Daily Court Transcripts
May 05, 2000
previous / next
VOLUME 5
PAGES 825 - 1082
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
FRIDAY, MAY 5, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
826
1
2 APPEARANCES: (CONTINUED)
3 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
4 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
5 THOMAS D. NEVINS
ATTORNEYS AT LAW
6
BAKER & HOSTETLER LLP
7 1050 CONNECTICUT AVE., N.W.
SUITE 1100
8 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
9 ATTORNEY AT LAW
10 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
11 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
12 BY: PETER K. HUSTON
J. THOMAS ROSCH
13 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
14
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
15 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
16 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
17 THOMAS S. HIXSON
ATTORNEYS AT LAW
18
19
20
21
22
23
24
25
827
1 I N D E X
2
3 PLAINTIFF'S WITNESSES PAGE VOL.
4 ASHER, JAMES
DIRECT EXAMINATION (RESUMED) BY MR. ALIOTO 830 5
5 CROSS-EXAMINATION BY MR. HALLING 929 5
REDIRECT EXAMINATION BY MR. ALIOTO 975 5
6
OSBORN, THAMAS
7 DIRECT EXAMINATION BY MR. SHULMAN 1005 5
CROSS-EXAMINATION BY MR. ROSCH 1031 5
8 CROSS-EXAMINATION BY MR. HOCKETT 1040 5
REDIRECT EXAMINATION BY MR. SHULMAN 1053 5
9
INGRAM, LAWRENCE L.
10 DIRECT EXAMINATION BY MR. SHULMAN 1057 5
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
828
1 I N D E X
3 E X H I B I T S
4
PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
5
89 911 5
6 165 1020 5
7 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
8 H-1181 948 5
H-1182 965 5
9 H-940 970 5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
829
1 FRIDAY - MAY 5, 2000 8:40 A.M.
2
3 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY
4 VERSUS THE HEARST CORPORATION, ET AL., FOR CONTINUED TRIAL.
5 COUNSEL, YOUR APPEARANCES FOR THE RECORD, PLEASE.
6 MR. ALIOTO: JOSEPH M. ALIOTO FOR THE PLAINTIFF.
7 THE COURT: VERY WELL. GOOD MORNING.
8 MR. HALLING: GARY HALLING FOR THE HEARST
9 CORPORATION.
10 MR. ROSCH: TOM ROSCH FOR THE CHRONICLE PUBLISHING
11 COMPANY.
12 MR. HOCKETT: CHRISTOPHER HOCKETT FOR INTERVENOR
13 EXIN LLC.
14 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
15 MR. ASHER IS COMING TO THE WITNESS STAND TO CONTINUE HIS
16 TESTIMONY.
17 JAMES ASHER,
18 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN PREVIOUSLY
19 DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:
20 THE COURT: YOU UNDERSTAND, MR. ASHER, THAT THE OATH
21 YOU TOOK YESTERDAY APPLIES TO THIS TESTIMONY AS WELL?
22 THE WITNESS: YES, I DO.
23 THE COURT: MR. ALIOTO, YOU MAY PROCEED.
24 MR. ALIOTO: THANK YOU, YOUR HONOR.
25 MAY IT PLEASE THE COURT, IF I MAY APPROACH THE WITNESS, YOUR
830
ASHER - DIRECT / ALIOTO
1 HONOR.
2 THE COURT: YES.
3 DIRECT EXAMINATION (RESUMED)
4 BY MR. ALIOTO:
5 Q. LET ME HAND YOU A COPY OF YOUR AFFIDAVIT, WHICH IS EXHIBIT
6 51, THAT YOU IDENTIFIED YESTERDAY. AND SPECIFICALLY I WANT TO
7 DIRECT YOUR ATTENTION TO PAGE 1, PARAGRAPH 3, AGAIN, AND
8 THERE'S A CERTAIN PORTION GOING DOWN TO LINE 24. NOW, THAT
9 SENTENCE STATES, QUOTE:
10 "THE COSTS TO PUBLISH THE EXAMINER CURRENTLY
11 EXCEED THE REVENUES IT CONTRIBUTES TO THE JOA BY
12 MILLIONS OF DOLLARS ANNUALLY."
13 DO YOU SEE THAT?
14 A. YES, I DO.
15 Q. AND YOU MADE THAT STATEMENT UNDER OATH; CORRECT?
16 A. YES, I DID.
17 Q. NOW, JUST SO THAT WE'RE CLEAR ABOUT THAT --
18 MR. ALIOTO: IF I MAY USE THE EASEL, YOUR HONOR.
19 THE COURT: YOU MAY.
20 MR. ALIOTO: OKAY.
21 Q. PUTTING ON THE TOP THE -- NOT WITH THIS -- PUTTING ON THE
22 TOP "EXAMINER," OF THE EASEL, ON ONE SIDE AND THEN "CHRON" OR
23 "CHRONICLE" ON THE OTHER SIDE. THEIR INCOME COMES FROM
24 ADVERTISING AND CIRCULATION. THAT PART IS CORRECT; RIGHT?
25 A. YES.
831
ASHER - DIRECT / ALIOTO
1 Q. AND THAT ADVERTISING AND CIRCULATION GOES INTO THE SAN
2 FRANCISCO NEWSPAPER AGENCY; CORRECT?
3 A. YES.
4 Q. AND THEN THE SAN FRANCISCO NEWSPAPER AGENCY DEDUCTS FROM
5 THAT THE COSTS FOR GENERATING THAT ADVERTISING AND CIRCULATION
6 AND THEN GIVES THE SO-CALLED EXCESS TO BOTH THE EXAMINER AND
7 THE CHRONICLE; CORRECT?
8 A. THAT'S CORRECT.
9 Q. AND IT'S AT THAT TIME THAT THEY DO -- THEY DEDUCT THEIR
10 COSTS FOR EDITORIAL AND OTHER COSTS, AND THEN WHATEVER IS LEFT
11 OVER IS PROFIT; IS THAT RIGHT?
12 A. THAT'S CORRECT.
13 Q. OKAY. NOW, THIS ADVERTISING, EITHER FROM THE EXAMINER OR
14 FROM THE CHRONICLE, APPROXIMATELY 99 PERCENT OF THAT IS JOINT
15 ADVERTISING; ISN'T THAT RIGHT?
16 A. THAT IS CORRECT.
17 Q. SO WHEN IT'S JOINT ADVERTISING, IT MEANS THAT IT'S BEING
18 ADVERTISED OR THE ADVERTISERS ARE PAYING FOR BOTH; IS THAT
19 RIGHT?
20 A. THAT IS CORRECT.
21 Q. ALL RIGHT. WHEN THAT IS PUT INTO THE JOA, ISN'T IT
22 CORRECT THAT THERE IS NO WAY THAT YOU CAN DETERMINE HOW MUCH OF
23 THAT, THAT IS PUT IN THE JOA, IS THE EXAMINER'S?
24 A. I THINK THERE ARE A NUMBER OF WAYS THAT YOU COULD
25 APPROXIMATE WHAT REVENUE WOULD BE ATTRIBUTABLE -- THE
832
ASHER - DIRECT / ALIOTO
1 CONTRIBUTION OF REVENUE FROM THE TWO PAPERS TO THAT AGGREGATE
2 JOINT RATE.
3 Q. OKAY. I'LL GET TO THAT IN ONE MINUTE.
4 NOW, IN ADDITION TO THE ADVERTISING, GENERAL
5 ADVERTISING, YOU HEARD THE TESTIMONY BY MR. SIAS THAT
6 APPROXIMATELY 40 PERCENT OF THE ADVERTISING INCOME PER WEEK IS
7 FROM THE SUNDAY PAPER; RIGHT?
8 A. THAT IS RIGHT.
9 Q. AND THAT'S GENERALLY THE EXAMINER; ISN'T IT?
10 A. NO.
11 Q. OKAY. IT'S BOTH; CORRECT?
12 A. THE SUNDAY PAPER IS A JOINT PAPER.
13 Q. OKAY. NOW, I WANTED TO READ A QUESTION AND AN ANSWER THAT
14 WAS GIVEN BY MR. WHITE IN HIS DEPOSITION TO YOU.
15 MR. ALIOTO: YOUR HONOR, I BELIEVE THE COPY OF MR.
16 WHITE'S DEPOSITION IS BEFORE THE COURT, THE ORIGINAL.
17 THE COURT: THIS IS HIS --
18 MR. ALIOTO: DEPOSITION.
19 THE COURT: -- DEPOSITION IN THIS CASE?
20 MR. ALIOTO: YES, YOUR HONOR.
21 THE COURT: RATHER THAN THE DEPOSITION BEFORE THE
22 DEPARTMENT OF JUSTICE?
23 MR. ALIOTO: YES, SIR. MORE ACCURATELY, IF IT
24 PLEASE THE COURT, THIS IS THE DEPOSITION OF TIMOTHY O. WHITE
25 TAKEN ON MONDAY, APRIL 24, 2000.
833
ASHER - DIRECT / ALIOTO
1 THE COURT: YES, SIR.
2 BY MR. ALIOTO:
3 Q. AND AT PAGE 99 --
4 MR. HALLING: WHAT ARE YOU PLANNING TO READ?
5 MR. ALIOTO: FROM MR. WHITE'S DEPOSITION.
6 MR. HALLING: WHAT PAGE AND LINE?
7 MR. ALIOTO: I WAS ABOUT TO SAY IT.
8 I'LL GIVE A COPY TO THE WITNESS, YOUR HONOR.
9 THE COURT: VERY WELL.
10 BY MR. ALIOTO:
11 Q. HERE'S A COPY OF MR. WHITE'S DEPOSITION. I DIRECT YOUR
12 ATTENTION TO PAGE 99. PAGE 99 OF MR. WHITE'S DEPOSITION HE
13 GAVE THIS ANSWER TO THIS QUESTION BEGINNING ON LINE 12,
14 QUESTION --
15 MR. HALLING: MR. ALIOTO, CAN YOU PLEASE TELL ME
16 WHAT LINES YOU INTEND TO READ?
17 MR. ALIOTO: I JUST SAID LINE 12.
18 MR. HALLING: WHERE DOES IT END?
19 MR. ALIOTO: OH. FROM LINE 12 TO LINE 17, OR ANY
20 FURTHER PART THAT YOU WOULD LIKE ME TO READ.
21 "Q. HOW MUCH OF THE REVENUE THAT YOU PUT
22 INTO THE POT," HERE (INDICATING), JOA, "HOW MUCH
23 OF THE REVENUE THAT YOU PUT INTO THE POT, THE
24 400 MILLION OR SO, HOW MUCH OF THAT WAS
25 ATTRIBUTABLE TO THE EXAMINER?
834
ASHER - DIRECT / ALIOTO
1 "THE WITNESS: THERE'S NO WAY TO TELL."
2 Q. DO YOU AGREE WITH THAT TESTIMONY FROM THE PUBLISHER --
3 MR. HALLING: THERE WAS AN OBJECTION TO THE QUESTION
4 IN THE TRANSCRIPT.
5 MR. ALIOTO: OKAY. OBJECTION BY MR. HALLING --
6 THE COURT: I THINK THE OBJECTION WOULD HAVE BEEN
7 OVERRULED, MR. HALLING.
8 MR. HALLING: THANK YOU.
9 BY MR. ALIOTO:
10 Q. OKAY. LET ME READ IT AGAIN SO YOU HAVE IT IN CONTEXT.
11 THIS IS FROM MR. WHITE, PUBLISHER OF THE EXAMINER:
12 "Q. OKAY. HOW MUCH OF THE REVENUE THAT YOU
13 PUT INTO THE POT, THE 400 MILLION OR SO, HOW
14 MUCH OF THAT WAS ATTRIBUTABLE TO THE EXAMINER?
15 "A. THERE'S NO WAY TO TELL."
16 DO YOU DISAGREE WITH THAT TESTIMONY BY THE PUBLISHER
17 OF THE EXAMINER?
18 A. YES, I DO, WITH ALL DUE RESPECT TO MR. --
19 Q. THANK YOU.
20 A. IF I COULD EXPLAIN.
21 MR. ALIOTO: I'D LIKE TO READ FROM MR. FALK'S
22 DEPOSITION. I'LL HAND TO THE COURT THE ORIGINAL, WHICH IS
23 UNDER SEAL. I ASK THAT THE SEAL BE BROKEN ON MR. FALK'S
24 DEPOSITION.
25 AND IF I MAY APPROACH THE WITNESS WITH A COPY OF
835
ASHER - DIRECT / ALIOTO
1 MR. FALK'S DEPOSITION.
2 THE COURT: WELL, YOU MAY. GO RIGHT AHEAD.
3 AS YOU DO THAT, LET'S SEE, MR. FALK IS?
4 MR. ALIOTO: LET ME IDENTIFY HIM, YOUR HONOR. HE
5 IS --
6 THE WITNESS: MR. FALK IS THE PRESIDENT OF THE SAN
7 FRANCISCO NEWSPAPER --
8 MR. ALIOTO: -- IS THE PRESIDENT AND THE CHIEF
9 EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY.
10 THE COURT: NOW, THE AGENCY IS NOT A PARTY TO THE
11 LAWSUIT.
12 MR. ALIOTO: THE AGENCY IS NOT A PARTY TO THE
13 LAWSUIT, BUT IN THIS CASE BOTH THE PARTIES WHO ARE THE
14 DEFENDANTS OWN THE SAN FRANCISCO NEWSPAPER AGENCY, AND THE SAN
15 FRANCISCO NEWSPAPER AGENCY IS THE COMPANY THAT DOES THE
16 FUNCTIONS OF WHAT ANOTHER COMPANY WOULD ORDINARILY DO ITSELF;
17 BUT BECAUSE OF THE JOA, THIS IS THE COMPANY THAT DOES IT.
18 THE COURT: DOES THAT FACT BRING MR. FALK WITHIN THE
19 AMBIT OF RULE 32?
20 MR. ALIOTO: I BELIEVE THAT IT DOES, YOUR HONOR.
21 MR. HALLING: YOUR HONOR, IT'S A SEPARATE
22 CORPORATION. IT'S A SEPARATE PERSON. THE SAN FRANCISCO
23 NEWSPAPER PRINTING COMPANY, INCORPORATED, BOTH PARTIES OWN
24 50 PERCENT OF THE STOCK, BUT SFNA HAS NOT BEEN MADE A PARTY
25 HERE.
836
ASHER - DIRECT / ALIOTO
1 THE COURT: WELL, WE PROBABLY DON'T HAVE TO ANSWER
2 THE QUESTION. MR. ALIOTO MAY PROPERLY, IT SEEMS TO ME, READ
3 WHATEVER STATEMENT MR. FALK MADE IN HIS DEPOSITION AND CAN ASK
4 THE WITNESS WHETHER OR NOT THE WITNESS AGREES OR DISAGREES WITH
5 THE STATEMENT. THAT WOULD SEEM TO ME TO BE AN APPROPRIATE WAY
6 TO PROCEED.
7 MR. ALIOTO: VERY GOOD. THANK YOU, YOUR HONOR.
8 Q. I WOULD BE READING FROM THE DEPOSITION OF MR. FALK.
9 THE COURT: THE TESTIMONY OF MR. FALK, HOWEVER, MAY
10 NOT BE CHARGEABLE AGAINST THE PARTIES HERE.
11 MR. ALIOTO: I WOULD READ FROM THE TESTIMONY GIVEN
12 BY MR. STEVEN B. FALK ON FRIDAY, APRIL 28, 2000. MR. FALK
13 IDENTIFIES HIMSELF AT PAGE 6 OF HIS DEPOSITION AS THE PRESIDENT
14 AND THE CHIEF EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER
15 AGENCY.
16 Q. I DIRECT YOUR ATTENTION, SIR, TO PAGE 26 OF MR. FALK'S
17 DEPOSITION AND IN PARTICULAR THE QUESTION --
18 A. EXCUSE ME. SORRY. WHAT PAGE WAS THAT?
19 Q. 26. AND IN PARTICULAR THE QUESTION BEGINNING ON PAGE 2 --
20 ON PAGE 26, LINE 2, TO THE ANSWER ON PAGE -- ON LINE 4 WHICH
21 READS AS FOLLOWS, QUOTE:
22 "Q. ARE YOU ABLE TO SAY HOW MUCH OF THE
23 REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED
24 TO ANOTHER?
25 "A. NO."
837
ASHER - DIRECT / ALIOTO
1 DO YOU --
2 MR. HALLING: CAN YOU READ THE NEXT QUESTION AND
3 ANSWER?
4 MR. ALIOTO: I CAN READ THE NEXT ONE AS WELL.
5 "Q. ARE YOU ABLE TO SAY HOW MUCH IS
6 ATTRIBUTABLE TO THE EXPENSES, HOW MUCH OF THE
7 EXPENSES ARE ATTRIBUTABLE, HOW MUCH OF THE
8 EXPENSES IS ATTRIBUTABLE TO ONE PAPER AS
9 DISTINGUISHED FROM ANOTHER?
10 "A. IT'S DIFFICULT TO DO."
11 Q. NOW, WITH REGARD TO HIS TESTIMONY ABOUT THE REVENUE, WHICH
12 IS IN YOUR AFFIDAVIT WHERE HE SAYS, "ARE YOU ABLE TO SAY HOW
13 MUCH OF THE REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO
14 ANOTHER," ANSWER, "NO," DO YOU DISAGREE WITH THAT TESTIMONY?
15 A. I AGREE THAT IT IS DIFFICULT TO PRECISELY QUANTIFY THE
16 REVENUE AND EXPENSES THAT ARE ALLOCABLE TO THE TWO NEWSPAPERS.
17 I DO BELIEVE, HOWEVER, THAT IT IS POSSIBLE TO REALISTICALLY
18 ASSESS THE MAXIMUM REVENUE THAT COULD BE ATTRIBUTABLE TO THE
19 EXAMINER; AND FOR PURPOSES, THEN, OF DECIDING WHETHER REVENUES
20 OF THE EXAMINER EXCEED ITS EXPENSES INSIDE THE JOA, ONCE YOU
21 KNOW THE MAXIMUM REVENUE, IT'S POSSIBLE TO PROCEED WITH A
22 CALCULATION.
23 MR. ALIOTO: I MOVE TO STRIKE THE WITNESS'
24 TESTIMONY, YOUR HONOR, AS BEING NONRESPONSIVE TO THE QUESTION
25 WHICH IS WHETHER OR NOT HE DISAGREES WITH THE TESTIMONY OF
838
ASHER - DIRECT / ALIOTO
1 MR. FALK, THE CHIEF EXECUTIVE OFFICER AND PRESIDENT OF SAN
2 FRANCISCO NEWSPAPER AGENCY, THAT WITH REGARD TO REVENUES,
3 QUOTE, "ARE YOU ABLE TO SAY HOW MUCH OF THE REVENUE IS
4 ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO ANOTHER," ANSWER, "NO,"
5 HE WOULD EITHER AGREE WITH THAT OR DISAGREE WITH IT, YOUR
6 HONOR.
7 THE COURT: WELL, TECHNICALLY YOU'RE CORRECT. THE
8 ANSWER WAS NOT RESPONSIVE. THE WITNESS PROVIDED THE
9 EXPLANATION FIRST. NOW LET'S GET THE ANSWER TO THE QUESTION.
10 THE WITNESS: I DISAGREE.
11 THE COURT: THE MOTION TO STRIKE WILL BE DENIED.
12 MR. ALIOTO: NOW I WOULD LIKE TO READ FROM THE
13 DEPOSITION OF MR. SIAS. MR. SIAS HAS BEEN IDENTIFIED AND
14 ALREADY TESTIFIED AS THE CHAIRMAN OF THE BOARD, THE CHIEF
15 EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE.
16 MAY I APPROACH THE WITNESS WITH MR. SIAS'
17 DEPOSITION, YOUR HONOR?
18 THE COURT: YES, YOU MAY.
19 BY MR. ALIOTO:
20 Q. LET ME SHOW YOU A COPY OF THE DEPOSITION OF MR. SIAS WHICH
21 WAS TAKEN ON FRIDAY, APRIL 21, 2000. I RESPECTFULLY DIRECT
22 YOUR ATTENTION TO PAGE 56 AND IN PARTICULAR THE QUESTION THAT
23 BEGINS ON LINE 19 AND GOES TO 22.
24 MR. HALLING: MR. ALIOTO, DO YOU HAVE ANOTHER COPY?
25 I GOT IT. THANK YOU.
839
ASHER - DIRECT / ALIOTO
1 WHAT PAGE?
2 MR. ALIOTO: PAGE 56 BEGINNING LINE 19 TO 22:
3 "Q. THE REVENUE THAT COMES INTO THE SAN
4 FRANCISCO NEWSPAPER AGENCY, DO YOU KNOW WHAT
5 PORTION IS ATTRIBUTABLE JUST TO THE EXAMINER?
6 "A. NO."
7 DO YOU DISAGREE WITH THE TESTIMONY OF MR. SIAS?
8 A. I WOULD HAVE NO BASIS FOR AGREEING OR DISAGREEING BECAUSE
9 THIS QUESTION AND ANSWER RELATES TO HIS STATE OF MIND AND
10 KNOWLEDGE, HIS PERSONAL STATE OF MIND AND KNOWLEDGE.
11 Q. OKAY. ISN'T IT ALSO CORRECT, SIR -- YESTERDAY YOU
12 IDENTIFIED A SO-CALLED INCREMENTAL COST STUDY. DO YOU REMEMBER
13 THAT?
14 A. YES, I DID.
15 Q. AND I BELIEVE THAT YOU SAID THAT ONE OF THE BASES FOR YOUR
16 STATEMENT IN YOUR AFFIDAVIT TO THIS COURT WITH REGARD TO THE
17 REVENUES THAT IS CONTRIBUTED TO THE JOA BY THE EXAMINER, THAT
18 YOU RELIED UPON THE SO-CALLED INCREMENTAL COST STUDY; IS THAT
19 RIGHT?
20 A. YES.
21 Q. NOW, IT'S TRUE, ISN'T IT, AND IT IS -- IT IS A FACT, IS IT
22 NOT, THAT THAT INCREMENTAL COST STUDY DOESN'T REALLY ALLOCATE
23 REVENUES TO EITHER PARTY? THAT'S THE MORE ACCURATE STATEMENT;
24 ISN'T THAT CORRECT?
25 A. THAT IS CORRECT. THE INCREMENTAL STUDY ASKS THE QUESTION:
840
ASHER - DIRECT / ALIOTO
1 WOULD THE JOA BE BETTER OFF IF THE EXAMINER WERE CLOSED THAN BY
2 CONTINUING ITS PUBLICATION?
3 Q. OKAY. SO THE STUDY THAT YOU RELIED ON YESTERDAY, YOU KNOW
4 THAT YOU TESTIFIED IN YOUR DEPOSITION THAT THAT STUDY DOESN'T
5 REALLY ALLOCATE REVENUES, THAT MEANS COMING INTO THE JOA, IT
6 DOES NOT ALLOCATE REVENUES TO EITHER PAPER; CORRECT?
7 A. THAT IS CORRECT.
8 Q. OKAY.
9 THE COURT: LET'S SEE, WHAT EXHIBIT NUMBER IS THIS?
10 MR. ALIOTO: THIS IS FROM THE DEPOSITION THAT I AM
11 READING, YOUR HONOR.
12 THE COURT: BUT IS THAT STUDY IN EVIDENCE?
13 MR. ALIOTO: I DON'T KNOW IF IT IS OR NOT, YOUR
14 HONOR.
15 MR. HALLING: YES, IT IS, YOUR HONOR.
16 MR. SHULMAN: YES, IT IS.
17 THE COURT: WHAT EXHIBIT NUMBER IS THAT?
18 MR. HALLING: 903 I'M TOLD.
19 THE COURT: THANK YOU.
20 BY MR. ALIOTO:
21 Q. SO THE TESTIMONY THAT YOU GAVE YESTERDAY TO JUSTIFY YOUR
22 STATEMENT IN THE -- AS JUSTIFICATION FOR THE STATEMENT IN YOUR
23 AFFIDAVIT WITH REGARD TO THE INCREMENTAL STUDY, THE FACT OF THE
24 MATTER IS THAT THAT STUDY DOES NOT ALLOCATE REVENUES TO EITHER
25 THE EXAMINER OR THE CHRONICLE, THAT PART IS TRUE; IS THAT NOT
841
ASHER - DIRECT / ALIOTO
1 RIGHT?
2 A. AS I HAVE SAID, THAT STUDY DOES NOT ALLOCATE REVENUES.
3 WHAT IT DOES IS DO AN ECONOMIC ANALYSIS TO ANALYZE WHETHER THE
4 JOA WOULD BE BETTER OFF BY CLOSING THE EXAMINER RATHER THAN
5 CONTINUING IT, WHICH IS A DIFFERENT WAY OF ASKING THE QUESTION:
6 DOES THE REVENUES CONTRIBUTION TO THE JOA EXCEED ITS COSTS TO
7 THE JOA?
8 Q. OKAY. NOW, IN ORDER TO MAKE YOUR STATEMENT IN YOUR
9 AFFIDAVIT, WHICH WE HAVE UP HERE ON THE SCREEN, IT STATED,
10 QUOTE, "THE COSTS TO PUBLISH THE EXAMINER CURRENTLY EXCEED THE
11 REVENUES IT CONTRIBUTES TO THE JOA BY MILLIONS OF DOLLARS
12 ANNUALLY," THE ONLY WAY YOU COULD KNOW THAT IS TO KNOW THE
13 REVENUES THAT THE EXAMINER CONTRIBUTES TO THE JOA; CORRECT?
14 A. THAT IS NOT CORRECT.
15 Q. EVEN THOUGH IT SAYS, "CURRENTLY EXCEED THE REVENUES IT
16 CONTRIBUTES TO THE JOA"? EVEN THOUGH THAT'S WHAT YOU SAID TO
17 THIS COURT, YOU'RE SAYING NOW THAT THAT IS NOT WHAT YOU MEANT?
18 A. I MEANT EXACTLY WHAT THIS DECLARATION SAYS.
19 Q. DO YOU STICK WITH YOUR STATEMENT THAT YOU GAVE UNDER OATH
20 TO THIS COURT THAT THE COSTS TO PUBLISH THE EXAMINER CURRENTLY
21 EXCEED THE REVENUES IT CONTRIBUTES TO THE JOA BY MILLIONS OF
22 DOLLARS ANNUALLY?
23 A. I ABSOLUTELY STICK TO IT.
24 Q. NOW, IT'S TRUE, IS IT NOT, THAT WITH REGARD TO THE COSTS
25 ALSO FROM THE SAN FRANCISCO NEWSPAPER AGENCY, THAT YOU CAN'T
842
ASHER - DIRECT / ALIOTO
1 DETERMINE THOSE EITHER?
2 A. I DO NOT AGREE WITH THAT STATEMENT.
3 Q. NOW, THIS ANALYSIS THAT YOU MADE THAT YOU SAY THAT YOU
4 RELIED ON FOR THIS STATEMENT -- FIRST OF ALL, YOU ACKNOWLEDGE,
5 DO YOU NOT, THAT YOUR TESTIMONY WITH REGARD TO THE ABILITY TO
6 DETERMINE THE REVENUES THAT THE EXAMINER CONTRIBUTES TO THE JOA
7 IS CONTRARY TO THE TESTIMONY OF MR. WHITE AND MR. FALK --
8 A. I DON'T --
9 Q. -- AND MR. SIAS?
10 A. I DON'T BELIEVE IT'S CONTRARY. I WOULD AGREE THAT IT IS
11 NOT POSSIBLE TO PRECISELY QUANTIFY THE REVENUE AND THE EXPENSES
12 THAT ARE EITHER ALLOCABLE OR ATTRIBUTABLE FROM AN ACCOUNTING
13 PERSPECTIVE OR ON THE BASIS OF AN INCREMENTAL COST STUDY. BUT
14 I DO BELIEVE, I DO BELIEVE THAT IT IS POSSIBLE TO APPROXIMATE
15 THOSE REVENUES AND EXPENSES WITH SUFFICIENT PRECISION TO BE
16 ABLE TO -- TO ENABLE ME TO MAKE THE STATEMENT THAT I MADE IN MY
17 DECLARATION.
18 AND, THEREFORE, I BELIEVE THAT THE QUESTIONS THAT
19 HAVE BEEN ASKED TO THE PREVIOUS WITNESSES THAT YOU REFERRED TO
20 COULD BE READ AS ASKING DO THEY KNOW DOWN TO THE DOLLAR.
21 MR. ALIOTO: YOUR HONOR, I OBJECT TO THIS AND MOVE
22 TO STRIKE THAT AS NOT BEING RESPONSIVE TO THE ANSWER -- TO THE
23 QUESTION.
24 THE COURT: WELL, HAVE YOU FINISHED YOUR ANSWER,
25 MR. ASHER?
843
ASHER - DIRECT / ALIOTO
1 THE WITNESS: I COULD CONTINUE, BUT PERHAPS I SHOULD
2 STOP.
3 THE COURT: WELL, THAT'S UP TO YOU, SIR.
4 THE WITNESS: I WAS GOING TO SAY, THEN, TO FINISH
5 IT, THAT AT LEAST I READ THE QUESTIONS THAT YOU REFERRED TO, OR
6 A FAIR READING OF THEM COULD BE DID THEY KNOW WITH PRECISION
7 THE AMOUNT OF REVENUES AND EXPENSES; AND I WOULD AGREE THAT
8 WITH PRECISION, THEY DID NOT KNOW THEM.
9 YOU DID NOT ASK THEM, I BELIEVE, ANY OF THEM: WAS
10 IT POSSIBLE TO COME TO A CONCLUSION WHETHER OR NOT THE REVENUES
11 OF THE EXAMINER EXCEED OR DON'T EXCEED ITS COSTS? SO I BELIEVE
12 MY TESTIMONY IS COMPLETELY CONSISTENT WITH THE OTHER TESTIMONY
13 THAT YOU HAVE REFERRED TO.
14 THE COURT: ALL RIGHT. NOW I THINK YOU'VE ANSWERED
15 THE QUESTION.
16 THE WITNESS: YES, I HAVE.
17 THE COURT: ALL RIGHT. LET'S MOVE ON.
18 BY MR. ALIOTO:
19 Q. IS IT ALSO NOT CORRECT THAT THE SO-CALLED STUDY THAT YOU
20 SAID THAT YOU RELIED ON FOR THIS STATEMENT THAT YOU MADE IN
21 YOUR AFFIDAVIT, IS IT NOT ALSO CORRECT THAT THAT PARTICULAR
22 STUDY WAS MADE AFTER THE AGREEMENT BETWEEN THE CHRONICLE AND
23 THE EXAMINER -- AND HEARST?
24 A. YES, I BELIEVE IT WAS.
25 Q. AND IT WAS MADE AFTER FOR THE PURPOSE OF GIVING IT TO THE
844
ASHER - DIRECT / ALIOTO
1 DEPARTMENT OF JUSTICE TO ATTEMPT TO JUSTIFY THE SHUTTING DOWN
2 OF THE EXAMINER; ISN'T THAT RIGHT?
3 A. IT WAS ACTUALLY MADE IN --
4 Q. IS THAT RIGHT?
5 A. IT IS NOT CORRECT.
6 Q. OKAY.
7 A. IT WAS MADE IN RESPONSE TO THE FOOTNOTE BY THE DEPARTMENT
8 OF JUSTICE IN THE HAWAII CASE IN WHICH THEY STATED THAT THE
9 CLOSING OF THE NEWSPAPER INSIDE THE JOA WHOSE INCREMENTAL COSTS
10 EXCEED ITS INCREMENTAL REVENUES WOULD RAISE NO ANTITRUST
11 ISSUES.
12 SO IN RESPONSE TO THAT MOST RECENT STATEMENT OF THE
13 POSITION OF THE DEPARTMENT OF JUSTICE, IT STRUCK US THAT IT
14 WOULD BE QUITE RESPONSIVE IN THE CONTEXT OF ANSWERING THE
15 SECOND REQUEST TO DO THAT ANALYSIS.
16 Q. OKAY. NOW, WHAT THE JUSTIFICATION OR ATTEMPTED
17 JUSTIFICATION WAS FOR SUBMITTING THOSE DOCUMENTS TO THE
18 DEPARTMENT OF JUSTICE WAS WHETHER OR NOT IT WOULD BE -- YOU
19 WOULD BE REQUIRED TO TRY TO SELL THE PAPER; IS THAT RIGHT?
20 A. YES.
21 Q. AND WHEN YOU SUBMITTED IT, YOU WANTED TO SUBMIT IT -- OR
22 IT WAS SUBMITTED TO THE DEPARTMENT OF JUSTICE ON THE HOPE THAT
23 YOU WOULDN'T EVEN HAVE TO TRY TO SELL THE PAPER; IS THAT RIGHT?
24 A. I BELIEVE I'VE ANSWERED WHY WE PREPARED IT AND SUBMITTED
25 IT.
845
ASHER - DIRECT / ALIOTO
1 Q. AND, AS A MATTER OF FACT, THE DEPARTMENT OF JUSTICE SAYS
2 YOU HAVE TO AT LEAST SELL THE PAPER; ISN'T THAT RIGHT?
3 A. THAT IS NOT CORRECT. THE JUSTICE DEPARTMENT, THEY'VE MADE
4 NO FINAL DETERMINATION OTHER THAN THE PRESS RELEASE THAT WAS
5 ISSUED APPROVING THIS TRANSACTION.
6 Q. IN ANY EVENT, THEY REJECTED THE COST STUDIES THAT YOU SENT
7 THEM FOR THE PURPOSE FOR WHICH YOU SENT THEM; ISN'T THAT TRUE?
8 A. THEY DID NOT.
9 Q. YESTERDAY WE WERE TALKING ABOUT EXHIBIT 35. EXHIBIT 35 IS
10 THE ASSETS PURCHASE AGREEMENT BETWEEN THE HEARST CORPORATION
11 AND THE EXIN LLC OR THE FANG FAMILY. LET ME --
12 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
13 HONOR.
14 THE COURT: YES, YOU MAY.
15 BY MR. ALIOTO:
16 Q. THIS IS, IN FACT, EXHIBIT 35 THAT I GAVE YOU YESTERDAY AND
17 IT IS THE AGREEMENT DATED MARCH 16, 2000. AND THIS IS THE
18 AGREEMENT BETWEEN YOURSELF AND -- "YOURSELF" MEANING HEARST
19 CORPORATION -- AND EXIN LLC; IS THAT RIGHT?
20 A. (WITNESS EXAMINES DOCUMENT.) YES.
21 Q. OKAY. THERE WAS JUST ONE -- TWO PARTS THAT I WANT TO
22 DIRECT YOUR ATTENTION TO. FIRST, IF YOU WILL GO TO PAGE 5 AND
23 WE WERE SPEAKING YESTERDAY OF ITEM NUMBER 1.4 UNDER
24 "CONSIDERATION."
25 MR. ALIOTO: AND IF I MAY APPROACH THE EASEL, YOUR
846
ASHER - DIRECT / ALIOTO
1 HONOR.
2 THE COURT: YES, YOU MAY.
3 BY MR. ALIOTO:
4 Q. YESTERDAY WE HAD THE -- WE WERE GOING OVER THE SUBSIDIES
5 AND WE DIDN'T DO THE FIRST YEAR. NOW, IN THE FIRST YEAR
6 INSTEAD OF A SUBSIDY OF $25 MILLION -- UP TO $25 MILLION, THE
7 SUBSIDY WAS UP TO $16 MILLION; CORRECT?
8 A. THAT WAS THE CASH SUBSIDY IN THE FIRST YEAR, YES.
9 Q. OKAY. AND THE REASON FOR THAT IS THAT THE FIRST FOUR
10 MONTHS WERE SUPPOSED TO BE OPERATED UNDER THE JOA; IS THAT
11 RIGHT?
12 A. NO.
13 Q. IT WAS OPERATED UNDER -- IT WOULD STILL BE OPERATED BY
14 HEARST?
15 A. IN ADDITION TO THE ASSET PURCHASE AGREEMENT, THERE WAS A
16 TRANSITION SERVICES AGREEMENT UNDER WHICH HEARST AGREED TO
17 ABSORB ALL OF THE COSTS OF -- AND EXPENSES TO PUBLISH THE
18 EXAMINER IN SUBSTANTIALLY THE SAME MANNER AS IT IS CURRENTLY
19 BEING PRODUCED AND TO RETAIN ALL REVENUE THAT WAS GENERATED.
20 Q. FOR FOUR MONTHS?
21 A. FOR FOUR MONTHS.
22 Q. FOR FOUR MONTHS. SO THAT'S WHY THE 16 IS LESS THAN THE
23 25 MILLION IN THE SECOND AND THIRD YEAR?
24 A. THAT'S A PRORATED AMOUNT OF THE ANNUAL AMOUNT OF
25 25 MILLION.
847
ASHER - DIRECT / ALIOTO
1 Q. OKAY. NOW, THE PRORATED AMOUNT OF THE AMOUNT THAT MUST BE
2 SPENT ON THE PAPER FOR REIMBURSEMENT THAT THEY WOULD HAVE TO DO
3 IN THE FIRST YEAR WOULD BE $10 MILLION; IS THAT RIGHT?
4 A. (WITNESS EXAMINES DOCUMENT.) YES.
5 Q. IF YOU'LL LOOK AT PAGE 6. THANK YOU.
6 ALL RIGHT. SO THAT THE REMAINDER, IF THEY JUST
7 SPENT $10 MILLION ON THE FIRST YEAR, THEN THE REMAINDER THAT
8 WOULD -- THAT THEY COULD GO UP TO IS $6 MILLION NOT SPENT;
9 CORRECT?
10 A. (WITNESS EXAMINES DOCUMENT.) WELL, THAT IS --
11 Q. CORRECT?
12 A. THAT IS CORRECT, YES.
13 Q. AND THAT $6 MILLION, IF THEY ONLY SPENT UP TO -- IF THEY
14 ONLY SPENT THE $10 MILLION IN THAT YEAR, THAT $6 MILLION, THEY
15 WOULD GET HALF OF IT, WHICH IS $3 MILLION; IS THAT RIGHT?
16 A. THAT IS CORRECT.
17 Q. SO EVEN IN THE FIRST YEAR THEY COULD GET $3 MILLION CASH
18 WITHOUT ANY STRINGS WHATSOEVER IF THEY SPENT JUST $10 MILLION;
19 IS THAT RIGHT?
20 A. THAT IS CORRECT.
21 Q. NOW, ALSO DID YOU EVER COMPARE THESE NUMBERS, THE
22 $3 MILLION IN THE FIRST YEAR, THE 10 MILLION IN THE SECOND YEAR
23 POTENTIAL AND THE THIRD YEAR $10 MILLION POTENTIAL -- I MEAN,
24 5 MILLION IN THE SECOND YEAR AND 5 MILLION IN THE THIRD YEAR,
25 DID YOU EVER ANALYZE THOSE IN TERMS OF WHAT THE PAN ASIAN GROUP
848
ASHER - DIRECT / ALIOTO
1 WAS ACTUALLY MAKING IN YEARS BEFORE THAT?
2 A. I HAVE NO KNOWLEDGE OF THEIR PROFITS.
3 Q. SO YOU DON'T KNOW WHETHER OR NOT, FOR EXAMPLE, IN THIS
4 FIRST YEAR THIS $3 MILLION IS THREE TIMES AS MUCH AS THEY'VE
5 EVER MADE IN ONE YEAR?
6 A. I'VE SAID I HAVE NO KNOWLEDGE OF THEIR PROFITS.
7 Q. AND YOU KNEW WHEN YOU DID THIS DEAL THAT THIS WAS AN
8 ENTICEMENT TO THESE PEOPLE --
9 A. NO --
10 Q. -- NOT TO SPEND FULL AMOUNT OF THIS MONEY ON THIS PAPER
11 BUT INSTEAD TO TAKE THE CASH; ISN'T THAT RIGHT?
12 A. THAT IS NOT RIGHT. ACTUALLY THE REASON FOR THIS ENTIRE
13 CONCEPT WAS TO MAKE SURE FROM OUR PERSPECTIVE THAT OUR SUBSIDY
14 WAS BEING SPENT EFFICIENTLY. AND IF I COULD EXPLAIN, YOU HAVE
15 NOT POINTED OUT THE OTHER INCENTIVE UNDER THIS AGREEMENT, WHICH
16 IS THAT THE FANG FAMILY OR THE PAN-ASIA AFFILIATE HERE RETAINS
17 ALL OF THE REVENUE, 100 PERCENT OF THE REVENUE GENERATED BY THE
18 EXAMINER DURING THIS ENTIRE SUBSIDY PERIOD. THAT IS QUITE
19 DIFFERENT FROM THE PROPOSAL, FOR EXAMPLE, THAT YOUR CLIENT
20 MADE.
21 SO UNDER THIS AGREEMENT, AS LONG AS THE EXPENDITURE
22 OF 1 DOLLAR GENERATES AS LITTLE AS 50 CENTS OF REVENUE, THE
23 INCENTIVE WILL BE TO SPEND THAT DOLLAR. SO I DO NOT AGREE AT
24 ALL WITH YOUR CHARACTERIZATION OF THE INCENTIVES UNDER THIS
25 AGREEMENT. YOU'VE ONLY TAKEN ONE PART OF IT. YOU HAVE NOT
849
ASHER - DIRECT / ALIOTO
1 TAKEN THE TOTALITY OF IT.
2 MR. ALIOTO: I MOVE TO STRIKE THE TESTIMONY, YOUR
3 HONOR, AFTER THE ANSWER WAS GIVEN AS BEING NONRESPONSIVE TO THE
4 QUESTION.
5 THE COURT: MOTION DENIED.
6 BY MR. ALIOTO:
7 Q. YOU ALSO POINT OUT HERE THAT THERE'S GOING TO BE A
8 2 MILLION-DOLLAR ADVANCE ON THE $16 MILLION; IS THAT RIGHT? OR
9 IS IT THE 2 MILLION ON -- STRIKE THAT.
10 YOU ALSO POINT OUT IN THE -- ON PAGE 5 THAT THERE
11 WILL BE A 2 MILLION-DOLLAR ADVANCE.
12 A. THAT IS CORRECT.
13 Q. AND THAT $2 MILLION WILL THEN BE DEDUCTED FROM THE THIRD
14 YEAR; CORRECT?
15 A. YES. IT WAS DESIGNED TO PROVIDE THE INITIAL WORKING
16 CAPITAL THAT WOULD BE REQUIRED TO CONTINUE THE OPERATIONS OF
17 THE PAPER.
18 Q. ALL RIGHT. AND THEN YOU ALSO STATED THAT WITH REGARD TO
19 THE COSTS THAT YOU WOULD -- THAT WOULD BE REIMBURSED, THAT
20 THOSE COSTS WOULD INCLUDE UP TO $500,000 PER YEAR IN THE
21 AGGREGATE FOR COMPENSATION AND PERQUISITES TO MR. TED FANG FOR
22 BONE FIDE SERVICES RENDERED TO THE EXAMINER AND FOR DIRECTORS'
23 FEES FOR OTHER FANG FAMILY MEMBERS AND REIMBURSABLE COSTS MAY
24 INCLUDE COMPENSATION, AND IT GOES ON.
25 A. I BELIEVE YOU HAVE MISREAD THE AGREEMENT. IT DOES NOT SAY
850
ASHER - DIRECT / ALIOTO
1 THAT THE COSTS WILL INCLUDE. IT SAYS THAT THE REIMBURSABLE
2 COSTS MAY NOT INCLUDE COMPENSATION OF THE SORT THAT YOU
3 DESCRIBED IN EXCESS OF THIS AMOUNT. SO IT IS A LIMITATION NOT
4 A REQUIREMENT TO SPEND IT.
5 Q. ACTUALLY I JUST READ IT, AND IT SAYS THE REIMBURSABLE
6 COSTS MAY INCLUDE -- EXCUSE ME --
7 A. THAT IS WHAT I SAID.
8 Q. EXCUSE ME A MINUTE.
9 MR. ALIOTO: AGAIN, I MOVE TO STRIKE THE LAST ANSWER
10 AS BEING NONRESPONSIVE TO THE QUESTION, YOUR HONOR.
11 THE COURT: WELL, YOU CAN CERTAINLY FOLLOWUP WITH A
12 FURTHER QUESTION.
13 MR. ALIOTO: OKAY.
14 THE COURT: I'M NOT SURE WE HAD A GOOD FIT WITH THE
15 ANSWER AND THE QUESTION, BUT --
16 MR. ALIOTO: VERY GOOD, YOUR HONOR.
17 THE COURT: -- YOU CAN PURSUE THE MATTER IF YOU
18 DESIRE TO.
19 MR. ALIOTO: OKAY.
20 Q. IT STATES, QUOTE:
21 "REIMBURSABLE COSTS MAY INCLUDE UP TO
22 $500,000," ET CETERA.
23 IS THAT RIGHT?
24 A. YES.
25 Q. OKAY. NOW, DO YOU KNOW WHAT THE -- DO YOU KNOW THAT THE
851
ASHER - DIRECT / ALIOTO
1 SALARY FOR THE PUBLISHER OF THE EXAMINER, MR. WHITE, WAS
2 APPROXIMATELY $300,000?
3 A. NO, I DON'T KNOW HIS EXACT SALARY.
4 Q. DO YOU KNOW THAT THE SALARY FOR THE PUBLISHER OR THE CHIEF
5 EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY IS
6 APPROXIMATELY $375,000?
7 A. I DON'T KNOW THEIR EXACT SALARIES. BUT YOU'RE SAYING
8 "SALARY." DOES THAT INCLUDE BONUS OR JUST THE ANNUAL SALARY?
9 Q. DO YOU KNOW EITHER ONE OF THEM?
10 A. NO, I DON'T.
11 Q. OKAY. YOU ALSO STATE HERE, ALSO ON PAGE 6, THAT YOU WOULD
12 BE REIMBURSING THE PAN ASIAN GROUP OF UP TO -- TO THEIR
13 ATTORNEYS OF UP TO $200,000 FOR THE NEGOTIATION OF THE DEAL,
14 AND THEN IT ALSO SAYS, QUOTE -- WELL, LET'S STOP WITH THE
15 200,000. UP TO THE $200,000 FOR JUST NEGOTIATING THIS
16 ARRANGEMENT; CORRECT?
17 A. I BELIEVE THE $200,000 REFERS TO BOTH ATTORNEYS AND THE
18 FIRM MENTIONED HERE IS AN ACCOUNTING FIRM. AND, AGAIN, WHAT
19 THIS SAYS IS THAT IF THE BUYER CHOOSES TO ASK THAT THESE -- UP
20 TO THIS AMOUNT BE INCLUDED IN THE REIMBURSABLE EXPENSES, WE
21 WILL DO SO.
22 Q. AND THEN ALSO IT GOES ON TO SAY, QUOTE:
23 "... AMOUNTS ACTUALLY PAID BY THE BUYER TO
24 DEFEND OR SETTLE ANY ACTION OR PROCEEDING
25 COMMENCED OR THREATENED BY ANY GOVERNMENTAL BODY
852
ASHER - DIRECT / ALIOTO
1 OR OTHER PERSON CHALLENGING THE TRANSACTIONS
2 CONTEMPLATED BY THIS AGREEMENT."
3 DO YOU SEE THAT?
4 A. YES, I DO.
5 Q. SO YOU'VE AGREED TO PAY FOR THE ATTORNEYS' FEES, IF THEY
6 ASK YOU TO, TO PAY FOR THE ATTORNEYS' FEES NOT ONLY TO DO THIS
7 TRANSACTION BUT ALSO THE ATTORNEYS' FEES THAT THEY WOULD EXPEND
8 IN DEFENDING THIS VERY CASE; IS THAT RIGHT?
9 A. THAT IS CORRECT.
10 Q. NOW I WOULD LIKE TO SHOW YOU WHAT IS IN EVIDENCE, I
11 BELIEVE, AS EXHIBIT 16.
12 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
13 THE COURT: YES.
14 BY MR. ALIOTO:
15 Q. EXHIBIT 16 IN EVIDENCE IS A DOCUMENT HEADNOTED, QUOTE,
16 "RESPONSE TO INTERROGATORY SPECIFICATIONS CONTAINED IN REQUESTS
17 FOR ADDITIONAL INFORMATION AND DOCUMENTARY MATERIAL ISSUED TO
18 THE HEARST CORPORATION ON OCTOBER 15, 1999," AND IT HAS ANSWERS
19 GIVEN BY THE HEARST CORPORATION.
20 I'D LIKE YOU TO LOOK AT THAT AND, FIRST OF ALL,
21 ADVISE US WHETHER OR NOT YOU'VE SEEN THAT DOCUMENT BEFORE.
22 A. (WITNESS EXAMINES DOCUMENT.) YES, I HAVE.
23 Q. DID YOU PARTICIPATE AT ALL IN THE PREPARATION OF THIS
24 DOCUMENT THAT WAS SUBMITTED TO THE GOVERNMENT?
25 A. YES, I DID.
853
ASHER - DIRECT / ALIOTO
1 Q. I'D LIKE TO DIRECT YOUR ATTENTION FIRST TO PAGE -- TO
2 SPECIFICATION NUMBER 13 ON PAGE 19, THE FIRST PARAGRAPH,
3 BEGINNING ON LINE 19 AND GOING TO LINE 23 READS AS FOLLOWS,
4 QUOTE:
5 "HEARST DOES NOT BELIEVE THAT ENTRY INTO THE
6 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE
7 RELEVANT AREA IN DIRECT COMPETITION WITH THE
8 COMBINED SAN FRANCISCO CHRONICLE AND EXAMINER
9 NEWSPAPERS (OR THE CHRONICLE ALONE) IS EITHER
10 ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS
11 BEHAVIOR," END OF QUOTE.
12 DO YOU SEE THAT?
13 A. YES, I DO.
14 Q. DO YOU AGREE WITH THAT STATEMENT?
15 A. YES, I DO.
16 Q. DID YOU AGREE WITH THAT STATEMENT AT THE TIME THAT YOU
17 WERE NEGOTIATING WITH THE FANG FAMILY?
18 A. YES, I -- YES, I DO OR DID.
19 Q. DID YOU ADVISE THE FANG FAMILY, MR. TED FANG OR ANYONE
20 ELSE IN THAT FAMILY, OF YOUR BELIEF THAT IT WAS NOT
21 ECONOMICALLY FEASIBLE TO GET INTO BUSINESS AGAINST THE
22 CHRONICLE? DID YOU ADVISE THEM OF THAT?
23 A. NO, I DID NOT.
24 Q. DID YOU ADVISE THE FANG FAMILY, OR MR. TED FANG OR ANYONE
25 IN THEIR FAMILY, OF THE HEARST BELIEF THAT IT WAS NOT RATIONAL
854
ASHER - DIRECT / ALIOTO
1 BUSINESS BEHAVIOR FOR THEM TO GET INTO THE BUSINESS AGAINST THE
2 CHRONICLE?
3 A. MR. ALIOTO, THAT IS NOT WHAT THIS SAYS.
4 Q. DID YOU ADVISE THEM OF THAT?
5 A. SO WE'RE NOT TALKING ABOUT THIS DOCUMENT ANYMORE?
6 Q. DID YOU ADVISE THEM OF THAT?
7 THE COURT: I THINK IT'S A FAIR QUESTION, MR. ASHER.
8 DID YOU ADVISE THE FANG FAMILY OF THE SUBSTANCE OF WHAT YOU
9 RESPONDED TO THE GOVERNMENT IN SPECIFICATION 13?
10 THE WITNESS: THE SUBSTANCE OF WHAT I RESPONDED TO
11 THE SPECIFICATION 13 I BELIEVE I DID ADVISE THEM, YES.
12 BY MR. ALIOTO:
13 Q. MY QUESTION WILL BE: DID YOU ADVISE ANYONE IN THE FANG
14 FAMILY, MR. TED FANG OR ANYONE ELSE, OR DID ANYONE TO YOUR
15 KNOWLEDGE IN THE HEARST CORPORATION ADVISE ANYONE IN THE FANG
16 FAMILY, OF THE HEARST BELIEF THAT IT WAS IRRATIONAL BUSINESS
17 BEHAVIOR FOR THEM TO ATTEMPT TO GET INTO THE BUSINESS AGAINST
18 THE CHRONICLE?
19 A. I ADVISED THEM --
20 Q. DID YOU ADVISE THEM OF THAT?
21 A. MY DIFFICULTY IN ANSWERING YOUR QUESTION IS THE PHRASE
22 "GET INTO THE BUSINESS OF" THAT WAS COMPETING WITH THE
23 CHRONICLE. I DID ADVISE THEM THAT IT WOULD BE IRRATIONAL,
24 UNFEASIBLE TO ENGAGE IN DIRECT COMPETITION AS A METROPOLITAN
25 DAILY NEWSPAPER THROUGHOUT THE BAY AREA, WHICH IS WHAT THIS
855
ASHER - DIRECT / ALIOTO
1 STATEMENT SAYS, IN COMPETITION WITH THE CHRONICLE. THAT I
2 FULLY BELIEVE AND I AM SURE I TOLD EVERYONE I DEALT WITH THAT.
3 Q. I'LL ASK YOU ONCE MORE, THEN I'LL QUIT ON IT.
4 A. OKAY.
5 Q. OKAY. DID YOU ADVISE ANYONE IN THE FANG FAMILY, MR. TED
6 FANG OR ANYONE ELSE, OF THE HEARSTS' BELIEF THAT ENTRY INTO THE
7 METROPOLITAN DAILY NEWSPAPER BUSINESS IN DIRECT COMPETITION
8 WITH THE CHRONICLE WAS IRRATIONAL BUSINESS BEHAVIOR? DID YOU
9 TELL THEM THAT?
10 A. I BELIEVE I MADE THAT CLEAR THAT IT WAS MY VIEW.
11 Q. SO YOU THINK YOU DID TELL THEM THAT?
12 A. I BELIEVE SO.
13 Q. BY THE WAY, YOU SAID "IN THE RELEVANT AREA." WHAT WAS THE
14 RELEVANT AREA HERE? YOU SAID THAT IT WAS THE BAY AREA; IS THAT
15 WHAT YOU SAID?
16 A. I BELIEVE, IF YOU LOOK AT THE SPECIFICATIONS FROM THE
17 DEPARTMENT OF JUSTICE WHICH DEFINE MANY OF THE TERMS, IN FACT
18 ASK ALL THE QUESTIONS THAT THIS IS RESPONDING TO, I BELIEVE THE
19 DEFINITION OF "RELEVANT AREA" IS THE ENTIRE BAY AREA. IT IS
20 NOT LIMITED TO THE CITY AND COUNTY OF SAN FRANCISCO.
21 Q. OKAY. SO THEN IF YOU'LL -- I DIRECT YOUR ATTENTION TO
22 PAGE 4 AND YOUR ANSWER IN SPECIFICATION NUMBER 2.
23 SPECIFICATION NUMBER 2 BY THE GOVERNMENT STATED AS FOLLOWS ON
24 PAGE 4 OF EXHIBIT 16, QUOTE:
25 "LIST EACH DAILY NEWSPAPER WHICH HAS ANY
856
ASHER - DIRECT / ALIOTO
1 CIRCULATION IN OR ADVERTISING REVENUE FROM THE
2 RELEVANT AREA AND STATE FOR EACH THE NAME OF THE
3 MANAGING EDITOR," ET CETERA.
4 IN RESPONSE TO SPECIFICATION NUMBER 2 THE HEARST
5 CORPORATION ANSWERED:
6 "SAN FRANCISCO CHRONICLE, SAN FRANCISCO
7 EXAMINER AND THE SUNDAY EXAMINER AND CHRONICLE."
8 DO YOU SEE THAT?
9 A. I SEE THAT.
10 Q. THEY MENTION NO OTHERS; CORRECT?
11 A. I SEE THAT, YES.
12 Q. SO WHEN IT REFERRED TO THE RELEVANT AREA, YOU UNDERSTOOD
13 IT TO MEAN SAN FRANCISCO; CORRECT?
14 A. AT LEAST FOR PURPOSES OF SPECIFICATION 13 THAT WAS MY
15 UNDERSTANDING. I'D HAVE TO GO BACK AND LOOK AT THE QUESTION
16 AND THE DEFINITIONS FOR SPECIFICATION 2 HERE. I DON'T KNOW. I
17 DON'T RECALL.
18 Q. SO YOU RETRACT THE TESTIMONY YOU JUST GAVE ABOUT FIVE
19 MINUTES AGO THAT THE RELEVANT AREA, ACCORDING TO THE
20 GOVERNMENT, WAS THE WHOLE BAY AREA? YOU RETRACT THAT; DON'T
21 YOU?
22 A. I DO NOT IN THE CONTEXT OF SPECIFICATION 13 AT ALL. THAT
23 WAS MY UNDERSTANDING.
24 Q. THEN DOES THAT MEAN THAT IN ANSWERING RESPONSE TO NUMBER
25 2 THAT YOU GAVE THE GOVERNMENT INADEQUATE INFORMATION?
857
ASHER - DIRECT / ALIOTO
1 A. I DON'T BELIEVE SO.
2 Q. I DIRECT YOUR ATTENTION TO PAGE 20 AND IN PARTICULAR
3 BEGINNING ON LINE 14, AGAIN OF EXHIBIT 16, WHICH IS THE ANSWERS
4 GIVEN BY THE HEARST CORPORATION TO THE UNITED STATES GOVERNMENT
5 INTERROGATORIES. AND BEGINNING ON PAGE 20, LINE 14, YOU STATE
6 OR HEARST STATES AS FOLLOWS, QUOTE:
7 "TO BE FULLY COMPETITIVE, A COMPETING
8 NEWSPAPER WOULD NEED TO HAVE APPROXIMATELY THE
9 SAME CIRCULATION AS THE SAN FRANCISCO
10 CHRONICLE -- 475,000 DAILY AND 590,000 SUNDAY.
11 THE MINIMUM DAILY AVERAGE CIRCULATION REQUIRED
12 TO MAINTAIN A 40 PERCENT MARKET SHARE IN THE
13 RELEVANT AREA WOULD BE APPROXIMATELY 300,000
14 DAILY AND 400,000 SUNDAY. SURVIVAL IS NOT
15 LIKELY BELOW THE 40 PERCENT SHARE RELATIVE TO
16 THE CHRONICLE."
17 DO YOU SEE THAT?
18 A. YES, I DO.
19 Q. DO YOU AGREE WITH THAT?
20 A. YES, I DO.
21 Q. DID YOU AGREE WITH IT AT THE TIME THAT YOU WERE
22 NEGOTIATING WITH THE MEMBERS OF THE FANG FAMILY?
23 A. YES, I DID.
24 Q. DID YOU TELL THEM THAT?
25 A. NO.
858
ASHER - DIRECT / ALIOTO
1 Q. LINE 19, QUOTE:
2 "ASSUMING THESE MINIMUM LEVELS OF
3 DISTRIBUTION, MODERN ERA PRINTING FACILITIES
4 WITH FOUR PRESSES EACH MADE UP OF 10 PRESS UNITS
5 AND A FOLDER CAPABLE OF PRINTING AT OVER TWICE
6 THE SPEED OF EXISTING AGENCY PRESSES WOULD BE
7 THE MINIMUM REQUIRED PRESS FIGURE. AT THE
8 CHRONICLE CIRCULATION LEVELS, SEVEN 10 UNIT
9 PRESSES WOULD BE NEEDED."
10 DID YOU BELIEVE THAT?
11 A. I WAS SATISFIED WITH THE ACCURACY OF THIS, YES.
12 Q. DID YOU BELIEVE IT AT THE PRESENT TIME THAT YOU NEGOTIATED
13 WITH THE MEMBERS OF THE FANG FAMILY?
14 A. YES.
15 Q. DID YOU TELL THEM THAT?
16 A. I DID NOT BECAUSE THEY DO NOT INTEND TO PUT OUT A
17 METROPOLITAN DAILY NEWSPAPER IN DIRECT COMPETITION WITH THE
18 CHRONICLE. WHAT IS BEING DESCRIBED HERE ON PAGE 20 IS WHAT
19 WOULD BE NECESSARY TO DO THAT, AND THAT IS NOT WHAT THE FANG
20 FAMILY IS DOING.
21 MR. ALIOTO: MAY I SEE THAT, PLEASE? MAY I JUST
22 HAVE THE FIRST PART OF THE LAST ANSWER READ, YOUR HONOR?
23 THE COURT: THE WITNESS STATED:
24 "I DID NOT BECAUSE THEY DO NOT INTEND TO PUT
25 OUT A METROPOLITAN DAILY NEWSPAPER IN DIRECT
859
ASHER - DIRECT / ALIOTO
1 COMPETITION WITH THE CHRONICLE."
2 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
860
ASHER - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. HOW DO YOU KNOW THAT?
