Daily Court Transcripts

May 10, 2000

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                                                     VOLUME 7 


                                                     PAGES 1261 - 1498  


                               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 
                                         WEDNESDAY, MAY 10, 2000 
               
                                 TRANSCRIPT OF PROCEEDINGS 
              APPEARANCES: 
              FOR PLAINTIFF:          JOSEPH M. ALIOTO LAW FIRM 
                                      ONE EMBARCADERO CENTER, SUITE 4000 
                                      SAN FRANCISCO, CALIFORNIA  94111 
                                 BY:  JOSEPH M. ALIOTO                          
                                      ANGELINA ALIOTO-GRACE 
                                      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 


              
                                                                         1262




         1    APPEARANCES:  (CONTINUED) 


         2    FOR DEFENDANT           SHEPPARD, MULLIN, RICHTER & HAMPTON 
              HEARST CORPORATION:     FOUR EMBARCADERO CENTER, 17TH FLOOR 
         3                            SAN FRANCISCO, CALIFORNIA  94111 
                                 BY:  GARY L. HALLING 
         4                            THOMAS D. NEVINS 
                                      ATTORNEYS AT LAW 
         5     
                                      BAKER & HOSTETLER LLP                         
         6                            1050 CONNECTICUT AVE., N.W. 
                                         SUITE 1100 
         7                            WASHINGTON, D.C.  20036            
                                 BY:  GERALD A. CONNELL 
         8                            ATTORNEY AT LAW                         
                                       
         9    FOR DEFENDANT           LATHAM & WATKINS 
              CHRONICLE PUBLISHING    505 MONTGOMERY STREET 
        10    COMPANY:                  SUITE 1900 
                                      SAN FRANCISCO, CALIFORNIA  94111 
        11                       BY:  PETER K. HUSTON 
                                      J. THOMAS ROSCH 
        12                            GREGORY P. LINDSTROM 
                                      ATTORNEYS AT LAW 
        13     
              FOR INTERVENOR-         MC CUTCHEN, DOYLE, BROWN & ENERSEN                         
        14    DEFENDANT EXIN, LLC:    THREE EMBARCADERO CENTER, SUITE 1800 
                                      SAN FRANCISCO, CALIFORNIA  94111  
        15                       BY:  DAVID M. BALABANIAN 
                                      CHRISTOPHER B. HOCKETT      
        16                            THOMAS S. HIXSON 
                                      ATTORNEYS AT LAW                         
        17     


        18    


        19    


        20    


        21    


        22    


        23    


        24    


        25    
                                                                         1263




         1                               I N D E X 


         2                                                                                                                                                                                              
                                                             PAGE    VOL. 
         3     
              OPENING STATEMENT BY MR. ROSCH                 1386      7
         4     
                                                                         
         5    PLAINTIFF'S WITNESSES                          PAGE    VOL. 
               
         6    WEAVER, MICHAEL (RECALLED) 
              DIRECT EXAMINATION BY MR. SHULMAN              1268      7
         7    CROSS-EXAMINATION BY MR. LINDSTROM             1282      7
              CROSS-EXAMINATION BY MR. HOCKETT               1344      7
         8    CROSS-EXAMINATION BY MR. HALLING               1351      7
              REDIRECT EXAMINATION BY MR. SHULMAN            1354      7
         9     
               
        10    DEFENDANTS' WITNESSES                          PAGE    VOL. 
                 
        11    FALK, STEVEN 
              DIRECT EXAMINATION BY MR. HALLING              1396      7
        12    CROSS-EXAMINATION BY MR. BALABANIAN            1441      7
              CROSS-EXAMINATION BY MR. ALIOTO                1446      7
        13     
                                                                                                                                                                                                                                                                                                 
        14                            E X H I B I T S 
               
        15     
              PLAINTIFF'S EXHIBITS   W/DRAWN       IDEN      EVID    VOL.   
        16     
              83                                             1465      7
        17    166                                            1269      7
               
        18    DEFENDANTS' EXHIBITS   W/DRAWN       IDEN      EVID    VOL.     
               
        19    1189                                           1418      7
              1194                                           1422      7
        20    1197                                           1426      7
              983                                            1434      7
        21    984                                            1431      7
              986                                            1428      7
        22    H-1190                                         1372      7
                                                             1408      7
        23                                                   1414      7
               
        24    


        25    
                                                                         1264




         1    WEDNESDAY - MAY 10, 2000                         8:43 A.M. 
               
         2     


         3               THE COURT:  VERY WELL.  COUNSEL? 


         4               MR. HALLING:  YOUR HONOR, IF IT PLEASE THE COURT, I 


         5    HAVE TWO PRELIMINARY MATTERS I WOULD LIKE TO TAKE UP.  FIRST, I 


         6    JUST WOULD LIKE TO ALERT THE COURT THAT IF A RELATED CASE 


         7    NOTICE HAS NOT BEEN FILED, IT WILL BE SHORTLY WITH RESPECT TO A 


         8    COMPLAINT THAT WAS FILED MONDAY.  IT'S ENTITLED SAN FRANCISCO 


         9    WEB PRESSMEN AND PREPRESS WORKERS UNION LOCAL 4 AGAINST SFNA, 


        10    HEARST AND CHRONICLE, AND THE COMPLAINT SAYS, COMPLAINT -- THE 


        11    TITLE IS "COMPLAINT TO COMPEL ARBITRATION AND FOR INJUNCTION TO 


        12    PRESERVE STATUS QUO PENDING ARBITRATION, C OO-1647.  I JUST 


        13    WANTED TO ALERT YOU THAT THIS HAS BEEN FILED. 


        14               THE COURT:  THANK YOU.  HAS A RELATED CASE NOTICE 


        15    BEEN FILED OR IS IT YOUR INTENTION TO FILE ONE, OR -- 


        16               MR. HALLING:  ONE WILL BE FILED I EXPECT TODAY, 


        17    ALTHOUGH IT MAY EVEN HAVE BEEN FILED; BUT IF IT HASN'T BEEN, IT 


        18    WILL BE SHORTLY. 


        19               THE COURT:  BY YOUR OFFICE OR BY THE PLAINTIFF IN 


        20    THIS NEW CASE? 


        21               MR. HALLING:  I DON'T KNOW ABOUT THE PLAINTIFF, BUT 


        22    EITHER IT WILL BE FILED BY SFNA OR THE HEARST CORPORATION OR 


        23    BOTH. 


        24               THE COURT:  ALL RIGHT. 


        25               MR. HALLING:  THE SECOND -- 
                                                                         1265




         1               THE COURT:  I HAVE NOT SEEN THE COMPLAINT AS YET.  I 


         2    WAS ALERTED BY THE CLERK THAT SHE HAD HEARD THAT ONE WAS COMING 


         3    IN. 


         4               MR. HALLING:  THE SECOND MATTER, YOUR HONOR, IS I 


         5    UNDERSTAND THAT MR. ROSCH WOULD LIKE TO ADDRESS THE QUESTION 


         6    THAT YOU POSED TO MR. CONNELL AT THE END OF THE DAY. 


         7               THE COURT:  WELL, I'M ANXIOUS TO GET YOUR VIEWS ON 


         8    THIS, BUT I'M NOT SURE THIS IS THE TIME TO DO THAT. 


         9               MR. ROSCH:  WHENEVER, YOUR HONOR.  I JUST HAD A 


        10    CLARIFICATION. 


        11               THE COURT:  CLARIFICATION OF THE QUESTION OR -- 


        12               MR. ROSCH:  CLARIFICATION OF THE RESPONSE.  


        13    ACTUALLY, OF THE COLLOQUY.  IT WOULDN'T TAKE MORE THAN ABOUT A 


        14    MINUTE.  BUT WHATEVER THE COURT'S PLEASURE IS. 


        15               THE COURT:  LET'S CARRY ON.  AS A MATTER OF FACT, I 


        16    HAVE ANOTHER QUESTION WHICH YOU CAN MULL OVER, ALL OF YOU, 


        17    SOMEWHAT ALONG THE SAME LINES, AND IT ARISES OUT OF SECTION 


        18    1804, WHICH IS PART OF THE NEWSPAPER PRESERVATION ACT.  I'M NOT 


        19    SURE WHAT SECTION OF THE ACT IT WAS, BUT IT'S BEEN CODIFIED AT 


        20    TITLE 15 U.S.C. 1803, THAT -- I'M SORRY, 1804. 


        21               THAT PROVISION, TOGETHER, OF COURSE, WITH THE OTHER 


        22    PROVISIONS OF THE ACT, FAIRLY READ NEGATE THE SUPREME COURT'S 


        23    DECISION IN CITIZEN PUBLISHING.  WHERE DOES THAT LEGISLATIVE 


        24    EXPRESSION LEAVE US?  DOES THAT MEAN THAT CITIZEN PUBLISHING IS 


        25    OFF THE BOOKS AND WE START AFRESH WITH OUR ANALYSIS UNDER 
                                                                         1266




         1    SECTION 7; OR IF THE COURT CONCLUDES THAT THE NEWSPAPER 


         2    PRESERVATION ACT HAS NO APPLICATION IN THIS ACTION, DOES 


         3    CITIZEN PUBLISHING KICK BACK IN AND EXPRESS THE LAW AS IT 


         4    EXISTS? 


         5               MR. ROSCH:  AND THAT I THINK I CAN RESPOND TO YOU 


         6    RIGHT NOW. 


         7               THE COURT:  ALL RIGHT.  I REALLY DON'T WANT ARGUMENT 


         8    ON THIS, MR. ROSCH.  I JUST WANT TO THROW THESE QUESTIONS OUT 


         9    AND HAVE YOU THINK ABOUT THEM. 


        10               MR. ROSCH:  YES. 


        11               THE COURT:  AND I DON'T WANT TO JUST HAVE 


        12    HIT-OR-MISS LEGAL ARGUMENTS. 


        13               MR. ROSCH:  I UNDERSTAND THAT. 


        14               THE COURT:  BUT THESE ARE THINGS THAT ARE ON MY MIND 


        15    AND I WANT YOU TO KNOW WHAT'S ON MY MIND AS WE GO THROUGH THIS 


        16    PROCESS, AND YOU CAN BE THINKING ABOUT HOW YOU RESPOND TO THESE 


        17    QUESTIONS AT AN APPROPRIATE TIME. 


        18               MR. ROSCH:  IF YOUR HONOR WOULD LIKE ME TO DEFER, I 


        19    WILL. 


        20               THE COURT:  THANK YOU. 


        21               MR. ROSCH:  THANK YOU. 


        22               THE COURT:  NOW, ARE WE READY WITH THE NEXT WITNESS, 


        23    MR. SHULMAN? 


        24               MR. SHULMAN:  WITH THE WITNESS WHO WAS ON THE STAND. 


        25               I HAVE ONE PRELIMINARY MATTER, YOUR HONOR.  YOUR 
                                                                         1267




         1    HONOR ASKED YESTERDAY ABOUT THE AMICUS BRIEF OF THE DEPARTMENT 


         2    OF JUSTICE IN THE HONOLULU CASE.  WE HAVE THAT FOR YOU.  I 


         3    THINK YOU WILL FIND THAT IT BEARS DIRECTLY ON SOME OF THE 


         4    QUESTIONS YOU'VE BEEN ASKING. 


         5               THE COURT:  VERY WELL.  I LOOK FORWARD TO READING 


         6    IT. 


         7               ANY OTHER PRELIMINARY MATTERS? 


         8                             (NO RESPONSE) 


         9               THE COURT:  I HOPE YOU HAVE AN INTERESTING DAY IN 


        10    STORE FOR US, MR. SHULMAN. 


        11               MR. ALIOTO:  IT'S GOING TO BE REAL EXCITING, JUDGE. 


        12               THE COURT:  I TURNED DOWN AN OPPORTUNITY TO SEE MARK 


        13    MC GWIRE AT PAC BELL PARK JUST TO BE HERE WITH YOU. 


        14                              (LAUGHTER) 


        15               THE COURT:  SO -- 


        16               MR. SHULMAN:  THAT'S A TALL ORDER, YOUR HONOR. 


        17               THE COURT:  ALL RIGHT.  YOUR NEXT WITNESS? 


        18               MR. SHULMAN:  IT'S MR. WEAVER, YOUR HONOR.  WE'RE 


        19    CONTINUING WITH MR. WEAVER. 


        20               THE COURT:  OH, YES, HE'S STILL ON THE STAND. 


        21                           MICHAEL WEAVER,  


        22    CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN PREVIOUSLY 


        23    DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:   


        24               THE COURT:  GOOD MORNING, MR. WEAVER. 


        25               THE WITNESS:  GOOD MORNING. 
                                                                         1268
                                 WEAVER - DIRECT / SHULMAN 



         1               THE COURT:  DO YOU UNDERSTAND THAT THE OATH THAT YOU 


         2    TOOK YESTERDAY APPLIES TO THIS TESTIMONY? 


         3               THE WITNESS:  YES, I DO. 


         4               THE COURT:  SO YOU'RE STILL UNDER OATH.  IS THAT 


         5    UNDERSTOOD? 


         6               THE WITNESS:  THAT'S UNDERSTOOD. 


         7               THE COURT:  VERY WELL.  YOU MAY PROCEED, 


         8    MR. SHULMAN. 


         9               MR. SHULMAN:  THANK YOU.  MAY IT PLEASE THE COURT. 


        10                            DIRECT EXAMINATION   (RESUMED) 


        11    BY MR. SHULMAN: 


        12    Q.   MR. WEAVER, YESTERDAY WHEN YOU WERE ON THE STAND I WAS 


        13    ASKING YOU ABOUT PLAINTIFF'S EXHIBIT 46, AND I WANT -- ONE OF 


        14    THE THINGS I HAD ASKED YOU ABOUT IN EXHIBIT 46 WAS THE VERY 


        15    LAST PAGE, WHICH WAS THE PROJECTED PROFIT AND LOSS STATEMENT 


        16    THAT YOU DID ON FEBRUARY 10.  DO YOU HAVE THAT IN FRONT OF YOU? 


        17    A.   YES, I DO. 


        18    Q.   OKAY.  NOW, YOU SHOULD ALSO HAVE ON THE WITNESS STAND IN 


        19    FRONT OF YOU PLAINTIFF EXHIBIT 166, WHICH IS NOT YET IN 


        20    EVIDENCE.  DO YOU HAVE THAT? 


        21    A.   YES, I DO. 


        22    Q.   OKAY.  NOW, IS THIS -- CAN YOU TELL US WHAT THIS IS 


        23    WITHOUT -- 


        24               MR. SHULMAN:  DOES YOUR HONOR HAVE THAT ONE, 166? 


        25               THE COURT:  I DON'T HAVE IT IN MY HAND, BUT -- 
                                                                         1269
                                 WEAVER - DIRECT / SHULMAN 



         1               MR. LINDSTROM:  YOUR HONOR, FOR THE RECORD, IT'S THE 


         2    SAME AS HEARST 1036, WHICH IS ALREADY IN EVIDENCE. 


         3               MR. SHULMAN:  OH, IT IS.  ALL RIGHT.   


         4               THE COURT:  PLAINTIFF'S 166? 


         5               MR. SHULMAN:  IT'S HEARST 1036 HE SAYS. 


         6               THE COURT:  I'VE GOT YOUR BOOK HERE. 


         7               MR. SHULMAN:  OH, IT'S PLAINTIFF 166, RIGHT. 


         8               THE COURT:  OKAY.  AND THEY'RE IDENTICAL; ARE THEY, 


         9    MR. -- 


        10               MR. LINDSTROM:  YES, YOUR HONOR. 


        11               MR. SHULMAN:  SO WE CAN OFFER 166? 


        12               MR. LINDSTROM:  AND YOU'LL BE MET WITH NO OBJECTION. 


        13               MR. SHULMAN:  OKAY.  WE OFFER 166. 


        14               THE COURT:  ALL RIGHT. 


        15                             (PLAINTIFF'S EXHIBIT 166  


        16                              RECEIVED IN EVIDENCE) 


        17               THE COURT:  GO AHEAD, MR. SHULMAN. 


        18               MR. SHULMAN:  LET ME PUT UP -- AM I GOING.... 


        19                        (PAUSE IN PROCEEDINGS.) 


        20    BY MR. SHULMAN: 


        21    Q.   ALL RIGHT.  PLAINTIFF EXHIBIT 166 IS SIMILAR TO -- THE 


        22    NUMBERS ON IT ARE THE SAME -- ARE THE NUMBERS ON 166 THE SAME 


        23    AS THE NUMBERS ON EXHIBIT -- ON THE LAST PAGE OF EXHIBIT 46? 


        24    A.   YES.  THE PAGES ARE MARKED R00036 IS THE SAME AS R000237. 


        25    Q.   OKAY.  BUT THE DATE ON EXHIBIT 166 IS APRIL 6, WHICH IS A 
                                                                         1270
                                 WEAVER - DIRECT / SHULMAN 



         1    LATER DATE THAN THE FEBRUARY 10 DATE OF THE EARLIER SCHEDULE; 


         2    CORRECT? 


         3    A.   THAT'S CORRECT.  THAT REPRESENTS THE DATE IN WHICH IT WAS 


         4    PRINTED. 


         5    Q.   OKAY.  SO CAN YOU EXPLAIN THE RELATIONSHIP BETWEEN 166 AND 


         6    46? 


         7    A.   YES.  THIS IS THE SAME ITERATION OF THE PROFIT AND LOSS 


         8    MODEL.  IT'S THE SAME NUMBERS, HAS THE SAME CURRENT EXPENSE 


         9    STREAM AND THE SAME THREE-YEAR -- TWO-, THREE-YEAR SCENARIOS. 


        10    Q.   BUT IT'S JUST PRINTED AT A LATER DATE? 


        11    A.   THAT'S CORRECT. 


        12    Q.   NOW, ATTACHED TO EXHIBIT 166 THERE ARE A NUMBER OF 


        13    SCHEDULES.  CAN YOU EXPLAIN GENERALLY WHAT THEY ARE? 


        14    A.   YES.  THE SCHEDULE MARKED PAGE 238, WE TALKED A LITTLE BIT 


        15    ABOUT THIS YESTERDAY, THIS IS A SCHEDULE OF EMPLOYEES, AND HERE 


        16    THE MAJOR -- THERE ARE TWO DIFFERENCES.  ONE IS THE EARNINGS, 


        17    AS YOU CAN SEE, ARE NOT ROUNDED TO ZERO.  THAT'S THE CENTER 


        18    COLUMN.  THOSE ARE ACTUALLY THE BEST NUMBERS I COULD GET FROM 


        19    THE VERONIS AND SUHLER OFFERING MEMORANDUM AS TO THE ACTUAL 


        20    SALARY LEVELS, AVERAGE SALARY LEVELS IN THESE GROUPS. 


        21               ALSO, AS YOU'LL SEE LATER, THAT THE ACTUAL STAFFING 


        22    IS DIFFERENT BECAUSE ON THE NEXT PAGE, WHICH IS 239, YOU SEE 


        23    THE ASSUMPTIONS THAT UNDERLIE THIS MODEL.  AND IN THIS CASE, AS 


        24    YOU SEE ON PAGE 239, THIS IS AN ATTEMPT TO LOOK AT OPERATING AN 


        25    EXAMINER WITH A PRESS RUN SIMILAR TO WHAT WE HAVE TODAY.   
                                                                         1271
                                 WEAVER - DIRECT / SHULMAN 



         1               YOU SEE 125,000 DAILY NEAR THE MIDDLE AND 150,000 ON 


         2    SUNDAY.  THIS, OF COURSE, IMPACTS THE CALCULATIONS FOR 


         3    NEWSPRINT AND THE COST OF SUPPLEMENTS, AS WELL AS LOOKING AT 


         4    THIS MODEL WE'RE GOING TO HAVE HIGHER STAFFING ON PAGE 238 


         5    BECAUSE WE'RE LOOKING AT A PAPER THAT LOOKS QUITE -- VERY, VERY 


         6    SIMILAR TO TODAY'S EXAMINER. 


         7    Q.   OKAY.  IF YOU SEE AT THE TOP YOU HAVE -- THESE ARE THE 


         8    ASSUMPTIONS FOR THE PAGES? 


         9    A.   YES.  THIS IS ALSO AN ATTEMPT TO LOOK AT THE NUMBER OF 


        10    PAGES AND ADVERTISING RATES, REVENUE FRINGE OR COST FRINGE.  


        11    AND IN THIS CASE THE NUMBER OF PAGES IS SIGNIFICANTLY LARGER 


        12    THAN IN THE OTHER MODEL THAT WE WERE LOOKING AT. 


        13    Q.   SO THIS ASSUMES A PAPER WITH 56 PAGES DAILY AND A HUNDRED 


        14    ON SUNDAY? 


        15    A.   THAT'S CORRECT. 


        16    Q.   AND THEN OF THOSE 56, 22.4 ARE FOR ADVERTISING? 


        17    A.   THAT'S CORRECT. 


        18    Q.   AND THE PRESS RUN OF THIS PAPER IS 125,000 DAILY AND 


        19    150,000 ON SUNDAY? 


        20    A.   THAT'S CORRECT. 


        21    Q.   OKAY.  NOW I WANT TO DIRECT YOUR ATTENTION TO THE -- AND 


        22    SO THEN THIS IS THE BACKUP FOR THE MODEL THAT'S ON THE LAST 


        23    PAGE OF EXHIBIT 46 OR THE FIRST PAGE OF EXHIBIT 166? 


        24    A.   THAT IS CORRECT. 


        25    Q.   ALL RIGHT.  NOW I WANT TO DIRECT YOUR ATTENTION BACK TO 
                                                                         1272
                                 WEAVER - DIRECT / SHULMAN 



         1    EXHIBIT 46 AND SPECIFICALLY THE SECOND PAGE.  THIS IS A MODEL 


         2    THAT YOU DID -- IS THIS ANOTHER MODEL YOU DID? 


         3    A.   YES.  THIS MODEL IS A -- WAS BASED UPON A COPY OF THE 


         4    EARLY ONE.  YOU CAN SEE ON TOP IT SAYS "SAN FRANCISCO 


         5    EXAMINER - 1."  SO I COPIED THE EARLIER MODEL AND PUT IN NEW 


         6    ASSUMPTIONS. 


         7    Q.   OKAY.  AND YOU DID THIS MODEL -- YOU PRINTED THIS MODEL ON 


         8    WHAT DATE? 


         9    A.   ON MARCH 23RD. 


        10    Q.   ALL RIGHT.  AND THIS IS -- WAS THIS DONE AFTER THE EARLIER 


        11    MODEL? 


        12    A.   YES.  THIS WAS DONE MUCH LATER.  THIS WAS DONE IN 


        13    PREPARATION FOR THE MEETING WE'VE TALKED ABOUT OR THAT'S BEEN 


        14    TALKED ABOUT IN COURT ON MARCH 25TH. 


        15    Q.   SO THIS WAS AN -- ALL RIGHT. 


        16               LET'S LOOK AT PAGE 300 -- FOUR ZEROS 33, WHICH IS 


        17    ENTITLED "REVENUE AND EXPENSE DETAILS."  CAN YOU EXPLAIN WHAT 


        18    THIS IS? 


        19    A.   THIS IS AN ITERATION OF THIS MODEL THAT SHOWS A NEWSPAPER 


        20    THAT IS SIGNIFICANTLY SMALLER IN TERMS OF PAGES, 44 PAGES 


        21    DAILY, 64 SUNDAY.  THAT RESULTS IN AN ASSUMPTION OF FEWER AD 


        22    PAGES. 


        23               BECAUSE OF THE PRESS RUN AND THE PAID CIRCULATION 


        24    ASSUMPTIONS ARE LOWER, THE RATE PER INCH IS NOW $25 VERSUS I 


        25    THINK WE'VE SEEN 36 AND 40 ON THE OTHER SCHEDULE. 
                                                                         1273
                                 WEAVER - DIRECT / SHULMAN 



         1    Q.   SO THE SECOND MODEL YOU DID ASSUMES A SMALLER PAPER? 


         2    A.   THAT'S CORRECT. 


         3    Q.   WITH 44 PAGES DAILY AND 64 ON SUNDAY? 


         4    A.   THAT'S CORRECT. 


         5    Q.   AND YOU MADE AN ASSUMPTION AS TO THE VARIOUS -- AS TO THE 


         6    NUMBER OF PAGES THAT WOULD BE USED FOR ADVERTISING IN EACH 


         7    PAPER? 


         8    A.   YES. 


         9    Q.   THAT'S 17.6 DAILY, 32 SUNDAY? 


        10    A.   YES. 


        11    Q.   ALL RIGHT.  AND THE PRESS RUN THAT YOU SHOW, IT'S A LITTLE 


        12    LOWER ON THE PAGE, FOR THE PAPERS, THAT IS 80,000 FOR THE 


        13    DAILY, 80,000 FOR THE SUNDAY? 


        14    A.   THAT'S CORRECT. 


        15    Q.   ALL RIGHT.  AND THEN USING THESE DID YOU MAKE -- DID YOU 


        16    MAKE ANY ASSUMPTIONS ABOUT WHETHER YOU WOULD IN FACT BE ABLE TO 


        17    ACHIEVE THE REVENUE -- THE ADVERTISING REVENUE THAT'S SHOWN AT 


        18    THE TOP OF THE PAGE, THE $23 MILLION? 


        19    A.   NO, I DID NOT.  THIS WAS NOT AN ATTEMPT FOR ME TO SUGGEST 


        20    THAT THE REVENUE NUMBER OF 23 MILLION 076 IS MY ESTIMATE OF THE 


        21    REVENUE, IT IS SIMPLY A CALCULATION GIVEN THE ASSUMPTIONS OF 


        22    THE TOTAL PAGES, THE NUMBER OF ADVERTISING PAGES AND THE RATE 


        23    PER INCH. 


        24    Q.   OKAY.  AND IF WE GO BACK TO THE SECOND PAGE, WE SEE, 


        25    ACCORDING TO THIS MODEL, WHAT YOU ANTICIPATE THE PERFORMANCE OF 
                                                                         1274
                                 WEAVER - DIRECT / SHULMAN 



         1    SUCH A PAPER TO BE IN THE THIRD YEAR? 


         2    A.   (WITNESS EXAMINES DOCUMENT.)  IT'S NOT WHAT I ANTICIPATE 


         3    IT TO BE.  IT'S SIMPLY WHAT THE MODEL COMES UP WITH GIVEN THAT 


         4    REVENUE ASSUMPTION. 


         5    Q.   AND THIS SIZE PAPER WITH THIS STAFFING? 


         6    A.   YES. 


         7    Q.   OKAY.  AND UNDER THIS MODEL OF THIS NEWSPAPER YOU SHOW 


         8    OPTIMISTIC IN THE THIRD YEAR A LOSS OF ABOUT $11 MILLION? 


         9    A.   THAT'S CORRECT. 


        10    Q.   AND THE REALISTIC LOSS FOR THE THIRD YEAR IS IN THE AREA 


        11    OF $20 MILLION; IS THAT RIGHT? 


        12    A.   YES, 19 MILLION 152. 


        13    Q.   NOW I WANT TO GO BACK TO YOUR AFFIDAVIT, EXHIBIT 60, THE 


        14    SECOND PAGE OF THE AFFIDAVIT.  IN PARAGRAPHS 2 AND 3 YOU RECITE 


        15    VARIOUS INFORMATION THAT WAS AVAILABLE TO YOU AT THE MEETING OR 


        16    BEFORE THE MEETING ON THE 25TH? 


        17    A.   THAT'S CORRECT. 


        18    Q.   ALL RIGHT.  NOW LET'S LOOK AT PARAGRAPH 4.  YOU SAY: 


        19                   "BASED UPON THOSE FACTS AND MY EXPERIENCE IN 


        20               THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL 


        21               NOT UNDER ANY CIRCUMSTANCES BE ABLE TO SUPPORT 


        22               THE PROBABILITY OR EVEN THE POSSIBILITY OF A 


        23               VIABLE PAPER WHICH WOULD BE COMPETITIVE TO THE 


        24               CHRONICLE." 


        25               IS THAT YOUR OPINION? 
                                                                         1275
                                 WEAVER - DIRECT / SHULMAN 



         1    A.   YES. 


         2    Q.   AND HAVE YOU STATED THE BASIS FOR THAT OPINION IN YOUR 


         3    TESTIMONY IN THIS TRIAL? 


         4    A.   NOT YET. 


         5    Q.   OKAY.  TELL US WHAT THE BASIS FOR YOUR OPINION IS. 


         6    A.   IN MY OPINION, THE COSTS SHOWN ON THE MODEL THAT WE TALKED 


         7    ABOUT, WHICH ARE IN THE 43 TO -- 42 TO 43 MILLION-DOLLAR RANGE 


         8    IN ONE SCENARIO AND THE MID-50 MILLION-DOLLAR RANGE IN ANOTHER, 


         9    UNDERSTATES THE ACTUAL COSTS BECAUSE I'M ASSUMING IN THIS MODEL 


        10    THAT WE'RE IN AN EQUILIBRIUM STATE RATHER THAN BUILDING 


        11    CIRCULATION.  AND I THINK THE COSTS TO BUILD CIRCULATION AND 


        12    EVEN TO GET IT TO THIS LEVEL WOULD BE SIGNIFICANTLY MORE THAN 


        13    THE AMOUNT SHOWN UNDER CIRCULATION OTHER ON THESE TWO MODELS. 


        14               THEREFORE, MY FEELING IS THAT THE COSTS WILL BE A 


        15    MINIMUM OF $50 MILLION, POSSIBLY $60 MILLION, AND THE REVENUE 


        16    OFFSETS IN MY OPINION WOULD BE RELATIVELY LOW. 


        17    Q.   OKAY.  YOU SAY, QUOTE: 


        18                   "IN ORDER TO PRODUCE A VIABLE COMPETITIVE 


        19               PAPER, ANY BUYER OF THE EXAMINER WOULD NEED A 


        20               SUBSIDY OF UP TO $50 MILLION FOR THREE YEARS." 


        21               I'M GOING TO STOP THERE.  IS THAT YOUR OPINION? 


        22    A.   YES. 


        23    Q.   NOW, DO YOU MEAN $50 MILLION A YEAR FOR EACH YEAR OR DO 


        24    YOU MEAN A TOTAL OF 50 MILLION? 


        25    A.   $50 MILLION PER YEAR FOR UP TO THREE YEARS. 
                                                                         1276
                                 WEAVER - DIRECT / SHULMAN 



         1    Q.   OKAY.  NOW, YOU UNDERSTAND THAT'S DIFFERENT FROM THE 


         2    OPINION THAT OTHERS AT THE MEETING REACHED? 


         3    A.   I UNDERSTAND THAT. 


         4    Q.   OKAY.  EXPLAIN, PLEASE, THE BASIS FOR YOUR OPINION. 


         5    A.   IN MY OPINION A REASONABLE SUBSIDY FOR THREE YEARS WOULD 


         6    GET THE EXAMINER INTO A SITUATION WHERE WE COULD MAKE A 


         7    DECISION OR THE OWNER COULD MAKE A DECISION ABOUT WHETHER THE 


         8    EXAMINER ITSELF WILL BE VIABLE IN THE LONG-TERM, AND IT SEEMS 


         9    TO ME TO BE A REASONABLE POINT AT WHICH TO STEP BACK AND SAY, 


        10    "WE PUT A SIGNIFICANT AMOUNT OF MONEY INTO THIS.  WE'VE 


        11    INVESTED INTO THE PAPER.  WHAT ARE OUR CHANCES AT THAT TIME?" 


        12    Q.   OKAY.  YOU SAY: 


        13                   "ACCORDING TO THE EVIDENCE THAT I HAVE SEEN 


        14               AND MY EXPERIENCE IN THE INDUSTRY, IT WILL COST 


        15               AT LEAST $50 MILLION A YEAR IN ORDER TO BE ABLE 


        16               TO PUBLISH AN ECONOMICALLY VIABLE AND 


        17               COMPETITIVE EXAMINER." 


        18               IS THAT YOUR OPINION? 


        19    A.   YES. 


        20    Q.   HAVE YOU TOLD US THE GROUNDS FOR THAT OPINION? 


        21    A.   YES. 


        22    Q.   AND YOU SAY, QUOTE: 


        23                   "I AM INFORMED THAT HEARST CURRENTLY PAYS 


        24               APPROXIMATELY $90 MILLION A YEAR TO SUPPORT THE 


        25               EXISTING PAPER," END OF QUOTE. 
                                                                         1277
                                 WEAVER - DIRECT / SHULMAN 



         1               WHAT IS THE SOURCE OF THAT INFORMATION? 


         2    A.   THAT INFORMATION COMES FROM THE $80 MILLION WE'VE TALKED 


         3    ABOUT IN THE OTHER DEPOSITIONS AND THE $10 MILLION ADDITIONAL 


         4    FOR THE SUNDAY PRODUCT. 


         5    Q.   THEN YOU SAY, QUOTE: 


         6                   "FURTHER, UNDER THE TERMS OF THE DEAL 


         7               BETWEEN HEARST AND PAN ASIA, THE FOUR-MONTH 


         8               TRANSITION IS TOO SHORT A TIMEFRAME FOR PAN ASIA 


         9               TO BE IN A POSITION TO PRODUCE A STAND-ALONE, 


        10               VIABLE, PAID CIRCULATION DAILY PAPER WHICH WOULD 


        11               BE COMPETITIVE TO THE CHRONICLE.  AT A 


        12               MINIMUM" -- I'M GOING TO STOP THERE. 


        13               IS THAT YOUR OPINION? 


        14    A.   YES, IT IS. 


        15    Q.   AND WHAT IS THE BASIS FOR THAT OPINION THAT THE FOUR-MONTH 


        16    TRANSITION TIME PERIOD IS TOO SHORT A TIMEFRAME FOR PAN ASIA TO 


        17    BE IN A POSITION TO PRODUCE A STAND-ALONE, VIABLE, PAID 


        18    CIRCULATION DAILY NEWSPAPER THAT WOULD BE COMPETITIVE TO THE 


        19    CHRONICLE? 


        20    A.   IN MY OPINION A STAND-ALONE, VIABLE, COMPETITIVE NEWSPAPER 


        21    WOULD BE, IN THE TERMS OF DR. COMANOR, A SUBSTITUTE FOR THE 


        22    CHRONICLE; IN OTHER WORDS, A PAPER THAT YOU WOULD READ INSTEAD 


        23    OF RATHER THAN ALONG WITH THE CHRONICLE.  AND AS A SUBSTITUTE 


        24    NEWSPAPER, A COMPETITIVE NEWSPAPER, IT WOULD HAVE TO CARRY MOST 


        25    OF THE ADVERTISING, PARTICULARLY FROM THE LARGE ADVERTISERS, 
                                                                         1278
                                 WEAVER - DIRECT / SHULMAN 



         1    AND IT WOULD HAVE TO HAVE NEWS CONTENT THAT WAS A SUBSTITUTE, 


         2    IF YOU WILL, COMPETITIVE WITH THE CHRONICLE. 


         3               IN MY OPINION IT WOULD TAKE MORE THAN FOUR MONTHS TO 


         4    TRANSITION THE ADVERTISING; AND WITHOUT THE NEWS-GATHERING 


         5    FORCE CURRENTLY EXISTENT AT THE EXAMINER, I THINK IT WOULD BE 


         6    DIFFICULT TO DUPLICATE THAT QUALITY OF NEWS COVERAGE AND HAVE 


         7    THAT UP AND GOING IN FOUR MONTHS. 


         8    Q.   THEN YOU SAY: 


         9                   "AT A MINIMUM ANY BUYER OF THE EXAMINER 


        10               WOULD REQUIRE AT LEAST A 12- TO 18-MONTH 


        11               TRANSITION PERIOD BEFORE IT COULD PRODUCE AN 


        12               ECONOMICALLY VIABLE PAPER." 


        13               IS THAT YOUR OPINION? 


        14    A.   YES. 


        15    Q.   WHAT IS THE BASIS FOR THAT OPINION? 


        16    A.   THAT'S BASED UPON THE DISCUSSIONS AND THE WORK THAT WERE 


        17    DONE WITH MR. FLAHERTY AND MR. INGRAM IN WHICH WE LOOKED AT HOW 


        18    LONG A TRANSITION PERIOD MIGHT BE.  EARLIER IN THE TRIAL WAS 


        19    TALKED ABOUT 22 MONTHS.  IF YOU LOOK CLOSELY AT THAT, I THINK 


        20    YOU WOULD SEE THE FIRST FOUR TO SIX MONTHS WERE NEGOTIATIONS 


        21    AND FOLLOWUP. 


        22               AND ALSO ON THE OPINION OF MR. INGRAM THAT TO 


        23    PRODUCE A PAPER, YOU WOULD HAVE TO PUT IN -- INTO PLACE A PRESS 


        24    ROOM CAPABLE OF PRODUCING THAT PAPER, AND THAT IN ITSELF WOULD 


        25    TAKE THE 12 TO 18 MONTHS. 
                                                                         1279
                                 WEAVER - DIRECT / SHULMAN 



         1               MR. SHULMAN:  THANK YOU.  I HAVE NO FURTHER 


         2    QUESTIONS. 


         3               THE COURT:  BEFORE YOU MOVE ON, MR. SHULMAN -- 


         4               MR. SHULMAN:  SURE. 


         5               THE COURT:  -- LET ME ASK THE WITNESS TO GO BACK TO 


         6    A STATEMENT ON PAGE 2, I BELIEVE IT IS, OF HIS DECLARATION, 


         7    PARAGRAPH 4, BEGINNING ABOUT LINE 23, IN WHICH YOU EXPRESS THE 


         8    OPINION THAT HEARST NOW PAYS APPROXIMATELY $90 MILLION PER YEAR 


         9    TO SUPPORT THE EXISTING PAPER. 


        10               LET ME ASK YOU TO EXPAND ON THAT.  TELL ME HOW YOU 


        11    ARRIVED AT THAT NUMBER. 


        12               THE WITNESS:  I WOULD CALL YOUR ATTENTION BACK TO 


        13    EXHIBIT EITHER 46 OR 166 WHERE I HAVE ATTEMPTED TO LAY OUT THE 


        14    CURRENT EXPENSE STREAM AS I UNDERSTOOD IT BASED UPON 


        15    INFORMATION IN THE OFFERING MEMORANDUM. 


        16               THE COURT:  ALL RIGHT.  I HAVE 46. 


        17               THE WITNESS:  166 IS -- 


        18               THE COURT:  I'VE GOT 166 AS WELL OR THE EQUIVALENT, 


        19    THE HEARST EQUIVALENT. 


        20               MR. SHULMAN:  THE FIRST PAGE, YOUR HONOR. 


        21               THE WITNESS:  IF YOU LOOK AT THAT, WHICH IS MARKED 


        22    PAGE 000237, YOU SEE A TOTAL EXPENSE STREAM THERE OF 


        23    $80 MILLION BASED UPON THE INFORMATION THAT I WAS ABLE TO 


        24    GATHER FROM THE OFFERING MEMORANDUM. 


        25               THE COURT:  LET'S SEE, WHAT'S THE BATES STAMP NUMBER 
                                                                         1280
                                 WEAVER - DIRECT / SHULMAN 



         1    YOU'RE READING FROM? 


         2               THE WITNESS:  000237. 


         3               THE COURT:  YES. 


         4               THE WITNESS:  LOWER RIGHT-HAND CORNER. 


         5               THE COURT:  OH, I SEE, CURRENT REVENUE STREAM.  


         6    THAT'S THE COLUMN YOU'RE READING FROM. 


         7               MR. SHULMAN:  CURRENT EXPENSE STREAM. 


         8               THE WITNESS:  CURRENT EXPENSE STREAM. 


         9               THE COURT:  CURRENT EXPENSE STREAM, THANK YOU. 


        10               THE WITNESS:  SO THE SOURCE OF THESE NUMBERS IS THE 


        11    OFFERING MEMORANDUM. 


        12               THE COURT:  RIGHT, I UNDERSTOOD THAT. 


        13               THE WITNESS:  AND THEN THERE'S BEEN A LOT OF 


        14    DISCUSSION ABOUT THE SUNDAY PAPER AND HOW MUCH OF THAT IS OR 


        15    ISN'T IN THIS $80 MILLION. 


        16               I BELIEVE IN EARLIER -- 


        17               MR. SHULMAN:  46, FIRST PAGE. 


        18               THE WITNESS:  46, FIRST PAGE -- 


        19               THE COURT:  WELL, WHAT I'M DRIVING AT IS YOUR 


        20    CHARACTERIZATION OR STATEMENT THAT THESE NUMBERS INVOLVE A 


        21    PAYMENT BY HEARST OF $90 MILLION.  YOU'RE NOT SAYING, ARE YOU, 


        22    THAT HEARST INCURS A LOSS OF $90 MILLION A YEAR ON THE PAPER, 


        23    AN OUT-OF-POCKET LOSS OF THAT MAGNITUDE; ARE YOU? 


        24               THE WITNESS:  YOU'RE CORRECT. 


        25               THE COURT:  ALL RIGHT.  NOW, WHAT IS IT YOU'RE 
                                                                         1281
                                WEAVER - CROSS / LINDSTROM 



         1    SAYING BY THAT STATEMENT, THAT HEARST CURRENTLY PAYS 


         2    $90 MILLION A YEAR TO SUPPORT THE EXISTING PAPER? 


         3               THE WITNESS:  I THINK IT WOULD BE MORE CORRECT TO 


         4    SAY THAT THE SAN FRANCISCO NEWSPAPER AGENCY AND HEARST SPENDS 


         5    APPROXIMATELY $90 MILLION A YEAR TO SUPPORT THE EXISTING PAPER. 


         6               THE COURT:  AND THAT PAPER GENERATES REVENUES OF 


         7    WHAT? 


         8               THE WITNESS:  I HAVEN'T -- I HAVE NOT IN THIS 


         9    SITUATION MADE ANY ESTIMATES OF THE REVENUE NUMBERS. 


        10               THE COURT:  ALL RIGHT.  SO YOUR STATEMENT, THEN, 


        11    REFERS ONLY TO THE AMOUNT OF MONEY THAT HEARST HAS TO INCUR AS 


        12    EXPENSES TO SUPPORT THE PAPER TOGETHER, OF COURSE, WITH ITS 


        13    SHARE OF WHAT EXPENSES ARE INCURRED BY THE NEWSPAPER AGENCY? 


        14               THE WITNESS:  THIS STATEMENT IS -- MY STATEMENT IS 


        15    THAT THE EXPENSES INCURRED BY THE NEWSPAPER AGENCY AND HEARST 


        16    ONLY, IRREGARDLESS OF REVENUES, IS APPROXIMATELY $90 MILLION. 


        17               THE COURT:  ALL RIGHT.  OKAY.  THANK YOU, 


        18    MR. SHULMAN. 


        19               MR. SHULMAN:  THANK YOU. 


        20               THE COURT:  MR. LINDSTROM. 


        21               MR. LINDSTROM:  THANK YOU, YOUR HONOR.  YOUR HONOR, 


        22    IF IT PLEASE THE COURT, MAY I APPROACH THE WITNESS? 


        23               THE COURT:  YES, YOU MAY. 


        24    


        25    
                                                                         1282
                                WEAVER - CROSS / LINDSTROM 



         1                           CROSS-EXAMINATION 


         2    BY MR. LINDSTROM: 


         3    Q.   GOOD MORNING, MR. WEAVER. 


         4    A.   GOOD MORNING, MR. LINDSTROM. 


         5    Q.   I HAVE -- WE'VE MET BEFORE; HAVEN'T WE? 


         6    A.   WE HAVE. 


         7               MR. LINDSTROM:  I HAVE, YOUR HONOR, FOR THE WITNESS, 


         8    IN ORDER TO EXPEDITE HIS EXAMINATION, A COLLECTION OF EXHIBITS 


         9    THAT I MIGHT REFER TO DURING THE COURSE OF THE EXAMINATION 


        10    WHICH I'D LIKE TO PLACE BEFORE HIM.  THEY'RE ALL IN EVIDENCE.  


        11    AND I HAVE A COPY FOR THE COURT.  IF YOUR HONOR WISHES TO HAVE 


        12    THE SAME DOCUMENT, I'LL TENDER IT TO YOUR CLERK AT THIS TIME. 


        13               THE COURT:  ALL RIGHT. 


        14               MR. LINDSTROM:  AND I WISH TO ADVISE THE COURT, I 


        15    HAVE NO INTENTION OF GOING THROUGH ALL THESE DOCUMENTS, BUT 


        16    THIS WITNESS HAS PRODUCED A NUMBER OF THINGS AND THEY MAY COME 


        17    INTO PLAY DURING THE COURSE OF THE EXAMINATION. 


        18               THE COURT:  ALL RIGHT. 


        19    BY MR. LINDSTROM: 


        20    Q.   LET ME ASK JUST A COUPLE OF FOLLOWUP QUESTIONS WITH 


        21    RESPECT TO YOUR CALCULATION OF THE COSTS RELATING TO PRODUCING 


        22    TODAY'S EXAMINER. 


        23               DIRECTING YOUR ATTENTION TO PLAINTIFF'S 46, ON THE 


        24    FIRST PAGE, AS MR. SHULMAN JUST INDICATED, THE FIRST PAGE OF 


        25    THIS EXHIBIT, BATES STAMPED PAGE R00030, IS YOUR CALCULATION OF 
                                                                         1283
                                WEAVER - CROSS / LINDSTROM 



         1    THE COSTS ASSOCIATED WITH PRODUCING A SUNDAY NUMBER, A SUNDAY 


         2    PAPER; CORRECT? 


         3    A.   THAT WAS A CALCULATION THAT WAS BASICALLY PREPARED BY 


         4    LARRY INGRAM. 


         5    Q.   WITH WHICH YOU AGREE; CORRECT? 


         6    A.   YES. 


         7    Q.   AND IF ONE ADDS THAT $10 MILLION TO THE $80 MILLION ON 


         8    PAGE 00036, YOU GET THE $90 MILLION THAT'S REFERENCED IN YOUR 


         9    DECLARATION; CORRECT? 


        10    A.   THAT'S CORRECT. 


        11    Q.   NOW, LET ME ASK YOU A QUESTION ABOUT BATES STAMPED PAGE 


        12    R00031.  HERE YOU COME UP WITH A COST ESTIMATE FOR THE 


        13    EXAMINER, NOT INCLUDING THE SUNDAY PAPER, OF 73 RATHER THAN 


        14    $80 MILLION.  I THINK I UNDERSTAND YOUR TESTIMONY ON THIS 


        15    POINT, BUT COULD YOU EXPLAIN TO THE COURT WHY IT IS THAT THIS 


        16    NUMBER IS DIFFERENT THAN THE 80 MILLION WE SAW A FEW MOMENTS 


        17    AGO? 


        18    A.   (WITNESS EXAMINES DOCUMENTS.)  I WOULD START WITH THE TOP 


        19    LINE ON THE RIGHT, NEWSPRINT AND INK.  ON THIS PAGE THE 


        20    4 MILLION 635 SIMPLY PICKS UP THE NEWSPRINT AND INK NUMBER 


        21    THAT'S UNDER THE OPTIMISTIC SCENARIO, SO THAT IT UNDERSTATES 


        22    THE COST OF NEWSPRINT AND INK.  THE NUMBER 8 MILLION 498 IS A 


        23    BETTER NUMBER FOR THAT.   


        24               THE SAME -- 


        25    Q.   LET ME STOP YOU FOR A MOMENT.  WHY DID YOU MODEL THIS 
                                                                         1284
                                WEAVER - CROSS / LINDSTROM 



         1    SCENARIO THAT'S DIFFERENT THAN THE FIRST THAT YOU RAN? 


         2    A.   I MODELED THE SECOND SCENARIO TO LOOK AT NOT THE CURRENT 


         3    EXPENSE STREAM, WHICH I DID NOT OBVIOUSLY GO BACK AND VERIFY 


         4    FROM ONE TO THE OTHER, BUT TO LOOK AT WHAT DIFFERENT 


         5    ASSUMPTIONS WOULD BE ON THE PROFIT AND LOSS OR THE EXPENSE AND 


         6    REVENUE STREAMS FROM ONE MODEL TO ANOTHER. 


         7    Q.   WOULD IT BE FAIR TO SAY WITH RESPECT TO THIS MODEL, YOUR 


         8    GOAL WAS TO MODEL FOR MR. REILLY A SCALED-BACK OPERATION THAT 


         9    WOULD ENTAIL A TOTAL COST TO HIM OF PUTTING THE PAPER OUT OF 


        10    SOMETHING ON THE ORDER OF $40 MILLION AND TO COMPARE THAT ON AN 


        11    APPLES-AND-APPLES BASIS WITH WHAT THE CURRENT COST OF PRODUCING 


        12    THE EXAMINER WOULD BE MADE ON THE SAME SET OF ASSUMPTIONS? 


        13    A.   YOU'RE CORRECT THAT THIS MODEL ON PAGE 31 WAS PUT TOGETHER 


        14    TO REFLECT WHAT COULD BE DONE IF YOU WERE TO SPEND 40 TO 


        15    $50 MILLION TO PRODUCE THE EXAMINER. 


        16               THE SECOND HALF OF THE STATEMENT I THINK I WOULD 


        17    STILL SAY THAT THE EXPENSE STREAM OF $80 MILLION IS MORE 


        18    ACCURATE. 


        19    Q.   CORRECT.  AND AUGMENTED BY THE 10 MILLION FOR SUNDAY, 


        20    $90 MILLION IS THE FIGURE THAT HIS HONOR SHOULD TAKE FROM YOUR 


        21    TESTIMONY IS THE COST OF PRODUCING TODAY'S EXAMINER; ISN'T THAT 


        22    RIGHT?  90 MILLION. 


        23    A.   I HAVE -- I HAVE PUT TOGETHER THE FIRST 80 MILLION FROM 


        24    INFORMATION PROVIDED TO ME IN THE OFFERING MEMORANDUM, AND I 


        25    BELIEVE THAT THE OFFERING MEMORANDUM HAS, AS THEY ALL DO, LOTS 
                                                                         1285
                                WEAVER - CROSS / LINDSTROM 



         1    OF CAVEATS IN THEM.  SO I CAN'T STAND BY THOSE NUMBERS 


         2    INDEPENDENTLY OF THE OFFERING MEMORANDUM.  I CAN ONLY OFFER 


         3    THEM UP -- EXCUSE THE PUN -- AS WHAT IS PRESENTED BY VERONIS 


         4    SUHLER AND HEARST CORPORATION AS THE COSTS ASSOCIATED WITH 


         5    PRODUCING THE EXAMINER. 


         6    Q.   WELL, THESE WERE THE NUMBERS YOU OFFERED UP TO YOUR 


         7    CLIENT, MR. REILLY; RIGHT? 


         8    A.   THAT'S CORRECT. 


         9    Q.   THE 80 MILLION; CORRECT? 


        10    A.   THAT'S CORRECT. 


        11    Q.   AND THE 10 MILLION FOR A SUNDAY EDITION; RIGHT? 


        12    A.   THAT'S CORRECT. 


        13    Q.   AND YOU PROVIDED HIM WITH THOSE ESTIMATES AT A POINT IN 


        14    TIME BEFORE YOU WERE RETAINED TO TESTIFY IN THIS LITIGATION; 


        15    RIGHT? 


        16    A.   THAT'S CORRECT. 


        17    Q.   YOUR GOAL IN PROVIDING HIM WITH THAT INFORMATION WAS TO 


        18    GIVE HIM THE BEST DATA YOU COULD COME UP WITH TO ENABLE HIM TO 


        19    NEGOTIATE WITH HEARST; ISN'T THAT RIGHT? 


        20    A.   THAT'S CORRECT. 


        21    Q.   NOW, YOU LOOKED AT THE VERONIS AND SUHLER OFFERING 


        22    MEMORANDUM; CORRECT? 


        23    A.   THAT'S CORRECT. 


        24    Q.   YOU TOLD US DURING DIRECT THAT YOU ALSO LOOKED AT A ROOM 


        25    FULL OF DOCUMENTS AT THE SHEPPARD, MULLIN LAW FIRM; RIGHT? 
                                                                         1286
                                WEAVER - CROSS / LINDSTROM 



         1    A.   THAT'S CORRECT. 


         2    Q.   AND WHAT KINDS OF DOCUMENTS DID YOU LOOK AT THERE? 


         3    A.   THE SHEPPARD, MULLIN LAW FIRM DOCUMENTS INCLUDED 


         4    INFORMATION ABOUT THE PROFIT AND LOSS OF THE SAN FRANCISCO 


         5    NEWSPAPER AGENCY.  THERE WAS A LOT OF INFORMATION ABOUT 


         6    ADVERTISING, ADVERTISERS, ADVERTISER CONTRACTS, AND THERE WAS 


         7    INFORMATION ABOUT CIRCULATION.  THERE WERE SOME OTHER THINGS I 


         8    DON'T THINK WE TOOK ANY -- I DIDN'T TAKE AWAY ANY INFORMATION 


         9    OTHER THAN THAT. 


        10    Q.   THE DOCUMENTS RELATING TO THE COSTS AND EXPENSES THAT YOU 


        11    SAW AT SHEPPARD, MULLIN, WERE THOSE THE TYPES OF DOCUMENTS THAT 


        12    YOU WOULD TYPICALLY RELY UPON AS A CFO IN PREPARING THIS KIND 


        13    OF A PROJECTION? 


        14    A.   YES. 


        15    Q.   AND YOU SAT THROUGH NEARLY THE ENTIRE COURSE OF THIS 


        16    TRIAL; ISN'T THAT RIGHT? 


        17    A.   YES. 


        18    Q.   AND YOU'VE HEARD NOTHING DURING THE COURSE OF THIS TRIAL 


        19    THAT SUGGESTS TO YOU THAT ANY OF THE NUMBERS THAT WERE PROVIDED 


        20    BY HEARST THROUGH ITS LAWYERS OR IN THE VERONIS SUHLER REPORT 


        21    WERE WRONG; HAVE YOU? 


        22    A.   THAT'S CORRECT. 


        23    Q.   NOW, AT THE TIME YOU PREPARED THIS PROJECTION, YOU 


        24    INCLUDED NO NUMBERS FOR CURRENT EXPENSE STREAM; CORRECT? 


        25    A.   NO REVENUE NUMBERS? 
                                                                         1287
                                WEAVER - CROSS / LINDSTROM 



         1    Q.   FOR TODAY'S EXAMINER, NO REVENUE NUMBERS. 


         2    A.   THAT'S CORRECT. 


         3    Q.   AND PART OF THE REASON FOR THAT IS YOU DON'T REGARD 


         4    YOURSELF AS A REVENUE EXPERT; RIGHT? 


         5    A.   THAT'S CORRECT. 


         6    Q.   YOU HAD THE IMPRESSION, THOUGH, DID YOU NOT, THAT TODAY'S 


         7    EXAMINER WAS LOSING MONEY? 


         8    A.   THAT'S CORRECT. 


         9    Q.   AND YOU AND MR. FLAHERTY TALKED ABOUT YOUR PERCEPTIONS IN 


        10    THAT REGARD; ISN'T THAT RIGHT? 


        11    A.   THAT'S CORRECT. 


        12    Q.   AND HE AGREED WITH YOU DID HE NOT? 


        13    A.   THAT'S CORRECT, YES. 


        14    Q.   AND MR. INGRAM ALSO SHARED THE SAME VIEW THAT THE PAPER 


        15    WAS LOSING MONEY; ISN'T THAT RIGHT? 


        16    A.   THAT'S CORRECT. 


        17    Q.   BUT AT THAT POINT YOU DIDN'T KNOW HOW MUCH; RIGHT? 


        18    A.   THAT'S CORRECT. 


        19    Q.   NOW, SINCE YOUR ENGAGEMENT IN THIS MATTER, YOU'VE HAD A 


        20    CHANCE TO TALK WITH REVENUE EXPERTS; HAVEN'T YOU? 


        21    A.   YES. 


        22    Q.   INCLUDING HEARING THEIR TESTIMONY HERE IN THIS COURT; 


        23    ISN'T THAT RIGHT? 


        24    A.   YES. 


        25    Q.   AND YOU WOULD REGARD MR. CLANCY AS A REVENUE EXPERT; WOULD 
                                                                         1288
                                WEAVER - CROSS / LINDSTROM 



         1    YOU NOT? 


         2    A.   YES. 


         3    Q.   AND MR. CLANCY ACTUALLY TOOK YOUR NUMBERS AND HE FILLED 


         4    THEM IN; DIDN'T HE? 


         5    A.   I WAS NOT HERE WHEN MR. CLANCY GAVE HIS DEPOSITION, SO I'M 


         6    NOT SURE. 


         7    Q.   HIS TRIAL TESTIMONY. 


         8    A.   HIS TRIAL TESTIMONY.  I'M NOT SURE. 


         9    Q.   LET ME DIRECT YOUR TESTIMONY TO CHRONICLE EXHIBIT C-23 IN 


        10    EVIDENCE.  NOW, YOU RECOGNIZE THE TEMPLATE ON WHICH THESE NOTES 


        11    ARE TAKEN; ISN'T THAT RIGHT? 


        12    A.   THAT'S CORRECT. 


        13    Q.   AND THIS IS A DOCUMENT THAT YOU HANDED OUT AT THE MARCH 


        14    25TH MEETING; RIGHT? 


        15    A.   THAT'S CORRECT. 


        16    Q.   AND I WILL REPRESENT TO YOU THAT MR. CLANCY APPEARED IN 


        17    THIS COURTROOM AND TESTIFIED THAT THESE WERE HIS REVENUE 


        18    CALCULATIONS FOR A STAND-ALONE EXAMINER.  I WANT YOU TO ASSUME 


        19    THAT'S TRUE. 


        20               SO IF YOU TAKE THESE NUMBERS FROM A REVENUE EXPERT 


        21    AND APPLY THEM AGAINST YOUR COST ESTIMATES, TODAY'S EXAMINER IS 


        22    LOSING, BY MR. CLANCY'S CALCULATION, ABOUT $40 MILLION; ISN'T 


        23    THAT RIGHT? 


        24    A.   YES. 


        25    Q.   BUT MR. CLANCY WAS USING THE 73 MILLION-DOLLAR COST 
                                                                         1289
                                WEAVER - CROSS / LINDSTROM 



         1    ESTIMATE; ISN'T THAT RIGHT? 


         2    A.   THAT'S CORRECT. 


         3    Q.   AND IF WE WERE TO USE THE NUMBER THAT YOU TOLD US WAS THE 


         4    CORRECT NUMBER WITHOUT SUNDAY, THE $80 MILLION, THIS 38 WOULD 


         5    NEED TO BE ABOUT 45 MILLION; ISN'T THAT RIGHT? 


         6    A.   THAT'S CORRECT. 


         7    Q.   AND IF WE WERE TO TAKE IT UP TO YOUR TESTIMONY TODAY OF 


         8    90 MILLION, MR. CLANCY, OUR REVENUE EXPERT, WOULD HAVE US AT 


         9    55 MILLION-DOLLAR LOSS; ISN'T THAT RIGHT? 


        10    A.   THAT'S CORRECT. 


        11    Q.   OKAY.  NOW, MR. FLOOD, YOU HEARD HIS TESTIMONY HERE IN THE 


        12    COURTROOM; DID YOU NOT? 


        13    A.   YES, I DID. 


        14    Q.   HE'S ANOTHER REVENUE EXPERT; ISN'T THAT RIGHT? 


        15    A.   THAT'S CORRECT. 


        16    Q.   AND YOU'VE WORKED WITH THESE GENTLEMEN IN YOUR PAST 


        17    CAREER; RIGHT? 


        18    A.   THAT'S NOT CORRECT. 


        19    Q.   HAVE YOU NOT WORKED WITH EITHER FLOOD OR CLANCY? 


        20    A.   I HAVE NOT WORKED WITH FLOOD AT ALL, AND I'VE NEVER REALLY 


        21    WORKED WITH MR. CLANCY.  I HAVE -- WHEN I WAS IN CHICAGO, HE 


        22    WAS IN CHICAGO DOING DIFFERENT THINGS. 


        23    Q.   IT'S TRUE, ISN'T IT, THAT YOU WERE ALL WITH THE TRIBUNE 


        24    ORGANIZATION AT ONE POINT OR ANOTHER? 


        25    A.   THAT'S TRUE. 
                                                                         1290
                                WEAVER - CROSS / LINDSTROM 



         1    Q.   ALL RIGHT.  AND YOU HAVE NO REASON TO DOUBT MR. FLOOD'S 


         2    CAPABILITIES AS A REVENUE-SIDE EXPERT; DO YOU? 


         3    A.   THAT'S CORRECT. 


         4    Q.   NOW, LET ME SHOW YOU EXHIBIT C-322 IN EVIDENCE.  THIS IS A 


         5    PAGE OF CALCULATIONS FROM MR. FLOOD TO WHICH HE JUST TESTIFIED 


         6    YESTERDAY.  AND LET ME ZOOM IN, IF I MAY. 


         7               YOU HEARD HIM, DIDN'T YOU, WHEN HE TESTIFIED 


         8    YESTERDAY THAT HE MADE A CALCULATION OF THE EXAMINER'S 


         9    CONTRIBUTION TO THE REVENUE OF THE AGENCY?  YOU HEARD THAT 


        10    TESTIMONY; DIDN'T YOU? 


        11    A.   YES. 


        12    Q.   AND HE TOLD US DURING HIS TESTIMONY, REFERRING TO THIS 


        13    EXHIBIT, THAT HIS CALCULATION WAS $43 MILLION FOR THE 


        14    EXAMINER'S CONTRIBUTION TO REVENUE; RIGHT? 


        15    A.   YES. 


        16    Q.   DO YOU REMEMBER THAT TESTIMONY? 


        17    A.   ACTUALLY I DO NOT REMEMBER THE 43 MILLION. 


        18    Q.   ALL RIGHT.  WELL, I WILL REPRESENT TO YOU AND ASSUME THAT 


        19    IT'S TRUE THAT THE NUMBER IN THIS DOCUMENT IN EVIDENCE C-322 


        20    WAS ALSO TESTIFIED TO YESTERDAY BY MR. FLOOD. 


        21               AND THEN HERE'S ANOTHER NUMBER, $275,000.  THAT 


        22    NUMBER IS FAMILIAR TO YOU; ISN'T IT, SIR? 


        23    A.   YES, IT IS. 


        24    Q.   IN FACT, THAT NUMBER WAS OBTAINED BY MR. FLOOD FROM YOU; 


        25    ISN'T THAT RIGHT? 
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         1    A.   IT CERTAINLY COULD BE.  I DON'T KNOW WHERE HE GOT IT. 


