONICLE IN 22 COMPETITION WITH THEM AFTER 2005, WERE THOSE STATEMENTS TRUE? 23 A. WELL, THEY WEREN'T -- I HAD NO KNOWLEDGE THEY WERE 24 NECESSARILY UNTRUE, BUT I HAD LITTLE CONFIDENCE THAT WE'D BE 25 ABLE TO DELIVER ON THAT THREAT. I VIEWED THEM AS A THREAT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 82 WHITE - DIRECT / ALIOTO 1 RATHER THAN AS A TRUE-OR-FALSE STATEMENT. 2 Q. A THREAT. SO YOU BELIEVED THAT IT WOULD BE A THREAT TO 3 TELL THE CHRONICLE THAT YOU WERE GOING TO COMPETE AGAINST THEM; 4 IS THAT RIGHT? 5 A. SURE. WE WERE HOPING TO GET THEM BACK TO THE TABLE. 6 Q. IN OTHER WORDS, YOU WANTED TO DO WHATEVER YOU COULD TO 7 AVOID HAVING TO COMPETE HEAD TO HEAD WITH THE CHRONICLE; IS 8 THAT RIGHT? 9 A. WELL, IT WAS THE SAME REASON I THINK THAT WE REUPPED IN 10 '95. HAD WE NOT REUPPED, WE WERE GONE. WE WERE OUT. 11 Q. I DIDN'T ASK YOU THAT. I SAID, IS IT CORRECT, THEN, IS IT 12 CORRECT, THEN, THAT WHAT YOU WANTED TO DO WAS DO ANYTHING YOU 13 POSSIBLY COULD TO AVOID HAVING TO COMPETE WITH THE CHRONICLE? 14 IS THAT TRUE? 15 A. AS OF THIS MOMENT, THAT IS SURELY TRUE. 16 Q. AND AT THE TIME -- WHEN YOU SAY "AS OF THIS MOMENT," THAT 17 MEANS AS THE PUBLISHER OF THE EXAMINER; CORRECT? 18 A. CORRECT. 19 Q. NOW, YOU ALSO FELT, DID YOU NOT, THAT THE EFFORTS BY THE 20 CHRONICLE -- YOU THOUGHT THAT WHAT THEY WERE TRYING TO DO 21 WAS -- OR AT LEAST YOU CHARGED THEM WITH WHAT THEY WERE DOING 22 WAS -- IS THAT IF THEY -- IF THEY WERE ABLE TO STOP THIS 23 PROGRAM, THAT WOULD SOMEHOW INHIBIT YOU FROM BEING ABLE TO BE 24 READY TO COMPETE IN 2005? 25 A. WELL, I WOULD LIKE TO REPEAT. THE PRIMARY FOCUS HERE WAS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 83 WHITE - DIRECT / ALIOTO 1 WE HAD BETWEEN US 16,000 CIRCULATION. IF WE CEASED THIS 2 PROGRAM, THAT CIRCULATION WOULD EVAPORATE QUICKLY. WE WOULD 3 REDUCE OUR ADVERTISING RATE BASE, REVENUES WOULD GO DOWN 4 INSTANTANEOUSLY, AND THEN AFTER THE FIRST INSTANTANEOUS DROP, A 5 FURTHER DROP AS ROP REVENUES DRIFT AWAY. 6 Q. AND YOU FELT THAT THIS WAS AN INTENT AND A PROGRAM BY 7 MR. SIAS AND THE CHRONICLE TO WEAKEN THE EXAMINER AS THE JOA 8 DREW TO A CLOSE? 9 A. WELL, IT WAS ONE PART OF A LARGER STRATEGY. THERE IS AN 10 UPCOMING LETTER THAT I'M SURE WE'RE GOING TO BE TALKING ABOUT, 11 AND THIS WAS PART OF THAT WHOLE STRATEGY. IT WAS TO DRAW A 12 NUMBER OF LINES IN THE SAND THAT I KNEW WOULD BE DISTASTEFUL TO 13 MR. SIAS. 14 Q. DISTASTEFUL. AND THE THING THAT YOU THOUGHT THAT WOULD BE 15 DISTASTEFUL TO HIM WOULD BE THE CONCEPT OF DIRECT HEAD-TO-HEAD 16 COMPETITION; CORRECT? 17 A. WELL, YOU KNOW, THE IRONY -- 18 Q. IS THAT CORRECT, MR. WHITE? THAT'S WHAT YOU THOUGHT WOULD 19 BE DISTASTEFUL TO MR. SIAS WOULD BE A THREAT OF HEAD-TO-HEAD 20 COMPETITION WITH THE CHRONICLE; IS THAT RIGHT? 21 A. YES. 22 Q. NOW, IN ADDITION, DIDN'T YOU ALSO SAY THAT BECAUSE YOU 23 WERE ATTEMPTING TO WEAKEN THE EXAMINER BEFORE 2005, THAT YOU 24 FELT THAT THAT VIOLATED THE ANTITRUST LAWS? DID YOU SAY THAT? 25 A. NO, I DIDN'T. THAT WAS IN A LETTER THAT I SIGNED. I HAD JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 84 WHITE - DIRECT / ALIOTO 1 NO OPINION ON THAT SUBJECT. 2 Q. YOU HAD NO OPINION ABOUT IT BUT YOU SENT THE LETTER 3 ANYWAY? 4 A. YES. 5 Q. OKAY. WELL, IF YOU'LL TURN THE PAGE, IT'S THIS LETTER 6 (INDICATING), TURN THE PAGE TO PAGE 2, AND I DIRECT YOUR 7 ATTENTION TO THE SECOND FULL PARAGRAPH. 8 THE COURT: THIS IS PARAGRAPH -- OR THIS IS 9 EXHIBIT 1? 10 MR. ALIOTO: I'M SORRY, YOUR HONOR. THIS IS 11 EXHIBIT 113, PAGE 2. 12 THE WITNESS: (WITNESS EXAMINES DOCUMENT.) 13 BY MR. ALIOTO: 14 Q. AND THE SECOND FULL PARAGRAPH BEGINNING, "BECAUSE 15 DISCONTINUANCE." DO YOU SEE THAT? 16 A. YEAH. 17 Q. OKAY. NOW, IT STATES: 18 "BECAUSE DISCONTINUANCE OF THE JOINT 19 PROMOTION WOULD SERIOUSLY ERODE THE EXAMINER'S 20 CIRCULATION (NOT TO SPEAK OF THE CHRONICLE'S 21 CIRCULATION), WOULD IMPEDE THE AGENCY'S ABILITY 22 TO SELL COMBINATION ADVERTISING AND WOULD RESULT 23 IN THE IMMEDIATE LOSS OF APPROXIMATELY 24 $1 MILLION IN ADVERTISING (PRIMARILY PREPRINT 25 REVENUE). THERE CAN BE NO REASON FOR MR. SIAS' JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 85 WHITE - DIRECT / ALIOTO 1 REQUEST OTHER THAN AN INTENT TO WEAKEN THE 2 EXAMINER AS THE JOA DRAWS TO A CLOSE," END OF 3 QUOTE. 4 DO YOU SEE THAT? 5 A. YES. 6 Q. AND WHEN YOU SAY, "AS THE JOA DRAWS TO A CLOSE," YOU MEAN 7 AS IT GETS CLOSER TO 2005? 8 A. THAT'S CORRECT. 9 Q. AND WHEN YOU PUT DOWN THERE THAT IT WOULD CAUSE AN 10 IMMEDIATE LOSS OF APPROXIMATELY $1 MILLION IN ADVERTISING, WAS 11 THAT TRUE? 12 A. YES. 13 Q. AND YOU SAID IN THE PARENTHESES, "PRIMARILY PREPRINT." 14 "PREPRINT" IS ADVERTISING THAT IS ALREADY PRINTED, LIKE 15 INSERTS; IS THAT RIGHT? 16 A. THAT'S ACCURATE. 17 Q. SO IT'S NOT A PART OF THE REGULAR PAPER, IT'S SOMETHING 18 THAT THEY PUT IN; IS THAT RIGHT? 19 A. YEP. YEP. 20 Q. AND YOU FELT THAT IF -- THAT YOU WOULD LOSE PRIMARILY FROM 21 THAT REVENUE ALMOST A MILLION DOLLARS IF THIS PROGRAM WERE 22 STOPPED; IS THAT RIGHT? 23 A. THAT WOULD BE THE IMMEDIATE LOSS, YES. 24 Q. OKAY. AND THEN YOU CONTINUED ON. YOU SAID, QUOTE: 25 "SUCH AN INTENT IS SQUARELY AT ODDS WITH THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 86 WHITE - DIRECT / ALIOTO 1 OBLIGATION OF THE PARTIES AS THE EXPIRATION OF 2 THE JOA APPROACHES TO," QUOTE, "REASONABLY 3 COOPERATE IN THE FORMULATION AND ORDERLY 4 EXECUTION OF A JUST AND EQUITABLE PLAN WHICH 5 SHALL ENABLE EACH OF SAID PARTIES TO ENGAGE 6 INDEPENDENTLY OF THE AGENCY IN THE NEWSPAPER 7 PUBLISHING BUSINESS," END OF QUOTE. 8 DO YOU SEE THAT? 9 A. YES. 10 Q. AND THAT WAS PART OF THE JOA; CORRECT? 11 A. YES. 12 Q. AND THAT PART WAS, THAT WHEN THE JOA WAS COMING TO A 13 CLOSE, NOBODY COULD DO ANYTHING TO THE OTHER GUY TO MAKE IT 14 MORE DIFFICULT FOR HIM TO BE ABLE TO COMPETE NOW INDEPENDENTLY; 15 RIGHT? 16 A. THAT WAS THE ARGUMENT I WAS TRYING TO MAKE TO MR. SIAS. 17 Q. OKAY. AND YOU SAID, QUOTE: 18 "IN ADDITION TO VIOLATING THE JOA AGREEMENT, 19 ACTIONS UNDERTAKEN WITH SUCH AN INTENT ARE ALSO 20 VIOLATIVE OF THE ANTITRUST LAWS." 21 DO YOU SEE THAT? 22 A. CORRECT, YES. 23 Q. AND THE REASON THAT YOU PUT THAT IS BECAUSE IF THEY WERE 24 SUCCESSFUL IN DOING THAT, THEN COME 2005, THEY WOULDN'T HAVE 25 THAT COMPETITOR? THAT WAS THE IDEA; WASN'T IT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 87 WHITE - DIRECT / ALIOTO 1 A. I GUESS SO. YOU'D HAVE TO ASK SOMEBODY ELSE. 2 Q. I'M ASKING THE PERSON WHO WROTE THE LETTER. THAT WAS YOUR 3 IDEA; WASN'T IT? 4 A. IT WAS NOT MY IDEA, NO. 5 Q. YOU PUT IT IN AT THE SUGGESTION OF MR. BENNACK? 6 A. WELL, I PUT IT IN AT THE SUGGESTION OF A COLLABORATION OF 7 PEOPLE THAT INVOLVED AT LEAST ONE ATTORNEY. I DON'T REMEMBER 8 WHO. 9 Q. WHOEVER THESE CONGLOMERATIONS OF PEOPLE WERE, THEY WERE 10 ALL HEARST OR EXAMINER PEOPLE; WEREN'T THEY? 11 A. ALL HEARST OR EXAMINER, YES. 12 Q. OKAY. AND YOU UNDERSTOOD WHEN YOU WROTE THIS, DIDN'T YOU, 13 THAT THE IDEA WAS, IS THAT YOU FELT THAT IF THE CHRONICLE HAD 14 THIS INTENT, IT WAS FOR THE PURPOSE OF PREVENTING THE EXAMINER 15 FROM BEING A VIABLE COMPETITOR IN 2005 WHEN THE JOA RAN OUT; 16 RIGHT? 17 A. THAT WAS THE POSTURE THAT WE WANTED TO ADOPT, YES. 18 Q. WELL, MORE THAN THE POSTURE, THAT'S WHAT YOU SAID; 19 CORRECT? 20 A. THAT IS WHAT I SAID BECAUSE -- 21 Q. OKAY. AND YOU KNEW -- AND WHEN YOU SAID IT, YOU SENT A 22 COPY OF THIS TO MR. SIAS; CORRECT? 23 A. YES. 24 Q. AND YOU KNEW -- AS A MATTER OF FACT, YOU HAVE MR. SIAS' 25 NAME AS THE FIRST NAME OF ALL THE PEOPLE YOU SENT CARBON COPIES JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 88 WHITE - DIRECT / ALIOTO 1 TO; CORRECT? 2 A. THE VERY FIRST. 3 Q. OKAY. AND THE OTHER PERSON YOU HAD WAS THE CEO, 4 MR. BENNACK, MR. IRISH, THEN AN ATTORNEY FOR THE HEARST 5 CORPORATION, MR. THACKERAY, AND W. RONALD INGRAM; CORRECT? 6 A. YEP. 7 Q. OKAY. YOU WANTED TO MAKE SURE THAT MR. SIAS UNDERSTOOD 8 THAT IF HE WANTED TO KNOCK OFF THIS PROGRAM, YOU MIGHT CONSIDER 9 DOING SOMETHING UNDER THE ANTITRUST LAWS; RIGHT? 10 A. I -- 11 Q. IS THAT RIGHT? 12 A. I DOUBT THAT, BUT THAT IS WHAT IT SAYS. 13 THE COURT: MR. WHITE, WHO IN MARCH, 1999, WAS W. 14 RONALD INGRAM? 15 THE WITNESS: HE WAS GENERAL COUNSEL, I BELIEVE, TO 16 THE CHRONICLE PUBLISHING COMPANY. HE WORKED CLOSELY WITH 17 MR. SIAS. 18 BY MR. ALIOTO: 19 Q. SO YOU WANTED TO MAKE SURE THAT NOT ONLY MR. SIAS GOT IT, 20 BUT THE LAWYER FOR THE CHRONICLE AS WELL? 21 A. YES. 22 THE COURT: AND IS MR. THACKERAY GENERAL COUNSEL OR 23 JUST -- 24 THE WITNESS: GENERAL COUNSEL. 25 THE COURT: GENERAL COUNSEL FOR HEARST CORPORATION? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 89 WHITE - DIRECT / ALIOTO 1 THE WITNESS: FOR HEARST CORPORATION. 2 THE COURT: THANK YOU, SIR. 3 BY MR. ALIOTO: 4 Q. IS IT CORRECT THAT ONE OF THE REASONS THAT YOU MOVED TO 5 SAN FRANCISCO QUICKLY WAS TO ENSURE THAT HEARST WOULD BE IN A 6 STRONG POSITION IN THE MARKET GOING FORWARD AFTER 2005? 7 A. IT WAS TO CREATE THAT IMPRESSION. IT WAS NOT -- I CAME 8 OUT HERE AS -- ANOTHER ANALOGY THAT HAD BEEN KICKED AROUND WAS 9 THAT OF THE COACH OF A LOSING TEAM AT HALF-TIME; AND, YOU KNOW, 10 IT'S TO GET OUT HERE TO RALLY THE TROOPS AND PUT ON AS GOOD A 11 SHOW AS WE CAN COME UP WITH. 12 MOST IMPORTANTLY, TO GET -- TRY TO GET THE 13 CHRONICLE, WHO HAD SAID THEY WERE NOT INTERESTED IN FURTHER 14 NEGOTIATIONS AT THAT POINT, BACK TO THE TABLE. 15 MR. ALIOTO: I MOVE TO STRIKE THAT ANSWER AS BEING 16 NONRESPONSIVE TO MY QUESTION, YOUR HONOR. 17 THE WITNESS: WHAT WAS YOUR QUESTION? 18 THE COURT: THE MOTION WILL BE DENIED. 19 BY MR. ALIOTO: 20 Q. ISN'T IT CORRECT THAT THE REASON THAT YOU CAME OUT OR YOU 21 UNDERSTOOD THAT THE REASON THAT YOU MOVED OUT TO SAN FRANCISCO 22 WAS TO ASSESS THE OPTIONS AVAILABLE TO HEARST IMMEDIATELY AND 23 UP TO 2005 TO ENSURE A STRONG POSITION IN THE MARKET GOING 24 FORWARD? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 90 WHITE - DIRECT / ALIOTO 1 Q. AND 2005 WAS THE END OF THE JOA; CORRECT? 2 A. YES. BUT YOU DID SAY GOING FORWARD. YOU DIDN'T SAY 3 BEYOND 2005. I WANTED TO ENSURE AS STRONG A POSITION IN 2000, 4 2001, 2002 IF IT TOOK THAT LONG. 5 THE COURT: MR. WHITE, YOU SAID THAT YOUR PURPOSE OR 6 OBJECTIVE IN COMING OUT HERE OR THE PURPOSE OR OBJECTIVE OF 7 HAVING YOU COME OUT HERE FROM ALBANY WAS TO GET THE CHRONICLE 8 BACK TO THE TABLE? 9 THE WITNESS: YES. 10 THE COURT: TO NEGOTIATE WHAT? 11 THE WITNESS: WELL, TO NEGOTIATE SOME OUTCOME TO 12 THE -- I PRESUME TO THE JOA. 13 THE COURT: WAS THAT TO INDUCE CHRONICLE TO EXTEND 14 THE JOINT OPERATING AGREEMENT ANOTHER 10 YEARS? 15 THE WITNESS: I DIDN'T CONSIDER THAT AN OPTION 16 BECAUSE I THINK BY THEN THEY HAD SAID THAT THEY -- I THINK THEY 17 HAD PUT IN WRITING OR LET SOME PERIOD OF TIME PASS THAT THEY 18 COULDN'T DO THAT. 19 THE COURT: DID THEY NOT STILL HAVE A PERIOD OF TIME 20 WITHIN WHICH TO EXERCISE THAT OPTION? 21 THE WITNESS: YEAH, I GUESS POSSIBLY THEY DO. I 22 DON'T -- I'M REALLY NOT CLEAR. I'M NOT CLEAR ON THAT. 23 THE COURT: THE OPTION CAN BE EXERCISED BY THE 24 CHRONICLE UP UNTIL -- 25 MR. ALIOTO: IT WOULD BE THE SEVENTH YEAR, YOUR JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 91 WHITE - DIRECT / ALIOTO 1 HONOR. SO IT WOULD BE 30 -- IT WOULD BE THE -- I BELIEVE IT 2 WOULD BE THE 37TH YEAR. 3 THE COURT: SO THAT'S 2002. 4 MR. ALIOTO: IT SHOULD BE, YES. IT SHOULD BE NEXT 5 YEAR. YEAH, IT SHOULD BE IN A YEAR, 2002, 37TH YEAR. 6 THE COURT: THAT'S GOVERNED BY -- 7 MR. ALIOTO: THAT'S IN THE -- I BELIEVE THAT THAT'S 8 AT -- THAT'S AT PAGE 47 OF THE JOA. IT'S PARAGRAPH 4.4 UNDER 9 THE TERM, AND THE PARTICULAR PROVISIONS ARE RIGHT IN THAT TERM 10 AND IT IS THE 27TH (SIC) YEAR, YOUR HONOR. SO THAT -- 11 THE COURT: 37TH YEAR. 12 MR. ALIOTO: I'M SORRY, 37TH YEAR. 13 THE COURT: 37TH YEAR. 14 MR. ALIOTO: CORRECT. THE 27TH YEAR FOR THE FIRST 15 ONE AND THE 37TH FOR THE SECOND. 16 THE COURT: 37TH FOR THE SECOND. 17 MR. ALIOTO: YES. AND THAT'S 4.4 OF PAGE 47 OF 18 EXHIBIT NUMBER 1 IN EVIDENCE. 19 THE COURT: VERY WELL. SORRY FOR THE INTERRUPTION. 20 MR. ALIOTO: NO, SIR. 21 Q. YOU WANTED TO BE SURE, DID YOU NOT, RIGHT AFTER THESE 22 LETTERS, YOU WANTED TO BE SURE, DID YOU NOT, THAT YOU CONTINUED 23 TO COMMUNICATE HEARST'S COMMITMENT AND INTENTIONS TO MR. SIAS 24 AND TO THE OTHERS AT THE CHRONICLE, HEARST'S COMMITMENT AND 25 INTENTION FOR THE LONG HAUL, MEANING AFTER 2005? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 92 WHITE - DIRECT / ALIOTO 1 A. CORRECT. 2 Q. AND YOU WANTED TO DO THAT EVEN THOUGH YOU UNDERSTOOD THAT 3 THAT WAS NOT WHAT YOU WANTED TO DO REALLY? 4 A. THAT'S PRETTY CLOSE TO CORRECT. NOT THAT IT WASN'T WHAT I 5 WANTED TO DO. IT WAS WHAT I CONSIDERED IMPOSSIBLE. THE TRICK 6 WAS HOW TO PERSUADE THEM FROM OUR DIMINUTIVE POSTURE TO BELIEVE 7 THAT. 8 Q. WELL, ACTUALLY THE TRICK WAS TO AVOID THE POSSIBILITY THAT 9 THE HEARST CORPORATION MIGHT HAVE TO COMPETE HEAD TO HEAD WITH 10 THE CHRONICLE; ISN'T THAT RIGHT? 11 A. OR MIGHT HAVE TO GO OUT OF BUSINESS. 12 Q. YEAH, MIGHT HAVE TO GO OUT OF BUSINESS OR COMPETE; IS THAT 13 RIGHT? 14 A. THAT'S RIGHT. 15 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 16 17 18 19 20 21 22 23 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 93 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. HEARST CORPORATION, BY THE WAY, YOU UNDERSTOOD, AS THE 3 PUBLISHER OF THE SAN FRANCISCO EXAMINER -- YOU UNDERSTOOD THAT 4 THE HEARST CORPORATION HAD SUBSTANTIALLY MORE RESOURCES, 5 FINANCIAL RESOURCES, THAN THE CHRONICLE? 6 A. IN TOTAL, YES, I BELIEVE THAT TO BE TRUE. 7 Q. LET ME HAND YOU WHAT IS MARKED -- WHAT IS IN EVIDENCE AS 8 EXHIBIT 132. 9 MAY I APPROACH THE WITNESS, YOUR HONOR? 10 THE COURT: VERY WELL. 11 BY MR. ALIOTO: 12 Q. EXHIBIT 132 IN EVIDENCE IS A MEMORANDUM ON HEARST 13 NEWSPAPER -- HEARST NEWSPAPERS. AND THEN ATTACHED TO IT IS AN 14 E-MAIL THAT PURPORTS TO BE FROM YOU TO MR. IRISH ON OR ABOUT 15 MARCH 13, 1999, THE DAY AFTER THE ANTITRUST LETTER. 16 AND I WOULD DIRECT YOUR ATTENTION TO THE FIRST -- 17 THE FIRST PAGE. IT'S STATES AT THE TOP UNDER "SAN FRANCISCO 18 STRATEGY," QUOTE: 19 "TIM HAS MOVED INTO SAN FRANCISCO QUICKLY 20 AND HAS BEGUN THE LOCAL WORK NECESSARY TO 21 ASSESSING OPTIONS AVAILABLE TO HEARST 22 IMMEDIATELY AND UP TO 2005 TO ENSURE STRONG 23 POSITION IN THE MARKET GOING FORWARD. I PLAN TO 24 HAVE HIM VISIT WITH US AFTER THE MARCH BOARD 25 MEETING." JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 94 WHITE - DIRECT / ALIOTO 1 WAS THIS A DOCUMENT THAT, AS FAR AS YOU KNEW, WAS 2 PREPARED BY MR. IRISH? 3 A. I SUSPECT IT WAS. I DON'T KNOW THAT FOR SURE. THIS -- 4 THIS DOCUMENT WASN'T SHARED WITH ME AT THAT TIME. 5 Q. OKAY. THEN IT STATES, QUOTE: 6 "SOME EARLY THOUGHTS FROM TIM AND HIS TEAM:" 7 AND I WOULD LIKE YOU TO GO DOWN TO THE SECOND 8 PORTION WHERE IT SAYS "HEARST LEVERAGE." AND THAT SAYS AFTER 9 "HEARST LEVERAGE," QUOTE: 10 "ACQUIRE THE BEST CONTENT THROUGHOUT HEARST 11 AND USE IN PAPER AND ON THE INTERNET GIVING US A 12 SUSTAINABLE COMPETITIVE ADVANTAGE." 13 DID YOU MAKE SUCH A STATEMENT IN SUM OR SUBSTANCE TO 14 MR. IRISH OR TO ANY OTHER REPRESENTATIVE OF HEARST? 15 A. YES. 16 Q. AND WHEN YOU SAID "SUSTAINABLE COMPETITIVE ADVANTAGE," 17 THAT MEANT A SUSTAINABLE COMPETITIVE ADVANTAGE AGAINST WHOM, 18 THE CHRONICLE? 19 A. NO. IN -- IN THAT PARTICULAR CASE JUST IN THE BAY AREA, 20 THE -- AGAINST ALL THE MEDIA WE WERE TRYING TO DEAL WITH. 21 Q. DID IT INCLUDE THE CHRONICLE? 22 A. IT CERTAINLY WOULD INCLUDE THE CHRONICLE, YEAH. 23 Q. AND BY "BEST CONTENT THROUGHOUT HEARST," DOES THAT MEAN 24 THAT YOU WOULD DRAW FROM ALL OF THE HEARST RESOURCES THROUGHOUT 25 THE COUNTRY TO BE ABLE TO GIVE SOME KINDS OF UPDATES OR THINGS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 95 WHITE - DIRECT / ALIOTO 1 LIKE THAT THAT YOU COULD ADD TO THE SAN FRANCISCO EXAMINER TO 2 MAKE IT MORE ACCEPTABLE TO SUBSCRIBERS? 3 A. YES. 4 Q. AND TO MAKE IT MORE APPEALING TO THEM, THAT THEY WOULD 5 HAVE MORE INFORMATION AND THAT THE PAPER WOULD BE PROVIDING 6 MORE THAN IT DOES NOW? IS THAT IT? 7 A. YES. 8 Q. AND THE REASON FOR THIS PROVIDING MORE, YOU FELT THE 9 REASON WAS -- OR THE NEED FOR IT WAS BECAUSE THAT -- TO BE 10 COMPETITIVE? 11 A. WELL, AS THIS WHOLE SUMMARY ADDRESSES, JUST DOING 12 EVERYTHING WE COULD TO BE BIGGER AND BETTER AND APPEAR TO BE 13 MORE COMPETITIVE. 14 Q. YEAH. AND COMPETE? 15 A. IF WE GOT THAT LUCKY, SURE. 16 Q. WELL, YOU WERE THERE. YOU COULD COMPETE IF YOU WANTED TO. 17 IF YOU WANTED TO, YOU COULD GET THE BEST CONTENT THROUGHOUT 18 HEARST, COULDN'T YOU? 19 A. YEAH. 20 Q. OKAY. AND YOU WERE THERE. YOU WERE THE PUBLISHER. IF 21 YOU WANTED TO GET IT AND YOU WANTED TO MAKE THE PAPER MORE 22 AGREEABLE AND ACCEPTABLE, YOU COULD HAVE DONE THAT, COULDN'T 23 YOU? 24 A. ABSOLUTELY. 25 Q. YOU COULD HAVE? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 96 WHITE - DIRECT / ALIOTO 1 A. YES. 2 Q. OKAY. DID YOU? 3 A. WE DIDN'T. 4 Q. YOU DID NOT? 5 A. WE DID NOT. 6 Q. OKAY. AND ONE OF THE REASONS YOU DID NOT WAS BECAUSE OF 7 THE AGREEMENT TO BUY THE CHRONICLE, RIGHT? 8 A. WELL, IT BECAME THAT. IT WASN'T ANYTHING LIKE THAT AT 9 THIS POINT IN TIME. I THINK THE POINT IN TIME IS MARCH. YEAH. 10 NO, IT SIMPLY TOOK MORE TIME. AS A MATTER OF FACT, 11 WE ARE STILL WORKING ON THAT. 12 Q. IT GOES ON FURTHER UNDER THE NEXT SECTION UNDER 13 "DEVELOPMENT LOCAL ALLIANCES." IN THE SECOND SENTENCE THERE IT 14 SAYS, QUOTE: 15 "CONSIDER ALLIANCE WITH BAY AREA NEWSPAPERS 16 AND OTHER STRATEGIC PARTNERS -- SINGLETON, 17 GANNETT, KR" -- 18 "KR" IS KNIGHT RIDDER? 