previous /
VOLUME 10
PAGES 2037 - 2294
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
MONDAY, MAY 15, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ANGELINA ALIOTO-GRACE
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
2038
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 THOMAS S. HIXSON
ATTORNEYS AT LAW
17
18
19
20
21
22
23
24
25
2039
1 I N D E X
2
3
DEFENDANTS' WITNESSES PAGE VOL.
4
5 FANG, TED
DIRECT EXAMINATION BY MR. BALABANIAN 2044 10
6 CROSS-EXAMINATION BY MR. HALLING 2193 10
CROSS-EXAMINATION BY MR. ALIOTO 2202 10
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2040
1 I N D E X
2
3 E X H I B I T S
4
PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
5
122 2043 10
6 126 2159 10
7 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
8 E-133 2100 10
E-134 2108 10
9 E-135 2165 10
E-137 2164 10
10 H-1188 2043 10
H-1205 2042 10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2041
1 MONDAY - MAY 15, 2000 8:45 A.M.
2
3 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
4 MR. ALIOTO: GOOD MORNING, YOUR HONOR.
5 MR. HALLING: GOOD MORNING, YOUR HONOR.
6 THE COURT: MR. ALIOTO.
7 MR. ALIOTO: SIR.
8 THE COURT: MISSION ACCOMPLISHED; WAS IT?
9 MR. ALIOTO: YES, SIR. THANK YOU VERY MUCH. I'M
10 HERE PHYSICALLY, YOUR HONOR.
11 THE COURT: GOOD.
12 MR. HALLING?
13 MR. HALLING: YOUR HONOR, AS PART OF OUR CASE, WE
14 WOULD LIKE TO OFFER THREE EXHIBITS. ONE -- THE FIRST ONE IS
15 THE JUSTICE DEPARTMENT PRESS RELEASE ON SAN ANTONIO, WHICH YOU
16 ASKED ABOUT ON FRIDAY. WE'VE MARKED IT AS EXHIBIT 1205. IT'S
17 BEEN SERVED.
18 AND, JUST FOR THE RECORD, I HAVE TWO OTHER EXHIBITS.
19 1188, HEARST 1188, WHICH IS THE STIPULATION PERMITTING SALE AND
20 ORDER IN THE HAWAII CASE WHERE THE PARTIES AGREED THAT THE
21 PAPER WOULD BE PUT UP FOR SALE OUTSIDE THE JOA WITHOUT A
22 SUBSIDY. THAT ORDER IN THE HAWAII CASE SIGNED BY THE JUDGE IS
23 OUR EXHIBIT 1188.
24 THE THIRD EXHIBIT IS PLAINTIFF'S EXHIBIT 122, WHICH
25 IS A LETTER FROM MR. SIAS TO MR. BENNACK DATED APRIL 23, 1998.
2042
1 THE COURT: MR. SIAS TO BENNACK?
2 MR. HALLING: FROM SIAS TO BENNACK. IT WAS USED IN
3 MR. BENNACK'S EXAMINATION BUT OUR RECORDS SHOW IT'S NOT IN
4 EVIDENCE. SO AT THIS POINT I WOULD LIKE TO OFFER THOSE THREE
5 EXHIBITS, H-1205, THE SAN ANTONIO PRESS RELEASE; H-1188, THE
6 HAWAII STIPULATION AND ORDER; AND P-122, THE SIAS-TO-BENNACK
7 4/23/98 LETTER.
8 THE COURT: VERY WELL. I ASSUME THERE'S NO
9 OBJECTION, MR. ALIOTO?
10 MR. ALIOTO: NO OBJECTION TO ALL OF THEM EXCEPT FOR
11 H-1205, YOUR HONOR.
12 THE COURT: ALL RIGHT.
13 MR. ALIOTO: THE GROUNDS FOR THE OBJECTION IS THAT
14 IT'S HEARSAY, ESPECIALLY THE LAST PARAGRAPH. NO WAY TO VERIFY
15 IT.
16 MR. HALLING: THIS IS A PRESS RELEASE FROM THE
17 DEPARTMENT OF JUSTICE, YOUR HONOR. YOU COULD TAKE JUDICIAL
18 NOTICE OF IT.
19 THE COURT: WELL, I CAN AND I BELIEVE IT WOULD FALL
20 UNDER ONE OF THE MYRIAD EXCEPTIONS TO THE HEARSAY RULE, SO THE
21 OBJECTION WILL BE OVERRULED. 1205 WILL BE ADMITTED.
22 (DEFENDANTS' EXHIBIT H-1205
23 RECEIVED IN EVIDENCE)
24 THE COURT: ALL RIGHT.
25 MR. HALLING: AND 1188 AND 122 ARE ALSO ADMITTED?
2043
1 THE COURT: YES. THERE'S NO OBJECTION, AS I
2 UNDERSTAND IT, TO 1188 AND 122.
3 MR. ALIOTO: THAT'S CORRECT, YOUR HONOR.
4 THE COURT: AND THEY WILL BE ADMITTED.
5 (DEFENDANTS' EXHIBIT H-1188
6 RECEIVED IN EVIDENCE)
7 (PLAINTIFF'S EXHIBIT 122
8 RECEIVED IN EVIDENCE)
9 MR. HALLING: YOUR HONOR, AT THIS POINT I BELIEVE
10 THE PLAINTIFF'S CASE IS NOW CLOSED. IF YOU RECALL, MR. ALIOTO
11 RESERVED HIS QUESTIONING OF MR. BENNACK AND MR. IRISH. THAT'S
12 NOW OCCURRED. NOTHING HAS COME UP THAT'S CHANGED THE SITUATION
13 CONCERNING STANDING; AND, FOR THE RECORD, WE WOULD RENEW OUR
14 MOTION UNDER RULE 52(C).
15 THE COURT: VERY WELL. THANK YOU, MR. HALLING.
16 MR. ROSCH: YOUR HONOR, FOR THE RECORD, WE JOIN IN
17 THAT.
18 THE COURT: VERY WELL. THANK YOU, MR. ROSCH.
19 AND THE COURT'S RULING ON THOSE MOTIONS WILL BE
20 RESERVED.
21 MR. BALABANIAN, ARE YOU READY WITH YOUR WITNESS?
22 MR. BALABANIAN: WE ARE, YOUR HONOR.
23 THE COURT: VERY WELL.
24 MR. BALABANIAN: CALL TED FANG.
25 THE CLERK: PLEASE RAISE YOUR RIGHT HAND TO BE
2044
FANG - DIRECT / BALABANIAN
1 SWORN.
2 TED FANG,
3 CALLED AS A WITNESS FOR THE DEFENDANTS, HAVING BEEN DULY SWORN,
4 TESTIFIED AS FOLLOWS:
5 THE CLERK: THANK YOU. PLEASE BE SEATED.
6 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST
7 NAME.
8 THE WITNESS: TED FANG, F-A-N-G.
9 MR. BALABANIAN: MAY IT PLEASE THE COURT.
10 THE COURT: VERY WELL.
11 DIRECT EXAMINATION
12 BY MR. BALABANIAN:
13 Q. MR. FANG, DO YOU HOLD A POSITION WITH THE SAN FRANCISCO
14 INDEPENDENT?
15 A. YES, I DO.
16 Q. AND WHAT IS THAT POSITION?
17 A. MY POSITION IS EDITOR AND PUBLISHER.
18 Q. FOR HOW LONG HAVE YOU HELD THAT POSITION?
19 A. SINCE APRIL OF 1987.
20 Q. THAT WOULD BE APPROXIMATELY 14 YEARS?
21 A. I THINK IT'S 13.
22 Q. 13. HOW OLD ARE YOU?
23 A. I'M 37 YEARS OLD.
24 Q. BRIEFLY DESCRIBE YOUR EDUCATION FOR THE COURT, IF YOU
25 WILL.
2045
FANG - DIRECT / BALABANIAN
1 A. I WENT TO FRANCIS SCOTT KEY ELEMENTARY SCHOOL, A.P.
2 GIANNINI JUNIOR HIGH, LOWELL HIGH SCHOOL AND DID MY COLLEGE
3 WORK AT THE UNIVERSITY OF CALIFORNIA AT BERKELEY.
4 Q. HOW DID YOUR FAMILY GET INTO THE PUBLISHING BUSINESS IN
5 SAN FRANCISCO?
6 A. WELL, WHEN MY FATHER CAME TO THIS COUNTRY, HE WAS A
7 NEWSPAPERMAN IN HIS HOMELAND AND WANTED TO BECOME -- GET INTO
8 NEWSPAPERS IN THIS COUNTRY. AND SO WHEN HE CAME TO THIS
9 COUNTRY, THE FIRST THING THAT HE DID WAS HE GOT INVOLVED IN THE
10 PRINTING BUSINESS BECAUSE HE FELT THAT IF HE WANTED TO BE SURE
11 OF BEING ABLE TO PRINT ALL OF HIS OWN VIEWS IN HIS NEWSPAPERS,
12 HE NEEDED TO HAVE HIS OWN PRINTING PRESSES FIRST. SO HE GOT
13 INTO THE PRINTING BUSINESS FIRST AND THEN GOT INTO THE
14 NEWSPAPER BUSINESS AFTER THAT IN THIS COUNTRY.
15 Q. WHAT WERE HIS INITIAL ACTIVITIES IN THE PRINTING BUSINESS?
16 A. WELL, WHEN HE FIRST CAME TO THIS COUNTRY, MY MOTHER AND
17 FATHER DIDN'T HAVE A WHOLE LOT OF MONEY. SO WHAT THEY DID WAS
18 THEY LEASED A PRINTING COMPANY CALLED GRANT PRINTING COMPANY
19 WHICH LATER ON THEY BOUGHT THROUGH A SMALL BUSINESS LOAN. AND
20 HE FIRST BEGAN TO PUBLISH SOME WHAT WE'LL CALL HANDY GUIDES,
21 CHINATOWN HANDY GUIDES, AND THEY'RE BASICALLY LIKE TOURIST --
22 TOURIST GUIDES FOR CHINATOWN.
23 AND THEN HE BECAME THE ASSOCIATE PUBLISHER OF THE
24 YOUNG CHINA DAILY NEWS AND EVENTUALLY BECAME THE PUBLISHER OF
25 THE YOUNG CHINA DAILY NEWS WHICH AT THE TIME WAS THE LONGEST
2046
FANG - DIRECT / BALABANIAN
1 CONTINUOUSLY-PUBLISHED DAILY NEWSPAPER, CHINESE DAILY
2 NEWSPAPER, IN THE UNITED STATES.
3 Q. AT THE PRESENT TIME DOES YOUR FAMILY PUBLISH ANYTHING
4 EXCEPT THE INDEPENDENT?
5 A. YES. WE PUBLISH A NUMBER OF OTHER PUBLICATIONS. IN 1979
6 MY FATHER LEFT HIS POSITION AT THE YOUNG CHINA DAILY NEWS AND
7 STARTED HIS OWN NEWSPAPER CALLED THE ASIAN WEEK NEWSPAPER,
8 WHICH WAS -- WHICH IS AN ENGLISH-LANGUAGE WEEKLY NEWSPAPER
9 THAT'S GEARED TOWARDS THE ASIAN AMERICAN COMMUNITY.
10 MY FAMILY ALSO PUBLISHES THE CHINESE TV GUIDE, WHICH
11 IS A CHINESE-LANGUAGE WEEKLY THAT IS BASICALLY A TELEVISION
12 LISTING OF ALL THE PROGRAMS THAT ARE ON EVERY WEEK AND IT ALSO
13 HAS A LOT OF STORIES ABOUT THE ASIAN MOVIE STARS. IT'S
14 PRIMARILY GEARED TOWARDS THE IMMIGRANT POPULATION, THE CHINESE
15 IMMIGRANT POPULATION.
16 LAST YEAR WE ALSO ACQUIRED ANOTHER SMALL PUBLICATION
17 CALLED THE REDWOOD CITY ALMANAC, WHICH IS A SUBSCRIPTION WEEKLY
18 NEWSPAPER BASED IN REDWOOD CITY, CALIFORNIA.
19 Q. PLEASE TELL THE COURT HOW YOUR FAMILY CAME TO OWN THE
20 INDEPENDENT.
21 A. WE CAME TO OWN THE INDEPENDENT IN 1987. AND THE WAY THAT
22 HAPPENED WAS THAT WHEN I LEFT COLLEGE IN 1983, MY PARENTS
23 BECAME INVOLVED IN A RESTAURANT AND THEY HAD THE PRINTING
24 COMPANY. AND SO WHEN I GRADUATED OR WHEN I LEFT COLLEGE, I
25 WENT TO GO WORK FOR THE PRINTING COMPANY AND STARTED PRINTING A
2047
FANG - DIRECT / BALABANIAN
1 NUMBER OF DIFFERENT NEWSPAPERS.
2 ONE OF THE NEWSPAPERS THAT WE PRINTED WAS A
3 NEWSPAPER CALLED SAN FRANCISCO INDEPENDENT. AT THAT TIME IT
4 WAS A SMALL TABLOID PUBLICATION ABOUT 12 PAGES AND 40,000
5 COPIES, AND IT WAS RUN BY A LADY NAMED MARCIA FONTES WHO WAS
6 HAVING -- WAS DOING WELL ON ONE HAND WITH THE NEWSPAPER BUT ON
7 THE OTHER HAND FINANCIALLY SHE WAS HAVING SOME PROBLEMS.
8 AND SHE BEGAN OWING ME, AS HER PRINTER, SOME MONEY
9 AND HAD SOME MONIES DUE TO ME, AND WAS ALSO GETTING TIRED OF
10 THE NEWSPAPER BUSINESS BECAUSE IT WAS A LOT OF WORK.
11 AND SO BY THIS TIME I HAD BEEN WORKING AT THE
12 PRINTING COMPANY FOR THREE OR FOUR YEARS AND HAD BEEN
13 RELATIVELY SUCCESSFUL AND HAD SOME EXTRA TIME ON MY HANDS AND
14 THOUGHT THAT SHE HAD A NICE PUBLICATION THAT I'D BE INTERESTED
15 IN. AND SO SHE AND I STRUCK A DEAL WHEREBY I ACQUIRED HER
16 NEWSPAPER IN EXCHANGE FOR SOME DEBT AND SOME CASH.
17 Q. AT THAT TIME WHAT WAS THE CIRCULATION OF THE INDEPENDENT?
18 A. AT THAT TIME THE CIRCULATION OF THE INDEPENDENT WAS 40,000
19 COPIES. IT WAS A TABLOID-SIZE NEWSPAPER, ABOUT 12 PAGES, AND
20 IT WAS CIRCULATED PRIMARILY IN THE WEST PORTAL AND LAKE MERCED
21 NEIGHBORHOODS OF SAN FRANCISCO.
22 Q. AND THE CIRCULATION TODAY?
23 A. THE CIRCULATION TODAY OF THE INDEPENDENT IS 379,000
24 COPIES, AND WE CIRCULATE FROM THE GOLDEN GATE BRIDGE, ALL OF
25 SAN FRANCISCO, DOWN THROUGH SAN MATEO TO REDWOOD CITY.
2048
FANG - DIRECT / BALABANIAN
1 Q. IS THERE ANY CONNECTION OR WAS THERE ANY CONNECTION
2 BETWEEN THE SAN FRANCISCO PROGRESS AND THE INDEPENDENT?
3 A. THERE'S NO DIRECT CONNECTION. HOWEVER, WHEN I TOOK OVER
4 THE INDEPENDENT FROM MS. FONTES, SHE AGAIN HAD A RELATIVELY
5 SMALL OVERHEAD AT THAT TIME. I THINK HER PRINTING BILL WAS
6 ABOUT $1500 A WEEK AND WE FELT THAT HER OTHER EXPENSES WAS
7 ABOUT -- I THINK HER TOTALLY WEEKLY EXPENSES WAS ABOUT $3,000 A
8 WEEK. AND SO WHEN I TOOK OVER THE INDEPENDENT, I THOUGHT THAT
9 WAS A SMALL NUT TO CRACK, BUT QUICKLY REALIZED THAT IN THE
10 NEWSPAPER BUSINESS THAT YOU NEED TO REACH A CERTAIN CRITICAL
11 MASS IN ORDER TO SELL ANY ADVERTISING AT ALL. AND WE COULDN'T
12 EVEN GET IN THE DOOR OF MOST ADVERTISERS TO TALK TO THEM
13 BECAUSE IT WAS SUCH A SMALL NEWSPAPER.
14 AT THAT TIME WE HAD SOME GROCERY STORE ADVERTISING
15 WHICH I FELT WAS THE GROWTH AREA FOR THE INDEPENDENT, AND THE
16 BULK OF ALL THE GROCERY STORE ADVERTISING AT THAT TIME WAS WITH
17 A NEWSPAPER CALLED THE SAN FRANCISCO PROGRESS, WHICH WAS IN
18 SOME WAYS SIMILAR TO WHAT THE INDEPENDENT WAS, IN THAT IT WAS A
19 FREE HOME DELIVERY NEWSPAPER AS THE INDEPENDENT BUT IT WAS
20 DELIVERED TO A MUCH LARGER CIRCULATION.
21 AND SO WE DID LOOK AT THE SAN FRANCISCO PROGRESS AS
22 THE NEXT STEP FOR THE INDEPENDENT. AND SO WE DID LOOK TO THAT
23 AND WANT TO GET SOME OF THAT BUSINESS.
24 IN FACT, WE PUT TOGETHER VARIOUS PROPOSALS TO GO TO
25 THE GROCERY STORE ADVERTISERS TO TRY TO GET SOME OF THOSE
2049
FANG - DIRECT / BALABANIAN
1 GROCERY STORE ADVERTISING.
2 AND ONE OF THE THINGS THAT HAPPENED WITH THE
3 INDEPENDENT AND THE PROGRESS, WAS ABOUT THE SAME TIME I BOUGHT
4 THE INDEPENDENT, THERE WAS ANOTHER GENTLEMAN THAT CAME OUT OF
5 CHICAGO THAT BOUGHT THE PROGRESS. AND WHEN HE CAME AND HE
6 BOUGHT THE PROGRESS, THERE WAS A LOT OF -- THERE WAS A LOT OF
7 ATTENTION TO HIM COMING TO BUY THE PROGRESS, AND HE WAS A VERY
8 DYNAMIC PERSONALITY, DID A LOT OF THE TALK SHOWS, AND SO A LOT
9 OF PEOPLE TALKED ABOUT HIM BUYING THE PROGRESS AND THERE WAS A
10 LOT OF ATTENTION GIVEN TO THAT.
11 HOWEVER, HIS OPERATIONS AT THE PROGRESS WERE HAVING
12 PROBLEMS. THEY WERE HAVING DELIVERY PROBLEMS. A LOT OF THE
13 ADVERTISERS WERE GETTING -- WERE UNHAPPY ABOUT THIS SITUATION
14 AT THE PROGRESS WITH THE CIRCULATION AND THE QUALITY OF THE
15 NEWSPAPER. AND SO ONE OF THE THINGS THAT WE DID AT THE
16 INDEPENDENT WAS THAT WE REALIZED THAT THE GROCERY STORE
17 ADVERTISING WOULD BE OUR BIGGEST, AND SO WE PREPARED A PROPOSAL
18 FOR ALL OF THE INDEPENDENT GROCERY STORES IN SAN FRANCISCO AND
19 SAID THAT WE COULD EXPAND THE INDEPENDENT AND PROVIDE THEIR
20 ADVERTISING SERVICES THROUGH AN EXPANDED INDEPENDENT THAT WOULD
21 BE BETTER OR MORE EFFECTIVE THAN WHAT THE GROCERY STORES WERE
22 GETTING IN THE SAN FRANCISCO PROGRESS.
23 AND, IN FACT, WHAT WE DID IS THAT WE HAD A MEETING
24 WITH ALL OF THE INDEPENDENT LOCAL GROCERY STORES OF SAN
25 FRANCISCO, IT WAS ACTUALLY A LUNCH MEETING, AND WE PRESENTED
2050
FANG - DIRECT / BALABANIAN
1 OUR PROPOSAL AND TOLD THEM THAT WE WOULD, YOU KNOW, GEAR OUR
2 PUBLICATION AND ZONE IT ACCORDING TO THEIR NEEDS AND OFFER THEM
3 BETTER SERVICE.
4 AND DURING THAT MEETING, WE HAD A VERY FAVORABLE
5 RESPONSE FROM THESE GROCERS, AND THEY ALL SEEMED TO LIKE THE
6 IDEA VERY MUCH.
7 THE COURT: MR. BALABANIAN, PERHAPS --
8 MR. BALABANIAN: A QUESTION, YOUR HONOR?
9 THE COURT: -- A QUESTION MIGHT FIT INTO THIS A
10 LITTLE BIT.
11 WHY DON'T YOU JUST --
12 MR. BALABANIAN: I WILL.
13 THE COURT: -- LISTEN TO THE QUESTION AND ANSWER THE
14 QUESTION. DON'T PROVIDE US A NARRATIVE, MR. FANG.
15 MR. BALABANIAN: CERTAINLY, YOUR HONOR.
16 Q. WHAT HAPPENED TO THE PROGRESS?
17 A. WELL, WHAT HAPPENED TO THE PROGRESS WAS THAT WE WEREN'T
18 ABLE TO GET THE GROCERY STORE ADVERTISING AT THAT POINT; AND WE
19 FELT -- AND THIS MEETING HAPPENED IN LIKE MIDDLE OF 1988, BUT
20 WE FELT THAT THE PROGRESS WAS HAVING PROBLEMS. AND SOME OF
21 THESE GROCERS TOLD US THAT THEY WANTED --
22 THE COURT: THE QUESTION, MR. FANG, IS: WHAT
23 HAPPENED TO THE PROGRESS?
24 THE WITNESS: THE PROGRESS ULTIMATELY FAILED IN
25 DECEMBER OF 1988.
2051
FANG - DIRECT / BALABANIAN
1 THE COURT: ALL RIGHT. YOU'VE ANSWERED THE
2 QUESTION.
3 THE WITNESS: I'M SORRY, SIR.
4 BY MR. BALABANIAN:
5 Q. THANK YOU, MR. FANG.
6 AND WHAT DID YOU DO IN RESPONSE TO THE FAILURE OF
7 THE PROGRESS?
8 A. WE INCREASED OUR CIRCULATION TO TAKE THE PLACE OF THE
9 PROGRESS.
10 Q. HOW QUICKLY DID YOU DO THAT?
11 A. WELL, WE HAD PLANNED THAT WE COULD REPLACE THE PROGRESS --
12 WE HAD PLANNED THAT THE PROGRESS WOULD LAST THROUGH JANUARY OF
13 1988, AND SO -- JANUARY OF 1989, AND SO WE HAD OUR PLANS THAT
14 WE WOULD NOT HAVE TO GEAR UP UNTIL JANUARY OF 1989.
15 THE PROGRESS CLOSED ITS DOOR UNEXPECTEDLY ON
16 DECEMBER 15TH, 1988. SO SIX DAYS LATER WE CHANGED THE
17 INDEPENDENT FROM A TABLOID TO A BROADSHEET AND INCREASED OUR
18 CIRCULATION FROM ABOUT 60,000 TO 180,000, AND IT HAPPENED IN
19 SIX DAYS.
20 Q. THANK YOU.
21 DO YOU OPERATE ANY NEWSPAPERS ON THE PENINSULA?
22 A. YES, WE DO.
23 Q. AND UNDER WHAT NAME ARE THEY OFFERED TO THE PUBLIC?
24 A. THEY ARE ALSO CALLED THE INDEPENDENT NEWSPAPER RIGHT NOW.
25 Q. CAN YOU GIVE US BRIEFLY THE HISTORY OF YOUR ACQUISITION OF
2052
FANG - DIRECT / BALABANIAN
1 THOSE NEWSPAPERS?
2 A. I'LL TRY TO BE AS BRIEF AS POSSIBLE.
3 WHAT HAPPENED WAS THAT --
4 THE COURT: JUST NAME THE PUBLICATIONS AND WHEN YOU
5 ACQUIRED THEM.
6 THE WITNESS: WELL, THEY'RE CALLED THE INDEPENDENT
7 RIGHT NOW. WE ACQUIRED THEM IN 1993. THEY WERE ACQUIRED FROM
8 THE CHICAGO TRIBUNE WHO AT THE TIME PUBLISHED THEM ALONG WITH
9 THE PALO ALTO DAILY PENINSULA TIMES TRIBUNE OR PALO ALTO DAILY
10 NEWS AND THE CHICAGO TRIBUNE WAS PULLING OUT OF THE MARKET AND
11 WAS CLOSING DOWN ALL THE OPERATIONS. AND SO WE ACQUIRED THOSE
12 PUBLICATIONS FROM THEM, AGAIN UNDER A KIND OF DISTRESSFUL
13 SITUATION.
14 BY MR. BALABANIAN:
15 Q. AND YOU OPERATE -- YOU NOW DISTRIBUTE TO ALL OF THE FORMER
16 SUBSCRIBERS OR RECIPIENTS OF THOSE PAPERS?
17 A. YES. I'M SORRY, THE NAMES OF THOSE NEWSPAPERS AT THE TIME
18 WERE THE MILLBRAE/SAN BRUNO SUN, THE BURLINGAME/HILLSBOROUGH
19 BOUTIQUE AND VILLAGER, THE SAN MATEO WEEKLY, THE FOSTER CITY
20 PROGRESS, THE SAN CARLOS/BELMONT ENQUIRER BULLETIN AND THE
21 REDWOOD CITY TRIBUNE. SO THERE WERE SIX DIFFERENT TITLES AT
22 THE TIME.
23 Q. WHAT THEN WAS THE CONDITION OF ALL OF THE NEWSPAPERS THAT
24 YOU BOUGHT OR REPLACED AT THE TIME YOU BOUGHT OR REPLACED THEM?
25 A. THEY WERE FAILING NEWSPAPERS AT THE TIME; AND, IN FACT,
2053
FANG - DIRECT / BALABANIAN
1 WHEN WE PURCHASED THOSE NEWSPAPERS, FOR WHATEVER REASON, THE
2 CHICAGO TRIBUNE WAS PULLING OUT OF THE MARKET VERY QUICKLY AND
3 WE WERE -- WE WERE NOT ABLE TO BUY VERY MANY HARD ASSETS FROM
4 THE CHICAGO TRIBUNE. IN FACT, WE WERE NOT ENABLE TO GET OFFICE
5 SPACE FROM THE CHICAGO TRIBUNE. THEY WOULD NOT LET US EVEN
6 TAKE OVER THEIR LEASED OFFICE SPACE.
7 AND SO FOR THE FIRST TWO WEEKS WHEN WE TOOK OVER
8 THOSE PUBLICATIONS, WE ACTUALLY HAD TO RENT OUT A SUITE OF
9 ROOMS IN THE MARRIOTT AIRPORT HOTEL AND PUBLISH THE NEWSPAPERS
10 OUT OF THOSE HOTEL ROOMS.
11 THE COURT: PRIOR TO YOUR ACQUISITION, WERE THOSE
12 NEWSPAPERS PAID CIRCULATION PAPERS?
13 THE WITNESS: NO, THEY WERE FREE CIRCULATION
14 NEWSPAPERS AND THEY WERE ALSO TABLOIDS. ONE OF THE FIRST
15 THINGS THAT WE DID WAS WE SWITCHED THEM TO BROADSHEETS.
16 THE COURT: BUT THEY REMAINED FREE DISTRIBUTION
17 PAPERS?
18 THE WITNESS: YES, SIR.
19 THE COURT: OKAY.
20 BY MR. BALABANIAN:
21 Q. MR. FANG, YOU'VE HEARD SEVERAL FORMER NEWSPAPERMEN
22 RETAINED BY MR. REILLY SAY THAT THE NEW EXAMINER IS DOOMED TO
23 FAILURE. HAVE YOU EVER HEARD THAT BEFORE?
24 A. YES, I HAVE.
25 Q. WHEN?
2054
FANG - DIRECT / BALABANIAN
1 A. EVERY TIME I'VE TAKEN OVER ONE OF THESE NEWSPAPERS,
2 WHETHER IT BE THE INDEPENDENT OR TO TRY TO FILL THE SHOES AT
3 THE PROGRESS OR TOOK OVER THE PAPERS FROM THE CHICAGO TRIBUNE,
4 OR EVEN THE REDWOOD CITY ALMANAC, EVERYBODY SAID THAT THESE
5 NEWSPAPERS COULD NOT BE REVIVED BECAUSE BY THE TIME I TOOK THEM
6 OVER, THEY WERE ALL FAILING NEWSPAPERS, AND EVERYBODY SAID I
7 CAN NEVER TURN THEM AROUND.
8 Q. DO YOU THINK YOU'LL FAIL THIS TIME?
9 A. I HOPE I DO NOT.
10 Q. THERE'S BEEN PRIOR REFERENCE TO YOUR FAMILY'S DREAM OF
11 OWNING A DAILY NEWSPAPER. WHY IS IT THAT YOU HAVE THAT DREAM?
12 A. WELL, I THINK THAT IT'S REALLY ONLY WITH A DAILY NEWSPAPER
13 THAT YOU'LL BE ABLE TO OFFER THE FULL SPECTRUM OF COMPREHENSIVE
14 NEWS COVERAGE FOR LOCAL NEWS AND EVENTS. ONE OF MY
15 FRUSTRATIONS RIGHT NOW, EVEN WITH THE INDEPENDENT NEWS
16 OPERATIONS, IS THERE ARE A LOT OF EVENTS WHICH YOU SIMPLY
17 CANNOT COVER ON A DAILY BASIS THAT NEED THE DAILY COVERAGE OF
18 UPDATES TO PROPERLY GIVE THE FULL NEWS COVERAGE, AND WE SIMPLY
19 CAN'T DO THAT WITH THE INDEPENDENT.
20 SO THERE ARE LOTS OF TYPES OF NEWS THAT FALL THROUGH
21 THE CRACKS WITH THE INDEPENDENT RIGHT NOW.
22 ALSO, FROM AN ADVERTISING PERSPECTIVE AND A REVENUE
23 PERSPECTIVE, AN ECONOMIC PERSPECTIVE, THERE'S A LOT MORE
24 REVENUE THAT CAN BE ACHIEVED THROUGH A DAILY NEWSPAPER OR NEW
25 REVENUE THAT CAN BE ACHIEVED THROUGH A DAILY NEWSPAPER THAN CAN
2055
FANG - DIRECT / BALABANIAN
1 JUST SIMPLY BE ACHIEVED THROUGH THE CURRENT OPERATIONS OF THE
2 INDEPENDENT.
3 Q. CAN YOU GIVE THE COURT SOME IDEA OF THE KIND OF NEWS OR
4 EVENTS THAT YOU ARE NOW UNABLE TO ADDRESS IN YOUR PUBLICATION,
5 CURRENT PUBLICATIONS?
6 A. WELL, I THINK ACTUALLY THIS TRIAL IS A GOOD EXAMPLE OF THE
7 KINDS OF NEWS THAT WE CANNOT COVER ON A REGULAR BASIS. IN THE
8 INDEPENDENT WE CAN ONLY SUMMARIZE WHAT HAPPENED DURING A WEEK'S
9 OR FEW DAYS' WORTH OF EVENTS AND TRY TO PICK OUT THOSE THINGS
10 THAT WE THINK ARE MORE IMPORTANT. WE CANNOT GIVE A DAY-TO-DAY
11 UPDATE TO THE PEOPLE OF SAN FRANCISCO.
12 I THINK THE OTHER THING WITH DAILY NEWSPAPERS IS
13 THAT DAILY NEWSPAPERS DRIVE THE ELECTRONIC MEDIA IN THIS TOWN
14 AS WELL; AND WHEN YOU NORMALLY HAVE ONE DAILY NEWSPAPER, YOU
15 KNOW, COVERING THE NEWS FROM ONE ANGLE, THAT TENDS TO INFLUENCE
16 HOW THE ELECTRONIC MEDIA IS GOING TO BE COVERING THE NEWS AS
17 WELL.
18 Q. MR. FANG, HAS YOUR FAMILY BEEN POLITICALLY ACTIVE?
19 A. YES. I THINK MY ENTIRE FAMILY HAS.
20 Q. WHY IS THAT?
21 A. WELL, I THINK THAT -- I THINK TO UNDERSTAND THE POLITICAL
22 ACTIVISM OF MY FAMILY, YOU REALLY NEED TO KIND OF UNDERSTAND
23 WHERE MY PARENTS CAME FROM. AND MY PARENTS GREW UP IN A
24 COUNTRY THAT WAS JUST GOING THROUGH THE END OF AN IMPERIAL
25 REGIME AND AS THEY WERE TRYING TO SET UP A DEMOCRATIC
2056
FANG - DIRECT / BALABANIAN
1 GOVERNMENT, THEY WENT THROUGH A SECOND WORLD WAR. AND AS THEY
2 CAME OUT OF THE SECOND WORLD WAR, WENT INTO A COMMUNIST REGIME
3 AND MY PARENTS FLED THAT COUNTRY TO GO TO TAIWAN WHERE THEY
4 WERE TRYING TO SET UP ANOTHER DEMOCRATIC GOVERNMENT BUT IN
5 EFFECT HAD MARTIAL LAW.
6 AND SO MY PARENTS LEFT THAT COUNTRY TO COME TO SAN
7 FRANCISCO AND THE UNITED STATES, AND SO THEY REALLY BELIEVED IN
8 THIS DEMOCRATIC PROCESS AND RAISED THEIR CHILDREN AND RAISED
9 THE FAMILY TO SAY THAT YOU HAVE THE RIGHTS AND RESPONSIBILITY
10 TO PARTICIPATE IN THIS DEMOCRATIC PROCESS AND THIS POLITICAL
11 PROCESS. AND THAT'S WHY WE ARE HERE IN THE FIRST PLACE, AND
12 THAT'S WHAT THEY ENCOURAGED US TO DO.
13 Q. WOULD YOU SAY THAT YOUR FAMILY HAS EXTENSIVE POLITICAL
14 CONNECTIONS?
15 A. I WOULD NOT MAKE THAT CHARACTERIZATION. I WOULD SAY THAT
16 WE ARE POLITICALLY ACTIVE.
17 Q. HAVE YOU HEARD OTHER PEOPLE SAY SO?
18 A. YES, I'VE HEARD THAT PREDOMINANTLY IN THE DAILY NEWSPAPERS
19 AND I THINK IT'S A FAVORITE CHARACTERIZATION OF MY FAMILY BY
20 THE HEARST CORPORATION.
21 Q. MR. FANG, THE INDEPENDENT IS DISTRIBUTED WITHOUT CHARGE;
22 IS THAT CORRECT?
23 A. THAT IS CORRECT.
24 Q. HOW MANY DAYS A WEEK?
25 A. TWO DAYS A WEEK WITH A THIRD DAY, WHICH IS AVAILABLE
2057
FANG - DIRECT / BALABANIAN
1 THROUGH RACKS ONLY.
2 THE COURT: WHICH IS AVAILABLE WHAT?
3 THE WITNESS: THROUGH RACKS ONLY, NEWS RACKS,
4 NEWSSTANDS.
5 BY MR. BALABANIAN:
6 Q. NEWSSTANDS; IS THAT CORRECT?
7 THE COURT: YES, I UNDERSTAND. WHICH DAYS IS IT
8 HOME DELIVERED AND WHICH DAYS IS IT AVAILABLE ONLY ON NEWS
9 RACKS?
10 THE WITNESS: IT'S HOME DELIVERED ON TUESDAYS AND
11 SATURDAYS, THEN THERE'S A THURSDAY PUBLICATION WHICH IS ONLY
12 AVAILABLE ON NEWSSTANDS.
13 THE COURT: THANK YOU.
14 BY MR. BALABANIAN:
15 Q. HOW DOES THE NUMBER OF NEWSSTANDS THAT THE INDEPENDENT HAS
16 COMPARE WITH THOSE OF THE CHRONICLE AND THE EXAMINER?
17 A. WE -- WELL, IF YOU'RE TALKING TOTAL OR JUST IN SAN
18 FRANCISCO --
19 Q. SAN FRANCISCO.
20 A. IN SAN FRANCISCO WE HAVE, I THINK, ABOUT THE SAME AMOUNT.
21 WELL, ABOUT THE SAME AMOUNT AS EACH ONE OF THEM, BUT THEY HAVE
22 TWICE AS MUCH AS WE HAVE.
23 Q. TO HOW MANY HOMES IS THE INDEPENDENT DISTRIBUTED?
24 A. I SAY 379,000.
25 Q. AND HOW DOES THAT COMPARE WITH THE SAN FRANCISCO
2058
FANG - DIRECT / BALABANIAN
1 CIRCULATION OF THE CHRONICLE AND THE EXAMINER?
2 A. IN SAN FRANCISCO THE INDEPENDENT IS DELIVERED TO 211,000
3 HOMES, WHICH IS MORE -- WHICH IS A GREATER HOME-DELIVERED
4 CIRCULATION THAN THE CHRONICLE AND EXAMINER COMBINED.
5 Q. DOES THE INDEPENDENT CONTAIN ANY EDITORIAL CONTENT WHICH
6 IS PRODUCED BY YOUR OWN STAFF?
7 A. CURRENTLY VIRTUALLY ALL OF THE EDITORIAL CONTENT IN THE
8 INDEPENDENT IS PRODUCED BY OUR OWN STAFF.
9 Q. HOW DOES THE AMOUNT OF SUCH CONTENT COMPARE WITH THAT OF
10 OTHER FREE HOME-DELIVERED NEWSPAPERS AROUND THE COUNTRY?
11 A. WELL, ONE OF THE THINGS THAT MAKES THE INDEPENDENT UNIQUE
12 IS THAT FOR HOME-DELIVERED FREE NEWSPAPERS, WE HAVE THE MOST OR
13 THE LARGEST AMOUNT OF EDITORIAL CONTENT OF ANY OTHER FREE
14 HOME-DELIVERED NEWSPAPER IN THE COUNTRY.
15 Q. HOW DOES THE CIRCULATION OF THE INDEPENDENT COMPARE WITH
16 THAT OF OTHER FREE NEWSPAPERS AROUND THE COUNTRY?
17 A. WELL, I THINK TRADITIONALLY FOR FREE NEWSPAPERS THERE ARE
18 TWO MODELS OF HOW THEY'RE DISTRIBUTED, AND ONE MODEL IS WHERE
19 THE NEWSPAPERS ARE DELIVERED ONLY IN RACKS AND STORES, SUCH AS
20 IN SAN FRANCISCO YOU HAVE THE BAY GUARDIAN OR THE SF WEEKLY.
21 THE OTHER MODEL IS WHERE YOU HAVE NEWSPAPERS THAT ARE DELIVERED
22 TO HOMES BUT HAVE MUCH LOWER NEWS CONTENT. AND SO, AGAIN, WE
23 ARE UNIQUE IN THAT RESPECT.
24 Q. I HAVE A QUESTION, THOUGH. HOW DOES YOUR CIRCULATION TO
25 HOMES COMPARE WITH THAT OF OTHER HOME-DELIVERED FREE NEWSPAPERS
2059
FANG - DIRECT / BALABANIAN
1 AROUND THE COUNTRY? WHERE DO YOU STAND IN THE LEAGUE
2 STANDINGS?
3 A. WE ARE ACTUALLY THE LARGEST NONDAILY NEWSPAPER IN THE
4 UNITED STATES OF AMERICA, WHETHER IT BE FREE OR NOT FREE, TO
5 ANSWER YOUR QUESTION, SIR.
6 Q. WHAT IS THE SECOND --
7 THE COURT: LET ME INTERRUPT IF I MIGHT,
8 MR. BALABANIAN.
9 YOU SAID YOU'VE HAD HOME-DELIVERY CIRCULATION OF
10 211,000 IN SAN FRANCISCO; IS THAT CORRECT?
11 THE WITNESS: YES, SIR.
12 THE COURT: AND 379,000 TOTAL.
13 THE WITNESS: YES, SIR.
14 THE COURT: THE BALANCE OF THE HOME-DELIVERY
15 CIRCULATION IS, WHAT, NORTHERN SAN MATEO COUNTY PRIMARILY?
16 THE WITNESS: SAN MATEO COUNTY DOWN THROUGH REDWOOD
17 CITY. SO IT'S MORE THAN JUST NORTHERN SAN MATEO COUNTY. IT'S
18 ABOUT 168,000 IN SAN MATEO COUNTY.
19 THE COURT: AND HOW DO YOU DETERMINE WHO IS TO
20 RECEIVE ONE OF THESE ISSUES? DO YOU HAVE SUBSCRIBERS? DO
21 PEOPLE SIGN UP FOR DELIVERY OR DO YOU SIMPLY DELIVER THE
22 NEWSPAPER TO THEIR DOORSTEP OR MAILBOX?
23 THE WITNESS: WE DELIVER TO DOORSTEPS AND WE DELIVER
24 BASICALLY TO ABOUT 70 PERCENT OF THE HOMES IN SAN FRANCISCO AND
25 SAN MATEO COUNTY. AND THE REAL DETERMINATE OF WHO WE DELIVER
2060
FANG - DIRECT / BALABANIAN
1 TO IS ACCESSIBILITY OR DELIVERABILITY.
2 THE COURT: IF I WANT TO RECEIVE THE INDEPENDENT,
3 CAN I SUBSCRIBE TO IT AND GET A DELIVERY OF IT FREE OF CHARGE?
4 THE WITNESS: IF YOU WISH TO RECEIVE THE
5 INDEPENDENT, YOU CAN CALL, AND IF YOU ARE IN OUR MARKET AREA,
6 YOU CAN CALL AND YOU CAN EITHER GET IT FREE OR THERE ARE SOME
7 PEOPLE WHO VOLUNTEER TO PAY AND WE TAKE THEIR MONEY TOO.
8 THE COURT: WHAT IF I DON'T WANT IT?
9 THE WITNESS: IF YOU DON'T WANT IT, YOU CALL UP AND
10 YOU SAY, "I WOULD RATHER NOT RECEIVE IT," AND WE PUT YOU ON A
11 LIST OF PEOPLE WHO DON'T WANT TO RECEIVE IT.
12 THE COURT: AND YOU DON'T DELIVER TO THOSE
13 INDIVIDUALS?
14 THE WITNESS: WE TRY NOT TO, YES.
15 THE COURT: THANK YOU.
16 BY MR. BALABANIAN:
17 Q. MR. FANG, YOU SAID THAT THE INDEPENDENT IS THE LARGEST
18 CIRCULATION OF ANY FREE NEWSPAPER IN THE COUNTRY; IS THAT
19 CORRECT?
20 A. ANY NONDAILY, FREE OR NOT FREE.
21 Q. ANY NONDAILY, ANY NONDAILY WHETHER FREE OR NOT; IS THAT
22 CORRECT?
23 A. YES.
24 Q. WHAT IS THE SECOND LARGEST?
25 A. THE SECOND LARGEST IS THE VILLAGE VOICE IN NEW YORK.
2061
FANG - DIRECT / BALABANIAN
1 Q. THESE CIRCULATION FIGURES THAT YOU'VE BEEN USING, ARE THEY
2 MONITORED IN ANY WAY?
3 A. YES, THEY ARE.
4 Q. BY WHOM?
5 A. THERE IS AN AUDITING FIRM THAT -- IN THE INDUSTRY THERE
6 ARE TWO, BASICALLY TWO AUDITING FIRMS. THERE'S THE AUDIT
7 BUREAU CIRCULATIONS, WHICH WE'VE TALKED ABOUT, WHICH AUDITS
8 PAID DAILY NEWSPAPERS. NONPAID, NONDAILY NEWSPAPERS ARE
9 AUDITED BY A FIRM CALLED VERIFIED AUDIT CIRCULATIONS OR VAC,
10 AND THEY ARE BASED OUT OF LOS ANGELES, CALIFORNIA.
11 Q. AND IS THAT THE COMPANY THAT AUDITS YOUR CIRCULATION?
12 A. YES. THEY AUDIT US BASICALLY EVERY YEAR.
13 Q. AND IS THAT FOR THE BENEFIT OF THE ADVERTISERS?
14 A. YES, BASICALLY.
15 Q. ARE YOUR CURRENT PAPERS ZONED?
16 A. YES, THEY ARE ZONED.
17 Q. HOW MANY ZONES ARE THERE?
18 A. WE HAVE 12 DIFFERENT EDITORIAL EDITIONS, ALTHOUGH THERE
19 ARE 11 DIFFERENT ADVERTISING ZONES.
20 Q. AND WHEN YOU SAY "DIFFERENT EDITORIAL EDITIONS," HOW DO
21 THEY VARY FROM ONE TO THE OTHER?
22 A. WELL, THEY ARE BASICALLY -- WE'RE A COMMUNITY OR
23 NEIGHBORHOOD NEWSPAPER, SO BASICALLY WE ZONE BY NEIGHBORHOOD.
24 AND IN THE CITY OF SAN FRANCISCO, YOU KIND OF ZONE IT ACCORDING
25 TO THE DIFFERENT NEIGHBORHOODS.
2062
FANG - DIRECT / BALABANIAN
1 IN SAN MATEO COUNTY THE NEIGHBORHOODS ARE MORE
2 DEFINED BY THEIR CITIES. SO IN SAN MATEO COUNTY WE ZONE OUR
3 DIFFERENT EDITORIAL EDITIONS TO THE DIFFERENT CITIES. THERE
4 ARE FIVE EDITORIAL ZONES IN SAN FRANCISCO, SEVEN EDITORIAL
5 ZONES IN SAN MATEO COUNTY.
6 Q. CAN YOU GIVE THE COURT SOME EXAMPLES OF THE KIND OF
7 DIFFERENCE THAT ONE MIGHT FIND IN THE EDITORIAL CONTENT OF
8 PAPERS DISTRIBUTED IN DIFFERENT ZONES?
9 A. YEAH. I THINK THAT, FOR EXAMPLE SAN FRANCISCO, I THINK
10 NEWSPAPER READERS IN SAN FRANCISCO KIND OF EXPECT A DIFFERENT
11 KIND OF NEWSPAPER THAN THE NEWSPAPER READERS IN SAN MATEO
12 COUNTY. SO, FOR EXAMPLE, IN SAN FRANCISCO, YOU KNOW, OUR MAIN
13 COLUMNIST IS A GENTLEMAN NAMED WARREN HINCKLE WHO TENDS TO
14 WRITE VERY CONTROVERSIAL ARTICLES.
15 SAN MATEO COUNTY PEOPLE ARE NOT THAT INTERESTED IN
16 SUCH MUCKRAKING TYPE OF ARTICLES, AND SO HIS COLUMN IS NOT RUN
17 IN SAN MATEO COUNTY AND WE HAVE A DIFFERENT MAIN COLUMNIST
18 WHOSE NAME IS JERRY FUKES. HE ALSO WRITES ABOUT POLITICAL
19 GOINGS ON IN SAN MATEO COUNTY BUT IN A MUCH MORE SUBDUED
20 MANNER.
21 Q. MR. FANG, SEVERAL WITNESSES HAVE TESTIFIED ABOUT
22 PAGINATION BUT I DON'T THINK ANYBODY HAS EVER EXPLAINED TO THE
23 COURT WHAT IT IS. WOULD YOU DO SO?
24 A. PAGINATION IS BASICALLY A METHOD WHEREBY ARTICLES ARE NOW
25 PUT TOGETHER ELECTRONICALLY INSTEAD OF MANUALLY, AND I CAN GO
2063
FANG - DIRECT / BALABANIAN
1 THROUGH THAT PROCESS IF YOU'D LIKE, OR NOT.
2 Q. BRIEFLY PERHAPS.
3 A. OKAY. WELL, IN THE TRADITIONAL METHOD OF PUTTING TOGETHER
4 PAGES, AFTER A REPORTER WRITES A STORY, IT WILL GO TO THE
5 TYPESETTER WHO TYPES IT.
6 AFTER THEY TYPESET IT, THEY HAVE TO PRINT IT OUT.
7 AFTER THEY PRINT IT OUT, THE STORY HAS TO BE DUMMIED
8 ON THE PAGE, WHERE IT'S GOING TO GO ON THE PAGE.
9 AFTER IT'S DUMMIED ON THE PAGE, THERE'S A PASTE-UP
10 PERSON WHO TYPES THE COLUMNS AND PASTES IT UP ON THE PIECE OF
11 PAPER.
12 AFTER IT'S PASTED ON THAT PIECE OF PAPER, THAT
13 CAMERA-READY ART IS THEN TAKEN TO THE CAMERA ROOM. THEN THE
14 CAMERA ROOM SHOOTS A NEGATIVE OF IT.
15 AFTER THE CAMERA ROOM SHOOTS A NEGATIVE OF IT,
16 THERE'S A PERSON CALLED THE STRIPPER WHO PUTS THE NEGATIVES
17 TOGETHER, PUTS THE PAGES TOGETHER SO ALL THE PAGES COME OUT IN
18 THE RIGHT ORDER.
19 AFTER THE STRIPPER PUTS THE NEGATIVES TOGETHER, THEN
20 YOU BURN A PLATE.
21 AND SO THERE ARE BASICALLY SEVEN OR EIGHT DIFFERENT
22 STEPS IN THE OLD WAY OF DOING IT.
23 UNDER ELECTRONIC PAGINATION, THE REPORTER WILL ENTER
24 HIS STORY INTO A COMPUTER. THEN ONE PRODUCTION PERSON WILL
25 TAKE THAT STORY AND FORMAT IT ONTO THE PAGE -- FORMAT IT ONTO
2064
FANG - DIRECT / BALABANIAN
1 THE PAGE WITH THE RIGHT TYPE WITH THE RIGHT SIZE.
2 AND THEN RATHER THAN -- AND THEN ELECTRONICALLY SEND
3 IT OVER THE TELEPHONE WIRE TO THE CAMERA ROOM. INSTEAD OF THE
4 CAMERA ROOM HAVING TO TAKE A NEGATIVE OR TAKE ANOTHER PICTURE
5 OF IT, IT GOES DIRECT TO A NEGATIVE OR THE NEW TECHNOLOGY IT
6 GOES DIRECT TO THE PLATE.
7 SO THE ELECTRONIC PAGINATION IS REDUCING THOSE EIGHT
8 MANUAL STEPS INTO ONE STEP THAT'S JUST DONE ON A COMPUTER
9 SCREEN IN THE NEWSROOM.
10 Q. ARE SUBSTANTIAL ECONOMIES ACHIEVED AS A RESULT?
11 A. YEAH, ABSOLUTELY. AGAIN, YOU HAVE EIGHT DIFFERENT STEPS
12 REDUCED DOWN TO ONE. THERE'S A LOT OF ECONOMIES.
13 Q. DO YOU KNOW, SIR, WHETHER THE CURRENT EXAMINER IS
14 PAGINATED?
15 A. I BELIEVE THE CURRENT EXAMINER IS NOT PAGINATED.
16 Q. IS THE INDEPENDENT PAGINATED?
17 A. THE INDEPENDENT IS NOT YET FULLY PAGINATED. WE HAVE
18 INVESTED IN ALL THE EQUIPMENT NECESSARY TO DO FULL PAGINATION.
19 WE ARE SCHEDULED TO GO TO FULL PAGINATION IN JULY OF THIS YEAR.
20 WE CURRENTLY ARE ABOUT 80 PERCENT OF THE WAY THERE.
21 Q. IS THE INDEPENDENT PROFITABLE?
22 A. YES, IT IS.
23 Q. HOW MANY PRESSES DO YOU HAVE AT THE PRESENT TIME?
24 A. WE BASICALLY HAVE 25 UNITS OF PRESS WITH THREE DIFFERENT
25 FOLDERS.
2065
FANG - DIRECT / BALABANIAN
1 Q. FOLDERS?
2 A. YES. UNITS OF PRESS ARE DETERMINED HOW MANY PAGES YOU CAN
3 PRINT, AND THE FOLDERS ARE BASICALLY LIKE THE OUTPUT DEVICES.
4 Q. WERE YOU PRESENT WHEN ONE OF PLAINTIFF'S EXPERTS TESTIFIED
5 THAT YOU HAVE ONLY 12 PRESSES?
6 A. YES, I WAS.
7 Q. HOW LONG HAS IT BEEN SINCE YOU HAD ONLY 12 PRESSES?
8 A. BEFORE WE STARTED THE INDEPENDENT, WE ACTUALLY HAD FIVE
9 PRESSES AND THEN WE UPGRADED TO ABOUT 20, AND NOW WE HAVE 25.
10 AND SO I'M NOT SURE WHERE HE GOT THAT NUMBER OF 12.
11 Q. COULD YOU RUN THE NEW EXAMINER ON YOUR CURRENT PRESSES?
12 A. YES, WE COULD.
13 Q. WHAT'S THE CURRENT SIZE OF YOUR TOTAL PAYROLL AT THE
14 INDEPENDENT?
15 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
16
17
18
19
20
21
22
23
24
25
2066
FANG - DIRECT / BALABANIAN
1 A. I THINK THE CURRENT SIZE OF THE CURRENT PAYROLL AT THE
2 INDEPENDENT IS ABOUT -- ABOUT 9 TO $10 MILLION.
3 Q. I'M SORRY, THE -- I REALLY MEANT THE NUMBER OF THE PERSONS
4 ON THE PAYROLL. I'M SORRY.
5 A. WE HAVE ABOUT -- ABOUT 200 PEOPLE ON THE PAYROLL.
6 Q. DO YOU CURRENTLY OUTSOURCE ANY FUNCTIONS OF THE
7 INDEPENDENT?
8 A. YES, WE DO.
9 Q. PLEASE TELL THE COURT WHAT THEY ARE.
10 A. WE OUTSOURCE OUR DISTRIBUTION FUNCTIONS. WE ALSO
11 OUTSOURCE OUR AD-COMPOSING FUNCTIONS, AND THEN WE OUTSOURCE
12 SOME OF OUR -- SOME OF OUR PRINTING IS ALSO OUTSOURCED.
13 Q. MR. FANG, WHY DON'T YOU JUST START A NEW DAILY OR TURN THE
14 INDEPENDENT INTO A DAILY?
15 A. WELL, I THINK THAT EVEN WITH THE INDEPENDENT, THERE ARE
16 GREAT BARRIERS TO ENTRY INTO THE DAILY NEWSPAPER MARKET. ONE
17 OF THE BIGGEST BARRIERS IS THAT IT REQUIRES A SIGNIFICANT
18 FINANCIAL INVESTMENT AND, IN MY OPINION, AN INVESTMENT ON THE
19 MAGNITUDE OF $66 MILLION OR SO.
20 ADDITIONALLY, THERE IS AN ISSUE WITH NAME
21 RECOGNITION. PEOPLE RECOGNIZE THE INDEPENDENT AS A FREE,
22 HOME-DELIVERED NEWSPAPER. THEY DO NOT RECOGNIZE IT AS A PAID
23 SUBSCRIBER VEHICLE, SUCH AS THE EXAMINER.
24 AND SO FOR THE NAME RECOGNITION AND THE FINANCIAL
25 INVESTMENT, I THINK THOSE ARE TWO REASONS WHY WE DON'T.
2067
FANG - DIRECT / BALABANIAN
1 Q. ANY OTHER REASONS?
2 A. ALSO THE -- THE INDEPENDENT UNDER ITS CURRENT STRUCTURE
3 ATTRACTS A CERTAIN KIND OF ADVERTISER WHICH, IF WE WERE TO
4 SWITCH THAT TO A DAILY NEWSPAPER, WE WOULD RISK LOSING OUR
5 CURRENT ADVERTISING BASE IN AN ATTEMPT TO ATTRACT A NEW
6 ADVERTISING BASE. AND SO WE DON'T WANT TO DO THAT.
7 THE COURT: WHAT'S THE DIFFERENCE BETWEEN THE
8 ADVERTISING BASE WHICH THE INDEPENDENT NOW ENJOYS AND THE
9 ADVERTISING BASE THAT YOU ENVISION A DAILY NEWSPAPER WOULD
10 HAVE?
11 THE WITNESS: I THINK ONE WAY OF DESCRIBING IT IS
12 THAT THE INDEPENDENT, AGAIN, IS DELIVERED TO HOMES THROUGHOUT
13 SAN FRANCISCO AND SAN MATEO COUNTY. BASICALLY, EVERY HOME GETS
14 ONE. AND SO THERE ARE CERTAIN RETAILERS, ADVERTISERS, THAT
15 WISH TO REACH BASICALLY EVERYBODY.
16 THE MOST OBVIOUS OR RECOGNIZABLE OF THOSE KINDS OF
17 ADVERTISERS ARE GROCERY STORES AND DRUGSTORES BECAUSE EVERYBODY
18 BUYS GROCERIES. EVERYBODY BUYS ASPIRIN OR SHAMPOO. AND SO
19 THESE TYPES OF ADVERTISERS WISH TO REACH AS MANY PEOPLE AS
20 POSSIBLE, AND SO THEY LIKE TO ADVERTISE IN THE INDEPENDENT.
21 AND, IN FACT, IF THEY WERE TO ADVERTISE IN THE DAILY
22 NEWSPAPERS, THE CHRONICLE AND THE EXAMINER, WHICH DELIVERS TO
23 HALF -- LESS THAN HALF AS MANY HOMES AS THE INDEPENDENT, THEY
24 WOULD NOT REACH ALL OF THEIR CUSTOMERS.
25 CONVERSELY, THERE ARE ADVERTISERS THAT WISH TO REACH
2068
FANG - DIRECT / BALABANIAN
1 A TARGETED GROUP OF -- OF PEOPLE, NAMELY, NEWSPAPER
2 SUBSCRIBERS. AND THESE ARE LARGELY LIKE DEPARTMENT STORES,
3 NATIONAL ADVERTISERS THAT WISH TO REACH A TARGETED GROUP OF
4 SUBSCRIBER -- NEWSPAPER SUBSCRIBERS.
5 ALSO THERE ARE ADVERTISERS, AGAIN, SUCH AS, SAY,
6 MACY'S DEPARTMENT STORE, WHICH LIKES TO RUN ONE-DAY SALES,
7 WHITE FLOWER DAY SALES, OR SPECIFICALLY TIMED SALES. YOU
8 CANNOT DO THAT WITH THE INDEPENDENT. YOU CAN DO THAT WITH THE
9 DAILY NEWSPAPER.
10 SO THOSE ARE SOME OF THE EXAMPLES OF THE DIFFERENT
11 KINDS OF ADVERTISERS.
12 THE COURT: THANK YOU, SIR.
13 BY MR. ROSCH:
14 Q. TO FOLLOW ON THAT, MR. FANG, IS THERE ANY OVERLAP BETWEEN
15 THESE TWO GROUPS OF ADVERTISERS?
16 A. YES, THERE IS OVERLAP OF THESE DIFFERENT KINDS OF GROUPS
17 OF ADVERTISERS.
18 Q. COULD YOU GIVE ME AN EXAMPLE?
19 A. YES. ONE EXAMPLE IS, FOR EXAMPLE, IN THE SUNDAY PAPER YOU
20 OFTEN WILL FIND THESE COUPON INSERTS WHICH IN THE INDUSTRY WE
21 CALL THEM FSI'S. THEY ARE BASICALLY COUPONS FOR GROCERY STORE
22 ITEMS OR DRUGSTORE ITEMS.
23 Q. CAN YOU TELL THE COURT WHAT "FSI" STANDS FOR?
24 A. "FSI" STANDS FOR FREE-STANDING INSERT.
25 AND THESE COUPON INSERTS ARE MORE ALIGNED WITH, SAY,
2069
FANG - DIRECT / BALABANIAN
1 THE GROCERY STORE AND THE DRUGSTORE ADVERTISING. BUT THEY WISH
2 TO ADVERTISE IN THE SUNDAY -- IN THE SUNDAY PAID SUBSCRIBER
3 VEHICLES.
4 Q. IF YOU ARE PERMITTED TO ACQUIRE THE EXAMINER, IS IT YOUR
5 INTENTION TO KEEP PUBLISHING THE INDEPENDENT?
6 A. YES, IT IS.
7 Q. WHY?
8 A. AGAIN, I THINK THAT BOTH FROM THE READER'S STANDPOINT, THE
9 INDEPENDENT PROVIDES A DIFFERENT KIND OF NEWS COVERAGE, THE
10 KIND OF NEIGHBORHOOD COMMUNITY COVERAGE THAT A DAILY NEWSPAPER
11 DOESN'T DO. AND FROM AN ADVERTISER'S STANDPOINT WE SERVE THE
12 ADVERTISER WITH DIFFERENT WAYS.
13 Q. LET'S TURN TO THE NEW EXAMINER. HOW OFTEN WILL IT COME
14 OUT?
15 A. I PLAN ON PUBLISHING THE EXAMINER AS A DAILY, BASICALLY,
16 FIVE DAYS A WEEK PLUS A WEEKEND PUBLICATION.
17 Q. WILL IT BE PUBLISHED IN THE MORNING OR IN THE AFTERNOON?
18 WILL IT BE DISTRIBUTED IN THE MORNING OR THE AFTERNOON?
19 A. IT WILL BE PUBLISHED IN THE MORNING.
20 Q. MR. FANG, WHY, IN YOUR OPINION, HAVE AFTERNOON NEWSPAPERS
21 BECOME UNSUCCESSFUL?
22 A. I THINK THERE ARE A COUPLE OF REASONS. ONE HAS TO DO WITH
23 THE NEWS CYCLE AND THE CYCLE FOR GATHERING NEWS, AND IT HAS TO
24 DO WITH THE ELECTRONICS. YOU KNOW, ONE OF THE SLOGANS THAT
25 AFTERNOON NEWSPAPERS LIKE TO USE IS THAT A LOT CAN HAPPEN
2070
FANG - DIRECT / BALABANIAN
1 BETWEEN 9:00 AND 5:00.
2 WELL, THE REALITY IS THAT WHATEVER HAPPENS BETWEEN
3 9:00 AND 5:00 FIRST GETS REPORTED ON YOUR 6:00 O'CLOCK NEWS.