         2    Q.   ALL RIGHT.  FOR THE COURT, WHAT IS THE $275,784 THAT'S 


         3    INDICATED ON EXHIBIT C-22? 


         4    A.   THAT'S THE REVENUE -- I BELIEVE THAT'S THE ADVERTISING 


         5    REVENUE ATTRIBUTABLE TO SALES OF EXAMINER-ONLY ADVERTISING IN 


         6    1997, 1998.  ONE OF THOSE TWO YEARS. 


         7    Q.   ALL RIGHT.  NOW, WERE YOU HERE WHEN MR. PAGE TESTIFIED? 


         8    A.   NO. 


         9    Q.   THIS NUMBER OF $275,000, IF I UNDERSTAND YOUR TESTIMONY, 


        10    THIS NUMBER, LESS THAN $300,000, REPRESENTS THOSE ADVERTISERS 


        11    WHO ARE ONLY IN THE EXAMINER; IS THAT RIGHT? 


        12    A.   THAT'S MY UNDERSTANDING.  I BELIEVE THERE'S A SCHEDULE 


        13    THAT BACKS THAT UP.  I'M NOT -- I ONLY HESITATE BECAUSE I DON'T 


        14    HAVE THAT IN MY MIND. 


        15    Q.   AND YOU PREPARED JUST SUCH A SCHEDULE; DID YOU NOT, SIR? 


        16    A.   THAT'S CORRECT. 


        17    Q.   BECAUSE YOU WANTED TO SEE, AS BEST YOU COULD, WHAT 


        18    REVENUES WERE ATTRIBUTABLE TO TODAY'S EXAMINER; RIGHT? 


        19    A.   NO.  I -- I DIDN'T DO IT TO DETERMINE WHAT WERE 


        20    ATTRIBUTABLE.  I WANTED TO FIND OUT HOW MUCH ADVERTISING WAS 


        21    SOLD EXAMINER ONLY IN CONJUNCTION WITH FINDING OUT HOW MUCH 


        22    ADVERTISING WAS SOLD IN COMBINATION. 


        23    Q.   OKAY.  AND IF WE LOOK AT C-315 IN EVIDENCE, THE LAST PAGE 


        24    OF THAT EXHIBIT, I THINK WE'LL FIND YOUR CALCULATION IN THAT 


        25    REGARD; ISN'T THAT RIGHT, SIR? 
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         1    A.   I CAN'T READ THAT. 


         2    Q.   THAT'S WHY I GAVE YOU THE NOTEBOOK. 


         3    A.   OH, I'M SORRY. 


         4    Q.   YOU CAN SEE IT THERE.  AND WHILE YOU'RE LOCATING IT, LET 


         5    ME ZOOM IN ON YOUR TOTAL FOR 1999.  THERE IT IS BIGGER THAN 


         6    LIFE; RIGHT? 


         7    A.   YES, THAT'S CORRECT. 


         8    Q.   OKAY.  NOW, WILL YOU EXPLAIN TO HIS HONOR HOW YOU CAME UP 


         9    WITH THIS NUMBER? 


        10    A.   THIS INFORMATION I GATHERED WHEN I WAS AT SHEPPARD, MULLIN 


        11    OFFICE LOOKING THROUGH THE INFORMATION THAT WAS MADE AVAILABLE 


        12    TO POTENTIAL PURCHASERS.  AND I PICKED UP THE NUMBER OF 


        13    INSERTIONS, THE NUMBER OF INCHES AND THE REVENUE IN THREE 


        14    DIFFERENT CATEGORIES THAT WERE EXAMINER ONLY. 


        15    Q.   OKAY.  AND THE CATEGORIES WERE RETAIL; RIGHT? 


        16    A.   YES. 


        17    Q.   NATIONAL? 


        18    A.   YES. 


        19    Q.   CLASSIFIED? 


        20    A.   YES. 


        21    Q.   IN OTHER WORDS, ALL OF THE TYPES OF ADVERTISING THAT MIGHT 


        22    BE PLACED IN THE EXAMINER; CORRECT? 


        23    A.   YES. 


        24    Q.   IN OTHER WORDS, YOU DIDN'T LEAVE OUT ANY SIGNIFICANT 


        25    CATEGORY OF ADVERTISING; DID YOU? 
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         1    A.   HAVING HEARD MR. FLOOD'S TESTIMONY ABOUT THE SUNDAY 


         2    MAGAZINE, THAT'S NOT INCLUDED IN HERE, BUT I DON'T THINK IT WAS 


         3    INTENDED TO BE.  THAT'S A FULL-RUN BUY. 


         4    Q.   ALL RIGHT.  NOW RETURNING TO MR. FLOOD, IF WE ADD UP THESE 


         5    TWO NUMBERS, OUR REVENUE EXPERT, MR. FLOOD, COMES UP WITH 


         6    SOMETHING ON THE ORDER OF $43,350,000 AS THE EXAMINER'S 


         7    CONTRIBUTION TO REVENUE IN 1998; RIGHT? 


         8    A.   YES, HE DOES. 


         9    Q.   OKAY.  SO IF YOU ASSUME THAT HIS CALCULATION IS TRUE AND 


        10    THAT IT COSTS $90 MILLION TO PUT THE PAPER OUT THAT YEAR, THEN 


        11    MR. FLOOD HAS US AT A LOSS OF HOW MUCH? 


        12    A.   FIRST, I DON'T KNOW WHETHER MR. FLOOD INCLUDED CIRCULATION 


        13    REVENUE.  YOU MIGHT BE ABLE TO PROVIDE SOME INSIGHT INTO THAT.  


        14    I THINK THAT'S ADVERTISING REVENUE.   


        15    Q.   ALL RIGHT.  MR. FLOOD IN HIS MATERIALS DID LOOK AT 


        16    ADVERTISING AND HE DID LOOK AT CIRCULATION; ISN'T THAT RIGHT? 


        17    A.   I DON'T KNOW.  I HAVEN'T SEEN THOSE MATERIALS. 


        18    Q.   WELL, LET ME SHOW THEM TO YOU.  THEY'RE -- AGAIN, THIS IS 


        19    322 IN EVIDENCE.  ON THE VERY NEXT PAGE HE HAS A CIRCULATION 


        20    NUMBER, DOES HE NOT, OF $7 MILLION?  DO YOU SEE THAT? 


        21    A.   (WITNESS EXAMINES DOCUMENT.)  NO, I DON'T SEE THAT. 


        22    Q.   IT'S ON THE SCREEN HERE. 


        23    A.   I SEE IT ON THE SCREEN.  I WAS LOOKING IN 322. 


        24    Q.   OKAY.  DO YOU SEE IT ON THE SCREEN, THE $7 MILLION?  I 


        25    WANT YOU TO ASSUME THAT FIGURE IS TRUE FROM MR. FLOOD.  AND, 
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         1    INDEED, IF WE GO BACK TO C-323, CLANCY'S DOCUMENT, WE SEE HE 


         2    HAS A VERY SIMILAR CALCULATION FOR CIRCULATION; DOES HE NOT, 


         3    7,400,000? 


         4    A.   YES. 


         5    Q.   OKAY.  SO IF WE TAKE THESE TWO NUMBERS, WE COME UP TO 


         6    ROUGHLY 50 MILLION IN REVENUE THAT ACCORDING TO MR. FLOOD WAS 


         7    CONTRIBUTED BY THE EXAMINER IN 1998; RIGHT?  43 PLUS 7. 


         8    A.   THAT'S CORRECT. 


         9    Q.   AND IF IT COST 90 MILLION TO PUT THAT PAPER OUT THAT YEAR, 


        10    THEN IT LOST 50 MILLION -- $40 MILLION; ISN'T THAT RIGHT? 


        11    A.   YES. 


        12    Q.   THIS ISN'T A TRICK QUESTION.  YOU'RE THE CFO. 


        13               MR. LINDSTROM:  YOUR HONOR, MAY I APPROACH THE 


        14    EASEL? 


        15               THE COURT:  YES, YOU MAY. 


        16    BY MR. LINDSTROM: 


        17    Q.   LET ME KEEP TRACK OF THIS IF I MAY.  REILLY EXPERTS. 


        18               NOW, A FEW MOMENTS AGO WE TALKED ABOUT CLANCY AND HE 


        19    CAME UP, AS WE SAW, WITH 45 TO $55 MILLION IN LOSSES FOR 


        20    TODAY'S EXAMINER; CORRECT?  WE JUST WENT THROUGH THAT. 


        21    A.   YES. 


        22    Q.   ALL RIGHT.  NOW, ON FLOOD, FLOOD HAS 50 MILLION IN 


        23    REVENUES AND APPLIED AGAINST YOUR 90 MILLION-DOLLAR COST 


        24    ESTIMATE, WHAT DOES THAT YIELD AS A LOSS? 


        25    A.   THAT YIELDS $40 MILLION. 
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         1    Q.   OKAY.  AND AS LONG AS I'M UP HERE, YOU HEARD YOUR COHORT, 


         2    MR. INGRAM, TESTIFY YESTERDAY; DID YOU NOT? 


         3    A.   YES. 


         4    Q.   AND HE SAID IT WAS 30 TO 50 IN HIS JUDGMENT; RIGHT? 


         5               THE COURT:  I THINK "COLLEAGUE" WOULD BE A BETTER 


         6    TERM, MR. LINDSTROM. 


         7               MR. LINDSTROM:  I'M SORRY.  COLLEAGUE. 


         8               THE WITNESS:  YES. 


         9    BY MR. LINDSTROM: 


        10    Q.   HIS BEST ESTIMATE WAS 30 TO 50 MILLION OF LOSSES; RIGHT?  


        11    AND THEN YOU HEARD MR. SCHMIDT AND HE TOLD US, DID HE NOT, THAT 


        12    HIS ESTIMATE WAS 75 MILLION? 


        13    A.   I DON'T RECALL THAT.  I REMEMBER MILLIONS BUT I DON'T 


        14    REMEMBER THE NUMBER. 


        15    Q.   ALL RIGHT.  I'LL REPRESENT TO YOU THAT THAT WAS HIS 


        16    TESTIMONY. 


        17               AND YOU WERE HERE IN COURT, SIR, WERE YOU NOT, WHEN 


        18    MR. OSBORN TESTIFIED? 


        19    A.   YES. 


        20    Q.   AND DO YOU RECALL HIM SAYING THAT HIS ESTIMATE OF THE 


        21    LOSSES TODAY'S EXAMINER WAS SUSTAINING WAS ON THE ORDER OF 20 


        22    TO $25 MILLION? 


        23    A.   YES. 


        24    Q.   AND MR. FLAHERTY, YOU HAD A NUMBER OF DISCUSSIONS WITH 


        25    MR. FLAHERTY CONCERNING THE PROFITABILITY OF TODAY'S EXAMINER; 
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         1    DID YOU NOT? 


         2    A.   THAT'S CORRECT. 


         3    Q.   AND HE TOLD YOU THAT HE HAD DONE AN INCREMENTAL ANALYSIS 


         4    THAT SUGGESTED THAT THE PAPER WAS LOSING ABOUT $40 MILLION A 


         5    YEAR; ISN'T THAT RIGHT? 


         6    A.   I WOULD HAVE -- I WOULD CHARACTERIZE HIM AS SAYING AT 


         7    LEAST 30. 


         8    Q.   AT LEAST 30 IS YOUR RECOLLECTION? 


         9    A.   THAT'S CORRECT. 


        10    Q.   AND YOUR OWN ESTIMATE, SIR, IS 30 TO $50 MILLION OF ANNUAL 


        11    LOSSES; IS THAT NOT CORRECT? 


        12    A.   MY ESTIMATE IS THAT THE NEWSPAPER AGENCY AND -- 


        13    Q.   DO YOU HAVE AN ESTIMATE, SIR? 


        14    A.   YES, I WOULD ESTIMATE THAT THE COMBINATION OF THE SPENDING 


        15    BY THE NEWSPAPER AGENCY AND THE EXAMINER EXCEEDS THE REVENUE 


        16    THAT WOULD BE FAIRLY ATTRIBUTABLE TO THE EXAMINER BY SOMETHING 


        17    IN THE NEIGHBORHOOD OF 20 TO $50 MILLION. 


        18    Q.   20 TO 50. 


        19               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 


        20    


        21    


        22    


        23    


        24    


        25    
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         1    BY MR. LINDSTROM: 


         2    Q.   NOW, LET'S TALK ABOUT THE CALCULATIONS THAT YOU PERFORMED. 


         3               YOU ARE A CFO, RIGHT? 


         4    A.   THAT'S CORRECT. 


         5    Q.   AND YOU HAVE EXTENSIVE EXPERIENCE IN THE NEWSPAPER 


         6    INDUSTRY, RIGHT? 


         7    A.   THAT'S CORRECT. 


         8    Q.   AND YOU HAVE GOT AN MBA FROM DARTMOUTH? 


         9    A.   YES. 


        10    Q.   AND YOU WENT TO BERKELEY BEFORE THAT? 


        11    A.   YES. 


        12    Q.   AND YOU WORKED AT, I THINK IT WAS THEN KNOWN AS ARTHUR 


        13    YOUNG IN NEW YORK, CORRECT? 


        14    A.   YES.   


        15    Q.   AND YOU HAVE DONE A LOT OF PROFIT-AND-LOSS PROJECTIONS IN 


        16    YOUR TIME; IS THAT FAIR TO SAY? 


        17    A.   YES. 


        18    Q.   NOW, AT SOME POINT IN TIME DID YOU PERFORM AN INCREMENTAL 


        19    ANALYSIS OF THE TYPE ADJUDICATED BY THE DEPARTMENT OF JUSTICE 


        20    IN THE HONOLULU CASE? 


        21    A.   WELL, I AM NOT FAMILIAR WITH THAT -- THAT CASE. 


        22    Q.   ARE YOU FAMILIAR WITH AN INCREMENTAL ANALYSIS? 


        23    A.   YES. 


        24    Q.   AND WHO ASKED YOU TO PERFORM THAT ANALYSIS? 


        25    A.   I DID IT MYSELF. 
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         1    Q.   WHY DID YOU UNDERTAKE TO PERFORM THAT ANALYSIS? 


         2    A.   TO ATTEMPT TO PUT A VALUE ON THE CHRONICLE AS A 


         3    STAND-ALONE BUSINESS. 


         4    Q.   ISN'T IT TRUE THAT YOU WERE ASKED BY THE LAWYERS IN THIS 


         5    CASE TO MAKE SUCH AN INCREMENTAL ANALYSIS? 


         6    A.   NO. 


         7    Q.   AS PART OF YOUR ANALYSIS, YOU LOOKED, AS I UNDERSTAND IT, 


         8    AT WHAT WOULD HAPPEN TO THE REVENUES AND COSTS OF THE SAN 


         9    FRANCISCO NEWS AGENCY WITHOUT THE EXAMINER; ISN'T THAT FAIR TO 


        10    SAY? 


        11    A.   YES. 


        12    Q.   AND WOULD YOU EXPLAIN TO HIS HONOR WHAT YOU CONCLUDED IN 


        13    THAT REGARD? 


        14    A.   I PREPARED A -- A HANDWRITTEN AND THEN A MORE FORMAL 


        15    ANALYSIS THAT LOOKED AT A RANGE OF REVENUE ASSUMPTIONS FOR THE 


        16    SAN FRANCISCO NEWSPAPER AGENCY/CHRONICLE WITHOUT THE EXAMINER 


        17    AND A RANGE OF OPERATING INCOME FIGURES FOR THE SAN FRANCISCO 


        18    NEWSPAPER AGENCY/CHRONICLE WITHOUT THE EXAMINER.  AND I USED 


        19    THAT, THEN, TO VALUE THE CHRONICLE AS A STAND-ALONE OPERATION 


        20    FREE OF THE JOA. 


        21    Q.   AND WHAT YOU CONCLUDED WAS THAT THE AGENCY WOULD BE NET 


        22    BETTER OFF BY 30 TO $50 MILLION WITHOUT THE EXAMINER; ISN'T 


        23    THAT RIGHT? 


        24    A.   I'D HAVE TO LOOK AT THE NUMBERS.  CAN WE LOOK THROUGH 


        25    THOSE? 
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         1               MR. LINDSTROM:  YOUR HONOR, IF I MAY APPROACH THE 


         2    WITNESS WITH HIS DEPOSITION TRANSCRIPT, I WOULD LIKE TO ATTEMPT 


         3    TO REFRESH HIS RECOLLECTION ON THIS POINT. 


         4               THE COURT:  ALL RIGHT.  I DON'T BELIEVE I HAVE    


         5    HIS . . . 


         6               MR. LINDSTROM:  LET ME TENDER IT UP, YOUR HONOR.  I 


         7    HAVE TWO VOLUMES -- THERE WERE TWO VOLUMES.  AND IF I MAY HAND 


         8    THEM TO YOUR CLERK, AND THEN I WILL PLACE BOTH VOLUMES BEFORE 


         9    THE WITNESS SHOULD WE NEED THEM. 


        10    BY MR. LINDSTROM: 


        11    Q.   AND LET ME ASK YOU, SIR, IF YOU TAKE A MOMENT TO LOOK AT 


        12    YOUR TESTIMONY AT PAGE 83, LINES 3 TO 25, AND READ THAT TO 


        13    YOURSELF, IF YOU WOULD. 


        14    A.   (WITNESS READING DOCUMENT). 


        15    Q.   HAVE YOU COMPLETED THAT REVIEW? 


        16    A.   NO, I HAVEN'T. 


        17    Q.   DO YOU HAVE THE PAGE BEFORE YOU? 


        18    A.   YES.  I WAS LOOKING AT WHAT'S IN FRONT OF IT SO THAT I 


        19    COULD REFRESH MY MEMORY AS TO WHERE WE WERE IN THAT DISCUSSION. 


        20    Q.   TAKE YOUR TIME. 


        21    A.   (WITNESS READING DOCUMENT) YES, I . . . 


        22    Q.   AND WOULD YOU TAKE A MOMENT ALSO TO LOOK AT YOUR TESTIMONY 


        23    ON THE NEXT PAGE, PAGE 84, FROM LINES 15 TO 23. 


        24    A.   YES. 


        25    Q.   DO THOSE PASSAGES REFRESH YOUR RECOLLECTION AS TO THE 
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         1    NUMBERS? 


         2    A.   YES. 


         3    Q.   AND WHAT WERE THE NUMBERS THAT RESULTED FROM YOUR 


         4    INCREMENTAL ANALYSIS OF THE EFFECT ON AGENCY REVENUES AND COSTS 


         5    OF SHEDDING THE EXAMINER? 


         6    A.   I DON'T BELIEVE THESE RELATE TO THAT SPECIFIC POINT IN 


         7    TIME.  I AM NOT TRYING TO BE ARGUMENTATIVE, BUT I THINK THESE 


         8    PASSAGES RELATE TO MY THINKING EARLIER ON IN THE PROCESS, AS WE 


         9    WERE REVIEWING THE $80 MILLION, AND HOW I CAME UP WITH THAT. 


        10    Q.   SO IS IT YOUR TESTIMONY YOU DON'T BELIEVE THESE PASSAGES 


        11    RELATE TO YOUR INCREMENTAL ANALYSIS? 


        12    A.   THESE DON'T RELATE TO THE ANALYSIS I HAD IN MIND THAT I -- 


        13    THAT I PREPARED MARCH 24TH AND -- 23RD, 24TH AND 25TH. 


        14    Q.   ALL RIGHT.  WHAT WAS THE RESULT OF THAT ANALYSIS? 


        15    A.   WELL, I'D LIKE -- I DON'T REMEMBER THE EXACT NUMBERS.  


        16    THAT'S WHY I WAS SUGGESTING WE LOOK AT THAT IN DETAIL. 


        17    Q.   WHICH DOCUMENT IS IT?  AND PERHAPS I CAN DIRECT YOU TO ITS 


        18    INCLUSION IN THE NOTEBOOK, IF IT IS. 


        19    A.   THERE WERE HANDWRITTEN NOTES. 


        20    Q.   TAKE A LOOK AT C311, WHICH ARE YOUR PREPARATION NOTES FOR 


        21    THE MARCH 25TH MEETING. 


        22    A.   AH, THAT'S IT, YES.  THAT'S WHAT I WAS REFERRING TO. 


        23    Q.   WOULD YOU TAKE A LOOK AT THOSE, PLEASE, AND AFTER YOU HAVE 


        24    HAD A CHANCE TO REVIEW THEM, TELL THE COURT WHAT THE RESULTS 


        25    WERE OF YOUR INCREMENTAL ANALYSIS. 
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         1    A.   I AM REFERRING TO THE PAGE MARKED AS R000452. 


         2               AND UNDER THE -- IN THE MIDDLE UNDER -- UNDER "JOA 


         3    HEARST NUMBER 5, "I START DOING AN INCREMENTAL ANALYSIS, 


         4    SUGGESTING THAT, FIRST, THERE ARE $75 MILLION IN SERVICES FROM 


         5    THE SNA.  AND I TAKE THE $75 MILLION AND ADD TO THAT THE 


         6    $50 MILLION IN EXCESS PROFITS DISTRIBUTED TO THE CHRONICLE AND 


         7    COME UP WITH $125 MILLION. 


         8    Q.   ALL RIGHT.  WOULD YOU TAKE US THROUGH THE REST OF THE 


         9    ANALYSIS? 


        10    A.   YES.  THEN UNDER SUBSECTION C, THE CHRONICLE CURRENTLY 


        11    GETS 225 MILLION IN SERVICES FROM SNA.  THAT IS BASICALLY THE 


        12    DIFFERENCE BETWEEN THE 75 -- I'D HAVE TO GO THROUGH THAT AGAIN.  


        13    225 MILLION PLUS 50 MILLION OR 275 MILLION.  SO I WOULD 


        14    REPHRASE THAT.  THE FIRST A AND B SUGGESTS WHAT VALUE HEARST 


        15    RECEIVES, 125 MILLION, WHAT VALUE THE CHRONICLE RECEIVES, 


        16    275 MILLION. 


        17    Q.   HAVE YOU COMPLETED YOUR RESPONSE? 


        18    A.   NO. 


        19               I THEN UNDER -- UNDER D, ACTUALLY, THERE IS A 


        20    $350 MILLION REVENUE FIGURE, AND I SUBTRACT FROM THAT 


        21    $350 MILLION REVENUE FIGURE THE $225 MILLION SERVICES FROM SAN 


        22    FRANCISCO NEWSPAPER AGENCY, THE CHRONICLE, RECEIVES.  THAT NETS 


        23    TO 125 MILLION. 


        24               ON THE LEFT-HAND SIDE YOU CAN SEE 125 MINUS 40, 


        25    WHICH WOULD BE -- IT WAS AN ESTIMATE I WAS USING AT THIS 
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         1    PARTICULAR POINT IN TIME FOR THE COSTS FOR EDITORIAL AND OTHER 


         2    EXPENSES OF THE CHRONICLE, AND I COME UP WITH AN $85 MILLION 


         3    OPERATING PROFIT FOR THE CHRONICLE AS A STAND-ALONE.  SO . . . 


         4    Q.   AND SO WHAT WAS YOUR CONCLUSION, SIR, ABOUT THE EFFECT ON 


         5    THE REVENUES OF THE SAN FRANCISCO NEWS AGENCY AND THE COSTS OF 


         6    THAT ENTITY IF IT WERE TO BE IN OPERATION WITHOUT THE EXAMINER? 


         7    A.   MY CONCLUSION IS THAT THE CHRONICLE, AS A STAND-ALONE, 


         8    WOULD EARN MORE MONEY THAN IT DOES NET OF ITS SHARE OF THE 


         9    EXCESS PROFITS. 


        10    Q.   WELL, IT'S YOUR VIEW, ISN'T IT, SIR, THAT THE CHRONICLE IS 


        11    SUBSIDIZING THE EXAMINER?  ISN'T THAT RIGHT? 


        12    A.   I AM NOT SURE WHAT YOU MEAN BY "SUBSIDIZE."  I READ THE 


        13    JOA TO SAY THAT THESE TWO PEOPLE HAVE AGREED TO WORK TOGETHER, 


        14    AND THE FACT THAT MORE MONEY MAY BE SPENT OR -- ON THE EXAMINER 


        15    THAN THE CHRONICLE RELATIVE TO THE REVENUE, IF YOU WANT TO 


        16    CHARACTERIZE THAT AS A "SUBSIDY," THAT'S FINE. 


        17    Q.   WELL, ISN'T IT TRUE, SIR, THAT YOU VIEW IT AS A SUBSIDY? 


        18    A.   NO, I DON'T VIEW IT AS A SUBSIDY.  I VIEW IT AS A 


        19    WORKING -- AS AN AGREEMENT THAT IS BEING CARRIED OUT BY THE TWO 


        20    PARTIES -- OR THREE PARTIES. 


        21    Q.   YOU WERE HERE WHEN DR. COMANOR GAVE THAT SAME TESTIMONY, 


        22    WEREN'T YOU? 


        23    A.   YES. 


        24    Q.   ALL RIGHT.  BUT I TOOK YOUR DEPOSITION BEFORE DR. COMANOR 


        25    GOT ON THE STAND, DIDN'T I? 
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         1    A.   THAT'S CORRECT. 


         2    Q.   AND, AMONG OTHER THINGS, I ASKED YOU ABOUT THE MARCH 25TH 


         3    MEETING; ISN'T THAT RIGHT? 


         4    A.   YES. 


         5    Q.   AND AT THE MARCH 25TH MEETING, ONE OF THIS ASSEMBLED GROUP 


         6    OF EXPERTS EXPRESSED THE VIEW THAT THE CHRONICLE WAS 


         7    SUBSIDIZING THE EXAMINER; ISN'T THAT RIGHT? 


         8    A.   YES. 


         9    Q.   AND YOU DID NOT DISAGREE WITH THAT VIEW, DID YOU? 


        10    A.   THAT'S CORRECT. 


        11    Q.   IN FACT, YOU TOLD ME IT WAS YOUR OWN VIEW; ISN'T THAT 


        12    RIGHT, SIR? 


        13    A.   THAT'S CORRECT. 


        14    Q.   SO YOUR VIEW IS DIFFERENT IN THAT REGARD TODAY THAN IT WAS 


        15    AT THE TIME I TOOK YOUR DEPOSITION; IS THAT YOUR TESTIMONY? 


        16    A.   NO, IT'S NOT. 


        17    Q.   NOW, IN FACT, ISN'T IT TRUE THAT YOU AND DR. COMANOR HAD A 


        18    MEETING IN WHICH IT WAS DISCUSSED THAT THE CHRONICLE WAS 


        19    SUBSIDIZING THE EXAMINER? 


        20    A.   YES. 


        21    Q.   WHO EXPRESSED THAT VIEW, YOU OR DR. COMANOR, OR WAS IT A 


        22    CONSENSUS? 


        23    A.   AS I RECALL THE CONVERSATION, WE WERE TALKING ABOUT THE 


        24    REVENUE AND EXPENSES, AND DR. COMANOR TOOK THE INITIAL POSITION 


        25    THAT IF YOU ALLOCATE REVENUE SIMPLY ON A CIRCULATION BASIS 
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         1    BETWEEN THE TWO, THE CHRONICLE AND THE EXAMINER, WE TALKED 


         2    ABOUT THAT, AND IF YOU DO THAT, YOU FIND THAT THE EXAMINER IS 


         3    SOMETHING CLOSE TO A BREAK-EVEN.   


         4               AND I BELIEVE I EXPRESSED THE OPINION THAT THAT -- 


         5    THAT TO ME WAS NOT A REALISTIC WAY TO ALLOCATE REVENUE.  THAT 


         6    PROBABLY OVERSTATED THE REVENUE THAT WOULD BE ALLOCATED TO THE 


         7    EXAMINER. 


         8               THEREFORE, AS WE HAVE SAID AND AS I HAVE SAID, THERE 


         9    IS MORE MONEY BEING SPENT TO PRODUCE AND DISTRIBUTE THE 


        10    EXAMINER THAN THERE IS REVENUE ATTRIBUTABLE TO IT. 


        11    Q.   IT IS TRUE, IS IT NOT, SIR, THAT IT IS YOUR OWN VIEW THAT 


        12    THE CHRONICLE IS EFFECTIVELY SUBSIDIZING THE EXAMINER TODAY? 


        13               YOUR ANSWER, PLEASE? 


        14    A.   YES. 


        15    Q.   AND YOU EXPRESSED THAT VIEW TO DR. COMANOR, DID YOU NOT? 


        16    A.   YES. 


        17    Q.   NOW, YOU WERE HERE IN COURT WHEN DR. COMANOR TESTIFIED; 


        18    ISN'T THAT RIGHT? 


        19    A.   YES. 


        20    Q.   AND YOU HEARD DR. COMANOR GIVE THIS ANSWER TO THIS 


        21    QUESTION PUT TO HIM DURING DIRECT EXAMINATION BY MR. SHULMAN, 


        22    DID YOU NOT?  AT PAGE 440 OF THE TRANSCRIPT: 


        23                   "Q.  DID YOU -- IN CONSIDERING WHETHER THE 


        24               EXAMINER IS A FAILING COMPANY, DID YOU ENDEAVOR 


        25               TO LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF 
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         1               OR IN THE ABSENCE OF THE JOINT OPERATING 


         2               AGREEMENT? 


         3                   "A.  NO.  IT SEEMED TO ME -- 


         4                   "MR. SHULMAN:  IS THERE AN ANSWER?  IS THAT 


         5               ANSWER NO? 


         6                   "A.  (WITNESS NODS HEAD)." 


         7               YOU WERE HERE WHEN DR. COMANOR GAVE THAT TESTIMONY; 


         8    ISN'T THAT RIGHT? 


         9    A.   YES. 


        10    Q.   AND WHEN HE GAVE IT, YOU KNEW THAT IT WASN'T TRUE; ISN'T 


        11    THAT RIGHT? 


        12    A.   NO. 


        13    Q.   WELL, YOU HAD HAD A MEETING WITH HIM ON APRIL 6TH WHERE 


        14    THE TWO OF YOU DISCUSSED WHETHER OR NOT THE EXAMINER WAS A 


        15    FAILING COMPANY; ISN'T THAT RIGHT? 


        16    A.   NO.  WE DISCUSSED THE -- THE ECONOMICS OF THE BUSINESS, 


        17    AND I WAS TRYING TO PROVIDE MR. COMANOR WITH DIFFERENT WAYS OF 


        18    LOOKING AT THE ALLOCATION OF REVENUE. 


        19               MR. LINDSTROM:  YOUR HONOR, I WOULD LIKE TO READ 


        20    FROM THE WITNESS' DEPOSITION TRANSCRIPT, DATED APRIL 17TH, PAGE 


        21    324, LINES 14 TO 22. 


        22               THE COURT:  324? 


        23               MR. LINDSTROM:  YES, YOUR HONOR. 


        24               THE COURT:  PROCEED. 


        25               MR. LINDSTROM:  "Q.  WAS THERE ANY DISCUSSION OF 
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         1               WHETHER THE EXISTING SAN FRANCISCO EXAMINER WAS 


         2               A FAILING FIRM OR COMPANY? 


         3                   "A.  YES.  I THINK THERE WAS A DISCUSSION 


         4               THAT SUGGESTED THAT THE EXAMINER, AS IT EXISTS 


         5               TODAY, COSTS THE NEWSPAPER AGENCY MORE THAN IT 


         6               BRINGS IN IN REVENUE AND THE FACT THAT IN FACT 


         7               THE EXAMINER SPENDS ONLY -- IN SOME WAYS SPENDS 


         8               ONLY 50 CENTS OUT OF A DOLLAR FOR ALL OF THE 


         9               ADDITIONAL EXPENSES IT INCURS." 


        10    BY MR. LINDSTROM: 


        11    Q.   WERE THOSE QUESTIONS PUT TO YOU AND DID YOU GIVE THOSE 


        12    ANSWERS AT YOUR DEPOSITION? 


        13    A.   YES. 


        14    Q.   AND YOU WERE UNDER OATH? 


        15    A.   YES. 


        16    Q.   AND IT WAS EXACTLY THIS DISCUSSION WITH DR. COMANOR THAT 


        17    PROMPTED THE CONCLUSION THAT THE CHRONICLE WAS SUBSIDIZING THE 


        18    EXAMINER; ISN'T THAT RIGHT? 


        19               DO YOU WANT TO LOOK ON THE NEXT PAGE, LINES 4 TO 9? 


        20    A.   I WOULD CALL YOUR ATTENTION TO LINES 8 AND 9.  I BELIEVE 


        21    THAT'S ANOTHER WAY OF STATING WHAT I TRIED TO EXPLAIN. 


        22    Q.   THE SUBSIDY, CORRECT? 


        23    A.   I WOULD GO -- IT SEEMS TO ME THIS IS A QUESTION OF 


        24    SEMANTICS, BUT I WOULD GO WITH LINES 17 TO 22 ON PAGE 324. 


        25               IF YOU WANT ME TO USE THE WORD "SUBSIDY," I WILL BE 
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         1    GLAD TO. 


         2    Q.   THE QUESTION -- 


         3               THE COURT:  THE QUESTION IS WHETHER YOU GAVE THIS 


         4    TESTIMONY. 


         5               THE WITNESS:  OH, YES, I DID. 


         6               THE COURT:  ALL RIGHT. 


         7    BY MR. LINDSTROM: 


         8    Q.   A QUESTION OF SEMANTICS REGARDING THE TERM "SUBSIDY," 


         9    RIGHT?  THAT'S WHAT YOU JUST SAID. 


        10    A.   THAT'S WHAT I SAID. 


        11    Q.   WERE YOU HERE IN THIS COURTROOM WHEN MR. ALIOTO QUESTIONED 


        12    JOHN SIAS ABOUT THE MEANING OF THE TERM "SUBSIDY"? 


        13    A.   YES. 


        14    Q.   AND WERE YOU HERE WHEN MR. ALIOTO SUGGESTED THAT MR. SIAS 


        15    HAD NO BASIS FOR THE REPRESENTATION HE MADE TO THE COURT THAT 


        16    THE CHRONICLE WAS SUBSIDIZING THE EXAMINER?  DO YOU RECALL HIM 


        17    BEING ASKED THOSE QUESTIONS? 


        18    A.   HE WAS ASKED THOSE QUESTIONS.  I DON'T KNOW THAT THAT'S 


        19    THE SAME AS WHAT YOU JUST SAID. 


        20    Q.   SUBSIDY.  IN YOUR MIND THE CHRONICLE IS SUBSIDIZING THE 


        21    EXAMINER, ISN'T THAT RIGHT, ACCORDING TO THE COMMON LAY 


        22    INTERPRETATION OF THE TERM "SUBSIDY"? 


        23    A.   YES.  CAN I TRY IT THIS WAY?  WITHIN THE -- WITHIN THE JOA 


        24    AND THE SAN FRANCISCO NEWSPAPER AGENCY, THE CHRONICLE 


        25    SUBSIDIZES THE EXAMINER. 
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         1    Q.   AND WITHOUT THE JOA THE EXAMINER IS A FAILING FIRM.  


         2    THAT'S WHAT YOU TOLD DR. COMANOR; ISN'T THAT RIGHT? 


         3    A.   YES. 


         4    Q.   THANK YOU. 


         5               NOW, WHEN DR. COMANOR INDICATED IN RESPONSE TO 


         6    MR. SHULMAN'S QUESTION THAT HE HAD NOT CONSIDERED WHETHER THE 


         7    EXAMINER WAS A FAILING COMPANY, YOU KNOW THAT TO BE NOT TRUE; 


         8    ISN'T THAT RIGHT? 


         9               YOU TALKED WITH HIM ABOUT IT, DID YOU NOT, SIR? 


        10    A.   YES. 


        11    Q.   AND THEN THE NEXT PORTION OF THE QUESTION:  


        12                   "DID YOU" -- REFERRING TO DR. COMANOR -- 


        13               "ENDEAVOR TO LOOK AT HOW THE EXAMINER WOULD DO 


        14               OUTSIDE OF OR IN ABSENCE OF THE JOINT OPERATING 


        15               AGREEMENT?   


        16               THE ANSWER WAS, "NO."   


        17               AND YET YOU KNOW HE DID THAT VERY ANALYSIS, DON'T 


        18    YOU? 


        19    A.   NO, I DON'T KNOW THAT AND I DON'T THINK HE DID THAT 


        20    ANALYSIS. 


        21    Q.   HE SENT IT TO YOU BY FAX, DID HE NOT? 


        22    A.   HE SENT ME A FAX THAT SAID, "LOOK AT THIS." THIS WAS A FAX 


        23    THAT BASICALLY ALLOCATED REVENUE IN THAT SAME METHOD I HAD 


        24    SUGGESTED EARLIER BASED UPON CIRCULATION. 


        25    Q.   WELL, WAS IT A FAX THAT INCLUDED AN ENDEAVOR TO LOOK AT 
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         1    HOW THE EXAMINER WOULD DO OUTSIDE OF OR IN THE ABSENCE OF THE 


         2    JOINT OPERATING AGREEMENT? 


         3    A.   NO. 


         4    Q.   ALL RIGHT.  LET'S TAKE A LOOK AT IT, IN YOUR NOTEBOOK 


         5    C345. 


         6               ON THE SCREEN HERE THE FIRST PAGE IS A FAX COVER 


         7    SHEET, RIGHT? 


         8    A.   THAT'S CORRECT. 


         9    Q.   AND THIS WAS ADDRESSED TO MICHAEL WEAVER, RIGHT? 


        10    A.   YES. 


        11    Q.   AT THE ALIOTO LAW FIRM, CORRECT? 


        12    A.   YES. 


        13    Q.   AND THEN SOMEONE HAS WRITTEN IN HANDWRITING, "MIKE, I WILL 


        14    BE INTERESTED IN YOUR COMMENTS.  BILL." 


        15               DO YOU SEE THAT? 


        16    A.   YES. 


        17    Q.   NOW, LET ME ASK YOU FIRST, THIS WAS NOT PRODUCED BY YOU AS 


        18    PART OF YOUR PRODUCTION OF DOCUMENTS TO OPPOSING COUNSEL IN 


        19    THIS LAWSUIT PRECEDING YOUR DEPOSITION; ISN'T THAT RIGHT? 


        20    A.   THAT'S CORRECT. 


        21    Q.   AND EACH OF THE EXPERTS WAS ASKED, WERE THEY NOT, TO TURN 


        22    OVER THE DOCUMENTS WHICH THEY HAD GENERATED IN CONJUNCTION WITH 


        23    THIS ASSIGNMENT TO THE OTHER SIDE?  AT LEAST YOU WERE ASKED TO 


        24    DO THAT; ISN'T THAT RIGHT? 


        25    A.   YES. 
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         1    Q.   NOW, LET ME SHOW YOU BEFORE WE MOVE ON A COPY OF EXHIBIT 


         2    C347 IN EVIDENCE. 


         3               MAY I APPROACH, YOUR HONOR? 


         4               THE COURT:  YES. 


         5               MR. LINDSTROM:  AND I HAVE A COPY OF THIS FOR YOUR 


         6    HONOR.  I DO NOT HAVE -- IT'S NOT IN THE NOTEBOOK AND SO I WILL 


         7    TENDER IT TO YOUR CLERK, C347 IN EVIDENCE. 


         8               THE COURT:  VERY WELL.  THANK YOU. 


         9    BY MR. LINDSTROM: 


        10    Q.   NOW, I WILL REPRESENT TO YOU, SIR, THAT THIS IS WHAT 


        11    DR. COMANOR SENT TO MY PARTNER, TOM ROSCH, SEATED OVER HERE AT 


        12    THE COUNSEL TABLE, J. THOMAS ROSCH, ESQUIRE: 


        13                   "DAN SHULMAN ASKED THAT I SEND YOU THE 


        14               ATTACHED DOCUMENTS.  BILL COMANOR." 


        15               AND ATTACHED IS A COLLECTION OF MATERIALS THAT 


        16    DR. COMANOR SENT IN ANTICIPATION OF HIS DEPOSITION TESTIMONY. 


        17               WOULD YOU LOOK THROUGH THIS EXHIBIT, SIR, AND TELL 


        18    THE COURT WHETHER YOU CAN FIND THE FAX THAT DR. COMANOR SENT TO 


        19    YOU? 


        20    A.   I DON'T SEE IT IN THIS STACK OF PAPERS. 


        21    Q.   IT'S NOT THERE, IS IT? 


        22    A.   THAT'S CORRECT. 


        23    Q.   NOW, LET'S GO BACK TO WHAT HE SENT TO YOU BUT DIDN'T SEND 


        24    TO MR. ROSCH.  4/14, JUST NINE DAYS BEFORE THE FAX TO 


        25    MR. ROSCH; ISN'T THAT RIGHT? 
                                                                         1311
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         1    A.   YES. 


         2    Q.   HE SENT YOU THIS DOCUMENT AND HE WAS INTERESTED IN YOUR 


         3    COMMENTS. 


         4               NOW, MY FIRST QUESTION IS:  DID YOU KNOW THIS WAS 


         5    COMING? 


         6    A.   NO, NOT UNTIL HE CALLED ME AND TOLD ME HE WAS GOING TO 


         7    SEND IT TO ME. 


         8    Q.   WHAT DID HE TELL YOU HE WAS SENDING YOU?  DO YOU REMEMBER? 


         9    A.   NOT SPECIFICALLY. 


        10    Q.   WELL, LET'S LOOK AND SEE WHAT HE SENT. 


        11               ON PAGE 2 OF THE EXHIBIT, "1998 INCOME STATEMENTS 


        12    EXAMINER," RIGHT-HAND COLUMN, "WITHOUT JOA." 


        13               YOU UNDERSTOOD THAT TO MEAN WHEN YOU RECEIVED THIS 


        14    FAX, DID YOU NOT, SIR, THAT THIS WAS DR. COMANOR'S ASSESSMENT 


        15    OF THE INCOME AND EXPENSES OF THE EXAMINER WITHOUT THE JOA? 


        16    A.   YES. 


        17    Q.   ALL RIGHT.  LET ME ASK YOU, THEN, ONE MORE TIME, WHEN 


        18    DR. COMANOR ANSWERED "NO" TO THIS QUESTION, DID YOU ENDEAVOR TO 


        19    LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF OR IN THE ANSWER 


        20    OF THE JOINT -- IN THE ABSENCE OF THE JOINT OPERATING AGREEMENT 


        21    HE ANSWERED THAT QUESTION NO.  THAT WAS NOT TRUE, ACCORDING TO 


        22    YOUR OWN KNOWLEDGE.  CORRECT? 


        23               MR. SHULMAN:  I OBJECT, YOUR HONOR.  THAT'S 


        24    ARGUMENTATIVE AND IT'S CONTRARY TO WHAT THE EVIDENCE IS. 


        25               THE COURT:  OBJECTION OVERRULED. 
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         1               THE WITNESS:  RESTATE IT. 


         2    BY MR. LINDSTROM: 


         3    Q.   ALL RIGHT.  YOU KNEW WHEN YOU GOT THIS DOCUMENT, SIR, 


         4    THAT, IN FACT, EXACTLY WHAT IT WAS WAS AN ENDEAVOR BY 


         5    DR. COMANOR TO LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF OR 


         6    IN THE ABSENCE OF THE JOINT OPERATING AGREEMENT; ISN'T THAT 


         7    TRUE? 


         8    A.   YES. 


         9    Q.   AND HE PROJECTED HERE A NET OPERATING LOSS OF MINUS THREE, 


        10    RIGHT? 


        11    A.   YES. 


        12    Q.   AND AFTER TAKING DEPRECIATION, A LOSS OF MINUS $9 MILLION, 


        13    RIGHT? 


        14    A.   YES. 


        15    Q.   OKAY.  AND THAT WAS PREDICATED ON HIS ASSUMPTION OF 


        16    ALLOCATING 19 PERCENT OF THE COSTS AND REVENUES OF THE AGENCY 


        17    TO THE EXAMINER, RIGHT? 


        18    A.   YES. 


        19    Q.   AND YOU TOLD HIM THAT WASN'T A GOOD ASSUMPTION, CORRECT? 


        20    A.   YES. 


        21    Q.   AND, IN FACT, TO MAKE THAT ALLOCATION HAS THE EFFECT OF 


        22    OVERSTATING THE EXAMINER'S CONTRIBUTION TO REVENUE, RIGHT? 


        23    A.   IN MY OPINION, YES. 


        24    Q.   AND, INDEED, DR. COMANOR HIMSELF INDICATES IN THE FOOTNOTE 


        25    THAT IT ALSO HAS THE EFFECT OF UNDERSTATING THE EXAMINER'S 
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         1    PORTION OF THE COSTS.  RIGHT? 


         2    A.   I DON'T SEE THAT IN THE FOOTNOTE. 


         3    Q.   WELL, IF YOU LOOK AT THE FOOTNOTE -- IT'S ON THE SCREEN.  


         4    AND AT THE VERY BOTTOM DO YOU SEE THERE HE HAS GOT A DOUBLE 


         5    ASTERISK AND THEN HE SAYS, "ASSUMES REVENUES AND EXPENSES ARE 


         6    ALLOCATED ACCORDING TO CIRCULATION PROPORTIONS." 


         7               DO YOU SEE THAT? 


         8    A.   YES. 


         9    Q.   AND THEN IN THE NEXT SENTENCE HE SAYS, "PROBABLY 


        10    UNDERSTATES EXPENSES."  RIGHT? 


        11    A.   OH, YES, I SEE AT THE VERY END, YES. 


        12    Q.   RIGHT.  AND THIS DOUBLE ASTERISK REFERS TO THE CALCULATION 


        13    OF THE 19 PERCENT THAT HE HAS ATTRIBUTED TO THE CHRONICLE -- OR 


        14    TO THE EXAMINER, RIGHT? 


        15    A.   YES. 


        16    Q.   OKAY.  NOW -- AND YOU AGREE WITH HIS SUGGESTION HERE THAT 


        17    TO -- TO MAKE THAT ALLOCATION PROBABLY UNDERSTATES THE 


        18    EXAMINER'S EXPENSES, RIGHT? 


        19    A.   YES. 


        20    Q.   OKAY.  SO IF THE REVENUES ARE OVERSTATED AND THE EXPENSES 


        21    ARE UNDERSTATED, THEN THE 9 MILLION IS GOING TO HAVE TO GO UP 


        22    UNDER A PROPER ANALYSIS, RIGHT? 


        23    A.   IT BECOMES A BIGGER NEGATIVE NUMBER? 


        24    Q.   YES.  THANK YOU. 


        25    A.   YES. 
                                                                         1314
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         1    Q.   DID YOU EXPRESS THAT SENTIMENT TO DR. COMANOR? 


         2    A.   YES. 


         3    Q.   AND YOU NEVER SAW THIS DOCUMENT AGAIN, DID YOU 


         4    (INDICATING), UNTIL YOUR DEPOSITION? 


         5    A.   I THINK THAT'S TRUE, YES. 


         6    Q.   NOW, LET ME TAKE YOU TO PLAINTIFF'S EXHIBIT 51.  THIS IS A 


         7    DECLARATION OF MR. ASHER.   


         8               YOU WERE HERE WHEN HE WAS EXAMINED BY THE 


         9    PLAINTIFFS, CORRECT? 


        10    A.   YES. 


        11    Q.   LET ME DIRECT YOUR ATTENTION TO PARAGRAPH 3 AND IN 


        12    PARTICULAR THIS SENTENCE: 


        13                   "THE EXAMINER, CURRENTLY WOULD NOT BE 


        14               PROFITABLE ON A STAND-ALONE BASIS OUTSIDE THE 


        15               JOA." 


        16               DO YOU SEE THAT STATEMENT? 


        17    A.   YES, I DO. 


        18    Q.   YOU AGREE WITH THAT STATEMENT BY MR. ASHER, DO YOU NOT? 


        19    A.   I DO. 


        20    Q.   AND, IN FACT, EVERY ONE OF THE REILLY EXPERTS AGREES WITH 


        21    THAT STATEMENT; ISN'T THAT TRUE? 


        22    A.   THAT'S TRUE. 


        23    Q.   AND AT THE MARCH 25TH MEETING WE WERE TOLD BY MR. OSBORN 


        24    THERE WAS AN EMPHATIC CONSENSUS BY THOSE EXPERTS THAT TODAY'S 


        25    EXAMINER WAS LOSING MONEY, RIGHT? 
                                                                         1315
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         1    A.   WE WERE TOLD BY MR. OSBORN THAT, APPARENTLY. 


         2    Q.   WELL, AND, IN FACT, NO ONE DISAGREED WITH THE NUMBER THAT 


         3    HE THREW OUT OF $20 MILLION LOSSES OR GREATER; ISN'T THAT 


         4    RIGHT? 


         5    A.   YES. 


         6    Q.   AND, IN FACT, AS WE HAVE SEEN FROM THIS ANALYSIS, 


         7    VIRTUALLY EVERY SINGLE EXPERT IN THEIR OWN MIND HAS A LARGER 


         8    NUMBER. 


         9    A.   THAT'S CORRECT. 


        10    Q.   OKAY.  NOW, IN THE NEXT SENTENCE, YOU WERE HERE, WEREN'T 


        11    YOU, WHEN MR. ALIOTO QUESTIONED MR. ASHER ON THURSDAY AFTERNOON 


        12    AND THEN AGAIN ON FRIDAY REGARDING WHAT BASIS THAT GENTLEMAN 


        13    HAD FOR MAKING THIS STATEMENT, "THE COSTS TO PUBLISH THE 


        14    EXAMINER CURRENTLY EXCEED THE REVENUES IT CONTRIBUTES TO THE 


        15    JOA BY MILLIONS OF DOLLARS ANNUALLY." 


        16               DO YOU SEE THAT? 


        17    A.   YES. 


        18    Q.   YOU AGREE WITH THAT STATEMENT BY MR. ASHER, DO YOU NOT? 


        19    A.   I DO. 


        20    Q.   AND SO DO ALL THE REILLY EXPERTS, ACCORDING TO YOUR 


        21    KNOWLEDGE; ISN'T THAT TRUE? 


        22    A.   YES. 


        23    Q.   AND IN THE NEXT SENTENCE: 


        24                   "AS A RESULT, CURRENTLY THE OPERATIONS OF 


        25               THE CHRONICLE SUBSIDIZE THE LOSSES WITHIN THE 
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         1               JOA FROM THE OPERATION OF THE EXAMINER." 


         2               DO YOU SEE THAT SENTENCE? 


         3    A.   YES. 


         4    Q.   AND, AGAIN, YOU AGREE WITH THE STATEMENT OF MR. ASHER, DO 


         5    YOU NOT? 


         6    A.   YES. 


         7    Q.   NOW, BEFORE MR. ALIOTO QUESTIONED MR. ASHER, HAD YOU MADE 


         8    KNOWN TO HIM WHAT YOUR VIEWS WERE REGARDING THE LOSSES 


         9    SUSTAINED BY TODAY'S EXAMINER? 


        10               THE COURT:  MADE KNOWN TO ALIOTO? 


        11               MR. LINDSTROM:  I'M SORRY? 


        12               THE COURT:  MADE KNOWN TO ALIOTO? 


        13               MR. LINDSTROM:  YES, TO PLAINTIFF'S COUNSEL. 


        14               THE WITNESS:  I THINK IT'S FAIR TO INFER THAT HE HAS 


        15    READ THE DOCUMENTS AND UNDERSTANDS THAT.  EVEN IN MY OWN 


        16    DECLARATION YOU COULD CERTAINLY DRAW THAT CONCLUSION. 


        17    BY MR. LINDSTROM: 


        18    Q.   ALL RIGHT.  MR. ALIOTO WAS AT THE MARCH 25TH MEETING, WAS 


        19    HE NOT? 


        20    A.   THAT'S CORRECT. 


        21    Q.   HE HEARD THE EMPHATIC CONSENSUS OF THE REILLY EXPERTS; 


        22    ISN'T THAT TRUE? 


        23    A.   YOU ARE USING MR. OSBORN'S WORDS.  HE HEARD THE CONSENSUS 


        24    OF THE EXPERTS. 


        25    Q.   AND HE WAS AT THE MEETING BETWEEN YOU AND DR. COMANOR; 
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         1    ISN'T THAT RIGHT? 


         2    A.   YES. 


         3    Q.   WHERE THE TWO OF YOU DISCUSSED WHETHER OR NOT THE EXAMINER 


         4    WAS A FAILING FIRM? 


         5    A.   HE WAS AT THE MEETING WHERE THE TWO OF US DISCUSSED THE 


         6    ECONOMICS OF THE EXAMINER. 


         7    Q.   AND WHERE YOU EXPRESSED THE VIEW THAT THE REVENUES EXCEED 


         8    THE COSTS OR VICE VERSA? 


         9    A.   THE COSTS EXCEED THE REVENUES, YES. 


        10    Q.   NOW, LET ME CHANGE SUBJECTS HERE. 


        11               THE COURT:  WHILE YOU ARE DOING THAT, HOW MUCH 


        12    LONGER DO YOU HAVE OF THIS WITNESS? 


        13               MR. LINDSTROM:  I WOULD SAY 15 MINUTES, MAYBE, YOUR 


        14    HONOR. 


        15               THE COURT:  IS THIS A CONVENIENT TIME TO TAKE A 


        16    BREAK? 


        17               MR. LINDSTROM:  WHY DON'T WE DO THAT NOW AND I WILL 


        18    COLLECT MY NOTES AND SEE IF WE CAN'T EXPEDITE THINGS. 


        19               THE COURT:  WE WILL TAKE UNTIL 25 AFTER. 


        20                     (RECESS TAKEN AT 10:10 A.M.) 


        21                  (PROCEEDINGS RESUMED AT 10:29 A.M.) 


        22               THE CLERK:  PLEASE REMAIN SEATED.  COME TO ORDER.  


        23    THIS COURT IS NOW IN SESSION. 


        24               THE COURT:  VERY WELL.  MR. WEAVER, WOULD YOU RESUME 


        25    THE STAND, SIR? 
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         1    BY MR. LINDSTROM: 


         2    Q.   MR. WEAVER, WE HAVE BEEN TALKING ABOUT TODAY'S EXAMINER, 


         3    AND I WANT TO SWITCH SUBJECTS AND MOVE ON TO THE PAPER THAT'S 


         4    ENVISIONED HERE IN YOUR DECLARATION THAT MR. SHULMAN TALKED TO 


         5    YOU ABOUT. 


         6               PARAGRAPH 4 OF YOUR DECLARATION SPEAKS IN TERMS OF A 


         7    VIABLE PAPER WHICH WOULD BE COMPETITIVE WITH THE CHRONICLE. 


         8               AND I THINK I UNDERSTAND FROM YOUR DIRECT TESTIMONY 


         9    THAT IN YOUR MIND THAT NEEDS TO BE A SUBSTITUTE FOR THE 


        10    CHRONICLE, CORRECT? 


        11    A.   YES. 


        12    Q.   AND I ASSUME THAT THE PAPER YOU ENVISION WOULD HAVE ALL OF 


        13    THE CHARACTERISTICS THAT MR. INGRAM TOLD US ABOUT YESTERDAY; IS 


        14    THAT RIGHT? 


        15    A.   IN MAKING THIS DECLARATION AND IN MAKING THESE 


        16    CALCULATIONS, THAT'S CORRECT. 


        17    Q.   OKAY.  AND WITHOUT BURDENING THE RECORD WITH GOING THROUGH 


        18    THAT, IT WOULD NEED TO BE OF A SUFFICIENT LENGTH AND CONTENT 


        19    AND SO FORTH TO BE COMPETITIVE WITH THE EXAMINER, RIGHT? 


        20    A.   WITH THE CHRONICLE, RIGHT. 


        21    Q.   I'M SORRY. 


        22               AND IT WOULD HAVE TO BE LIKE TODAY'S EXAMINER; ISN'T 


        23    THAT RIGHT? 


        24    A.   YES. 


        25    Q.   IT WOULD HAVE TO BE A DAILY METROPOLITAN PAPER, RIGHT? 
                                                                         1319
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         1    A.   YES. 


         2    Q.   NOW, IN WHAT MARKETS DID YOU ENVISION THIS PAPER COMPETING 


         3    WHEN YOU EXECUTED YOUR DECLARATION? 


         4    A.   THE PAPER THAT IS SPOKEN ABOUT IN THE DECLARATION IS TO 


         5    PRODUCE A PAPER SIMILAR IN SUBSTANCE AND IN DISTRIBUTION TO 


         6    TODAY'S EXAMINER. 


         7    Q.   SO IT WOULD BE IN ALL THE SAME MARKETS WHERE TODAY'S 


         8    EXAMINER COMPETES, RIGHT? 


         9    A.   THERE ARE DIFFERENT PARTS OF THE DECLARATION.  THE ONE 


        10    THAT RELATES TO $90 MILLION, YES.  THE PART THAT RELATES TO THE 


        11    LOSSES, MY -- I WOULD ENVISION A SMALLER AND WAS ENVISIONING A 


        12    SMALLER PAPER IN A SMALLER MARKET. 


        13    Q.   OKAY. 


        14    A.   A DISTRIBUTION -- "A SMALLER PAPER," MEANING LESS 


        15    DISTRIBUTION IN A MORE CONDENSED MARKET. 


        16    Q.   BUT THE MARKET YOU ENVISIONED DIDN'T STOP WITH THE 


        17    BOUNDARIES OF THE CITY AND COUNTY OF SAN FRANCISCO, DID IT? 


        18    A.   THAT'S CORRECT. 


        19    Q.   THE PAPER THAT YOU ARE TALKING ABOUT HERE, THE ONE THAT 


        20    YOU MODELED FOR MR. REILLY, WOULD COMPETE IN PARTS OF MARIN 


        21    COUNTY, RIGHT? 


        22    A.   WE DISCUSSED COMPETING IN PARTS OF MARIN COUNTY, YES. 


        23    Q.   AND THE EAST BAY? 


        24    A.   YES. 


        25    Q.   AND IN -- DOWN THE PENINSULA, CORRECT? 
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         1    A.   YES. 


         2    Q.   ALL RIGHT.  WHAT IS THE SAN FRANCISCO MARKET IN YOUR 


         3    JUDGMENT? 


         4    A.   THE SAN FRANCISCO MARKET FOR THIS -- THE NEWSPAPER THAT I 


         5    MODELED?  OR -- I AM NOT SURE OF THE QUESTION.  WHAT'S THE SAN 


         6    FRANCISCO MARKET? 


         7    Q.   WELL, LET'S START WITH THE PAPER THAT YOU MODELED FOR 


         8    MR. REILLY. 


         9    A.   THE SAN FRANCISCO MARKET WOULD BE CENTERED AROUND THE CITY 


        10    AND COUNTY OF SAN FRANCISCO AND INCLUDE COMMUTERS IN AND OUT OF 


        11    THE CITY AND OTHERS WHO ARE INTERESTED IN AND TIED TO THE CITY 


        12    BECAUSE THEY WORK HERE IN SAN FRANCISCO OR HAVE OTHER CLOSE 


        13    TIES TO THE CITY. 


        14    Q.   SO THAT WOULD INCLUDE PEOPLE WHO RESIDE OUTSIDE THE CITY 


        15    AND COUNTY OF SAN FRANCISCO, CORRECT? 


        16    A.   YES, COMMUTERS GENERALLY WILL INCLUDE THAT. 


        17    Q.   AND THEY'RE IN THE SAN FRANCISCO MARKET IN YOUR JUDGMENT; 


        18    ISN'T THAT RIGHT? 


        19    A.   THEY'RE IN THE MARKET FOR A SAN FRANCISCO NEWSPAPER. 


        20    Q.   THEY'RE IN WHAT YOU TERMED A "SAN FRANCISCO METROPOLITAN 


        21    MARKET"; ISN'T THAT RIGHT? 


        22    A.   NO, I DON'T BELIEVE I SAID THAT.  I SAID YOU WOULD HAVE A 


        23    SAN FRANCISCO METROPOLITAN -- I THINK I SAID THERE WOULD BE A 


        24    METROPOLITAN NEWSPAPER. 


        25               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 
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         1    Q.   LET ME SHOW YOU YOUR PREPARATION NOTES, EXHIBIT C-311 IN 


         2    EVIDENCE.  AND BEFORE I DO THAT, LET ME ASK YOU A FEW QUESTIONS 


         3    ABOUT THIS. 


         4               YOU TOOK THESE NOTES ON MARCH 24TH; RIGHT? 


         5    A.   THAT'S CORRECT. 


         6    Q.   SOME NINE PAGES OF NOTES; RIGHT? 


         7    A.   YES. 


         8    Q.   AND YOU DID SO IN ANTICIPATION OF THE MEETING OF REILLY 


         9    EXPERTS TO OCCUR THE FOLLOWING DAY; RIGHT? 


        10    A.   THAT'S CORRECT. 


        11    Q.   AND YOU HAD BEEN ON THIS ASSIGNMENT SINCE THE VERY EARLY 


        12    PART OF FEBRUARY; RIGHT? 


        13    A.   THAT'S CORRECT. 


        14    Q.   AND YOU KNEW THAT A NUMBER OF THE PEOPLE WHO WERE COMING 


        15    TOGETHER ON SATURDAY WERE NEW TO THE TEAM; RIGHT? 


        16    A.   THAT'S CORRECT. 


        17    Q.   AND ONE OF THE THINGS YOU DID WAS PREPARE INFORMATION THAT 


        18    YOU WANTED TO SHARE WITH THE ASSEMBLED EXPERTS; RIGHT? 


        19    A.   THAT'S CORRECT. 


        20    Q.   AND YOU ALSO PULLED TOGETHER YOUR THOUGHTS ON A WHOLE HOST 


        21    OF TOPICS IN ANTICIPATION OF WHAT THE DISCUSSION MIGHT INVOLVE 


        22    THE NEXT DAY; RIGHT? 


        23    A.   YES. 


        24    Q.   AND THERE CONTAINED -- THOSE THOUGHTS OF YOURS ARE 


        25    CONTAINED IN C-311, RIGHT, YOUR HANDWRITTEN NOTES? 
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         1    A.   YES. 