19 A. YES. 20 Q. -- "COMMERCIAL PRINTERS (E.G. TREASURE CHEST)." 21 DO YOU SEE THAT? 22 A. YES. 23 Q. DID YOU MAKE SUCH A STATEMENT TO MR. IRISH? 24 A. YES. 25 Q. OKAY. AND WHEN YOU SAY "CONSIDER ALLIANCES WITH OTHER BAY JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 97 WHITE - DIRECT / ALIOTO 1 AREA NEWSPAPERS," THAT WOULD THEN MAKE YOU STRONGER AS AGAINST 2 THE CHRONICLE? 3 A. YES. 4 Q. AND THAT WAS THE IDEA, THAT YOU WANTED TO TELL THE 5 CHRONICLE THAT THAT'S WHAT YOU WERE THINKING ABOUT DOING? 6 A. CORRECT. 7 Q. AND THAT WOULD -- AND THAT WOULD BE KIND OF A COMPETITIVE 8 THREAT TO THEM? 9 A. HOPEFULLY. 10 Q. BECAUSE YOU WERE OF THE VIEW THAT IF YOU CONTINUED TO 11 THREATEN THEM WITH COMPETITIVE IDEAS AND COMPETITION, SOONER OR 12 LATER THEY'D GIVE UP AND THEN MAYBE COME BACK TO THE TABLE; IS 13 THAT RIGHT? 14 A. THAT'S CORRECT. 15 Q. LET'S GO TO THE NEXT PAGE, PLEASE. 16 THE NEXT PAGE IS YOUR E-MAIL. AND YOU SENT THIS 17 E-MAIL ON OR ABOUT MARCH 13, '99, 7:00 P.M. AT NIGHT? 18 A. IT LOOKS LIKE IT. 19 Q. TO MR. IRISH, AMONG OTHERS, CORRECT? 20 A. YES. 21 Q. AND YOU CALL IT -- YOU HEAD NOTED IT, QUOTE, "STRATEGIC 22 INITIATIVES, MARCH 1999, TOW." 23 THAT'S YOU, CORRECT? 24 A. THAT IS. 25 Q. AND YOU FIGURED THAT THESE WERE STRATEGIC INITIATIVES? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 98 WHITE - DIRECT / ALIOTO 1 A. YES. 2 Q. AND YOU STATE -- NEXT YOU SAY "GOAL." AND THEN YOU SAY, 3 QUOTE: 4 "STRENGTHEN THE EXAMINER'S FRANCHISE PRIOR 5 TO 2005 IN EVERY WAY POSSIBLE. USE EVERY MEDIUM 6 AVAILABLE. SEEK EVERY PARTNERSHIP/ALLIANCE AND 7 AFFILIATION THAT WILL HASTEN AND STRENGTHEN 8 HEARST'S PRESENCE IN THE BAY AREA. CONTINUE TO 9 COMMUNICATE HEARST'S COMMITMENT AND INTENTIONS 10 FOR THE LONG HAUL TO SIAS AND THE CHRONICLE." 11 YOU SEE THAT? 12 A. A PRETTY GOOD HALF-TIME SPEECH, DON'T YOU THINK? 13 Q. YES. 14 AND IN MAKING THAT SPEECH YOU DID THAT TO MR. IRISH; 15 IS THAT RIGHT? 16 A. YES. 17 Q. DID YOU MEAN IT? 18 A. YOU BET. 19 Q. SO THAT THE FOLLOWING POINTS OR THE POSSIBILITIES, THEN, 20 WERE FOR THE PURPOSE OF STRENGTHENING HEARST'S PRESENCE, 21 CORRECT? 22 A. IT WAS -- AS YOU KNOW FROM OUR DEPOSITION, MR. ALIOTO, I 23 LIKENED IT TO -- I CALLED THIS A BLOWFISH THEORY. IT WAS 24 SOMETHING I WAS WORKING ON. IT IS WHAT IT IS, BUT IT CAN BE 25 MADE TO LOOK AS BIG AS IT CAN BE MADE TO LOOK. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 99 WHITE - DIRECT / ALIOTO 1 Q. MR. -- 2 A. THAT -- SO, YES, THAT WAS ON STRATEGY. 3 Q. MR. IRISH, WAS HE -- WOULD YOU CONSIDER MR. IRISH TO BE 4 YOUR BOSS? 5 A. YES, YOU BET. 6 Q. WERE YOU SAYING SOMETHING TO YOUR BOSS THAT WAS NOT TRUE? 7 A. NO. 8 Q. SO, AGAIN, ISN'T IT CORRECT THAT YOU INTENDED TO DO SOME 9 OF THESE THINGS IN ORDER TO STRENGTHEN HEARST'S PRESENCE IN THE 10 BAY AREA? 11 A. YES. 12 Q. AND THAT YOU WERE -- AND YOU WERE TELLING YOUR BOSS THAT 13 YOU BELIEVED THAT IT WAS IMPORTANT -- THAT THE GOAL WAS TO 14 STRENGTHEN THE EXAMINER'S FRANCHISE PRIOR TO 2005 IN EVERY 15 POSSIBLE WAY, CORRECT? 16 A. YES. 17 Q. AND THEN YOU LIST A NUMBER OF POSSIBILITIES, CORRECT? 18 A. YEP. 19 Q. OKAY. ONE OF THEM IS, "CREATE ADVERTISING AND NEWS 20 ALLIANCE WITH ALAMEDA PAPERS." 21 THAT WAS ONE OF THEM? 22 A. YES. 23 Q. AND YOU FELT THAT THAT WOULD BE -- THAT WOULD SHOW SOME 24 KIND OF COMPETITIVE STRENGTH TO THE CHRONICLE, CORRECT? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 100 WHITE - DIRECT / ALIOTO 1 Q. AND THEN YOU SAY, "EXPLORE A MUTUAL 'RIGHT OF FIRST 2 REFUSAL' WITH SINGLETON." 3 OKAY. YOU CAN PASS ON THAT. 4 YOU SAY, NUMBER TWO, "EXPLORE A SIMILAR ALLIANCE 5 WITH GANNETT." 6 IDENTIFY GANNETT. 7 A. GANNETT IS A LARGE PUBLICLY HELD COMMUNICATIONS COMPANY. 8 Q. AND YOU THOUGHT THAT THAT ALSO WOULD IMPRESS THE CHRONICLE 9 IF YOU WERE ABLE TO DO THAT FROM A COMPETITIVE STANDPOINT? 10 A. YES. 11 Q. THAT MAYBE, JUST MAYBE, THE CHRONICLE MAYBE WOULD NOT LIKE 12 THE IDEA OF HAVING TO COMPETE AGAINST YOU IF YOU HAD THESE 13 KINDS OF ALLIANCES? 14 A. OR AT LEAST THEY MIGHT TAKE US SERIOUSLY. 15 THE COURT: IS ALAMEDA NEWSPAPERS THE SAME AS 16 SINGLETON? 17 THE WITNESS: YES. 18 MR. ALIOTO: YES, YOUR HONOR. 19 BY MR. ALIOTO: 20 Q. "THREE, TAKE ADVANTAGE OF CHRONICLE'S OBSESSION WITH KR 21 AND KR'S OBSESSION WITH THE CHRONICLE." 22 NOW, I ASSUME YOU WERE REFERRING TO KNIGHT RIDDER? 23 A. CORRECT. 24 Q. AND WHEN YOU SAY "TAKE ADVANTAGE OF THAT," YOU THINK THAT 25 IF YOU WERE SOMEHOW ABLE TO DO SOMETHING WITH KNIGHT RIDDER, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 101 WHITE - DIRECT / ALIOTO 1 THAT WOULD REALLY GET THE CHRONICLE UPSET, CORRECT? 2 A. YES. 3 Q. OKAY. BUT GET THEM UPSET IN A COMPETITIVE WAY, A 4 COMPETITIVE PROBLEM, RIGHT? 5 A. YES, YES. 6 Q. BECAUSE YOU MIGHT BE -- BECAUSE THIS MIGHT SHOW THAT YOU 7 HAVE STRENGTH OR ADDED STRENGTH TO COMPETE AGAINST THE 8 CHRONICLE; IS THAT RIGHT? 9 A. YES. 10 Q. AND YOU FELT THAT IF YOU -- THAT IF YOU WERE ABLE TO 11 IMPRESS THE CHRONICLE WITH A VIEW THAT YOU MIGHT BE A TOUGH 12 COMPETITOR THAT THEY MAY NOT LIKE -- THEY MAY COME TO THE 13 TABLE, RIGHT? 14 A. WELL, YES. 15 Q. AND WHEN YOU SAY "COME TO THE TABLE," WHAT YOU MEAN IS 16 COME TO YOU AND MAKE SOME KIND OF DEAL WITH YOU THAT AVOIDS 17 BOTH OF YOU COMPETING AGAINST EACH OTHER, RIGHT? 18 A. CORRECT. 19 Q. FOUR, IT SAYS, FOUR, QUOTE, "PUSH RAPIDLY TO EXPAND 20 ADVERTISING FRANCHISE THROUGH MODIFIED TNC'S." 21 WOULD YOU EXPLAIN THAT? 22 A. WELL, IT GOES ON TO EXPLAIN TO CREATE DISTRIBUTION 23 WRAPPERS TARGETED THROUGH -- THROUGHOUT -- THROUGH DATABASES. 24 Q. AND, AGAIN, THIS IS ANOTHER THING THAT YOU COULD DO 25 COMPETITIVELY? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 102 WHITE - DIRECT / ALIOTO 1 A. RIGHT. 2 Q. AND BY "COMPETITIVELY," I MEAN -- DID YOU NOT MEAN THAT 3 THIS WOULD BE ANOTHER ADDED THING THAT MAYBE WOULD BE 4 ATTRACTIVE TO SUBSCRIBERS? 5 A. WELL, NO. THIS -- IN THIS PARTICULAR CASE IT WOULD BE 6 ATTRACTIVE TO ADVERTISERS. 7 Q. TO ADVERTISERS. 8 A. YES. 9 Q. OKAY. THE TWO SOURCES OF INCOME ARE ADVERTISERS AND 10 SUBSCRIBERS? 11 A. RIGHT. 12 Q. SO ON A COMPETITIVE BASIS THIS WOULD MAKE YOU LOOK MORE 13 ATTRACTIVE TO ADVERTISERS. 14 A. YES. 15 Q. IT WOULD BE A COMPETITIVE PLUS FOR YOU. 16 A. YEAH. 17 Q. IT WOULD BE -- AND YOUR CONSIDERED -- OKAY. AND THEN IF 18 YOU GO TO THE NEXT ONE, YOU SAY -- GO TO NUMBER SIX. YOU SAY: 19 "HIRE THE BEST COLUMNIST," AND THEN YOU HAVE 20 "(S) WE CAN FIND IN THE COUNTRY." 21 SO PART OF YOUR VIEW WAS THAT IF YOU HIRED THE BEST 22 COLUMNIST OR COLUMNISTS THAT THAT WOULD SOMEHOW INCREASE THE 23 ATTRACTION OF YOUR NEWSPAPER? 24 A. UH-HUH. 25 Q. AND MAKE IT MORE COMPETITIVE TO THE CHRONICLE, CORRECT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 103 WHITE - DIRECT / ALIOTO 1 A. CORRECT. 2 Q. AND IF YOU HAD THE BEST COLUMNISTS, THEN PEOPLE WOULD BE 3 MORE LIKELY TO BUY YOUR PAPER THAN THE CHRONICLE, CORRECT? 4 A. WELL, ALL OF THESE THINGS WERE THE MOST VISIBLE THINGS WE 5 COULD DO. THESE WEREN'T STEALTH PROJECTS. 6 Q. NO. THESE -- 7 A. THESE WERE IN-YOUR-FACE PROJECTS. 8 Q. THEY ARE IN-YOUR-FACE PROJECTS? 9 A. YES. 10 Q. OKAY. AND BY THAT YOU MEAN THAT IT IS SOMETHING THAT 11 ANYONE CAN SEE, AND THEY CAN SEE THAT YOU WOULD BE OR LOOK LIKE 12 YOU ARE GOING TO BE COMPETITIVE, CORRECT? 13 A. CORRECT, YEAH. 14 Q. BUT ALL THE WHILE YOU WERE FIGURING IN YOUR OWN MIND, 15 THOUGH, THAT THIS WAS -- YOU WERE GOING TO FAKE IT? 16 A. WELL, I DON'T KNOW THAT I WAS GOING TO FAKE IT. I WAS 17 GOING TO DO SEVERAL OF THESE THINGS. 18 NOW, REMEMBER, THIS IS WRITTEN -- I AM THERE NOT 19 QUITE A FULL MONTH IN ANY MEANINGFUL WAY. 20 Q. WELL, DID YOU HIRE THE BEST COLUMNISTS? 21 A. WE HAVE HUNG ON TO SOME OF THE BEST. WE HAVEN'T BEEN ABLE 22 TO BRING ANY GREAT NEW COLUMNISTS TO THE EXAMINER, NO. 23 Q. WELL, YOU HAVE HUNG ON TO SOME OF THE -- YOU HAVE HUNG ON 24 TO THEM. BUT DID YOU HIRE ANY NEW COLUMNISTS FROM THIS DATE, 25 MARCH OF 1999, WHICH IS MORE THAN A YEAR AGO? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 104 WHITE - DIRECT / ALIOTO 1 A. NO. 2 Q. AND THE - REASON THAT YOU DIDN'T HIRE OR GO OUT AND TRY TO 3 HIRE THE SO-CALLED "BEST COLUMNISTS" AND OTHER COLUMNISTS IS 4 BECAUSE -- BECAUSE YOU MADE A DEAL WITH THE CHRONICLE? 5 A. NO. THE REASON IS WE EXTENDED TWO OFFERS AND WE COULDN'T 6 CUT A DEAL. EVERYBODY WAS LOOKING AT THE SITUATION HERE AND 7 SAYING, "DO I WANT TO COME TO THE EXAMINER?" AND IN THOSE TWO 8 CASES, ANYWAY, CONCLUDED NO. 9 Q. ISN'T ONE OF THE REASONS -- 10 A. WE DID TRY. WE CONTINUE TO TRY. 11 Q. ISN'T IT CORRECT THAT ONE OF THE REASONS THAT YOU HAVEN'T 12 HIRED A NEW OR WHAT YOU CALL A BEST COLUMNIST OR COLUMNISTS 13 SINCE MARCH OF LAST YEAR IS BECAUSE YOU MADE A DEAL WITH THE 14 CHRONICLE SO YOU DON'T HAVE TO? 15 A. NO. AS I JUST SAID, WE ARE ACTUALLY COURTING TWO 16 ADDITIONAL AND DIFFERENT PEOPLE AS WE SPEAK. 17 Q. YOU ALSO STATE ON NUMBER EIGHT, QUOTE: 18 "WORK WITH EDEN COLLINGSWORTH TO TAKE 19 FULLEST ADVANTAGE OF HEARST SYNERGIES (JDI)." 20 THAT'S MR. IRISH, RIGHT? 21 A. YES. 22 Q. "URGE JIM ASHER TO DIRECT EDEN'S ATTENTION TO SFO." SAN 23 FRANCISCO, RIGHT? 24 A. YES. 25 Q. OKAY. NOW, THIS -- WHEN YOU TALK ABOUT HEARST SYNERGIES, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 105 WHITE - DIRECT / ALIOTO 1 YOU ARE TALKING ABOUT OTHER PRODUCTS AND THINGS THAT THE HEARST 2 CORPORATION DOES? 3 A. YES. 4 Q. AND YOU WOULD -- AND YOU WOULD TRY TO REACH OUT THROUGHOUT 5 THE COUNTRY TO GET THOSE AND BRING THEM TO SAN FRANCISCO? 6 A. YEAH. 7 Q. AND THE REASON THAT YOU WOULD WANT TO BRING THEM TO SAN 8 FRANCISCO IS THAT IT MIGHT MAKE YOUR PAPER MORE ATTRACTIVE? 9 A. YES. 10 Q. AND THAT WOULD -- AND THAT WOULD MAKE IT -- AND THAT WOULD 11 GIVE YOU A COMPETITIVE ADVANTAGE AGAINST THE CHRONICLE? 12 A. YES. 13 Q. AND IT MIGHT HELP ADVERTISERS, AS WELL? 14 A. YES. 15 Q. DID YOU DO IT? 16 A. WE HAVEN'T CONCLUDED ANY OF THOSE DEALS, NO. 17 Q. YOU DIDN'T DO IT, DID YOU? 18 A. WE TRIED. 19 Q. YOU DIDN'T DO IT, DID YOU? 20 A. WE DIDN'T DO IT. 21 Q. NOW, ONE OF THE REASONS YOU DIDN'T DO IT IS BECAUSE YOU 22 MADE A DEAL WITH THE CHRONICLE; ISN'T THAT RIGHT? 23 A. WHEN? 24 Q. IN AUGUST OF 1999. 25 A. THAT'S NOT MADE IT ANY EASIER, THAT'S FOR SURE. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 106 WHITE - DIRECT / ALIOTO 1 Q. SINCE YOU -- ONE OF THE REASONS THAT YOU DIDN'T DO ANY OF 2 THE SYNERGIES IS BECAUSE YOU DID THE DEAL WITH THE CHRONICLE; 3 IS THAT RIGHT? 4 A. NO. YOU KNOW, THE -- YOU'RE -- IT'S THE DIVISION OF LABOR 5 HERE THAT YOU'RE -- YOU'RE NOT GETTING. I AM OUT HERE CHARGING 6 ALONG ON THE FIELD WITH THE TEAM TRYING TO GET THEM TO RUN DOWN 7 THE FIELD INTO TACKLES AND GUARDS THAT ARE TWICE THEIR SIZE. 8 THE DEAL MAKING IS GOING ON BACK IN NEW YORK. I AM NOT PART OF 9 THAT LOOP. 10 Q. WELL, YOU ARE SENDING WHAT YOUR GOALS ARE AND WHAT YOU 11 INTEND TO DO, AND YOU ARE SENDING THESE TO MR. IRISH, YOUR 12 BOSS, IN NEW YORK, CORRECT? 13 A. YES. 14 Q. NOW, YOU GO ON AND YOU SAY, NUMBER TEN, QUOTE: 15 "BEGIN OPENLY ANALYZING THE, QUOTE, 16 'PHYSICAL UNBUNDLING,' END OF QUOTE, OF THE JOA. 17 EMPLOY A CONSULTANT SIMILAR TO THE CHRONICLE'S 18 MCLEAR. EXPLORE OUTSOURCING PRODUCTION AFTER 19 2005 (E.G., TCA)." 20 DO YOU SEE THAT? 21 A. YES. 22 Q. OKAY. NOW, FIRST OF ALL, LET ME GO -- I WANT TO PROCEED 23 BACKWARDS ON THIS ONE. HERE YOU ARE SAYING THAT ONE OF THE 24 THINGS YOU WANT TO DO IS EXPLORE OUTSOURCING PRODUCTIONS AFTER 25 2005. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 107 WHITE - DIRECT / ALIOTO 1 A. RIGHT. 2 Q. AND OUTSOURCING PRODUCTIONS MEANS GET SOMEONE ELSE TO 3 PRINT THE PAPER? 4 A. RIGHT. 5 Q. BUT THE PAPER WOULD STILL BE IN EXISTENCE. 6 A. THAT'S RIGHT. 7 BUT THE EMPHASIS HERE IS ON THE EXPLORING, NOT 8 GETTING IT. 9 Q. SO YOU ARE TELLING YOUR BOSS THAT YOU ARE GOING TO EXPLORE 10 IT BUT DON'T WORRY ABOUT IT. I WON'T DO IT. 11 A. THAT'S CORRECT. 12 Q. AND WHEN YOU SAY "BEGIN OPENLY ANALYZING THE PHYSICAL 13 UNBUNDLING OF THE JOA," DOES THAT HAVE REFERENCE TO THE ASSETS 14 OF THE JOA? 15 A. THAT DOES. BUT, AGAIN, THE -- YOU KNOW, ASK YOURSELF WHY 16 THE USE OF "OPENLY ANALYZING." IT'S THE OPENLY ANALYZING TO 17 GET THE CHRONICLE'S ATTENTION THAT WE ARE OF SOLID INTENT AND 18 WE ARE GOING TO COME OUT OF THE BUSHES SCREAMING WHETHER WE ARE 19 HOLDING SPEARS OR NOT. 20 Q. SO YOU WOULD HAVE -- SO THE IDEA WAS TO MAKE THIS DISPLAY 21 OF THIS SOLID INTENT THAT YOU MAY COMPETE, BUT YOU NEVER MEANT 22 IT. IS THAT IT? 23 A. I WON'T SAY I DIDN'T MEAN IT. I THINK YOU COME OUT 24 SCREAMING OUTSIDE AND YOU HOPE FOR MIRACLES. 25 Q. WELL, DID YOU HAVE THE -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 108 WHITE - DIRECT / ALIOTO 1 A. SO I MEANT IT. 2 Q. -- DID YOU HAVE THE SOLID INTENT TO COMPETE AND YOU MEANT 3 IT OR YOU DIDN'T MEAN IT? 4 A. I MEANT IT. 5 Q. YOU MEANT IT? 6 A. I MEANT IT. 7 Q. AND YOU MEANT TO COMPETE AFTER 2005? 8 A. I DIDN'T BELIEVE I'D BE THERE. 9 Q. DID YOU MEAN TO COMPETE AFTER 2005? 10 A. IF POSSIBLE, WITH A MIRACLE, SURE. 11 Q. WERE YOU TRYING TO -- WERE YOU TRYING TO REALLY GET 12 YOURSELF, MEANING THE EXAMINER, READY TO COMPETE AFTER 2005, OR 13 WAS THIS JUST SOME KIND OF DISPLAY OR SHOW YOU WANTED TO MAKE 14 TO THE CHRONICLE TO BRING THEM TO THE TABLE? 15 A. I THINK THE LATTER IS CLOSER. 16 Q. BY THE WAY, WITH REGARD TO THE ASSETS, UNDER THE JOINT 17 OPERATING AGREEMENT, IS IT CORRECT THAT ALL OF THE ASSETS -- 18 MAY I APPROACH THE EASEL, YOUR HONOR? 19 THE COURT: YOU MAY. 20 BY MR. ALIOTO: 21 Q. WE HAD DONE THIS WITH THE SAN FRANCISCO NEWSPAPER AGENCY, 22 AND THEY HAD A LOT OF THE FUNCTIONS. ONE OF THEM, WAS, LIKE, 23 PRESSES AND THINGS LIKE -- PRESSING THE PAPER AND THINGS LIKE 24 THAT, CORRECT? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 109 WHITE - DIRECT / ALIOTO 1 Q. NOW, ALL OF THE ASSETS, WERE THEY PUT INTO THE SAN 2 FRANCISCO NEWSPAPER AGENCY? 3 A. NO. 4 Q. WHERE WERE THEY PUT? 5 A. THEY'RE HELD JOINTLY, 50/50, UNDIVIDED BY THE TWO 6 PRINCIPALS. 7 Q. OKAY. SO ALL OF THE DIFFERENT ASSETS -- GIVE US AN 8 EXAMPLE OF SOME OF THE DIFFERENT ASSETS. 9 A. PRESSES, BUILDINGS. 10 Q. PRESSES, BUILDINGS. WHAT ELSE? 11 A. TRUCKS. 12 Q. TRUCKS. OKAY. 13 ALL OF THOSE WERE 50/50 OWNED, RIGHT? 14 A. RIGHT. 15 Q. OKAY. NOW, IN ORDER TO UNBUNDLE IT, THAT WOULD BE A 16 MAMMOTH JOB. THAT WAS THE IDEA, RIGHT? 17 A. CORRECT. 18 Q. AND ALSO YOU WOULD BE ABLE TO USE THAT TO STOP THE 19 CHRONICLE IF THE CHRONICLE WANTED TO CONTINUE TO COMPETE. YOU 20 COULD SAY, "HEY, WE HAVE A PROBLEM WITH THE ASSETS," RIGHT? 21 A. YOU BET. 22 Q. AND WHEN YOU SAY "YOU BET," WHAT YOU MEAN IS THAT IF YOU 23 WANTED TO STOP THE CHRONICLE FROM PRINTING, YOU COULD DO IT 24 BECAUSE YOU COULD TELL THEM, "HEY, YOU CAN'T USE OUR PRESSES," 25 RIGHT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 110 WHITE - DIRECT / ALIOTO 1 A. WELL, I DON'T THINK I'D STOP THEM. I'D LET THEM KNOW THEY 2 WERE GOING TO NEED SOME ADDITIONAL CAPACITY. 3 Q. IN OTHER WORDS, THEY'D HAVE TO GO OUT AND BUY SOMETHING 4 ELSE IF THEY WANTED TO COMPETE, RIGHT? 5 A. YES. 6 Q. BUY ANOTHER PRESS, RIGHT? 7 A. YES. 8 Q. AND PRESSES COST ABOUT 125 MILLION? 9 A. IT DEPENDS. 10 Q. MORE? 11 A. WELL, WHAT DO YOU NEED? 12 Q. I DON'T KNOW. 13 YOU ALSO WERE PREPARING, WERE YOU NOT, TO HAVE A 14 DISCUSSION WITH MR. SIAS. AND IN PREPARING TO HAVE A 15 DISCUSSION WITH MR. SIAS, YOU PREPARED CERTAIN TALKING POINTS, 16 CORRECT? 17 A. YES. 18 Q. AND ONE OF THE TALKING POINTS THAT YOU WANTED TO DO AND 19 CONVEY TO THE CHRONICLE WAS THAT YOU WANTED TO GO -- YOU WANTED 20 TO PRODUCE YOUR PAPER IN THE MORNING. 21 A. THAT WAS THE PITCH. 22 Q. OKAY. THAT WAS THE PITCH. 23 DID YOU MEAN THAT ONE? 24 A. I THINK -- I'M REAL SQUEAMISH ABOUT THAT ONE. 25 Q. WELL, DIDN'T YOU REFER TO THE NOTION THAT -- DIDN'T YOU JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 111 WHITE - DIRECT / ALIOTO 1 SAY THAT EVERYONE KNOWS THAT PUSHING IN THE P.M., MEANING THE 2 AFTERNOON CYCLE, IS A DEATH WARRANT FOR A MAJOR METROPOLITAN 3 DAILY NEWSPAPER? 4 A. IN -- THAT WAS STATED IN A VERY LONG-TERM PERSPECTIVE, 5 AND, OF COURSE, THAT'S BEEN TRUE EVERYWHERE IN THE COUNTRY. 6 Q. OKAY. DID YOU BELIEVE THAT? 7 A. I BELIEVED THAT. 8 Q. WHEN YOU -- AND YOU DID TELL MR. SIAS THAT, DIDN'T YOU? 9 A. I DID. 10 Q. AND YOU UNDERSTOOD THAT -- I MEAN, YOU WERE TELLING IN 11 EFFECT THE CHRONICLE, CORRECT? 12 A. YEAH. BUT DO I BELIEVE THAT TAKING THE EXAMINER OUT OF A 13 NICHE THAT'S IT'S GOT TO ITSELF NOW AND GOING MORNING IT WOULD 14 BE BETTER OFF? I'M -- I'M NOT REAL COMFORTABLE ABOUT THAT. 15 Q. WELL, YOU TOLD MR. SIAS, DIDN'T YOU, THAT YOU WERE GOING 16 IN -- YOU WERE GOING TO PRODUCE IN THE MORNING AND IF YOU DID 17 PRODUCE IN THE MORNING IT WOULD MAKE BOTH PAPERS MORE 18 PROFITABLE, CORRECT? 19 A. WHAT I SAID WAS THAT IT WOULD COST LESS IF WE COULD BOTH 20 PRINT ON ONE CYCLE. I DON'T BELIEVE I SAID ANYTHING ABOUT 21 MAKING BOTH MORE PROFITABLE. 22 Q. DIDN'T YOU SAY THAT IF YOU WENT IN THE MORNING THAT THE 23 EFFECT OF THAT WOULD BE TO IMPROVE THE PROFITABILITY OF BOTH 24 THE CHRONICLE AND THE EXAMINER? 25 A. WELL, IT SOUNDS LIKE YOU JUST READ FROM SOMETHING SO I JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 112 WHITE - DIRECT / ALIOTO 1 BETTER NOT DENY IT. 2 Q. I DID. I DID. 3 THAT'S WHAT YOU REPRESENTED TO MR. SIAS, CORRECT? 