4 SO WHEN YOU GET HOME, YOU CAN SEE THAT ON THE T.V.
5 THE SECOND PLACE WHERE THAT NEWS GETS REPORTED IS IN
6 YOUR NEXT DAY -- NEXT MORNING'S MORNING NEWSPAPER. AND SO THAT
7 NEWS IS THEN IN THE MORNING NEWSPAPER.
8 THE LAST PLACE THAT IT GETS REPORTED IS ACTUALLY IN
9 THE NEXT DAY'S AFTERNOON NEWSPAPER.
10 SO FROM A NEWS-GATHERING PERSPECTIVE, AFTERNOON
11 NEWSPAPERS ARE IN A GREAT DISADVANTAGE AS FAR AS REPORTING THE
12 NEWS.
13 Q. WHAT IS LEFT FOR THEM TO REPORT?
14 A. FOR ONE --
15 THE COURT: SAY AGAIN?
16 BY MR. ROSCH:
17 Q. WHAT'S LEFT FOR THEM TO REPORT?
18 A. I THINK THE ONE THING THAT AFTERNOON NEWSPAPERS DO IS THE
19 STOCK -- THE CLOSING STOCK TABLES AND YOU CAN GET THAT IN AN
20 AFTERNOON NEWSPAPER. YOU CAN'T -- SOONER THAN YOU CAN GET IN
21 THE DAILY NEWSPAPER.
22 I THINK THERE IS ANOTHER IMPORTANT REASON WHY
23 AFTERNOON NEWSPAPERS HAVE DECLINED, WHICH IS THAT ADVERTISERS
24 ARE GETTING MUCH MORE SOPHISTICATED THESE DAYS ABOUT TRACKING
25 THEIR ADVERTISING AND THEIR RESULTS. AND WHEN AN ADVERTISEMENT
2071
FANG - DIRECT / BALABANIAN
1 APPEARS IN AN AFTERNOON NEWSPAPER, YOU MIGHT GET SOME PEOPLE
2 COMING INTO THE STORE THAT EVENING AND SOME THE NEXT MORNING.
3 BUT WHEN YOU ADVERTISE IN A MORNING NEWSPAPER, YOU CAN BE SURE
4 THAT YOU CAN GET RESULTS THAT VERY SAME DAY. AND SO FROM AN
5 ADVERTISING PERSPECTIVE, I THINK THEY ALSO LIKE THE A.M.
6 NEWSPAPER MUCH BETTER THAN THE AFTERNOON.
7 Q. DO THESE TRENDS REPRESENT CHANGE OVER THE SITUATION THAT
8 MAYBE EXISTED TEN YEARS AGO?
9 A. YES. THERE HAS BEEN DRAMATIC CHANGE IN THAT.
10 Q. AND AS A RESULT OF WHAT?
11 A. AND THAT'S A RESULT OF THESE NEW -- LIKE, THE PAGINATION
12 THINGS THAT I HAVE BEEN TALKING ABOUT, THE USE OF INTERNET, THE
13 USE OF ALL OF THESE KINDS OF THINGS HAVE MADE IT A VERY
14 DIFFERENT SITUATION.
15 Q. IS THAT BECAUSE THEY ENABLE -- IT'S NOW POSSIBLE FOR THE
16 MORNING NEWSPAPER TO PICK UP THE PREVIOUS DAY'S NEWS?
17 A. YES, THE MORNING NEWSPAPER CAN PICK UP THE PREVIOUS DAY'S
18 NEWS.
19 Q. WHAT IS THE INITIAL -- WHAT DO YOU EXPECT WILL BE THE
20 INITIAL CIRCULATION OF THE NEW EXAMINER?
21 A. WE ANTICIPATE BETWEEN 50 AND 100,000 CIRCULATION FOR THE
22 NEW EXAMINER.
23 Q. WILL IT BE HOME DELIVERED OR ONLY SINGLE COPY SALES?
24 A. WE ARE PROJECTING BETWEEN 50 AND 70 PERCENT OF THE
25 CIRCULATION TO BE SUBSCRIPTION BASED AND THE REMAINDER TO BE
2072
FANG - DIRECT / BALABANIAN
1 SINGLE COPY SALES.
2 Q. AND IT WILL BE A PAID NEWSPAPER, CORRECT?
3 A. YES, IT WILL BE PAID.
4 Q. WHERE WILL THE NEW EXAMINER BE DISTRIBUTED?
5 A. WE ARE GOING TO HAVE A PRIMARY FOCUS IN THE CITY AND
6 COUNTY OF SAN FRANCISCO, MAY DISTRIBUTE AS WELL IN SAN MATEO
7 COUNTY, AND THEN POSSIBLY IN MARIN COUNTY.
8 Q. HOW DID YOU PICK THOSE AREAS?
9 A. WELL, SAN FRANCISCO IS OUR PRIMARY TARGET BECAUSE IF YOU
10 LOOK AT ALL OF THE OTHER BAY AREA CITIES AND COUNTIES, EACH ONE
11 OF THEM HAS A LOCAL DAILY NEWSPAPER. SAN FRANCISCO IS THE ONLY
12 ONE THAT DOES NOT HAVE THAT. SO IT MAKES IT THE MOST OBVIOUS
13 AND PRIME CANDIDATE FOR A LOCAL DAILY NEWSPAPER.
14 SAN MATEO COUNTY IS ALSO A STRONG POSSIBILITY, ONE,
15 BECAUSE THEIR LOCAL DAILY NEWSPAPER IS NOT VERY STRONG AND,
16 TWO, BECAUSE WE HAVE EXISTING OPERATIONS IN SAN MATEO COUNTY
17 WHICH ARE VERY STRONG.
18 AND WE ARE THINKING ABOUT MARIN SIMPLY BECAUSE THAT
19 IS THE THIRD STRONGEST AREA OF THE CURRENT EXAMINER'S
20 CIRCULATION BASE.
21 Q. WHAT DOES THE TERM "PENETRATION" MEAN AS USED IN
22 CONNECTION WITH THE CIRCULATION OF A NEWSPAPER?
23 A. "PENETRATION" REFERS TO A NUMBER OF HOUSEHOLDS THAT
24 RECEIVE THE NEWSPAPER. FOR EXAMPLE, I MENTIONED THAT
25 70 PERCENT OF ALL THE HOUSEHOLDS IN SAN FRANCISCO AND SAN MATEO
2073
FANG - DIRECT / BALABANIAN
1 COUNTY RECEIVE THE INDEPENDENT. WE HAVE A 70 PERCENT
2 PENETRATION.
3 Q. ARE ADVERTISERS INTERESTED IN -- MORE INTERESTED IN
4 CIRCULATION, TOTAL CIRCULATION, OR PENETRATION?
5 A. I THINK THEY ARE INTERESTED IN BOTH. BUT, AS THE NEW KIND
6 OF COMPUTER, SCIENTIFIC ANALYSIS TOOLS HAVE BECOME AVAILABLE,
7 PENETRATION IS BECOMING MORE AND MORE IMPORTANT.
8 BEFORE, FOR EXAMPLE, AN ADVERTISER WOULD CHOOSE TO
9 ADVERTISE IN ONE NEWSPAPER AND GET THE ENTIRE CIRCULATION. NOW
10 AN ADVERTISER CAN TARGET A STORE -- IF I CAN GIVE YOU AN
11 EXAMPLE?
12 Q. PLEASE.
13 A. THERE IS A SEARS STORE IN SAN BRUNO WHICH IS, I THINK, THE
14 LARGEST SEARS STORE IN THE ENTIRE CHAIN. AND WHAT THEY DO IS
15 THEY ANALYZE THEIR TOP 12 OF 15 ZIP CODES. AND FOR THAT STORE
16 IN THE TOP 15 ZIP CODES, I THINK ABOUT EIGHT OF THEM ARE IN SAN
17 FRANCISCO AND ABOUT SEVEN OF THEM ARE IN SAN MATEO COUNTY. SO
18 THEY DON'T WANT TO ADVERTISE, SAY, AN ENTIRE CIRCULATION OF THE
19 CHRONICLE/EXAMINER. THEY WOULD LIKE TO ADVERTISE JUST IN THOSE
20 ZIP CODES THAT ARE MOST IMPORTANT TO THEM.
21 AND SO WHEN THEY PICK THEIR TOP REVENUE-PRODUCING
22 ZIP CODES, THEN THEY GO AND THEY LOOK AT WHICH NEWSPAPERS HAVE
23 THE HIGHEST PENETRATION FOR THOSE ZIP CODES, AND THEY LIKE TO
24 PICK THOSE NEWSPAPERS WHICH HAVE THE HIGHEST PENETRATION IN THE
25 ZIP CODES THAT THEY MOST CARE ABOUT. AND THAT'S WHY
2074
FANG - DIRECT / BALABANIAN
1 PENETRATION IS SO IMPORTANT THESE DAYS.
2 Q. WOULD AN ADVERTISER LIKE THAT GAIN ANY ECONOMIC ACTIVITY
3 FOR PAPERS SOLD IN THE EAST BAY?
4 A. FOR STORES LIKE SEARS, YES, BECAUSE THEY HAVE A STORE IN
5 THE EAST BAY OR WHATEVER. BUT STILL THE WAY THAT THESE MAJOR
6 RETAILERS ARE LOOKING AT THEIR BUDGETS THESE DAYS, THEY LOOK AT
7 THEM STORE BY STORE. SO EACH STORE HAS AN ADVERTISING BUDGET.
8 SO EVEN IF THERE IS SOME USE IN THE EAST BAY, THAT IS ALLOCATED
9 TO SOMEBODY ELSE.
10 AND, AGAIN, IF THEY BUY ALL OF SAN FRANCISCO, THE
11 NORTHERN ZIP CODES OF SAN FRANCISCO ARE GOING TO HAVE NO USE TO
12 THAT SEARS STORE IN SAN BRUNO.
13 Q. IN YOUR OPINION, WHAT IS MORE IMPORTANT FOR THE SUCCESS OF
14 THE NEW EXAMINER, INCREASING ITS CIRCULATION OR INCREASING
15 PENETRATION?
16 A. WELL, I THINK THE CIRCULATION -- THE OVERALL CIRCULATION
17 NUMBER OF THE EXAMINER IS -- IS NOT BAD AT ALL. THERE ARE MANY
18 NEWSPAPERS THAT ARE SUCCESSFUL WITH MUCH SMALLER CIRCULATIONS,
19 AND THE CURRENT CIRCULATION OF THE EXAMINER I THINK IS JUST
20 OVER 100,000 RIGHT NOW.
21 A CONTINUING MAIN PROBLEM WITH THE EXAMINER'S
22 CIRCULATION RIGHT NOW IS THAT IT'S TOO SPREAD OUT. I MEAN, YOU
23 HAVE COPIES OF THE EXAMINER GOING TO HAWAII, OR I UNDERSTAND
24 THEY SEND A LOT OF COPIES TO SAN LUIS OBISPO FOR TRADITIONAL
25 REASONS. BUT THOSE ARE NOT COPIES THAT ARE VERY VALUABLE TO
2075
FANG - DIRECT / BALABANIAN
1 ADVERTISERS. AND SO BOTH ARE IMPORTANT, BUT THE PROBLEM FOR
2 THE EXAMINER IS PENETRATION.
3 Q. WHAT IS THE PENETRATION OF THE OLD EXAMINER IN SAN
4 FRANCISCO?
5 A. IN SAN FRANCISCO, BELIEVE IT OR NOT, THE PENETRATION OF
6 THE EXAMINER IS ONLY ABOUT SIX OR SEVEN PERCENT.
7 Q. I'M SORRY?
8 A. SIX OR SEVEN PERCENT.
9 Q. WHAT IS THE PENETRATION OF THE INDEPENDENT IN SAN
10 FRANCISCO?
11 A. THE PENETRATION OF THE INDEPENDENT IS 70 PERCENT --
12 70 PERCENT, TEN TIMES AS MUCH.
13 Q. WHAT PENETRATION DO YOU EXPECT FOR THE NEW EXAMINER?
14 A. WE ARE SHOOTING FOR AN INITIAL PENETRATION OF ABOUT 10 TO
15 15 PERCENT OF THE HOUSEHOLDS IN SAN FRANCISCO.
16 Q. YOU MIGHT MOVE THE MICROPHONE AP LITTLE CLOSER?
17 A. (INDICATING).
18 Q. THANK YOU.
19 NOW, WHAT WILL THE SIZE OF THE NEW EXAMINER BE, THE
20 NUMBER OF PAGES?
21 A. WE ARE PROJECTING THE SIZE OF THE EXAMINER, THE NEW
22 EXAMINER, TO BE BETWEEN 40 AND 48 PAGES.
23 MR. BALABANIAN: YOUR HONOR, MAY I APPROACH THE
24 WITNESS?
25 THE COURT: YES, YOU MAY.
2076
FANG - DIRECT / BALABANIAN
1 BY MR. BALABANIAN:
2 Q. MR. FANG, I HAVE HANDED YOU WHAT I REPRESENT TO BE A COPY
3 OF THE NEW YORK TIMES NATIONAL EDITION FOR THE DAY BEFORE
4 YESTERDAY, AS DISTRIBUTED TO MY HOME.
5 CAN YOU TELL ME HOW MANY PAGES ARE IN IT?
6 A. IT HAS A TOTAL OF 48 PAGES.
7 Q. THAT IS THE NUMBER OF PAGES YOU PROJECT FOR THE NEW
8 EXAMINER?
9 A. YES, IN THAT RANGE.
10 THE COURT: THIS IS THE SATURDAY EDITION, IS IT NOT?
11 MR. BALABANIAN: SATURDAY EDITION.
12 I DON'T INTEND TO OFFER IT IN EVIDENCE, BUT I --
13 SOLELY FOR DEMONSTRATIVE PURPOSES.
14 THE COURT: OKAY.
15 BY MR. BALABANIAN:
16 Q. PERHAPS, MR. FANG, YOU COULD HAND IT TO THE COURT SO THE
17 COURT COULD GET SOME SENSE OF THE SUBSTANTIALITY OF A 48-PAGE
18 NEWSPAPER.
19 THE COURT: THE COURT READS A LOT OF NEWSPAPERS,
20 MR. BALABANIAN, SO THAT'S NOT NECESSARY.
21 BY MR. BALABANIAN:
22 Q. IS THE NEW EXAMINER GOING TO HAVE THE SAME CONTENT AS THE
23 NEW YORK TIMES?
24 A. NO, I THINK THE CONTENT WILL BE VERY DIFFERENT.
25 Q. IS THERE A BAY AREA NEWSPAPER, MR. FANG, WITH WHICH THE
2077
FANG - DIRECT / BALABANIAN
1 COURT MIGHT BE FAMILIAR WHICH MORE CLOSELY RESEMBLES THE PAPER
2 THAT YOU ARE PLANNING TO PUBLISH?
3 A. I THINK THERE HAVE BEEN ANOTHER -- A NUMBER OF NEWSPAPERS
4 THAT HAVE BEEN MENTIONED IN THE COURT -- IN THIS PROCEEDING,
5 SUCH AS THE MARIN INDEPENDENT JOURNAL, THE HAYWARD DAILY
6 REVIEW, THE SAN MATEO COUNTY TIMES. THOSE ARE MORE ALONG THE
7 LINES OF THE NEWSPAPER THAT I ENVISION THE NEW EXAMINER TO BE
8 FROM THE SENSE OF BEING LOCALLY ORIENTED, AGAIN, MORE SAN
9 FRANCISCO NEWS AS OPPOSED TO, SAY, MARIN NEWS BUT MORE ALONG
10 THOSE LINES.
11 Q. TALKING ABOUT THE LOCAL PAPERS, HOW DO THEIR ADVERTISING
12 RATES, THE OTHER DAILIES, THE OTHER DAILIES IN THE BAY AREA,
13 COMPARE WITH THE ADVERTISING RATES OF THE CHRONICLE AND THE
14 EXAMINER?
15 A. THEY'RE MUCH LOWER.
16 Q. WHAT IS TO KEEP AN ADVERTISER WHICH WISHES TO SAVE MONEY
17 IN THE BAY AREA FROM JUST PIECING TOGETHER AN AD PROGRAM USING
18 ALL OF THE LOCAL DAILIES, SUCH AS THE OAKLAND TRIBUNE AND THE
19 MARIN IJ?
20 A. WELL, ONE OF THE DIFFICULTIES OF DOING A REGIONAL
21 ADVERTISING BUY IN THE BAY AREA -- AND THE SAN FRANCISCO BAY
22 AREA IS ONE OF THE MOST DIFFICULT REGIONS IN THE COUNTRY TO BUY
23 ADVERTISING IN -- IS BECAUSE ON A REGIONAL BASIS YOU CAN BUY --
24 YOU CAN PIECE TOGETHER ALL OF THESE LITTLE, WHAT I -- ALL OF
25 THESE LOCAL DAILY NEWSPAPERS, SUCH AS MARIN AND HAYWARD AND THE
2078
FANG - DIRECT / BALABANIAN
1 CONTRA COSTA AND SAN MATEO AND PUT TOGETHER A REGIONAL BUY.
2 BUT BECAUSE THERE IS NO LOCAL DAILY IN SAN FRANCISCO, THERE
3 IS -- AND I THINK YOU MIGHT HAVE BEEN DESCRIBING THESE
4 PROCEEDINGS AS A HOLE IN THE DONUT. YOU CANNOT BUY SAN
5 FRANCISCO. THE ONLY WAY TO BUY SAN FRANCISCO IS BY BUYING THE
6 SAN FRANCISCO CHRONICLE/EXAMINER COMBINATION. AND WHEN YOU BUY
7 THE SAN FRANCISCO CHRONICLE/EXAMINER COMBINATION, YOU ARE
8 FORCED TO BUY THE ENTIRE CIRCULATION OF THE CHRONICLE/EXAMINER.
9 AND SO THEN IT BECOMES VERY UNECONOMICAL IF YOU HAVE TO BUY ALL
10 OF THE CHRONICLE/EXAMINER'S CIRCULATION PLUS ALL OF THE
11 REGIONAL LOCAL DAILY NEWSPAPERS TO MAKE UP YOUR REGIONAL BUY.
12 Q. WILL THE NEW EXAMINER CHANGE THAT SITUATION?
13 A. YES. THE NEW EXAMINER WILL BE THE NEW DAILY THAT FILLS
14 THAT HOLE IN THE DONUT SO THAT ADVERTISERS NOW WILL HAVE A
15 CHOICE. THEY CAN EITHER BUY THE HEARST-OWNED CHRONICLE AND GET
16 THE REGIONAL BUY OR THEY COULD BEGIN TO START PUTTING TOGETHER
17 NETWORKS OF ALL THE LOCAL DAILIES TO OFFER THE SAME KIND OF
18 REGIONAL BUY AND IN MANY CASES, I THINK, BETTER PENETRATION
19 THAN OTHERS THAT MIGHT BE OFFERED BY OTHERS.
20 Q. WILL THAT CREATE COMPETITION FOR THE CHRONICLE THAT NOW
21 EXISTS?
22 A. YES, THAT WILL CREATE REGIONAL COMPETITION THAT DOES NOT
23 NOW EXIST.
24 Q. WILL THE NEW EXAMINER COMPETE DIRECTLY WITH THE CHRONICLE
25 FOR ADVERTISERS?
2079
FANG - DIRECT / BALABANIAN
1 A. YES.
2 Q. DO YOU EXPECT TO OBTAIN ADVERTISING FROM THE SAME TYPE OF
3 ADVERTISERS WHO CURRENTLY USE THE CHRONICLE AND THE OLD
4 EXAMINER?
5 A. YES.
6 Q. ARE THOSE ADVERTISERS, THE ONES WHO CURRENTLY USE THE
7 CHRONICLE AND THE EXAMINER -- WILL THEY BE CONTRACTUALLY BOUND
8 TO THE CHRONICLE AFTER HEARST ACQUIRES IT?
9 A. NO.
10 Q. HOW DO YOU KNOW THAT?
11 A. BECAUSE I HEARD TESTIMONY FROM STEVE FALK, WHO I BELIEVE
12 IS THE CEO OF THE NEWSPAPER AGENCIES, WHO SAID THOSE CONTRACTS
13 WILL BE TERMINATED BECAUSE THEY APPLY ONLY TO THE CHRONICLE AND
14 EXAMINER RIGHT NOW.
15 Q. HOW DO THE AD RATES OF THE -- THE ADVERTISING RATES OF THE
16 CHRONICLE AND THE EXAMINER TODAY COMPARE WITH THOSE CHARGED BY
17 OTHER DAILY NEWSPAPERS AROUND THE COUNTRY?
18 A. THE AD RATES -- THE AD RATES OF THE CHRONICLE AND EXAMINER
19 ARE AMONG THE HIGHEST IN THE COUNTRY.
20 Q. HOW WILL YOU COMPETE -- HOW WILL THE NEW EXAMINER COMPETE
21 WITH THE CHRONICLE FOR ADVERTISERS?
22 A. I THINK WE'LL COMPETE IN A LOT OF DIFFERENT WAYS. ONE
23 WAY, FOR EXAMPLE, OF -- AND, AGAIN, IF WE GO BACK TO THE
24 DIFFERENT TYPES OF ADVERTISERS, THE TYPES OF ADVERTISING THAT
25 ADVERTISE IN DAILY NEWSPAPERS AND THE TYPES OF ADVERTISERS THAT
2080
FANG - DIRECT / BALABANIAN
1 TRADITIONALLY DON'T. GROCERY STORES, SUCH AS SAFEWAY, RUN
2 THEIR PRIMARY -- PRIMARY WEEKLY PREPRINTED INSERTED
3 ADVERTISEMENT WITH THE INDEPENDENT. BUT THEY ALSO RUN SOME
4 SUPPLEMENTAL ADVERTISING IN -- ON THE WEEKENDS TO GET A SALES
5 BOOST ON THE WEEKENDS. BUT THOSE WEEKEND ADVERTISEMENTS ONLY
6 OCCUR IN PAID DAILY NEWSPAPERS, AND SO CURRENTLY THE
7 INDEPENDENT IS NOT ABLE TO ATTRACT THOSE KINDS OF ADVERTISING.
8 BUT WITH THE NEW EXAMINER, WE WILL BE ABLE TO
9 ATTRACT THOSE KINDS OF ADVERTISERS.
10 Q. HAVE YOU MADE ANY APPROACHES TO THE CURRENT ADVERTISERS IN
11 THE CHRONICLE AND THE EXAMINER?
12 A. YES, AS FAR AS THOSE DAILY -- DAILY ADVERTISING TYPE OF
13 CUSTOMERS, WE HAVE APPROACHED THEM, AS WELL.
14 Q. WITH RESPECT TO THE POSSIBILITY OF ADVERTISING IN THE NEW
15 EXAMINER?
16 A. THAT'S CORRECT.
17 Q. HOW WOULD YOU CHARACTERIZE THE RESPONSE?
18 A. THE RESPONSE HAS BEEN VERY FAVORABLE BECAUSE -- FOR A
19 COUPLE OF REASONS. ONE IS THAT THEY ARE CONCERNED -- YOU KNOW,
20 WE HAVE HEARD TALK ABOUT THE -- WHAT WOULD HAPPEN TO THE
21 CIRCULATION OF THE CHRONICLE WHEN THE EXAMINER -- IF THE
22 EXAMINER WERE TO GO TO MY OWNERSHIP. AND THERE IS SOME DEBATE
23 ON WHETHER OR NOT THE CHRONICLE CIRCULATION WOULD DECLINE OR
24 NOT.
25 BUT WHETHER OR NOT THE CHRONICLE CIRCULATION
2081
FANG - DIRECT / BALABANIAN
1 DECLINES BECAUSE OF THAT, OVER THE LAST FIVE OR TEN YEARS THE
2 CIRCULATION OF THE CHRONICLE HAS DECREASED DRAMATICALLY, HAS
3 LOST OVER 120,000. AND SO ADVERTISERS ARE LOOKING FOR WAYS TO
4 MAKE UP THAT CIRCULATION AND I THINK WILL LOOK TO THE NEW
5 EXAMINER AS ONE OF THE WAYS TO MAKE UP THAT CIRCULATION.
6 THEY HAVE ALSO SPECIFIED TO ME THAT THEY ARE
7 INTERESTED IN THE NEW EXAMINER BECAUSE THEY FEEL THAT IT WILL
8 BRING PRICE PRESSURE TO THE NEW CHRONICLE. AND THEY ALSO HAVE
9 HEARD THAT THE CHRONICLE MAY NOT LOWER ITS ADVERTISING RATES
10 UNDER THE NEW SCENARIO, AND THEY ARE HOPING THAT THE NEW
11 EXAMINER -- THEY WILL BE ABLE TO LEVERAGE THE NEW EXAMINER TO
12 GET BETTER ADVERTISING RATES.
13 MR. ALIOTO: YOUR HONOR, I ASSUME THAT THIS EVIDENCE
14 IS FOR THE PURPOSE OF THE WITNESS' UNDERSTANDING. OTHERWISE, I
15 MOVE TO STRIKE IT AS HEARSAY.
16 THE COURT: I ASSUME THAT'S THE REASON IT'S BEING
17 OFFERED?
18 MR. BALABANIAN: CORRECT, YOUR HONOR.
19 THE COURT: ALL RIGHT. ON THAT BASIS YOU MAY
20 PROCEED.
21 BY MR. BALABANIAN:
22 Q. HAVE YOU HAD ANY EXPERIENCE, EVEN AT THE INDEPENDENT, WITH
23 COMPETING WITH THE CHRONICLE AND EXAMINER FOR ADVERTISING?
24 A. YES, WE HAVE HAD.
25 Q. CAN YOU GIVE US AN EXAMPLE?
2082
FANG - DIRECT / BALABANIAN
1 A. YES. ONE EXAMPLE IS FOR THESE COUPON INSERTS THAT I
2 MENTIONED BEFORE, THEY TRADITIONALLY, AGAIN, ADVERTISE ONLY IN
3 THE PAID DAILY NEWSPAPERS. THEY MADE AN EXCEPTION THAT
4 RECEIVED NATIONWIDE ATTENTION IN 1998 WHEN THEY DROPPED OUT OF
5 THE CHRONICLE/EXAMINER AND WENT INTO THE INDEPENDENT. AND SO
6 THEY CAME INTO THE INDEPENDENT, BUT THEY ACTUALLY ONLY STAYED
7 IN THE INDEPENDENT FOR ONE YEAR BECAUSE WHAT HAPPENED WAS THAT
8 WHILE THEY WERE PAYING RATES OF ABOUT $47 PER THOUSAND PRIOR TO
9 THEM COMING INTO THE INDEPENDENT, AFTER THEY CAME INTO THE
10 INDEPENDENT THEY WERE ABLE TO LEVERAGE THE INDEPENDENT AND GOT
11 A RATE OF ABOUT $25 THAT THEY CURRENTLY PAY WITH THE
12 CHRONICLE/EXAMINER RIGHT NOW. SO THAT'S LIKE ONE DAILY -- TYPE
13 OF DAILY NEWSPAPER ADVERTISER THAT I HAVE HAD INTERACTION WITH.
14 ANOTHER ONE WOULD BE, FOR EXAMPLE, THE MOVIE STUDIOS
15 WHICH TRADITIONALLY, AGAIN, ONLY ADVERTISE IN THE PAID DAILY
16 NEWSPAPERS. ABOUT A YEAR AND A HALF AGO MY ADVERTISING STAFF
17 BEGAN CONTACTING THE MAJOR MOTION PICTURE STUDIOS ABOUT
18 ADVERTISING IN THE INDEPENDENT. AND, AGAIN, ALTHOUGH IT IS NOT
19 THEIR CUSTOM, 12 OUT OF THE TOP 12 MAJOR STUDIOS ARE ALL
20 PLACING SMALL ADVERTISING SCHEDULES NOW WITH THE INDEPENDENT.
21 AND SO NOT ONLY DO I KNOW THESE ADVERTISERS, BUT I ALSO KNOW
22 WHAT THEY WOULD BE LOOKING FOR IN A DAILY NEWSPAPER. AND
23 SPECIFICALLY I KNOW THAT ONE OF THEIR CONCERNS WITH THE
24 CHRONICLE IS THAT CURRENTLY THE MOVIE LISTINGS -- OR THEY CALL
25 IT THE "MOVIE CLOCK" OR THE LISTING OF WHERE THE MOVIES ARE
2083
FANG - DIRECT / BALABANIAN
1 PLAYING OR WHAT TIME THE MOVIES ARE PLAYING, THOSE LISTINGS,
2 CURRENTLY THE CHRONICLE CHARGES FOR ALL OF THOSE LISTINGS. AND
3 THEY'RE THE ONLY NEWSPAPER IN THE BAY AREA THAT CHARGES FOR
4 THEM. AND THE STUDIOS ARE VERY UNHAPPY WITH THAT, BUT THEY
5 CAN'T DO ANYTHING ABOUT IT BECAUSE IT'S THE ONLY WAY TO GET
6 YOUR MOVIES LISTED IN SAN FRANCISCO.
7 AND SO I THINK THAT WE WILL BE ABLE TO OFFER THEM
8 SOME SERVICES THAT THEY AREN'T CURRENTLY GETTING WITH THE NEW
9 EXAMINER.
10 Q. DO YOU EXPECT TO PROVIDE PRICE COMPETITION TO THE NEW --
11 I'M SORRY.
12 WILL THE NEW EXAMINER PROVIDE PRICE COMPETITION TO
13 THE CHRONICLE?
14 A. YES.
15 Q. ON ADVERTISING?
16 A. YES, WE WILL.
17 Q. DO YOU EXPECT ANY ADVERTISING SYNERGIES BETWEEN THE NEW
18 EXAMINER AND THE INDEPENDENT?
19 A. YES, WE DO.
20 Q. IF YOU HAD SOMEWHAT DIFFERENT ADVERTISING BASES, HOW CAN
21 THOSE SYNERGIES BE OBTAINED?
22 A. WELL, AS I GAVE ONE EXAMPLE BEFORE ABOUT, SAY, SAFEWAY
23 THAT, AGAIN, ADVERTISES WITH US, WE WILL BE ABLE TO, I HOPE,
24 GET SOME EXTRA ADVERTISING WITH THE -- OUR NEW PAID DAILY
25 PRODUCT.
2084
FANG - DIRECT / BALABANIAN
1 ANOTHER EXAMPLE IS CLASSIFIED ADS, FOR EXAMPLE. IF
2 YOU BUY AN AD IN THE INDEPENDENT, WE WILL BE ABLE TO SAY --
3 TELL PEOPLE THAT YOU CAN PICK UP YOUR AD IN THE NEW EXAMINER
4 FOR AN EXTRA DOLLAR A DAY OR TWO DOLLARS A DAY OR SOME VERY
5 ATTRACTIVE RATE. AND SO THERE ARE SYNERGIES THERE.
6 AND THEN I THINK WE WILL BE ABLE TO USE SOME OF THE
7 TECHNOLOGIES THAT WE HAVE AT THE INDEPENDENT, AS FAR AS
8 ADVERTISING TECHNOLOGIES, TO INCREASE REVENUE IN THE NEW
9 EXAMINER.
10 Q. MR. FANG, WILL THE NEW EXAMINER COMPETE WITH THE CHRONICLE
11 FOR READERS?
12 A. YES, WE WILL.
13 Q. WE HEARD MR. FALK TESTIFY THAT FOR ONLY 60 PERCENT OF
14 THE -- THAT FOR 60 PERCENT OF ITS CURRENT READERS THE EXAMINER
15 IS ONLY A COMPLEMENT TO THE CHRONICLE. DO YOU KNOW WHY THAT
16 IS? WHY DO MOST --
17 A. I -- I THINK THE MOST OBVIOUS REASON IS BECAUSE ONE IS A
18 MORNING PAPER AND ONE IS AN AFTERNOON PAPER. SO YOU CAN BUY
19 BOTH, AS OPPOSED TO WITH THE NEW EXAMINER THEY WILL BOTH BE
20 MORNING NEWSPAPERS SO PEOPLE WILL CHOOSE BETWEEN ONE OR THE
21 OTHER.
22 Q. DO YOU THINK THE NEW EXAMINER WILL BE A MORE EFFECTIVE
23 SUBSTITUTE FOR THE CHRONICLE THAN THE OLD EXAMINER?
24 A. YES, I DO.
25 Q. LET'S TALK ABOUT THE CONTENT OF THE NEW EXAMINER. WHAT
2085
FANG - DIRECT / BALABANIAN
1 KIND OF NEWS WILL IT INCLUDE?
2 A. IT WILL FOCUS ON LOCAL NEWS, BUT IT WILL ALSO INCLUDE
3 NATIONAL AND INTERNATIONAL NEWS.
4 Q. WILL YOU HAVE NEWS BUREAUS TO GATHER NATIONAL AND
5 INTERNATIONAL NEWS?
6 A. WE -- I DON'T ANTICIPATE US HAVING OUR OWN NEWS BUREAUS,
7 BUT I HAVE ALREADY BEGUN TALKING TO NEWS SERVICES FOR HAVING
8 BUREAUS, SAY, IN SACRAMENTO AND WASHINGTON, D.C.
9 Q. DOES THE -- DOES NEW TECHNOLOGY HAVE ANY IMPACT ON NEWS
10 GATHERING?
11 A. YES, NEW TECHNOLOGY HAS A LOT OF IMPACT ON NEWS GATHERING.
12 AND, YOU KNOW, ONE OF MY -- ONE OF THE THINGS THAT WE HOPE TO
13 DO WITH THE INDEPENDENT IS TO CREATE NEW STRATEGIC ALLIANCES
14 WITH INTERNET COMPANIES. AND BECAUSE -- PARTICULARLY IN SAN
15 FRANCISCO, WHICH IS, LIKE, THE MULTI-MEDIA CAPITAL OF THE
16 WORLD, THERE ARE A LOT OF INTERNET COMPANIES THAT SPECIALIZE IN
17 CONTENT, AND WHETHER IT BE BUSINESS NEWS OR ENTERTAINMENT NEWS
18 OR SPORTS. AND WE HOPE TO FORM STRATEGIC ALLIANCES WITH THESE
19 KINDS OF ORGANIZATIONS TO HELP PROVIDE SOME NEWS, AS WELL.
20 Q. I THINK YOU SAID "INDEPENDENT." DID YOU MEAN THE
21 EXAMINER?
22 A. I MEANT THE NEW EXAMINER. I'M SORRY, SIR.
23 Q. WILL THE NEW EXAMINER CARRY SYNDICATED COLUMNS?
24 A. YES, WE WILL, COMIC STRIPS, FEATURES.
25 Q. DO YOU EXPECT TO CARRY ANY THAT ARE -- THAT WILL APPEAR IN
2086
FANG - DIRECT / BALABANIAN
1 THE CHRONICLE?
2 A. WE MAY. ONE OF THE THINGS THAT WE HAVE NEGOTIATED IN OUR
3 PURCHASE AGREEMENT WITH THE HEARST CORPORATION IS WHAT I
4 BELIEVE TO BE ONE OF THE MOST PRO-COMPETITIVE CLAUSES IN THE
5 ENTIRE COUNTRY FOR NEWSPAPERS BECAUSE, TRADITIONALLY, WHEN ONE
6 NEWSPAPER GETS A SYNDICATED COLUMN OR A COMIC STRIP, THE OTHER
7 NEWSPAPER IS NO LONGER ABLE TO GET THAT COMIC STRIP OR FEATURE.
8 AND WHAT HAPPENS TOO OFTEN IS THAT THE LARGER
9 NEWSPAPER -- THE PRICE FOR THESE FEATURES OR THESE COMIC STRIPS
10 ARE BASED ON CIRCULATION. SO WHAT HAPPENS IS THAT THE LARGER
11 NEWSPAPER CAN AFFORD TO PAY A LARGER PRICE AND SO THE SMALLER
12 NEWSPAPER NEVER GETS ANY OF THE BETTER FEATURES OR THE BETTER
13 COMIC STRIPS. BUT WE HAVE A CLAUSE IN THE AGREEMENT WITH THE
14 HEARST CORPORATION THAT THEY WILL NOT USE EXCLUSIVITY ON ANY
15 FEATURE OR COMIC STRIP SO THAT WE CAN BOTH HAVE THOSE AND BOTH
16 OFFER THEM INTO THE PUBLIC.
17 Q. IS THAT A NEGOTIATED TERM OF YOUR AGREEMENT WITH HEARST?
18 A. YES. IT WAS ONE OF THE MORE DIFFICULT NEGOTIATING POINTS.
19 Q. HOW WILL THE LOCAL COVERAGE OF THE NEW EXAMINER COMPARE
20 WITH THE OLD ONE?
21 A. AGAIN, I THINK THAT THE NEW EXAMINER WILL EMPHASIZE LOCAL
22 NEWS COVERAGE MORE THAN THE OLD EXAMINER DID. AGAIN, I THINK
23 WE HAVE HEARD TALK THROUGH THIS TRIAL THAT -- YOU KNOW, THAT
24 HEARST IS TRYING TO PRESERVE THEIR POSITION TO TAKE OVER THE
25 CHRONICLE'S POSITION, SO THEY HAD TO -- WHILE THEIR CIRCULATION
2087
FANG - DIRECT / BALABANIAN
1 WAS DECLINING, WHILE THEY WERE LOSING MONEY, THEY STILL HAD TO
2 KEEP UP THE FACADE OF BEING A METROPOLITAN DAILY NEWSPAPER AND
3 SO KEPT BEEFING UP THEIR NEWSPAPER AND BEEFING UP THEIR
4 NEWSPAPER.
5 AND WE ARE NOT GOING TO MAKE ANY PRETENSE OF BEING A
6 METROPOLITAN DAILY NEWSPAPER BUT, RATHER, A LOCAL DAILY
7 NEWSPAPER.
8 Q. WE HEARD MR. FALK SAY THAT THE SUNDAY NEWSPAPER DOES NOT
9 CARRY ONE INCH OF LOCAL NEWS BECAUSE THE EXAMINER DOES NOT HAVE
10 A LOCAL NEWS BUREAU.
11 WILL THE NEW EXAMINER CARRY ONE INCH OF LOCAL NEWS?
12 A. YES.
13 Q. MORE THAN ONE INCH?
14 A. FAR MORE THAN ONE INCH.
15 Q. MR. FANG, I -- I THINK I REFERRED TO THE INDEPENDENT'S
16 STYLE OR TONE AS "MUSCULAR." WILL THE -- WILL AS MUCH MUSCLE
17 BE SHOWING IN THE NEW EXAMINER?
18 A. NO.
19 Q. WHY NOT?
20 A. WELL, AGAIN, I THINK THAT IT HAS TO DO WITH THE DIFFERENT
21 KINDS OF PUBLICATIONS IS THAT IT WILL BE AS A DAILY AND THE
22 INDEPENDENT CURRENTLY IS AS A NON-DAILY.
23 WHEN YOU ARE A NON-DAILY NEWSPAPER AND YOU ARE
24 TRYING TO FILL YOUR NEWS PAGES, WHAT YOU NEED TO DO IS YOU NEED
25 TO TAKE, BASICALLY, THE WEEK'S EVENTS AND TRY TO CHOOSE THOSE
2088
FANG - DIRECT / BALABANIAN
1 ISSUES OR EVENTS THAT YOU THINK ARE MOST IMPORTANT AND THEN PUT
2 THEM ON THE FRONT PAGE OF YOUR NEWSPAPER.
3 NOW, QUITE OFTEN THOSE WILL ALREADY HAVE BEEN
4 REPORTED IN THE DAILY NEWSPAPERS SO NON-DAILIES DON'T HAVE THE
5 CURRENCY TO SELL OF THOSE -- OF ITS NEWS COVERAGE SO YOU
6 SOMEHOW TRY TO ATTRIBUTE MORE IMPORTANCE OR CREATE DIFFERENT
7 ANGLES. AND SOME PEOPLE WOULD CHARACTERIZE IT AS A MORE
8 SENSATIONALIST APPROACH, BUT YOU HAVE A DIFFERENT WAY AND A
9 DIFFERENT NEED OF COVERING NEWS WITH NON-DAILIES THAN WHEN YOU
10 ARE A DAILY NEWSPAPER.
11 Q. AND THAT -- YOU BELIEVE THAT WILL BE -- THAT ABILITY TO
12 OFFER CURRENCY RATHER THAN SENSATIONALISM WILL AFFECT THE
13 EDITORIAL STYLE AND TONE OF THE EXAMINER?
14 A. WELL, I DIDN'T SAY THAT I AM OFFERING ANY SENSATIONALISM
15 AT ALL. BUT THE NEW EXAMINER WILL BE A MUCH MORE TRADITIONAL
16 DAILY NEWSPAPER WITH THE KIND OF NEWS THAT IT COVERS.
17 AND, AGAIN, I THINK WITH -- DAILY NEWSPAPERS ARE A
18 MORE TRADITIONAL VEHICLE. THEY HAVE THEIR DIFFERENT
19 SECTIONS -- A NEWS SECTION, A BUSINESS SECTION, A SPORTS
20 SECTION, A LIFE-STYLE SECTION. THE NEW EXAMINER WILL BE MORE
21 TRADITIONAL IN THAT VEIN.
22 Q. WILL -- LET'S TALK ABOUT FORMAT.
23 DO YOU AGREE WITH THE PLAINTIFF'S EXPERT WHO
24 TESTIFIED THAT SHIFTING THE EXAMINER TO TABLOID WAS ESSENTIAL
25 OR THE ONE WHO SAID IT WOULD BE FATAL?
2089
FANG - DIRECT / BALABANIAN
1 A. I THINK THAT -- I THINK THE ANSWER LIES PROBABLY SOMEWHERE
2 MORE IN BETWEEN.
3 NOW, MY INTENTIONS AT THIS POINT ARE TO KEEP THE
4 EXAMINER IN ITS BROAD-SHEET FORMAT AND TO NOT SWITCH IT INTO A
5 TABLOID FORMAT.
6 Q. HOW WILL YOU -- DO YOU PLAN ANY CHANGES IN THE FORMAT?
7 A. YES, WE DO.
8 Q. HOW WILL YOU DECIDE ON THOSE CHANGES?
9 A. WELL, ONE OF THE ADVISERS THAT WE HAVE CONTACTED AND THAT
10 WE ARE WORKING WITH IS A GENTLEMAN NAMED ROGER BLACK, AND
11 MR. BLACK IS ONE OF THE PREEMINENT NEWSPAPER DESIGNERS IN THE
12 COUNTRY, HAS REDESIGNED THE EXAMINER IN THE PAST WHEN WILL
13 HEARST WAS THE PUBLISHER, IS CURRENTLY IN THE PROCESS OF
14 REDESIGNING THE LOS ANGELES TIMES. AND HE IS GIVING US ADVICE
15 ON REDESIGNING THE EXAMINER.
16 BUT, AGAIN, WE PROBABLY WILL KEEP IT IN THE
17 BROAD-SHEET FORMAT.
18 Q. DO YOU HAVE ANY IDEA WHAT KIND OF FORMAT CHANGES ARE UNDER
19 CONSIDERATION?
20 A. I THINK THAT WE ARE GOING TO MAKE BETTER USE OF COLOR,
21 PROBABLY USE MORE PHOTOS, TRY TO MAKE THE NEWSPAPER MORE A
22 PLEASANT READ THAN JUST THE KIND OF VERTICAL FORMATTING THAT
23 THE EXAMINER CURRENTLY HAS.
24 Q. YOU HAVE MENTIONED MR. BLACK AS ONE OF YOUR ADVISERS.
25 AGAIN, HIS LINE OF -- HIS EXPERTISE IS IN WHAT AREA?
2090
FANG - DIRECT / BALABANIAN
1 A. HIS EXPERTISE IS IN NEWSPAPER DESIGN.
2 Q. WHAT IS HIS RELATIONSHIP WITH THE NEW EXAMINER?
3 A. HE IS CURRENTLY ONE OF THE PEOPLE THAT IS ADVISING ME.
4 Q. DO YOU ANTICIPATE ANY ROLE FOR HIM IN THE NEW EXAMINER?
5 A. YES. WE HAVE TALKED TO HIM ABOUT PLACING HIM ON THE BOARD
6 OF DIRECTORS FOR THE NEW EXAMINER.
7 Q. DO YOU ANTICIPATE MAKING ANY USE OF NEW TECHNOLOGY AT THE
8 NEW EXAMINER?
9 A. YES. WE ANTICIPATE MAKING MANY DIFFERENT USES OF NEW
10 TECHNOLOGY AT THE EXAMINER.
11 Q. OKAY. WE HAVE ALREADY TALKED ABOUT PAGINATION. IS THAT
12 ONE OF THEM?
13 A. THAT IS ONE OF THEM.
14 Q. ARE THERE OTHERS?
15 A. YES, THERE ARE.
16 Q. WOULD YOU PLEASE TELL THE COURT WHAT OTHER CHANGES IN
17 TECHNOLOGY YOU HAVE IN MIND?
18 A. WELL, FOR EXAMPLE, WITH ADVERTISING, WITH CLASSIFIED
19 ADVERTISING, IF SOMEBODY WANTS TO, FOR EXAMPLE, SELL THEIR CAR
20 OR SOMETHING LIKE THAT, RIGHT NOW ALL THEY REALLY CAN DO IN A
21 NEWSPAPER IS CALL UP AND, YOU KNOW, HAVE A FEW LINES OF
22 DESCRIBING THEIR CAR.
23 WITH THE NEW TECHNOLOGY, YOU CAN PUT THE PHOTO OF
24 THE CAR INTO THE ADVERTISEMENT.
25 IN A SIMILAR VEIN FOR HELP WANTED ADS OR REAL ESTATE
2091
FANG - DIRECT / BALABANIAN
1 ADS, YOU CAN PUT THE LOGO OF THE COMPANY THAT IS SELLING THE
2 HOUSE OR THE LOGO OF THE COMPANY THAT IS SELLING -- THAT HAS
3 BEEN TRYING TO TRACK THE EMPLOYEE.
4 AND THOSE ARE KINDS OF THINGS THAT YOU COULD NOT DO
5 BEFORE BECAUSE YOU HAVE TO, YOU KNOW, GET THE LOGO AND
6 REPRODUCE IT, BUT NOW YOU CAN BASICALLY DO IT WITH THE TOUCH OF
7 A BUTTON. SO THAT'S ANOTHER AREA WHERE I THINK WE WILL TAKE
8 ADVANTAGE OF THE NEW TECHNOLOGY.
9 Q. MR. FANG, YOU HAVE TESTIFIED THAT YOU COULD PRINT THE NEW
10 EXAMINER ON YOUR EXISTING PRESSES. IS THAT YOUR PLAN?
11 A. NO, IT IS NOT.
12 Q. HOW DO YOU PLAN TO PRINT THE NEW EXAMINER?
13 A. WE PLAN TO -- IN THE SHORT TERM WE PLAN TO OUTSOURCE THE
14 PRINTING OF THE EXAMINER TO EXISTING COMMERCIAL PRINTERS.
15 Q. AND IN THE LONG TERM?
16 A. IN THE LONG TERM WE ARE INVESTIGATING PURCHASING NEW PRESS
17 EQUIPMENT OR CREATING LONG-TERM FAVORABLE CONTRACTS WITH THESE
18 COMMERCIAL PRINTERS.
19 Q. THERE HAS BEEN TESTIMONY THAT THERE IS NO COMMERCIAL
20 PRINTING -- NEWSPAPER PRINTING CAPACITY AVAILABLE ANYWHERE IN
21 THE BAY AREA. IS THAT CORRECT?
22 A. THAT'S JUST WRONG.
23 Q. HOW DO YOU KNOW THAT?
24 A. BECAUSE I WENT OUT AND LOOKED FOR COMMERCIAL PRINTING
25 CAPACITY AND FOUND AT LEAST TWO COMMERCIAL PRINTERS THAT HAVE
2092
FANG - DIRECT / BALABANIAN
1 CONFIRMED TO ME PRESS AVAILABILITY AND PRESS CAPACITY TO PRINT
2 THE NEW EXAMINER.
3 MR. ALIOTO: AGAIN, DEPENDING UPON THE PURPOSE, YOUR
4 HONOR, I MOVE TO STRIKE AS BEING HEARSAY.
5 THE COURT: AGAIN, THIS IS ALL OFFERED FOR THE
6 WITNESS' STATE OF MIND. IS THERE ANY OTHER BASIS UPON WHICH
7 THIS IS OFFERED?
8 MR. BALABANIAN: NO, YOUR HONOR. IT GOES TO HIS
9 INTENTIONS AND HIS BASES FOR HIS BELIEF THAT HE CAN SUCCEED.
10 THE COURT: ALL RIGHT. SO WITH THE UNDERSTANDING
11 THAT THIS IS ALL STATE-OF-MIND EVIDENCE, IT WILL BE RECEIVED.
12 BY MR. BALABANIAN:
13 Q. THIS PRINTING CAPACITY THAT YOU TALK ABOUT, IS IT CLOSE
14 ENOUGH TO THE BAY AREA TO ALLOW PAPERS TO BE DELIVERED IN THE
15 MORNING?
16 A. YES. THERE ARE BOTH -- ONE IS IN THE EAST BAY AND ONE IS
17 ON THE PENINSULA, AND THEY ARE BOTH ABOUT 30 MINUTES AWAY IN
18 NON-RUSH-HOUR TRAFFIC OR LESS.
19 Q. WELL, WHERE IS THE WALL STREET JOURNAL PRINTED THAT WE GET
20 HERE IN SAN FRANCISCO?
21 A. IT'S CURRENTLY PRINTED IN PALO ALTO, WHICH IS FURTHER THAN
22 ANY OF THE COMMERCIAL PRINTERS THAT I AM LOOKING AT RIGHT NOW.
23 Q. WHERE IS THE NEW YORK TIMES PRINTED THAT WE GET IN SAN
24 FRANCISCO?
25 A. THE NEW YORK TIMES IS PRINTED ON THE PRESSES OF THE CONTRA
2093
FANG - DIRECT / BALABANIAN
1 COSTA TIMES, WHICH IS ALSO FURTHER THAN EITHER OF THE
2 COMMERCIAL PRINTERS THAT I AM THINKING ABOUT.
3 Q. WAS THERE ANY AVAILABLE PRINTING CAPACITY IN THE BAY AREA
4 BACK IN 1988, THE DATE MR. INGRAM, ONE OF PLAINTIFFS'S EXPERTS,
5 SAID HE CHECKED AND COULDN'T FIND ANY?
6 A. YES. I KNOW THAT THERE WAS PRESS CAPACITY AT THAT TIME.
7 Q. HOW DO YOU KNOW THAT?
8 A. BECAUSE, AS I SAID, AT THAT TIME THE INDEPENDENT IN
9 DECEMBER OF 1988 WAS EXPANDING AND WE NEEDED TO EXPAND IN A
10 SIX-DAY WINDOW. AND SO WE FOUND PRESS CAPACITY IN PITTSBURGH,
11 CALIFORNIA WHERE WE BEGAN PRINTING THE INDEPENDENT WHEN IT
12 FIRST STARTED, AND I KNOW THOSE PRESSES WERE COMPLETELY IDLE,
13 AND IN FACT THEY WERE SO IDLE THAT EVENTUALLY THEY GOT MOVED TO
14 TEXAS.
15 Q. MR. FANG, HAVE YOU PREPARED A BUSINESS PLAN FOR THE NEW
16 EXAMINER?
17 A. NO.
18 Q. WHY NOT?
19 A. BECAUSE I THINK A BUSINESS PLAN IS SOMETHING THAT YOU USE
20 WHEN YOU ARE LOOKING TO SELL A BUSINESS OR LOOKING FOR
21 INVESTORS OF A BUSINESS.
22 Q. ARE YOU DOING EITHER?
23 A. NO, I AM NOT.
24 Q. WELL, HAVE YOU -- IF YOU HAVE NOT PREPARED A BUSINESS
25 PLAN, HAVE YOU PREPARED PLANS FOR THE NEW EXAMINER'S BUSINESS?
2094
FANG - DIRECT / BALABANIAN
1 A. YES, I HAVE PREPARED A LOT OF PLANS FOR THE BUSINESS.
2 MR. ALIOTO: MAY I HAVE THAT AGAIN? EXCUSE ME.
3 (PAUSE IN THE PROCEEDINGS.)