         2    Q.   OKAY.  NOW LET ME ASK YOU FIRST, DIRECTING YOUR ATTENTION 


         3    TO BATES PAGE NUMBER 449, YOU EXPRESSED THE VIEW THAT:   


         4                   "A FANG-PRODUCED EXAMINER WILL NOT BE 


         5               'COMPETITIVE...'"   


         6               DO YOU SEE THAT? 


         7    A.   (WITNESS EXAMINES DOCUMENT.)  I SEE WHERE I HAVE WRITTEN 


         8    DOWN:   


         9                   "FANG-PRODUCED EXAMINER WILL NOT BE," QUOTE, 


        10               "'COMPETITIVE...' 


        11    Q.   AND BENEATH THAT YOU HAVE A NOTATION TO YOURSELF:   


        12               "...  IN A MARKETPLACE FOR A PAID DAILY 


        13               NEWSPAPER IN SAN FRANCISCO AND THE THREE-COUNTY 


        14               SAN FRANCISCO METROPOLITAN AREA."   


        15               DO YOU SEE THAT? 


        16    A.   YES. 


        17    Q.   WHAT IS THE THREE-COUNTY SAN FRANCISCO METROPOLITAN AREA? 


        18    A.   I BELIEVE, WHEN I WAS LOOKING AT THAT, THAT THE 


        19    THREE-COUNTY AREA INCLUDES SAN MATEO AND MARIN COUNTIES AS WELL 


        20    AS SAN FRANCISCO COUNTY. 


        21    Q.   OKAY.  NOW, WHAT WAS THE RELEVANCE TO YOUR THOUGHT PROCESS 


        22    OF INCLUDING THIS REFERENCE TO THE THREE-COUNTY SAN FRANCISCO 


        23    METROPOLITAN AREA? 


        24    A.   I WAS LOOKING AT OTHER DEFINITIONS THAT HAVE BEEN USED, 


        25    PARTICULARLY IN THE VERONIS SUHLER OFFERING, THAT SUGGESTED 
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         1    THERE WAS AN EIGHT- OR NINE-COUNTY AREA IN WHICH THERE WAS 


         2    COMPETITION. 


         3    Q.   AND YOU CALL THAT THE BAY AREA MARKETPLACE; CORRECT? 


         4    A.   I PROBABLY WOULD.  I DON'T KNOW IF I HAD IN HERE OR NOT. 


         5    Q.   NOW, THE SAN FRANCISCO METROPOLITAN MARKETPLACE, AS YOU 


         6    ENVISION IT, INCLUDES SAN FRANCISCO AND THESE OUTLYING AREAS; 


         7    ISN'T THAT RIGHT? 


         8    A.   NO.  I BELIEVE THIS IS A DEFINITION OF THE SAN FRANCISCO 


         9    METROPOLITAN AREA THAT'S COMMONLY ACCEPTED IN MARKETING 


        10    CIRCLES.  I THINK THAT'S WHERE I GOT IT.  I THINK I HAD SEEN A 


        11    REFERENCE OR WAS LOOKING AT A REFERENCE TO THE SAN FRANCISCO 


        12    METROPOLITAN AREA DEFINED FOR MARKETING PURPOSES AS SAN 


        13    FRANCISCO COUNTY, SAN MATEO COUNTY AND MARIN COUNTY. 


        14    Q.   AND THAT WAS THE SAME AS THE MARKET IN WHICH THE REILLY 


        15    PAPER WAS GOING TO OPERATE PLUS PARTS OF THE EAST BAY WEST OF 


        16    THE BERKELEY HILLS; RIGHT? 


        17    A.   THE REILLY PAPER WAS GOING TO OPERATE IN CERTAIN PARTS OF 


        18    SAN MATEO AND MARIN COUNTY AND IN SELECTED AREAS IN BERKELEY, 


        19    OAKLAND AND PIEDMONT. 


        20    Q.   AND THOSE ARE ALL AREAS IN WHICH TODAY'S EXAMINER 


        21    COMPETES; RIGHT? 


        22    A.   YES. 


        23    Q.   AND THEY'RE ALL AREAS IN WHICH TODAY'S CHRONICLE COMPETES; 


        24    ISN'T THAT RIGHT? 


        25    A.   YES. 
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         1    Q.   AND THERE ARE OTHER COMPETITORS IN THOSE MARKETS; ISN'T 


         2    THAT SO? 


         3    A.   YES. 


         4    Q.   NOW, YOU VIEW THIS MARKETPLACE AS VERY COMPETITIVE; ISN'T 


         5    THAT FAIR TO SAY? 


         6    A.   YES. 


         7    Q.   AND IF WE GO BACK TO THE PRECEDING PAGE, THE NUMBER ONE 


         8    FIRST THOUGHT THAT YOU HAD TO YOURSELF: 


         9               "... GIVEN ALL THE COMPETITION THAT CURRENTLY 


        10               EXISTS IN SAN FRANCISCO AND THE BAY AREA." 


        11               WHAT DID YOU MEAN BY THAT STATEMENT, SIR? 


        12    A.   MY THOUGHTS HERE WERE WHAT COULD IT POSSIBLY MEAN IN THE 


        13    JOA TO MAINTAIN COMPETITION GIVEN THAT ALL -- THAT THERE IS A 


        14    LOT OF COMPETITION THAT CURRENTLY EXISTS AND THAT DID EXIST IN 


        15    1965. 


        16    Q.   AND IN YOUR MIND THE CURRENT COMPETITION INCLUDES 


        17    WEEKLIES; RIGHT? 


        18    A.   YES. 


        19    Q.   OTHER DAILIES? 


        20    A.   YES. 


        21    Q.   AND MR. FANG'S GROUP OF THRICE WEEKLIES; RIGHT? 


        22    A.   YES. 


        23    Q.   THAT WOULD INCLUDE, AMONG OTHERS, THE INDEPENDENT IS; 


        24    CORRECT? 


        25    A.   THAT'S WHAT I WAS REFERRING TO IN FANG'S GROUP OF THRICE 
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         1    WEEKLIES. 


         2    Q.   NOW, FROM THE VERY BEGINNING OF YOUR WORK WITH MR. REILLY 


         3    ON THIS PROCESS, YOU WERE CONCERNED ABOUT POSSIBLE COMPETITIVE 


         4    RESPONSES FROM BAY AREA PAPERS OTHER THAN THE CHRONICLE; ISN'T 


         5    THAT TRUE? 


         6    A.   YES. 


         7    Q.   AND IN PARTICULAR YOU WERE VERY WORRIED THAT THIS SAN 


         8    FRANCISCO-FOCUSED PAPER YOU WERE PLANNING WOULD BE MET WITH A 


         9    COMPETITIVE RESPONSE FROM THE SAN JOSE MERCURY NEWS; ISN'T THAT 


        10    RIGHT? 


        11    A.   NO. 


        12    Q.   YOU DID VIEW THE SAN JOSE MERCURY NEWS AS A FORMIDABLE 


        13    COMPETITOR IN THE SAN FRANCISCO MARKETPLACE; IS THAT NOT TRUE? 


        14    A.   IN THE MARKETPLACE THAT WE DEFINED NOW FOR THE REILLEY 


        15    PAPER? 


        16    Q.   YES. 


        17    A.   NOT FOR READERS. 


        18    Q.   FOR ADVERTISING? 


        19    A.   I BELIEVE SO.   


        20    Q.   LET'S LOOK AT ANOTHER SET OF YOUR NOTES.  THIS IS C-302 IN 


        21    EVIDENCE.  IT'S THERE IN THE NOTEBOOK.   


        22               THESE ARE YOUR VERY, VERY FIRST NOTES YOU TOOK IN 


        23    THIS ENGAGEMENT, ISN'T THAT RIGHT, THE DAY BEFORE YOU WERE TO 


        24    MEET WITH MR. REILLY FOR THE FIRST TIME? 


        25    A.   YES. 
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         1    Q.   AND YOU WANTED TO ORGANIZE YOUR THOUGHTS BEFORE YOU MET 


         2    WITH HIM; ISN'T THAT RIGHT? 


         3    A.   YES. 


         4    Q.   AND SO IN ITEM ONE YOU START OUT TALKING ABOUT DUE 


         5    DILIGENCE YOU'D WANT TO PERFORM; CORRECT? 


         6    A.   YES. 


         7    Q.   AND THEN WE GO OVER TO THE SECOND PAGE WE HAVE, "DUE 


         8    DILIGENCE 2."  AND YOU SAY:   


         9                   "COMPETITION PRINT IN SF, DAILY, WEEKLY, 


        10               ALTERNATIVE."   


        11               THOSE WERE ALL THINGS THAT -- ON WHICH YOU WANTED TO 


        12    CONDUCT DUE DILIGENCE; ISN'T THAT RIGHT? 


        13    A.   I WANTED TO UNDERSTAND, YES. 


        14    Q.   BECAUSE THE EXAMINER YOU WERE MODELING FOR REILLY WAS 


        15    GOING TO FACE COMPETITION FROM ALL THESE SOURCES; CORRECT? 


        16    A.   YES. 


        17    Q.   INCLUDING THE WEB AND BROADCAST; RIGHT? 


        18    A.   YES. 


        19    Q.   AND THEN UNDER "STRATEGY," "DEFINE MARKET, READERS"; 


        20    RIGHT?  THAT'S EYEBALLS AS YOU TOLD ME; CORRECT? 


        21    A.   YES. 


        22    Q.   ADVERTISERS; RIGHT? 


        23    A.   YES. 


        24    Q.   AND UNDER "GEOGRAPHIC" YOU'VE GOT "SF ONLY."  DO YOU SEE 


        25    THAT? 
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         1    A.   YES. 


         2    Q.   THAT'S DR. COMANOR'S DEFINITION, ISN'T IT, OF THE MARKET? 


         3    A.   THAT IS HIS DEFINITION, YES. 


         4    Q.   AND FROM THE VERY BEGINNING YOU WERE TALKING ABOUT A 


         5    MARKET THAT INCLUDED OTHERS; WERE YOU NOT? 


         6    A.   I WAS LOOKING AT A BROADER MARKETPLACE THAN SF ONLY, YES. 


         7    Q.   BECAUSE YOU VIEWED IT AS THE RELEVANT MARKETPLACE, ISN'T 


         8    THAT RIGHT, SIR, FOR A SAN FRANCISCO-FOCUSED PAPER? 


         9    A.   NO. 


        10    Q.   ALL RIGHT.  LET'S TAKE A LOOK AT THE MEMO THAT YOU WROTE 


        11    AFTER THAT FIRST MEETING.  THIS IS H-1038 IN EVIDENCE, SUMMARY 


        12    OF DISCUSSIONS FEBRUARY 2 TO 3.   


        13               THOSE ARE THE MEETINGS THAT YOU HAD WITH MR. REILLY; 


        14    RIGHT? 


        15    A.   COULD YOU GIVE ME A NUMBER HERE? 


        16    Q.   H-1038. 


        17    A.   (WITNESS EXAMINES DOCUMENTS.)  YES. 


        18    Q.   NOW, YOU PREPARED THIS SUMMARY IN ORDER TO CAPTURE THE 


        19    ESSENCE OF WHAT WAS DISCUSSED IN THE TWO DAYS OF MEETINGS; 


        20    RIGHT? 


        21    A.   YES. 


        22    Q.   AND THE FIRST MEETING WAS WITH YOU, FLAHERTY AND REILLY ON 


        23    THE 2ND; RIGHT? 


        24    A.   YES. 


        25    Q.   AND THEN THE NEXT DAY YOU AND INGRAM AND REILLY MET; 
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         1    RIGHT? 


         2    A.   YES. 


         3    Q.   OKAY.  AND YOU DESCRIBE, DO YOU NOT, IN THE OVERVIEW, THE 


         4    MARKET THAT REILLY WAS SEEKING TO SERVE AS INCLUDING, NUMBER 


         5    ONE, THE PEOPLE WHO LIVE IN THE CITY AND COUNTY OF SAN 


         6    FRANCISCO; RIGHT? 


         7    A.   YES. 


         8    Q.   THAT'S DR. COMANOR'S MARKET; CORRECT? 


         9    A.   YES. 


        10    Q.   IN ADDITION, YOU WERE TARGETING THOSE PEOPLE WHO ARE SAN 


        11    FRANCISCO ORIENTED BECAUSE THEY WORK IN THE CITY OR INVOLVED 


        12    WITH THE THEATER AND THE ARTS; RIGHT? 


        13    A.   YES. 


        14    Q.   SO THOSE ARE INBOUND COMMUTERS; CORRECT? 


        15    A.   YES. 


        16    Q.   AND THEY'RE PEOPLE TO WHOM YOU WERE GOING TO SELL HOME 


        17    DELIVERY COPIES WHO MIGHT BE INTERESTED IN ENTERTAINMENT OR THE 


        18    ARTS OR SPORTS HERE IN THE CITY; RIGHT? 


        19    A.   YES. 


        20    Q.   AND THEY WERE PART OF THE READERSHIP FOR EYEBALLS AND FOR 


        21    ADVERTISING; RIGHT? 


        22    A.   YES. 


        23    Q.   OKAY.  AND THEN ONE OF THE THINGS YOU WANT TO ANALYZE IS A 


        24    DEFINITION OF THE GEOGRAPHIC MARKET TO BE SERVED; RIGHT? 


        25    A.   YES. 
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         1    Q.   A COMPETITIVE ANALYSIS OF SAN FRANCISCO AND BAY AREA PRINT 


         2    AND BROADCAST MEDIA? 


         3    A.   YES. 


         4    Q.   AND THEN DOWN HERE UNDER 9:   


         5                   "POSSIBLE COMPETITIVE RESPONSES OF THE 


         6               CHRONICLE AND OTHER BAY AREA NEWSPAPERS."   


         7               DO YOU SEE THAT? 


         8    A.   YES. 


         9    Q.   WHO WERE YOU TALKING ABOUT THERE?  OTHER BAY AREA 


        10    NEWSPAPERS BESIDES THE CHRONICLE, WHO MIGHT THAT BE? 


        11    A.   SAN MATEO TIMES, SAN JOSE MERCURY NEWS, OAKLAND TRIBUNE, 


        12    CONTRA COSTA TIMES, ALL OF THOSE DAILY NEWSPAPERS THAT ARE IN 


        13    THAT EIGHT- OR NINE-MARKET AREA. 


        14    Q.   COMPETITORS.  AND THAT WOULD INCLUDE THE MARIN INDEPENDENT 


        15    JOURNAL AS WELL; RIGHT? 


        16    A.   YES. 


        17    Q.   AND YOU CONTINUED, AS YOU DID YOUR DUE DILIGENCE, TO HAVE 


        18    CONCERNS ABOUT COMPETITIVE RESPONSES FROM THESE OTHER BAY AREA 


        19    NEWSPAPERS; ISN'T THAT RIGHT, SIR? 


        20    A.   YES. 


        21    Q.   SO, FOR EXAMPLE, YOU SENT THIS E-MAIL TO MR. REILLY.  THIS 


        22    IS EXHIBIT C-303.  LET'S ZOOM IN.   


        23               THIS IS AN E-MAIL THAT YOU SENT TO CLINTON REILLY ON 


        24    OR ABOUT THE DATE THAT IT BEARS, FEBRUARY 22ND; RIGHT? 


        25    A.   (WITNESS EXAMINES DOCUMENT.)  YES. 
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         1    Q.   AND THIS IS SOME 20 DAYS AFTER YOUR INITIAL MEETINGS; 


         2    RIGHT? 


         3    A.   YES. 


         4    Q.   AND YOU OFFER SOME -- A FEW MORE THOUGHTS ON THE EXAMINER 


         5    SITUATION.  THAT'S YOUR OPENING LINE; CORRECT? 


         6    A.   YES. 


         7    Q.   AND THEN YOU INDICATE: 


         8                   "ALSO, WE HAVEN'T FOCUSED ON THE MARKET 


         9               RISKS AND THE POSSIBLE COMPETITIVE RESPONSES OF 


        10               THE CHRONICLE AND THE OTHER BAY AREA 


        11               NEWSPAPERS." 


        12               DO YOU SEE THAT? 


        13    A.   YES. 


        14    Q.   WHY WAS IT NECESSARY FOR YOU TO CALL TO MR. REILLY'S 


        15    ATTENTION THE NEED TO ASSESS POSSIBLE COMPETITIVE RESPONSES OF 


        16    THE CHRONICLE AND OTHER BAY AREA NEWSPAPERS? 


        17    A.   I THINK IT'S IMPORTANT TO UNDERSTAND IF OTHER BAY AREA 


        18    NEWSPAPERS CAN RESPOND IN A WAY THAT WOULD NEGATIVELY IMPACT 


        19    THE PROPOSED EXAMINER. 


        20    Q.   YOU WERE CONCERNED THAT THEY COULD IMPEDE THE POTENTIAL 


        21    SUCCESS OF THE REILLY EXAMINER; RIGHT? 


        22    A.   I WAS CONCERNED THAT WE UNDERSTAND WHETHER THEY COULD HAVE 


        23    AN IMPACT ON A REILLY EXAMINER, YES. 


        24    Q.   EVEN HERE IN THE CITY OF SAN FRANCISCO; RIGHT? 


        25    A.   YES. 
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         1    Q.   NOW, YOUR MOTHER LIVES IN THE EAST BAY; RIGHT? 


         2    A.   THAT'S CORRECT. 


         3    Q.   AND WHEN YOU GET ON THE BART TO COME INTO THE CITY, YOU 


         4    CAN FIND THE SAN FRANCISCO PAPERS OUT THERE IN CERRITOS; RIGHT? 


         5    A.   YES, IN EL CERRITO. 


         6    Q.   CERRITO, THANK YOU. 


         7    A.   EL CERRITO. 


         8    Q.   WHEN YOU GET OFF AND WALK UP MARKET STREET, AS YOU WALK 


         9    DOWN MARKET STREET FROM THE BART TERMINAL OR FROM THE FERRY 


        10    TERMINAL, YOU CAN FIND ON THE STREETS OF SAN FRANCISCO TODAY 


        11    EVERY ONE OF THOSE NEWSPAPERS YOU IDENTIFIED; ISN'T THAT RIGHT? 


        12    A.   I DON'T KNOW SPECIFICALLY; BUT, YES, I AGREE THAT I CAN 


        13    FIND THOSE OTHER NEWSPAPERS IN SAN FRANCISCO FOR SALE. 


        14    Q.   CERTAINLY THE SAN JOSE MERCURY; RIGHT? 


        15    A.   I JUST HAVEN'T SEEN THEM.  I'M AGREEING THAT THOSE ARE 


        16    AVAILABLE IN SAN FRANCISCO FOR SALE. 


        17    Q.   OKAY.  AND AS YOU WALK UP THE STREET, YOU ALSO SEE THE LOS 


        18    ANGELES TIMES FOR SALE IN SAN FRANCISCO; ISN'T THAT RIGHT? 


        19    A.   I DON'T KNOW IF THERE'S A NEWS RACK FOR THE LOS ANGELES 


        20    TIMES OR IF I CAN SEE THE LOS ANGELES TIMES WALKING UP THE 


        21    STREET, BUT I KNOW THE LOS ANGELES TIMES IS AVAILABLE FOR SALE 


        22    IN SAN FRANCISCO. 


        23    Q.   ALL RIGHT.  AND YOU KNOW THAT THE NEW YORK TIMES IS 


        24    AVAILABLE? 


        25    A.   YES. 
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         1    Q.   AND YOU KNOW THAT THE WALL STREET JOURNAL IS AVAILABLE? 


         2    A.   YES. 


         3    Q.   AND YOU KNOW THAT U.S.A. TODAY IS AVAILABLE? 


         4    A.   YES. 


         5    Q.   ALL IN THE MARKET FOR SALE ON THE STREET IN THE CITY OF 


         6    SAN FRANCISCO; ISN'T THAT RIGHT? 


         7    A.   YES. 


         8    Q.   NOW, LET ME ASK YOU A QUESTION.  WHEN I DROVE INTO COURT 


         9    THIS MORNING, I CAME UP LOMBARD STREET AND I PASSED TWO 


        10    BILLBOARDS, ONE FOR THE NEW YORK TIMES AND ONE FOR THE WALL 


        11    STREET JOURNAL. 


        12               MR. ALIOTO:  OBJECTION. 


        13               THE COURT:  SUSTAINED. 


        14               MR. LINDSTROM:  IT'S HYPOTHETICAL, YOUR HONOR. 


        15    Q.   I WANT YOU TO ASSUME THAT THOSE TWO -- 


        16               THE COURT:  MR. LINDSTROM, STRAIGHTEN OUT YOUR 


        17    QUESTIONS. 


        18    BY MR. LINDSTROM: 


        19    Q.   TO YOUR KNOWLEDGE BOTH THE NEW YORK TIMES AND THE WALL 


        20    STREET JOURNAL ARE CURRENTLY SEEKING ENHANCED READERSHIP IN THE 


        21    CITY OF SAN FRANCISCO; ISN'T THAT RIGHT? 


        22    A.   IT'S APPARENT TO ME THAT THE NEW YORK TIMES IS AND I WOULD 


        23    ASSUME THE WALL STREET JOURNAL IS.   


        24    Q.   NOW, SIR, YOU PERSONALLY WOULDN'T AGREE, WOULD YOU, WITH 


        25    THE STATEMENT THAT WITHOUT THE EXAMINER, THE CHRONICLE WOULD 
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         1    HAVE A MONOPOLY IN THE MARKETPLACE? 


         2    A.   NO, I WOULD NOT AGREE WITH THAT. 


         3    Q.   AND IT'S YOUR VIEW THAT NO PAPER HAS A MONOPOLY IN THIS 


         4    MARKETPLACE; ISN'T THAT RIGHT? 


         5    A.   YES, THAT'S MY VIEW. 


         6    Q.   AND THAT WOULD EVEN BE TRUE IF THE EXAMINER WERE TO EXIT 


         7    THE MARKETPLACE; CORRECT? 


         8    A.   THAT'S MY VIEW, YES. 


         9    Q.   NOW, RETURNING TO YOUR DECLARATION, THE SUBSIDY THAT YOU 


        10    INDICATED WOULD BE REQUIRED OF $50 MILLION A YEAR, THAT WILL BE 


        11    REQUIRED NO MATTER WHO WAS TO OPERATE THE EXAMINER; ISN'T THAT 


        12    TRUE? 


        13    A.   YES. 


        14    Q.   WHETHER NEW YORK TIMES WAS TO OPERATE THE EXAMINER; RIGHT? 


        15    A.   YES. 


        16    Q.   OR THE FANGS? 


        17    A.   YES. 


        18    Q.   OR REILLY OR GANNETT OR ANY OF THESE OTHER EXISTING 


        19    PUBLISHERS; ISN'T THAT TRUE? 


        20    A.   YES.   


        21    Q.   AND IN YOUR DEFINITION YOU INDICATE YOU THINK THAT THAT 


        22    SUBSIDY OF $50 MILLION WOULD BE REQUIRED FOR A MINIMUM OF THREE 


        23    YEARS; RIGHT? 


        24    A.   I BELIEVE IT SAYS UP TO THREE YEARS, YES. 


        25    Q.   AND IN YOUR DEPOSITION YOU INDICATED THAT YOU THOUGHT 
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         1    MAYBE THAT IT WAS MORE LIKE FOUR OR FIVE YEARS; RIGHT? 


         2    A.   YES. 


         3    Q.   BECAUSE YOUR MODEL OF A 50 MILLION-DOLLAR A YEAR COST 


         4    PAPER ASSUMES THAT THAT PAPER IS ALREADY AT A COMPETITIVE 


         5    PARITY LEVEL WITH THE CHRONICLE; RIGHT? 


         6    A.   CAN YOU CLARIFY THAT?  I'M NOT SURE EXACTLY. 


         7    Q.   IT'S YOUR JUDGMENT, SIR, THAT IT'S GOING TO TAKE YEARS FOR 


         8    THE EXAMINER, NO MATTER WHO RUNS IT, TO GET TO THE POINT WHERE 


         9    IT WILL BE COMPETITIVE WITH THE CHRONICLE? 


        10    A.   THAT'S CORRECT. 


        11    Q.   AND DURING THAT INTERIM PERIOD, IT'S GOING TO TAKE A LOT 


        12    MORE THAN $50 MILLION TO SUPPORT THAT EFFORT; ISN'T THAT FAIR 


        13    TO SAY? 


        14    A.   YES. 


        15    Q.   AND THE REVENUES ARE GOING TO BE NEAR ZERO INITIALLY; 


        16    ISN'T THAT FAIR TO SAY? 


        17    A.   CERTAINLY THE ADVERTISING REVENUES AND CIRCULATION 


        18    REVENUES MAY BE MORE THAN ZERO. 


        19    Q.   HOW MUCH MORE THAN ZERO?  DO YOU HAVE AN ESTIMATE? 


        20    A.   NO. 


        21    Q.   FLAHERTY THOUGHT THE AD REVENUES WOULD BE NEAR ZERO; 


        22    DIDN'T HE? 


        23    A.   I'D HAVE TO REFER TO HIS MEMOS, BUT I THINK HE FELT THAT 


        24    THERE WOULDN'T BE VERY MUCH ADVERTISING REVENUE. 


        25    Q.   HE WAS VERY SKEPTICAL OF THE BEIHOFF NUMBERS; WAS HE NOT? 
                                                                         1335
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         1    A.   YES, HE WAS.  THAT'S CORRECT. 


         2    Q.   AND YOU WERE SKEPTICAL TOO; RIGHT? 


         3    A.   YES. 


         4    Q.   NOW, IN YOUR JUDGMENT IT'S GOING TO TAKE THREE TO FIVE 


         5    YEARS FOR THE EXAMINER TO BECOME COMPETITIVE WITH THE 


         6    CHRONICLE; IS THAT FAIR TO SAY? 


         7    A.   YES. 


         8    Q.   AND DURING THAT PERIOD, INEVITABLY THERE'S GOING TO BE A 


         9    SHORTFALL BETWEEN REVENUE AND THE EXPENSES ASSOCIATED WITH 


        10    PUTTING OUT A PAPER THAT COULD BE COMPETITIVE; RIGHT? 


        11    A.   YES. 


        12    Q.   AND IN YOUR JUDGMENT THAT SHORTFALL IS $50 MILLION? 


        13    A.   UP TO $50 MILLION, YES. 


        14    Q.   OKAY.  NOW, THAT SUBSIDY IS ONLY TO GET YOU TO BREAK EVEN; 


        15    RIGHT? 


        16    A.   YES. 


        17    Q.   IT DOESN'T INCLUDE ANY PROFIT? 


        18    A.   THAT'S CORRECT. 


        19    Q.   AND IT DOESN'T INCLUDE ANY RETURN ON INVESTMENT OR 


        20    ANYTHING ELSE THAT MIGHT BE AFTER PROFIT; IS THAT FAIR TO SAY? 


        21    A.   YES. 


        22    Q.   AND WHEN WE GET TO THE END OF THE SUBSIDY PERIOD, THREE 


        23    YEARS IN YOUR DECLARATION, THERE'S NO GUARANTEE, IS THERE, THAT 


        24    THE PAPER WILL BE PROFITABLE? 


        25    A.   THAT'S CORRECT. 
                                                                         1336
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         1    Q.   AND, IN FACT, THE PAPER THAT YOU MODELED FOR MR. REILLY 


         2    WAS SHOWN TO BE NOT PROFITABLE AFTER THREE YEARS; ISN'T THAT 


         3    RIGHT? 


         4    A.   THAT MODEL SHOWS MAKING A LOSS, YES. 


         5    Q.   AND THAT'S P-46 AND I THINK YOU'VE TOLD US THAT THE 


         6    INITIAL MODEL WAS FOUND ON BATES STAMP PAGE 36.   


         7               YOU'VE GOT TWO CASES HERE, OPTIMISTIC AND REALISTIC.  


         8    AND YOU PERSONALLY DIDN'T VIEW THAT THE OPTIMISTIC CASE WAS 


         9    ACHIEVABLE; DID YOU? 


        10    A.   THAT'S CORRECT. 


        11    Q.   AND SO YOU WERE LOOKING AT REALISTIC AND A PROJECTED LOSS 


        12    AFTER THREE YEARS WAS STILL NEARLY $20 MILLION; RIGHT? 


        13    A.   YES. 


        14    Q.   AND AT SOME POINT IN TIME YOU MODELED A SCALED-BACK 


        15    VERSION OF THE PAPER THAT INVOLVED LESS COST TO PUT IT OUT.  DO 


        16    YOU RECALL THAT TESTIMONY? 


        17    A.   YES. 


        18    Q.   AND THAT MODEL IS SHOWN ON PAGE 31, RIGHT, OF EXHIBIT 


        19    P-46? 


        20    A.   YES. 


        21    Q.   AND NOW EVEN THOUGH YOU'RE SPENDING LESS, LOW 40'S, 


        22    COMPARED TO MID-50'S; RIGHT? 


        23    A.   YES. 


        24    Q.   YOU'RE LOSING MORE, ISN'T THAT TRUE, IN THIS MODEL? 


        25    A.   (WITNESS EXAMINES DOCUMENT.)  YES. 
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         1    Q.   SO IN THE OPTIMISTIC CASE, YOU'RE NOW LOSING ALMOST 


         2    $11 MILLION; ISN'T THAT CORRECT? 


         3    A.   YES. 


         4    Q.   AND ALMOST 20 IN THE REALISTIC CASE? 


         5    A.   YES. 


         6    Q.   NOW, DID YOU EVER SUGGEST TO MR. REILLY THAT YOU DIDN'T 


         7    THINK THIS PAPER COULD BE MADE TO BE PROFITABLE? 


         8    A.   NO. 


         9    Q.   WELL, THESE NUMBERS AFTER THREE YEARS HARDLY LOOK LIKE A 


        10    FINANCIAL HOME RUN; DO THEY? 


        11    A.   THAT'S CORRECT. 


        12    Q.   SO WHERE WAS THE HOME RUN GOING TO COME FROM IF NOT FROM 


        13    THE OPERATION OF THE EXAMINER? 


        14    A.   I HAVEN'T SPOKEN TO A HOME RUN. 


        15    Q.   WELL, YOU WERE AWARE -- YOU HEARD MR. INGRAM'S TESTIMONY 


        16    YESTERDAY IN COURT ABOUT THE LUNCHEON THAT HE HAD WITH 


        17    MR. REILLY AND MR. REILLY'S GOALS AND MOTIVATIONS AS THEY WERE 


        18    DESCRIBED TO HIM; DIDN'T YOU? 


        19    A.   YES. 


        20    Q.   OKAY.  AND LET'S PUT BEFORE YOU EXHIBIT E-88.  IT MAY NOT 


        21    BE IN YOUR NOTEBOOK.  IN FACT, I THINK IT'S NOT.  THIS IS IN 


        22    EVIDENCE. 


        23               NOW, MR. INGRAM AND YOU CONSULTED REGULARLY DURING 


        24    THE COURSE OF THIS ENGAGEMENT; ISN'T THAT RIGHT? 


        25    A.   WE SPOKE REGULARLY.  IS THAT WHAT YOU'RE SAYING? 
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         1    Q.   YES. 


         2    A.   YES. 


         3    Q.   AND FROM TIME TO TIME HE WOULD APPRISE YOU ON 


         4    CONVERSATIONS HE'D HAD WITH MR. REILLY; RIGHT? 


         5    A.   THAT'S CORRECT. 


         6    Q.   AND IF YOU HAD A CONVERSATION WITH MR. REILLY, YOU'D DO 


         7    THE SAME FOR MR. INGRAM; RIGHT? 


         8    A.   YES. 


         9    Q.   AND FOR MR. FLAHERTY WHEN HE WAS INVOLVED? 


        10    A.   YES. 


        11    Q.   AND THE IDEA WAS YOU ALL WANTED TO BE ON THE SAME PAGE; 


        12    RIGHT? 


        13    A.   YES. 


        14    Q.   NOW, YOU BECAME AWARE, DID YOU NOT, THAT CLINT, 


        15    MR. REILLY, WANTED TO GET THE EXAMINER AT LOW RISK? 


        16    A.   YES. 


        17    Q.   OKAY.  AND YOU ALSO BECAME AWARE THAT HE WANTED ANOTHER 


        18    ASSET FROM HEARST; RIGHT? 


        19               THE COURT:  WHAT EXHIBIT NUMBER IS THIS? 


        20               MR. LINDSTROM:  E-88, YOUR HONOR.  SO THAT WOULD BE 


        21    EXIN 88. 


        22               THE COURT:  OH, I'M SORRY. 


        23               MR. LINDSTROM:  I'M SORRY, YOUR HONOR. 


        24               THE COURT:  ALL RIGHT. 


        25               THE WITNESS:  YES.  IF YOU'LL REMEMBER, THE OFFERING 
                                                                         1339
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         1    MEMORANDUM SUGGESTED THAT POTENTIAL BUYERS COME BACK WITH 


         2    WHATEVER THEY FELT WAS REASONABLE OR WHATEVER THEY WERE 


         3    INTERESTED IN TAKING OVER. 


         4    BY MR. LINDSTROM: 


         5    Q.   EXACTLY.  WHAT WAS BEING OFFERED IN THE VERONIS AND SUHLER 


         6    OFFERING MEMORANDUM WAS THE ARMY STREET PRINT FACILITY; RIGHT? 


         7    A.   YES. 


         8    Q.   HEARST WAS NOT OFFERING THIS CHOICE REAL ESTATE ON MARKET 


         9    STREET AT THAT POINT IN TIME; WAS IT? 


        10    A.   I'D HAVE TO READ THE OFFERING MEMORANDUM TO KNOW WHETHER 


        11    IN FACT IT STATED, AS MR. ASHER DID, THAT THE INTENT WAS TO 


        12    SOLICIT BIDS ANY WAY -- IN ANY MANNER IN WHICH YOU WANTED TO. 


        13    Q.   LET ME REPHRASE THE QUESTION.  I'M NOT ASKING YOU ABOUT 


        14    FLEXIBILITY ON THE PART OF HEARST.  WE'RE GOING TO COME TALK 


        15    ABOUT THAT IN A MINUTE. 


        16    A.   OKAY. 


        17    Q.   WHAT WAS PROPOSED IN THE VERONIS SUHLER MEMORANDUM WAS THE 


        18    ARMY STREET FACILITY; CORRECT? 


        19    A.   THE ARMY STREET FACILITY WAS OFFERED UP IN THE VERONIS 


        20    SUHLER MEMORANDUM. 


        21    Q.   AND WHERE IS THE ARMY STREET FACILITY LOCATED? 


        22    A.   I HAVEN'T SEEN IT.  I WOULD ASSUME IT'S ON THE BAY SIDE OF 


        23    THE 101 ON ARMY STREET. 


        24    Q.   WELL, IN YOUR JUDGMENT WOULD IT HAVE THE SAME REAL ESTATE 


        25    VALUE AS A MARKET STREET OFFICE BUILDING AND GARAGE? 
                                                                         1340
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         1    A.   I DON'T CLAIM TO BE AN EXPERT OR EVEN KNOWLEDGEABLE.  IF 


         2    YOU'D LIKE -- IF YOU'D LIKE MY OPINION, I'LL GIVE IT TO YOU, 


         3    BUT IT WOULD BE AS NOT AN EXPERT AND NOT KNOWLEDGEABLE. 


         4    Q.   AND MR. REILLY DIDN'T NEED YOUR HELP TO EVALUATE REAL 


         5    ESTATE; DID HE? 


         6    A.   THAT'S CORRECT. 


         7    Q.   AND MR. REILLY SAID THAT HE WANTED TO TALK ABOUT TRYING 


         8    FOR A MARKET STREET OFFICE BUILDING AND GARAGE.  DO YOU KNOW 


         9    WHY? 


        10    A.   MY UNDERSTANDING WAS THAT THAT GOES TO THE QUESTION OF LOW 


        11    RISK.  THAT IF HE INVESTED MONEY AND THE EXAMINER DIDN'T WORK 


        12    OUT, THAT HE WOULD REDUCE HIS RISK BECAUSE HE FELT HE COULD 


        13    DEVELOP PROPERTY. 


        14    Q.   SO IF THE PAPER FAILED, THEN MR. REILLY WOULD END UP WITH 


        15    THE REAL ESTATE; WOULDN'T HE? 


        16    A.   YES. 


        17    Q.   BUT HE DIDN'T WANT THE REAL ESTATE ON ARMY STREET; DID HE? 


        18    A.   HE DIDN'T WANT THE ARMY STREET FACILITY.  WE RECOMMENDED 


        19    AGAINST THE ARMY STREET FACILITY. 


        20    Q.   OKAY.  LET'S TAKE A LOOK AT YOUR VERY FIRST REPORT.  WE 


        21    SAW THIS EARLIER WITH MR. INGRAM.  THIS IS PLAINTIFF'S 23, 


        22    H-1024 IN EVIDENCE, DUPLICATES OF THE SAME DOCUMENT.   


        23               THE FIRST PAGE, JUST TO FAMILIARIZE YOURSELF WITH 


        24    IT, YOU HAVE IT IN THE NOTEBOOK -- 


        25    A.   WHAT'S THE NUMBER, THE REFERENCE? 
                                                                         1341
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         1    Q.   IT'S -- I THINK IN YOUR NOTEBOOK IT'S H-1024. 


         2    A.   1024.  (WITNESS EXAMINES DOCUMENT.) 


         3    Q.   BEFORE I CONTINUE WITH THIS DOCUMENT, YOU JUST MENTIONED 


         4    SOMETHING THAT CAUGHT MY ATTENTION.  YOU SAID THAT IF 


         5    MR. REILLY INVESTED MONEY, THEN HE COULD RECOUP IT, OR 


         6    SOMETHING ALONG THAT LINE.  DO YOU RECALL THAT TESTIMONY? 


         7    A.   YES. 


         8    Q.   ISN'T IT TRUE THAT MR. REILLY TOLD YOU HIS GOAL WAS NOT TO 


         9    INVEST ANY OF HIS OWN MONEY IN THIS PAPER? 


        10    A.   HE MADE THAT STATEMENT AND HE MADE OTHER STATEMENTS THAT 


        11    WOULD CONTRADICT THAT STATEMENT. 


        12    Q.   NOW, RETURNING TO YOUR FIRST REPORT, ONE OF THE VERY FIRST 


        13    THINGS THAT YOU SUGGEST TO MR. REILLY THAT YOU WANT IN ORDER TO 


        14    DO YOUR CONSULTING WORK IS HERE UNDER THE HEADING OF 


        15    "INFORMATION REQUEST."  DO YOU SEE THAT? 


        16    A.   YES. 


        17    Q.   AND I'M RIGHT, AREN'T I, THAT YOU WERE CONVEYING THIS 


        18    INFORMATION TO HIM, THE THREE OF YOU, SO THAT HE COULD GET FOR 


        19    YOU THE INFORMATION THAT YOU NEEDED FROM HEARST IN ORDER TO 


        20    EVALUATE THIS POSSIBLE ACQUISITION? 


        21    A.   YES. 


        22    Q.   OKAY.  AND, NUMBER ONE, "CURRENT BUILDING PLANS FOR 110 


        23    FIFTH STREET AND BRANNAN STREET GARAGE."  DO YOU SEE THAT? 


        24    A.   YES. 


        25    Q.   NOW, THE REASON YOU NEEDED THAT INFORMATION WAS HERETOFORE 
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         1    IT HADN'T BEEN OFFERED BY HEARST; ISN'T THAT RIGHT? 


         2    A.   I DON'T KNOW THAT IT HAD OR HAD NOT BEEN OFFERED BY 


         3    HEARST. 


         4    Q.   AND YOU ALSO WANTED CURRENT SITE PLANS FOR BRANNAN STREET 


         5    PROPERTY, 110 FIFTH PLOT AND ALL PLOTS TO THE SOUTH OF 110 


         6    FIFTH SITE.  DO YOU SEE THAT? 


         7    A.   YES.   


         8    Q.   NOW, WHAT IS A PLOT? 


         9    A.   I DON'T KNOW WHAT A PLOT IS IN THESE TERMS. 


        10    Q.   WELL, WHAT'S A SITE PLAN? 


        11    A.   MY UNDERSTANDING IS THE SITE PLAN WOULD GIVE YOU A LAYOUT 


        12    OF THE BUILDING -- THE BUILDINGS -- THE PROPERTY AND THE 


        13    BUILDING ON THAT PROPERTY. 


        14    Q.   ALL PLOTS TO THE SOUTH OF 110 FIFTH SITE, WHAT'S THAT 


        15    ABOUT? 


        16    A.   I DON'T KNOW THE OWNERSHIP OR THE LAYOUT IN DETAIL OF 


        17    EITHER BRANNAN STREET OR THE 110 FIFTH STREET. 


        18    Q.   NOW, IF WE TURN TO THE NEXT PAGE, YOU SUMMARIZE CERTAIN 


        19    KEY DEAL POINTS FOR MR. REILLY.  DO YOU SEE THAT? 


        20    A.   YES. 


        21    Q.   NUMBER ONE IS, "BUYER WILL NOT ACQUIRE ARMY STREET"; ISN'T 


        22    THAT RIGHT? 


        23    A.   YES. 


        24    Q.   OKAY.  NOW, AT ARMY STREET THERE WAS ALREADY A PRESS 


        25    PRINTING FACILITY IN PLACE; ISN'T THAT RIGHT? 
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         1    A.   YES. 


         2    Q.   BUT THERE WASN'T ONE IN PLACE AT 110 FIFTH STREET; WAS 


         3    THERE? 


         4    A.   THAT'S CORRECT. 


         5    Q.   AND THERE WASN'T ONE AT BRANNAN STREET EITHER? 


         6    A.   THAT'S CORRECT. 


         7    Q.   SO THOSE FACILITIES WOULD HAVE TO BE CONVERTED FROM THEIR 


         8    CURRENT USE TO A NEW USE; IS THAT RIGHT? 


         9    A.   YES. 


        10    Q.   BUT YOU STILL WANTED THEM; RIGHT? 


        11    A.   YES. 


        12    Q.   "BUYER WILL REQUIRE 110 FIFTH STREET AND ITS ADJACENT LOT 


        13    TO THE SOUTH PLUS THE BRANNAN STREET SITE."  WAS THAT A KEY 


        14    DEAL POINT IN THE JUDGMENT OF THE THREE OF YOU? 


        15    A.   THAT'S WHAT IT SAYS HERE. 


        16    Q.   AND THAT'S BECAUSE IF THE PAPER FAILED, AS EVERYONE KNEW 


        17    IT WOULD, MR. REILLY WOULD END UP WITH THE REAL ESTATE AT 110 


        18    FIFTH STREET AND ITS ADJACENT LOT TO THE SOUTH PLUS THE BRANNAN 


        19    STREET SITE; ISN'T THAT CORRECT, SIR? 


        20    A.   I WOULD DISAGREE THAT EVERYONE KNEW IT WOULD FAIL. 


        21    Q.   BUT YOU'D AGREE IF IT DID FAIL, HE'D END UP WITH THAT REAL 


        22    ESTATE; ISN'T THAT TRUE? 


        23    A.   IF THE AGREEMENT INCLUDED THAT REAL ESTATE, HE WOULD END 


        24    UP WITH IT, YES. 


        25    Q.   AND THE PAPER THAT YOU MODELED FOR HIM WAS LOSING MONEY IN 
                                                                         1344
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         1    YEAR THREE; ISN'T THAT RIGHT? 


         2    A.   YES. 


         3               MR. LINDSTROM:  THANK YOU.  I HAVE NO FURTHER 


         4    QUESTIONS, YOUR HONOR. 


         5               THE COURT:  VERY WELL.  MR. HOCKETT? 


         6                           CROSS-EXAMINATION 


         7    BY MR. HOCKETT: 


         8    Q.   GOOD MORNING, MR. WEAVER. 


         9    A.   GOOD MORNING. 


        10    Q.   YOU SPENT A GOOD DEAL OF TIME THIS MORNING WITH 


        11    MR. LINDSTROM TALKING ABOUT THE ECONOMICS OF THE EXAMINER AS IT 


        12    EXISTS CURRENTLY, AND I WANT TO FOCUS ON THE WORK YOU DID 


        13    RELATING TO THE EXAMINER AFTER HEARST DIVESTS IT. 


        14               NOW, WITH RESPECT TO YOUR DECLARATION, WHICH IS 


        15    PLAINTIFF'S EXHIBIT 60 AND ALREADY IN EVIDENCE, I BELIEVE 


        16    YOU'VE ALREADY TESTIFIED THAT YOU WERE PART OF THE GROUP THAT 


        17    CONVENED ON MARCH 25TH TO PREPARE YOUR DECLARATIONS AND 


        18    COORDINATE YOUR EFFORTS IN SUPPORT OF MR. REILLY'S CASE; IS 


        19    THAT CORRECT? 


        20    A.   TO PREPARE OUR DECLARATIONS, YES. 


        21    Q.   AND THE GROUP INCLUDED YOU AND MR. PAGE, MR. OSBORN, 


        22    MR. INGRAM; CORRECT? 


        23    A.   YES. 


        24    Q.   AND IT ALSO INCLUDED MR. ALIOTO AND MR. REILLY AND OTHER 


        25    ATTORNEYS FOR MR. REILLY; CORRECT? 
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         1    A.   YES. 


         2    Q.   AND IN YOUR DISCUSSIONS REGARDING THE APPROPRIATE ANNUAL 


         3    SUBSIDY FOR A BUYER OF THE EXAMINER, YOU RECALL MR. ALIOTO 


         4    SAYING IN SUM OR SUBSTANCE, "HOW DO PEOPLE FEEL ABOUT 


         5    $50 MILLION"; CORRECT? 


         6    A.   THAT'S IN MY DEPOSITION, YES. 


         7    Q.   AND WHEN MR. ALIOTO MADE THE STATEMENT, ALL OF THE EXPERTS 


         8    WERE ASSEMBLED TOGETHER IN ONE ROOM WITH HIM; CORRECT? 


         9    A.   THAT'S CORRECT. 


        10    Q.   AND YOU DON'T REMEMBER ANYTHING SPECIFICALLY THAT ANYBODY 


        11    SAID IN RESPONSE TO THAT SUGGESTION; DO YOU? 


        12    A.   NO.  I THINK THERE WAS A GENERAL AGREEMENT THAT HIS 


        13    SUMMARY OF THE DISCUSSION THAT HAD TAKEN PLACE EARLIER THAT DAY 


        14    WAS CORRECT. 


        15    Q.   AND RIGHT AFTER THE MEETING, EVERY ONE OF THE EXPERTS 


        16    THERE WHO ATTENDED, INCLUDING YOU, SIGNED DECLARATIONS WITH A 


        17    50 MILLION-DOLLAR SUBSIDY INCLUDED IN THEM; CORRECT? 


        18    A.   YES. 


        19    Q.   NOW, IN YOUR PARAGRAPH 4 YOU ACTUALLY DID CHANGE A FEW 


        20    WORDS REGARDING THE SUBSIDY THAT YOU CLAIM IS NECESSARY TO 


        21    SUPPORT THE NEW EXAMINER.   


        22               AND, BY THE WAY, YOUR VISION OF A NEW EXAMINER THAT 


        23    YOU'RE DISCUSSING IN YOUR DECLARATION IS AS A MAJOR 


        24    METROPOLITAN DAILY NEWSPAPER; CORRECT? 


        25    A.   YES. 
                                                                         1346
                                 WEAVER - CROSS / HOCKETT 



         1    Q.   YOU SAY HERE THAT IT WOULD BE NECESSARY FOR A BUYER TO 


         2    RECEIVE A SUBSIDY OF UP TO $50 MILLION FOR THREE YEARS AS 


         3    OPPOSED TO A MINIMUM SUBSIDY OF 50 FOR FIVE YEARS; CORRECT? 


         4    A.   I SAY THAT, UP TO $50 MILLION FOR THREE YEARS, YES. 


         5    Q.   AND THAT MEANS A MAXIMUM OF $50 MILLION A YEAR FOR THREE 


         6    YEARS; CORRECT? 


         7    A.   YES. 


         8    Q.   AND ONE OF THE REASONS YOU SAY "UP TO" IS THAT THE 


         9    THREE-YEAR SUBSIDY OF UP TO $50 MILLION THAT YOU REFER TO 


        10    ASSUMES THAT THE BUYER RECEIVES NO OFFSETTING REVENUE FROM THE 


        11    OPERATIONS OF THE NEW EXAMINER; CORRECT? 


        12    A.   THAT'S NOT CORRECT. 


        13    Q.   DID YOU ASSUME, IN CALCULATING YOUR SUBSIDY, THAT THE 


        14    BUYER WOULD RECEIVE REVENUE? 


        15    A.   IN MAKING THE STATEMENT OF UP TO $50 MILLION, THERE'S NO 


        16    REASON TO -- I DIDN'T CONCLUDE THAT THERE WOULD BE NO REVENUE 


        17    SHARED FOR THOSE THREE YEARS. 


        18    Q.   NOW, YOU'RE NOT A REVENUE EXPERT; CORRECT? 


        19    A.   THAT'S TRUE. 


        20    Q.   AND YOU DIDN'T CALCULATE ANYTHING WITH REGARD TO WHAT 


        21    REVENUE A BUYER WOULD GET, DID YOU, YOURSELF? 


        22    A.   I DIDN'T MAKE ANY ESTIMATES OF WHAT I THOUGHT A BUYER 


        23    WOULD RECEIVE IN ADVERTISING REVENUE OR CIRCULATION REVENUE. 


        24    Q.   AND DO YOU KNOW WHETHER THE EXIN TRANSACTION WITH HEARST 


        25    CONTEMPLATES THAT EXIN GETS TO RECEIVE REVENUE THE NEWSPAPER 
                                                                         1347
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         1    GENERATES DURING THE PERIOD IN WHICH IT RECEIVES FINANCIAL 


         2    SUPPORT? 


         3    A.   I DON'T KNOW. 


         4    Q.   ACCORDING TO YOUR DECLARATION, ALSO IN PARAGRAPH 4, A 


         5    BUYER OF THE EXAMINER WOULD NEED A 12- TO 18-MONTH TRANSITION 


         6    PERIOD BEFORE IT COULD PRODUCE AN ECONOMICALLY-VIABLE PAPER; IS 


         7    THAT CORRECT? 


         8    A.   YES. 


         9    Q.   AND YOU STAND BEHIND THAT? 


        10    A.   YES. 


        11    Q.   YOU ALSO SAY THAT YOU THINK THE SUBSIDY WOULD BE NECESSARY 


        12    FOR THREE YEARS; CORRECT? 


        13    A.   YES. 


        14    Q.   AND YOU HAVE TESTIFIED IN YOUR DEPOSITION THAT YOU 


        15    BELIEVE, AND THESE ARE YOUR WORDS, THAT IT IS A TOSS UP WHETHER 


        16    AFTER THE THREE YEARS OF SUBSIDY THE STAND-ALONE EXAMINER THAT 


        17    YOU ENVISION WOULD BE EARNING A PROFIT; CORRECT? 


        18    A.   YES. 


        19    Q.   LET ME SHOW YOU THE COST CALCULATIONS THAT YOU DID WHICH 


        20    HAVE BEEN RECEIVED INTO EVIDENCE AS PLAINTIFF'S EXHIBIT 166. 


        21               YOU PREPARED THESE; CORRECT? 


        22    A.   YES. 


        23    Q.   AND THE REVENUE NUMBERS COME FROM YOUR ASSUMPTIONS PLUS 


        24    SOME INFORMATION FROM MR. BEIHOFF WHO IS A REVENUE EXPERT THAT 


        25    WORKS AT THE PITTSBURGH POST GAZETTE; CORRECT? 
                                                                         1348
                                 WEAVER - CROSS / HOCKETT 



         1    A.   THAT'S INCORRECT. 


         2    Q.   IN WHAT RESPECT IS IT INCORRECT? 


         3    A.   THIS DOESN'T REFLECT ANY INPUT FROM MR. BEIHOFF. 


         4    Q.   DOES IT USE ASSUMPTIONS THAT WERE PROVIDED BY MR. BEIHOFF? 


         5    A.   NO. 


         6    Q.   PLEASE TURN TO YOUR DEPOSITION AT PAGE 70, AND I WOULD 


         7    LIKE TO READ FROM LINE 19 ON PAGE 70 TO LINE 1 ON PAGE 71. 


         8    A.   (WITNESS EXAMINES DOCUMENT.) 


         9    Q.                      "Q.  ALL RIGHT.  AND WHERE DID THE  


        10               REVENUE SIDE OF THE EQUATION COME FROM? 


        11                   "A.  WE USED DIFFERENT REVENUE ASSUMPTIONS. 


        12                   "Q.  WHO PROVIDED THOSE TO YOU? 


        13                   "A.  WE USED SOME ASSUMPTIONS THAT WERE 


        14               PROVIDED BY MR. BEIHOFF AND WE ALSO BACKED INTO 


        15               SOME REVENUE ASSUMPTIONS BASED UPON LINEAGE 


        16               RATES AND THE SIZE OF THE PAPER." 


        17               WERE YOU ASKED THOSE QUESTIONS AND DID YOU GIVE 


        18    THOSE RESPONSES? 


        19    A.   YES. 


        20    Q.   NOW, IF YOU LOOK AT PLAINTIFF'S EXHIBIT 166 -- AND, BY THE 


        21    WAY, A VERSION OF THIS WITH THE SAME FIGURES WAS GIVEN TO 


        22    MR. REILLY IN FEBRUARY; CORRECT? 


        23    A.   YES. 


        24    Q.   THIS DOCUMENT ON THE SCREEN? 


        25    A.   YES. 
                                                                         1349
                                 WEAVER - CROSS / HOCKETT 



         1    Q.   THE COLUMN ENTITLED "REALISTIC" SHOWS A LOSS IN YEAR THREE 


         2    OF ABOUT $18 MILLION; CORRECT? 


         3    A.   (WITNESS EXAMINES DOCUMENT.)  YES. 


         4    Q.   AND $18 MILLION IS LESS THAN $25 MILLION, CORRECT, THE 


         5    AMOUNT OF THE -- 


         6    A.   THAT'S CORRECT. 


         7    Q.   -- FINANCIAL SUPPORT THAT HEARST IS PROVIDING THE FANGS? 


         8    A.   YES. 


         9    Q.   AND THE COLUMN ENTITLED "OPTIMISTIC" SHOWS AN OPERATING 


        10    PROFIT IN YEAR THREE; CORRECT? 


        11    A.   YES. 


        12    Q.   NOW, YOU KNOW NOTHING OTHER THAN WHAT YOU READ IN THE 


        13    PAPER ABOUT THE FANG FAMILY'S DEAL FOR ACQUIRING THE EXAMINER; 


        14    IS THAT CORRECT? 


        15    A.   THAT'S CORRECT. 


        16    Q.   AND YOU KNOW NOTHING ABOUT HOW THEY INTEND TO OPERATE THE 


        17    NEW EXAMINER; IS THAT CORRECT? 


        18    A.   THAT'S CORRECT. 


        19    Q.   AND YOU DON'T KNOW WHAT SORT OF PAPER THEY HAVE IN MIND; 


        20    CORRECT? 


        21    A.   THAT'S CORRECT. 


        22    Q.   BUT YOU DO KNOW THAT THE FANG FAMILY HAS ALREADY EXISTING 


        23    NEWSPAPER OPERATIONS IN BOTH SAN FRANCISCO AND SAN MATEO 


        24    COUNTIES; DO YOU NOT? 


        25    A.   YES, I DO KNOW THAT. 
                                                                         1350
                                 WEAVER - CROSS / HOCKETT 



         1    Q.   AND YOU DO KNOW THAT THEY WOULD HAVE THE BENEFIT OF 


         2    SYNERGIES IN ADVERTISING REVENUE AND COST SAVINGS FROM COST 


         3    SHARING WITH THEIR OTHER OPERATIONS; CORRECT? 


         4    A.   I BELIEVE THAT SYNERGIES DO EXIST THERE, YES. 


         5    Q.   LET'S TAKE A LOOK AT YOUR NOTES, A PAGE OF YOUR NOTES, 


         6    WHICH IS PART OF CHRONICLE EXHIBIT C-311, AND SPECIFICALLY PAGE 


         7    446. 


         8    A.   (WITNESS EXAMINES DOCUMENT.) 


         9    Q.   THESE ARE YOUR NOTES; ARE THEY NOT? 


        10    A.   THAT'S CORRECT. 


        11    Q.   AND THEY SAY: 


        12                   "FANGS PROVIDE  


        13                   "1)  ALREADY EXISTING NEWSPAPER OPERATIONS 


        14               IN SF-SAN MATEO COUNTIES," AND,  


        15                   "2)  SYNERGIES IN ADVERTISING REVENUE, 


        16               ESPECIALLY CLASSIFIED, COST SAVINGS, THROUGH 


        17               COST SHARING." 


        18               DO YOU SEE THAT? 


        19    A.   YES. 


        20    Q.   AND THESE NOTES BEAR THE DATE OF MARCH 24TH; CORRECT? 


        21    A.   THAT'S CORRECT. 


        22    Q.   THE DAY BEFORE THE MEETING WITH MR. ALIOTO AND THE OTHER 


        23    EXPERTS; CORRECT? 


        24    A.   THAT'S CORRECT, YES. 


        25    Q.   AND YOUR DECLARATION, WHICH WAS SIGNED TWO DAYS LATER, 
                                                                         1351
                                 WEAVER - CROSS / HALLING 



         1    DOES NOT MENTION THE FANGS ALREADY EXISTING NEWSPAPER 


         2    OPERATIONS OR THE SYNERGIES THEY WOULD ENJOY IN OPERATING THE 


         3    EXAMINER; DOES IT? 


         4    A.   THAT'S CORRECT. 


         5    Q.   AND NONE OF THE COST CALCULATIONS THAT YOU PERFORMED 


         6    INCLUDE ANY ALLOWANCE FOR THESE FACTORS; DO THEY? 


         7    A.   I DON'T HAVE ANY INFORMATION ABOUT THE FANGS' OPERATIONS, 


         8    SO I COULDN'T DO THAT, SO THEY DON'T. 


         9               MR. HOCKETT:  I HAVE NOTHING FURTHER, YOUR HONOR. 


        10               THE COURT:  VERY WELL.  MR. HALLING? 


        11                           CROSS-EXAMINATION 


        12    BY MR. HALLING: 


        13    Q.   MR. WEAVER, YOU ESTIMATED THAT THE AGENCY WOULD SAVE 30 TO 


        14    $50 MILLION ANNUALLY IF THE EXAMINER WERE CLOSED; ISN'T THAT 


        15    CORRECT? 


        16    A.   YES, THE NET -- YES. 


        17    Q.   AND THAT WOULD BE NETTING THE LOSS OF REVENUE YOU WOULD 


        18    EXPECT FROM THE EXAMINER WITH THE COSTS THAT WOULD BE SAVED BY 


        19    NOT HAVING THE EXAMINER PUBLISHED; IS THAT CORRECT? 


        20    A.   YES.  THAT'S ASSUMING THAT YOU DID NOT KEEP ALL OF THOSE 


        21    EMPLOYEES AND DIDN'T CONTINUE TO INCLUDE -- INCUR THOSE COSTS. 


        22    Q.   TAKE A LOOK, IF YOU WOULD, AT EXHIBIT 1033.  I'M NOT SURE 


        23    IF YOU HAVE IT THERE OR NOT. 


        24    A.   YES, I DO. 


        25    Q.   ALL RIGHT.  THIS IS EXHIBIT 1033 IN EVIDENCE.  THAT'S YOUR 
                                                                         1352
                                 WEAVER - CROSS / HALLING 



         1    SIGNATURE ON THE DOCUMENT; IS IT NOT? 


         2    A.   YES. 


         3    Q.   THIS IS A LETTER THAT YOU SENT TO MR. REILLY ON MARCH 


         4    21ST; IS THAT CORRECT? 


