Daily Court Transcripts
May 02, 2000
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201
1 VOLUME 2
2 PAGES 201 - 382
3 UNITED STATES DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
5 BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
6 CLINTON REILLY, )
)
7 PLAINTIFF, )
)
8 VS. ) NO. C 00-0119 VRW
)
9 THE HEARST CORPORATION, )
ET AL., )
10 )
DEFENDANTS. )
11
____________________________)
SAN FRANCISCO, CALIFORNIA
12 TUESDAY, MAY 2, 2000
13 TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
14 FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
15 SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
16 ANGELINA ALIOTO-GRACE
ATTORNEYS AT LAW
17
SHULMAN, WALCOTT & SHULMAN, P.A.
18 121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
19 BY: DANIEL R. SHULMAN
JAMES HILBERT
20 ATTORNEYS AT LAW
21 (APPEARANCES CONTINUED ON FOLLOWING PAGE)
22 REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
23 OFFICIAL REPORTERS, USDC
24 COMPUTERIZED TRANSCRIPTION BY ECLIPSE
25
202
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
203
1 I N D E X
2
3
PLAINTIFF'S WITNESSES PAGE VOL.
4
5 SIAS, JOHN
DIRECT EXAMINATION BY MR. ALIOTO 210 2
6 CROSS-EXAMINATION BY MR. ROSCH 354 2
CROSS-EXAMINATION BY MR. HALLING 360 2
7 REDIRECT EXAMINATION BY MR. ALIOTO 365 2
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
204
1 I N D E X
2
E X H I B I T S
3
PLAINTIFF'S EXHIBITS
W/DRAWN IDEN EVID VOL.
4 1 209 2
3 THROUGH 6 209 2
5 8 THROUGH 11 209 2
15 THROUGH 16 209 2
6 18 209 2
20 THROUGH 31 209 2
7 33 THROUGH 36 209 2
45 THROUGH 46 209 2
8 48 209 2
50 THROUGH 52 209 2
9 55 THROUGH 58 209 2
62 209 2
10 64 209 2
66 THROUGH 75
209 2
11 79 THROUGH 81 209 2
84 THROUGH 88 209 2
12 91 THROUGH 95 209 2
99 THROUGH 106 209 2
13 110 THROUGH 114 209 2
115 249 2
14 116 249 2
117 254 2
15 120 AND 131 305 2
125 209 2
16 127 THROUGH 128 209 2
132 THROUGH 133 209 2
17
DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
18 C-300 THROUGH C-336 209 2
C-338 THROUGH C-347 209 2
19 H-1017 THROUGH H-1019 209 2
H-1021 209 2
20 H-1024 209 2
H-1027 209 2
21 H-1031 209 2
H-1033 209 2
22 H-1036 THROUGH H-1038 209 2
H-1044 209 2
23 H-900 THROUGH H-918 209 2
H-920 THROUGH H-937 209 2
24 H-941 THROUGH H-947 209 2
H-949 THROUGH H-953 209 2
25 H-955 THROUGH H-967 209 2
H-974 THROUGH H-982 209 2
205
1
1 TUESDAY, MAY 2, 2000 8:35 A.M.
2 THE CLERK: CALLING CIVIL 2000-119, CLINTON RILEY
3 VS. THE HEARST CORPORATION AND THE CHRONICLE PUBLISHING
4 COMPANY, ET AL.
5 MR. HALLING: YOUR HONOR, WE LEFT OFF WITH
6 MR. ALIOTO COMPLETING HIS EXAMINATION OF MR. WHITE.
7 WE MAY CALL THE HIM IN OUR CASE, BUT WE HAVE NO
8 QUESTIONS OF MR. WHITE AT THIS TIME. AND I UNDERSTAND THAT
9 MR. BALABANIAN AND MR. ROSCH DON'T HAVE QUESTIONS, EITHER.
10 MR. HOCKETT: THAT IS CORRECT, YOUR HONOR.
11 THE COURT: VERY WELL. THEN, MR. ALIOTO, YOU MAY
12 CALL YOUR NEXT WITNESS.
13 MR. ALIOTO: THANK YOU, YOUR HONOR.
14 WE DO HAVE SOME ADDITIONAL EXHIBITS THAT WE WOULD
15 LIKE TO PUT IN FIRST, IF WE MIGHT, YOUR HONOR.
16 THE COURT: VERY WELL. MR. SHULMAN?
17 MR. SHULMAN: YOUR HONOR, WHAT WE WOULD LIKE TO DO
18 IS JUST READ INTO THE RECORD, AS TEDIOUS AS IT MAY BE, THE
19 NUMBERS OF THE EXHIBITS THAT THE PARTIES HAVE AGREED TO, JUST
20 SO IT IS IN THE RECORD.
21 MR. NEVINS: THIS IS TOM NEVINS, AND I AM READING
22 INTO THE RECORD ALL OF THE EXHIBITS THAT ARE ADMITTED OR MAY BE
23 ADMITTED BY STIPULATION OF THE PARTIES: PLAINTIFF'S EXHIBIT 1,
24 3, 4, 5, 6, 8, 9, 10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,
25 26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45, 46, 48, 50, 51, 52,
206
1 55, 56, 57, 58, 62, 64, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75,
2 79, 80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94, 95, 99, 100.
3 PLAINTIFF'S 101, 102, 103 --
4 THE COURT: YOU SAID "101."
5 MR. NEVINS: OKAY. 104 AND 1 -- I'M SORRY, YOUR
6 HONOR?
7 THE COURT: YOU ARE ADMITTING BY STIPULATION 101?
8 MR. NEVINS: WELL, THESE, AS I UNDERSTAND IT FROM
9 EXIN'S COUNSEL, MODIFY REDACTED VERSIONS OF THE FOLLOWING
10 EXHIBITS THAT ARE TO BE ADMITTED BY STIPULATION.
11 MR. SHULMAN: YES. WE AGREED LAST NIGHT ON THE
12 REDACTIONS THAT THEY ASKED FOR IN THOSE EXHIBITS, TAKING OUT
13 CERTAIN NUMBERS, SO THAT THOSE EXHIBITS WHICH ARE 101 THROUGH
14 106 MAY BE RECEIVED AS REDACTED.
15 MR. HIXSON: YOUR HONOR, WE HAVE GIVEN THE REDACTED
16 COPIES --
17 THE COURT: LET'S SEE. WE BEGAN YESTERDAY BY
18 RESERVING 101 THROUGH 105 AND THEN 107 THROUGH 109. NOW DO I
19 UNDERSTAND THAT YOU HAVE REDACTED THOSE AND ARE NOW OFFERING
20 REDACTED VERSIONS OF THESE EXHIBITS?
21 MR. SHULMAN: 101 THROUGH 106, YOUR HONOR, THOSE
22 EXHIBITS.
23 THE COURT: 101 THROUGH 106 ARE ALL ADMITTED?
24 MR. SHULMAN: RIGHT.
25 THE COURT: AS REDACTED?
207
1 MR. SHULMAN: RIGHT.
2 MR. NEVINS: OKAY.
3 MR. HIXSON: WE HAVE REDACTED COPIES TO PROVIDE TO
4 THE COURT AND TO THE CLERK. WE HAVE GIVEN THEM TO THE OTHER
5 PARTIES.
6 THE COURT: ALL RIGHT. THAT'S THROUGH AND INCLUDING
7 106, CORRECT?
8 MR. SHULMAN: RIGHT.
9 THE COURT: ALL RIGHT.
10 MR. NEVINS: OKAY. THEN 110 THROUGH 114, INCLUSIVE,
11 125, 127, 128, 132 AND 133.
12 THEN EXHIBITS H-900.
13 THE COURT: H-900?
14 MR. NEVINS: -900 THROUGH H-930.
15 MR. SHULMAN: NO. I'M SORRY. THAT'S THROUGH 918.
16 MR. NEVINS: OKAY. I -- LET ME JUST READ THEM INTO
17 THE RECORD. THAT'S TEDIOUS BUT WE GET IT RIGHT.
18 THE COURT: IT CERTAINLY IS.
19 MR. NEVINS: OKAY.
20 H-900, 901, 902, 903, 904, 905, 906, 907, 908, 909,
21 910 --
22 THE COURT: LET'S SEE. 907, 908?
23 MR. NEVINS: 909.
24 THE COURT: RIGHT.
25 MR. NEVINS: 910, 911, 912, 913, 914, 915, 916, 917,
208
1 918. 920 THROUGH 924, 925 THROUGH 933.
2 THE COURT: WHY NOT JUST . . .
3 MR. NEVINS: 934, 935.
4 THE COURT: LET'S SEE. 925 THROUGH 933.
5 MR. NEVINS: 934, 935, 936, 937, 941 THROUGH 944,
6 945, 946, 947, 949 THROUGH 953, 955 THROUGH 962, 963 THROUGH
7 967, 974 THROUGH 979, 980, 981, 982, 1017, 1018, 1019, 1021,
8 1024, 1027, 1031, 1033, 1036, 1037, 1038, 1044.
9 CHRONICLE EXHIBITS C-300 THROUGH 336 AND C-338
10 THROUGH 347.
11 AND THAT'S IT.
12 MR. SHULMAN: YOUR HONOR, WE ALSO HAVE STIPULATED TO
13 THE ADMISSIBILITY OF THE -- ALL EXIN EXHIBITS ON THEIR LIST
14 EXCEPT FOR EXHIBITS 84, 111 --
15 THE COURT: JUST A MINUTE. SO IT WOULD BE X-84?
16 MR. SHULMAN: YES. ACTUALLY, THAT WOULD BE EXIN
17 EXHIBITS 1 THROUGH 83.
18 MR. NEVINS: BEFORE WE MOVE ON TO THESE, YOUR HONOR,
19 I HAVEN'T HAD A CHANCE TO LOOK AT THE EXIN EXHIBITS. COULD I
20 MOVE ALL OF THE STIPULATED EXHIBITS INTO EVIDENCE AT THIS
21 POINT, YOUR HONOR, THAT I HAVE READ ON THAT LIST?
22 THE COURT: VERY WISE.
23 I GATHER THERE IS NO OBJECTION.
24 MR. SHULMAN: RIGHT, RIGHT. WELL, THAT MEANS WE
25 SHOULD WAIT ON EXIN UNTIL YOU HAVE HAD A CHANCE TO LOOK?
209
1 MR. NEVINS: YES.
2 MR. HALLING: THE STIPULATED EXHIBITS ARE ALL
3 RECEIVED, YOUR HONOR?
4 THE COURT: YES. I WON'T REPEAT THEM.
5 (PLAINTIFF'S EXHIBITS 1, 3, 4, 5, 6, 8, 9,
6 10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,
7 26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45,
8
46, 48, 50, 51, 52, 55, 56, 57, 58, 62, 64,
9 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 79,
10 80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94,
11 95, 99, 100, 101 - 106, 110 - 114, 125,
12 127, 128, 132 AND 133)
13 RECEIVED IN EVIDENCE)
14 (DEFENDANT'S EXHIBITS H-900 - H-918, H-920
15
- H-924, H-925 - H-933, 934, 935, 936, 937,
16 941 THROUGH 944, 945, 946, 947, 949 THROUGH
17 953, 955 THROUGH 962, 963 THROUGH 967, 974
18 THROUGH 979, 980, 981, 982, 1017, 1018,
19 1019, 1021, 1024, 1027, 1031, 1033, 1036,
20 1037, 1038, 1044
21 RECEIVED IN EVIDENCE)
22 (DEFENDANT'S EXHIBITS C-300 THROUGH 336 AND
23 C-338 THROUGH 347
24 RECEIVED IN EVIDENCE)
25
210
1 THE COURT: ALL RIGHT. NOW ARE WE READY FOR A
2 WITNESS?
3 MR. ALIOTO?
4 MR. ALIOTO: THANK YOU, YOUR HONOR.
5 MAY IT PLEASE YOUR HONOR, THE PLAINTIFFS WOULD CALL
6 TO THE STAND MR. JOHN B. SIAS.
7 THE CLERK: THANK YOU. PLEASE RAISE YOUR RIGHT HAND
8 TO BE SWORN.
9 JOHN B. SIAS,
10 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
11 TESTIFIED AS FOLLOWS:
12 THE CLERK: THANK YOU. PLEASE BE SEATED.
13 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST FOR
14 THE RECORD.
15 THE WITNESS: JOHN B., AS IN BOY, SIAS, S-I-A-S.
16 DIRECT EXAMINATION
17 BY MR. ALIOTO:
18 Q. MR. SIAS, YOU ARE PRESENTLY THE CHAIRMAN OF THE BOARD, THE
19 CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE
20 PUBLISHING COMPANY; IS THAT RIGHT?
21 A. YES, SIR.
22 Q. AND YOU BECAME -- AND YOU BEGAN TO WORK FOR THE CHRONICLE
23 PUBLISHING COMPANY IN 1993; IS THAT CORRECT?
24 A. APRIL 1993.
25 Q. AND YOU BECAME THE CHAIRMAN OF THE BOARD OF THE CHRONICLE
211
SIAS - DIRECT / ALIOTO
1 PUBLISHING COMPANY IN 1995; IS THAT CORRECT?
2 A. YES, SIR.
3 Q. AND THE CHAIRMAN OF THE BOARD OR CHAIRWOMAN OF THE BOARD
4 BEFORE YOU WAS MS. NAN MCEVOY; IS THAT RIGHT?
5 A. NAN T. MCEVOY.
6 Q. AND MS. MCEVOY IS THE GRANDDAUGHTER OF THE FOUNDER OF THE
7 CHRONICLE PUBLISHING COMPANY; IS THAT RIGHT?
8 A. YES, SIR.
9 Q. ONE OF THEM?
10 A. YES, SIR.
11 Q. WHEN YOU BECAME -- WHEN YOU CAME TO THE CHRONICLE
12 PUBLISHING COMPANY, YOU FAMILIARIZED YOURSELF, DID YOU NOT,
13 WITH THE JOA?
14 A. NO, I DID NOT.
15 Q. DID YOU EVER READ THE --
16 A. I HAD A CURSORY INSPECTION OF IT AND RELIED ON MR. RON
17 INGRAM FOR INTERPRETATIONS AS WE PROGRESSED. RON INGRAM IS THE
18 CHIEF LEGAL COUNSEL FOR THE CHRONICLE PUBLISHING COMPANY.
19 Q. WELL, HAVE YOU EVER READ IT?
20 A. ABSOLUTELY NOT. I HAVE READ PORTIONS OF IT AS HE WOULD
21 HIGHLIGHT IT.
22 Q. OKAY. SO FROM THE TIME THAT YOU BECAME THE CHIEF
23 EXECUTIVE OFFICER AND THE PRESIDENT IN 1993 AND THEN AS THE
24 CHAIRMAN IN 1995, YOU NEVER READ THE JOA ALL THE WAY THROUGH;
25 IS THAT CORRECT?
212
SIAS - DIRECT / ALIOTO
1 A. THAT IS CORRECT.
2 Q. DID YOU FILE AN AFFIDAVIT IN THIS CASE?
3 A. IN WHAT CASE, SIR?
4 Q. THIS CASE.
5 A. YES, I BELIEVE I DID.
6 Q. ALL RIGHT. LET ME HAND YOU -- I WANT TO SHOW YOU YOUR
7 AFFIDAVIT AND ASK YOU WHETHER OR NOT -- IT IS EXHIBIT 50.
8 EXHIBIT 50, FOR THE RECORD, IS THE DECLARATION OF
9 JOHN B. SIAS IN SUPPORT OF OPPOSITION OF DEFENDANT THE
10 CHRONICLE PUBLISHING COMPANY TO THE PLAINTIFF'S MOTION FOR
11 PRELIMINARY INJUNCTION.
12 IS THIS YOUR SIGNATURE ON THE THIRD PAGE?
13 A. YES, IT IS.
14 Q. OKAY. AND THIS IS IN FACT THE DECLARATION THAT YOU FILED
15 IN THIS CASE?
16 A. YES.
17 Q. NOW, FROM TIME TO TIME IN YOUR AFFIDAVIT YOU MADE
18 REFERENCE TO THE JOA, DID YOU NOT?
19 A. I SEE ONE REFERENCE, TWO -- YES, I SEE TWO THAT I CAN FIND
20 HERE. MAYBE THERE ARE THREE.
21 Q. ALL RIGHT. AND THE ANSWER, I GUESS, TO THE QUESTION IS,
22 YES, YOU DID REFER TO THE JOA IN YOUR AFFIDAVIT, DID YOU NOT?
23 A. I DID. BUT YOU REFERRED TO IT FROM TIME TO TIME, AND I
24 WANTED TO BE SPECIFIC.
25 Q. OKAY. AND WHEN YOU REFERRED TO CERTAIN PROVISIONS OF THE
213
SIAS - DIRECT / ALIOTO
1 JOA, DID YOU READ THOSE PROVISIONS?
2 A. I HAD THIS DECLARATION PREPARED FOR ME AND I DID NOT READ
3 EACH OF THOSE PROVISIONS, ALTHOUGH I WAS FAMILIAR WITH THEM
4 FROM CONVERSATIONS OVER THE YEARS WITH OUR CHIEF COUNSEL.
5 Q. WELL, IF YOU GO TO PAGE 2 -- FIRST OF ALL, WHEN YOU FILED
6 THIS AFFIDAVIT, YOU KNEW THAT YOU WERE FILING IT UNDER OATH,
7 DID YOU NOT?
8 A. YES.
9 Q. AND YOU ALSO STATED IN THIS AFFIDAVIT ON PAGE 1 -- ON THE
10 SECOND SENTENCE OF PAGE 1, YOU STATED, QUOTE:
11 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
12 FACTS SET FORTH IN THIS DECLARATION UNLESS
13 OTHERWISE INDICATED."
14 YOU STATED THAT, DID YOU NOT?
15 A. YES, I DID.
16 Q. IF YOU WILL GO TO PAGE 2 UNDER PARAGRAPH 3, PARAGRAPH 3 IN
17 THE FIRST SENTENCE STATES, QUOTE:
18 "ONLY HEARST HAS THE ABILITY TO BUY THE
19 CHRONICLE WITHOUT ASSUMING THE CHRONICLE'S
20 OBLIGATIONS UNDER THE JOA TO SUBSIDIZE THE
21 EXAMINER."
22 DO YOU SEE THAT?
23 A. I DO.
24 Q. IS THERE A STATEMENT OR ANY REFERENCE WHATSOEVER IN THE
25 JOA THAT THE CHRONICLE HAS AN OBLIGATION TO SUBSIDIZE THE
214
SIAS - DIRECT / ALIOTO
1 EXAMINER?
2 A. NOT TO MY KNOWLEDGE.
3 Q. SO WHEN YOU STATED THIS WITH REGARD -- WHEN YOU STATED
4 THIS IN YOUR AFFIDAVIT, IT WASN'T TRUE, WAS IT?
5 A. MR. ALIOTO--
6 Q. SIR, IT WASN'T TRUE, WAS IT?
7 A. I WOULD SAY THAT --
8 Q. IT WASN'T TRUE, WAS IT, SIR?
9 A. I AM NOT GOING TO ANSWER THAT UNTIL I CAN .
. .
10 THE COURT: MR. SIAS, THE QUESTION IS PENDING.
11 PLEASE ANSWER.
12 THE WITNESS: THE WORD "SUBSIDIZE" IS --
13 MR. ALIOTO: I MOVE TO STRIKE, YOUR HONOR, AND I
14 REQUEST A MOTION TO --
15 THE COURT: LET'S HEAR THE ANSWER.
16 THE WITNESS: THE WORD "SUBSIDIZED" IS NOT IN THE
17 JOA, THE TERMS OF THE -- TO MY KNOWLEDGE.
18 THE COURT: I THINK THE QUESTION, MR. SIAS, IS
19 WHETHER OR NOT THE STATEMENT IN THE FIRST SENTENCE OF
20 PARAGRAPH 3 IS TRUE OR NOT TRUE.
21 THE WITNESS: I GUESS IT'S NOT TRUE.
22 BY MR. ALIOTO:
23 Q. NOW, WITH REGARD TO THE JOA ITSELF AND YOUR UNDERSTANDING,
24 IN 1999 STATE FOR US WHAT THE REVENUES WERE COMING INTO THE SAN
25 FRANCISCO NEWSPAPER AGENCY FROM BOTH THE CHRONICLE AND THE
215
SIAS - DIRECT / ALIOTO
1 EXAMINER.
2 A. WOULD YOU PLEASE REPEAT THE QUESTION?
3 Q. WHAT WERE THE -- ALL RIGHT. LET ME START IT OVER.
4 YOU UNDERSTAND UNDER THE JOA THAT THE INCOME COMING
5 FROM THE CHRONICLE AND THE EXAMINER GOES INTO THE SAN FRANCISCO
6 NEWSPAPER AGENCY?
7 A. YES.
8 Q. AND THAT REVENUE COMES FROM ADVERTISING AND IT COMES FROM
9 CIRCULATION; IS THAT RIGHT?
10 A. THAT IS CORRECT.
11 Q. AND IN 1999, APPROXIMATELY HOW MUCH WAS THAT?
12 A. THE COMBINED CIRCULATION AND ADVERTISING REVENUE --
13 Q. OF BOTH PAPERS COMING INTO THE SAN FRANCISCO NEWSPAPER
14 AGENCY, HOW MUCH WAS THAT?
15 A. IT WAS APPROXIMATELY $444 MILLION.
16 MR. ALIOTO: OKAY. MAY I USE THE EASEL, YOUR HONOR?
17 THE COURT: VERY WELL.
18 BY MR. ALIOTO:
19 Q. OKAY. SO APPROXIMATELY THIS WOULD -- WE ARE JUST GOING TO
20 USE THIS. THIS WAS IN 19 --
21 A. '99.
22 Q. 1999. SO I AM GOING TO PUT ON THE LEFT-HAND SIDE OF THE
23 EASEL -- NEXT TO WHERE WE HAVE "SAN FRANCISCO NEWSPAPER
24 AGENCY," I WILL PUT '99 AND THEN IT WAS APPROXIMATELY 400 AND
25 HOW MUCH?
216
SIAS - DIRECT / ALIOTO
1 A. 400 --
2 Q. APPROXIMATELY.
3 A. $44 MILLION.
4 Q. 444. I WON'T PUT THE "MILLION." 444.
5 OKAY. NOW, OF THE 444, HOW MUCH OF THAT MONEY WAS
6 ATTRIBUTABLE TO REVENUE COMING IN FROM THE SAN FRANCISCO
7 EXAMINER?
8 A. I DO NOT KNOW.
9 Q. HOW MUCH OF THIS MONEY THAT CAME IN OF THE 444 -- HOW MUCH
10 OF IT WAS REVENUE THAT CAME IN FROM ADVERTISING AND CIRCULATION
11 FROM THE SAN FRANCISCO CHRONICLE?
12 A. I DO NOT KNOW.
13 Q. WHAT WAS THE APPROXIMATE COST THAT WAS DEDUCTED BY THE SAN
14 FRANCISCO NEWSPAPER AGENCY PRIOR TO GETTING THE NET EXCESS
15 FIGURE, DO YOU KNOW, APPROXIMATELY?
16 A. YES, I DO. IT WAS APPROXIMATELY $300 MILLION.
17 Q. OKAY. LET'S PUT THAT. MINUS $300 MILLION.
18 HOW MUCH OF THE $300 MILLION IN EXPENSES OF THE SAN
19 FRANCISCO NEWSPAPER AGENCY WAS ATTRIBUTABLE TO THE SAN
20 FRANCISCO CHRONICLE?
21 A. I CANNOT SAY. THAT CALCULATION WAS NOT DONE.
22 Q. HOW MUCH OF THE 300 MILLION IN EXPENSES WAS ATTRIBUTABLE
23 TO THE SAN FRANCISCO EXAMINER?
24 A. THOSE CALCULATIONS HAVE NOT BEEN PERFORMED. I DO NOT
25 KNOW.
217
SIAS - DIRECT / ALIOTO
1 Q. HAVE YOU EVER KNOWN THEM?
2 A. THEY'RE NOT IN THE FORM OF THE QUESTION YOU ARE ASKING.
3 Q. ALL RIGHT. NOW, IF WE DEDUCT THIS, THIS LEAVES
4 $144 MILLION.
5 NOW, THEN, THIS $144 MILLION WOULD BE CHARACTERIZED
6 AS NET EXCESSIVE, IS THAT -- NET EXCESS. IS THAT RIGHT?
7 A. YOU ARE CORRECT. I AM -- THE EXPENSES -- THE NET EXCESS
8 WAS 57 MILLION. I WAS LOW IN THE EXPENSES. THE NET EXCESS
9 LAST YEAR WAS APPROXIMATELY $115 MILLION.
10 Q. 115.
11 A. YES.
12 Q. OKAY. SO --
13 A. SO I AM LOW -- THE REVENUE FIGURE IS CORRECT. I WAS LOW
14 IN THE EXPENSES.
15 Q. SO THE EXPENSES MAY HAVE BEEN APPROXIMATELY
$330 MILLION?
16 A. YES, SIR. YES, SIR.
17 Q. SO THAT LEFT A NET EXCESS OF $114 MILLION?
18 A. ABOUT THAT, BETWEEN 114 AND 115.
19 Q. OKAY. AND THEN THAT WAS DIVIDED 50/50 BETWEEN THE
20 CHRONICLE AND THE EXAMINER?
21 A. YES.
22 Q. SO THAT THE CHRONICLE WOULD GET 57 AND THE EXAMINER WOULD
23 GET 57, CORRECT?
24 A. YES.
25 Q. OKAY. NOW, SINCE YOU -- IN THIS INSTANCE.
218
SIAS - DIRECT / ALIOTO
1 AND THEN AFTER YOU GOT THE 57, EACH OF YOU GOT THE
2 57, THEN YOU WOULD TAKE OUT YOUR EDITORIAL EXPENSES, CORRECT?
3 A. EDITORIAL AND -- EDITORIAL AND PROMOTION EXPENSES.
4 Q. OKAY. AND THEN THAT WOULD LEAVE YOU WITH A PROFIT OR AT
5 LEAST A CASH FLOW FIGURE?
6 A. YES, SIR.
7 Q. AND WHAT WAS IT IN 1999?
8 A. THE CASH FLOW WAS APPROXIMATELY $18 MILLION.
9 Q. OKAY. ALL RIGHT. SO YOUR EXPENSES WERE ABOUT 40 -- ABOUT
10 $40 MILLION IN EDITORIAL?
11 A. EDITORIAL, A LITTLE LESS THAN THAT, 38 -- EDITORIAL AND
12 PROMOTION EXPENSES.
13 Q. AND PROMOTION, ABOUT 38, SAY?
14 A. OR 38 AND A HALF.
15 Q. ALL RIGHT. SOMETHING LIKE THAT. OKAY.
16 THE COURT: IS THE $18 MILLION BEFORE DEPRECIATION,
17 TAXES, INTEREST?
18 THE WITNESS: YES, SIR, IT IS, AND I CAN GIVE YOU
19 THE FREE CASH FLOW AND THE OPERATING EARNINGS IF MR. ALIOTO
20 WANTS IT.
21 THE COURT: OKAY.
22 BY MR. ALIOTO:
23 Q. OKAY NOW --
24 THE COURT: SO THE 18 MILLION WOULD BE THE EBITDA
25 FIGURE?
219
SIAS - DIRECT / ALIOTO
1 THE WITNESS: YES, SIR.
2 BY MR. ALIOTO:
3 Q. DO YOU KNOW WHAT THE EDITORIAL COSTS OF THE EXAMINER ARE?
4 A. SINCE I HAVE JUST BEEN EXPOSED AS A PERJURER, I AM GOING
5 TO BE VERY TECHNICAL ON MY ANSWER. AND BECAUSE I WAS IN THE
6 COURTROOM YESTERDAY, I HEARD WHAT THEY WERE. OTHER THAN THAT,
7 I WOULD NOT HAVE ANY REASON TO KNOW WITH ANY PRECISION WHAT THE
8 EXAMINER'S EDITORIAL COSTS ARE.
9 THE COURT: I DON'T THINK YOU MEANT THAT ANSWER
10 LITERALLY, DID YOU?
11 THE WITNESS: WELL . . .
12 THE COURT: THE CHARACTERIZATION.
13 THE WITNESS: THANK YOU, SIR.
14 THE COURT: ALL RIGHT.
15 BY MR. ALIOTO:
16 Q. ALL RIGHT. NOW, SINCE YOU DO NOT KNOW HOW MUCH OF THE
17 $444 MILLION IN THE REVENUE THAT GOES INTO THE SAN FRANCISCO
18 NEWSPAPER AGENCY IS ATTRIBUTABLE TO THE SAN FRANCISCO EXAMINER
19 AND SINCE YOU DO NOT KNOW HOW MUCH OF THE $330 MILLION IN
20 EXPENSES ARE ATTRIBUTABLE TO THE EXAMINER, THEN YOU DON'T KNOW
21 WHETHER THE EXAMINER WAS MAKING MONEY OR NOT, DO YOU, ON ITS
22 OWN?
23 A. THAT IS CORRECT.
24 Q. NONETHELESS, IN YOUR AFFIDAVIT YOU REPRESENTED TO THIS
25 COURT, DID YOU NOT, THAT IF IN FACT THE COURT WERE TO GRANT THE
220
SIAS - DIRECT / ALIOTO
1 INJUNCTION YOU STATE AT PAGE 1, BEGINNING ON PARAGRAPH 2 -- THE
2 LAST SENTENCE OF THAT PARAGRAPH, AND IT BEGINS AND IT STATES,
3 QUOTE, "THE EFFECT OF AN INJUNCTION" -- DO YOU SEE THAT?
4 A. YES, SIR.
5 Q. QUOTE:
6 "THE EFFECT OF AN INJUNCTION WOULD BE TO
7 REQUIRE CPC TO CONTINUE TO SUBSIDIZE THE NEWS
8 AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE
9 TERM OF THE INJUNCTION."
10 DO YOU SEE THAT?
11 A. YES, SIR.
12 Q. AND WHEN YOU SAID "SUBSIDIZE THE NEWS AND EDITORIAL
13 OUTPUT," YOU MEANT THAT YOU HAD TO TAKE -- THAT YOU WERE
14 SUPPORTING THEM; IS THAT RIGHT? THAT'S WHAT YOU MEANT, ISN'T
15 IT?
16 A. I MEANT WHAT THIS SAYS.
17 Q. ISN'T THAT WHAT YOU MEANT, THAT YOU WERE -- THAT YOU WERE
18 SUPPORTING THE EXAMINER?
19 A. IT'S VERY CLEAR WHAT IT SAYS. WE BELIEVE THAT THE
20 CHRONICLE, BY VIRTUE OF ITS SIZE, IS SUBSIDIZING THE EXAMINER.
21 Q. YOU DIDN'T SAY THAT IN YOUR AFFIDAVIT, DID YOU?
22 AS A MATTER OF FACT, YOU SAID IN YOUR AFFIDAVIT,
23 QUOTE:
24 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
25 FACTS SET FORTH IN THIS DECLARATION UNLESS
221
SIAS - DIRECT / ALIOTO
1 OTHERWISE INDICATED."
2 AND IT ISN'T OTHERWISE INDICATED IN THAT SENTENCE
3 THAT I JUST READ, IS IT?
4 MR. ROSCH: I OBJECT, YOUR HONOR. IT SUGGESTS THAT
5 IT'S INCONSISTENT, AND THERE IS NOTHING INCONSISTENT AT ALL
6 WITH THE ANSWER.
7 MR. ALIOTO: I THINK THAT'S FOR THE TRIER OF FACT,
8 YOUR HONOR.
9 THE COURT: THIS IS CROSS-EXAMINATION. OBJECTION
10 OVERRULED.
11 BY MR. ALIOTO:
12 Q. YOU DIDN'T SAY OTHERWISE IN THAT SENTENCE, DID YOU, THAT
13 THIS WAS YOUR BELIEF OR THIS IS WHAT YOU THINK ONLY BECAUSE
14 THERE IS A LARGER CIRCULATION OF THE CHRONICLE. YOU DIDN'T SAY
15 THAT, DID YOU?
16 A. NO. WE MADE THE DECLARATIVE STATEMENT.
17 Q. OKAY. SO THAT YOU WANTED TO INDICATE TO THE COURT, DID
18 YOU NOT, THAT IF THE COURT GRANTED THE INJUNCTION, THE
19 TEMPORARY OR THE PRELIMINARY INJUNCTION, THAT DURING THAT TIME
20 PERIOD YOU WOULD BE SUPPORTING THE EXAMINER. THAT'S WHAT YOU
21 WANTED THE COURT TO BELIEVE; ISN'T THAT TRUE?
22 A. YES.
23 Q. BUT, IN FACT, YOU KNEW THAT THAT WASN'T TRUE BECAUSE YOU
24 KNEW THAT YOU DIDN'T KNOW WHETHER OR NOT YOU WERE SUBSIDIZING
25 THEM OR NOT; ISN'T THAT TRUE?
222
SIAS - DIRECT / ALIOTO
1 A. WE . . .
2 Q. ISN'T THAT TRUE?
3 MR. ROSCH: YOUR HONOR, I THINK THE WITNESS IS
4 ENTITLED TO EXPLAIN AN ANSWER. HE DOESN'T HAVE TO JUST SAY
5 "YES" OR "NO."
6 MR. ALIOTO: HE HAS TO GIVE AN ANSWER, YOUR HONOR.
7 I HAVE NO OBJECTION TO AN EXPLANATION AFTER.
8 THE COURT: YOU HAVE TO GIVE AN ANSWER, MR. ROSCH.
9 MAY WE HAVE THE QUESTION REREAD, PLEASE, YOUR HONOR?
10 THE WITNESS: ANY RATIONAL --
11 MR. ALIOTO: EXCUSE ME, SIR.
12 THE WITNESS: I ONLY HAVE TO GIVE AN ANSWER "YES" OR
13 "NO"?
14 MR. ALIOTO: WE ARE GOING TO READ THE QUESTION TO
15 YOU. I WOULD LIKE YOU TO ANSWER THE QUESTION TO YOU AFTER.
16 MR. ROSCH: YOUR HONOR, DO YOU WANT THE WITNESS TO
17 SIMPLY ANSWER "YES" OR "NO" WITHOUT EXPLAINING?
18 THE COURT: LET'S HAVE THE QUESTION PUT TO THE
19 WITNESS.
20 LET ME ALSO HAVE A MOMENT WITH THE REPORTER.
21 (RECORD READ AS FOLLOWS: "BUT, IN FACT, YOU
22 KNEW THAT THAT WASN'T TRUE BECAUSE YOU KNEW THAT
23 YOU DIDN'T KNOW WHETHER OR NOT YOU WERE
24 SUBSIDIZING THEM OR NOT; ISN'T THAT TRUE?")
25 THE WITNESS: THE TERM "NO" --
223
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. CAN YOU ANSWER THE QUESTION?