4 MR. BALABANIAN: WOULD YOU LIKE IT READ BACK,
5 MR. ALIOTO?
6 MR. SHULMAN: HERE IT IS.
7 (RECORD READ AS FOLLOWS: "Q. WELL, HAVE YOU --
8 IF YOU HAVE NOT PREPARED A BUSINESS PLAN, HAVE
9 YOU PREPARED PLANS FOR THE NEW EXAMINER'S
10 BUSINESS?")
11 MR. BALABANIAN: YOU HEARD IT, MR. ALIOTO?
12 MR. ALIOTO: I OBJECT ON THE GROUND IT'S VAGUE. I
13 HAVE NEVER MADE THAT OBJECTION IN TRIAL BEFORE BUT I AM GOING
14 TO.
15 THE COURT: I THINK I UNDERSTAND THE QUESTION.
16 MR. BALABANIAN: YOUR HONOR, I WOULD LIKE TO BEGIN
17 LOOKING AT SOME DOCUMENTS, WITH THE COURT'S PLEASURE TO TAKE A
18 BREAK AT THIS POINT.
19 THE COURT: I TAKE IT YOU DO NOT WANT AN ANSWER TO
20 YOUR QUESTION?
21 MR. BALABANIAN: I THOUGHT I GOT AN ANSWER.
22 BY MR. BALABANIAN:
23 Q. MR. FANG, PLEASE ANSWER THE QUESTION.
24 A. YES, I HAVE MADE A LOT OF PLANS FOR THIS NEW BUSINESS.
25 THE COURT: HE HAS MADE A LOT OF PLANS BUT THERE IS
2095
FANG - DIRECT / BALABANIAN
1 NO BUSINESS PLAN.
2 MR. BALABANIAN: THERE IS NOT A DOCUMENT CALLED A
3 BUSINESS PLAN FOR THE REASON THAT HE STATES.
4 THE COURT: IF THIS IS A CONVENIENT TIME TO TAKE A
5 BREAK, THEN WE WILL DO THAT. LET'S RESUME AT 10:15.
6 (RECESS TAKEN AT 10:00 A.M.)
7 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2096
FANG - DIRECT / BALABANIAN
1 (PROCEEDINGS RESUMED AT 10:25 A.M.)
2 THE COURT: VERY WELL, MR. BALABANIAN, YOU MAY
3 CONTINUE YOUR EXAMINATION OF MR. FANG.
4 MR. BALABANIAN: THANK YOU, YOUR HONOR.
5 BEFORE DOING SO, I JUST WANT TO MAKE SURE THAT MY
6 POSITION IS CLEAR WITH REGARD TO THE EVIDENTIARY POINT THAT HAS
7 BEEN RAISED.
8 I BELIEVE THAT ALL OF MR. FANG'S TESTIMONY THIS
9 MORNING WAS ADMITTED FOR ITS TRUTH WITH THE EXCEPTION ONLY OF
10 THE TWO ISSUES AS TO WHICH MR. ALIOTO MADE A MOTION TO STRIKE;
11 THE FIRST BEING THE RESPONSE OF ADVERTISERS TO THE INQUIRIES
12 WHICH MR. FANG HAS MADE OF THEM, AND THE SECOND BEING THE
13 AVAILABILITY OF PRINTING CAPACITY IN THE BAY AREA.
14 I THINK THOSE ARE THE ONLY TWO SUBJECTS AS TO WHICH
15 MOTION TO STRIKE WAS MADE AND THOSE ARE THE ONLY TWO AREAS
16 WHERE THE TESTIMONY HAS BEEN OFFERED ONLY FOR THE WITNESS'
17 STATE OF MIND.
18 THE COURT: WELL, WITH THOSE EXCEPTIONS, AS I
19 UNDERSTAND IT, THE TESTIMONY IS ESSENTIALLY OF THE WITNESS'
20 PLANS FOR THE EXAMINER IF HE ACQUIRES IT.
21 MR. BALABANIAN: WELL, THERE WAS ALSO TESTIMONY AS
22 TO THE HISTORY OF THE PUBLICATIONS, HIS EXPERIENCE AND THE
23 SUCCESS OF HIS EFFORTS TO DATE. I BELIEVE THE ONLY TWO AREAS
24 AS TO WHICH --
25 THE COURT: WELL, BUT I DON'T THINK THOSE MATTERS,
2097
FANG - DIRECT / BALABANIAN
1 THOSE LATTER TWO MATTERS THAT YOU REFERRED TO, ARE IN DISPUTE;
2 ARE THEY, MR. ALIOTO?
3 MR. ALIOTO: I UNDERSTOOD THEM TO BE INTRODUCTORY,
4 YOUR HONOR, AND AS A CONSEQUENCE. BUT, NONETHELESS, LATER ON
5 IT GOT TO BE JUST STATEMENTS OF THIRD PARTIES OUT OF COURT THAT
6 HE WAS TESTIFYING TO, AND I WANTED TO BE CLEAR THAT THOSE
7 STATEMENTS OF THIRD PARTIES OUT OF COURT TO THIS WITNESS AND
8 RECOUNTING THEM IS HEARSAY AND NOT OFFERED FOR THE TRUTH.
9 THE COURT: ALL RIGHT. I THINK THAT'S CLEAR.
10 MR. BALABANIAN: THANK YOU.
11 MAY I JUST BRIEFLY, THEN, ADDRESS THOSE TWO ISSUES
12 IN ANOTHER WAY? WE HAVE DESIGNATED MR. FANG AS AN EXPERT.
13 INDEED, I BELIEVE THAT WAS THE ONLY EXPERT DESIGNATION FILED IN
14 THIS CASE THAT COMPLIED WITH THE COURT'S DIRECTIVE. AND I
15 WOULD LIKE TO ASK MR. FANG TO ADDRESS THESE TWO MATTERS AS AN
16 EXPERT BASED ON HIS 13 YEARS OF EXPERIENCE IN THE BAY AREA
17 NEWSPAPER COMMUNITY. I'LL BE VERY BRIEF, YOUR HONOR.
18 THE COURT: ALL RIGHT.
19 BY MR. BALABANIAN:
20 Q. MR. FANG, DO YOU HAVE AN OPINION AS TO THE LIKELY REACTION
21 OF BAY AREA ADVERTISERS TO THE AVAILABILITY OF A DAILY
22 NEWSPAPER OFFERING LOWER ADVERTISING RATES?
23 A. YES, I DO.
24 Q. WHAT IS THAT OPINION?
25 A. ADVERTISERS ARE LOOKING FORWARD TO SUCH A POSSIBILITY.
2098
FANG - DIRECT / BALABANIAN
1 Q. AND AS AN EXPERT IN NEWSPAPER PRINTING IN THE BAY AREA, DO
2 YOU HAVE AN OPINION AS TO THE AVAILABILITY OF PRINTING
3 CAPACITY, COMMERCIAL PRINTING CAPACITY, FOR NEWSPAPERS IN THE
4 BAY AREA?
5 A. YES, I DO.
6 Q. AND WHAT IS THAT OPINION, SIR?
7 A. THERE IS PLENTY OF NEWSPAPER PRINTING CAPACITY IN THE BAY
8 AREA.
9 Q. THANK YOU.
10 MR. FANG, LET'S LOOK AT EXHIBIT 133. I HAVE PLACED
11 AT YOUR -- AT THE WITNESS STAND THERE A BOOK CONTAINING SOME OF
12 THE DOCUMENTS I'D LIKE TO REVIEW WITH YOU.
13 MR. BALABANIAN: YOUR HONOR, I HAVE PREPARED ONE FOR
14 THE COURT IF IT WOULD PREFER TO RECEIVE IT.
15 THE COURT: THAT WOULD BE FINE. THANK YOU.
16 BY MR. BALABANIAN:
17 Q. EXHIBIT E-133, MR. FANG, HAVE YOU FOUND THAT IN YOUR BOOK?
18 A. YES, I HAVE.
19 Q. CAN YOU PLEASE TELL THE COURT WHAT THAT IS?
20 A. THIS IS OUR PROJECTIONS FOR THE NEW SAN FRANCISCO EXAMINER
21 FOR THE FIRST SIX YEARS.
22 MR. BALABANIAN: YOUR HONOR, THIS DOCUMENT IS NOT
23 YET IN EVIDENCE, AND AT THIS TIME I WOULD MOVE THAT IT BE
24 ADMITTED INTO EVIDENCE.
25 MR. ALIOTO: MAY I JUST ASK ONE OR TWO VOIR DIRE
2099
FANG - DIRECT / BALABANIAN
1 QUESTIONS ABOUT THIS DOCUMENT, YOUR HONOR? IT'S NEW TO US.
2 THE COURT: VERY WELL.
3 MR. BALABANIAN: IT WAS PRODUCED WELL OVER TWO WEEKS
4 AGO.
5 MR. ALIOTO: I'M NOT SAYING -- IF COUNSEL SAYS IT
6 WAS PRODUCED TWO WEEKS AGO, OKAY; BUT WE DIDN'T HAVE IT AT THE
7 TIME OF THE DEPOSITION I DON'T THINK.
8 MR. BALABANIAN: THAT'S CORRECT.
9 MR. ALIOTO: OKAY. IF YOU HAVE -- MAY I, YOUR
10 HONOR?
11 THE COURT: YES, YOU MAY.
12 MR. ALIOTO: OKAY. DIRECTING YOUR ATTENTION TO
13 EXHIBIT 133 THAT IS IN FRONT OF YOU, WHEN WAS THIS PREPARED?
14 THE WITNESS: A FEW WEEKS AGO OR A MONTH AGO.
15 MR. ALIOTO: WAS IT PREPARED BEFORE OR AFTER THE
16 AGREEMENT WITH THE HEARST CORPORATION?
17 THE WITNESS: AFTER.
18 MR. ALIOTO: SO YOU DID NOT RELY UPON THIS DOCUMENT
19 AT ALL WITH REGARD TO YOUR AGREEMENT WITH HEARST?
20 THE WITNESS: NOT THIS DOCUMENT.
21 MR. ALIOTO: THEN I OBJECT TO IT BEING IRRELEVANT.
22 MR. BALABANIAN: YOUR HONOR, IT'S BEING OFFERED WITH
23 REGARD TO THE REASONABLENESS OF HIS BUSINESS PLANS FOR THE NEW
24 EXAMINER, WHICH I UNDERSTAND IS AN ISSUE IN DISPUTE.
25 THE COURT: THE OBJECTION WILL BE OVERRULED AND
2100
FANG - DIRECT / BALABANIAN
1 EXHIBIT 133 ADMITTED.
2 (DEFENDANTS' EXHIBIT E-133
3 RECEIVED IN EVIDENCE)
4 BY MR. BALABANIAN:
5 Q. DOES THIS DOCUMENT, EXHIBIT 133, DEAL WITH ANTICIPATED
6 REVENUE OF THE NEW EXAMINER, ANTICIPATED EXPENSE OR BOTH?
7 A. THIS DEALS WITH REVENUE ONLY.
8 Q. AND IS THIS ONE OF THE PLANS FOR THE EXAMINER'S BUSINESS
9 TO WHICH YOU REFERRED BEFORE THE BREAK?
10 A. YES. IT IS ONE OF THE MORE CONSERVATIVE REVENUE
11 PROJECTIONS WE HAVE.
12 Q. DID YOU -- WHO PREPARED THIS DOCUMENT?
13 A. I PREPARED IT WITH THE ASSISTANCE OF ONE OF MY ADVISORS,
14 DAYTON PIERSON, AND VARIOUS MEMBERS OF THE INDEPENDENT'S
15 CURRENT ADVERTISING STAFF.
16 Q. WHO IS MR. PIERSON?
17 A. MR. PIERSON IS ONE OF MY ADVISORS. HE OWNS A COMPANY
18 CALLED PIERSON MARKETING. HE HAS ABOUT 40 YEARS OF NEWSPAPER
19 EXPERIENCE, 20 YEARS WITH THE HAYWARD DAILY REVIEW, ABOUT FIVE
20 YEARS WITH THE SAN FRANCISCO PROGRESS AND ABOUT 10 YEARS WITH
21 THE INDEPENDENT NEWSPAPER.
22 Q. AND DID YOU RECEIVE ANY OTHER ASSISTANCE IN CREATING THESE
23 REVENUE PROJECTIONS FROM SOMEONE OTHER THAN MEMBERS OF YOUR
24 STAFF?
25 A. IT WAS PRIMARILY MR. PIERSON AND I ALSO WENT OVER THESE
2101
FANG - DIRECT / BALABANIAN
1 WITH MR. JOE NIEHAUS.
2 Q. WHO IS MR. NIEHAUS?
3 A. MR. NIEHAUS IS A PARTNER IN THE INVESTMENT BANKING FIRM OF
4 HELLMAN AND FRIEDMAN. HE IS THE PARTNER THERE THAT SPECIALIZES
5 IN THEIR NEWSPAPER INVESTMENTS AND CONSULTATION PROJECTS.
6 Q. DO YOU HAVE ANY KNOWLEDGE OF THE EXTENT OF HIS EXPERIENCE
7 IN THE NEWSPAPER BUSINESS?
8 A. I HAVE SOME KNOWLEDGE, YES.
9 Q. WOULD YOU PLEASE SHARE IT WITH THE COURT?
10 A. EARLIER ON THEY DID CONSULTATION PROJECTS AND IN THE '80'S
11 DID A MAJOR CONSULTING PROJECT WITH THE MC CLATCHY NEWSPAPER
12 GROUP WHICH RUNS THE SACRAMENTO BEE AND THE MINNEAPOLIS STAR
13 TRIBUNE. IN THE '90'S THEY DID A CONSULTING PROJECT WITH THE
14 CHRONICLE PUBLISHING COMPANY.
15 THEY HAVE SINCE STOPPED DOING CONSULTATION PROJECTS
16 AND ARE IN THE -- ONLY DO INVESTMENTS AND PURCHASES OF
17 NEWSPAPER ORGANIZATIONS. THEY HAD A NEWSPAPER DEAL RECENTLY
18 WITH CONRAD BLACK, AMONG OTHERS.
19 Q. WHEN YOU SAY "THEY," TO WHOM ARE YOU REFERRING?
20 A. THE FIRM HELLMAN AND FRIEDMAN.
21 Q. ALL RIGHT. LET'S LOOK AT THE FIRST LINE, IF WE MAY,
22 PARAGRAPH A. YOU FIND THERE THE STATEMENT:
23 "ALL REVENUE NUMBERS WERE DERIVED FROM THE
24 HISTORY OF THE EXAMINER ADVERTISING ACCOUNTS
25 FROM 1998 AND 1999."
2102
FANG - DIRECT / BALABANIAN
1 IS THAT A TRUE STATEMENT?
2 A. YES, SIR.
3 Q. HOW DID YOU OBTAIN THAT INFORMATION?
4 A. WE OBTAINED SOME ADVERTISING RECORDS, BOOKS AND RECORDS,
5 FROM THE SAN FRANCISCO NEWSPAPER AGENCY THROUGH THE HEARST
6 CORPORATION.
7 Q. PARAGRAPH B STATES:
8 "REVENUE BY CATEGORY WAS DETERMINED BY PRIOR
9 KNOWLEDGE OF THE MARKET, THE HISTORY OF KEY
10 MAJOR ADVERTISERS AND THE PERFORMANCE OF
11 ADVERTISING AND CIRCULATION REVENUE OF OTHER
12 DAILY NEWSPAPERS WITH LIKE CIRCULATION AND
13 DEMOGRAPHICS."
14 FROM WHAT SOURCE DID YOU DERIVE THAT INFORMATION?
15 A. FROM A VARIETY OF SOURCES.
16 Q. CAN YOU BRIEFLY STATE WHAT THEY ARE?
17 A. YEAH. SO PRIOR KNOWLEDGE OF THE MARKET WAS PRIOR
18 KNOWLEDGE BY MR. PIERSON, MYSELF AND OTHER MEMBERS OF MY
19 ADVERTISING STAFF WHO HAVE BEEN WORKING IN THIS MARKET FOR MANY
20 YEARS.
21 THE HISTORY OF KEY MAJOR ADVERTISERS WAS PARTIALLY
22 FROM OUR OWN KNOWLEDGE AND PARTIALLY FROM THE RECORDS SUPPLIED
23 BY THE HEARST CORPORATION.
24 AND THE PERFORMANCE OF ADVERTISING AND CIRCULATION
25 REVENUE FOR OTHER DAILY NEWSPAPERS WAS OBTAINED THROUGH LOOKING
2103
FANG - DIRECT / BALABANIAN
1 AT WHAT OTHER NEWSPAPERS -- LOCAL DAILY NEWSPAPERS OF LIKE SIZE
2 IN THE BAY AREA MARKET ARE DOING.
3 Q. PARAGRAPH D STATES:
4 "YEAR ONE RETAIL ADVERTISING RATES ARE BASED
5 ON $22 PER COLUMN INCH. THIS RATE IS VERY LOW
6 AND COMPETITIVE FOR A DAILY NEWSPAPER WITH
7 45,000 PAID CIRCULATION."
8 MY FIRST QUESTION TO YOU, SIR, IS: IS 45,000 YOUR
9 TARGET CIRCULATION?
10 A. NO, IT IS NOT.
11 Q. WHY WAS THAT NUMBER USED IN THIS REVENUE PROJECTION?
12 A. THIS PROJECTION WAS OUR MOST CONSERVATIVE APPROACH TO THE
13 KIND OF REVENUE THAT WE MIGHT BE GENERATING.
14 Q. HOW DOES THE PROJECTED ADVERTISING RATE OF $22 PER COLUMN
15 INCH COMPARE WITH THAT OF OTHER BAY AREA NEWSPAPERS?
16 A. FOR EXAMPLE, IF YOU COMPARE IT WITH THE MARIN INDEPENDENT
17 JOURNAL, WHICH HAS CIRCULATION OF ABOUT 41,000, THEIR
18 ADVERTISING RATE IS ABOUT $38. IF YOU COMPARE IT WITH THE
19 CURRENT ADVERTISING RATE OF THE CHRONICLE/EXAMINER COMBINATION,
20 THEIR ADVERTISING RATE AVERAGES ABOUT $250, I BELIEVE GOES UP
21 TO ABOUT $280.
22 IF YOU COMPARE IT TO THE WAY THE NEWSPAPER AGENCY
23 SELLS ADVERTISING, SAY AN EXAMINER STAND-ALONE, THE EXAMINER AS
24 A STAND-ALONE BUY WOULD BE ABOUT $30 ACCORDING TO THE
25 CHRONICLE/EXAMINER RATE CARD.
2104
FANG - DIRECT / BALABANIAN
1 Q. COMPARING THE RATE USED IN THIS PROJECTION WITH THAT OF
2 THE CURRENT CHRONICLE/EXAMINER, ARE YOU SAYING THEN THAT THE
3 RATE YOU USED FOR THESE PROJECTIONS IS LESS THAN ONE TENTH OF
4 THE CURRENT ADVERTISING PER INCH RATE OF THE
5 CHRONICLE/EXAMINER?
6 A. YES, THAT'S CORRECT.
7 Q. AND, AGAIN, DO YOU REGARD THAT AS AN OPTIMISTIC, REALISTIC
8 OR A CONSERVATIVE ASSUMPTION?
9 A. A CONSERVATIVE ASSUMPTION.
10 Q. LET'S TURN, IF WE MAY, TO PAGE BEARING PRODUCTION NUMBER
11 1449. WHAT IS THAT?
12 A. THIS IS A SUMMARY OF THE REVENUE PROJECTED IN THE THIRD
13 YEAR FOR THE NEW EXAMINER.
14 Q. THE FIRST CATEGORY IS RETAIL DISPLAY ADVERTISING. WOULD
15 YOU PLEASE TELL THE COURT WHAT THAT REFERS TO?
16 A. RETAIL DISPLAY ADVERTISING IS THE ADVERTISING THAT RUNS IN
17 THE NEWSPAPER FROM MOSTLY LOCAL RETAILERS, LOCAL BUSINESSES.
18 Q. NOW, I NOTICE THAT IN THAT DETAIL THERE YOU HAVE SOME
19 CATEGORIES OF RETAILERS BUT ALSO A SPECIFIC -- SOME SPECIFIC
20 ONES, SAFEWAY, FOR EXAMPLE, AND MACY'S. HOW DID YOU DERIVE
21 THOSE NUMBERS?
22 A. AGAIN, WE LOOKED AT WHAT THE STORES WERE CURRENTLY DOING
23 AND TRIED TO MAKE A CONSERVATIVE ESTIMATE OF WHAT WE COULD MOST
24 CONSERVATIVELY EXPECT.
25 Q. LET'S TAKE, FOR EXAMPLE, MACY'S. YOU PROJECT IN THE THIRD
2105
FANG - DIRECT / BALABANIAN
1 YEAR THAT YOU WILL DERIVE REVENUE OF $794,430 FROM MACY'S BASED
2 ON FIVE PAGES PER WEEK. WHERE DOES THAT NUMBER COME FROM?
3 A. THE 794 OR --
4 Q. THE FIVE PAGES PER WEEK, LET'S START THERE.
5 A. THE FIVE PAGES PER WEEK IS A CONSERVATIVE ESTIMATE OF WHAT
6 MACY'S MIGHT RUN IN THE NEW EXAMINER. CURRENTLY, FOR EXAMPLE,
7 I BELIEVE MACY'S RUNS BETWEEN 12 AND 15 PAGES IN THE
8 CHRONICLE/EXAMINER COMBINATION.
9 Q. AND THE DOLLAR FIGURE, BY WHAT MEANS WAS THAT DERIVED?
10 A. THAT'S MULTIPLIED OUT USING THE NUMBER OF PAGES TIMES THE
11 RATE TIMES THE NUMBER OF COLUMNS PER PAGE TIMES FIVE PAGES PER
12 WEEK TIMES 52 WEEKS PER YEAR.
13 Q. LET'S LOOK AT THE LAST PAGE OF THIS EXHIBIT. WHAT IS --
14 I'M SORRY, THE LAST PAGE OF THE EXHIBIT. THIS -- THERE'S A
15 PROBLEM HERE.
16 DOES THIS EXHIBIT THEN SUMMARIZE YOUR REVENUE
17 PROJECTIONS -- PROVIDE DETAILED REVENUE PROJECTIONS FOR EACH
18 YEAR BY CATEGORY OF ADVERTISERS?
19 A. YES, IT DOES.
20 Q. AND DO YOU, WHEN IT WAS POSSIBLE, SPECIFY PARTICULAR
21 ADVERTISERS FROM WHOM YOU EXPECT TO DERIVE ADVERTISING REVENUE?
22 A. YES, SPECIFIC ADVERTISER GROUP USUALLY NAMED WHEN THEY
23 WERE LARGER ADVERTISERS.
24 Q. ALL RIGHT. LET'S LOOK AT EXHIBIT 134, E-134, IN THE BOOK,
25 MR. FANG.
2106
FANG - DIRECT / BALABANIAN
1 A. YES, SIR.
2 Q. WHAT IS THIS EXHIBIT?
3 A. THIS IS A SIX-YEAR FORECAST FOR THE NEW EXAMINER TAKING
4 INTO ACCOUNT REVENUE PROJECTIONS AND EXPENSE PROJECTIONS.
5 MR. BALABANIAN: YOUR HONOR, THIS DOCUMENT IS ALSO
6 NOT IN EVIDENCE AND I WOULD AT THIS TIME MOVE ITS ADMISSION.
7 MR. ALIOTO: MAY I ASK JUST TWO QUESTIONS ON VOIR
8 DIRE?
9 THE COURT: VERY WELL.
10 MR. ALIOTO: DIRECTING YOUR ATTENTION TO WHAT IS
11 MARKED AS E-134 THAT WAS JUST PLACED BEFORE YOU, WHICH IS
12 HEADNOTED "SAN FRANCISCO EXAMINER LONG-TERM FORECAST," WHEN WAS
13 THIS DOCUMENT PREPARED?
14 THE WITNESS: A FEW WEEKS, A MONTH AGO.
15 MR. ALIOTO: BEFORE OR AFTER YOUR DEPOSITION?
16 THE WITNESS: ABOUT THE SAME -- I THINK IT WAS IN
17 PROCESS ABOUT THE SAME TIME AS MY DEPOSITION. IT WASN'T
18 COMPLETED UNTIL AFTERWARDS.
19 MR. ALIOTO: OKAY. SO IT WAS AFTER YOUR DEPOSITION?
20 THE WITNESS: YEAH, A FEW DAYS AFTERWARDS.
21 MR. ALIOTO: AND WAS IT PREPARED AT THE SAME TIME AS
22 EXHIBIT 133 THAT YOU'VE BEEN JUST BEING QUESTIONED ON?
23 THE WITNESS: IT WAS BEING PREPARED AT ABOUT THE
24 SAME TIME IN CONJUNCTION WITH THAT, YES.
25 MR. ALIOTO: IF 133 HAD A FAX DATE OF APRIL 28TH,
2107
FANG - DIRECT / BALABANIAN
1 THE FRIDAY BEFORE THE BEGINNING OF TRIAL, WOULD THAT ADVISE YOU
2 THAT THAT WAS ABOUT THE DATE THAT THESE DOCUMENTS WERE
3 PREPARED?
4 THE WITNESS: THESE WOULD HAVE BEEN PREPARED, I
5 THINK, SOMEWHAT BEFORE THAT DATE.
6 MR. ALIOTO: IF YOU WERE SERVED -- YOU WERE SERVED
7 WITH A SUBPOENA RIGHT BEFORE YOUR DEPOSITION?
8 THE WITNESS: YES.
9 MR. ALIOTO: AND THESE DOCUMENTS ORDINARILY WOULD
10 HAVE BEEN RESPONSIVE TO THAT SUBPOENA IF THEY HAD BEEN PREPARED
11 AT THAT TIME; WOULDN'T THEY? YOU WOULD HAVE HAD --
12 THE WITNESS: YES. YES.
13 MR. ALIOTO: SO YOU OBVIOUSLY DIDN'T HAVE THEM,
14 OTHERWISE YOU WOULD HAVE BEEN REQUIRED TO GIVE THEM TO US;
15 CORRECT?
16 THE WITNESS: I DID NOT HAVE THESE DOCUMENTS AT MY
17 DEPOSITION.
18 MR. ALIOTO: AND THEY HADN'T BEEN PREPARED --
19 THE WITNESS: THAT'S CORRECT.
20 MR. ALIOTO: -- AT THAT TIME?
21 OKAY. ALL RIGHT. I OBJECT ON THE GROUND THAT IT'S
22 INCOMPETENT IN THE SENSE THAT IT'S PREPARED SOLELY FOR THE
23 LITIGATION AND NOT FOR THE PURPOSE FOR WHICH IT IS INTENDED TO
24 BE OFFERED.
25 BY MR. BALABANIAN:
2108
FANG - DIRECT / BALABANIAN
1 Q. MR. FANG, WERE THESE DOCUMENTS PREPARED AS PART OF YOUR
2 PREPARATION FOR THE COMMENCEMENT OF OPERATIONS OF THE NEW
3 EXAMINER?
4 A. YES, THEY WERE.
5 Q. HAS YOUR PLANNING FOR THE NEW EXAMINER BEEN AN ONGOING
6 PROCESS FROM THE TIME THAT YOU ENTERED INTO YOUR AGREEMENT WITH
7 HEARST?
8 A. YES, IT HAS BEEN AND CONTINUES TO BE.
9 Q. AND ARE THESE THE LATEST VERSIONS OF YOUR PROJECTIONS AND
10 BUDGETS FOR THE NEW EXAMINER?
11 A. WE CONTINUE TO WORK ON THE BUDGETS AND THE PROJECTIONS.
12 MR. BALABANIAN: OFFER THE DOCUMENT IN EVIDENCE,
13 YOUR HONOR.
14 THE COURT: THE OBJECTION WILL BE OVERRULED AND 134
15 WILL BE ADMITTED.
16 (DEFENDANTS' EXHIBIT E-134
17 RECEIVED IN EVIDENCE)
18 BY MR. BALABANIAN:
19 Q. NOW, MR. FANG, LOOKING AT THE FIRST PAGE OF EXHIBIT E-134,
20 YOU HAVE TOLD US THAT THIS IS A SIX-YEAR FORECAST OF REVENUE
21 AND EXPENSE; IS THAT CORRECT?
22 A. YES, IT IS.
23 Q. AND WHO PREPARED THIS DOCUMENT, THIS PARTICULAR PAGE?
24 A. MR. NIEHAUS AT HELLMAN AND FRIEDMAN DID THIS DOCUMENT.
25 Q. THE TOP ROW OF NUMBERS, WHAT IS THAT?
2109
FANG - DIRECT / BALABANIAN
1 A. THE REVENUE NUMBERS THERE OR --
2 Q. YES.
3 A. THAT IS THE REVENUE BY YEAR THAT WE ARE PROJECTING.
4 Q. AND WHAT IS THE BASIS FOR THE ASSUMPTIONS THERE REGARDING
5 THE GROWTH OF REVENUE?
6 A. THESE REVENUE NUMBERS ARE DETAILED IN THE EXHIBIT THAT WE
7 JUST LOOKED AT.
8 Q. THAT'S EXHIBIT E-133?
9 A. YES, THAT'S CORRECT.
10 Q. I NOTE THAT THERE IS A COLUMN DOWN THE PAGE CALLED "SHARED
11 SAVINGS." DO YOU SEE THAT?
12 A. YES, I DO.
13 Q. CAN YOU EXPLAIN TO THE COURT WHAT THAT IS?
14 A. THAT IS -- HAS TO DO WITH THE REIMBURSEMENT FORMULA IN MY
15 PURCHASE AGREEMENT FROM THE HEARST CORPORATION FOR THE EXAMINER
16 AND IT REFERS TO -- THERE'S A 25 MILLION-DOLLAR REIMBURSEMENT,
17 APPROXIMATELY 25 MILLION-DOLLAR PER YEAR REIMBURSEMENT FOR
18 ABOUT THREE YEARS; AND EXPENSES THAT FALL BELOW THAT
19 $25 MILLION ARE SHARED WHERE 50 PERCENT OF IT GOES TO THE
20 HEARST CORPORATION AND 50 PERCENT OF IT GOES BACK INTO EXIN
21 LLC, THE COMPANY THAT RUNS THE NEW EXAMINER.
22 Q. AND IS THAT -- DO THOSE FIGURES REPRESENT YOUR PROJECTIONS
23 AS TO THE AMOUNT OF SHARED SAVINGS IN THOSE YEARS WHERE YOUR
24 EXPENSES WOULD BE REIMBURSED IN PART BY HEARST?
25 A. THAT'S RIGHT.
2110
FANG - DIRECT / BALABANIAN
1 Q. MOVING DOWN TO THE NET INCOME LINE, DOES THIS LONG-TERM
2 FORECAST PROJECT PROFITS IN EACH OF THE NEXT SIX YEARS?
3 A. NO, IT DOES NOT.
4 Q. DOES IT PROJECT ANY LOSSES?
5 A. YES, IT DOES.
6 Q. WHICH YEAR? YEAR OR YEARS.
7 A. IN YEAR FOUR WE PROJECT A LOSS.
8 Q. AND WHY IS THAT?
9 A. BECAUSE YEAR FOUR IS THE FIRST YEAR WHERE WE WON'T HAVE
10 THE SUBSIDY AND OUR REVENUE WE ARE PROJECTING MAY NOT REACH OUR
11 EXPENSES FOR THAT ONE YEAR.
12 Q. YOU'VE USED THE TERM "SUBSIDY." ARE YOU IN FACT RECEIVING
13 A SUBSIDY FROM HEARST?
14 A. NO.
15 Q. WHAT ARE YOU RECEIVING?
16 A. IT IS A REIMBURSEMENT OF EXPENSES THAT ARE SPENT ON THE
17 EXAMINER.
18 Q. WHAT'S THE DIFFERENCE BETWEEN COST REIMBURSEMENT AND A
19 SUBSIDY IN YOUR OPINION?
20 A. A SUBSIDY, IF THEY WERE JUST TO WRITE ME A CHECK FOR
21 $25 MILLION AND GAVE ME THAT MONEY, THAT'S ONE THING; BUT IN
22 THIS CASE THE MONEY CAN ONLY BE SPENT ON THE EXAMINER.
23 Q. IS THERE ANY WAY THAT HEARST CAN CONFIRM THAT THAT'S WHAT
24 HAPPENED TO ITS MONEY?
25 A. YES. IN FACT, IN THE CONTRACT WE AGREED THAT THERE WOULD
2111
FANG - DIRECT / BALABANIAN
1 BE AN OUTSIDE INDEPENDENT AUDIT ON AN ANNUAL BASIS OF THE
2 EXPENSES TO MAKE SURE THAT ALL OF THE EXPENSES WERE REASONABLY
3 RELATED TO THE NEW EXAMINER; AND, IN FACT, WE CHOSE AS OUR
4 AUDITING FIRM ARTHUR ANDERSEN BECAUSE NEITHER HEARST NOR I HAD
5 A RELATIONSHIP WITH THAT ACCOUNTING FIRM.
6 Q. WELL, LET'S LOOK AT THE NET INCOME LINE AGAIN. IS THERE
7 ANY YEAR IN WHICH THERE'S A CUMULATIVE DEFICIT?
8 A. NO, THERE IS NOT.
9 Q. SO DOES -- WHAT IS THE EFFECT OF YOUR -- BASED ON THE
10 FIGURES IN THIS FORECAST, WHAT WOULD BE THE NET CASH POSITION
11 OF THE NEW EXAMINER FROM YEAR TO YEAR? WOULD IT EVER BE IN A
12 DEFICIT?
13 A. NO, IT WOULD NOT.
14 Q. LET'S TURN TO THE NEXT PAGE. CAN YOU TELL US, MR. FANG,
15 WHAT THIS PAGE REFLECTS?
16 A. THIS PAGE BASICALLY REFLECTS THE EXPENSE BUDGETS OVER THE
17 FIRST SIX YEARS.
18 Q. BY WHOM WAS IT PREPARED?
19 A. THIS IS A SUMMARY THAT WAS PREPARED BY MR. NIEHAUS USING
20 INFORMATION PROVIDED PRIMARILY BY ME AND A GENTLEMAN NAMED
21 MR. THOMAS STULTZ.
22 Q. STULTZ?
23 A. STULTZ.
24 Q. WHO IS MR. STULTZ?
25 A. MR. STULTZ IS THE PRESIDENT OF THE NEWSPAPER DIVISION FOR
2112
FANG - DIRECT / BALABANIAN
1 A COMPANY CALLED GRAY COMMUNICATIONS.
2 Q. WHAT IS HIS CONNECTION WITH THE INDEPENDENT?
3 A. HE -- HE HAS NO CONNECTION TO THE INDEPENDENT.
4 Q. HOW DID HE COME TO BE INVOLVED IN PREPARATION OF THIS
5 EXPENSE BUDGET?
6 A. HE IS SOMEONE THAT I'VE KNOWN FOR A NUMBER OF YEARS IN THE
7 INDUSTRY, SOMEONE WHOSE OPINION I RESPECT, SOMEONE WHO HAS HAD
8 EXPERIENCE RUNNING NEWSPAPERS ABOUT THE SIZE OF THE NEW
9 EXAMINER.
10 HE ALSO HAS HAD EXPERIENCE WITH COMMUNITY WEEKLIES,
11 NOTABLY THE ST. LOUIS SUBURBAN JOURNALS. HE HAS ALSO BEEN
12 INVOLVED IN START-UP NEWSPAPER OPERATIONS; AND, IN FACT,
13 CURRENTLY ONE OF HIS NEWSPAPER OPERATIONS IS IN GWYNETTE COUNTY
14 WHERE HE PUBLISHES THE GWYNETTE DAILY POST. AND I THINK WE'VE
15 HEARD SOME TESTIMONY IN THIS TRIAL AGAIN THAT THE NEW YORK
16 TIMES HAD A NEWSPAPER IN GWYNETTE THAT FAILED BUT HE PICKED UP
17 THE PIECES AND STARTED THE GWYNETTE DAILY POST AND IS NOW A
18 SUCCESSFUL DAILY NEWSPAPER.
19 Q. IS HE CURRENTLY AN OPERATOR OF ACTIVE NEWSPAPER
20 PUBLICATIONS?
21 A. YES, HE IS AN ACTIVE OPERATOR OF NEWSPAPER PUBLICATIONS
22 TODAY.
23 Q. WAS HE INVOLVED AT ALL IN THE PROCESS THAT LED TO YOUR
24 CONTRACT TO ACQUIRE THE EXAMINER?
25 A. YES, HE WAS.
2113
FANG - DIRECT / BALABANIAN
1 Q. IN WHAT WAY?
2 A. HE ADVISED ME DURING THE NEGOTIATING PROCESS. HE ALSO
3 ADVISED ME AS FAR AS EXPENSE BUDGETS AND OPERATIONAL BUDGETS
4 THROUGH MY NEGOTIATIONS.
5 Q. MR. FANG, DO THE EXPENSES PROJECTED ON THE FIRST PAGE OF
6 THIS EXHIBIT COME FROM THE DETAILED BUDGET THAT APPEARS ON THE
7 SECOND PAGE?
8 A. THAT'S CORRECT.
9 Q. AND DOES THAT EXPENSE BUDGET COVER ALL CATEGORIES OF
10 ANTICIPATED EXPENSE FOR THE NEW EXAMINER?
11 A. YES, IT DOES.
12 Q. AGAIN, THE PEOPLE WHO PARTICIPATED IN ITS CREATION ARE
13 MR. STULTZ, YOURSELF?
14 A. MYSELF, MR. NIEHAUS AND MR. PIERSON TO A SMALL EXTENT.
15 Q. DO YOU HAVE AN OPINION, SIR, AS TO WHETHER YOUR EXPENSE
16 BUDGET IS OPTIMISTIC, REALISTIC OR CONSERVATIVE?
17 A. THE EXPENSE BUDGET IS MORE REALISTIC, NOT AS CONSERVATIVE
18 AS THE REVENUE.
19 Q. YOU'VE MADE REFERENCE TO ADVICE RECEIVED FROM MR. STULTZ.
20 IN WHAT FORM DID MR. STULTZ TYPICALLY CONVEY THAT ADVICE TO
21 YOU?
22 A. TYPICALLY IT WAS THROUGH E-MAIL OR OVER THE PHONE, AND HE
23 ALSO MADE A COUPLE OF TRIPS OUT HERE DURING THE KIND OF
24 NEGOTIATING PERIOD.
25 Q. LET'S LOOK AT EXHIBIT E-66 YOU'LL FIND IN YOUR BINDER.
2114
FANG - DIRECT / BALABANIAN
1 THIS IS IN EVIDENCE.
2 COULD YOU TELL US, MR. FANG, WHAT E-66 CONSISTS OF?
3 A. IT'S AN E-MAIL FROM MR. STULTZ TO MYSELF.
4 Q. IS THIS TYPICAL OF THE KIND OF E-MAIL THAT HE SENT YOU?
5 A. YES, IT IS.
6 Q. CAN YOU GIVE US SOME ESTIMATE OF HOW MANY E-MAILS OF THIS
7 SORT YOU GOT FROM MR. STULTZ IN THE COURSE OF THE WORK THAT HE
8 DID FOR YOU?
9 A. I DON'T KNOW THE EXACT NUMBER.
10 Q. WITH WHAT TOPIC IS THIS E-MAIL CONCERNED?
11 A. THIS E-MAIL IS PRIMARILY CONCERNED WITH THE CALCULATION OF
12 NEWSPRINT AND PRINTING COSTS.
13 Q. ACCORDING TO THIS DOCUMENT, MR. STULTZ CALCULATES THAT YOU
14 WILL NEED 3,000 METRIC TONS OF NEWSPRINT PER YEAR AT $600 PER
15 METRIC TON. WHAT DOES THAT COME OUT TO ON AN ANNUAL BASIS? BE
16 CAREFUL.
17 A. I DON'T WANT TO GET INTO... IT'S $1.8 MILLION A YEAR.
18 Q. DO YOU KNOW, SIR, ANY BASIS FOR THE REPRESENTATION MADE BY
19 PLAINTIFF'S COUNSEL TO THE COURT THAT THE 25 MILLION-DOLLAR
20 REIMBURSEMENT FOR HEARST WOULDN'T EVEN COVER THE COST OF
21 NEWSPRINT?
22 A. ONLY THAT THEY MIGHT HAVE ADDED AN EXTRA ZERO.
23 Q. LET ME ASK YOU THIS QUESTION: WERE THESE DOCUMENTS,
24 EXHIBIT E-133 AND E-134, PRODUCED TO PLAINTIFF'S COUNSEL IN
25 DISCOVERY?
2115
FANG - DIRECT / BALABANIAN
1 A. (WITNESS EXAMINES DOCUMENTS.) NO, I BELIEVE NOT.
2 Q. IN DISCOVERY, NOT -- I'M NOT ASKING ABOUT WHEN THEY WERE
3 PRODUCED.
4 A. THEY WERE PRODUCED TO THE -- YES, THEY WERE PRODUCED AFTER
5 MY DEPOSITION.
6 Q. WERE THEY IN THE POSSESSION OF PLAINTIFF'S COUNSEL AT THE
7 TIME THEY REPEATEDLY REPRESENTED TO WITNESSES IN THIS CASE THAT
8 YOU HAD NO PLANS FOR YOUR BUSINESS?
9 A. YES, THEY WERE.
10 Q. HOW MANY PEOPLE DO YOU PLAN TO HAVE IN THE EDITORIAL STAFF
11 OF THE NEW EXAMINER?
12 A. WE'RE PLANNING AT THIS POINT IN THE EDITORIAL DEPARTMENT
13 30 TO 40 PEOPLE.
14 Q. DO YOU THINK THAT'S A REALISTIC NUMBER?
15 A. YES, IT IS A REALISTIC NUMBER.
16 Q. HOW DID YOU ARRIVE AT IT?
17 A. IT'S A LITTLE BIT LOWER THAN THE INDUSTRY AVERAGE. THE
18 INDUSTRY RULE OF THUMB IS THAT YOU HAVE ONE PER THOUSAND; BUT
19 THERE ARE MANY NEWSPAPERS THAT RUN ON FAR LESS THAN THAT.
20 AND, FOR EXAMPLE, EVEN THE EXAMINER CURRENTLY WHICH,
21 YOU KNOW, HAS IN ITS NEWSROOM ABOUT 200 PEOPLE, ONE OF THE
22 THINGS IS WE LOOKED THROUGH A WEEK'S WORTH OF EXAMINER AND
23 THERE WERE A TOTAL OF 100 AND I THINK 86 STORIES WRITTEN BY
24 EXAMINER STAFF. AND IN THE INDUSTRY YOU WANT EACH REPORTER TO
25 BE WRITING AT LEAST SIX STORIES A WEEK, SO THAT WOULD MAKE 31
2116
FANG - DIRECT / BALABANIAN
1 REPORTERS THAT ACTUALLY DID WORK FOR THE EXAMINER FOR THAT
2 WEEK.
3 Q. AND IS THAT THE MANNER IN WHICH YOU DERIVED THE PROJECTED
4 STAFFING OF THE EDITORIAL DEPARTMENT OF NEW EXAMINER?
5 A. YES.
6 Q. DO YOU -- ONE OF PLAINTIFF'S EXPERTS TESTIFIED THAT YOU'RE
7 PLANNING 100 PERCENT TURNOVER OF THE EDITORIAL STAFF; IS THAT
8 CORRECT?
9 A. NO, IT IS NOT.
10 Q. HOW MANY PEOPLE DO YOU ANTICIPATE BEING INVOLVED IN THE
11 PRINTING OPERATION?
12 A. OF THE NEW EXAMINER?
13 Q. YES.
14 A. WELL, IT DEPENDS IF WE OUTSOURCE IT OR WE DON'T OUTSOURCE
15 IT.
16 Q. AND IF YOU ULTIMATELY DEVELOP YOUR OWN PRINTING
17 CAPABILITY, HOW MANY PEOPLE WILL YOU HAVE ON THE STAFF?
18 A. I THINK IT COULD BE ABOUT 30 PEOPLE.
19 Q. WITH RESPECT TO THE POSSIBILITY OF GETTING YOUR OWN
20 PRINTING PLANT, DO YOU HAVE ANY ESTIMATE, SIR, AS TO HOW LONG
21 IT WOULD TAKE YOU TO DO THAT?
22 A. YES, I DO.
23 Q. WHAT IS THAT?
24 A. IT COULD TAKE AS LITTLE AS SIX TO EIGHT WEEKS TO GET A
25 PRESS INSTALLED.
2117
FANG - DIRECT / BALABANIAN
1 Q. HOW WOULD YOU ACCOMPLISH THAT?
2 A. I WOULD ACCOMPLISH THAT THROUGH PRESS EQUIPMENT PROVIDERS
3 AND PRESS EQUIPMENT INSTALLATION COMPANIES WHOM I'VE ALREADY
4 CONTACTED.
5 Q. AND, SIR, AS AN EXPERT IN NEWSPAPER PRINTING IN THE BAY
6 AREA, DO YOU HAVE AN OPINION AS TO WHETHER THERE EXISTS
7 EQUIPMENT AVAILABLE IN THE MARKET THAT YOU COULD ACQUIRE AND
8 PUT INTO OPERATION WITHIN THAT PERIOD OF TIME?
9 A. YES.
10 Q. AND WHAT IS THAT OPINION?
11 A. I KNOW THAT THERE ARE EQUIPMENT -- THERE IS EQUIPMENT
12 AVAILABLE IN MORE THAN ONE FORM THAT COULD BE INSTALLED WITH
13 ENOUGH CAPACITY TO PRINT THE NEW EXAMINER.
14 Q. WOULD THAT BE NEW OR USED EQUIPMENT?
15 A. I'M FOCUSING ON USED EQUIPMENT AT THIS TIME.
16 Q. APPROXIMATELY HOW MUCH OF AN INVESTMENT WOULD IT TAKE TO
17 ACQUIRE YOUR OWN PRINTING -- ADDITIONAL PRINTING CAPACITY?
18 A. IF YOU INCLUDE NOT ONLY THE PRESSES BUT THE ADDITIONAL
19 PIECES NEEDED TO HELP THE PRESSES RUN AS QUICKLY AS POSSIBLE, I
20 THINK THE INVESTMENT COULD BE ABOUT THREE AND A HALF MILLION
21 DOLLARS.
22 Q. WELL, BASED ON YOUR PROJECTIONS OF REVENUE AND EXPENSE, DO
23 YOU ANTICIPATE ANY NEED TO INVEST ADDITIONAL FUNDS OF YOUR OWN
24 IN THE NEW EXAMINER?
25 A. NO, I DO NOT.
2118
FANG - DIRECT / BALABANIAN
1 Q. DO YOU ANTICIPATE ANY NEED TO TAKE ON ADDITIONAL INVESTORS
2 IN THE NEW EXAMINER?
3 A. NO, I DO NOT.
4 Q. ARE YOU PREPARED TO DO SO WERE THAT TO BECOME NECESSARY?
5 A. YES, I AM.
6 Q. DO YOU ANTICIPATE ANY NEED FOR DEBT FINANCING AT THE NEW
7 EXAMINER?
8 A. YES. I ANTICIPATE, LIKE ANY OTHER BUSINESS, WHETHER IT'S,
9 YOU KNOW, SOME LOANS FOR DEBT FINANCING OR CAPITAL EXPENSES
10 THAT WE MAY GO OUT TO A BANK TO BORROW SOME MONEY.
11 Q. NOW, YOU'VE PREVIOUSLY TALKED ABOUT THE SYNERGIES YOU
12 EXPECT ON THE REVENUE SIDE. WILL THERE BE ANY SYNERGIES ON THE
13 EXPENSE SIDE BETWEEN THE NEW EXAMINER AND THE INDEPENDENT?
14 A. YES, THERE WILL BE.
15 Q. CAN YOU PLEASE BRIEFLY IDENTIFY THE AREAS IN WHICH YOU
16 ANTICIPATE ACHIEVING THOSE SYNERGIES?
17 A. WELL, FOR EXAMPLE, IN PRODUCTION BECAUSE WE HAVE
18 ELECTRONIC PAGINATION EQUIPMENT AND SYSTEMS ALREADY IN PLACE,
19 WE WILL BE ABLE TO HAVE SOME SYNERGIES THERE.
20 AS FAR AS OUR ADVERTISING STAFF, IF THEY'RE CALLING
21 ON LOCAL RETAILERS, THEY CAN BE SELLING ADVERTISEMENTS INTO THE
22 INDEPENDENT AS WELL AS INTO THE NEW EXAMINER I WOULD HOPE.
23 ALSO, ON THE ADMINISTRATIVE FUNCTIONS, ONE OF THE
24 DIFFICULTIES IN STARTING UP A NEW NEWSPAPER IS THAT IT'S A VERY
25 COMPLEX PROCESS TO PLACE ADVERTISEMENTS INTO THE PAPER BECAUSE
2119
FANG - DIRECT / BALABANIAN
1 YOU HAVE TO DOCUMENT IT ALL THE WAY THROUGH AND THERE ARE
2 DIFFERENT ADVERTISING RATES; AND SO THE KINDS OF SYSTEMS THAT
3 ARE NEEDED TO -- ADMINISTRATIVE SYSTEMS THAT ARE NEEDED ARE
4 VERY COMPLEX, AND WE ALREADY HAVE THOSE AT THE INDEPENDENT,
5 WHICH CAN BE USED AT THE NEW EXAMINER.
6 AS FAR AS DISTRIBUTION, BECAUSE I'M FAMILIAR WITH
7 DISTRIBUTION PATTERNS IN THIS MARKET ALREADY AND MY MANAGEMENT
8 IS FAMILIAR WITH THOSE DISTRIBUTION NEEDS, I THINK THERE WILL
9 BE SYNERGIES THERE AS WELL.
10 Q. TALKING ABOUT MANAGEMENT, HAVE YOU CONDUCTED ANY
11 INTERVIEWS FOR MANAGERIAL POSITIONS?
12 A. YES, I HAVE.
13 Q. WHAT KIND OF PEOPLE ARE YOU LOOKING FOR?
14 A. I'M LOOKING FOR PEOPLE THAT HAVE DAILY NEWSPAPER
15 EXPERIENCE AND I'M LOOKING FOR PEOPLE THAT HAVE THE ENERGY AND
16 ENTHUSIASM TO MAKE THE NEW EXAMINER WORK.
17 Q. HAVE WE COMPLETED THE AREAS IN WHICH YOU ANTICIPATE
18 ACHIEVING SYNERGIES OR ECONOMIES BY COMBINING CERTAIN
19 OPERATIONS OF THE NEW EXAMINER WITH THE EXISTING OPERATIONS OF
20 THE INDEPENDENT?
21 A. I THINK ALSO IN THE EDITORIAL DEPARTMENT THERE WILL BE
22 SOME SYNERGIES. MAYBE NOT SO MUCH SHARING STORIES BUT SHARING
23 SYSTEMS ON HOW THE STORIES GET PUT INTO THE SYSTEM.
24 AND, AGAIN, IN THE PRINTING AND THE MAIL ROOM
25 OPERATIONS, I MAY OUTSOURCE, I MAY GET NEW EQUIPMENT OR I MAY
2120
FANG - DIRECT / BALABANIAN
1 DO SOME OF IT IN-HOUSE AND SOME OF IT OUTSOURCED.
2 Q. BASED ON THE CALCULATIONS THAT YOU HAVE MADE TO DATE AND
3 YOUR OWN EXPERIENCE, THE ADVICE YOU RECEIVED FROM YOUR
4 ADVISORS, DO YOU ANTICIPATE THAT THE NEW EXAMINER WILL BE A
5 FINANCIAL SUCCESS?
6 A. YES, I DO.
7 Q. MR. FANG, I WOULD LIKE TO TURN TO THE GENESIS OF YOUR
8 TRANSACTION WITH THE HEARST COMPANY.
9 PRIOR TO ENTERING INTO DISCUSSIONS WITH HEARST TO
10 BUY THE EXAMINER, HAD YOU HAD ANY PRIOR DEALINGS WITH HEARST?
11 A. YES, I HAD.
12 Q. CAN YOU TELL THE COURT BRIEFLY WHAT THEY WERE?
13 A. MY PRIMARY INTERACTIONS WITH THE HEARST CORPORATION WERE
14 IN LITIGATION.
15 Q. WHAT WAS THE NATURE OF THAT LITIGATION?
16 A. THERE WERE TWO PIECES OF LITIGATION BOTH OVER WHAT I
17 PERCEIVED TO BE PREDATORY BUSINESS PRACTICES BY THE HEARST
18 CORPORATION.
19 Q. DID YOU AT SOME POINT BECOME AWARE THAT HEARST WAS
20 OFFERING THE EXAMINER OR SOME OF ITS ASSETS FOR SALE?
21 A. I'M SORRY?
22 Q. DID YOU AT SOME POINT BECOME AWARE THAT HEARST WAS
23 OFFERING THE EXAMINER OR SOME OF ITS ASSETS FOR SALE?
24 A. YES.
25 Q. HOW DID YOU OBTAIN THAT INFORMATION?
2121
FANG - DIRECT / BALABANIAN
1 A. PRIMARILY I WAS CONTACTED BY VERONIS SUHLER THAT SAID THAT
2 THEY HAD BEEN RETAINED TO MARKET THE EXAMINER.
3 Q. DID YOU RECEIVE A COPY OF THE ORIGINAL VERONIS SUHLER
4 SOLICITATION MEMO, WHICH IS EXHIBIT E-10 IN EVIDENCE?
5 A. YES, I DID.
6 Q. WHAT WAS YOUR ASSESSMENT OF THE PACKAGE OF ASSETS BEING
7 OFFERED AT THAT TIME OF THE ORIGINAL OFFERING?
8 A. MY ASSESSMENT OF THE ORIGINAL PACKAGE WAS THAT THIS SET OF
9 ASSETS THAT THEY WERE OFFERING DID NOT CONSTITUTE A VIABLE
10 BUSINESS ENTITY.
11 Q. DID YOU TAKE ANY ACTION IN RESPONSE TO THE ORIGINAL
12 VERONIS SUHLER SOLICITATION?
13 A. YES, I DID.
14 Q. WHAT DID YOU DO?
15 A. I TOLD THEM THAT I WOULD BE INTERESTED IN PURCHASING THE
16 EXAMINER DEPENDING ON WHAT KINDS OF TRANSITIONAL ARRANGEMENTS
17 THEY WERE WILLING TO MAKE.
18 Q. AND BY "TRANSITIONAL ARRANGEMENTS," WHAT DID YOU MEAN?
19 A. I WAS REFERRING TO THEIR RIGHTS UNDER THE JOINT OPERATING
20 AGREEMENT WHICH THEY HAD WITH THE CHRONICLE PUBLISHING COMPANY.
21 Q. WHAT WERE YOU LOOKING FOR?
22 A. I WAS LOOKING FOR RIGHTS UNDER THE JOINT OPERATING
23 AGREEMENT.
24 Q. DID YOU SEEK ANY CASH REIMBURSEMENT FOR YOUR EXPENSES?
25 A. NO.
2122
FANG - DIRECT / BALABANIAN
1 Q. WHERE DID THAT IDEA COME FROM?
2 A. THAT CAME FROM THE HEARST CORPORATION.
3 Q. YOUR DESIRE WAS FOR WHAT?
4 A. MY DESIRE WAS TO PURCHASE THE EXAMINER WITH RIGHTS UNDER
5 THE JOINT OPERATING AGREEMENT.
6 Q. ALL RIGHT. DID YOU MAKE A PROPOSAL TO HEARST IN RESPONSE
7 TO THE FIRST VERONIS SUHLER REPORT THAT INCLUDED WHAT HAS BEEN
8 CALLED A NEGATIVE PURCHASE PRICE?
9 A. NO, I DID NOT.
10 Q. WERE YOU ASKED TO PROPOSE A NUMBER?
11 A. YES, I WAS.
12 Q. AND FROM WHAT SOURCE DID THAT REQUEST COME?
13 A. THAT REQUEST CAME FROM MR. ASHER THROUGH MY ATTORNEY.
14 Q. PRIOR TO THAT TIME HAD THERE BEEN ANY DISCUSSION OF A
15 NEGATIVE PURCHASE PRICE?
16 A. NO, THERE HAD NOT.
17 Q. HAD YOU PROPOSED SUCH A THING?
18 A. NO, I HAD NOT.
19 Q. THE FIRST TIME YOU HEARD OF THAT CONCEPT WAS IN RESPONSE
20 TO MR. ASHER'S REQUEST; IS THAT CORRECT?
21 A. THAT IS CORRECT.
22 Q. AND DID YOU OFFER A NUMBER AT THAT TIME?
23 A. YES, I DID.
24 Q. WHAT WAS THAT NUMBER?
25 A. THAT WAS $35 MILLION A YEAR THROUGH THE TERM OF THE JOINT
2123
FANG - DIRECT / BALABANIAN
1 OPERATING AGREEMENT.
2 Q. HOW DID YOU COME UP WITH THAT NUMBER?
3 A. WELL, THE WAY IT HAPPENED WAS THAT I GOT A PHONE CALL FROM
4 MY ATTORNEY WHO SAID THAT HE WAS TALKING TO MR. ASHER AND THAT
5 MR. ASHER SAID, "WELL, LET'S COME UP WITH A NUMBER."
6 MR. ALIOTO: I OBJECT TO THIS, YOUR HONOR. THIS IS
7 NOT ONLY HEARSAY BUT I GUESS IT'S GETTING INTO HIS
8 CONVERSATIONS WITH HIS ATTORNEY. THAT MEANS THAT THAT'S OPEN.
9 THE COURT: I DON'T KNOW THAT YOU HAVE STANDING TO
10 RAISE AN OBJECTION AS TO THAT, HOWEVER; THAT IS, AS TO THE
11 ATTORNEY-CLIENT ISSUE.
12 MR. BALABANIAN: NOT OFFERED FOR THE TRUTH, YOUR
13 HONOR, SIMPLY FOR WHAT HAPPENED AND THE REQUEST THAT HE
14 RECEIVED AND TO WHICH HE WAS RESPONDING.
15 THE COURT: OBJECTION OVERRULED.
16 BY MR. BALABANIAN:
17 Q. AGAIN, SIR, WHAT POSITION DID YOU UNDERSTAND HEARST WAS
18 TAKING AT THAT TIME?
19 A. MR. ASHER CALLED MY ATTORNEY AND TOLD THEM -- TOLD MY
20 ATTORNEY THAT HE WANTED A NUMBER. SO MY ATTORNEY CALLED ME AND
21 SAID, "ASHER WANTS A NUMBER SO LET'S -- WHAT NUMBER DO YOU WANT
22 TO COME UP WITH, TED?" AND HE SAYS, "WE NEED TO GET BACK TO
23 HIM RIGHT AWAY."
24 AND I CAME UP WITH THE 35 MILLION THROUGH LOOKING
25 THROUGH THE OFFERING MEMORANDUM THAT INDICATED THAT THE COSTS
2124
FANG - DIRECT / BALABANIAN
1 OF THE EXAMINER WERE I THINK 25 TO $30 MILLION, AND SO THAT'S
2 HOW THAT NUMBER CAME UP.
3 Q. WHAT WAS THE RESPONSE OF HEARST?
4 A. THERE WAS NO IMMEDIATE RESPONSE. ULTIMATELY THEY WERE NOT
5 INTERESTED.
6 Q. LET'S PUT THIS IN A TIMEFRAME. WHEN DID YOU HEAR THAT
7 THEY WERE NOT INTERESTED IN THE FIGURE THAT YOU PUT OUT?
8 A. I THINK IT WAS A FEW WEEKS LATER THAT THEY SAID THAT THEY
9 WEREN'T INTERESTED IN TALKING TO US ANYMORE.
10 Q. CAN YOU GIVE US A MONTH?
11 A. I'M SORRY?
12 Q. A MONTH.
13 A. IT WAS IN JANUARY.
14 Q. ALL RIGHT. WHAT HAPPENED NEXT?
15 A. IN REGARDS TO THE TRANSACTION, WHAT HAPPENED NEXT WAS THAT
16 HEARST AND VERONIS SUHLER CAME OUT WITH A SECOND OFFERING
17 MEMORANDUM.
18 Q. LET'S LOOK AT EXHIBIT E-43 IN EVIDENCE, A LETTER ON THE
19 LETTERHEAD OF VERONIS SUHLER TO MR. FANG DATED JANUARY 27,
20 2000.