         5    A.   YES. 


         6    Q.   THE FIRST SENTENCE OF THE LETTER READS: 


         7                   "HEARST'S DECISION TO SELL THE EXAMINER TO 


         8               THE FANGS CERTAINLY DOESN'T SIT WELL WITH US." 


         9               NOW, IS "US" THE OTHER EXPERTS? 


        10    A.   THAT WOULD BE CERTAINLY INGRAM, AND I DON'T WANT TO SPEAK 


        11    FOR MR. FLAHERTY. 


        12    Q.   DOES THAT STATEMENT APPLY TO MR. REILLY AS WELL? 


        13    A.   I THINK IT WOULD.  I DON'T THINK IT SAT WELL WITH 


        14    MR. REILLY. 


        15    Q.   TURNING TO THE NEXT PARAGRAPH, IT SAYS: 


        16                   "JOE HAS BEEN TALKING TO A NUMBER OF US 


        17               ABOUT HELPING WITH THE LAWSUIT." 


        18               DO YOU SEE THAT? 


        19    A.   YES. 


        20    Q.   NOW, YOU WERE ORIGINALLY CONTACTED I BELIEVE YOU SAID WITH 


        21    RESPECT TO YOUR CONSULTATION BY A MR. JOSEPH BARLETTA; IS THAT 


        22    CORRECT? 


        23    A.   YES. 


        24    Q.   IS THAT WHO YOU'RE REFERRING TO IN THIS SENTENCE? 


        25    A.   YES. 
                                                                         1353
                                 WEAVER - CROSS / HALLING 



         1    Q.   NOW, MR. WEAVER, I BELIEVE YOU SAID THAT THE ORANGE COUNTY 


         2    REGISTER HAD THE SECOND LARGEST AD LINEAGE IN CALIFORNIA; IS 


         3    THAT RIGHT? 


         4    A.   YES, WHEN I WAS THERE. 


         5    Q.   AND THE ORANGE COUNTY REGISTER IS PART OF THE FREEDOM 


         6    NEWSPAPER CHAIN; IS THAT CORRECT? 


         7    A.   YES. 


         8    Q.   WAS IT A SUCCESSFUL PAPER WHILE YOU WERE THERE? 


         9    A.   YES. 


        10    Q.   AND YOU REPORTED TO THE PUBLISHER OF THE ORANGE COUNTY 


        11    REGISTER? 


        12    A.   YES. 


        13    Q.   IN 1993 I BELIEVE YOU SAID YOU LEFT; IS THAT CORRECT? 


        14    A.   I LEFT THE REGISTER, YES. 


        15    Q.   AT THAT TIME THE PUBLISHER OF THE ORANGE COUNTY REGISTER 


        16    REPORTED TO THE CEO OF FREEDOM NEWSPAPERS, DR. JAMES ROSSE; IS 


        17    THAT CORRECT? 


        18    A.   YES, IT IS. 


        19    Q.   AND DR. ROSSE IS HEARST'S EXPERT IN THIS CASE, IS THAT 


        20    CORRECT, AS FAR AS YOU KNOW? 


        21    A.   THAT'S MY UNDERSTANDING.  I DON'T KNOW THAT PER SE, BUT 


        22    THAT'S MY UNDERSTANDING.  I'VE SEEN HIM HERE. 


        23    Q.   YOU HAVE A LOT OF RESPECT FOR DR. ROSSE; DON'T YOU? 


        24    A.   I DO, YES. 


        25               MR. HALLING:  NOTHING FURTHER. 
                                                                         1354
                                WEAVER - REDIRECT / SHULMAN 



         1               THE COURT:  MR. SHULMAN, ANY REDIRECT? 


         2               MR. SHULMAN:  YES, YOUR HONOR.  MAY IT PLEASE THE 


         3    COURT. 


         4                         REDIRECT EXAMINATION 


         5    BY MR. SHULMAN: 


         6    Q.   LET'S START WITH THE DOCUMENT YOU WERE JUST BEING ASKED 


         7    ABOUT THAT COUNSEL HAD UP ON THE SCREEN.  AND THIS WAS THE 


         8    LETTER THAT YOU WROTE TO MR. REILLY ON MARCH 21? 


         9    A.   YES. 


        10    Q.   OKAY.  THE THIRD PARAGRAPH OF THE LETTER SAYS: 


        11                   "THERE IS NO DOUBT THAT THE FANGS CAN AND 


        12               WILL PUT OUT A PAPER FOR LESS THAN $25 MILLION 


        13               PER YEAR IN NET COSTS TO THEMSELVES DURING THE 


        14               THREE YEARS OF HEARST'S SUBSIDY; CREAM AS MUCH 


        15               OFF THE TOP FOR THEMSELVES AND THE INDEPENDENT 


        16               AS THEY CAN, AND THEN EITHER MERGE THE PAPERS OR 


        17               CLOSE THEIR," QUOTE, "'MONEY-LOSING VENTURE,'" 


        18               CLOSED QUOTE.  "NOT A PRETTY PICTURE FOR THE 


        19               COMPETITIVE NEWSPAPER SITUATION IN SAN 


        20               FRANCISCO," END OF QUOTE. 


        21               DO YOU SEE THAT? 


        22    A.   YES. 


        23    Q.   WERE YOU CONCERNED ABOUT THAT? 


        24    A.   YES. 


        25    Q.   YOU WERE ALSO -- 
                                                                         1355
                                WEAVER - REDIRECT / SHULMAN 



         1               THE COURT:  BEFORE LEAVING THAT, MR. SHULMAN, BEFORE 


         2    LEAVING THAT SUBJECT, LET ME INQUIRE OF THE WITNESS.  WHAT DID 


         3    YOU MEAN "NOT A PRETTY PICTURE FOR THE COMPETITIVE NEWSPAPER 


         4    SITUATION IN SAN FRANCISCO"? 


         5               THE WITNESS:  THAT THERE WOULD NOT BE A COMPETITIVE 


         6    NEWSPAPER TO THE EXTENT THAT THERE IS A SUBSTITUTE NEWSPAPER 


         7    FOR THE CHRONICLE PUBLISHED UNDER THE FANGS IN THAT EVEN THAT 


         8    PAPER WOULD PROBABLY CLOSE AND BE LESS COMPETITIVE AFTER THE 


         9    THREE YEARS. 


        10               THE COURT:  WHAT EFFECT, IN YOUR VIEW, IF YOU HAVE 


        11    ONE, IS THE SUBSIDY THAT HEARST PROPOSES TO PAY TO THE FANGS, 


        12    WHAT EFFECT DOES THAT SUBSIDY HAVE ON THE COMPETITIVE SITUATION 


        13    IN SAN FRANCISCO? 


        14               THE WITNESS:  I WOULD SAY THAT WITHOUT A SUBSIDY, 


        15    THE FANGS WOULD NOT PRODUCE A DAILY NEWSPAPER IN SAN FRANCISCO.  


        16    SO THAT WHATEVER DAILY NEWSPAPER THEY PRODUCE IS GOING TO BE 


        17    MORE COMPETITIVE THAN NOT HAVING A NEWSPAPER, THAT THAT WOULD 


        18    MAKE IT MORE COMPETITIVE THAN NOT HAVING A SECOND NEWSPAPER. 


        19               THE COURT:  WELL, IF I UNDERSTAND WHAT YOUR 


        20    TESTIMONY IS AND THE PURPORT OF THIS LETTER, YOU THINK THAT THE 


        21    FANG VENTURE IS NOT A VIABLE ONE BEYOND THE PERIOD OF THE FIRST 


        22    SUBSIDY; IS THAT A FAIR STATEMENT? 


        23               THE WITNESS:  NOT TO THE EXTENT YOU'RE SAYING VIABLE 


        24    IS A MONEY-MAKING OPERATION. 


        25               THE COURT:  ALL RIGHT.  VIABLE IN THE SENSE THAT IT 
                                                                         1356
                                WEAVER - REDIRECT / SHULMAN 



         1    CANNOT SUSTAIN ITSELF BY BEING A PROFIT-MAKING ENTERPRISE 


         2    BEYOND THE THREE-YEAR PERIOD OF THE HEARST SUBSIDY.  IS THAT 


         3    YOUR VIEW? 


         4               THE WITNESS:  YES. 


         5               THE COURT:  AND WHAT IS THE EFFECT ON THE 


         6    COMPETITIVE SITUATION, THE COMPETITIVE NEWSPAPER SITUATION, IN 


         7    HEARST SUBSIDIZING THE FANG OPERATION FOR A THREE-YEAR PERIOD 


         8    OF TIME WHEN AT THE END A VIABLE, PROFITABLE, DAILY NEWSPAPER 


         9    WILL NOT BE THE PRODUCT OF THAT SUBSIDY? 


        10               THE WITNESS:  I GUESS THAT DEPENDS ON WHETHER WE'RE 


        11    COMPARING IT AGAINST NOT HAVING AN EXAMINER OR HAVING THE 


        12    EXISTING EXAMINER. 


        13               THE COURT:  I'M ASKING YOU WHAT IS THE EFFECT DURING 


        14    THE PERIOD OF THE SUBSIDY.  DO YOU HAVE AN OPINION?  MAYBE YOU 


        15    DON'T HAVE AN OPINION. 


        16               THE WITNESS:  I THINK A SUBSIDY WILL ALLOW A PERSON 


        17    TO PUT OUT A BETTER PRODUCT. 


        18               THE COURT:  THAT'S NOT MY QUESTION. 


        19               THE WITNESS:  OKAY. 


        20               THE COURT:  MY QUESTION IS:  WHAT IS THE EFFECT ON 


        21    THE COMPETITIVE NEWSPAPER SITUATION NOT THE EFFECT ON THE 


        22    FANGS, NOT THE EFFECT ON HEARST, THE EFFECT ON THE MARKET 


        23    DURING THE PERIOD OF THE SUBSIDY? 


        24               THE WITNESS:  I THINK IT WILL BE LESS COMPETITIVE 


        25    THAN IT IS TODAY. 
                                                                         1357
                                WEAVER - REDIRECT / SHULMAN 



         1               THE COURT:  WHY? 


         2               THE WITNESS:  BECAUSE I DO NOT BELIEVE THE PAPER 


         3    THAT WILL BE PUT OUT FOR THREE YEARS WILL BE AS GOOD A 


         4    SUBSTITUTE AS THE EXISTING EXAMINER IS FOR THE CHRONICLE.  IT 


         5    WILL NOT, THEREFORE, BE AS COMPETITIVE AS THE EXISTING EXAMINER 


         6    IS WITH THE CHRONICLE. 


         7               THE COURT:  DO YOU HAVE AN OPINION ABOUT THE EFFECT 


         8    ON HEARST'S ABILITY TO COMPETE VIS-A-VIS THESE OTHER NEWSPAPERS 


         9    IN THE BAY AREA THAT YOU'VE MENTIONED? 


        10               THE WITNESS:  HEARST AS THE OWNER OF THE CHRONICLE 


        11    OR -- 


        12               THE COURT:  CORRECT.  TO COMPETE VIS-A-VIS THE SAN 


        13    JOSE MERCURY NEWS, THE CONTRA COSTA TIMES, THE INDEPENDENT 


        14    JOURNAL, THE SINGLETON GROUP, THE OTHER PAPERS THAT WERE 


        15    MENTIONED IN THE EXHIBIT THAT COUNSEL HAVE REFERRED TO. 


        16               THE WITNESS:  JUST I WANT -- 


        17               THE COURT:  DO YOU HAVE AN OPINION? 


        18               THE WITNESS:  NO. 


        19               THE COURT:  ALL RIGHT, MR. SHULMAN, THANK YOU. 


        20    BY MR. SHULMAN: 


        21    Q.   MR. WEAVER, YOU WERE ASKED ALSO, SINCE WE'RE -- THIS MAKES 


        22    REFERENCE TO THE FANGS, THIS PART OF THE LETTER.  YOU WERE 


        23    ASKED ALSO IF YOU WERE AWARE OF THE FANGS' PLANS FOR THE 


        24    EXAMINER AFTER THEY GET IT.  DO YOU RECALL THAT? 


        25    A.   YES. 
                                                                         1358
                                WEAVER - REDIRECT / SHULMAN 



         1    Q.   OKAY.  I WOULD LIKE TO DIRECT YOUR ATTENTION -- WELL, WERE 


         2    YOU IN COURT WHEN I READ MR. FANG'S DEPOSITION TESTIMONY THAT 


         3    HE HAS NO BUSINESS PLAN -- 


         4    A.   YES. 


         5    Q.   -- FOR THE EXAMINER? 


         6    A.   YES. 


         7    Q.   OKAY.  YOU WERE ALSO ASKED ABOUT WHETHER THERE WERE ANY 


         8    SYNERGIES -- 


         9    A.   YES. 


        10    Q.   -- THAT THE FANGS MIGHT BRING IN THE AREA OF ADVERTISING 


        11    OR CIRCULATION, AND I WANT TO DIRECT YOUR ATTENTION TO 


        12    TESTIMONY GIVEN BY MR. FANG AT PAGE 155 OF HIS DEPOSITION, LINE 


        13    7: 


        14                   "Q.  OKAY.  MR. FANG, I THINK YOU TESTIFIED 


        15               THIS MORNING THAT IT WAS YOUR DREAM TO OWN A 


        16               DAILY NEWSPAPER. 


        17                   "A.  YES, SIR. 


        18                   "Q.  OKAY.  WHY DIDN'T YOU JUST MAKE THE 


        19               INDEPENDENT A DAILY NEWSPAPER? 


        20                   "A.  YES, THE INDEPENDENT IS IN A DIFFERENT 


        21               MARKET THAN THE DAILY NEWSPAPER.  IT'S DELIVERED 


        22               TO EVERY HOME FREE OF CHARGE; AND, AS I SAID 


        23               BEFORE, NEWSPAPERS ARE ADVERTISING DRIVEN.  THE 


        24               ADVERTISERS OF THE INDEPENDENT LOOK TO ADVERTISE 


        25               IN A NEWSPAPER THAT REACHES AS MANY HOMES AS 
                                                                         1359
                                WEAVER - REDIRECT / SHULMAN 



         1               POSSIBLE.  THESE ADVERTISERS ARE ADVERTISERS 


         2               SUCH AS GROCERY STORES AND DRUGSTORES BECAUSE 


         3               EVERYBODY NEEDS TO BUY FOOD AND EVERYBODY NEEDS 


         4               TO BUY SHAMPOO OR ASPIRIN. 


         5                   "DAILY NEWSPAPERS DEPEND ON A DIFFERENT TYPE 


         6               OF ADVERTISER.  THOSE ADVERTISERS ARE LOOKING 


         7               FOR SUBSCRIBERS.  SO IF I TURNED THE INDEPENDENT 


         8               INTO A SUBSCRIPTION-ONLY VEHICLE, I WOULD LOSE 


         9               MY CURRENT ADVERTISING ACCOUNTS OR A LOT OF MY 


        10               CURRENT ADVERTISING ACCOUNTS THAT REACH -- THAT 


        11               WISH TO REACH A MASS DISTRIBUTION.  SO THAT'S 


        12               WHY I DON'T WANT TO JEOPARDIZE MY OPERATIONS AT 


        13               THE INDEPENDENT, AND I'M NOT GOING TO HAVE THAT 


        14               AS A DAILY NEWSPAPER." 


        15               NOW, DOES THAT -- WHAT DOES THAT INDICATE TO YOU 


        16    ABOUT WHETHER THERE ARE ANY SYNERGIES? 


        17    A.   I THINK THERE CONTINUE TO BE SYNERGIES BETWEEN A NEWSPAPER 


        18    OPERATION THAT PROVIDES DAILY NEWSPAPERS AND WEEKLY NEWSPAPERS 


        19    IN THE SAME MARKETPLACE.  WHETHER THEY'RE LARGE OR NOT, NO ONE 


        20    HAS ASKED ME.  WHERE THEY ARE, NO ONE HAS ASKED ME, BUT I 


        21    BELIEVE THERE ARE SYNERGIES. 


        22    Q.   WELL, DOES THIS INDICATE TO YOU WHETHER THE SYNERGIES ARE 


        23    LARGE OR SMALL? 


        24    A.   I DON'T BELIEVE THEY'RE GOING TO BE VERY LARGE. 


        25    Q.   LET ME -- YOU WERE ALSO ASKED SOME QUESTIONS ABOUT THE 
                                                                         1360
                                WEAVER - REDIRECT / SHULMAN 



         1    REAL ESTATE THAT WAS DISCUSSED IN CONNECTION WITH 


         2    MR. REILLY'S -- THE PLANS HE PUT TOGETHER CONCERNING THE 


         3    POSSIBLE ACQUISITION OF THE EXAMINER.  DO YOU REMEMBER THAT? 


         4    A.   YES. 


         5    Q.   AND ONE OF THE PIECES OF REAL ESTATE WAS THE 110 FIFTH 


         6    STREET BUILDING; CORRECT? 


         7    A.   YES. 


         8    Q.   THAT'S THE EXAMINER BUILDING? 


         9    A.   YES. 


        10    Q.   OKAY.  NOW, DID YOU UNDERSTAND FROM THE DISCUSSIONS WITH 


        11    MR. INGRAM AND MR. REILLY THAT THE IDEA WAS THAT THE PRINTING 


        12    PLANT FOR THE NEWSPAPER WOULD BE REINSTALLED IN THAT BUILDING? 


        13    A.   YES. 


        14    Q.   I WANT TO DIRECT YOUR ATTENTION TO -- SO -- WELL, GOING 


        15    BACK TO THE 110 FIFTH STREET, ONE OF THE REASONS TO ACQUIRE 


        16    THAT WAS BECAUSE THAT'S WHERE YOU WOULD ULTIMATELY BE PRINTING 


        17    THE PAPER; CORRECT? 


        18    A.   YES. 


        19    Q.   ALL RIGHT.  NOW I WANT TO DIRECT YOUR ATTENTION TO EXHIBIT 


        20    345, AND THESE ARE THE NOTES THAT WERE DONE BY MR. COMANOR, DO 


        21    YOU RECALL -- DR. COMANOR, DO YOU RECALL THAT, AND THAT WERE 


        22    SENT TO YOU? 


        23    A.   YES. 


        24    Q.   AND I BELIEVE THERE WAS AN IMPLICATION RAISED BY COUNSEL 


        25    THAT SOMEHOW THESE NOTES OR THIS INFORMATION WAS NOT MADE 
                                                                         1361
                                WEAVER - REDIRECT / SHULMAN 



         1    AVAILABLE TO LAWYERS FOR THE CHRONICLE.  DO YOU REMEMBER THAT? 


         2    A.   I WOULD INTERPRET IT TO BE -- TO THAT HAVING BEEN SAID, 


         3    YES. 


         4    Q.   OKAY.  NOW, I WANT TO DIRECT YOUR ATTENTION TO THE 


         5    DEPOSITION OF DR. COMANOR, SOME TESTIMONY HE GAVE WHERE HE WAS 


         6    ASKED ABOUT THESE VERY NOTES IN HIS DEPOSITION ON THE 25TH OF 


         7    APRIL.  AND THIS IS AT PAGE 83, LINE 17.  OKAY, IT SAYS: 


         8                   "Q.  LET ME SHOW YOU A DOCUMENT THAT HAS 


         9               BEEN MARKED AS EXHIBIT 1106 AND IT'S -- 


        10                   "A.  OH, YEAH. 


        11                   "Q.  WHAT IS THIS? 


        12                   "A.  WHEN I WAS PLAYING AROUND WITH THIS, 


        13               THE PROSPECTS FOR THE EXAMINER AND THE 


        14               CHRONICLE, I PULLED TOGETHER SOME NUMBERS FROM 


        15               VARIOUS PLACES AND I SENT IT TO MIKE WEAVER 


        16               ASKING IF HE HAD ANY COMMENTS ON IT.  I PLAYED 


        17               AROUND, I LOOKED AT IT.  AS YOU CAN SEE, I ENDED 


        18               UP NOT -- THIS WAS A DRY HOLE, AS THEY SAY.  


        19               IT'S NOT SOMETHING THAT I USED IN FORMULATING MY 


        20               OPINIONS.  I DID LOOK AT IT.  THIS IS MY 


        21               HANDWRITING AND I DID PULL THOSE NUMBERS 


        22               TOGETHER, BUT I DIDN'T KNOW WHAT CONCLUSIONS I 


        23               SHOULD DRAW FROM IT.  IT'S BASED ON SOME 


        24               ARBITRARY NOTIONS AND SO I DID NOT RELY ON THE 


        25               ANALYSIS THAT'S CONTAINED IN THESE TWO PAGES IN 
                                                                         1362
                                WEAVER - REDIRECT / SHULMAN 



         1               FORMING MY OPINIONS, BUT IT WAS A PRELIMINARY 


         2               EXERCISE THAT I DID ENGAGE IN." 


         3               NOW, IS THAT CONSISTENT WITH YOUR DISCUSSIONS WITH 


         4    DR. COMANOR? 


         5    A.   YES. 


         6    Q.   ALL RIGHT.  YOU WERE ALSO ASKED SOME QUESTIONS ABOUT 


         7    EXHIBIT 311, AND LET ME SHOW YOU PAGE 452 OF THAT. 


         8               AND I THINK YOU SAID THAT -- TELL ME WHEN YOU'RE 


         9    WITH ME, WHEN YOU'VE GOT THAT. 


        10    A.   (WITNESS EXAMINES DOCUMENT.)  YES. 


        11    Q.   I THINK YOU SAID THAT THIS WAS AN EFFORT BY YOU TO VALUE 


        12    THE CHRONICLE AS A STAND-ALONE BUSINESS.  DO YOU RECALL THAT? 


        13    A.   YES. 


        14    Q.   OKAY.  CAN YOU EXPLAIN WHAT YOU DID? 


        15    A.   WHAT I DID WAS I LOOKED AT THE PROFIT AND LOSS STATEMENT 


        16    FOR THE SAN FRANCISCO NEWSPAPER AGENCY, REMOVED THE COSTS THAT 


        17    WERE ASSOCIATED WITH THE EXAMINER BASED UPON THE INFORMATION I 


        18    GOT OUT OF THE VERONIS AND SUHLER OFFERING MEMORANDUM, MADE AN 


        19    ASSUMPTION ABOUT THE REDUCTION IN REVENUE AND CAME UP WITH A 


        20    CONCLUSION ABOUT WHERE THAT WOULD LEAD ME IN TERMS OF THE 


        21    PROFITABILITY OF A STAND-ALONE CHRONICLE. 


        22    Q.   OKAY.  DID YOU, IN THIS EXERCISE, REACH A VALUE FOR THE 


        23    STAND-ALONE CHRONICLE?  WITHOUT TELLING US WHAT IT IS AT THE 


        24    MOMENT, DID YOU GET THERE? 


        25    A.   A RANGE, YES. 
                                                                         1363
                                WEAVER - REDIRECT / SHULMAN 



         1    Q.   OKAY.  CAN YOU EXPLAIN WHAT THAT VALUE WAS AND HOW YOU GOT 


         2    THERE? 


         3               MR. LINDSTROM:  YOUR HONOR, I OBJECT ON THE GROUNDS 


         4    IT EXCEEDS THE SCOPE. 


         5               MR. SHULMAN:  HE WAS ASKED -- 


         6               THE COURT:  OVERRULED. 


         7    BY MR. SHULMAN: 


         8    Q.   GO AHEAD. 


         9    A.   WOULD YOU REPEAT THE QUESTION, PLEASE? 


        10    Q.   YES.  CAN YOU EXPLAIN THE RANGE OF VALUES THAT YOU ARRIVED 


        11    AT AS THE VALUE OF THE STAND-ALONE -- I'M SORRY, THE VALUE OF 


        12    THE STAND-ALONE CHRONICLE -- 


        13    A.   AT THIS POINT IN TIME IF YOU LOOK AT -- 


        14    Q.   -- AND HOW YOU GOT THERE? 


        15    A.   -- IF YOU LOOK AT THE LEFT-HAND SIDE, THE LOWER LEFT-HAND 


        16    SIDE OF THIS ANALYSIS, AS I EXPLAINED, STARTING WITH THE 


        17    125,000, THAT WAS A CALCULATION OF THE POTENTIAL GROSS EXCESS, 


        18    AS IT'S CALLED.  FROM THAT I AT THIS POINT IN TIME SUBTRACTED 


        19    $40 MILLION FOR CHRONICLE EXPENSES.  THOSE WOULD BE EDITORIAL 


        20    AND OTHER EXPENSES.  CAME UP WITH AN EBITDA NUMBER OF 


        21    85 MILLION.  THEN I MULTIPLIED THAT TIMES 8, CAME UP WITH 


        22    680 MILLION.  AND THEN I MULTIPLIED THE 85 TIMES 12 TO COME UP 


        23    WITH 1 BILLION AND $20 MILLION AS A RANGE TO BEGIN TO THINK 


        24    ABOUT THE VALUE OF THE CHRONICLE BASED UPON AN EBITDA OF 


        25    $85 MILLION. 
                                                                         1364
                                WEAVER - REDIRECT / SHULMAN 



         1               BELOW THAT I LOOKED AT A REVENUE FIGURE OF 


         2    $350 MILLION AND TOOK A RANGE FIRST OF TWO TIMES REVENUE AS A 


         3    VALUATION FOR $700 MILLION.  AND THEN UNDERNEATH THAT THERE IS 


         4    "TO $1.5 BILLION" AND THAT'S THREE TIMES REVENUE.   


         5               AND THEN BELOW THAT, JUST AS A CHECK, I SAID, WHAT'S 


         6    THE REVENUE PER SUBSCRIBER -- WHAT'S THE COST PER SUBSCRIBER, 


         7    WHAT'S THE PAYMENT PER SUBSCRIBER.  IT'S ABOUT $2,000 IF YOU 


         8    ASSUME YOU'VE GOT 400,000 SUBSCRIBERS AND YOU PAY $800 MILLION 


         9    FOR THE PROPERTY.  $800 MILLION, 400,000 SUBSCRIBERS, $2,000 


        10    PER SUBSCRIBER, JUST TO CHECK ON THE REASONABLENESS OF THE 


        11    NUMBERS. 


        12    Q.   ARE DOLLARS PER SUBSCRIBER A MEASURE USED IN THE INDUSTRY 


        13    FROM TIME TO TIME TO VALUE NEWSPAPERS? 


        14    A.   I'M ONLY WAITING.  A LAWYER GOT UP, SO I DIDN'T KNOW IF HE 


        15    WAS GOING TO SAY SOMETHING OR NOT. 


        16    Q.   OH, NO.  HE'S GETTING A DRINK OF WATER. 


        17    A.   OKAY.  I THINK FROM TIME TO TIME YOU WILL SEE CALCULATIONS 


        18    OF, ON A PER SUBSCRIBER BASIS, OF WHAT PEOPLE PAY.  I WOULDN'T 


        19    SUGGEST THAT THAT'S NECESSARILY HOW PEOPLE VALUE IT WHEN THEY 


        20    GO INTO THE NEGOTIATIONS, BUT IT'S A CHECK AND YOU CAN SEE THAT 


        21    IN VARIOUS REPORTS. 


        22    Q.   AND THE PER SUBSCRIBER NUMBERS THAT ARE USED RUN FROM WHAT 


        23    TO WHAT? 


        24    A.   I THINK I TESTIFIED 1500 TO $3,000 IN MY DEPOSITION.  I 


        25    THINK THAT'S PROBABLY A FAIR NUMBER. 
                                                                         1365
                                WEAVER - REDIRECT / SHULMAN 



         1    Q.   IF THE EXAMINER -- IF THE CHRONICLE HAS 450,000 


         2    SUBSCRIBERS AND THE NUMBER OF $3,000 PER SUBSCRIBER IS USED, 


         3    THAT PRODUCES A VALUE OF 1 MILLION 300 -- $1,350,000,000; IS 


         4    THAT RIGHT? 


         5    A.   THAT'S CORRECT. 


         6    Q.   THAT'S ABOUT TWICE WHAT HEARST WAS PAYING; RIGHT? 


         7    A.   YES. 


         8    Q.   LET -- OH, I THINK YOU ALSO SAID THAT YOU WERE SHOWN AT 


         9    SOME POINT THE FIGURE OF $275,784.  DO YOU REMEMBER THAT AS 


        10    PART OF THE -- AS REVENUE OF THE AGENCY, ADVERTISING REVENUE 


        11    THAT WAS ATTRIBUTABLE TO ADVERTISING THAT WAS JUST -- THAT WAS 


        12    PLACED ONLY IN THE EXAMINER?  DO YOU REMEMBER THAT? 


        13    A.   YES. 


        14    Q.   SO -- AND THAT'S OUT OF OVER $300 MILLION OF REVENUE? 


        15    A.   YES. 


        16    Q.   SO THE CONTRACTS FOR THE EXAMINER ALONE OUT OF THAT ARE 


        17    ONLY $275,000? 


        18    A.   THE REVENUE THAT WAS RECEIVED DURING THAT YEAR WAS 


        19    $275,000, YES. 


        20    Q.   WHAT, IF ANYTHING, DOES THAT TELL YOU ABOUT THE DIFFICULTY 


        21    OF SOMEBODY STARTING OUT WITH A NEW EXAMINER? 


        22    A.   WELL, IT TELLS ME THAT AT THE RATES AT WHICH THE 


        23    EXAMINER -- THE CURRENT RATES AT WHICH THEY SELL THEIR 


        24    ADVERTISING WOULD NOT BE SUCCESSFUL. 


        25    Q.   YOU WERE ALSO ASKED ABOUT VARIOUS ESTIMATES, THEY'RE ON 
                                                                         1366
                                WEAVER - REDIRECT / SHULMAN 



         1    THE EASEL THERE, THAT WERE MADE BY THE EXPERTS THAT WORKED WITH 


         2    MR. REILLY AS TO HOW THE EXAMINER WOULD DO OR IS DOING.  DO YOU 


         3    REMEMBER THAT, ALL THOSE VARIOUS LOSSES? 


         4    A.   YES. 


         5    Q.   OKAY.  NOW, THOSE -- WERE ALL OF THOSE ESTIMATES BASED ON 


         6    THE INFORMATION THAT WAS AVAILABLE AT THE TIME? 


         7    A.   YES. 


         8    Q.   LET ME SHOW YOU WHAT WAS IN EVIDENCE SHOWN TO YOU.... 


         9                        (PAUSE IN PROCEEDINGS.) 


        10    BY MR. SHULMAN: 


        11    Q.   303 IN EVIDENCE THAT WAS SHOWN TO YOU.  AND THIS IS THE 


        12    MEMO OF FEBRUARY 22, 2000.  DO YOU SEE THAT? 


        13    A.   THAT'S CORRECT, YES. 


        14    Q.   OKAY.  IT SAYS IN THE SECOND PARAGRAPH: 


        15                   "IT IS OBVIOUS THAT HEARST'S CURRENT 


        16               POSITION IN SAN FRANCISCO IS A PROFITABLE ONE.  


        17               WITH THEIR SHARE OF THE NEWSPAPER AGENCY EXCESS 


        18               PROFITS, THEY ARE MAKING MONEY." 


        19               IS THAT CONSISTENT WITH WHAT YOU KNEW? 


        20    A.   YES. 


        21               MR. SHULMAN:  THANK YOU.  I HAVE NO FURTHER 


        22    QUESTIONS. 


        23               THE COURT:  VERY WELL.   


        24               THEN, MR. WEAVER, YOU DESCRIBED A COMPETITIVE 


        25    SITUATION AS A SITUATION IN WHICH TWO DAILY NEWSPAPERS WERE 
                                                                         1367




         1    SUBSTITUTES FOR ONE ANOTHER RATHER THAN COMPLEMENTARY OF ONE 


         2    ANOTHER.  DO YOU RECALL YOUR TESTIMONY IN THAT REGARD? 


         3               THE WITNESS:  YES. 


         4               THE COURT:  IN HOW MANY CITIES IN THE UNITED STATES 


         5    OR METROPOLITAN AREAS IN THE COUNTRY ARE PAPERS WHICH YOU WOULD 


         6    CONSIDER SUBSTITUTES FOR ONE ANOTHER PUBLISHED? 


         7               THE WITNESS:  I THINK MOST METROPOLITAN AREAS HAVE A 


         8    SUBSTITUTE PAPER UNDER THAT DEFINITION, AND I COULD GIVE YOU AN 


         9    EXAMPLE. 


        10               THE COURT:  ALL RIGHT, IF YOU WOULD. 


        11               THE WITNESS:  I BELIEVE IN ORANGE COUNTY, THE ORANGE 


        12    COUNTY REGISTER AND THE L.A. TIMES ARE SUBSTITUTE PAPERS. 


        13               THE COURT:  ALL RIGHT.  IN ORANGE COUNTY? 


        14               THE WITNESS:  IN ORANGE COUNTY, YES. 


        15               THE COURT:  IS THE ORANGE COUNTY REGISTER A 


        16    SUBSTITUTE FOR THE LOS ANGELES TIMES IN LOS ANGELES COUNTY? 


        17               THE WITNESS:  I DON'T BELIEVE SO. 


        18               THE COURT:  IS THERE A SUBSTITUTE FOR THE LOS 


        19    ANGELES TIMES, IN YOUR VIEW, IN LOS ANGELES COUNTY? 


        20               THE WITNESS:  YES.  I BELIEVE THE LOS ANGELES DAILY 


        21    NEWS IS A SUBSTITUTE IN THE AREAS IN WHICH IT CIRCULATES, WHICH 


        22    IS BASICALLY THE SAN FERNANDO VALLEY. 


        23               THE COURT:  BUT IT DOES NOT HAVE THE SAME GEOGRAPHIC 


        24    REACH AS THE LOS ANGELES TIMES; IS THAT CORRECT? 


        25               THE WITNESS:  THAT'S CORRECT. 
                                                                         1368




         1               THE COURT:  CAN YOU NAME ANY OTHER EXAMPLES? 


         2               THE WITNESS:  I WOULD SAY THAT IN SAN MATEO AND 


         3    NORTHERN SANTA CLARA COUNTY, THAT THE CHRONICLE, THE EXAMINER 


         4    AND THE MERCURY NEWS ARE SUBSTITUTES.  I WOULD SAY -- I WOULD 


         5    SAY NORTHERN SANTA CLARA AND SOUTHERN SAN MATEO COUNTY. 


         6               THE COURT:  SOUTHERN SAN MATEO COUNTY, NORTHERN 


         7    SANTA CLARA COUNTY YOU WOULD CONSIDER CHRONICLE AND THE 


         8    EXAMINER AND THE MERCURY NEWS SUBSTITUTES FOR ONE ANOTHER? 


         9               THE WITNESS:  YES. 


        10               THE COURT:  IS THERE -- WHAT ABOUT THE SAN MATEO 


        11    TIMES, IS THAT WHAT YOU WOULD REGARD AS A SUBSTITUTE NEWSPAPER? 


        12               THE WITNESS:  NO. 


        13               THE COURT:  WHY NOT? 


        14               THE WITNESS:  I THINK IF YOU LOOKED AT THE 


        15    OVERLAPPING READERSHIP, YOU'D FIND THAT THERE'S A MUCH GREATER 


        16    PERCENTAGE OF TWO NEWSPAPER READERS IF THEY TAKE THE SAN MATEO 


        17    TIMES.  IN OTHER WORDS, THEY WILL TAKE THE SAN MATEO TIMES IN 


        18    ADDITION TO ONE OF THOSE METROPOLITAN NEWSPAPERS. 


        19               THE COURT:  OKAY. 


        20               THE WITNESS:  AND THAT PUTS THEM IN A DIFFERENT 


        21    SITUATION. 


        22               THE COURT:  WHAT ABOUT OTHER AREAS OF THE BAY AREA?  


        23    ARE THERE OTHER AREAS WHERE THERE ARE PAPERS PUBLISHED THAT ARE 


        24    SUBSTITUTES FOR THE EXAMINER OR THE CHRONICLE? 


        25               THE WITNESS:  I GUESS I WOULD ARGUE CONSISTENTLY 
                                                                         1369




         1    HERE THAT IN CERTAIN PARTS OF MARIN COUNTY THE MARIN 


         2    INDEPENDENT JOURNAL IS A SUBSTITUTE; THAT IN CERTAIN PARTS OF 


         3    OAKLAND IN THE EAST BAY, THE OAKLAND TRIBUNE IS A SUBSTITUTE.  


         4    I GO BACK TO MY MOTHER WHO TAKES THE OAKLAND TRIBUNE, NOT A SAN 


         5    FRANCISCO PAPER.  AND I THINK IN CONTRA COSTA COUNTY YOU HAVE 


         6    THE SAME THING WITH THE WEST CONTRA COSTA -- THE TIMES AND THE 


         7    CONTRA COSTA TIMES. 


         8               THE COURT:  NOW, WHEN YOU'RE MAKING THIS ANALYSIS OR 


         9    FORMING THESE OPINIONS, ARE YOU THINKING OF SUBSTITUTE PAPERS 


        10    IN TERMS OF SUBSTITUTE PROVIDERS OF NEWS, ENTERTAINMENT AND 


        11    OPINION OR AS SUBSTITUTE ADVERTISING OUTLETS? 


        12               THE WITNESS:  IT HAS TO INCLUDE BOTH OF THOSE, I 


        13    BELIEVE.   


        14               THE COURT:  I SEE.  SO IF A NEWSPAPER IS SIMPLY A 


        15    SUBSTITUTE FOR NEWS, ENTERTAINMENT OR OPINION, IT'S NOT REALLY 


        16    A SUBSTITUTE NEWSPAPER IN YOUR VIEW; IS THAT CORRECT? 


        17               THE WITNESS:  MY VIEW OF THE NEWSPAPER INDUSTRY 


        18    IS -- YES, THAT'S CORRECT.  MY VIEW IS THAT THE ADVERTISING 


        19    CONTENT IS AN IMPORTANT PART OF A NEWSPAPER TO A READER; AND, 


        20    THEREFORE, IT WOULD COME INTO THAT ANALYSIS OF A SUBSTITUTE. 


        21               AN EXAMPLE WOULD BE THE SAN MATEO TIMES AGAIN.  THAT 


        22    IF YOU LIVE IN SAN MATEO AND YOU WANT TO KNOW AND BE AWARE OF 


        23    ALL THE ADVERTISING MACY'S DOES, YOU PROBABLY NEED TO TAKE ONE 


        24    OF THOSE THREE PAPERS.  YOU PROBABLY WON'T GET NEARLY AS MUCH 


        25    IN THE SAN MATEO TIMES. 
                                                                         1370




         1               THE COURT:  YOU MEAN THE MERCURY NEWS, THE EXAMINER 


         2    AND CHRONICLE? 


         3               THE WITNESS:  YES. 


         4               THE COURT:  VERY WELL.  THANK YOU, MR. WEAVER, FOR 


         5    YOUR TESTIMONY. 


         6               THE WITNESS:  THANK YOU. 


         7                          (WITNESS EXCUSED.) 


         8               THE COURT:  WELL, MR. SHULMAN, I MUST SAY MARK 


         9    MC GWIRE IS LOOKING MORE AND MORE TEMPTING ALL THE TIME. 


        10                              (LAUGHTER) 


        11               MR. SHULMAN:  TO ME TOO, JUDGE. 


        12               THE COURT:  WELL, PERHAPS WE SHOULD JUST ADJOURN. 


        13               WHO'S YOUR NEXT WITNESS? 


        14               MR. ALIOTO:  OKAY.  IF IT PLEASE YOUR HONOR, 


        15    MR. JOHN MORTON'S TESTIMONY WAS TAKEN BY DEPOSITION.  WE DO 


        16    HAVE A VIDEOTAPE IF THE COURT WANTS TO WATCH THAT OR -- 


        17               THE COURT:  HOW LONG IS THE VIDEOTAPE? 


        18               MR. ALIOTO:  IT'S 52 MINUTES. 


        19               THE COURT:  OH, I THINK I CAN READ PROBABLY THE 


        20    TRANSCRIPT. 


        21               MR. ALIOTO:  AS IT PLEASES YOUR HONOR.   


        22               THEN WITH REGARD TO -- WE DO HAVE A STIPULATION WITH 


        23    DEFENSE COUNSEL THAT THE PLAINTIFF IS, IN FACT, A SUBSCRIBER 


        24    AND, THEREFORE, WE WOULD NOT BE CALLING THE PLAINTIFF TO 


        25    ESTABLISH THAT FACT. 
                                                                         1371




         1               THE COURT:  OKAY.  IS THIS WITH REGARD TO BOTH 


         2    NEWSPAPERS? 


         3               MR. ALIOTO:  HE IS A SUBSCRIBER OF THE CHRONICLE AND 


         4    HE IS A PURCHASER OF THE EXAMINER AFTERNOON PAPER. 


         5               MR. HALLING:  YOUR HONOR, WE'VE ACTUALLY DISCUSSED 


         6    SPECIFIC LANGUAGE AND THAT'S ALL WE'RE WILLING TO AGREE TO. 


         7               MR. ALIOTO:  GO AHEAD.  WELL, THAT'S FINE.  I JUST 


         8    SAID IT. 


         9               THE COURT:  OKAY.  LET'S SEE HOW THINLY ARE WE GOING 


        10    TO SLICE THIS. 


        11               MR. HALLING:  THE PARTIES STIPULATE THAT THE 


        12    PLAINTIFF, CLINTON REILLY, IS AND HAS BEEN A SUBSCRIBER TO THE 


        13    CHRONICLE AND IS AND HAS BEEN A PURCHASER OF SINGLE COPIES OF 


        14    THE EXAMINER. 


        15               MR. ALIOTO:  OKAY.   


        16               THE COURT:  OKAY. 


        17               MR. ALIOTO:  THEN, YOUR HONOR, WE WOULD -- BEFORE 


        18    RESTING, WE WILL HAVE OR CROSS-EXAMINE MR. BENNACK AND 


        19    MR. IRISH, AND THEY, HOWEVER, WILL BE PUT ON ON THE DEFENDANTS' 


        20    CASE. 


        21               SO OTHERWISE WE WOULD REST, BUT WE ARE GOING TO -- 


        22    WE AGREED TO TAKE THEM ON -- WE'RE NOT RESTING UNTIL WE FINISH 


        23    THE CROSS-EXAMINATION OF THOSE TWO WITNESSES. 


        24               THE COURT:  I SEE.  OKAY.  THEIR DIRECT TESTIMONY IS 


        25    GOING TO PRECEDE THEIR CROSS-EXAMINATION? 
                                                                         1372




         1               MR. ALIOTO:  CORRECT, YOUR HONOR. 


         2               THE COURT:  ALL RIGHT.  SO WITH THE EXCEPTION OF 


         3    THOSE TWO REMAINING WITNESSES, YOU HAVE NO OTHER LIVE WITNESSES 


         4    TO PRESENT? 


         5               MR. ALIOTO:  CORRECT.  WE UNDERSTAND MR. FALK WILL 


         6    NOW TESTIFY. 


         7               MR. SHULMAN:  WE NEED TO OFFER THE DEPOSITION AS AN 


         8    EXHIBIT. 


         9                        (PAUSE IN PROCEEDINGS.) 


        10               MR. ALIOTO:  WE THEN WILL OFFER -- AS THE COURT SAID 


        11    THE COURT WANTED TO READ MR. MORTON'S DEPOSITION, THEN WE WOULD 


        12    OFFER IT AS AN EXHIBIT. 


        13               THE COURT:  ALL RIGHT. 


        14               MR. ALIOTO:  I DON'T KNOW WHICH NUMBER, YOUR HONOR.  


        15    IT WOULD BE THE NEXT IN ORDER.  THE DEFENDANTS HAVE GIVEN IT A 


        16    NUMBER.  1190, H-1190. 


        17               THE COURT:  ALL RIGHT. 


        18               MR. ALIOTO:  THANK YOU. 


        19               THE COURT:  1190 WILL BE ADMITTED. 


        20                             (DEFENDANTS' EXHIBIT H-1190  


        21                              RECEIVED IN EVIDENCE) 


        22               THE COURT:  THANK YOU.   


        23               SO WE HAVE REMAINING IN THE PLAINTIFF'S CASE BENNACK 


        24    AND IRISH.  THEIR TESTIMONY FOR THE PLAINTIFFS WILL BE 


        25    PRESENTED AS CROSS FOLLOWING THEIR DIRECT TESTIMONY IN THE 
                                                                         1373




         1    DEFENDANTS' CASE IN CHIEF. 


         2               MR. ALIOTO:  CORRECT. 


         3               THE COURT:  ALL RIGHT.  I ASSUME WE HAVE SOME 


         4    MOTIONS. 


         5               MR. HALLING:  WE DO, YOUR HONOR.   


         6               WHEN WE COMMENCED THE TRIAL, WE FILED A MEMORANDUM 


         7    IN SUPPORT OF A MOTION TO DISMISS UNDER RULE 52(C) BECAUSE OF A 


         8    LACK OF STANDING.  AT THIS POINT WE WOULD LIKE FOR THE RECORD 


         9    TO FORMALLY MAKE THAT MOTION. 


        10               A COUPLE OF THINGS HAVE OCCURRED RECENTLY THAT I 


        11    THINK ARE QUITE PERTINENT.  FIRST, MR. REILLY APPARENTLY DOES 


        12    NOT HAVE ENOUGH OF A STAKE IN HIS OWN CASE EVEN TO TESTIFY, 


        13    NUMBER ONE. 


        14               NUMBER TWO, MR. REILLY, WHO PURPORTS TO BE TRYING TO 


        15    SAVE THE EXAMINER, IS NOT EVEN A SUBSCRIBER TO THE EXAMINER.  


        16    HE ONLY PURCHASES SINGLE COPY SALES, AS YOU JUST HEARD IN THE 


        17    STIPULATION.  THERE ARE APPROXIMATELY 50,000 SINGLE COPY SALES 


        18    MADE TO INDIVIDUALS EVERY DAY. 


        19               THE GROUNDS FOR OUR MOTION ARE STATED IN THE 


        20    MEMORANDUM.  I WOULD JUST NOTE THEM.  FIRST, UNDER ARTICLE 


        21    THREE OF THE CONSTITUTION, THERE IS NOT A SUFFICIENT STAKE HERE 


        22    AS DEMONSTRATED BY THE FACT THAT WE HAVE 500,000 OR SO 


        23    SUBSCRIBERS TO THE CHRONICLE.  WE HAVE THE 50,000 SINGLE COPY 


        24    SALES DAILY I MENTIONED FOR THE EXAMINER.  THERE ARE MILLIONS 


        25    OF POTENTIAL ADVERTISERS IN THE BAY AREA.  MR. REILLY HAS 
                                                                         1374




         1    ASSERTED PREVIOUSLY THAT AS AN INDIVIDUAL HE IS A POTENTIAL 


         2    ADVERTISER.  THERE NEEDS TO BE MORE UNDER ARTICLE THREE. 


         3               THERE IS ALSO AN ISSUE UNDER THE CONSTITUTION OF 


         4    JUSTICIABILITY BECAUSE MR. REILLY HAS STATED IN HIS DEPOSITION, 


         5    QUOTED IN OUR PAPERS, THAT HE IS TRYING TO PRESERVE THE 


         6    EXAMINER IN EXACTLY THE FORM IT'S IN, THE SAME JOURNALISTIC 


         7    QUALITY, THE SAME FORMAT AND SO FORTH.  WE DON'T THINK THAT'S A 


         8    PROPER -- THAT'S A PROPER TOPIC FOR FEDERAL COURTS TO BE 


         9    ADJUDICATING, THE TYPE OF NEWSPAPER ONE PUBLISHES. 


        10               THE SECOND GROUND WOULD BE SECTION -- 


        11               THE COURT:  WELL, I WAS JUST MULLING THAT OVER IN MY 


        12    MIND. 


        13               MR. HALLING:  THE QUESTION IS WHETHER WE WANT THE 


        14    FEDERAL COURTS TO BE DECIDING WHETHER OR NOT A CERTAIN 


        15    NEWSPAPER IS OF A CERTAIN QUALITY.  I DON'T THINK THAT'S THE 


        16    KIND OF DISPUTE THAT NORMALLY IS RESOLVED BY FEDERAL COURTS. 


        17               THE COURT:  IT'S TEMPTING NONETHELESS. 


        18                              (LAUGHTER) 


        19               MR. HALLING:  FAIR ENOUGH. 


        20               THE SECOND GROUND IS SECTION 16 OF THE CLAYTON ACT 


        21    SPECIFICALLY PROVIDES THAT THERE HAS TO BE A THREATENED 


        22    ECONOMIC INJURY.  WE KNOW FROM THE NINTH CIRCUIT DECISION OF 


        23    LUCAS AUTOMOTIVE THAT THE INJURY MUST BE OF THE SAME TYPE AS 


        24    SECTION 4 OF THE CLAYTON ACT, WHICH IS INJURY TO THE 


        25    PLAINTIFF'S BUSINESS OR PROPERTY.  THERE IS NO SUCH INJURY 
                                                                         1375




         1    HERE.  MR. REILLY IS MERELY A POTENTIAL ADVERTISER. 


         2               AND, FINALLY, THE THIRD GROUND IS THERE'S NO 


         3    ANTITRUST INJURY, WHICH IS A SPECIAL REQUIREMENT THAT -- A 


         4    SPECIAL REQUIREMENT IN ANTITRUST CASES THAT THE PLAINTIFF MUST 


         5    HAVE INJURY OF THE TYPE OR HERE AT LEAST THREATENED INJURY OF 


         6    THE TYPE THE ANTITRUST LAWS ARE DESIGNED TO PREVENT. 


         7               WE KNOW FROM MR. SCHMIDT'S TESTIMONY FROM YESTERDAY 


         8    HE STATED IN RESPONSE TO YOUR HONOR'S QUESTIONS THAT THERE WERE 


         9    THREE COMPETING METROPOLITAN DAILY NEWSPAPERS HERE:  THE 


        10    CHRONICLE, EXAMINER AND THE MERCURY NEWS IN THIS MARKETPLACE. 


        11               YOUR HONOR ASKED HIM A QUESTION ABOUT VIEWING THE 


        12    CHRONICLE AND EXAMINER AS A SINGLE ENTERPRISE, WHICH OF COURSE 


        13    IS HOW THEY SHOULD BE VIEWED BECAUSE THEY ARE A JOINT OPERATING 


        14    AGREEMENT AND THE RATES ARE SET JOINTLY. 


        15               SO BEFORE THIS ACQUISITION, THERE WERE TWO ECONOMIC 


        16    ENTITIES IN THE METROPOLITAN DAILY NEWSPAPER BUSINESS HERE, THE 


        17    CHRONICLE AND EXAMINER ON THE ONE HAND AND THE MERCURY NEWS ON 


        18    THE OTHER, ACCORDING TO MR. SCHMIDT.  AFTER THIS ACQUISITION, 


        19    THERE WILL STILL BE TWO, EVEN IF THE EXAMINER IS SHUT DOWN. 


        20               IF ANY COMPETITION IS PROVIDED BY THE INDEPENDENT, 


        21    AND THERE WILL BE SOME, THAT IS A COMPLAINT MR. REILLY IS 


        22    MAKING THAT IS NOT OF THE TYPE THAT THE ANTITRUST LAWS ARE 


        23    DESIGNED TO ADDRESS. 


        24               THE COURT:  LET ME STOP YOU HERE.  I ASKED AND 


        25    SOLICITED YOUR ARGUMENT ON MOTIONS AND THEN AFTER THEY BEGAN I 
                                                                         1376




         1    BEGAN TO HAVE SECOND THOUGHTS. 


         2               THE PLAINTIFF STILL INTENDS TO PRESENT TESTIMONY 


         3    THROUGH TWO WITNESSES, AND SO TECHNICALLY HAS NOT BEEN FULLY 


         4    HEARD ON THE ISSUE.  SO I SUPPOSE I SHOULD ASK MR. ALIOTO AT 


         5    THIS POINT WHETHER THE TESTIMONY OF BENNACK AND IRISH ARE GOING 


         6    TO AFFECT ANY OF THE MATTERS THAT MR. HALLING IS ADDRESSING. 


         7               MR. ALIOTO:  I THINK SO, YOUR HONOR, AND ALSO 


         8    MR. FALK.  MR. FALK WILL BE COMING ON AS THEIR NEXT WITNESS.  


         9    MR. FALK RUNS THE SAN FRANCISCO NEWSPAPER AGENCY. 


        10               THE COURT:  WELL, I'M AFRAID I DREW YOU INTO YOUR 


        11    ARGUMENT, MR. HALLING, AND THEN REALIZED PLAINTIFF HAD NOT BEEN 


        12    FULLY HEARD AND, THEREFORE, A MOTION UNDER RULE 50 IS PROBABLY 


        13    NOT APPROPRIATE AT THIS TIME. 


        14               LET ME, WITHOUT CUTTING YOU OFF OR FORECLOSING YOU 


        15    FROM AMPLIFYING THESE ARGUMENTS FURTHER AT AN APPROPRIATE TIME, 


        16    SIMPLY SAY THAT AS LONG AS THERE REMAINS A PART OF THE 


        17    PLAINTIFF'S CASE TO PRESENT, I THINK I BEST DEFER RULING ON 


        18    YOUR RULE 50 MOTION. 


        19               MR. ROSCH:  CAN I TAKE A WHACK AT IT, YOUR HONOR? 


        20               THE COURT:  BEFORE THE PLAINTIFF IS FULLY HEARD? 


        21               MR. ROSCH:  YES. 


        22               THE COURT:  ON WHAT GROUND? 


        23               MR. ROSCH:  BECAUSE I BELIEVE THAT THE PLAINTIFF HAS 


        24    BEEN FULLY HEARD WITH RESPECT TO THE SECTION 16 ISSUE. 


        25               THE COURT:  WELL, WITH REFERENCE TO THE STANDING 
                                                                         1377




         1    ISSUE? 


         2               MR. ROSCH:  THAT'S CORRECT.  MORE SPECIFICALLY, YOUR 


         3    HONOR, THE PLAINTIFF HAS NOW RESTED WITHOUT PUTTING ON ANY 


         4    EVIDENCE, AND IT COULD ONLY COME FROM MR. REILLY, WITH RESPECT 


         5    TO WHETHER OR NOT HE IS THREATENED WITH INJURY TO BUSINESS OR 


         6    PROPERTY.  THAT CAN ONLY COME FROM MR. REILLY. 


         7               THE COURT:  WELL, WE HAVE THE STIPULATION -- 


         8               MR. ROSCH:  WE DO, YOUR HONOR. 


         9               THE COURT:  -- THAT HE IS A SUBSCRIBER AND THAT HAS 


        10    BEEN THE BASIS OF HIS CLAIM FOR STANDING.  ISN'T THE STANDING 


        11    INQUIRY INFORMED BY THE GLOSS, AS WE DESCRIBED IT, THAT THE 


        12    NEWSPAPER PRESERVATION ACT PLACES ON THE --  


        13               MR. ROSCH:  I THINK NOT, YOUR HONOR, IF I MAY, AND 


        14    I'D LIKE TO EXPLAIN WHY I BELIEVE THAT IS NOT SO. 


        15               THE COURT:  ALL RIGHT. 


        16               MR. ROSCH:  AGAIN, IF I MAY JUST START BY FOCUSING 


        17    ON WHAT THE EVIDENCE IS BEFORE THE COURT RIGHT NOW, BECAUSE 


        18    IT'S CLOSED AS FAR AS THAT ISSUE IS CONCERNED, AND IT COMES 


        19    DOWN TO THIS -- 


        20               THE COURT:  I'M NOT SURE THAT MR. ALIOTO AGREES WITH 


        21    THAT. 


        22               MR. ROSCH:  WELL, YOUR HONOR, WITH RESPECT TO 


        23    MR. REILLY'S STATUS HERE, IT COMES DOWN TO THIS:  HE SAYS HE'S 


        24    A SUBSCRIBER TO THE CHRONICLE AND A SOMETIME BUYER OF THE 


        25    EXAMINER, AND THAT'S IT.  AND THERE'S NOT GOING TO BE ANY MORE 
                                                                         1378




         1    EVIDENCE THAN THAT.  HE HASN'T EVEN TOLD THE COURT WHAT HE DOES 


         2    WITH THE EXAMINER WHEN HE BUYS IT.  THIS IS JUST -- THAT'S IT. 


         3                              (LAUGHTER) 


         4               MR. ROSCH:  THAT'S THE STATE OF THE RECORD.  THAT'S 


         5    THE STATE OF THE RECORD, AND THERE'S NOT GOING TO BE ANY MORE.  


         6    SO IT CAN BE TESTED. 


         7               NOW, WITH RESPECT TO THE LAW, THE LAW IS PERFECTLY 


         8    CLEAR THAT HE HAS TO DEMONSTRATE, UNDER SECTION 16, THAT HE IS 


         9    THREATENED WITH INJURY TO HIS BUSINESS OR PROPERTY WHEN HE IS A 


        10    SUBSCRIBER, AND THAT MEANS HE HAS TO DEMONSTRATE ECONOMIC LOSS. 


        11               NOW, THE PLAINTIFFS SUGGESTED IN THEIR TRIAL BRIEF 


        12    THAT THAT DIDN'T COUNT IF YOU WERE A CONSUMER, THAT IT WAS 


        13    ENOUGH TO DEMONSTRATE THAT THERE WOULD BE A LOSS OF CHOICE.  


        14    AND I THINK THAT'S WHAT THE COURT IS ALLUDING TO. 


        15               BUT THE CASES THAT THEY'VE CITED DON'T SAY THAT AT 


        16    ALL.  EACH AND EVERY ONE OF THEM HAVE BEEN CASES WHERE THE 


        17    CONSUMER HAS BEEN ABLE TO DEMONSTRATE EITHER ACTUAL OR 


        18    THREATENED ECONOMIC LOSS.  GENERALLY SPEAKING, IT'S THROUGH AN 


        19    OVERCHARGE OR SOMETHING OF THAT NATURE.  BUT EACH AND EVERY ONE 


        20    OF THOSE CASES HAVE BEEN CASES WHERE THERE HAS BEEN A 


        21    DEMONSTRATION OF ECONOMIC LOSS AND THERE IS NO AUTHORITY, NONE 


        22    WHATEVER, THAT WHEN A PLAINTIFF CAN'T DEMONSTRATE THAT, THAT HE 


        23    HAS STANDING UNDER EITHER SECTION 4 OR 16. 


        24               THE COURT:  WHAT ABOUT THE HONOLULU CASE?  NOW, 


        25    THAT, OF COURSE, WAS BROUGHT BY THE STATE AND I BELIEVE THE 
                                                                         1379




         1    CITY OF HONOLULU, PUBLIC ENTITY THAT -- 


         2               MR. ROSCH:  ABSOLUTELY, YOUR HONOR. 


         3               THE COURT:  AND OBVIOUSLY MR. REILLY CANNOT SO 


         4    CLAIM, ALTHOUGH -- 


         5               MR. ROSCH:  THAT'S CORRECT. 


         6               THE COURT:  -- HAD THE RESULTS OF THE ELECTION BEEN 


         7    DIFFERENT, HE MIGHT HAVE BEEN ABLE TO DO SO; BUT, NONETHELESS, 


         8    THERE'S NO INJURY TO THE PARENS PATRIAE, NO INJURY IN THE 


         9    STRICT ANTITRUST SENSE THAT YOU'VE BEEN SPEAKING OF; AND YET 


        10    IT'S PRETTY CLEAR THE NINTH CIRCUIT HAS PERMITTED THE HONOLULU 


        11    CASE TO GO FORWARD.  MR. REILLY IS PROCEEDING MORE OR LESS ON 


        12    THE SAME KIND OF PRIVATE ATTORNEY GENERAL THEORY. 


        13               MR. ROSCH:  WELL, IF I MAY, YOUR HONOR, SPEAK TO 


        14    THAT. 


        15               NUMBER ONE, IT WAS A PARENS CASE, AND AS THE COURT 


        16    KNOWS, THERE'S A SPECIFIC PROVISION IN THE CLAYTON ACT THAT 


        17    AFFORDS THE STATE OF HAWAII STANDING.  AND MR. REILLY DOES NOT 


        18    HAVE THE BENEFIT OF THAT STATUTE, BUT HE IS SUING HERE -- HE IS 


        19    NOT -- HE'S NOT EVEN A CLASS PLAINTIFF.  HE'S SUING AS 


        20    MR. REILLY, A SUBSCRIBER AND SOMETIME PURCHASER OF THE 


        21    EXAMINER. 


        22               NOW, THE RECORD, AS IT BEARS ON HIS ECONOMIC LOSS, 


        23    IS CLEAR THAT HE SUFFERS NONE.  AND THE REASON FOR THAT IS THAT 


        24    EVERY SINGLE WITNESS, INCLUDING DR. COMANOR, HAS TESTIFIED THAT 


        25    THERE IS CURRENTLY NO PRICE COMPETITION BETWEEN THE EXAMINER 
                                                                         1380




         1    AND THE CHRONICLE NOW. 


         2               THE COURT:  WELL -- 


         3               MR. ROSCH:  AND, INDEED -- EXCUSE ME. 


         4               THE COURT:  YOU'RE THINKING -- ALL RIGHT.  FINISH 


         5    YOUR THOUGHT. 


         6               MR. ROSCH:  NO, PLEASE. 


         7               THE COURT:  THE TESTIMONY HAS BEEN THAT NEWSPAPERS 


         8    SERVE TWO MARKETS.  THEY SERVE A MARKET OF ADVERTISING OUTLETS 


         9    AND THEY SERVE A MARKET FOR READERS IN PROVIDING NEWS, 


        10    ENTERTAINMENT AND OPINION. 


        11               GIVEN THAT FACT, WHY IS NOT IT REASONABLE TO ASSUME 


        12    THAT ANTITRUST INJURY CAN EMBRACE THE LOSS OF AN OUTLET OF 


        13    NEWS, OPINION AND -- NEWS, ENTERTAINMENT AND OPINION TO ONE WHO 


        14    REGULARLY SUBSCRIBES TO ONE OF THOSE SOURCES AND WHO IS A 


        15    REGULAR PURCHASER OF ANOTHER OF THOSE SOURCES? 


        16               MR. ROSCH:  THE ANSWER TO THAT, YOUR HONOR, IS THAT 


        17    ANTITRUST INJURY IS A SEPARATE AND ADDITIONAL REQUIREMENT TO 


        18    INJURY TO BUSINESS OR PROPERTY.  THERE ARE TWO REQUIREMENTS 


        19    UNDER SECTION 16. 


        20               THE COURT:  WELL, I QUITE AGREE WITH THAT.  WE'RE 


        21    TALKING ABOUT INJURY TO BUSINESS OR PROPERTY. 


        22               MR. ROSCH:  CORRECT.  AND, AS I SAY, THAT NEEDS BE 


        23    ECONOMIC INJURY. 


        24               THE COURT:  AND WHY, GIVEN THE NEWSPAPER 


        25    PRESERVATION ACT AND THE TWO SEPARATE MARKETS WHICH NEWSPAPERS 
                                                                         1381