3 THE COURT: WELL, LET HIM ANSWER THE QUESTION,
4 MR. ALIOTO.
5 THE WITNESS: COMMON SENSE LOGIC ON THESE TWO
6 NEWSPAPERS AND THEIR RELATIVE SIZE WHEN THE ADVERTISING CAME
7 IN -- AND CIRCULATION REVENUE CAUSES US TO SAY -- INFER THAT
8 THE EXAMINER IS BEING SUBSIDIZED BY THE CHRONICLE. BUT I GUESS
9 YOU CAN SAY I DON'T KNOW THAT FROM A COST ACCOUNTING STUDY OF
10 BREAKDOWN OF THE REVENUE SOURCES.
11 THE COURT: YOUR ANSWER IS THAT YOU KNOW THIS BY
12 VIRTUE OF YOUR COMMON SENSE AND YOUR EXPERIENCE IN THE
13 NEWSPAPER BUSINESS AND YOUR FAMILIARITY WITH THE MARKET EVEN
14 THOUGH YOU DID NOT HAVE THE FIGURES DIRECTLY BEFORE YOU?
15 THE WITNESS: YES, SIR.
16 THE COURT: IS THAT FAIR?
17 THE WITNESS: YES, SIR.
18 THE COURT: ALL RIGHT.
19 BY MR. ALIOTO:
20 Q. SO, IN OTHER WORDS, YOU ARE SAYING THAT THIS WAS AN
21 ASSUMPTION THAT YOU WERE MAKING; IS THAT IT?
22 MR. ROSCH: OBJECTION, YOUR HONOR. THAT MISSTATES
23 HIS JUST PRIOR TESTIMONY.
24 THE COURT: COUNSEL IS ENTITLED TO FOLLOW UP.
25 OBJECTION OVERRULED.
224
SIAS - DIRECT / ALIOTO
1 THE WITNESS: I AM EXPLAINING MY REASON FOR
2 HESITATING TO ANSWER "YES" OR "NO." I AM GIVING SOME
3 BACKGROUND ON IT.
4 AND, AGAIN, WITH THE LOGIC AND EXPERIENCE AND
5 INFERENCE BASED UPON THE SIZE OF THE TWO NEWSPAPERS AND THE
6 RATE STRUCTURE, ONE CAN MAKE A VERY LOGICAL INFERENCE THAT THE
7 EXAMINER IS BEING SUBSIDIZED.
8 DO I KNOW THAT AS A RESULT OF A COST ACCOUNTING
9 BREAKDOWN OF THE TWO NEWSPAPERS' COST IN REVENUE? AND THE
10 ANSWER IS, NO, WE HAVE NOT HAD SUCH A BREAKDOWN OR ANALYSIS.
11 Q. NOW, THE SECOND SENTENCE OF PARAGRAPH 1 STATED, QUOTE --
12 YOU STATED UNDER OATH, QUOTE:
13 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
14 FACTS SET FORTH IN THIS DECLARATION UNLESS
15 OTHERWISE INDICATED."
16 YOU DID NOT IN THIS AFFIDAVIT OTHERWISE INDICATE,
17 DID YOU, THAT YOUR STATEMENTS ABOUT SUBSIDIZING THE EXAMINER
18 WERE A MATTER OF YOUR LOGICAL INFERENCES FROM OTHER FACTS OTHER
19 THAN YOUR PERSONAL KNOWLEDGE, DID YOU? YOU DIDN'T SAY THAT,
20 DID YOU?
21 A. NO, I DID NOT.
22 Q. NOW, AS A MATTER OF FACT, YOU KNOW AND ARE AWARE, AREN'T
23 YOU, THAT A STUDY WAS DONE ON YOUR BEHALF WHICH SHOWED -- WHICH
24 SHOWED THAT THE HEARST CORPORATION WITH AN INDEPENDENT
25 NEWSPAPER WITH LESS THAN ONE QUARTER OF THE REVENUES OF THE SAN
225
SIAS - DIRECT / ALIOTO
1 FRANCISCO CHRONICLE COULD MAKE A PROFIT. CORRECT?
2 A. WELL, WILL YOU PLEASE LET ME SEE THE STUDY? WE HAVE HAD A
3 LOT OF STUDIES DONE, SOME OF WHICH WERE DONE INTERNALLY, SOME
4 OF WHICH WERE DONE EXTERNALLY. AND THEY ALL WERE NOT AGREED TO
5 OR THEY WERE ALL JUST THAT, STUDIES. SO IF I MAY SEE THE
6 EXHIBIT, I CAN GIVE YOU A PRECISE ANSWER AS TO WHETHER I KNOW
7 IT.
8 Q. DO YOU KNOW MR. JAFFE? HAVE YOU EVER HEARD OF MR. JAFFE?
9 A. YES, I HAVE. MR. MARTIN JAFFE IS CURRENTLY THE CHIEF
10 FINANCIAL OFFICER. HE WAS OF THE CHRONICLE CORPORATION AND HE
11 WAS HEAD OF ACCOUNTING AND LONG-TERM PLANNING ANALYSIS. AND HE
12 DID A NUMBER OF MODELS FOR US OVER THE YEARS ON OUR BUSINESSES.
13 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
14
15
16
17
18
19
20
21
22
23
24
25
226
SIAS - DIRECT / ALIOTO
1 Q. AND ONE OF THE CALCULATIONS THAT MR. JAFFE MADE WAS THAT
2 HEARST COULD ACHIEVE A HIGH SUCCESS IN THE YEAR 2006 AFTER THE
3 JOA AND INDEPENDENT WITH LESS THAN ONE QUARTER THE REVENUES OF
4 THE SAN FRANCISCO CHRONICLE; CORRECT?
5 A. I'M NOT -- NO, I DON'T THINK HE SAID A HIGH DEGREE. THERE
6 WAS SOME -- HE HAD A MODEL WITH DIFFERENT LEVELS OF SUCCESS OR
7 NONSUCCESS BY HEARST. HE HAD A NUMBER AT THE TIME. BUT THE
8 MODEL TO WHICH YOU REFER IS BASED UPON ASSUMPTIONS WHICH ARE SO
9 AT ODDS WITH THE SITUATION THAT -- IN THE REAL WORLD THAT WE
10 DID NOT GIVE IT ANY GREAT CREDENCE.
11 Q. MR. JAFFE AGAIN IS THE CHIEF FINANCIAL OFFICER OF --
12 A. HE IS NOW.
13 Q. AND HE DID CERTAIN CALCULATIONS FOR YOU; DIDN'T HE?
14 A. HE DID A LOT OF THEM.
15 Q. ONE OF THE CALCULATIONS HE DID WAS WHETHER OR NOT THE
16 HEARST WOULD BE PROFITABLE, THE HEARST CORPORATION PAPER, THE
17 EXAMINER, WOULD BE PROFITABLE AFTER THE JOA? HE MADE THAT
18 STUDY; DIDN'T HE?
19 A. HE MADE A NUMBER OF STUDIES INCLUDING THAT ONE,
20 MR. ALIOTO. HE ALSO MADE A NUMBER IN WHICH IT SHOWED THE
21 HEARST CORPORATION WOULD NOT BE SUCCESSFUL.
22 Q. AND IN --
23 A. BUT WE DO SCENARIOS FOR PLANNING PURPOSES ON THE EXTREMES.
24 Q. AND IN ONE OF THOSE STUDIES HE CALCULATED, DID HE NOT,
25 THAT THE EXAMINER COULD, IN FACT, BE QUITE PROFITABLE EVEN WITH
227
SIAS - DIRECT / ALIOTO
1 ONLY ONE FOURTH -- ONE QUARTER OF THE REVENUE OF THE CHRONICLE;
2 CORRECT? HE DID THAT; DIDN'T HE?
3 A. HE DID IT. THE ASSUMPTIONS UNDER WHICH HE DID IT WERE
4 NOT -- AGAIN, THEY WERE UNREALISTIC BASED UPON EXISTING
5 INFORMATION AND PROBABLE OUTCOME. THEY WERE VERY, VERY
6 UNREALISTIC AND WE DID NOT GIVE GREAT CREDENCE TO THEM.
7 Q. AND ONE COULD CONFER -- ONE COULD INFER -- ISN'T IT
8 CORRECT THAT ONE COULD INFER FROM THAT CALCULATION THAT, IN
9 FACT, THE EXAMINER COULD BE PROFITABLE EVEN THOUGH IT ONLY HAD
10 ONE QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?
11 A. I DON'T KNOW WHO "ONE" IS. THIS "ONE" (INDICATING) DIDN'T
12 INFER THAT NOR DID MY ASSOCIATES AT THE CHRONICLE.
13 Q. YOU DID NOT INFER THAT FROM THE CALCULATION THAT WAS MADE?
14 A. ABSOLUTELY NOT. AS I TOLD YOU, WE DO A NUMBER OF ANALYSES
15 AND INCLUDING ONES ON THE EXTREMES; AND JUST WHAT WOULD BE THE
16 CASE -- AND, FRANKLY, WHEN MARTIN DID THAT, MY AND SOME OTHER
17 REACTIONS WAS THAT THIS WAS TOTALLY UNREALISTIC BASED ON THE
18 ASSUMPTIONS HE USED.
19 Q. MAYBE YOU THINK IT MAY HAVE BEEN UNREALISTIC OR NOT, BUT
20 THE QUESTION WAS, FROM HIS CALCULATION, DIDN'T YOU IN FACT
21 INFER FROM HIS CALCULATION THAT, IN FACT, THE EXAMINER COULD BE
22 A SUCCESS WITH ONE QUARTER OF THE REVENUE OF THE CHRONICLE?
23 A. I DID NOT.
24 Q. I'D LIKE TO -- YOUR DEPOSITION WAS TAKEN BY THE UNITED
25 STATES GOVERNMENT IN THIS MATTER; WAS IT NOT?
228
SIAS - DIRECT / ALIOTO
1 A. IT WAS.
2 Q. AND THAT DEPOSITION WAS TAKEN ON DECEMBER 10, 1999?
3 A. YES, SIR.
4 Q. YOU WERE UNDER OATH AT THE TIME; WERE YOU NOT?
5 A. I WAS.
6 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION, AND I WILL DIRECT
7 YOUR ATTENTION AND THE ATTENTION OF YOUR COUNSEL BEGINNING ON
8 PAGE 288.
9 THE COURT: DO YOU HAVE A COPY FOR THE COURT?
10 MR. ALIOTO: YOUR HONOR, I ONLY HAVE ONE COPY OF THE
11 EXHIBIT. I WILL PASS IT TO THE COURT.
12 MR. SHULMAN: GAYLE HAS IT.
13 MR. ALIOTO: DO YOU HAVE ANOTHER ONE OF THE
14 GOVERNMENT'S? NO, THIS IS THE GOVERNMENT.
15 PAGE 288, AND I WILL GO TO PAGE 289, LINE 5, AND I
16 WILL READ ANYTHING ELSE THAT COUNSEL WOULD WANT ME TO READ.
17 MAY I APPROACH --
18 MR. ROSCH: WOULD YOU PLEASE READ THROUGH LINE 11,
19 PLEASE?
20 MR. ALIOTO: I WILL.
21 MAY I APPROACH THE WITNESS?
22 THE COURT: VERY WELL. YOU'RE READING FROM THE TOP
23 OF 288?
24 MR. ALIOTO: 288 BEGINNING LINE 20, YOUR HONOR.
25 THE COURT: THANK YOU.
229
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. THIS IS PAGE 288, LINE 20. AT THE TIME YOU GAVE THIS
3 DEPOSITION, YOU WERE UNDER OATH; WERE YOU NOT, SIR? WERE YOU
4 UNDER OATH AT THE TIME, SIR?
5 A. YES, I WAS.
6 Q. "Q. OKAY. THEREFORE MR. JAFFE
7 CALCULATED THAT HEARST COULD ACHIEVE HIGH
8 SUCCESS IN THE YEAR 2006 WITH LESS THAN ONE
9 QUARTER THE REVENUES OF THE SAN FRANCISCO
10 CHRONICLE; IS THAT RIGHT?
11 "A. HE CALCULATED WITH," QUOTE, "'HIGH
12 SUCCESS' THAT THEY WOULD GENERATE 12 MILLION
13 EBITDA.
14 "Q. AND THEY WOULD NEED LESS THAN ONE
15 QUARTER OF THE REVENUE OF THE SAN FRANCISCO
16 CHRONICLE TO ACHIEVE THAT HIGH SUCCESS; ISN'T
17 THAT RIGHT?
18 "A. THAT'S WHAT ONE COULD INFER FROM THIS
19 CALCULATION.
20 "Q. DID YOU QUESTION THOSE CALCULATIONS
21 THAT HE CAME UP WITH?
22 "A. I DID NOT SPEND A GREAT DEAL OF TIME
23 DISCUSSING THESE FIGURES BECAUSE OF OUR BELIEF
24 THAT IT WAS SO IMPROBABLE THAT HEARST WOULD END
25 UP PUBLISHING IN 2006 A MORNING EXAMINER."
230
SIAS - DIRECT / ALIOTO
1 NOW, WHEN YOU MADE THE STATEMENT AT LINE 4, QUOTE,
2 "THAT'S WHAT ONE COULD INFER FROM THIS CALCULATION," DID YOU
3 MEAN SOMEONE OTHER THAN YOURSELF?
4 A. I'M NOT SURE WHO I MEANT.
5 Q. IT COULD HAVE BEEN YOU; RIGHT?
6 A. IT COULD HAVE BEEN ME.
7 Q. SO YOU WERE ONE PERSON WHO COULD, IN FACT, INFER FROM THIS
8 THAT THE EXAMINER COULD FUNCTION AT ONE -- PROFITABLY AT ONE
9 QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?
10 A. I SAID COULD, ONE COULD, NOT ONE DID INFER THAT.
11 Q. NOW, WHAT YOU JUST TOLD THE COURT IN EXPLANATION OF YOUR
12 AFFIDAVIT WAS THAT IT WAS A LOGICAL INFERENCE THAT BECAUSE THE
13 CHRONICLE HAD FOUR TIMES THE AMOUNT OF THE REVENUE, THAT THAT
14 MEANT THAT THE EXAMINER HAD TO BE SUBSIDIZED; ISN'T THAT RIGHT?
15 ISN'T THAT WHAT YOU JUST SAID?
16 A. I THINK SO.
17 Q. OKAY. AND THAT WAS CONTRARY TO WHAT YOU KNEW THAT
18 MR. JAFFE HAD DONE AND THAT YOU INFERRED WOULD BE CORRECT;
19 ISN'T THAT RIGHT?
20 A. I'M NOT SURE I CAN -- DO YOU WANT TO GO THROUGH THAT
21 AGAIN? I'M SORRY, BUT YOU --
22 THE COURT: ALL RIGHT.
23 BY MR. ALIOTO:
24 Q. NEVER MIND. I'LL JUST ASK YOU ONE MORE QUESTION AND THEN
25 I'LL GET OFF YOUR AFFIDAVIT.
231
SIAS - DIRECT / ALIOTO
1 THIS STATEMENT, THIS STATEMENT THAT, QUOTE, "THE
2 EFFECT OF AN INJUNCTION WOULD BE TO REQUIRE CPC TO CONTINUE TO
3 SUBSIDIZE THE NEWS AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE
4 TERM OF THE INJUNCTION," THAT STATEMENT IS SIMPLY NOT A TRUE
5 STATEMENT; ISN'T THAT CORRECT? THAT'S A FALSE STATEMENT; ISN'T
6 IT?
7 A. I DON'T BELIEVE IT IS. THE SUBSIDIZE -- THE TERM
8 "SUBSIDY" IS AN ADJECTIVE AND -- WELL, NO, IT'S A NOUN.
9 Q. IT'S A VERB ACTUALLY; ISN'T IT?
10 A. OKAY, THANK YOU.
11 (LAUGHTER)
12 A. "SUBSIDIZE" IS A VERB. "SUBSIDY" I THINK WOULD BE A NOUN,
13 BUT THAT'S WHAT --
14 Q. ALL I'M SAYING, SIR, IS, THE POINT IS THAT YOU WERE TRYING
15 TO INDICATE TO THE COURT IN YOUR SWORN AFFIDAVIT, LISTING
16 YOURSELF AS THE CHIEF EXECUTIVE OFFICER AND AS THE PRESIDENT OF
17 THE CHRONICLE CORPORATION, YOU WERE TRYING TO INDICATE THAT THE
18 EXAMINER WAS LOSING MONEY AND YOU WERE SUPPORTING THE EXAMINER
19 AND YOU DIDN'T WANT TO DO IT ANY MORE AND THIS INJUNCTION WOULD
20 MAKE YOU CONTINUE TO DO IT? THAT'S WHAT YOU WERE TRYING TO
21 TELL THE COURT; RIGHT?
22 A. I BELIEVE THAT'S CORRECT.
23 Q. AND YOU KNOW THAT THAT'S NOT TRUE BECAUSE YOU HAVEN'T GOT
24 THE SLIGHTEST IDEA WHETHER THAT'S TRUE OR NOT; CORRECT?
25 A. NO, SIR. I DO NOT KNOW THAT THAT IS NOT TRUE, BUT NEITHER
232
SIAS - DIRECT / ALIOTO
1 CAN I GIVE YOU A COST ACCOUNTING BREAKDOWN OF THE AGENCY'S
2 OPERATION BETWEEN THE CHRONICLE AND THE EXAMINER THAT WOULD
3 CAUSE ME TO BE ABLE TO SAY WITH ASSURETY THAT THAT IS, INDEED,
4 CORRECT OR BASED UPON A CAREFUL COST ACCOUNTING ANALYSIS.
5 MR. ALIOTO: EXCUSE ME, YOUR HONOR.
6
(PAUSE IN PROCEEDINGS.)
7 MR. ALIOTO: MAY I HAVE MR. SIAS' DEPOSITION,
8 PLEASE.
9 Q. YOUR DEPOSITION WAS TAKEN IN THIS CASE; WAS IT NOT?
10 A. YES, SIR.
11 Q. LET ME HAND YOU -- AND YOUR DEPOSITION WAS TAKEN ON
12 APRIL 21, 2000; IS THAT RIGHT?
13 A. IT WAS TAKEN IN YOUR OFFICES AND IF THAT'S THE DATE THAT I
14 WAS THERE, THEN IT'S CORRECT. I'D HAVE TO GO BACK AND LOOK AT
15 A CALENDAR.
16 Q. OKAY.
17 MR. ALIOTO: WE WOULD HAND THE ORIGINAL CONFIDENTIAL
18 DEPOSITION TO THE COURT IN SEAL AND ASK THAT IT BE UNSEALED.
19 AND IF I MAY HAND THE DEPOSITION TO THE WITNESS.
20 THE COURT: YOU MAY.
21 (PAUSE IN PROCEEDINGS.)
22 BY MR. ALIOTO:
23 Q. NOW, IT IS CORRECT, IS IT NOT, SIR, THAT YOU CANNOT SAY
24 WHETHER THE EXAMINER IS A FAILING NEWSPAPER OR NOT?
25 MR. HALLING: YOUR HONOR, I OBJECT TO THE QUESTION
233
SIAS - DIRECT / ALIOTO
1 TO THE EXTENT IT'S TRYING TO ELICIT A LEGAL OPINION.
2 THE COURT: IS THAT YOUR OBJECTION, MR. ROSCH?
3 MR. ROSCH: I'LL JOIN IN IT TO THAT EXTENT, YOUR
4 HONOR.
5 THE COURT: PERHAPS YOU CAN CLARIFY THE QUESTION,
6 MR. ALIOTO.
7 BY MR. ALIOTO:
8 Q. ISN'T IT CORRECT THAT YOU TESTIFIED THAT YOU CAN'T SAY
9 WHETHER IT'S A FAILING NEWSPAPER OR NOT, THE EXAMINER?
10 THE COURT: THAT'S NOT MUCH OF A CLARIFICATION.
11 MR. ALIOTO: I'M TRYING TO USE THE EXACT WORDS OF
12 HIS TESTIMONY, YOUR HONOR.
13 MR. ROSCH: THAT'S THE PROBLEM, YOUR HONOR.
14 MR. ALIOTO: THAT'S HIS OPINION, YOUR HONOR. HE'S
15 THE CHIEF EXECUTIVE OFFICER. I THINK THE STATEMENT --
16 MR. ROSCH: HE'S ALSO NOT A LAWYER.
17 THE COURT: WHAT PAGE ARE YOU REFERRING TO?
18 MR. ALIOTO: PAGE 57, LINE 6, YOUR HONOR.
19 MR. ROSCH: WELL, YOUR HONOR, ACTUALLY THERE IS AN
20 OBJECTION AS OF -- IN THE RECORD IN THAT RESPECT RIGHT THEN ON
21 THE SAME GROUND.
22 THE COURT: THE OBJECTION WILL BE OVERRULED. YOU
23 MAY ANSWER.
24 BY MR. ALIOTO:
25 Q. YOU TESTIFIED, DIDN'T YOU, THAT YOU COULDN'T SAY WHETHER
234
SIAS - DIRECT / ALIOTO
1 THE EXAMINER IS A FAILING NEWSPAPER OR NOT; ISN'T THAT TRUE?
2 A. THAT'S CORRECT. IN THIS TESTIMONY I SAID BECAUSE I DON'T
3 KEEP THE HEARST BOOKS.
4 Q. YOU JUST DON'T KNOW; CORRECT?
5 A. I DO NOT KNOW.
6 Q. AND IT WOULD BE WRONG FOR YOU TO SUGGEST TO ANYBODY THAT
7 YOU DID KNOW; WOULDN'T IT?
8 A. NO, THAT'S NOT -- I DON'T KNOW WHETHER IT'S WRONG.
9 Q. IT WOULD BE WRONG FOR YOU TO SWEAR UNDER OATH THAT YOU
10 KNEW WHEN YOU DIDN'T; WOULDN'T IT?
11 A. WHAT IS IT I'M SWEARING UNDER OATH THAT I KNOW?
12 Q. I WANT TO DIRECT YOUR ATTENTION TO 1996. AT THAT TIME YOU
13 HAD DISCUSSIONS WITH MR. BENNACK; DID YOU NOT?
14 A. YES.
15 Q. AND AT THAT TIME YOU WERE HAVING DISCUSSIONS WITH
16 MR. BENNACK, WHAT YOU WERE DISCUSSING WITH HIM IS UNDER WHAT
17 CONDITIONS THE HEARST CORPORATION WANTED IN ORDER TO CLOSE DOWN
18 THE EXAMINER; IS THAT RIGHT?
19 A. THAT WOULD BE CORRECT.
20 Q. AND YOU WENT AND VISITED WITH MR. BENNACK IN NEW YORK TO
21 FIND OUT WHAT THE CONDITIONS WOULD BE FOR THEM TO CLOSE DOWN
22 THE EXAMINER; IS THAT TRUE?
23 A. YES.
24 Q. AND ONE OF THE THINGS THAT YOU WANTED TO NEGOTIATE WITH
25 THE EXAMINER
-- WITH THE HEARST CORPORATION IS THAT IF THE
235
SIAS - DIRECT / ALIOTO
1 EXAMINER SIMPLY CLOSED DOWN, YOU WOULD NONETHELESS PAY THE
2 HEARST CORPORATION, CONTINUE TO PAY THE HEARST CORPORATION
3 THEIR 50-50 SHARE; IS THAT RIGHT?
4 A. I'M NOT SURE THAT'S RIGHT BECAUSE THERE WERE NEGOTIATIONS
5 AND DISCUSSIONS REGARDING THE EXAMINER AND THE CHRONICLE THAT
6 WENT ON OVER A PERIOD OF YEARS BEFORE I GOT THERE AND AFTER I
7 GOT THERE. SO I'M -- YOU'RE -- YOU'RE ASKING ME TO SAY IS IT
8 RIGHT IN THAT PARTICULAR NEGOTIATION.
9 Q. ALL RIGHT. FORGET THAT PARTICULAR NEGOTIATION.
10 A. BUT LET ME ADD ONE THING.
11 Q. ALL RIGHT.
12 A. IN THE TALK -- YOU MENTIONED CLOSING DOWN THE EXAMINER.
13 IN ANY OF THE TALKS THAT WERE EVER HELD WITH THE HEARST
14 CORPORATION IN DISCUSSIONS OF RESOLUTION OF THE JOA WHICH WOULD
15 ENTAIL THE EXAMINER EITHER CLOSING OR FIRST BEING OFFERED FOR
16 SALE, THAT WAS ALWAYS A PREMISE THAT WAS PRESENT.
17 Q. WHAT WAS A PREMISE?
18 A. THAT THE EXAMINER WOULD BE OFFERED FOR SALE BEFORE IT
19 WOULD BE CONSIDERED FOR CLOSING DOWN.
20 Q. DID YOU HAVE DISCUSSIONS WITH MR. BENNACK THAT IF HE
21 CLOSED DOWN THE EXAMINER, YOU WOULD ENTER INTO A DEAL WITH HIM
22 THAT WOULD GIVE A CERTAIN PERCENTAGE OF THE REVENUE TO MR. --
23 TO THE HEARST CORPORATION, A CERTAIN PERCENTAGE UP TO THE -- UP
24 TO THE DATE OF THE END OF THE JOA AND A DIFFERENT PERCENTAGE
25 FROM THAT DATE IN PERPETUITY?
236
SIAS - DIRECT / ALIOTO
1 A. WE HAD DISCUSSIONS WITH A NUMBER OF SCENARIOS, AND THE ONE
2 THAT YOU'RE REFERRING TO I'M NOT SURE WHETHER IT WAS IN '96 OR
3 '97; BUT THERE WAS A RESPONSE FROM THE HEARST CORPORATION TO A
4 PROPOSAL THE CHRONICLE HAD MADE, AND I BELIEVE IT WAS IN 1997,
5 THAT THE EXAMINER BE CLOSED OR SOLD AND ALL TERMS OF THE JOA
6 WOULD STAY IN FORCE THROUGH THE END OF THE CURRENT TERM,
7 SEPTEMBER 12, 2005.
8 AT THAT TIME THE CHRONICLE WOULD NEGOTIATE WITH
9 HEARST ON THE VALUE OF HEARST'S REMAINING ASSETS IN THE
10 NEWSPAPER AGENCY, AND THERE WAS NO PROPOSAL FROM THE CHRONICLE
11 THAT HEARST GET AN ONGOING INTEREST IN THE CHRONICLE BEYOND
12 2005.
13 HEARST AT OUR REQUEST RESPONDED. I BELIEVE
14 MR. BENNACK SENT A LETTER IN APRIL OF 1998 WITH HIS TERMS AND
15 CONDITIONS UNDER WHICH THEY WOULD CONSIDER DOING SUCH A THING;
16 AND THAT INCLUDED A 27 AND A HALF PERCENT INTEREST IN THE
17 CHRONICLE FROM SEPTEMBER 12TH, 2005, GOING FORWARD, AND I
18 FORGET -- 50 YEARS OR INFINITY, WHICHEVER -- IF YOU PUT A
19 TIMETABLE ON THE 50 YEARS, I GUESS IT WOULD MAKE A LOT OF
20 LAWYERS WORK FIGURING OUT HOW YOU WERE GOING TO GET TO RANGE.
21 SO I FORGET WHETHER IT WAS 50 OR INFINITY, BUT IT WAS A
22 LONG-TERM EXTENSION IN WHICH THE HEARST CORPORATION WOULD HAVE
23 OBTAINED A CARRIED INTEREST IN THE CHRONICLE.
24 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
25 THE COURT: BUT UNDER THAT SCENARIO, THE EXAMINER
237
SIAS - DIRECT / ALIOTO
1 WOULD EITHER BE SOLD OR CLOSED; IS THAT CORRECT?
2 THE WITNESS: YES, SIR. IT WOULD -- THAT IS
3 CORRECT, FROM THE TIME THAT SUCH AN AGREEMENT MIGHT HAVE BEEN
4 REACHED, AND THIS WAS -- I WONDER, YOUR HONOR, IF I MIGHT MAKE
5 A COMMENT THAT MIGHT SHED A LITTLE -- WELL, MAYBE I'LL --
6 THE COURT: I THINK YOU HAVE A VERY ABLE LAWYER.
7 HE'LL BRING OUT ANY OF THE FACTS THAT HE THINKS ARE RELEVANT.
8 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
9 THE COURT: YES, YOU MAY.
10 BY MR. ALIOTO:
11 Q. LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE AS
12 EXHIBIT 115. IT'S A DOCUMENT DATED APRIL 5, 1996. IT IS FROM
13 YOU TO MS. PATRICIA TOBIN. THERE ARE COPIES TO MR. RON INGRAM
14 AND ALAN NICHOLS. ATTACHED TO IT IS A CONFIDENTIAL MEMORANDUM
15 TO PATRICIA TOBIN ALSO FROM YOU, THREE PAGES.
16 DID YOU, SIR, PREPARE THIS DOCUMENT AND CAUSE IT TO
17 BE SENT ON OR ABOUT THE DATE INDICATED TO MS. TOBIN?
18 A. (WITNESS EXAMINES DOCUMENT.) YES, I DID.
19 THE COURT: WHAT EXHIBIT NUMBER IS THIS, MR. ALIOTO?
20 MR. ALIOTO: PARDON ME?
21 THE COURT: I'M SORRY. WHAT EXHIBIT NUMBER IS THIS?
22 MR. ALIOTO: 115, YOUR HONOR.
23 THE COURT: THANK YOU.
24 BY MR. ALIOTO:
25 Q. IDENTIFY FOR THE RECORD, PLEASE, WHO MS. PATRICIA TOBIN
238
SIAS - DIRECT / ALIOTO
1 IS.
2 A. MS. PATRICIA TOBIN CURRENTLY IS A SHAREHOLDER OF THE
3 CHRONICLE CORPORATION AND A DIRECTOR OF THE CHRONICLE
4 CORPORATION AND WAS A DIRECTOR AT THE TIME OF THIS MEMORANDUM.
5 Q. OKAY. YOU STATE --
6 A. SHE WAS ALSO A MEMBER OF A NEGOTIATING COMMITTEE THAT WE
7 HAD OF DIRECTORS TO REVIEW OUR DISCUSSIONS WITH THE HEARST
8 CORPORATION.
9 Q. YOU STATE, QUOTE:
10 "ATTACHED IS A SUMMATION OF THE PRESENT
11 CONDITION OF DISCUSSIONS WITH THE HEARST
12 CORPORATION."
13 THE NEXT PARAGRAPH YOU STATE:
14 "VIC GANZI SPOKE WITH RON INGRAM ON APRIL 2
15 AND IS PRESUMABLY DRAFTING SOME DEFINITIVE
16 HEARST POSITIONS ON THIS SUBJECT."
17 NEXT PARAGRAPH:
18 "PER OUR PHONE DISCUSSION, KEEPING THIS OUT
19 OF THE MEDIA AT THIS POINT IN TIME IS IN THE
20 BEST INTEREST OF ALL PARTIES."
21 FIRST OF ALL, MR. VIC GANZI, MR. VIC GANZI IS THE
22 EXECUTIVE VICE PRESIDENT OR WAS AT THE TIME THE EXECUTIVE VICE
23 PRESIDENT OF THE HEARST CORPORATION; IS THAT CORRECT?
24 A. YES, SIR.
25 Q. AND MR. RON INGRAM, MR. RON INGRAM WAS THE GENERAL COUNSEL
239
SIAS - DIRECT / ALIOTO
1 OF THE CHRONICLE PUBLISHING COMPANY; IS THAT CORRECT?
2 A. YES, SIR.
3 Q. AND THIS WAS SUPPOSED TO REFLECT SOME OF THE DRAFTING BY
4 THESE TWO GENTLEMEN; IS THAT CORRECT?
5 A. YES, SIR.
6 Q. AND WHEN YOU HAD REFERENCE TO KEEPING THIS OUT OF THE
7 MEDIA AT THIS POINT, DID YOU MEAN KEEPING IT OUT OF THE
8 CHRONICLE AND THE EXAMINER?
9 A. I HAD --
10 Q. DID YOU MEAN KEEPING IT OUT OF THE CHRONICLE AND THE
11 EXAMINER?
12 A. I MEANT KEEPING IT OUT OF ALL THE MEDIA.
13 Q. INCLUDING THE CHRONICLE AND THE EXAMINER?
14 A. IT WOULD INCLUDE THE CHRONICLE AND THE EXAMINER. YOU MAY
15 RECALL THAT THE SAN JOSE MERCURY NEWS WAS RUNNING AT THIS TIME
16 STORIES SAYING THAT A DEAL WAS IMMINENT AND IT WAS VERY
17 DISRUPTIVE TO EMPLOYEES, AND WHAT HAVE YOU, AND A DEAL WASN'T
18 IMMINENT.
19 THE COURT: YOU MEAN YOU CAN'T ALWAYS BELIEVE WHAT
20 YOU READ IN THE NEWSPAPERS?
21 (LAUGHTER)
22 THE WITNESS: WELL....
23 (LAUGHTER)
24 THE COURT: ALL RIGHT.
25
240
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. ALL RIGHT. IF YOU WILL GO TO THE NEXT PAGE.
3 A. I BEG YOUR PARDON?
4 Q. IF YOU WILL GO TO THE NEXT PAGE.
5 A. YES.
6 Q. THE NEXT PAGE IS THE FIRST PAGE OF THE MEMORANDUM AND IT
7 IS ALSO DATED APRIL 5, 1996, AND THIS DOCUMENT -- DID YOU
8 PREPARE THIS DOCUMENT?
9 A. (WITNESS EXAMINES DOCUMENT.) I BELIEVE I DID. IT WOULD
10 HAVE BEEN SOME INPUT FROM PROBABLY NICHOLS OR RON INGRAM IN IT.
11 Q. OKAY. YOU BEGIN BY SAYING, QUOTE:
12 "WE ARE LISTING HERE WITH SOME OF THE MAJOR
13 NEGOTIATING POSITIONS CURRENTLY BEING DISCUSSED
14 WITH HEARST IN CONNECTION WITH ONGOING ATTEMPTS
15 TO RESOLVE THE JOA."
16 THE NEXT PARAGRAPH, QUOTE:
17 "A TERM OF THE AGREEMENT WOULD BE IN
18 PERPETUITY."
19 YOU GO ON, QUOTE:
20 "THIS IS LARGELY A RESULT OF THERE NOT BEING
21 MUCH DIFFERENCE IN SHARING PERCENTAGES BETWEEN
22 50 YEARS AND PERPETUITY."
23 DO YOU SEE THAT?
24 A. YES.
25 Q. SO WAS THIS PARTICULAR PART AT LEAST AGREED BY BOTH
241
SIAS - DIRECT / ALIOTO
1 PARTIES THAT WHATEVER, IF THERE WERE AN AGREEMENT, IT WOULD BE
2 IN PERPETUITY?
3 A. NO, SIR, NOTHING IN THIS MEMORANDUM WAS AGREED TO BY
4 EITHER PARTY. WE WERE TALKING AND DISCUSSING THE POSITIONS
5 WHICH APPEARED LIKELY TO BE WITHIN THE RANGE OF REASONABILITY
6 IN WHICH PERHAPS AN AGREEMENT COULD BE REACHED, BUT THERE WAS
7 ABSOLUTELY NO FINALITY IN ANY OF THIS.
8 Q. GOING TO THE SENTENCE AFTER THE NEXT, BEGINNING "SHARING
9 PERCENTAGES," DO YOU SEE THAT?
10 A. YES, SIR.
11 Q. OKAY.
12 "SHARING PERCENTAGES ARE NOT FINALIZED BUT
13 IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER
14 POINTS, A 66 PERCENT CHRONICLE, 34 PERCENT
15 HEARST SHARING WOULD BE APPROVED BY HEARST."
16 DO YOU SEE THAT?
17 A. UH-HUH.
18 Q. HOW DID YOU KNOW THAT A 66 CHRONICLE, 34 PERCENT HEARST
19 SHARING WOULD BE APPROVED BY HEARST?
20 A. I DIDN'T KNOW IT. I WAS, AGAIN, USING SOME EXPERIENCE, OR
21 WHAT HAVE YOU, BASED UPON COMMENTS THAT WERE MADE BY THE HEARST
22 CORPORATION IN THESE MEETINGS THAT APPEARED TO BE WITHIN THE
23 RANGE OF WHICH THEY WOULD GO. WE HAD STARTED OUT PROPOSING 80
24 CHRONICLE, 20 HEARST, AND MR. BENNACK WAS QUITE -- QUITE
25 COLORFUL IN DISREGARDING THAT.
242
SIAS - DIRECT / ALIOTO
1 BUT THERE I WANT TO EMPHASIZE --
2 Q. DID HE THEN COME TO 66 PERCENT?
3 A. NO. AS A MATTER OF FACT, I BELIEVE CHRONICLE HAD
4 TRANSFERRED, USING AGAIN SOME OF THESE MANY PROJECTIONS, THAT A
5 50 PERCENT FOR THE BALANCE OF THE JOA, 50-50 SHARING, AND THEN
6 GOING TO 25.8 IN THE FUTURE WOULD BE VERY CLOSE TO 66-34
7 STARTING AT THE TIME THESE DISCUSSIONS WERE TAKING PLACE.
8 Q. OKAY.
9 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR?
10 THE COURT: YES.
11 BY MR. ALIOTO:
12 Q. LET'S SEE IF WE CAN GET THESE STRAIGHT.
13 OKAY. WE HAD PREVIOUSLY DRAWN YESTERDAY -- WERE YOU
14 IN COURT YESTERDAY?
15 A. YES, SIR.
16 Q. WE HAD PREVIOUSLY DRAWN YESTERDAY THAT THE JOA COMMENCES
17 ON JANUARY -- COMMENCED ON JANUARY -- EFFECTIVE DATE JANUARY,
18 '65.
19 A. YES.
20 Q. IT WENT FOR THE 30 YEARS TO JANUARY, '95.
21 A. YES.
22 Q. AND THEN IT WAS EXTENDED BY HEARST TO 2005. YOU HEARD
23 THAT; RIGHT?
24 A. I DID.
25 Q. AND YOU UNDERSTAND THAT TO BE THE FACT; RIGHT?
243
SIAS - DIRECT / ALIOTO
1 A. I DO.
2 Q. AND THAT AFTER 2005, IF IT'S GOING TO BE EXTENDED TO 2015,
3 THAT WOULD BE ONLY UP TO THE CHRONICLE; CORRECT?
4 A. WE WOULD HAVE TO MAKE THAT DETERMINATION, I BELIEVE, THREE
5 YEARS PRIOR TO THE END OF THIS PRESENT TERM.
6 Q. SO YOU WOULD HAVE TO MAKE THAT DETERMINATION IN THE NEXT
7 YEAR, NEXT YEAR OR SO?
8 A. I THINK THE NEXT --
9 Q. TWO YEARS.
10 A. -- TWO YEARS OR SO.
11 Q. OKAY. NOW, THE ARRANGEMENT THAT YOU WERE TALKING ABOUT
12 WITH MR. BENNACK WOULD BE THAT -- AND THIS IS IN 19 -- THIS IS
13 IN 1996.
14 A. YES.
15 Q. OKAY. SO I'M GOING TO PUT THIS DOWN HERE. I'LL PUT
16 DOWN -- I'M NOT GOING TO PUT IT DOWN WITH THAT. I'LL PUT DOWN
17 1996.
18 OKAY. NOW, THE DEAL GOING FORWARD -- AND I'LL PUT A
19 LINE HERE FOR 2005.
20 NOW, THE IDEA WAS THAT WHEN YOU SAY THAT -- WHEN YOU
21 SAY THAT:
22 "SHARING PERCENTAGES ARE NOT FINALIZED BUT
23 IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER
24 POINTS A 66 PERCENT CHRONICLE, 34 PERCENT HEARST
25 SHARING WOULD BE APPROVED. HEARST'S PREVIOUS
244
SIAS - DIRECT / ALIOTO
1 PROPOSAL WAS FOR 50 PERCENT SHARING THROUGH THE
2 END OF THE CURRENT AGREEMENT WITH HEARST,
3 PERCENTAGE DROPPING TO 25 PERCENT FOR THE
4 FUTURE. CHRONICLE PROPOSED THE 66-34 WHICH
5 MATHEMATICALLY IS CLOSE TO AN AVERAGE OF THEIR
6 50/25.8 POST 2005 SHARING RATIO," DO YOU SEE
7 THAT?
8 A. YES.
9 Q. OKAY. SO THAT THE IDEA OF THE 66-34, THAT WOULD GO UP TO
10 2005?
11 A. NO. IT WAS 66-34 --
12 Q. SORRY.
13 A. -- WOULD START AT WHATEVER TIME AN AGREEMENT MIGHT HAVE
14 BEEN REACHED AND WOULD GO ON FOR THE TERM OF THIS REVISED
15 AGREEMENT, WHICH WOULD BE TO BE DETERMINED. AT THIS POINT
16 THERE WAS PERPETUITY. IT MIGHT BE 50 YEARS, WHATEVER IT WAS.
17 Q. ALL RIGHT. SO LET'S PUT THAT DOWN. THE CHRONICLE, THIS
18 IS WHAT YOU WERE SAYING, THE CHRONICLE 60-60 -- 66-34 AND THE
19 66 WOULD BE TO THE CHRONICLE, 34 TO HEARST; CORRECT?
20 A. YES, SIR.
21 Q. AND THAT DEAL WOULD GO IN PERPETUITY OR 50 YEARS; CORRECT?
22 A. YES.
23 Q. AND WHAT HEARST WAS SAYING WAS THAT THEY WANTED A 50-50
24 DEAL UNTIL THE END, 2005; IS THAT RIGHT?
25 A. YES. THEY WANTED TO CONTINUE THE PRESENT -- THE PRESENT
245
SIAS - DIRECT / ALIOTO
1 ARRANGEMENT AS CALLED FOR IN THE PRESENT JOINT OPERATING
2 AGREEMENT UNTIL THE CONCLUSION, WHICH IS SEPTEMBER 12TH, 2005.
3 Q. OKAY. SO THEY WANTED 50-50, SAME DEAL, 50-50, UNTIL 2005.
4 A. THAT'S RIGHT.
5 Q. AND THEN FROM 2005 THEY WOULD GO APPROXIMATELY 75-25?
6 A. YES, SIR.
7 Q. 75-25. AND AGAIN THAT WOULD BE IN PERPETUITY; CORRECT?
8 THAT WAS THE IDEA?
9 A. PERPETUITY OR 50 YEARS. LONG-TERM.
10 Q. PERPETUITY OR 50 YEARS, OKAY.
11 THE COURT: AND WHAT WOULD BE THE SITUATION WITH THE
12 EXAMINER UNDER BOTH OF THOSE SCENARIOS?
13 THE WITNESS: THE EXAMINER WOULD HAVE BEEN
14 PRESUMABLY PUT UP FOR SALE. MR. BENNACK WAS ALWAYS VERY
15 EMPHATIC THAT THEY WOULD PUT THE EXAMINER UP FOR SALE ON THIS
16 KIND OF A MATTER; AND IF THEY WERE UNABLE TO FIND A BUYER, THEN
17 THEY WOULD CLOSE IT.
18 THE COURT: IT WOULD BE CLOSED PRIOR TO SEPTEMBER,
19 2005, AND --
20 THE WITNESS: YES.
21 THE COURT: -- YET HEARST WOULD CONTINUE TO RECEIVE
22 50 PERCENT OF THE NET EXCESS OF THE --
23 THE WITNESS: YES.
24 THE COURT: -- OF THE AGENCY AGREEMENT?
25 THE WITNESS: ALL TERMS OF THE JOA WILL CONTINUE IN
246
SIAS - DIRECT / ALIOTO
1 PLACE.
2 THE COURT: OKAY.
3 MR. ALIOTO: THANK YOU, YOUR HONOR.
4 THE WITNESS: THERE WERE OTHER ELEMENTS --
5 BY MR. ALIOTO:
6 Q. NOW, IF YOU GO TO THE LAST PAGE --
7 A. IF I MIGHT, THIS IS -- THERE ARE A NUMBER OF OTHER
8 ELEMENTS THAT ARE PART OF THE JOA, NOT THE LEAST OF WHICH WAS
9 THE SUNDAY NEWSPAPER IS LARGELY PRODUCED BY THE HEARST
10 CORPORATION AS A RESULT OF THEIR TAKING THE EVENING SLOT. AND
11 SO THE SUNDAY NEWSPAPER, THE COST OF IT, THE EDITORIAL COSTS OF
12 IT ARE BORNE BY HEARST. THE ONLY SECTIONS OF IT ARE THE
13 DATEBOOK AND THE TELEVISION BOOK AND A SMALL CHRONICLE SECTION
14 THAT ARE IN THAT PAPER. BUT ALL THE LIVE NEWS SECTIONS ARE
15 PRODUCED BY HEARST WITH ATTENDANT EDITORIAL EXPENSES.
16 AND THE ISSUE OF WHETHER HEARST WOULD BE -- SINCE
17 THEY WOULD BE RELIEVED OF THAT RESPONSIBILITY, WHETHER THEY
18 WOULD BE PREPARED TO GIVE CHRONICLE SOME MONEY TO PAY FOR THOSE
19 EXTRA EDITORIAL EXPENSES.
20 THE COURT: THAT WAS, I GATHER, A POINT OF
21 NEGOTIATION?
22 THE WITNESS: ABSOLUTELY.
23 THE COURT: OKAY.
24 THE WITNESS: ALONG WITH MANY OTHERS THAT WE WILL
25 NOT BURDEN YOU WITH.
247
SIAS - DIRECT / ALIOTO
1 THE COURT: ALL RIGHT.
2 BY MR. ALIOTO:
3 Q. BUT IN ADDITION TO THOSE COSTS, THE FACT OF THE MATTER IS
4 THAT THE SUNDAY PAPER WAS RESPONSIBLE FOR 30 TO 40 PERCENT OF
5 THE TOTAL ADVERTISING VOLUME PER WEEK; ISN'T THAT RIGHT?
6 A. YES, SIR.
7 Q. NOW, IF YOU'LL GO TO THE THIRD PAGE --
8 A. AND ABOUT 80 PERCENT OF ITS CIRCULATION IS CHRONICLE.
9 Q. IF YOU GO TO THE THIRD PAGE AND IF YOU LOOK AT THE
10 SECOND-TO-THE-LAST PARAGRAPH, IT STATES, QUOTE:
11 "THESE ARE PRESENT ELEMENTS ON THE STATUS OF
12 DISCUSSIONS. THEY ARE SUBJECT TO CHANGES. IN
13 THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A
14 SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST
15 WOULD AGREE TO CLOSE THE EXAMINER," END OF
16 QUOTE.
17 DO YOU SEE THAT?
18 A. JUST GIVE ME A MOMENT, PLEASE.
19 Q. IT'S THE SECOND-TO-LAST PARAGRAPH ON THE LAST PAGE.
20 THE COURT: ON THE LAST PAGE?
21 MR. ALIOTO: THE VERY LAST PAGE, YES, SIR.
22 THE WITNESS: (WITNESS EXAMINES DOCUMENT.)
23 BY MR. ALIOTO:
24 Q. IT BEGINS, "THESE ARE PRESENT ELEMENTS."
25 A. OKAY. I'M NOT ON THE RIGHT ONE.
248
SIAS - DIRECT / ALIOTO
1 (WITNESS EXAMINES DOCUMENT.) YES. ALL RIGHT, I'M
2 THERE.
3 Q. OKAY. IT SAYS, QUOTE:
4 "THESE ARE PRESENT ELEMENTS ON THE STATUS OF
5 DISCUSSIONS. THEY ARE SUBJECT TO CHANGES. IN
6 THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A
7 SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST
8 WOULD AGREE TO CLOSE THE EXAMINER."
9 DO YOU SEE THAT?
10 A. YES.
11 Q. NOW, LET ME SHOW YOU --
12 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
13 HONOR.
14 MR. ROSCH: EXCUSE ME, YOUR HONOR, THAT IS NOT AN
15 EXHIBIT THAT'S BEEN ADMITTED INTO EVIDENCE AND I'D LIKE OFFER
16 THAT IT BE ADMITTED.
17 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT IS
18 MARKED FOR IDENTIFICATION AS EXHIBIT 115. I DID THINK IT WAS
19 IN EVIDENCE.
20 THE COURT: NO OBJECTION, I GATHER.
21 MR. ROSCH: NO. I'M THE ONE THAT'S MOVING IT, YOUR
22 HONOR.
23 MR. ALIOTO: OKAY. THEN I DON'T HAVE AN OBJECTION
24 TO HIM PUTTING IT IN.
25 THE COURT: ALL RIGHT. I THOUGHT MR. ALIOTO WAS
249
SIAS - DIRECT / ALIOTO
1 OFFERING IT, BUT 115 WILL BE ADMITTED.
2 (PLAINTIFF'S EXHIBIT 115
3 RECEIVED IN EVIDENCE)
4 BY MR. ALIOTO:
5 Q. NOW, LET ME SHOW YOU AN EXHIBIT WHICH IS MARKED AS
6 EXHIBIT 116 IN EVIDENCE, I BELIEVE.
7 THE COURT: 116?
8 MR. ALIOTO: YES.
9 Q. 116 IS A DOCUMENT DATED MAY 7, 1996. IT IS FROM
10 MR. RONALD INGRAM, GENERAL COUNSEL. IT IS TO VICTOR GANZI.
11 MR. SHULMAN: IT'S NOT IN.
12 MR. ROSCH: IT'S NOT IN, YOUR HONOR, BUT WE'LL -- WE
13 HAVE NO OBJECTION TO ITS BEING MADE --
14 THE COURT: VERY WELL. 116 WILL BE ADMITTED.
15 (PLAINTIFF'S EXHIBIT 116
16 RECEIVED IN EVIDENCE)
17 BY MR. ALIOTO:
18 Q. LET ME SHOW YOU THIS DOCUMENT AND ASK YOU WHETHER OR NOT
19 YOU RECEIVED A COPY OF IT SOMETIME IN OR ABOUT MAY 7, 1996.
20 A. (WITNESS EXAMINES DOCUMENT.) THE REASON I'M TAKING SOME
21 TIME IS THAT THERE IS NOT A MARKED COPY TO ME, AND MY MEMORY --
22 I WANT TO BE VERY CAREFUL BEFORE I --
23 Q. ALL RIGHT. THEN LET ME JUST ASK YOU --
24 A. I THINK THAT -- I THINK THAT I PROBABLY WOULD HAVE SEEN
25 EITHER A DRAFT OF THIS OR SOME PORTION THEREOF, BUT I CANNOT --
250
SIAS - DIRECT / ALIOTO
1 THE COURT: YOU CAN'T PIN IT DOWN IN YOUR MIND; IS
2 THAT IT?
3 THE WITNESS: NO, SIR.
4 BY MR. ALIOTO:
5 Q. OKAY. WELL, DOES IT ACCORD WITH YOUR RECOLLECTION THAT
6 SOMETIME AT OR ABOUT MAY OF 19 --
7 A. I SAW SOME VARIATION OF THIS, BUT THIS ITERATION IS
8 UNCLEAR TO ME.
9 Q. ALL RIGHT. WAS THERE AN EFFORT TO PUT -- WELL, FIRST OF
10 ALL, THERE WAS SUPPOSED TO HAVE BEEN A PARTNERSHIP AND THE
11 PARTNERSHIP WAS SUPPOSED TO HAVE PERPETUAL -- WELL, LET ME READ
12 FROM IT AND ASK YOU IF IT ACCORDS WITH YOUR RECOLLECTION.
13 UNDER THE JOA PROPOSAL -- AND, AGAIN, THIS IS THE
14 DOCUMENT FROM MR. RONALD INGRAM, THE GENERAL COUNSEL OF THE
15 CHRONICLE PUBLISHING COMPANY, DIRECTED TO MR. VICTOR GANZI,
16 EXECUTIVE VICE PRESIDENT OF THE HEARST CORPORATION. AND UNDER
17 "ORGANIZATION" IT STATES, QUOTE:
18 "CHRONICLE AND HEARST WILL FORM A CALIFORNIA
19 GENERAL PARTNERSHIP. THE PARTNERSHIP WILL HAVE
20 A PERPETUAL LIFE. PROFITS, LOSSES AND
21 DISTRIBUTIONS WILL BE ALLOCATED 66 PERCENT TO
22 CHRONICLE, 34 PERCENT TO HEARST."
23 NOW, THAT ACCORDS WITH YOUR RECOLLECTION OF ONE OF
24 THE --
25 A. YES, SIR.
251
SIAS - DIRECT / ALIOTO
1 Q. ALL RIGHT. AND THEN ALSO DOES IT ACCORD WITH YOUR
2 RECOLLECTION THAT THERE WAS TO BE INSERTED IN THIS AGREEMENT A
3 60-MILE CONCEPT; IN OTHER WORDS, THAT ON A FIRST RIGHT OF
4 REFUSAL THERE COULD BE -- NO PARTNER COULD COMPETE WITH THE
5 PARTNERSHIP WITHIN A 60-MILE RADIUS?
6 A. (WITNESS EXAMINES DOCUMENT.) I BELIEVE THAT THERE IS SUCH
7 A PROHIBITION IN THE CURRENT JOA.
8 Q. IN THE JOA.
9 A. AND THERE WOULD BE -- AND I DO RECALL THAT THERE WOULD BE
10 A CONTINUING OF THAT IN THIS.
11 Q. AND THE IDEA OF THAT IS, IS THAT NO OWNER
-- IN THIS
12 INSTANCE THE PARTNER, BUT IN THE JOA NEITHER THE CHRONICLE NOR
13 THE EXAMINER, NOR IF THEY SOLD TO SOMEONE ELSE COULD THEY BE IN
14 COMPETITION WITH THE JOA WITHIN 60 MILES; IS THAT RIGHT?
15 A. I THINK IT'S CONFINED TO THE DAILY NEWSPAPER.
16 Q. TO DAILY NEWSPAPERS WITHIN 60 MILES; CORRECT?
17 A. I THINK THAT IS CORRECT.
18 Q. AND THE EFFECT OF THAT WOULD BE, WOULD IT NOT, TO EXCLUDE
19 KNIGHT RIDDER AS BEING A POTENTIAL MEMBER OF THE JOA?
20 A. I SUPPOSE THAT IS CORRECT IF -- AS LONG AS KNIGHT RIDDER
21 OWNS NEWSPAPERS WITHIN A 60-MILE RADIUS.
22 MR. ROSCH: YOUR HONOR, INSOFAR AS IT'S ASKING FOR A
23 LEGAL CONCLUSION, I WOULD ASK -- I WILL OBJECT AND ASK THAT THE
24 ANSWER BE STRICKEN.
25 THE COURT: I'LL UNDERSTAND THE ANSWER TO BE
252
SIAS - DIRECT / ALIOTO
1 OTHERWISE.
2 YOU MAY PROCEED, MR. ALIOTO.
3 BY MR. ALIOTO:
4 Q. AND IT WOULD ALSO EXCLUDE THE SINGLETON GROUP OR ANY OF
5 THEM FROM BEING A MEMBER OF THE JOA OR -- YES, BEING A MEMBER
6 OF THE JOA, PURCHASING ONE OF THE PAPERS; CORRECT?
7 A. I'M NOT SURE OF THAT.
8 Q. DO YOU KNOW WHO SINGLETON IS?
9 A. OF COURSE.
10 Q. DOES HE HAVE --
11 A. YES, I DO. HE'S THE PRESIDENT OF THE MEDIA GENERAL GROUP.
12 Q. AND THAT IS A GROUP OF NEWSPAPERS; IS THAT CORRECT?
13 A. YES, SIR.
14 Q. SOME OF THEM ARE WITHIN 60 MILES OF SAN FRANCISCO?
15 A. IT'S THE ALAMEDA NEWSPAPER GROUP, THE OAKLAND TRIBUNE.
16 Q. THEREFORE, SINGLETON COULD NOT PURCHASE EITHER THE
17 EXAMINER OR THE CHRONICLE, COULD IT, AND MAINTAIN ITS PAPERS IN
18 ALAMEDA ACCORDING TO THE JOA; IS THAT RIGHT?
19 A. I WILL --
20 THE COURT: THIS CALLS FOR THE UNDERSTANDING OF THE
21 WITNESS.
22 MR. ALIOTO: YES.
23 Q. YOU UNDERSTOOD AS THE CHAIRMAN OF THE BOARD AND THE CHIEF
24 EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE PUBLISHING
25 COMPANY THAT NEITHER KNIGHT RIDDER NOR SINGLETON COULD PURCHASE
253
SIAS - DIRECT / ALIOTO
1 EITHER THE CHRONICLE OR THE EXAMINER AS A MEMBER OF THE JO --
2 AND BECOME -- AND HAVING ANYTHING TO DO WITH THE JOA; CORRECT?
3 A. MY UNDERSTANDING WOULD HAVE BEEN -- THAT IS CORRECT,
4 BUT --
5 Q. THANK YOU.
6 THE COURT: WHEN YOU'RE READY TO MOVE ON TO A NEW
7 TOPIC, WHY, JUST LET ME KNOW.
8 MR. ALIOTO: PARDON ME, YOUR HONOR?
9 THE COURT: WHEN YOU'RE READY TO MOVE ON TO A NEW
10 TOPIC, LET ME KNOW.
11 MR. ALIOTO: VERY GOOD, YOUR HONOR. AT THE COURT'S
12 CONVENIENCE.
13 THE COURT: IT'S YOURS.
14 MR. ALIOTO: VERY GOOD.
15 THE COURT: WHY DON'T WE TAKE, LADIES AND GENTLEMEN,
16 UNTIL FIVE MINUTES AFTER THE HOUR, AND WE'LL RESUME WITH
17 FURTHER ACTION OF THIS WITNESS.
18 (RECESS TAKEN AT 9:50 A.M.)