3 A. BASED ON MY DISCUSSIONS DURING THE COURSE OF THE
4 NEGOTIATIONS.
5 Q. SO YOU WERE ADVISED, AS I UNDERSTAND IT NOW -- YOU WERE
6 ADVISED AND YOU UNDERSTOOD DURING YOUR CONVERSATIONS WITH THE
7 MEMBERS OF THE FANG FAMILY THAT THEY DID NOT INTEND TO PUT OUT
8 A METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
9 CHRONICLE. IS THAT YOUR TESTIMONY?
10 A. THAT IS CORRECT.
11 PERHAPS I SHOULD EXPLAIN WHAT A METROPOLITAN DAILY
12 NEWSPAPER IS.
13 Q. AND THAT WAS TOLD TO YOU BY SOME MEMBER OF THE FANG
14 FAMILY?
15 A. IT WAS TOLD TO ME BY HAVING THEM DESCRIBE THE NATURE OF
16 THE PRODUCT THAT THEY PLANNED TO PUT OUT, WHICH WAS A PRODUCT
17 FOCUSED ON THE CITY AND -- PRINCIPALLY THE CITY AND, LET'S SAY,
18 COUNTY OF SAN FRANCISCO. AND THAT IS NOT A METROPOLITAN DAILY
19 NEWSPAPER.
20 Q. AGAIN, THE QUESTION IS: AND THEY TOLD YOU THAT? THEY
21 TOLD YOU THAT THEY DID NOT INTEND TO PUT OUT A METROPOLITAN
22 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE? DID THEY
23 TELL YOU THAT?
24 A. NO. WHAT THEY TOLD ME IS WHAT THEY DID INTEND TO DO.
25 THEY DIDN'T TELL ME WHAT THEY DIDN'T INTEND TO DO.
861
ASHER - DIRECT / ALIOTO
1 Q. DID YOU ADVISE THE FEDERAL GOVERNMENT THAT YOU UNDERSTOOD
2 AND KNEW THAT THE AGREEMENT WITH THE EXIN GROUP, PAN ASIAN
3 GROUP, THAT THEY DID NOT INTEND TO PUT OUT A METROPOLITAN
4 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE? DID YOU
5 TELL THE GOVERNMENT THAT?
6 A. WE DID NOT.
7 Q. AND YOU KNOW THAT WHEN THE GOVERNMENT ISSUED ITS PRESS
8 RELEASE THAT IT SAID FOR THE FIRST TIME IN 35 YEARS THE PEOPLE
9 OF SAN FRANCISCO ARE GOING TO HAVE TWO COMPETING NEWSPAPERS --
10 TWO COMPETING DAILY NEWSPAPERS?
11 A. YES, I AM AWARE OF THAT.
12 Q. YOU DON'T THINK THAT YOU MISLED THE GOVERNMENT?
13 A. NOT AT ALL. THE GOVERNMENT FULLY QUESTIONED MR. FANG
14 DIRECTLY ABOUT HIS PURPOSES AND THE TYPE OF PRODUCT THAT HE
15 PLANNED TO PUT OUT. SO I AM SURE THE DEPARTMENT OF JUSTICE
16 KNEW EXACTLY WHAT PRODUCT WAS GOING TO BE PRODUCED BEFORE THEY
17 ISSUED THAT PRESS RELEASE.
18 Q. SO THAT WE ARE CLEAR, IF THIS ARRANGEMENT IS NOT STOPPED
19 AND IF IT GOES FORWARD AND HEARST CORPORATION IS ALLOWED TO BUY
20 THE CHRONICLE, THE PEOPLE OF SAN FRANCISCO NEED TO KNOW THAT
21 THERE WILL NOT BE A METROPOLITAN -- ANOTHER METROPOLITAN DAILY
22 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE.
23 YOU AGREE WITH THAT, DON'T YOU?
24 A. I DON'T THINK --
25 Q. THEY SHOULD KNOW THAT?
862
ASHER - DIRECT / ALIOTO
1 A. I AM NOT SURE I HAVE A VIEW OF WHAT THE PEOPLE OF SAN
2 FRANCISCO SHOULD KNOW. I WILL LEAVE THAT TO YOU.
3 Q. HAS THE HEARST CORPORATION REPRESENTED TO ANYONE IN THE
4 PUBLIC THAT BY REASON OF THIS ARRANGEMENT THAT NOW THERE WILL
5 BE A COMPETING NEWSPAPER, COMPETING DAILY METROPOLITAN
6 NEWSPAPER, COMPETING WITH THE CHRONICLE? DID THE HEARST
7 CORPORATION EVER ISSUE SUCH A STATEMENT?
8 A. NOT TO MY KNOWLEDGE.
9 Q. DID THE HEARST CORPORATION EVER ISSUE ANY STATEMENT,
10 PUBLIC STATEMENT, TO ANYONE AFTER THE AGREEMENT WITH THE PAN
11 ASIAN GROUP THAT THIS DID NOT MEAN THAT THERE WOULD BE A
12 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
13 CHRONICLE?
14 A. I'M SORRY. I THINK I GOT LOST IN THE NEGATIVES AND SO ON.
15 COULD YOU REPEAT THAT QUESTION?
16 Q. DID THE HEARST CORPORATION EVER ADVISE ANYONE, PUBLICLY,
17 THAT AFTER THE AGREEMENT WITH THE FANG GROUP THAT THAT DID
18 NOT -- THAT THERE WAS NOT GOING TO BE A MAJOR -- A DAILY
19 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
20 CHRONICLE?
21 A. NOT TO MY KNOWLEDGE.
22 Q. I DIRECT YOUR ATTENTION TO PAGE 23.
23 BY THE WAY, WITH REGARD TO THE PRESS -- PRESSES THAT
24 WE JUST WENT OVER BEFORE YOUR STATEMENT ABOUT NO INTENTION OF A
25 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
863
ASHER - DIRECT / ALIOTO
1 CHRONICLE, YOU WERE TALKING ABOUT ITEM NUMBER 4 ON PAGE 20 OF
2 YOUR ANSWERS TO THE GOVERNMENT ABOUT 10 PRESS UNITS AND THAT
3 BEING A MINIMUM.
4 DO YOU REMEMBER THAT?
5 A. I SEE IT HERE, YES.
6 Q. OKAY. NOW, AS A MATTER OF FACT, DO YOU HAVE ANY NOTION AS
7 TO HOW MUCH 10 PRESS UNITS WOULD COST OR ANY NUMBER OF THEM?
8 A. AS I SIT HERE RIGHT NOW, I DON'T HAVE A NOTION, NO.
9 Q. NOW, IN YOUR AGREEMENT WITH THE EXIN, OR THE FANG GROUP,
10 YOU LIMITED THEM TO CAPITAL EXPENDITURES OF $3.3 MILLION A
11 YEAR, DIDN'T YOU?
12 A. NO, WE DID NOT IMPOSE ANY LIMITATION WHATSOEVER ON THE
13 AMOUNT OF CAPITAL EXPENDITURES THAT COULD BE MADE BY THE FANG
14 FAMILY. ALL WE SAID WAS THE REIMBURSABLE COSTS THAT WE WOULD
15 PAY FOR COULD NOT INCLUDE MORE THAN $3.3 MILLION OF CAPITAL
16 EXPENDITURES. THEY WERE FREE TO SPEND AS MUCH AS THEY WANTED
17 ON CAPITAL EXPENDITURES.
18 Q. SO YOU PUT A RESTRICTION ON THE SO-CALLED REIMBURSABLE
19 COSTS OF $3.3 MILLION FOR CAPITAL, CORRECT?
20 A. THAT IS CORRECT.
21 Q. AND YOU UNDERSTOOD, DID YOU NOT, THAT IF THEY WERE UNABLE
22 TO GET MONEY ELSEWHERE, THAT THAT $3.3 MILLION WOULD BE
23 INSUFFICIENT TO BE ABLE TO BUY THE NECESSARY EQUIPMENT TO PUT
24 OUT A PAPER IN COMPETITION WITH THE CHRONICLE?
25 A. NO, I DID NOT. BECAUSE THEY HAVE THEIR OWN PRINTING
864
ASHER - DIRECT / ALIOTO
1 CAPACITY.
2 Q. EVEN WITH THEIR PRINTING CAPACITY, YOU KNEW THAT THAT
3 AMOUNT WAS INSUFFICIENT TO BE ABLE -- FOR THEM, UNLESS THEY GOT
4 MONEY ELSEWHERE, IT WOULD BE INSUFFICIENT FOR THEM TO BE ABLE
5 TO GET THE NECESSARY EQUIPMENT TO PUT OUT A COMPETING PAPER
6 WITH THE CHRONICLE?
7 A. NO, I DID NOT KNOW THAT.
8 Q. GO TO PAGE 23. PAGE 23 -- PAGE 23 BEGINS WITH REGARD
9 TO -- YOU STATE AS FOLLOWS, QUOTE -- AND THESE ARE THE ANSWERS
10 TO THE GOVERNMENT FROM THE INTERROGATORIES.
11 I SHOULD GIVE A DATE, YOUR HONOR, AND I FORGOT TO DO
12 THAT. I APOLOGIZE. THESE WERE FILED ON OR ABOUT NOVEMBER 12,
13 1999.
14 YOU STATE AS FOLLOWS, QUOTE:
15 "IF AN ENTRANT DID NOT UTILIZE EXISTING
16 PRINTING FACILITIES, THE COST OF A NEW PRINTING
17 PLANT AND EQUIPMENT, ASSUMING A NEWSPAPER OF
18 300,000 CIRCULATION DAILY, 400,000 SUNDAY, IS
19 ESTIMATED AS FOLLOWS:"
20 THIS IS GIVEN TO THE GOVERNMENT -- "CAPITAL COSTS."
21 FIRST OF ALL, THE TOTAL CAPITAL COSTS SHOWN HERE ARE
22 $210 MILLION.
23 DO YOU SEE THAT ON LINE 12?
24 A. YES, I DO.
25 Q. OF WHICH APPROXIMATELY $100 MILLION IS FOR 40 UNITS OF
865
ASHER - DIRECT / ALIOTO
1 PRESS EQUIPMENT, MEANING THAT 10 UNITS WOULD BE $25 MILLION,
2 CORRECT?
3 A. I SUPPOSE IF THEY WERE ALL IDENTICAL, YES.
4 Q. CLEARLY, THIS AMOUNT, THE $210 MILLION, OR EVEN ANY -- OR
5 EVEN SOME PART OF THE PRESS EQUIPMENT, IS GREATER THAN WHAT YOU
6 WERE AGREEING TO SUBSIDIZE THE FANG FAMILY FOR, CORRECT?
7 A. I WOULD AGREE WITH THAT.
8 Q. SO THAT YOU KNEW WHEN YOU AGREED TO THIS THAT THERE WAS NO
9 CHANCE OF THIS PAPER BEING COMPETITIVE -- "THIS PAPER," MEANING
10 THE PAPER PUT OUT BY THE FANG FAMILY -- BEING COMPETITIVE TO
11 THE CHRONICLE?
12 A. I DID NOT KNOW THAT AT ALL. I THOUGHT WE WERE TALKING
13 ABOUT PRINTING PRESSES.
14 Q. YOU ALSO UNDERSTOOD, IF YOU WILL GO DOWN ON THAT PAGE, 23,
15 IT STATES: "RECOVERABLE COSTS."
16 AND IT HAS CERTAIN COSTS AFTER EACH ONE OF THESE --
17 RECOVERABLE COSTS OF $71 MILLION.
18 DO YOU SEE THAT?
19 A. YES.
20 Q. OKAY. THAT MEANS THAT IF SOMEONE WERE ABLE TO DO THIS AND
21 IT DIDN'T WORK OUT, THEY WOULD AT LEAST BE ABLE -- OUT OF THE
22 $210 MILLION, THEY WOULD BE ABLE TO GET $71 MILLION BACK
23 SOMEHOW -- SALE, SALVAGE, WHATEVER, CORRECT?
24 A. CORRECT.
25 Q. THE SUBCOSTS, OR THE ONES THAT THEY CAN COMPLETELY FORGET
866
ASHER - DIRECT / ALIOTO
1 ABOUT, THAT ARE GONE FOREVER, WOULD BE ABOUT $138 MILLION,
2 CORRECT?
3 A. CORRECT.
4 Q. YOU KNEW THIS AT THE TIME THAT YOU WERE NEGOTIATING WITH
5 THE FANG FAMILY, DID YOU NOT?
6 A. YES, I DID.
7 Q. IF YOU GO TO THE NEXT PAGE, PAGE 24. IN PAGE 24 IT
8 STATES, QUOTE:
9 "IN ADDITION IT SHOULD BE NOTED THAT ANNUAL
10 OPERATING EXPENSES BASED ON THE 1998 INLAND COST
11 STUDY FOR A NEWSPAPER OF 300,000 CIRCULATION
12 DAILY AND 400,000 SUNDAY IS $172,751,000."
13 DO YOU SEE THAT?
14 A. I DO.
15 Q. THOSE OPERATING EXPENSES ARE IN ADDITION TO THESE CAPITAL
16 EXPENSES THAT WE JUST WENT OVER, CORRECT?
17 A. CORRECT.
18 Q. SO EACH YEAR IT WOULD COST -- YOU UNDERSTOOD IT WOULD COST
19 APPROXIMATELY $172 MILLION IN ADDITION TO THE CAPITAL JUST TO
20 RUN THE THING?
21 A. IF WE ARE -- REMEMBER, WE ARE STILL TALKING ABOUT A
22 METROPOLITAN DAILY NEWSPAPER, WHICH, AMONG OTHER THINGS, HAS
23 ENORMOUSLY HIGH CIRCULATION AND DISTRIBUTION EXPENSE. SO THIS
24 IS NOT -- AGAIN, AS I HAVE SAID -- THE PRODUCT THAT THE . . . I
25 WILL STOP.
867
ASHER - DIRECT / ALIOTO
1 Q. AND IT WAS NEVER THE INTENTION OF THE HEARST CORPORATION
2 TO DO ANYTHING TO ENSURE THAT THERE WOULD BE ANY PAPER THAT
3 COULD POSSIBLY COMPETE AGAINST ITS CHRONICLE IF IT BOUGHT THE
4 CHRONICLE, CORRECT?
5 A. IN FACT, I THINK -- NO, THAT'S NOT CORRECT.
6 Q. THAT'S NOT CORRECT?
7 A. IN FACT, I THINK WE HAVE GONE TO THE EXTRAORDINARY STEP OF
8 ACTUALLY PROVIDING A SUBSIDY SO THAT THAT COMPETITION COULD
9 OCCUR AT LEAST TO SOME EXTENT IN THE CITY AND COUNTY OF SAN
10 FRANCISCO.
11 Q. WHEN YOU MET WITH THE FANG FAMILY, DID YOU TELL THEM IN
12 SUM OR OF YOUR BELIEF THAT THE OPERATION WOULD COST AT LEAST
13 $172 MILLION -- OPERATING EXPENSES ALONE. DID YOU TELL THEM
14 THAT?
15 A. WE DID NOT DISCUSS THE OPERATING EXPENSES FOR A
16 METROPOLITAN DAILY NEWSPAPER WHATSOEVER IN OUR DISCUSSIONS.
17 Q. NOW, YOU KNEW, DID YOU NOT -- I WANT TO GO BACK TO
18 EXHIBIT 100.
19 MAY I APPROACH THE WITNESS, YOUR HONOR?
20 THE COURT: YES, YOU MAY.
21 BY MR. ALIOTO:
22 Q. I SHOW YOU EXHIBIT 100 THAT WE WENT OVER BRIEFLY
23 YESTERDAY. EXHIBIT 100 IS A MEMO TO FILE BY YOU, DATED
24 DECEMBER 14, 1999, AND THE SUBJECT WAS SAN FRANCISCO, AND THIS
25 WAS YOUR MEETING WITH MR. BALABANIAN ABOUT THE -- THE FANG
868
ASHER - DIRECT / ALIOTO
1 FAMILY.
2 NOW, IF YOU WILL GO TO THE BOTTOM OF THE PAGE -- WE
3 WENT OVER THIS YESTERDAY. BUT AT THAT TIME MR. BALABANIAN
4 STATED, QUOTE:
5 "HIS PROPOSAL WHICH HE STATED WAS NEGOTIABLE
6 WAS THAT HEARST WOULD PAY 35 MILLION A YEAR
7 THROUGH THE END OF THE EXISTING TERM OF THE
8 JOA."
9 DO YOU SEE THAT?
10 A. YES, I DO.
11 Q. AND YOU UNDERSTOOD THAT THAT, THROUGH THE TERM, THAT WOULD
12 BE APPROXIMATELY $210 MILLION. YOU UNDERSTOOD THAT, RIGHT?
13 A. YES, I DID.
14 Q. AND YOU UNDERSTOOD THAT IF YOU GAVE A SUBSIDY IN THAT
15 RANGE THAT THAT MIGHT IN FACT CREATE A METROPOLITAN NEWSPAPER
16 THAT WOULD BE ABLE TO BE IN DIRECT COMPETITION WITH THE
17 CHRONICLE, MAYBE?
18 A. NO. I AM NOT SURE THERE IS ANY AMOUNT THAT WOULD
19 ACCOMPLISH THAT.
20 Q. YOU MEAN TO TELL ME WHEN YOU SAY YOU ARE NOT SURE OF ANY
21 AMOUNT YOU ARE JUST GOING TO GIVE THIS MONEY AWAY? IS THAT
22 WHAT YOU ARE SAYING?
23 A. GIVE WHAT MONEY AWAY?
24 Q. WELL, YOU ARE SAYING -- YOU SAID JUST NOW -- JUST NOW YOU
25 SAID, "I DON'T THINK IT COULD BE ACCOMPLISHED FOR ANY AMOUNT."
869
ASHER - DIRECT / ALIOTO
1 A. THE --
2 Q. SO DOES THAT MEAN YOU ARE JUST GIVING THIS MONEY AWAY?
3 A. I BELIEVE YOUR QUESTION TO ME WAS DID I KNOW THAT
4 $210 MILLION WOULD BE ENOUGH TO ESTABLISH A COMPETING
5 METROPOLITAN DAILY NEWSPAPER. AT LEAST THAT'S HOW I UNDERSTOOD
6 YOUR QUESTION. AND WHEN I ANSWERED I DIDN'T BELIEVE THERE WAS
7 ANY AMOUNT THAT WOULD DO THAT, THAT'S WHAT I WAS REFERRING TO.
8 I WAS NOT REFERRING TO WHAT YOU HAVE ON THE EASEL.
9 Q. OKAY. SO SINCE YOU KNEW THAT -- OR YOU BELIEVED THAT
10 THERE WASN'T ANY AMOUNT THAT COULD CREATE A METROPOLITAN
11 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE, THEN THAT
12 MEANS THAT GIVING THIS MONEY AWAY WAS JUST SOME KIND OF SHOW TO
13 PRETEND THAT MAYBE THERE MIGHT BE SOMETHING THAT YOU COULD AT
14 LEAST SAY LOOKS LIKE SOME KIND OF COMPETITION; IS THAT IT?
15 A. I RESENT THE IMPLICATION OF AN ADDED -- WELL, EXCUSE ME.
16 I WILL TRY TO COMPOSE MYSELF.
17 THE COURT: ALL RIGHT. JUST ANSWER THE QUESTION.
18 THE WITNESS: NO, I DO NOT AGREE WITH ANYTHING THAT
19 YOU JUST SAID.
20 BY MR. ALIOTO:
21 Q. DO YOU THINK THAT YOU ARE JUST THROWING THIS MONEY AWAY?
22 THIS 16 MILLION, 25 MILLION, 25 MILLION, DO YOU THINK YOU ARE
23 THROWING IT AWAY?
24 THE COURT: ISN'T THAT ARGUMENTATIVE, MR. ALIOTO?
25 MR. ALIOTO: IT IS. THANK YOU, YOUR HONOR. I'M
870
ASHER - DIRECT / ALIOTO
1 SORRY. I WILL WITHDRAW IT.
2 BY MR. ALIOTO:
3 Q. OKAY. I WOULD LIKE TO DIRECT YOUR ATTENTION TO PAGE 28,
4 PAGE 28, AGAIN, OF EXHIBIT 16. IT STATES AS FOLLOWS, BEGINNING
5 ON LINE 22 UNDER "FINANCIAL PLANS." IT FIRST HAS THE
6 "PERSONNEL" ON THAT PAGE, BUT THEN BEGINNING ON LINE 21, I'M
7 SORRY, "FINANCIAL PLANS," QUOTE:
8 "THE FOLLOWING PLANS WERE DEVELOPED AS AN
9 ALTERNATIVE IN THE EVENT THAT NO BUYER CAME
10 FORWARD TO ACQUIRE THE EXAMINER. FINANCIAL
11 INFORMATION IS CONTAINED IN ATTACHMENT."
12 THEN IT HAS "CIRCULATION:"
13 "AFTER ACQUISITION OF THE CHRONICLE, THE
14 PAID CIRCULATION IS EXPECTED TO BE APPROXIMATELY
15 509,000 DAILY AND 585,000 SUNDAY. CURRENTLY,
16 THE CHRONICLE AND EXAMINER DAILY READERSHIP
17 DUPLICATION IS SIGNIFICANT AND IT IS EXPECTED
18 THAT APPROXIMATELY 60 PERCENT OF THE EXAMINER
19 CIRCULATION WILL NOT BE ADDED TO THE CHRONICLE.
20 SUNDAY CIRCULATION IS PROJECTED TO DECLINE
21 SLIGHTLY BY APPROXIMATELY 14,000 COPIES. TOTAL
22 CIRCULATION REVENUE IS PROJECTED TO DECLINE IN
23 THE FIRST YEAR BY APPROXIMATELY $4.8 MILLION."
24 DO YOU SEE THAT?
25 A. YES, I DO.
871
ASHER - DIRECT / ALIOTO
1 Q. OKAY. NOW, THIS WAS AN EFFORT, WAS IT NOT, TO -- THIS IS
2 THE STATEMENT WHERE YOU SAY THIS IS CONTINGENT UPON WHAT YOU
3 DESCRIBE AS "NO BUYER CAME FORWARD TO ACQUIRE THE EXAMINER."
4 THAT'S WHAT THIS WAS ABOUT, CORRECT?
5 A. YES, IT WAS.
6 Q. AND THIS WAS THE JUSTIFICATION IF THE EXAMINER JUST WERE
7 FOLDED INTO THE CHRONICLE, CORRECT?
8 A. I DON'T THINK IT WAS A JUSTIFICATION. IT WAS JUST A
9 DESCRIPTION OF WHAT WE THOUGHT WOULD HAPPEN IF THAT OCCURRED.
10 Q. NOW, ALSO THERE HAS BEEN A LISTING OF THE NUMBER OF
11 PERSONS THAT WOULD BE REQUIRED TO RUN A NEWSPAPER, A MAJOR
12 METROPOLITAN NEWSPAPER, IN COMPETITION WITH THE CHRONICLE. BUT
13 WE WON'T GO OVER THAT NOW BECAUSE, AS I UNDERSTAND YOUR
14 TESTIMONY NOW, IT IS THE POSITION OF HEARST THAT THEY NEVER
15 INTENDED THAT ANYTHING THEY DID WITH ANY POTENTIAL BUYER OF THE
16 EXAMINER WOULD BE TO PUT THE -- WOULD BE TO MAKE A METROPOLITAN
17 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE; IS THAT
18 RIGHT?
19 A. THAT IS CORRECT.
20 Q. MR. REILLY ALSO MADE A PROPOSAL TO YOU; IS THAT CORRECT?
21 A. YES.
22 Q. IS IT CORRECT THAT AFTER THREE DAYS -- THREE DAYS AFTER HE
23 MADE THE PROPOSAL YOU ENTERED INTO AN EXCLUSIVE AGREEMENT WITH
24 THE INDEPENDENT, WITH THE FANG FAMILY?
25 A. WELL, I BELIEVE HIS FIRST PROPOSAL WAS MADE WEEKS BEFORE
872
ASHER - DIRECT / ALIOTO
1 THAT.
2 Q. DID YOU ADVISE MR. REILLY THAT -- THAT YOU HAD ENTERED
3 INTO AN EXCLUSIVE THREE DAYS AFTER HE GAVE HIS LAST PROPOSAL TO
4 YOU?
5 A. NO.
6 Q. YOU SAID YESTERDAY THAT THE OFFER OF THE, QUOTE,
7 "EXTENSIVE POLITICAL CONSIDERATIONS" -- OR WAIT A MINUTE. I
8 BETTER GET THAT RIGHT.
9 YOU SAID YESTERDAY THAT WHEN IT WAS OFFERED TO YOU
10 BY THE FANG FAMILY THAT IF YOU REACHED AN AGREEMENT WITH THEM
11 THEY WOULD USE THEIR, QUOTE, "EXTENSIVE POLITICAL CONNECTIONS,"
12 END OF QUOTE, TO ASSIST US TO COMPLETING OUR PURCHASE OF THE
13 CHRONICLE. YOU SAID THAT THAT WAS A CONSIDERATION FOR YOU,
14 CORRECT?
15 A. I JUST WANT TO BE SURE I'M -- YOU'RE --
16 Q. DO YOU HAVE EXHIBIT 100 IN FRONT OF YOU?
17 A. YOU ARE REFERRING TO EXHIBIT 100 AND THE STATEMENT THAT I
18 SUMMARIZED TO OUR FILES THAT MR. BALABANIAN MADE TO ME IN OUR
19 MEETING IN DECEMBER --
20 Q. CORRECT.
21 A. -- OF 1999?
22 Q. RIGHT. CORRECT. AND NUMBER 4 SAYS, QUOTE:
23 "ASSUMING WE REACHED AGREEMENT ON ALL
24 MATTERS, THE FANGS WOULD USE THEIR EXTENSIVE
25 POLITICAL CONNECTIONS TO ASSIST US IN COMPLETING
873
ASHER - DIRECT / ALIOTO
1 OUR PURCHASE OF THE CHRONICLE."
2 DO YOU SEE THAT?
3 A. I DO.
4 Q. OKAY. AND THEN YESTERDAY YOU SAID THAT THAT WAS A
5 CONSIDERATION OF YOURS.
6 A. I BELIEVE I SAID IT WAS A MINOR CONSIDERATION.
7 Q. WELL, IN YOUR DEPOSITION YOU SAID, QUOTE:
8 "I SUPPOSE IT WAS A CONSIDERATION, YES."
9 DO YOU REMEMBER THAT?
10 A. I DON'T REMEMBER SPECIFICALLY IN MY DEPOSITION. I BELIEVE
11 YOU WERE ASKING ME ABOUT MY TESTIMONY YESTERDAY.
12 Q. OKAY. WELL, THERE IS NO --
13 A. THAT I DO REMEMBER.
14 Q. THERE WERE NO QUALIFICATIONS ON YOUR TESTIMONY IN YOUR
15 DEPOSITION, WERE THERE?
16 A. AH.
17 Q. ALL RIGHT. LET ME SHOW IT TO YOU. I HAND YOU --
18 MAY I APPROACH THE WITNESS, YOUR HONOR?
19 THE COURT: YOU MAY.
20 BY MR. ALIOTO:
21 Q. I HAND YOU WHAT IS YOUR DEPOSITION, TAKEN ON TUESDAY,
22 APRIL 18, 2000. DIRECTING YOUR ATTENTION TO PAGE 98. TO PUT
23 IT INTO CONTEXT LET'S BEGIN ON -- I GUESS, ON PAGE 96, LINE 22:
24 "Q. DO THE FANGS HAVE POLITICAL
25 CONNECTIONS?
874
ASHER - DIRECT / ALIOTO
1 "A. I DON'T KNOW.
2 "Q. DO YOU THINK THEY DO?
3 "A. I DON'T KNOW IF THEY HAVE POLITICAL
4 CONNECTIONS.
5 "Q. DID YOU EVER TALK TO THEM ABOUT THAT?
6 "A. NO.
7 "Q. DID THEY EVER SAY THAT THEY WERE GOING
8 TO USE THEIR POLITICAL CONNECTIONS TO HELP YOU
9 ACQUIRE THE CHRONICLE?
10 "A. IN THE CONTEXT OF DECIDING UPON WHICH
11 PARTY THAT WE WOULD SELL THE EXAMINER TO, THEY
12 DID MAKE THE ARGUMENT THAT THEY THOUGHT THAT A
13 SALE TO THEM WOULD ASSIST IN RESOLUTION OF
14 ISSUES THAT HAD BEEN RAISED BY LOCAL
15 GOVERNMENTAL AUTHORITIES.
16 "Q. WHO MADE THAT ARGUMENT?
17 "A. I BELIEVE THEIR COUNSEL MADE IT TO ME,
18 ALTHOUGH I JUST DON'T RECALL EXACTLY."
19 GOING DOWN TO PAGE 98:
20 "Q. WAS THAT A CONSIDERATION TO YOU WHEN
21 DECIDING TO WHOM TO SELL THE PAPER?
22 "A. I SUPPOSE IT WAS A CONSIDERATION, YES."
23 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
24 A. YES, I DID.
25 Q. AND YOU WERE UNDER OATH, WERE YOU NOT?
875
ASHER - DIRECT / ALIOTO
1 A. YES, I WAS.
2 Q. AND THOSE ANSWERS ARE TRUE, ARE THEY NOT?
3 A. YES.
4 THE COURT: TELL ME WHEN YOU REACH A CONVENIENT
5 BREAKING POINT.
6 MR. ALIOTO: NOW IS FINE, YOUR HONOR.
7 THE COURT: ALL RIGHT. FINE. WHY DON'T WE TAKE
8 UNTIL 10:00 O'CLOCK AND WE WILL RESUME WITH FURTHER TESTIMONY
9 BY MR. ASHER.
10 (RECESS TAKEN AT 9:45 A.M.)
11 (PROCEEDINGS RESUMED AT 10:05 A.M.)
12 THE CLERK: PLEASE REMAIN SEATED. COME TO ORDER.
13 THIS COURT IS NOW IN SESSION.
14 THE COURT: MR. ALIOTO, DO YOU WISH TO CONTINUE YOUR
15 EXAMINATION OF MR. ASHER?
16 MR. ALIOTO: I DO, YOUR HONOR. THANK YOU.
17 BY MR. ALIOTO:
18 Q. MAY IT PLEASE YOUR HONOR.
19 I WOULD LIKE TO DIRECT YOUR ATTENTION TO YOUR
20 DEPOSITION AT PAGE 58. AND WITH REGARD TO YOUR ANSWER AT PAGE
21 58 ON LINE 8, I WANT TO READ THIS ANSWER AND THEN ASK YOU
22 WHETHER OR NOT YOU GAVE IT UNDER OATH DURING YOUR DEPOSITION.
23 THE COURT: IS THAT TRANSCRIPT --
24 MR. ALIOTO: IT IS PAGE 58, YOUR HONOR.
25 THE COURT: HAS THAT BEEN SUBMITTED TO THE COURT?
876
ASHER - DIRECT / ALIOTO
1 MR. ALIOTO: YOU DO HAVE THE ASHER --
2 MR. SHULMAN: (INDICATING).
3 MR. ALIOTO: OH, NO, YOU DON'T. I DIDN'T REALIZE
4 THAT. I'M SORRY.
5 IT'S SEALED SO WE REQUEST THAT IT BE UNSEALED.
6 THE COURT: PAGE?
7 MR. ALIOTO: PAGE 58 OF IT, PLEASE, YOUR HONOR, AND
8 THE ANSWER BEGINS ON LINE 8.
9 BY MR. ALIOTO:
10 Q. FIRST OF ALL, LET ME JUST SAY AS THE PREDICATE, THIS
11 MORNING I READ TO YOU EXCERPTS FROM THE TESTIMONY OF MR. WHITE,
12 MR. SIAS AND MR. FALK.
13 MR. FALK, YOU UNDERSTAND, IS IN CHARGE OF OPERATIONS
14 FOR THE SAN FRANCISCO NEWSPAPER AGENCY, CORRECT?
15 A. MR. FALK, YES.
16 Q. AND YOU UNDERSTOOD THAT MR. SIAS WAS IN CHARGE OF, AMONG
17 OTHER THINGS, THE OPERATIONS OF THE CHRONICLE?
18 A. AT THE EDITORIAL LEVEL, YES.
19 Q. AND MR. WHITE THE SAME; IS THAT NOT SO?
20 A. HE IS THE PUBLISHER, YES.
21 Q. AND YOU, YOU HAVE HAD NO -- AND THIS WAS IN RELATIONSHIP
22 TO YOUR AFFIDAVIT THAT YOU FILED WITH REGARD TO THE REVENUES.
23 AND YOU HAVE NO EXPERTISE, DO YOU, IN THE
24 OPERATIONAL LEVEL?
25 A. THAT IS CORRECT.
877
ASHER - DIRECT / ALIOTO
1 Q. AND YOU SAID SO AT PAGE 58 IN YOUR ANSWER TO -- BEGINNING
2 AT LINE 8, AS FOLLOWS:
3 "A. WELL, I THINK MY ANSWER STANDS. I
4 DON'T HAVE THE REQUISITE EXPERTISE TO MAKE THIS
5 TYPE OF -- MY KNOWLEDGE IS PUTTING TRANSACTIONS
6 TOGETHER. I DO NOT HAVE THE DETAILED KNOWLEDGE
7 AT THE OPERATIONAL LEVEL."
8 YOU GAVE THAT ANSWER UNDER OATH, DID YOU NOT?
9 A. I DID.
10 Q. AND IT'S A TRUE ANSWER?
11 A. YES, IT IS.
12 Q. AND NOW I WANT TO DIRECT YOUR ATTENTION ALSO TO PAGE 173
13 OF YOUR DEPOSITION. AND ON PAGE 173 IN PARTICULAR, LINE 7, AND
14 READING THAT ANSWER, BEGINNING AT LINE 7, STATES AS FOLLOWS,
15 QUOTE:
16 "A. I HAVE STATED BEFORE THAT MY AREA OF
17 EXPERTISE DOES NOT EXTEND TO THE DETAILS OF
18 OPERATIONS OF THE NEWSPAPER."
19 AND THEN IT GOES ON.
20 THAT IS TESTIMONY THAT YOU GAVE, IS IT NOT?
21 MR. HALLING: CAN YOU FINISH, PLEASE, READING THE
22 ANSWER?
23 MR. ALIOTO: YES. I CAN READ THE WHOLE THING:
24 "A. I HAVE STATED BEFORE THAT MY AREA OF
25 EXPERTISE DOES NOT EXTEND TO THE DETAILS OF
878
ASHER - DIRECT / ALIOTO
1 OPERATIONS OF THE NEWSPAPER. MY BELIEF ON THE
2 VIABILITY OF THE EXAMINER IS -- WOULD BE BASED
3 OR IS BASED MORE ON THE SALES PROCESS. AT THIS
4 TIME THE SALES PROCESS -- AND IT CONTINUED
5 THROUGH THE END OF THE SALES PROCESS -- THE
6 MARKET WAS TELLING ME THAT NO ONE WAS INTERESTED
7 IN BUYING THE EXAMINER WITHOUT A SUBSTANTIAL
8 CASH SUBSIDY."
9 DID YOU GIVE THAT ANSWER?
10 A. YES, I DID.
11 Q. AND THAT ANSWER WAS TRUE AND UNDER OATH?
12 A. YES, IT WAS.
13 Q. OKAY. AND WITH REGARD -- SO THAT YOUR PARTICULAR
14 EXPERTISE WAS IN THE SALE PROCESS, MEANING, THE SALE OF THE
15 EXAMINER -- TRANSACTION PROCESS?
16 A. THAT IS CORRECT.
17 MR. ALIOTO: YOUR HONOR, I ALSO WISH TO READ CERTAIN
18 PORTIONS FROM THE MEMORANDUM THAT WAS FILED BY THE DEFENDANTS
19 IN THIS CASE IN OPPOSITION -- IT'S THE OPPOSITION OF DEFENDANT
20 THE HEARST CORPORATION TO THE PLAINTIFF'S MOTION FOR A
21 PRELIMINARY INJUNCTION.
22 THE COURT: VERY WELL.
23 MR. ALIOTO: THE FIRST READING WOULD BE FROM PAGE 1
24 IN THE INTRODUCTION, BEGINNING ON LINE 13, QUOTE:
25 "PAN ASIA INTENDS TO MOVE THE EXAMINER TO
879
ASHER - DIRECT / ALIOTO
1 MORNING PUBLICATION AND OPERATE IT AS A
2 FREE-STANDING DAILY NEWSPAPER IN DIRECT
3 COMPETITION WITH THE CHRONICLE."
4 DO YOU BELIEVE THAT THAT'S AN ACCURATE STATEMENT?
5 A. YES, I DO.
6 Q. DID YOU READ THIS AT THE TIME THAT THIS MEMORANDUM WAS
7 FILED?
8 A. YES.
9 Q. SO THAT -- AND YOU KNEW THAT IT WAS BEING REPRESENTED TO
10 THE COURT THAT PAN ASIA INTENDS TO MOVE THE EXAMINER TO MORNING
11 PUBLICATION AND OPERATE IT AS A FREE-STANDING DAILY NEWSPAPER
12 IN DIRECT COMPETITION WITH THE CHRONICLE?
13 A. THAT WAS OUR UNDERSTANDING OF THE FANG FAMILY'S INTENT.
14 NOTE THAT THE WORD "METROPOLITAN" IS NOT IN THAT SENTENCE.
15 Q. WELL, THEN, LET ME -- LET ME SKIP TO PAGE 5 WHERE
16 "METROPOLITAN" IS IN THE SENTENCE, PAGE 5, BEGINNING AT LINE
17 19. IT WAS STATED TO THE COURT, QUOTE -- BY THE HEARST
18 CORPORATION:
19 "ALSO PAN ASIA CLAIMS THE NEW EXAMINER WILL
20 BE THE FIRST MAJOR ASIAN AMERICAN OWNED
21 METROPOLITAN DAILY IN THE UNITED STATES."
22 YOU READ THAT AT THE TIME, DID YOU NOT?
23 A. YES.
24 Q. AND YOU KNEW IT WAS BEING REPRESENTED -- THIS WAS BEING
25 REPRESENTED TO THE COURT, CORRECT?
880
ASHER - DIRECT / ALIOTO
1 A. AS A CLAIM MADE BY THAT -- BY THE PARTY WHO MADE IT, YES.
2 Q. ALSO ON PAGE 5 IT WAS REPRESENTED TO THE COURT, AS
3 FOLLOWS, BEGINNING ON LINE 3, QUOTE:
4 "PAN ASIA HAS ANNOUNCED THAT IT INTENDS TO
5 PUBLISH THE EXAMINER AS A REGULAR SUBSCRIPTION
6 BASED PAID DAILY NEWSPAPER AND SWITCH THE
7 EXAMINER TO MORNING PUBLICATION TO COMPLETE
8 DIRECTLY WITH THE CHRONICLE. "
9 DID YOU BELIEVE THAT THAT WAS A FALSE STATEMENT
10 BEING MADE TO THE COURT?
11 A. I BELIEVE -- WE BELIEVED THAT THAT WAS AN ACCURATE
12 STATEMENT OF PAN ASIA'S INTENT.
13 Q. LINE 21, YOU REPRESENTED TO THE COURT AS FOLLOWS:
14 "HEARST'S PURCHASE OF THE CHRONICLE AND PAN
15 ASIA'S ACQUISITION OF THE EXAMINER WILL
16 DRAMATICALLY INCREASE BOTH LOCAL AND REGIONAL
17 DAILY NEWSPAPER COMPETITION IN THE SAN FRANCISCO
18 AREA FOR THE BENEFIT OF CONSUMERS, INCLUDING
19 MR. REILLY."
20 YOU BELIEVED THAT THAT STATEMENT THAT WAS MADE TO
21 THE COURT WAS A TRUE STATEMENT?
22 A. YES.
23 Q. AND ON PAGE 23 OF THE MEMORANDUM IN THE CONCLUSION
24 PORTION, THE FOLLOWING STATEMENT WAS MADE -- WAS REPRESENTED TO
25 THE COURT, QUOTE:
881
ASHER - DIRECT / ALIOTO
1 "THE ACQUISITION OF THE EXAMINER BY PAN ASIA
2 WILL FURTHER THE GOALS OF THE ANTITRUST LAWS BY
3 ESTABLISHING ECONOMICALLY COMPETITIVE DAILY
4 NEWSPAPERS IN SAN FRANCISCO FOR THE FIRST TIME
5 IN 35 YEARS."
6 DID YOU BELIEVE THAT THAT WAS A TRUE STATEMENT THAT
7 WAS BEING MADE TO THE COURT?
8 A. YES.
9 Q. THE TESTIMONY YOU GAVE BEFORE THE RECESS THAT YOU
10 UNDERSTOOD THAT THEY DID NOT INTEND TO HAVE -- THEY DID NOT
11 INTEND TO PUT OUT A METROPOLITAN NEWSPAPER IN DIRECT
12 COMPETITION WITH THE CHRONICLE, THAT WAS NOT REPRESENTED TO THE
13 COURT, WAS IT?
14 LET ME DO IT THIS WAY BECAUSE I HAVE, AS I
15 UNDERSTAND -- I WILL REPRESENT TO YOU THAT THIS IS THE ACTUAL
16 QUOTE FROM THE TESTIMONY OF ABOUT 20 MINUTES AGO ON --
17 APPARENTLY ON PAGE 33 OF THE PRELIMINARY RECORDING OF THE
18 TRANSCRIPT, YOUR HONOR. I KNOW IT'S NOT OFFICIAL BUT THIS IS
19 WHAT WE HAVE.
20 ABOUT 20 MINUTES AGO OR SO YOU STATED, QUOTE:
21 "THEY, "IN REFERENCE TO THE PAN ASIAN GROUP,
22 QUOTE, "THEY DO NOT INTEND TO PUT OUT A
23 METROPOLITAN DAILY NEWSPAPER IN DIRECT
24 COMPETITION WITH THE CHRONICLE."
25 YOU ARE AWARE, ARE YOU NOT, THAT THAT REPRESENTATION
882
ASHER - DIRECT / ALIOTO
1 WAS NOT MADE TO THIS COURT IN THE OPPOSITION TO THE PRELIMINARY
2 INJUNCTION?
3 A. I BELIEVE THAT'S CORRECT. I DON'T BELIEVE WE DISCUSSED
4 WHAT PAN ASIA DID NOT INTENT TO DO. I THINK WE DISCUSSED WHAT
5 THEY INTENDED TO DO.
6 Q. I WILL LET OTHERS THINK ABOUT THAT ONE.
7 I WANT TO DIRECT YOUR ATTENTION TO EXHIBIT NUMBER
8 71.
9 MAY I APPROACH THE WITNESS, YOUR HONOR?
10 THE COURT: YES, YOU MAY.
11 BY MR. ALIOTO:
12 Q. EXHIBIT NUMBER 71 IN EVIDENCE IS A DOCUMENT DATED
13 SEPTEMBER 8, 1998. IT IS DIRECTED TO GEORGE IRISH. IT IS FROM
14 FRANK BENNACK, JR. AND THERE IS A CARBON COPY SHOWN AS GOING
15 TO YOU.
16 NOW, DID YOU RECEIVE A COPY OF THAT DOCUMENT ON OR
17 ABOUT THE DATE INDICATED FROM MR. FRANK BENNACK, THE CHIEF
18 EXECUTIVE OFFICER OF THE HEARST CORPORATION?
19 A. YES, I DID.
20 Q. I DIRECT YOUR ATTENTION TO THE LAST PARAGRAPH ON THE FIRST
21 PAGE. MR. BENNACK MAKES THE FOLLOWING STATEMENT. IT JUST
22 BEGINS ON THE VERY LAST THREE WORDS OF THAT PAGE, "I TOLD
23 HIM" -- ON THE VERY LAST THREE WORDS, IT SAYS, "I TOLD HIM,"
24 AND THEN WE GO TO THE LAST PAGE -- THIS IS IN REFERENCE TO
25 MR. SIAS:
883
ASHER - DIRECT / ALIOTO
1 "I TOLD HIM, HOWEVER, THAT WE WERE CERTAINLY
2 GOING TO TAKE THE STEPS WE BELIEVE NECESSARY TO
3 PREPARE OURSELVES FOR THE RESUMPTION OF A FULLY
4 COMPETITIVE SITUATION IN THE POST-2005 PERIOD."
5 DO YOU SEE THAT?
6 A. YES, I DO.
7 Q. AND MR. BENNACK, WHO WROTE THIS DOCUMENT, IS THE CHIEF
8 EXECUTIVE OFFICER OF THE HEARST CORPORATION, CORRECT?
9 A. THAT IS CORRECT.
10 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
884
ASHER - DIRECT / ALIOTO
1 Q. AND YOU UNDERSTOOD THAT HE WAS TALKING ABOUT WHAT HE TOLD
2 MR. SIAS, THE CHIEF EXECUTIVE OFFICER OF THE CHRONICLE;
3 CORRECT?
4 A. THAT IS CORRECT.
5 Q. AND SO YOU KNEW AND WERE AWARE, AT LEAST AS OF SEPTEMBER
6 8, 1998, THAT MR. BENNACK HAD TOLD MR. SIAS THAT THE HEARST
7 CORPORATION WAS GOING TO TAKE THE STEPS THAT WERE NECESSARY TO
8 PREPARE HEARST FOR THE RESUMPTION OF A FULLY-COMPETITIVE
9 SITUATION AFTER 2005? YOU KNEW THAT?
10 A. YES.
11 Q. AND YOU UNDERSTOOD WHEN YOU READ THIS THAT RESUMPTION OF A
12 FULLY-COMPETITIVE SITUATION MEANT THAT THE EXAMINER WOULD BE
13 COMPETING HEAD TO HEAD AGAINST THE CHRONICLE IN SAN FRANCISCO
14 AFTER 2005; IS THAT RIGHT?
15 A. I BELIEVE THAT THAT IS WHAT MR. BENNACK WOULD HAVE BEEN
16 REFERRING TO HERE, YES.
17 Q. AND YOU UNDERSTOOD TOO AT THAT TIME, DID YOU NOT -- OR YOU
18 UNDERSTOOD THAT THERE WAS -- STRIKE THAT.
19 AND IT IS CORRECT, IS IT NOT, THAT THE EXAMINER
20 SPECIFICALLY ADVISED THE CHRONICLE THAT THEY INTENDED TO GO TO
21 THE MORNING, PUBLISH THEIR PAPER IN THE MORNING?
22 A. YOU SAID THE EXAMINER ADVISED THEM?
23 Q. YES.
24 A. I DO RECALL A LETTER FROM MR. WHITE, SO --
25 Q. YES.
885
ASHER - DIRECT / ALIOTO
1 A. -- IF THAT'S THE LETTER YOU'RE REFERRING TO.
2 Q. IT IS.
3 A. I'M AWARE OF THAT LETTER, YES.
4 Q. OKAY. LET ME SHOW IT TO YOU.
5 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: VERY WELL.
7 BY MR. ALIOTO:
8 Q. LET ME SHOW YOU WHAT IS EXHIBIT 72 IN EVIDENCE. EXHIBIT
9 72 IN EVIDENCE IS A DOCUMENT DATED APRIL 15, 1999. IT IS FROM
10 TIMOTHY O. WHITE, EDITOR AND PUBLISHER SAN FRANCISCO EXAMINER,
11 AND IT IS DIRECTED TO MR. SIAS AND IT SHOWS A BLIND COPY TO
12 YOU.
13 DID YOU RECEIVE A COPY OF THAT DOCUMENT ON OR ABOUT
14 THE DATE INDICATED FROM MR. WHITE?
15 A. (WITNESS EXAMINES DOCUMENT.) YES, I DID.
16 Q. AND DID YOU, IN FACT, DISCUSS THIS LETTER PRIOR TO THE
17 TIME THAT HE SENT IT TO MR. SIAS?
18 A. YES, I DID.
19 Q. AND YOU REVIEWED THE LETTER, DID YOU NOT, BEFORE IT WENT
20 TO MR. SIAS?
21 A. YES, I DID.
22 Q. I WANT TO DIRECT YOUR ATTENTION TO PAGE 2. IS IT
23 CORRECT -- YOU ARE, IN ADDITION TO YOUR OTHER DUTIES AND
24 RESPONSIBILITIES, YOU ARE AN ATTORNEY; ARE YOU NOT?
25 A. YES, I AM.
886
ASHER - DIRECT / ALIOTO
1 Q. ARE YOU CHIEF COUNSEL FOR THE EXAMINER -- FOR THE HEARST
2 CORPORATION?
3 A. NO, I AM NOT. I AM CHIEF --
4 Q. WHAT IS YOUR LEGAL TITLE?
5 A. MY LEGAL TITLE IS CHIEF LEGAL OFFICER.
6 Q. SO YOU ARE THE CHIEF LEGAL OFFICER OF THE HEARST
7 CORPORATION; IS THAT RIGHT?
8 A. YES.
9 Q. OKAY. FIRST OF ALL, LET ME START FROM THE FIRST PAGE. ON
10 THE FIRST PAGE IT STATES THAT THERE'S ACKNOWLEDGMENT, IT'S THE
11 FOURTH PARAGRAPH AND THE LAST SENTENCE OF THAT, THAT THERE'S AN
12 ACKNOWLEDGMENT THAT THE, QUOTE:
13 "CHRONICLE DOES NOT INTEND TO EXTEND THE
14 JOINT OPERATING AGREEMENT BEYOND
15 SEPTEMBER 2005."
16 DO YOU SEE THAT?
17 A. I DO.
18 Q. SO YOU HAD THAT INFORMATION OBVIOUSLY BEFORE THIS LETTER
19 WAS SENT?
20 A. YES.
21 Q. AND WHO WAS THE SOURCE OF THAT INFORMATION TO YOU?
22 A. I BELIEVE -- WELL, I BELIEVE MR. -- IT WAS A COMMUNICATION
23 THAT MR. SIAS MADE TO MR. BENNACK. I BELIEVE THAT WAS THE
24 BASIS OF MY UNDERSTANDING HERE.
25 Q. OKAY. SO YOU GOT THE INFORMATION FROM MR. BENNACK
887
ASHER - DIRECT / ALIOTO
1 HIMSELF?
2 A. OR PERHAPS I SAW A COPY OF THE LETTER. I'M NOT SURE
3 EXACTLY HOW I CAME TO UNDERSTAND THIS.
4 Q. OKAY. THEN SECOND, GOING TO THE NEXT PARAGRAPH AND THE
5 SECOND SENTENCE OF THE NEXT PARAGRAPH, IT BEGINS, "THE
6 CHRONICLE'S UNILATERAL EFFORT." DO YOU SEE THAT?
7 A. YES.
8 Q. IT STATES, QUOTE: THE CHRONICLE'S UNILATERAL EFFORT WAS
9 MADE DESPITE THE HARM THIS WOULD DO TO THE AGENCY'S REVENUE AND
10 PROFIT AND THE CLEARLY DISPROPORTIONATE HARM TO EXAMINER
11 CIRCULATION. AS INDICATED IN PRIOR LETTERS, WE BELIEVE THIS TO
12 BE IN VIOLATION OF ANTITRUST LAWS AND THE AGREEMENT,
13 PARTICULARLY SECTIONS 3.1 AND 4.4 PAREN SMALL A END OF PAREN
14 PERIOD."
15 NOW, THE REFERENCE -- DO YOU SEE THAT?
16 A. YES, I DO.
17 Q. IT'S ON THE TOP OF PAGE 2.
18 ALL RIGHT. AND DID YOU, IN FACT, BELIEVE THAT THE
19 CHRONICLE'S CONDUCT WITH REGARD TO THIS PARTICULAR MATTER WOULD
20 HARM THE EXAMINER?
21 A. YES, I BELIEVED IT COULD.
22 Q. AND DID YOU BELIEVE THAT THAT HARM WOULD BE -- DID YOU
23 BELIEVE THAT THAT HARM TO BE IN VIOLATION OF THE ANTITRUST LAWS
24 OF THE UNITED STATES?
25 A. I DID NOT HAVE AN INDEPENDENT BELIEF IN THIS RESPECT. I
888
ASHER - DIRECT / ALIOTO
1 WAS RELYING ON WHAT I UNDERSTOOD WAS AN ARGUMENT THAT WE COULD
2 MAKE BASED ON THE ANTITRUST LAWS.
3 Q. OKAY. AND THAT --
4 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR?
5 THE COURT: YES, YOU MAY.
6 BY MR. ALIOTO:
7 Q. LET'S SEE WHAT WE'RE TALKING ABOUT HERE. THE JOA
8 AGREEMENT, THIS IS IN 1990 -- I FORGOT -- 1998 -- '99, I'M
9 SORRY, APRIL 15, 1999.
10 OKAY. I'M GOING TO DRAW A STRAIGHT LINE ACROSS THE
11 TOP OF THE EASEL AND THEN DRAW A HORIZONTAL -- A VERTICAL LINE,
12 AND THIS WILL BE 2005 I'LL PUT ABOVE THE VERTICAL LINE. AND
13 THEN I'LL DRAW ANOTHER VERTICAL LINE BACK TO THE LEFT, AND THIS
14 IS APRIL OF 1999.
15 THE IDEA WAS THAT YOU KNEW OR STATED IN THIS LETTER,
16 OR MR. WHITE DID, THAT IN 2005 THERE WAS GOING TO BE NO -- NO
17 MORE JOA; CORRECT? THAT'S WHAT YOU UNDERSTOOD?
18 A. YES.
19 Q. AND YOU UNDERSTOOD WHAT MR. BENNACK SAID IS THAT HE TOLD
20 MR. SIAS THAT COME 2005, THE EXAMINER IS GOING TO BE READY TO
21 COMPETE HEAD TO HEAD WITH THE CHRONICLE; CORRECT?
22 A. THAT -- YES, I UNDERSTOOD THAT WAS THE STATEMENT HE MADE
23 TO MR. SIAS, YES.
24 Q. OKAY. SO HERE IS THE EXAMINER. I'M PUTTING THIS ON THE
25 STRAIGHT LINE, AND THE CHRONICLE. I'M PUTTING THEM TOGETHER
889
ASHER - DIRECT / ALIOTO
1 BECAUSE OF THE JOA. NOW, THEY HAVE TO BEGIN PREPARATIONS
2 BEFORE 2005 TO START TO SEPARATE. THAT WAS THE IDEA; RIGHT?
3 A. THAT WAS WHAT IDEA, THE -- THAT WAS WHAT MR. BENNACK WAS
4 REFERRING TO IN HIS STATEMENT.
5 Q. RIGHT. GETTING READY FOR THE HEAD-TO-HEAD COMPETITION;
6 RIGHT?
7 A. I DON'T BELIEVE THAT'S QUITE WHAT IT SAYS, BUT IT SAYS WE
8 WERE INTENDING TO TAKE THE STEPS TO GET READY FOR THAT, YES.
9 Q. AND THEN AFTER 2005, THE IDEA WOULD BE THE EXAMINER AND
10 THE CHRONICLE AND THEY WOULD BE COMPETING AGAINST EACH OTHER
11 HEAD TO HEAD TO SEE WHO WINS THIS RACE; RIGHT?
12 A. I DON'T BELIEVE THAT'S WHAT THIS SENTENCE SAYS.
13 Q. NO. THAT'S WHAT MR. BENNACK SAID. WE JUST DID HIS
14 LETTER.
15 A. CORRECT. I MEANT TO REFER BACK TO MR. BENNACK'S
16 STATEMENT.
17 Q. YES. THAT'S WHAT HE SAID. HE SAID THAT --
18 A. HE SAID THAT WE CERTAINLY WERE GOING TO TAKE THE STEPS WE
19 BELIEVE NECESSARY TO PREPARE OURSELVES --
20 Q. CORRECT.
21 A. -- FOR THE RESUMPTION. SO --
22 Q. OF A FULLY-COMPETITIVE SITUATION IN POST-2005 PERIOD;
23 RIGHT?
24 A. THAT IS WHAT THIS SAYS, YES.
25 Q. OKAY. AND THEN THEY WERE GOING TO -- TO PREPARE
890
ASHER - DIRECT / ALIOTO
1 THEMSELVES TO GET READY TO COMPETE HEAD TO HEAD AFTER 2005; IS
2 THAT RIGHT?
3 A. THAT IS WHAT THE STATEMENT SAYS.
4 Q. OKAY. SO THE IDEA IN THIS LETTER OF APRIL 15TH WAS, WITH
5 REGARD TO THE ANTITRUST LAWS, THAT ANY EFFORT BY THE CHRONICLE
6 TO TRY TO STOP OR HARM THE EXAMINER BEFORE THEY GOT TO THE
7 STARTING LINE OF 2005, THAT THAT WOULD HARM THEM AND PUT THEM
8 IN A LESS ADVANTAGEOUS POSITION TO BE ABLE TO COMPETE AGAINST
9 THE CHRONICLE AFTER 2005. THAT WAS THE IDEA; RIGHT?
10 A. NO, I ACTUALLY DON'T KNOW WHAT THE SPECIFIC CONCEPT OR
11 IDEA MIGHT HAVE BEEN OR WHAT THE ARGUMENT MIGHT HAVE BEEN IN
12 RESPECT TO THE ANTITRUST LAWS. I REALLY DON'T KNOW WHAT IT
13 WAS.
14 Q. WELL, YOU'RE THE CHIEF LEGAL OFFICER FOR HEARST AND YOU
15 REVIEWED THIS LETTER AND YOU SAW IT BEFORE IT WENT OUT, AND IT
16 STATES ON THE FIRST PAGE TO MR. SIAS FROM MR. WHITE, QUOTE:
17 "THE CHRONICLE'S UNILATERAL EFFORT WAS MADE
18 DESPITE THE HARM THIS WOULD DO TO THE AGENCY'S
19 REVENUE AND PROFIT AND THE CLEARLY
20 DISPROPORTIONATE HARM TO EXAMINER CIRCULATION."
21 THAT, YOU UNDERSTOOD, WAS WITH REGARD TO THIS
22 PRE-2005 PERIOD; DIDN'T YOU?
23 A. YES.
24 Q. AND YOU UNDERSTOOD THAT THE ANTITRUST ALLEGATION WAS THAT
25 THIS WOULD VIOLATE THE ANTITRUST LAWS BECAUSE IT WOULD KIND
891
ASHER - DIRECT / ALIOTO
1 OF -- IT WOULD HARM OR HURT THE EXAMINER BEFORE 2005 AND
2 SOMEHOW INHIBIT THE ABILITY OF THE EXAMINER TO COMPETE AFTER
3 2005; ISN'T THAT RIGHT?
4 A. NO. I BELIEVE I SAID I DON'T KNOW WHAT THE ANTITRUST
5 THEORY WOULD HAVE BEEN.
6 Q. WELL, AS THE CHIEF LEGAL OFFICER OF THE HEARST
7 CORPORATION, WHEN YOU HAVE THIS LETTER THAT YOU ARE SENDING
8 FROM THE EDITOR AND PUBLISHER OF THE EXAMINER TO THE
9 PRESIDENT/CHIEF EXECUTIVE OFFICER OF THE CHRONICLE, THERE'S AN
10 ALLEGATION OF ANTITRUST LAW VIOLATION, ISN'T IT YOUR DUTY AND
11 RESPONSIBILITY AND OBLIGATION TO FIND OUT WHAT THEY'RE TALKING
12 ABOUT?
13 A. I DON'T BELIEVE SO. I RELIED ON THE FACT THAT THIS WAS
14 REVIEWED BY MANY PEOPLE, INCLUDING THOSE WHO HAD EXPERTISE. SO
15 I DIDN'T -- AS I SAY, I DON'T KNOW WHAT THE ANTITRUST THEORY
16 COULD HAVE BEEN.
17 Q. OKAY. AT ANY RATE, YOU DIDN'T BELIEVE, DID YOU, THAT YOU
18 WERE SENDING A LETTER OUT OR A LETTER WAS GOING OUT BY THE
19 EDITOR AND THE PUBLISHER OF THE EXAMINER TO THE CEO OF THE
20 CHRONICLE THAT WAS INCORRECT?
21 A. I DON'T BELIEVE THAT WE WERE -- NO, I DON'T BELIEVE WE
22 WERE SAYING THINGS THAT WERE INCORRECT.
23 Q. YEAH. YOU WEREN'T -- YOU BELIEVED THAT THIS STATEMENT
24 THAT WAS BEING GIVEN TO MR. SIAS WAS TRUE; DIDN'T YOU?
25 A. IF I COULD EXPLAIN --
892
ASHER - DIRECT / ALIOTO
1 Q. WELL, FIRST TELL ME WHETHER YOU BELIEVED IT WAS TRUE; THEN
2 IF YOU WANT AN EXPLANATION, YOU CAN DO THAT TOO.
3 A. I BELIEVE IT WAS A TRUE STATEMENT OF OUR BELIEF. IT SAYS
4 "WE BELIEVE." IT IS MADE IN THE CONTEXT OF AT LEAST WHAT I
5 REGARDED AS A NEGOTIATION PROCESS THAT HAD BEEN GOING ON FOR A
6 LONG TIME.
7 Q. AS THE CHIEF LEGAL COUNSEL OF THE HEARST CORPORATION, YOU
8 DID NOT BELIEVE THAT THIS WAS MAKING A FRIVOLOUS CHARGE; DID
9 YOU?
10 A. NO.
11 Q. BECAUSE IF YOU DID THINK IT WAS A FRIVOLOUS CHARGE, THAT
12 WOULD BE UNETHICAL, WOULDN'T IT, FOR A LAWYER?
13 A. WELL, IF A LAWYER --
14 Q. WOULDN'T IT?
15 A. IF A LAWYER MADE A FRIVOLOUS CHARGE, YES, I DO BELIEVE
16 THAT WOULD BE UNETHICAL.
17 Q. AND THEN WHEN YOU REVIEWED THIS AS CHIEF LEGAL COUNSEL AND
18 YOU KNEW IT WAS GOING OUT TO THE HEAD OR -- AND YOU KNEW IT WAS
19 GOING OUT TO THE CHIEF EXECUTIVE OFFICER OF THE CHRONICLE, YOU
20 KNEW AND BELIEVED THAT THIS WAS NOT A FRIVOLOUS CHARGE;
21 CORRECT?
22 A. AS I HAVE STATED --
23 Q. DID YOU THINK IT WAS A FRIVOLOUS CHARGE?
24 A. I DID NOT THINK IT WAS A FRIVOLOUS CHARGE, THAT IS
25 CORRECT.
893
ASHER - DIRECT / ALIOTO
1 Q. THANK YOU.
2 IF YOU'LL GO TO THE BOTTOM OF THE PAGE. ON THE
3 BOTTOM OF THE PAGE IT STATES IN PARAGRAPH -- FULL PARAGRAPH --
4 IT'S THE SECOND FULL PARAGRAPH -- I'M SORRY, THIRD FULL
5 PARAGRAPH, IT BEGINS, "ACCORDINGLY." THIS IS AFTER THE DEATH
6 WARRANT FOR A MAJOR METROPOLITAN DAILY NEWSPAPER IN THE
7 AFTERNOON.
8 WELL, LET ME ASK YOU ABOUT THAT. IT STATES IN THE
9 THIRD PARAGRAPH, ABOUT THREE LINES DOWN:
10 "WE NOW KNOW THAT PUBLISHING IN THE P.M.