21 WHAT IS THIS DOCUMENT, MR. FANG?
22 A. THIS WAS THE COVER LETTER BY VERONIS SUHLER OF THE SECOND
23 OFFERING MEMORANDUM FOR THE EXAMINER, A REVISED PACKAGE OF
24 ASSETS.
25 Q. WERE YOU AT ALL SURPRISED THAT THERE WAS NOW A SECOND
2125
FANG - DIRECT / BALABANIAN
1 OFFERING FROM HEARST?
2 A. NO, I WAS NOT.
3 Q. WHY WERE YOU NOT SURPRISED?
4 A. THE DEPARTMENT OF JUSTICE HAD INDICATED TO ME THAT THERE
5 MIGHT BE A SECOND --
6 MR. ALIOTO: OBJECT ON THE GROUNDS OF HEARSAY, YOUR
7 HONOR.
8 MR. BALABANIAN: AGAIN, YOUR HONOR, SIMPLY
9 DESCRIBING WHAT THE WITNESS HEARD.
10 THE COURT: OVERRULED.
11 THE DEPARTMENT OF JUSTICE WHAT, SIR?
12 THE WITNESS: ADVISED ME THAT THERE MIGHT BE A
13 SECOND OFFERING WITH A DIFFERENT SET OF ASSETS COMING SHORTLY.
14 BY MR. BALABANIAN:
15 Q. DID THE DEPARTMENT OF JUSTICE GIVE YOU A REASON WHY THEY
16 THOUGHT THAT MIGHT HAPPEN?
17 A. YES, THEY DID.
18 Q. WHAT REASON DID THEY GIVE?
19 A. WELL --
20 MR. ALIOTO: I OBJECT AGAIN ON THE GROUND OF
21 HEARSAY, YOUR HONOR.
22 THE COURT: WELL, IT IS HEARSAY. LET'S LAY A LITTLE
23 MORE FOUNDATION, TIME, PLACE, WHO WAS PRESENT FOR THE
24 CONVERSATION.
25 MR. BALABANIAN: ALL RIGHT. WE WERE TALKING --
2126
FANG - DIRECT / BALABANIAN
1 CERTAINLY, YOUR HONOR. I DO PLAN, YOUR HONOR, A WHOLE SERIES
2 OF QUESTIONS REGARDING HIS INTERACTION WITH THE DEPARTMENT OF
3 JUSTICE. IF THE COURT WOULD PERMIT ME TO TAKE THAT UP IN
4 ORDER, I THINK THE CONNECTION WILL BE CLEAR ALTHOUGH I CAN DO
5 SOME OF THAT NOW.
6 THE COURT: LET'S DO ENOUGH OF IT NOW SO WE CAN TIE
7 IT UP.
8 MR. BALABANIAN: ALL RIGHT.
9 Q. HAD YOU, PRIOR TO JANUARY, BEEN CONTACTED BY THE
10 DEPARTMENT OF JUSTICE?
11 A. YES, I HAD BEEN CONTACTED BY THEM.
12 Q. AND HAD THE DEPARTMENT OF JUSTICE SOUGHT INFORMATION FROM
13 YOU REGARDING THE CONDITIONS IN THE NEWSPAPER MARKET IN SAN
14 FRANCISCO?
15 A. YES, THEY HAD.
16 Q. AND HAD THE DEPARTMENT OF JUSTICE, PRIOR TO THE SECOND
17 VERONIS SUHLER SOLICITATION, INQUIRED AS TO WHETHER YOU HAD ANY
18 INTEREST IN ACQUIRING THE EXAMINER?
19 A. YES, THEY DID.
20 Q. AND HAD THE DEPARTMENT OF JUSTICE, PRIOR TO THAT DATE,
21 INQUIRED OF YOU WHETHER YOU REGARDED THE FIRST PACKAGE OF
22 ASSETS BEING OFFERED BY VERONIS SUHLER AS BEING, AS YOU PUT IT,
23 NOT VIABLE OR INSUBSTANTIAL?
24 A. YES, THEY DID.
25 Q. AND YOU PROVIDED THAT INFORMATION, YOUR VIEWS ON THOSE
2127
FANG - DIRECT / BALABANIAN
1 SUBJECTS TO THE DEPARTMENT OF JUSTICE PRIOR TO THE DATE OF THE
2 SECOND VERONIS SUHLER SOLICITATION?
3 A. YES, I DID.
4 THE COURT: WELL, WHO DID HE TALK TO? LET'S --
5 MR. BALABANIAN: YOUR HONOR --
6 THE COURT: LET'S EITHER GET IT OUT OR --
7 MR. BALABANIAN: ALL RIGHT.
8 THE COURT: YOU HAVE ONE BIT OF TESTIMONY BY THE
9 WITNESS THAT OCCURRED IN JANUARY, I BELIEVE, 2000.
10 MR. BALABANIAN: YES.
11 THE COURT: OKAY. LET'S LAY YOUR FOUNDATION AS TO
12 THAT CONVERSATION. WHO WAS HE TALKING TO IN THE DEPARTMENT?
13 MR. BALABANIAN: PRIOR TO THAT -- WELL, WHY DON'T WE
14 DO THE WHOLE SUBJECT THEN, IF THAT'S THE COURT --
15 THE COURT: HOWEVER IT MAKES SENSE, BUT I THINK WE
16 OUGHT TO DO IT IN AN ORDERLY FASHION, MR. BALABANIAN.
17 MR. BALABANIAN: ALL RIGHT. I THINK IT WOULD BE
18 MORE ORDERLY, YOUR HONOR, TO TAKE IT UP IN SEQUENCE AND,
19 THEREFORE, AT THIS POINT I'LL SIMPLY DROP THE TOPIC AND PICK IT
20 UP LATER.
21 Q. WERE THERE ANY DIFFERENCES IN THE PACKAGE OF ASSETS BEING
22 OFFERED AS BETWEEN THE FIRST AND SECOND VERONIS SUHLER
23 SOLICITATIONS?
24 A. YES.
25 Q. WHAT WERE THE DIFFERENCES?
2128
FANG - DIRECT / BALABANIAN
1 A. THEY OFFERED MORE HARD ASSETS, SUCH AS A BUILDING AND A
2 PRINTING PRESS.
3 Q. DID THOSE CHANGES MAKE THE PACKAGE, WHICH YOU HAD
4 PREVIOUSLY THOUGHT TO BE NONVIABLE, VIABLE?
5 A. WELL, IT WAS NOT THE CHANGES THAT I JUST MENTIONED THAT I
6 FELT MADE THE SECOND OFFERING MEMORANDUM MORE VIABLE.
7 Q. WERE THERE OTHER CHANGES WHICH IN YOUR OPINION GAVE YOU
8 REASON TO HOPE THAT A VIABLE EXAMINER MIGHT BE ACQUIRED?
9 A. YES. IN -- YES.
10 Q. WHAT WERE THEY?
11 A. PRIMARILY IN THE SECOND OFFERING MEMORANDUM, VERONIS
12 SUHLER AND THE HEARSTS OPENED THE DOOR TO SAY THAT THEY WOULD
13 BE WILLING TO ENTERTAIN TRANSITIONAL ARRANGEMENTS FOR THE NEW
14 EXAMINER, WHICH I TOOK TO MEAN SOME VERSION OF THE JOINT
15 OPERATING AGREEMENT.
16 Q. AND WAS THAT THE TYPE OF ARRANGEMENT IN WHICH YOU HAD BEEN
17 INTERESTED FROM THE START?
18 A. YES, THAT'S CORRECT.
19 Q. DID YOU MAKE A RESPONSE TO THE SECOND VERONIS SUHLER
20 SOLICITATION?
21 A. YES, I DID.
22 Q. WAS THAT IN WRITING?
23 A. YES, IT WAS.
24 Q. PLEASE LOOK, IF YOU WILL, AT EXHIBIT E-53.
25 A. (WITNESS EXAMINES DOCUMENT.)
2129
FANG - DIRECT / BALABANIAN
1 Q. IS THAT DOCUMENT YOUR -- WHICH IS IN EVIDENCE.
2 IS THAT DOCUMENT YOUR RESPONSE TO VERONIS SUHLER II?
3 A. (WITNESS EXAMINES DOCUMENT.) YES, IT IS.
4 Q. DID YOU IN THAT DOCUMENT INDICATE ANY INTEREST IN A COST
5 REIMBURSEMENT OR SUBSIDY FROM HEARST?
6 A. NO, I DID NOT.
7 Q. DID YOU IN THAT DOCUMENT INDICATE ANY INTEREST IN A
8 NEGATIVE PURCHASE PRICE?
9 A. NO, I DID NOT.
10 Q. DID YOU, ON THE CONTRARY, INDICATE AN INTEREST IN A
11 POSITIVE PURCHASE PRICE?
12 A. THAT IS CORRECT, SIR.
13 Q. WHAT WAS THE POSITIVE PURCHASE PRICE THAT YOU WERE
14 INDICATING IN THAT DOCUMENT?
15 A. AT THAT TIME WE WERE OFFERING A PURCHASE PRICE OF BETWEEN
16 10 MILLION AND $15 MILLION IN CASH.
17 Q. YOU'RE REFERRING TO THE LAST SENTENCE ON THE FIRST PAGE?
18 A. YES, I AM.
19 Q. THIS GOES ON:
20 "UNDER THESE TERMS, WE PRELIMINARILY SEE AN
21 ENTERPRISE VALUE OF BETWEEN $10 MILLION AND
22 $15 MILLION. WE WOULD ANTICIPATE PAYING ALL
23 CASH, PROVIDED THROUGH CASH ON HAND AND
24 RESOURCES AVAILABLE FROM EXISTING FINANCING
25 ARRANGEMENTS."
2130
FANG - DIRECT / BALABANIAN
1 WHAT WAS IT ABOUT THE PROPOSAL YOU MADE, MR. FANG,
2 IN E-53 THAT MADE IT POSSIBLE FOR YOU TO SUGGEST A POSITIVE
3 PURCHASE PRICE?
4 A. WE WERE SEEKING RIGHTS UNDER THE JOINT OPERATING
5 AGREEMENT, WHICH WAS BASICALLY A MODIFIED JOINT OPERATING
6 AGREEMENT.
7 Q. AND WHERE IN THIS DOCUMENT DOES THAT APPEAR?
8 A. IT'S ON THE FOURTH PAGE, THE PAGE THAT'S TITLED "EXAMINER
9 TRANSITIONAL ARRANGEMENTS."
10 Q. THE PAGE BEARING PRODUCTION NUMBER 498?
11 A. THAT'S CORRECT, SIR.
12 Q. IS IT THEN YOUR TESTIMONY THAT YOU MADE THIS WRITTEN
13 PROPOSAL TO HEARST IN FEBRUARY OF THIS YEAR INVOLVING THE
14 POSITIVE PURCHASE PRICE AND THE TRANSITIONAL ARRANGEMENTS THAT
15 APPEAR ON THE PAGE BEARING PRODUCTION NUMBER 498? IS THAT
16 CORRECT?
17 A. THAT'S CORRECT.
18 Q. DID YOU MAKE ANY OTHER WRITTEN PROPOSAL TO HEARST IN
19 RESPONSE TO VERONIS SUHLER II?
20 A. NO, I DID NOT.
21 Q. THIS IS THE ONLY ONE YOU EVER MADE?
22 A. THAT'S THE ONLY ONE.
23 Q. WHAT WAS THE RESPONSE OF THE HEARST CORPORATION TO THIS
24 PROPOSAL?
25 A. I THINK A LITTLE BIT OF TIME WENT BY, I DON'T KNOW IF IT
2131
FANG - DIRECT / BALABANIAN
1 WAS A WEEK OR TWO WEEKS, AND WE GOT A CALL FROM MR. ASHER WHO
2 SAID THAT HE WANTED TO MEET WITH US TO TALK ABOUT OUR PROPOSAL.
3 Q. DID HE AT THAT MEETING SUPPLY THE RESPONSE OF THE HEARST
4 CORPORATION TO EXHIBIT E-53?
5 A. YES, HE DID.
6 Q. AND WHAT WAS THAT RESPONSE?
7 A. HIS RESPONSE WAS THAT THE HEARST CORPORATION WAS STILL
8 UNWILLING TO OFFER UP ANY PORTION OF THE JOINT OPERATING
9 AGREEMENT AND INSTEAD WANTED TO TALK ABOUT A CASH REIMBURSEMENT
10 FOR SOME PERIOD OF TIME IN EXCHANGE FOR RIGHTS UNDER THE JOINT
11 OPERATING AGREEMENT.
12 Q. AGAIN, AT THAT POINT IN TIME WAS IT YOUR DESIRE TO OBTAIN
13 COST REIMBURSEMENT OR TO OBTAIN WHAT YOU CALL RIGHTS UNDER THE
14 JOA?
15 A. NO, WE WENT INTO THAT MEETING LOOKING FOR RIGHTS UNDER THE
16 JOA BUT HE PRESENTED A DIFFERENT SCENARIO TO US.
17 Q. DID MR. ASHER AT THAT MEETING INDICATE HOW -- WHETHER
18 HEARST HAD OTHER POTENTIAL BUYERS?
19 A. YES, HE DID.
20 Q. DID HE TELL YOU WHO THEY WERE?
21 A. NO, HE DID NOT.
22 Q. DID HE TELL YOU HOW MANY THERE WERE?
23 A. NO, ONLY THAT THERE WERE OTHERS.
24 Q. DID YOU BELIEVE HIM?
25 A. I CERTAINLY DID.
2132
FANG - DIRECT / BALABANIAN
1 Q. DID MR. ASHER AT THAT MEETING INDICATE TO YOU HOW HEARST
2 WOULD GO ABOUT SELECTING THE SUCCESSFUL BIDDER ON THE EXAMINER?
3 A. YES, HE DID.
4 Q. WHAT DID HE SAY?
5 A. HE TOLD US THAT HE WAS HAVING SIMILAR MEETINGS WITH ALL OF
6 THE OTHER PROSPECTIVE BUYERS AND LAYING OUT THE SAME GROUND
7 RULES, AND THAT ULTIMATELY THE HEARST CORPORATION WOULD MAKE A
8 DECISION ON WHO THE BUYER OF THE EXAMINER WOULD BE BASED ON
9 THREE CRITERIA.
10 Q. WHAT WERE THEY?
11 A. THE THREE CRITERIA WERE, ONE, LOWEST COST REIMBURSEMENT TO
12 THE HEARST CORPORATION --
13 Q. YOU MEAN FROM OR TO?
14 A. FROM THE HEARST -- THE LOWEST COST TO HEARST IS WHAT HE
15 SAID.
16 THE SECOND WAS THE SHORTEST TRANSITION PERIOD THAT
17 WOULD BE NEEDED FOR THE NEW EXAMINER OWNER TO TAKE OVER THE
18 INDEPENDENT OPERATIONS; AND, THREE, WAS SPEED AND SURETY OF
19 CLOSING OF THE DEAL.
20 Q. DID YOU THEN ENTER INTO ACTIVE NEGOTIATIONS WITH HEARST?
21 A. NO.
22 Q. WHAT HAPPENED NEXT?
23 A. WE SUBMITTED A REVISED INDICATION OF INTEREST LETTER.
24 Q. AND THEN WHAT HAPPENED?
25 A. AND THEN WE GOT A CALL FROM HEARST AND BEGAN ACTIVE
2133
FANG - DIRECT / BALABANIAN
1 NEGOTIATIONS.
2 Q. WHAT FORM DID THOSE NEGOTIATIONS TAKE?
3 THE COURT: LET'S TIE DOWN WHEN THIS WAS.
4 BY MR. BALABANIAN:
5 Q. YES. WHAT TIME PERIOD ARE WE TALKING ABOUT?
6 A. THE MEETING WITH MR. ASHER OCCURRED IN EARLY MARCH. WE
7 BEGAN -- WE BEGAN -- I DON'T REMEMBER WHEN WE TURNED IN OUR
8 SECOND REVISED INDICATION OF INTEREST LETTER EXACTLY, BUT WE
9 BEGAN ACTIVE NEGOTIATIONS OVER THE PHONE ABOUT I THINK THE WEEK
10 OF MARCH 5TH.
11 Q. WHEN YOU SAY "NEGOTIATIONS OVER THE PHONE," WHO
12 PARTICIPATED IN THOSE NEGOTIATIONS?
13 A. PRIMARILY THOSE NEGOTIATIONS WERE HANDLED THROUGH
14 MR. NIEHAUS; AND THE WAY IT WOULD WORK WAS THAT MR. ASHER WOULD
15 CALL MR. NIEHAUS AND THEN MR. NIEHAUS WOULD RELAY MR. ASHER'S
16 POSITION TO ME. I WOULD THEN RELAY MY POSITION TO MR. NIEHAUS
17 AND MR. NIEHAUS WOULD THEN -- HE ACTED AS THE GO-BETWEEN
18 BETWEEN MR. ASHER AND MYSELF.
19 Q. WHAT WAS YOUR REASON FOR USING MR. NIEHAUS IN THIS
20 RESPECT?
21 A. I THINK PART OF IT HAD TO DO WITH THE FACT THAT WE HAD HAD
22 SOME SOMEWHAT HOSTILE RELATIONSHIPS WITH THE HEARSTS IN THE
23 PAST, AND CERTAINLY THROUGHOUT THIS TRANSACTION PROCESS I HAD
24 NOT BEEN ABLE TO MAKE MUCH PROGRESS WITH THE HEARST CORPORATION
25 AND MR. NIEHAUS SEEMED TO BE MAKING A LOT MORE PROGRESS.
2134
FANG - DIRECT / BALABANIAN
1 Q. ALL RIGHT. DID YOU REACH A POINT WHERE A LETTER OF INTENT
2 OR ANY SIMILAR TERM SHEET WAS AGREED UPON?
3 A. YES, WE DID.
4 Q. WAS THAT DONE IN A MEETING OR IN SOME OTHER FASHION?
5 A. THE LETTER OF INTENT WAS BASICALLY NEGOTIATED OVER THE
6 PHONE AND ULTIMATELY AS WE CAME CLOSER TO THE EXACT SPECIFICS
7 OF THAT LETTER, I THINK THERE MIGHT HAVE BEEN ONE OR TWO DRAFTS
8 THAT WENT BACK AND FORTH OVER THE FAX MACHINE. AT THAT POINT
9 MY ATTORNEYS GOT INVOLVED IN HELPING TO DRAFT THE LETTER.
10 Q. DID MR. ASHER -- WERE ANY OF THESE NEGOTIATIONS FACE TO
11 FACE?
12 A. NO, THEY WERE NOT.
13 Q. ONCE AGREEMENT WAS REACHED, DID MR. ASHER COME TO SAN
14 FRANCISCO?
15 A. WELL, ULTIMATELY WE AGREED ON A LETTER OF INTENT WHICH
16 BOTH MR. ASHER AND MYSELF SIGNED. THAT OCCURRED VIA FAX AND
17 WAS LATE ACTUALLY I THINK MARCH 10TH, FRIDAY NIGHT, AFTER WHICH
18 MR. ASHER GOT ON THE PLANE AND CAME TO SAN FRANCISCO.
19 THE COURT: THAT WAS FRIDAY, MARCH THE WHAT?
20 THE WITNESS: 10TH I BELIEVE IT WAS, YOUR HONOR.
21 THE COURT: THANK YOU.
22 BY MR. BALABANIAN:
23 Q. LET'S LOOK AT EXHIBIT E-79 IN EVIDENCE. WHAT IS THIS
24 DOCUMENT?
25 A. E-79 IS THE ASSET PURCHASE AGREEMENT THAT WAS ULTIMATELY
2135
FANG - DIRECT / BALABANIAN
1 NEGOTIATED BETWEEN EXIN LLC AND THE HEARST CORPORATION TO
2 PURCHASE THE SAN FRANCISCO EXAMINER.
3 MR. BALABANIAN: YOUR HONOR, THE COPY SUPPLIED TO
4 THE COURT AND TO THE WITNESS DOES NOT INCLUDE THE VOLUMINOUS
5 SCHEDULES, WHICH I BELIEVE ARE IN THE COURT'S BINDER. THEY
6 DON'T FORM PART OF MY --
7 THE COURT: YOU SAY --
8 MR. BALABANIAN: THIS COPY DOESN'T HAVE ALL THE
9 SCHEDULES. IT'S JUST TOO VOLUMINOUS. IT'S JUST THE TEXT OF
10 THE AGREEMENT IS PRESENT IN THIS BINDER, BUT WE HAVE IN THE
11 OTHER BINDERS INCLUDED THE COMPLETE DOCUMENT.
12 THE COURT: THIS DOES APPEAR TO HAVE LENGTHY
13 SCHEDULES.
14 MR. BALABANIAN: WELL, THEN I'VE OFFERED THE COURT
15 MORE THAN I THOUGHT I HAD.
16 THE COURT: I DON'T KNOW IF IT'S COMPLETE, BUT --
17 THE WITNESS: I THINK THERE ARE MORE SCHEDULES.
18 THE COURT: WE HAVE THROUGH SCHEDULE 2.11.
19 MR. BALABANIAN: THERE MAY HAVE BEEN -- MY QUESTIONS
20 DO NOT INVOLVE THE SCHEDULES. I'M SIMPLY SAYING THERE ARE A
21 GREAT MANY SCHEDULES, AND I BELIEVE THAT THEY ARE PRESENT IN
22 THE COPY OF THIS DOCUMENT THAT APPEARS IN THE COURT'S OTHER
23 BINDER.
24 THE COURT: ALL RIGHT. THANK YOU. IF THAT BECOMES
25 A PROBLEM, WE'LL GET THOSE SCHEDULES.
2136
FANG - DIRECT / BALABANIAN
1 MR. BALABANIAN: I DON'T THINK IT WILL. SO WE CAN
2 LOOK AT IT -- MY QUESTIONS --
3 THE COURT: CAN I -- SORRY TO INTERRUPT. CAN I ASK
4 YOU, MR. BALABANIAN, TO DIRECT THE WITNESS' ATTENTION TO THE
5 NONEXCLUSIVITY PROVISION THAT HE REFERRED TO EARLIER IN HIS
6 TESTIMONY?
7 MR. BALABANIAN: CERTAINLY.
8 THE WITNESS: YES. IT'S SECTION 4.8 OR 4.9.
9 BY MR. BALABANIAN:
10 Q. THAT'S ON PAGE 15 OF THE DOCUMENT, PARAGRAPH 4.9, ENTITLED
11 "EXCLUSIVE CONTRACTS"; IS THAT CORRECT?
12 A. YES, THAT'S CORRECT.
13 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
14
15
16
17
18
19
20
21
22
23
24
25
2137
FANG - DIRECT / BALABANIAN
1 BY MR. BALABANIAN:
2 Q. AND THAT RECITES THAT FROM AND AFTER THE TRANSITION
3 TERMINATION DATE -- THE TRANSITION TERMINATION DATE IS THE DATE
4 ON WHICH THE TRANSITION ENDS; IS THAT CORRECT?
5 A. THAT'S CORRECT.
6 Q. -- TO THE EXTENT THAT ANY OF THE CONTRACTS BETWEEN
7 BUYER -- THAT'S YOU -- OR THE COMPANY -- THAT'S HEARST -- AND
8 ANY WIRE SERVICES WITH RESPECT TO NEWS ITEMS FOR THE EXAMINER,
9 THE CHRONICLE --
10 (INTERRUPTION BY COURT REPORTER)
11 MR. BALABANIAN: "FROM AND AFTER THE TRANSITION
12 TERMINATION DATE, TO THE EXTENT THAT ANY OF THE
13 CONTRACTS BETWEEN BUYER OR THE COMPANY AND ANY
14 WIRE SERVICES WITH RESPECT TO NEWS ITEMS FOR THE
15 EXAMINER, THE CHRONICLE OR THE SUNDAY PAPER OR
16 CONTRACTS WITH SYNDICATES FOR FEATURES TO BE
17 INCLUDED IN THE EXAMINER, THE CHRONICLE OR THE
18 SUNDAY PAPER PROVIDES THAT SUCH NEWS ITEMS OR
19 FEATURES ARE PROVIDED TO THE EXAMINER, THE
20 CHRONICLE OR THE SUNDAY PAPER ON AN EXCLUSIVE
21 BASIS, EACH OF BUYER AND THE SELLER AGREES TO
22 WAIVE SUCH EXCLUSIVITY OBLIGATION TO THE EXTENT
23 NECESSARY AND AS REQUESTED BY THE OTHER PARTY SO
24 THAT THE OTHER PARTY MAY OBTAIN SUCH NEWS ITEMS
25 OR FEATURES FOR INCLUSION IN THE EXAMINER, THE
2138
FANG - DIRECT / BALABANIAN
1 CHRONICLE OR THE SUNDAY PAPER OR A SUNDAY
2 EDITION OF THE EXAMINER OR THE CHRONICLE."
3 IT GOES ON:
4 "IN ADDITION, TO THE EXTENT THAT AFTER THE
5 TRANSITION TERMINATION DATE, HCI" -- IS THAT
6 HEARST CORPORATION?
7 A. THAT'S CORRECT.
8 Q. "-- OR ANY OF ITS AFFILIATES
9 SYNDICATES FEATURES TO NEWSPAPERS AND BUYER
10 WISHES TO ACQUIRE THE RIGHT TO PUBLISH SUCH
11 FEATURES IN THE EXAMINER, HCI WILL OR WILL CAUSE
12 ITS AFFILIATES TO PROVIDE SUCH RIGHT TO THE
13 EXAMINER AT A PRICE AND ON OTHER TERMS WHICH ARE
14 NO LESS FAVORABLE THAN HCI OR ITS AFFILIATES
15 MAKES AVAILABLE TO NEWSPAPERS OF COMPARABLE
16 CIRCULATION AS THE EXAMINER. AT BUYER'S
17 REQUEST, HCI WILL CONFIRM TO A THIRD PARTY
18 SYNDICATOR OF FEATURES THAT HCI DOES NOT OBJECT
19 TO SUCH SYNDICATOR PROVIDING SUCH FEATURES TO
20 THE EXAMINER."
21 IS THAT THE PROVISION YOU WERE REFERRING TO?
22 A. THAT IS THE PROVISION.
23 Q. AND WAS THAT INTENSIVELY NEGOTIATED?
24 A. YES, IT WAS.
25 Q. WHILE WE ARE ON THIS PAGE, CAN YOU TELL THE COURT THE
2139
FANG - DIRECT / BALABANIAN
1 SIGNIFICANCE OF PARAGRAPH 4.8?
2 A. YES. THE SIGNIFICANCE OF PARAGRAPH 4.8 IS THAT ONE OF OUR
3 CONCERNS WAS IN RELATIONSHIP TO ADVERTISERS AND ADVERTISING
4 PERSONNEL, THAT WE HAVE ACCESS TO THE CURRENT ADVERTISING
5 PERSONNEL OF THE SAN FRANCISCO NEWSPAPER AGENCY.
6 AND PARAGRAPH 4.8 PROVIDES THAT WE CAN MAKE AN OFFER
7 TO ANY OF THOSE EMPLOYEES AND THAT HEARST WILL NOT INCREASE
8 THAT PERSON'S COMPENSATION IN SUCH A WAY THAT IT WILL DISSUADE
9 THAT PERSON FROM COMING TO WORK FOR THE NEW EXAMINER.
10 Q. WHY ARE YOU PARTICULARLY INTERESTED IN ADVERTISING
11 PERSONNEL?
12 A. BECAUSE ADVERTISING IS THE LARGEST SOURCE OF REVENUE FOR
13 ANY NEWSPAPER, AND WE WANTED TO HAVE THE OPTION OF BEING ABLE
14 TO HIRE KEY ADVERTISING PERSONNEL THAT WE THOUGHT MIGHT HAVE
15 PARTICULARLY GOOD CONTACTS WITH EXISTING ADVERTISERS.
16 Q. LET'S GO BACK TO PAGE 2 OF THIS DOCUMENT, BEARING
17 PRODUCTION NUMBER 187. AND CAN YOU TELL US, MR. FANG, WHAT THE
18 ITEMS ARE THAT ARE ENUMERATED ON THAT PAGE?
19 A. YES. THE FIRST ONE IS THE NAME, SAN FRANCISCO EXAMINER,
20 INCLUDING THE TRADEMARKS --
21 Q. FIRST WE SHOULD HAVE PROBABLY STARTED ON THE PRECEDING
22 PAGE CALLED "PURCHASE OF ASSETS."
23 IS THIS THE PARAGRAPH -- THE SECTION OF THE
24 AGREEMENT THAT ENUMERATES THE ASSETS BEING TRANSFERRED TO YOU
25 BY HEARST FOR YOUR USE IN THE NEW EXAMINER?
2140
FANG - DIRECT / BALABANIAN
1 A. YES, IT DOES.
2 Q. AND NOW WOULD YOU PLEASE BE GOOD ENOUGH TO TELL US WHAT
3 THE -- OR IDENTIFY THEM.
4 FIRST YOU SAY IS THE NAME AND THE TRADEMARKS?
5 A. YES, THE NAME AND THE TRADEMARKS AND THE MASTHEAD OF THE
6 EXAMINER.
7 Q. DOES THAT INCLUDE THE MONARCH OF THE DAILIES?
8 A. IT DOESN'T (SIC).
9 Q. THE SECOND PART -- THE SECOND PARAGRAPH, B, WHAT DOES THAT
10 COVER?
11 A. IT COVERS THE COMPUTER, HARDWARE AND SOFTWARE, AND
12 FURNITURE, WHICH PRIMARILY RELATES TO THE EDITORIAL AND
13 ADMINISTRATIVE SYSTEMS OF THE EXAMINER, SUCH AS THEIR E-MAIL
14 SYSTEMS AND THINGS LIKE THAT.
15 Q. PARAGRAPH C?
16 A. ALL OF THE NEWS RACKS. THERE IS A SCHEDULE WHICH IS
17 BASICALLY LISTING ALL OF THE NEWS RACKS CURRENTLY USED BY THE
18 EXAMINER.
19 Q. YOU TESTIFIED EARLIER THAT THE NUMBER OF NEWS RACKS THE
20 EXAMINER HAS IS ROUGHLY EQUAL TO THE NUMBER THE CHRONICLE HAS?
21 A. YES, THAT'S CORRECT.
22 Q. AND ROUGHLY EQUAL TO THE NUMBER THAT YOU ALREADY HAVE AT
23 THE EXAMINER?
24 A. JUST IN SAN FRANCISCO.
25 Q. IN SAN FRANCISCO.
2141
FANG - DIRECT / BALABANIAN
1 A. THEY HAVE MANY MORE THAN I DO BECAUSE THEY HAVE A MUCH
2 WIDER DISTRIBUTION BASE.
3 Q. ALL RIGHT.
4 THE COURT: MR. BALABANIAN, THERE MAY HAVE BEEN A
5 PROBLEM WITH THE TRANSCRIPT. DOES PARAGRAPH A OR SUBPARAGRAPH
6 A INCLUDE THE LOGO OR SLOGAN "MONARCH OF THE DAILIES"?
7 THE WITNESS: YES, IT DOES.
8 THE COURT: ALL RIGHT. JUDI?
9 THE REPORTER: OKAY.
10 MR. BALABANIAN: THANK YOU, YOUR HONOR.
11 BY MR. BALABANIAN:
12 Q. PARAGRAPH D REFERS TO CERTAIN CONTRACTS. VERY BRIEFLY,
13 WHAT CATEGORY OF CONTRACTS DOES THAT EMBRACE?
14 A. IT MOSTLY HAS TO DO WITH THOSE SYNDICATED CONTRACTS THAT
15 WE REFERRED TO IN SECTION 4.9.
16 Q. PARAGRAPH E OF THE EXAMINER ARCHIVES, WHAT DO THEY CONSIST
17 OF?
18 A. THEY ARE ALL THE RECORDS OF THE EXAMINER.
19 AND, AGAIN, THE EXAMINER HAS BEEN IN PUBLICATION
20 SINCE, I BELIEVE, 1887. AND SO THERE IS A LOT OF HISTORICAL
21 SIGNIFICANCE TO THESE ARCHIVES, AND THERE IS A LOT OF ORIGINAL
22 ARTWORK THAT'S ATTACHED TO THESE ARCHIVES THAT MAKE IT A
23 VALUABLE ASSET.
24 Q. YOU BELIEVE THAT THOSE ARCHIVES WILL BE VALUABLE TO YOU IN
25 CONNECTION WITH THE PUBLICATION OF THE NEW EXAMINER?
2142
FANG - DIRECT / BALABANIAN
1 A. YES, TO CARRY ON THE TRADITION OF WHAT THE EXAMINER IS.
2 Q. PARAGRAPH F, CAN YOU TELL US IN YOUR OWN WORDS WHAT THAT
3 MEANS?
4 A. IT IS THE SUBSCRIPTIONS -- ALL OF THE SUBSCRIBERS FOR THE
5 EXAMINER. BUT IN ADDITION WE WILL HAVE RIGHTS TO ALL OF THE
6 SUNDAY SUBSCRIBERS, AS WELL, ON A NON-EXCLUSIVE BASIS.
7 Q. AND WHEN YOU SAY "ALL THE SUNDAY SUBSCRIBERS," ARE YOU
8 INCLUDING CHRONICLE SUBSCRIBERS WHO GET THE SUNDAY PAPER?
9 A. YES. IT INCLUDES THOSE SUBSCRIBERS WHO RECEIVE THE SUNDAY
10 EXAMINER/CHRONICLE THAT ARE ALSO CHRONICLE SUBSCRIBERS.
11 Q. DID THE ORIGINAL VERONIS SUHLER -- DID EITHER VERONIS
12 SUHLER OFFER INCLUDE THAT?
13 A. I THINK IT WAS NOT INCLUDED IN VS1 BUT WAS ADDED IN VS2.
14 Q. SO VS1, AS FAR AS SUNDAY SUBSCRIBERS ARE CONCERNED, WOULD
15 GIVE YOU ONLY THE NAMES OF PEOPLE WHO WERE -- WHO GOT THE
16 SUNDAY PAPER BUT WHO WERE EXAMINER ONLY SUBSCRIBERS?
17 A. YES.
18 Q. OKAY.
19 A. A MUCH SMALLER NUMBER.
20 Q. BUT YOU ENDED UP WITH THE ENTIRE LIST?
21 A. THAT'S CORRECT.
22 Q. ON A NON-EXCLUSIVE BASIS?
23 A. THAT'S CORRECT.
24 Q. THAT MEANS THAT YOU CAN SOLICIT SUBSCRIPTIONS FROM THE
25 ENTIRE SUNDAY READERSHIP?
2143
FANG - DIRECT / BALABANIAN
1 A. THAT'S CORRECT.
2 Q. WHAT ABOUT SUBPARAGRAPH G?
3 A. THIS HAS TO DO WITH THE EXAMINER'S WEBSITE, EXAMINER DOT
4 COM. THEY ALSO HAVE A WEB SITE FOR THE SUNDAY MAGAZINE CALLED
5 EXAMINER MAGAZINE DOT COM.
6 Q. HOW MUCH VALUE DO YOU ATTRIBUTE TO THAT?
7 A. I THINK IT'S VERY IMPORTANT, PARTICULARLY AS WE MOVE INTO
8 THIS NEW AGE WHEN THE INTERNET HAS GREAT IMPORTANCE.
9 Q. PARAGRAPH H ARE VEHICLES. WHAT VEHICLES WERE CONVEYED?
10 A. THEY WERE PRIMARILY TRUCKS THAT WERE MARKED AS BEING USED
11 PRIMARILY FOR EXAMINER DISTRIBUTION, BUT IN ADDITION I THINK
12 THERE ARE SOME VEHICLES USED BY THE REPORTING STAFF AND
13 ADMINISTRATIVE STAFF.
14 Q. PARAGRAPH G -- H -- I'M SORRY -- I REFERS TO
15 "BAY-TO-BREAKERS."
16 IS IT YOUR INTENTION, MR. FANG, TO MAINTAIN THE
17 BAY-TO-BREAKERS TRADITION IN OUR CITY?
18 A. YES, IT IS.
19 Q. YOU PROMISE THAT?
20 A. I DO PROMISE THAT.
21 THE COURT: CAN WE DISSUADE YOU?
22 (LAUGHTER)
23 THE WITNESS: I AM OPEN TO SUGGESTIONS, YOUR HONOR.
24 BY MR. BALABANIAN:
25 Q. PARAGRAPH J, WHAT IS THAT?
2144
FANG - DIRECT / BALABANIAN
1 A. PARAGRAPH J HAS TO DO WITH THE FACT THAT SUBSCRIBERS OFTEN
2 ARE PAID FOR BY THREE MONTHS' OR FOUR MONTHS' WORTH OF
3 SUBSCRIPTIONS. SO AS OF THE TRANSFER DATE OF THE ASSETS, A
4 SUBSCRIBER MAY WELL HAVE PAID FOR HIS OR HER SUBSCRIPTION IN
5 ADVANCE. AND SO THIS ACCOUNTS FOR THOSE REVENUES.
6 Q. ALL RIGHT. THE LAST ITEM HERE ON THE NEXT PAGE,
7 "EXAMINER'S RIGHTS TO TICKETS TO SPORTING EVENTS."
8 MR. FANG, WITH WHOM DO YOU INTEND TO SHARE THOSE?
9 (LAUGHTER)
10 MR. BALABANIAN: I WITHDRAW THE QUESTION, YOUR
11 HONOR.
12 BY MR. BALABANIAN:
13 Q. NOW, WE TALKED EARLIER ABOUT THE COSTS REIMBURSEMENT AND
14 YOU TOLD US THAT THE -- HOW WAS THE -- THE FIGURE ARRIVED AT?
15 A. THE $25 MILLION?
16 Q. YES.
17 A. THAT FIGURE WAS ARRIVED AT BY CALCULATING WHAT WE THOUGHT
18 THE EXPENSES OF THE EXAMINER WOULD BE, HOW LONG WE FELT IT
19 WOULD TAKE TO GENERATE THE REVENUE NECESSARY TO MAKE THE
20 EXAMINER SELF-SUSTAINING, AND WE ALSO TOOK INTO CONSIDERATION
21 THE FACT THAT WE WERE ONLY ONE OF A NUMBER OF PROSPECTIVE
22 BUYERS OF THE EXAMINER, AND SO WE TOOK THAT INTO CONSIDERATION,
23 AS WELL.
24 Q. NOW, DOES THE COST REIMBURSEMENT PROVISION IN FACT PROVIDE
25 FOR $75 MILLION WORTH OF COST REIMBURSEMENT?
2145
FANG - DIRECT / BALABANIAN
1 A. NOT EXACTLY.
2 Q. HOW DOES IT WORK?
3 A. IT WORKS THAT -- IT BASICALLY IS FOR 32 MONTHS' WORTH OF
4 COST REIMBURSEMENT OVER AN ANNUALIZED BASIS OF $25 MILLION A
5 YEAR OF COST REIMBURSEMENTS.
6 Q. WHY ONLY 32 MILLION AND NOT 36?
7 A. BECAUSE THERE IS A FOUR-MONTH TRANSITION PERIOD WHERE THE
8 HEARST CORPORATION IS GOING TO RUN THE EXAMINER AND THEY'RE
9 GOING TO INCUR THE COSTS THERE. SO THERE ARE NO COST
10 REIMBURSEMENTS.
11 Q. AND YOU HAVE TOLD US THAT THE REIMBURSEMENT PROVISION ONLY
12 COVERS ACTUAL COSTS INCURRED?
13 A. YES, THAT'S CORRECT.
14 Q. AND THAT THERE -- FIGURE -- THOSE EXPENDITURES ARE SUBJECT
15 TO BEING AUDITED, AND THAT'S PROVIDED FOR IN THE AGREEMENT?
16 A. THAT'S CORRECT.
17 Q. NOW, THE AGREEMENT -- DOES THE AGREEMENT INCLUDE A
18 PROVISION THAT LIMITS THE AMOUNT OF THE COST REIMBURSEMENT
19 WHICH CAN BE EXPENDED ON YOUR OWN COMPENSATION AND PAYMENTS TO
20 YOUR FAMILY?
21 A. YES.
22 Q. AND IS THAT ON PAGE 6?
23 A. YES, IT IS.
24 Q. IN THE MIDDLE OF THE PAGE THERE WHICH DEFINES
25 REIMBURSEMENT, WHICH STATES:
2146
FANG - DIRECT / BALABANIAN
1 "REIMBURSABLE COSTS MAY NOT INCLUDE ANY
2 COMPENSATION OR OTHER AMOUNTS PAID TO MR. TED
3 FANG OR ANY OF HIS FAMILY MEMBERS, EXCEPT THAT,
4 FOR SO LONG AS MR. TED FANG IS EMPLOYED AS THE
5 PUBLISHER OF THE EXAMINER, REIMBURSABLE COSTS
6 MAY INCLUDE UP TO $500,000 PER YEAR IN THE
7 AGGREGATE FOR COMPENSATION AND PERQUISITES TO
8 MR. TED FANG FOR BONA FIDE SERVICES RENDERED TO
9 THE EXAMINER AND FOR DIRECTORS' FEES FOR OTHER
10 FANG FAMILY MEMBERS."
11 COULD YOU TELL US, SIR, THE GENESIS OF THAT
12 PROVISION?
13 A. MR. ASHER WANTED SOME PROVISION IN THERE ALONG THESE
14 LINES.
15 Q. AND DO YOU KNOW, SIR, WHERE THE FIGURE OF $500,000 CAME
16 FROM AS A -- AS A CAP ON THE AMOUNT OF THE REIMBURSEMENT OF --
17 THAT COULD BE ALLOCATED TO THE COMBINATION OF YOUR SALARY AND
18 PAYMENTS TO MEMBERS OF YOUR FAMILY?
19 A. YES.
20 Q. HOW WAS THAT NUMBER ARRIVED AT?
21 A. WELL, AS I SAID, THERE HAVE BEEN SOME ANIMOSITIES BETWEEN
22 MY FAMILY AND THE HEARST CORPORATION IN THE PAST, AND MR. ASHER
23 SAID THAT THEY WANTED TO PUT A CAP ON THESE KINDS OF
24 EXPENDITURES.
25 AND DURING THE -- BLESS YOU. DURING THE NEGOTIATING
2147
FANG - DIRECT / BALABANIAN
1 SESSIONS, MR. IRISH WAS ALSO PRESENT AND MR. ASHER TURNED TO
2 MR. IRISH AND SAID, "WELL, HOW MUCH ARE YOU PAYING TIM WHITE AS
3 THE PUBLISHER OF THE EXAMINER?"
4 AND MR. IRISH WROTE DOWN A NUMBER AND HE SHOWED IT
5 TO MR. ASHER, AND THEN MR. ASHER CAME UP WITH THE $500,000, AND
6 THAT'S HOW IT WAS PUT IN THERE.
7 Q. DID YOU SEE THE NUMBER ON THE PIECE OF PAPER?
8 A. NO. THEY KEPT THAT TO THEMSELVES.
9 Q. THERE HAVE BEEN NUMEROUS STATEMENTS BY PLAINTIFFS'S
10 COUNSEL THAT YOU ARE GOING TO RECEIVE A MILLION DOLLAR SALARY
11 FROM THE NEW EXAMINER. DO YOU HAVE ANY IDEA WHERE THAT NUMBER
12 COMES FROM?
13 A. YES.
14 Q. WHERE?
15 A. IT CAME FROM ONE OF THE PRELIMINARY BUDGETS PREPARED BY
16 TOM STULTZ FOR THE NEW EXAMINER.
17 Q. DO YOU KNOW WHERE HE GOT THAT NUMBER?
18 A. I THINK HE JUST PUT IT IN THERE -- JUST PUT IT IN THERE
19 HIMSELF, ACTUALLY.
20 Q. DID YOU EVER ADOPT IT?
21 A. NO, I DID NOT. I WAS A LITTLE FLATTERED BY IT BUT --
22 MR. ALIOTO: I MOVE TO STRIKE THE LAST ANSWER AS
23 BEING NONRESPONSIVE TO THE QUESTION, YOUR HONOR.
24 THE COURT: I THINK IT'S RESPONSIVE.
25 MR. ALIOTO: AND HEARSAY, YOUR HONOR.
2148
FANG - DIRECT / BALABANIAN
1 THE COURT: THAT OBJECTION WILL BE OVERRULED.
2 BY MR. BALABANIAN:
3 Q. MR. FANG, DID YOU EVER ADOPT THAT NUMBER?
4 A. NO.
5 Q. IN YOUR CURRENT BUDGET WE HAVE SEEN HERE, IS THERE ANY
6 FIGURE THAT'S ALLOCATED OR BUDGETED FOR YOUR OWN SALARY?
7 A. YES, THERE IS.
8 Q. TELL THE COURT WHAT THAT FIGURE IS.
9 A. I BUDGETED MY SALARY AT $150,000 PER YEAR.
10 Q. HOW MUCH OF THE STOCK OF EXIN, LLC DO YOU OWN?
11 A. I WILL OWN THE MAJORITY OF EXIN, LLC.
12 Q. SO HOW MUCH OF THE $150,000 SALARY WOULD IN EFFECT COME
13 OUT OF YOUR OWN POCKET?
14 A. WELL, BASICALLY, MORE THAN HALF OF IT WILL COME OUT OF MY
15 OWN POCKET TO PAY MY OWN SALARY.
16 Q. YOU TALKED EARLIER ABOUT THE PROVISION OF THE AGREEMENT
17 WHICH PROVIDES FOR A SHARING OF COST SAVINGS AND WHICH GIVES
18 YOU THE OPPORTUNITY IF YOU DO NOT SPEND THE ENTIRE AMOUNT OF
19 THE COST REIMBURSEMENT TO USE ONE-HALF OF THE UNEXPECTED --
20 UNEXPENDED PORTION FOR PURPOSES OTHER THAN COST REIMBURSEMENT.
21 HAVE I STATED IT CORRECTLY?
22 A. I THINK SO, YES.
23 Q. WHAT WAS THE GENESIS OF THAT PROVISION?
24 A. THE GENESIS OF THAT PROVISION WAS THAT THE HEARST
25 CORPORATION, AS THEY MADE CLEAR FROM THE VERY BEGINNING, WANTED
2149
FANG - DIRECT / BALABANIAN
1 TO KEEP THEIR COSTS AS LOW AS POSSIBLE, AND THEY WANTED TO PUT
2 IN SOME LANGUAGE THAT WOULD -- THAT THEY FELT WOULD INCENTIVIZE
3 US TO KEEP THOSE COSTS AS LOW AS POSSIBLE.
4 MR. ALIOTO: I OBJECT TO THE -- EXCUSE ME. I OBJECT
5 TO THE WITNESS TESTIFYING AS TO THE STATE OF MIND OF THE -- OF
6 ANOTHER PARTY. AND IF IT IS -- AND IF THE SOURCE IS STATEMENT,
7 THEN IT'S HEARSAY.
8 MR. BALABANIAN: YOUR HONOR, I AM ASKING FOR THE
9 GENESIS OF THE -- OF THIS PORTION OF THE AGREEMENT. THE
10 WITNESS IS SIMPLY RECITING THE NEGOTIATING PROCESS. WHETHER
11 HEARST WAS TELLING THE TRUTH OR NOT IS NOT RELEVANT AND IS NOT
12 PART OF THE EVIDENCE BEING OFFERED.
13 THE COURT: ALL RIGHT. I WILL ALLOW IT. THIS IS,
14 AGAIN, STATE-OF-MIND EVIDENCE OF THE WITNESS, AND IT WILL BE
15 INTERPRETED IN THAT FASHION.
16 BY MR. BALABANIAN:
17 Q. DID YOU AT ANY TIME SEEK TO INCLUDE IN THE AGREEMENT A
18 PROVISION THAT WOULD GIVE YOU THE RIGHT TO USE ANY PORTION OF
19 THE EXPENSE REIMBURSEMENT MONEY FOR ANOTHER PURPOSE?
20 A. NO.
21 Q. THAT IDEA CAME SOLELY FROM HEARST?
22 A. THAT IS CORRECT.
23 Q. DID YOU MAKE ANY PROPOSAL TO HEARST IN RESPONSE TO ITS
24 REQUEST FOR SUCH A TERM IN THE CONTRACT?
25 A. NO.
2150
FANG - DIRECT / BALABANIAN
1 Q. WERE THERE ANY OTHER OPTIONS CONSIDERED AS A WAY OF
2 IMPLEMENTING HEARST'S DESIRE TO KEEP COSTS TO THE MINIMUM
3 NECESSARY?
4 THE COURT: WELL, NOW YOU ARE --
5 MR. BALABANIAN: ALL RIGHT.
6 THE COURT: YOU BETTER REPHRASE THAT,
7 MR. BALABANIAN.
8 BY MR. BALABANIAN:
9 Q. WERE THERE ANY ALTERNATIVES DISCUSSED REGARDING THE
10 COST-SHARING FORMULA?
11 A. NO.
12 Q. ALL RIGHT. MR. FANG, TAKING THE CONTRACT AS A WHOLE, WHAT
13 ARE YOUR FINANCIAL INCENTIVES UNDER IT?
14 A. MY FINANCIAL INCENTIVES ARE TO GENERATE AS MUCH REVENUE
15 FOR THE EXAMINER AS POSSIBLE.
16 Q. WHY IS THAT?
17 A. BECAUSE FOR EVERY DOLLAR OF REVENUE THAT I GENERATE, I GET
18 TO KEEP 100 PERCENT OF THAT. FOR EVERY DOLLAR OF EXPENSE THAT
19 I SAVE, I ONLY GET TO KEEP 50 PERCENT OF THAT. AND SO,
20 NATURALLY, MY INCENTIVE IS TO GENERATE REVENUE AS OPPOSED TO
21 SAVE THE HEARST CORPORATION'S MONEY.
22 Q. DOES THE AGREEMENT GIVE YOU ANY OTHER FINANCIAL INCENTIVE?
23 A. WELL, MY MAIN INCENTIVE IN THE AGREEMENT IS TO MAKE THE
24 EXAMINER A SUCCESS. SO I AM GOING TO SPEND AS MUCH OF THE
25 HEARST CORPORATION'S MONEY AS POSSIBLE TO MAKE THE EXAMINER A
2151
FANG - DIRECT / BALABANIAN
1 SUCCESSFUL AND CONTINUING PUBLICATION.
2 Q. IF AT THE END OF THE THREE-YEAR PERIOD IT IS A SUCCESS AND
3 IT IS GENERATING REVENUE, WHO WILL OWN IT, YOU OR HEARST?
4 A. I WILL, THANK YOU.
5 Q. AND IF IT'S A FAILURE, WHOSE FAILURE IS IT?
6 A. IT IS ALSO MINE, SIR.
7 Q. LET'S LOOK AT EXHIBIT E-77. PLEASE TELL THE COURT, IF YOU
8 WILL, SIR, WHAT THIS DOCUMENT IS.
9 A. E-77 IS THE TRANSITION SERVICES AGREEMENT. WE TALKED
10 BEFORE THAT THERE IS A FOUR-MONTH TRANSITION PERIOD WHEREIN THE
11 HEARST CORPORATION IS GOING TO RUN THE EXAMINER, AND WE WANTED
12 TO HAVE SOME SORT OF CONTRACTUAL ARRANGEMENT TO MAKE SURE THAT
13 THEY WOULD RUN THE EXAMINER UNDER BASICALLY CONTINUING
14 STANDARDS OF BUSINESS TYPE OF CLAUSES.
15 Q. DOES THIS AGREEMENT IMPOSE THAT OBLIGATION ON THE HEARST
16 CORPORATION?
17 A. I BELIEVE AS MUCH AS LEGALLY POSSIBLE.
18 Q. NOW, YOU HAVE TOLD US THAT THE PERIOD OF THIS AGREEMENT IS
19 120 DAYS; IS THAT CORRECT?