4 A. IF YOU SAY SO. WHERE DID I SAY THAT? 5 Q. OKAY. LET ME SHOW YOU EXHIBIT 72. 6 MAY I APPROACH THE WITNESS, YOUR HONOR? 7 LET ME SHOW YOU WHAT IS IN EVIDENCE NOW AS 8 EXHIBIT 72. IT'S DATED APRIL 15, 1999. IT IS FROM YOU TO 9 MR. SIAS, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHRONICLE, WITH 10 BLIND COPIES TO MESSRS. ASHER, BENNACK AND OTHERS OF HEARST 11 CORPORATION. 12 IS THIS THE LETTER THAT YOU SENT TO MR. SIAS ON OR 13 ABOUT APRIL 15, 1999? 14 A. YES. 15 Q. I DIRECT YOUR ATTENTION TO THE SECOND PAGE AND THE THIRD 16 PARAGRAPH. 17 OKAY. IN THAT PARAGRAPH DO YOU SEE WHERE IT SAYS 18 BEGINNING WITH "IN ADDITION"? 19 A. YES. 20 Q. OKAY. YOU STATE, QUOTE: 21 "IN ADDITION, WE ARE FOCUSING ON THE LEGAL 22 QUESTION OF UNFORESEEN CIRCUMSTANCES. WHAT IS 23 CLEAR TODAY WAS NOT CLEAR TO THE DRAFTERS OF THE 24 JOA IN 1964: NO MATTER HOW SUPERIOR THE 25 NEWSPAPER PRODUCT, WE NOW KNOW THAT PUBLISHING JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 113 WHITE - DIRECT / ALIOTO 1 IN THE P.M. CYCLE IS A DEATH WARRANT FOR A MAJOR 2 METROPOLITAN DAILY NEWSPAPER. THE STATED INTENT 3 AND PURPOSE OF THE AGREEMENT IS NOW CLEARLY 4 FRUSTRATED BY REQUIRING THE EXAMINER TO REMAIN 5 IN THE AFTERNOON FIELD." 6 DO YOU SEE THAT? 7 A. YES. 8 Q. DID YOU BELIEVE THAT -- 9 A. YES. 10 Q. -- WHEN YOU WROTE IT? 11 A. YES. 12 Q. WAS THE STATEMENT THAT YOU -- THIS STATEMENT THAT YOU SENT 13 TO MR. SIAS TRUE AT THE TIME THAT YOU WROTE IT? 14 A. YES. 15 Q. YOU GO ON TO SAY, QUOTE: 16 "ACCORDINGLY, WE HEREBY FORMALLY REQUEST 17 YOUR CONCURRENCE IN OUR MOVING THE EXAMINER 18 EXPEDITIOUSLY TO THE A.M. CYCLE ALONGSIDE THE 19 CHRONICLE. NOT ONLY WILL THIS CARRY OUT THE 20 INTENT AND PURPOSE OF THE JOA, WE BELIEVE IT 21 WILL HAVE THE MUTUALLY POSITIVE EFFECT OF 22 REDUCING AGENCY EXPENSES" -- 23 DID YOU BELIEVE IT WOULD REDUCE AGENCY EXPENSES? 24 A. YES. 25 Q. -- "IMPROVING THE PROFITABILITY OF BOTH THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 114 WHITE - DIRECT / ALIOTO 1 CHRONICLE AND THE EXAMINER" -- 2 DID YOU BELIEVE IT WOULD IMPROVE THE PROFITABILITY 3 OF BOTH THE CHRONICLE AND THE EXAMINER? 4 A. YES, IN THE IMMEDIATE SHORT TERM, YES. 5 Q. -- "AND ENHANCING BOTH NEWSPAPERS' ABILITY TO 6 COMPETE WITH OTHER PUBLISHERS IN THE REGION." 7 DID YOU BELIEVE THAT? 8 A. LESS -- LESS CERTAIN ABOUT THAT. 9 Q. NOW, I WANT YOU TO GO TO THE FIRST PAGE. 10 LET ME JUST SEE JUST FOR ONE MINUTE. 11 IF YOU WENT -- IF YOU MOVED THE EXAMINER FROM THE 12 MORNING -- I MEAN, FROM THE AFTERNOON TO THE MORNING, YOU 13 BELIEVED THAT THE EXPENSES, I TAKE IT, FOR THE SAN FRANCISCO 14 NEWSPAPER AGENCY WOULD BE LESS THAN THEY ARE WHEN THE EXAMINER 15 PUBLISHES IN THE AFTERNOON? 16 A. CORRECT. 17 Q. AND BECAUSE THEY ARE LESS, YOU FELT THAT BOTH PAPERS, 18 THEN, WOULD HAVE MORE PROFIT TO SHARE, MORE NET EXCESS TO 19 SHARE, IF THE EXAMINER WERE IN THE MORNING HEAD TO HEAD? 20 A. YEAH. ASSUMING NOTHING ELSE CHANGED. CLEARLY, THE 21 EXPENSES WERE GOING TO GO DOWN. FRANKLY, THE BIG WORRY ON THIS 22 PIECE OF THIS WAS WHAT I WOULD DO IF MR. SIAS SUDDENLY SAID, 23 "FINE, GO MORNING." IT WOULDN'T BE AT ALL CLEAR THAT WOULD BE 24 TERRIFIC FOR US. 25 BUT WOULD IT HAVE THIS JOINT EFFECT IN THE SHORT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 115 WHITE - DIRECT / ALIOTO 1 TERM? ABSOLUTELY. 2 Q. WELL, FIRST OF ALL, YOU DON'T SAY "JOINT" -- YOU DON'T SAY 3 "SHORT TERM," DO YOU? 4 A. NO, I DON'T. 5 Q. OKAY. AND YOU SAY THAT IT WOULD IMPROVE THE PROFITABILITY 6 OF BOTH. I MEAN, DID YOU BELIEVE THAT OR NOT? 7 A. YES. 8 Q. SO THAT IF YOU WENT IN THE MORNING, YOU BELIEVED THAT IF 9 THE EXAMINER WERE PUBLISHED IN THE MORNING, HEAD TO HEAD 10 COMPETITOR OF THE CHRONICLE, THAT IT WOULD BE MORE PROFITABLE 11 FOR BOTH OF YOU, CORRECT? 12 A. WELL, I WANTED TO MAKE THAT PITCH. I MEAN, THIS ENTIRE 13 LETTER IS -- HAS TO BE TAKEN IN ITS ENTIRETY. THIS IS THE 14 ULTIMATE -- WHATEVER ANALOGY YOU PREFER, THE ULTIMATE BLOWFISH, 15 THE ULTIMATE SCREAM COMING OUT OF THE BUSHES. 16 Q. ARE YOU SAYING -- ARE YOU SAYING TO -- ARE YOU SAYING IN 17 THESE PROCEEDINGS -- ARE YOU SAYING THAT THAT STATEMENT WITH 18 REGARD TO BOTH PAPERS BEING PROFITABLE IF THE EXAMINER 19 PUBLISHED IN THE MORNING -- ARE YOU SAYING THAT THAT STATEMENT 20 IS PHONY? 21 A. THE -- THAT IT WOULD IMPROVE PROFITABILITY? 22 Q. YES. 23 A. NO, I AM NOT SAYING THAT. 24 Q. SO YOU THEN -- SO YOU ARE SAYING, THEN, THAT THEY WILL 25 BE -- BOTH OF THEM WILL BE PROFITABLE, EVEN IF THE EXAMINER JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 116 WHITE - DIRECT / ALIOTO 1 GOES HEAD TO HEAD WITH THE CHRONICLE IN THE MORNING? 2 A. THERE WILL BE AN IMMEDIATE PROFIT BUMP. 3 WHAT HAPPENS TO EXAMINER CIRCULATION IS AN 4 UNANSWERED QUESTION IN THAT PARTICULAR PIECE OF THIS. 5 Q. OKAY. NOW, IF YOU WILL GO TO THE FRONT FIRST PAGE OF THIS 6 DOCUMENT. NOW, THIS IS APPROXIMATELY ONE MONTH AFTER. YOU HAD 7 THE EXCHANGES IN MARCH WITH MR. SIAS ABOUT THE PROMOTION 8 PROGRAM. 9 NOW, HERE YOU SAY -- AND THIS IS DIRECTED TO 10 MR. SIAS. AND YOU -- AND YOU HAVE BLIND COPIES, APPARENTLY, TO 11 MESSRS. ASHER AND BENNACK AND OTHERS, AND MR. IRISH. AND YOU 12 SAY IN THE FIRST PARAGRAPH, QUOTE: 13 "THANKS FOR MEETING WITH GEORGE IRISH AND ME 14 LAST THURSDAY. THIS LETTER WILL SUMMARIZE AND 15 CONFIRM THE POINTS WE WANTED TO COMMUNICATE." 16 NOW, WHERE DID YOU MEET WITH MR. SIAS? 17 A. IN MY OFFICE. 18 Q. AND THAT WAS YOU, MR. IRISH AND MR. SIAS AND WHO ELSE? 19 A. THAT'S IT, THE THREE OF US. 20 Q. AND WERE YOU TALKING BETWEEN AND AMONG YOURSELVES ABOUT 21 POTENTIAL COMPETITION IN THE FUTURE FOR THE CHRONICLE AND THE 22 EXAMINER? 23 A. NO. IT WAS A VERY FORMAL MEETING. AND I BELIEVE YOU HAVE 24 THE TALKING POINTS. THOSE WERE LITERALLY READ TO MR. SIAS. 25 Q. NOW, YOU STATE HERE, QUOTE, IN THE SECOND PARAGRAPH: JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 117 WHITE - DIRECT / ALIOTO 1 "THE OVERARCHING INTENT AND PURPOSE OF THE 2 JOINT OPERATING AGREEMENT IS TO, QUOTE, 'ENABLE 3 BOTH CHRONICLE AND HEARST TO SURVIVE AS 4 PUBLISHERS OF INDEPENDENT NEWSPAPERS,' END OF 5 QUOTE, "AND UPON TERMINATION OF THE 6 AGREEMENT" -- 7 THAT WOULD BE IN 2005, RIGHT? 8 A. YES. 9 Q. -- "IN THE ABSENCE OF ITS RENEWAL OR EXTENSION, 10 TO 'ENABLE EACH OF SAID PARTIES TO ENGAGE 11 INDEPENDENTLY OF PRINTING COMPANY IN THE 12 NEWSPAPER PUBLISHING BUSINESS." 13 DO YOU SEE THAT? 14 A. YES. 15 Q. AND YOU TOOK THAT DIRECTLY FROM THE JOINT OPERATING 16 AGREEMENT; IS THAT RIGHT? 17 A. YES. 18 Q. AND THAT INTENT WAS EXPRESSED AT LEAST TWICE IN THE JOINT 19 OPERATING AGREEMENT, CORRECT? 20 A. CORRECT. 21 Q. AND THE IDEA IS THAT -- IS THAT -- THAT BOTH PARTIES TO 22 THE JOINT OPERATING AGREEMENT ARE SUPPOSED TO COOPERATE WITH 23 EACH OTHER SO THAT AT THE END OF THE JOINT OPERATING AGREEMENT 24 BOTH CAN GO OUT INDEPENDENTLY WITH NO MORE JOINT OPERATING 25 AGREEMENT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 118 WHITE - DIRECT / ALIOTO 1 A. RIGHT. 2 Q. AND -- AND THAT NO ONE WILL DO -- NO ONE WILL DO ANYTHING 3 TO THE OTHER THAT WOULD HARM THEM OR HURT THEM OR INHIBIT THEM 4 FROM DOING THAT? 5 A. CORRECT. 6 Q. AND THEN YOU SAY TWO OBSERVATIONS TO MR. SIAS. 7 "FIRST, DESPITE THE INTENTION OF THE PARTIES THAT 8 THE JOA WOULD EXTEND TO THE FULL 50 YEARS" -- 50 YEARS WOULD GO 9 INTO 2015, RIGHT? 10 A. YES. 11 Q. -- "PROVIDED FOR BY THE AGREEMENT AND HEARST'S EXERCISE OF 12 ITS OPTION FOR THE TEN-YEAR EXTENSION" -- YOU HAD ALREADY DONE 13 THAT, RIGHT? 14 A. YES. 15 Q. -- "YOU HAVE MADE IT ABUNDANTLY CLEAR THAT THE CHRONICLE 16 DOES NOT INTEND TO EXTEND THE JOINT OPERATING AGREEMENT BEYOND 17 2005." 18 NOW, DID MR. SIAS SAY THAT? 19 A. I BELIEVE SO. HE DIDN'T SAY IT IN THAT MEETING. 20 Q. BUT AT LEAST YOU ARE MAKING IT CLEAR HERE THAT THAT'S YOUR 21 UNDERSTANDING OF THEIR INTENT. 22 A. RIGHT. 23 Q. OKAY? 24 MAY I APPROACH THE EASEL, YOUR HONOR? 25 THE COURT: YES, YOU MAY. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 119 WHITE - DIRECT / ALIOTO 1 //// 2 BY MR. ALIOTO: 3 Q. SO THAT WE HAD DONE THIS BEFORE. SO THAT THE POSSIBILITY 4 OF EXTENDING THE AGREEMENT FROM 2005 TO 2015, YOU FIGURED THAT 5 WAS NOW FINISHED, NO CHANCE, RIGHT? 6 A. CORRECT. 7 Q. OKAY. SO THAT WAS OUT. SO IF ANYTHING WAS GOING TO BE 8 DONE, YOU HAD TO DO SOMETHING BEFORE 2005. OTHERWISE, YOU WERE 9 GOING TO FACE THE POSSIBILITY OF GOING HEAD TO HEAD COMPETITION 10 WITH THE CHRONICLE, RIGHT? 11 A. I WAS FACING THE POSSIBILITY OF EXTINCTION. I MEAN, 12 THAT'S -- 13 Q. YOU SAY YOU WERE FACING THE POSSIBILITY OF EXTINCTION. WE 14 HAVE GONE OVER THE RECORDS AND I WILL GO OVER THEM AGAIN. 15 THE FACT OF THE MATTER IS THAT YOU ARE MAKING OVER 16 $20 MILLION A YEAR GOING UP, RIGHT? 17 A. AS LONG AS I GOT HIM BY MY SIDE. I MEAN, I AM STEALING 18 70 PERCENT OF HIS MONEY. SURE. 19 Q. OKAY. WE HAD GONE OVER THAT BEFORE SO LET'S DO IT AGAIN. 20 YOU KNOW THAT THE WAY -- MAY I GO TO THE EASEL, YOUR 21 HONOR? 22 THE COURT: YES, YOU MAY. 23 BY MR. ALIOTO: 24 Q. YOU KNOW THAT THE WAY THIS OPERATES IS THAT ALL THE 25 REVENUE FROM THE CHRONICLE AND THE EXAMINER FROM ADVERTISERS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 120 WHITE - DIRECT / ALIOTO 1 AND FROM SUBSCRIBERS GOES INTO THE SAN FRANCISCO NEWSPAPER 2 AGENCY, RIGHT? CORRECT? 3 A. YES, INDEED. 4 Q. AND YOU DON'T KNOW HOW MUCH OF THAT ADVERTISING AND HOW 5 MUCH OF THAT SUBSCRIPTION PRICE IS THE CHRONICLE'S AND HOW MUCH 6 IS THE EXAMINER'S; ISN'T THAT TRUE? 7 A. WELL, I'VE GOT A PRETTY FAIR IDEA. 8 Q. I AM NOT ASKING ABOUT YOUR CIRCULATION. I AM ASKING YOU 9 POINT BLANK, DO YOU KNOW HOW MUCH OF THAT IS ATTRIBUTABLE TO 10 THE CHRONICLE? 11 A. WELL, YOU CAN START ON A CIRCULATION BASIS. THEY'VE GOT 12 ABOUT 80 PERCENT OF THE CIRCULATION. SO AT LEAST THAT MUCH AND 13 IF THE EXAMINER DISAPPEARED, CERTAINLY 20 PERCENT OF THOSE 14 REVENUES WOULD NOT GO AWAY. 15 Q. AND IF THEY HAVE -- IF THEY HAVE A LARGE PERCENTAGE -- 16 SAY, IF YOU WANTED TO USE CIRCULATION WITH REGARD TO THE 17 REVENUE, YOU'D HAVE TO USE THE SAME NOTION WITH REGARD TO THE 18 EXPENSES, WOULDN'T YOU? 19 A. NO. THE EXPENSES FOR THE EXAMINER ARE LESS. 20 Q. THAT'S WHAT I MEAN. 21 A. THEY ARE NOT HALF. 22 Q. THEY ARE LESS THAN THE CHRONICLE. 23 A. YES, SURE. 24 Q. OKAY. DO YOU KNOW WHAT THE EXPENSES ARE JUST FOR THE 25 EXAMINER? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 121 WHITE - DIRECT / ALIOTO 1 A. IN THE AGENCY MIX? 2 Q. YES. 3 A. I DON'T KNOW THOSE. 4 Q. DO YOU KNOW WHAT THE EXPENSES ARE FOR THE CHRONICLE IN THE 5 AGENCY MIX? 6 A. I DON'T. 7 Q. DO YOU KNOW WHAT THE REVENUES ARE FOR THE EXAMINER FROM 8 ADVERTISING IN THE AGENCY MIX? 9 A. I DON'T. 10 Q. DO YOU KNOW WHAT THE SUBSCRIPTION AND THE HOUSE SALES ARE 11 FOR THE EXAMINER AND THE AGENCY MIX? 12 A. YES. 13 Q. WHAT ARE THEY? 14 A. I CAN'T TELL YOU. 15 Q. WHY NOT? 16 A. I MEAN, I CAN DETERMINE THOSE. EXCUSE ME. 17 Q. DO YOU KNOW WHAT THE CHRONICLE'S SUBSCRIPTION AND STREET 18 SALES ARE IN THE AGENCY MIX? 19 A. EASILY DETERMINED, YEAH. 20 Q. AND YOU CAN DETERMINE THAT FROM THEIR PRICE AND FROM THEIR 21 CIRCULATION? IS THAT WHAT YOU ARE DOING? 22 A. SURE. 23 Q. OKAY. NOW, THEN, IF YOU DON'T KNOW THE COST, DO YOU KNOW 24 WHO MADE THE PROFIT AND WHO DIDN'T? 25 A. SURE. THROUGH COMMON SENSE I DO. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 122 WHITE - DIRECT / ALIOTO 1 Q. DO YOU KNOW THAT BOTH OF THEM MADE A PROFIT? 2 A. NO. 3 Q. DO YOU KNOW THAT BOTH OF -- DO YOU KNOW THAT EITHER ONE OF 4 THEM LOST ANYTHING? 5 A. I DON'T KNOW THAT. 6 Q. SO THE ANSWER IS YOU DON'T KNOW WHETHER OR NOT THE 7 EXAMINER LOST MONEY; ISN'T THAT TRUE? 8 A. YOU KNOW, ALL I CAN DO IS REPEAT TO YOU. I KNOW THAT 9 WITHOUT AT LEAST 80 PERCENT OF THE CIRCULATION THERE DRIVING 10 THE AD RATES THAT I WOULD BE IN BAD SHAPE. 11 I MEAN, ARE YOU ASKING WOULD I BE LOSING MONEY 12 OUTSIDE OF THE JOA? 13 Q. LET'S DO IT ANOTHER WAY, TOO. 14 INSIDE THE JOA UP UNTIL 2005 THERE IS NO QUESTION 15 YOU HAVE BEEN MAKING MONEY AND YOU WILL CONTINUE TO MAKE MONEY, 16 CORRECT? 17 A. IN THE RECENT FEW YEARS, YES. 18 Q. YES. 19 A. WE HAVE. 20 Q. AND IF, FOR EXAMPLE, THE SALE OR THE PURCHASE OF THE 21 CHRONICLE DOES NOT GO FORWARD AND YOU CONTINUED IN THE JOA, 22 YOU'D STILL MAKE WELL OVER $20 MILLION EVERY YEAR UP TO 25, 23 CORRECT? 24 A. POSSIBLY. 25 Q. WELL, THAT'S YOUR PROJECTIONS, CORRECT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 123 WHITE - DIRECT / ALIOTO 1 A. WELL, THEY WERE SOMEBODY'S PROJECTIONS WHEN THAT PLAN WAS 2 PUT TOGETHER. 3 Q. THESE ARE THE ATTACHED DOCUMENTS, THE FINANCIAL 4 PROJECTIONS FOR SAN FRANCISCO EXAMINER, SAN FRANCISCO NEWSPAPER 5 AGENCY FOR THE YEARS DONE BY THE AGENCY. OKAY? 6 A. YEAH. 7 Q. ALL RIGHT. SO THERE IS NO QUESTION THAT IF THE JOA 8 CONTINUES TO 2005, YOU WILL MAKE MONEY, CORRECT? 9 A. WELL, I THINK IT'S A REASONABLE PROJECTION. LET'S LEAVE 10 IT AT THAT. 11 Q. OKAY. AND THE REASONABLE PROJECTION IS THAT YOU WOULD BE 12 MAKING MORE THAN $20 MILLION A YEAR AT LEAST; ISN'T THAT TRUE? 13 A. THE REASONABLE PROJECTION, YES. 14 Q. OKAY. SO THAT IF YOU ARE UNABLE, IF YOU WERE NOT 15 ALLOWED -- IF THE HEARST CORPORATION WERE NOT ALLOWED TO BUY 16 THE CHRONICLE, YOU'D STILL BE MAKING MONEY, CORRECT, UNTIL AT 17 LEAST 2005; ISN'T THAT TRUE? 18 A. WELL, IT'S -- YOU KNOW, IT REALLY IS HARD TO TELL. BUT IF 19 THIS -- YOU KNOW, I CAN'T PROJECT BEYOND WHAT YOU'VE GOT THERE, 20 AND I DIDN'T PARTICIPATE IN PUTTING THOSE NUMBERS TOGETHER. 21 Q. WELL, YOU JUST TOLD US, AS THE PUBLISHER OF THE EXAMINER 22 THAT THESE WERE REASONABLE ESTIMATES IN YOUR VIEW. 23 NOW, I AM ASKING YOU, AS YOU WENT FORWARD TO 2005, 24 IF YOU DID NOT -- THE HEARST CORPORATION DID NOT BUY THE 25 CHRONICLE, YOU'D STILL BE MAKING PROFITS OF AT LEAST JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 124 WHITE - DIRECT / ALIOTO 1 $20 MILLION AND MORE, ISN'T THAT TRUE, UNTIL 2005? 2 A. THAT'S WHAT THEIR PROJECTION SAYS. AND I SAY IT'S NOT 3 UNREASONABLE. 4 Q. OKAY. SO YOU WILL -- ALL RIGHT. SO YOU SAY THAT THAT'S 5 NOT UNREASONABLE. OKAY. 6 NOW, IF THE COURT SHOULD DECIDE THAT THE HEARST 7 CORPORATION IS NOT ALLOWED TO BUY THE CHRONICLE, ARE YOU GOING 8 TO LEAVE AND THROW THAT MONEY AWAY? 9 A. I DON'T KNOW. YOU'LL HAVE TO ASK SOMEBODY ELSE THAT. 10 Q. WHO, BENNACK, MR. BENNACK? 11 A. THAT'S A GREAT PLACE TO START. 12 Q. NOW, YOU ALSO SAY IN THIS -- STATE IN THIS LETTER -- THERE 13 WERE TWO POINTS. THE FIRST ONE WAS THAT YOU FELT THAT THE 14 CHRONICLE BY SAYING THAT THEY ARE NOT GOING TO EXTEND THE 15 AGREEMENT -- YOU THOUGHT THAT THAT WAS A STRIKE AGAINST THEM, 16 RIGHT? 17 YOU FELT THAT THEY WERE BEING NOT COOPERATIVE. 18 A. THAT THEY WEREN'T GOING TO EXTEND THE AGREEMENT? 19 Q. YES. 20 A. I DIDN'T HAVE ANY FEELING ABOUT THAT. I MEAN, I WASN'T 21 SURPRISED. 22 Q. BUT YOU FELT THAT THAT MIGHT JEOPARDIZE YOU INSTEAD OF 23 TRYING TO ENABLE YOU TO BE ABLE TO MEET 2005 INDEPENDENTLY, 24 THAT THIS MIGHT HURT YOU. ISN'T THAT RIGHT? 25 A. YEAH. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 125 WHITE - DIRECT / ALIOTO 1 Q. OKAY. THEN YOU HAVE THE SECOND ONE. YOU STATE IN THE 2 NEXT PARAGRAPH: 3 "SECOND, THE CHRONICLE RECENTLY ATTEMPTED 4 UNILATERALLY TO ORDER THE DISCONTINUATION OF OUR 5 SUCCESSFUL JOINT CIRCULATION PROMOTION OF THE 6 PAST TWO YEARS. THE CHRONICLE'S UNILATERAL 7 EFFORT WAS MADE DESPITE THE HARM THIS WOULD DO 8 TO THE AGENCY'S REVENUE AND PROFIT AND THE 9 CLEARLY DISPROPORTIONATE HARM TO EXAMINER 10 CIRCULATION. AS INDICATED IN PRIOR LETTERS, WE 11 BELIEVE THIS TO BE IN VIOLATION OF ANTITRUST 12 LAWS AND THE AGREEMENT." 13 DO YOU SEE THAT? 14 A. YES. 15 Q. OKAY. DID YOU BELIEVE THAT? 16 A. WELL, I -- I WAS FULLY UNDERSTANDING OF IT UP TO THE LAST 17 SENTENCE AND PHRASE WHICH -- 18 Q. ABOUT THE ANTITRUST LAWS? 19 A. YEAH. WHICH I DON'T HAVE AN OPINION ON. I AM NOT EXPERT 20 IN -- I DON'T REALLY UNDERSTAND THE ANTITRUST LAWS. 21 Q. WELL, SOMEBODY GAVE YOU THIS. 22 A. SURE. 23 Q. AND YOU FELT AT LEAST COMFORTABLE ENOUGH WITH IT TO SIGN 24 YOUR NAME TO IT. YOU WOULDN'T SIGN YOUR NAME TO SOMETHING YOU 25 DIDN'T BELIEVE IN, WOULD YOU? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 126 WHITE - DIRECT / ALIOTO 1 A. I TRUSTED THE PEOPLE THAT COLLABORATED ON THIS LETTER. 2 Q. OKAY. YOU GO INTO THE NEXT PARAGRAPH. YOU STATE, QUOTE: 3 "THE SIGNALS ARE UNMISTAKABLY CLEAR THAT THE 4 CHRONICLE INTENDS THAT OUR PARTNERSHIP COME TO 5 AN END DESPITE THE BENEFITS DERIVED FROM THE JOA 6 BY THE CHRONICLE AT THE TIME OF ITS 7 IMPLEMENTATION AND OVER THE PAST 34 YEARS." 8 DO YOU SEE THAT? 9 A. YES. 10 Q. OKAY. AND WHEN YOU SAY THE SIGNALS ARE UNMISTAKABLE, YOU 11 ARE SAYING, IN EFFECT, THAT IT LOOKS LIKE 2005 IS GOING TO BE 12 IT. CORRECT? 13 A. RIGHT. 14 Q. NOW, SINCE 2005 IS GOING TO BE IT, THEN YOU BETTER START 15 GIVING THEM SOME THREATS, RIGHT? 16 A. CORRECT. 17 Q. SO YOU STARTED GIVING THEM SOME MORE THREATS, RIGHT? 18 A. YES. 19 Q. AND THE IDEA OF GIVING THEM MORE THREATS WAS THAT YOU WERE 20 GOING TO LET THEM KNOW THAT EITHER YOU WERE GOING TO BE A BIG, 21 STRONG, POWERFUL, HEAD-TO-HEAD COMPETITOR IN 2005 -- THAT'S ONE 22 THING, RIGHT? 23 A. UH-HUH. 24 Q. YOU HAVE TO ANSWER. 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 127 WHITE - DIRECT / ALIOTO 1 Q. OR YOU ARE GOING TO GIVE THEM TROUBLE WITH THE ASSETS, 2 RIGHT? 