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VOLUME 9
PAGES 1697 - 2036
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
FRIDAY, MAY 12, 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
ATTORNEYS AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
1698
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 ATTORNEYS AT LAW
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1 I N D E X
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3 DEFENDANTS' WITNESSES PAGE VOL.
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ROSSE, JAMES (RECALLED)
5 REDIRECT EXAMINATION BY MR. CONNELL 1730 9
RECROSS-EXAMINATION BY MR. SHULMAN 1745 9
6 REDIRECT EXAMINATION BY MR. BALABANIAN 1768 9
7 BENNACK, FRANK A.
DIRECT EXAMINATION BY MR. CONNELL 1771 9
8 CROSS-EXAMINATION BY MR. ALIOTO 1829 9
9 IRISH, GEORGE B.
DIRECT EXAMINATION BY MR. CONNELL 1984 9
10 CROSS-EXAMINATION BY MR. ALIOTO 1991 9
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PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
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7 141 2002 9
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1 FRIDAY, MAY 12, 2000 8:40 A.M.
2 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY
3 VS. THE HEARST CORPORATION, ET AL., FOR TRIAL.
4 COUNSEL, YOUR APPEARANCES FOR THE RECORD.
5 MR. HALLING: GARY HALLING FOR THE HEARST
6 CORPORATION.
7 MR. ROSCH: TOM ROSCH FOR CHRONICLE PUBLICATION.
8 MR. BALABANIAN: DAVID BALABANIAN FOR EXIN, LLC.
9 MR. SHULMAN: DANIEL SHULMAN FOR THE PLAINTIFFS.
10 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
11 MR. HALLING: GOOD MORNING, YOUR HONOR.
12 THE COURT: I UNDERSTAND THAT YOU'VE RELAYED SOME
13 INFORMATION TO THE CLERK ABOUT THE SCHEDULE FOR THE REMAINDER
14 OF THIS CASE.
15 IT IS MY UNDERSTANDING THAT ALL COUNSEL BELIEVE THAT
16 THE REMAINING WITNESSES SHOULD BE ABLE TO BE PRESENTED TODAY
17 AND ON MONDAY. AND WITH THAT AMOUNT OF TRIAL TIME, THAT SHOULD
18 BE SUFFICIENT FOR THE SUBMISSION OF ALL EVIDENCE IN THE CASE.
19 IT IS FURTHER MY UNDERSTANDING THAT YOU DO NOT AGREE
20 ON WHETHER TO HAVE CLOSING ARGUMENTS OR POST-TRIAL BRIEFS OR
21 SOME COMBINATION OF THE TWO.
22 MR. HALLING: YOUR HONOR, I AM NOT SURE THAT'S
23 ACCURATE. IF I MAY, I THINK WE ARE CLEAR THAT THE TRIAL WILL
24 BE COMPLETED BY THE END OF TODAY OR, IF IT SPILLS OVER, BY
25 MONDAY MORNING. WE THINK THERE IS A CHANCE, REALISTICALLY, TO
1702
1 BE DONE TODAY.
2 IN TERMS OF BRIEFING, I THINK WE DO AGREE THERE
3 SHOULD BE AN ARGUMENT. OUR POSITION IS THAT IT WILL BE MORE
4 USEFUL IF IT OCCURRED AFTER THE BRIEFING RATHER THAN BEFORE.
5 WE DO DISAGREE ON THE LENGTH OF TIME FOR THE
6 BRIEFING. WE WOULD PREFER A SHORTER PERIOD, AND WE HAVE A
7 SPECIFIC PROPOSAL, AND I UNDERSTAND FROM MR. SHULMAN THEY WOULD
8 LIKE QUITE A BIT LONGER.
9 THE COURT: I AM INCLINED TO AWAIT UNTIL AFTER THE
10 COMPLETION OF ALL OF THE EVIDENCE TO MAKE A DECISION ON HOW THE
11 CASE IS ARGUED AND BRIEFED AT THE CONCLUSION.
12 MR. HALLING: OKAY.
13 THE COURT: BUT WHAT I HAVE DONE IN THE MEANTIME IS
14 TO POSTPONE THE CRIMINAL TRIAL THAT I MENTIONED YESTERDAY,
15 WHICH WAS DUE TO START ON MONDAY, UNTIL -- WE POSTPONED THAT
16 UNTIL TUESDAY MORNING. AND WE WILL BEGIN JURY SELECTION IN
17 THAT CASE ON TUESDAY MORNING.
18 SO, IN ESSENCE, ALTHOUGH I DON'T WANT TO GIVE YOU
19 TIME AVAILABLE WHICH YOU CAN THEN FILL, NONETHELESS, WE HAVE,
20 OF COURSE, ALL OF TODAY AND, IF NEED BE, ALL OF MONDAY.
21 NOW, IF YOU CAN COMPLETE THE PRESENTATION OF THE
22 EVIDENCE TODAY OR LESS THAN ALL OF MONDAY, THAT WILL BE FINE.
23 BUT IT DOES APPEAR THAT THAT ALLOCATION OF TIME TO THIS TRIAL
24 SHOULD BE SUFFICIENT TO SUBMIT ALL OF THE EVIDENCE TO BE
25 PRESENTED.
1703
1 AND WHEN THAT IS DONE, THEN I WILL HAVE A LITTLE
2 BETTER HANDLE ON HOW MUCH ADDITIONAL TIME WE NEED, AND THE
3 SCHEDULE SHOULD BE ALLOTTED THEN FOR BRIEFING AND ARGUMENT OF.
4 I THINK IT WOULD BE HELPFUL TO HAVE SOME POST-TRIAL
5 BRIEFING AND SOME ARGUMENT. BUT EXACTLY WHAT COMBINATION OF
6 THE TWO, I THINK, IT MIGHT BE BETTER TO DECIDE AFTER ALL OF THE
7 EVIDENCE IS IN.
8 MR. ROSCH: YOUR HONOR, MAY I JUST SAY ONE THING?
9 AND THIS IS ON BEHALF OF CHRONICLE ONLY.
10 YOUR HONOR HAS PUT ENORMOUS PRESSURE ON YOURSELF --
11 PERHAPS THE PUBLIC DOESN'T KNOW THAT, BUT WE IN THE LITIGATING
12 BAR KNOW THAT IT'S EXTRAORDINARY TO GET ON THE CALENDAR THIS
13 QUICKLY AND TO HAVE THIS MUCH TRIAL TIME.
14 NOW, WHAT WE AT CHRONICLE ASK THE COURT TO DO, IF
15 THE COURT DECIDES YOU WANT BRIEFING AND ORAL ARGUMENT, IS TO
16 PUT THE PRESSURE ON US. AS YOU KNOW, WE HAVE SOME IMPERATIVES
17 AT CHRONICLE. BUT PART -- QUITE APART FROM THAT THERE ARE A
18 LOT OF PEOPLE WHO ARE UP IN THE AIR AT THESE NEWSPAPERS AT THE
19 PRESENT TIME.
20 SO, AGAIN, WITHOUT SUGGESTING ANYTHING SPECIFIC, I
21 WOULD URGE THE COURT JUST TO PUT THE PRESSURE ON US AND MAKE US
22 GET THIS DONE QUICKLY.
23 THE COURT: WELL, YOU DON'T HAVE TO INVITE ME TO PUT
24 PRESSURE ON LAWYERS, MR. ROSCH.
25 MR. ROSCH: THANK YOU.
1704
1 (LAUGHTER)
2 THE COURT: THAT'S AN INVITATION I AM ALWAYS HAPPY
3 TO ACCEPT.
4 MR. ROSCH: THANK YOU.
5 MR. HALLING: THANK YOU, YOUR HONOR.
6 THE COURT: ALL RIGHT. ANYTHING FURTHER BEFORE WE
7 RESUME WITH DR. ROSSE'S TESTIMONY?
8 MR. ALIOTO: WE HAD -- WE RECEIVED -- IF IT PLEASE
9 YOUR HONOR, WE RECEIVED A PRIVILEGE LOG FROM THE DEFENDANTS
10 YESTERDAY MORNING. AND WE THINK THAT THERE ARE SOME DOCUMENTS
11 IN THAT PRIVILEGE LOG THAT SHOULD BE PRODUCED, AND WE WOULD
12 LIKE TO TAKE IT UP WITH THE COURT AT THE RECESS -- OR NOW IF
13 THE COURT WANTS TO DO IT NOW.
14 THE COURT: WELL --
15 MR. ALIOTO: OR AT ANY TIME.
16 THE COURT: I WONDER IF WE SHOULDN'T COMPLETE
17 DR. ROSSE'S TESTIMONY.
18 MR. ALIOTO: OKAY.
19 THE COURT: AND THEN TAKE UP THAT MATTER.
20 MR. ALIOTO: THANK YOU.
21 THE COURT: ALL RIGHT. FIRST OFF, DR. ROSSE, YOU
22 UNDERSTAND THAT YOU ARE STILL UNDER THE OATH THAT YOU TOOK
23 YESTERDAY?
24 THE WITNESS: I CERTAINLY DO.
25 THE COURT: AND THAT OATH APPLIES TO THIS TESTIMONY,
1705
ROSSE - CROSS / SHULMAN
1 AS WELL AS YOUR TESTIMONY YESTERDAY.
2 THE WITNESS: OF COURSE.
3 THE COURT: THANK YOU.
4 MR. SHULMAN, YOU MAY PROCEED.
5 MR. SHULMAN: THANK YOU.
6 JAMES ROSSE,
7 CALLED AS A WITNESS FOR THE DEFENDANTS, HAVING BEEN PREVIOUSLY
8 DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:
9 CROSS-EXAMINATION (RESUMED)
10 BY MR. SHULMAN:
11 Q. DR. ROSSE, I BELIEVE YOU SAID YESTERDAY WHEN YOU WERE ON
12 DIRECT EXAMINATION THAT YOU BELIEVE DR. COMANOR MADE HIS
13 DETERMINATION OF THE RELEVANT MARKET RELYING ON -- ALMOST
14 ENTIRELY ON LEGAL AUTHORITIES; IS THAT YOUR TESTIMONY?
15 A. YES, IN PART. I WAS RELYING ON THE -- THE QUESTION THAT
16 OCCURRED IN HIS DEPOSITION IN WHICH WHEN HE WAS ASKED WHAT --
17 WHAT HE DID WHEN HE WAS -- WHEN HE WAS ASKED TO DEFINE THE
18 MARKET, HE SAID THE FIRST THING HE DID WAS CHECK THE RELEVANT
19 CASE LAW.
20 Q. WELL, YOU KNOW THAT WHEN HE TESTIFIED HERE IN THIS TRIAL
21 THAT THE QUESTION OF LEGAL AUTHORITIES DIDN'T COME UP UNTIL HIS
22 CROSS-EXAMINATION. ARE YOU AWARE OF THAT?
23 A. I DON'T RECALL THAT SPECIFICALLY.
24 Q. YOU ALSO SAID THAT YOU WERE ASKED ABOUT THE PRICE YOU PAID
25 FOR THE MOVIES. DO YOU REMEMBER THAT?
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ROSSE - CROSS / SHULMAN
1 A. YES, I DO.
2 Q. AND THAT, AS A -- AS A PERSON OVER 60, YOU PAY A DIFFERENT
3 PRICE FROM PERSONS UNDER THAT AGE AND ALSO DIFFERENT FROM
4 CHILDREN, RIGHT?
5 A. CORRECT.
6 Q. OKAY. NOW -- AND YOU SAID THAT THAT IN NO WAY INDICATED
7 TO YOU THERE WERE SEPARATE MARKETS, RIGHT?
8 A. THAT'S CORRECT.
9 Q. OKAY. NOW, SUPPOSE THAT YOU WENT TO SEE A MOVIE IN SAN
10 FRANCISCO AND YOU WERE CHARGED A PRICE OF $5 AND THEN YOU LIKED
11 THE MOVIE SO MUCH YOU WENT TO SEE THE SAME PICTURE IN OAKLAND
12 AND YOU WERE CHARGED 7.50, AND YOU LIKED THE MOVIE SO MUCH THAT
13 YOU WENT TO SEE IT AGAIN IN SAN JOSE AND YOU WERE CHARGED $10.
14 WOULD THAT TEND TO INDICATE TO YOU THAT THOSE WERE
15 SEPARATE MARKETS?
16 A. YES.
17 Q. YOU ALSO ARE AWARE THAT THE CHRONICLE AND THE EXAMINER
18 HAVE 93 TO 97 PERCENT OF DAILY CIRCULATION -- NEWSPAPER
19 CIRCULATION WITHIN THE CITY OF SAN FRANCISCO, CORRECT?
20 A. THAT'S WHAT THE STATISTICS SHOW, THAT'S CORRECT.
21 Q. OKAY. AND THAT IS NOT VERY SURPRISING TO YOU, IS IT?
22 A. NOT PARTICULARLY, NO.
23 Q. AND THAT'S BECAUSE IN YOUR VIEW PEOPLE WHO LIVE IN SAN
24 FRANCISCO DON'T HAVE VERY MUCH INTEREST IN THE CONTRA COSTA
25 TIMES, FOR INSTANCE, OR THE VALLEY TIMES OR ANY OTHER PAPERS,
1707
ROSSE - CROSS / SHULMAN
1 CORRECT?
2 A. WELL, THEY HAVE AN INTEREST IN NATIONAL NEWSPAPERS, AND
3 SOME OF THEM WILL HAVE INTEREST IN OTHER PAPERS. BUT MOST
4 RESIDENTS OF SAN FRANCISCO WILL BE CONCERNED ABOUT THE LOCAL
5 AFFAIRS AND THE REGIONAL AFFAIRS THAT ARE CENTERED AROUND SAN
6 FRANCISCO.
7 Q. AND PEOPLE WHO ARE IN THE CITY OF SAN FRANCISCO, WHEN THEY
8 WANT NEWS, THEY GO TO THE NEWSPAPERS THAT ARE PUBLISHED IN SAN
9 FRANCISCO, CORRECT?
10 A. THEY WILL PROBABLY MORE OFTEN GO TO THE TELEVISION NEWS
11 FIRST, AND THEN THEY WOULD GO TO THE SAN FRANCISCO NEWSPAPERS,
12 BOTH WEEKLIES AND DAILIES, BUT PRIMARILY DAILIES.
13 Q. AND --
14 A. AND ALSO -- I FORGOT RADIO. RADIO IS A LIKELY SOURCE OF
15 NEWS FOR MANY PEOPLE, ESPECIALLY DURING COMMUTING HOURS.
16 Q. WHEN PEOPLE IN SAN FRANCISCO WANT NEWS FROM DAILY
17 NEWSPAPERS, THEY GO TO THE SAN FRANCISCO NEWSPAPERS, DO THEY
18 NOT?
19 A. THAT'S CORRECT.
20 Q. AND THAT'S BECAUSE THOSE NEWSPAPERS ARE FOCUSED ON SAN
21 FRANCISCO EVENTS, SAN FRANCISCO NEWS AND SAN FRANCISCO
22 INFORMATION THAT'S PARTICULARLY RELEVANT TO READERS IN SAN
23 FRANCISCO, CORRECT?
24 A. IN SAN FRANCISCO AND IN THE GENERAL -- AND THE REGIONS
25 CENTERED AROUND SAN FRANCISCO, YES.
1708
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1 Q. AND STUFF THAT'S PUBLISHED ELSEWHERE IS OF LESS INTEREST?
2 A. NOT NECESSARILY "STUFF." LOCAL NEWS PUBLISHED ELSEWHERE
3 IS OF LESSER INTEREST.
4 Q. SO -- AND THAT'S PART OF THE REASON THAT IN YOUR VIEW THE
5 NOTES -- THE NEWSPAPER BUSINESS IN THIS COUNTRY IS LARGELY A
6 LOCAL BUSINESS?
7 A. THAT'S CORRECT.
8 Q. NOW, YOU SAID -- I WANT TO ASK YOU SOME OF YOUR -- ABOUT
9 SOME OF YOUR VIEWS CONCERNING COMPETITION THAT THE CHRONICLE
10 MIGHT FACE.
11 AND I THINK IT'S YOUR VIEW -- IN FACT, YOU HAVE A
12 STRONG OPINION -- THAT THE EXAMINER EITHER AS A WEEKDAY ONLY
13 PUBLICATION OR IN COMBINATION WITH THE SUNDAY EDITION COULD NOT
14 SURVIVE NOW OR IN THE FUTURE AS A FREE-STANDING GENERAL
15 CIRCULATION DAILY NEWSPAPER IN COMPETITION WITH THE CHRONICLE.
16 IS THAT CORRECT?
17 A. THAT'S CORRECT.
18 Q. AND THAT'S SO EVEN IF SOMEONE WERE TO MAKE THE SIGNIFICANT
19 INVESTMENT NEEDED TO MOVE THE EXAMINER TO A MORNING PUBLICATION
20 WITH A SUNDAY EDITION, RIGHT?
21 A. THAT'S CORRECT.
22 Q. AND BY "SIGNIFICANT INVESTMENT," WHAT DO YOU MEAN?
23 A. IT DEPENDS -- THERE ARE MANY WAYS OF DOING THAT. ONE
24 COULD DO IT BY BUILDING AN APPROPRIATE PRINTING PLANT AND
25 GETTING THE BUILDINGS AND PUTTING -- BUYING ALL OF THE
1709
ROSSE - CROSS / SHULMAN
1 EQUIPMENT AND EVERYTHING ELSE TO DO IT.
2 ALTERNATIVELY, ONE COULD DO IT BY USING COMMERCIAL
3 SOURCES FOR MUCH OF THAT AND DO IT FOR MUCH -- FOR MUCH LESS
4 MONEY. SO THE AMOUNT OF INVESTMENT DEPENDS ON HOW YOU DO IT,
5 AMOUNT OF INVESTMENT REQUIRED.
6 Q. AND I THINK IT'S YOUR VIEW, IS IT NOT, THAT THE REALITY IS
7 THAT THE ODDS AGAINST THE EXAMINER BEING ABLE TO SURVIVE AS AN
8 INDEPENDENT DIRECT COMPETITOR OF THE CHRONICLE ARE
9 ASTRONOMICAL?
10 A. THOSE ARE, I BELIEVE, MY EXACT WORDS IN THE PARTICULAR
11 REGION.
12 Q. CORRECT. SO, AS FAR AS YOU ARE CONCERNED, THE BOTTOM LINE
13 IS THAT THE EXAMINER IS INCAPABLE OF SURVIVING AS A
14 FREE-STANDING, SELF-SUPPORTING DAILY NEWSPAPER COMPETING ACROSS
15 THE BOARD WITH THE CHRONICLE FOR GENERAL CIRCULATION AND
16 ADVERTISING IN THE SAN FRANCISCO AREA; ISN'T THAT TRUE?
17 A. THAT'S CERTAINLY TRUE.
18 Q. AND WITH REGARD TO MR. FANG, IF HE TRIED TO -- WELL,
19 YOU'VE READ THE -- THE DECLARATIONS OF THE -- OF MR. REILLY'S
20 EXPERTS IN THIS CASE, RIGHT?
21 A. NOT ALL OF THEM BUT SEVERAL OF THEM, YES.
22 Q. YOU ARE AWARE OF THEIR OPINION THAT IT WOULD TAKE A
23 SUBSIDY OF AT LEAST $50 MILLION A YEAR FOR THE EXAMINER TO HAVE
24 A CHANCE UNDER MR. FANG COMPETING DIRECTLY AGAINST THE
25 CHRONICLE?
1710
ROSSE - CROSS / SHULMAN
1 A. I DON'T BELIEVE THAT'S THE TESTIMONY I HEARD. I BELIEVE
2 THE TESTIMONY I HEARD WAS THAT IT WOULD TAKE AT LEAST
3 50 MILLION A YEAR TO PRODUCE A PAPER THAT WAS ABLE TO COMPETE
4 DIRECTLY WITH THE CHRONICLE.
5 Q. WELL, YOU ARE AWARE OF THEIR OPINION THAT THE -- THE
6 OPINION OF THE EXPERTS OF MR. REILLY THAT THE PRESENT SUBSIDY
7 BY HEARST WILL NOT BE ABLE UNDER ANY CIRCUMSTANCES TO SUPPORT
8 THE PROBABILITY OR EVEN THE POSSIBILITY OF A VIABLE PAPER WHICH
9 WOULD BE COMPETITIVE TO THE CHRONICLE?
10 A. IF YOU ARE DEFINING "COMPETITIVE" AS -- IN THE WAY IN
11 WHICH WE HAVE BEEN USING IT, THAT IS, BROADLY COMPETITIVE AS A
12 GENERAL CIRCULATION MORNING NEWSPAPER, METROPOLITAN NEWSPAPER,
13 THE ANSWER IS I AGREE WITH THAT.
14 Q. OKAY. AND YOU ARE AWARE OF THEIR OPINION THAT IN ORDER TO
15 PRODUCE A VIABLE COMPETITIVE PAPER, ANY BUYER OF THE EXAMINER
16 WOULD NEED A SUBSIDY OF $50 MILLION FOR FIVE YEARS OR A
17 ONE-TIME PAYMENT OF $250 MILLION, CORRECT?
18 A. I AM AWARE OF THAT TESTIMONY. I DISAGREE WITH IT.
19 Q. WELL, YOU DISAGREE WITH IT BECAUSE YOU DON'T THINK YOU CAN
20 PRODUCE A NEWSPAPER OF THE SIZE THAT WOULD BE COMPETITIVE WITH
21 THE CHRONICLE EVEN WITH THAT AMOUNT OF SUBSIDY. RIGHT?
22 A. THAT'S CORRECT. THAT'S MY VIEW.
23 Q. NOW, ARE YOU AWARE THAT THE JUSTICE DEPARTMENT HAS
24 ISSUED -- THAT THE JUSTICE DEPARTMENT ISSUED A PRESS RELEASE
25 AFTER HEARST ANNOUNCED ITS SALE TO THE FANGS?
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1 A. I AM AWARE THAT THE PRESS RELEASE WAS ISSUED. I HAVEN'T
2 SEEN IT.
3 Q. AND -- WELL, I WILL SHOW YOU -- I WILL SHOW IT TO YOU.
4 IT'S DEFENDANT'S EXHIBIT 940.
5 DO YOU HAVE A COPY?
6 MAY I APPROACH THE WITNESS, YOUR HONOR?
7 THE COURT: YES, YOU MAY.
8 (PAUSE IN THE PROCEEDINGS.)
9 MR. SHULMAN: DO YOU HAVE THAT ONE OR NO?
10 SHOULD I USE THE ELMO?
11 MR. HALLING: I THINK WE HAVE IT.
12 MR. SHULMAN: OKAY.
13 BY MR. SHULMAN:
14 Q. THIS IS DEFENDANT'S EXHIBIT 940 IN EVIDENCE, AND THIS IS
15 THE PRESS RELEASE OF THE DEPARTMENT OF JUSTICE AFTER THE
16 ANNOUNCEMENT OF THE SALE OF -- OR THE TRANSACTION INVOLVING THE
17 TRANSFER OF CERTAIN ASSETS OF THE EXAMINER TO THE FANGS.
18 I WANT TO DIRECT YOUR ATTENTION TO THE SECOND PAGE,
19 PAGE 2 AND THE SENTENCE THAT APPEARS AT THE VERY TOP OF THE
20 PAGE ON PAGE 2, WHICH SAYS:
21 "CONSUMERS, SUCH AS ADVERTISERS AND READERS,
22 WILL OBTAIN THE BENEFITS OF FULL COMPETITION
23 BETWEEN TWO DAILY MORNING NEWSPAPERS" -- "TWO
24 DAILY MORNING PAPERS."
25 DO YOU AGREE WITH THAT?
1712
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1 A. NO.
2 MR. CONNELL: MAY I -- BEFORE -- MAY I ASK THAT THE
3 WITNESS BE GIVEN AN OPPORTUNITY, IF HE HASN'T HAD ONE, TO READ
4 THIS ENTIRE SHORT RELEASE BEFORE HE IS ASKED TO COMMENT ON ONE
5 SENTENCE?
6 MR. SHULMAN: I THINK HE DID.
7 THE COURT: ALL RIGHT. I BELIEVE THE WITNESS HAS
8 THE DOCUMENT?
9 THE WITNESS: YES, I HAVE.
10 THE COURT: ALL RIGHT. HAVE YOU HAD A CHANCE TO
11 READ IT?
12 THE WITNESS: I SCANNED THROUGH IT QUICKLY.
13 THE COURT: ALL RIGHT, WELL, SCAN THROUGH IT FROM
14 BEGINNING TO END.
15 THE WITNESS: (WITNESS READING DOCUMENT) YES.
16 THE COURT: HAVE YOU READ IT?
17 THE WITNESS: I HAVE READ IT.
18 THE COURT: OKAY. GO AHEAD, MR. SHULMAN.
19 BY MR. SHULMAN:
20 Q. OKAY. THE QUESTION WAS -- AND I THINK YOU ANSWERED -- DO
21 YOU AGREE WITH THE STATEMENT BY THE DEPARTMENT OF JUSTICE THAT
22 CONSUMERS, SUCH AS ADVERTISERS AND READERS, WILL OBTAIN THE
23 BENEFITS OF FULL COMPETITION BETWEEN TWO DAILY MORNING PAPERS?
24 A. I DON'T AGREE WITH IT IF I INTERPRET "FULL" AS I WOULD
25 ORDINARILY INTERPRET IT IN COMMON LANGUAGE USED. I AGREE WITH
1713
ROSSE - CROSS / SHULMAN
1 THE STATEMENT IF THE WORD "FULL" IS TAKEN OUT, IF IT READS,
2 "CONSUMERS, SUCH AS ADVERTISERS AND READERS, WILL OBTAIN THE
3 BENEFITS OF COMPETITION BETWEEN TWO DAILY MORNING NEWSPAPERS."
4 I THINK THAT'S A TRUE STATEMENT.
5 Q. BUT IF IT'S "FULL COMPETITION," THEN THE STATEMENT IS
6 FALSE IN YOUR OPINION?
7 A. IT DEPENDS ON WHAT MR. KLEIN MEANT BY "FULL." IF HE MEANT
8 WHAT I THINK HE MEANT BY IT, THEN I DON'T AGREE WITH THAT
9 STATEMENT.
10 Q. LET ME DIRECT YOUR ATTENTION TO SOME STATEMENTS THAT --
11 THE COURT: LET ME JUST CLARIFY THAT.
12 MR. SHULMAN: GO AHEAD.
13 THE COURT: YOU SAID, "MR. KLEIN MEANT WHAT I THINK
14 HE MEANT." BUT PUT IT IN CONTEXT OF WHAT YOU MEAN BY "FULL
15 COMPETITION."
16 THE WITNESS: CERTAINLY. I WOULD INTERPRET THAT AS
17 MEANING FULL METROPOLITAN FACE-TO-FACE DAILY NEWSPAPER
18 COMPETITION.
19 THE COURT: AND I GATHER YOUR TESTIMONY IS THAT THE
20 SPINOFF OF THE EXAMINER ASSETS TO THE FANG GROUP WILL NOT
21 RESULT IN THAT KIND OF FULL COMPETITION; IS THAT CORRECT?
22 THE WITNESS: THAT'S CORRECT, YOUR HONOR.
23 BY MR. SHULMAN:
24 Q. OKAY. LET ME DIRECT YOUR ATTENTION TO SOME STATEMENTS
25 THAT WERE MADE BY HEARST IN ITS OPPOSITION OF DEFENDANT THE
1714
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1 HEARST CORPORATION TO PLAINTIFFS'S MOTION FOR A PRELIMINARY
2 INJUNCTION. THERE IS A STATEMENT BY HEARST WHICH SAYS, QUOTE:
3 "PAN ASIA INTENDS TO MOVE THE EXAMINER TO
4 MORNING PUBLICATION AND OPERATE AS A
5 FREE-STANDING DAILY NEWSPAPER IN DIRECT
6 COMPETITION WITH THE CHRONICLE."
7 DO YOU THINK THAT PAN ASIA WILL BE ABLE TO OPERATE
8 THE EXAMINER AS A FREE-STANDING DAILY NEWSPAPER IN DIRECT
9 COMPETITION WITH THE CHRONICLE?
10 A. THAT'S A DIFFICULT QUESTION TO ANSWER BECAUSE IT HINGES ON
11 WHAT YOU MEAN BY "DIRECT." I WOULD NOT USE "DIRECT" IN THAT
12 CONTEXT, BUT PERHAPS OTHERS WOULD.
13 Q. OKAY. AND LET ME GIVE YOU ANOTHER STATEMENT BY HEARST IN
14 THE SAME MEMORANDUM. IT SAYS, QUOTE:
15 "PAN ASIA HAS ANNOUNCED THAT IT INTENDS TO
16 PUBLISH THE EXAMINER AS A REGULAR
17 SUBSCRIPTION-BASED, PAID DAILY NEWSPAPER AND
18 SWITCH THE EXAMINER TO MORNING PUBLICATION TO
19 COMPETE DIRECTLY WITH THE CHRONICLE."
20 MR. CONNELL: MR. HALLING, COULD YOU TELL ME WHERE
21 YOU ARE READING FROM?
22 MR. SHULMAN: YES, I AM READING FROM PAGE 5 AT LINE
23 3.
24 MR. CONNELL: LINE WHAT?
25 MR. SHULMAN: LINE 3.
1715
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1 THE WITNESS: SAME ANSWER, SAME WORD.
2 MR. ALIOTO: DAN?
3 (PAUSE IN THE PROCEEDINGS.)
4 BY MR. SHULMAN:
5 Q. DO YOU AGREE OR DISAGREE WITH THE -- THAT THE EXAMINER --
6 THAT THE FANGS CAN PUBLISH THE EXAMINER AS A REGULAR
7 SUBSCRIPTION-BASED, PAID DAILY NEWSPAPER AND SWITCH THE
8 EXAMINER TO MORNING PUBLICATION TO COMPETE DIRECTLY WITH THE
9 CHRONICLE?
10 A. IT ALL -- TO REPEAT THE ANSWER THAT I GAVE BEFORE, IF YOU
11 INTERPRET "DIRECT" MEANING WILL IT BE COMPETITIVE, WILL IT BE
12 COMPETING WITH THE CHRONICLE, THE ANSWER IS YES. IF YOU
13 INTERPRET "DIRECT" TO MEAN WILL IT BE A FULL GENERAL
14 CIRCULATION NEWSPAPER COMPETING ACROSS THE BOARD AGAINST THE
15 EXAMINER -- THE CHRONICLE, THE ANSWER IS NO.
16 Q. OKAY.
17 A. SO IT HINGES ON WHAT YOU MEAN BY "DIRECT."
18 Q. WE WILL HAVE TO ASK HEARST. I AM READING FROM THEIR
19 BRIEF.
20 LET ME DIRECT YOUR ATTENTION TO PAGE -- TO LINE 19,
21 SAME PAGE. IT SAYS, QUOTE:
22 "ALSO PAN ASIA CLAIMS THE NEW EXAMINER WILL
23 BE THE FIRST MAJOR ASIAN AMERICAN OWNED
24 METROPOLITAN DAILY IN THE UNITED STATES."
25 DO YOU AGREE THAT THE EXAMINER WILL BE A
1716
ROSSE - CROSS / SHULMAN
1 METROPOLITAN OWNED DAILY NEWSPAPER -- A METROPOLITAN DAILY
2 NEWSPAPER?
3 A. I DON'T AGREE WITH THE ORDER OF THE WORDS IN THAT CASE.
4 IT WILL BE A PAPER PUBLISHED IN A METROPOLITAN AREA. IT WILL
5 NOT BE, AS I WOULD DESCRIBE, A METROPOLITAN DAILY NEWSPAPER IN
6 THE SAME SENSE AS THE CHRONICLE IS.
7 Q. ALL RIGHT. THE STATEMENT ON PAGE 21 OF THE SAME
8 MEMORANDUM, LINE 8. IT SAYS, QUOTE:
9 "HEARST PURCHASE OF THE CHRONICLE AND PAN
10 ASIA'S ACQUISITION OF THE EXAMINER WILL
11 DRAMATICALLY INCREASE BOTH LOCAL AND REGIONAL
12 DAILY NEWSPAPER COMPETITION IN THE SAN FRANCISCO
13 AREA FOR THE BENEFIT OF CONSUMERS, INCLUDING
14 MR. REILLY."
15 DO YOU AGREE OR DISAGREE WITH THAT?
16 A. I AGREE -- THERE IS A LITTLE HYPERBOLE WITH THAT BUT I
17 AGREE WITH THE THRUST OF THE STATEMENT.
18 Q. DO YOU AGREE THAT THE PAN ASIA'S ACQUISITION OF THE
19 EXAMINER WILL DRAMATICALLY INCREASE REGIONAL NEWSPAPER
20 COMPETITION IN THE SAN FRANCISCO AREA?
21 A. YES, BECAUSE IT WILL PERMIT THE CHRONICLE TO BE A MUCH
22 MORE VIGOROUS COMPETITOR IN THE AREA THAN IT NOW IS.
23 Q. BUT NOT FANG, RIGHT?
24 A. I DON'T BELIEVE MR. FANG INTENDS TO COMPETE REGIONALLY.
25 Q. NOW, I THINK YOU ALSO TESTIFIED THAT, IN YOUR OPINION,
1717
ROSSE - CROSS / SHULMAN
1 UNDER THE PRESENT JOA THERE IS NO ECONOMIC COMPETITION IN
2 EXISTENCE BETWEEN THE CHRONICLE AND THE EXAMINER; IS THAT
3 RIGHT?
4 A. THAT'S CORRECT.
5 Q. OKAY. I WANT TO DIRECT YOUR ATTENTION TO SOME STATEMENTS
6 THAT WERE MADE BY THE ANTITRUST DIVISION OF THE UNITED STATES
7 DEPARTMENT OF JUSTICE IN THE AMICUS BRIEF THAT IT FILED IN THE
8 HONOLULU CASE.
9 AND I AM READING FROM PAGE 21. IT SAYS:
10 "FIRST" --
11 A. MAY I HAVE A COPY OF THAT TO LOOK AT AS YOU READ IT?
12 Q. SURE.
13 MAY I APPROACH THE WITNESS, YOUR HONOR?
14 THE COURT: YES.
15 AND I AM GOING TO ASK THE CLERK TO RETRIEVE MY COPY
16 OF THAT WHICH IS IN CHAMBERS.
17 MR. SHULMAN: HERE. MAY WE HAND ONE UP, YOUR HONOR?
18 MR. HALLING: (INDICATING).
19 THE COURT: ALL RIGHT. THAT'S FINE.
20 THANK YOU.
21 THE WITNESS: THANK YOU.
22 BY MR. SHULMAN:
23 Q. FOR CONTEXT, IF YOU WILL GO TO PAGE 20, THAT'S THE SECTION
24 I AM GOING TO BE TAKING -- READING STATEMENTS FROM. IT'S
25 HEADED.
1718
ROSSE - CROSS / SHULMAN
1 "C: THE COURT SHOULD NOT CONCLUDE ON THIS
2 RECORD THAT ECONOMIC COMPETITION BETWEEN THE
3 PARTIES TO THIS JOA CANNOT EXIST."
4 AND THEN IF YOU'VE HAD A CHANCE TO READ THAT
5 PARAGRAPH, I WILL BEGIN AT THE TOP OF THE NEXT PAGE, PAGE 21.
6 A. YES.
7 Q. OKAY. IT SAYS:
8 "FIRST, PRIOR TO TERMINATION OF THE JOA,
9 NEWSPAPERS MAY HAVE AN INCENTIVE TO IMPROVE
10 OPERATIONS AND INCREASE CIRCULATION IN ORDER TO
11 POSITION THEMSELVES BETTER FOR POSSIBLE POST-JOA
12 COMPETITION."
13 DO YOU AGREE OR DISAGREE WITH THAT?
14 A. THERE MAY BE AN INCENTIVE THERE. HOWEVER, THE -- THAT
15 OPERATES BOTH WAYS. THE INCENTIVE WITH RESPECT TO COMPETITION
16 ON CIRCULATION, FOR INSTANCE, GETS FILTERED THROUGH THE JOINT
17 DECISION PROCESS OF THE JOA. AND SO WHILE THEY MAY ARGUE, AS
18 THEY APPARENTLY HAVE IN THE CASE IN SAN FRANCISCO, FOR
19 DIFFERING POSITIONS, ULTIMATELY THEY GET RESOLVED.
20 AS FAR AS THE COMPETITION FOR IMPROVING THE PRODUCT
21 IS CONCERNED, IT'S THERE, BUT, OF COURSE, IT HAS DIMINISHED
22 BECAUSE THEY ONLY GET HALF THE BENEFITS OF ANY IMPROVEMENTS
23 THEY MAKE SINCE THEY SPLIT -- SPLIT ENTIRELY. SO IT'S A --
24 IT'S A -- IT'S A MIXED STATEMENT AS FAR AS INCENTIVES ARE
25 CONCERNED.
1719
ROSSE - CROSS / SHULMAN
1 Q. OKAY. SO DO YOU AGREE OR DISAGREE WITH --
2 A. I DON'T AGREE WITH IT AS IT'S WRITTEN. I THINK THAT I
3 STANDS ON WHAT I SAID AS TO WHAT I DO BELIEVE.
4 Q. THEN IT CONTINUES, QUOTE:
5 "THAT IS, IF COMMERCIAL COMPETITION BETWEEN
6 THE NEWSPAPERS FOLLOWING TERMINATION OF THE JOA
7 WERE POSSIBLE, THEN EDITORIAL RIVALRY BETWEEN
8 THE NEWSPAPERS PRIOR TO TERMINATION MIGHT BE
9 EXPECTED TO AFFECT BOTH CIRCULATION OF AND THE
10 INTEREST OF ADVERTISERS IN VYING SPACE IN THE
11 TWO NEWSPAPERS DIFFERENTIALLY."
12 DO YOU AGREE OR DISAGREE WITH THAT?
13 A. I DON'T AGREE WITH IT BECAUSE I THINK THAT'S WHAT FALLS IN
14 THE CATEGORY OF BEING A VACUOUS HYPOTHESIS. THAT IS, I DON'T
15 THINK COMMERCIAL COMPETITION FOLLOWING TERMINATION OF THE JOA
16 WOULD BE POSSIBLE.
17 Q. SO YOU THINK THAT THE --
18 A. SO THE REST OF THE STATEMENT IS MEANINGLESS.
19 Q. SO YOU THINK THAT THIS STATEMENT BY THE ANTITRUST DIVISION
20 OF THE DEPARTMENT OF JUSTICE IS A VACUOUS HYPOTHESIS THAT IS
21 MEANINGLESS?
22 A. VACUOUS HYPOTHETICAL.
23 Q. THEN IT SAYS, QUOTE:
24 "AND CIRCULATION AND ADVERTISING ATTAINED
25 DURING THE PERIOD OF THE JOA OBVIOUSLY WOULD
1720
ROSSE - CROSS / SHULMAN
1 AFFECT COMPETITION FOLLOWING TERMINATION."
2 DO YOU THINK THIS IS ANOTHER VACUOUS HYPOTHESIS BY
3 THE DEPARTMENT OF JUSTICE?
4 A. SAME RESPONSE.
5 Q. OKAY. NOW, YOU ARE AWARE, ARE YOU NOT, THAT DURING --
6 UP -- IN FACT, UP UNTIL CLOSE TO THE TIME THAT HEARST AGREED TO
7 BUY THE CHRONICLE, HEARST WAS MAKING REPEATED STATEMENTS TO THE
8 CHRONICLE THAT HEARST INTENDED TO STAY IN THIS MARKET AND
9 COMPETE AFTER THE END OF THE JOA?
10 A. I AM FAMILIAR WITH THE RECORD IN THAT REGARD, YES.
11 Q. OKAY. AND IT'S TRUE ALSO, IS IT NOT, THAT YOU ASKED
12 HEARST AT ONE TIME WHAT ITS PLANS WERE FOR AFTER THE COMPLETION
13 OF THE JOA?
14 A. I MAY HAVE BECAUSE I WAS --
15 Q. WELL, REGARDLESS OF THE REASON, YOU DID MAKE THE REQUEST,
16 RIGHT?
17 A. I SAID I MAY HAVE. I DON'T RECALL SPECIFICALLY.
18 Q. AND YOU -- IT'S ALSO TRUE, IS IT NOT, THAT YOU NEVER
19 REALLY GOT AN ANSWER?
20 A. I DON'T RECALL THAT SPECIFICALLY.
21 Q. OKAY. WELL, YOU WERE IN A MEETING, WERE YOU NOT, WITH
22 HEARST OFFICIALS AND OFFICIALS OF THE ANTITRUST DIVISION OF THE
23 DEPARTMENT OF JUSTICE, CORRECT?
24 A. YES, I WAS.
25 Q. AND DURING THAT MEETING THERE WAS DISCUSSION OF HEARST'S
1721
ROSSE - CROSS / SHULMAN
1 STATEMENTS THAT IT INTENDED TO COMPETE AFTER THE END OF THE
2 JOA. DO YOU RECALL THAT?
3 A. YES, I DO REMEMBER SOME DISCUSSION.
4 Q. OKAY. AND YOU ALSO HAVE ASKED A QUESTION OR TWO TO PEOPLE
5 AT HEARST ABOUT HEARST'S PLANS AFTER THE EXPIRATION OF THE JOA,
6 BUT YOU HAVEN'T GOTTEN MUCH IN THE WAY OF ANSWERS; ISN'T THAT
7 TRUE?
8 A. I DON'T REMEMBER SPECIFICALLY.
9 Q. ALL RIGHT.
10 MAY I GIVE THE WITNESS HIS DEPOSITION?
11 THE COURT: YOU MAY.
12 MR. HALLING: WHAT PAGE?
13 MR. SHULMAN: PAGE 78, LINE 15.
14 DO YOU HAVE THAT?
15 MR. HALLING: WHAT PAGE?
16 MR. SHULMAN: IT'S PAGE 78, LINE 15.
17 BY MR. SHULMAN:
18 Q. WERE YOU ASKED THIS --
19 THE WITNESS: EXCUSE ME. WILL YOU WAIT UNTIL I GET
20 THERE?
21 BY MR. SHULMAN:
22 Q. SURE. TELL ME WHEN YOU HAVE IT.
23 A. YES, I AM THERE.
24 Q. OKAY. WERE YOU ASKED THIS QUESTION AND DID YOU GIVE THIS
25 ANSWER?
1722
ROSSE - CROSS / SHULMAN
1 "Q. HAVE YOU EVER TALKED OUTSIDE OF THE
2 MEETING WITH THE JUSTICE DEPARTMENT -- HAVE YOU
3 EVER TALKED TO ANYBODY AT HEARST ABOUT ITS PLANS
4 AFTER THE EXPIRATION OF THE JOA, ASSUMING THEY
5 DON'T BUY THE CHRONICLE?
6 "A. I HAVE ASKED A QUESTION OR TWO BUT I
7 HAVEN'T GOTTEN MUCH IN THE WAY OF ANSWERS."
8 WERE YOU ASKED THAT QUESTION AND DID YOU GIVE THAT
9 ANSWER?
10 A. I DON'T REMEMBER THAT SPECIFICALLY, BUT IT'S A MATTER OF
11 RECORD HERE SO I MUST HAVE BEEN.
12 Q. OKAY. AND IS THAT TRUE?
13 A. TO THE BEST OF MY RECOLLECTION, YES.
14 Q. OKAY. NOW, IN THE -- I WANT TO GO BACK AND ASK YOU ABOUT
15 SOME MORE OF THESE STATEMENTS IN THE --
16 A. I WENT ON, OBVIOUSLY, TO SAY SOME OTHER THINGS AT THAT
17 POINT.
18 Q. RIGHT. OKAY.
19 WOULD YOU TURN YOUR ATTENTION BACK TO THE BRIEF OF
20 THE -- THE AMICUS BRIEF OF THE JUSTICE DEPARTMENT? I THINK YOU
21 HAVE THAT, PAGE 21.
22 A. CORRECT.
23 Q. IN THE -- YOU WILL NOTE, I THINK, AFTER THE SENTENCE I
24 JUST READ TO YOU, THE NEXT SENTENCE READS, QUOTE:
25 "IN THIS CASE, FOR EXAMPLE, THE 1993
1723
ROSSE - CROSS / SHULMAN
1 AGREEMENT PLAINLY CONTEMPLATED THAT THE STAR
2 BULLETIN MIGHT IN FACT PUBLISH AFTER
3 TERMINATION."
4 YOU ARE AWARE, ARE YOU NOT, THAT IN THIS CASE THE
5 JOA AGREEMENT BETWEEN HEARST AND THE CHRONICLE PLAINLY
6 CONTEMPLATES THAT BOTH WILL PUBLISH AFTER TERMINATION?
7 A. I AM AWARE OF WHAT THE LANGUAGE IS AND THAT'S NOW HOW I
8 WOULD INTERPRET IT.
9 Q. OKAY. WOULD YOU TURN TO THE NEXT PAGE, PLEASE, PAGE 22?
10 THE FIRST FULL PARAGRAPH SAYS, QUOTE:
11 "SECOND, PARTICIPANTS IN A JOA CAN AND DO
12 RENEGOTIATE THEIR AGREEMENTS."
13 WOULD YOU AGREE WITH THAT?
14 A. YES.
15 Q. THEN IT SAYS, QUOTE:
16 "BECAUSE THE RELATIVE STRENGTH OF EACH
17 NEWSPAPER CAN AFFECT ITS BARGAINING LEVERAGE IN
18 SUCH A RENEGOTIATION, JOA PARTICIPANTS OFTEN
19 RETAIN AT LEAST SOME INCENTIVE TO MAXIMIZE THEIR
20 RELATIVE CONTRIBUTIONS TO THE PROFITABILITY OF
21 THE COMBINED VENTURE, AS WELL AS THEIR
22 CREDIBILITY TO MAKE CREDIBLE" -- "AS WELL AS
23 THEIR ABILITY TO MAKE CREDIBLE THREATS TO GO IT
24 ALONE."
25 DO YOU AGREE WITH THAT?
1724
ROSSE - CROSS / SHULMAN
1 A. EXCUSE ME.
2 I GUESS -- I DON'T AGREE WITH IT AS IT'S WRITTEN. I
3 GUESS THERE IS SOME MINOR INCENTIVE IN THAT REGARD.
4 Q. OKAY. THEN IT SAYS, QUOTE:
5 "THUS, THE RIVALRY OF PARTIES UNDER A JOA
6 COULD UNDER AT LEAST SOME CIRCUMSTANCES PROPERLY
7 BE REGARDED AS COMPETITION WITHIN THE MEANING OF
8 THE ANTITRUST LAWS."
9 DO YOU AGREE OR DISAGREE WITH THAT STATEMENT BY THE
10 DEPARTMENT OF JUSTICE?
11 A. I AM NOT A LAWYER, AND, THEREFORE, I WOULD REFRAIN FROM
12 MAKING -- OFFERING A LEGAL OPINION. AS A LAY PERSON INTERESTED
13 IN THESE MATTERS AND AS I INTERPRET THE LAW, I WOULD NOT AGREE
14 WITH THAT STATEMENT.
15 Q. IS THAT ANOTHER VACUOUS HYPOTHESIS IN YOUR VIEW?
16 A. NO. I SIMPLY DON'T THINK THAT THAT'S WHAT THE ANTITRUST
17 LAWS CONTEMPLATE.
18 Q. SO YOU DISAGREE WITH THAT STATEMENT?
19 A. AS A LAY PERSON, THAT'S CORRECT.
20 Q. OKAY.
21 A. AS A NON-LAWYER.
22 THE COURT: IS IT THAT THE ANTITRUST LAWS DON'T
23 CONTEMPLATE THIS OR IS IT YOUR OPINION THAT IN FACT THERE IS
24 NOT ECONOMIC RIVALRY BETWEEN PARTICIPANTS IN A JOINT OPERATING
25 AGREEMENT?
1725
ROSSE - CROSS / SHULMAN
1 THE WITNESS: YOUR HONOR, THERE IS -- ANY TIME THERE
2 ARE TWO PARTIES JOINED IN A JOINT VENTURE, WHICH IS WHAT THIS
3 IS ALL ABOUT, THAT HAVE NOT NECESSARILY COINCIDENT INTERESTS,
4 THERE WILL BE A CERTAIN AMOUNT OF RIVALRY, AND THAT'S A NATURAL
5 PART OF THE WAY BUSINESS IS DONE.
6 THE COURT: I SAID "ECONOMIC RIVALRY." DOES THAT
7 MAKE A DIFFERENCE IN YOUR ANSWER?
8 THE WITNESS: THERE IS NO ECONOMIC RIVALRY. THE
9 JUSTICE DEPARTMENT IN THIS CASE WAS TRYING TO READ ECONOMIC
10 RIVALRY INTO -- RIVALRY INTO DECISION MAKING THAT I AM NOT SURE
11 IS JUSTIFIED. AND THEY WERE TRYING TO GENERATE A FORM OF
12 ECONOMIC COMPETITION WHICH, EVEN IF IT EXISTED, I AM NOT SURE
13 FALLS WITHIN THE PURVIEW OF THE ANTITRUST LAWS.
14 AGAIN, THAT IS NOT A LEGAL OPINION, SIMPLY MY VIEW
15 OF WHAT THE ANTITRUST LAWS ARE ABOUT.
16 THE COURT: SORRY FOR THE INTERRUPTION.
17 MR. SHULMAN: THAT'S FINE.
18 BY MR. SHULMAN:
19 Q. I THINK YOU ALSO TESTIFIED IN YOUR DIRECT EXAMINATION THAT
20 YOU ARE A PROPONENT OF WHAT YOU TERMED "MONOPOLY" -- OR,
21 ACTUALLY, IT WAS MR. CHAMBERLAIN TERMED "MONOPOLISTIC
22 COMPETITION"; IS THAT RIGHT?
23 A. I AM NOT A PROPONENT OF IT. SIMPLY, THAT'S ONE OF MANY
24 MODELS OF COMPETITION THAT ECONOMISTS USE TO ANALYZE
25 INDUSTRIES, AND IT HAPPENS TO BE THE ONE THAT -- THAT'S
1726
ROSSE - CROSS / SHULMAN
1 APPROPRIATE FOR ANALYZING COMMUNICATION INDUSTRIES. AND SO, AS
2 I BECAME MORE AND MORE INTERESTED IN COMMUNICATION INDUSTRIES,
3 I FOUND MYSELF SPENDING MORE AND MORE TIME WITH CHAMBERLAINIAN
4 THEORY.
5 Q. OKAY. AND SO THAT YOU BELIEVE THAT MONOPOLISTIC
6 COMPETITION IS THE APPROPRIATE MODEL TO APPLY, FOR EXAMPLE, TO
7 THE NEWSPAPER BUSINESS?
8 A. I DO.
9 Q. OKAY. AND YOU MENTIONED THAT ONE OF YOUR ARTICLES WAS
10 ABOUT A CONTROVERSY, AN ACADEMIC CONTROVERSY, OF CHAMBERLAIN
11 VERSUS AN ENGLISH ECONOMIST JOAN ROBINSON, WHO MAINTAINED THAT
12 THIS KIND OF INDUSTRIAL STRUCTURE, I.E. MONOPOLISTIC
13 COMPETITION, CREATED MONOPOLY RENTS. DO YOU RECALL THAT?
14 A. THAT'S CORRECT.
15 Q. MONOPOLY RENTS ARE ESSENTIALLY THE SAME AS MONOPOLY
16 PROFITS?
17 A. IN LAY LANGUAGE, CORRECT.
18 Q. OKAY. AND ARE YOU AWARE THAT IN THE -- IN THE CLASSIC
19 MODEL OF ECONOMIC COMPETITION THAT WHERE THERE IS COMPETITION,
20 PRICES TEND TO APPROACH MARGINAL COSTS?
21 A. YES, I AM.
22 Q. OKAY. AND ARE YOU AWARE THAT THE SUPREME COURT -- THE
23 UNITED STATES SUPREME COURT HAS TALKED ABOUT THE ABILITY -- AND
24 THIS IS IN THE INDIANA FEDERATION OF DENTISTS CASE -- HAS
25 TALKED ABOUT THE ABILITY OF THE MARKET TO ENHANCE SOCIAL
1727
ROSSE - CROSS / SHULMAN
1 WELFARE BY ENSURING THE DIVISION OF DESIRED GOODS AND SERVICES
2 TO CONSUMERS AT A PRICE APPROXIMATING THE MARGINAL COSTS OF
3 PROVIDING THEM?
4 MR. CONNELL: OBJECTION. NOT A LAWYER, PROBABLY
5 NEVER HEARD OF THE CASE.
6 THE COURT: CALLS FOR CONCLUSION. OBJECTION
7 SUSTAINED.
8 STATE THE GROUND OF YOUR OBJECTION. I DON'T FAVOR
9 SPEAKING OBJECTIONS, BUT IT DOES HELP TO HAVE A GROUND OF
10 OBJECTION STATED, MR. CONNELL.
11 MR. CONNELL: YOUR HONOR, I APOLOGIZE. I TAKE YOUR
12 POINT AND I DO APOLOGIZE. EXCITED UTTERANCE.
13 THE COURT: EXCITED UTTERANCE, WAS IT?
14 MR. CONNELL: YES.
15 MR. ALIOTO: ANCIENT DOCUMENT.
16 (LAUGHTER)
17 BY MR. SHULMAN:
18 Q. NOW, THE -- YOU -- ONE OF THE -- ONE OF THE EXERCISES THAT
19 YOU PERFORMED WAS TO LOOK AT THE NEWSPAPER AGENCY IN THE
20 ABSENCE OF PUBLISHING THE EXAMINER, IN OTHER WORDS, JUST
21 PUBLISHING ONE NEWSPAPER, CORRECT?
22 A. THAT'S CORRECT. THAT'S WHAT THE INCREMENTAL STUDY WAS
23 ABOUT, YES.
24 Q. OKAY. AND THAT -- WE ALSO TALKED YESTERDAY ABOUT THE
25 EXERCISE THAT HAD BEEN DONE BY THE AGENCY, MR. FALK LOOKING AT
1728
ROSSE - CROSS / SHULMAN
1 THE A.M. ONLY PRO FORMA, RIGHT?
2 A. YES.
3 Q. OKAY. NOW, IN THAT SCENARIO THERE IS AN INCREASE OF
4 PROFITS, IS THERE NOT?
5 A. IN WHICH SCENARIO?
6 Q. BOTH OF THEM, THE ONE YOU MODELED AND THE ONE THAT
7 MR. FALK MODELED.
8 A. CORRECT.
9 Q. AND THERE -- IN THE ONE THAT MR. FALK MODELED THERE IS
10 ALSO AN INCREASE IN PRICES.
11 A. THERE IS AN INCREASE IN COSTS PER THOUSAND PRICING, NOT IN
12 SPACE PRICING.
13 Q. BUT THERE IS THAT INCREASE IN PRICING THAT WE TALKED ABOUT
14 YESTERDAY.
15 A. I JUST -- I JUST STATED --
16 Q. OKAY.
17 A. -- WHAT THE TRUTH WAS.
18 Q. AND THAT IS THE OPPOSITE OF A SITUATION WHERE PRICES
19 APPROACH MARGINAL COSTS, IS IT NOT?
20 A. OPPOSITE? I DON'T KNOW WHAT YOU MEAN BY "OPPOSITE."
21 Q. THEY ARE GOING THE OTHER WAY.
22 A. NOT NECESSARILY. THAT'S NOT AN ANSWER -- NOT A QUESTION
23 THAT CAN BE ANSWERED TO SIMPLISTICALLY.
24 Q. YOU -- I THINK YOU SAID ONE OF THE ARTICLES THAT YOU WERE
25 ASKED ABOUT IS YOUR -- YOUR ARTICLE ABOUT ECONOMIC -- THE
1729
ROSSE - CROSS / SHULMAN
1 ECONOMIC LIMITS OF PRESS RESPONSIBILITY.
2 DO YOU REMEMBER THAT?
3 A. YES.
4 Q. AND I THINK THE ESSENCE OF THE -- OR THE THESIS OF THE
5 ARTICLE, AS I UNDERSTOOD YOUR TESTIMONY -- AND LET ME SEE IF I
6 HAVE GOT IT RIGHT. BECAUSE A NEWSPAPER HAS TO SURVIVE
7 ECONOMICALLY, THERE ARE ECONOMIC LIMITS ON HOW FAR A NEWSPAPER
8 CAN EXERCISE ITS FUNCTION AS A FOURTH ARM OF GOVERNMENT TO
9 PROVIDE THE INFORMATION THAT MAKES AN ECONOMY IN A SOCIETY WORK
10 WELL. THERE ARE ECONOMIC LIMITS ON THE EXTENT TO WHICH A
11 NEWSPAPER CAN BE COUNTED ON TO SPEAK FREELY.
12 HAVE I GOT IT RIGHT?
13 A. I AM NOT SURE I ADDED THE WORD "SPEAK FREELY," BUT THE
14 REST OF IT, I THINK THAT'S CORRECT.
15 Q. OKAY. LET ME ASK YOU THIS: IN YOUR VIEW, IN YOUR
16 OPINION, CAN ECONOMIC CIRCUMSTANCES EVER JUSTIFY AN OFFER BY A
17 NEWSPAPER TO A PUBLIC OFFICIAL TO PROVIDE FAVORABLE EDITORIAL
18 TREATMENT IN RETURN FOR THAT PUBLIC OFFICIAL'S SUPPORT OF THAT
19 NEWSPAPER'S ACQUISITION OF ANOTHER PAPER?
20 MR. CONNELL: OBJECTION.
21 THE COURT: OVERRULED.
22 THE WITNESS: NO.
23 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
24 QUESTIONS.
25 THE COURT: REDIRECT?
1730
ROSSE - REDIRECT / CONNELL
1 MR. CONNELL: IF YOU PLEASE, YOUR HONOR.
2 REDIRECT EXAMINATION
3 BY MR. CONNELL:
4 Q. DR. ROSSE, GOOD MORNING.
5 A. GOOD MORNING.
6 Q. DR. ROSSE, IN YOUR TESTIMONY YESTERDAY DURING EXAMINATION
7 BY MR. SHULMAN -- AND I AM READING FROM PAGE -- WELL, I AM
8 READING, YOUR HONOR, FROM, I GUESS, THE ROUGH -- THE ROUGH
9 DRAFT BECAUSE I DIDN'T HAVE THE FINAL. BUT IT'S PAGE 158. AND
10 YOU WERE ASKED BY MR. SHULMAN A SERIES OF QUESTIONS ABOUT
11 WHETHER IT IS BETTER FOR SAN FRANCISCO TO HAVE ONE NEWSPAPER
12 VOICE OR TWO NEWSPAPER VOICES, AND YOU SAID -- HE ASKED YOU:
13 "Q. THEY WOULD BE BETTER OFF WITH ONE VOICE
14 AND NOT TWO, RIGHT?
15 "A. THAT'S RIGHT.
16 "Q. OKAY. NOW YOU KNOW, DO YOU NOT, THAT
17 IT'S -- THAT THAT WAS EXACTLY CONTRARY TO THE
18 POLICY THAT HAS BEEN ENACTED INTO LAW BY THE
19 CONGRESS OF THE UNITED STATES IN THE NEWSPAPER
20 PRESERVATION ACT"?
21 I MADE AN OBJECTION WHICH THE COURT OVERRULED. AND
22 YOU SAID:
23 "IT APPEARS TO BE IN CONFLICT WITH THAT --
24 WITH THAT POLICY. IT WOULD NOT BE THE FIRST
25 TIME I EVER DISAGREED WITH AN ACT OF CONGRESS,
1731
ROSSE - REDIRECT / CONNELL
1 HOWEVER. DR. ROSSE" --
2 THE COURT: WHAT PAGE WAS THAT?
3 MR. CONNELL: PAGE 158 OF THE ROUGH. AND I AM NOT
4 SURE THAT IS GOING TO TRACK WITH THE --
5 MR. SHULMAN: WE HAVE THE . . .
6 MR. CONNELL: I COULDN'T -- I DIDN'T HAVE TIME TO
7 FIND IT IN THE FINAL. MAYBE SOMEBODY ELSE DID.
8 MR. SHULMAN: I DID, YOUR HONOR.
9 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1732
ROSSE - REDIRECT / CONNELL
1 (PAUSE IN PROCEEDINGS.)
2 MR. SHULMAN: OH, I HAVE IT. OKAY. THAT'S AT PAGE
3 16 -- I'M SORRY, PAGE 1664.
4 MR. CONNELL: 1664.
5 THE COURT: THANK YOU.
6 MR. SHULMAN: BEGINNING -- IT ACTUALLY STARTS ON
7 1663, LINE 18.
8 THE COURT: THANK YOU.
9 MR. CONNELL: ALL RIGHT. AND LET ME SEE IF I READ
10 IT -- WHY DON'T I READ IT FROM THIS RECORD, YOUR HONOR.
11 "Q. THEY WOULD BE BETTER OFF WITH ONE VOICE
12 AND NOT TWO, RIGHT?
13 "A. THAT'S RIGHT.
14 "Q. OKAY. NOW, YOU KNOW, DO YOU NOT, THAT
15 THAT IS EXACTLY CONTRARY TO THE POLICY THAT HAS
16 BEEN ENACTED INTO LAW BY THE CONGRESS OF THE
17 UNITED STATES AND THE NEWSPAPER PRESERVATION
18 ACT?"
19 CONNELL'S OBJECTION IS OVERRULED.
20 "THE WITNESS: IT APPEARS TO BE IN CONFLICT
21 WITH THAT -- WITH THAT POLICY. IT WOULD NOT BE
22 THE FIRST TIME I EVER DISAGREED WITH AN ACT OF
23 CONGRESS, HOWEVER."
24 Q. DO YOU REMEMBER THAT STATEMENT?
25 A. I DO.
1733
ROSSE - REDIRECT / CONNELL
1 Q. WHAT DID YOU HAVE IN MIND WITH RESPECT TO THE POLICY IN
2 THE NEWSPAPER PRESERVATION ACT THAT CAUSED YOU TO SAY THAT YOUR
3 VIEW THAT THE EXAMINER OUGHT TO BE CLOSED WAS IN CONFLICT WITH
4 IT?
5 A. WELL, IT WAS -- THAT REALLY IS A LEGAL ISSUE RATHER THAN
6 AN ECONOMIC ISSUE, AND I THINK MY POINT WAS -- I WAS ACCEPTING
7 MR. SHULMAN'S WORD ON THAT WHEN I SHOULDN'T HAVE BEEN.
8 THE TRUTH OF THE MATTER IS, I DON'T FIND MYSELF IN
9 OPPOSITION TO THE ACT AS IT WAS WRITTEN AND AS IT'S APPLIED IN
10 THE FORMATION OF JOA'S. I DO FIND MYSELF IN OPPOSITION TO THE
11 INTERPRETATION THAT SOMEONE PUT ON IT THAT THAT FOREVER LOCKS
12 THOSE NEWSPAPERS INTO AN ARRANGEMENT THAT, AS CIRCUMSTANCES
13 CHANGE, BECOMES UNECONOMIC AND CERTAINLY NOT IN THE BEST
14 INTERESTS OF EITHER THE PARTIES OR THE COMMUNITY INVOLVED. AND
15 THAT WAS THE PART THAT I WAS EXPRESSING MY DISAGREEMENT WITH.
16 Q. AND, DR. ROSSE, IN THE COURSE OF YOUR DIRECT TESTIMONY YOU
17 REVIEWED THE LIST OF JOINT OPERATING AGREEMENT CITIES AND THE
18 INSTANCES WHERE THOSE JOA'S HAVE BEEN TERMINATED, SOME OF THEM
19 TERMINATED IN ADVANCE OF THE DATE ORIGINALLY SET OUT IN THE JOA
20 ITSELF. YOU REMEMBER THAT?
21 A. YES, I DO.
22 Q. ARE YOU AWARE OF ANY INSTANCES IN WHICH THE JUSTICE
23 DEPARTMENT HAS FILED A CASE TO STOP THOSE TERMINATIONS FROM
24 TAKING PLACE?
25 A. NO, I'M NOT.
1734
ROSSE - REDIRECT / CONNELL
1 Q. DR. ROSSE, IF YOU WOULD LOOK TO YOUR LEFT. TO THE EASEL,
2 I'M SORRY.
3 A. THE EASEL, OKAY.
4 Q. THAT REPRESENTS A PART OF THE CROSS-EXAMINATION DONE BY
5 MR. SHULMAN; DOES IT NOT?
6 A. THAT'S CORRECT.
7 Q. AND THAT CROSS-EXAMINATION --
8 MR. CONNELL: EXCUSE ME FOR A MOMENT, YOUR HONOR.
9 I'VE GOT TO FIND AN EXHIBIT.
10 (PAUSE IN PROCEEDINGS.)
11 MR. CONNELL: PERHAPS THE -- WHAT I HAVE IN MIND, IF
12 SOMEONE OVER THERE COULD ASSIST ME, IS -- AH -- IS EXHIBIT
13 0983.
14 Q. DO YOU STILL HAVE THAT UP THERE, H-0983? THAT'S A PRO
15 FORMA, JUST TO ASSIST YOU IN LOCATING IT.
16 A. (WITNESS EXAMINES DOCUMENT.)
17 Q. HAVE YOU FOUND IT?
18 A. YES, I DO HAVE IT IN FRONT OF ME.
19 Q. DR. ROSSE, WHAT IS A PRO FORMA?
20 A. PRO FORMA, IT'S A PHRASE USED BY BUSINESS PEOPLE TO
21 DESCRIBE A HYPOTHETICAL OR A "WHAT IF" CALCULATION TO
22 ILLUSTRATE OR TO MAKE A POINT OR TO HELP THEM ANALYZE A
23 PARTICULAR PROBLEM.
24 Q. DO YOU UNDERSTAND THAT THIS DOCUMENT THAT WE'RE LOOKING AT
25 REPRESENTS OR CONSTITUTES A DECISION BY HEARST AS TO WHAT IT
1735
ROSSE - REDIRECT / CONNELL
1 WILL DO IF IT ACQUIRES THE CHRONICLE?
2 A. NO, I DO NOT. IT'S A PRO FORMA THAT WAS PRODUCED, AS I
3 UNDERSTAND IT, BY MR. FALK NOT BY HEARST, AND IT WAS ALSO
4 PRODUCED INDEPENDENTLY AND EARLIER THAN ANY OF ANY TRANSACTION,
5 I BELIEVE. YES. IN ANY EVENT, I DO NOT VIEW THIS AS A
6 POSITION OF HEARST.
7 Q. NOW, DR. ROSSE, IF YOU COULD LOOK AT THE EASEL THERE, AND
8 MR. SHULMAN DID SOME CALCULATIONS BASED UPON THE DATA CONTAINED
9 IN THIS EXHIBIT AND THE RESULTS OF THOSE CALCULATIONS ARE ON
10 THAT BOARD.
11 THERE'S A 14 PERCENT WITH AN ARROW GOING UP LINE.
12 DO YOU SEE IT?
13 A. YES.
14 Q. DO YOU UNDERSTAND THAT THIS EXHIBIT SHOWS THAT IF THE
15 HEARST BUYS THE CHRONICLE, THERE'S GOING TO BE A 14 PERCENT
16 INCREASE IN ADVERTISING RATES?
17 A. NO.
18 Q. WHAT DO YOU UNDERSTAND THAT THIS EXHIBIT SHOWS?
19 A. THIS EXHIBIT SHOWS THE THOUGHT EXERCISE THAT MR. FALK WAS
20 GOING THROUGH AS HE CARRIED OUT THIS PRO FORMA.
21 Q. AND AS A PERSON WHO ONCE WAS THE CHIEF EXECUTIVE OFFICER
22 OF A CHAIN OF NEWSPAPERS, WHAT WOULD YOU EXPECT HEARST WOULD DO
23 IF IT TRANSFERRED THE EXAMINER TO MR. FANG AND ACQUIRED THE
24 CHRONICLE RELATIVE TO ITS ADVERTISING RATES?
25 A. IT WOULD LOOK VERY CLOSELY AT THOSE ADVERTISING RATES AND
1736
ROSSE - REDIRECT / CONNELL
1 AT THE COMPETITION. IT'S CONSTRAINED, OF COURSE, IN WHAT IT
2 CAN CHARGE BY WHAT THE MARKET WILL ACCEPT. IF THE MARKET IS
3 PREPARED TO ACCEPT A CONTINUATION OF THE SAME TERMS, SAME
4 ADVERTISING PRICES, IT WILL PROBABLY KEEP THEM.
5 THERE ARE REASONS TO BELIEVE THAT MIGHT BE THE CASE.
6 ONE OF THEM IS THAT I UNDERSTAND IT'S BEEN SEVERAL YEARS
7 SINCE -- SOME TIME SINCE THE LAST GENERAL ADVERTISING PRICE
8 INCREASE TOOK PLACE WITH THE CHRONICLE AND EXAMINER, AND THAT
9 WAS SOMETHING MR. FALK TOLD ME WHEN WE WERE CONSTRUCTING THE
10 ORIGINAL -- THE INCREMENTAL STUDY, AT WHICH TIME HE ARGUED THAT
11 WE SHOULD USE HIS PRICING ASSUMPTIONS; AND WE SAID, "NO. WE'D
12 RATHER BE MORE CONSERVATIVE."
13 BUT, IN ANY EVENT, THE ARGUMENT WAS MADE THAT IT HAD
14 BEEN SOME TIME AND THEY WERE DUE FOR A PRICE INCREASE BECAUSE A
15 FAIR AMOUNT OF INFLATION HAD TAKEN PLACE AND THEY NEEDED TO
16 CATCH UP. AND HE ARGUED AT THAT TIME, AND I THINK WITH SOME
17 JUSTICE, THAT THEY WOULD SIMPLY DELAY AN INCREASE THAT WOULD
18 OTHERWISE TAKE PLACE BECAUSE OF INFLATION IN ORDER TO MAINTAIN
19 THE EXISTING PRICE STRUCTURE.
20 ALSO IN MAKING THAT DECISION I WOULD LOOK AT THE
21 CHANGE IN READERSHIP. DUE TO THE LOSS OF DUPLICATION, THERE
22 WOULD BE A RELATIVELY SMALL CHANGE IN READERSHIP AND I WOULD
23 THINK ABOUT THE CASE THAT I COULD MAKE TO MY ADVERTISERS. AND
24 IF I THOUGHT I COULD MAKE A CASE BOTH ON GROUNDS OF IT'S BEEN A
25 WHILE SINCE WE HAD OUR LAST PRICE INCREASE, I'LL PASS THAT
1737
ROSSE - REDIRECT / CONNELL
1 ON -- I'LL DELAY ANY PRICE INCREASE ON INFLATION GROUNDS BUT IN
2 THE MEANTIME WE'RE GIVING YOU VERY MUCH, ALMOST AS MUCH
3 READERSHIP AS YOU HAD BEFORE AND, THEREFORE, I WILL LEAVE THE
4 PRICES, I WOULD BE INCLINED I COULD LEAVE THE PRICES THE SAME.
5 BUT, AGAIN, I WANT TO EMPHASIZE IT REALLY IS NOT
6 SOMETHING THAT YOU CAN DECIDE TO DO ABSENT THE CONTEXT OF THE
7 MARKET BECAUSE THE MARKET WILL LIMIT WHATEVER IT IS YOU'RE ABLE
8 TO DO, AND YOU NEED TO SIMPLY ASK YOURSELF WHETHER YOU CAN MAKE
9 A CASE FOR DOING IT. IF YOU CAN'T MAKE THE CASE TO YOUR
10 ADVERTISERS IN VIEW OF THEIR COMPETITIVE CHOICES, THEN YOU'RE
11 GOING TO REDUCE THOSE PRICES. AND SO THAT'S HOW I WOULD TREAT
12 IT WERE I IN THIS DECISION POSITION.
13 Q. ALL RIGHT, SIR.
14 DR. ROSSE, MR. SHULMAN QUESTIONED YOU ABOUT AN
15 EXHIBIT WHERE YOU HAD CALCULATED SOME DAILY CPM
16 COST-PER-THOUSAND ANALYSIS. DO YOU HAVE THAT IN FRONT OF YOU?
17 AND IF YOU DO, COULD YOU TELL ME WHAT NUMBER IT IS?
18 A. WHY DON'T YOU TELL ME WHAT NUMBER IT IS?
19 Q. WELL, I....
20 (PAUSE IN PROCEEDINGS.)
21 THE WITNESS: I'LL SEE IF I CAN FIND IT.
22 BY MR. CONNELL:
23 Q. 1197.
24 A. (WITNESS EXAMINES DOCUMENT.)
25 MR. CONNELL: I'M GOING TO APPROACH THE WITNESS, IF
1738
ROSSE - REDIRECT / CONNELL
1 YOUR HONOR PLEASE, AND HAND HIM A COPY.
2 THE COURT: THAT WILL BE FINE.
3 THE WITNESS: THANK YOU.
4 BY MR. CONNELL:
5 Q. YOU RECOGNIZE THAT AS SOMETHING YOU WERE ASKED ABOUT BY
6 MR. SHULMAN?
7 A. YES, I DO.
8 Q. AND YOU HAD THAT PREPARED BECAUSE OF CERTAIN EXHIBITS THAT
9 DR. COMANOR PREPARED; IS THAT RIGHT?
10 A. THAT'S CORRECT.
11 Q. AND DO YOU HAVE IN FRONT OF YOU THE DR. COMANOR EXHIBITS
12 THAT ARE CONCERNED HERE? AND I'M GOING TO SUGGEST NUMBERS 143,
13 144, IN THAT RANGE, 145.
14 A. I DON'T HAVE THOSE HERE.
15 Q. YOU DON'T HAVE THEM?
16 A. NO.
17 Q. OKAY. NOW YOU DO.
18 MR. CONNELL: I'M SORRY, YOUR HONOR.
19 Q. COULD YOU PICK OUT OF THAT SMALL PILE OF EXHIBITS,
20 STARTING AT 143, THAT WOULD BE PLAINTIFF'S 143, WHICH ONES YOU
21 HAD -- YOU WERE USING WHEN YOU PREPARED YOUR OWN EXHIBIT?
22 A. WELL, 144, WHICH IS TITLED "NATIONAL AND LOCAL ADVERTISING
23 RATES BY COUNTY," 145, WHICH IS TITLED "CLASSIFIED SECTION
24 ADVERTISING RATES BY TARGET COUNTY," AND THEN A THIRD ONE,
25 1101, "NATIONAL AND LOCAL ADVERTISING RATES BY COUNTY."
1739
ROSSE - REDIRECT / CONNELL
1 Q. ALL RIGHT. AND IN THOSE EXHIBITS, JUST BRIEFLY SUMMARIZE,
2 WHAT IS IT THAT DR. COMANOR DID.
3 A. WHAT DR. COMANOR DID WAS TO LOOK AT THE CIRCULATION OF
4 EACH OF FOUR DAILY NEWSPAPERS IN EACH OF FOUR COUNTIES, AND
5 THEN THE FOUR NEWSPAPERS WERE THE CHRONICLE/EXAMINER
6 COMBINATION, THE OAKLAND TRIBUNE, THE SAN JOSE MERCURY AND THE
7 CONTRA COSTA TIMES. THE COUNTIES WERE SAN FRANCISCO COUNTY,
8 ALAMEDA COUNTY, SANTA CLARA COUNTY AND CONTRA COSTA COUNTY.
9 AND WHAT HE DID THEN WAS TO TAKE WHAT HE THOUGHT
10 WERE RELEVANT ADVERTISING PRICES FOR REACHING THE READERS IN
11 EACH OF THOSE COUNTIES USING THE MEDIUM IN QUESTION AND
12 CALCULATED A COST PER THOUSAND FOR REACHING THE READERS OF THAT
13 COUNTY.
14 SO, FOR INSTANCE, HE SHOWS THAT NATIONAL
15 ADVERTISING -- ADVERTISERS ON AN OPEN-RATE BASIS WOULD PAY
16 $2.71 PER THOUSAND IN ORDER TO REACH SAN FRANCISCO READERS
17 USING THE SAN FRANCISCO CHRONICLE AND EXAMINER; WHEREAS, THEY
18 WOULD PAY $226 PER THOUSAND TO REACH THOSE SAME READERS USING
19 THE OAKLAND TRIBUNE.
20 Q. IS THAT A REASONABLE ANALYSIS?
21 A. NO.
22 Q. WHY NOT?
23 A. WELL, IT BASICALLY PRESUMES A CONCLUSION IN ORDER TO GET
24 THE RESULT; THAT IS, HE HAS DIVIDED THE MARKET INTO FOUR
25 DIFFERENT COUNTIES AND TREATED EACH OF THOSE COUNTIES AS IF
1740
ROSSE - REDIRECT / CONNELL
1 IT'S A SEPARATE MARKET. AND THEN HE'S PRESUMED THAT IF
2 ADVERTISERS WANTED TO REACH ONLY THE READERS IN, FOR INSTANCE,
3 SANTA CLARA COUNTY, THEY WOULD BUY THE SAN FRANCISCO CHRONICLE
4 AND EXAMINER TO REACH THOSE READERS. SO THEY WOULD PAY A VERY
5 HIGH PRICE FOR DOING SO BY COMPARISON WITH WHAT THEY WOULD HAVE
6 PAID HAD THEY USED THE MERCURY NEWS.
7 THAT'S SIMPLY AN UNREALISTIC -- IT'S UNREALISTIC TO
8 START OFF BY DIVIDING THE MARKET -- BY ASSUMING THAT THE MARKET
9 IS DIVIDED INTO COUNTIES AND THEN TRYING TO CONSTRUCT SOME KIND
10 OF A PRICE TEST TO SEE WHETHER OR NOT THOSE ARE -- THAT'S THE
11 RELEVANT MARKET. THAT'S PRESUMING THE RESULT IN ORDER TO GET
12 THE CONCLUSION.
13 Q. AND THEN YOU TOOK SIMILAR DATA AND PREPARED YOUR OWN
14 EXHIBITS; IS THAT RIGHT?
15 A. I ASKED --
16 Q. YOU HAVE IT?
17 A. -- MR. FALK AND HIS ASSISTANTS TO PREPARE THIS USING THE
18 BASIC SAME SOURCE OF DATA, AND THIS EXHIBIT WAS PREPARED BY
19 THEM AT MY REQUEST.
20 THE COURT: THIS IS EXHIBIT NUMBER?
21 BY MR. CONNELL:
22 Q. THE EXHIBIT NUMBER, DOCTOR?
23 A. 1197.
24 Q. 1197, THANK YOU.
25 AND WHAT DOES THIS ANALYSIS SHOW?
1741
ROSSE - REDIRECT / CONNELL
1 A. WELL, WHAT THEY'VE DONE IS TO FIND A -- IS TO CALCULATE
2 GENERAL ADVERTISING -- AND BY "GENERAL" THEY MEAN NATIONAL
3 ADVERTISING -- NATIONAL ADVERTISING CPM'S, RETAIL ADVERTISING
4 CPM'S AND CLASSIFIED ADVERTISING CPM'S FOR EACH OF THE FIVE
5 NEWSPAPERS IN QUESTION AND -- FIVE NEWSPAPER COUNTIES
6 CHRONICLE/EXAMINER SINGLE SALE.
7 THEY SHOWED THE CIRCULATION OF EACH OF THOSE AND
8 THEN SHOW THE OPEN RATE OR THE 5,000-INCH EQUIVALENT RATE IN
9 EACH CASE. THIS IS ALL BASED ON A 31-AND-A-HALF-INCH AD SIZE;
10 IN OTHER WORDS, A QUARTER PAGE AD.
11 AND SO THEY SHOW, FOR INSTANCE, THAT THE SAN
12 FRANCISCO CHRONICLE AND EXAMINER WOULD CHARGE $24.45 PER
13 THOUSAND READERS FOR THE AD OF 31 AND A HALF INCH, THE QUARTER
14 PAGE AD, TO GENERAL ADVERTISERS FOR THEIR ENTIRE CIRCULATION.
15 WHEREAS, THE MARIN INDEPENDENT WITH 40,000 CIRCULATION WOULD
16 CHARGE $33.98 FOR -- COST PER THOUSAND FOR THE SAME TYPE OF AD
17 FOR ALL OF ITS READERS.
18 Q. ALL RIGHT, SIR.
19 A. AND THAT'S CARRIED OUT. I DON'T WANT TO GO THROUGH ALL OF
20 THEM. IT'S AN INTERESTING DOCUMENT. BUT WHAT IT SHOWS IS
21 THAT, GENERALLY SPEAKING, THE REGIONAL PAPERS ARE LOWER COST ON
22 A COST-PER-THOUSAND BASIS IF YOU WANT TO REACH THE LARGER
23 REGION, IN THIS CASE THE CHRONICLE AND EXAMINER OR THE MERCURY
24 NEWS.
25 IT HAS ANOTHER INTERESTING FEATURE THAT IF YOU LOOK
1742
ROSSE - REDIRECT / CONNELL
1 ACROSS TO THE CLASSIFIED CPM'S, YOU'LL SEE THAT THE MERCURY
2 NEWS, ALTHOUGH IT'S QUITE LOW IN ITS NATIONAL AND RETAIL CPM'S
3 AND QUITE HIGH IN ITS CLASSIFIED, AND THAT REFLECTS THE FACT
4 THAT THAT PARTICULAR NEWSPAPER HAS ONE OF THE STRONGEST
5 RECRUITMENT AND EMPLOYMENT ADVERTISING SECTIONS IN THE COUNTRY;
6 AND IN ORDER TO KEEP THEIR PAPER EVEN APPROXIMATELY IN BALANCE,
7 THEY'VE RAISED THE RATES PRETTY HIGH ON THAT KIND OF
8 ADVERTISING AND KEPT IT LOW ON OTHER KINDS OF ADVERTISING.
9 Q. YOU MEAN THEY RAISED THE RATE TO KEEP DOWN THE DEMAND?
10 A. THAT'S CORRECT.
11 MR. CONNELL: THANK YOU, SIR. I HAVE NO FURTHER
12 QUESTIONS.
13 THE WITNESS: THERE'S A SECOND PAGE --
14 BY MR. CONNELL:
15 Q. I'M SORRY. YOU GO AHEAD.
16 A. -- WHICH I ALSO ASKED TO HAVE PREPARED AND THE SECOND PAGE
17 SHOWS THE ACTUAL SPACE COST. THE FIRST ONE -- WHEN NEWSPAPERS
18 SELL SPACE, THEY SELL IT ON A SPACE BASIS. IF YOU CALL UP AN
19 ADVERTISING SALESMAN AT THE CHRONICLE AND ASK THEM ABOUT THE
20 PRICE FOR A CERTAIN AMOUNT OF SPACE, THEY WOULD GIVE YOU THAT
21 SPACE PRICE. THEY'RE NOT GOING TO GIVE YOU A CPM PRICE.
22 SO THIS SECOND PAGE IS THE ONE THEY ACTUALLY QUOTE
23 IN TERMS OF HOW MUCH IT COSTS TO BUY A CERTAIN AMOUNT OF SPACE,
24 AND THESE ARE THE ONES THAT, YOU KNOW, MATCH EXACTLY THE ONES
25 ON THE PREVIOUS PAGE.
1743
ROSSE - REDIRECT / CONNELL
1 THIS IS ALSO QUITE INTERESTING. IT SHOWS YOU HOW
2 THE OPEN RATE FOR GENERAL ADVERTISING IS VERY HIGH IN THE
3 CHRONICLE BECAUSE, OF COURSE, IT HAS THE LARGEST CIRCULATION,
4 574,000 CIRCULATION. IT'S THE LOWEST IN THE MARIN INDEPENDENT
5 BECAUSE IT'S ONLY GOT 40,000 CIRCULATION. THAT'S A FACTOR OF
6 10 DIFFERENCE IN SPACE PRICE, BUT THERE'S A FACTOR MORE THAN 10
7 DIFFERENCE IN CIRCULATION.
8 THE MAIN POINT OF THIS, HOWEVER, IS TO SHOW THAT IF
9 AN ADVERTISER WERE INTERESTED IN BUYING JUST MARIN COUNTY, HE
10 SURELY WOULDN'T BUY THE CHRONICLE TO GET THERE. HE WOULD BUY
11 THE MARIN INDEPENDENT JOURNAL BECAUSE IT'S MUCH CHEAPER TO
12 REACH MARIN COUNTY.
13 ON THE OTHER HAND, IF THE ADVERTISER WERE INTERESTED
14 IN REACHING SEVERAL COUNTIES OR THE WHOLE BAY AREA, CLEARLY THE
15 CHEAPER SOLUTION IS TO BUY THE CHRONICLE/EXAMINER BECAUSE YOU
16 GET THE LOWER COST PER THOUSAND EVEN THOUGH THE OPEN RATE -- I
17 MEAN, THE SPACE COST RATE IS MUCH HIGHER.
18 Q. AND ARE THESE FACTS CONSISTENT WITH THE TESTIMONY YOU'D
19 PREVIOUSLY GIVEN ABOUT WHAT THE COMPETITION IS IN THIS MARKET?
20 A. IT CERTAINLY IS.
21 MR. CONNELL: THANK YOU, SIR. I'VE CONCLUDED.
22 THE COURT: VERY WELL. ANY OTHER REDIRECT?
23 MR. SHULMAN: YOUR HONOR, I WOULD ASK LEAVE FOR A
24 VERY BRIEF RECROSS JUST ON THIS DOCUMENT BECAUSE IT WAS NOT
25 MENTIONED IN HIS ORIGINAL DIRECT EXAMINATION. I ADMIT I KIND
1744
ROSSE - REDIRECT / CONNELL
1 OF OPENED IT UP BECAUSE I WASN'T AWARE OF IT ON CROSS, BUT THIS
2 IS THE FIRST TIME HE'S REALLY TESTIFIED ABOUT IT.
3 THE COURT: ALL RIGHT. GO AHEAD, MR. SHULMAN.
4 MR. SHULMAN: ALL RIGHT.
5 THE COURT: BEFORE YOU --
6 MR. SHULMAN: GO AHEAD.
7 THE COURT: BEFORE YOU DO THAT, HOWEVER, LET ME
8 CLARIFY SOMETHING BECAUSE I MAY HAVE MISHEARD THE WITNESS.
9 DID I UNDERSTAND YOU TO SAY THAT THE RATE ON A
10 COST-PER-THOUSAND BASIS WAS LOWER IN THE OUTLYING NEWSPAPERS
11 THAN IN THE CHRONICLE/EXAMINER?
12 THE WITNESS: NO. NO. COST-PER-THOUSAND BASIS --
13 THE COURT: IS LOWER IN THE CHRONICLE/EXAMINER?
14 THE WITNESS: -- IS LOWER IN THE REGIONAL PAPERS;
15 THAT IS, THE ONES THAT SERVE THE WHOLE REGION.
16 THE COURT: OH, I SEE. ALL RIGHT.
17 THE WITNESS: THAT'S WHAT I MEANT BY THAT.
18 THE COURT: WHICH WOULD BE THE CHRONICLE AND THE
19 EXAMINER --
20 THE WITNESS: AND THE MERCURY NEWS, CORRECT.
21 THE COURT: -- AND THE MERCURY NEWS, ALL RIGHT.
22 I DID MISUNDERSTAND YOU THEN.
23 MR. SHULMAN?
24 MR. SHULMAN: THANK YOU, YOUR HONOR.
25 MAY I HAVE EXHIBIT 3? I NEED ANOTHER ONE FOR THE
1745
ROSSE - RECROSS / SHULMAN
1 WITNESS.
2 (PAUSE IN PROCEEDINGS.)
