Daily Court Transcripts

May 01, 2000

previous / next


                                                                      



                                                     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
                                            






previous / next