11 CYCLE IS A DEATH WARRANT FOR A MAJOR
12 METROPOLITAN DAILY NEWSPAPER."
13 DO YOU SEE THAT?
14 A. YES, I DO.
15 Q. I WANT TO ASK YOU, ARE YOU FAMILIAR WITH THE SITUATION IN
16 SEATTLE?
17 A. GENERALLY, YES.
18 Q. HEARST HAS A NEWSPAPER IN SEATTLE; IS THAT TRUE?
19 A. YES.
20 Q. HEARST HAS A NEWSPAPER -- HAD THE MORNING NEWSPAPER;
21 CORRECT?
22 A. YES.
23 Q. AND THERE WAS AN AFTERNOON NEWSPAPER; WASN'T THERE?
24 A. YES.
25 Q. AND THE AFTERNOON NEWSPAPER, WAS IT MORE -- DID IT HAVE
894
ASHER - DIRECT / ALIOTO
1 MORE CIRCULATION THAN THE HEARST MORNING PAPER?
2 A. I DON'T RECALL THE RELEVANT CIRCULATION -- THE COMPARATIVE
3 CIRCULATION.
4 Q. AND DID THE HEARST CORPORATION ASK THE AFTERNOON PAPER TO
5 ENTER INTO A JOA WITH IT?
6 A. I BELIEVE SO, BUT I DON'T -- I DON'T RECALL THE HISTORY OF
7 THE CREATION OF THAT JOA.
8 Q. YOU AT LEAST KNOW, DO YOU NOT, THAT HEARST WAS UNWILLING
9 TO CONTINUE COMPETITION EVEN THOUGH THE COMPETITION WAS IN THE
10 AFTERNOON IN SEATTLE; CORRECT?
11 A. WELL, MY UNDERSTANDING IS --
12 Q. DO YOU KNOW THAT?
13 A. NO. MY UNDERSTANDING IS THAT THE PAPERS ARE OPERATING
14 INSIDE OF -- INSIDE OF A JOA.
15 Q. IT GOES ON TO SAY, QUOTE:
16 "ACCORDINGLY, WE HEREBY FORMALLY REQUEST
17 YOUR CONCURRENCE IN OUR MOVING THE EXAMINER
18 EXPEDITIOUSLY TO THE A.M. CYCLE ALONGSIDE THE
19 CHRONICLE."
20 DO YOU SEE THAT?
21 A. YES, I DO.
22 Q. WAS THAT A TRUE STATEMENT?
23 A. WELL, THE STATEMENT WAS MADE HERE.
24 Q. I KNOW THE STATEMENT WAS MADE. DID HEARST MEAN IT?
25 A. DID WE MEAN IT?
895
ASHER - DIRECT / ALIOTO
1 Q. YES.
2 A. WE MEANT IT AS A REQUEST, WHICH IS WHAT IT SAYS HERE.
3 Q. YOU MEANT -- DID YOU MEAN AND INTEND THAT YOU WANTED TO GO
4 IN THE MORNING ALONGSIDE THE CHRONICLE OR WAS THAT A BLUFF?
5 A. WHAT WE WERE DOING HERE, AND MAYBE I SHOULD EXPLAIN SOME
6 OF THE BACKGROUND, BUT I BELIEVE IT'S ACTUALLY -- THE TESTIMONY
7 HERE EXPLAINS IT. WE OWNED ONE HALF OF THE PRINTING ASSETS.
8 WE OWNED THEM. WE PAID FOR THEM AND WE OWNED THEM. THE
9 CHRONICLE OWNED THE OTHER HALF. ALL OF THE PRINTING ASSETS,
10 HOWEVER, WERE NECESSARY TO PUT OUT THE CHRONICLE ON ITS CYCLE.
11 IF YOU LOOK AT THIS LETTER, IT MAKES A VARIETY OF
12 POINTS BECAUSE OUR MAJOR LEVERAGE IN OUR NEGOTIATIONS WITH THE
13 CHRONICLE RELATED TO THOSE PRINTING ASSETS.
14 SO, AND I BELIEVE IT'S REFERRED TO IN THIS LETTER,
15 WE TALK ABOUT THE FACT THAT WE'RE GOING TO REVIEW THE NEEDS
16 THAT WE WOULD HAVE FOR PRINTING ASSETS AT THE END OF THE JOA.
17 WE WERE GOING TO REVIEW THOSE, AND WE WANTED TO LAY THE
18 FOUNDATION THAT WE WERE GOING TO REVIEW THOSE IN THE CONTEXT OF
19 A MORNING PAPER BECAUSE ON THE --
20 Q. OF WHAT?
21 A. IN THE CONTEXT OF A MORNING PAPER.
22 Q. MORNING PAPER.
23 A. SO WE SAY TO THEM WE'D LIKE TO MOVE TO THE MORNING, AND
24 THEN WE POINT OUT THAT WE'RE GOING TO BE REVIEWING OUR NEEDS.
25 AND THE COMBINED MESSAGE TO THE CHRONICLE THAT WE WERE TRYING
896
ASHER - DIRECT / ALIOTO
1 TO CONVEY HERE IS THAT WHEN IT COMES TO THE DIVISION OF ASSETS
2 AT THE END OF THE JOA, WE'RE GOING TO WANT OUR FULL FAIR SHARE
3 AND NOT MERELY THE SHARE THAT WOULD BE ALLOCABLE TO AN
4 AFTERNOON PAPER.
5 SO YOU HAVE TO LOOK AT THE WHOLE LETTER HERE TO
6 UNDERSTAND WHAT'S GOING ON. IN FACT, YOU HAVE TO LOOK AT THE
7 WHOLE SEQUENCE OF LETTERS TO REALLY UNDERSTAND.
8 Q. OKAY. MY QUESTION TO YOU, AGAIN, IF YOU WILL LISTEN TO
9 THE QUESTION AND TRY TO ANSWER IT, IS: WHEN YOU MADE THIS --
10 WHEN THIS STATEMENT WAS MADE IN THIS LETTER, WHICH YOU REVIEWED
11 AND YOU AT THE TIME WERE THE CHIEF LEGAL OFFICER OF THE HEARST
12 CORPORATION, SO FAR AS YOU KNOW, DID THE HEARST CORPORATION
13 MEAN AND INTEND TO GO TO THE MORNING CYCLE ALONGSIDE THE
14 CHRONICLE OR WAS IT A BLUFF?
15 A. I DON'T THINK IT WAS EITHER OF THOSE.
16 Q. SO YOU DIDN'T MEAN IT AND IT WASN'T A BLUFF; IS THAT THE
17 TESTIMONY?
18 A. I BELIEVE MY TESTIMONY IS, TO BE CLEAR ON THIS --
19 Q. IT'S NOT CLEAR. I ASKED YOU --
20 MR. HALLING: OBJECTION, ARGUMENTATIVE AND HE
21 INTERRUPTED THE WITNESS.
22 THE COURT: WELL, OBJECTION OVERRULED. IT'S
23 CROSS-EXAMINATION.
24 PROCEED, MR. ALIOTO.
25 THE WITNESS: WE MEANT --
897
ASHER - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. MR. ASHER --
3 A. WE MEANT --
4 Q. -- YOU EITHER MEANT IT OR IT WAS A BLUFF OR IT WAS JUST AN
5 OUTRIGHT LIE.
6 A. ALL RIGHT. IF YOU'RE GIVING ME THOSE CHOICES, WE MEANT
7 IT.
8 Q. NOW, YOU ALSO SAY THAT IF YOU GO IN THE MORNING, IT'S
9 GOING TO IMPROVE THE PROFIT OF BOTH PAPERS; CORRECT?
10 A. THAT WAS OUR ARGUMENT, YES.
11 Q. SO THAT IF THE EXAMINER WENT IN THE MORNING HEAD TO HEAD
12 WITH THE CHRONICLE, YOU BELIEVED THAT BOTH -- THAT THE
13 PROFITABILITY OF BOTH PAPERS WOULD BE IMPROVED; IS THAT RIGHT?
14 A. MY ONLY --
15 Q. IS THAT RIGHT?
16 A. IT IS CORRECT. HOWEVER, I WOULD POINT OUT THAT INSIDE THE
17 JOA THERE'S NO SUCH THING AS GOING HEAD TO HEAD. BUT, YES, IT
18 IS CORRECT WE ARGUED PRINCIPALLY BECAUSE OF THE COST SAVINGS OF
19 HAVING A SECOND PRINTING CYCLE AND A SECOND DISTRIBUTION CYCLE
20 THAT THERE WOULD BE INCREASED PROFITABILITY BY GOING TO THE
21 MORNING, NOT BECAUSE OF COMPETITION BUT BECAUSE OF COST
22 SAVINGS.
23 Q. NOW, YOU UNDERSTOOD ALSO THAT YOU HAD -- THE EXAMINER HAD
24 THE RIGHT, IF IT WANTED TO, TO SET ANY PRICE IT WANTED TO;
25 CORRECT? UNDER THE JOA YOU UNDERSTOOD THAT?
898
ASHER - DIRECT / ALIOTO
1 A. ANY PRICE FOR WHAT?
2 Q. YOU UNDERSTOOD THAT THE EXAMINER HAD THE RIGHT UNDER THE
3 JOA TO SET THE RATES FOR CIRCULATION AND FOR ADVERTISING;
4 CORRECT?
5 A. FOR ITS STAND-ALONE ADVERTISING AND CIRCULATION IT HAD THE
6 RIGHT UNDER THE AGREEMENT TO DO SO, YES.
7 Q. THERE'S NO STAND-ALONE ANYTHING IN THE JOA; IS THERE?
8 THEY HAD THE RIGHT AND THE RESPONSIBILITY TO SET THE PRICE FOR
9 THEIR AD RATES AND THEIR CIRCULATION UNDER THE JOA; ISN'T THAT
10 TRUE?
11 A. THE JOA AGREEMENT HAS PROVISIONS TO THAT EFFECT. BUT AS
12 YOU JUST SAID, THERE IS NO STAND-ALONE ADVERTISING; AND AS TO
13 JOINT ADVERTISING, THERE'S ONLY ONE WAY TO SET THAT RATE, AND
14 THAT IS FOR BOTH PARTIES TO AGREE ON IT.
15 Q. NOW, WHEN YOU WERE GOING TO GO IN THE MORNING AND YOU
16 BELIEVED THAT THIS WOULD IMPROVE THE PROFITABILITY OF BOTH THE
17 CHRONICLE AND THE EXAMINER, DID YOU INTEND TO COMPETE AGAINST
18 THE CHRONICLE ON RATES?
19 A. NO.
20 Q. DID YOU INTEND TO COMPETE AGAINST THE CHRONICLE ON
21 ADVERTISING PRICES?
22 A. NO. THERE IS NO COMPETITION INSIDE THE JOA.
23 Q. DID YOU INTEND TO COMPETE AGAINST THE CHRONICLE FOR STREET
24 SALES?
25 A. NO.
899
ASHER - DIRECT / ALIOTO
1 Q. IN TALKING ABOUT STREET SALES YOU KNOW YESTERDAY THAT THE
2 CHRONICLE REDUCED ITS STREET PRICE IN SAN FRANCISCO FROM 50
3 CENTS TO 25 CENTS? YOU KNOW THAT; RIGHT?
4 A. YES.
5 Q. AS A MATTER OF FACT, WHEN I POINTED THAT OUT TO YOU
6 YESTERDAY, YOU TESTIFIED YESTERDAY AFTERNOON AT PAGE 801, YOU
7 SAY, QUOTE, "IT SHOWS THERE'S SOME COMPETITION," END OF QUOTE.
8 A. THAT'S CORRECT, FROM THE SAN JOSE MERCURY NEWS, WHICH HAD
9 ANNOUNCED -- WHICH HAS ANNOUNCED THAT IT IS COMING INTO THE
10 CITY OF SAN FRANCISCO WITH A 25-CENT NEWSPAPER. THAT'S WHY
11 THAT RATE WAS CHANGED.
12 Q. OKAY. SO WHEN YOU SAY, "IT SHOWS THERE'S SOME
13 COMPETITION," WHEN YOU SAID THAT YESTERDAY, YOU WEREN'T
14 REFERRING TO THE CHRONICLE, YOU WERE REFERRING TO --
15 A. I WAS REFERRING --
16 Q. -- THE SAN JOSE MERCURY NEWS?
17 A. I WAS REFERRING TO THE REAL COMPETITION THAT EXISTS
18 BETWEEN THE CHRONICLE AND THE EXAMINER TODAY ON THE ONE HAND
19 AND THE SAN JOSE MERCURY NEWS ON THE OTHER. THAT'S WHAT I WAS
20 REFERRING TO.
21 Q. AND YOU KNOW THAT YOUR OWN PAPER, THE SAN FRANCISCO
22 EXAMINER, WENT ORIGINALLY FROM 50 CENTS TO 25 CENTS UNDER
23 MR. WILLIAM HEARST THE THIRD?
24 A. I'LL HAVE TO CONFESS THAT MY KNOWLEDGE IN THAT RESPECT
25 IS -- DOESN'T GO BACK THAT FAR.
900
ASHER - DIRECT / ALIOTO
1 Q. WELL, YOU KNEW THAT -- YOU KNEW OR UNDERSTOOD, DIDN'T YOU,
2 THAT THEY LOWERED THE PRICE IN ORDER TO TRY TO INCREASE THEIR
3 CIRCULATION?
4 A. I HAVE NO IDEA WHY THAT RATE WAS CHANGED AT THAT TIME.
5 Q. ALL RIGHT. NOW, YOU WERE -- YOU WERE ADVISED, WERE YOU
6 NOT, THAT -- DO YOU KNOW WHO DICK ROSENBERG IS, RICHARD
7 ROSENBERG?
8 A. I CAN'T RECALL OR I DON'T KNOW.
9 Q. YOU KNOW THAT RICHARD ROSENBERG -- DOES IT REFRESH YOUR
10 RECOLLECTION THAT RICHARD ROSENBERG WAS THE FORMER CHAIRMAN OF
11 THE BOARD OF THE BANK OF AMERICA AND ALSO A MEMBER OF THE
12 CHRONICLE BOARD?
13 A. I'LL TAKE YOUR WORD FOR IT. I DIDN'T KNOW THAT.
14 Q. WELL, LET ME SHOW YOU WHAT IS EXHIBIT NUMBER 88.
15 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
16 THE COURT: YOU MAY.
17 BY MR. ALIOTO:
18 Q. SHOWING YOU WHAT IS IN EVIDENCE AS EXHIBIT 88 -- IS IT IN
19 EVIDENCE?
20 EXHIBIT 88 APPEARS TO BE AN E-MAIL FROM FRANK
21 BENNACK TO A NUMBER OF FOLKS, INCLUDING YOURSELF, RE SUBJECT
22 SAN FRANCISCO, AND IT INCLUDES AN E-MAIL FROM MR. GEORGE IRISH
23 AT HEARST. THE DATE IS JUNE 22ND, 1999. YOU ARE SHOWN AS A
24 RECIPIENT ON THE TOP OF BOTH.
25 I ASK YOU, SIR, WHETHER OR NOT YOU RECEIVED A COPY
901
ASHER - DIRECT / ALIOTO
1 OF THIS E-MAIL ON OR ABOUT THE DATE INDICATED.
2 A. (WITNESS EXAMINES DOCUMENT.) YES, I DID.
3 Q. OKAY. NOW, FIRST I WILL READ THE STATEMENT THAT IS MADE
4 IN THE E-MAIL BY MR. BENNACK THAT INCLUDED THE E-MAIL FROM
5 MR. IRISH, AND THEN WE'LL GO TO HIS AND THEN PERHAPS BACK. BUT
6 MR. BENNACK SAYS TO THOSE WHO WERE COPIED -- NAMELY YOURSELF,
7 MR. GANZI, MR. IRISH, YOURSELF, MR. DOERFLER, MR. THACKERAY --
8 MR. BENNACK STATES, QUOTE:
9 "IN VIEW OF THIS, I'D BE INTERESTED IN THE
10 PROGRESS WITH WASSERSTEIN. I'M UNDER THE
11 IMPRESSION THAT THERE WAS TO BE A MEETING WITH
12 THEM ON MONDAY. SHOULD WE ACT AS ROSENBERG
13 SUGGESTS, I WOULD CONSIDER THIS FAIRLY VALID
14 INPUT. FAB," WHICH IS FRANK BENNACK.
15 AND THEN THE DOCUMENT FROM MR. IRISH STATES AS
16 FOLLOWS:
17 "FIRST, TODAY STEVE FALK RELAYED A
18 CONVERSATION HE HAD WITH DICK ROSENBERG, WHO WAS
19 IN THE CHRONICLE BOARD MEETING, ABOUT THE
20 DISCUSSION ON THE DECISION TO SELL."
21 DO YOU SEE THAT?
22 A. YES, I DO.
23 Q. AND STEVE FALK YOU KNEW WAS THE --
24 A. HEAD OF THE NEWSPAPER AGENCY.
25 Q. OKAY.
902
ASHER - DIRECT / ALIOTO
1 A. SAN FRANCISCO NEWSPAPER AGENCY.
2 Q. OKAY.
3 "ROSENBERG TOLD STEVE" --
4 NOW STEVE WORKS FOR BOTH -- STEVE FALK WORKS FOR
5 BOTH THE CHRONICLE AND THE EXAMINER?
6 A. NO, HE DOESN'T. HE'S --
7 Q. OKAY. I'M SORRY.
8 A. HE WORKS FOR THE SAN FRANCISCO NEWSPAPER AGENCY.
9 Q. OKAY. HE WORKS FOR THE SAN FRANCISCO NEWSPAPER AGENCY,
10 OWNED BY BOTH THE CHRONICLE AND THE EXAMINER?
11 A. WHICH IS OWNED ONE HALF BY CHRONICLE PUBLISHING COMPANY
12 AND ONE HALF BY THE HEARST CORPORATION.
13 Q. HE GOES ON TO SAY, QUOTE:
14 "ROSENBERG TOLD STEVE THAT THEY
15 DISCUSSED" --
16 NOW THAT "THEY" IS IN REFERENCE TO THE CHRONICLE
17 BOARD; ISN'T IT?
18 A. (WITNESS EXAMINES DOCUMENT.) THAT WOULD -- I THINK THAT'S
19 A REASONABLE INFERENCE FROM THE FIRST SENTENCE, YES.
20 Q. OKAY. QUOTE:
21 "ROSENBERG TOLD STEVE THAT THEY DISCUSSED
22 THE HEARST/JOA SITUATION AT LENGTH AND ENDED UP
23 WITH THE EXPECTATION THAT HEARST WOULD MAKE
24 THEIR BEST OFFER VERY QUICKLY INSTEAD OF WAITING
25 UNTIL ALL THE OTHER OFFERS WERE IN AND THEN
903
ASHER - DIRECT / ALIOTO
1 USING THE JOA FIRST 'RIGHT OF REFUSAL' LANGUAGE
2 AT THE END. DICK TOLD STEVE THAT THERE IS STILL
3 A GREAT DEAL OF LONG-STANDING DISLIKE OF HEARST
4 AMONG SOME OF THE SHAREHOLDERS AND A STRONG
5 OFFER UP FRONT COULD LEAD TO THEIR ACCEPTANCE
6 WITHOUT THE LONGER PROCESS.
7 "STEVE TOLD ME," AND THIS IS IRISH TALKING,
8 "STEVE TOLD ME THAT ROSENBERG OPINED THAT IF WE
9 WAITED UNTIL THE END OF THE PROCESS, THEY MAY
10 FIND THEMSELVES FLUSH WITH CASH AND DECIDE TO
11 KEEP THE CHRONICLE."
12 OKAY, END OF QUOTE.
13 NOW, FIRST OF ALL, BY READING THIS, YOU UNDERSTOOD
14 THAT MR. ROSENBERG WAS ON THE BOARD OF DIRECTORS OF THE
15 CHRONICLE; CORRECT?
16 A. YES.
17 Q. AND HE WAS GIVING INFORMATION TO THE HEAD OF THE SAN
18 FRANCISCO NEWSPAPER AGENCY, AS YOU READ THIS, THIS IS YOUR
19 UNDERSTANDING, AND HE WAS GIVING INFORMATION TO THE HEAD OF THE
20 SAN FRANCISCO NEWSPAPER AGENCY TO PASS ALONG TO HEARST;
21 CORRECT?
22 A. I DON'T KNOW IF THE -- IF THE -- I REALLY DON'T KNOW WHAT
23 MR. ROSENBERG'S INTENT WAS IN TALKING TO MR. FALK. I DON'T SEE
24 HOW I COULD KNOW THAT.
25 Q. I'M ASKING FOR YOUR UNDERSTANDING. WHEN YOU READ THIS,
904
ASHER - DIRECT / ALIOTO
1 YOU UNDERSTOOD THAT WHAT MR. ROSENBERG WAS DOING WAS CONTACTING
2 MR. STEVE FALK OF THE SAN FRANCISCO NEWSPAPER AGENCY TO
3 TRANSMIT INFORMATION TO HEARST, THAT WAS YOUR UNDERSTANDING
4 WHEN YOU READ THIS; WASN'T IT?
5 A. I THINK IT IS REASONABLE -- WELL, I DON'T KNOW. AS I
6 SAID, I DON'T KNOW WHAT MR. ROSENBERG'S PURPOSE OR INTENT WAS
7 IN TALKING. ALL -- MY UNDERSTANDING HERE WAS SIMPLY FOR THE
8 FACT OF WHAT'S SAID.
9 Q. WELL, YOU SEE HERE THAT MR. ROSENBERG MADE A SUGGESTION,
10 THE LAST ONE, QUOTE:
11 "STEVE TOLD ME THAT ROSENBERG OPINED THAT IF
12 WE WAITED UNTIL THE END OF THE PROCESS, THEY MAY
13 FIND THEMSELVES FLUSH WITH CASH AND DECIDE TO
14 KEEP THE CHRONICLE."
15 NOW, YOU DIDN'T THINK HE WAS TELLING THAT TO STEVE
16 FALK JUST SO MR. FALK COULD DO SOMETHING WITH THE SAN FRANCISCO
17 NEWSPAPER AGENCY; DID YOU?
18 A. I THINK -- I WAS ABOUT TO SAY, I THINK IT'S -- WITH THE
19 CAVEAT THAT I DON'T KNOW WHAT MR. ROSENBERG'S PURPOSE OR INTENT
20 WAS, I WOULD AGREE THAT A FAIR INFERENCE FROM THIS IS THAT
21 THERE WAS AN INTENT FOR THIS INFORMATION TO FIND ITS WAY BACK
22 TO HEARST, YES.
23 Q. OKAY. NOW, AT THIS TIME DID YOU HAVE ANY SUSPICION
24 WHATSOEVER THAT THERE WAS ANYBODY IN THE HEARST ORGANIZATION,
25 THEIR BOARD OF DIRECTORS OR OTHERWISE, THAT MIGHT REVEAL -- WHO
905
ASHER - DIRECT / ALIOTO
1 MIGHT REVEAL INFORMATION HE LEARNS IN YOUR BOARD OF DIRECTORS
2 TO THE CHRONICLE?
3 A. I DIDN'T HAVE ANY SUSPICION IN THAT REGARD, NO.
4 Q. DID YOU THINK MR. ROSENBERG WAS DOING ANYTHING UNETHICAL
5 OR OTHERWISE BY ADVISING YOU, INDIRECTLY THROUGH MR. FALK,
6 ABOUT WHAT TOOK PLACE IN A CHRONICLE BOARD OF DIRECTORS MEETING
7 OF WHICH HE WAS A MEMBER?
8 A. I DIDN'T HAVE ANY THOUGHT ABOUT THAT AT THE TIME, NO.
9 Q. NOW, WHEN IT SAYS, THEY MAY FIND THEMSELVES FLUSH, MEANING
10 THE CHRONICLE FOLKS, IF HEARST DIDN'T ACT QUICKLY, ACCORDING TO
11 MR. ROSENBERG, IF HEARST DIDN'T ACT QUICKLY, THEY, MEANING THE
12 CHRONICLE BOARD OR CHRONICLE, MAY FIND THEMSELVES FLUSH WITH
13 CASH AND DECIDE TO KEEP THE CHRONICLE, NOW, THE "FLUSH WITH
14 CASH," YOU UNDERSTOOD THAT TO MEAN, DID YOU NOT, THAT THEY
15 MIGHT POSSIBLY SELL OTHER OF THEIR ASSETS IN ADDITION TO THE
16 CHRONICLE?
17 A. YES.
18 Q. AND THE OTHER ASSETS WOULD INCLUDE -- WERE QUITE
19 SUBSTANTIAL, YOU UNDERSTOOD THEM TO BE; CORRECT?
20 A. YES.
21 Q. AND AT OR ABOUT THIS TIME HAD THE CHRONICLE ALREADY SOLD
22 OR ATTEMPTED TO SELL ITS TELEVISION STATION AND OTHER ASSETS?
23 A. YES. I BELIEVE BY THIS DATE THE SALES PROCESS FOR ALL OF
24 THEIR ASSETS WAS UNDER WAY, YES.
25 Q. I'M SORRY, HAD BEEN OR WHAT? WHAT DID YOU SAY?
906
ASHER - DIRECT / ALIOTO
1 A. WAS UNDER WAY, YES.
2 Q. WAS UNDER WAY. AND THE IDEA HERE WAS, WAS IT NOT, YOU
3 UNDERSTOOD THAT THE IDEA HERE WAS THAT IF THE CHRONICLE FOLKS
4 GOT THIS MONEY, THEY MAY SAY SOMETHING LIKE, "WELL, WE'LL KEEP
5 THE CHRONICLE. WE WON'T SELL IT," AND THAT WOULD BE A MAJOR
6 PROBLEM FOR HEARST; CORRECT? THAT WAS THE IDEA?
7 A. THE IDEA -- WELL, I'M SORRY, THE IDEA BEHIND THIS
8 STATEMENT?
9 Q. WHEN YOU GOT THIS MEMO, WHEN YOU GOT THIS E-MAIL FROM
10 MR. BENNACK HIMSELF, HE SAID, QUOTE:
11 "IN VIEW OF THIS, I'D BE INTERESTED IN THE
12 PROGRESS WITH WASSERSTEIN. I'M UNDER THE
13 IMPRESSION THAT THERE WAS TO BE A MEETING WITH
14 THEM ON MONDAY. SHOULD WE ACT AS ROSENBERG
15 SUGGESTS? I WOULD CONSIDER THIS FAIRLY VALID
16 INPUT. FAB."
17 SO WHEN YOU GOT THAT, YOU UNDERSTOOD, DID YOU NOT,
18 THAT HEARST BETTER ACT AND ACT QUICKLY ON THE CHRONICLE;
19 CORRECT?
20 A. IT IS CORRECT. IN FACT, OUR PRINCIPAL CONCERN IN THIS
21 ENTIRE TRANSACTION WAS NOT THAT WE WOULDN'T BE ABLE TO, USING
22 OUR RIGHT OF FIRST REFUSAL. OUR FOCUS WAS NOT TO USE THE RIGHT
23 OF FIRST REFUSAL BECAUSE OUR CONCERN WAS THAT IF OUR PRICE WAS
24 NOT GOOD ENOUGH, THE CHRONICLE FAMILY WOULD SIMPLY DECIDE NOT
25 TO SELL.
907
ASHER - DIRECT / ALIOTO
1 SO THIS INTELLIGENCE, I'LL USE THAT TERM, WAS
2 CONSISTENT WITH THE CONCERNS THAT WE HAD; THAT IF WE WERE GOING
3 TO BE SUCCESSFUL IN ACQUIRING THE CHRONICLE, WE WERE GOING TO
4 HAVE TO DO THAT ON THE BASIS OF PRICE NOT ON THE BASIS OF
5 WHATEVER LEGAL RIGHTS WE HAD UNDER THE JOA AGREEMENT.
6 Q. NOW, WHATEVER IT IS, YOU BETTER DO IT QUICKLY BEFORE THESE
7 MEMBERS GET SOME CASH FOR SOME OF THOSE OTHER ASSETS, THAT'S
8 THE IDEA HERE; RIGHT?
9 A. YES.
10 Q. AND WHEN YOU REFERRED TO MR. ROSENBERG'S GIVING YOU
11 INTELLIGENCE, AS FAR AS YOU KNOW, WAS MR. ROSENBERG GIVING
12 INTELLIGENCE TO THE HEARST CORPORATION BEFORE THIS TIME?
13 A. I DON'T HAVE ANY KNOWLEDGE OF THAT, NO.
14 Q. NOW, JUST IN GENERAL, ON THE FLUSH WITH CASH, LET ME JUST
15 SEE IF WE CAN PUT SOME ACTUAL NUMBERS ON IT. WAS IT YOUR
16 UNDERSTANDING THAT THE CHRONICLE -- THE KRON WAS GOING TO BE
17 SOLD FOR SOMEWHERE IN THE RANGE OR WAS SOLD FOR SOMEWHERE IN
18 THE RANGE OF $840 MILLION, OR SOMETHING LIKE THAT?
19 A. I DON'T RECALL THE EXACT PURCHASE PRICE, BUT I KNOW IT WAS
20 LARGE.
21 Q. AND BY "LARGE," WE'RE TALKING ABOUT --
22 A. HUNDREDS OF MILLIONS.
23 Q. -- HUNDREDS OF MILLIONS.
24 AND THEN THE WORCESTER PAPER --
25 A. WORCESTER.
908
ASHER - DIRECT / ALIOTO
1 Q. WORCESTER PAPER. SORRY. I SHOULD KNOW THAT.
2 A. I WAS BORN IN LEOMINSTER NEXT-DOOR.
3 Q. I APOLOGIZE ON THAT ONE.
4 -- WAS GOING FOR $295 MILLION, THAT WAS THE
5 APPROXIMATE RANGE?
6 A. AGAIN, I DON'T RECALL THE PRECISE PRICES, AND I DON'T
7 RECALL IN TERMS OF TIMING WHETHER ONE OR MORE OF THOSE
8 TRANSACTIONS HAD OCCURRED BY JUNE 22ND, WHICH IS THE DATE OF
9 THESE E-MAIL CORRESPONDENCE, BUT I DO RECALL THAT THOSE
10 NEWSPAPERS WERE SOLD FOR SUBSTANTIAL SUMS.
11 Q. OKAY. AND THEN BLOOMINGDALE PAPER APPROXIMATELY A HUNDRED
12 MILLION -- $180 MILLION?
13 A. THAT COMPORTS WITH MY GENERAL RECOLLECTION, YES.
14 THE COURT: I THINK IT'S BLOOMINGTON.
15 MR. ALIOTO: WHAT DID I SAY?
16 THE COURT: BLOOMINGDALE I THINK YOU SAID.
17 MR. ALIOTO: I'M GOING TO BLAME THIS ON MR. SHULMAN,
18 JUDGE.
19 MR. SHULMAN: I SAID BLOOMINGTON.
20 MR. ALIOTO: HE DID SPELL IT RIGHT, BY THE WAY.
21 Q. IN ANY EVENT, THERE WAS A LIKELIHOOD THAT THE CHRONICLE,
22 THE CHRONICLE FAMILY MEMBERS, MAY HAVE OVER A BILLION DOLLARS
23 AND UNLESS HEARST ACTED QUICKLY, THAT MAY BE ENOUGH SO THAT
24 THERE WOULD BE NO REAL IMPETUS FOR THEM TO -- FINANCIAL NEED OR
25 ANYTHING LIKE THAT TO SELL THE CHRONICLE?
909
ASHER - DIRECT / ALIOTO
1 A. THAT WAS A CONCERN WE HAD INDEPENDENT OF THIS E-MAIL.
2 Q. NOW, MR. BENNACK REFERRED TO WASSERSTEIN. WHO ARE THEY?
3 A. WASSERSTEIN.
4 Q. WASSERSTEIN.
5 A. THE INDIVIDUAL HERE IS BRUCE WASSERSTEIN WHO WAS THE
6 SENIOR PARTNER OF WASSERSTEIN AND PERELLA.
7 Q. ALL RIGHT. LET ME SHOW YOU EXHIBIT 89. EXHIBIT 89 MARKED
8 FOR IDENTIFICATION IS A PART OF PROJECT SUN STRATEGIC
9 CONSIDERATIONS PREPARED -- IT CARRIES THE DATE JUNE 28, 1999
10 FROM WASSERSTEIN, PERELLA & COMPANY.
11 AND IS THIS A PORTION AT LEAST OF WHAT WAS PREPARED
12 BY WASSERSTEIN AND PERELLA FOR AND ON BEHALF OF THE HEARST
13 CORPORATION WITH REGARD TO THE POSSIBLE PURCHASE OF THE
14 CHRONICLE?
15 A. (WITNESS EXAMINES DOCUMENT.) YES, THIS WAS PREPARED BY
16 WASSERSTEIN AND PERELLA FOR OUR REVIEW.
17 MY ONLY CONCERN IS WITH YOUR STATEMENT -- I BELIEVE
18 YOUR QUESTION WAS, WAS THIS PREPARED FOR AND ON BEHALF OF THE
19 HEARST CORPORATION. SO JUST SO WE'RE CLEAR, THIS IS A DOCUMENT
20 PREPARED BY WASSERSTEIN AND PERELLA I BELIEVE IN ADVANCE OF ONE
21 OF OUR FIRST MEETINGS WITH THEM. SO THEY WERE PUTTING DOWN
22 SOME THOUGHTS ABOUT HOW THEY SAW THE TRANSACTION FOR OUR
23 CONSIDERATION.
24 Q. NOW, THIS IS THE WASSERSTEIN THAT MR. BENNACK HIMSELF
25 REFERRED TO IN THE PREVIOUS MEMO; CORRECT?
910
ASHER - DIRECT / ALIOTO
1 A. YES.
2 Q. AND IF YOU'LL GO TO ON THE FIRST PAGE AND IT'S ARABIC TWO,
3 ARABIC NUMBER TWO, IT STATES, QUOTE:
4 "HEARST POSSIBLE LOSS OF COMPETITIVE
5 ADVANTAGE OVER TIME."
6 DO YOU SEE THAT?
7 A. I DO SEE IT.
8 Q. AND THE FIRST BULLET STATES, QUOTE:
9 "THIS WILL BE PARTICULARLY TRUE IF THE
10 CHRONICLE SALE WERE ONLY TO OCCUR SHORTLY BEFORE
11 THE JOA UNWIND IN 2005 SINCE," AND THEN THE
12 FIRST ONE IS, "THIRD-PARTY BUYERS WOULD NO
13 LONGER BE SUBJECT TO UNFAVORABLE
14 ECONOMICS/SPLITS OF JOA GOING FORWARD."
15 NOW, THAT MEANT TO YOU THAT THE LONGER TIME THAT YOU
16 WAIT AND THE CLOSER IT GETS TO 2005, THE LESS LEVERAGE THAT
17 HEARST WOULD HAVE AGAINST OTHER POTENTIAL COMPETITORS WHO MIGHT
18 BUY THE CHRONICLE?
19 A. I THINK THAT'S A FAIR STATEMENT, YES.
20 MR. ALIOTO: I'M NOT SURE IF I OFFERED THIS OR NOT.
21 IF I DIDN'T, I OFFER WHAT IS MARKED FOR IDENTIFICATION --
22 PLAINTIFF'S OFFER WHAT IS MARKED FOR IDENTIFICATION AS EXHIBIT
23 89.
24 MR. HALLING: NO OBJECTION.
25 THE COURT: VERY WELL. 89 WILL BE ADMITTED.
911
ASHER - DIRECT / ALIOTO
1 (PLAINTIFF'S EXHIBIT 89
2 RECEIVED IN EVIDENCE)
3 BY MR. ALIOTO:
4 Q. NOW, RIGHT UNDER THAT STATEMENT WHERE IT SAYS THAT THE --
5 DOWN TO ARABIC NUMBER TWO, "HEARST POSSIBLE LOSS OF COMPETITIVE
6 ADVANTAGE OVER TIME," ARABIC TWO -- RIGHT, THAT'S IT -- OKAY,
7 UNDER THAT, THE FIRST BULLET WE READ IS THAT, QUOTE:
8 "THIS WILL BE PARTICULARLY TRUE IF THE
9 CHRONICLE SALE WERE ONLY TO OCCUR SHORTLY BEFORE
10 JOA UNWIND IN 2005 SINCE THIRD PARTIES WOULD NO
11 LONGER BE SUBJECT TO UNFAVORABLE ECONOMIC SPLITS
12 OF JOA GOING FORWARD."
13 THEN UNDERNEATH THAT, QUOTE:
14 "'COMPETITORS' (WITH THEIR OWN PLANT SLASH
15 FACILITIES) WOULD BE ABLE TO BID FOR CHRONICLE."
16 DO YOU SEE THAT?
17 A. YES.
18 Q. AND THE IDEA THERE WAS, IS THAT IF IT GOT CLOSER TO THE
19 JOA, THEN NEWSPAPERS OR ORGANIZATIONS LIKE THE ONES MENTIONED
20 YESTERDAY WOULD BECOME FAR MORE POTENT POTENTIAL BIDDERS FOR
21 THE CHRONICLE. THAT WAS THE IDEA; CORRECT?
22 A. NO. I THINK THEY'RE AS POTENT AS EVER. THIS IS ONLY A
23 QUESTION OF PRICE.
24 Q. THIS IS UNDER THE SECTION, QUOTE, "HEARST POSSIBLE LOSS OF
25 COMPETITIVE ADVANTAGE OVER TIME," AND THIS IS UNDER THE SECTION
912
ASHER - DIRECT / ALIOTO
1 WHAT WOULD OCCUR IF THERE WERE NO SALE UNTIL SHORTLY BEFORE THE
2 JOA; CORRECT?
3 A. THAT'S CORRECT.
4 Q. OKAY.
5 A. BUT YOU'RE FOCUSING ON THE WORD "COMPETITIVE" I THINK
6 BECAUSE IT'S A WORD THAT YOU FOCUS ON. WE HAVE TO UNDERSTAND
7 ALL WE'RE TALKING ABOUT -- ALL THEY ARE REFERRING TO HERE, I
8 BELIEVE, IS SIMPLY A QUESTION OF PRICE, SIMPLY A QUESTION OF
9 WHAT PRICE WOULD BE PAID OR WHAT A THIRD PARTY MIGHT BE WILLING
10 TO PAY FOR THE CHRONICLE.
11 AND I BELIEVE ALL THEY'RE SAYING HERE IS THAT SINCE
12 WE ALREADY OWN A ONE HALF INTEREST IN EFFECT IN THE CHRONICLE
13 THROUGH THE END OF THE JOA BUT ONLY UNTIL THEN, THAT ONCE WE
14 HAD REALIZED ON THAT ASSET AND IT HAD BEEN DISSIPATED, THAT AT
15 THAT POINT A THIRD PARTY MIGHT BE WILLING TO PAY MORE FOR THE
16 CHRONICLE THAN THEY WOULD BE WILLING TO PAY IN TERMS OF A
17 CURRENT SALE. THAT'S ALL THEY'RE SAYING.
18 Q. BECAUSE OF THE JOA; CORRECT?
19 A. BECAUSE OF WHAT WE OWN, OUR INTEREST IN THE JOA, WHICH
20 WAS, OF COURSE, BOTH OUR INTEREST IN THE ECONOMICS AND THE ONE
21 HALF INTEREST IN THE ASSETS.
22 Q. AND THE CLOSER YOU GOT TO THE END OF THE JOA, THE MORE
23 LIKELY IT WOULD BE THAT THE CHRONICLE WOULD GET A COMPETITIVE
24 BID FOR THE PAPER; CORRECT?
25 A. I DON'T BELIEVE THAT'S WHAT THIS SAYS AT ALL. AGAIN, THIS
913
ASHER - DIRECT / ALIOTO
1 IS --
2 Q. THAT SAYS, QUOTE --
3 A. THIS IS --
4 Q. -- COMPETITORS IN --
5 MR. HALLING: YOUR HONOR, I WOULD ASK THAT
6 MR. ALIOTO BE INSTRUCTED NOT TO INTERRUPT THE WITNESS' ANSWER.
7 HE WAS IN THE MIDDLE OF AN ANSWER.
8 THE COURT: ALL RIGHT. HAD YOU FINISHED YOUR
9 ANSWER, MR. ASHER?
10 THE WITNESS: NO, I HADN'T.
11 IF YOU LOOK AT THE HEADING, NUMBER 2, THIS SAYS
12 HEARST'S POSSIBLE LOSS OF ADVANTAGE. THAT IS TO SAY IT'S THE
13 QUESTION OF PRICE, THAT OUR ABILITY TO PAY MORE THAN WHAT A
14 THIRD PARTY MIGHT BE WILLING TO PAY, THAT ADVANTAGE, THAT
15 LEVERAGE, WHICH WAS THE TERM YOU USED AND I WOULD AGREE WITH
16 THAT, THAT LEVERAGE WOULD DISSIPATE OVER -- OR COULD DISSIPATE
17 OVER TIME, AND THAT'S ALL THIS IS SAYING.
18 THIS IS NOT -- I'LL STOP. I STOPPED. NO, I MEANT
19 I'M FINISHED.
20 BY MR. ALIOTO:
21 Q. OKAY.
22 A. I'M SORRY.
23 Q. RIGHT UNDERNEATH IT WHERE THIS SAYS, QUOTE, "'COMPETITORS'
24 (WITH THEIR OWN PLANT FACILITIES) WOULD BE ABLE TO BID FOR THE
25 CHRONICLE," RIGHT UNDER THAT IT THEN SAYS:
914
ASHER - DIRECT / ALIOTO
1 "THEREBY ELIMINATING NEED TO PAY 'MAXIMUM' VALUE
2 TO ACQUIRE HEARST'S SHARE OF AGENCY IN 2005
3 LEAVING HEARST WITH MORE LIMITED ALTERNATIVES TO
4 MONETIZE ITS INTEREST IN THE JOA."
5 DO YOU SEE THAT?
6 A. I DO.
7 Q. SO THE CLOSER YOU GOT TO 2005, IF HEARST DIDN'T DO
8 SOMETHING, THE MORE COMPETITIVE WOULD BE THE BIDS FROM OTHER
9 COMPETITORS TO BUY THE CHRONICLE; IS THAT RIGHT?
10 A. WELL, ACTUALLY ON THIS POINT, BECAUSE WE'RE TALKING ABOUT
11 PHYSICAL ASSETS, IT HAD NOTHING TO DO WITH TIME. IN OTHER
12 WORDS, ANY EXISTING NEWSPAPER OPERATOR IN THIS MARKET WHO HAD
13 FACILITIES WOULD BE ABLE TO BID FOR THE CHRONICLE EVEN INSIDE
14 THE JOA AND NOT WORRY ABOUT THE FACT THAT WE OWNED HALF THE
15 ASSETS BECAUSE THEY ALREADY OWNED THEIR OWN ASSETS SO THEY
16 DON'T HAVE TO WORRY ABOUT IT.
17 SO THIS ONE WAS NOT -- THIS ONE WOULDN'T CHANGE OVER
18 TIME.
19 WHAT WASSERSTEIN AND PERELLA IS DOING HERE IS THE
20 OTHER SIDE OF WHAT I RECALL JILL GREENTHAL REFERRING TO, AND
21 THAT IS THE JOB OF AN INVESTMENT BANKER WHO REPRESENTS A BUYER
22 IS TO GET -- TO BE WILLING TO PAY AS MUCH AS POSSIBLE. THE JOB
23 OF AN INVESTMENT BANKER WHO REPRESENTS A SELLER IS TO GET THEM
24 TO BE WILLING TO SELL AT AS LOW A PRICE AS POSSIBLE.
25 SO AS JILL SAID, PUTTING IT DIFFERENTLY, SHE'S
915
ASHER - DIRECT / ALIOTO
1 TRYING TO GET US TO BID UP AND WASSERSTEIN PERELLA IS TRYING TO
2 POINT OUT TO US THAT WE MAY LOSE THE LEVERAGE AND MAYBE THE
3 EXISTING LEVERAGE WE THINK WE HAVE ISN'T WORTH SO MUCH SO WE
4 ARE GOING TO BE WILLING TO GET INTO THE ZONE OF PRICE THAT
5 MIGHT BE NECESSARY TO ACCOMPLISH A TRANSACTION.
6 AND, AFTER ALL, THAT'S THE ONLY WAY INVESTMENT
7 BANKERS EVER GET PAID.
8 I'M FINISHED.
9 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
916
ASHER - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. NOW, GOING BACK TO MY QUESTION AND WHAT WE WERE TALKING
3 ABOUT IS THAT RIGHT HERE IT SAYS, "THEREBY LIMITING NEED TO
4 MAXIMIZE VALUE."
5 YOU KNEW THAT BECAUSE OF THE 60-MILE PROVISION THAT
6 NONE OF THESE OTHER NEWSPAPERS, NEWSPAPER COMPANIES, THAT IF
7 THEY ATTEMPTED TO BUY THE CHRONICLE AND TO BUY THE CHRONICLE'S
8 PART OF THE JOA, YOU WOULD ATTEMPT TO STOP IT. CORRECT?
9 A. I WANT TO MAKE SURE I UNDERSTAND THE QUESTION.
10 Q. IS THAT RIGHT?
11 A. I WANT TO MAKE SURE I UNDERSTAND THE QUESTION.
12 Q. RIGHT.
13 A. THE QUESTION IS THAT I KNEW THAT I -- OR YOU SAY THAT YOU
14 WERE TRYING TO STOP THEM.
15 Q. I AM TALKING ABOUT HEARST. HEARST.
16 FOR EXAMPLE, YESTERDAY IT WAS REPRESENTED BY THE DLJ
17 REPRESENTATIVE THAT SHE TALKED TO A NUMBER OF FOLKS, INCLUDING
18 KNIGHT RIDDER.
19 NOW, IF KNIGHT RIDDER WANTED TO GO TO THE CHRONICLE
20 AND BID FOR THE CHRONICLE AND PAY FOR THE JOA PART OF THE
21 CHRONICLE, YOU COULD CHALLENGE THAT ON THE BASIS THAT THEY HAVE
22 PAPERS WITHIN 60 MILES, COULDN'T YOU?
23 A. AS WE BELIEVED THAT WE HAD RIGHTS UNDER THE 60-MILE
24 RADIUS.
25 Q. RIGHT.
917
ASHER - DIRECT / ALIOTO
1 A. WE ALSO HAD -- WE ALSO ACKNOWLEDGED THAT THERE COULD BE
2 QUESTIONS RAISED ABOUT THE ENFORCEABILITY OF THAT.
3 Q. SURE, ON AN ANTICOMPETITIVE BASIS, RIGHT?
4 A. I DON'T KNOW IF -- WHAT THE TERM IS BUT --
5 Q. WELL, THAT WOULD BE THE BASIS FOR CHALLENGING IT BECAUSE
6 CLEARLY HERE YOU WOULD BE ABLE TO BID ON IT AND THESE OTHER
7 FOLKS COULDN'T ONLY BECAUSE THEY HAD COMPETING PAPERS WITHIN
8 60 MILES, CORRECT?
9 A. WELL, I DON'T THINK THAT WOULD HAVE BEEN THE THEORY. THE
10 THEORY HAS NOTHING TO DO WITH PERMITTING PEOPLE TO BID OR NOT
11 BID.
12 I BELIEVE THE QUESTION WOULD HAVE BEEN IS A COVENANT
13 IN AN AGREEMENT THAT A PARTY CANNOT COMPETE WITH ANOTHER PARTY
14 TO THAT AGREEMENT WITHIN A CERTAIN AREA -- WOULD THAT BE
15 ENFORCEABLE. AND I DO KNOW GENERALLY THERE ARE -- THAT
16 CALIFORNIA HAS LAW THAT RAISES QUESTIONS ABOUT THE
17 ENFORCEABILITY.
18 BUT, NOTWITHSTANDING THAT, WE BELIEVED WE HAD
19 SUBSTANTIAL RIGHTS UNDER THAT PROVISION.
20 Q. YOU ARE TALKING ABOUT -- WHEN YOU SAY "CALIFORNIA," YOU
21 MEAN, CALIFORNIA ANTITRUST LAWS?
22 A. I DON'T KNOW IF IT'S THE ANTITRUST LAWS OR WHETHER IT'S
23 COMMON LAW ABOUT THE ENFORCEABILITY OF NON-COMPETE PROVISIONS.
24 Q. OKAY. SO THE CLOSER IT GOT TO 2005, THE LESS LIKELIHOOD
25 OF THE ENFORCEABILITY OF THE 60-MILE RULE. IS THAT RIGHT?
918
ASHER - DIRECT / ALIOTO
1 A. I DON'T THINK -- I DON'T THINK THAT PROVISION AND ITS
2 ENFORCEABILITY HAS ANYTHING TO DO WITH TIME.
3 Q. IF AT 2005 THE JOA IS OVER AND THEN THERE IS NO 60-MILE
4 RULE, CORRECT?
5 A. THAT'S TRUE. IF THE JOA TERMINATED, OF COURSE, THAT
6 PROVISION WOULD BE LIMITED. I'M SORRY. YES.
7 Q. OKAY. AND THAT MEANS THAT ANYBODY COULD COME IN AND BID
8 FOR THE CHRONICLE FOR ANYTHING THEY WANTED TO PAY FOR IT ON THE
9 MERITS, CORRECT? CORRECT? WITHOUT RESTRICTION.
10 A. ANYONE WHO WANTED TO BID AT THE END OF THE JOA WOULD NOT
11 HAVE TO -- IF THE JOA AGREEMENT HAD TERMINATED, THEY WOULD NOT
12 HAVE TO BE SUBJECT TO ANY OF THE PROVISIONS IN THE JOA
13 AGREEMENT, INCLUDING THE 60-MILE RADIUS PROVISION.
14 Q. OKAY. AND THAT WOULD AS -- AND THAT WOULD -- AS
15 WASSERSTEIN SAYS, "HEARST'S POSSIBLE LOSS OF COMPETITIVE
16 ADVANTAGE OVER TIME," THAT'S WHAT THAT HAS REFERENCE TO,
17 CORRECT? THAT'S THE COMPETITIVE ADVANTAGE LOSS. THE MORE IT
18 GOES -- GETS CLOSER TO 2005 -- IF IT GOT TO 2005, IT MIGHT HAVE
19 TO FACE OPEN BIDDING, HEARST MIGHT?
20 A. THAT -- I BELIEVE THERE WAS OPEN BIDDING IN ANY EVENT, SO
21 I DON'T BELIEVE THAT THE JOA AGREEMENT INHIBITED THAT, AS I
22 LISTENED TO THE TESTIMONY YESTERDAY.
23 BUT -- BUT THE -- SO THE COMPETITIVE ADVANTAGE IS
24 NOT SO MUCH ON WHETHER THE BIDDING WOULD BE OPEN OR NOT. IT'S
25 A QUESTION OF PRICE.
919
ASHER - DIRECT / ALIOTO
1 Q. YOU UNDERSTOOD, DID YOU NOT -- AND THEN I WILL MOVE ON TO
2 ANOTHER THING.
3 YOU UNDERSTOOD, DID YOU NOT, THAT THE IDEA HERE WAS
4 THAT THE CLOSER IT GOT TO 2005, THE MORE DIFFICULT IT WAS FOR
5 HEARST TO MAINTAIN ITS COMPETITIVE ADVANTAGE AND THAT AT THE
6 CONCLUSION OF 2005 THAT THEN IF THEY WANTED TO GET OR TRIED TO
7 GET THE CHRONICLE, THEY WOULD HAVE TO GO HEAD TO HEAD
8 COMPETITION FOR THE PURCHASE OF THE CHRONICLE ON THE MERITS
9 WITHOUT REGARD TO ANY JOA OR ANY SPLITTING OF ASSETS OR FIRST
10 RIGHT OF REFUSAL OR 60-MILE LIMIT OR ANY OF THAT. RIGHT?
11 A. I BELIEVE I TESTIFIED BEFORE THAT IF THE JOA AGREEMENT HAD
12 TERMINATED, NO THIRD PARTY WOULD HAVE TO DEAL WITH IT IF THE
13 CHRONICLE WERE OFFERED FOR SALE AT THAT TIME.
14 Q. NOW, IF YOU WILL TURN THE PAGE, THIS IS UNDER, QUOTE,
15 ARABIC 3, "FAMILY ECONOMIC/FINANCIAL ANALYSIS OF BENEFITS FROM
16 SELLING CHRONICLE TODAY VERSUS LATER."
17 AND ITEM NUMBER 2 -- OF THE SECOND BULLET -- FIRST
18 IT SAYS ON THE FIRST BULLET, QUOTE:
19 "CAN, QUOTE, 'COMPETITORS,' END QUOTE, BE
20 EXPECTED TO PAY A SIGNIFICANTLY HIGHER MULTIPLE
21 THAN HEARST IN 2005?"
22 THAT'S THE QUESTION THAT'S ASKED.
23 UNDERNEATH THAT:
24 "DOES HEARST'S COMPETITIVE ADVANTAGE OFFSET
25 PRICE PRESSURE RESULTING FROM PROHIBITION ON,
920
ASHER - DIRECT / ALIOTO
1 QUOTE, 'COMPETITORS,' END QUOTE, BIDDING FOR THE
2 CHRONICLE TODAY"?
3 DO YOU SEE THAT?
4 A. I DO.
5 Q. AND THE PROHIBITION OF COMPETITORS BIDDING FOR THE
6 CHRONICLE TODAY WAS WITH REGARD TO THE RESTRICTIONS THAT WERE
7 IN THE JOA. THAT'S THE WAY YOU UNDERSTOOD THAT, CORRECT?
8 A. I WOULD SAY IT'S WITH REGARD TO THE TOTALITY OF THE JOA
9 AGREEMENT.
10 Q. AND THEN IT STATES, QUOTE:
11 "WILL HEARST STILL BE AN AGGRESSIVE BIDDER
12 IN 2005 AND, IF NOT, WILL THE AUCTION PROCESS BE
13 LESS COMPETITIVE?"
14 WAS THAT AN ISSUE THAT HEARST MAY NOT EVEN ATTEMPT
15 TO BID IN 2005 IF IT GOT THAT FAR?
16 A. I HAVE NO WAY OF KNOWING WHAT WOULD HAPPEN IN 2005.
17 Q. OKAY. THEN THE LAST IS --
18 A. THIS IS A SERIES OF QUESTIONS PUT DOWN ON A PIECE OF PAPER
19 BY INVESTMENT BANKERS AS TALKING POINTS, AS DISCUSSION POINTS,
20 FOR A PRELIMINARY -- FOR ONE OF OUR FIRST MEETINGS TO DEVISE
21 OUR STRATEGY IN CONNECTION WITH THE SALE AND PURCHASE OF THE
22 CHRONICLE. THIS IS NOT A STATEMENT OF ANY -- OF ANY THOUGHT,
23 OF ANY INTENTION, TO DO SOMETHING OR NOT TO DO SOMETHING AT ANY
24 POINT IN TIME.
25 Q. THIS DOCUMENT IS DATED JUNE 2 -- ARE YOU FINISHED?
921
ASHER - DIRECT / ALIOTO
1 A. YES.
2 Q. THIS DOCUMENT (INDICATING) IS DATED JUNE 28, 1999. THE
3 ACTUAL AGREEMENT WAS CONSUMMATED IN THE -- OR IT WAS AGREED TO
4 BY THE CHRONICLE ON AUGUST 6TH, 1999. SO THIS IS ONE MONTH
5 BEFORE THE DEAL, RIGHT?
6 A. IS THAT ONE MONTH OR TWO MONTHS?
7 Q. THIS IS -- THIS IS JUNE 28.
8 A. YEAH, JUNE 28TH. SO ABOUT A MONTH.
9 Q. JUNE 28. AND THE CHRONICLE HAD THEIR MEETING AUGUST 6TH.
10 A. YES.
11 Q. ONE MONTH, RIGHT?
12 A. YES.
13 Q. OKAY. AND THE LAST ITEM, THEN -- SO THIS ISN'T ANY KIND
14 OF TALKING POINTS. THERE IS A REAL URGENCY AND NEED TO GET
15 THIS DONE NOW, ISN'T IT? WASN'T THAT THE IDEA?
16 A. WE CERTAINLY HAD TO DECIDE ON WHAT OUR STRATEGY WAS GOING
17 TO BE QUICKLY, YES.
18 Q. RIGHT. BECAUSE ALL OF THAT MONEY WAS FLOWING INTO THESE
19 CHRONICLE FOLKS AND THOSE GUYS MIGHT -- AND THOSE FOLKS MIGHT
20 THINK THAT WITH THAT MONEY MAYBE THEY DON'T HAVE TO SELL THE
21 CHRONICLE, RIGHT?
22 A. I DON'T KNOW HOW MUCH MONEY WAS FLOWING INTO THE CHRONICLE
23 FOLKS AT THIS TIME.
24 Q. AS A MATTER OF FACT, YOU KNEW AT THE TIME -- YOU DID
25 UNDERSTAND, DIDN'T YOU, THAT MS. NION MCEVOY, WHO USED TO BE
922
ASHER - DIRECT / ALIOTO
1 THE CHAIRMAN OF THE BOARD OF THE CHRONICLE, WAS ADVOCATING THAT
2 THE CHRONICLE NOT BE SOLD UNTIL THE JOA RUNS OUT IN 2005 OR
3 THAT, IF IT WERE, SHE WAS GOING TO ATTEMPT TO BUY IT HERSELF.
4 CORRECT?
5 A. WELL, I DON'T KNOW -- ALL I KNOW ABOUT NION MCEVOY'S
6 INTENT --
7 Q. DID YOU KNOW THAT? DID YOU KNOW WHAT I JUST TOLD YOU?
8 A. I DON'T BELIEVE I KNEW THAT SPECIFICALLY. I KNEW
9 GENERALLY THAT -- FROM PRESS REPORTS THAT SHE DID NOT WANT TO
10 SELL THE CHRONICLE, I THOUGHT, UNDER ANY CIRCUMSTANCES, AND I
11 THINK THERE WAS PERHAPS A PARTICULAR AVERSION TO HAVING IT SOLD
12 TO HEARST BUT -- BUT --
13 Q. YOU UNDERSTOOD -- ARE YOU FINISHED?
14 A. YES.
15 Q. YOU UNDERSTOOD AT THE TIME, DID YOU NOT, THAT MS. MCEVOY
16 WAS CONSIDERING PUTTING A BID TOGETHER WITH OTHERS TO BUY THE
17 CHRONICLE? YOU KNEW THAT?
18 A. YES. I DO RECALL -- I DO RECALL THAT WE HEARD SHE WAS
19 DOING THAT, YES.
20 Q. OKAY. AND WHEN YOU SAY "WE," YOU INCLUDE MR. BENNACK, THE
21 CHAIRMAN OF HEARST, CORRECT?
22 A. YES.
23 Q. AND HE SAID THAT YOU BETTER DO -- REFIX THESE NUMBERS IN
24 LIGHT OF THAT LADY'S BID, RIGHT?
25 A. NO.
923
ASHER - DIRECT / ALIOTO
1 Q. HE SAID THAT THE NUMBERS HAD TO BE CHANGED IN LIGHT OF THE
2 POSSIBILITY THAT MS. MCEVOY WOULD BID ON THE CHRONICLE; ISN'T
3 THAT CORRECT? ISN'T THAT CORRECT?
4 A. I DON'T RECALL A SPECIFIC STATEMENT TO THAT EFFECT.
5 Q. WHETHER YOU RECALL A SPECIFIC STATEMENT OR NOT, THAT'S
6 YOUR UNDERSTANDING, WHETHER GENERAL OR OTHERWISE, CORRECT?
7 THAT'S WHAT MR. BENNACK SAID. YOU UNDERSTOOD THAT, RIGHT?
8 A. I DON'T RECALL WHAT MR. BENNACK SAID SPECIFICALLY OR
9 GENERALLY RELATING TO THE POSSIBILITY THAT NION MCEVOY MIGHT
10 MAKE A BID. I KNOW WE TOOK ALL THINGS INTO CONSIDERATION IN
11 OUR STRATEGY. SO I JUST CAN'T RECALL SPECIFICALLY WHAT HE SAID
12 OR GENERALLY, ON THAT POINT.
13 Q. ISN'T IT CORRECT THAT THE BID BY HEARST WAS INCREASED
14 BECAUSE OF THE UNDERSTANDING THAT MS. MCEVOY WAS GOING OR
15 ATTEMPTING TO GET TOGETHER TO BID ON THE CHRONICLE?
16 A. COULD YOU PUT THIS IN A TIME REFERENCE? I AM JUST NOT
17 SURE. YOU SAY "INCREASED." I MEAN, AT WHAT TIME?
18 Q. 19 -- RIGHT BEFORE, IN THE SUMMER AREA OR SUMMERTIME
19 PERIOD OF 1999.
20 A. WELL, THE ONLY INCREASE IN AN OFFER THAT I AM AWARE OF
21 OCCURRED AFTER WE MADE OUR FIRST OFFER AT 565 MILLION -- IF
22 THAT'S THE INCREASE YOU ARE REFERRING TO, THE INCREASE FROM
23 565, WHICH WAS OUR FIRST OFFER, TO THE 660, WHICH WAS OUR FINAL
24 OFFER THAT WAS ACCEPTED.
25 I DON'T BELIEVE THAT INCREASE WAS IN RESPONSE TO --
924
ASHER - DIRECT / ALIOTO
1 TO ANY THOUGHT THAT NION MCEVOY WAS MAKING A BID.
2 Q. WAS ANY INCREASE BECAUSE OF MS. MCEVOY?
3 A. WELL, I BELIEVE THOSE WERE THE ONLY TWO OFFERS WE MADE.
4 Q. SO THE ANSWER IS, ACCORDING TO YOUR -- TO YOUR TESTIMONY
5 IS NO?
6 THE QUESTION IS: WAS ANY INCREASE, AS FAR AS YOU
7 KNOW, MADE BY HEARST IN RESPONSE TO MS. MCEVOY?
8 A. AS FAR AS I KNOW, NO.
9 Q. NOW, IT WOULD BE CORRECT, WOULDN'T IT, THAT MS. MCEVOY
10 WOULD BE A PROBLEM, MUCH MORE OF A PROBLEM THAN ANY OF THESE
11 COMPETITORS, BECAUSE OF THE RESTRICTIONS ON THOSE COMPETITORS
12 DID NOT EXIST ON MS. MCEVOY; IS THAT CORRECT?
13 A. I BELIEVE THAT WOULD HAVE BEEN CORRECT, YES.
14 Q. BY THE WAY, DID THIS DLJ PERSON THAT WE HAD HERE
15 YESTERDAY -- DO YOU KNOW WHETHER OR NOT SHE EVER TRIED TO TALK
16 TO MS. MCEVOY TO SEE HOW MUCH MS. MCEVOY WOULD PAY?
17 A. I DON'T KNOW.
18 Q. OKAY. LET ME DIRECT YOUR ATTENTION TO -- EXCUSE ME JUST
19 ONE MOMENT, YOUR HONOR -- EXHIBIT 78.
20 MAY I APPROACH THE WITNESS, YOUR HONOR?
21 THE COURT: YES, YOU MAY.
22 BY MR. ALIOTO:
23 Q. LET ME SHOW YOU EXHIBIT -- WHAT IS IN EVIDENCE AS
24 PLAINTIFF'S -- AS EXHIBIT 78.
25 EXHIBIT 78 IS A SERIES OF E-MAILS TO -- FROM
925
ASHER - DIRECT / ALIOTO
1 MR. IRISH AND FROM MR. TIMOTHY WHITE AND AN E-MAIL PASSING THAT
2 ALONG WITH REGARD TO MAYOR WILLIE BROWN.
3 DID YOU RECEIVE A COPY OF THAT E-MAIL ON OR ABOUT
4 THE DATE INDICATED?
5 A. YES, I BELIEVE I DID.
6 Q. AND IN PARTICULAR I DIRECT YOUR ATTENTION TO THE FIRST
7 PARAGRAPH -- SECOND PARAGRAPH OF MR. WHITE'S MEMO OR E-MAIL
8 WHERE HE STATES, QUOTE:
9 "I ASKED WILLIE HOW I WAS GOING TO JUSTIFY
10 TO MY SUPERIORS IN NEW YORK WANTING TO SUPPORT
11 HIM AND COOPERATE WITH HIM WHEN HE WAS SEEMING
12 TO GO OUT OF HIS WAY TO MAKE OUR LIVES
13 DIFFICULT."
14 NOW, DO YOU SEE THAT?
15 A. YES, I DO.
16 Q. DID YOU CALL MR. WHITE ABOUT THAT, ASK HIM WHAT HE WAS
17 TALKING ABOUT?
18 A. NO, I DID NOT.
19 Q. DID YOU TALK TO MR. BENNACK ABOUT IT?
20 A. NO, I DID NOT.
21 Q. DID YOU TALK TO MR. IRISH ABOUT IT?
22 A. NO.
23 Q. DID YOU ATTEMPT TO STOP ANY KIND OF COOPERATION OR
24 SUPPORT, OR AT LEAST TRY TO FIND OUT WHAT IT WAS, WHEN YOU
25 RECEIVED THIS DOCUMENT?
926
ASHER - DIRECT / ALIOTO
1 A. NO. I DIDN'T GIVE THIS SENTENCE MUCH THOUGHT AT ALL. IT
2 STRUCK ME AS A RATHER CHATTY OPENING REMARK THAT MR. WHITE
3 APPARENTLY MADE IN HIS MEETING WITH THE MAYOR. I KNEW IT WAS
4 NOT OUR POLICY THAT ANYONE IN NEW YORK WOULD HAVE ANYTHING TO
5 DO OR ANY INTERFERENCE WITH THE EDITORIAL POLICY OF THE
6 PAPERS -- OF OUR PAPERS, AND I KNEW MR. WHITE KNEW THAT.
7 (PAUSE IN THE PROCEEDINGS.)