3 MR. SHULMAN: MAY I APPROACH THE WITNESS, YOUR
4 HONOR?
5 THE COURT: YES, YOU MAY.
6 RECROSS-EXAMINATION
7 BY MR. SHULMAN:
8 Q. I HAVE PUT IN FRONT OF YOU EXHIBIT 3 IN EVIDENCE. I WANT
9 TO DIRECT YOUR ATTENTION TO PAGE 1739, BATES NUMBER 1739, WHICH
10 IS "SHARE OF FIELD 1998 DAILY NEWSPAPER CIRCULATION IN THE SAN
11 FRANCISCO DMA."
12 A. (WITNESS EXAMINES DOCUMENT.) OKAY.
13 Q. THE TOTAL CIRCULATION FIGURES FOR THE VARIOUS NEWSPAPERS
14 APPEAR AT THE BOTTOM. THEY'RE A LITTLE DIFFERENT FROM THE
15 FIGURES THAT ARE IN YOUR EXHIBIT THAT MR. FALK DID FOR YOU, BUT
16 THEY'RE NOT THAT FAR OFF.
17 I WANT TO DIRECT YOUR ATTENTION FIRST TO THE SAN
18 JOSE MERCURY NEWS. THAT SHOWS TOTAL CIRCULATION RIGHT AT THE
19 BOTTOM OF 294,000; RIGHT?
20 A. THAT'S CORRECT.
21 Q. OF THAT CIRCULATION, ROUGHLY 236,000 IS IN SANTA CLARA
22 COUNTY; RIGHT?
23 A. CORRECT.
24 Q. SO THAT IS ABOUT, BY MY MATH, ABOUT 85, 88 PERCENT; RIGHT?
25 A. I'LL ACCEPT YOUR CALCULATION.
1746
ROSSE - RECROSS / SHULMAN
1 Q. AND IF YOU LOOK AT THE CONTRA COSTA TIMES, THAT SHOWS --
2 WELL, ON THIS ONE IT SHOWS -- IT'S CERTAINLY GROWN. THIS ONE
3 SHOWS TOTAL CIRCULATION OF 98,000; RIGHT?
4 A. CORRECT.
5 Q. AND 93,000 -- I'M SORRY, 92,000 OF THAT IS IN CONTRA
6 COSTA; CORRECT?
7 A. THAT'S CORRECT.
8 Q. SO THAT'S ABOUT -- THAT'S 90 SOME PERCENT; CORRECT?
9 A. YES.
10 Q. AND THEN FOR THE OAKLAND TRIBUNE, THE TOTAL CIRCULATION
11 SHOWN IS ABOUT 67,000; RIGHT?
12 A. CORRECT.
13 Q. AND OF THAT, 55,000 IS IN ALAMEDA?
14 A. THAT'S CORRECT.
15 Q. SO THAT'S ABOUT 85 PERCENT.
16 A. THAT'S CORRECT.
17 Q. AND THEN FOR THE MARIN INDEPENDENT JOURNAL, THAT HAS TOTAL
18 CIRCULATION OF ABOUT 41,000; RIGHT?
19 A. THAT'S CORRECT.
20 Q. AND THAT IS ALMOST ALL THAT 40,000 OF THAT IS IN MARIN;
21 CORRECT?
22 A. THAT'S CORRECT.
23 Q. SO FOR ADVERTISERS WANTING TO REACH, FOR EXAMPLE, READERS
24 IN MARIN, THE CHEAPEST BUY FOR THEM PER THOUSAND IS THE MARIN
25 INDEPENDENT; RIGHT?
1747
ROSSE - RECROSS / SHULMAN
1 A. YES, THAT'S CORRECT.
2 Q. AND THAT WOULD BE TRUE, SAY, ADVERTISERS WANTING TO REACH
3 READERS IN OAKLAND, THE CHEAPEST BUY FOR THEM WOULD BE THE
4 OAKLAND TRIBUNE?
5 A. THAT'S EXACTLY WHAT I TESTIFIED JUST A FEW MOMENTS AGO.
6 Q. AND FOR CONTRA COSTA ADVERTISERS, THE CHEAPEST BUY TO
7 REACH CONTRA COSTA READERS IS THE CONTRA COSTA TIMES?
8 A. THAT'S CORRECT. THAT'S WHAT I TESTIFIED JUST A FEW
9 MOMENTS AGO.
10 MR. SHULMAN: ALL RIGHT. THANK YOU.
11 THE COURT: DR. ROSSE, LET ME ASK A FEW QUESTIONS IF
12 I MIGHT PICK UP ON MR. SHULMAN'S LAST LINE OF QUESTIONS.
13 ARE THE MERCURY NEWS AND CONTRA COSTA TIMES SOLD ON
14 A COMBINATION RATE BASIS?
15 THE WITNESS: NO, THEY'RE NOT BECAUSE THEY BOTH
16 PRODUCE ONLY ONE EDITION A DAY.
17 THE COMBINATION RATE BECAUSE THEY'RE JOINTLY OWNED?
18 THE COURT: YES.
19 THE WITNESS: AS FAR AS I KNOW, I DON'T KNOW THE
20 ANSWER TO THAT. I DON'T BELIEVE THEY ARE, BUT I DON'T KNOW.
21 THE COURT: HOW ABOUT THE OAKLAND TRIBUNE AND THE
22 OTHER PROPERTIES OWNED BY THE SAME OWNERSHIP, I BELIEVE THAT'S
23 MEDIA NEWS?
24 THE WITNESS: I DON'T KNOW THE ANSWER TO THAT. IT'S
25 POSSIBLE THAT THEY ARE. I DON'T BELIEVE THEY ARE, BUT I DON'T
1748
ROSSE - RECROSS / SHULMAN
1 KNOW.
2 YOUR HONOR, IT MAKES SENSE FOR THEM TO SELL THAT AS
3 A JOINT BUY WHEN THEY'RE GOING AFTER REGIONAL ADVERTISERS. TO
4 THE EXTENT THOSE ARE SERVING LOCAL MARKETS, IT DOESN'T MAKE
5 MUCH SENSE. SO IN THE CASE OF THE SINGLETON PAPERS, IT WOULD
6 NOT MAKE SENSE TO OFFER A COMBINATION BUY WITH THE OAKLAND
7 PAPERS AND THE SAN MATEO PAPERS BECAUSE EACH OF THEM IS SELLING
8 DIRECTLY INTO LOCAL MARKETS.
9 NOW, IF THEY WANT TO SELL TO NATIONAL ADVERTISERS,
10 THEY MIGHT OFFER A JOINT BUY, BUT I DON'T KNOW WHETHER THEY DO
11 OR NOT.
12 THE COURT: YOU WERE CHIEF EXECUTIVE OFFICER OF THE
13 FREEDOM NEWSPAPERS --
14 THE WITNESS: FREEDOM COMMUNICATION, YOUR HONOR.
15 THE COURT: -- FREEDOM COMMUNICATION, THE MAIN
16 PROPERTY, THE MAIN NEWSPAPER PROPERTY OF WHICH IS THE ORANGE
17 COUNTY REGISTER?
18 THE WITNESS: THAT'S THE LARGEST ONE, YES.
19 THE COURT: IS THAT SITUATION, COMPETITIVE SITUATION
20 THAT THE ORANGE COUNTY REGISTER FACES, ANALOGOUS TO THAT WHICH
21 THE SAN JOSE MERCURY NEWS FACES VIS-A-VIS THE SAN FRANCISCO
22 PAPERS; THAT IS, THE ORANGE COUNTY REGISTER VIS-A-VIS THE LOS
23 ANGELES TIMES WOULD BE ANALOGOUS TO THE COMPETITIVE SITUATION
24 WHICH THE SAN JOSE MERCURY NEWS FACES VIS-A-VIS THE SAN
25 FRANCISCO PAPERS?
1749
ROSSE - RECROSS / SHULMAN
1 THE WITNESS: NO, NOT VERY CLOSE ACTUALLY.
2 THE COURT: WHY NOT?
3 THE WITNESS: BECAUSE THE LOS ANGELES TIMES CLAIMS
4 ALL OF ORANGE COUNTY AS PART OF ITS CITY ZONE. IT REGARDS ITS
5 PRIMARY MARKET AREA, THE AREA THAT IT -- WITH WHICH IT WANTS TO
6 IDENTIFY ITSELF AS INCLUDING ALL OF ORANGE COUNTY. THE
7 CHRONICLE AND EXAMINER CERTAINLY DO NOT INCLUDE SAN JOSE AS
8 PART OF THE AREA THAT THEY WOULD THINK OF AS THEIR HOME BASE,
9 AS THEIR PRIMARY MARKET AREA OF THEIR CITY ZONE.
10 NEWSPAPERS DEFINE SEVERAL DIFFERENT -- DO SEVERAL
11 DIFFERENT DEFINITIONS OF MARKET AREA, AND ONE IS THE CITY ZONE
12 AND THAT'S THE CLOSE-IN MARKET. SO THE CITY ZONE, I DON'T KNOW
13 FOR A FACT WITHOUT LOOKING IT UP, BUT I IMAGINE THE CITY ZONE
14 OF THE CHRONICLE AND THE EXAMINER INCLUDES THE CITY AND COUNTY
15 OF SAN FRANCISCO PLUS CLOSE OUTLYING AREAS LIKE PARTS OF MARIN
16 COUNTY, PERHAPS PARTS OF OAKLAND, PARTS OF SAN MATEO COUNTY,
17 BUT IT CERTAINLY DOES NOT INCLUDE A MUCH LARGER REGION THAN
18 THAT.
19 THEY THEN DEFINE A SECOND CATEGORY CALLED DMA,
20 DESIGNATED MARKET AREA, AND THAT'S -- THAT INCLUDES MANY -- A
21 MUCH LARGER AREA AND AREAS IN WHICH THEY TYPICALLY FACE LOCAL
22 COMPETITION IN WHICH THEY DO NOT HAVE SUCH A HIGH PENETRATION
23 WHICH ARE NOT REALLY A PART OF THEIR CITY ZONE MARKET.
24 SOMETIMES THEY ALSO USE SOMETHING THAT'S CALLED A
25 TRADE ZONE. A TRADE ZONE IS APPROXIMATELY THE SAME AS THE
1750
ROSSE - RECROSS / SHULMAN
1 DESIGNATED MARKET AREA.
2 BUT, IN ANY EVENT, ALL THAT'S A LONG WAY OF SAYING
3 THE LOS ANGELES TIMES REGARDS THE ORANGE COUNTY AREA AS PART OF
4 ITS CITY ZONE, IN OTHER WORDS, OF ITS CLOSE-IN MARKET AREA, AND
5 IT TREATS IT ACCORDINGLY. THAT'S QUITE DIFFERENT FROM THE WAY
6 IN WHICH THE CHRONICLE AND EXAMINER ARE RELATED TO THE SAN JOSE
7 MERCURY.
8 THE COURT: DID YOU NOT TESTIFY THAT AT ONE TIME THE
9 CHRONICLE AND THE EXAMINER REGARDED SAN JOSE AS WITHIN ITS
10 BASIC AREA OF NEWSPAPER COMPETITION?
11 THE WITNESS: YES, I DID. AND THEIR LARGER TRADE
12 ZONE, IF YOU GO BACK A FEW YEARS, CERTAINLY INCLUDED THAT AND
13 MAY STILL INCLUDE IT. BUT THEY NO LONGER CAN LAY CLAIM TO IT
14 IN THE SAME WAY THAT THEY CAN, FOR INSTANCE, AT AREAS OF MARIN
15 COUNTY OR MENDOCINO COUNTY BECAUSE THE MERCURY NEWS HAS
16 EMERGED -- SAN JOSE HAS EMERGED AS A MAJOR URBAN CENTER WITH A
17 MAJOR URBAN NEWSPAPER THAT HAS EMERGED AS ANOTHER REGIONAL
18 POWER, SO TO SPEAK. IT'S IN THE PROCESS OF SO EMERGING. IT
19 JUST HASN'T FULLY COME OUT.
20 IF SAN JOSE WERE LOCATED 20 MILES CLOSER TO SAN
21 FRANCISCO, THEN IT WOULD BE MORE ANALOGOUS TO THE SITUATION
22 WITH ORANGE COUNTY AND LOS ANGELES AND THE ORANGE COUNTY
23 REGISTER.
24 THE COURT: WELL, UNDER THOSE CIRCUMSTANCES, IS IT
25 REALISTIC TO VIEW THE MERCURY NEWS AS PROVIDING REAL
1751
ROSSE - RECROSS / SHULMAN
1 COMPETITION TO THE SAN FRANCISCO-BASED PAPERS?
2 THE WITNESS: YES. IT'S PUSHING COMPETITION,
3 REGIONAL COMPETITION, UP THE PENINSULA. IT'S A -- IT'S
4 PROVIDING -- THERE ARE A LARGE NUMBER OF ADVERTISERS AND
5 READERS FOR WHICH THE MERCURY NEWS IS A REAL CHOICE. I WAS ONE
6 OF THOSE, FOR INSTANCE, FOR MANY YEARS AS I LIVED ON THE FRINGE
7 OF THE SAN FRANCISCO MARKET AND I IN FACT SUBSCRIBED ONLY
8 OCCASIONALLY TO THE SAN FRANCISCO PAPERS AND REGULARLY TO THE
9 SAN JOSE PAPERS SIMPLY BECAUSE THEY DID A BETTER JOB OF
10 COVERING THE NEWS, MY INSTITUTION AT THAT TIME WAS STANFORD,
11 THAN THE SAN FRANCISCO PAPERS DID. BUT IT'S THAT AUDIENCE THAT
12 IS IN CONTENTION RIGHT NOW.
13 THE MERCURY NEWS AS PART OF A GROWING CENTER IN THE
14 BAY AREA IS PUSHING ITS MARKET -- ITS MARGIN FARTHER AND
15 FARTHER IN; AND, YOU KNOW, MY VIEW IS THAT AS SAN JOSE AND
16 SOUTH BAY BECOMES A MORE IMPORTANT PART OF THE BAY AREA, THAT
17 THE CENTER OF GRAVITY IN THE BAY AREA IS GOING TO SHIFT IN THAT
18 DIRECTION AND THE MERCURY NEWS WILL CERTAINLY BENEFIT THEREBY.
19 THE COURT: YOU MENTIONED THAT YOU TESTIFIED IN THE
20 PACIFIC SUN CASE.
21 THE WITNESS: I DID, YOUR HONOR.
22 THE COURT: THAT WAS, I BELIEVE, 1979.
23 THE WITNESS: THAT'S CORRECT.
24 THE COURT: AND WAS THAT A CASE TRIED BY JUDGE
25 RENFREW?
1752
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1 THE WITNESS: NO, IT WAS NOT. JUDGE RENFREW TRIED
2 THE KNUDSEN/DAILY REVIEW CASE.
3 THE COURT: EXCLUSIVE DAILY REVIEW CASE?
4 THE WITNESS: KNUDSEN/DAILY REVIEW CASE.
5 THE COURT: KNUDSEN?
6 THE WITNESS: KNUDSEN/DAILY REVIEW CASE WHICH WAS A
7 VERTICAL PRICE FIXING CASE THAT FELL UNDER THE ALBRIGHT
8 DECISION OF THE SUPREME COURT.
9 THE COURT: AND IT IS IN THAT CASE THAT HE GAVE RISE
10 TO THE "DOWNWARD SPIRAL" PHRASE?
11 THE WITNESS: THAT WAS THE PHRASE -- FIRST TIME I
12 HAD HEARD IT. AS I WAS SITTING ON THE WITNESS STAND, YOUR
13 HONOR, BUSILY EXPLAINING HOW ADVERTISING AND READER DEMANDS
14 INTERACT IN THE CASE OF A NEWSPAPER AND WITH WHAT CONSEQUENCE,
15 AND HE INTERRUPTED AND SAID, "SO THAT'S WHAT THEY MEANT BY THE
16 INFAMOUS DOWNWARD SPIRAL." AND SO THAT WAS THE FIRST TIME I'D
17 ACTUALLY EVER HEARD THAT PHRASE USED.
18 THE COURT: ALL RIGHT. I BELIEVE YOU HAVE BEFORE
19 YOU EXHIBIT 983 OR DID HAVE IT AT ONE POINT.
20 THE WITNESS: WHAT IS THAT EXHIBIT, YOUR HONOR?
21 THE COURT: THAT IS THIS PRO FORMA THAT WAS
22 PREPARED --
23 THE WITNESS: YES, I'VE GOT IT.
24 THE COURT: -- IN CONJUNCTION WITH MR. FALK, THE JOA
25 A.M. ONLY PRO FORMA.
1753
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1 THE WITNESS: YES, I HAVE THAT IN FRONT OF ME.
2 THE COURT: ALL RIGHT. NOW, IF I UNDERSTAND THAT
3 CORRECTLY, IT SHOWS THAT THE NEWSPAPER AGENCY NET EXCESS WOULD
4 HAVE INCREASED 20 AND A HALF MILLION DOLLARS PER YEAR IF THE
5 EXAMINER WERE CLOSED.
6 THE WITNESS: THAT'S WHAT IT APPEARS TO SHOW.
7 THE COURT: AND WE HAVE NOT FROM THIS EXHIBIT BUT
8 FROM ANOTHER EXHIBIT, I HAVE NOT NOTED THE EXHIBIT NUMBER --
9 COUNSEL CAN PERHAPS HELP ME. IT'S THE EXHIBIT THAT SHOWS THE
10 RESULTS OF THE EXAMINER FROM THE INCEPTION OF THE JOINT
11 OPERATING AGREEMENT THROUGH 1998.
12 MR. CONNELL: EXHIBIT 91.
13 THE COURT: IS THAT 91?
14 MR. ALIOTO: I THINK THAT'S RIGHT.
15 MR. CONNELL: THAT'S THE 1965 THROUGH 1998 --
16 THE COURT: YES.
17 MR. CONNELL: YES, SIR, 91.
18 THE COURT: YES. DOES THE WITNESS HAVE THAT?
19 MR. CONNELL: I'LL GIVE HIM A COPY.
20 THE COURT: ALL RIGHT. I'M ONLY GOING TO ASK YOU
21 ABOUT 1998 ON THIS EXHIBIT, AND I REALIZE THAT WE'RE COMPARING
22 1999 WITH 1998, BUT JUST USING THOSE NUMBERS FOR ORDERS OF
23 MAGNITUDE.
24 IF I UNDERSTAND EXHIBIT 91, IT SHOWS THAT THE
25 EXAMINER-ONLY OPERATING EXPENSES NET OF EXAMINER-ONLY OTHER
1754
ROSSE - RECROSS / SHULMAN
1 INCOME WAS APPROXIMATELY 29 AND A HALF MILLION DOLLARS DURING
2 CALENDAR 1998. IS THAT HOW YOU READ --
3 THE WITNESS: THIS IS -- THE LINE SAYS EXAMINER --
4 IT SHOWS, FIRST OF ALL, EXAMINER'S SHARE OF AGENCY EXCESS --
5 THE COURT: CORRECT.
6 THE WITNESS: -- 51 MILLION. THEN IT SHOWS
7 EXAMINER-ONLY OPERATING EXPENSES OF 29,900,000, CORRECT.
8 THE COURT: RIGHT. AND THEN THERE'S SOME
9 EXAMINER-ONLY INCOME ABOUT A HALF A MILLION DOLLARS.
10 THE WITNESS: YES.
11 THE COURT: SO ROUGHLY IT'S 29 AND A HALF MILLION.
12 THE WITNESS: YES, SIR.
13 THE COURT: THAT DOES NOT INCLUDE HEARST'S PORTION
14 OF CAPITAL EXPENDITURES --
15 THE WITNESS: THAT'S CORRECT, WHICH IS DOWN BELOW.
16 THE COURT: -- FOR THE NEWSPAPER AGENCY WHICH WERE
17 ABOUT THREE AND A THIRD MILLION DOLLARS?
18 THE WITNESS: THAT'S CORRECT.
19 THE COURT: ALL RIGHT. WELL, ADDING THAT UP, IF I'M
20 DOING THIS CORRECTLY, THE NET GAIN TO THE PARTIES TO THE JOINT
21 OPERATING AGREEMENT CLOSING THE EXAMINER WOULD BE ABOUT
22 $50 MILLION; IS THAT CORRECT?
23 THE WITNESS: SAY THAT AGAIN?
24 THE COURT: WELL, I'M SIMPLY ADDING 29 AND A HALF TO
25 20 AND A HALF --
1755
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1 THE WITNESS: YES.
2 THE COURT: -- AND SAYING THAT ASSUMING THE '98
3 FIGURES APPLY IN 1999, THAT THE NET GAIN OF CLOSING THE
4 EXAMINER TO BOTH PARTIES WOULD BE APPROXIMATELY $50 MILLION.
5 THE WITNESS: I'M NOT SURE THAT THAT'S A FAIR
6 INFERENCE BECAUSE --
7 THE COURT: ALL RIGHT. WHY IS IT NOT?
8 THE WITNESS: WELL, FOR ONE THING, CLOSING THE
9 EXAMINER WOULD NOT DO AWAY WITH THE DEPRECIATION EXPENSES THAT
10 ARE THERE. OKAY, THOSE NEED TO BE ACCOUNTED FOR. THEY'RE
11 GOING TO HAVE TO BE PAID. YOU'RE GOING TO HAVE TO EXPENSE THE
12 DEPRECIATION ONE WAY OR ANOTHER, SO THAT WOULD SHOW UP.
13 THE COURT: WOULDN'T THAT BE INCLUDED IN THE
14 NEWSPAPER AGENCY EXPENDITURES?
15 THE WITNESS: NO. NO, IT'S INCLUDED IN THE -- IT'S
16 INCLUDED -- EACH OF THE PARTNERS, EACH OF THE SEPARATE
17 COMPANIES CLAIMS DEPRECIATION EXPENSE SEPARATELY. YOU SEE THAT
18 IN LINE --
19 THE COURT: I SEE THERE IS NO DEPRECIATION IN THE
20 PRO FORMA, EXHIBIT --
21 THE WITNESS: YOU SEE DOWN BELOW IT SAYS "ADD
22 DEPRECIATION" ON THIS ONE YOU WERE JUST SHOWING ME --
23 THE COURT: ALL RIGHT.
24 THE WITNESS: -- DOWN BELOW "NET INCOME." AND SO
25 THERE IS, IN FACT, I THINK 6,400,000 OF DEPRECIATION THAT NEEDS
1756
ROSSE - RECROSS / SHULMAN
1 TO BE ADDED.
2 THE COURT: OKAY. WHAT DOES THAT DO TO THE
3 ANALYSIS?
4 THE WITNESS: THAT WOULD REDUCE -- YOU SAID
5 50 MILLION WOULD BE SAVED.
6 THE COURT: CORRECT.
7 THE WITNESS: THAT WOULD REDUCE THAT AMOUNT.
8 THEN THERE'S A SECOND LARGE COMPONENT. CURRENTLY
9 THE EXAMINER, I GUESS BEARING THE BULK OF THE EXPENSE FOR
10 PREPARING THE EDITORIAL PRODUCT FOR THE SUNDAY PAPER, IF YOU
11 CLOSE THE EXAMINER AND SHUT DOWN THAT NEWSROOM, YOU WOULD NEED
12 TO ADD TO THE NEWSROOM FOR THE CHRONICLE IN ORDER TO BE ABLE TO
13 STAFF THE WEEKEND PRODUCT. THAT'S A VERY SUBSTANTIAL AMOUNT OF
14 MONEY.
15 THE COURT: OKAY.
16 THE WITNESS: IT'S PROBABLY ANOTHER 10 MILLION OR
17 SO.
18 BUT THAT GETS YOU CLOSER TO THE RIGHT NUMBER.
19 HOWEVER, I WOULD ARGUE, YOUR HONOR, THAT THAT'S NOT ACTUALLY
20 THE RIGHT WAY TO GET TO THAT NUMBER. THE RIGHT WAY TO GET TO
21 THAT NUMBER IS TO GO TO THE EXPENSES THEMSELVES AND TO THE
22 REVENUES THEMSELVES AND EXAMINE WHICH OF THOSE COULD BE AVOIDED
23 OR WHICH YOU WOULD HAVE TO FOREGO IF YOU WERE TO CLOSE THE
24 EXAMINER, WHICH IS WHAT THE A.M. STUDY WAS TRYING TO DO AND
25 WHICH ALSO WE DID IN THE INCREMENTAL STUDY THAT WAS A PART OF
1757
ROSSE - RECROSS / SHULMAN
1 EVIDENCE.
2 THE COURT: ALL RIGHT. SO YOU DID THIS SAME
3 ANALYSIS, TRIED TO REACH THE SAME CONCLUSIONS, AND THAT IS
4 REFLECTED IN YOUR INCREMENTAL ANALYSIS; IS THAT RIGHT?
5 THE WITNESS: THAT'S CORRECT. THAT WAS DONE
6 INDEPENDENTLY OF THE A.M. STUDY AND WAS DONE UNDER SOMEWHAT
7 DIFFERENT ASSUMPTIONS, ALTHOUGH I GOT VERY SIMILAR RESULTS.
8 THE COURT: AND THE CONCLUSIONS YOU DREW FROM THAT
9 ANALYSIS WERE?
10 THE WITNESS: IT WOULD BE ABOUT 20 MILLION -- ABOUT
11 $20 MILLION GAIN.
12 THE COURT: TO BOTH PARTIES?
13 THE WITNESS: WELL, COMBINED TOTAL. THAT IS, WE DID
14 NOT TRY TO SEPARATE THEM OUT. WE SIMPLY TREATED THE ENTIRE
15 ORGANIZATION, THE JOA, THE ENTIRE JOA ORGANIZATION, NAMELY THE
16 PRINTING COMPANY AND THE EXAMINER AND THE CHRONICLE, AS THOUGH
17 THEY WERE A SINGLE ENTERPRISE AND WE DIDN'T PAY ANY ATTENTION
18 TO WHO WAS PAYING WHAT. WE SIMPLY WENT THROUGH AND CALCULATED
19 WHAT PART OF THE CURRENTLY -- OF THE CURRENT EXPENSE COULD BE
20 AVOIDED OR WHAT PART OF CURRENT INCOME WOULD BE FOREGONE IF YOU
21 CLOSE THE EXAMINER.
22 AND WHEN WE GOT ALL DONE, WE LOOKED -- WE COMPARED
23 THAT NUMBER WITH THE GAIN. WHAT WE FOUND WAS THAT THE CHANGE
24 IN PROFITABILITY -- LET ME SAY IT MORE ACCURATELY.
25 WE LOOKED AT CHANGE IN REVENUE. WE LOOKED AT THE
1758
ROSSE - RECROSS / SHULMAN
1 CHANGE IN COSTS. FROM THAT WE COULD LOOK AT THE CHANGE IN
2 TOTAL PROFITABILITY AND THAT CHANGE IN TOTAL PROFITABILITY WAS
3 SOMETHING OVER 20 MILLION. I THINK ABOUT 22 MILLION.
4 OKAY. NOW, HOW THAT GOT DIVIDED, HOW THAT WOULD GET
5 DIVIDED BY THE PARTIES TO THIS IS ANOTHER MATTER. WE DIDN'T
6 TRY TO SORT THAT OUT.
7 THE COURT: OKAY. LET ME ASK YOU TO STATE THE
8 CONCLUSION THAT YOU DREW FROM THAT ANALYSIS.
9 THE WITNESS: THE CONCLUSION I DREW FROM THAT
10 ANALYSIS WAS THAT THE EXAMINER IS A DRAG ON THE OVERALL
11 NEWSPAPER OPERATIONS AND IT'S COSTING THE OVERALL NEWSPAPER
12 OPERATION A FAIR AMOUNT OF MONEY TO PRODUCE THE EXAMINER; AND
13 THAT IF IT WERE A SINGLE OWNERSHIP, IT WOULD HAVE BEEN CLOSED
14 SOME TIME AGO.
15 AND THAT, FURTHERMORE, THAT'S PART OF THE REASON WHY
16 I STATED IN MY TESTIMONY YESTERDAY THAT I THINK SAN FRANCISCO
17 IS CURRENTLY BEING UNDERSERVED BY ITS NEWSPAPERS BECAUSE THEY
18 SIMPLY ARE NOT INVESTING AS MUCH IN THE PRODUCT AS THEY SHOULD
19 BE.
20 THE COURT: OKAY. THAT'S A SUBJECT I WANTED TO MOVE
21 TO NEXT. YOU'VE USED THE TERM THAT SAN FRANCISCO WAS BEING
22 UNDERNEWSPAPERED.
23 THE WITNESS: THAT'S THE WORD I USED, YOUR HONOR,
24 YES.
25 THE COURT: AND BY THAT YOU MEAN THAT THE
1759
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1 COMPETITION WHICH THE SAN FRANCISCO PAPERS WERE PROVIDING IN
2 THE MARKET AS A WHOLE WAS LESS VIGOROUS THAN IT COULD BE?
3 THE WITNESS: THAT'S CORRECT.
4 THE COURT: AND A WAY TO INCREASE THE LEVEL OF
5 COMPETITION WHICH THE SAN FRANCISCO NEWSPAPERS WOULD GIVE
6 VIS-A-VIS ALL OF THE OTHER MEDIA OUTLETS WOULD BE BY CLOSING
7 THE EXAMINER?
8 THE WITNESS: THAT'S RIGHT.
9 THE COURT: AND THE OVERALL COMPETITIVE SITUATION
10 WOULD BE BETTER; IS THAT YOUR INTERPRETATION?
11 THE WITNESS: THAT'S MY CONCLUSION, YOUR HONOR, YES.
12 THE COURT: AND BY STATING THAT THE OVERALL
13 COMPETITIVE SITUATION WOULD BE BETTER, YOU MEAN WHAT?
14 THE WITNESS: WHAT I MEAN BY THAT IS THAT THE
15 PRODUCT THAT WOULD BE PRODUCED WOULD BE A BETTER NEWSPAPER. IT
16 WOULD -- SOME OF THE INEFFICIENCIES THAT HAVE BEEN INTRODUCED
17 BY THE EXISTENCE OF THE JOA COULD BE ELIMINATED. THE EDITORIAL
18 AND NEWS RESOURCES COULD BE CONCENTRATED AND MADE LARGER; THAT
19 IS, THE AMOUNT OF NEWS STAFF NEEDED AND USED TO PRODUCE AN
20 IMPROVED CHRONICLE WOULD BE LARGER THAN IS NOW PRESENTLY BEING
21 USED TO PRODUCE THE CHRONICLE.
22 THE SUNDAY PAPER WOULD BECOME A MUCH STRONGER
23 PRODUCT THAN IT IS NOW, IN MY VIEW, IF IT WERE BETTER MANAGED.
24 IT COULD -- IT WOULD PROVIDE READERS AND ADVERTISERS BOTH WITH
25 A NEWSPAPER THAT SERVES THEIR INTERESTS BETTER THAN THE
1760
ROSSE - RECROSS / SHULMAN
1 NEWSPAPERS THAT PRESENTLY EXIST.
2 IT WOULD PROVIDE STRONGER COMPETITION FOR THE OTHER
3 MEDIA, FOR THE REGIONAL NEWSPAPER -- FOR THE LOCAL NEWSPAPERS
4 AND FOR THE OTHER ENTITIES THAT COMPETE IN THIS MARKETPLACE.
5 IT WOULD PARTICULARLY BE A STRONGER AND I BELIEVE A MORE
6 BELIEVABLE AND CREDIBLE VOICE IN COMPETITION WITH THE -- WITH
7 TELEVISION, WHICH IS A MAJOR COMPETITOR.
8 I THINK THE --
9 THE COURT: WOULD READERS BE BETTER OFF?
10 THE WITNESS: YES.
11 THE COURT: WOULD ADVERTISERS BE BETTER OFF?
12 THE WITNESS: YES, IN MY VIEW.
13 THE COURT: SO I GUESS YOUR TESTIMONY IS THAT THE
14 MONARCH OF THE DAILIES IS BETTER DEAD THAN READ.
15 (LAUGHTER)
16 THE WITNESS: HAVE YOU COPYRIGHTED THAT LINE, YOUR
17 HONOR?
18 (LAUGHTER)
19 THE COURT: NOW, THE TYPES OF ADVERTISING THAT YOU
20 SPOKE ABOUT WERE DISPLAY ADVERTISING, CLASSIFIED AND RETAIL?
21 THE WITNESS: NO. "DISPLAY" AND "RETAIL" ARE
22 GENERALLY USED MORE OR LESS SYNONYMOUSLY. "GENERAL" AND
23 "NATIONAL" ARE USED MORE OR LESS SYNONYMOUSLY.
24 THE COURT: OKAY. NOW, DR. COMANOR IN HIS TESTIMONY
25 DESCRIBED TWO THEORIES OF ANTITRUST. ALLOCATIVE EFFICIENCY WAS
1761
ROSSE - RECROSS / SHULMAN
1 ONE THEORY, NUMBER OF COMPETITORS WAS THE OTHER THEORY THAT HE
2 DESCRIBED.
3 FIRST, ARE THERE TWO SCHOOLS OF THOUGHT IN THIS AREA
4 AND DO YOU AGREE THAT THOSE ARE TWO SCHOOLS OF THOUGHT THAT
5 EXIST?
6 THE WITNESS: I'VE NEVER RECOGNIZED THOSE AS TWO
7 SCHOOLS OF THOUGHT. I'VE NOT HEARD OF THAT BEFORE.
8 THE COURT: BUT HAVE YOU HEARD THE TERM "ALLOCATIVE
9 EFFICIENCY"?
10 THE WITNESS: OH, ABSOLUTELY, YOUR HONOR.
11 THE COURT: WHAT IS THAT?
12 THE WITNESS: AND I'VE ALSO HEARD PEOPLE TALK ABOUT
13 USE OF THE LAW TO PROTECT COMPETITORS, HOWEVER NOT USUALLY IN
14 AN ANTITRUST CONTEXT.
15 THE COURT: ALL RIGHT. AND WHAT DOES "ALLOCATIVE
16 EFFICIENCY" MEAN IN YOUR VIEW?
17 THE WITNESS: "ALLOCATIVE EFFICIENCY" MEANS GETTING
18 THE BEST PRODUCTS MADE AVAILABLE TO BUYERS, ADVERTISERS AND
19 READERS IN THIS CASE, AT THE LOWEST POSSIBLE PRICE.
20 THE COURT: OKAY. AND IN THE CONTEXT OF ALLOCATIVE
21 EFFICIENCY, DO YOU HAVE AN OPINION ON WHETHER ALLOCATIVE
22 EFFICIENCY IS ENHANCED BY TRANSACTIONS WHICH OCCUR AT A
23 NEGATIVE PRICE?
24 THE WITNESS: GENERALLY NOT, YOUR HONOR.
25 THE COURT: YOU HAVE NO OPINION OR --
1762
ROSSE - RECROSS / SHULMAN
1 THE WITNESS: I HAVE AN OPINION. GENERALLY --
2 THE COURT: WHAT IS YOUR OPINION?
3 THE WITNESS: MY OPINION IS ALLOCATIVE EFFICIENCY IS
4 NOT GENERALLY VERY WELL SERVED BY NEGATIVE PRICE TRANSACTIONS.
5 THE COURT: AND WHY IS THAT?
6 THE WITNESS: BECAUSE BASICALLY THAT'S A -- IN ORDER
7 TO GENERATE A NEGATIVE PRICE, YOU HAVE TO BE DOING SOMETHING
8 THAT THE MARKET WOULDN'T OTHERWISE DO EASILY, AND GENERALLY THE
9 MARKET CARRIES OUT ALLOCATIVE EFFICIENCY MOST EFFECTIVELY.
10 A GOOD EXAMPLE OF A NEGATIVE PRICE PRODUCT, HOWEVER,
11 THAT IS -- THAT IS -- WHERE IT IS ALLOCATIVELY EFFICIENT WOULD
12 BE IN TERMS OF GARBAGE DISPOSAL WHERE YOU PAY -- YOU SELL THAT
13 AT A NEGATIVE PRICE IN ORDER TO GET RID OF IT.
14 THE COURT: ALL RIGHT. GARBAGE DISPOSAL.
15 THE WITNESS: I JUST USE THAT AS A SIMPLE EXAMPLE,
16 YOUR HONOR, OF A CASE WHERE ALLOCATIVE EFFICIENCY --
17 MR. ALIOTO: THAT'S WORSE THAN DEAD, JUDGE.
18 (LAUGHTER)
19 THE WITNESS: -- A CASE WHERE -- AND, AGAIN, I
20 DIDN'T MEAN TO IMPLY ANYTHING AT ALL ABOUT THAT EXAMPLE OTHER
21 THAN TO POINT OUT THAT THERE ARE CASES, THERE ARE CASES WHERE
22 NEGATIVE PRICES CAN BE ALLOCATIVELY EFFICIENT.
23 THE COURT: ALL RIGHT. WELL, NOW, ARE YOU AWARE
24 THAT THE TRANSACTION THAT HEARST HAS ENTERED INTO WITH THE FANG
25 GROUP INVOLVES A NEGATIVE PRICE?
1763
ROSSE - RECROSS / SHULMAN
1 THE WITNESS: YES, I AM.
2 THE COURT: AND DO YOU THINK THAT A NEGATIVE PRICE
3 TRANSACTION IN THAT REGARD ENHANCES ALLOCATIVE EFFICIENCY?
4 THE WITNESS: I DO NOT.
5 THE COURT: WOULD YOU EXPLAIN WHY NOT?
6 THE WITNESS: WELL, BECAUSE, AS I SAID IN MY DIRECT
7 TESTIMONY, I BELIEVE THAT THE RESOURCES THAT ARE BEING USED TO
8 FUND THAT NEGATIVE PRICE COULD BE BETTER USED TO PROVIDE
9 PRODUCTS THAT CONSUMERS ARE PREPARED TO PAY FOR IN SUPPORT WITH
10 THEIR DOLLARS. CONSUMERS BY THAT I MEAN ADVERTISERS AND
11 READERS.
12 THE COURT: SO ADVERTISERS AND READERS WOULD BE
13 BETTER OFF IF THAT TRANSACTION WERE NOT CONSUMMATED?
14 THE WITNESS: THAT'S MY OPINION, YOUR HONOR, YES.
15 THE COURT: YOU SAID THAT TECHNOLOGIES ARE PROVING
16 THAT ENTRY BARRIERS IN THE NEWSPAPER INDUSTRY ARE BECOMING
17 LOWER.
18 THE WITNESS: YES. I NEED TO -- I DID SAY THAT. I
19 NEED TO EXPLAIN THAT A LITTLE MORE FULLY THAN I DID.
20 THE COURT: ALL RIGHT. IF YOU WOULD.
21 THE WITNESS: THE TECHNOLOGIES HAVE REDUCED THE COST
22 OF CREATING TYPESETTING, OF PAGE MAKE-UP, OF PREPARING
23 MATERIALS FOR THE PRESS, OF COLLECTING DATA. THEY'VE MADE
24 POSSIBLE KINDS OF PRODUCTS THAT NEVER EXISTED BEFORE. AND I
25 WAS TESTIFYING AT THAT POINT IN THE CONTEXT OF THE GROWTH OF
1764
ROSSE - RECROSS / SHULMAN
1 THE NUMBER OF WEEKLY NEWSPAPERS AND THEIR STRENGTH AND OF
2 SHOPPING GUIDES OF VARIOUS KINDS AND OF PUBLICATIONS LIKE REAL
3 ESTATE GUIDES AND AUTO TRADERS AND EMPLOYMENT GUIDES, AND SO
4 FORTH AND SO ON.
5 FORTY YEARS AGO THOSE WOULD NOT HAVE BEEN ECONOMIC.
6 TODAY THEY ARE, PRIMARILY BECAUSE OF CHANGING TECHNOLOGY. THE
7 LOWERING COST OF ACTUALLY CARRYING OUT PUBLICATION HAS DROPPED
8 SIGNIFICANTLY, AND THAT'S BROUGHT IN LARGE NUMBERS OF NEW
9 COMPETITORS OF A DIFFERENT KIND THAN HAS -- I IN FACT POINTED
10 OUT THAT I THOUGHT THAT A LOT OF THE PROBLEMS THAT EVENING
11 PAPERS RAN INTO WERE DUE EXACTLY TO THAT KIND OF NEW PRODUCT
12 BEING MADE AVAILABLE IN THE MARKETPLACE AT RELATIVELY LOW
13 PRICES.
14 THE NEW TECHNOLOGIES, OF COURSE, HAVE MADE IT
15 POSSIBLE FOR NEWSPAPERS TO REDUCE THEIR COSTS AND IMPROVE THEIR
16 PRODUCTS; AND THE AMOUNT OF PRODUCT IMPROVEMENT THAT'S TAKEN
17 PLACE IS REALLY QUITE REMARKABLE. IF YOU LOOK AT NEWSPAPERS
18 TODAY AS COMPARED WITH WHAT THEY WERE 30 YEARS AGO OR 40 YEARS
19 AGO, THEY'RE REALLY DRAMATICALLY DIFFERENT PRODUCTS AND MUCH
20 IMPROVED. THEY ALSO ARE CHEAPER TO USE; THAT IS, THE NEW
21 TECHNOLOGIES PERMIT YOU TO DO A BETTER JOB OF PRODUCING AT A
22 LOWER COST.
23 THERE ARE STILL, HOWEVER, SUBSTANTIAL BARRIERS TO
24 ENTRY INTO THE DAILY NEWSPAPER MARKETPLACE; AND THE REASON
25 THERE ARE IS BECAUSE IT'S NOT THE TECHNOLOGIES THAT CREATES
1765
ROSSE - RECROSS / SHULMAN
1 THAT BARRIER SO MUCH AS IT IS THE FACT THAT YOU NEED TO BUILD A
2 READERSHIP AND A FOLLOWING AND BUILD A FRANCHISE, IF YOU WILL.
3 NEWSPAPERS ARE SOLD ON A DAY-TO-DAY BASIS BECAUSE
4 READERS EXPECT TO FIND THE MATERIAL IN IT THAT'S INTERESTING,
5 AND YOU DON'T BUILD UP THAT EXPECTATION OVERNIGHT. YOU DO IT
6 BY PROVIDING A CREDIBLE PRODUCT OVER A FAIRLY EXTENDED PERIOD
7 OF TIME.
8 AND ADVERTISERS DON'T BUY THE NEWSPAPER SIMPLY
9 BECAUSE YOU SAY YOU HAVE DISTRIBUTED IT FREE. THEY WANT TO
10 MAKE SURE THAT, IN FACT, THEY'RE GOING TO GET RESULTS FROM IT.
11 YOU BUILD UP THAT KIND OF FRANCHISE ONLY SOLELY AND CAREFULLY
12 OVER A PERIOD OF TIME.
13 THE EXAMPLE I GAVE AT ANOTHER POINT DURING MY
14 TESTIMONY WAS OF THE -- OF U.S.A. TODAY WHICH STARTED WITH ZERO
15 FRANCHISE BUT A LOT OF RESOURCES AND IT TOOK THREE OR FOUR
16 YEARS BEFORE THEY EVEN BEGAN TO GET MONTHS IN WHICH THEY BROKE
17 EVEN. AND I DON'T KNOW HOW MANY HUNDREDS OF MILLIONS OF
18 DOLLARS WERE INVESTED IN THAT PRODUCT BEFORE IT WAS FINALLY
19 ESTABLISHED. THAT'S AN EXAMPLE OF HOW A FRANCHISE WAS BUILT
20 AND BUILT SOLELY AND CAREFULLY AT HUGE EXPENSE.
21 SO THE BOTTOM LINE ON THIS ALL IS THAT IN TERMS OF
22 THE PRODUCTION TECHNOLOGY, ENTRY HAS NEVER BEEN EASIER. IT'S
23 VERY EASY. IT TAKES -- NOT ONLY IS IT EASY TO BUY THIS STUFF,
24 A LOT OF IT COMES DIRECTLY OFF THE SHELF, BUT YOU CAN RENT A
25 LOT OF IT. YOU CAN NOW RENT PRESS CAPACITY. YOU CAN RENT
1766
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1 HIGHER -- HAVE YOUR TYPESETTING DONE.
2 ONE OF THE THINGS THAT WE DID, JUST TO GIVE AN
3 EXAMPLE OF THIS, IS THAT WE RAN A MAGAZINE BUSINESS AND IN OUR
4 MAGAZINE BUSINESS WE OWNED NOT ONE WIT OF PRODUCTION FACILITY.
5 ALL THE MAGAZINE CONSISTS OF, BY AND LARGE, IS A STAFF TO SELL
6 ADVERTISING AND AN EDITORIAL STAFF, AND EVERYTHING ELSE IS
7 CONTRACTED. THAT'S POSSIBLE NOW. IT WASN'T POSSIBLE 40 YEARS
8 AGO.
9 THE COURT: I GATHER YOUR TESTIMONY IS THAT BECAUSE
10 OF THE NEED TO BUILD A FRANCHISE VALUE, BARRIERS TO ENTRY FOR A
11 METROPOLITAN OR REGIONAL DAILY NEWSPAPER ARE STILL VERY HIGH.
12 THE WITNESS: CORRECT.
13 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
14
15
16
17
18
19
20
21
22
23
24
25
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1 THE COURT: BUT ENTRY BARRIERS WITH RESPECT TO
2 SO-CALLED "NICHE" PUBLICATIONS MAY ACTUALLY BE DECLINING?
3 THE WITNESS: CORRECT.
4 THE COURT: IT WAS YOUR TESTIMONY THAT YOU BELIEVE
5 THE FANG GROUP WOULD PRODUCE A NICHE PRODUCT RATHER THAN A
6 REGIONAL DAILY?
7 THE WITNESS: THAT'S CORRECT, YOUR HONOR.
8 THE COURT: WHAT IS THE EFFECT OF THE NEGATIVE PRICE
9 FEATURES OF HEARST'S ARRANGEMENT WITH THE FANG GROUP UPON
10 BARRIERS TO ENTRY INTO THE NICHE PUBLICATION FIELD?
11 THE WITNESS: THERE ARE STILL BARRIERS TO ENTRY
12 THERE. THAT IS, WHEREVER YOU CREATE A MASS MEDIA PRODUCT YOU
13 HAVE TO CREATE A FRANCHISE. IT'S JUST A QUESTION OF THE
14 RELATIVE SIZE AND THE --
15 THE COURT: BUT MY QUESTION IS WHAT IS THE EFFECT OF
16 THE SUBSIDY WHICH HEARST AGREED TO PROVIDE TO THE FANG GROUP ON
17 BARRIERS TO ENTRY OF OTHER COMPETITORS INTO THAT NICHE.
18 THE WITNESS: I UNDERSTAND YOUR QUESTION.
19 LET ME PREFACE THIS BY SAYING THAT I VIEW THE
20 SUBSIDY AS PROVIDING THE FANG GROUP AN OPPORTUNITY TO CREATE A
21 FRANCHISE AND, AS I SAID, I THINK THE CHANCES ARE -- ARE NOT
22 GREAT THAT THEY WILL BE ABLE TO DO IT, BUT THEY ARE CERTAINLY
23 NOT ZERO. I WOULD BE DISINCLINED TO BET AGAINST THEM.
24 IT WILL -- I DON'T THINK IT HAS MUCH IMPACT ON
25 OTHER -- OTHER POSSIBLE ENTRANTS BECAUSE THERE ARE STILL
1768
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1 OTHER -- THERE ARE OTHER -- OTHER NICHES THAT PEOPLE COULD
2 FIND.
3 THE COURT: I SEE.
4 THE WITNESS: I DON'T THINK IT WOULD HAVE A BIG
5 IMPACT ON ENTRY FOR OTHER PARTIES IF THEY WANTED TO ENTER.
6 THE COURT: AND THAT'S BECAUSE OF THE ABILITY OF
7 PARTIES TO DIFFERENTIATE THEIR PRODUCTS?
8 THE WITNESS: THAT'S CORRECT, YOUR HONOR.
9 THE COURT: AND A NICHE PUBLICATION WOULD HAVE TO BE
10 DIFFERENTIATED EITHER BY CONTENT OR BY GEOGRAPHIC PENETRATION
11 OR SOME OTHER FEATURE OR CHARACTERISTIC; IS THAT FAIR?
12 THE WITNESS: THAT'S CORRECT.
13 THE COURT: ALL RIGHT. THANK YOU, DR. ROSSE, FOR
14 YOUR TESTIMONY, SIR. YOU MAY STEP DOWN.
15 MR. BALABANIAN: YOUR HONOR, MIGHT I ASK A COUPLE OF
16 QUESTIONS RELATING TO THE TESTIMONY WHICH DR. ROSSE HAS JUST
17 GIVEN?
18 THE COURT: VERY WELL.
19 REDIRECT EXAMINATION
20 BY MR. BALABANIAN:
21 Q. DR. ROSSE, FROM THE STANDPOINT OF ALLOCATIVE EFFICIENCY,
22 WHICH IS WORSE, CONTINUING THE JOA WITH ITS LARGER SUBSIDY OR
23 THE FANG TRANSACTION WITH ITS SMALLER SUBSIDY?
24 A. THAT'S WHAT ECONOMISTS WOULD CALL A "SECOND BEST CHOICE."
25 THE -- I THINK THE FANG SUBSIDY REPRESENTS A -- A SMALLER
1769
ROSSE - REDIRECT / BALABANIAN
1 ALLOCATIVE -- A SMALLER DISORGANIZATION OF ALLOCATIVE
2 EFFICIENCY AND A RATHER INTERESTING EXPERIMENT.
3 Q. I TAKE IT, THEN, SIR, THAT YOU WOULD SAY THAT A
4 $69 MILLION SUBSIDY IN THE CASE OF THE FANGS INVOLVES LESS
5 VIOLENCE TO ALLOCATIVE EFFICIENCY THAN A $250 MILLION SUBSIDY?
6 A. THAT'S CORRECT.
7 Q. FINALLY, SIR, TO THE EXTENT THAT THE FANG TRANSACTION IS
8 ABLE TO CREATE COMPETITION WHICH DOES NOT NOW EXIST, AT LEAST
9 FOR ADVERTISERS AND POTENTIALLY FOR READERS, WOULD THAT NET
10 INCREMENT IN COMPETITION TEND TO REDUCE THE ALLOCATIVE
11 INEFFICIENCY OF THE NEGATIVE PURCHASE PRICE?
12 A. YES, IT WOULD. AND PERHAPS I COULD SAY JUST A WORD MORE.
13 THE -- OBVIOUSLY, WHENEVER YOU LOOK AT ALLOCATIVE EFFICIENCY
14 YOU LOOK AT GAINS VERSUS LOSSES VERSUS COSTS.
15 IN THIS CASE THE -- IF THE FANG GROUP NEVER
16 SUCCEEDED AT ALL, THEN IT'S ALL DEAD LOSS. IF THEY DO SUCCEED
17 IN PRODUCING A PRODUCT THAT BECOMES A REAL PART OF THE
18 CONSUMERS' AND ADVERTISERS' MENU, THEN THAT WILL BE A GAIN SO
19 YOU HAVE TO MATCH THOSE GAINS AGAINST THE LOSSES. I STILL
20 THINK IT'S A LOSS OF ALLOCATIVE EFFICIENCY BUT IT'S A SMALLER
21 ONE.
22 Q. IT'S POSSIBLE THAT IF THEY MAKE A SUCCESS OF IT THERE WILL
23 BE NO NET LOSS IN ALLOCATIVE EFFICIENCY?
24 A. I DOUBT THAT. I DOUBT THEY WILL EVER BE ABLE TO RECOVER A
25 RETURN ON THE ORIGINAL $69 MILLION WHICH IS -- BUT THEY MAY --
1770
ROSSE - REDIRECT / BALABANIAN
1 THEY MAY BE ABLE TO MAKE IT A SUCCESS FROM THEIR OWN
2 STANDPOINT.
3 Q. WHICH WOULD REDUCE THE AMOUNT OF THE INEFFICIENCY?
4 A. THAT'S CORRECT.
5 MR. BALABANIAN: THANK YOU VERY MUCH, DOCTOR.
6 THE COURT: VERY WELL. THANK YOU, DR. ROSSE, FOR
7 YOUR TESTIMONY.
8 COUNSEL, WHY DON'T WE TAKE A 15-MINUTE BREAK AND
9 RESUME AT 10:45.
10 LET'S SEE, THE NEXT WITNESS WILL BE?
11 MR. HALLING: MR. BENNACK.
12 THE COURT: VERY WELL. THANK YOU.
13 (RECESS TAKEN AT 10:30 A.M.)
14 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
15
16
17
18
19
20
21
22
23
24
25
1771
BENNACK - DIRECT / CONNELL
1 (PROCEEDINGS RESUMED AT 10:47 A.M.)
2 THE COURT: VERY WELL, MR. CONNELL, YOUR NEXT
3 WITNESS, PLEASE.
4 MR. CONNELL: WE CALL MR. FRANK A. BENNACK, JUNIOR.
5 THE CLERK: PLEASE RAISE YOUR RIGHT HAND TO BE
6 SWORN.
7 FRANK A. BENNACK,
8 CALLED AS A WITNESS FOR THE DEFENDANTS, HAVING BEEN DULY SWORN,
9 TESTIFIED AS FOLLOWS:
10 THE CLERK: THANK YOU. PLEASE BE SEATED.
11 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST NAME
12 FOR THE RECORD.
13 THE WITNESS: I'M FRANK A. BENNACK, B-E-N-N-A-C-K,
14 JUNIOR.
15 MR. CONNELL: YOUR HONOR.
16 DIRECT EXAMINATION
17 BY MR. CONNELL:
18 Q. GOOD MORNING, MR. BENNACK.
19 A. GOOD MORNING, MR. CONNELL.
20 Q. MR. BENNACK, YOU'VE BEEN EMPLOYED CONTINUOUSLY AT THE
21 HEARST CORPORATION SINCE 1961?
22 A. THAT'S CORRECT.
23 Q. YOUR CURRENT POSITION THERE IS WHAT?
24 A. I'M PRESIDENT AND CHIEF EXECUTIVE OFFICER.
25 Q. IF YOU COULD TRACE FOR THE COURT YOUR CAREER AT HEARST
1772
BENNACK - DIRECT / CONNELL
1 BEGINNING IN 1961.
2 A. WELL, I WENT BACK THERE AFTER HAVING SPENT SOME TIME IN MY
3 YOUTH THERE AS THE ADVERTISING MANAGER IN 1961, AND FOLLOWING
4 THAT BECAME --
5 Q. WHICH PAPER WAS THAT?
6 A. THE SAN ANTONIO LIGHT, EXCUSE ME.
7 AND SUBSEQUENTLY BECAME THE ASSISTANT PUBLISHER AND
8 AT AGE 34 IN 1967 BECAME THE PUBLISHER OF THE SAN ANTONIO
9 LIGHT.
10 FOLLOWING THAT, AFTER A SEVEN-YEAR TENURE AS THE
11 PUBLISHER OF THE SAN ANTONIO LIGHT, I WAS ASKED TO COME TO NEW
12 YORK TO BECOME THE GENERAL MANAGER OF NEWSPAPERS. IN THOSE
13 DAYS WE DIDN'T HAVE PRESIDENT OF NEWSPAPERS, WE HAD GENERAL
14 MANAGERS. AND I BECAME THE GENERAL MANAGER OF NEWSPAPERS IN
15 NEW YORK FOLLOWING WHICH IN A YEAR OR SO I BECAME EXECUTIVE
16 VICE PRESIDENT AND SOMETIME AFTER THAT CHIEF OPERATING OFFICER
17 OF THE CORPORATION.
18 AND THEN FINALLY IN 1979, 21 YEARS AGO NOW, I BECAME
19 PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE ENTIRE HEARST
20 CORPORATION.
21 Q. AND DO YOU SIT ON THE BOARD OF DIRECTORS?
22 A. YES, I DO.
23 THE COURT: HOW MANY NEWSPAPERS DID HEARST HAVE WHEN
24 YOU BECAME HEAD OF THE NEWSPAPER OPERATION?
25 THE WITNESS: I BELIEVE THE NUMBER WAS SEVEN, YOUR
1773
BENNACK - DIRECT / CONNELL
1 HONOR.
2 THE COURT: SEVEN?
3 THE WITNESS: SEVEN, YES.
4 THE COURT: AND THAT WAS 19?
5 THE WITNESS: 1974.
6 BY MR. CONNELL:
7 Q. WHO OWNS THE HEARST CORPORATION?
8 A. THE HEARST CORPORATION IS OWNED BY A FAMILY TRUST WHICH
9 WAS ESTABLISHED BY WILLIAM RANDOLPH HEARST PRIOR TO HIS DEATH
10 AND EFFECTIVE UPON HIS DEATH IN 1951. IT'S A PRIVATE COMPANY
11 BUT IN TRUST FOR THE BENEFIT OF HIS LINEAL DESCENDANTS.
12 Q. YOU'VE ALREADY SAID THAT THERE ARE 12 NEWSPAPERS
13 CURRENTLY --
14 A. I BELIEVE THAT'S THE CORRECT NUMBER.
15 Q. -- IN THE HEARST CORPORATION. COULD YOU NAME A FEW OF
16 THEM, THE LARGER ONES?
17 A. YES. THE HOUSTON CHRONICLE IS THE LARGEST OF THE HEARST
18 NEWSPAPERS TODAY. WE LIKE CHRONICLES, YOUR HONOR. AND THE
19 ALBANY TIMES UNION IN ALBANY, NEW YORK; THE SAN ANTONIO EXPRESS
20 NEWS IN MY HOMETOWN OF SAN ANTONIO; THE SEATTLE POST
21 INTELLIGENCER, ET CETERA. THERE ARE A NUMBER OF OTHERS, BUT
22 THOSE ARE THE LARGEST ONES.
23 Q. ALL RIGHT, SIR. AND IN ADDITION TO NEWSPAPERS, WHAT ARE
24 THE OTHER BUSINESSES OF THE HEARST CORPORATION THAT YOU
25 SUPERVISE?
1774
BENNACK - DIRECT / CONNELL
1 A. HEARST IS -- OUR LARGEST BUSINESS IS THE MAGAZINE
2 BUSINESS. HEARST IS, WE THINK, THE LARGEST PUBLISHER OF
3 MONTHLY MAGAZINES IN THE WORLD. WE PUBLISH GOOD HOUSEKEEPING,
4 REDBOOK, COSMOPOLITAN, HOUSE BEAUTIFUL, POPULAR MECHANICS,
5 HARPER'S BAZAAR, ET CETERA. SOMETHING ON THE ORDER OF
6 15 MILLION MONTHLY CIRCULATION IN THE UNITED STATES, AND WE
7 HAVE ABOUT A HUNDRED EDITIONS OF THOSE AND OTHER MAGAZINES
8 AROUND THE WORLD IN ALMOST AS MANY COUNTRIES.
9 Q. DOES THE HEARST HAVE TV STATIONS?
10 A. YES. WE -- WITHIN RECENT TIMES WE HAVE TAKEN WHAT WERE
11 OUR WHOLLY-OWNED TELEVISION ASSETS AND MERGED INTO A PUBLIC
12 COMPANY WHICH IS NOW CALLED HEARST ARGYLE. WE ARE SOMETHING
13 AROUND 62 OR '3 PERCENT OWNERS OF HEARST ARGYLE, AND HEARST
14 ARGYLE OWNS AND OPERATES 26 TELEVISION STATIONS, I BELIEVE,
15 REACHING ABOUT 17 AND A HALF PERCENT OF THE COUNTRY'S
16 TELEVISION HOUSEHOLDS.
17 Q. AND WHAT ARE THE OTHER PORTIONS OF THE COMPANY'S BUSINESS?
18 ARE YOU IN CALL IT THE ENTERTAINMENT BUSINESS?
19 A. YES, WE ARE. WE ARE, WITH THE WALT DISNEY COMPANY,
20 PARTNERS AND WERE FOUNDERS OF SOME CABLE TELEVISION NETWORKS,
21 INCLUDING ESPN, WHICH WAS AN ACQUIRED PIECE; BUT AMONG THOSE
22 THAT WE HELPED START AND OWNED WITH DISNEY ARE WHAT IS NOW
23 CALLED LIFETIME AS WELL AS A & E AND THE HISTORY CHANNEL. AND,
24 AS I'VE SAID, WE'RE -- IN THOSE WE'RE AN EQUAL PERCENTAGE OWNER
25 WITH THE WALT DISNEY COMPANY IN THE CASE OF ESPN, AND ITS
1775
BENNACK - DIRECT / CONNELL
1 SEVERAL NETWORKS WE OWN 20 PERCENT AND THEY OWN 80 PERCENT.
2 Q. ARE YOU ALSO IN THE FEATURE SYNDICATION BUSINESS?
3 A. YES, WE ARE. KING FEATURES IS CERTAINLY AMONG IF NOT THE
4 BEST-KNOWN SYNDICATOR OF COMICS AND FEATURES NOT ONLY IN THE
5 UNITED STATES BUT AROUND THE WORLD.
6 Q. COULD YOU NAME TWO OF THEM?
7 A. I WOULD NAME BLONDIE AND HAGAR THE HORRIBLE, IF I HAD TO
8 NAME TWO.
9 Q. DOES HEARST HAVE ANY OTHER -- ARE THERE ANY OTHER PARTS TO
10 THE BUSINESS OF HEARST THAT YOU'RE RESPONSIBLE FOR?
11 A. THERE ARE. WE'VE NAMED THE MOST -- THE LARGEST OF OUR
12 BUSINESSES; BUT, IN ADDITION, WE'RE A GROWING BUSINESS
13 PUBLISHER OF B TO B AS IT'S COMMONLY CALLED TODAY. WE ARE
14 INVESTORS AND ARE OWNERS OF A NUMBER OF INTERNET ACTIVITIES
15 WHICH ARE GROWING VERY RAPIDLY, INCLUDING A SIGNIFICANT PIECE
16 OF ONE PUBLIC COMPANY IN THAT ARENA CALLED WOMEN.COM.
17 AND --
18 THE COURT: CALLED WHAT, SIR?
19 THE WITNESS: WOMEN.COM.
20 THE COURT: WOMEN.COM, OKAY.
21 THE WITNESS: YES, SIR.
22 AND, FINALLY, AND I'M SURE I'VE LEFT OUT SOME OTHER
23 PIECES, BUT WE HAVE NOT INSIGNIFICANT REAL ESTATE HOLDINGS
24 AROUND THE COUNTRY INCLUDING SOME ARMY AND RANCHING LAND CALLED
25 SAN SIMEON.
1776
BENNACK - DIRECT / CONNELL
1 BY MR. CONNELL:
2 Q. AH, YES.
3 IN ADDITION TO SITTING ON THE BOARD OF HEARST, DO
4 YOU SIT ON THE BOARD OF ANY OTHER CORPORATIONS?
5 A. I DO. I'M ON THE BOARD OF THE CHASE MANHATTAN
6 CORPORATION, OF AMERICAN HOME PRODUCTS AND OF POLO RALPH
7 LAUREN.
8 Q. DO YOU SIT ON THE BOARD OF ANY CHARITABLE ORGANIZATIONS?
9 A. A NUMBER, BUT I GUESS MOST NOTABLY I'M ON THE BOARD OF NEW
10 YORK PRESBYTERIAN HOSPITAL AND THE METROPOLITAN OPERA AND
11 LINCOLN CENTER.
12 Q. WHAT WAS HEARST'S FIRST NEWSPAPER?
13 A. THE SAN FRANCISCO EXAMINER.
14 Q. WHAT YEAR WAS THAT?
15 A. 1887. 1887 WHEN YOUNG WILLIAM RANDOLPH HEARST TOOK IT
16 OVER, WHICH IS WHERE WE DATE THE COMPANY AND ITS MEDIA
17 CONFIGURATION TO, MARCH OF 1887.
18 Q. MR. BENNACK, WHO DETERMINES EDITORIAL POSITIONS AND NEWS
19 POSITIONS AT ANY HEARST NEWSPAPER?
20 A. THE LOCAL PUBLISHER AND EDITOR ARE THE DETERMINERS OF
21 THAT -- OF THOSE POLICIES.
22 Q. WHY IS IT DONE THAT WAY?
23 A. WELL, THERE ARE TWO VERY GOOD REASONS. ONE IS THAT I AND
24 MY COLLEAGUES IN GENERAL MANAGEMENT AND I IN PARTICULAR WITH
25 MORE THAN A HUNDRED BUSINESSES, THERE'S NO WAY THAT I COULD
1777
BENNACK - DIRECT / CONNELL
1 POSSIBLY KNOW THE FACTS OR UNDERSTAND WHAT WOULD BE APPROPRIATE
2 EDITORIAL POLICY IN THE LOCAL MARKETPLACE.
3 THE SECOND IS PERHAPS MORE IMPORTANTLY AND -- MORE
4 IMPORTANT, AND THAT IS THAT THE ABILITY TO ATTRACT JOURNALISTS
5 AND PEOPLE WHO WANT TO PARTICIPATE IN PRODUCTS OF INTEGRITY AND
6 QUALITY IS VERY LIMITED IF YOU'RE GOING TO TELL THEM WHAT TO
7 PRINT. THERE ARE STILL SOME ORGANIZATIONS I WOULD GUESS THAT
8 DO THAT, BUT MOST OF THE LARGER NEWS ORGANIZATIONS OPERATE IN
9 THE SAME FORUM THAT WE NOW DO.
10 Q. WITH RESPECT TO NATIONAL ISSUES SUCH AS ENDORSEMENT OF A
11 CANDIDATE FOR PRESIDENT, WHO DETERMINES THAT, MAKES THAT
12 DETERMINATION?
13 A. LOCAL PUBLISHER AND EDITORS. USUALLY THEY HAVE AN
14 EDITORIAL BOARD THAT THEY TALK ABOUT WITH IT, BUT ULTIMATELY
15 THE PUBLISHER HAS THE RESPONSIBILITY.
16 Q. DO YOU KNOW WHETHER THERE WAS A SPLIT ON THE HEARST
17 NEWSPAPERS IN THE LAST PRESIDENTIAL ELECTION?
18 A. I DO. I AM ALERT ENOUGH AND INTERESTED ENOUGH THAT I CAN
19 TELL YOU WHAT THE OUTCOME OF THAT WAS. IN THE 1996 ELECTION, I
20 BELIEVE FIVE OF OUR PAPERS ENDORSED PRESIDENT CLINTON AND
21 SEVEN, I BELIEVE, ENDORSED SENATOR DOLE. AND IN THE '92
22 ELECTION ALL BUT TWO PAPERS, I BELIEVE, ENDORSED PRESIDENT BUSH
23 AND AMONG THOSE FOR PRESIDENT CLINTON WAS THE SAN FRANCISCO
24 EXAMINER.
25 Q. MR. BENNACK, I WANT TO READ -- NO, I WANT TO ASK YOU
1778
BENNACK - DIRECT / CONNELL
1 SOMETHING ELSE FIRST.
2 HAVE YOU EVER YOURSELF HAD A MEETING WITH THE MAYOR
3 OF THE CITY, MR. MAYOR WILLIE BROWN?
4 A. YES, I HAVE.
5 Q. HOW MANY TIMES?
6 A. ONCE.
7 Q. CAN YOU TELL THE COURT WHAT THE OCCASION OF THAT MEETING
8 WAS?
9 A. YES. WHEN MY ASSOCIATES AND I WERE OUT HERE TO SIGN THE
10 CONTRACT THAT ANNOUNCED THE TRANSACTION FOR THE ACQUISITION OF
11 THE SAN FRANCISCO CHRONICLE, I AND MY EXECUTIVE VICE PRESIDENT
12 MR. GANZI AND MR. IRISH AND OUR PUBLISHER TIM WHITE, CALLED ON
13 MAYOR BROWN.
14 THE COURT: WHAT DATE?
15 BY MR. CONNELL:
16 Q. AUGUST 6TH?
17 A. AUGUST 6TH, THAT'S CORRECT.
18 Q. AND IN ADDITION TO THE PEOPLE YOU HAVE NAMED AND MAYOR
19 BROWN, WAS ANYBODY ELSE THERE FROM MAYOR BROWN'S OFFICE?
20 A. I DON'T BELIEVE THERE WAS.
21 Q. WAS THE MEETING AT HIS OFFICE?
22 A. THE MEETING WAS IN HIS OFFICE.
23 Q. AND WHY DID YOU DO THAT? WHAT'S THE PURPOSE OF MAKING
24 THAT VISIT?
25 A. WE CHARACTERISTICALLY DO THAT. WE THINK THAT, WHEN WE'VE
1779
BENNACK - DIRECT / CONNELL
1 ANNOUNCED AN ACQUISITION OR ANY EVENT OF IMPORTANCE, THAT WE'RE
2 TRYING TO BE CITIZENS OF THE COMMUNITY AND IT'S PRETTY ROUTINE,
3 IF YOU WERE TO CHECK OUR RECORD IN A NUMBER OF OTHER
4 ACQUISITIONS, THAT WE WOULD CALL ON THE MAYOR OR TALK TO HIM ON
5 THE PHONE IF HE WEREN'T AVAILABLE AS WELL AS COMMUNICATE WHAT'S
6 HAPPENING TODAY TO THE SENATORS AND OFTEN THE GOVERNOR AND
7 PERHAPS OTHERS.
8 BUT IT'S A COURTESY. IT WAS BASICALLY TO TELL HIM
9 WHAT WE HAD ANNOUNCED, ALTHOUGH I THINK HE ALREADY KNEW BECAUSE
10 THE PRESS RELEASES HAD GONE OUT; AND TO LET HIM KNOW, AS WE DID
11 THE OTHERS, THAT WE CARE ABOUT THIS PLACE AND LOOK FORWARD TO
12 THE COMPLETION OF THIS.
13 Q. AND DID YOU INFORM OTHER ELECTED OFFICIALS AS WELL THE
14 SAME DAY?
15 A. YES. THAT DAY I WAS INVOLVED IN PHONE CALLS TO SENATOR
16 FEINSTEIN AND TO SENATOR BOXER. I BELIEVE THOSE ARE THE ONLY
17 TWO THAT I WAS PERSONALLY INVOLVED IN, ALTHOUGH I THINK OTHERS
18 WERE CALLED.
19 WE KIND OF DIVIDE UP THAT KIND OF RESPONSIBILITY,
20 AND I HAPPENED TO HAVE KNOWN SENATOR FEINSTEIN AND I DID
21 PARTICIPATE IN THAT CALL. WE USUALLY FAX THEM A COPY OF THE
22 PRESS RELEASE AND CALL THEM UP AND ASK IF THEY HAVE ANY
23 COMMENTS OR QUESTIONS.
24 Q. MR. BENNACK, DO YOU HAVE IN FRONT OF YOU SOME DOCUMENTS?
25 DO YOU HAVE EXHIBIT 78 IN FRONT OF YOU? IT MIGHT BE THE SECOND
1780
BENNACK - DIRECT / CONNELL
1 ONE AS IT OCCURS TO ME. AND IF YOU DON'T, I'LL HELP YOU.
2 A. (WITNESS EXAMINES DOCUMENTS.) NO 78.
3 MR. CONNELL: ALL RIGHT. I'M SORRY. I KNOW WHAT
4 HAPPENED.
5 (PAUSE IN PROCEEDINGS.)
6 BY MR. CONNELL:
7 Q. LET ME HAND YOU A COPY OF THAT EXHIBIT, MR. BENNACK.
8 MR. BENNACK, WHAT I'VE PLACED IN FRONT OF YOU IS AN
9 EXHIBIT IN EVIDENCE IN THIS CASE, EXHIBIT 78, AND IT IS
10 ESSENTIALLY AN E-MAIL MESSAGE FROM TIMOTHY WHITE TO GEORGE B.
11 IRISH, A MESSAGE THAT MR. IRISH IN TURN RELAYED TO OTHERS,
12 YOURSELF INCLUDED. IF YOU -- YOU'LL SEE YOUR NAME AT THE TOP
13 THERE. DO YOU SEE IT?
14 A. YES, I DO. YES, I DO.
15 Q. DO YOU HAVE ANY RECOLLECTION, MR. BENNACK, OF HAVING READ
16 THIS E-MAIL AT OR ABOUT THE TIME THAT IT'S DATED?
17 A. I JUST DON'T KNOW. I WISH THAT I COULD TELL YOU THAT I
18 DID OR DIDN'T. I DO REMEMBER THAT I WAS ADVISED ABOUT SOME
19 ELEMENTS THAT ARE CONTAINED HERE. I REMEMBER SPECIFICALLY
20 SOMEONE TOLD ME OR I SAW IT IN THE E-MAIL, AND AS I SAID I
21 DON'T THINK I DID BECAUSE I DON'T REMEMBER THE REST OF THE
22 CONTENTS, BUT THE FACT THAT JANET RENO HAD -- THE ATTORNEY
23 GENERAL HAD TOLD MAYOR BROWN THAT THIS WAS INTERESTING BUT
24 WHERE ARE THE ANTITRUST ISSUES AND HIS LETTER TO HER WAS
25 SOMETHING THAT WOULD OBVIOUSLY STICK WITH ME.
1781
BENNACK - DIRECT / CONNELL
1 Q. ALL RIGHT, SIR.
2 A. SO IT CERTAINLY LOOKS AS IF IT CAME TO ME. I GET A LOT OF
3 E-MAILS. I DON'T -- I CANNOT RECALL SPECIFICALLY HAVING READ
4 IT.
5 Q. ALL RIGHT, SIR. LET ME READ ALOUD FROM THE BEGINNING OF
6 THE E-MAIL THE FOLLOWING:
7 "PHIL BRONSTEIN AND I HAD LUNCH WITH WILLIE
8 TODAY. I ASKED WILLIE HOW I WAS GOING TO
9 JUSTIFY TO MY SUPERIORS IN NEW YORK WANTING TO
10 SUPPORT HIM AND COOPERATE WITH HIM WHEN HE WAS
11 SEEMING TO GO OUT OF HIS WAY TO MAKE OUR LIVES
12 DIFFICULT."
13 MR. BENNACK, DOES YOUR REACTION TO THAT PASSAGE IN
14 THAT MEMORANDUM SUGGEST TO YOU THAT MR. WHITE HAS DONE ANYTHING
15 INAPPROPRIATE AT ALL?
16 A. NO. I READ THAT AS HIS CHIDING THE MAYOR. I WOULD ASSUME
17 THAT THEY KNEW EACH OTHER AND I READ IT AS A COMMENT IN WHICH
18 HE'S CHIDING HIM, AND THAT'S ALL I GET OUT OF THAT.
19 Q. ALL RIGHT, SIR.
20 I'M NOW GOING TO READ TO YOU TESTIMONY THAT WAS
21 GIVEN IN THE TRIAL IN THIS CASE ON MAY THE 1ST OF THIS YEAR BY
22 MR. WHITE, AND I'M READING FROM PAGE 161 STARTING AT LINE 9.
23 AND YOU DON'T HAVE THAT IN FRONT OF YOU.
24 A. DO I HAVE THAT? NO.
25 Q. BUT I'M GOING TO READ IT.
1782
BENNACK - DIRECT / CONNELL
1 A. ALL RIGHT.
2 Q. AND IT'S QUESTIONING BY MR. ALIOTO OF MR. WHITE. THE
3 FIRST:
4 "Q. IS IT NOT CORRECT THAT YOU WERE IN FACT
5 INTENDING TO CONVEY TO MAYOR BROWN THAT HIS
6 SUPPORT FOR HEARST'S PROPOSED ACQUISITION OF THE
7 ORIGINAL CHRONICLE -- EXCUSE ME, ACQUISITION OF
8 THE CHRONICLE WOULD RESULT IN MORE FAVORABLE
9 TREATMENT FOR HIM IN THE EXAMINER?
10 "A. YES."