19 (PROCEEDINGS RESUMED AT 10:10 A.M.)
20 THE COURT: VERY WELL, MR. ALIOTO, YOU MAY RESUME
21 YOUR EXAMINATION OF THIS WITNESS.
22 MR. ALIOTO: THANK YOU, YOUR HONOR.
23 MAY I APPROACH THE WITNESS, YOUR HONOR?
24 THE COURT: YES, YOU MAY.
25
254
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. LET ME SHOW YOU EXHIBIT 117 IN EVIDENCE. EXHIBIT 117 IN
3 EVIDENCE IS DATED JUNE 5, 1997. IT'S DIRECTED TO THE DIRECTORS
4 CHRONICLE PUBLISHING COMPANY, RE THE JOA, AND FROM YOU. AND
5 THEN ENCLOSED
-- WITH CARBONS TO MR. INGRAM AND MR. NICHOLS.
6 AND ENCLOSED IS THE JOA PROPOSAL SIMILAR TO THE ONE IN 116.
7 SO IF YOU TAKE A LOOK AT 117, IS THAT, IN FACT, THE
8 DOCUMENT -- IS THAT, IN FACT, YOUR COVER OF THE SAME JOA
9 PROPOSAL THAT YOU SENT TO THE DIRECTORS OF THE CHRONICLE
10 PUBLISHING COMPANY?
11 A. (WITNESS EXAMINES DOCUMENT.) YES.
12 Q. AND YOU SENT THAT ON OR ABOUT THE DATE INDICATED, JUNE 5,
13 1997?
14 A. YES.
15 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT IS
16 MARKED FOR IDENTIFICATION ONLY APPARENTLY AS EXHIBIT 117, YOUR
17 HONOR.
18 MR. ROSCH: NO OBJECTION, YOUR HONOR.
19 THE COURT: VERY WELL. ADMITTED BY STIPULATION,
20 117.
21 (PLAINTIFF'S EXHIBIT 117
22 RECEIVED IN EVIDENCE)
23 BY MR. ALIOTO:
24 Q. NOW, IN THE FIRST PARAGRAPH, DIRECTING YOUR ATTENTION TO
25 THE FIRST PARAGRAPH, AND THIS GOING TO THE DIRECTORS, YOU
255
SIAS - DIRECT / ALIOTO
1 STATE, QUOTE:
2 "YOU WILL FIND ENCLOSED A DRAFT OF THE MAY,
3 1996, JOA PROPOSAL BY CHRONICLE TO HEARST."
4 THEN IN THE NEXT SENTENCE YOU SAY, QUOTE:
5 "SHORTLY THEREAFTER, HEARST WAS ADVISED THE
6 CHRONICLE SHAREHOLDERS WERE NOT INTERESTED IN
7 FURTHER DISCUSSIONS."
8 DO YOU SEE THAT?
9 A. YES, SIR.
10 Q. SO YOU'RE SENDING THEM THE PROPOSAL THAT WAS BEING WORKED
11 ON BY MR. INGRAM AND BY MR. -- BY BOTH HEARST AND CHRONICLE BUT
12 APPARENTLY CHRONICLE SHAREHOLDERS SAID THEY WEREN'T INTERESTED
13 PERIOD; IS THAT IT?
14 A. YES. I WOULD POINT OUT THAT 116 WAS IN MAY OF 1996.
15 Q. YES.
16 A. AND THIS MEMORANDUM IS IN MAY OF -- JUNE OF 1997.
17 Q. YES.
18 A. AT THE CHRONICLE SHAREHOLDERS MEETING IN APRIL OF 1997,
19 THE STATUS OR THE PRESENT SITUATION AS IT REGARDS DISCUSSIONS
20 WITH HEARST AND JOA WAS A MATTER OF INTEREST. AND I REVIEWED
21 WITH THE SHAREHOLDERS A NUMBER OF THE ELEMENTS THAT ARE
22 CONTAINED IN HERE. IT WAS APPARENT THAT THE CHRONICLE
23 SHAREHOLDERS TO A PERSON WERE NOT IN FAVOR OF DOING ANYTHING AT
24 THAT TIME FOR VARIOUS REASONS, BUT THEY WERE NOT. WE DID NOT
25 TAKE A FORMAL VOTE, BUT WE -- BUT I -- IT WAS VERY CLEAR THAT
256
SIAS - DIRECT / ALIOTO
1 THEY DID NOT WANT MANAGEMENT TO PURSUE ANY FURTHER DISCUSSIONS
2 AT THAT TIME.
3 Q. NOW, YOU ALSO STATE HERE THAT -- IN PARAGRAPH THREE, ALSO
4 TO THE DIRECTORS, YOU STATE, QUOTE, AND THIS IS AFTER YOU'VE
5 GONE THROUGH WHAT THE DIFFERENT ARRANGEMENTS WERE, THE
6 SPLITTING ARRANGEMENTS WITH HEARST, YOU STATE, QUOTE:
7 "THE BOOZ ALLEN WORK HAS SUGGESTED THAT THE
8 CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN
9 AGAIN PURSUING A JOA RESOLUTION."
10 DO YOU SEE THAT?
11 A. YES, SIR.
12 Q. AND ONE OF THE INTERESTS OF THE BOOZ ALLEN THAT SUGGESTED
13 THAT THE CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN AGAIN
14 PURSUING A JOA RESOLUTION WAS BECAUSE BOOZ ALLEN MADE A REPORT
15 THAT WOULD TEND TO SHOW WHAT THE HEARST CORPORATION WOULD BE
16 ABLE TO DO IF IT COMPETED HEAD TO HEAD AGAINST THE CHRONICLE
17 AFTER THE JOA; CORRECT?
18 A. THAT IS WITHIN VERY NARROW LIMITATIONS. MAY I GIVE A
19 LITTLE MORE DESCRIPTION OF THE BOOZ ALLEN WORK?
20 Q. YES, YOU MAY. YOU CAN GIVE ANY EXPLANATION YOU WANT AT
21 ANY TIME, MR. SIAS, BUT JUST ANSWER MY QUESTION FIRST AND THEN
22 IF YOU WANT TO EXPLAIN IT, FEEL FREE TO DO SO.
23 A. ALL RIGHT. RESTATE THE QUESTION WHAT YOU SAY THE BOOZ
24 ALLEN REPORT
--
25 Q. OKAY. ONE OF THE STATEMENTS IN BOOZ ALLEN THAT THE
257
SIAS - DIRECT / ALIOTO
1 CHRONICLE SHAREHOLDERS -- THAT WAS SHOWN TO THE CHRONICLE
2 SHAREHOLDERS WAS THAT THEY MADE AN ANALYSIS OF WHAT THE HEARST
3 CORPORATION MIGHT BE ABLE TO DO, THE EXAMINER, IN HEAD-TO-HEAD
4 COMPETITION WITH THE CHRONICLE AFTER THE -- AFTER 2005?
5 A. YES. ONE OF THEM WAS.
6 Q. AND ONE OF THOSE -- AND THAT WAS THAT SHOWED
-- OR THE
7 ANALYSIS --
8 A. ONE OF THEM WAS.
9 Q. OKAY. AND THAT ONE THAT SHOWED THAT IF HEARST, THE
10 EXAMINER, COMPETED HEAD TO HEAD WITH THE CHRONICLE AFTER 2005,
11 IT SHOWED THAT THE CHRONICLE WOULD OBVIOUSLY RECEIVE LESS
12 PROFITS THAN IT OTHERWISE WOULD IF THE EXAMINER WERE SHUT DOWN;
13 CORRECT?
14 A. THAT WAS A LONG QUESTION AND I DON'T WANT TO --
15 Q. THE ONE THAT SHOWED -- THE ONE THAT SHOWED THAT WHAT MIGHT
16 HAPPEN IF THE EXAMINER WAS HEAD-TO-HEAD --
17 A. YES.
18 Q. -- COMPETITION WITH THE CHRONICLE AFTER 2005, THAT THE
19 PROFITS OF THE CHRONICLE WOULD BE LESS THAN IF THERE WERE NO
20 EXAMINER.
21 A. THAT IS ONE OF THEIR SCENARIOS.
22 MAY I PLEASE GIVE THE COURT A DESCRIPTION OF THE
23 BOOZ ALLEN ASSIGNMENT? BECAUSE THE INFERENCE HERE IS SOMEHOW
24 THAT BOOZ ALLEN WAS BROUGHT IN SIMPLY TO EVALUATE THE
25 CHRONICLE, AND I --
258
SIAS - DIRECT / ALIOTO
1 Q. YOU WANTED TO MAKE AN EXPLANATION ABOUT BOOZ ALLEN, IS
2 THAT WHAT YOU WANT?
3 A. YES.
4 Q. OKAY. IF YOU START TO TALK ABOUT HEARSAY, I'M GOING TO
5 INTERRUPT YOU, OTHERWISE GO AHEAD AND SAY WHATEVER YOU WANT.
6 THE COURT: WELL, LET'S HEAR WHAT THE ANSWER IS. GO
7 AHEAD, MR. SIAS.
8 THE WITNESS: THE BOOZ ALLEN FIRM WAS RETAINED BY
9 CHRONICLE SHAREHOLDERS AT A TIME TO EVALUATE THE COMPANY'S
10 PROSPECTS AND WHAT POTENTIAL EVALUATIONS THEY MIGHT HAVE AND
11 WHAT COURSES OF ACTIONS THEY MIGHT PURSUE TO GET THEM INTO THE
12 21ST CENTURY.
13 IT'S A PRIVATELY-HELD MEDIA COMPANY S CORP., AND A
14 NUMBER OF THE SHAREHOLDERS WERE CONCERNED THAT MOST OF THEIR
15 WEALTH IS TIED UP IN SHARES OF CHRONICLE CORPORATION COMPRISED
16 OF EIGHT DIFFERENT BUSINESSES AND THEY WANTED A LOOK-SEE AT
17 WHAT POTENTIAL ALTERNATIVES THEY MIGHT HAVE.
18 SO INCLUDED IN THAT OVERALL ASSIGNMENT WAS A LOOK AT
19 INDIVIDUAL COMPONENTS, INCLUDING THE CHRONICLE, AND IT WAS IN
20 THAT CONTEXT THAT THE STUDY TO WHICH YOU REFER WAS INCLUDED.
21 Q. OKAY. AND WHAT THEY SHOWED, ONE OF THE THINGS THAT IT
22 SHOWED IS THAT IF THE EXAMINER COMPETED HEAD TO HEAD WITH THE
23 CHRONICLE AFTER THE JOA, THAT THAT WOULD REDUCE THE PROFIT OF
24 THE CHRONICLE?
25 A. THAT WAS ONE OF THEIR SCENARIOS. WE DID NOT AGREE WITH
259
SIAS - DIRECT / ALIOTO
1 IT.
2 Q. THAT WAS ONE OF THE THINGS THAT WAS GIVEN TO THE CHRONICLE
3 SHAREHOLDERS; IS THAT CORRECT?
4 A. IT WAS GIVEN TO THE CHRONICLE SHAREHOLDERS, BUT I WANT TO
5 MAKE IT CLEAR THAT IT WAS NOT AGREED TO. THERE WERE A LOT OF
6 THINGS GIVEN TO THEM.
7 Q. WELL, YOU GAVE IT TO THEM FOR THEIR INFORMATION SO THEY
8 COULD MAKE CERTAIN JUDGMENTS WITH REGARD TO WHETHER CONTINUING
9 THE JOA OR NOT; CORRECT?
10 A. AN ENTIRE REPORT INCLUDED IN WHICH WAS THIS PARTICULAR
11 REFERENCE TO THE CHRONICLE.
12 Q. ONE OF THE THINGS YOU WANTED THEM TO KNOW IS THAT IF THERE
13 WERE HEAD-TO-HEAD COMPETITION WITH THE EXAMINER, IF THERE WERE
14 A NEWSPAPER WAR, THAT THAT MIGHT RESULT IN LESS PROFITS FOR
15 THEM AND THEY SHOULD THINK ABOUT THAT; RIGHT?
16 A. I DON'T KNOW THAT THAT'S RIGHT.
17 THE COURT: YOU SAID THAT IS RIGHT?
18 THE WITNESS: I SAID I DO NOT KNOW THAT THAT IS
19 CORRECT.
20 THE COURT: I SEE.
21 BY MR. ALIOTO:
22 Q. YOU'RE NOT SURE WHETHER IT IS OR IT ISN'T?
23 A. YES. BECAUSE WANTED THEM TO KNOW -- YOU'RE FRAMING
24 THINGS -- THIS
-- AGAIN, THE BOOZ ALLEN STUDY WAS MUCH MORE
25 COMPREHENSIVE. IT WAS -- WE DID NOT AGREE. THIS DID NOT GET A
260
SIAS - DIRECT / ALIOTO
1 RINGING MANAGEMENT ENDORSEMENT THAT YOU SHOULD DO THIS AND
2 THAT. SO TO SAY THAT WHAT YOU HAVE JUST FRAMED AS A QUESTION,
3 I DON'T KNOW THAT IT'S CORRECT. I DON'T KNOW THAT IT'S
4 INCORRECT, BUT I CERTAINLY AM NOT PREPARED TO SAY, "YES, THAT'S
5 RIGHT, AND THAT'S WHAT WE WANTED TO DO."
6 Q. YOU ALSO SAY IN THE VERY LAST PARAGRAPH OF THIS DOCUMENT,
7 YOU STATE THAT:
8 "THE WRITER, RON INGRAM AND ALAN NICHOLS,
9 WILL BE PLEASED TO ANSWER YOUR QUESTIONS. IT IS
10 VERY IMPORTANT THAT YOU TREAT THIS INFORMATION
11 AS CONFIDENTIAL TO BE DISCUSSED ONLY WITH
12 CHRONICLE SHAREHOLDERS OR THEIR
13 REPRESENTATIVES."
14 DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. AND YOU HAVE UNDERLINED "CONFIDENTIAL." DO YOU SEE THAT?
17 A. YES, SIR.
18 Q. OKAY. NOW, YOU WANT TO MAINTAIN IT AS CONFIDENTIAL EVEN
19 THOUGH THE CHRONICLE SHAREHOLDERS TURNED DOWN THE OFFER;
20 CORRECT?
21 A. YES.
22 Q. SO IT WAS A MATTER IN THE PAST; WAS IT NOT? IT WASN'T
23 SOMETHING BEING DISCUSSED AS A POTENTIAL HAPPENING; CORRECT?
24 A. I'M NOT --
25 Q. THE VERY LAST SENTENCE, SIR.
261
SIAS - DIRECT / ALIOTO
1 A. I'M TRYING TO DETERMINE WHETHER THIS IS REFERRING TO THE
2 WHOLE BOOZ ALLEN STUDY OR ONLY WITH CHRONICLE SHAREHOLDERS AND
3 THEIR REPRESENTATIVES.
4 WE DID WANT TO KEEP RUMORS, AND WHAT HAVE YOU, DOWN
5 TO BOTH COMPANIES ARE PRIVATELY HELD. AND THE RUMORS FUELED BY
6 PRESS AND OTHER MEDIA REPORTS ABOUT POSSIBLE DEALS WERE QUITE
7 DISRUPTIVE OF THE STAFF WHO WERE UNDERSTANDABLY NERVOUS ABOUT
8 WHAT WOULD HAPPEN, ET CETERA, TO THEM AND TO THEIR JOB, HOW
9 WOULD THEY BE CHANGED, AND I CAN GO ON AND ON.
10 SO SINCE THERE HAD BEEN NO FIRM DEAL, THERE WAS
11 CERTAINLY NO LEGAL REQUIREMENT THAT WE DO SO, AND WE HAD IN THE
12 PAST SOME CHRONICLE SHAREHOLDERS WHO CHOSE TO TALK AND THERE
13 WAS NOTHING WE COULD DO TO STOP THEM, BUT IT WASN'T IN THEIR
14 BEST INTEREST TO HAVE THIS KIND OF CONFIDENTIAL DISCUSSIONS
15 AIRED, IF YOU WILL, IN THE MEDIA.
16 Q. INCLUDING THE CHRONICLE AND THE EXAMINER?
17 A. YES, INCLUDING THE CHRONICLE AND THE EXAMINER.
18 Q. NOW, THESE ARE NOT CONFIDENTIAL, ONGOING DISCUSSIONS,
19 HOWEVER, WITH HEARST. THE CHRONICLE SHAREHOLDERS ALREADY CAME
20 TO A DECISION THAT THEY'RE SIMPLY NOT INTERESTED IN FURTHER
21 DISCUSSIONS; CORRECT?
22 A. THEY DID, BUT THE TIMEFRAME WHICH THEY DID IT, THE BOOZ
23 ALLEN STUDY, WHICH WAS BEING COMPLETED, ENTAILED AN INTERVIEW
24 WITH ALL CHRONICLE SHAREHOLDERS -- OR ALL BUT TWO OR THREE, AND
25 IN THE PROCESS OF THIS AND THEN THEY REGISTERED THEIR REPORT, A
262
SIAS - DIRECT / ALIOTO
1 MAJORITY OF CHRONICLE SHAREHOLDERS INDICATED A WILLINGNESS TO
2 CONSIDER SEVERAL THINGS, ONE OF WHICH WAS PERHAPS TO OPEN
3 RENEGOTIATIONS BUT THE MOST FUNDAMENTAL WAS TO KEEP THE COMPANY
4 GOING AS IT WAS AT THAT TIME.
5 Q. WELL, THE MODEL THAT WAS BEING USED, WAS IT NOT, IN THOSE
6 DISCUSSIONS WAS BASED UPON HEARST'S EXPERIENCE IN SAN ANTONIO
7 WHERE THE HEARST CORPORATION CLOSED THE HEARST-OWNED NEWSPAPER,
8 THE LIGHT, AFTER BUYING THE SAN ANTONIO EXPRESS NEWS? ISN'T
9 THAT CORRECT? DON'T LOOK AT THAT.
10 A. WELL, OKAY.
11 ONE OF THE ORIGINAL MODELS -- THERE WERE MODELS
12 FLYING ALL OVER. NOT MODEL PLANES, BUT MODEL -- FINANCIAL
13 MODELS OF VARIOUS SCENARIOS; AND THE FIRST -- WHEN I FIRST
14 ARRIVED ON THE SCENE, THE MODEL WAS BASED UPON A HEARST
15 EXPERIENCE IN SAN ANTONIO WHERE TWO SEPARATE NEWSPAPERS
16 OPERATED, AND
--
17 Q. AND THAT'S A SITUATION IN WHICH HEARST --
18 THE COURT: LET THE WITNESS FINISH HIS ANSWER.
19 THE WITNESS: THE SAN ANTONIO LIGHT WAS OWNED BY
20 HEARST AND THE EXPRESS NEWS BY RUPERT MURDOCH. THE HEARST
21 CORPORATION BOUGHT THE EXPRESS NEWS. THEY OFFERED, I BELIEVE,
22 THE LIGHT FOR SALE AND THEY CLOSED IT AND THEN THEY COMBINED
23 THE CIRCULATION.
24 BUT THERE WERE TWO SEPARATE NEWSPAPERS. THERE WAS
25 NOT A JOA. AND THE EXPERIENCE THERE WAS THAT, AS I RECALL, THE
263
SIAS - DIRECT / ALIOTO
1 COMBINED NEWSPAPERS' REVENUES THEY GOT 91 PERCENT OF THE
2 REVENUES THAT THE COMBINED NEWSPAPERS HAD PRIOR TO THE PURCHASE
3 OF THE EXPRESS NEWS AND 82 OR 83 PERCENT OF THE EXPENSES. AND
4 A MODEL THEN WAS BASED IN SAN FRANCISCO IF THAT WERE TO HAPPEN,
5 AND ONE OF THE NEWSPAPERS WERE CLOSED, I.E., THE EXAMINER, OR
6 SOLD, HOW MUCH REVENUE AND HOW MUCH EXPENSE WOULD BE ENTAILED.
7 AND THAT WAS THE BASE FROM WHICH THE MODEL THEN WAS BUILT TO
8 GOING FORWARD.
9 BY MR. ALIOTO:
10 Q. AND EVEN THOUGH THE DISCUSSIONS HAD CONCLUDED
--
11 THE COURT: LET ME SEE, LET ME SEE, THIS IS I ASSUME
12 A HEARST MODEL, A MODEL THAT THEY DEVELOPED FOR THEIR OWN
13 PLANNING PURPOSES?
14 THE WITNESS: I BELIEVE THAT IS CORRECT, YOUR HONOR.
15 I'M -- IT WAS THERE AND IT WAS -- WE GRAFTED ON AND STARTED
16 DOING THINGS, BUT I BELIEVE IT WAS THEIR MODEL. THEY HAD THE
17 INFORMATION. WE WOULD NOT HAVE HAD THAT INFORMATION.
18 THE COURT: I UNDERSTAND. THEY HAD THAT
19 INFORMATION. THEY EVIDENTLY RELATED THAT INFORMATION TO YOU OR
20 YOUR CONSULTANTS AND THEN YOU FOR YOUR OWN PLANNING PURPOSES
21 USED THAT TO
--
22 THE WITNESS: SHARED IT.
23 BY MR. ALIOTO:
24 Q. OKAY. BUT THE SCENARIO WAS ONE IN WHICH HEARST -- IN
25 WHICH HEARST CLOSED ITS OWN NEWSPAPER AND THEN BOUGHT THE
264
SIAS - DIRECT / ALIOTO
1 COMPETING NEWSPAPER IN SAN ANTONIO; CORRECT?
2 A. THAT IS CORRECT. I BELIEVE THAT THEY OFFERED THE LIGHT
3 FOR SALE.
4 Q. AND ONE OF THE REASONS THAT YOU DIDN'T WANT THIS TO BE
5 MADE PUBLIC, EVEN THOUGH THE CHRONICLE SHAREHOLDERS ALREADY
6 TOLD YOU THAT THEY HAD NO FURTHER INTEREST IN DISCUSSING THIS
7 WITH HEARST, WAS BECAUSE YOU FELT THAT NEWSPAPER REPORTERS IN
8 THE CHRONICLE, EXAMINER OR OTHERWISE, MAY SEE THE ANALOGY WITH
9 SAN ANTONIO IN WHICH HEARST SHUT DOWN ITS PAPER AND BOUGHT THE
10 OTHER PAPER; RIGHT?
11 A. NO, I DON'T THINK THAT WAS ONE OF THE REASONS, ALTHOUGH AS
12 A MATTER OF EXPERIENCE, BEFORE -- JUST BEFORE I GOT TO THE
13 CHRONICLE, THIS SAN ANTONIO EXPERIENCE HAD TAKEN PLACE AND THE
14 NEWSROOMS OF BOTH NEWSPAPERS WERE FILLED WITH RUMORS BACK AND
15 FORTH OF WHAT WAS GOING ON. THAT WAS BEFORE I GOT THERE.
16 BUT IT IS A FACT THAT THERE WAS A GREAT DEAL OF
17 RUMORING GOING ON AS TO -- WHAT THE HECK, YOU HAVE INTELLIGENT
18 ENERGETIC PEOPLE AND THEY'RE IN THE NEWS BUSINESS, SO THEY ARE
19 SPECULATING, AND WHAT HAVE YOU. AND THERE WAS GREAT INTEREST
20 AT THAT TIME IN WHAT MIGHT HAPPEN IN SAN FRANCISCO SINCE THE
21 HEARST CORPORATION WAS OPERATING IN BOTH MARKETS.
22 Q. AND WHEN YOU SAY THERE WERE RUMORS AT THAT TIME, YOU FELT
23 THAT IF THIS INFORMATION GOT OUT, THOSE RUMORS WOULD HAVE BEEN
24 VERIFIED; IS THAT RIGHT?
25 A. I DON'T KNOW. NO, I DON'T KNOW THAT THE RUMORS VERIFIED
265
SIAS - DIRECT / ALIOTO
1 AT THE TIME THIS LETTER, THAT BOOZ ALLEN STUDY, AND SO FORTH.
2 THAT WAS FOUR YEARS LATER, THREE AND A HALF YEARS LATER.
3 I EXPLAINED MY INTEREST IN HAVING THE MEDIA
4 ATTENTION NOT FUELED BY OUR SHAREHOLDERS TALKING WITH THE MEDIA
5 BECAUSE IT WAS VERY DISRUPTIVE OF THE PROCESS.
6 AND THE SAN JOSE MERCURY NEWS RAN A STORY IN APRIL,
7 EITHER LATE APRIL OR MAY OF I BELIEVE IT WAS '97, IN WHICH THEY
8 SAID THAT A DEAL TO CLOSE THE EXAMINER AND THE CHRONICLE WAS
9 DUE WITHIN 10 DAYS OR LESS. AND THAT IS VERY DISRUPTIVE; AND,
10 IN FACT, IT WAS INCORRECT. AND LATER THE SAN JOSE MERCURY NEWS
11 PRINTED AN APOLOGY. I THINK IT WAS ABOUT THREE YEARS LATER.
12 (LAUGHTER)
13 Q. AT THE TIME OF THE RUMORS, DID YOU DENY THAT THERE WERE
14 ANY DISCUSSIONS GOING ON IN THE NEWSPAPER?
15 A. I DON'T COMMENT TO THE MEDIA ON MATTERS OF THIS NATURE.
16 (LAUGHTER)
17 Q. LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE I BELIEVE
18 AS 85. EXHIBIT 85 IS A DOCUMENT DIRECTED TO MR. FRANK BENNACK
19 DATED OCTOBER 24, 1997, FROM YOU.
20 DID YOU, SIR, WRITE THAT DOCUMENT OR CAUSE THAT
21 DOCUMENT TO BE PREPARED AND SENT TO MR. BENNACK ON OR ABOUT
22 THAT DATE?
23 A. YES, SIR.
24 MR. ALIOTO: IT'S IN EVIDENCE; ISN'T IT?
25 MR. SHULMAN: (NODS HEAD.)
266
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. THE DOCUMENT IS IN EVIDENCE. I WANT TO DIRECT YOUR
3 ATTENTION TO THE SECOND PARAGRAPH AND YOU STATE, QUOTE:
4 "CHRONICLE'S SHAREHOLDERS HAVE DECIDED TO
5 KEEP THE COMPANY INTACT AND UNDER THEIR
6 EXCLUSIVE OWNERSHIP FOR THE LONG TERM AND
7 COORDINATED ESTATE-PLANNING ACTIONS ARE BEING
8 UNDERTAKEN BY THEM TO ASSURE THIS RESULT. THEY
9 HAVE DECIDED AGAINST TRANSFERRING PARTIAL
10 OWNERSHIP IN ANY OF ITS PROPERTIES TO ANYONE
11 ELSE. THEY HAVE ALSO DECIDED NOT TO EXTEND OUR
12 JOINT NEWSPAPER OPERATIONS BEYOND SEPTEMBER 12,
13 2005, EXPIRATION DATE OF OUR JOINT OPERATING
14 AGREEMENT."
15 THESE ARE THE STATEMENTS THAT YOU WROTE TO
16 MR. BENNACK ON OR ABOUT THIS DATE; CORRECT?
17 A. YES, SIR.
18 Q. SO THAT AS OF THIS DATE, OCTOBER 24, 1997, THE CHRONICLE
19 SHAREHOLDERS DID NOT WANT TO CONTINUE ANY FURTHER NEGOTIATION
20 WITH HEARST; CORRECT?
21 A. THAT IS CORRECT.
22 Q. AND NOT ONLY THAT, BUT THEY INTENDED NOT TO EXTEND THE
23 JOA; CORRECT?
24 A. YES.
25 Q. ALL RIGHT. NOW, THEN YOU STATE IN -- IF YOU GO DOWN TWO
267
SIAS - DIRECT / ALIOTO
1 PARAGRAPHS, IT BEGINS, "IF HEARST," YOU STATE TO MR. BENNACK,
2 QUOTE:
3 "IF HEARST CONSIDERED CLOSING THE EXAMINER,
4 CHRONICLE WOULD GIVE ITS APPROVAL TO SUCH ACTION
5 AND WOULD TAKE ON THE RESPONSIBILITY OF PUTTING
6 OUT THE ENTIRE SUNDAY PAPER, SPLITTING EQUALLY
7 WITH HEARST ITS INCREMENTAL EDITORIAL COSTS OF
8 DOING SO."
9 DO YOU SEE THAT?
10 A. YES, SIR.
11 Q. NOW, IF HEARST IN FACT CLOSED THE EXAMINER AND THE
12 CHRONICLE TOOK OVER THE SUNDAY PAPER, WAS IT GOING TO SPLIT ANY
13 REVENUE WITH HEARST?
14 A. LATER ON THIS LETTER COVERS THAT, MR. ALIOTO.
15 Q. GO AHEAD.
16 THE COURT: COULD YOU POINT WHERE THAT SUBJECT IS
17 DISCUSSED, MR. SIAS?
18 THE WITNESS: ALL RIGHT, LET ME....
19 BY MR. ALIOTO:
20 Q. GO TO PAGE 2 AND THE SECOND-TO-LAST PARAGRAPH.
21 A. (WITNESS EXAMINES DOCUMENT.) YES. "HEARST WOULD
22 CONTINUE"
--
23 Q. QUOTE:
24 "HEARST WOULD CONTINUE TO HONOR SFNP,"