8 BY MR. ALIOTO:
9 Q. I MISSED THAT WORD. WHAT DID YOU CALL IT, "CHATTY" OR
10 "SHODDY"? WHAT DID YOU CALL IT?
11 A. "CHATTY."
12 MR. ALIOTO: CHATTY.
13 THE COURT: OKAY. CHATTY.
14 BY MR. ALIOTO:
15 Q. AND THIS CHAT WITH THE MAYOR WAS OF NO REAL IMPORTANCE TO
16 YOU; IS THAT IT?
17 A. I DID NOT ATTACH ANY SIGNIFICANCE TO THIS SENTENCE
18 WHATSOEVER.
19 Q. WELL, YOU HAD PREVIOUSLY BEEN -- NO. IT WAS AFTER THIS
20 THAT YOU WERE -- YOU MET WITH A REPRESENTATIVE OF THE FANGS IN
21 WHICH THEY WERE TALKING ABOUT EXTENSIVE POLITICAL CONNECTIONS.
22 REMEMBER? WE WENT OVER THAT DOCUMENT BEFORE, REMEMBER?
23 A. YES.
24 Q. AND YOU SAID THAT THAT WAS A CONSIDERATION. REMEMBER
25 THAT?
927
ASHER - DIRECT / ALIOTO
1 A. I SAID -- I BELIEVE I SAID IT WAS A MINOR CONSIDERATION,
2 YES.
3 Q. NO. IN YOUR DEPOSITION YOU SAID IT WAS A CONSIDERATION.
4 YESTERDAY YOU SAID IT WAS A MINOR CONSIDERATION.
5 A. I BELIEVE IN MY DEPOSITION I SAID, "I SUPPOSE IT WAS A
6 CONSIDERATION."
7 Q. OKAY. AND IT WAS A CONSIDERATION. SO IT WAS OF INTEREST
8 TO YOU, CORRECT?
9 A. THAT WHAT WAS OF INTEREST TO ME?
10 Q. THE POLITICAL -- THE POLITICAL CONNECTIONS WAS OF INTEREST
11 TO YOU, WASN'T IT?
12 A. NOT SIGNIFICANTLY, NO.
13 Q. WAS IT OF INTEREST TO YOU AT ALL?
14 A. AS A MINOR INTEREST, YES.
15 Q. AND YOU KNEW MR. -- AND YOU KNEW THE MAYOR HAD PREVIOUSLY
16 SENT A LETTER TO THE ATTORNEY GENERAL OF THE UNITED STATES WITH
17 REGARD TO THE ACQUISITION -- THE PROPOSED ACQUISITION BY HEARST
18 OF THE CHRONICLE, CORRECT?
19 A. YES, I BELIEVE I RECALL READING THAT.
20 Q. SO YOU ARE TELLING US NOW IT'S YOUR TESTIMONY NOW THAT
21 WHEN YOU GOT THIS AND YOU SAW THAT MR. WHITE, YOUR PUBLISHER
22 AND EDITOR OF THE EXAMINER, HAD A MEETING WITH THE MAYOR, AND
23 HE WAS TALKING ABOUT HOW HE WAS GOING TO JUSTIFY TO HIS
24 SUPERIORS IN NEW YORK -- YOU WERE IN NEW YORK AT THE TIME,
25 RIGHT?
928
ASHER - DIRECT / ALIOTO
1 A. YES, I WAS.
2 Q. -- WANTING TO SUPPORT HIM AND COOPERATE WITH HIM -- BY THE
3 WAY, DID YOU WANT TO SUPPORT HIM AND COOPERATE WITH HIM?
4 A. I HAD NO -- NO FEELING ONE WAY OR THE OTHER ON THAT.
5 Q. SO WHEN YOU GOT THIS -- WHEN YOU GOT THIS, DID YOU CALL
6 MR. WHITE AND SAY, "HEY, WAIT A MINUTE. I HAVE NO INTEREST IN
7 SUPPORTING HIM OR COOPERATING WITH HIM ABOUT ANYTHING"?
8 A. AS I EXPLAINED, MR. ALIOTO --
9 Q. DID YOU TELL HIM THAT?
10 A. NO, I DID NOT CALL MR. WHITE, AS I SAID, IN RESPONSE TO
11 THIS SENTENCE. I DIDN'T REGARD IT AS A VERY SIGNIFICANT
12 STATEMENT.
13 Q. DID YOU PARTICIPATE AT ALL IN THE DECISION TO HAVE
14 MR. WHITE PUT ON LEAVE?
15 A. I HAD A VERY MINOR PARTICIPATION.
16 Q. DID YOU AGREE OR DISAGREE WITH WHETHER HE SHOULD BE PUT ON
17 LEAVE?
18 A. I WAS CONSULTED IN MY CAPACITY VERY --
19 Q. DID YOU AGREE OR DISAGREE?
20 A. I WOULD LIKE TO --
21 THE COURT: WELL, YOU SHOULD ANSWER THE QUESTION,
22 MR. ASHER.
23 THE WITNESS: IN MY CAPACITY AS CHIEF LEGAL OFFICER
24 IS WHAT I WAS ABOUT TO SAY. THAT IS THE CAPACITY IN WHICH I
25 WAS CONSULTED. SO YOU ARE ASKING WHAT WAS MY ADVICE AS CHIEF
929
ASHER - DIRECT / ALIOTO
1 LEGAL OFFICER? I WILL ANSWER IT IF I AM DIRECTED TO DO SO.
2 MR. HALLING: YOUR HONOR, CAN I HAVE A
3 CLARIFICATION?
4 MR. ALIOTO: THAT'S ALL, YOUR HONOR. THANK YOU. NO
5 FURTHER QUESTIONS.
6 GIVE ME ONE SECOND TO CLEAN UP HERE.
7 THE COURT: ALL RIGHT.
8 MR. ALIOTO: THANK YOU.
9 THE COURT: EXAMINATION, MR. HALLING?
10 MR. HALLING: YES, YOUR HONOR.
11 CAN I HAVE A MOMENT?
12 THE COURT: YES.
13 (PAUSE IN THE PROCEEDINGS.)
14 MR. HALLING: MAY IT PLEASE THE COURT?
15 THE COURT: PROCEED.
16 CROSS-EXAMINATION
17 BY MR. HALLING:
18 Q. MR. ASHER, WHAT ROLE DID YOU HAVE WITH RESPECT TO THE SALE
19 OF THE EXAMINER?
20 A. I WAS GENERALLY IN CHARGE OF THE SALES EFFORT.
21 Q. WHEN DID THAT PROCESS BEGIN?
22 A. IT BEGAN IN LATE JULY OF 1999.
23 Q. CAN YOU BRIEFLY DESCRIBE THE STEPS THAT WERE UNDERTAKEN
24 INITIALLY AS PART OF THAT PROCESS?
25 A. THE FIRST STEP WAS TO RETAIN AN INVESTMENT BANKING FIRM TO
930
ASHER - CROSS / HALLING
1 ASSIST US IN THAT SALES EFFORT.
2 Q. DID YOU RETAIN SUCH A FIRM?
3 A. YES, WE DID.
4 Q. AND WHAT FIRM WAS THAT?
5 A. VERONIS SUHLER & ASSOCIATES.
6 Q. WHY WERE THEY CHOSEN?
7 A. WE CHOSE THEM BECAUSE THEY ARE EXPERTS IN THE PURCHASE AND
8 THE SALE OF MEDIA ASSETS. THAT WAS THE PRIMARY REASON. IN
9 ADDITION, THE SENIOR -- OR A SENIOR DIRECTOR, MANAGING DIRECTOR
10 OF VERONIS & SUHLER, WAS AN INVESTMENT BANKER THAT WE HAD KNOWN
11 FOR MANY YEARS.
12 Q. I WOULD DIRECT YOUR ATTENTION TO EXHIBIT H-904 IN
13 EVIDENCE.
14 DO YOU HAVE THAT IN FRONT OF YOU?
15 A. YES, I DO.
16 Q. CAN YOU IDENTIFY THIS DOCUMENT?
17 A. YES. THIS IS A REPORT PROVIDED TO ME ON SEPTEMBER 23RD,
18 1999, BY VERONIS SUHLER & ASSOCIATES DESCRIBING THEIR EFFORTS
19 IN CONNECTION WITH OUR FIRST SALES EFFORT.
20 Q. DID YOU REQUEST SUCH A REPORT?
21 A. YES, I DID.
22 Q. I WOULD DIRECT YOUR ATTENTION TO THE FIRST PAGE UNDER THE
23 HEADING TOWARDS THE BOTTOM, "VS&A QUALIFICATIONS."
24 DO YOU SEE THAT?
25 A. YES, I DO.
931
ASHER - CROSS / HALLING
1 Q. IT STATES:
2 "VS&A IS AN INVESTMENT BANK THAT SPECIALIZES
3 IN THE MEDIA AND COMMUNICATIONS INDUSTRIES.
4 VS&A HAS BEEN IN OPERATION FOR 18 YEARS AND HAS
5 ADVISED CLIENTS ON OVER 450 TRANSACTIONS WITH
6 AGGREGATE VALUE IN EXCESS OF $23 BILLION. VS&A
7 HAS OVER 100 EMPLOYEES OF WHOM 52 ARE MERGER AND
8 ACQUISITION SPECIALISTS. VS&A HAS BEEN ACTIVE
9 IN REPRESENTING CLIENTS IN THE NEWSPAPER
10 INDUSTRY FOR 15 YEARS. VS&A HAS A TEAM OF FOUR
11 PROFESSIONALS DEDICATED FULL TIME TO THE
12 NEWSPAPER INDUSTRY."
13 IT CONTINUES:
14 "THE LEADER OF THE VS&A NEWSPAPER TEAM IS
15 ROBERT J. BROADWATER, WHO HAS WORKED" -- I AM
16 AT THE TOP OF THE SECOND PAGE NOW -- "WHO HAS
17 WORKED OVER THE LAST TEN YEARS ON OVER TEN
18 TRANSACTIONS IN THE NEWSPAPER INDUSTRY
19 AGGREGATING OVER $1 BILLION."
20 NOW, WAS MR. BROADWATER ONE OF THE PEOPLE AT VS&A
21 WHO WORKED ON THIS PROJECT?
22 A. YES, HE WAS.
23 Q. THE PARAGRAPH CONTINUES AT THE TOP OF PAGE 2:
24 "THE OTHER SENIOR MEMBER OF THE NEWSPAPER
25 TEAM IS KEVIN M. LAVALLA, WHO HAS SPENT THE LAST
932
ASHER - CROSS / HALLING
1 15 YEARS WORKING EXCLUSIVELY ON NEWSPAPER
2 TRANSACTIONS AS AN INVESTMENT AND COMMERCIAL
3 BANKER."
4 WAS MR. LAVALLA ALSO ASSIGNED TO THIS PROJECT?
5 A. YES, HE WAS.
6 Q. AND A LITTLE FURTHER DOWN IN THE PARAGRAPH THERE IS A
7 SENTENCE THAT STATES, IN PART, THAT "MR. RUTHERFURD WORKED ON
8 OVER 10 TRANSACTIONS AGGREGATING OVER $3.6 BILLION, WHICH
9 INVOLVED EITHER THE PURCHASE OR THE SALE OF A DAILY NEWSPAPER
10 IN THE U.S. "
11 DO YOU SEE THAT?
12 A. YES, I DO.
13 Q. WAS MR. RUTHERFURD INVOLVED IN THIS PROJECT, AS WELL?
14 A. YES, HE WAS.
15 Q. WHAT WAS THE FIRST THING THAT OCCURRED IN CONNECTION WITH
16 THIS PROJECT AFTER YOU RETAINED VERONIS SUHLER?
17 A. WE SAT DOWN WITH THEM TO START TO PUT TOGETHER A LIST OF
18 WHO WE THOUGHT WOULD BE THE MOST LIKELY PARTIES WHO WOULD BE
19 INTERESTED IN ACQUIRING THE EXAMINER.
20 Q. OKAY. CONTINUING ON EXHIBIT 904 TOWARDS THE BOTTOM OF THE
21 SECOND PAGE UNDER A HEADING, "THE IDENTIFICATION OF PROSPECTIVE
22 BUYERS OF THE ASSETS," THE PARAGRAPH AT THE BOTTOM SAYS:
23 "IN ADDITION, THE VS&A TEAM CONSULTED ITS
24 PROPRIETARY DATABASE OF INFORMATION ON OVER
25 21,000 MEDIA COMPANIES WORLDWIDE. OUT OF ALL OF
933
ASHER - CROSS / HALLING
1 THESE EFFORTS THE TEAM EXPANDED THE LIST OF
2 POTENTIAL PURCHASERS. THE PRIMARY FOCUS WAS ON
3 NEWSPAPER PUBLISHING COMPANIES IN THE U.S. AND
4 EUROPE KNOWN TO BE INTERESTED IN ACQUISITIONS OF
5 U.S. NEWSPAPER PROPERTIES. WITHIN THIS GROUP,
6 PARTICULAR ATTENTION WAS FOCUSED ON COMPANIES
7 KNOWN TO BE INVOLVED IN OR INTERESTED IN EITHER
8 METROPOLITAN DAILY NEWSPAPERS OR CALIFORNIA
9 DAILY NEWSPAPERS. THIS GROUP OF POTENTIAL
10 BUYERS NUMBERED APPROXIMATELY 25 AND INCLUDED
11 GANNETT, CENTRAL NEWSPAPERS, TIMES MIRROR
12 COMPANY, KNIGHT RIDDER, TRIBUNE, MEDIANEWS" --
13 NOW, MEDIANEWS, IS THAT THE COMPANY THAT'S --
14 A. THAT'S THE SINGLETON GROUP.
15 Q. THEN IT CONTINUES:
16 "E. W. SCRIPPS, MCCLATCHY NEWSPAPERS, NEW
17 YORK TIMES COMPANY, NEWS CORPORATION, HOLLINGER
18 AND DAILY MAIL AND GENERAL TRUST AND OTHERS."
19 NOW, WHO IS THE PRINCIPAL INDIVIDUAL ASSOCIATED WITH
20 NEWS CORPORATION?
21 A. MR. RUPERT MURDOCH, THE -- I GUESS, COMPULSIVE COMPETITOR
22 WE HEARD SO MUCH ABOUT EARLIER.
23 Q. THAT'S WHEN MR. PAGE WAS TESTIFYING?
24 A. YES.
25 Q. WAS MR. MURDOCH CONTACTED AS A POTENTIAL BUYER OF THE
934
ASHER - CROSS / HALLING
1 EXAMINER?
2 A. YES, HE WAS.
3 Q. DID HE EXPRESS ANY INTEREST?
4 A. HE DIDN'T HAVE THE SLIGHTEST INTEREST.
5 Q. CONTINUING ON PAGE 3 --
6 MR. ALIOTO: YOUR HONOR, I ASSUME, AGAIN, THAT THIS
7 IS FOR THE PURPOSE OF THE FRAME OF MIND OF THE WITNESS IN THESE
8 NEGOTIATIONS. OTHERWISE, WHAT HE JUST SAID IS HEARSAY AND I
9 WOULD MOVE TO STRIKE IT.
10 MR. HALLING: YOUR HONOR, MR. ASHER WAS IN CHARGE OF
11 THE EFFORT TO SELL THE PAPER. HE DIRECTLY SUPERVISED VERONIS
12 SUHLER. HE WAS IN CONTACT WITH THEM ON A REGULAR BASIS, AND, I
13 BELIEVE, RECEIVED COPIES OF ALL CORRESPONDENCE THEY HAD WITH
14 BUYERS.
15 I THINK HE IS COMPETENT TO ANSWER THE QUESTION DID
16 MR. MURDOCH HAVE ANY INTEREST IN ACQUIRING THE PAPER.
17 THE COURT: PERHAPS I CAN AVOID THE PROBLEM. I WAS
18 ABOUT READY TO COMMENT, MR. HALLING, WHILE I UNDERSTAND YOU ARE
19 BUILDING YOUR RECORD, THE DOCUMENT WHICH YOU HAVE BEEN READING
20 FROM IS IN EVIDENCE, AND I DON'T BELIEVE THAT WE NEED TO HAVE
21 LONG PASSAGES OF IT READ INTO THE RECORD. YOU CERTAINLY MAY
22 INQUIRE OF THE WITNESS HIS KNOWLEDGE OF CERTAIN ITEMS OF
23 INFORMATION IN THE DOCUMENT AND ASK HIM TO EXPAND UPON THOSE
24 ITEMS OF INFORMATION WHERE YOU THINK APPROPRIATE OR SIMPLY
25 WHERE YOU WOULD LIKE TO DRAW THE COURT'S ATTENTION TO THOSE
935
ASHER - CROSS / HALLING
1 ITEMS. BUT I DON'T THINK WE NEED TO HAVE EXTENSIVE READINGS
2 FROM THE DOCUMENT ITSELF.
3 WITH RESPECT TO MR. MURDOCH AND HIS INTEREST IN THE
4 EXAMINER, I BELIEVE THAT IS A TOPIC WHICH IS COVERED IN THIS
5 EXHIBIT 904, IS IT NOT? IS THERE NOT REFERENCE --
6 THE WITNESS: YES, I BELIEVE IT IS, YES.
7 THE COURT: ALL RIGHT.
8 THE WITNESS: I BELIEVE THERE ARE DETAILED
9 REFERENCES OF ALL THE -- EITHER WRITTEN COMMUNICATIONS OR
10 TELEPHONE COMMUNICATIONS WITH ALL THE PARTIES, YES, YOUR HONOR.
11 THE COURT: AND I CAN'T PUT MY FINGER ON IT
12 IMMEDIATELY, BUT I BELIEVE THAT IT'S IN THE TABULATION OF
13 RESPONSES, IS IT NOT?
14 THE WITNESS: YES. STARTING AT PAGE 11 OF THIS
15 SEPTEMBER 23, 1999 LETTER, THERE IS A LIST OF ALL 81 COMPANIES
16 WHO WERE CONTACTED, AND THEN IT CONTINUES ON FOR SEVERAL PAGES
17 TO BREAK DOWN WHAT THE RESPONSE WAS OF ALL OF THESE 81
18 COMPANIES INTO VARIOUS CATEGORIES, THOSE THAT HAD AN INTEREST,
19 THOSE THAT HAD NO INTEREST, THOSE THAT HAD AN INTEREST AT LEAST
20 FOR A WHILE AND THEN -- AND THEN DECLINED TO HAVE AN INTEREST,
21 AND THEN, ULTIMATELY, DOWN TO THE ONLY TWO PARTIES WHO HAD WHAT
22 I WOULD SAY WAS SERIOUS INTEREST IN PURCHASING THE EXAMINER,
23 AND THAT'S ON PAGE 16, INDEPENDENT NEWSPAPER GROUP -- THAT'S
24 THE FANG FAMILY -- AND LEUCADIA NATIONAL CORP. ARE AS THE ONLY
25 TWO PARTIES.
936
ASHER - CROSS / HALLING
1 THE COURT: AND WHERE SPECIFICALLY IS NEWS
2 CORPORATION MENTIONED?
3 THE WITNESS: WELL, THEY WOULD BE MENTIONED FIRST IN
4 THE LIST OF THE 81 COMPANIES, I HOPE, ALPHABETICALLY.
5 THE WITNESS: AS I AM LOOKING AT THIS, I DON'T SEE
6 IT ON THIS TABULATION.
7 THE COURT: I COULD NOT FIND IT IN THE TABULATION
8 BEGINNING AT PAGE -- THAT APPEARS IN APPENDIX B.
9 THE WITNESS: MAYBE THAT'S WHERE IT IS.
10 BY MR. HALLING:
11 Q. DO YOU KNOW, MR. ASHER, OF YOUR OWN KNOWLEDGE WHETHER THEY
12 WERE CONTACTED?
13 A. YES, I DO.
14 Q. DO YOU KNOW OF YOUR OWN KNOWLEDGE WHAT THEIR RESPONSE WAS?
15 A. THAT THEY WERE NOT INTERESTED.
16 MR. ALIOTO: THAT'S THE PART --
17 THE COURT: LAY YOUR FOUNDATION, MR. HALLING. HOW
18 DOES THE WITNESS KNOW THAT?
19 BY MR. HALLING:
20 Q. DID YOU RECEIVE COPIES SENT OUT BY VERONIS SUHLER IN
21 CONNECTION WITH THE SALE EFFORT?
22 A. YES, I DID. I ALSO REGULARLY COMMUNICATED WITH
23 MR. RUTHERFURD ABOUT HIS CONTACT -- WITH ALL OF THE PARTIES
24 FROM VERONIS. AS IT RELATES TO THE NEWS CORPORATION, I RECALL
25 MR. RUTHERFURD TELLING ME THAT THE NEWS CORPORATION WAS NOT
937
ASHER - CROSS / HALLING
1 INTERESTED.
2 MR. ALIOTO: I OBJECT. THAT IS -- THAT'S DOUBLE
3 HEARSAY. I DON'T MIND, YOUR HONOR -- I AM NOT OBJECTING IF
4 THEY ARE INTRODUCING IT FOR THE FRAME OF MIND OF THIS -- OF THE
5 WITNESS WHO MAY BE ATTEMPTING TO TRY TO SELL THE EXAMINER. BUT
6 IF THEY ARE TRYING TO PUT IT IN AS IF THIS IS ACTUALLY SO,
7 THAT'S DIFFERENT, AND THAT'S WHAT I OBJECT TO, AS DOUBLE
8 HEARSAY, THE HEARSAY OF MR. RUTHERFURD WHO GAVE THE HEARSAY OF
9 MR. MURDOCH.
10 THE COURT: MR. ASHER.
11 MR. ALIOTO: YES, MR. ASHER GIVING THE TESTIMONY OF
12 MR. RUTHERFURD WHO IS GIVING THE STATEMENTS OF MR. RUPERT
13 MURDOCH.
14 THE COURT: DO YOU REALLY NEED TO GET INTO THIS
15 QUITE SO DEEPLY, MR. HALLING?
16 MR. HALLING: I DO NOT, YOUR HONOR. I WILL JUST
17 SIMPLY CONTINUE. I AM TRYING TO LAY A FOUNDATION FOR OUR
18 EFFORT HERE IN THE SALE PROCESS.
19 BY MR. HALLING:
20 Q. LET ME JUST ASK YOU THIS, MR. ASHER: WAS THERE A PUBLIC
21 ANNOUNCEMENT MADE IN CONNECTION WITH THE VERONIS SUHLER EFFORT
22 TO SELL THE PAPER?
23 A. YES. WE ISSUED A PRESS RELEASE AT THE TIME WE STARTED THE
24 OFFER. AND, IN FACT, THERE WERE SOME PARTIES WHO CONTACTED US
25 TO EXPLORE PURCHASING THE EXAMINER REALLY AS A RESULT OF THAT
938
ASHER - CROSS / HALLING
1 PRESS RELEASE. I BELIEVE THAT LEUCADIA WAS ONE SUCH PARTY.
2 Q. WAS THERE A MEMORANDUM, OFFERING =MEMORANDUM, PUT
3 TOGETHER?
4 A. YES.
5 Q. -- THAT WAS SENT TO PROSPECTIVE PURCHASERS?
6 A. YES, THERE WAS.
7 Q. TAKE A LOOK --
8 MR. SHULMAN: YOUR HONOR, I AM GOING TO HELP COUNSEL
9 HERE. IT'S PAGE 594 OF THE EXHIBIT IS MR. MURDOCH'S RESPONSE.
10 THE WITNESS: THANK YOU, MR. SHULMAN.
11 MR. SHULMAN: IT SAYS "THERE IS NO INTEREST. TOO
12 BLOODY DIFFICULT."
13 MR. HALLING: THANK YOU, MR. SHULMAN. I APPRECIATE
14 THAT.
15 THERE IS A LOT OF DETAIL IN THIS DOCUMENT, "TOO
16 BLOODY DIFFICULT."
17 THE WITNESS: HE'S AUSTRALIAN.
18 BY MR. HALLING:
19 Q. ALL RIGHT. SO A PRESS RELEASE WAS ISSUED. WHAT HAPPENED
20 NEXT?
21 A. THE -- WELL, THESE OFFERING MATERIALS WERE PREPARED AND
22 CIRCULATED. VERONIS SUHLER SENT LETTERS, HAD NUMEROUS PHONE
23 CALLS, AN EXTENSIVE EFFORT TO CONTACT ALL THE PARTIES THAT HAD
24 BEEN IDENTIFIED AND TO RESPOND TO THOSE WHO INDICATED AN
25 INTEREST AS A RESULT OF THE PRESS RELEASE.
939
ASHER - CROSS / HALLING
1 Q. TAKE A LOOK, IF YOU WOULD, AT APPENDIX D TO EXHIBIT 904.
2 A. IS THAT MARKED HERE?
3 Q. IT'S HEADED "CONFIDENTIAL MEMORANDUM." CAN YOU IDENTIFY
4 THAT?
5 A. YES.
6 THE COURT: WHAT'S THE BATES STAMP NUMBER?
7 MR. HALLING: IT'S H-600.
8 THE WITNESS: YES, I CAN. THIS WAS THE OFFERING
9 MEMORANDUM THAT WAS DISTRIBUTED IN CONNECTION WITH THE FIRST
10 OFFER FOR THE SALE OF THE EXAMINER.
11 BY MR. HALLING:
12 Q. NOW, THE NEXT TWO PAGES OF THE TABLE OF CONTENTS SET FORTH
13 THE VARIOUS CATEGORIES OF INFORMATION CONTAINED IN THE OFFERING
14 MEMORANDUM?
15 A. YES. WE PROVIDED INFORMATION CONCERNING THE -- THE
16 EDITORIAL OPERATIONS, THE CIRCULATION AND ADVERTISING AND
17 PRODUCTION OPERATIONS, DESCRIBED THE JOINT OPERATING AGREEMENT
18 AND PROVIDED CERTAIN FINANCIAL INFORMATION CONCERNING THE
19 STAND-ALONE WORK -- I SHOULDN'T SAY "STAND-ALONE" -- CONCERNING
20 THE OPERATIONS OF THE EXAMINER.
21 Q. TURN, IF YOU WOULD, TO THE NEXT PAGE ENTITLED "EXECUTIVE
22 SUMMARY."
23 I WOULD DRAW YOUR ATTENTION TO THE LAST SENTENCE
24 UNDER THE SECOND PARAGRAPH WHICH READS:
25 "HEARST IS SEEKING A QUALIFIED BUYER WHO
940
ASHER - CROSS / HALLING
1 WILL CONTINUE THE OPERATION OF THE EXAMINER AS A
2 DAILY NEWSPAPER IN THE SAN FRANCISCO AREA (THE
3 BAY AREA)."
4 DO YOU SEE THAT?
5 A. YES, I DO.
6 Q. WAS THERE A RESTRICTION, IF YOU WILL, ON WHO HEARST WAS
7 WILLING TO SELL THE PAPER TO?
8 A. WELL, WE WOULD -- WE WERE WILLING TO SELL THE PAPER TO ANY
9 BUYER WHO WAS PREPARED TO CONTINUE -- WHO WOULD USE THESE
10 ASSETS THAT WERE BEING OFFERED TO CONTINUE THE OPERATION OF THE
11 EXAMINER AS A DAILY NEWSPAPER. WE WERE -- WE WERE NOT PREPARED
12 TO ENTER INTO ANY TRANSACTION WITH SOMEONE WHO WANTED TO USE
13 ASSETS FOR SOME OTHER PURPOSE.
14 Q. OR SIMPLY TO LIQUIDATE THEM?
15 A. OR SIMPLY TO LIQUIDATE THEM, YES.
16 Q. SO THE POINT WAS YOU WERE TRYING TO SELL TO SOMEONE WHO
17 WOULD OPERATE THE EXAMINER AS A DAILY NEWSPAPER?
18 A. YES, THAT'S CORRECT.
19 Q. NOW, WHAT ASSETS WERE OFFERED FOR SALE?
20 A. WE OFFERED WHAT I CALL THE "EDITORIAL ASSETS," WHICH I
21 DESCRIBED HERE ON PAGE 1 IN SUMMARY FASHION. IT'S PRINCIPALLY
22 THE NAME, THE EDITORIAL EQUIPMENT AND THE RACKS, AGREEMENTS
23 WITH NEWS AND WIRE AND FEATURE SERVICES, THE ARCHIVES, WHICH
24 ARE QUITE EXTENSIVE.
25 IN TERMS OF THE EDITORIAL STAFF, THE BUYER WAS GOING
941
ASHER - CROSS / HALLING
1 TO HAVE THE OPPORTUNITY TO EMPLOY ANY OR ALL OF THE -- OF THE
2 EDITORIAL STAFF OF THE EXAMINER, PROVIDED THE SUBSCRIBER LISTS.
3 THOSE WERE THE PRINCIPAL ASSETS OFFERED.
4 IN ADDITION TO THE ASSETS THAT WERE OFFERED, THE
5 PHYSICAL ASSETS -- SOME OF THESE WERE INTANGIBLE ASSETS. WE
6 ALSO OFFERED A TRANSITION SERVICE AGREEMENT UNDER WHICH HEARST
7 WOULD HAVE PROVIDED FOR THE PRODUCTION AND DISTRIBUTION OF
8 THE -- OF THE EXAMINER FOR A TRANSITION PERIOD WHILE A BUYER
9 MADE THEIR OWN ARRANGEMENTS TO CONTINUE THOSE ACTIVITIES
10 INDEPENDENTLY.
11 Q. WERE PRINTING FACILITIES OFFERED?
12 A. SO THE -- OUR -- AT THE TIME OF THIS FIRST OFFER, WE DID
13 NOT OFFER ANY OF OUR PHYSICAL PRINTING FACILITIES. INSTEAD, WE
14 OFFERED THE -- THIS TRANSITION SERVICE AGREEMENT THAT I JUST
15 DESCRIBED.
16 Q. WHY WAS THAT?
17 A. WE FELT THAT THIS WAS THE BEST WAY TO ATTRACT AN
18 INTERESTED BUYER TO THE EXAMINER. HAD WE OFFERED THE -- A
19 PRINTING PLANT -- OR ONE OR MORE OF THE PRINTING PLANTS FOR
20 SALE, THAT WOULD HAVE REQUIRED A MUCH MORE SUBSTANTIAL INITIAL
21 CAPITAL INVESTMENT BY A BUYER. WE FELT THAT THE MOST
22 ATTRACTIVE OPPORTUNITY HERE WOULD BE FOR A RELATIVELY SMALL
23 INITIAL INVESTMENT TO BE ABLE TO PURSUE THE CONTINUATION OF THE
24 EXAMINER.
25 Q. ALL RIGHT. SO AFTER THE PRESS RELEASE -- THE RETENTION OF
942
ASHER - CROSS / HALLING
1 VERONIS SUHLER, THE PRESS RELEASE AND THE OFFERING MEMO --
2 WELL, LET ME ASK YOU THIS: WAS THE OFFERING MEMO SENT TO
3 EVERYONE WHO EXPRESSED AN INTEREST?
4 A. EVERYONE WHO SIGNED A CONFIDENTIALITY AGREEMENT.
5 Q. DO YOU KNOW ABOUT HOW MANY PEOPLE ARE IN THAT CATEGORY,
6 HOW MANY POTENTIAL BUYERS?
7 A. GOING BACK TO THE SUMMARY REPORT FROM VERONIS SUHLER, I
8 BELIEVE THERE IS A CATEGORY -- THERE WERE 14 COMPANIES WHO
9 SIGNED A COPY OF THE CONFIDENTIALITY AGREEMENT AND RECEIVED A
10 COPY OF THE MEMORANDUM, AND THEY ARE LISTED ON PAGES 14 TO 15
11 OF THAT SEPTEMBER 23RD LETTER, INCLUDED ON -- I AM JUST NOTING
12 HERE, INCLUDED IN THAT LIST WERE KNIGHT RIDDER, LEUCADIA
13 INDEPENDENT NEWS GROUP, HELLMAN AND FREEDMAN, WASSERSTEIN AND
14 PERELLA, YOUNG BROADCASTING AND A VARIETY OF OTHER PARTIES.
15 Q. OTHER THAN THE OFFERING MEMO, WAS THERE OTHER INFORMATION
16 AVAILABLE?
17 A. YES. FOR THOSE PARTIES WHO SIGNED THE CONFIDENTIALITY
18 AGREEMENT, WE HAD PREPARED A DATA ROOM PROVIDING ADDITIONAL,
19 SUPPLEMENTAL INFORMATION THAT WENT BEYOND THE INFORMATION THAT
20 WAS IN THE -- IN THE OFFERING DOCUMENT. THAT INFORMATION
21 INCLUDED ACTUAL COPIES OF -- OF UNION AGREEMENTS AND OTHER
22 CONTRACTS THAT EXISTED, PROVIDED SOME MORE DETAILED INFORMATION
23 ABOUT SOME OF THE INFORMATION THAT WAS IN THE OFFERING
24 DOCUMENT, AND EVENTUALLY WE INCLUDED IN THE DATA ROOM FIVE
25 YEARS OF HISTORICAL FINANCIAL INFORMATION FOR THE COMBINED
943
ASHER - CROSS / HALLING
1 OPERATIONS OF THE AGENCY ITSELF.
2 Q. AND DID SOME OF THE POTENTIAL PURCHASERS EITHER SEND
3 REPRESENTATIVES OR COME THEMSELVES TO THE DATA ROOM?
4 A. YES, THEY DID.
5 Q. NOW, WHAT WAS THE END RESULT OF THIS INITIAL SALES EFFORT,
6 IF I CAN CALL IT THAT?
7 A. THE END RESULT IS THAT WE RECEIVED INDICATIONS OF INTEREST
8 FROM TWO PARTIES, THE INDEPENDENT NEWSPAPER GROUP AND LEUCADIA
9 NATIONAL CORP.
10 AT THIS TIME THE -- BOTH PARTIES WERE NOT PREPARED
11 TO MAKE A POSITIVE PAYMENT -- A POSITIVE PURCHASE PRICE PAYMENT
12 TO HEARST FOR THE ASSETS THAT WERE BEING OFFERED.
13 THE ONLY BASIS ON WHICH THOSE TWO PARTIES WERE
14 PREPARED TO PROCEED WITH THE ACQUISITION OF THE EXAMINER IS IF
15 HEARST PAID THEM -- IT RANGED BETWEEN 25 AND $35 MILLION A
16 YEAR -- FOR THE REMAINDER OF THE TERM OF THE JOA. WE FOUND
17 THOSE OFFERS TO BE UNACCEPTABLE AND WE DID NOT ACCEPT THEM.
18 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
19
20
21
22
23
24
25
944
ASHER - CROSS / HALLING
1 Q. AT SOME POINT IN TIME DID YOU REVISE THE OFFER OF ASSETS
2 YOU WERE WILLING TO SELL?
3 A. YES, WE DID.
4 Q. TAKE A LOOK AT EXHIBIT C. FIRST START WITH EXHIBIT 916.
5 THE FIRST PAGE OF 916 APPEARS TO BE A MEMO TO YOU FROM JAMES
6 RUTHERFORD DATED FEBRUARY 18, 2000. DO YOU HAVE THAT?
7 A. YES.
8 Q. AND MR. RUTHERFORD, AGAIN, WAS ONE OF THE PROFESSIONALS AT
9 VERONIS SUHLER THAT YOU RETAINED?
10 A. YES, HE WAS.
11 Q. CAN YOU IDENTIFY WHAT IS EXHIBIT 916 IN EVIDENCE?
12 A. YES. 906 --
13 Q. 916.
14 A. 916 IS A MEMORANDUM FROM MR. RUTHERFORD TO ME DESCRIBING
15 THE SECOND SALES EFFORT THAT WE UNDERTOOK TO SELL THE EXAMINER.
16 THE COURT: COUNSEL, DO I HAVE 916? I DON'T HAVE IT
17 IN MY BOOK.
18 MR. HALLING: YOU SHOULD, YOUR HONOR.
19 DO WE HAVE ANOTHER COPY?
20 THE COURT: OH, I'M SORRY. I'M SORRY. IT'S IN A
21 DIFFERENT BINDER.
22 MR. HALLING: IT'S RATHER LARGE AND HARD TO MISS.
23 THE COURT: YES.
24 MR. HALLING: BUT I HAVE ANOTHER COPY.
25 THE COURT: NO, THAT'S FINE. THANK YOU. SORRY FOR
945
ASHER - CROSS / HALLING
1 THE INTERRUPTION.
2 BY MR. HALLING:
3 Q. TAKE A LOOK, IF YOU WOULD, MR. ASHER, AT EXHIBIT C TO 916.
4 IT'S BATES PAGE H1175.
5 A. (WITNESS EXAMINES DOCUMENT.) YES.
6 Q. THIS TWO-PAGE DOCUMENT, EXHIBIT C, APPEARS TO BE A PRESS
7 RELEASE DATED JANUARY 25, 2000. HAVE YOU EVER SEEN THIS
8 BEFORE?
9 A. YES, I HAVE. THIS IS THE PRESS RELEASE THAT WE ISSUED AT
10 THE TIME WE COMMENCED OUR SECOND SALES EFFORT.
11 Q. NOW, WHAT ASSETS WERE OFFERED FOR SALE AS PART OF THIS
12 SECOND SALES EFFORT?
13 A. WELL, AS DESCRIBED IN THE SECOND PARAGRAPH HERE OF THE
14 PRESS RELEASE, BASICALLY IN ADDITION TO ALL OF THE ASSETS THAT
15 WE HAD OFFERED FOR SALE IN THE FIRST SALES EFFORT, THIS TIME WE
16 ADDED SUFFICIENT PHYSICAL ASSETS SO THAT A BUYER WOULD BE ABLE,
17 ON A TURNKEY BASIS, TO CONTINUE TO PRODUCE AND DISTRIBUTE THE
18 EXAMINER.
19 Q. WAS THERE A REASON WHY YOU ENGAGED IN THE SECOND SALES
20 EFFORT?
21 A. YES, THERE WAS. IN FACT, I BELIEVE IT SAYS IN THE NEXT
22 PARAGRAPH, THIS WOULD BE AN ACCURATE STATEMENT, THAT WE
23 COMMENCED THE SECOND SALES EFFORT IN RESPONSE TO CONCERNS THAT
24 HAD BEEN RAISED BY LOCAL, STATE AND FEDERAL AUTHORITIES ABOUT
25 WHETHER OUR FIRST SALES EFFORT FAILED BECAUSE WE HAD NOT
946
ASHER - CROSS / HALLING
1 INCLUDED THE OPPORTUNITY TO -- OPPORTUNITY FOR A BUYER TO
2 ACQUIRE THE ACTUAL PHYSICAL MEANS OF PRODUCING AND DISTRIBUTING
3 THE EXAMINER.
4 AND WHILE WE BELIEVED THAT THE FAILURE OF THE FIRST
5 SALES EFFORT WAS NOT BECAUSE OF THE LACK OF PHYSICAL ASSETS, WE
6 FELT THAT THE BEST WAY TO DEMONSTRATE OUR BELIEF WAS TO OFFER
7 THOSE ASSETS FOR SALE AND SEE IF ANYONE IN THE MARKET WAS
8 INTERESTED IN BUYING THEM.
9 Q. SO HOW DID YOU PROCEED WITH RESPECT TO THIS SECOND OFFER?
10 A. QUITE -- IN A QUITE SIMILAR FASHION FROM THE FIRST.
11 STARTING WITH ALL OF THE PARTIES WHO WERE CONTACTED IN THE
12 FIRST OFFERING, THOSE THAT HAD ACTUALLY PROCEEDED TO THE POINT
13 OF SIGNING A CONFIDENTIALITY AGREEMENT, WE JUST WENT AHEAD AND
14 SENT THEM THE REVISED OFFERING DOCUMENT SO THAT THEY COULD
15 PERHAPS RECONSIDER WHETHER THEY HAD AN INTEREST IN THE
16 OFFERING.
17 IN ADDITION, WE MAILED OR FAXED LETTERS SUMMARIZING
18 THE REVISED SALES OFFER, SENT THAT TO EVERY PARTY WHO WAS
19 CONTACTED IN THE FIRST OFFERING. AND BY THIS TIME I BELIEVE WE
20 HAD IDENTIFIED A FEW ADDITIONAL PARTIES THAT WE WOULD GO AHEAD
21 AND CONTACT, AND WE CONTACTED THEM.
22 Q. ALL RIGHT. WITH RESPECT TO THE LETTERS THAT YOU SENT OUT,
23 CAN YOU PLEASE TAKE A LOOK AT WHAT'S BEEN MARKED AS EXHIBIT
24 H-1181?
25 A. (WITNESS EXAMINES DOCUMENT.)
947
ASHER - CROSS / HALLING
1 MR. HALLING: YOUR HONOR, THIS EXHIBIT IS NOT IN
2 EVIDENCE AND IF I MAY PASS YOU A COPY. I'M NOT SURE IT'S IN
3 THE NOTEBOOK.
4 THE COURT: VERY WELL.
5 THE WITNESS: DO I.... (WITNESS EXAMINES
6 DOCUMENTS.)
7 MR. HALLING: MAY I APPROACH THE WITNESS, YOUR
8 HONOR?
9 THE COURT: YES, YOU MAY.
10 BY MR. HALLING:
11 Q. CAN YOU IDENTIFY, MR. ASHER, EXHIBIT H-1181?
12 A. (WITNESS EXAMINES DOCUMENT.) YES, I CAN.
13 Q. WHAT IS THE DOCUMENT?
14 A. THESE ARE THE LETTERS THAT I JUST REFERRED TO THAT WERE
15 SENT OUT -- THERE ARE SEVERAL FORMS OF LETTERS HERE, ONE FORM
16 THAT WAS SENT TO PARTIES WHO HAD ALREADY SIGNED THE
17 CONFIDENTIALITY AGREEMENT, ANOTHER FORM THAT WAS SENT TO
18 PARTIES WHO WERE CONTACTED IN THE FIRST OFFERING, AND I BELIEVE
19 THERE'S A THIRD FORM FOR NEW PARTIES WHO WOULD BE CONTACTED FOR
20 THE FIRST TIME AT THIS TIME. SO THESE ARE THE FORM LETTERS
21 THAT WERE SENT TO THAT UNIVERSE OF POTENTIAL BUYERS.
22 Q. WHEN THESE LETTERS WERE ACTUALLY SENT OUT BY VERONIS
23 SUHLER, DID YOU RECEIVE COPIES OF THE ACTUAL LETTERS?
24 A. YES, I DID.
25 Q. AND WERE THEY CONSISTENT WITH THESE FORM LETTERS?
948
ASHER - CROSS / HALLING
1 A. YES, THEY WERE.
2 MR. HALLING: I WOULD OFFER EXHIBIT 1181.
3 MR. ALIOTO: NO OBJECTION, YOUR HONOR.
4 THE COURT: VERY WELL. 1181 WILL BE ADMITTED.
5 (DEFENDANTS' EXHIBIT H-1181
6 RECEIVED IN EVIDENCE)
7 BY MR. HALLING:
8 Q. NOW, LOOKING AT THE DOCUMENT, THIS IS IN THE FIRST OF THE
9 FORM LETTERS, THERE'S A DESCRIPTION OF THE ASSETS TO BE SOLD.
10 THE HEADINGS ARE PRINTING PLANT AND EQUIPMENT, NEXT PAGE OFFICE
11 BUILDING, ALL EDITORIAL ASSETS -- I'M JUST READING THE
12 HEADINGS -- SUBSCRIBER LIST, DISTRIBUTION, ADVERTISING, STAFF.
13 IS THIS A SUMMARY, AT LEAST IN BROAD SCOPE, OF THE
14 FURTHER ASSETS THAT WERE OFFERED FOR SALE?
15 A. YES, IT IS.
16 Q. WHICH ONES OF THESE ASSETS WERE NOT INCLUDED IN THE FIRST
17 SALE?
18 A. THE PRINTING PLANT AND EQUIPMENT AND THE DISTRIBUTION ON
19 THE SECOND PAGE, THE DISTRIBUTION ASSETS, THOSE WERE THE
20 PRIMARY ASSETS THAT WERE ADDED TO THE PACKAGE OF ASSETS THAT
21 WERE OFFERED FOR SALE.
22 IN PARTICULAR, THERE WAS THE CITY PLANT THAT WAS
23 OFFERED FOR SALE. WE SELECTED THAT PLANT AS THE SPECIFIC ONE
24 TO OFFER FOR SALE BECAUSE THE EXAMINER TODAY IS ENTIRELY
25 PRINTED AT THAT PLANT.
949
ASHER - CROSS / HALLING
1 BUT IN ADDITION TO THE SPECIFIC ASSETS -- WELL, NO,
2 THAT'S OKAY.
3 Q. TURN TO THE NEXT PAGE, IF YOU WOULD, OF THE EXHIBIT, THE
4 LETTER THAT WAS SENT OUT IN CONNECTION WITH THE SECOND SALES
5 EFFORT, THE FIRST FORM LETTER. ON PAGE 2 THERE'S A
6 PARAGRAPH -- I'M SORRY, THIS IS PAGE 3. THERE'S A PARAGRAPH
7 TOWARDS THE BOTTOM. IT READS:
8 "HEARST IS FLEXIBLE AS TO THE SCOPE OF THE
9 ASSETS OFFERED FOR SALE AND THE TRANSITIONAL
10 ARRANGEMENTS IT IS WILLING TO CONSIDER. BUYERS
11 ARE ENCOURAGED TO SUBMIT PROPOSALS WHICH ADD OR
12 DELETE ASSETS OR REQUEST SERVICES OF WHATEVER
13 NATURE TO FULFILL TRANSITIONAL NEEDS."
14 DOES THAT STATEMENT ACCURATELY REFLECT HEARST'S
15 ATTITUDE TOWARDS THIS SALE?
16 A. YES, IT WAS. WE WANTED TO MAKE IT CLEAR THAT ALTHOUGH WE
17 HAD SELECTED CERTAIN PHYSICAL ASSETS TO OFFER FOR SALE, THAT IF
18 THERE WERE ADDITIONAL ASSETS THAT A BUYER WAS INTERESTED IN
19 ACQUIRING, WE WERE PREPARED TO CONSIDER SELLING THOSE ASSETS TO
20 THEM.
21 SO THAT I SUPPOSE THEORETICALLY IF A BUYER WANTED TO
22 BUY AN UNDIVIDED HALF INTEREST IN ALL THE ASSETS, WHICH IS WHAT
23 WE OWN TODAY, A BUYER COULD HAVE EXPRESSED AN INTEREST IN DOING
24 THAT.
25 IN ANY EVENT, WHATEVER CONFIGURATION OF ASSETS THAT
950
ASHER - CROSS / HALLING
1 A BUYER WAS INTERESTED IN ACQUIRING, WE INDICATED A WILLINGNESS
2 TO ENTERTAIN INDICATIONS OF INTEREST IN THAT RESPECT.
3 WE ALSO INDICATED THAT WE WERE PREPARED, AS WE WERE
4 IN THE FIRST OFFER, TO PROVIDE TRANSITIONAL ARRANGEMENTS FOR
5 SERVICES TO A BUYER. AND WE THROUGH THIS LANGUAGE INTENDED TO
6 MAKE IT VERY CLEAR THAT WE WERE WILLING TO CONSIDER WHATEVER
7 TRANSITIONAL ARRANGEMENT A BUYER WAS INTERESTED IN HAVING FROM
8 US.
9 AND, AGAIN, OUR INTENT WAS TO DEMONSTRATE MAXIMUM
10 FLEXIBILITY IN THIS REVISED SALES OFFERING IN TERMS OF THE
11 ASSETS THAT WERE OFFERED FOR SALE AND THE TRANSITIONAL SERVICES
12 THAT WE WOULD PROVIDE.
13 THE COURT: BE CAREFUL ABOUT LEADING THE WITNESS.
14 MR. HALLING: THANK YOU, YOUR HONOR.
15 Q. MR. ASHER, WAS THERE A FURTHER OFFERING MEMO AS WELL?
16 A. YES, THERE WAS.
17 Q. TAKE A LOOK AT EXHIBIT 916, EXHIBIT A, AND TELL ME IF
18 THAT'S THE FURTHER OFFERING MEMO THAT WAS SENT OUT. THAT'S AT
19 PAGE H896.
20 A. YES. THIS IS THE SECOND OR REVISED OFFERING MEMORANDUM
21 THAT WE DISTRIBUTED.
22 Q. NOW, CAN YOU BRIEFLY DESCRIBE THE RESULTS OF THIS SECOND
23 SALES EFFORT?
24 A. (WITNESS EXAMINES DOCUMENT.) WITHOUT DOING THE VARIOUS
25 INTERIM STEPS, MOVING RIGHT TO THE CONCLUSION OF THIS -- OR THE
951
ASHER - CROSS / HALLING
1 END OF THIS SALES EFFORT, THERE WERE THREE PARTIES WHO
2 EXPRESSED A RESPONSIVE PROPOSAL TO OUR REQUEST TO INDICATE WHAT
3 THEY WOULD BE INTERESTED IN BUYING, WHAT ASSETS THEY WANTED AND
4 WHAT TRANSITIONAL SERVICES THEY WOULD EXPECT HEARST TO PROVIDE.
5 AND THOSE THREE PARTIES WERE THE PLAINTIFF IN THIS CASE,
6 MR. REILLY, THE LEUCADIA NATIONAL CORP. AND THE PAN-ASIA GROUP.
7 Q. TAKE A LOOK IF YOU WOULD, PLEASE, AT EXHIBIT 920 IN
8 EVIDENCE. IT'S A FEBRUARY 29, 2000, LETTER FROM YOU TO A
9 MR. SCRUGGS.
10 A. (WITNESS EXAMINES DOCUMENT.) YES, I SEE THAT LETTER.
11 Q. WHO IS MR. SCRUGGS?
12 A. MR. SCRUGGS IS THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
13 AMERICAN INVESTMENT BANK, WHICH IS A SUBSIDIARY OF LEUCADIA
14 NATIONAL CORP. MR. SCRUGGS WAS THE PARTY WHO WAS PUT IN CHARGE
15 OF THE NEGOTIATIONS WITH ME ON BEHALF OF LEUCADIA FOR THE
16 POSSIBLE PURCHASE OF THE EXAMINER BY THAT COMPANY.
17 Q. WHO IS LEUCADIA?
18 A. LEUCADIA IS A LARGE PUBLICLY-TRADED CORPORATION. THEY
19 DESCRIBE THEMSELVES TO US AS A COMPANY WHICH SPECIALIZES IN
20 INVESTING OR ACQUIRING DISTRESSED SITUATIONS. THE WAY THEY PUT
21 IT, THEY LIKE TO BUY ASSETS THAT NOBODY ELSE LIKES TO BUY.
22 AS I SAID, THIS WAS ONE OF THE PARTIES THAT
23 EXPRESSED AN INTEREST HERE AS A RESULT OF OUR PRESS RELEASE
24 FROM THE FIRST OFFERING. THEY WERE NOT ACTUALLY ON A CONTACT
25 LIST. THEY WERE NOT KNOWN TO VERONIS SUHLER AT THE TIME.
952
ASHER - CROSS / HALLING
1 SO....
2 Q. DOES EXHIBIT 920 ACCURATELY SET FORTH THE PROPOSAL THEY
3 MADE TO YOU?
4 A. YES. IT'S REALLY IN PARAGRAPH TWO OF THIS LETTER, AND THE
5 ESSENCE OF THEIR PROPOSAL WAS THAT THEY WOULD BE PREPARED TO
6 ACQUIRE THE EXAMINER PROVIDED WE PROVIDED THEM A
7 25 MILLION-DOLLAR A YEAR SUBSIDY FOR A FOUR-YEAR PERIOD. AND
8 THEN IN PARAGRAPH THREE THEY INDICATED THAT THEY WOULD NEED A
9 SIX-MONTH PERIOD OF JOINT ADVERTISING, SALE, PRODUCTION AND
10 DISTRIBUTION SERVICES WHILE THEY MADE PROVISION TO ENGAGE IN
11 THOSE ACTIVITIES SEPARATELY.
12 THEY WERE NOT INTERESTED IN ACQUIRING ANY OF THE
13 ADDITIONAL PHYSICAL ASSETS THAT WE HAD OFFERED IN THE REVISED
14 SALES OFFER. INDEED, IN TERMS OF -- WELL, IN LARGE PART NONE
15 OF THE PARTIES WERE INTERESTED IN ACQUIRING ANY OF THOSE FOR
16 THE PURPOSE OF PRODUCING THE EXAMINER.
17 THE COURT: NONE OF THE PARTIES WAS INTERESTED IN
18 ACQUIRING WHAT YOU DESCRIBED AS THE PRODUCTION AND DISTRIBUTION
19 ASSETS?
20 THE WITNESS: THAT IS CORRECT. NO PARTY WANTED TO
21 PURCHASE ANY OF OUR PRINTING PLANTS, ANY OF OUR PRESSES.
22 THE COURT: AND THAT INCLUDES THE PAN-ASIA GROUP?
23 THE WITNESS: THAT IS CORRECT.
24 BY MR. HALLING:
25 Q. DID IT ALSO INCLUDE MR. REILLY?
953
ASHER - CROSS / HALLING
1 A. YES.
2 Q. TAKE --
3 THE COURT: THEN I GATHER THE SECOND OFFER REALLY
4 DIDN'T SWEETEN THINGS, IS THAT A FAIR STATEMENT?
5 THE WITNESS: THAT IS CORRECT. I BELIEVE THAT THIS
6 CONFIRMED OUR VIEW THAT THE REASON NO BUYER WAS WILLING TO
7 PURCHASE THE EXAMINER FOR A POSITIVE PURCHASE PRICE REALLY HAD
8 NOTHING TO DO WITH WHETHER OR NOT WE HAD OFFERED PRINTING
9 PLANTS FOR SALE.
10 THE COURT: JUST TELL ME WHEN YOU REACH A CONVENIENT
11 BREAKING POINT.
12 MR. HALLING: NOW WOULD BE ALL RIGHT OR FIVE OR TEN
13 MINUTES.
14 THE COURT: IT'S UP TO YOU. IF YOU WANT TO FINISH
15 YOUR DOCUMENT OR FINISH A LINE OF QUESTIONS, THAT'S FINE.
16 BY MR. HALLING:
17 Q. ALL RIGHT. PLEASE TURN TO EXHIBIT 1019.
18 A. YES.
19 Q. 1019 APPEARS TO BE A MEMO DATED MARCH 7, 2000, FROM YOU TO
20 MR. BENNACK AND OTHERS AT THE HEARST CORPORATION AND IT READS
21 ON THE FIRST PAGE:
22 "ATTACHED IS A SUMMARY OF THE CURRENT
23 PROPOSAL FROM REILLY."
24 AND THEN IT HAS THE INITIALS. IS THIS A MEMO THAT
25 YOU PREPARED?
954
ASHER - CROSS / HALLING
1 A. YES, IT IS.
2 Q. AND THE SECOND PAGE SAYS "REILLY" AND THEN UNDER IT ARE
3 SIX POINTS. CAN YOU TELL US WHAT THIS DOCUMENT REPRESENTS?
4 A. THESE SIX POINTS SUMMARIZE THE FINAL PROPOSAL THAT WE
5 RECEIVED FROM MR. REILLY TO ACQUIRE THE EXAMINER.
6 Q. AND WHAT WERE THE TERMS THAT MR. REILLY PROPOSED?
7 A. WELL, HE PROPOSED A THREE-YEAR PERIOD OF JOINT
8 ADVERTISING, CIRCULATION, PRODUCTION AND DISTRIBUTION SERVICES.
9 SO THAT BASICALLY DURING THIS THREE-YEAR PERIOD, WE WOULD
10 RETAIN ALL OF THE REVENUES GENERATED FROM THE EXAMINER AND WE
11 WOULD ALSO BEAR ALL OF THE EXPENSES FOR THE PRODUCTION AND
12 DISTRIBUTION OF THE EXAMINER DURING THIS PERIOD. BASICALLY THE
13 SAME KINDS OF EXPENSES THAT TODAY ARE BORNE AT THE AGENCY
14 LEVEL.
15 IN ADDITION, WE WOULD MAKE A CASH PAYMENT -- IN
16 ADDITION TO BEARING THOSE EXPENSES, WE WOULD MAKE A CASH
17 PAYMENT TO MR. REILLY TO COVER HIS EDITORIAL AND G & A EXPENSE
18 UP TO $20 MILLION A YEAR FOR THE FIRST THREE YEARS AND THERE
19 WOULD BE AN ADDITIONAL $17 MILLION A YEAR FOR THOSE SET OF
20 PURPOSES FOR YEARS FOUR, FIVE AND SIX.
21 MR. REILLY WAS ALSO INTERESTED IN ACQUIRING THE
22 EXAMINER OFFICE BUILDING, ADJACENT PARKING LOT AND ANOTHER
23 PROPERTY ON BRANNAN STREET, AND HIS OFFER PRICES ARE SUMMARIZED
24 HERE. AND HE WAS PREPARED TO PROCEED TO A CONTRACT WITHIN TWO
25 WEEKS.
955
ASHER - CROSS / HALLING
1 Q. I TAKE IT FROM YOUR DESCRIPTION THAT THIS WAS ANOTHER
2 NEGATIVE PURCHASE PRICE?
3 A. YES, THAT IS EXACTLY HOW WE VIEWED THIS. THERE WAS -- I
4 DON'T SEE ANY PROVISION IN HERE FOR A PAYMENT TO HEARST.
5 Q. IS IT POSSIBLE TO CALCULATE HOW MUCH OF A SUBSIDY THIS
6 OFFER WOULD REPRESENT IF HEARST HAD ACCEPTED IT?
7 A. YES, I BELIEVE IT IS.
8 MR. HALLING: YOUR HONOR, MAY I APPROACH THE
9 WITNESS?
10 THE COURT: VERY WELL.
11 BY MR. HALLING:
12 Q. MR. ASHER, HOW WOULD YOU GO ABOUT CALCULATING THE COST OF
13 THIS PROPOSAL TO HEARST.
14 A. WELL, STARTING WITH PARAGRAPH TWO, OR ITEM TWO IN THIS
15 SUMMARY, I WOULD TAKE THE 17 MILLION-DOLLAR FIGURE THERE, WHICH
16 IS THE COST THAT WE ESTIMATED WE WOULD BEAR ON AN INCREMENTAL
17 BASIS TO PRODUCE THE TYPE OF PAPER THAT MR. REILLY WAS PLANNING
18 ON PRODUCING, AND THAT COST WAS 17 MILLION A YEAR. SO I WOULD
19 TAKE THAT 17 MILLION-DOLLAR NUMBER AS THE FIRST FACTOR OF THE
20 ANNUAL SUBSIDY.
21 I WOULD REDUCE THAT FIGURE BY THE REVENUE THAT'S
22 DESCRIBED IN PARAGRAPH THREE, WHICH WOULD BE OUR ESTIMATE OF
23 THE INCREMENTAL REVENUE THAT WE WOULD RETAIN UNDER MR. REILLY'S
24 PROPOSAL. AND THAT WAS 3 AND A HALF MILLION DOLLARS. SO I
25 WOULD SUBTRACT 3 AND A HALF FROM 17.
956
ASHER - CROSS / HALLING
1 Q. AND THAT WOULD GIVE US 13.5 MILLION?
2 A. 13.5, YES.
3 Q. THEN WHAT WOULD YOU DO?
4 A. TO THAT NUMBER, MOVING TO POINT FOUR --
5 Q. WELL, FIRST, LET ME ASK YOU THIS: IT'S FOR A THREE-YEAR
6 PERIOD?
7 A. YES. SO WE WOULD THEN MULTIPLY -- MAYBE WE'LL DO THAT.
8 IF WE'RE GOING TO LOOK AT THE AGGREGATE SUBSIDY AS OPPOSED TO
9 THE ANNUAL SUBSIDY, I WOULD MULTIPLY THAT NUMBER BY 3.
10 Q. CAN YOU DO THAT FOR ME?
11 THE COURT: WELL, COUNSEL.
12 BY MR. HALLING:
13 Q. I GET 40.5.
14 A. THAT LOOKS RIGHT, YES.
15 Q. SO $40.5 MILLION. AND THEN WHAT ELSE?
16 A. THEN MOVING TO POINT FOUR, WE HAVE THREE YEARS OF
17 $20 MILLION A YEAR. SO THAT WOULD BE AN ADDITIONAL 60 MILLION.