11 DID YOU LEARN -- WHEN DID YOU LEARN ABOUT THAT
12 TESTIMONY GIVEN BY MR. WHITE IN THIS COURT?
13 A. I WAS NOT IN THE COURT THAT DAY. I WAS TRAVELING AND
14 SOMETIME THAT EVENING MR. GANZI AND MR. IRISH, AND OTHERS WHO
15 TYPICALLY GIVE ME A REPORT ON WHAT'S GOING ON WITH RESPECT TO
16 THESE MATTERS, CALLED AND TOLD ME ABOUT THAT.
17 Q. WHAT WAS YOUR REACTION TO IT?
18 A. I WAS HORRIFIED.
19 Q. WHY?
20 A. BECAUSE IF TRUE, IT CLEARLY WAS OUTSIDE AND CONTRARY TO
21 OUR POLICY, CONTRARY TO WHAT I BELIEVE IS JOURNALISM 101 AND
22 SOMETHING THAT I WOULD NEVER ENDORSE OR SUPPORT OR ENCOURAGE.
23 Q. AS A RESULT OF YOUR CONSIDERATION OF MR. WHITE'S
24 TESTIMONY, DID YOU REACH SOME DECISION?
25 A. WE DID.
1783
BENNACK - DIRECT / CONNELL
1 Q. WHAT WAS THE DECISION THAT YOU REACHED?
2 A. AFTER SIGNIFICANT DISCUSSION WITH MY COLLEAGUES, AGAIN I'M
3 ON THE PHONE AND THEY'RE ON THE SCENE, BUT IT ULTIMATELY WAS
4 RECOMMENDED AND I DECIDED TO SUSPEND HIM, FOR WANT OF A BETTER
5 WAY OF DESCRIBING IT, TO ACT IMMEDIATELY TO PUT HIM ON PAID
6 LEAVE OF ABSENCE OF INDETERMINATE DURATION WHILE WE FOUND OUT
7 WHAT THIS ALL MEANT.
8 BECAUSE THIS DIDN'T SOUND LIKE TIM WHITE TO ME AND
9 IT CERTAINLY DIDN'T SOUND LIKE THE GENERAL POLICIES UNDER WHICH
10 WE OPERATE, AND I THOUGHT THAT THE EDITORIAL INTEGRITY AND OUR
11 REPUTATION OF THE COMPANY AND ALL OF THESE INTERESTS WAS OF
12 PARAMOUNT IMPORTANCE.
13 THERE WAS SOME DEBATE WHETHER THAT SHOULD HAPPEN
14 AFTER THE TRIAL OR WHATEVER, BUT WE FELT THAT THIS WAS SO OFF
15 THE WALL, FRANKLY, THAT WE HAD TO ACT IMMEDIATELY AND WE DID.
16 Q. HAVE YOU INITIATED AN INVESTIGATION INTO THE MATTER?
17 A. WE HAVE. WE DETERMINED THEN THAT THAT'S WHAT WE SHOULD
18 DO, HAVE AN INDEPENDENT INVESTIGATION. AS I'M SURE THE COURT
19 KNOWS AND YOU KNOW, WE HAVE ASKED A FORMER FEDERAL JUDGE TO
20 UNDERTAKE A REVIEW OF THE MATTER.
21 Q. THAT'S JUDGE RENFREW?
22 A. THAT'S CORRECT.
23 Q. LET ME READ YOU NOW FROM A PORTION OF THE TRANSCRIPT OF
24 MAY THE 3RD. I'M GOING TO READ FROM PAGE 391, MR. BENNACK, AND
25 I'M GOING TO READ BEGINNING AT LINE 5. THIS IS MR. ALIOTO
1784
BENNACK - DIRECT / CONNELL
1 SPEAKING:
2 "YESTERDAY, I RESPECTFULLY INFORM THE COURT,
3 THAT MR. WHITE, WHO WAS THE PUBLISHER OF THE
4 EXAMINER AND SUPPOSED TO BE THE PUBLISHER OF THE
5 NEW PAPER IF THE ACQUISITION EVER WENT THROUGH,
6 WAS EUPHEMISTICALLY RELIEVED, OTHERWISE KNOWN AS
7 BEING FIRED. HE WAS FIRED FOR TESTIMONY HE GAVE
8 IN THIS CASE SPECIFICALLY.
9 "AND I WOULD POINT OUT TO THE COURT THAT THE
10 POINT OF THIS IS THAT HE HAD GIVEN THAT
11 TESTIMONY, THAT VERY TESTIMONY ON DECEMBER 16,
12 1999, IN NEW YORK WHEN HE TESTIFIED BEFORE THE
13 JUSTICE DEPARTMENT. AND THAT'S AT PAGE 243 OF
14 HIS DEPOSITION IN THAT PROCEEDING FROM LINE 18
15 THROUGH LINE 22, WHICH I WOULD LIKE TO READ INTO
16 THE RECORD."
17 I'M GOING TO PASS OVER THAT FOR THE MOMENT.
18 "SO THAT TESTIMONY WAS GIVEN, AND AT THAT
19 TIME COUNSEL FOR HEARST OBVIOUSLY WAS THERE.
20 HEARST WAS AWARE OF THIS, AND SO APPARENTLY" --
21 I'M GOING TO GO BACK AND I'M GOING TO READ WHAT
22 MR. ALIOTO READ OUT OF THE RECORD OF MR. WHITE'S DEPOSITION:
23 "Q. WERE YOU INTENDING TO CONVEY TO MAYOR
24 BROWN THAT HIS SUPPORT FOR HEARST'S PROPOSED
25 ACQUISITION OF THE CHRONICLE WOULD RESULT IN
1785
BENNACK - DIRECT / CONNELL
1 MORE FAVORABLE TREATMENT IN THE EXAMINER?
2 "A. YEAH."
3 MR. ALIOTO NOW SAYS:
4 "SO THAT TESTIMONY WAS GIVEN, AND AT THAT
5 TIME COUNSEL FOR HEARST OBVIOUSLY WAS THERE.
6 HEARST WAS AWARE OF THIS, AND SO APPARENTLY THEY
7 HAVE FIRED THIS MAN NOT BECAUSE OF THE
8 INFORMATION ITSELF BUT BECAUSE IT WAS REVEALED
9 IN A PUBLIC FORUM."
10 IS THAT ALLEGATION BY MR. ALIOTO TRUE OR IS IT
11 FALSE?
12 A. WHICH PART WOULD YOU LIKE FOR ME TO ANSWER? IT'S FALSE.
13 Q. IT'S FALSE. IT'S FALSE.
14 WHEN WAS THE FIRST TIME, MR. BENNACK, THAT YOU
15 LEARNED THAT MR. WHITE HAD GIVEN THE DEPOSITION TESTIMONY CITED
16 BY MR. ALIOTO?
17 A. IT WOULD HAVE BEEN THE DAY THAT MR. ALIOTO READ IT INTO
18 THE RECORD HERE BECAUSE, IF THAT WAS WEDNESDAY, IT WOULD HAVE
19 BEEN LATER THAT DAY WHEN I GOT MY REPORT OF WHAT WAS GOING ON
20 HERE. AGAIN, I WASN'T HERE. I WOULD HAVE BEEN ADVISED OF
21 THAT. I HAD NO PRIOR KNOWLEDGE OF THAT TESTIMONY.
22 Q. BETWEEN -- YOU KNEW AT THE TIME MR. WHITE'S DEPOSITION WAS
23 TAKEN IN DECEMBER, 1999, THAT HIS DEPOSITION HAD BEEN TAKEN;
24 CORRECT?
25 A. YES, I DID. I KNEW HE HAD BEEN DEPOSED. IN FACT, I WAS
1786
BENNACK - DIRECT / CONNELL
1 GOING TO BE DEPOSED. I WAS ON THE LIST BUT IT NEVER CAME
2 ABOUT.
3 Q. ALL RIGHT. DID ANYONE, FOLLOWING MR. WHITE'S DEPOSITION,
4 UP TO AND INCLUDING THESE DAYS IN MAY THAT WE'VE BEEN TALKING
5 ABOUT BEFORE MR. ALIOTO PUT IT IN THE RECORD, DID ANYONE EVER
6 TELL YOU THAT THAT TESTIMONY HAD BEEN GIVEN?
7 A. ABSOLUTELY NOT.
8 Q. HAD YOU KNOWN, MR. BENNACK, EITHER ON DECEMBER 16,
9 DECEMBER 17, OR ANY POINT THEREAFTER, THAT MR. WHITE HAD GIVEN
10 THAT DEPOSITION TESTIMONY, WHAT WOULD YOU HAVE DONE?
11 A. I BELIEVE I WOULD HAVE DONE WHAT WE DID AFTER HAVING HEARD
12 HIS TESTIMONY ON MAY 1ST. I THINK WE WOULD HAVE HAD TO HAVE
13 GOTTEN HIM OUT OF THE PICTURE LONG ENOUGH TO HAVE INVESTIGATED
14 WHAT THE FACTS OF THE MATTER WERE.
15 I WOULD LIKE TO SAY THAT MR. WHITE HAS NOT BEEN
16 FIRED. WE'RE UNDERTAKING A REVIEW OF WHAT TOOK PLACE AND
17 OBVIOUSLY WE WILL BE FAIR TO HIM.
18 Q. DID IT MAKE ANY DIFFERENCE TO YOU, MR. BENNACK, WHETHER
19 MR. WHITE GAVE THAT TESTIMONY HERE IN OPEN COURT OR IN A
20 CONFIDENTIAL DEPOSITION?
21 A. IT WOULD NOT HAVE MADE ANY DIFFERENCE OF HOW I THOUGHT WE
22 SHOULD DEAL WITH IT, NO.
23 Q. MR. BENNACK, LET ME MOVE TO ANOTHER TOPIC.
24 A. ALL RIGHT.
25 Q. DURING THE COURSE OF YOUR EMPLOYMENT AT HEARST, HAVE THERE
1787
BENNACK - DIRECT / CONNELL
1 BEEN INSTANCES WHERE THE COMPANY HAS CLOSED DOWN SOME OF ITS
2 DAILY NEWSPAPERS?
3 A. I REGRET TO SAY THERE HAVE BEEN.
4 Q. COULD YOU IDENTIFY THE ONES THAT YOU'RE FAMILIAR WITH IN
5 LARGER CITIES?
6 A. WELL, IN MY TIME AS AN EMPLOYEE OF HEARST, DETROIT,
7 PITTSBURGH. THERE HAVE BEEN QUITE A LARGE NUMBER BUT THOSE ARE
8 TWO THAT COME TO MIND. TWO NEWSPAPERS IN NEW YORK CITY, THE
9 JOURNAL AMERICAN AND THE MIRROR.
10 Q. MILWAUKEE?
11 A. MILWAUKEE -- IN MILWAUKEE. AND DURING MY TENURE AS CHIEF
12 EXECUTIVE, REGRETTABLY WE HAVE HAD TO CLOSE NEWSPAPERS IN LOS
13 ANGELES, BALTIMORE AND SAN ANTONIO.
14 Q. IN BALTIMORE --
15 THE COURT: BALTIMORE, SAN ANTONIO AND WHAT WAS THE
16 OTHER?
17 THE WITNESS: LOS ANGELES.
18 THE COURT: LOS ANGELES.
19 BY MR. CONNELL:
20 Q. BALTIMORE WAS 1986?
21 A. YES, I BELIEVE THAT'S RIGHT.
22 Q. WHY DID YOU HAVE TO CLOSE THE BALTIMORE PAPER?
23 A. BECAUSE IT WAS A FAILING NEWSPAPER AND WE WERE UNABLE TO
24 ON OUR OWN SUSTAIN ITS PUBLICATION AND WE WERE UNABLE TO ENTER
25 INTO A JOINT OPERATING AGREEMENT IN BALTIMORE.
1788
BENNACK - DIRECT / CONNELL
1 Q. WHO WAS THE OTHER PUBLISHER IN BALTIMORE AT THAT TIME?
2 A. BALTIMORE SUN PAPERS, WHICH I THINK IN THOSE DAYS HAD
3 ALREADY BECOME A DIVISION OF TIMES MIRROR, BUT HAD BEEN
4 PREVIOUSLY OWNED BY THE A.S. ABEL COMPANY AND THEN ULTIMATELY
5 SOLD TO TIMES MIRROR.
6 Q. IN LOS ANGELES 1989, THE HERALD EXAMINER WAS CLOSED?
7 A. CORRECT, YES.
8 Q. AND WHY WAS IT CLOSED?
9 A. IT WAS LOSING A GREAT DEAL OF MONEY AND WE COULD NOT
10 ULTIMATELY, DESPITE THE WONDERFUL NATURE OF THAT MARKET, SEE AN
11 ECONOMIC OPPORTUNITY TO CHANGE IT. ALTHOUGH RIGHT TO THE DAY
12 WE CLOSED IT, WE THOUGHT ABOUT AND TRIED AND LOOKED AT EVERY
13 CONCEIVABLE OPPORTUNITY.
14 WE HAD LOST A VERY SIGNIFICANT AMOUNT OF MONEY OVER
15 A FAIRLY LONG PERIOD OF TIME THERE, AND IT WAS GETTING WORSE
16 RATHER THAN BETTER, AND WE FINALLY DECIDED WE HAD TO DEPART THE
17 MARKET.
18 Q. DID YOU SEE IF THE L.A. TIMES WAS INTERESTED IN A JOA?
19 A. WE ASKED THE QUESTION.
20 Q. AND THE ANSWER WAS?
21 A. THERE WAS HARDLY AN ENTHUSIASTIC RESPONSE. OF COURSE,
22 THEY WERE NOT INTERESTED IN DOING THAT; BUT, YES, WE DID ASK
23 THEM.
24 Q. IN SAN ANTONIO WHERE YOU WERE ONCE PUBLISHER OF THE LIGHT,
25 THAT NEWSPAPER WAS CLOSED IN 1993; RIGHT?
1789
BENNACK - DIRECT / CONNELL
1 A. THAT'S CORRECT, AFTER A SALES EFFORT.
2 Q. AND YOU'RE AWARE THAT THE SAN ANTONIO LIGHT HAD BEEN PUT
3 UP FOR SALE BY HEARST?
4 A. OF COURSE.
5 Q. AND COULDN'T FIND A BUYER?
6 A. CORRECT.
7 Q. AND THEN WHAT HAPPENED? YOU HAD AGREED WITH MR. MURDOCH
8 TO ACQUIRE HIS PAPER?
9 A. THAT'S CORRECT.
10 Q. AND THAT'S WHAT HAPPENED?
11 A. THAT'S WHAT HAPPENED. WE OFFERED THE SAN ANTONIO LIGHT
12 FOR SALE. IT WENT THROUGH AN EXTENSIVE EFFORT, SALES EFFORT.
13 IT WAS ALSO LOSING A SIGNIFICANT AMOUNT OF MONEY, SUPERVISED I
14 MIGHT ADD BY THE DEPARTMENT OF JUSTICE. THEY WERE VERY MUCH
15 INVOLVED IN THAT EVERY STEP OF THE WAY.
16 WE DID NOT FIND --
17 MR. ALIOTO: I OBJECT TO THAT, YOUR HONOR --
18 THE WITNESS: -- A QUALIFIED BUYER.
19 MR. ALIOTO: -- ON THE GROUND THAT THAT'S HEARSAY
20 EVIDENCE. IF IT'S GOING TO BACKGROUND, IT'S SOMETHING ELSE.
21 THE COURT: I THINK IT'S BACKGROUND, BUT PROCEED,
22 MR. CONNELL.
23 THE WITNESS: ANYWAY, WE ULTIMATELY CLOSED THE SAN
24 ANTONIO LIGHT AND WE ACQUIRED THE SAN ANTONIO EXPRESS NEWS
25 WHICH WAS OWNED BY MR. RUPERT MURDOCH AND HIS COMPANY, NEWS
1790
BENNACK - DIRECT / CONNELL
1 CORP.
2 BY MR. CONNELL:
3 Q. MR. BENNACK, DID THE JUSTICE DEPARTMENT ISSUE A PRESS
4 RELEASE ON THE OCCASION OF -- PRIOR TO THE TIME THAT HEARST
5 CLOSED THE LIGHT AND BOUGHT THE EXPRESS NEWS?
6 A. I BELIEVE THEY DID.
7 Q. AND DID THAT PRESS RELEASE ANNOUNCE THAT THE JUSTICE
8 DEPARTMENT DID NOT --
9 MR. ALIOTO: I OBJECT, YOUR HONOR, TO WHAT SOME
10 HEARSAY PRESS RELEASE MAY HAVE STATED.
11 THE COURT: DO YOU HAVE THE PRESS RELEASE?
12 MR. CONNELL: I'LL GET IT, YOUR HONOR.
13 THE COURT: ALL RIGHT.
14 MR. CONNELL: I SHOULD HAVE IT AND I DON'T.
15 Q. IN HOUSTON IN 1995 DID HEARST BUY ANOTHER NEWSPAPER?
16 A. WE BOUGHT THE ASSETS OF THE HOUSTON POST, YES.
17 Q. AND PRIOR TO THAT TIME, THE POST AND THE HOUSTON CHRONICLE
18 WERE COMPETITORS?
19 A. YES, THEY WERE.
20 Q. AND ARE YOU AWARE WHETHER OR NOT THE HOUSTON POST SOUGHT
21 TO FIND A BUYER FOR ITSELF BEFORE ANOTHER BUYER -- ANOTHER
22 BUYER BEFORE YOUR ACQUISITION OF IT?
23 A. YES, I AM AWARE THAT THEY DID SEEK TO FIND A BUYER.
24 Q. AND ARE YOU AWARE WHETHER THE JUSTICE DEPARTMENT
25 INVESTIGATED --
1791
BENNACK - DIRECT / CONNELL
1 MR. ALIOTO: I OBJECT, YOUR HONOR.
2 BY MR. CONNELL:
3 Q. -- THAT -- ARE YOU AWARE WHETHER OR NOT THE JUSTICE
4 DEPARTMENT INVESTIGATED THAT TRANSACTION?
5 A. YES, I BELIEVE THEY DID.
6 MR. ALIOTO: I HAVE AN OBJECTION.
7 THE COURT: I THINK THE WITNESS WOULD HAVE FIRSTHAND
8 KNOWLEDGE OF THIS; WOULD HE NOT?
9 MR. CONNELL: YES.
10 THE WITNESS: YES, I DO, YOUR HONOR.
11 THE COURT: OBJECTION OVERRULED.
12 BY MR. CONNELL:
13 Q. AND THEY DID INVESTIGATE?
14 A. AND THEY DID.
15 Q. AND THEY DID NOT SEEK TO BLOCK THE TRANSACTION?
16 A. I BELIEVE WE WERE TOLD THAT THEY WOULD NOT SEEK TO
17 BLOCK --
18 MR. ALIOTO: I OBJECT TO WHAT HE WAS TOLD BY THE
19 JUSTICE DEPARTMENT, YOUR HONOR, AS HEARSAY.
20 THE COURT: WELL, LAY YOUR FOUNDATION.
21 BY MR. CONNELL:
22 Q. WAS ANY ATTEMPT MADE BY THE JUSTICE DEPARTMENT TO BLOCK
23 THE TRANSACTION?
24 A. NO.
25 THE COURT: THAT'S NOT FOUNDATION, MR. CONNELL.
1792
BENNACK - DIRECT / CONNELL
1 MR. CONNELL: IT'S A DIFFERENT QUESTION, YOUR HONOR.
2 THE COURT: WHAT'S THAT?
3 LET ME SEE, HEARST BOUGHT THE ASSETS OF THE HOUSTON
4 POST?
5 THE WITNESS: YES, SIR.
6 THE COURT: BUT DID HEARST OPERATE THE HOUSTON POST
7 AS A PUBLICATION?
8 THE WITNESS: NO, SIR, WE DIDN'T.
9 THE COURT: I SEE. THE OWNERS OF THE POST CLOSED
10 THE PAPER AND HEARST BOUGHT THE ASSETS?
11 THE WITNESS: THAT'S CORRECT.
12 THE COURT: ALL RIGHT.
13 BY MR. CONNELL:
14 Q. WELL, JUST TO CLARIFY, IN SAN ANTONIO HOW MANY NEWSPAPERS
15 ARE PUBLISHED TODAY?
16 A. ONE.
17 Q. AND --
18 A. ONE NEWSPAPER OF DAILY GENERAL DISTRIBUTION I THINK IS A
19 MORE CORRECT RESPONSE.
20 THE COURT: AND THAT'S THE EXPRESS NEWS; IS THAT
21 RIGHT?
22 THE WITNESS: YES, SIR.
23 BY MR. CONNELL:
24 Q. MR. BENNACK --
25 THE COURT: BEFORE YOU LEAVE HOUSTON --
1793
BENNACK - DIRECT / CONNELL
1 MR. CONNELL: SIR?
2 THE COURT: BEFORE YOU LEAVE HOUSTON, IF YOU WERE.
3 MR. CONNELL: YES, SIR.
4 THE COURT: YOU TESTIFIED, MR. BENNACK, THAT HEARST
5 BOUGHT THE ASSETS OF THE HOUSTON POST BUT EARLIER YOU TESTIFIED
6 THAT HEARST IS NOW THE PUBLISHER OF THE HOUSTON CHRONICLE.
7 THE WITNESS: HEARST WAS THEN THE PUBLISHER OF THE
8 HOUSTON CHRONICLE, YOUR HONOR, AND THE POST WAS OFFERED FOR
9 SALE. NO BUYER EMERGED AND HEARST BOUGHT THE ASSETS OF THE
10 HOUSTON POST.
11 THE COURT: ALL RIGHT. WHEN DID HEARST ACQUIRE THE
12 HOUSTON CHRONICLE?
13 THE WITNESS: I'M GOING TO HAVE TO DIG INTO MY
14 MEMORY, BUT I'M GOING TO SAY IN THE MID-'80'S. I DON'T HAVE
15 THAT DATE OFF THE TOP OF MY HEAD. LET'S SAY 1986, SOMETIME IN
16 THAT TIME. AND THEN THE TRANSACTION WE'RE TALKING ABOUT WAS
17 AFTER 1990. SO IT WAS SOME YEARS LATER.
18 THE COURT: ALL RIGHT.
19 BY MR. CONNELL:
20 Q. MR. BENNACK, I THINK YOU HAVE IN FRONT OF YOU EXHIBIT 91;
21 DO YOU?
22 A. YES, I DO.
23 Q. MR. BENNACK, IN REFERENCE TO THAT EXHIBIT, I JUST WANT
24 TO -- I WANT TO ASK YOU WHETHER OR NOT THE SAN FRANCISCO JOINT
25 NEWSPAPER OPERATING ARRANGEMENT, HEARST'S PARTICIPATION IN IT
1794
BENNACK - DIRECT / CONNELL
1 FROM 1965 TO 1998, WHICH IS THE PERIOD OF TIME COVERED BY THE
2 DATA IN THAT EXHIBIT, WHETHER OR NOT THAT PARTICIPATION BY
3 HEARST HAS REPRESENTED A GOOD INVESTMENT FOR THE COMPANY.
4 A. WELL, I WOULD CERTAINLY NOT CONSIDER IT TO HAVE BEEN A
5 GOOD INVESTMENT. THESE NUMBERS SHOW THAT FROM 1965 TO 1998,
6 THAT APPROXIMATELY $24 MILLION IN POSITIVE CASH FLOW WAS
7 DERIVED OFFSETTING LOSSES FROM YEARS OF POSITIVE CASH FLOW.
8 THESE ARE NOT PRESENT VALUED USING THAT NUMBER, BUT
9 I MAKE THAT TO BE A PERIOD OF 33 YEARS AND SOMETHING UNDER
10 25 MILLION IN PROFIT. I ASSUME THAT MOST EVERYONE HERE HAS
11 GONE DOWN AND SEEN WHAT FACILITIES AND INVESTMENT THIS
12 NEWSPAPER ORGANIZATION REPRESENTS. I MAKE THAT TO BE SOMETHING
13 LIKE -- SOMETHING LESS THAN A MILLION DOLLARS A YEAR IN RETURN.
14 IF YOU PRESENT VALUE IT, I BELIEVE IT'S SOMETHING
15 OVER A MILLION DOLLARS A YEAR, WHICH FOR THE SIZE INVESTMENT
16 AND ENERGY AND TIME THAT ALL OF US HAVE SPENT IN TRYING TO MAKE
17 IT A GO, I DON'T CONSIDER IT TO HAVE BEEN A GOOD INVESTMENT.
18 Q. UNDER THE JOINT NEWSPAPER OPERATING ARRANGEMENT, HEARST
19 HAD THE OPTION TO EXTEND THE JOA FOR A 10-YEAR PERIOD FROM 1995
20 TO 2005. YOU'RE OBVIOUSLY AWARE OF THAT.
21 A. YES, WE DID.
22 Q. AND YOU DID EXERCISE THAT OPTION IN 1992.
23 A. '92, I BELIEVE, YES.
24 Q. GIVEN THE FACT THAT YOU THINK THIS WAS NOT SUCH A GREAT
25 INVESTMENT, WHY DID YOU EXTEND THE JOA AT THAT TIME?
1795
BENNACK - DIRECT / CONNELL
1 A. OBVIOUSLY A VERY GOOD QUESTION; BUT, FIRST OF ALL, LET ME
2 LAY A PREMISE WHICH IS NOT AN ECONOMIC PREMISE, WHICH IS THAT
3 WE'VE BEEN -- THIS COMPANY STARTED HERE, AS WE'VE ESTABLISHED,
4 113 YEARS AGO. WE THINK IT IS A GREAT REGION WITH SIGNIFICANT
5 FINANCIAL OPPORTUNITIES.
6 WE HAVE FOUND OURSELVES IN A VERY BAD ECONOMIC
7 CIRCUMSTANCE, BUT WE HAVE BELIEVED FOR SOME YEARS THAT AN
8 OPPORTUNITY WOULD COME, GIVEN THE FACT THAT MOST FAMILY-OWNED
9 NEWSPAPERS ARE ULTIMATELY SOLD, FOR US TO ACQUIRE A PORTION OF
10 OR ALL OF THE SAN FRANCISCO CHRONICLE.
11 THE ONLY WAY WE COULD STAY IN THE GAME, GIVEN THE
12 FACT THAT WE OWN HALF OF THE PHYSICAL ASSETS AND GIVEN OUR HOPE
13 THAT WE WOULD FIND A WAY SOMEDAY TO GET A RETURN THAT LOOKS
14 MORE REASONABLE IN ECONOMIC TERMS, WAS TO BE HERE AND TAKE
15 ADVANTAGE OF THAT OPPORTUNITY BECAUSE HAD WE NOT EXTENDED, I
16 BELIEVE THE CHRONICLE WOULD HAVE TAKEN THE POSITION THAT WE'RE
17 DEAD LIKE A HORSE AND THAT WOULD HAVE BEEN THE END OF OUR LIFE.
18 SO IT WAS OUR WAY OF STAYING ALIVE.
19 Q. ALL RIGHT, SIR. OVER THE PERIOD OF TIME THAT YOU HAVE
20 BEEN THE CEO OF HEARST BEGINNING IN THE MID TO LATE '80'S, WERE
21 THERE FROM TIME TO TIME DISCUSSIONS BETWEEN REPRESENTATIVES OF
22 HEARST AND REPRESENTATIVES OF THE CHRONICLE ABOUT A RESOLUTION
23 OF THE JOA?
24 A. INDEED THERE WERE.
25 Q. AND WHAT FORMS OF RESOLUTION DID THOSE DISCUSSIONS COVER?
1796
BENNACK - DIRECT / CONNELL
1 WHAT WERE THE PARTIES TRYING TO ACCOMPLISH?
2 A. WELL, SOME RATIONALIZATION OF THE DIFFICULT ECONOMIC
3 CIRCUMSTANCE. USUALLY THEY TOOK THE FORM, SINCE CHRONICLE HAD
4 NOT ANNOUNCED ITS INTENTION TO SELL, THEY GENERALLY TOOK THE
5 FORM OF UNDER WHAT CIRCUMSTANCES HEARST WOULD OFFER THE
6 EXAMINER FOR SALE AND THEN CLOSE IT IN THE EVENT IT WAS NOT
7 SOLD. AND THEY TOOK VARIOUS FORMS, INCLUDING A MINORITY
8 PARTICIPATION IN THE OWNERSHIP OF THE SURVIVING NEWSPAPER,
9 WHICH IN THAT SCENARIO WOULD HAVE BEEN THE CHRONICLE.
10 Q. AT THE TIME YOU WERE HAVING THESE DISCUSSIONS, WERE YOU
11 AWARE OF ANY OTHER INSTANCES WHERE JOA'S HAD CONCLUDED IN THE
12 WAY YOU'VE JUST DESCRIBED?
13 A. YES, I WAS AND AM.
14 Q. WHICH ONES?
15 A. ST. LOUIS IS A VERY SIGNIFICANT EXAMPLE WHERE -- WHEN THE
16 POST DISPATCH AND THE GLOBE DEMOCRAT, THAT JOINT AGREEMENT WAS
17 CANCELED AND THE GLOBE DEMOCRAT SHUT DOWN BUT THE NEWHOUSE
18 ORGANIZATION WHICH OWNED THAT NEWSPAPER KEPT A CONTINUING
19 FINANCIAL INTEREST IN THE PAPER GOING FORWARD. IN FACT, I
20 THINK IT WAS TESTIFIED EARLIER THAT THAT'S BEEN RECENTLY BOUGHT
21 OUT, FOR WANT OF A BETTER WAY OF DESCRIBING IT, BY THE
22 PULITZERS WHO OWN THE POST DISPATCH.
23 ALSO I REMEMBERED THE SITUATION IN MIAMI WHERE
24 KNIGHT-RIDDER HAD A JOA WITH COX AND THERE, TOO, THE COX
25 NEWSPAPER WAS OFFERED FOR SALE, ULTIMATELY SHUT DOWN BUT THE
1797
BENNACK - DIRECT / CONNELL
1 COX FAMILY OR ORGANIZATION MAINTAINED A FINANCIAL PARTICIPATION
2 IN THE AGENCY GOING FORWARD.
3 SO THERE PROBABLY ARE OTHERS, BUT I KNOW ABOUT THOSE
4 TWO.
5 Q. AND THAT WAS ONE OF THE FORMS OF RESOLUTION THAT THE
6 PARTIES WERE DISCUSSING FROM TIME TO TIME?
7 A. YES, IT WAS.
8 Q. IF YOU COULD LOOK AT EXHIBIT 85. I HOPE THAT'S IN FRONT
9 OF YOU, SIR. IT'S A LETTER DATED OCTOBER 24, 1997, ADDRESSED
10 TO YOU FROM MR. JOHN SIAS.
11 AND IS THIS LETTER, MR. BENNACK, AN EXAMPLE OF THE
12 COMMUNICATIONS AND DISCUSSIONS THAT THE PARTIES WERE HAVING
13 RELATING TO A RESOLUTION OF THE JOA?
14 A. WELL, THIS LETTER CAME ALONG THE WAY WHILE OUR FOLLOWING
15 CERTAIN EXCHANGES AND EFFORTS TO TRY TO FIND A RESOLUTION, YES.
16 Q. IN THIS LETTER FROM MR. SIAS TO YOU ON THE FIRST PAGE,
17 SECOND PARAGRAPH, HE SAYS:
18 "THE CHRONICLE SHAREHOLDERS HAVE DECIDED TO
19 KEEP THE COMPANY INTACT AND UNDER THEIR
20 EXCLUSIVE OWNERSHIP FOR THE LONG-TERM AND
21 COORDINATED ESTATE PLANNING ACTIONS ARE BEING
22 UNDERTAKEN BY THEM TO ASSURE THIS RESULT. THEY
23 HAVE DECIDED AGAINST TRANSFERRING PARTIAL
24 OWNERSHIP IN ANY OF ITS PROPERTIES TO ANYONE
25 ELSE. THEY HAVE ALSO DECIDED NOT TO EXTEND OUR
1798
BENNACK - DIRECT / CONNELL
1 JOINT NEWSPAPER OPERATIONS BEYOND THE
2 SEPTEMBER 12, 2005, EXPIRATION DATE OF OUR JOINT
3 OPERATING AGREEMENT. WITH THESE PARAMETERS
4 FIXED IN PLACE, WE HAVE HAD TO CONSIDER NEW
5 ALTERNATIVES FOR IMPROVING THE PERFORMANCE OF
6 OUR JOINT OPERATION AND HAVE THE FOLLOWING
7 PROPOSAL:"
8 AND I WON'T READ ALL THE LANGUAGE, BUT THE PROPOSAL
9 IS -- INVOLVES --
10 A. ALL RIGHT.
11 Q. YOU CHARACTERIZE IT. WHAT IS THE PROPOSAL?
12 A. WELL, THE PROPOSAL WAS THAT THE EXAMINER WOULD BE OFFERED
13 FOR SALE. I THINK I'M IN THE RIGHT PEW HERE IN THIS PARTICULAR
14 LETTER. THE EXAMINER WOULD BE OFFERED FOR SALE AND EITHER SOLD
15 OR CLOSED DOWN.
16 AND UNDER THAT SCENARIO, THAT HEARST UNTIL THE END
17 OF THE JOA WOULD CONTINUE TO OWN ONE HALF OF THE SAN FRANCISCO
18 NEWSPAPER PRINTING AGENCY AND WOULD HAVE FULL PARTICIPATION IN
19 THAT AND WOULD CONTINUE TO RECEIVE ITS PORTION OF THE FINANCIAL
20 SPLIT SUBJECT TO A COUPLE OF FACTORS THAT WOULD REDUCE THAT.
21 BECAUSE THIS WOULD CONTEMPLATE CHRONICLE OWNING ALL
22 OF THE ASSETS, THEY PROPOSED THAT WE PAY AN 8 PERCENT CHARGE ON
23 THE VALUE OF THOSE, AND IN ADDITION THAT WE PARTICIPATE IN THE
24 EDITORIAL COST OF THE SUNDAY PAPER. BUT WE WOULD GET WHAT WE
25 WOULD GET OUT OF -- 50-50 OUT OF THE SPLIT OF ECONOMICS AND IT
1799
BENNACK - DIRECT / CONNELL
1 WOULD BE REDUCED BY THOSE AMOUNTS.
2 Q. MR. BENNACK, I WOULD ASK YOU NOW IF YOU WOULD TURN TO
3 EXHIBIT 67, WHICH I HOPE IS NEXT IN THAT PILE IN FRONT OF YOU.
4 AND THAT IS A MEMORANDUM DATED OCTOBER 27, THREE DAYS AFTER THE
5 DATE OF THIS LETTER TO THE FILE AND TO SEVERAL PERSONS FROM
6 YOURSELF, AND IT BEGINS BY SAYING THAT:
7 "ON FRIDAY, OCTOBER 24, I MET FOR
8 APPROXIMATELY TWO HOURS WITH JOHN SIAS STARTING
9 AT 10:00 A.M. AFTER A FAIRLY EXTENDED PREAMBLE,
10 JOHN PROVIDED ME WITH THE ATTACHED LETTER, A
11 COPY OF WHICH HAS BEEN PREVIOUSLY PROVIDED TO
12 SOME OF THE RECIPIENTS OF THIS MEMO TO FILE."
13 I TAKE IT THAT THE LETTER THAT YOU REFER TO HERE IS
14 THE ONE WE JUST LOOKED AT?
15 A. YES, IT WOULD APPEAR TO BE THAT. IT'S THREE DAYS LATER.
16 Q. I WOULD INVITE YOUR ATTENTION TO THE FOURTH PAGE OF YOUR
17 MEMORANDUM WHERE IN THE MIDDLE OF THAT PAGE IT APPEARS, QUOTE:
18 "I TOLD HIM," REFERRING I SUPPOSE TO
19 MR. SIAS, "THAT AT FIRST BLUSH WE WOULD BE VERY
20 WEARY OF ANYTHING THAT DID NOT CONTINUE A HEARST
21 PRESENCE PAST THE CURRENT EXPIRATION DATE.
22 HOWEVER, I TOLD HIM THAT AS BUSINESSMEN AND
23 FIDUCIARIES WE WOULD CERTAINLY EVALUATE THE
24 PROPOSAL AND THAT WE COULD TALK FURTHER SOMETIME
25 AFTER I RETURNED FROM A FORTHCOMING TRIP."
1800
BENNACK - DIRECT / CONNELL
1 DID YOU SAY IN SUBSTANCE THOSE WORDS TO MR. SIAS?
2 A. I BELIEVE I DID, YES.
3 Q. WHY WAS -- WHY WERE YOU WEARY OF ANYTHING THAT DID NOT
4 CONTINUE A HEARST PRESENCE PAST THE CURRENT EXPIRATION DATE?
5 A. BECAUSE, AS I'VE PREVIOUSLY STATED, IT'S BEEN MY POSITION
6 AND MY VIEW AS A BUSINESSMAN THAT WE COULD NOT RECEIVE A
7 SATISFACTORY RETURN ON THE INVESTMENT WE MADE HERE, BOTH IN
8 FINANCIAL AND OTHER TERMS, IF OUR EXISTENCE ENDED IN 2005.
9 WE STARTED THIS JOINT OPERATING AGREEMENT WITH
10 NEWSPAPERS THAT WERE ROUGHLY IN EQUIVALENCY. THE DISPARITY
11 LARGELY HAD COME ABOUT RESULTING FROM THE MORNINGNESS OF THE
12 CHRONICLE, WITH ALL DUE RESPECT TO ITS OTHER QUALITIES, AND I
13 DIDN'T BELIEVE THAT WE COULD GET A REASONABLE ECONOMIC RETURN
14 BY SIMPLY TAKING A CHECK AND GOING AWAY.
15 AND SO WHAT THIS -- WHAT PRECEDED THIS LETTER OR
16 PRECEDED MR. SIAS' LETTER WAS A NEGOTIATION FOR HEARST TO OWN A
17 PERCENTAGE OF THE SURVIVING NEWSPAPER GOING FORWARD HAD THE
18 CHRONICLE -- HAD THE EXAMINER BEEN SOLD OR SHUT DOWN.
19 AND SO WHAT I'M TALKING ABOUT HERE, WAS WHAT WE
20 ALREADY KNEW, THAT SOME WAY, SOMEHOW WE HOPED TO FIND A WAY TO
21 BE HERE. IN THIS SPECIFIC INSTANT CASE WE HAD BEEN TALKING
22 ABOUT OUR BEING HERE AS A CO-OWNER OF THE CHRONICLE, WITH A
23 RIGHT OF FIRST REFUSAL BEAR IN MIND, BELIEVING AS I DID THAT
24 ULTIMATELY THE FAMILY WOULD DECIDE TO SELL THE CHRONICLE.
25 Q. AND YOU WERE LOOKING FOR A PERPETUAL ARRANGEMENT?
1801
BENNACK - DIRECT / CONNELL
1 A. YES, I WAS. WE TALKED ABOUT VARIOUS TERMS, BUT MY
2 POSITION WAS PERPETUAL BECAUSE I THOUGHT THAT THAT WOULD BE THE
3 BEST WAY TO HAVE AN ECONOMIC RETURN FOR WHAT WE'D INVESTED
4 HERE.
5 Q. AND FOLLOWING THE EVENTS DESCRIBED IN THIS DOCUMENT, WERE
6 THERE ADDITIONAL DISCUSSIONS BETWEEN THE CHRONICLE AND HEARST?
7 A. I'D HAVE TO THINK ABOUT THE PARTICULAR TIMING, BUT THE
8 ANSWER IS YES, IS THAT THERE WAS A STOP AND START NATURE TO
9 THESE DISCUSSIONS. WE WOULD HAVE DISCUSSIONS AND THEN WE WOULD
10 BE TOLD, "NO, WE'LL WAIT AND LET YOU GO AWAY IN 2005." AND
11 THEN WE WOULD HAVE DISCUSSIONS AND THEN WE'D BE TOLD SOME FORM
12 OR VERSION OF THIS.
13 BUT IT DID KEEP COMING UP; AND AS THE INSTANT
14 TRANSACTION INDICATES, WHAT WE THOUGHT MIGHT HAPPEN, ULTIMATELY
15 DID IN FACT HAPPEN.
16 Q. LET ME ASK YOU, MR. BENNACK, TO TURN TO EXHIBIT 122, WHICH
17 AGAIN I HOPE IS NEXT IN LINE IN THAT PILE.
18 A. YES, SIR, I HAVE IT.
19 Q. EXHIBIT 122 IS A LETTER TO YOU FROM MR. SIAS DATED
20 APRIL 23, 1998, WHICH BEGINS, QUOTE:
21 "THE BOARD OF DIRECTORS OF THE CHRONICLE
22 PUBLISHING COMPANY WISHES TO THANK YOU AND VIC
23 GANZI FOR TAKING THE TIME TO PERSONALLY VISIT
24 WITH THEM."
25 LET ME ASK YOU, MR. BENNACK, DO YOU RECALL THE VISIT
1802
BENNACK - DIRECT / CONNELL
1 YOU MADE -- YOU AND MR. GANZI MADE TO THE CHRONICLE BOARD OF
2 DIRECTORS AT ABOUT THIS TIME?
3 A. YES, I DO.
4 Q. AND WHAT WAS THE PURPOSE OF THAT VISIT?
5 A. WELL, FOLLOWING THE SEQUENCE THAT WE EARLIER COVERED IN MY
6 TESTIMONY, WE WERE, AGAIN, TALKING. MY BEST RECOLLECTION IS
7 THAT I PROBABLY HAD ATTEMPTED TO REOPEN DISCUSSIONS AFTER
8 MR. SIAS HAD CLOSED THE DOOR.
9 AND I BELIEVE I HAD SAID SOMETHING TO THE EFFECT
10 THAT, IF IT WOULD BE USEFUL AT ALL, I'D LIKE TO COME AND TALK
11 TO YOUR SHAREHOLDERS AND DIRECTORS BECAUSE THIS CASE FOR BOTH
12 THE HEARST CORPORATION AND CHRONICLE JOINING TOGETHER IN ORDER
13 TO COMPETE MORE EFFECTIVELY WITH ALL THE MEDIA IN THIS REGION I
14 THOUGHT WAS AN IMPORTANT CASE, AND I THOUGHT IF THEY HEARD FROM
15 ME AND MY ASSOCIATE, MR. GANZI, WHAT KIND OF COMPANY WE ARE AND
16 WHAT OUR RESOURCES COULD BE BROUGHT TO BEAR IN ORDER TO HELP
17 THIS NOW-SURVIVING ENTERPRISE, THAT THERE MIGHT BE SOME GOOD IN
18 THAT. AND THEY OBVIOUSLY THOUGHT WELL ENOUGH OF IT TO PERMIT
19 IT.
20 Q. SO YOU HAD A MEETING AND THEN AS THE LETTER SAYS IN THE
21 SECOND PARAGRAPH:
22 "THE CHRONICLE BOARD WOULD APPRECIATE
23 RECEIVING FROM YOU A LETTER DETAILING TERMS THE
24 HEARST CORPORATION WOULD DESIRE IN AN ONGOING
25 RELATIONSHIP."
1803
BENNACK - DIRECT / CONNELL
1 DID YOU SEND SUCH A LETTER, MR. BENNACK?
2 A. YES, I DID. YES, I DID.
3 Q. AND I WOULD INVITE YOUR ATTENTION TO EXHIBIT 86 WHICH,
4 AGAIN, I HOPE IS THERE IN YOUR PILE.
5 A. (WITNESS EXAMINES DOCUMENTS.)
6 Q. NO? NO.
7 A. NO, IT'S HERE. IT'S HERE.
8 Q. THANK YOU, SIR.
9 86, MR. BENNACK, IS DATED JULY 9, 1998. IT'S A
10 LETTER THAT IS SIGNED BY YOU AND IS SENT TO MR. SIAS. AND WAS
11 THIS THE LETTER THAT FOLLOWED UP ON THE APRIL 23 LETTER THAT WE
12 JUST SAW?
13 A. YES, IT WAS.
14 Q. OKAY. AND IN THIS -- WAS THIS LETTER THE PROPOSAL THAT
15 HEARST MADE TO THE CHRONICLE ABOUT A RESOLUTION OF THE JOA?
16 A. YES, IT WAS.
17 Q. OKAY. IN THIS LETTER ON PAGE 2 YOU STATE:
18 "JOHN, ALONG WITH HEARST'S LONG-STANDING
19 DESIRE TO CONTINUE A MORE THAN 100-YEAR
20 TRADITION OF NEWSPAPER PUBLISHING IN THE SAN
21 FRANCISCO MARKET, WE GENUINELY BELIEVE THAT THE
22 COMBINED STRENGTHS OF THE CHRONICLE AND HEARST
23 WILL BE INDISPENSABLE FOR THE SUCCESS OF THE
24 SURVIVING NEWSPAPER GOING FORWARD. WHILE WE
25 HAVE CONFINED THE DRAFT PROPOSAL TO JOA ITEMS,
1804
BENNACK - DIRECT / CONNELL
1 YOU KNOW THAT WE ARE DESIROUS OF FORGING A
2 RELATIONSHIP BETWEEN HEARST AND CHRONICLE THAT
3 WOULD LEAD NOT ONLY TO THE MOST FINANCIALLY AND
4 COMPETITIVELY VIABLE STATUS FOR THE SURVIVING
5 DAILY AND SUNDAY NEWSPAPER, BUT POTENTIALLY TO
6 OTHER RELATIONSHIPS BETWEEN OUR TWO COMPANIES
7 OUTSIDE THE SAN FRANCISCO NEWSPAPER AGREEMENT."
8 MR. BENNACK, IN THIS LETTER YOU MAKE A PROPOSAL
9 ABOUT A 66-34 SPLIT; CORRECT?
10 A. THAT'S CORRECT, I BELIEVE.
11 Q. WHAT --
12 A. NO. ACTUALLY I THINK THAT'S NOT THE --
13 Q. I'M SORRY.
14 A. -- FINANCIAL PROPOSAL BECAUSE I DON'T HAVE THE PROPOSAL.
15 Q. ALL RIGHT.
16 A. BUT I THINK WE THOUGHT OF THAT PROPOSAL AS THE FINANCIAL
17 EQUIVALENT OF THE 66-34 PREVIOUSLY. I DON'T RECALL EXACTLY
18 WHAT THE TERMS WERE. WE PROPOSED ALMOST EVERYTHING ALONG THE
19 WAY.
20 Q. OKAY. WHAT RESPONSE DID YOU GET TO THIS PROPOSAL?
21 A. WELL, TO MY SURPRISE, ALMOST OUTRAGE RESPONSE. WE THOUGHT
22 WE HAD -- OR MY ASSOCIATES LARGELY HAD DONE THIS AND PULLED
23 TOGETHER VARIOUS ELEMENTS THAT WE THOUGHT WERE APPROPRIATE AND
24 THAT THE PARTIES HAD PREVIOUSLY DISCUSSED, INCLUDING THE
25 FINANCIAL SPLIT; BUT THE LETTER WAS SEEN BY THE CHRONICLE
1805
BENNACK - DIRECT / CONNELL
1 APPARENTLY AS AN OVERREACH AND THEY WERE NOT INTERESTED IN ITS
2 TERMS.
3 Q. AND IF YOU'LL TURN TO EXHIBIT 70, THAT'S A LETTER DATED
4 AUGUST 11TH, 1998 --
5 A. (WITNESS EXAMINES DOCUMENTS.) YES.
6 Q. -- FROM MR. SIAS TO YOU.
7 A. YES.
8 Q. AND IN THAT LETTER MR. SIAS SAYS TO YOU, QUOTE:
9 "IT IS THE UNANIMOUS OPINION OF THE
10 CHRONICLE BOARD THAT WE ARE TOO FAR APART ON OUR
11 JOA POSITIONS TO WARRANT ANY FURTHER DISCUSSION.
12 WE WILL COMMENCE THE ADVANCE PLANNING NECESSARY
13 FOR THE ULTIMATE DISSOLUTION OF THE SAN
14 FRANCISCO NEWSPAPER AGENCY IN 2005. WHILE THE
15 CLOCK RUNS DOWN, WE ASSURE YOU THAT WE WILL
16 CONTINUE TO WORK VERY HARD TO BE A PRODUCTIVE
17 PARTNER WITH HEARST."
18 WAS THAT A LETTER THAT YOU ENJOYED READING?
19 A. IT CERTAINLY WAS NOT. DEAD YET AGAIN IS WHAT THE LETTER
20 SAYS.
21 Q. WHAT DID YOU DO NEXT? DID YOU HAVE FURTHER COMMUNICATIONS
22 WITH MR. SIAS?
23 A. I THINK THERE PROBABLY WERE SOME. I DON'T REMEMBER
24 SPECIFICALLY, BUT I KNOW WE DID WHAT WE ALWAYS DID WHEN IT
25 SEEMED WE HAD HIT A BRICK WALL, AND THAT IS WE STARTED
1806
BENNACK - DIRECT / CONNELL
1 THINKING, "IS THERE SOME SILVER BULLET HERE THAT WE CAN ACHIEVE
2 SOME KIND OF ECONOMIC RETURN? IS THERE SOMETHING WE CAN DO
3 EITHER ON OUR OWN, NOW OR IN THE FUTURE TO MOVE THIS?" AND I'M
4 SURE WE BEGAN AGAIN TO STUDY EVERY CONCEIVABLE APPROACH TO
5 RESOLVING THIS VERY DIFFICULT PROBLEM, ALTHOUGH I HAVE TO SAY
6 THAT HAVING GONE THROUGH THIS OVER A PERIOD DATING BACK AT
7 LEAST TO 1987, I WAS NOT A HUNDRED PERCENT SURE THAT THIS IS
8 THE LAST TIME I WAS EVER GOING TO HEAR FROM THEM UNTIL 2005.
9 Q. OKAY. IF YOU'LL TURN TO EXHIBIT 71, WHICH IS A MEMO
10 WRITTEN BY YOU ON SEPTEMBER 8, 1998, WHICH BEGINS BY NOTING,
11 QUOTE:
12 "FOLLOWING OUR DISCUSSION OF EARLIER TODAY,
13 I TELEPHONED JOHN SIAS TO ACKNOWLEDGE HIS LETTER
14 OF AUGUST 11 CONCERNING THE BREAK OFF OF OUR SAN
15 FRANCISCO NEGOTIATIONS."
16 LET ME INVITE YOUR ATTENTION, SIR, TOWARDS THE
17 BOTTOM OF PAGE 1, THE SENTENCE BEGINNING:
18 "I TOLD HIM, HOWEVER, THAT WE WERE CERTAINLY
19 GOING TO TAKE THE STEPS WE BELIEVED NECESSARY TO
20 PREPARE OURSELVES FOR THE RESUMPTION OF A
21 FULLY-COMPETITIVE SITUATION IN THE POST-2005
22 PERIOD."
23 WHAT DID YOU SAY TO MR. SIAS?
24 A. I'M SURE I SAID SOMETHING TO THAT EFFECT. THERE'S BEEN A
25 FAIR AMOUNT OF DISCUSSION ABOUT THAT, AND I HAVE NEVER
1807
BENNACK - DIRECT / CONNELL
1 UNDERSTOOD ANYONE WHO BELIEVED THAT WE COULD SAY, "YOU'RE
2 RIGHT. WE'RE DEAD. WE HAVE NO LEVERAGE WHATSOEVER HERE. YES,
3 WE OWN HALF OF THE PHYSICAL ASSETS, BUT OTHERWISE WE'RE A
4 GONER." I DON'T THINK YOU CAN SAY THAT TO YOUR OWN
5 ORGANIZATION AND I DON'T THINK YOU CAN SAY THAT IN A BUSINESS
6 NEGOTIATION.
7 SO WE CLEARLY WERE, AGAIN, EVEN AS RECENTLY AS THIS,
8 LOOKING AT WERE THERE ANY ALTERNATIVES. AND WE HAD TO PREPARE
9 OURSELVES FOR THAT PROSPECT, ALTHOUGH CLEARLY I DON'T THINK IT
10 SAYS HERE, NOR WAS IT A FACT, THAT WE MADE THE DECISION TO DO
11 THAT.
12 Q. YOU MADE NO DECISION TO RESUME COMPETITION?
13 A. WE DIDN'T HAVE TO MAKE THE DECISION. WE'RE NOW IN 1998.
14 THERE'S SEVEN YEARS TO GO. I'VE SAID THAT WE'VE TAKEN A
15 LONG-TERM VIEW ABOUT THIS, AND WE CERTAINLY HAD NOT MADE ANY
16 DECISION TO COMPETE.
17 Q. IF YOU'LL TURN TO EXHIBIT 72, MR. BENNACK, WHICH IS A
18 LETTER DATED APRIL 15, 1999. AND THIS ONE IS WRITTEN BY MR.
19 WHITE TO MR. SIAS. IT'S INDICATED A BLIND CARBON WAS SENT TO
20 SEVERAL PEOPLE, YOURSELF INCLUDED.
21 A. YES.
22 Q. I TAKE IT -- WERE YOU AWARE OF THIS LETTER BEFORE IT
23 WAS -- BEFORE MR. WHITE SENT IT?
24 A. I WAS AWARE.
25 Q. IN THE LETTER MR. WHITE SAYS THAT, AND I'M LOOKING -- I'M
1808
BENNACK - DIRECT / CONNELL
1 LOOKING NOW AT PAGE 2 OF THE LETTER IN THE PARAGRAPH BEGINNING,
2 "THE SIGNALS ARE UNMISTAKABLY CLEAR THAT" -- WELL, I'LL READ
3 THAT.
4 "THE SIGNALS ARE UNMISTAKABLY CLEAR THAT THE
5 CHRONICLE INTENDS THAT OUR PARTNERSHIP COME TO
6 AN END DESPITE THE BENEFITS DERIVED FROM THE JOA
7 BY THE CHRONICLE AT THE TIME OF ITS
8 IMPLEMENTATION AND OVER THE PAST 34 YEARS.
9 ACCORDINGLY, WE HAVE BEEN REVIEWING OUR
10 JOINTLY-HELD ASSETS TO DETERMINE WHAT WE WILL
11 REQUIRE TO ENGAGE INDEPENDENTLY IN THE
12 PUBLISHING OF A MORNING NEWSPAPER AT THE TIME
13 THE JOA TERMINATES."
14 YOU ARE AWARE THAT MR. WHITE WAS MAKING THAT
15 STATEMENT TO MR. SIAS?
16 A. I WAS.
17 Q. AND HAD YOU AT THIS TIME MADE ANY DETERMINATION AS TO
18 WHETHER HEARST WOULD ENGAGE INDEPENDENTLY IN THE PUBLISHING OF
19 A MORNING NEWSPAPER AT THE TIME THE JOA TERMINATES?
20 A. WE CONSTANTLY EVALUATED IT. WE CERTAINLY MADE NO DECISION
21 THAT WE WERE GOING TO DO THAT. WE WERE GOING TO DO JUST WHAT
22 THIS SAYS, WHICH IS ENGAGE AND REVIEW THE ASSETS.
23 REMEMBER MR. SIAS HAD MADE A SIMILAR STATEMENT IN
24 HIS LETTER AND SO WE SAID, "YOU'RE GOING TO LOOK AT THE ASSETS
25 AND WHAT YOU'RE GOING TO DO WITH THEM, WE'RE GOING TO LOOK AT
1809
BENNACK - DIRECT / CONNELL
1 THE ASSETS TO DETERMINE WHAT WE'RE GOING TO DO WITH THEM."SO
2 THAT'S ALL THAT'S INTENDED TO CONVEY.
3 Q. HAD IT BEEN NECESSARY FOR HEARST TO MAKE A DECISION AT
4 THIS TIME WHAT IT WAS GOING TO DO IF THE JOA WAS JUST COMING TO
5 AN END, WHAT WOULD YOU DO?
6 A. OBVIOUSLY WITH GREAT SORROW BUT AS A BUSINESSMAN I DON'T
7 SEE HOW I COULD HAVE MADE ANY DECISION BUT THAT WE CANNOT
8 UNDERTAKE THE FINANCIAL COST OF ATTEMPTING TO GO ANY LONGER.
9 WE WERE STILL LOOKING FOR EVERY OTHER ALTERNATIVE, BUT I HAVE
10 NO DOUBT THAT THAT'S THE DECISION THAT WOULD HAVE BEEN MADE.
11 I WOULD ADD, HOWEVER, THAT WE CONSTANTLY LOOKED AT
12 WHETHER THERE WERE ALTERNATIVES. WE TOOK COMFORT IN THE
13 INTERNET, FOR EXAMPLE.
14 Q. WHAT IS THAT?
15 A. MAYBE BY -- THE INTERNET. MAYBE BY 2005 NEWSPAPER
16 PUBLISHING IS NOT GOING TO BE EXACTLY WHAT IT WAS EVEN IN 1998
17 AND WAS THERE SOME WAY THAT SOME COMBINATION OF INK ON PAPER
18 AND INTERNET WOULD GIVE US SOME LIFE THAT WE DIDN'T HAVE.
19 WELL, WE NEVER FOUND THAT -- AT LEAST TO THIS DATE
20 WE NEVER FOUND THAT A VIABLE ALTERNATIVE.
21 Q. MR. BENNACK, IS THE EXAMINER CONTRIBUTING TO THE PROFITS
22 OF THE JOA?
23 A. NO, SIR, IT IS NOT.
24 Q. AND HOW DO YOU KNOW THAT?
25 A. I KNOW IT FROM ALMOST 40 YEARS OR MORE THAN 40 YEARS
1810
BENNACK - DIRECT / CONNELL
1 EXPERIENCE, THAT WHEN YOU LOOK AT CIRCULATIONS AND ADVERTISING
2 RATES AND THE VARIOUS INDICES THAT MAKE UP THE ECONOMIC HEALTH
3 OR LACK THEREOF; BUT IN ADDITION TO THAT, IT'S A SUBJECT THAT
4 WE'VE STUDIED AND I'M FAMILIAR WITH ALL OF THE ANALYSES THAT
5 HAVE BEEN MADE AND DISCUSSED IN THIS COURTROOM, AND I HAVE A
6 VERY FIRM CONVICTION AND PROFESSIONAL OPINION THAT IT'S A
7 SIGNIFICANT DRAG ON THE ECONOMICS OF THE AGENCY.
8 Q. AT SOME POINT NOT TOO LONG AFTER THAT LAST LETTER WE
9 LOOKED AT, CHRONICLE SHAREHOLDERS MADE A DECISION TO OFFER THE
10 CHRONICLE AND THEIR OTHER ASSETS FOR SALE; CORRECT?
11 A. THAT'S CORRECT.
12 Q. AND OBVIOUSLY HEARST WAS INTERESTED IN PURCHASING THE
13 CHRONICLE?
14 A. YES, WE WERE.
15 Q. AND I TAKE IT THAT AS THE CHIEF EXECUTIVE OFFICER, YOU
16 WERE IMPORTANTLY INVOLVED IN DETERMINING HOW TO GO ABOUT THAT?
17 A. YES, I WAS.
18 Q. YOUR POSITION -- WHAT WAS, JUST SUMMARIZE, WHAT WAS
19 HEARST'S POSITION IN THE JOA AT THIS TIME? IT OWNED 50 PERCENT
20 OF --
21 A. IT OWNED 50 PERCENT OF THE ASSETS AND IT HAD A JOINT
22 AGREEMENT OBVIOUSLY, THE EXPIRATION DATE WHICH BY THIS TIME IS
23 NOW 2005. THAT WAS OUR POSITION.
24 Q. AND AT THE OUTSET WHEN HEARST SUBMITTED ITS FIRST BID IN
25 AN ATTEMPT TO BUY THE CHRONICLE, WHAT WAS THE AMOUNT THAT YOU
1811
BENNACK - DIRECT / CONNELL
1 BID?
2 A. I BELIEVE IT WAS $565 MILLION.
3 Q. WHAT HAPPENED TO THAT BID?
4 A. IT KIND OF WENT OFF INTO NEVER, NEVERLAND. WE WERE -- IT
5 WAS NOT ACCEPTED AND THE PROCESS THAT HAD BEEN UNDERTAKEN BY
6 CHRONICLE FOR THE DISPOSITION OF THEIR ASSETS WITH DLJ
7 CONTINUED.
8 WE HAD EMPLOYED AN INVESTMENT BANKER, WASSERSTEIN
9 PERELLA; AND ALTHOUGH I HAD HAD A COUPLE OF CONVERSATIONS WITH
10 DLJ, MOST OF THE CONTACT WAS BETWEEN OUR INVESTMENT BANKERS AND
11 THEIRS, BUT WE WEREN'T GETTING MUCH FEEDBACK EXCEPT, "WE'RE NOT
12 GOING TO ACCEPT THIS."
13 Q. OKAY. UNDER THE JOA DID HEARST HAVE A RIGHT OF FIRST
14 REFUSAL?
15 A. YES, WE DID.
16 Q. DID YOU BELIEVE THAT WAS A VALID RIGHT?
17 A. I DID INDEED.
18 Q. WHAT HAPPENED NEXT, AS FAR AS YOU KNOW, ABOUT THE PRICE
19 NEGOTIATION? DID THE CHRONICLE MAKE A COUNTERPROPOSAL TO
20 HEARST THROUGH ITS BANKERS?
21 A. ULTIMATELY IT WAS COMMUNICATED, AND THERE WERE, I BELIEVE,
22 SOME INTERMEDIATE STEPS DURING WHICH I ASSUME THEY WERE TESTING
23 THE MARKET, ULTIMATELY THEY COMMUNICATED TO US THAT
24 $700 MILLION WOULD BE AN APPROPRIATE PRICE AND ONE THAT THEY
25 THOUGHT MIGHT BE ACCEPTABLE.
1812
BENNACK - DIRECT / CONNELL
1 AND WORKING WITH OUR INVESTMENT BANKERS, IN DUE
2 COURSE, PROBABLY IN MORE THAN ONE STEP, WE ULTIMATELY BID THE
3 $660 MILLION THAT WAS IN FACT ACCEPTED.
4 Q. ALL RIGHT, SIR.
5 DID YOU REGARD THE 660 MILLION-DOLLAR BID AS A
6 PREEMPTIVE BID?
7 A. WE HOPED IT WAS PREEMPTIVE. WE HOPED THAT IT WOULD CAUSE
8 THEM TO DECIDE THAT THAT'S THE BEST THEY WERE GOING TO BE ABLE
9 TO DO.
10 HAVING BEEN TOLD 700, YOU NEVER KNOW HOW MUCH
11 NEGOTIATING ROOM THERE IS IN THERE, BUT WE THOUGHT WE WERE
12 GETTING VERY CLOSE.
13 Q. WHAT'S YOUR DEFINITION OF A PREEMPTIVE BID?
14 A. IT'S A BID IN WHICH THE SELLER CONCLUDES THAT IT'S THE
15 BEST THEY'RE GOING TO DO, AND IT IS NO LONGER PRODUCTIVE TO GO
16 THROUGH THE PROCESS OF TRYING TO GET OTHER OFFERS OR BIDS.
17 Q. MR. BENNACK, IF HEARST ACQUIRES THE CHRONICLE --
18 A. YES, SIR.
19 Q. -- CAN YOU -- WILL HEARST BE ABLE TO TAKE STEPS TO IMPROVE
20 THE CHRONICLE?
21 A. I BELIEVE WE CAN.
22 Q. DO YOU HAVE SOME IDEAS THAT YOU CAN TELL US ABOUT?
23 A. I'LL TELL YOU WHAT OUR ASPIRATION IS. I'VE ARTICULATED IT
24 BEFORE. IT'S OUR BELIEF THAT THE JOINT AGREEMENT IS A SERIOUS
25 DETRIMENT TO THE ABILITY OF THE MORNING LEADERSHIP NEWSPAPER TO
1813
BENNACK - DIRECT / CONNELL
1 COMPETE, PARTICULARLY IN THE BROADER REGION THAT IS SO
2 IMPORTANT TO ITS ECONOMIC HEALTH.
3 RECOGNIZING THAT SOMETHING LIKE 80 PERCENT OF ITS
4 CURRENT CIRCULATION IS OUTSIDE THE SAN FRANCISCO CITY AREA, WE
5 BELIEVE THAT IF ALL THE RESOURCES ARE AVAILABLE, THAT AN
6 ENHANCED EDITORIAL PRODUCT IS POSSIBLE. AND I HAVE A
7 REASONABLE RESPECT FOR THE PRESENT ONE, BUT IT'S BEING LIMITED
8 BY THE FINANCIAL RESOURCES TO SOME EXTENT.
9 I THINK THAT WE HAVE THE OPPORTUNITY, AS THE OWNER,
10 TO GIVE THIS REGION THE KIND OF WORLD CLASS -- WHICH IS AN EASY
11 WORD TO SAY, HARDER TO DO -- BUT KIND OF WORLD CLASS NEWSPAPER
12 THAT I BELIEVE IT'S ENTITLED TO. AND SINCE THIS IS WHERE OUR
13 COMPANY STARTED AND SINCE WE'RE IN THIS BUSINESS AND SINCE WE
14 THINK THAT WILL BE REWARDED WITH SIGNIFICANT ECONOMIC RETURN,
15 THAT'S WHAT WE INTEND TO DO.
16 IT'S IN THAT CONNECTION, AMONG OTHER CONSIDERATIONS,
17 THAT WE'VE SAID, FOR EXAMPLE, THAT IN THE INSTANT TRANSACTION
18 ALL OF THE EMPLOYEES WHO ARE NOT EDITORIAL, NOW I'M TALKING
19 ABOUT WHO ARE NOT EMPLOYED BY MR. FANG, WILL BE GIVEN JOBS IN
20 THE NEW CHRONICLE BECAUSE WE THINK AN EXPANSION OF THOSE
21 RESOURCES IS INDICATED.
22 AND I PARTICULARLY LOOK AT SILICON VALLEY AND THE
23 FACT THAT THIS CITY IS STILL THE HUB OF THE REGION
24 NOTWITHSTANDING WHAT'S BEEN SAID BY DR. ROSSE ABOUT THE
25 EMERGENCE OF SAN JOSE, AND THAT THERE IS STILL AN OPPORTUNITY,
1814
BENNACK - DIRECT / CONNELL
1 ALTHOUGH IT'S WANING, TO RECLAIM THE KIND OF SUCCESS THAT WE
2 THINK A -- A NEWSPAPER THAT SAYS "SAN FRANCISCO CHRONICLE"
3 OUGHT TO HAVE.
4 Q. LET ME PLACE IN FRONT OF YOU AN EXHIBIT H-0983. I'M NOT
5 SURE YOU HAVE THAT ONE THERE.
6 THE COURT: 903?
7 MR. HALLING: 983.
8 MR. CONNELL: H-0983. IT'S THE PRO FORMA, YOUR
9 HONOR.
10 THE COURT: THANK YOU.
11 BY MR. CONNELL:
12 Q. MR. BENNACK, THIS DOCUMENT WAS SHOWN TO SEVERAL WITNESSES,
13 DR. ROSSE AND TO MR. FALK. AND IF YOU'LL LOOK AT THE FIRST
14 PAGE OF THE DOCUMENT, THE JOA A.M. ONLY/P.M. COMPARISON, IN HIS
15 QUESTIONING OF MR. FALK, MR. ALIOTO WAS POINTING TO THE, UNDER
16 "EXPENSES" ON PAGE 1, THE PAYROLL AND HE POINTED TO THE PAYROLL
17 CIRCULATION SHOWING A REDUCTION OF 125 FTE'S. DO YOU SEE THAT?
18 A. I DO.
19 Q. AND HE POINTED TO PRODUCTION AND BUILDING SERVICES AND
20 SHOWING A REDUCTION OF 83 FTE'S. DO YOU SEE THAT?
21 A. YES, I DO.
22 Q. IS THAT GOING TO HAPPEN IF HEARST PURCHASES THE CHRONICLE?
23 A. WE'RE GOING TO -- WE HAVE ASSURED THE EMPLOYEES THAT THERE
24 WILL BE NO INVOLUNTARY LAYOFFS. THIS IS NOT OUR SCHEDULE.
25 THIS IS SOMETHING THAT I GATHER HAS BEEN STUDIED AND THAT THAT
1815
BENNACK - DIRECT / CONNELL
1 IS BELIEVED BY THE AGENCY TO BE POSSIBLE.
2 THERE ARE A LOT OF IMPONDERABLES HERE, BUT WE'VE
3 SAID THAT NO ONE WILL BE INVOLUNTARILY LAID OFF. THE TOTAL
4 SIZE OF THE WORK FORCE WILL DEPEND ON OUR SUCCESS TO BE ABLE TO
5 DO SOME OF THE THINGS THAT I TALKED TO YOU ABOUT AND SO ON, BUT
6 WE CERTAINLY INTEND TO CONTINUE TO EMPLOY THE WORK FORCE AS
7 PRESENTLY IN PLACE.
8 THE COURT: HOW LONG WILL THAT COMMITMENT LAST?
9 THE WITNESS: WE HAVEN'T PUT A TIME LINE, ALTHOUGH I
10 THINK THE CONTRACT HAS A LIMITATION IN IT. BUT WE HAVE NOT PUT
11 A TIME LINE ON IT, YOUR HONOR. OUR INTENTION IS THAT THERE
12 WILL BE NO INVOLUNTARY LAYOFF.
13 THAT DOESN'T MEAN THAT AS ATTRITION AND OTHER
14 REASONS FOR PEOPLE TO LEAVE TAKES PLACE THAT WE WILL BE FREE TO
15 ASSESS WHAT'S THE RIGHT SIZE OF WORK FORCE. BUT WE HAVEN'T
16 SAID -- OBVIOUSLY THERE HAS TO BE SOME RULE OF REASON THERE,
17 BUT IT'S NOT LIMITED TO A YEAR OR TWO YEARS. IT'S OUR
18 INTENTION THAT PEOPLE WHO ARE THERE NOW AND WISH TO CONTINUE TO
19 BE EMPLOYED, THEY WILL NOT INVOLUNTARILY BE ASKED TO LEAVE.
20 THE COURT: YOU REFERRED TO A CONTRACT. YOU MEAN
21 THE LABOR MANAGEMENT CONTRACT?
22 THE WITNESS: NO. I THINK THE -- THERE IS A
23 NOT-LESS-THAN PERIOD THAT THE CHRONICLE INSISTED ON ON THE
24 EMPLOYMENT OF CHRONICLE EMPLOYEES.
25 THE COURT: I SEE, IN THE BUYOUT.
1816
BENNACK - DIRECT / CONNELL
1 THE WITNESS: BUT THAT DOESN'T HAVE ANYTHING TO DO
2 WITH THE EXAMINER PEOPLE THAT WE'VE GUARANTEED.
3 NO, SIR, LET ME RESTATE. THE CONTRACT OF SALE IN
4 WHICH THE CHRONICLE IS SOLD TO US, THEY STIPULATED THAT WE
5 WOULD CONTINUE TO EMPLOY THEIR EMPLOYEES IN EFFECT.
6 THE COURT: ALL RIGHT. SORRY FOR THE INTERRUPTION.
7 BY MR. CONNELL:
8 Q. MR. BENNACK, YOU HAVE IN FRONT OF YOU THE JOA. I BELIEVE
9 YOU DO.
10 A. I DO.
11 Q. YOU HAVE SOME FAMILIARITY WITH THE DOCUMENT, SIR?
12 A. YES, I DO.
13 Q. WOULD YOU LOOK ON PAGE 1 DOWN AT THE BOTTOM OF THE PAGE
14 THERE'S A "WHEREAS" CLAUSE THAT SAYS THE FOLLOWING:
15 "WHEREAS, CHRONICLE AND HEARST ARE CONVINCED
16 THAT ONLY BY THE CREATION OF A JOINT PRINTING
17 PRODUCING FACILITY IN WHICH THEIR RESPECTIVE
18 MECHANICAL, ADVERTISING, BUSINESS AND
19 CIRCULATION DEPARTMENTS ARE INTEGRATED..."
20 AND I'LL STOP THERE. WHAT DOES THAT CLAUSE MEAN TO
21 YOU, SIR?
22 A. ONLY BY PUTTING TOGETHER THOSE ENUMERATED ACTIVITIES INTO
23 ONE ACTIVITY, THAT'S WHAT THAT MEANS TO ME.
24 Q. AND WITHIN THAT INTEGRATED ORGANIZATION WILL THERE BE
25 COMPETITION IN THE COMMERCIAL --
1817
BENNACK - DIRECT / CONNELL
1 A. NO, I DON'T SEE HOW YOU CAN HAVE AN INTEGRATED ADVERTISING
2 AND CIRCULATION DEPARTMENT AND HAVE COMPETITION. NO, I DON'T
3 THINK THAT WAS ENVISIONED.
4 Q. LET ME ASK YOU IF YOU'D TURN IN THAT SAME DOCUMENT TO PAGE
5 47.
6 A. (WITNESS EXAMINES DOCUMENT.)
7 Q. AND IT'S 4.4 "TERM" AND DOWN INTO THAT CLAUSE I'M GOING TO
8 START READING AT THIS POINT:
9 "EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
10 PARAGRAPH 4.3, UPON THE TERMINATION OF THIS
11 AGREEMENT, WHETHER BY EXPIRATION OF THE TERM
12 HEREOF OR ANY EARLIER TERMINATION BY MUTUAL
13 CONSENT OF THE PARTIES OR OTHERWISE,
14 "(A) CHRONICLE AND HEARST WILL REASONABLY
15 COOPERATE IN THE FORMULATION AND ORDERLY
16 EXECUTION OF A JUST AND EQUITABLE PLAN WHICH
17 SHALL ENABLE EACH OF SAID PARTIES TO ENGAGE
18 INDEPENDENTLY OF PRINTING COMPANY IN THE
19 NEWSPAPER PUBLISHING BUSINESS; AND, (II), RESULT
20 IN THE DISSOLUTION OF PRINTING COMPANY AT SUCH
21 TIME AND IN SUCH MANNER AS WILL ACCOMPLISH THE
22 OBJECTIVE SET FORTH IN THE FOREGOING CLAUSE."
23 DO YOU HAVE THAT IN MIND, SIR? DOES THAT CLAUSE
24 MEAN THAT HEARST, IF THE JOA WERE TO RUN ITS COURSE, HAD AN
25 OBLIGATION TO PUBLISH A NEWSPAPER?
1818
BENNACK - DIRECT / CONNELL
1 A. I CAN'T IMAGINE IT DOES. THE ANSWER IS NO, I CAN'T
2 IMAGINE MY PREDECESSORS IN 1965 COMMITTING WHAT THEY WOULD DO
3 AS A BUSINESS DECISION WHENEVER THIS AGREEMENT EXPIRED, THE
4 FIRST TIME OF WHICH WOULD HAVE BEEN 1995. I DON'T READ IT THAT
5 WAY AT ALL.
6 Q. IS IT YOUR UNDERSTANDING THAT THE TWO PARTIES TO THE
7 AGREEMENT CAN MODIFY IT?
8 A. IN FACT, IN TRYING TO GET TO THE PAGE, I THINK THE BACK OF
9 THIS IS A NUMBER OF AMENDMENTS THAT HAVE IN FACT BEEN MADE TO
10 THE AGREEMENT BY CONSENT OF BOTH PARTIES.
11 THE COURT: LET ME ASK YOU, HOW MUCH LONGER DO YOU
12 THINK YOU HAVE ON YOUR DIRECT OF MR. BENNACK?
13 MR. CONNELL: I'M SORRY?
14 THE COURT: HOW MUCH LONGER DO YOU ESTIMATE YOUR
15 DIRECT OF MR. BENNACK WILL BE?
16 MR. CONNELL: PROBABLY A HALF AN HOUR.
17 THE COURT: ALL RIGHT. PROCEED. BUT WHEN YOU COME
18 TO A CONVENIENT BREAKING POINT --
19 MR. CONNELL: WE'LL BREAK FOR LUNCH?
20 THE COURT: -- WE'LL BREAK FOR LUNCH, YES.
21 BY MR. CONNELL:
22 Q. THIS JOA THAT'S IN FRONT OF YOU, IS IT STILL IN EFFECT?
23 A. YES, IT IS.
24 Q. WHEN WILL IT TERMINATE?
25 A. IT WILL TERMINATE ON THE CONCLUSION OF THE HEARST
1819
BENNACK - DIRECT / CONNELL
1 ACQUISITION OF THE CHRONICLE.
2 THE COURT: CONCEIVABLY IT COULD RUN 'TIL 2015;
3 COULD IT NOT?
4 THE WITNESS: IT COULD HAVE, YES, SIR, HAD THE
5 CHRONICLE EXTENDED AND HEARST ALSO EXTENDED, THAT WOULD HAVE
6 CREATED A TOTAL TERM OF 50 YEARS, WHICH WOULD HAVE BEEN TO '15,
7 YES, SIR.
8 THE COURT: THE CHRONICLE STILL HAS AN OPTION TO
9 EXTEND; DOES IT NOT?
10 THE WITNESS: YES, THEY DO.
11 THE COURT: AND THEY HAVE UNTIL 2002?
12 THE WITNESS: I THINK IT'S THREE YEARS BEFORE.
13 THERE'S SOME LANGUAGE IN HERE. I'D HAVE TO REREAD IT. IT
14 REQUIRES A NOTICE, BUT THEY DO -- I BELIEVE IT'S STILL IN
15 EFFECT.
16 THE COURT: SO THE CHRONICLE COULD EXTEND IT FOR
17 ANOTHER, WELL, 15 YEARS FROM NOW.
18 THE WITNESS: FROM NOW, YES, SIR, GIVEN THE FACT
19 THAT THEY HAVE NEVER IN MODERN TIME GIVEN ME ANY INDICATION
20 THAT THEY ARE GOING TO DO THAT. I WOULDN'T PUT A LOT OF
21 CONFIDENCE IN THAT PROBABILITY, BUT TECHNICALLY THEY COULD,
22 YES, SIR.
23 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
24
25
1820
BENNACK - DIRECT / CONNELL
1 BY MR. CONNELL:
2 Q. THEY COULD IF THE JOA WAS STILL IN EFFECT AT THE TIME?
3 A. IF IT WAS STILL IN EFFECT, OF COURSE.
4 Q. MR. BENNACK, YOU ARE FAMILIAR, ARE YOU, WITH THE EFFORTS
5 MADE BY THE HEARST CORPORATION TO SELL THE EXAMINER?
6 A. I AM.
7 Q. YOU RETAINED VERONIS SUHLER TO DO THAT?
8 A. YES, WE DID, THE INVESTMENT BANKING FIRM OF VERONIS
9 SUHLER.
10 Q. AND THE INITIAL EFFORT, MR. BENNACK, WOULD YOU JUST
11 DESCRIBE BRIEFLY THE SORT OF ASSETS THAT WERE INCLUDED IN WHAT
12 WAS BEING OFFERED FOR SALE?
13 A. YES. IT WAS WHAT WE UNDERSTOOD BASED ON PRECEDENT AND THE
14 SO-CALLED "BAXTER THEORY," NAMED AFTER ATTORNEY GENERAL -- OR
15 ASSISTANT ATTORNEY GENERAL BAXTER, SELLING IT OUTSIDE THE JOINT
16 AGREEMENT, WOULD BE ITS MASTHEAD, ITS EDITORIAL EMPLOYEES, IF
17 THE BUYER WANTED THOSE FEATURES, VARIOUS OTHER ISSUES OTHER
18 THAN THE HARD ASSETS THAT WERE A PART OF OUR SUBSEQUENT, WHICH
19 I SUPPOSE WOULD BE YOUR NEXT QUESTION FOR ME.
20 BUT THE GOODWILL NAME, EDITORIAL FEATURES, ET
21 CETERA, THOSE THINGS THAT I WOULD ARGUE ARE REALLY THE HEART OF
22 THE FRANCHISE AS CONTRASTED TO THE IRON THAT IS REPRESENTED IN
23 THE PHYSICAL FACILITIES.
24 Q. AT THE TIME THAT YOU INITIATED THE SALES EFFORT, WHAT WAS
25 YOUR EXPECTATION AS TO WHETHER OR NOT YOU WOULD FIND SOME BUYER
1821
BENNACK - DIRECT / CONNELL
1 AT ABOVE LIQUIDATION VALUE?
2 A. WELL, CURIOUSLY, ALTHOUGH THE HISTORY OF THESE BARRACKS
3 BEING OFFERED OUTSIDE THE JOA IS ONLY, I BELIEVE, ONE SALE,
4 ST. LOUIS, EVENTUATED. WE ALL THOUGHT THAT BECAUSE SAN
5 FRANCISCO IS SAN FRANCISCO THAT THERE MIGHT WELL BE A BUYER.
6 SOMEONE USED THE TERM -- I THINK DR. ROSSE REFERRED
7 TO IT AS "VANITY." I DON'T KNOW WHETHER VANITY IS THE ONLY
8 CATEGORY. BUT WE THOUGHT THAT SOMEONE -- THAT THERE COULD BE A
9 SITUATION THAT WOULD BE LIKE WHAT HAS OCCURRED IN WASHINGTON,
10 D.C. WITH THE REVEREND MOON OR I WOULD ARGUE IN SOME OTHER
11 SITUATIONS BY OWNERS WHO SIMPLY WANT TO OWN A NEWSPAPER, QUITE
12 WITHOUT REGARD TO ECONOMICS.
13 SO WE THOUGHT THERE MIGHT IN FACT BE A BUYER.
14 Q. AND CAN YOU NAME SOME OF THE -- SOME OF THE ENTITIES YOU
15 THOUGHT MIGHT BE INTERESTED?
16 A. WELL, WE THOUGHT THAT THERE WERE SOME LOCAL AND REGIONAL
17 PAPER. WE THOUGHT THAT MR. FANG MIGHT BE A BUYER. OBVIOUSLY,
18 WE WERE AWARE OF HIM AND HIS OPERATION HERE.
19 WE ALSO THOUGHT THAT SOME OF THE PAPERS IN THE -- IN
20 THE IMMEDIATE REGION, SUCH AS KNIGHT RIDDER OR THE SINGLETON
21 GROUP OR OTHERS, MIGHT SEE SOME WAY, AS MR. SINGLETON DID, I
22 THINK, WITH THE OAKLAND TRIBUNE, TO MAKE IT A PART OF SOMETHING
23 THAT THEY WERE DOING.
24 SO WE THOUGHT THERE WERE SOME PEOPLE WE -- WE ASKED
25 SOMETHING NORTH OF 80 DIFFERENT PROSPECTS. BUT THOSE ARE WHAT
1822
BENNACK - DIRECT / CONNELL
1 WE THOUGHT MIGHT IN FACT BE BUYERS.
2 Q. AND DID THAT FIRST SALES EFFORT RESULT IN ANY PROPOSALS TO
3 OFFERS FOR A LIQUIDATION?
4 A. NO. I LOSE TRACK A LITTLE BIT OF THE SEQUENCE, BUT EITHER
5 DURING THAT OR DURING THE SUBSEQUENT SEQUENCE, THE ONLY
6 PROPOSALS WE GOT WERE WHAT WOULD BE DESCRIBED AS "SUBSIDIZED
7 PROPOSALS."
8 Q. THERE WAS A SECOND SALES EFFORT; IS THAT RIGHT?
9 A. YES, THERE WAS.
10 Q. AND THE SECOND SALES EFFORT INCLUDED ADDITIONAL HARD
11 ASSETS; IS THAT CORRECT?
12 A. YES.
13 Q. AND DID THAT SECOND SALES EFFORT, MR. BENNACK, RESULT IN
14 TURNING UP A BUYER WHO WOULD PAY LIQUIDATION VALUE?
15 A. NO, IT DID NOT.
16 Q. WHEN THAT EFFORT HAD GOTTEN TO A -- A POINT, ARE YOU
17 FAMILIAR WITH THE THREE PROPOSALS THAT WERE BEING MADE TO
18 HEARST AT THAT TIME TO TAKE THE EXAMINER WITH A SUBSIDY?
19 A. YES, I AM.
20 Q. AND WHO WERE THE THREE PARTIES?
21 A. IT WAS THE FANG GROUP, IT WAS MR. REILLY AND A GROUP
22 CALLED LEUCADIA, WHO ARE, I BELIEVE, PEOPLE WHO DO TAKE ON THE
23 DISTRESSED ASSETS AND ATTEMPT TO REHABILITATE THEM.
24 Q. AND IN ASSESSING THE RELATIVE MERITS OF THE PROPOSALS THAT
25 YOU HAD, HOW DID YOU EVALUATE THOSE PROPOSALS? WHAT CRITERIA
1823
BENNACK - DIRECT / CONNELL
1 WERE YOU APPLYING TO LOOK AT THEM?
2 A. WELL, THE ESSENTIAL CRITERIA WAS WHAT WAS THE LOWEST COST
3 TO HEARST, WHICH I THOUGHT WAS A FAIRLY OBVIOUS THING TO LOOK
4 AT, JUST AS THE CHRONICLE WAS LOOKING AT WHAT WAS THE HIGHEST
5 PRICE TO THEM.
6 WE ALSO THOUGHT, AS WE WENT THROUGH IT, THAT,
7 FRANKLY, THE FANG GROUP, AS A LOCAL PUBLISHER OF NEWSPAPERS
8 AND -- WOULD HAVE PERHAPS MORE CREDIBILITY TO THOSE WHO WERE
9 INTERESTED -- AND THERE WERE MANY -- IN SEEING THE EXAMINER
10 CONTINUED PUBLISHED.
11 Q. WERE -- IN COMING TO A DECISION AS -- WELL, LET ME ASK YOU
12 A DIFFERENT QUESTION.
13 THIS TRANSACTION HAS BEEN DESCRIBED AS ONE THAT
14 INVOLVES A NEGATIVE PRICE FOR OBVIOUS REASONS.
15 A. YES.
16 Q. SINCE MONEY IS FLOWING FROM THE SELLER TO THE BUYER --
17 A. YES.
18 Q. -- RATHER THAN THE OTHER WAY.
19 IN DECIDING WHAT TO DO, DID YOU HAVE IN MIND ANY
20 OTHER TRANSACTIONS YOU WERE AWARE OF THAT INVOLVED THE NEGATIVE
21 PRICE?
22 A. I DID, ALTHOUGH I WOULD FIRST WANT TO SAY THAT THE CONCEPT
23 IS RATHER CONTRARY TO ANYTHING THAT I FEEL I HAVE EVER ENGAGED
24 IN. BUT IT BECAME OBVIOUS THAT WE NEEDED TO FIND A BUYER IF WE
25 COULD, AND I DID REMEMBER WHEN ALL WE HAD ON THE TABLE WERE
1824
BENNACK - DIRECT / CONNELL
1 THESE THREE PROPOSALS OF TWO FORMER CIRCUMSTANCES OR PRIOR
2 CIRCUMSTANCES WHERE I THINK SOMETHING LIKE THIS APPROXIMATING
3 THIS HAD BEEN DONE. ONE OF THOSE, INTERESTINGLY ENOUGH, WAS
4 WITH THE OAKLAND TRIBUNE.
5 REMEMBER THAT GANNETT WAS ATTEMPTING TO ACQUIRE KRON
6 AND, I THINK, HAD A DEAL TO ACQUIRE THE TELEVISION STATION.
7 THAT WOULD HAVE GIVEN THEM A VIOLATION OF FCC RULES UNDER THE
8 CROSS-OWNERSHIP PROVISIONS, AND THEY OWNED THE OAKLAND TRIBUNE
9 AND HAD TO DISPOSE OF IT. AND THEY SOLD THAT TO A MAN NAMED
10 ROBERT MAYNARD, WHO IS A DISTINGUISHED BLACK JOURNALIST NOW
11 DECEASED, AND THEY DID SO IN A SERIES OF LOANS, ALTHOUGH
12 ULTIMATELY MY -- AND I READ ALL OF THIS IN THE NEWSPAPERS AND
13 ELSEWHERE -- THAT THEY FORGAVE ABOUT $31 MILLION WORTH OF
14 LOANS. SO I BELIEVE THAT WAS CLEARLY A NEGATIVE PURCHASE
15 PRICE.
16 SIMILARLY, I WAS AWARE THAT THE NEW YORK DAILY NEWS
17 OWNED BY THE TRIBUNE COMPANY WAS TRYING TO FIND A WAY -- IT
18 ALSO OWNED A TELEVISION STATION IN THE NEW YORK CITY AREA. AND
19 ALTHOUGH THAT WAS GRANDFATHERED, THEY DIDN'T HAVE A
20 CROSS-OWNERSHIP PROBLEM -- THEY DID HAVE A COMMUNITY ATTITUDE
21 PROBLEM OF CLOSING DOWN A NEWSPAPER OF THE STORY AND HISTORY
22 AND IMPORTANCE OF THE DAILY NEWS AND THAT PAYMENTS WERE MADE TO
23 MR. ROBERT MAXWELL TO -- TO COVER CERTAIN COSTS THAT HE WOULD
24 HAVE.
25 AND I HAVE TRIED TO GO BACK AND LOOK AGAIN AT THE
1825
BENNACK - DIRECT / CONNELL
1 DETAILS OF IT. ABOUT ALL I KNOW IS THAT MONEY IN THE AMOUNT OF
2 ABOUT $60 MILLION WAS GIVEN TO HIM, AND NEITHER OF THOSE IS
3 IDENTICAL TO THIS SITUATION, BUT I GUESS ULTIMATELY WE GOT
4 COMFORTABLE WITH THE FACT THAT WHILE THIS WAS DIFFICULT, THAT
5 IT WAS A PART OF PURCHASE PRICE FOR US AND WOULD ALLOW US TO GO
6 AHEAD WITH THE TRANSACTION WHICH WE VERY MUCH WANTED TO DO.
7 MR. CONNELL: YOUR HONOR, WOULD THIS BE A CONVENIENT
8 PLACE TO BREAK?
9 THE COURT: THIS WOULD BE FINE.
10 MR. CONNELL: THANK YOU, SIR.
11 THE COURT: CAN WE BE BACK AND RESUME, SAY, AT 1:15?
12 IS THAT GOING TO PROVIDE COUNSEL WITH ENOUGH TIME?
13 MR. CONNELL: YES.
14 THE COURT: ALL RIGHT. FINE. WE WILL RESUME, THEN,
15 WITH FURTHER TESTIMONY OF THIS WITNESS AT 1:15.
16 MR. CONNELL: THANK YOU, SIR.
17 (LUNCHEON RECESS WAS TAKEN AT 12:05 A.M.)