3 A. YES. 4 Q. AND SO YOU TELL THEM, QUOTE: 5 "WE ARE ENGAGING THE SERVICES OF AN OUTSIDE 6 CONSULTANT FOR PURPOSES OF ASSESSING THESE NEEDS 7 AND WE WILL NEED THE FULL COOPERATION OF THE 8 AGENCY. UNTIL THIS ANALYSIS IS COMPLETED, WE 9 THINK IT PRUDENT TO AVOID ANY DISPOSITION OF 10 ASSETS, INCLUDING OUR JOINTLY OWNED FLEET 11 MAINTENANCE GARAGE. WHEN OUR ANALYSIS, AND THE 12 ONE IN WHICH CHRONICLE IS ENGAGED, ARE COMPLETE, 13 WE WILL BE PREPARED TO TALK ABOUT HOW TO DIVIDE 14 ALL OF THE ASSETS EVENLY, INCLUDING THE GARAGE 15 PROPERTY." 16 NOW, BY MENTIONING THE GARAGE, WAS THAT A THREAT? 17 A. YES. 18 Q. AND STATE TO THE COURT HOW THAT WAS A THREAT. 19 A. WELL, IT JUST HAPPENED TO BE A HOT TOPIC AT THE TIME THE 20 CHRONICLE WANTED TO MOVE THE KRON TELEVISION FACILITIES TO THAT 21 LOCATION. 22 Q. AND SO WHAT YOU WERE SAYING IS, WELL, THAT'S FINE, 23 CHRONICLE, BUT YOU CAN FORGET ABOUT THE GARAGE, RIGHT? 24 A. THAT'S CORRECT. 25 THE COURT: WHERE IS THIS GARAGE? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 128 WHITE - DIRECT / ALIOTO 1 THE WITNESS: FIFTH AND BRANNAN. 2 BY MR. ALIOTO: 3 Q. ON THE OTHER HAND, IF THEY CAME TO YOU, THEN YOU MIGHT 4 THINK ABOUT THE GARAGE. THAT WOULD BE OKAY THEN? 5 A. WE COULD TALK. 6 Q. OKAY. NOW, LET ME SHOW YOU YOUR TALKING POINTS. I GOT A 7 LITTLE AHEAD OF MYSELF, BUT IT'S EXHIBIT NUMBER 125. 8 MAY I APPROACH THE WITNESS, YOUR HONOR? 9 THE COURT: YES, YOU MAY. 10 BY MR. ALIOTO: 11 Q. LET ME HAND YOU WHAT IS EXHIBIT 125 IN EVIDENCE. IT'S 12 ENTITLED TALKING POINTS. IT'S DATED APRIL 8, 1999. IT'S TWO 13 PAGES. 14 AND THIS WAS A DOCUMENT THAT YOU AND OTHER FOLKS 15 PREPARED IN ANTICIPATION OF WRITING THE LETTER THAT WE JUST 16 WENT OVER, EXHIBIT 72, AND THE MEETING WITH MR. SIAS? 17 A. YES. 18 Q. OKAY. NOW, A TALKING POINT MEANS THAT THIS IS SOMETHING 19 THAT -- THIS IS SOMETHING THAT WHEN YOU MEET WITH MR. SIAS, 20 THIS IS WHAT YOU WANT TO TELL HIM, RIGHT? 21 A. YES. 22 Q. THAT'S WHAT THIS IS ABOUT? 23 A. YEAH. 24 Q. AND YOU AND WHO, MR. IRISH? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 129 WHITE - DIRECT / ALIOTO 1 Q. AND SOMEONE ELSE, MR. ASHER? 2 A. THREE PEOPLE. 3 Q. WHO IS THE OTHER ONE? YOU -- 4 A. SIAS. 5 Q. WHO DID THE TALKING POINTS? 6 A. OH, WHO CREATED THESE? 7 Q. YES. WHO GOT TOGETHER ON THE TALKING POINTS BESIDES 8 YOURSELF AND MR. IRISH? 9 A. I HONESTLY DON'T REMEMBER. 10 Q. OKAY. IF YOU WILL GO TO THE TALKING POINTS AND THE -- IF 11 YOU GO TO THE SECOND BULLET, IT BEGINS, "YOU KNOW." 12 DO YOU SEE THAT? 13 A. YES. 14 Q. OKAY. IT STATES: 15 "YOU KNOW IT'S OUR INTENT TO STAY AND 16 PUBLISH, INDEPENDENT OF THE AGENCY." 17 DO YOU SEE THAT? 18 A. YEAH. 19 Q. NOW, IN ORDER TO BE INDEPENDENT OF THE AGENCY, THAT WOULD 20 HAVE TO BE AFTER 2005, RIGHT? 21 A. CORRECT. 22 Q. SO YOU WERE GOING TO TELL MR. SIAS AND THE CHRONICLE THAT 23 THEY SHOULD KNOW THAT IT WAS HEARST'S INTENT TO STAY AND 24 PUBLISH AFTER THE END OF THE JOA 2005, RIGHT? 25 A. YES. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 130 WHITE - DIRECT / ALIOTO 1 Q. AND DID YOU WHEN YOU MET WITH MR. SIAS -- DID YOU TELL HIM 2 THAT? 3 A. YES. 4 Q. AND WAS THAT STATEMENT TRUE? 5 A. AGAIN, I THINK PROBABLY IT'S BEST TO ASK MR. BENNACK. 6 Q. ASK WHO? 7 A. MR. BENNACK. 8 Q. WELL, DID MR. BENNACK APPROVE OF YOU MAKING THIS 9 STATEMENT? 10 A. YES. 11 Q. SO THIS STATEMENT, THEN, THAT WAS TO BE MADE TO THE 12 CHRONICLE, THAT IT WAS THE INTENT OF HEARST TO STAY AND PUBLISH 13 INDEPENDENT OF THE AGENCY -- NAMELY, AFTER 2005 -- WAS 14 SOMETHING THAT MR. BENNACK WANTED, CORRECT? 15 A. YEAH. 16 Q. AND YOU FOLLOWED HIS INSTRUCTIONS BECAUSE HE IS THE CEO OF 17 HEARST CORPORATION, RIGHT? 18 A. YOU GOT IT. 19 Q. AND SO IF THIS WERE A TRUE STATEMENT OR NOT, MR. BENNACK 20 WOULD BE THE ONE TO KNOW; IS THAT RIGHT? 21 A. YES. 22 Q. HAVE YOU KNOWN MR. BENNACK TO -- BENNACK TO MAKE FALSE 23 STATEMENTS TO YOU? 24 A. NO. I -- AGAIN, YOU KNOW FULL WELL THAT -- I'LL SAY IT 25 ONE MORE TIME -- THE -- WHETHER IT WAS IN FACT OUR INTENT TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 131 WHITE - DIRECT / ALIOTO 1 STAY IS -- WHAT WAS VERY TRUE AND VERY CLEAR WAS WE WANTED TO 2 CREATE THAT IMPRESSION WITH MR. SIAS. 3 Q. IF YOU WANTED TO MAKE -- 4 A. 2000 -- THIS IS BACK IN '99. 5 Q. '99. 6 A. SO 2005 IS -- YOU KNOW, WHO KNOWS WHAT OUR INTENT COME 7 2005 IS GOING TO BE? BUT RIGHT NOW ARE WE EXHORTING THE TEAM 8 AND TRYING TO CONVINCE THE OPPOSITION THAT WE ARE BIGGER AND 9 NOISIER THAN WE ARE? YES. 10 Q. YOU WANTED TO USE THE SIZE OF HEARST AGAINST THE 11 CHRONICLE? 12 A. YES. 13 Q. YOU TOLD THEM THAT, RIGHT? 14 A. YEAH. 15 Q. YOU WANTED TO USE THE RESOLVE OF HEARST, THE COMMITMENT OF 16 HEARST, TO STAY IN THE MARKET? 17 A. YES. 18 Q. YOU WANTED TO USE THAT, RIGHT? 19 A. YES. 20 Q. AND YOU WANTED TO USE OR LET THEM KNOW THAT YOU WERE -- 21 YOU WOULD USE THE RESOURCES OF HEARST TO STAY IN THE MARKET. 22 A. YES. 23 Q. AND YOU TOLD THEM ALL THOSE THINGS. 24 A. TOLD THEM ALL THOSE THINGS. 25 Q. AND MR. BENNACK APPROVED THOSE STATEMENTS BEING MADE TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 132 WHITE - DIRECT / ALIOTO 1 THE CHRONICLE. 2 A. I -- YOU KNOW, I AM NOT SURE THAT HE WAS ACTUALLY IN THE 3 AUTHORSHIP OF THESE PARTICULAR TALKING POINTS. BUT, BROADLY 4 STATED, YES. 5 Q. HAD YOU KNOWN MR. BENNACK TO ALLOW ONE OF THE PUBLISHERS 6 OF A HEARST PAPER TO MAKE SOME STATEMENT TO ANOTHER PUBLISHER 7 OF ANOTHER COMPETING PAPER THAT WAS KNOWINGLY FALSE? 8 A. NO. 9 Q. IF YOU WILL GO TO THE SECOND PAGE. AND THE SECOND-TO-LAST 10 BULLET BEGINS, QUOTE, "JOHN." 11 DO YOU SEE THAT? 12 A. YES. 13 Q. AND JOHN IS JOHN IRISH; IS THAT RIGHT? 14 A. JOHN SIAS. 15 Q. I'M SORRY, JOHN SIAS. 16 A. YES. 17 Q. OKAY. SO THIS IS LIKE A REHEARSAL; IS THAT RIGHT? 18 A. HOW IS THAT? 19 Q. IT'S LIKE A REHEARSAL. THIS IS THE SCRIPT THAT YOU ARE 20 GOING TO BE USING WHEN YOU MEET MR. SIAS, RIGHT? 21 A. YES. 22 Q. OKAY. SO YOU SAY, QUOTE: 23 JOHN, YOU CAN UNDERSTAND, THESE ARE THINGS 24 WE HAVE TO DO. I KNOW THERE ARE PEOPLE ON YOUR 25 SIDE WHO DON'T BELIEVE THESE THINGS ARE GOING TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 133 WHITE - DIRECT / ALIOTO 1 HAPPEN, AND THAT HEARST FULLY INTENDS TO PRESS 2 ON IN THE MORNING FIELD, AND IN ALL AVAILABLE 3 MEDIA FRONTS. THAT'S WHY I'M HERE; IT'S WHAT I 4 WAS SENT TO DO." 5 NOW, DID YOU MAKE THOSE STATEMENTS IN SUM OR 6 SUBSTANCE TO MR. SIAS? 7 A. YES. 8 Q. AND WHEN YOU SAY THAT YOU KNOW THAT THERE ARE PEOPLE ON 9 YOUR SIDE -- "YOUR SIDE" IS WHAT, THE CHRONICLE SIDE? 10 A. YES. 11 Q. -- WHO DON'T BELIEVE THESE THINGS ARE GOING TO HAPPEN, YOU 12 HAD REFERENCE TO SOME OF THE PERSONS WHO WERE OWNERS OF THE 13 CHRONICLE? 14 A. YES. 15 Q. AND YOU FELT THAT, WELL, MAYBE THEY THOUGHT THAT YOU -- 16 THAT HEARST WASN'T GOING TO STAY? 17 A. I BELIEVED THAT, YEAH. 18 Q. AND SO WHAT YOU WANTED TO BE SURE OF WAS THAT MR. SIAS 19 UNDERSTOOD AND CONVEYED TO THOSE PEOPLE THAT THEY WERE WRONG, 20 YOU ARE GOING TO STAY, RIGHT? 21 A. CORRECT. 22 Q. AND YOU -- AND -- AND WHEN YOU SAY "FULLY PRESS ON," YOU 23 MEAN -- "IN THE MORNING FIELD," YOU MEAN, MORNING PAPER, 24 HEAD-TO-HEAD COMPETITION? 25 A. YEAH. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 134 WHITE - DIRECT / ALIOTO 1 Q. AND YOU UNDERSTOOD THAT THAT'S WHY YOU WERE THERE AND 2 THAT'S WHAT YOU WERE SENT TO DO. THAT'S YOUR MISSION, CORRECT? 3 A. CORRECT. 4 Q. OKAY. ALL OF THESE THREATS ARE ABOUT COMPETITION, AREN'T 5 THEY? 6 A. YES. 7 Q. AND THEY ARE MEANT TO SAY IF YOU, CHRONICLE, DON'T DO 8 SOMETHING WITH US, WE ARE GOING TO COMPETE AGAINST YOU. 9 CORRECT? 10 A. YES. 11 Q. AND YOU BELIEVED THAT THAT WOULD SOMEHOW FRIGHTEN THEM 12 INTO THEN COMING TO THE TABLE AND MAKING SOME DEAL THAT GOT RID 13 OF THAT COMPETITION, THAT THREAT OF COMPETITION. RIGHT? 14 A. CORRECT. 15 Q. LET ME HAND YOU -- LET ME SHOW YOU WHAT IS EXHIBIT 133. 16 MAY I APPROACH THE WITNESS, YOUR HONOR? 17 THE COURT: YOU MAY. 18 BY MR. ALIOTO: 19 Q. I SHOW YOU WHAT IS EXHIBIT 133. IT APPEARS TO BE AN 20 E-MAIL SENT BY YOU TO KIRK MACDONALD AND GEORGE IRISH ON OR 21 ABOUT MAY 2ND, 1999, THE SUBJECT SAN FRANCISCO, STRATEGIC 22 UPDATE. 23 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 24 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 135 WHITE - DIRECT / ALIOTO 1 A. (WITNESS EXAMINES DOCUMENT.) 2 BY MR. ALIOTO: 3 Q. NOW, THIS IS, EXHIBIT 133, THIS IS, IN FACT, AN E-MAIL 4 THAT YOU SENT ON OR ABOUT THIS DATE TO MR. IRISH AND 5 MR. MAC DONALD; CORRECT? 6 A. (WITNESS EXAMINES DOCUMENT.) YES. YEAH. 7 Q. WOULD YOU IDENTIFY TO THE COURT WHO MR. KIRK MAC DONALD 8 IS? 9 A. HE WORKS AT HEARST CORPORATE OFFICE IN NEW YORK DIRECTLY 10 WITH MR. IRISH IN THE NEWSPAPER DIVISION SPECIFICALLY. 11 THE COURT: TELL ME MR. IRISH'S POSITION. HE'S NOT 12 THE CEO. THAT'S MR. BENNACK. 13 THE WITNESS: BENNACK. 14 THE COURT: AND MR. IRISH? 15 THE WITNESS: HE'S HEAD OF HEARST NEWSPAPER -- THE 16 NEWSPAPER GROUP OF HEARST. 17 THE COURT: THANK YOU, SIR. 18 BY MR. ALIOTO: 19 Q. IN OTHER WORDS, THE HEARST CORPORATION HAS A NEWSPAPER 20 DIVISION, IT HAS A MAGAZINE DIVISION OR SUBSIDIARY, IT HAS A 21 TELEVISION OR PROGRAMMING, AND EACH OF THOSE DIFFERENT 22 DIVISIONS IS HEADED BY AN INDIVIDUAL WHO REPORTS TO 23 MR. BENNACK? 24 A. CORRECT. 25 Q. AND THE ONE WHO IS IN CHARGE OF THE NEWSPAPERS IS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 136 WHITE - DIRECT / ALIOTO 1 MR. IRISH? 2 A. CORRECT. 3 Q. AND HE'S -- AND YOU REPORT TO HIM AS DO ALL THE PUBLISHERS 4 OF ALL THE HEARST NEWSPAPERS? 5 A. CORRECT. 6 THE COURT: AND MR. MAC DONALD IS AN ASSISTANT? 7 THE WITNESS: HE'S A STAFF ASSISTANT TO MR. IRISH, 8 YES. 9 THE COURT: THANK YOU. 10 BY MR. ALIOTO: 11 Q. OKAY. IF YOU'LL LOOK AT THE THIRD PARAGRAPH, YOU STATE, 12 QUOTE: 13 "THAT SAID, IT IS VERY IMPORTANT, I THINK, 14 TO FOLLOWUP OUR STRONG LETTER WITH SOME ACTIONS 15 THAT PERSUADE THE CHRONICLE FOLKS THAT," QUOTE; 16 "'WE'RE HERE TO STAY AND WE'RE HERE TO PLAY,'" 17 END OF QUOTE. "IT WOULD BE EXTREMELY RISKY TO 18 LET ANY OF THE CHRONICLE NONSELLERS COME TO THE 19 BELIEF THAT WE WERE JUST BLOWING SMOKE, THAT WE 20 HAVE NEITHER THE RESOURCES NOR THE WILL TO WIN 21 THIS MARKET," END OF QUOTE. 22 DO YOU SEE THAT? 23 A. YES. 24 Q. NOW, FIRST OF ALL, YOU SAY "CHRONICLE NONSELLERS." DO YOU 25 SEE THAT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 137 WHITE - DIRECT / ALIOTO 1 A. YES. 2 Q. NOW, THIS IS DATED MAY 2ND, 1999. AS OF THIS TIME, THE 3 HEARST CORPORATION DID NOT HAVE ANY AGREEMENT WITH THE 4 CHRONICLE TO BUY THE CHRONICLE; CORRECT? 5 A. CORRECT. 6 Q. AND WERE THEY CONDUCTING ANY NEGOTIATIONS AT THIS TIME TO 7 BUY THE CHRONICLE? 8 A. NOT TO MY KNOWLEDGE. 9 Q. YOU, NONETHELESS, REFERRED TO THE CHRONICLE FOLKS AS 10 "CHRONICLE NONSELLERS." SO YOU HAD IT IN YOUR MIND THAT THE 11 CHRONICLE WAS GOING TO BE SELLING TO SOMEBODY; CORRECT? 12 A. WELL, WHAT I WAS REALLY REFERRING TO THERE WAS THERE WAS 13 AN ARTICLE ALONG ABOUT JANUARY IN THE AMERICAN JOURNALISM 14 REVIEW, A BIG PIECE ON THE COMPETITIVE SETUP, THE INTENSE 15 COMPETITION IN THE BAY AREA. AND IT TALKED ABOUT THE CHRONICLE 16 AND THE EXAMINER, AND SO FORTH, AND IT REFERRED TO -- AND THERE 17 HAD BEEN OTHER STORIES IN THE MERCURY NEWS ABOUT PRIOR 18 NEGOTIATIONS, AND SO FORTH, AND THAT ROUGHLY TWO THIRDS OF THE 19 CHRONICLE BOARD, FAMILY BOARD AS I UNDERSTOOD IT, WERE 20 INTERESTED IN SELLING AND A THIRD WERE NONSELLERS. THOSE ARE 21 THE NONSELLERS THAT I'M REFERRING TO HERE. 22 Q. OKAY. WELL, THEN YOU'RE SAYING, QUOTE, "IT WOULD BE 23 EXTREMELY RISKY TO LET ANY OF THE CHRONICLE NONSELLERS," SO YOU 24 FELT THAT THOSE WERE THE TARGET OF WHAT -- YOUR TARGETS IN 25 ORDER TO -- BECAUSE YOU DIDN'T HAVE TO CONVINCE THE OTHERS TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 138 WHITE - DIRECT / ALIOTO 1 SELL; IS THAT THE IDEA? 2 A. CORRECT. 3 Q. ALL RIGHT. AND WHEN YOU SAY THAT YOU DIDN'T WANT THEM TO 4 COME TO THE BELIEF THAT WE, MEANING HEARST, WAS JUST BLOWING 5 SMOKE, THAT WAS IN REFERENCE TO THE RESOURCES AND THE WILL TO 6 WIN THE MARKET; CORRECT? 7 A. CORRECT. 8 THE COURT: MR. ALIOTO? 9 MR. ALIOTO: YES, YOUR HONOR. 10 THE COURT: WHEN WOULD BE A CONVENIENT TIME TO TAKE 11 A BREAK. 12 MR. ALIOTO: AT YOUR HONOR'S CONVENIENCE. VERY 13 GOOD, SIR. 14 THE COURT: ALL RIGHT. LET'S PLAN TO GO UNTIL ABOUT 15 5:00 O'CLOCK THIS EVENING. HOW MUCH LONGER DO YOU THINK YOU 16 HAVE OF MR. WHITE? 17 MR. ALIOTO: I THINK ABOUT AN HOUR, I THINK, YOUR 18 HONOR. IF I COULD -- I COULD KNOCK THAT DOWN, I'M SURE. 19 THE COURT: ALL RIGHT. GOOD. WE'LL TAKE 10 MINUTES 20 AND RESUME WITH FURTHER TESTIMONY OF MR. WHITE. 21 (RECESS TAKEN AT 3:30 P.M.) 22 (PROCEEDINGS RESUMED AT 3:37 P.M.) 23 THE COURT: VERY WELL, MR. ALIOTO, YOU MAY RESUME 24 YOUR EXAMINATION OF THE WITNESS. 25 MR. ALIOTO: THANK YOU, YOUR HONOR. MAY IT PLEASE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 139 WHITE - DIRECT / ALIOTO 1 THE COURT. 2 Q. LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE AS 3 EXHIBIT 110. 4 MAY I APPROACH THE WITNESS, YOUR HONOR? 5 THE COURT: VERY WELL. 6 BY MR. ALIOTO: 7 Q. EXHIBIT 110 ALSO APPEARS TO BE AN E-MAIL FROM YOU DATED 8 MAY 5, 1999. IT IS DIRECTED TO JIM SEVRENS AND THE SUBJECT IS 9 SIAS MEETING. DID YOU SEND THIS E-MAIL TO MR. SEVRENS ON OR 10 ABOUT THE DATE INDICATED? 11 A. (WITNESS EXAMINES DOCUMENT.) IT WOULD APPEAR SO. I'M 12 SURE I DID. 13 Q. NOW, I'LL DIRECT YOUR ATTENTION TO THE FIRST PARAGRAPH. 14 IT SAYS: 15 "DEAR GEORGE: 16 "OUR MEETING WITH JOHN SIAS AND ALAN 17 NICHOLS..." 18 NOW, I BELIEVE THAT YOU IDENTIFIED MR. NICHOLS 19 BEFORE. WOULD YOU DO IT ONCE MORE TO BRING US UP-TO-DATE ON 20 WHO HE IS? 21 A. NO, I THINK I HAD IDENTIFIED RON INGRAM. ALAN NICHOLS WAS 22 AT THE TIME, I BELIEVE, CHIEF FINANCIAL OFFICER FOR THE 23 CHRONICLE PUBLISHING COMPANY. 24 Q. OKAY. SO THAT YOU HAD A MEETING WITH MR. SIAS AND 25 MR. NICHOLS. AND WHO WAS WITH YOU? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 140 WHITE - DIRECT / ALIOTO 1 A. I'M NOT SURE WHETHER IT WAS JIM SEVRENS AND I WITH HIM 2 OR -- I DON'T RECALL. I'M ASSUMING, SINCE I'M ASKING 3 MR. SEVRENS TO REVIEW THIS NOTE PRIOR TO SENDING IT TO GEORGE 4 IRISH, THAT HE WAS WITH ME IN THAT MEETING. 5 Q. NOW, YOU STATE, QUOTE: 6 "OUR MEETING WITH JOHN SIAS AND ALAN NICHOLS 7 WAS, ONCE AGAIN, QUITE CORDIAL. I AM EVER MORE 8 CONVINCED THAT OUR THEORY IS CORRECT THAT JOHN 9 MAINLY WANTS A FIRM RESPONSE FROM US TO 10 DEMONSTRATE TO HIS DIRECTORS THAT HEARST IS 11 SERIOUS AND THAT WE'RE HERE TO STAY." 12 THEN YOU GO ON. 13 OKAY. NOW, FIRST OF ALL, WHEN YOU SAY ABOUT YOUR 14 THEORY, DOES THAT MEAN THAT YOUR IDEA ABOUT MR. SIAS WAS THAT 15 MR. SIAS WANTED STRONG DEMANDS FROM YOU SO THAT HE COULD 16 PRESENT THEM TO HIS BOARD? 17 A. YES. 18 Q. DID YOU FEEL LIKE MR. SIAS WAS KIND OF WORKING WITH YOU TO 19 ACCOMPLISH GETTING OVER TO THE MEMBERS OF THE CHRONICLE BOARD 20 THAT THEY SHOULD DO SOMETHING WITH HEARST? 21 A. I COULD NEVER HAVE GONE SO FAR AS TO SAY WORKING WITH ME, 22 BUT I WAS TRYING TO READ THE TEA LEAVES AS BEST I COULD. 23 Q. WELL, OTHER THAN THE TEA LEAVES, I MEAN, DID YOU GET 24 THESE -- DID YOU GET THESE VIEWS FROM YOUR CONVERSATIONS WITH 25 MR. SIAS, WHAT HE SAID TO YOU, THE WAY HE ACTED? WHAT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 141 WHITE - DIRECT / ALIOTO 1 A. PROBABLY A CUMULATIVE. I ALLUDED TO THE AMERICAN 2 JOURNALISM REVIEW ARTICLE EARLIER, THAT WAS A BIG PIECE OF IT; 3 BACKGROUND FROM VARIOUS AGENCY PEOPLE THAT WE BOTH DEAL WITH 4 AND FROM CONVERSATIONS WITH MR. SIAS. 5 Q. ALL RIGHT. NOW, DID YOU FEEL THAT IF, IN FACT, MR. SIAS 6 FELT THAT WAY, THAT IF YOU TOLD SOMETHING TO MR. SIAS THAT WAS 7 NOT TRUE, HE MAY TURN AROUND AND TELL HIS OWN BOARD OF 8 DIRECTORS SOMETHING THAT WAS NOT TRUE? 9 A. I EXPECTED THAT HE PROBABLY WOULD FEEL FREE TO SHARE WITH 10 HIS BOARD WHATEVER I SHARED WITH HIM, YES. 11 Q. SO THAT WHEN YOU WERE TELLING HIM, "HEARST IS SERIOUS AND 12 WE'RE HERE TO STAY" -- YOU DID TELL HIM THAT; RIGHT? 13 A. YES. 14 Q. AND YOU UNDERSTOOD THAT HE WANTED A FIRM RESPONSE FROM YOU 15 AND YOU THOUGHT THAT'S A PRETTY GOOD FIRM RESPONSE; RIGHT? 16 A. YES. I WAS HOPING HE WANTED A FIRM RESPONSE FROM US. 17 Q. WERE YOU UNDER THE -- DID YOU FEEL THEN THAT MR. -- YOU 18 KNEW THAT MR. SIAS WAS THE CHAIRMAN OF THE BOARD OF 19 CHRONICLE -- 20 A. YES. 21 Q. -- CPC? YOU KNEW THAT? 22 A. YES. 23 Q. DID YOU THINK THAT YOU WERE GOING TO BE ABLE TO -- 24 MR. ROSCH: YOUR HONOR, I THINK THAT MISSTATES THE 25 TESTIMONY. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 142 WHITE - DIRECT / ALIOTO 1 THE COURT: I THINK THAT'S CONTRARY TO THE 2 TESTIMONY. I BELIEVE MR. SIAS IS THE PRESIDENT NOT THE 3 CHAIRMAN OF THE BOARD. 4 MR. ALIOTO: I'M SORRY. MR. SIAS IS THE CHIEF 5 EXECUTIVE OFFICER AND THE PRESIDENT. WHAT HAPPENED? 6 THE COURT: THAT'S MY UNDERSTANDING. 7 MR. ROSCH: THAT'S CORRECT, YOUR HONOR. 8 THE COURT: I THINK YOU MAY HAVE MISSPOKE AND SAID 9 "CHAIRMAN OF THE BOARD." 10 MR. ALIOTO: OH, I'M SORRY. MY APOLOGIES. 11 Q. OKAY. YOU KNEW THAT KNOWING THAT MR. SIAS WAS THE 12 CHAIRMAN -- I'M SORRY. I ALMOST DID IT AGAIN. 