         1    SERVE, IT'S NOT REASONABLE TO INFER THAT INJURY TO BUSINESS OR 


         2    PROPERTY IN THIS CONTEXT, A VERY LIMITED CONTEXT TO BE SURE, 


         3    WOULD NEVERTHELESS EMBRACE THE KIND OF INJURY WHICH THE 


         4    PLAINTIFF ASSERTS IN THIS CASE? 


         5               MR. ROSCH:  BECAUSE IT IS NOT ECONOMIC LOSS, YOUR 


         6    HONOR.  WHAT YOUR HONOR IS TALKING ABOUT IS, AND WHAT I BELIEVE 


         7    THE PLAINTIFF IS TALKING ABOUT, IS A LOSS OF CHOICE, AND THAT 


         8    IS NOT ECONOMIC LOSS AND NEVER HAS BEEN TREATED AS SUCH. 


         9               THE COURT:  WELL -- 


        10               MR. ROSCH:  WITH RESPECT TO ECONOMIC LOSS, 


        11    DR. COMANOR -- 


        12               THE COURT:  ECONOMIC LOSS OR ANTITRUST INJURY? 


        13               MR. ROSCH:  ECONOMIC LOSS.  INJURY TO BUSINESS OR 


        14    PROPERTY, DIFFERENT CONCEPT FROM ANTITRUST INJURY.  IT MAY WELL 


        15    BE, ALTHOUGH FRANKLY I DON'T BELIEVE IN THE NINTH CIRCUIT IT IS 


        16    THE LAW, THAT ONE CAN POSIT ANTITRUST INJURY ON THE BASIS OF A 


        17    LOSS OR DIMINUTION IN SIMPLY, A DIMINUTION IN THE NUMBER OF 


        18    COMPETITORS OR CONSUMER CHOICE.  I THINK REBEL OIL SPEAKS TO 


        19    THAT.   


        20               BUT THAT'S NOT WHAT I'M TALKING ABOUT.  I'M TALKING 


        21    ABOUT INJURY TO BUSINESS OR PROPERTY WHICH IS A CONCEPT OF 


        22    ECONOMIC LOSS.  AND DR. COMANOR SPECIFICALLY TESTIFIED AT PAGE 


        23    468 THAT, QUOTE:   


        24                   "THE FURTHER COMBINATION OF THE CHRONICLE 


        25               AND THE EXAMINER UNDER THE SAME OWNERSHIP 
                                                                         1382




         1               WOULDN'T HAVE ANY IMPACT ON ECONOMIC 


         2               COMPETITION." 


         3               NOW, THAT'S EXACTLY THE STATE OF THE RECORD THAT 


         4    WE'RE DEALING WITH HERE WHEN MR. REILLY CLOSES HIS CASE AND 


         5    COMES TO THE COURT AND ASKS TO PROCEED ON THE BASIS THAT HE IS 


         6    SIMPLY A SUBSCRIBER TO THE CHRONICLE AND A SOMETIME PURCHASER 


         7    OF THE EXAMINER. 


         8               THANK YOU, YOUR HONOR. 


         9               THE COURT:  MR. ALIOTO OR MR. SHULMAN, WHO WISHES TO 


        10    ADDRESS THAT? 


        11               MR. ALIOTO:  WELL, I AM GOING TO ADDRESS SOME OF 


        12    THESE ISSUES WITH THE NEXT WITNESS, AS A MATTER OF FACT.  


        13    HOWEVER, I WOULD POINT OUT TO THE COURT -- 


        14               THE COURT:  THE NEXT WITNESS WILL BE? 


        15               MR. ALIOTO:  MR. FALK. 


        16               THE COURT:  OKAY. 


        17               MR. HALLING:  WHO IS NOT ONE OF THE WITNESSES IN HIS 


        18    CASE. 


        19               MR. ALIOTO:  HE IS NOT, BUT I'M WAITING AND I 


        20    HAVEN'T RESTED YET.  AND IF HE'S IN THE COURTROOM, THEN I WOULD 


        21    REQUEST THAT HE BE DIRECTED TO GET ON THE STAND. 


        22                              (LAUGHTER) 


        23               THE COURT:  ANYWAY. 


        24               MR. ALIOTO:  I WILL SAY, YOUR HONOR, THAT AMONG 


        25    OTHER THINGS, EVEN ON A VERY STRAIGHT ECONOMIC BASIS, YOU HAVE 
                                                                         1383




         1    THE ANALYSIS THAT WAS DONE BY THE ADVISORS TO THE CHRONICLE 


         2    ITSELF WHO ADVISED THEM AND TOLD THEM, AND I BELIEVE IT WAS 


         3    PART OF THEIR CONSIDERATION, THAT IF WE HAVE ONE NEWSPAPER IN 


         4    THIS CITY, THAT THE EFFECT IS GOING TO BE THAT THE PRICES ARE 


         5    GOING TO BE SUBSTANTIALLY GREATER AND THAT -- 


         6               THE COURT:  SUBSCRIBER PRICES? 


         7               MR. ALIOTO:  YES. 


         8               THE COURT:  STREET PRICES? 


         9               MR. ALIOTO:  RATES, YES, YOUR HONOR.  WE DID HAVE 


        10    ALSO EVEN IN THIS CASE AN EFFECT, I BELIEVE, UPON SOME OF THE 


        11    PRICES AS WELL. 


        12               THE COURT:  WHO PROVIDED THAT TESTIMONY? 


        13               MR. ALIOTO:  THAT WAS IN THE DLJ DOCUMENT. 


        14               THE COURT:  ALL RIGHT. 


        15               MR. ALIOTO:  AND IT WAS THE MAY 4, 1999, DOCUMENT. 


        16               THE COURT:  THE WAR SCENARIO? 


        17               MR. ALIOTO:  THE WAR, OTHERWISE KNOWN AS 


        18    COMPETITION, YES, YOUR HONOR. 


        19                              (LAUGHTER) 


        20               MR. ALIOTO:  BUT THAT'S NOT THE -- BUT THAT'S NOT 


        21    THE -- THAT'S NOT THE COMPLETE PART OF THAT, AND I WOULD, IF 


        22    WE'RE GOING TO HAVE THIS ARGUMENT, I WOULD LIKE TO HAVE IT, IF 


        23    WE'RE GOING TO HAVE IT BEFORE WE'RE FINISHED WITH MR. BENNACK 


        24    AND WITH MR. IRISH, I WOULD LIKE TO HAVE IT AT LEAST AFTER 


        25    MR. FALK. 
                                                                         1384




         1               THE COURT:  WELL, I'M GOING TO RESERVE ON THIS AT 


         2    THE PRESENT TIME.  AS COUNSEL WELL KNOW, ORDINARILY THE ISSUE 


         3    OF STANDING IN AN ANTITRUST CASE WOULD HAVE BEEN LITIGATED IN 


         4    AN EARLY STAGE IN THE PROCEEDINGS, PROBABLY BY MOTION, MAYBE BY 


         5    AN EVIDENTIARY HEARING.  BUT IT'S AN ISSUE THAT WOULD HAVE BEEN 


         6    FLESHED OUT EARLY IN THE CASE.   


         7               THIS CASE HAS PROCEEDED ALONG AT SUCH AN UNUSUALLY 


         8    FAST CLIP WE BASICALLY COLLAPSED THE ENTIRE PRETRIAL AND 


         9    DISCOVERY PHASE INTO A MATTER OF, YOU KNOW BETTER THAN I, SIX 


        10    WEEKS, BUT A VERY SHORT PERIOD OF TIME AND THE LAW AND MOTION 


        11    PRACTICE THAT OTHERWISE WOULD HAVE OCCURRED AND SORTED OUT 


        12    THESE ISSUES HAS SIMPLY NOT OCCURRED. 


        13               AND, INDEED, IT WAS AT THE DEFENDANTS' REQUEST AS 


        14    WELL AS THE PLAINTIFF'S THAT WE WENT TO TRIAL -- 


        15               MR. ROSCH:  SO STIPULATED, YOUR HONOR. 


        16               THE COURT:  -- BEFORE DOING THESE -- GOING THROUGH 


        17    ALL OF THESE MOTION PRACTICES AND SORTING OUT THESE ISSUES. 


        18               SO HAVING PROCEEDED ALONG THAT LINE AND IN ADDITION 


        19    BECAUSE THE PLAINTIFF HAS NOT FULLY PRESENTED HIS CASE, 


        20    ALTHOUGH I'M NOT SURE WHAT ADDITIONAL EVIDENCE ON THE STANDING 


        21    WILL BE PRESENTED, I'LL KEEP AN OPEN MIND WITH REFERENCE TO 


        22    THAT, BUT BECAUSE OF THOSE TWO MATTERS, THE FAST PACE THAT WE 


        23    PROCEEDED UNDER AND THE FACT THAT TECHNICALLY THE PLAINTIFF HAS 


        24    NOT RESTED, I'M GOING TO RESERVE ON THE STANDING ISSUE AT THIS 


        25    TIME.  I'M SURE WE'LL REVISIT THIS QUESTION. 
                                                                         1385




         1               MR. ROSCH:  THANK YOU, YOUR HONOR. 


         2               THE COURT WILL RECALL THAT I DID RESERVE FOR OPENING 


         3    STATEMENT AND I'D LIKE TO SPEND ABOUT FIVE MINUTES TELLING THE 


         4    COURT WHAT WE'RE GOING TO BE PUTTING ON. 


         5               THE COURT:  ALL RIGHT.  WHY DON'T WE DO THAT RIGHT 


         6    AFTER LUNCH. 


         7               MR. ROSCH:  THAT WILL BE SPLENDID.  THANK YOU, YOUR 


         8    HONOR. 


         9               THE COURT:  ALL RIGHT.  WHY DON'T WE COME BACK AT 


        10    1:30 AND THEN MR. ROSCH WILL MAKE HIS OPENING STATEMENT AND 


        11    WE'LL LEAD OFF WITH THE FIRST WITNESS.  MR. FALK; IS THAT 


        12    CORRECT? 


        13               MR. HALLING:  CORRECT. 


        14               THE COURT:  THANK YOU. 


        15               MR. SHULMAN:  YOUR HONOR?  YOUR HONOR? 


        16               THE COURT:  YES, SIR. 


        17               MR. SHULMAN:  MAY I JUST BRIEFLY SUGGEST THAT THE 


        18    JUSTICE DEPARTMENT'S AMICUS BRIEF DOES HAVE SOME BEARING ON THE 


        19    ISSUE OF COMPETITIVE EFFECT. 


        20               THE COURT:  COMPETITIVE? 


        21               MR. SHULMAN:  COMPETITIVE EFFECT FROM THE ENDING OF 


        22    A JOA, WHICH I THINK IS RELEVANT TO THE ISSUES THAT HAVE JUST 


        23    BEEN RAISED. 


        24               THE COURT:  VERY WELL.  THANK YOU, MR. SHULMAN.   


        25               (LUNCHEON RECESS WAS TAKEN AT 12:08 P.M.) 
                                                                         1386




         1    AFTERNOON SESSION                                     1:37 P.M. 


         2     


         3               THE COURT:  COUNSEL, FOR YOUR PLANNING PURPOSES, WE 


         4    HAVE MANAGED TO CLEAR MOST OF THE MATTERS FROM TOMORROW 


         5    AFTERNOON'S CALENDAR.  SO I STILL HAVE A NUMBER OF CASE 


         6    MANAGEMENT CONFERENCES TO TAKE AT 3:30, BUT WE'LL BE ABLE TO GO 


         7    PRETTY MUCH RIGHT UP TO 3:30 TOMORROW, IF NECESSARY.  SO THAT 


         8    SHOULD HELP IN GETTING THINGS CLEARED AWAY. 


         9               MR. ALIOTO:  ALL DAY TOMORROW? 


        10               THE COURT:  PRETTY MUCH ALL DAY TOMORROW. 


        11               MR. ALIOTO:  VERY GOOD, YOUR HONOR. 


        12               THE COURT:  MR. ROSCH, YOU LOOK LIKE YOU'RE ABOUT 


        13    READY TO COME TO THE PODIUM WITH YOUR OPENING STATEMENT. 


        14               MR. ROSCH:  THANK YOU, YOUR HONOR.  I PROMISED YOU 


        15    FIVE MINUTES, AND I'LL TRY TO DO IT IN LESS. 


        16                           OPENING STATEMENT 


        17               MR. ROSCH:  YOUR HONOR, YOU ALREADY HEARD FROM OUR 


        18    WITNESSES MR. SIAS AND MS. GREENTHAL, AND OUR REMAINING 


        19    WITNESSES WILL BE TWOFOLD.  I'D LIKE TO DISCUSS THEM IN REVERSE 


        20    ORDER, IF I MAY. 


        21               ONE WILL BE DR. ROSSE, WHO YOU WILL RECALL THAT 


        22    DR. COMANOR ACKNOWLEDGED AS ONE OF THE PREEMINENT NEWSPAPER 


        23    ECONOMISTS IN THE UNITED STATES. 


        24               DR. ROSSE WILL CONFIRM WHAT ALL SEVEN OF 


        25    MR. REILLY'S NEWSPAPER EXPERTS TESTIFIED -- HAVE ALREADY 
                                                                         1387




         1    TESTIFIED TO, MORE SPECIFICALLY THAT THE EXAMINER IS A FAILING 


         2    ENTERPRISE. 


         3               HE WILL TESTIFY, AS DID MR. REILLY'S EXPERTS, THAT 


         4    IT IS LOSING TENS OF MILLIONS OF DOLLARS ON A STAND-ALONE 


         5    BASIS.  HE WILL ALSO TESTIFY THAT, AS MR. REILLY'S EXPERTS HAVE 


         6    TESTIFIED, THAT THOSE LOSSES CAN BE EXPECTED TO CONTINUE AND, 


         7    INDEED, ACCELERATE IN THE FUTURE BECAUSE OF THE SO-CALLED 


         8    DOWNWARD ECONOMIC SPIRAL, A PHENOMENON IN WHICH A NEWSPAPER'S 


         9    DECLINING CIRCULATION REDUCES ITS ADVERTISING REVENUE AND VICE 


        10    VERSA, AND THAT SPIRAL OPERATES INEVITABLY IN THE CONTEXT OF A 


        11    NEWSPAPER LIKE THE EXAMINER, WHICH IS AT A FOUR-PLUS-TO-ONE 


        12    DISADVANTAGE VIS-A-VIS THE CHRONICLE. 


        13               THE SECOND WITNESS WHICH WE WILL BE CO-SPONSORING 


        14    WITH HEARST IS MR. STEVE FALK, WHO HAS HEADED THE SAN FRANCISCO 


        15    NEWSPAPER AGENCY.  MR. FALK WILL CONFIRM WHAT I BELIEVE EVERY 


        16    WITNESS, INCLUDING MR. REILLY'S SEVEN EXPERT WITNESSES, HAVE 


        17    ALREADY SAID TO YOUR HONOR; NAMELY, THAT DR. COMANOR'S 


        18    TESTIMONY THAT THE RELEVANT MARKET IN THIS CASE IS LIMITED TO 


        19    THE TWO DAILY NEWSPAPERS IN SAN FRANCISCO, NAMELY, THE 


        20    CHRONICLE AND THE EXAMINER, IS NOTHING MORE THAN A FIGMENT OF 


        21    DR. COMANOR'S IMAGINATION. 


        22               MR. ALIOTO:  THAT'S ARGUMENT.  I OBJECT.  THAT'S 


        23    ARGUMENT.  IT'S NOT AN OPENING STATEMENT, JUDGE.  OKAY. 


        24               THE COURT:  ALL RIGHT.  SOMETHING ABOUT POTS AND 


        25    KETTLES COME TO MIND, BUT ANYWAY. 
                                                                         1388




         1                              (LAUGHTER) 


         2               MR. ROSCH:  WE'VE DONE THIS BEFORE, YOUR HONOR, 


         3    MR. ALIOTO AND I. 


         4               MORE SPECIFICALLY, MR. FALK WILL CONFIRM THAT MORE 


         5    THAN HALF OF THE CHRONICLE'S CIRCULATION IS OUTSIDE SAN 


         6    FRANCISCO AND THAT ITS ADVERTISING REVENUE IS VERY LARGELY 


         7    DEPENDENT UPON THAT CIRCULATION. 


         8               THE COURT:  DID I NOT SEE SOME FIGURES IN SOME OF 


         9    THE EXHIBITS THAT HAVE BEEN FLOATING THROUGH HERE IN THE LAST 


        10    FEW DAYS THAT SUGGESTED EVEN MORE OF THE CHRONICLE CIRCULATION 


        11    IS OUTSIDE THE CITY AND COUNTY OF SAN FRANCISCO? 


        12               MR. ROSCH:  YES, YOUR HONOR, AND I WAS BEING 


        13    CONSERVATIVE ABOUT THAT.  MR. FALK WILL BE PUTTING BEFORE THE 


        14    COURT VERY PRECISE FIGURES IN THAT REGARD.   


        15               THE COURT:  ALL RIGHT.  ALL RIGHT. 


        16               MR. ROSCH:  HE WILL ALSO CONFIRM WHAT MR. REILLY'S 


        17    EXPERTS HAVE SAID AND, FRANKLY, WHAT I THINK ECONOMICS TEACHES; 


        18    NAMELY, THAT THE CHRONICLE FACES STIFF COMPETITION FROM THE 


        19    SUBURBAN NEWSPAPERS AND THAT BECAUSE IT DOES SO, IT MUST 


        20    MAINTAIN ITS STANDARDS AND IT MUST PAY ATTENTION TO ITS PRICING 


        21    LEST IT LOSE CIRCULATION AND ULTIMATELY ADVERTISING TO THOSE 


        22    SUBURBAN NEWSPAPERS. 


        23               IN OTHER WORDS, THE OUTSIDE PRESSURE OF THESE 


        24    NEWSPAPERS IMPOSES A COMPETITIVE CHECK UPON IT. 


        25               HE WILL ALSO TESTIFY WHAT -- AND CONFIRM WHAT 
                                                                         1389




         1    MR. FLOOD TOLD YOU YESTERDAY; NAMELY, THAT OTHER MEDIA ALSO 


         2    IMPOSE A SUBSTANTIAL COMPETITIVE CHECK ON THE CHRONICLE. 


         3               IN OTHER WORDS, YOUR HONOR, THESE TWO WITNESSES WILL 


         4    CONFIRM WHAT WE BELIEVE THAT MR. REILLY'S EXPERTS HAVE ALREADY 


         5    ESTABLISHED TO DATE; NAMELY, THAT THIS CASE, AS AN ANTITRUST 


         6    CASE, IS NOT VIABLE. 


         7               THANK YOU, YOUR HONOR. 


         8               THE COURT:  BEFORE YOU LEAVE, IS THERE GOING TO BE 


         9    ANY EVIDENCE ON WHY THE CHRONICLE NEVER ATTEMPTED, AS FAR AS 


        10    I'M AWARE, TO BREAK THE JOINT OPERATING AGREEMENT?   


        11               IF THE FACTS ARE AS YOU CONTEND THE EVIDENCE WILL 


        12    SHOW, THAT THE EXAMINER HAS BEEN SUBSIDIZED, TO USE THE TERM 


        13    THAT HAS BEEN USED IN THE PROCEEDINGS, HAS BEEN SUB -- THAT THE 


        14    EXAMINER HAS BEEN SUBSIDIZED BY THE CHRONICLE OVER THE YEARS TO 


        15    THE POINT THAT THE JOINT OPERATING AGREEMENT AS A WHOLE, BOTH 


        16    COMPANIES OPERATING IN THEIR ENTIRETY, WOULD BE BETTER OFF 


        17    WITHOUT THE JOINT OPERATING AGREEMENT, WHY HAS THERE BEEN NO 


        18    EFFORT TO ELIMINATE THE JOINT OPERATING AGREEMENT? 


        19               MR. ROSCH:  WELL, YOUR HONOR, I CERTAINLY CAN'T 


        20    SPEAK FOR HEARST, BUT I CAN SPEAK FOR THE FAMILY THAT OWNS THE 


        21    CHRONICLE; AND I THINK THAT THE ANSWER TO THAT IS THAT THEY 


        22    BELIEVE THEY HAVE A CONTRACT, A WRITTEN CONTRACT, A BINDING 


        23    CONTRACT.  THEY BELIEVE THAT THEY ARE BOUND BY THAT CONTRACT, 


        24    AND THEY HAVE EXERCISED THE RIGHTS THAT THEY HAVE UNDER THAT 


        25    CONTRACT TO GET OUT OF IT AS SOON AS THEY CAN.  BUT AS SOON AS 
                                                                         1390




         1    THEY CAN IS 2005. 


         2               THE COURT:  AND THAT'S THE ONLY REASON? 


         3               MR. ROSCH:  I BELIEVE SO, YOUR HONOR.  I BELIEVE 


         4    THEY BELIEVE THAT THEY HAVE A LEGAL OBLIGATION. 


         5                        (PAUSE IN PROCEEDINGS.) 


         6               THE COURT:  WELL, FROM AN ANTITRUST POINT OF VIEW, 


         7    WHEN THE -- I WAS GOING TO SAY WHEN THE DEPARTMENT APPROVED 


         8    THIS JOINT OPERATING AGREEMENT, BUT THE DEPARTMENT DID NOT, IN 


         9    FACT, APPROVE THIS JOINT OPERATING AGREEMENT SINCE IT PREDATED 


        10    THE NEWSPAPER PRESERVATION ACT.  BUT THERE WAS AN IMPLICIT 


        11    ENDORSEMENT OF THE JOINT OPERATING AGREEMENT WHEN THE NEWSPAPER 


        12    PRESERVATION ACT CAME INTO EFFECT, WHICH IS TANTAMOUNT TO THE 


        13    DEPARTMENT GIVING THEIR BLESSING TO THE JOINT OPERATING 


        14    AGREEMENT.  


        15               WHEN THAT OCCURS, AS A LEGAL MATTER, WHAT DOES THAT 


        16    ENDORSEMENT ENDORSE?  THE WHOLE CONTRACT WITH ALL OF ITS 


        17    PROVISIONS, THE TERMINATION PROVISIONS AND EVERYTHING, OR IS IT 


        18    SIMPLY AN APPROVAL OF A JOINT OPERATING AGREEMENT FOR SUCH 


        19    PERIOD OF TIME AS IT IS ECONOMICALLY REASONABLE FOR THE PARTIES 


        20    TO CONDUCT THEIR AFFAIRS UNDER THAT ARRANGEMENT? 


        21               MR. ROSCH:  WELL, YOUR HONOR, I BELIEVE THAT, AGAIN, 


        22    SPEAKING SIMPLY FOR MY CLIENT, WE HAVE CONSIDERED IT TO BE THE 


        23    FORMER; THAT IS TO SAY, THAT IN THE CASE OF -- I'M SORRY, GO 


        24    AHEAD. 


        25               THE COURT:  AND IF I UNDERSTAND THE TERMINATION 
                                                                         1391




         1    PROVISIONS HERE, THEY'RE VERY SPARSE UNLESS THEY'RE TUCKED AWAY 


         2    IN SOME OTHER PART OF THE AGREEMENT THAT I HAVEN'T FOCUSED ON, 


         3    BUT THOSE TERMINATION PROVISIONS IN THIS CONTRACT, IF MEMORY 


         4    SERVES CORRECT, SIMPLY CONTEMPLATE THAT AT THE END OF THE JOINT 


         5    OPERATING AGREEMENT TERM, THE PARTIES WILL DIVIDE THE ASSETS 


         6    AND EACH ENGAGE IN THE NEWSPAPER BUSINESS.   


         7               IS THAT A FAIR INTERPRETATION OF THE TERMINATION 


         8    PROVISIONS? 


         9               MR. ROSCH:  ACTUALLY, YOUR HONOR, I DON'T EVEN THINK 


        10    THAT IT PROVIDES THAT EACH WILL PARTICIPATE IN THE NEWSPAPER 


        11    BUSINESS.  I BELIEVE WHAT THE TERMINATION PROVISION SAYS IS 


        12    THAT THE DIVISION OF ASSETS SHALL BE SUCH THAT IT WILL ENABLE 


        13    EACH PARTY, IF IT CHOOSES, TO DO SO.  AND I BELIEVE THE 


        14    TESTIMONY OF MR. SIAS WAS THAT THAT'S JUST FINE; BUT THE FACT 


        15    OF THE MATTER IS, THAT THE ASSETS CAN'T BE USED AS A PRACTICAL 


        16    MATTER TO PUBLISH TWO NEWSPAPERS.  IT JUST SIMPLY CANNOT BE 


        17    DONE, AT LEAST ON AN A.M. BASIS.   


        18               THE COURT:  TO BE SURE -- I'LL ACCEPT THAT AS A 


        19    FACT.  I DON'T BELIEVE THAT'S A MATTER IN CONTEST HERE.  BUT 


        20    SURELY THE ASSETS COULD BE DIVIDED. 


        21               MR. ROSCH:  I BEG YOUR PARDON? 


        22               THE COURT:  SURELY THE ASSETS COULD BE DIVIDED 


        23    BETWEEN THE PARTIES IN SOME FASHION OR OTHER. 


        24               MR. ROSCH:  YES.  YES, THEY CAN BE, AND I THINK 


        25    THAT'S THE PROBLEM, THAT ONE PARTY OR THE OTHER CAN REALLY HOLD 
                                                                         1392




         1    THE OTHER PARTY UP BECAUSE THE PARTY WHO'S GOING -- WHO WISHES 


         2    TO USE THOSE ASSETS TO PUBLISH IN THE MORNING IS GOING TO NEED 


         3    THE OTHER HALF AND THE OTHER PARTY IS IN A POSITION TO MAKE 


         4    THEM PAY VERY DEARLY FOR THAT. 


         5               THE COURT:  AT THE END OF THE JOINT OPERATING 


         6    AGREEMENT? 


         7               MR. ROSCH:  WELL, ACTUALLY PROBABLY REALISTICALLY IN 


         8    ADVANCE, BECAUSE, AS MR. SIAS SAID, IF, AND TO THE EXTENT THAT 


         9    A REALISTIC PRICE CAN'T BE STRUCK, THEN TO THAT EXTENT, YOU 


        10    WANT TO REDUCE THE BARGAINING POWER THAT THE OTHER PARTY HAS TO 


        11    HOLD YOU UP BY LOOKING FOR ALTERNATIVE ASSETS.  AND IN HIS VIEW 


        12    THAT IS EXACTLY WHAT HE FELT THE HEARSTS WERE DOING. 


        13               THE COURT:  I'M SORRY? 


        14               MR. ROSCH:  IN HIS VIEW, HE FELT THAT THAT WAS WHAT 


        15    THE HEARSTS' SABER RATTLING WAS ABOUT. 


        16               THE COURT:  THERE WAS, I GATHER FROM THE EVIDENCE 


        17    THAT'S BEEN PRESENTED, A GOOD DEAL OF SABER RATTLING ON BOTH 


        18    SIDES THERE.   


        19               MR. ROSCH:  WELL, IT WASN'T ON OUR SIDE, YOUR HONOR.  


        20    THE CHRONICLE INTENDED TO PUBLISH AS AN A.M. NEWSPAPER NO 


        21    MATTER WHAT, AND THAT WAS NOT SABER RATTLING.  AND, OF COURSE, 


        22    THAT WAS REAL EASY FOR US TO SAY BECAUSE WE HAD THE FOUR-TO -- 


        23    MORE THAN FOUR-TO-ONE ADVANTAGE.  THERE WAS NEVER ANY DOUBT IN 


        24    THE CHRONICLE'S MIND THAT -- FRANKLY, THAT HEARST WOULD EVER 


        25    COMPETE POST-JOA FOR THAT REASON; BUT THAT IF IT DID, THAT IT 
                                                                         1393




         1    WOULD BE CRUSHED PROMPTLY. 


         2               THE COURT:  NOW, THERE HAVE BEEN SEVERAL OF THESE 


         3    JOINT OPERATING AGREEMENTS THAT HAVE BEEN TERMINATED PRIOR TO 


         4    THE EXPIRATION DATE. 


         5               MR. ROSCH:  CORRECT, YOUR HONOR. 


         6               THE COURT:  WHAT WERE THE CIRCUMSTANCES UNDER WHICH 


         7    THOSE EARLY TERMINATIONS WERE MADE?  WAS THAT -- WAS EACH OF 


         8    THOSE A TERMINATION BY AGREEMENT OF THE PARTIES, OR HOW WAS THE 


         9    TERMINATION CARRIED OUT? 


        10               MR. ROSCH:  YOUR HONOR, I WOULDN'T PRETEND TO KNOW 


        11    ABOUT ALL OF THEM.  I BELIEVE MY COLLEAGUE, MR. CONNELL, IS THE 


        12    EXPERT IN THAT AREA; BUT I ALSO BELIEVE THAT DR. ROSSE IS AS 


        13    WELL, AND PERHAPS HE CAN ENLIGHTEN THE COURT MORE ON THAT 


        14    SCORE. 


        15               I DO BELIEVE THAT IN THE CASE OF THE TWO, THAT THE 


        16    DIVISION AS SPOKEN TO PUBLICLY, THAT THOSE WERE AGREEMENTS; 


        17    THAT IS TO SAY, ST. LOUIS AND FRANKLIN COUNTY.   


        18               THE COURT:  FRANKLIN. 


        19                        (PAUSE IN PROCEEDINGS.) 


        20               THE COURT:  I GATHER, TOO, FROM YOUR POINT OF VIEW, 


        21    THE CHRONICLE'S POINT OF VIEW -- WELL, LET ME ASK IT MORE 


        22    DIRECTLY. 


        23               WHAT EFFECT SHOULD THE FANG TRANSACTION HAVE UPON 


        24    THE ANTITRUST ANALYSIS?  DOES IT HAVE ANY EFFECT AT ALL? 


        25               MR. ROSCH:  WELL, YOUR HONOR, I MUST TELL YOU IN ALL 
                                                                         1394




         1    CANDOR I DON'T BELIEVE THAT IT DOES.  I BELIEVE, AS A MATTER OF 


         2    ANTITRUST LAW, THAT THIS TRANSACTION SHOULD BE ANALYZED ON THE 


         3    BASIS THAT THE EXAMINER IS A FAILING COMPANY, FAILING 


         4    ENTERPRISE, AND THAT IT COULD BE CLOSED FOR THAT REASON; AND, 


         5    INDEED, THERE IS A VERY STRONG ARGUMENT THAT ALLOCATIVE 


         6    EFFICIENCY WOULD BE SERVED BY THAT. 


         7               THE ONE THING THAT SEEMS TO ME THAT IS ABSOLUTELY 


         8    CLEAR, THOUGH, IS THAT THE FANG TRANSACTION -- IF IT IS NOT 


         9    CLOSED, THEN THE FANG TRANSACTION IS THE NEXT BEST SUBSTITUTE.  


        10    AND THE REASON THAT I SAY THAT IS AS FOLLOWS: 


        11               THE SUBSIDY IN THAT CASE WILL BE UP TO $66 MILLION.  


        12    YOU'VE HEARD FROM MR. REILLY'S EXPERTS THAT IF THE JOA WERE TO 


        13    RUN ITS COURSE AND THE EXAMINER WERE TO REMAIN IN BUSINESS AS A 


        14    STAND -- I'M SORRY, EITHER AS PART OF THE JOA OR AS A 


        15    STAND-ALONE BUSINESS AS A METROPOLITAN DAILY NEWSPAPER, THE 


        16    SUBSIDY WOULD BE IN THE NATURE OF $250 MILLION. 


        17               I DON'T -- AS AN ANTITRUST LAWYER, I DON'T LIKE THE 


        18    IDEA OF A SUBSIDY AT ALL; BUT IN MY MIND, $66 MILLION BEATS 


        19    $250 MILLION.  AND THE BALANCE, AND THIS IS -- AGAIN, IT'S 


        20    SPEAKING AS AN ANTITRUST LAWYER -- 


        21               THE COURT:  $184 MILLION BETTER. 


        22               MR. ROSCH:  YEAH, $184 MILLION THAT CAN BE -- 


        23               THE COURT:  OR LESS BETTER. 


        24               MR. ROSCH:  CORRECT, THAT CAN BE PUT INTO MAKING THE 


        25    CHRONICLE A SUPERLATIVE NEWSPAPER.  AND I THINK THAT'S WHAT THE 
                                                                         1395




         1    ANTITRUST LAWS ARE ALL ABOUT.   


         2               AND THE OTHER THING THAT WILL HAPPEN, QUITE FRANKLY, 


         3    IS WHAT MR. WEAVER SAID IN RESPONSE TO YOUR HONOR'S QUESTIONS; 


         4    AND THAT IS, THAT AT LEAST FOR THE NEXT THREE YEARS, THERE WILL 


         5    BE, AND ONE CAN QUIBBLE ABOUT THE QUALITY OF THE NEW EXAMINER 


         6    VOICE, I DON'T KNOW HOW I WOULD COME OUT ON THAT ONE, BUT ONE 


         7    THING IS CLEAR, AND THAT IS THAT AT LEAST FOR THE NEXT THREE 


         8    YEARS, THERE WILL BE ECONOMIC COMPETITION FROM THAT CORRIDOR 


         9    WHICH HAS NOT EXISTED IN THE PAST. 


        10               NOW, I HAPPEN TO THINK THAT THAT ADDITIONAL ECONOMIC 


        11    COMPETITION IS NOT HUGELY CONSEQUENTIAL BECAUSE I BELIEVE THAT 


        12    THERE ARE ENOUGH COMPETITIVE FORCES OPERATING ON THE CHRONICLE 


        13    THAT REGARDLESS OF WHETHER IT WERE CLOSED OR MR. FANG OPERATES 


        14    THIS NEW EXAMINER, THE CHRONICLE WOULD BE DISCIPLINED. 


        15               BUT FROM MY PERSPECTIVE AS AN ANTITRUST LAWYER, IT 


        16    DOES SEEM TO ME THAT IT IS THE LESSER OF THE TWO EVILS. 


        17               THE COURT:  BUT YOU ACKNOWLEDGE THE ALLOCATIVE 


        18    PROBLEMS WITH A NEGATIVE PRICE FOR THAT TRANSACTION? 


        19               MR. ROSCH:  MOST ASSUREDLY, YOUR HONOR. 


        20               THE COURT:  ALL RIGHT.  THANK YOU, MR. ROSCH. 


        21               MR. ROSCH:  THANK YOU, YOUR HONOR.  I APPRECIATE THE 


        22    OPPORTUNITY. 


        23               THE COURT:  VERY WELL.  LET'S SEE, MR. HALLING, ARE 


        24    YOU GOING TO BE LEADING OFF WITH THE FIRST WITNESS? 


        25               MR. HALLING:  IF IT PLEASE THE COURT, WE WOULD CALL 
                                                                         1396




         1    STEVE FALK. 


         2               THE COURT:  VERY WELL. 


         3                        (PAUSE IN PROCEEDINGS.) 


         4               THE CLERK:  PLEASE RAISE YOUR RIGHT HAND TO BE 


         5    SWORN. 


         6                             STEVEN FALK,  


         7    CALLED AS A WITNESS FOR THE DEFENDANT, HAVING BEEN DULY SWORN, 


         8    TESTIFIED AS FOLLOWS: 


         9               THE CLERK:  THANK YOU.  PLEASE BE SEATED. 


        10               PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST 


        11    NAME. 


        12               THE WITNESS:  STEVEN, MIDDLE INITIAL B AS IN BOY, 


        13    FALK, F-A-L-K. 


        14                          DIRECT EXAMINATION 


        15    BY MR. HALLING: 


        16    Q.   WHAT'S YOUR CURRENT POSITION, MR. FALK? 


        17    A.   PRESIDENT AND CEO OF THE SAN FRANCISCO NEWSPAPER AGENCY. 


        18    Q.   AND FOR HOW LONG A PERIOD OF TIME HAVE YOU HELD THAT 


        19    POSITION? 


        20    A.   A LITTLE MORE THAN THREE YEARS. 


        21    Q.   AND WHAT WAS YOUR EMPLOYMENT PRIOR TO THAT? 


        22    A.   PRIOR TO THE PRESIDENT/CEO POSITION, I WAS SENIOR VICE 


        23    PRESIDENT SALES AND MARKETING FOR THE NEWSPAPER AGENCY.   


        24    Q.   AND HOW LONG DID YOU HOLD THAT POSITION? 


        25    A.   APPROXIMATELY THREE YEARS. 
                                                                         1397




         1    Q.   AND WERE YOU EMPLOYED PRIOR TO THAT AT THE AGENCY? 


         2    A.   YES.  I JOINED THE AGENCY IN 1987 AS CIRCULATION DIRECTOR 


         3    FOR THE CHRONICLE. 


         4    Q.   AND THEN YOU BECAME VP OF CIRCULATION FOR BOTH PAPERS IN 


         5    '93? 


         6    A.   VP OF CIRCULATION FOR A FEW MONTHS IN '93, FOLLOWED BY 


         7    SALES AND MARKETING. 


         8    Q.   CAN YOU BRIEFLY SUMMARIZE YOUR EXPERIENCE IN THE NEWSPAPER 


         9    BUSINESS PRIOR TO JOINING THE AGENCY IN 1987? 


        10    A.   PRIOR TO 19 -- MOST -- THE MOST RECENT POSITION PRIOR TO 


        11    1987 WAS VICE PRESIDENT CIRCULATION FOR THE GANNETT NEWSPAPERS 


        12    IN WHITE PLAINS, NEW YORK.  PRIOR TO SEVERAL YEARS WITH 


        13    GANNETT, I WAS -- I HAD VARIOUS ADVERTISING, CIRCULATION AND 


        14    MANAGEMENT POSITIONS IN NEWSPAPERS IN OHIO, PENNSYLVANIA AND 


        15    NEW YORK. 


        16    Q.   WHEN DID YOU FIRST GET STARTED IN THE NEWSPAPER BUSINESS? 


        17    A.   I STARTED IN THE BUSINESS AT THE AGE OF 12 AS A NEWSPAPER 


        18    CARRIER. 


        19    Q.   I'D LIKE TO DIRECT YOUR ATTENTION, IF I COULD, TO EXHIBIT 


        20    982, WHICH IS IN EVIDENCE.  THE COVER SAYS, "STRATEGIC 


        21    MARKETING PLAN 2000."  DO YOU HAVE THAT THERE? 


        22    A.   YES, I DO. 


        23    Q.   CAN YOU IDENTIFY THIS DOCUMENT, PLEASE? 


        24    A.   THIS WAS OUR -- OR IS OUR STRATEGIC SALES AND MARKETING 


        25    PLAN FOR THE NEWSPAPER AGENCY PREPARED AS PART OF OUR BUDGET 
                                                                         1398




         1    PREPARATIONS FOR THE YEAR 2000. 


         2    Q.   WHAT ROLE DID YOU HAVE IN CONNECTION WITH THE PREPARATION 


         3    OF THIS DOCUMENT? 


         4    A.   I INSTRUCTED THAT THIS DOCUMENT BE DONE AND HAVE EVER 


         5    SINCE I BECAME PRESIDENT OF THE NEWSPAPER AGENCY.  THIS IS -- 


         6    THIS IS THE SALES AND MARKETING PLANNING DOCUMENT ON WHICH OUR 


         7    OPERATING BUDGET IS BUILT. 


         8    Q.   AND CAN YOU JUST EXPLAIN TO THE COURT WHAT DO YOU MEAN BY 


         9    "UPON WHICH OUR OPERATING BUDGET IS BUILT"? 


        10    A.   WELL, I HAVE A -- I HAVE A STRONG BELIEF IN THIS BUSINESS, 


        11    OR ANY COMPETITIVE BUSINESS, THAT, YOU KNOW, YOU HAVE TO START 


        12    OFF WITH A SALES AND MARKETING STRATEGIC PLAN BEFORE YOU CAN 


        13    BEGIN TO PLAN HOW TO SPEND MONEY OR ALLOCATE EXPENSES TO ONE 


        14    PROGRAM VERSUS ANOTHER.   


        15               SO THIS IS -- THIS IS A SALES AND MARKETING BASIS ON 


        16    WHICH WE BUILD THE BUDGET. 


        17    Q.   I'D LIKE TO DIRECT YOUR ATTENTION, PLEASE, TO THE FIRST 


        18    PAGE.  IT APPEARS THAT THE FIRST HEADING IS "1999 IN REVIEW."  


        19    AND THEN IN THAT FIRST SECTION, LET ME JUST DIRECT YOU, IF I 


        20    COULD, TO THE SECOND PAGE UNDER THE HEADING "1999 IN REVIEW," 


        21    AND SPECIFICALLY TO THE FIRST SENTENCE OF THE FIRST PARAGRAPH 


        22    ON PAGE 2.  THE SENTENCE READS: 


        23                   "COMPETITION IS FIERCE FOR AUDIENCE AND 


        24               ADVERTISING SHARE." 


        25               DO YOU SEE THAT? 
                                                                         1399




         1    A.   YES, I DO. 


         2    Q.   WHAT DOES THAT MEAN? 


         3    A.   WELL, IT MEANS EXACTLY WHAT IT SAYS.  WE ARE SITTING IN 


         4    THE MIDDLE OF, IN MY OPINION, ONE OF THE MOST COMPETITIVE NOT 


         5    ONLY NEWSPAPER MARKETS BUT MEDIA MARKETS IN THE COUNTRY, AND 


         6    COMPETITION IS FIERCE FOR BOTH AUDIENCE, FOR EYEBALLS AS 


         7    SOMEONE REFERRED TO IT EARLIER, AND FOR ADVERTISING SHARE.   


         8    Q.   WHAT COMPETITION ARE WE TALKING ABOUT? 


         9    A.   COMPETITION IN THE BAY AREA IS BIG AND IT'S BROAD.  MOST 


        10    DIRECTLY, WE COMPETE WITH 12 OF THE BEST SUBURBAN DAILY 


        11    NEWSPAPERS OWNED BY SOME OF THE LARGEST MEDIA COMPANIES IN THE 


        12    COUNTRY.  WE CERTAINLY COMPETE FOR THE SUBURBAN PAPERS FOR BOTH 


        13    ADVERTISING DOLLARS AND READERS. 


        14               BUT COMPETITION GOES FAR BEYOND NEWSPAPERS PER SE.  


        15    WE ARE, IN A VERY REAL SENSE, COMPETING FOR ADVERTISING DOLLARS 


        16    AND CONSUMERS' TIME WITH DOZENS OF TELEVISION STATIONS, CABLE 


        17    TV STATIONS, RADIO STATIONS, AND YOU CAN'T EXCLUDE THE 


        18    INTERNET, WHICH, AT LEAST AS OF TODAY, IS FREE AND IT'S A 


        19    GROWING SOURCE OF NEWS AND INFORMATION FOR CONSUMERS.   


        20    Q.   DIRECTING YOUR ATTENTION FURTHER DOWN ON PAGE 2, THERE'S A 


        21    PIE CHART IN THE FIRST COLUMN.  I THINK IT REFERS TO APPENDIX 


        22    A5.  DO YOU SEE THAT? 


        23    A.   YES, I DO. 


        24    Q.   AND IN APPENDIX A5 THERE'S A LARGER VERSION OF THE CHART.  


        25    CAN YOU TELL US WHY THAT CHART IS INCLUDED HERE IN YOUR 
                                                                         1400




         1    MARKETING PLAN? 


         2    A.   WE PUT THIS CHART IN THE SALES AND MARKETING PLANS 


         3    SPECIFICALLY TO IMPRESS UPON THE OWNERS OF THE NEWSPAPERS THAT 


         4    THIS IS A VERY COMPETITIVE MEDIA MARKET.  AS THIS CHART SHOWS, 


         5    WE COMPETE FOR $1.3 BILLION OF MEDIA EXPENDITURES.  NEWSPAPERS 


         6    GET A PIECE, TV GETS A BIG PIECE, DIRECT MAIL GETS A VERY LARGE 


         7    PIECE.  THIS IS JUST MEANT TO BE A GRAPHIC DEPICTION OF THAT 


         8    VERY COMPETITIVE, OVERALL MEDIA SITUATION. 


         9    Q.   I THINK YOU REFERENCED IN YOUR LAST ANSWER THAT THERE WAS 


        10    SOME PRESENTATION THAT'S ASSOCIATED WITH THIS PLAN.  WHAT'S 


        11    THAT? 


        12    A.   WE PRESENT EVERY YEAR TO THE PRINCIPALS OF BOTH CHRONICLE 


        13    PUBLISHING AND HEARST CORPORATION, ACTUALLY TO THE BOARD 


        14    MEMBERS WHO ARE ON THE BOARD OF THE NEWSPAPER AGENCY, ALONG 


        15    WITH EXECUTIVES OF BOTH COMPANIES, NOT ONLY THE STRATEGIC SALES 


        16    AND MARKETING PLAN BUT THE OPERATING BUDGET THAT GOES WITH IT.  


        17    THAT'S DONE ON AN ANNUAL BASIS. 


        18    Q.   NOW, WITH RESPECT TO THIS CHART ON A5 THAT YOU INCLUDED IN 


        19    THE MARKETING PLAN, HOW DOES THIS COMPARE WITH PRIOR YEARS? 


        20    A.   WELL, IN THE GENERAL MAKE-UP OF THE CHART, THERE AREN'T 


        21    MANY SIGNIFICANT CHANGES.  UNFORTUNATELY, IF YOU WOULD ROLL 


        22    BACK THE CLOCK ONE YEAR EARLIER, NEWSPAPER SHARE WAS A LITTLE 


        23    BIT HIGHER AND DIRECT MAIL WAS A LITTLE BIT LOWER.  SO WE 


        24    HAVE -- YOU KNOW, WE HAVE SOME INCREASING COMPETITION ON THE 


        25    DIRECT MAIL SIDE FOR ADVERTISING DOLLARS. 
                                                                         1401




         1               BUT, YOU KNOW, FORTUNATELY NEWSPAPERS ACCOUNT FOR 


         2    28 PERCENT OF THE TOTAL PIE.  THAT'S SLIPPING, BUT IT'S STILL 


         3    THE HIGHEST SHARE. 


         4    Q.   CAN YOU DESCRIBE WHAT YOU MEAN BY DIRECT MAIL?  WHAT TYPE 


         5    OF AN ADVERTISING VEHICLE IS THAT? 


         6    A.   WELL, DIRECT MAIL IS DIRECT MAIL.  THEY HATE TO HEAR 


         7    ANYONE USE THE TERM "JUNK MAIL," BUT SOME PEOPLE REFER TO 


         8    DIRECT MAIL AS JUNK MAIL.  IT'S, YOU KNOW, ADVERTISING THAT 


         9    COMES THROUGH THE MAIL. 


        10    Q.   LET ME DIRECT YOUR ATTENTION BACK TO PAGE 2 OF THE 


        11    SUMMARY.  ON THE RIGHT-HAND SIDE BETWEEN THE TWO PIE CHARTS, DO 


        12    YOU SEE THAT? 


        13    A.   YES. 


        14    Q.   IT STARTS OUT: 


        15                   "DESPITE THE POOR PERFORMANCE IN THE 


        16               NEWSPAPER CATEGORY," THEN THE NEXT SENTENCE 


        17               READS: 


        18                   "THIS MAY SEEM A SURPRISE GIVEN INCREASED 


        19               FOCUS OF KNIGHT-RIDDER ON THE SF DMA AND THE 


        20               PRICE PRESSURE OF THE ALAMEDA NEWSPAPER GROUP." 


        21               FIRST, CAN YOU TELL US WHAT'S THE SF DMA? 


        22    A.   THE SAN FRANCISCO -- DMA STANDS FOR THE DESIGNATED MARKET 


        23    AREA.  THE SAN FRANCISCO DMA IS THE 11-AND-A-HALF-COUNTY 


        24    METROPOLITAN AREA. 


        25    Q.   IS THAT A STATISTICAL MEASURE THAT YOU USE IN YOUR 
                                                                         1402




         1    BUSINESS? 


         2    A.   YES, IT IS. 


         3    Q.   THE SENTENCE THAT WE'VE HIGHLIGHTED FOLLOWS A REFERENCE I 


         4    SEE TO CHRONICLE AND EXAMINER INCREASING THEIR SHARE OF FIELD 


         5    SLIGHTLY.  I ASSUME THAT'S FROM YEAR TO YEAR? 


         6    A.   YES, THAT'S YEAR TO YEAR. 


         7    Q.   THE SENTENCE THAT'S HIGHLIGHTED TALKS ABOUT THE INCREASED 


         8    FOCUS OF KNIGHT-RIDDER.  WHAT'S THAT? 


         9    A.   THE WHOLE PURPOSE OF THIS PARAGRAPH WAS, FIRST OF ALL, A 


        10    LITTLE BIT JUST TO BRAG ABOUT OUR SUCCESS.  WE DID HAVE A VERY 


        11    GOOD YEAR IN THE PREVIOUS YEAR; AND EVEN THOUGH THE NEWSPAPER 


        12    SHARE OF THE MARKET DROPPED FROM 30 PERCENT TO 28 PERCENT OF 


        13    MEDIA EXPENDITURES, THE SAN FRANCISCO NEWSPAPER AGENCY ACTUALLY 


        14    IMPROVED.   


        15               AND THE SURPRISING PART ABOUT THAT IS WITH THE FOCUS 


        16    OF KNIGHT-RIDDER, WITH THE PURCHASE OF THE CONTRA COSTA TIMES 


        17    BY KNIGHT-RIDDER, YOU KNOW, THEIR COMBINED CIRCULATION NOW 


        18    BETWEEN THE TWO NEWSPAPERS IS DANGEROUSLY CLOSE TO OUR 


        19    CIRCULATION LEVEL.  AND SO AS A RESULT, WE ARE IN DIRECT 


        20    COMPETITION WITH THEIR COMBINED CIRCULATION FOR NATIONAL 


        21    ADVERTISING. 


        22    Q.   WHAT PART OF YOUR ADVERTISING REVENUE APPROXIMATELY IS 


        23    MADE UP OF NATIONAL ADVERTISING? 


        24    A.   OF OUR 350 MILLION IN AD REVENUE, ABOUT 115 MILLION IS 


        25    NATIONAL ADVERTISING. 
                                                                         1403




         1    Q.   ALL RIGHT.  THE SENTENCE CONTINUES WITH A REFERENCE TO THE 


         2    PRICE PRESSURE OF THE ALAMEDA NEWSPAPER GROUP.  WHAT'S THAT A 


         3    REFERENCE TO? 


         4    A.   WELL, PRICE -- ALAMEDA NEWSPAPER GROUP HAS A LONG-STANDING 


         5    REPUTATION OF, YOU KNOW, CUTTING PRICES AND CUTTING RATES.  I 


         6    THINK RIGHT NOW YOU CAN GET A YEAR'S SUBSCRIPTION TO THE 


         7    OAKLAND TRIBUNE FOR $12 UNDER THE RIGHT PROMOTION.  SO THERE'S 


         8    JUST A LOT OF PRICE PRESSURE IN THE EAST BAY FROM THE ALAMEDA 


         9    NEWSPAPER GROUP. 


        10    Q.   WHO OWNS THE ALAMEDA NEWSPAPER GROUP? 


        11    A.   I THINK THE CORPORATE NAME IS MEDIA NEWS CORP., DEAN 


        12    SINGLETON. 


        13    Q.   LET ME DIRECT YOUR ATTENTION, IF I COULD, TO PAGE 5 OF THE 


        14    MARKETING PLAN.  THE HEADING IS "SWOT ANALYSIS," S-W-O-T.  WHAT 


        15    DOES THAT STAND FOR? 


        16    A.   WELL, THE WORD SWOT STANDS FOR STRENGTHS, WEAKNESSES, 


        17    OPPORTUNITIES AND THREATS.  IT'S A VERY TRADITIONAL WAY THAT 


        18    BUSINESSES DISSECT THEIR MARKETING PLANS AND TALK ABOUT THOSE 


        19    FOUR THINGS, STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS. 


        20    Q.   ALL RIGHT.  AND I SEE RIGHT UNDER THERE YOU START WITH 


        21    STRENGTHS, AND IN THE FIRST PARAGRAPH, YOU SAY IN THE FIRST 


        22    SENTENCE: 


        23                   "THE POTENTIAL END OF THE JOA SHOULD 


        24               INCREASE THE COMPETITIVENESS OF OUR NEWSPAPERS 


        25               BY CONSOLIDATING OUR RESOURCES AND FOCUSING ON 
                                                                         1404




         1               MARKETING EFFORTS." 


         2               CAN YOU EXPLAIN HOW THE END OF THE JOA WOULD BE A 


         3    STRENGTH IN TERMS OF INCREASING COMPETITIVENESS? 


         4    A.   THE ANSWER IS LENGTHY, BUT THE SHORT VERSION OF THE 


         5    ANSWER, THE JOINT OPERATING AGREEMENT AND SAN FRANCISCO 


         6    NEWSPAPER AGENCY TODAY IS A VERY CUMBERSOME, EXPENSIVE 


         7    ORGANIZATION.  WE HAVE TWO OF LOTS OF THINGS.  WE HAVE TWO 


         8    DISTRIBUTION SYSTEMS.  WE HAVE TWO CARRIER FORCES.  WE HAVE TWO 


         9    SETS OF TRUCKS.  WE HAVE TWO PRESS ROOM CREWS.  WE HAVE TWO 


        10    MAIL ROOM CREWS.  WE SPEND LOTS OF MONEY.  AND UNFORTUNATELY WE 


        11    DON'T DO THE THINGS WE SHOULD DO AS WELL AS WE SHOULD DO THEM.  


        12    OUR CUSTOMER SERVICE ISN'T QUITE AS GOOD AS IT SHOULD BE.  OUR 


        13    SALES AND MARKETING EFFORTS AREN'T QUITE AS GOOD AS THEY SHOULD 


        14    BE.  OUR PROMOTION EFFORTS AREN'T ANYWHERE CLOSE TO BEING AS 


        15    GOOD AS THEY SHOULD BE.  IN MY OPINION, THE CONTENT OF THE 


        16    PAPERS ISN'T AS GOOD AS IT SHOULD BE OR COULD BE. 


        17               THE SUNDAY NEWSPAPER, FOR INSTANCE, DOES NOT HAVE A 


        18    SINGLE INCH OF LOCAL NEWS, AND WE FIGHT THIS BATTLE IN THE 


        19    SUBURBAN MARKETPLACE WITH THE SUNDAY NEWSPAPER WITHOUT ANY 


        20    LOCAL NEWS BECAUSE THE EXAMINER THAT DOES THE MAIN NEWS 


        21    SECTIONS ON SUNDAY DOESN'T HAVE ANY LOCAL BUREAUS. 


        22               SO -- 


        23               THE COURT:  WHEN YOU SAY "LOCAL NEWS," YOU MEAN 


        24    OTHER THAN SAN FRANCISCO? 


        25               THE WITNESS:  YES, LOCAL, SUBURBAN NEWS IN THE 
                                                                         1405




         1    MARKETS IN WHICH WE HAVE OTHER SUBURBAN COMPETITORS. 


         2               THE COURT:  BUT LOCAL SAN FRANCISCO NEWS DOES APPEAR 


         3    IN THE SUNDAY PAPER? 


         4               THE WITNESS:  YES, IT DOES.  YES, IT DOES.  I HAPPEN 


         5    TO LIVE IN THE SUBURBS AND REALIZE THAT WE DON'T DO A VERY GOOD 


         6    JOB THERE. 


         7               THE COURT:  I SEE, OKAY. 


         8    BY MR. HALLING: 


         9    Q.   WHAT PERCENTAGE, APPROXIMATELY, OF THE CHRONICLE'S 


        10    CIRCULATION IS OUTSIDE THE CITY OF SAN FRANCISCO? 


        11    A.   80 PERCENT OF THE CHRONICLE'S CIRCULATION IS OUTSIDE THE 


        12    CITY AND COUNTY OF SAN FRANCISCO. 


        13    Q.   WHAT PERCENTAGE OF SUNDAY SUBSCRIBERS ARE ALSO CHRONICLE 


        14    DAILY SUBSCRIBERS? 


        15    A.   80 PERCENT PLUS OF SUNDAY SUBSCRIBERS ARE LINKED TO 


        16    CHRONICLE SUBSCRIPTIONS. 


        17    Q.   SO WHY WOULD THIS BE A STRENGTH?  WHY WOULD THIS BE LISTED 


        18    AS A STRENGTH? 


        19    A.   WELL, THE STRENGTH PART COMES IN BECAUSE GIVEN THE END OF 


        20    THE JOA AND GIVEN A LIMITED POOL OF RESOURCES, WE WILL THEN BE 


        21    ABLE TO CONCENTRATE THOSE RESOURCES PRESUMABLY TO CREATE A MORE 


        22    LOCAL SUNDAY NEWSPAPER FOR THE SUBURBS, A BETTER SALES AND 


        23    MARKETING PROGRAM FOR THE PAPERS, A BETTER DISTRIBUTION SYSTEM, 


        24    BETTER DELIVERY SERVICE BECAUSE THE EXPENSE BURDEN OF HAVING 


        25    TWO OF EVERYTHING WILL BE GONE. 
                                                                         1406




         1    Q.   LET ME DIRECT YOUR ATTENTION TO THE SECOND COLUMN STILL ON 


         2    PAGE 5.  NOW WE'RE STILL UNDER THE CATEGORY "STRENGTHS," BUT 


         3    THE FIRST SENTENCE OF THE LAST PARAGRAPH READS: 


         4                   "DUPLICATION BETWEEN THE CHRONICLE AND THE 


         5               EXAMINER IS HIGH." 


         6               WHY IS THAT SOMETHING THAT IS BEING PRESENTED HERE 


         7    UNDER THE SECTION CALLED "STRENGTHS"? 


         8    A.   WELL, DUPLICATION BETWEEN THE PAPERS IS HIGH.  60 PERCENT 


         9    OF TODAY'S EXAMINER READERS READ THE CHRONICLE; AND WHILE THERE 


        10    ARE CERTAINLY SOME BENEFITS OF DUPLICATION, FOR THE MOST PART 


        11    JUST DUPLICATION MEANS ADDITIONAL EXPENSE BURDEN.  IT'S -- YOU 


        12    KNOW, WE'RE REACHING THE SAME READER TWICE, SO YOU HAVE THE 


        13    ADDITIONAL EXPENSE OF NEWSPRINT, INK, DELIVERY. 


        14               SO IT'S UNDER "STRENGTH" BECAUSE, OBVIOUSLY, AT THE 


        15    END OF THE JOA WHEN THE JOA CEASES TO EXIST, THAT DUPLICATION 


        16    WILL DISAPPEAR. 


        17    Q.   FURTHER DOWN IN THIS COLUMN THERE IS A HEADING 


        18    "WEAKNESSES."  AND THEN THAT CONTINUES ON PAGE 6, AND LET ME 


        19    DRAW YOUR ATTENTION TO THE FIRST FULL PARAGRAPH ON PAGE 6.  


        20    ABOVE THE CHART IT SAYS: 


        21                   "READERSHIP AND CIRCULATION FOR THE SUNDAY 


        22               NEWSPAPER AND DAILY COMBINATION ARE IN DECLINE." 


        23               HAS THAT BEEN A PROBLEM? 


        24    A.   UNFORTUNATELY, YES.  CIRCULATION, AS THIS STATISTIC 


        25    ILLUSTRATES, CIRCULATION OVER THIS 10-YEAR PERIOD IS DOWN 
                                                                         1407




         1    10 PERCENT. 


         2               MORE IMPORTANT IS IT'S DOWN 10 PERCENT IN THE FACE 


         3    OF VERY SIGNIFICANT COMPETITORS BEING FLAT OR UP IN THE SAME 


         4    PERIOD OF TIME. 


         5    Q.   AND I GUESS THE SMALL CHART THERE IS REPLICATED ON A31? 


         6    A.   YES, IN THE APPENDIX. 


         7    Q.   AND WHY IS THIS CHART INCLUDED HERE UNDER THE HEADING 


         8    "WEAKNESSES"? 


         9    A.   WELL, WE WERE TRYING TO POINT OUT, AND WE HAVE USED THE 


        10    CHARTS SIMILAR TO THIS FOR SEVERAL YEARS, YOU KNOW -- WE'RE 


        11    TRYING TO POINT OUT IN VERY SPECIFIC TERMS TO THE OWNERS OF 


        12    THESE TWO COMPANIES THAT CIRCULATION IS IN TROUBLE, CIRCULATION 


        13    IS DECLINING.  AND TO THE EXTENT CIRCULATION SUPPORTS 


        14    ADVERTISING REVENUE, THAT GETS TO THE HEART OF THE ENTERPRISE. 


        15               THE COURT:  EXCUSE ME, MR. HALLING.   


        16               THE AUDIENCE FOR THIS PUBLICATION AGAIN WAS WHO? 


        17               THE WITNESS:  THIS IS OUR INTERNAL SALES AND 


        18    MARKETING PLAN PRESENTED TO THE PRINCIPALS, THE EXECUTIVES OF 


        19    HEARST CORPORATION AND CHRONICLE PUBLISHING COMPANY. 


        20               THE COURT:  IT WAS NOT INTENDED FOR OUTSIDE 


        21    DISTRIBUTION? 


        22               THE WITNESS:  NO, IT WAS NOT.  WE CONSIDER THIS A 


        23    CONFIDENTIAL DOCUMENT BECAUSE WITHIN THIS DOCUMENT ARE ALL OF 


        24    OUR STRATEGIC PLANS FOR THE COMING YEAR. 


        25               THE COURT:  GO AHEAD. 
                                                                         1408




         1    BY MR. HALLING: 


         2    Q.   LET ME DIRECT YOUR ATTENTION -- LET'S GO BACK TO PAGE 6.  


         3    TAKE A LOOK, IF YOU WOULD, AT SOME EXHIBITS THAT I HOPE YOU 


         4    HAVE THERE, 1165 -- 


         5    A.   YES, I DO. 


         6    Q.   -- AND ALSO WHY DON'T YOU LOOK AT THE SAME TIME AT 1159, 


         7    '60 AND '61.   