18
19
20
21
22
23
24
25
1826
BENNACK - DIRECT / CONNELL
1 FRIDAY, MAY 12, 1999 1:15 P.M.
2 THE LAW CLERK: PLEASE REMAIN SEATED. COME TO
3 ORDER. THIS COURT IS NOW IN SESSION.
4 THE COURT: VERY WELL, MR. CONNELL. YOU MAY
5 CONTINUE YOUR EXAMINATION OF THIS WITNESS.
6 MR. CONNELL: THANK YOU, YOUR HONOR.
7 BY MR. CONNELL:
8 Q. MR. BENNACK, JUST TO RECAP WHERE WE LEFT OFF BEFORE THE
9 LUNCH BREAK, HEARST HAD MADE TWO EFFORTS TO FIND A BUYER FOR
10 THE EXAMINER AT OR ABOVE LIQUIDATION VALUE; IS THAT CORRECT?
11 A. YES, SIR.
12 Q. AND HAD BEEN UNSUCCESSFUL IN DOING THAT, CORRECT?
13 A. THAT'S CORRECT.
14 Q. AND NOW YOU HAD IN FRONT OF YOU NEGATIVE PURCHASE PRICE
15 OFFERS, CORRECT?
16 A. THAT'S CORRECT.
17 Q. IN CONSIDERING WHAT TO DO ABOUT THAT, WHAT DID YOU
18 UNDERSTAND WAS THE SITUATION RELATIVE TO THE JUSTICE DEPARTMENT
19 CONCERNING OUR PROPOSED PURCHASE OF THE CHRONICLE?
20 A. WELL, FOR -- FOR WHATEVER REASON I UNDERSTOOD THAT WE
21 WEREN'T BEING -- WE WEREN'T BEING GIVEN THE GREEN LIGHT. I
22 PERSONALLY, AS I HAVE PREVIOUSLY STATED -- TESTIFIED AND STATED
23 BELIEVED THAT THE BAXTER TEST OF ST. LOUIS WOULD HAVE APPLIED.
24 SO I WAS, FRANKLY, SURPRISED AT THE CONCLUSION OF THAT THAT WE
25 DIDN'T HAVE A GREEN LIGHT.
1827
BENNACK - DIRECT / CONNELL
1 AND THEN FOLLOWING THE SO-CALLED "BROADER EFFORT"
2 INVOLVING THE ASSETS, PHYSICAL ASSETS, I CONTINUED TO BE
3 SURPRISED. AND I WAS BEING TOLD BY MY ASSOCIATES WHO WERE
4 WORKING THIS MATTER --
5 MR. ALIOTO: I OBJECT TO WHAT HE WAS BEING TOLD BY
6 ANYONE, YOUR HONOR, AS HEARSAY.
7 MR. CONNELL: YOU CAN JUST --
8 THE COURT: IT GOES TO THE WITNESS' STATE OF MIND.
9 OBJECTION OVERRULED.
10 MR. CONNELL: YES.
11 THE WITNESS: I DON'T KNOW HOW ELSE I COULD TELL YOU
12 WHAT MY STATE OF MIND WAS. BUT I WAS BEING TOLD THAT IT WAS
13 HIGH RISK OR SOME PROSPECT THAT SOMEONE WOULD CONSIDER
14 INSTITUTING LITIGATION IN THIS MATTER, AND THAT WHILE I WAS
15 ALSO BEING ASSURED THAT WE WERE ON THE RIGHT SIDE OF THE CASE
16 LEGALLY THAT WE HAD A TIME PROBLEM THAT WAS VERY SERIOUS.
17 BY MR. CONNELL:
18 Q. WHAT WAS THE TIME PROBLEM?
19 A. THE TIME PROBLEM WAS -- REMEMBER, NOW, THIS HAD STARTED ON
20 AUGUST THE 6TH AND HAD CONTINUED TO GO ON -- WE ARE NOW
21 SOMETIME IN MARCH -- THAT WE ARE FILING PAPERS BACK AND FORTH
22 AND SOME OF OUR PEOPLE ARE BEING DEPOSED, ET CETERA. AND THE
23 ORIGINAL CONTRACT WITH THE CHRONICLE CALLED FOR A SUNSET DATE
24 EARLY IN MAY -- I DON'T REMEMBER WHETHER IT WAS THE 2ND OF MAY
25 OR THE 1ST OF MAY BUT VERY EARLY IN MAY.
1828
BENNACK - DIRECT / CONNELL
1 Q. IT WOULD HAVE PASSED BY NOW?
2 A. IT WOULD HAVE PASSED BY NOW, YES, THIS WEEK, I SUPPOSE --
3 OR LAST WEEK, ACTUALLY.
4 IN ANY CASE, I WAS CONCERNED THAT THE DELAY HERE
5 WOULD, IN EFFECT, POCKET VETO THIS TRANSACTION, WHICH CERTAINLY
6 I DID NOT WANT TO HAPPEN.
7 AND SO I SHOULD SAY, PARENTHETICALLY, THAT I
8 SUBSEQUENTLY BECAME AWARE THAT THERE IS A PROVISION THAT IF
9 THERE HAD BEEN AN INJUNCTION THAT THERE WAS SOME TIME TO BE
10 ADDED BUT THAT THAT WOULD START TO RUN AND STILL WOULD BE --
11 AND I THINK WE ARE UNDER THAT PARTICULAR TIME PRESS RIGHT
12 NOW -- SOMETIME IN JUNE, LATE IN JUNE. SO WE ARE OUT OF TIME.
13 AND WE -- DESPITE OUR BELIEF AND THE LONG YEARS OF
14 EFFORT THAT WENT INTO THIS, WE LOOKED AS IF WE WERE NOT GOING
15 TO BE ABLE TO GET THIS TRANSACTION CLOSED WITHOUT SOMEONE
16 CONTINUING TO PUBLISH THE EXAMINER. AND THAT'S WHAT FINALLY
17 PERSUADED ME ON THE ADVICE OF MY ASSOCIATES TO LOOK AT THESE
18 OPTIONS SINCE THEY HAD BEEN LOOKED AT AS A -- AS A WAY TO GO BY
19 SOME OF THE REGULATORS INVOLVED.
20 Q. AND THAT LED TO YOUR DECISION TO APPROVE THE TRANSACTION
21 THAT WOULD TRANSFER THE EXAMINER TO THE FANG FAMILY?
22 A. YES, IT DID. YES, IT DID. AS I PREVIOUSLY STATED, I
23 THOUGHT OF IT AS ADDITIONAL PURCHASE PRICE AND THOUGHT THAT IT
24 WAS THE BETTER OF THE OPTIONS BEFORE US.
25 Q. AND FROM YOUR POINT OF VIEW HOW DO YOU -- HOW DO YOU
1829
BENNACK - CROSS / ALIOTO
1 CONSIDER THE 66 MILLION? IS IT A SEPARATE FUND OR IS IT PART
2 OF THE MAJOR TRANSACTIONS?
3 A. WELL, IN THE END IT WOULD INCREASE OUR COST OF COMPLETING
4 THIS TRANSACTION. IT SEEMS TO ME THAT IT'S JUST ADDITIVE TO
5 THE PRESENT VALUE OF THAT AMOUNT -- WHICH I DON'T HAVE IN MY
6 HEAD -- IS ADDITIVE TO OUR PURCHASE PRICE.
7 MR. CONNELL: ALL RIGHT, SIR.
8 YOUR HONOR, I HAVE NO FURTHER QUESTIONS.
9 THE COURT: VERY WELL. DO ANY OTHER DEFENDANTS WISH
10 TO EXAMINE THE WITNESS?
11 MR. HOCKETT: WE HAVE NO QUESTIONS AT THIS TIME.
12 MR. ROSCH: NO, YOUR HONOR.
13 THE COURT: VERY WELL.
14 MR. ALIOTO, CROSS-EXAMINE?
15 MR. ALIOTO: YES, YOUR HONOR. THANK YOU.
16 CROSS-EXAMINATION
17 BY MR. ALIOTO:
18 Q. MAY IT PLEASE YOUR HONOR.
19 I THINK THAT YOU MENTIONED ON YOUR EXAMINATION, ON
20 YOUR DIRECT EXAMINATION, THAT THE BASIC BEGINNING OF THE HEARST
21 CORPORATION WAS THE ESTABLISHMENT, REALLY, OF THE SAN FRANCISCO
22 EXAMINER IN THE HANDS OF WILLIAM RANDOLPH HEARST IN 1887.
23 A. AS WE DATE IT, ALTHOUGH THE HEARST INTERESTS WERE HERE IN
24 MINING AND ELSEWHERE IN CALIFORNIA. BUT THAT'S WHAT WE
25 CONSIDERED THE START OF THE COMPANY AS WE KNOW IT.
1830
BENNACK - CROSS / ALIOTO
1 Q. OKAY. AND AT THE TIME, OF COURSE, HE WAS A VERY YOUNG
2 MAN.
3 A. THAT IS CORRECT.
4 Q. LATER ON HE WENT TO NEW YORK, AS I UNDERSTAND IT.
5 A. YES, SIR.
6 Q. HE RAN FOR MAYOR TWICE.
7 A. I KNOW HE RAN. I HAD FORGOTTEN IT WAS TWICE.
8 Q. DO YOU THINK IT WOULD BE FAIR TO CALL HIM A TWO-TIME
9 FAILED MAYORAL CANDIDATE?
10 A. IF YOU CHOOSE. THAT WOULDN'T BE MY CHARACTERIZATION.
11 Q. I DON'T CHOOSE IT. I AM ASKING YOU IF YOU THINK IT WOULD
12 BE FAIR TO CALL HIM THAT.
13 A. IF HE RAN FOR MAYOR UNSUCCESSFULLY TWICE, THAT'S PROBABLY
14 A FAIR COMMENT.
15 Q. DO YOU HAVE IN FRONT OF YOU EXHIBIT 983?
16 EXIT 983 IS A DOCUMENT WHICH WAS SUBMITTED WITH THE
17 TESTIMONY OF MR. FALK. IT IS A HEARST DOCUMENT. AND IT'S
18 HEADNOTED "JOA AND A.M. ONLY, P&L COMPARISON."
19 I BELIEVE YOU WERE JUST QUESTIONED ABOUT IT BY YOUR
20 COUNSEL.
21 A. JUST A MOMENT, MR. ALIOTO, PLEASE. I DON'T SEE IT. I DO
22 THINK THAT --
23 Q. ALL RIGHT. LET ME HELP YOU.
24 A. -- IT WAS SHOWN TO ME BUT I DON'T KNOW THAT I RETAINED IT.
25 MR. ALIOTO: MAY I APPROACH THE WITNESS?
1831
BENNACK - CROSS / ALIOTO
1 THE WITNESS: I HAVE IT, 0983.
2 BY MR. ALIOTO:
3 Q. CORRECT.
4 A. I'M SORRY.
5 MR. SHULMAN: THEY ARE PUTTING IT UP.
6 MR. ALIOTO: WHO IS PUTTING IT UP?
7 MR. HALLING: DO YOU WANT IT?
8 MR. ALIOTO: ALL RIGHT. I THOUGHT WE HAD IT. ALL
9 RIGHT. CAN YOU PUT THAT UP? OKAY.
10 BY MR. ALIOTO:
11 Q. MAYBE YOU CAN ZERO IN ON THE PART HERE ABOUT THE -- UNDER
12 THE EXPENSES, THE PAYROLL.
13 THAT'S RIGHT. THANK YOU VERY MUCH. YOU ARE VERY
14 KIND.
15 ALL RIGHT. NOW, AS I UNDERSTAND YOUR TESTIMONY
16 TODAY, THIS REDUCTION, THIS SAVINGS OR SO-CALLED "SAVINGS"
17 ABOUT SHUTTING DOWN THE EXAMINER OF 8. -- $8,469,000 FOR
18 CUTTING PAYROLL PERSONNEL WITH REGARD TO CIRCULATION AND
19 PRODUCTION AND THEIR PENSIONS AMOUNTING TO 2.475, SO A TOTAL OF
20 ABOUT 10.8 OR 9.
21 THIS IS NO LONGER VALID, ACCORDING TO YOU; IS THAT
22 RIGHT?
23 A. MR. ALIOTO, THESE ARE NOT MY FIGURES. WHAT I STATED
24 WAS -- AND I WILL RESTATE -- THAT WE HAVE ASSURED THE EMPLOYEES
25 THERE WILL BE NO INVOLUNTARY LAYOFFS. THAT'S ALL.
1832
BENNACK - CROSS / ALIOTO
1 Q. OKAY. OKAY. SO THAT ANYONE WHO PUT THIS DOCUMENT IN AND
2 TRIED TO USE IT TO EXPRESS AN OPINION OR SOMETHING, AT LEAST SO
3 FAR AS THIS $10.9 MILLION IS CONCERNED, THAT IS OUT OF THE
4 PICTURE NOW; IS THAT RIGHT?
5 A. IT WOULD DEPEND ON WHAT YOU DID WITH THE REVENUE LINES AND
6 MANY OTHER FACTORS. BUT WE DO NOT PLAN THAT IMMEDIATE
7 REDUCTION OF THOSE PEOPLE.
8 Q. OKAY. SO WE CAN ELIMINATE THAT FROM ANYTHING THAT WILL
9 POSSIBLY HAPPEN IN THIS CASE IF THE EXAMINER IS ELIMINATED; IS
10 THAT RIGHT?
11 A. I DIDN'T SAY THAT. THAT WOULD -- THAT'S YOUR WORDS. THAT
12 IS ONE OF MANY ASSUMPTIONS IN THIS PRO FORMA, WHICH I WILL
13 STATE AGAIN IS NOT MINE. SO I DON'T WANT TO RATIFY THOSE
14 NUMBERS ANY MORE THAN I WOULD RATIFY ANY OTHERS. WE DID OUR
15 OWN STUDIES OF WHAT WOULD OCCUR. AND THIS IS NOT MINE.
16 I HEAR WHAT YOU ARE SAYING, BUT I THINK THAT WOULD
17 TO -- TO CHANGE ONE PART WITHOUT UNDERSTANDING ALL OF THE
18 COMPONENTS, WHAT ONE THOUGHT WAS GOING TO BE THE OUTCOME ON
19 CIRCULATION -- MANY OTHER MATTERS WOULD BE NOT A FAIR
20 CHARACTERIZATION.
21 Q. WELL, LET'S FIND OUT EXACTLY WHAT YOU INTEND TO DO, THEN.
22 IF IN FACT THE EXAMINER IS EITHER SOLD OR
23 ELIMINATED, DO YOU INTEND TO FIRE ANY OF THESE PEOPLE AND SAVE
24 $8.4 MILLION? EITHER YOU DO OR YOU DO NOT.
25 A. WE DO NOT INTEND TO FIRE ANY OF THOSE PEOPLE.
1833
BENNACK - CROSS / ALIOTO
1 Q. THANK YOU.
2 AND ALSO WITH REGARD TO THEIR PENSIONS, YOU DO NOT
3 INTEND TO CUT THOSE OFF AND SAVE THAT MONEY, EITHER,
4 $2.4 MILLION; IS THAT RIGHT?
5 A. THOSE WHO WOULD CONTINUE TO BE EMPLOYED WOULD HAVE
6 PENSIONS, I ASSUME.
7 Q. OKAY. ALL RIGHT.
8 NOW, IN THIS DOCUMENT DID YOU KNOW THAT IT WAS ALSO
9 REPRESENTED -- IF WE COULD GO TO THE TOP OF THE DOCUMENT, IF
10 YOU WOULD BE SO GOOD ENOUGH TO DO THAT FOR US.
11 ON THE TOP OF THE DOCUMENT WITH REGARD TO REVENUES,
12 DO YOU SEE THIS?
13 A. I SEE THE TOP.
14 Q. OKAY. AND -- AND YOU WILL SEE THAT UNDER THIS ANALYSIS
15 THAT WAS MADE IT SHOWS THAT WHAT THE REVENUES ARE THROUGH
16 ADVERTISING -- AND IT GOES THROUGH THE DIFFERENT ADVERTISING
17 DEALS. AND THEN IT HAS CERTAIN NUMBERS UNDER THE PRO FORMA.
18 THEN IT HAS OTHER NUMBERS WITH THE EXAMINER CLOSED.
19 DO YOU SEE THAT?
20 A. YOU MEAN, A.M. ONLY?
21 Q. YES.
22 A. YES, YES, I SEE.
23 Q. RIGHT. OKAY.
24 SO THE IDEA HERE ON THIS DOCUMENT WAS THAT EVEN
25 THOUGH THE EXAMINER WOULD BE CLOSED AND EVEN THOUGH THE
1834
BENNACK - CROSS / ALIOTO
1 CIRCULATION WOULD BE LESS, ADVERTISERS WOULD STILL BE PAYING
2 THE SAME AMOUNT OF MONEY TO THE SAN FRANCISCO NEWSPAPER
3 ASSOCIATION OR THE CHRONICLE. DID YOU KNOW THAT?
4 A. THAT'S NOT WHAT WE HAVE PLANNED, BUT I -- IF I MAY, I
5 WOULD LIKE TO EXPLAIN MY VIEW ON THAT.
6 Q. WELL, I THINK -- ALL RIGHT. WELL, IF YOU ARE GOING TO USE
7 THIS DOCUMENT TO MAKE SOME CLAIM ABOUT THE EXAMINER BEING A
8 FAILING COMPANY, THAT'S ONE THING.
9 WILL YOU ADOPT THIS DOCUMENT?
10 A. WILL I ADOPT IT?
11 Q. YES.
12 A. WHAT DOES THAT MEAN?
13 Q. WELL, WILL YOU USE IT TO MAKE ANY OPINIONS OF YOURS?
14 A. NO.
15 Q. OKAY. THEN WE DON'T -- WE ARE FINISHED WITH THE DOCUMENT.
16 THANK YOU.
17 I THINK THAT YOU SAID -- SO THAT WE COULD BE CLEAR
18 FROM THE BEGINNING, IS IT CORRECT THAT YOU WOULD STICK WITH THE
19 JOA AT LEAST UNTIL 2005 IF -- IF THE COURT SHOULD FIND THAT
20 YOU, HEARST CORPORATION, WOULD NOT BE ABLE TO PURCHASE THE
21 CHRONICLE?
22 A. I DON'T THINK I UNDERSTOOD THAT, MR. ALIOTO --
23 Q. WOULD YOU STICK WITH IT OR NOT?
24 A. WE HAVEN'T MADE THAT DECISION.
25 Q. WELL, IF IT COMES ABOUT THAT YOU ARE NOT ALLOWED --
1835
BENNACK - CROSS / ALIOTO
1 "YOU," MEANING THE HEARST CORPORATION -- ARE NOT ALLOWED TO
2 PURCHASE THE CHRONICLE, ISN'T IT CORRECT THAT ABSENT THE
3 TRANSACTION THAT YOU WOULD STAY WITH THE JOA?
4 A. WE HAVE NOT MADE THAT DECISION.
5 Q. YOU HAVE NOT?
6 A. NO, WE HAVE NOT.
7 Q. YOU ARE SURE ABOUT THAT?
8 A. I AM SURE ABOUT THAT.
9 Q. I WANT TO SHOW YOU YOUR DEPOSITION.
10 YOU REMEMBER YOUR DEPOSITION WAS TAKEN?
11 A. YES, I DO.
12 Q. AND IT WAS TAKEN IN NEW YORK ON OR ABOUT APRIL 26TH, 2000,
13 WAS IT NOT?
14 A. YES, IT WAS.
15 Q. AND YOU WERE UNDER OATH AT THE TIME, WERE YOU NOT?
16 A. I WAS.
17 Q. I WANT TO DIRECT YOUR ATTENTION TO PAGE 35 OF YOUR
18 DEPOSITION, BEGINNING ON LINE 14. I WILL ASK YOU, SIR, WHETHER
19 OR NOT YOU WERE ASKED THESE QUESTIONS AND YOU GAVE THESE
20 ANSWERS.
21 MAY I APPROACH THE WITNESS, YOUR HONOR?
22 THE COURT: DO WE HAVE THE ORIGINAL?
23 MR. ALIOTO: THE ORIGINAL, AS I UNDERSTAND, IS WITH
24 YOUR HONOR.
25 HAS IT ALREADY BEEN SUBMITTED?
1836
BENNACK - CROSS / ALIOTO
1 MR. CONNELL: I OBJECT TO THE QUESTION AS NOT
2 IMPEACHMENT.
3 (PAUSE IN THE PROCEEDINGS.)
4 MR. ALIOTO: HEARST HAS THE ORIGINAL, WE UNDERSTAND,
5 YOUR HONOR.
6 MAY I APPROACH THE WITNESS, YOUR HONOR?
7 THE COURT: YES, YOU MAY.
8 MR. CONNELL: MAY I INQUIRE OF MR. ALIOTO, IS HE
9 USING THIS TO REFRESH OR IMPEACH?
10 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
11 THE COURT: WELL, MR. BENNACK IS A PARTY WITNESS.
12 MR. CONNELL: I UNDERSTAND, YOUR HONOR.
13 THE COURT: UNDER RULE 32 THE DEPOSITION CAN BE USED
14 FOR ANY PURPOSE.
15 MR. CONNELL: YES, SIR.
16 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
17 THE COURT: YES, YOU MAY.
18 BY MR. ALIOTO:
19 Q. I HAND YOU WHAT IS YOUR DEPOSITION THAT WAS TAKEN ON
20 APRIL 26TH, 2000. I DIRECT YOUR ATTENTION RESPECTFULLY TO PAGE
21 35 OF YOUR DEPOSITION AND IN PARTICULAR TO -- BEGINNING THE
22 QUESTION ON LINE 14.
23 WE ARE GOING TO PLAY THAT, AND THEN I AM GOING TO
24 ASK YOU WHETHER OR NOT YOU GAVE THIS TESTIMONY -- THIS ANSWER
25 TO THIS QUESTION.
1837
BENNACK - CROSS / ALIOTO
1 WOULD YOU RUN IT, PLEASE?
2 "Q. IF IT COMES ABOUT THAT YOU ARE NOT
3 ALLOWED, YOU MEANING THE HEARST CORPORATION, YOU
4 ARE NOT ALLOWED TO PURCHASE THE CHRONICLE, HAVE
5 YOU HAD ANY OR MADE ANY CONSIDERATIONS AS TO
6 WHETHER OR NOT YOU WOULD CONTINUE WITH THE JOA?
7 "A. WE HAVE CERTAINLY THOUGHT, ABSENT THE
8 TRANSACTION, THAT WE WOULD STAY IN THE JOA UNTIL
9 ITS CONCLUSION, BUT WE INTEND AND HOPE TO
10 COMPLETE THIS TRANSACTION AND HAVE NOT MADE ANY
11 DEFINITIVE DECISIONS ABOUT ANYTHING OTHER THAN
12 TRYING TO GET THE TRANSACTION COMPLETED."
13 MR. ALIOTO: THAT'S ENOUGH. THANK YOU. THAT'S
14 ENOUGH.
15 BY MR. ALIOTO:
16 Q. DID YOU GIVE THAT ANSWER TO THAT QUESTION?
17 A. I DID.
18 Q. DID YOU IN FACT STATE UNDER OATH AT THAT TIME THAT YOU
19 INTENDED TO -- THAT YOU WOULD STAY IN THE JOA UNTIL ITS
20 CONCLUSION?
21 A. NO.
22 MR. CONNELL: OBJECTION.
23 THE WITNESS: I STATED THAT HAD THERE NOT BEEN A
24 TRANSACTION, WE WOULD -- WE THOUGHT WE WOULD STAY. THAT'S WHAT
25 IT SAYS. AND THERE WAS A TRANSACTION, AND I THINK IF YOU READ
1838
BENNACK - CROSS / ALIOTO
1 THE REST OF MY TESTIMONY, I SAY I AM NOT GOING TO GET INTO A
2 HYPOTHETICAL. IF YOU GO ON TO THE NEXT OF IT:
3 "Q. WOULD THERE BE ANY REASON WHY YOU WOULD
4 SIMPLY QUIT," ET CETERA?
5 AND I SAY: "THAT'S HYPOTHETICAL AND I DON'T
6 WANT TO ANSWER HYPOTHETICAL QUESTIONS."
7 Q. I ASK YOU AGAIN, SIR, DID YOU NOT TESTIFY UNDER OATH THAT
8 IN ABSENCE OF THE PURCHASE OF THE CHRONICLE THAT YOU WOULD STAY
9 IN THE JOA?
10 MR. CONNELL: OBJECTION.
11 THE COURT: SUSTAINED.
12 BY MR. ALIOTO:
13 Q. IF THIS COURT SHOULD FIND THAT THE HEARST CORPORATION IS
14 NOT ALLOWED TO PURCHASE THE CHRONICLE, WILL YOU STAY IN THE
15 JOA?
16 A. I DON'T KNOW, MR. ALIOTO.
17 Q. SO IF YOU TESTIFIED BEFORE THAT ONE OF THE CONSIDERATIONS
18 MIGHT BE TO SHUT DOWN THE PAPER, IS THAT NO LONGER THE CASE?
19 A. I BEG YOUR PARDON?
20 Q. IF YOU TESTIFIED BEFORE, BEFORE LUNCH, THAT YOU MIGHT
21 CONSIDER SHUTTING DOWN THE EXAMINER, IS THAT NOT THE CASE?
22 A. WE WOULD CONSIDER -- WHEN YOU DON'T HAVE A DECISION, YOU
23 CONSIDER ALL POSSIBLE OUTCOMES. SO, YES, WE WOULD CONSIDER.
24 Q. OKAY. SO THAT IS IT YOUR TESTIMONY, THEN, THAT EVEN
25 THOUGH THE JOA IS DESIGNED RIGHT NOW TO CONTINUE TO 2005, THAT
1839
BENNACK - CROSS / ALIOTO
1 IF IN FACT YOU ARE NOT ALLOWED TO PURCHASE THE CHRONICLE, YOU
2 ARE NOT SURE WHETHER YOU WILL CONTINUE TO 2005. IS THAT THE
3 TESTIMONY?
4 A. I HAVE SAID WE HAVEN'T DECIDED WHAT WE WILL DO IN THAT
5 HYPOTHETICAL SITUATION.
6 Q. AND WILL YOU COOPERATE UNDER THE JOA TO ENABLE THE
7 CHRONICLE TO BE ABLE TO PUBLISH AN INDEPENDENT PAPER?
8 A. WOULD WE COOPERATE UNDER THE JOA?
9 IF THE LANGUAGE THAT EXISTS WERE NOT AMENDED AND WE
10 WERE IN THE JOA TO THE END OF IT, WE WOULD DO WHAT WE ARE
11 COMMITTED TO IN THE LANGUAGE.
12 Q. DO YOU UNDERSTAND THAT IF THE HEARST CORPORATION CONTINUED
13 UNDER THE JOA THAT THE EXAMINER IS PROJECTED TO MAKE OVER
14 $20 MILLION A YEAR FROM THIS DAY FORWARD TO THE END?
15 A. HEARST IS PROJECTED TO MAKE THAT AMOUNT. I DON'T THINK
16 IT'S ACCURATE TO SAY THE EXAMINER IS PROJECTED TO MAKE THAT
17 AMOUNT.
18 Q. YES. YOU ARE AWARE OF THAT FACT, HOWEVER, HEARST IS TO
19 MAKE THAT AMOUNT?
20 A. YES, I AM.
21 Q. YOU ALSO SAID THAT ONE OF THE THINGS THAT YOU WOULD DO IF
22 YOU PURCHASED THE CHRONICLE WOULD BE TO MAKE IT A WORLD-CLASS
23 NEWSPAPER?
24 A. THAT'S OUR INTENTION.
25 Q. IS THE EXAMINER A WORLD-CLASS NEWSPAPER?
1840
BENNACK - CROSS / ALIOTO
1 A. I THINK THE EXAMINER IS A GOOD NEWSPAPER. I THINK BOTH
2 NEWSPAPERS ARE ENCUMBERED BY THE SHARING OF REVENUE, AND THAT
3 WHILE THE EXAMINER HAS A SUBSIDY FROM THE CHRONICLE, IT'S NOT
4 LARGE ENOUGH TO DO WHAT WE HOPE TO DO IN THIS TRANSACTION.
5 Q. WOULD YOU PLEASE LISTEN TO THE QUESTION AND ANSWER THE
6 QUESTION AND THEN GIVE ANY EXPLANATION THAT YOU WISH IF YOU
7 FEEL THAT IT'S NECESSARY?
8 A. ALL RIGHT. OKAY.
9 Q. THE QUESTION IS, IS THE EXAMINER A WORLD-CLASS NEWSPAPER?
10 A. NO, I DON'T BELIEVE IT IS.
11 Q. IS THE REASON THAT IT IS NOT A WORLD-CLASS NEWSPAPER --
12 ARE THE REPORTERS THE REASON WHY IT IS NOT A WORLD-CLASS
13 NEWSPAPER?
14 A. NO.
15 Q. IS THE EDITORIAL STAFF THE REASON WHY IT IS NOT A
16 WORLD-CLASS NEWSPAPER?
17 A. NO.
18 Q. IS ITS LAYOUT OR ITS ART THE REASON WHY IT IS NOT A
19 WORLD-CLASS NEWSPAPER?
20 A. NO.
21 Q. IS IT THE -- ANY OF THE EMPLOYEES -- ARE ANY OF THE
22 EMPLOYEES THE REASON WHY IT IS NOT A WORLD-CLASS NEWSPAPER?
23 A. NO.
24 Q. WAS IT EVER A WORLD-CLASS NEWSPAPER?
25 A. EVER IS A LONG TIME. IT HAS BEEN HERE A HUNDRED YEARS. I
1841
BENNACK - CROSS / ALIOTO
1 THINK IT WAS.
2 Q. SO IT LOST IT AT SOMETIME, YOU THINK?
3 A. WELL, I THINK THAT THE COMPETITIVE PRESSURES ABOUT WHICH
4 YOU HEARD A GREAT DEAL TOOK A TOLL ON BOTH PAPERS AND CERTAINLY
5 THE JOA DID.
6 Q. AT THE TIME THAT IT ENTERED INTO THE JOA, ARE YOU OF THE
7 OPINION THAT IT WAS A WORLD-CLASS NEWSPAPER AT THAT TIME?
8 A. I DON'T HAVE AN OPINION ON THAT, MR. ALIOTO.
9 Q. YOU KNEW, DID YOU NOT, THAT THE HEARST CORPORATION WAS
10 SUFFERING A DEFICIT WITH REGARD TO THEIR NEWSPAPERS WHEN THEY
11 ENTERED INTO THE JOA?
12 A. YES, SIR, I DO KNOW THAT.
13 Q. AND YOU UNDERSTOOD THAT THAT WAS THE REASON WHY YOU
14 ENTERED INTO THE JOA?
15 A. YES, SIR.
16 Q. YOU KNOW MR. GOULD, CHARLES GOULD, WHO WAS THE PUBLISHER
17 AT THE TIME?
18 A. I DID KNOW MR. GOULD, YES.
19 Q. OKAY. AND SO THE PURPOSE OF THE -- ENTERING INTO THE JOA
20 WAS BECAUSE OF THE BELIEF THAT THE -- THE BELIEF BY THE HEARST
21 CORPORATION THAT THE SAN FRANCISCO EXAMINER, AMONG OTHERS,
22 WOULD NOT BE ABLE TO SURVIVE?
23 A. OH, I THINK THERE WAS THAT DEFINITE CONCERN, YES.
24 Q. AND THAT WAS THE REASON FOR ENTERING INTO THE JOA?
25 A. YES.
1842
BENNACK - CROSS / ALIOTO
1 Q. AND THAT CONCERN IS THE SAME CONCERN THAT EXISTS TODAY?
2 IS THAT WHAT YOU ARE SAYING?
3 A. I AM -- YOU WILL HAVE TO ASK THE QUESTION -- I DON'T
4 UNDERSTAND THE QUESTION.
5 Q. WERE YOU OF THE OPINION OR DID YOU HAVE THE KNOWLEDGE OR
6 VIEW OR UNDERSTANDING THAT THE ONLY WAY IN WHICH THE PAPER --
7 THE SAN FRANCISCO EXAMINER COULD SURVIVE BEGINNING IN 1964 WAS
8 THROUGH A JOA?
9 A. YES.
10 Q. DO YOU BELIEVE THAT THE ONLY WAY THAT THE SAN FRANCISCO
11 EXAMINER CAN SURVIVE TODAY IS THROUGH A JOA?
12 A. I BELIEVE THAT IT IS A FAILING NEWSPAPER TODAY, AND I
13 BELIEVE THAT ABSENT HUGE DEFICITS THAT IT CAN'T SURVIVE OUTSIDE
14 THE JOA.
15 Q. MY QUESTION, AGAIN, WAS INSIDE THE JOA. SO IF YOU WILL
16 PLEASE CONCENTRATE --
17 A. ALL RIGHT. I WILL TRY TO LISTEN BETTER TO THE QUESTION.
18 Q. ALL RIGHT. IF YOU WOULD.
19 ARE YOU OF THE VIEW TODAY THAT THE ONLY WAY THAT THE
20 SAN FRANCISCO EXAMINER CAN SURVIVE IS THROUGH THE JOA?
21 A. IN ITS PRESENT FORM AS A FULL-SERVICE NEWSPAPER, MY ANSWER
22 IS YES WITH THAT MODIFIER.
23 Q. DO YOU INTEND OR HAVE YOU EVER INTENDED TO COMPETE AFTER
24 THE JOA WAS TERMINATED?
25 A. WE HAVE -- WE HAVE CONSIDERED THAT THROUGH THE ENTIRE
1843
BENNACK - CROSS / ALIOTO
1 PERIOD. WE HAVE NEVER MADE A DECISION TO DO THAT.
2 Q. HAVE YOU EVER ADVISED THE CHRONICLE OR ANY REPRESENTATIVE
3 OF THE CHRONICLE THAT YOU INTENDED TO COMPETE HEAD TO HEAD WITH
4 THEM AT THE CONCLUSION OF THE JOA?
5 A. WE HAVE SAID THAT WE WANT TO CONTINUE TO BE A PUBLISHER IN
6 THE SAN FRANCISCO MARKET. THEY ARE AWARE OF THE -- UNDER WHAT
7 CIRCUMSTANCES WE HAVE TALKED ABOUT DOING THAT, AND I MAKE NO
8 BONES ABOUT THE BELIEF -- OR ABOUT THE FACT THAT WE HAVE
9 CERTAINLY WANTED TO LEAVE THEM WITH THE IMPRESSION THAT WE WERE
10 NOT JUST GOING TO LIE BY THE ROAD AND BE ROAD KILL IN 2005.
11 Q. AND WHEN YOU SAY "LEAVE THEM WITH THE IMPRESSION," DO YOU
12 MEAN THAT YOU REALLY DIDN'T MEAN IT?
13 A. NO, I MEANT IT.
14 Q. OKAY. SO YOU MEANT, IN FACT, WHEN YOU TALKED TO THE
15 CHRONICLE AND YOU TOLD THEM THAT YOU WERE GOING TO COMPETE
16 AGAINST THEM HEAD TO HEAD, AFTER THE JOA IN 2005, YOU MEANT IT.
17 IS THAT YOUR TESTIMONY?
18 A. I THINK YOU WILL FIND THAT THE STATEMENTS --
19 Q. IS THAT YOUR TESTIMONY?
20 A. NO.
21 MAY I EXPLAIN, YOUR HONOR?
22 THE COURT: WAIT.
23 MR. ALIOTO: I HAVE NO OBJECTION TO THE WITNESS
24 EXPLAINING IF YOU WOULD ANSWER THE QUESTION FIRST, YOUR HONOR.
25 THE COURT: MY OBJECTION IS TO BOTH OF YOU TALKING
1844
BENNACK - CROSS / ALIOTO
1 AT THE SAME TIME.
2 MR. ALIOTO: VERY GOOD, YOUR HONOR.
3 BY MR. ALIOTO:
4 Q. IS IT NOT CORRECT, SIR --
5 THE COURT: DO YOU HAVE SOMETHING TO ADD TO YOUR
6 ANSWER, MR. BENNACK?
7 THE WITNESS: I WANT TO HEAR THE QUESTION.
8 THE COURT: ALL RIGHT.
9 THE WITNESS: YES.
10 BY MR. ALIOTO:
11 Q. YOU SAID THAT YOU MEANT IT. I AM ASKING YOU NOW IF YOU
12 WILL ANSWER THIS QUESTION. IF YOU FEEL NECESSARY TO MAKE AN
13 EXPLANATION, PLEASE DO SO.
14 IS IT CORRECT, THEN, THAT YOU MEANT IT WHEN YOU TOLD
15 THE CHRONICLE THAT YOU INTENDED TO COMPETE AGAINST THE
16 CHRONICLE HEAD TO HEAD AFTER THE JOA? DID YOU MEAN THAT?
17 A. YES.
18 Q. DO YOU WANT TO GIVE AN EXPLANATION ABOUT IT?
19 A. I DO. I DO. BECAUSE I THINK THE NATURE OF MY STATEMENTS
20 DIRECTLY -- AND I CAN'T TAKE RESPONSIBILITY FOR WHAT -- HOW
21 THOSE WERE CHARACTERIZED BY EVERYONE. BUT THE NATURE OF MY --
22 WHAT I ALWAYS SAID WAS THAT WE INTEND TO PREPARE FOR THAT. IF
23 YOU LOOK AT SOME OF THE DOCUMENTS THAT ARE IN TESTIMONY HERE, I
24 HAVE SAID THAT.
25 I COULDN'T HAVE SAID, "WE'RE GOING TO NO MATTER WHAT
1845
BENNACK - CROSS / ALIOTO
1 COMPETE AT THE END OF THE JOA" BECAUSE THAT DECISION WAS NEVER
2 MADE. BUT I CERTAINLY INTENDED TO CONVEY THAT WE WERE LOOKING
3 AT OUR OPTIONS, AND INDEED WE WERE, AT EVERY STEP ALONG THE
4 WAY, RIGHT UP UNTIL THE FINAL RESOLUTION OF THIS MATTER.
5 Q. AND DID YOU ADVISE EVEN FOLKS IN THE HEARST CORPORATION
6 ITSELF -- NOT OUTSIDERS BUT IN THE HEARST CORPORATION ITSELF --
7 THAT YOU INTENDED TO COMPETE AGAINST THE CHRONICLE HEAD TO HEAD
8 AT THE COMPLETION OF THE JOA IN 2005?
9 A. I THINK I WAS TELLING THE PEOPLE INSIDE THE SAME THING I
10 WAS TELLING THE PEOPLE OUTSIDE. WE WERE GOING TO DO EVERYTHING
11 WE COULD TO BE IN THIS MARKET AND EXPLORE EVERY OPTION RIGHT UP
12 UNTIL THE TIME WE HAD TO MAKE THAT DECISION.
13 Q. AND WHEN YOU WERE ADVISING PERSONS IN THE HEARST
14 CORPORATION ITSELF THAT YOU INTENDED TO COMPETE HEAD TO HEAD
15 WITH THE CHRONICLE AFTER THE 2005, WHEN YOU WERE TALKING --
16 WHEN YOU WERE SAYING THAT TO YOUR OWN PEOPLE, DID YOU MEAN IT?
17 A. WELL, THAT -- YOU -- YOU GAVE A HYPOTHESIS THERE THAT I
18 DIDN'T AGREE TO. YOU SAY WHEN I ADVISED THEM THAT I WAS GOING
19 TO DO THAT. I DON'T THINK THAT'S WHAT I WAS ADVISING THEM.
20 THAT'S NOT WHAT MY ANSWER WAS.
21 Q. DID YOU EVER -- I WILL DO IT AGAIN, THEN.
22 DID YOU EVER STATE AN INTENTION TO THE FOLKS IN THE
23 HEARST CORPORATION ITSELF THAT HEARST WOULD COMPETE HEAD TO
24 HEAD AGAINST THE CHRONICLE AFTER 2005?
25 A. NO. I STATED AN INTENTION THAT WE WERE GOING TO STUDY
1846
BENNACK - CROSS / ALIOTO
1 EVERY OPTION WE HAD, INCLUDING THAT ONE, AND I BELIEVE THAT
2 THAT WAS THE PROPER CONDUCT WITH MY ASSOCIATES, AS WELL AS WITH
3 THE PEOPLE AT THE CHRONICLE.
4 Q. LET ME SHOW YOU WHAT IS MARKED AS EXHIBIT 84.
5 MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: YES, YOU MAY.
7 THE WITNESS: DO I HAVE THAT, MR. ALIOTO?
8 BY MR. ALIOTO:
9 Q. NO. I AM SHOWING IT TO YOU. I WILL SHOW YOU WHAT IS
10 MARKED AS EXHIBIT 84.
11 EXHIBIT 84 IS A DOCUMENT DATED MAY 23, 1996. IT IS
12 FROM MR. ROBERT DANZIG TO YOU AND TO MR. GILBERT MAURER.
13 DID YOU, SIR, RECEIVE A COPY OF THIS DOCUMENT ON OR
14 ABOUT THE DATE INDICATED?
15 A. YES, I BELIEVE I DID.
16 Q. I WANT TO DIRECT YOUR ATTENTION FIRST TO THE THIRD
17 PARAGRAPH. THE THIRD PARAGRAPH STATES AS FOLLOWS, QUOTE:
18 "ATTACHED IS A SOLO A.M." -- "IS A, QUOTE,
19 'SOLO A.M.,' END QUOTE, PLAN. WE HAD JIM
20 SEVRENS AND LEE DEVELOP LAST JULY. WE NEVER
21 ADJUDICATED IT BECAUSE THE JOA DIALOGUE WAS
22 ALIVE."
23 DO YOU SEE THAT?
24 A. YES, SIR.
25 Q. LET ME SHOW YOU WHAT IS MARKED AS EXHIBIT 83.
1847
BENNACK - CROSS / ALIOTO
1 MAY I APPROACH THE WITNESS, YOUR HONOR?
2 THE COURT: YOU MAY.
3 BY MR. ALIOTO:
4 Q. I SHOW YOU WHAT IS MARKED AS EXHIBIT 83. EXHIBIT 83 IS
5 DATED JULY 24, 1995, FIRST DRAFT, SAN FRANCISCO EXAMINER
6 BUSINESS PLAN. THE TABLE OF CONTENTS IS INTO FOUR SECTIONS ON
7 THE MISSION STATEMENT DOWN THROUGH DOCUMENTATION.
8 I HAND YOU THAT DOCUMENT, SIR.
9 IS THAT THE DOCUMENT THAT WAS ATTACHED TO
10 EXHIBIT 84, THE LETTER FROM MR. DANZIG TO YOU IN REFERENCE TO
11 THE PLAN THAT WAS DEVELOPED IN JULY OF LAST YEAR, MEANING 1995,
12 BY MR. SEVRENS AND MR. LEE?
13 A. I DON'T KNOW.
14 Q. IF YOU WILL LOOK AT 84, HAVE YOU SEEN THE DOCUMENT BEFORE,
15 THE ONE THAT IS ENTITLED "SAN FRANCISCO EXAMINER BUSINESS PLAN,
16 FIRST DRAFT"?
17 THE COURT: YOU MEAN '83, RIGHT?
18 THE WITNESS: '83.
19 BY MR. ALIOTO:
20 Q. '83. SORRY. THANK YOU.
21 A. I HAVE SEEN IT IN CONNECTION WITH THESE PROCEEDINGS. I
22 HAVE SEEN SO MANY MISSIONS AND SO MANY PLANS AND HYPOTHESES
23 ABOUT WHAT WE MIGHT DO, I CAN'T TESTIFY WITH ABSOLUTE ASSURANCE
24 THAT I EVER READ THIS DOCUMENT OR SAW IT, BUT NEITHER CAN I
25 DENY IT.
1848
BENNACK - CROSS / ALIOTO
1 Q. I WAS GOING TO ASK YOU, DO YOU HAVE ANY REASON TO DOUBT
2 THAT THIS IN FACT --
3 A. NO, I JUST DON'T KNOW.
4 Q. ALL RIGHT. I WANT TO DIRECT YOUR ATTENTION TO THE
5 BUSINESS PLAN ITSELF AND PARTICULARLY FIRST TO THE MISSION
6 STATEMENT, IF YOU WOULD TURN TO THAT PAGE, WHICH IS THE FIRST
7 PAGE -- THE FIRST FULL PAGE OF THE DOCUMENT AFTER THE MISSION
8 STATEMENT AND IT CARRIES THE BATES NUMBER 0013761.
9 A. YES.
10 Q. DO YOU SEE IT?
11 A. I DO.
12 Q. OKAY. AND ON THE TOP IT SAYS "MISSION STATEMENT." DO YOU
13 SEE THAT?
14 A. I DO.
15 Q. AND THE MISSION STATEMENT ITSELF STATES AS FOLLOWS, QUOTE:
16 "THE SAN FRANCISCO JOA" --
17 MR. CONNELL: YOUR HONOR, MAY I MAKE A POINT? I
18 THINK THIS DOCUMENT --
19 THE COURT: NO. YOU MAY MAKE AN OBJECTION.
20 MR. CONNELL: WELL, OBJECTION. IT'S NOT -- IT'S IN
21 EVIDENCE SUBJECT TO A MOTION TO STRIKE, AND IF MR. ALIOTO LAYS
22 A FOUNDATION WITH THIS WITNESS, I THINK, BEFORE HE READS THE
23 DOCUMENT -- HE OUGHT TO DO THAT.
24 MR. ALIOTO: THE WITNESS ALREADY -- I SHOWED THE
25 WITNESS WHAT IS EXHIBIT 84, YOUR HONOR, DIRECTED TO --
1849
BENNACK - CROSS / ALIOTO
1 THE COURT: OBJECTION OVERRULED.
2 BY MR. ALIOTO:
3 Q. DIRECTING YOUR ATTENTION TO THE MISSION STATEMENT AND THE
4 FIRST PREAMBLE TO THE MISSION STATEMENT, IT STATES AS FOLLOWS:
5 "THE SAN FRANCISCO JOA TERMINATES IN 2005.
6 IT IS THE INTENTION OF THE HEARST CORPORATION TO
7 MAINTAIN A NEWSPAPER PRESENT" -- "PRESENCE AND
8 COMPETE FOR THE MARKETPLACE FOLLOWING THE DEMISE
9 OF THE JOA."
10 DO YOU SEE THAT?
11 A. YES, I DO.
12 Q. DO YOU AGREE THAT THAT IN FACT WAS THE INTENTION OF
13 HEARST, AT LEAST AS OF 1995, TO MAINTAIN A NEWSPAPER PRESENCE
14 AND COMPETE FOR THE MARKETPLACE FOLLOWING THE DEMISE OF THE
15 JOA?
16 A. WE HAD NOT DETERMINED WHAT WE WOULD DO, AND I HAVE
17 PREVIOUSLY TESTIFIED TO THAT.
18 I AM NOT THE AUTHOR OF THIS, AND HOW WOULD YOU
19 SUGGEST THE MISSION STATEMENT BE WRITTEN, THAT IT IS OUR
20 INTENTION THAT WE JUST WITHER ON THE VINE AND DISAPPEAR?
21 MISSION STATEMENTS DON'T ALL GET CARRIED OUT. I
22 CONSIDER THIS PEOPLE TRYING TO DO THEIR JOB AND ACCOMPLISH
23 WHATEVER THEY COULD TO STIMULATE A BETTER OUTCOME THAN WE WERE
24 CONTEMPLATING.
25 Q. PLEASE LISTEN TO THE QUESTION AND SEE IF YOU CAN ANSWER
1850
BENNACK - CROSS / ALIOTO
1 THE QUESTION.
2 THE COURT: I THINK YOU HAVE AN ANSWER TO THE
3 QUESTION.
4 THE QUESTION YOU POSED, AT ANY RATE.
5 BY MR. ALIOTO:
6 Q. DID YOU, SIR, EVER EXPRESS TO ANYONE IN 1995 THAT IT WAS
7 THE INTENTION OF HEARST TO MAINTAIN A NEWSPAPER PRESENCE AND
8 COMPETE FOR THE MARKETPLACE FOLLOWING THE DEMISE OF THE JOA?
9 A. I EXPRESSED THE INTENTION TO CONTINUE TO LOOK FOR A WAY TO
10 BE PUBLISHING IN THE SAN FRANCISCO MARKET FOLLOWING -- UNTIL
11 AND FOLLOWING 2005.
12 Q. YOU DID? TO WHOM?
13 A. TO REMAIN IN THE MARKET.
14 Q. AND FOLLOWING 2005?
15 A. YES. BUT, OF COURSE, THIS IS IN THE CONTEXT OF
16 NEGOTIATIONS TO BE A PARTIAL OWNER OF THE CHRONICLE WITH THE
17 HOPE OF ULTIMATELY BEING THE OWNER OF THE CHRONICLE, WHICH IS
18 WHAT HAPPENED.
19 Q. WELL, ARE YOU SAYING YOU HAD SUCH AN INTENTION OR NOT?
20 A. I HAD SUCH AN INTENTION TO DO WHAT?
21 Q. YOU STATED, QUOTE:
22 "I EXPRESSED THE" --
23 I AM READING FROM THE TRANSCRIPT, RECOGNIZING, YOUR
24 HONOR, IT IS NOT THE OFFICIAL TRANSCRIPT. IT STATES AS
25 FOLLOWS:
1851
BENNACK - CROSS / ALIOTO
1 THE COURT: WELL, YOU ASK HIM IF HE TESTIFIED THUS
2 AND SUCH.
3 BY MR. ALIOTO:
4 Q. DID YOU TESTIFY JUST NOW, QUOTE:
5 "I EXPRESSED THE INTENTION TO CONTINUE TO
6 LOOK FOR A WAY TO BE PUBLISHING IN THE SAN
7 FRANCISCO MARKET FOLLOWING -- UNTIL AND
8 FOLLOWING 2005?"
9 A. I DID SAY THAT, AND I WOULD SAY EXACTLY THAT AGAIN, IF YOU
10 WOULD LIKE SOME VERSION OF THAT.
11 Q. OKAY. AND SO YOU EXPRESSED THAT INTENTION TO CONTINUE TO
12 BE IN THE MARKET, INCLUDING FOLLOWING 2005 --
13 A. TO ATTEMPT TO, TO ATTEMPT. YOU -- YOU LEFT OUT A PRETTY
14 CRITICAL WORD.
15 Q. AND --
16 A. DO YOU WANT TO READ IT AGAIN? INTENTION TO OR ENDEAVOR.
17 Q. OKAY. DID YOU GIVE THE FOLLOWING TESTIMONY:
18 "I EXPRESSED THE INTENTION TO CONTINUE TO
19 LOOK FOR A WAY TO BE PUBLISHING IN THE SAN
20 FRANCISCO MARKET" --
21 A. I WILL ACCEPT THAT.
22 Q. "FOLLOWING -- UNTIL AND FOLLOWING 2005"?
23 A. AGREED. AGREED. THAT'S WHAT I SAID.
24 Q. OKAY. NOW, THIS INTENTION TO CONTINUE TO PUBLISH,
25 INCLUDING FOLLOWING 2005 --
1852
BENNACK - CROSS / ALIOTO
1 A. THAT'S NOT WHAT I SAID, MR. -- I REALIZE I HAVE NO
2 STANDING TO CORRECT YOU, BUT I WOULD APPRECIATE IT IF YOU WOULD
3 SAY -- TO LOOK FOR A WAY AS A PART OF THAT STATEMENT --
4 Q. OKAY. THIS IS JUST -- I REQUEST --
5 THE COURT: WHERE ARE WE GOING WITH ALL OF THIS?
6 (LAUGHTER)
7 MR. ALIOTO: THE NOTION IS THAT IN ABSENCE OF THE
8 TRANSACTION, THE CORPORATION INTENDED TO COMPETE NOT ONLY TO
9 THE CONCLUSION OF 2005 BUT AFTERWARDS.
10 THE COURT: I THINK THE WITNESS HAS TESTIFIED ON
11 THIS POINT.
12 MR. ALIOTO: VERY GOOD.
13 THE COURT: AND IS NOT GOING TO MAKE ANY MORE --
14 MR. ALIOTO: VERY GOOD, YOUR HONOR.
15 THE COURT: -- ANY MORE PROGRESS.
16 MR. ALIOTO: VERY GOOD, YOUR HONOR.
17 BY MR. ALIOTO:
18 Q. I WOULD LIKE TO GO, THEN, TO ARABIC NUMBER 1.
19 INSTEAD GO TO THE -- IF YOU WOULD GO TO THE VERY
20 BOTTOM OF THE PAGE. THIS IS UNDER THE MISSION STATEMENT. IT
21 STATES, QUOTE -- IT'S AT THE VERY BOTTOM OF THIS PAGE, WHICH IS
22 BATES NUMBER 13761 OF EXHIBIT NUMBER 83. IT STAYS, STATES,
23 QUOTE:
24 "THE FOLLOWING PLAN ASSUMES THAT OUR
25 STRATEGIC MOVES WILL HAVE PUT US IN A POSITION
1853
BENNACK - CROSS / ALIOTO
1 TO ESSENTIALLY LAUNCH A NEW MORNING EXAMINER IN
2 2005 AND INCLUDES ASSUMPTIONS IN EACH OF THE
3 FOLLOWING CATEGORIES:"
4 DO YOU SEE THAT?
5 A. YES, SIR, I DO.
6 Q. AND WAS THERE -- AND WAS THERE, TO YOUR KNOWLEDGE, AT OR
7 ABOUT THIS TIME ANY STATEMENT MADE TO YOU, IN THIS REPORT OR
8 OTHERWISE, THAT AFTER 2005 OR UP TO IT THE EXAMINER WOULD
9 LAUNCH A MORNING EDITION?
10 A. THERE WERE -- THERE WAS ADVOCACY OF THAT. IF THAT'S A
11 STATEMENT, I AM NOT SURE, BUT IT'S NOT A POLICY.
12 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION TO THE NEXT PAGE.
13 THE NEXT PAGE STATES UNDER "SCENARIO 1," IT STATES, QUOTE:
14 "THE SAN FRANCISCO EXAMINER WILL BE A
15 300,000 CIRCULATION NEWSPAPER OF WHICH 225,000
16 WILL BE CONTROLLED CIRCULATION AND THE BALANCE
17 PAID SINGLE COPIES."
18 DO YOU SEE THAT?
19 A. I DO.
20 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION NOW TO THREE PAGES
21 LATER, WHICH IS BATES NUMBER 13764.
22 AND UNDER "SCENARIO 1, EXAMINER BUSINESS PLAN FOR
23 CONTROLLED CIRCULATION NEWSPAPER." AND IN THE FIRST PARAGRAPH
24 IT STATES, QUOTE:
25 "UPON THE DISSOLUTION OF THE JOINT OPERATING
1854
BENNACK - CROSS / ALIOTO
1 AGREEMENT, THE HEARST CORPORATION WILL CONTINUE
2 PUBLICATION OF THE SAN FRANCISCO EXAMINER AS A
3 300,000 CONTROLLED PAID SEVEN-DAY DAILY FOR SAN
4 MATEO AND SAN FRANCISCO COUNTIES."
5 DO YOU SEE THAT?
6 A. YES, I DO.
7 Q. THE NEXT SENTENCE -- THE NEXT PARAGRAPH STATES, QUOTE:
8 "COMPETITION IN THIS TWO-COUNTY AREA WILL BE
9 INTENSE FOR BOTH READERSHIP AND THE ADVERTISING
10 DOLLAR. THE EXAMINER WILL BE UNIQUELY
11 POSITIONED TO ACHIEVE A DOMINANT MARKET POSITION
12 THROUGH EDITORIAL CONTENT, AVAILABILITY AND
13 PRICING."
14 DO YOU SEE THAT?
15 A. I SEE THAT.
16 Q. OKAY. WERE YOU ADVISED IN SUM OR SUBSTANCE SOMETIME IN
17 1995 OR LATER IN 1996, MID-1996, THAT IT WAS ONE OF THE PLANS
18 OF THE HEARST CORPORATION THAT THE EXAMINER WOULD BE A 300,000
19 CIRCULATION AND THAT IT WOULD COMPETE ON THE BASIS OF BOTH
20 CONTENT, AVAILABILITY AND PRICING?
21 A. I AM NOT THE AUTHOR, NOR IS THE HEARST CORPORATION THE
22 AUTHOR. THE AUTHOR, THIS WAS HIS OR HER VISION. AND THAT'S
23 ABOUT ALL I CAN ATTACH TO IT.
24 Q. BUT DID ANYONE EVER TELL YOU THAT AT OR ABOUT THIS TIME IN
25 1995 OR 1996?
1855
BENNACK - CROSS / ALIOTO
1 A. TELL ME WHAT?
2 Q. TELL YOU THAT IT WAS THE INTENTION THAT THE EXAMINER WOULD
3 BE A MORNING PAPER WITH AN ESTIMATED 300,000 CIRCULATION OVER
4 TIME AND THAT IT WOULD ATTEMPT TO ACHIEVE TO BE THE DOMINANT --
5 HAVE A DOMINANT MARKET POSITION BECAUSE OF CONTENT,
6 AVAILABILITY AND PRICING?
7 A. SOMEONE MIGHT HAVE TOLD ME OF THAT IDEA. I DON'T RECALL,
8 MR. ALIOTO. THEY COULD NOT HAVE TOLD ME IT WAS THE INTENTION
9 OF THE HEARST CORPORATION BECAUSE THEY WOULDN'T BE IN A
10 POSITION TO EXPRESS THE INTENTION OF THE HEARST CORPORATION TO
11 ITS CHIEF EXECUTIVE.
12 Q. AT OR ABOUT THE TIME THAT SOMEONE COULD HAVE TOLD YOU
13 THAT, DID THE -- DID YOU -- WERE YOU ADVISED THAT THE PLAN OF
14 PROFITABILITY WAS THAT THE COMPANY WOULD BE PROFITABLE ON ITS
15 OWN IN THREE YEARS?
16 A. MR. ALIOTO, YOU ARE GOING TO TAKE ME THROUGH A LOT OF
17 DETAIL HERE. I DON'T KNOW WHAT'S IN THIS DOCUMENT.
18 NOW, IF YOU WANT ME TO TAKE SOME TIME AND READ THIS
19 ENTIRE DOCUMENT AND REACT TO EVERY NUMBER IN IT, I WILL -- IF
20 HIS HONOR WANTS ME TO DO THAT, I WILL DO THAT BUT . . .
21 Q. I AM ASKING YOU IF ANYONE TOLD YOU THAT.
22 A. I DON'T KNOW. I DON'T RECALL.
23 Q. YOU DON'T REMEMBER. ALL RIGHT.
24 IF YOU WILL GO TO THE BOTTOM OF THE PAGE, IT STATES
25 ON THE VERY LAST -- BEGINNING OF THE VERY LAST PARAGRAPH,
1856
BENNACK - CROSS / ALIOTO
1 QUOTE:
2 "HOWEVER, TO OVERCOME ADVERTISER SKEPTICISM
3 AND TO ESTABLISH MARKET DOMINANCE, OUR INITIAL
4 RATES WILL BE EXTREMELY COMPETITIVE TO ENSURE A
5 SUCCESSFUL MARKET LAUNCH. IN YEAR ONE THE
6 CURRENT COST PER THOUSAND FIGURES WILL BE
7 DISCOUNTED BY 20 PERCENT AND IN YEAR TWO THE
8 DISCOUNT WILL BE ADJUSTED TO TEN PERCENT."
9 DID ANYONE ADVISE YOU OF ANYTHING LIKE THAT IN SUM
10 OR SUBSTANCE --
11 A. I DON'T RECALL.
12 Q. -- SOMETIME IN 1995 OR 1996?
13 A. I DON'T RECALL THAT THEY DID.
14 Q. DID ANYONE EVER ADVISE YOU IN SUM OR SUBSTANCE THAT IT WAS
15 THE -- THAT IT WAS THE INTENTION TO MAKE THE EXAMINER HAVE
16 MARKET DOMINANCE IN SAN FRANCISCO BY REASON OF EXTREMELY
17 COMPETITIVE PRICING?
18 A. NO.
19 Q. DID ANYONE EVER ADVISE YOU IN SUM OR SUBSTANCE THAT THERE
20 WOULD BE A DISCOUNT OF AS MUCH AS 20 PERCENT IN THE FIRST YEAR
21 OR TWO?
22 A. I DON'T RECALL GOING -- THE DETAILS OF THIS PLAN.
23 THERE WERE MANY PLANS, MR. ALIOTO, AS I HAVE TOLD
24 YOU, AND I CAN'T REMEMBER EVERY ONE OF THEM, BUT THEY
25 ENCOMPASSED EVERY APPROACH POSSIBLE TO CONTINUING TO PUBLISH IN
1857
BENNACK - CROSS / ALIOTO
1 THIS MARKET.
2 Q. LET ME DIVERT FOR ONE MINUTE AND GO BACK TO EXHIBIT 84.
3 EXHIBIT 84 WAS DATED MAY 23, 1996. IT WAS DIRECTED TO YOU AND
4 ALSO TO GILBERT MAURER.
5 A. YES, SIR.
6 Q. ALL RIGHT. MR. GILBERT MAURER WAS THE EXECUTIVE VICE
7 PRESIDENT AND THE CHIEF OPERATING OFFICER OF THE COMPANY, WAS
8 HE NOT?
9 A. THAT'S CORRECT.
10 Q. AND ROBERT G. DANZIG, HE WAS -- WHAT WAS HIS POSITION WITH
11 THE COMPANY?
12 A. HE WAS THE GENERAL MANAGER OF NEWSPAPERS, AS WE CALLED
13 HIM. HE WAS MR. IRISH'S PREDECESSOR.
14 Q. HE WAS IN CHARGE OF ALL NEWSPAPERS?
15 A. YES, HE WAS.
16 Q. ALL NEWSPAPERS IN THE UNITED STATES?
17 A. YES, HE WAS.
18 Q. THEN ON THE BOTTOM THERE ARE CARBON COPIES TO MR. GANZI.
19 MR. GANZI, WOULD YOU IDENTIFY HIS POSITION AT THIS TIME?
20 A. AT THIS TIME HE IS THE EXECUTIVE VICE PRESIDENT AND CHIEF
21 OPERATING OFFICER OF THE COMPANY.
22 Q. OF?
23 A. THE HEARST CORPORATION.
24 Q. AND MR. IRISH?
25 A. MR. IRISH IS THE PRESIDENT OF OUR HEARST NEWSPAPER GROUP.
1858
BENNACK - CROSS / ALIOTO
1 Q. NOW, BUT WHAT WAS HE AT THE TIME?
2 A. HE WAS MR. DANZIG'S DEPUTY.
3 Q. VERY GOOD. NOW, IF IN FACT THIS DOCUMENT WHICH IS
4 REFERENCED IN -- OR THE DOCUMENT BEING REFERENCED IN THE THIRD
5 PARAGRAPH WENT TO YOU AND MR. MAURER AND MR. DANZIG AND
6 MR. IRISH FROM MR. -- FROM MR. DANZIG HIMSELF, THOSE PERSONS --
7 YOURSELF, MR. MAURER, DANZIG -- IRISH AND DANZIG, THOSE PERSONS
8 CONTROLLED THIS COMPANY, THE HEARST CORPORATION, DID THEY NOT?
9 A. WELL, THEY ARE THE PRINCIPAL OFFICERS OF THE HEARST
10 CORPORATION. THE BOARD OF DIRECTORS CONTROLS IT.
11 Q. I NOW DIRECT YOUR ATTENTION BACK TO DOCUMENT NUMBER 83.
12 AND IF YOU WILL GO TO THE THIRD FULL PARAGRAPH, WHICH BEGINS --
13 AND THIS IS ON BATES NUMBER 13765. WE WERE JUST THERE IN THE
14 THIRD FULL PARAGRAPH, WHICH BEGINS, "THE SINGLE COPY PRICING."
15 IT STATES, AS FOLLOWS, QUOTE:
16 "THE SINGLE COPY PRICING WILL BE 10 CENTS
17 DAILY AND 50 CENTS ON SUNDAY, A REDUCTION FROM
18 OUR CURRENT PRICING OF 25 CENTS DAILY AND $1.50
19 ON SUNDAY. THESE DISCOUNTED RATES SHOULD RESULT
20 IN SEVEN-DAY VENDING MACHINE SALES OF 75,000.
21 THIS LEVEL IS HELD CONSTANT IN YEARS ONE THROUGH
22 FIVE OF THE PLAN."
23 DO YOU SEE THAT?
24 A. I DO SEE THAT.
25 Q. DID ANYONE IN THE HEARST ORGANIZATION ADVISE YOU IN SUM OR
1859
BENNACK - CROSS / ALIOTO
1 SUBSTANCE, EITHER ORALLY OR IN WRITING, OF A PROPOSAL THAT
2 THE -- IN ORDER TO BE THE DOMINANT NEWSPAPER IN SAN FRANCISCO
3 THAT THE SINGLE COPIES OF THE EXAMINER WOULD BE REDUCED TO 10
4 CENTS DAILY AND 50 CENTS ON SUNDAY FROM THE PRICE OF 25 CENTS
5 AND $1.50?
6 A. NO. AND MAY I OFFER AN EXPLANATION AFTER HAVING SAID
7 "NO"? CERTAINLY, THE REDUCTION OF THE PRICES TO INCLUDING A
8 10-CENT PRICE AND FREE DISTRIBUTION WERE ALL ITEMS THAT WERE
9 LOOKED AT AND DISCUSSED. NO ONE ADVISED ME THAT THAT'S WHAT WE
10 WERE GOING TO DO BECAUSE THAT DECISION WAS NEVER MADE.
11 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1860
BENNACK - CROSS / ALIOTO
1 Q. NOW, THESE TWO PRICES, BOTH FOR -- THESE PRICE REDUCTIONS,
2 BOTH FOR ADVERTISING AND FOR READERS THEMSELVES AND SUBSCRIBERS
3 AND PURCHASERS OF THE PAPER, WAS THIS EVER -- WERE YOU EVER
4 ADVISED THAT SUCH A PRICING PROGRAM, BOTH FOR ADVISORS --
5 ADVERTISERS AND SUBSCRIBERS WOULD BE THE WAY IN WHICH THE
6 EXAMINER COULD ACHIEVE DOMINANCE IN THE SAN FRANCISCO NEWSPAPER
7 MARKET?
8 A. I DON'T KNOW, MR. ALIOTO.
9 Q. I WANT TO DIRECT YOUR ATTENTION TO THE PARAGRAPH UNDER
10 "OTHER REVENUE." AND THE LAST SENTENCE OF THAT PARTICULAR
11 PARAGRAPH STATES AS FOLLOWS, QUOTE:
12 "THESE ADVERTISING AND READER SERVICES WILL
13 COMPLEMENT THE NEW EXAMINER AND BE AN INTEGRAL
14 PART OF OUR NEW OPERATION."
15 DO YOU RECALL ANY REPRESENTATIVE OF THE HEARST
16 CORPORATION, EITHER ORALLY OR IN WRITING, ADVISING YOU OF
17 ANYTHING LIKE THAT?
18 A. YOU'LL HAVE TO ASK THE QUESTION AGAIN. YOU LOST ME.
19 Q. DID ANYONE EVER ADVISE YOU IN SUM OR SUBSTANCE THAT AFTER
20 2005 THE EXAMINER, AMONG OTHER THINGS, COULD LOWER THE PRICES
21 TO THE ADVERTISERS AND LOWER THE PRICES TO THE SUBSCRIBERS AND
22 THE READERS AND THAT THAT WOULD BE ONE OF THE MEANS TO BE ABLE
23 TO HAVE THE EXAMINER BECOME THE DOMINANT NEWSPAPER IN SAN
24 FRANCISCO?
25 A. I WOULD BE SURPRISED IF AT SOME POINT SOMEONE DIDN'T TELL
1861
BENNACK - CROSS / ALIOTO
1 ME THAT THEY THOUGHT THAT WAS THE WAY TO GO.
2 Q. OKAY. AND DID YOU AND MR. DANZIG AND MR. MAURER AND
3 MR. IRISH EVER DISCUSS THAT TOGETHER AS A GROUP?
4 A. I DON'T RECALL.
5 Q. AND LOOKING AT EXHIBIT 84, WHEN YOU RECEIVED EXHIBIT 84
6 FROM MR. DANZIG, WAS THERE A MEETING BETWEEN -- AMONG YOU AND
7 MR. DANZIG, MR. MAURER, AND MR. IRISH?
8 A. I DON'T RECALL.
9 Q. DO YOU RECALL -- DID ANYONE -- DID ANY REPRESENTATIVE OF
10 HEARST EVER ADVISE YOU THAT THE IDEA WAS TO MAKE THE SAN
11 FRANCISCO EXAMINER AT LEAST A 300,000-DOLLAR -- 300,000
12 CIRCULATION NEWSPAPER IN SAN FRANCISCO?
13 A. THAT WAS ALWAYS THE IDEA. WE JUST WEREN'T ABLE TO ACHIEVE
14 IT.
15 Q. DID YOU EVER LOWER THE PRICES IN AN EFFORT TO TRY TO
16 ACHIEVE IT?
17 A. I BELIEVE, AS A MATTER OF FACT, THE COVER PRICE WAS
18 LOWERED FROM 50 CENTS TO 25 CENTS. I THINK THAT'S IN THE
19 RECORD.
20 Q. OKAY. OTHER THAN LOWERING THAT PRICE -- AND THAT WAS DONE
21 BY MR. WILLIAM RANDOLPH HEARST THE THIRD?
22 A. I DON'T RECALL WHO WAS THERE AT THE TIME.
23 Q. ALL RIGHT. WERE THERE ANY ADVERTISING RATES REDUCED?
24 A. I DON'T KNOW THE ANSWER TO THAT.
25 Q. I WANT TO DIRECT YOUR ATTENTION NOW TO EXHIBIT 84.
1862
BENNACK - CROSS / ALIOTO
1 EXHIBIT 84 STATES AS FOLLOWS, IN THE SECOND FULL PARAGRAPH:
2 "ONE CONSIDERATION MAY BE TO VIEW THIS AS
3 OUR MC CLATCHY/ANCHORAGE, ALASKA, WINDOW OR OUR
4 GANNETT/U.S.A. TODAY INVESTMENT OPPORTUNITY.
5 I'M NOT ADVOCATING AT THIS POINT, BUT DO BELIEVE
6 SUFFICIENT AMMUNITION IN OUR CORNER TO ENVISION
7 PROSPECT OF OWNING," UNDERLINED, "THE SAN
8 FRANCISCO NEWSPAPER MARKET WITHIN FIVE YEARS.
9 INVESTMENT MOST LIKELY IN 100 TO
10 130 MILLION-DOLLAR RANGE PRETAX BUT COULD GIVE
11 US A ONE-BILLION-DOLLAR ASSET FOR THE AFTER-TAX
12 INVESTMENT OF 60 MILLION OR SO."
13 DO YOU SEE THAT?
14 A. I DO.
15 Q. OKAY. NOW, MR. DANZIG, AGAIN IF YOU WOULD IDENTIFY WHO HE
16 IS.
17 A. HE WAS THE HEAD OF OUR NEWSPAPERS.
18 Q. ALL RIGHT. AND DID YOU BELIEVE THAT MR. DANZIG WAS UNABLE
19 OR INCOMPETENT IN ANY WAY OR DID NOT HAVE THE ABILITY, IN YOUR
20 JUDGMENT, TO BE MAKING STATEMENTS LIKE THAT TO YOU AND TO THE
21 EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER?
22 A. I BELIEVE MR. DANZIG WAS IRRATIONALLY EXUBERANT.
23 (LAUGHTER)
24 Q. DID YOU TELL HIM THAT?
25 A. I'M SURE I DID.
1863
BENNACK - CROSS / ALIOTO
1 Q. IT GOES ON FURTHER. I WANT TO DIRECT YOUR ATTENTION TO
2 THE FOURTH PARAGRAPH AND BEGINNING IN THE MIDDLE WHERE IT
3 BEGINS, "I ALSO BELIEVE." IT STATES, MR. DANZIG, QUOTE:
4 "I ALSO BELIEVE THAT WITH REASONABLE
5 EMPLOYMENT ASSURANCE, THE OVERWHELMING MAJORITY
6 OF AGENCY TALENT WOULD SIGN ON WITH US. THEY
7 RESPECT YOU. THEY FAVOR HEARST AND THEY ARE NOW
8 A FIRST-RATE GROUP OF TALENTS," END OF QUOTE.
9 DO YOU BELIEVE THAT ESTIMATE WAS IRRATIONALLY
10 EXUBERANT?
11 A. I THINK IT WAS FLATTERING AND I HAVE NO OPINION AS TO
12 WHETHER IT WAS THE FACT OR NOT.
13 Q. DID YOU TELL HIM THAT YOU DIDN'T BELIEVE THAT?
14 A. I DON'T THINK I PARSED THE LETTER. I THINK IT PROBABLY
15 WENT NOWHERE GIVEN WHAT WE'VE JUST DISCUSSED IN PARAGRAPH TWO.
16 Q. OKAY. HE STATES FURTHER IN THE VERY LAST PARAGRAPH --
17 THE COURT: CAN I INTERRUPT, MR. ALIOTO --
18 MR. ALIOTO: YES, SIR.
19 THE COURT: -- TO ASK BEFORE YOU LEAVE IT, IF YOU
20 COULD GO BACK TO THE SECOND PARAGRAPH, MR. BENNACK.
21 THE WITNESS: YES, SIR.
22 THE COURT: THERE'S REFERENCE TO "OUR
23 MC CLATCHY/ANCHORAGE, ALASKA, WINDOW OR OUR GANNETT/U.S.A.
24 TODAY INVESTMENT OPPORTUNITY."
25 THE WITNESS: YES, SIR.
1864
BENNACK - CROSS / ALIOTO
1 THE COURT: DID THAT HAVE ANY MEANING TO YOU?
2 THE WITNESS: WELL, I KNEW WHAT HE WAS REFERRING TO.
3 THE COURT: WHAT WAS HE REFERRING TO?
4 THE WITNESS: HE WAS REFERRING TO THE FACT THAT
5 AFTER THE CANCELLATION OR TERMINATION OF THE JOINT AGREEMENT IN
6 ANCHORAGE, THE JUNIOR PAPER, THE MC CLATCHY PAPER ENDED UP
7 BEING THE SURVIVOR, AND SO I THINK HE WAS SAYING MIRACLES DO
8 HAPPEN. I WOULD PUT IT IN THAT CATEGORY.
9 DOES THAT ANSWER YOUR HONOR'S QUESTION?
10 THE COURT: I BELIEVE IT DOES.
11 THE WITNESS: YES.
12 THE COURT: AND GANNETT/U.S.A. TODAY?
13 THE WITNESS: WELL, AS PROFESSOR ROSSE OR DR. ROSSE
14 TESTIFIED, IT'S WELL KNOWN THAT AFTER I THINK PROBABLY
15 LITERALLY BILLIONS BUT CERTAINLY HUNDREDS OF MILLIONS OF
16 DOLLARS OF INVESTMENT, U.S.A. TODAY HAS FINALLY CARVED OUT A
17 MARKET. I DON'T KNOW THAT THEY'LL EVER GET A PROPER RETURN ON
18 THAT INVESTMENT, BUT IT'S OUT THERE AND HAS GAINED A FRANCHISE
19 OF SORTS.
20 THE COURT: THANK YOU. SORRY FOR THE INTERRUPTION.
21 MR. ALIOTO: NO, YOUR HONOR.
22 Q. DO YOU BELIEVE THAT YOU WOULD BE ABLE TO MAKE THE SAN
23 FRANCISCO EXAMINER A WORLD CLASS NEWSPAPER IN SAN FRANCISCO IF
24 YOU INVESTED $660 MILLION INTO IT?
25 A. UNDER WHAT CIRCUMSTANCES?
1865
BENNACK - CROSS / ALIOTO
1 Q. UNDER THE CIRCUMSTANCES THAT EXIST TODAY.
2 A. WITHIN THE JOA?
3 Q. YES. IN PREPARATION FOR 2005.
4 A. I DON'T THINK THAT WE COULD DIMENSION THE AMOUNT OF MONEY
5 IT WOULD TAKE TO HAVE, IF THIS IS THE QUESTION, TWO FULLY
6 FULL-SERVICE, REGIONALLY EFFECTIVE COMPETING NEWSPAPERS.
7 Q. ARE YOU SAYING, SIR --
8 A. I DON'T KNOW WHAT AMOUNT OF MONEY, MR. ALIOTO. MY CONCERN
9 ON THAT WOULD BE WHETHER THERE WAS ANY WAY TO EVER GET YOUR
10 MONEY BACK. IT'S NOT SO MUCH WHAT YOU COULD PRODUCE IF YOU HAD
11 ENOUGH MONEY, BUT WOULD THERE EVER BE AN ECONOMIC RETURN ON
12 THAT THAT WOULD COME INTO PLAY.
13 Q. WHEN MR. DANZIG WAS REFERRING TO THE ONE-BILLION-DOLLAR --
14 GIVE US A ONE-BILLION-DOLLAR ASSET, YOU DIDN'T BELIEVE THAT?
15 A. I DIDN'T BELIEVE THAT IT COULD BE PRODUCED, IF AT ALL, ON
16 THE BASIS OF WHAT HE'S TALKING ABOUT.
17 Q. NOW, IS IT CORRECT, SIR, THAT IT IS THE INTENTION OF THE
18 HEARST CORPORATION THAT NOT ONLY WOULD IT PAY THE CHRONICLE
19 PUBLISHING COMPANY $660 MILLION FOR THE CHRONICLE, BUT THAT
20 EVEN AFTER THAT IT WOULD INVEST MONEY TO CHANGE THE PAPER?
21 A. YES, SIR, ALTHOUGH IT WOULD BE OUR BELIEF THAT SOME OF
22 THAT WOULD BE GENERATED BY AN UNSHACKLED-BY-THE-JOA CHRONICLE.
23 YOU KNOW, IT OPERATES EVERY DAY AND EVERY MONTH AND
24 EVERY YEAR AND IS PRESUMABLY GOING TO GENERATE SOME OF ITS OWN
25 CASH FLOW FOR REINVESTMENT.
1866
BENNACK - CROSS / ALIOTO
1 Q. HOW MUCH MORE THAN THE $660 MILLION DID YOU INTEND TO
2 INVEST IN THE CHRONICLE TO MAKE IT -- WELL, LET ME BACK UP.
3 IS THE CHRONICLE A WORLD CLASS NEWSPAPER?
4 A. NO, I DON'T BELIEVE IT IS.
5 Q. OKAY. AFTER YOU PAY THE $660 MILLION, HOW MUCH -- OR HAVE
6 YOU EVER BUDGETED HOW MUCH YOU MIGHT SPEND OR PLAN TO SPEND TO
7 MAKE THE CHRONICLE A WORLD CLASS NEWSPAPER?
8 A. NO, BECAUSE WE KNOW AS EXPERIENCED NEWSPAPERMEN THAT THOSE
9 HAVE TO WORK IN TANDEM. YOU HAVE TO GENERATE INCREASED CASH SO
10 THAT YOU HAVE THE RESOURCES TO DO THAT. SOMETIMES THEY HAVE --
11 THERE HAS TO BE AN UPFRONT INVESTMENT, BUT I CAN'T GIVE YOU A
12 NUMBER OF WHAT THE ADDITIONAL INVESTMENT BEYOND 660 MILLION IS
13 GOING TO BE.
14 Q. OUT OF THE 16, YOU HAVE, AS I UNDERSTAND IT, YOU HAVE 12
15 DAILY NEWSPAPERS.
16 A. I BELIEVE THAT'S CORRECT.
17 Q. AND YOU ALSO HAVE SOME 18 WEEKLY NEWSPAPERS.
18 A. YES.
19 Q. ARE ANY OF THOSE NEWSPAPERS WORLD CLASS NEWSPAPERS?
20 A. WE BELIEVE THAT THE HOUSTON CHRONICLE IS PERHAPS CLOSEST
21 TO THAT CHARACTERIZATION OF OUR NEWSPAPER, AND IT'S GETTING
22 BETTER AND WE'RE HOPEFULLY MAKING IT BETTER.
23 Q. HAS IT REACHED THAT LEVEL YET?
24 A. I'M NOT SATISFIED THAT IT HAS, NO.
25 Q. ARE WE CORRECT, DID YOU TESTIFY THIS MORNING WITH REGARD
1867
BENNACK - CROSS / ALIOTO
1 TO THE HOUSTON CHRONICLE THAT IT USED TO HAVE A COMPETITOR, THE
2 HOUSTON POST?
3 A. YES.
4 Q. AND THE HOUSTON POST WAS OWNED BY SINGLETON GROUP?
5 A. YES.
6 Q. AND THE HOUSTON POST SHUT DOWN?
7 A. YES, IT DID.
8 Q. AND AFTER IT SHUT DOWN, YOU BOUGHT THE ASSETS?
9 A. THAT'S CORRECT.
10 Q. YOU BOUGHT THE ASSETS EVEN THOUGH IT WAS SHUT DOWN?
11 A. WELL, WE NEEDED -- THEY HAD SOME VERY GOOD PHYSICAL
12 EQUIPMENT, PRINTING PRESSES, ET CETERA. YES, WE DID.
13 Q. OKAY. JUST SO WE'RE CLEAR, THOUGH, YOU BOUGHT THE ASSETS
14 OF THE POST EVEN THOUGH IT HAD SHUT DOWN?
15 A. YES, WE DID.
16 Q. AND ONE OF THE REASONS YOU DID THAT WAS TO MAKE SURE THAT
17 NO OTHER POTENTIAL COMPETITOR MIGHT BUY THOSE ASSETS?
18 A. NO, THAT'S NOT TRUE. WE NEEDED THEM FOR WHAT WE FORESAW
19 WAS THE GROWTH OF THE HOUSTON CHRONICLE.
20 Q. AND YOU ALSO TESTIFIED THAT -- I BELIEVE YOU SAID THAT SAN
21 ANTONIO WAS YOUR HOME.
22 A. YES, IT IS.
23 Q. AND YOU SAID THAT YOU ALSO WORKED FOR THE SAN ANTONIO
24 LIGHT.
25 A. YES, I DID.
1868
BENNACK - CROSS / ALIOTO
1 Q. AND ALSO MR. IRISH WAS THE PUBLISHER OF THE SAN FRANCISCO
2 (SIC) LIGHT, I THINK YOU SAID, FOR THREE OR FOUR YEARS.