13 KNOWING THAT MR. SIAS WAS THE CHIEF EXECUTIVE 14 OFFICER AND THAT HE WAS IN COMMUNICATION WITH THE BOARD, IF YOU 15 TOLD HIM TO CONVEY TO THE BOARD THAT HEARST IS SERIOUS AND THAT 16 THEY'RE HERE TO STAY, DID YOU BELIEVE THAT HE WOULD BE 17 CONVEYING SOMETHING THAT WAS NOT TRUE? 18 A. NO. 19 Q. IS IT CORRECT THAT IT WAS THE -- AS YOU UNDERSTOOD IT, 20 THAT IT WAS THE INTENTION OF THE HEARST CORPORATION TO MAINTAIN 21 A NEWSPAPER PRESENCE AND COMPETE FOR THE MARKETPLACE FOLLOWING 22 THE DEMISE OF THE JOA? 23 A. NO, I HAD NO KNOWLEDGE OR INSIGHT INTO WHAT HEARST'S 24 INTENTIONS WERE POST JOA. 25 Q. ALL RIGHT. LET ME SHOW YOU -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 143 WHITE - DIRECT / ALIOTO 1 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 2 THE COURT: YOU MAY. 3 BY MR. ALIOTO: 4 Q. LET ME SHOW YOU WHAT IS MARKED AS E-114. THIS IS ENTITLED 5 "A MISSION STATEMENT." HAVE YOU SEEN THIS DOCUMENT BEFORE? 6 A. (WITNESS EXAMINES DOCUMENT.) 7 Q. MISSION STATEMENT FOR THE HEARST CORPORATION. 8 A. YES, I'VE SEEN THIS BEFORE, BUT ONLY WHEN YOU SHARED IT 9 WITH ME IN DEPOSITION. 10 Q. OTHER THAN AT DEPOSITION? 11 A. NO. 12 THE COURT: DID YOU SAY EXHIBIT ONE -- 13 MR. ALIOTO: THIS ONE IS E-114. 14 THE COURT: E-114. 15 MR. ALIOTO: I BELIEVE, YES. IT'S THE EXIN 16 EXHIBIT 114. 17 (PAUSE IN PROCEEDINGS.) 18 BY MR. ALIOTO: 19 Q. THE LAST DOCUMENTS THAT WE HAVE BEEN GOING OVER, THESE 20 WERE IN MAY. NOW, DID YOU UNDERSTAND -- 21 MR. HALLING: DID YOU ASK HIM ABOUT THIS ONE? 22 MR. ALIOTO: NO. I JUST GAVE IT TO HIM AND HE SAID 23 HE HADN'T SEEN IT. 24 Q. WHEN WAS IT THAT THE CHRONICLE -- WHEN WAS IT THAT YOU 25 UNDERSTOOD THAT THE CHRONICLE AGREED TO SELL TO THE HEARST JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 144 WHITE - DIRECT / ALIOTO 1 CORPORATION? 2 A. ON AUGUST 6, '99. 3 Q. AND WHO TOLD YOU? 4 A. WELL, AT THAT POINT, I MEAN, TO TAKE YOU LITERALLY, THERE 5 WAS A BOARD MEETING OF THE CHRONICLE THAT MORNING AND THEY 6 DECIDED. I KNEW AS EARLY AS TWO DAYS PRIOR TO THAT THAT THERE 7 WAS HOPE THAT THAT MIGHT HAPPEN. 8 Q. DID YOU PARTICIPATE IN THE NEGOTIATIONS FOR THE HEARST 9 CORPORATION TO BUY THE CHRONICLE? 10 A. NO. 11 Q. DID YOU UNDERSTAND THAT THE HEARST CORPORATION OFFERED TO 12 PAY MORE FOR THE CHRONICLE THAN WAS BEING OFFERED AT THE TIME 13 FOR THE CHRONICLE? 14 MR. HALLING: OBJECTION, LACK OF FOUNDATION. 15 THE COURT: SUSTAINED. 16 BY MR. ALIOTO: 17 Q. DID YOU KNOW WHETHER OR NOT ANYONE ELSE WAS ATTEMPTING TO 18 PURCHASE THE CHRONICLE? 19 A. NO. 20 Q. THE ONLY PERSON YOU KNEW WAS THE HEARST CORPORATION? 21 A. THAT'S CORRECT. 22 Q. WHO DID YOU UNDERSTAND WAS NEGOTIATING ON BEHALF OF THE 23 HEARST CORPORATION? 24 A. I BASICALLY DIDN'T KNOW. I ASSUMED THE TOP TEAM OF 25 EXECUTIVES AT THE HEARST CORPORATION. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 145 WHITE - DIRECT / ALIOTO 1 Q. SO YOU JUST DIDN'T KNOW. YOU WEREN'T A PART OF THAT; IS 2 THAT RIGHT? 3 A. I WAS NOT A PART OF THAT. 4 Q. OKAY. NOW, SUBSEQUENTLY YOU ATTEMPTED, DID YOU NOT, TO 5 SEEK THE -- TO SEEK THE SUPPORT FROM THE COMMUNITY FOR THE 6 PURCHASE OF THE CHRONICLE? 7 A. CORRECT. 8 Q. AND IN CONNECTION WITH THAT, YOU MET WITH CERTAIN 9 OFFICIALS FROM THE CITY; DID YOU NOT? 10 A. YES, I DID. 11 Q. AND ONE OF THE PERSONS THAT YOU MET WITH WAS THE MAYOR; IS 12 THAT NOT TRUE? 13 A. THAT IS CORRECT. 14 Q. AND THAT WAS A MEETING THAT WAS ARRANGED BY YOU; WAS IT 15 NOT? 16 A. WHICH MEETING ARE YOU REFERRING TO? I MET WITH HIM -- 17 Q. THE FIRST MEETING THAT YOU HAD WITH THE MAYOR. 18 A. YES. 19 Q. AND THE PURPOSE OF YOUR MEETING WAS THAT YOU WERE SEEKING 20 HIS SUPPORT FOR THE ACQUISITION OF THE CHRONICLE; IS THAT 21 RIGHT? 22 A. YES. 23 Q. AND IN PARTICULAR YOU WANTED TO URGE HIS SUPPORT OF MAKING 24 SURE THAT THERE WOULDN'T BE A REQUIREMENT THAT THE HEARST 25 CORPORATION HAD TO DIVEST ITSELF OF THE EXAMINER? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 146 WHITE - DIRECT / ALIOTO 1 A. THAT'S CORRECT. 2 Q. SO YOU WANTED TWO THINGS. ONE, YOU WANTED TO GET HIS 3 SUPPORT FOR PURCHASING THE CHRONICLE; AND, TWO, YOU WANTED TO 4 GET HIS SUPPORT SO THAT YOU DIDN'T HAVE TO EITHER SELL THE 5 EXAMINER OR GET RID OF IT; RIGHT? 6 A. CORRECT. 7 Q. AND THAT'S BECAUSE YOU WANTED TO KEEP THE EXAMINER, IS 8 THAT RIGHT -- 9 A. NO. 10 Q. -- FOLDED INTO THE CHRONICLE? 11 A. WELL, PROBABLY CLOSE IT. 12 Q. OKAY. SO THE IDEA WAS TO PURCHASE -- YOUR IDEA WAS THAT 13 THE HEARST CORPORATION WANTED TO PURCHASE THE CHRONICLE, CLOSE 14 THE EXAMINER AND YOU WANTED TO GET THAT -- SUPPORT FOR THAT 15 FROM THE MAYOR; IS THAT RIGHT? 16 A. YES. 17 Q. OKAY. SO YOU MET WITH HIM; IS THAT RIGHT? 18 A. I DID. 19 Q. WHERE DID YOU MEET WITH HIM? 20 A. I THINK OUR FIRST MEETING -- I DON'T REMEMBER WHETHER IT 21 WAS IN HIS OFFICE OR AT A RESTAURANT. I THINK OUR FIRST 22 MEETING WAS AT A RESTAURANT. 23 Q. AND YOU INVITED HIM? 24 A. YEAH, I THINK SO. 25 Q. NOW, DID YOU TELL HIM THAT YOU WANTED HIS SUPPORT FOR THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 147 WHITE - DIRECT / ALIOTO 1 ACQUISITION OF THE CHRONICLE? 2 A. I DON'T REMEMBER WHETHER THAT WAS DISCUSSED AT THAT 3 FIRST -- I DON'T THINK AT OUR FIRST MEETING. 4 Q. AT ANY MEETING DID YOU DISCUSS THAT WITH HIM? 5 A. YES. 6 Q. AND DID YOU TELL HIM THAT -- DID YOU TELL HIM SPECIFICALLY 7 YOU WANTED HIS SUPPORT FOR THE ACQUISITION OF THE CHRONICLE? 8 A. SOMEWHERE ALONG THE WAY I DEFINITELY SAID THAT. 9 Q. OKAY. AND DID YOU ALSO TELL HIM THAT YOU WANTED HIS 10 SUPPORT FOR NOT HAVING TO DIVEST THE EXAMINER? 11 A. YES. 12 Q. TO SIMPLY CLOSE THE EXAMINER? 13 A. YES. 14 Q. NOW, AT THAT TIME DID HE ADVISE -- DID HE DISCUSS ANYTHING 15 ELSE WITH YOU? 16 A. YOU'RE GOING TO HAVE TO HELP ME PIN DOWN A TIME. I'M 17 FUZZY ON WHICH IS WHICH. 18 Q. ALL RIGHT. LET ME HAND YOU A DOCUMENT WHICH IS AN E-MAIL 19 DATED JULY 28, 1999, AND THIS IS EXHIBIT 99. EXHIBIT 99 IN 20 EVIDENCE. 21 EXHIBIT 99 IN EVIDENCE IS AN E-MAIL FROM YOU TO 22 JONATHAN THACKERAY AND GEORGE IRISH, SUBJECT WILLIE BROWN 23 STRATEGIES. 24 OKAY. DID YOU WRITE AND CAUSE THAT E-MAIL TO BE 25 SENT TO MR. THACKERAY AND MR. IRISH ON OR ABOUT THE DATE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 148 WHITE - DIRECT / ALIOTO 1 INDICATED, WHICH IS JULY 28, 1999? 2 A. YES. 3 Q. I DIRECT YOUR ATTENTION TO THE SECOND PARAGRAPH -- WELL, 4 THE FIRST PARAGRAPH STATES, QUOTE: 5 "GEORGE, THIS WILL RECAP OUR CONVERSATION 6 AND WILL OUTLINE THE IMPORTANT ELEMENTS OF MY 7 MEETING WITH MAYOR WILLIE BROWN THIS AFTERNOON." 8 THEN IN THE SECOND PARAGRAPH, QUOTE: 9 "AFTER I PITCHED HIM EXTENSIVELY FOR HIS 10 SUPPORT OF OUR ACQUISITION OF THE CHRONICLE, 11 PARTICULARLY URGING HIS SUPPORT OF DROPPING A 12 REQUIREMENT (IF ANY) TO DIVEST OF THE EXAMINER, 13 WILLIE TURNED AND ASKED ABOUT WHAT I WAS DOING 14 IN COURT (THE COURT OF APPEALS) YESTERDAY. I 15 TOLD HIM AND BROUGHT HIM UP-TO-DATE ON THE 16 PAN-ASIA CASE. I AM CERTAIN THAT HE KNEW MORE 17 ABOUT IT THAN I DID." 18 THEN YOU STATE, QUOTE: 19 "HE ASKED CERTAIN QUESTIONS ABOUT POSSIBLY 20 SETTLING THE CASE." 21 DO YOU REMEMBER THIS CONVERSATION? 22 A. YES. 23 Q. DID YOU BELIEVE THAT THIS CONVERSATION HAD ANYTHING 24 WHATSOEVER TO DO WITH -- LET ME BACK UP. 25 HE WAS MENTIONING THE CASE THAT WAS INVOLVING THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 149 WHITE - DIRECT / ALIOTO 1 EXAMINER AND PAN-ASIA? 2 A. CORRECT. 3 Q. AND PAN-ASIA IS THE GROUP THAT IS OWNED BY THE FANG 4 FAMILY; THAT'S RIGHT? 5 A. YES. 6 Q. WAS THERE ANY CONNECTION BETWEEN THE TWO, BRINGING THAT UP 7 AND YOUR REQUEST FOR SUPPORT OF THE ACQUISITION OF THE 8 CHRONICLE? 9 A. THERE WAS NONE, NO OVERT CONNECTION. 10 Q. OKAY. NOW, YOU SAY -- IF YOU'LL GO TO THE NEXT PAGE -- 11 WHEN YOU SAY "NO OVERT CONNECTION," WAS THERE ANY CONNECTION, 12 AS FAR AS YOU WERE CONCERNED, YOUR UNDERSTANDING AND YOUR FRAME 13 OF MIND BETWEEN THE TWO? 14 A. I THINK I SAY SOMEWHERE IN THIS MEMO, I'M NOT FINDING IT 15 QUICKLY, THAT AS I WAS WALKING BACK TO MY OFFICE, I DID WONDER 16 ABOUT THE COINCIDENCE OF THIS. 17 Q. ALL RIGHT. LET ME DIRECT YOUR ATTENTION TO THE SECOND 18 PAGE, PAGE 2, FIRST FULL PARAGRAPH. IT STATES, QUOTE: 19 "WILLIE THEN REFLECTED THAT IT WAS REALLY 20 NOT SMART FOR US TO HAVE SOMETHING LIKE THIS 21 PREDATORY PRICING CASE HANGING AROUND WHEN WE'RE 22 TRYING TO GET SOMETHING BIG DONE LIKE AN 23 ACQUISITION OR MERGER. HE OBSERVED THAT FUNNY, 24 UNDESIRED CONSEQUENCES OFTEN RIPPLE FROM 25 SOMETHING LIKE THIS, EVEN IF ONE THING HAS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 150 WHITE - DIRECT / ALIOTO 1 NOTHING DIRECTLY TO DO WITH THE OTHER." 2 DO YOU SEE THAT? 3 A. YES. 4 Q. WHAT WERE YOU TRYING TO CONVEY BY THAT TO MR. IRISH? 5 A. I'M A WELL-TRAINED REPORTER IN DEALING WITH GEORGE IRISH. 6 I MEAN, I WAS CONVEYING ABOUT AS CLOSE TO A VERBATIM 7 CONVERSATION AS I COULD CONJURE UP. 8 Q. DID YOU UNDERSTAND THAT THE MAYOR WANTED YOU TO MAKE SOME 9 KIND OF ARRANGEMENT WITH PAN-ASIA AS A CONDITION OF GETTING ANY 10 APPROVAL OR SUPPORT FOR THE ACQUISITION OF THE CHRONICLE? 11 A. NO. NO, I THINK THAT THE TENOR AND TONE OF THAT 12 PARTICULAR OBSERVATION WASN'T LINKED EITHER BY IMPLICATION OR 13 DIRECTLY IN THAT CASE. 14 Q. OKAY. IF YOU'LL GO DOWN TO THE THIRD FULL SENTENCE -- I'M 15 SORRY, THIRD FULL PARAGRAPH. IT BEGINS "IMPLICIT." YOU STATE 16 AS FOLLOWS -- DO YOU SEE IT? 17 A. YEAH. 18 Q. YOU STATE AS FOLLOWS, QUOTE: 19 "IMPLICIT IN ALL OF THIS, IN MY VIEW, WAS 20 THE MESSAGE THAT SUPPORT OF OUR EFFORTS IN THE 21 ACQUISITION WOULD BE INFLUENCED BY OUR ABILITY 22 TO COME TO SOME TERMS IN THE PAN-ASIA CASE." 23 DO YOU SEE THAT? 24 A. YES. 25 Q. DID YOU BELIEVE THAT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 151 WHITE - DIRECT / ALIOTO 1 A. YEAH. WELL, MODIFIED BY THE FOLLOWING SENTENCE TO CLARIFY 2 MY UNCERTAINTY. I BELIEVED THAT, WHETHER THAT MEANS SUPPORT 3 FROM THE FANGS OR SUPPORT FROM WILLIE, I CAN ONLY SPECULATE. 4 Q. DID YOU BELIEVE THAT THE MAYOR WAS HORSE TRADING? 5 A. I DIDN'T FEEL LIKE HE WAS HORSE TRADING. I THINK HE WAS 6 TRYING TO, FIRST OF ALL, BROKER A MEETING BETWEEN ME AND 7 MRS. FANG. 8 Q. DID YOU UNDERSTAND THAT THAT HAD ANYTHING WHATSOEVER TO DO 9 WITH THE ACQUISITION OF THE CHRONICLE? 10 A. NO, I DID NOT. 11 Q. DID YOU FIND IT STRANGE THAT THE TWO WERE BEING MENTIONED 12 IN THE SAME -- AT THE SAME MEETING? 13 A. STRANGE, NO. I DID SPECULATE. I MEAN, I WONDERED ABOUT 14 IT, AS I STATED THERE, WHETHER -- WHETHER I WAS SUPPOSED TO BE 15 A BETTER READER OF THE TEA LEAVES THAN I WAS BEING OR NOT. I 16 WAS SPECULATING. 17 Q. YOU DID GIVE TESTIMONY, DID YOU NOT, TO THE DEPARTMENT OF 18 JUSTICE SOMETIME AROUND DECEMBER 16, 1999? 19 A. YES. 20 Q. AND AT THAT TIME YOU GAVE TESTIMONY UNDER OATH; IS THAT 21 NOT CORRECT? 22 A. THAT'S CORRECT. 23 Q. I'M GOING TO DIRECT YOUR ATTENTION TO PAGE 2 -- 24 MR. HALLING: YOUR HONOR, WE OBJECT TO THIS. WE 25 TOOK THIS UP THE OTHER DAY AND I THOUGHT WE AGREED THAT IF JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 152 WHITE - DIRECT / ALIOTO 1 THERE WAS GOING TO BE ANY USE MADE OF THIS, WE WOULD GET NOTICE 2 OF IT AND AN OPPORTUNITY TO DISCUSS IT WITH THE COURT. 3 MR. ALIOTO: I AGREE, YOUR HONOR. THE MATTER CAME 4 UP IN LIGHT OF THE WITNESS' TESTIMONY JUST NOW WITH REGARD TO 5 HIS DESCRIPTION, WHICH I BELIEVE THIS WOULD IMPEACH. 6 THE COURT: MAY I SEE THE TESTIMONY -- 7 MR. ALIOTO: YES, YOUR HONOR. 8 THE COURT: -- YOU PLAN TO OFFER? 9 MR. ALIOTO: IT BEGINS ON PAGE 227, LINE 16, AND 10 GOES THROUGH PAGE 228, LINE 16, ALSO, YOUR HONOR. 11 THE COURT: LINE? 12 MR. ALIOTO: 16. 13 (PAUSE IN PROCEEDINGS.) 14 THE COURT: MR. HALLING? 15 MR. HALLING: I HAVEN'T BEEN ABLE TO READ IT, YOUR 16 HONOR. 17 THE COURT: ALL RIGHT. I HAND IT BACK TO YOU. 18 (PAUSE IN PROCEEDINGS.) 19 MR. HALLING: I STILL OBJECT, YOUR HONOR. I DON'T 20 THINK IT'S INCONSISTENT WITH HIS TESTIMONY. 21 THE COURT: IS THAT THE GROUND OF THE OBJECTION? 22 MR. HALLING: AND ALSO, YOUR HONOR, THERE ARE 23 CONFIDENTIALITY ISSUES THAT WE'VE NEVER ADDRESSED. 24 MR. ROSCH: YOUR HONOR, IF I MIGHT BE HEARD VERY 25 BRIEFLY ON THIS BECAUSE I DO HAVE A DOG IN THIS HUNT AS WELL. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 153 WHITE - DIRECT / ALIOTO 1 I THINK THE MAJOR PROBLEM HERE IS THAT WITHOUT THE 2 KIND OF NOTICE THAT THE COURT SPECIFICALLY ORDERED LAST FRIDAY, 3 IT'S IMPOSSIBLE FOR US TO IDENTIFY TESTIMONY IN THOSE 4 TRANSCRIPTS WHICH SHOULD BE READ FOR PURPOSES OF COMPLETENESS. 5 SO THAT, FRANKLY, IS MY CONCERN IF AND WHEN AS WE ENCOUNTER THE 6 SAME PROBLEM WITH RESPECT TO MR. SIAS. 7 THE COURT: ALL RIGHT. WITH RESPECT TO THE 8 CONFIDENTIALITY ISSUE, IN OUR DISCUSSION OF THIS MATTER LAST 9 FRIDAY, MR. HALLING WAS UNABLE TO POINT TO ANY OBLIGATION OF 10 HIS CLIENT IN UNDERTAKING TO MAINTAIN THE CONFIDENTIALITY OF 11 THESE TRANSCRIPTS. AND, CONSEQUENTLY, I SEE NO OBSTACLE 12 THEREFOR TO THEIR USE INASMUCH AS THESE ARE TRANSCRIPTS WHICH 13 BECAME PART OF THE FILES AND RECORDS OF THE HEARST CORPORATION 14 AND APPARENTLY ALSO THERE ARE SIMILAR DOCUMENTS IN THE FILES OF 15 THE CHRONICLE. 16 WITH RESPECT TO THE OBJECTION WHICH MR. ROSCH 17 RAISES, YOU NOW ARE ON WARNING THAT THESE TRANSCRIPTS MAY BE 18 USED FOR THE KINDS OF PURPOSES THAT MR. ALIOTO IS ATTEMPTING TO 19 USE THIS TRANSCRIPT, SO YOU SHOULD REVIEW THESE TRANSCRIPTS 20 WITH THAT IN MIND. 21 MR. WHITE IS ON THE STAND, AND I GATHER FROM THE 22 HOUR HE'S GOING TO BE ON THE STAND TOMORROW, AND SO YOU CAN 23 REVIEW THE REMAINDER OF HIS TRANSCRIPT TO DETERMINE IF THERE 24 ARE ADDITIONAL PORTIONS OF IT THAT NEED TO BE READ FOR PURPOSES 25 OF COMPLETENESS. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 154 WHITE - DIRECT / ALIOTO 1 WITH REGARD, THEN, COMING BACK TO MR. HALLING'S 2 RELEVANCY OBJECTION, THAT WILL BE OVERRULED. 3 PROCEED. 4 MR. ALIOTO: THANK YOU, YOUR HONOR. 5 MR. ROSCH: THANK YOU, YOUR HONOR. 6 BY MR. ALIOTO: 7 Q. YOU GAVE A DEPOSITION ON DECEMBER 16, 1999, IN THE MATTER 8 OF THE PROPOSED ACQUISITION OF THE SAN FRANCISCO CHRONICLE BY 9 THE HEARST CORPORATION TO THE DEPARTMENT OF JUSTICE; IS THAT 10 CORRECT? 11 A. CORRECT. 12 Q. AND YOU WERE UNDER OATH AT THE TIME; IS THAT CORRECT? 13 A. CORRECT. 14 Q. I WANT TO DIRECT YOUR ATTENTION, AND -- WE BOTH HAVE TO 15 USE -- I ONLY HAVE ONE COPY. 16 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR 17 HONOR. 18 THE COURT: VERY WELL. 19 BY MR. ALIOTO: 20 Q. I WANT TO DIRECT YOUR ATTENTION TO PAGE 227 BEGINNING LINE 21 16. I'M GOING TO READ FROM THERE TO PAGE 228, LINE 16. I'LL 22 ASK YOU WHETHER OR NOT YOU WERE ASKED THESE QUESTIONS, YOU GAVE 23 THESE ANSWERS UNDER OATH. 24 "Q. COULD YOU TURN TO THE NEXT PAGE, 25 PLEASE. THE SECOND PARAGRAPH ON THE SECOND JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 155 WHITE - DIRECT / ALIOTO 1 PAGE, PAGE 12865 READS, QUOTE: 2 "'WILLIE THEN REFLECTED THAT IT WAS REALLY 3 NOT SMART FOR US TO HAVE SOMETHING LIKE THIS 4 PREDATORY PRICING CASE HANGING AROUND WHEN WE'RE 5 TRYING TO GET SOMETHING BIG DONE LIKE AN 6 ACQUISITION OR MERGER. HE OBSERVED THAT FUNNY, 7 UNDESIRED CONSEQUENCES OFTEN RIPPLE FROM 8 SOMETHING LIKE THIS, EVEN IF ONE THING HAS 9 NOTHING DIRECTLY TO DO WITH THE OTHER. BUT IN 10 THIS CASE, OF COURSE, THERE'S AT LEAST SOME 11 INTEREST IN BOTH SITUATIONS BY BOTH PARTIES,' 12 END OF QUOTE. DO YOU SEE THAT? 13 "A. YES. 14 "Q. CAN YOU RECALL SPECIFICALLY WHAT MAYOR 15 BROWN SAID RELATED TO THAT TOPIC? 16 "A. IT'S ABOUT AS TIGHT A JOB AS I CAN DO 17 OF PARAPHRASING WHAT HE SAID. 18 "Q. AS YOU SIT HERE TODAY, DO YOU THINK 19 THAT IT IS AN ACTUAL PARAPHRASING OF WHAT HE 20 SAID? 21 "A. YES. 22 "Q. TO CAPTURE WHAT HE SAID? 23 "A. I DO. 24 "Q. WHEN HE SAID THAT, WHAT WAS YOUR 25 THOUGHT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 156 WHITE - DIRECT / ALIOTO 1 "A. MY THOUGHT WAS THAT HE'S TRYING TO 2 HORSE TRADE." 3 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS? 4 A. I BELIEVE I DID. 5 Q. YOU'RE NOT SURE? 6 A. WELL, THAT'S FOUR OR FIVE MONTHS AGO, BUT I'M SURE I DID. 7 Q. AND YOU WERE UNDER OATH AT THE TIME? 8 A. YES. 9 Q. THESE ANSWERS ARE TRUE; ARE THEY NOT? 10 A. YES. 11 Q. OKAY. SO YOUR THOUGHTS WERE, AND YOUR IMPRESSION WAS, 12 THAT THE MAYOR WAS HORSE TRADING; CORRECT? 13 A. RIGHT. 14 Q. OKAY. WHAT WAS THE TRADE? 15 A. I HAVE NO IDEA. 16 Q. IF YOU HAVE NO IDEA WHAT HE WAS HORSE TRADING, I TAKE IT, 17 THEN, THAT YOU THOUGHT THAT HE WAS JUST TALKING AND IT WAS 18 MEANINGLESS; IS THAT IT? 19 A. WELL, NO. I THINK HE WAS TRYING TO HORSE TRADE GETTING 20 SUPPORT. I MEAN, I DON'T THINK I CAN -- THE PART THAT'S BEING 21 LEFT OUT THERE IS WHAT I EXPLICITLY RELATED WHEN IT WAS TIMELY, 22 IN FACT THE VERY DAY OF THAT MEETING, WHICH WAS THAT I COULD 23 ONLY SPECULATE AND THAT'S WHAT I DID THEN. THAT'S WHAT I'D BE 24 DOING NOW. 25 Q. DID YOU UNDERSTAND, MR. WHITE, THAT IF YOU WERE GOING TO JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 157 WHITE - DIRECT / ALIOTO 1 GET THE SUPPORT OF THE MAYOR, THAT YOU HAD TO MAKE SOME KIND OF 2 AN ARRANGEMENT IN THE PAN-ASIA CASE WHICH HAD NOTHING AT ALL TO 3 DO WITH THE ACQUISITION OF THE CHRONICLE? 4 A. NO. 5 Q. THE NEXT DAY YOU WENT -- YOU ARRANGED TO SEE MS. FANG, IS 6 THAT TRUE, OR AT LEAST YOU TOLD THE MAYOR THAT YOU WOULD SEE 7 HER AT ANY TIME, ANYPLACE; IS THAT TRUE? 8 A. I TOLD HIM ON THE 28TH, JULY 28TH, THAT I'D BE HAPPY TO 9 MEET WITH HER ANY TIME. 10 Q. THAT WAS THE NEXT DAY; CORRECT? 11 A. NO. I THOUGHT THAT OCCURRED IN THAT SAME MEETING. DID I 12 NOT REFER -- 13 Q. ALL RIGHT. LET ME -- 14 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 15 THE COURT: VERY WELL. 16 BY MR. ALIOTO: 17 Q. LET ME HAND YOU A LETTER DATED JULY 29, 1999, DIRECTED TO 18 THE MAYOR FROM YOU. AND THAT IS IN FACT A LETTER OR COPY OF A 19 LETTER THAT YOU SENT TO THE MAYOR ON OR ABOUT THE DATE 20 INDICATED? 