25 THAT'S SAN FRANCISCO NEWSPAPER, "AND WOULD HAVE
268
SIAS - DIRECT / ALIOTO
1 FULL PARTICIPATION ON SFNP'S BOARD OF DIRECTORS
2 UNTIL SEPTEMBER 12, 2005"; CORRECT?
3 A. YES, SIR.
4 Q. OKAY. NOW, THE IDEA THERE WAS THAT YOU ARE TELLING --
5 YOU'RE TELLING HEARST, YOU'RE TELLING MR. BENNACK, THAT, NUMBER
6 ONE, CHRONICLE SHAREHOLDERS DON'T WANT TO HAVE ANYTHING MORE TO
7 DO WITH ANY KIND OF DEAL WITH HEARST; AND, SECOND, WE'RE NOT
8 GOING PAST THE JOA OF 2005, THAT'S GOING TO BE IT, FROM THEN ON
9 EVERYONE IS ON THEIR OWN; CORRECT?
10 A. (WITNESS NODS HEAD.)
11 Q. AND THEN YOU WERE ALSO TELLING THEM THAT IF HEARST CLOSED,
12 YOU'D STILL PAY THEM 50 PERCENT; CORRECT? IF HEARST CLOSED THE
13 EXAMINER, YOU'D STILL PAY THEM 50 PERCENT UNTIL 2005?
14 A. THE CONSEQUENCES OF WHAT WE WOULD DO WOULD BE THAT THEY
15 WOULD HAVE 50 PERCENT OF THE REVENUE. THE CONSEQUENCES. BUT
16 WHAT WE SAID WAS THEY WOULD CONTINUE TO OWN THE -- THEIR HALF
17 OF THE JOA FOR THE REMAINING TERMS OF THE JOA.
18 Q. EVEN THOUGH THEY DIDN'T HAVE A PAPER?
19 A. EVEN THOUGH THEY DIDN'T HAVE A PAPER.
20 Q. SO THAT --
21 MR. ALIOTO: IF I MAY USE THE EASEL, YOUR HONOR.
22 THE COURT: VERY WELL.
23 BY MR. ALIOTO:
24 Q. SO THAT WHAT YOU WERE SAYING -- SO THAT WHAT YOU WERE
25 SAYING IS THAT EVEN THOUGH THERE WOULD NO LONGER BE A SAN
269
SIAS - DIRECT / ALIOTO
1 FRANCISCO EXAMINER AND ALL THE REVENUE WOULD BE COMING IN FROM
2 THE SAN FRANCISCO CHRONICLE INTO THE SAN FRANCISCO NEWSPAPER --
3 A. AGENCY.
4 Q. -- AGENCY, YOU'RE SAYING YOU'LL STILL PAY THE HEARST
5 CORPORATION EVEN THOUGH THEY NO LONGER HAVE A PAPER; CORRECT?
6 A. THAT'S CORRECT.
7 Q. AND THAT WAS IN -- THAT WAS TO ENTICE THEM, WAS IT NOT, TO
8 CLOSE THE EXAMINER?
9 MR. ROSCH: OBJECTION, YOUR HONOR. I THINK IT
10 MISSTATES THE DOCUMENT, WHICH SPEAKS IN TERMS OF --
11 THE COURT: OBJECTION OVERRULED.
12 YOU MAY ANSWER.
13 THE WITNESS: "ENTICE" IS AN INTERESTING WORD. I
14 DON'T KNOW THAT I WOULD USE THAT, BUT THIS WAS TO LET THE
15 HEARST CORPORATION KNOW WHAT WE WOULD DO IF THEY DECIDED TO
16 STOP PUBLISHING THE EXAMINER OR OFFER IT FOR SALE.
17 BY MR. ALIOTO:
18 Q. SO THEN YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT --
19 WELL, WAIT A MINUTE. YOU DON'T SAY HERE ABOUT -- YOU
20 ANTICIPATE -- STRIKE THAT. LET ME BEGIN AGAIN.
21 YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT,
22 THAT YOU MIGHT HAVE A MONOPOLY IN THE MARKET; ISN'T THAT RIGHT?
23 A. MR. ALIOTO, WHEN YOU USE THE TERM "MONOPOLY," I'M NOT AN
24 ATTORNEY, OBVIOUSLY THE CASE, BUT IT HAS WIDE-RANGING
25 IMPLICATIONS. I DO NOT BELIEVE THERE ARE MANY MEDIA MONOPOLIES
270
SIAS - DIRECT / ALIOTO
1 OF ANY KIND LEFT IN TODAY'S FRAGMENTED MEDIA MARKETPLACE. SO
2 I'M NOT PREPARED TO SAY THAT THERE WOULD BE A MONOPOLY.
3 Q. YOU BELIEVED, DID YOU NOT, THAT YOU WOULD BE THE ONLY
4 DAILY NEWSPAPER IN SAN FRANCISCO IF THE EXAMINER -- IF HEARST
5 AGREED TO SHUT DOWN OR CLOSE THE EXAMINER; CORRECT?
6 A. WE WOULD BE THE ONLY DAILY NEWSPAPER PUBLISHED IN SAN
7 FRANCISCO. THERE ARE A NUMBER OF OTHER DAILY NEWSPAPERS THAT
8 CIRCULATE IN THE CITY.
9 Q. AND YOU BELIEVED THAT YOU WOULD BE SO POWERFUL AND STRONG
10 THAT YOU WOULD BE ABLE TO SPLIT 50-50 WITH HEARST EVEN THOUGH
11 THEY DIDN'T HAVE A PAPER IN THE MARKET; CORRECT?
12 A. ONCE AGAIN, YOU'RE --
13 Q. IS THAT CORRECT?
14 A. NO. THOSE ARE YOUR WORDS, NOT MINE.
15 Q. I'M ASKING YOU IF IT'S CORRECT, THAT YOU BELIEVED --
16 A. ALL I'M SAYING -- I'M NOT PREPARED TO SAY THAT YOUR
17 PHRASEOLOGY IS CORRECT. YOU'RE IMPUTING MOTIVES TO ME AND SO
18 FORTH. SO, NO.
19 WHAT I DO KNOW IS THAT IF THEY HAD DONE THAT, WE
20 WOULD HAVE ENJOYED A MORE PROFITABLE POSITION AND WE WOULD HAVE
21 BEEN IN A POSITION TO PUT OUT A MUCH STRONGER NEWSPAPER THAN IS
22 CURRENTLY THE CASE UNDER THE JOINT OPERATING AGREEMENT; AND
23 WE'RE VERY CONCERNED WITH OUR EDITORIAL FRANCHISE, THE HEART OF
24 THE BUSINESS, AND THAT IS THE HEART OF THIS PRESENT JOINT
25 OPERATING AGREEMENT.
271
SIAS - DIRECT / ALIOTO
1 THE CHRONICLE IS THE CORE BUSINESS, AND WE ARE NOT
2 DOING AS WELL IN THE CIRCULATION AREA AS WE SHOULD; AND I
3 WANTED MORE RESOURCES GOING INTO OUR PRODUCT TO MAKE IT A
4 STRONGER, MORE COMPETITIVE PRODUCT IN THE GREATER MEDIA
5 ENVIRONMENT THAT EXISTS IN THIS MARKET, THE GREATER -- AND I
6 MEAN THE GREATER BAY AREA.
7 Q. AND YOU BELIEVED THAT ONE OF THE THINGS YOU CERTAINLY
8 COULD DO IF YOU WERE THE ONLY DAILY NEWSPAPER IN SAN FRANCISCO
9 IS THAT WHAT YOU COULD DO IS IF YOU WANTED TO RAISE YOUR RATES
10 FOR ADVERTISING, YOU COULD DO THAT; COULDN'T YOU?
11 A. NOW, ONCE AGAIN, WE'RE GETTING INTO WIDE-RANGING THINGS
12 WHERE RATES GO UP AND THEY GO DOWN. I DON'T KNOW WHAT WE WOULD
13 HAVE DONE WITH RATES.
14 Q. WELL, YOU SAID THAT YOU WOULD BE MORE PROFITABLE IF THE
15 EXAMINER SHUT DOWN; CORRECT?
16 A. YES.
17 Q. BUT YOU'RE STILL GIVING THEM 50 PERCENT OF THE BUSINESS;
18 AREN'T YOU?
19 A. THAT'S CORRECT.
20 Q. YOU STILL WOULD MAKE MORE PROFIT WITH THEM OUT OF THE
21 MARKET; IS THAT RIGHT? IS THAT WHAT YOU'RE SAYING?
22 A. I'M SAYING THAT WE WOULD HAVE -- I DIDN'T SAY THAT IN THIS
23 LETTER, SO YOU
--
24 Q. I'M ASKING YOU, SIR. YOU SAID THAT YOU WANTED THEM -- YOU
25 SAID IF THEY SHUT DOWN, IF THEY SHUT DOWN THEIR NEWSPAPER,
272
SIAS - DIRECT / ALIOTO
1 YOU'RE STILL GOING TO SHARE WITH THEM 50-50; CORRECT?
2 A. WE'RE STILL GOING TO CONTINUE THE JOA AND ITS TERMS, YES.
3 Q. BUT YOU SAID THAT IF THEY DID SHUT DOWN, THE SAN FRANCISCO
4 CHRONICLE WOULD BE MORE PROFITABLE.
5 A. IT WOULD.
6 Q. YOU JUST SAID THAT.
7 A. I DID, YOU'RE RIGHT.
8 Q. OKAY. AND IT WOULD BE MORE PROFITABLE EVEN THOUGH YOU'RE
9 SHARING 50-50 WITH THE EXAMINER?
10 A. YES, SIR.
11 Q. SO THE WAY IT WOULD BE MORE PROFITABLE IS YOU'D UP YOUR
12 RATES; ISN'T THAT TRUE?
13 A. I DON'T THINK YOU'VE BEEN IN THE NEWSPAPER BUSINESS.
14 Q. I DIDN'T ASK WHETHER I WAS IN THE NEWSPAPER BUSINESS. I
15 SAID ISN'T THAT TRUE.
16 (LAUGHTER)
17 Q. ISN'T THAT TRUE?
18 A. IT'S NOT CORRECT. IT IS NOT CORRECT.
19 Q. DESPITE THE NERVOUS LAUGHTER, ISN'T THAT TRUE?
20 A. IT IS NOT CORRECT. IT IS NOT CORRECT.
21 THE COURT: ALL RIGHT. ALL RIGHT.
22 THE WITNESS: THE EXPENSES WOULD GO DOWN.
23 THE COURT: WHAT ABOUT THE SUNDAY NEWSPAPER UNDER
24 THIS SCENARIO? HEARST PUTS OUT, AS YOU POINTED OUT, THE BULK
25 OF THE SUNDAY NEWSPAPER. UNDER THIS SCENARIO, WHO WOULD BEAR
273
SIAS - DIRECT / ALIOTO
1 THE COSTS OF THE EDITORIAL PRODUCT THAT WAS PUT OUT ON SUNDAY?
2 IS THAT COVERED IN THIS LETTER?
3 THE WITNESS: YES, SIR, AND THERE IS A -- THANK YOU
4 FOR ASKING.
5 HALF OF THE INCREMENTAL EDITORIAL COST OF PUTTING
6 OUT A SUNDAY PAPER WOULD HAVE BEEN BORNE BY HEARST AND HALF BY
7 THE CHRONICLE.
8 AND ONE OF THE GREAT PROBLEMS WITH OUR JOA IS
9 MR. ALIOTO HAS REFERRED TO THE FACT THAT SOMETHING LIKE
10 40 PERCENT OF THE COMBINED REVENUE FOR THE NEWSPAPERS COMES
11 FROM THE SUNDAY NEWSPAPER; AND IN SAN FRANCISCO, UNLIKE OTHER
12 MARKETS, THE SUNDAY PAPER IS NOT SUBSTANTIALLY HIGHER IN
13 CIRCULATION THAN THE DAILY, COMBINED DAILY CIRCULATION.
14 AND ONE OF THE POTENTIAL REASONS IS THAT THERE IS A
15 LARGE DISCONNECT FOR ABOUT 80 PERCENT OF THE COMBINED
16 CIRCULATION ON SUNDAY IN THAT ALL OF THE LIVE SECTIONS ARE
17 PRODUCED BY THE EXAMINER SO THAT CHRONICLE READERS DO NOT GET
18 THEIR REGULAR COLUMNISTS, THEY DO NOT GET THEIR STYLE OF
19 WRITING, THEY DO NOT GET THEIR REGULAR SECTIONS.
20 AND I'M NOT -- THIS IS NOT SAID IN A PEJORATIVE
21 SENSE AT ALL. IT'S SIMPLY A DISCONNECT OF A VERY IMPORTANT
22 PART OF THE MARKET, AND ONE THAT WE WOULD VERY DEFINITELY FEEL
23 WOULD BE IN THE LONG-TERM INTEREST OF THE NEWSPAPER THAT WE
24 WOULD PUBLISH, NAMELY THE CHRONICLE.
25
274
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. YOU -- LET ME SHOW YOU -- IF I MAY APPROACH THE WITNESS,
3 YOUR HONOR.
4 THE COURT: BEFORE YOU DO THAT, LET ME FOLLOW UP ON
5 THAT, MR. SIAS.
6 DID YOU EVER HAVE ANY DISCUSSIONS WITH THE HEARST
7 CORPORATION ABOUT THIS DISCONNECT?
8 THE WITNESS: YES, WE DID, BUT UNDERSTANDABLY HEARST
9 WAS VERY RELUCTANT. THIS WAS -- THEY GOT THIS BECAUSE THEY GOT
10 AFFLICTED WITH THE EVENING FIELD, AND EVENING PAPERS WITH THE
11 CHANGE IN LIFESTYLE IN THE LAST 30 YEARS HAVE BEEN A VERY,
12 ALMOST AN IMPOSSIBLE POSITION. AND THEY WERE NOT GOING TO GIVE
13 UP THAT LEVERAGE THAT THEY HAD WITH THAT SUNDAY PAPER, AND --
14 THE COURT: SO THERE WAS NO APPROACH TO THEM
--
15 THE WITNESS: WE NEVER HAD ANY DETAILED DISCUSSIONS.
16 IT WAS JUST THAT THAT WAS THEIR RESPONSIBILITY AND THEY DID A
17 NUMBER OF THINGS TO TRY TO MAKE THE SUNDAY PAPER STRONG, AND SO
18 FORTH.
19 THE CHRONICLE, I MIGHT ADD, MY ATTITUDE TOWARD THIS
20 SITUATION IS THAT WE WERE PARTNERS WITH THE HEARST CORPORATION
21 FOR THE TERMS OF THIS AGREEMENT, AND I DON'T THINK THERE'S
22 ANYTHING THAT ANYONE WILL EVER FIND THAT I ACTED ANY OTHER WAY.
23 INCLUDED IN THAT WE TURNED OVER THE NEW YORK TIMES
24 SERVICE, WHICH WAS THE CHRONICLE'S, TO HEARST TO USE ON SUNDAY
25 TO HELP BOLSTER THEIR PAPER. AND THERE ARE OTHER THINGS. AND
275
SIAS - DIRECT / ALIOTO
1 HEARST INCREASED AND TOTALLY REVAMPED THEIR MAGAZINE ABOUT FOUR
2 YEARS AGO TO VERY GOOD ADVANTAGE.
3 BUT YOU CAN'T ESCAPE THE ISSUE THERE. THE HEARST OR
4 THE EXAMINER DOESN'T REALLY HAVE BUREAUS OUT IN THE SUBURBS,
5 AND THE CHRONICLE -- AND OUR CIRCULATION IS REGIONAL. WE'RE IN
6 SIX COUNTIES PRETTY GOOD SIZED, AND ALL OF THESE THINGS COMBINE
7 TO MAKE A PROBLEM FOR BOTH COMPANIES.
8 THE COURT: BUT THERE WAS NO -- I GATHER THERE WAS
9 NO SERIOUS DISCUSSION WITH HEARST CORRECTING THIS DISCONNECT
10 PROBLEM, AS YOU CHARACTERIZE IT, IN ORDER TO IMPROVE THE
11 EDITORIAL PRODUCT AND PRESUMABLY GENERATE GREATER REVENUES FOR
12 THE COMBINED ENTITY, NO SERIOUS DISCUSSIONS?
13 THE WITNESS: NO, THERE WAS NOT.
14 THE COURT: ALL RIGHT. EXCUSE THE INTERRUPTION,
15 MR. ALIOTO.
16 MR. ALIOTO: YOUR HONOR. THANK YOU, YOUR HONOR.
17 Q. LET ME HAND YOU -- IF I MAY APPROACH THE WITNESS, YOUR
18 HONOR.
19 THE COURT: VERY WELL.
20 BY MR. ALIOTO:
21 Q. LET ME HAND YOU WHAT IS PLAINTIFF'S EXHIBIT 5 IN EVIDENCE.
22 PLAINTIFF'S EXHIBIT 5 IN EVIDENCE IS A PRESENTATION. IT IS
23 ENTITLED "PROJECT GOLDEN." IT'S DATED MAY 4, 1999, AND THIS IS
24 IN FACT A PRESENTATION PREPARED WITH REGARD TO THE CHRONICLE
25 AND THE EXAMINER.
276
SIAS - DIRECT / ALIOTO
1 PROJECT GOLDEN BEING WHAT?
2 A. PROJECT GOLDEN WAS THE STUDY DONE BY DONALDSON, LUFKIN,
3 JENRETTE, AN INVESTMENT BANKING FIRM HIRED BY CHRONICLE
4 CORPORATION TO EVALUATE THE PROSPECTS OF THE CORPORATION AND
5 MANY BUSINESSES AND WHAT TO DO ABOUT THEM OR WHAT POTENTIAL
6 COURSES OF ACTION CHRONICLE SHAREHOLDERS MIGHT TAKE.
7 Q. AND THIS EXHIBIT 5 IS, IN FACT, A COPY OF PROJECT GOLDEN,
8 IS IT NOT, OF THE MAY --
9 A. YES.
10 Q. -- 1999? CORRECT?
11 A. YES.
12 Q. AND ONE OF THE ITEMS THAT WAS BEING DISCUSSED AT THIS TIME
13 AND ONE OF THE OBLIGATIONS OF DONALDSON, LUFKIN, WAS TO GIVE
14 SOME KIND OF COMPARISON AS TO WHAT WOULD HAPPEN IF THE EXAMINER
15 DROPPED OUT OR IF THE EXAMINER AND THE CHRONICLE COMPETED HEAD
16 TO HEAD AFTER THE JOA; CORRECT?
17 A. NOT QUITE. THEIR ASSIGNMENT WAS TO EVALUATE THE POTENTIAL
18 PRICES THEY COULD GET FOR OUR BUSINESSES, EACH OF THE
19 BUSINESSES, AND TO GIVE THE CHRONICLE SHAREHOLDERS THEIR
20 ASSESSMENT OF WHAT THEIR CAPACITY WOULD BE TO GET THAT KIND OF
21 MONEY FOR EACH ONE OF THESE THINGS. SO OUT OF THAT THEY DID
22 SOME ANALYSES AND INCLUDING THE ONE TO WHICH YOU REFER.
23 Q. OKAY. WE'LL GET TO THAT IN ONE MINUTE, BUT YOU REMINDED
24 ME OF SOMETHING.
25 YOU SAID PREVIOUSLY THAT 30 TO 40 PERCENT OF THE
277
SIAS - DIRECT / ALIOTO
1 TOTAL ADVERTISING VOLUME PER WEEK IS IN THE SUNDAY NEWSPAPER;
2 CORRECT?
3 A. I DIDN'T SAY 30. YOU DID EARLIER, BUT 40 PERCENT IS --
4 Q. 40 PERCENT?
5 A. I THINK 40 PERCENT NOW IS, OF THE ADVERTISING VOLUME AND
6 PROBABLY A LITTLE HIGHER, IS RUNNING ON SUNDAY.
7 Q. ON SUNDAY, OKAY.
8 SO WOULD YOU SAY THAT A PAPER NEEDS THE SUNDAY PAPER
9 TO MAKE IT IN SAN FRANCISCO, A DAILY NEWSPAPER?
10 A. NOT NECESSARILY.
11 Q. YOU SHARED IN THE BUSINESS OF THE SUNDAY PAPER, DID YOU
12 NOT? "YOU" MEANING THE CHRONICLE.
13 A. WE SHARED -- DO YOU MEAN WE SHARED THE REVENUE DERIVED
14 FROM IT?
15 Q. YES.
16 A. YES, SIR.
17 Q. AND IN YOUR PROPOSAL WHEN YOU WANTED THE EXAMINER, IF THE
18 EXAMINER SHUT DOWN, YOU SAID ON SUNDAY THEY WOULD HAVE TO PAY
19 THEIR SHARE OF THE EXPENSES FOR THE SUNDAY PAPER; CORRECT?
20 A. THEIR SHARE OF EDITORIAL EXPENSES.
21 Q. FOR THE SUNDAY PAPER?
22 A. YES.
23 Q. OKAY. BUT NOT FOR ANY OTHER -- NOT FOR ANY OTHER DAY OF
24 THE WEEK?
25 A. NO.
278
SIAS - DIRECT / ALIOTO
1 Q. NOW, IF YOU'LL GO TO PROJECT GOLDEN, AND I WANT TO DIRECT
2 YOUR ATTENTION TO THE SECOND PART. THERE'S A SUPPLEMENT AND
3 IT'S PAGE 26 OF THE SUPPLEMENT. SO THIS DOCUMENT, EXHIBIT 5,
4 IS BOTH THE ORIGINAL REPORT AND THEN THE SUPPLEMENT.
5 MR. ALIOTO: THAT WOULD BE, IF IT PLEASE YOUR HONOR,
6 THE BATES NUMBER IS 350227. OTHERWISE IT MIGHT GET CONFUSED.
7 Q. ARE YOU ON PAGE 26, SIR?
8 A. I'M ON PAGE 26, YES.
9 MR. ALIOTO: OKAY. I NEED PAGE 26. ARE YOU GOING
10 TO PUT IT BACK UP?
11 MR. SHULMAN: YES.
12 BY MR. ALIOTO:
13 Q. OKAY. I WANT TO DIRECT YOUR ATTENTION TO PAGE 26. NOW,
14 THERE ARE THREE VERTICAL COLUMNS, AND IT'S HEADNOTED, QUOTE,
15 "IF THE JOA IS UNRESOLVED, HEARST COULD LEAVE THE MARKET AFTER
16 2005."
17 A. I MAY HAVE A DIFFERENT PAGE 26.
18 Q. OKAY.
19 A. I'VE GOT A SUMMARY OF ALTERNATIVES.
20 MR. ALIOTO: OKAY. THERE'S TWO.
21 MAY I APPROACH THE WITNESS, YOUR HONOR?
22 THE COURT: YES. GIVE HIM A HAND IF YOU WOULD,
23 MR. ALIOTO.
24 BY MR. ALIOTO:
25 Q. THERE'S TWO, AND THEN THERE'S A SUPPLEMENT.
279
SIAS - DIRECT / ALIOTO
1 A. SORRY ABOUT THAT.
2 Q. IT'S ALL RIGHT.
3 (PAUSE IN PROCEEDINGS.)
4 THE WITNESS: THANK YOU.
5 BY MR. ALIOTO:
6 Q. OKAY. AND THIS IS HEADNOTED "JOA OPERATING SCENARIOS."
7 AND IT STATES:
8 "IF THE JOA IS UNRESOLVED, HEARST COULD
9 LEAVE THE MARKET AFTER 2005 RESULTING IN ONE
10 SURVIVING NEWSPAPER, THE CHRONICLE, OR STAY IN
11 THE MARKET AFTER 2005 RESULTING IN WAR."
12 DO YOU SEE THAT?
13 A. I SEE IT.
14 Q. OKAY. NOW, THERE ARE THREE VERTICAL COLUMNS. ON THE
15 LEFT-HAND COLUMN IT STATES THE MAJOR PROFIT AND LOSS COMPONENT.
16 AND GOING DOWN
-- GOING DOWN ON VERTICALLY THERE'S CIRCULATION
17 PRICING, AD REVENUE, CIRCULATION PRODUCTION AND CIRCULATION
18 EDITORIAL, CAPITAL EXPENDITURE AND LENGTH OF COMPETITION. DO
19 YOU SEE THAT, THEY COME DOWN ON THE LEFT-HAND SIDE? SEE HOW
20 THEY COME DOWN ON THE LEFT-HAND SIDE?
21 A. YES.
22 Q. OKAY. THE SECOND COLUMN IS ENTITLED "JOA RESOLUTION OF
23 HEARST WALKS IN 2006."
24 SO THAT WOULD -- AND THEN IT HAS UNDERNEATH THAT,
25 PARENTHESES, "ONE NEWSPAPER." DO YOU SEE THAT?
280
SIAS - DIRECT / ALIOTO
1 A. YES.
2 Q. IT'S THE SECOND COLUMN.
3 AND SO THEN IT WOULD SHOW, IF THERE WERE JUST ONE
4 NEWSPAPER, WHAT THE CIRCULATION WOULD BE. AND THEN IT WOULD
5 SHOW WHAT THE CIRCULATION PRICING WOULD BE AND THE AD REVENUE,
6 AND THEN WHAT THE PRODUCTION CIRCULATION WOULD BE AND THE
7 EDITORIAL AND THEN THE CAPITAL EXPENDITURES AND THEN THE LENGTH
8 OF COMPETITION. DO YOU SEE THAT?
9 A. YES.
10 Q. THEN ON THE FAR RIGHT-HAND SIDE IT HAS "NO RESOLUTION" AND
11 IT HAS "WAR." IT STATES, QUOTE, "NO RESOLUTION - WAR," RIGHT
12 ON THE TOP.
13 AND IT ALSO HAS, GOING DOWN VERTICALLY, WHAT WOULD
14 HAPPEN IF THERE WERE COMPETITION AFTER 2005 ON EACH OF THOSE
15 ITEMS: CIRCULATION, AD REVENUE, PRODUCTION, ET CETERA. DO YOU
16 SEE THAT?
17 A. YES, SIR.
18 Q. OKAY. NOW, ACCORDING TO THIS DOCUMENT, IF THERE WERE ONLY
19 ONE PAPER, IF ONE OF THE PAPERS FOLDED, IF THERE WERE ONLY ONE
20 PAPER, IT STATES, QUOTE:
21 "92 PERCENT OF THE COMBINED CIRCULATION IS
22 KEPT (OTHER MARKETS AVERAGE 80 PERCENT)."
23 DO YOU SEE THAT?
24 A. YES.
25 Q. YOU READ THIS; DIDN'T YOU?
281
SIAS - DIRECT / ALIOTO
1 A. I READ IT.
2 Q. OKAY.
3 A. I DIDN'T AGREE WITH IT.
4 Q. WELL, THEN I'M GOING TO ASK YOU WHAT PART YOU AGREE AND
5 WHICH PART YOU DON'T AGREE. BUT WAS IT YOUR UNDERSTANDING THAT
6 WHEN THEY SAY "92 PERCENT OF THE COMBINED CIRCULATION IS KEPT,"
7 THAT MEANS IF YOU JUST ADDED THE CIRCULATION OF BOTH THE
8 EXAMINER AND THE CHRONICLE, BOTH DAILY AND SUNDAY, THAT
9 92 PERCENT OF THAT FIGURE WOULD BE WHAT WOULD REMAIN IF THERE
10 WERE JUST ONE PAPER; CORRECT?
11 A. THAT'S WHAT THIS SAYS.
12 Q. IS IT CORRECT THAT THE OTHER MARKETS AVERAGE --
13 A. I'M NOT SAYING --
14 Q. -- 80 PERCENT --
15 A. IF I MIGHT, PLEASE.
16 Q. DO YOU DISAGREE --
17 A. WHEN I SAY "CORRECT," I AM SAYING CORRECT TO YOUR READING
18 OF WHAT'S SAID HERE. I AM NOT AGREEING THAT WHAT IS SAID IS
19 CORRECT.
20 Q. DO YOU AGREE THAT IF ONE OF THE PAPERS DROPPED OUT, THAT
21 THE SURVIVING PAPER WOULD HAVE 92 PERCENT OF THE COMBINED
22 CIRCULATION?
23 A. I DON'T KNOW. IT WOULD HAVE MOST OF THE COMBINED
24 CIRCULATION, BUT I DO NOT KNOW WHAT THAT WOULD BE AND I DON'T
25 THINK ANYBODY DOES. EXPERIENCE WOULD HAVE TO RULE THAT.
282
SIAS - DIRECT / ALIOTO
1 Q. WITH REGARD TO NO RESOLUTION OR WAR, IT STATES, QUOTE:
2 "EXAMINER LOSES 25,000 OVERLAPPING
3 SUBSCRIBERS BUT GAINS 50,000 SUBSCRIBERS WITH
4 PRICE COMPETITION RESULTING IN 25 PERCENT NET
5 SUBSCRIBER LOSS FOR THE CHRONICLE."
6 DO YOU SEE THAT?
7 A. I SEE IT.
8 Q. DO YOU DISAGREE WITH THAT?
9 MR. ROSCH: I THINK IT'S 25,000.
10 MR. HALLING: 25,000.
11 MR. ALIOTO: INSTEAD OF WHAT?
12 MR. ROSCH: YOU SAID 25 PERCENT.
13 BY MR. ALIOTO:
14 Q. ALL RIGHT. LET ME DO IT AGAIN. WHAT IT SAYS IS EXAMINER
15 LOSES --
16 THE COURT: I THINK I'VE GOT IT.
17 MR. ALIOTO: OKAY. THANK YOU, YOUR HONOR. ALL
18 RIGHT.
19 Q. SO, IN OTHER WORDS, WHAT THEY'RE SAYING HERE IS IF THERE'S
20 HEAD-TO-HEAD COMPETITION, THE EXAMINER WILL GAIN 25,000
21 SUBSCRIBERS BECAUSE OF PRICE COMPETITION? THAT'S WHAT IT SAYS;
22 RIGHT?
23 A. THAT'S WHAT IT SAYS.
24 Q. DO YOU AGREE WITH THAT?
25 A. ABSOLUTELY NOT.
283
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY?
3 ALL RIGHT, THEN, WITH REGARD TO CIRCULATION PRICING,
4 IF THERE IS ONE NEWSPAPER, IT SAYS "NO PRICE INCREASE."
5 DO YOU SEE THAT?
6 A. YES, SIR.
7 Q. DO YOU AGREE WITH THAT, THAT IF THE EXAMINER SHUT DOWN,
8 THE CHRONICLE WOULD NOT INCREASE THE PRICE?
9 A. I THINK THAT THAT IS CORRECT BUT I DON'T KNOW THIS. WE
10 ARE TALKING OUT IN THE -- INTO A SPECULATIVE AREA, AND I DON'T
11 CHOOSE TO GET INTO SPECULATION.
12 Q. YOU WERE MAKING THAT OFFER TO HEARST, WERE YOU NOT, THAT
13 THEY CLOSED THEIR PAPER AND YOU WOULD BE THE ONLY PAPER,
14 CORRECT?
15 A. YES.
16 Q. DID YOU HAVE ANY IDEA WHATSOEVER AS TO WHAT YOU WOULD DO
17 IF, IN FACT, HEARST AGREED?
18 A. CIRCULATION PRICING?
19 Q. YES.
20 A. WAS THE IMMEDIATE SUBJECT.
21 Q. ALL RIGHT, FOR THAT ONE.
22 A. NOT REALLY BECAUSE CIRCULATION THESE DAYS IS ANYTHING
23 WE -- THE NEWSPAPER INDUSTRY MAY BE GOING TO LOWER CIRCULATION
24 PRICES AND MAYBE EVEN FREE DISTRIBUTION. SO I AM NOT PREPARED
25 TO GIVE YOU A DEFINITIVE ANSWER ON WHAT WE WILL DO SIX YEARS
284
SIAS - DIRECT / ALIOTO
1 HENCE. OF COURSE, THIS IS SPECULATING.
2 Q. WELL, IN THIS REPORT -- YOU GAVE THIS REPORT TO YOUR BOARD
3 OF DIRECTORS, CORRECT?
4 A. EXCUSE ME. I DIDN'T GIVE THE REPORT. DONALDSON, LUFKIN &
5 JENRETTE GAVE IT AS PART OF THEIR -- OKAY.
6 Q. LET'S DO IT THIS WAY:
7 A. THIS REPORT WAS PREPARED BY SOME DONALDSON, LUFKIN
8 BACK-ROOM PERSONNEL WHO WOULD HAVE GOTTEN MOST OF THEIR THINGS
9 FROM VARIOUS SOURCES, I KNOW NOT WHAT, AND I DID NOT AGREE WITH
10 MANY OF THESE BUT . . . AND I AM NOT SURE THAT MANY OF OUR
11 DIRECTORS EVEN UNDERSTOOD IT, MUCH LESS AGREED WITH IT OR
12 DISAGREED.
13 Q. THIS WAS PRESENTED TO THE BOARD OF DIRECTORS, WAS IT NOT?
14 A. YES, SIR.
15 Q. IT WAS PRESENTED TO THE BOARD OF DIRECTORS IN MAKING THE
16 DETERMINATION AS TO WHETHER THEY WOULD SELL TO HEARST, WAS IT
17 NOT?
18 A. I AM NOT SURE THAT -- IT WAS PRESENTED TO THE BOARD AS
19 PART OF THE OVERALL PROJECT GOLDEN PROSPECT, AND IN EACH OF THE
20 BUSINESSES THE INVESTMENT BANK WAS GOING TO CONTACT A VARIETY
21 OF POTENTIAL BUYERS, INCLUDING IN THIS CASE THE HEARST
22 CORPORATION. YOUR QUESTION -- IF YOU WANT TO REPEAT IT, I WILL
23 TRY TO ANSWER IT MORE DEFINITIVELY THAN THAT BUT . . .
24 Q. THE PERSON FROM DLJ ACTUALLY ADDRESSED THE BOARD OF
25 DIRECTORS ABOUT THIS AT THE MEETING AT WHICH THE BOARD OF
285
SIAS - DIRECT / ALIOTO
1 DIRECTORS AGREED TO SELL TO HEARST; ISN'T THAT TRUE?
2 A. NO, THAT IS NOT CORRECT. THE BOARD OF DIRECTORS, AS A
3 RESULT OF THE MEETING AT WHICH THIS (INDICATING) WAS INCLUDED,
4 VOTED TO SELL ALL COMPONENTS OF THE CHRONICLE PUBLISHING
5 COMPANY. AND WE DID NOT DIRECT THE INVESTMENT BANK TO SELL ANY
6 OF THEM TO ANY GIVEN PROSPECT.
7 Q. OKAY. LET'S BACK UP, THEN.
8 THIS DOCUMENT WAS PREPARED FOR THE BOARD OF
9 DIRECTORS OF THE CHRONICLE PUBLISHING COMPANY?
10 A. YES, SIR.
11 Q. IT WAS PRESENTED TO THEM AT THE BOARD OF DIRECTORS
12 MEETING?
13 A. YES, SIR.
14 Q. A PRESENTATION WAS MADE BY A REPRESENTATIVE
-- BY
15 REPRESENTATIVES OF DONALDSON, LUFKIN & JENRETTE, CORRECT?
16 A. YES, SIR.
17 Q. AT THAT MEETING THEY VOTED TO SELL, AMONG OTHER THINGS,
18 THE CHRONICLE, CORRECT?
19 A. YES, SIR.
20 Q. OKAY. NOW, IF YOU WILL GO BACK TO THE DOCUMENT THAT WAS
21 PRESENTED TO THE BOARD OF DIRECTORS, AT THAT TIME, AT THE
22 MEETING AT WHICH THEY DECIDED TO SELL, IF YOU GO TO THE ONE ON
23 CIRCULATION PRICING, IT SAYS WITH REGARD TO ONE NEWSPAPER NO
24 PRICE INCREASE, BUT IF THE EXAMINER AND THE CHRONICLE WERE HEAD
25 TO HEAD COMPETING, IT STATES, QUOTE:
286
SIAS - DIRECT / ALIOTO
1 "SUBSTANTIAL PRICE CUTS AT EXAMINER WITH
2 MODEST PRICE CUTS AT CHRONICLE."
3 DO YOU BELIEVE THAT IF THE EXAMINER AND THE
4 CHRONICLE WENT HEAD TO HEAD COMPETITION THAT ON CIRCULATION
5 PRICING THE EXAMINER WOULD MAKE SUBSTANTIAL PRICE CUTS AND THE
6 CHRONICLE WOULD MAKE MODEST PRICE CUTS?
7 A. I BELIEVE THAT THE CHRONICLE WOULD BE VERY AGGRESSIVE IN
8 MEETING COMPETITIVE PRESSURES, VERY AGGRESSIVE, AND THE
9 CONSEQUENCES OF THAT SIX YEARS HENCE I AM NOT PREPARED TO GET
10 INTO QUANTIFYING.
11 Q. BUT WHEN YOU SAY YOU WOULD BE VERY AGGRESSIVE, YOU MEAN,
12 COMPETE ON PRICE?
13 A. WE COMPETE ON A LOT OF AREAS, INCLUDING PRICE.
14 Q. INCLUDING PRICE.
15 BY THE WAY, YOU MENTIONED THAT WHEN YOU WERE HAVING
16 THESE -- OR -- IN SOME OF THESE QUESTIONS YOU SAID YOU WEREN'T
17 SURE WHAT YOU WERE GOING TO DO. ONE OF THE THINGS YOU MIGHT DO
18 IS -- IF IT WERE JUST THE CHRONICLE, ONE OF THE THINGS YOU
19 MIGHT DO IS GIVE SOME OF THE PAPER AWAY FOR FREE. YOU SAID
20 "FREE DISTRIBUTION."
21 A. I SAID THAT THAT IS -- IN THE NEWSPAPER BUSINESS THERE IS
22 SUBSTANTIAL -- THE INDUSTRY, NOT -- THERE IS A SUBSTANTIAL MOVE
23 TO LOOK AT CIRCULATION PATTERNS AND PRICING, WHICH THERE IS
24 MORE AND MORE OF A TENDENCY TO OFFER DISCOUNTED OR LOWER-PRICED
25 CIRCULATION. AND THE ALAMEDA NEWSPAPER GROUP IS NOT A BAD
287
SIAS - DIRECT / ALIOTO
1 EXAMPLE OF THAT. I THINK YOU CAN GET A -- YOU CAN BUY A DAILY
2 OVER THERE FOR
$7 A YEAR, HOME SUBSCRIPTION PRICE -- DENVER.
3 ANYWAY.
4 Q. BUT YOU MENTIONED FREE DISTRIBUTION.
5 A. I DID MENTION. FREE DISTRIBUTION IS AN AREA THAT IS
6 COMING INTO THE BUSINESS. AND I WOULD NOT EXCLUDE THAT IN A
7 SAN FRANCISCO SITUATION AT SOME POINT IN TIME.
8 Q. AND YOU DID CONSIDER THAT IN THE PAST, RIGHT?
9 A. NOT TO MY KNOWLEDGE.
10 Q. BUT YOU WOULD CONSIDER IT IF IN FACT HEARST CORPORATION
11 SAID, "OKAY, WE'RE GOING TO CLOSE THE EXAMINER AND IT WILL BE
12 JUST THE CHRONICLE." ONE OF THE THINGS THAT YOU CONSIDERED WAS
13 FREE DISTRIBUTION?
14 A. NO. WE HAVEN'T GOT -- I HAVE NOT GONE INTO THE KIND OF
15 DETAIL THAT YOU ARE BRINGING UP NOW. WE DON'T HAVE ANY KIND OF
16 FORMAL PLANS OR WHATEVER. I DON'T KNOW.
17 Q. WELL, YOU KNOW THAT THERE ARE A NUMBER OF INDEPENDENT
18 SMALLER NEWSPAPERS IN THE SAN FRANCISCO AREA THAT OPERATE ON
19 THE BASIS OF FREE DISTRIBUTION, DON'T YOU?
20 A. YES, SIR.
21 Q. OKAY. AND ONE OF THE THINGS, ARE YOU SAYING THAT IF
22 YOU -- IF THE EXAMINER SHUT DOWN THAT ONE OF THE THINGS YOU
23 MIGHT DO IS TARGET THOSE NEWSPAPERS?
24 A. ABSOLUTELY NOT.
25 Q. THERE WAS A REASON, HOWEVER, WHY YOU MENTIONED IT IN YOUR
288
SIAS - DIRECT / ALIOTO
1 TESTIMONY, ISN'T THERE?
2 WELL, DID YOU CONSIDER IT OR DIDN'T YOU, MR. SIAS?
3 A. I WAS DESCRIBING WHAT'S GOING ON IN THE NEWSPAPER INDUSTRY
4 GENERALLY.
5 Q. YOU SAID THAT YOU WOULD DO IT.
6 MR. ROSCH: OBJECTION, YOUR HONOR. MISSTATES THE
7 PRIOR TESTIMONY.
8 THE WITNESS: I CERTAINLY DID NOT SAY WE WOULD DO
9 IT. I SAID WE WOULD CONSIDER AMONG OTHER THINGS THAT. THERE
10 IS A BIG DIFFERENCE BY SAYING WE WOULD DO IT. I DON'T KNOW HOW
11 TO MAKE -- DO SOMETHING SIX YEARS HENCE.
12 THE COURT: ALL RIGHT. LET'S MOVE ON.
13 BY MR. ALIOTO:
14 Q. WITH REGARD TO AD REVENUES, ACCORDING TO THIS DOCUMENT
15 THAT WAS PRESENTED TO THE BOARD OF DIRECTORS OF THE CHRONICLE
16 ON THE DAY THAT THEY VOTED TO SELL THE CHRONICLE, IT STATES
17 THAT -- WITH ONE NEWSPAPER IT STATES AS FOLLOWS, QUOTE:
18 "ONE TIME 20 PERCENT INCREASE IN RETAIL
19 NATIONAL AD RATES OFFSET BY MODEST DECLINES OF
20 COMBINED CIRCULATION."
21 DO YOU SEE THAT?
22 A. YES.
23 Q. UNDER THE COLUMN OF "HEAD TO HEAD COMPETITION BETWEEN THE
24 EXAMINER AND THE CHRONICLE" IT STATES, QUOTE:
25 "SIGNIFICANT AD PRICE COMPETITION WITH
289
SIAS - DIRECT / ALIOTO
1 15 PERCENT AND 10 PERCENT RATE DECLINES AT THE
2 EXAMINER AND THE CHRONICLE, RESPECTIVELY."
3 DO YOU SEE THAT?
4 A. YES, I DO.
5 Q. SO THAT ACCORDING TO THIS REPORT, IF IT WERE HEAD-TO-HEAD
6 COMPETITION, AD PRICES WOULD BE GOING DOWN AT BOTH PAPERS, BUT
7 IF IT WERE JUST ONE PAPER, IT WOULD GO UP 20 PERCENT, CORRECT?
8 A. ACCORDING TO THIS REPORT (INDICATING).
9 Q. AND THAT'S A 30 AND 35 PERCENT DIFFERENCE ONLY BECAUSE
10 THERE IS A COMPETING PAPER, CORRECT?
11 A. ONCE AGAIN, IF ONE WANTS TO MEMORIALIZE THIS PARTICULAR
12 REPORT WRITTEN BY PEOPLE WHO HAVE HAD NO NEWSPAPER EXPERIENCE
13 AND HAVE NEVER LIVED IN SAN FRANCISCO AND ARE WRITING IT FOR
14 OTHER PURPOSES, THEN THAT WOULD BE CORRECT. I DO NOT AGREE
15 WITH THE REPORT AND, TO MY KNOWLEDGE, I DON'T THINK THAT THE
16 CHRONICLE DIRECTORS DID.
17 Q. WELL, YOU SAID THAT IF THERE WERE HEAD-TO-HEAD COMPETITION
18 YOU WOULD COMPETE AND YOU WOULD COMPETE AGGRESSIVELY, RIGHT?
19 A. YES, SIR, I DID SAY THAT.
20 Q. INCLUDING PRICE, CORRECT?
21 A. IT COULD INCLUDE PRICE.
22 Q. AND THE PRICE WOULD NOT ONLY BE CIRCULATION BUT AD RATES,
23 TOO, CORRECT?
24 A. POSSIBLY.
25 Q. AND YOU WOULD EXPECT THAT THE HEARST CORPORATION HEAD TO
290
SIAS - DIRECT / ALIOTO
1 HEAD WOULD ALSO BE AGGRESSIVE, WOULDN'T YOU?
2 A. I WOULD -- IF THEY -- IF THEY CHOSE TO STAY IN THE MARKET?
3 Q. YES.
4 A. I WOULD ASSUME THEY WOULD MAKE A MAJOR EFFORT.
5 Q. AND DO YOU THINK THAT THEIR MAJOR EFFORT WOULD INCLUDE
6 COMPETITION ON PRICE, DON'T YOU?
7 A. I THINK THAT THAT CAN BEST BE ASKED OF THE HEARST
8 CORPORATION.
9 Q. YOU WOULD EXPECT IT FROM THEM, WOULDN'T YOU?
10 A. I WOULD EXPECT IT AS A POSSIBILITY.
11 Q. AND THAT POSSIBILITY WOULD BE BOTH FOR CIRCULATION AND
12 RATES; ISN'T THAT RIGHT?
13 A. AGAIN, IT IS WELL WITHIN THE REALM OF POSSIBILITY.
14 Q. WITH REGARD TO PRODUCTION -- I WANT TO GO DOWN TO CAPITAL
15 EXPENDITURES BECAUSE I WOULD LIKE TO TALK TO YOU ABOUT THIS FOR
16 A MINUTE.
17 A. ALL RIGHT.
18 Q. UNDER THE CAPITAL EXPENDITURES UNDER THE COLUMN WHERE
19 THERE WOULD JUST BE ONE SURVIVING NEWSPAPER, IT STATES, QUOTE:
20 "NO NEW PLANT IF JOA RESOLVED NOW."
21 THEN IT SAYS, "IF NO RESOLUTION," SOMETHING ELSE. I
22 AM GOING TO GET TO THAT IN A MINUTE.
23 DO YOU SEE THAT?
24 A. YES, I SEE IT.
25 Q. HOWEVER, ON A HEAD-TO-HEAD BASIS IT STATES, QUOTE:
291
SIAS - DIRECT / ALIOTO
1 "CHRONICLE CONSTRUCTS NEW PLANT AT TOTAL
2 COST OF $125 MILLION IN 2003-2005 PLUS LAND
3 COSTS OF $15 MILLION. ASSUMES EXAMINER DOES NOT
4 CONSTRUCT NEW PLANT BUT RECEIVES TWO PLANTS AT
5 TERMINATION AND CHRONICLE RECEIVES ONE PLANT AND
6 $8 MILLION FROM HEARST."
7 DO YOU SEE THAT?
8 A. YES.
9 Q. DO YOU AGREE THAT IF YOU WERE GOING HEAD TO HEAD
10 COMPETITION WITH THE EXAMINER YOU'D HAVE TO CONSTRUCT A NEW
11 PRESSING PLANT?
12 A. I AGREE TO THE FOLLOWING: IF THE PRODUCTION FACILITIES OF
13 THE NEWSPAPER AGENCY WERE DIVIDED IN HALF PROPORTIONATE TO THE
14 OWNERSHIP OF THE TWO OWNERS, THAT IT WOULD BE IMPOSSIBLE TO PUT
15 OUT THE CHRONICLE IN A TIMELY FASHION AND WITH A PRODUCT THAT
16 WOULD BE SATISFACTORY TO ADVERTISERS. SO THAT WOULD ENTAIL
17 UNDER THOSE CIRCUMSTANCES THE CONSTRUCTION OF SOME KIND OF
18 SUPPLEMENTAL OR NEW FACILITIES.
19 Q. AND IF YOU DID CONSTRUCT A NEW PLANT OR, AS YOU SAY,
20 FACILITIES, WOULD THE COST BE APPROXIMATELY $125 MILLION?
21 A. IT WOULD --
22 Q. OR MORE?
23 A. IT WOULD NOT BE.
24 Q. WOULD IT BE MORE?
25 A. THIS IS TYPICAL OF WHY THIS REPORT IS -- IS AT THE BEST
292
SIAS - DIRECT / ALIOTO
1 VERY, VERY SUPERFICIAL. NO, IT WOULD PROBABLY BE MORE IN THE
2 AREA OF 250 TO
$275 MILLION.