18 I CAN DO THAT MATH QUICKLY.
19 Q. 3 TIMES 20 IS 60.
20 A. AND THEN I WOULD TAKE THE 17 MILLION A YEAR FOR THE NEXT
21 THREE YEARS TIMES 3. SO THAT WOULD BE 51 MILLION ADDITIONAL.
22 Q. THAT'S 3 TIMES 17 MILLION?
23 A. YES.
24 Q. AND THEN WHAT ABOUT THE REAL ESTATE?
25 A. WELL, AT THIS POINT THAT IS THE ENTIRE CASH SUBSIDY THAT
957
ASHER - CROSS / HALLING
1 WE'RE PROVIDING. THIS NEXT POINT, TO HAVE AN ESTIMATE OF WHAT
2 WE WOULD REGARD AS THE SUBSIDY HERE, BASED ON MY DISCUSSIONS
3 WITH OUR PEOPLE IN SAN FRANCISCO, WE WOULD HAVE BELIEVED THAT
4 THE VALUE OF THE THREE PROPERTIES DESCRIBED HERE WAS, FAIR
5 MARKET VALUE, WAS PROBABLY AT LEAST -- LET'S SAY WAS TWICE THE
6 PRICE OFFERED HERE.
7 SO THAT I WOULD SAY THAT THE SUBSIDY WOULD BASICALLY
8 BE THE SUM OF THESE AMOUNTS, 5, 6, 7 AND A HALF MILLION AS
9 REPRESENTING THE DIFFERENCE BETWEEN WHAT WE THOUGHT WAS THE
10 FAIR MARKET VALUE OF THESE PROPERTIES AND THE PRICE THAT
11 MR. REILLY WAS INDICATING HE WOULD PAY FOR THEM.
12 Q. SO THAT'S 8.5 MILLION FOR THE REAL ESTATE?
13 A. THAT'S RIGHT. I MISSPOKE. IT'S 8.5 NOT 7, YES.
14 Q. ALL RIGHT. IS THAT IT?
15 A. YES.
16 Q. ALL RIGHT. SO WE ADD THAT UP.
17 A. 5, YOU GET 9 IN THE NEXT COLUMN.
18 Q. 10?
19 A. OH, 10, YES. I THINK I BETTER STOP.
20 Q. I GET 160.
21 A. 11, 10... YES.
22 Q. IS THAT CORRECT?
23 A. YES.
24 Q. OKAY. NOW, FOR HOW MANY YEARS WOULD THAT SUBSIDY --
25 A. SO THIS WOULD HAVE BEEN A 160 MILLION-DOLLAR SUBSIDY OVER
958
ASHER - CROSS / HALLING
1 A SIX-YEAR PERIOD.
2 Q. AND HOW MUCH WOULD THAT BE A YEAR? I GET 26.6 MILLION.
3 A. YES. ALTHOUGH, AGAIN, I WOULD POINT OUT THAT OF COURSE
4 THE CASH SUBSIDY WOULD NOT INCLUDE THE REAL ESTATE.
5 THE COURT: OF COURSE YOU WOULD PRESENT VALUE THAT,
6 BUT LET'S NOT GO THROUGH THAT.
7 THE WITNESS: YES. I'M DOING A NONDISCOUNTED
8 QUANTIFICATION OF THOSE NUMBERS.
9 THE COURT: YES, CORRECT.
10 BY MR. HALLING:
11 Q. HOW DOES THE SUBSIDY, THEN, MR. REILLY WAS SEEKING COMPARE
12 WITH THE SUBSIDY THAT THE OTHER TWO BUYERS, LEUCADIA AND
13 PAN-ASIA, WERE SEEKING?
14 A. WELL, IT'S INTERESTING. ON AN ANNUAL BASIS ALL THREE
15 PARTIES WERE REQUESTING US TO PROVIDE A SUBSIDY IN
16 APPROXIMATELY THE SAME AMOUNTS. WHERE THE OFFERS DIFFERED WAS
17 FOR THE DURATION OF THAT ANNUAL SUBSIDY. IN THE FANGS CASE IT
18 WAS THREE YEARS, IN LEUCADIA'S CASE IT WAS FOUR YEARS, AND IN
19 MR. REILLY'S CASE IT WAS SIX YEARS.
20 MR. HALLING: THIS WOULD BE A CONVENIENT TIME TO
21 BREAK FOR LUNCH.
22 THE COURT: ALL RIGHT. VERY WELL. WE'LL TAKE OUR
23 BREAK AT THIS TIME. BE BACK AND READY TO GO, COUNSEL, AT
24 1:30 AND WE'LL RESUME WITH FURTHER DIRECT EXAMINATION OF
25 MR. ASHER.
959
ASHER - CROSS / HALLING
1 MR. BALABANIAN: WHAT TIME DID YOU SAY?
2 THE COURT: 1:30. 1:30, COUNSEL. DID EVERYBODY
3 HEAR THAT?
4 (LUNCHEON RECESS WAS TAKEN AT 12:10 .M.)
5 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
960
ASHER - CROSS / HALLING
1 AFTERNOON SESSION 1:39 P.M.
2
3 THE LAW CLERK: PLEASE REMAIN SEATED. COME TO
4 ORDER. THIS COURT IS NOW IN SESSION.
5 THE COURT: VERY WELL. MR. HALLING, DO YOU WISH TO
6 CONTINUE YOUR EXAMINATION OF THIS WITNESS?
7 MR. HALLING: THANK YOU, YOUR HONOR.
8 BY MR. HALLING:
9 Q. MR. ASHER, I DIRECT YOUR ATTENTION BACK TO EXHIBIT H-1019,
10 WHICH IS WHERE WE LEFT OFF. IT'S YOUR MEMO ABOUT MR. REILLY'S
11 PROPOSAL.
12 DO YOU HAVE THAT?
13 A. YES, I DO.
14 Q. LET ME DIRECT YOUR ATTENTION TO THE BULLET POINT NUMBER --
15 OR NUMBERED POINT NUMBER 2. THERE IS A REFERENCE TO A 65 TO
16 70,000 CIRCULATION P.M. NEWSPAPER.
17 DO YOU SEE THAT?
18 A. YES, I DO.
19 Q. WAS MR. REILLY PLANNING ON A P.M. NEWSPAPER, AS FAR AS YOU
20 KNOW?
21 A. ACTUALLY, IN OUR DISCUSSIONS BOTH THE POSSIBILITY OF AN
22 A.M. OR A P.M. PAPER WERE DISCUSSED, AND, AS I REFLECT UPON IT,
23 I BELIEVE THAT HIS INTENT WAS AS QUICKLY AS POSSIBLE TO MOVE TO
24 AN A.M. PAPER SO THAT THE REFERENCE HERE TO A P.M. PAPER IS
25 PROBABLY NOT AN ACCURATE DESCRIPTION OF HIS FINAL PROPOSAL.
961
ASHER - CROSS / HALLING
1 Q. THE PHRASE CONTINUES, "ONE PRINT RUN, HOME DELIVERY IN SF
2 CITY AREA."
3 DO YOU SEE THAT?
4 A. YES.
5 Q. DID MR. REILLY COMMUNICATE TO YOU IN YOUR DISCUSSIONS WITH
6 HIM AS TO THE KIND OF PAPER HE INTENDED TO PUBLISH IF HE WERE
7 TO ACQUIRE THE EXAMINER?
8 A. YES, HE DID DESCRIBE IT IN GENERAL TERMS TO ME.
9 Q. AND WHAT DID HE TELL YOU?
10 A. AS I UNDERSTAND IT, HIS FOCUS WOULD HAVE BEEN ON A SAN
11 FRANCISCO CITY FOCUSED PRODUCT THAT WOULD BE PRIMARILY
12 DISTRIBUTED IN THE CITY OF SAN FRANCISCO, THE COUNTY OF SAN
13 FRANCISCO AND PERHAPS SOME CIRCULATION IN SOME OF THE AREAS
14 IMMEDIATELY TO THE SOUTH OF THE CITY.
15 BUT THE MAIN FOCUS WOULD HAVE BEEN IN THE CITY AND
16 THE COUNTY OF SAN FRANCISCO. IT WOULD HAVE BEEN PRINCIPALLY A
17 SINGLE-COPY SALE, NEWSSTAND SALE, PAPER, ALTHOUGH THERE WOULD
18 HAVE BEEN HOME DELIVERY, AS WELL IN -- PARTICULARLY IN THE CITY
19 OF SAN FRANCISCO.
20 IT IS MY UNDERSTANDING THAT HE CONTEMPLATED
21 PUBLISHING A PAPER MONDAY TO FRIDAY, AS WELL AS A WEEKEND
22 PRODUCT. IT WAS SOMEWHAT UNCLEAR WHETHER THAT WOULD COME OUT
23 ON SATURDAY OR PRODUCT THAT WOULD BE PRINTED AND DISTRIBUTED ON
24 SUNDAY.
25 THIS WAS BASICALLY THE SAME PRODUCT -- THE SAME TYPE
962
ASHER - CROSS / HALLING
1 OF PRODUCT THAT ALL THREE OF THE FINAL PARTIES WHO WERE
2 INTERESTED IN ACQUIRING THE EXAMINER -- THEY HAD ALL
3 INDEPENDENTLY ARRIVED AT THE SAME GENERAL BUSINESS PLAN. THAT
4 WAS TO -- TO CUT OUT THE CIRCULATION IN -- IN THE MORE DISTANT
5 PARTS OF THIS GEOGRAPHIC OF THE WHOLE BAY AREA AND TO
6 CONCENTRATE BOTH IN TERMS OF COVERAGE AND IN TERMS OF
7 CIRCULATION ON THE CITY OF SAN FRANCISCO.
8 Q. WHAT WERE THE THREE PARTIES YOU JUST REFERENCED IN YOUR
9 LAST ANSWER?
10 A. IN ADDITION TO REILLY IT WAS LEUCADIA AND THE PAN ASIA
11 GROUP.
12 Q. CAN YOU DESCRIBE THE FINAL PROCESS IN THE SALES EFFORT
13 THAT LED TO THE DEAL WITH PAN ASIA?
14 A. ONCE WE HAD ASKED FOR EACH PARTY TO SUBMIT THEIR BEST AND
15 FINAL PROPOSAL AND WE HAD TOLD EACH PARTY THAT WE WOULD
16 EVALUATE THEIR PROPOSALS ON TWO OR THREE DIFFERENT FACTORS,
17 FROM OUR PERSPECTIVE WE WANTED A PROPOSAL -- OR WE WOULD
18 EVALUATE IT IN TERMS OF THE SIZE OF THE SUBSIDY -- WE OBVIOUSLY
19 WANTED, FROM OUR PERSPECTIVE, AS SMALL A SUBSIDY AS POSSIBLE.
20 WE WOULD EVALUATE IT ON THE BASIS OF HOW LONG A PERIOD JOINT
21 SERVICES WERE GOING TO BE NECESSARY. FROM OUR PERSPECTIVE THE
22 SHORTER PERIOD WAS BETTER. AND, THIRDLY, WE WERE INTERESTED IN
23 CERTAINTY EXECUTION OF A TRANSACTION; THAT IS, HOW QUICKLY
24 WOULD THE PARTY BE PREPARED TO EXECUTE AND CLOSE A TRANSACTION.
25 AND WE TOLD EACH PARTY THAT THOSE WERE THE FACTORS
963
ASHER - CROSS / HALLING
1 THAT WERE MOST IMPORTANT TO US, AND WE INVITED EACH PARTY TO
2 SUBMIT THEIR -- THEIR BEST AND FINAL PROPOSAL.
3 FOLLOWING THAT, WE SELECTED THE PAN ASIA PROPOSAL.
4 Q. WHY DID YOU SELECT PAN ASIA OVER LEUCADIA AND REILLY?
5 A. FOR SEVERAL REASONS. THE FACTORS THAT I JUST MENTIONED,
6 THE PAN ASIA PROPOSAL INVOLVED THE SMALLEST SUBSIDY, SMALLEST
7 COST TO US IN TERMS OF THE SUBSIDY, OF ANY OF THE PROPOSALS.
8 IT INVOLVED THE SHORTEST PERIOD OF TRANSITIONED SERVICES
9 COMPARED WITH ANY OF THE OTHER PROPOSALS. AND, THIRDLY --
10 ALTHOUGH I THINK EACH PARTY WAS PROBABLY EQUAL ON THIS FACTOR
11 IN TERMS OF WILLINGNESS TO PROCEED PROMPTLY TO EXECUTION OF
12 CONTRACTS AND CLOSING -- IN ADDITION TO THOSE FACTORS, WE -- WE
13 CONSIDERED THE CREDIBILITY OF EACH OF THE PARTIES FROM THE
14 PERSPECTIVE OF A BONA FIDE INTENT TO PUBLISH A NEWSPAPER, TO
15 CONTINUE PUBLISHING, USE THE ASSETS, USE OUR SUBSIDY, TO
16 CONTINUE TO PUBLISH A NEWSPAPER.
17 AND IN THAT REGARD WE FELT THAT THE PAN ASIA GROUP
18 WAS SUPERIOR TO THE OTHER TWO PARTIES BECAUSE THEY WERE THE
19 ONLY PARTY OF ANY OF THE THREE THAT HAD ANY KNOWLEDGE OR
20 EXPERIENCE ABOUT THE NEWSPAPER BUSINESS GENERALLY OR KNOWLEDGE
21 AND EXPERIENCE OF THE NEWSPAPER BUSINESS SPECIFICALLY IN THE
22 SAN FRANCISCO AREA. AND THERE WAS NO DOUBT IN OUR MIND THAT
23 THEIR INTENT WAS TO USE OUR ASSETS, USE OUR SUBSIDY, TO PUBLISH
24 A NEWSPAPER.
25 ON THE OTHER HAND, I WAS CONCERNED THAT THE OTHER
964
ASHER - CROSS / HALLING
1 TWO PARTIES MAY HAVE HAD OTHER MOTIVATIONS. LEUCADIA, GOING
2 BACK TO OUR FIRST MEETING WITH THEM, THEIR FOCUS STRUCK ME
3 POTENTIALLY AS BEING ONE OF BEING INTERESTED MORE -- OR COULD
4 BE INTERESTED MORE IN A SHORT-TERM FINANCIAL PLAY; THAT IS,
5 THEY WOULD USE OUR SUBSIDY, TRY TO, IN A SENSE, MILK IT AS MUCH
6 AS THEY COULD, AND MAKE AS MUCH MONEY AS THEY COULD USING --
7 OUT OF OUR SUBSIDY OVER THE SHORT PERIOD OF TIME AND THEN --
8 Q. WHAT ABOUT REILLY?
9 A. AND AS TO REILLY, A CONCERN I HAD -- WHICH GOES BACK TO
10 OUR FIRST MEETING -- MR. REILLY WAS VERY INTERESTED IN
11 ACQUIRING REAL ESTATE FROM US. AND I KNOW THAT THAT IS
12 MR. REILLY'S PRIMARY BUSINESS. AND IN ALL OF OUR DISCUSSIONS,
13 THERE WOULD HAVE BEEN NO RESTRICTION PLACED WHATSOEVER ON HOW
14 THAT REAL ESTATE COULD BE USED. AND I HAD SOME CONCERNS THAT
15 PERHAPS MR. REILLY WAS MORE INTERESTED IN MAKING SOME REAL
16 ESTATE INVESTMENTS THAN HE WAS IN PUBLISHING A NEWSPAPER.
17 BUT, IN ANY EVENT, I HAD NO DOUBT THAT THE FANGS
18 INTENDED TO PUBLISH A DAILY NEWSPAPER.
19 THE COURT: YOU MIGHT TOSS IN A QUESTION EVERY ONCE
20 IN A WHILE, MR. HALLING.
21 (LAUGHTER)
22 MR. HALLING: I DID. I ASKED HIM WHAT ABOUT REILLY.
23 BY MR. HALLING:
24 Q. MR. ASHER, CAN YOU PLEASE SEE IF YOU CAN LOCATE
25 EXHIBIT 1182 UP THERE?
965
ASHER - CROSS / HALLING
1 THE COURT: IS THAT THIS EXHIBIT (INDICATING)?
2 MR. HALLING: I DON'T THINK SO.
3 THE WITNESS: YES, I HAVE IT.
4 BY MR. HALLING:
5 Q. HAVE YOU EVER SEEN THAT DOCUMENT BEFORE?
6 A. YES, I HAVE.
7 Q. CAN YOU TELL US WHAT IT IS?
8 A. THIS IS THE SECOND REQUEST THAT WE RECEIVED FOR
9 INFORMATION THAT WE RECEIVED FROM THE DEPARTMENT OF JUSTICE IN
10 CONNECTION WITH OUR ACQUISITION OF THE CHRONICLE.
11 Q. NOW, MR. ALIOTO ASKED YOU SOME QUESTIONS ABOUT THE
12 INTERROGATORY RESPONSES TO THE DEPARTMENT OF JUSTICE. DO YOU
13 RECALL THAT?
14 A. YES, I DO.
15 Q. WERE THOSE RESPONSES PROVIDED TO THE GOVERNMENT IN
16 RESPONSE TO THIS SECOND REQUEST FOR INFORMATION WHICH IS
17 EXHIBIT 1182?
18 A. YES, THEY WERE.
19 MR. HALLING: I WOULD OFFER 1182.
20 MR. ALIOTO: NO OBJECTION, YOUR HONOR.
21 THE COURT: 1182 WILL BE ADMITTED.
22 (DEFENDANT'S EXHIBIT H-1182
23 RECEIVED IN EVIDENCE)
24 BY MR. HALLING:
25 Q. NOW, LET ME DIRECT YOUR ATTENTION TO THE INTERROGATORY
966
ASHER - CROSS / HALLING
1 RESPONSES. TAKE A LOOK AT EXHIBIT 947.
2 A. I HAVE IT HERE.
3 MR. HALLING: YOUR HONOR, JUST FOR CLARITY, I
4 BELIEVE THIS EXHIBIT IS IN EVIDENCE WITH TWO DIFFERENT -- WITH
5 TWO NUMBERS. SO IT WAS REFERRED TO EARLIER BY --
6 MR. SHULMAN: PLAINTIFF'S 16.
7 MR. HALLING: MR. SHULMAN SAYS IT'S ALSO PLAINTIFF'S
8 16.
9 THE COURT: AH.
10 BY MR. HALLING:
11 Q. TAKE A LOOK, IF YOU WOULD, AT THE PAGE THAT MR. ALIOTO
12 ASKED YOU ABOUT, WHICH IS SPECIFICATION 13, I BELIEVE, THE
13 RESPONSE TO 13.
14 A. YES.
15 Q. PAGE 19 OF THE DOCUMENT.
16 A. YES.
17 Q. DO YOU SEE THAT?
18 A. YES, I HAVE THAT, YES.
19 Q. HE ASKED YOU A QUESTION ABOUT THIS RESPONSE:
20 "HEARST DOES NOT BELIEVE THAT ENTRY INTO THE
21 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE
22 RELEVANT AREA IN DIRECT COMPETITION WITH THE
23 COMBINED SAN FRANCISCO CHRONICLE AND EXAMINER
24 NEWSPAPERS OR THE CHRONICLE ALONE IS EITHER
25 ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS
967
ASHER - CROSS / HALLING
1 BEHAVIOR."
2 AND THEN HE ASKED YOU SOME QUESTIONS ABOUT THE
3 RELEVANT AREA. DO YOU RECALL THAT?
4 A. YES, I DO.
5 Q. TAKE A LOOK BACK AT WHAT IS NOW IN EVIDENCE, EXHIBIT 1182,
6 AND TURN TO PAGE 14 OF THE SECOND REQUEST, WHICH I BELIEVE
7 SECOND FROM THE TOP, SUBPART M, IS A DEFINITION OF THE RELEVANT
8 AREA.
9 DO YOU SEE THAT?
10 A. YES, I DO.
11 Q. IT STATES:
12 "THE RELEVANT AREA MEANS THE 11 COUNTIES OF
13 ALAMEDA, CONTRA COSTA, MARIN, SAN FRANCISCO, SAN
14 MATEO, LAKE, MENDOCINO, NAPA, SANTA CLARA,
15 SOLANO AND SONOMA, LOCATED IN THE SAN FRANCISCO
16 DMA, AND ANY LOCALITIES THEREIN."
17 DO YOU SEE THAT?
18 A. YES, I DO.
19 Q. NOW, BACK TO THE PRIOR QUESTION THAT WAS BEING RESPONDED
20 TO IN NUMBER 13, THE RESPONSE TO 13, WHERE THERE WAS THE ANSWER
21 WE JUST READ ABOUT THE RELEVANT AREA?
22 A. YES.
23 Q. WAS THAT THE RELEVANT AREA THAT YOU WERE TALKING ABOUT
24 WHEN YOU ANSWERED THAT QUESTION?
25 A. YES. WE USED THIS DEFINITION FROM PAGE 14 OF THE SECOND
968
ASHER - CROSS / HALLING
1 REQUEST IN ANSWERING THIS QUESTION NUMBER 13.
2 Q. NOW, THIS --
3 A. IT WAS THAT DEFINITION OF "RELEVANT AREA."
4 Q. NOW, MR. ALIOTO ALSO ASKED YOU SOME QUESTIONS ABOUT THE
5 RESPONSE TO THE SECOND SPECIFICATION FROM THE DEPARTMENT OF
6 JUSTICE IN 1182, WHICH HAD TO DO WITH NEWSPAPERS -- LET'S FIND
7 IT. IT'S AT PAGE 1 OF 2 OF EXHIBIT 1182. IT LISTS -- IT SAYS:
8 "LIST EACH DAILY NEWSPAPER WHICH HAS ANY
9 CIRCULATION IN OR ADVERTISING REVENUE FROM THE
10 RELEVANT AREA."
11 DO YOU SEE THAT?
12 A. YES.
13 Q. AND THEN MR. ALIOTO ASKED YOU HOW COME ONLY THE CHRONICLE
14 AND EXAMINER NEWSPAPERS AND THEIR EMPLOYEES WERE LISTED IN
15 RESPONSE TO THIS REQUEST.
16 DO YOU RECALL THAT?
17 A. YES, I DO.
18 Q. IS THERE AN EXPLANATION AS TO WHY THERE WAS A -- ONLY THE
19 CHRONICLE AND THE EXAMINER WERE LISTED?
20 A. YES. AND, AS IT -- WHEN I WAS ASKED EARLIER THIS
21 MORNING -- I HADN'T FOCUSED ON IT. ON LINE 18 THERE IS A
22 REFERENCE TO THE WORD "COMPANY," WITH A CAPITAL "C." SO THIS
23 QUESTION IS ASKING -- THE WAY WE INTERPRETED THIS QUESTION, IT
24 WAS ASKING US TO LIST EACH DAILY NEWSPAPER IN THIS SAME
25 RELEVANT AREA THAT WAS OWNED BY THE COMPANY. AND "COMPANY," AS
969
ASHER - CROSS / HALLING
1 DEFINED IN THIS SECOND REQUEST DOCUMENT (INDICATING), REFERS TO
2 THE HEARST CORPORATION AND ITS AFFILIATES.
3 SO OUR INTERPRETATION OF SPECIFICATION NUMBER 2 WAS
4 THAT THE QUESTION RELATED ONLY TO DAILY NEWSPAPERS OWNED BY
5 HEARST OR ITS AFFILIATES THAT HAD CIRCULATION OR ADVERTISING
6 REVENUE IN THIS BROAD RELEVANT AREA.
7 AND WITH THAT INTERPRETATION, THE PAPERS LISTED ARE
8 THE ONLY ONES THAT EXIST.
9 AND WHEN I SAY "OWNED BY THE HEARST CORPORATION," I
10 BELIEVE IT WAS HEARST CORPORATION OR -- OR INTERPRETED TO
11 INCLUDE THE CHRONICLE IN THAT -- CHRONICLE PUBLISHING COMPANY,
12 WHICH IS WHY WE INCLUDED THE CHRONICLE AND THE EXAMINER.
13 Q. ALL RIGHT. NOW, ARE YOU FAMILIAR WITH THE RESPONSES THAT
14 WERE MADE BY HEARST TO THE SECOND REQUEST, EXHIBIT 1182?
15 A. YES.
16 Q. WERE THERE DOCUMENTS PRODUCED?
17 A. YES. THERE WERE NUMEROUS DOCUMENTS. I RECALL SOME 170
18 BOXES OF DOCUMENTS THAT WERE DELIVERED TO THE DEPARTMENT OF
19 JUSTICE IN RESPONSE.
20 Q. WERE THERE ANY MEETINGS THAT OCCURRED?
21 A. I RECALL MEETINGS. I RECALL -- I GUESS THEY'RE CALLED
22 "INTERVIEWS" THAT WERE CONDUCTED BY THE DEPARTMENT OF JUSTICE.
23 I BELIEVE THEY TOOK SOME DEPOSITIONS. THAT'S WHAT I RECALL.
24 Q. TAKE A LOOK, IF YOU WOULD, AT EXHIBIT 940.
25 A. YES.
970
ASHER - CROSS / HALLING
1 Q. 940 IS A DOCUMENT ON DEPARTMENT OF JUSTICE LETTERHEAD.
2 IT'S A PRESS RELEASE, DATED THURSDAY, MARCH 30, 2000. THE
3 HEAD -- THE HEADING ON IT IS "HEARST CORP." -- "HEARST CORP. TO
4 SELL SAN FRANCISCO EXAMINER TO EXIN, LLC RESOLVES JUSTICE
5 DEPARTMENT'S ANTITRUST CONCERNS."
6 HAVE YOU EVER SEEN THIS BEFORE?
7 A. YES, I HAVE.
8 MR. HALLING: YOUR HONOR, I WOULD OFFER THIS PRESS
9 RELEASE IN EVIDENCE.
10 THE COURT: THIS IS THE PRESS RELEASE IN THIS CASE?
11 MR. HALLING: CORRECT. IT'S EXHIBIT 940.
12 THE COURT: I THOUGHT IT HAD ALREADY BEEN ADMITTED.
13 I AM SURE THERE IS NO OBJECTION.
14 MR. ALIOTO: NO, YOUR HONOR.
15 THE COURT: VERY WELL. ADMITTED.
16 (DEFENDANT'S EXHIBIT H-940
17 RECEIVED IN EVIDENCE)
18 MR. ALIOTO: THERE USED TO BE.
19 THE COURT: WELL, NOT TO ITS ADMISSION.
20 MR. ALIOTO: NO, YOUR HONOR.
21 THE COURT: ALL RIGHT.
22 PROCEED, MR. HALLING.
23 BY MR. HALLING:
24 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION NOW TO EXHIBIT 91,
25 PLAINTIFF'S EXHIBIT 91.
971
ASHER - CROSS / HALLING
1 A. YES.
2 THE COURT: ARE WE DONE WITH THE REILLY MEMORANDUM?
3 MR. HALLING: YES, WE ARE, YOUR HONOR.
4 THE COURT: 1019? OKAY.
5 BY MR. HALLING:
6 Q. EXHIBIT 91 IS DATED AUGUST 20, 1999. IT APPEARS TO BE A
7 MEMO FROM MR. FRANK ROBERT TO FRANK BENNACK, GEORGE IRISH AND
8 JON THACKERAY. THE HEADING IS "RE SAN FRANCISCO HISTORICAL
9 PROFIT AND LOSS AND NET CASH FLOW."
10 THIS IS AN EXHIBIT IN EVIDENCE.
11 CAN YOU TELL ME WHO IS FRANK ROBERT?
12 A. HE IS ON THE FINANCIAL STAFF OF OUR -- OF THE CORPORATE
13 NEWSPAPER GROUP.
14 Q. HAVE YOU EVER SEEN THIS DOCUMENT BEFORE?
15 A. YES, I HAVE.
16 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION TO THE PAGE OF THE
17 DOCUMENT, THE THIRD PAGE -- WELL, FIRST OF ALL, LET ME JUST ASK
18 YOU THIS: WHAT IS THE PURPOSE, IF YOU KNOW, OF THIS --
19 PREPARATION OF THIS DOCUMENT?
20 A. WHAT THIS DOCUMENT DOES IS START FROM THE INCEPTION OF THE
21 JOA AND DETERMINE THE CASH THAT WAS GENERATED TO HEARST FROM
22 THE OPERATION OF THE EXAMINER. AND THIS IS ON A TRUE CASH
23 BASIS SO THAT DEPRECIATION CHARGES, FOR EXAMPLE, WHICH ARE
24 NON-CASH, ARE ADDED BACK IN. CAPITAL EXPENDITURES ARE
25 SUBTRACTED AS THEY ARE MADE EACH YEAR AS ACTUAL CASH
972
ASHER - CROSS / HALLING
1 EXPENDITURES.
2 THE STARTING POINT IS THE NET EXCESS FROM THE
3 NEWSPAPER AGENCY, AND THEN THE VARIOUS ADDITIONS AND
4 SUBTRACTIONS THAT IMPACT CASH ARE MADE FROM THAT NUMBER TO
5 ARRIVE AT THE NET CASH FLOW TO HEARST FROM THE EXAMINER FROM
6 THE INCEPTION OF THE JOA THROUGH -- I BELIEVE THIS PARTICULAR
7 REPORT STOPPED IN 19 -- AT THE END OF 1998.
8 Q. ALL RIGHT. LET ME DIRECT YOUR ATTENTION, IF I COULD, TO
9 THE THIRD PAGE THAT BEARS A BATES NUMBER ENDING IN "14151."
10 AND THE YEARS ACROSS THE TOP ON THIS PAGE ARE 1987, '98.
11 LET ME JUST DIRECT YOUR ATTENTION, IF I COULD, TO
12 THE FIRST FIVE YEARS SHOWN, '87, '88, '89, '90 AND '91.
13 DO YOU SEE THAT?
14 A. YES, I DO.
15 Q. AND, IF I UNDERSTAND YOUR TESTIMONY, IF YOU GO DOWN THE
16 PAGE ABOVE THE HARD LINE ACROSS, THERE IS A NUMBER CALLED "NET
17 CASH FLOW"?
18 A. THAT'S CORRECT. SO THAT NUMBER --
19 Q. WHAT IS THAT NUMBER?
20 A. THAT NUMBER REPRESENTS FOR EACH OF THE YEARS INDICATED THE
21 NET CASH FLOW IN THE MANNER THAT I WAS DESCRIBING FROM THE
22 OPERATION OF THE EXAMINER FOR THAT YEAR.
23 Q. AND SO THIS WOULD START WITH THE NET EXCESS?
24 A. YES.
25 Q. IS THAT RIGHT?
973
ASHER - CROSS / HALLING
1 A. YES.
2 Q. AND THEN JUST VERY BRIEFLY, WHAT ARE THE OTHER ITEMS THAT
3 WOULD BE TAKEN INTO ACCOUNT IN GETTING TO THAT NET CASH FLOW
4 NUMBER?
5 A. WELL, I BELIEVE, AS I DESCRIBED, STARTING WITH THE NET
6 EXCESS, ALL OTHER EXPENSES THAT INVOLVED CASH OUTSIDE OF THE
7 JOA -- ALL THOSE INSIDE THE JOA HAVE ALREADY BEEN ACCOUNTED
8 FOR. SO ALL OF THE OTHER EXPENSES OUTSIDE OF THE JOA THAT
9 INVOLVE A CASH PAYMENT, SUCH AS EDITORIAL, SUCH AS INCOME
10 TAXES, SUCH AS ACTUAL CASH EXPENDITURES FOR CAPITAL EXPENSES --
11 THOSE ITEMS ARE SUBTRACTED FROM THE NET EXCESS TO ARRIVE AT THE
12 NET CASH FLOW.
13 Q. ALL RIGHT. SO LOOKING AT THE -- THE NET CASH FLOW FOR
14 THESE YEARS, '87 TO '91, THE DOCUMENT SHOWS, IF I AM READING
15 THIS RIGHT, ABOUT $4.7 MILLION NEGATIVE CASH FLOW IN '87?
16 A. YES. IN '87 IT WAS NEGATIVE 4.7 MILLION. IN '88 IT WAS
17 NEGATIVE A LITTLE OVER 18 MILLION. IN '89 IT WAS NEGATIVE
18 17.2 MILLION; IN '90 IT WAS NEGATIVE 17.2; '91 IT WAS NEGATIVE
19 4.8.
20 DURING THAT PERIOD THE ANNUAL NET CASH FLOW WAS
21 NEGATIVE IN EACH YEAR.
22 Q. NOW, THIS IS JUST HEARST'S EXPERIENCE, CORRECT?
23 A. THAT'S CORRECT.
24 Q. DO YOU HAVE ANY BASIS FOR HAVING AN UNDERSTANDING AS TO
25 HOW THE CHRONICLE'S EXPERIENCE WOULD BE IN THESE SAME YEARS?
974
ASHER - CROSS / HALLING
1 A. YES. BECAUSE THE STARTING POINT, NET EXCESS, IS THE SAME
2 FOR THE EXAMINER AND THE CHRONICLE. THEIR EDITORIAL EXPENSE IS
3 LARGER THAN OURS. THEY HAVE MORE REPORTERS IN THEIR NEWSROOM.
4 AND, BASICALLY, ALL OF THE OTHER SIGNIFICANT EXPENSES, SUCH AS
5 CAPITAL EXPENDITURES, ARE EXACTLY THE SAME. THEY ARE SHARED BY
6 EACH PARTY IN A 50/50 PROPORTION.
7 SO, FUNDAMENTALLY, THE CHRONICLE'S RESULTS WOULD BE
8 THE SAME AS OURS BUT WORSE, TO REFLECT THEIR HIGHER EDITORIAL
9 EXPENSE.
10 Q. ALL RIGHT. LOOK FURTHER DOWN ON THE PAGE. THERE IS A --
11 AT THE BOTTOM OF THIS PAGE THERE IS AN ENTRY CALLED "CUMULATIVE
12 NET CASH FLOW."
13 DO YOU SEE THAT?
14 A. YES.
15 Q. WHAT DOES THAT REPRESENT?
16 A. WHAT THIS DOES AT THE END OF EACH OF THE YEARS INDICATED
17 IS TO ADD UP ALL OF THE NET CASH FLOWS FOR EACH YEAR STARTING
18 FROM INCEPTION IN 1965, ADD THEM UP, NO -- NO TIME VALUE OF
19 MONEY IS ACCOUNTED FOR. JUST ADD THEM UP ARITHMETICALLY FROM
20 INCEPTION TO THE END OF THE YEAR INDICATED.
21 SO THAT, FOR EXAMPLE, AT THE END OF 1987, IF YOU ADD
22 UP ALL OF THE NET CASH FLOWS THAT WE RECEIVED OR SUBTRACT ALL
23 OF THE NEGATIVE CASH FLOWS THAT WE INCURRED FROM INCEPTION
24 THROUGH THE END OF 1987, HEARST WAS IN A POSITIVE $14.3 MILLION
25 POSITION AT THAT POINT.
975
ASHER - REDIRECT / ALIOTO
1 STARTING IN 1988 -- THIS IS THE LAST LINE OF THIS
2 CHART -- OUR CUMULATIVE NET CASH FLOW FROM 1965 THROUGH 1988
3 WAS NEGATIVE 3.7 MILLION AT THE END OF 1988.
4 AND THAT DEFICIT POSITION GREW AND REMAINED IN A
5 DEFICIT POSITION CUMULATIVELY FROM INCEPTION ALL THE WAY
6 THROUGH 1996. IT DID NOT TURN POSITIVE UNTIL 1997 AGAIN.
7 Q. WHAT DOES THAT TELL YOU ABOUT THE BUSINESS?
8 A. THIS IS IN MY VIEW, IN MY CAPACITY NOW AS CHIEF
9 DEVELOPMENT OFFICER, TO HAVE THIS LEVEL OF CASH FLOW GENERATED
10 CUMULATIVELY OVER THIS LONG A PERIOD OF TIME, THIS IS NOT A
11 VERY GOOD INVESTMENT.
12 MR. HALLING: NOTHING FURTHER.
13 THE COURT: VERY WELL.
14 ANY OTHER EXAMINATION BY THE DEFENDANTS --
15 MR. ROSCH: NO, YOUR HONOR.
16 THE COURT: -- OF THIS WITNESS?
17 MR. HOCKETT: NONE FROM US, YOUR HONOR.
18 THE COURT: VERY WELL.
19 REDIRECT, MR. ALIOTO, OR RECROSS, MORE TECHNICALLY?
20 MR. ALIOTO: THANK YOU, YOUR HONOR. MAY IT PLEASE
21 YOUR HONOR.
22 REDIRECT EXAMINATION
23 BY MR. ALIOTO:
24 Q. IN THE FIRST DOCUMENT -- IN THE FIRST DOCUMENT THAT YOU
25 WERE GIVEN THERE WAS REFERENCE IN THE QUALIFICATIONS OF THE
976
ASHER - REDIRECT / ALIOTO
1 COMPANY THAT YOU HIRED TO MR. RUTHERFURD.
2 A. THE -- YES, I REMEMBER THE REFERENCE TO MR. RUTHERFURD,
3 YES.
4 Q. AND WOULD YOU IDENTIFY MR. RUTHERFURD ONCE MORE TO THE
5 COURT?
6 A. HE IS A MANAGING DIRECTOR -- ACTUALLY, I BELIEVE, HIS
7 CURRENT TITLE IS PERHAPS PRESIDENT OF VERONIS SUHLER INVESTMENT
8 BANKING GROUP, SOMETHING LIKE THAT.
9 Q. AND THEY WERE THE PEOPLE WHO YOU HIRED FOR THE PURPOSE OF
10 SELLING THE EXAMINER?
11 A. THAT IS CORRECT.
12 Q. NOW, ONE OF THE THINGS YOU DID WAS YOU ASKED HIM TO GET IN
13 TOUCH WITH MAYOR BROWN?
14 A. YES, WE DID, FOLLOWING THE PRESS RELEASE THAT MAYOR BROWN
15 WAS TRYING TO ORGANIZE A GROUP TO EXPLORE PURCHASING THE
16 EXAMINER.
17 Q. AND YOU INSTRUCTED HIM TO GIVE THE INFORMATION OTHERWISE
18 CONFIDENTIAL TO MAYOR BROWN?
19 A. YES, I BELIEVE WE DID.
20 Q. NOW, IN THE -- YOU ARE AWARE, ARE YOU NOT, THAT --
21 A. I AM JUST REFLECTING ON YOUR LAST QUESTION. I KNOW WE
22 ASKED MR. RUTHERFURD TO INQUIRE OF THE MAYOR'S OFFICE WHETHER
23 THEY WOULD LIKE TO RECEIVE A COPY OF OUR CONFIDENTIAL
24 MEMORANDUM. I KNOW WE DID THAT. I WOULD HAVE TO -- I WOULD
25 HAVE TO GO BACK IN SOME OF THESE DOCUMENTS TO KNOW IF WE
977
ASHER - REDIRECT / ALIOTO
1 ACTUALLY DELIVERED A COPY. I JUST DON'T RECALL.
2 Q. SO WERE YOU INTERESTED IN ANYTHING HAVING TO DO WITH MAYOR
3 BROWN'S STATEMENTS ABOUT THIS PARTICULAR SALE?
4 A. WELL, WE WERE INTERESTED --
5 Q. NO, YOU WERE.
6 A. I WAS INTERESTED IN FOLLOWING UP ON EVERY SINGLE POSSIBLE
7 AVENUE TO FIND A BUYER OF THE EXAMINER. AND WHEN I READ THAT
8 MAYOR BROWN WAS INTERESTED IN TRYING TO BRING THAT ABOUT, I WAS
9 INTERESTED IN FOLLOWING UP ON THAT, YES.
10 Q. OKAY. SO IN LIGHT OF THAT STATEMENT, THEN, WHEN YOU
11 RECEIVED THE MEMORANDUM OR THE E-MAIL FROM MR. WHITE WHERE HE
12 WAS TALKING ABOUT HOW HARD IT WAS FOR THE SUPERIORS IN NEW YORK
13 TO SUPPORT AND COOPERATE WITH THE MAYOR WHEN THE MAYOR WASN'T
14 BEING SO NICE TO THEM, ARE YOU STILL MAINTAINING THAT THAT
15 MEANT NOTHING TO YOU, THAT THAT WAS SIMPLY CHATTING?
16 A. WELL, I BELIEVE --
17 MR. HALLING: OBJECTION. BEYOND THE SCOPE, YOUR
18 HONOR. WE TALKED ABOUT THE SALE PROCESS.
19 THE COURT: SUSTAINED.
20 MR. ALIOTO: VERY GOOD.
21 BY MR. ALIOTO:
22 Q. MR. RUTHERFURD, DO YOU TRUST HIS JUDGMENT -- OR WERE YOU
23 TRUSTING HIS JUDGMENT WITH REGARD TO THE SALE OF THE EXAMINER?
24 A. I WAS RELYING ON HIS EXPERTISE.
25 Q. HIS EXPERTISE IN DOING WHAT?
978
ASHER - REDIRECT / ALIOTO
1 A. HE IS AN INVESTMENT BANKER, AND HIS EXPERTISE TOGETHER
2 WITH THE EXPERTISE OF HIS ASSOCIATES AND VERONIS SUHLER
3 TOGETHER WERE INVESTMENT BANKERS WHO SPECIALIZED IN THE
4 PURCHASE AND SALE OF MEDIA ASSETS GENERALLY AND NEWSPAPERS IN
5 PARTICULAR.
6 Q. I TAKE IT, HE WOULD BE THE KIND OF PERSON WHO WOULD KNOW
7 WHETHER OR NOT A NEWSPAPER IS EITHER A SUCCESSFUL NEWSPAPER OR
8 A FAILING NEWSPAPER?
9 A. I DON'T KNOW IF HE WOULD KNOW THAT.
10 Q. OKAY. I WOULD LIKE TO READ FROM HIS DEPOSITION TO YOU AND
11 ASK YOU A QUESTION ABOUT IT. THIS IS FROM THE DEPOSITION OF
12 JAMES RUTHERFURD, YOUR EXPERT, WHO WAS SELLING THE PAPER, DATED
13 APRIL 25, 2000. HIS DEPOSITION WAS TAKEN, I BELIEVE, IN NEW
14 YORK.
15 AT PAGE 48 OF HIS DEPOSITION, BEGINNING ON LINE 18:
16 "Q. WHEN YOU WERE TRYING TO SELL THE
17 EXAMINER, DID YOU BELIEVE THAT THE EXAMINER WAS
18 A FAILING NEWSPAPER?
19 "A. NO.
20 "Q. WHY NOT?
21 "A. WE THOUGHT THAT WHAT WE WERE SELLING
22 WAS SALABLE.
23 "Q. AND WHEN YOU SAY THAT YOU DID NOT
24 BELIEVE THE EXAMINER WAS A FAILING NEWSPAPER,
25 YOU MEANT THE EXAMINER WITHOUT ANY INTEREST IN
979
ASHER - REDIRECT / ALIOTO
1 THE JOA; IS THAT CORRECT?
2 "A. CORRECT."
3 DO YOU AGREE WITH THAT TESTIMONY?
4 A. NO.
5 Q. WHEN YOU WERE TALKING ABOUT CUMULATIVE CASH FLOW,
6 CUMULATIVE CASH FLOW MEANS TAKING A -- TAKING HOW THE CASH FLOW
7 WOULD RESULT OVER A TIME PERIOD, CORRECT?
8 A. JUST ADDING UP ARITHMETICALLY THE CASH FLOW FROM EACH YEAR
9 WITHOUT TAKING INTO ACCOUNT TIME VALUE OF MONEY.
10 Q. OKAY. NOW, YOU SAID THAT IT WAS NEGATIVE ON A CUMULATIVE
11 BASIS, ANYWAY. YOU SAID IT WAS NEGATIVE FROM 1988 UNTIL 19 --
12 I THINK YOU SAID "'96," RIGHT?
13 A. THROUGH 1996, YES.
14 Q. OKAY. BUT THE FACT OF THE MATTER IS THAT THE IMPROVEMENT
15 BEGAN AT LEAST AS EARLY AS 1992, CORRECT?
16 A. THE CUMULATIVE DEFICITS STARTED TO DECREASE IN 1992, THAT
17 IS CORRECT.
18 Q. WHICH MEANS IN THAT YEAR YOU HAD POSITIVE CASH FLOW,
19 CORRECT?
20 A. YES, WE DID, AS IS INDICATED HERE.
21 Q. AND YOU HAD POSITIVE CASH FLOW IN '92, AND YOU HAD EVEN
22 BETTER POSITIVE CASH FLOW IN '93, CORRECT?
23 A. ACTUALLY, IT WENT -- THE POSITIVE CASH FLOW WENT DOWN IN
24 '93 FROM 4.8 MILLION DOWN TO -- MY EYESIGHT IS GETTING BAD --
25 1. -- A LITTLE OVER ONE MILLION. IT WAS POSITIVE BUT IT WAS
980
ASHER - REDIRECT / ALIOTO
1 POSITIVE AT A SMALLER NUMBER.
2 Q. MR. ASHER, YOU WERE TALKING ABOUT THE NET CUMULATIVE CASH
3 FLOW, CORRECT? THAT LINE IS THE LINE YOU WERE TALKING ABOUT,
4 CORRECT?
5 A. WELL, I WAS ANSWERING YOUR QUESTION, WHICH I BELIEVE ASKED
6 ABOUT THE NET CASH FLOW FOR THAT YEAR. PERHAPS I
7 MISUNDERSTOOD.
8 Q. YOU GAVE TESTIMONY ABOUT THE CUMULATIVE NET CASH FLOW.
9 AND THE FACT OF THE MATTER IS THAT NOTWITHSTANDING YOUR
10 TESTIMONY, IS IT NOT CORRECT THAT FROM 1992 -- FROM 1992 DURING
11 THE TIME PERIOD '93, '94, '95, '96, '97 AND '98, THERE WAS
12 ALWAYS A POSITIVE CASH FLOW; IS THAT CORRECT?
13 A. THAT IS CORRECT.
14 Q. AND THE SO-CALLED "NEGATIVE CASH FLOW" THAT YOU WERE
15 TALKING ABOUT DECREASED BEGINNING IN 1992, NOT 1996, CORRECT?
16 A. THE DECREASE STARTED IN 1992, THAT IS CORRECT.
17 Q. '92. THANK YOU.
18 THANK YOU, YOUR HONOR.
19 THE COURT: MR. ASHER?
20 THE WITNESS: YES, YOUR HONOR.
21 THE COURT: AS I UNDERSTAND THE OFFER THAT WAS MADE
22 TO MESSRS. REILLY -- WELL, MR. REILLY TO THE LEUCADIA COMPANY
23 AND THE FANG GROUP, HEARST WILL PROVIDE THE PRINTING PLANT AND
24 EQUIPMENT THAT IS SET FORTH IN EXHIBIT 1181, OFFICE BUILDING,
25 EDITORIAL ASSETS, SUCH AS THE TRADE NAME, SAN FRANCISCO
981
1 EXAMINER, THE EXAMINER WEBSITE, EDITORIAL EQUIPMENT, COMPUTERS
2 AND HARDWARE AND SOFTWARE, CONTRACTS FOR WIRE SERVICES AND
3 FUTURE SYNDICATES, ARCHIVES, SUBSCRIBER LISTS, DISTRIBUTION
4 ASSETS, ADVERTISING CONTRACTS AND AN OPPORTUNITY TO EMPLOY THE
5 STAFF OF THE EXAMINER AND SO FORTH.
6 THE WITNESS: YES. WE OFFERED THAT TO EACH OF THEM.
7 THE COURT: AND IN ADDITION WITH RESPECT TO THE FANG
8 GROUP, A THREE-YEAR SUBSIDY ON THE TERMS THAT HAVE BEEN
9 DESCRIBED IN YOUR TESTIMONY AND IN THE OTHER TESTIMONY WE HAVE
10 HEARD AGGREGATING IN TOTAL WITHOUT DISCOUNTING ABOUT
11 $66 MILLION?
12 THE WITNESS: YES, THAT'S CORRECT.
13 THE COURT: ALL RIGHT. WHAT DOES HEARST GET OUT OF
14 THIS DEAL?
15 THE WITNESS: WE HAD MADE A BUSINESS DECISION THAT
16 RATHER THAN RISK THE DELAY THAT WE THOUGHT WOULD OCCUR IF ANY
17 LEVEL OF GOVERNMENT DECIDED TO ENTER THIS CASE -- MADE THE
18 BUSINESS DECISION THAT WE WERE BETTER OFF SELLING THE EXAMINER,
19 EVEN IF IT REQUIRED A SUBSIDY, THAN WE WERE CLOSING IT. WE
20 WERE CONCERNED THAT IF A LAYER OF GOVERNMENT ENTERED THIS CASE
21 THAT IT WAS ENTIRELY POSSIBLE THAT WE COULD NOT REACH A TRIAL
22 ON THE MERITS OF THE CASE IN TIME TO HAVE THAT OCCUR AND BE
23 RESOLVED BEFORE THE TERMINATION DATE WOULD HAVE OCCURRED UNDER
24 OUR AGREEMENT TO PURCHASE THE CHRONICLE.
25 SO THAT WE BELIEVED THAT WE WOULD BE -- THAT WE
982
1 WOULD ULTIMATELY PREVAIL EVEN IF ANY LEVEL OF GOVERNMENT
2 ENTERED THIS CASE. OUR CONCERN WAS WE DIDN'T HAVE THE TIME TO
3 LITIGATE THAT TO CONCLUSION. SO WE MADE THE BUSINESS JUDGMENT
4 THAT WE WERE BETTER OFF SELLING THE EXAMINER SO THAT WE COULD
5 IN A PROMPT FASHION COMPLETE OUR PURCHASE OF THE CHRONICLE.
6 THE COURT: WHAT WAS THE TERMINATION DATE THAT YOU
7 REFERRED TO?
8 THE WITNESS: THE INITIAL TERMINATION DATE, I
9 BELIEVE -- I DON'T LIKE DOING THIS FROM MEMORY. BUT I BELIEVE
10 IT WAS -- IT WOULD HAVE -- THE INITIAL TERMINATION DATE WAS
11 EARLY MAY.
12 THE COURT: EARLY MAY, 2000?
13 THE WITNESS: EARLY MAY, 2000. SO AT THIS TIME, FOR
14 EXAMPLE -- WE ARE NOW AT MARCH -- WHEN WE MADE THIS DECISION,
15 WE HAD BEEN -- WE HAD BEEN THROUGH A VERY LENGTHY PROCESS IN
16 TERMS OF OUR DISCUSSIONS WITH THE VARIOUS LEVELS OF GOVERNMENT.
17 IT HAD BEEN GOING ON FOR SIX OR SEVEN MONTHS BY THIS TIME, AND
18 WE WERE FACING A TERMINATION DATE THAT WAS RAPIDLY APPROACHING
19 ON THE CHRONICLE PURCHASE AGREEMENT.
20 NOW, THAT -- THAT TERMINATION DATE COULD BE
21 EXTENDED -- IN FACT, HAS BEEN EXTENDED -- UNDER VARIOUS
22 CIRCUMSTANCES. IN FACT, I BELIEVE THAT HAS BEEN DESCRIBED IN
23 EARLIER PAPERS, YOUR HONOR. BUT -- SO, BUT THAT -- AT THAT
24 TIME, AT THE TIME WE MADE THIS DECISION, THE PURCHASE AGREEMENT
25 WAS SCHEDULED TO TERMINATE ON MAY 2ND. I THINK IT'S MAY 2ND IS
983
1 MY RECOLLECTION.
2 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
984
1 THE COURT: YOU SAY THAT THE PURPOSE OR REASON FOR
2 ENTERING INTO THE FANG TRANSACTION WAS TO HEAD OFF THIS
3 OPPOSITION THAT YOU WERE CONCERNED ABOUT COMING FROM SOME LEVEL
4 OF GOVERNMENT.
5 THE WITNESS: YES. I BELIEVE THAT WE FELT A SALE OF
6 THE EXAMINER RATHER THAN CLOSING IT WOULD ELIMINATE ANY OF THE
7 OBJECTIONS THAT MIGHT BE FROM GOVERNMENTAL AUTHORITIES TO OUR
8 PURCHASING THE CHRONICLE.
9 THE COURT: NOW, AT THE TIME, THIS IS NOW MARCH OF
10 THIS YEAR, YOU WERE GOING THROUGH, PERHAPS INDEED HAD BY THAT
11 TIME COMPLETED, THE DEPARTMENT OF JUSTICE REVIEW OF THIS
12 TRANSACTION; CORRECT?
13 THE WITNESS: WELL, I DON'T THINK THAT THEIR REVIEW
14 HAD BEEN COMPLETED, NO.
15 THE COURT: LET'S SEE, THEIR REVIEW WAS COMPLETED
16 WITH THE ISSUANCE OF THE PRESS RELEASE IN APRIL?
17 MR. ALIOTO: MARCH 30, YOUR HONOR.
18 THE COURT: MARCH 30?
19 MR. ALIOTO: YES, SIR.
20 THE WITNESS: ACTUALLY, IT WAS MARCH 30, YES.
21 THE COURT: ALL RIGHT.
22 THE WITNESS: MARCH 30.
23 THE COURT: BUT AT THE TIME YOU ENTERED INTO THE
24 FANG TRANSACTION, THE DEPARTMENT OF JUSTICE INVESTIGATION WAS
25 GOING FORWARD.
985
1 THE WITNESS: IT WAS STILL PENDING, YES.
2 THE COURT: STILL PENDING. I ASSUME THAT YOU
3 BELIEVED THAT INVESTIGATION HAD TO CONTINUE ON THROUGH TO A
4 CONCLUSION.
5 THE WITNESS: I DID ASSUME THAT, ALTHOUGH THERE WERE
6 TIMES I HAD MY DOUBTS IT WAS GOING TO REACH A CONCLUSION. BUT,
7 YES.
8 THE COURT: WELL, THE REASON I'M ASKING THIS
9 QUESTION IS WHEN YOU SAY THAT THE PURPOSE OF THE FANG
10 TRANSACTION WAS TO HEAD OFF OPPOSITION AT SOME LEVEL OF
11 GOVERNMENT, WERE YOU NOT THINKING OF SOME LEVEL OF GOVERNMENT
12 OTHER THAN THE DEPARTMENT OF JUSTICE?
13 THE WITNESS: NO. EVEN AT THE DEPARTMENT OF JUSTICE
14 THERE WAS WHAT I WOULD CALL ENCOURAGEMENT, SUGGESTION, THERE
15 WAS CERTAINLY THE INFERENCE THAT WE DREW FROM VARIOUS
16 DISCUSSIONS AND MEETINGS THAT WE HAD HAD WITH THEM THAT THEY
17 REALLY PREFERRED US TO FIND A WAY TO SELL THE EXAMINER RATHER
18 THAN CLOSING IT.
19 THEY NEVER SPECIFICALLY TOLD US EXACTLY WHAT WE HAD
20 TO DO. IT JUST SEEMED THAT THE DIALOGUE KEPT GOING ON AND ON
21 AND ON.
22 THE COURT: CAN YOU TELL ME SPECIFICALLY WHAT GAVE
23 YOU THAT IMPRESSION?
24 THE WITNESS: WELL, IT REALLY WAS THE LENGTH OF THE
25 DISCUSSIONS; THAT WE HAD OUR FIRST SALES EFFORT, WHICH WE
986
1 CERTAINLY DID ARGUE TO THE DEPARTMENT OF JUSTICE THAT WE FELT
2 THAT THAT DEMONSTRATED THE FAILING-COMPANY DEFENSE. AND THEY
3 EXPRESSED CONCERNS, WELL, MAYBE IT WAS THE LACK OF TANGIBLE
4 ASSETS. THEY MADE REFERENCE TO HAVING HEARD FROM PARTIES IN
5 THE MARKET THAT IF ONLY WE HAD OFFERED PHYSICAL ASSETS, THAT
6 MIGHT HAVE LED TO A DIFFERENT RESULT.
7 SO THEY MADE IT CLEAR THAT THEY WERE NOT FULLY
8 SATISFIED WITH OUR FIRST SALES EFFORT AND WE DECIDED AT THAT
9 TIME, ALL RIGHT, RATHER THAN CONTINUING THE DIALOGUE ON THAT
10 POINT, WE WOULD JUST GO AHEAD AND DO A SECOND SALES EFFORT THAT
11 WOULD DEMONSTRATE OUR WILLINGNESS IN A VERY FLEXIBLE FASHION TO
12 CONSIDER SELLING ANYTHING.
13 AND THEN WE FELT HAVING ADDRESSED THAT POINT, THE
14 DIALOGUE SEEMED TO CONTINUE, THAT THERE WERE STILL QUESTIONS,
15 DISCUSSIONS, "WELL, REALLY WOULDN'T IT BE BETTER IF YOU COULD
16 FIND SOME WAY TO SELL THE EXAMINER RATHER THAN CLOSING IT?"
17 AND ON THE BASIS OF THIS SALES EFFORT, IT WAS CLEAR
18 TO US THAT THE ONLY WAY TO DO THAT WAS TO OFFER A SUBSIDY. NO
19 ONE WAS WILLING TO ACQUIRE THIS PAPER WITHOUT A SUBSIDY.
20 THE COURT: YOU MADE REFERENCE TO PARTIES IN THE
21 MARKET. DID YOU HAVE AN IMPRESSION WHAT PARTIES IN THE MARKET
22 THE DEPARTMENT OF JUSTICE WAS REFERRING TO?
23 THE WITNESS: WELL, I ACTUALLY RECALL ASKING THEM
24 AND THEY DECLINED TO IDENTIFY THEM TO ME.
25 THE COURT: DID YOU HAVE AN IMPRESSION IN YOUR OWN
987
1 MIND?
2 THE WITNESS: WELL, I HONESTLY COULDN'T THINK OF
3 ANY. SO THAT WAS IN PART WHY I ASKED THEM THAT QUESTION. BUT
4 I HONESTLY DON'T KNOW BECAUSE I DID NOT BELIEVE THAT THE
5 PHYSICAL ASSETS WERE REALLY NECESSARY FOR SOMEONE TO PURSUE
6 THIS OPPORTUNITY.
7 THE COURT: WELL, WHAT I WAS ASKING WAS WHETHER YOU
8 HAD AN IMPRESSION ABOUT WHAT PARTIES IN THE MARKET THE
9 DEPARTMENT HAD REFERENCE TO.
10 THE WITNESS: WELL, IN TERMS OF THIS SPECIFIC
11 COMMENT, I DON'T. I DO KNOW THAT THEY TALKED TO A WIDE NUMBER
12 OF PARTIES IN THE MARKET, AND I KNOW THEY SPOKE WITH PAN-ASIA.
13 I BELIEVE THAT THEY SPOKE -- THEY NEVER SAID IT SPECIFICALLY,
14 BUT I HAD THE IMPRESSION THAT THEY HAD CONVERSATIONS WITH
15 KNIGHT-RIDDER AND WITH SINGLETON, WITH LEUCADIA, COMING BACK TO
16 PARTIES IN THE MARKET. I THINK THOSE WERE PROBABLY THE THREE
17 THAT I HAD THE IMPRESSION THAT THEY WERE HAVING CONVERSATIONS
18 WITH, YES.
19 THE COURT: DID YOU HAVE AN IMPRESSION WHETHER THEY
20 HEARD FROM ANY POLITICAL OR GOVERNMENTAL SOURCES IN THE MARKET?
21 THE WITNESS: MY IMPRESSION IN THAT RESPECT WAS NOT
22 BASED ON ANY DISCUSSIONS THAT WE HAD WITH ANY REPRESENTATIVE OF
23 THE DEPARTMENT OF JUSTICE. THE ONLY IMPRESSION I HAD IN THAT
24 RESPECT WAS I BELIEVE THE E-MAIL THAT I WAS QUESTIONED ON THAT
25 REFERENCED MAYOR WILLIE BROWN AND THE FACT, AND I BELIEVE HE
988
1 ISSUED A PRESS RELEASE OR COMMENTED PUBLICLY, THAT MAYOR BROWN
2 HAD WRITTEN TO JANET RENO, ATTORNEY GENERAL JANET RENO, ABOUT
3 THIS TRANSACTION.
4 SO I GUESS MY INFORMATION IN TERMS OF WHETHER THE
5 DEPARTMENT OF JUSTICE WAS HEARING FROM LOCAL PUBLIC OFFICIALS
6 WAS NOT BASED ON WHAT THE DEPARTMENT OF JUSTICE OFFICIALS SAID
7 TO ME, IT WAS BASED ON STATEMENTS THAT THOSE OFFICIALS MADE.
8 NOW, I'M ALSO RECALLING, HOWEVER, THAT I DO KNOW
9 THAT REPRESENTATIVES OF THE DEPARTMENT OF JUSTICE I HAD THE
10 IMPRESSION WERE COORDINATING THEIR REVIEW CLOSELY WITH THE
11 STATE ATTORNEY GENERAL'S OFFICE; AND I BELIEVE, IN FACT I'M
12 AWARE, THAT THERE HAVE BEEN -- THERE WERE CONVERSATIONS BETWEEN
13 STAFF MEMBERS OF THE DEPARTMENT OF JUSTICE LOOKING AT THIS AND
14 REPRESENTATIVES OF THE CITY ATTORNEY AND THE DISTRICT ATTORNEY
15 AS WELL.
16 THE COURT: THE DISTRICT ATTORNEY AND CITY ATTORNEY
17 OF SAN FRANCISCO?
18 THE WITNESS: YES.
19 THE COURT: AND YOUR IMPRESSION IN THAT REGARD WAS
20 WHAT?
21 THE WITNESS: THAT REPRESENTATIVES OF THE DEPARTMENT
22 OF JUSTICE WERE AND PERHAPS THE IMPRESSION I HAD IS PERHAPS
23 COORDINATING THEIR REVIEW OF OUR TRANSACTION WITH ALL LAYERS
24 REALLY OF STATE AND LOCAL GOVERNMENT IN CALIFORNIA, IN SAN
25 FRANCISCO.
989
1 THE COURT: SO IT'S YOUR IMPRESSION THAT THE
2 DEPARTMENT OF JUSTICE WAS NOT ACTING AUTONOMOUSLY IN THIS
3 INVESTIGATION, THAT IT WAS COORDINATING WITH OTHER LAYERS OF
4 GOVERNMENT?
5 THE WITNESS: YES, THAT WAS MY IMPRESSION.
6 THE COURT: AND IT WAS THAT IMPRESSION WHICH LED TO
7 THE DECISION TO MAKE THIS SWEETENED OFFER, AS I THINK WE
8 DESCRIBED IT EARLIER, TO POTENTIAL PURCHASERS OF THE EXAMINER?
9 THE WITNESS: YES. I BELIEVE EACH LAYER OF
10 GOVERNMENT EXPRESSED TO US CONCERNS THAT OUR FIRST OFFER, WHICH
11 DID NOT INCLUDE THE PHYSICAL ASSETS, WAS AN INSUFFICIENT
12 TESTING OF THE MARKET.
13 THE COURT: BUT YOUR TESTIMONY, IF I HEARD IT
14 CORRECTLY, WAS THAT, IN FACT, THE PHYSICAL ASSETS DID NOT BRING
15 OUT ANY NEW OFFERS OR ANY BETTER OFFERS; IS THAT YOUR
16 TESTIMONY?
17 THE WITNESS: THAT IS CORRECT.
18 THE COURT: SO, IN FACT, THESE ADDITIONAL TERMS DID
19 NOT SWEETEN THE POT?
20 THE WITNESS: WELL, IT WASN'T THE PHYSICAL ASSETS
21 THAT SWEETENED THE POT. IT WAS OUR WILLINGNESS AT THE END OF
22 THE PROCESS TO BE PREPARED TO PROVIDE A CASH SUBSIDY. I THINK
23 THAT WAS THE, SHALL WE SAY, POT SWEETENER THAT ENABLED THE
24 TRANSACTION TO OCCUR.
25 THE COURT: ALL RIGHT. LET ME ASK YOU, DO YOU HAVE
990
1 IN MIND AN APPROXIMATE VALUE OF THESE ASSETS THAT WERE OFFERED,
2 OFFERED TO POTENTIAL PURCHASERS OF THE EXAMINER? AND THAT
3 WOULD BE ALL OF THE ASSETS THAT WERE OFFERED FROM THE PRINTING
4 PLANT AND EQUIPMENT TO THE SUBSCRIBER LIST AND EDITORIAL ASSETS
5 AND ALL THAT STUFF.
6 THE WITNESS: YEAH. IN THE SECOND OFFER WE HAD DONE
7 SOME ANALYSIS ON WHAT WE THOUGHT LIQUIDATION VALUE WOULD BE FOR
8 THOSE ASSETS, AND MY RECOLLECTION IS THAT WE THOUGHT THE
9 LIQUIDATION VALUE OF THOSE ASSETS WOULD BE APPROXIMATELY
10 $50 MILLION.