         8               LET ME ASK YOU FIRST ABOUT 1165. 


         9    A.   OKAY. 


        10    Q.   CAN YOU IDENTIFY THIS DOCUMENT? 


        11    A.   1165 IS, AGAIN, A DEPICTION ON A GRAPH OF THE CIRCULATION 


        12    TRENDS FOR THE CHRONICLE, THE EXAMINER AND FOR THE SUNDAY 


        13    EXAMINER/CHRONICLE SINCE 1990. 


        14    Q.   WAS THIS DOCUMENT PREPARED UNDER YOUR SUPERVISION? 


        15    A.   IT WAS PREPARED AT MY REQUEST BY THE CIRCULATION 


        16    DEPARTMENT OF THE NEWSPAPER AGENCY, YES. 


        17    Q.   DOES IT ACCURATELY REFLECT THE TRENDS IN CIRCULATION SHOWN 


        18    ON IT? 


        19    A.   THE CIRCULATION POINTS THAT ARE CHARTED HERE ARE -- 


        20    ACTUALLY ARE ANNUAL ABC-AUDITED NUMBERS SINCE 1990. 


        21               MR. HALLING:  I WOULD OFFER EXHIBIT 1165. 


        22               MR. ALIOTO:  NO OBJECTION, YOUR HONOR. 


        23               THE COURT:  1165 WILL BE ADMITTED. 


        24                             (DEFENDANT'S EXHIBIT 1165  


        25                              RECEIVED IN EVIDENCE) 
                                                                         1409




         1    BY MR. HALLING: 


         2    Q.   NOW, MR. FALK, LET ME DIRECT YOUR ATTENTION AT THE 


         3    EXHIBITS 1159, '60 AND '61.  ARE THOSE MERELY COLOR VERSIONS OF 


         4    THE CHARTS ON 1165? 


         5    A.   YES.  THESE ARE COLOR REPRESENTATIONS OF THE SAME BAD 


         6    NEWS, UNFORTUNATELY. 


         7    Q.   WELL, TAKE A LOOK AT 1159. 


         8    A.   OKAY. 


         9    Q.   WHICH THE HEADING ON THE DOCUMENT IS "ANNUAL AVERAGE 


        10    CHRONICLE NET PAID CIRCULATION."  CAN YOU TELL ME WHAT THIS 


        11    REPRESENTS? 


        12    A.   AGAIN, THESE ARE THE ANNUAL 12-MONTH AVERAGE CIRCULATION 


        13    POINTS.  WE MEASURE OUR CIRCULATION, YOU KNOW, FOR A 12-MONTH 


        14    PERIOD ENDING SEPTEMBER 30TH, AND THE AUDIT BUREAU OF 


        15    CIRCULATION AUDITS THOSE NUMBERS AND RELEASES PUBLICLY THE 


        16    RESULTS OF THAT AUDIT, AND THESE ARE THOSE CIRCULATION LEVELS 


        17    SINCE 1990. 


        18    Q.   THE TREND ISN'T VERY GOOD; IS IT? 


        19    A.   NO. 


        20    Q.   TAKE A LOOK, IF YOU WOULD, AT 1160. 


        21    A.   (WITNESS EXAMINES DOCUMENT.) 


        22    Q.   NOW, THE FIRST -- THE FIRST CHART WAS "AVERAGE CHRONICLE," 


        23    AND THIS ONE IS HEADED "ANNUAL AVERAGE EXAMINER."  DO YOU SEE 


        24    THAT? 


        25    A.   YES.  THIS IS THE EXAMINER. 
                                                                         1410




         1    Q.   AND WHAT DOES IT SHOW? 


         2    A.   IT SHOWS THE SAME CIRCULATION MEASUREMENT POINTS, 


         3    OBVIOUSLY ON A DIFFERENT SCALE BECAUSE THE EXAMINER IS SMALLER, 


         4    FOR THE SAME PERIOD OF TIME.  UNFORTUNATELY, IT'S SHOWING THE 


         5    SAME TREND. 


         6    Q.   AND, FINALLY, TAKE A LOOK AT 1161, WHICH IS HEADED "ANNUAL 


         7    AVERAGE SUNDAY." 


         8    A.   (WITNESS EXAMINES DOCUMENT.) 


         9    Q.   AND CAN YOU TELL US WHAT THIS REPRESENTS? 


        10    A.   AGAIN, IT'S THE SAME CIRCULATION AUDITED BY THE SAME FIRM.  


        11    THIS IS SPECIFICALLY FOR THE YEARLY AVERAGES, 52-WEEK AVERAGES, 


        12    FOR THE SUNDAY PAPER SINCE 1990. 


        13    Q.   LET ME DIRECT YOUR ATTENTION BACK TO PAGE 6 OF THE 


        14    MARKETING PLAN.  AND, AGAIN, WE'RE STILL UNDER THE HEADING 


        15    "WEAKNESSES."  TAKE A LOOK AT THE FIRST FULL PARAGRAPH IN THE 


        16    RIGHT COLUMN.  IT READS: 


        17                   "PREPRINT ADVERTISING IS HIGHLY SENSITIVE TO 


        18               CIRCULATION DECLINES." 


        19    A.   YES. 


        20    Q.   CAN YOU EXPLAIN WHAT THAT MEANS? 


        21    A.   PREPRINT ADVERTISING, FIRST OF ALL, ARE THE CIRCULARS, THE 


        22    PREPRINTED ADVERTISING MATERIAL THAT YOU MIGHT GET IN THE DAILY 


        23    AND SUNDAY NEWSPAPER, LIKE SEARS OR J. C. PENNEY.  AND THIS 


        24    SIMPLY STATES THE OBVIOUS, THAT PREPRINT ADVERTISING IS NOT 


        25    ONLY HIGHLY SENSITIVE, IT'S DIRECTLY CORRELATED WITH 
                                                                         1411




         1    CIRCULATION BECAUSE WE CHARGE FOR THE NUMBER OF PREPRINTS 


         2    INCLUDED IN THE NEWSPAPERS. 


         3    Q.   THE NEXT SENTENCE HAS THE PHRASE "IF CPM'S CONTINUE 


         4    DECLINE."  WHAT ARE CPM'S?    


         5    A.   CPM STANDS FOR OUR AVERAGE COST PER THOUSAND.  IT'S AN 


         6    ADVERTISING TERM.  THE COST PER THOUSAND NEWSPAPERS. 


         7    Q.   ALL RIGHT.  FURTHER DOWN IN THE COLUMN, THE BEGINNING OF 


         8    THE NEXT PARAGRAPH SAYS: 


         9                   "CURRENT PRESS CONFIGURATIONS ARE VERY 


        10               LIMITING." 


        11               AGAIN, WE'RE STILL UNDER THE HEADING IN YOUR 


        12    MARKETING PLAN OF "WEAKNESSES."  WHAT DO YOU MEAN BY "PRESS 


        13    CONFIGURATIONS ARE VERY LIMITING"?   


        14    A.   I GUESS THE EASIEST ANSWER IS EVEN THOUGH WE HAVE PRESSES 


        15    THAT PRINT GREAT-LOOKING COLOR, THEY'RE VERY SLOW.  WE PRINT 


        16    18,000 COPIES PER HOUR ON AVERAGE.  THE INDUSTRY STANDARD IS 


        17    DOUBLE THAT OR MORE. 


        18    Q.   TAKE A LOOK, IF YOU WOULD, PLEASE, AT PAGE 8.  WE'RE STILL 


        19    IN THE "SUMMARY" SECTION OF THE MARKETING PLAN.  UNDER THE 


        20    HEADING "THREATS," AND THEN CONTINUE, IF YOU WOULD, PLEASE, ON 


        21    PAGE 9.  I'D LIKE TO ASK YOU A QUESTION ABOUT A REFERENCE IN 


        22    THE SECOND FULL PARAGRAPH IN THE RIGHT COLUMN.  IT SAYS: 


        23                   "IT REMAINS TO BE SEEN WHAT IMPACT 


        24               KNIGHT-RIDDER'S PURCHASE OF THE HILLS 


        25               NEWSPAPERS, PAREN, CURRENTLY WEEKLIES OR TWICE 
                                                                         1412




         1               WEEKLIES."   


         2               WHAT TRANSACTION ARE WE TALKING ABOUT HERE?   


         3    A.   WELL, RECENTLY WITHIN THE PAST, I'M NOT SURE OF THE DATE, 


         4    18, 24 MONTHS, KNIGHT-RIDDER, IN ADDITION TO PURCHASING THE 


         5    CONTRA COSTA NEWSPAPERS, ALSO PURCHASED A GROUP OF WEEKLIES OR 


         6    TWICE WEEKLIES IN THE OAKLAND HILLS FORMERLY KNOWN AS THE HILLS 


         7    NEWSPAPERS. 


         8               AND THIS WAS JUST A STATEMENT.  AGAIN, INTERNALLY WE 


         9    REFER TO KNIGHT-RIDDER AS THE EVIL EMPIRE, AND THEY'RE, YOU 


        10    KNOW, OBVIOUSLY GROWING VERY QUIETLY THROUGH THE BAY AREA.  AND 


        11    THIS WAS JUST A COMMENT ABOUT, YOU KNOW, THIS IS JUST ANOTHER 


        12    KNIGHT-RIDDER ACQUISITION IN THE COMPETITIVE MIX. 


        13               THE COURT:  WHAT ARE SOME OF THE HILLS NEWSPAPERS?  


        14    CAN YOU NAME ANY OF THE TITLES? 


        15               THE WITNESS:  OFF THE TOP OF MY HEAD, THE 


        16    MONTCLARION COMES TO MIND.  I THINK THAT'S ONE OF THE HILLS 


        17    NEWSPAPERS.  I HATE TO MISSTATE THAT, BUT.... 


        18               THE COURT:  THANK YOU. 


        19    BY MR. HALLING: 


        20    Q.   ON PAGE 17, IF WE CAN LEAVE THE SUMMARY FOR A MOMENT, 


        21    THERE'S A SECTION ENTITLED "CIRCULATION STRATEGIC PLAN."  DO 


        22    YOU SEE THAT? 


        23    A.   WHAT PAGE?  I'M SORRY. 


        24    Q.   17. 


        25    A.   (WITNESS EXAMINES DOCUMENT.)  OKAY. 
                                                                         1413




         1    Q.   IS THIS DOCUMENT ORGANIZED INTO SEPARATE CATEGORIES FOR 


         2    THE DIFFERENT PARTS OF THE BUSINESS? 


         3    A.   THIS DOCUMENT, AS WE STARTED, IS AN EXECUTIVE OVERVIEW OF, 


         4    YOU KNOW, A LITTLE BIT OF THE HISTORY, A LITTLE BIT ABOUT THE 


         5    MARKET, A LITTLE BIT ABOUT OVERALL STRATEGIC INITIATIVES, AND 


         6    THEN IT GOES INTO ADVERTISING PLANS, CIRCULATION PLANS AND 


         7    MARKETING PLANS, YES. 


         8    Q.   ALL RIGHT.  THE SECOND PARAGRAPH UNDER THE EXECUTIVE 


         9    SUMMARY, THE FIRST SENTENCE READS: 


        10                   "OUR MAIN FOCUS WILL BE ATTACKING OUR MAJOR 


        11               PRINT COMPETITION IN KEY AREAS WITHIN OUR 


        12               MARKETPLACE." 


        13               WHAT IS YOUR MARKETPLACE? 


        14    A.   WELL, AGAIN, THE MARKETPLACE FOR THE SAN FRANCISCO 


        15    NEWSPAPER AGENCY IS THE 11-COUNTY SAN FRANCISCO DMA, THE BAY 


        16    AREA. 


        17    Q.   LET ME DIRECT YOUR ATTENTION NOW TO EXHIBIT 1187.  IT'S A 


        18    ONE-PAGE DOCUMENT PRESS RELEASE.  THE HEADING IS, "SAN 


        19    FRANCISCO NEWSPAPER AGENCY UNDERTAKES MAJOR INITIATIVES."  HAVE 


        20    YOU SEEN THIS BEFORE? 


        21    A.   YES, I HAVE. 


        22    Q.   CAN YOU IDENTIFY WHAT THIS DOCUMENT IS? 


        23    A.   THIS IS A VERY RECENT PRESS RELEASE WE ISSUED ANNOUNCING 


        24    SEVERAL EDITORIAL IMPROVEMENTS TO THE NEWSPAPERS, THE 


        25    ANNOUNCEMENT ABOUT A NEW ZONED EDITORIAL AND ADVERTISING 
                                                                         1414




         1    SECTION FOR BOTH PAPERS IN SAN FRANCISCO AND ALSO ANNOUNCED A 


         2    REDUCTION IN THE CHRONICLE NEWSSTAND PRICE. 


         3               MR. HALLING:  YOUR HONOR, I WOULD OFFER EXHIBIT 


         4    1187. 


         5               MR. ALIOTO:  NO OBJECTION. 


         6               THE COURT:  VERY WELL.  1187 WILL BE ADMITTED. 


         7                             (DEFENDANT'S EXHIBIT 1187  


         8                              RECEIVED IN EVIDENCE) 


         9    BY MR. HALLING: 


        10    Q.   CAN YOU DESCRIBE THE EVENTS THAT LED TO THE ISSUING OF 


        11    THIS PRESS RELEASE? 


        12    A.   WELL, THIS PRESS RELEASE IS A CULMINATION OF SEVERAL 


        13    ISSUES AND SEVERAL STRATEGIC INITIATIVES, SOME OF WHICH ARE 


        14    OUTLINED IN THIS STRATEGIC MARKETING PLAN THAT WE JUST 


        15    REVIEWED, SOME OF WHICH HAVE BEEN TALKED ABOUT, YOU KNOW, SINCE 


        16    THE ISSUING OF THE STRATEGIC MARKETING PLAN. 


        17    Q.   WAS THIS PRESS RELEASE ISSUED IN RESPONSE TO ANYTHING IN 


        18    PARTICULAR? 


        19    A.   THE PRESS RELEASE WAS SIMPLY -- I MEAN, IT'S A COMMON 


        20    PRACTICE IN THE BUSINESS WHEN YOU HAVE BIG, NEW, EXCITING 


        21    EVENTS HAPPENING, LIKE IMPROVED BUSINESS SECTIONS OR ZONING, WE 


        22    ISSUE A PRESS RELEASE TO GET, YOU KNOW, EXCITEMENT OF NOT ONLY 


        23    CONSUMERS AND READERS, BUT ADVERTISERS. 


        24    Q.   ALL RIGHT.  LET ME DIRECT YOUR ATTENTION TO THE THIRD 


        25    PARAGRAPH.  THERE'S A SENTENCE: 
                                                                         1415




         1                   "FALK," I ASSUME THAT'S YOU -- 


         2    A.   YES. 


         3    Q.   "NOTED THAT THE PROMOTIONAL RESOURCES DEVOTED TO THESE 


         4    CAMPAIGNS REPRESENT THE BIGGEST PROMOTIONAL EXPENDITURES THE 


         5    SFNA HAS UNDERTAKEN IN RECENT YEARS." 


         6               IS THAT AN ACCURATE STATEMENT? 


         7    A.   WE'RE GOING TO SPEND SEVERAL HUNDRED THOUSAND DOLLARS 


         8    PROMOTING ALL OF THESE INITIATIVES; AND, YES, TAKEN AS A SINGLE 


         9    EXPENDITURE, ALL OF THESE INITIATIVES COMBINED, IT WILL BE ONE 


        10    OF THE LARGEST, IF NOT THE LARGEST, PROMOTION EXPENDITURES FOR 


        11    A SINGLE SET OF CIRCUMSTANCES, YES. 


        12    Q.   THE NEXT PARAGRAPH READS: 


        13                   "ACCORDING TO FALK, THESE INITIATIVES ARE, 


        14               QUOTE, NECESSARY TO REMAIN COMPETITIVE IN SAN 


        15               FRANCISCO AND THE BAY AREA AND TO ENSURE THE TWO 


        16               NEWSPAPERS CONTINUE TO BE THE BEST IN THE BAY 


        17               AREA IN CONTENT AND SERVICE." 


        18               I TAKE IT BY "TWO NEWSPAPERS" YOU MEAN THE CHRONICLE 


        19    AND THE EXAMINER? 


        20    A.   YES. 


        21    Q.   CAN YOU DESCRIBE HOW THESE INITIATIVES THAT ARE REFERENCED 


        22    EARLIER IN THE PRESS RELEASE WILL HELP YOU REMAIN COMPETITIVE? 


        23    A.   OBVIOUSLY FROM THE CIRCULATION CHARTS WE NEED TO DO MANY 


        24    THINGS TO TURN AROUND THE CIRCULATION READERSHIP PICTURE.  


        25    KNIGHT-RIDDER RECENTLY ANNOUNCED THAT THE MERCURY NEWS WAS 
                                                                         1416




         1    COMING TO TOWN WITH A SAN FRANCISCO EDITION, WITH 12 OR 15 


         2    REPORTERS, AT A LOWER PRICE.  THEY HAVE A REPUTATION FOR HAVING 


         3    A GOOD BUSINESS SECTION; AND ALL OF THESE INITIATIVES ARE 


         4    CERTAINLY DESIGNED AS PART OF OUR STRATEGIC MARKETING PLAN, 


         5    SOME OF THEM DESIGNED AND PLANNED SINCE THAT STRATEGIC 


         6    MARKETING PLAN, BUT ALL DESIGNED TO, NUMBER ONE, TURN AROUND 


         7    THAT CIRCULATION SITUATION; AND, NUMBER TWO, YOU KNOW, CONFRONT 


         8    WHAT WE EXPECT WILL BE A SIGNIFICANT INVASION BY THE MERCURY 


         9    NEWS INTO OUR BACKYARDS. 


        10    Q.   WHAT DO YOU MEAN BY AN INVASION BY THE MERCURY NEWS IN 


        11    YOUR OWN BACKYARD? 


        12    A.   WELL, I MEAN, THE MERCURY NEWS BASED IN SAN JOSE, YOU 


        13    KNOW, 60 MILES AWAY HAS BEEN CREEPING UP THE PENINSULA FOR 


        14    MANY, MANY YEARS.  IT'S A VERY COMPETITIVE AREA FOR US ON THE 


        15    PENINSULA, AND I THINK THIS IS AN EFFORT BY THEM TO LOB A 


        16    GRENADE AND JUMP RIGHT INTO SAN FRANCISCO JUST TO STIR THINGS 


        17    UP. 


        18    Q.   ALL RIGHT.  THE NEXT PARAGRAPH, THERE'S A REFERENCE TO THE 


        19    SINGLE COPY PRICE.  DO YOU SEE THAT? 


        20    A.   YES. 


        21    Q.   YOU SAY YOU'RE GOING TO CHANGE THE SINGLE COPY PRICE OF 


        22    THE CHRONICLE.  FROM WHAT TO WHAT? 


        23    A.   THE SINGLE COPY PRICE AS OF THIS PAST MONDAY WENT DOWN 


        24    FROM 50 CENTS TO 25 CENTS FOR ALL SINGLE COPIES OF THE 


        25    CHRONICLE. 
                                                                         1417




         1    Q.   FOR HOW LONG A PERIOD OF TIME HAVE YOU BEEN CONSIDERING 


         2    THIS? 


         3    A.   THE NEWSPAPER AGENCY HAS BEEN TALKING ABOUT THE SINGLE 


         4    COPY PRICE OF THE CHRONICLE AS IT RELATES TO THE DECLINING 


         5    CIRCULATION NUMBERS FOR PROBABLY 18 TO 24 MONTHS.  WE'VE DONE 


         6    ANALYSIS OF THE REVENUE IMPACT AND THE REVENUE IMPACT VERSUS A 


         7    RETURN IN CIRCULATION FOR QUITE SOME PERIOD OF TIME. 


         8               WHAT PROMPTED US TO RECOMMEND TO THE CHRONICLE 


         9    DROPPING THE PRICE WHEN WE DID WAS A COMBINATION OF OUR MARCH 


        10    ABC PUBLISHER STATEMENT COMPILATION, WHICH WAS GOING TO SHOW 


        11    CIRCULATION DOWN AGAIN, AND CLEARLY THIS ANNOUNCEMENT BY THE 


        12    MERCURY NEWS TO COME TO TOWN WITH A SAN FRANCISCO EDITION. 


        13    Q.   LET ME DIRECT YOUR ATTENTION, IF I COULD, TO EXHIBIT 1189. 


        14    A.   (WITNESS EXAMINES DOCUMENT.) 


        15    Q.   IT'S A DOCUMENT THAT APPEARS TO BE ON CITY AND COUNTY OF 


        16    SAN FRANCISCO STATIONERY DATED MARCH 24, 2000. 


        17    A.   YES. 


        18    Q.   IS THIS A DOCUMENT THAT YOU RECEIVED IN YOUR CAPACITY AS 


        19    THE PRESIDENT OF THE AGENCY? 


        20    A.   YES, I DID. 


        21    Q.   AND WHO SENT IT TO YOU? 


        22    A.   THIS CAME DIRECTLY FROM MARK PRIMO AND DAN BRUGMAN, WHO 


        23    ARE MEMBERS OF THE DEPARTMENT OF PUBLIC WORKS OF THE CITY AND 


        24    COUNTY OF SAN FRANCISCO.   


        25               THE COURT:  DO I HAVE THAT, MR. HALLING, 1189? 
                                                                         1418




         1               MR. HALLING:  1189.  I BELIEVE YOU DO.  I HAVE 


         2    ANOTHER COPY.   


         3                        (PAUSE IN PROCEEDINGS.) 


         4               THE COURT:  GO AHEAD. 


         5    BY MR. HALLING: 


         6    Q.   IN THE FIRST PARAGRAPH IT TALKS ABOUT A COPY OF A SURVEY.  


         7    WAS THERE A SURVEY YOU WERE EXPECTING FROM THE CITY? 


         8    A.   THIS DOCUMENT AND SURVEY ARE ALL WRAPPED UP IN THE CITY'S 


         9    PASSING OF A NEWS RACK ORDINANCE THAT IS SPECIFICALLY DESIGNED 


        10    TO REMOVE FREE-STANDING NEWS RACKS FROM THE STREETS OF SAN 


        11    FRANCISCO AND REPLACE THEM WITH PEDESTAL MOUNT UNITS.  AND THIS 


        12    IS A SURVEY THAT THE CITY PROMISED THOSE INVOLVED, THOSE 


        13    NEWSPAPER PUBLISHERS WHO PUBLISH PAPERS DISTRIBUTED THROUGH 


        14    RACKS, AS TO HOW MANY RACKS ARE ON THE STREETS OF SAN FRANCISCO 


        15    AND WHERE THEY ARE LOCATED. 


        16               MR. HALLING:  I WOULD OFFER EXHIBIT 1189. 


        17               MR. ALIOTO:  NO OBJECTION, YOUR HONOR. 


        18               THE COURT:  1189 WILL BE ADMITTED. 


        19                             (DEFENDANT'S EXHIBIT 1189  


        20                              RECEIVED IN EVIDENCE) 


        21               THE COURT:  I FOUND MY COPY OF THAT, MR. HALLING, SO 


        22    I'LL GIVE THAT BACK.  THANK YOU. 


        23    ///// 
               
        24    BY MR. HALLING: 


        25    Q.   NOW, IN THE FIRST PARAGRAPH OF THIS LETTER YOU RECEIVED 
                                                                         1419




         1    THERE'S A DESCRIPTION OF A SURVEY, WHICH I BELIEVE YOU'VE 


         2    ALREADY IDENTIFIED, AND IT ALSO SAYS THERE'S SOMETHING CALLED A 


         3    PUBLISHER'S KEY.  WHAT'S THAT, IF YOU KNOW? 


         4    A.   WELL, WHAT THE CITY DID IN THIS DOCUMENT IS THEY HAVE A 


         5    CODE NUMBER FOR EACH OF THE PUBLISHERS WHO DISTRIBUTE THROUGH 


         6    NEWS RACKS, AND THIS WAS THE DETAIL BY THOSE CODE NUMBERS OF 


         7    WHO HAS -- WHO OWNS RACKS WHERE AND HOW MANY THEY OWN. 


         8    Q.   ALL RIGHT.  IN THE THIRD PARAGRAPH THERE'S A REFERENCE TO 


         9    8,322 FREE-STANDING NEWS RACKS.  DO YOU SEE THAT? 


        10    A.   THAT'S THE TOTAL NUMBER THAT WERE COUNTED IN THIS SURVEY, 


        11    YES. 


        12    Q.   IS THERE CURRENTLY A DISPUTE PENDING BETWEEN THE CITY AND 


        13    PUBLISHERS CONCERNING THIS NEWS RACK ORDINANCE? 


        14    A.   YES, UNFORTUNATELY WE'RE IN LITIGATION WITH THE CITY.  


        15    SEVERAL MAJOR NEWSPAPER COMPANIES, OURSELVES, THE NEW TIMES, 


        16    THE BAY GUARDIAN, AMONG OTHERS, DISPUTING THE PROPOSED RACK 


        17    ORDINANCE OR THE PASSED RACK ORDINANCE, AND THAT IS CURRENTLY 


        18    IN LITIGATION, YES. 


        19    Q.   WHO WERE THE OTHER NEWSPAPER PUBLISHERS THAT YOU'RE IN -- 


        20    LET ME JUST BACK UP. 


        21               IS THERE A LAWSUIT THAT'S BEEN FILED? 


        22    A.   YES, WE HAVE FILED A LAWSUIT. 


        23    Q.   AND SFNA IS A PLAINTIFF? 


        24    A.   YES, WE ARE. 


        25    Q.   WHO ARE THE OTHER PLAINTIFFS? 
                                                                         1420




         1    A.   NEW TIMES, WHICH IS THE SF WEEKLY; THE BAY GUARDIAN; THE 


         2    WALL STREET JOURNAL; THE L.A. TIMES AND TIMES MIRROR; GANNETT 


         3    AND U.S.A. TODAY. 


         4    Q.   IS KNIGHT-RIDDER A PARTY? 


         5    A.   KNIGHT-RIDDER AND THE MERCURY NEWS.  I THINK I'VE COVERED 


         6    THEM ALL. 


         7    Q.   ALL RIGHT.  TURN TO THE SECOND PAGE, IF YOU WOULD, OF THE 


         8    EXHIBIT 1189.  THERE'S A HEADING, "NEWSPAPER -- SAN FRANCISCO 


         9    NEWS RACK SURVEY PUBLISHER'S KEY."  DO YOU SEE THAT? 


        10    A.   YES. 


        11    Q.   AND IT GOES ON FOR TWO PAGES.  I SEE ON THE SECOND PAGE 


        12    THERE IS A REFERENCE TO SAN FRANCISCO CHRONICLE.  DO YOU SEE 


        13    THAT? 


        14    A.   YES, CHRONICLE IS ON PAGE 2. 


        15    Q.   AND ALSO ON PAGE 2 WOULD BE THE EXAMINER, THE MERCURY 


        16    NEWS? 


        17    A.   YES.  THE EXAMINER IS NUMBER 90.  YES. 


        18    Q.   AND THEN TURN TO THE NEXT PAGE OF THE EXHIBIT.  THERE'S A 


        19    PAGE HEADED "NEWS RACK SUMMARY BOX COUNT."  DO YOU SEE THAT? 


        20    A.   YES. 


        21    Q.   WHAT'S YOUR UNDERSTANDING AS TO WHAT'S DEPICTED ON THIS 


        22    PAGE? 


        23    A.   THAT'S JUST A TOTAL OF NEWS RACKS BY THE VARIOUS AREAS OF 


        24    THE CITY, THE FILLMORE, UNION STREET, SOUTH OF MARKET, ET 


        25    CETERA.  THESE ARE THE AREAS IN WHICH THE CITY INTENDS TO 
                                                                         1421




         1    REPLACE FREE-STANDING NEWS RACKS WITH PEDESTAL MOUNTS. 


         2    Q.   ALL RIGHT.  THE REST OF THE DOCUMENT APPEARS TO BE A 


         3    40-PAGE SUMMARY.  MAYBE YOU CAN JUST TELL ME WHAT YOUR 


         4    UNDERSTANDING IS OF THE REMAINDER OF THE DOCUMENT. 


         5    A.   THE REMAINDER OF THE DOCUMENT IS ALL OF THE DETAIL OF THE 


         6    CITY SURVEY OF STREET CORNER BY STREET CORNER OF WHICH 


         7    NEWSPAPER RACKS ARE THERE, WHAT NEWSPAPERS OR PUBLICATIONS ARE 


         8    DISTRIBUTED THROUGH THE NEWS RACKS AND WHO THE PUBLISHERS OF 


         9    THOSE PUBLICATIONS ARE. 


        10    Q.   USING THE DATA CONTAINED IN THE CITY'S NEWS RACK SURVEY, 


        11    EXHIBIT 1189, DID YOU HAVE A COMPILATION PREPARED? 


        12    A.   YES, I DID.  I ASKED OUR CIRCULATION PEOPLE TO ACTUALLY GO 


        13    THROUGH THESE 40 PAGES AND ADD UP THE NUMBER OF NEWS RACKS BY 


        14    PUBLICATION. 


        15    Q.   AND HOW ARE YOU ABLE TO TELL WHICH PUBLICATION HAS HOW 


        16    MANY NEWS RACKS? 


        17    A.   THEY'RE INDICATED IN THE SURVEY. 


        18    Q.   THAT'S BY CODE? 


        19    A.   YES. 


        20    Q.   TAKE A LOOK, IF YOU WOULD, AT WHAT'S BEEN MARKED AS 


        21    EXHIBIT 1194. 


        22    A.   (WITNESS EXAMINES DOCUMENT.)  OKAY. 


        23    Q.   IS THAT THE COMPILATION YOU JUST REFERRED TO A MOMENT AGO 


        24    THAT'S BASED ON THE CITY SURVEY IN 1189? 


        25    A.   YES.  SPECIFICALLY THESE ARE THE TOTALS BY PUBLISHER OF 
                                                                         1422




         1    THE NEWS RACKS IN THOSE DESIGNATED AREAS. 


         2               MR. HALLING:  I WOULD OFFER EXHIBIT 1194. 


         3               MR. ALIOTO:  OKAY.  I HAVE NO OBJECTION, YOUR HONOR. 


         4               THE COURT:  1194 IS ADMITTED. 


         5                             (DEFENDANT'S EXHIBIT 1194  


         6                              RECEIVED IN EVIDENCE) 


         7    BY MR. HALLING: 


         8    Q.   I'D LIKE TO ASK YOU SOME QUESTIONS ABOUT SOME OF THE 


         9    ENTRIES ON THIS COMPILATION.  LET'S TAKE THE FIRST ONE, NUMBER 


        10    ONE.  IT SAYS "ADVERTISER," AND THEN IT HAS A COUNT OF 691.  


        11    WHAT DOES THAT REPRESENT? 


        12    A.   THERE ARE 691 NEWS RACKS DISTRIBUTING THIS PUBLICATION ON 


        13    THE STREETS OF SAN FRANCISCO TODAY. 


        14               THE COURT:  MR. HALLING, IF I LET YOU LEAD THE 


        15    WITNESS A LITTLE, COULD WE COME TO THE POINT? 


        16                              (LAUGHTER) 


        17               MR. HALLING:  CERTAINLY, YOUR HONOR. 


        18               THE COURT:  ALL RIGHT. 


        19               MR. HALLING:  THANK YOU. 


        20    Q.   TURN TO THE SECOND PAGE AND TELL ME HOW MANY NEWS RACKS 


        21    THE CHRONICLE HAS IN SAN FRANCISCO ACCORDING TO THIS CITY 


        22    SURVEY. 


        23    A.   THE CHRONICLE HAS 546, THE EXAMINER HAS 612. 


        24    Q.   ABOUT WHAT PERCENTAGE IS THAT OF THE TOTAL? 


        25    A.   OF THE TWO COMBINED OF THE TOTAL, YOU'RE TESTING ME, 
                                                                         1423




         1    10 PERCENT, 12 PERCENT. 


         2    Q.   HOW MANY NEWS RACKS DOES THE BAY GUARDIAN HAVE? 


         3    A.   THE BAY GUARDIAN HAS 723. 


         4    Q.   HOW ABOUT THE SF WEEKLY? 


         5    A.   774. 


         6    Q.   HOW ABOUT THE MERCURY NEWS? 


         7    A.   (WITNESS EXAMINES DOCUMENT.)  GIVE ME A HINT. 


         8               THE COURT:  IT'S UNDER SAN JOSE. 


         9    BY MR. HALLING: 


        10    Q.   IT'S UNDER SAN JOSE. 


        11                              (LAUGHTER) 


        12    A.   112. 


        13    Q.   OKAY. 


        14               THE COURT:  I THINK WE'RE GETTING THE POINT. 


        15               MR. HALLING:  ONE MORE, YOUR HONOR? 


        16               THE COURT:  ALL RIGHT. 


        17                              (LAUGHTER) 


        18    BY MR. HALLING: 


        19    Q.   THERE'S 691, THE FIRST ONE WE MENTIONED FOR THE 


        20    ADVERTISER? 


        21    A.   YES. 


        22    Q.   WHAT'S THE ADVERTISER? 


        23    A.   TO THE BEST OF MY KNOWLEDGE, IT'S A CLASSIFIED ADVERTISING 


        24    PUBLICATION.  MANY OF THESE ARE ADVERTISING PUBLICATIONS, MANY 


        25    ARE EDITORIAL PUBLICATIONS, MANY ARE A COMBINATION OF THE TWO. 
                                                                         1424




         1    Q.   ALL RIGHT.  LET ME MOVE ON TO ANOTHER TOPIC. 


         2               ARE YOU ABLE TO ESTIMATE THE AMOUNT OF AD REVENUE 


         3    THAT IS CURRENTLY ATTRIBUTABLE TO THE EXAMINER? 


         4    A.   YES, WE CAN ESTIMATE. 


         5    Q.   AND WHAT WOULD IT BE? 


         6    A.   WELL, WHEN I SAY WE CAN ESTIMATE THE ADVERTISING REVENUE 


         7    ASSOCIATED WITH THE EXAMINER, I GUESS THE MOST COMPLETE ANSWER 


         8    IS WE CAN CERTAINLY ESTIMATE WITH A FAIR DEGREE OF ACCURACY, A 


         9    RANGE OF REVENUE THAT COULD BE ATTRIBUTABLE TO THE EXAMINER. 


        10    Q.   AND WHAT'S THAT RANGE? 


        11    A.   THAT RANGE WOULD BE ZERO TO THE SAME PERCENTAGE AS THEIR 


        12    CIRCULATION OF THE TOTAL, WHICH WOULD BE 20 PERCENT.  SO 


        13    20 PERCENT OF THE DAILY ADVERTISING REVENUE WOULD BE THE MOST 


        14    CONSERVATIVE HIGHEST NUMBER. 


        15    Q.   AND WHAT DO YOU THINK IT IS?  THE QUESTION BEING, THE 


        16    AMOUNT OF AD REVENUE THAT'S ATTRIBUTABLE TO THE EXAMINER. 


        17    A.   IF THE EXAMINER WAS CLOSED TOMORROW, I COULD MAKE A VERY 


        18    STRONG CASE THAT THE SAN FRANCISCO NEWSPAPER AGENCY'S AD 


        19    REVENUE WOULD NOT DECREASE AT ALL. 


        20    Q.   WHY IS THAT? 


        21    A.   WELL, IT'S A COMBINATION OF REASONS.  WE WOULD EXPECT THAT 


        22    IF THE EXAMINER CLOSED TOMORROW, THAT PROBABLY A THIRD TO A 


        23    HALF OF THOSE READERS WOULD BEGIN BUYING THE MORNING NEWSPAPER, 


        24    THE CHRONICLE.  SO CHRONICLE CIRCULATION WOULD INCREASE. 


        25               AND AS I'VE ALREADY COVERED, YOU KNOW, THERE'S 
                                                                         1425




         1    60 PERCENT DUPLICATION BETWEEN EXAMINER READERS AND CHRONICLE 


         2    READERS, AND I THINK, YOU KNOW, BETWEEN THOSE TWO FACTS, THE 


         3    FACT THAT A.M. CIRCULATION WOULD INCREASE AND THAT THE ONLY 


         4    REAL NET LOSS WOULD BE DUPLICATIVE READERS, CHRONICLE 


         5    READERSHIP WOULD NOT ONLY STAY THE SAME, BUT PROBABLY INCREASE. 


         6    Q.   LET ME SHOW YOU A DOCUMENT THAT WAS JUST MARKED TODAY AS 


         7    EXHIBIT 1197.  DO YOU HAVE IT THERE?   


         8    A.   (WITNESS EXAMINES DOCUMENT.)  NOT YET. 


         9               MR. HALLING:  MAY I APPROACH THE WITNESS, YOUR 


        10    HONOR? 


        11               THE COURT:  YES, YOU MAY. 


        12               THE WITNESS:  OKAY. 


        13    BY MR. HALLING: 


        14    Q.   IS THIS A DOCUMENT THAT WAS PREPARED UNDER YOUR 


        15    SUPERVISION? 


        16    A.   YES.  I ASKED OUR MARKETING AND RESEARCH DEPARTMENT TO 


        17    PREPARE THIS ANALYSIS JUST THIS WEEK. 


        18    Q.   AND THE HEADING IS "DAILY CPM," PAREN, "COST PER 


        19    THOUSAND," PAREN, "ANALYSIS FOR SELECTED BAY AREA NEWSPAPERS." 


        20    A.   YES. 


        21    Q.   IS THE DATA CONTAINED ON THIS EXHIBIT THE TYPE OF DATA 


        22    THAT YOU WOULD NORMALLY LOOK TO YOUR MARKETING DEPARTMENT TO 


        23    COMPILE? 


        24    A.   YES, OUR MARKETING RESEARCH DEPARTMENT WOULD DO CPM 


        25    ANALYSIS WORK. 
                                                                         1426




         1    Q.   DO YOU BELIEVE THAT THE INFORMATION CONTAINED IN THIS 


         2    EXHIBIT IS ACCURATE? 


         3    A.   YES, IT IS. 


         4    Q.   WHY WAS IT PREPARED? 


         5    A.   IT WAS PREPARED AT THE REQUEST OF JIM ROSSE. 


         6               MR. HALLING:  I WOULD OFFER EXHIBIT 1197. 


         7               MR. ALIOTO:  MAY I SEE IT, YOUR HONOR? 


         8               THE COURT:  WHAT'S THAT? 


         9               MR. ALIOTO:  WE WERE GIVEN A COPY THIS AFTERNOON, 


        10    BUT I DON'T -- WE CAN'T FIND IT APPARENTLY. 


        11               THE COURT:  ANY OBJECTION? 


        12                        (PAUSE IN PROCEEDINGS.) 


        13               MR. ALIOTO:  YES, THERE'S NO OBJECTION TO THAT. 


        14               THE COURT:  1197 WILL BE ADMITTED. 


        15                             (DEFENDANT'S EXHIBIT 1197  


        16                              RECEIVED IN EVIDENCE) 


        17               THE COURT:  THIS IS THE ORIGINAL; IS IT? 


        18               MR. HALLING:  YES.  THEY'RE ALL ORIGINALS.  SINCE WE 


        19    COULDN'T COPY, WE PUT A STICKER ON ALL OF THEM. 


        20               THE COURT:  OH, YOU DID.  I WAS JUST GOING TO MARK 


        21    ON THIS.  THIS SHOULD BE PART OF THE RECORD, AND IF YOU HAVE AN 


        22    EXTRA COPY.... 


        23                        (PAUSE IN PROCEEDINGS.) 


        24    BY MR. HALLING: 


        25    Q.   NOW, MR. FALK, I'D LIKE TO DIRECT YOUR ATTENTION, PLEASE, 
                                                                         1427




         1    TO EXHIBIT 986. 


         2    A.   OKAY. 


         3    Q.   EXHIBIT 986 BEARS A DATE MAY 19, 1995.  IT APPEARS TO BE 


         4    AN INTEROFFICE AGENCY MEMO FROM YOU TO JIM HALE, SUBJECT A.M. 


         5    ONLY ANALYSIS.  NOW, WHO IS JIM HALE? 


         6    A.   JIM HALE WAS THE PRESIDENT AND CEO OF THE NEWSPAPER AGENCY 


         7    PRIOR TO ME. 


         8    Q.   AND SO YOU REPORTED TO HIM AT THIS TIME, MAY, '95? 


         9    A.   YES.  I WAS THE SENIOR VP OF SALES AND MARKETING. 


        10    Q.   DOES EXHIBIT -- IS EXHIBIT 986 A MEMO YOU PREPARED TO 


        11    MR. HALE? 


        12    A.   YES, IT IS.   


        13    Q.   AND DID HE REQUEST THIS MEMO? 


        14    A.   YES, HE DID.  HE ASKED ME TO DO A FINANCIAL ANALYSIS OF 


        15    WHAT OUR COSTS AND REVENUE WOULD LOOK LIKE IF THE EXAMINER 


        16    CLOSED. 


        17    Q.   AND THIS IS THE ANALYSIS YOU DID FOR HIM? 


        18    A.   YES, IT IS. 


        19               MR. HALLING:  I WOULD OFFER 986. 


        20               MR. ALIOTO:  I'M SORRY, YOUR HONOR.  I DID NOT HEAR 


        21    WHO MR. HALE WAS.  COULD I JUST HAVE THAT STATEMENT, PLEASE? 


        22               THE COURT:  FORMER -- PREDECESSOR -- 


        23               THE WITNESS:  FORMER CEO PRIOR TO MYSELF OF THE 


        24    NEWSPAPER AGENCY. 


        25               MR. ALIOTO:  OKAY.  NO OBJECTION. 
                                                                         1428




         1               THE COURT:  VERY WELL.  986 WILL BE ADMITTED. 


         2                             (DEFENDANT'S EXHIBIT 986  


         3                              RECEIVED IN EVIDENCE) 


         4    BY MR. HALLING: 


         5    Q.   NOW, CAN YOU JUST TELL US AGAIN WHAT WAS THE PURPOSE OF 


         6    THIS ANALYSIS? 


         7    A.   WELL, THE SPECIFIC REQUEST WAS TO DO A CONFIDENTIAL 


         8    FINANCIAL ANALYSIS OF THE IMPACT ON SAN FRANCISCO NEWSPAPER 


         9    AGENCY EXPENSES AND REVENUE IF THE EXAMINER WERE TO BE CLOSED. 


        10    Q.   OKAY.  AND ON THE FIRST PAGE OF THE DOCUMENT UNDER THE 


        11    HEADING "SUMMARY OF SAVINGS" -- 


        12    A.   YES. 


        13    Q.   -- DOES THAT REFLECT YOUR CONCLUSIONS? 


        14    A.   YES.  THE SUMMARY BREAKS DOWN BY CATEGORY AND BY 


        15    DEPARTMENT, NUMBER ONE, SOME LOST REVENUE FROM CIRCULATION AND 


        16    THE EXPENSE SAVINGS IF WE DID NOT HAVE THE EXPENSE BURDEN OF 


        17    THE EXAMINER. 


        18    Q.   WHAT ASSUMPTION, IF ANY, DID YOU MAKE CONCERNING 


        19    ADVERTISING REVENUE? 


        20    A.   THE ASSUMPTION MADE ON AD REVENUE, THAT THERE WOULD BE NO 


        21    LOSS OF AD REVENUE IN THE EXAMINER WAS CLOSED. 


        22    Q.   AND WHY WAS THAT?  I KNOW YOU -- 


        23    A.   AGAIN, THE ASSUMPTION WAS -- MY BELIEF WAS AND IS THAT 


        24    THERE WOULD BE -- IN THIS SPECIFIC DOCUMENT ANALYSIS, ABOUT 


        25    HALF OF THE EXAMINER CIRCULATION WOULD GO FROM AFTERNOON TO 
                                                                         1429




         1    MORNING; AND BETWEEN THE INCREASE IN CIRCULATION IN THE MORNING 


         2    AND THE HIGH DUPLICATION IN THE AFTERNOON AND THE FACT THAT 


         3    READERSHIP AS AN ENTERPRISE WOULD NOT BE LOST, THAT THERE WOULD 


         4    BE NO REASON TO LOWER AD RATES.  ADVERTISING REVENUE WOULD 


         5    REMAIN THE SAME. 


         6    Q.   AND WHAT DID YOU CONCLUDE IN THIS ANALYSIS? 


         7    A.   THE CONCLUSION THERE ON PAGE 1 IS THAT THE NET SAVINGS TO 


         8    THE AGENCY, NETTING A LOSS OF 3.7 MILLION FROM SOME LOST 


         9    CIRCULATION REVENUE AGAINST THE EXPENSE SAVINGS OF ABOUT 


        10    25 MILLION, WOULD IMPROVE THE NEWSPAPER AGENCY'S BOTTOM LINE, 


        11    GROSS EXCESS, BY 21,625,000. 


        12    Q.   AND THAT WOULD BE IF YOU CLOSED THE EXAMINER? 


        13    A.   YES. 


        14    Q.   NOW, DOES THIS ANALYSIS TAKE INTO ACCOUNT ANY OF THE 


        15    EDITORIAL COSTS? 


        16    A.   NO, IT DOES NOT. 


        17               THE COURT:  MR. HALLING, YOU INTRODUCED AN EXHIBIT 


        18    IN WHICH YOU SHOWED, I BELIEVE, FROM 1965 THROUGH 1999 THE 


        19    EXAMINER'S SHARE OF THE EXCESS, NET EXCESS BY THE NEWSPAPER 


        20    AGENCY AND THEN THE EDITORIAL COSTS. 


        21               MR. HALLING:  CORRECT.  IT WAS -- 


        22               THE COURT:  WHAT EXHIBIT NUMBER WAS THAT? 


        23               MR. HALLING:  91. 


        24               THE COURT:  91.  THANK YOU. 


        25    BY MR. HALLING: 
                                                                         1430




         1    Q.   I'D LIKE TO DIRECT YOUR ATTENTION, PLEASE, TO ANOTHER 


         2    EXHIBIT, 984. 


         3    A.   OKAY. 


         4    Q.   984 IS HEADED "CONFIDENTIAL SAN FRANCISCO NEWSPAPER AGENCY 


         5    INTEROFFICE MEMO."  IT'S DATED JUNE 6, 1997.  THE SUBJECT 


         6    STATED ON THE EXHIBIT IS "A.M. ONLY," SLASH, "CHRONICLE."  IT 


         7    APPEARS TO BE FROM YOU, STEVE FALK, TO LEE GUITTAR AND JOHN 


         8    SIAS.  DO YOU HAVE THAT IN FRONT OF YOU? 


         9    A.   YES, I DO. 


        10    Q.   IS THIS A DOCUMENT THAT YOU PREPARED? 


        11    A.   YES, I DID. 


        12    Q.   AND WHO IS LEE GUITTAR? 


        13    A.   LEE GUITTAR AT THE TIME WAS PUBLISHER AND EDITOR OF THE 


        14    EXAMINER. 


        15    Q.   AND WHAT WAS YOUR PURPOSE IN PREPARING THIS DOCUMENT? 


        16    A.   WELL, AGAIN, MUCH LIKE THE REQUEST I HAD IN 1995, I WAS 


        17    ASKED BY LEE GUITTAR AND JOHN SIAS TO AGAIN DO AN ANALYSIS FOR 


        18    THE NEWSPAPER AGENCY FOR EXPENSE AND REVENUE IMPACT IN THE 


        19    EVENT THE EXAMINER WAS CLOSED, A VERY SIMILAR EXERCISE TO THE 


        20    ONE I DID ON MAY 19TH, 1995. 


        21    Q.   AND DOES THIS DOCUMENT, EXHIBIT 984, REFLECT YOUR ANALYSIS 


        22    AND RESPONSE TO THAT INQUIRY? 


        23    A.   YES, IT DOES. 


        24               MR. HALLING:  I WOULD OFFER 984. 


        25               MR. ALIOTO:  NO OBJECTION. 
                                                                         1431




         1               THE COURT:  984 WILL BE ADMITTED. 


         2                             (DEFENDANT'S EXHIBIT 984  


         3                              RECEIVED IN EVIDENCE) 


         4    BY MR. HALLING: 


         5    Q.   LET ME DIRECT YOUR ATTENTION TO THE SECOND PAGE UNDER THE 


         6    HEADING "SUMMARY OF CHANGES." 


         7    A.   OKAY. 


         8    Q.   DOES THAT REFLECT THE CONCLUSIONS YOU REACHED IN YOUR 


         9    ANALYSIS? 


        10    A.   YES, IT DOES. 


        11    Q.   ALL RIGHT.  THE FIRST LINE ITEM SAYS "ADVERTISING REVENUE 


        12    NO CHANGE."  IS THAT AN ASSUMPTION OR PART OF YOUR ANALYSIS? 


        13    A.   AGAIN, THAT WAS PART OF THE ANALYSIS DONE AT THE TIME; AND 


        14    BASED ON THE SAME CIRCULATION ASSUMPTIONS AS I HAD IN THE 1995 


        15    PLAN DID NOT EXPECT THERE WOULD BE A CHANGE IN ADVERTISING 


        16    REVENUE. 


        17    Q.   AND THEN CAN YOU JUST GO DOWN THE LIST AND JUST VERY 


        18    BRIEFLY TELL US WHAT THE CATEGORIES AND THE FIGURES REPRESENT? 


        19    A.   THE CIRCULATION REVENUE LOSS OF 6.1 MILLION COMES FROM THE 


        20    REDUCTION OF CIRCULATION.  EVEN THOUGH HALF OF THE EXAMINER 


        21    READERS MAY START READING AND BUYING THE CHRONICLE, THERE 


        22    CERTAINLY WILL BE A NUMBER THAT READS SOMETHING ELSE OR SOMEONE 


        23    ELSE'S NEWSPAPER.  SO THERE IS A LOSS OF CIRCULATION REVENUE OF 


        24    6.1 MILLION. 


        25               THE NEXT LINE, CIRCULATION PAYROLL, ARE THE EXPENSES 
                                                                         1432




         1    THAT WE PAY TO CIRCULATION PERSONNEL FOR DELIVERING THE 


         2    NEWSPAPER, OUR DISTRICT MANAGERS, OUR DRIVERS, EVERYONE 


         3    INVOLVED WITH THE DISTRIBUTION OF THE EXAMINER. 


         4               THE CIRCULATION EXPENSE LINE OF 7 MILLION WOULD BE 


         5    ALL OTHER CIRCULATION EXPENSES OTHER THAN PAYROLL.  IT WOULD BE 


         6    THE COSTS OF MAINTAINING EXAMINER TRUCKS.  IT WOULD BE THE 


         7    DELIVERY FEES WE PAY TO NEWSPAPER CARRIERS.  THEY WOULD BE THE 


         8    PROMOTION AND SALES, TELEMARKETING EXPENSES FOR SUPPORTING 


         9    EXAMINER CIRCULATION. 


        10               THE FOLLOWING LINE, NEWSPRINT AND INK, IS THE AMOUNT 


        11    OF MONEY WE WOULD SAVE ON NEWSPRINT AND INK FROM NOT HAVING TO 


        12    PRINT THE EXAMINER.  THAT NUMBER WAS ALREADY NETTED AGAINST THE 


        13    CIRCULATION INCREASE THAT WOULD GO TO THE MORNING CYCLE. 


        14               PRODUCTION PAYROLL IS THE SAVINGS THAT WE WOULD 


        15    INCUR FROM NOT HAVING TO PRINT THE EXAMINER.  THE PRESS ROOM 


        16    COSTS, THE MAIL ROOM COSTS, PAYROLL, SALARIES, BENEFITS OF ALL 


        17    OF THE PEOPLE INVOLVED IN THE PRINTING PROCESS. 


        18               THE BOTTOM LINE IS AN APPROXIMATION, ALL OTHER 


        19    COSTS.  WE WERE CLEARLY TRYING TO KEEP THIS KIND OF ANALYSIS 


        20    CONTAINED TO A VERY SMALL CIRCLE OF MANAGERS AND EXECUTIVES AT 


        21    THE NEWSPAPER AGENCY.  SO WE ESTIMATED THAT IF THE EXAMINER WAS 


        22    CLOSED, WE WOULD SAVE ANOTHER $2 MILLION, A LITTLE BIT IN THE 


        23    FINANCE DEPARTMENT, A LITTLE BIT IN THE HUMAN RESOURCES 


        24    DEPARTMENT, A LITTLE BIT IN THE LABOR RELATIONS DEPARTMENT, 


        25    JUST ALL OF THE OTHER NEWSPAPER SUPPORT DEPARTMENTS WOULD 
                                                                         1433




         1    PROBABLY BE IN THE RANGE OF $2 MILLION. 


         2    Q.   AND THE FINAL LINE AT THE BOTTOM SAYS "TOTAL AGENCY 


         3    $20 MILLION."  WHAT DOES THAT REPRESENT? 


         4    A.   AGAIN, THAT WOULD BE THE IMPROVEMENT TO THE SAN FRANCISCO 


         5    NEWSPAPER AGENCY GROSS EXCESS NET OF REVENUE LOSS FROM 


         6    CIRCULATION OF CLOSING THE EXAMINER AT THAT PERIOD IN TIME. 


         7    Q.   AND, AGAIN, AS WITH THE PRIOR STUDY, THIS WOULD NOT 


         8    REFLECT ANY SAVINGS THAT MIGHT OCCUR BY ELIMINATING THE 


         9    EDITORIAL DEPARTMENT OF THE EXAMINER? 


        10    A.   THAT'S CORRECT. 


        11    Q.   DID YOU DO ANY OTHER OF THESE A.M. ANALYSES CONCERNING 


        12    POTENTIALLY CLOSING THE EXAMINER? 


        13    A.   THERE WAS ANOTHER ONE, AT LEAST ONE ADDITIONAL ONE DONE IN 


        14    1999, YES. 


        15    Q.   TAKE A LOOK, IF YOU WOULD, AT EXHIBIT 983. 


        16    A.   (WITNESS EXAMINES DOCUMENT.)  OKAY. 


        17    Q.   CAN YOU IDENTIFY WHAT'S BEEN MARKED AS EXHIBIT 983? 


        18    A.   AGAIN, THIS IS ANOTHER JOINT OPERATING AGREEMENT A.M. ONLY 


        19    PROFIT AND LOSS COMPARISON.  THIS GOES INTO A LITTLE BIT MORE 


        20    DETAIL THAN WE HAD GONE INTO IN THE PAST. 


        21    Q.   LET ME STOP YOU THERE. 


        22    A.   OKAY. 


        23    Q.   WHO PREPARED THIS DOCUMENT? 


        24    A.   MYSELF AND OUR CHIEF FINANCIAL OFFICER. 


        25    Q.   AND WAS THIS IN RESPONSE TO SOME INQUIRY? 
                                                                         1434




         1    A.   AGAIN, THIS WAS IN RESPONSE TO A REQUEST BY THE PRINCIPALS 


         2    TO THE NEWSPAPER AGENCY TO DO THIS ANALYSIS. 


         3    Q.   AND THE ANALYSIS BEING WHAT WOULD THE FINANCES OF THE 


         4    AGENCY LOOK LIKE IF YOU CLOSED THE EXAMINER? 


         5    A.   WHAT CHANGE WOULD THERE BE IN THE GROSS EXCESS OF THE 


         6    AGENCY IF THE EXAMINER WAS CLOSED. 


         7    Q.   AND WHAT'S THE DATE OF THIS ANALYSIS?  WHEN WAS IT 


         8    PREPARED? 


         9    A.   THIS IS DATED MAY 24TH, 1999. 


        10               MR. HALLING:  I WOULD OFFER EXHIBIT 983. 


        11               MR. ALIOTO:  NO OBJECTION. 


        12               THE COURT:  983 WILL BE ADMITTED. 


        13                             (DEFENDANT'S EXHIBIT 983  


        14                              RECEIVED IN EVIDENCE) 


        15    BY MR. HALLING: 


        16    Q.   AND WHAT WAS THE RESULT OF THIS ANALYSIS? 


        17    A.   THE RESULT OF THIS ANALYSIS WAS VERY SIMILAR TO THE PRIOR 


        18    TWO ANALYSES IN 1995 AND 1997.  THE THIRD COLUMN SHOWING THE 


        19    DIFFERENCE BETWEEN THE NEWSPAPER AGENCY'S PRO FORMA EXPECTED 


        20    PERFORMANCE FOR 1999 VERSUS AN A.M. ONLY OPERATION, AND THE 


        21    DIFFERENCE COLUMN BEING THE CHANGE TO THE GROSS EXCESS LINE.  


        22    AND THIS REPORT IS, AGAIN, $20 MILLION. 


        23    Q.   SO THAT NUMBER IS APPROXIMATELY WHAT YOU GOT IN THE OTHER 


        24    TWO STUDIES? 


        25    A.   YES. 
                                                                         1435




         1    Q.   WHAT, IF ANYTHING, DO YOU CONCLUDE FROM HAVING DONE THESE 


         2    STUDIES OVER A FOUR-YEAR PERIOD? 


         3    A.   WELL, IT'S CLEAR IN ALL OF THESE STUDIES THAT, YOU KNOW, 


         4    CLOSING THE EXAMINER WOULD CERTAINLY HAVE A POSITIVE FINANCIAL 


         5    IMPACT ON THE FINANCIAL PERFORMANCE OF THE SAN FRANCISCO 


         6    NEWSPAPER AGENCY. 


         7    Q.   LET ME TURN TO ANOTHER TOPIC.  CAN YOU DESCRIBE THE 


         8    PROCESS BY WHICH ADVERTISING RATES ARE ESTABLISHED AT THE 


         9    AGENCY? 


        10    A.   ADVERTISING RATE INCREASES -- I HAVE TO SPLIT UP THAT 


        11    ANSWER INTO TWO PIECES. 


        12               ADVERTISING RATE INCREASES, IF WE INCREASE THE 


        13    RETAIL ADVERTISING RATE 3 PERCENT, FOR INSTANCE, THE NEWSPAPER 


        14    AGENCY WOULD MAKE FROM TIME TO TIME RATE INCREASE 


        15    RECOMMENDATIONS TO THE PRINCIPALS. 


        16               THE SECOND PIECE OF ADVERTISING RATES ARE ALL OTHER 


        17    ADVERTISING RATES, RATES FOR SPECIAL SECTIONS, RATES FOR 


        18    SPECIAL PROJECTS, RATES FOR NEW PAGES, NEW IDEAS THAT MAY COME 


        19    OUT OF THE ADVERTISING DEPARTMENT.  AND ALL OF THOSE 


        20    ADVERTISING RATES ARE RECOMMENDED TO ME BY THE ADVERTISING 


        21    DEPARTMENT AND APPROVED BY ME. 


        22    Q.   ARE THEY APPROVED BY ANYONE OTHER THAN YOU?  DO YOU HAVE 


        23    TO TAKE THOSE RATES THE SECOND -- 


        24    A.   NO, THOSE RATES FOR THE PAST THREE YEARS HAVE BEEN 


        25    APPROVED BY ME. 
                                                                         1436




         1    Q.   ABOUT HOW MANY RATES HAVE YOU APPROVED ON YOUR OWN 


         2    AUTHORITY? 


         3    A.   IN EXCESS OF 350, I WOULD ESTIMATE. 


         4    Q.   ALL RIGHT.  NOW, WITH RESPECT TO THESE PERCENTAGE RATE 


         5    INCREASES THAT YOU REFERRED TO AS ONE OF THE TWO TYPES -- 


         6    A.   YES. 


         7    Q.   -- WHAT STANDARDS DO YOU EMPLOY IN DECIDING WHETHER TO 


         8    MAKE A RECOMMENDATION FOR A RATE PERCENTAGE CHANGE? 


         9    A.   WELL, RATE INCREASES ARE SIGNIFICANT EVENTS FOR NEWSPAPERS 


        10    BECAUSE OBVIOUSLY YOU GO OUT AND RAISE A RATE, THAT AFFECTS 


        11    YOUR ENTIRE ADVERTISING BASE. 


        12               GENERALLY SPEAKING, ADVERTISING RATE INCREASES ARE 


        13    TIED TO ONE OF TWO THINGS.  EITHER CIRCULATION IS GOING UP AND 


        14    YOU'RE CHARGING FOR MORE READERS, MORE EYEBALLS, OR EXPENSES 


        15    ARE GOING UP TO THE POINT WHERE YOU NEED TO RAISE RATES TO 


        16    COVER NEWSPRINT COSTS, FOR INSTANCE. 


        17               SO IT'S A -- IT'S CERTAINLY A DIFFICULT ANALYSIS 


        18    THAT NEWSPAPERS TAKE VERY SERIOUSLY BECAUSE YOU HAVE TO WEIGH 


        19    RAISING RATES. 


        20               IT'S EASY TO HAVE HIGH RATES AND LOW VOLUME.  SO YOU 


        21    WANT TO FIND A NICE MIX OF HAVING LOTS OF ADS BUT GETTING A 


        22    GOOD RATE FOR THEM. 


        23    Q.   SINCE YOU'VE BEEN PRESIDENT OF THE AGENCY, ON HOW MANY 


        24    OCCASIONS HAVE YOU MADE A RECOMMENDATION TO HEARST AND 


        25    CHRONICLE FOR APPROVAL FOR A RATE INCREASE? 
                                                                         1437




         1    A.   AN ADVERTISING RATE INCREASE, SINCE I HAVE BEEN PRESIDENT, 


         2    I THINK HAS ONLY BEEN ONCE. 


         3    Q.   IN THREE YEARS? 


         4    A.   YES.  THE CIRCULATION SITUATION BEING WHAT IT IS HAS -- 


         5    HAS MADE IT UNABLE TO RAISE AD RATES FOR THE PAST COUPLE OF 


         6    YEARS. 


         7    Q.   AND IN THE ONE INSTANCE YOU JUST REFERENCED, DID YOU 


         8    RECOMMEND A PARTICULAR RATE CHANGE? 


         9    A.   I BELIEVE IT WAS IN THE TWO AND A HALF TO THREE PERCENT 


        10    RANGE, YES. 


        11    Q.   WAS YOUR RECOMMENDATION ADOPTED BY BOTH HEARST AND 


        12    CHRONICLE? 


        13    A.   YES. 


        14    Q.   WITHOUT ANY CHANGE? 


        15    A.   WITHOUT ANY CHANGE. 


        16    Q.   NOW, WE'VE BEEN TALKING ABOUT ADVERTISING RATES.  LET'S 


        17    TALK ABOUT CIRCULATION RATES.  HOW ARE CIRCULATION RATES 


        18    ESTABLISHED AT THE AGENCY? 


        19    A.   ACTUALLY THE SAME WAY.  THE NEWSPAPER AGENCY RECOMMENDS TO 


        20    BOTH PRINCIPALS FROM TIME TO TIME CIRCULATION RATE INCREASES.  


        21    SOMETIMES DECREASES, BUT FROM TIME TO TIME INCREASES. 


        22    Q.   AND WHAT STANDARDS OR GOALS WOULD YOU HAVE IN CONNECTION 


        23    WITH CHANGING CIRCULATION RATES? 


        24    A.   AGAIN, CIRCULATION RATES ARE GENERALLY CERTAINLY TIED TO 


        25    COMPETITIVE FORCES IN THE MARKET.  YOU CAN'T CHARGE -- YOU 
                                                                         1438




         1    CAN'T CHARGE MORE FOR A PRODUCT IF A CONSUMER IS GOING TO STOP 


         2    SUBSCRIBING TO THAT PRODUCT.  SO WE SET RATES, YOU KNOW, TO 


         3    COVER COSTS, TO COVER DELIVERY COSTS, BUT CERTAINLY IN ANOTHER 


         4    DELICATE BALANCE WITH COMPETITION IN THE MARKETPLACE. 


         5    Q.   WITH RESPECT TO CIRCULATION RATES, HAVE YOU EVER 


         6    RECOMMENDED A CHANGE IN RATES TO HEARST AND CHRONICLE THAT WAS 


         7    NOT APPROVED? 


         8    A.   NO. 


         9    Q.   NOW, DO YOU HAVE CONTRACTS WITH ADVERTISERS? 


        10    A.   YES, WE DO. 


        11    Q.   WHAT'S THE LENGTH OF TIME THAT THOSE CONTRACTS ARE IN 


        12    EFFECT, IF THERE'S A WAY TO GENERALIZE? 


        13    A.   WE HAVE YEARLY CONTRACTS WITH ADVERTISERS.  RETAIL 


        14    ADVERTISERS, NATIONAL ADVERTISERS AND CLASSIFIED ADVERTISERS. 


        15    Q.   WILL THOSE CONTRACTS REMAIN IN EFFECT IF THIS TRANSACTION 


        16    WERE TO BE APPROVED AND HEARST WERE TO BUY THE CHRONICLE? 


        17    A.   NOT IN THEIR CURRENT FORM.  THE CURRENT CONTRACTS VERY 


        18    SPECIFICALLY TALK ABOUT A COMBINATION ADVERTISING BUY, 


        19    CHRONICLE AND EXAMINER.  THOSE TERMS WOULD CHANGE, AND WE WOULD 


        20    RENEGOTIATE ADVERTISING CONTRACTS WITH THOSE ADVERTISERS. 


        21    Q.   DO YOU HAVE ANY ADVERTISING CONTRACTS THAT RESTRICT THE 


        22    ADVERTISER IN ANY WAY AS TO ADVERTISING WITH SOMEONE ELSE? 


        23    A.   NO. 


        24    Q.   WHAT PERCENTAGE OF SFNA ADVERTISING REVENUE IS FROM 


        25    SAN-FRANCISCO-BASED LOCAL ADVERTISERS, IF YOU KNOW? 
                                                                         1439




         1    A.   OUR TOTAL ADVERTISING REVENUE IS $350 MILLION.  WE HAVE A 


         2    SAN-FRANCISCO-ZONED EDITION IN VARIOUS PARTS OF THE PAPER 


         3    THROUGHOUT THE WEEK. 


         4               IN 1999 OUR TOTAL SAN-FRANCISCO-ZONED AD REVENUE WAS 


         5    3.4 MILLION OF THE TOTAL. 