3 Q. 250 TO $275 MILLION?
4 A. THAT IS CORRECT.
5 Q. SO THAT IF THERE IS COMPETITION, THAT'S WHAT YOU WOULD
6 HAVE TO DO. YOU WOULD HAVE TO SPEND OR MAKE THAT KIND OF
7 CAPITAL INVESTMENT TO BE COMPETITIVE, YOU THINK?
8 A. LET ME GO OVER THIS ONE MORE TIME. IF WE HAVE A -- AND
9 HERE IS WHERE I MIGHT -- THE NEWSPAPER AGENCY, THE JOINT
10 OPERATING AGREEMENT WE HAVE HERE, IS DIFFERENT THAN MOST
11 NEWSPAPER JOINT OPERATING AGREEMENTS, WHICH CALLED -- WHICH
12 ENTAIL A HOST NEWSPAPER. AND THE HOST NEWSPAPER -- IN SEATTLE
13 THE HEARST CORPORATION IS IN A JOINT OPERATING AGREEMENT WITH
14 THE SEATTLE TIMES. THE SEATTLE TIMES IS THE HOST NEWSPAPER.
15 AND IN THESE ARRANGEMENTS THE HOST NEWSPAPER OWNS ALL THE
16 PRODUCTION FACILITIES AND ALL THE BUSINESS SYSTEMS AND
17 ADVERTISING AND DOES EVERYTHING THAT THE JOINT OPERATING
18 AGREEMENT CALLS FOR THE SFNA TO DO. AND SO THE -- SOME OF THE
19 ISSUES THAT COME UP HERE ARE PECULIAR TO SAN FRANCISCO BECAUSE
20 OF THIS JOA WHERE WE'RE SHARING ASSETS.
21 NOW, TO COME BACK TO YOUR POINT, IF THE EXAMINER
22 IS -- IF WE -- IF WE HAVE TO SPLIT THE AGENCY IN HALF, IT WILL
23 BE NECESSARY
-- WE CANNOT PRINT THE CHRONICLE WITH HALF OF
24 THOSE FACILITIES. AND WE WOULD HAVE TO MAKE A MAJOR INVESTMENT
25 IN THE PRODUCTION OF A PLANT.
293
SIAS - DIRECT / ALIOTO
1 Q. WAS THAT DISCUSSED AT THE BOARD OF DIRECTORS MEETING AT
2 WHICH THEY MADE THE DETERMINATION TO SELL THE CHRONICLE, THAT
3 IF THEY WENT TO HEAD-TO-HEAD COMPETITION, THEY MIGHT HAVE TO
4 MAKE A CAPITAL INVESTMENT OF ALMOST A QUARTER OF A BILLION
5 DOLLARS, OR MORE?
6 A. WELL, I DON'T REMEMBER WITH ANY SPECIFICITY HOW MUCH
7 DISCUSSION AND TIME WAS SPENT ON THIS. I AM SURE THERE WOULD
8 HAVE BEEN SOME PASSING REFERENCE, AT LEAST, AND PROBABLY MORE.
9 IT DOESN'T JUMP OUT AT ME.
10 Q. NOW, IT ACCORDS WITH YOUR UNDERSTANDING OF COMPETITION,
11 DOES IT NOT, THAT WHEN YOU ARE GOING HEAD TO HEAD IN
12 COMPETITION, YOU HAVE TO CONTINUALLY ATTEMPT TO IMPROVE THE
13 QUALITY OF YOUR PRODUCT?
14 A. I THINK WE HAVE TO DO THAT WHETHER WE HAVE WHAT YOU REFER
15 TO AS "COMPETITION" OR NOT. WE NEED TO -- WE NEED TO APPEAL --
16 HAVE A PRODUCT, AN EDITORIAL PRODUCT, THAT CONTAINS
17 INFORMATION, ENTERTAINMENT, USEFUL -- USEFUL COMPONENTS FOR THE
18 LIVES OF READERS, AND WE HAVE TO ATTRACT READERS. AND THEY'VE
19 GOT -- WHAT WE DO IS THE PRODUCT. SO WE HAVE TO DO THAT. AND
20 WE DO IT WHETHER THERE IS ANOTHER NEWSPAPER OR THERE IS NOT
21 ANOTHER NEWSPAPER IN HOPE -- TO USE YOUR TERM, "COMPETITION."
22 Q. IF IN FACT YOU HAD TO GO HEAD-TO-HEAD COMPETITION WITH THE
23 EXAMINER, ONE OF THE THINGS THAT YOU WOULD HAVE TO DO, WOULD IT
24 NOT, IS THAT YOU HAVE TO ENSURE -- I AM TALKING ABOUT THE --
25 FIRST THE PHYSICAL QUALITY OF THE PAPER BUT ALSO ITS EDITORIAL
294
SIAS - DIRECT / ALIOTO
1 AND REPORTORIAL QUALITY, WOULDN'T YOU?
2 A. YES. WE HAVE.
3 Q. AND IN THAT REGARD -- AND IN THAT REGARD YOU WOULD HAVE TO
4 ATTEMPT TO -- IF YOU WERE GOING HEAD TO HEAD TO COMPETE FOR
5 THE, AMONG OTHER THINGS, REPORTERS?
6 A. CLARIFICATION. WHEN YOU SAY "HEAD TO HEAD," DO YOU MEAN
7 COME OUT IN THE SAME TIME CYCLE AS THE --
8 Q. YES.
9 A. SO IN THIS CASE, THEN, IT WOULD BE THE MORNING CYCLE.
10 Q. CORRECT.
11 A. AND NOW IF YOU -- DO WE COMPETE -- WE COMPETE FOR
12 REPORTERS WITH
-- WITH PUBLICATIONS ALL OVER THE COUNTRY. WE
13 LOSE THEM WHEN WE GET THEM, INCLUDING THE EXAMINER. AND RIGHT
14 NOW THEY'RE -- THEY'RE NOT IN THE SAME PUBLISHING CYCLE. SO I
15 DON'T KNOW THAT ANYTHING WOULD CHANGE IF THEY CHANGE THE CYCLE
16 WHERE THEY ARE PUBLISHED. THERE STILL IS COMPETITION FOR GOOD
17 EDITORIAL TALENT. AND IT'S NOT CONFINED TO JUST SAN FRANCISCO.
18 IT COMES FROM ALL OVER THE COUNTRY.
19 Q. AS AN ANECDOTE, THE HELM THAT HERB CAEN WENT FIRST FROM
20 THE -- FIRST IN THE CHRONICLE, THEN THE EXAMINER AND THEN BACK
21 TO THE CHRONICLE.
22 A. YES.
23 Q. AND, I TAKE IT, THAT -- DO YOU KNOW ANYTHING ABOUT THAT?
24 A. NO, I DON'T.
25 Q. DID IT HAVE ANYTHING TO DO WITH PAYING HIM MORE MONEY?
295
SIAS - DIRECT / ALIOTO
1 A. OTHERS WHO WERE HERE AT THE TIME -- THERE AREN'T TOO MANY
2 LEFT -- WOULD BE ABLE TO GIVE YOU THAT. I AM UNDER THE
3 IMPRESSION THAT MONEY DID HAVE SOMETHING TO DO WITH HIS LEAVING
4 THE CHRONICLE.
5 Q. OKAY.
6 A. AND PROBABLY ON HIS RETURN.
7 Q. ALL RIGHT. WITH REGARD TO EDITORIAL -- AND THIS IS WHAT I
8 WANTED TO ASK YOU ABOUT -- WITH THE EDITORIAL COLUMN ON THE --
9 ON -- UNDERNEATH WHERE THERE WOULD BE ONLY ONE SURVIVING
10 NEWSPAPER, IT STATES, QUOTE:
11 "INCREMENTAL $5 MILLION FOR SUNDAY."
12 DO YOU SEE THAT? THIS IS --
13 A. YES.
14 Q. BUT HEAD TO HEAD IT STATES, QUOTE:
15 "EXAMINER INCREASES SPENDING BY 25 MILLION
16 AND CHRONICLE INCREMENTALLY SPENDS 5 MILLION FOR
17 SUNDAY."
18 DO YOU SEE THAT?
19 A. YES, SIR.
20 Q. OKAY. DO YOU AGREE WITH THAT?
21 A. NO, NOT NECESSARILY. I THINK YOU ARE PULLING FIGURES
22 RIGHT OUT OF THIN AIR BY PEOPLE WHO DON'T KNOW DOODLY-SQUAT
23 ABOUT THE BUSINESS. AND SO I -- CHRONICLE INCREMENTALLY, WE'VE
24 HAD VARIOUS ESTIMATES. IT DEPENDS ON WHEN YOU MAKE THEM HOW
25 MUCH INCREMENTAL SPENDING WE HAVE DONE. AND I HAVE NOT A CLUE
296
SIAS - DIRECT / ALIOTO
1 AS TO HOW THEY CAME UP WITH WHAT THE HEARST CORPORATION WOULD
2 SPEND ON THE EXAMINER. BUT I AM CONFIDENT THAT WHOEVER CAME UP
3 WITH IT IS TOTALLY INCOMPETENT TO MAKE THAT KIND OF A DECISION.
4 Q. WHEN THIS PRESENTATION WAS MADE TO THE BOARD OF DIRECTORS
5 OF THE CHRONICLE ON THE DAY -- BY REPRESENTATIVES OF DONALDSON,
6 LUFKIN & JENRETTE?
7 A. YES, HEADED BY JILL GREENTHAL.
8 Q. HEADED BY JILL GREENTHAL, ON THE DAY THAT THEY VOTED TO
9 SELL THE CHRONICLE, DID YOU TELL THE BOARD OF DIRECTORS, BEING
10 THE CHAIRMAN OF THE BOARD -- DID YOU TELL THEM, "YOU ARE GOING
11 TO HEAR FROM THESE PEOPLE BUT THEY'RE INCOMPETENT AND DON'T
12 KNOW WHAT THEY'RE TALKING ABOUT"?
13 A. WE DIDN'T VOTE TO SELL THE CHRONICLE. WE VOTED TO SELL
14 THE CHRONICLE CORPORATION AND ITS ATTENDANT ASSETS, NUMBER ONE.
15 NUMBER TWO, THIS DID NOT GET THE KIND OF ATTENTION
16 THAT YOU ARE GIVING IT HERE NOW, THIS -- THIS PARTICULAR
17 ANALYSIS. AND, NO, I DIDN'T USE SUCH COLORFUL LANGUAGE, BUT I
18 MADE IT QUITE CLEAR THAT I DID NOT THINK A GREAT DEAL OF
19 THIS -- OF THESE ASSUMPTIONS -- BECAUSE MANY OF THEM WERE
20 DERIVED FROM WHAT THEY HAD PICKED UP BY STUDIES AND THEY
21 WEREN'T REALLY ASSIGNED TO DO ALL OF THESE -- MAKE SCENARIOS ON
22 OPERATING THINGS. THEY WERE ASSIGNED TO FIND OUT HOW MUCH
23 MONEY OR GIVE US, BASED ON THEIR EXPERIENCE, WHAT THEY THOUGHT
24 THEY COULD GENERATE IN TERMS OF RESULTS OR SALES PRICES FOR OUR
25 VARIOUS BUSINESSES.
297
SIAS - DIRECT / ALIOTO
1 Q. BUT THESE PEOPLE MADE A PRESENTATION, ISN'T IT CORRECT,
2 NOT ONLY OF THE DOCUMENT BUT THEY MADE AN ORAL PRESENTATION TO
3 YOUR BOARD.
4 A. YES, THEY DID.
5 Q. IF YOU THOUGHT AND BELIEVED THAT THEY WERE INCOMPETENT,
6 THERE WOULD BE NO REASON FOR YOU TO PERMIT THEM TO DO THAT AS
7 THE CHAIRMAN, WOULD THERE?
8 A. MR. ALIOTO, I DIDN'T SAY DONALDSON, LUFKIN
& JENRETTE WAS
9 INCOMPETENT AS IT RELATES TO THEIR ASSIGNMENT, WHICH WAS TO
10 EVALUATE THE BUSINESS AND TELL THE SHAREHOLDERS WHAT THEY
11 THOUGHT THEY WOULD BE ABLE TO OBTAIN IN PRICES FOR THESE
12 BUSINESSES AND WHAT THE TIME FRAME AND WHAT CONDITIONS MIGHT
13 PERTAIN TO THOSE TRANSACTIONS. THAT'S WHAT THEY ARE VERY
14 COMPETENT TO DO.
15 Q. ARE YOU STATING OR WOULD IT BE YOUR TESTIMONY BEFORE THE
16 COURT THAT -- THAT THIS PARTICULAR DOCUMENT AND THE DONALDSON,
17 LUFKIN, JENRETTE PRESENTATION HAD NOTHING TO DO WITH THE
18 DECISION BY THE BOARD TO VOTE TO SELL, AMONG OTHER ASSETS, THE
19 CHRONICLE?
20 A. NO, I AM NOT SAYING THAT.
21 MR. ALIOTO: MAY WE TAKE A SHORT RECESS, YOUR HONOR?
22 THE COURT: ALL RIGHT. IS TEN MINUTES ENOUGH?
23 MR. ALIOTO: YES, SIR. THANK YOU.
24 THE COURT: ALL RIGHT. FINE. WE WILL BE IN RECESS
25 FOR TEN MINUTES.
298
SIAS - DIRECT / ALIOTO
1 AND I THINK WE CAN GO UNTIL BETWEEN 1:00 AND 1:30.
2 MR. ALIOTO: VERY GOOD, YOUR HONOR.
3 THE COURT: IF THAT IS AGREEABLE --
4 MR. ALIOTO: YES.
5 THE COURT: -- WE WILL PLAN TO DO THAT.
6 VERY WELL.
7 (RECESS TAKEN FROM 11:16 TO 11:29 A.M.)
8 THE COURT: YOU MAY CONTINUE, MR. ALIOTO.
9 MR. ALIOTO: THANK YOU, YOUR HONOR. MAY IT PLEASE
10 YOUR HONOR.
11 BY MR. ALIOTO:
12 Q. IN REFERENCE TO THE -- IN REFERENCE TO THIS PRESENTATION,
13 THE DLJ PRESENTATION, YOU UNDERSTOOD THAT MOST OF IT WAS
14 DERIVED FROM THE DLJ PEOPLE TALKING WITH PEOPLE AT THE
15 CHRONICLE CORPORATION, DIDN'T YOU?
16 A. AT OUR DIVISIONS.
17 Q. AT YOUR DIVISIONS?
18 A. YES.
19 Q. SO THAT YOU UNDERSTOOD THAT --
20 A. AND THE CHRONICLE CORPORATION, THE CORPORATE FINANCIAL
21 PEOPLE AND THEN AT EACH INDIVIDUAL OPERATION.
22 Q. BUT I AM SAYING THAT MOST OF IT -- YOU UNDERSTOOD THAT
23 MOST OF IT WAS DERIVED DIRECTLY FROM TALKING WITH PEOPLE AT THE
24 CHRONICLE CORPORATION OR CHRONICLE.
25 THE COURT: WELL, I THINK YOU ARE TALKING ABOUT TWO
299
SIAS - DIRECT / ALIOTO
1 DIFFERENT -- I THINK THE WITNESS IS TALKING ABOUT SOMETHING
2 DIFFERENT FROM WHAT YOU HAVE IN MIND, MR. ALIOTO.
3 BY MR. ALIOTO:
4 Q. ALL RIGHT. LET ME DO IT THIS WAY.
5 A. WHAT DO YOU MEAN BY THE CHRONICLE? THERE IS A CHRONICLE
6 CORPORATION AND IT OPERATES EIGHT -- AT THE TIME EIGHT
7 DIFFERENT BUSINESSES. AND IN PREPARING THIS DOCUMENT, THE
8 INVESTMENT BANK TALKED FIRST WITH THE CORPORATE GROUP -- WE
9 HAVE A SMALL ONE BUT THE FINANCIAL, MYSELF AND THE EXECUTIVE
10 VICE PRESIDENT AND OUR CHIEF FINANCIAL OFFICER, ALAN NICHOLS,
11 MR. JAFFE, AND OUR CONTROLLER AND OTHERS. AND THEN THEY
12 VISITED IN VARIOUS TEAMS, EACH OF OUR EIGHT DIFFERENT OPERATING
13 BUSINESSES. SO THAT'S HOW THIS
-- AND FROM THAT . . .
14 Q. "THIS" MEANING EXHIBIT 5?
15 A. EXHIBIT 5 -- "THIS" MEANING PROJECT GOLDEN, THE WHOLE
16 THING (INDICATING), YES.
17 Q. YES, THIS WHOLE THING.
18 A. UH-HUH.
19 Q. BEFORE THIS RECESS JUST A WHILE AGO, I THOUGHT YOU SAID
20 YOU THOUGHT THIS WAS INCOMPETENT?
21 A. NO, I WAS VERY CLEAR, MR. ALIOTO.
22 Q. YOU THOUGHT THE PEOPLE WERE INCOMPETENT?
23 A. NO. I WAS VERY CLEAR. I REFERRED TO THE PARTICULAR
24 CONCLUSIONS THAT YOU WERE READING FROM PAGE NUMBER 26 IN THE
25 ADDENDUM, AND I GOT A LITTLE COLORFUL. I SHOULDN'T HAVE. THE
300
SIAS - DIRECT / ALIOTO
1 WAY THESE THINGS ARE PUT TOGETHER IS PEOPLE FROM THE INVESTMENT
2 BANK GO OUT TO VISIT THE INDIVIDUAL OPERATIONS AND THEY PREPARE
3 A SUMMARY, AND THEN THE SUMMARY IS SENT BACK TO THE GIVEN
4 BUSINESS WHO THEN EDITS AND MAKES CHANGES AND HELPS TO CORRECT
5 MANY THINGS THAT ARE NOT IN IT.
6 AND OUT OF THAT EVENTUALLY YOU GET A DOCUMENT LIKE
7 THIS (INDICATING) AND YOU GET AN OFFERING MEMORANDUM ON EACH OF
8 THE BUSINESSES.
9 AND WHAT I REFERRED TO WAS THAT THIS PARTICULAR
10 SECTION, PAGE HERE, AND THE TERMINOLOGY AND SOME OF THE
11 CONCLUSIONS I DO NOT AGREE WITH. AND I -- I COULD NOT BE MORE
12 EXPRESSIVE THAN THAT.
13 THE COURT: ALL RIGHT. LET'S MOVE ON.
14 BY MR. ALIOTO:
15 Q. I SHOW YOU EXHIBIT 86.
16 MAY I APPROACH THE WITNESS, YOUR HONOR?
17 THE COURT: YES, YOU MAY.
18 BY MR. ALIOTO:
19 Q. EXHIBIT 86 IS A DOCUMENT DATED JULY 9, 1998. IT IS
20 DIRECTED TO YOU. IT IS FROM THE HEARST CORPORATION AND
21 PARTICULARLY MR. FRANK BENNACK.
22 DID YOU RECEIVE THAT DOCUMENT ON OR ABOUT THE DATE
23 INDICATED FROM MR. BENNACK?
24 A. YES, SIR.
25 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION TO PAGE 2 OF THE
301
SIAS - DIRECT / ALIOTO
1 DOCUMENT.
2 A. YES.
3 Q. AND IT STATES AT PAGE 2 IN THE SECOND FULL PARAGRAPH -- DO
4 YOU SEE WHERE IT SAYS, QUOTE:
5 "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS"?
6 A. YES.
7 Q. OKAY. NOW, IT STATES, QUOTE:
8 "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS
9 IN OUR LAST MEETING CONCERNING THE DIFFICULTY OF
10 THE SO-CALLED FIRST REFUSAL PROVISION."
11 LET ME MAKE SURE ABOUT THIS. THIS IS IN JULY OF
12 1998. BY THIS TIME DID THE -- WERE THE DISCUSSIONS BACK ON
13 TRACK?
14 A. THIS -- THIS LETTER FROM MR. BENNACK WAS IN RESPONSE TO
15 THAT LETTER THAT WE -- EXHIBIT -- THE OCTOBER 24TH, 1997,
16 EXHIBIT 85, THERE WERE DISCUSSIONS THAT MR. BENNACK AND I HAD
17 AFTER HE RECEIVED A COPY OF THAT. WE HAD ABOUT AN HOUR OR TWO
18 IN NEW YORK. AND WE TALKED IN GENERAL WITH WHAT MIGHT BE,
19 NOTHING OF ANY CONSEQUENCE IN TERMS OF ACTIONABLE THINGS.
20 AND THEN, AS A FOLLOW-UP, I SOMEWHERE ALONG THE LINE
21 ASKED HIM IF HE WOULD BE GOOD ENOUGH TO LET US KNOW WHAT --
22 WHAT IT MIGHT BE -- UNDER WHAT CONDITIONS HEARST WOULD
23 CONTINUE. AND THIS WAS DONE AT THE INSTIGATION OF OUR
24 SHAREHOLDERS AND SHAREHOLDER DIRECTORS.
25 Q. SO THEY WANTED TO BRING IT UP AGAIN --
302
SIAS - DIRECT / ALIOTO
1 A. YES.
2 Q. -- SOMETIME AT LEAST BY THIS TIME PERIOD IN 1998, EARLY
3 '98 AND THE SUMMER OF '98?
4 A. YES.
5 Q. AND AT THAT TIME, THEN, IF YOU LOOK AT -- ON PAGE 2, THERE
6 IS REFERENCE AGAIN TO DISCUSSING THE DIFFERENT SPLIT IF THE
7 EXAMINER WERE TO CLOSE, CORRECT, THE FIRST FULL PARAGRAPH?
8 A. YES. THANK YOU. THAT IS CORRECT.
9 Q. OKAY. THEN GOING DOWN TO THE NEXT FULL PARAGRAPH HE
10 STATES, QUOTE:
11 "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS
12 IN OUR LAST MEETING CONCERNING THE DIFFICULTY OF
13 THE SO-CALLED FIRST REFUSAL PROVISION. SINCE
14 HEARST'S DESIRE, AND INDEED INTENTION, IS TO
15 REMAIN IN THE SAN FRANCISCO NEWSPAPER MARKET,
16 GOING FORWARD, THE PRESERVATION OF THE FIRST
17 REFUSAL RIGHTS CURRENTLY ENJOYED BY THE PARTIES
18 REMAINS A VITAL INGREDIENT."
19 WHAT DID YOU UNDERSTAND THAT TO MEAN?
20 A. IN REGARD TO HEARST'S INTENTIONS ABOUT THE SAN FRANCISCO
21 NEWSPAPER MARKET OR THE FIRST REFUSAL RIGHTS?
22 Q. FIRST WITH REGARD TO THEIR INTENTION TO REMAIN IN THE SAN
23 FRANCISCO NEWSPAPER MARKET.
24 A. WHAT I UNDERSTOOD OR WHAT I THOUGHT WAS -- AND I HAVE
25 ALWAYS THOUGHT
-- THAT MR. BENNACK SAYING THAT WITH GREAT
303
SIAS - DIRECT / ALIOTO
1 ELOQUENCE, I DID NOT BELIEVE IT, AND SO I DON'T KNOW WHETHER TO
2 SAY THAT'S MY UNDERSTANDING OR NOT. I DID NOT BELIEVE THAT
3 THEY WOULD INDEED STAY IN THE MARKET AFTER 2005. THAT'S NUMBER
4 ONE.
5 NUMBER TWO, IF -- FIRST REFUSAL RIGHTS, MR. BENNACK
6 ALWAYS SAID THAT IN THE EVENT THERE WAS ANY KIND OF A
7 RESOLUTION OF THE JOA, ONE OF THE THINGS THAT HEARST WOULD
8 REQUIRE WOULD BE SOME FORM OF CONTINUUM OF FIRST REFUSAL. IT
9 WAS SUBJECT TO BEING REWRITTEN. IT'S VERY RESTRICTIVE AS IT'S
10 CURRENTLY WRITTEN. BUT HE WAS VERY CONSISTENTLY EMPHATIC THAT
11 THAT WAS ONE OF THE TERMS OR CONDITIONS UNDER WHICH THEY WOULD
12 CONSIDER SOME FORM OF A CLOSING OR SELLING THE EXAMINER.
13 Q. WELL, WHAT YOU WERE DOING HERE IS THAT YOU WERE GOING TO
14 ENTER INTO THIS NEW PARTNERSHIP, AND AGAIN IT WAS GOING TO BE
15 50/50 UNTIL THE CONCLUSION OF THE JOA, CORRECT?
16 A. YES.
17 Q. AND THEN IT WAS GOING TO GO TO 72 PERCENT AND 27 PERCENT,
18 CORRECT?
19 A. THAT'S WHAT MR. BENNACK WAS PROPOSING.
20 Q. AND WHAT YOU WERE DOING, IN EFFECT -- AND THIS ASSUMED
21 THAT THE EXAMINER CLOSED; IS THAT RIGHT?
22 A. IT ASSUMED THAT THE EXAMINER WOULD EITHER HAVE BEEN BOUGHT
23 BY SOMEBODY AFTER HAVING BEEN OFFERED FOR SALE OR -- OR CLOSED
24 IF IT HAD -- IF THERE WERE NO TAKERS.
25 Q. WELL, LET ME SHOW YOU EXHIBIT 120 AND 131.
304
SIAS - DIRECT / ALIOTO
1 MAY I APPROACH THE WITNESS, YOUR HONOR?
2 THE COURT: YES, YOU MAY.
3 BY MR. ALIOTO:
4 Q. 120 PURPORTS TO BE A HEARST JULY 9, 1998 PROPOSAL. AND
5 THEN ATTACHED TO IT ARE SOME -- IS A SPREADSHEET. AND THIS IS
6 FROM -- THESE WERE PRODUCED FROM THE CHRONICLE FILES.
7 AND THEN EXHIBIT 131 IS ALSO A HEARST JULY 9, 1998
8 PROPOSAL, AND IT SEEMS TO BE ALMOST THE SAME AS 120, AND IT
9 GOES FOR TWO PAGES AND IT'S JUST A LITTLE BIGGER.
10 WOULD YOU LOOK AT BOTH OF THOSE DOCUMENTS AND TELL
11 US WHETHER OR NOT THOSE WERE DOCUMENTS THAT EITHER WERE
12 PREPARED BY YOU OR FOR YOU AS TO THE HEARST PROPOSAL OF JULY 9,
13 1998, WHICH IS THE LETTER OF MR. BENNACK, WHICH IS EXHIBIT 86?
14 A. EXHIBIT 120 WOULD HAVE BEEN PREPARED BY -- UNDER NICHOLS
15 AND JAFFE WITH SOME OF THE -- WITH THE PRESUMPTIONS THAT YOU
16 SEE HERE AS A
-- AND NOW EXHIBIT 131 IS -- IT WILL TAKE ME A
17 MINUTE TO GO OVER THIS, COUNSEL. (WITNESS READING DOCUMENT).
18 EXHIBIT 131, YEAH, I HAVE SEEN IT. IT'S GOT A LOT
19 ON IT.
20 AND NOW IF YOU WOULD BE GOOD ENOUGH TO REPEAT THE
21 QUESTION, I WILL TRY TO . . .
22 Q. ARE THESE DOCUMENTS THAT WERE EITHER PREPARED BY YOU OR
23 FOR YOU OR AT LEAST PREPARED BY SOMEONE IN THE CHRONICLE?
24 A. THEY WERE PREPARED BY CHRONICLE PUBLISHING COMPANY.
25 Q. OKAY. AND THEY ATTEMPTED -- AND YOU SAW THEM AT OR ABOUT
305
SIAS - DIRECT / ALIOTO
1 THIS TIME, SOMETIME IN '98?
2 A. YES.
3 Q. ALL RIGHT. AND -- AND THEY WERE WITH REGARD TO
4 MR. BENNACK'S PROPOSAL OF JULY 9, CONTAINED IN MR. BENNACK'S
5 LETTER OF JULY 9, 1998?
6 A. YES.
7 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT ARE
8 MARKED FOR IDENTIFICATION, YOUR HONOR, AS 120 AND 131.
9 MR. ROSCH: NO OBJECTION, YOUR HONOR.
10 THE COURT: VERY WELL. 120 AND 131 ARE ADMITTED.
11 (PLAINTIFF'S EXHIBITS 120 AND 131
12 RECEIVED IN EVIDENCE)
13 BY MR. ALIOTO:
14 Q. OKAY. NOW, EXHIBIT 131 ASSUMES THAT THE -- NUMBER 1,
15 ARABIC NUMBER 1, STATES, QUOTE, "EXAMINER CLOSED."
16 DO YOU SEE THAT?
17 A. YES.
18 Q. THAT'S THE FIRST ITEM, NUMBER 1.
19 AND THAT WAS THE -- THAT WAS THE ASSUMPTION OF ALL
20 OF THIS; IS THAT RIGHT?
21 A. WELL, I -- THAT'S WHAT THIS SAYS, AND THESE PEOPLE --
22 CLOSED OR SOLD. I MEAN, I HAVE TO -- I HAVE NEVER HAD ANY
23 CONVERSATION WITH -- OF ANY CONSEQUENCE WITH MR. BENNACK WHERE
24 IT HASN'T BEEN EMPHASIZED THAT THE EXAMINER WOULD BE OFFERED
25 FOR SALE. AND IF THERE WERE NOT -- IT WAS ONLY AFTER THAT THAT
306
SIAS - DIRECT / ALIOTO
1 THE EXAMINER COULD BE CLOSED.
2 THE PREPARER OF THIS WOULD NOT GO THROUGH THAT
3 BUT -- EXCUSE ME. I HIT THIS (INDICATING).
4 Q. OKAY. WELL, IT SAYS "EXAMINER CLOSED"?
5 A. IT DOES SAY THAT.
6 Q. NOW, IF YOU WILL GO TO 120, THE VERY FIRST BULLET OF 120,
7 IT IS ABOUT THE SAME OFFER. BULLET 1 STATES:
8 "ASSUMES EXAMINER CLOSED. EFFECTIVE
9 JANUARY 1, '99."
10 A. UH-HUH.
11 Q. DO YOU SEE THAT?
12 A. YES.
13 Q. OKAY. SO AT LEAST BOTH OF THESE THAT WERE PREPARED BY THE
14 CHRONICLE FOLKS OF THE OFFER -- BOTH OF THEM ASSUMED THAT THE
15 EXAMINER WOULD CLOSE, CORRECT?
16 A. YES.
17 Q. AND --
18 A. YES.
19 Q. OKAY. AND THEN THEY PUT OUT -- THEY PUT OUT THE
20 PERCENTAGES AT 72 AND A HALF PERCENT TO THE CHRONICLE AND 27
21 AND A HALF PERCENT TO HEARST, CORRECT?
22 A. YES.
23 Q. OKAY. NOW, WAS THIS REJECTED BY THE BOARD OF DIRECTORS OF
24 THE CHRONICLE?
25 A. WAS THIS HEARST JULY 9TH (INDICATING) PROPOSAL?
307
SIAS - DIRECT / ALIOTO
1 Q. YES.
2 A. I DON'T BELIEVE THE BOARD REJECTED IT. I BELIEVE THAT WE
3 HAD A DISCUSSION WITH SEVERAL. WE DIDN'T HAVE ANY BOARD
4 MEETINGS AT THAT TIME. AND WE DID HAVE A TELEPHONE CONFERENCE
5 CALL WITH MR. BENNACK AND MR. GANZI -- AND "WE" BEING SIAS,
6 NICHOLS AND JAFFE AND INGRAM -- IN WHICH WE WERE TRYING TO GET
7 SOME CLARIFICATION ON WHAT THE BASIS FOR HEARST'S PROPOSALS
8 WERE.
9 AND
-- AND AFTER WE DID THAT WE CONSIDERED IT AND
10 TOLD -- I ADVISED MR. BENNACK THAT WE THOUGHT THAT IT WAS TOO
11 HIGH AND WE WERE NOT PREPARED TO CONTINUE ON.
12 Q. NOW, WAS THE TOO HIGH FOR THE ENTIRE THING OR BECAUSE
13 THERE WAS OBJECTION THAT THEY WOULD HAVE ANY INTEREST
14 WHATSOEVER AFTER 2005?
15 A. IT WAS VERY -- IN TRYING TO FIND OUT HOW HEARST ARRIVED AT
16 WHAT WOULD GIVE THEM 27 AND A HALF PERCENT GOING FORWARD. THEY
17 WENT THROUGH THE REASONING, AND THAT WAS FOR HEARST -- THE
18 VALUE THEY PUT ON THEIR PORTION OF THE NEWSPAPER AGENCY'S
19 ASSETS. AND THEY THEN DID SOME CALCULATIONS AND CONVERTED THAT
20 VALUE THAT THEY THOUGHT THAT IT WAS WORTH TO AN ONGOING EQUITY
21 INTEREST IN THE CHRONICLE.
22 AND SO I -- WE -- WE FELT THAT IT WAS MUCH TOO HIGH
23 A FIGURE, AND EXPLORING IT THERE WAS NO APPARENT EVIDENCE ON
24 THE PART OF HEARST TO BACK OFF FROM THAT, AND SO WE TOLD THEM
25 THAT WE WERE NOT PREPARED TO DISCUSS THIS ANY FURTHER.
308
SIAS - DIRECT / ALIOTO
1 Q. NOW, IN JANUARY 1999, MR. WHITE CAME TO SERVE AS THE
2 PUBLISHER OF THE EXAMINER. DID YOU MEET HIM AT OR ABOUT THAT
3 TIME?
4 A. YES. MR. GEORGE IRISH BROUGHT HIM BY MY OFFICE, I THINK,
5 THE DAY THAT HE WAS INTRODUCED OUT THERE AND WE MET FOR ABOUT
6 TEN MINUTES.
7 Q. AND THAT WAS THE FIRST TIME THAT YOU HAD MET MR. WHITE?
8 A. YES, SIR.
9 Q. AND THEN SUBSEQUENTLY -- NOW, LET ME BACK UP FOR ONE
10 MOMENT.
11 DID YOU AGREE SOMETIME IN 1997 OR '96 OR EVEN '98 TO
12 A JOINT PROMOTION AGREEMENT TO BE CONDUCTED BY MR. FALK OF THE
13 SAN FRANCISCO NEWSPAPER AGENCY?
14 A. YOU MENTIONED SEVERAL DATES. SO THE -- THE ANNUAL BUDGET
15 PROCESS OF THE NEWSPAPER AGENCY, I BELIEVE, WOULD HAVE BEEN FOR
16 THE 1997 BUDGET. SO THE MEETING WOULD HAVE BEEN IN OCTOBER OF
17 '96 -- INCLUDED IN THE CIRCULATION PLAN THIS JOINT PROMOTION
18 PROJECT. AND WHEN THE APPROVAL CAME IT WAS FOR THE WHOLE
19 BUDGET, INCLUDING THAT. AND I DID APPROVE THE WHOLE BUDGET,
20 INCLUDING THAT PROMOTION.
21 Q. OKAY. NONETHELESS, SOMETIME IN MARCH OF 1999, YOU
22 COMPLAINED TO MR. FALK, DID YOU NOT, ABOUT THE COMBINATION
23 PROMOTION?
24 A. NO, I DIDN'T COMPLAIN. I DID THE FOLLOWING:
25 Q. YOU DIDN'T WHAT?
309
SIAS - DIRECT / ALIOTO
1 A. I DID NOT COMPLAIN TO MR. FALK AT THAT MOMENT. THE FIRST
2 THING I DID WAS GO DOWN TO THE CIRCULATION DEPARTMENT ONE
3 MORNING WHEN IT DAWNED ON ME THAT WE WERE STILL DOING THIS
4 BECAUSE SOME FRIENDS OF MINE FROM MARIN COUNTY WHO ARE
5 LONG-TIME CHRONICLE SUBSCRIBERS WERE BAFFLED THAT THEY GOT A
6 CALL AT 8:30 IN THE EVENING TO SUBSCRIBE TO THE EXAMINER AT NO
7 COST. AND THEY WERE CONFUSED AND DIDN'T KNOW ABOUT IT AND
8 WHAT -- WHY THIS WAS GOING ON. AND I WAS NOT A HAPPY CAMPER
9 BECAUSE WE HAD BEEN SUFFERING VERY SIGNIFICANT CIRCULATION
10 LOSSES AT THE CHRONICLE. AND THE NEWSPAPER AGENCY, IN MY
11 JUDGMENT, WAS NOT DOING A VERY GOOD JOB ON OUR CIRCULATION AND
12 CIRCULATION ACQUISITION AND RETENTION.
13 AND SO I WENT DOWN TO THE CIRCULATION DEPARTMENT --
14 I BELIEVE IT WAS ONE MR. JERRY HILL, AND SAID, "STOP THIS,
15 EFFECTIVE IMMEDIATELY, CALLING CHRONICLE SUBSCRIBERS AND
16 OFFERING EXAMINER AT NO CHARGE."
17 I MADE A MISTAKE IN ONE THING ONLY THAT I REGRET,
18 AND THAT IS I DIDN'T LET TIM WHITE KNOW AT THAT SAME TIME. I
19 JUST DIDN'T THINK OF IT. BUT THAT'S HOW -- AND IT WAS AFTER
20 THAT THAT MR. FALK GOT -- WAS ADVISED AND SO FORTH AND THEN
21 MR. WHITE AND SO FORTH. BUT I REGRET NOT ADVISING MR. WHITE
22 THAT MORNING. I HAD OTHER THINGS IN MY MIND AND THAT WAS A
23 MISTAKE.
24 Q. LET ME HAND YOU --
25 MAY I APPROACH THE WITNESS, YOUR HONOR?
310
SIAS - DIRECT / ALIOTO
1 THE COURT: YOU MAY.
2 BY MR. ALIOTO:
3 Q. LET ME HAND YOU EXHIBIT 111. THIS IS A LETTER DIRECTED OR
4 SENT BY YOU TO MR. STEPHEN FALK ON MARCH 11, 1999. AND YOU
5 HAVE COPIES TO MR. WHITE AND TO MR. INGRAM.
6 A. YES.
7 Q. OKAY. DID YOU SEND THIS TO MR. FALK ON OR ABOUT THIS DATE
8 (INDICATING)?
9 A. YES, I DID.
10 Q. AND IN THIS LETTER WHAT YOU WANTED TO DO WAS YOU WERE
11 OBJECTING TO MR. FALK USING THE PROGRAM OF CALLING UP SAN
12 FRANCISCO -- OF CALLING UP SUBSCRIBERS TO THE CHRONICLE AND
13 OFFERING THEM A FREE SUBSCRIPTION TO THE EXAMINER, CORRECT?
14 A. YES, THAT'S CORRECT.
15 Q. DID YOU KNOW AT THE TIME THAT THEY WERE ALSO CALLING UP
16 EXAMINER SUBSCRIBERS AND GIVING THOSE SUBSCRIBERS AN OFFER OF A
17 FREE CHRONICLE?
18 A. YES, SIR.
19 Q. DID YOU OBJECT TO THAT?
20 A. I DIDN'T REALLY CARE ONE WAY OR THE OTHER.
21 Q. SO THAT YOU JUST OBJECTED TO THE PROGRAM ITSELF?
22 A. AT THIS POINT IN TIME I DID.
23 Q. OKAY. NOW, YOU WERE OF THE OPINION THAT IF -- THAT WHAT
24 IN EFFECT WAS HAPPENING, AT LEAST AS FAR AS YOU WERE CONCERNED
25 FROM THE CHRONICLE SIDE, WAS THAT THEY WERE USING THE CHRONICLE
311
SIAS - DIRECT / ALIOTO
1 TO PROMOTE THE EXAMINER, CORRECT?
2 A. I DON'T THINK THAT -- THAT MAY BE CORRECT, BUT WHAT I WAS
3 CONCERNED ABOUT IS THE CHRONICLE, CIRCULATION WAS IN A
4 SIGNIFICANT DECLINE, AND THE AGENCY WAS NOT VERY SUCCESSFUL IN
5 STEMMING IT, AND THERE WAS A LOT OF WORK THAT HAD TO BE DONE IN
6 THE CIRCULATION ACQUISITION AREA.
7 THIS IS -- WHILE THIS IS TECHNICALLY PAID
8 CIRCULATION, ACCORDING TO ABC RULES, IT IS JUST A CRUTCH FOR
9 COVERING OVER FAR MORE FUNDAMENTAL PROBLEMS AND DISCOURAGES THE
10 USE OF OTHER DEVICES TO RETAIN SUBSCRIBERS. AND MY INTEREST IS
11 IN RETAINING CHRONICLE SUBSCRIBERS. CHRONICLE CIRCULATION IS
12 MY PRIMARY INTEREST. AND I DID NOT FEEL THAT THIS WAS AN
13 APPROPRIATE ACTION FOR THEM TO TAKE.
14 Q. OKAY. NOW --
15 MAY I USE THE EASEL, YOUR HONOR?
16 THE COURT: YOU MAY.
17 BY MR. ALIOTO:
18 Q. YOU MENTIONED A COUPLE OF THINGS IN THAT ANSWER. AND YOU,
19 FIRST OF ALL, MENTIONED ABC. WOULD YOU STATE TO THE COURT WHAT
20 ABC IS?
21 A. IT IS THE AUDIT BUREAU OF CIRCULATIONS, AN INDEPENDENT
22 AGENCY THAT AUDITS NEWSPAPERS, MAGAZINES AND OTHER PUBLICATIONS
23 FOR PAID CIRCULATION. THEY HAVE A VARIETY OF RULES.
24 Q. OKAY. IT'S FOR PAID CIRCULATION, CORRECT?
25 A. YES, SIR.
312
SIAS - DIRECT / ALIOTO
1 Q. AND YOU UNDERSTAND, IT HAS BEEN YOUR EXPERIENCE, THAT --
2 THAT ADVERTISERS USE ABC GUIDES?
3 A. THEY DO. AND THEY ARE ON THE ABC BOARD.
4 Q. AND IT'S IMPORTANT FOR THEM TO KNOW THAT IN
-- THAT
5 THESE -- THAT THESE CIRCULATIONS ARE PAID CIRCULATIONS IN
6 DETERMINING HOW MUCH THEY ARE GOING TO PAY FOR ADVERTISING?
7 A. IT IS ONE OF THEIR CONSIDERATIONS.
8 Q. OKAY. NOW, UNDER THIS PROGRAM IF WE HAVE THE CHRONICLE--
9 THIS WOULD BE A SUBSCRIBER OF THE CHRONICLE HERE (INDICATING).
10 AND IF HE IS PAYING -- HOW MUCH IS THE SUBSCRIPTION FOR THE
11 CHRONICLE?
12 A. WELL, AT THAT TIME I BELIEVE IT WAS $13.
13 Q. OKAY.
14 A. NO. EXCUSE ME. IT HAD GONE UP TO 14
-- 14.40. THAT'S
15 ANOTHER PART OF THIS STORY THAT I'D LIKE TO COME TO.
16 Q. WELL, WE WILL TALK ABOUT THAT PART OF THE STORY LATER.
17 A. OKAY. LET'S SAY IT'S $14.
18 Q. OKAY.
19 A. SEVEN-DAY SUBSCRIBER, TOO, MR. ALIOTO.
20 Q. OKAY. WE WILL PUT "SEVEN DAYS."
21 A. AND THE -- AND THE FREE BUSINESS IS FOR SIX DAYS.
22 Q. OKAY. NOW, WHEN -- WHEN THE CHRONICLE SUBSCRIBER -- AT
23 THIS TIME DID YOU KNOW WHAT THE SUBSCRIPTION PRICE WAS FOR THE
24 EXAMINER?
25 A. I BELIEVE IT WAS THE SAME FOR SEVEN DAYS AS IT WAS FOR THE
313
SIAS - DIRECT / ALIOTO
1 CHRONICLE.
2 Q. OKAY. SO, NOW, IF THE -- NOW, WHAT YOU UNDERSTOOD THE
3 PROGRAM WOULD BE IS THE PERSON WHO IS PAYING THE $14 WOULD THEN
4 GET THE EXAMINER FOR SIX DAYS; IS THAT RIGHT?
5 A. YES.
6 Q. AND DIDN'T HAVE TO PAY ANY MORE THAN THE
$14, CORRECT?
7 A. THAT IS CORRECT.
8 Q. OKAY. BUT WHEN ABC IS TAKING A COUNT OF THE CIRCULATION,
9 IN ORDER TO DO SO THEY WANT TO KNOW WHAT THE -- MAKE SURE THAT
10 IT'S A PAID CIRCULATION, CORRECT?
11 A. WELL, THE TERMINOLOGY -- BUT BASICALLY THEY
-- THE RULE
12 IS -- AND MAYBE THIS WILL BE HELPFUL. THE RULE IS THAT AS LONG
13 AS YOU HAVE 51 PERCENT OF YOUR -- OF YOUR RATE. YOU CAN SET
14 WHATEVER RATE ONE WANTS. BUT AS LONG AS A PUBLICATION IS
15 GETTING 51 PERCENT OF THAT RATE, THEN IT CAN BE COUNTED AS
16 PAID. SO A SEVEN-DAY SUBSCRIPTION, $14, GIVING SIX DAYS OF
17 EITHER PAPER IS -- IS MORE THAN 50 PERCENT -- OR IS LESS THAN
18 50 PERCENT.