11 THE COURT: OKAY. SO YOU ADD THAT $50 MILLION TO
12 THE $66 MILLION IN FINANCIAL SUBSIDY THAT ULTIMATELY WAS AGREED
13 TO WITH THE FANGS?
14 THE WITNESS: WELL, NO. THE FANGS ARE NOT ACQUIRING
15 ANY OF THE PHYSICAL ASSETS. SO WHEN I GAVE THE
16 50 MILLION-DOLLAR LIQUIDATION VALUE, THE PRINCIPAL COMPONENT OF
17 THAT WAS THE PRINTING PLANT AND THE REAL ESTATE.
18 SO IF YOU TAKE THAT AWAY AND JUST LOOK AT THE
19 LIQUIDATION VALUE OF IT'S REALLY THE ASSETS THAT WE OFFERED THE
20 FIRST TIME, BECAUSE THAT'S FUNDAMENTALLY THE ONLY ASSETS THAT
21 THE FANGS ARE ACQUIRING, IT'S WHAT WE OFFERED IN THE FIRST
22 OFFERING COUPLED WITH OUR CASH SUBSIDY. THAT'S -- THAT'S WHAT
23 THE FANGS ARE RECEIVING IN THIS TRANSACTION, THE LIQUIDATION
24 VALUE OF THOSE ASSETS. BECAUSE THAT'S LIMITED TO THE EXAMINER
25 NAME, THE SUBSCRIBER LIST, ARCHIVES, THE EDITORIAL ASSETS, I
991
1 BELIEVE WE FELT THE LIQUIDATION VALUE OF THOSE ASSETS COULD
2 HAVE BEEN AS LOW AS A MILLION DOLLARS.
3 THE COURT: LET ME SEE IF I HAVE THIS RIGHT. YOU
4 ESTIMATE THAT -- WE'LL CALL THEM THE FIRST-STAGE ASSETS, HOW'S
5 THAT?
6 THE WITNESS: YES.
7 THE COURT: -- THE FIRST-STAGE ASSETS HAVE A
8 LIQUIDATION VALUE OF APPROXIMATELY A MILLION DOLLARS.
9 THE WITNESS: YES.
10 THE COURT: AND THE SECOND-STAGE ASSETS, WHICH WOULD
11 BE ALL OF THE FIRST-STAGE ASSETS PLUS THE PRINTING PLANT AND
12 EQUIPMENT AND DISTRIBUTION ASSETS, TOGETHER WOULD HAVE A
13 LIQUIDATION VALUE OF APPROXIMATELY $50 MILLION?
14 THE WITNESS: THAT'S CORRECT.
15 THE COURT: AND IF I UNDERSTAND THE TRANSACTION WITH
16 THE FANG GROUP, THE FANG GROUP IS RECEIVING ONLY THE
17 FIRST-STAGE ASSETS PLUS THE FINANCIAL SUBSIDY.
18 THE WITNESS: THAT IS CORRECT.
19 THE COURT: THE FINANCIAL SUBSIDY OBVIOUSLY NOT ON A
20 DISCOUNTED BASIS BUT WE'LL CALL IT $66 MILLION PLUS THE FIRST-
21 AND SECOND-STAGE ASSETS TOTAL ROUGHLY $117 MILLION, 50 MILLION,
22 PLUS 1 MILLION, PLUS 66 MILLION.
23 THE WITNESS: WELL, WE ARE RETAINING THOSE
24 50 MILLION OF ASSETS.
25 THE COURT: I UNDERSTAND.
992
1 THE WITNESS: YOU'RE SAYING IF YOU JUST ADD THOSE
2 THREE THINGS UP, YES.
3 THE COURT: IF YOU ADD THOSE THREE THINGS TOGETHER,
4 $117 MILLION PLUS THE $660 MILLION THAT HEARST IS WILLING TO
5 PAY FOR THE CHRONICLE ITSELF, IN ESSENCE HEARST WAS WILLING TO
6 PAY $777 MILLION FOR THE CHRONICLE.
7 THE WITNESS: I'M TRYING TO UNDERSTAND WHAT YOUR
8 HONOR IS SAYING, BUT I BELIEVE --
9 THE COURT: LET ME JUST RUN THROUGH IT. YOU'RE
10 WILLING TO PAY $660 MILLION FOR THE CHRONICLE.
11 THE WITNESS: THAT'S CORRECT.
12 THE COURT: YOU WERE WILLING TO PROVIDE FIRST- AND
13 SECOND-STAGE ASSETS TO A POTENTIAL PURCHASER OF THE EXAMINER OF
14 $51 MILLION.
15 THE WITNESS: BUT THEY WOULD HAVE HAD TO PAY US FOR
16 THOSE.
17 THE COURT: OH, THAT WAS GOING TO BE $50 MILLION FOR
18 $50 MILLION IN CASH?
19 THE WITNESS: YES.
20 THE COURT: I SEE.
21 THE WITNESS: IN OTHER WORDS, WHEN I SAID THAT WAS
22 THE LIQUIDATION VALUE, THAT WOULD HAVE BEEN THE AMOUNT THAT WE
23 WOULD HAVE EXPECTED A BUYER TO -- PUT IT DIFFERENTLY, IF A
24 BUYER HAD OFFERED US THAT AMOUNT OF MONEY, THAT THAT WOULD HAVE
25 BEEN LIQUIDATION VALUE AND WE WOULD HAVE BEEN REQUIRED TO
993
1 ACCEPT THAT TRANSACTION, AS I UNDERSTOOD THE WAY THE
2 FAILING-COMPANY TEST WAS APPLIED. THAT IS, IF A BUYER IS
3 WILLING TO PAY LIQUIDATION VALUE FOR THE BUSINESS THAT WAS --
4 THAT WOULD OTHERWISE BE CLOSED, THE SELLER MUST SELL THE
5 BUSINESS AT THAT VALUE, AT ITS LIQUIDATION VALUE OR MORE.
6 SO HAD WE FOUND A BUYER WHO WAS WILLING TO PAY US
7 THAT LIQUIDATION VALUE, WE WOULD HAVE RECEIVED THAT
8 $50 MILLION. SO THAT'S WHY I WAS A LITTLE --
9 THE COURT: ALL RIGHT.
10 THE WITNESS: OKAY.
11 THE COURT: FINE. I'M GLAD YOU CLEARED THAT UP.
12 BUT, NONETHELESS --
13 THE WITNESS: SO I THINK IT WOULD BE ACCURATE TO SAY
14 THAT WE SEE, IN EFFECT, THAT OUR INVESTMENT IN THE CHRONICLE
15 HERE IS REALLY COSTING US THE $660 MILLION PURCHASE PRICE PLUS
16 THE $66 MILLION SUBSIDY THAT WE ARE PROVIDING TO THE FANGS.
17 AND WE DECIDED TO DO THAT BECAUSE WE STILL FELT THAT WAS A
18 LEGITIMATE OR WAS AN APPROPRIATE BUSINESS DECISION AND WE
19 THOUGHT THE VALUE WAS JUSTIFIED BY THAT INCREASED PRICE.
20 THE COURT: OKAY. FINE. I THINK I UNDERSTAND THAT.
21 YOU WERE HERE, I BELIEVE, FOR THE TESTIMONY OF
22 MR. SIAS.
23 THE WITNESS: YES, I WAS.
24 THE COURT: AND I BELIEVE YOU WERE HERE ALSO FOR THE
25 TESTIMONY OF MS. GREENTHAL.
994
1 THE WITNESS: YES, I WAS.
2 THE COURT: AS I UNDERSTOOD THEIR TESTIMONY WITH
3 RESPECT TO THE SUBJECT I'M ABOUT TO GET INTO, AND IT'S
4 CONSISTENT, NAMELY THAT A METROPOLITAN DAILY NEWSPAPER, SUCH AS
5 THE CHRONICLE OR THE EXAMINER OR THE SAN JOSE MERCURY NEWS OR
6 MANY OF THE OTHER PUBLICATIONS THAT HAVE BEEN DISCUSSED IN
7 THESE PROCEEDINGS, STARTS FROM A CIRCULATION BASE AND HAS A
8 REACH OUT BEYOND THAT CIRCULATION BASE, AND THAT CIRCULATION
9 BASE PROVIDES BASICALLY THE PRODUCT OR THE SERVICE THAT THE
10 NEWSPAPER CAN OFFER TO POTENTIAL ADVERTISERS.
11 AND YOU RECALL MR. SIAS' TESTIMONY IN WHICH HE
12 DESCRIBED THE, I'LL USE MY TERM, I THINK IT'S A FAIR
13 DESCRIPTION OF HIS TESTIMONY -- IF YOU THINK IT'S NOT FAIR, I'M
14 SURE YOU'LL CORRECT ME -- HE SPOKE ABOUT THE ENCROACHMENT INTO
15 THE CIRCULATION BASE OF THE CHRONICLE OVER THE YEARS BY THE
16 KNIGHT-RIDDER PUBLICATIONS, THE SAN JOSE PAPER FROM THE SOUTH
17 AND CONTRA COSTA PAPER FROM THE NORTHEAST.
18 DO YOU AGREE WITH THAT ASSESSMENT FIRST? DO YOU
19 THINK THAT'S A FAIR WAY TO DESCRIBE THE ECONOMICS OF THE
20 NEWSPAPER MARKET IN THE BAY AREA?
21 THE WITNESS: YES, I BELIEVE SO. GENERALLY, YES.
22 THE COURT: ALL RIGHT. SO WOULD IT ALSO BE FAIR TO
23 SAY THAT IN THE CONTEXT OF A METROPOLITAN PAPER, SUCH AS THE
24 CHRONICLE, WHICH HAS A WIDE CIRCULATION OVER BASICALLY THE
25 ENTIRE BAY AREA, THE LOCAL PUBLICATIONS ON THE PERIPHERY TEND
995
1 TO INTRUDE ON THAT MARKET; AND IF NOT A COMPLETE SUBSTITUTE FOR
2 THE CHRONICLE, NEVERTHELESS DO PROVIDE COMPETITION FOR THE
3 CHRONICLE?
4 THE WITNESS: YES, I BELIEVE THEY DO.
5 THE COURT: SO THE INDEPENDENT JOURNAL WOULD PROVIDE
6 COMPETITION FROM THE NORTH, THE CONTRA COSTA PAPER THE
7 NORTHEAST, THE SINGLETON PAPERS BASICALLY IN THE EAST BAY AND
8 OF COURSE THE KNIGHT-RIDDER PAPERS IN THE SOUTH, AND THEN THE
9 MORE LOCALIZED PUBLICATIONS SUCH AS THE SAN MATEO TIMES, AND
10 SOME OF THESE OTHERS, PROVIDE COMPETITION IF NOT DIRECTLY IN A
11 METROPOLITAN DAILY NEWSPAPER CONTEXT, NONETHELESS ON THE
12 PERIPHERY OF THAT MARKET?
13 THE WITNESS: WELL, EACH OF THESE PUBLICATIONS YOU
14 ARE DESCRIBING COMPETE WITH THE EXAMINER AND THE CHRONICLE IN
15 THE AREAS THAT THEY OPERATE IN AND THE CIRCULATION BASE AND
16 ADVERTISING BASE THAT THEY HAVE. SO I DO BELIEVE ALL THOSE
17 PAPERS ARE COMPETING WITH US, YES.
18 THE COURT: AND THE CIRCULATION BASE OF THE
19 CHRONICLE STARTS IN SAN FRANCISCO AND IT REACHES OUT TO THE
20 SURROUNDING AREAS FROM SAN FRANCISCO?
21 THE WITNESS: YES.
22 THE COURT: WELL, THEN, SETTING UP THE FANG GROUP IN
23 WHAT HAS BEEN DESCRIBED AS A LOCALIZED PUBLICATION OR A NICHE
24 PUBLICATION RIGHT AT THE VERY HEART OF THE CHRONICLE'S MARKET
25 IS SETTING UP A COMPETITOR FOR THE CHRONICLE; IS IT NOT?
996
1 THE WITNESS: IN THE CITY -- PRINCIPALLY I THINK IN
2 THE CITY OF SAN FRANCISCO, YES.
3 THE COURT: DOES IT NOT SEEM ODD THAT YOUR COMPANY
4 WOULD PAY THIS AMOUNT OF MONEY, GO TO THESE LENGTHS IN ORDER TO
5 SET UP A COMPETITOR?
6 THE WITNESS: YES, THIS DOES STRIKE ME AS ODD.
7 HAVING SAID THAT --
8 THE COURT: HAVE YOU EVER DONE THAT IN ANY OTHER
9 MARKET?
10 THE WITNESS: NO, WE HAVE NOT DONE THAT EVER IN ANY
11 OTHER MARKET THAT I CAN THINK OF.
12 THE COURT: WHAT ARE THE UNIQUE FEATURES HERE THAT
13 PROMPT THE BUSINESS DECISION TO DO THAT IN THIS MARKET?
14 THE WITNESS: WELL, I BELIEVE I DESCRIBED THAT THE
15 BUSINESS DECISION HERE WAS DRIVEN BY OUR DESIRE TO, AS
16 EXPEDITIOUSLY AS POSSIBLE, COMPLETE OUR PURCHASE OF THE
17 CHRONICLE. THE CLOCK WAS RUNNING ON OUR CONTRACT IN TERMS OF
18 THEIR RIGHT TO TERMINATE.
19 WE HAD BEEN IN THIS PROCESS FOR MANY MONTHS. THE
20 PROCESS WAS DESTABILIZING IN TERMS OF THE STAFFS OF THE PAPERS.
21 WE HAD A LAWSUIT PENDING, THIS ONE, AND I COULD NOT DISCOUNT
22 THE RISK THAT A GOVERNMENTAL AUTHORITY MIGHT DECIDE TO COME
23 INTO THIS CASE IF WE ATTEMPTED TO CLOSE THE CHRONICLE.
24 NOW, IF THAT OCCURRED, HOWEVER CONFIDENT I MIGHT
25 HAVE BEEN ABOUT PREVAILING IN THAT LITIGATION, I WAS NOT AT ALL
997
1 CONFIDENT THAT I WOULD HAVE THE TIME TO LITIGATE THAT BEFORE
2 THE CHRONICLE PURCHASE WAS COMPLETED.
3 IN PARTICULAR, I WAS LOOKING AT WHAT HAPPENED IN THE
4 HAWAII SITUATION. IT STARTED WITH A PRIVATE LAWSUIT. THE
5 STATE ATTORNEY GENERAL BECAME INVOLVED IN THE LITIGATION. AND
6 BETWEEN THE TIME THAT THEY GOT INVOLVED AND THE TIME THE TRIAL
7 WAS GOING TO BE SCHEDULED, THE PRELIMINARY INJUNCTION WAS
8 OBTAINED, I BELIEVE THE TRIAL WAS NOT SET FOR A YEAR. AND I
9 BELIEVE THAT THE PAPERS THERE ARGUED TO TRY TO GET THE TRIAL
10 SET QUICKLY AND THE STATE ARGUED THAT IT WAS A COMPLEX CASE AND
11 THEY WOULD NEED LOTS OF TIME TO PREPARE, AND THAT A YEAR FOR AN
12 ANTITRUST CASE WAS NOT AT ALL UNUSUAL FOR PREPARATION.
13 SO EFFECTIVELY, IF THAT HAD HAPPENED IN OUR CASE, IT
14 WOULDN'T HAVE MATTERED WHAT THE RESULT ON THE MERITS OF THIS
15 CASE WOULD HAVE BEEN. WE WOULD HAVE LOST THE OPPORTUNITY TO
16 ACQUIRE THE CHRONICLE.
17 SO THE BUSINESS DECISION WAS TO, WHICH I THINK
18 BUSINESSMEN DO QUITE OFTEN, IS TO ASSESS THE RISKS, THE
19 UNCERTAINTY OF LITIGATION, THE RISKS OF DELAY THAT LITIGATION
20 CAN DO. AND FREQUENTLY BUSINESS PEOPLE, I KNOW I'VE DONE THIS
21 BEFORE, AGREE TO THINGS IN LITIGATION THAT THEY DON'T BELIEVE
22 THEY HAVE TO DO. THEY ACTUALLY DON'T BELIEVE THEY REALLY HAVE
23 TO DO IT. THEY'RE DOING IT BECAUSE OF THE BUSINESS DECISION TO
24 MOVE ON PAST LITIGATION. AND THAT'S REALLY WHAT HAPPENED TO US
25 HERE.
998
1 THE COURT: ALL RIGHT. WELL, WHATEVER ELSE MAY BE
2 SAID, YOU'RE AT LEAST GETTING A TRIAL PRETTY FAST.
3 THE WITNESS: YES, WE ARE. YES, WE ARE. I
4 APPRECIATE THAT.
5 THE COURT: ALL RIGHT. THANK YOU VERY MUCH,
6 MR. ASHER, FOR YOUR TESTIMONY.
7 DO YOU WANT TO TAKE A BRIEF RECESS AND THEN BEGIN
8 WITH THE NEXT WITNESS?
9 MR. ALIOTO: VERY GOOD, YOUR HONOR.
10 THE COURT: ALL RIGHT. WHO'S THE NEXT WITNESS GOING
11 TO BE?
12 MR. SHULMAN: MR. OSBORN, YOUR HONOR.
13 THE COURT: VERY WELL. BE BACK AND READY TO GO AT
14 FIVE MINUTES OF THE HOUR.
15 (RECESS TAKEN AT 2:40 P.M.)
16 (PROCEEDINGS RESUMED AT 3:00 P.M.)
17 THE COURT: VERY WELL. MR. SHULMAN, ARE YOU TAKING
18 THIS NEXT WITNESS?
19 MR. ALIOTO: YOUR HONOR, I JUST HAVE ONE MATTER, IF
20 I MIGHT.
21 THE COURT: YES, SIR.
22 MR. ALIOTO: IF IT PLEASE YOUR HONOR, WE'VE ASKED
23 FOR -- MR. BENNACK IS GOING TO BE COMING, BUT HE'S GOING TO BE
24 TESTIFYING IN THEIR CASE. SO WE WILL FINISH -- WHEN WE FINISH
25 OUR CASE, WE WILL HAVE FINISHED EVERYTHING EXCEPT FOR
999
1 MR. BENNACK.
2 WE ALSO WANT MR. IRISH. NOW, THE DEFENDANTS HAVE
3 AGREED TO BRING MR. IRISH HERE IF, THE WORDS ARE, IF THE COURT
4 WANTS HIM.
5 (LAUGHTER)
6 THE COURT: WELL, I'M --
7 MR. ALIOTO: I'M SURE THE COURT MAY NOT WANT
8 ANYBODY, BUT WE DO AND WE'RE REQUESTING THAT HE COME.
9 MR. HALLING: YOUR HONOR --
10 THE COURT: WELL, MR. HALLING?
11 MR. HALLING: YOUR HONOR, MR. IRISH IS NOT ON OUR
12 WITNESS LIST. HE'S NEVER BEEN ON IT, AND THEY TOOK HIS
13 DEPOSITION I'M SURE ASSUMING THAT IT WAS A TRIAL DEPOSITION.
14 AND SO HE HAS BEEN DEPOSED. WE WERE NOT PLANNING TO BRING HIM.
15 HE'S BACK EAST AND SO WE TOLD MR. ALIOTO IF THE COURT WISHES
16 HIM TO BE HERE, WE WILL BRING HIM.
17 THE COURT: I'M NOT SURE WHAT QUESTIONS I WOULD ASK
18 MR. IRISH. I'VE GOTTEN OUT OF THE HABIT OF PREPARING
19 EXAMINATIONS OF WITNESSES. I GATHER YOU CAN PRODUCE HIM AND
20 ARE WILLING TO PRODUCE HIM IF PLAINTIFFS REQUEST THAT HE BE
21 PRODUCED.
22 MR. CONNELL: YOUR HONOR, MAY I ADD POSSIBLY TO THE
23 CONFUSION?
24 THE COURT: OF COURSE.
25 MR. CONNELL: I THINK THE POINT OF MR. ALIOTO'S
1000
1 REQUEST HAS TO DO WITH MR. WHITE. MR. IRISH --
2 THE COURT: I GATHERED THAT MIGHT HAVE SOMETHING TO
3 DO WITH IT.
4 MR. CONNELL: -- BEING MR. WHITE'S SUPERIOR. AND
5 IT'S IN THAT CONTEXT, I ASSUME, THAT HE SAYS HE WANTS TO ASK
6 HIM SOME QUESTIONS. OUR ONLY POINT IS, A, CERTAINLY THE HEARST
7 CORPORATION DOES NOT WANT TO BE PERCEIVED AS DOING ANYTHING
8 OTHER THAN DISCLOSING WHATEVER IS APPROPRIATE TO DISCLOSE; AND
9 TO THAT END, IF THE COURT BELIEVES IT APPROPRIATE TO DO SO, WE
10 WILL PRODUCE MR. IRISH ON THE WITNESS STAND IN OUR CASE AND SO
11 HE CAN BE AVAILABLE FOR CROSS-EXAMINATION.
12 I WOULD ASSUME, YOUR HONOR, IN VIEW OF THE FACT THAT
13 HIS DEPOSITION WAS TAKEN, THAT THAT APPEARANCE WOULD BE LIMITED
14 TO THAT ISSUE OF MR. WHITE. THAT'S MY VIEW ON THE MATTER, AND
15 I JUST WANT TO EMPHASIZE THAT WE DON'T NEED PUSHING AND SHOVING
16 TO DO THIS. IF THE COURT WISHES HIM TO COME, WE'LL PRODUCE
17 HIM. WE'LL HAVE HIM COME OUT.
18 THE COURT: LET'S FIND OUT. MR. ALIOTO, WHAT ISSUES
19 WOULD YOU LIKE TO EXAMINE MR. IRISH ON?
20 MR. ALIOTO: WELL, THE ISSUES THAT HE -- HE WAS IN
21 FACT DEPOSED, YOUR HONOR, AND A DEPOSITION IS ALWAYS A LOT
22 DIFFERENT THAN CROSS-EXAMINATION AT TRIAL.
23 MR. IRISH IS, IN FACT, IN CHARGE OF THE NEWSPAPER
24 DIVISION. HE WAS THE SUPERIOR OFFICER. WE THINK THAT -- AND
25 HE IS THE LINK BETWEEN MR. BENNACK AND THE EXAMINER DIRECTLY,
1001
1 MR. WHITE. MR. IRISH HAS BEEN INVOLVED IN MOST OF THE THINGS,
2 AND I THINK THAT HIS TESTIMONY WOULD GO MUCH FASTER CERTAINLY
3 ON THE STAND AND I THINK THAT WE COULD GET TO THE POINTS
4 QUICKER BECAUSE NOW HAVING THE TRIAL WE KNOW WHERE WE'RE GOING
5 IN THE SENSE OF BEING MORE DIRECT THAN IN DISCOVERY WHEN
6 THERE'S A LOT OF DIFFERENT ISSUES THAT WE WEREN'T TOO SURE
7 ABOUT.
8 IT WOULD CERTAINLY BE -- WE WOULD REQUEST THAT
9 MR. IRISH COME. IT WOULD BE MORE CONVENIENT FOR -- CERTAINLY
10 FOR US, I THINK FOR THE PROCEEDINGS. AND, AS I'VE SAID, YOU
11 KNOW, HE'S CERTAINLY ON VERY SIGNIFICANT DOCUMENTS IN THE CASE.
12 HE IS ALSO -- I WOULD SAY TO THE COURT, HE WAS ALSO
13 ONE OF THE -- HE WAS THE PUBLISHER OF THE SAN ANTONIO LIGHT,
14 WHICH WAS THE MODEL THAT WAS USED, ADMITTEDLY USED, IN THIS
15 PARTICULAR CASE AND HE WAS THE PUBLISHER THERE WHEN THE SAN
16 ANTONIO LIGHT WAS SHUT DOWN.
17 THOSE ARE THE GENERAL AREAS. THE REASON WE WOULD
18 WANT HIM IS BECAUSE WE THINK HE'S A SIGNIFICANT PERSON AND IT'S
19 MUCH BETTER TO HAVE HIM LIVE.
20 THE COURT: WELL, THEN, I GATHER YOU HAVE SOME
21 INTEREST IN HIS TESTIMONY IN VIEW OF THE TESTIMONY WHICH MR.
22 WHITE GAVE ON MONDAY.
23 MR. ALIOTO: I DO.
24 THE COURT: WELL, I MUST TELL MR. HALLING AND
25 MR. CONNELL THAT THE SIGNIFICANCE OF MR. WHITE'S TESTIMONY ON
1002
1 MONDAY IS NOT CLEAR. I BELIEVE I DISAGREED WITH MR. HALLING'S
2 ASSERTION THE DAY BEFORE YESTERDAY THAT THE PORTION OF MR.
3 WHITE'S TESTIMONY THAT HAS RECEIVED SO MUCH ATTENTION THE PAST
4 FEW DAYS IS IRRELEVANT TO THE ANTITRUST ISSUES. I'M NOT
5 CONVINCED THAT IT'S IRRELEVANT, BUT I MUST ALSO SAY I'M NOT
6 SURE WHAT THAT RELEVANCE IS.
7 SO I THINK UNDER THE CIRCUMSTANCES, SINCE PART OF
8 YOUR OBJECTIVE, PART OF YOUR CLIENT'S OBJECTIVE IN THESE
9 PROCEEDINGS IS TO CLEAR THE AIR, IT WOULD BE IN YOUR CLIENT'S
10 INTEREST TO PRODUCE MR. IRISH SO THAT HE CAN TESTIFY ON
11 WHATEVER ISSUES MR. ALIOTO THINKS BEAR ON THESE MATTERS. AND
12 IT MAY CLEAR THE AIR OR IT MAY SUBSTANTIATE THE SUGGESTIONS
13 WHICH MR. ALIOTO'S EXAMINATION OF MR. WHITE BROUGHT FORTH.
14 SO I CAN'T, I THINK, TELL YOU TO BRING MR. IRISH.
15 HE WAS DEPOSED. HIS DEPOSITION CAN BE USED. BUT IF YOU'RE
16 ASKING WHETHER I THINK HIS TESTIMONY MIGHT BE VALUABLE IN THIS
17 PROCEEDING, I THINK IT PROBABLY WOULD BE.
18 MR. ALIOTO: THANK YOU, YOUR HONOR.
19 THE COURT: SO I'M CERTAINLY NOT PLANNING ON
20 EXAMINING HIM MYSELF EXCEPT POSSIBLY A FEW FOLLOWUP QUESTIONS,
21 BUT I THINK IT WOULD BE USEFUL TO HAVE HIM HERE AND HE CAN
22 EXPLAIN WHAT HE UNDERSTOOD SOME OF THESE COMMUNICATIONS TO BE
23 AND EXPLAIN THE ACTIONS THAT HE TOOK OR THE ACTIONS THAT HE DID
24 NOT TAKE. SO IT MIGHT BE -- IT MIGHT BE HELPFUL TO HEARST AND
25 IT MIGHT GET TO THE BOTTOM OF SOME OF THE THINGS THAT
1003
1 MR. ALIOTO THINKS NEED TO BE AIRED.
2 MR. CONNELL: MR. IRISH CERTAINLY WILL BE HERE NEXT
3 WEEK, YOUR HONOR.
4 MAY I JUST SAY THAT THE SAN ANTONIO LIGHT SITUATION
5 DOESN'T SEEM TO ME TO BE AN APPROPRIATE TOPIC ON WHICH TO BRING
6 MR. IRISH OUT HERE FOR EXAMINATION. THE OTHER ONE I CAN
7 UNDERSTAND.
8 BUT, IN ANY EVENT, CERTAINLY, YOUR HONOR, MR. IRISH
9 WILL APPEAR NEXT WEEK.
10 THE COURT: WELL, I REMEMBER THE SAN ANTONIO LIGHT
11 WITH SOME SENTIMENT SINCE I THINK THE ONLY TIME I READ IT WAS
12 AT A STOPOVER ON THE AZTEC EAGLE BETWEEN ST. LOUIS AND MEXICO
13 CITY A FEW YEARS AGO AND THE ONLY NEWSPAPER I COULD FIND WAS
14 THE SAN ANTONIO LIGHT. SO THE ONLY LIGHT I HAD BETWEEN ST.
15 LOUIS AND MEXICO CITY CAME FROM THAT NEWSPAPER.
16 MR. CONNELL: A WONDERFUL NEWSPAPER BEFORE IT DIED.
17 THE COURT: ALL RIGHT.
18 MR. ALIOTO: BEFORE IT WAS SHUT DOWN.
19 (LAUGHTER)
20 THE COURT: ALL RIGHT. MR. SHULMAN.
21 MR. ALIOTO: YES. MAY IT PLEASE THE COURT, ONE
22 OTHER PROCEDURAL MATTER. THIS MORNING MR. FALK'S DEPOSITION,
23 PART OF IT WAS READ, AND THE ISSUE WAS RAISED THAT HE'S NOT A
24 PARTY. WE HAVE HAD SOME DISCUSSIONS WITH HEARST'S COUNSEL
25 SINCE THEN AND WE'VE AGREED THAT THE DEPOSITION OF MR. FALK CAN
1004
1 BE USED AS A PARTY DEPOSITION.
2 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1005
OSBORN - DIRECT / THAMAS
1 THE COURT: IS THAT CORRECT?
2 MR. HALLING: THAT'S CORRECT.
3 THE COURT: VERY WELL. ARE YOU READY WITH YOUR NEXT
4 WITNESS?
5 MR. SHULMAN: YES, YOUR HONOR.
6 MAY IT PLEASE THE COURT, THE PLAINTIFF CALLS THAMAS
7 G. OSBORN.
8 THAMAS OSBORN,
9 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
10 TESTIFIED AS FOLLOWS:
11 THE CLERK: THANK YOU. PLEASE BE SEATED.
12 PLEASE STATE YOUR FULL NAME FOR THE RECORD AND SPELL
13 YOUR LAST NAME.
14 THE WITNESS: MY FIRST NAME IS TAM MASS,
15 T-H-A-M-A-S, G. OSBORN, O-S-B-O-R-N.
16 THE COURT: T-H-A-M-A-S?
17 THE WITNESS: YES, SIR. SCOTTISH.
18 THE COURT: IS THAT THE WAY THE SCOTTS SPELL
19 "THAMAS"?
20 THE WITNESS: THAT'S ONE OF THE WAYS.
21 THE COURT: ALL RIGHT. PROCEED.
22 MR. SHULMAN: MAY IT PLEASE THE COURT.
23 DIRECT EXAMINATION
24 BY MR. SHULMAN:
25 Q. MR. OSBORN, WOULD YOU STATE YOUR ADDRESS, PLEASE?
1006
OSBORN - DIRECT / THAMAS
1 A. 2325 GARDEN STREET, SANTA BARBARA, CALIFORNIA.
2 Q. AND WHAT IS YOUR AGE, SIR?
3 A. SEVENTY-TWO.
4 Q. AND WOULD YOU STATE, PLEASE, YOUR EDUCATIONAL BACKGROUND?
5 A. I GRADUATED FROM THE UNIVERSITY OF MICHIGAN IN 1950 WITH A
6 BACHELOR OF BUSINESS ADMINISTRATION.
7 Q. OKAY.
8 MAY I APPROACH THE WITNESS, YOUR HONOR?
9 THE COURT: YES.
10 BY MR. SHULMAN:
11 Q. (INDICATING).
12 MR. OSBORN, I HAVE PUT IN FRONT OF YOU TWO EXHIBITS.
13 THE FIRST ONE I AM GOING TO ASK YOU ABOUT IS PLAINTIFF'S
14 EXHIBIT 58 IN EVIDENCE, IF WE COULD . . .
15 AND DO YOU RECOGNIZE THAT AS A DECLARATION THAT YOU
16 SIGNED IN THIS CASE?
17 A. I DO.
18 Q. OKAY. NOW -- AND WERE YOU RETAINED TO ASSIST MR. REILLY
19 IN CONNECTION WITH ANALYZING THE PROPOSED SALE OF THE -- OR
20 TRANSFER OF THE EXAMINER TO THE FANGS?
21 A. YES.
22 Q. AND DID YOU ATTEND THE SATURDAY MEETING THAT WAS TESTIFIED
23 TO BY MR. PAGE AND MR. CLANCY?
24 A. YES.
25 Q. OKAY. NOW, I WANT TO ASK YOU A LITTLE BIT ABOUT YOUR --
1007
OSBORN - DIRECT / THAMAS
1 YOUR DECLARATION.
2 FIRST OF ALL, ARE YOU EMPLOYED AT THIS TIME?
3 A. NO, SIR.
4 Q. ARE YOU RETIRED?
5 A. YES, SIR.
6 Q. OKAY. THIS -- YOUR DECLARATION SAYS IN LINE -- WELL, IT'S
7 BETWEEN THE LINES. THE THIRD LINE FROM THE BOTTOM:
8 "BETWEEN 1971 AND 1975, I WAS THE ASSISTANT
9 CIRCULATION DIRECTOR OF THE CHICAGO TRIBUNE,
10 WHICH AT THAT TIME HAD A DAILY CIRCULATION OF
11 APPROXIMATELY 800,000."
12 DO YOU SEE THAT?
13 A. I DO.
14 Q. OKAY. IS THAT ACCURATE?
15 A. IT'S -- IT'S ACCURATE IN THAT I WAS APPOINTED ASSISTANT
16 CIRCULATION DIRECTOR. THE COMPANY DECIDED THEY WEREN'T GOING
17 TO HAVE ANY ASSISTANT DEPARTMENT HEAD. SO I BECAME AN
18 ADMINISTRATION MANAGER, BUT I ACTED IN THE IDENTICAL CAPACITY.
19 Q. OKAY. NOW, IN THE -- IN LINES 1 AND 2 YOU SAY -- I'M
20 SORRY. IN THE FIRST SENTENCE YOU SAY:
21 "I AM THE FORMER CIRCULATION DIRECTOR OF THE
22 SANTA BARBARA NEWS PRESS, WHICH IS OWNED BY THE
23 NEW YORK TIMES. I HELD THAT POSITION FROM --
24 "FOR SEVEN YEARS FROM 1988 TO 1995."
25 DO YOU SEE THAT?
1008
OSBORN - DIRECT / THAMAS
1 A. YES.
2 Q. IS 1995 WHEN YOU RETIRED?
3 A. YES.
4 Q. SO CAN YOU TELL US HOW MANY YEARS YOU WERE IN THE
5 NEWSPAPER BUSINESS?
6 A. FORTY-FOUR.
7 Q. OKAY. THE -- WHEN DID YOU START IN THE NEWSPAPER
8 BUSINESS?
9 A. 1950 -- 1950.
10 Q. OKAY. CAN YOU TELL US BRIEFLY WHAT YOU DID FROM 1950
11 UNTIL YOU BECAME THE ASSISTANT CIRCULATION DIRECTOR OF THE
12 CHICAGO TRIBUNE IN 1971?
13 A. I WAS HIRED AS AN ADVERTISING SALESMAN, AND I SOLD
14 CLASSIFIED ADVERTISING FOR THE CHICAGO TRIBUNE.
15 FROM THERE I BECAME INVOLVED IN A MARKETING DATA
16 DIVISION THAT DID SPECIAL RESEARCH TO FIND WAYS TO STOP A
17 CIRCULATION SLIDE IN THE CHICAGO TRIBUNE.
18 FROM THERE I DID GO INTO CIRCULATION AND SPENT
19 THE -- UNTIL 1975, THE REST OF MY TIME, IN CIRCULATION.
20 Q. OKAY. NOW, WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS
21 ASSISTANT CIRCULATION DIRECTOR OF THE CHICAGO TRIBUNE?
22 A. I EFFECTIVELY ADMINISTERED THE HOME DELIVERY, THE SINGLE
23 COPY, THE SALES PROMOTION, BUDGETING, OFFICE ACTIVITIES OF THE
24 CHICAGO TRIBUNE.
25 Q. NOW --
1009
OSBORN - DIRECT / THAMAS
1 A. THE CIRCULATION DEPARTMENT, ALL OF THAT.
2 Q. THE SECOND SENTENCE OF THE FIRST PARAGRAPH SAYS, QUOTE:
3 "FROM 1975 TO 1987, I WAS THE VICE PRESIDENT
4 OF CIRCULATION OF THE LOS ANGELES DAILY NEWS,
5 WITH A DAILY CIRCULATION OF APPROXIMATELY
6 150,000 AND A SUNDAY CIRCULATION OF
7 APPROXIMATELY 175,000."
8 DO YOU SEE THAT?
9 A. YES.
10 Q. IS THAT TRUE?
11 A. YES.
12 Q. AND WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS THE VICE
13 PRESIDENT OF CIRCULATION AT THE LOS ANGELES DAILY NEWS?
14 A. TO OVERSEE ALL CIRCULATION FUNCTIONS AND DO THE BUDGETING,
15 AS WELL AS I HAD CHARGE OF THE MAIL ROOM OPERATIONS FOR A SHORT
16 PERIOD OF TIME.
17 Q. OKAY. AND THEN YOU -- AFTER THAT YOU -- UNTIL YOU RETIRED
18 YOU WERE THE CIRCULATION DIRECTOR OF THE SANTA BARBARA NEWS
19 PRESS?
20 A. YES, SIR.
21 Q. WHAT WERE YOUR DUTIES AND RESPONSIBILITIES IN THAT
22 POSITION?
23 A. CIRCULATION DEPARTMENT, AND ALL THE FUNCTIONS OF
24 CIRCULATION. EACH MANAGER REPORTED TO ME.
25 Q. NOW, WERE -- WHEN YOU WERE THE CIRCULATION DIRECTOR --
1010
OSBORN - DIRECT / THAMAS
1 WHEN YOU HAD YOUR CIRCULATION POSITIONS FIRST WITH THE CHICAGO
2 TRIBUNE, SECOND WITH THE LOS ANGELES DAILY NEWS, THIRD WITH THE
3 SANTA BARBARA NEWS PRESS, WERE THOSE PAID DAILY NEWSPAPERS?
4 A. YES, SIR.
5 Q. DID YOU IN ANY OF THOSE FUNCTIONS HAVE ANY DUTIES AND
6 RESPONSIBILITIES THAT INVOLVED WHAT ARE CALLED GIVEAWAY PAPERS
7 OR FREE PAPERS?
8 A. OR SHOPPERS OR WHATEVER. YES.
9 BEFORE THE LOS ANGELES DAILY NEWS BECAME THE LOS
10 ANGELES DAILY NEWS, IT WAS CALLED THE VALLEY NEWS AND GREEN
11 SHEET. AND WE DISTRIBUTED THREE NEWSPAPERS. AND DURING THAT
12 PERIOD OF TIME I TRIED TO CONVERT IT TO A DAILY PAPER, WHICH WE
13 DID. BUT . . .
14 THE COURT: WHAT WAS THE OWNERSHIP OF THE PAPER AT
15 THAT TIME?
16 THE WITNESS: THE CHICAGO TRIBUNE BOUGHT IT.
17 THE COURT: WHAT YEAR DID THE TRIB BUY IT?
18 THE WITNESS: THE TRIBUNE BOUGHT IT IN DECEMBER OF
19 1973, AND I MOVED OUT THERE IN JULY OF 1975.
20 THE COURT: IT HAD NOT BEEN A DAILY NEWSPAPER BEFORE
21 THE TRIB ACQUISITION IN 1973?
22 THE WITNESS: NO. IT HAD BEEN A -- A SHOPPER FOR
23 MAYBE 30 OR 40 YEARS, THREE OR FOUR DAYS A WEEK.
24 THE COURT: OKAY.
25 ////
1011
OSBORN - DIRECT / THAMAS
1 BY MR. SHULMAN:
2 Q. WITH THE SANTA BARBARA NEWS PRESS DID YOU HAVE ANY DUTIES
3 AND RESPONSIBILITIES THAT INVOLVED ANY SHOPPERS OR FREE
4 CIRCULATION PAPERS?
5 A. YES. WE HAD A SHOPPER THAT WE DISTRIBUTED TO ALL OF THE
6 NON-SUBSCRIBERS OF THE TRIBUNE ON MONDAY OR TUESDAY MORNINGS.
7 DID YOU HAVE A QUESTION YOU WANTED?
8 THE COURT: CAN I INTERRUPT FOR ONE MOMENT?
9 MR. SHULMAN: SURE. I'M SORRY, YOUR HONOR.
10 THE COURT: DOES THE TRIBUNE STILL OWN THE VALLEY
11 NEWS?
12 THE WITNESS: NO. THEY SOLD IT TO JACK KENT COOK IN
13 197 -- 1986.
14 THE COURT: AND I ASSUME MR. COOK NO LONGER OWNS IT
15 OR ITS OWNERSHIP HAS CHANGED?
16 THE WITNESS: THE OWNERSHIP HAS CHANGED. MR. COOK
17 IS DEAD. BUT HE -- HIS -- AFTER HE DIED IT WAS SOLD TO
18 MIDDLETON, IF I HAVE THE RIGHT NAME.
19 THE COURT: MIDDLETON?
20 THE WITNESS: SINGLETON. I'M SORRY.
21 THE COURT: SINGLETON?
22 THE WITNESS: SINGLETON. YES.
23 THE COURT: ALL RIGHT. THANK YOU.
24 THE WITNESS: YES, SIR.
25 ////
1012
OSBORN - DIRECT / THAMAS
1 BY MR. SHULMAN:
2 Q. NOW, DID YOU HAVE RESPONSIBILITY FOR THE CIRCULATION OF
3 THE SHOPPER OF THE SANTA BARBARA NEWS PRESS?
4 A. YES.
5 Q. ALL RIGHT. I WANT TO ASK YOU SOME QUESTIONS ABOUT WHAT IS
6 INVOLVED IN THE FUNCTION OF -- THE AREA OF CIRCULATION FOR A
7 SHOPPER AND ALSO -- AND THEN FOR A PAID NEWSPAPER.
8 MAY I APPROACH THE EASEL, YOUR HONOR?
9 THE COURT: YES.
10 MR. ROSCH: YOUR HONOR, MAY I OBJECT TO THIS,
11 PLEASE? THIS IS WELL OUTSIDE THE SCOPE OF WHAT HAS BEEN
12 DESIGNATED AS WHAT THIS WITNESS WILL TESTIFY TO.
13 MR. HOCKETT: I JOIN IN THAT OBJECTION. IT'S NOT
14 DISCLOSED BY THE DECLARATION, AND THIS IS THE ISSUE THAT I
15 BROUGHT UP IN THE MOTION AT THE BEGINNING OF THE TRIAL.
16 MR. ROSCH: THIS IS EXACTLY THE KIND OF THING THAT
17 WE HAD UNDERSTOOD THAT THE COURT DID NOT WANT TO OCCUR, AND
18 CERTAINLY WE ARE NOT PREPARED TO HANDLE IT.
19 MR. SHULMAN: I BELIEVE THE WITNESS -- THE WITNESS
20 WILL BE TESTIFYING CONCERNING THE -- CERTAINLY CONCERNING THE
21 FUNCTIONS OF A PAID CIRCULATION NEWSPAPER AND WHAT CIRCULATION
22 WITH THAT INVOLVES.
23 TO CONTRAST THAT, I WAS GOING TO SHOW WHAT HE KNOWS
24 ABOUT WHAT A FREE NEWSPAPER INVOLVES.
25 MR. ROSCH: WELL, YOUR HONOR, IF I MAY, HERE IS WHAT
1013
OSBORN - DIRECT / THAMAS
1 THE STATEMENT AS TO WHAT THIS WITNESS IS GOING TO TESTIFY TO
2 SAYS. IT SAYS:
3 "HE WILL TESTIFY THAT THE PROPOSED TRANSFER
4 OF THE EXAMINER BY HEARST WILL NOT RESULT IN A
5 VIABLE DAILY NEWSPAPER BECAUSE IT IS
6 INSUFFICIENTLY CAPITALIZED AND HAS FAILED TO
7 PROVIDE FOR THE ESTABLISHMENTS OF PRESS
8 FACILITIES LOCATED SUFFICIENTLY CLOSE TO
9 EDITORIAL OFFICES TO SECURE EFFICIENT AND TIMELY
10 DELIBERATION OF THE NEWSPAPER."
11 THAT'S WHAT WE'RE PREPARED TO EXAMINE THIS WITNESS
12 ABOUT.
13 MR. SHULMAN: WELL, HE --
14 THE COURT: WELL, I --
15 MR. SHULMAN: HE WAS GOING TO --
16 THE COURT: I AM NOT GOING TO SUSTAIN THE OBJECTION
17 AT THIS POINT, NOR AM I GOING TO CUT OFF MR. SHULMAN AT THIS
18 POINT.
19 IT DOES SEEM TO ME THAT THE QUESTION MAY BE A FAIR
20 ONE WITH RESPECT TO DISTRIBUTION PRACTICES IN THE NEWSPAPER
21 INDUSTRY. I DON'T KNOW THE EXTENT TO WHICH MR. SHULMAN WANTS
22 TO GET INTO THE SUBJECT OF DISTRIBUTION OF FREE NEWSPAPERS.
23 THAT'S OBVIOUSLY NOT THE ISSUE BEFORE THE COURT, AND SO I WON'T
24 LET HIM GO TOO FAR DOWN THAT PATH. BUT ACCEPTING THE
25 REPRESENTATION THAT HE IS GETTING TO THE SUBJECT THAT YOU JUST
1014
OSBORN - DIRECT / THAMAS
1 DESCRIBED, MR. ROSCH, I WILL PERMIT HIM TO GO FORWARD AT THIS
2 JUNCTURE.
3 MR. ROSCH: THANK YOU, YOUR HONOR.
4 THE COURT: YOU CAN RENEW YOUR OBJECTION IF YOU
5 THINK IT'S GOING TOO FAR AND WE WILL CONSIDER WHERE WE ARE AT
6 THAT POINT.
7 MR. ROSCH: THANK YOU, YOUR HONOR.
8 MR. SHULMAN: MAY I USE THE EASEL, YOUR HONOR?
9 THE COURT: YES, YOU MAY.
10 BY MR. SHULMAN:
11 Q. LET'S TAKE THE FUNCTIONS THAT ARE INVOLVED IN CIRCULATION
12 FOR A PAID DAILY NEWSPAPER, ALL RIGHT? I WILL WRITE
13 "CIRCULATION PAID DAILY."
14 NOW, TELL US, WHAT -- WHAT ARE THE VARIOUS FUNCTIONS
15 THAT ARE CARRIED ON BY A -- BY THE CIRCULATION DEPARTMENT FOR A
16 PAID DAILY NEWSPAPER?
17 A. THE BASIC FUNCTION IS THE DISTRIBUTION OF THE NEWSPAPER.
18 FROM THE TIME IT COMES OFF OF THE PRESS WE TRUCK IT TO VARIOUS
19 LOCATIONS.
20 Q. ALL RIGHT. SO WE HAVE --
21 A. SO YOU HAVE DISTRIBUTION AND TRUCKING.
22 Q. ALL RIGHT. SO TRUCKING DISTRIBUTION. GO AHEAD.
23 A. AND IT'S DELIVERED TO HOME DELIVERY CARRIERS OR
24 DISTRIBUTORS.
25 Q. OKAY. SO HOME DELIVERY, THAT'S ANOTHER?
1015
OSBORN - DIRECT / THAMAS
1 A. THAT'S ONE FUNCTION.
2 Q. GO AHEAD.
3 A. DISTRIBUTE IT TO SINGLE-COPY OUTLETS, MEANING STORES AND
4 NEWSSTANDS.
5 Q. SINGLE-COPY OUTLETS. GO AHEAD.
6 A. THE OFFICE OPERATION, THAT THE SERVICE DEPARTMENT TAKES
7 COMPLAINTS, VERIFIES NEW STARTS.
8 THE COURT: NEWS STARTS?
9 THE WITNESS: NEW STARTS.
10 THE COURT: YOU MEAN, NEW SUBSCRIBERS?
11 THE WITNESS: NEW SUBSCRIBERS, YES.
12 AND THEY ALSO DO CIRCULATION REPORTS.
13 BY MR. SHULMAN:
14 Q. NOW --
15 A. UNDER THAT SAME SUBJECT.
16 AND LASTLY BUT NOT LEAST, A SALES DIVISION THAT
17 PROMOTES BOTH SINGLE-COPY SOLICITS, EITHER BY PHONE OR
18 DOOR-TO-DOOR OR DIRECT MAIL, NEW HOME DELIVERY SUBSCRIBERS.
19 Q. OKAY. THE SALES DIVISION. AND THAT -- THAT IS -- TELL US
20 AGAIN WHAT THE SALES DIVISION DOES.
21 A. THEY DO -- THEY SOLICIT TO SELL PEOPLE ON HAVING THE PAPER
22 DELIVERED TO THEIR HOME AND SUBSCRIBE, AS YOU WILL, AND THEY
23 ALSO DO THAT ONLY WITH THE PHONE, WITH THE DOOR-TO-DOOR AND
24 WITH DIRECT MAIL. THERE ARE A LOT OF DIFFERENT WAYS TO
25 PROMOTE.
1016
OSBORN - DIRECT / THAMAS
1 Q. BUT AT LEAST PHONE AND DOOR-TO-DOOR?
2 A. AT LEAST.
3 Q. ARE THERE ANY OF THESE -- WHICH OF THESE FUNCTIONS ARE
4 CARRIED ON WITH A FREE CIRCULATION NEWSPAPER BY THE CIRCULATION
5 DEPARTMENT?
6 A. THE TRUCKING AND -- AND THIS IS MOST NEWSPAPERS. THERE
7 ARE DIFFERENT WAYS SOME MAY DO IT. BUT THEY TRUCK THE
8 NEWSPAPER OUT TO LOCATIONS WHERE MOST OF THEM ARE DELIVERED TO
9 HOMES. AND THEN THEY DELIVER -- SOMETIMES WITH A DELIVERY
10 LIST. USUALLY THEY DELIVER JUST TO EVERY HOUSE. THEY BLANKET
11 AN AREA THAT THE -- THE NEWSPAPER SELECTS, NOT THE HOMEOWNER OR
12 THE HOUSEHOLD.
13 THEY ALSO HAVE --
14 THE COURT: (INDICATING).
15 BY MR. SHULMAN:
16 Q. IF YOU COULD TALK INTO THE MICROPHONE.
17 THE COURT: IF YOU COULD MOVE THE MICROPHONE A
18 LITTLE CLOSER.
19 THE WITNESS: AND MANY OF THEM ALSO HAVE RACKS WHERE
20 PEOPLE CAN PICK THE NEWSPAPER UP. AND THERE IS NO CHARGE FOR
21 IT. IT'S A FREE -- FREE AVAILABILITY OF THE NEWSPAPER. AND
22 THAT'S ABOUT IT.
23 BY MR. SHULMAN:
24 Q. OKAY. SO THE SALES DIVISION AND THE SERVICE DEPARTMENT
25 WOULD BE FUNCTIONS OF A PAID DAILY BUT NOT THE FREE
1017
OSBORN - DIRECT / THAMAS
1 CIRCULATION?
2 A. THAT'S CORRECT.
3 Q. YOU ALSO SAY IN YOUR DECLARATION -- AT THE END OF THE
4 FIRST PAGE, YOU SAY:
5 "IN ADDITION I AM A FORMER PRESIDENT OF THE
6 CAL WESTERN CIRCULATION MANAGERS ASSOCIATION, A
7 FORMER PRESIDENT OF THE CALIFORNIA CONTROLLED
8 NEWSPAPERS, AND A FORMER MEMBER OF THE BOARD OF
9 DIRECTORS OF THE INTERNATIONAL CIRCULATION
10 MANAGERS ASSOCIATION."
11 IS THAT CORRECT?
12 A. CORRECT.
13 Q. CAN YOU TELL US WHAT THOSE ORGANIZATIONS ARE?
14 A. CAL WESTERN ARE A GROUP OF NEWSPAPERS IN THE FIVE WESTERN
15 STATES THAT -- THEY MEET USUALLY ONCE, TWICE A YEAR, AND THEY
16 HAVE PRESENTATIONS TO HELP THE MEMBERS DO THEIR JOB BETTER,
17 FIND A BETTER WAY TO DO IT. AND IT'S A VERY HELPFUL PART OF
18 THE CIRCULATION BUSINESS IN GENERAL.
19 THE CONTROLLED IS ANOTHER NAME FOR SHOPPER, IF YOU
20 WILL, AND MEANING THAT THERE IS FREE DISTRIBUTION OF NEWSPAPERS
21 THAT ARE DISTRIBUTED WHERE THE NEWSPAPER WANTS THEM TO BE
22 DISTRIBUTED OR MAYBE ADVERTISERS THAT ADVERTISE WOULD LIKE TO
23 HAVE IT DISTRIBUTED. AND IT IS NOT PAID CIRCULATION. IT'S
24 FREE DISTRIBUTION.
25 AND THE FORMER BOARD MEMBER -- THE BOARD MEMBER OF
1018
OSBORN - DIRECT / THAMAS
1 THE INTERNATIONAL CIRCULATION MANAGERS, WE FOLLOWED THE SAME
2 TYPE OF INFORMATION THAT CAL WESTERN DID. IT'S JUST IT'S AN
3 INTERNATIONAL ORGANIZATION. THERE ARE MAYBE 15, 16, 1700
4 NEWSPAPERS FROM ALL OVER THE WORLD.
5 Q. SO WERE YOU THE PRESIDENT AT VARIOUS TIMES OF THE PAID
6 CIRCULATION MANAGERS ASSOCIATION, THE PAID NEWSPAPER
7 CIRCULATION MANAGERS ASSOCIATION AND ALSO THE FREE NEWSPAPER
8 ASSOCIATION?
9 A. YES. THE FREE AND -- AND WHAT WE CALL IT THE CAL WESTERN,
10 WHICH IS PAID CIRCULATION MEMBERS.
11 Q. OKAY. I WOULD LIKE YOU TO LOOK AT WHAT I HAVE PLACED IN
12 FRONT OF YOU AS WHAT IS MARKED FOR IDENTIFICATION AS
13 PLAINTIFF'S EXHIBIT 165.
14 AND PLAINTIFF'S EXHIBIT 165 IS FOUR HANDWRITTEN
15 PAGES.
16 DO YOU SEE THAT?
17 A. YES, SIR.
18 MR. SHULMAN: YOU DON'T HAVE IT?
19 (PAUSE IN THE PROCEEDINGS.)