20 A. THAT IS CORRECT.
21 Q. HAD YOU EARLIER SOUGHT A LONGER PERIOD?
22 A. YES, WE DID.
23 Q. HAD YOU EARLIER BELIEVED THAT A LONGER PERIOD WAS
24 NECESSARY?
25 A. YES, BUT UNDER DIFFERENT SCENARIOS.
2152
FANG - DIRECT / BALABANIAN
1 Q. WHY WERE YOU ULTIMATELY WILLING TO ACCEPT A 120-DAY
2 TRANSITIONAL PERIOD?
3 A. FOR A NUMBER OF REASONS. ONE BEING THE WAY THE DEAL
4 UNFOLDED WITH THE COST REIMBURSEMENTS. TWO IS, AS WE BEGAN TO
5 TALK ABOUT A LONGER TRANSITIONAL ARRANGEMENT AND TRYING TO
6 DETERMINE DURING THAT TRANSITIONAL ARRANGEMENT -- IF, FOR
7 EXAMPLE, I OWNED THE EXAMINER BUT THE HEARST CORPORATION WAS
8 RUNNING IT, THEN WHERE WOULD THE REVENUE -- WHO WOULD THE
9 REVENUES GO TO? HOW WOULD THE EXPENSES BE ALLOCATED? IT
10 BECAME MORE AND MORE COMPLEX TO TRY TO FIGURE THAT OUT. THAT
11 WAS A CONSIDERATION.
12 AT THE SAME TIME THEY WERE OFFERING THE COST
13 REIMBURSEMENT AND ALSO, AGAIN, FROM A NEGOTIATING STANDPOINT
14 THEY WERE -- IT WAS ADVANTAGEOUS FOR US, AS THE PROSPECTIVE
15 BUYER, TO OFFER A SHORTER TRANSITION PERIOD. AND I FELT THAT
16 WE HAD THE FACILITIES AND THE CONTACTS TO BE ABLE TO EFFECTUATE
17 THIS TRANSITION IN A SHORTER TIME FRAME THAN ANYBODY ELSE.
18 Q. AND WHY DO YOU SAY THAT YOU FELT YOU COULD EFFECT THE
19 TRANSITION MORE RAPIDLY THAN ANYONE ELSE?
20 A. BECAUSE OF OUR EXISTING NEWSPAPER OPERATIONS, OUR -- WE
21 TALKED ABOUT SOME OF MY PRESS CAPACITIES, SOME OF THE OTHER
22 SYSTEMS AND PERSONNEL THAT -- EXPERIENCE THAT WE HAVE IN THE
23 NEWSPAPER BUSINESS. AND THEN ALSO PARTICULARLY BECAUSE WE WERE
24 SITUATED RIGHT IN SAN FRANCISCO ALREADY. AND SO WE NOT ONLY
25 HAD THE NEWSPAPER EXPERIENCE, BUT WE ALSO HAD THE NEWSPAPER
2153
FANG - DIRECT / BALABANIAN
1 EXPERIENCE IN THE LOCAL MARKET.
2 Q. HAVE YOU OBTAINED ANY INFORMATION ALONG THE WAY WHICH HAS
3 AFFECTED YOUR JUDGMENT AS TO THE LENGTH OF TIMELINESS TO EFFECT
4 AN ORDERLY TRANSITION?
5 A. I DON'T UNDERSTAND THE QUESTION.
6 Q. WELL, YOU TOLD US THAT EARLIER YOU THOUGHT IT WOULD TAKE
7 MORE THAN 120 DAYS, AND ULTIMATELY YOU AGREED TO ACCEPT 120
8 DAYS. I AM SIMPLY INQUIRING WHETHER IN THE COURSE OF THE
9 NEGOTIATIONS OR YOUR INQUIRIES YOU OBTAINED ANY INFORMATION
10 THAT BORE ON THAT DECISION?
11 A. WELL, AGAIN, PART OF IT HAD TO DO WITH THE ASSETS THAT
12 WERE BEING TRANSFERRED. WE PUT INTO THIS CONTRACT AN AGREEMENT
13 BY THE HEARST CORPORATION, FOR EXAMPLE, THAT THEY WOULD ALLOW
14 US TO DO JOINT SALES CALLS BECAUSE I FELT CONTACTS WITH THE
15 ADVERTISERS WOULD BE VERY IMPORTANT. THIS WAS NOT SOMETHING
16 THAT THEY HAD BEEN OFFERING, BUT THEY ADDED THAT INTO THE MIX.
17 THEY ALSO OFFERED US THE ACCESS TO THE ADVERTISING
18 PERSONNEL, WHICH I THOUGHT WAS IMPORTANT TO THE MIX.
19 ALSO, AS WE BEGAN NEGOTIATING THIS AND PARTICULARLY
20 IN MY CONVERSATIONS WITH MR. STULTZ, WE TALKED ABOUT POTENTIAL,
21 LIKE, CANDIDATES THAT MIGHT COME IN TO RUN THIS ORGANIZATION,
22 FELT THAT THERE WERE CANDIDATES THAT CAN COME HERE AND DO IT
23 MORE QUICKLY.
24 AND SO ALL OF THOSE THINGS, I THINK, PLAYED INTO MY
25 DECISION TO GO WITH A SHORTER TRANSITION PERIOD.
2154
FANG - DIRECT / BALABANIAN
1 Q. AS YOU SIT HERE TODAY, MR. FANG, HOW REALISTIC DO YOU
2 THINK IT IS TO BELIEVE THAT YOU CAN MAKE THAT TRANSITION IN 120
3 DAYS?
4 A. OH, I THINK IT'S ABSOLUTELY VERY REALISTIC. IF IT WEREN'T
5 FOR THIS TRIAL, AS A MATTER OF FACT, I THINK I WOULD HAVE HIRED
6 THREE OF MY TOP FIVE MANAGEMENT PERSONNEL ALREADY.
7 Q. COULD YOU JUST GIVE THE COURT VERY BRIEFLY A TIMETABLE OR
8 A DESCRIPTION OF HOW YOU BELIEVE THE TRANSITION WILL UNFOLD?
9 A. WELL.
10 Q. FOCUSING ON THE KEY ELEMENTS OF THE GROUP PLAN.
11 A. BASICALLY, MY APPROACH IS THAT I NEED TO HIRE MY TOP
12 MANAGERS IMMEDIATELY, AND I HAVE ALREADY BEGUN THAT PROCESS.
13 ONE OF MY CRITERIA IN HIRING MY TOP MANAGEMENT
14 CANDIDATES IS THAT THEY HAVE ACCESS TO PERSONNEL THAT ARE
15 CURRENTLY IN THE NEWSPAPER INDUSTRY AND THAT COULD COME WITH
16 THEM TO BECOME, FOR EXAMPLE, THE MIDDLE MANAGEMENT. AND SO
17 THEN THAT'S HOW WE WOULD HIRE THE MIDDLE MANAGEMENT.
18 AND THEN FROM THOSE PEOPLE I HOPE TO HAVE CONTACTS
19 TO HIRE THE ENTIRE STAFF.
20 AS WELL, BECAUSE THIS TRANSACTION HAS RECEIVED A LOT
21 OF PUBLICITY NATIONALLY, EVEN PRIOR TO THIS TRIAL, WE'VE
22 ALREADY RECEIVED A LOT OF -- I THINK IN MY OFFICE THERE ARE
23 OVER 150 RESUMES OF PEOPLE WHO ARE INTERESTED IN COMING TO WORK
24 FOR THE NEW EXAMINER.
25 Q. IN YOUR OPINION, DO THOSE RESUMES INCLUDE HIGHLY QUALIFIED
2155
FANG - DIRECT / BALABANIAN
1 CANDIDATES?
2 MR. ALIOTO: I OBJECT. THAT'S HEARSAY EVIDENCE,
3 YOUR HONOR.
4 THE COURT: SUSTAINED.
5 THE WITNESS: WELL, NOT ALL OF THEM ARE HIGHLY
6 QUALIFIED.
7 MR. ALIOTO: I OBJECT.
8 THE COURT: IN ANY EVENT, MOVE ON, MR. BALABANIAN.
9 BY MR. BALABANIAN:
10 Q. WHAT ABOUT THE OTHER MOVING PARTS, THE OTHER THINGS THAT
11 HAVE TO BE DONE TO GET THE PAPER UP AND RUNNING IN 120 DAYS?
12 A. AGAIN, AS FAR AS PRINTING, WE HAVE PRINTING FACILITIES
13 LINED UP. AS FAR AS DISTRIBUTION, ONE OF THE NICE THINGS --
14 ONE OF THE INEFFICIENCIES OF THE CURRENT CHRONICLE/EXAMINER
15 OPERATION IS A BENEFIT TO US. BECAUSE THERE ARE TWO DIFFERENT
16 DELIVERY FORCES FOR THE EXAMINER AND THE CHRONICLE SO THERE IS
17 GOING TO BE AN EXISTING EXAMINER DELIVERY FORCE THAT IS GOING
18 TO BE OUT OF WORK AND GOING TO BE LOOKING FOR WORK, SO WE WILL
19 BE ABLE TO TAP INTO THAT IMMEDIATELY.
20 AS FAR AS ADVERTISING CONTACTS, MY -- MY CURRENT
21 STAFF AND MR. PIERSON HAVE ALREADY BEEN TALKING TO ADVERTISERS
22 ABOUT JOINING ON WITH THE NEW EXAMINER.
23 SO BASICALLY IN ALL OF THE MAJOR CATEGORIES WE HAVE
24 ALREADY MADE HEADWAY AND FEEL VERY CONFIDENT THAT WITHIN 120
25 DAYS WE WILL BE READY TO GO.
2156
FANG - DIRECT / BALABANIAN
1 Q. HOW DO YOU -- HAVE YOU CONSIDERED ANY WAYS TO INCENTIVIZE
2 THE NEW EMPLOYEES?
3 A. YES, WE HAVE.
4 Q. WHAT OPTIONS HAVE YOU -- ARE YOU CONSIDERING?
5 A. WE ARE CREATING A LONG-TERM -- WHAT WE CALL LONG-TERM
6 INCENTIVE PLANS FOR EMPLOYEES TO JOIN US. AND THE WAY THAT
7 PLAN WORKS IS THAT WE ARE RECOGNIZING THAT THERE IS SOME RISK
8 WITH THIS NEW EXAMINER VENTURE. AND SO, FOR EXAMPLE, WE ARE
9 OFFERING AN INCENTIVE THAT WILL KICK IN AFTER THREE YEARS OF
10 OPERATION. AND IF THE EXAMINER IS SUCCESSFUL THEN, THEN WE ARE
11 OFFERING UP TO TWO AND A HALF TIMES SOMEONE'S ANNUAL SALARY AS
12 A BONUS PACKAGE TO GIVE THEM AN INCENTIVE TO MAKE SURE THAT THE
13 EXAMINER WORKS AND CONTINUES.
14 BUT, AT THE SAME TIME, REALIZING THAT THE EXAMINER
15 MAY NOT CONTINUE AND THAT WE ARE TRYING TO ATTRACT THE HIGHEST
16 CALIBER OF PEOPLE AND THEY HAVE SOME RISK IN COMING HERE. IF
17 THE EXAMINER WERE TO FAIL AFTER THREE YEARS, WE ARE PUTTING IN
18 ABOUT A HALF YEAR'S WORTH OF SALARY SO THEY STILL GET A LITTLE
19 BIT OF A BONUS FOR COMING HERE.
20 Q. HOW DOES THE SUCCESS BONUS COMPARE TO THE FAILURE BONUS?
21 A. THE SUCCESS BONUS IS ABOUT THREE TIMES OR MORE THAN THAT
22 THAN THE FAILURE BONUS.
23 Q. ALL RIGHT. LET'S JUST LOOK AT EXHIBIT E-78.
24 CAN YOU TELL THE COURT, PLEASE, WHAT THIS DOCUMENT
25 IS?
2157
FANG - DIRECT / BALABANIAN
1 A. YES. WITH -- THIS IS A GUARANTEE OF -- FOR EXIN, LLC BY
2 PAN ASIA VENTURE.
3 Q. IT GUARANTEES THE OBLIGATIONS OF EXIN UNDER ITS AGREEMENTS
4 WITH HEARST?
5 A. YES, THAT'S CORRECT.
6 Q. AND WAS THIS PART OF THE OVERALL ARRANGEMENT WITH HEARST
7 BY WHICH EXIN, LLC OBTAINED THE RIGHTS TO THE EXAMINER ASSETS
8 THAT WE HAVE BEEN LOOKING AT?
9 A. THAT'S CORRECT.
10 Q. SO THERE ARE ALL TOGETHER THREE AGREEMENTS ENTERED INTO AT
11 THE SAME TIME; IS THAT CORRECT?
12 A. THAT'S CORRECT.
13 Q. THE ASSET PURCHASE AGREEMENT, THE TRANSITION SERVICES
14 AGREEMENT AND THE GUARANTEE; IS THAT CORRECT?
15 A. THAT IS CORRECT, YES, SIR.
16 MR. BALABANIAN: YOUR HONOR, I AM GOING TO MOVE TO
17 MAKE A MAJOR CHANGE IN SUBJECT. IF THE COURT WOULD ENTERTAIN A
18 REQUEST TO TAKE THE LUNCH BREAK AT THIS TIME, WE WOULD NOT
19 INTERRUPT THE FLOW OF THE NEXT SUBJECT.
20 THE COURT: ALL RIGHT. YOU ARE GOING TO GET INTO
21 THE MATTER OF COMMUNICATIONS BETWEEN THE WITNESS AND THE
22 DEPARTMENT OF JUSTICE?
23 MR. BALABANIAN: INTENSIVELY.
24 THE COURT: ALL RIGHT. VERY WELL. IF THIS IS A
25 CONVENIENT TIME, THEN LET'S TAKE OUR LUNCH BREAK AND BE BACK,
2158
FANG - DIRECT / BALABANIAN
1 COUNSEL, AND READY TO GO AT 1:00 O'CLOCK?
2 MR. BALABANIAN: I BELIEVE SO, YOUR HONOR.
3 THE COURT: ALL RIGHT. FINE. WE WILL SEE YOU AT
4 THAT TIME AND RESUME WITH FURTHER TESTIMONY OF THIS WITNESS.
5 MR. BALABANIAN: THANK YOU.
6 THE COURT: COUNSEL?
7 MR. ALIOTO: YES, YOUR HONOR.
8 THE COURT: DO I UNDERSTAND THAT MR. REILLY WILL NOT
9 BE A WITNESS?
10 MR. ALIOTO: WILL NOT.
11 MR. BALABANIAN: WILL NOT. WE HAVE NO QUESTION THAT
12 WE WILL CONCLUDE TODAY. WE WILL CERTAINLY CONCLUDE TODAY.
13 (LUNCHEON RECESS WAS TAKEN AT 11:50 A.M.)
14 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
15
16
17
18
19
20
21
22
23
24
25
2159
FANG - DIRECT / BALABANIAN
1 AFTERNOON SESSION 1:05 P.M.
2 THE COURT: VERY WELL. MR. BALABANIAN, YOU MAY
3 CONTINUE YOUR EXAMINATION OF THIS WITNESS.
4 MR. BALABANIAN: THANK YOU, YOUR HONOR.
5 TO BEGIN THIS AFTERNOON WITH EXHIBIT P-126,
6 PLAINTIFF'S EXHIBIT 126, I DON'T BELIEVE IT IS YET IN EVIDENCE;
7 AND IF THERE'S NO OBJECTION, I WOULD MOVE ITS ADMISSION AT THIS
8 TIME.
9 THE COURT: HEARING NO OBJECTION, P --
10 MR. ALIOTO: NO OBJECTION.
11 THE COURT: -- 126 IS ADMITTED.
12 (PLAINTIFF'S EXHIBIT 126
13 RECEIVED IN EVIDENCE)
14 BY MR. BALABANIAN:
15 Q. MR. FANG, I HAVE SHOWN YOU -- I'M SHOWING YOU A LETTER
16 FROM MAYOR WILLIE BROWN TO ATTORNEY GENERAL JANET RENO DATED
17 MAY 6, 1996. CAN YOU TELL US, SIR, TO WHAT SUBJECT OR
18 DEVELOPMENT THAT LETTER IS ADDRESSED?
19 A. I BELIEVE THIS IS THE LETTER THAT MAYOR BROWN WROTE TO
20 ATTORNEY GENERAL RENO IN RESPONSE TO REPORTS IN THE SAN JOSE
21 MERCURY NEWS IN ABOUT 1996 THAT THE CHRONICLE AND EXAMINER WERE
22 ABOUT TO MERGE.
23 Q. DID YOU SEE THOSE REPORTS?
24 A. I DID SEE THEM, YES, SIR.
25 Q. AND DID YOU PROVIDE ANY INFORMATION, HAVE ANY INPUT TO THE
2160
FANG - DIRECT / BALABANIAN
1 MAYOR WITH REGARD TO THAT POSSIBLE DEVELOPMENT?
2 A. NOT SPECIFICALLY AT THAT TIME, NO, SIR.
3 Q. THE LETTER STATES:
4 "I HAVE RECEIVED NUMEROUS INQUIRIES
5 REGARDING THE POSSIBLE MERGER OF THE SAN
6 FRANCISCO CHRONICLE AND THE SAN FRANCISCO
7 EXAMINER AS REPORTED BY THE SAN JOSE MERCURY
8 NEWS. ACCORDING TO THE ARTICLE, SUCH A MERGER
9 IS IMMINENT. I WOULD LIKE TO KNOW THE ROLE OF
10 THE JUSTICE DEPARTMENT UNDER THE
11 HART-SCOTT-RODINO ACT AND THE NEWSPAPER
12 PRESERVATION ACT AND TO BE ASSURED THAT SAN
13 FRANCISCANS WILL HAVE THE OPPORTUNITY TO PRESENT
14 COMMUNITY INPUT INTO THIS PROCESS."
15 THE MAYOR GOES ON TO TELL THE ATTORNEY GENERAL:
16 "THE LOSS OF JOBS IS BUT ONE CONCERN. BOTH
17 THE CHRONICLE AND THE EXAMINER HAVE BEEN PARTIES
18 TO PREDATORY ADVERTISING LAWSUITS AND I BELIEVE
19 SUCH CIVIL LITIGATION IS CURRENTLY PENDING
20 AGAINST THE EXAMINER. IT IS THE EXAMINER
21 MANAGEMENT THAT WOULD CONTROL THE MERGED ENTITY
22 ACCORDING TO THE SAN JOSE MERCURY STORY. I WANT
23 TO BE ASSURED THAT A CONSUMMATED MERGER WOULD
24 NOT CREATE AN INCREASED POWER POSITION THAT
25 WOULD CAUSE LEGITIMATE ANTICOMPETITIVE CONCERNS
2161
FANG - DIRECT / BALABANIAN
1 FOR OUR LOCAL AND NEIGHBORHOOD PAPERS."
2 MR. FANG, HAD YOU, PRIOR TO THE MAYOR'S LETTER OF
3 1996, EXPRESSED TO HIM CONCERN ABOUT THE POSSIBLE MERGER OF THE
4 TWO PAPERS, THE CHRONICLE AND THE EXAMINER?
5 A. YES, I HAD.
6 Q. WHY HAD YOU DONE SO?
7 A. BECAUSE, AS I SAID BEFORE, I HAD BEEN IN LITIGATION WITH
8 THEM OVER WHAT I FELT WERE PREDATORY BUSINESS PRACTICES; AND I
9 WAS CONCERNED THAT IF A MERGER WERE TO OCCUR, THEY MIGHT HAVE
10 EVEN MORE MONOPOLY-TYPE POWERS AND THEY MIGHT VIOLATE THE LAW
11 AND USE THOSE POWERS TO HARM IN PARTICULAR MY NEWSPAPERS, BUT
12 ALSO OTHER LOCAL SAN FRANCISCO PUBLICATIONS.
13 Q. HAVE YOU --
14 THE COURT: MR. BALABANIAN, IS THE QUESTION TO THE
15 WITNESS WHETHER HE HAS HAD THIS COMMUNICATION WITH THE MAYOR
16 PRIOR TO MAY 6, 1996?
17 MR. BALABANIAN: THAT'S CORRECT, YOUR HONOR.
18 Q. AND HAD YOU, PRIOR TO MAY 6, 1996, SUPPLIED THE MAYOR ANY
19 INFORMATION REGARDING YOUR LITIGATION WITH THE EXAMINER, WITH
20 THE HEARSTS?
21 A. GENERALLY I THINK THAT I TALKED TO HIM THAT THERE WAS SUCH
22 LITIGATION, AND THAT IT HAD TO DO IN REGARDS TO THE LOW-COST
23 PRICING WITH AN INTENT TO INJURE MY BUSINESS.
24 I THINK HE PROBABLY ALSO READ IT ABOUT -- READ ABOUT
25 IT IN MY NEWSPAPER.
2162
FANG - DIRECT / BALABANIAN
1 MR. ALIOTO: I OBJECT TO THAT SUPPOSITION, YOUR
2 HONOR.
3 BY MR. BALABANIAN:
4 Q. THE QUESTION WAS WHETHER YOU HAD DISCUSSED IT WITH HIM,
5 AND I TAKE IT YOUR ANSWER TO THAT IS YES?
6 A. YES.
7 Q. AND YOU HAD DONE SO PRIOR TO MAY 6TH WHEN THE MAYOR WROTE
8 TO THE ATTORNEY GENERAL?
9 A. THAT IS CORRECT.
10 Q. NOW, AS OF MAY 6, 1996, WAS THERE ANY PLAN, AS FAR AS YOU
11 KNEW IT, FOR HEARST TO OFFER THE EXAMINER FOR SALE?
12 A. NO, I KNEW NO SUCH PLANS.
13 Q. THE TRANSACTION THAT WAS THE SUBJECT OF THE MAYOR'S
14 LETTER, WHAT TRANSACTION WAS THAT?
15 A. THAT WAS A MERGER OF THE EXAMINER AND THE CHRONICLE.
16 Q. DID THAT TRANSACTION INVOLVE, AS YOU UNDERSTOOD IT, ANY
17 ELEMENT OF -- BY WHICH SOME OR ALL OF THE ASSETS OF THE
18 EXAMINER WOULD BE OFFERED FOR SALE?
19 A. NO.
20 Q. DID YOU AT THAT TIME, BACK IN 1996, HAVE ANY IDEA THAT AT
21 SOME FUTURE POINT THREE YEARS LATER, OR ANY OTHER TIME IN THE
22 FUTURE, HEARST MIGHT OFFER THE EXAMINER FOR SALE?
23 A. NO, I DID NOT.
24 Q. DID THE POSSIBILITY OF YOUR ACQUIRING THE EXAMINER HAVE
25 ANYTHING TO DO WITH YOUR COMPLAINING TO THE MAYOR ABOUT THE
2163
FANG - DIRECT / BALABANIAN
1 POSSIBLE MERGER OF THE TWO PAPERS?
2 A. NO, IT DID NOT.
3 Q. DID THE POSSIBILITY OF YOUR ACQUIRING THE EXAMINER HAVE --
4 THE COURT: YOU'RE LEADING THE WITNESS PRETTY BADLY,
5 MR. BALABANIAN.
6 BY MR. BALABANIAN:
7 Q. WAS THERE ANY SUCH POSSIBILITY BACK IN 1996, MR. FANG?
8 A. THERE WAS NO SUCH POSSIBILITY THAT I WAS AWARE OF.
9 Q. IS THERE ANY WAY, THEN, IN WHICH SUCH A POSSIBILITY COULD
10 HAVE ENTERED YOUR MIND IN CONNECTION WITH YOUR COMMUNICATIONS
11 BACK IN 1996?
12 A. NO.
13 THE COURT: ALL RIGHT.
14 MR. BALABANIAN: ALL RIGHT. YOUR HONOR, I'D LIKE
15 TO --
16 MR. ALIOTO: NO SPEAKING OBJECTIONS, YOUR HONOR.
17 (LAUGHTER)
18 BY MR. BALABANIAN:
19 Q. AT THIS TIME, MR. FANG --
20 MR. BALABANIAN: ACTUALLY, YOUR HONOR, BEFORE WE
21 MOVE ON, THERE HAVE BEEN NUMEROUS REFERENCES TO THE MAYOR'S
22 LETTER TO THE ATTORNEY GENERAL IN 1999, BUT I DISCOVERED TO MY
23 SURPRISE OVER THE WEEKEND THAT NOT ONLY HAD IT NOT BEEN ENTERED
24 INTO EVIDENCE, NO ONE HAD EVEN SUPPLIED A COPY TO THE COURT.
25 SO I HAVE NOW DONE THAT AND IT'S EXHIBIT E-137.
2164
FANG - DIRECT / BALABANIAN
1 THE COURT: VERY WELL.
2 MR. BALABANIAN: AND I WOULD AT THIS TIME MOVE ITS
3 ADMISSION INTO EVIDENCE.
4 THE COURT: HEARING NO OBJECTION --
5 MR. ALIOTO: NO OBJECTION.
6 THE COURT: -- E-137 IS ADMITTED.
7 (DEFENDANTS' EXHIBIT E-137
8 RECEIVED IN EVIDENCE)
9 BY MR. BALABANIAN:
10 Q. ALL RIGHT. MOVING AHEAD TO 1999, MR. FANG, DID YOU
11 DISCUSS WITH MAYOR BROWN YOUR INTEREST IN BUYING THE EXAMINER?
12 A. YES.
13 Q. WAS THERE ANYTHING IN PARTICULAR THAT PROMPTED YOU TO DO
14 SO?
15 A. I THINK IN PARTICULAR DURING THE MAYOR'S INAUGURAL
16 ADDRESS, WHICH ACTUALLY HAPPENED IN 2000, HE MENTIONED IN HIS
17 ADDRESS THAT HE WAS GOING TO MAKE SAVING THE EXAMINER A TOP
18 PRIORITY OF HIS SECOND TERM IN OFFICE AND THAT HE WOULD BE
19 LOOKING TO PUT TOGETHER A GROUP TO HELP BUY THE EXAMINER AND
20 SAVE IT.
21 Q. LET'S LOOK AT EXHIBIT E-135. DO YOU RECOGNIZE THAT,
22 MR. FANG, AS A COPY OF THE MAYOR'S INAUGURAL ADDRESS IN JANUARY
23 OF THIS YEAR?
24 A. YES, I DO.
25 MR. BALABANIAN: YOUR HONOR, I WOULD MOVE
2165
FANG - DIRECT / BALABANIAN
1 EXHIBIT 135 INTO EVIDENCE, E-135.
2 THE COURT: HEARING NO OBJECTION, 135 IS ADMITTED.
3 MR. ALIOTO: I OBJECT, YOUR HONOR.
4 THE COURT: I'M SORRY?
5 MR. ALIOTO: I OBJECT. THIS IS THE -- I OBJECT TO
6 THE INTRODUCTION OF THE INAUGURATION OF THE MAYOR ON JANUARY 8
7 AS BEING HEARSAY.
8 MR. BALABANIAN: AGAIN, YOUR HONOR, IT'S NOT OFFERED
9 FOR ITS TRUTH BUT MERELY FOR THE FACT THAT THE MAYOR SAID IT.
10 (LAUGHTER)
11 MR. BALABANIAN: HE MIGHT NOT HAVE BEEN TELLING THE
12 TRUTH, ALTHOUGH WE'VE GENERALLY FOUND HIM RELIABLE.
13 MR. ALIOTO: ON THAT BASIS, PUT IT IN, YOUR HONOR.
14 THEN I HAVE NO OBJECTION.
15 (LAUGHTER)
16 THE COURT: ALL RIGHT. 135 IS ADMITTED. OBJECTION
17 WITHDRAWN.
18 (DEFENDANTS' EXHIBIT E-135
19 RECEIVED IN EVIDENCE)
20 BY MR. BALABANIAN:
21 Q. LET'S LOOK AT PAGE 9 BEARING PRODUCTION NUMBER 1468, THE
22 THIRD PARAGRAPH REPORTS THE MAYOR AS SAYING -- I GUESS IT'S
23 ACTUALLY THE THIRD FULL PARAGRAPH, IT REPORTS THE MAYOR AS
24 SAYING:
25 "I ALONG WITH MANY OF OUR ELECTED OFFICIALS
2166
FANG - DIRECT / BALABANIAN
1 WERE VERY UPSET WHEN IT APPEARED AS IF THERE WAS
2 ABOUT TO BE A QUICK MERGER (SIC) OF OUR TWO
3 DAILY NEWSPAPERS. I CAN ASSURE YOU THAT IF THE
4 GIANTS AND THE A'S WERE ABOUT TO MERGE AND PLAY
5 SOME OTHER PLACE, WE WOULD PUT TOGETHER THE MOST
6 AWESOME SAVE THE GIANTS COMMITTEE AND JERRY
7 WOULD PUT TOGETHER THE MOST AWESOME SAVE THE A'S
8 COMMITTEE THAT HAS EVER EXISTED."
9 DID YOU HEAR THE MAYOR MAKE THOSE STATEMENTS?
10 A. YES, I DID.
11 Q. THE NEXT PARAGRAPH THE MAYOR STATED:
12 "IN OUR CIVIC CONVERSATIONS, WE OUGHT TO
13 TALK ABOUT HOW WE CAN PUT TOGETHER SOMEBODY AND
14 A GROUP OF PEOPLE TO BUY THE EXAMINER. LET'S
15 LET HEARST HAVE THE CHRONICLE, MAYBE IT WILL BE
16 A BETTER PAPER, WHO KNOWS. BUT LET THEM HAVE
17 THE CHRONICLE. BUT LEAVE THE EXAMINER AS A
18 CIVIC TREASURE FOR US. AND WE OUGHT TO PUT
19 TOGETHER A SAVE THE EXAMINER COMMITTEE THE SAME
20 WAY WE WOULD PUT TOGETHER A SAVE THE 49ER
21 COMMITTEE, A SAVE THE GIANTS COMMITTEE. IT IS A
22 CIVIC ASSET."
23 MR. FANG, ARE THESE THE REMARKS OF THE MAYOR TO
24 WHICH YOU REFERRED IN YOUR PRIOR TESTIMONY?
25 A. YES, SIR.
2167
FANG - DIRECT / BALABANIAN
1 Q. DID YOU KNOW THAT THE MAYOR WAS GOING TO ADDRESS THIS
2 TOPIC IN HIS INAUGURAL ADDRESS?
3 A. NO, SIR.
4 Q. IN HIS REMARKS THE MAYOR REFERS TO A SAVE THE GIANTS
5 COMMITTEE. DO YOU RECALL WHETHER SUCH A COMMITTEE WAS EVER
6 FORMED?
7 A. YES, I DO.
8 Q. WHO ORGANIZED IT?
9 A. IT WAS FORMER MAYOR FRANK JORDAN.
10 Q. DID YOU SERVE ON IT?
11 A. YES, I DID.
12 Q. DO YOU SEE ANY DIFFERENCE BETWEEN MAYOR JORDAN'S EFFORTS
13 TO SAVE THE GIANTS AND MAYOR BROWN'S EFFORTS TO SAVE THE
14 EXAMINER?
15 MR. ALIOTO: I OBJECT ON THE GROUND THAT IT'S
16 IRRELEVANT, YOUR HONOR.
17 THE COURT: SUSTAINED.
18 BY MR. BALABANIAN:
19 Q. AFTER THE MAYOR'S SPEECH, DID YOU DISCUSS WITH HIM THE
20 ISSUES THAT HE HAD RAISED IN THAT SPEECH THAT WE'VE JUST BEEN
21 LOOKING AT?
22 A. YES, I DID.
23 Q. HOW MANY TIMES WOULD YOU SAY THAT YOU DID?
24 A. WELL, I DISCUSSED IT WITH HIM NUMEROUS TIMES. I DON'T
25 KNOW THE EXACT NUMBER.
2168
FANG - DIRECT / BALABANIAN
1 Q. DID YOU DISCUSS BOTH OF THE ISSUES; NAMELY, PREVENTING THE
2 DISAPPEARANCE OF THE EXAMINER AND --
3 MR. ALIOTO: I OBJECT TO LEADING THE WITNESS, YOUR
4 HONOR.
5 BY MR. BALABANIAN:
6 Q. WHAT TOPICS DID YOU DISCUSS WITH THE MAYOR?
7 A. I DISCUSSED GENERALLY CONCERNS ABOUT IF THE HEARST
8 CORPORATION WERE TO BUY THE CHRONICLE AND TO SHUT DOWN THE
9 EXAMINER, THAT THEY WOULD HAVE A DAILY NEWSPAPER MONOPOLY. I
10 ALSO DISCUSSED WITH HIM MY INTEREST IN ACQUIRING THE EXAMINER.
11 Q. DID THESE DISCUSSIONS TAKE PLACE AT MEETINGS WITH THE
12 MAYOR OR IN OTHER SETTINGS?
13 A. MOSTLY IN OTHER SETTINGS.
14 Q. WHAT KIND OF SETTINGS?
15 A. WELL, I THINK THE MAYOR IS PRETTY UBIQUITOUS IN WHERE HE
16 IS AND HE APPEARS JUST ABOUT EVERYWHERE; AND EVERY TIME THAT I
17 SAW HIM, YOU KNOW, EITHER HE OR I WOULD BRING THIS UP. AT THIS
18 TIME THE POTENTIAL CLOSURE OF THE EXAMINER WAS A MAJOR TOPIC OF
19 CONVERSATION WITH JUST ABOUT EVERYBODY IN SAN FRANCISCO, AND SO
20 IT WOULD COME UP IN ONE FORM OR ANOTHER WHEN I WOULD BUMP INTO
21 HIM AT FUNCTIONS OR WHEREVER.
22 Q. IN ANY OF YOUR CONVERSATIONS WITH THE MAYOR, WAS THERE ANY
23 DISCUSSION OF WHETHER YOU WOULD BE THE BEST POTENTIAL BUYER FOR
24 THE EXAMINER?
25 A. YES, I THINK SO.
2169
FANG - DIRECT / BALABANIAN
1 Q. AND DID YOU STATE A POSITION ON THAT?
2 A. YES, I DID.
3 Q. WHAT WAS YOUR POSITION?
4 A. MY POSITION WAS THAT I FELT THAT I WOULD BE THE BEST BUYER
5 FOR THE EXAMINER.
6 Q. CAN YOU TELL THE COURT THE REASONS YOU GAVE THE MAYOR?
7 A. PRIMARILY BECAUSE I WAS ALREADY IN THE NEWSPAPER BUSINESS,
8 BECAUSE I HAD A RECORD OF ACQUIRING FAILING NEWSPAPER ENTITIES
9 AND TURNING THEM AROUND INTO SUCCESSFUL OPERATIONS, AND ALSO
10 BECAUSE OF MY LOCAL PRESENCE IN THE MARKET SO THAT NOT ONLY DID
11 I HAVE NEWSPAPER EXPERIENCE BUT I HAD THE NEWSPAPER EXPERIENCE
12 RIGHT IN SAN FRANCISCO.
13 Q. NOW, DID ANY OF THESE CONVERSATIONS TAKE PLACE AT A
14 MEETING WITH THE MAYOR?
15 A. YES.
16 Q. WAS THERE MORE THAN ONE SUCH MEETING?
17 A. YES, THERE WERE.
18 Q. HOW MANY?
19 A. I DON'T RECALL THE EXACT NUMBER. MAYBE TWO OR THREE.
20 Q. OTHER THAN YOU AND MEMBERS OF YOUR FAMILY, WAS ANYONE ELSE
21 PRESENT AT ANY OF THOSE MEETINGS?
22 A. YES, SIR.
23 Q. HOW MANY?
24 A. ONE OF THOSE MEETINGS.
25 Q. WHO OTHER THAN YOU AND MEMBERS OF YOUR FAMILY ATTENDED
2170
FANG - DIRECT / BALABANIAN
1 THAT MEETING?
2 A. MY ATTORNEY ATTENDED THE MEETING AND MR. HELLMAN, WARREN
3 HELLMAN, ATTENDED THE MEETING, AND MR. JOE NIEHAUS ATTENDED THE
4 MEETING.
5 Q. DID THE MAYOR HAVE QUESTIONS OF YOU AND YOUR ADVISORS?
6 A. YES, HE DID.
7 Q. WOULD YOU TELL THE COURT WHAT HIS QUESTIONS WERE?
8 MR. ALIOTO: AGAIN, I OBJECT ON THE GROUND OF
9 HEARSAY, YOUR HONOR.
10 MR. BALABANIAN: NOT OFFERED FOR THE TRUTH. SIMPLY
11 TO SHOW THE AREAS OF INTEREST IN WHICH THE MAYOR EXPRESSED.
12 THE COURT: OBJECTION OVERRULED.
13 THE WITNESS: I THINK HE WANTED TO KNOW ABOUT OUR
14 INTEREST IN THE EXAMINER, WHAT WE THOUGHT ABOUT POTENTIAL OF
15 THE EXAMINER SURVIVING.
16 I THINK HE WAS ALSO INTERESTED IN ANY INTERACTIONS
17 THAT WE HAD HAD WITH THE DEPARTMENT OF JUSTICE AND PARTICULARLY
18 DIRECTED THOSE TYPES OF QUESTIONS TO MY ATTORNEY, WHO WAS
19 PRESENT, ABOUT CONTACTS WITH THE DEPARTMENT OF JUSTICE.
20 BY MR. BALABANIAN:
21 Q. WERE THERE ANY QUESTIONS TO WHICH MR. HELLMAN RESPONDED?
22 A. YES.
23 Q. WHAT WAS THE SUBJECT MATTER ADDRESSED BY MR. HELLMAN?
24 MR. ALIOTO: THAT IS HEARSAY, YOUR HONOR. I OBJECT.
25 MR. BALABANIAN: I'M SIMPLY ASKING FOR THE TOPICS IN
2171
FANG - DIRECT / BALABANIAN
1 WHICH MR. HELLMAN RESPONDED, NOT FOR THE --
2 THE COURT: OBJECTION OVERRULED.
3 THE WITNESS: THE MAYOR WAS INTERESTED IN KNOWING
4 WHAT MR. HELLMAN'S INTEREST WAS IN SAVING THE EXAMINER. HE WAS
5 INTERESTED IN MR. HELLMAN'S OPINION ON WHAT THE BUSINESS
6 COMMUNITY'S REACTION WOULD BE TO SAVING THE EXAMINER. I THINK
7 THOSE WERE THE GENERAL TOPICS.
8 BY MR. BALABANIAN:
9 Q. DID HE RESPOND TO ANY QUESTIONS RELATING TO YOU OR YOUR
10 INTENTIONS?
11 A. YES, HE DID.
12 Q. TO WHAT TYPE OF QUESTIONS ON THAT SUBJECT DID MR. HELLMAN
13 RESPOND?
14 A. MR. BROWN?
15 Q. I'M SORRY, TO WHAT TYPE OF QUESTIONS FROM THE MAYOR DID
16 MR. HELLMAN RESPOND ON THAT SUBJECT?
17 A. I'M CONFUSED.
18 Q. I'M CONFUSING YOU. LET ME TRY AGAIN.
19 I UNDERSTOOD YOU TO SAY THAT MR. HELLMAN RESPONDED
20 TO QUESTIONS FROM MAYOR BROWN RELATING TO YOU AND YOUR
21 INTENTIONS; IS THAT CORRECT?
22 A. YES.
23 Q. AND TO WHAT TYPE OF QUESTIONS ALONG THAT LINE DID
24 MR. HELLMAN RESPOND?
25 A. ALONG THE LINES OF WHAT MR. HELLMAN AND I HAD TALKED
2172
FANG - DIRECT / BALABANIAN
1 ABOUT, ABOUT PLANS AND VIABILITY OF THOSE PLANS AND
2 MR. HELLMAN'S OPINIONS ON THOSE PLANS.
3 Q. NOW, AFTER YOU ENTERED INTO YOUR AGREEMENT WITH HEARST TO
4 ACQUIRE THE EXAMINER, DID YOU HAVE OCCASION TO DISCUSS THAT
5 DEVELOPMENT WITH MAYOR BROWN?
6 A. I DID, YES.
7 Q. HOW DID THAT OCCUR?
8 A. THAT OCCURRED BECAUSE THE ANNOUNCEMENT OF MY ACQUISITION
9 OF THE EXAMINER OCCURRED ON FRIDAY AT NOON, I BELIEVE IT WAS
10 MARCH 17TH, AND THE MAYOR WAS OUT OF THE COUNTRY. AND IT
11 HAPPENED AT NOON. THE ANNOUNCEMENT HAPPENED AT NOON. SO WHEN
12 IT HAPPENED, THERE WAS A LOT OF PRESS CALLS AND THERE WAS A LOT
13 OF ACTIVITY.
14 AND THEN THERE WAS A STATEMENT ISSUED BY THE MAYOR'S
15 OFFICE LATER THAT AFTERNOON. I CALLED THE MAYOR'S OFFICE AND
16 WANTED TO TALK TO THE MAYOR BECAUSE I HAD READ HIS STATEMENT,
17 BUT I WAS INFORMED THAT HE WAS OUT OF TOWN. AND I ASKED HIS
18 AIDE WHO HAD WRITTEN THAT STATEMENT AND THE AIDE INFORMED ME
19 THAT THE MAYOR HAD WRITTEN THAT. AND I ASKED HOW THAT COULD
20 BE, AND THEY SAID THAT THEY HAD CONTACTED THE MAYOR WHO WAS
21 VACATIONING IN PARIS. I BELIEVE IT WAS HIS BIRTHDAY. AND SO
22 HE HAD WRITTEN IT IN PARIS AND SENT IT TO THEM.
23 Q. WHAT WAS THE PURPORT OF THE MAYOR'S STATEMENT?
24 A. THAT HE WAS VERY HAPPY THAT THE EXAMINER HAD BEEN SAVED.
25 Q. NOW, SO THAT THE RECORD IS CLEAR, DID YOUR CONVERSATION
2173
FANG - DIRECT / BALABANIAN
1 WITH THE MAYOR ABOUT THAT STATEMENT OCCUR BEFORE OR AFTER HE
2 HAD ISSUED IT?
3 A. MY CONVERSATION OCCURRED AFTER THAT STATEMENT HAD BEEN
4 ISSUED. IT DID NOT OCCUR UNTIL SATURDAY. THE STATEMENT WAS
5 ISSUED ON FRIDAY.
6 Q. CAN YOU TELL US WHAT TRANSPIRED IN YOUR CONVERSATION WITH
7 THE MAYOR? WHAT DID YOU TELL HIM?
8 A. ON SATURDAY MORNING I WAS ABLE TO TRACK THE MAYOR DOWN IN
9 HIS HOTEL IN PARIS, AND I TOLD HIM THAT I HAD ENTERED INTO AN
10 AGREEMENT TO BUY THE EXAMINER AND I WAS VERY EXCITED.
11 AND WHILE HE SEEMED GENUINELY HAPPY FOR ME, I THINK
12 HE WAS MORE INTERESTED IN GETTING ON WITH HIS VACATION AND IT
13 WAS A RATHER SHORT CONVERSATION.
14 Q. MR. FANG, HAVE YOU EVER HAD LUNCH WITH THE MAYOR?
15 A. NO, I HAVE NOT.
16 Q. DO YOU THINK THAT IF YOU BECOME THE PUBLISHER OF THE
17 EXAMINER, YOU MAY BE INVITED TO LUNCH WITH THE MAYOR?
18 MR. ALIOTO: I OBJECT, YOUR HONOR.
19 THE COURT: MR. BALABANIAN, MOVE ON.
20 BY MR. BALABANIAN:
21 Q. ALL RIGHT. HAVE YOU EVER MET WITH THE MAYOR ALONE?
22 A. I HAVE NEVER HAD A ONE-ON-ONE MEETING WITH THE MAYOR.
23 Q. ON ANY SUBJECT?
24 A. ON ANY SUBJECT.
25 Q. MR. FANG, I'M NOW GOING TO TURN TO THE QUESTION OF YOUR
2174
FANG - DIRECT / BALABANIAN
1 CONTACTS WITH THE DEPARTMENT OF JUSTICE IN WHICH SOME INTEREST
2 HAS BEEN EXPRESSED.
3 HOW MANY CONTACTS WITH THE DEPARTMENT OF JUSTICE DID
4 YOU HAVE IN CONNECTION WITH THESE MATTERS; THAT IS, THE
5 PROPOSED ACQUISITION OF THE CHRONICLE BY HEARST AND THE SALE OF
6 THE EXAMINER TO YOU?
7 A. I HAD A TOTAL OF FIVE CONTACTS WITH THE DEPARTMENT OF
8 JUSTICE.
9 Q. WHO INITIATED THOSE CONTACTS?
10 A. EACH ONE OF THOSE CONTACTS WAS INITIATED BY THE DEPARTMENT
11 OF JUSTICE.
12 Q. WHEN DID THE FIRST OCCUR?
13 A. THE FIRST, I BELIEVE, OCCURRED AROUND OCTOBER 1ST, 1999.
14 Q. WHAT FORM DID IT TAKE?
15 A. IT WAS AN INTERVIEW OF ME BY THE DEPARTMENT OF JUSTICE.
16 Q. WHERE DID THAT TAKE PLACE?
17 A. THAT TOOK PLACE IN MY OFFICES AT THE INDEPENDENT.
18 Q. WHO WAS PRESENT FOR THE DEPARTMENT OF JUSTICE?
19 A. MR. THOMAS HORTON WAS PRESENT REPRESENTING THE DEPARTMENT
20 OF JUSTICE.
21 THE COURT: TOM HORTON?
22 MR. BALABANIAN: TOM HORTON.
23 THE COURT: H-O-R-T-O-N?
24 MR. BALABANIAN: YES, YOUR HONOR.
25 THE WITNESS: YES.
2175
FANG - DIRECT / BALABANIAN
1 BY MR. BALABANIAN:
2 Q. DO YOU KNOW WHAT ROLE MR. HORTON WAS PLAYING IN THE
3 ACTIVITIES OF THE DEPARTMENT AT THIS TIME?
4 A. I BELIEVE THAT MR. HORTON WAS THE LEAD INVESTIGATOR ON THE
5 INVESTIGATING TEAM OF THE DEPARTMENT OF JUSTICE IN REGARDS TO
6 THE HEARST ACQUISITION OF THE CHRONICLE.
7 Q. IS MR. HORTON AN ATTORNEY?
8 A. YES.
9 Q. WAS YOUR ATTORNEY PRESENT AT THAT TIME?
10 A. YES, HE WAS.
11 Q. WAS ANYONE ELSE PRESENT?
12 A. I THINK THERE WERE TWO OF MY ATTORNEYS PRESENT.
13 Q. AND MR. HORTON?
14 A. AND MR. HORTON AND MYSELF.
15 Q. APPROXIMATELY HOW LONG WAS THAT INTERVIEW?
16 A. THE ENTIRE MEETING WAS BASICALLY A DAY-LONG EVENT.
17 Q. WHAT TOPICS WERE COVERED IN THE COURSE OF THE DEPARTMENT
18 OF JUSTICE INTERVIEW, THE FIRST DEPARTMENT OF JUSTICE
19 INTERVIEW?
20 A. I THINK MR. HORTON STARTED BY LAYING OUT SOME GROUND RULES
21 OF WHAT HE WAS THERE FOR AND WHAT HIS ROLE WAS. MR. HORTON
22 WANTED MY UNDERSTANDING OF THE MARKET, THE SAN FRANCISCO
23 MARKET.
24 MR. HORTON WANTED MY UNDERSTANDING OF THE
25 COMPETITIVE ASPECTS, THE NEWSPAPER COMPETITIVE ASPECTS OF THE
2176
FANG - DIRECT / BALABANIAN
1 MARKET.
2 MR. HORTON WANTED TO UNDERSTAND MY OPERATIONS. HE
3 ALSO WANTED TO UNDERSTAND THE DIFFERENT KINDS OF NEWSPAPERS
4 THAT EXISTED IN SAN FRANCISCO. I THINK THOSE WERE HIS GENERAL
5 TOPICS.
6 Q. YOU SAY THAT CONVERSATION TOOK THE BETTER PART OF A DAY?
7 A. YES, IT DID.
8 Q. WERE ANY DOCUMENTS REFERRED TO IN THE COURSE OF THAT
9 INTERVIEW?
10 A. WE LOOKED THROUGH COPIES OF THE --
11 (POWER OUTAGE IN COURTROOM.)
12 THE COURT: WE'LL TAKE A RECESS AT THIS TIME. I'LL
13 SEE IF I CAN FIND OUT WHAT'S GOING ON HERE.
14 (RECESS TAKEN AT 1:25 P.M.)
15 (PROCEEDINGS RESUMED AT 1:35 P.M.)
16 THE COURT: VERY WELL, MR. BALABANIAN, YOU MAY
17 RESUME YOUR EXAMINATION OF THIS WITNESS.
18 MR. BALABANIAN: THANK YOU, YOUR HONOR.
19 Q. MR. FANG, WHEN WE LOST POWER, WE WERE TALKING ABOUT THE
20 INTERVIEW CONDUCTED BY MR. HORTON OF THE DEPARTMENT OF JUSTICE
21 IN OCTOBER OF LAST YEAR.
22 A. YES, THAT'S CORRECT.
23 Q. AND WAS MR. -- DO YOU UNDERSTAND THAT MR. HORTON'S OFFICE
24 IS IN WASHINGTON, D. C.?
25 A. YES, THAT'S CORRECT.
2177
FANG - DIRECT / BALABANIAN
1 THE COURT: COULD YOU HOLD ONE MOMENT,
2 MR. BALABANIAN.
3 (PAUSE IN PROCEEDINGS.)