21 A. RIGHT. 22 MR. HALLING: WHAT'S THE EXHIBIT? 23 MR. ALIOTO: OH, I'M SORRY. EXHIBIT 76. EXHIBIT 76 24 IN EVIDENCE, I BELIEVE. NO, IT IS NOT. 25 MR. HALLING: IT'S NOT IN EVIDENCE. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 158 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. IS THAT A LETTER THAT YOU SENT ON OR ABOUT THAT DATE TO 3 THE MAYOR? 4 A. YES. 5 MR. ALIOTO: WE OFFER INTO EVIDENCE WHAT IS MARKED 6 FOR IDENTIFICATION AS EXHIBIT 76. 7 THE COURT: IS THAT ONE OF THE EXCEPTED EXHIBITS? 8 MR. ALIOTO: I DON'T -- I THINK JUST NOBODY LOOKED 9 AT IT, YOUR HONOR. I'M GOING TO DIRECT THE WITNESS' ATTENTION 10 TO ONE SENTENCE ON THE FOURTH PARAGRAPH THAT SIMPLY SAYS ABOUT 11 HIS PROPOSED MEETING. 12 (PAUSE IN PROCEEDINGS.) 13 THE COURT: HEARING NO OBJECTION, 76 IS ADMITTED. 14 MR. ALIOTO: THANK YOU, YOUR HONOR. 15 (PLAINTIFF'S EXHIBIT 76 16 RECEIVED IN EVIDENCE) 17 BY MR. ALIOTO: 18 Q. DIRECTING YOUR ATTENTION TO THE FOURTH PARAGRAPH, FIRST 19 LINE AND FIRST SENTENCE, IT STATES, AND THIS IS YOUR LETTER TO 20 THE MAYOR WHICH YOU MADE CONFIDENTIAL, YOU SAY, QUOTE: 21 "FINALLY I WILL BE PLEASED TO MEET WITH 22 FLORENCE FANG ANY TIME, ANYPLACE," END OF QUOTE. 23 DO YOU SEE THAT? 24 A. YES. 25 Q. AND DID YOU INTEND THAT THE MAYOR WAS TO SET UP THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 159 WHITE - DIRECT / ALIOTO 1 MEETING? 2 A. HE HAD OFFERED TO DO SO. 3 Q. AND SO YOU WERE ADVISING HIM THE NEXT DAY AFTER YOUR 4 MEETING THAT YOU WOULD BE PLEASED TO DO THAT; IS THAT RIGHT? 5 A. RIGHT. I WAS SIMPLY CONFIRMING OFFERING -- REAFFIRMING 6 WHAT I HAD SAID TO HIM THE PRIOR DAY. 7 Q. AND DID YOU MEET WITH MS. FANG? 8 A. NOT AS A RESULT OF -- AT NO TIME CLOSE TO THIS. 9 Q. WHAT HAPPENED? YOU JUST DIDN'T DO IT? 10 A. NO. IT HAD -- ACTUALLY HE HAD SUGGESTED THAT HE WOULD 11 URGE HER TO GIVE ME A CALL. I DIDN'T HEAR FROM HER. 12 Q. ALL RIGHT. LET ME SHOW YOU A DOCUMENT WHICH IS -- 13 MR. ALIOTO: EXCUSE ME ONE MINUTE, YOUR HONOR, IF I 14 MIGHT. 15 THE COURT: VERY WELL. 16 (PAUSE IN PROCEEDINGS.) 17 MR. ALIOTO: THIS IS EXHIBIT 78. MAY I APPROACH THE 18 WITNESS, YOUR HONOR? 19 THE COURT: YES. 20 BY MR. ALIOTO: 21 Q. LET ME SHOW YOU EXHIBIT 78, WHICH IS APPARENTLY NOT ONE OF 22 THE DOCUMENTS SO FAR AGREED TO. THIS IS AN E-MAIL APPARENTLY 23 SENT FROM YOU TO MR. IRISH, SUBJECT MAYOR WILLIE BROWN, ON OR 24 ABOUT IT APPEARS TO BE AUGUST 30, 1999. 25 FIRST OF ALL, IF YOU CAN IDENTIFY TO THE COURT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 160 WHITE - DIRECT / ALIOTO 1 WHETHER OR NOT YOU SENT OR CAUSED THAT E-MAIL TO BE SENT ON OR 2 ABOUT THAT DATE. 3 A. YES. 4 Q. AND THIS WAS WITH REGARD TO A LUNCH THAT YOU HAD WITH THE 5 MAYOR? 6 A. CORRECT. 7 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT IS 8 MARKED FOR IDENTIFICATION AS EXHIBIT 78. 9 THE COURT: HEARING NO OBJECTION -- 10 MR. HALLING: WE OBJECT, YOUR HONOR -- 11 THE COURT: ON WHAT GROUND? 12 MR. HALLING: -- TO THAT DOCUMENT. 13 ON THE GROUNDS OF RELEVANCY AND ON THE GROUNDS OF 14 HEARSAY. JUST BECAUSE THERE'S BEEN SOME LIMITED TESTIMONY SO 15 FAR ON POLITICS, WE DON'T THINK IT BEARS ON THE ANTITRUST 16 ISSUES THAT ARE BEFORE THE COURT; AND THIS DOCUMENT IS 17 IRRELEVANT TO THE ISSUES BEFORE THE COURT AND IT ALSO HAS 18 HEARSAY IN ALMOST EVERY PARAGRAPH. 19 THE COURT: WELL, THE RELEVANCY OBJECTION I DON'T 20 BELIEVE IS WELL TAKEN. THERE CERTAINLY IS HEARSAY IN THE 21 DOCUMENT, BUT THIS IS A DOCUMENT THAT WAS AUTHORED BY THE 22 WITNESS HIMSELF AND, THEREFORE, THAT PORTION OF THE OBJECTION 23 WILL BE OVERRULED. EXHIBIT 78 IS ADMITTED. 24 (PLAINTIFF'S EXHIBIT 78 25 RECEIVED IN EVIDENCE) JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 161 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. WERE YOU INTENDING TO CONVEY TO THE MAYOR AT YOUR MEETING 3 THAT HIS SUPPORT FOR HEARST'S PROPOSED ACQUISITION OF THE 4 CHRONICLE WOULD RESULT IN MORE FAVORABLE TREATMENT TO THE MAYOR 5 IN THE EXAMINER? 6 A. NOT THAT SPECIFICALLY. WE HAD TALKED EARLIER ABOUT 7 WORKING TOGETHER ON A NUMBER OF PRIORITIES HE HAD FOR THE CITY 8 THAT WE SHARED. 9 Q. IS IT NOT CORRECT THAT YOU WERE IN FACT INTENDING TO 10 CONVEY TO MAYOR BROWN THAT HIS SUPPORT FOR HEARST'S PROPOSED 11 ACQUISITION OF THE CHRONICLE WOULD RESULT IN MORE FAVORABLE 12 TREATMENT FOR HIM IN THE EXAMINER? 13 A. YES. 14 Q. SO THAT IF THE MAYOR HELPED WITH REGARD TO THE 15 ACQUISITION, THE NEWSPAPER MIGHT WRITE THINGS THAT WOULD BE A 16 LITTLE MORE FAVORABLE TO HIM THAN OTHERWISE WOULD BE; IS THAT 17 RIGHT? 18 A. NO. ACTUALLY PRECISELY THE WAY I PUT IT TO HIM WAS THAT 19 IT WAS GOING TO BE DIFFICULT IF ON THE ONE HAND HE WAS BEATING 20 US UP AND CLEARLY ON THE OPPOSITE SIDE OF THE FENCE TO BE OUT 21 THERE CHAMPIONING HIS INITIATIVES ON THE MUNI AT THE TIME, ON 22 THE STADIUM, AND SO FORTH. 23 Q. IT WAS GOING TO BE WHAT? 24 A. IT WAS GOING TO BE MORE DIFFICULT IF HE WAS BEATING US UP 25 ON THE ONE HAND TO BE CHUMMY ON THE OTHER. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 162 WHITE - DIRECT / ALIOTO 1 Q. OKAY. AND "CHUMMY" MEANS WITH REGARD TO, I THINK YOU 2 IDENTIFIED THE MUNI AND WHAT ELSE? WHAT ARE THE OTHER ONES? 3 A. AND THE STADIUM. 4 Q. OKAY. SO THAT IF HE -- SO THAT IF HE WENT ALONG WITH THE 5 ACQUISITION, THAT THEN WHEN YOU FOLKS WERE WRITING ABOUT HIM 6 ABOUT MUNI AND OTHER AREAS, THE STADIUM AND OTHER THINGS, YOU 7 WOULDN'T BE AS HARSH AS YOU OTHERWISE WOULD BE? 8 A. NO, THAT WOULDN'T AFFECT THE JOURNALISM SIDE. IT WOULD 9 AFFECT THE EDITORIAL SIDE. 10 Q. WELL, "EDITORIAL SIDE" MEANS WHAT? IN THE EDITORIALS? 11 A. IN THE EDITORIALS. 12 Q. SO IN THE EDITORIALS YOU WOULD NOT BE AS HARSH WITH HIM AS 13 YOU OTHERWISE WOULD BE IF HE SUPPORTED YOU ON THE ACQUISITION 14 OF THE CHRONICLE; RIGHT? 15 A. POTENTIALLY. 16 Q. POTENTIALLY, NO. YOU SAID THAT TO HIM, THOUGH; DIDN'T 17 YOU? 18 A. I -- IT WAS PRETTY OBLIQUE. 19 Q. OKAY. WELL, BUT YOU FELT THAT IT WAS CLEAR TO HIM; DID 20 YOU NOT? 21 A. I THINK IT WAS. 22 Q. OKAY. AND THEN IS IT CORRECT THAT SUBSEQUENTLY THE MAYOR 23 IN FACT SUGGESTED TO THE FANGS THAT IT WAS NOT GOING TO BE SUCH 24 A BAD DEAL FOR THE EXAMINER TO FOLD INTO THE CHRONICLE AND BE 25 ONE NEWSPAPER BECAUSE THAT WOULD SOMEHOW LOWER THE COMPETITION JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 163 WHITE - DIRECT / ALIOTO 1 IN TERMS OF CIRCULATION? 2 A. I HAVE NO IDEA WHAT THE MAYOR SAID TO THE FANGS. 3 Q. IN WHAT WAY, IF ANY, DID HE SUPPORT -- STRIKE THAT. 4 LET ME DIRECT YOUR ATTENTION TO THE MEMO THAT IS IN 5 FRONT OF YOU, WHICH IS EXHIBIT 78. 6 FIRST OF ALL, IT STATES, QUOTE: 7 "I ASKED WILLIE HOW I WAS GOING TO JUSTIFY 8 TO MY SUPERIORS IN NEW YORK WANTING TO SUPPORT 9 HIM AND COOPERATE WITH HIM WHEN HE WAS SEEMING 10 TO GO OUT OF HIS WAY TO MAKE OUR LIVES 11 DIFFICULT," END OF QUOTE. 12 NOW, YOU MADE THAT STATEMENT TO HIM; CORRECT? 13 A. YES. 14 Q. FIRST OF ALL, YOU DID NOT NEED THE -- YOU DIDN'T NEED TO 15 JUSTIFY THAT TO YOUR SUPERIORS; DID YOU? 16 A. NO. 17 Q. YOU JUST TOLD THEM SOMETHING THAT WASN'T SO; IS THAT NOT 18 RIGHT? 19 A. THAT'S CORRECT. 20 Q. BUT WHAT YOU WERE TRYING TO DO IS, IS YOU WERE SAYING TO 21 HIM -- LET ME BACK UP A MINUTE. 22 HAD THE MAYOR BEEN COMPLAINING ABOUT HIS COVERAGE IN 23 THE EXAMINER? 24 A. YES. 25 Q. AND SO WHAT YOU WERE SAYING TO HIM WAS, IN EFFECT, WAS IT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 164 WHITE - DIRECT / ALIOTO 1 NOT -- WELL, STRIKE THAT ONE. 2 YOU WERE DOING A LITTLE HORSE TRADING YOURSELF; 3 WEREN'T YOU? 4 A. I WAS. 5 Q. NOW, THE HORSE TRADE THERE WAS THAT IF HE GOES ALONG WITH 6 THE ACQUISITION AND HELPS AND SUPPORTS, THEN WELL, THEN, MAYBE 7 THE EDITORIALS WERE NOT GOING TO BE AS HARD ON HIM AS THEY 8 OTHERWISE WOULD BE? 9 A. THAT WAS THE IMPLICATION, YES. 10 Q. THE IMPLICATION BY YOU THAT THE MAYOR WOULD INFER? 11 A. YES. 12 Q. THEN YOU STATE, QUOTE: 13 "HE TOLD ME HIS LETTER TO A.G., JANET RENO," 14 "A.G." IS THE ATTORNEY GENERAL; CORRECT? 15 A. CORRECT. 16 Q. "... A.G. JANET RENO WAS SOMETHING HE HAD TO DO TO 17 PLACATE THE BOARD OF SUPERVISORS AND OTHER 18 CONSTITUENTS BECAUSE THEY FELT IT WAS URGENT." 19 DID HE SAY THAT? 20 A. YES. 21 Q. THEN YOU GO DOWN AND HE SAID THAT -- YOU SAY IN THE THIRD 22 PARAGRAPH, I THINK IT'S THE THIRD PARAGRAPH: 23 "MAYOR B. SEGUED FROM THAT INTO HIS 24 CONVERSATIONS WITH MS. RENO. SHE TOLD HIM THERE 25 WOULD BE NO HEARINGS: LOCAL, PUBLIC OR JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 165 WHITE - DIRECT / ALIOTO 1 OTHERWISE." 2 DID HE TELL YOU THAT? 3 A. YES. 4 Q. HUH? PARDON ME? 5 A. YES. 6 Q. IF YOU'LL GO DOWN TO THE FIFTH PARAGRAPH THAT BEGINS, "SHE 7 TOLD THE MAYOR," IN THE MIDDLE OF THAT IT'S THE -- IT LOOKS 8 LIKE THE THIRD SENTENCE. "THE MAYOR THEN TOLD ME," DO YOU SEE 9 THAT? IT'S ABOUT THE THIRD LINE FROM THE BOTTOM OF THAT 10 PARAGRAPH: 11 "THE MAYOR THEN TOLD ME THAT LOCALLY THE 12 CITY ATTORNEY'S INQUIRY INTO THE MATTER HAD BEEN 13 ASSIGNED TO MR. DENNIS AFTERGUT WHO THE MAYOR 14 AND PHIL AGREED WAS NOT SOMEONE LIKELY TO LEAD A 15 CHARGE ON A MAJOR ISSUE." 16 DO YOU SEE THAT? 17 A. YES. 18 Q. DID HE TELL THAT YOU? 19 A. YES. 20 Q. SO THE IDEA WAS THAT HE TOLD YOU THAT THE ONLY REASON YOU 21 SHOULDN'T GET UPSET ABOUT HIM -- ABOUT HIS LETTER TO THE 22 ATTORNEY GENERAL -- HE DID WRITE ONE; DIDN'T HE? 23 A. I BELIEVE SO. 24 Q. AND HE WAS CRITICAL OF THE MERGER; WAS HE NOT? 25 ACQUISITION. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 166 WHITE - DIRECT / ALIOTO 1 A. NO, NOT EXPLICITLY. HE WAS URGING THE DEPARTMENT OF 2 JUSTICE TO DO A THOROUGH INVESTIGATION. 3 Q. OKAY. AND THEN YOU -- AND THEN YOU UNDERSTOOD FROM HIM AT 4 THIS OCCASION THAT HE DIDN'T -- HE REALLY JUST DID IT BECAUSE 5 HE FELT LIKE HE HAD TO DO IT? 6 A. YES. 7 Q. SO HE WAS TRYING TO BEFRIEND YOU AND TELL YOU NOT TO WORRY 8 ABOUT THAT; IS THAT THE WAY YOU FELT? 9 A. YES. 10 Q. AND THEN HE TOLD YOU THAT MRS. RENO, THE ATTORNEY GENERAL, 11 WAS NOT GOING TO BE CONDUCTING ANY LOCAL, PUBLIC OR OTHERWISE 12 HEARINGS? 13 A. CORRECT. 14 Q. AND DID HE TELL YOU YOU THAT MS. RENO HAD DECIDED OR THE 15 ATTORNEY GENERAL DECIDED NOT TO PUT THE HEAD OF THE ANTITRUST 16 DIVISION ON THE CASE? 17 A. NO, THAT'S CITY ATTORNEY, I THINK. 18 Q. NO, I'M ASKING YOU NOW ABOUT THE ATTORNEY GENERAL. DID HE 19 EVER TELL YOU THAT, THAT THE ATTORNEY GENERAL DECIDED NOT TO 20 PUT THE HEAD OF THE ANTITRUST DIVISION ON THE CASE? 21 A. NO. 22 Q. OKAY. 23 A. IS THAT WHAT'S SAID HERE? 24 Q. THEN WITH REGARD TO THE CITY ATTORNEY -- 25 THE COURT: YOU MIGHT REFER TO THE FIFTH PARAGRAPH. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 167 WHITE - DIRECT / ALIOTO 1 THE WITNESS: (WITNESS EXAMINES DOCUMENT.) 2 THE COURT: MR. KLEIN IS THE ASSISTANT ATTORNEY 3 GENERAL IN CHARGE OF THE ANTITRUST DIVISION. 4 THE WITNESS: RIGHT. 5 BY MR. ALIOTO: 6 Q. IT SAYS IN THE FIFTH PARAGRAPH, QUOTE: 7 "SHE TOLD HIM THE CHRON-EX INVESTIGATION HAD 8 BEEN NOT ASSIGNED TO MR. KLEIN, HEAD OF 9 ANTITRUST, BUT RATHER TO A DEPUTY NAMED MR. B." 10 THE MAYOR WASN'T SURE? 11 A. OH, THERE WE ARE, OKAY. GOT IT. 12 Q. HE TOLD YOU THAT? 13 A. RIGHT. 14 Q. AND YOU HAD RECEIVED COMFORT FROM THAT STATEMENT; DID YOU 15 NOT? 16 A. YES. 17 Q. AND ALSO FROM THE STATEMENT THAT THE CITY ATTORNEY HAD 18 ASSIGNED SOMEONE WHO AT LEAST ACCORDING TO THE MAYOR AND PHIL 19 BRONSTEIN WAS NOT SOMEONE WHO WOULD PUSH THE ISSUE; IS THAT 20 RIGHT? 21 A. YES. 22 Q. AND BOTH OF THOSE STATEMENTS GAVE YOU SOME COMFORT THAT 23 THERE WOULDN'T BE -- WELL, IT GAVE YOU SOME COMFORT? 24 A. RIGHT, AND I LATER LEARNED THAT IN BOTH CASES THE MAYOR 25 EITHER DIDN'T KNOW WHAT HE WAS TALKING ABOUT OR WAS MISTAKEN. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 168 WHITE - DIRECT / ALIOTO 1 Q. WITH REGARD TO THE CITY ATTORNEY OR WITH REGARD TO THE 2 ATTORNEY GENERAL? 3 A. BOTH. I THINK THAT'S WHAT HE HAD BEEN TOLD AT THE TIME. 4 Q. I WANT TO DIRECT YOUR ATTENTION TO THE SECOND PAGE OF YOUR 5 MEMO, YOUR E-MAIL, AND NEAR THE BOTTOM ABOUT FIVE OR SIX 6 COLUMNS UP IS THE LAST SENTENCE OR SECOND-TO-THE-LAST SENTENCE 7 BEGINS, "HE THEN SAID THAT." DO YOU SEE THAT? 8 A. YES. 9 Q. IT STATES, QUOTE: 10 "HE THEN SAID THAT THE CHRONICLE'S EDITORIAL 11 LAMBASTING HIS PRACTICES HAD BEEN MORE BRUTAL 12 THAN OUR TREATMENT." 13 DID HE SAY THAT TO YOU? 14 A. I'M SORRY, I'VE LOST YOU. 15 Q. YEAH. 16 A. WHERE ARE YOU? 17 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 18 THE COURT: YES, YOU MAY. 19 THE WITNESS: OKAY. GOT IT. 20 BY MR. ALIOTO: 21 Q. "HE THEN"? 22 A. YEAH. 23 Q. OKAY. IT STATES, QUOTE: 24 "HE," IN REFERENCE TO THE MAYOR, "THEN SAID 25 THAT THE CHRONICLE'S EDITORIAL LAMBASTING HIS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 169 WHITE - DIRECT / ALIOTO 1 PRACTICES HAD BEEN MORE BRUTAL THAN OUR 2 TREATMENT." 3 DID HE SAY THAT? 4 A. YES. 5 Q. QUOTE: 6 "HE SPECIFICALLY COMPLAINED ABOUT A COLUMN 7 IN THE CHRONICLE BY KEN GARCIA AND ANOTHER BY 8 SCOTT OSTLER." 9 DID HE SAY THAT? 10 A. YES. 11 Q. THE VERY LAST SENTENCE SAYS, QUOTE: 12 "HE THEN TELLS ME PHIL HAS ALWAYS TAKEN CARE 13 OF ANY PROBLEMS HE'S RAISED," END OF QUOTE. 14 DID HE SAY THAT? 15 A. YES. 16 Q. DID HE -- DID YOU UNDERSTAND THAT HE EXPECTED YOU TO TALK 17 TO SOMEBODY AT THE CHRONICLE WITH REGARD TO THESE REPORTERS? 18 A. NO. 19 Q. DID YOU EXPECT, WHEN YOU WERE TOLD THIS, DID YOU EXPECT 20 THAT YOU WERE SUPPOSED TO CALL SOMEBODY OR TALK TO SOMEBODY AT 21 THE CHRONICLE EDITORIAL ABOUT THE EDITORIALS OF THE CHRONICLE 22 ABOUT THE MAYOR? 23 A. NO. 24 Q. DURING THIS TIME, THIS IS AUGUST 31ST OR, YOU KNOW, THE 25 BEGINNING OF SEPTEMBER, WAS THERE AN ELECTION GOING ON AT THIS JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 170 WHITE - DIRECT / ALIOTO 1 TIME? 2 A. I'M PRETTY -- YES, IT WAS IN FULL SWING, I THINK. 3 Q. FOR THE MAYORAL -- WAS THERE A MAYORAL ELECTION? 4 A. YES. 5 Q. DID YOU RECEIVE CALLS FROM A MR. JACK DAVIS? 6 A. I SPOKE WITH HIM. ACTUALLY I GOT A CALL FROM WARREN 7 HINKLE AND THEN JACK DAVIS WAS -- JOINED THE CALL. 8 Q. OKAY. DID YOU UNDERSTAND THAT THERE WAS ANY ASSOCIATION 9 OF MR. DAVIS WITH EITHER THE MAYOR OR PAN-ASIA GROUP? 10 A. I DID WITH PAN-ASIA. I WAS UNAWARE OF ANY ASSOCIATION 11 WITH THE MAYOR AT THAT TIME. 12 Q. DID YOU LEARN THAT HE HAD SOME ASSOCIATION WITH THE MAYOR? 13 A. SUBSEQUENTLY, YES. 14 Q. WELL, YOU WROTE AN E-MAIL AND REFERRED TO HIM AS WILLIE 15 BROWN'S ELECTION CAMPAIGN CONSULTANT; DID YOU NOT? 16 A. PERHAPS SO. I HAVE A FEELING I'M GOING TO LEARN I DID. 17 Q. DID YOU -- WERE YOU IN ANY WAY THREATENED BY MR. DAVIS? 18 A. I DON'T KNOW. REFRESH MY MEMORY. I DON'T RECALL BEING 19 THREATENED, NO. I RECALL HIM SAYING SOMETHING LIKE, I'LL BET 20 BEFORE THIS IS OVER, THERE WILL BE A LAWSUIT FROM AN 21 ADVERTISER, A LAWSUIT FROM A READER AND A LAWSUIT FROM -- I 22 DON'T REMEMBER. THERE WERE THREE. 23 Q. HOW ABOUT A SUBSCRIBER? 24 A. SUBSCRIBER, READER, WHICHEVER. 25 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 171 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. DID YOU FROM -- YOU SAID THAT YOU SPOKE TO BOTH MR. DAVIS 3 AND MR. HINCKLE? 4 A. YES. 5 Q. AND DID IT HAVE ANYTHING WHATSOEVER TO DO WITH THE 6 ACQUISITION OF THE CHRONICLE? 7 A. I DON'T RECALL, BUT IT, I AM SURE, WAS TRIGGERED BY 8 SOMETHING LIKE THAT. IT WAS A FAIRLY BIZARRE CALL. 9 Q. WELL, WERE YOU -- DID THEY CALL YOU OR DID YOU CALL THEM? 10 A. THEY CALLED ME. 11 Q. WHEN YOU SAY IT WAS A BIZARRE CALL -- A BIZARRE CALL, WHAT 12 DO YOU MEAN? 13 A. WELL, IT WAS KIND OF DISJOINTED. IT WAS FROM A NOISY BAR. 14 IT WAS 2:00 IN THE AFTERNOON. IT WAS KIND OF HARD TO PASTE IT 15 ALL TOGETHER. 16 Q. OKAY. DID YOU IN ANY WAY -- DID YOU IN ANY WAY FEEL 17 THAT -- THAT MR. DAVIS OR ANYONE COULD MAKE IT DIFFICULT FOR 18 YOU AND FOR THE ACQUISITION OF THE CHRONICLE IF THEY WANTED TO? 19 A. YES. 20 Q. AND DID YOU FEEL THAT WHEN YOU WERE TALKING TO HIM? 21 A. NOT REALLY WHILE I WAS TALKING TO HIM, ONLY WHAT I 22 SUBSEQUENTLY HAVE LEARNED OR MAYBE HAD PREVIOUSLY LEARNED ABOUT 23 HIM. 24 Q. IN WHAT WAY DID YOU THINK THAT HE COULD DO SOMETHING THAT 25 WOULD MAKE IT DIFFICULT FOR YOU WITH REGARD TO THE ACQUISITION JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 172 WHITE - DIRECT / ALIOTO 1 OF THE CHRONICLE? 2 A. I HAD NO IDEA. 3 Q. LET ME SHOW YOU -- LET ME SHOW YOU WHAT IS MARKED AS 4 EXHIBIT 142. 5 MAY I APPROACH THE WITNESS, YOUR HONOR? 6 THE COURT: YES, YOU MAY. 7 EXHIBIT 142 FOR IDENTIFICATION IS A DOCUMENT 8 DIRECTED TO MR. GEORGE IRISH, OCTOBER 19, 1999. IT IS -- IT 9 IS -- I'M SORRY -- FROM MR. WHITE TO MR. IRISH, SUBJECT JACK 10 DAVIS SPECULATION. 11 DID YOU WRITE OR CAUSE THIS E-MAIL TO BE PREPARED 12 AND SENT ON OR ABOUT THE DATE TO MR. IRISH IN NEW YORK? 13 THE WITNESS: YES, I DID. 14 BY MR. ALIOTO: 15 Q. AND DID YOU -- AND IN WRITING THE E-MAIL TO MR. IRISH, DID 16 YOU CONSIDER THE SITUATION -- I MEAN, MR. IRISH BEING YOUR 17 BOSS, DID YOU CONSIDER THE SITUATION IMPORTANT ENOUGH THAT 18 MR. IRISH SHOULD BE TOLD ABOUT IT? 19 A. YEAH. BUT, AS YOU'VE SEEN, I COMMUNICATE A LOT OF STUFF, 20 BOTH IMPORTANT AND NOT SO IMPORTANT. 21 MR. ALIOTO: WE WOULD OFFER IN EVIDENCE WHAT IS 22 MARKED FOR IDENTIFICATION AS EXHIBIT 142, YOUR HONOR. 