20 MR. SHULMAN: IT'S IN THE FOURTH VOLUME, YOUR HONOR.
21 WE JUST PUT IT IN.
22 THE COURT: I AM AFRAID I ONLY GO TO 152.
23 AH, YOU DON'T HAVE A TAB FOR IT. I'M SORRY. GO
24 AHEAD.
25 ////
1019
OSBORN - DIRECT / THAMAS
1 BY MR. SHULMAN:
2 Q. DO YOU -- IS THIS -- IS THIS IN YOUR HANDWRITING?
3 A. YES, SIR.
4 Q. OKAY. WITHOUT TELLING US ANY OF THE NUMBERS IN IT, CAN
5 YOU TELL US -- WELL, WHEN DID YOU PREPARE THIS?
6 A. I PREPARED IT AFTER A MEETING OF MARCH 25TH. AND IT WAS,
7 I THINK, FINISHED ON APRIL THE 6TH.
8 Q. OKAY. AND THE MARCH 25TH MEETING YOU ARE TALKING ABOUT IS
9 THE MEETING THAT MR. PAGE AND MR. CLANCY TESTIFIED ABOUT?
10 A. YES, SIR.
11 Q. THIS WAS DONE SOMETIME AFTER THAT?
12 A. YES.
13 Q. OKAY. AND WERE YOU ASKED ABOUT THIS AT YOUR DEPOSITION?
14 A. YES.
15 Q. WHAT DID YOU INTEND TO ACCOMPLISH OR LOOK AT WHEN YOU
16 PREPARED THIS?
17 A. THAT -- MY EXPERIENCE SHOWS THAT A NEWSPAPER WITH -- THAT
18 HAS BEEN --
19 Q. WITHOUT -- DON'T TESTIFY ABOUT THE NUMBERS YET.
20 A. OKAY.
21 Q. JUST TELL US WHAT YOU WERE TRYING TO DO.
22 A. SHOW WHAT THE EXPENSES AND THE REVENUE WOULD BE OF THE
23 NEWSPAPER.
24 Q. WHAT NEWSPAPER?
25 A. OF THE EXAMINER IF IT WERE SOLD OR TAKEN OVER BY SOMEBODY
1020
OSBORN - DIRECT / THAMAS
1 ELSE.
2 Q. OKAY?
3 MR. SHULMAN: PLAINTIFF OFFERS EXHIBIT 165.
4 MR. HALLING: NO OBJECTION.
5 MR. HOCKETT: WE HAVE NO OBJECTION, YOUR HONOR.
6 THE COURT: VERY WELL. 165 WILL BE ADMITTED.
7 (PLAINTIFF'S EXHIBIT 165
8 RECEIVED IN EVIDENCE)
9 THE COURT: LET'S SEE. 58 WAS PREVIOUSLY ADMITTED,
10 WAS IT NOT?
11 MR. SHULMAN: YES, YOUR HONOR.
12 LET'S SEE. I AM GOING TO SWITCH TO THE ELMO HERE.
13 BY MR. SHULMAN:
14 Q. THIS HAS GOT A DATE OF APRIL 6TH ON IT. IT SAYS, "SF
15 EXAMINER, CIRCULATION TOTAL, REVENUE AND EXPENSES." AND THEN
16 POINT ONE SAYS, "CIRCULATION: FIVE DAILY AND WEEKEND DELIVERY.
17 HOME" -- IS THAT "HOME DELIVERY"?
18 A. "HOME DELIVERY."
19 Q. -- "EQUALS 50,000" -- I'M SORRY, "30,000, SINGLE COPY
20 35,000."
21 DID I READ THAT RIGHT?
22 A. YES, SIR.
23 Q. AND THAT IS A TOTAL CIRCULATION -- IT'S A LITTLE BIT CUT
24 OF -- OF 65,000?
25 A. YES.
1021
OSBORN - DIRECT / THAMAS
1 Q. IS THAT THE ASSUMPTION YOU MADE AS TO THE CIRCULATION OF
2 THE PAPER THAT YOU WERE LOOKING AT?
3 A. THAT WAS ONE ASSUMPTION THAT I MADE AFTER LOOKING AT
4 DISTRIBUTORS' NUMBERS, AND IT WAS ONE OF THE FIGURES I USED.
5 Q. OKAY. SO THE THIRD -- I AM GOING TO SKIP THE REVENUE FOR
6 NOW. WELL, NO, LET'S TAKE THE REVENUE.
7 THE SECOND POINT SAYS, "REVENUE, NET AFTER BAD
8 DEBTS," AND THE NUMBER IS $8,785,000?
9 A. YES.
10 Q. OKAY. TELL ME WHAT THAT IS.
11 A. THIS IS REVENUE FROM HOME DELIVERY SUBSCRIBERS FOR
12 DELIVERY SIX DAYS DURING THE WEEK. AND IT'S THE NEWSSTAND SALE
13 OF THE PAPER BASED ON 25 CENTS DAILY AND $1 ON SUNDAY.
14 Q. OKAY.
15 A. AND THAT'S TOTAL REVENUE.
16 Q. FROM CIRCULATION?
17 A. YES.
18 Q. NOW, NUMBER THREE IS "EXPENSES." AND THE FIRST IS -- IS
19 THAT "DELIVERY FEES"?
20 A. YES.
21 Q. AND THAT SAYS "$3,900,000"?
22 A. YES, SIR.
23 Q. OKAY. CAN YOU TELL US WHAT THAT IS?
24 A. THAT IS THE TOTAL OF THE MONEY WE PAID TO CONTRACTORS OR
25 CARRIERS WHO DELIVER THE PAPER TO THE HOMES AND ALSO THE ONES
1022
OSBORN - DIRECT / THAMAS
1 THAT DELIVER THE -- THE SINGLE-COPY DISTRIBUTORS THAT DELIVER
2 IT TO NEWSSTANDS AND STORES.
3 Q. AND ARE THOSE WHAT YOU BELIEVE THE DELIVERY EXPENSES WOULD
4 BE FOR THIS PAPER WITH 65,000 CIRCULATION?
5 A. YES.
6 Q. ALL RIGHT. NOW, THE NEXT LINE SAYS, "SALARIES,
7 $6,245,000."
8 DO YOU SEE THAT?
9 A. YES.
10 Q. CAN YOU EXPLAIN WHAT THAT REPRESENTS?
11 A. THIS REPRESENTS -- THIS REPRESENTS THE SALARIES PAID TO
12 ALL SALARIED EMPLOYEES OF WHICH THERE WERE A TOTAL OF 102 WHO
13 WORKED IN THESE DIVISIONS (INDICATING) THAT WE SHOW HERE.
14 Q. WHICH DIVISIONS?
15 A. TRUCKING, HOME DELIVERY, SINGLE COPY, SERVICE DEPARTMENT
16 AND THE SALES DIVISION.
17 Q. AND YOU CALCULATE THE TOTAL SALARIES FOR THOSE POSITIONS
18 AT $6,245,000?
19 A. YES.
20 Q. THE NEXT LINE IS "SALES PROMOTION, $2,746,000."
21 CAN YOU EXPLAIN WHAT THAT IS?
22 A. THE BULK OF THAT MONEY IS PAYING FOR SELLING AND GETTING
23 NEW HOME DELIVERY SUBSCRIBERS TO THE PAPER. AND THERE IS A
24 CONTINUOUS PROGRAM OF WHETHER IT'S DOOR-TO-DOOR SALES OR
25 TELEPHONE SALES FOR THE BULK OF IT OR OTHER DIRECT MAIL-TYPE
1023
OSBORN - DIRECT / THAMAS
1 PROMOTION.
2 Q. YOU SAY THERE IS A CONTINUOUS PROGRAM OF DOING THAT.
3 A. YES.
4 Q. WOULD YOU EXPLAIN WHAT THE CONDITIONS ARE THAT LEAD
5 NEWSPAPERS TO HAVE A CONTINUOUS PROGRAM OF -- WELL, SALES
6 PROMOTION IS SIGNING UP SUBSCRIBERS, RIGHT?
7 A. AND PART OF IT IS ALSO FOR THE PROMOTION OF SINGLE-COPY
8 SALES AND RACKS WHICH WE DIDN'T GO INTO.
9 Q. OKAY.
10 A. BUT RACK CARDS AND THAT TYPE OF PROMOTION.
11 Q. CAN YOU TELL US WHAT THE -- WHAT CONDITIONS EXIST IN THE
12 DAILY NEWSPAPER BUSINESS THAT REQUIRE DAILY NEWSPAPERS TO HAVE
13 THIS CONTINUOUS EFFORT TO SIGN UP SUBSCRIBERS?
14 A. THE HOME DELIVERY SUBSCRIBERS -- THERE IS A CONTINUOUS IN
15 AND OUT, PEOPLE STOPPING AND PEOPLE STARTING, FOR VARIOUS
16 REASONS. IT COULD BE FOR SERVICE. IT COULD BE FOR MOVING. IT
17 COULD BE ANY ONE OF A NUMBER OF REASONS. AND SO THE AVERAGE
18 PAPER WILL SELL AND REPLACE ITS HOME DELIVERY BASE ONCE EVERY
19 YEAR.
20 SO IN THIS EXAMPLE IF WE HAD 30,000 HOME DELIVERY,
21 MOST NEWSPAPERS WOULD HAVE TO REPLACE 30,000 SUBSCRIBERS. THEY
22 ALL DON'T QUIT. BUT THAT'S HOW MANY HAVE TO BE REPLACED TO
23 HOLD THAT NUMBER.
24 IN THIS MARKET IT'S A MUCH, MUCH TOUGHER MARKET AND
25 THERE IS A 200 PERCENT "TURN," IS A TERM OF THE TRADE. INSTEAD
1024
OSBORN - DIRECT / THAMAS
1 OF 30,000 HOME DELIVERY SUBSCRIBERS, THEY WERE TURNING OVER
2 60,000 EVERY YEAR. SO THEY HAD TO REPLACE ALL OF THEIR HOME
3 DELIVERY SUBSCRIBERS TWICE. AND THAT'S WHERE THE -- THE SALES
4 EFFORT IS DIRECTED. AND IF YOU DON'T DO IT, YOU ARE NOT EVEN
5 GOING TO HOLD YOUR BASIC CIRCULATION.
6 Q. IS CIRCULATION IMPORTANT FOR REVENUE OTHER THAN THE
7 CIRCULATION REVENUE?
8 A. ABSOLUTELY.
9 Q. FOR WHAT ELSE?
10 A. THE ADVERTISING DEPARTMENT BASED ON THE CIRCULATION
11 NUMBERS THAT WE PRODUCE AND THE ADVERTISING RATES USUALLY TO A
12 DEGREE ARE BASED ON THE AMOUNT OF CIRCULATION AND WHERE THAT
13 CIRCULATION IS. SO IT'S CRITICAL TO THE SUCCESS OF A NEWSPAPER
14 THAT THOSE NUMBERS NOT ONLY ARE MAINTAINED BUT YOU SHOULD GROW
15 IN CIRCULATION AND PROMOTE SO THAT YOU ARE CONTINUOUSLY GROWING
16 AND IT GIVES A VEHICLE FOR ADVERTISING TO INCREASE THEIR RATES.
17 Q. NOW, I THINK YOU'VE SAID THAT IN THIS MARKET IT'S
18 NECESSARY IF A NEWSPAPER WANTS TO HAVE 30,000 HOME DELIVERED
19 SUBSCRIBERS AT THE END OF THE YEAR TO SIGN UP 60,000 DURING THE
20 YEAR?
21 A. THAT'S THE NUMBER I USED, YES.
22 Q. AND WHERE DID YOU GET THAT?
23 A. I GOT IT FROM MR. CLANCY. HE SAID THE CHURN IN THIS
24 MARKET WAS DOUBLE, AND HE GAVE ME THAT NUMBER.
25 Q. ALL RIGHT.
1025
OSBORN - DIRECT / THAMAS
1 THE COURT: LET ME JUST ASK YOU, WHAT IS THE CHURN
2 IN SANTA BARBARA?
3 THE WITNESS: THE CHURN IN SANTA BARBARA IS
4 77 PERCENT.
5 THE COURT: 77 PERCENT?
6 THE WITNESS: SO IF WE HAVE 100,000 CIRCULATION,
7 THEN HOPEFULLY YOU WOULD HAVE TO REPLACE 77,000. AND THAT'S
8 GOOD.
9 THE COURT: WHAT WAS IT -- WHAT WAS IT IN CHICAGO?
10 THE WITNESS: CHICAGO IT WAS A DIFFERENT SITUATION,
11 BUT IT WAS 100 PERCENT, A LITTLE OVER. BUT THEY HAD A BASE
12 THAT JUST NEVER MOVED. THEY HAD 429,000 HOME DELIVERY IN THE
13 CITY AND SUBURBS. AND OUT OF THAT 375,000 STAYED FOREVER. AND
14 IT SEEMED THAT WAY UNTIL THEY DIED. BUT THAT OTHER PART WE
15 REALLY HAD TO SELL. I WAS A SALES MANAGER FOR A NUMBER OF
16 YEARS. WE HAD TO SELL 5500 NEW STARTS A WEEK TO STAY EVEN.
17 THE COURT: THAT WAS IN CHICAGO?
18 THE WITNESS: IN CHICAGO.
19 THE COURT: WHAT ACCOUNTS FOR THE RELEVANT STABILITY
20 OF THE CHICAGO MARKET AS OPPOSED TO THE SAN FRANCISCO MARKET?
21 THE WITNESS: I AM NOT AN EXPERT ON THAT.
22 THE COURT: OKAY. FAIR ENOUGH.
23 BY MR. SHULMAN:
24 Q. WHAT WAS -- AS LONG AS WE ARE DOING IT, WHAT WAS THE CHURN
25 IN LOS ANGELES?
1026
OSBORN - DIRECT / THAMAS
1 A. THE LOS ANGELES DAILY NEWS WAS 104 PERCENT AND THE L.A.
2 TIMES, IF YOU WANT IT, IS ABOUT THE SAME.
3 Q. NOW, THE -- THE NEXT -- OKAY. THE BOTTOM LINE IS
4 "TRUCKING" AND "WAREHOUSING," AND YOU'VE GOT $850,000 FOR THAT,
5 RIGHT?
6 A. YES, SIR.
7 Q. OKAY. AND WHERE DOES THAT -- WHAT IS THAT FOR?
8 A. IT'S THE MAINTENANCE AND GARAGE FOR THE TRUCKS THAT ARE
9 USED IN CIRCULATION FOR THE DISTRIBUTION OF THE PAPER.
10 Q. NOW, THE TOTAL -- THE TOTAL CIRCULATION EXPENSE THAT
11 YOU'VE CALCULATED, CLOSE TO $14 MILLION, RIGHT?
12 A. YES.
13 Q. AND THAT EXCEEDS THE CIRCULATION REVENUE, RIGHT?
14 A. YES, SIR.
15 Q. IS THAT CUSTOMARY IN A NEWSPAPER?
16 A. NO, SIR.
17 Q. IT'S NOT?
18 A. NO, SIR.
19 Q. OKAY. IN YOUR EXPERIENCE, THE NEWSPAPERS YOU HAVE WORKED
20 ON, THE CIRCULATION -- WERE YOU FAMILIAR WITH WHETHER THE --
21 WITH THE PERCENTAGE OF THE CIRCULATION EXPENSE AS A PERCENTAGE
22 OF THE TOTAL OPERATING COST OF THE NEWSPAPER?
23 A. ABOUT 20 PERCENT. IT COULD BE A LITTLE MORE BUT USUALLY
24 20, 22 PERCENT.
25 MR. SHULMAN: OKAY.
1027
OSBORN - DIRECT / THAMAS
1 MAY I USE THE EASEL, YOUR HONOR?
2 THE COURT: YES.
3 BY MR. SHULMAN:
4 Q. SO IF THE -- THE CIRCULATION EXPENSE THAT YOU FIGURED FOR
5 THIS PAPER OF 65,000 CIRCULATION WAS $14 MILLION?
6 A. YES, SIR, ROUND NUMBERS.
7 Q. RIGHT. AND IF THAT IS 20 PERCENT OF THE TOTAL EXPENSES OF
8 THAT NEWSPAPER, THEN THE TOTAL EXPENSES WOULD BE 70 MILLION --
9 THE TOTAL COST OF THAT NEWSPAPER WOULD BE $70 MILLION?
10 A. I GUESS SO.
11 Q. I WILL PUT 20 PERCENT AND THEN TOTAL EXPENSE.
12 AND THAT'S $70 MILLION A YEAR, RIGHT?
13 A. IT WOULD INDICATE THAT, YES.
14 Q. ALL RIGHT. I WANT TO GO BACK TO YOUR DECLARATION NOW --
15 WELL, THE SUCCEEDING PAGES, I'M SORRY, OF EXHIBIT 165, DO THEY
16 CONTAIN BACKUP CALCULATIONS?
17 A. YES.
18 Q. THAT IS THE --
19 A. I THINK THAT THE FOLLOWING PAGES, 349, 350, 351, ARE THE
20 DETAILS IN THE FRONT PAGE.
21 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
22
23
24
25
1028
OSBORN - DIRECT / SHULMAN
1 Q. OKAY. IF WE LOOK BACK AGAIN AT EXHIBIT 150 -- I'M SORRY,
2 EXHIBIT 58, YOUR DECLARATION, SECOND PAGE, I WANT TO GO DOWN TO
3 PARAGRAPH 4 ON THE SECOND PAGE BEGINNING AT LINE 22, YOU SAY:
4 "THERE ARE NUMEROUS LOGISTICAL CONCERNS
5 WHICH MUST BE OVERCOME BEFORE PAN-ASIA WILL BE
6 ABLE TO PUBLISH A VIABLE COMPETITIVE MORNING
7 NEWSPAPER, INCLUDING THE ESTABLISHMENT OF PRESS
8 FACILITIES LOCATED SUFFICIENTLY CLOSE TO THE
9 EDITORIAL OFFICES TO MINIMIZE THE TIME GAP
10 BETWEEN THE END OF THE NEWS DAY AND THE
11 DISSEMINATION OF THE PRINTED NEWSPAPERS TO THE
12 DISTRIBUTORS IN ORDER TO COMPLETE DELIVERY TO
13 SINGLE-COPY LOCATIONS BY 5:30 A.M. AND TO HOME
14 DELIVERY SUBSCRIBERS BY 6:00 A.M."
15 DO YOU SEE THAT?
16 A. YES.
17 Q. CAN YOU EXPLAIN THE IMPORTANCE OF THIS LOGISTICAL CONCERN
18 THAT YOU'VE DESCRIBED HERE?
19 A. THE DAILY NEWSPAPER CLOSES THE EDITORIAL CONTENT SOMEWHERE
20 USUALLY AROUND MIDNIGHT FOR A MORNING NEWSPAPER. FOR AN
21 AFTERNOON PAPER, IT'S USUALLY 4:00 O'CLOCK -- 4:00 A.M. IN THE
22 MORNING.
23 THE KEY TO THE DISTRIBUTION OF THE NEWSPAPER IS THAT
24 ONCE THE EDITORIAL CLOSES THE NEWS CONTENT, THAT THE PRESSES
25 START ROLLING USUALLY WITHIN A HALF HOUR OF THAT CLOSE, AND THE
1029
OSBORN - DIRECT / SHULMAN
1 EDITORIAL CONTENT IS THE LAST PART OF THE PAPER THAT'S PUT
2 TOGETHER.
3 SO ONCE THEY CLOSE -- AND VISUALIZE MOST OF MY
4 EXPERIENCE HAS BEEN GETTING THE PAPER OUT ON TIME, AND IF YOU
5 WANT TO DISTRIBUTE A HUNDRED THOUSAND PAPERS, YOU HAVE A TWO-
6 OR THREE-HOUR TIMEFRAME TO FINISH THAT DISTRIBUTION. SO YOUR
7 PRINTING PRESS HAS TO BE LOCATED IN A LOCATION WHERE YOU CAN
8 GET OUT AND COVER THAT MARKET VERY QUICKLY AND EFFICIENTLY AND
9 NOT HAVE ANY MORE LONG DISTANCE HAULS THAN YOU HAVE TO BECAUSE
10 YOU'VE GOT TO SERVE THAT SUBSCRIBER. IF YOU DON'T SERVE THE
11 SUBSCRIBER, YOU'RE IN TROUBLE.
12 Q. OKAY. NOW, YOUR DECLARATION SAYS, SAME PARAGRAPH, LINE
13 18, SAME PAGE, PARAGRAPH 4:
14 "BASED UPON THOSE FACTS AND MY EXPERIENCE IN
15 THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL
16 NOT UNDER ANY CIRCUMSTANCES BE ABLE TO SUPPORT
17 THE PROBABILITY OR EVEN THE POSSIBILITY OF A
18 VIABLE PAPER WHICH WOULD BE COMPETITIVE TO THE
19 CHRONICLE. IN ORDER TO PRODUCE A VIABLE
20 COMPETITIVE PAPER, ANY BUYER OF THE EXAMINER
21 WOULD NEED A SUBSIDY OF $50 MILLION FOR FIVE
22 YEARS OR A ONE-TIME PAYMENT OF $250 MILLION."
23 DO YOU SEE THAT?
24 A. YES.
25 Q. IS THAT YOUR OPINION?
1030
OSBORN - DIRECT / SHULMAN
1 A. YES, SIR.
2 Q. IS THERE ANY BASIS FOR THAT OPINION BEYOND WHAT YOU'VE
3 ALREADY TESTIFIED TO?
4 A. YES.
5 Q. WHAT?
6 A. THE BASIS IS THE DISCUSSIONS THAT WENT ON DURING THE
7 MEETING OF APRIL -- APRIL -- MARCH 25TH. EACH PERSON THERE PUT
8 THEIR BEST THOUGHTS FORWARD AS TO HOW MUCH IT WOULD COST TO DO
9 THEIR FUNCTION, WHETHER IT'S PRODUCTION OR ADVERTISING OR
10 EDITORIAL; AND AFTER LISTENING TO THE VARIOUS NUMBERS BY
11 VARIOUS PEOPLE, IT WAS QUITE EVIDENT THAT IT WAS A VERY
12 EXPENSIVE OPERATION THAT NEEDED HELP BASED ON THE REVENUE THAT
13 WOULD BE COMING IN.
14 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
15 QUESTIONS.
16 THE COURT: VERY WELL. MR. ROSCH, WOULD YOU LIKE TO
17 TAKE THIS WITNESS?
18 MR. ROSCH: THANK YOU, YOUR HONOR.
19 MAY I APPROACH THE WITNESS AND GIVE HIM HIS
20 DEPOSITION, YOUR HONOR?
21 THE COURT: YES, YOU MAY.
22 MR. ROSCH: THANK YOU.
23 MAY IT PLEASE THE COURT.
24
25 ///
1031
OSBORN - CROSS / ROSCH
1 CROSS-EXAMINATION
2 BY MR. ROSCH:
3 Q. GOOD AFTERNOON, MR. OSBORN. YOU RECALL I TOOK YOUR
4 DEPOSITION A COUPLE OF WEEKS AGO.
5 A. YES, SIR.
6 Q. AND YOU'VE READ IT, I TAKE IT?
7 A. YES.
8 Q. AND MADE ANY CORRECTIONS THAT YOU WISH TO MAKE IN IT?
9 A. VERY MINOR.
10 Q. OKAY. I JUST WANT TO ASK YOU SOME QUESTIONS. ACTUALLY,
11 THE SAME QUESTIONS THAT I ASKED YOU IN THAT DEPOSITION, NOT ALL
12 OF THEM BUT SOME OF THEM.
13 A. I HOPE NOT.
14 Q. OKAY. ON MARCH 25TH OF THIS YEAR YOU WERE PRESENT AT A
15 MEETING IN MR. ALIOTO'S OFFICE; IS THAT CORRECT?
16 A. YES.
17 Q. AND THAT MEETING STARTED ABOUT 9:00 IN THE MORNING AND IT
18 LASTED UNTIL 7:00, 7:30 THAT NIGHT?
19 A. THAT'S RIGHT.
20 Q. AND PRESENT AT THAT MEETING WAS A GROUP OF NEWSPAPER
21 EXPERTS WHO HAD BEEN ASSEMBLED BY MR. REILLY'S LAWYER,
22 MR. BARLETTA; IS THAT CORRECT?
23 A. YES.
24 Q. AND SPECIFICALLY THE FOLLOWING EXPERTS BESIDES YOURSELF
25 WHO WERE PRESENT WERE MR. CLANCY, MR. FLOOD, MR. INGRAM,
1032
OSBORN - CROSS / ROSCH
1 MR. WEAVER AND MR. PAGE; IS THAT CORRECT?
2 A. YES.
3 Q. OKAY. NOW, BEFORE YOU GOT TO THAT MEETING, YOU TALKED TO
4 PEOPLE WHO'D BEEN INVOLVED IN CIRCULATION FOR THE SAN FRANCISCO
5 EXAMINER; HAD YOU NOT? IN FACT, SOME OF THEM HAD BEEN
6 CIRCULATION DIRECTORS.
7 A. YES.
8 Q. AND THEY HAD TOLD YOU THAT THE EXAMINER HAD BEEN GOING
9 DOWNHILL FOR YEARS; DIDN'T THEY?
10 A. YES.
11 Q. AND IT WAS YOUR IMPRESSION FROM HAVING SPOKEN WITH THEM
12 BEFORE YOU GOT TO THE MEETING THAT THE EXAMINER WAS LOSING
13 ABOUT 20 TO $25 MILLION A YEAR; ISN'T THAT CORRECT?
14 A. NO, SIR.
15 Q. WOULD YOU PLEASE TAKE A LOOK AT PAGE 48 OF YOUR
16 DEPOSITION?
17 MR. ROSCH: YOUR HONOR, LET ME HAND THE DEPOSITION
18 UP.
19 Q. DO YOU HAVE IT THERE? LET ME READ TO YOU ON PAGE 48
20 BEGINNING WITH LINE 1 THE FOLLOWING TESTIMONY GOING THROUGH
21 LINE 19:
22 "Q. BASED UPON THE CONVERSATION THAT YOU'VE
23 HAD WITH THE FOLKS YOU MENTIONED WHO HAD
24 FAMILIARITY WITH THE EXAMINER, WAS IT YOUR
25 IMPRESSION THAT THE EXAMINER WAS OPERATING AT A
1033
OSBORN - CROSS / ROSCH
1 LOSS OR WOULD BE IF IT WERE OUTSIDE THE JOINT
2 OPERATING AGREEMENT?
3 "A. YES.
4 "Q. WAS IT YOUR IMPRESSION THAT IT WAS
5 OPERATING AT A VERY SUBSTANTIAL LOSS IN THAT
6 RESPECT?
7 "A. YES.
8 "Q. MILLIONS OF DOLLARS?
9 "A. YES.
10 "Q. DO YOU HAVE AN IMPRESSION OF HOW MANY
11 MILLIONS OF DOLLARS IT WAS LOSING EACH YEAR?
12 "A. CURRENTLY LOSING?
13 "Q. YES.
14 "A. I HAVE AN IMPRESSION THAT IT WAS ABOUT
15 25 OR $20 MILLION, SOMEPLACE IN THAT AREA, THAT
16 THEY WERE LOSING A YEAR."
17 NOW, YOU WERE ASKED THOSE QUESTIONS AND YOU GAVE
18 THOSE ANSWERS; DID YOU NOT, SIR?
19 A. YES, I DID.
20 Q. NOW, GOING BACK TO THE MEETING, THERE WAS DISCUSSION AT
21 THE MARCH 25TH MEETING AS WELL ABOUT WHETHER THE EXAMINER WAS
22 OPERATING AT A LOSS. DO YOU REMEMBER THAT?
23 A. YES.
24 Q. AND EVERYBODY AT THAT MEETING WAS EMPHATIC THAT IT WAS
25 OPERATING AT A LOSS; WERE THEY NOT?
1034
OSBORN - CROSS / ROSCH
1 A. I BELIEVE SO, YES.
2 Q. AND YOUR OWN VIEW WAS THAT THE EXAMINER WAS OPERATING AT A
3 LOSS OF GREATER THAN $20 MILLION A YEAR.
4 A. THAT WAS MY IMPRESSION.
5 Q. AND THAT WAS THE VIEW OF THE OTHER PEOPLE THERE AS WELL;
6 WASN'T IT?
7 A. I DON'T THINK I CAN REALLY ANSWER FOR THOSE INDIVIDUALS.
8 Q. THERE WAS DISCUSSION AT THE MARCH 25TH MEETING ABOUT
9 WHETHER THE EXAMINER'S LOSSES WERE BEING SUBSIDIZED BY THE
10 CHRONICLE; WAS THERE NOT?
11 A. YES.
12 Q. AND YOUR OWN VIEW WAS THAT THE CHRONICLE WAS SUBSIDIZING
13 THE EXAMINER'S LOSSES WITH DOLLARS AND THAT IT WAS CARRYING THE
14 EXAMINER ALONG; WASN'T THAT YOUR VIEW?
15 A. THAT'S CORRECT.
16 Q. AND THAT WAS THE VIEW OF THE OTHER PEOPLE WHO WERE PRESENT
17 AS WELL; WAS IT NOT?
18 A. YES.
19 Q. AND IT WAS YOUR IMPRESSION AND THE IMPRESSION OF THE OTHER
20 EXPERTS PRESENT THAT THAT SUBSIDY WAS AT LEAST $20 MILLION PER
21 YEAR; IS THAT NOT CORRECT?
22 A. I REALLY CAN'T SPEAK FOR THE OTHERS.
23 Q. CAN YOU PLEASE TAKE A LOOK AT PAGE 51 OF YOUR DEPOSITION?
24 A. (WITNESS EXAMINES DOCUMENT.)
25 Q. IF I COULD START WITH LINE 9 AND GO THROUGH LINE 19.
1035
OSBORN - CROSS / ROSCH
1 A. UH-HUH.
2 Q. LINE 9:
3 "Q. SO WAS IT YOUR VIEW THAT THE CHRONICLE
4 WAS SUBSIDIZING THE EXAMINER?
5 "A. YES.
6 "Q. WAS THAT THE VIEW OF OTHER PEOPLE WHO
7 WERE PRESENT AS WELL?
8 "A. I BELIEVE SO.
9 "Q. WAS IT YOUR IMPRESSION AND TO YOUR
10 KNOWLEDGE THE IMPRESSION OF THE PEOPLE THAT THAT
11 SUBSIDY WAS IN THE NATURE OF ABOUT $20 MILLION A
12 YEAR?
13 "A. YES."
14 WERE THOSE QUESTIONS ASKED AND WERE THOSE YOUR
15 ANSWERS?
16 A. THAT WAS MY ANSWER TO YOU, YES.
17 Q. THANK YOU.
18 NOW, THERE WAS A CONVERSATION OF THE EXPERTS AT THAT
19 MEETING THAT IT COULD TAKE AT LEAST FIVE YEARS BEFORE
20 PROFITABILITY COULD EVEN BE HOPED FOR; IS THAT NOT CORRECT?
21 A. YES.
22 Q. AND THERE WAS DISCUSSION AT THE MEETING ABOUT THE AMOUNT
23 OF THE ANNUAL LOSSES THAT THE EXAMINER ON A STAND-ALONE BASIS
24 WAS LIKELY TO SUSTAIN FOR EACH OF THOSE FIVE YEARS; WAS THERE
25 NOT?
1036
OSBORN - CROSS / ROSCH
1 A. REPEAT THE QUESTION. I --
2 Q. YEAH. I'M GOING A LITTLE FAST.
3 A. THAT'S OKAY.
4 Q. I'LL SLOW DOWN A BIT.
5 THERE WAS DISCUSSION AT THAT MEETING ABOUT THE
6 AMOUNT OF THE ANNUAL LOSSES THAT THE EXAMINER WAS LIKELY TO
7 SUSTAIN FOR EACH OF THOSE FIVE YEARS.
8 A. WHAT I DON'T UNDERSTAND IS IF THE EXAMINER CONTINUED ON AS
9 IT WAS OPERATING.
10 Q. OUTSIDE THE JOA WHAT WOULD THE AMOUNT OF THE ANNUAL LOSSES
11 BE IN EACH OF THE FIVE YEARS AFTER IT OPERATED OUTSIDE THE JOA?
12 A. OUTSIDE OF THE JOA --
13 Q. YES.
14 A. -- IT WAS $50,000 (SIC).
15 Q. $50 MILLION?
16 A. MILLION DOLLARS, YES.
17 Q. AND THAT WAS FOR EACH OF THOSE FIVE YEARS, 50 MILLION A
18 YEAR?
19 A. YES, SIR.
20 Q. AND THAT WAS THE CONSENSUS OF THE EXPERTS AT THAT MEETING;
21 WAS IT NOT?
22 A. IT WAS.
23 Q. AND THE CONSENSUS WAS THAT THE SUBSIDY OF $50 MILLION FOR
24 EACH OF THOSE YEARS WOULD BE NEEDED IN ORDER TO COVER THE
25 SHORTFALL IN EACH OF THOSE YEARS; IS THAT NOT CORRECT?
1037
OSBORN - CROSS / ROSCH
1 A. CORRECT. CORRECT.
2 Q. SO TO PUT IT DIFFERENTLY, THAT THE SUBSIDY WOULD BE NEEDED
3 FOR THE EXAMINER JUST TO BREAK EVEN IN EACH OF THOSE FIVE
4 YEARS; IS THAT CORRECT?
5 A. I BELIEVE THAT'S CORRECT, YES.
6 Q. OKAY. NOW, THE SUBSIDY THAT YOU PROJECTED FOR THE
7 EXAMINER WAS FOR AN EXAMINER THAT WOULD BE ESSENTIALLY THE SAME
8 AS THE ONE BEING PUBLISHED TODAY; IS THAT NOT CORRECT?
9 A. I THINK SO, YEAH.
10 Q. OKAY. AND THAT 50 MILLION-DOLLAR PER YEAR SUBSIDY IN YOUR
11 JUDGMENT WAS ONE THAT WOULD BE REQUIRED REGARDLESS OF WHO
12 OPERATED THE EXAMINER, BE IT KNIGHT-RIDDER, THE NEW YORK TIMES
13 OR HEARST; ISN'T THAT CORRECT?
14 A. I DON'T THINK IT CAME UP IN THAT CONTEXT AT ALL.
15 Q. CAN YOU TAKE A LOOK, PLEASE, AT PAGE 120 OF YOUR
16 DEPOSITION?
17 A. (WITNESS EXAMINES DOCUMENT.)
18 THE COURT: I BELIEVE MR. ROSCH WILL ALSO REFER YOU
19 TO PAGE 121.
20 MR. ROSCH: YES, I'M GOING TO. YOUR HONOR, I WILL
21 BE READING FROM PAGE 19 (SIC) THROUGH PAGE 121, LINE 9.
22 THE COURT: PAGE 119, LINE?
23 MR. ROSCH: 119. I'M SORRY. I'M SORRY. I
24 REALLY --
25 THE COURT: LINE 19, 120?
1038
OSBORN - CROSS / ROSCH
1 MR. ROSCH: YES.
2 THE COURT: ALL RIGHT.
3 MR. ROSCH: I'M SORRY.
4 Q. AND NOW BEFORE WE DO THAT, I'M QUOTING FROM YOUR
5 AFFIDAVIT, PARAGRAPH 4 IN WHICH YOU MENTION THIS
6 50 MILLION-DOLLAR A YEAR SUBSIDY HERE.
7 A. ALL RIGHT.
8 Q. OKAY.
9 "Q. YOU SAY HERE THAT, 'IN ORDER TO PRODUCE
10 A VIABLE COMPETITIVE PAPER, ANY BUYER OF THE
11 EXAMINER WOULD NEED A SUBSIDY.' AND THEN YOU GO
12 ON TO DESCRIBE WHAT THAT SUBSIDY WOULD BE. DO
13 YOU SEE THAT?
14 "A. UH-HUH.
15 "Q. I TAKE IT, THEN, THAT YOU'RE EXPRESSING
16 AN OPINION THAT THIS APPLIES NOT JUST TO THE
17 FANGS; CORRECT?
18 "A. NOT JUST THE FANGS, YES.
19 "Q. IT WOULD APPLY TO NIGHT RIDER," IS WHAT
20 IT SAYS HERE, BUT
21 I BELIEVE YOU CORRECTED THE TRANSCRIPT TO MAKE IT
22 KNIGHT-RIDDER; RIGHT?
23 A. RIGHT.
24 Q. OKAY.
25 "A. YES.
1039
OSBORN - CROSS / ROSCH
1 "Q. TO THE NEW YORK TIMES?
2 "A. CORRECT. YES.
3 "Q. INDEED TO HEARST?
4 "A. I BELIEVE SO, YES."
5 NOW, WERE THOSE QUESTIONS ASKED AND DID YOU GIVE
6 THOSE ANSWERS AT YOUR DEPOSITION?
7 A. I'M SURE I DID.
8 Q. NOW, YOU'VE WORKED ON AT LEAST ONE NEWSPAPER THAT WAS
9 SUSTAINING A LOSS IN THE NEIGHBORHOOD OF 20 MILLION A YEAR;
10 HAVEN'T YOU?
11 A. YES.
12 Q. AND THAT WAS THE --
13 A. MAY I CORRECT THAT?
14 Q. -- CHICAGO --
15 A. I CONSULTED WITH IT.
16 Q. I WOULDN'T WANT TO LINK YOU WITH IT.
17 A. I WAS NOT AN EMPLOYEE.
18 Q. YOU'RE FAMILIAR WITH IT; RIGHT?
19 A. I'M FAMILIAR WITH IT, YES.
20 Q. AND THAT'S THE CHICAGO HERALD AMERICA OR OTHERWISE KNOWN
21 AS THE CHICAGO TODAY NEWSPAPER?
22 A. YES, SIR.
23 Q. OKAY. AND WHAT HAPPENED TO IT? IT FOLDED; DIDN'T IT?
24 A. IT FOLDED, YES, SIR.
25 Q. OKAY. NOW, JUST A COUPLE MORE QUESTIONS.
1040
OSBORN - CROSS / HOCKETT
1 A. THAT'S OKAY.
2 Q. THERE WAS NO DESCRIPTION OR ACCOUNT AT THE MARCH 25TH
3 MEETING, WAS THERE, OF THE KIND OF NEWSPAPER THAT THE FANGS
4 WERE GOING TO BE PUTTING OUT?
5 A. NO.
6 Q. BECAUSE, IN FACT, YOU HAD NO INFORMATION ABOUT THE FANGS'
7 PARTICULAR BUSINESS PLAN; ISN'T THAT CORRECT?
8 A. I DID NOT.
9 MR. ROSCH: THANK YOU VERY MUCH.
10 THANK YOU, YOUR HONOR.
11 THE COURT: YES, MR. HOCKETT.
12 CROSS-EXAMINATION
13 BY MR. HOCKETT:
14 Q. GOOD AFTERNOON, MR. OSBORN.
15 A. GOOD DAY, SIR.
16 Q. MY NAME IS CHRISTOPHER HOCKETT AND I REPRESENT EXIN LLC,
17 THE INTERVENOR.
18 IN YOUR 44-YEAR CAREER, YOU HAVE NEVER WORKED IN THE
19 SAN FRANCISCO MARKET; IS THAT CORRECT?
20 A. I WAS NOT EMPLOYED BUT I DID ADVISE THE PALO ALTO
21 PENINSULA TIMES, WHICH WAS OWNED BY THE TRIBUNE.
22 Q. THE PALO ALTO TIMES AND THE PENINSULA TIMES TRIBUNE WERE
23 OWNED BY THE CHICAGO TRIBUNE COMPANY?
24 A. YES, SIR.
25 Q. AND YOU HAD SOME MANAGERIAL RESPONSIBILITY FOR THAT PAPER?
1041
OSBORN - CROSS / HOCKETT
1 A. TO OVERSEE FROM A DISTANCE AND ADVISE.
2 Q. OTHER THAN THAT, YOU HAD NO EXPERIENCE WITH BAY AREA
3 NEWSPAPERS; CORRECT?
4 A. THAT'S CORRECT.
5 Q. NOW, THE PALO ALTO TIMES, PENINSULA TIMES TRIBUNE, THAT
6 NEWSPAPER ULTIMATELY FAILED AND WAS CLOSED; CORRECT?
7 A. YES.
8 Q. AND ARE YOU AWARE THAT THE TRIBUNE COMPANY AT THE TIME IT
9 CLOSED THAT PAPER SOLD THE OTHER PAPERS IN THAT SAME GROUP TO
10 MR. TED FANG?
11 A. NO.
12 Q. ARE YOU AWARE THAT HE OPERATES THOSE PAPERS TODAY AS PART
13 OF HIS GROUP?
14 A. NO, I WAS NOT AWARE THAT HE HAS THOSE.
15 Q. I WANT TO TALK TO YOU ABOUT YOUR DECLARATION, WHICH HAS
16 BEEN MARKED AND IS IN EVIDENCE AS PLAINTIFF'S EXHIBIT 58.
17 I BELIEVE YOU TESTIFIED THAT YOU DICTATED NOTES TO
18 MR. HILBERT, ONE OF MR. REILLY'S LAWYERS, AND THAT HE TYPED UP
19 THE DECLARATION.
20 A. YES.
21 Q. AND THAT YOU VERIFIED THAT THE DECLARATION IS WHAT YOU HAD
22 SAID TO MR. HILBERT AND YOU SIGNED IT. DO YOU RECALL SAYING
23 THAT?
24 A. YES.
25 Q. AND YOUR DECLARATION INCLUDES THE STATEMENTS AT THE
1042
OSBORN - CROSS / HOCKETT
1 BEGINNING OF YOUR PARAGRAPH 4 THAT ARE THE SAME AS THE
2 STATEMENTS WORD FOR WORD IN THE DECLARATIONS OF PAGE, CLANCY,
3 FLOOD AND INGRAM. ARE YOU AWARE OF THAT?
4 A. YES.
5 Q. AND YOU TESTIFIED THAT THOSE STATEMENTS ARE IN YOUR OWN
6 WORDS; IS THAT CORRECT, SIR?
7 A. I DON'T THINK THAT'S WHAT I SAID.
8 Q. THOSE ARE THE LAWYER'S WORDS; ARE THEY NOT, SIR?
9 A. THAT WAS THE CONCLUSION OF ALL OF US AS A GROUP, THE
10 PARAGRAPH 4. SO....
11 Q. EVERYBODY CAME TO THE SAME CONCLUSION AND EVERYBODY
12 INDEPENDENTLY DECIDED TO EXPRESS THAT CONCLUSION IN EXACTLY THE
13 SAME WORDS?
14 A. COLLECTIVELY, YES.
15 Q. NOW, BEFORE THE MARCH 25TH MEETING WITH ALL THE OTHER
16 EXPERTS FOR MR. REILLY, YOU WERE ASSUMING A PHASE-IN PERIOD FOR
17 A STAND-ALONE EXAMINER UNDER NEW OWNERSHIP OF THREE YEARS; WERE
18 YOU NOT?
19 A. NOT DEFINITELY THREE YEARS. IT COULD BE THREE TO FIVE
20 YEARS.
21 Q. I BELIEVE AT YOUR DEPOSITION YOU TESTIFIED TO TWO TO THREE
22 YEARS. IF YOU WOULD TURN TO PAGE 82, PLEASE.
23 A. (WITNESS EXAMINES DOCUMENT.)
24 Q. AT THE BOTTOM READING WITH -- STARTING AT LINE 11, I'LL
25 READ THROUGH PAGE 83 AT LINE 3.
1043
OSBORN - CROSS / HOCKETT
1 MR. SHULMAN: I WOULD LIKE COUNSEL TO START AT LINE
2 5 ON PAGE 82 TO BE FAIR TO THE WITNESS.
3 MR. HOCKETT: OKAY.
4 "Q. SO ANYWHERE FROM TWO TO THREE TO FIVE
5 YEARS IS THE ASSUMPTION YOU USED IN YOUR
6 CALCULATION?
7 "A. I THINK SO."
8 THE WITNESS: I'M -- I DON'T KNOW WHERE YOU ARE.
9 BY MR. HOCKETT:
10 Q. LINE 5 ON PAGE 82.
11 A. OH, 82. I'M SORRY. (WITNESS EXAMINES DOCUMENT.)
12 Q. "Q. SO ANYWHERE FROM TWO TO THREE TO
13 FIVE YEARS IS THE ASSUMPTION YOU USED IN YOUR
14 CALCULATIONS?
15 "A. I THINK SO.
16 "Q. I'M NOT TRYING TO MISLEAD YOU.
17 "A. I'M TRYING TO THINK AND ANSWER.
18 "Q. TO BE MORE SPECIFIC, WHEN YOU SAID
19 EARLIER THAT THE FIGURE YOU HAD TAKEN INTO THE
20 MEETING FOR EXPENSES FOR CIRCULATION WAS
21 $7,695,000, DID YOU MEAN THAT THAT WOULD BE THE
22 FIRST YEAR OF OPERATION OR WOULD THAT BE THE
23 YEAR OF OPERATION AFTER THE PHASE-IN PERIOD THAT
24 YOU'VE JUST DESCRIBED?
25 "A. THE ONLY WAY I CAN ANSWER IS WHAT I
1044
OSBORN - CROSS / HOCKETT
1 THOUGHT IT SHOULD BE.
2 "Q. WHAT DID YOU THINK IT SHOULD BE?
3 "A. BEFORE I WENT TO THE MEETING OR AFTER
4 THE MEETING?
5 "Q. WELL, LET'S TALK FIRST ABOUT BEFORE.
6 WHAT DID YOU THINK IT SHOULD BE?
7 "A. LET'S GO BACK. WHAT ARE WE TALKING
8 ABOUT, WHAT THE PERIOD OF TIME SHOULD BE?
9 "Q. YES.
10 "A. I WOULD THINK AT LEAST THREE YEARS."
11 DO YOU SEE THAT?
12 A. YES.
13 Q. WERE YOU ASKED THOSE QUESTIONS AND DID YOU GIVE THOSE
14 ANSWERS?
15 A. YES.
16 Q. SO BEFORE THE MEETING WITH ALL THE OTHER EXPERTS, YOU WERE
17 ASSUMING A PHASE-IN PERIOD OF AT LEAST THREE YEARS; CORRECT?
18 A. YES.
19 Q. AND AFTER THE MEETING, YOU AND EVERYBODY ELSE WHO ATTENDED
20 THAT MEETING SAID FIVE YEARS; CORRECT?
21 A. YES.
22 Q. THAT WAS THE CONSENSUS; CORRECT?
23 A. YES.
24 Q. AND YOU WENT ALONG WITH IT?
25 A. ABSOLUTELY.
1045
OSBORN - CROSS / HOCKETT
1 Q. NOW, I WANT TO ASK YOU ABOUT SOMETHING ELSE IN YOUR
2 DECLARATION ALSO IN PARAGRAPH 4. YOU TESTIFY THAT THERE ARE
3 NUMEROUS LOGISTICAL CONCERNS WHICH MUST BE OVERCOME BEFORE
4 PAN-ASIA WILL BE ABLE TO PUBLISH A VIABLE COMPETITIVE MORNING
5 NEWSPAPER, INCLUDING THE ESTABLISHMENT OF PRESS FACILITIES
6 LOCATED SUFFICIENTLY CLOSE TO THE EDITORIAL OFFICES TO MINIMIZE
7 THE TIME GAP BETWEEN THE END OF THE NEWS DAY AND THE
8 DISSEMINATION OF THE PRINTED NEWSPAPERS TO DISTRIBUTORS IN
9 ORDER TO COMPLETE DELIVERY TO SINGLE-COPY LOCATIONS BY
10 5:30 A.M. AND TO HOME DELIVERY SUBSCRIBERS BY 6:00 A.M. DO YOU
11 SEE THAT?
12 A. UH-HUH.
13 Q. WHY IS THAT IMPORTANT, SIR?
14 A. THE DEADLINES OR THE PRINTING FACILITY OR --
15 Q. THE PHYSICAL PROXIMITY OF THE PRINTING FACILITIES AND THE
16 EDITORIAL OFFICES.
17 A. IN ORDER TO PRODUCE A NEWSPAPER THAT HAS THE LATEST
18 EDITORIAL CONTENT, WHICH IS WHAT READERS ARE BUYING THE
19 NEWSPAPER FOR BESIDES ADVERTISEMENT, YOU WANT TO CLOSE THE
20 EDITORIAL DEADLINE AS LATE AS YOU CAN, AND YOU WANT TO DELIVER
21 THAT PAPER PRIOR TO THEIR GOING TO WORK.
22 AND SO YOU HAVE A THREE OR FOUR -- IF THE PRESS
23 CLOSES AT 2:00 O'CLOCK, YOU ONLY HAVE FOUR HOURS TO GET 65,000
24 OR A HUNDRED THOUSAND NEWSPAPERS OUT AND DISTRIBUTED TO THE
25 READERS.
1046
OSBORN - CROSS / HOCKETT
1 Q. SO IF I UNDERSTAND YOUR DECLARATION, YOU SAY THAT THE
2 EDITORIAL OFFICES OF THE NEWSPAPER NEED TO BE PHYSICALLY CLOSE
3 TO THE PRINTING FACILITIES IN ORDER TO MAKE THIS HAPPEN;
4 CORRECT?
5 A. IDEALLY, YES.
6 Q. OKAY. AND LET ME ASK YOU, SIR, THE EDITORIAL OFFICES OF
7 THE WALL STREET JOURNAL ARE IN NEW YORK; CORRECT? AND ARE YOU
8 AWARE THAT THE WALL STREET JOURNAL PAPERS THAT WE READ HERE ON
9 THE WEST COAST ARE PRINTED DOWN AT PALO ALTO, CALIFORNIA?
10 A. YES.
11 Q. THAT'S ABOUT 3,000 MILES AWAY; ISN'T IT?
12 A. YOU BET.
13 Q. DO YOU KNOW ANYTHING ABOUT THE PHYSICAL DISTANCE BETWEEN
14 EXIN'S EDITORIAL OFFICES AND THE PLACES WHERE IT WILL PRINT THE
15 EXAMINER?
16 A. NO, SIR.
17 Q. NOW, YOU'VE DESCRIBED IN RESPONSE TO MR. ROSCH'S QUESTIONS
18 THE MEETING OF THE EXPERTS ON MARCH 25TH AND WHO WAS THERE. IN
19 ADDITION TO THE EXPERTS, I GATHER MR. ALIOTO AND SOME OF THE
20 OTHER LAWYERS FOR MR. REILLY WERE THERE, CORRECT?
21 A. YES.
22 Q. AND MR. REILLY HIMSELF WAS THERE; CORRECT?
23 A. IN AND OUT.
24 Q. NOW, COMING TO THAT MEETING YOU BELIEVED THAT YOUR
25 ASSIGNMENT WAS TO ASSIST MR. REILLY IN HIS EFFORTS TO BUY THE
1047
OSBORN - CROSS / HOCKETT
1 EXAMINER; IS THAT CORRECT?
2 A. I REALLY WAS NOT QUITE SURE, BUT I WOULD THINK THAT WAS
3 WHY I WAS GOING THERE.
4 Q. YOU THOUGHT THAT'S WHY YOU WERE GOING THERE?
5 A. I THOUGHT SO.
6 Q. AND YOUR UNDERSTANDING OF YOUR ASSIGNMENT COMES FROM
7 CONVERSATIONS THAT YOU HAD WITH ONE OF MR. REILLY'S ADVISORS,
8 MR. BARLETTA; CORRECT?
9 A. YES.
10 Q. AND AT THE MEETING MR. REILLY TOLD THE GROUP THAT, AND YOU
11 SAID THAT IN YOUR DEPOSITION, HE REALLY HAD A CONCERN
12 PERSONALLY ABOUT WHEN HE HAD GIVEN AN OFFER AND IT HAD NOT BEEN
13 ACCEPTED AND THEN LATER FANG'S OFFER HAD BEEN ACCEPTED WITH
14 MUCH BETTER TERMS AND HE NEVER HAD THE CHANCE TO GO BACK. DO
15 YOU RECALL THAT?
16 A. YES.
17 Q. HE WAS DISAPPOINTED THAT THE DEAL HAD NOT GONE HIS WAY;
18 CORRECT?
19 A. VERY.
20 Q. AND HE INDICATED THAT HE WOULD LIKE TO HAVE THE EXAMINER;
21 CORRECT?
22 A. YES.
23 Q. TO YOUR KNOWLEDGE DOES MR. REILLY HAVE ANY NEWSPAPER
24 EXPERIENCE AT ALL?
25 A. TO MY KNOWLEDGE, NO.
1048
OSBORN - CROSS / HOCKETT
1 Q. I THINK YOU'VE TESTIFIED THAT YOUR CAREER HAS INVOLVED A
2 CIRCULATION FUNCTION OF NEWSPAPERS; IS THAT CORRECT?
3 A. YES, SIR.
4 Q. AND YOU HAVE HAD NO DIRECT RESPONSIBILITY FOR OTHER
5 FUNCTIONS OF THE NEWSPAPER, SUCH AS EDITORIAL, ADVERTISING,
6 PRODUCTION, FINANCE, HUMAN RELATIONS, PERSONNEL, DATA
7 PROCESSING, MARKETING, SALES OR PROMOTION OF THE NEWSPAPER AS A
8 WHOLE, THAT KIND OF THING?
9 A. INVOLVED VERY DIRECTLY BUT NOT IN CHARGE OF.
10 Q. YOU'VE NOT BEEN IN CHARGE OF THOSE FUNCTIONS?
11 A. BUT WORKED VERY CLOSELY WITH THEM.
12 Q. AND YOU'VE HAD NO RESPONSIBILITY FOR PREPARING BUDGETS FOR
13 ANY OF THOSE OTHER FUNCTIONS?
14 A. THAT'S CORRECT.
15 Q. NO RESPONSIBILITY FOR PREPARING PROFIT AND LOSS STATEMENTS
16 FOR THOSE OTHER FUNCTIONS?
17 A. CORRECT.
18 Q. WHEN YOU MADE YOUR CALCULATIONS TO COME UP WITH THE
19 CIRCULATION REVENUE AND EXPENSE FIGURES THAT YOU JOTTED DOWN,
20 YOU MADE SOME ASSUMPTIONS; CORRECT?
21 A. YES, I DID.
22 Q. OKAY. AND YOUR ASSUMPTION WAS THAT MR. FANG, IF HE WERE
23 SMART, WOULD NOT CHANGE THE EXAMINER SIGNIFICANTLY; CORRECT?
24 A. CORRECT.
25 Q. BECAUSE CHANGES --
1049
OSBORN - CROSS / HOCKETT
1 A. ARE YOU READING FROM THE DEPOSITION?
2 Q. I'M BASING THIS ON YOUR DEPOSITION, YES, SIR.
3 A. YEAH, OKAY. I JUST WONDERED WHERE YOU WERE.
4 Q. YOU FELT THAT WAY BECAUSE CHANGES IN THE NEWSPAPER YOU
5 BELIEVE WOULD TURN OFF READERS?
6 A. YES.
7 Q. AND YOU ALSO SAID, IN RESPONSE TO MR. ROSCH'S QUESTION,
8 THAT YOU HAD UNDERSTOOD THE EXAMINER HAD BEEN GOING DOWNHILL
9 FOR YEARS?
10 A. YES, SIR.
11 Q. AND THAT IF OPERATED THE SAME WAY IT IS NOW BUT OUTSIDE
12 THE JOA, IT WOULD LOSE 20 TO $25 MILLION A YEAR; CORRECT?
13 A. YES.
14 Q. BUT YOUR THOUGHT WAS THAT IF MR. FANG WERE SMART, HE'D
15 OPERATE THE NEWSPAPER THE SAME WAY WITHOUT ANY SIGNIFICANT
16 CHANGES; CORRECT?
17 A. INITIALLY IS WHAT I MEANT.
18 Q. AND YOUR CALCULATIONS ASSUMED THAT THERE WOULD BE NO
19 SIGNIFICANT CHANGES IN THE NEWSPAPER; CORRECT?
20 A. INITIALLY, NO.
21 Q. DID YOU CONSIDER NONCIRCULATION REVENUES AT ALL IN YOUR
22 CALCULATIONS?
23 A. NO, SIR.
24 Q. DID YOU CONSIDER ANY ADVERTISING REVENUES?
25 A. NO, SIR.
1050
OSBORN - CROSS / HOCKETT
1 Q. AND IS IT CORRECT THAT ADVERTISING REVENUES ARE THE
2 LARGEST SOURCE OF A NEWSPAPER'S INCOME GENERALLY?
3 A. YES, SIR.
4 Q. NOW, BEFORE YOUR MEETING WITH THE OTHER EXPERTS ON MARCH
5 25TH, I BELIEVE YOU CALCULATED EXPENSES OF CIRCULATION
6 SOMEWHERE BETWEEN 8 MILLION TO 12 MILLION TO $15 MILLION. DO
7 YOU RECALL THAT?
8 A. YES.
9 Q. AND YOU CALCULATED REVENUES OF 18.7 MILLION. DO YOU
10 REMEMBER THAT?
11 A. I COULDN'T FIGURE OUT -- THESE ARE VERY ROUGH NOTES THAT
12 WE WERE LOOKING AT, AND I DID THREE OR FOUR OR FIVE PAGES OF
13 JUST TRYING TO COLLECT THOUGHTS BECAUSE I HADN'T DONE THIS IN
14 THE LAST FOUR YEARS.
15 SO I WAS PLAYING GAMES NOT JUST WITH THE EXAMINER
16 BUT I WAS PLAYING -- "PLAYING GAMES" IS NOT THE WORD, THIS IS
17 VERY SERIOUS BUSINESS -- TO LOOK AT OTHER PAPERS WHERE I HAD
18 WORKED AND WHAT WAS OUR EXPENSES FOR A PAPER OF A HUNDRED
19 THOUSAND OR WHAT WAS THE REVENUE OF THE OTHER PAPERS.
20 Q. BEFORE THE MEETING ON MARCH 25TH, YOU HAD MADE NOTES
21 INDICATING THAT SIX-DAY REVENUES FOR THE, YOU CALL IT THE SAN
22 FRANCISCO HERALD EXAMINER --
23 A. YEAH.
24 Q. I ASSUME YOU THE MEAN THE EXAMINER.
25 A. YES.
1051
OSBORN - CROSS / HOCKETT
1 Q. -- ARE $18.7 MILLION. DO YOU RECALL DOING THAT?
2 A. THE REVENUE DID YOU SAY?
3 Q. YES.
4 A. NO, I DO NOT. I DON'T RECALL THAT, BUT --
5 MR. HOCKETT: MAY I APPROACH THE WITNESS, YOUR
6 HONOR?
7 THE COURT: YES, YOU MAY.
8 BY MR. HOCKETT:
9 Q. I'M SHOWING YOU A DOCUMENT BATES NUMBERED R284 AND ASK YOU
10 IF THAT REFRESHES YOUR RECOLLECTION.
11 A. (WITNESS EXAMINES DOCUMENT.) THE NUMBER IN THAT, WAS THAT
12 A HUNDRED THOUSAND?
13 Q. NO. WHERE IT SAYS, "SIX-DAY REVENUE EQUAL 18,720,000."
14 A. YES, BUT THE CIRCULATION THAT'S INVOLVED THERE, YOU CAN'T
15 TELL WHAT THAT WAS.
16 Q. DO YOU RECALL THAT PRIOR TO YOUR MEETING WITH ALL THE
17 OTHER EXPERTS ON MARCH 25TH, THAT WHATEVER THE NUMBERS, YOU HAD
18 CALCULATED A NET POSITIVE CIRCULATION REVENUE?
19 A. NO. AND NEVER COULD ESTABLISH IN PREVIOUS TESTIMONY WHAT
20 I WAS DOING WITH THAT NUMBER OR WHERE IT CAME FROM.
21 Q. YOU CAN'T RECALL WHERE THAT NUMBER CAME FROM OR WHERE THE
22 COST NUMBERS CAME FROM?
23 A. AND THESE WERE JUST WHEN I WAS DOING THE VERY PRELIMINARY
24 WITH NO OTHER INFORMATION IN FRONT OF ME.
25 Q. 18 MILLION IS MORE THAN 12 TO 15 MILLION; IS IT NOT, SIR?
1052
OSBORN - CROSS / HOCKETT
1 A. YES, SIR.
2 Q. SO IF 12 TO $15 MILLION EXPENSES MEANS EXPENSES, YOU HAD
3 CALCULATED A NECESSARY POSITIVE CIRCULATION REVENUE BEFORE THE
4 MEETING ON MARCH 25TH; CORRECT?
5 A. I NEVER REALLY GOT THAT FAR.
6 Q. BUT AFTER THE MEETING WHEN YOU LEARNED THAT MR. REILLY HAD
7 NOT WON THE HEARST CONTRACT, YOU CAME UP WITH REVISED
8 ESTIMATES, THE ONES THAT YOU TESTIFIED TO WITH MR. SHULMAN,
9 SHOWING A CIRCULATION LOSS OF $5 MILLION OR SO; CORRECT?
10 A. AFTER THE MEETING WAS THE FIRST TIME I HAD REALLY GOOD
11 INFORMATION BASED ON THE VERONIS REPORT AND DAVE BEIHOFF AND
12 INFORMATION THAT WEAVER HAD IN HIS REPORTS.
13 Q. PRIOR TO BEING RETAINED BY MR. REILLY, YOU HAD NO
14 FAMILIARITY WHATSOEVER WITH MR. FANG OR HIS NEWSPAPERS;
15 CORRECT?
16 A. CORRECT.
17 Q. AND YOU HAVE NO PERSONAL KNOWLEDGE OF WHAT PRINTING
18 PRESSES ARE AVAILABLE TO MR. FANG?
19 A. NO PERSONAL KNOWLEDGE, NO.
20 Q. YOU'VE NEVER SEEN HIS PRESSES?
21 A. NO, SIR.
22 Q. AND YOU HAVE NO INFORMATION ABOUT WHAT KIND OF PAPER EXIN
23 INTENDS TO PUBLISH?
24 A. THAT'S CORRECT.
25 Q. OR WHAT ITS GEOGRAPHIC SCOPE OF CIRCULATION WOULD BE?
1053
OSBORN - REDIRECT / SHULMAN
1 A. THAT'S CORRECT.
2 MR. HOCKETT: I HAVE NO FURTHER QUESTIONS.
3 THE COURT: MR. HALLING?
4 MR. HALLING: NO QUESTIONS, YOUR HONOR.
5 THE COURT: VERY WELL. REDIRECT, MR. SHULMAN?
6 MR. SHULMAN: YES, YOUR HONOR.
7 REDIRECT EXAMINATION
8 BY MR. SHULMAN:
9 Q. YOUR DECLARATION, PARAGRAPH 4 AGAIN, COUNSEL, ON THE
10 SECOND PAGE, EXHIBIT 58, COUNSEL -- WHERE YOU SAY:
11 "THERE ARE NUMEROUS LOGISTICAL CONCERNS
12 WHICH MUST BE OVERCOME BEFORE PAN-ASIA WILL BE
13 ABLE TO PUBLISH A VIABLE COMPETITIVE MORNING
14 NEWSPAPER, INCLUDING THE ESTABLISHMENT OF PRESS
15 FACILITIES LOCATED SUFFICIENTLY CLOSE TO THE
16 EDITORIAL OFFICES TO MINIMIZE THE TIME GAP
17 BETWEEN THE END OF THE NEWS DAY AND THE
18 DISSEMINATION OF THE PRINTED NEWSPAPERS TO THE
19 DISTRIBUTORS IN ORDER TO COMPLETE DELIVERY TO
20 SINGLE-COPY LOCATIONS BY 5:30 A.M. AND TO HOME
21 DELIVERY SUBSCRIBERS BY 6:00 A.M."
22 DO YOU SEE THAT?
23 A. YEP.
24 Q. NOW, COUNSEL ASKED YOU ABOUT WHETHER IT WAS SIGNIFICANT TO
25 HAVE THE EDITORIAL FACILITIES NEXT TO THE -- OR CLOSE TO THE
1054
OSBORN - REDIRECT / SHULMAN
1 PRINTING FACILITIES AND USED THE EXAMPLE OF THE WALL STREET
2 JOURNAL.
3 IS IT IMPORTANT TO HAVE THE PRINTING FACILITIES
4 CLOSE TO THE DISTRIBUTORS?
5 A. IF I HAD SAID IT BETTER, MY ANSWER WOULD BE YES TO THE
6 DISTRIBUTORS AS WELL AS TO THE PRINTING PLANT.
7 Q. OKAY. NOW, IF THE WALL STREET JOURNAL PUBLISHED --
8 PRINTED THEIR PAPERS IN NEW YORK INSTEAD OF PALO ALTO, AS A
9 CIRCULATION MANAGER, DO YOU THINK THEY'D HAVE SOME DIFFICULTY
10 GETTING THE PAPERS TO THE CUSTOMERS THE NEXT MORNING?
11 A. YES, SIR.
12 Q. YOU WERE ALSO ASKED SOME QUESTIONS ABOUT THE MEETING THAT
13 YOU HAD, AND I THINK YOU SAID THAT IT WAS BROUGHT OUT THAT
14 BEFORE THE MEETING YOU TOOK SOME -- TRIED SOME ROUGH ESTIMATES
15 OF WHAT THE CIRCULATION EXPENSE WOULD BE FOR THE PAPER;
16 CORRECT?
17 A. YES.
18 Q. AND I THINK THE NUMBERS THAT YOU USED WERE IN THE RANGE OF
19 8 TO $15 MILLION?