4 THE COURT: SORRY.
5 BY MR. BALABANIAN:
6 Q. MR. FANG, CONTINUING WITH THE EVENTS OF OCTOBER -- OF THE
7 OCTOBER MEETING WITH MR. HORTON, DID ANYTHING -- WHAT HAPPENED
8 AFTER THE INTERVIEW?
9 A. AFTER THE INTERVIEW, MR. HORTON WANTED A TOUR OF MY
10 NEWSPAPER OPERATIONS.
11 Q. DID HE INSPECT THEM PHYSICALLY?
12 A. YES. HE INSPECTED ALL ASPECTS OF MY OPERATION FROM THE
13 NEWSROOM TO ADVERTISING FUNCTIONS TO THE PRINTING OPERATIONS TO
14 THE INSERTING OPERATIONS.
15 Q. APPROXIMATELY HOW MUCH TIME WAS DEVOTED TO THAT PHYSICAL
16 INSPECTION OF YOUR FACILITIES?
17 A. MAYBE ABOUT THREE HOURS.
18 Q. AND DID IT COVER ALL OF YOUR OPERATIONS?
19 A. YES. HE WAS NOT THAT FAMILIAR WITH THE PRODUCTION
20 PROCESSES OF NEWSPAPERS AND HAD ME WALK THROUGH ALL THE
21 DIFFERENT PROCESSES. FOR EXAMPLE, THE PAGINATION PROCESSES
22 THAT WE TALKED ABOUT, HE ALSO WANTED AN EXPLANATION OF HOW IT
23 HAD BEEN DONE MANUALLY AND HOW IT WAS NOW DONE ELECTRONICALLY,
24 AND HE WANTED TO WALK THROUGH ALL THOSE TYPES OF THINGS.
25 Q. ALL RIGHT. NOW, YOU'VE TOLD US THAT THERE WERE ALL
2178
FANG - DIRECT / BALABANIAN
1 TOGETHER FIVE CONTACTS THAT YOU RECEIVED FROM THE DEPARTMENT OF
2 JUSTICE; IS THAT CORRECT?
3 A. YES.
4 Q. CAN YOU TELL US ABOUT THE SECOND? WHEN DID THAT OCCUR?
5 A. THE SECOND OCCURRED, I BELIEVE, IN NOVEMBER OF 1999.
6 Q. AND WHAT TRANSPIRED AT THAT TIME?
7 A. AT THAT TIME MR. HORTON TOOK MY DEPOSITION.
8 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2179
FANG - DIRECT / BALABANIAN
1 BY MR. BALABANIAN:
2 Q. DID THAT OCCUR ON NOVEMBER 8TH?
3 A. YES, I BELIEVE SO.
4 Q. AND HAS A TRANSCRIPT OF YOUR TESTIMONY CONSISTING OF 234
5 PAGES BEEN MADE AVAILABLE TO PLAINTIFFS'S COUNSEL IN THIS
6 MATTER?
7 A. YES, IT HAS.
8 Q. MR. FANG, WAS ANYONE ELSE PRESENT FOR THE DEPARTMENT OF
9 JUSTICE AT THE TIME YOUR DEPOSITION WAS TAKEN?
10 A. YES.
11 Q. WHO?
12 A. THERE WAS ONE OTHER GENTLEMAN WITH MR. HORTON, A COLLEAGUE
13 OF HIS, I BELIEVE, NAMED MR. LYNCH, WHO WAS ALSO WITH THE
14 DEPARTMENT OF JUSTICE BUT WAS WITH THE SAN FRANCISCO OFFICE. I
15 THINK THEY HAVE THEIR OFFICES IN THIS BUILDING HERE.
16 Q. OTHER THAN MR. HORTON, MR. LYNCH, YOURSELF AND YOUR
17 COUNSEL, WAS ANYONE ELSE PRESENT?
18 A. NO ONE ELSE WAS PRESENT.
19 Q. CAN YOU VERY BRIEFLY SUMMARIZE THE TOPICS THAT WERE
20 COVERED IN THE COURSE OF THE TESTIMONY THAT YOU GAVE?
21 A. THEY WERE SIMILAR TOPICS TO THE TOPICS THAT HAD BEEN
22 COVERED BY MR. HORTON IN HIS INITIAL INTERVIEW. I THINK HE
23 BASICALLY WANTED TO GET EVERYTHING ON THE RECORD. THE ONLY
24 ADDITIONAL TOPICS WERE MY FURTHER CONTACT WITH THE HEARST
25 CORPORATION REGARDING MY EFFORTS TO PURCHASE THE EXAMINER.
2180
FANG - DIRECT / BALABANIAN
1 Q. WHERE DID THOSE EFFORTS STAND AT THE TIME YOU GAVE YOUR
2 DEPOSITION TO THE JUSTICE DEPARTMENT?
3 A. AT THAT TIME I THINK WE WERE GOING BACK AND FORTH WITH THE
4 HEARST CORPORATION OVER DUE DILIGENCE ASPECTS, AND WE HAD KIND
5 OF REACHED AN IMPASSE IN REGARDS TO ANY PROGRESS ON MY
6 POTENTIAL PURCHASE.
7 Q. HAD THE SECOND VERONIS SUHLER SOLICITATION BEEN ISSUED AT
8 THAT POINT?
9 A. NO, IT HAD NOT.
10 Q. SO YOUR COMMENTS ABOUT THE CURRENT STATE OF THE OFFER,
11 WERE THEY ADDRESSED TO THE FIRST OR THE SECOND VERONIS SUHLER
12 OFFER, YOUR COMMENTS IN YOUR DEPOSITION?
13 A. THE COMMENTS IN MY DEPOSITION REFER TO VERONIS SUHLER 1,
14 THE FIRST OFFERING MEMORANDUM.
15 Q. ALL RIGHT. LET'S GO TO THE THIRD OF THE FIVE CONTACTS.
16 WHEN DID THAT OCCUR?
17 A. I BELIEVE IT OCCURRED IN JANUARY OF THE YEAR 2000.
18 Q. AND AT WHOSE INITIATIVE DID THAT TAKE PLACE?
19 A. THAT ALSO OCCURRED AT THE INITIATIVE OF THE DEPARTMENT OF
20 JUSTICE, MR. HORTON SPECIFICALLY.
21 THE COURT: MR. HORTON AND?
22 THE WITNESS: MR. HORTON SPECIFICALLY.
23 THE COURT: THANK YOU.
24 BY MR. BALABANIAN:
25 Q. DID THAT TAKE PLACE IN SAN FRANCISCO OR WASHINGTON?
2181
FANG - DIRECT / BALABANIAN
1 A. THAT TOOK PLACE IN SAN FRANCISCO.
2 Q. MR. HORTON CAME OUT HERE FOR THAT MEETING?
3 A. YES. I BELIEVE HE WAS OUT HERE AS PART OF HIS
4 INVESTIGATION AND WANTED TO MEET WITH ME, AS WELL.
5 Q. WAS HE ACCOMPANIED BY MR. LYNCH AT THAT TIME?
6 A. YES, I BELIEVE HE WAS.
7 Q. WHERE DID THAT MEETING TAKE PLACE?
8 A. THAT MEETING TOOK PLACE IN THE OFFICES OF HELLMAN &
9 FREEDMAN.
10 Q. HOW DID IT COME TO TAKE PLACE THERE?
11 A. MR. HORTON, I THINK, HAD HEARD THAT MR. HELLMAN WAS
12 ADVISING ME ON THIS PROJECT AND WANTED TO MEET WITH
13 MR. HELLMAN, AS WELL AS MEET WITH MYSELF TO GET AN UPDATE ON
14 WHERE I WAS.
15 Q. WHO ELSE WAS PRESENT AT THAT MEETING BESIDES MR. HORTON,
16 MR. LYNCH AND YOURSELF?
17 A. MY COUNSEL WAS THERE, MY ATTORNEYS WERE THERE, AND MY
18 MOTHER WAS PRESENT AT THAT MEETING, AS WELL.
19 Q. WAS MR. HELLMAN PRESENT?
20 A. MR. HELLMAN WAS PRESENT, YES.
21 Q. CAN YOU TELL US, MR. FANG, WHAT TOPICS WERE COVERED AT THE
22 MEETING WITH MR. HORTON AND MR. LYNCH THAT TOOK PLACE AT THE
23 OFFICES OF HELLMAN & FREEDMAN?
24 A. AGAIN, WE TALKED ABOUT -- WE TALKED ABOUT THE PROGRESS OF
25 MY CONTACTS WITH THE HEARST CORPORATION AND WE TALKED ABOUT
2182
FANG - DIRECT / BALABANIAN
1 MR. HELLMAN'S INVOLVEMENT IN THIS PROJECT. IT WAS BASICALLY AN
2 UPDATE FOR MR. HORTON.
3 Q. DID MR. HORTON POSE QUESTIONS TO YOU AND YOUR ADVISERS ON
4 THESE SUBJECTS?
5 A. YES, HE DID. HE WANTED TO MAKE SURE THAT WE WERE STILL
6 INTERESTED AND . . .
7 Q. DID MR. HELLMAN RESPOND TO ANY OF MR. HORTON'S QUESTIONS?
8 A. YES, HE DID.
9 Q. WHAT TOPICS?
10 A. THE TOPICS ALSO WERE WHAT MR. HELLMAN'S INVOLVEMENT WAS
11 AND WHAT MR. HELLMAN'S OPINION WAS REGARDING THE VIABILITY OF
12 MY PLANS -- THOSE GENERAL TOPICS.
13 Q. AND THIS MEETING YOU PLACE IN -- AT WHAT TIME
14 APPROXIMATELY?
15 A. JANUARY.
16 Q. JANUARY OF THIS YEAR?
17 A. OF THIS YEAR.
18 Q. ALL RIGHT. LET'S GO ON, THEN, TO THE FOURTH CONTACT WITH
19 THE DEPARTMENT OF JUSTICE. WHEN DID THAT OCCUR?
20 A. THE FOURTH CONTACT OCCURRED IN LATE MARCH OF 2000, AFTER
21 THE ANNOUNCEMENT HAD BEEN MADE THAT I HAD ENTERED INTO AN
22 AGREEMENT WITH THE HEARST CORPORATION TO ACQUIRE THE EXAMINER.
23 Q. AT WHOSE INITIATIVE DID THAT CONTACT TAKE PLACE?
24 A. MR. HORTON.
25 Q. WHERE DID THAT CONTACT TAKE PLACE?
2183
FANG - DIRECT / BALABANIAN
1 A. MR. HORTON SUMMONED MYSELF TO GO BACK TO WASHINGTON, D.C.
2 Q. DID YOU DO SO?
3 A. YES, I DID.
4 Q. WERE YOU ACCOMPANIED BY COUNSEL?
5 A. YES, I WAS.
6 Q. DID ANYONE ELSE GO WITH YOU?
7 A. NO, SIR.
8 Q. WHERE DID THE MEETING TAKE PLACE?
9 A. THE MEETING TOOK PLACE IN WASHINGTON, D.C. IN THE OFFICES
10 OF THE DEPARTMENT OF JUSTICE.
11 Q. WAS MR. HORTON PRESENT?
12 A. YES, HE WAS.
13 Q. WERE ANY OTHER REPRESENTATIVES OF THE DEPARTMENT OF
14 JUSTICE PRESENT DURING THAT MEETING?
15 A. YES, SIR.
16 Q. APPROXIMATELY HOW MANY?
17 A. THERE WERE APPROXIMATELY 12 TO 15 PEOPLE IN THE ROOM FOR
18 THE DEPARTMENT OF JUSTICE.
19 Q. DID THEY IDENTIFY THEIR AREAS OF EXPERTISE?
20 A. YES.
21 Q. CAN YOU TELL US WHAT THEY WERE?
22 A. GENERALLY, THEY IDENTIFIED THEMSELVES AS ATTORNEYS WITH
23 THE DEPARTMENT OF JUSTICE, ECONOMISTS, I THINK THAT HAD BEEN
24 RETAINED BY THE DEPARTMENT OF JUSTICE AND NEWSPAPER EXPERTS
25 THAT WERE WORKING WITH THE DEPARTMENT OF JUSTICE.
2184
FANG - DIRECT / BALABANIAN
1 Q. WERE YOU ASKED QUESTIONS BY THE DEPARTMENT OF JUSTICE
2 REPRESENTATIVES AT THAT MEETING?
3 A. YES, I WAS.
4 Q. ON WHAT TOPICS?
5 A. THIS MEETING BASICALLY WAS TO COVER MY PLANS FOR THE NEW
6 EXAMINER, AND THEY ASKED ME A NUMBER OF QUESTIONS ON HOW I
7 PLANNED TO RUN THE NEW EXAMINER.
8 Q. WAS ANYTHING ELSE COVERED IN THE COURSE OF THE MEETING?
9 A. NO. THAT WAS THE TOPIC OF THE ENTIRE MEETING.
10 Q. DO YOU RECALL APPROXIMATELY HOW MANY OF THE DOZEN OR SO
11 REPRESENTATIVES PRESENT HAD QUESTIONS FOR YOU?
12 A. I THINK A MAJORITY OF THEM, SIX TO EIGHT OF THEM, ASKED
13 QUESTIONS, GIVEN QUESTIONS, ALONG THE WAY.
14 Q. DID THEY APPEAR TO BE WELL INFORMED ABOUT THE TOPICS ON
15 WHICH THEY QUESTIONED YOU?
16 A. AS A MATTER OF FACT, THEY DID APPEAR TO BE WELL INFORMED.
17 IT WAS APPARENT THAT THIS WAS AN INVESTIGATIVE TEAM AND THAT
18 THEY KNEW ABOUT THE NEWSPAPER INDUSTRY AND THAT THEY KNEW ABOUT
19 THE SAN FRANCISCO MARKET.
20 Q. ALL RIGHT. WHAT WAS THE LAST CONTACT YOU HAD WITH THE
21 DEPARTMENT OF JUSTICE CONCERNING THIS MATTER?
22 A. THE LAST CONTACT I HAD WITH THEM WAS A CONFERENCE CALL
23 THAT I HAD WHERE I WAS ON THE LINE AND MR. HORTON WAS ON THE
24 LINE AND MY COUNSEL WAS ON THE LINE.
25 Q. WHEN DID THAT OCCUR?
2185
FANG - DIRECT / BALABANIAN
1 A. I BELIEVE THAT OCCURRED ON MARCH 29TH, 2000.
2 Q. WHO INITIATED THE CONFERENCE CALL?
3 A. MR. HORTON DID.
4 Q. WHAT TOPICS WERE ADDRESSED IN THE COURSE OF THAT
5 CONFERENCE CALL?
6 A. THEY WERE -- THE TOPIC, AGAIN, WAS GENERALLY ABOUT MY
7 PLANS FOR THE NEW EXAMINER. AND HE HAD SPECIFIC QUESTIONS
8 ABOUT MY PLANS. SOME OF THE QUESTIONS WERE SIMILAR TO THE ONES
9 THAT HAD BEEN ASKED WHEN I WAS IN WASHINGTON, D.C., BUT IT
10 SEEMED ALMOST AS IF HE HAD A CHECKLIST AND THAT HE WAS GOING
11 THROUGH ALL THE QUESTIONS ON HIS LIST AND ASKING ME THOSE
12 QUESTIONS.
13 Q. DID YOU ANSWER ALL OF THE --
14 (ELECTRICAL POWER OUTAGE)
15 BY MR. BALABANIAN:
16 Q. WE HAVE TO RAISE OUR VOICES, MR. FANG.
17 DID YOU ANSWER ALL OF THE QUESTIONS THAT WERE POSED
18 TO YOU IN THE COURSE OF THE CONFERENCE CALL?
19 A. YES, I DID.
20 Q. NOW, DID YOU IN ANY OF YOUR COMMUNICATIONS WITH THE
21 DEPARTMENT OF JUSTICE EXPRESS THE VIEW THAT YOU WERE THE BEST
22 BUYER FOR THE EXAMINER?
23 A. YES, I DID.
24 Q. DID YOU GIVE ANY REASONS FOR THAT?
25 A. YES, I DID.
2186
FANG - DIRECT / BALABANIAN
1 Q. WHAT WERE THEY?
2 A. THEY WERE THE SAME REASONS THAT I HAD ARTICULATED BEFORE,
3 THAT I HAD NEWSPAPER EXPERIENCE, THAT I WAS AN EXISTING
4 NEWSPAPER OPERATOR, THAT I KNEW THIS MARKET.
5 Q. APART FROM THE DEPARTMENT OF JUSTICE, DID YOU RECEIVE ANY
6 INQUIRY FROM ANY OTHER REGULATORY AGENCY CONCERNING ANY OF
7 THESE MATTERS?
8 A. YES, I DID.
9 Q. FROM WHICH AGENCY OR BODY?
10 A. I ALSO TALKED TO THE CITY ATTORNEY'S OFFICE OF SAN
11 FRANCISCO.
12 Q. WITH -- AT WHOSE INITIATIVE?
13 A. AT THE CITY ATTORNEY'S INITIATIVE.
14 Q. DID YOU TALK TO THE CITY ATTORNEY HERSELF?
15 A. NO, I DID NOT.
16 Q. WHO CONTACTED YOU?
17 A. A GENTLEMAN NAMED PATRICK MAHONEY.
18 Q. DO YOU KNOW WHAT POSITION MR. MAHONEY HOLDS IN THE CITY
19 ATTORNEY'S OFFICE?
20 A. I BELIEVE HE IDENTIFIED HIMSELF AS CHIEF OF LITIGATION.
21 Q. DID YOU AT ANY TIME SPEAK WITH A MR. DENNIS AFTERGUT?
22 A. NO, I DID NOT.
23 Q. DID MR. MAHONEY POSE ANY QUESTIONS TO YOU REGARDING ANY OF
24 THE MATTERS WE HAVE DISCUSSED HERE TODAY?
25 A. YES, HE DID.
2187
FANG - DIRECT / BALABANIAN
1 Q. DO YOU RECALL THE TOPICS OF MR. MAHONEY'S INQUIRY?
2 A. YES, I DO.
3 Q. WHAT WERE THEY?
4 A. THEY WERE SIMILAR TO THE INITIAL CONVERSATIONS THAT I HAD
5 HAD WITH THE DEPARTMENT OF JUSTICE, TRYING TO UNDERSTAND THE
6 NEWSPAPER BUSINESS, THE COMPETITIVE SITUATIONS OF NEWSPAPERS IN
7 SAN FRANCISCO, MY OPERATIONS AND THOSE TYPES OF GENERAL TOPICS.
8 Q. DID YOU RECEIVE ANY INQUIRY FROM ANY OTHER REGULATORY
9 AGENCY CONCERNING ANY OF THESE MATTERS?
10 A. NO, I DID NOT.
11 Q. IN CONNECTION WITH MR. MAHONEY'S INQUIRY, WAS THERE ANY
12 INVOLVEMENT BY ANY REPRESENTATIVE OF THE DEPARTMENT OF JUSTICE?
13 A. NO, THERE WAS NOT.
14 Q. IN ANY OF YOUR --
15 THE COURT: WAS THERE ANY WHAT?
16 MR. BALABANIAN: INVOLVEMENT. WAS THE DEPARTMENT OF
17 JUSTICE INVOLVED IN ANY WAY IN HIS COMMUNICATION WITH
18 MR. MAHONEY.
19 THE COURT: OKAY.
20 IS THAT HOW YOU UNDERSTOOD THE QUESTION?
21 THE WITNESS: YES, SIR.
22 THE COURT: ALL RIGHT.
23 BY MR. BALABANIAN:
24 Q. LET ME ASK IT THE OTHER WAY: IN ANY OF YOUR FIVE CONTACTS
25 WITH THE DEPARTMENT OF JUSTICE, WAS ANYONE PRESENT REPRESENTING
2188
FANG - DIRECT / BALABANIAN
1 THE CALIFORNIA ATTORNEY GENERAL?
2 A. NO, SIR.
3 Q. REPRESENTING THE SAN FRANCISCO CITY ATTORNEY?
4 A. NO, SIR.
5 Q. REPRESENTING THE SAN FRANCISCO DISTRICT ATTORNEY?
6 A. NO, SIR.
7 Q. REPRESENTING ANY ELECTED OR APPOINTED OFFICIAL?
8 A. NO, SIR.
9 Q. WAS THERE ANYONE INVOLVED AT ANY POINT IN YOUR CONTACTS
10 WITH THE DEPARTMENT OF JUSTICE OTHER THAN YOU, YOUR ADVISERS
11 AND EMPLOYEES OF THE DEPARTMENT OF JUSTICE?
12 A. THERE WAS NO ONE ELSE INVOLVED.
13 Q. DID YOU EVER RECEIVE A JOINT REQUEST FOR INFORMATION FROM
14 THE DEPARTMENT OF JUSTICE AND ANY OTHER AGENCY OR OFFICIAL?
15 A. NO, I DID NOT.
16 Q. DID YOU EVER RECEIVE ANY INDICATION OF ANY KIND THAT THE
17 DEPARTMENT OF JUSTICE INVESTIGATION WAS ANYTHING OTHER THAN
18 AUTONOMOUS?
19 THE COURT: ANYTHING OTHER THAN?
20 MR. BALABANIAN: AUTONOMOUS.
21 THE WITNESS: I BELIEVE THEY WERE AUTONOMOUS.
22 BY MR. BALABANIAN:
23 Q. LET'S LOOK AT -- WE CAN'T SEE IT ON THE SCREEN BUT WE CAN
24 MANUALLY LOOK AT EXHIBIT H-940 IN EVIDENCE.
25 DO YOU RECOGNIZE THAT AS THE PRESS RELEASE ISSUED BY
2189
FANG - DIRECT / BALABANIAN
1 THE ANTITRUST DIVISION OF THE DEPARTMENT OF JUSTICE ON
2 MARCH 30TH OF THIS YEAR?
3 A. YES, I DO.
4 Q. DID YOU HAVE ANYTHING TO DO WITH ITS PREPARATION?
5 A. NO, I DID NOT.
6 Q. THE PRESS RELEASE STATES IN THE SECOND PARAGRAPH THAT THE
7 DEPARTMENT ANTITRUST DIVISION HAS BEEN INVESTIGATING HEARST'S
8 PROPOSED ACQUISITION OF THE SAN FRANCISCO CHRONICLE FROM
9 CHRONICLE PUBLISHING COMPANY BECAUSE IT HAD ANTITRUST CONCERNS
10 ABOUT THE TRANSACTION.
11 MR. FANG, HAD THE DEPARTMENT EXPRESSED SUCH CONCERNS
12 TO YOU?
13 A. YES, THEY HAD.
14 Q. GOING ON DOWN TO THE BOTTOM OF THE PAGE, DO YOU FIND THE
15 FOLLOWING STATEMENT IN QUOTATION MARKS:
16 "FOR THE FIRST TIME IN 35 YEARS SAN
17 FRANCISCO WILL HAVE TWO INDEPENDENT DAILY
18 NEWSPAPERS, SAID JOEL I. KLEIN, ASSISTANT
19 ATTORNEY GENERAL IN CHARGE OF THE DEPARTMENT'S
20 ANTITRUST DIVISION."
21 GOING ON IT QUOTES MR. KLEIN AS SAYING:
22 "CONSUMERS, SUCH AS ADVERTISERS AND READERS,
23 WILL OBTAIN THE BENEFITS OF FULL COMPETITION
24 BETWEEN TWO DAILY MORNING NEWSPAPERS."
25 MR. FANG, DID YOU HAVE ANYTHING TO DO WITH THE
2190
FANG - DIRECT / BALABANIAN
1 INCLUSION OF THAT STATEMENT IN THIS PRESS RELEASE?
2 A. NO, I DID NOT.
3 Q. IS IT TRUE, AS MR. KLEIN STATES, THAT CONSUMERS SUCH AS
4 ADVERTISERS AND READERS WILL OBTAIN THE BENEFITS OF FULL
5 COMPETITION BETWEEN TWO DAILY AND MORNING NEWSPAPERS?
6 MR. ALIOTO: I OBJECT TO THAT ON THE GROUND THAT IT
7 CALLS FOR A CONCLUSION ON THE PART OF THE WITNESS, YOUR HONOR.
8 THE COURT: SUSTAINED.
9 BY MR. BALABANIAN:
10 Q. IS THE COMPETITION THAT YOU FORESEE BETWEEN THE EXAMINER
11 AND THE CHRONICLE FULL COMPETITION?
12 A. IN THE CITY OF SAN FRANCISCO, YES.
13 Q. DO YOU KNOW MR. KLEIN?
14 A. NO, I DO NOT.
15 Q. HAVE YOU EVER MET HIM?
16 A. NO. I HAVE SEEN HIM ON T.V.
17 Q. ARE YOU AWARE OF ANY INFLUENCE THAT YOU OR ANY MEMBER OF
18 YOUR FAMILY HAS OVER MR. KLEIN?
19 A. NO, SIR.
20 Q. MR. FANG, WHAT DO YOU HAVE AT RISK IN THE NEW EXAMINER?
21 A. WELL, OVER THE LAST 12 YEARS I THINK THAT WE'VE BUILT UP
22 THE INDEPENDENT INTO A VERY UNIQUE NEWSPAPER IN THE INDUSTRY
23 AND HAVE GAINED A SOLID REPUTATION FOR BEING STRONG NEWSPAPER
24 OPERATORS. AND I THINK THAT REPUTATION IS HELPING ME TO OPEN
25 DOORS WITH ADVERTISERS, EVEN THE KINDS OF DAILY ADVERTISERS
2191
FANG - DIRECT / BALABANIAN
1 THAT DON'T CURRENTLY ADVERTISE IN THE INDEPENDENT. AND SO I
2 THINK ONE OF THE THINGS THAT I DO HAVE AT RISK IS THE
3 INDEPENDENT'S REPUTATION WITH THE NEW EXAMINER, PARTICULARLY
4 WITH ALL OF THE ATTENTION THAT MY ACQUISITION OF THE EXAMINER
5 HAS ACHIEVED.
6 I ALSO HAVE AT RISK THE INDEPENDENT'S OPERATIONS
7 ITSELF BECAUSE SOME OF THESE SYNERGIES THAT WE HAVE TALKED
8 ABOUT WITH THE INDEPENDENT, WORKING WITH THE EXAMINER, IF THE
9 EXAMINER WERE TO FAIL, I THINK THAT THAT COULD CAUSE HARM TO
10 THE INDEPENDENT, AND SO THE INDEPENDENT IS AT RISK, AS WELL, IN
11 THIS VENTURE.
12 Q. MR. FANG, IF THE COURT ALLOWS YOUR PURCHASE OF THE
13 EXAMINER TO GO FORWARD, CAN YOU GIVE IT YOUR GUARANTEE THAT THE
14 EXAMINER, THE NEW EXAMINER, WILL SUCCEED?
15 MR. ALIOTO: WILL WHAT?
16 BY MR. BALABANIAN:
17 Q. CAN YOU GUARANTEE THAT THE NEW EXAMINER WILL SUCCEED?
18 MR. ALIOTO: I OBJECT TO THE QUESTION, YOUR HONOR,
19 ON THE GROUND THAT IT'S CALLING FOR A CONCLUSION.
20 THE COURT: DO YOU HAVE ANY OTHER QUESTIONS OF THIS
21 WITNESS, MR. BALABANIAN?
22 MR. BALABANIAN: NO, YOUR HONOR. THAT CONCLUDES MY
23 EXAMINATION.
24 THE COURT: WHY DON'T WE TAKE A BREAK THEN? I WILL
25 SEE IF I CAN SEE WHAT THE ELECTRICAL SITUATION IS.
2192
FANG - DIRECT / BALABANIAN
1 AND THEN DO ANY OF THE OTHER DEFENDANTS HAVE ANY
2 EXAMINATION OF THIS WITNESS?
3 MR. HALLING: I HAVE A FEW QUESTIONS, YOUR HONOR.
4 THE COURT: MR. ROSCH?
5 MR. ROSCH: NO, YOUR HONOR.
6 THE COURT: ALL RIGHT. THEN WE WILL RESUME WITH --
7 HOW MANY QUESTIONS DO YOU HAVE, MR. HALLING?
8 MR. HALLING: IT WILL BE VERY SHORT. ARE YOU ASKING
9 FOR A TIME ESTIMATE?
10 THE COURT: WHAT'S THAT?
11 MR. HALLING: A TIME ESTIMATE?
12 THE COURT: FIVE MINUTES?
13 MR. HALLING: NO, MAYBE 15.
14 THE COURT: I SEE. WELL, LET'S SEE IF WE CAN SEE
15 WHAT THE ELECTRICAL SITUATION IS AND THEN WE WILL RESUME WITH
16 MR. HALLING'S EXAMINATION.
17 ALL RIGHT. WE WILL BE IN RECESS UNTIL FIVE MINUTES
18 AFTER.
19 (RECESS TAKEN AT 1:50 P.M.)
20 (PROCEEDINGS RESUMED AT 2:05 P.M.)
21 THE LAW CLERK: PLEASE REMAIN SEATED. COME TO
22 ORDER. THIS COURT IS NOW IN SESSION.
23 THE COURT: VERY WELL, MR. HALLING. DO YOU WISH TO
24 EXAMINE THE WITNESS?
25
2193
FANG - CROSS / HALLING
1 CROSS-EXAMINATION
2 BY MR. HALLING:
3 Q. GOOD AFTERNOON, MR. FANG.
4 A. GOOD AFTERNOON.
5 Q. IS IT FAIR TO SAY THAT YOU DON'T LIKE THE HEARST
6 CORPORATION?
7 A. YES, SIR.
8 Q. WOULD YOU HAVE DONE THE DEAL WITH HEARST TO ACQUIRE THE
9 EXAMINER IF YOU DID NOT RECEIVE THE $66 MILLION SUBSIDY?
10 A. IT WOULD HAVE DEPENDED ON WHAT -- ON WHAT OTHER ASSETS
11 THEY HAD TO OFFER.
12 Q. WAS THE SUBSIDY IMPORTANT TO YOU IN ACQUIRING THE PAPER?
13 A. YES, IT WAS.
14 Q. YOU HAD AN OPPORTUNITY TO ACQUIRE THE PAPER FOR FREE,
15 DIDN'T YOU?
16 A. I DON'T RECALL THAT.
17 Q. WHEN THE EXAMINER WAS FIRST PUT UP FOR SALE, YOU COULD
18 HAVE ACQUIRED IT FOR NOTHING, CORRECT?
19 A. NO.
20 Q. THE FIRST SALE OFFER INVOLVED ESSENTIALLY THE SAME ASSETS
21 THAT YOU ARE ACQUIRING NOW; IS THAT CORRECT?
22 A. NO, SIR.
23 Q. WHAT WAS DIFFERENT?
24 A. THE ACCESS TO THE SUNDAY EXAMINER -- SUNDAY SUBSCRIBERS ON
25 A NON-EXCLUSIVE BASIS, THE BAY-TO-BREAKERS -- ALTHOUGH I AM NOT
2194
FANG - CROSS / HALLING
1 SURE THAT WE ARE GOING TO CONTINUE THAT OPERATION.
2 EXAMINER DOT COM, EXAMINER MAGAZINE, PROVISIONS THAT
3 ARE -- THAT I NEGOTIATED WITH REGARDS TO JOINT SALES CALLS,
4 WITH REGARDS TO ACCESS TO EMPLOYEES, WHICH WAS SPECIFICALLY
5 EXCLUDED IN THE FIRST OFFERING, THE CLAUSE THAT WE NEGOTIATED
6 REGARDING THE SYNDICATION CONTRACTS.
7 AND THOSE ARE JUST SOME OF THE THINGS OFF THE TOP OF
8 MY HEAD RIGHT NOW, SIR.
9 Q. ISN'T IT FAIR TO SAY, THOUGH, THAT THE BASIC ASSETS THAT
10 WERE BEING OFFERED, THE EXAMINER NAME, SUBSCRIPTION LIST AND SO
11 FORTH, WERE ESSENTIALLY THE SAME IN THE FIRST OFFER AS WHAT YOU
12 EVENTUALLY AGREED TO ACQUIRE?
13 A. NO, SIR.
14 Q. NOW, YOU MADE AN EARLIER PROPOSAL, DID YOU NOT, AROUND
15 FEBRUARY OF 2000?
16 A. ABOUT FEBRUARY 15TH OF 2000, YES.
17 Q. AND AT THAT POINT IN TIME, I BELIEVE YOU SAID YOU OFFERED
18 ABOUT 10 TO $15 MILLION FOR THE EXAMINER?
19 A. YES, THAT IS CORRECT.
20 Q. PART OF YOUR OFFER, HOWEVER, WAS A PARTICIPATION IN THE
21 JOA AND RECEIVING AT LEAST FOR THE FIRST FEW YEARS 30 PERCENT
22 OF THE NET EXCESS; ISN'T THAT RIGHT?
23 A. THAT IS CORRECT, SIR.
24 Q. AND YOU UNDERSTAND THAT THE NET EXCESS IS APPROXIMATELY
25 $100 MILLION?
2195
FANG - CROSS / HALLING
1 A. YES.
2 Q. AND THEN YOUR PROPOSAL FOR THE NEXT FEW YEARS HAD A
3 PROVISION THAT YOU WOULD GET ABOUT 20 PERCENT OF THE NET
4 EXCESS; IS THAT CORRECT?
5 A. I DON'T RECALL THE EXACT SPECIFICS OF THAT PROPOSAL, SIR.
6 Q. WELL, THE SECOND PART OF THE PROPOSAL AFTER THE FIRST FEW
7 YEARS WAS THAT THE NET EXCESS WOULD BE SPLIT ACCORDING TO THE
8 CIRCULATION PERCENTAGES BETWEEN THE EXAMINER AND THE CHRONICLE,
9 CORRECT?
10 A. I BELIEVE THAT IS CORRECT.
11 Q. AND IF THOSE PERCENTAGES REMAINED ABOUT WHERE THEY ARE
12 NOW, THAT WOULD BE ABOUT 20 PERCENT?
13 A. I DON'T RECALL THE SPECIFICS OF THAT PROPOSAL.
14 Q. ALL RIGHT. WELL, AT LEAST WITH RESPECT TO THE FIRST FEW
15 YEARS THAT YOU DO RECALL, YOU WOULD HAVE GOTTEN APPROXIMATELY
16 $90 MILLION FOR THE FIRST THREE YEARS?
17 A. I DON'T KNOW THE EXACT NUMBER, SIR.
18 Q. IT WOULD BE ABOUT 30 PERCENT OF THE NET EXCESS?
19 A. YES. I DON'T REMEMBER IF IT WAS FOR THREE YEARS OR IF IT
20 WAS THAT LONG, SIR.
21 Q. I BELIEVE YOU SAID THAT THE FIRST TIME THERE WAS EVER A
22 NEGATIVE PURCHASE PRICE WAS WHEN MR. ASHER RAISED IT, CORRECT?
23 A. YES, SIR.
24 Q. YOUR FIRST OFFER WOULD HAVE CAUSED YOU TO REALIZE, AT
25 LEAST IN THE FIRST FEW YEARS, ABOUT $90 MILLION LESS THE 10 OR
2196
FANG - CROSS / HALLING
1 15 MILLION YOU WERE WILLING TO PAY.
2 WOULD THAT HAVE BEEN A NEGATIVE PURCHASE PRICE?
3 A. NOW I AM A LITTLE BIT CONFUSED BY YOUR QUESTIONS.
4 THE COURT: COULD YOU CLARIFY THE QUESTION,
5 MR. HALLING?
6 BY MR. HALLING:
7 Q. DURING THE FIRST FEW YEARS OF YOUR PROPOSAL, YOU WOULD
8 HAVE RECEIVED ABOUT 30 PERCENT OF THE NET EXCESS, CORRECT?
9 A. YES.
10 Q. AND THAT WOULD BE ABOUT $90 MILLION, 30 MILLION A YEAR FOR
11 THREE YEARS?
12 A. AGAIN, I DON'T KNOW THE -- I DON'T REMEMBER THE EXACT
13 NUMBERS. IF YOU ARE SAYING IT WAS THREE YEARS AT $90 MILLION,
14 I DON'T KNOW THE NUMBERS.
15 Q. I WILL REPRESENT TO YOU THE NET EXCESS IS ABOUT
16 $100 MILLION.
17 A. AND YOU ARE ALSO REPRESENTING THAT IT WAS FOR THREE YEARS?
18 Q. WHY DON'T YOU TAKE A LOOK AT EXHIBIT E-53.
19 MAY I APPROACH THE WITNESS, YOUR HONOR?
20 THE COURT: YES, YOU MAY.
21 BY MR. HALLING:
22 Q. (INDICATING).
23 A. I HAVE IT HERE.
24 Q. TURN, IF YOU WOULD, TO THE FOURTH PAGE OF THE EXHIBIT.
25 A. YES, SIR.
2197
FANG - CROSS / HALLING
1 Q. NOW, THIS -- THIS DOCUMENT IS YOUR FEBRUARY 15TH, 2000
2 PROPOSAL, ISN'T IT?
3 A. YES, IT IS, SIR.
4 Q. AND UNDER PHASE 1, PART B, WHICH IS UP TO THE FIRST TWO
5 YEARS, IT SAYS:
6 "HEARST INCREASES PROFIT SHARE TO 70 PERCENT."
7 CORRECT?
8 A. YES, SIR.
9 Q. AND THAT WOULD BE 70 PERCENT OF THE NET EXCESS VERSUS
10 30 PERCENT FOR YOU?
11 A. YES, SIR.
12 Q. AND THEN, I BELIEVE, THE NEXT TIME IN YOUR PROPOSAL THERE
13 IS ANY CHANGE IS DURING MONTHS 49 TO 72 WHERE YOUR PROPOSAL
14 STATES THAT ADVERTISING REVENUE WILL BE SPLIT BETWEEN THE TWO
15 PAPERS IN PROPORTION TO THE RESPECTIVE DAILY CIRCULATION?
16 A. YES, SIR.
17 Q. ALL RIGHT. THAT WAS THE PROPOSAL YOU MADE, CORRECT?
18 A. YES, SIR.
19 Q. DO YOU CONSIDER THE EXAMINER TO BE A VIABLE BUSINESS
20 WITHOUT A SUBSIDY?
21 A. IT DEPENDS ON WHAT ASSETS ARE BEING OFFERED FOR SALE.
22 Q. WELL, LET'S ASSUME THE ASSETS THAT ARE BEING OFFERED FOR
23 SALE ARE THE ONES YOU ARE GOING TO RECEIVE IF THE CONTRACT
24 YOU'VE SIGNED WITH HEARST IS IMPLEMENTED.
25 DO YOU HAVE THOSE ASSETS IN MIND?
2198
FANG - CROSS / HALLING
1 A. YES.
2 Q. LET'S SAY THAT HEARST WERE TO GIVE YOU THOSE ASSETS FOR
3 FREE. WOULD YOU BE ABLE TO RUN THE EXAMINER AS A VIABLE
4 BUSINESS IF THOSE ASSETS WERE SIMPLY GIVEN TO YOU WITHOUT THE
5 SUBSIDY?
6 A. WITHOUT THE REIMBURSEMENT, I DO NOT BELIEVE IT WOULD BE A
7 VIABLE BUSINESS.
8 Q. YOU TESTIFIED EARLIER ABOUT THE INDEPENDENT'S RACKS THAT
9 IT HAS IN SAN FRANCISCO. AND CORRECT ME IF I'M WRONG, BUT I
10 THOUGHT YOU SAID THAT THE INDEPENDENT HAD ABOUT AS MANY RACKS
11 IN THE CITY AS THE EXAMINER OR THE CHRONICLE?
12 A. YES, SIR.
13 Q. ACTUALLY, ISN'T IT QUITE A FEW LESS?
14 A. I DON'T KNOW THE EXACT NUMBER.
15 Q. ARE YOU FAMILIAR WITH THE RACK SURVEY THAT THE CITY OF SAN
16 FRANCISCO DID RECENTLY?
17 A. I HAVE SEEN IT IN THESE PROCEEDINGS.
18 Q. HAVE YOU SEEN THAT SURVEY BEFORE?
19 A. NO, I HAVE NOT.
20 Q. ARE YOU FAMILIAR WITH THE CIRCUMSTANCES UNDER WHICH THAT
21 SURVEY WAS DONE?
22 A. GENERALLY, YES.
23 Q. DO YOU HAVE ANY REASON TO THINK THAT IT'S INACCURATE WITH
24 RESPECT TO THE NUMBER OF INDEPENDENT RACKS THAT WERE SURVEYED
25 BY THE CITY?
2199
FANG - CROSS / HALLING
1 A. I DON'T KNOW.
2 Q. BUT DO YOU HAVE ANY REASON TO THINK IT'S WRONG?
3 A. I DON'T KNOW HOW THEY COUNTED IT. I HAVE NO IDEA.
4 Q. ABOUT HOW MANY RACKS DOES THE INDEPENDENT HAVE?
5 A. I BELIEVE WE HAVE ABOUT FOUR OR FIVE HUNDRED.
6 Q. I BELIEVE YOU TESTIFIED THAT THERE WOULD BE NO PRETENSE OF
7 THE NEW EXAMINER BEING A METROPOLITAN DAILY NEWSPAPER IN THE
8 SAME SENSE THE CHRONICLE IS; IS THAT CORRECT?
9 A. YES, SIR.
10 Q. I BELIEVE YOU INDICATED THAT THE NEW EXAMINER WILL BE
11 ANALOGOUS TO A SUBURBAN DAILY BUT IN SAN FRANCISCO; IS THAT
12 CORRECT?
13 A. GENERALLY, YES, SIR.
14 Q. THAT'S A FAIR CHARACTERIZATION OF THE NEW EXAMINER YOU
15 INTEND?
16 A. YES, SIR.
17 Q. YOU TESTIFIED ABOUT POTENTIAL STRATEGIC ALLIANCES, I
18 BELIEVE, IN THE CONTEXT OF SAYING THAT SAN FRANCISCO WAS THE
19 HOLE IN THE DONUT. DO YOU RECALL THAT?
20 A. I DON'T BELIEVE THAT -- I BELIEVE THE HOLE-IN-THE-DONUT
21 ANALOGY WAS IN RELATIONSHIP TO HOW AN ADVERTISER COULD PUT
22 TOGETHER A NETWORK OF NEWSPAPER BUYS TO CREATE A REGIONAL BUY.
23 THEY COULD THEN BE SUBSTITUTABLE FOR THE CHRONICLE AS AN
24 ADVERTISING BUY.
25 I BELIEVE I TALKED ABOUT THE INTERNET STRATEGIC
2200
FANG - CROSS / HALLING
1 PARTNERSHIPS MORE IN THE VEIN OF TAPPING INTO THE RAPID
2 DEVELOPMENT OF INTERNET COMPANIES IN THE BAY AREA AND
3 PARTICULARLY WITH SAN FRANCISCO KIND OF BEING AT THE CENTER OF
4 THE MULTI-MEDIA ACTIVITY.
5 Q. WITH RESPECT TO THOSE ADVERTISING ALLIANCES YOU JUST
6 MENTIONED, DO YOU HAVE ANY PLANS TO DO THAT?
7 A. I HAVE IDEAS ON THAT.
8 Q. HAVE YOU HAD ANY DISCUSSIONS WITH THE SINGLETON PROPERTIES
9 OR NEWSPAPERS CONCERNING SUCH A JOINT BUY?
10 A. NOT IN THE CONTEXT OF THE EXAMINER.
11 Q. HAVE YOU HAD ANY DISCUSSIONS WITH KNIGHT RIDDER CONCERNING
12 A POTENTIAL JOINT -- JOINT ACTIVITIES WITH THE NEW EXAMINER?
13 A. NO, SIR.
14 Q. DURING YOUR TESTIMONY ON DIRECT, I BELIEVE IN THE CONTEXT
15 OF EXHIBIT P-126, WHICH WAS MAYOR BROWN'S MAY 6TH, '96 LETTER
16 TO ATTORNEY GENERAL RENO -- AND PERHAPS ELSEWHERE -- YOU MADE A
17 REFERENCE TO "LITIGATION OVER PREDATORY BUSINESS PRACTICES."
18 DO YOU RECALL THAT?
19 A. YES, SIR.
20 Q. NOW, YOU SUED THE SFNA AND THE HEARST CORPORATION IN 1995
21 CONCERNING THE CITY OF SAN FRANCISCO'S LEGAL AD CONTRACT,
22 CORRECT?
23 A. YES, SIR.
24 Q. AND THERE WAS A RECENT DECISION BY THE CALIFORNIA COURT OF
25 APPEALS IN FAVOR OF THE DEFENDANTS IN THAT CASE, CORRECT?
2201
FANG - CROSS / HALLING
1 A. IT WAS SENT BACK FOR RETRIAL. I DON'T KNOW IF THAT'S IN
2 FAVOR OF THE HEARST CORPORATION, BUT IT WAS SENT BACK FOR
3 RETRIAL.
4 Q. YOU HAD INITIALLY PREVAILED AND THEN IT WAS REVERSED,
5 CORRECT?
6 A. YES, I DID PREVAIL IN THE JURY TRIAL.
7 Q. NOW, THAT LEGAL ADVERTISING CONTRACT THAT YOU SUED OVER
8 WAS FOR A SINGLE YEAR, CORRECT, 1994 TO 1995?
9 A. YES, SIR.
10 Q. AND THE INDEPENDENT HAD THAT CONTRACT FOR SEVERAL YEARS
11 PREVIOUSLY?
12 A. THAT'S CORRECT.
13 Q. AND AFTER THAT ONE YEAR, THE INDEPENDENT GOT IT BACK,
14 CORRECT?
15 A. THAT'S CORRECT.
16 Q. AND YOU'VE HAD IT EVER SINCE?
17 A. THAT'S CORRECT.
18 Q. HOW WOULD YOU CHARACTERIZE THE NEGOTIATIONS THAT YOU HAD
19 WITH THE HEARST CORPORATION THAT LED TO YOUR ACQUISITION
20 AGREEMENT FOR THE NEW EXAMINER?
21 A. I WOULD CHARACTERIZE THEM AS INTENSE.
22 Q. WOULD YOU SAY THEY WERE AT ARM'S LENGTH?
23 A. YES, THEY WERE.
24 MR. HALLING: NO FURTHER QUESTIONS.
25 THE COURT: VERY WELL. THANK YOU, MR. HALLING.
2202
FANG - CROSS / ALIOTO
1 MR. ALIOTO, DO YOU WISH TO CROSS-EXAMINE?
2 MR. ALIOTO: YES, SIR. THANK YOU. THANK YOU.
3 CROSS-EXAMINATION
4 BY MR. ALIOTO:
5 Q. MAY IT PLEASE THE COURT.
6 IT IS CORRECT, IS IT NOT, SIR, THAT WHEN YOU MET
7 WITH THE DOJ, ON ONE OF THOSE OCCASIONS, THE DOJ, ON ONE OF
8 THOSE OCCASIONS SOMETIME IN NOVEMBER OF 1999, YOUR DEPOSITION
9 WAS TAKEN BY THEM?
10 A. THAT IS CORRECT.
11 Q. AND AT THAT TIME THEY ASKED YOU WHAT YEAR YOU GRADUATED
12 FROM BERKELEY AND YOU TOLD THEM "1983." IS THAT TRUE?
13 A. THAT IS CORRECT.
14 Q. DID YOU GRADUATE FROM BERKELEY IN 1983?
15 A. I WENT THROUGH THE CEREMONIES BUT I AM FOUR UNITS SHORT OF
16 A FULL DEGREE.
17 Q. OKAY. SO YOU DID NOT GRADUATE FROM BERKELEY IN 1983; IS
18 THAT RIGHT?
19 A. THAT'S CORRECT, SIR.
20 Q. YOU JUST -- YOUR COMPANY JUST HANDED OUT THIS, I GUESS,
21 NEWS RELEASE TYPE SITUATION. YOU WERE AWARE OF THAT BEFORE --
22 A. NO, I WAS NOT.
23 Q. -- TODAY?
24 WELL, IN THIS THEY -- WITH REGARD TO YOU, SIR, AS IT
25 STATES, TED FANG, PUBLISHER OF THE INDEPENDENT NEWSPAPER
2203
FANG - CROSS / ALIOTO
1 GROUP -- IT STATES THAT YOU GRADUATED WITH A DEGREE IN ETHNIC
2 STUDIES FROM THE CALIFORNIA -- FROM THE UNIVERSITY OF
3 CALIFORNIA AT BERKELEY.
4 DID YOU GRADUATE WITH A DEGREE IN ETHNIC STUDIES
5 FROM THE UNIVERSITY OF CALIFORNIA OR ANY OTHER SCHOOL?
6 A. I WENT TO THE UNIVERSITY OF CALIFORNIA AT BERKELEY. I
7 MAJORED IN ETHNIC STUDIES AND I HAVE -- AS I HAVE TESTIFIED,
8 AND AS I TESTIFIED IN MY DEPOSITION, I AM FOUR UNITS SHORT OF A
9 FULL DEGREE.
10 Q. I UNDERSTAND THAT.
11 BUT DID YOU GRADUATE WITH A DEGREE IN ETHNIC
12 STUDIES?
13 A. I TOLD YOU THAT I HAVE NOT GRADUATED. I AM FOUR UNITS
14 SHORT, SIR.
15 Q. OKAY. SO YOU DIDN'T GRADUATE WITH A DEGREE IN ETHNIC
16 STUDIES FROM THE UNIVERSITY OF CALIFORNIA AT BERKELEY OR ANY
17 OTHER PLACE?
18 A. YOU GOT ME, MR. ALIOTO.
19 Q. THANK YOU.
20 I UNDERSTAND THAT YOU MET WITH THE MAYOR
21 APPROXIMATELY -- ABOUT A HALF A DOZEN TIMES OR MORE; IS THAT
22 CORRECT?
23 A. I DON'T RECALL THESE --
24 Q. WITH REGARD -- I'M SORRY -- WITH REGARD TO THE SUPPOSED OR
25 ATTEMPTED PURCHASE OF THE CHRONICLE BY THE HEARST CORPORATION?
2204
FANG - CROSS / ALIOTO
1 A. I DON'T RECALL THE EXACT NUMBER OF TIMES, SIR.
2 Q. OKAY. BUT WOULD YOU AGREE OR ARE YOU ABLE TO SAY THAT YOU
3 MET WITH THE MAYOR AT LEAST A HALF A DOZEN TIMES?
4 A. I DON'T RECALL THE EXACT NUMBER, SIR.
5 Q. COULD IT BE MORE THAN THAT?
6 A. I DON'T RECALL THE EXACT NUMBER, SIR.
7 Q. OKAY. WHEN YOU DON'T RECALL THE EXACT NUMBER, THOUGH, ARE
8 WE TALKING ABOUT TWO, THREE, FOUR, TEN OR 20?
9 A. AGAIN, IF YOU ARE TALKING ABOUT MEETINGS, SIR, THE MAYOR
10 APPEARS AT MANY DIFFERENT FUNCTIONS, AT PLACES THAT YOU WOULD
11 NOT EXPECT HIM TO BE AT, AND IN THE COURSE OF MY GOINGS ON IN
12 SAN FRANCISCO AND IN THE COURSE OF HIS GOINGS ON IN SAN
13 FRANCISCO, I CANNOT TELL YOU HOW MANY TIMES WE MET.
14 Q. OKAY. COULD WE SAY, THOUGH, YOU HAVE MET WITH THE MAYOR
15 IN THE MAYOR'S OFFICE MORE THAN ONCE?
16 A. YES, SIR.
17 Q. AND YOU HAVE MET WITH HIM IN HIS OFFICE MORE THAN ONCE
18 WITH NO ONE ELSE PRESENT OTHER THAN MEMBERS OF YOUR FAMILY OR
19 YOUR LAWYER; IS THAT RIGHT?
20 A. I'M SORRY. YOU HAVE TO REPEAT THAT QUESTION.
21 Q. OKAY. YOU HAVE MET WITH THE MAYOR AT HIS OFFICE BEFORE,
22 CORRECT?
23 A. YES.
24 Q. AND YOU HAVE MET WITH THE MAYOR AT HIS OFFICE BEFORE WITH
25 NO ONE ELSE PRESENT OTHER THAN MEMBERS OF YOUR FAMILY; IS THAT
2205
FANG - CROSS / ALIOTO
1 TRUE?
2 A. YES.
3 Q. HOW MANY TIMES?
4 A. TWO OR THREE MAYBE.
5 Q. AT ANY OF THOSE TIMES DID YOU SUGGEST TO THE MAYOR THAT
6 THEY SHOULD PUT TOGETHER A LOCAL INVESTMENT GROUP TO SAVE THE
7 EXAMINER?
8 A. NO, SIR.
9 Q. OKAY. WOULD YOU -- DO YOU HAVE YOUR DEPOSITION BEFORE
10 YOU?
11 A. NO, SIR.
12 YOUR HONOR, HERE IS THE ORIGINAL. I ASK THAT THE
13 SEAL BE BROKEN ON THAT.
14 I DO NOT HAVE ANOTHER COPY TO GIVE TO THE WITNESS
15 EXCEPT A SMALL -- A SMALL-PAGE ONE, IF I MAY USE THIS?
16 THE COURT: VERY WELL.
17 MR. ALIOTO: OKAY.
18 THE COURT: OR WE --
19 MR. ALIOTO: LET ME DO --
20 THE COURT: IF HE HAS TROUBLE WITH THAT, I WILL SHOW
21 HIM THE ORIGINAL.
22 MR. ALIOTO: OKAY. THANK YOU, YOUR HONOR.
23 BY MR. ALIOTO:
24 Q. ALL RIGHT. LET ME DIRECT YOUR ATTENTION TO PAGE 121 OF
25 YOUR DEPOSITION, BEGINNING THERE GOING DOWN (INDICATING).
2206
FANG - CROSS / ALIOTO
1 FIRST OF ALL, YOUR DEPOSITION WAS IN FACT TAKEN, WAS
2 IT NOT, SIR, ON WEDNESDAY, APRIL 19, 2000, IN THIS CASE?
3 CORRECT?
4 A. THAT IS CORRECT.
5 Q. AND YOU WERE UNDER OATH AT THE TIME, WERE YOU NOT?
6 A. I WAS, SIR.
7 MR. SHULMAN: DO YOU WANT TO SHOW IT?
8 MR. ALIOTO: HOW DO I DO IT?
9 THAT'S ALL RIGHT. THAT'S ALL RIGHT.
10 BY MR. ALIOTO:
11 Q. ALL RIGHT. I DIRECT YOUR ATTENTION -- I DIRECT YOUR
12 ATTENTION TO PAGE 121 OF THE DEPOSITION, AND LET'S BEGIN AT
13 LINE 8, AND I WILL GO TO PAGE 122, LINE 4:
14 "Q. WHEN YOU MET WITH HIM IN HIS OFFICE AND
15 DISCUSSED THIS SUBJECT, WAS ANYBODY ELSE
16 PRESENT?
17 "A. YES, SIR.
18 "Q. WHO ELSE?
19 "A. MY BROTHER JAMES AND MY MOTHER
20 FLORENCE.
21 "Q. OKAY. AND DID THIS HAPPEN MORE THAN
22 ONCE?
23 "A. YES, SIR.
24 "Q. APPROXIMATELY HOW MANY TIMES?
25 "A. I DON'T RECALL, SIR.
2207
FANG - CROSS / ALIOTO
1 "Q. WAS ANYBODY ELSE OUTSIDE OF YOUR FAMILY
2 AND THE MAYOR PRESENT?
3 "A. IN ONE OF THE MEETINGS, YES.
4 "Q. WHO ELSE WAS THERE?
5 "A. MY COUNSEL, MR. BALABANIAN, AND
6 MR. HELLMAN.
7 "Q. WHAT WAS SAID AT THAT MEETING?
8 "A. I DON'T RECALL EXACTLY.
9 "Q. DO YOU HAVE A GENERAL RECOLLECTION?
10 "A. I THINK WE TALKED ABOUT INTERACTIONS
11 THAT I HAD HAD WITH THE DEPARTMENT OF JUSTICE.
12 I BELIEVE WE TALKED IN GENERAL TERMS ABOUT
13 PUTTING TOGETHER A LOCAL INVESTMENT GROUP TO
14 SAVE THE EXAMINER. AND I DON'T RECALL WHAT
15 ELSE."
16 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
17 A. YES, I DID.
18 Q. WERE THOSE ANSWERS TRUE?
19 A. YES, THEY WERE.
20 Q. SO, IN FACT, YOU DID DISCUSS, AT LEAST IN GENERAL TERMS
21 WITH THE MAYOR, PUTTING TOGETHER A LOCAL INVESTMENT GROUP TO
22 SAVE THE EXAMINER; IS THAT TRUE?
23 A. I DON'T -- I THOUGHT THAT YOUR QUESTION WAS DID I BRING
24 THAT SUBJECT UP. AND HE BROUGHT THAT SUBJECT UP IN HIS
25 INAUGURATION. THIS MEETING FOLLOWED HIS INAUGURAL SPEECH IN
2208
FANG - CROSS / ALIOTO
1 WHICH HE HAD SUGGESTED THAT.
2 Q. OKAY. THEN IT'S YOUR TESTIMONY -- ARE YOU SAYING THAT
3 IT'S YOUR TESTIMONY THAT YOU KNOW THAT THIS WOULD BE -- THAT
4 THIS STATEMENT OR THIS DISCUSSION IN THE MAYOR'S OFFICE WOULD
5 HAVE TAKEN PLACE AFTER THE INAUGURAL ADDRESS THAT WAS PUT IN,
6 WHICH I BELIEVE WAS SOMETIME JANUARY 20 SOMETHING IN 2000; IS
7 THAT IT?
8 A. YES, SIR.
9 Q. OKAY. NOW, IF YOU WILL DIRECT YOUR ATTENTION TO THE
10 BOTTOM OF PAGE 122, I WILL ASK YOU WHETHER OR NOT -- FIRST OF
11 ALL, I AM JUST GOING TO READ THIS INTO THE RECORD AND I AM
12 GOING TO ASK YOU QUESTIONS ABOUT IT. BEGINNING AT LINE 16:
13 "Q. AND WOULD YOU SAY THAT YOU HAVE MET
14 WITH HIM IN HIS OFFICE AS MANY AS HALF A DOZEN
15 TIMES ABOUT THIS SUBJECT?
16 "A. I DON'T RECALL EXACT NUMBERS.
17 "Q. IT COULD BE THAT MANY?
18 "A. POSSIBLY.
19 "Q. AND THESE WOULD BE MEETINGS THAT BEGAN
20 BASICALLY IN AUGUST OF 1999, CONTINUING TO WHEN?
21 "A. I DON'T KNOW THE TIME FRAME."