         6    Q.   ON A PERCENTAGE BASIS, ABOUT HOW MUCH WOULD THAT BE? 


         7    A.   ONE PERCENT. 


         8    Q.   WHEN YOU SAY YOU HAVE A SAN-FRANCISCO-ZONED EDITION, CAN 


         9    YOU EXPLAIN WHAT THAT MEANS? 


        10    A.   WE HAVE GEOGRAPHICALLY DIVIDED UP THE BAY AREA INTO THE 


        11    KEY STRATEGIC SUBURBAN COMPONENTS.  SO WE HAVE ON WEDNESDAYS, 


        12    FOR INSTANCE, THE FOOD SECTION AND THE HOME SECTION OF THE 


        13    CHRONICLE. 


        14               YOU CAN -- IF YOU ARE AN ADVERTISER, YOU CAN BUY A 


        15    NORTH BAY EDITION, YOU CAN BUY ONE OF TWO EAST BAY, ALAMEDA OR 


        16    CONTRA COSTA EDITION, YOU CAN BUY A SOUTH BAY EDITION, OR YOU 


        17    CAN BUY A CITY EDITION; AND YOUR ADVERTISEMENT WOULD APPEAR 


        18    ONLY IN THAT EDITION. 


        19               SO WE HAVE THOSE TWO SECTIONS ON WEDNESDAY, AND THE 


        20    CHRONICLE SUNDAY SECTION IS ALSO ZONED IN THOSE SAME FIVE 


        21    GEOGRAPHICAL AREAS. 


        22    Q.   HOW MUCH ADVERTISING DO YOU GET FOR THE CHRONICLE 


        23    SUNDAY-ZONED PRODUCT YOU JUST REFERENCED? 


        24    A.   THE SUNDAY-ZONED PRODUCT IS VERY, VERY SMALL.  OUR TOTAL 


        25    ZONED AD REVENUE FROM ALL OF THOSE ZONES COMBINED FOR LAST YEAR 
                                                                         1440




         1    WAS ABOUT $11 MILLION. 


         2    Q.   AND BY "ALL THOSE ZONES," DOES THAT -- ARE YOU REFERRING 


         3    TO SAN FRANCISCO -- 


         4    A.   YES, SAN FRANCISCO, NORTH BAY, EAST BAY, SOUTH BAY, 


         5    WEDNESDAY, SUNDAY, COMBINED ZONED REVENUE WAS ABOUT 11 MILLION. 


         6    Q.   OUT OF ABOUT 340 MILLION TOTAL? 


         7    A.   350 MILLION. 


         8    Q.   IF A -- 


         9    A.   WE WORKED HARD TO GET THAT 10. 


        10    Q.   IF A SAN-FRANCISCO-BASED LOCAL ADVERTISER WANTED TO PLACE 


        11    AN AD THAT WOULD ONLY REACH YOUR SAN FRANCISCO CIRCULATION, IS 


        12    THERE ANY WAY TO DO IT OTHER THAN THE ZONED EDITION YOU JUST 


        13    REFERENCED? 


        14    A.   NOT TODAY.  NOW, IN THE PRESS RELEASE WE TALKED ABOUT A 


        15    FEW MINUTES AGO, WE ARE FINALLY GOING TO HAVE A SAN FRANCISCO 


        16    FRIDAY ZONE.  WE HAVE FRIDAY STAND-ALONE SECTIONS NOW IN THE 


        17    NORTH BAY, TWO IN THE EAST BAY, ONE ON THE PENINSULA.  AND PART 


        18    OF OUR STRATEGIC PLAN FOR THE YEAR WAS TO FILL IN THAT FINAL 


        19    COMPONENT IN SAN FRANCISCO ON BOTH THE CHRONICLE AND EXAMINER.   


        20               EFFECTIVE FRIDAY MAY 26 WE WILL HAVE TWO SAN 


        21    FRANCISCO STAND-ALONE EDITIONS FOR ADVERTISING. 


        22    Q.   I BELIEVE YOU INDICATED A MOMENT AGO THAT ALL OF YOUR 


        23    ZONED ADVERTISING IS A TOTAL OF ABOUT $11 MILLION IN '99? 


        24    A.   YES, 11 MILLION. 


        25    Q.   DOES THAT MEAN THAT THE REST OF THE 350 MILLION WOULD BE 
                                                                         1441




         1    ADVERTISEMENTS THAT RUN IN THE ENTIRE BAY AREA THROUGH ALL THE 


         2    CIRCULATION OF THE CHRONICLE AND EXAMINER? 


         3    A.   YES.  AS A MAJOR METROPOLITAN NEWSPAPER OPERATION, WE ARE 


         4    CERTAINLY A REGIONAL ADVERTISING BUY.  I MEAN, MEANT FOR 


         5    ADVERTISERS REACHING ALL OF NORTHERN CALIFORNIA. 


         6               MR. HALLING:  I HAVE NOTHING FURTHER. 


         7               THE COURT:  VERY WELL.  WHO IS GOING TO FURTHER 


         8    EXAMINE THIS WITNESS ON THE DEFENSE SIDE?  ANYBODY? 


         9               MR. BALABANIAN:  YES, YOUR HONOR. 


        10               THE COURT:  MR. BALABANIAN. 


        11                           CROSS-EXAMINATION 


        12    BY MR. BALABANIAN: 


        13    Q.   MR. FALK, I'M DAVID BALABANIAN.  I REPRESENT INTERVENOR 


        14    EXIN CORPORATION -- I'M SORRY, LLC.  MY QUESTION TO YOU, SIR:  


        15    IS THERE TODAY ANY ECONOMIC COMPETITION BETWEEN THE CHRONICLE 


        16    AND THE EXAMINER? 


        17    A.   NO. 


        18    Q.   NOT ON AD RATES? 


        19    A.   EVERYTHING THE NEWSPAPER AGENCY DOES IS DONE JOINTLY FOR 


        20    BENEFIT OF BOTH.   


        21    Q.   SO IF THE FANGS ARE PERMITTED TO BUY THE EXAMINER, WILL 


        22    THERE BE MORE OR LESS ECONOMIC COMPETITION BETWEEN THE DAILIES 


        23    THAN THERE IS TODAY? 


        24    A.   THERE WILL CERTAINLY BE MORE.  I MEAN, TO THE EXTENT THAT 


        25    MR. FANG DOES A GOOD JOB HERE LOCALLY, IT WILL BE ONE MORE 
                                                                         1442




         1    COMPETITOR ON A RADAR SCREEN FULL OF COMPETITORS.  I MEAN, THIS 


         2    ONE WILL HAPPEN TO BE IN SAN FRANCISCO BUT CERTAINLY WILL NOT 


         3    BE UNLIKE THE IJ IN MARIN OR THE SAN MATEO TIMES ON THE 


         4    PENINSULA. 


         5    Q.   TO PUT IT ANOTHER WAY, IF THE FANGS WERE PREVENTED FROM 


         6    BUYING THE EXAMINER, WOULD THAT TEND TO PROTECT ECONOMIC 


         7    COMPETITION OR PREVENT ECONOMIC COMPETITION? 


         8    A.   IF THEY DON'T BUY THE EXAMINER, OBVIOUSLY THEY WON'T HAVE 


         9    A VEHICLE FROM WHICH TO COMPETE WITH US.  SO THAT WOULD LEAD TO 


        10    LESS ECONOMIC COMPETITION. 


        11    Q.   IT WOULD BE ANTICOMPETITIVE? 


        12    A.   YES. 


        13    Q.   NOW, IS THERE TODAY ANY COMPETITION BETWEEN THE CHRONICLE 


        14    AND THE EXAMINER FOR READERS? 


        15    A.   WELL, AGAIN, WE HAVE -- YOU KNOW, THE NEWSPAPER AGENCY HAS 


        16    AN ADVERTISING PORTFOLIO THAT INCLUDES JOINT ADVERTISING IN 


        17    BOTH NEWSPAPERS, AND IT HAS A READERSHIP PORTFOLIO OF A MORNING 


        18    NEWSPAPER AND AN AFTERNOON NEWSPAPER.  SO, I MEAN, WE HAVE -- 


        19    WE HAVE JOINTLY AT OUR DISPOSAL PRODUCTS AND DELIVERY CYCLES 


        20    AND READERSHIP CYCLES THAT, YOU KNOW, MEET CONSUMERS' 


        21    EXPECTATIONS EITHER IN THE MORNING OR IN THE AFTERNOON. 


        22    Q.   LET ME ASK YOU A PRELIMINARY QUESTION.  ARE THERE PLACES 


        23    WHERE ONLY ONE OF THE TWO NEWSPAPERS IS DISTRIBUTED? 


        24    A.   NO.  I MEAN, WHICH GETS TO WHY THE EXAMINER IS SUCH AN 


        25    EXPENSIVE DISTRIBUTION ORGANIZATION.  YOU CAN GET THE EXAMINER 
                                                                         1443




         1    DELIVERED IN REDDING, CALIFORNIA, OR IN SOUTH LAKE TAHOE IF 


         2    YOU'D LIKE IT. 


         3    Q.   DOES ANYONE MAKE ANY MONEY ON AN EXAMINER DELIVERED IN 


         4    REDDING, CALIFORNIA? 


         5    A.   NO. 


         6    Q.   ALL RIGHT.  WERE YOU PRESENT IN COURT WHEN DR. COMANOR 


         7    GAVE HIS DEFINITION OF COMPETITIVE NEWSPAPERS? 


         8    A.   I READ SOME OF HIS TESTIMONY THROUGH TRANSCRIPT. 


         9    Q.   YOU RECALL THAT HE SAID NEWSPAPERS ARE ONLY COMPETITIVE 


        10    WHEN THEY SUBSTITUTE FOR ONE ANOTHER, NOT WHEN THEY'RE 


        11    COMPLEMENTARY.  DID YOU SEE THAT? 


        12    A.   YES, I HEARD THAT TODAY ALSO. 


        13    Q.   AND YOU HEARD MR. FLOOD ADOPT THE SAME DEFINITION? 


        14    A.   YES. 


        15    Q.   CORRECT? 


        16               NOW, USING THAT DEFINITION, THE DEFINITION OF 


        17    COMPETITION ADVANCED BY PLAINTIFF'S EXPERT, ARE THE CHRONICLE 


        18    AND THE EXAMINER TODAY COMPETITIVE ON THE EDITORIAL SIDE? 


        19    A.   I HAVE NEVER HEARD COMPETITION IN THE NEWSPAPER BUSINESS 


        20    DEFINED AS ONE NEWSPAPER THAT REPLACES ANOTHER.  I MEAN, 


        21    THEY'RE DIFFERENT CYCLES, DIFFERENT PUBLICATION CYCLES.  THIS 


        22    IS A WELL-READ COMMUNITY OF EDUCATED PEOPLE.  PEOPLE READ LOTS 


        23    OF NEWSPAPERS.  I DON'T THINK CONSUMERS THINK ABOUT REPLACING 


        24    ONE FOR THE OTHER COMPETITIVELY. 


        25               THE COURT:  ISN'T THIS OPINION TESTIMONY THAT YOU'RE 
                                                                         1444




         1    ELICITING? 


         2               MR. BALABANIAN:  THIS MAN KNOWS MORE ABOUT THE 


         3    COMPETITION BETWEEN THESE TWO PAPERS, I BELIEVE, YOUR HONOR, 


         4    THAN ANYONE.  BUT LET ME QUICKLY ADDRESS A FACTUAL QUESTION, 


         5    THEN. 


         6               THE COURT:  ALL RIGHT. 


         7    BY MR. BALABANIAN: 


         8    Q.   YOU TESTIFIED, DID YOU NOT, SIR, THAT 60 PERCENT OF THE 


         9    EXAMINER READERS ARE ALSO CHRONICLE READERS? 


        10    A.   YES.  GALLUP, AN INDEPENDENT RESEARCH FIRM, DOES EVERY 


        11    OTHER YEAR READERSHIP RESEARCH, AND THEY TELL US THAT 


        12    60 PERCENT OF EXAMINER READERS TODAY ALSO READ THE CHRONICLE. 


        13    Q.   SO AS TO 60 PERCENT OF THE EXAMINER READERS, THE PAPERS 


        14    ARE COMPLEMENTARY AND NOT SUBSTITUTES; CORRECT? 


        15    A.   CLEARLY. 


        16    Q.   SO USING THE DEFINITION ADVANCED BY PLAINTIFF'S EXPERTS, 


        17    THE CHRONICLE AND THE EXAMINER DO NOT COMPETE TODAY, EVEN ON 


        18    THE EDITORIAL SIDE, AS TO FULLY TWO-THIRDS OF THE MARKET; WOULD 


        19    THAT BE CORRECT, SIR? 


        20    A.   THAT'S CORRECT. 


        21               MR. BALABANIAN:  I HAVE NO FURTHER QUESTIONS. 


        22               THE COURT:  MR. ROSCH? 


        23               MR. ROSCH:  NO, YOUR HONOR. 


        24               THE COURT:  NO QUESTIONS?  VERY WELL.  MR. ALIOTO, 


        25    YOU MAY CROSS-EXAMINE. 
                                                                         1445




         1               YES, WHY DON'T WE TAKE A RECESS.  I WAS SO 


         2    INTERESTED IN YOUR TESTIMONY, MR. FALK, I COMPLETELY FORGOT 


         3    ABOUT THE RECESS.  WE'LL TAKE UNTIL 3:30, AND THEN WE'LL HAVE 


         4    THE CROSS-EXAMINATION BY MR. ALIOTO.   


         5                      (RECESS TAKEN AT 3:17 P.M.) 


         6               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 


         7    


         8    


         9    


        10    


        11    


        12    


        13    


        14    


        15    


        16    


        17    


        18    


        19    


        20    


        21    


        22    


        23    


        24    


        25    
                                                                         1446




         1                  (PROCEEDINGS RESUMED AT 3:40 P.M.) 


         2               THE COURT:  VERY WELL, MR. ALIOTO, YOU MAY 


         3    CROSS-EXAMINE THE WITNESS. 


         4               MR. ALIOTO:  THANK YOU, YOUR HONOR.  MAY IT PLEASE 


         5    YOUR HONOR. 


         6                           CROSS-EXAMINATION 


         7    BY MR. ALIOTO: 


         8    Q.   A SLIGHT RECAP, YOU'RE THE PRESIDENT AND HAVE BEEN THE 


         9    PRESIDENT AND THE CHIEF EXECUTIVE OFFICER OF SAN FRANCISCO 


        10    NEWSPAPER AGENCY SINCE NOVEMBER OF 1996; IS THAT RIGHT? 


        11    A.   YES. 


        12    Q.   AND PRIOR TO THAT TIME YOU SERVED AS THE SENIOR VICE 


        13    PRESIDENT OF SALES AND MARKETING FOR THE SAN FRANCISCO 


        14    NEWSPAPER AGENCY; CORRECT? 


        15    A.   YES. 


        16    Q.   AND IN THE CAPACITY OF BOTH OF THOSE -- AND BEFORE THAT, 


        17    BY THE WAY, YOU ACTED AS THE CIRCULATION DIRECTOR FOR THE 


        18    CHRONICLE FOR THE SAN FRANCISCO NEWSPAPER AGENCY; IS THAT 


        19    RIGHT? 


        20    A.   YES. 


        21    Q.   DURING THAT TIME PERIOD, YOU FAMILIARIZED YOURSELF, 


        22    ESPECIALLY WHEN YOU BECAME THE PRESIDENT AND THE CHIEF 


        23    EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY, WITH 


        24    THE JOINT OPERATING AGREEMENT; DID YOU NOT? 


        25    A.   YES, I READ IT. 
                                                                         1447




         1    Q.   LET ME SHOW YOU -- 


         2               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR? 


         3               THE COURT:  YOU MAY. 


         4    BY MR. ALIOTO: 


         5    Q.   I SHOW YOU WHAT IS IN EVIDENCE AS EXHIBIT NUMBER 1.  THIS 


         6    IS THE JOINT OPERATING AGREEMENT BETWEEN THE CHRONICLE 


         7    PUBLISHING COMPANY AND THE HEARST PUBLISHING COMPANY DATED 


         8    OCTOBER OF 1964. 


         9               THAT IS THE JOINT OPERATING AGREEMENT THAT YOU 


        10    FAMILIARIZED YOURSELF WITH; IS IT NOT? 


        11    A.   YES. 


        12    Q.   OKAY.  NOW, I WANT TO DIRECT YOUR ATTENTION TO THE VERY 


        13    FIRST PAGE AND IT WOULD BE THE THIRD "WHEREAS" GOING DOWN WHERE 


        14    IT SAYS, "WHEREAS, FOR MANY YEARS PAST."  DO YOU SEE THAT, 


        15    THIRD ONE DOWN? 


        16    A.   YES, I DO. 


        17    Q.   OKAY.  NOW, IT SAYS, QUOTE: 


        18                   "WHEREAS, FOR MANY YEARS PAST THE COSTS 


        19               INCIDENT TO THE PUBLICATION OF THE SAN FRANCISCO 


        20               CHRONICLE, THE SAN FRANCISCO EXAMINER AND THE 


        21               NEWS CALL BULLETIN HAVE BEEN INCREASING STEADILY 


        22               AS A RESULT OF WHICH HEARST HAS, IN RECENT 


        23               YEARS, INCURRED DEFICITS WITH RESPECT TO THE 


        24               PUBLICATION, SALE AND DISTRIBUTION OF ITS 


        25               AFORESAID NEWSPAPERS." 
                                                                         1448




         1               DO YOU SEE THAT? 


         2    A.   YES. 


         3    Q.   SO WHEN YOU FAMILIARIZED YOURSELF WITH THE AGREEMENT, YOU 


         4    UNDERSTOOD, DID YOU NOT, THAT FOR THE NEWSPAPERS THAT WERE 


         5    BEING PUT OUT BY THE HEARST CORPORATION, THAT THEY WERE 


         6    SUFFERING A DEFICIT IN 1964; CORRECT? 


         7    A.   THAT'S WHAT IT SAYS. 


         8    Q.   YES.  BUT YOU -- I'LL ASK YOU AGAIN.   


         9               WHEN YOU FAMILIARIZED YOURSELF WITH THE JOINT 


        10    OPERATING AGREEMENT, YOU WERE AWARE, WERE YOU NOT, THAT THE 


        11    HEARST CORPORATION WAS OPERATING AT A DEFICIT IN 1964? 


        12    A.   TO BE HONEST, THIS IS -- WE'VE SPENT MORE TIME ON THIS 


        13    PARAGRAPH RIGHT NOW THAN I EVER DID READING IT.  I READ IT.  I 


        14    DON'T KNOW THAT I THOUGHT ABOUT IT. 


        15    Q.   OKAY.  SO IT'S YOUR TESTIMONY THAT YOU DON'T KNOW, YOU AS 


        16    THE CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF THE SAN 


        17    FRANCISCO NEWSPAPER AGENCY ARE UNAWARE OF THE FACT THAT THE 


        18    JOINT OPERATING AGREEMENT WAS PUT INTO EFFECT IN 1964 BECAUSE 


        19    THE HEARST CORPORATION WAS OPERATING AT A DEFICIT; IS THAT YOUR 


        20    TESTIMONY? 


        21    A.   I DO NOT KNOW THAT. 


        22    Q.   YOU DIDN'T KNOW ONE WAY OR ANOTHER? 


        23    A.   IN 1965, NO. 


        24    Q.   NO.  WHEN YOU BECAME -- I'LL DO IT AGAIN.  WHEN YOU BECAME 


        25    THE PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SAN FRANCISCO 
                                                                         1449




         1    NEWSPAPER AGENCY, YOU FAMILIARIZED YOURSELF WITH THIS 


         2    AGREEMENT; DID YOU NOT? 


         3    A.   I READ IT. 


         4    Q.   OKAY. 


         5    A.   NO ONE EXPLAINED THIS PARAGRAPH. 


         6    Q.   AND IS IT CORRECT -- IS IT CORRECT NOW -- 


         7               THE COURT:  LET'S HAVE ONE PERSON TALK AT A TIME. 


         8    BY MR. ALIOTO: 


         9    Q.   AND IS IT NOW CORRECT THAT YOU DID NOT NOTICE THE FACT 


        10    THAT THE REASON THEY HAD THE JOINT OPERATING AGREEMENT IN THE 


        11    FIRST PLACE WAS BECAUSE HEARST WAS OPERATING AT A DEFICIT?  IS 


        12    THAT YOUR TESTIMONY? 


        13    A.   I RECOGNIZED THE FACT THAT THE PURPOSE OF THE JOA WAS THAT 


        14    BOTH WERE OPERATING AT DEFICITS. 


        15    Q.   OKAY.  SO YOU UNDERSTOOD THAT NOT ONLY WAS THE HEARST 


        16    CORPORATION OPERATING AT A DEFICIT, BUT SO WAS THE CHRONICLE; 


        17    IS THAT YOUR UNDERSTANDING? 


        18    A.   THAT'S WHAT I'VE HEARD, YES. 


        19    Q.   OKAY.  BUT THAT'S NOT WHAT IT SAYS; RIGHT? 


        20    A.   THIS PARAGRAPH POINTS TO WHAT IT SAYS, CHRONICLE, EXAMINER 


        21    AND NEWS CALL BULLETIN. 


        22    Q.   AND IT SAYS:   


        23               "... AS A RESULT OF WHICH HEARST HAS IN RECENT 


        24               YEARS INCURRED DEFICITS WITH RESPECT TO THE 


        25               PUBLICATION, SALE AND DISTRIBUTION OF ITS 
                                                                         1450




         1               AFORESAID NEWSPAPERS."   


         2               DO YOU SEE THAT? 


         3    A.   YES. 


         4    Q.   ALL RIGHT.  WELL, LET'S JUST TAKE THAT. 


         5               MR. ALIOTO:  MAY I USE THE EASEL, YOUR HONOR? 


         6               THE COURT:  YES, YOU MAY. 


         7    BY MR. ALIOTO: 


         8    Q.   THIS IS EXHIBIT 1.  DID YOU TRY TO FAMILIARIZE YOURSELF 


         9    WITH WHY THEY HAD A JOINT OPERATING AGREEMENT IN THE FIRST 


        10    PLACE? 


        11    A.   I FELT I KNEW WHY. 


        12    Q.   BUT YOU DIDN'T KNOW THAT IT WAS BECAUSE HEARST HAD A 


        13    DEFICIT; IS THAT RIGHT? 


        14    A.   I THOUGHT THEY BOTH HAD DEFICITS. 


        15    Q.   SO YOU WERE WRONG ABOUT THAT; RIGHT? 


        16    A.   I DON'T KNOW. 


        17    Q.   IT DOESN'T SAY THAT; DOES IT?  YOU WERE WRONG ABOUT IT; 


        18    WEREN'T YOU? 


        19    A.   THIS PARAGRAPH SAYS HEARST INCURRED DEFICITS WITH RESPECT 


        20    TO PUBLICATION, SALE AND DISTRIBUTION OF ITS AFORESAID 


        21    NEWSPAPERS. 


        22    Q.   OKAY.  SO WE'RE GOING TO PUT -- THIS IS IN THE "WHEREAS."  


        23    THE FIRST PAGE, HEARST DEFICIT. 


        24               NOW, DEFICIT MEANT TO YOU THEY WERE LOSING MONEY, 


        25    RIGHT, OR DOES MEAN TO YOU NOW; RIGHT? 
                                                                         1451




         1    A.   YES. 


         2    Q.   OKAY.  THE NEXT SENTENCE, NEXT PARAGRAPH, QUOTE: 


         3                   "WHEREAS, CHRONICLE AND HEARST ARE CONVINCED 


         4               THAT ONLY..."  


         5               DO YOU SEE "ONLY"? 


         6    A.   YES. 


         7    Q.   OKAY. 


         8               "... THAT ONLY BY THE CREATION OF A JOINT 


         9               PRINTING PRODUCING FACILITY IN WHICH THEIR 


        10               RESPECTIVE MECHANICAL, ADVERTISING, BUSINESS AND 


        11               CIRCULATION DEPARTMENTS ARE INTEGRATED 


        12               (CONFORMING TO WHAT HAS BECOME AN ACCEPTED 


        13               PROCEDURE IN THE NEWSPAPER BUSINESS IN MANY 


        14               CITIES THROUGHOUT THE UNITED STATES) AND BY THE 


        15               CONSOLIDATION OF THE HEARST MORNING DAILY AND 


        16               AFTERNOON DAILY NEWSPAPERS INTO AN AFTERNOON 


        17               DAILY NEWSPAPER CAN THE NECESSARY OPERATIONAL 


        18               EFFICIENCIES BE EFFECTED WHICH, IN THE FACE OF 


        19               INCREASING PUBLISHING COSTS AND EXPENSES, WILL 


        20               ENABLE BOTH CHRONICLE AND HEARST TO SURVIVE AS 


        21               PUBLISHERS OF SEPARATE AND INDEPENDENT 


        22               NEWSPAPERS." 


        23               DO YOU SEE THAT? 


        24    A.   YES. 


        25    Q.   DID YOU, WHEN YOU FAMILIARIZED YOURSELF WITH THE JOA, DID 
                                                                         1452




         1    YOU AGREE THAT THE JOINT OPERATING AGREEMENT WAS THE ONLY WAY 


         2    IN WHICH -- WHICH WOULD ENABLE BOTH THE CHRONICLE AND HEARST TO 


         3    SURVIVE AS PUBLISHERS OF SEPARATE AND INDEPENDENT NEWSPAPERS?  


         4    DID YOU AGREE WITH THAT? 


         5    A.   I READ IT. 


         6    Q.   DID YOU AGREE WITH IT? 


         7    A.   I HAVE NO REASON TO DISAGREE WITH IT. 


         8    Q.   OKAY.  I WANT TO BE CLEAR HERE NOW. 


         9               MR. ALIOTO:  IF I MAY APPROACH THE EASEL AGAIN, YOUR 


        10    HONOR. 


        11               THE COURT:  YOU MAY. 


        12    BY MR. ALIOTO: 


        13    Q.   OKAY.  IT SAYS ONLY, ONLY THE JOA.  WHEN YOU FAMILIARIZED 


        14    YOURSELF WITH THAT, YOU UNDERSTOOD, DID YOU NOT, THERE WAS NO 


        15    OTHER WAY THAT THESE TWO PAPERS WOULD BE ABLE TO CONTINUE TO 


        16    PUBLISH SEPARATE AND INDEPENDENT NEWSPAPERS; CORRECT?   


        17    A.   THEY WERE CONVINCED AT THAT TIME, YES, THAT'S WHAT IT 


        18    SAYS. 


        19    Q.   OKAY.  NOW, YOU HEARD -- AND THEN AFTER THAT IT IS 


        20    CORRECT, IS IT NOT, THAT -- LET ME SHOW YOU WHAT IS MARKED FOR 


        21    IDENTIFICATION -- NO, IT'S IN EVIDENCE AS EXHIBIT NUMBER 23 -- 


        22    93. 


        23               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR? 


        24               THE COURT:  YES.  THE NUMBER IS WHAT? 


        25               MR. ALIOTO:  93. 
                                                                         1453




         1               THE COURT:  93. 


         2               MR. ALIOTO:  YES, SIR. 


         3    Q.   EXHIBIT 93 IS A DOCUMENT DATED SEPTEMBER 23, 1999.  IT IS 


         4    ON THE HEARST MEMORANDA AND IT IS SIGNED BY MR. GEORGE IRISH.  


         5    IT REFERS TO THE DOCUMENTS THAT SUMMARIZE THE FINANCIAL 


         6    PROJECTIONS FOR SAN FRANCISCO EXAMINER, SAN FRANCISCO NEWSPAPER 


         7    AGENCY, FOR THE YEARS THROUGH 2003.  THE 1999 MARKETING PLAN 


         8    WAS PREPARED BY THE AGENCY AND IS THE LATEST AVAILABLE. 


         9               IT IS CORRECT THAT YOU SAW THAT DOCUMENT ON OR ABOUT 


        10    THAT DATE; DIDN'T YOU? 


        11    A.   (WITNESS EXAMINES DOCUMENT.)  THE ATTACHMENT, YES. 


        12    Q.   LET ME ADD, AFTER ONLY -- 


        13               MR. ALIOTO:  IF I MAY USE THE EASEL AGAIN, YOUR 


        14    HONOR. 


        15               THE COURT:  YOU MAY. 


        16    BY MR. ALIOTO: 


        17    Q.   AFTER "ONLY," "ONLY THE JOA," I THINK IT'S IMPORTANT, I'M 


        18    GOING TO PUT "ENABLE," I'M WRITING IT DOWN SO WE'LL REFER TO IT 


        19    A LITTLE BIT LATER, "ENABLE BOTH."  DO YOU SEE "BOTH," WHERE IT 


        20    SAYS "BOTH"? 


        21    A.   YES. 


        22    Q.   "... BOTH CHRONICLE AND EXAMINER AND HEARST" -- SORRY, 


        23    "AND HEARST TO SURVIVE."  DO YOU SEE THAT?  DO YOU SEE THAT 


        24    "SURVIVE"? 


        25    A.   YES. 
                                                                         1454




         1    Q.   "... AS PUBLISHERS OF SEPARATE..."  "SEPARATE," DO YOU SEE 


         2    THAT? 


         3    A.   YES. 


         4    Q.   "... AND INDEPENDENT..."  DO YOU SEE THAT, "INDEPENDENT"? 


         5    A.   YES. 


         6    Q.   YES.  "... NEWSPAPERS." 


         7               NOW, LOOKING AT YOUR MOST -- LOOKING AT THE MOST 


         8    RECENT DOCUMENTS FROM THE SAN FRANCISCO NEWSPAPER AGENCY, THIS 


         9    IS IN REFERENCE TO THE EXAMINER.  IF YOU'LL TURN TO WHAT IS 


        10    BATES NUMBER 13682.  IT'S PAGE 3.  ARE YOU THERE? 


        11    A.   YES. 


        12    Q.   OKAY.  AND THAT IS HEADNOTED "SAN FRANCISCO EXAMINER 


        13    INCOME STATEMENT."  DO YOU SEE THAT? 


        14    A.   YES. 


        15    Q.   OKAY.  AND THEN FOR 1999 UNDER "NET PROFIT," I'M GOING TO 


        16    GET IN THE WAY OF THIS, BUT IN NET PROFIT -- OOPS, TOO MANY 


        17    BOOKS -- DO YOU SEE WHERE IT SAYS "NET PROFIT"? 


        18    A.   YES. 


        19    Q.   OKAY.  1998, 22 MILLION; 1999, 20 MILLION.  DO YOU SEE IT? 


        20    A.   YES. 


        21    Q.   OKAY.  2000, 21 MILLION FOR THE EXAMINER; CORRECT? 


        22    A.   YES. 


        23    Q.   2001, 22,840,000.  DO YOU SEE THAT? 


        24    A.   YES. 


        25    Q.   2002, 23 MILLION.  DO YOU SEE THAT? 
                                                                         1455




         1    A.   YES. 


         2    Q.   2003, 25 MILLION.  DO YOU SEE THAT? 


         3    A.   YES, I DO. 


         4    Q.   AND THAT ACCORDS WITH YOUR UNDERSTANDING THAT THE AMOUNT 


         5    OF WHAT THEY CALL THE NET EXCESS -- AND THIS IS NET PROFIT -- 


         6    BUT EVEN THE NET EXCESS WOULD AND CONTINUES TO INCREASE SINCE 


         7    1999; IS THAT RIGHT? 


         8    A.   THAT'S WHAT THE NUMBERS INDICATE, YES. 


         9    Q.   WELL, ARE THEY TRUE? 


        10    A.   IT'S A PROJECTION. 


        11    Q.   ARE THEY TRUE?  ARE THEY THE BEST PROJECTION THAT THE SAN 


        12    FRANCISCO NEWSPAPER AGENCY COULD DO AT THE TIME SEPTEMBER 23, 


        13    1999? 


        14    A.   THE NEWSPAPER AGENCY WOULD HAVE PROJECTED EVERYTHING 


        15    EXCEPT THE EDITORIAL EXPENSE LINE; AND, YES, IT WOULD BE AN 


        16    ACCURATE PROJECTION BASED ON OUR BEST INFORMATION AT THAT TIME. 


        17    Q.   OKAY.  AND YOU ALSO -- NOW, THAT MEANS THAT THE HEARST 


        18    CORPORATION IT IS ESTIMATED THAT AT LEAST THROUGH 2003 WILL BE 


        19    MAKING PROFITS OVER $20 MILLION EACH YEAR; CORRECT? 


        20    A.   THAT'S THE PROJECTION. 


        21    Q.   AND THEY'RE INCREASING EACH YEAR; CORRECT? 


        22    A.   YES. 


        23    Q.   AND WHILE THEY ARE DOING THAT, BOTH PAPERS WILL BE 


        24    SURVIVING; CORRECT? 


        25    A.   UNDER THE JOA, YES. 
                                                                         1456




         1    Q.   YES, UNDER THE JOA. 


         2               AND BOTH WILL BE INDEPENDENT; CORRECT? 


         3    A.   YES. 


         4    Q.   AND BOTH WILL BE SEPARATE; CORRECT? 


         5    A.   YES. 


         6    Q.   OKAY.  AND IT GOES TO 2005; DOES IT NOT? 


         7    A.   THIS DOCUMENT IS 2003. 


         8    Q.   THIS GOES TO 2003.  THE JOA GOES TO 2005; DOES IT NOT? 


         9    A.   YES. 


        10    Q.   OKAY.  NOW, YOU WERE IN COURT AND YOU HEARD COUNSEL FOR 


        11    CHRONICLE SAY THAT THE CHRONICLE WOULD NOT BREAK ITS CONTRACT, 


        12    THAT THEY BELIEVE THE CONTRACT, THE JOA, IS A BINDING CONTRACT 


        13    AND THEY ARE GOING TO STICK IT OUT TO 2005.  YOU HEARD THAT; 


        14    DID YOU NOT?  YOU WERE HERE. 


        15               MR. ROSCH:  OBJECTION, YOUR HONOR.  THAT IS NOT WHAT 


        16    I SAID.  IF THERE WERE NO OTHER AGREEMENT -- 


        17               MR. ALIOTO:  IT'S ALMOST WORD FOR WORD, BUT I'M NOT 


        18    GOING TO QUIBBLE ABOUT IT. 


        19               MR. ROSCH:  IF THERE WERE NO OTHER AGREEMENT, THEY 


        20    WOULD STICK IT OUT TO 2005. 


        21               THE COURT:  THIS IS CROSS-EXAMINATION.  OBJECTION 


        22    OVERRULED. 


        23    BY MR. ALIOTO: 


        24    Q.   DID YOU HEAR THAT? 


        25    A.   I HEARD -- YES, I HEARD THAT. 
                                                                         1457




         1    Q.   OKAY.  SO YOU KNOW -- AND YOU'RE SUPPOSED TO BE WORKING 


         2    FOR BOTH THE PAPERS; RIGHT? 


         3    A.   THAT'S RIGHT. 


         4    Q.   OKAY.  YOU KNOW THAT IF THE JOA STAYS IN EFFECT, THAT THE 


         5    EXAMINER, NO MATTER ALL THE OTHER DIRE THINGS THAT WE'VE HEARD 


         6    TODAY, THAT THE EXAMINER WILL SURVIVE AS A NEWSPAPER AND MAKE 


         7    MONEY UNDER THE JOA; CORRECT?  YOU KNOW THAT? 


         8    A.   UNDER THOSE PROJECTIONS, YES. 


         9    Q.   AND SO WILL THE CHRONICLE; CORRECT? 


        10    A.   I DON'T KNOW IF THE CHRONICLE WILL MAKE MONEY.  I DON'T 


        11    HAVE THOSE STATISTICS.  IT WILL MOST LIKELY BE IN BUSINESS AND 


        12    SEPARATE AND INDEPENDENT, YES. 


        13    Q.   YOU YOURSELF KNOW -- 


        14               MR. ALIOTO:  IF I MAY USE THE EASEL AGAIN, YOUR 


        15    HONOR. 


        16               THE COURT:  YES. 


        17    BY MR. ALIOTO: 


        18    Q.   JUST SO WE CAN RECAP, THE MONEY FROM THE -- THE MONEY OR 


        19    REVENUE OF THE NEWSPAPERS THAT COMES IN IS ADVERTISING.  I'LL 


        20    PUT ADS AND CIRCULATION.  THAT IS THE BASIC SOURCE OF REVENUE 


        21    FOR THESE NEWSPAPERS; IS THAT RIGHT? 


        22    A.   YES. 


        23    Q.   AND THAT COMES INTO THE CHRONICLE AND THE EXAMINER; 


        24    CORRECT? 


        25    A.   YES.  WELL, IT COMES INTO THE NEWSPAPER AGENCY. 
                                                                         1458




         1    Q.   OKAY.  FLOWING TO THE SAN FRANCISCO NEWSPAPER AGENCY. 


         2               AND YOU ARE THE PRESIDENT AND CHIEF EXECUTIVE 


         3    OFFICER OF THIS, THE SAN FRANCISCO NEWSPAPER AGENCY; RIGHT? 


         4    A.   TECHNICALLY THAT'S UPSIDE DOWN.  THE NEWSPAPER AGENCY 


         5    SHOULD COME FIRST. 


         6    Q.   WELL, I'M GOING TO PUT CHRONICLE AND EXAMINER DOWN BELOW 


         7    ALSO. 


         8    A.   OKAY. 


         9    Q.   I'M JUST TRYING TO SHOW THAT YOU HAVE TO HAVE THE PAPER 


        10    OUT THERE TO GET THE ADS AND CIRCULATION, OKAY? 


        11    A.   OKAY. 


        12    Q.   ALL RIGHT.  MONEY COMES INTO THE SAN FRANCISCO NEWSPAPER 


        13    AGENCY.  YOU RUN THE WHOLE SHOW AND YOU DEDUCT THE EXPENSES, 


        14    AND WHATEVER IS LEFT OVER IS CALLED THE NET EXCESS; CORRECT? 


        15    A.   YES. 


        16    Q.   WE'LL CALL THAT OUT HERE NET EXCESS.  NET EXCESS. 


        17               AND THEN YOU SPLIT THAT NET EXCESS 50-50; RIGHT? 


        18    A.   YES. 


        19    Q.   50-50, AND THAT'S TO HEARST OR THE EXAMINER AND TO THE 


        20    CHRONICLE; IS THAT RIGHT? 


        21    A.   YES. 


        22    Q.   OKAY.  NOW, THIS NET EXCESS, SINCE YOU'RE RUNNING THE 


        23    SHOW, YOU HAVE BEEN ASKED FROM TIME TO TIME, HAVE YOU NOT, TO 


        24    MAKE SOME KIND OF PROJECTIONS OF THE FUTURE AS TO WHAT WOULD BE 


        25    HAPPENING WITH REGARD TO THE NET EXCESS IN THE FUTURE, 
                                                                         1459




         1    PROJECTIONS; CORRECT? 


         2    A.   YES. 


         3    Q.   AND YOU HAVE DONE THAT AND YOUR PROJECTIONS HAVE SHOWN -- 


         4    YOUR OWN PROJECTIONS HAVE SHOWN THE NET EXCESS HAS CONTINUED TO 


         5    INCREASE SINCE 1999; IS THAT NOT RIGHT? 


         6    A.   THAT'S CORRECT. 


         7    Q.   AND HOW FAR HAVE YOU GONE, UP TO 2004 OR SO? 


         8    A.   GENERALLY IT'S A FIVE-YEAR PROJECTION. 


         9    Q.   OKAY.  '99 TO 2004, 2005? 


        10    A.   2004. 


        11    Q.   RIGHT.  THE LAST GUY WHO ASKED YOU TO DO THAT WAS HEARST; 


        12    RIGHT? 


        13    A.   I BELIEVE SO. 


        14    Q.   SO THEY ASKED YOU TO DO A PROJECTION WHETHER OR NOT THERE 


        15    WOULD BE ANY MONEY COMING IN FROM 1999 GOING FORWARD, YOU DID 


        16    IT AND YOU TOLD THEM YOU'RE GOING TO MAKE MONEY; RIGHT? 


        17    A.   I TOLD THEM WHAT THE AGENCY'S PROJECTION FOR GROSS EXCESS 


        18    WOULD BE, YES. 


        19    Q.   OKAY.  AND THE CATEGORIES OF DOLLARS THAT YOU WERE TALKING 


        20    ABOUT WERE FROM WHAT TO WHAT?  APPROXIMATELY. 


        21    A.   ON GROSS EXCESS? 


        22    Q.   YES, THE NET EXCESS. 


        23    A.   ONE HUNDRED -- 


        24    Q.   THIS NET EXCESS THAT WOULD BE SPLIT. 


        25    A.   110 MILLION TO 120 MILLION. 
                                                                         1460




         1    Q.   OKAY.  SO OVER THE TIME PERIOD FROM 110 TO 120.  SO THE 


         2    50-50 DEAL WOULD BE FROM 55 MILLION EACH TO 60 MILLION EACH; 


         3    RIGHT? 


         4    A.   YES. 


         5    Q.   AND YOU UNDERSTAND THE EDITORIAL COSTS AND THE 


         6    DEPRECIATION THAT THEY WOULD TAKE OFF OF THAT BEFORE THEY DO 


         7    THEIR PROFIT IS IN THE RANGE OF ABOUT 25 MILLION OR SO; IS THAT 


         8    RIGHT? 


         9    A.   FOR THE EXAMINER, YES. 


        10    Q.   OKAY.  SO IF THE EXAMINER, GOING UP TO EVEN THE 60 NUMBER, 


        11    IF YOU TOOK 25 OFF, AT LEAST IN THEIR LAST YEAR GOING DOWN THE 


        12    ROAD THAT YOU WERE DOING, THEY'D BE MAKING $35 MILLION PROFIT; 


        13    IS THAT RIGHT? 


        14    A.   YES. 


        15    Q.   NOW, MAKING THAT MONEY AND OPERATING UNDER THE JOA AT 


        16    LEAST TO THE END OF THE JOA IT IS CORRECT, IS IT NOT, THAT THEY 


        17    WOULD NOT HAVE TO FIRE ANYBODY? 


        18    A.   I DON'T UNDERSTAND YOUR QUESTION. 


        19    Q.   WELL, I THOUGHT YOU GAVE ME SOME DOCUMENTS HERE WHEN YOU 


        20    WERE -- 


        21    A.   PEOPLE ARE FIRED FROM TIME TO TIME UNFORTUNATELY. 


        22    Q.   WAIT A MINUTE.  I THINK YOU GAVE US SOME DOCUMENTS ON YOUR 


        23    DIRECT EXAMINATION.  I THOUGHT THAT ONE OF THE BIG SAVINGS THAT 


        24    YOU WERE TALKING ABOUT WAS THE PAYROLL. 


        25    A.   OF COURSE. 
                                                                         1461




         1    Q.   OKAY.  WELL, YOU DON'T HAVE TO DO IT UNDER THIS PROGRAM; 


         2    DO YOU? 


         3    A.   LAYOFF EMPLOYEES? 


         4    Q.   YES. 


         5    A.   NO. 


         6    Q.   SO YOU CAN KEEP THE EMPLOYEES, YOU CAN KEEP THE EDITORIAL 


         7    STAFF AT 200 OR WHATEVER IT IS, YOU DON'T HAVE TO FIRE ANYBODY 


         8    AND THE EXAMINER IS MAKING MONEY AND THE CHRONICLE IS MAKING 


         9    MONEY IF THE JOA STAYS IN EFFECT; IS THAT NOT TRUE? 


        10    A.   YES, AND CIRCULATION WILL CONTINUE TO DECLINE. 


        11    Q.   ALL RIGHT.  AND THE CIRCULATION, BY THE WAY, THAT'S YOUR 


        12    JOB; ISN'T IT? 


        13    A.   YES, IT IS. 


        14    Q.   OKAY.  SO YOU HAVEN'T BEEN DOING SUCH A GOOD JOB; IS THAT 


        15    IT? 


        16    A.   ONE COULD DRAW THAT CONCLUSION, BUT -- 


        17    Q.   I DON'T MEAN TO BE FACETIOUS.  I'M ASKING YOU IN A SERIOUS 


        18    VEIN.  IT'S YOUR PROBLEM, THERE'S SOME PROBLEM GOING ON BUT 


        19    IT'S YOUR JOB; RIGHT? 


        20    A.   YOU CANNOT SEPARATE NEWSPAPER AGENCY PERFORMANCE FROM THE 


        21    EDITORIAL PRODUCT THAT CONSUMERS MAY OR MAY NOT WANT TO READ 


        22    TODAY. 


        23    Q.   OKAY.  SO IS IT YOUR VIEW THAT THE REASON THAT THE 


        24    CIRCULATION IS GOING DOWN IS NOT MARKETING BUT IT'S THE 


        25    EDITORIAL PROBLEMS?  IN OTHER WORDS, NOBODY WANTS TO READ WHAT 
                                                                         1462




         1    THESE EDITORS ARE WRITING; IS THAT IT? 


         2    A.   I THINK THAT'S AN OVERSTATEMENT, BUT THAT COMBINED WITH A 


         3    VERY COMPETITIVE SUBURBAN MARKETPLACE, YES, PEOPLE, CONSUMERS 


         4    MAKE CHOICES.  LATELY THEY HAVEN'T BEEN CHOOSING AS MANY OF OUR 


         5    PAPERS AS THEY HAVE IN THE PAST. 


         6    Q.   YOU WERE AWARE, WERE YOU NOT, THAT BEGINNING AT LEAST IN 


         7    1995 THE EXAMINER OR THE HEARST CORPORATION HAS PREPARED AND 


         8    WAS PREPARING STUDIES FOR THE PURPOSE OF GETTING PREPARED FOR 


         9    THE END OF THE JOA IN 2005? 


        10    A.   I HAD HEARD ABOUT THAT, YES. 


        11    Q.   RIGHT.  AND YOU UNDERSTOOD THAT WHAT THE HEARST 


        12    CORPORATION WAS PLANNING TO DO IS TO PUT THEM IN THE POSITION 


        13    DURING THESE FIVE YEARS SO THAT THEY WOULD BE ABLE TO HAVE A 


        14    PAPER OF A CIRCULATION OF AT LEAST 300,000? 


        15    A.   I CAN'T SAY I WAS DIRECTLY INVOLVED IN ANY OF THOSE 


        16    DISCUSSIONS, BUT I HAVE -- 


        17    Q.   BUT THAT'S WHAT YOU HEARD? 


        18    A.   I HAVE HEARD THAT, YES. 


        19    Q.   RIGHT, YOU HEARD IT.  SO YOU KNEW IT AND YOU HEARD IT FROM 


        20    HEARST PEOPLE; DIDN'T YOU? 


        21    A.   I CAN'T REMEMBER EXACTLY WHERE I WOULD HAVE HEARD IT. 


        22    Q.   SO AS THE CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF THE 


        23    SAN FRANCISCO NEWSPAPER AGENCY, YOU UNDERSTOOD THAT NOT ONLY 


        24    WOULD THESE PAPERS BE MAKING MONEY, BUT ALSO DURING THIS 


        25    INTERIM THE HEARST CORPORATION WAS PREPARING ITSELF FOR 
                                                                         1463




         1    HEAD-TO-HEAD COMPETITION AGAINST THE CHRONICLE AT THE 


         2    CONCLUSION OF THE JOA; ISN'T THAT RIGHT? 


         3    A.   I HEARD THAT TALK, YES. 


         4               THE COURT:  WHEN YOU ASK THE QUESTION HEARST 


         5    CORPORATION WAS PUTTING THEM IN A POSITION TO HAVE 300,000 


         6    DAILY CIRCULATION? 


         7               MR. ALIOTO:  HEARST WAS PREPARING ITS OWN PROGRAM 


         8    AND PLAN TO PUT ITSELF IN THE POSITION IN 2005 TO COMPETE HEAD 


         9    TO HEAD, AND BY THAT TIME ANTICIPATING 300,000 CIRCULATION. 


        10               THE COURT:  FOR THE EXAMINER? 


        11               MR. ALIOTO:  FOR THE EXAMINER.  SORRY, YOUR HONOR. 


        12               THE WITNESS:  I NEVER HEARD A CIRCULATION NUMBER OF 


        13    300,000.  WHERE DID THAT COME FROM? 


        14               THE COURT:  WELL, WHAT DID YOU HEAR? 


        15               THE WITNESS:  I HAD HEARD GENERALLY POSTURING KINDS 


        16    OF STATEMENTS.  I MEAN, I'VE BEEN WORKING IN THIS 50-50 


        17    ENTERPRISE SINCE 1987, AND THERE HAS BEEN MORE POSTURING GOING 


        18    ON OVER THAT PERIOD OF TIME THAN, YOU KNOW, I CAN COUNT AND 


        19    THIS WAS MORE OF IT.  WE JUST TRIED TO STAY FOCUSED ON THE 


        20    BUSINESS. 


        21               MR. ALIOTO:  I'LL SHOW YOU -- MAY I APPROACH THE 


        22    WITNESS, YOUR HONOR? 


        23               THE COURT:  YOU MAY. 


        24    BY MR. ALIOTO: 


        25    Q.   LET ME SHOW YOU EXHIBIT 83.  EXHIBIT 83 IS ENTITLED "SAN 
                                                                         1464




         1    FRANCISCO EXAMINER BUSINESS PLAN JULY 24, 1995, FIRST DRAFT."  


         2    I ASK YOU, SIR, IF YOU WILL LOOK AT THIS, IF THERE IS ANY 


         3    PORTION OF THIS DOCUMENT THAT YOU HAVE SEEN BEFORE. 


         4    A.   (WITNESS EXAMINES DOCUMENT.)  I BELIEVE YOU SHOWED THIS TO 


         5    ME IN A DEPOSITION. 


         6    Q.   HAVE YOU SEEN IT BEFORE? 


         7    A.   NO. 


         8    Q.   OR ANY PORTION OF IT? 


         9    A.   NO. 


        10    Q.   HAS ANYONE EVER GIVEN YOU ANY -- HAS ANYONE FROM HEARST 


        11    EVER STATED TO YOU IN SUM OR SUBSTANCE THAT WHEN THE JOA 


        12    TERMINATES IN 2000 --  


        13               MR. ALIOTO:  IT'S NOT IN EVIDENCE?  IT IS OR IS NOT? 


        14               MR. SHULMAN:  NO, IT'S NOT. 


        15               MR. ALIOTO:  IT IS NOT IN EVIDENCE. 


        16               WE WOULD OFFER WHAT IS MARKED FOR IDENTIFICATION AS 


        17    EXHIBIT 83, YOUR HONOR, THE DOCUMENT THAT I IDENTIFIED. 


        18               MR. HALLING:  OBJECTION, YOUR HONOR.  THERE'S NO 


        19    FOUNDATION.  IT'S HEARSAY. 


        20               MR. ALIOTO:  I WILL -- THE DOCUMENT ALONG WITH 


        21    OTHERS WAS PASSED ON TO MR. BENNACK.  I WILL -- I WOULD OFFER 


        22    THE DOCUMENT AT THIS TIME SUBJECT TO A MOTION TO TIE IT AT THE 


        23    TIME THAT MR. BENNACK COMES ONTO THE STAND. 


        24               MR. HALLING:  SAME OBJECTION, YOUR HONOR. 


        25               THE COURT:  I'LL RECEIVE IT SUBJECT TO IT BEING 
                                                                         1465




         1    STRUCK IN THE EVENT THAT A FOUNDATION IS NOT LAID WITH 


         2    MR. BENNACK. 


         3               MR. ALIOTO:  VERY GOOD, YOUR HONOR. 


         4                             (PLAINTIFF'S EXHIBIT 83  


         5                              RECEIVED IN EVIDENCE) 


         6    BY MR. ALIOTO: 


         7    Q.   HAVE YOU EVER BEEN ADVISED IN SUM OR SUBSTANCE THAT IT 


         8    WAS, QUOTE:   


         9                   "THE INTENTION OF HEARST CORPORATION TO 


        10               MAINTAIN A NEWSPAPER PRESENCE AND COMPETE FOR 


        11               THE MARKETPLACE FOLLOWING THE DEMISE OF JOA"?   


        12               DID ANY REPRESENTATIVE OF HEARST EVER MAKE SUCH A 


        13    STATEMENT TO YOU IN SUM OR SUBSTANCE? 


        14    A.   AGAIN, I HAD HEARD THAT TALK.  I'M NOT SURE IT CAME 


        15    DIRECTLY FROM -- OR WHO IT CAME FROM. 


        16    Q.   OKAY.  DID ANY REPRESENTATIVE OF HEARST AT ANY TIME STATE 


        17    TO YOU IN SUM OR SUBSTANCE, QUOTE:   


        18                   "THE SAN FRANCISCO EXAMINER WILL BE A 


        19               300,000 CIRCULATION NEWSPAPER OF WHICH 225,000 


        20               WILL BE CONTROLLED CIRCULATION AND THE BALANCE 


        21               PAID SINGLE COPIES"? 


        22    A.   THIS IS THE FIRST TIME I'VE EVER HEARD THAT. 


        23               THE COURT:  WHAT IS A CONTROLLED CIRCULATION? 


        24               THE WITNESS:  CONTROLLED CIRCULATION IS A TERM THAT 


        25    JUST -- THAT MEANS YOU WOULD CONTROL THE GEOGRAPHY, CONTROL THE 
                                                                         1466




         1    GEOGRAPHIC CIRCULATION BOUNDARY. 


         2               THE COURT:  I SEE.  YOU TARGET YOUR CIRCULATION FOR 


         3    CERTAIN GEOGRAPHIC AREAS; IS THAT IT? 


         4               THE WITNESS:  YES. 


         5               THE COURT:  OKAY.  THANK YOU. 


         6    BY MR. ALIOTO: 


         7    Q.   YOU UNDERSTOOD, DID YOU NOT, IN 1996 THAT THERE WAS AN 


         8    EFFORT BY THE CHRONICLE TO ATTEMPT TO HAVE THE HEARST 


         9    CORPORATION SHUT DOWN THE EXAMINER AND ENTER INTO A PARTNERSHIP 


        10    WITH THE CHRONICLE? 


        11    A.   AGAIN, BEING IN THE MIDDLE OF A 50-50 RELATIONSHIP, I HEAR 


        12    LOTS OF THINGS AND, YES, I HAD HEARD THAT. 


        13    Q.   AND THE IDEA THERE WAS, IS THAT THE EXAMINER -- THE HEARST 


        14    CORPORATION WAS GOING TO SHUT DOWN THE EXAMINER BUT GET -- BUT 


        15    GET A PERCENTAGE OF THE PROFITS FROM THE PAPER RUN BY THE 


        16    CHRONICLE; CORRECT? 


        17    A.   NO ONE EVER FILLED ME IN ON THE DETAILS. 


        18    Q.   BY THE WAY, LET ME BACK UP.  YOU SAY NO ONE FILLED YOU IN 


        19    ON THE DETAILS.  DID THEY IN SUM OR SUBSTANCE -- DID YOU 


        20    UNDERSTAND THAT THERE WAS AN EFFORT BY HEARST AND THE CHRONICLE 


        21    TO SHUT DOWN THE EXAMINER AND MAKE SOME KIND OF SPLIT THAT 


        22    WOULD CONTINUE IN PERPETUITY SO -- 


        23    A.   I KNEW SPECIFICALLY THAT I HAD BEEN REQUESTED FROM TIME TO 


        24    TIME TO DO THIS A.M. ONLY ANALYSIS ASSUMING THE EXAMINER WOULD 


        25    BE CLOSED.  SO, OF COURSE, I ASSUMED THAT THERE WAS SOMETHING 
                                                                         1467




         1    GOING ON RELATED TO THAT REQUEST. 


         2    Q.   DID YOU UNDERSTAND, THEN, THAT THE HEARST CORPORATION WAS 


         3    GOING TO GET PAID A PERCENTAGE OF WHATEVER THE CHRONICLE DID IN 


         4    PERPETUITY? 


         5    A.   I NEVER KNEW THAT DETAIL. 


         6    Q.   WHATEVER YOU KNEW, YOU DID UNDERSTAND THIS, DID YOU NOT, 


         7    THAT THE EXAMINER OR HEARST CORPORATION WAS GOING TO GET PAID 


         8    FOR NOT PRODUCING A PAPER? 


         9    A.   NO ONE EVER TOLD ME THE DETAILS OF A PLAN, A DISCUSSION OR 


        10    WHATEVER MAY HAVE BEEN TAKING PLACE. 


        11    Q.   ALL RIGHT. 


        12               MR. ALIOTO:  IF I MAY GO BACK TO THE EASEL, YOUR 


        13    HONOR. 


        14    Q.   THEN THE JOA THAT WE WERE TALKING ABOUT, IF, FOR EXAMPLE, 


        15    THE JOA CONTINUED AT LEAST UNTIL 2005, IF AT ANY TIME THE 


        16    HEARST CORPORATION WANTED TO SELL ITS PORTION UNDER THE JOA, IF 


        17    SOMEONE WANTED TO BUY IT, THEY'D HAVE TO PAY HEARST MONEY; 


        18    WOULDN'T THEY? 


        19    A.   IF IT WAS FOR SALE FOR A PRICE, I GUESS, YES, THEY'D HAVE 


        20    TO. 


        21    Q.   THEY WOULDN'T BE GIVING IT AWAY OR HAVE ANY NEGATIVE 


        22    PRICE; WOULD THEY? 


        23    A.   THAT'S COMPLETELY UP TO THEM.  I WOULD NOT KNOW THAT. 


        24    Q.   YOU KNOW -- WE JUST WENT OVER THEIR CASH FLOW AND IT'S 


        25    SHOWING PROFITS OF $20 MILLION.  WERE YOU HERE WHEN 
                                                                         1468




         1    MS. GREENTHAL TESTIFIED, THE LADY FROM THE DLJ? 


         2    A.   NO.  I READ SOME OF HER TRANSCRIPT. 


         3    Q.   DID YOU READ THE PART WHERE SHE VALUED THAT CASH STREAM UP 


         4    TO 2005 OF AT LEAST $90 MILLION? 


         5    A.   NO, I DIDN'T SEE THAT. 


         6    Q.   WELL, IF THE EXAMINER REMAINED IN THE JOA AND HAD THAT 


         7    KIND OF CASH STREAM OF THE $20 MILLION THAT WE JUST WENT OVER 


         8    AND EVERYTHING, DO YOU THINK THAT THE EXAMINER WOULD GIVE IT 


         9    AWAY?  THEY'D MAKE SOMEBODY PAY FOR THE MONEY THAT THEY'RE 


        10    GOING TO BE MAKING IN THE FIVE YEARS; WOULDN'T THEY?  YOU KNOW 


        11    THAT; DON'T YOU? 


        12    A.   IN THE CONTEXT OF THAT QUESTION, YEAH, IT CAN HAVE NO 


        13    OTHER ANSWER. 


        14    Q.   YEAH.  OF COURSE, IT CAN HAVE NO OTHER ANSWER. 


        15               WHEN WE WERE -- YOU REMEMBER I TOOK YOUR DEPOSITION 


        16    IN THIS CASE; CORRECT? 


        17    A.   YES. 


        18    Q.   NOW, ONE OF THE THINGS I UNDERSTOOD -- AGAIN, I HAVE TO 


        19    USE THE EASEL, YOUR HONOR  -- ONE OF THE THINGS I UNDERSTOOD 


        20    WAS WHEN YOU'RE DOING THESE ADS, THE ADS ACCOUNT FOR HOW MUCH 


        21    OF THE REVENUE ABOUT? 


        22    A.   80 PERCENT. 


        23    Q.   OKAY.  AND THEN THE -- ALL RIGHT.  I'LL PUT UP HERE 


        24    80 PERCENT.   