3 A. YES, HE WAS, FOR SOME PERIOD OF TIME.
4 THE COURT: SAN ANTONIO LIGHT.
5 MR. ALIOTO: I'M SORRY, SAN ANTONIO LIGHT.
6 Q. AND I UNDERSTAND --
7 A. ONE OF YOUR FAVORITE NEWSPAPERS I UNDERSTAND. I READ OF
8 AN EVENT WHERE IT WAS THE ONLY THING YOU HAD TO READ, YOUR
9 HONOR.
10 THE COURT: YOU BET. IT WAS LIGHT IN MY LIFE AT
11 THAT TIME.
12 THE WITNESS: IT WARMED MY HEART, HAVING PUT AS MANY
13 YEARS AS I DID, THAT SOMEBODY WAS READING IT.
14 (LAUGHTER)
15 BY MR. ALIOTO:
16 Q. AND THE FACT IS, IS THAT WHILE MR. IRISH WAS THE PUBLISHER
17 OF THE SAN ANTONIO LIGHT, THAT THE SAN ANTONIO LIGHT ALSO SHUT
18 DOWN?
19 A. YES, IT DID.
20 Q. AND HEARST WAS THE OWNER OF THE SAN ANTONIO LIGHT BUT AS
21 THE PAPER THAT WAS SHUTTING DOWN, YOU PUT THE DOMINANT PAPER,
22 IN THAT CASE THE HOUSTON -- I MEAN, THE --
23 A. THE SAN ANTONIO EXPRESS NEWS.
24 Q. THE SAN ANTONIO EXPRESS?
25 A. YES, THAT'S CORRECT.
1869
BENNACK - CROSS / ALIOTO
1 Q. SO WHAT YOU DID IN SAN ANTONIO, YOU SEEK TO DO IN SAN
2 FRANCISCO; IS THAT TRUE?
3 A. NOT EXACTLY, BECAUSE IT WAS NOT A JOA. THAT WAS A
4 TRADITIONAL SITUATION WHERE WE HAD A FAILED NEWSPAPER ALREADY
5 OUTSIDE A JOA SINCE IT WAS NEVER IN ONE, AND WE WERE FORCED TO
6 SHUT DOWN, AND THE OWNER OF THE EXPRESS NEWS WISHED TO DEPART
7 THE MARKET. THAT MAKES A PRETTY NICE COMBINATION.
8 Q. YES. AND IT COINCIDED, I UNDERSTAND, SIMULTANEOUS WITH
9 YOUR DECISION TO SHUT DOWN THE SAN ANTONIO LIGHT; IS THAT TRUE?
10 A. WELL, I DON'T KNOW --
11 Q. IS THAT TRUE?
12 A. -- ABOUT COINCIDE. WE DID THEM SIMULTANEOUSLY. I DON'T
13 KNOW WHEN THEY DECIDED TO BE A SELLER.
14 Q. AND ALSO, AS I UNDERSTAND IT, ONE OF YOUR PRINCIPAL PAPERS
15 IS IN SEATTLE?
16 A. THAT'S CORRECT.
17 Q. AND IN SEATTLE THE NAME OF YOUR PAPER IS THE
18 INTELLIGENCER?
19 A. POST INTELLIGENCER.
20 Q. AND IT'S THE MORNING PAPER?
21 A. THAT'S CORRECT.
22 Q. AND THE AFTERNOON PAPER IS THE SEATTLE TIMES?
23 A. YES.
24 Q. AND YOU, IN THAT COMPETITION WITH THE SEATTLE TIMES, YOU
25 FELT LIKE YOU WERE UNABLE TO COMPETE AGAINST THEM; DID YOU NOT?
1870
BENNACK - CROSS / ALIOTO
1 A. WE WERE LOSING MONEY, SO WE ATTEMPTED AND SUCCEEDED IN
2 GETTING A JOINT OPERATING AGREEMENT.
3 Q. OKAY. BUT YOU BELIEVED THAT YOU WOULD NOT BE ABLE TO
4 COMPETE AGAINST THEM; IS THAT CORRECT?
5 A. WE THOUGHT WE WERE IN A NEWSPAPER WHICH WAS IN DANGER OF
6 FAILING.
7 Q. EVEN THOUGH YOU HAD THE MORNING PAPER; IS THAT RIGHT?
8 A. THAT'S CORRECT. THAT'S CORRECT.
9 Q. SO YOU WERE ABLE TO SECURE A JOINT OPERATING AGREEMENT?
10 A. YES, WE WERE.
11 Q. AND UNDER THAT AGREEMENT, YOU GET A CERTAIN PERCENTAGE; IS
12 THAT RIGHT?
13 A. THAT'S CORRECT.
14 Q. DOES THE HEARST CORPORATION HAVE ANY POLICY WITH REGARD TO
15 COMPETING? ARE YOU IN FAVOR OF COMPETITION OR NOT?
16 A. OH, I'M CERTAINLY IN FAVOR OF COMPETITION. AND IF YOU
17 LOOK ACROSS OUR PORTFOLIO OF BUSINESSES, WE HAVE PLENTY OF IT.
18 Q. LET ME SHOW YOU WHAT IS MARKED FOR IDENTIFICATION -- OH,
19 NO, IN EVIDENCE AS 64.
20 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
21 THE COURT: VERY WELL.
22 BY MR. ALIOTO:
23 Q. EXHIBIT NUMBER 64 IS A DOCUMENT ENTITLED "SAN FRANCISCO
24 EXAMINER STRATEGIC ALTERNATIVES," A NUMBER OF SCENARIOS. I
25 SHOW YOU THIS DOCUMENT AND THEN IT HAS AS A BACKUP CERTAIN
1871
BENNACK - CROSS / ALIOTO
1 SPREADSHEETS.
2 I ASK YOU, SIR, WHETHER OR NOT YOU'VE SEEN THAT
3 DOCUMENT BEFORE.
4 A. (WITNESS EXAMINES DOCUMENT.) I REALLY DON'T KNOW. HAVE
5 YOU INDICATED THAT IT IS ADDRESSED TO ME? I DON'T KNOW THAT
6 I'VE SEEN IT. I'VE SEEN SO MANY SCHEDULES, SO MANY SCENARIOS,
7 SO MANY PLANS, I CAN'T TELL YOU WHICH ONES I'VE SEEN OR WHEN I
8 SAW THEM.
9 WHAT'S THE DATE OF THIS EVEN? IT'S NOT DATED.
10 Q. I BELIEVE YOU TESTIFIED THAT ALTHOUGH YOU RECEIVED MANY
11 DOCUMENTS THAT ARE LIKE THAT, THAT IT'S POSSIBLE THAT YOU DID
12 RECEIVE THIS DOCUMENT. IS THERE ANYTHING THAT YOU CAN READ
13 FROM IT THAT INDICATES TO YOU THAT YOU RECEIVED THIS DOCUMENT
14 SPEAKING IN SUM OR SUBSTANCE OF THE SUBJECTS THAT ARE THERE?
15 A. I THINK IT'S QUITE LIKELY THAT I DID RECEIVE IT.
16 Q. OKAY.
17 A. I HAVE NO RECOLLECTION, THOUGH.
18 Q. ONE OF THEM AND UNDER THIS SCENARIO "A" -- I MEAN, WAS
19 THERE EVER ANY DISCUSSIONS ABOUT DIFFERENT SCENARIOS THAT YOU
20 WOULD GO THROUGH WITH REGARD TO WHAT YOU WOULD DO AFTER 2005?
21 A. YES.
22 Q. THIS PARTICULAR SCENARIO IS UNDER THE, QUOTE, "MAINTAIN
23 JOA STATUS QUO." AND THEN UNDER "OBJECTIVES," IT STATES:
24 "ACHIEVE PROJECTED ECONOMIC POTENTIAL.
25 "ENCOURAGE CHRONICLE TO BARGAIN.
1872
BENNACK - CROSS / ALIOTO
1 "PRESERVE RIGHT TO COMPETE AS A.M. NEWSPAPER
2 IN 2005."
3 DO YOU SEE THAT?
4 A. I DO.
5 Q. NOW, WAS IT THE OBJECTIVE OR WAS ONE OF THE OBJECTIVES OF
6 THE HEARST CORPORATION IN THE '90'S, EARLY '90'S, TO SOMEHOW
7 GET CONTROL OF THE CHRONICLE?
8 A. IT WAS ONE OF THE ASPIRATIONS AND IT WAS A BELIEF THAT IT
9 WOULD ONE DAY BE SOLD; AND SO THE ANSWER IS, YES, WE WOULD LIKE
10 TO HAVE ACQUIRED IT.
11 Q. NOW, DID YOU BELIEVE THAT THE CHRONICLE WAS A BETTER
12 NEWSPAPER THAN THE EXAMINER?
13 A. NO.
14 Q. SO THAT IF YOU DID NOT BELIEVE THAT THE CHRONICLE WAS A
15 BETTER NEWSPAPER, DID IT OCCUR TO YOU THAT YOU MIGHT USE
16 MARKETING, ADVERTISING AND OTHER REGULAR, ORDINARY MARKET VIEWS
17 TO SELL THE EXAMINER AND MAKE THE EXAMINER THE DOMINANT PAPER
18 IN SAN FRANCISCO?
19 A. IN THE AFTERNOON FIELD?
20 Q. IN ANY FIELD.
21 A. NO. I DID NOT CONSIDER THAT A VIABLE ALTERNATIVE.
22 Q. WHEN DID YOU GIVE UP ON THE EXAMINER EVEN THOUGH YOU
23 BELIEVED IT TO BE A BETTER PAPER THAN THE CHRONICLE?
24 A. I DIDN'T GIVE UP ON IT. THAT'S NOT -- THAT'S YOUR
25 CHARACTERIZATION.
1873
BENNACK - CROSS / ALIOTO
1 Q. WHEN DID YOU COME TO THE VIEW THAT THERE WAS NO CHANCE
2 ABOUT THE EXAMINER EVEN THOUGH YOU BELIEVED IT WAS A BETTER
3 PAPER THAN THE CHRONICLE?
4 A. I THINK SOMETIME IN THE EARLY '90'S THAT MY EXUBERANCE,
5 NEVER AS EXUBERANT AS MR. DANZIG'S, BEGAN TO WANE AS I LOOKED
6 AT THE REALITY. SO I WOULD SAY THAT ABOUT THEN I STARTED
7 LOOKING FOR SOME ALTERNATIVE OTHER THAN CONTINUED PUBLICATION
8 OF THE EXAMINER.
9 Q. DID YOU EVER CONSIDER COMPETING?
10 A. DID I EVER CONSIDER COMPETING? ABSOLUTELY. I DO IT EVERY
11 DAY.
12 Q. IF YOU'LL GO TO THE NEXT PAGE, UNDER SCENARIO "B," WHICH
13 IS HEADNOTED "DISSOLVE JOA NOW, COMPETE IN A.M. FIELD," THAT
14 WAS A SUBJECT AND TOPIC THAT YOU DISCUSSED WITH OTHER
15 REPRESENTATIVES OF THE HEARST CORPORATION; DID YOU NOT?
16 A. I'M SURE THAT IT WAS, YES.
17 Q. UNDER THE "OBJECTIVES" IT STATES, QUOTE:
18 "TO BECOME DOMINANT NEWSPAPER IN SAN
19 FRANCISCO MARKET, BEGIN COMPETITIVE BATTLE
20 BEFORE P.M. POSITION WEAKENS EXAMINER FURTHER."
21 DO YOU SEE THAT?
22 A. I DO.
23 Q. YOU BELIEVED THAT THE EXAMINER BEING IN THE AFTERNOON
24 WEAKENED ITS FUTURE; IS THAT RIGHT?
25 A. CLEARLY.
1874
BENNACK - CROSS / ALIOTO
1 Q. SO THAT SOMETHING HAD TO BE DONE EITHER TO PUT THE
2 EXAMINER IN THE MORNING OR AT LEAST BEGIN TO PREPARE TO BE ABLE
3 TO DO THAT; IS THAT RIGHT?
4 A. THAT HAD TO BE CONSIDERED.
5 Q. AND THAT HAD TO BE CONSIDERED ONLY WITH RESPECT TO THE
6 VIEW OF COMPETING AFTER THE JOA; ISN'T THAT RIGHT?
7 A. WELL, I THINK THIS SAYS THAT DO THAT NOW, AND I'VE STATED
8 BEFORE THAT IF YOU ARE EVER GOING TO GO INTO THE MORNING FIELD
9 AND TRY THAT, THE EARLIER THE BETTER. I'VE STATED THAT.
10 Q. WERE YOU AWARE THAT MR. WHITE, THE PUBLISHER OF THE
11 EXAMINER, TESTIFIED THAT HE INTENDED TO GO TO THE -- HE ADVISED
12 THE CHRONICLE THAT HE WAS GOING TO THE A.M. AND THAT HE
13 INTENDED TO DO IT RIGHT AWAY?
14 A. I'M AWARE THAT HE WROTE THEM AND ASKED FOR THEIR
15 CONCURRENCE THAT HE DO THAT.
16 Q. AND DO YOU KNOW WHETHER -- AND WAS IT YOUR VIEW -- AS FAR
17 AS YOU KNOW, WAS IT YOUR VIEW -- STRIKE THAT.
18 DO YOU KNOW WHETHER OR NOT MR. WHITE WAS OF THE VIEW
19 AND OPINION THAT HE COULD GO IN THE MORNING AND THAT THE
20 CHRONICLE COULDN'T STOP HIM FROM DOING THAT?
21 A. I DON'T KNOW WHAT MR. WHITE'S VIEW ON THAT WAS. I DOUBT
22 THAT HE THOUGHT THAT THEY COULDN'T STOP HIM.
23 Q. WHEN IT'S STATED HERE, "BEGIN COMPETITIVE BATTLE,"
24 COMPETITIVE BATTLE, IS IT YOUR UNDERSTANDING THAT COMPETITIVE
25 BATTLE MEANS MAKING THE PAPER BETTER?
1875
BENNACK - CROSS / ALIOTO
1 A. COMPETITIVE BATTLE MEANS COMPETITIVE BATTLE. OBVIOUSLY
2 YOU DO EVERYTHING YOU CAN TO STRENGTHEN YOUR COMPETITIVE
3 POSITION, SO I ASSUME THAT'S ALSO IMPLIED.
4 Q. DOES IT MEAN PRICE, PRICE COMPETITION?
5 A. WELL, OF COURSE IF THERE'S HEAD-TO-HEAD COMPETITION,
6 PRESUMABLY THERE IS PRICE COMPETITION.
7 Q. NOW, YOU KNOW, OF COURSE, UNDER THE JOA THAT THE HEARST
8 CORPORATION MAINTAINED THE RIGHT AND THE RESPONSIBILITY TO SET
9 THE RATES FOR CIRCULATION AND ADVERTISING?
10 A. I KNOW THAT'S WHAT THE JOA AGREEMENT SAYS.
11 Q. AND SO THAT YOU WOULD HAVE THE AUTHORITY UNDER THAT
12 AGREEMENT TO ENGAGE IN PRICE COMPETITION?
13 A. YOU WOULD HAVE THE AUTHORITY PRESUMABLY, BUT THERE IS
14 NONE.
15 Q. AND SO IF YOU HAD THE AUTHORITY TO DO IT, IF YOU WANTED TO
16 COMPETE ON PRICE, YOU COULD HAVE DONE THAT; COULD YOU NOT?
17 A. I SUPPOSE THE ANSWER TO THAT IS YES. I'M NOT A LAWYER,
18 BUT I SUPPOSE THE ANSWER IS YOU COULD IF YOU HAD WANTED TO, BUT
19 THE FACT IS THEY DIDN'T I DON'T BELIEVE.
20 Q. WHETHER YOU'RE A LAWYER OR NOT, IT'S YOUR UNDERSTANDING,
21 IS IT NOT, AS THE CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF
22 THE HEARST CORPORATION, THAT IF YOU WANTED TO COMPETE AGAINST
23 THE CHRONICLE ON PRICE IN TERMS OF ADVERTISERS AND SUBSCRIBERS,
24 YOU HAD THE RIGHT AND THE AUTHORITY TO DO IT UNDER THE JOA;
25 ISN'T THAT TRUE?
1876
BENNACK - CROSS / ALIOTO
1 A. THAT'S WHAT THE LANGUAGE SAYS.
2 Q. DID YOU EVER -- DID YOU EVER -- DID YOU EVER DO IT?
3 A. AS FAR AS I KNOW, PRICE DECISIONS WERE MADE JOINTLY.
4 Q. UNDER THE ACTION STEPS UNDER SCENARIO "B" IT STATES AS
5 FOLLOWS:
6 "1. SEEK TERMINATION OF JOA.
7 "SEEK IMMEDIATE DIVISION OF ASSETS.
8 "RECRUIT MANAGEMENT AND STAFF.
9 "LAUNCH COMPETITIVE A.M. EXAMINER."
10 DO YOU SEE THAT?
11 A. I DO.
12 Q. NOW, DID YOU EVER DISCUSS RECRUITING MANAGEMENT AND STAFF,
13 EITHER FROM THE CHRONICLE OR FROM OTHER PAPERS THROUGHOUT THE
14 COUNTRY?
15 A. I DON'T RECALL A SPECIFIC DISCUSSION OF THIS SCENARIO
16 GOING FAR ENOUGH TO GET TO THAT KIND OF DETAIL.
17 Q. WHETHER IT BE THIS SCENARIO OR ANY OTHER, MY QUESTION IS:
18 DID YOU EVER CONSIDER OR DID YOU EVER ATTEMPT TO RECRUIT
19 MANAGEMENT OR STAFF FROM EITHER THE CHRONICLE OR FROM ANY OTHER
20 NEWSPAPER IN THE COUNTRY?
21 A. OH, ABSOLUTELY.
22 Q. BY LAUNCHING A COMPETITIVE A.M. EXAMINER, DID THAT -- DOES
23 THAT -- FIRST OF ALL, THAT WAS DISCUSSED FROM TIME TO TIME; IS
24 THAT RIGHT?
25 A. YES, SIR.
1877
BENNACK - CROSS / ALIOTO
1 Q. AND BY LAUNCHING A COMPETITIVE A.M. EXAMINER, YOU
2 UNDERSTOOD, DID YOU NOT, THAT BECAUSE THE EXAMINER WAS
3 GENERALLY IN THE AFTERNOON, YOU WOULD HAVE TO COMPETE ON
4 SOMETHING AGAINST THE CHRONICLE OTHER THAN JUST BEING IN THE
5 MORNING?
6 A. I DON'T UNDERSTAND THE QUESTION.
7 Q. WELL, YOU'D HAVE TO IMPROVE THE QUALITY OF YOUR PAPER OR
8 LOWER YOUR PRICES OR DO SOMETHING DIFFERENT THAN THE CHRONICLE;
9 DIDN'T YOU BELIEVE THAT?
10 A. WELL, YOU WOULD HAVE TO SPEND A GREAT DEAL OF MONEY TO TRY
11 TO GAIN CIRCULATION NOTWITHSTANDING THE QUALITY OF THE PRODUCT.
12 SO THERE WOULD BE MANY LEVELS THAT YOU WOULD -- THAT WOULD HAVE
13 TO CHANGE. IT WOULDN'T ONLY BE THE MORNING, ALTHOUGH WE
14 BELIEVE THAT'S A CRITICAL INGREDIENT.
15 Q. NOW, THIS SAYS, QUOTE:
16 "ECONOMIC POTENTIAL.
17 "100 MILLION-DOLLAR INVESTMENT RETURN,"
18 QUESTION MARKS.
19 DO YOU SEE THAT?
20 A. I DO.
21 Q. OKAY. NOW, HAD YOU EVER DISCUSSED WITH ANY OF THESE FOLKS
22 BEFORE ANY -- FOR INSTANCE, MR. DANZIG OR MR. MAURER OR
23 MR. GANZI OR MR. IRISH THE POSSIBILITY OF INVESTING
24 $100 MILLION OR MORE IN THE SAN FRANCISCO EXAMINER?
25 A. WELL, I READ THE COMMENT ON THAT PAGE, MR. ALIOTO. IT
1878
BENNACK - CROSS / ALIOTO
1 SAYS:
2 "EMOTIONALLY SATISFYING, HIGH-RISK
3 ALTERNATIVE. SUCCESS WOULD LIKELY PRODUCE TWO
4 MONEY-LOSING NEWSPAPERS LOCKED IN A LONG-TERM
5 BATTLE FOR SUPREMACY."
6 THAT WOULD BE MY VIEW OF THE OUTCOME OF THAT
7 SCENARIO.
8 Q. OKAY.
9 A. DID WE DISCUSS IT? OF COURSE. WE DISCUSSED EVERYTHING
10 ONE COULD POSSIBLY DO. I'VE STIPULATED TO THAT PREVIOUSLY.
11 Q. ALL RIGHT. JUST SO WE'RE CLEAR ABOUT -- GOING BACK TO MY
12 QUESTION, DID YOU DISCUSS THE POSSIBILITY OF THE
13 100 MILLION-DOLLAR INVESTMENT?
14 A. I DON'T RECALL THAT SPECIFIC NUMBER OR INVESTMENT AROUND
15 THAT NUMBER.
16 Q. OR ANY AMOUNT LIKE THAT?
17 A. NO, I DON'T RECALL IT.
18 Q. OKAY. NOW, DID YOU BELIEVE THAT IF, IN FACT, YOU COMPETED
19 HEAD TO HEAD, THAT IT WOULD BE HIGH RISK?
20 A. YES.
21 Q. AND BECAUSE YOU BELIEVED -- AND IS IT CORRECT THAT BECAUSE
22 YOU BELIEVED IT WOULD BE -- STRIKE THAT.
23 AND YOU ARE FAMILIAR, ARE YOU NOT, THAT IN OTHER
24 INDUSTRIES IN THE UNITED STATES PEOPLE ARE COMPETING HEAD TO
25 HEAD AGAINST OTHER COMPETITORS ALL THE TIME?
1879
BENNACK - CROSS / ALIOTO
1 A. SUCH AS IN TELEVISION AND MAGAZINES AND NEWSPAPERS
2 COMPETING HERE WITH 28 TELEVISION STATIONS, ET CETERA. I'M
3 PRETTY WELL AWARE OF COMPETITION.
4 Q. AND THEN KNOWING THAT AND BELIEVING THAT, ISN'T IT CORRECT
5 THAT YOU WANTED TO TAKE THE AVENUE OF ATTEMPTING TO BUY THE
6 CHRONICLE AND NOT COMPETING AGAINST THE CHRONICLE? IS THAT
7 TRUE?
8 A. I WAS FIRM OF THE VIEW THAT THERE WOULD BE ONE SURVIVING
9 NEWSPAPER AND, YES, I WOULD LIKE TO HAVE OWNED IT.
10 Q. EVEN THOUGH YOU BELIEVED THE EXAMINER WAS BETTER THAN THE
11 CHRONICLE --
12 A. I DIDN'T SAY THAT.
13 Q. YOU WANTED THE CHRONICLE --
14 A. I SAID THAT -- YOU ASKED ME IF EITHER WAS A WORLD CLASS
15 NEWSPAPER. YOU ASKED ME DID I THINK THE CHRONICLE WAS BETTER
16 THAN THE EXAMINER, AND I SAID NO. I DON'T THINK I SAID I
17 BELIEVED THE EXAMINER WAS BETTER THAN THE CHRONICLE; BUT IF YOU
18 CAN -- IF I SAID THAT --
19 Q. LET'S CLEAR IT UP.
20 THE COURT: WELL, THE QUALITY OF THE NEWSPAPERS IS
21 NOT AN ISSUE HERE.
22 THE WITNESS: WELL....
23 BY MR. ALIOTO:
24 Q. YOU ATTEMPTED, THEN, IS IT NOT CORRECT, AFTERWARDS, YOU
25 ATTEMPTED THEN TO ENTER INTO A PARTNERSHIP WITH THE CHRONICLE?
1880
BENNACK - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. AND THE IDEA OF THE PARTNERSHIP WITH THE CHRONICLE WAS
3 THAT YOU WOULD SHUT DOWN THE EXAMINER AND THAT THE CHRONICLE
4 WOULD GO FORWARD AND YOU WOULD GET A PERCENTAGE OF THE REVENUE
5 FROM THE CHRONICLE?
6 A. WE WOULD OFFER THE EXAMINER FOR SALE AND IF THERE WERE NOT
7 A BUYER, WE WOULD SHUT THE EXAMINER DOWN.
8 Q. LIKE IN THE SIMILAR PATTERN AND MODEL OF THE SAN ANTONIO
9 LIGHT?
10 A. THAT SAME THING OCCURRED ALTHOUGH THEY WERE NOT MEMBERS OF
11 A JOINT OPERATING AGREEMENT. THAT WAS A PURE DIRECT SEARCH FOR
12 A BUYER OF AN INDEPENDENT NEWSPAPER.
13 Q. SO YOU CONTEMPLATED -- LET'S ASSUME THAT UNDER THAT
14 PROGRAM THAT THE EXAMINER WAS SHUT DOWN. THE CONTEMPLATION
15 WAS, IS THAT YOU WOULD BE PAID A CERTAIN PERCENTAGE OF THE
16 REVENUE FROM THE CHRONICLE OPERATING ALONE; CORRECT?
17 A. WE WOULD RECEIVE A CERTAIN PERCENTAGE OF THE NET PROCEEDS
18 OF THE SURVIVING NEWSPAPER, YES.
19 Q. AND YOU WOULD RECEIVE THOSE PROCEEDS FOR APPROXIMATELY 50
20 YEARS OR IN PERPETUITY; IS THAT RIGHT?
21 A. THAT WAS OUR VIEW.
22 Q. AND SO THE IDEA WAS, IS THAT YOU WOULD BE BEING PAID BY
23 THE CHRONICLE FOR NOT PUBLISHING A PAPER; IS THAT RIGHT?
24 A. NO, I WOULDN'T CHARACTERIZE IT THAT WAY AT ALL.
25 Q. WELL, IF YOU WERE GOING TO BE PAID IN PERPETUITY OR 50
1881
BENNACK - CROSS / ALIOTO
1 YEARS, OR WHATEVER THE TIME PERIOD WAS, YOU WERE BEING PAID
2 BECAUSE THE CHRONICLE WOULD NO LONGER BE PUBLISHING UNDER
3 HEARST; CORRECT?
4 A. THE EXAMINER, I'M NOT SURE HOW -- YOU'VE CONFUSED ME.
5 Q. THE EXAMINER WOULD NO LONGER BE PUBLISHED BY HEARST; IS
6 THAT CORRECT?
7 A. CORRECT. CORRECT.
8 Q. SO YOU WERE BEING PAID NOT TO PUBLISH THE EXAMINER;
9 CORRECT?
10 A. I DON'T VIEW IT THAT WAY AT ALL. IF YOU'D LIKE AN
11 EXPLANATION, I VIEW IT AS THE TWO PARTIES WHO HAVE MADE
12 SIGNIFICANT INVESTMENT IN THE SAN FRANCISCO NEWSPAPERS WOULD GO
13 FORWARD AS A PARTNER.
14 Q. AND UNDER THIS PARTNERSHIP WITH YOUR FORMER COMPETITOR,
15 PART OF THE DEAL WOULD BE THAT NOBODY -- THAT EACH PARTNER
16 WOULD NOT BE ABLE TO COMPETE AGAINST THE CHRONICLE WITHIN
17 60 MILES OF SAN FRANCISCO; IS THAT RIGHT?
18 A. WELL, THAT'S IN THE PRESENT JOA. SINCE THERE WAS NEVER AN
19 AGREEMENT, I DON'T KNOW WHAT THE FINAL NEW AGREEMENT WOULD --
20 HOW IT WOULD HAVE READ.
21 Q. LET ME HAND YOU WHAT IS MARKED AS EXHIBIT NUMBER 66 IN
22 EVIDENCE.
23 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
24 HONOR.
25 THE COURT: VERY WELL.
1882
BENNACK - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. EXHIBIT 66 IS AN E-MAIL FROM YOU DATED AUGUST 14, 1997, TO
3 A NUMBER OF INDIVIDUALS AND IT CARRIES WITH IT AN E-MAIL THAT
4 WAS SENT APPARENTLY TO YOU FROM MR. GUITTAR.
5 A. YES.
6 Q. THAT IS THE E-MAIL THAT YOU RECEIVED AND THEN SENT ON TO
7 OTHERS ON OR ABOUT THE DATE INDICATED; IS IT NOT?
8 A. YES, IT IS.
9 Q. AND THIS IS A REPORT FROM MR. GUITTAR AND AT THE TIME
10 MR. GUITTAR WAS THE PUBLISHER OF THE EXAMINER; CORRECT?
11 A. YES, HE WAS.
12 Q. AND THE DATE OF THIS IS AUGUST 14, 1997, AND HE IS WRITING
13 TO YOU IN REFERENCE TO A LUNCH THAT HE HAD WITH MR. SIAS OF THE
14 CHRONICLE; CORRECT?
15 A. THAT'S CORRECT.
16 Q. AND HE BEGINS BY STATING, QUOTE:
17 "JOHN SIAS INVITED ME TO LUNCH YESTERDAY
18 TO," QUOTE, "'BRING ME UP-TO-DATE ON THE
19 INTERNAL SITUATION,'" END OF QUOTE.
20 DO YOU SEE THAT?
21 A. YES, I DO.
22 Q. AND YOU UNDERSTOOD THE "INTERNAL SITUATION" TO BE THE
23 FAMILY SITUATION AT THE CHRONICLE; IS THAT RIGHT?
24 A. I GUESS THAT'S WHAT I UNDERSTOOD IT TO MEAN. IT'S NOT
25 CLEAR TO ME THAT THE SITUATION HERE -- YES, IT COULD HAVE MEANT
1883
BENNACK - CROSS / ALIOTO
1 THAT.
2 Q. WELL, DID IT MEAN THAT TO YOU REGARDLESS OF WHAT MR. --
3 A. YES, I THINK THAT I WOULD HAVE READ IT TO MEAN THAT.
4 Q. OKAY. NOW, AT THIS TIME ONE OF THE THINGS THAT YOU HAD
5 RESOLVED TO DO WAS TO DO WHATEVER YOU COULD TO ATTEMPT TO BUY
6 THE CHRONICLE OR AT LEAST ENTER INTO SOME KIND OF AN AGREEMENT,
7 LIKE A PARTNERSHIP, WITH THE CHRONICLE; IS THAT RIGHT?
8 A. YES.
9 Q. AND UNDER BOTH OF THOSE INTENTIONS, AT LEAST AS OF THIS
10 TIME, THE IDEA WOULD BE IS THAT THE EXAMINER WOULD BE SHUT
11 DOWN; IS THAT RIGHT?
12 A. THE EXAMINER UNDER ANY OF THOSE SCENARIOS WOULD BE OFFERED
13 FOR SALE AND IF THERE WERE NOT A BUYER, IT WOULD BE SHUT DOWN.
14 Q. NOW, DOWN THERE, IT STATES UNDER THE "INCLUDED IN THE
15 PACKET," AND THIS IS FROM MR. SIAS, FIRST OF ALL, HE SAYS IN
16 THE SECOND PARAGRAPH, QUOTE:
17 "JOHN SAID THAT HE JUST SENT A PACKET TO
18 EACH OF THE CHRONICLE SHAREHOLDERS ASKING THEM
19 TO STUDY THE MATERIAL."
20 DO YOU SEE THAT?
21 A. YES, I DO.
22 Q. THEN BELOW THAT IS WHAT MR. GUITTAR DESCRIBES AS, QUOTE,
23 "INCLUDED IN THE PACKET." DO YOU SEE THAT?
24 A. YES.
25 Q. SO THAT HE WAS SENDING TO YOU FOLKS A PACKET THAT HE
1884
BENNACK - CROSS / ALIOTO
1 APPARENTLY HAD SENT TO THE CHRONICLE SHAREHOLDERS.
2 A. NO, I DON'T THINK THAT SAYS THAT. LET ME REREAD IT, BUT I
3 THINK HE SAID HE IS SENDING A PACKET TO HIS OWN SHAREHOLDERS
4 AND INCLUDED, AND THEN HE DESCRIBES WHAT'S THERE. I DON'T
5 BELIEVE HE'S SAYING -- HE COULDN'T SEND THE PACKET BY E-MAIL TO
6 BEGIN WITH, BUT I DON'T THINK THAT'S WHAT HE'S SAYING. THAT'S
7 NOT THE WAY I READ THAT.
8 Q. HE IS SENDING YOU THE INFORMATION AT LEAST IN THE PACKET
9 THAT WAS SENT TO THE CHRONICLE SHAREHOLDERS; CORRECT?
10 A. I WOULD ASSUME SOME HIGHLIGHTS AS HE UNDERSTOOD THEM OF
11 THAT.
12 Q. YOU UNDERSTOOD THAT MR. SIAS WAS SENDING YOU INFORMATION
13 CONTAINED IN PACKETS THAT WERE SENT TO THE CHRONICLE
14 SHAREHOLDERS; IS THAT RIGHT?
15 A. NO, I DON'T READ THAT THAT WAY. THOSE -- IF YOU READ
16 THE -- IF YOU READ "A," HE'S TALKING ABOUT RUNNING SCENARIOS IN
17 WHICH HEARST WOULD HAVE 20, 26 AND A HALF AND VARIOUS
18 SCENARIOS. THAT'S SOMETHING WE'D BEEN TALKING ABOUT. HE
19 DIDN'T NEED TO ADVISE ME.
20 I WAS HOPING THAT HE WAS SHARING THAT INFORMATION
21 WITH HIS SHAREHOLDERS. I DON'T KNOW WHAT THAT MEANS ON THE
22 LEGAL AND OTHER ISSUES. IT'S NOT EXPLAINED. NOR IN THE CASE
23 OF THE GOVERNANCE. THERE WAS ALWAYS A QUESTION AS TO WHAT
24 HEARST'S ROLE IN THE FROM THIS POINT GOING FORWARD AS TO
25 GOVERNANCE. AND AS TO BOOZ ALLEN RECOMMENDATIONS, SAYING "BOOZ
1885
BENNACK - CROSS / ALIOTO
1 ALLEN RECOMMENDATIONS" HARDLY TELLS ME WHAT THEY ARE.
2 Q. GO BACK TO THE PARAGRAPH PLEASE, SIR. IT STATES, QUOTE:
3 "JOHN SAID THAT HE JUST SENT A PACKET TO
4 EACH OF THE CHRONICLE SHAREHOLDERS ASKING THEM
5 TO STUDY THE MATERIAL, DISCUSS IT WITHIN THEIR
6 PARTICULAR FAMILY CONSTITUENCIES PRIOR AND BE
7 PREPARED TO REACT TO IT AT A SPECIAL
8 SHAREHOLDERS MEETING SCHEDULED FOR LATE
9 SEPTEMBER."
10 DO YOU SEE THAT?
11 A. I DO.
12 Q. FROM THAT YOU UNDERSTOOD THERE WAS GOING TO BE A SPECIAL
13 SHAREHOLDERS MEETING OF THE CHRONICLE FOLKS?
14 A. THAT'S WHAT IT SAYS.
15 Q. AND YOU UNDERSTOOD FROM THAT THAT MR. SIAS HAD SENT THEM A
16 PACKET TO STUDY; CORRECT?
17 A. THAT'S WHAT IT SAYS, YES.
18 Q. AND YOU ALSO UNDERSTOOD THAT MR. SIAS WAS TELLING YOU WHAT
19 WAS -- OR DESCRIBING THE INFORMATION OF WHAT WAS IN THE PACKET;
20 CORRECT?
21 A. VERY THIN DESCRIPTION BUT, YES, THERE ARE SOME ITEMS THERE
22 THAT PRESUMABLY WERE IN THE PACKET.
23 Q. OKAY. DID YOU BELIEVE THAT THAT WAS A BREACH OF MR. SIAS'
24 DUTY AND RESPONSIBILITIES TO THE SHAREHOLDERS OF THE CHRONICLE?
25 A. NO, I DO NOT.
1886
BENNACK - CROSS / ALIOTO
1 Q. OKAY. IT STATES, "INCLUDED IN THE PACKET." NOW, IT
2 STATES -- THERE ARE FOUR DIFFERENT SCENARIOS. DO YOU SEE THAT
3 WHERE IT SAYS FOUR DIFFERENT SCENARIOS?
4 A. WHERE ARE YOU, MR. ALIOTO?
5 Q. UNDER "INCLUDED IN THE PACKET, A."
6 A. OH, YES. "FOUR DIFFERENT SCENARIOS," YES.
7 Q. AND IT SAYS "FINANCIAL PROJECTIONS"?
8 A. I SEE IT. I'M SORRY.
9 Q. AND IT'S BASED ON THE LATEST FORECASTED DATA FROM THE
10 AGENCY. DO YOU SEE THAT?
11 A. YES.
12 Q. AND THERE WERE FOUR DIFFERENT SCENARIOS. FIRST WOULD BE
13 HOW CHRONICLE WOULD FAIR WITH HEARST SPLITS AT 20 PERCENT. DO
14 YOU SEE THAT?
15 A. YES.
16 Q. YOU UNDERSTOOD THAT THAT MEANT WHAT, AS A PARTNERSHIP?
17 A. I WOULD READ THAT TO MEAN IF HEARST GOT 20 PERCENT.
18 Q. AND THE CHRONICLE WOULD GET 80 PERCENT?
19 A. YES, SIR.
20 Q. UNDER A PARTNERSHIP?
21 A. YES, SIR.
22 Q. WHICH WOULD INCLUDE THE EXAMINER EITHER SHUT DOWN OR SOLD?
23 A. YES, SIR.
24 Q. AND THE NEXT SCENARIO WAS 26 PERCENT -- 26.5 PERCENT;
25 CORRECT?
1887
BENNACK - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. AND THE NEXT, AND IT STATES THERE:
3 "(JOHN SAYS IS THE BREAK-EVEN POINT FOR
4 CHRONICLE BETWEEN NOW AND 2005.)"
5 DO YOU SEE THAT?
6 A. YES.
7 Q. OKAY. AND THEN THERE'S ONE FOR 30 PERCENT. THAT MEANS
8 THAT HEARST WOULD GET 30 PERCENT, THE CHRONICLE 70 PERCENT.
9 A. THAT'S WHAT I READ THAT TO MEAN, YES.
10 Q. AGAIN UNDER THE THEORY THAT THE EXAMINER WOULD BE SHUT
11 DOWN OR SOLD.
12 A. SOLD OR SHUT DOWN.
13 Q. AND THEN IT SAYS:
14 "AND ONE EXHIBIT SHOWING WHAT THEY COULD
15 EXPECT IF," QUOTE, "'HEARST CHOSE TO GO TO
16 WAR,'" END OF QUOTE.
17 DO YOU SEE THAT?
18 A. YES.
19 Q. AND THAT WOULD MEAN OR MEANT TO YOU HEAD-TO-HEAD
20 COMPETITION; CORRECT?
21 A. I ASSUME THAT'S WHAT "WAR" MEANS.
22 Q. I WANT TO DIRECT YOUR ATTENTION TO THE LAST PARAGRAPH ON
23 THAT PAGE. IT STATES, QUOTE:
24 "SIAS SAID THERE IS GENERAL AGREEMENT THAT
25 THE CHRONICLE COMPANY SHOULD SELL ITS FRINGE
1888
BENNACK - CROSS / ALIOTO
1 PROPERTIES - THE TWO NEWSPAPERS AND THE MIDWEST
2 TV STATIONS."
3 DO YOU SEE THAT?
4 A. I DO.
5 Q. AND THAT MEANT TO YOU THAT THAT MIGHT BE A POSSIBILITY AND
6 THAT IF THAT HAPPENED, THERE MIGHT BE LESS LIKELIHOOD OF THE
7 CHRONICLE SHAREHOLDERS' WILLINGNESS TO SELL THE CHRONICLE. IS
8 THAT THE WAY YOU INTERPRETED THAT?
9 A. WHERE DOES THAT SAY THAT? LET ME LOOK. "SIAS SAYS AND
10 SOME WOULD BE SOLD IN '98 TO AVOID..." I DON'T THINK IT SAYS
11 THAT.
12 Q. DID YOU UNDERSTAND IT THAT WAY?
13 A. NO. I UNDERSTOOD IT TO MEAN THAT THEY WERE GOING TO SELL
14 SOME OF THEIR FRINGE PROPERTIES.
15 Q. LET ME DIRECT YOUR ATTENTION TO EXHIBIT 85 THAT YOU WERE
16 QUESTIONED ABOUT ON YOUR CROSS-EXAMINATION.
17 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
18 THE COURT: VERY WELL.
19 BY MR. ALIOTO:
20 Q. I BELIEVE YOU MAY HAVE A COPY OF IT ALREADY, BUT LET ME
21 JUST GIVE YOU ONE SO YOU DON'T HAVE TO LOOK. EXHIBIT 85 IS A
22 DOCUMENT DATED OCTOBER 24, 1997. IT IS DIRECTED TO YOU AND IT
23 IS FROM MR. SIAS.
24 A. YES, SIR.
25 Q. AND THAT IS, AS YOU IDENTIFIED ON YOUR EXAMINATION, A
1889
BENNACK - CROSS / ALIOTO
1 DOCUMENT THAT MR. SIAS SENT TO YOU AND THAT YOU RECEIVED ON OR
2 ABOUT THAT DATE; IS THAT RIGHT?
3 A. YES, SIR.
4 Q. NOW, IN THE FIRST -- SECOND PARAGRAPH, MR. SIAS IS
5 ADVISING YOU, AMONG OTHER THINGS, AS FOLLOWS, HE BEGINS BY
6 STATING, QUOTE:
7 "CHRONICLE SHAREHOLDERS HAVE DECIDED TO KEEP
8 THE COMPANY INTACT AND UNDER THEIR EXCLUSIVE
9 OWNERSHIP FOR THE LONG-TERM, AND COORDINATED
10 ESTATE PLANNING ACTIONS ARE BEING UNDERTAKEN BY
11 THEM TO ASSURE THIS RESULT."
12 DO YOU SEE THAT?
13 A. YES, SIR.
14 Q. YOU UNDERSTOOD OR BELIEVED THAT THAT WAS AN INDICATION TO
15 YOU THAT EITHER THERE WAS NO CHANCE OF THE SO-CALLED
16 PARTNERSHIP OR AT LEAST IT WAS PUT OFF FOR A WHILE?
17 A. THAT'S WHAT IT SAYS.
18 Q. AND THE LAST SENTENCE ON THAT PARAGRAPH STATES, QUOTE:
19 "THEY HAVE ALSO DECIDED NOT TO EXTEND OUR
20 JOINT NEWSPAPER OPERATIONS BEYOND THE
21 SEPTEMBER 12, 2005, EXPIRATION DATE OF OUR JOINT
22 OPERATING AGREEMENT."
23 DO YOU SEE THAT?
24 A. YES, I DO.
25 Q. SO YOU WERE ADVISED THEN THAT ALTHOUGH THE CHRONICLE HAD
1890
BENNACK - CROSS / ALIOTO
1 THE RIGHT TO EXTEND IT TO 2015, YOU WERE BEING ADVISED THAT,
2 FROM MR. SIAS, THAT THE CHRONICLE DID NOT INTEND TO DO THAT?
3 A. THAT'S WHAT IT SAYS.
4 Q. SO THAT THE JOA WOULD BE OVER AT 2005 AND SOMETHING EITHER
5 HAS TO BE DONE BY THAT TIME OR WOULD HAVE TO BE HEAD-TO-HEAD
6 COMPETITION OR JUST LEAVE THE MARKET?
7 A. YES.
8 Q. IF YOU'LL GO DOWN ANOTHER PARAGRAPH WHERE IT BEGINS, "IF
9 HEARST CONSIDERED." DO YOU SEE THAT?
10 A. YES.
11 Q. NOW, MR. SIAS IS STATING TO YOU:
12 "IF HEARST CONSIDERED CLOSING THE EXAMINER,
13 CHRONICLE WOULD GIVE ITS APPROVAL TO SUCH ACTION
14 AND WOULD TAKE ON THE RESPONSIBILITY OF PUTTING
15 OUT THE ENTIRE SUNDAY PAPER SPLITTING EQUALLY
16 WITH HEARST ITS INCREMENTAL EDITORIAL COSTS OF
17 DOING SO."
18 DO YOU SEE THAT?
19 A. YES, SIR.
20 Q. AND SUBSEQUENTLY HE ALSO SAID IN THIS DOCUMENT, WE'LL GET
21 TO IT IN A MOMENT, BUT HE ALSO SAID THAT IN EXCHANGE YOU WOULD
22 GET 50-50 OF THE SAN FRANCISCO NEWSPAPER AGENCY -- OR YOU WOULD
23 GET 50-50 OF THE REVENUE -- PROFIT FROM THE COMPANY?
24 A. SUBJECT TO SOME CHARGES THAT WOULD REDUCE THAT AND TO THE
25 END -- TO 2005.
1891
BENNACK - CROSS / ALIOTO
1 Q. OKAY. SO WHAT HE WAS SAYING NOW, HIS CHANGE WAS, "OKAY,
2 YOU SHUT DOWN THE EXAMINER. WE'LL GIVE YOU 50-50, BUT ONLY TO
3 2005"; IS THAT RIGHT?
4 MR. ROSCH: YOUR HONOR, OBJECTION, LACKING IN
5 FOUNDATION. IF HE COULD JUST READ THE NEXT PARAGRAPH AFTER
6 WHAT HE JUST READ.
7 THE WITNESS: HE SAYS -- AND WE SAID ALWAYS, AND HE
8 ARTICULATES HERE THAT HEARST WOULD HAVE TO OFFER THE EXAMINER
9 FOR SALE IN COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE
10 U.S. DEPARTMENT OF JUSTICE FOR FAILING NEWSPAPERS. AND UNDER
11 THAT SCENARIO IF THERE WERE NOT A BUYER -- IF THERE WERE A
12 BUYER, THE EXAMINER WOULD BE SOLD TO THAT BUYER. IF THERE
13 WEREN'T, IT WOULD BE SHUT DOWN.
14 BY MR. ALIOTO:
15 Q. WELL, LET'S TALK ABOUT THAT JUST FOR ONE MOMENT.
16 YOU UNDERSTOOD OR YOU BELIEVED, ISN'T IT CORRECT YOU
17 BELIEVED THAT THE EXAMINER STANDING ALONE WOULD NOT BE ABLE TO
18 MAKE IT?
19 A. I TESTIFIED I THOUGHT THE EXAMINER OFFERED FOR SALE WOULD
20 BE SOLD.
21 Q. AND DID YOU THINK THAT THAT WOULD MAKE IT, THAT THE
22 EXAMINER WOULD MAKE IT IF IT WERE SOLD?
23 A. IT DEPENDS ON WHAT THE EXAMINER IS. YOU'VE HEARD LOTS OF
24 TESTIMONY ABOUT THAT, AND YOU KNOW I DON'T BELIEVE THAT A
25 FULL-SERVICE NEWSPAPER COMPETING THROUGHOUT THE REGION COULD IN
1892
BENNACK - CROSS / ALIOTO
1 FACT SURVIVE AGAINST THE CHRONICLE.
2 Q. OKAY. NOW, ONE OF THE CONDITIONS THAT MR. -- THAT
3 MR. SIAS PUT ON YOU IN THIS VERY LETTER WAS THAT IF YOU DID
4 CLOSE IT OR PUT IT UP FOR SALE, THAT YOU WOULD HAVE TO AGREE IN
5 THE NEXT PARAGRAPH, AND IF YOU'LL LOOK AT THE SECOND SENTENCE
6 AFTER THE FIRST ONE THAT WAS JUST READ, IT STATES, QUOTE:
7 "IF SUCH A SALE COULD BE NEGOTIATED, IT
8 WOULD BE MADE OUTSIDE OF THE JOA..."
9 THAT MEANS ANYONE WHO BOUGHT THE EXAMINER COULD HAVE
10 NO PART OF THE JOA; CORRECT?
11 A. THAT'S RIGHT.
12 Q. "... AND WOULD NOT INCLUDE EITHER AN
13 ASSIGNMENT OF ANY OF HEARST'S RIGHTS OR
14 OBLIGATIONS UNDER THE JOINT OPERATING
15 AGREEMENT..."
16 THAT MEANS THAT ANY RIGHTS THAT YOU HAD UNDER THAT
17 COULD NOT BE SOLD TO A THIRD PARTY; RIGHT?
18 A. CORRECT.
19 Q. "... AND ANY OF HEARST'S INTEREST IN ANY OF
20 THE PROPERTY THAT IS OWNED BY CHRONICLE AND
21 HEARST AS TENANTS IN COMMON..."
22 YOU COULDN'T GIVE ANY OF THAT PROPERTY TO ANY
23 POTENTIAL SELLER; CORRECT?
24 A. THAT'S CORRECT.
25 Q. "... AND ANY CLASS B COMMON STOCK OF SAN
1893
BENNACK - CROSS / ALIOTO
1 FRANCISCO NEWSPAPER..."
2 THAT'S THE NEWSPAPER AGENCY. ANY POTENTIAL BUYER
3 COULDN'T HAVE ANY OF THAT; CORRECT?
4 A. CORRECT.
5 Q. "... AND THE SUNDAY PAPER."
6 IT COULDN'T HAVE ANY PART IN THE SUNDAY PAPER;
7 RIGHT?
8 A. CORRECT.
9 Q. OKAY. SO WHAT YOU UNDERSTAND MR. SIAS WAS SAYING IS, IS
10 THAT IF YOU CLOSE THE CHRONICLE -- THE EXAMINER OR PUT IT UP
11 FOR SALE, YOU'LL GET 50-50, BUT IF YOU PUT IT UP FOR SALE, YOU
12 CAN'T INCLUDE THE PROPERTY, YOU CAN'T INCLUDE THE SUNDAY PAPER,
13 YOU CAN'T INCLUDE ANY OF THE STOCK IN THE SAN FRANCISCO
14 NEWSPAPER AGENCY AND YOU CAN'T INCLUDE ANYTHING UNDER THE JOA;
15 CORRECT?
16 A. THAT'S WHAT IT SAYS.
17 Q. YOU WERE ALSO QUESTIONED OFF OF EXHIBIT NUMBER 67.
18 BY THE WAY, YOU UNDERSTOOD, DID YOU NOT, THAT THE
19 WHOLE PURPOSE OF THE JOA WAS TO MAKE SURE THAT COMPETING
20 NEWSPAPERS WOULD BE ABLE TO SURVIVE IN A PARTICULAR MARKET?
21 A. THAT WAS THE PURPOSE OF THE NEWSPAPER PRESERVATION ACT
22 WHICH DID NOT EXIST WHEN THIS CONTRACT WAS ENTERED INTO, BUT IT
23 WAS CERTAINLY THE INTENTION OF THE PARTIES TO PUT THEIR ASSETS
24 TOGETHER IN ORDER TO CAUSE BOTH PAPERS TO SURVIVE.
25 Q. AND IT IS CORRECT, IS IT NOT, THAT YOU UNDERSTOOD THAT IF
1894
BENNACK - CROSS / ALIOTO
1 THE EXAMINER WERE SHUT DOWN, THE PURPOSE OF THE NEWSPAPER
2 PRESERVATION ACT WOULD NOT HAPPEN ANY LONGER IN SAN FRANCISCO?
3 A. IT WOULD NO LONGER BE ACHIEVED. I DON'T -- YES. THE
4 PURPOSES OF THE NEWSPAPER ACT WAS TO PROMOTE THAT. I
5 UNDERSTAND IT TO BE AN EXEMPTION TO THE ANTITRUST LAWS THAT ONE
6 CAN TAKE ADVANTAGE OF IF ONE WISHES, BUT NEED NOT.
7 Q. AND YOU UNDERSTOOD THAT, AT LEAST UP TO THAT POINT IN
8 TIME, IT WAS ACTUALLY WORKING?
9 A. WELL, IT'S WORKING IF "WORKING" MEANS THAT WE'RE STILL
10 HERE.
11 Q. AND MAKING MONEY.
12 A. NO, NOT MAKING MONEY. WE ARE ENJOYING A PROFIT BY VIRTUE
13 OF OUR SHARE OF THE OVERALL ENTERPRISE, THE BUSINESS
14 PROPOSITION. THE EXAMINER IS NOT MAKING MONEY, MR. ALIOTO.
15 Q. YOU'RE MAKING MONEY.
16 A. HEARST IS MAKING MONEY. FORTUNATELY NOT ONLY IN SAN
17 FRANCISCO.
18 Q. ALL RIGHT. LET ME SHOW YOU EXHIBIT 67. YOU WERE ALSO
19 GIVEN THAT ONE, BUT INSTEAD OF --
20 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
21 THE COURT: YES.
22 BY MR. ALIOTO:
23 Q. EXHIBIT 67, SO WE'RE FOLLOWING ALONG, THIS IS IN RESPONSE
24 TO THAT. IT'S DATED OCTOBER 27, 1997. IT IS TO THE FILE WITH
25 CARBON COPIES TO A NUMBER OF PERSONS AT THE HEARST CORPORATION
1895
BENNACK - CROSS / ALIOTO
1 AND IT IS FROM YOU, AND IT'S REGARDING THE SAN FRANCISCO
2 NEWSPAPER AGENCY, AND THIS IS A DOCUMENT YOU PREPARED ON OR
3 ABOUT THIS DATE AND IT WAS IN REFERENCE TO THE MEETING WITH
4 MR. SIAS; CORRECT?
5 A. YES, SIR.
6 Q. NOW THERE, IF YOU'LL GO TO THE THIRD PARAGRAPH AND HALFWAY
7 DOWN BEGINNING WITH THE SENTENCE, "CONSISTENT WITH INPUT." DO
8 YOU SEE THAT? IT'S ON THE RIGHT-HAND SIDE, THIRD PARAGRAPH.
9 A. YES, I DO.
10 Q. AND IT STATES, QUOTE:
11 "CONSISTENT WITH INPUT PREVIOUSLY RECEIVED
12 FROM LEE GUITTAR..."
13 AND LEE GUITTAR IS THE PUBLISHER, CORRECT, OF THE
14 EXAMINER AT THE TIME?
15 A. YES, SIR.
16 Q. "... AS A RESULT OF HIS CONVERSATIONS WITH
17 SIAS, BOOZ ALLEN APPARENTLY CAUTIONED
18 CHRONICLE..."
19 NOW LET'S STOP THERE FOR A MINUTE. YOU UNDERSTOOD
20 THAT BOOZ ALLEN WAS A GROUP THAT WAS HIRED BY THE CHRONICLE TO
21 GIVE THEM FINANCIAL ADVICE; CORRECT?
22 A. MANAGEMENT OR FINANCIAL ADVICE.
23 Q. AND YOU UNDERSTAND THAT THIS REPORT WAS BEING SUBMITTED
24 AND GIVEN TO THE SHAREHOLDERS OF THE CHRONICLE FOR THEIR
25 SPECIAL MEETING; CORRECT?
1896
BENNACK - CROSS / ALIOTO
1 A. I ASSUMED SO.
2 Q. AND SO NOW MR. GUITTAR IS TELLING YOU OR GIVING HIS VIEW
3 FROM HIS CONVERSATIONS WITH MR. SIAS ABOUT WHAT WAS IN THE BOOZ
4 ALLEN REPORT; CORRECT?
5 A. RIGHT.
6 Q. SO DID YOU FEEL LIKE MR. -- DID YOU FEEL, THEREFORE, YOU
7 WERE GETTING INSIDE INFORMATION WHICH WAS SUPPOSED TO GO JUST
8 TO THE SHAREHOLDERS OF THE CHRONICLE?
9 A. NO. I NOT ONLY RESPECT MR. SIAS, BUT I THINK HE'S VERY
10 SMART AND I WAS ALWAYS WARY OF ANY INFORMATION THAT MIGHT HAVE
11 BEEN DESIGNED FOR MY EARS AS BEING PART OF THE BARGAINING
12 PROCESS, SO I DID NOT THINK THAT HE WAS DOING ANYTHING OTHER
13 THAN WHAT HE SAW TO BE HIS JOB.
14 Q. OKAY. SO THE ANSWER TO MY QUESTION IS NO?
15 A. WHAT WAS YOUR QUESTION, MR. ALIOTO?
16 Q. YOU UNDERSTOOD, DID YOU NOT, THAT YOU WERE GIVEN -- YOU
17 WERE BEING GIVEN INFORMATION FROM A DOCUMENT THAT WAS PREPARED
18 FOR THE BENEFIT OF THE CHRONICLE SHAREHOLDERS FOR THEIR SPECIAL
19 MEETING?
20 A. I UNDERSTOOD I WAS BEING GIVEN INFORMATION FROM IT, BUT
21 YOUR EARLIER QUESTION HAD TO DO WHETHER IT WAS APPROPRIATE THAT
22 I WAS BEING GIVEN IT.
23 Q. I SHOULD HAVE ASKED -- THAT'S THE ONE I WANTED TO ASK YOU.
24 DID YOU BELIEVE THAT THAT WAS APPROPRIATE THAT
25 MR. SIAS WAS GIVING YOU INFORMATION THAT WAS DESIGNED FOR THEIR
1897
BENNACK - CROSS / ALIOTO
1 STOCKHOLDERS FOR THEIR SPECIAL MEETING?
2 A. I BELIEVED IT WAS, BECAUSE I BELIEVED IT WAS DESIGNED TO
3 GET A RESULT. IT WAS IN THE INTEREST OF THE SHAREHOLDERS.
4 Q. DID YOU ADVISE THE SHAREHOLDERS THAT YOU THOUGHT THAT IT
5 WAS IN THEIR INTEREST THAT YOU HAD INFORMATION THAT WAS
6 SUPPOSED TO GO JUST TO THEM?
7 A. NO, I DIDN'T ADVISE THE SHAREHOLDERS OF ANYTHING.
8 THE COURT: HOW MUCH LONGER DO YOU HAVE WITH THIS
9 WITNESS?
10 MR. ALIOTO: I THINK, YOUR HONOR, ABOUT AN HOUR.
11 THE COURT: TELL ME WHEN YOU'VE REACHED A CONVENIENT
12 BREAKING POINT.
13 MR. ALIOTO: AT YOUR CONVENIENCE, YOUR HONOR.
14 THE COURT: WELL, I DON'T WANT TO INTERRUPT SOME
15 SUBJECT. WHY DON'T YOU FINISH OFF. CARRY ON.
16 BY MR. ALIOTO:
17 Q. IT STATES, QUOTE, CONTINUING THAT ONE:
18 "BOOZ ALLEN APPARENTLY CAUTIONED CHRONICLE
19 THAT HEARST WOULD NOT SIMPLY GO AWAY AT THE
20 CONCLUSION OF THE JOA AND COULD WELL REESTABLISH
21 A COMPETITIVE NEWSPAPER AND CERTAINLY WOULD
22 DEMAND A SUBSTANTIAL PORTION OF THE PHYSICAL
23 ASSETS."
24 DO YOU SEE THAT?
25 A. YES, I DO.
1898
BENNACK - CROSS / ALIOTO
1 Q. WAS IT TRUE THAT HEARST WOULD NOT SIMPLY GO AWAY AT THE
2 CONCLUSION OF THE JOA?
3 A. WE HADN'T MADE THAT DECISION.
4 Q. WAS IT TRUE THAT HEARST WOULD REESTABLISH A COMPETITIVE
5 NEWSPAPER?
6 A. WE HADN'T MADE THAT DECISION.
7 Q. WAS IT TRUE THAT HEARST DEMANDED A SUBSTANTIAL PORTION OR
8 WOULD DEMAND A SUBSTANTIAL PORTION OF THE PHYSICAL ASSETS?
9 A. IT'S TRUE THAT WE MIGHT HAVE.
10 Q. YOU UNDERSTOOD, DID YOU NOT, THAT MS. NAN MC EVOY AND HER
11 SON, OR MR. MC ANNENY, MARTIN, WERE RESISTANT TO ANY HEARST
12 INVESTMENT OR INVOLVEMENT WITH REGARD TO THE CHRONICLE? DID
13 YOU KNOW THAT?
14 A. I THINK I DID KNOW THAT WITHOUT IT HAVING COME FROM
15 MR. SIAS.
16 Q. OKAY. THEN IF YOU'LL GO TO PAGE 3. IN THE FIRST FULL
17 PARAGRAPH IN THE SECOND SENTENCE YOU STATE, QUOTE:
18 "I REMINDED HIM..."
19 THIS IS MR. SIAS THAT YOU REMINDED; CORRECT?
20 A. FIRST FULL PARAGRAPH.
21 Q. FIRST FULL PARAGRAPH, PAGE 3.
22 A. OKAY.
23 Q. SECOND SENTENCE.
24 A. ALL RIGHT.
25 Q. QUOTE:
1899
BENNACK - CROSS / ALIOTO
1 "I REMINDED HIM THAT WE HAD PREVIOUSLY TAKEN
2 THE POSITION THAT WERE HEARST TO CLOSE OR SELL A
3 FAILING EXAMINER OUTSIDE THE JOA, HEARST COULD
4 DEPART THE MARKET AND RETAIN THE FULL HEARST
5 50 PERCENT SPLIT FROM THE JOA FOR THE REMAINDER
6 OF THE CONTRACT."
7 YOU DID ADVISE MR. SIAS THAT?
8 A. YES.
9 Q. SO YOU WERE WILLING AT LEAST TO DO THAT?
10 A. NO, NO, NO, NO. THERE'S NO EXPRESSION OF WILLINGNESS.
11 I'M STATING IN RESPONSE TO HIS PROPOSAL THAT HE WAS GIVING ME
12 THE VEST OUT OF HIS SLEEVES, THAT I THOUGHT WE ALREADY HAD THAT
13 RIGHT.
14 Q. YOU STATED:
15 "I REMINDED HIM THAT WE HAD PREVIOUSLY TAKEN
16 THE POSITION THAT WERE HEARST TO CLOSE OR SELL
17 THE FAILING EXAMINER OUTSIDE THE JOA, HEARST
18 COULD DEPART THE MARKET AND RETAIN THE FULL
19 50 PERCENT."
20 A. IT'S CLEAR HERE WHAT I SAID, AND I ACKNOWLEDGED THAT THEY
21 WOULD HAVE TO RELIEVE US OF OUR PUBLISHING OBLIGATIONS, WHICH
22 WE BELIEVED THEY WOULD DO.
23 Q. OKAY. NOW, YOU --
24 THE COURT: WAS IT THE SLEEVES OUT OF HIS VEST
25 RATHER THAN THE OTHER WAY AROUND?
1900
BENNACK - CROSS / ALIOTO
1 THE WITNESS: PARDON ME, SIR?
2 THE COURT: WAS IT THE SLEEVES OUT OF THE VEST
3 RATHER THAN THE OTHER WAY AROUND?
4 THE WITNESS: HE WAS OFFERING ME THE SLEEVES OUT OF
5 HIS VEST, YES.
6 (LAUGHTER)
7 BY MR. ALIOTO:
8 Q. WHAT YOU WERE SAYING IN EFFECT WAS THAT YOU COULD SIMPLY,
9 EVEN IN THE MIDDLE OF THE JOA, WALK AWAY AND STILL BE ENTITLED
10 TO 50 PERCENT?
11 A. YES, SIR. BUT THE CONTRACT IS SPECIFIC WE HAD AN
12 OBLIGATION TO PUBLISH. HE WOULD HAVE TO RELIEVE US OF THAT
13 OBLIGATION.
14 Q. OKAY.
15 A. WE THOUGHT THERE WAS A FAIR CHANCE HE WOULD DO THAT.
16 Q. OKAY. SO THAT IF HE DIDN'T DO THAT, THEN YOU WOULDN'T BE
17 ABLE SIMPLY TO JUST PICK UP AND LEAVE?
18 A. IF HE DIDN'T DO THAT --
19 Q. IF HE DID NOT -- IF THE CHRONICLE DID NOT RELIEVE YOU OF
20 YOUR PUBLISHING OBLIGATIONS UNDER THE JOA, YOU SIMPLY COULD NOT
21 JUST SHUT DOWN AND LEAVE?
22 A. THAT'S A LEGAL QUESTION. I'M NOT SURE I KNOW THE ANSWER.
23 Q. WELL, THAT WAS YOUR BELIEF; CORRECT?
24 A. I BELIEVED THAT WE COULD BUT SUBJECT TO HIS PERMITTING US.
25 Q. AND IF HE DIDN'T?
1901
BENNACK - CROSS / ALIOTO
1 A. IF HE SAID, "NO, YOU CAN'T SHUT DOWN," THAT'S NOT AN ISSUE
2 THAT I EVER EXAMINED OR ASKED ABOUT THE LEGAL CONSEQUENCES OF
3 THAT.
4 WE HAD A CONTRACT TO SUPPLY THAT. IT DOES SAY, OF
5 COURSE, THAT THE CONTRACT CAN BE AMENDED SUBJECT TO THE
6 PARTIES. I CAN'T TELL YOU WHAT WOULD HAPPEN IF THEY HAD SAID,
7 "NO, YOU'RE GOING TO SIT RIGHT HERE AND PUBLISH NO MATTER
8 WHAT."
9 Q. OKAY. BUT YOU UNDERSTOOD THAT, DID YOU NOT, THAT YOU
10 WOULD NEED HIS PERMISSION IF YOU WANTED TO JUST LEAVE?
11 A. WELL, WHAT I'M SAYING HERE IS THAT I WOULD NEED HIS
12 PERMISSION IF WE WERE GOING TO LEAVE AND ALSO CONTINUE TO DRAW
13 OUR PORTION OF THE NET EXCESS OF THE AGENCY. THAT'S WHAT THIS
14 SAYS.
15 Q. OKAY. NOW --
16 A. IT DOESN'T SAY THAT I'D SIMPLY NEED HIS PERMISSION TO
17 LEAVE.
18 Q. IS IT NOT CORRECT, SIR, THAT SHOULD YOU NOT BE PERMITTED,
19 THE HEARST CORPORATION -- THAT IF HEARST CORPORATION IS NOT
20 PERMITTED TO PURCHASE THE CHRONICLE, YOU MUST CONTINUE TO
21 PUBLISH UNTIL 2005 UNLESS YOU GET PERMISSION AT LEAST FROM THE
22 CHRONICLE? ISN'T THAT YOUR UNDERSTANDING?
23 A. I'M NOT SURE THAT I CAN ANSWER THAT.
24 Q. DO YOU -- IS IT YOUR BELIEF THAT SHOULD THE HEARST
25 CORPORATION BE PROHIBITED FROM PURCHASING THE CHRONICLE, IS IT
1902
BENNACK - CROSS / ALIOTO
1 YOUR BELIEF THAT YOU COULD SIMPLY PICK UP AND LEAVE AND STILL
2 BE PAID 50 PERCENT?
3 A. THE 50 PERCENT PART, I BELIEVE WE WOULD HAVE A RIGHT
4 SUBJECT TO WHAT MY LAWYERS WOULD TELL ME TO SIMPLY QUIT
5 PUBLISHING. I THINK THAT WE HAVE THAT RIGHT.
6 NOW, WHAT THE PHYSICAL -- WHAT THE FINANCIAL
7 CONSEQUENCES OF DOING THAT WOULD BE IS OPEN TO SOME DEBATE.
8 I'M NOT GOING TO WING AN ANSWER TO YOU.
9 I'VE SAID IN THIS MEMORANDUM AND I BELIEVE THAT ALL
10 WE NEED IS THEIR CONCURRENCE THAT WE'RE NO LONGER GOING TO
11 FULFILL OUR OBLIGATION OF PROVIDING AN EVENING NEWSPAPER AND
12 THE REST OF THE AGREEMENT CAN STAY IN PLACE. THAT WAS MY
13 BELIEF.
14 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
15
16
17
18
19
20
21
22
23
24
25
1903
BENNACK - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. DO YOU UNDERSTAND UNDER THE JOA THAT HEARST HAS AN
3 OBLIGATION TO PUBLISH THE EXAMINER DURING THE PERIOD OF THE JOA
4 OUTSIDE OF ANY INSOLVENCY OR BANKRUPTCY?
5 A. I WOULD HAVE TO READ THE LANGUAGE AGAIN.
6 Q. WHAT IS YOUR UNDERSTANDING TODAY?
7 A. MY UNDERSTANDING IS THAT IF WE WANTED TO UNILATERALLY SHUT
8 DOWN, WE COULD DO SO.
9 MR. ALIOTO: THAT'S ALL, YOUR HONOR.
10 THAT'S NOT ALL. IT'S A CONVENIENT TIME.
11 THE COURT: ALL RIGHT. LET'S TAKE UNTIL FIVE
12 MINUTES AFTER THE HOUR, AND WE WILL RESUME WITH FURTHER
13 EXAMINATION OF THIS WITNESS.
14 I AM GETTING A LITTLE CONCERNED ABOUT THE TIME.
15 MR. ALIOTO: ME, TOO, YOUR HONOR.
16 THE COURT: WE HAVE AN IMPORTANT MISSION TO
17 ACCOMPLISH.
18 MR. ALIOTO: YES, YOUR HONOR.
19 THE COURT: LET'S TAKE A 15-MINUTE RECESS AT THIS
20 POINT.
21 (RECESS TAKEN AT 2:50 P.M.)
22 (PROCEEDINGS RESUMED AT 3:10 P.M.)
23 THE COURT: VERY WELL, MR. ALIOTO, YOU MAY RESUME
24 YOUR CROSS-EXAMINATION OF THIS WITNESS.
25 MR. ALIOTO: THANK YOU, YOUR HONOR.
1904
BENNACK - CROSS / ALIOTO
1 MAY IT PLEASE YOUR HONOR.
2 ALSO I WISH TO ADVISE THE COURT I WAS GRANTED A
3 REPRIEVE FROM MY WIFE AND DAUGHTER. SO I DON'T -- THEY ARE NOT
4 GOING TO COME AND PULL ME OUT OF HERE.
5 THE COURT: IS THAT GOOD NEWS?
6 (LAUGHTER)
7 MR. ALIOTO: I HOPE SO.
8 THE COURT: ALL RIGHT.
9 MR. ALIOTO: I HOPE SO.
10 BY MR. ALIOTO:
11 Q. IN REFERENCE TO -- MAY IT PLEASE YOUR HONOR.
12 THE DOCUMENT THAT IS BEFORE YOU IS EXHIBIT 67. AND
13 WE WERE ON PAGE 3.
14 AND ON THE BOTTOM OF THE PAGE THERE IS REFERENCE
15 TO -- AGAIN, TO MS. NAN MCEVOY. AND THIS IS THE DOCUMENT THAT
16 YOU WERE WRITING TO MESSRS. DANZIG AND MAUR, GANZI, IRISH AND
17 THACKERAY.
18 A. ACTUALLY TO FILE BUT COPIES TO THEM.
19 Q. COPIES TO THEM, CORRECT.
20 NOW, I TAKE IT THAT NAN MCEVOY WAS OBVIOUSLY OF SOME
21 INTEREST TO YOU?
22 A. OF COURSE.
23 Q. AND IT STATES TO HER ADVISERS, WHICH INCLUDE APPARENTLY
24 GEORGE GILLESPIE AND WARREN BUFFET. YOU KNOW WHO THEY ARE?
25 A. YES, I DO.
1905
BENNACK - CROSS / ALIOTO
1 Q. AND YOU WERE ADVISING THESE OTHER GENTLEMEN THAT THESE
2 ADVISERS WERE TELLING MS. MCEVOY TO IN EFFECT PAY WHATEVER IT
3 TAKES BETWEEN NOW AND 2005 TO BE SURE THE NEWSPAPER OPERATIONS
4 WERE ENTIRELY THEIRS AFTER THAT DATE?
5 A. THAT'S WHAT IT SAYS.
6 Q. OKAY. WELL, THAT'S WHAT YOU WROTE.
7 A. YES, THAT'S --
8 Q. AND THAT'S THE INFORMATION YOU HAD?
9 A. YES.
10 Q. AND YOU THOUGHT IT IMPORTANT ENOUGH TO PASS ON, CORRECT?
11 A. YES.
12 Q. OKAY.
13 THE COURT: GEORGE GILLESPIE IS WHO?
14 THE WITNESS: HE IS MRS. MCEVOY'S PERSONAL ATTORNEY
15 AND HAPPENS TO BE A VERY WELL-KNOWN -- A VERY GOOD FRIEND OF
16 MINE.
17 THE COURT: LOCAL?
18 THE WITNESS: HE LIVES IN NEW YORK. HE LIVES IN NEW
19 YORK.
20 THE COURT: ALL RIGHT.
21 THE WITNESS: HE IS ON THE BOARD, YOUR HONOR, OF
22 WASHINGTON POST COMPANY AND IS A LAWYER FOR MRS. GRAHAM AND A
23 VERY HIGHLY REGARDED GENTLEMAN, AS IS MR. BUFFET.
24 BY MR. ALIOTO:
25 Q. OKAY. NOW, APPROXIMATELY, THIS DATE -- THIS DOCUMENT THAT
1906
BENNACK - CROSS / ALIOTO
1 WE JUST WENT OVER, THIS WAS DATED THE ONE THAT YOU SENT,
2 OCTOBER 27, 1997.
3 NOW, APPROXIMATELY A WEEK LATER YOU HEARD WORD FROM
4 MR. GUITTAR, THE PUBLISHER OF THE EXAMINER, THAT THE NEW YORK
5 TIMES WAS MAKING INQUIRY WITH REGARD TO THE INTENTIONS OF THE
6 HEARST CORPORATION AND THE JOA, CORRECT?
7 A. I THINK THE -- DO YOU HAVE A COPY OF THE --
8 Q. I DO.
9 IF I MAY APPROACH THE WITNESS, YOUR HONOR?
10 THE COURT: YES.
11 BY MR. ALIOTO:
12 Q. LET ME SHOW YOU WHAT IS EXHIBIT 68.
13 EXHIBIT 68, FOR THE RECORD, IS A DOCUMENT WHICH IS
14 AN E-MAIL FROM LEE GUITTAR, DATED NOVEMBER 5, 1997. IT'S
15 DIRECTED TO MR. FRANK BENNACK AND OTHERS, SUBJECT, SAN
16 FRANCISCO JOA, NEW YORK TIMES.
17 THAT IS AN E-MAIL THAT YOU RECEIVED ON OR ABOUT THAT
18 DATE; IS THAT NOT SO?
19 A. I BELIEVE IT IS.
20 Q. AND, AGAIN, MR. GUITTAR IS THE -- AT THIS TIME WAS THE
21 EDITOR OF THE EXAMINER, CORRECT?
22 A. THE PUBLISHER.
23 Q. THE PUBLISHER. SORRY.
24 IT STATES, QUOTE:
25 "DEAR FRANK: BOB DANZIG ASKED ME TO PASS
1907
BENNACK - CROSS / ALIOTO
1 THIS ALONG SO YOU WOULDN'T BE SURPRISED. A NEW
2 YORK TIMES REPORTER, IVER PETERSON, SHOWED UP IN
3 SAN FRANCISCO LAST WEEK TO WORK ON A STORY ABOUT
4 SAN FRANCISCO NEWSPAPERS."
5 AND THEN IF YOU WILL GO TO THE FOURTH PARAGRAPH
6 THERE BEGINNING "HIS QUESTIONS," DO YOU SEE THAT?
7 A. "HIS QUESTIONS MOSTLY," IS THAT IT?
8 Q. IT STATES, QUOTE:
9 "HIS QUESTIONS MOSTLY WENT TO THE FUTURE OF
10 THE SAN FRANCISCO JOA. I TOLD HIM THAT, AS FAR
11 AS WE'RE CONCERNED, OUR JOB IS TO PRODUCE THE
12 BEST NEWSPAPER WE CAN AND THAT WE FULLY INTEND
13 TO CONTINUE DOING THAT BEYOND THE YEAR 2005."
14 DO YOU SEE THAT?
15 A. YES, I DO.
16 Q. NOW, WHEN YOU READ THAT DID YOU BELIEVE THAT TO BE TRUE?
17 A. YES, I DO -- I DID. I THINK HE DOESN'T SAY UNDER WHAT
18 BANNER, AND I THINK THAT HE DOESN'T WANT TO TELL THE NEW YORK
19 TIMES WE'RE LEAVING.
20 Q. WELL, IF HE DOESN'T WANT TO TELL THE NEW YORK TIMES THAT
21 YOU'RE LEAVING AND HE DOESN'T WANT TO TELL THEM WHAT BANNER,
22 THEN IT'S NOT TRUE THE STATEMENT HE MADE TO THE NEW YORK TIMES
23 IS NOT TRUE?
24 A. OH, YES, IT IS TRUE. I THINK THAT'S ABSOLUTELY TRUE. WE
25 FULLY INTEND TO DO THAT.
1908
BENNACK - CROSS / ALIOTO
1 Q. IT STATES, QUOTE:
2 "OUR JOB IS TO PRODUCE THE BEST NEWSPAPER WE
3 CAN AND THAT WE FULLY INTEND TO CONTINUE DOING
4 THAT BEYOND THE YEAR 2005."
5 SO ARE YOU SAYING IT'S TRUE IN THE SENSE THAT IT
6 WOULD INCLUDE THE CHRONICLE AND NOT THE EXAMINER?
7 A. WELL, I -- I DON'T KNOW. I THINK IT'S A FAIRLY SAFE
8 STATEMENT. I DON'T TAKE EXCEPTION TO HIM SAYING WE'RE TRYING
9 TO PUT OUT THE BEST PAPER WE CAN, AND WE INTEND TO DO THAT FROM
10 NOW ON. I DON'T FIND ANY ALARM IN THE STATEMENT.
11 Q. WELL, I GUESS THE -- TO MAKE THE -- WE NEED TO HAVE THIS
12 CLEAR.
13 DID YOU -- IF MR. GUITTAR, WHO WAS VISITED BY THE
14 NEW YORK TIMES REPORTER -- IF MR. GUITTAR AT THE TIME WAS THE
15 PUBLISHER OF THE EXAMINER, YOU BELIEVED IT REASONABLE, DID YOU
16 NOT, THAT THE NEW YORK TIMES REPORTER WOULD ASSUME WHEN HE IS
17 TALKING ABOUT A NEWSPAPER, THE BEST NEWSPAPER, HE WAS TALKING
18 ABOUT THE EXAMINER?
19 A. I -- I DON'T KNOW WHAT HE WAS TALKING ABOUT. BUT THIS IS
20 MR. GUITTAR'S STATEMENT, NOT MINE. I AM JUST SAYING I DON'T
21 TAKE EXCEPTION TO IT.
22 Q. DID YOU SAY THAT YOU DIDN'T WANT TO TELL THE NEW YORK
23 TIMES THAT YOU WERE LEAVING?
24 A. I DIDN'T SAY THAT -- I COULD UNDERSTAND WHY HE DID NOT
25 WANT TO TELL THEM THAT. I WASN'T TALKING TO THE NEW YORK
1909
BENNACK - CROSS / ALIOTO
1 TIMES.
2 Q. WELL, WHEN YOU SAY THAT YOU COULD UNDERSTAND WHY THE
3 PUBLISHER DID NOT WANT TO TELL THE NEW YORK TIMES THAT WE WERE
4 LEAVING -- I MEAN, THAT YOU WERE LEAVING, ARE YOU SAYING THAT
5 HE GAVE A FALSE STATEMENT TO THE NEW YORK TIMES REPORTER?
6 A. NO, I DON'T THINK IT'S A FALSE STATEMENT. I DON'T THINK
7 IT GOES TO ANY SPECIFICS UNDER WHAT CIRCUMSTANCE HE WOULD DO
8 THAT. AND, BESIDES, IT'S EXPRESSED AS HIS INTENTION.
9 Q. IS IT FAIR TO SAY, SIR, THAT NOTWITHSTANDING THIS
10 STATEMENT, THAT AT THIS TIME THE HEARST CORPORATION DID NOT
11 INTEND, MUCH LESS FULLY INTEND, TO CONTINUE TO PRODUCE THE BEST
12 NEWSPAPER IT COULD BEYOND THE YEAR 2005?
13 A. I TOLD YOU IN MY TESTIMONY THAT WE HAVE NOT MADE THAT
14 DECISION SO I DON'T THINK THIS IS CONTRARY TO HAD THERE BEEN AN
15 ABSOLUTE DECISION, THEN IT WOULD NOT BE A TRUTHFUL STATEMENT.
16 Q. FINALLY, THEN, WHAT YOU ARE SAYING IS YOU DIDN'T MAKE A
17 DECISION, BUT YOU FULLY INTENDED AT THE TIME TO CONTINUE BEYOND
18 2005, BUT YOU HADN'T MADE A FINAL DECISION?