23 MR. HALLING: YOUR HONOR, WE WOULD OBJECT AGAIN ON 24 THE RELEVANCE GROUNDS. IT'S LOCAL POLITICS. IT'S DISCUSSIONS 25 ABOUT POTENTIAL LAWSUITS. IT MAY BE VERY INTERESTING, BUT I JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 173 WHITE - DIRECT / ALIOTO 1 DON'T THINK IT'S RELEVANT TO THE ANTITRUST ISSUES. 2 THE COURT: OBJECTION OVERRULED. 3 BY MR. ALIOTO: 4 Q. OKAY. NOW, IT BEGINS IN THE FIRST PART BY STATING THAT, 5 QUOTE: 6 "THIS MORNING (MONDAY) JACK DAVIS, WILLIE 7 BROWN'S ELECTION CAMPAIGN CONSULTANT" -- AND 8 THEN YOU SAY, QUOTE, "AN ALL-AROUND BRIGHT, 9 DEVIOUS, DANGEROUS STRATEGIST, AND WELL-KNOWN 10 CONSIGLIERI TO THE FANGS, WAS OVERHEARD SAYING 11 HE WOULDN'T BE SURPRISED IF THERE WERE AT LEAST 12 THREE LAWSUITS FILED OVER THE PROPOSED 13 ACQUISITION OF THE CHRONICLE -- ONE EACH BY AN 14 ADVERTISER, A READER AND A COMPETITOR. 15 "DAVIS SPECULATED THAT THESE SUITS COULD TIE 16 UP THE ACQUISITION IN COURT FOR AT LEAST A 17 COUPLE OF YEARS." 18 YOU GO ON TO SAY, QUOTE: 19 "IT IS SIMILAR TO THE THINLY VEILED THREAT 20 DAVIS LAID ON ME THREE OR FOUR MONTHS AGO, ONE 21 AFTERNOON, PHONING FROM A BAR WITH WARREN 22 HINCKLE." 23 AND THEN YOU SAY, QUOTE: 24 "THE FACT THAT THE EXAMINER ENDORSED THIS 25 MAN FOR REELECTION APPARENTLY HAS NO EFFECT." JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 174 WHITE - DIRECT / ALIOTO 1 NOW, WOULD YOU PLEASE STATE WHAT IT WAS -- WHEN YOU 2 SAY THAT THERE WAS A THINLY VEILED THREAT, DOES THAT MEAN A 3 THINLY VEILED THREAT THAT YOU MIGHT ENCOUNTER TROUBLE THAT YOU 4 WEREN'T LOOKING FOR WITH REGARD TO THE ACQUISITION OF THE 5 CHRONICLE? 6 A. NO. I HAD THE IMPRESSION THAT -- I MEAN, IT COULD BE THE 7 ACQUISITION OF THE CHRONICLE. IT COULD BE TAKING THE EXAMINER. 8 I HAD HEARD A CONCERN FROM THE INDEPENDENT THAT WE MIGHT TAKE 9 THE EXAMINER SOMEHOW TO A WEEKLY AND DISTRIBUTE IT FREE IN 10 DIRECT COMPETITION WITH THE INDEPENDENT. 11 ALL OF THESE CONCERNS -- I MEAN, IT WAS VERY CLEAR 12 TO ME THAT JACK DAVIS WAS GOING TO DO WHATEVER HE COULD DREAM 13 UP DOING TO PROTECT THE INTERESTS OF THE INDEPENDENT. 14 Q. WELL, DID YOU UNDERSTAND THAT HE WAS SUGGESTING TO YOU 15 THAT YOU SOMEHOW AGREE -- AS A PART OF THE ACQUISITION OF THE 16 CHRONICLE, THAT YOU SOMEHOW AGREE NOT TO COMPETE WITH THE 17 INDEPENDENT? 18 A. NO. 19 Q. WHEN YOU SAY THAT THERE WERE SOME STATEMENTS ABOUT 20 ENTERING INTO THE BUSINESS OF A FREE NEWSPAPER THAT THAT WOULD 21 BE IN COMPETITION WITH THE INDEPENDENT, WERE YOU CONCERNED 22 ABOUT THAT? 23 A. NO. I MEAN, THAT WAS NOT ANY PART OF THIS CONVERSATION. 24 IT WAS JUST A CONCERN -- I WAS IN MY OWN MIND TRYING TO LINK 25 WHY THIS BIZARRE CONVERSATION WAS OCCURRING AND JUST MY GENERAL JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 175 WHITE - DIRECT / ALIOTO 1 KNOWLEDGE OF CONCERNS THE INDEPENDENT HAD. 2 Q. DID YOU UNDERSTAND THAT IT WAS STATED TO MR. ASHER THAT 3 THERE WAS A REQUEST MADE WITH REGARD TO THE SALE OF THE 4 EXAMINER THAT THERE WAS A REQUEST MADE THAT THE HEARST 5 CORPORATION WITH THE CHRONICLE WOULD NOT COMPETE AGAINST THE 6 INDEPENDENT WITH REGARD TO THE DISTRIBUTION OF A FREE 7 CIRCULATION NEWSPAPER? 8 MR. HALLING: OBJECTION. LACK OF FOUNDATION. 9 THE COURT: OBJECTION OVERRULED. 10 THE WITNESS: NO. 11 BY MR. ALIOTO: 12 Q. LET ME SHOW YOU EXHIBIT 100. 13 THE COURT: BEFORE YOU LEAVE THAT EXHIBIT, 14 MR. WHITE, IN THE FIRST SENTENCE OF THE LAST PARAGRAPH OF 15 EXHIBIT 142 YOU WROTE: 16 "THE FACT THAT THE EXAMINER ENDORSED HIS MAN 17 FOR REELECTION APPARENTLY HAS NO EFFECT." 18 WHAT DID YOU MEAN BY THAT SENTENCE? 19 THE WITNESS: WHAT I MEANT WAS "HIS MAN" BEING 20 DAVIS' MAN. 21 THE COURT: WHO WAS? 22 THE WITNESS: MAYOR BROWN -- WILLIE BROWN RUNNING 23 FOR REELECTION AS MAYOR. 24 THE COURT: AND YOU ARE REFERRING TO THE EXAMINER'S 25 ENDORSEMENT OF MAYOR BROWN IN THE NOVEMBER 1999 MAYORAL-- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 176 WHITE - DIRECT / ALIOTO 1 THE WITNESS: RIGHT. 2 THE COURT: -- ELECTION? 3 THE WITNESS: RIGHT. 4 THE COURT: THANK YOU. 5 THE WITNESS: WHICH, I WOULD ADD PARENTHETICALLY, 6 DESPITE OUR OPPOSING POSITIONS THROUGH ALL OF THIS, WE ENDORSED 7 ON THE MERITS. 8 BY MR. ALIOTO: 9 Q. YOU HAVE TO BE PARENTHETICAL WHEN YOU ARE SAYING ABOUT 10 DOING SOMETHING ON THE MERITS? 11 A. YOU BET, APPARENTLY HERE. 12 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR? 13 THE COURT: VERY WELL. 14 BY MR. ALIOTO: 15 Q. LET ME SHOW YOU WHAT IS EXHIBIT 100. EXHIBIT 100 IN 16 EVIDENCE, IT IS A DOCUMENT DATED DECEMBER 14, 1999. IT IS 17 DIRECTED TO -- A CARBON COPY TO MR. THACKERAY. IT IS FROM 18 JAMES ASHER AND IT IS TO THE FILES. 19 I ASK YOU, SIR, WHETHER OR NOT YOU HAVE EVER SEEN 20 THAT DOCUMENT BEFORE (INDICATING). 21 A. NO, I HAVE NOT. 22 Q. WERE YOU EVER ADVISED -- WERE YOU EVER ADVISED IN SUM OR 23 SUBSTANCE THAT -- THAT THE PAN ASIA GROUP WANTED TO EXPLORE 24 WHETHER OR NOT THERE WERE ANY -- WHETHER OR NOT THERE COULD BE 25 ASSURANCES FROM HEARST THAT HEARST WOULD NOT ENGAGE IN THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 177 WHITE - DIRECT / ALIOTO 1 BUSINESS OF DISTRIBUTING FREE CIRCULATION NEWSPAPERS? 2 A. NO. NEVER. 3 Q. WERE YOU EVER ADVISED IN SUM OR SUBSTANCE THAT THE -- THAT 4 THE PAN ASIAN GROUP SOUGHT ORIGINALLY APPROXIMATELY $210 5 MILLION AS A SUBSIDY WITH REGARD TO THE EXAMINER? 6 A. NO. 7 Q. WERE YOU BROUGHT IN AT ALL ON THE NEGOTIATIONS FOR THE 8 SALE OF THE EXAMINER? 9 A. NO. 10 Q. WERE YOU EVER ADVISED IN SUM OR SUBSTANCE THAT IF 11 AGREEMENT WAS REACHED WITH THE FANG FAMILY THAT THEY WOULD USE 12 THEIR EXTENSIVE POLITICAL CONNECTIONS TO ASSIST HEARST IN 13 COMPLETING THE PURCHASE OF THE CHRONICLE? 14 A. ARE YOU READING FROM THIS DOCUMENT (INDICATING)? 15 Q. I AM. BUT I AM ASKING YOU INDEPENDENTLY OF THE DOCUMENT. 16 A. WELL, I JUST -- I WANTED TO READ IT. I LOST TRACK OF YOUR 17 QUESTION. GO AHEAD. 18 Q. ALL RIGHT. 19 A. I'VE GOT IT IN FRONT OF ME. 20 Q. OKAY. THEN GO TO THE SECOND PAGE. IT'S IN EVIDENCE. 21 A. OKAY. 22 Q. NUMBER 4 STATES, QUOTE: 23 "ASSUMING WE REACHED AGREEMENT ON ALL 24 MATTERS, THE FANGS WOULD USE THEIR EXTENSIVE 25 POLITICAL CONNECTIONS TO ASSIST US IN COMPLETING JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 178 WHITE - DIRECT / ALIOTO 1 OUR PURCHASE OF THE CHRONICLE." 2 DO YOU SEE THAT? 3 A. YES. 4 Q. WAS THAT EVER TOLD TO YOU IN SUM OR SUBSTANCE? 5 A. NO. 6 Q. NUMBER 3 -- LET ME JUST READ IT TO YOU DIRECTLY AND ASK 7 YOU THE SAME QUESTION. 3, QUOTE: 8 "THEY WOULD WANT TO EXPLORE OBTAINING SOME 9 ASSURANCE FROM HEARST THAT IT WOULD NOT ENGAGE 10 IN THE BUSINESS OF DISTRIBUTING FREE CIRCULATION 11 NEWSPAPERS." 12 WAS THAT STATEMENT EVER MADE TO YOU? 13 A. IT WAS NOT. 14 Q. WAS THERE ANY STATEMENT TO YOU THAT THE -- THAT THE 15 LITIGATION BETWEEN THE HEARST CORPORATION AND THE PAN ASIA 16 GROUP WOULD BE PART AND PARCEL OF A PACKAGE TO PURCHASE THE 17 EXAMINER? 18 A. NO. 19 Q. NOW, YOU -- DID YOU HAVE ANYTHING TO DO WITH THE -- WITH 20 THE AGREEMENT BETWEEN THE EXIN AND PAN ASIA GROUP AND THE 21 HEARST CORPORATION WITH REGARD TO THE SALE OF THE EXAMINER, THE 22 AGREEMENT ITSELF? 23 A. NOTHING. 24 Q. IS THERE -- IS THERE ANY -- ARE YOU AWARE OF ANY EFFORT ON 25 THE PART OF THE HEARST CORPORATION TO USE A SITUATION WITH THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 179 WHITE - DIRECT / ALIOTO 1 PAN ASIA GROUP OR THE FANG GROUP TO INJURE THEM IN AN EFFORT TO 2 HURT NOT ONLY THEIR ABILITY TO RUN THE EXAMINER BUT ALSO TO RUN 3 THE INDEPENDENT? 4 A. AN EFFORT TO -- 5 Q. YES. 6 A. ON OUR PART TO INJURE THEM? 7 Q. YES. 8 A. DID I HEAR OF ANYTHING LIKE THAT? 9 Q. DO YOU KNOW OF ANYTHING LIKE THAT? 10 A. NO. DO YOU? 11 Q. ARE YOU FAMILIAR WITH THE -- ARE YOU FAMILIAR WITH THE 12 COSTS OF -- OF OPERATING THE EXAMINER AS THE PUBLISHER? 13 A. I AM MORE FAMILIAR WITH THE EDITORIAL ONLY COSTS. 14 Q. THE EDITORIAL ONLY COSTS ARE APPROXIMATELY HOW MUCH? 15 A. FIFTEEN TO 20 MILLION. 16 Q. FIFTEEN TO $20 MILLION? 17 A. YES. 18 Q. OKAY. 19 NOW, IF I MAY APPROACH THE EASEL, YOUR HONOR? 20 THE COURT: VERY WELL. 21 BY MR. ALIOTO: 22 Q. THAT WOULD BE THE COST AFTER THE NET EXCESSIVES, RIGHT? 23 A. YES. 24 Q. SO THAT -- SO THAT THE COSTS OF ACTUALLY RUNNING THE 25 PAPER, IF IT WERE AN INDEPENDENT OR STAND-ALONE, WHATEVER THOSE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 180 WHITE - DIRECT / ALIOTO 1 ARE, THE EDITORIAL COSTS OF 20 MILLION -- WHAT DID YOU SAY, 15 2 TO 20? 3 A. YES. 4 Q. -- 15 TO $20 MILLION WOULD BE JUST THIS AREA RIGHT HERE, 5 IS THAT RIGHT, THE EDITORIAL PART? 6 A. YES. 7 Q. AND YOU KNOW, OF COURSE, THE COSTS TO ACTUALLY RUN THE 8 PAPER IF IT WERE A STAND-ALONE WOULD BE MUCH GREATER THAN THE 9 EDITORIAL COSTS; IS THAT RIGHT? 10 A. YES. 11 Q. DOES IT ACCORD WITH YOUR UNDERSTANDING THAT THOSE COSTS 12 ARE AT LEAST IN THE RANGE OF APPROXIMATELY $50 MILLION? 13 A. YES. 14 Q. I WANTED TO ASK YOU ONE MORE QUESTION ON EXHIBIT 100. ON 15 EXHIBIT 100, ITEM NUMBER 1 ON 100 ON PAGE 1, IT STATES THAT 16 PART OF THIS PROPOSAL OF THE PAN ASIA GROUP WAS, QUOTE: 17 "THE PENDING LITIGATION WOULD BE SETTLED IN 18 A WAY TO RESOLVE THE UNDERLYING ISSUES IN A 19 MANNER THAT WOULD PREVENT THE SAME ISSUES FROM 20 BEING RAISED IN FUTURE LITIGATION." 21 DID ANYBODY EVER TALK TO YOU ABOUT ANYTHING LIKE 22 THAT? 23 A. NO. 24 Q. IS IT CORRECT THAT -- HOW WERE YOU ADVISED THAT 25 MR. REILLY -- WERE YOU ADVISED THAT MR. REILLY FILED A LAWSUIT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 181 WHITE - DIRECT / ALIOTO 1 SOMETIME IN JANUARY OF 19 -- OF 2000? 2 A. YES. 3 Q. AFTER MR. REILLY'S LAWSUIT, DID YOU HAVE A MEETING WITH 4 MS. FANG AND UNITED STATES SENATOR DIANNE FEINSTEIN? 5 A. I THINK IT OCCURRED AFTER, YEAH. IT WAS PRETTY CLOSE TO 6 THE SAME TIME. 7 Q. WHO ARRANGED THAT? 8 A. SENATOR FEINSTEIN. 9 Q. WHERE WAS IT? 10 A. AT VILLA TAVERNA. 11 Q. WERE YOU ADVISED AS TO WHAT THE PURPOSE OF THE MEETING 12 WAS? 13 A. IT WAS REALLY TO BRING US, THE TWO OF US, TOGETHER. NO. 14 Q. WERE YOU ADVISED FOR WHAT PURPOSE OR REASON THERE WAS -- 15 THERE WAS AN EFFORT TO BRING YOU TOGETHER? 16 A. I HAD EXPRESSED AT ONE POINT TO SENATOR FEINSTEIN THE -- 17 THAT IT MYSTIFIED ME THAT WE WERE GETTING TO BEAT UP IN THE 18 INDEPENDENT OVER THE WHOLE DEAL WITH THE CHRONICLE AND THAT IF 19 THERE WERE EITHER A SALE OR A CLOSING OF THE EXAMINER AND OUR 20 ACQUISITION OF THE CHRONICLE THAT IF ANYTHING, RATHER THAN 21 HARMING THEM COMPETITIVELY, IT WOULD MAKE LIFE BETTER FOR THEM 22 COMPETITIVELY. 23 Q. SO YOU WERE ASKING UNITED STATES SENATOR FEINSTEIN TO 24 INTERCEDE ON YOUR BEHALF WITH THE FANGS? 25 A. NO. THIS ACTUALLY HAD BEEN A CONVERSATION, AND SHE SAID, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 182 WHITE - DIRECT / ALIOTO 1 "WELL, HAD YOU" -- I MEAN, I WASN'T ASKING HER TO DO A THING. 2 SHE WAS FUNDAMENTALLY AGREEING WITH ME. IN FACT, IT ORIGINALLY 3 WAS HER STATEMENT, THAT SHE DIDN'T UNDERSTAND THIS. IT SEEMED 4 THAT THERE WOULD BE A LESS FORMIDABLE COMPETITOR IF IT WERE 5 SMALLER THAN IT IS CURRENTLY TODAY ACTING AS -- AS ONE ENTITY 6 THROUGH THE AGENCY. 7 Q. AND DID YOU AT THIS MEETING SUGGEST THAT THE -- THAT 8 THE -- THAT THE FANG GROUP PURCHASE THE EXAMINER? 9 A. YES. 10 Q. AND DID YOU BELIEVE THAT THAT WOULD THEN BRING PEACE TO 11 YOU SOMEHOW? 12 A. NO. WELL, IT WOULD CERTAINLY HELP. WE WERE -- AT THAT 13 POINT WE HAD THE MAYOR'S COMMITTEE TO HELP FIND A BUYER. WE 14 WERE LOOKING FOR A BUYER. IT WASN'T -- TO CHARACTERIZE IT AS A 15 "PROPOSAL" WOULD BE TO OVERPLAY IT. IT WAS AN OFFHAND, ALMOST 16 FLIP COMMENT TO THE EXTENT OF, "WELL, THEN, YOU KNOW, WHY DON'T 17 YOU BUY THE EXAMINER?" 18 Q. WELL, YOU WROTE A MEMORANDUM ABOUT IT, DIDN'T YOU? 19 A. YES. 20 Q. AND YOU SENT THE MEMORANDUM TO WHOM? 21 A. WELL, PROBABLY GEORGE IRISH. 22 Q. WELL, LET ME SHOW YOU EXHIBIT 128. MAYBE I WILL SHOW YOU 23 128. OH, HERE IT IS. 24 MAY I APPROACH THE WITNESS, YOUR HONOR? 25 THE COURT: YES, YOU MAY. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 183 WHITE - DIRECT / ALIOTO 1 BY MR. ALIOTO: 2 Q. I SHOW YOU EXHIBIT 128 IN EVIDENCE. EXHIBIT 128 HAS THE 3 DATE OF JANUARY 21, 2000, QUOTE: 4 "LUNCH WITH FLORENCE FANG AND SENATOR DIANNE 5 FEINSTEIN," A TWO-PAGE DOCUMENT." 6 DID YOU PREPARE OR CAUSE THIS DOCUMENT TO BE 7 PREPARED ON OR ABOUT THE DATE INDICATED? 8 A. I AM SURE I MUST HAVE, YEAH. I AM SURE I DID. IT'S 9 NOT -- 10 Q. OKAY. 11 A. IT'S NOT ADDRESSED OR DATED. YES, IT'S DATED. 12 Q. WHAT WAS -- WAS THE PURPOSE OF THIS TO PUT THIS IN THE 13 FILE OR WAS IT TO SEND TO SOMEONE? WHAT? 14 A. I AM SURE IT MUST -- OH, LET'S SEE. ACTUALLY, I DON'T 15 THINK THIS WAS SENT ANYWHERE. I THINK IT'S A FILE MEMO. BUT 16 I'M -- I HONESTLY DON'T REMEMBER BEYOND THAT. 17 Q. OKAY. ON THE SECOND PAGE OF THE FIRST FULL PARAGRAPH IT 18 STATES, QUOTE: 19 "I SUGGEST THAT A GOOD START TOWARD BECOMING 20 A DAILY WOULD BE FOR TED TO BUY THE EXAMINER." 21 DO YOU SEE THAT? 22 A. YES. 23 Q. AND THAT WAS AFTER MS. FANG SAID THAT SHE HAD A DREAM TO 24 HAVE A DAILY NEWSPAPER? 25 A. CORRECT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 184 WHITE - DIRECT / ALIOTO 1 Q. AND YOU THEN GO ON TO SAY THAT -- THAT YOU WOULD INCLUDE 2 PRESSES, BUILDINGS, TRUCKS, ET CETERA, AT THE BOTTOM OF THE 3 PARAGRAPH. 4 A. RIGHT. 5 Q. AND THAT WAS A CHANGE IN THE OFFER AT THE TIME? 6 A. IT WAS CLOSE TO THAT TIME THAT THE OFFER WAS ENRICHED WITH 7 THAT. 8 Q. ENRICHED. BUT THIS WAS BEFORE IT WAS? 9 A. IT WAS PRETTY CLOSE TO -- IT WAS PROBABLY NOT BEFORE IT 10 WAS INTERNALLY, BUT IT WAS BEFORE -- IT MAY HAVE BEEN BEFORE IT 11 WAS. 12 Q. AND MS. FANG HAD SAID TO YOU THAT IT WAS OBVIOUS TO HER 13 THAT HEARST WAS NOT MAKING A GOOD-FAITH OFFER AND THAT HEARST 14 WANTED TO CLOSE THE EXAMINER AND HAVE A MONOPOLY POSITION IN 15 THE MARKET? 16 A. UH-HUH. 17 Q. IS THAT RIGHT? 18 A. YES. 19 Q. AND YOU WERE TRYING TO SAY NO, THAT WASN'T TRUE. IS THAT 20 WHAT YOU WERE DOING? 21 A. YES. 22 Q. AND FROM THAT START -- AND FROM THAT TIME, THEN, AS FAR AS 23 YOU KNOW, WERE THERE SERIOUS NEGOTIATIONS WITH REGARD TO THE 24 FANGS PURCHASING THE EXAMINER? 25 A. I WAS COMPLETELY UNAWARE OF IT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 185 WHITE - DIRECT / ALIOTO 1 Q. DID YOU ADVISE ANYONE ORALLY ABOUT THIS MEETING WITH 2 SENATOR FEINSTEIN? 3 A. I AM SURE I MENTIONED IT, YES. 4 Q. NOW, YOU UNDERSTOOD THAT SENATOR FEINSTEIN WAS A MEMBER OF 5 THE JUDICIARY COMMITTEE OF THE UNITED STATES SENATE? 6 A. I DID NOT. 7 Q. DID YOU -- DID YOU BELIEVE OR UNDERSTAND THAT MS. -- THAT 8 SENATOR FEINSTEIN HAD ANY KIND OF RELATIONSHIP WITH THE 9 ATTORNEY GENERAL? 10 A. I DID NOT. 11 Q. DID YOU SEE THIS AS HAVING ANY ADVANTAGE TO YOURSELF IN 12 THE ACQUISITION OF THE CHRONICLE? 13 A. TO HAVE HER OR ANY OF OUR PUBLIC OFFICIALS FAVORABLE -- 14 FAVORABLY DISPOSED TOWARD IT? SURE. 15 Q. AND DID YOU BELIEVE -- SO YOU BELIEVED THAT, THAT THAT WAS 16 SOMETHING THAT WAS -- 17 A. YEAH. I CALLED ON ALL OF OUR CONGRESS PEOPLE AND 18 SENATORS. 19 Q. AND DID YOU FEEL HERE IN THIS SITUATION THAT IT WOULD BE 20 BETTER FOR YOU TO MAKE SOME KIND OF AN ARRANGEMENT WITH THE PAN 21 ASIAN GROUP? 22 A. I AM NOT SURE WHAT YOU MEAN. 23 Q. THERE WAS ONE ITEM THAT I WANTED TO BE CLEAR ABOUT. 24 AND I WANT TO READ A PORTION FROM THE WITNESS' 25 DEPOSITION, YOUR HONOR, THAT WAS TAKEN ON APRIL 24 AT PAGE 143, JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 186 WHITE - DIRECT / ALIOTO 1 BEGINNING LINE 21 THROUGH TO -- THROUGH TO LINE 5? 2 THE COURT: HAVE YOU GOT A TRANSCRIPT? 3 MR. ALIOTO: I DO HAVE THE TRANSCRIPT, YOUR HONOR. 4 AND ALSO WE HAVE A TAPE OF IT. I WOULD JUST LIKE TO 5 PLAY IT. AND I WOULD LIKE TO GIVE A TRANSCRIPT COPY TO THE 6 WITNESS. 7 THE COURT: HOW ABOUT TO THE JUDGE? 8 MR. ALIOTO: I'M SORRY. ABSOLUTELY TO THE JUDGE. 9 MR. SHULMAN: HERE IT IS. 10 MR. ALIOTO: THE OFFICIAL ONE IS -- 11 THE COURT: IS THAT THE ORIGINAL? 12 MR. ALIOTO: YES, YOUR HONOR. 13 THE COURT: ALL RIGHT. 14 (PAUSE IN THE PROCEEDINGS.) 15 MR. ALIOTO: I AM GOING TO SHOW THIS ONE QUESTION 16 AND ANSWER. AND THE QUESTION WILL BE, I GUESS, YOU KNOW, WERE 17 YOU ASKED THIS QUESTION? DID YOU GIVE THIS ANSWER? AND WERE 18 YOU UNDER OATH AT THE TIME? 19 WHAT DO I DO? 20 MR. SHULMAN: WAIT JUST A SECOND. 21 MR. ALIOTO: I WAIT. 22 THE COURT: TO LINE 5 ON PAGE 144, CORRECT? 23 MR. ALIOTO: YES, YOUR HONOR. 24 "Q. OKAY. SO THAT IF I ASK" -- 25 THE COURT: YOU ARE TREATING MR. WHITE AS A PARTY JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 187 WHITE - DIRECT / ALIOTO 1 WITNESS? 2 MR. ALIOTO: YES, YOUR HONOR. 3 THE COURT: VERY WELL. PROCEED. 4 MR. ALIOTO: HOW ABOUT IF I READ IT? 5 MR. HALLING: IT MIGHT BE FASTER. 6 (WHEREUPON, TAPE WAS PLAYED.) 7 "Q. OKAY. SO THAT IF I ASK YOU QUESTIONS 8 ABOUT WHETHER THE EXAMINER IS MAKING A PROFIT, 9 OR WHETHER THE EXAMINER IS LOSING MONEY, OR 10 WHETHER THE EXAMINER IS MAKING MONEY, OR WHETHER 11 THE EXAMINER IS A SUCCESSFUL NEWSPAPER 12 FINANCIALLY, OR WHETHER THE EXAMINER IS A 13 FAILING NEWSPAPER, IS IT YOUR TESTIMONY THAT THE 14 ONLY ANSWERS YOU CAN GIVE TO ANY OF THOSE 15 QUESTIONS IS SIMPLY THAT THE EXAMINER WAS 16 RECEIVING MORE MONEY THAN ITS COST FROM WHAT WAS 17 SPLIT BY THE NEWSPAPER AGENCY? 