22 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
23 A. I DID, SIR.
24 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
25
2209
FANG - CROSS / ALIOTO
1 Q. WERE THEY TRUE?
2 A. YES, SIR.
3 Q. IS IT CORRECT THAT YOU DIDN'T KNOW THE TIMEFRAME OF THESE
4 MEETINGS?
5 A. AT THE TIME I HAD NOT PIECED TOGETHER THE EXACT TIME LINE.
6 Q. ARE YOU SAYING NOW THAT YOU DO KNOW THE TIME AT WHICH YOU
7 DISCUSSED WITH THE MAYOR, OR AT LEAST IT WAS DISCUSSED IN HIS
8 OFFICE, PUTTING TOGETHER A SO-CALLED INVESTMENT -- LOCAL
9 INVESTMENT GROUP TO SAVE THE EXAMINER?
10 A. YES.
11 Q. AND SO ARE YOU SAYING THAT YOUR MEMORY IS BETTER TODAY
12 THAN IT WAS WHEN YOUR DEPOSITION WAS TAKEN IN THIS CASE SOME
13 TWO AND A HALF OR THREE WEEKS AGO?
14 A. YES. I PREPARED AND WENT OVER MY NOTES AND KNOW THAT THAT
15 OCCURRED AFTER THE INAUGURATION.
16 Q. OKAY. AND THEN YOU HAD AN OPPORTUNITY, DID YOU NOT, SIR,
17 TO REVIEW YOUR TESTIMONY IN THIS CASE AND THE DEPOSITION THAT
18 YOU GAVE AND YOU HAD AN OPPORTUNITY TO MAKE ANY CHANGES THAT
19 YOU WANTED TO MAKE; IS THAT NOT TRUE?
20 A. YES, SIR.
21 Q. BUT YOU DID NOT CHANGE THIS ONE WITH REGARD TO THE TIMES
22 THAT YOU MET WITH THE MAYOR; IS THAT TRUE?
23 A. I SAW NO NEED TO CHANGE THAT COMMENT, SIR.
24 Q. OKAY. UNTIL YOU GOT ON THE STAND TODAY AND PUT A TIME
25 LIMIT ON IT, WHICH WAS AFTER THE INAUGURAL ADDRESS BY THE MAYOR
2210
FANG - CROSS / ALIOTO
1 WHICH YOUR COUNSEL PUT INTO EVIDENCE; IS THAT RIGHT?
2 A. WHAT IS YOUR QUESTION, SIR?
3 Q. YOU SAID THAT WHEN YOU LOOKED AT YOUR TESTIMONY AND YOU
4 HAD THE OPPORTUNITY TO CHANGE YOUR TESTIMONY, WHICH WAS ASKING
5 YOU WHEN THE MEETINGS TOOK PLACE WITH THE MAYOR, AND YOU SAID,
6 QUOTE, "I DON'T KNOW THE TIMEFRAME," WHEN YOU SAW THAT, YOU SAW
7 NO NEED TO CHANGE THAT; IS THAT YOUR TESTIMONY?
8 A. YES. WHEN I SAW THAT, I DID NOT UNDERSTAND THAT ANYTHING
9 THAT I DIDN'T KNOW THAT I LATER -- IF I KNEW LATER ON, THAT I
10 HAD TO CORRECT THAT IN MY DEPOSITION. AT THE TIME WHEN I GAVE
11 THIS ANSWER, IT WAS CORRECT.
12 Q. THE FACT OF THE MATTER IS, IS THAT YOU DID, IN FACT, TALK
13 ABOUT AN INVESTMENT GROUP TO SAVE THE EXAMINER WITH THE MAYOR,
14 YOUR COUNSEL WITH YOU JUST PUT IN THE MAYOR'S SPEECH, AND NOW
15 YOU'RE TELLING US THAT THIS MEETING AT WHICH YOU DISCUSSED THIS
16 WITH THE MAYOR WAS AFTER HE GAVE THE SPEECH BUT NOT BEFORE; IS
17 THAT WHAT YOU'RE SAYING?
18 A. THAT IS EXACTLY WHAT I'M SAYING.
19 Q. ISN'T IT CORRECT, SIR, THAT YOU WERE THE ONE THAT ASKED
20 THE MAYOR TO ASK FOR A GROUP TO SAVE THE EXAMINER WITH YOU, OF
21 COURSE, AS ONE OF THE MEMBERS?
22 A. I THINK YOU'RE MAKING THAT UP, SIR.
23 Q. WHAT'S THE ANSWER TO THE QUESTION?
24 A. YOUR STATEMENT IS INCORRECT.
25 Q. SO YOU DENY THAT YOU ASKED THE MAYOR TO GET A GROUP
2211
FANG - CROSS / ALIOTO
1 TOGETHER TO SAVE THE EXAMINER; IS THAT RIGHT?
2 A. I TOLD YOU, SIR, THAT YOUR STATEMENT IS INCORRECT.
3 THE COURT: NO, COUNSEL IS ENTITLED TO AN ANSWER TO
4 HIS QUESTION, MR. FANG. LISTEN TO THE QUESTION AND ANSWER IT
5 DIRECTLY.
6 THE WITNESS: YES, SIR.
7 MR. ALIOTO: MAY THE QUESTION BE REREAD, PLEASE,
8 YOUR HONOR.
9 THE COURT: VERY WELL.
10 (RECORD READ AS FOLLOWS: "SO YOU DENY THAT YOU
11 ASKED THE MAYOR TO GET A GROUP TOGETHER TO SAVE
12 THE EXAMINER; IS THAT RIGHT?")
13 THE WITNESS: YES.
14 BY MR. ALIOTO:
15 Q. AT THE MINIMUM, OF COURSE -- AT THE MINIMUM, OF COURSE, IT
16 WAS DISCUSSED WITH YOU AND THE MAYOR IN HIS OFFICE; CORRECT?
17 A. YES.
18 Q. ALL RIGHT. AND WHEN YOU DISCUSSED IT WITH HIM IN THE
19 OFFICE, IS IT CORRECT THAT YOU AT LEAST SUGGESTED THAT YOU
20 WOULD BE THE PERSON WHO WOULD BE IN CHARGE OF THAT?
21 A. NO, SIR.
22 Q. WHEN YOU WERE DISCUSSING IT WITH THE MAYOR TO FORM -- WHEN
23 YOU WERE DISCUSSING WITH THE MAYOR PUTTING TOGETHER A LOCAL
24 INVESTMENT GROUP TO SAVE THE EXAMINER, DID YOU MEAN TO EXCLUDE
25 YOURSELF?
2212
FANG - CROSS / ALIOTO
1 A. NO, SIR.
2 Q. SO YOU MEANT TO INCLUDE YOURSELF; DID YOU NOT?
3 A. YES.
4 Q. SO THAT'S WHAT I MEAN. WHEN YOU DID THAT, WHEN YOU
5 DISCUSSED THAT WITH HIM, DID YOU MENTION IT OR YOU DIDN'T HAVE
6 TO MENTION IT?
7 A. I BELIEVE YOUR ORIGINAL QUESTION WAS DID I SAY I WANTED TO
8 LEAD, AND THAT DID NOT COME UP IN THE DISCUSSION WITH THE
9 MAYOR.
10 Q. WELL, THE IDEA ABOUT GETTING A LOCAL GROUP TO SAVE THE
11 EXAMINER, SOMEBODY WOULD HAVE HAD TO RUN THE EXAMINER; RIGHT?
12 A. YES, SIR.
13 Q. AND YOU TOLD THE MAYOR, DID YOU NOT, THAT YOU'D BE THAT
14 PERSON?
15 A. NO, SIR.
16 Q. DID YOU ASSUME THAT THE MAYOR UNDERSTOOD -- WAS IT YOUR
17 FRAME OF MIND THAT THE MAYOR UNDERSTOOD THAT IF, IN FACT, A
18 GROUP WAS PUT TOGETHER TO SAVE THE EXAMINER, YOU'D BE THE
19 PERSON THAT WOULD RUN IT?
20 A. NO, SIR.
21 Q. YOU WERE THERE AT THE TIME WHEN YOU DISCUSSED THIS WITH --
22 WERE YOU WITH YOUR BROTHER AND YOUR MOTHER OR BY YOURSELF?
23 A. NEITHER.
24 Q. WAS ANYONE ELSE THERE --
25 A. YES, SIR.
2213
FANG - CROSS / ALIOTO
1 Q. -- BESIDES YOURSELF?
2 A. YES, SIR.
3 Q. AND THE MAYOR?
4 A. YES, SIR.
5 Q. AND YOUR MOTHER?
6 A. YES, SIR.
7 Q. AND YOUR BROTHER?
8 A. YES, SIR.
9 Q. THEY WERE ALL THERE?
10 A. YES, SIR.
11 Q. WAS YOUR ATTORNEY THERE AT THAT MEETING?
12 A. YES, SIR.
13 Q. I SEE. OKAY.
14 SO THE MEETING THAT YOU HAD WITH THE ATTORNEY,
15 THAT'S WHERE THIS WAS DISCUSSED; CORRECT?
16 A. THERE WERE OTHERS PRESENT AS WELL, SIR.
17 Q. IF YOU'LL TAKE A LOOK AT YOUR DEPOSITION. I READ THIS TO
18 YOU, I WILL READ IT TO YOU AGAIN, AND I ASK YOU WHETHER OR NOT
19 YOU WERE ASKED THESE QUESTIONS, YOU GAVE THESE ANSWERS. IF YOU
20 WILL LOOK AGAIN AT PAGE 121:
21 "Q. WHEN YOU MET WITH HIM IN HIS OFFICE AND
22 DISCUSSED THIS SUBJECT, WAS ANYBODY ELSE
23 PRESENT?
24 "A. YES, SIR.
25 "Q. WHO ELSE?
2214
FANG - CROSS / ALIOTO
1 "A. MY BROTHER JAMES AND MY MOTHER
2 FLORENCE.
3 "Q. OKAY. AND DID THIS HAPPEN MORE THAN
4 ONCE?
5 "A. YES, SIR.
6 "Q. APPROXIMATELY HOW MANY TIMES?
7 "A. I DON'T RECALL, SIR.
8 "Q. WAS ANYBODY ELSE PRESENT -- WAS ANYBODY
9 ELSE OUTSIDE OF YOUR FAMILY AND THE MAYOR
10 PRESENT?
11 "A. IN ONE OF THE MEETINGS, YES.
12 "Q. WHO ELSE WAS THERE?
13 "A. MY COUNSEL, MR. BALABANIAN, AND
14 MR. HELLMAN.
15 "Q. WHAT WAS SAID AT THE MEETING?
16 "A. I DON'T RECALL EXACTLY.
17 "Q. DO YOU HAVE A GENERAL RECOLLECTION?
18 "A. I THINK WE TALKED ABOUT INTERACTIONS
19 THAT I HAD HAD WITH THE DEPARTMENT OF JUSTICE.
20 I BELIEVE WE TALKED IN GENERAL TERMS ABOUT
21 PUTTING TOGETHER A LOCAL INVESTMENT GROUP TO
22 SAVE THE EXAMINER, AND I DON'T RECALL WHAT
23 ELSE."
24 NOW, YOU GAVE THOSE ANSWERS TO THOSE QUESTIONS;
25 CORRECT?
2215
FANG - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. OKAY. NOW, YOU DID NOT IDENTIFY ANYONE ELSE, OTHER THAN
3 YOUR FAMILY MEMBERS AND TWO OF YOUR COUNSEL, AT ANY OF THESE
4 MEETINGS; IS THAT NOT TRUE? IN YOUR DEPOSITION.
5 A. IT WAS NOT TWO OF MY COUNSEL, SIR.
6 Q. OH, MR. HELLMAN IS YOUR INVESTOR?
7 A. HE'S MY FINANCIAL ADVISOR.
8 Q. HE'S YOUR FINANCIAL ADVISOR?
9 A. YES, SIR.
10 Q. SO HE WAS AT THE MEETING WHEN THE DISCUSSION ABOUT PUTTING
11 TOGETHER THE INVESTMENT GROUP TO SAVE THE EXAMINER?
12 A. YES, SIR.
13 Q. DID HE OFFER TO PUT UP ANY MONEY ON HIS OWN?
14 A. NO, SIR.
15 Q. DID HE OFFER TO ORGANIZE A GROUP?
16 A. HE OFFERED TO ASSIST.
17 Q. IN ORGANIZING A GROUP?
18 A. YES, SIR.
19 Q. NOW, HE HAD PREVIOUSLY DONE SOME CONSULTING WORK FOR YOU
20 ON A FREE BASIS; IS THAT TRUE?
21 A. YES, SIR.
22 Q. AND HE WAS WORKING FOR YOU NOW ON A FREE BASIS, ALSO TRUE;
23 CORRECT?
24 A. YES.
25 Q. SO HE WAS THERE AND HE WANTED TO WORK WITH YOU WITH REGARD
2216
FANG - CROSS / ALIOTO
1 TO THE INDEPENDENT AND THE EXAMINER; CORRECT?
2 A. YES, SIR.
3 Q. AND SO HE WAS AT THIS MEETING AT WHICH THERE WAS
4 DISCUSSION ABOUT FORMING A GROUP TO SAVE THE EXAMINER; CORRECT?
5 HE WAS AT THAT MEETING?
6 A. YES, SIR.
7 Q. ALL RIGHT. AND THE PURPOSE FOR HIM TO BE THERE WAS TO LET
8 THE MAYOR KNOW, AMONG OTHER THINGS, THAT IF A GROUP GOT
9 TOGETHER, YOU'D BE THE GUY WHO WOULD RUN THE EXAMINER; IS THAT
10 RIGHT?
11 A. WE DID NOT GET INTO SPECIFICS THAT I WOULD BE THE GUY.
12 Q. OKAY. YOU DIDN'T GET INTO SPECIFICS BECAUSE YOU DIDN'T
13 HAVE TO, YOU BELIEVED YOU DIDN'T HAVE TO; IS THAT RIGHT?
14 A. NO, SIR.
15 Q. IT'S NOT RIGHT? SO YOU THOUGHT THAT PERHAPS IF, INDEED,
16 ONE OF THESE ORGANIZATIONS WERE TO SAVE THE EXAMINER, THAT
17 SOMEONE OTHER THAN YOU WOULD RUN IT WHEN YOU WERE TALKING TO
18 THE MAYOR THERE WITH YOUR FAMILY AND MR. HELLMAN; IS THAT YOUR
19 TESTIMONY?
20 A. THAT WAS A POSSIBILITY, YES, SIR.
21 Q. ON YOUR DIRECT EXAMINATION YOUR COUNSEL INTRODUCED A
22 DOCUMENT, WHICH IS MARKED IN EVIDENCE AS E-137. E-137, IF
23 YOU'LL TAKE A LOOK AT IT, IT'S UP THERE IN YOUR BINDER.
24 E-137 IS THE LETTER DATED AUGUST 20, 1999. IT IS
25 DIRECTED TO THE ATTORNEY GENERAL JANET RENO FROM THE MAYOR.
2217
FANG - CROSS / ALIOTO
1 Q. NOW, YOU -- DO YOU HAVE IT BEFORE YOU?
2 A. I DO.
3 Q. NOW CERTAINLY YOU WERE -- AT THAT TIME IN AUGUST OF 1999
4 YOU HAD HAD AT LEAST A MEETING, IF NOT MORE, WITH THE MAYOR BY
5 THIS TIME; HAD YOU NOT?
6 A. I DO NOT KNOW THAT, SIR.
7 Q. ARE YOU IN A POSITION TO BE ABLE TO DENY THAT YOU HAD AT
8 LEAST ONE MEETING WITH THE MAYOR PRIOR TO AUGUST, 1999, WITH
9 REGARD TO THE HEARST ATTEMPTED PURCHASE OF THE CHRONICLE?
10 A. NO, SIR.
11 Q. I WANT TO DIRECT YOUR ATTENTION TO THE -- I DON'T KNOW
12 THAT WE HAVE IT.
13 (PAUSE IN PROCEEDINGS.)
14 MR. ALIOTO: ARE YOU READY? NEVER MIND. NO, NO.
15 THAT'S ALL RIGHT.
16 Q. I WANT TO DIRECT YOUR ATTENTION TO THE SECOND PARAGRAPH,
17 IT STATES, BY THE MAYOR TO ATTORNEY GENERAL JANET RENO, QUOTE:
18 "EARLY TERMINATION OF THE JOINT OPERATING
19 AGREEMENT BETWEEN THE TWO COMPANIES WOULD RESULT
20 NOT ONLY IN THE IMMEDIATE CLOSING OF THE CITY'S
21 SECOND DAILY NEWSPAPER BUT ALSO THREATEN THE
22 EXISTENCE OF THE CITY'S THIRD MAJOR NEWSPAPER AS
23 WELL."
24 DO YOU SEE THAT?
25 A. I DO, SIR.
2218
FANG - CROSS / ALIOTO
1 Q. DID THE MAYOR ADVISE YOU THAT HE WAS IN SUM OR SUBSTANCE
2 GOING TO ADVISE THE ATTORNEY GENERAL THAT ONE OF THE EFFECTS OF
3 THE PURCHASE OF THE CHRONICLE BY HEARST MIGHT BE TO JEOPARDIZE
4 THE THIRD MAJOR NEWSPAPER OR YOUR PAPER?
5 A. NO, SIR.
6 Q. DO YOU CONSIDER YOUR PAPER TO BE THE THIRD MAJOR NEWSPAPER
7 IN SAN FRANCISCO?
8 A. I DO.
9 Q. YOU DO?
10 A. YES, SIR.
11 Q. AND YOU HAVE DISCUSSED WITH THE MAYOR AND YOU HAVE IN HIS
12 PRESENCE STATED YOUR BELIEF, HAVE YOU NOT, THAT YOU BELIEVE
13 YOUR PAPER IS THE THIRD MAJOR NEWSPAPER?
14 A. NO, SIR.
15 Q. WELL, YOU'VE SAID THAT IN HIS PRESENCE; HAVEN'T YOU?
16 A. NO, SIR.
17 Q. BY THE WAY, THE OTHER TWO NEWSPAPERS, I TAKE IT, ARE THE
18 CHRONICLE AND THE EXAMINER; IS THAT RIGHT?
19 A. I THINK YOU'LL HAVE TO ASK THE MAYOR THAT QUESTION, SIR.
20 Q. WELL, IN READING THIS THAT YOU PUT IN, YOUR COUNSEL PUT
21 IN, YOU HAD IT BEFORE YOU, ISN'T IT YOUR VIEW THAT THE OTHER
22 TWO PAPERS ARE THE EXAMINER AND THE CHRONICLE?
23 A. YES, IT IS.
24 Q. ALL RIGHT. AND THOSE ARE PAID NEWSPAPERS; ARE THEY NOT?
25 A. YES, THEY ARE.
2219
FANG - CROSS / ALIOTO
1 Q. NOW, YOUR PAPER IS NOT A PAID NEWSPAPER; CORRECT?
2 A. THAT IS CORRECT, SIR.
3 Q. AND YOU DON'T WANT TO CHANGE IT TO A PAID NEWSPAPER; DO
4 YOU?
5 A. THAT IS CORRECT, SIR.
6 Q. AND THE REASON YOU WOULDN'T WANT TO CHANGE IT TO A PAID
7 NEWSPAPER IS BECAUSE THE MARKET IS DIFFERENT?
8 A. THAT IS ONE OF THE REASONS.
9 Q. AND YOU BELIEVE THAT IF YOU DID CHANGE IT TO A PAID
10 NEWSPAPER, YOU'D LOSE A LOT OF YOUR ADVERTISERS?
11 A. YES, SIR.
12 Q. AND IF YOU CHANGE IT TO A PAID NEWSPAPER, FIRST OF ALL
13 YOU'D HAVE TO HIRE A STAFF TO ENCOURAGE PEOPLE AND MARKET THE
14 PEOPLE TO HAVE PEOPLE BUY IT?
15 A. NOT NECESSARILY, SIR.
16 Q. OKAY. YOU THINK THAT YOU COULD JUST PUT IT OUT AND THEY
17 WOULD BUY IT, JUST THROW IT -- DELIVER IT AT THEIR HOMES?
18 A. NO, SIR.
19 Q. ALL RIGHT. WITH REGARD TO ONE OF THE REASONS YOU DIDN'T
20 WANT TO BE -- YOU DIDN'T WANT TO BECOME INVOLVED WITH A PAID
21 NEWSPAPER IS BECAUSE YOU UNDERSTOOD THAT IF YOU DID HOME
22 DELIVERIES, WHICH WAS MOST OF WHAT YOU WERE DOING WITH YOUR
23 PAPER; CORRECT? YOU WERE DOING HOME DELIVERIES; RIGHT?
24 A. I AM, SIR, YES.
25 Q. YES. AND ONE OF THE THINGS THAT YOU WOULD HAVE TO DO IF
2220
FANG - CROSS / ALIOTO
1 YOU WANTED TO CONTINUE TO DO THAT, IS YOU'D ACTUALLY HAVE TO
2 HAVE A MARKETING GROUP GO TO THE VARIOUS HOMES AT WHICH YOU
3 DELIVER YOUR PAPER AND HAVE THEM AGREE TO PAY FOR IT. YOU'D
4 HAVE TO DO THAT; WOULDN'T YOU?
5 A. YES, I WOULD NEED TO DO MARKETING.
6 Q. OKAY. AND THAT WAS AN EXPENSE THAT YOU DIDN'T WANT TO
7 TAKE ON; ISN'T THAT TRUE?
8 A. THAT'S NOT THE REASON WHY WE DON'T TURN THE INDEPENDENT
9 INTO A PAID NEWSPAPER.
10 Q. OKAY. SO THAT ONE OF THE REASONS IS MAYBE YOU DIDN'T
11 THINK THAT YOU'D BE ABLE TO HAVE PEOPLE BUY THE PAPER; IS THAT
12 RIGHT?
13 A. NO, SIR.
14 Q. IS IT BECAUSE ONLY OF THE ADVERTISERS?
15 A. NO, SIR.
16 Q. IS IT BECAUSE OF -- THEN WHAT MORE BESIDES THE
17 ADVERTISERS?
18 A. I THINK THE INDEPENDENT IS A COMMUNITY NEIGHBORHOOD TYPE
19 OF NEWSPAPER AND IT SERVES THAT PURPOSE. AS I'VE SAID BEFORE,
20 I THINK DAILY NEWSPAPERS SERVE A DIFFERENT PURPOSE BOTH FOR
21 READERS AND FOR ADVERTISERS.
22 Q. BOTH FOR READERS AND ADVERTISERS?
23 A. YES, SIR.
24 Q. DO YOU BELIEVE THE READERS OF A PAID PAPER ARE DIFFERENT
25 THAN THE READERS OF A FREE PAPER?
2221
FANG - CROSS / ALIOTO
1 A. NOT NECESSARILY.
2 Q. WELL, WITH THE -- NOT NECESSARILY. BUT THE READERS IN A
3 PAID PAPER, THESE ARE PEOPLE THAT ACTUALLY ARE GOING TO PAY TO
4 HAVE THE OPPORTUNITY TO BE ABLE TO READ THE PAPER; RIGHT?
5 A. YES, SIR.
6 Q. OKAY. AND YOU DIDN'T WANT TO FACE THAT OR DO THAT?
7 A. I DON'T UNDERSTAND THE QUESTION. I DIDN'T WANT TO -- I
8 DIDN'T WANT TO TURN THE INDEPENDENT INTO A PAID DAILY
9 NEWSPAPER.
10 Q. THE INDEPENDENT IS IN A DIFFERENT MARKET THAN THE DAILY
11 NEWSPAPER, THAT'S CORRECT; ISN'T IT?
12 A. I BELIEVE THAT IS TRUE.
13 Q. OKAY. THE DAILY NEWSPAPERS DEPEND ON A DIFFERENT TYPE OF
14 ADVERTISER, THAT'S TRUE?
15 A. YES, SIR.
16 Q. ALL RIGHT. YOU BELIEVE THAT YOU WOULD LOSE YOUR CURRENT
17 ADVERTISING ACCOUNTS OR A LOT OF YOUR CURRENT ADVERTISING
18 ACCOUNTS BECAUSE -- IF YOU SWITCHED TO A PAID PAPER?
19 A. YES. IF I CAN EXPLAIN IT.
20 Q. IF YOU WANT TO EXPLAIN, EXPLAIN ANYTHING YOU WANT,
21 MR. FANG, AFTER YOU ANSWER. I APPRECIATE YOUR ANSWERING AND
22 THEN IF YOU WANT TO EXPLAIN, GO AHEAD.
23 A. YES, SIR. IF IT WENT TO A PAID SUBSCRIBER-ONLY VEHICLE,
24 SUCH AS THE CHRONICLE AND THE EXAMINER CURRENTLY ARE, IT WOULD
25 LOSE A GREAT DEAL OF ITS PENETRATION AND, THEREFORE,
2222
FANG - CROSS / ALIOTO
1 ADVERTISERS THAT WANT THE LARGE PENETRATION OF THE INDEPENDENT
2 WOULD NO LONGER ADVERTISE IN IT IF IT HAD LOW PENETRATION.
3 Q. AND YOU BELIEVED, AND YOU BELIEVED, DID YOU NOT, THAT IF
4 YOU WENT TO A PAID NEWSPAPER, IT WOULD JEOPARDIZE YOUR
5 OPERATIONS?
6 A. NO, SIR.
7 Q. IF YOU'LL TAKE A LOOK AT YOUR DEPOSITION, PAGE 156. AND
8 I'M GOING TO READ, IT'S A LONG ANSWER, TO YOU AND THEN I'LL ASK
9 YOU A QUESTION ABOUT IT.
10 MR. ALIOTO: IT BEGINS ON PAGE 155. I WOULD READ
11 INTO THE RECORD, IF IT PLEASE YOUR HONOR, BEGINNING AT PAGE
12 155, STARTING WITH -- BEGINNING WITH LINE 7:
13 "Q. MR. FANG, I THINK YOU TESTIFIED THIS
14 MORNING THAT IT WAS YOUR DREAM TO OWN A DAILY
15 NEWSPAPER.
16 "A. YES, SIR.
17 "Q. OKAY. WHY DIDN'T YOU JUST MAKE THE
18 INDEPENDENT A DAILY NEWSPAPER?
19 "A. YES, THE INDEPENDENT IS IN A DIFFERENT
20 MARKET THAN THE DAILY NEWSPAPER. IT IS
21 DELIVERED TO EVERY HOME FREE OF CHARGE; AND, AS
22 I SAID BEFORE, NEWSPAPERS ARE ADVERTISING
23 DRIVEN. THE ADVERTISERS OF THE INDEPENDENT LOOK
24 TO ADVERTISE IN A NEWSPAPER THAT REACHES AS MANY
25 HOMES AS POSSIBLE. THESE ADVERTISERS ARE
2223
FANG - CROSS / ALIOTO
1 ADVERTISERS SUCH AS GROCERY STORES AND
2 DRUGSTORES BECAUSE EVERYBODY NEEDS TO BUY FOOD
3 AND EVERYBODY NEEDS TO BUY SHAMPOO OR ASPIRIN.
4 DAILY NEWSPAPERS DEPEND ON A DIFFERENT TYPE OF
5 ADVERTISER. THOSE ADVERTISERS ARE LOOKING FOR
6 SUBSCRIBERS. SO IF I TURN THE INDEPENDENT INTO
7 A SUBSCRIPTION-ONLY VEHICLE, I WOULD LOSE MY
8 CURRENT ADVERTISING ACCOUNTS OR A LOT OF MY
9 CURRENT ADVERTISING ACCOUNTS THAT REACH -- THAT
10 WISH TO REACH MASS -- A MASS DISTRIBUTION. SO
11 THAT'S WHY I DON'T WANT TO JEOPARDIZE MY
12 OPERATIONS AT THE INDEPENDENT AND I'M NOT GOING
13 TO HAVE THAT AS A DAILY NEWSPAPER."
14 NOW, YOU GAVE THAT ANSWER IN YOUR DEPOSITION;
15 CORRECT?
16 MR. BALABANIAN: MR. ALIOTO, WOULD YOU ALSO READ --
17 MR. ALIOTO: YES, I WILL.
18 MR. BALABANIAN: -- THE QUESTION AND ANSWER
19 BEGINNING ON LINE 22 OF THAT PAGE?
20 MR. ALIOTO: I'LL GO ALL THE WAY DOWN.
21 "Q. IS THAT ALSO WHY YOU DON'T MAKE THE
22 INDEPENDENT A PAID NEWSPAPER?
23 "A. AGAIN, AS I SAID, I THINK A VOLUNTARY
24 PAID NEWSPAPER FITS IN WITH THE INDEPENDENT'S
25 MARKET STRATEGY BUT NOT A SUBSCRIPTION-ONLY PAID
2224
FANG - CROSS / ALIOTO
1 NEWSPAPER.
2 "Q. AND WHY WOULDN'T A SUBSCRIPTION PAID
3 NEWSPAPER FIT IN WITH THE INDEPENDENT'S
4 STRATEGY?
5 "A. BECAUSE IF I ONLY DELIVERED TO THOSE
6 PEOPLE THAT SUBSCRIBE, I WOULDN'T BE DELIVERING
7 TO AS MANY PEOPLE AS I DELIVER TO RIGHT NOW. MY
8 ADVERTISERS WOULD NOT BE REACHING AS MANY PEOPLE
9 AS THEY ARE REACHING NOW OR AS MANY PEOPLE AS
10 THEY WISH TO REACH."
11 MORE?
12 MR. BALABANIAN: YES.
13 MR. ALIOTO: "Q. SO OPERATING A PAID NEWSPAPER OR,
14 FOR THAT MATTER, A DAILY NEWSPAPER MEANS THAT
15 YOU HAVE TO DEVELOP A DIFFERENT BASE OF
16 ADVERTISERS FROM WHAT YOU USE AT THE
17 INDEPENDENT; RIGHT?
18 "A. THERE IS SOME OVERLAP. IT'S LIKE
19 THERE'S TWO CIRCLES AND THERE'S SOME
20 INTERSECTION; BUT, BY AND LARGE, YES, THERE IS.
21 ONE OF THE DIFFERENCES BETWEEN A DAILY NEWSPAPER
22 AND A NEWSPAPER LIKE THE INDEPENDENT IS THE
23 CLASS OF ADVERTISERS."
24 MR. BALABANIAN: THANK YOU.
25
2225
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. THOSE ARE ANSWERS THAT YOU GAVE TO THOSE QUESTIONS;
3 CORRECT?
4 A. YES, SIR.
5 Q. SO YOU DO BELIEVE THAT IF YOU CHANGE TO A DAILY NEWSPAPER,
6 IT WOULD JEOPARDIZE YOUR OPERATIONS AT THE INDEPENDENT;
7 CORRECT?
8 A. IF WE CHANGE TO A SUBSCRIPTION-ONLY DAILY NEWSPAPER, YES.
9 IF WE CHANGE TO A PAID NEWSPAPER, AS YOU ASKED BEFORE, I THINK
10 A VOLUNTARY PAY VEHICLE WOULD FIT IN WELL WITH THE INDEPENDENT
11 STRATEGY.
12 Q. OKAY. SO THAT WE DON'T -- SO THAT WE'RE CLEAR FROM NOW
13 ON, WHEN I SAY "PAID," I MEAN PAID IN TERMS OF SUBSCRIPTION OR
14 AT THE RACK. I DO NOT MEAN A VOLUNTARY PAYMENT WHERE SOMEBODY
15 VOLUNTARILY PAYS FOR THE PAPER. OKAY?
16 A. SO ARE YOU SAYING A PAID DAILY NEWSPAPER OR PAID --
17 Q. PAID DAILY NEWSPAPER.
18 A. OKAY, SIR.
19 Q. ALL RIGHT?
20 A. NOW I UNDERSTAND YOU.
21 Q. OKAY. NOW, YOUR PAPER -- FIRST OF ALL, SO WE'RE CLEAR
22 ABOUT WHAT YOU JUST SAID, YOUR PAPER IS A FREE PAPER; CORRECT?
23 A. YES, SIR.
24 Q. IT IS NOT A PAID PAPER?
25 A. YES, SIR.
2226
FANG - CROSS / ALIOTO
1 Q. OKAY. IT IS NOT?
2 A. IT IS NOT.
3 Q. OKAY. ON YOUR DIRECT TESTIMONY YOU TESTIFIED THAT THERE
4 ARE SOME PEOPLE THAT VOLUNTARILY PAY?
5 A. YES, SIR.
6 Q. SO WHEN YOU JUST SAID THAT YOU WERE CONFUSED BECAUSE YOU
7 WEREN'T SURE WHETHER I WAS TALKING ABOUT VOLUNTARY PAY, YOU
8 KNOW THAT VOLUNTARY PAY IN YOUR OWN MIND DID NOT MEAN PAID
9 PAPER; DID IT?
10 A. NO, SIR. I'M SORRY. IF I CAN EXPLAIN.
11 Q. ALL RIGHT.
12 A. WELL, THERE ARE SOME PEOPLE THAT PAY FOR THE INDEPENDENT.
13 WE ARE NOT CLASSIFIED AS A VOLUNTARY PAY NEWSPAPER BECAUSE A
14 VOLUNTARY PAY NEWSPAPER IS NORMALLY WHEN YOU HAVE A NEWSPAPER
15 OPERATION THAT ASKS PEOPLE TO VOLUNTARILY PAY.
16 Q. OKAY. SO JUST SO WE'RE ABSOLUTELY CLEAR, YOU HAVE -- HAVE
17 YOU EVER -- YOU HAVE NEVER CONSIDERED MAKING THE INDEPENDENT A
18 DAILY NEWSPAPER EVER; RIGHT?
19 A. I DON'T KNOW THAT I WOULD AGREE TO THAT CHARACTERIZATION.
20 Q. YOU DON'T KNOW WHETHER YOU WOULD SAY THAT?
21 A. YES, I HAVE CONSIDERED, I'VE THOUGHT ABOUT IT.
22 Q. YOU HAVE?
23 ALL RIGHT. LOOK AT YOUR DEPOSITION AT PAGE 146 AND
24 I DIRECT YOUR ATTENTION TO LINE 18. I WILL READ THEM AND ASK
25 YOU A QUESTION:
2227
FANG - CROSS / ALIOTO
1 "Q. HAVE YOU EVER CONSIDERED MAKING THE
2 INDEPENDENT A DAILY NEWSPAPER?
3 "A. NO, SIR."
4 DID YOU GIVE THAT ANSWER TO THAT QUESTION?
5 A. YES, I DID.
6 Q. WAS IT TRUE?
7 A. YES, SIR.
8 Q. SO YOU HAVE NOT EVER CONSIDERED MAKING THE INDEPENDENT A
9 DAILY NEWSPAPER; HAVE YOU?
10 A. NO, SIR.
11 Q. SO WHEN YOU SAID THAT YOU MAY HAVE CONSIDERED IT, YOU
12 REALLY DIDN'T MEAN THAT?
13 A. I MEAN I'VE THOUGHT ABOUT IT. IT'S CROSSED MY MIND.
14 Q. AGAIN, WHEN YOU WERE ASKED THIS QUESTION IN YOUR
15 DEPOSITION -- AND IF YOU THOUGHT ABOUT IT, YOU COULD HAVE
16 CHANGED THIS DEPOSITION ANSWER AND SAID YOU THOUGHT ABOUT IT;
17 COULDN'T YOU HAVE?
18 A. I DON'T KNOW IF I COULD HAVE OR NOT THOUGHT ABOUT IT.
19 Q. YOU KNEW THAT YOU HAD A RIGHT TO CHANGE THE DEPOSITION. I
20 WANT TO DIRECT YOUR ATTENTION TO PAGE 150 -- I THINK IT'S 182,
21 YES. I WANT TO DIRECT YOUR ATTENTION TO PAGE 182.
22 OKAY. I WANT TO QUOTE FROM ON PAGE 182 MR. SHULMAN
23 AND I'LL ASK YOU WHETHER OR NOT YOU WERE PRESENT WHEN
24 MR. SHULMAN MADE THE FOLLOWING STATEMENT ON THE RECORD
25 BEGINNING LINE 15:
2228
FANG - CROSS / ALIOTO
1 "MR. SHULMAN: RIGHT. THAT'S MY POINT.
2 I -- WE HAVE THE OPTION TO READ AND SIGN, BUT
3 WE'RE ALL AGREEING WE CAN USE THE DEPOSITIONS.
4 IF SOMEBODY HAS A CORRECTION, THEN THEY BETTER
5 MAKE IT BEFORE THE DEPOSITION IS USED IN COURT;
6 RIGHT?"
7 MR. HALLING SAYS: I THINK THAT'S FAIR. LAWYER OR A
8 PARTY HERE."
9 OKAY? WERE YOU THERE WHEN THAT STATEMENT WAS MADE
10 BY MR. SHULMAN?
11 A. YES, I WAS.
12 Q. SO YOU IN FACT HAD THE OPPORTUNITY TO CHANGE YOUR
13 DEPOSITION AND YOU KNEW IT AFTER YOU GAVE IT; CORRECT?
14 A. IF I HAD A CORRECTION.
15 Q. SO YOU DON'T BELIEVE THAT THE TESTIMONY I JUST READ TO YOU
16 AT PAGE -- THE TESTIMONY I JUST READ TO YOU AT PAGE 146 WHERE
17 THE QUESTION WAS, QUOTE, "HAVE YOU EVER CONSIDERED MAKING THE
18 INDEPENDENT A DAILY NEWSPAPER," ANSWER, "NO, SIR," YOU DON'T
19 THINK THAT THAT SHOULD BE CHANGED NOW?
20 A. NO, I DO NOT.
21 Q. SO IT'S TRUE, THEN, YOU HAVE NEVER CONSIDERED MAKING THE
22 INDEPENDENT A DAILY NEWSPAPER EVER?
23 A. YES, SIR, I WILL AGREE TO THAT.
24 Q. THANK YOU.
25 OKAY. I WANT TO SHOW YOU CERTAIN DOCUMENTS THAT, AS
2229
FANG - CROSS / ALIOTO
1 I UNDERSTAND, WERE PREPARED BY YOU OR UNDER YOUR SUPERVISION OR
2 BY SOMEONE AIDING YOU.
3 THE FIRST ONE IS EXHIBIT 101.
4 MR. ALIOTO: OKAY. THE EXHIBIT 101 THAT I HAVE IS
5 REDACTED. I WILL USE IT ANYWAY I GUESS, YOUR HONOR.
6 IF I MAY APPROACH THE WITNESS, YOUR HONOR.
7 THE COURT: VERY WELL.
8 BY MR. ALIOTO:
9 Q. EXHIBIT 101 IS AN E-MAIL. IT IS DATED MARCH 11, 2000. IT
10 IS FROM MR. STULTZ. IT IS TO YOU. THE SUBJECT IS THE PROPOSED
11 PAYROLL MODEL.
12 I ASK YOU, SIR, TO LOOK AT THAT DOCUMENT AND TO
13 STATE WHETHER OR NOT YOU RECEIVED THAT E-MAIL FROM MR. STULTZ
14 ON OR ABOUT THE DATE INDICATED.
15 A. (WITNESS EXAMINES DOCUMENT.) YES, SIR.
16 Q. DID YOU?
17 A. YES, SIR.
18 MR. ALIOTO: CAN WE PUT IT UP?
19 (PAUSE IN PROCEEDINGS.)
20 BY MR. ALIOTO:
21 Q. NOW. I WANT TO DIRECT YOUR ATTENTION TO THE TOP PART OF
22 IT.
23 MR. BALABANIAN: YOUR HONOR, THIS IS THE UNREDACTED
24 VERSION WHICH --
25 MR. ALIOTO: TAKE THAT ONE OFF THEN.
2230
FANG - CROSS / ALIOTO
1 MR. BALABANIAN: -- THE COURT WILL RECALL ITS PRIOR
2 RULING THAT SALARIES OF PARTICULAR POSITIONS OTHER THAN
3 MR. FANG'S WOULD NOT BE PUBLICLY DISCLOSED.
4 MR. ALIOTO: DO WE HAVE ONE THAT'S NOT REDACTED?
5 MR. BALABANIAN: I HAVE ONE.
6 MR. ALIOTO: OR THAT IS, OR WHATEVER.
7 MR. BALABANIAN: I HAVE A REDACTED VERSION.
8 MR. ALIOTO: OKAY, DAVID, THANK YOU. THANK YOU VERY
9 MUCH.
10 ALL RIGHT. WE'LL USE THE ELMO.
11 MR. BALABANIAN: I'M SORRY, I HAVE ANOTHER PAGE, THE
12 SECOND PAGE.
13 BY MR. ALIOTO:
14 Q. FIRST I WANT TO DIRECT YOUR ATTENTION TO, IF YOU CAN -- IF
15 YOU TAKE A LOOK ON THE TOP IT IS FROM MR. STULTZ. IT IS TO YOU
16 AND IT'S DATED MARCH 11, 2000.
17 ONCE AGAIN, WOULD YOU PLEASE IDENTIFY FOR THE RECORD
18 WHO MR. STULTZ IS?
19 A. MR. STULTZ IS ONE OF MY ADVISORS. HE IS CURRENTLY THE
20 HEAD OF THE NEWSPAPER DIVISION OF GRAY COMMUNICATIONS.
21 Q. NOW, AS I UNDERSTAND IT, YOU MADE AN AGREEMENT -- WHEN YOU
22 MADE AN AGREEMENT WITH -- WHEN YOU MADE AN AGREEMENT WITH THE
23 HEARST CORPORATION ON THE AMOUNT THAT WOULD BE INCLUDED IN
24 THERE AS TO THE MAXIMUM AMOUNT THAT THEY WOULD REIMBURSE, THE
25 FIGURE THAT WAS USED WAS $500,000; CORRECT?
2231
FANG - CROSS / ALIOTO
1 A. YES.
2 Q. AND I BELIEVE YOU TESTIFIED THAT THAT NUMBER CAME FROM
3 MR. ASHER; CORRECT?
4 A. YES.
5 Q. AND THAT AGREEMENT WAS MARCH 16TH?
6 A. YES, SIR.
7 Q. DID YOU -- ALL RIGHT.
8 SO I WANT TO DIRECT YOUR ATTENTION TO THIS DOCUMENT,
9 WHICH IS MARCH 11, AND IT STATES, "TED." LET'S SEE IF WE CAN
10 FOCUS IN ON THE FIRST LINE:
11 "TED,
12 "HERE'S THE PROPOSED PAYROLL BUDGET FOR THE
13 EXAMINER."
14 DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. AND, OF COURSE, THE EXAMINER WOULD BE -- THIS IS UNDER THE
17 POTENTIAL AGREEMENT THAT YOU WOULD PURCHASE THE EXAMINER;
18 RIGHT?
19 A. YES.
20 Q. AND IT ALSO SHOWS ON THE BOTTOM HERE THAT IT SAYS:
21 "DEPENDING UPON WHETHER OR NOT IT CONTINUES
22 AFTER THE THREE-YEAR SUBSIDY ENDS, I'VE ALSO
23 FACTORED IN AN ADDITIONAL 18 PERCENT TO PAYROLL
24 FOR TAXES AND FRINGE BENEFITS."
25 DO YOU SEE THE 18 PERCENT?
2232
FANG - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. ALL RIGHT. NOW, ON THAT DOCUMENT IT HAS YOU UNDER SALARY,
3 IT HAS MANAGEMENT, SALARY TED FANG, PUBLISHER, $500,000. DO
4 YOU SEE THAT?
5 A. YES, SIR.
6 Q. AND THEN FOR A BONUS $500,000. DO YOU SEE THAT?
7 A. YES, SIR.
8 Q. AND THEN FOR A TOTAL OF $1 MILLION; CORRECT?
9 A. YES, SIR.
10 Q. OKAY. AND SO YOU DID NOT BELIEVE THAT A BONUS -- YOU
11 CERTAINLY DIDN'T -- OR DID YOU BELIEVE AT THIS TIME THAT A
12 BONUS WAS THE SAME AS A SALARY?
13 A. NO, SIR.
14 Q. NOW I WANT TO SHOW YOU EXHIBIT -- OH, AND, BY THE WAY, THE
15 TOTAL OF THAT IS ON THE NEXT PAGE. FIRST WIDE, YOU CAN SEE
16 WHERE IT SAYS "TOTAL" -- DO YOU SEE "TOTAL PAYROLL TAXES AND
17 FRINGE BENEFITS"?
18 A. YES, SIR.
19 Q. OKAY. AND THE TOTAL THAT IS THERE IS THE -- IS 6,995,900;
20 CORRECT?
21 A. YES, SIR.
22 Q. ALL RIGHT.
23 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR?
24 THE COURT: YES, YOU MAY.
25
2233
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. LET'S PUT THAT NUMBER UP SO WE DON'T FORGET IT. SO
3 PAYROLL TOTAL, I'M PUTTING IT ON THE EASEL, AND THAT IS
4 6,995,900.
5 NOW, THAT 6,995,900 INCLUDES BOTH THE SALARY AND THE
6 BONUS TO YOU; CORRECT? $1 MILLION; CORRECT?
7 A. I BELIEVE SO.
8 Q. NOW I SHOW YOU EXHIBIT 103.
9 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
10 THE COURT: YES, YOU MAY.
11 BY MR. ALIOTO:
12 Q. EXHIBIT 103 IS AN E-MAIL FROM MR. STULTZ TO MR. FANG DATED
13 MARCH 12, 2000, SUBJECT: ANNUAL OPERATING BUDGET PROPOSAL.
14 IS THAT A COPY OF THE E-MAIL THAT YOU RECEIVED ON OR
15 ABOUT THAT DATE FROM MR. STULTZ?
16 A. (WITNESS EXAMINES DOCUMENT.) YES, I BELIEVE IT IS.
17 Q. ALL RIGHT. LET ME DIRECT YOUR ATTENTION TO THAT DOCUMENT.
18 OKAY. FIRST, IT IS WITH REGARD TO THE ANNUAL
19 OPERATING BUDGET PROPOSAL. NOW THAT MEANS THE ANNUAL OPERATING
20 BUDGET PROPOSAL, THAT'S FOR THE PROPOSED EXAMINER; CORRECT?
21 A. YES.
22 Q. AND IN THE FIRST LINE MR. STULTZ SAYS TO YOU:
23 "HERE'S A SUMMARY OF THE ITEMS IN THE
24 OPERATIONAL BUDGET I WOULD PROPOSE FOR THE
25 EXAMINER."
2234
FANG - CROSS / ALIOTO
1 DO YOU SEE THAT?
2 A. YES, SIR.
3 Q. AND BY "OPERATIONAL BUDGET" YOU UNDERSTOOD THAT TO MEAN
4 THE AMOUNT OF MONEY THAT WOULD BE NECESSARY TO RUN THE PAPER;
5 CORRECT?
6 A. YES.
7 Q. IT ALSO STATES IN THE SECOND PARAGRAPH, FIRST LINE:
8 "I'VE ASSUMED A 40-PAGE DAILY, FIVE DAYS,
9 AND A 48-PAGE WEEKEND EDITION."
10 DO YOU SEE THAT?
11 A. I DO, SIR.
12 Q. AND THAT WAS FOR -- AGAIN FOR THE EXAMINER. AND THEN IT
13 NOTES THERE'S FURTHER NOTATION ON THE FAR LEFT TALKING ABOUT
14 50,000 COPIES. DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. ALL RIGHT. NOW, GOING TO THE THIRD PARAGRAPH IT STATES,
17 QUOTE, IN THE BEGINNING:
18 "I'VE TAKEN THE ACTUAL PROPOSED PAYROLL
19 NUMBERS."
20 DO YOU SEE THAT?
21 A. YES, SIR.
22 Q. AND THEN YOU WILL SEE ON THE BOTTOM THE TOTAL PAYROLL
23 NUMBERS. DO YOU SEE THAT NUMBER, 6,995,900?
24 A. YES.
25 Q. DO YOU SEE THAT?
2235
FANG - CROSS / ALIOTO
1 A. I DO SEE IT.
2 Q. AND THAT WAS THE NUMBERS OF ALL OF THOSE THAT WERE
3 CALCULATED FROM THE EXHIBIT THAT WE JUST WENT OVER; CORRECT?
4 A. I BELIEVE SO, YES.
5 Q. OKAY. SO THAT MR. STULTZ THEN ON MARCH 12 -- THIS IS FOUR
6 DAYS BEFORE YOU SIGNED THE AGREEMENT; RIGHT?
7 A. (WITNESS EXAMINES DOCUMENT.) YES, SIR.
8 Q. ALL RIGHT. AND THEN HE ALSO PUTS IN THERE, HE SAYS:
9 "I THEN ADDED," HE SAYS, "I THEN ADDED IN
10 800,000 AS A CONTINGENCY AMOUNT IN CASE WE
11 MISSED SOMETHING."
12 DO YOU SEE THAT?
13 A. YES, SIR.
14 Q. SO THEN HE ADDS ALL THIS UP AND HE COMES TO A SUBTOTAL OF
15 15,129,000. DO YOU SEE THAT?
16 A. YES, SIR.
17 Q. AND THEN HE ADDS 2.3 FOR EXECUTIVE AND EMPLOYEE
18 EQUITY/SEPARATION PLANS AND COMES UP WITH A TOTAL EXPENSE
19 BUDGET OF 17.4 MILLION; CORRECT?
20 A. YES, SIR.
21 Q. AND I BELIEVE THAT YOU SAID THAT THIS 2 MILLION 3 FOR THE
22 EXECUTIVE AND EMPLOYEE EQUITY/SEPARATION PLANS, THAT'S IN CASE
23 THE EXAMINER DOESN'T MAKE IT?
24 A. NO, SIR.
25 Q. WHAT IS IT FOR?
2236
FANG - CROSS / ALIOTO
1 A. IT'S TO INCENTIVIZE PEOPLE, ONE, TO COME WORKING FOR THE
2 EXAMINER, THE NEW EXAMINER; AND, TWO, TO INCENTIVIZE THEM TO
3 MAKE SURE THAT IT BECOMES A LONG-TERM SUCCESS.
4 Q. OKAY. AND IF IT DOESN'T, THAT MONEY IS TO DO WHAT?
5 A. ABOUT A THIRD OF THAT MONEY WILL BE PAID OUT AS INCENTIVES
6 FOR PEOPLE TO COME WORK AT THE NEW EXAMINER.
7 Q. OKAY. SO THAT'S THE EXTRA INCENTIVE THAT YOU'RE TRYING TO
8 USE TO ENCOURAGE PEOPLE TO COME TO THE EXAMINER BECAUSE OF THE
9 RISK INVOLVED; IS THAT RIGHT?
10 A. NO, SIR.
11 Q. ALL RIGHT. THE SUBTOTAL OF THE 15,129,900, THAT'S FOR THE
12 OPERATIONS OF THE EXAMINER; CORRECT?
13 A. IN THIS PROPOSAL, YES.
14 Q. AND IT ALSO HAS A CONTINGENCY OF 800,000 RIGHT ABOVE IT;
15 CORRECT?
16 A. YES, SIR.
17 Q. SO THE 800,000 IS IN THE 15 MILLION; CORRECT?
18 A. YES, SIR.
19 Q. SO THIS OPERATING -- SO THIS, IN FACT -- AND THEN ON THE
20 BOTTOM IT SAYS:
21 "THE REAL NUT TO CRACK FOR A 50,000
22 CIRCULATION PAPER WOULD BE BETWEEN $14 MILLION
23 AND $15 MILLION ANNUALLY."
24 DO YOU SEE THAT?
25 A. YES, SIR.
2237
FANG - CROSS / ALIOTO
1 Q. AND THIS IS COMING FROM YOUR ADVISOR; CORRECT?
2 A. YES, SIR.
3 Q. YOUR FINANCIAL PERSON; CORRECT?
4 A. NO, SIR.
5 Q. HE'S GIVING YOU -- YOU ASKED HIM TO DO YOUR BUDGET; DIDN'T
6 YOU?
7 A. NO. HE PUT TOGETHER A PROPOSAL FOR A BUDGET.
8 Q. RIGHT. YOU ASKED HIM TO DO IT; DIDN'T YOU?
9 A. I THINK HE VOLUNTEERED TO DO IT.
10 Q. VOLUNTEERED? YOU AGREED TO GIVE HIM $125,000 AS A
11 CONSULTANT IF YOU TOOK OVER THE EXAMINER; DIDN'T YOU?
12 A. YES, SIR.
13 Q. OKAY. SO THAT'S NOT VOLUNTEERING; IS IT?
14 A. I DID NOT SPECIFICALLY ASK HIM TO DO THIS, BUT HE WANTED
15 TO START PUTTING TOGETHER SOME NUMBERS AND I AGREED THAT WE
16 SHOULD PUT TOGETHER SOME NUMBERS.
17 Q. ISN'T IT CORRECT THAT THAT $15 MILLION, IS THAT IN YOUR
18 AGREEMENT WITH HEARST, IF ALL YOU -- IF YOU SPEND AT LEAST
19 $15 MILLION BUT NO MORE, THE DIFFERENCE BETWEEN THE 15 MILLION
20 OR THE 17 MILLION, THE DIFFERENCE BETWEEN THE TWO OF THEM YOU'D
21 BE ABLE TO SPLIT WITH THE HEARSTS, YOU'D GET $5 MILLION CASH;
22 RIGHT?
23 A. I DO NOT UNDERSTAND YOUR WHOLE QUESTION THERE.
24 Q. IN YOUR ARRANGEMENT WITH HEARST, IF YOU SPEND UP TO
25 $15 MILLION AND THAT'S ALL, THE REMAINING $10 MILLION, YOU
2238
FANG - CROSS / ALIOTO
1 WOULD GET PAID HALF OF THAT IN CASH, $5 MILLION; CORRECT?
2 A. THE EXAMINER'S OPERATING COMPANY WOULD, YES.
3 Q. AT 5 MILLION -- ALL RIGHT, THE EXAMINER'S OPERATING
4 COMPANY WHICH IS EXID, THAT'S -- EXIN?
5 A. EXIN.
6 Q. RIGHT. AND THAT'S OWNED BY?
7 A. MY FAMILY.
8 Q. OKAY. SO THEY'D GET $5 MILLION, AND YOU UNDERSTOOD THAT
9 $5 MILLION WAS WITHOUT STRINGS; RIGHT?
10 A. YES, SIR.
11 Q. SO FOUR DAYS BEFORE AT LEAST MR. STULTZ WAS STATING THE
12 BUDGET, THE OPERATING BUDGET AT $15 MILLION, ADDING -- YOU ADD
13 THIS 2 MILLION IT'S 17, BUT HE SAYS DOWN ON THE BOTTOM, THE
14 REAL NUT IS 15 MILLION ANNUALLY.
15 NOW I WANT TO SHOW YOU EXHIBIT 105.
16 NOW, AFTER YOU GOT THIS, BY THE WAY, IS IT CORRECT
17 THAT THE ONLY CHANGE THAT YOU WANTED TO MAKE WAS WITH REGARD TO
18 THE 18 PERCENT? YOU WANTED TO MAKE IT 23 PERCENT ON THE
19 PAYROLL, THE BENEFITS; RIGHT?
20 A. I ASKED HIM TO CHANGE THAT, YES.
21 Q. OKAY. SO LET ME SHOW YOU THAT ONE. AND THAT'S
22 EXHIBIT 105.
23 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
24 THE COURT: YES, YOU MAY.
25
2239
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. EXHIBIT 105 IS AN E-MAIL DATED MARCH 12, 2000, 3:42 P.M.
3 IT IS FROM MR. STULTZ TO MR. FANG.
4 IF YOU'LL LOOK AT THIS DOCUMENT, SIR, I ASK YOU
5 WHETHER OR NOT YOU RECEIVED A COPY OF THIS DOCUMENT ON OR ABOUT
6 THE DATE INDICATED FROM MR. STULTZ.
7 A. (WITNESS EXAMINES DOCUMENT.) YES, I BELIEVE I DID.
8 Q. OKAY. WE'LL PUT THAT ON THE ELMO. SPECIFICALLY, AGAIN,
9 THIS IS AGAIN FOUR DAYS BEFORE, AND ON THE VERY TOP THERE IS A
10 CHANGE. THE VERY FIRST SENTENCE SAYS, QUOTE:
11 "I MADE THE CHANGES YOU SUGGESTED IN
12 PAYROLL, MOVED THE BENEFITS TO 23 PERCENT
13 INSTEAD OF 18 PERCENT AND INCREASED RENT TO A
14 REDACTED NUMBER."
15 OKAY. DO YOU SEE THAT?
16 A. YES, SIR.
17 Q. AND THEN, AGAIN, HE STILL REPEATS, RIGHT BEFORE HE DOES
18 THE CALCULATIONS, HE SAYS, I ADDED IN THE 800,000 AS A
19 CONTINGENCY AMOUNT IN CASE WE MISSED SOMETHING. DO YOU SEE
20 THAT?
21 A. YES, SIR.
22 Q. OKAY. AND THEN HE COMES DOWN FOR THE SUBTOTAL. AGAIN
23 THIS TIME OF 15,669,000. DO YOU SEE THAT?
24 A. YES, SIR.
25 Q. AND THAT IS BECAUSE OF THE 23 PERCENT AND THE RENT?
2240
FANG - CROSS / ALIOTO
1 A. I'M NOT SURE OF ALL THE CHANGES THAT WERE MADE.
2 Q. OKAY. NOW, BY THE WAY, THIS PARTICULAR RENT, INCREASING
3 THE RENT, THAT WOULD BE INCREASING THE RENT TO WHOM?
4 A. TO A PROSPECTIVE LANDLORD.
5 Q. AND DID YOU INTEND TO RENT FACILITIES OR DID YOU INTEND TO
6 OWN AND RENT THEM AND RENT THEM BACK?
7 A. RENT.
8 Q. I ALSO WANT TO DIRECT YOUR ATTENTION -- I ALSO WANT TO
9 DIRECT YOUR ATTENTION TO THE SECOND PARAGRAPH. IT STATES,
10 QUOTE:
11 "WHEN I SEND THE NEW SIX-YEAR PROJECTIONS
12 WHEN I GET HOME MONDAY NIGHT, I WILL CHANGE TO
13 $2 MILLION IN START-UP COSTS."
14 DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. DID HE MAKE THE SIX-YEAR PROJECTIONS?
17 A. I DON'T RECALL.
18 Q. OKAY. NOW, ISN'T IT CORRECT THAT YOU -- IS IT CORRECT
19 THAT YOU DIDN'T START -- YOU PERSONALLY DIDN'T START DIRECT
20 NEGOTIATIONS WITH HEARST UNTIL MARCH 14, TWO DAYS LATER?
21 A. I DON'T RECALL IF WE STARTED ON MONDAY OR TUESDAY, WHICH
22 WOULD BE THE 13TH OR THE 14TH, BECAUSE I HAD JURY DUTY AND I
23 WAS GETTING IN AND OUT OF COURT TO BEGIN THE NEGOTIATIONS.
24 Q. OKAY. IN ANY EVENT, THIS DOCUMENT AND THE ONES BEFORE IT,
25 MARCH 11 AND MARCH 12, THESE WERE BEFORE YOU HAD YOUR -- YOU
2241
FANG - CROSS / ALIOTO
1 BEGAN YOUR DIRECT NEGOTIATIONS; CORRECT?
2 A. YES, SIR.
3 Q. NOW, AT THE NEGOTIATIONS, ONE OF THE ITEMS WAS FOR THE
4 $500,000, CORRECT, AS THE MAXIMUM?
5 A. YES.
6 Q. AND THAT WAS WHAT YOU HAD BUDGETED, AT LEAST IN THESE
7 DOCUMENTS BY MR. STULTZ, FOR THREE -- THREE AND FOUR DAYS
8 EARLIER; CORRECT?
9 A. NO, SIR.
10 Q. YOU HAD ALREADY PUT THE $500,000 IN; HADN'T YOU?
11 A. I HADN'T, NO.
12 Q. IN THESE NUMBERS IT'S CALCULATED IN; ISN'T IT?
13 A. IN THESE NUMBERS THERE IS A $500,000 CALCULATION, YES,
14 SIR.
15 Q. OKAY. THERE'S A $500,000 SALARY AND A $500,000 BONUS;
16 CORRECT?
17 A. YES, SIR.
18 Q. OKAY. NOW, THEN, TWO OR THREE DAYS LATER YOU GO IN TO
19 HAVE DIRECT NEGOTIATIONS WITH HEARST, AND I UNDERSTAND YOUR
20 TESTIMONY TO BE THAT HEARST AT FIRST WAS UNWILLING TO HAVE --
21 TO REIMBURSE ANY EXPENSES FOR YOUR SALARY; IS THAT RIGHT?
22 A. I THINK GENERALLY, YES.
23 Q. AND THAT, OF COURSE, WAS AN UNREASONABLE POSITION AND YOU
24 TOLD HIM SO; DIDN'T YOU?
25 A. WE TALKED ABOUT IT.
2242
FANG - CROSS / ALIOTO
1 Q. AND THEN HE SAID, "OKAY. WELL" -- AND MR. IRISH WAS WITH
2 HIM; RIGHT?
3 A. YES, SIR.
4 Q. SO IN ORDER TO COME UP WITH A NUMBER, HE TURNS, AS I
5 UNDERSTAND YOUR TESTIMONY, HE TURNS TO MR. IRISH AND SAYS,
6 "WHAT ARE WE PAYING OUR PUBLISHERS"; RIGHT?