19 A. WE HADN'T MADE A DECISION.
20 Q. DO YOU KNOW OF ANY REASON WHY THE NEW YORK TIMES WAS NOT
21 ADVISED THAT YOU SIMPLY HAD NOT MADE A DECISION YET?
22 A. NO, I DON'T.
23 Q. AS DISTINGUISHED --
24 A. MR. GUITTAR TALKED TO THEM. I DIDN'T TALK TO THEM.
25 Q. IN ANY EVENT, DID YOU DISCUSS THIS WITH MR. GUITTAR AFTER
1910
BENNACK - CROSS / ALIOTO
1 YOU RECEIVED THIS E-MAIL? DID YOU CHANGE IT OR DID YOU ASK HIM
2 TO CHANGE IT OR ANYTHING LIKE THAT?
3 A. NO, I DON'T THINK I DID ANYTHING EXCEPT ACKNOWLEDGE --
4 MAYBE I DIDN'T EVEN DO THAT BUT . . .
5 Q. DID THE NEW YORK -- SORRY. DID THE NEW YORK TIMES -- DID
6 THE NEW YORK TIMES REPORTER OR ANYONE FROM THE NEW YORK TIMES
7 THEN INTERVIEW YOU ABOUT THIS?
8 A. NO.
9 Q. SO AS FAR AS --
10 A. I DON'T BELIEVE ANYBODY DID.
11 Q. OKAY. SO, AS FAR AS YOU KNEW, AS OF THIS TIME, THE NEW
12 YORK TIMES, AS FAR AS YOU KNEW, WAS OF THE VIEW THAT THE HEARST
13 CORPORATION INTENDED TO -- FULLY INTENDED TO CONTINUE TO
14 PRODUCE THE SAN FRANCISCO EXAMINER BEYOND THE YEAR 2005?
15 MR. CONNELL: OBJECTION.
16 THE WITNESS: I AM NOT SURE WHAT THE NEW YORK TIMES
17 THOUGHT.
18 BY MR. ALIOTO:
19 Q. I AM NOT ASKING YOU WHAT THEY THOUGHT.
20 A. OR WHAT THEY WERE OF THE VIEW OF.
21 Q. I AM ASKING YOU IF YOU BELIEVED THAT.
22 A. BELIEVED WHAT?
23 MR. CONNELL: I WILL WAIT FOR THE NEXT QUESTION.
24 THE COURT: ALL RIGHT. NO OBJECTION.
25 BY MR. ALIOTO:
1911
BENNACK - CROSS / ALIOTO
1 Q. OKAY. IF YOU WILL GO TO THE NEXT E-MAIL THAT IS ATTACHED
2 TO THAT ONE. THERE ARE TWO E-MAILS. IF YOU WILL GO TO THE
3 THIRD ONE.
4 THE THIRD ONE IS DIRECTED TO YOU, DATED OCTOBER 2,
5 1997. IT'S STILL PART OF EXHIBIT 68. AND THAT'S PASSING ON AN
6 E-MAIL THAT WAS SENT TO YOU FROM MR. GUITTAR OF OCTOBER 1.
7 DO YOU SEE THAT?
8 A. OCTOBER 1?
9 Q. IT WOULD BE BASED --
10 A. I SEE NOW. OKAY. THAT'S THE THIRD ONE.
11 Q. THAT'S RIGHT.
12 A. I SEE IT. I SEE IT.
13 Q. OKAY. NOW, THIS IS AN E-MAIL TO YOU.
14 A. YES, SIR.
15 Q. IT'S FROM MR. GUITTAR.
16 A. YES.
17 Q. IT ALSO REFERENCES MR. SIAS. IT STATES IN THE FIRST
18 PARAGRAPH:
19 "JOHN SIAS TELEPHONED ME AFTER HIS TWO-DAY
20 MEETING WITH CHRONICLE DIRECTORS/SHAREHOLDERS
21 LAST WEEK, BUT WE DIDN'T CATCH UP WITH EACH
22 OTHER UNTIL TODAY ..."
23 HE THEN STATES, QUOTE:
24 "HE SAID THAT HE HAD CALLED TO GIVE ME A
25 'HEADS UP' ON THE MEETING, PER OUR DISCUSSION
1912
BENNACK - CROSS / ALIOTO
1 THE PREVIOUS WEEK, AND THAT, AS HE ANTICIPATED,
2 THE OUTCOME SUGGESTED IT WOULDN'T LOOK VERY
3 PROMISING AS TO OUR BEING ABLE TO WORK OUT
4 THINGS BEYOND 2005."
5 SO WAS IT -- FIRST OF ALL, DO YOU SEE THAT?
6 A. I DO.
7 Q. OKAY. SO WERE YOU OF THE VIEW AS OF THIS TIME THAT IT
8 LOOKED AS IF THE CHRONICLE FOLKS WERE NOT GOING TO BE MAKING
9 ANY AGREEMENT THAT WOULD CONTINUE ANY HEARST INVOLVEMENT, AT
10 LEAST AS FAR AS THEY WERE CONCERNED, AFTER 2005?
11 A. THAT'S WHAT HE APPEARS TO BE SAYING.
12 Q. AS A RESULT OF THAT -- AS A RESULT OF THAT AND THAT
13 ATTITUDE, YOU TESTIFIED ON YOUR DIRECT EXAMINATION THAT AT
14 SOMETIME YOU FINALLY WENT OUT TO ACTUALLY VISIT THE BOARD OF
15 DIRECTORS OF THE CHRONICLE?
16 A. YES, SIR.
17 Q. IS THAT RIGHT?
18 A. YES, SIR.
19 Q. AND THAT WAS FOR THE PURPOSE OF ATTEMPTING TO GET THEM TO
20 AGREE TO SOME KIND OF SITUATION THAT WOULD AVOID HEAD-TO-HEAD
21 COMPETITION AFTER 2005?
22 A. THAT WAS TO TRY TO GET THEM PERSUADED THAT THE PLAN THAT
23 WE HAD BEEN TALKING ABOUT OF COMBINATION OWNERSHIP BY CHRONICLE
24 AND HEARST WAS BETTER THAN THE STATUS QUO AND ALSO, FRANKLY, TO
25 MONITOR FOR MYSELF WHAT I THOUGHT THE VIEWS OF THE SHAREHOLDERS
1913
BENNACK - CROSS / ALIOTO
1 WERE. I THOUGHT WE MIGHT LEARN SOMETHING ABOUT THAT SINCE WE
2 WERE NOT DIRECTLY IN CONTACT WITH THEM.
3 Q. OKAY. BUT YOU SAY THAT THE PURPOSE WAS TO GO OUT THERE
4 AND TRY TO CONVINCE THEM TO ENTER INTO SOME KIND OF AN
5 AGREEMENT WITH HEARST.
6 A. YES.
7 Q. AND THAT AGREEMENT WOULD INVOLVE THE EXAMINER EITHER BEING
8 SOLD OR SHUT DOWN. CORRECT?
9 A. OFFERED FOR SALE, YES, YES.
10 Q. OKAY. AND THE IDEA WAS TO -- AND UP TO THAT TIME YOU WERE
11 GETTING THE STATEMENTS FROM THE CHRONICLE THAT THEY INTENDED TO
12 GO FORWARD PAST 2005 WITHOUT HEARST.
13 A. CORRECT.
14 Q. SO WHAT YOU WANTED TO DO WAS TO MAKE SOME KIND OF AN
15 ARRANGEMENT, ISN'T IT CORRECT, TO AVOID ANY HEAD-TO-HEAD
16 COMPETITION AFTER 2005?
17 A. I THINK ANY PRUDENT BUSINESSMAN WOULD NOT LOOK FORWARD TO
18 HEAD-TO-HEAD COMPETITION GIVEN THE HISTORY OF NEWSPAPERS IN THE
19 UNITED STATES.
20 Q. OKAY. SO THAT -- SO ONE OF THE REASONS, THEN, FOR THE
21 TRIP WAS TO TRY TO AVOID THAT.
22 A. TO PERSUADE THEM TO MAKE US A PARTNER IN THE SURVIVING
23 NEWSPAPER IN THE JOA AFTER THE EXAMINER HAD BEEN OFFERED FOR
24 SALE OR SHUT DOWN.
25 Q. IN ORDER TO AVOID HEAD-TO-HEAD COMPETITION AFTER 2005.
1914
BENNACK - CROSS / ALIOTO
1 A. I HAVE NO PROBLEM SAYING THAT I DID NOT WANT HEAD-TO-HEAD
2 COMPETITION AFTER 2005. I THOUGHT IT WAS NOT A PRUDENT,
3 FISCALLY SOUND STRATEGY FOR ME AND THE HEARST CORPORATION.
4 Q. AND THAT WAS, AT LEAST, ONE OF THE REASONS WHY YOU WENT
5 OUT TO SEE THE CHRONICLE BOARD OF DIRECTORS?
6 A. I HAVE ANSWERED YOUR QUESTION, I THINK, MR. ALIOTO.
7 Q. LET ME -- YOU WERE ALSO ASKED ON DIRECT EXAMINATION
8 CERTAIN QUESTIONS ABOUT THE LETTER AFTER THE MEETING THAT YOU
9 MET WITH THE BOARD OF DIRECTORS. AND THAT IS THE LETTER OF
10 JULY 9, 1998. IT IS EXHIBIT 86.
11 IF I MAY APPROACH THE WITNESS, YOUR HONOR?
12 THE COURT: VERY WELL.
13 BY MR. ALIOTO:
14 Q. LET ME HAND YOU EXHIBIT 86.
15 EXHIBIT 86 IS DATED JULY 9, 1998, "STRICTLY PERSONAL
16 AND CONFIDENTIAL," DIRECTED TO MR. SIAS FROM YOU WITH BLIND
17 COPIES TO MESSRS. ASHER, GANZI, IRISH AND THACKERAY.
18 AND THIS IS THE LETTER THAT YOU SENT OR CAUSED TO BE
19 SENT TO MR. SIAS AND THE OTHER INDIVIDUALS ON OR ABOUT THE DATE
20 INDICATED; IS THAT RIGHT?
21 A. I BELIEVE IT IS, SIR.
22 Q. NOW, DIRECTING YOUR ATTENTION TO THE SECOND PAGE AND THE
23 SECOND FULL PARAGRAPH AND THE FIRST -- AND THE SECOND SENTENCE
24 OF THE SECOND FULL PARAGRAPH. AND IT BEGINS, "SINCE HEARST'S
25 DESIRE."
1915
BENNACK - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. IT'S THE SECOND FULL PARAGRAPH.
3 A. YES, I SEE IT.
4 Q. OKAY. AND IT STATES, QUOTE:
5 "SINCE HEARST'S DESIRE AND INDEED INTENTION
6 IS TO REMAIN IN THE SAN FRANCISCO NEWSPAPER
7 MARKET GOING FORWARD" . . .
8 LET ME STOP THERE.
9 WHEN YOU SAY THAT IT IS HEARST'S DESIRE AND
10 INTENTION TO REMAIN IN THE SAN FRANCISCO NEWSPAPER MARKET GOING
11 FORWARD, WHAT DID YOU MEAN BY "GOING FORWARD"?
12 A. I MEANT AFTER 2005.
13 Q. SO IT WAS IN FACT -- AND THAT WAS A TRUE STATEMENT THAT
14 YOU WERE MAKING TO THE CHRONICLE?
15 A. IT WAS TRUE BECAUSE WE WERE -- THIS WAS IN THE CONTEXT OF
16 A PROPOSAL WHICH ARRANGED FOR HEARST CORPORATION TO BE A
17 MINORITY OWNER IN THE CHRONICLE. REMEMBER THE CONTEXT IN WHICH
18 THIS WAS MADE.
19 BUT WE HAD STATED OVER AND OVER AGAIN THAT IT WAS
20 OUR DESIRE AND INTENTION TO TRY TO REMAIN IN THIS MARKET.
21 Q. AFTER 2005?
22 A. PERIOD.
23 Q. PERIOD, AFTER --
24 A. PERIOD, TO REMAIN IN THIS MARKET.
25 Q. "PERIOD," MEANING --
1916
BENNACK - CROSS / ALIOTO
1 A. THAT WOULD INCLUDE AFTER 2005.
2 Q. OKAY. THANK YOU.
3 AND EVEN WITH REGARD TO THIS PARTNERSHIP, WHERE YOU
4 WOULD BE GETTING A PERCENTAGE OF THE CHRONICLE --
5 A. YES.
6 Q. -- UNDER THAT PROPOSAL, YOU STATE, QUOTE:
7 "THE PRESERVATION OF THE FIRST REFUSAL
8 RIGHTS CURRENTLY ENJOYED BY THE PARTIES REMAINS
9 A VITAL INGREDIENT."
10 DO YOU SEE THAT?
11 A. YES.
12 Q. SO THERE WHAT YOU WERE TALKING ABOUT IS IF YOU ENTERED
13 IN -- IF YOU -- SORRY -- IF YOU SHUT DOWN THE EXAMINER OR SOLD
14 IT AND ENTERED INTO THIS PARTNERSHIP THAT IF THE CHRONICLE
15 WANTED TO SELL ITS PART OF THE PARTNERSHIP, YOU WANTED TO MAKE
16 SURE THAT THERE WAS A FIRST RIGHT OF REFUSAL THAT YOU COULD BUY
17 IT?
18 A. YES, SIR.
19 Q. ALL RIGHT. IF YOU WILL GO DOWN TO THE NEXT PARAGRAPH. IT
20 STATES, QUOTE:
21 "JOHN:" -- THIS IS TO MR. SIAS -- "ALONG
22 WITH HEARST'S LONG-STANDING DESIRE TO CONTINUE A
23 MORE THAN 100 YEAR TRADITION OF SAN FRANCISCO
24 PUBLISHING IN THE SAN FRANCISCO NEWSPAPER
25 MARKET."
1917
BENNACK - CROSS / ALIOTO
1 NOW, FIRST OF ALL, WHEN YOU MAKE REFERENCE TO THE
2 "100 YEAR TRADITION OF NEWSPAPER PUBLISHING IN THE SAN
3 FRANCISCO MARKET," THAT IS A REFERENCE TO THE SAN FRANCISCO
4 EXAMINER, IS IT NOT?
5 A. WELL, THAT'S A REFERENCE TO HOW LONG HEARST HAS BEEN A
6 PUBLISHER IN THE MARKET.
7 IT'S TRUE THAT DURING THAT PERIOD HEARST WAS
8 PUBLISHING SAN FRANCISCO EXAMINER, BUT I DON'T THINK YOU CAN
9 READ THIS TO SAY THAT WE HAVE A LONG-STANDING DESIRE --
10 ALTHOUGH WE DID -- TO CONTINUE TO PUBLISH THE EXAMINER. THAT'S
11 NOT WHAT IT SAYS. IT SAYS, "TO CONTINUE A TRADITION OF
12 PUBLISHING IN THIS MARKET," WHICH WE HAVE DONE FOR 100 YEARS.
13 Q. BUT EVERY TIME YOU DID IT FOR THE HUNDRED YEARS, WHEN YOU
14 WERE PUBLISHING, IT WAS THE SAN FRANCISCO EXAMINER?
15 A. THAT'S CORRECT. IT REMAINS THE CASE RIGHT TO TODAY.
16 Q. WHEN YOU SAID, BY THE WAY, THAT YOU HAD AN INTENTION --
17 YOU CONTINUE TO SAY, QUOTE:
18 "WE GENUINELY BELIEVE" -- THIS IS IN THAT
19 SAME PARAGRAPH. "WE GENUINELY BELIEVE THAT THE
20 COMBINED STRENGTH OF CHRONICLE AND HEARST WILL
21 BE INDISPENSABLE FOR THE SUCCESS OF THE
22 SURVIVING NEWSPAPER GOING FORWARD."
23 DO YOU SEE THAT?
24 A. YES, I DO.
25 Q. SO THE WHOLE POINT HERE THAT YOU WERE TRYING TO SAY TO THE
1918
BENNACK - CROSS / ALIOTO
1 CHRONICLE IS THAT THE CHRONICLE AND THE HEARST SHOULD -- SHOULD
2 BE COMBINED AND NOT COMPETE AGAINST EACH OTHER.
3 A. I AM SAYING THAT WE BOTH KNEW THAT THE PROBABILITY WAS
4 THAT THE EXAMINER WOULD FAIL AND NOT CONTINUE TO BE PUBLISHED
5 AND IF WE WANTED TO BE A PART OF THE SUCCESS OF THE SURVIVING
6 NEWSPAPER GOING FORWARD.
7 Q. NOW, IF YOU UNDERSTOOD THAT THE CHRONICLE BELIEVED THAT,
8 THEN DID THEY EVER GIVE YOU A REASON WHY THEY WOULD WANT TO
9 HAVE YOU AS A PARTNER WHEN THEY THOUGHT THAT IF THEY WENT HEAD
10 TO HEAD WITH YOU THEY COULD BEAT YOU?
11 A. WELL, THEY NEVER AGREED TO THAT. THEY DECIDED IT WAS IN
12 THEIR ECONOMIC INTERESTS, BOTH BECAUSE THERE IS BY THIS TIME
13 EVEN SOME SEVEN YEARS LEFT ON THE JOA IN WHICH THEY WERE PAYING
14 A HUGE SUBSIDY AND WATCHING THEIR OWN NEWSPAPER DO LESS THAN IT
15 COULD DO, AND HEARST OWNED 50 PERCENT OF THE ASSETS, AND I
16 DON'T IMAGINE THEY KNEW WHAT WAS GOING TO HAPPEN WHEN THOSE GOT
17 READY TO BE DIVIDED.
18 Q. SO --
19 A. SO THAT'S THE REASON THEY TALKED TO US. BUT THE RECORD IS
20 CLEAR THEY NEVER AGREED TO MAKE US A PARTNER.
21 Q. OKAY.
22 A. THEY ULTIMATELY DECIDED TO SELL THE CHRONICLE.
23 Q. ALL RIGHT. SO, IN OTHER WORDS, THE JOA'S ORIGINAL PURPOSE
24 WAS TO ALLOW -- WAS THE ONLY MEANS TO ALLOW BOTH NEWSPAPERS TO
25 PUBLISH, CORRECT?
1919
BENNACK - CROSS / ALIOTO
1 A. CORRECT.
2 Q. AND NOW YOU WERE SAYING THAT, WELL, BECAUSE OF THE JOA
3 YOU, CHRONICLE, ARE NOW KIND OF SUBSIDIZING THE EXAMINER?
4 A. NOT KIND OF.
5 Q. YOU ARE SUBSIDIZING THE EXAMINER.
6 A. IN BIG -- BIG TIME.
7 Q. RIGHT. AND UNLESS YOU MAKE AN AGREEMENT -- AND UNLESS YOU
8 MAKE AN AGREEMENT WITH US, YOU ARE GOING TO CONTINUE TO DO
9 THAT, AT LEAST UNTIL 2005.
10 A. THAT WAS THE IMPLICATION.
11 Q. SO THAT YOU WERE NOW USING THE JOA, NOT FOR THE PURPOSE OF
12 HAVING TWO VOICES, BUT AS A -- AS A TOOL TO CONVINCE THE
13 CHRONICLE NOT TO HAVE TWO NEWSPAPERS; IS THAT RIGHT?
14 A. NO, MR. ALIOTO, THAT'S NOT RIGHT. THE REALITY WAS WE HAD
15 A CONTRACT.
16 I DON'T THINK THEY EXPECTED -- DID YOU? -- THAT WE
17 WOULD WALK AWAY FROM OUR ASSETS AND FROM THE STREAM OF INCOME
18 YET TO COME? I MEAN, LET'S BE REAL HERE. I DON'T THINK
19 ANYBODY ON EITHER SIDE HAD ANY VISION THAT WE WERE JUST GOING
20 TO SAY -- WALK AWAY AND LEAVE EVERYTHING SITTING HERE. WE
21 WEREN'T USING IT. IT WAS A CONTRACT THAT WAS IN PLACE. IT
22 WAS -- WE WERE ENTITLED TO IT. WE HAD BEEN -- WE HAD BEEN
23 INVESTING A DOLLAR ALONGSIDE EVERY DOLLAR THEY INVESTED, OTHER
24 THAN IN THE EDITORIAL PRODUCTS, THROUGHOUT THE FULL HISTORY OF
25 THE JOA. SO I DON'T CONSIDER THAT -- IN FACT, IT'S A LITTLE
1920
BENNACK - CROSS / ALIOTO
1 INSULTING THAT WE WERE USING IT FOR SOME PURPOSE OTHER THAN
2 SIMPLY STATING THE FACTS OF THE MATTER.
3 YOU ASKED ME WHY THEY WERE INTERESTED IN TALKING TO
4 US. AND I AM TELLING YOU WHY THEY WERE INTERESTED IN TALKING
5 TO US.
6 Q. YEAH. BUT THE WHOLE PURPOSE -- ISN'T IT CORRECT THE WHOLE
7 PURPOSE OF THE JOA WAS TO HAVE THE TWO VOICES?
8 A. THAT WAS THE INTENT --
9 Q. AND YOU WERE TRYING TO CONVINCE THEM THAT THEY SHOULDN'T
10 DO THAT ANYMORE.
11 A. THAT WAS THE INTENT OF THE NEWSPAPER PRESERVATION ACT AND
12 OF THE JOA. IN SOME 13 OR WHATEVER NUMBER WAS RECOUNTED FOR
13 HIS HONOR YESTERDAY OR THE DAY BEFORE, HALF OF THOSE ARE GONE.
14 THAT'S THE ECONOMIC REALITY OF THOSE SITUATIONS. IT WASN'T
15 FORESEEN AS TO HOW THAT WOULD WORK OUT.
16 Q. THESE WERE SOME OF THE JOA'S THAT WERE CONCLUDED BEFORE
17 THEIR TIME WAS OVER?
18 A. THAT -- YES, THEY WERE CONCLUDED BEFORE THEIR TIME.
19 Q. AND THEY ALL RESULTED IN BASICALLY ONE NEWSPAPER WHERE
20 THERE USED TO BE TWO?
21 A. CORRECT.
22 Q. SO THAT THEY -- AND UNDER THE JOA, YOU UNDERSTOOD THAT
23 BEFORE THEY WERE CONCLUDED THERE WERE TWO NEWSPAPERS?
24 A. CORRECT.
25 Q. SO DID IT EVER OCCUR TO YOU THAT THE JOA WAS BEING
1921
BENNACK - CROSS / ALIOTO
1 MISUSED, EVEN IN THEIR INSTANCES?
2 A. NO.
3 Q. NOW, I HAVE YOUR TESTIMONY. I JUST WANTED TO BE SURE
4 ABOUT THIS. WE HAVE YOU AS STATING, QUOTE:
5 "BUT WE HAD STATED OVER AND OVER AGAIN THAT
6 IT WAS OUR DESIRE AND INTENTION TO TRY TO REMAIN
7 IN THIS MARKET AFTER 2005."
8 NOW, IS THAT YOUR INTENTION TODAY?
9 A. OUR WISH.
10 Q. TODAY.
11 A. OUR WISH IS TO DO THAT. WE INTEND TO DO THAT BY VIRTUE OF
12 COMPLETING THE TRANSACTION FOR WHICH WE HAVE A CONTRACT TO
13 ACQUIRE THE CHRONICLE. WE HAVE OFFERED THE EXAMINER FOR SALE,
14 AND WE HAVE ENTERED INTO AN AGREEMENT WITH XLC -- WHATEVER THE
15 NUMBER -- EXIN LC. SO OUR PRESENT INTENTION IS TO BE HERE
16 FOREVER AS PUBLISHER OF THE CHRONICLE.
17 Q. ALL RIGHT. YOU WERE EXAMINED, I BELIEVE, ON EXHIBIT 69.
18 EXHIBIT 69 IS FROM YOU, AND IT IS DIRECTED TO VIC GANZI AND
19 GEORGE IRISH AND JAMES ASHER.
20 AND IF I MAY APPROACH THE WITNESS, YOUR HONOR?
21 THE COURT: YES, YOU MAY.
22 BY MR. ALIOTO:
23 Q. THIS IS EXHIBIT 69, IDENTIFIED AS THE E-MAIL FROM YOU OF
24 AUGUST 5, 1998, TO THE PERSONS THAT I INDICATED.
25 THIS IS AN E-MAIL THAT YOU SENT TO THOSE FOLKS ON OR
1922
BENNACK - CROSS / ALIOTO
1 ABOUT THAT DATE, IS IT NOT?
2 A. YES, SIR.
3 Q. AND IN THIS ONE YOU STATE, QUOTE:
4 "JOHN SIAS CALLED TODAY TO GIVE ME AN UPDATE
5 ON THE REACTION TO OUR LAST PROPOSAL."
6 THAT'S THE ONE WE JUST WENT OVER, CORRECT?
7 A. I BELIEVE THAT'S CORRECT.
8 Q. AND IT STATES:
9 "VIC AND I FIELDED A RATHER STUNNED REACTION
10 IN A RECENT TELEPHONE DISCUSSION AND JOHN WANTED
11 TO TELL ME FURTHER WHERE THEY ARE IN THEIR
12 THINKING. THE CHRONICLE FOLKS CLEARLY THINK OUR
13 PROPOSAL IS AN OVERREACH. HE STATED TODAY THAT
14 HIS BOARD IS CLEARLY, QUOTE, 'NOT INTERESTED IN
15 ANYTHING CLOSE,' END OF QUOTE, TO WHAT WE HAD
16 ADVANCED."
17 I THINK YOU TESTIFIED ON DIRECT EXAMINATION THAT
18 AFTER GETTING THAT YOU CONSIDERED THAT YOU WERE DEAD AGAIN.
19 A. WELL, I USED THAT PHRASE. I HAVE ALWAYS -- I HAVE
20 CONTENDED ALWAYS THAT WE HAD SOME HOPE THAT IT WOULD COME OUT
21 AS IT HAS COME OUT, BUT WE DIDN'T FEEL VERY GOOD ABOUT THIS.
22 AND WE WERE SURPRISED, AS I SAID, AT THE STRENGTH OF MR. SIAS'
23 RESPONSE TO OUR PROPOSAL.
24 Q. WELL, ONE OF THE THINGS THAT YOU WERE -- YOU WANTED TO BE
25 SURE OF IS THAT YOU DID NOT WANT TO ALLOW THEM TO RUN OUT THE
1923
BENNACK - CROSS / ALIOTO
1 JOA AND LEAVE YOU ON THE SIDE OF THE ROAD FOR DEAD.
2 A. THAT'S RIGHT.
3 Q. AND THEN YOU HAD EXHIBIT 70, WHICH I BELIEVE IS IN FRONT
4 OF YOU. I JUST WANT TO KEEP THE CHRONOLOGY, IF I MAY.
5 MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: VERY WELL.
7 BY MR. ALIOTO:
8 Q. AND THIS IS THE LETTER OF AUGUST 11, EXHIBIT --
9 PLAINTIFFS'S 70 IS AUGUST 11. IT IS DIRECTED TO MR. BENNACK.
10 IT IS FROM MR. SIAS WITH CARBON COPIES TO THE BOARD OF
11 DIRECTORS OF THE CHRONICLE.
12 THIS IS A LETTER THAT YOU RECEIVED FROM MR. SIAS ON
13 OR ABOUT THAT DATE; IS THAT RIGHT?
14 A. YES, SIR.
15 Q. AND ALSO TO THE RIGHT-HAND SIDE THERE SHOW COPIES SENT TO
16 MR. GANZI, IRISH, ASHER AND THACKERAY.
17 IS THAT YOUR HANDWRITING?
18 A. THE "IRISH," "ASHER" AND "THACKERAY" IS MY HANDWRITING.
19 THE "VICTOR GANZI," I BELIEVE, IS MY SECRETARY'S HANDWRITING.
20 Q. OKAY. AND IF YOU WILL GO TO THE THIRD PARAGRAPH, IT
21 STATES FROM MR. SIAS TO YOU, QUOTE:
22 "IT IS THE UNANIMOUS OPINION OF THE
23 CHRONICLE BOARD THAT WE ARE TOO FAR APART ON OUR
24 JOA POSITIONS TO WARRANT ANY FURTHER
25 DISCUSSION."
1924
BENNACK - CROSS / ALIOTO
1 THAT WAS THE PART THAT YOU BELIEVED TO BE THAT THAT
2 WAS FAIRLY CLEAR THAT THEY DIDN'T WANT TO DO ANYMORE DEALINGS
3 WITH YOU?
4 A. THAT'S WHAT IT SAYS.
5 Q. AND DID YOU FEEL THAT WAY?
6 A. I FELT VERY BADLY ABOUT IT, AND I THOUGHT IT WAS UNWISE,
7 BUT I ALSO DIDN'T THINK THAT THE WORLD HAD ENDED.
8 Q. OKAY. NOW, YOU WERE ALSO QUESTIONED OFF OF EXHIBIT 71,
9 WHICH IS DATED SEPTEMBER 8, 1998, APPROXIMATELY ONE MONTH
10 LATER.
11 MAY I APPROACH THE WITNESS, YOUR HONOR?
12 THE COURT: VERY WELL.
13 BY MR. ALIOTO:
14 Q. EXHIBIT -- EXHIBIT 71 IS A DOCUMENT DATED SEPTEMBER 8,
15 1998. IT IS DIRECTED TO GEORGE IRISH WITH CARBON COPIES TO
16 MESSRS. ASHER, GANZI, THACKERAY AND DANZIG FROM MR. BENNACK.
17 THIS IS MARKED "STRICTLY PERSONAL AND CONFIDENTIAL."
18 IS THIS A DOCUMENT THAT YOU PREPARED OR CAUSED TO BE
19 PREPARED AND SENT TO THOSE INDIVIDUALS ON OR ABOUT THAT DATE?
20 A. I BELIEVE IT IS.
21 Q. I WANT TO DIRECT YOUR ATTENTION TO FIRST THE FIRST
22 PARAGRAPH. IT STATES, QUOTE -- AND THIS IS DIRECTED TO
23 MR. IRISH, QUOTE:
24 "FOLLOWING OUR DISCUSSION OF EARLIER TODAY,
25 I TELEPHONED JOHN SIAS TO ACKNOWLEDGE HIS LETTER
1925
BENNACK - CROSS / ALIOTO
1 OF AUGUST 11 CONCERNING THE BREAK-OFF OF OUR SAN
2 FRANCISCO NEGOTIATIONS."
3 DO YOU SEE THAT?
4 A. YES, I DO.
5 Q. OKAY. THEN YOU GO DOWN AND YOU STATE IN THE -- AND YOU
6 WERE QUESTIONED ABOUT THIS. YOU STATE -- AND THIS IS AGAIN TO
7 MR. IRISH AND OTHERS. THE LAST THREE WORDS OF THIS -- OF THIS
8 FIRST PAGE, "I TOLD HIM."
9 DO YOU SEE THAT?
10 A. YES.
11 Q. THE LAST THREE WORDS. IT STATES AS FOLLOWS:
12 "I TOLD HIM" -- AND "HIM" IS MR. SIAS?
13 A. YES.
14 Q. "I TOLD HIM, HOWEVER, THAT WE WERE CERTAINLY
15 GOING TO TAKE THE STEPS WE BELIEVED NECESSARY TO
16 PREPARE OURSELVES FOR THE RESUMPTION OF A FULLY
17 COMPETITIVE SITUATION IN THE POST-2005 PERIOD."
18 DO YOU SEE THAT?
19 A. YES, I DO.
20 Q. DID YOU IN FACT MAKE SUCH A STATEMENT TO MR. SIAS?
21 A. YES, I DID.
22 Q. WAS IT A TRUE STATEMENT?
23 A. IT WAS A TRUE STATEMENT. WE WERE GOING TO TAKE THE STEPS
24 NECESSARY TO PREPARE OURSELVES. THAT'S WHAT IT SAYS. AND,
25 YES, I INTENDED -- I MEANT IT.
1926
BENNACK - CROSS / ALIOTO
1 Q. IN OTHER WORDS, YOU SAID THAT -- IN OTHER WORDS, YOU ARE
2 SAYING --
3 A. I SAID WHAT I SAID, MR. ALIOTO. WE WERE GOING TO PREPARE
4 OURSELVES.
5 Q. BUT YOU DIDN'T REALLY MEAN THAT YOU INTENDED TO ACTUALLY
6 COMPETE; IS THAT IT?
7 A. WE HADN'T -- WE HADN'T MADE THE DECISION, AS I HAVE TOLD
8 YOU. IT WAS NOT NECESSARY TO MAKE THE DECISION. IT WAS
9 NECESSARY TO HAVE SOME DEGREE OF PREPAREDNESS AND TO LOOK AT
10 SOME RANGE OF OPTIONS.
11 Q. WHEN YOU SAY "IT WASN'T NECESSARY TO MAKE THE DECISION,"
12 DID YOU BELIEVE THAT THE CHRONICLE'S POSITION WAS ANYTHING
13 OTHER THAN FINAL?
14 A. I SAID -- I HAVE ALREADY TESTIFIED THAT I -- AT SOME LEVEL
15 I THOUGHT SINCE I HAVE BEEN HERE TIME AND AGAIN THAT IT MAY NOT
16 BE FINAL. YES, I BELIEVE IT WAS NOT FINAL.
17 Q. YOU BELIEVE IT WAS NOT FINAL. OKAY.
18 WELL, WOULD YOU TURN TO THE FIRST PAGE OF THIS
19 DOCUMENT TO YOUR OWN FOLKS?
20 A. RIGHT.
21 Q. MR. IRISH, MR. ASHER, MR. GANZI AND MR. THACKERAY AND
22 MR. DANZIG, AND IF YOU WILL GO TO THE THIRD PARAGRAPH IN THE
23 LAST SENTENCE, IT STATES, QUOTE:
24 "I WOULD SAY, HOWEVER, THAT THERE WAS
25 NOTHING IN OUR EXCHANGE THAT GAVE ME ANY REASON
1927
BENNACK - CROSS / ALIOTO
1 TO BELIEVE THAT THE CHRONICLE'S POSITION IS
2 OTHER THAN FINAL."
3 A. THAT'S WHAT --
4 Q. DO YOU SEE THAT?
5 A. THERE WAS NOTHING IN THE EXCHANGE. THAT DOESN'T SAY THAT
6 THAT'S MY BELIEF. IT SAYS THERE IS NOTHING THAT HE SAID TO ME
7 OR I SAID TO HIM THAT GAVE ME ANY REASON TO BELIEVE THAT HE
8 DIDN'T MEAN IT, THAT IT WAS FINAL. THAT DOESN'T MEAN THAT I
9 DON'T HAVE MY OWN INDEPENDENT VIEW ABOUT THAT.
10 Q. WELL, THIS SAYS "THAT GAVE ME." THAT "ME" MEANS YOU,
11 DOESN'T IT?
12 A. BUT IT REFERS BACK TO IN THE EXCHANGE. IT DOESN'T SAY
13 THAT THERE IS NOTHING THAT I KNOW FOR THE WHOLE OF MY LIFE
14 ABOUT THE SITUATION THAT WOULD GIVE ME A REASON. IT SAYS,
15 "NOTHING IN THIS EXCHANGE THAT WOULD GIVE ME A REASON."
16 Q. WELL, ISN'T IT CORRECT, SIR, THAT WHEN YOU WERE WRITING
17 THIS TO YOUR OWN PEOPLE -- WELL, FIRST OF ALL, IS THE STATEMENT
18 I READ TRUE?
19 A. YES.
20 Q. DID YOU MEAN TO INDICATE TO THE -- TO YOUR OWN OFFICERS
21 THAT YOU BELIEVED THAT THE CHRONICLE'S POSITION WAS ANYTHING
22 OTHER THAN FINAL?
23 A. I MEANT TO CONVEY TO MY COLLEAGUES THAT THERE WAS NOTHING
24 THAT WAS -- THAT TOOK PLACE IN THE EXCHANGE THAT GAVE ME ANY
25 REASON TO BELIEVE THAT IT WAS OTHER THAN FINAL. IT'S A SIMPLE
1928
BENNACK - CROSS / ALIOTO
1 DECLARATIVE STATEMENT AND IT'S TRUE.
2 Q. AND ISN'T IT CORRECT THAT BECAUSE YOU BELIEVED OR THERE
3 WAS NO REASON FOR YOU NOT TO BELIEVE THAT IT WASN'T FINAL,
4 THAT'S WHY YOU TOLD HIM -- MEANING MR. SIAS -- THAT YOU WERE
5 GOING TO TAKE STEPS NECESSARY TO PREPARE YOURSELF FOR THE
6 RESUMPTION OF A FULLY COMPETITIVE SITUATION IN THE POST-2005
7 PERIOD?
8 A. NO, THAT IT IS NOT THE REASON I TOLD HIM THAT.
9 Q. "FULLY COMPETITIVE SITUATION" MEANS, DOES IT NOT -- MEANT
10 TO YOU WHEN YOU WROTE IT -- THAT YOU WERE WILLING TO TAKE STEPS
11 TO RESUME A SITUATION IN WHICH YOU WOULD BE PRICE COMPETITIVE
12 AGAINST THEM?
13 A. I BEG YOUR PARDON?
14 Q. WHEN YOU SAY "FULLY COMPETITIVE," DID YOU MEAN TO INCLUDE
15 PRICE COMPETITION AGAINST THE CHRONICLE?
16 A. I MEANT THAT WE WERE -- WE THOUGHT IT NECESSARY TO PREPARE
17 OURSELVES FOR THAT, AND "FULLY COMPETITIVE" MEANS "FULLY
18 COMPETITIVE."
19 Q. DOES "FULLY COMPETITIVE" MEAN PRICE COMPETITION?
20 A. YES.
21 Q. AND PRICE COMPETITION WOULD AFFECT, WOULD IT NOT, BOTH
22 ADVERTISERS AND SUBSCRIBERS AND PURCHASERS OF THE PAPER,
23 CORRECT?
24 A. COULD HAVE EFFECT. IT DEPENDS ON THE NATURE AND DEGREE OF
25 COMPETITION.
1929
BENNACK - CROSS / ALIOTO
1 I HAVE SEEN SITUATIONS WHERE AN INDEPENDENT
2 NEWSPAPER IS SO POWERFUL THAT THE SECOND NEWSPAPER'S PRACTICES
3 AND PRICING MEANS NOTHING TO THEM.
4 Q. AT LEAST EVEN IN THOSE SITUATIONS THE CONSUMERS AND THE
5 ADVERTISERS WOULD HAVE A CHOICE NOT ONLY BETWEEN PAPERS BUT
6 ALSO ON PRICE; IS THAT CORRECT?
7 A. THERE'S A CHOICE. THERE'S A CHOICE.
8 Q. IF YOU WILL GO DOWN TO THE MIDDLE OF THAT PARAGRAPH --
9 IT'S ALMOST AT THE END OF IT, ACTUALLY. IT SAYS, "I TOLD" --
10 "I TOLD HIM."
11 HERE. DO YOU SEE THAT?
12 A. YES, SIR.
13 Q. "I TOLD HIM."
14 A. I SEE IT.
15 Q. OKAY. IT STATES, QUOTE:
16 "I TOLD HIM THAT I HAD A SIMILAR DISCUSSION
17 WITH YOU ABOUT THE NECESSITY OF OUR MAKING
18 PLANS" --
19 NOW, THIS IS WHEN -- WHEN YOU SAY "I TOLD HIM,"
20 THAT'S IN REFERENCE TO MR. SIAS, RIGHT?
21 A. YES.
22 Q. AND WHEN YOU SAY -- AND YOU ARE SAYING THAT I HAD A
23 SIMILAR DISCUSSION WITH YOU, THAT "YOU" IS REFERRING TO
24 MR. IRISH, TO WHOM YOU SENT THIS DOCUMENT, CORRECT?
25 A. YES.
1930
BENNACK - CROSS / ALIOTO
1 Q. OKAY. SO YOU ARE TELLING YOUR PERSON, MR. IRISH, THAT YOU
2 TOLD MR. SIAS SOMETHING, CORRECT?
3 A. YES.
4 Q. OKAY. IT STATES, QUOTE:
5 "I TOLD HIM THAT I HAD A SIMILAR DISCUSSION
6 WITH YOU ABOUT THE NECESSITY OF OUR MAKING PLANS
7 AND THAT WE WOULD WORK VERY HARD TO BALANCE THE
8 COMBINED PRIORITIES OF, ONE, BEING GOOD AND
9 PROFITABLE PARTNERS FOR THE NEXT SEVEN YEARS,
10 BUT, TWO, PREPARING OURSELVES FOR THE DAYS WHEN
11 WE WOULD BE CONVENTIONAL COMPETITORS AGAIN."
12 DO YOU SEE THAT?
13 A. I SEE THAT.
14 Q. DID YOU MAKE THAT STATEMENT TO MR. SIAS?
15 A. WELL, IF I DID, I WAS NOT AS CAREFUL AS I WOULD NORMALLY
16 BE. I PLEAD GUILTY TO USING "WOULD." I WOULD PREFER TO HAVE
17 SAID "WOULD MOVE TOWARD THE PROSPECT OF BEING CONVENTIONAL
18 COMPETITORS," BUT THAT'S WHAT IT SAYS.
19 Q. HOW ABOUT DID YOU WISH THAT YOU WOULD HAVE USED BETTER
20 WORDING WHEN YOU WERE TALKING TO MR. IRISH?
21 A. THIS IS TO MR. IRISH.
22 Q. THIS IS TO MR. IRISH.
23 DO YOU WISH THAT YOU HAD TOLD THIS TO MR. IRISH
24 BECAUSE IN READING THIS TO MR. IRISH -- AND YOU ARE THE CEO --
25 MR. IRISH MIGHT THINK THAT YOU MEANT IT, RIGHT?
1931
BENNACK - CROSS / ALIOTO
1 A. WELL, I AM NOT GOING TO SPECULATE ON WHETHER THIS IS
2 EXACTLY WHAT I TOLD SIAS. THIS IS WHAT'S IN THE MEMORANDUM
3 WITH MR. IRISH, AND I ACCEPT THAT IT'S THERE AS WRITTEN. I
4 HAVE JUST DESCRIBED THAT I DON'T BELIEVE THAT IT'S QUITE AS
5 ARTFULLY SAID, ALTHOUGH I CERTAINLY DIDN'T WANT MR. IRISH OR
6 ANY OF OUR ASSOCIATES DECIDING THAT IT WAS ALL OVER.
7 Q. NOW, ON THIS WHOLE PROSPECT OF THE POTENTIAL OF HAVING TO
8 COMPETE IN 2005 AND HAVING TO SEPARATE THE ASSETS, THIS WHOLE
9 THING WAS NOT VERY PLEASANT FOR YOU TO CONTEMPLATE, WAS IT?
10 A. THAT'S FOR SURE.
11 Q. NOW I WANT TO DIRECT YOUR ATTENTION TO -- THIS WAS -- THAT
12 LAST LETTER. THIS WAS SENT OF 1998.
13 SO AT THE CONCLUSION OR NEAR THE END OF 1998, YOU
14 MADE A DETERMINATION, DID YOU NOT, TO SEND MR. WHITE OUT HERE
15 TO SAN FRANCISCO FOR THE PURPOSE OF TRYING TO ENSURE AND SET UP
16 A STRONG POSITION IN SAN FRANCISCO TO COMPETE AFTER 2005?
17 A. NO. THAT WAS NOT -- THAT IS NOT A CORRECT DESCRIPTION.
18 WE SENT HIM NOT KNOWING THE ULTIMATE OUTCOME TO OVERSEE OUR
19 OPERATIONS HERE BECAUSE HIS PREDECESSOR, MR. GUITTAR, WANTED TO
20 RETIRE.
21 Q. WELL, YOU SENT HIM OUT. ONE OF THE PURPOSES OF SENDING
22 HIM OUT WAS TO ATTEMPT TO ENSURE A STRONG POSITION IN THE
23 MARKET FOR THE SAN FRANCISCO EXAMINER GOING FORWARD. RIGHT?
24 A. I CERTAINLY WANTED HIM TO DO EVERYTHING WITHIN HIS POWER
25 TO ACQUIT OUR POSITION HERE AS POSITIVELY AS POSSIBLE,
1932
BENNACK - CROSS / ALIOTO
1 ABSOLUTELY.
2 Q. OKAY. NOW, LET ME SHOW YOU A DOCUMENT WHICH IS 132 IN
3 EVIDENCE.
4 MAY I APPROACH THE WITNESS, YOUR HONOR?
5 THE COURT: YES, YOU MAY.
6 BY MR. ALIOTO:
7 Q. EXHIBIT 132 IN EVIDENCE IS A DOCUMENT ENTITLED "SAN
8 FRANCISCO STRATEGY."
9 AND ATTACHED TO THAT IS -- ATTACHED TO THAT IS AN
10 E-MAIL FROM MR. WHITE AND IS -- TO MR. IRISH.
11 HAVE YOU EVER SEEN THIS DOCUMENT BEFORE?
12 A. I AM NOT SURE, MR. ALIOTO. I HAVE SAID I HAVE SEEN SO
13 MANY, BUT I AM CERTAINLY NOT GOING TO DENY THAT I EVER SAW IT.
14 THERE WERE ALL SORTS OF THESE SORTS OF PLANS AND STRATEGIES AND
15 MISSIONS DEVELOPED, AND I CAN'T SAY.
16 Q. WELL, THIS IS WITH REGARD TO MR. WHITE. AND LET ME READ
17 THE FIRST PARAGRAPH OF THE FIRST PAGE OF 132 UNDER "SAN
18 FRANCISCO STRATEGY." IT STATES, QUOTE:
19 "TIM HAS MOVED INTO SAN FRANCISCO QUICKLY
20 AND HAS BEGUN THE LOCAL WORK NECESSARY TO
21 ASSESSING OPTIONS AVAILABLE TO HEARST
22 IMMEDIATELY AND UP TO 2005 TO ENSURE A STRONG
23 POSITION IN THE MARKET GOING FORWARD. I PLAN TO
24 HAVE HIM VISIT WITH US AFTER THE MARCH BOARD
25 MEETING."
1933
BENNACK - CROSS / ALIOTO
1 THIS IS ON HEARST LETTERHEAD. DOES THIS --
2 A. ON HEARST NEWSPAPER'S LETTERHEAD.
3 Q. HEARST NEWSPAPER'S, RIGHT.
4 A. THAT'S NOT MY LETTERHEAD.
5 Q. YES. IS THIS -- DOES THIS APPEAR TO YOU TO BE FROM
6 MR. IRISH?
7 A. I WOULDN'T -- THAT WOULD BE A GREAT LEAP TO DECIDE THAT
8 FOR MR. IRISH.
9 Q. ALL RIGHT.
10 A. THERE ARE A LOT OF PEOPLE AT HEARST NEWSPAPERS.
11 Q. OKAY. IF YOU WILL TURN THE PAGE TO THE E-MAIL. UNDER
12 "STRATEGIC INITIATIVES" FOR MARCH, IT SAYS, "GOAL," AND I WILL
13 READ -- THIS IS MR. WHITE.
14 NOW, READ THE GOAL UNDER "GOAL" WHAT HE HAS AND THEN
15 I WILL ASK YOU A QUESTION ABOUT IT. UNDER "GOAL" HE STATES,
16 QUOTE:
17 "STRENGTHEN THE EXAMINER'S FRANCHISE PRIOR
18 TO 2005 IN EVERY WAY POSSIBLE. USE EVERY MEDIUM
19 AVAILABLE. SEEK EVERY PARTNERSHIP/ALLIANCE AND
20 AFFILIATION THAT WILL HASTEN AND STRENGTHEN
21 HEARST'S PRESENCE IN THE BAY AREA. CONTINUE TO
22 COMMUNICATE HEARST'S COMMITMENT AND INTENTIONS
23 FOR THE LONG HAUL TO SIAS AND THE CHRONICLE."
24 DO YOU SEE THAT?
25 A. I DO.
1934
BENNACK - CROSS / ALIOTO
1 Q. OKAY. DOES THAT ACCORD WITH YOUR UNDERSTANDING AS TO WHAT
2 THE PURPOSE WAS OF SENDING MR. WHITE TO SAN FRANCISCO?
3 A. NO. I HAVE EXPLAINED THAT -- AND THIS IS NOT -- I AM NOT
4 THE AUTHOR OF THIS. I HAVE EXPLAINED THAT WE SENT MR. WHITE TO
5 BE THE LEADER OF THIS ORGANIZATION AND TO -- TO COPY WITH AND
6 DEAL WITH WHATEVER MIGHT BE THE FUTURE. THAT'S A VERY WORTHY
7 GOAL. I HAVE NO PROBLEM WITH THAT GOAL. BUT THAT'S NOT --
8 THAT WOULDN'T BE MY VERSION OF EXACTLY WHAT HIS DUTIES WERE.
9 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1935
BENNACK - CROSS / ALIOTO
1 Q. WELL, AMONG THOSE THAT HE LISTS AS THE POSSIBILITIES IS,
2 FOR EXAMPLE, ONE OF THEM IS, ARABIC SIX, QUOTE:
3 "HIRE THE BEST COLUMNISTS WE CAN FIND IN THE
4 COUNTRY."
5 DO YOU SEE THAT?
6 A. YES.
7 Q. DID YOU BELIEVE AT THE TIME -- DID YOU BELIEVE -- LET ME
8 BACK UP.
9 IN 1999, IMMEDIATELY -- RIGHT PRIOR TO THE TIME OF
10 THE AGREEMENT WITH THE CHRONICLE, DID YOU BELIEVE THAT THE
11 EXAMINER HAD THE BEST COLUMNISTS IN THE COUNTRY?
12 A. OH, I'M NOT QUALIFIED TO SAY. I THINK THE EXAMINER HAS
13 GOOD COLUMNISTS, BUT I REGRETTABLY CAN'T READ ALL OF OUR
14 COLUMNISTS EVERYWHERE, EVERY DAY.
15 Q. THERE WAS ALSO AN EFFORT TO USE TO THE FULLEST ADVANTAGE
16 HEARST SYNERGIES FROM OTHER NEWSPAPERS. DO YOU SEE THAT?
17 A. YES.
18 Q. THAT'S IN ITEM -- OKAY.
19 AND THAT WOULD BE TO BE ABLE TO USE THOSE FACILITIES
20 FOR THE EXAMINER. DID YOU EVER DISCUSS THAT ABOUT BEING --
21 USING THAT FOR THE EXAMINER?
22 A. WE DISCUSSED THAT MANY TIMES, NOT ONLY FOR THE EXAMINER
23 BUT ALL OF OUR PAPERS. THE SYNERGY IS A WORD WE ALL WANT TO
24 UTILIZE AND ACHIEVE, BUT EASIER SAID THAN DONE.
25 Q. THEN DID YOU UNDERSTAND THAT THERE WAS SOME -- AND YOU
1936
BENNACK - CROSS / ALIOTO
1 WERE QUESTIONED ABOUT THIS DOCUMENT, SO LET ME JUST HAND IT TO
2 YOU. THIS IS EXHIBIT NUMBER 72.
3 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
4 THE COURT: YOU MAY.
5 BY MR. ALIOTO:
6 Q. EXHIBIT NUMBER 72 IS THE DOCUMENT DATED APRIL 15, 1999,
7 FROM MR. WHITE TO MR. -- DIRECTED TO MR. SIAS, AND THERE ARE
8 BLIND COPIES TO YOU, AMONG OTHERS.
9 A. YES.
10 Q. YOU DID RECEIVE A COPY OF THAT LETTER ON OR ABOUT THAT
11 DATE; DIDN'T YOU?
12 A. YES, I BELIEVE I DID.
13 Q. OKAY. NOW, IN THIS PARTICULAR LETTER TO MR. SIAS, IN THE
14 SECOND PARAGRAPH -- YOU SEE, FIRST OF ALL, THERE WAS A MEETING
15 WITH MR. SIAS AND MR. IRISH LAST THURSDAY, AND MR. WHITE, ON
16 THE VERY FIRST PARAGRAPH?
17 A. (WITNESS EXAMINES DOCUMENT.) YES, I SEE THAT.
18 Q. OKAY. NOW, THE SECOND PARAGRAPH STATES, QUOTE:
19 "THE OVERARCHING INTENT AND PURPOSE OF THE
20 JOINT OPERATING AGREEMENT IS TO 'ENABLE BOTH
21 CHRONICLE AND HEARST TO SURVIVE AS PUBLISHERS OF
22 INDEPENDENT NEWSPAPERS,' AND UPON TERMINATION OF
23 THE AGREEMENT IN THE ABSENCE OF ITS RENEWAL OR
24 EXTENSION TO 'ENABLE EACH OF SAID PARTIES TO
25 ENGAGE INDEPENDENTLY OF PRINTING COMPANY AND THE
1937
BENNACK - CROSS / ALIOTO
1 NEWSPAPER PUBLISHING BUSINESS,'" END OF QUOTE.
2 DO YOU SEE THAT?
3 A. I DO.
4 Q. HE CONTINUES. HE SAYS:
5 "TWO OBSERVATIONS. FIRST, DESPITE THE
6 INTENTIONS OF THE PARTIES THAT THE JOA WOULD
7 EXTEND TO THE FULL 50 YEARS PROVIDED FOR BY THE
8 AGREEMENT AND HEARST'S EXERCISE OF ITS OPTION
9 FOR THE 10-YEAR EXTENSION, YOU HAVE MADE IT
10 ABUNDANTLY CLEAR THAT THE CHRONICLE DOES NOT
11 INTEND TO EXTEND THE JOINT OPERATING AGREEMENT
12 BEYOND SEPTEMBER 2005."
13 DO YOU SEE THAT?
14 A. I DO.
15 Q. DID HEARST WANT THE CHRONICLE TO EXTEND THE JOA BEYOND
16 2005?
17 A. WE HAD FREQUENTLY TRIED TO GET CHRONICLE TO EXTEND THE JOA
18 BEYOND 2005. WE HAD EXTENDED -- LET ME RESTATE THAT.
19 WE HAD CONTINUOUSLY ATTEMPTED TO GET THEM TO USE THE
20 FIRST EXTENSION THAT WE ENDED UP HAVING TO USE TO STAY ALIVE SO
21 THAT WE WOULD, AGAIN, STAY IN THE GAME OR HAVE THE PROSPECT OF
22 STAYING IN THE GAME FOR A LONGER PERIOD OF TIME. SO WE
23 CERTAINLY HAD URGED THEM TO EXTEND THE JOA.
24 Q. BEYOND 2005?
25 A. WELL, THIS SAYS THAT -- NO. IN THAT INSTANCE WE WOULD
1938
BENNACK - CROSS / ALIOTO
1 HAVE BEEN URGING THEM TO EXTEND IT TO 2005. SO WE WOULD HAVE
2 HAD THE OPTION TO EXTEND IT PAST THAT IF WE THOUGHT THAT WAS
3 STILL NECESSARY TO STAY IN THE GAME TO ACCOMPLISH THE OBJECTIVE
4 THAT I'VE DESCRIBED HERE TODAY.
5 THE COURT: HADN'T HEARST BY APRIL, 1999, ALREADY
6 EXERCISED ITS EXTENSION OPTION?
7 THE WITNESS: WE HAD, YOUR HONOR. AND THAT'S STATED
8 HERE. WE HAD DONE THAT ACTUALLY, BUT I'M MAKING THE POINT
9 THAT -- HE'D ASKED ME IF WE WANTED THE CHRONICLE TO EXTEND, AND
10 I BEGGED THE POINT THAT WE HAD AT EARLIER TIMES URGED THEM TO
11 DO THAT SO THAT WE COULD HAVE THE MOST OPTION POSSIBLE WITH OUR
12 OPTIONS STILL INTACT.
13 THE COURT: WELL, THAT ISN'T RESPONSIVE TO WHAT THE
14 QUESTION WAS.
15 THE WITNESS: THEN ASK THE QUESTION AGAIN. WHAT'S
16 THE QUESTION?
17 BY MR. ALIOTO:
18 Q. THIS -- THE TWO OBSERVATIONS THAT ARE MADE TO MR. SIAS ON
19 THE APRIL 15, 1999, LETTER --
20 A. RIGHT.
21 Q. -- MR. WHITE SAYS:
22 "FIRST, DESPITE THE INTENTION OF THE PARTIES
23 THAT THE JOA WOULD EXTEND TO THE FULL 50 YEARS
24 PROVIDED FOR BY THE AGREEMENT AND HEARST'S
25 EXERCISE OF ITS OPTION FOR A 10-YEAR EXTENSION,
1939
BENNACK - CROSS / ALIOTO
1 YOU HAVE MADE IT ABUNDANTLY CLEAR THAT THE
2 CHRONICLE DOES NOT INTEND TO EXTEND THE JOINT
3 OPERATING AGREEMENT BEYOND SEPTEMBER 2005."
4 DO YOU SEE THAT?
5 A. I DO.
6 Q. DID HEARST WANT THE CHRONICLE TO EXTEND THE JOINT
7 OPERATING AGREEMENT BEYOND 2005?
8 A. WE WERE NOT IN THIS INSTANCE ASKING THEM TO DO THAT. WE
9 WERE SIMPLY STATING WHAT THEY HAD TOLD US AND WE BELIEVED TO BE
10 THE TRUTH, THAT THEY HAD NO INTENTION OF DOING THAT.
11 Q. BUT --
12 A. IS YOUR -- EXCUSE ME.
13 Q. BUT WAS THE HEARST CORPORATION ATTEMPTING TO TELL OR --
14 TELL THE CHRONICLE THAT HEARST WAS UPSET THAT THE CHRONICLE WAS
15 NOT EXTENDING THE JOINT OPERATING AGREEMENT BEYOND 2005?
16 A. WE HADN'T MADE A DECISION AT THIS POINT IN TIME WHETHER IT
17 WOULD BE PRODUCTIVE OR WE EVEN WANTED TO CAUSE THEM TO EXTEND
18 IT, BUT WE CERTAINLY HAD ALONG THE LINE.
19 I DON'T READ ANYTHING INTO THIS EXCEPT THAT WE'VE
20 USED OUR EXTENSION AND YOU HAVE SAID YOU'RE NOT GOING TO USE
21 YOURS DESPITE THE FACT THAT WE BELIEVE IT WAS THE INTENTION OF
22 THE PARTIES THAT THIS WOULD GO ON FOR A FULL 50 YEARS. SO I
23 DON'T KNOW WHAT ELSE TO TELL YOU ABOUT IT, MR. ALIOTO.
24 Q. WELL, THE FULL 50 YEARS WOULD GO TO 2015.
25 A. '15, THAT'S RIGHT.
1940
BENNACK - CROSS / ALIOTO
1 Q. SO DIDN'T YOU UNDERSTAND WHEN YOU SAW THIS THAT MR. WHITE
2 WAS SAYING TO THE CHRONICLE IN EFFECT THAT, "WE'RE MAD AT YOU
3 BECAUSE YOU'RE NOT WILLING TO EXTEND IT BEYOND 2005"?
4 A. IF YOU WISH TO READ IT THAT WAY, I'M NOT SURE THAT I DO
5 READ IT THAT WAY. I READ IT AS A DECLARATIVE SENTENCE, THAT
6 THEY'VE SAID THEY'RE NOT GOING TO.
7 I THINK HE'S SAYING, "WE'VE BEEN GOOD GUYS AND GOOD
8 PARTNERS HERE AND YOU HAVEN'T BEEN SUCH GOOD GUYS AND GOOD
9 PARTNERS IN THAT RESPECT."
10 Q. AND THEY'RE NOT GOOD PARTNERS IN THAT RESPECT BECAUSE THEY
11 DIDN'T EXTEND IT BEYOND 2005; RIGHT?
12 A. THAT'S WHAT THIS SAYS, YES.
13 Q. THANK YOU.
14 IT GOES ON:
15 "SECOND, THE CHRONICLE RECENTLY ATTEMPTED
16 UNILATERALLY TO ORDER THE DISCONTINUATION OF OUR
17 SUCCESSFUL JOINT CIRCULATION PROMOTION OF THE
18 PAST TWO YEARS. THE CHRONICLE'S UNILATERAL
19 EFFORT WAS MADE DESPITE THE HARM THIS WOULD DO
20 TO THE AGENCY'S REVENUE AND PROFIT AND THE
21 CLEARLY DISPROPORTIONATE HARM TO EXAMINER
22 CIRCULATION."
23 DO YOU REMEMBER THE DISCUSSION ABOUT THAT JOINT
24 PROJECT?
25 A. I DO.
1941
BENNACK - CROSS / ALIOTO
1 Q. AND THAT WAS THE PROJECT WHERE THE AGENCY WAS GOING TO
2 CHRONICLE SUBSCRIBERS AND SAYING THAT THEY COULD GET A FREE
3 EXAMINER AND GOING TO EXAMINER SUBSCRIBERS AND SAYING THEY
4 COULD GET A FREE CHRONICLE?
5 A. THEY WERE -- YES. IF YOU WERE AN EXAMINER SUBSCRIBER, YOU
6 COULD ADD THE CHRONICLE. IF YOU WERE A CHRONICLE SUBSCRIBER,
7 YOU COULD ADD THE EXAMINER.
8 Q. OKAY. AND YOU UNDERSTOOD, DID YOU NOT, THAT THE CHRONICLE
9 WANTED TO STOP THAT?
10 A. I DID.
11 Q. AND THAT BECAUSE OF THAT -- THEN AS MR. WHITE STATES, HE
12 CONTINUES, QUOTE:
13 "AS INDICATED IN PRIOR LETTERS, WE BELIEVE
14 THIS TO BE IN VIOLATION OF ANTITRUST LAWS AND
15 THE AGREEMENT. IN PARTICULAR..."
16 AND IT GOES ON. DO YOU SEE THAT?
17 A. I DO.
18 Q. AND YOU SAW IT AT THE TIME THAT YOU SAW -- RECEIVED THIS
19 LETTER; RIGHT?
20 A. I ASSUME I DID.
21 Q. DID YOU BELIEVE IT?
22 A. I DIDN'T RECEIVE THIS LETTER. THIS LETTER -- I GOT A COPY
23 OF THIS LETTER.
24 Q. YES.
25 A. I'M NOT A LAWYER. I DON'T KNOW WHETHER THERE WERE
1942
BENNACK - CROSS / ALIOTO
1 ANTITRUST VIOLATIONS OR NOT.
2 Q. WELL, YOU KNEW, HOWEVER, THAT THERE WAS A CHARGE BEING
3 MADE BY THE HEARST CORPORATION AGAINST THE CHRONICLE THAT IT
4 WAS SOMEHOW MAKING IT DIFFICULT FOR THE -- FOR HEARST TO BE --
5 TO PUT ITSELF IN A POSITION TO BEGIN TO COMPETE IN 2005?
6 A. WE DIDN'T WANT TO SEE ANYTHING THAT WOULD HAVE HAD THE
7 EFFECT, AS THIS WOULD HAVE, OF SIGNIFICANTLY REDUCING THE
8 EXAMINER'S CIRCULATION.
9 Q. WELL, THERE WERE -- AT THIS TIME, EVEN THIS TIME THERE
10 WERE BENEFITS DERIVED FROM THE JOA, WEREN'T THERE, AS FAR AS
11 HEARST WAS CONCERNED?
12 A. ECONOMIC BENEFITS, YES.
13 Q. YES.
14 A. YES.
15 Q. OKAY. AND BOTH THE CHRONICLE AND THE EXAMINER SHARED IN
16 THOSE BENEFITS FOR SOME 35 YEARS UP TO THIS TIME; CORRECT?
17 A. THAT'S CORRECT.
18 Q. ALL RIGHT. NOW -- BUT AT THE TIME WHAT YOU WANTED TO TELL
19 THEM WAS, WAS IT NOT TRUE, THAT BECAUSE THEY WERE BEING HARD
20 HEADED -- STRIKE THAT -- BECAUSE THEY REFUSED TO EXTEND THE
21 2005, BEYOND THAT, AND BECAUSE THEY WOULDN'T ENTER INTO AN
22 AGREEMENT WITH YOU, MEANING WITH HEARST, THAT YOU WANTED TO LET
23 THEM KNOW THAT YOU WERE ENGAGING INDEPENDENTLY OR YOU WERE
24 GETTING YOURSELF READY TO ENGAGE INDEPENDENTLY IN THE
25 PUBLISHING OF A MORNING PAPER AS SOON AS THE JOA TERMINATES?
1943
BENNACK - CROSS / ALIOTO
1 A. WE WERE --
2 MR. CONNELL: OBJECTION.
3 THE COURT: OBJECTION?
4 MR. CONNELL: TOO COMPOUND.
5 THE WITNESS: ASK IT AGAIN. EXCUSE ME, YOUR HONOR.
6 MR. ALIOTO: ALL RIGHT.
7 THE COURT: I'LL SUSTAIN THE OBJECTION.
8 MR. ALIOTO: OKAY.
9 Q. IT'S CORRECT, IS IT NOT, THAT WHAT YOU WANTED TO -- OR
10 WHAT HEARST WAS CONVEYING TO THE CHRONICLE WAS THAT BECAUSE THE
11 CHRONICLE WOULD NOT EXTEND THE JOA BEYOND 2005 AND BECAUSE THE
12 CHRONICLE WOULD NOT ENTER INTO SOME KIND OF DEAL, PARTNERSHIP
13 OR OTHERWISE, WITH HEARST, THAT YOU WANTED THEM TO KNOW THAT
14 HEARST WAS GOING TO ENGAGE INDEPENDENTLY, PREPARING ITSELF TO
15 ENGAGE INDEPENDENTLY, APART FROM THE CHRONICLE, APART FROM THE
16 JOA, IN THE PUBLISHING OF A MORNING NEWSPAPER AT THE TIME THE
17 JOA TERMINATES.
18 MR. CONNELL: SAME OBJECTION.
19 THE COURT: OVERRULED.
20 THE WITNESS: WE CLEARLY WANTED THEM TO KNOW THAT WE
21 WERE NOT GOING TO GO QUIETLY AND JUST BE DEAD MEAT, AS I HAVE
22 SAID. WE HAD NOT MADE A DETERMINATION, AS I HAVE PREVIOUSLY
23 SAID, THAT WE WOULD GO AND PUBLISH A COMPETITIVE MORNING
24 NEWSPAPER, A DETERMINATION WHICH WE NEVER MADE; BUT WE ALSO HAD
25 EVERY -- MADE EVERY EFFORT WE KNEW HOW TO USE THE SMALL AMOUNT
1944
BENNACK - CROSS / ALIOTO
1 OF LEVERAGE THAT ONE HAS WHEN YOU HAVE A HUNDRED THOUSAND
2 CIRCULATION AND YOUR PARTNER HAS 450,000 CIRCULATION, OR
3 WHATEVER IT WAS AT THE TIME.
4 BY MR. ALIOTO:
5 Q. BUT ISN'T IT CORRECT THAT WHAT YOU WANTED THEM TO KNOW
6 WAS, "LOOK, WE BOTH OWN THE ASSETS?" THAT WAS TRUE, THE ASSETS
7 WERE 50-50; RIGHT?
8 A. THAT'S CORRECT. THAT'S CORRECT.
9 Q. AND THAT WOULD INCLUDE THE PRESSES; CORRECT?
10 A. THAT'S CORRECT.
11 Q. SO THE IDEA WAS, "WE'RE GOING TO LOOK AT OUR ASSETS AND TO
12 MAKE A DETERMINATION AND PREPARE OURSELVES TO BE ABLE TO
13 INDEPENDENTLY PUBLISH A MORNING PAPER WHEN THE JOA TERMINATES.
14 THAT'S WHY WE'RE GOING TO LOOK AT THE ASSETS."
15 A. DO YOU THINK SEVEN YEARS IN ADVANCE THAT I SHOULD SAY WE
16 DON'T CARE WHAT HAPPENS TO THE ASSETS? WE HAD A SIGNIFICANT
17 INVESTMENT THERE. THERE WAS NO RESOLUTION OF WHAT WOULD HAPPEN
18 AFTER 2005, AND WE WERE IN IMMINENT DANGER OF NOT BEING IN
19 BUSINESS, WHICH IS AN OUTCOME WE DIDN'T WANT.
20 Q. AND WHAT YOU WERE SAYING WAS, IF WE LOOK AT THE ASSETS TO
21 PUT OUT A MORNING PAPER, WHICH MEANS THE PRESS WOULD WORK AT
22 THE SAME TIME AS THE CHRONICLE'S MORNING PAPER, THAT YOU WOULD
23 NOT BE ABLE TO PUT OUT YOUR PAPER ON THOSE ASSETS? YOU'D HAVE
24 TO BUILD A NEW PLANT; RIGHT?
25 A. WELL, I THINK THAT ANYONE WHO IS IN THE BUSINESS WHO KNOWS
1945
BENNACK - CROSS / ALIOTO
1 THAT ALL OF THE ASSETS, AS MR. FALK TESTIFIED HERE, ARE BEING
2 UTILIZED FOR PUBLICATION OF THE CHRONICLE, THAT IF THEY DIDN'T
3 HAVE A HUNDRED PERCENT OF THE ASSETS, THEY WOULD HAVE TO MAKE
4 SOME OTHER ARRANGEMENTS. SO TOO WOULD WE PRESUMABLY.
5 Q. WELL, SO THAT WHAT YOU WERE DOING OR WANTED TO DO WITH THE
6 CHRONICLE WAS, YOU WANTED TO THREATEN THEM THAT IF THEY DIDN'T
7 MAKE A DEAL WITH YOU, THAT YOU WERE GOING TO LOOK AT THE
8 ASSETS, PUT OUT YOUR OWN MORNING PAPER, WHICH MEANT THAT THE
9 CHRONICLE WOULD NOT BE ABLE TO PUT OUT THEIRS?
10 A. NO, THAT'S NOT CORRECT.
11 Q. OKAY. IF YOU'LL TAKE A LOOK AT THE NEXT SENTENCE IN MR.
12 WHITE'S LETTER, AND THIS IS THE FIRST FULL PARAGRAPH. THIS IS
13 ON PAGE 2, SECOND SENTENCE ON PAGE 2. IT STATES, QUOTE --
14 WELL, I'LL DO THE FULL PARAGRAPH -- FIRST TWO SENTENCES, QUOTE,
15 AND THIS IS FROM MR. WHITE TO MR. SIAS, QUOTE:
16 "THE SIGNALS ARE UNMISTAKABLY CLEAR THAT THE
17 CHRONICLE INTENDS THAT OUR PARTNERSHIP COME TO
18 AN END DESPITE THE BENEFITS DERIVED FROM THE JOA
19 BY THE CHRONICLE AT THE TIME OF ITS
20 IMPLEMENTATION AND OVER THE PAST 34 YEARS.
21 ACCORDINGLY, WE HAVE BEEN REVIEWING OUR
22 JOINTLY-HELD ASSETS TO DETERMINE WHAT WE WILL
23 REQUIRE TO ENGAGE INDEPENDENTLY IN THE
24 PUBLISHING OF A MORNING NEWSPAPER AT THE TIME
25 THE JOA TERMINATES."
1946
BENNACK - CROSS / ALIOTO
1 DO YOU SEE THAT?
2 A. I DO.
3 Q. AND THEN HE CONTINUES THAT YOU'RE HAVING AN OUTSIDE
4 CONSULTANT LOOK AT IT, AND THEN HE STATES IN THE LAST SENTENCE
5 OF THAT PARAGRAPH, QUOTE:
6 "WHEN OUR ANALYSIS AND THE ONE IN WHICH
7 CHRONICLE IS ENGAGED ARE COMPLETE, WE WILL BE
8 PREPARED TO TALK ABOUT HOW TO DIVIDE ALL ASSETS
9 EVENLY, INCLUDING GARAGE PROPERTY."
10 DO YOU SEE THAT?
11 A. YES.
12 Q. AND THE REASON FOR MAKING THAT STATEMENT TO THE CHRONICLE
13 WAS THAT THAT WOULD MAKE IT UNDENIABLY CLEAR TO THEM, YOU
14 UNDERSTOOD, THAT IF IN FACT THAT HAPPENED, THEIR ONLY CHOICE TO
15 KEEP A MORNING NEWSPAPER WAS TO BUILD A NEW PLANT?
16 A. THAT'S NOT SUCH A DESPERATE THING TO DO.
17 Q. BUILD A NEW PLANT?
18 A. YES. IT'S EXPENSIVE, BUT I DON'T THINK THAT -- WE WERE
19 SAYING, I BELIEVE IN THIS, AND I'M NOT THE AUTHOR OF THIS
20 LETTER, ALTHOUGH I CLEARLY SAW IT AND WAS ENGAGED -- INVOLVED
21 IN PUTTING TOGETHER THIS SHOT ACROSS THE BOW, THAT THESE
22 MATTERS HAVE NOT BEEN RESOLVED. THAT'S WHAT I BELIEVE THIS IS
23 SAYING.
24 Q. BUT THAT MEANS, THOUGH, DOES IT NOT, THAT SUPPOSE -- NOW,
25 WHEN YOU SAY MAKE AN INVESTMENT IN A NEW PLANT, YOU UNDERSTOOD
1947
BENNACK - CROSS / ALIOTO
1 MAKING AN INVESTMENT IN A NEW PLANT WOULD BE IN THE RANGE OF
2 125 MILLION, MAYBE 250 MILLION; CORRECT?
3 A. MAYBE SO.
4 Q. OKAY. SO YOU'RE SAYING TO THEM, AREN'T YOU, "HEY, YOU
5 DON'T MAKE A DEAL WITH US, YOU'RE LOOKING AT 250 MILLION-DOLLAR
6 CAPITAL INVESTMENT RIGHT NOW"?
7 A. YOU EXPECT ME TO SAY TO THEM, "WE OWN HALF OF THESE
8 ASSETS, JUST TAKE THEM"?
9 Q. NO. BUT YOU WERE USING IT AS A THREAT TO STOP THE JOA AND
10 HAVE THEM MAKE A DEAL WITH YOU.
11 A. THAT'S YOUR PHRASE.
12 MR. CONNELL: OBJECTION.
13 THE COURT: ALL RIGHT. ALL RIGHT. LET'S NOT GET
14 ARGUMENTATIVE.
15 BY MR. ALIOTO:
16 Q. NOW, IN THIS LETTER ALSO YOU STATE TO THE CHRONICLE OR IT
17 IS STATED BY MR. WHITE, WITH COPIES TO YOU, THAT THE EXAMINER
18 INTENDS TO GO TO THE MORNING CYCLE; CORRECT? THAT'S THE --
19 WE'RE STILL ON PAGE 2 AND IT'S THE SECOND-TO-LAST PARAGRAPH.
20 A. WHAT IT SAYS IS THAT:
21 "WE HEREBY FORMALLY REQUEST YOUR CONCURRENCE
22 IN OUR MOVING THE EXAMINER EXPEDITIOUSLY TO THE
23 A.M. CYCLE ALONGSIDE THE CHRONICLE."
24 Q. RIGHT. OKAY. NOW, IT STATES, QUOTE:
25 "NOT ONLY WILL THIS CARRY OUT THE INTENT AND
1948
BENNACK - CROSS / ALIOTO
1 PURPOSE OF THE JOA, WE BELIEVE IT WILL HAVE THE
2 MUTUALLY-POSITIVE EFFECT OF REDUCING AGENCY
3 EXPENSES, IMPROVING THE PROFITABILITY OF BOTH
4 THE CHRONICLE AND THE EXAMINER, AND ENHANCING
5 BOTH NEWSPAPERS' ABILITY TO COMPETE WITH OTHER
6 PUBLISHERS IN THE REGION," END OF QUOTE.
7 DO YOU SEE THAT?
8 A. I DO.
9 Q. DO YOU AGREE THAT IF THE EXAMINER PUBLISHED IN THE MORNING
10 ALONGSIDE THE CHRONICLE, THAT IT WOULD IMPROVE THE
11 PROFITABILITY OF BOTH THE CHRONICLE AND THE EXAMINER?
12 A. I DO BELIEVE THAT. I BELIEVE MR. FALK, WHO WORKS WITH IT
13 EVERY DAY, SAID HE CERTAINLY BELIEVED IT. HE ALSO SAID IT
14 WASN'T PHYSICALLY POSSIBLE.
15 Q. NOW, DID YOU -- NOW, THIS LETTER -- THAT LETTER WAS
16 APRIL 15TH, AND THAT WAS IN -- THAT WAS AFTER THE MEETING WITH
17 MR. WHITE AND MR. IRISH. YOU'RE AWARE OF THAT, BECAUSE WE WENT
18 OVER THAT.
19 A. THE LETTER BETWEEN MR. IRISH, MR. SIAS AND MR. WHITE, NOT
20 ME. YOU'RE NOT SUGGESTING I WAS IN THAT MEETING.
21 Q. NO, I DON'T MEAN YOU.
22 A. YEAH.
23 Q. NOW, DID YOU KNOW OR HAVE ANY KNOWLEDGE THAT ONE OF THE
24 TALKING POINTS THAT WAS TO BE MADE TO MR. SIAS WAS THAT IT WAS
25 HEARST'S INTENT TO STAY AND PUBLISH INDEPENDENT OF THE AGENCY?
1949
BENNACK - CROSS / ALIOTO
1 A. I DON'T KNOW. WHAT DO YOU HAVE TO SHOW ME IN THAT REGARD?
2 AS I'VE SAID, I'VE SEEN THIS LETTER. I WAS NOT PRESENT FOR THE
3 MEETING AND I'M NOT SURE WHETHER I SAW THE TALKING POINTS. I
4 MAY HAVE.
5 Q. ALL RIGHT. WELL, LET ME SHOW IT TO YOU. IT'S
6 EXHIBIT 125.
7 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
8 HONOR.
9 THE COURT: YES, YOU MAY.
10 BY MR. ALIOTO:
11 Q. PLAINTIFF'S EXHIBIT -- NO, EXHIBIT 125 IS HEADNOTED
12 "TALKING POINTS APRIL 8, 1999." IT HAS A NUMBER OF BULLETS.