18 "A. UNDER THE JOA, YES." 19 BY MR. ALIOTO: 20 Q. OKAY. NOW, FINALLY, THEN, I -- ON AUGUST 6TH OF 1999, 21 WHICH WAS THE TIME PERIOD THAT THE HEARST CORPORATION ENTERED 22 INTO ITS AGREEMENT WITH THE CHRONICLE, IT IS CORRECT, IS IT 23 NOT, THAT YOU WERE STATING TO AS MANY PEOPLE AS YOU COULD THAT 24 THE EXAMINER MEANT TO -- THE HEARST CORPORATION MEANT TO STAY 25 AND COMPETE IN SAN FRANCISCO AND BE STRONG ABOUT IT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 188 WHITE - DIRECT / ALIOTO 1 A. YES. 2 Q. IS THAT RIGHT? 3 A. THAT'S RIGHT. 4 Q. AND YOU -- AND THEN AFTER AUGUST 6TH -- AFTER AUGUST 6TH, 5 1999, WHICH IS THE DATE OF THE -- OF THE AGREEMENT WITH THE 6 CHRONICLE, THEN THE HEARST CORPORATION TOLD THE JUSTICE 7 DEPARTMENT AND EVERYONE ELSE THAT NEITHER HEARST NOR INDEED 8 ANYONE ELSE COULD COMPETE AFTER 2005; ISN'T THAT RIGHT? 9 A. THAT'S RIGHT. 10 Q. AND -- AND -- AND THEN AFTER MARCH 16TH, 2000, WHEN YOU 11 ENTERED INTO THE AGREEMENT WITH THE FANG GROUP, THEN THE HEARST 12 CORPORATION TOLD THE COURT AND THE JUSTICE DEPARTMENT AND 13 EVERYONE ELSE THAT THE FANGS COULD BE A VIABLE COMPETITOR 14 AGAINST THE HEARST CORPORATION; ISN'T THAT RIGHT? 15 A. WE ARE NOT SPECULATING AS TO WHETHER THEY COULD BE A 16 VIABLE COMPETITOR OR NOT, AS I UNDERSTAND IT. BUT THAT'S NOT 17 MY SPECULATION. 18 Q. ISN'T THAT EXACTLY WHAT YOU TOLD THE JUSTICE DEPARTMENT IN 19 ORDER TO GET APPROVAL BY THE JUSTICE DEPARTMENT SO THAT THE 20 JUSTICE DEPARTMENT COULD BELIEVE THAT FOR THE FIRST TIME IN 35 21 YEARS THERE WAS SUPPOSED TO BE COMPETITION ON THE MERITS 22 BETWEEN TWO VIABLE NEWSPAPERS; ISN'T THAT TRUE? 23 MR. HALLING: OBJECTION. LACK OF FOUNDATION. THERE 24 IS NO FOUNDATION THIS WITNESS KNOWS ANYTHING ABOUT WHAT IS 25 PRESENTED TO THE JUSTICE DEPARTMENT. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 189 WHITE - DIRECT / ALIOTO 1 MR. ALIOTO: I AM ASKING HIM. 2 THE COURT: OBJECTION OVERRULED. 3 THE WITNESS: SO THE QUESTION? I'M SORRY. 4 BY MR. ALIOTO: 5 Q. YES. ISN'T IT CORRECT THAT AFTER THE SALE TO THE FANGS, 6 NOW -- NOW WE ARE GOING -- PUT IT IN CONTEXT. BEFORE THE 7 PURCHASE OF THE CHRONICLE, HEARST CORPORATION WAS REPRESENTING 8 TO THE WORLD THAT THEY WERE GOING TO COMPETE AND BE STRONG IN 9 THE MARKET. AFTER THE ACQUISITION HEARST CORPORATION WAS 10 TELLING THE WORLD THAT THERE WAS NO WAY ANYONE COULD COMPETE IN 11 THE MARKET AGAINST ONE PAPER. AND NOW, IN MAKING THE DEAL WITH 12 THE FANG GROUP THE HEARST CORPORATION IS TELLING THE WORLD, AND 13 THIS COURT, AND THE JUSTICE DEPARTMENT, THAT NOW THERE ARE TWO 14 VIABLE NEWSPAPERS THAT ARE GOING TO BE COMPETITIVE. ISN'T THAT 15 RIGHT? 16 MR. HALLING: OBJECTION. COMPOUND. LACKS 17 FOUNDATION. 18 THE COURT: OBJECTION OVERRULED. 19 THE WITNESS: WE ARE SAYING THAT IF ANYONE CAN MAKE 20 THIS WORK, IT SEEMS LIKE THE FANGS AND THE INDEPENDENT HAVE A 21 GREAT SHOT AT IT. 22 BY MR. ALIOTO: 23 Q. WELL, YOU TOLD THE GOVERNMENT -- 24 A. WE COULDN'T FIGURE OUT NOW. 25 Q. BUT YOU TOLD THE GOVERNMENT -- OR "YOU," MEANING HEARST -- JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 190 WHITE - DIRECT / ALIOTO 1 ISN'T IT CORRECT -- AND THIS IS FROM THE RESPONSES TO 2 INTERROGATORIES SUBMITTED TO THE GOVERNMENT, STATED IN RESPONSE 3 TO SPECIFICATION NUMBER 13, PAGE 19, IN EVIDENCE, QUOTE: 4 "HEARST DOES NOT BELIEVE THAT ENTRY INTO THE 5 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE 6 RELEVANT AREA IN DIRECT COMPETITION WITH THE 7 COMBINED SAN FRANCISCO CHRONICLE AND EXAMINER 8 NEWSPAPERS (OR THE CHRONICLE ALONE) IS EITHER 9 ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS 10 BEHAVIOR." 11 ARE YOU AWARE OF THAT? 12 A. I CERTAINLY SUPPORT IT. 13 Q. OKAY. 14 A. IT SOUNDS RIGHT TO ME. 15 Q. BUT NOW -- 16 A. BUT YOU JUST ADDED A WHOLE LOT OF QUALIFIERS THAT I THINK 17 ARE CRITICAL. AND, AS STATED, THAT'S ABSOLUTELY TRUE. 18 Q. SO ARE YOU SAYING THAT EVEN WITH THE -- WITH THE SALE TO 19 THE -- TO THE FANG GROUP THAT HEARST DOES NOT BELIEVE THAT 20 ENTRY INTO THE METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE 21 RELEVANT AREA IN DIRECT COMPETITION WITH THE CHRONICLE IS 22 EITHER ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS BEHAVIOR? 23 A. YEAH. I BELIEVE THAT. 24 MR. ALIOTO: THAT'S ALL. 25 THANK YOU, YOUR HONOR. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 191 1 THE COURT: VERY WELL. WE WILL BE IN RECESS UNTIL 2 TOMORROW MORNING AT 8:30. 3 AND, AS YOU KNOW, COUNSEL -- 4 MR. BALABANIAN: IS IT THE WILL OF THE COURT TO HEAR 5 THE IN LIMINES THIS EVENING OR IN THE MORNING, YOUR HONOR? 6 THE COURT: -- WE WILL ONLY BE ABLE TO GO TO ABOUT 7 ROUGHLY 1:00 O'CLOCK TOMORROW. 8 HOW LONG DO YOU WISH TO TAKE? 9 MR. BALABANIAN: I THINK IT WILL JUST TAKE A COUPLE 10 OF MINUTES. 11 THE COURT: WHY DON'T WE TAKE A BRIEF RECESS, GIVE 12 THE REPORTER A CHANCE TO STRETCH, AND THEN WE WILL HEAR SOME 13 ARGUMENT? ALL RIGHT. 14 (RECESS TAKEN FROM 5:05 TO 5:20 P.M.) 15 THE COURT: VERY WELL, MR. BALABANIAN. 16 MR. BALABANIAN: THE FIRST MOTION WILL BE PRESENTED 17 BY MR. HOCKETT. 18 THE COURT: VERY WELL, MR. HOCKETT. 19 MR. HOCKETT: MAY IT PLEASE THE COURT, I WANTED TO 20 TAKE CARE OF ONE HOUSEKEEPING MATTER, WHICH IS THE ORDER OF 21 CALL AND JUST PUT THAT ON THE RECORD. 22 WHEN WE CONCLUDE, WHEN MR. WHITE'S TESTIMONY ENDS, 23 THE NEXT WITNESSES, AS WE UNDERSTAND THEM, ARE GOING TO BE 24 MR. SIAS AND MR. ASHER. AND THEN, DEPENDING ON WHERE WE ARE IN 25 TERMS OF TIME, MR. COMANOR WILL PROCEED FIRST THING ON JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 192 1 WEDNESDAY MORNING. BUT, OTHERWISE, THE ORDER OF WITNESSES IS 2 PAGE, WEAVER, CLANCY AND FLOOD. 3 IS THAT CORRECT? 4 MR. SHULMAN: THAT'S RIGHT, YOUR HONOR. 5 THE COURT: ALL RIGHT. 6 MR. HOCKETT: AND JILL GREENTHAL WILL BE ON THURSDAY 7 MORNING. SCHMIDT WILL BE ON FRIDAY. OSBORN AND BENNACK HAVE 8 YET TO BE SCHEDULED. 9 MR. SHULMAN: YOUR HONOR, MAY IT PLEASE THE COURT, 10 MY UNDERSTANDING IS THAT THE CHRONICLE HAS REQUESTED THAT WE 11 TAKE JILL GREENTHAL ON THURSDAY MORNING OUT OF ORDER, WHICH -- 12 THEN THEY WANTED TO PUT HER ON, AND THAT'S FINE WITH US. 13 MR. LINDSTROM: YES, YOUR HONOR. WE WOULD 14 APPRECIATE THAT AS AN ACCOMMODATION, AS SHE IS TRAVELING FROM 15 BOSTON ESPECIALLY FOR THE PROCEEDING. 16 THE COURT: THIS WOULD BE A WITNESS CALLED BY THE 17 CHRONICLE AND TAKEN ON DIRECT BY THE CHRONICLE? 18 MR. LINDSTROM: CORRECT, OUT OF ORDER, WITH THE 19 COURT'S PERMISSION. 20 THE COURT: THAT'S FINE, OF COURSE. 21 MR. LINDSTROM: THANK YOU, YOUR HONOR. 22 THE COURT: LET ME ASK MR. HALLING -- AND THIS WILL 23 BE A QUESTION FOR MR. ROSCH AS WELL -- IS IT YOUR PLAN TO 24 EITHER DO NO CROSS OF MR. WHITE AND PRESUMABLY ALSO THEN 25 MR. SIAS AND CALL THEM BACK AS DIRECT WITNESSES, OR DO A VERY JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 193 1 LIMITED CROSS AT THIS POINT, OR -- IT'S REALLY DIRECT, BUT TO 2 HAVE A LIMITED EXAMINATION AT THIS POINT, OR DO YOU PLAN TO 3 HAVE A LENGTHY EXAMINATION OF THESE WITNESSES BEFORE THE 4 PLAINTIFF PRESENTS ALL OF HIS WITNESSES? WHAT IS YOUR 5 THINKING? 6 MR. ROSCH: YOUR HONOR, FOR OUR PART, THAT IS TO SAY 7 THE CHRONICLE'S PART, WE DO PLAN TO DO A DIRECT EXAMINATION OF 8 MR. SIAS. I CAN'T TELL YOU IF IT'S GOING TO BE LENGTHY OR NOT 9 BECAUSE IT WILL DEPEND ON -- ON WHAT MR. ALIOTO DOES. BUT WE 10 DO NOT PLAN TO RECALL HIM. 11 THE COURT: YOU DO NOT? ALL RIGHT. 12 WHAT IS YOUR PLAN WITH REGARD TO MR. WHITE? DO YOU 13 PLAN TO RE-CALL HIM OR? 14 MR. HALLING: MR. WHITE? 15 THE COURT: YES. 16 MR. HALLING: NO, WE PROBABLY WILL NOT RE-CALL HIM. 17 THE COURT: ALL RIGHT. 18 MR. HOCKETT: A SECOND HOUSEKEEPING MATTER IS THAT 19 THE PLAINTIFF HAS INDICATED HIS INTENTION TO POST A NUMBER OF 20 THE EXHIBITS, WHICH WERE OFFERED AND RECEIVED INTO EVIDENCE 21 TODAY ON THE WEB. I UNDERSTAND THAT THIS IS LIMITED TO 22 EXHIBITS USED WITH MR. WHITE TODAY, AND IT WILL NOT INCLUDE 23 EXHIBITS THAT ARE SUBJECT TO OUR IN LIMINE MOTION OR WHICH HAVE 24 NOT OTHERWISE BEEN RECEIVED INTO EVIDENCE. 25 IS THAT CORRECT? JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 194 1 MR. SHULMAN: THAT'S CORRECT, YOUR HONOR. 2 THE COURT: ALL RIGHT. 3 DO YOU HAVE ANYTHING FOR ME, MR. HOCKETT? 4 MR. HOCKETT: YES, I DO, YOUR HONOR, AND THAT IS OUR 5 MOTION REGARDING UNDESIGNATED EXPERT TESTIMONY. THE COURT'S 6 APRIL 19TH ORDER REQUIRED THE PARTIES TO PROVIDE A COMPLETE 7 STATEMENT OF ALL OPINIONS TO BE OFFERED BY EXPERTS, ALL THE 8 FACTS AND DATA THAT THEY RELIED ON, THE WRITINGS AND A LIST OF 9 LEGAL PROCEEDINGS IN WHICH THEY TESTIFIED TO IN THE PREVIOUS 10 FIVE YEARS. 11 WE HAVEN'T RECEIVED ANYTHING OF THE KIND FROM THE 12 PLAINTIFFS. 13 WHAT WE HAVE IS A LIST OF THEIR WITNESSES, WHICH 14 STILL DOESN'T INCLUDE ANY OF THE EXPERTS THAT WE IDENTIFIED AS 15 DUPLICATIVE. THERE ARE NINE OF THEM. WE HAVE DECLARATIONS 16 FROM SOME BUT NOT ALL -- I THINK, EIGHT OF THE NINE HAVE 17 DECLARATIONS FILED -- 18 THE COURT: LET ME INTERRUPT LONG ENOUGH TO ASK THE 19 CLERK TO FISH OUT THAT ORDER WHILE YOU ARE TALKING. 20 MR. HOCKETT: YOUR HONOR, I HAVE A COPY OF IT HERE 21 IF YOU'D LIKE TO LOOK AT IT. 22 (PAUSE IN THE PROCEEDINGS.) 23 MR. HOCKETT: THE TOP OF PAGE 2, YOUR HONOR. 24 (PAUSE IN THE PROCEEDINGS.) 25 MR. HOCKETT: SO THE ORDER IS PRETTY CLEAR. THE JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 195 1 PLAINTIFFS HAVE DECLINED TO COMPLY WITH IT. 2 WHAT WE HAVE IS . . . 3 (PAUSE IN THE PROCEEDINGS.) 4 MR. HOCKETT: YOUR HONOR, WHAT WE HAVE IS A -- A 5 LIST OF WITNESSES, INCLUDING THE NINE EXPERTS THAT HAVE ALWAYS 6 BEEN IDENTIFIED. WE HAVE DECLARATIONS FROM, I THINK, EIGHT OF 7 THE NINE, MOSTLY IN CONNECTION WITH THE PRELIMINARY INJUNCTION 8 HEARING, AND WE HAVE DEPOSITIONS, I THINK, OF EIGHT OF THE 9 NINE. 10 THE PURPOSE OF THE COURT'S ORDER, I TAKE IT, IS TO 11 GIVE US NOTICE OF WHAT THEY ARE GOING TO SAY, WHO IS GOING TO 12 SAY IT, AND TO MAKE SURE THAT THEY DON'T STRAY IN THEIR 13 TESTIMONY AT TRIAL FROM WHAT THEY GAVE US NOTICE OF. 14 THE COURT: YOU HAVE TAKEN THE DEPOSITION OF ALL OF 15 THESE PEOPLE? 16 MR. HOCKETT: CORRECT. AND REALLY ALL WE WOULD ASK, 17 YOUR HONOR, IN LIGHT OF HOW COMPRESSED THE PREPARATION HAS BEEN 18 IS, NUMBER ONE, IF THEY CAN TELL US THEY ARE GOING TO NARROW 19 THE LIST DOWN, WOULD THEY PLEASE DO THAT NOW? 20 AND, NUMBER TWO, THE WITNESSES OUGHT TO BE PRECLUDED 21 FROM OFFERING OPINIONS THAT ARE NOT DISCLOSED IN THE 22 DECLARATIONS OR FROM OFFERING ANY BASIS FOR THOSE OPINIONS THAT 23 WAS NOT DISCLOSED IN THE DEPOSITIONS. THAT SEEMS TO US TO BE 24 REASONABLE AND SOMETHING THAT IS ENTIRELY CONSISTENT WITH THE 25 SPIRIT OF THE COURT'S ORDER. JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 196 1 THE COURT: WELL, WHAT YOU ARE WORRIED ABOUT, OF 2 COURSE -- AND QUITE LEGITIMATELY SO -- IS UNFAIR SURPRISE. 3 MR. HOCKETT: CORRECT, YOUR HONOR. 4 THE COURT: MR. SHULMAN? 5 MR. SHULMAN: YOUR HONOR, THEY DO HAVE DEPOSITIONS, 6 LENGTHY DEPOSITIONS, FROM THE PEOPLE THAT WE WOULD CALL. IT 7 HAS ALWAYS BEEN MY UNDERSTANDING AND INTENTION TO LIMIT ANY 8 TESTIMONY TO WHAT HAS BEEN DISCLOSED IN THE DECLARATIONS AND 9 THE DEPOSITIONS. SO I THINK THAT SHOULD SATISFY COUNSEL'S 10 INTEREST HERE. I BELIEVE THAT WE WERE SUBSTANTIALLY -- IN 11 SUBSTANTIAL COMPLIANCE WITH THE COURT'S ORDER BECAUSE THEY DID 12 HAVE ALL OF THAT INFORMATION. 13 THE COURT: I AM INCLINED TO BE FAIRLY GENEROUS, 14 MR. HOCKETT, UNDER THE CIRCUMSTANCES -- AND GENEROUS TO BOTH 15 SIDES -- BECAUSE YOU HAVE BEEN OPERATING UNDER AN 16 EXTRAORDINARILY ABBREVIATED SCHEDULE. AND SOME OF THE 17 FORMALITIES THAT WE MIGHT OTHERWISE REQUIRE BY WAY OF PRETRIAL 18 PREPARATION ARE, AS YOU PUT IT, OBSERVED IN A COMPRESSED 19 SCHEDULE HERE AND PERHAPS NOT OBSERVED WITH THE FORMALITY THAT 20 THEY MIGHT HAVE BEEN HAD WE TWO OR THREE YEARS TO PRETRY THIS 21 CASE, AS IS FREQUENTLY THE CASE, RATHER THAN SIX WEEKS OR 22 WHATEVER THE PERIOD OF TIME HAS BEEN. 23 SO THE ISSUE REALLY COMES DOWN TO UNFAIR SURPRISE. 24 IF SOME EXPERT COMES UP WITH SOMETHING OUT OF LEFT FIELD THAT 25 WAS NOT APPARENT TO YOU AT THE TIME OF HIS DEPOSITION AND YOU JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 197 1 COULD NOT CROSS-EXAMINE HIM ABOUT, THEN I THINK YOU ARE ON GOOD 2 GROUNDS TO ATTEMPT TO EXCLUDE THAT PORTION OF THE EXPERT'S 3 TESTIMONY. BUT IF THE SUBSTANCE OF THE OPINION OF WHICH HE 4 OFFERS WAS DISCLOSED TO YOU, THEN I THINK IT'S FAIR GAME, AND 5 EVEN IF IT WASN'T ALL SPELLED OUT WITH THE PARTICULARITY THAT 6 WE MIGHT OTHERWISE REQUIRE, I DON'T THINK THERE IS A BASIS FOR 7 EXCLUSION. 8 BUT THIS GOES ON BOTH SIDES. SO LET'S HANDLE THIS 9 AS WE GO ALONG. IF YOU THINK THAT SOMETHING IS BEING OFFERED 10 BY AN EXPERT THAT YOU HAVE NOT HAD NOTICE OF AND HAVEN'T HAD AN 11 OPPORTUNITY TO PREPARE ON, I WILL HEAR YOU IN THAT CONNECTION. 12 MR. HOCKETT: IT SOUNDED FROM MR. SHULMAN'S 13 STATEMENT THAT WE ARE ON THE SAME PAGE WITH THIS, AND WE WILL 14 SPEAK UP IF THE EXPERTS SEEM TO BE OFFERING NEW MATERIAL OR NEW 15 BASES FOR THEIR OPINIONS. 16 THE COURT: ALL RIGHT. 17 MR. HOCKETT: THANK YOU, YOUR HONOR. 18 MR. BALABANIAN: YOUR HONOR, OUR SECOND MOTION HAS A 19 VERY NARROW FOCUS. IT RELATES TO AN ISSUE WITH WHICH I BELIEVE 20 THE COURT IS FAMILIAR SINCE IT WAS RAISED IN CONNECTION WITH A 21 TELEPHONE CONFERENCE WITH THE COURT, AT WHICH TIME THE COURT -- 22 I DIRECTED THE CREATION OF A LEVEL OF CONFIDENTIALITY FOR 23 PARTICULARLY SENSITIVE BUSINESS INFORMATION. 24 AT THIS TIME WE ARE ASKING FOR VERY LIMITED 25 PROTECTION. AS THE COURT IS AWARE, WE INTEND TO PRESENT TO IT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 198 1 DETAILED BUDGETS, OPERATING BUDGETS, FOR THE NEW EXAMINER, 2 INCLUDING REVENUE PROJECTIONS AND FIGURES DESCRIBING EACH AND 3 EVERY COST ITEM ANTICIPATED. 4 THERE ARE, HOWEVER, CERTAIN FIGURES, PARTICULARLY IN 5 OUTDATED BUDGETS, WHICH ARE A SOURCE OF CONCERN TO US SHOULD 6 THEY BE MADE PUBLIC. THEY RELATE TO ONGOING NEGOTIATIONS OF 7 MR. FANG WITH REGARD TO ACQUISITION OF PERSONNEL, MANAGERIAL 8 POSITIONS, AS WELL AS ACQUISITION OF CERTAIN ADDITIONAL SPACE 9 THAT WILL BE REQUIRED FOR THE OPERATIONS OF THE NEW EXAMINER. 10 AS I BELIEVE I EXPLAINED IN THE EARLIER CONFERENCE, 11 MR. FANG WILL BE IN A VERY DIFFICULT NEGOTIATING POSTURE IF A 12 PUBLIC DISCLOSURE IS MADE OF THE FIGURES THAT HE HAS IN MIND 13 FOR THOSE POSITIONS FOR THAT SPACE. 14 I WANT TO MAKE IT CLEAR I AM NOT TALKING ABOUT 15 MR. FANG'S OWN SALARY, WHICH I WOULD BE HAPPY TO DISCLOSE, AS I 16 ALREADY REFERRED TO THE FACT THAT IT IN NO WAY CORRESPONDS TO 17 THE FIGURES THAT MR. ALIOTO HAS GIVEN TO THE COURT. 18 WE ARE CONCERNED THAT IN THE ONGOING NEGOTIATIONS, 19 RECRUIT PERSONNEL AND OBTAINING ADDITIONAL REAL ESTATE, 20 MR. FANG WOULD BE GREATLY PREJUDICED IF A PUBLIC DISCLOSURE IS 21 MADE OF THE SALARIES THAT WERE CONTEMPLATED, AT LEAST AT ONE 22 POINT IN HIS BUDGETING PROCESS, AND THE PER-SQUARE FOOT RENTAL 23 THAT HE ANTICIPATES PAYING. I SEE NO REASON FOR PLAINTIFF TO 24 HAVE THIS INFORMATION OR TO REQUIRE THAT IT BE PUT ON THE 25 PUBLIC RECORD. IF IT'S DEEMED RELEVANT, I WOULD ASK JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 199 1 RESPECTFULLY THAT IT BE RECEIVED IN A FASHION WHICH IT WOULD 2 NOT BECOME PUBLIC. 3 THE COURT: IT HAS BEEN DISCLOSED, I GATHER? 4 MR. BALABANIAN: YOUR HONOR, IT WAS DISCLOSED 5 SUBJECT TO THIS MOTION, YOUR HONOR. 6 THE COURT: ATTORNEYS' EYES ONLY? 7 MR. BALABANIAN: YES, THAT'S CORRECT. 8 THE COURT: ALL RIGHT. 9 MR. BALABANIAN: WE WOULD ASK ONLY THAT THOSE 10 PARTICULAR FIGURES NOT BE PUBLICIZED. 11 THE COURT: HAVE YOU INQUIRED OF PLAINTIFF TO WHAT 12 EXTENT PLAINTIFFS INTEND TO INTRODUCE THIS EVIDENCE? 13 MR. BALABANIAN: THE RESPONSE WHEN WE RAISED THIS 14 ISSUE WITH THEM WAS AT TRIAL ALL BETS ARE OFF AND EVERYTHING IS 15 PUBLIC. 16 THE COURT: YOU HAVE IDENTIFIED SPECIFIC DOCUMENTS? 17 MR. BALABANIAN: WE DID IN THE TELEPHONE CALL. I 18 WOULD BE HAPPY TO MEET AND CONFER AGAIN WITH PLAINTIFF'S 19 COUNSEL AND ATTEMPT TO RESOLVE THE MATTER, YOUR HONOR. 20 THE COURT: WOULD YOU? IF YOU WOULD PINPOINT 21 EXACTLY WHICH DOCUMENTS YOU HAVE REFERENCE TO AND THEN LET'S 22 FIND OUT FROM MR. ALIOTO AND HIS COLLEAGUE, MR. SHULMAN, 23 WHETHER THEY INTEND TO USE ANY OF THOSE AND, IF SO, I WILL 24 ATTEMPT TO ADDRESS THE ISSUE. 25 MR. BALABANIAN: THANK YOU, YOUR HONOR. THAT'S WHAT JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301 200 1 WE WILL DO. 2 THE COURT: ALL RIGHT. ANYTHING FURTHER? 3 MR. SHULMAN: YOUR HONOR, COULD I MAKE THE REQUEST 4 THAT COUNSEL PROVIDE US WITH SOMETHING SPECIFIC IN WRITING 5 SAYING WHICH DOCUMENTS -- WHICH EXHIBIT NUMBERS AND WHICH 6 PARTICULAR FIGURES HE HAS IN MIND? BECAUSE I THINK THAT WILL 7 FACILITATE OUR REACHING AN ACCOMMODATION IF IT'S POSSIBLE. 8 THE COURT: I HAVE IN MIND THAT MR. BALABANIAN WOULD 9 SIT DOWN AND WRITE A LETTER AND IDENTIFY THE DOCUMENTS BY 10 IDENTIFICATION NUMBER AND IF IT'S ONLY A PORTION OF A DOCUMENT, 11 SUCH PORTIONS AS HE HAS IN MIND. 12 MR. BALABANIAN: IT'S PORTIONS OF A-101 THROUGH 105. 13 BUT I WILL BE HAPPY TO SIT DOWN THIS EVENING WITH 14 MR. SHULMAN AND WE MAY WELL BE ABLE TO REACH AGREEMENT, YOUR 15 HONOR. 16 THE COURT: VERY WELL. 17 MR. BALABANIAN: ALL RIGHT. THANK YOU. 18 THE COURT: ALL RIGHT. ANYTHING FURTHER? 19 MR. BALABANIAN: NOT FROM US, YOUR HONOR. 20 THE COURT: VERY WELL, COUNSEL. I WILL SEE YOU 21 TOMORROW MORNING AT 830. 22 MR. BALABANIAN: THANK YOU, YOUR HONOR. 23 MR. ALIOTO: THANK YOU, YOUR HONOR. 24 (PROCEEDINGS ADJOURNED FOR THE DAY AT 5:35 P.M.) 25 JO ANN BRYCE, CSR 3321 - USDC - (415)437-1301
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