19 Q. OKAY. SO THAT, FIRST OF ALL, THIS -- THIS CIRCULATION
20 THAT THE EXAMINER ACHIEVES BY REASON OF THIS PROGRAM, THEY GET
21 COUNTED FOR THIS CIRCULATION --
22 A. AS PAID.
23 Q. -- EVEN THOUGH -- EVEN THOUGH NO ONE IS PAYING FOR THE
24 EXAMINER, CORRECT?
25 A. THAT'S CORRECT.
314
SIAS - DIRECT / ALIOTO
1 Q. BUT THEY ARE GETTING IT BECAUSE WHAT THE SAN FRANCISCO
2 NEWSPAPER AGENCY IS DOING IS THEY ARE SAYING, "WELL, WE CAN
3 TAKE 50 PERCENT -- 51 PERCENT OF THAT AND COUNT IT," RIGHT?
4 A. I'M -- MY ONLY HESITATION IS THE COUNTING IS SUFFICIENTLY
5 BIZARRE THAT I
-- I WOULD NOT BE CONFIDENT THAT I WOULD GIVE
6 YOU A CORRECT ANSWER.
7 Q. WELL, THE BOTTOM LINE IS --
8 A. THE RULE IS IS THE RULES CHANGE AND PAPERS CAN START
9 OFFERING IN THIS CASE WITH THE COMBO SIX DAYS OF THE -- FOR A
10 SEVEN-DAY SUBSCRIBER, AND THEY WOULD BE COUNTED AS PAID
11 CIRCULATION.
12 Q. OKAY. THE FACT, HOWEVER, IS -- IS, FINALLY, THOUGH, IN
13 THIS PROGRAM, WHETHER IT'S THE EXAMINER GIVEN AWAY FOR FREE FOR
14 SIX DAYS OR THE CHRONICLE GIVEN AWAY FOR FREE FOR SIX DAYS, THE
15 SAN FRANCISCO
-- THE SAN FRANCISCO NEWSPAPER AGENCY ATTEMPTS TO
16 HAVE THAT COUNTED AS PAID CIRCULATION EVEN THOUGH NO ONE PAID
17 FOR IT?
18 A. IT IS PAID CIRCULATION -- IT IS LISTED AS PAID BECAUSE IT
19 CONFORMS TO THE ABC REGULATIONS.
20 Q. NOW, YOU WERE -- ONE OF THE CONCERNS THAT YOU HAD -- AND
21 THIS IS IN EXHIBIT 111. ONE OF THE CONCERNS YOU HAVE, YOU
22 STATE IN THE THIRD PARAGRAPH AND THE SECOND SENTENCE OF THE
23 THIRD PARAGRAPH -- OR THE FIRST TWO SENTENCES. YOU STATE,
24 QUOTE:
25 "IN ANY EVENT, CPC DOES NOT CONSENT OR
315
SIAS - DIRECT / ALIOTO
1 APPROVE THE CONTINUATION OF THE PROMOTION AND IS
2 HEREBY INSTRUCTING THE AGENCY PURSUANT TO
3 PARAGRAPH 3.15(G) OF THE JOA TO TERMINATE THE
4 PROMOTION. PARAGRAPH 3.15(G) GRANTS TO CPC THE
5 EXCLUSIVE RIGHT TO SET BOTH THE CIRCULATION
6 PRICES FOR THE CHRONICLE AND ALL TERMS AND
7 CONDITIONS APPLICABLE THERETO."
8 DO YOU SEE THAT?
9 A. YES.
10 Q. AND WHEN YOU WROTE THIS YOU BELIEVED, DID YOU NOT, THAT
11 THE CHRONICLE HAD THE EXCLUSIVE RIGHT TO SET CIRCULATION
12 PRICES?
13 A. I DID. THE BACKGROUND ON WHY THIS WAS WRITTEN, IT WAS
14 DRAFTED BY MR. INGRAM, WHO IS AN EXPERT ON THE JOA. AND I
15 OBVIOUSLY AM NOT WHEN YOU GET DOWN TO INDIVIDUAL PARAGRAPHS.
16 AND MR. FALK HAD BEEN --
17 Q. DID YOU READ THE PARAGRAPH --
18 A. -- IN THE MIDDLE OF THE TWO PARTIES, PARTNERS, AT ODDS ON
19 THIS PARTICULAR ISSUE AND TO CLARIFY WHERE CHRONICLE -- WE HAD
20 A MEETING AND MR. WHITE STATED WHAT THE HEARST'S CHRONICLE
21 CORPORATION'S FEELING WAS AND I STATED WHERE WE WERE, AND, AS A
22 FOLLOW-UP AND TO CONFIRM IT, THIS LETTER WAS DISPATCHED TO
23 MR. FALK.
24 Q. NOW, BACK TO THE QUESTION, THE QUESTION IS: YOU BELIEVED
25 THAT THE CHRONICLE HAD THE EXCLUSIVE RIGHT TO SET THE
316
SIAS - DIRECT / ALIOTO
1 CIRCULATION PRICES FOR THE CHRONICLE, CORRECT?
2 A. YES, SIR.
3 Q. YOU BELIEVED AND UNDERSTOOD THAT THE JOA ALSO GAVE YOU THE
4 EXCLUSIVE RIGHT TO SET THE RATES FOR ADVERTISING FOR THE
5 CHRONICLE, CORRECT?
6 A. THAT IS CORRECT.
7 Q. YOU UNDERSTOOD THAT THE JOA GAVE THE EXCLUSIVE RIGHT TO
8 THE EXAMINER TO SET THEIR CIRCULATION PRICE, CORRECT?
9 A. YES, SIR.
10 Q. AND YOU BELIEVED THAT THE JOA GAVE THE EXCLUSIVE RIGHT TO
11 THE EXAMINER TO FIX THEIR ADVERTISING RATES, CORRECT?
12 A. YES, SIR.
13 Q. SO --
14 A. IF I MIGHT, THERE IS AN AMBIGUITY IN -- TO THIS EXTENT:
15 THE SUNDAY PAPER, WHICH IS JOINTLY PUBLISHED, HAS TO BE
16 APPROVED BY -- BOTH RATES HAVE TO BE APPROVED BY BOTH PARTIES.
17 Q. OKAY. THAT IS ALSO A PART OF THE JOA, HOWEVER, ISN'T IT?
18 A. YES.
19 Q. YOU HAVE THE JOA IN FRONT OF YOU, EXHIBIT 1? IT'S THE BIG
20 ONE.
21 A. OH, WOW, OKAY.
22 Q. I THINK YOU HAVE IT.
23 A. THIS ONE HERE -- THIS HERE (INDICATING)? THIS IS WHAT
24 (INDICATING).
25 Q. NO. I MUST HAVE TAKEN IT DOWN. HERE IT IS (INDICATING).
317
SIAS - DIRECT / ALIOTO
1 ALL RIGHT. I HAVE PLACED IN FRONT OF YOU THE JOA.
2 AND YOU WILL SEE IF YOU GO TO THE SECOND
-- IF YOU WILL GO TO
3 THE SECOND PAGE OF THE JOA --
4 A. UH-HUH.
5 Q. -- AND YOU WILL SEE AS YOU GO DOWN THE PAGE TO THE
6 "WHEREAS," THE LAST "WHEREAS," WHERE IT STATES, QUOTE:
7 "WHEREAS, CHRONICLE AND HEARST."
8 DO YOU SEE THAT?
9 A. YES.
10 Q. OKAY. IT STATES, QUOTE:
11 "WHEREAS, CHRONICLE AND HEARST WILL HAVE
12 COMPLETE CONTROL OVER THE ADVERTISING RATES AND
13 CIRCULATION PRICES RELATING TO THE RESPECTIVE
14 DAILY, MORNING AND AFTERNOON NEWSPAPERS OPERATED
15 BY THEM."
16 DO YOU SEE THAT?
17 A. YES, SIR.
18 Q. OKAY. AND I ALSO WANT TO DIRECT YOUR ATTENTION TO PAGE
19 32. PAGE 32 IS THE PORTION THAT YOU QUOTE FROM IN YOUR LETTER.
20 AND IT'S PARAGRAPH 3.15. AND IT BEGINS UNDERLINED ON THE
21 BOTTOM OF THE PAGE, QUOTE:
22 "PUBLICATION AND CIRCULATION OF THE SAN
23 FRANCISCO CHRONICLE, EXAMINER AND SAN FRANCISCO
24 SUNDAY EXAMINER AND CHRONICLE. CHRONICLE AND
25 HEARST AGREE THAT DURING THE TERM HERE OF" --
318
SIAS - DIRECT / ALIOTO
1 AND THEN IF YOU WILL GO TO PAGE 34, THE VERY LAST
2 LINE IS G, IT STATES, QUOTE:
3 "CHRONICLE AND HEARST WILL HAVE AUTHORITY
4 OVER AND RESPONSIBILITY FOR DETERMINING THE
5 ADVERTISING RATES AND CIRCULATION PRICES
6 (INCLUDING BUT NOT LIMITED TO TERMS AND
7 CONDITIONS RELATING TO SUCH RATES AND PRICES) OF
8 THEIR RESPECTIVE DAILY NEWSPAPERS AND SUCH
9 DETERMINATION SHALL NOT BE SUBJECT TO
10 ARBITRATION."
11 DO YOU SEE THAT? DO YOU SEE THAT?
12 A. YES, I DO, MR. ALIOTO.
13 Q. AND THEN IF YOU WILL JUST GO DOWN TO THE NEXT FULL
14 PARAGRAPH, IT STATES, QUOTE:
15 "CHRONICLE AND HEARST WILL DETERMINE JOINTLY
16 THE ADVERTISING RATES AND CIRCULATION PRICES OF
17 THE SUNDAY NEWSPAPER," END OF QUOTE.
18 DO YOU SEE THAT?
19 A. YES, SIR.
20 Q. OKAY. SO THE JOA, IN FACT, AS YOU KNOW AND BELIEVE AND
21 UNDERSTAND -- THE JOA GIVES YOU THE EXCLUSIVE RIGHT AND
22 RESPONSIBILITY TO SET THE RATES FOR YOUR ADVERTISING AND FOR
23 CIRCULATION FOR THE CHRONICLE ALONE.
24 A. YES, SIR.
25 Q. HOWEVER, YOU ARE ALLOWED TO SET A JOINT PRICE WITH THE
319
SIAS - DIRECT / ALIOTO
1 EXAMINER ON THE SUNDAY PAPER UNDER THE JOA, CORRECT?
2 A. YES.
3 Q. NOW, YOU, IN FACT, FROM TIME TO TIME PRICE YOUR PAPER
4 DIFFERENTLY THAN THE EXAMINER. FOR EXAMPLE, ON STREET SALES,
5 YOU PRICE THE CHRONICLE AT A DIFFERENT PRICE THAN THE EXAMINER;
6 IS THAT RIGHT?
7 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
320
SIAS - DIRECT / ALIOTO
1 A. PRICE OF THE PAPER, YOU'RE REFERRING NOW JUST TO
2 CIRCULATION, YOU'RE NOT INCLUDING ADVERTISING?
3 Q. WE'LL DO CIRCULATION FIRST.
4 A. CIRCULATION.
5 Q. I'M TALKING ABOUT STREET SALES.
6 A. ALL RIGHT.
7 Q. HOLD ON. WE SHOULD MAKE THAT CLEAR TOO.
8 A. SINGLE COPY SALES WOULD BE MORE ACCURATE. YESTERDAY THE
9 TERM WAS "STREET SALES." "SINGLE COPY SALES" IS A MORE
10 ACCURATE DESCRIPTION.
11 Q. ONE MORE. EXCUSE ME A MINUTE.
12 MR. ALIOTO: MAY I APPROACH THE EASEL, YOUR HONOR?
13 THE COURT: VERY WELL.
14 BY MR. ALIOTO:
15 Q. LET'S MAKE SURE WE UNDERSTAND THIS. WE'LL DO IT ON THE
16 BOTTOM HERE. ADVERTISING AND CIRCULATION ARE THE TWO BASIC
17 FORMS OF REVENUE FOR THE NEWSPAPERS; IS THAT RIGHT?
18 A. YES, SIR.
19 Q. OKAY. AND ADVERTISING IS DIVIDED INTO NATIONAL
20 ADVERTISING, CORRECT, IS ONE?
21 A. YES.
22 Q. CLASSIFIED ADVERTISING?
23 A. YES.
24 Q. WHAT OTHER ADVERTISING?
25 A. RETAIL ADVERTISING.
321
SIAS - DIRECT / ALIOTO
1 Q. OKAY. I'M GOING TO HAVE YOU EXPLAIN EACH ONE. RETAIL
2 ADVERTISING.
3 A. ZONED RETAIL.
4 Q. OKAY, THAT'S THE SAME.
5 A. AND PREPRINTS OR --
6 Q. OKAY. NOW, NATIONAL ADVERTISING. THE NATIONAL
7 ADVERTISING WOULD BE LIKE FOR WHAT?
8 A. NEWSPAPER RATE STRUCTURES ARE RATHER ARCHAIC AND HAVE
9 BEEN, BUT THE NATIONAL CATEGORY IS GENERAL BUSINESS THAT IS --
10 THAT ORIGINATES OUTSIDE OF THE HOME MARKET. IT WOULD BE A
11 MANUFACTURER LIKE FORD MOTOR COMPANY.
12 Q. CAR COMPANIES?
13 A. CAR COMPANIES, AIRLINES, FINANCIAL INSTITUTIONS. THERE'S
14 A FINANCIAL RATE TOO, BUT IT'S REALLY A CLASSIFIED -- I MEAN A
15 NATIONAL RATE.
16 Q. OKAY. CLASSIFIED. WHAT IS CLASSIFIED ADVERTISING?
17 A. CLASSIFIED IS THERE'S DISPLAY CLASSIFIED FROM AUTOMOTIVE
18 COMPANIES, REAL ESTATE COMPANIES AND THE EMPLOYMENT OR CAREER
19 SECTION, THE THREE MAJOR CATEGORIES OF CLASSIFIED. AND THAT'S
20 PLACED IN COLUMNS AND/OR DISPLAY ADS. IT IS HANDLED BY A
21 SEPARATE SALES STAFF.
22 Q. OKAY. SEPARATE FROM THE NATIONAL ADVERTISING GROUP?
23 A. YES, THAT'S RIGHT.
24 Q. OKAY. AND RETAIL?
25 A. RETAIL WOULD BE ADVERTISING FROM RETAILERS, DEPARTMENT
322
SIAS - DIRECT / ALIOTO
1 STORES, ANY KIND OF RETAILER THAT SELLS -- THAT HAS A PLACE OF
2 BUSINESS AND SELLS TO CUSTOMERS. IT COULD BE INCLUDING EVEN --
3 OH, WE HAVE OTHER CATEGORIES, BUT --
4 Q. OKAY. AND YOU HAVE A GROUP THAT DOES THAT TOO?
5 A. YOU DO.
6 Q. AND THEN PREPRINT.
7 A. PREPRINTS ARE THE THINGS THAT ARE IN YOUR PAPER THAT HAVE
8 BEEN PREPRINTED BY THE ADVERTISER AND ARE INSERTED INTO THE
9 PAPER IN THE PRINTING PLANTS OR BY THE CARRIERS, AND THEY
10 ARE -- THEY ARE A SIGNIFICANT COMPONENT BUT NOT AS LARGE AS
11 EITHER NATIONAL, CLASSIFIED OR RETAIL, BUT THEY'RE GROWING.
12 Q. OKAY. NOW, THESE COSTS FOR THE PEOPLE -- AND ABOUT HOW
13 MANY PEOPLE ARE WE TALKING ABOUT WHO DO THIS?
14 A. WOW. THAT I WOULD NOT BE ABLE TO GIVE YOU, BUT THE
15 BIGGEST DEPARTMENT IN TERMS OF NUMBERS OF SOLICITORS WOULD BE
16 THE CLASSIFIED AND THEN RETAIL CLOSE BY AND NATIONAL SOLICITORS
17 MUCH FEWER -- FEWER. YOU HAVE A REP AND SO FORTH. AND THE
18 PREPRINTS, THEY'RE HANDLED BY THESE SPECIALISTS BUT THE LABOR
19 PART OF THEM, THEY ARE INSERTED IN THE PLANTS IN MOST CASES
20 OR -- IN THE PLANT.
21 Q. OKAY. NOW, THESE ARE UNDER THE SAN FRANCISCO NEWSPAPER
22 AGENCY?
23 A. YES, SIR.
24 Q. OKAY. NOW, THEN, CIRCULATION. CIRCULATION YOU HAVE HOME
25 DELIVERY --
323
SIAS - DIRECT / ALIOTO
1 A. YES.
2 Q. -- CORRECT?
3 AND THAT'S SIMPLY DELIVERED TO THE HOMES.
4 A. YES.
5 Q. OKAY. THEN YOU HAVE YOU CALL IT STREET SALES?
6 A. SINGLE COPY SALES.
7 Q. OKAY. AND SINGLE COPY SALES ARE BY RACKS?
8 A. THEY ARE BY RACKS.
9 Q. AND?
10 A. THEY ARE BY DEALERS.
11 Q. DEALERS.
12 A. AND MAYBE ASSORTED OTHER THINGS MAY BE IN THERE.
13 Q. ALL RIGHT. NOW, LET'S TALK --
14 A. RETAILERS.
15 Q. LET'S TALK ABOUT THE SINGLE COPY GROUP. NOW, THE SINGLE
16 COPY GROUP YOU CHARGE A DIFFERENT PRICE THAN THE EXAMINER
17 CHARGES FOR ITS PAPER?
18 A. IN MOST -- WE HAVE A 50-CENT PRICE WHICH WE'VE HAD FOR
19 SOME TIME FOR THE CHRONICLE EXCEPT IN SOUTHERN SAN MATEO COUNTY
20 AND NORTHERN SANTA CLARA COUNTY WE HAVE A 25-CENT PRICE FOR THE
21 CHRONICLE. WE'VE HAD IT FOR ABOUT FOUR YEARS.
22 AND THE OBJECTIVE THERE WAS TO TRY TO INCREASE OUR
23 PRESENCE IN READERSHIP IN THE SILICON VALLEY AREA WHERE THE
24 RECRUITMENT ADVERTISING IS A VERY, VERY BIG ADVERTISING
25 CATEGORY. AND THE MERCURY NEWS DOES VERY WELL WITH IT, AND WE
324
SIAS - DIRECT / ALIOTO
1 WANTED TO TRY TO INCREASE OUR PRESENCE CIRCULATION-WISE AS WELL
2 AS ADVERTISING-WISE AND HAVE.
3 AND THEN WE CHARGE ON -- IN SOME BART STATIONS IN
4 THE EAST BAY WE PUT IN A 25-CENT PRICE SEVERAL YEARS AGO.
5 Q. OKAY. NOW, THE 50-CENT PRICE IS IN SAN FRANCISCO; IS THAT
6 RIGHT?
7 A. IN A LOT OF AREAS OF SAN FRANCISCO, YES.
8 Q. THE 25-CENT PRICE IS DOWN NEAR SAN JOSE, SILICON VALLEY?
9 A. SOME OF IT'S THERE AND OVER IN THE EAST BAY IN BART
10 STATIONS.
11 Q. OKAY. WE'LL GET TO THE BART STATIONS IN A MINUTE.
12 NOW, THE ONE -- NOW, THE 25 CENTS THAT YOU CHARGE IN
13 SILICON VALLEY, YOU CHARGE 25 CENTS EVEN THOUGH IT COSTS YOU
14 MORE TO GET THE PAPER DOWN THERE THAN IT DOES TO GET THE PAPERS
15 HERE IN THE CITY; ISN'T THAT RIGHT?
16 A. THE TRANSPORTATION COST OF GETTING IT DOWN THERE, I THINK
17 WE'VE BEEN -- THE -- THE ANSWER IS I BELIEVE THAT THAT WOULD BE
18 CORRECT, BUT WE HAVE NOT DONE A COST ANALYSIS THAT WOULD PROVE
19 THAT TO BE CORRECT.
20 Q. AND THE REASON YOU'RE CHARGING 25 CENTS DOWN IN SILICON
21 VALLEY IS BECAUSE YOU HAVE TO COMPETE DOWN THERE; IS THAT
22 RIGHT?
23 A. THE REASON WE -- THE REASON WE'RE CHARGING 25 CENTS IN
24 SILICON VALLEY IS TO TRY TO GET MORE MARKET PRESENCE SO THAT
25 OUR SOLICITORS FOR CLASSIFIED RECRUITMENT ADVERTISING WILL BE
325
SIAS - DIRECT / ALIOTO
1 ABLE TO TALK WITH THE BUYERS ABOUT A PAPER THAT THE BUYERS SEE.
2 Q. OKAY. BUT WHEN YOU SAY "GET MORE PRESENCE," YOU MEAN
3 COMPETE. YOU HOPE THAT PEOPLE WILL BUY YOUR NEWSPAPER AND
4 INCREASE YOUR PRESENCE IN SILICON VALLEY; CORRECT?
5 A. YES.
6 Q. AND YOU'RE CHARGING 25 CENTS RATHER THAN 50 CENTS BECAUSE
7 YOU THINK THEY'LL BE MORE LIKELY TO BUY YOUR PAPER THAN IF IT'S
8 50 CENTS; RIGHT?
9 A. YES.
10 Q. AND ONE OF THE REASONS YOU'RE CHARGING 50 CENTS -- I MEAN
11 25 CENTS IS BECAUSE YOU'RE TRYING TO SELL A DAILY PAID
12 NEWSPAPER IN COMPETITION WITH THE SAN JOSE MERCURY NEWS AND
13 SILICON VALLEY; CORRECT?
14 A. YES.
15 Q. OKAY. AND THE SAN JOSE MERCURY NEWS IS KNIGHT RIDDER SO
16 THEY'RE NOT IN A JOA WITH YOU; ISN'T THAT RIGHT?
17 A. THAT IS CORRECT.
18 Q. IN THE EAST BAY YOU SAY AT THE BART STATIONS YOU'RE
19 CHARGING 25 CENTS ALSO; CORRECT?
20 A. YES.
21 Q. AND, AGAIN, ANOTHER ONE OF THE REASONS THERE IS THAT IN
22 THE MORNING WHEN PEOPLE GO USE THE BART STATIONS, OR THE
23 AFTERNOON FOR THAT MATTER, YOU WANT THEM TO BUY YOUR PAPER
24 RATHER THAN THE EAST BAY PAPERS; CORRECT?
25 A. YES, WE WANT -- I DON'T KNOW WHETHER IT'S RATHER BECAUSE I
326
SIAS - DIRECT / ALIOTO
1 DON'T KNOW THAT THEY ARE NECESSARILY EXCLUSIVE, BUT THEY ARE
2 PEOPLE COMING INTO SAN FRANCISCO AND WE WANT TO MAKE IT EASIER
3 FOR THEM TO BUY US BY HAVING A SINGLE COIN TO PUT IN THE BOX,
4 AND HOPEFULLY WE WILL DO WELL. NOW, WHETHER THAT CAUSES THEM
5 TO BUY US VERSUS THE CONTRA COSTA, I DON'T KNOW.
6 Q. WELL, WHEN YOU SAY THAT YOU WANT TO MAKE IT EASIER FOR
7 THEM BECAUSE
--
8 A. THEY MIGHT NOT BE BUYING ANY PAPER.
9 Q. WHEN YOU SAY THAT YOU WANT TO MAKE IT EASIER FOR THEM
10 BECAUSE THEY ONLY HAVE TO JUST PUT ONE COIN IN --
11 A. THAT'S RIGHT.
12 Q. -- DON'T YOU WANT TO MAKE IT EASIER FOR THE PEOPLE IN SAN
13 FRANCISCO TO JUST PUT ONE COIN IN?
14 (LAUGHTER)
15 Q. THE REASON IS, IS BECAUSE THERE'S NO COMPETITION HERE;
16 ISN'T IT? THE REASON IS BECAUSE THERE'S NO COMPETITION HERE;
17 ISN'T THAT THE ANSWER? THAT'S THE ANSWER.
18 A. YOU'VE ANSWERED YOUR OWN QUESTION.
19 THE COURT: WELL, LET'S LET THE WITNESS ANSWER THE
20 QUESTION.
21 BY MR. ALIOTO:
22 Q. IS IT? IS THAT THE ANSWER?
23 A. THAT'S A SIMPLISTIC ANSWER.
24 Q. IS IT THE ANSWER?
25 A. YES.
327
SIAS - DIRECT / ALIOTO
1 Q. OKAY. NOW, YOU MAKE MONEY ON THE 25-CENT SALE IN SILICON
2 VALLEY, DON'T YOU, ON THE PAPERS IN SILICON VALLEY?
3 A. ABSOLUTELY NOT.
4 Q. ABSOLUTELY WHAT?
5 A. NOT, N-O-T, NOT.
6 Q. NOT. ARE YOU SELLING THEM AT A LOSS?
7 A. APPARENTLY WE ARE.
8 Q. ARE YOU SELLING THE PAPERS AT THE BART --
9 A. LET ME PUT IT THIS WAY: THE CIRCULATION REVENUE OF THE
10 NEWSPAPER, COMBINED NEWSPAPERS, IS LESS THAN THE CIRCULATION
11 EXPENSES OF THE JOINT OPERATING AGREEMENT.
12 SO NOW WE GET INTO WHETHER WE'RE SELLING IT --
13 NEWSPAPERS AT A LOSS OR NOT. I WOULD NOT BE PREPARED TO SAY
14 WITH CERTAINTY WHAT THE SIZE OF THAT LOSS IS OR WHERE. WE HAVE
15 ALL KINDS OF CIRCULATION RATES AND I'M RELUCTANT TO GIVE YOU A
16 DEFINITIVE ANSWER ON A VERY COMPLEX SUBJECT.
17 Q. DO YOU BELIEVE THAT YOU ARE SELLING THE PAPERS IN SILICON
18 VALLEY AT A LOSS?
19 THE COURT: I BELIEVE HIS ANSWER IS THEY'RE SELLING
20 THE NEWSPAPERS AT A LOSS ALL OVER; IS THAT CORRECT?
21 THE WITNESS: YES, SIR.
22 THE COURT: IS THAT YOUR ANSWER?
23 THE WITNESS: THAT WOULD APPARENTLY BE THE CASE
24 BECAUSE, AGAIN, I'M GOING TO COME BACK AND SAY THAT THE
25 CIRCULATION REVENUE THAT FLOWS THROUGH THE NEWSPAPER AGENCY IS
328
SIAS - DIRECT / ALIOTO
1 SUBSTANTIALLY LESS IN THE MILLIONS OF DOLLARS THAN THE
2 CIRCULATION COSTS OF RUNNING THE CIRCULATION DEPARTMENT, THE
3 ACQUISITIONS, THE DISTRIBUTION COSTS, AND ALL THOSE MATTERS.
4 MR. ALIOTO: EXCUSE ME. MAY I USE THE EASEL?
5 Q. ARE YOU SAYING -- WE WENT OVER THIS THIS MORNING. '99,
6 THESE ARE THE REVENUES TO THE SAN FRANCISCO NEWSPAPER AGENCY
7 ACCORDING TO YOUR BEST RECOLLECTION.
8 A. YES. YES, SIR.
9 Q. THOSE REVENUES -- AND THEN THE NEXT ONE, THE 330 MILLION
10 ARE THE COSTS?
11 A. YES, SIR.
12 Q. THIS MORNING YOU SAID THE REVENUES WERE GREATER THAN THE
13 COSTS, YOU HAD
$114 MILLION NET EXCESS.
14 A. I DID.
15 Q. ARE YOU SAYING THAT THAT'S NOT SO NOW?
16 A. NO. I'M SAYING THAT'S STILL SO. WHAT IS -- MR. ALIOTO --
17 THE COURT: THIS IS A MATTER --
18 THE WITNESS: THE CIRCULATION --
19 THE COURT: THIS IS A MATTER OF APPLES AND ORANGES.
20 THE WITNESS: NOT EVEN THAT, YOUR HONOR.
21 THE COURT: CIRCULATION REVENUE IS DIFFERENT FROM
22 ADVERTISING REVENUE.
23 THE WITNESS: YES, SIR.
24 THE COURT: AND I THINK THE PREMISE OF THE QUESTION
25 IS FAULTY. WHY DON'T YOU MOVE ON, MR. ALIOTO.
329
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. JUST SO I --
3 A. ADVERTISING -- OF THE TOTAL $444 MILLION, ROUGHLY
4 80 PERCENT IS ADVERTISING REVENUE.
5 Q. OH, I SEE. OKAY.
6 IN OTHER WORDS, WHAT YOU WERE SAYING JUST NOW, YOU
7 WERE TRYING TO TAKE OUT CIRCULATION ALONE, IS THAT WHAT YOU
8 WERE DOING?
9 A. THE CIRCULATION DEPARTMENT HAS REVENUE OF THE AGENCY AND
10 IT HAS COSTS, AND I AM SAYING THAT THE COSTS FOR THE AGENCY OF
11 THE CIRCULATION DEPARTMENT ARE IN EXCESS OF THE REVENUES THAT
12 ARE REPORTED FOR BOTH NEWSPAPERS IN THE CIRCULATION DEPARTMENT.
13 Q. OH, I SEE. OKAY.
14 SO THAT AS FAR AS THE CIRCULATION, IF YOU SEPARATED
15 OUT THE CIRCULATION, THE CIRCULATION, IT COSTS YOU MORE TO DO
16 THE CIRCULATION THAN THE REVENUES YOU GET FROM THE STREET SALES
17 OR FROM THE HOME DELIVERY?
18 A. YES, SIR.
19 Q. BUT THE IMPORTANCE OF THE CIRCULATION IS NOT THE STREET
20 SALES AND IT'S NOT THE HOME DELIVERY, IT'S TO GET ADVERTISING
21 REVENUE; RIGHT?
22 A. YES, SIR.
23 Q. THAT'S THE WHOLE PURPOSE OF THE CIRCULATION?
24 A. YES.
25 Q. OKAY. NOW LET ME SHOW YOU EXHIBITS 112 AND 113.
330
SIAS - DIRECT / ALIOTO
1 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
2 THE COURT: YES, YOU MAY.
3 BY MR. ALIOTO:
4 Q. OKAY. EXHIBIT 112 IS A LETTER DATED MARCH 12, 1999, TO
5 MR. FALK FROM MR. WHITE OF THE EXAMINER WITH A COPY TO YOU,
6 AMONG OTHERS. AND EXHIBIT 113 IS A COPY OF A LETTER DATED
7 MARCH 12 ALSO, ALSO DIRECTED TO MR. FALK, ALSO WITH A COPY TO
8 YOU. BOTH ON THE SAME DATE.
9 DID YOU GET COPIES OF BOTH OF THOSE LETTERS ON OR
10 ABOUT THAT DATE?
11 A. (WITNESS EXAMINES DOCUMENTS.) I'M SURE I DID.
12 Q. OKAY. NOW, I WANT TO DIRECT YOUR ATTENTION TO
13 EXHIBIT 113. EXHIBIT 113 ALSO MARCH 12, 1999.
14 OKAY. NOW, IN EXHIBIT 113 THERE ARE CERTAIN NUMBERS
15 THAT ARE PUT OUT BY MR. WHITE AS TO THE RESULTS OF THIS JOINT
16 PROMOTION PROGRAM SHOWING THAT THERE WAS A SUBSTANTIAL NUMBER
17 OF EXAMINER PERSONS WHO TOOK ON THE PAPER AND ALSO IN THE
18 THOUSANDS NUMBER OF CHRONICLE FOLKS WHO TOOK ON -- I MEAN
19 EXAMINER FOLKS WHO TOOK ON THE CHRONICLE. DO YOU SEE THOSE?
20 A. YES, SIR.
21 Q. DID YOU DOUBT THOSE AT ALL?
22 A. NO.
23 Q. DID YOU CHECK THEM OUT?
24 A. I DON'T THINK I DID. I ACCEPTED THEM.
25 Q. OKAY. NOW, IN THE LAST SENTENCE OF THAT LETTER MR. WHITE
331
SIAS - DIRECT / ALIOTO
1 IS REFERRING TO -- HE STATES THAT:
2 "THE EXAMINER SUBSCRIPTIONS ARE AN IMPORTANT
3 PART OF THE EXAMINER'S TOTAL CIRCULATION AND
4 ACCOUNT FOR APPROXIMATELY 16 PERCENT OF THE
5 EXAMINER'S HOME DELIVERY CIRCULATION."
6 DO YOU SEE THAT? IT'S THE SECOND PARAGRAPH, THE
7 VERY LAST SENTENCE.
8 A. SECOND -- ON PAGE 2?
9 Q. NO. PAGE 1, SIR.
10 A. PAGE 1.
11 Q. SORRY.
12 A. SECOND PARAGRAPH.
13 Q. YES.
14 A. (WITNESS EXAMINES DOCUMENT.)
15 Q. SEE ON THE BOTTOM?
16 A. YES, ALL RIGHT, I DO. THANK YOU.
17 Q. OKAY. NOW, YOU UNDERSTOOD, DID YOU NOT, THAT MR. WHITE
18 WAS COMPLAINING THAT YOU WANTED THE PROGRAM SHUT DOWN?
19 A. YES.
20 Q. AND ONE OF THE REASONS HE WAS COMPLAINING YOU UNDERSTOOD,
21 IS IT NOT CORRECT, WAS THAT HE THOUGHT THAT YOU WERE ATTEMPTING
22 TO HARM THE EXAMINER?
23 A. WILL YOU PLEASE -- I THINK I FOLLOW IT, BUT
--
24 Q. YOU UNDERSTOOD THAT HE WAS CHARGING THAT YOU WERE HARMING
25 THE EXAMINER IF YOU TRIED TO STOP THE PROGRAM?
332
SIAS - DIRECT / ALIOTO
1 A. WELL, I DON'T RECALL EXACTLY, BUT THAT'S CLEARLY WHAT HE
2 WAS DOING.
3 Q. WELL, ACTUALLY HE CHARGED THAT WHAT YOU WERE DOING IN
4 ATTEMPTING TO STOP THE PROGRAM, IF YOU SUCCEEDED, WOULD VIOLATE
5 THE ANTITRUST LAWS; RIGHT?
6 A. ARE YOU REFERRING TO A LETTER THAT'S GOING TO BE GIVEN TO
7 US LATER?
8 Q. GO TO PAGE 2 OF THAT LETTER.
9 A. ALL RIGHT.
10 THE COURT: PAGE 2 OF 113?
11 MR. ALIOTO: YES, SIR.
12 Q. THIS IS A LONG PARAGRAPH AND IT INVOLVES A COUPLE OF
13 ITEMS, BUT I'M GOING TO READ IT ALL THE WAY THROUGH FIRST.
14 THE COURT: WELL, WE HAD IT READ YESTERDAY.
15 MR. ALIOTO: OKAY.
16 THE COURT: SO UNLESS THE WITNESS NEEDS TO HAVE IT
17 READ ORALLY --
18 THE WITNESS: NO. I'M NOT AN AUTHORITY ON THE
19 ANTITRUST LAWS AND I NO DAMN WELL THAT MR. -- EXCUSE ME, DARN
20 WELL, THAT MR. WHITE ISN'T, SO I DON'T KNOW THAT I CAN GIVE YOU
21 MUCH MORE IN THE WAY OF A COMMENT ON THAT.
22 BY MR. ALIOTO:
23 Q. DID YOU UNDERSTAND THAT AS PART OF THE JOA, THAT IT
24 REQUIRED THAT THERE BE SOME COOPERATION BETWEEN THE TWO IN
25 ORDER TO ENABLE THE TWO PARTIES TO BE ABLE TO ENGAGE
333
SIAS - DIRECT / ALIOTO
1 INDEPENDENTLY AT THE CONCLUSION OF THE JOA? DID YOU KNOW THAT?
2 A. WELL, I PROBABLY WAS AWARE OF IT IN THE BACKGROUND.
3 MAY I POINT OUT THE DATE ON THIS, SIR, IS MARCH
4 12TH, 1999. I BELIEVE THE END OF THE JOA IS SEPTEMBER 12TH,
5 2005. AND I THINK IT WOULD BE CLEAR TO SAY I WASN'T THINKING
6 AHEAD LIKE -- THAT FAR AHEAD, AND I DON'T OPERATE THAT WAY.
7 Q. WELL, WOULDN'T IT BE CORRECT THAT IF YOU DID, IN FACT,
8 THINK THAT FAR AHEAD AND IF YOU DID BELIEVE -- IF YOU WERE
9 GOING TO BEGIN TO COMPETE HEAD TO HEAD IN 2005, THAT YOU'D HAVE
10 TO TAKE AT LEAST TWO OR THREE YEARS TO PREPARE FOR THAT?
11 A. TO PREPARE FOR A DISSOLUTION OF THE --
12 Q. YES.
13 A. YES, THAT IS CORRECT.
14 Q. YES. ABOUT THREE OR FOUR YEARS; IS THAT RIGHT?
15 A. PROBABLY.
16 Q. AND ALSO THAT IF YOU WERE GOING TO --
17 A. THIS IS SIX.
18 Q. PARDON ME?
19 A. THIS IS SIX, SIR.
20 Q. OKAY. AND IF YOU WERE GOING TO COMPETE HEAD TO HEAD, AND
21 YOU NEEDED TO, WE ALREADY WENT OVER THIS SLIGHTLY ON ONE POINT,
22 BUT IF YOU NEEDED PRESSES, YOU FIGURED THAT YOU'D HAVE TO HAVE
23 THOSE PRESSES IN BY 2002 OR '3; CORRECT?
24 A. I BELIEVE WE'D HAVE TO HAVE THEM IN BY SEPTEMBER 12TH,
25 2005, OR ELSE IT WOULD NOT BE POSSIBLE TO PRINT THE CHRONICLE
334
SIAS - DIRECT / ALIOTO
1 WITH HALF OF THE EXISTING AGENCY FACILITIES.
2 Q. AND THAT WOULD REQUIRE THE SAME -- THAT WOULD REQUIRE
3 TIMING, WOULD IT NOT --
4 A. YES.
5 Q. -- AT LEAST OF A YEAR, MAYBE TWO, WITH REGARD TO THE
6 PRESSES?
7 A. YES. THE SUGGESTION HERE THAT I DID THIS WITH THE IDEA OF
8 HARMING THE EXAMINER, THEY'RE ATTRIBUTING MOTIVE TO ME AND I
9 DISPUTE THAT.
10 Q. DID YOU RESPOND TO THIS LETTER AND SAY, "THAT'S NOT TRUE"?
11 A. (WITNESS EXAMINES DOCUMENT.) THERE WAS ANOTHER LETTER
12 THAT MR. WHITE ADDRESSED TO ME PERSONALLY, SO I --
13 Q. THAT'S THE NEXT ONE. THAT'S APRIL 15. WE'RE GOING TO GET
14 TO THAT.
15 A. ALL RIGHT. BUT I DID REMIND MR. WHITE SOMEWHERE ALONG THE
16 LINE BEFORE HE ARRIVED, WHEN WE GET INTO MOTIVES, MY PHILOSOPHY
17 IS THAT WE ARE IN BUSINESS WITH THE HEARSTS AS PARTNERS IN THIS
18 ENTERPRISE UNTIL THE JOA IS EITHER DISSOLVED OR SEPTEMBER 12TH,
19 2005, ARRIVES. AND AS A PARTNER, I AGREED TO DO THINGS
20 SOMETIMES THAT I DIDN'T THINK WERE IN THE BEST INTEREST OF OUR
21 ENTERPRISE; BUT IN THE INTEREST OF PARTNERSHIP, I'VE DONE THAT.
22 AND, MOST SPECIFICALLY, IN THE SPRING OF 1997, THE
23 CHRONICLE AND SUNDAY CIRCULATION WAS IN A VERY SERIOUS DECLINE.
24 AND TO MAKE UP FOR THE REVENUE LOSS, THE AGENCY PROPOSED
25 RAISING THE HOME SUBSCRIPTION PRICES OF BOTH PAPERS, AND THERE
335
SIAS - DIRECT / ALIOTO
1 WAS A SUBSTANTIAL DESCRIPTION OR A DISCUSSION. I DID NOT WANT
2 TO DO IT. I DID NOT WANT TO DO IT BECAUSE WE WEREN'T HANDLING
3 IT WITH THE EXISTING PRICE AND THE AGENCY WAS RECOMMENDING
4 GOING UP A DOLLAR A MONTH OR FOUR WEEKS, AND WE WENT ON AND ON.
5 THEY WOULD TAKE CERTAIN STEPS TO SPEND MONEY, A
6 MILLION DOLLARS IN PROMOTION, ET CETERA. AND MR. LEE GUITTAR,
7 WHO WAS THE PREDECESSOR OF MR. WHITE, WANTED TO DO THAT AND I
8 WAFFLED AND SAID, "I REALLY DON'T WANT TO. I THINK THAT THE
9 PROPER THING TO DO IS WAIT UNTIL SEPTEMBER AND WE SEE IF,
10 INDEED, THESE PROMOTIONS AND OTHER ELEMENTS OF WHAT THE AGENCY
11 SAID THEY WERE GOING TO DO WOULD AFFECT OUR DECLINE AND THEN WE
12 CAN MAKE A DETERMINATION."
13 THAT STILL WAS ON THE TABLE AND LEE OBVIOUSLY WANTED
14 IT AND IN THE INTEREST IT WAS A BUM DECISION. I AGREED TO IT,
15 AND IT WAS A MATTER OF RECORD; AND I THINK THAT FOR HEARST TO
16 SUGGEST THAT MY MOTIVE IS TO DISRUPT THEM OR HURT THEM IS
17 BALONEY. THEY MIGHT HAVE HURT THEMSELVES BY THAT PARTICULAR
18 DECISION.
19 Q. OKAY. BUT LET ME ASK YOU THE QUESTION AGAIN AND JUST
20 MAYBE YOU CAN ANSWER JUST MY QUESTION AND THEN IF YOU WANT
21 ANOTHER EXPLANATION, IT'S UP TO YOU.
22 BUT MY QUESTION IS: WHEN YOU READ THAT, DID YOU
23 UNDERSTAND THAT TO MEAN THAT HE, MR. WHITE, WAS SAYING TO YOU
24 THAT THE PARTIES HAD AN OBLIGATION TO COOPERATE WITH EACH OTHER
25 SO THAT AT THE END OF THE JOA, THEY WOULD BOTH BE IN A POSITION
336
SIAS - DIRECT / ALIOTO
1 TO COMPETE?
2 A. I UNDERSTOOD THAT'S WHAT HE SAID.
3 Q. AND YOU UNDERSTOOD THAT THAT'S WHAT'S IN THE JOA?
4 A. YES.
5 Q. OKAY. NOW LET ME SHOW YOU EXHIBIT 72.
6 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
7 Q. EXHIBIT 72 IS A LETTER DATED APRIL 15, 1999. IT IS
8 DIRECTED TO YOU. IT IS FROM MR. WHITE.
9 DID YOU RECEIVE A COPY OF THAT LETTER ON OR ABOUT
10 THE DATE INDICATED?
11 A. YES, SIR.
12 Q. NOW, THIS -- MR. WHITE, FIRST OF ALL, REFERS IN THE
13 FIRST -- SECOND PARAGRAPH, HE STATES, QUOTE, "THE OVERARCHING
14 INTENT"
-- NOW, THIS FOLLOWS, BY THE WAY, EXCUSE ME, BUT THIS
15 FOLLOWS A MEETING WITH MR. GEORGE IRISH AND MR. WHITE AND YOU.
16 YOU HAD A MEETING; CORRECT?
17 A. YES, SIR.
18 Q. BY THE WAY, DID YOU ULTIMATELY AGREE TO THE JOINT
19 PROMOTION?
20 A. NO.
21 Q. WAS IT DISCONTINUED?
22 A. IT WAS DISCONTINUED, AND I'M JUST TRYING TO REMEMBER,
23 UNTIL -- I THINK THEY HAD A FEW -- ANOTHER WEEK OR SO TO GO,
24 AND IT WAS DISCONTINUED AND IT WAS RECENTLY I WAS ASKED IF I
25 WOULD AGREE TO IT AND I AGREED TO IT.
337
SIAS - DIRECT / ALIOTO
1 Q. SO THEY'RE DOING IT AGAIN, PUTTING IT BACK IN; IS THAT
2 WHAT'S GOING ON?
3 A. I BELIEVE THAT'S THE CASE.
4 Q. AND YOU AGREED TO THAT?
5 A. I DID.
6 Q. WHEN WAS THAT?
7 A. WHEN WAS IT?
8 Q. YEAH. WHEN DID THEY PUT IT BACK IN?
9 A. THERE'S BEEN SO MUCH GOING ON, I THINK IT MIGHT HAVE BEEN
10 WITHIN THE LAST SIX WEEKS.
11 Q. OKAY. IF YOU'LL GO BACK TO THE LETTER, THIS IS AFTER A
12 MEETING WITH YOU, MR. GEORGE IRISH AND MR. WHITE, AND MR. WHITE
13 STATES, QUOTE:
14 "THE OVERARCHING INTENT AND PURPOSE OF THE
15 JOINT OPERATING AGREEMENT IS TO 'ENABLE BOTH
16 CHRONICLE AND HEARST TO SURVIVE AS PUBLISHERS OF
17 INDEPENDENT NEWSPAPERS,' AND UPON TERMINATION OF
18 THE AGREEMENT IN THE ABSENCE OF ITS RENEWAL OR
19 EXTENSION, TO '... ENABLE EACH OF SAID PAPERS TO
20 ENGAGE INDEPENDENTLY OF THE PRINTING COMPANY IN
21 THE NEWSPAPER PUBLISHING BUSINESS."
22 Q. DO YOU SEE THAT?
23 A. YES.
24 Q. DO YOU AGREE THAT THE INTENT AND PURPOSE OF THE JOINT
25 OPERATING AGREEMENT WAS TO ENABLE BOTH THE CHRONICLE AND THE
338
SIAS - DIRECT / ALIOTO
1 HEARSTS -- AND HEARST TO SURVIVE AS PUBLISHERS OF INDEPENDENT
2 NEWSPAPERS?
3 MR. ROSCH: OBJECTION, YOUR HONOR, LACK OF
4 FOUNDATION. THIS WITNESS WAS NOT THERE IN '65.
5 THE COURT: WELL, I THINK THE WITNESS CAN ANSWER
6 THAT. OBJECTION OVERRULED.
7 DO YOU KNOW?
8 THE WITNESS: NO, I DON'T KNOW.
9 BY MR. ALIOTO:
10 Q. DO YOU AGREE THAT -- IS IT YOUR UNDERSTANDING THAT THE
11 INTENT AND PURPOSE OF THE JOINT OPERATING AGREEMENT IS TO
12 ENABLE BOTH CHRONICLE AND HEARST TO SURVIVE AS PUBLISHERS OF
13 INDEPENDENT NEWSPAPERS?
14 A. I BELIEVE THAT TERMINOLOGY IS IN THE JOINT OPERATING
15 AGREEMENT. IT WOULD BE SUBJECT TO A LOT OF INTERPRETATION, AND
16 I --
17 Q. WELL, DO YOU --
18 A. -- I WOULD AGREE TO DOING A LOT OF DISCUSSION ON THAT
19 MATTER.
20 Q. OKAY. YOU HAVE EXHIBIT 1 IN FRONT OF YOU, THE JOINT
21 OPERATING AGREEMENT? IT'S RIGHT IN FRONT OF YOU.
22 A. THIS ONE (INDICATING)?
23 Q. YES.
24 A. YES.
25 Q. IS THAT THE JOINT OPERATING AGREEMENT?
339
SIAS - DIRECT / ALIOTO
1 A. YES, SIR.
2 Q. OKAY. WOULD YOU TURN TO PAGE 2, PLEASE, OF THE JOINT
3 OPERATING AGREEMENT?
4 A. YES.
5 Q. AND IF YOU WILL LOOK AT THE -- IT ACTUALLY STARTS ON PAGE
6 1, THE "WHEREAS CHRONICLE AND HEARST ARE CONVINCED"?