13 IT'S A TWO-PAGE DOCUMENT. IT HAS BEEN IDENTIFIED AS THE
14 TALKING POINTS BY MR. WHITE IN THIS TRIAL.
15 DID YOU EVER SEE THAT DOCUMENT BEFORE?
16 A. I DON'T HAVE A RECOLLECTION OF IT.
17 Q. OKAY. WELL, DO YOU AGREE -- LET ME ASK YOU, IF YOU LOOK
18 AT THE SECOND BULLET POINT, DID YOU YOURSELF BELIEVE -- DID YOU
19 YOURSELF AT ANY TIME REPRESENT TO THE CHRONICLE, OR ANY
20 REPRESENTATIVE OF THE CHRONICLE, THAT IT WAS HEARST'S INTENT TO
21 STAY AND PUBLISH INDEPENDENT OF THE AGENCY?
22 A. I REPRESENTED TO THEM THAT THAT REMAINED A POSSIBILITY,
23 WHICH WAS TRUE BECAUSE WE HAD NOT MADE A FINAL DECISION.
24 Q. OKAY. NOW, IF YOU'LL GO TO THE NEXT PAGE, PAGE 2 OF THESE
25 TALKING POINTS, AND THE SECOND-TO-LAST BULLET, I'M GOING TO
1950
BENNACK - CROSS / ALIOTO
1 READ IT THEN ASK YOU A QUESTION.
2 IT STATES AS FOLLOWS, THIS IS THE TALKING POINTS FOR
3 THE MEETING WITH JOHN SIAS, QUOTE:
4 "JOHN, YOU CAN UNDERSTAND THESE THINGS WE
5 HAVE TO DO. I KNOW THERE ARE PEOPLE ON YOUR
6 SIDE WHO DON'T BELIEVE THESE THINGS ARE GOING TO
7 HAPPEN, AND THAT HEARST FULLY INTENDS TO PRESS
8 ON IN THE MORNING FIELD, AND IN ALL AVAILABLE
9 MEDIA FRONTS. THAT'S WHY I'M HERE; IT'S WHAT I
10 WAS SENT TO DO," END OF QUOTE.
11 DO YOU SEE THAT?
12 A. I DO.
13 Q. WOULD YOU AGREE THAT THAT WAS THE REASON WHY MR. WHITE WAS
14 SENT TO SAN FRANCISCO?
15 A. NO, I WOULD NOT.
16 Q. SO IF, IN FACT, MR. WHITE SAID THAT TO MR. SIAS, THAT
17 WOULD NOT BE TRUE AS FAR AS YOU KNOW?
18 A. WELL, I THINK THAT'S A VERY NARROW DESCRIPTION OF WHAT MR.
19 WHITE WAS SENT TO DO. OBVIOUSLY IF HEARST DID, IN FACT, MAKE A
20 DECISION AND PRESSED INTO THE MORNING FIELD AND ON ALL
21 AVAILABLE MEDIA FRONTS, MR. WHITE WOULD PROBABLY HAVE BEEN A
22 PART OF THOSE, BUT I DON'T THINK THAT IT'S RIGHT TO SAY THAT'S
23 WHAT HE WAS SENT HERE TO DO.
24 Q. AND THEN IS IT CORRECT THAT SUBSEQUENT TO THAT, YOU
25 LEARNED, DID YOU NOT, THAT THE CHRONICLE -- THE SHAREHOLDERS OF
1951
BENNACK - CROSS / ALIOTO
1 THE CHRONICLE -- STRIKE THAT.
2 SUBSEQUENTLY YOU LEARNED, DID YOU NOT, THAT THERE
3 WAS A POSSIBILITY THAT THE CHRONICLE FAMILY MEMBERS MIGHT BE
4 ABLE TO SELL SOME OF THEIR ASSETS AND THAT THAT WOULD MAKE THEM
5 FLUSH WITH CASH AND THAT BECAUSE OF THAT, THEY MIGHT DECIDE TO
6 KEEP THE CHRONICLE?
7 A. I BELIEVE I REMEMBER SOMEONE SUGGESTING THAT THAT COULD BE
8 THE CASE, YES, THAT THIS -- YOU'RE FAST-FORWARDING NOW TO THE
9 TIME WHEN THEY HAVE ANNOUNCED THAT THEY'RE GOING TO SELL THEIR
10 ASSETS; HAVE YOU NOT?
11 Q. YES. THIS IS BETWEEN, IS IT NOT, THIS IS BETWEEN APRIL,
12 THE END OF APRIL, SO MAY AND THE ONE I HAVE HERE IS IN JUNE?
13 A. OKAY. SO IN JUNE ARE YOU ASKING ME IF I THOUGHT THAT
14 THERE WAS SOME PROSPECT STILL THAT THE CHRONICLE MAY RETAIN THE
15 CHRONICLE?
16 Q. YES.
17 A. YES, I DID.
18 Q. YES. AND YOU THOUGHT THAT THE CHRONICLE MEMBERS MIGHT BE
19 ABLE TO GET PAID SOME MONEY FOR THEIR OTHER ASSETS; AND IF THEY
20 GOT PAID THESE OTHER --
21 A. I KNEW THEY WOULD GET PAID SOME OTHER. IT'S NOT A
22 QUESTION OF THINKING OF IT.
23 Q. AND IF THEY DID GET PAID, IF THEY DID GET PAID OR THEY DID
24 GET MONEY, THEN THEIR INTEREST IN SELLING THE CHRONICLE MIGHT
25 NOT BE SO STRONG.
1952
BENNACK - CROSS / ALIOTO
1 A. THIS IS TEA-LEAVE READING, MR. ALIOTO. OF COURSE IF THEY
2 HAD ALL THE MONEY THEY WANTED AND SINCE IT WAS CLEAR THAT THERE
3 WERE SOME SHAREHOLDERS WHO WANTED TO BE CONTINUED TO
4 ASSOCIATED -- TO BE ASSOCIATED WITH THE CHRONICLE, THAT'S NOT
5 AN ILLOGICAL THOUGHT PROCESS.
6 THEY HAD ANNOUNCED, HOWEVER, AND WE WERE LED TO
7 BELIEVE, THAT THEY WERE GOING TO OFFER ALL OF THEIR ASSETS FOR
8 SALE BY THAT TIME.
9 Q. LET ME SHOW YOU EXHIBIT 88.
10 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
11 THE COURT: YES, YOU MAY.
12 BY MR. ALIOTO:
13 Q. EXHIBIT 88 IN EVIDENCE IS AN E-MAIL FROM MR. BENNACK DATED
14 JUNE 22, 1999, DIRECTED TO MR. GANZI, MR. ASHER, MR. IRISH AND
15 OTHERS, AND IT INCLUDES AN E-MAIL SENT BY MR. IRISH ON JUNE 22,
16 1999.
17 DID YOU RECEIVE THIS E-MAIL FROM MR. IRISH ON OR
18 ABOUT THIS DATE AND THEN TRANSMIT IT TO THE OTHER GENTLEMEN
19 LISTED ON OR ABOUT THE SAME DATE?
20 A. IT APPEARS I DID, YES.
21 Q. AND THERE'S REFERENCE HERE FROM MR. IRISH. MR. IRISH
22 STATES, QUOTE:
23 "TODAY STEVE FALK..."
24 STEVE FALK WAS, YOU KNEW, THE PRESIDENT OF THE --
25 A. AGENCY, YES.
1953
BENNACK - CROSS / ALIOTO
1 Q. -- OF THE AGENCY?
2 A. YES.
3 Q. "TODAY STEVE FALK RELAYED A
4 CONVERSATION HE HAD WITH DICK ROSENBERG."
5 YOU KNEW WHO MR. ROSENBERG WAS?
6 A. YES, I DID.
7 Q. YOU UNDERSTOOD THAT HE -- AT THE TIME YOU UNDERSTOOD THAT
8 HE WAS THE CHAIRMAN OR FORMER CHAIRMAN OF -- NOT AT THE TIME
9 BUT WAS THE FORMER CHAIRMAN OF THE BANK OF AMERICA?
10 A. I KNEW WHO MR. ROSENBERG WAS.
11 Q. OKAY, QUOTE:
12 "STEVE FALK RELAYED A CONVERSATION HE HAD
13 WITH DICK ROSENBERG, WHO WAS IN THE CHRONICLE
14 BOARD MEETING, ABOUT THE DISCUSSION ON THE
15 DECISION TO SELL."
16 I'LL STOP THERE FOR ONE MINUTE.
17 DID YOU UNDERSTAND THAT THE BOARD MEETING WAS THE
18 DAY BEFORE?
19 A. I'M NOT SURE THAT I KNEW THAT, MR. ALIOTO. DOES IT SAY
20 THAT?
21 Q. IT'S SHOWN INDEPENDENTLY OF THIS, BUT IT'S NOT --
22 A. OKAY. IT SAYS TODAY HE HAD A CONVERSATION, SO I'M NOT SO
23 PLUGGED IN THAT I KNOW EXACTLY WHEN THEY'RE MEETING AND NOT,
24 BUT THERE COULD HAVE BEEN A MEETING ON THAT DAY.
25 Q. IT GOES ON TO SAY, QUOTE:
1954
BENNACK - CROSS / ALIOTO
1 "ROSENBERG TOLD STEVE THAT THEY DISCUSSED
2 THE HEARST JOA SITUATION AT LENGTH AND ENDED UP
3 WITH THE EXPECTATION THAT HEARST WOULD MAKE
4 THEIR BEST OFFER VERY QUICKLY INSTEAD OF WAITING
5 UNTIL ALL OTHER OFFERS WERE IN AND THEN USING
6 THE JOA FIRST RIGHT OF REFUSAL LANGUAGE AT THE
7 END."
8 DO YOU SEE THAT?
9 A. YES.
10 Q. OKAY. IT CONTINUES, QUOTE:
11 "DICK TOLD STEVE THAT THERE IS STILL A GREAT
12 DEAL OF LONG-STANDING DISLIKE OF HEARST AMONG
13 SOME OF THE SHAREHOLDERS AND A STRONG OFFER UP
14 FRONT COULD LEAD TO THEIR ACCEPTANCE WITHOUT THE
15 LONGER PROCESS," END OF QUOTE.
16 DID YOU BELIEVE THAT THERE WAS OR HAVE INFORMATION
17 THAT THERE WAS SOME DISLIKE OF THE HEARST FOLKS BY THE
18 CHRONICLE FOLKS AT THIS TIME?
19 A. WELL, BY 1965 THEY HAD BEEN IN COMPETITION FOR, WHAT, 68
20 YEARS AND THEN IN THIS RATHER TROUBLESOME MARRIAGE SINCE THEN,
21 AND I WOULD HAVE BEEN STUNNED IF SOMEBODY WOULD HAVE TOLD ME
22 THERE WAS NO DISCOMFORT OR ANIMOSITY WHATSOEVER ON ANY SIDE.
23 Q. OKAY. THEN IT GOES ONTO THE NEXT PARAGRAPH, QUOTE:
24 "STEVE TOLD ME THAT ROSENBERG OPINED THAT IF
25 WE WAITED UNTIL THE END OF THE PROCESS, THEY MAY
1955
BENNACK - CROSS / ALIOTO
1 FIND THEMSELVES FLUSH WITH CASH AND DECIDE TO
2 KEEP THE CHRONICLE," END OF QUOTE.
3 DO YOU SEE THAT?
4 A. I DO.
5 Q. NOW, THAT INFORMATION YOU RECEIVED BY THIS E-MAIL AND ON
6 THE SAME DAY YOU SENT OUT AN E-MAIL TO MESSRS. ASHER, GANZI,
7 IRISH, DOERFLER AND THACKERAY STATING AS FOLLOWS, QUOTE:
8 "IN VIEW OF THIS, I'D BE INTERESTED IN THE
9 PROGRESS WITH WASSERSTEIN."
10 WHO ARE THEY?
11 A. WASSERSTEIN WAS AN INVESTMENT BANKER THAT WE HAD ENGAGED.
12 REMEMBER BY THIS TIME THEY HAD OFFICIALLY ANNOUNCED THAT THEY
13 WERE GOING TO SELL THE ASSETS OF THE CHRONICLE PUBLISHING
14 COMPANY AND WE HAD ENGAGED MR. WASSERSTEIN OF WASSERSTEIN AND
15 PERELLA TO REPRESENT US IN ANYTHING THAT MIGHT EVENTUATE.
16 Q. OKAY. YOU STATE, QUOTE.
17 "I'M UNDER THE IMPRESSION THAT THERE WAS TO
18 BE A MEETING WITH THEM ON MONDAY. SHOULD WE ACT
19 AS ROSENBERG SUGGESTS? I WILL CONSIDER THIS
20 FAIRLY VALID INPUT. FAB."
21 NOW, THE REASON YOU SAY THAT YOU WOULD CONSIDER IT
22 VALID INPUT WAS BECAUSE YOU UNDERSTOOD IT WAS COMING FROM
23 MR. ROSENBERG?
24 A. THAT'S WHAT I WAS BEING TOLD.
25 Q. AND DID YOU LATER FIND OUT THAT THAT WAS NOT CORRECT, IT
1956
BENNACK - CROSS / ALIOTO
1 WAS MR. NICHOLS?
2 A. I UNDERSTAND THAT MR. FALK HAS TESTIFIED THAT HE GOT THE
3 INFORMATION FROM NICHOLS, YES, I KNOW THAT NOW. I DIDN'T KNOW
4 THAT AT THE TIME I RECEIVED THIS.
5 Q. NOW, WASSERSTEIN, THE WASSERSTEIN GROUP, IN TERMS OF YOUR
6 PURCHASE OR THE PURCHASE OF THE HEARST CORPORATION -- POSSIBLE
7 PURCHASE OF THE CHRONICLE, YOU UNDERSTOOD, DID YOU NOT, THAT
8 ONE OF THE THINGS THAT THEY WERE GOING TO DO IS THAT THEY
9 BELIEVED THAT HEARST HAD AN ADVANTAGEOUS POSITION AGAINST ANY
10 OTHER POTENTIAL BIDDER FOR THE CHRONICLE BECAUSE OF THE JOA AND
11 THE 60-MILE LIMITATION AND THE FIRST RIGHT OF REFUSAL; IS THAT
12 RIGHT?
13 A. I BELIEVE THAT'S -- THOSE ARE AMONG THINGS THAT I NOW KNOW
14 THEY LISTED IN SOME TALKING PAPERS THAT THEY DEVELOPED.
15 Q. ALL RIGHT. AND BY COMPETITORS YOU UNDERSTOOD THAT IT
16 WOULD BASICALLY PREEMPT POTENTIAL PURCHASERS LIKE KNIGHT-RIDDER
17 OR SINGLETON?
18 A. IF IT WERE TO BE UPHELD, THEY WOULD -- UNDER THE JOA,
19 THEY'RE NOT ABLE TO BE A MEMBER OF THE JOA AND OWN A NEWSPAPER
20 WITHIN 60 MILES.
21 Q. AND SO, THEREFORE, DID YOU -- IT'S TRUE, IS IT NOT, THAT
22 YOU FELT COMFORTABLE IN THE SENSE THAT IN ATTEMPTING TO
23 PURCHASE THE CHRONICLE, YOU KNEW THAT THE SUBSTANTIAL LOCAL
24 COMPETITORS WOULD BE EXCLUDED FROM THE BIDDING PROCESS?
25 A. I WAS NOT COMFORTABLE ABOUT ANYTHING. I DID NOT -- I KNEW
1957
BENNACK - CROSS / ALIOTO
1 WHAT WAS BEING REPRESENTED THERE AS A PROVISION IN THE
2 CONTRACT, BUT I CERTAINLY WAS NOT COMFORTABLE AS TO ANYTHING
3 OTHER THAN WE WERE GOING TO MAKE OUR BEST EFFORTS TO MAKE AN
4 OFFER WHICH WAS AGREEABLE TO THE SHAREHOLDERS OF THE CHRONICLE.
5 AND THAT'S WHAT I'M SAYING, INCIDENTALLY, IN THIS.
6 I USE THE IRISH MEMORANDUM TO SAY, "WHAT ARE WASSERSTEIN DOING?
7 WE HAVE HIRED THEM TO TRY TO GIVE US ADVICE AND TO MAKE AN
8 OFFER, AND WHAT ARE THEY TELLING US? WHAT DO THEY ADVISE?"
9 Q. NOW, IS IT CORRECT THAT YOU DID MAKE AN INITIAL OFFER?
10 WHAT WAS THE FIRST OFFER THAT YOU MADE?
11 A. I BELIEVE IT WAS $565 MILLION.
12 Q. OKAY. NOW, AT THE TIME YOU UNDERSTOOD THAT ALSO STANDING
13 IN THE WAY OF POTENTIAL PURCHASERS WAS THAT ANY POTENTIAL
14 PURCHASER OF THE CHRONICLE WOULD HAVE TO SHARE PROFITS WITH
15 HEARST UNTIL 2005?
16 A. CORRECT.
17 Q. AND SO THIS, YOU FELT, GAVE YOU A SUBSTANTIAL ADVANTAGE IN
18 TERMS OF BIDDING FOR THE CHRONICLE; CORRECT?
19 A. ANYTHING THE MATTER WITH THAT, THAT WE WERE A PARTY TO A
20 CONTRACT WHICH HAD BEEN IN PLACE BY THIS TIME FOR 35 YEARS OR
21 34 YEARS AND INVESTED ALONGSIDE OUR PARTNERS, AND WE HAD A
22 CONTRACT THAT HAD UNTIL 2005 TO GO. SO, YES, WE -- THAT'S
23 CERTAINLY NOT AN ENCOURAGEMENT BUT I DON'T KNOW THAT IN THE END
24 IT WOULD BE DETERMINATIVE.
25 Q. DO YOU BELIEVE, YOU YOURSELF BELIEVE, THAT THE NEWSPAPER
1958
BENNACK - CROSS / ALIOTO
1 PRESERVATION ACT AND THE JOA, THAT THE PURPOSE OF THOSE WERE
2 DESIGNED TO STOP BIDDERS OR TO IMPINGE ON BIDDERS IN A
3 COMPETITIVE SITUATION?
4 A. I DON'T BELIEVE IT WAS INTENDED FOR THAT AND I DON'T
5 BELIEVE THAT OCCURRED HERE.
6 Q. THAT'S WHAT IT WAS BEING USED FOR I TAKE IT; WASN'T IT?
7 A. NO.
8 MR. CONNELL: OBJECTION.
9 THE COURT: WELL, ONE QUESTION TOO LATE,
10 MR. CONNELL.
11 MR. CONNELL: HE'S TOO QUICK FOR ME, YOUR HONOR.
12 BY MR. ALIOTO:
13 Q. YOU UNDERSTOOD, DID YOU NOT, THAT ONE OF THE PURPOSES OF
14 THE NATIONAL -- OF THE NEWSPAPER PRESERVATION ACT WAS TO
15 ENCOURAGE NEW COMPETITORS, NOT TO STOP?
16 A. NO, I DON'T --
17 MR. CONNELL: OBJECTION.
18 THE COURT: SUSTAINED. NOW HE'S GOT IT.
19 BY MR. ALIOTO:
20 Q. ONE OF THE PURCHASERS, HOWEVER, WAS MS. -- WAS, A
21 POTENTIAL PURCHASER, WAS MS. MC EVOY; CORRECT?
22 A. WE WERE TOLD THAT.
23 Q. AND LET ME SHOW YOU THAT. THAT'S EXHIBIT 75.
24 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
25 THE COURT: VERY WELL. GETTING NEAR THE END; ARE
1959
BENNACK - CROSS / ALIOTO
1 YOU, MR. ALIOTO?
2 MR. ALIOTO: YES, I AM, YOUR HONOR.
3 THE COURT: GOOD.
4 BY MR. ALIOTO:
5 Q. EXHIBIT 75 IS AN E-MAIL DIRECTED TO MR. IRISH DATED
6 JULY 21, 1999, FROM MR. THACKERAY, SUBJECT: SAN FRANCISCO, AND
7 THEN DIRECTED TO YOU -- I GUESS FROM YOU TO MR. GANZI.
8 DID YOU SEND THAT E-MAIL ON OR ABOUT THAT DATE?
9 A. YES, I BELIEVE I DID.
10 Q. NOW, THIS ONE STATES UNDER -- AND YOU SENT IT TO MR. GANZI
11 AND MR. IRISH. NOW, AS OF THIS DATE, JULY 21, 1999, THE OFFER
12 THAT YOU HAD MADE UP TO THIS TIME WAS HOW MUCH, 565 MILLION?
13 A. WELL, THAT WAS OUR FIRST OFFER. I CAN'T TELL YOU
14 CATEGORICALLY WHAT THE DATE OF IT WAS. I KNOW THAT THE
15 ULTIMATE NEGOTIATION RESOLVED ITSELF ON AUGUST 6. SO SOMEONE
16 WOULD HAVE TO PROMPT ME AS TO WHETHER BY THIS TIME WE'D MADE AN
17 OFFER; BUT IF, IN FACT, WE HAD ALREADY PUT THE
18 565 MILLION-DOLLAR OFFER IN, THEN I WILL ANSWER YES TO YOUR
19 QUESTION.
20 Q. OKAY. NOW, THIS STATES, QUOTE:
21 "VIC, GEORGE WILL BE COMING TO SEE YOU WITH
22 SOME PRELIMINARY CALCULATIONS HE'S WORKING ON
23 TONIGHT (7:45 WEDNESDAY) IN RESPONSE TO WORD
24 TODAY FROM TIM..."
25 THAT'S TIM WHITE; RIGHT?
1960
BENNACK - CROSS / ALIOTO
1 A. I ASSUME SO, YES.
2 Q. "... AND PHIL..."
3 WHO'S PHIL?
4 A. I WOULD ASSUME THAT'S PHIL BRONSTEIN.
5 Q. "... THAT NAN..."
6 NAN IS MS. MC EVOY?
7 A. YES.
8 Q. "... IS ABOUT TO MAKE A BID FOR THE CHRONICLE.
9 BILL COBLENZ..."
10 WHO IS HE?
11 A. HE'S AN ATTORNEY IN SAN FRANCISCO.
12 Q. BILL COBLENZ --
13 A. I IMAGINE YOU KNEW THE ANSWER TO THAT.
14 Q. I DID, BUT THE QUESTION IS WHETHER YOU DO.
15 A. I DO.
16 Q. YOU PUT BILL COBLENZ, SO I TAKE IT THAT TIM AND PHIL TOLD
17 YOU ABOUT -- THAT MR. COBLENZ WAS THE SOURCE; IS THAT RIGHT?
18 A. THAT'S WHAT THEY'RE SAYING.
19 Q. OKAY. BILL COBLENZ IS THE SOURCE.
20 "... AND STATED THAT BECAUSE OF WHAT SHE
21 ALREADY OWNS, SHE WILL NOT 'HAVE TO PAY MUCH.'
22 PLEASE EVALUATE WHAT SHE NEEDS TO PAY TO TOP US
23 AND ALSO CONSIDER ANY OTHER RAMIFICATIONS. I
24 KNOW YOU'RE OUT THURSDAY A.M. AS AM I, BUT I'LL
25 CALL ASHER AND/OR YOU ASAP. SHOULD BE BACK BY
1961
BENNACK - CROSS / ALIOTO
1 NOON. FAB."
2 OKAY. NOW, YOU UNDERSTOOD, DID YOU NOT, THAT, FIRST
3 OF ALL, MS. MC EVOY HAD SUBSTANTIAL STOCK IN THE COMPANY?
4 A. YES. I BELIEVE SHE OWNED SOMETHING ON THE ORDER OF A
5 THIRD OF THE STOCK.
6 Q. AND DID YOU ALSO UNDERSTAND THAT SHE DIDN'T CARE WHETHER
7 OR NOT THE AGREEMENT WENT OUT TO 2005?
8 A. I DON'T -- I DON'T UNDERSTAND THE QUESTION.
9 Q. WELL, DID YOU FEEL THAT MS. MC EVOY WAS MORE OF A THREAT
10 TO PURCHASE THE CHRONICLE THAN ANY OF THE OTHER NEWSPAPERS?
11 A. NOT NECESSARILY. I'M ACTING ON INFORMATION WHICH SINCE
12 SHE ALREADY OWNED A THIRD OF IT, I ASSUME THAT IF SHE'D BEEN
13 ABLE TO PUT TOGETHER AN OFFER, THAT SHE WOULD NOT HAVE TO COME
14 UP WITH AS MUCH MONEY AS WE SINCE WE WERE GOING TO BE BUYING A
15 HUNDRED PERCENT.
16 Q. AND DID YOU RAISE YOUR OFFER BY REASON OF THIS
17 INFORMATION?
18 A. I DON'T BELIEVE SO. I THINK WE -- I'M NOT EVEN SURE THAT
19 THIS WAS EVER ANSWERED. IT MIGHT HAVE BEEN. IT WAS ONE OF
20 MANY RUMORS. IT PROBABLY OCCURRED TO YOU THAT EVERYBODY IN SAN
21 FRANCISCO TALKS A FAIR AMOUNT, AND --
22 (LAUGHTER)
23 A. -- AND THERE HAS BEEN AN EXCHANGE OF INFORMATION BACK AND
24 FORTH ABOUT ALL MANNER OF THINGS. MRS. MC EVOY, WHO IS A VERY
25 LOVELY AND NICE PERSON, MY UNDERSTANDING WAS DID NOT WISH TO
1962
BENNACK - CROSS / ALIOTO
1 SELL THE SAN FRANCISCO CHRONICLE AND FURTHER DIDN'T WISH TO
2 SELL TO US.
3 SO I DIDN'T KNOW WHAT WAS GOING TO HAPPEN; BUT I
4 THOUGHT THAT WE HAD AN ABSOLUTE RIGHT, SINCE THEY HAD GONE TO
5 MARKET AND A MAJORITY OF THEIR SHAREHOLDERS HAD DECIDED TO SELL
6 THE CHRONICLE, TO MAKE OUR OFFER SUCH THAT WE WOULD BE
7 SUCCESSFUL WHETHER SHE WAS THE OPPONENT OR KNIGHT-RIDDER OR NEW
8 YORK TIMES OR WHOEVER ELSE MIGHT HAVE DECIDED TO ENTER THE
9 FRAY.
10 Q. WERE YOU ADVISED THAT MR. -- YOU WERE ADVISED THAT MR.
11 WHITE FROM TIME TO TIME HAD MET WITH THE MAYOR?
12 A. YES. I WAS IN A MEETING, AS I TESTIFIED EARLIER, WITH THE
13 MAYOR. I WAS CERTAINLY NOT AWARE OF ALL OF MR. WHITE'S
14 ATTITUDES, BUT -- OR ALL OF MR. WHITE'S GOINGS AND COMINGS, BUT
15 I THINK IT'S FAIRLY TYPICAL THAT OUR PUBLISHERS WOULD KNOW THE
16 MAYOR OF THEIR CITY.
17 Q. WERE YOU AWARE THAT HE MET WITH THE MAYOR PRIOR TO THE
18 ANNOUNCEMENT OF THE PURCHASE OR THE TRANSACTION, CONTEMPLATED
19 PURCHASE OF HEARST OF THE CHRONICLE?
20 A. I'M NOT SURE RIGHT NOW. YOU'D HAVE TO PROMPT MY MEMORY ON
21 WHETHER -- HOW MANY MEETINGS I KNEW HE WOULD HAVE HAD. I THINK
22 IT WOULD HAVE BEEN VERY STRANGE SINCE HE'D BEEN OUT HERE, SINCE
23 THE PRIOR YEAR, IF HE HAD NOT MET WITH THE MAYOR BY THE TIME WE
24 GOT AROUND TO AUGUST THE 6TH.
25 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
1963
BENNACK - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. THIS IS -- OKAY. AS OF -- AS OF JULY OF 1999, MR. WHITE
3 HAD BEEN OUT HERE SINCE JANUARY 1ST OF 1999, CORRECT?
4 A. ALL RIGHT.
5 Q. OKAY.
6 A. SO THAT'S SIX MONTHS, THEN.
7 Q. OKAY.
8 A. I ACCEPT THAT CORRECTION.
9 Q. OKAY. AND THE ANNOUNCEMENT WAS MADE ON AUGUST --
10 A. THE 6TH.
11 Q. -- AUGUST THE 6TH.
12 A. YES.
13 Q. OKAY. NOW, DID YOU KNOW THAT HE MET A WEEK BEFORE WITH
14 THE MAYOR?
15 A. I DON'T THINK I KNEW THAT, MR. ALIOTO, NOT SPECIFICALLY.
16 Q. OKAY. LET ME SHOW YOU AN E-MAIL AND ASK YOU -- WELL, LET
17 ME SHOW IT TO YOU, EXHIBIT 99.
18 MAY I APPROACH THE WITNESS, YOUR HONOR?
19 THE COURT: YES, YOU MAY.
20 BY MR. ALIOTO:
21 Q. EXHIBIT 99 IN EVIDENCE IS AN E-MAIL FROM TIMOTHY WHITE TO
22 JONATHAN THACKERAY AND TO GEORGE IRISH, SUBJECT, WILLIE BROWN'S
23 STRATEGIES.
24 IF YOU WILL TAKE A LOOK AT THIS E-MAIL AND -- AND
25 SEE IF -- TELL US WHETHER OR NOT YOU EVER SAW THAT E-MAIL AT OR
1964
BENNACK - CROSS / ALIOTO
1 ABOUT THAT TIME.
2 A. I HAVE NO RECOLLECTION OF THIS.
3 AS YOU CAN SEE, I AM NOT A RECIPIENT OF IT, AND I
4 HAVE TO STIPULATE THAT I SEE SO MUCH I -- I REALLY CAN'T TELL
5 YOU WHETHER I HAVE SEEN IT OR NOT.
6 Q. OKAY. WELL, DID MR. --
7 A. I HAVE SEEN IT IN CONNECTION WITH THESE PROCEEDINGS.
8 Q. OTHER THAN IN CONNECTION WITH THESE PROCEEDINGS, YOU HAVE
9 NOT SEEN IT OR AT LEAST --
10 A. MY TESTIMONY IS I DON'T KNOW.
11 Q. YOU DON'T REMEMBER. YOU DON'T KNOW.
12 A. I DON'T RECALL.
13 Q. OKAY. WERE YOU ADVISED IN SUM OR SUBSTANCE AT ANY TIME
14 THAT MR. WHITE SOUGHT THE SUPPORT OF THE MAYOR FOR THE HEARST
15 ACQUISITION OF THE CHRONICLE AND PARTICULARLY URGING THE
16 MAYOR -- THE MAYOR'S SUPPORT OF DROPPING A REQUIREMENT TO
17 DIVEST THE EXAMINER?
18 A. NO. I DIDN'T KNOW THAT. I FOUND OUT WHEN I GOT HERE ON
19 THE 6TH WHEN WE KNEW THAT WE WERE GOING TO OFFER THE EXAMINER
20 FOR SALE THAT MR. WHITE HAD -- IF HE HAD SAID ANYTHING TO
21 ANYONE, IT WAS IN THE CONTEXT OF A PROBABLE SHUTDOWN OF THE
22 EXAMINER, AND I DON'T KNOW WHERE HE GOT THAT NOTION; AND,
23 THEREFORE, I DID NOT KNOW THAT HE WAS ADVANCING THAT TO ANYONE.
24 Q. "THAT NOTION," MEANING THE SHUTDOWN OF THE EXAMINER?
25 A. NOT OFFERING THE EXAMINER FOR SALE, WHICH WAS WHAT WE
1965
BENNACK - CROSS / ALIOTO
1 BELIEVED WE SHOULD DO AND HAD PLANNED TO DO.
2 Q. WERE YOU ADVISED IN SUM OR SUBSTANCE BY ANYONE FROM HEARST
3 THAT THE -- THAT THE MAYOR WAS SUGGESTING -- OR HAD SUGGESTED
4 TO MR. WHITE THAT HE SETTLE THE EXAMINER CASE WITH THE FANGS?
5 A. I DON'T RECALL THAT I WAS. I HAVE HEARD ALL OF THIS IN
6 CONNECTION WITH THESE PROCEEDINGS, AND I HAVE TO BE HONEST AND
7 TELL YOU I DON'T REMEMBER WHEN I HEARD THAT. BUT -- I JUST
8 DON'T KNOW.
9 Q. WELL, I AM ASKING AT OR ABOUT THE TIME. I AM NOT
10 ASKING --
11 A. I UNDERSTAND, BUT THE ANSWER IS I DON'T KNOW WHETHER I HAD
12 HEARD THAT THEN OR NOT.
13 I KNEW, OBVIOUSLY, THAT WE HAD BEEN IN LITIGATION
14 WITH THE FANGS.
15 Q. DID YOU UNDERSTAND THAT YOU HAD -- THAT YOU HAD THE -- HAD
16 WON THE CASE?
17 A. WE DID AT SOME POINT. I DON'T KNOW WHAT IN TIME HERE,
18 BUT, YES, I DO UNDERSTAND THAT WE HAD WON THAT CASE.
19 Q. DID YOU UNDERSTAND THAT -- DID ANYONE EVER ADVISE YOU IN
20 SUM OR SUBSTANCE THAT THE MAYOR ADVISED MR. WHITE THAT FUNNY,
21 UNDESIRED CONSEQUENCES OFTEN RIPPLE FROM SOMETHING LIKE THIS
22 EVEN THOUGH ONE THING HAS NOTHING DIRECTLY TO DO WITH ANOTHER?
23 A. I HAVE NO RECOLLECTION OF THAT, NO.
24 Q. DID -- WERE YOU EVER ADVISED IN SUM OR SUBSTANCE OF
25 MR. WHITE'S VIEW THAT IMPLICIT IN HIS MEETING WITH THE MAYOR
1966
BENNACK - CROSS / ALIOTO
1 WAS THE MESSAGE THAT SUPPORT OF OUR EFFORTS IN THE ACQUISITION
2 OF THE CHRONICLE WOULD BE INFLUENCED BY HEARST'S ABILITY TO
3 COME TO SOME TERMS WITH THE FANGS?
4 A. I DON'T UNDERSTAND THE QUESTION.
5 Q. IF YOU WILL LOOK AT THE SECOND PAGE -- LET ME READ IT AND
6 MAYBE IT WILL BE EASIER TO UNDERSTAND IT THAT WAY. ON THE
7 SECOND PAGE ON THE THIRD FULL PARAGRAPH WHERE IT BEGINS,
8 "IMPLICIT IN ALL OF THIS."
9 A. YES, I SEE THAT PARAGRAPH.
10 Q. IT STATES, QUOTE:
11 "IMPLICIT IN ALL OF THIS, IN MY VIEW, WAS
12 THE MESSAGE THAT SUPPORT OF OUR EFFORTS IN THE
13 ACQUISITION WOULD BE INFLUENCED BY OUR ABILITY
14 TO COME TO SOME TERMS IN THE PAN ASIA CASE."
15 DID ANYONE EVER STATE THAT TO YOU IN SUM OR
16 SUBSTANCE?
17 A. I DON'T RECALL THAT -- THAT ANYONE EVER SAID THAT TO ME,
18 NO. IT GOES ON TO SAY WHETHER THAT MEANS SUPPORT FROM THE
19 FANGS OR SUPPORT FROM WILLIE, I CAN'T IMAGINE WHAT THAT WOULD
20 HAVE TO DO WITH OUR ACQUISITION. BUT . . .
21 Q. WELL, THAT'S WHY I AM ASKING YOU, DID ANYONE TELL YOU IN
22 SUM OR SUBSTANCE THAT THE MAYOR, AT LEAST ACCORDING TO
23 MR. WHITE, SAID THAT FUNNY, UNDESIRED CONSEQUENCES OFTEN RIPPLE
24 FROM SOMETHING LIKE THIS EVEN IF ONE THING HAS NOTHING DIRECTLY
25 TO DO WITH THE OTHER?
1967
BENNACK - CROSS / ALIOTO
1 A. WELL, I'VE STATED THAT I DON'T BELIEVE I KNEW THAT AT THE
2 TIME.
3 Q. I WANT TO DIRECT YOUR ATTENTION TO THE E-MAIL THAT YOU
4 WERE EXAMINED ON, EXHIBIT 78.
5 MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: VERY WELL.
7 BY MR. ALIOTO:
8 Q. IT'S EXHIBIT 78. IT IS AN E-MAIL TO -- FROM JONATHAN
9 THACKERAY, THEN FROM MR. IRISH TO YOU AND OTHER PERSONS SUBJECT
10 TO MAYOR WILLIE BROWN, AND IT ENCLOSES AN E-MAIL FROM MR. WHITE
11 TO MR. IRISH, SUBJECT, MAYOR WILLIE BROWN.
12 NOW, YOU DID RECEIVE A COPY OF THAT ON OR ABOUT THAT
13 DATE, DIDN'T YOU?
14 A. I BELIEVE I DID.
15 Q. AND, OF COURSE, THE SUBJECT BEING THE MAYOR OF THE CITY, I
16 TAKE IT, THAT THAT WAS SOMETHING OF SOME MOMENT?
17 A. WELL, I TESTIFIED EARLIER THAT I DON'T HAVE A SPECIFIC
18 RECOLLECTION OF HAVING READ IT, BUT I DO REMEMBER SOMEBODY
19 BRIEFING ME ON SOME OF THE CONTENTS OF IT AS IT RELATED TO
20 ATTORNEY GENERAL JANET RENO.
21 Q. ALL RIGHT. AND HOW ABOUT FOR THE CITY ATTORNEY?
22 A. I DON'T REMEMBER. I'VE TOLD YOU WHAT MY RECOLLECTION WAS,
23 THAT IT WAS OF SOME INTEREST TO US IF TRUE THAT THE ATTORNEY
24 GENERAL DID NOT SEE AN ANTITRUST MATTER IN THAT IN OUR PROPOSED
25 ACQUISITION OF THE CHRONICLE AFTER OFFERING THE EXAMINER FOR
1968
BENNACK - CROSS / ALIOTO
1 SALE.
2 Q. WELL, THIS ONE STATED -- IF YOU LOOK AT PARAGRAPH 4 OF
3 THIS DOCUMENT, IT STATES, QUOTE:
4 "MAYOR B. SEGUED FROM THAT INTO HIS
5 CONVERSATION WITH MS. RENO. SHE TOLD HIM THERE
6 WOULD BE NO HEARINGS: LOCAL, PUBLIC, OR
7 OTHERWISE. SHE TOLD HIM THE CHRON-EX
8 INVESTIGATION HAD BEEN NOT ASSIGNED TO
9 MR. KLEIN, HEAD OF ANTITRUST BUT REFER TO A
10 DEPUTY NAMED MR. B. . . . (THE MAYOR WASN'T
11 SURE). SHE TOLD THE MAYOR: WE HANDLE ANTITRUST
12 AT JUSTICE. THE MAYOR RESPONDED, I KNOW NOTHING
13 ABOUT ANTITRUST MATTERS. IF THERE IS ANYTHING
14 ABOUT ANTITRUST TO BE RAISED LOCALLY, IT WILL
15 COME FROM OUR ATTORNEY'S OFFICE, MS. LOUISE
16 RENNE. THE MAYOR THEN TOLD ME THAT LOCALLY THE
17 CITY ATTORNEY'S INQUIRY INTO THE MATTER HAD BEEN
18 ASSIGNED TO MR. DENNIS AFTERGUT WHO THE MAYOR
19 AND PHIL AGREED WAS NOT SOMEONE LIKELY TO LEAD A
20 CHARGE ON A MAJOR ISSUE."
21 IT WENT ON, QUOTE:
22 "I ASKED THE MAYOR IF HE WOULD FEEL
23 COMPELLED TO DO ANYTHING MORE ON THIS ISSUE
24 LOCALLY. HE SAID, QUOTE, 'NOT UNLESS THE CITY
25 ATTORNEY'S INVESTIGATION DEMANDS MY ATTENTION.'
1969
BENNACK - CROSS / ALIOTO
1 "ALL IN ALL, MAYOR BROWN GAVE ME THE
2 IMPRESSION THAT HIS HEART WAS NOT IN
3 INTERVENING, AND THAT HE WOULD BE DOING ONLY
4 WHAT WAS POLITICALLY MINIMALLY NECESSARY."
5 NOW, WAS THAT -- WAS THERE INFORMATION -- WHEN YOU
6 TALK ABOUT THE ATTORNEY GENERAL, WAS THE INFORMATION GIVEN TO
7 YOU THAT THE ATTORNEY GENERAL WAS OF THE VIEW THAT THERE WOULD
8 BE NO HEARINGS, LOCAL, PUBLIC OR OTHERWISE?
9 A. I -- SOMEONE TOLD ME -- MY RECOLLECTION IS THAT SOMEONE
10 TOLD ME THAT WE HAD THIS FEEDBACK FROM THE ATTORNEY GENERAL,
11 AND I BELIEVE I DID PROBABLY KNOW, AS A PART OF THAT FEEDBACK,
12 WHETHER IT WAS FROM SEEING THIS, WHICH I HAVE SAID I DON'T
13 RECALL, OR SOMEONE TELLING ME THAT -- AND I KNEW OF MY OWN
14 KNOWLEDGE, I THOUGHT, THAT IN A SITUATION LIKE THIS LOCAL
15 HEARINGS ARE NOT CONDUCTED BY THE DEPARTMENT OF JUSTICE. SO IT
16 WOULD NOT HAVE BEEN PARTICULARLY NEW INFORMATION. BUT I -- IN
17 ANY EVENT, THAT'S MY TESTIMONY.
18 Q. BUT DO YOU UNDERSTAND THAT THIS INFORMATION ABOUT THE
19 ATTORNEY GENERAL CAME THROUGH MAYOR BROWN'S OFFICE?
20 A. YES. BECAUSE I KNEW THAT THE RESPONSE ABOUT -- FROM
21 ATTORNEY GENERAL RENO WAS TO A LETTER I UNDERSTOOD HAD BEEN
22 WRITTEN BY MAYOR BROWN ABOUT OUR TRANSACTION.
23 Q. AND THEN, IF YOU WILL LOOK AT -- IF YOU WILL LOOK AT THE
24 SECOND PARAGRAPH, THIS STATES:
25 "I ASKED WILLIE HOW I WAS GOING TO JUSTIFY
1970
BENNACK - CROSS / ALIOTO
1 TO MY SUPERIORS IN NEW YORK WANTING TO SUPPORT
2 HIM AND COOPERATE WITH HIM WHEN HE WAS SEEMING
3 TO GO OUT OF HIS WAY TO MAKE OUR LIVES
4 DIFFICULT."
5 DO YOU SEE THAT?
6 A. I DO.
7 Q. NOW, WOULD MR. -- WOULD MR. WHITE, AS THE PUBLISHER, HAVE
8 TO JUSTIFY TO YOU, AS A SUPERIOR IN NEW YORK, ANYTHING WITH
9 REGARD TO HIS ACTIVITIES OUT HERE ABOUT SUPPORTING OR NOT
10 SUPPORTING THE MAYOR?
11 A. HE WOULD NOT HAVE TO JUSTIFY TO ME THE EDITORIAL POSITION
12 OF THE PAPER SINCE I HAVE ALREADY TESTIFIED THAT THAT'S DONE
13 AUTONOMOUSLY BY THE LOCAL MANAGEMENT.
14 Q. WELL, WHEN YOU --
15 A. SO IT'S A NON SEQUITUR IN THAT REGARD.
16 Q. WELL, WOULD YOU SAY, THEN, THAT THE STATEMENT THAT IS MADE
17 IN THIS E-MAIL BY MR. WHITE TO HIS SUPERIOR, MR. IRISH, WHO WAS
18 IN NEW YORK, RIGHT? MR. IRISH'S OFFICES ARE IN NEW YORK?
19 A. YES, HE -- YES, HE IS.
20 Q. AS ARE YOURS?
21 A. YES.
22 Q. OKAY. WOULD YOU -- IN THIS E-MAIL FROM MR. WHITE TO HIS
23 SUPERIOR IN NEW YORK WHEN HE SAYS THAT HE ASKED THE MAYOR HOW
24 HE WAS GOING TO JUSTIFY TO HIS SUPERIORS IN NEW YORK, WOULD
25 YOU, AS FAR AS YOU KNOW -- IS THAT A STATEMENT THAT IS NOT
1971
BENNACK - CROSS / ALIOTO
1 TRUE, THAT HE DOES NOT HAVE TO JUSTIFY THAT TO HIS SUPERIORS?
2 A. IT IS TRUE THAT THE EDITORIAL POLICY OF OUR NEWSPAPERS IS
3 ESTABLISHED BY THE LOCAL MANAGEMENT AND THAT THEY DO NOT HAVE
4 TO JUSTIFY IT TO THEIR SUPERIORS IN NEW YORK.
5 Q. THEN THIS STATEMENT WOULD BE WRONG, RIGHT?
6 A. YES, IN THAT RESPECT IT'S CERTAINLY WRONG.
7 Q. AND THE STATEMENT WOULD BE WRONG FROM MR. WHITE TO HIS
8 SUPERIORS, SO THERE IS NO NEED FOR MR. WHITE TO SAY SOMETHING
9 TO HIS SUPERIORS THAT ISN'T CORRECT, IS THERE?
10 A. WELL --
11 Q. AS FAR AS YOU KNOW?
12 A. I CAN'T ATTRIBUTE MR. WHITE'S MOTIVES OR THOUGHT PROCESS.
13 I HAVE JUST TRIED TO GIVE YOU WHAT I KNOW TO BE THE POLICIES ON
14 HOW WE OPERATE.
15 Q. DID YOU UNDERSTAND OR BELIEVE THAT THE MAYOR WAS IN ANY
16 WAY GOING OUT OF HIS WAY TO MAKE YOUR LIVES DIFFICULT?
17 A. WELL, I THINK THE MAYOR -- WE KNEW THE MAYOR HAD MADE A
18 LOT OF STATEMENTS ABOUT THE TRANSACTION. I DON'T KNOW THAT I
19 WOULD HAVE CHARACTERIZED IT THAT WAY. BUT HE CERTAINLY, LIKE,
20 I THINK, MANY PEOPLE LOCALLY -- AND I WOULD JOIN THEM -- WOULD
21 LIKE TO SEE TWO NEWSPAPERS RATHER THAN ONE. I DON'T KNOW
22 ANYBODY THAT JUST WITHOUT AN ECONOMIC EVALUATION THINKS THAT --
23 THAT YOU'RE BETTER OFF -- ALTHOUGH WE HEARD THAT TESTIMONY FROM
24 MR. ROSSE ON WHAT YOU COULD INVEST AND THEREFORE MAKE A BETTER
25 NEWSPAPER. BUT, GENERALLY, I DON'T KNOW ANYBODY THAT WANTS A
1972
BENNACK - CROSS / ALIOTO
1 NEWSPAPER TO DISAPPEAR. AND SO I THINK HIS REACTION TO THE
2 EXTENT I KNEW ABOUT IT -- REMEMBER, I AM HOWEVER MANY MILES IT
3 IS -- 3000 MILES AWAY AND HAD NEVER MET MAYOR BROWN UNTIL I
4 CAME HERE ON AUGUST THE 6TH. BUT I WAS AWARE THAT -- THAT HE
5 WAS CHALLENGING WHETHER THIS WAS GOOD FOR THE PEOPLE OF SAN
6 FRANCISCO OR NOT.
7 Q. IN YOUR STATEMENT YOU SAID, "EVERYONE WOULD LIKE TO HAVE
8 TWO NEWSPAPERS." WOULD YOU, IN SAN FRANCISCO?
9 A. IF THERE WERE AN ECONOMIC VIABILITY TO THEM, YOU BET. BUT
10 I CAN'T REPEAL THE LAWS OF ECONOMICS.
11 Q. NOW, WHEN YOU SAY -- WHEN MR. WHITE SAYS THAT, "JUSTIFY TO
12 MY SUPERIORS IN NEW YORK WANTING TO SUPPORT HIM AND COOPERATE
13 WITH HIM."
14 FIRST OF ALL, DID YOU WANT TO SUPPORT MAYOR BROWN
15 FOR ANYTHING
16 A. I HAVE NO ROLE IN THAT. I DON'T KNOW WHAT -- NO. THE
17 ANSWER IS THAT THAT'S NOT MY PLACE UNDER OUR POLICY TO DECIDE
18 TO SUPPORT MAYOR BROWN OR NOT. I DON'T KNOW AN AWFUL LOT ABOUT
19 THE CITY MANAGERS AND WHAT GOES ON DAILY HERE TO MAKE A
20 JUDGMENT ABOUT THAT. I HAVE ALREADY TESTIFIED ABOUT THAT.
21 Q. AND HOW ABOUT COOPERATE WITH HIM?
22 A. I DON'T KNOW WHAT THAT MEANS.
23 Q. DO YOU --
24 A. I DON'T SEE THAT -- I WILL MAKE THE STATEMENT AS A
25 GENERALIZATION THAT WHAT'S GOOD FOR A COMMUNITY, AS LONG AS IT
1973
BENNACK - CROSS / ALIOTO
1 IS WORTHWHILE AND APPROPRIATE AND GOOD FOR ITS CITIZENS,
2 GENERALLY TURNS OUT TO BE GOOD FOR THE NEWSPAPER AND FOR
3 EVERYONE WHO LIVES THERE. SO IN THAT CONTEXT COOPERATION IS
4 NOT ANYTHING THAT I WOULD BE CRITICAL OF.
5 Q. DID YOU BELIEVE THAT -- THAT THE MAYOR'S COOPERATION WOULD
6 HELP WITH THE JUSTICE DEPARTMENT FOR THE ACQUISITION OF THE
7 CHRONICLE?
8 A. I HAD NO REASON AT ALL TO BELIEVE THAT. AND I HAVE
9 ALREADY STATED THAT I DON'T RECALL HAVING READ THIS, BUT I ALSO
10 TESTIFIED THAT TAKEN BY ITSELF THAT THAT STATEMENT DOESN'T MEAN
11 ANYTHING TO ME EXCEPT THAT HE IS CHASTISING THE MAYOR. THEY
12 OBVIOUSLY KNOW EACH OTHER, AND HE IS CHASTISING HIM.
13 Q. WHO IS CHASTISING HIM?
14 A. THE -- MR. WHITE IN HIS STATEMENT THAT I ASKED WILLIE HOW
15 I WAS GOING TO JUSTIFY. IN EFFECT, HE IS SAYING, LOOK, WE'RE
16 FOR THE THINGS YOU WANTED BEFORE AND YOU ARE MAKING MY LIFE
17 MISERABLE. I DON'T THINK THAT'S SUCH AN EXTREME STATEMENT, AS
18 LONG AS IT DOES NOT CONNOTE SOMETHING ELSE.
19 Q. DID YOU UNDERSTAND FROM ANYONE THAT MR. IRISH OR FROM
20 THIS -- WELL, YOU'VE -- ALL RIGHT. LET'S BACK UP.
21 FIRST OF ALL, WITH REGARD TO THIS PARTICULAR E-MAIL,
22 YOU DO NOT REMEMBER RECEIVING IT?
23 A. I'VE ALREADY TESTIFIED THAT I DO NOT HAVE A RECOLLECTION
24 OF IT BUT THAT I HAVE A RECOLLECTION OF BEING AWARE OF SOME OF
25 ITS CONTENTS. IF I HAD TO GUESS, I WOULD SAY I WAS TOLD ABOUT
1974
BENNACK - CROSS / ALIOTO
1 SOME OF THIS. WHEN IT CAME TO THIS I JUST DELETED IT. BUT I
2 CANNOT TESTIFY TO THAT. I MAY HAVE SEEN IT.
3 Q. OKAY. TO YOUR KNOWLEDGE, WERE YOU ADVISED BY ANYONE,
4 MR. IRISH OR ANYONE, OR MR. WHITE, OF ANY BELIEF THAT IF THE
5 EXAMINER WAS NOT AS CRITICAL OF THE MAYOR, THAT THAT MIGHT GET
6 THE MAYOR'S SUPPORT WITH THE JUSTICE DEPARTMENT OR ANYONE ELSE
7 ON THE ACQUISITION OF THE CHRONICLE?
8 A. NO. MR. IRISH, IN MY OPINION, WOULD HAVE NEVER
9 CHARACTERIZED IT THAT WAY, AND I WOULD GO ONE STEP FURTHER,
10 THAT WE DON'T DO THAT. THAT'S NOT A PART OF THE WAY WE RUN OUR
11 BUSINESS, OUR LIFE, AND I HAVE TESTIFIED THAT I WOULD NOT
12 CONTINENCE ANYTHING THAT INFLUENCED WHAT GOES IN THE COLUMNS OF
13 OUR NEWSPAPERS.
14 Q. WERE YOU ADVISED THAT IF YOU SOLD THE NEWSPAPER OR SOME
15 PART OF THE EXAMINER TO THE FANGS THAT THE FANG FAMILY WOULD
16 USE ITS EXTENSIVE POLITICAL CONNECTIONS TO ASSIST HEARST IN THE
17 PURCHASE OF THE CHRONICLE?
18 A. I BELIEVE I HAVE SEEN -- DO YOU HAVE SOMETHING FOR ME TO
19 LOOK AT IN THAT CONNECTION?
20 Q. WELL, HAVE YOU SEEN --
21 THE COURT: I THINK COUNSEL IS ENTITLED TO AN ANSWER
22 TO HIS QUESTION.
23 THE WITNESS: I KNOW FROM SOME SOURCE THAT
24 MR. BALABANIAN MADE A STATEMENT TO MR. ASHER THAT IF A DEAL WAS
25 DONE WITH THE FANGS THAT -- THAT THEY WOULD USE THEIR EXTENSIVE
1975
BENNACK - CROSS / ALIOTO
1 POLITICAL INFLUENCE, OR WORDS TO THAT EFFECT.
2 BY MR. ALIOTO:
3 Q. AND WAS THAT AT ALL -- AS FAR AS YOU KNOW, WAS THAT AT ALL
4 A CONSIDERATION IN SELLING THE PAPER TO THE FANGS?
5 A. NOT BY ME.
6 Q. DID YOU MAKE THE DECISION TO --
7 A. OF COURSE. OF COURSE.
8 Q. DID YOU MAKE THE DECISION TO SELL THE PAPER TO THE FANGS?
9 A. I DID.
10 Q. DID YOU APPROVE MR. ASHER'S RECOMMENDATION?
11 A. WITH RESPECT TO --
12 Q. -- OR DID YOU MAKE THE DECISION?
13 A. WE -- WE DO THESE THINGS AS COLLEAGUES AND AS A TEAM. WE
14 TALKED ABOUT THE THREE PROPOSALS, AS I PREVIOUSLY TESTIFIED,
15 ALL OF WHICH REQUIRED PAYMENT OF INTERIM FUNDS AND ON THE BASIS
16 OF IT BEING THE LOWEST COST AND ON THE BASIS THAT WE BELIEVED
17 THAT THERE WOULD BE SOME CREDIT FOR ENABLING A MINORITY TO
18 BEGIN THE PUBLICATION OF A DAILY -- ALL OF THOSE
19 CONSIDERATIONS. BUT OVERWHELMINGLY WE WERE INTERESTED IN THE
20 LOWEST COST BUT CREDIBLE TRANSACTION. WE THOUGHT IT WAS THE
21 MOST CREDIBLE.
22 Q. WERE YOU ADVISED OF A MEETING WITH MR. WHITE AND
23 MS. FLORENCE FANG AND SENATOR DIANNE FEINSTEIN?
24 A. I PROBABLY HEARD ABOUT THAT SOMEPLACE ALONG THE LINE, YES.
25 Q. DID YOU HEAR ABOUT IT AT OR ABOUT THE TIME OR IN THIS
1976
BENNACK - CROSS / ALIOTO
1 LITIGATION?
2 A. I DON'T KNOW. I DON'T KNOW.
3 Q. WHO DID YOU HEAR IT FROM?
4 A. I DON'T KNOW THAT, EITHER. I KNOW THAT PUBLISHERS DO
5 RESPOND TO COMMUNITY PEOPLE, AND IF I'D HAVE HEARD IT, I
6 WOULDN'T HAVE THOUGHT ANYTHING EXCEPTIONAL OF IT, THAT HE MET
7 WITH HER, THAT WE HAD BEEN IN LITIGATION, AND THAT'S ALL I KNOW
8 ABOUT IT. BUT --
9 Q. THAT YOU HAD BEEN IN LITIGATION.
10 NOW, DO YOU BELIEVE THAT SENATOR -- UNITED STATES
11 SENATOR FEINSTEIN WOULD MEET WITH MR. WHITE AND MS. FANG ON
12 SOME LITIGATION BETWEEN --
13 A. NO, I DON'T.
14 Q. OKAY.
15 A. I THINK SHE PROBABLY WOULD MEET IN PURSUIT, I WOULD
16 ASSUME -- AND I CAN'T SPEAK FOR SENATOR FEINSTEIN -- IN PURSUIT
17 OF SOME HARMONY IN A COMMUNITY THAT SHE CARES ABOUT BECAUSE
18 THERE HAD BEEN CONSIDERABLE TENSION BETWEEN THE FANGS AND THE
19 NEWSPAPER.
20 Q. AND WOULD THE -- AND WOULD THE HARMONY BE THAT -- YOU
21 UNDERSTOOD THAT THE INDEPENDENT, WHICH IS PUT OUT BY THE FANGS,
22 WAS SHARPLY CRITICAL OF THE ACQUISITION OR PROPOSED
23 ACQUISITION?
24 A. INDEED I DID.
25 Q. OKAY. AND THAT WAS SOMETHING THAT EXISTED AS OF THE
1977
BENNACK - CROSS / ALIOTO
1 ANNOUNCEMENT AND UP TO AND INCLUDING, AT LEAST, JANUARY OF
2 2000, WASN'T IT?
3 A. IT WAS UNRELENTING.
4 Q. OKAY. NOW, TO YOUR KNOWLEDGE, WAS THERE ANY -- WAS THERE
5 ANY -- WERE YOU EVER -- WERE YOU EVER ADVISED OR DO YOU HAVE
6 ANY KNOWLEDGE WHATSOEVER OF ANY SITUATION IN WHICH THAT
7 CRITICISM WOULD BE NOT AS STRONG IN EXCHANGE FOR THE SALE OF
8 THE EXAMINER TO THE FANGS?
9 A. THE CRITICISM WITHIN THE INDEPENDENT?
10 Q. YES.
11 A. NOBODY EVER DISCUSSED THAT WITH ME ONE WAY OR ANOTHER.
12 Q. WHEN YOU SAID "HARMONY," IS THAT WHAT YOU MEANT?
13 A. NO. I MEANT PEOPLE IN THE COMMUNITY WHO ARE INTERESTED IN
14 PROGRESS IN THE COMMUNITY, NOT BEING AT WAR UNLESS IT'S
15 NECESSARY.
16 Q. NOT BEING AT WAR. OKAY.
17 NOW, YOU JUST SAID THAT, AS I UNDERSTAND IT, YOU
18 CERTAINLY WOULDN'T EXPECT THE UNITED STATES SENATOR TO SIT DOWN
19 WITH THE -- WITH MR. WHITE AND MS. FANG TO TRY TO SETTLE SOME
20 PRIVATE LAWSUIT BETWEEN THEM, WOULD YOU?
21 A. I WOULDN'T EXPECT THAT.
22 Q. OKAY. SO IF THERE IS ANY DISHARMONY --
23 A. RIGHT.
24 Q. -- YOU UNDERSTOOD THAT THE DISHARMONY BETWEEN THEM WOULD
25 BE THAT ON THE ONE HAND THE EXAMINER WAS -- HEARST WAS
1978
BENNACK - CROSS / ALIOTO
1 ATTEMPTING TO BUY THE CHRONICLE AND, ON THE OTHER, MS. FANG AND
2 HER NEWSPAPER WERE SHARPLY CRITICAL OF THAT PURCHASE.
3 A. DID I UNDERSTAND THAT THEY WERE SHARPLY CRITICAL OF THAT
4 PURCHASE?
5 Q. YES.
6 A. YES, I DID.
7 Q. ALL RIGHT. AND SO THAT THAT IS THE ONLY -- OTHER THAN
8 THIS LAWSUIT, ISN'T IT YOUR UNDERSTANDING AND WEREN'T YOU
9 ADVISED IN SUM OR SUBSTANCE THAT THAT WAS THE DISHARMONY AND
10 THAT HAD TO BE FIXED?
11 A. WELL, I DON'T KNOW ABOUT "FIXED."
12 Q. WELL --
13 A. I -- I DON'T UNDERSTAND WHAT THE QUESTION IS. ASK ME A
14 QUESTION.
15 Q. WELL, DO YOU KNOW WHETHER OR NOT IT WAS SUGGESTED AT THIS
16 MEETING THAT -- TO MS. FANG THAT IT WASN'T SUCH A BAD IDEA IF
17 THE EXAMINER -- IF HEARST BOUGHT THE CHRONICLE?
18 A. BOUGHT THE EXAMINER MAYBE?
19 Q. NO. DO YOU KNOW IF --
20 A. OH, THE HEARST BOUGHT -- I DON'T KNOW. I WAS NOT THERE.
21 Q. OKAY.
22 A. I DON'T KNOW WHAT THEY SAID TO EACH OTHER.
23 Q. I KNOW YOU WEREN'T THERE. I AM ASKING YOU WHETHER OR NOT
24 YOU HAD ANY KNOWLEDGE OF THAT.
25 A. I DON'T KNOW WHAT THEY SAID, NO.
1979
BENNACK - CROSS / ALIOTO
1 Q. DO YOU KNOW IF --
2 A. I WOULD EXPECT THAT IF HE SAID ANYTHING, HE WOULD BE IN
3 SUPPORT OF HEARST BUYING THE CHRONICLE. THAT WOULD HAVE BEEN A
4 PRETTY GOOD GUESS. BUT I DON'T KNOW WHAT WAS SAID OR -- OR
5 WHAT -- HOW THE CONVERSATION EVENTUATED.
6 Q. OKAY. WHAT I AM ASKING YOU IS DO YOU KNOW OR HAVE ANY
7 INDEPENDENT KNOWLEDGE WHETHER OR NOT AT THIS MEETING IT WAS
8 SUGGESTED BY THE SENATOR THAT -- TO MS. FANG THAT PERHAPS IT'S
9 NOT SUCH A BAD IDEA IF THE HEARST CORPORATION PURCHASED THE
10 CHRONICLE?
11 A. I BELIEVE I SAW THAT IN ONE OF THESE -- IN PREPARATION FOR
12 THIS (INDICATING). AT THAT TIME I HAD NO -- NO.
13 Q. OTHER THAN WHAT YOU ARE DOING IN PREPARATION FOR THE
14 CASE -- I AM ASKING YOU INDEPENDENTLY IF YOU EVER WERE ADVISED
15 OF THAT IN SUM OR SUBSTANCE.
16 A. I DO BELIEVE THAT THERE WERE THOSE -- AND I THINK I KNOW
17 THAT SENATOR FEINSTEIN OPINED -- AND I READ THAT SOMEWHERE --
18 THAT MAYBE IT WASN'T THE WORLD'S WORST THING FROM THE
19 STANDPOINT OF THE INDEPENDENT.
20 Q. OKAY.
21 A. I BELIEVE I DO RECALL THAT.
22 Q. OKAY. INDEPENDENT OF THIS -- INDEPENDENT OF PREPARATION
23 OF THE CASE?
24 A. I DON'T KNOW. BY THIS TIME I'VE LOOKED AT ENOUGH
25 DOCUMENTS OF DIFFERENT VINTAGES, ET CETERA, I CAN'T ALWAYS TELL
1980
BENNACK - CROSS / ALIOTO
1 YOU EXACTLY WHERE I SAW THEM.
2 Q. OKAY. DO YOU HAVE ANY KNOWLEDGE OF WHETHER OR NOT AT THIS
3 MEETING IT WAS ALSO SUGGESTED ON THE OTHER HAND THAT THAT --
4 THAT HEARST WOULD SELL THE EXAMINER TO -- TO MS. FANG?
5 A. I BELIEVE I STATED EARLIER THAT WE EXPECTED THE FANGS TO
6 BE A PROSPECT FOR THE EXAMINER AND I --
7 Q. NO, I AM TALKING --
8 A. AND I BELIEVE THAT I UNDERSTAND THAT MR. WHITE SUGGESTED
9 MAYBE IN FACT THEY WOULD LIKE TO BUY THE EXAMINER.
10 Q. IS THAT THE HARMONY?
11 A. NO, THAT'S NOT THE HARMONY. THAT'S A SUGGESTION THAT WE
12 HAVEN'T BEEN ABLE TO FIND A QUALIFIED BUYER FOR THE EXAMINER IF
13 IT OCCURRED, AND THEY HAD ALWAYS BEEN ON A LIST THAT WE THOUGHT
14 WERE APPROPRIATE PROSPECTS SINCE THEY PUBLISH IN THE MARKET.
15 Q. DID YOU HAVE ANY KNOWLEDGE OR WERE YOU EVER ADVISED THAT
16 MR. BLUM MET WITH MR. BRONSTEIN WITH REGARD TO THE --
17 A. YES. I BELIEVE I -- I DON'T KNOW WHETHER HE MET WITH HIM,
18 BUT I BELIEVE I WAS A RECIPIENT OF SOME INFORMATION OR SAW IT
19 SOMEWHERE ON SOME CONVERSATION THAT MR. BLUM HAD WITH
20 MR. BRONSTEIN.
21 Q. YOU STATED -- YOU STATED THAT EVERYONE -- I THINK
22 INCLUDING YOURSELF -- WOULD LIKE TO HAVE TWO NEWSPAPERS IN SAN
23 FRANCISCO.
24 A. I SAID THAT IN A MORE PERFECT WORLD THERE WOULD BE TWO
25 FLOURISHING NEWSPAPERS IN EVERY CITY OF EVERY SIZE.
1981
BENNACK - CROSS / ALIOTO
1 Q. AND --
2 A. AND I BELIEVE THAT.
3 Q. OKAY. AND YOU KNOW, DO YOU NOT, THAT UNDER THE JOA THAT
4 AT LEAST WOULD -- WOULD CONTINUE UNTIL 2005.
5 A. I KNOW THAT IF NOTHING ELSE HAPPENED THAT THERE WOULD BE
6 THE PROSPECT OF THAT CONTINUING TO 2005, DEPENDING ON WHAT THE
7 PARTIES DECIDED EACH AND EVERY DAY BETWEEN NOW AND 2005.
8 MR. ALIOTO: AND WITH THE COURT'S -- THANK YOU, YOUR
9 HONOR.
10 THE COURT: VERY WELL. ANY REDIRECT, MR. CONNELL?
11 MR. CONNELL: NO, SIR.
12 THE COURT: VERY WELL. NO OTHER REDIRECT?
13 MR. ROSCH: THANK YOU, YOUR HONOR.
14 THE COURT: THEN THANK YOU, MR. BENNACK, FOR YOUR
15 TESTIMONY, SIR. YOU MAY STEP DOWN.
16 THE WITNESS: THANK YOU.
17 THE COURT: YOU ARE EXCUSED.
18 WE HAVE ANOTHER WITNESS OR TWO?
19 MR. CONNELL: YES, SIR.
20 THE COURT: DO WE HAVE TIME TO GET HIM ON?
21 MR. CONNELL: IT SHOULD TAKE ABOUT FIVE MINUTES.
22 THE COURT: OH, WELL, THEN, LET'S DO IT.
23 MR. CONNELL: MAY I SAY IN SUPPORT OF THAT, YOUR
24 HONOR, IT'S MR. IRISH WHO HAS COME HERE TO TESTIFY ABOUT THE
25 TIMOTHY WHITE INCIDENT. YOU RECALL, YOUR HONOR, WE HAD A
1982
1 DISCUSSION ABOUT THAT.
2 THE COURT: YES.
3 MR. CONNELL: AND MY STATEMENT OF "VERY SHORT" IS
4 BASED ENTIRELY ON THE NOTION THAT THAT'S WHY HE'S HERE, NOT TO
5 TESTIFY GENERALLY, SINCE HIS DEPOSITION WAS TAKEN IN THIS CASE
6 IN THAT MY DIRECT EXAMINATION SHOULD TAKE FIVE MINUTES AND I
7 WOULD ASSUME THE CROSS, IF ANY, MIGHT TAKE LESS THAN THAT, AND
8 WE WOULD LIKE TO PUT HIM ON.
9 THE COURT: ALL RIGHT.
10 MR. ALIOTO: WE WOULD -- WE WOULD RESPECTFULLY
11 SUBMIT, YOUR HONOR, THAT WE WOULD NOT -- THAT WE SHOULD NOT BE
12 LIMITED TO THE SCOPE OF THE DIRECT.
13 MR. CONNELL: YOUR HONOR, HIS DEPOSITION WAS FULLY
14 TAKEN IN THIS CASE, AND THE ONLY REASON HE --
15 THE COURT: WELL, I MUST SAY, I DID UNDERSTAND THAT
16 WITH RESPECT TO BOTH MR. BENNACK AND MR. IRISH THAT MR. ALIOTO
17 WAS NOT CALLING THEM OR READING THEIR DEPOSITIONS IN HIS CASE
18 BECAUSE HE UNDERSTOOD THAT THEY WERE GOING TO BE CALLED AS
19 WITNESSES BY HEARST AND THAT MR. ALIOTO WOULD TAKE THOSE
20 WITNESSES ON DIRECT DURING THAT PHASE OF THE CASE. THAT WAS MY
21 UNDERSTANDING.
22 AM I INCORRECT?
23 MR. CONNELL: WELL, I HESITATE TO STATE IT QUITE
24 THAT WAY, SIR.
25 THE COURT: WELL, IT WOULDN'T BE THE FIRST TIME.
1983
1 MR. CONNELL: LET ME GIVE YOU MY VIEW. MY VIEW IS
2 THAT THE SITUATION AS BETWEEN MR. BENNACK AND MR. IRISH IS
3 QUITE DIFFERENT. MR. BENNACK WAS ALWAYS GOING TO BE A WITNESS
4 TO TESTIFY ABOUT EVERYTHING AND ANYTHING, WHICH HE HAS.
5 MR. IRISH WAS NEVER ON EITHER PARTY'S WITNESS LIST
6 (INDICATING).
7 THE COURT: IS THAT RIGHT?
8 MR. CONNELL: HIS DEPOSITION WAS TAKEN, AND UNTIL
9 THE INCIDENT INVOLVING MR. WHITE AROSE, THERE WAS NO INTENTION
10 ON THE PART OF EITHER SIDE TO DO ANYTHING EXCEPT USE HIS
11 DEPOSITION TESTIMONY.
12 THE IMPETUS FOR HAVING HIM COME HERE -- AND HE HAS
13 HAD TO BE HERE FOR SEVERAL DAYS BECAUSE WE DON'T KNOW WHAT THE
14 SCHEDULE IS GOING TO BE -- THE IMPETUS FOR HAVING HIM HERE WAS
15 SIMPLY TO -- AND I THINK YOUR HONOR'S PHRASE WAS "IT MIGHT BE
16 USEFUL TO CLEAR THE AIR" RELATIVE TO MR. WHITE, THAT'S WHY HE'S
17 HERE. THAT'S WHY MY VIEW IS THAT IT OUGHT TO BE JUST ON THAT
18 ISSUE.
19 THE COURT: WELL, I MAY HAVE BEEN LUMPING BENNACK
20 AND IRISH TOGETHER AND INCORRECTLY.
21 BUT RATHER THAN CONTINUING TO TALK ABOUT THE MATTER,
22 LET'S GET MR. IRISH ON THE STAND, COMPLETE YOUR DIRECT
23 EXAMINATION AND THEN WE WILL SEE WHERE WE GO FROM THERE.
24 MR. CONNELL: THANK YOU, SIR. I CALL MR. IRISH.
25 MR. LINDSTROM: YOUR HONOR?
1984
IRISH - DIRECT / CONNELL
1 THE COURT: YES.
2 MR. LINDSTROM: GREG LINDSTROM.
3 IF I MAY BEG THE COURT'S INDULGENCE, I DID NOT
4 REALIZE THAT MR. ALIOTO WAS GOING TO GET THE REPRIEVE THAT HE
5 APPARENTLY GOT, AND I HAVE A 12-YEAR-OLD DAUGHTER THAT IS
6 DISEMBARKING FROM A FERRY IN 15 MINUTES AND IF I AM NOT THERE,
7 I AM GOING TO BE FACING ANOTHER HIGHER AUTHORITY; AND IF I MAY
8 BE EXCUSED, I WOULD APPRECIATE IT. AND I MEAN NO DISRESPECT,
9 OF COURSE, TO THE COURT.
10 THE COURT: OF COURSE NOT. AND HAVE A PLEASANT
11 WEEKEND, MR. LINDSTROM.
12 MR. LINDSTROM: THANK YOU, SIR.
13 GEORGE B. IRISH,
14 CALLED AS A WITNESS FOR THE DEFENDANTS, HAVING BEEN DULY SWORN,
15 TESTIFIED AS FOLLOWS:
16 THE LAW CLERK: THANK YOU. PLEASE BE SEATED.
17 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST
18 NAME.
19 THE WITNESS: MY NAME IS GEORGE, MIDDLE. B., LAST
20 NAME IRISH, I-R-I-S-H.
21 DIRECT EXAMINATION
22 BY MR. CONNELL:
23 Q. GOOD AFTERNOON, MR. IRISH.
24 A. MR. CONNELL.
25 Q. WHAT IS YOUR POSITION AT THE HEARST CORPORATION, SIR?
1985
IRISH - DIRECT / CONNELL
1 A. PRESIDENT OF HEARST NEWSPAPERS.
2 Q. HOW LONG HAVE YOU BEEN EMPLOYED BY HEARST?
3 A. SINCE 1979.
4 Q. OKAY. AND WHAT POSITIONS HAVE YOU HELD WITHIN THE HEARST
5 CORPORATION STARTING IN 1979?
6 A. I SERVED AS GENERAL MANAGER OF THE MIDLAND, MICHIGAN,
7 DAILY NEWS, BECAME PUBLISHER OF THAT PAPER; AND THEN IN 1982
8 MOVED FROM MIDLAND, MICHIGAN, TO MIDLAND, TEXAS, AS PUBLISHER
9 OF THAT NEWSPAPER.
10 IN 19 -- LATE 1984 TO MIDDLE -- TO BEAUMONT, TEXAS,
11 AS PUBLISHER OF THAT NEWSPAPER; AND THEN 1988, IN MARCH, TO
12 PUBLISHER OF THE SAN ANTONIO LIGHT; AND THEN IN MARCH, APRIL,
13 1993 AS THE GROUP EXECUTIVE FOR NEWSPAPERS IN NEW YORK.
14 Q. AND THEN YOU BECAME -- YOU ACQUIRED THE JOB YOU'VE GOT
15 RIGHT NOW WHEN?
16 A. JANUARY 1998.
17 Q. AND IN THAT POSITION YOU HAVE DIRECT SUPERVISORY
18 RESPONSIBILITIES FOR THE HEARST NEWSPAPERS?
19 A. THAT'S CORRECT.
20 Q. OF WHICH THERE ARE HOW MANY?
21 A. TWELVE.
22 Q. TWELVE. OKAY.
23 WHAT IS THE POLICY OF THE HEARST CORPORATION
24 RELATIVE TO WHO IT IS THAT DETERMINES AT ANY HEARST NEWSPAPER
25 THE NEWS AND EDITORIAL POSITIONS OF THAT NEWSPAPER?
1986
IRISH - DIRECT / CONNELL
1 A. IT'S THE RESPONSIBILITY OF THE PUBLISHER, ALONG WITH THE
2 EDITOR, TO DETERMINE THOSE RESPONSIBILITIES AND POSITIONS.
3 Q. AND WHEN YOU WERE THE PUBLISHER AT THE VARIOUS PAPERS YOU
4 HAVE MENTIONED, I TAKE IT, YOU HAD THAT RESPONSIBILITY?
5 A. INDEED.
6 Q. HAVE YOU EVER ATTENDED A MEETING WITH MAYOR WILLIE BROWN
7 OF SAN FRANCISCO?
8 A. I HAVE.
9 Q. WHEN WAS THAT?
10 A. THAT WAS THE SAME MEETING THAT MR. BENNACK ATTENDED.
11 Q. AUGUST 6TH, 19 --
12 A. AUGUST 6TH, 1999.
13 Q. IN THE COURSE OF BEING A PUBLISHER IN OTHER CITIES, HAD
14 YOU ATTENDED -- HAD YOU GONE TO VISIT THE MAYORS IN THOSE
15 CITIES?
16 A. EVERY MAYOR. I SPENT TIME WITH ALL THE MAYORS IN ALL THE
17 CITIES THAT I WORKED IN.
18 Q. MR. IRISH, I AM GOING TO READ FOR YOU TESTIMONY GIVEN IN
19 THIS CASE ON MAY THE 1ST BY MR. TIMOTHY WHITE. I AM READING
20 FROM PAGE 161 OF THE TRIAL TRANSCRIPT OF THAT DATE. I AM
21 BEGINNING AT PAGE 9. THE QUESTIONING IS DONE BY MR. ALIOTO.
22 AND AT LINE 9 HE SAYS:
23 "Q. IS IT NOT CORRECT THAT YOU WERE IN FACT
24 INTENDING TO CONVEY TO MAYOR BROWN THAT HIS
25 SUPPORT FOR HEARST'S PROPOSED ACQUISITION OF THE
1987
IRISH - DIRECT / CONNELL
1 CHRONICLE WOULD RESULT IN MORE FAVORABLE
2 TREATMENT FOR HIM IN THE EXAMINER?
3 "A. YES."
4 WHEN DID YOU FIRST BECOME AWARE OF THAT TESTIMONY BY
5 MR. WHITE?
6 A. I LEARNED OF IT AS I WAS COMING OUT TO SAN FRANCISCO JUST
7 CLOSE TO LANDING WHEN I WAS TOUCHING -- TOUCHING BASE.
8 Q. WHAT WAS YOUR REACTION TO LEARNING OF THAT TESTIMONY?
9 A. I WAS SHOCKED.
10 Q. WHY?
11 A. WELL, I WAS SHOCKED, FIRST OF ALL, TO HEAR THAT TESTIMONY
12 FROM ANY PUBLISHER OR EDITOR, OR ANYONE WITH EDITORIAL
13 RESPONSIBILITY; AND, SECONDLY, I'VE KNOWN TIM WHITE FOR NINE
14 YEARS. I KNOW HIM TO BE A VERY HONORABLE PERSON AND I JUST
15 THINK HE WAS CONFUSED.
16 Q. DID YOU DISCUSS THIS MATTER OF MR. WHITE'S TESTIMONY
17 THEREAFTER WITH OTHERS IN THE HEARST CORPORATION?
18 A. I -- I JOINED A DISCUSSION WITH MR. BENNACK AND MR. GANZI
19 MONDAY --
20 Q. WAS THAT THE SAME DAY?
21 A. -- MONDAY EVENING AND -- AND THEN FINALIZED THAT
22 DISCUSSION -- WE FINALIZED THAT DISCUSSION EARLY TUESDAY
23 MORNING.
24 Q. AND WAS A DECISION REACHED AS A CONSEQUENCE OF THOSE
25 DISCUSSIONS?
1988
IRISH - DIRECT / CONNELL
1 A. YES. YES, IT WAS.
2 Q. WHAT WAS THE DECISION?
3 A. THE DECISION WAS BASED ON THE -- THE COMMENTS THAT WERE --
4 THAT WERE MADE THAT THERE WAS NO CHOICE BUT TO SUSPEND
5 MR. WHITE INDEFINITELY AND TO BEGIN AN INVESTIGATION OF THAT
6 MATTER.
7 Q. AND WHO COMMUNICATED THAT DECISION TO MR. WHITE?
8 A. MR. GANZI AND I HAD LUNCH WITH -- WITH MR. WHITE AND
9 MR. GANZI DELIVERED MOST OF THE MESSAGE.
10 Q. PRIOR TO LEARNING OF THAT TESTIMONY ON MAY THE 1ST BY
11 MR. WHITE, HAD THERE -- DID YOU HAVE ANY INFORMATION FROM ANY
12 SOURCE AT ANY TIME SUGGESTING THAT MR. WHITE HAD MADE ANY DEAL
13 RELATIVE TO THE EDITORIAL OPINIONS OF THE EXAMINER?
14 A. NO, NEVER.
15 Q. LET ME READ TO YOU NOW FROM THE TRANSCRIPT OF THIS TRIAL
16 OF MAY THE 3RD ON PAGE 391. AND I AM STARTING AT LINE 5.
17 MR. ALIOTO IS TALKING, SAYING THE FOLLOWING:
18 "YESTERDAY, I RESPECTFULLY INFORM THE COURT,
19 THAT MR. WHITE, WHO WAS THE PUBLISHER OF THE
20 EXAMINER AND SUPPOSED TO BE THE PUBLISHER OF THE
21 NEW PAPER IF THE ACQUISITION EVER WENT THROUGH,
22 WAS EUPHEMISTICALLY RELIEVED, OTHERWISE KNOWN AS
23 BEING FIRED. HE WAS FIRED FOR TESTIMONY HE GAVE
24 IN THIS CASE SPECIFICALLY."
25 MR. IRISH, HAS MR. WHITE BEEN FIRED?
1989
IRISH - DIRECT / CONNELL
1 A. NO, HE HAS NOT.
2 Q. MR. ALIOTO GOES ON:
3 "AND I WOULD POINT OUT TO THE COURT THAT THE
4 POINT OF THIS IS THAT HE HAD GIVEN THAT
5 TESTIMONY, THAT VERY TESTIMONY, ON DECEMBER 16,
6 1999, IN NEW YORK WHEN HE TESTIFIED BEFORE THE
7 JUSTICE DEPARTMENT. AND THAT'S AT PAGE 243 OF
8 HIS DEPOSITION IN THAT PROCEEDING FROM LINE 18
9 THROUGH TO LINE 22, WHICH I WOULD LIKE TO READ
10 INTO THE RECORD. AND AT THAT TIME HE WAS ASKED
11 THIS QUESTION AND HE GAVE THIS ANSWER."
12 AND WHAT I AM NOW READING, MR. IRISH, IS FROM THAT
13 DECEMBER 16, 1999 DEPOSITION OF MR. WHITE. THE QUESTION IS
14 ASKED OF MR. WHITE BY THE JUSTICE DEPARTMENT LAWYER:
15 "Q. WERE YOU INTENDING TO CONVEY TO MAYOR
16 BROWN THAT HIS SUPPORT FOR HEARST'S PROPOSED
17 ACQUISITION OF THE CHRONICLE WOULD RESULT FROM A
18 MORE FAVORABLE -- IN MORE FAVORABLE TREATMENT IN
19 THE EXAMINER?
20 "A. YEAH."