20 A. I HONESTLY REALLY DON'T REMEMBER, AND THAT NUMBER, I NEVER
21 REALLY USED IT. IT WAS JUST IN SOME SCRIBBLED NOTES THAT I
22 MADE.
23 Q. ALL RIGHT. AND THEN WHEN YOU GOT TO THE MEETING, THE
24 PAPER THAT WAS DISCUSSED WAS A PAPER THAT WAS LIKE THE
25 EXAMINER?
1055
OSBORN - REDIRECT / SHULMAN
1 A. I BELIEVE SO, YES.
2 Q. WHICH IS A HUNDRED THOUSAND CIRCULATION?
3 A. YES.
4 Q. NOW, LET ME SHOW YOU AGAIN EXHIBIT 165. THIS IS THE WORK
5 YOU DID AFTERWARDS; RIGHT?
6 A. YES.
7 Q. AND THIS WAS -- AND I THINK YOU SAID AT THE MEETING THE
8 CONCLUSION WAS THAT THE PAPER WITH A HUNDRED THOUSAND
9 CIRCULATION WOULD HAVE A DEFICIT OF ABOUT $50 MILLION.
10 A. YES.
11 Q. OKAY. NOW, AFTERWARDS, THE WORK YOU DID YOU LOOKED AT A
12 PAPER WITH A CIRCULATION OF 65,000?
13 A. YES, SIR.
14 Q. AND YOUR CALCULATIONS THERE WERE THAT THE CIRCULATION
15 EXPENSE FOR THAT PAPER WOULD BE ABOUT $14 MILLION; RIGHT?
16 A. YES.
17 Q. FOR 65,000 COPIES?
18 A. YES.
19 Q. AND THE TOTAL COST OF THAT PAPER WOULD BE ABOUT
20 $70 MILLION THEN; RIGHT?
21 A. I BELIEVE SO, YES.
22 Q. AND YOU CALCULATED CIRCULATION REVENUE OF CLOSE TO
23 9 MILLION; RIGHT?
24 A. YES.
25 Q. SO YOU'D NEED ANOTHER $60 MILLION OF ADVERTISING REVENUE
1056
OSBORN - REDIRECT / SHULMAN
1 TO HAVE A CHANCE JUST TO BREAK EVEN ON THAT PAPER?
2 A. CORRECT.
3 MR. SHULMAN: NOTHING FURTHER.
4 THE COURT: VERY WELL. THANK YOU, MR. OSBORN, FOR
5 YOUR TESTIMONY, SIR. YOU MAY STEP DOWN AND YOU'RE EXCUSED.
6 (WITNESS EXCUSED.)
7 THE COURT: DO WE HAVE TIME FOR ANOTHER WITNESS?
8 MR. SHULMAN: CERTAINLY. WE HAVE TIME TO START ONE.
9 THE COURT: WELL --
10 MR. SHULMAN: SURE, I'M READY TO GO, YOUR HONOR.
11 THE COURT: ALL RIGHT. DO YOU THINK WE CAN COMPLETE
12 THE OTHER WITNESS BY ABOUT 5:00 O'CLOCK?
13 MR. SHULMAN: I THINK IT WILL -- HONESTLY I THINK IT
14 WILL BE DIFFICULT BECAUSE THERE IS MORE DETAIL WITH THIS
15 WITNESS THAN THERE WAS WITH THE LAST WITNESS.
16 THE COURT: WHO'S THE NEXT WITNESS?
17 MR. SHULMAN: MR. INGRAM.
18 THE COURT: ALL RIGHT. WELL, PERHAPS IT WOULD BE A
19 GOOD IDEA TO START WITH HIM AND AT LEAST GET SOME PRELIMINARIES
20 OUT OF THE WAY UNLESS ANY COUNSEL HAVE ANY PROBLEM WITH THAT.
21 (NO RESPONSE)
22 THE COURT: FINE.
23 THE CLERK: PLEASE RAISE YOUR RIGHT HAND TO BE
24 SWORN.
25
1057
INGRAM - DIRECT / SHULMAN
1 LAWRENCE L. INGRAM,
2 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
3 TESTIFIED AS FOLLOWS:
4 THE CLERK: THANK YOU. PLEASE BE SEATED.
5 PLEASE STATE YOUR FULL NAME FOR THE RECORD AND SPELL
6 YOUR LAST NAME.
7 THE WITNESS: LAWRENCE L. INGRAM, I-N-G-R-A-M.
8 THE COURT: MR. SHULMAN.
9 MR. SHULMAN: MAY IT PLEASE THE COURT.
10 DIRECT EXAMINATION
11 BY MR. SHULMAN:
12 Q. MR. INGRAM, WOULD YOU PLEASE STATE YOUR ADDRESS FOR THE
13 COURT.
14 A. IT'S 1397 EAST LUPINE AVENUE, SCOTTSDALE, ARIZONA.
15 Q. OKAY. DO YOU WANT TO POUR YOURSELF SOME WATER THERE
16 FIRST?
17 A. IF I MAY.
18 Q. MR. INGRAM, WOULD YOU STATE YOUR AGE, PLEASE?
19 A. I'M 64.
20 Q. AND WHAT IS YOUR EDUCATIONAL BACKGROUND?
21 A. I HAVE A BACHELOR'S OF SCIENCE IN MECHANICAL ENGINEERING
22 FROM THE UNIVERSITY OF COLORADO.
23 Q. OKAY. ARE YOU EMPLOYED AT THIS TIME?
24 A. I'M AN INDEPENDENT CONSULTANT.
25 Q. AND WHAT IS THE BUSINESS IN WHICH YOU CONSULT? WHAT TYPE
1058
INGRAM - DIRECT / SHULMAN
1 OF CONSULTING DO YOU DO?
2 A. IN THE NEWSPAPER INDUSTRY, PRIMARILY PRODUCTION FACILITIES
3 CONSULTING.
4 Q. OKAY.
5 MR. SHULMAN: MAY I APPROACH THE WITNESS, YOUR
6 HONOR?
7 THE COURT: YES, YOU MAY.
8 BY MR. SHULMAN:
9 Q. MR. INGRAM, ONE OF THE EXHIBITS I HAVE PUT IN FRONT OF YOU
10 IS PLAINTIFF'S EXHIBIT 57 IN EVIDENCE, AND I WOULD LIKE TO
11 DIRECT YOUR ATTENTION TO THAT DOCUMENT.
12 PLAINTIFF'S EXHIBIT 57 IS ENTITLED "DECLARATION OF
13 LAWRENCE L. INGRAM IN SUPPORT OF PLAINTIFF'S MOTION FOR
14 PRELIMINARY INJUNCTION."
15 DO YOU RECOGNIZE THIS AS A DECLARATION THAT YOU
16 SIGNED IN CONNECTION WITH THIS LAWSUIT?
17 A. YES, I DO.
18 Q. OKAY. THIS BEGINS:
19 "I AM THE FORMER SENIOR VICE PRESIDENT OF
20 OPERATIONS OF THE SAN FRANCISCO NEWSPAPER
21 PRINTING CO., INC., DBA SAN FRANCISCO NEWSPAPER
22 AGENCY, WHICH PERFORMS ALL COMMERCIAL OPERATIONS
23 OF THE SAN FRANCISCO EXAMINER AND THE SAN
24 FRANCISCO CHRONICLE. I HELD THAT POSITION FOR
25 FOUR YEARS FROM 1989 TO 1993."
1059
INGRAM - DIRECT / SHULMAN
1 IS THAT CORRECT?
2 A. THAT'S CORRECT.
3 Q. OKAY. WHEN DID YOU START IN THE NEWSPAPER BUSINESS?
4 A. I BEGAN IN THE NEWSPAPER BUSINESS IN ABOUT 1963. I WAS --
5 I WAS EMPLOYED BY A SHARING CONSULTING FIRM, MANAGEMENT
6 CONSULTING AS WELL, THAT SPECIALIZED IN NEWSPAPER PRODUCTION
7 AND BUILDING DEVELOPMENT.
8 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1060
INGRAM - DIRECT / SHULMAN
1 BY MR. SHULMAN:
2 Q. AND THIS -- THE FIFTH -- WELL, I WILL READ THE NEXT
3 SENTENCE. IT SAYS:
4 "I HELD THAT INFORMATION FOR FOUR YEARS,
5 FROM 1989 TO 1993. FROM 1985 TO 1989, I WAS THE
6 VICE PRESIDENT OF OPERATIONS OF THE NEWS AGENCY.
7 FROM 1977 TO 1985, I WAS THE VICE PRESIDENT OF
8 OPERATIONS OF THE NEW YORK DAILY NEWS, WHICH
9 OPERATES 20 PRESSES AND HAS A DAILY CIRCULATION
10 OF APPROXIMATELY 1.8 MILLION."
11 WHAT I WOULD LIKE YOU TO DO IS TAKE US BRIEFLY, GIVE
12 US AN OVERVIEW FROM 1963 WHEN YOU WENT INTO THE -- FIRST GOT
13 INTO THE NEWSPAPER BUSINESS, UP TO 1977 WHEN YOU BECAME THE
14 VICE PRESIDENT OF OPERATIONS OF THE -- OF THE NEW YORK DAILY
15 NEWS. TELL US WHAT YOU DID.
16 A. IN -- WHEN I BEGAN WITH -- TECHNICAL SERVICE COMPANY IS
17 THE NAME OF THE COMPANY. IT WAS LOCATED IN DENVER, COLORADO.
18 AND I BEGAN THERE AS AN ENGINEER. TWO YEARS LATER I WAS NAMED
19 DIRECTOR OF PLANNING FOR -- FOR THAT FIRM. AND I STAYED THERE
20 UNTIL -- I BELIEVE IT WAS 1971.
21 DURING THAT PERIOD OF TIME, I -- I WAS RESPONSIBLE
22 FOR A VARIETY OF THINGS, PRIMARILY THE -- THE PLANNING OF NEW
23 NEWSPAPER FACILITIES, SUCH AS THE DETROIT NEWS IS ONE PLANT
24 THAT I -- I BUILT AND DEVELOPED THERE. I PROBABLY HAD AT LEAST
25 A DOZEN OTHERS THAT I BUILT DURING THAT TIME. BUT THE --
1061
INGRAM - DIRECT / SHULMAN
1 Q. WHAT DO YOU MEAN, YOU BUILT?
2 A. I DID THE PLANNING AND OUR ARCHITECTS DID THE DESIGN. IN
3 SOME CASES WE EMPLOYED THE CONTRACTOR AND WORKED WITH THEM AND
4 OTHERS IT WAS PUT OUT BY THE NEWSPAPER AND THEY MANAGED IT.
5 AND WE -- WE ALWAYS DID THE -- THE PLANNING OF THE MATERIAL
6 HANDLING SYSTEMS AND THE -- AND THE PRODUCTION SYSTEMS FOR THE
7 PLANT.
8 Q. DESCRIBE WHAT GOES INTO A NEWSPAPER PLANT.
9 A. WHY DON'T I BEGIN WITH THE DETROIT NEWS? BECAUSE I THINK
10 THAT'S -- AT LEAST IT'S ONE THAT I CAN -- I CAN RELATE DIRECTLY
11 TO. WE HAD -- THE DETROIT NEWS, THE FACILITIES THAT THEY HAD
12 WERE ANTIQUATED. THEY HAD TWO PLANTS. ONE OF THEM WAS DOWN ON
13 LAFAYETTE STREET AND THEY HAD SOME VERY OLD SCOTT PRESSES IN
14 THERE. THEY NEEDED ADDITIONAL PRODUCTION CAPACITY.
15 WE WORKED -- WE WERE HIRED BY THE DETROIT NEWS TO
16 HELP THEM DO THE INITIAL PLANNING -- ULTIMATELY WE DID THE
17 DESIGN, AS WELL. BUT WE -- WE SPENT PROBABLY A YEAR IN
18 DEVELOPING THE -- THE CRITERIA, THE GROWTH PROJECTIONS, THE --
19 WHAT THE PAPER MAY LOOK LIKE IN -- IN A WINDOW OF 8 TO 20
20 YEARS. SO WE HAD SOME -- SOME FIGURES TO -- TO MODEL THAT
21 PLANT ABOUT.
22 WE ASSISTED THEM IN GETTING TWO BLOCKS FROM HUD,
23 WHICH WAS ACROSS LAFAYETTE STREET FROM WHERE THEY WERE, GETTING
24 THE STREET ABANDONED IN THE MIDDLE AND DID THE PLANNING ON A
25 MAJOR PRINTING FACILITY IN THAT AREA.
1062
INGRAM - DIRECT / SHULMAN
1 UNFORTUNATELY, THEY HAD A STRIKE FOLLOWED BY A BIG
2 RIOT IN THE CITY AND DETROIT DECIDED THAT THEY NEEDED TO GO OUT
3 OF TOWN. WE WENT OUT OF TOWN AND STARTED ALL OVER AGAIN. WE
4 DID JUST WHAT I SAID BEFORE. WE ACQUIRED PROPERTY AND MADE --
5 DEVELOPED THE CONCEPTUAL PLANS, HAD THEM APPROVED BY THEIR
6 MANAGEMENT PEOPLE. IT MOVED IT INTO OUR DESIGN DEPARTMENT
7 WHERE THEY PRODUCED THE WORKING DRAWINGS. WE OBTAINED THE
8 BUILDING PERMITS FROM THE CITY, EMPLOYED A CONTRACTOR --
9 THE COURT: MR. INGRAM, I'M SORRY TO INTERRUPT, BUT
10 YOU MIGHT FOCUS ON THE QUESTION WHICH IS ASKED HERE AND --
11 THE WITNESS: ALL RIGHT.
12 THE COURT: -- AND THINK ABOUT --
13 THE WITNESS: MAYBE YOU COULD ASK IT AGAIN, THEN.
14 THE COURT: -- ABOUT EXACTLY THE FACILITIES THAT ARE
15 NECESSARY TO PUT OUT A PAPER. THAT WAS THE QUESTION. I DON'T
16 THINK WE NEED A RECITAL OF THE HISTORY OF THE DETROIT NEWS.
17 THE WITNESS: ALL RIGHT. THAT'S FAIR.
18 BY MR. SHULMAN:
19 Q. TELL US WHAT'S -- THE DETROIT NEWS WAS -- YOU WERE
20 BUILDING A PLANT FOR A PAPER WITH A CIRCULATION OF ROUGHLY WHAT
21 SIZE?
22 A. AT THAT TIME I THINK THEY HAD A CIRCULATION OF ABOUT
23 600,000.
24 Q. OKAY. SO WHAT -- WHAT GOES INTO A TYPICAL NEWSPAPER
25 PLANT?
1063
INGRAM - DIRECT / SHULMAN
1 A. IN THIS PLANT THAT WAS GOING TO PUT OUT ABOUT 400,000 OF
2 THOSE. WE PUT IN NINE DOUBLE WIDTH SEMI OF CYLINDRICAL
3 PRESSES. THE PRESSES WERE GEARED FOR ABOUT 65,000 PAPERS AN
4 HOUR AND THAT'S WHAT WE PRINTED OUT.
5 Q. SO ONE THING IF WE COULD --
6 THE COURT: A LITTLE TIGHTER REIN, MR. SHULMAN.
7 MR. SHULMAN: OKAY. I WILL DO THAT, YOUR HONOR.
8 BY MR. SHULMAN:
9 Q. SO ONE THING THAT YOU HAVE TO PUT IN THE PLANT IS THE
10 PRINTING PRESSES, RIGHT?
11 A. THAT'S RIGHT.
12 Q. ALL RIGHT. WHAT ELSE?
13 MAY I GO TO THE EASEL, YOUR HONOR?
14 THE COURT: YES, YOU MAY.
15 BY MR. SHULMAN:
16 Q. OKAY. I AM GOING TO WRITE "PRINTING PLANT."
17 OKAY. YOU HAVE SAID "PRESSES," RIGHT? THAT'S ONE
18 THING.
19 A. RIGHT.
20 Q. OKAY. WHAT ELSE?
21 A. YOU NEED THE PREPRESS EQUIPMENT, THE COMPOSING ROOM TO SET
22 TYPE AND A DEPARTMENT TO MAKE PLATES AND SEPARATE COLOR.
23 Q. OKAY. OKAY. CAN WE BREAK THAT DOWN A LITTLE BIT THERE?
24 THERE WERE A NUMBER OF THINGS THERE. YOU SAID THAT WAS THE
25 PREPRESS EQUIPMENT?
1064
INGRAM - DIRECT / SHULMAN
1 A. PREPRESS, RIGHT.
2 Q. AND WHAT IS IN THE PREPRESS EQUIPMENT?
3 A. THE PREPRESS EQUIPMENT -- THE PREPRESS DEPARTMENT IS
4 THE -- IS THE PORTION OF THE PLANT WHERE THEY TAKE THE
5 EDITORIAL AND ADVERTISING MATERIAL AND TURN IT INTO A NEWSPAPER
6 PAGE.
7 THE COURT: WOULD THAT BE CALLED COMPOSING?
8 THE WITNESS: COMPOSING IS PART OF IT.
9 BY MR. SHULMAN:
10 Q. SO THERE ARE -- YOU SAID PLATES THAT YOU NEED -- THAT NEED
11 TO BE MADE?
12 A. PLATES WOULD BE THE OUTPUT OF PREPRESS. IF THE -- IF WE
13 ARE STILL TALKING ABOUT THE DETROIT NEWS --
14 Q. WELL, IF YOU CAN TRY TO BE -- GIVE US WHAT A TYPICAL
15 NEWSPAPER PLANT WOULD INVOLVE. CAN YOU DO THAT?
16 A. I -- YEAH, I CAN. THERE IS -- THERE IS A PART OF THAT
17 THAT THE TECHNOLOGY IS CHANGING SO FAST THAT IT CHANGES. SO
18 ALLOW ME TO PICK SOMETHING, LIKE, SAY, THE EXAMINER.
19 Q. OKAY. YOU ARE FAMILIAR WITH THE EXAMINER, RIGHT?
20 A. YES, I AM VERY FAMILIAR WITH THE EXAMINER.
21 Q. OKAY. DESCRIBE THE PLANT -- DESCRIBE THE PRINTING PLANT
22 THAT'S NEEDED TO PRINT THE EXAMINER. I THINK WE HAVE GOT
23 PRESSES AND PREPRESS, RIGHT?
24 A. IN PREPRESS THEY HAVE A COMPOSING ROOM BECAUSE ONLY ABOUT
25 A THIRD OF THEIR PAGES ARE -- ARE ASSEMBLED THROUGH THE
1065
INGRAM - DIRECT / SHULMAN
1 PAGINATION OF THE OUTPUT FROM THE EDITORIAL. SO THEY HAVE A
2 COMPOSING ROOM WHERE TYPE IS OUTPUT AND PASTED DOWN ON PAGE
3 FORMS.
4 Q. OKAY. SO THERE IS THE COMPOSING ROOM. WHAT ELSE IN
5 PREPRESS?
6 A. AND THAT GOES INTO AN ENGRAVING DEPARTMENT WHERE IT'S --
7 IN THE CASE OF THE EXAMINER IT WAS -- IT WAS SCANNED AND
8 TRANSMITTED TO THE PRINTING PLANT AS A NEGATIVE. THAT NEGATIVE
9 WAS USED TO MAKE A PLATE THAT WAS OUTPUT FROM PREPRESS.
10 Q. ALL RIGHT. SO IN ADDITION TO THE PRESSES AND THE
11 PREPRESS, WHAT ELSE WAS INVOLVED IN THE PRINTING PLANT?
12 A. THEN YOU HAVE THE -- THE BUNDLING OR THE MAIL ROOM WHERE
13 THE PAPERS ARE CONVEYED, COUNTED, STACKED, IDENTIFIED, TIED
14 AND -- AND OUTPUT TO THE LOADING DOCK.
15 Q. OKAY. WHAT ABOUT INSERTS THAT GO IN THE PAPER? HOW ARE
16 THEY HANDLED?
17 A. THEY'RE HANDLED IN THE MAIL ROOM. ON INSERT EQUIPMENT IF
18 IT'S ON THE SUNDAY PRODUCT THAT'S HANDLED THROUGH THE WEEK,
19 INSERT INTO -- GENERALLY INTO THE COMICS OR SOME -- SOME
20 PACKAGE THAT YOU HAVE AHEAD OF TIME FOR THE DAILY INSERTS, AND,
21 AGAIN, AT THE EXAMINER THEY ARE DONE IN THE MAIL ROOM. THEY
22 ARE DONE ON THE LINE WITH INSERTING EQUIPMENT.
23 Q. IS THERE SPECIAL EQUIPMENT NEEDED TO DO THE INSERTS?
24 A. YES.
25 Q. IT'S CALLED INSERTING EQUIPMENT?
1066
INGRAM - DIRECT / SHULMAN
1 A. YES.
2 Q. NOW, I THINK WE DIGRESSED HERE. YOU WERE TELLING US ABOUT
3 YOUR CAREER UP TO THE TIME WHEN YOU JOINED THE DAILY NEWS. AND
4 YOU MENTIONED THAT YOU WERE -- YOU HAD BUILT ABOUT -- BEEN
5 INVOLVED IN THE BUILDING OF A NUMBER OF NEWSPAPER PLANTS.
6 A. RIGHT. AND WE DID MANAGEMENT CONSULTING AND A FAIR AMOUNT
7 OF LABOR CONSULTING.
8 IN 1971 WE -- WE SOLD THAT -- THAT BUSINESS TO THE
9 COMPETITOR, CHARLES T. MAIN IN BOSTON. AND SHORTLY BEFORE
10 THAT I HAD BOUGHT A -- I BOUGHT A COMPANY, CONSTRUCTION
11 COMPANY, AND DECIDED TO RUN THAT RATHER THAN TO WORK FOR
12 CHARLES T. MAIN. ALTHOUGH THROUGH THE PERIOD OF TIME I HAD
13 THE CONSULTING COMPANY I TOOK -- OR THE CONSTRUCTION COMPANY I
14 TOOK CONSULTING ASSIGNMENTS FOR MAIN AND FOR OTHER CLIENTS SUCH
15 AS THE DAILY NEWS THAT WERE CLIENTS OF MINE.
16 I -- I CONSULTED AND RAN THAT CONSTRUCTION COMPANY
17 FOR -- UNTIL 1977 AND SOLD THAT AND SHORTLY AFTER THAT I WAS --
18 I WAS RECRUITED BY THE NEW YORK DAILY NEWS AS THE ENGINEERING
19 MANAGER. I WENT OUT THERE. TWO YEARS LATER I WAS NAMED
20 DIRECTOR OF ENGINEERING, AND IN --
21 THE COURT: ALL RIGHT. ALL RIGHT.
22 BY MR. SHULMAN:
23 Q. ALL RIGHT. AS VICE PRESIDENT OF OPERATION OF THE --
24 OPERATIONS OF THE NEW YORK DAILY NEWS, WHAT WERE YOUR DUTIES
25 AND RESPONSIBILITIES?
1067
INGRAM - DIRECT / SHULMAN
1 A. I WAS RESPONSIBLE -- RESPONSIBLE FOR THE -- FOR PRODUCTION
2 FOR ENGINEERING AND SAT ON THE NEWSPRINT COMMITTEE OF THE
3 TRIBUNE COMPANY.
4 Q. ALL RIGHT. THEN IN 1985 TO -- FROM 1985 TO 1989, YOU WERE
5 THE VICE PRESIDENT OF OPERATIONS FOR THE SAN FRANCISCO
6 NEWSPAPER AGENCY, CORRECT?
7 A. THAT'S RIGHT.
8 Q. WHAT DID YOU DO IN THAT POSITION?
9 A. AGAIN, I WAS RESPONSIBLE FOR PRODUCTION. I WAS
10 RESPONSIBLE FOR THE ENGINEERING DEPARTMENT. YOU KNOW, MY
11 DUTIES WERE NOT DISSIMILAR FROM WHAT I DID IN NEW YORK.
12 Q. OKAY. AND THEN YOU BECAME -- FROM 1989 TO 1993, YOU WERE
13 THE SENIOR VICE PRESIDENT OF OPERATIONS OF THE AGENCY?
14 A. THAT'S RIGHT.
15 Q. WHAT WERE YOUR DUTIES AND RESPONSIBILITIES IN THAT
16 POSITION?
17 A. I CONTINUED TO HAVE THE SAME RESPONSIBILITIES I HAD HAD
18 FOR PRODUCTION. I DIDN'T REPLACE MY JOB. AND I ASSUMED THE
19 RESPONSIBILITIES FOR LABOR, HUMAN RESOURCES, INFORMATION
20 SYSTEMS, BUILDING PURCHASING. I THINK THAT'S IT.
21 Q. OKAY. AND WHAT IS INCLUDED -- OKAY. YOU SAY YOU WERE
22 RESPONSIBLE FOR PRODUCTION.
23 A. THAT'S RIGHT.
24 Q. OKAY. NOW, YOU SAY THAT YOU ARE CURRENTLY A CONSULTANT TO
25 THE GANNETT CORPORATION AND SEVERAL NEWSPAPERS?
1068
INGRAM - DIRECT / SHULMAN
1 A. THAT'S RIGHT. GANNETT IS JUST -- IS THE ASSIGNMENT I HAVE
2 RIGHT NOW.
3 Q. OKAY. WHAT DO YOU DO FOR GANNETT?
4 A. THEY -- THEY WANT TO EXPAND THE PLANT THAT THEY HAVE IN --
5 IN -- AROUND THE PHOENIX AREA. I AM AT THE MOMENT FINISHING UP
6 THE REQUEST FOR THE CAPITAL APPROPRIATIONS, AND ONCE THAT'S
7 APPROVED THEN I WILL MANAGE -- THEN I WILL DO THE DESIGN AND
8 MANAGE THAT -- MANAGE THAT PROGRAM.
9 Q. NOW, YOU WERE IN ATTENDANCE AT THE MEETING THAT HAS BEEN
10 REFERRED TO IN MR. ALIOTO'S OFFICE ON THE 25TH OF MARCH WITH A
11 NUMBER OF OTHER PEOPLE?
12 A. YES.
13 Q. HAD YOU BEEN RETAINED BY MR. REILLY SOMETIME BEFORE THAT?
14 A. YES.
15 Q. APPROXIMATELY WHEN WERE YOU FIRST RETAINED BY MR. REILLY?
16 A. ABOUT THE 1ST OF FEBRUARY.
17 Q. OKAY. SO THAT WAS ALMOST TWO MONTHS BEFORE THE MEETING ON
18 MARCH 25?
19 A. YES.
20 Q. WHAT WERE YOU RETAINED TO DO BY MR. REILLY AROUND THE 1ST
21 OF FEBRUARY?
22 A. MR. REILLY ASKED ME TO WORK WITH HIM. HE WAS IN THE
23 PROCESS OF TRYING TO PURCHASE THE SAN FRANCISCO EXAMINER. HE
24 NEEDED SOME ASSISTANCE IN -- FROM SOMEONE WITH NEWSPAPER
25 EXPERIENCE, BOTH IN -- IN UNDERSTANDING WHAT IT MAY TAKE TO RUN
1069
INGRAM - DIRECT / SHULMAN
1 AND OPERATE THE ENTERPRISE, IF HE GOT IT, AND -- AND TO GIVE
2 HIM ADVICE AS HE WENT THROUGH THE NEGOTIATIONS OF THE SALE.
3 Q. OKAY. SO THIS WAS -- THE EVIDENCE IN THIS CASE IS THAT
4 HEARST ENTERED INTO ITS AGREEMENT TO TRANSFER THE EXAMINER TO
5 THE -- TO EXIN ON MARCH 16, 19 -- 19 -- 2000.
6 YOU WERE RETAINED LONG BEFORE THAT; IS THAT RIGHT?
7 A. THAT'S RIGHT.
8 Q. OKAY. AND YOU -- SO WHAT YOU WERE RETAINED FOR AT FIRST
9 DIDN'T RELATE AT ALL TO THE FANG TRANSACTION; IS THAT RIGHT?
10 A. THIS WASN'T EVEN CONTEMPLATED THEN.
11 Q. OKAY. AND WHAT DID YOU DO AFTER YOU WERE RETAINED BY
12 MR. REILLY TO ADVISE HIM IN CONNECTION WITH HIS DISCUSSIONS
13 WITH THE HEARST CORPORATION ABOUT HIS POSSIBLE PURCHASE OF THE
14 EXAMINER?
15 A. I THINK IT WAS ON THE 3RD OF FEBRUARY I CAME TO SAN
16 FRANCISCO AND SPENT TIME WITH -- WITH MR. REILLY AND WITH --
17 WITH MIKE WEAVER. HE -- HE OUTLINED WHAT -- WHAT HE KNEW AT
18 THAT TIME, ASKED ME QUESTIONS ABOUT THE FACILITIES, SHOWED ME
19 THE VERONIS REPORT, AND AT THAT TIME HE HAD ALSO -- BESIDES
20 MIKE WEAVER AND MYSELF, WE HAD ASKED ALAN FLAHERTY TO WORK WITH
21 HIM ON THAT. HE ASKED US TO GET TOGETHER AS QUICKLY AS WE
22 COULD AND GIVE HIM SOME -- SOME DIRECTION OF WHAT HE MIGHT
23 EXPECT AND WHAT HE MIGHT BE FACING BECAUSE HE WAS ABOUT TO GO
24 INTO HIS FIRST MEETING WITH THE HEARST CORPORATION.
25 Q. OKAY. YOU HAVE -- I BELIEVE YOU HAVE IN FRONT OF YOU WHAT
1070
INGRAM - DIRECT / SHULMAN
1 IS IN EVIDENCE AS PLAINTIFF EXHIBIT 23.
2 DO YOU SEE THAT?
3 A. YES.
4 Q. OKAY. THIS IS A -- THIS IS A MEMORANDUM, AND RIGHT AT THE
5 VERY BOTTOM THERE IS A -- VERY, VERY BOTTOM -- THERE IS A
6 LITTLE LINE THAT SAYS, "FLAHERTY/INGRAM/WEAVER, 2/10/00, SFX
7 TIMELINE 007A."
8 ARE YOU FAMILIAR WITH THIS DOCUMENT?
9 A. YES.
10 Q. WHAT IS IT?
11 A. THIS IS A DOCUMENT THAT I AUTHORED BUT IN CONJUNCTION
12 WITH -- WITH MIKE WEAVER AND WITH ALAN FLAHERTY. IT CAME OUT
13 OF A MEETING THAT WE HAD SHORTLY AFTER THE ONE ON THE 3RD OF
14 FEBRUARY DOWN IN ORANGE COUNTY THAT WE SENT TO CLINT BEFORE HIS
15 FIRST MEETING.
16 Q. OKAY. CAN YOU -- WOULD YOU IDENTIFY WHO MIKE WEAVER IS?
17 A. MIKE WEAVER IS ONE OF THE CONSULTANTS THAT CLINT HIRED.
18 HE IS THE -- HAS BEEN THE CFO IN SEVERAL OTHER NEWSPAPERS AND
19 WAS -- WORKED WITH US AND HELPED -- AND PUT TOGETHER MOST OF
20 THE NUMBERS.
21 Q. OKAY. AND WHO IS ALAN FLAHERTY WHO IS REFERRED TO HERE?
22 A. ALAN FLAHERTY IS A CONSULTANT IN THE NEWSPAPER BUSINESS.
23 HE WORKED IN NEW YORK WHEN I WAS THERE. HE HAS BEEN CONSULTING
24 FOR QUITE A NUMBER OF YEARS NOW.
25 Q. OKAY. NOW, WHAT -- WHAT DID YOU INTEND TO CONVEY BY THIS
1071
INGRAM - DIRECT / SHULMAN
1 DOCUMENT?
2 A. THIS DOCUMENT WAS TO LAY OUT, NUMBER ONE, SOME -- SOME
3 SERIOUS CONCERNS THAT WE HAD THAT HE -- THAT WE BELIEVED THAT
4 HE SHOULD ADDRESS EARLY IN THE NEGOTIATIONS WITH THE HEARST
5 CORPORATION AND TO LAY OUT WHAT WE CALLED A -- A TIMELINE FOR
6 PHASE-IN PERIOD. IT -- WE ALL BELIEVED THAT -- THAT THERE WAS
7 GOING TO HAVE TO BE A TREMENDOUS AMOUNT OF COOPERATION
8 BEFORE -- BETWEEN THE HEARST CORPORATION AND BETWEEN CLINT
9 REILLY'S GROUP IN ORDER TO TAKE THE EXAMINER FROM -- FROM WHAT
10 IT WOULD BE AT THE TIME HE BOUGHT IT AND -- AND GET IT TO A
11 POINT WHERE IT COULD STAND ON ITS OWN TWO FEET, IF THAT COULD
12 BE DONE. AND THAT THE -- SINCE CLINT REILLY WASN'T A KNIGHT
13 RIDDER OR SOMEBODY THAT HAS -- NOT ONLY HAS NEWSPAPER
14 EXPERIENCE BUT HAS HUNDREDS AND HUNDREDS OF EXECUTIVES AND
15 NEWSPAPER MANAGERS BEHIND HIM THAT THEY CAN BRING INTO A
16 SITUATION LIKE THIS, THAT IN ORDER FOR IT TO BE SUCCESSFUL,
17 THEY WERE GOING TO HAVE TO HAVE THE COOPERATION TO PHASE THIS
18 THING IN FOR HEARST TO CONTINUE TO DO MOST OF THE WORK FOR SOME
19 PERIOD OF TIME AS HE DEVELOPED HIS STAFF AND, MOST IMPORTANTLY,
20 TO KEEP THE -- THE EXAMINER -- THE TRANSITION FAIRLY SEAMLESS
21 SO THAT THEY WOULDN'T LOSE THE VERY FRAGILE CIRCULATION THAT
22 THEY HAD AT THAT POINT.
23 Q. NOW -- SO WHAT WAS THE -- HOW LONG WAS THIS PHASE-IN
24 PERIOD THAT YOU ADVISED MR. REILLY HE WOULD NEED IF HE WERE
25 GOING TO TAKE OVER THE EXAMINER AND OPERATE THE EXAMINER?
1072
INGRAM - DIRECT / SHULMAN
1 A. WE HAD A PHASE-IN PERIOD OF 22 MONTHS.
2 Q. ALMOST TWO YEARS?
3 A. THAT'S RIGHT.
4 Q. OKAY. AND CAN YOU EXPLAIN WHAT WOULD NEED TO BE DONE
5 DURING THAT 22-MONTH PHASE-IN PERIOD TO ENABLE A -- A NEW
6 BUYER, A NEW OWNER OF THE EXAMINER, TO TAKE OVER THAT PAPER?
7 A. SURE. THE -- THE FIRST -- THE FIRST ELEMENT -- AND I -- I
8 BELIEVE VERY STRONGLY THAT THIS HAD TO -- HAD TO BE IN PLACE IF
9 THERE WAS GOING TO BE ANY CHANCE OF SUCCESS AT ALL. AND THAT
10 WAS TO -- TO HAVE AN AGREEMENT WITH HEARST THAT -- THAT
11 MR. REILLY WOULD BE IDENTIFIED AS A BUYER OF LAST RESORT AND BE
12 ALLOWED A 30- TO 60-DAY PERIOD TO RENEGOTIATE THE COLLECTIVE
13 BARGAINING AGREEMENTS, TO MAKE THEM MORE APPLICABLE TO A
14 SMALL -- TO A SMALLER CIRCULATED PAPER THAN THE ONES THAT
15 REALLY WERE DESIGNED AROUND THE -- THE -- THE PRINT ORDER AND
16 THE -- AND THE SIZE OF THE CHRONICLE.
17 Q. CAN YOU HOLD ON FOR A SECOND?
18 MAY I GO TO THE EASEL, YOUR HONOR?
19 THE COURT: YES, YOU MAY.
20 BY MR. SHULMAN:
21 Q. ALL RIGHT. I AM GOING TO WRITE "22-MONTH PHASE-IN." AND
22 I THINK THE FIRST THING THAT YOU SAID WOULD NEED TO BE DONE WAS
23 SOMEHOW RENEGOTIATE THE LABOR CONTRACTS?
24 A. THAT'S RIGHT.
25 Q. AND WHAT ARE THE LABOR CONTRACTS THAT YOU ARE REFERRING
1073
INGRAM - DIRECT / SHULMAN
1 TO?
2 A. THESE ARE THE COLLECTIVE BARGAINING AGREEMENTS WITH THE --
3 WITH THE CRAFT UNIONS, THE GUILD AND THE TEAMSTERS THAT EXIST
4 NOW BETWEEN THE AGENCY AND THOSE GROUPS.
5 Q. CRAFT UNIONS ARE THE --
6 A. THE CRAFTSMEN, THE MAILERS, ELECTRICIANS, MACHINISTS --
7 THERE ARE OTHERS BUT I . . .
8 Q. OKAY. AND THE GUILD -- THE GUILD CONTRACTS, THAT'S --
9 A. THAT'S THE EDITORIAL DEPARTMENT, ADVERTISING, FINANCE.
10 Q. OKAY. I THINK WE KNOW WHAT THE REST IS.
11 WHAT ELSE WOULD NEED TO BE DONE IN THIS 22-MONTH
12 PHASE-IN PERIOD?
13 A. THAT WAS THE FIRST PHASE, AND I THINK I SAID 30 TO 60
14 DAYS, BUT WE HAD IDENTIFIED IT AS TWO TO THREE MONTHS, AND
15 DURING THAT PERIOD THAT HE SHOULD IDENTIFY HIS GENERAL MANAGER
16 AND EXECUTIVE EDITOR SO THAT THEY WOULD BEGIN TO DEVELOP THOSE
17 PARTS, TOO.
18 THE SECOND PHASE -- THE SECOND PHASE WOULD BE THE --
19 THE NEGOTIATION.
20 THE THIRD -- THE THIRD PHASE IS THE TRANSFER OF
21 OWNERSHIP. WE WEREN'T SURE HOW LONG THAT WOULD TAKE.
22 APPARENTLY, THEY WERE PREPARED TO MOVE IN A HURRY. BUT WE HAVE
23 IDENTIFIED A PERIOD IN THERE THAT MIGHT BE AS LONG AS A COUPLE
24 OF MONTHS.
25 THE -- WE CALLED A -- THE FOLLOWING PHASE THE
1074
INGRAM - DIRECT / SHULMAN
1 "INITIAL SWITCHOVER PERIOD." THIS IS ASSUMING ALL THE
2 CONTRACTS WERE DEVELOPED AND THE DEAL CLOSES AND THE BUYER IS
3 READY TO BEGIN OPERATING THE PAPER.
4 HEARST WOULD BE REQUIRED TO CONTINUE WITH WHAT THEY
5 PRESENTLY DO, WHICH IS THE SELLING OF THE ADVERTISING, THE
6 PRINTING OF THE PAPER, THE DISTRIBUTION OF THE PAPER. AND
7 WHILE THE AGENCY BEGAN TO BUILD ITS MANAGEMENT STAFF WORKING
8 WITH THE -- THE STAFF OF THE AGENCY, SOME OF WHICH THEY WOULD
9 LATER HIRE TO DEVELOP THE DEPARTMENTS.
10 Q. OKAY. YOU MENTIONED SELLING THE ADVERTISING, RIGHT?
11 A. RIGHT.
12 Q. AND I THINK YOU SAID THAT THE IDEA WAS FOR HEARST TO DO
13 THIS DURING THE PHASE-IN PERIOD?
14 A. YES.
15 Q. AND THEN WHAT WOULD MR. -- WHAT WOULD MR. REILLY -- WHAT
16 WOULD THE BUYER NEED TO DO IN ORDER TO BE READY TO SELL THE
17 ADVERTISING AFTER THAT TIME?
18 A. HE IS GOING TO HAVE TO DEVELOP AN ADVERTISING STAFF. HE
19 IS GOING TO HAVE TO STAFF IT. BUT WE ARE GETTING A LITTLE BIT
20 AHEAD OF IT. LET ME GO AND -- COMPLETE THAT QUESTION. HE
21 NEEDS TO DEVELOP A STAFF. IT WAS OUR FEELING THAT HE HAS GOT
22 TO BUILD A STAFF THAT'S WORKING BOTH WITH THE -- THE PRESENT
23 STAFF AND WITH THE ADVERTISERS TO GET A SWITCHOVER THAT'S CLEAN
24 AND SMOOTH, NOT ONE THAT ABRUPTLY STOPS AND THOSE CONTACTS HAVE
25 TO BE REBUILT.
1075
INGRAM - DIRECT / SHULMAN
1 Q. OKAY. NOW, YOU ALSO SAID THAT THE AGENCY WOULD CONTINUE
2 THE PRINTING, RIGHT, DURING THE PHASE-IN PERIOD?
3 A. THAT'S RIGHT.
4 Q. AND WHAT WOULD MR. REILLY OR A BUYER OF THE EXAMINER HAVE
5 TO DO DURING THE PHASE-IN PERIOD TO BE READY FOR WHEN THE
6 PHASE-IN ENDS AND HEARST STOPS PRINTING THE PAPER?
7 A. THEY WOULD HAVE TO BUILD AND CONSTRUCT A PRINTING
8 FACILITY.
9 Q. DID YOU THINK -- SO THAT WAS SOMETHING MR. REILLY WOULD
10 HAVE TO DO?
11 A. YES.
12 Q. DID YOU THINK THAT THAT COULD BE DONE IN 22 MONTHS?
13 A. YES.
14 Q. OKAY. HOW LONG DO YOU THINK THAT WOULD TAKE?
15 A. I THINK WE HAD ABOUT 18 MONTHS TO ACQUIRE THE EQUIPMENT
16 AND GO UP TO 18 MONTHS TO ACQUIRE THE EQUIPMENT AND INSTALL IT
17 IN.
18 WHAT YOU SHOULD UNDERSTAND IS IN -- IN WHAT WE WERE
19 SUGGESTING HERE AND WHAT WE HAD TALKED ABOUT IN OUR MEETING IN
20 SAN FRANCISCO WAS THE FACT THAT THE -- THE BUILDING THAT --
21 THAT HOUSES THE EDITORIAL DEPARTMENT AT 110 FIFTH STREET IS IN
22 FACT A PRODUCTION FACILITY AND WAS DESIGNED AS THAT. THE PRESS
23 EQUIPMENT HAD BEEN REMOVED, BUT THE PRESS BAYS WERE STILL THERE
24 AND MOST OF THE -- MOST OF THAT SPACE WAS STILL THERE.
25 SO THE INTENT WAS TO REUSE THAT RATHER THAN BUILD A
1076
INGRAM - DIRECT / SHULMAN
1 NEW PLANT, BUY PRESS EQUIPMENT, INSTALL IT IN THERE, BUY MAIL
2 ROOM EQUIPMENT, INSTALL IT IN THERE, AND -- AND IN THAT PERIOD
3 IDENTIFY WHAT HAD TO BE DONE ON THE SHARE EQUIPMENT, WHICH ALL
4 THE PREPRESS IS, TO GET THAT SEPARATED FROM THE -- FROM THE
5 CHRONICLE AND BUILD THE PREPRESS FACILITY.
6 Q. OKAY. AND YOU WERE FIGURING A -- YOU WERE FIGURING A
7 PRINTING PLANT THAT WAS GOING TO BE ABLE TO PRINT HOW MANY
8 COPIES?
9 A. WE FELT THAT -- THAT THE -- THE THRESHOLD WAS SOMEWHERE
10 AROUND 90,000 PAPERS, PROBABLY 100,000 PRINT ORDER. AND
11 INITIALLY -- AGAIN, GOING BACK TO THE -- THE NOTION THAT WE
12 FELT THAT IT WOULD BE WRONG TO DO ANYTHING TERRIBLY DISRUPTIVE
13 TO THE -- THE MOTHER LOAD, THAT WE WOULD -- AND WE DID WANT TO
14 MOVE TO THE MORNING. BUT TO BEGIN WITH A MORNING RUN OF ABOUT
15 25,000, CONTINUE TO SERVICE THE -- THE HOME DELIVERY IN THE
16 EVENING AND HAVE AN AFTERNOON STREET SALE PAPER THAT WOULD GO
17 OUT SO IT WOULD BE PUT OUT IN THREE -- IN THREE RUNS. BUT
18 CONTINUE TO -- THROUGHOUT THIS PERIOD AND BEYOND TO MOVE THAT
19 CIRCULATION UNTIL IT'S ALL IN THE MORNING FIELD.
20 Q. OKAY.
21 A. THIS FACILITY THAT WE ARE TALKING ABOUT WOULD HANDLE THAT
22 PRINT ORDER, BUT BY THE TIME YOU GOT ALL OF IT IN THE MORNING
23 FIELD, YOU WOULD NEED ANOTHER PRESS.
24 Q. OKAY. SO THE PRINTING FACILITY YOU ENVISIONED WAS --
25 WOULD GIVE YOU -- WOULD BE ABLE TO DO 100,000 COPIES,
1077
INGRAM - DIRECT / SHULMAN
1 ULTIMATELY?
2 A. YES, YES.
3 Q. AND YOU WERE COUNTING ON HAVING THE EXISTING BUILDING
4 THAT -- WHERE HEARST -- WHERE THE EXAMINER WAS LOCATED?
5 A. YES.
6 Q. NOW, IF YOU DIDN'T HAVE THAT BUILDING, IF YOU WEREN'T ABLE
7 TO GET THAT BUILDING, THEN WHAT WOULD -- THEN WHAT WOULD NEED
8 TO BE DONE?
9 A. WE WOULD NEED TO CONSTRUCT A FACILITY AND -- AND YOU'D BE
10 LOOKING, IN OUR OPINION, PROBABLY AT 18 MONTHS TO TWO YEARS TO
11 BE UP AND RUNNING.
12 Q. AND WHAT DID YOU FIGURE WOULD BE THE COST -- ASSUMING THAT
13 YOU GOT THE HEARST BUILDING, WHAT DID YOU FIGURE THE COST WOULD
14 BE FOR THE EQUIPMENT THAT YOU WOULD NEED TO HAVE THE PRINTING
15 PLANT?
16 A. I -- YOU MUST UNDERSTAND AT THE TIME WE PUT THIS TOGETHER
17 WE HAD THE BENEFIT OF -- OF A VERY SHORT MEETING WHICH WE
18 WEREN'T ALL IN SAN FRANCISCO AND A FIVE- OR SIX-HOUR MEETING IN
19 ORANGE COUNTY, AND WE WERE TRYING TO GET THIS IN IN CLINT'S
20 HANDS.
21 WE DID A VERY QUICK OUTLINE OF WHAT THE CAPITAL
22 OUTLAY MIGHT BE JUST FOR A USED PRINTING PRESS AND THE
23 MATERIAL -- HANDLING EQUIPMENT TO HANDLE THAT. AND I THINK WE
24 ATTACHED THAT OF -- OF 16 AND A HALF MILLION.
25 Q. SIXTEEN AND A HALF MILLION FOR THE EQUIPMENT?
1078
INGRAM - DIRECT / SHULMAN
1 A. RIGHT, INSTALLED.
2 Q. IF YOU WEREN'T ABLE TO GET THE BUILDING, THEN HOW MUCH
3 WOULD IT COST TO DO THE PLANT FOR THE NEW -- FOR THE PAPER, IF
4 YOU HAD TO FIND YOUR OWN BUILDING?
5 A. THAT WOULD DEPEND ON -- ON WHAT YOU DID. BUT YOU WOULD
6 HAVE TO EXPECT IT WOULD BE ANYWHERE FROM -- FROM 8 TO
7 15 MILLION AT THE MINIMUM.
8 Q. OKAY. NOW, ARE YOU -- ARE YOU FAMILIAR WITH THE -- THE
9 PRESS FACILITIES -- CURRENT PRESS FACILITIES OF THE
10 INDEPENDENT, THE NEWSPAPER THAT THE FANG FAMILY NOW HAS?
11 A. I AM NOT FAMILIAR. I HAVE A -- I HAVE AN IDEA OF WHAT
12 THEY HAVE IN TERMS OF THEIR PRESS EQUIPMENT, AND I BELIEVE I AM
13 RIGHT, BUT I HAVE NEVER SEEN THE EQUIPMENT.
14 Q. OKAY. WHERE DID YOU GET YOUR IDEA?
15 A. THIS ISN'T A VERY BIG INDUSTRY AND YOU CAN TALK TO
16 SUPPLIERS AND OTHER PEOPLE AND GET -- AND GET IDEAS ABOUT WHAT
17 THEY HAVE.
18 I CAN GET IT -- JUST FROM LOOKING AT THE PRODUCT, I
19 HAVE A PRETTY GOOD IDEA OF WHAT THEY ARE RUNNING ON.
20 Q. HOW CAN YOU KNOW JUST FROM LOOKING AT THE PRODUCT ABOUT
21 WHAT THE PRESS IS?
22 A. WELL, THE -- EVERYTHING I HAVE SEEN PRINTED WAS TWO
23 SECTIONS AND I -- I ASSUMED PROBABLY IT WAS A SINGLE-WIDTH
24 PRESS, WHICH WOULD BE VERY COMMON FOR WHAT THEY PUT OUT, EITHER
25 A -- A GOSS COMMUNITY OR GOSS URBANITE.
1079
INGRAM - DIRECT / SHULMAN
1 SINCE THEN I FOUND OUT THAT THEIR -- MY INFORMATION
2 IS THAT THEY ARE GOSS COMMUNITY PRESSES -- PRESSES THAT THEY
3 HAVE. AND -- AND, AS I UNDERSTAND IT, THEY HAVE TWO PRESSES,
4 ONE WITH TEN UNITS AND ONE WITH FIVE UNITS WITH A FOLDER ON
5 EACH OF THEM.
6 MR. HALLING: OBJECTION, YOUR HONOR. THIS IS ALL
7 HEARSAY. THERE IS ABSOLUTELY NO FOUNDATION.
8 THE COURT: SUSTAINED.
9 HOW MUCH LONGER DO YOU HAVE WITH THIS WITNESS?
10 MR. SHULMAN: IT WILL BE A LITTLE WHILE, YOUR HONOR.
11 THE COURT: WELL, A LITTLE WHILE OR A LITTLE WHILE?
12 MR. HALLING: YOUR HONOR, I WOULD ALSO MOVE TO
13 STRIKE THE LAST ANSWER.
14 THE COURT: ABOUT THE PRESSES, THE GOSS PRESSES? IS
15 THAT WHAT YOUR MOTION IS DIRECTED TO?
16 MR. HALLING: THE TESTIMONY ABOUT HIS SPECULATION
17 ABOUT WHAT PRESSES THE FANGS HAVE.
18 THE COURT: WELL, IT IS HEARSAY, ISN'T IT,
19 MR. SHULMAN?
20 MR. SHULMAN: WELL, I THINK HE IS ENTITLED TO RELY
21 ON HEARSAY, YOUR HONOR, AND THEY HAVE THE ABILITY TO CONTRADICT
22 IT IF IT'S NOT RIGHT.
23 THE COURT: WELL, HE IS BEING CALLED AS AN OPINION
24 WITNESS. I WILL DENY THE MOTION.
25 BUT LET'S GET BACK TO THE QUESTION THAT I POSED.
1080
INGRAM - DIRECT / SHULMAN
1 MR. SHULMAN: I WOULD SAY -- I WOULD SAY IT COULD BE
2 AS LONG AS AN HOUR, YOUR HONOR.
3 THE COURT: MY GOODNESS.
4 WELL, TELL ME WHEN YOU REACH A CONVENIENT BREAKING
5 POINT.
6 MR. SHULMAN: I AM THERE NOW IF THAT SUITS YOUR
7 HONOR.
8 THE COURT: WELL, ALL RIGHT. WHY DON'T WE, THEN,
9 RECESS FOR THE DAY?
10 I AM AFRAID, MR. INGRAM, THAT YOU WILL HAVE TO COME
11 BACK ON TUESDAY. WE ARE RESUMING THE TRIAL ON TUESDAY. WE
12 WILL NOT BE IN TRIAL ON MONDAY. WE WILL RESUME ON TUESDAY AT
13 8:30 A.M.
14 ARE THERE ANY MATTERS THAT COUNSEL WISH TO TAKE UP
15 WITH THE COURT BEFORE WE RECESS?
16 MR. HOCKETT: WE HAVE NONE, YOUR HONOR.
17 THE COURT: MR. HOCKETT -- YOU HAVE NONE OR YOU HAVE
18 ONE?
19 MR. HOCKETT: WE HAVE NONE.
20 THE COURT: NONE.
21 ANYONE ELSE?
22 MR. ROSCH: WE HAVE NONE, YOUR HONOR.
23 THE COURT: ALL RIGHT, MR. HALLING, NONE.
24 MR. HALLING: NONE.
25 MR. ALIOTO: NO, SIR.
1081
INGRAM - DIRECT / SHULMAN
1 THE COURT: WELL, I WILL BID YOU ALL A PLEASANT
2 WEEKEND. I AM SURE YOU CAN USE THE REST AND PREPARATION TIME.
3 LET ME ASK MR. ALIOTO AND MR. SHULMAN -- WE WILL
4 COMPLETE MR. INGRAM'S TESTIMONY, I ASSUME, ON TUESDAY AND THEN
5 HOW MANY WITNESSES REMAIN?
6 MR. SHULMAN: WE HAVE MR. WEAVER, MR. FLOOD,
7 MR. SCHMIDT. WE HAVE THE DEPOSITION OF MR. MORTON. THAT TAKES
8 ABOUT AN HOUR.
9 THE COURT: CAN I NOT JUST READ THE DEPOSITION
10 EXCERPTS?
11 MR. SHULMAN: YES, YOU COULD DO THAT, YOUR HONOR.
12 WE HAVE THE PLAINTIFF AND THEN WE HAVE OUR
13 EXAMINATION OF MR. IRISH AND MR. BENNACK, WHICH WILL BE, I
14 PRESUME, AS PART OF THEIR CASE.
15 MR. ALIOTO: YES.
16 MR. CONNELL: IT WILL.
17 MR. ALIOTO: WE SHOULD BE FINISHED WITH THESE
18 WITNESSES ON TUESDAY, RIGHT?
19 MR. SHULMAN: WELL, IT'S A HALF DAY.
20 MR. ALIOTO: OH, IT'S A HALF DAY TUESDAY.
21 THE COURT: PROBABLY ON WEDNESDAY YOU WILL COMPLETE?
22 MR. SHULMAN: RIGHT, RIGHT.
23 MR. ALIOTO: YES.
24 MR. SHULMAN: WE HAVE A -- WE COULD FINISH OUR
25 WITNESSES WEDNESDAY MAYBE?
1082
INGRAM - DIRECT / SHULMAN
1 MR. ALIOTO: SURE.
2 THE COURT: ALL RIGHT. THEN MR. HALLING WILL HAVE
3 BENNACK AND IRISH, I ASSUME, STARTING OUT ON WEDNESDAY?
4 MR. HALLING: AND MR. FALK AND DR. ROSSE.
5 THE COURT: ALL RIGHT. AND MR. ROSCH?
6 MR. ROSCH: WE ARE FINISHED, YOUR HONOR.
7 THE COURT: MR. BALABANIAN?
8 MR. BALABANIAN: WE WILL HAVE MR. FANG FOR ONE DAY.
9 THE COURT: IT WILL TAKE ALL DAY FOR MR. FANG'S
10 TESTIMONY?
11 MR. BALABANIAN: I BELIEVE SO, PROBABLY WITH THE
12 CROSS, ANTICIPATED CROSS.
13 THE COURT: WELL, I STILL HOPE THAT WE CAN COMPLETE
14 NEXT WEEK. WE ARE TRAILING ONE OTHER CIVIL CASE, AND WE ARE
15 SCHEDULED TO START A CRIMINAL CASE THE FOLLOWING WEEK, AND I
16 THINK THAT'S A PRETTY SURE BET TO GO OUT TO TRIAL.
17 ALL RIGHT. ANYTHING FURTHER?
18 MR. ALIOTO: NO, YOUR HONOR.
19 MR. HALLING: NO, YOUR HONOR.
20 THE COURT: VERY WELL. HAVE A PLEASANT WEEKEND AND
21 I WILL SEE YOU TUESDAY MORNING AT 8:30.
22 MR. ALIOTO: VERY GOOD, SIR.
23 MR. HALLING: THANK YOU, YOUR HONOR.
24 (PROCEEDINGS ADJOURNED FOR THE DAY AT 5:02 P.M.)
25
previous / next