7 A. UH-HUH.
8 Q. DO YOU SEE THAT?
9 A. YES.
10 Q. OKAY. IT STATES, QUOTE:
11 "WHEREAS, CHRONICLE AND HEARST ARE CONVINCED
12 THAT ONLY BY THE CREATION OF A JOINT PRINTING
13 PRODUCING FACILITY IN WHICH THEIR RESPECTIVE
14 MECHANICAL ADVERTISING BUSINESS AND CIRCULATION
15 DEPARTMENTS ARE INTEGRATED (CONFORMING TO WHAT
16 HAS BECOME AN ACCEPTED PROCEDURE IN THE
17 NEWSPAPER BUSINESS AND IN MANY CITIES THROUGHOUT
18 THE UNITED STATES) AND BY CONSOLIDATION OF
19 HEARST'S MORNING DAILY NEWS" -- SORRY, "HEARST'S
20 DAILY AND MORNING DAILY NEWSPAPERS INTO AN
21 AFTERNOON DAILY NEWSPAPER CAN THE NECESSARY
22 OPERATIONAL EFFICIENCIES BE EFFECTED WHICH IN
23 THE FACE OF INCREASING PUBLISHING COSTS AND
24 EXPENSES WILL ENABLE BOTH CHRONICLE AND HEARST
25 TO SURVIVE AS PUBLISHERS OF SEPARATE AND
340
SIAS - DIRECT / ALIOTO
1 INDEPENDENT NEWSPAPERS."
2 DO YOU AGREE WITH THAT?
3 A. YES.
4 Q. AND THEN IF YOU'LL GO TO PAGE 47, AND I WOULD LIKE TO
5 DIRECT YOUR ATTENTION ON PAGE 47 UNDER TERM 4.4, PARAGRAPH 4.4
6 AND SUBSECTION (A), WHICH IS APPROXIMATELY ONE -- TWO THIRDS OF
7 THE WAY DOWN THE PAGE. DO YOU SEE THAT SMALL "(A)"?
8 A. YES.
9 Q. IT STATES, QUOTE:
10 "CHRONICLE AND HEARST WILL REASONABLY
11 COOPERATE IN THE FORMULATION AND ORDERLY
12 EXECUTION OF A JUST AND EQUITABLE PLAN WHICH
13 SHALL," SMALL ROMAN ONE, "ENABLE EACH OF SAID
14 PARTIES TO ENGAGE INDEPENDENTLY OF PRINTING
15 COMPANY IN THE NEWSPAPER PUBLISHING BUSINESS."
16 DO YOU SEE THAT?
17 A. YES.
18 Q. DO YOU AGREE WITH THAT?
19 A. WHETHER I AGREE WITH IT -- THIS IS IN THE AGREEMENT. SO
20 WHETHER I AGREE WITH IT OR NOT IS IRRELEVANT I GUESS.
21 THE COURT: WHAT IS YOUR QUESTION, MR. ALIOTO?
22 MR. ALIOTO: YES.
23 Q. DO YOU BELIEVE THAT -- IN THE SAME LETTER, WHICH IS IN
24 FRONT OF YOU, EXHIBIT 72, IN THAT LETTER YOU -- IT WAS STATED
25 BY THE HEARST CORPORATION OR MR. WHITE THAT HE INTENDED TO GO
341
SIAS - DIRECT / ALIOTO
1 PUT HIS PAPER IN THE MORNING; CORRECT?
2 A. SO FAR EXHIBIT 112 OR --
3 Q. NO, 72.
4 A. 72.
5 Q. IT'S APRIL 15, 1999.
6 A. OH, HERE. I'M SORRY. I'M SORRY. THERE ARE A LOT OF
7 THINGS HERE.
8 Q. OKAY.
9 A. NOW I'VE GOT IT.
10 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
11 THE WITNESS: NOW I'VE GOT EXHIBIT 72. YES, OKAY.
12 BY MR. ALIOTO:
13 Q. YOU'VE GOT IT. ALL RIGHT.
14 A. YES. HE DOES....
15 Q. IF YOU'LL LOOK ON THE SECOND PAGE --
16 A. YES.
17 Q. -- AND THE SECOND FULL PARAGRAPH BEGINNING "IN ADDITION."
18 A. YES.
19 Q. AND THEN THE ONE FOLLOWING IT, "ACCORDINGLY." DO YOU SEE
20 THAT?
21 A. YES, I DO.
22 Q. OKAY. FIRST HE SAYS, QUOTE:
23 "IN ADDITION, WE'RE FOCUSING ON THE LEGAL
24 QUESTION OF UNFORESEEN CIRCUMSTANCES. WHAT IS
25 CLEAR TODAY WAS NOT CLEAR TO THE DRAFTERS OF THE
342
SIAS - DIRECT / ALIOTO
1 JOA IN 1964. NO MATTER HOW SUPERIOR THE
2 NEWSPAPER PRODUCT, WE NOW KNOW THAT PUBLISHING
3 IN THE P.M. CYCLE IS A DEATH WARRANT FOR A MAJOR
4 METROPOLITAN DAILY NEWSPAPER. THE STATED INTENT
5 AND PURPOSE OF THE AGREEMENT IS NOW CLEARLY
6 FRUSTRATED BY REQUIRING THE EXAMINER TO REMAIN
7 IN THE AFTERNOON FIELD."
8 DO YOU SEE THAT?
9 A. YES, SIR.
10 Q. DID HE MENTION THAT WHEN YOU HAD THE MEETING WITH
11 MR. IRISH?
12 A. YES, HE DID.
13 Q. IT GOES ON TO SAY, QUOTE:
14 "ACCORDINGLY, WE HEREBY FORMALLY REQUEST
15 YOUR CONCURRENCE IN OUR MOVING THE EXAMINER
16 EXPEDITIOUSLY TO THE A.M. CYCLE ALONGSIDE THE
17 CHRONICLE."
18 DO YOU SEE THAT?
19 A. YES.
20 Q. OKAY. NOW, DID YOU AGREE WITH HIM THAT PUBLISHING IN THE
21 P.M. CYCLE IS A DISADVANTAGE TO PUBLISHING IN THE A.M. CYCLE?
22 A. (WITNESS EXAMINES DOCUMENT.) YES, I DO AGREE WITH
23 PUBLISHING IN THE P.M. IS --
24 Q. OKAY, YOU DID. AND DIDN'T YOU BELIEVE --
25 A. THOUGH I DIDN'T AGREE -- IF I MIGHT, IN THE MEETING -- I'M
343
SIAS - DIRECT / ALIOTO
1 NOT QUITE CLEAR IF YOU'RE TALKING ABOUT THIS LETTER. IF YOU'RE
2 TALKING ABOUT THE MEETING I HAD, I DID NOT AGREE OR DISAGREE.
3 I LISTENED TO THEM AND THEY WENT THROUGH THIS.
4 Q. NO. I'M ASKING YOU, INDEPENDENT OF THE LETTER --
5 A. UH-HUH.
6 Q. -- DO YOU AGREE THAT A MORNING DAILY NEWSPAPER HAS A
7 COMPETITIVE ADVANTAGE OVER AN AFTERNOON DAILY NEWSPAPER?
8 A. YES, SIR, I DO.
9 Q. AND I'M ASKING YOU IF YOU FEEL THAT THERE IS A COMPETITIVE
10 ADVANTAGE JUST BY REASON OF WHEN THE PAPER IS PUT OUT, MORNING
11 AGAINST AFTERNOON.
12 A. YES.
13 Q. OKAY. SO, THEREFORE, WHEN HE SAID THAT, THEN HE SAID,
14 QUOTE, "ACCORDINGLY, WE HEREBY FORMALLY REQUEST YOUR
15 CONCURRENCE IN OUR MOVING THE EXAMINER EXPEDITIOUSLY TO THE
16 A.M. CYCLE ALONGSIDE THE CHRONICLE," DID YOU BELIEVE THAT IT
17 WOULD BE THE JUST AND EQUITABLE THING TO DO TO ENABLE HEARST OR
18 THE EXAMINER TO BE ABLE TO ENGAGE INDEPENDENTLY IN THE BUSINESS
19 AFTER THE JOA TO ALLOW HIM TO COME TO THE A.M. MARKET?
20 A. WELL, YOUR QUESTION IS QUITE -- I -- THIS PARTICULAR
21 REQUEST IS NOTABLE BY WHAT IT DOESN'T SAY. I DON'T BELIEVE
22 THAT MR. WHITE WROTE IT. I DIDN'T BELIEVE AT THE TIME. I
23 BELIEVE IT WAS COMPOSED BY PROBABLY A LAWYER; AND WHAT HE
24 DOESN'T SAY IS, A, IT IS NOT -- IF IT WAS REALLY A SERIOUS
25 REQUEST, THERE WOULD HAVE BEEN SOME REFERENCE TO HOW COULD WE
344
SIAS - DIRECT / ALIOTO
1 PUBLISH OR PRINT BOTH NEWSPAPERS IN THE MORNING CYCLE AND THE
2 ANSWER IS, WITH OUR EXISTING FACILITIES WE COULD NOT DO SO.
3 THAT'S NUMBER ONE.
4 HE DID NOT -- IT'S A PROFOUND CHANGE IN THE JOINT
5 OPERATING AGREEMENT, WHICH HEARST REMINDS US OF ITS PROVISIONS
6 CONSTANTLY. THERE WAS NO REFERENCE TO THE REST OF THE
7 CONDITIONS OF THE JOINT OPERATING AGREEMENT BEING SUBJECT TO
8 CHANGE BUT JUST THIS. SO I DIDN'T TAKE IT VERY SERIOUSLY. IN
9 FACT, I ALMOST CONSIDERED IT JUNK MAIL.
10 Q. DID YOU SAY THAT TO -- DID YOU TELL MR. WHITE THAT OR
11 MR. BENNACK THAT?
12 A. I DIDN'T BOTHER TO REPLY.
13 MR. ALIOTO: MAY I HAVE JUST ONE MINUTE, YOUR HONOR?
14 THE COURT: YES.
15 (PAUSE IN PROCEEDINGS.)
16 BY MR. ALIOTO:
17 Q. OKAY. IS IT CORRECT THAT UNTIL THE HEARST CORPORATION
18 PURCHASED OR AGREED TO PURCHASE THE CHRONICLE, THAT THEY
19 CONTINUALLY TOLD YOU THAT THEY INTENDED TO STAY IN THE MARKET
20 AND, IF NECESSARY, BEYOND 2005 AND COMPETE HEAD TO HEAD AGAINST
21 THE CHRONICLE?
22 A. YES, THAT IS CORRECT.
23 Q. AND THEY TOLD YOU THAT ON NUMEROUS OCCASIONS; IS THAT
24 RIGHT?
25 A. YES, SIR.
345
SIAS - DIRECT / ALIOTO
1 Q. DID YOU PARTICIPATE IN THE ACTUAL NEGOTIATIONS OF THE SALE
2 OF THE CHRONICLE TO THE HEARST CORPORATION?
3 A. NO, I DID NOT. I DID NOT.
4 Q. DO YOU KNOW HOW THE $660 MILLION WAS ARRIVED AT?
5 A. THE 660 --
6 Q. $660 MILLION.
7 A. I DID NOT PARTICIPATE IN THE NEGOTIATIONS, SO I CANNOT SAY
8 FROM FIRSTHAND KNOWLEDGE.
9 THE COURT: YOU DIDN'T PARTICIPATE IN THE
10 NEGOTIATIONS?
11 THE WITNESS: NO, SIR. THAT'S A -- WHEN AN
12 INVESTMENT BANK IS HIRED, THEY REQUIRE THAT YOU TURN OVER, THE
13 COMPANY THAT YOU'RE SELLING, ALL THE INTERESTED PARTIES YOU MAY
14 KNOW ABOUT, ET CETERA, AND ALL NEGOTIATIONS ARE CONDUCTED BY
15 THE INVESTMENT BANK.
16 THE COURT: BUT YOU HAVE A RIGHT TO ACCEPT OR REJECT
17 THE OFFER?
18 THE WITNESS: OH, ABSOLUTELY. THIS IS -- BUT THEY
19 WOULD -- BUT THE ACTUAL NEGOTIATIONS WOULD BE CONDUCTED WITH --
20 I BELIEVE HEARST ENDED UP WITH AN INVESTMENT BANK, BUT --
21 BY MR. ALIOTO:
22 Q. AND WERE YOU ADVISED THAT -- WERE YOU ADVISED BY THE
23 INVESTMENT BANKERS THAT THEY EITHER RECEIVED OR ANTICIPATED
24 RECEIVING OFFERS FROM OTHERS THAN THE HEARST CORPORATION ONLY
25 IN THE RANGE OF 400 TO $500 MILLION?
346
SIAS - DIRECT / ALIOTO
1 A. I BELIEVE THAT THAT IS CORRECT.
2 Q. SO THAT YOU UNDERSTOOD THAT OTHERS MAY BE OFFERING OR MAY
3 HAVE OFFERED BETWEEN FOUR OR $500 MILLION, SUBSTANTIALLY LESS
4 THAN WHAT THE HEARST CORPORATION PAID?
5 A. MY UNDERSTANDING IS THAT THERE WERE NO FORMAL OFFERS, BUT
6 EXPRESSIONS OF INTEREST INDICATED 400 TO $500 MILLION.
7 Q. AND UNDER THE JOA, THE HEARST CORPORATION HAD THE FIRST
8 RIGHT OF REFUSAL; IS THAT RIGHT?
9 A. YES.
10 Q. AND ALSO UNDER THE JOA, IS IT CORRECT THAT THEY HAD ONE
11 HALF OF THE ASSETS?
12 A. YES.
13 Q. AND UNDER THIS FIRST RIGHT OF REFUSAL, THE IDEA WOULD BE
14 IS THAT IF THE CHRONICLE WANTED TO TRY TO SELL IT TO SOMEONE
15 ELSE, THEY COULDN'T WITHOUT FIRST GIVING A CHANCE TO HEARST; IS
16 THAT RIGHT?
17 A. YES. THE SPECIFICS OF IT ARE THE TWO PARTIES -- THE
18 SELLING PARTY WOULD NEGOTIATE WITH THE STAYING PARTY AND
19 THERE'S NO TIME LIMIT. IF THEY COULD NOT REACH AN AGREEMENT,
20 THE SELLING PARTY WAS FREE TO GO OUT IN THE MARKET AND TRY TO
21 FIND ALTERNATIVE BUYERS. IF THEY CAME UP WITH ONE, THEY WERE
22 REQUIRED TO GO BACK TO THE REMAINING PARTY AND OFFER THAT PRICE
23 TO IN THIS CASE HEARST.
24 Q. SO UNDER THAT PROVISION --
25 A. IT DISCOURAGES COMPETITIVE BIDS.
347
SIAS - DIRECT / ALIOTO
1 Q. THANK YOU.
2 NOW, DO YOU KNOW THE DIFFERENCE BETWEEN THESE
3 EXPRESSIONS OF INTEREST, FOUR TO $500 MILLION, AND WHAT THE
4 HEARST CORPORATION ULTIMATELY PAID, $660 MILLION, DO YOU KNOW
5 WHAT ACCOUNTS FOR THAT DIFFERENCE?
6 A. I BELIEVE THAT THE --
7 Q. DO YOU KNOW WHAT ACCOUNTS FOR THAT DIFFERENCE?
8 MR. ROSCH: I THINK HE WAS STARTING TO ANSWER, YOUR
9 HONOR.
10 MR. ALIOTO: HE STARTED WITH "I BELIEVE."
11 THE COURT: WELL, LET'S --
12 THE WITNESS: WELL --
13 THE COURT: LET'S GET THE ANSWER OF THE WITNESS.
14 THE WITNESS: DO I KNOW? NO, I DON'T KNOW. ONLY
15 THE HEARST CORPORATION KNOWS IT, BUT -- BUT IT SEEMS TO ME IT'S
16 RATHER OBVIOUS THAT THE SIX YEARS LEFT TO GO IN THE JOINT
17 OPERATING AGREEMENT, THAT A BUYER OF THE CHRONICLE WOULD BE --
18 WOULD BE ASSUMING WOULD DISCOURAGE BUYERS IN TERMS OF THE PRICE
19 THEY'D BE WILLING TO PAY.
20 WHETHER THAT MEANS I KNOW OR DON'T KNOW, BUT I THINK
21 THE ONLY PEOPLE WHO KNOW WHAT THE DIFFERENCE IS, IS THE HEARST
22 CORPORATION.
23 BY MR. ALIOTO:
24 Q. DO YOU KNOW -- IF THE INTEREST THAT YOU UNDERSTOOD WAS
25 BEING EXPRESSED WAS BETWEEN FOUR AND $500 MILLION, DO YOU KNOW
348
SIAS - DIRECT / ALIOTO
1 THE REASONS WHY HEARST WAS WILLING TO PAY A DIME MORE THAN
2 THAT?
3 A. NO, I DON'T KNOW THAT. I'M NOT THE BUYER.
4 Q. TO YOUR KNOWLEDGE DID THE PURCHASING OUT OF THE REMAINING
5 JOINT VENTURE HAVE ANYTHING TO DO WITH THAT DIFFERENCE IN MONEY
6 BETWEEN THE FOUR AND $500 MILLION AND THE
$660 MILLION?
7 A. DID THE PURCHASING OUT? I'M NOT SURE WHAT THAT --
8 Q. YES. WELL, THE IDEA WAS, IS IT NOT, IS THAT IF HEARST
9 BOUGHT THE CHRONICLE, THE JOA WAS SUPPOSED TO THEN DISAPPEAR;
10 CORRECT?
11 A. YES.
12 Q. AND IF THE CHRONICLE WANTED TO JUST HANG AROUND UNTIL THE
13 END OF THE JOA, THEY WOULD BE BEING PAID MORE THAN $20 MILLION
14 EVERY YEAR; WOULDN'T THEY?
15 A. WHO WOULD BE PAID MORE THAN $20 MILLION A YEAR?
16 Q. THE CHRONICLE UNDER THE JOA.
17 A. NO. WE WOULD BE PAID WHATEVER THE -- BE PAID, YOU MEAN
18 THE EARNINGS OR THE CASH FLOW?
19 Q. YES.
20 A. IF THE CASH FLOW LAST YEAR WAS $18 MILLION, WHICH IS
21 EBITDA, THE EARNINGS WERE $9 MILLION AND I DON'T KNOW WHAT TO
22 EXPECT IN THE NEXT FIVE YEARS. A LOT OF TIMES LONG-RANGE PLANS
23 DON'T SEEM TO BEAR MUCH RELATION TO THE OUTCOME, SO I DON'T
24 KNOW WHERE THE
$20 MILLION COMES FROM.
25 Q. MR. SIAS, HAVE YOU SEEN ANY STATEMENTS OR ANALYSES OF WHAT
349
SIAS - DIRECT / ALIOTO
1 THE POTENTIAL
-- WELL, WHAT THE NET PROFITS HAVE BEEN FOR THE
2 LAST FEW YEARS OF THE JOA AND THEN WHAT THE POTENTIAL PROFITS
3 ARE TO BE GOING FORWARD? HAVE YOU SEEN DOCUMENTS THAT INDICATE
4 THAT?
5 A. YOU ARE USING THE TERM "PROFITS" AND THE JOA HAS A NET
6 EXCESS. SO FOR THEM -- FROM THEIR STANDPOINT, I DO NOT KNOW
7 THE HEARST CORPORATION'S INTERNAL ACCOUNTING OR HOW THEY -- I
8 KNOW THAT THE EXAMINER GETS $57 MILLION A YEAR LAST YEAR FROM
9 THE AGENCY. WE HAVE $18 MILLION OF CASH FLOW, 9 MILLION OF
10 EARNINGS LAST YEAR, AND THIS YEAR IF WE HAD OPERATED THE WHOLE
11 YEAR WE MIGHT HAVE HAD MORE. THE WAY THE YEAR IS SHAPING UP,
12 WE PROBABLY WOULD HAVE.
13 Q. IN ANY EVENT, IN 1999, IN 1999, IF THE AVERAGE WOULD BE
14 ABOUT $20 MILLION, THERE WOULD BE APPROXIMATELY FIVE YEARS LEFT
15 WITH THE JOA; ISN'T THAT RIGHT?
16 A. YES.
17 Q. AND IF YOU ADDED THAT UP, AND EVEN IF THERE WERE NO
18 INCREASE, THAT WOULD BE OVER A HUNDRED MILLION DOLLARS?
19 A. WELL, YOU'D DISCOUNT IT BECAUSE OF THE TIMEFRAME, AND IT
20 WOULD BE PROBABLY LESS THAN A HUNDRED MILLION DOLLARS.
21 Q. AND SO MY QUESTION TO YOU IS: DO YOU KNOW WHETHER OR NOT
22 ANY PART OF THE JOA, EXTINGUISHING THE JOA, WAS IN ANY WAY PAID
23 FOR BY HEARST WHEN IT PAID MORE THAN EVERYONE ELSE WAS SHOWING
24 INTEREST IN PAYING?
25 THE COURT: DO YOU UNDERSTAND THE QUESTION?
350
SIAS - DIRECT / ALIOTO
1 THE WITNESS: I GUESS I DO.
2 THE COURT: LET'S SEE IF I DO.
3 (LAUGHTER)
4 THE COURT: WHAT I THINK THE QUESTION IS, BY ALL
5 MEANS CORRECT ME IF I'M WRONG, MR. ALIOTO, IS WHETHER OR NOT
6 THE THEN SIX YEARS REMAINING IN THE JOA DEPRESSED THE PRICE
7 WHICH A WILLING BUYER WOULD OFFER TO BUY THE CHRONICLE. ISN'T
8 THAT THE ESSENCE OF YOUR QUESTION?
9 MR. ALIOTO: NO, IT IS NOT, YOUR HONOR. WHAT I AM
10 TRYING TO -- ON THAT ISSUE, THAT WAS NEXT; BUT THIS ONE IS
11 WHETHER OR NOT THE AMOUNT THAT -- IF I MAY USE THE EASEL, YOUR
12 HONOR.
13 THE COURT: ALL RIGHT.
14 BY MR. ALIOTO:
15 Q. HEARST CORPORATION PAID 660 OR IS OFFERING TO PAY
16 $660 MILLION; CORRECT?
17 A. YES.
18 Q. WHAT YOU HEARD WERE THE EXPRESSIONS OF INTEREST WERE IN
19 THE RANGE OF 400 TO $500 MILLION; CORRECT?
20 A. YES.
21 Q. CORRECT?
22 A. YES.
23 Q. OKAY. SO PUTTING FOUR TO $500 MILLION, THAT'S A
24 DIFFERENCE OF ANYWHERE BETWEEN $260 MILLION AND $160 MILLION
25 BETWEEN THE PRICE THAT HEARST AGREED TO PAY AND WHAT OTHERS
351
SIAS - DIRECT / ALIOTO
1 WERE PROPOSING TO PAY; CORRECT?
2 A. YES.
3 Q. WAS ANY PART OF THIS, TO YOUR KNOWLEDGE, ANY PART OF THIS
4 EXCESS? DID ANY PART OF THAT HAVE TO DO WITH HEARST PAYING THE
5 CHRONICLE FOR THE REMAINING YEARS OF THE JOA?
6 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
352
SIAS - DIRECT / ALIOTO
1 THE COURT: OKAY.
2 THE WITNESS: I DON'T KNOW HOW HEARST WOULD.
3 BY MR. ALIOTO:
4 Q. WHO WOULD KNOW THAT?
5 A. I BEG YOUR PARDON?
6 Q. WHO WOULD KNOW THAT?
7 A. I THINK THE HEARST CORPORATION WOULD KNOW WHAT THEIR
8 MOTIVATION AND WHAT THEIR COMPONENTS OF THEIR BID -- WHAT THE
9 REASONS WERE FOR THEIR BID.
10 Q. DO YOU KNOW WHETHER -- THE PERSON WHO NEGOTIATED FOR YOU
11 WAS THE DLJ?
12 A. JILL GREENTHAL.
13 Q. SHE NEGOTIATED --
14 A. YES.
15 Q. -- THE SALE OF THE CHRONICLE FOR THE CHRONICLE?
16 A. YES.
17 Q. SHE CAME BACK TO YOU AND GAVE YOU --
18 A. RIGHT.
19 Q. SHE CAME BACK TO YOU AND GAVE YOU JUST THE AMOUNT, 660,
20 660 MILLION?
21 A. CAME BACK WITH THAT BEING THE AMOUNT THAT SHE FINALLY WAS
22 ABLE TO GET. SOME CHRONICLE SHAREHOLDERS WERE VERY CONCERNED
23 WITH THE DLJ'S ORIGINAL ESTIMATE OF WHAT THEY COULD GET FOR THE
24 CHRONICLE, WHICH WAS LESS THAN $660 MILLION, A RANGE OF PRICES.
25 Q. WOULD YOU SAY THAT AGAIN, PLEASE?
353
SIAS - DIRECT / ALIOTO
1 A. THE -- THE PROJECT GOLDEN IN THE MEETING THAT YOU WERE
2 REFERRING TO THIS MORNING, THE DLJ CAME IN WITH A RANGE OF
3 ESTIMATED PRICES THEY COULD OBTAIN FOR OUR VARIOUS PROPERTIES.
4 AND IN THE CASE OF THE CHRONICLE MY RECOLLECTION WAS
5 IT WAS SOMEWHERE 400 -- 450 TO 600 AND -- NOT 600 -- 580 OR
6 SOME SUCH. AND THAT'S IN THE RANGE.
7 AND THERE WERE SOME CHRONICLE SHAREHOLDERS THAT WERE
8 EMPHATIC THEY WERE NOT GOING TO SELL THE THING -- IF THAT WAS
9 THE CASE, THEY WOULDN'T SELL. SO SHE IN HER NEGOTIATIONS ENDED
10 UP WITH THIS PRICE.
11 Q. DO YOU KNOW WHETHER OR NOT IN HER NEGOTIATIONS WITH HEARST
12 THE JOA WAS EVEN -- WAS MENTIONED?
13 A. NO, I DO NOT KNOW WHAT WAS MENTIONED. I WAS NOT IN THOSE
14 CONVERSATIONS. I ASSUME IT WAS.
15 MR. ALIOTO: THAT'S ALL I HAVE, YOUR HONOR.
16 THE COURT: VERY WELL.
17 DIRECT EXAMINATION, MR. ROSCH?
18 MR. ROSCH: THANK YOU, YOUR HONOR.
19 MR. ALIOTO: IF I CAN HAVE JUST ONE SECOND TO CLEAN
20 UP HERE.
21 THE COURT: ALL RIGHT, MR. ROSCH?
22 MR. ROSCH: THANK YOU, YOUR HONOR.
23 I HAVE A FEW QUESTIONS, MR. SIAS.
24
25
354
SIAS - CROSS / ROSCH
1 CROSS-EXAMINATION
2 BY MR. ROSCH:
3 Q. DO YOU HAVE EXHIBIT 50 BEFORE YOU, THAT IS, YOUR
4 DECLARATION?
5 I THINK IT'S PROBABLY RIGHT AT THE BOTTOM OF YOUR
6 PILE.
7 A. I HAVE IT.
8 Q. OKAY. I WOULD LIKE YOU TO TURN, PLEASE, TO PAGE 2,
9 PARAGRAPH 3. AND THE FIRST SENTENCE I WOULD LIKE TO HAVE YOU
10 READ THAT. THAT'S THE SENTENCE THAT MR. ALIOTO QUESTIONED YOU
11 ABOUT AT THE BEGINNING OF THE DAY TODAY. IT SAYS:
12 "ONLY HEARST HAS THE ABILITY TO BUY THE
13 CHRONICLE WITHOUT ASSUMING THE CHRONICLE'S
14 OBLIGATIONS UNDER THE JOA TO SUBSIDIZE THE
15 EXAMINER."
16 DO YOU SEE THAT?
17 A. YES.
18 Q. NOW, WILL YOU PLEASE TELL THE COURT WHAT PROVISIONS OF THE
19 JOA YOU HAD IN MIND WHEN YOU SAID THAT?
20 A. THE FACT THAT HEARST ALREADY OWNS HALF OF THE JOA AND IS
21 ABLE -- TEARING APART THE JOA IS AN IMPROBABLE -- ALMOST AN
22 IMPROBABLE JOB. AND HEARST, HAVING HALF OWNERSHIP, WOULD NOT
23 HAVE TO GO THROUGH THAT. AND THEY -- THEY ARE IN THE MARKET
24 AND KNOW THE SITUATION AND, MOST IMPORTANTLY, WILL NOT HAVE TO
25 GO THROUGH THE PROCESS OF DISENGAGING FROM -- FROM THE JOA IN
355
SIAS - CROSS / ROSCH
1 SOME FORM, THAT IS, NEGOTIATING -- IF A THIRD PARTY WERE TO BUY
2 THE CHRONICLE, THEY WOULD HAVE TO NEGOTIATE WITH HEARST THE
3 DISSOLUTION OF THE JOA.
4 Q. MR. ALIOTO QUESTIONED YOU ABOUT A POSSIBLE NEW PLANT AND
5 EQUIPMENT. DO YOU RECALL THAT LINE OF QUESTIONS?
6 A. YES.
7 Q. DID YOU CONSIDER BUILDING A NEW PLANT FOR THE CHRONICLE
8 REGARDLESS OF WHETHER YOU COULD OBTAIN THE CURRENT PLANT FROM
9 HEARST AT THE END OF THE JOA?
10 THE COURT: DID --
11 MR. ROSCH: YES. THE QUESTION IS --
12 THE COURT: DID THE CHRONICLE CONSIDER BUILDING A
13 NEW PRINTING PLANT?
14 MR. ROSCH: YES.
15 THE COURT: FOR PUBLIC --
16 MR. ROSCH: REGARDLESS OF WHETHER THEY COULD GET THE
17 CURRENT PRINTING PLANT FROM HEARST.
18 THE COURT: A PRINTING PLANT THAT WOULD GO ONLINE IN
19 SEPTEMBER OF 2005?
20 MR. ROSCH: YES. REGARDLESS -- BASICALLY, I AM
21 ASKING YOU, WERE THERE ANY REASONS -- LET ME BE LESS LEADING
22 ABOUT THAT.
23 THE COURT: ALL RIGHT.
24 BY MR. ROSCH:
25 Q. DID YOU CONSIDER BUILDING A NEW PRINTING PLANT FOR THE
356
SIAS - CROSS / ROSCH
1 CHRONICLE NO MATTER WHAT?
2 THE COURT: YOU MEAN, AT ANY TIME?
3 MR. ROSCH: YES. HAS HE CONSIDERED DOING THAT.
4 THE WITNESS: NO, WE HAVE NOT IN ANY FORMAL WAY. WE
5 HAVE COMMISSIONED A STUDY BY THE MCCLEAR GROUP TO GIVE US SOME
6 SENSE OF WHAT WOULD BE INVOLVED WITH A PRINTING PLANT, AND IT
7 WAS THE BEGINNING OF THE PREPARATIONS FOR -- FOR NEGOTIATIONS.
8 Q. ARE THERE ANY REASONS WHY IT WOULD BE TO THE CHRONICLE'S
9 BENEFIT TO BUILD A NEW PRINTING PLANT REGARDLESS?
10 A. YES.
11 THE COURT: REGARDLESS OF?
12 MR. ROSCH: OF WHETHER IT COULD OBTAIN THE CURRENT
13 PRINTING PLANT FROM HEARST.
14 THE WITNESS: YES.
15 BY MR. ROSCH:
16 Q. AND WHAT ARE THOSE REASONS?
17 A. THE EFFICIENCY OF OPERATION. OPERATING THREE PRINTING
18 PLANTS IS VERY INEFFICIENT, PARTICULARLY WHEN THEY ARE LOCATED
19 OUTSIDE OF SOME OF THE AREAS WHERE YOUR CIRCULATION HAS MORE
20 INTENSITY.
21 THERE IS A VERY DEFINITE LIMITATION ON OUR PAGE
22 CAPACITY OF OUR PRESSES. SO WE HAVE TO PUT OUT PAPERS IN
23 WHAT'S KNOWN AS A COLLECT MODE, AND IT IS -- IT DELAYS OUR
24 TIMELY DELIVERY OF THE PAPERS. SO THAT IS AN IMPORTANT
25 CONSIDERATION AND WILL SOME DAY HAVE TO BE ADDRESSED.
357
SIAS - CROSS / ROSCH
1 AND, LASTLY, BUT BY NO MEANS LEAST, WE HAVE VERY
2 LIMITED COLOR CAPACITY.
3 I WOULD REGARD THE EFFICIENCY OF THE THREE PLANTS --
4 OR THE INEFFICIENCY -- TO BE QUITE -- QUITE AN IMPORTANT
5 ELEMENT. BUT THE MOST IMPORTANT OF ALL IS THE INABILITY TO
6 PRODUCE NEWSPAPERS AND GET THEM TO -- WE ARE A MORNING
7 NEWSPAPER -- AND GET THEM TO THE SUBSCRIBER BEFORE THEY LEAVE
8 FOR WORK.
9 THE COURT: LET ME INTERRUPT, IF I MIGHT, MR. ROSCH.
10 MR. ROSCH: OF COURSE, YOUR HONOR.
11 THE COURT: JUST TO CLARIFY THE SITUATION.
12 YOU REFER TO THREE PRINTING PLANTS.
13 THE WITNESS: YES, SIR.
14 THE COURT: DOES THE JOINT OPERATING AGREEMENT
15 PRESENTLY HAVE TWO PRINTING PLANTS?
16 THE WITNESS: IT HAS THREE, YOUR HONOR.
17 THE COURT: IT HAS THREE PRESENTLY?
18 THE WITNESS: YES.
19 THE COURT: AND WHERE ARE THE THREE LOCATED?
20 THE WITNESS: ONE IS IN SAN FRANCISCO ON CAESAR
21 CHAVEZ BOULEVARD. ONE IS IN UNION CITY. THAT IS THE LARGEST
22 OF THE PLANTS. THAT HAS 48 UNITS. AND THE SAN FRANCISCO PLANT
23 HAS 32, SEVEN-UNIT PRESSES. AND THE RICHMOND PLANT HAS 32
24 SEVEN-UNIT PRESSES -- 24. I BEG YOUR PARDON, 24, NOT 32. SO
25 WE'VE GOT TWO SMALLER PLANTS AND ONE LARGE ONE. THEY'RE OUT IN
358
SIAS - CROSS / ROSCH
1 UNION CITY -- WHICH PRODUCES MANY OF THE -- OF THE INSERTS, ET
2 CETERA, THAT WE RUN.
3 THE COURT: YOU SAID "UNION CITY"?
4 THE WITNESS: UNION CITY, YES.
5 THE COURT: OH, I MISUNDERSTOOD. I THOUGHT YOU SAID
6 "DALY CITY."