21 MR. ALIOTO GOES ON TO SAY:
22 "SO THAT TESTIMONY WAS GIVEN AND AT THAT
23 TIME COUNSEL FOR HEARST OBVIOUSLY WAS THERE.
24 HEARST WAS AWARE OF THIS, AND SO APPARENTLY THEY
25 HAVE FIRED THIS MAN NOT BECAUSE OF THE
1990
IRISH - DIRECT / CONNELL
1 INFORMATION ITSELF BUT BECAUSE IT WAS REVEALED
2 IN A PUBLIC FORUM."
3 A, FIRST, HAS MR. WHITE BEEN FIRED?
4 A. NO.
5 Q. AND HAS HE BEEN SUSPENDED, AS MR. ALIOTO SAYS, NOT FOR THE
6 INFORMATION ITSELF BUT BECAUSE IT WAS REVEALED IN THIS COURT?
7 A. HE WAS SUSPENDED BECAUSE OF WHAT WAS REVEALED ON MONDAY,
8 MAY 1ST.
9 Q. PRIOR TO MONDAY, MAY 1ST -- OR PRIOR -- EXCUSE ME.
10 LET ME ASK YOU THIS: YOU LEARNED, DID YOU NOT,
11 AFTER MR. ALIOTO HAD MADE THIS STATEMENT TO THE COURT ON
12 MAY 3RD, THAT THIS TESTIMONY HAD BEEN GIVEN BY MR. WHITE IN HIS
13 DEPOSITION?
14 A. I LEARNED THAT ON -- ON MAY 1ST, THAT'S CORRECT.
15 Q. HAD YOU KNOWN THAT PRIOR TO THAT TIME?
16 A. I HAD NOT.
17 Q. HAD YOU HAD ANY INFORMATION AT ALL INDICATING IN ANY WAY
18 AT HIS DECEMBER 16 DEPOSITION THAT MR. WHITE HAD GIVEN
19 TESTIMONY OF THAT KIND?
20 A. NOT AT ALL.
21 MR. CONNELL: THANK YOU. NO FURTHER QUESTIONS.
22 THE COURT: VERY WELL. CROSS-EXAMINE?
23 MR. ALIOTO: MAY IT PLEASE YOUR HONOR.
24 AND I WILL EXAMINE THE WITNESS ON WHAT WAS JUST
25 DONE, BUT I ALSO AFTERWARDS WOULD LIKE TO GO FURTHER.
1991
IRISH - CROSS / ALIOTO
1 THE COURT: WELL, LET'S DO ONE STEP AT A TIME.
2 MR. ALIOTO: VERY GOOD.
3 THE COURT: WE WILL SEE WHERE WE ARE.
4 MR. ALIOTO: VERY GOOD.
5 CROSS-EXAMINATION
6 BY MR. ALIOTO:
7 Q. FIRST OF ALL, MR. IRISH, YOU ARE AWARE, ARE YOU NOT, THAT
8 MR. WHITE, AFTER HE GAVE HIS TESTIMONY, CAME BACK THE NEXT DAY?
9 A. YES, I AM.
10 THE COURT: CAME BACK?
11 MR. ALIOTO: CAME BACK TO COURT.
12 BY MR. ALIOTO:
13 Q. CAME BACK TO COURT THE NEXT DAY.
14 A. YES, I AM.
15 Q. YOU ARE AWARE OF THAT.
16 WERE YOU HERE THEN?
17 A. IN THE CITY?
18 Q. YES.
19 A. YES, I WAS.
20 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
21
22
23
24
25
1992
IRISH - CROSS / ALIOTO
1 Q. OKAY. SO YOU KNEW THAT HE WAS COMING BACK THAT DAY?
2 A. I KNEW THAT HE CAME BACK THAT DAY, YES.
3 Q. OKAY. NOW, HEARST DECIDED NOT TO PUT MR. WHITE BACK ON
4 THE STAND. YOU KNEW THAT TOO?
5 A. I KNEW THAT THE LAWYERS --
6 Q. NO. JUST YOU KNEW THAT HEARST --
7 A. IT WAS NOT HEARST -- WELL, I'M AWARE OF THE FACT THAT MR.
8 WHITE DID NOT TAKE THE STAND, THAT'S CORRECT.
9 Q. AND YOU KNOW THAT IT WAS HEARST'S OPPORTUNITY ON WHAT THEY
10 CALL THEIR DIRECT EXAMINATION WITH MR. WHITE TO TAKE HIM IF
11 THEY WANTED TO?
12 A. YES.
13 Q. AND SO THAT IF MR. WHITE HAD ANY EXPLANATION THAT HE
14 WANTED TO MAKE ABOUT ANY TESTIMONY HE MADE THE DAY BEFORE, YOU
15 KNEW THAT HE HAD THE OPPORTUNITY TO DO IT?
16 A. WELL, I DIDN'T KNOW. I'M NOT A LAWYER, BUT YOU'RE
17 SUGGESTING THAT HE HAD THAT OPPORTUNITY.
18 Q. WELL, I UNDERSTAND THAT YOU HAD MET WITH OTHER FOLKS THAT
19 NIGHT. AM I WRONG? WHAT NIGHT -- WHEN WAS IT THAT YOU MET
20 WITH THESE OTHER FOLKS AND MADE A DECISION ABOUT MR. WHITE'S
21 EMPLOYMENT?
22 A. THE DECISION WAS FINALIZED ON TUESDAY, TUESDAY MORNING.
23 Q. TUESDAY MORNING WHEN?
24 A. OH, MID-MORNING.
25 Q. AFTER HE LEFT THE COURTROOM?
1993
IRISH - CROSS / ALIOTO
1 A. I THINK IT WAS EARLY MORNING.
2 Q. BEFORE HE LEFT -- BEFORE HE CAME TO THE COURTROOM?
3 A. I DON'T HAVE AN ACCURATE RECOLLECTION OF THE TIME THAT IT
4 WAS, BUT IT WAS CLEARLY IN THE MORNING.
5 Q. WELL, WAS THE DECISION, I'M ASKING YOU, WAS THE DECISION
6 MADE ABOUT HIS EMPLOYMENT BEFORE OR AFTER HE HAD THE
7 OPPORTUNITY TO GET BACK ON THE STAND?
8 A. I DON'T KNOW EXACTLY WHEN IT WAS. THE DECISION WAS
9 MADE -- THE DECISION WAS MADE TUESDAY MORNING AND THE DECISION
10 WAS NOT ONE OF DISCHARGE BUT ONE OF SUSPENSION FOR STATEMENTS
11 MADE EARLIER.
12 Q. DID YOU HAVE ANY DISCUSSION WITH MR. WHITE?
13 A. YES.
14 Q. YOU PERSONALLY?
15 A. YES.
16 Q. WHEN?
17 A. MONDAY EVENING.
18 Q. MONDAY EVENING?
19 A. YES.
20 Q. AFTER HE GAVE HIS TESTIMONY?
21 A. YES.
22 Q. BUT BEFORE HE CAME TO COURT THE NEXT MORNING?
23 A. YES.
24 Q. SINCE I HAVEN'T TAKEN YOUR DEPOSITION ON THIS, I'M GOING
25 TO GO AHEAD AND ASK YOU ANYWAY.
1994
IRISH - CROSS / ALIOTO
1 THE COURT: THIS IS THE OLD-FASHIONED KIND OF
2 CROSS-EXAMINATION, MR. ALIOTO.
3 (LAUGHTER)
4 MR. ALIOTO: THIS IS REALLY WINGING IT, JUDGE.
5 Q. HAD YOU, WHEN YOU MET WITH MR. WHITE ON MONDAY EVENING
6 AFTER HE TESTIFIED, HAD YOU READ WHAT HE TESTIFIED IN COURT?
7 A. NOT COMPLETELY.
8 Q. DID ANYONE GIVE YOU A WRITTEN VIEW OR SOMETHING AS TO WHAT
9 HE SAID IN SUM AND SUBSTANCE AT COURT?
10 A. BY TUESDAY MORNING I HAD READ THAT, YES.
11 Q. BUT AT THE TIME THAT YOU MET HIM, DID YOU HAVE ANYTHING IN
12 WRITING?
13 A. I HAD -- I HAD KNOWLEDGE FROM THE ATTORNEYS PRESENT AT THE
14 TRIAL.
15 Q. FORGET -- I'M NOT ASKING YOU ABOUT ANY STATEMENTS THAT YOU
16 HAD WITH YOUR ATTORNEYS. I'M ASKING: DID YOU HAVE ANYTHING
17 LIKE THE TRANSCRIPT OF THE PROCEEDING THAT DAY OR ANYTHING LIKE
18 THAT?
19 A. I HAD IN MY POSSESSION A COPY OF THE TRANSCRIPT. I HAD
20 NOT HAD A CHANCE TO READ IT ALL.
21 Q. DID YOU HAVE THIS DISCUSSION WITH MR. WHITE AT DINNER OR
22 IN AN OFFICE OR WHERE?
23 A. THE DISCUSSION WAS AT DINNER.
24 Q. WITH WHOM?
25 A. TIM WHITE AND MYSELF.
1995
IRISH - CROSS / ALIOTO
1 Q. JUST THE TWO OF YOU?
2 A. YES.
3 Q. WHERE?
4 A. SILKS.
5 Q. ALL RIGHT. AND DID YOU TELL HIM AT THAT TIME THAT YOU
6 WERE CONSIDERING SUSPENDING HIM?
7 A. I TOLD HIM THAT THAT WAS CERTAINLY AN OPTION.
8 Q. AT THE TIME THAT YOU MET WITH HIM, DID YOU HAVE HIS
9 TESTIMONY BEFORE THE DEPARTMENT OF JUSTICE --
10 A. NO, I DID NOT.
11 Q. -- IN DECEMBER?
12 A. NO, I DID NOT.
13 Q. DID YOU KNOW ABOUT IT?
14 A. NO, I DID NOT.
15 Q. WHEN WAS THE FIRST TIME YOU WERE TOLD ABOUT IT?
16 A. AFTER YOU DISCLOSED IT IN COURT.
17 Q. DID YOU ASK MR. WHITE IF HE HAD GIVEN SUCH TESTIMONY
18 BEFORE?
19 A. NO, I DIDN'T.
20 Q. BY THE WAY, WHEN YOU WERE GIVEN -- YOU WERE GIVEN A COPY
21 OF THE E-MAIL FROM MR. WHITE TO YOU ABOUT HIS MEETING WITH
22 MAYOR BROWN; WERE YOU NOT?
23 A. I WAS, YES.
24 Q. AND AFTER YOU GOT THAT E-MAIL OR AFTER YOU RECEIVED THAT
25 E-MAIL, YOU DID HAVE CONTACT WITH MR. WHITE AFTER YOU GOT THAT
1996
IRISH - CROSS / ALIOTO
1 E-MAIL; DIDN'T YOU?
2 A. I'VE HAD CONTACT WITH MR. WHITE MANY TIMES. NOW IF YOU'RE
3 ASKING WHETHER I HAD CONTACT REGARDING THE -- WITH MR. WHITE
4 REGARDING THE E-MAIL AFTER I RECEIVED IT --
5 Q. YES.
6 A. -- THE ANSWER IS NO. THE ANSWER IS NO. MY CONTACT WAS
7 PRIOR --
8 Q. DID YOU HAVE ANY CONTACT --
9 A. -- PRIOR TO RECEIVING THE E-MAIL.
10 Q. DID YOU HAVE ANY CONTACT WITH MR. WHITE AFTER YOU RECEIVED
11 THIS E-MAIL ABOUT THE CONTENTS OF THE E-MAIL?
12 A. NOT AFTER THE E-MAIL. THE DISCUSSION TOOK PLACE REGARDING
13 THE CONTENTS OF THE E-MAIL PRIOR TO RECEIVING IT.
14 MR. ALIOTO: I DON'T HAVE HIS DEPOSITION.
15 Q. YOUR DEPOSITION WAS TAKEN IN THIS CASE; WAS IT NOT?
16 A. YES, IT WAS.
17 Q. AND IT WAS TAKEN ON APRIL 27, 2000? WHERE WAS IT, IN NEW
18 YORK?
19 A. YES.
20 Q. AND YOU WERE UNDER OATH AT THE TIME?
21 A. THAT'S CORRECT.
22 MR. ALIOTO: IF I CAN GET A COPY OF THE DEPOSITION.
23 IF I MAY APPROACH THE WITNESS, YOUR HONOR.
24 THE COURT: YES, YOU MAY.
25 (PAUSE IN PROCEEDINGS.)
1997
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. I DIRECT YOUR ATTENTION TO PAGE 89. I DIRECT YOUR
3 ATTENTION TO PAGE 89 BEGINNING ON LINE 16, QUESTION -- THIS IS
4 AFTER YOU WERE SHOWN --
5 THE COURT: DO WE HAVE THE ORIGINAL?
6 MR. ALIOTO: PARDON ME, YOUR HONOR?
7 THE COURT: DO WE HAVE THE ORIGINAL?
8 (PAUSE IN PROCEEDINGS.)
9 THE COURT: GO AHEAD WHILE SHE LOOKS FOR IT.
10 MR. ALIOTO: I'M VERY SORRY ABOUT THAT, YOUR HONOR.
11 Q. IN REFERENCE TO THE -- IN REFERENCE TO THE E-MAIL, ON PAGE
12 89, LINE 16:
13 "Q. DID YOU HAVE ANY CONTACT WITH MR. WHITE
14 AFTER YOU RECEIVED THIS E-MAIL ABOUT THE
15 CONTENTS OF THE E-MAIL?
16 "A. I THINK I DID."
17 MR. ALIOTO: IT'S PAGE 89, YOUR HONOR.
18 THE COURT: THANK YOU.
19 MR. ALIOTO: LINE 16, QUESTION, I'LL DO IT ONCE
20 MORE:
21 "Q. DID YOU HAVE ANY CONTACT WITH MR. WHITE
22 AFTER YOU RECEIVED THIS E-MAIL ABOUT THE
23 CONTENTS OF THE E-MAIL?
24 "A. I THINK I DID."
25 Q. DID YOU GIVE THAT ANSWER TO THAT QUESTION?
1998
IRISH - CROSS / ALIOTO
1 A. I DID.
2 Q. IS IT TRUE?
3 A. AT THE TIME IT WAS.
4 Q. AT THE TIME IT WAS BUT IT'S NOT NOW?
5 A. I DON'T KNOW THAT IT IS OR ISN'T. I KNOW THAT -- I KNOW
6 THAT I HAD CONVERSATION WITH MR. WHITE PRIOR TO RECEIVING THE
7 E-MAIL; AND, IN FACT, HAD MADE SOME NOTES OF THAT CONVERSATION.
8 I SAID I THINK I DID IN TERMS OF THE RECOLLECTION OF HAVING HAD
9 A DISCUSSION AFTERWARDS.
10 Q. WHAT DID YOU TELL MR. WHITE?
11 A. AFTER THE E-MAIL?
12 Q. YES.
13 A. I DON'T HAVE A RECOLLECTION OF WHAT WE DISCUSSED. I KNOW
14 THAT WHEN WE DISCUSSED THIS LUNCH IN DETAIL, THAT WE TALKED
15 ABOUT HIS MEETING WITH THE MAYOR, ABOUT THE MAYOR'S LETTER TO
16 JANET RENO AND SUBSEQUENT PHONE CALL. I RECALL THAT.
17 Q. DID YOU ASK MR. WHITE ABOUT HIS STATEMENT TO MAYOR BROWN
18 ABOUT HOW HE WAS GOING TO JUSTIFY TO HIS SUPERIORS IN NEW YORK
19 WANTING TO SUPPORT MAYOR BROWN AND COOPERATE WITH MAYOR BROWN?
20 A. I DID NOT.
21 Q. YOU DIDN'T TELL MR. WHITE HE WAS WRONG ABOUT THAT
22 STATEMENT?
23 A. I DID NOT.
24 Q. AS A MATTER OF FACT, YOU DON'T HAVE ANY RECOLLECTION
25 WHETHER YOU DID OR YOU DIDN'T; IS THAT RIGHT?
1999
IRISH - CROSS / ALIOTO
1 A. I HAVE RECOLLECTION THAT I DID NOT TELL HIM IT WAS WRONG.
2 Q. OKAY. IF YOU LOOK AT YOUR DEPOSITION.
3 A. SURE.
4 Q. I DIDN'T ASK YOU WHETHER YOU SAID DID OR DID NOT, WHETHER
5 IT WAS WRONG. I ASKED YOU DID YOU TELL MR. WHITE -- YES, OKAY.
6 LET ME READ YOUR DEPOSITION BEGINNING AGAIN PAGE 89,
7 WE'LL BEGIN ON LINE 20:
8 "Q. WHAT DID YOU TELL MR. WHITE?
9 "A. I HAVE NO RECOLLECTION.
10 "Q. DID YOU ASK MR. WHITE ABOUT HIS
11 STATEMENT TO MAYOR BROWN ABOUT HOW HE WAS GOING
12 TO JUSTIFY TO HIS SUPERIORS IN NEW YORK WANTING
13 TO SUPPORT MAYOR BROWN AND COOPERATE WITH MAYOR
14 BROWN?
15 "A. I HAVE NO CONNECTION TO THAT.
16 "Q. YOU DIDN'T TELL MR. WHITE HE WAS WRONG
17 ABOUT THAT STATEMENT?
18 "A. I DON'T HAVE ANY RECOLLECTION THAT I
19 DID OR DIDN'T."
20 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
21 A. I DID. I DID.
22 Q. SO YOU DON'T KNOW WHETHER YOU DID OR DIDN'T TELL HIM IT
23 WAS WRONG; DO YOU?
24 A. MY RECOLLECTION IS NOT STRONG.
25 Q. PARDON ME?
2000
IRISH - CROSS / ALIOTO
1 A. MY RECOLLECTION -- I'VE GOT A COLD, EXCUSE ME.
2 MY RECOLLECTION OF THIS MATTER IS NOT STRONG.
3 Q. WELL, THEN, WHEN YOU WERE MEETING WITH MR. WHITE, THE
4 NIGHT AFTER HE TESTIFIED, AND YOU WERE -- AND YOU BROUGHT UP
5 THE MATTER THAT HE MIGHT BE SUSPENDED, WAS YOUR RECOLLECTION
6 STRONG THEN?
7 A. STRONG ABOUT WHAT?
8 Q. WHETHER IT WAS WRONG.
9 A. WHETHER WHAT WAS WRONG?
10 Q. DID YOU ADVISE MR. WHITE WHEN YOU MET HIM AFTER HE GAVE
11 HIS TESTIMONY THAT YOU BELIEVED THAT HIS TESTIMONY WAS WRONG?
12 A. I TOLD MR. WHITE THAT WHAT HE STATED IN HIS TESTIMONY WAS
13 A VIOLATION -- WOULD BE A VIOLATION OF THE ETHICS OF OUR
14 BUSINESS.
15 THE COURT: THIS WAS ON MAY 1ST?
16 THE WITNESS: MAY 1ST, YES, SIR.
17 BY MR. ALIOTO:
18 Q. WELL, WHEN YOU RECEIVED A COPY OF THE -- WHEN YOU RECEIVED
19 A COPY OF THE E-MAIL --
20 THE COURT: EXHIBIT 78?
21 BY MR. ALIOTO:
22 Q. -- EXHIBIT 78 -- YOU DID RECEIVE A COPY OF THE E-MAIL,
23 EXHIBIT 78?
24 A. YES. YES, I DID.
25 Q. AND IT STATED, QUOTE:
2001
IRISH - CROSS / ALIOTO
1 "I ASKED WILLIE HOW I WAS GOING TO JUSTIFY
2 TO MY SUPERIORS IN NEW YORK WANTING TO SUPPORT
3 HIM AND COOPERATE WITH HIM WHEN HE WAS SEEMING
4 TO GO OUT OF HIS WAY TO MAKE OUR LIVES
5 DIFFICULT,"
6 WHEN YOU RECEIVED THAT AND SAW THAT, AS I UNDERSTAND IT, YOU
7 THINK YOU -- YOU THINK YOU HAD CONTACT WITH MR. WHITE BUT YOU
8 HAVE NO RECOLLECTION OF WHAT YOU SAID TO HIM ABOUT IT; IS THAT
9 RIGHT?
10 A. THAT'S CORRECT.
11 Q. BUT YOU DID SAY SOMETHING TO HIM ABOUT IT?
12 A. ABOUT THAT PARAGRAPH?
13 Q. YES.
14 A. I'M NOT CERTAIN THAT I DID.
15 Q. YOU DID READ THE E-MAIL AT THE TIME?
16 A. I CERTAINLY ACKNOWLEDGE RECEIVING THE E-MAIL AND
17 CLEARLY -- CLEARLY REMEMBER FOCUSING ON THE ISSUES RELATED TO
18 THE MAYOR AND THE ATTORNEY GENERAL, YES.
19 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
20 THE COURT: YES.
21 BY MR. ALIOTO:
22 Q. LET ME SHOW YOU EXHIBIT 141. EXHIBIT 141 ARE SOME
23 HANDWRITTEN NOTES DATED AUGUST 30, 1999. IT SAYS "TIM WHITE"
24 ON THE TOP, TWO PAGES.
25 ARE THOSE, SIR, THE NOTES THAT YOU TOOK -- ARE
2002
IRISH - CROSS / ALIOTO
1 THOSE, SIR, THE NOTES THAT YOU TOOK OF ANY CONVERSATION WITH
2 MR. WHITE?
3 A. THEY CERTAINLY APPEAR TO BE, YES.
4 Q. THESE WERE NOTES MADE DURING A PHONE CALL YOU HAD WITH MR.
5 WHITE?
6 A. YES.
7 Q. AND AT THE TOP IT SAYS, THE FIRST LINE SAYS, "PRETTY
8 AMAZING," QUOTE, "PRETTY AMAZING"; RIGHT?
9 A. YEP.
10 MR. ALIOTO: BY THE WAY, YOUR HONOR, WE WOULD OFFER
11 INTO EVIDENCE WHAT IS 141.
12 MR. CONNELL: NO OBJECTION, YOUR HONOR.
13 THE COURT: EXHIBIT 141 IS ADMITTED.
14 (PLAINTIFF'S EXHIBIT 141
15 RECEIVED IN EVIDENCE)
16 BY MR. ALIOTO:
17 Q. THE VERY FIRST WORDS, FIRST TWO WORDS AFTER "TIM WHITE,"
18 STATE, QUOTE, "PRETTY AMAZING."
19 THE COURT: LET ME JUST FLESH OUT THE FOUNDATION.
20 MR. ALIOTO: I'M SORRY.
21 THE COURT: THESE ARE HANDWRITTEN NOTES OF THE
22 WITNESS?
23 THE WITNESS: YES.
24 THE COURT: AND THESE WERE MADE AT OR ABOUT THE DATE
25 INDICATED, AUGUST 30?
2003
IRISH - CROSS / ALIOTO
1 THE WITNESS: YES.
2 THE COURT: AND THESE ARE NOTES OF A TELEPHONE
3 CONVERSATION WITH MR. WHITE?
4 THE WITNESS: THAT'S RIGHT.
5 THE COURT: ALL RIGHT.
6 BY MR. ALIOTO:
7 Q. WELL, NOW, THE E-MAIL IS DATED -- THE E-MAIL, WHICH IS
8 EXHIBIT 78, IS DATED AUGUST 30, 8:14 P.M. DO YOU SEE THAT?
9 A. I DO.
10 Q. AND SO IS THIS A TELEPHONE -- ARE THESE NOTES OF A
11 TELEPHONE CONVERSATION YOU HAD WITH MR. WHITE AFTER YOU GOT THE
12 E-MAIL?
13 A. IT'S DIFFICULT TO TELL, MR. ALIOTO.
14 Q. OKAY. WELL, YOU BEGIN BY SAYING, AT THE TOP IT SAYS,
15 QUOTE, "PRETTY AMAZING." WHAT DID YOU MEAN BY THAT?
16 A. IT'S NOT REALLY WHAT I MEANT. I WAS JUST CAPTURING THE
17 WORDS OF TIM WHITE AS HE WAS TALKING TO ME.
18 Q. OH, SO IT WAS -- ARE YOU SAYING THAT -- ARE YOU SAYING
19 THAT "PRETTY AMAZING" IS WHAT MR. WHITE SAID TO YOU?
20 A. YES.
21 Q. WOULD YOU PLEASE TAKE A LOOK AT YOUR DEPOSITION?
22 A. (WITNESS EXAMINES DOCUMENT.)
23 Q. GO TO PAGE 126, PLEASE.
24 A. (WITNESS EXAMINES DOCUMENT.)
25 Q. I DIRECT YOUR ATTENTION TO LINE 19. I ASK YOU WHETHER OR
2004
IRISH - CROSS / ALIOTO
1 NOT YOU GAVE THIS ANSWER TO THIS QUESTION:
2 "Q. AT THE TOP IT SAYS, QUOTE, 'PRETTY
3 AMAZING,' END QUOTE. WHAT DID YOU MEAN BY THAT?
4 "A. I DON'T KNOW."
5 DID YOU GIVE THAT ANSWER TO THAT QUESTION?
6 A. I APPARENTLY DID, YES.
7 Q. NO. WHAT DO YOU MEAN APPARENTLY YOU DID?
8 A. WELL, I DID, YES.
9 Q. WELL, IS IT TRUE?
10 A. I DID. IT'S TRUE, YES.
11 Q. SO THESE ARE NOT MR. -- YOU'RE NOT RECORDING MR. WHITE'S
12 WORDS; ARE YOU? OR AT LEAST YOU DON'T KNOW WHETHER YOU ARE OR
13 YOU AREN'T; IS THAT RIGHT?
14 A. THESE WORDS -- IT'S UNCLEAR. TOO MANY MONTHS HAVE PAST
15 SINCE THE NOTES WERE MADE.
16 Q. WELL, THE FACT IS THAT YOU DON'T KNOW ONE WAY OR ANOTHER;
17 RIGHT? IS THAT RIGHT?
18 A. IT'S UNCLEAR, THAT'S CORRECT.
19 Q. ARE YOU CONFUSED?
20 A. THAT'S CORRECT.
21 Q. ARE YOU CONFUSED?
22 A. IT'S CORRECT THAT --
23 Q. I'M ASKING YOU.
24 A. I CAN UNDERSTAND WHY MR. WHITE WAS CONFUSED.
25 THE COURT: DON'T INTERRUPT THE WITNESS.
2005
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. I'M ASKING YOU, WHEN YOU PUT DOWN THERE "PRETTY AMAZING,"
3 YOU TESTIFIED THAT YOU THINK THAT YOU WERE RECORDING MR.
4 WHITE'S WORDS, IN YOUR DEPOSITION WHEN YOU WERE ASKED ABOUT IT
5 YOU SAID -- "WHAT DID YOU MEAN BY THAT," YOU SAID, "I DON'T
6 KNOW." NOW, ARE THOSE YOUR WORDS LISTENING TO MR. WHITE OR ARE
7 YOU RECORDING MR. WHITE'S WORDS?
8 A. IT'S UNCLEAR AT THIS POINT.
9 Q. THE NEXT LINE SAYS, "COULDN'T HAVE BEEN BETTER." DO YOU
10 SEE THAT?
11 A. YES.
12 Q. WHAT DID YOU MEAN BY THAT?
13 A. I'M NOT -- I'M NOT SURE WHAT IT MEANS. TOO MANY MONTHS
14 HAVE PAST.
15 Q. WELL, WHEN YOU SAID -- WHEN YOU WROTE DOWN HERE, "COULDN'T
16 HAVE BEEN BETTER," SOMETHING MUST HAVE BEEN BETTER THAN
17 SOMETHING ELSE.
18 MR. CONNELL: OBJECTION.
19 THE COURT: OVERRULED. THIS IS CROSS-EXAMINATION.
20 THE WITNESS: THESE ARE -- THESE ARE CRYPTIC, QUICK
21 NOTES OF A CONVERSATION WHICH EITHER PRECEDED OR WERE FOLLOWED
22 BY AN E-MAIL.
23 BY MR. ALIOTO:
24 Q. UNDER THE PART WHERE IT SAYS, "THANKED HIM" -- DO YOU SEE
25 WHERE IT SAYS "THANKED HIM"? THAT'S THE THIRD LINE.
2006
IRISH - CROSS / ALIOTO
1 A. YES. YES.
2 Q. OKAY. UNDERNEATH THAT IT SAYS, "TOLD PALS IN NEW YORK ALL
3 GOING WELL. WE WANT IT. TRYING TO," WHAT, "TO UNDERSTAND
4 WHERE WE ARE"? WHAT DOES THAT MEAN?
5 A. I REALLY DON'T KNOW.
6 Q. WELL, READ THAT LAST PART. TRYING TO DO WHAT TO
7 UNDERSTAND?
8 A. I THINK IT'S "TRYING TO NEED TO UNDERSTAND."
9 Q. "TRYING TO NEED TO UNDERSTAND"?
10 A. THAT'S CORRECT. I THINK THAT'S CORRECT.
11 Q. WHAT DOES IT MEAN "THE PALS IN NEW YORK"? WHO'S THAT?
12 A. MY ONLY ASSUMPTION CAN BE THAT IT'S ME AND MY COLLEAGUES
13 IN THE HEARST OFFICE IN NEW YORK.
14 Q. AND YOUR COLLEAGUES INCLUDE MR. BENNACK?
15 A. I HAVE -- I HAVE MANY COLLEAGUES IN NEW YORK.
16 Q. I KNOW, BUT YOU SENT THE E-MAIL TO, AMONG OTHERS,
17 MR. BENNACK. HE WAS THE FIRST ONE YOU SENT IT TO ACCORDING TO
18 EXHIBIT 78; CORRECT?
19 A. THAT'S CORRECT.
20 Q. OKAY. SO "THE PALS IN NEW YORK" YOUR BEST RECOLLECTION
21 IS, IS THAT THAT MEANS YOU AND MR. BENNACK AT LEAST.
22 A. IT WAS NEVER DEFINED FOR ME WHAT "PALS IN NEW YORK" MEANT.
23 THAT'S YOUR ASSUMPTION AND --
24 Q. NO, I'M JUST ASKING YOU WHAT -- YOU WROTE THIS. IS
25 THIS -- ARE THESE WORDS THAT, "TOLD THE PALS IN NEW YORK ALL
2007
IRISH - CROSS / ALIOTO
1 GOING WELL," DOES THE "ALL GOING WELL" HAVE TO DO WITH THE
2 ACQUISITION?
3 A. NO, IT DOESN'T. THIS WAS PRIOR TO THE ACQUISITION. THIS
4 WAS IN -- I GUESS THIS WASN'T PRIOR TO THE ACQUISITION, BUT --
5 Q. WELL, DOES "ALL GOING WELL" MEAN IT'S ALL GOING WELL WITH
6 THE MAYOR?
7 A. I REALLY DON'T KNOW. THAT WOULD BE A SUPPOSITION ON MY
8 PART.
9 Q. WHEN IT SAYS "TOLD PALS" -- WHEN YOU WROTE THIS, "TOLD
10 PALS IN NEW YORK ALL GOING WELL, WE WANT IT," OKAY, NOW, IS
11 THAT WHAT MR. WHITE TOLD YOU?
12 A. YES.
13 Q. AND WHAT YOU WANTED AT THAT TIME AND WHAT THIS E-MAIL IS
14 ABOUT IS ABOUT THE ACQUISITION OF THE CHRONICLE; CORRECT?
15 A. I DON'T KNOW THAT, NO.
16 Q. WELL, WHEN YOU WROTE, "ALL GOING WELL, WE WANT IT," WHAT
17 DID YOU MEAN "WE WANT IT"?
18 A. I HAVE NO IDEA. HE WAS SIMPLY -- I'M JUST RECAPTURING HIS
19 WORDS AS HE RELAYED THEM TO ME. AND IF THEY -- IF THERE WAS
20 REASON TO FOLLOWUP, I WOULD HAVE DONE SO.
21 Q. DOES THAT MEAN OR DID THAT MEAN TO YOU AT THE TIME THAT
22 YOU WROTE IT THAT A DEAL HAD BEEN STRUCK?
23 A. ABSOLUTELY NOT.
24 Q. THIS IS A REPORT FROM MR. WHITE ABOUT THE COMMUNICATIONS
25 HE HAD WITH MAYOR BROWN; RIGHT?
2008
IRISH - CROSS / ALIOTO
1 A. THIS IS A REPORT ABOUT THE LUNCH -- OR THE MEETING THAT
2 MR. WHITE HAD WITH MAYOR BROWN, THAT'S CORRECT.
3 Q. UNDERNEATH THAT IT SAYS, "BOARD OF SUP. CLEARLY AGITATED."
4 DO YOU KNOW WHAT THAT'S ABOUT?
5 A. I HAVE A VAGUE RECOLLECTION.
6 Q. UNDERNEATH THAT IT SAYS, "GOING ON VAC.," V-A-C. DOES
7 THAT MEAN THAT THE BOARD OF SUPERVISORS WERE AGITATED BUT
8 THEY'RE GOING ON VACATION?
9 A. I THINK IT MEANT THAT THE BOARD OF SUPERVISORS WERE
10 HEADING OFF ON A VACATION AND THAT THERE WAS SOMETHING THAT HAD
11 TO BE ACCOMPLISHED WITHIN 15 DAYS.
12 THE COURT: WHAT'S THAT LANGUAGE? "SOMETHING," THE
13 UNDERSCORED WORD?
14 THE WITNESS: "PALS IN" -- OH, "MAGIC."
15 THE COURT: "SOMETHING MAGIC."
16 THE WITNESS: "SOMETHING MAGIC ABOUT 15 DAYS."
17 BY MR. ALIOTO:
18 Q. WHAT'S THAT ABOUT?
19 A. I DON'T HAVE A CLEAR RECOLLECTION.
20 Q. GOING ON YOU SAY, "LETTER TO RENO. SHE SAID THERE WILL BE
21 NO HEARING OF ANY KIND." WHERE DID YOU GET THAT?
22 A. FROM MR. WHITE.
23 Q. AND HE WAS RELATING TO YOU WHAT THE MAYOR HAD SAID TO HIM?
24 A. CORRECT.
25 Q. THAT'S THE WAY YOU UNDERSTOOD IT?
2009
IRISH - CROSS / ALIOTO
1 A. THAT'S CORRECT.
2 Q. "HAD NOT BEEN ASSIGNED TO KLEIN BUT TO AN UNDERLING. NAME
3 BEGINS WITH B." IS THAT WHAT MR. WHITE TOLD YOU?
4 A. THAT'S CORRECT.
5 Q. THAT WAS GOOD NEWS?
6 A. NOT NECESSARILY. I BELIEVE THAT EVERYONE REPORTS TO
7 MR. KLEIN.
8 THE COURT: WHO DID YOU UNDERSTAND MR. KLEIN TO BE?
9 THE WITNESS: I'M SORRY, YOUR HONOR?
10 THE COURT: WHO DID YOU UNDERSTAND MR. KLEIN TO BE?
11 THE WITNESS: THE SPELLING IS WRONG, BUT JOEL KLEIN,
12 THE ASSISTANT ATTORNEY GENERAL.
13 THE COURT: IN CHARGE OF THE ANTITRUST DIVISION?
14 THE WITNESS: THAT'S CORRECT.
15 BY MR. ALIOTO:
16 Q. IT SAYS, "SHE SAID WE HANDLE ANTITRUST MATTERS," THEN YOU
17 CROSSED SOMETHING OUT, "ONLY INVOLVED IF DEALT WITH INQUIRED
18 ABOUT." DO YOU SEE THAT?
19 A. YEAH. I HAVE NO IDEA WHAT THAT IS.
20 Q. "NO -- NOTHING IN -- ABOUT A-T." WHAT'S THAT? IT'S ON
21 THE FAR RIGHT?
22 A. I THINK IT WAS THERE WAS NOTHING IN THE LETTER THAT HAD TO
23 DO WITH ANTITRUST MATTERS IN THE MAYOR'S LETTER, AND THAT THE
24 JUSTICE DEPARTMENT OF THIS DIVISION ONLY DEALS WITH ANTITRUST
25 MATTERS.
2010
IRISH - CROSS / ALIOTO
1 Q. "WASN'T SURE ABOUT ANTITRUST. IF LOCAL CONCERNED, THEY
2 WILL COME FROM CITY ATTORNEY OFFICE." WHAT'S THAT?
3 A. THE MAYOR INDICATED HE WASN'T SURE WHETHER THERE WERE
4 ANTITRUST MATTERS; BUT IF THERE WERE ANY, THAT IF THERE WERE
5 LOCAL CONCERNS, THAT THEY WOULD BE COMING FROM THE CITY
6 ATTORNEY'S OFFICE.
7 Q. "WILLIE POSITIONS HER AS PRETTY LAID BACK." WHAT'S THAT
8 ABOUT?
9 A. THAT'S JUST REPORTING WHAT -- REPORTING WHAT MR. WHITE
10 TOLD ME.
11 Q. WHAT DID THAT HAVE REFERENCE TO?
12 A. I'M NOT CERTAIN.
13 THE COURT: IS THAT THE ATTORNEY GENERAL?
14 THE WITNESS: YEAH.
15 THE COURT: IS THAT HOW YOU UNDERSTOOD IT?
16 THE WITNESS: I THINK SO, YES, SIR.
17 BY MR. ALIOTO:
18 Q. SO THAT YOU UNDERSTOOD THAT THE MAYOR WAS SUGGESTING OR
19 STATING THAT, TO MR. WHITE, THAT THE ATTORNEY GENERAL WAS LAID
20 BACK, PRETTY LAID BACK; RIGHT?
21 A. THAT WOULD ONLY BE A SUPPOSITION ON MY PART.
22 Q. WELL, THAT'S WHAT YOU UNDERSTOOD WHEN YOU WERE WRITING
23 THESE NOTES TALKING TO MR. WHITE.
24 A. I'M NOT SURE WHAT I UNDERSTOOD. I'M NOT SURE WHAT THE
25 SPECIFIC REFERENCE AT THAT POINT WAS.
2011
IRISH - CROSS / ALIOTO
1 Q. WELL, THAT WAS ALSO GOOD NEWS; WASN'T IT? THAT'S ONE OF
2 THE THINGS THAT'S PRETTY AMAZING; RIGHT?
3 A. I DON'T THINK SO. I THINK -- MY EXPERIENCE IS THAT THE
4 ATTORNEY GENERAL ISN'T DIRECTLY INVOLVED IN THESE MATTERS.
5 Q. "NOT GOING" -- NEXT LINE, "NOT GOING TO MOVE. ONLY IF
6 CITY ATTORNEY BELIEVES" -- WHAT DOES THE NEXT LINE SAY?
7 A. MAYBE IT'S "MOVE."
8 Q. "BELIEVES MOVE" WHAT? "MOVE" WHAT?
9 A. "NEEDED" MAYBE.
10 Q. "MOVE NEEDED." OKAY. "NOT GOING TO MOVE" -- "NOT GOING
11 TO DO MOVE. ONLY IF CITY ATTORNEY BELIEVES MOVE NEEDED." SO
12 THAT MEANT TO YOU THAT THE MAYOR WAS SAYING HE WASN'T GOING TO
13 BE DOING ANYTHING?
14 A. MY -- I WOULD JUST HAVE TO MAKE AN ASSUMPTION.
15 Q. WELL, WHEN IT SAYS "NOT GOING TO MOVE," WAS THAT REFERENCE
16 TO THE MAYOR OR THE ATTORNEY GENERAL OR TO WHOM? THE CITY
17 ATTORNEY, WHO WAS IT?
18 A. HE SPEAKS HERE OF THE CITY ATTORNEY BUT I WOULD BE MAKING
19 JUST A SUPPOSITION.
20 Q. WELL, IF HE'S NOT GOING TO MOVE, WHOEVER IS NOT GOING TO
21 MOVE, DOES THAT MEAN A DEAL WAS STRUCK?
22 A. A DEAL WAS STRUCK WITH WHOM?
23 Q. WITH WHOEVER IS SAYING THEY'RE NOT GOING TO MOVE.
24 A. OF COURSE NOT.
25 Q. DOES IT MEAN THAT -- THE MAYOR IS NOT GOING TO MOVE, DOES
2012
IRISH - CROSS / ALIOTO
1 THAT MEAN -- IF IT'S -- YOU DON'T KNOW IF IT'S THE MAYOR OR THE
2 CITY ATTORNEY OR THE ATTORNEY GENERAL; CORRECT?
3 A. THAT'S CORRECT, BUT WHAT I DO KNOW IS THAT THE CITY
4 ATTORNEY, AS WELL AS THE COUNTY DISTRICT ATTORNEY AND THE STATE
5 ATTORNEY GENERAL BECAME VERY MUCH INVOLVED.
6 Q. WELL, NOT GOING -- ALL RIGHT.
7 THE NEXT LINE SAYS, "ASSIGNED TO DENNIS. FRIEND OF
8 PHIL. LIGHTWEIGHT." WHAT'S THAT?
9 A. I COULD ONLY MAKE A SUPPOSITION ON THAT.
10 Q. WELL, WHAT IS YOUR BEST RECOLLECTION TRYING TO PUT
11 YOURSELF BACK TO AUGUST 30TH, '99, ON THIS RECITATION BY MR.
12 WHITE TO YOU STARTING WITH "PRETTY AMAZING" TO SEE IF YOU CAN
13 RECOLLECT WHAT YOU MEANT WHEN YOU WROTE DOWN, "FRIEND OF PHIL.
14 LIGHTWEIGHT"?
15 A. I THINK MY RECOLLECTION IS THAT THE ATTORNEY ASSIGNED TO
16 THIS MATTER WAS SOMEONE WHO WAS NOT SCHOOLED IN THESE MATTERS.
17 Q. NOT SCHOOLED IN THESE MATTERS MEANING ANTITRUST MATTERS?
18 A. NOT AN ANTITRUST LAWYER PERHAPS.
19 Q. NOT AN ANTITRUST LAWYER. SO PUT SOMEONE ON THAT DOESN'T
20 KNOW ANYTHING ABOUT IT, THAT'S WHAT YOU UNDERSTOOD?
21 A. THAT'S A SUPPOSITION. THAT WOULD BE A SUPPOSITION.
22 Q. HOW DID YOU UNDERSTAND THAT THE MAYOR WOULD HAVE ANYTHING
23 TO DO WITH WHO WOULD BE PUT ON BY THE CITY ATTORNEY?
24 A. WELL, I DON'T THINK THE MAYOR DID HAVE ANYTHING TO DO WITH
25 WHO THE CITY ATTORNEY PUT ON THIS MATTER.
2013
IRISH - CROSS / ALIOTO
1 Q. WELL, THEN, DID YOU ASK MR. WHITE, "YOU KNOW, WHAT IS HE
2 TALKING ABOUT?"
3 A. THE FOCUS OF --
4 Q. DID YOU ASK HIM?
5 A. WHAT I ASKED MR. WHITE ABOUT WAS THE FACT THAT THERE WAS A
6 LETTER AND A RESPONSE FROM JANET RENO. THAT WAS THE SOLE FOCUS
7 OF THE DISCUSSION AFTER HEARING HIM TALK ABOUT THESE ISSUES.
8 Q. DOES THE "NOT GOING TO DO WON'T MOVE" -- "NOT GOING TO
9 MOVE," THAT PART THERE, DID THAT MEAN TO YOU THAT THERE WAS --
10 THAT YOU DIDN'T HAVE TO WORRY ABOUT SOME KIND OF ACTION OR
11 CONDUCT BY SOME OFFICIAL WITH REGARD TO AN ANTITRUST CLAIM
12 AGAINST HEARST?
13 A. PLEASE RESTATE THE QUESTION.
14 Q. DID THAT MEAN TO YOU, "NOT GOING TO MOVE" --
15 MR. CONNELL: EXCUSE ME. IT SAYS "NOT GOING TO DO
16 MOVE."
17 BY MR. ALIOTO:
18 Q. PARDON ME, "NOT GOING TO DO MOVE."
19 A. "NOT GOING TO DO MORE."
20 Q. "NOT GOING TO DO MORE," I SEE. OKAY.
21 "NOT GOING TO DO MORE," SO THAT MUST HAVE BEEN --
22 THAT WAS A PROMISE FROM SOMEBODY; IS THAT IT?
23 A. I DON'T KNOW.
24 Q. WELL, THE "NOT GOING TO DO MORE," DO YOU KNOW WHETHER THE
25 MAYOR WAS NOT GOING TO DO MORE OR THE CITY ATTORNEY WAS NOT
2014
IRISH - CROSS / ALIOTO
1 GOING TO DO MORE OR THE JUSTICE DEPARTMENT WAS NOT GOING TO DO
2 MORE?
3 A. I DON'T KNOW.
4 Q. PHIL, BY THE WAY, IS WHO?
5 A. PHIL BRONSTEIN.
6 Q. WAS MR. BRONSTEIN AT THIS MEETING? I MEAN, STRIKE THAT.
7 WAS MR. BRONSTEIN ON THE TELEPHONE WITH YOU WHEN MR.
8 WHITE WAS ON THE PHONE?
9 A. NO, HE WAS NOT.
10 Q. HOW LONG DID THIS CALL LAST?
11 A. I HAVE NO IDEA.
12 Q. OKAY. WHAT DOES THE NEXT ONE SAY? LET ME GO DOWN TO THE
13 BOTTOM, THE BOTTOM OF THE PAGE. IT SAYS, "FBI INVESTIGATION
14 GETTING" WHAT?
15 A. "CLOSER SCRUTINY."
16 Q. "IN EXAMINER."
17 A. "EXAMINER."
18 Q. AND THEN, "FBI EXAMINATION GETTING CLOSER SCRUTINY IN
19 EXAMINER" AND THEN THERE'S AN "N" AND A CIRCLE AROUND THE "N."
20 WHAT'S THAT MEAN?
21 A. NEWSPAPER.
22 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
23
24
25
2015
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OH, NEWSPAPER, OKAY.
3 A. SURE.
4 Q. SO "FBI INVESTIGATION GETTING CLOSER SCRUTINY IN EXAMINER
5 NEWSPAPER. AS MUCH AS I HATE BEING CLOSE."
6 A. THAT'S WHAT I AM READING ALSO BUT I DON'T -- I CAN'T PUT
7 THAT INTO CONTEXT.
8 Q. SO -- SO DID YOU UNDERSTAND THAT MR. WHITE WAS TELLING YOU
9 THAT THE MAYOR WAS TELLING HIM THAT THE FBI INVESTIGATION WAS
10 GETTING CLOSER SCRUTINY IN THE EXAMINER NEWSPAPER AS MUCH AS I
11 HATE BEING CLOSE?
12 A. I'D JUST BE GUESSING.
13 Q. WAS THERE AT THE TIME SOME FBI INVESTIGATION BEING
14 FOLLOWED BY THE EXAMINER?
15 A. I DON'T KNOW. EXCUSE ME. I THINK THAT THERE WAS SOME
16 LEVEL OF INVESTIGATION INTO SOME FORM OF CONTRACTING THAT WAS
17 TAKING PLACE AND PERHAPS BEING COVERED IN THE EXAMINER AT THAT
18 TIME.
19 THE COURT: THIS PORTION OF THE NOTES IS UNDER A
20 HEADING THAT'S UNDERSCORED. IS THAT "RACIAL"?
21 THE WITNESS: I THINK IT SAYS "RACIAL," YES, SIR.
22 BY MR. ALIOTO:
23 Q. WHAT DOES IT SAY UNDERNEATH THAT?
24 A. IT SAYS, "GETTING BEET UP ON RACIAL THING IN INDEPENDENT."
25 I --
2016
IRISH - CROSS / ALIOTO
1 Q. WHO IS?
2 A. I -- I HAVE NO IDEA.
3 Q. WAS THIS FROM -- THIS AGAIN IS -- THIS IS MR. WHITE'S
4 STILL, RIGHT?
5 A. THIS -- THIS NOTE (INDICATING)?
6 Q. YES. IS HE THE ONE WHO TOLD YOU THIS ONE?
7 A. YES.
8 Q. BUT YOU DON'T KNOW WHAT IT'S ABOUT?
9 A. I DON'T.
10 Q. WHAT IS THE NEXT ONE?
11 A. "VERY DIVISIVE TO COMMUNITY."
12 Q. WHAT IS?
13 A. I AM ASSUMING IT'S A REFERENCE TO THE EARLIER STATEMENT,
14 BUT I DON'T KNOW FOR SURE.
15 Q. REFERENCE TO WHAT EARLIER STATEMENT, YOU MEAN, THE
16 INDEPENDENT?
17 A. THE LINE -- THE LINE ABOVE.
18 Q. WELL, TELL ME WHAT. WHAT DO YOU MEAN?
19 A. I DON'T KNOW.
20 Q. WHAT'S "VERY DIVISIVE TO THE COMMUNITY"?
21 A. I DON'T KNOW.
22 Q. WELL, YOU SAID IT'S REFERENCED TO THE ONE ABOVE. DO YOU
23 MEAN --
24 A. I SAY IT FOLLOWS THE ONE ABOVE. I ASSUME IT TIES TO THE
25 RACIAL THING.
2017
IRISH - CROSS / ALIOTO
1 Q. NOW, THIS IS SOMETHING THAT -- AS YOU UNDERSTOOD IT, THIS
2 IS SOMETHING THAT THE MAYOR WAS TELLING MR. WHITE THAT
3 MR. WHITE IS TELLING YOU?
4 A. THAT'S THE WAY I RECALL THE NOTES, YES.
5 Q. OKAY. THEN WHAT DOES THE NEXT LINE SAY?
6 A. WELL, IT SAYS, "PHIL OPEN ABOUT GETTING ON TABLE."
7 Q. WHAT DOES THAT MEAN?
8 A. I DON'T KNOW.
9 Q. THAT PHIL IS BRONSTEIN, RIGHT?
10 A. I ASSUME IT IS, YES.
11 Q. OKAY. THEN IT SAYS "BACK PEDALED," AND THEN WHAT?
12 A. A BUNCH OF WORDS, "REFUSED TO."
13 Q. "BACK PEDALED, REFUSED TO --
14 A. IT COULD BE "REFERRED."
15 Q. OH, "REFERRED." I SEE, "REFERRED."
16 THE COURT: MR. ALIOTO, LET'S NOT TALK OVER THE
17 WITNESS.
18 MR. ALIOTO: YES, YOUR HONOR.
19 THE WITNESS: I AM NOT SURE IT'S "REFERRED" OR
20 "REFUSED TO KEN GARCIA ABOUT COLUMN."
21 Q. AND THEN AFTER THAT -- AFTER THAT DASH IT SAYS, "OPINION
22 STUFF GOES OVER THE EDGE"; IS THAT RIGHT?
23 A. RIGHT.
24 Q. SO DID YOU UNDERSTAND, THEN, THAT THE MAYOR WAS TELLING
25 MR. WHITE THAT -- OR THAT THE MAYOR HAD REFERRED TO KEN GARCIA
2018
IRISH - CROSS / ALIOTO
1 ABOUT COLUMN -- OR ABOUT COLUMN, OPINION STUFF GOING OVER THE
2 EDGE? THAT'S WHAT YOU UNDERSTOOD THAT TO BE?
3 A. I UNDERSTAND THE WORDS, BUT I DON'T KNOW THAT THE -- THE
4 ESSENCE OF THEM.
5 Q. WHO IS KEN GARCIA?
6 A. I BELIEVE HE IS A COLUMNIST FOR THE CHRONICLE.
7 Q. WHAT DID THAT HAVE TO DO WITH THE EXAMINER?
8 A. I -- I DON'T KNOW.
9 Q. THE NEXT PAGE, IT STATES, QUOTE, "I HAVE BEEN CALLING PHIL
10 WITH PROBLEMS" -- "I HAVEN'T BEEN CALLING PHIL WITH PROBLEMS"?
11 A. RIGHT.
12 Q. AGAIN, THAT'S MR. BRONSTEIN?
13 A. PHIL IS MR. BRONSTEIN.
14 Q. IS THAT IN REFERENCE TO THE MAYOR, THAT THE MAYOR HASN'T
15 BEEN CALLING PHIL WITH PROBLEMS?
16 A. I BELIEVE SO.
17 Q. DO YOU HAVE ANY IDEA WHAT HE WOULD BE CALLING
18 MR. BRONSTEIN ABOUT, WHAT PROBLEMS?
19 A. AS A FORMER PUBLISHER, I CAN TELL YOU THAT MAYORS CALL
20 EDITORS AND PUBLISHERS OFTEN ABOUT PROBLEMS.
21 Q. DO THEY ASK THEM TO FIX THEM?
22 A. NO. THEY ASK FOR CORRECTION IF CORRECTION IS NEEDED.
23 Q. WAS MR. BRONSTEIN, TO YOUR KNOWLEDGE, WRITING CRITICAL
24 ARTICLES ABOUT THE MAYOR AT THIS TIME?
25 A. I HAVE NO KNOWLEDGE.
2019
IRISH - CROSS / ALIOTO
1 Q. WAS THE EXAMINER PUBLISHING CRITICAL ARTICLES ABOUT THE
2 MAYOR AT THIS TIME?
3 A. I HAVE NO KNOWLEDGE OF THAT.
4 Q. THE NEXT ONE SAYS, IF YOU WILL READ IT -- IF YOU WILL READ
5 IT?
6 A. I'M SORRY. IT SAYS, "WILLIE INVITES PHIL TO JOIN HIM IN
7 MAYOR'S BOX," I GUESS FOR THE 49'ERS.
8 Q. GO AHEAD.
9 A. AND I THINK -- I THINK THERE WAS SOMETHING ABOUT WHETHER
10 THE EXAMINER IS GOING TO HAVE A BOX, WHICH IS UP IN THE AIR.
11 Q. OKAY. NOW, YOU HAVE "WILLIE INVITES" UNDERLINED. RIGHT?
12 A. YEAH.
13 Q. AND THAT IS UNUSUAL; IS THAT RIGHT? THAT'S WHY YOU
14 UNDERLINED IT?
15 A. I'M NOT SURE. I VERY WELL COULD HAVE.
16 Q. BECAUSE IT LOOKED LIKE THAT THE MAYOR WAS BEING FRIENDLY
17 WITH BRONSTEIN?
18 A. WELL, I GUESS AN INVITATION TO GO TO A GAME IS A FRIENDLY
19 GESTURE.
20 Q. AND WAS UNEXPECTED IN LIGHT OF WHAT HAD BEEN HAPPENING
21 BEFORE?
22 A. WELL, AGAIN, FROM MY EXPERIENCE I WOULD SUGGEST THAT IT'S
23 NOT VERY OFTEN THAT A MAYOR INVITES AN EDITOR TO GO TO A BALL
24 GAME WITH HIM.
25 Q. UNLESS THERE IS HORSE TRADING?
2020
IRISH - CROSS / ALIOTO
1 A. THERE IS NO HORSE TRADING.
2 Q. THE NEXT LINE SAYS, "OBJECTION" OR "OBJECTIVE."
3 A. PROBABLY "OBJECTIVE."
4 Q. OKAY. WHAT WAS IT?
5 A. I TOOK NO NOTES THERE.
6 Q. WHY NOT?
7 A. WHO KNOWS? I HAVE NO KNOWLEDGE. THIS GOES BACK TO AUGUST
8 THE 30TH.
9 Q. BUT THERE WAS AN OBJECTIVE, AT ANY RATE, RIGHT?
10 A. FROM READING THESE NOTES, I HAVE NO KNOWLEDGE WHETHER
11 THERE WAS AN OBJECTIVE.
12 Q. WELL, YOU WOULDN'T HAVE JUST PUT IT DOWN UNLESS MR. WHITE
13 TOLD YOU?
14 A. I AM SURE THAT HE -- THAT HE OFFERED SOMETHING.
15 Q. OKAY. AND THEN UNDERNEATH THAT IF YOU WILL READ THAT.
16 A. THIS IS -- TIM HAD MENTIONED IN THE SAME PHONE CALL THAT
17 THERE WERE MEETINGS SET WITH SENATOR FEINSTEIN AND -- SENATOR
18 FEINSTEIN AND REPRESENTATIVE PELOSI IN WASHINGTON ON SEPTEMBER
19 THE 22ND.
20 Q. DID YOU TAKE ANY OTHER MINUTES -- ANY OTHER NOTES OF ANY
21 OF THESE E-MAILS FROM MR. WHITE?
22 A. I BELIEVE I HAVE FROM TIME TO TIME.
23 Q. ALL RIGHT. WITH REGARD TO THE -- YOU DID UNDERSTAND THAT
24 BEFORE THAT . . .
25 (PAUSE IN THE PROCEEDINGS.)
2021
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. LET ME SHOW YOU EXHIBIT 137.
3 MAY I APPROACH THE WITNESS, YOUR HONOR?
4 THE COURT: YES.
5 BY MR. ALIOTO:
6 Q. OKAY. LET ME SHOW YOU EXHIBIT 137.
7 EXHIBIT 137 ARE NOTES. THEY HAVE THE DATE OF
8 JUNE 28, '99, MAYOR UNDERLINED, "WILLIE BROWN."
9 THOSE ARE YOUR NOTES?
10 A. YES, THEY ARE.
11 Q. AND THOSE ARE NOTES THAT YOU MADE IN CONNECTION WITH
12 THE -- IN CONNECTION WITH THE E-MAIL WHICH IS EXHIBIT 99, DATED
13 JULY 28 ABOUT WILLIE BROWN'S STRATEGIES?
14 A. YES, UH-HUH.
15 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE 137, YOUR
16 HONOR.
17 THE COURT: HEARING NO OBJECTION, 137 IS ADMITTED.
18 (PLAINTIFF'S EXHIBIT 137
19 RECEIVED IN EVIDENCE)
20 BY MR. ALIOTO:
21 Q. OKAY. NOW, THIS ONE ALSO BEGINS WITH, "AMAZING. HAVING A
22 LOVE AFFAIR."
23 WHAT'S THAT?
24 A. WELL, I HAVE A RECOLLECTION OF -- OF THOSE WORDS, AND I
25 THINK TIM WHITE FELT HE HAD A VERY PLEASANT VISIT WITH THE
2022
IRISH - CROSS / ALIOTO
1 MAYOR, RELATIVELY NEW IN THE COMMUNITY AND STILL IN HIS HIGH
2 MODE, METAPHORICALLY SPEAKING.
3 Q. LET'S STICK WITH HORSE TRADING.
4 (LAUGHTER)
5 BY MR. ALIOTO:
6 Q. THE NEXT WORD IS "CORDIAL." AND THEN, "WANT SUPPORT --
7 WANT SUPPORT IF IT COMES TO PASS AND."
8 DO YOU SEE THAT?
9 A. YEAH.
10 Q. OKAY. NOW, THAT SUPPORT IS FOR THE ACQUISITION OF THE
11 CHRONICLE, CORRECT?
12 A. I HAVE NO KNOWLEDGE THAT THAT'S THE CASE.
13 Q. YOU HAVE -- DO YOU HAVE EXHIBIT 99 IN FRONT OF YOU?
14 A. YES, I DO.
15 Q. THAT IS THE E-MAIL?
16 AND IF YOU WILL LOOK AT THE SECOND PARAGRAPH, QUOTE:
17 "AFTER I PITCHED HIM EXTENSIVELY FOR HIS
18 SUPPORT OF OUR ACQUISITION OF THE CHRONICLE,
19 PARTICULARLY URGING HIS SUPPORT OF DROPPING A
20 REQUIREMENT (IF ANY) TO DIVEST OF THE EXAMINER,
21 WILLIE TURNED AND ASKED ABOUT WHAT I WAS DOING
22 IN COURT (THE COURT OF APPEALS) YESTERDAY. I
23 TOLD HIM AND BROUGHT HIM UP TO DATE ON THE PAN
24 ASIA CASE; I AM CERTAIN THAT HE KNEW MORE ABOUT
25 IT THAN I DID."
2023
IRISH - CROSS / ALIOTO
1 A. ALL RIGHT.
2 Q. OKAY. NOW, IN REFERENCE BACK TO YOUR NOTES WHEN YOU
3 REFERRED TO WHAT SUPPORT IF IT COMES TO PASS.
4 NOW, THAT IS -- IN LOOKING AT THE E-MAIL THAT DOES
5 INDICATE TO YOU, DOES IT NOT -- IT REFRESHES YOUR RECOLLECTION
6 OF YOUR CONVERSATION WITH MR. WHITE AND IT REFERS TO -- THE
7 SUPPORT REFERS TO THE ACQUISITION OF THE CHRONICLE.
8 A. I THINK PUTTING THOSE TWO TOGETHER I WOULD SAY THAT THAT'S
9 CORRECT.
10 Q. THE NEXT LINE SAYS:
11 "YOU MAY HAVE NOTICED I HAVEN'T SAID
12 ANYTHING. WHILE THEY FEEL PASSIONATE -- IT'S
13 NOSTALGIA, ET CETERA."
14 WHAT'S THAT?
15 A. I DON'T KNOW. I DON'T KNOW IF THIS PERTAINS TO SOME OTHER
16 MATTER. I JUST DON'T -- I DON'T KNOW.
17 THE COURT: IS THIS WHAT WHITE TOLD YOU BROWN SAID?
18 THE WITNESS: YES.
19 THE COURT: "YOU MAY HAVE NOTICED I HAVEN'T SAID
20 ANYTHING WHILE THEY FEEL PASSIONATE. IT'S NOSTALGIA," ET
21 CETERA?
22 THE WITNESS: YEAH. I THINK THAT IS WHITE REPORTING
23 THE WORDS OF THE MAYOR, YOUR HONOR.
24 THE COURT: AND WHO IS THE "THEY"?
25 THE WITNESS: I HAVE NO IDEA.
2024
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. IF YOU WOULD READ YOUR NOTES ON THE NEXT LINE, "IN
3 COURT."
4 A. "IN COURT YESTERDAY. ONE OF MY AIDS" -- I AM NOT SURE
5 WHAT I SAID THERE BUT . . .
6 Q. "WAS THERE"?
7 A. COULD BE.
8 Q. "WHAT'S THAT ALL ABOUT?"
9 A. YEAH. I -- I THINK GIVEN THE FACT THAT YOU HAVE GIVEN ME
10 THE E-MAIL TO LOOK AT, IT PERTAINS TO THE LITIGATION BETWEEN
11 PAN ASIA AND THE -- THE AGENCY.
12 Q. OKAY.
13 THE COURT: LET ME JUST INTERJECT, IF I MAY,
14 MR. ALIOTO. THESE NOTES IN 137 AND IN 141 ARE NOTES OF
15 TELEPHONE CONVERSATIONS YOU HAD WITH MR. WHITE?
16 THE WITNESS: YES.
17 THE COURT: AND THESE TELEPHONE CONVERSATIONS, THEN,
18 WERE FOLLOWED UP BY THE E-MAILS THAT CORRESPOND TO THESE
19 CONVERSATIONS, EXHIBIT 99 AND EXHIBIT 78?
20 THE WITNESS: CERTAINLY IN THIS CASE, YES, SIR.
21 THE COURT: HOW ABOUT IN THE OTHER CASE?
22 THE WITNESS: IN THE OTHER CASE, IN MY DEPOSITION
23 I -- I SUGGESTED THAT THE E-MAIL CAME FIRST. I SAID THAT IN MY
24 DEPOSITION. GENERALLY, IF I HAD NOTES OF A TELEPHONE
25 CONVERSATION AND DECIDED IT SHOULD BE PUT INTO AN E-MAIL, I
2025
IRISH - CROSS / ALIOTO
1 WOULD SAY, "FOLLOW UP WITH AN E-MAIL, PLEASE."
2 SO CLEARLY IN THIS CASE IT'S MY RECOLLECTION THAT I
3 HAD THE CONVERSATION AND SAID, "PUT IT IN E-MAIL." IT HAPPENED
4 TO DEAL WITH A MATTER IN LITIGATION, AND I SUGGESTED THAT IT BE
5 SENT TO OUR GENERAL COUNSEL, AS WELL.
6 THE COURT: THAT'S WHY MR. THACKERAY RECEIVED THE
7 E-MAIL?
8 THE WITNESS: YES.
9 THE COURT: OKAY. WHAT I GATHER IS THAT THE E-MAIL
10 REPRESENTED BY EXHIBIT 78 EITHER PRECEDED OR FOLLOWED THE
11 TELEPHONE CONVERSATION REFLECTED IN EXHIBIT 141, CORRECT?
12 THE WITNESS: THAT'S CORRECT, YES, YOUR HONOR.
13 THE COURT: ALL RIGHT. THANK YOU.
14 BY MR. ALIOTO:
15 Q. NEXT IT STATES, IF YOU WILL READ THAT LINE, "WHY HAVEN'T"?
16 A. "WHY HAVEN'T YOU GUYS TRIED TO SETTLE?"
17 Q. AND THAT'S IN REFERENCE TO THE CASE WITH PAN ASIA GROUP?
18 A. YES, SIR.
19 Q. DID THE -- AS FAR AS YOU KNOW, IF YOU -- IF YOU WERE
20 TALKING TO MR. WHITE BEFORE HE DID THE E-MAIL, DID HE TELL YOU
21 WHY OR FOR WHAT REASON THE MAYOR EVEN MENTIONED IT OR WHAT HE
22 HAS TO DO WITH WHETHER OR NOT HE SETTLED WITH THE PAN ASIAN
23 GROUP?
24 A. NO.
25 Q. DID YOU ASK MR. WHITE TO ASK THE MAYOR, "WHAT DOES THAT
2026
IRISH - CROSS / ALIOTO
1 HAVE TO DO WITH ANYTHING?"
2 A. I DID NOT.
3 Q. THE NEXT ONE SAYS -- CAN YOU READ THAT?
4 A. "DISCUSSION."
5 Q. "DISCUSSION" OR "DECISION"?
6 A. "DECISION OUR INDUSTRY COULDN'T LIVE WITH."
7 Q. "DECISION THAT YOUR INDUSTRY COULD NOT -- COULDN'T LIVE
8 WITH." WHAT'S THAT?
9 A. I BELIEVE IT HAS TO DO WITH THE -- THE PAN ASIA SUIT, AND
10 IT HAS TO DO WITH THE FACT THAT THERE WAS A -- A PRICING MODEL
11 IN THE SUIT, THAT IF IT STOOD IT WAS -- IT COULD -- OUR
12 INDUSTRY SIMPLY COULDN'T LIVE WITH IT.
13 Q. I WANT YOU TO GO DOWN TO THE BOTTOM OF THE PAGE. CAN YOU
14 READ THAT -- YOUR NOTATION ON THE BOTTOM, THE LAST TWO LINES?
15 A. "PIVOTAL OBSERVATION. YOU DON'T WANT THIS IN THE WAY."
16 Q. OKAY. NOW, "YOU DON'T WANT THIS IN THE WAY," "THIS," DOES
17 THAT REFER TO THE LAWSUIT BETWEEN YOUR -- BETWEEN THE EXAMINER
18 AND THE PAN ASIA GROUP?
19 A. YES.
20 Q. AND "PIVOTAL" -- "PIVOTAL OBSERVATION," WAS THIS WHAT THE
21 MAYOR SAID?
22 A. I -- I BELIEVE THAT'S PROBABLY TIM WHITE'S WORDS.
23 Q. AND BY "PIVOTAL OBSERVATION," DOES THAT MEAN THAT -- WHAT
24 DOES IT MEAN?
25 A. I RECORDED THE WORDS. I AM NOT SURE.
2027
IRISH - CROSS / ALIOTO
1 Q. DOES IT MEAN THAT IF YOU DON'T GET RID OF THE CASE THAT
2 THE MAYOR IS GOING TO GIVE YOU TROUBLE ON THE ACQUISITION?
3 A. WELL, I THINK THE MAYOR, SINCE I NOW HAVE HAD CHANCE TO
4 READ THE E-MAIL AS WELL, THAT THE MAYOR'S POINT THERE WAS THAT
5 EVEN THOUGH THESE TWO ITEMS BE UNRELATED, THE FACT THAT THERE
6 IS THIS ANTITRUST CASE THAT HAD BEEN FILED BY THE FANGS THAT --
7 THAT, I BELIEVE, BY THIS TIME THE COURTS HAD OVERTURNED IN
8 FAVOR OF HEARST -- OR AT LEAST SENT BACK TO TRIAL -- RETRIAL.
9 HAVING THAT AND A REQUEST FOR A -- THE ACQUISITION
10 OF THE CHRONICLE, BOTH ON THE PLATE AT THE SAME TIME, WAS NOT
11 ADVISED.
12 Q. BY THE MAYOR?
13 A. YES, HIS JUDGMENT.
14 Q. SO YOU HAD TO GET RID OF ONE OF THEM?
15 A. IN MY VIEW, NO.
16 Q. WELL, I THOUGHT YOU JUST SAID THAT -- IT SAYS, "WHY DON'T
17 YOU" -- GOING BACK TO THE -- MIDWAY IN YOUR NOTES IT SAYS, "WHY
18 HAVEN'T YOU GUYS TRIED TO SETTLE?"
19 YOU JUST SAID THAT YOU HAD ALREADY WON. RIGHT?
20 A. THE CASE WAS STILL IN THE COURTS.
21 Q. BUT YOU WANTED --
22 A. I BELIEVE BY THIS TIME WE HAD HAD A DETERMINATION IN OUR
23 FAVOR, YES.
24 Q. BY THE COURT OF APPEALS?
25 A. YES.
2028
IRISH - CROSS / ALIOTO
1 Q. SO YOU HAD NOTHING TO SETTLE.
2 A. I AM NOT SO SURE OF THAT. I'M NOT A LAWYER. I'M NOT SO
3 SURE.
4 Q. WELL, DID THEY REVERSE EVERYTHING OR WHAT DID THEY DO?
5 WHAT HAPPENED?
6 A. I AM NOT CERTAIN.
7 Q. IN ANY EVENT, YOU GOT A VERY CLEAR MESSAGE THAT THESE --
8 FROM THE MAYOR THAT THESE TWO THINGS CANNOT CONTINUE.
9 A. I BELIEVE, COUNSEL, THAT'S -- THAT'S TOO STRONG. I
10 BELIEVE THE MAYOR WAS GIVING THE ADVICE THAT YOU ARE BETTER OFF
11 NOT HAVING THESE TWO THINGS AT THE SAME TIME.
12 Q. BETTER OFF WITH HIM?
13 A. OURSELVES BETTER OFF, THAT WE'RE --
14 Q. WITH HIM?
15 A. I DON'T KNOW THAT.
16 Q. DID YOU THINK HE WAS HORSE TRADING?
17 A. NO. I THINK HE WAS DOING WHAT ALL MAYORS DO IN TERMS OF
18 TRYING TO CREATE CIVIC HARMONY BETWEEN THEIR CONSTITUENTS.
19 THE COURT: CAN I INTERJECT AND ASK THE WITNESS TO
20 GO BACK AND READ THE PORTION THAT BEGINS, I BELIEVE, FOUR
21 PARAGRAPHS UP FROM THE BOTTOM OF THE PAGE ON 137?
22 THE WITNESS: STARTING WITH "FLORENCE"?
23 THE COURT: YES.
24 THE WITNESS: "FLORENCE FANG CALLED HIM. THE KIDS
25 DON'T MAKE ANY DECISIONS. SHE'S THE BRAINS. SHE OWNS IT ALL."
2029
IRISH - CROSS / ALIOTO
1 (LAUGHTER)
2 THE COURT: NEXT PARAGRAPH?
3 THE WITNESS: "SHE WANTS TO COME AND SEE HIM, EITHER
4 ABOUT THE CASE OR MERGER OF C&E," WHICH I ASSUME TO BE
5 CHRONICLE AND EXAMINER.
6 THE COURT: AND THIS AGAIN IS WHAT YOU -- WHAT WHITE
7 TOLD YOU BROWN SAID TO HIM?
8 THE WITNESS: THAT'S CORRECT.
9 BY MR. ALIOTO:
10 Q. SO THEN YOU UNDERSTOOD THAT IF MS. FANG WANTED TO COME THE
11 MAYOR ABOUT EITHER THE CASE OR -- YOU HAVE "OR" THERE, RIGHT?
12 A. YES.
13 Q. "WANTED TO SEE HIM ABOUT THE CASE OR THE MERGER OF THE
14 CHRONICLE AND THE EXAMINER," AND THEN THE MAYOR TOLD YOU YOU
15 DON'T WANT ONE OF THESE IN THE WAY, THEN DID YOU -- WAS IT YOUR
16 UNDERSTANDING THAT IF YOU WANTED APPROVAL ON THE MERGER YOU HAD
17 TO DO SOMETHING?
18 A. FIRST OF ALL, THE MAYOR DIDN'T TELL ME.
19 Q. WAS IT YOUR UNDERSTANDING FROM YOUR CONVERSATIONS WITH
20 MR. WHITE THAT THE MAYOR EXPECTED YOU TO DO SOMETHING --
21 A. NO.
22 Q. -- WITH THE FANGS?
23 A. NO.
24 Q. WAS THERE ANY DISCUSSION AT ALL ABOUT SELLING THE EXAMINER
25 TO THE FANGS DURING THIS TIME PERIOD?
2030
IRISH - CROSS / ALIOTO
1 A. NO.
2 Q. SO IT WAS AFTER THIS THAT THE FIRST CONVERSATIONS ABOUT
3 SELLING THE PAPER TO THE FANGS CAME UP; IS THAT RIGHT?
4 A. IT WAS AFTER THIS THAT THE FANGS SHOWED INTEREST IN
5 ACQUIRING THE PAPER, THAT'S CORRECT.
6 Q. AND -- AND DID YOU PARTICIPATE, BY THE WAY, IN SELLING
7 THE --
8 A. AND LET ME CLARIFY MR. ALIOTO, THAT THIS IS -- THIS IS THE
9 28TH OF JULY. THERE WAS NO PAPER TO SELL AT THAT POINT.
10 Q. WELL --
11 A. THAT IT WASN'T UNTIL AUGUST 6TH THAT THE HEARST
12 CORPORATION ENTERED INTO AN AGREEMENT.
13 Q. WELL, THEN, LET ME ASK YOU THIS: IF THERE WERE NO MERGER
14 YET, NO ANNOUNCEMENT OF THE PROPOSED ACQUISITION YET -- RIGHT?
15 A. THAT'S CORRECT.
16 Q. -- THEN HOW IS IT, DO YOU SUPPOSE, THAT MR. -- THAT
17 MS. FANG WAS GOING TO GO SEE THE MAYOR ABOUT EITHER THE CASE OR
18 MERGER OF THE CHRONICLE AND THE EXAMINER?
19 A. IT WAS WIDELY REPORTED AT THIS TIME WHEN -- AFTER THE
20 CHRONICLE COMPANY PUT ALL OF THEIR ASSETS UP FOR SALE -- IT WAS
21 WIDELY REPORTED THAT THE HEARST CORPORATION WAS EXPECTED TO BE
22 A STRONG BIDDER IN THE PROCESS.
23 MR. ALIOTO: IT'S TOO HOT, JUDGE. CAN I HAVE ONE
24 SECOND?
25 THE COURT: ALL RIGHT.
2031
IRISH - CROSS / ALIOTO
1 (PAUSE IN THE PROCEEDINGS.)
2 BY MR. ALIOTO:
3 Q. IT WAS -- IT WAS REPORTED IN THE EXAMINER THAT MR. WHITE
4 ORIGINALLY WANTED TO -- IN TERMS OF EDITORIALS FOR THE EXAMINER
5 THAT MR. WHITE WANTED TO SUPPORT MR. REILLY BUT HE CHANGED TO
6 THE MAYOR.
7 DID YOU READ THAT?
8 A. NO, AND I HAD NO DISCUSSION WITH HIM ABOUT IT.
9 Q. DO YOU KNOW ANYTHING ABOUT THAT?
10 A. NO, NO, I DON'T.
11 Q. YOU DO NOT?
12 A. I DO NOT.
13 Q. ALL RIGHT. YOU ALSO HAVE CALLED FOR A SPECIAL
14 INVESTIGATION?
15 A. YES.
16 Q. THAT WAS BROUGHT OUT?
17 A. YES.
18 Q. OKAY. IS THERE ANYTHING THAT YOU COULD NOT DO IN THIS
19 COURT THAT YOU HAVE TO DO IN SOME SPECIAL INVESTIGATION?
20 MR. CONNELL: OBJECTION.
21 THE COURT: GROUND OF OBJECTION?
22 MR. CONNELL: UNCLEAR.
23 THE COURT: OVERRULED.
24 THE WITNESS: MY -- MY REACTION? I AM NOT A JURIST.
25 I MEAN, I AM NOT A LAWYER OR A JURIST, OF COURSE.
2032
IRISH - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. BUT YOU KNOW THAT ISSUE?
3 A. I THINK ONCE WE HAD KNOWLEDGE OF MR. WHITE'S STATEMENT
4 THAT I THINK THAT THE SCOPE OF THE INVESTIGATION SHOULD BE
5 BROADER THAN WHATEVER MIGHT BE DEALT WITH IN THIS COURT.
6 MR. ALIOTO: THAT'S ALL.
7 THE COURT: REDIRECT, MR. CONNELL?
8 MR. CONNELL: NO, SIR.
9 THE COURT: MR. IRISH, I HAVE JUST ONE QUESTION.
10 YOU HAVE TESTIFIED ABOUT THE E-MAIL REFLECTED IN
11 EXHIBIT 78 AND EXHIBIT -- LET'S SEE. WHAT'S THE OTHER EXHIBIT
12 NUMBER?
13 MR. SHULMAN: 99.
14 THE COURT: 99 -- ABOUT MR. WHITE'S CONVERSATIONS
15 WITH THE MAYOR. AND THEN YOU HAVE TESTIFIED ABOUT YOUR
16 HANDWRITTEN NOTES OF HIS CONVERSATION, TELEPHONE
17 CONVERSATION --
18 THE WITNESS: YES.
19 THE COURT: -- WITH YOU ON THOSE TWO CONVERSATIONS
20 WITH THE MAYOR.
21 LET ME ASK YOU, DID YOU BELIEVE WHAT MR. WHITE WAS
22 TELLING YOU IN THESE CONVERSATIONS AND IN THESE E-MAILS?
23 THE WITNESS: YES.
24 THE COURT: YOU DID. OKAY.
25 WELL, COUNSEL, IT IS 6:00 O'CLOCK. THE GENERAL
2033
1 SERVICES ADMINISTRATION HAS TURNED OFF THE VENTILATION. THE
2 COURTROOM IS GETTING WARM, ATTRIBUTED TO THE LACK OF
3 VENTILATION RATHER THAN TO ANYTHING ELSE. BUT I THINK WE
4 SHOULD ADJOURN FOR THE DAY.
5 LET'S SEE. THE NEXT WITNESS IS GOING TO BE
6 MR. FANG, IS IT?
7 MR. BALABANIAN: I BELIEVE SO, YOUR HONOR.
8 THE COURT: ALL RIGHT. THEN WE WILL RESUME AT
9 8:30 ON MONDAY FOR MR. FANG'S TESTIMONY.
10 AND IS HE THE LAST WITNESS?
11 MR. BALABANIAN: NO, YOUR HONOR, THAT HAS NOT YET
12 BEEN RESOLVED.
13 THE COURT: I SEE.
14 MR. BALABANIAN: WE WILL CONCLUDE ON MONDAY.
15 THE COURT: ALL RIGHT. VERY WELL.
16 HAVE A PLEASANT WEEKEND AND --
17 MR. ALIOTO: YOUR HONOR, WE WOULD -- WE NEED TO
18 KNOW -- OR WE WOULD LIKE TO KNOW. WE ADVISED THEM AS TO THE
19 WITNESSES THAT WE'VE HAD. IF THEY HAVE OTHER WITNESSES, THEY
20 SHOULD TELL US.
21 MR. BALABANIAN: WE HAVE NO OTHER WITNESSES. WE
22 HAVE ADVISED THEM THAT IT'S OUR PRESENT INTENTION TO CALL
23 MR. FANG AND MR. REILLY, AND THAT IS OUR INTENTION AS OF THIS
24 EVENING.
25 THE COURT: ALL RIGHT. SO YOU WILL -- YOU WILL CALL
2034
1 FANG AND REILLY OR YOU WILL NOT CALL FANG AND REILLY. IS THAT
2 IT?
3 MR. BALABANIAN: THAT'S CORRECT, YOUR HONOR.
4 THE COURT: SO, I GATHER, THAT MEANS YOU BETTER BE
5 READY FOR FANG OR REILLY. IS THAT CLEAR?
6 MR. SHULMAN: YES.
7 MR. ALIOTO: OH, IT'S CLEAR WHAT THEY HAVE SAID,
8 YOUR HONOR, BUT I DON'T THINK THAT'S RIGHT. I THINK THAT --
9 THE COURT: WELL, IT IS -- I MUST SAY,
10 MR. BALABANIAN, I THINK IT IS A BIT WEASELLY FOR YOU TO SAY,
11 "WELL, WE MAY OR MAY NOT CALL THESE PEOPLE."
12 MR. BALABANIAN: WE DO INTEND TO CALL MR. FANG. IT
13 IS OUR PRESENT INTENTION ALSO TO CALL MR. REILLY. IT MAY BE
14 THAT IN LIGHT OF MR. FANG'S TESTIMONY THAT THAT MAY BE
15 UNNECESSARY.
16 THE COURT: WELL, YOU KNOW, IN FAIRNESS TO
17 PLAINTIFFS'S COUNSEL, THEY ARE EITHER GOING TO SPEND THE
18 WEEKEND PREPARING FOR ONE WITNESS OR TWO WITNESSES. MR. ALIOTO
19 HAS AN IMPORTANT FAMILY ENGAGEMENT, AND I WOULD THINK
20 PROFESSIONAL COURTESY WOULD DEMAND THAT YOU BE IN A POSITION TO
21 TELL PLAINTIFFS'S COUNSEL WHETHER OR NOT YOU ARE GOING TO CALL
22 MR. REILLY.
23 MR. BALABANIAN: WE WILL DO SO PROBABLY, YOUR HONOR.
24 IT'S SOMETHING WE NEED TO CONFER ON AND RESOLVE AND WE WILL DO
25 THAT.
2035
1 THE COURT: ALL RIGHT. BUT THERE WILL BE NO OTHER
2 WITNESSES BESIDES FANG AND REILLY?
3 MR. BALABANIAN: THAT'S CORRECT.
4 THE COURT: IS THAT CORRECT?
5 MR. BALABANIAN: THAT'S CORRECT.
6 THE COURT: THAT'S TRUE OF ALL OF THE DEFENDANTS?
7 MR. CONNELL: YES, SIR.
8 THE COURT: ALL RIGHT. NOW, BASED ON THAT DO YOU
9 PLAN ON ANY REBUTTAL WITNESSES?
10 MR. ALIOTO: I'VE GOT A "PROBABLY," JUDGE, AND SO I
11 DON'T KNOW.
12 THE COURT: WELL --
13 MR. ALIOTO: I THINK HE SHOULD SIMPLY STATE WHO HIS
14 WITNESSES ARE.
15 THE COURT: I UNDERSTAND MR. BALABANIAN TO SAY HE IS
16 GOING TO CALL BOTH OF THESE WITNESSES.
17 MR. ALIOTO: IS THAT TRUE?
18 THE COURT: AND IF HE DOESN'T CALL BOTH OF THEM, HE
19 BETTER HAVE A PRETTY GOOD REASON WHY HE IS NOT CALLING BOTH OF
20 THEM.
21 MR. BALABANIAN: WE WILL DETERMINE THIS EVENING
22 WHETHER WE WILL CALL MR. REILLY, AND I WILL ADVISE MR. ALIOTO
23 SO HE CAN PLAN ACCORDINGLY. UP UNTIL THIS MOMENT IT HAD BEEN
24 OUR PLAN TO CALL BOTH. MR. ALIOTO HAS KNOWN THAT FOR DAYS. I
25 MUST ASSUME THAT HE HAS BEEN PREPARING ON THAT ASSUMPTION.
2036
1 IN ANY EVENT, WE CERTAINLY HAVE NO DESIRE TO CAUSE
2 HIM UNNECESSARY EFFORT, AND AS SOON AS WE HAVE RESOLVED THE
3 MATTER, WE WILL LET HIM KNOW.
4 THE COURT: WELL, I DON'T WANT TO PRECIPITATE
5 CALLING UNNECESSARY WITNESSES, BUT, BY THE SAME TOKEN, YOU ARE
6 PROFESSIONALS. YOU HAVE BEEN PRACTICING IN THIS TOWN FOR A
7 LONG TIME. I THINK YOU ARE IN A POSITION TO ADVISE OPPOSING
8 COUNSEL WHAT TO DO, AND IF YOU DON'T KNOW AT THIS POINT WHETHER
9 YOU ARE GOING TO CALL REILLY, I DON'T KNOW WHEN YOU ARE GOING
10 TO KNOW.
11 MR. BALABANIAN: YOUR HONOR, IT'S SOMETHING I WOULD
12 LIKE TO DISCUSS WITH MY COLLEAGUES AND I WILL ADVISE MR. ALIOTO
13 THIS EVENING.
14 THE COURT: BY? BY 7:00 O'CLOCK?
15 MR. BALABANIAN: BY 7:00 O'CLOCK.
16 THE COURT: ALL RIGHT.
17 DOES THAT HELP?
18 MR. ALIOTO: VERY GOOD. THANK YOU, YOUR HONOR.
19 THE COURT: VERY WELL.
20 THANK YOU, MR. IRISH.
21 THE WITNESS: THANKS VERY MUCH, SIR.
22 (PROCEEDINGS ADJOURNED FOR THE DAY AT 6:05 P.M.)
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