        25               AND THEN THE CIRCULATION WOULD BE MAYBE NOT 
                                                                         1469




         1    20 PERCENT, 19 BECAUSE THERE'S OTHER ONES? 


         2    A.   YEAH. 


         3    Q.   ABOUT 20 PERCENT ANYWAY.  WE'LL USE ROUND NUMBERS. 


         4    A.   YES. 


         5    Q.   OKAY.  OF THIS 80 PERCENT OF ADS AND, FOR EXAMPLE, THE 


         6    REVENUE -- THE LAST REVENUE WAS HOW MUCH? 


         7    A.   LAST YEAR'S? 


         8    Q.   YES. 


         9    A.   TOTAL REVENUE WAS 445. 


        10    Q.   445, OKAY.  SO I'LL PUT 445.  THAT WOULD BE FOR 


        11    CIRCULATION, THAT WOULD BE -- 


        12    A.   350 ADVERTISING. 


        13    Q.   350 MILLION? 


        14    A.   YES.  95 MILLION CIRCULATION. 


        15    Q.   ALL RIGHT, I'LL PUT 95 CIRCULATION. 


        16               OKAY.  NOW, OUT OF THIS 350 MILLION, THIS 


        17    ADVERTISING IS ALL COMBINED; ISN'T IT? 


        18    A.   WE SELL OUR ADVERTISING IN COMBINATION, YES. 


        19    Q.   MOST OF IT.  99 PERCENT OF IT? 


        20    A.   99 PERCENT OF IT. 


        21    Q.   OKAY.  AND YOU HAVE CONTRACTS, YOU JUST TALKED ABOUT THOSE 


        22    CONTRACTS WITH ALL THESE OTHER FOLKS, THESE ADVERTISERS, AND 


        23    THE CONTRACTS INCLUDE BOTH PAPERS; CORRECT? 


        24    A.   IT'S A COMBO RATE. 


        25    Q.   OKAY.  SO THIS $350 MILLION, IS IT NOT CORRECT, BECAUSE 
                                                                         1470




         1    IT'S ALL IN COMBINATION, ISN'T IT CORRECT THAT YOU CAN'T SAY 


         2    HOW MUCH OF THIS 350 MILLION IS THE CHRONICLE AND HOW MUCH OF 


         3    THIS 350 MILLION IS THE EXAMINER? 


         4    A.   WE DON'T SELL IT THAT WAY.  KNOWING IS DIFFERENT THAN 


         5    BEING ABLE TO ESTIMATE. 


         6    Q.   ESTIMATES ARE DIFFERENT; RIGHT? 


         7    A.   DIFFERENT THAN WHAT? 


         8    Q.   YOU HEARD ABOUT THESE EXPERTS; DIDN'T YOU? 


         9    A.   YES. 


        10    Q.   THAT WERE BROUGHT IN BY MR. REILLY? 


        11    A.   YES. 


        12    Q.   AND THEY MADE CERTAIN ESTIMATES OF THE EXAMINER'S STANDING 


        13    ALONE.  DID YOU HEAR ABOUT THAT? 


        14    A.   YES. 


        15    Q.   OKAY.  AND THEY WERE MAKING ESTIMATES USING THE FIGURES AS 


        16    BEST THEY COULD TO COME UP WITH WHAT THEY THOUGHT MAY OR MAY 


        17    NOT BE THE SITUATION, BUT YOU UNDERSTOOD THEY WERE ESTIMATES; 


        18    RIGHT? 


        19    A.   YES. 


        20    Q.   NOBODY HAS PERSONAL KNOWLEDGE OF HOW MUCH OF THIS 


        21    350 MILLION IS THE EXAMINER; DO THEY? 


        22    A.   WE DO NOT SELL IT THAT WAY NOR DO WE BILL IT THAT WAY. 


        23    Q.   AND NOR COULD YOU FIGURE IT OUT THAT WAY? 


        24    A.   I CAN ESTIMATE IT FIGURE IT OUT. 


        25    Q.   I DIDN'T ASK YOU IF YOU COULD ESTIMATE IT.  I SAID NOBODY 
                                                                         1471




         1    HAS PERSONAL KNOWLEDGE OF HOW MUCH IT IS; DO THEY? 


         2    A.   IT'S A COMBINED FIGURE. 


         3    Q.   CORRECT.  SO NO ONE HAS KNOWLEDGE, PERSONAL KNOWLEDGE, OF 


         4    WHAT IT IS; DO THEY? 


         5    A.   NOT SPECIFICALLY, NO. 


         6    Q.   CORRECT.  AND IF SOMEONE FILED AN AFFIDAVIT IN THIS CASE, 


         7    LIKE MR. ASHER, AND SAID HE HAD PERSONAL KNOWLEDGE OF HOW MUCH 


         8    REVENUE WAS DONATED BY THE EXAMINER, HE WOULD BE INCORRECT; 


         9    WOULDN'T HE? 


        10    A.   MR. ASHER IS CERTAINLY CAPABLE -- 


        11    Q.   WOULDN'T HE? 


        12    A.   -- OF ESTIMATING ANY NUMBER OF WAYS WHAT THAT BREAKDOWN 


        13    MIGHT BE.  I DON'T KNOW WHAT HE TESTIFIED TO. 


        14               THE COURT:  COUNSEL IS ENTITLED TO AN ANSWER TO HIS 


        15    QUESTION, NOT A QUESTION THAT YOU WOULD LIKE TO HAVE POSED TO 


        16    YOU. 


        17    BY MR. ALIOTO: 


        18    Q.   I'M GOING TO SHOW YOU HIS AFFIDAVIT. 


        19    A.   WOULD YOU REPEAT THE QUESTION?  I'M SORRY. 


        20    Q.   I'M GOING TO SHOW YOU HIS AFFIDAVIT.   


        21               IF I MAY APPROACH THE WITNESS, YOUR HONOR. 


        22               THE COURT:  YOU MAY. 


        23    BY MR. ALIOTO: 


        24    Q.   THIS IS EXHIBIT 51.  THIS IS THE DECLARATION OF MR. JAMES 


        25    ASHER. 
                                                                         1472




         1    A.   (WITNESS EXAMINES DOCUMENT.) 


         2    Q.   I DIRECT YOUR ATTENTION TO PAGE 1, LINE 8. 


         3    A.   LINE 8? 


         4    Q.   LINE 8 WHERE IT SAYS: 


         5                   "IF CALLED AS A WITNESS, I COULD AND WOULD 


         6               TESTIFY TO THE MATTERS SET FORTH IN THIS 


         7               DECLARATION OF MY OWN PERSONAL KNOWLEDGE." 


         8               DO YOU SEE THAT? 


         9    A.   I SEE THAT. 


        10    Q.   I DIRECT YOUR ATTENTION TO PAGE 1, LINE 24, HE STATES AS 


        11    FOLLOWS:  QUOTE, "THE COST TO PUBLISH THE EXAMINER CURRENTLY 


        12    EXCEED THE REVENUES IT CONTRIBUTES TO THE JOA BY MILLIONS OF 


        13    DOLLARS ANNUALLY." 


        14               DO YOU SEE THAT? 


        15    A.   YES. 


        16    Q.   THERE IS NO WAY ANYONE OF THEIR OWN PERSONAL KNOWLEDGE 


        17    WOULD KNOW THE REVENUES THE EXAMINER CONTRIBUTES TO THE JOA; 


        18    WOULD THEY?  THERE'S NO WAY. 


        19    A.   HE MAY HAVE LOOKED AT, FOR EXAMPLE, THAT 1995 A.M. ONLY 


        20    ANALYSIS THAT I COMPLETED OR ONE IN '97 OR ONE IN '99. 


        21    Q.   I DIDN'T ASK YOU WHAT HE MAY HAVE LOOKED AT.  I DIDN'T ASK 


        22    YOU TO SPECULATE ABOUT ANYTHING.  I'M ASKING YOU STRAIGHT, 


        23    POINT BLANK, IT IS CORRECT, IS IT NOT, THAT THERE IS NO WAY 


        24    THAT ANYONE WOULD HAVE PERSONAL KNOWLEDGE OF THE REVENUES THAT 


        25    THE EXAMINER CONTRIBUTES TO THE JOA; ISN'T THAT TRUE? 
                                                                         1473




         1    A.   TO THE EXTENT WE DO NOT SELL IT NOR BILL IT, THERE IS NO 


         2    MEASUREMENT SPECIFICALLY OF THAT DIFFERENCE. 


         3    Q.   YOU CAN'T DO IT; CAN YOU? 


         4    A.   REPORT IT OR ESTIMATE IT?   


         5    Q.   I'M GOING TO ASK YOU, AS SOON AS I FIND THE PAPER HERE, IT 


         6    IS CORRECT, IS IT NOT, THAT YOU ARE NOT ABLE TO SAY HOW MUCH OF 


         7    THE REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO ANOTHER?  


         8    THAT'S TRUE; ISN'T IT? 


         9    A.   NOT SPECIFICALLY, YES, THAT'S TRUE. 


        10    Q.   ARE YOU ABLE TO SAY HOW MUCH OF THE REVENUE IS 


        11    ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO ANOTHER? 


        12    A.   I HAVE A PRETTY GOOD IDEA, BUT IT'S NOT MEASURED THAT WAY, 


        13    NO. 


        14    Q.   OKAY. 


        15               MR. ALIOTO:  IF I MAY APPROACH THE WITNESS, YOUR 


        16    HONOR. 


        17               THE COURT:  YOU MAY. 


        18    BY MR. ALIOTO: 


        19    Q.   YOUR DEPOSITION WAS TAKEN ON FRIDAY, APRIL THE 28TH, IN 


        20    THIS PROCEEDINGS; WAS IT NOT? 


        21    A.   YES, IT WAS. 


        22    Q.   I'M GOING TO DIRECT YOUR ATTENTION TO PAGE 26 OF YOUR 


        23    DEPOSITION.  I WILL ASK YOU -- I'M GOING TO SHOW ON THE SCREEN 


        24    HERE A QUESTION THAT WAS ASKED OF YOU AND AN ANSWER THAT YOU 


        25    GAVE, AND I'LL ASK YOU AFTER WE SHOW IT WHETHER OR NOT YOU WERE 
                                                                         1474




         1    ASKED THIS QUESTION AND YOU GAVE THIS ANSWER. 


         2               THE COURT:  DO WE HAVE THE ORIGINAL? 


         3               MR. ALIOTO:  PARDON ME? 


         4               THE COURT:  DO WE HAVE THE ORIGINAL TRANSCRIPT? 


         5               MR. ALIOTO:  WE DO.  AND I BELIEVE YOUR HONOR HAS, I 


         6    BELIEVE, THE ORIGINAL.  WE THOUGHT IT WAS WITH YOUR HONOR. 


         7               THE COURT:  AH, PERHAPS IT IS. 


         8               MR. ALIOTO:  IT IS PAGE 26, YOUR HONOR. 


         9                        (PAUSE IN PROCEEDINGS.) 


        10               THE COURT:  YOU'RE ABSOLUTELY CORRECT. 


        11               MR. ALIOTO:  DID YOU HAVE IT, YOUR HONOR? 


        12               THE COURT:  I DO.  THANK YOU. 


        13               MR. ALIOTO:  VERY GOOD, YOUR HONOR.  THEN WE WOULD 


        14    RESPECTFULLY DIRECT THE COURT'S ATTENTION TO THE PORTION THAT 


        15    WE ARE GOING TO BE READING FROM, WHICH IS PAGE 26, BEGINNING 


        16    LINE 2.  CAN YOU DO THAT? 


        17                    (VIDEOTAPE PLAYED AS FOLLOWS:) 


        18                   "Q.  ARE YOU ABLE TO SAY HOW MUCH OF THE 


        19               REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED 


        20               TO ANOTHER? 


        21                   "A.  NO. 


        22                   "Q.  ARE YOU ABLE --" 


        23               MR. ALIOTO:  STOP IT.  STOP IT. 


        24    Q.   WERE YOU ASKED THAT QUESTION, AND DID YOU GIVE THAT 


        25    ANSWER? 
                                                                         1475




         1    A.   YES.   


         2    Q.   WAS IT TRUE? 


         3    A.   YES. 


         4    Q.   YOU WERE UNDER OATH AT THE TIME; CORRECT? 


         5    A.   CORRECT. 


         6    Q.   NOW I'M GOING TO ASK YOU:  ARE YOU ABLE TO SAY HOW MUCH IS 


         7    ATTRIBUTABLE TO THE EXPENSES, HOW MUCH OF THE EXPENSES ARE 


         8    ATTRIBUTABLE, HOW MUCH OF THE EXPENSES IS ATTRIBUTABLE TO ONE 


         9    PAPER AS DISTINGUISHED FROM ANOTHER?  ARE YOU ABLE TO DO THAT? 


        10    A.   IT'S DIFFICULT TO DO. 


        11    Q.   DID YOU READ THE ANSWER DOWN THERE? 


        12    A.   THAT'S WHAT I SAID. 


        13    Q.   RIGHT, OKAY, GOOD. 


        14                              (LAUGHTER) 


        15               MR. ALIOTO:  IF I MAY APPROACH THE WITNESS, YOUR 


        16    HONOR. 


        17    BY MR. ALIOTO: 


        18    Q.   DID YOU EVER -- DID YOU EVER ADVISE MR. IRISH -- MR. IRISH 


        19    IS IN CHARGE OF THE NEWSPAPERS FOR THE HEARST CORPORATION; WAS 


        20    HE NOT? 


        21    A.   YES, HE IS. 


        22    Q.   STILL IS, OKAY.  AND PRESENTLY IS HE THE PUBLISHER OF THE 


        23    EXAMINER TODAY? 


        24    A.   NO. 


        25    Q.   HE'S NOT.  WHO IS THE PUBLISHER? 
                                                                         1476




         1    A.   (PAUSE) THE MASTHEAD SAYS TIMOTHY O. WHITE. 


         2    Q.   I DIDN'T ASK YOU THAT.  WHO'S THE PUBLISHER? 


         3    A.   TIM WHITE. 


         4    Q.   DID YOU EVER ADVISE MR. IRISH IN SUM OR SUBSTANCE THAT YOU 


         5    HAD A CONVERSATION WITH MR. RICHARD ROSENBERG, FORMER CHAIRMAN 


         6    OF THE BOARD OF BANK OF AMERICA, WHO WAS IN THE CHRONICLE BOARD 


         7    MEETING, ABOUT THE DISCUSSION ON THE MEMBER -- THE BOARD 


         8    MEMBERS OF THE CHRONICLE DECISION TO SELL THE PAPER?   


         9    A.   NO. 


        10    Q.   I'LL SHOW YOU EXHIBIT 88. 


        11               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR? 


        12               THE COURT:  YES, YOU MAY. 


        13    BY MR. ALIOTO: 


        14    Q.   LET ME SHOW YOU WHAT IS EXHIBIT 88 IN EVIDENCE.  EXHIBIT 


        15    88 IS AN E-MAIL FROM MR. FRANK BENNACK DATED JUNE 22, '99, 


        16    DIRECTED TO VARIOUS INDIVIDUALS ENCLOSING AN E-MAIL FROM 


        17    MR. GEORGE IRISH.  I ASK YOU IF YOU'VE EVER SEEN THAT DOCUMENT 


        18    BEFORE. 


        19    A.   (WITNESS EXAMINES DOCUMENT.)  NO. 


        20    Q.   I WANT TO DIRECT YOUR ATTENTION TO THE FIRST SENTENCE OF 


        21    THE PARAGRAPH OF THE FIRST E-MAIL, WHICH IS IN THE MIDDLE OF 


        22    THE PAGE BEGINNING DOWN HERE (INDICATING), "TODAY," DO YOU SEE 


        23    THAT? 


        24    A.   YES, I DO. 


        25    Q.   QUOTE: 
                                                                         1477




         1                   "TODAY STEVE FALK RELAYED A CONVERSATION HE 


         2               HAD WITH DICK ROSENBERG WHO WAS IN THE CHRONICLE 


         3               BOARD MEETING ABOUT THE DISCUSSION ON THE 


         4               DECISION TO SELL.  ROSENBERG TOLD STEVE THAT 


         5               THEY DISCUSSED THE HEARST/JOA SITUATION AT 


         6               LENGTH AND ENDED UP WITH THE EXPECTATION THAT 


         7               HEARST WOULD MAKE THEIR BEST OFFER VERY QUICKLY, 


         8               INSTEAD OF WAITING UNTIL ALL THE OTHER OFFERS 


         9               WERE IN, AND THEN USING THE JOA, QUOTE, FIRST 


        10               RIGHT OF REFUSAL, END QUOTE, LANGUAGE AT THE 


        11               END.  DICK TOLD STEVE THAT THERE IS STILL A 


        12               GREAT DEAL OF LONG-STANDING DISLIKE OF HEARST 


        13               AMONG SOME OF THE SHAREHOLDERS, AND A STRONG 


        14               OFFER UP FRONT COULD LEAD TO THEIR ACCEPTANCE 


        15               WITHOUT THE LONGER PROCESS. 


        16                   "STEVE TOLD ME THAT ROSENBERG OPINED THAT IF 


        17               WE WAITED UNTIL THE END OF THE PROCESS, THEY MAY 


        18               FIND THEMSELVES FLUSH WITH CASH AND DECIDE TO 


        19               KEEP THE CHRONICLE." 


        20               DO YOU SEE THAT? 


        21    A.   YES, I DO. 


        22    Q.   FIRST, YOU KNOW WHO MR. RICHARD ROSENBERG IS; DO YOU NOT? 


        23    A.   YES, I DO. 


        24    Q.   AND HE WAS THE FORMER CHAIRMAN OF THE BANK OF AMERICA; 


        25    CORRECT? 
                                                                         1478




         1    A.   I BELIEVE SO, YES. 


         2    Q.   YOU UNDERSTOOD THAT HE ALSO WAS A MEMBER OF THE BOARD OF 


         3    DIRECTORS OF THE CHRONICLE? 


         4    A.   YES. 


         5    Q.   DID MR. ROSENBERG MAKE ANY OF THE STATEMENTS THAT ARE 


         6    ATTRIBUTED HERE TO HIM, DID HE MAKE ANY OF THOSE STATEMENTS TO 


         7    YOU? 


         8    A.   NO. 


         9    Q.   DID YOU MAKE -- DID YOU STATE ANY OF THESE STATEMENTS THAT 


        10    ARE CONTAINED IN THIS DOCUMENT TO MR. IRISH? 


        11    A.   WE HAD A -- 


        12    Q.   DID YOU MAKE ANY OF THESE STATEMENTS TO MR. IRISH ABOUT 


        13    MR. ROSENBERG? 


        14    A.   NOT PER SE.  IT NEEDS A LITTLE MORE EXPLANATION. 


        15    Q.   DID YOU TELL MR. IRISH THAT ANYBODY FROM THE CHRONICLE 


        16    BOARD OF DIRECTORS MADE ANY SUCH STATEMENT TO YOU? 


        17    A.   YES. 


        18    Q.   WHICH MEMBER OF THE CHRONICLE BOARD OF DIRECTORS MADE THE 


        19    STATEMENT TO YOU? 


        20    A.   I TOLD MR. IRISH -- 


        21    Q.   WHO TOLD YOU FROM THE BOARD OF DIRECTORS OF THE CHRONICLE?  


        22    WHO WAS IT? 


        23               MR. HALLING:  OBJECTION TO FOUNDATION.  I DON'T 


        24    UNDERSTAND WHAT THE ANSWER IS GOING TO REFER TO.  WHO SAID 


        25    WHAT? 
                                                                         1479




         1               THE COURT:  THE QUESTION WAS:  DID YOU TELL 


         2    MR. IRISH THAT ANYBODY FROM THE CHRONICLE BOARD OF DIRECTORS 


         3    MADE ANY SUCH STATEMENT TO YOU."  THE ANSWER WAS YES.  THE 


         4    FOLLOWUP QUESTION IS WHO. 


         5               MR. ALIOTO:  WHO. 


         6               THE COURT:  IT'S A FAIR QUESTION. 


         7               THE WITNESS:  ALAN NICHOLS. 


         8    BY MR. ALIOTO: 


         9    Q.   ARE YOU NERVOUS ABOUT THAT? 


        10    A.   AM I NERVOUS ABOUT ALAN NICHOLS? 


        11    Q.   NO, ABOUT HAVING TO SAY THAT IT WAS ALAN NICHOLS? 


        12    A.   NO. 


        13    Q.   IT WAS ALAN NICHOLS? 


        14    A.   ALAN NICHOLS AT THE TIME WAS THE CHIEF FINANCIAL OFFICER 


        15    OF THE CHRONICLE PUBLISHING COMPANY. 


        16    Q.   AND DID ALAN NICHOLS TELL YOU -- DID ALAN NICHOLS MENTION 


        17    MR. ROSENBERG TO YOU? 


        18    A.   IN A CONVERSATION ROSENBERG'S NAME CAME UP, YES. 


        19    Q.   AND MR. NICHOLS WAS ON THE BOARD OF DIRECTORS OF THE 


        20    CHRONICLE; IS THAT RIGHT? 


        21    A.   I BELIEVE HE WAS. 


        22    Q.   AND HE WOULD BE SITTING ON THE BOARD OF DIRECTORS OF THE 


        23    CHRONICLE WITH MR. ROSENBERG? 


        24    A.   I ASSUME SO, YES. 


        25    Q.   AND MR. NICHOLS TOLD YOU THAT MR. ROSENBERG -- THAT 
                                                                         1480




         1    MR. ROSENBERG FELT THAT IF HEARST DIDN'T ACT NOW, THAT THE 


         2    MEMBERS OF THE BOARD -- THE MEMBERS OF THE CHRONICLE FAMILY 


         3    MIGHT FIND THEMSELVES FLUSH WITH CASH AND DECIDE NOT TO -- AND 


         4    DECIDE TO KEEP THE CHRONICLE? 


         5    A.   I DON'T REMEMBER, IN ALL HONESTY, THE SPECIFICS OF THE 


         6    CONVERSATION.  I CAN TELL YOU GENERALLY WHAT WE DISCUSSED. 


         7    Q.   "WE" MEANING YOU AND MR. IRISH? 


         8    A.   NO, MEANING ME AND MR. NICHOLS. 


         9    Q.   DID MR. NICHOLS TELL YOU IN SUM OR SUBSTANCE THAT THE 


        10    HEARST CORPORATION SHOULD ACT QUICKLY BECAUSE THE CHRONICLE 


        11    FAMILY MEMBERS MIGHT FIND THEMSELVES FLUSH WITH CASH AND DECIDE 


        12    TO KEEP THE CHRONICLE?  DID HE SAY THAT TO YOU IN SUM OR 


        13    SUBSTANCE? 


        14    A.   THERE WAS THAT INDICATION, YES. 


        15    Q.   WELL, YOU SAY "INDICATION."  I MEAN, DID HE SAY LIKE FLUSH 


        16    WITH CASH, DID HE SAY THAT? 


        17    A.   I -- I HAVE TO SAY ON THE RECORD I DON'T HAVE A GOOD 


        18    RECOLLECTION OF THE CONVERSATION.  IT WAS A SOMEWHAT CASUAL 


        19    HALLWAY CONVERSATION, THOUGH IT WAS CLEAR TO ME THE MESSAGE.  


        20    THE MESSAGE WAS WE HOPE, ROSENBERG AND OTHER BOARD MEMBERS ARE 


        21    HOPING HEARST STEPS UP TO THE PLATE IN AN AGGRESSIVE WAY 


        22    QUICKLY. 


        23    Q.   QUICKLY BEFORE THE CHRONICLE FAMILY MEMBERS GET FLUSH WITH 


        24    CASH AND KEEP THE CHRONICLE? 


        25    A.   I DON'T -- 
                                                                         1481




         1    Q.   IS THAT RIGHT? 


         2    A.   I DON'T REMEMBER THE SPECIFICS OF ALL OF THAT DETAIL.  I 


         3    REMEMBER -- I REMEMBER THE CONVERSATION.  I REMEMBER THINKING 


         4    NICHOLS IS A PRETTY SAVVY CFO, HE'S TRYING TO GET THE HIGHEST 


         5    PRICE HE CAN FOR THE PAPER THAT HE WORKS FOR AND HE'S DROPPING 


         6    A HINT MY WAY AS TO THAT EXPECTATION. 


         7    Q.   AND THE HINT THAT HE DROPPED WAS ON BEHALF OF HIMSELF AND 


         8    MR. ROSENBERG? 


         9    A.   HE MENTIONED ROSENBERG'S NAME IN THE CONVERSATION IN THE 


        10    CONTEXT OF ROSENBERG AND OTHERS ON THE BOARD. 


        11    Q.   NOW, WHEN THEY SAID -- WHEN MR. NICHOLS SAID QUICKLY, THE 


        12    REASON HE GAVE FOR ACTING QUICKLY WAS THAT THEY MIGHT -- YOU 


        13    MIGHT LOSE THE CHRONICLE BECAUSE THE FAMILY MEMBERS MIGHT BE -- 


        14    GET FLUSH WITH CASH WITH THESE OTHER ASSETS? 


        15    A.   I DON'T REMEMBER HIM ADDING THAT COMMENT.  MY TAKE-AWAY 


        16    WAS FAST AS OPPOSED TO A LONG, DRAWN-OUT, LOW-BALL BID PROCESS. 


        17    Q.   BUT THERE WAS A REASON GIVEN FOR ASKING THEM -- FOR ASKING 


        18    YOU TO MOVE QUICKLY OR FOR YOU TO -- STRIKE THAT. 


        19               THERE WAS A REASON GIVEN, WAS THERE NOT, WHEN 


        20    MR. NICHOLS WAS TALKING TO YOU, TO SUGGEST TO HEARST THAT THEY 


        21    ACT QUICKLY? 


        22    A.   NOT THAT I RECALL. 


        23    Q.   DID YOU SAY IN SUM OR SUBSTANCE, DID YOU SAY IN SUM OR 


        24    SUBSTANCE THAT THE REASON TO ACT QUICKLY WAS BECAUSE THE FAMILY 


        25    MEMBERS OF THE CHRONICLE MIGHT GET CASH FROM THESE OTHER DEALS 
                                                                         1482




         1    LIKE THE KRON OR SOMETHING AND THEN DECIDE NOT TO SELL THE 


         2    CHRONICLE, ANYTHING LIKE THAT AT ALL? 


         3    A.   I DON'T REMEMBER HIM MENTIONING THOSE WORDS PER SE, NO.  I 


         4    JUST DON'T REMEMBER. 


         5    Q.   REGARDLESS OF THE WORDS PER SE, WAS THAT CONVEYED TO YOU 


         6    AS THE REASON TO ACT QUICKLY? 


         7    A.   THE CONVEYANCE WAS, GENERALLY SPEAKING, ROSENBERG AND 


         8    OTHERS ON THE BOARD ARE HOPING THAT THERE IS A SUBSTANTIAL 


         9    OFFER. 


        10    Q.   QUICKLY? 


        11    A.   I THINK HE SAID QUICKLY, AS -- 


        12    Q.   BECAUSE -- 


        13    A.   AS OPPOSED TO -- THE IMPLICATION WAS, AS OPPOSED TO A 


        14    LOW-BALL OFFER AND DRAGGING OUT THE PROCESS. 


        15    Q.   SO THERE WAS NO BECAUSE, QUICKLY BECAUSE, THERE WAS NONE 


        16    OF THAT? 


        17    A.   NOT THAT I REMEMBER. 


        18    Q.   GOING BACK TO THIS DOCUMENT, WHICH IS EXHIBIT NUMBER 88, 


        19    IT SAYS, QUOTE: 


        20                   "STEVE TOLD ME THAT ROSENBERG OPINED THAT IF 


        21               WE WAITED UNTIL THE END OF THE PROCESS, THEY MAY 


        22               FIND THEMSELVES FLUSH WITH CASH AND DECIDE TO 


        23               KEEP THE CHRONICLE." 


        24               THERE'S NO QUESTION IN YOUR MIND THAT YOU DID NOT 


        25    SAY THAT TO MR. IRISH; CORRECT? 
                                                                         1483




         1    A.   THE ONLY THING I KNOW FOR SURE IS I DON'T REMEMBER THE 


         2    SPECIFICS.  I REMEMBER WHAT I THOUGHT THE INTENT OF NICHOLS 


         3    STOPPING IN MY OFFICE WAS, AND GEORGE IRISH HAPPENED TO CALL ME 


         4    THE DAY AFTER, AND I SAID, "GEORGE, FOR WHAT THIS IS WORTH," 


         5    AND I RELAYED THAT QUICK CONVERSATION WITHOUT, I MIGHT ADD, AT 


         6    THE TIME TELLING HIM THAT IT WAS FROM NICHOLS. 


         7    Q.   WELL, YOU MUST HAVE TOLD HIM IT WAS FROM SOMEBODY; DIDN'T 


         8    YOU? 


         9    A.   NO, I DID NOT TELL HIM WHO IT WAS FROM. 


        10    Q.   YOU THINK MR. IRISH, WHEN HE MADE REFERENCE TO 


        11    MR. ROSENBERG, THAT HE MADE THIS UP? 


        12    A.   NO.  I MENTIONED ROSENBERG'S NAME, THERE'S NO DOUBT ABOUT 


        13    THAT. 


        14    Q.   DID YOU SAY ROSENBERG WAS THE SOURCE? 


        15    A.   NO. 


        16    Q.   IF YOU DIDN'T -- 


        17    A.   NO. 


        18    Q.   IF YOU DIDN'T MENTION NICHOLS, THEN THE ONLY ONE YOU 


        19    MENTIONED WAS ROSENBERG, THEN YOU UNDERSTOOD THE ONLY THING 


        20    THAT MR. IRISH COULD UNDERSTAND WAS THAT ROSENBERG WAS THE 


        21    SOURCE; RIGHT? 


        22    A.   ROSENBERG'S NAME WAS MENTIONED, CERTAINLY NOT AS THE 


        23    SOURCE. 


        24    Q.   BUT YOU JUST SAID THAT YOU DIDN'T MENTION NICHOLS; 


        25    CORRECT? 
                                                                         1484




         1    A.   I DON'T BELIEVE I DID. 


         2    Q.   SO WHEN YOU MENTIONED ROSENBERG, YOU UNDERSTOOD THAT IT 


         3    WAS REASONABLE FOR MR. IRISH TO UNDERSTAND THAT THIS WAS COMING 


         4    FROM ROSENBERG; RIGHT? 


         5    A.   I DON'T THINK THAT'S A LOGICAL CONCLUSION, NO. 


         6    Q.   IN ANY EVENT, YOU ARE CLEAR, IT IS YOUR SWORN TESTIMONY 


         7    THAT THERE'S NO QUESTION YOU DID NOT, YOU DID NOT TELL 


         8    MR. IRISH THAT ROSENBERG OPINED THAT IF WE WAITED UNTIL THE END 


         9    OF THE PROCESS, THEY MAY FIND THEMSELVES FLUSH WITH CASH AND 


        10    DECIDE TO KEEP THE CHRONICLE? 


        11    A.   I DON'T REMEMBER SAYING THAT, NO. 


        12    Q.   IN OTHER WORDS, YOU'RE NOT SURE?  WHEN YOU SAY YOU DON'T 


        13    REMEMBER -- 


        14    A.   YOU'RE RIGHT, I'M NOT SURE. 


        15    Q.   SO YOU CAN'T DENY IT?  YOU ARE NOT IN A -- YOUR MEMORY IS 


        16    NOT SUCH THAT YOU CAN DENY IT; IS THAT RIGHT? 


        17    A.   THAT'S RIGHT.  IT WAS NOT A MAJOR EVENT IN MY 


        18    RECOLLECTION, AND I JUST DON'T REMEMBER THE DETAIL OF WHAT WAS 


        19    SAID. 


        20    Q.   YOU SAY NOT A MAJOR EVENT.  YOU HAVE THE CHIEF FINANCIAL 


        21    OFFICER GIVING YOU INSIDE INFORMATION ABOUT WHAT'S GOING ON IN 


        22    THE BOARD OF DIRECTORS MEETING OF THE CHRONICLE, THE COMPETITOR 


        23    OF THE HEARSTS, WITH REGARD TO THE SALE OF THE CHRONICLE, YOU 


        24    SAY THAT THAT IS NOT SOMETHING THAT WAS OF GREAT MOMENT TO YOU? 


        25    A.   THAT'S RIGHT.  IT WAS NOT QUITE AS SERIOUS AND -- 
                                                                         1485




         1    Q.   AS IT'S SOUNDING? 


         2    A.   -- EARTH MOVING AS YOU JUST RESTATED IT. 


         3    Q.   WELL, YOU UNDERSTOOD; DIDN'T YOU -- 


         4    A.   IN A HALLWAY CONVERSATION, IT CAME UP; AND, YES, I THOUGHT 


         5    IT WAS SIGNIFICANT ENOUGH TO PASS ON. 


         6    Q.   YOU BELIEVED IT TO BE UNETHICAL; DIDN'T YOU? 


         7    A.   NO.  IN MY OPINION, NICHOLS WAS DOING HIS JOB. 


         8    Q.   DOING HIS JOB SO THAT -- AND DOING IT BEFORE THE MEMBERS 


         9    OF THE FAMILY OWNING THE CHRONICLE -- WHEN YOU SAY DOING HIS 


        10    JOB, YOU MEAN FOR THE CHRONICLE, IS THAT WHAT YOU MEAN? 


        11    A.   AGAIN, I THINK ALAN WAS BEING A VERY SAVVY CFO.  HE WAS -- 


        12    I MEAN, HIS MISSION WAS, I BELIEVE, TO GET THE HIGHEST PRICE HE 


        13    COULD FOR THE CHRONICLE FOR HIS BOARD AND FOR HIS SHAREHOLDERS.  


        14    AND I THINK HE THOUGHT IF HE DROPPED A LITTLE BIT OF 


        15    INFORMATION IN THE RIGHT PLACE, THAT WORD MAY JUST GET BACK TO 


        16    WHERE IT MIGHT DO SOME GOOD. 


        17    Q.   OKAY.  AND GETTING THAT WORD BACK TO WHERE IT MAY DO SOME 


        18    GOOD, YOU UNDERSTOOD THAT WHEN HE GAVE YOU THAT INFORMATION, 


        19    YOU WERE SUPPOSED TO PASS IT ON TO MR. IRISH? 


        20    A.   THAT WAS NEVER STATED NOR IMPLIED. 


        21    Q.   YOU JUST SAID TO DO SOME GOOD TO GET IT -- JUST WAIT ONE 


        22    SECOND.  EXCUSE ME.  MAY I JUST READ THE ANSWER, YOUR HONOR? 


        23               THE COURT:  YOU MAY. 


        24                        (PAUSE IN PROCEEDINGS.) 


        25    BY MR. ALIOTO: 
                                                                         1486




         1    Q.   YOU SAID, QUOTE, AND I THINK, THIS IS FROM THE UNOFFICIAL 


         2    RECORD, BUT AT LINE 10, YOU SAY, QUOTE, AND I THINK HE THOUGHT 


         3    IF HE DROPPED A LITTLE BIT OF INFORMATION IN THE RIGHT PLACE, 


         4    YOU WERE THE RIGHT PLACE; RIGHT? 


         5    A.   TURNED OUT TO BE. 


         6    Q.   IN THE RIGHT PLACE, THAT WORD MAY JUST GET BACK TO WHERE 


         7    IT MIGHT DO SOME GOOD, AND WHERE MEANS THE EXECUTIVE OFFICES IN 


         8    NEW YORK OF HEARST; RIGHT? 


         9    A.   YES, UH-HUH. 


        10    Q.   YOU UNDERSTOOD, DID YOU NOT, THAT THE EXAMINER WAS 


        11    INTERESTED IN MOVING THE PAPER TO THE MORNING? 


        12    A.   I HAD HEARD ABOUT A LETTER THAT DISCUSSED THAT TOPIC, YES. 


        13    Q.   OKAY.  LET ME SHOW YOU WHAT IS IN EVIDENCE AS EXHIBIT 72. 


        14               MR. ALIOTO:  IF I MAY APPROACH THE WITNESS, YOUR 


        15    HONOR. 


        16               THE COURT:  YOU MAY. 


        17    BY MR. ALIOTO: 


        18    Q.   I SHOW YOU WHAT IS IN EVIDENCE AS EXHIBIT NUMBER 72.  


        19    EXHIBIT NUMBER 72 IS A DOCUMENT DATED APRIL 15, 1999.  IT IS 


        20    DIRECTED TO MR. SIAS FROM MR. WHITE.  IT SHOWS VARIOUS BLIND 


        21    COPIES TO OTHER PERSONS. 


        22               DID YOU EVER GET A COPY OF THAT LETTER ON OR ABOUT 


        23    THAT DATE? 


        24    A.   I DON'T BELIEVE SO, NO. 


        25    Q.   ARE YOU FAMILIAR WITH IT? 
                                                                         1487




         1    A.   YES, I AM FAMILIAR WITH IT. 


         2    Q.   I'D LIKE TO DIRECT YOUR ATTENTION TO PAGE 2.  NOW, YOU 


         3    WERE -- WHEN YOU SAY YOU'RE FAMILIAR WITH IT, HAVE YOU READ IT 


         4    BEFORE? 


         5    A.   I CAN'T REMEMBER EXACTLY WHEN I HAVE READ IT.  I HAVE READ 


         6    IT. 


         7    Q.   OKAY.  WHENEVER IT WAS THAT YOU READ IT, YOU UNDERSTOOD 


         8    THAT ONE OF THE CHARGES THAT MR. WHITE WAS MAKING WAS THAT THE 


         9    EFFORT BY THE CHRONICLE TO TRY TO IMPEDE THEIR ABILITY TO 


        10    POSITION THEMSELVES FOR COMPETITION AFTER 2005 VIOLATED THE 


        11    ANTITRUST LAWS? 


        12    A.   HE SAID SOMETHING TO THAT EXTENT IN THIS LETTER, YES. 


        13    Q.   OKAY.  SO THAT YOU UNDERSTOOD THAT WHAT WAS GOING ON HERE 


        14    WAS THAT THE HEARST CORPORATION THIS EARLY WAS BEGINNING TO PUT 


        15    ITSELF IN A POSITION TO BE ABLE TO COMPETE HEAD TO HEAD WITH 


        16    THE CHRONICLE AFTER THE JOA IN 2005; CORRECT? 


        17    A.   WELL, I KNEW MORE IN A LARGER CONTEXT THAN THAT.  I KNEW 


        18    THAT THERE HAD RECENTLY BEEN AN ARM-WRESTLING CONTEST OVER A 


        19    CIRCULATION JOINT PROMOTION AND SOME LETTERS WENT BACK AND 


        20    FORTH IN THAT REGARD; AND IT WAS, YOU KNOW, CAN I DO THE OTHER 


        21    GUY ONE UP THAN WHAT HE'S DONE TO ME.  AND THERE WAS AN 


        22    EXCHANGE OF LETTERS ON VARIOUS TOPICS, AND CERTAINLY THIS WAS 


        23    ONE. 


        24    Q.   WELL, WHAT YOU'RE TALKING ABOUT IS, IS THAT IMMEDIATELY 


        25    BEFORE THIS, APPROXIMATELY ONE MONTH BEFORE, YOU HAD A JOINT -- 
                                                                         1488




         1    IN EFFECT, YOU HAD A JOINT -- WHAT ARE YOU LOOKING FOR, WATER? 


         2    A.   NO, I HAVE WATER. 


         3    Q.   YOU HAD A JOINT PROGRAM THAT YOU INSTITUTED IN WHICH YOU 


         4    WOULD GO TO SUBSCRIBERS OF THE CHRONICLE AND OFFER THEM A FREE 


         5    EXAMINER, AND THEN YOU WOULD GO TO SUBSCRIBERS OF THE EXAMINER 


         6    AND OFFER THEM A FREE CHRONICLE? 


         7    A.   YES.  ONE OF MANY CIRCULATION PROMOTIONS. 


         8    Q.   AND AS FAR AS YOU WERE CONCERNED, THIS WAS A PROGRAM THAT 


         9    WAS AGREED TO BY THE HEARST CORPORATION, THE PERSON BEFORE MR. 


        10    WHITE, MR. GUITTAR, AND BY MR. SIAS? 


        11    A.   IT WAS RECOMMENDED BY THE AGENCY AND JOINTLY APPROVED. 


        12    Q.   BY THOSE TWO INDIVIDUALS? 


        13    A.   YES. 


        14    Q.   AND IT HAD BEEN GOING ON FOR ABOUT TWO YEARS? 


        15    A.   YES. 


        16    Q.   AND IT HAD RESULTED IN AN INCREASE OF CIRCULATION FOR THE 


        17    EXAMINER AND THE CHRONICLE BOTH? 


        18    A.   YES. 


        19    Q.   AND THE CHRONICLE DIDN'T WANT ITS PAPER TO BE USED AS A 


        20    SPRINGBOARD, SO TO SPEAK, FOR A FREE EXAMINER, THAT WAS THE 


        21    BASIC PROBLEM; CORRECT? 


        22    A.   NO.  THE BASIC PROBLEM WAS JOHN SIAS WOKE UP ONE DAY, AND 


        23    A NEIGHBOR OF HIS SAID, "I GOT A PHONE CALL LAST NIGHT OFFERING 


        24    ME A FREE EXAMINER WITH MY CHRONICLE SUBSCRIPTION.  HOW COULD 


        25    YOU ALLOW THAT TO HAPPEN?" 
                                                                         1489




         1    Q.   AND SO HE INSTRUCTED YOU TO CEASE THE PROGRAM, STOP IT? 


         2    A.   YES, HE HAD AN EMOTIONAL REACTION TO HIS NEIGHBOR'S 


         3    COMMENT AND CAME IN THAT DAY AND IN A COLORFUL WAY ASKED THAT 


         4    WE STOP THIS PROGRAM, YES. 


         5    Q.   AND IN THE COURSE OF THAT, HE ADVISED YOU AND REMINDED YOU 


         6    THAT THE JOA, AMONG OTHER THINGS, GAVE THE CHRONICLE THE 


         7    EXCLUSIVE RIGHT AND RESPONSIBILITY TO SET NOT ONLY ADVERTISING 


         8    RATES BUT ALSO CIRCULATION RATES? 


         9    A.   BY THE TIME THE LETTERS AND WRITING -- 


        10    Q.   DID HE TELL YOU THAT? 


        11    A.   NO. 


        12    Q.   HE DID NOT? 


        13    A.   NOT THEN, NO. 


        14    Q.   DIDN'T HE TELL YOU THAT IN THE LETTER? 


        15    A.   YES.  I WAS STARTING TO SAY BY THE TIME THE LETTERS WERE 


        16    FLYING BACK AND FORTH AND THE LAWYERS WERE INVOLVED, YES, THERE 


        17    WAS REFERENCE TO JOA'S AND SECTIONS AND DOCUMENTS AND -- 


        18    Q.   SO YOU UNDERSTOOD, THEN -- 


        19               THE COURT:  THINGS DO GO DOWNHILL FAST WHEN LAWYERS 


        20    ARE INVOLVED. 


        21               THE WITNESS:  YEAH, THE MINUTE THAT -- OKAY. 


        22    BY MR. ALIOTO: 


        23    Q.   OKAY.  SO THEN YOU UNDERSTOOD, THEN, YOU SAID THE LAWYERS 


        24    GOT INVOLVED. 


        25    A.   YES. 
                                                                         1490




         1    Q.   IS THAT WHAT YOU SAID? 


         2    A.   YES. 


         3    Q.   THE HEARST LAWYERS?   


         4    A.   NOT INITIALLY.  AFTER MR. SIAS GOT HIS LAWYER INVOLVED AND 


         5    SENT OFF THE FIRST SHOT, I'M SURE THE HEARST LAWYERS HELPED 


         6    SEND OFF THE SECOND SHOT. 


         7    Q.   OKAY.  AND IN THAT SECOND SHOT WITH THE LAWYERS INVOLVED, 


         8    ALL OF A SUDDEN THE ANTITRUST LAWS CAME UP; RIGHT? 


         9    A.   EVERYTHING CAME UP. 


        10                              (LAUGHTER) 


        11    Q.   AND YOU DIDN'T SUSPECT THAT THESE LAWYERS FROM HEARST 


        12    DIDN'T KNOW WHAT THEY WERE TALKING ABOUT; DID YOU? 


        13    A.   I SUSPECTED THEY WERE GOING TO ARM WRESTLE OVER THIS FOR A 


        14    WHILE, AS THEY HAVE DONE OVER MANY SITUATIONS OVER 12 YEARS, 


        15    AND THAT IF I JUST HUNKERED DOWN, IT WOULD GO AWAY, AND WE 


        16    WOULD CONTINUE TO RUN THE BUSINESS AS WE ALWAYS HAVE IN THE 


        17    PAST. 


        18    Q.   OKAY.  AND, IN FACT, THE PROGRAM THEN CONTINUED ANYWAY; IS 


        19    THAT RIGHT? 


        20    A.   WE CONTINUED FOLLOWING OUR BUDGET PLAN, OUR SALES AND 


        21    MARKETING PLAN FOR SOME PERIOD OF TIME. 


        22    Q.   OKAY. 


        23    A.   I -- 


        24    Q.   NOW -- 


        25    A.   I SENT A LETTER TO BOTH HOPING THAT BOTH WOULD COME TO 
                                                                         1491




         1    THEIR SENSES AND LIFE WENT ON. 


         2    Q.   NOW, GOING BACK TO THIS LETTER OF APRIL 12, WHICH IS 


         3    EXHIBIT 72. 


         4    A.   YES. 


         5    Q.   APRIL -- SORRY, 15TH. 


         6    A.   YES. 


         7    Q.   EXHIBIT 72.  NOW, THIS REFERENCE TO THE ANTITRUST 


         8    VIOLATION WAS BECAUSE OF THIS PROBLEM THAT CAME ABOUT BECAUSE 


         9    OF THE COMBINATION SALE; CORRECT? 


        10    A.   IN MY OPINION, THIS WAS ALL CONNECTED.  IT WAS GETTING -- 


        11    YES. 


        12    Q.   AND THE -- SORRY. 


        13               AND AT THE TIME THE EXAMINER SAID THAT THIS IMPACTED 


        14    AT LEAST 16 PERCENT OF THEIR CIRCULATION; CORRECT? 


        15    A.   THE SPECIFIC REFERENCE WAS THAT WITHIN THIS PROGRAM 


        16    RESIDED -- 16 PERCENT OF THE TOTAL HOME DELIVERY BASE OF THE 


        17    EXAMINER WERE UNDER THIS PROMOTION. 


        18    Q.   SO IN EFFECT DID AT LEAST 16 PERCENT OF THEIR CIRCULATION 


        19    HOME DELIVERY; CORRECT? 


        20    A.   YES.  YES. 


        21    Q.   NOW, MR. WHITE OF THE HEARST CORPORATION THEN IN THIS 


        22    LETTER SAYING -- HE STATES, QUOTE -- IF YOU'LL GO DOWN ON PAGE 


        23    2 AND IF YOU'LL GO TO THE THIRD PARAGRAPH, HE STATES, QUOTE: 


        24                   "WHAT IS CLEAR" -- WELL, LET ME READ THE 


        25               WHOLE THING.  QUOTE: 
                                                                         1492




         1                   "IN ADDITION, WE ARE FOCUSING ON THE LEGAL 


         2               QUESTION OF UNFORESEEN CIRCUMSTANCES.  WHAT IS 


         3               CLEAR TODAY WAS NOT CLEAR TO THE DRAFTERS OF THE 


         4               JOA IN 1964.  NO MATTER HOW SUPERIOR THE 


         5               NEWSPAPER PRODUCT, WE NOW KNOW THAT PUBLISHING 


         6               IN THE P.M. CYCLE IS A DEATH WARRANT FOR A MAJOR 


         7               METROPOLITAN DAILY NEWSPAPER.  THE STATED INTENT 


         8               AND PURPOSE OF THE AGREEMENT IS NOW CLEARLY 


         9               FRUSTRATED BY REQUIRING THE EXAMINER TO REMAIN 


        10               IN THE AFTERNOON FIELD." 


        11               DO YOU SEE THAT? 


        12    A.   YES. 


        13    Q.   SO YOU UNDERSTOOD, RIGHT, THAT ONE OF THE DEALS -- 


        14               MR. ALIOTO:  IF I MAY USE THE EASEL, YOUR HONOR? 


        15    Q.   -- ONE OF THE ARRANGEMENTS HERE UNDER THE JOA BACK IN 


        16    1964, ONE OF THE DEALS TO ENABLE BOTH TO SURVIVE WAS THAT THE 


        17    HEARST CORPORATION THAT WAS SUFFERING A DEFICIT AT THE TIME 


        18    AGREED TO MOVE ITS PAPER FROM THE MORNING TO THE AFTERNOON? 


        19    A.   THEN? 


        20    Q.   THEN, YEAH. 


        21    A.   YES. 


        22    Q.   YES, 1964. 


        23    A.   YES. 


        24    Q.   YES.  HEARST CORPORATION, THE SAN FRANCISCO EXAMINER WAS A 


        25    MORNING PAPER AT THAT TIME, YES? 
                                                                         1493




         1    A.   I BELIEVE SO. 


         2    Q.   WELL, OKAY.  LOOK AT THE JOA. 


         3               THE COURT:  OH, I THINK -- 


         4               MR. ALIOTO:  OKAY. 


         5               THE COURT:  I DON'T THINK THAT'S NECESSARY. 


         6               MR. ALIOTO:  ALL RIGHT.  OKAY. 


         7    Q.   NOW -- NOW, YOU UNDERSTOOD THAT ACCORDING AT LEAST TO 


         8    HEARST, THE AFTERNOON WAS NOT THE PLACE TO BE, AND THEY 


         9    INTENDED TO GO IN THE MORNING; CORRECT? 


        10    A.   I THINK THAT'S WHAT TIM MEANT BY THAT PARAGRAPH, YES. 


        11    Q.   OKAY.  AND DID YOU UNDERSTAND THAT MR. WHITE MEANT THAT HE 


        12    INTENDED TO GO TO THE MORNING RIGHT AWAY? 


        13    A.   (WITNESS EXAMINES DOCUMENT.)  I'M NOT -- HE NEVER CAME TO 


        14    THE NEWSPAPER AGENCY AND SAID, "GET PREPARED FOR PRINTING THE 


        15    EXAMINER TOMORROW MORNING," NO.  WE DIDN'T -- 


        16    Q.   OKAY. 


        17    A.   -- PUT TOGETHER A PLAN OR HAVE ANY CONVERSATION ABOUT A 


        18    PLAN TO DO ANYTHING WITH THE EXAMINER EXCEPT WHAT HAS BEEN DONE 


        19    SINCE 1965. 


        20    Q.   NOW, THEN IN THE NEXT PARAGRAPH HE STATES, AMONG OTHER 


        21    THINGS -- 


        22    A.   WHICH WOULD HAVE BEEN IMPOSSIBLE, BY THE WAY, BUT -- 


        23    Q.   IT WOULD HAVE BEEN IMPOSSIBLE.  YOU SAY IT WOULD HAVE BEEN 


        24    IMPOSSIBLE, IT WOULD HAVE BEEN IMPOSSIBLE BECAUSE OF THE 


        25    PRESSES? 
                                                                         1494




         1    A.   YES. 


         2    Q.   HOWEVER, DID YOU UNDERSTAND AND KNOW THAT THE DLJ HAD 


         3    PLANNED THAT THE CHRONICLE IN ITS PREPARATION FOR COMPETITION 


         4    IN 2005 WOULD BEGIN TO BUILD A NEW PLANT IN 2001 OR '2?  DID 


         5    YOU KNOW THAT? 


         6    A.   THE DLJ? 


         7    Q.   YES.  DID YOU KNOW THAT? 


         8    A.   NO.  I KNEW THERE WAS SOME TALK ABOUT PLANNING FOR THE 


         9    FUTURE, YES. 


        10    Q.   AND THAT THEY WERE GOING TO SPEND $125 MILLION FOR A NEW 


        11    PRINTING PLANT IN 2000, I THINK IT WAS 2001 OR '2? 


        12    A.   ALL I KNOW FOR SURE IS THAT THE CHRONICLE COMMISSIONED A 


        13    STUDY -- 


        14    Q.   TO DO THAT? 


        15    A.   -- TO PUT TOGETHER WHAT THOSE ESTIMATES MIGHT BE. 


        16    Q.   OKAY.  AND IF THEY COMPLETED THE PLANT IN 2002 OR '3, 


        17    THERE WOULDN'T BE A PROBLEM ABOUT GOING IN THE A.M.; WOULD 


        18    THERE, BOTH PAPERS? 


        19    A.   I GO BACK TO YOUR QUESTION DID MR. WHITE MAKE IT CLEAR HE 


        20    WANTED THE EXAMINER TO GO MORNING IMMEDIATELY, AND I DON'T KNOW 


        21    WHETHER THAT'S SAID HERE, BUT THAT IS IMPOSSIBLE. 


        22    Q.   YOU UNDERSTOOD ALSO, DID YOU NOT, THAT THE HEARST 


        23    CORPORATION OWNED HALF OF THE PRESSES? 


        24    A.   THE ASSETS ARE OWNED 50-50. 


        25    Q.   CORRECT.  AND SO THEY HAD SOME LEVERAGE, DID THEY NOT, 
                                                                         1495




         1    THAT IF THEY WANTED TO GO IN THE MORNING, THAT THEY COULD USE 


         2    THAT TOO; COULDN'T THEY?  YOU UNDERSTOOD THAT; RIGHT? 


         3    A.   NO, I DID NOT UNDERSTAND THAT. 


         4    Q.   I WANT TO DIRECT YOUR ATTENTION ALSO TO PAGE -- THE SAME 


         5    PAGE, AND IT IS THE SECOND-TO-LAST PARAGRAPH, AND IT STATES, 


         6    QUOTE -- 


         7               BY THE WAY, COULD THE EXAMINER HAVE USED HALF OF THE 


         8    ASSETS, HALF OF ITS PRESSES IF IT WANTED TO TO PRINT A MORNING 


         9    PAPER?   


        10    A.   THAT SOUNDS LIKE A LEGAL QUESTION.  I WOULD SAY NO. 


        11    Q.   IT STATES, FINALLY IT STATES, IF YOU'LL GO TO THE SECOND 


        12    PAGE, IT STATES, QUOTE: 


        13                   "ACCORDINGLY WE HEREBY FORMALLY REQUEST YOUR 


        14               CONCURRENCE IN OUR MOVING THE EXAMINER 


        15               EXPEDITIOUSLY TO A.M. CYCLE ALONGSIDE THE 


        16               CHRONICLE.  NOT ONLY WILL THIS CARRY OUT THE 


        17               INTENT AND PURPOSE OF THE JOA, WE BELIEVE IT 


        18               WILL HAVE THE MUTUALLY-POSITIVE EFFECT OF 


        19               REDUCING AGENCY EXPENSES, IMPROVING THE 


        20               PROFITABILITY OF BOTH THE CHRONICLE AND THE 


        21               EXAMINER AND ENHANCING BOTH NEWSPAPERS' ABILITY 


        22               TO COMPETE WITH OTHER PUBLISHERS IN THE REGION." 


        23               DO YOU SEE THAT? 


        24    A.   YES, I DO. 


        25    Q.   DO YOU AGREE WITH MR. WHITE, THE PUBLISHER OF THE EXAMINER 
                                                                         1496




         1    AT THIS TIME, THAT IF HE WENT TO THE A.M. CYCLE, THAT THAT 


         2    WOULD IMPROVE THE PROFITABILITY OF BOTH THE CHRONICLE AND THE 


         3    EXAMINER?   


         4    A.   NO DOUBT ABOUT THAT. 


         5               THE COURT:  THIS WOULD BE MOVING THE EXAMINER TO THE 


         6    A.M. CYCLE IN THE CONTEXT OF THE JOINT OPERATING AGREEMENT; IS 


         7    THAT THE WAY YOU UNDERSTOOD THIS? 


         8               THE WITNESS:  WHAT TIM PROPOSED IN THE LETTER WAS 


         9    CHRONICLE'S CONCURRENCE, IF I READ THAT PARAGRAPH CORRECTLY, IN 


        10    MOVING THE EXAMINER TO THE A.M. CYCLE.  PHYSICALLY, PHYSICALLY 


        11    IMPOSSIBLE TO DO, BUT THAT'S WHAT'S BEEN REQUESTED HERE.  OF 


        12    COURSE, REMEMBERING IT'S IN THE CONTEXT OF THIS BIGGER SPAT, IF 


        13    YOU WILL, ON OTHER ISSUES.  BUT, YES, THAT'S WHAT IT SAYS. 


        14               THE COURT:  WELL, OKAY. 


        15    BY MR. ALIOTO: 


        16    Q.   I'D LIKE TO READ TO YOU FROM THE DEPOSITION OF MR. ASHER 


        17    AT PAGE 154. 


        18               MR. HALLING:  COULD I HAVE A MOMENT? 


        19               MR. ALIOTO:  YES.  BEGINNING AT LINE 21. 


        20                        (PAUSE IN PROCEEDINGS.) 


        21               MR. ALIOTO:  LINE 21, PAGE 154.  ARE YOU READY? 


        22               MR. HALLING:  YEAH. 


        23               MR. ALIOTO:  "QUESTION:  SO IF THE ASSETS WERE 


        24    DIVIDED AND HEARST GOT HALF THE PRINTING PRESSES, YOU WOULD 


        25    HAVE ENOUGH THERE TO PRINT THE EXAMINER UNDER ITS PRESENT 
                                                                         1497




         1    CIRCULATION; RIGHT? 


         2                   "A.  WELL, EVEN THEN IT WOULD DEPEND ON 


         3               EXACTLY HOW THE ASSETS WERE DIVIDED.  IF YOUR -- 


         4               IF YOU'RE ASKING ONLY ABOUT THE PRINTING 


         5               PRESSES, THAT WOULD BE CORRECT. 


         6                   "Q.  IN FACT, YOU WOULD HAVE ENOUGH SO YOU 


         7               COULD PRINT DOUBLE THE PRESENT CIRCULATION OF 


         8               THE EXAMINER? 


         9                   "A.  PRINTING, YES." 


        10    Q.   DO YOU AGREE WITH THAT?  DO YOU HAVE ANY REASON TO DOUBT 


        11    THAT FROM MR. ASHER? 


        12    A.   THERE'S ENOUGH PRESS CAPACITY WITH HALF OF THE ASSETS TO 


        13    PRINT THE DAILY EXAMINER WITH ITS CURRENT CIRCULATION, YES. 


        14    Q.   AND EVEN DOUBLE.  DO YOU HAVE ANY REASON TO DOUBT THAT, UP 


        15    TO 200,000? 


        16    A.   WITH HALF THE ASSETS, NO.  THAT'S POSSIBLE, YES. 


        17    Q.   SO WHEN YOU SAID THAT THERE WOULD BE A PHYSICAL 


        18    IMPOSSIBILITY BECAUSE OF THE PRINTING, YOU DIDN'T MEAN THAT? 


        19    A.   I ABSOLUTELY MEANT IT.  WE USE EVERY PIECE OF IRON WE OWN 


        20    TO PRINT THE CHRONICLE. 


        21               MR. ALIOTO:  IF IT PLEASE, YOUR HONOR, I WOULD LIKE 


        22    TO HAVE TWO MINUTES TO REVIEW MY NOTES. 


        23               THE COURT:  VERY WELL. 


        24                        (PAUSE IN PROCEEDINGS.) 


        25               THE COURT:  HOW MUCH LONGER DO YOU HAVE OF THE 
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         1    WITNESS? 


         2               MR. ALIOTO:  TEN MINUTES, FIVE MINUTES. 


         3               THE COURT:  OKAY.  THEN LET'S -- 


         4               MR. ALIOTO:  PERHAPS NOT, YOUR HONOR.  LET ME SAY 


         5    THIS, YOUR HONOR:  THESE LAST DOCUMENTS -- I WILL SAY THIS, I 


         6    WOULD APPRECIATE IT, IF IT'S CONVENIENT TO THE COURT, IF WE 


         7    MIGHT RECESS, BECAUSE THE DOCUMENTS, THE LAST DOCUMENTS OF THE 


         8    WITNESS I HAVE NOT BEEN ABLE TO READ SINCE THE WITNESS WAS 


         9    TAKEN OVER.  IF I CAN REFINE IT, I AM SURE I WILL BE ABOUT 10 


        10    MINUTES, PERHAPS 20 OR SO TOMORROW, IF IT'S CONVENIENT TO YOUR 


        11    HONOR. 


        12               THE COURT:  WELL, THAT'S FINE WITH ME, AND IT'S 


        13    ALMOST 5:00 O'CLOCK, SO I THINK IT'S PROBABLY TIME THAT WE CALL 


        14    IT A DAY. 


        15               AS I INDICATED EARLIER, WE'LL BE ABLE TO GO UNTIL IN 


        16    THE NEIGHBORHOOD OF 3:00 O'CLOCK TOMORROW.  AND SO WE'LL HAVE 


        17    ALMOST A FULL DAY TOMORROW AS WELL. 


        18               ANY MATTERS TO TAKE UP WITH THE COURT BEFORE WE 


        19    RECESS FOR THE EVENING? 


        20                             (NO RESPONSE) 


        21               THE COURT:  SEE YOU TOMORROW MORNING AT 8:30.   


        22               (WHEREUPON PROCEEDINGS ADJOURNED AT 4:50 P.M.)   


        23    


        24    


        25    

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