7 THE WITNESS: AND THAT IS, AGAIN, ONE OF THE
--
8 SPLITTING THAT IN HALF IS -- FOR EITHER PARTY WOULD BE A --
9 JUST THE PRODUCTION, NOT TO MENTION THE SYSTEMS AND EVERYTHING
10 ELSE, IT'S -- IT'S AT THE LEAST A HERCULEAN TASK.
11 MR. ROSCH: DOES THE COURT HAVE ANY FURTHER
12 QUESTIONS ON THAT?
13 THE COURT: I THINK I AM CLEARED UP.
14 MR. ROSCH: THANK YOU.
15 THE COURT: THANK YOU.
16 BY MR. ROSCH:
17 Q. MR. ALIOTO ASKED YOU ABOUT THE PROVISIONS OF THE JOINT
18 OPERATING AGREEMENT THAT GIVE YOU THE EXCLUSIVE RIGHT TO SET
19 CIRCULATION AND AD RATES FOR THE CHRONICLE.
20 DO YOU RECALL THOSE QUESTIONS?
21 A. YES.
22 Q. AND, AS I UNDERSTAND YOUR ANSWERS, YOU SAID THAT IN
23 EXERCISING THOSE RIGHTS, YOU DID NOT ENGAGE IN PRICE
24 COMPETITION WITH THE EXAMINER; IS THAT CORRECT?
25 A. THE AGENCY RECOMMENDS TO EACH PARTNER ADVERTISING RATES
359
SIAS - CROSS / ROSCH
1 AND CIRCULATION RATES. AND EACH PARTNER MUST INDIVIDUALLY
2 APPROVE THOSE. SO THAT --
3 Q. I UNDERSTAND THAT.
4 BUT IN APPROVING THEM, I UNDERSTAND YOU TO SAY THAT
5 YOU HAVE NOT ENGAGED IN PRICE COMPETITION WITH THE EXAMINER?
6 A. NO, WE'RE NOT.
7 Q. AND WHY IS THAT?
8 A. WELL, IT'S PRETTY OBVIOUS. THE 50/50 SPLIT OF REVENUE, IT
9 WOULD BE A SELF-DEFEATING PROJECT.
10 Q. AND, FINALLY, YOU SAID THAT YOU WERE CONCERNED ABOUT
11 STEMMING THE LOSS OF CIRCULATION OF THE CHRONICLE AND THAT THAT
12 WAS YOUR PRIMARY CONCERN.
13 A. THAT'S CORRECT.
14 Q. NOW, WHY DID YOU THINK THAT THE CIRCULATION OF THE
15 CHRONICLE WAS SO IMPORTANT?
16 A. WELL, IT'S THE KEY TO A SUCCESSFUL NEWSPAPER SO FAR. IT
17 IS THE LARGEST NEWSPAPER. WE HAVE 462,000, 465,000, DAILY
18 CIRCULATION. AND IT IS VERY CRITICAL TO MAINTAIN THAT SIZE AND
19 SCALE IN THE COMPETITIVE ENVIRONMENT THAT PERSISTS IN THE
20 IMMEDIATE BUSINESS HERE IN THE GREATER BAY AREA.
21 MR. ROSCH: THANK YOU, YOUR HONOR.
22 THE COURT: REDIRECT?
23 OH, I'M SORRY.
24 MR. HALLING: YOUR HONOR, MAY I?
25 THE COURT: YES, MR. HALLING?
360
SIAS - CROSS / HALLING
1 CROSS-EXAMINATION
2 BY MR. HALLING:
3 Q. MR. SIAS, WHO DO YOU CONSIDER TO BE THE CHRONICLE'S
4 PRINCIPAL COMPETITORS?
5 A. FOR ADVERTISING? IT WOULD BE THE WORLD. AND NOT -- NOT
6 QUITE. BUT TODAY'S ADVERTISING OR MANY OF THEM ARE IN -- IN
7 MORE THAN ONE MEDIUM. AND, THEREFORE, WE HAVE VERY -- A NUMBER
8 OF THE ADVERTISERS THAT ARE -- THE AGENCY SOLICITS. THEY ARE
9 IN -- ON TELEVISION HERE IN THIS MARKET. THEY ARE ON
10 BILLBOARDS. THEY ARE IN OTHER NEWSPAPERS IN THIS GREATER
11 AREA -- SAN JOSE, CONTRA COSTA, MARIN, INDEPENDENT JOURNAL,
12 MAYBE THE OAKLAND TRIBUNE, ALAMEDA NEWSPAPER GROUP.
13 SO I -- I DON'T KNOW -- I WOULDN'T CONFINE IT.
14 RADIO IS VERY ACTIVE AND ENJOYS ADVERTISERS THAT ALSO USE THE
15 SAN FRANCISCO NEWSPAPERS.
16 Q. DOES THE MERCURY NEWS SELL ITS PAPERS IN SAN FRANCISCO?
17 A. IT DOES AND IT PLANS TO START A SAN FRANCISCO EDITION
18 STARTING IN -- I BELIEVE, IT'S LATE JULY.
19 Q. DO YOU HAVE ANY FURTHER INFORMATION AS TO WHAT TYPE OF
20 OPERATION OR PLANS THE MERCURY NEWS HAS?
21 MR. ALIOTO: I OBJECT, YOUR HONOR, ON THE GROUND
22 THAT THIS IS HEARSAY EVIDENCE.
23 THE COURT: WELL, IT IS -- IT IN ALL LIKELIHOOD IS
24 HEARSAY, ISN'T IT?
25 MR. HALLING: YOUR HONOR, HE IS THE PRESIDENT OF THE
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SIAS - CROSS / HALLING
1 CHRONICLE AND WE ARE TALKING ABOUT THE COMPETITORS.
2 THE COURT: I UNDERSTAND THAT, BUT IT'S HEARSAY.
3 MR. HALLING: I WILL REPHRASE THE QUESTION.
4 BY MR. HALLING:
5 Q. DO YOU HAVE ANY INFORMATION CONCERNING ANNOUNCEMENTS THAT
6 THE MERCURY NEWS HAS MADE ABOUT OPERATING IN SAN FRANCISCO?
7 A. THEY HAVE ANNOUNCED --
8 MR. ALIOTO: NO. I OBJECT TO THAT. HE CAN ANSWER
9 THAT YES OR NO, IT SEEMS TO ME, YOUR HONOR, WITHOUT HEARSAY.
10 THE COURT: I GATHER THE ANSWER TO THAT IS YES?
11 THE WITNESS: YES.
12 THE COURT: ALL RIGHT.
13 WELL, I THINK IN VIEW OF THE NATURE OF THE
14 PROCEEDINGS, I WILL LET THIS IN UNDER THE RESIDUAL EXCEPTION.
15 GO AHEAD.
16 BY MR. HALLING:
17 Q. PLEASE ANSWER THE QUESTION.
18 A. THEY HAVE ANNOUNCED AND ARE STARTING TO RECRUIT AN
19 ENLARGED EDITORIAL STAFF, IN PARTICULAR REFERENCE TO
20 INDIVIDUALS IN THE ENTERTAINMENT AREA AND THE BUSINESS AREA.
21 AND THEY HAVE SUGGESTED THAT THEY MIGHT HAVE AS MANY AS 40
22 ADDITIONAL JOURNALISTS UP HERE.
23 THE COURT: THEY MIGHT HAVE A WHAT, SIR?
24 THE WITNESS: FORTY ADDITIONAL JOURNALISTS.
25 ////
362
SIAS - CROSS / HALLING
1 BY MR. HALLING:
2 Q. IS THE MERCURY NEWS CURRENTLY SOLD IN NEWS RACKS IN SAN
3 FRANCISCO?
4 A. YES, IT IS.
5 Q. WHAT OTHER DAILY NEWSPAPERS ARE AVAILABLE IN NEWS RACKS IN
6 SAN FRANCISCO?
7 A. USA TODAY, THE NEW YORK TIMES, THE WALL STREET JOURNAL,
8 THE LOS ANGELES TIMES IN A FEW LOCATIONS AND -- WELL, THAT'S --
9 THERE MIGHT BE A FEW, BUT THAT'S AS MUCH AS I KNOW, THAT I CAN
10 GIVE YOU WITH SPECIFICITY.
11 Q. MR. ALIOTO ASKED YOU SOME QUESTIONS -- I THINK THE NUMBERS
12 ARE STILL UP ON THE EASEL -- ABOUT THE DIFFERENCE IN PRICE
13 BETWEEN WHAT HEARST OFFERED TO PAY AND A LOWER FIGURE OF 400 TO
14 500 MILLION.
15 DO YOU RECALL THAT?
16 A. YES.
17 Q. AND I BELIEVE YOU RESPONDED -- STRIKE THAT.
18 WOULD A PURCHASER OF THE CHRONICLE OTHER THAN HEARST
19 BE ABLE TO PRINT THE CHRONICLE WITH ONE-HALF OF THE AGENCY'S
20 PRINTING ASSETS?
21 A. NO.
22 Q. WOULD THEY HAVE TO BUILD A NEW PRINTING FACILITY, ASSUMING
23 THEY DIDN'T ACQUIRE THOSE OTHER PRINTING ASSETS FROM HEARST?
24 MR. ALIOTO: I OBJECT TO LEADING THIS WITNESS, YOUR
25 HONOR. HE IS THE CEO.
363
SIAS - CROSS / HALLING
1 THE COURT: WELL, OBJECTION OVERRULED.
2 PROCEED, COUNSEL.
3 COUNSEL IS ATTEMPTING TO LAY FOUNDATION FOR A
4 FOLLOW-UP QUESTION.
5 THE WITNESS: THE -- I DON'T KNOW ABOUT HAVE TO.
6 BUT IF THEY WANTED TO GET A NEWSPAPER, A COMPETITIVE NEWSPAPER,
7 OUT, THEY WOULD NEED TO HAVE A -- A PRINTING FACILITY THAT IS
8 SUBSTANTIALLY LARGER THAN WHAT THEY WOULD HAVE WITH HALF OF THE
9 PRESENT AGENCY FACILITIES.
10 BY MR. HALLING:
11 Q. HOW MUCH WOULD THAT COST?
12 A. WE HAVE A PRELIMINARY ESTIMATE FROM THE MCCLEAR
13 CORPORATION THAT WITH WHAT IS CURRENTLY INVOLVED WITH THE
14 CHRONICLE PROJECTED FOR THE YEAR 2005, SOMETHING IN THE ORDER
15 OF TODAY'S PRICES OF $250 MILLION PLUS $30 MILLION FOR LAND.
16 Q. NOW, YOU ALSO TESTIFIED, MR. SIAS, THAT IT WOULD BE AN
17 ADVANTAGE TO BE AN A.M. OR MORNING PAPER RATHER THAN A P.M. OR
18 EVENING NEWSPAPER.
19 DO YOU RECALL THAT?
20 A. YES.
21 Q. WHAT'S THE BASIS FOR YOUR VIEW THAT IT'S PREFERABLE TO BE
22 A MORNING PAPER?
23 A. THE EXPERIENCE OF MAJOR METROPOLITAN EVENING NEWSPAPERS IN
24 THE UNITED STATES OVER THE PAST 30 YEARS.
25 Q. ARE THERE PARTICULAR FACTORS THAT WOULD DISADVANTAGE OR
364
SIAS - CROSS / HALLING
1 ADVANTAGE A MORNING VERSUS AN EVENING NEWSPAPER?
2 A. I AM NOT SURE I UNDERSTAND THE QUESTION. BUT EVENING --
3 THE RECORD IS THAT THE EVENING NEWSPAPERS ARE NOT ABLE TO
4 ATTRACT THE CIRCULATION THAT MORNING PAPERS ARE AND --
5 THE COURT: AND I THINK COUNSEL'S QUESTION IS WHY.
6 WHY IS THAT?
7 MR. HALLING: THANK YOU, YOUR HONOR.
8 THE WITNESS: OKAY. WHY.
9 WELL, I DON'T KNOW ALL OF THEM, BUT PROBABLY MOST
10 IMPORTANTLY THE CHANGED LIFESTYLES THAT TELEVISION BROUGHT ON
11 US. PEOPLE ARE NOT -- AND, ALONG WITH THAT, THE
-- THE COMMUTE
12 BY CAR THAT HAS TAKEN PLACE WITH SO MUCH OF OUR WORKFORCE AND
13 THE THOUGHT OF BUYING A NEWSPAPER, A SINGLE COPY, IF YOU WILL,
14 AND LEAVING WORK AND/OR -- AND GOING HOME AND READING THE
15 NEWSPAPER INSTEAD OF DOING A NUMBER OF THINGS IS CLEARLY A
16 MAJOR CONTRIBUTOR.
17 BY MR. HALLING:
18 Q. CAN YOU THINK OF ANYTHING ELSE?
19 A. JUST THAT THE EXPERIENCE IS THAT -- I ASSUME IT'S -- THOSE
20 ARE THE TWO PRIMARY REASONS.
21 MR. HALLING: THANK YOU.
22 THE COURT: MR. BALABANIAN?
23 MR. BALABANIAN: NO QUESTIONS, YOUR HONOR.
24 THE COURT: VERY WELL. ANY REDIRECT?
25 MR. ALIOTO: JUST A FEW, I THINK, YOUR HONOR.
365
SIAS - REDIRECT / ALIOTO
1 REDIRECT EXAMINATION
2 BY MR. ALIOTO:
3 Q. YOU HAVE EXHIBIT 5 IN FRONT OF YOU STILL, MR. SIAS?
4 A. EXHIBIT 5?
5 Q. YES, EXHIBIT 5. AND WE HAD THAT PAGE 26 OF THE
6 SUPPLEMENT. IT IS THE BATES NUMBER 350227.
7 A. EXCUSE ME, COUNSELOR. I AM STILL LOOKING FOR 5.
8 THE COURT: 5 IS THE PROJECT GOLDEN?
9 MR. ALIOTO: YES, SIR.
10 THE WITNESS: OH, PROJECT GOLDEN. THANK YOU.
11 BY MR. ALIOTO:
12 Q. SORRY.
13 A. ALL RIGHT. NOW, YES. AND NOW GO TO?
14 Q. PAGE 26.
15 A. OF THE SUPPLEMENT OR THE FIRST PAPER?
16 Q. SUPPLEMENT.
17 THE COURT: THE PAGE WE WERE LOOKING AT, I GATHER.
18 MR. ALIOTO: YES.
19 THE WITNESS: IS THIS THE JOA OPERATING SCENARIOS?
20 BY MR. ALIOTO:
21 Q. YES, IT IS.
22 A. ALL RIGHT. I HAVE IT.
23 Q. NOW, IF YOU WILL LOOK ON THE CAPITAL EXPENDITURES, YOU
24 WERE JUST BEING ASKED QUESTIONS ABOUT THE PLANTS AND THE PRICES
25 FOR THE PLANTS.
366
SIAS - REDIRECT / ALIOTO
1 SO
-- ALL RIGHT. UNDER THIS -- UNDER THIS
2 PARTICULAR SCENARIO, IT STATES THAT IF THERE IS ONLY ONE
3 NEWSPAPER, IT SAYS, QUOTE:
4 "NO NEW PLANT OF JOA RESOLVED NOW."
5 DO YOU SEE THAT?
6 A. YES.
7 Q. WOULD YOU AGREE WITH THAT, THAT THERE WOULD BE NO NEW
8 PLANT IF THE JOA WAS RESOLVED BY THIS ACQUISITION OF THE -- BY
9 THIS ACQUISITION OF THE CHRONICLE BY HEARST?
10 A. I AM NOT SURE, BECAUSE THAT'S A DECISION THAT THE BUYER
11 WOULD -- WOULD MAKE.
12 Q. DO YOU KNOW WHETHER OR NOT -- OR UP TO THE TIME OF --
13 STRIKE THAT.
14 DO YOU KNOW WHETHER OR NOT HEARST INTENDS TO BUILD A
15 NEW PLANT?
16 A. NO, I DO NOT.
17 Q. ALL RIGHT. NOW, IF YOU WILL LOOK ON THE -- WHERE THERE IS
18 COMPETITION, HEAD-TO-HEAD COMPETITION, IT STATES:
19 "CHRONICLE CONSTRUCTS NEW PLANT AT TOTAL
20 COST OF 125 MILLION IN 2003 AND 2005, PLUS LAND
21 COST OF $15 MILLION. IT ASSUMES EXAMINER DOES
22 NOT CONSTRUCT NEW PLANT BUT RECEIVES" -- NOW,
23 HERE WE JUST TALKED ABOUT IT -- "RECEIVES TWO
24 PLANTS AT TERMINATION AND CHRONICLE RECEIVES ONE
25 PLANT AND $8 MILLION FROM HEARST."
367
SIAS - REDIRECT / ALIOTO
1 SO, IN OTHER WORDS, WAS THERE EVER -- AT LEAST TO
2 YOUR KNOWLEDGE, WAS THERE EVER ANY DISCUSSION WITHIN CHRONICLE
3 TO GIVE THIS INFORMATION TO DONALDSON, LUFKIN & JENRETTE, THAT
4 WHAT WOULD HAPPEN WOULD BE THAT OUT OF THE THREE PLANTS, TWO
5 WOULD GO TO HEARST, ONE WOULD GO TO THE CHRONICLE, THE
6 CHRONICLE WOULD GET $8 MILLION FOR THE DIFFERENCE BETWEEN THE
7 ONE PLANT THAT HEARST GETS, PLUS THEN CHRONICLE WOULD HAVE TO
8 CONSTRUCT ANOTHER PLANT FOR 125 MILLION?
9 A. WELL, I MUST CONFESS TO YOU, I HAVE NO IDEA HOW THE
10 WRITERS OF THIS CAME UP WITH THIS TWO PLANTS AT TERMINATION AND
11 $8 MILLION. I DON'T HAVE A CLUE. BECAUSE, TO MY KNOWLEDGE, IT
12 NEVER -- THAT WOULD BE -- WHATEVER IT WOULD BE, DISPOSITION,
13 WOULD HAVE BEEN THE RESULT OF NEGOTIATIONS BETWEEN HEARST AND
14 THE PRINCIPALS. AND SO THESE THIRD-PARTIES, I AM UNPLEASANT
15 AND IT BOGGLES MY MIND. I DON'T KNOW WHY HEARST WOULD GET TWO
16 PLANTS AND CHRONICLE ONE.
17 Q. DID YOU SAY IN RESPONSE TO YOUR COUNSEL'S QUESTIONS THAT
18 YOU HAD COMMISSIONED SOME STUDY OR SOMETHING?
19 A. YES, SIR.
20 Q. AND THAT WAS A STUDY WITH REGARD TO PLANTS?
21 A. IT WAS --
22 Q. CONSTRUCTION OF PLANTS?
23 A. IT WAS A STUDY BY THE MCCLEAR CORPORATION AFTER THE
24 DISCUSSION WITH MR. BENNACK IN WHICH WE DECIDED -- AND VIC
25 GANZI-- WHICH CHRONICLE FELT THAT IT WAS TOO -- TOO RICH, WHAT
368
SIAS - REDIRECT / ALIOTO
1 THEY PROPOSED, IN RESPONSE TO OUR REQUEST.
2 I SAID, "WE MUST START THE PLANNING FOR A POTENTIAL
3 DISSOLUTION OF THE AGENCY BECAUSE THAT'S WHAT HEARST HAS
4 THREATENED. WE DON'T THINK THEY WILL -- WE DON'T THINK THEY
5 ARE GOING TO DO IT, BUT WE CANNOT AVOID THE PLANNING."
6 AND SO WITH THAT STUDY PRODUCED BY THE MCCLEAR
7 CORPORATION GAVE A PRELIMINARY -- AFTER A GREAT DEAL OF TALK
8 WITH THE AGENCY.
9 Q. WAS THIS IN WRITING, THIS STUDY?
10 A. WAS THE MCCLEAR CORPORATION?
11 Q. YES.
12 A. YES, I BELIEVE IT WAS.
13 Q. AND DID IT HAVE ANYTHING WITH REGARD TO PLANTS, BUILDING A
14 NEW PLANT?
15 A. YES. THAT'S WHAT IT WAS ALL ABOUT. THEY INTERVIEWED THE
16 NEWSPAPER AGENCY PEOPLE, AND THEY WERE INVOLVED IN IT, AND
17 WERE -- BASED UPON LOOKING FOR IT, ADVERTISING, IT WAS A WISH
18 LIST, IF YOU HAD A THING WHAT WOULD IT BE, AND OUT OF THIS --
19 IT WAS ABOUT A THREE AND A HALF, FOUR-MONTH PROCESS. MR. MATT
20 WILSON OF THE CHRONICLE, THE EXECUTIVE EDITOR, WAS IN CHARGE OF
21 IT FOR US. AND OUT OF IT CAME A REPORT, A PRELIMINARY REPORT,
22 BECAUSE WE CLOSED THE THING DOWN OR ABORTED IT AFTER IT WAS
23 CLEAR WE WERE GOING TO BE SELLING THE PAPER.
24 Q. OKAY. SO THE SEQUENCE OF EVENTS IS THAT, FIRST, YOU WERE
25 TURNED DOWN BY MR. BENNACK -- I MEAN, MR. BENNACK'S OFFER,
369
SIAS - REDIRECT / ALIOTO
1 HEARST'S OFFER, WAS TURNED DOWN BY THE CHRONICLE --
2 A. YES.
3 Q. -- BOARD OF DIRECTORS?
4 A. YES.
5 Q. AFTER THEY TURNED IT DOWN BECAUSE OF THE THREATS OF HEARST
6 BEING INTERESTED IN STAYING IN THE MARKET AFTER 2005, YOU
7 CONDUCTED A SURVEY WITH MR. -- OR A STUDY?
8 A. WITH MCCLEAR CORPORATION, A STUDY.
9 Q. TO LOOK FORWARD TO BUILDING A NEW PLANT IN ANTICIPATION OF
10 COMPETING HEAD TO HEAD WITH HEARST AFTER 2005?
11 A. IN ANTICIPATION OF ENDING UP IN NEGOTIATIONS WITH HEARST
12 ON THE DISSOLUTION OF THE AGENCY BEFORE 2005. IT WAS --
13 WHILE -- IT WAS REPRESENTED BY HEARST CONSTANTLY THAT THEY
14 INTENDED TO -- IF WE COULD NOT RESOLVE THE JOA, THEY INTENDED
15 TO MOVE THE EXAMINER TO THE MORNING FIELD IN 2005 AND COMPETE
16 WITH THE CHRONICLE. AND WE DID NOT BELIEVE THAT THEY WOULD DO
17 THAT.
18 WE DID BELIEVE THEY WOULD PUT US THROUGH THE RINGER
19 IF WE CAME TO THAT, AND WE WOULD HAVE NO CHOICE BUT TO MAKE
20 PLANS AND PROVISIONS FOR WHAT WE WOULD DO SO WE WOULD NOT BE
21 HUNG OUT TO DRY AT THE CONCLUSION WHEN WE DON'T HAVE A NEW
22 PRINTING PLANT AND WE HAVE HEARST SAYING, "IF YOU WANT TO PRINT
23 YOUR PAPER, YOU ARE GOING TO HAVE TO PAY US X AMOUNT FOR OUR
24 HALF OF THESE FACILITIES."
25 Q. AND WHEN YOU JUST SAID "PUT YOU THROUGH THE RINGER" SO
370
SIAS - REDIRECT / ALIOTO
1 THAT YOU COULD HAVE TO MAKE YOUR PLANS AND PROVISIONS -- WHEN
2 YOU SAID "PUT YOU THROUGH THE RINGER," THAT MEANS PREPARE FOR
3 COMPETITION; IS THAT RIGHT?
4 A. NO, THAT DOES NOT MEAN THAT. FIGURATIVELY, IT MEANS THE
5 NEGOTIATIONS UNDER WHICH WE WOULD RESOLVE THE NEWSPAPER AGENCY
6 PRIOR TO 2005.
7 Q. I THOUGHT YOU SAID YOU DIDN'T WANT TO BE HUNG OUT TO DRY.
8 A. THAT'S RIGHT.
9 Q. AND THAT --
10 A. AND IF WE DIDN'T HAVE ANY PLAN AND WE DIDN'T HAVE -- AND
11 WE KNOW THAT THE -- FOLLOW THIS. HEARST CAN SAY, "THIS IS WHAT
12 WE ARE GOING TO DO." THEY DON'T HAVE TO DO A DARN THING. AT
13 THE END OF THE THING THEY COULD SAY, "OOPS, SORRY," WHAT HAVE
14 YOU.
15 BUT WE WOULD BE -- THEY ARE HOLDING TO IT. WE ARE
16 LEFT OUT THERE WITH THE INABILITY TO PUBLISH THE NEWSPAPER
17 BECAUSE THE PRESSES -- HALF OF THOSE PRESSES -- ALL OF THEM IS
18 ENOUGH PROBLEM. HALF OF THEM WE WOULD BE IN DEEP KEEKY. AND
19 SO WE HAD TO DO THE ADVANCED PLANNING AS PART OF OUR
20 NEGOTIATING POSTURE WITH THE HEARST CORPORATION.
21 Q. OKAY. SO YOU DID NOT WANT TO BE LEFT OUT HUNG TO DRY
22 BECAUSE YOU DIDN'T WANT TO BE PUT IN A SITUATION WHERE YOU HAD
23 NO PLAN AND YOU HAD MADE NO PROVISION TO PUBLISH YOUR PAPER IF
24 IN FACT A DEAL WITH HEARST COULDN'T BE MADE, CORRECT?
25 A. IF -- AS WE NEGOTIATED -- WE -- WE DID NOT BELIEVE THAT
371
SIAS - REDIRECT / ALIOTO
1 HEARST WOULD INDEED PRINT OR PUBLISH THE EXAMINER IN THE
2 MORNING FIELD IN 2005.
3 WE DID BELIEVE THAT THEY WOULD USE THAT AGGRESSIVELY
4 TO NEGOTIATE RESOLUTION OF THE JOA AND THAT IF WE DID NOT
5 PURSUE THE PREPLANNING AND BE READY TO PUBLISH WITHOUT HALF OF
6 THE PRINTING PLANTS, HEARST WOULD BE IN A POSITION TO DEMAND A
7 VERY HIGH PRICE FOR THEIR RESIDUAL INTEREST IN THE JOA.
8 Q. RESIDUAL INTEREST IN THE JOA? DID ANY OF THIS --
9 A. EXCUSE ME, THEIR ASSETS. THEIR "RESIDUAL INTEREST," I
10 HAVE USED THE WRONG TERM. THEY HAVE 50 PERCENT OF AN
11 INVESTMENT IN THE JOINT OPERATING AGREEMENT, IN THE AGENCY, AND
12 THEY OWN 50 PERCENT OF THOSE ASSETS AND ARE ENTITLED TO THEM AT
13 THE DISSOLUTION.
14 Q. DID ANY PART OF THIS DIFFERENCE IN MONEY HAVE TO DO WITH
15 THE RESIDUAL INTERESTS OF THE CHRONICLE AND THE JOA OR WHAT YOU
16 DESCRIBE AS THE "RESIDUAL INTERESTS" OF THE JOA?
17 A. AGAIN, I AM NOT TRYING TO BE CUTE, BUT, OBVIOUSLY, THAT'S
18 A QUESTION WHICH SHOULD BE PUT TO HEARST, AND I AM NOT IN A
19 POSITION TO ANSWER IT.
20 Q. OKAY. DO YOU THINK THAT THE CHRONICLE, AS OF 1966 WHEN
21 THEY MADE THEIR DEAL WITH THE -- WITH HEARST HAD A RESIDUAL
22 INTEREST IN THE JOA?
23 A. THEY HAD AN ONGOING INTEREST, YES.
24 Q. SO -- AND THEY HAD SOME SIX YEARS TO GO, CORRECT?
25 A. YES.
372
SIAS - REDIRECT / ALIOTO
1 Q. AND YOU WOULD CONSIDER THAT RESIDUAL INTEREST, CORRECT?
2 A. YES.
3 Q. AND YOU WOULD WANT TO BE PAID FOR THAT IF YOU GAVE IT UP,
4 WOULDN'T YOU?
5 A. YES.
6 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
7 THE COURT: VERY WELL.
8 BY MR. ALIOTO:
9 Q. LET ME SHOW YOU EXHIBIT 3.
10 EXHIBIT 3 IS CATEGORIZED AS ATTACHMENT 3, SMALL
11 (B)(1). IT'S IN EVIDENCE. THIS PURPORTS TO BE THE SHARE OF
12 FIELD, 1996 DAILY NEWSPAPER CIRCULATION IN SAN FRANCISCO DMA.
13 HAVE YOU EVER SEEN THESE FIGURES AND NUMBERS THAT
14 PURPORT TO SHOW THE SHARE OF DAILY NEWSPAPERS IN PARTICULAR
15 MARKETS?
16 A. YES, I THINK I HAVE.
17 Q. OKAY. AND YOU WILL SEE IF YOU GO DOWN ON THE LEFT-HAND
18 COLUMN, THE LEFT-HAND COLUMN IS THE COUNTY OR THE -- THE COUNTY
19 AND THE SHARE OF FIELD.
20 DO YOU SEE THAT COLUMN, THE LEFT-HAND COLUMN ALL THE
21 WAY DOWN?
22 A. YES.
23 Q. AND DO YOU SEE THAT THE FOURTH COLUMN OR THE FOURTH ONE IS
24 SAN FRANCISCO
-- OR FIFTH? IT'S RIGHT -- OOPS.
25 A. I SEE IT UNDER "MARIN."
373
SIAS - REDIRECT / ALIOTO
1 Q. YEAH, UNDER "MARIN." IT'S THE FIFTH ONE, "SAN FRANCISCO,"
2 ON THE LEFT SIDE.
3 A. YES, YES.
4 Q. OKAY. AND THEN TO THE RIGHT OF SAN FRANCISCO, SHARE OF
5 THE FIELD --
6 A. YES.
7 Q. -- YOU SEE THAT FOR THE CHRONICLE, IF YOU GO TO THE RIGHT,
8 IT SAYS SAN FRANCISCO CHRONICLE HAS 61.5 PERCENT.
9 DO YOU SEE THAT?
10 A. YES.
11 Q. AND SAN FRANCISCO EXAMINER HAS 32.1 PERCENT.
12 DO YOU SEE THAT?
13 A. YES.
14 Q. AND SO IF YOU ADD THOSE UP, THAT'S -- THAT IS
15 93 PERCENT -- NO, 93.6 PERCENT. CORRECT?
16 A. YES.
17 Q. AND THEN THE REST IS SHARED BY OTHER NEWSPAPERS.
18 DO YOU HAVE ANY REASON TO DOUBT THOSE NUMBERS?
19 A. NO, I DO NOT.
20 MR. ALIOTO: THAT'S ALL.
21 THANK YOU, YOUR HONOR.
22 THE COURT: MR. SIAS, WHILE WE ARE ON EXHIBIT 3, IF
23 YOU DON'T MIND. THERE HAS BEEN TESTIMONY, I BELIEVE, THAT THE
24 SAN JOSE MERCURY NEWS AND CONTRA COSTA TIMES ARE UNDER THE SAME
25 OWNERSHIP.
374
SIAS - REDIRECT / ALIOTO
1 THE WITNESS: YES.
2 THE COURT: WHAT IS THE OWNERSHIP OF THE SANTA ROSA
3 PRESS DEMOCRAT?
4 THE WITNESS: IT'S THE NEW YORK TIMES, YOUR HONOR.
5 THE COURT: AND THE OAKLAND TRIBUNE IS?
6 THE WITNESS: IS ALAMEDA NEWSPAPER GROUP, A MEDIA
7 GENERAL.
8 THE COURT: SINGLETON?
9 THE WITNESS: YES.
10 THE COURT: AND IS THAT TRUE ALSO OF THE VALLEY
11 TIMES, THE VALLEY HERALD?
12 THE WITNESS: I BELIEVE IT'S --
13 THE COURT: AND THE HAYWARD DAILY NEWS -- DAILY
14 REVIEW?
15 THE WITNESS: YES, YES, I THINK THAT'S THE
-- THE
16 ALAMEDA NEWSPAPER GROUP.
17 THE COURT: ALL RIGHT. AND THE OWNERSHIP OF THE
18 MARIN INDEPENDENT JOURNAL?
19 THE WITNESS: THAT IS THE GANNETT CORPORATION.
20 THE COURT: AND THE SAN MATEO TIMES?
21 THE WITNESS: THAT'S SINGLETON.
22 THE COURT: THAT'S SINGLETON?
23 THE WITNESS: YES.
24 THE COURT: AND THE WEST COUNTY TIMES?
25 THE WITNESS: THAT, I BELIEVE, IS PART OF THE CONTRA
375
SIAS - REDIRECT / ALIOTO
1 COSTA TIMES. I THINK THEY MAY HAVE CHANGED. I COULD BE WRONG
2 ON THAT, YOUR HONOR.
3 THE COURT: SO THAT'S KNIGHT RIDDER?
4 THE WITNESS: THAT WOULD BE KNIGHT RIDDER NOW IF IT
5 IS PART OF THAT -- THE CONTRA COSTA TIMES.
6 THE COURT: AND THE FREMONT NEWARK ARGUS?
7 THE WITNESS: THAT'S SINGLETON.
8 THE COURT: AND THE ANTIOCH LEDGER DISPATCH?
9 THE WITNESS: I AM OVER MY HEAD AT THIS POINT ON
10 SOME OF THESE CHANGES. I AM NOT SURE ABOUT THAT ONE.
11 THE COURT: WELL, LET'S JUST FINISH OFF.
12 THE VALLEJO TIMES HERALD?
13 THE WITNESS: THAT -- I THINK THAT WAS A SCRIPPS
14 REGAN PAPER THAT MAY HAVE CHANGED HANDS RECENTLY. BUT IT'S
15 NONE OF THE OTHER PEOPLE WE HAVE MENTIONED SO FAR.
16 THE COURT: NAPA VALLEY REGISTER?
17 THE WITNESS: THAT IS A PULITZER PAPER NOW.
18 THE COURT: PULITZER.
19 THE WITNESS: YES, IT WAS SCRIPPS REGAN, NOW IT'S
20 PULITZER.
21 THE COURT: THE VACAVILLE REPORTER?
22 THE WITNESS: I DON'T KNOW THE OWNERSHIP OF THAT.
23 THE COURT: AND, FINALLY, THE FAIRFIELD DAILY
24 REPUBLIC?
25 THE WITNESS: I HAVE FORGOTTEN WHO OWNS THAT ONE.
376
SIAS - REDIRECT / ALIOTO
1 THE COURT: ALL RIGHT.
2 NOW, YOU CAME TO THE CHRONICLE IN APRIL OF 1993, I
3 BELIEVE YOU TESTIFIED.
4 THE WITNESS: YES.
5 THE COURT: AND AT THE TIME YOU CAME, IT WAS YOUR
6 MISSION TO LIQUIDATE THE ASSETS OF THE COMPANY, OR WAS THAT A
7 PLAN WHICH DEVELOPED AFTER YOU CAME IN APRIL 1993?
8 THE WITNESS: IT CAME -- IT CAME AFTERWARDS,
9 CONSIDERABLY. THERE WAS A GOOD DEAL OF -- OF INTERNAL FAMILY
10 DISCUSSION, AND THERE WERE SOME FOLKS THAT WANTED TO SELL RIGHT
11 ON THE SPOT AND THERE WERE OTHERS THAT DID NOT.
12 AND MY INITIAL MISSION REALLY WAS TO DO A LOT OF --
13 OF BLOCKING AND TACKLING TO GET OPERATIONS AND OTHER THINGS IN
14 ORDER TO IMPROVE -- WE WERE BORROWING MONEY TO PAY DIVIDENDS --
15 NOT A GOOD IDEA -- AND THROUGH -- THROUGH A NUMBER OF THINGS
16 WE -- WE GOT THAT TAKEN CARE OF.
17 BUT THE -- THE INTEREST IN SELLING FROM THE PART OF
18 SOMETHING THAT WAS A FAMILY, IT WAS GROWING BECAUSE IT IS AN S
19 CORP AND A LACK OF LIQUIDITY FOR -- THERE WERE 24 SHAREHOLDERS
20 DURING THIS TIME -- WAS A MAJOR CONCERN TO MANY OF THEM WHO HAD
21 MOST OF THEIR FAMILY WEALTH -- OR THEIR WEALTH TIED UP IN STOCK
22 IN THE CHRONICLE AND WHO WERE CONCERNED ABOUT THEIR LACK OF
23 LIQUIDITY AND THE CONCENTRATION OF THEIR WEALTH IN A SINGLE
24 COMPANY.
25 THE COURT: ALL RIGHT. AND DID THERE COME A TIME
377
SIAS - REDIRECT / ALIOTO
1 WHEN A CORPORATE DECISION WAS REACHED TO LIQUIDATE THE ASSETS
2 OF THE COMPANY?
3 THE WITNESS: IT WOULD HAVE BEEN REACHED IN THE
4 SPRING OF 1999.
5 THE COURT: CAN YOU PLACE A MONTH ON IT?
6 THE WITNESS: THE FORMAL -- THE FORMAL BOARD VOTE
7 WAS IN EITHER VERY LATE MAY OR EARLY JUNE.
8 THE COURT: YOU SAID THAT IT WOULD BE EXTREMELY
9 DIFFICULT TO DISENTANGLE THE ASSETS OF THE JOINT OPERATING
10 AGREEMENT.
11 THE WITNESS: YES, SIR.
12 THE COURT: THAT IS, BETWEEN HEARST AND CHRONICLE
13 PUBLISHING COMPANY. WOULD THAT FACT FORECLOSE A THIRD PARTY
14 FROM PURCHASING THE INTERESTS OF BOTH HEARST AND CHRONICLE
15 PUBLISHING IN THE JOINT OPERATING AGREEMENT?
16 THE WITNESS: I DON'T BELIEVE IT WOULD BECAUSE THE
17 CONSEQUENCE OF A THIRD PARTY NEGOTIATING AND DOING THAT WOULD
18 BE THE -- WOULD BE THE END OF THE JOA.
19 THE COURT: AT LEAST AS BETWEEN THE TWO PARTIES?
20 THE WITNESS: YES. THEY WOULD BE BUYING THE JOINT
21 OPERATING AGREEMENT PRESUMABLY WITH THE PURCHASE OF BOTH OF
22 THOSE PAPERS.
23 THE COURT: ALL RIGHT. AND THEN WOULD BE ABLE TO
24 MAKE A DECISION WITH RESPECT TO THE TWO NEWSPAPER PRODUCTS OF
25 THE JOINT OPERATING AGREEMENT, I ASSUME --
378
SIAS - REDIRECT / ALIOTO
1 THE WITNESS: THAT --
2 THE COURT: -- IS YOUR UNDERSTANDING?
3 THE WITNESS: -- WOULD BE MY ASSUMPTION ALSO.
4 THE COURT: ALL RIGHT. NOW, I GATHER FROM YOUR
5 TESTIMONY, ALTHOUGH YOU WERE CERTAINLY NOT ON THE SCENE AT THE
6 TIME AND ONLY CAME ALONG A GOOD MANY YEARS LATER, AND WITH THE
7 OBVIOUS BENEFIT OF 20/20 HINDSIGHT, IT'S YOUR OPINION THAT FOR
8 THE CHRONICLE THE JOINT OPERATING AGREEMENT WAS A MISTAKE. IS
9 THAT CORRECT?
10 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
379
SIAS - REDIRECT / ALIOTO
1 THE WITNESS: I'M NOT SURE, YOUR HONOR, SINCE I WAS
2 NOT HERE AT THE TIME; AND SO TO CHARACTERIZE IT AS A MISTAKE,
3 WOULD BE PRESUMPTUOUS OF ME. I HAVE NEVER DONE THAT.
4 I'M DEALING WITH THE PRESENT; AND AS THE INDUSTRY
5 HAS CHANGED, IT HAS MEANT THAT THE EXAMINER IS A NEWSPAPER THAT
6 IS, WE BELIEVE, FAILING AND BECAUSE OF THE TERMS OF THIS THING,
7 50-50, THEY'RE GETTING BENEFITS DISPROPORTIONATE TO THEIR SIZE
8 AS IT EXISTS TODAY.
9 THE COURT: I UNDERSTOOD YOUR TESTIMONY TO BE THAT
10 IT WAS YOUR BELIEF THAT AT PRESENT, AT ANY RATE, THE EXISTENCE
11 OF THE JOINT OPERATING AGREEMENT HAS IMPAIRED THE ABILITY OF
12 THE CHRONICLE TO PUBLISH A QUALITY NEWSPAPER AND VIGOROUSLY TO
13 COMPETE IN THIS MARKET WITH ALL THESE OTHER NEWSPAPERS THERE
14 ARE ARRAYED IN EXHIBIT 3 AND THE OTHER MEDIA WITH WHICH THE
15 CHRONICLE COMPETES; IS THAT A FAIR STATEMENT?
16 THE WITNESS: I THINK WE BELIEVE THAT IT HAS.
17 BECAUSE OF THE MODEST FINANCIAL PERFORMANCE, WE ARE NOT PUTTING
18 AS MUCH MONEY AS WE BELIEVE WE OTHERWISE WOULD INTO THE PRODUCT
19 ITSELF AND WE BELIEVE THAT WE ARE NOT PUTTING AS MUCH MONEY
20 INTO SOME OF THE CIRCULATION AREAS THAT WE THINK WE SHOULD.
21 THE COURT: SO IT WOULD BE YOUR BELIEF THAT ENDING
22 THE JOINT OPERATING AGREEMENT WOULD ELIMINATE THAT OBSTACLE OR
23 HINDRANCE TO THESE MEASURES THAT YOU THINK WOULD IMPROVE THE
24 QUALITY OF THE PAPER AND ITS ABILITY TO COMPETE IN THIS MARKET?
25 THE WITNESS: WELL, ENDING THE JOINT OPERATING
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1 AGREEMENT WOULD ENHANCE THE CHRONICLE'S FINANCIAL PERFORMANCE
2 AND SOME OF THOSE RESOURCES COULD BE DEVOTED TOWARD WHAT I CALL
3 PRODUCT IMPROVEMENTS.
4 THE COURT: ALL RIGHT. THANK YOU, MR. SIAS.
5 COUNSEL, IN VIEW OF THE HOUR, I THINK WE'LL ADJOURN
6 FOR THE DAY. MR. SIAS MAY BE EXCUSED, I GATHER.
7 MR. ALIOTO: YOUR HONOR, I JUST HAVE -- MAY I JUST
8 ASK ONE OR TWO FOLLOWUP QUESTIONS TO YOUR HONOR'S QUESTIONS?
9 THE COURT: VERY BRIEFLY. VERY BRIEFLY.
10 REDIRECT EXAMINATION
11 BY MR. ALIOTO:
12 Q. THE NEWSPAPERS THAT YOU LISTED THAT ARE LISTED ON
13 EXHIBIT 3 AND YOU IDENTIFIED THE OWNERS OF THE DIFFERENT
14 NEWSPAPERS, INCLUDING THE NEW YORK TIMES I THINK YOU SAID IN
15 ONE OF THEM --
16 A. SANTA ROSA PRESS DEMOCRAT.
17 Q. -- AND OTHERS, OKAY, NOW, ISN'T IT CORRECT THAT ALL OF
18 THESE NEWSPAPERS AND THEIR OWNERS WOULD BE PROHIBITED BY THE
19 JOA, OR A MEMBER OF THE JOA COULD PROHIBIT ANY OF THESE PEOPLE
20 FROM BUYING THE OTHER PARTNER IN THE JOA BECAUSE THEY'RE ALL
21 WITHIN 60 MILES? ISN'T THAT RIGHT?
22 A. I THINK SO, MR. ALIOTO, BUT I DON'T KNOW WHETHER -- I
23 ASSUME THAT THE REMAINING PARTNER COULD SAY YES.
24 Q. I KNOW. BUT, I MEAN, HE COULD VETO IT. THE REMAINING
25 PARTNER OF THE JOA COULD VETO ANY OF THESE PAPERS OR THEIR
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1 OWNERS, NEW YORK TIMES, KNIGHT RIDDER, ALL THESE OWNERS, THEY
2 COULD BE PROHIBITED FROM BUYING THE OTHER PARTNER IN THE JOA;
3 ISN'T THAT RIGHT? THE PARTNER COULD VETO IT?
4 A. I AM NOT SURE BECAUSE YOU'RE GETTING INTO A LEGAL AREA,
5 AND THAT'S MY RELUCTANCE TO SAY IT'S CORRECT OR NOT.
6 MR. ALIOTO: THANK YOU.
7 THE COURT: ALL RIGHT. PERHAPS COUNSEL CAN IN DUE
8 COURSE FURNISH THE ANSWERS TO THE OWNERSHIP OF THE NEWSPAPERS
9 THAT MR. SIAS WAS NOT ABLE TO RECALL OFFHAND. YOU CAN SUBMIT
10 THAT IN DUE COURSE OF THE TRIAL.
11 MR. ROSCH: YOUR HONOR, MAY I JUST NOTE THAT WE DID
12 FILE TODAY A MOTION IN LIMINE TO EXCLUDE CERTAIN TESTIMONY OF
13 DR. COMANOR WHO IS SCHEDULED TO BE THE FIRST WITNESS TOMORROW.
14 I KNOW WE'RE INTRUDING ON YOUR CALENDAR THIS AFTERNOON, BUT I
15 WONDER IF WE MIGHT TAKE THAT UP BEFORE COURT TOMORROW.
16 THE COURT: IF HE'S GOING TO BE THE NEXT WITNESS, IT
17 SEEMS WE'RE GOING TO HAVE TO.
18 MR. ROSCH: I COULD WAIT AND MOVE TO STRIKE, BUT I
19 WOULD PREFER IF THE COURT COULD LOOK AT IT.
20 THE COURT: DO YOU HAVE A MEMORANDUM IN SUPPORT OF
21 YOUR MOTION IN LIMINE?
22 MR. ROSCH: WE DO, AND IT'S BEEN SUBMITTED TO YOUR
23 HONOR.
24 THE COURT: I'M SORRY?
25 MR. ROSCH: YES, WE DO, AND IT HAS BEEN SUBMITTED TO
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1 YOUR HONOR, AND IT'S BEEN SERVED ON --
2 THE COURT: ALL RIGHT. WHEN WAS IT SUBMITTED?
3 MR. ROSCH: THIS MORNING.
4 THE COURT: AH, ALL RIGHT.
5 ALL RIGHT. WELL, I'LL TAKE A LOOK AT IT AND WE'LL
6 TAKE IT UP TOMORROW MORNING 8:30.
7 MR. ROSCH: THANK YOU, YOUR HONOR.
8 THE COURT: ANYTHING FURTHER, COUNSEL?
9 MR. ALIOTO: NO, SIR.
10 THE COURT: VERY WELL. SEE YOU AT THAT TIME.
11 MR. HALLING: NO, YOUR HONOR.
12 THE COURT: AND, MR. SIAS, I THINK YOU CAN BE
13 EXCUSED.
14 THE WITNESS: THANK YOU, SIR.
15 (WITNESS EXCUSED.)
16 (WHEREUPON PROCEEDINGS ADJOURNED AT 1:30 P.M.)
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