7 A. HE SPECIFICALLY NAMED TIM WHITE.
8 Q. HE SPECIFICALLY NAMED TIM WHITE, "WHAT ARE WE PAYING TIM
9 WHITE?" AND MR. IRISH WROTE SOMETHING DOWN.
10 A. YES, SIR.
11 Q. GAVE IT TO MR. ASHER?
12 A. YES, SIR.
13 Q. MR. ASHER SAYS, "OKAY, WE'LL PAY YOU 500,000"?
14 A. NO, SIR.
15 Q. NO, HE DIDN'T SAY, "WE'LL PAY YOU 500,000. WE'LL PAY" --
16 HE SAID IT'S 500,000?
17 A. 500,000 WAS THE LIMITATION FOR MY SALARY AND FOR OTHER
18 MEMBERS OF MY FAMILY AS WELL.
19 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
20
21
22
23
24
25
2243
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. NOW, DID HE TELL -- HE DIDN'T TELL YOU WHAT
3 WHITE -- WHAT WHITE WAS PAYING; IS THAT RIGHT?
4 A. THAT IS CORRECT.
5 MR. ALIOTO: I WOULD LIKE TO READ INTO THE RECORD,
6 YOUR HONOR, WHAT MR. WHITE SAID ABOUT THAT. AND THIS WOULD BE
7 HIS TESTIMONY ABOUT WHAT HE WAS TO BE PAID WHEN HE MOVED FROM
8 ALBANY, AS THE EDITOR/PUBLISHER, AND -- AND THE COMPARISONS
9 BETWEEN WHAT HE GOT AND WHAT HE HAD IN ALBANY.
10 THE COURT: PAGE AND LINE?
11 MR. ALIOTO: DO YOU HAVE -- THIS IS THE DESK COPY, I
12 GUESS, YOUR HONOR.
13 THE COURT: I HAVE THE ORIGINAL.
14 MR. ALIOTO: YOU DO?
15 THE COURT: VOLUME ONE OF HIS DEPOSITION?
16 MR. ALIOTO: YES, YOUR HONOR. AND IT IS VOLUME ONE,
17 PAGE 19.
18 MR. HALLING: COULD I HAVE JUST A SECOND, PLEASE?
19 MR. ALIOTO: YES.
20 (PAUSE IN THE PROCEEDINGS.)
21 MR. ALIOTO: OKAY? OKAY. BEGINNING PAGE 19,
22 BEGINNING LINE 5 OF MR. WHITE'S DEPOSITION, TAKEN ON APRIL 24,
23 2000:
24 "Q. WHAT WAS THE SALARY SUPPOSED TO BE?
25 "A. LET'S SEE. LET'S SEE. IT WAS 300
2244
FANG - CROSS / ALIOTO
1 SOMETHING THOUSAND. I DON'T RECALL.
2 "Q. AND HOW DID THAT COMPARE TO WHAT YOU
3 WERE BEING PAID AS THE PUBLISHER OF THE TIMES
4 UNION?
5 "A. IT WAS ABOUT 20 PERCENT MORE."
6 BY MR. ALIOTO:
7 Q. NOW, IN ADDITION, ISN'T IT CORRECT THAT IF IN FACT YOU
8 WERE PAID 500,000 TO ACT AS THE PUBLISHER OF THE EXAMINER, THAT
9 THAT WOULD BE APPROXIMATELY FOUR TIMES AS MUCH AS WHAT YOU WERE
10 BEING PAID IN YOUR CAPACITY AS THE PUBLISHER OF THE INDEPENDENT
11 AND THE GRANT PRESS COMPANY?
12 A. YES, SIR.
13 Q. IS IT ALSO CORRECT THAT IF IN FACT THE COMPANY, YOUR
14 COMPANY, WERE PAID THIS $5 MILLION, IF IT ONLY SPENT
15 $15 MILLION AND THEN THE REMAINING TEN YOU GOT FIVE, YOU GOT
16 HALF OF THAT $5 MILLION, THAT THAT $5 MILLION WOULD BE GREATER
17 THAN ANY PROFIT THAT YOU HAD EVER REALIZED ON THE INDEPENDENT?
18 A. YES, SIR.
19 Q. AND THAT IT WOULD BE APPROXIMATELY FOUR TIMES THE AMOUNT
20 OF ANY PROFIT THAT YOU EVER REALIZED ON THE INDEPENDENT?
21 A. YES, SIR. MY BUSINESS HAS BEEN A GROWING BUSINESS. ANY
22 MONEY THAT I'VE EVER MADE HAS BEEN REINVESTED BACK INTO THE
23 BUSINESS.
24 Q. OKAY. BUT, I MEAN, YOU MAKE PROFITS AND SOME PEOPLE TAKE
25 THEM HOME BUT SOME PEOPLE PUT THEM BACK INTO THE BUSINESS. YOU
2245
FANG - CROSS / ALIOTO
1 WERE MAKING PROFITS. YOU WOULD PUT THEM BACK INTO THE
2 BUSINESS. THAT'S WHAT YOU ARE SAYING?
3 A. JUST AS IF I WERE TO OPERATE THE NEW EXAMINER, I WOULD PUT
4 ANY MONIES MADE BY THE EXAMINER BACK INTO THE BUSINESS TO GROW
5 THAT BUSINESS.
6 Q. ALL RIGHT. BUT MY QUESTION NOW SO THAT WE ARE CLEAR IS
7 THAT IF YOU ONLY -- IF YOU ONLY USED UP TO $15 MILLION AND
8 BECAUSE OF THAT YOU GOT PAID $5 MILLION CASH WITH NO STRINGS,
9 THAT THAT $5 MILLION CASH WAS MORE -- WAS ABOUT FOUR TIMES MORE
10 THAN YOU EVER MADE ANNUALLY FROM THE INDEPENDENT; IS THAT
11 CORRECT?
12 A. YES.
13 THE COURT: AND DO YOU MEAN THE ANNUAL EARNINGS?
14 MR. ALIOTO: YES, YOUR HONOR, ANNUAL EARNINGS.
15 THE COURT: THAT'S HOW YOU UNDERSTOOD THE QUESTION?
16 THE WITNESS: YES, SIR. YES, SIR.
17 BY MR. ALIOTO:
18 Q. NOW, I BELIEVE YOU TESTIFIED -- NOW, YOU UNDERSTOOD, AS I
19 UNDERSTAND -- AS I UNDERSTAND YOUR TESTIMONY, WHEN YOU
20 PURCHASED THE -- OR WHEN YOU NEGOTIATED FOR THE TRANSACTION --
21 MAY I USE THE EASEL, YOUR HONOR?
22 THE COURT: VERY WELL.
23 MR. ALIOTO: LET ME JUST PUT THIS ON IT TO MAKE IT
24 STIFF (INDICATING).
25 ////
2246
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. WHEN YOU WERE DOING THE -- WHEN YOU ENTERED INTO
3 THE TRANSACTION WITH THE HEARST CORPORATION, YOU UNDERSTOOD
4 THAT THE WAY THE OPERATIONS OF THE SAN FRANCISCO NEWSPAPER
5 AGENCY WERE DONE WAS THAT THE SAN FRANCISCO NEWSPAPER AGENCY
6 SOLD MOST OF THE ADVERTISING ON A COMBINATION BASIS?
7 A. YES, SIR.
8 Q. BOTH THE CHRONICLE AND THE EXAMINER?
9 A. YES.
10 Q. TOGETHER?
11 A. YES, SIR.
12 Q. AND THAT THAT COMPRISED ABOUT 99 PERCENT OF THE
13 ADVERTISING?
14 A. YES, SIR.
15 Q. AND YOU UNDERSTOOD WHEN YOU DID THE TRANSACTION THAT --
16 WITH THE HEARST CORPORATION THAT YOU WERE NOT GOING TO GET ANY
17 OF THE CONTRACTS, ANY OF THOSE COMBINATION CONTRACTS?
18 A. YES, SIR.
19 Q. THE ONLY ONES THEY WOULD THINK ABOUT TALKING TO YOU ABOUT
20 WOULD BE CONTRACTS FOR THE VERY FEW CONTRACTS THAT WERE FOR THE
21 EXAMINER ALONE?
22 A. YES, SIR.
23 Q. SO YOU THOUGHT YOU WERE SHUT OUT OF THOSE CONTRACTS, THE
24 COMBINATION CONTRACTS, THE 99 PERCENT?
25 A. YES, SIR.
2247
FANG - CROSS / ALIOTO
1 Q. AND I BELIEVE THAT I -- AS YOU TESTIFIED TODAY, IT WASN'T
2 UNTIL MR. FALK CAME ON THE STAND THAT YOU FIGURED OUT THAT WHEN
3 HE SAID, WELL, THOSE CONTRACTS WERE ALL IN COMBINATION, THAT
4 NOW THEY'D HAVE TO RENEW THEIR CONTRACTS, SO THIS MIGHT BE AN
5 OPENING FOR YOU TO GO IN THERE AND TRY TO GET SOME OF THOSE
6 ADVERTISERS?
7 A. NO, SIR.
8 Q. OKAY. DID YOU THINK THAT YOU COULD -- THEN DID YOU
9 CONSIDER THAT YOU WERE SHUT OUT OF ALL OF THOSE PEOPLE THAT HAD
10 THOSE CONTRACTS?
11 A. I BELIEVED THAT THOSE CONTRACTS WERE FOR COMBINATION
12 ADVERTISING, FOR BOTH THE CHRONICLE AND THE EXAMINER. SO IF
13 THE CHRONICLE AND EXAMINER WERE NO LONGER IN COMBINATION, THAT
14 THOSE CONTRACTS WOULD NO LONGER BE VALID AND BOTH THE
15 CHRONICLE -- HEARST-OWNED CHRONICLE AND THE NEW EXAMINER WOULD
16 HAVE TO GET NEW ADVERTISERS.
17 Q. OKAY. AND YOU ALSO YOU UNDERSTOOD, DID YOU NOT, THAT IN
18 DEALING WITH THE HEARST CORPORATION, YOU WERE NOT GETTING ANY
19 OF THE JOA? YOU WOULD NOT BE SPLITTING ANY OF THAT?
20 A. YES, SIR.
21 Q. OKAY. NOW, YOU HAVE IN FRONT OF YOU THE DEPOSITION THAT
22 YOU TOOK IN FRONT OF THE DOJ, DO YOU NOT?
23 A. NO, SIR.
24 Q. YOU DON'T HAVE IT?
25 A. NO, SIR.
2248
FANG - CROSS / ALIOTO
1 MR. ALIOTO: I ONLY HAVE ONE COPY. I DON'T --
2 THE COURT: I HAVE A COPY.
3 MR. HOCKETT: I HAVE ONE (INDICATING).
4 MR. ALIOTO: THANK YOU.
5 BY MR. ALIOTO:
6 Q. I AM GOING TO READ CERTAIN PORTIONS --
7 IF I MAY APPROACH THE WITNESS, YOUR HONOR?
8 THE COURT: YES.
9 BY MR. ALIOTO:
10 Q. OKAY. LET ME HAND YOU WHAT IS YOUR DEPOSITION THAT WAS
11 TAKEN APPARENTLY IN SAN FRANCISCO ON NOVEMBER 8, 1999, BY THE
12 DEPARTMENT OF JUSTICE.
13 AGAIN, YOU WERE UNDER OATH AT THAT TIME AND THAT
14 THE -- YOU UNDERSTOOD THAT?
15 A. YES, SIR.
16 Q. OKAY. NOW, I WANT TO DIRECT YOUR ATTENTION TO PAGE 163.
17 OKAY. BEGINNING ON PAGE 163, LINE 13 -- I AM GOING TO READ TO
18 YOU AND THEN ASK YOU SOME QUESTIONS:
19 "Q. DO YOU THINK IT'S FAIR FOR THE
20 CHRONICLE TO TAKE ALL THE ADVERTISING REVENUE
21 AND SAY THAT WHOEVER GETS THE EXAMINER IS NOT
22 ENTITLED TO ANY OF THE HISTORICAL ADVERTISING
23 REVENUES AND REVENUE BASE THAT THE EXAMINER HAS
24 HAD AS PART OF THE SFNA?
25 "A. I THINK THAT THAT'S NOT FAIR, AND I
2249
FANG - CROSS / ALIOTO
1 THINK THAT'S SETTING UP THE EXAMINER OR THE NEW
2 OWNERS OF THE EXAMINER FOR FAILURE.
3 "Q. WHY IS THAT?
4 "A. AGAIN, YOU NEED THAT ADVERTISING BASE
5 AND YOU NEED TO START BUILDING THOSE ADVERTISING
6 RELATIONSHIPS IN ORDER TO MAKE YOUR NEWSPAPER
7 WORK."
8 BY MR. ALIOTO:
9 Q. OKAY. DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
10 A. YES, SIR.
11 Q. NOW, THAT WAS IN REFERENCE TO THE JOA OR TO THE CONTRACTS
12 OR BOTH OR WHAT? WHAT DID YOU UNDERSTAND WHEN YOU SAID, QUOTE,
13 "I THINK THAT THAT'S NOT FAIR, AND I THINK THAT'S SETTING UP
14 THE EXAMINER OR THE NEW OWNERS OF THE EXAMINER FOR FAILURE"?
15 A. IF ALL THE ADVERTISING REVENUE WERE TO STAY WITH THE
16 CHRONICLE, THAT WOULD NOT BE FAIR.
17 Q. ALL RIGHT. NOW, WE JUST WENT OVER THOSE CONTRACTS. THE
18 COMBINATION CONTRACTS WERE 99 PERCENT, CORRECT?
19 A. I BELIEVE SO.
20 Q. ALL RIGHT. IS THAT WHAT YOU WERE TALKING ABOUT?
21 A. NO, SIR.
22 Q. WERE YOU TALKING ABOUT JOA SPLITTING IN EXCESS?
23 A. NO, SIR.
24 Q. IN YOUR TRANSACTION WITH HEARST WERE YOU GIVEN ANY OF
25 THESE?
2250
FANG - CROSS / ALIOTO
1 A. ANY OF?
2 Q. ANY THAT ARE MENTIONED IN THE QUESTION. IT'S THE
3 ADVERTISING REVENUE, THE HISTORICAL -- SO-CALLED HISTORICAL
4 ADVERTISING REVENUES AND REVENUE BASE THAT THE EXAMINER HAS HAD
5 AS PART OF THE SFNA.
6 A. NO, SIR. I DON'T GET ANY ADVERTISING REVENUE.
7 Q. OKAY. SO THAT DO YOU BELIEVE NOW THAT UNDER THE SITUATION
8 YOU HAVE WITH HEARST -- DO YOU BELIEVE, SIMILARLY, AS YOU
9 TESTIFIED IN FRONT OF THE DEPARTMENT OF JUSTICE -- DO YOU STILL
10 BELIEVE YOU THINK -- DO YOU STILL BELIEVE THAT, AS FOLLOWS:
11 "AND I THINK THAT'S SETTING UP THE EXAMINER
12 OR THE NEW OWNERS OF THE EXAMINER FOR FAILURE"?
13 A. IF ALL OF THE REVENUE WERE TO BE GUARANTEED TO BE KEPT
14 WITH THE CHRONICLE AND NONE OF IT WOULD BE GUARANTEED TO THE
15 EXAMINER, I THINK THAT WOULD BE SETTING UP THE NEW OWNERS OF
16 THE EXAMINER FOR FAILURE.
17 Q. DO YOU THINK YOU -- YOU HAVE BEEN SET UP BY THE HEARST
18 CORPORATION FOR FAILURE, THE EXAMINER, FOR FAILURE?
19 A. NO, SIR.
20 Q. WELL, YOU ARE NOT GETTING ANY OF THIS ADVERTISING, ARE
21 YOU? UNDER YOUR AGREEMENT WITH HEARST, YOU DON'T GET ANY OF
22 IT, DO YOU?
23 A. IT'S NOT GUARANTEED TO ME BUT NEITHER IS IT GUARANTEED TO
24 THE CHRONICLE.
25 Q. OKAY. YOU SAY IT'S NOT GUARANTEED TO THE CHRONICLE
2251
FANG - CROSS / ALIOTO
1 BECAUSE IT'S A COMBINATION.
2 A. YES, SIR.
3 Q. AND YOU UNDERSTAND THAT WHEN THE CHRONICLE -- WHEN HEARST
4 BUYS THE CHRONICLE, THEY INTEND TO COLLAPSE THE JOA COMPLETELY.
5 YOU KNOW THAT?
6 A. I BELIEVE THAT TO BE TRUE, YES, SIR.
7 Q. AND YOU KNOW THAT THEY SOLD THESE CONTRACTS TO THE HEARST
8 CORPORATION, DON'T YOU?
9 A. I DON'T BELIEVE THAT TO BE TRUE, SIR.
10 Q. DO YOU KNOW ONE WAY OR THE OTHER?
11 A. YES, SIR.
12 Q. IF IN FACT -- IF IN FACT THE HEARST CORPORATION SOLD THE
13 CONTRACTS -- I MEAN, IF IN FACT THE CHRONICLE SOLD ITS
14 CONTRACTS TO THE HEARST CORPORATION, WOULD YOU BE OF THE VIEW
15 THAT THE HEARST CORPORATION HAS SET YOU UP FOR FAILURE --
16 MR. HALLING: OBJECTION.
17 BY MR. ALIOTO:
18 Q. -- ON THE EXAMINER?
19 MR. HALLING: OBJECTION. LACK OF FOUNDATION. CALLS
20 FOR SPECULATION.
21 THE COURT: OBJECTION OVERRULED.
22 I THOUGHT THIS WAS MR. BALABANIAN'S CLIENT.
23 MR. HALLING: IT IS, YOUR HONOR, BUT I -- I THINK
24 ALL PARTIES CAN MAKE OBJECTIONS.
25 ////
2252
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. IF THAT TURNED OUT TO BE THE CASE, WOULD YOU THEN BELIEVE
3 THAT THE HEARST CORPORATION HAS SET YOU UP FOR FAILURE ON THE
4 EXAMINER?
5 A. IF THE CHRONICLE CONTRACTS?
6 Q. IF IN THE PURCHASE -- IF IN THE PURCHASE AGREEMENT BETWEEN
7 THE CHRONICLE AND THE HEARST CORPORATION THE CONTRACTS, THE
8 ADVERTISING CONTRACTS OF THE CHRONICLE, ARE BEING SOLD TO THE
9 EXAMINER -- I MEAN, TO HEARST CORPORATION, IF YOU FIND -- IF
10 THAT HAPPENS TO BE SO, IF IT TURNS OUT TO BE SO, WOULD YOU THEN
11 BELIEVE THAT THE HEARST CORPORATION HAS SET YOU UP FOR FAILURE?
12 A. NO, SIR.
13 Q. IS THERE ANYTHING IN YOUR TESTIMONY THAT YOU GAVE TO THE
14 DEPARTMENT OF JUSTICE THAT I READ TO YOU THAT YOU WOULD CHANGE
15 TODAY?
16 A. NOT WHAT YOU JUST READ TO ME.
17 Q. WELL, IS IT IN FACT TRUE, YOUR STATEMENT, WHEN YOU -- IS
18 YOUR STATEMENT THAT IS RECORDED AT PAGE 163 AT LINES 18 TO
19 20 -- ARE THOSE TRUE STATEMENTS?
20 A. YES, SIR.
21 I WANT TO ADD, I DON'T THINK THE CHRONICLE HAS ANY
22 ADVERTISING CONTRACTS.
23 Q. THE ADVERTISING -- THE CONTRACTS ARE WITH THE SAN
24 FRANCISCO -- I SEE. OKAY. I SEE. ALL RIGHT. THE CONTRACTS
25 ARE WITH THE SAN FRANCISCO NEWSPAPER AGENCY. IS THAT IT?
2253
FANG - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. I SEE. AND THE SAN FRANCISCO NEWSPAPER AGENCY IS PART OF
3 THE JOA, CORRECT?
4 A. YES, SIR.
5 Q. AND IF IN FACT THE HEARST CORPORATION WILL GET ALL OF THE
6 CONTRACTS FROM THE SAN FRANCISCO NEWSPAPER AGENCY AND THE --
7 FROM THE SAN FRANCISCO NEWSPAPER AGENCY, THEN WOULD YOU SAY --
8 THEN WOULD YOU SAY THAT THE HEARST CORPORATION HAS SET YOU UP
9 FOR FAILURE?
10 A. NO, SIR. I THINK I WOULD GET A WINDFALL.
11 Q. YOU THINK -- YOU THINK THAT YOU WOULD GET THE CONTRACTS OF
12 THE SAN FRANCISCO NEWSPAPER AGENCY?
13 A. NO. AGAIN, THE CONTRACTS ARE FOR COMBINATION ADVERTISING.
14 SO IF THE CONTRACTS OF THE NEWSPAPER AGENCY ARE FOR ADVERTISING
15 IN THE CHRONICLE AND THE EXAMINER AND THE HEARST CORPORATION
16 WERE TO TAKE OVER THAT -- THOSE CONTRACTS, THE ONLY WAY THEY
17 COULD FULFILL THOSE CONTRACTS IS BY PLACING THOSE
18 ADVERTISEMENTS IN THE EXAMINER, AND THEY WOULD HAVE TO COME TO
19 ME TO MAKE SURE THAT THOSE ADVERTISERS WERE PLAYED IN THE NEW
20 EXAMINER, AND I WOULD HAVE ALL OF THOSE ADVERTISERS.
21 Q. I SEE. SO YOU THINK THAT THE JOA IS STILL IN EFFECT FOR
22 ADVERTISING?
23 A. YOU ARE ASKING ME A SERIES OF QUESTIONS AND I AM TRYING TO
24 ANSWER YOU AS BEST AS I CAN, MR. ALIOTO.
25 Q. OKAY. SO, THEN, DO WE UNDERSTAND YOUR TESTIMONY TO BE
2254
FANG - CROSS / ALIOTO
1 THAT YOU BELIEVE THAT ONE OF THE -- THAT ONE OF THE THINGS THAT
2 IS GOING TO HAPPEN IS THAT THE CONTRACTS OF THE SAN FRANCISCO
3 NEWSPAPER AGENCY, BECAUSE THEY WERE IN COMBINATION WITH THE
4 CHRONICLE AND THE EXAMINER, THAT YOU WILL NOW -- THAT THEY WILL
5 NOW BE FORCED, THE NEW CHRONICLE, SO-CALLED "NEW CHRONICLE" --
6 WILL BE FORCED TO ADVERTISE IN YOUR PAPER, TOO?
7 A. NO, SIR.
8 Q. OKAY. NOW, ABOUT HOW MUCH TIME DO YOU THINK -- WELL, DO
9 YOU THINK -- IS IT FAIR TO SAY THAT THE ASSETS THAT ARE
10 CURRENTLY -- THAT WERE BEING OFFERED FOR SALE BEFORE, AND THOSE
11 ASSETS -- THAT'S THAT FIRST GROUP. REMEMBER YOU TESTIFIED THAT
12 FIRST HEARST OFFERED ONE GROUP OF ASSETS, THE NAME AND SOME
13 THINGS, AND THEN IT ADDED THE PRESSES AND THINGS LIKE THAT. OR
14 SOMETHING LIKE THAT. RIGHT?
15 A. A FEW TOO MANY "SOMETHINGS" FOR ME THERE, MR. ALIOTO.
16 Q. OKAY. YOU ARE NOT BUYING ANY PRESSES, ARE YOU?
17 A. NO, SIR.
18 Q. OKAY. IS IT CORRECT THAT IN THE FIRST OFFER THAT YOU
19 UNDERSTOOD TO BE THE FIRST OFFER, THAT THE ASSETS THAT WERE
20 THEN BEING OFFERED FOR SALE WOULD MORE OR LESS REQUIRE A
21 PURCHASER TO BUILD A NEWSPAPER FROM THE GROUND UP TO COMPETE
22 WITH THE CHRONICLE?
23 A. I FELT THAT THE ORIGINAL ASSETS BEING OFFERED WERE NOT A
24 VIABLE BUSINESS ENTITY.
25 Q. YOU FELT IT WAS NOT A VIABLE WHAT?
2255
FANG - CROSS / ALIOTO
1 A. BUSINESS ENTITY.
2 Q. OKAY. AND THEN WITH THE SECOND OFFER, IT ADDED WHAT TO
3 THE FIRST OFFER?
4 A. A NUMBER OF THINGS, INCLUDING PRESSES, SOME BUILDINGS AND,
5 AGAIN, AS I TESTIFIED, I THOUGHT THE MOST VALUABLE THING THAT
6 WAS OFFERED WAS SOME TRANSITION ARRANGEMENTS WHICH I FELT WOULD
7 BE A SUBSTITUTE FOR THE JOA.
8 Q. OKAY. NOW, THE ADDITIONS OF PRESSES AND BUILDINGS, YOU
9 DIDN'T BUY ANY PRESSES. DID YOU BUY ANY BUILDINGS?
10 A. NO, SIR.
11 Q. OKAY. SO, IN OTHER WORDS, THE OFFER, AT LEAST AS FAR AS
12 YOU WERE CONCERNED, WAS BASICALLY THE SAME AS THE FIRST
13 OFFER -- I MEAN, WHAT YOU ENDED UP WITH -- EXCEPT THAT YOU HAD
14 SOME TRANSITIONAL ARRANGEMENT.
15 A. I THINK THAT BY OFFERING THE JOA THAT WAS THE MOST
16 IMPORTANT ASSET IN THE SECOND OFFERING.
17 Q. THEY DIDN'T OFFER THE JOA, DID THEY?
18 A. I BELIEVE THEY WERE OPENING UP THE DOOR TO OFFERING THAT.
19 Q. WAS THIS NEW?
20 A. I'M SORRY?
21 Q. YOU SAY THEY WERE OPENING UP THE DOOR TO OFFER. IS THIS
22 NEW?
23 A. I DON'T KNOW. IS WHAT NEW?
24 Q. YOU JUST SAID THEY'RE -- YOU JUST SAID THEY'RE OPENING UP
25 THE DOOR TO OFFERING IT.
2256
FANG - CROSS / ALIOTO
1 A. I FELT THAT THEIR SECOND OFFER -- THEIR SECOND OFFERING
2 MEMORANDUM WAS OPENING UP THE DOOR TO OFFER SOME ASPECT OF THE
3 JOINT OPERATING AGREEMENT.
4 Q. SOME ASPECT OF IT?
5 A. YES, SIR.
6 Q. SHARING IN PROFITS OR SOMETHING LIKE THAT?
7 A. SHARING IN PROFITS, SHARING IN OPERATIONS, SHARING IN
8 ADVERTISERS.
9 Q. ALL RIGHT. THEN LET ME ASK YOU, DID THEY SHARE ANY
10 PROFITS WITH YOU IN YOUR AGREEMENT?
11 A. NO, SIR.
12 Q. DID THEY SHARE ANY ADVERTISING WITH YOU IN YOUR AGREEMENT?
13 A. NO, SIR.
14 Q. OKAY. I WANT TO READ ON AND ASK YOU A QUESTION ABOUT IT,
15 BEGINNING WITH THIS ANSWER ON PAGE 184.
16 MR. HOCKETT: WHERE ARE YOU READING FROM?
17 MR. ALIOTO: I AM READING FROM -- THIS IS THE DOJ
18 THAT I STARTED TO READ FROM. I BETTER READ THE QUESTION AGAIN:
19 "Q. IS IT FAIR TO SAY, MR. FANG, THAT THE
20 ASSETS THAT ARE CURRENTLY BEING OFFERED FOR SALE
21 WOULD MORE OR LESS REQUIRE A PURCHASER TO BUILD
22 A NEWSPAPER FROM THE GROUND UP TO COMPETE WITH
23 THE CHRONICLE?
24 "A. YES, IT'S BASICALLY REQUIRING SOMEONE
25 TO BUILD IT FROM THE GROUND UP.
2257
FANG - CROSS / ALIOTO
1 "Q. YOU WOULD START WITH THE NAME BUT,
2 OTHER THAN THAT, YOU WOULD BASICALLY HAVE TO
3 BUILD IT FROM THE GROUND UP; IS THAT RIGHT?
4 "A. THAT'S CORRECT.
5 "Q. AND THAT WOULD TAKE SOME TIME UNDER ANY
6 SCENARIO TO DO THAT SUCCESSFULLY FOR ANYONE THAT
7 CAME IN TO START A NEWSPAPER; ISN'T THAT RIGHT?
8 "A. IT WOULD TAKE TIME UNDER ANY SCENARIO
9 AND -- BUT GIVEN THIS SCENARIO WHERE ALL OF THE
10 ASSETS OF BOTH NEWSPAPERS ARE BASICALLY BEING
11 GIVEN TO THE CHRONICLE ALONE, I THINK IT WOULD
12 BE IMPOSSIBLE TO SUCCEED.
13 "Q. AND WOULD YOU EXPECT THAT IF YOU
14 COULDN'T BEGIN COMPETING IN A MEANINGFUL WAY
15 RIGHT AWAY THAT YOU WOULD LOSE THE GOODWILL
16 ASSOCIATED WITH THE EXAMINER NAME?
17 "A. YES, THE GOODWILL ASSOCIATED WITH THE
18 EXAMINER NAME WOULD QUICKLY DETERIORATE IF YOU
19 COULDN'T COME UP TO SPEED QUICKLY."
20 BY MR. ALIOTO:
21 Q. OKAY. DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
22 A. YES, I DID.
23 Q. AND YOU SAID, DID YOU NOT, THAT BECAUSE -- WHERE ALL OF
24 THE ASSETS OF BOTH PAPERS WERE BASICALLY BEING GIVEN --
25 BASICALLY BEING GIVEN TO THE CHRONICLE ALONE, THAT YOU THINK
2258
FANG - CROSS / ALIOTO
1 THAT IT WOULD BE IMPOSSIBLE TO SUCCEED.
2 DO YOU SEE THAT TESTIMONY?
3 A. YES.
4 Q. DO YOU AGREE WITH THAT TODAY?
5 A. YES.
6 Q. NOW, IN TERMS OF A TRANSITION PERIOD, YOU WERE -- YOUR
7 AGREEMENT WITH THE EXAMINER IS A TRANSITION PERIOD OF FOUR
8 DAYS; IS THAT RIGHT?
9 A. NO, SIR, THAT'S A LITTLE TOO SHORT.
10 Q. I'M SORRY. OKAY. THAT WOULD BE TOO SHORT.
11 FOUR MONTHS. IS THAT RIGHT?
12 A. YES, SIR.
13 Q. OKAY. AND YOU BELIEVE THAT THAT TRANSITION PERIOD IS TOO
14 SHORT?
15 A. I'M SORRY, SIR?
16 Q. YOU BELIEVE THAT THAT TRANSITION PERIOD IS TOO SHORT. THE
17 TRANSITION PERIOD YOU AGREED TO OF FOUR MONTHS, YOU BELIEVE
18 THAT THAT TRANSITION PERIOD IS TOO SHORT; IS THAT RIGHT?
19 A. NOT UNDER THE CIRCUMSTANCES BY WHICH I NEGOTIATED AN ASSET
20 IN A TRANSITION AGREEMENT WITH THE HEARST CORPORATION TO
21 PURCHASE THE EXAMINER.
22 Q. OKAY. WELL, THEN, I AM GOING TO READ FROM YOUR
23 DEPOSITION. AND THIS WAS WITH THE GOVERNMENT. THEN I AM GOING
24 TO ASK YOU A QUESTION ABOUT IT. AND IF THERE ARE CHANGED
25 CIRCUMSTANCES, I WOULD LIKE TO KNOW ABOUT IT.
2259
FANG - CROSS / ALIOTO
1 BEGINNING ON PAGE 193, LINE 23:
2 "Q. AND HAVE YOU PREVIOUSLY TESTIFIED THAT
3 A SIX-MONTH TRANSITION PERIOD WOULD NOT BE
4 ADEQUATE TO TAKE OVER ALL OF THE FUNCTIONS
5 NECESSARY TO PRODUCE THE EXAMINER ON AN
6 INDEPENDENT BASIS?
7 "A. THAT'S CORRECT. I BELIEVE SIX MONTHS
8 WOULD BE TOO SHORT A TIME FRAME FOR A TRANSITION
9 PERIOD."
10 FIRST OF ALL, DID YOU GIVE THAT ANSWER TO THAT
11 QUESTION?
12 A. YES, I DID.
13 Q. WAS IT TRUE THEN?
14 A. YES, IT WAS.
15 Q. IS IT TRUE TODAY?
16 A. UNDER THOSE CIRCUMSTANCES, YES.
17 Q. OKAY. ARE YOU SAYING THAT THE SITUATION -- THAT YOUR
18 PARTICULAR AGREEMENT WITH THE HEARST CORPORATION IS SUCH THAT
19 BECAUSE OF, WHAT, THE SUBSIDIES YOU ARE ABLE TO DO THIS IN A
20 SHORTER PERIOD OF TIME?
21 A. THERE ARE MANY DIFFERENT ASPECTS TO MY AGREEMENT WHICH
22 MAKE IT POSSIBLE FOR ME TO DO THIS IN A MUCH SHORTER TIME.
23 MR. ALIOTO: MAY I HAVE EXHIBIT 21? I NEED A COPY
24 OF IT.
25 MR. SHULMAN: RIGHT HERE (INDICATING).
2260
FANG - CROSS / ALIOTO
1 MR. ALIOTO: I SEE.
2 IS IT UP THERE?
3 WELL, I CAN -- ALL RIGHT.
4 MAY I APPROACH THE WITNESS, YOUR HONOR?
5 THE COURT: YES, YOU MAY.
6 BY MR. ALIOTO:
7 Q. LET ME SHOW YOU WHAT IS MARKED FOR IDENTIFICATION -- WHAT
8 IS IN EVIDENCE AS EXHIBIT 21. EXHIBIT 21 IS DATED FEBRUARY 7,
9 2000. IN THIS CASE IT'S A LETTER DIRECTED TO KNIGHT RIDDER.
10 IT'S FROM MR. RUTHERFURD OF THE VERONIS SUHLER & ASSOCIATES
11 GROUP WITH REGARD TO THE EXAMINER.
12 DID YOU RECEIVE A SIMILAR LETTER FROM MR. RUTHERFURD
13 OF THE VERONIS GROUP?
14 A. (WITNESS READING DOCUMENT). I HAVE READ THE LETTER.
15 I'M SORRY. COULD YOU REPEAT THE QUESTION, PLEASE?
16 Q. DID YOU RECEIVE A SIMILAR LETTER?
17 A. I DID NOT.
18 Q. DID ANYONE EVER TELL YOU IN SUM OR SUBSTANCE THAT THE
19 HEARST IS NOT WILLING TO SELL ITS EXISTING INTEREST IN THE JOA?
20 A. YES, SIR.
21 Q. SO YOU KNEW THAT, CORRECT?
22 A. I KNEW THAT THEY WERE NOT -- THAT THEY WERE RELUCTANT TO
23 SELL THEIR ENTIRE RIGHTS UNDER THE JOINT OPERATING AGREEMENT.
24 Q. DID YOU THINK THAT THEY WERE GOING TO BE -- DID YOU
25 UNDERSTAND THEY WERE SELLING ANY RIGHTS UNDER THE JOA?
2261
FANG - CROSS / ALIOTO
1 A. I THOUGHT THAT THEY MIGHT.
2 Q. DID THEY?
3 A. NO, THEY DID NOT.
4 Q. NOW, IF YOU WILL GO TO PAGE 38 OF YOUR DEPOSITION WITH THE
5 JOA, I AM GOING TO READ -- I WANT TO READ YOUR TESTIMONY AND
6 ASK YOU A QUESTION ABOUT IT.
7 A. DOJ.
8 Q. DOJ. SORRY.
9 BEGINNING ON LINE 10, IT STATES:
10 "Q. OKAY. AND HAVE YOU EVER FIGURED OUT
11 YOUR DAILY CAPACITY ON YOUR PRESSES?
12 "A. I HAVE NOT. I HAVE NOT SAT DOWN AND
13 SPECIFICALLY PENCILLED IN NUMBERS. I THINK THAT
14 KIND OF IN ANTICIPATION OF ALL THE CHANGES THAT
15 ARE GOING ON IN SAN FRANCISCO MARKET HAVE LOOKED
16 AT THAT AS POSSIBLE SCENARIOS AND FEEL THAT IN
17 ORDER TO RUN A DAILY NEWSPAPER -- TO OPERATE A
18 DAILY NEWSPAPER EFFECTIVELY, WE WOULD NEED TO
19 ADD PRESS CAPACITY. WE WOULD NEED TO ADD PRESS
20 CAPACITY. AND EVEN IF OUR CURRENT PRESSES COULD
21 DO IT, THEY WOULD JUST BARELY DO. AND IN ANY
22 NEWSPAPER SITUATION YOU DON'T WANT TO PUSH YOUR
23 PRESSES TO COMPLETE CAPACITY BECAUSE OF
24 UNFORESEEN PROBLEMS."
25 NOW, YOU GAVE THAT ANSWER TO THAT QUESTION?
2262
FANG - CROSS / ALIOTO
1 A. I DID, SIR.
2 Q. AND IT WAS TRUE AND UNDER OATH?
3 A. YES, SIR.
4 Q. OKAY. NOW, DIDN'T YOU TESTIFY ON DIRECT EXAMINATION THAT
5 YOU COULD RUN THE NEW EXAMINER WITH THE PRESSES YOU HAVE?
6 A. I DID, SIR. I HAVE ADDED QUITE A BIT OF PRESS CAPACITY
7 SINCE THIS DEPOSITION WAS TAKEN.
8 Q. SINCE NOVEMBER?
9 A. YES, SIR.
10 Q. OKAY. AND WHAT DID YOU ADD?
11 A. I ADDED FIVE UNITS OF PRESS AND I'VE ADDED SIX WHAT ARE
12 KNOWN AS "SPLICERS" TO INCREASE THE SPEED OF THE PRESS.
13 Q. AND WAS -- TO YOUR KNOWLEDGE, WAS ANY OF THIS INFORMATION
14 GIVEN TO ANY OF MR. REILLY'S EXPERTS TO DETERMINE WHAT CAPACITY
15 THOSE UNITS WOULD HAVE?
16 A. I DON'T THINK MR. REILLY'S EXPERTS EVER CARED ABOUT MY --
17 ABOUT INVESTIGATING WHAT MY REAL PRESS CAPACITIES WERE.
18 Q. OKAY. CAN YOU ANSWER THE QUESTION?
19 WAS ANY OF THAT INFORMATION EVER GIVEN, AS FAR AS
20 YOU KNOW, TO ANY OF MR. REILLY'S EXPERTS TO DETERMINE WHETHER
21 OR NOT OR WHAT CAPACITY THOSE NEW UNITS WOULD HAVE?
22 A. NO, SIR.
23 Q. IS IT ALSO CORRECT THAT MOST NATIONAL ADVERTISING GOES
24 THROUGH AGENCIES?
25 A. NATIONAL ADVERTISING, YES, SIR.
2263
FANG - CROSS / ALIOTO
1 Q. AND IS IT CORRECT THAT THEY ADVERTISE ALMOST EXCLUSIVELY
2 IN PAID SUBSCRIBER VEHICLES?
3 A. YES, SIR.
4 Q. OKAY. I WANT TO DIRECT YOUR ATTENTION TO PAGE 97, PAGE 97
5 OF THE DOJ DEPOSITION, AND ASK YOU WHETHER OR NOT YOU WERE
6 ASKED THESE QUESTIONS AND GAVE THESE ANSWERS UNDER OATH:
7 "Q. NOW, THERE ARE SOME WHO SAY THAT WITH
8 SO MANY EDITORIAL VOICES IN SAN FRANCISCO, THE
9 LOSS OF THE EXAMINER'S VOICE WON'T MAKE ANY
10 DIFFERENCE. DO YOU AGREE WITH THAT?
11 "A. NO, I DISAGREE QUITE STRONGLY WITH THAT
12 STATEMENT.
13 "Q. WHY?
14 "A. THE METROPOLITAN DAILIES TEND TO DRIVE
15 THE NEWS AND THE REST OF THE TOWN. PARTICULARLY
16 THE ELECTRONIC MEDIA WILL PICK UP ON WHAT THE
17 DAILY NEWSPAPERS ARE REPORTING."
18 AND THEN IT GOES ON:
19 "YOU CAN SEE THAT IF YOU WATCH THE -- IF YOU
20 WATCH THE NEWS LOCALLY, YOU CAN SEE THAT A LOT
21 OF TIMES THEIR HEADLINES ARE THE SAME THAT
22 APPEAR IN THE MORNING PAPER. MORE THAN THAT YOU
23 OFTEN SEE THEM DOING THIS AS JOINT REPORTS
24 BETWEEN THE EXAMINER AND THE KTVU OR THE
25 CHRONICLE AND KRO" -- I GUESS YOU MEAN "KRON" --
2264
FANG - CROSS / ALIOTO
1 OH, YEAH, THERE IS AN "N -- "AND THEY DO JOINT
2 REPORTS. SO THE PRINTED DAILY NEWSPAPERS TEND
3 TO DRIVE THE ELECTRONIC MEDIA IN THIS TOWN.
4 ALSO, BECAUSE THEY ARE DAILY NEWSPAPERS, THEY
5 CAN COVER AN EVENT MUCH QUICKER AS IT HAPPENS
6 THAN ANY OTHER NEWSPAPER, THE WEEKLIES, FOR
7 EXAMPLE. WE TALKED A BIT EARLIER ABOUT MY
8 DEADLINES AND WHEN WE PRINT AND THEN SOME OF
9 SECTIONS THAT GO TO PRESS, YOU KNOW, ONE OR TWO
10 DAYS BEFORE THE ACTUAL PUBLICATION DATES. SO
11 EVEN IF SOMETHING HAPPENED MONDAY NIGHT, I MIGHT
12 NOT BE ABLE TO GET INTO IT, INTO MY TUESDAY
13 PAPER. AND SO THE DAILY NEWSPAPERS WOULD THEN
14 COVER THAT EVENT TWO OR THREE DAYS IN A ROW
15 BEFORE ANYBODY ELSE COULD COVER IT, AND THAT
16 COVERAGE CAN'T BE ANY DIFFERENT. SO THE DAILY
17 NEWSPAPERS, THE VOICES THE DAILY NEWSPAPERS
18 PROVIDE, ARE DIFFERENT THAN THE VOICES THAT THE
19 OTHER NEWSPAPERS PROVIDE."
20 DO YOU AGREE WITH THAT?
21 A. YES, SIR.
22 Q. AND YOU AGREE WITH THAT TODAY?
23 A. YES, SIR.
24 Q. BY THE WAY, IF YOU SHOULD PURCHASE THE EXAMINER, YOU STILL
25 WOULD MAINTAIN THE INDEPENDENT, CORRECT?
2265
FANG - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. WOULD YOU WORK FULL TIME ON THE EXAMINER, YOU PERSONALLY?
3 A. I BELIEVE THE MAJORITY OF MY TIME WOULD BE SPENT ON THE
4 EXAMINER.
5 Q. OKAY. SO YOU WOULD STILL BE WORKING AS THE PUBLISHER OF
6 THE INDEPENDENT?
7 A. I PLAN TO RETAIN THAT TITLE AT THIS TIME.
8 Q. OKAY. DOES THAT MEAN THE VOICES ARE GOING TO BE THE SAME,
9 THE INDEPENDENT AND THE EXAMINER?
10 A. NO, SIR.
11 Q. DOES IT MEAN THAT IF THERE -- IF THOSE VOICES ARE GOING TO
12 BE DIFFERENT, THEY NEED YOUR APPROVAL?
13 A. NO, SIR.
14 Q. IT'S ALSO CORRECT, IS IT NOT, SIR, THAT YOU DON'T
15 BELIEVE -- YOU DON'T WORRY ABOUT THE INTERNET COMPETITION,
16 SO-CALLED INTERNET COMPETITION; IS THAT RIGHT?
17 A. I DON'T SPEND A GREAT DEAL OF TIME WORRYING ABOUT IT.
18 Q. WELL, ARE YOU OF THE VIEW THAT FROM A READER'S POINT OF
19 VIEW, THE INTERNET DOES NOT OFFER LOCAL NEWS LIKE OTHER PAPERS,
20 DAILY PAPERS?
21 A. YES, SIR.
22 Q. AND HOW ABOUT RADIO? DO YOU BELIEVE THAT -- THAT THE
23 DAILY NEWSPAPERS OFFER MORE NEWS THAN THE RADIO?
24 A. I BELIEVE THEY OFFER A DIFFERENT KIND OF NEWS.
25 Q. AND DO YOU BELIEVE THAT THEY OFFER DIFFERENT KIND OF NEWS
2266
FANG - CROSS / ALIOTO
1 THAN TELEVISION?
2 A. YES, SIR.
3 Q. AND DO YOU BELIEVE THAT THERE ARE SOME PEOPLE THAT WOULD
4 LIKE TO HAVE THAT DIFFERENT KIND OF NEWS OR APPROACH?
5 A. YES, SIR.
6 Q. AND DO YOU FIND IT UNUSUAL THAT PERSONS WOULD ALSO --
7 WOULD BUY THE -- WOULD LISTEN TO THE RADIO AND WATCH THE T.V.
8 FOR NEWS BUT WOULD ALSO BUY THE NEWSPAPERS AND READ THOSE, TOO?
9 A. NO, SIR.
10 Q. OKAY. SO YOU THINK THAT PEOPLE WOULD READ THE -- PEOPLE
11 WHO LISTEN TO THE RADIO WON'T BUY NEWSPAPERS?
12 A. NO, SIR.
13 Q. OKAY. MAYBE I MISSTATED IT.
14 A. YES.
15 Q. OKAY. WHAT I AM SAYING IS DO YOU BELIEVE THAT PEOPLE WHO
16 LISTEN TO THE RADIO AND WATCH T.V. ALSO BUY NEWSPAPERS?
17 A. SOME OF THEM DO, YES, SIR.
18 Q. OKAY. OKAY. DO YOU BELIEVE THAT IF THE -- IF THE PRICE
19 AT THE NEWSSTANDS FOR THE EXAMINER AND THE CHRONICLE, EVEN
20 TODAY, IF THAT PRICE WERE TO GO UP TEN PERCENT, THAT THAT WOULD
21 START -- FORCE PEOPLE TO GO TO BUY THE OAKLAND TRIBUNE?
22 A. NO, SIR.
23 Q. IS IT CORRECT THAT YOU DON'T BELIEVE THAT PEOPLE WOULD BUY
24 THE OAKLAND TRIBUNE IF THE CHRONICLE AND THE EXAMINER DOUBLED
25 THEIR PRICE JUST BECAUSE IT'S TWO DIFFERENT PAPERS, NEWSPAPERS,
2267
FANG - CROSS / ALIOTO
1 IN TWO DIFFERENT CITIES?
2 A. I BELIEVE THAT THE OAKLAND TRIBUNE CONCENTRATES ON OAKLAND
3 NEWS, WHICH IS OF LITTLE INTEREST TO SAN FRANCISCO NEWSPAPER
4 READERS. AND SO EVEN IF YOU INCREASE THE PRICE OF THE SAN
5 FRANCISCO NEWSPAPERS, THE OAKLAND TRIBUNE WOULD NOT BE A
6 SUBSTITUTE FOR THE SAN FRANCISCO DAILY NEWSPAPERS.
7 Q. AND WOULD YOUR OPINION BE THE SAME WITH REGARD TO SAN JOSE
8 MERCURY NEWS?
9 A. YES, IT WOULD.
10 Q. AND WOULD IT BE THE SAME FOR THE CONTRA COSTA TIMES?
11 A. YES, IT WOULD.
12 Q. YOU REFERRED -- YOU YOURSELF REFERRED TO THE HEARST
13 ATTEMPT TO SELL THE EXAMINER AS "PHONY," DIDN'T YOU?
14 A. YES, SIR.
15 Q. ALSO YOU SAY THAT -- I WANT TO DIRECT YOUR ATTENTION TO
16 PAGE 132 OF YOUR DEPOSITION WITH THE DOJ. AND IT'S JUST PART
17 OF YOUR ANSWER, BUT I WANT TO BEGIN ON THE BOTTOM OF THE PAGE
18 AT LINE 23. AND I WILL ASK YOU WHETHER OR NOT YOU GAVE THIS
19 ANSWER UNDER OATH AT THE TIME, BEGINNING AT LINE 23:
20 "ALSO TRANSITION SERVICES, WE WOULD NEED TO
21 HAVE SOME SORT OF TRANSITION SERVICES. WE
22 TALKED ABOUT SOME OF MY PRESS CAPABILITIES AND,
23 WHILE I MIGHT HAVE SOME PRESS CAPABILITIES TO
24 PRINT A SMALL DAILY, TO REALLY GO FORWARD WITH
25 THE EXAMINER I WOULD NEED MORE PRESSES. AND SO
2268
FANG - CROSS / ALIOTO
1 WE TALKED ABOUT A TRANSITION PERIOD WITH THE
2 HEARST FOLKS."
3 DO YOU SEE THAT?
4 A. YES, SIR.
5 Q. AND ARE YOU SAYING THAT THAT TESTIMONY NOW IS NOT -- IS
6 NOT AS VALID AS IT WAS THEN BECAUSE YOU BOUGHT NEW UNITS?
7 A. THAT IS ONE OF THE DIFFERENCES, YES.
8 Q. OKAY. SO ARE YOU SAYING -- IS IT YOUR TESTIMONY THAT YOU
9 WOULD REALLY BE ABLE TO GO FORWARD WITH AN EXAMINER IN DIRECT
10 COMPETITION WITH THE CHRONICLE WITHOUT MORE PRESSES?
11 A. AS A LOCAL SAN FRANCISCO DAILY, I -- ONE OF MY OPTIONS IS
12 TO PRINT IT COMPLETELY IN-HOUSE.
13 Q. SO ARE YOU SAYING THAT YOU WOULD BE ABLE TO BE A FULL
14 COMPETITOR AGAINST THE CHRONICLE WITHOUT ANY MORE PRESSES?
15 A. IN THE CITY AND COUNTY OF SAN FRANCISCO, YES.
16 Q. HOW MANY -- AND YOU ARE LOOKING FOR A CIRCULATION OF HOW
17 MANY?
18 A. BETWEEN 50 AND 100,000 COPIES.
19 Q. IS IT CORRECT THAT IF YOU HAVE LESS THAN 50,000, THAT THAT
20 WOULD . . .
21 EXCUSE ME ONE MINUTE, YOUR HONOR.
22 (PAUSE IN THE PROCEEDINGS.)
23 MR. ALIOTO: OKAY. I THINK I AM LOOKING FOR 105,
24 YOUR HONOR. IT'S 104, YOUR HONOR. I'M SORRY ABOUT THAT DELAY.
25 I TOOK 104 WITH ME. NO, HERE IT IS. OKAY.
2269
FANG - CROSS / ALIOTO
1 MAY I APPROACH THE WITNESS, YOUR HONOR?
2 THE COURT: YES, WITH EXHIBIT WHAT NUMBER?
3 MR. ALIOTO: 104, YOUR HONOR.
4 THE COURT: 104?
5 MR. ALIOTO: YES.
6 BY MR. ALIOTO:
7 Q. LET ME SHOW YOU -- LET ME SHOW YOU WHAT IS MARKED FOR
8 IDENTIFICATION AS -- NO, NOT FOR IDENTIFICATION -- IN EVIDENCE
9 AS 104. IT IS THE E-MAIL FROM MR. SCHULTZ --
10 A. STULTZ.
11 Q. STULTZ, SORRY, OF MARCH 14 TO YOU RE ALLOCATION.
12 I ASK YOU, SIR, WHETHER OR NOT YOU RECEIVED A COPY
13 OF THIS E-MAIL ON OR ABOUT THIS -- ON OR ABOUT THE DATE
14 INDICATED FOR MR. STULTZ.
15 A. YES, I BELIEVE I DID.
16 Q. I WANT TO DIRECT YOUR ATTENTION TO THE SECOND PAGE.
17 NOW, THIS IS ON MARCH 14TH, CORRECT? TWO DAYS
18 BEFORE THE AGREEMENT. AND I WANT TO DIRECT YOUR ATTENTION TO
19 THE SECOND PARAGRAPH AND -- WHERE IT STATES -- IT STATES ON THE
20 TOP:
21 "THEY MAY THEN ASK FOR LANGUAGE THAT REDUCES
22 THE BENCHMARK NUMBERS BASED ON YOUR ACTUAL
23 CIRCULATION."
24 THIS IS IN PREPARATION FOR YOUR MEETING WITH HEARST,
25 CORRECT?
2270
FANG - CROSS / ALIOTO
1 A. IT COINCIDED WITH MY NEGOTIATIONS WITH HEARST.
2 Q. "I WOULD REJECT SUCH A PROPOSAL ON THE GROUNDS
3 THAT TO BE COMPETITIVE IN SAN FRANCISCO MARKET,
4 YOU WILL NEED TO PRODUCE A QUALITY PRODUCT AND
5 DROPPING BELOW THE EXPECTATIONS FOR A 50,000
6 CIRCULATION PAPER WILL AUTOMATICALLY SPELL DOOM
7 FOR THE EX," FOR EXAMINER.
8 DO YOU SEE THAT?
9 A. YES, I DO, SIR.
10 Q. DO YOU AGREE WITH THE STATEMENT THAT IF YOU DROPPED BELOW
11 50,000 -- I'M SORRY, YOUR HONOR.
12 IF YOU DROP BELOW THE 50,000, DO YOU BELIEVE -- DO
13 YOU AGREE WITH THE STATEMENT THAT THAT WOULD AUTOMATICALLY
14 SPELL DOOM FOR THE EXAMINER?
15 A. I DON'T KNOW IF I AGREE WITH THOSE EXACT WORDS. I DO
16 AGREE THAT IT'S VERY IMPORTANT FOR THE EXAMINER TO MAINTAIN A
17 CIRCULATION OF AT LEAST 50,000.
18 Q. AND -- BUT YOU -- ALL RIGHT. YOU THINK THAT MAYBE IT
19 WON'T SPELL DOOM BUT, WHAT, IT WILL GET CLOSE?
20 A. I THINK IT IS IMPORTANT, EVEN VITAL, TO MAINTAIN A
21 CIRCULATION OF AT LEAST 50,000.
22 Q. AND DO YOU BELIEVE THAT IT WOULD BE DIFFICULT FOR THE
23 EXAMINER TO SURVIVE IF ITS CIRCULATION FELL BELOW 50,000?
24 A. YES, I DO, SIR.
25 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
2271
FANG - CROSS / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. NOW, THIS MORNING YOU WERE GIVEN OR SHOWN SOME
3 DOCUMENTS THAT, AS I UNDERSTAND IT, ARE SUPPOSED TO, I GUESS,
4 REFLECT -- THIS IS THE SAN FRANCISCO EXAMINER REVENUE
5 PROJECTIONS THAT YOU WERE ASKED ABOUT THIS MORNING AND IT IS
6 EXHIBIT E-133. AND SPECIFICALLY -- I DON'T HAVE IT --
7 SPECIFICALLY E-133 YOU WERE ASKED ABOUT SECTION D.
8 NOW, BEFORE I ASK YOU ABOUT THAT SECTION D, I WANT
9 TO ASK YOU ABOUT THIS DOCUMENT. NOW, UNDER THIS DOCUMENT, THIS
10 HAS A -- THIS SHOWS THAT THERE'S A FAX DATE OF APRIL 28 AT
11 3:30 IN THE AFTERNOON.
12 NOW, APRIL 28 WAS THE -- AND IT'S FROM THE SAN
13 FRANCISCO INDEPENDENT. APRIL 28 WAS THE FRIDAY BEFORE THE
14 TRIAL BEGAN IN THIS CASE. I'M GOING TO TELL YOU THAT THAT'S --
15 A. YES, SIR, I AGREE.
16 Q. OKAY. AND IS IT CORRECT THAT THIS DOCUMENT AND ALSO
17 DOCUMENT NUMBER E-134 WAS PREPARED AT OR ABOUT THE SAME TIME?
18 A. THEY WERE BOTH IN PROCESS AT THE SAME TIME.
19 Q. NOW, YOU UNDERSTOOD WHEN YOUR DEPOSITION WAS TAKEN ON
20 APRIL THE 19TH --
21 MR. ALIOTO: ON APRIL WHAT?
22 MR. SHULMAN: 25.
23 BY MR. ALIOTO:
24 Q. -- ON APRIL 25, I'M SORRY.
25 A. I BELIEVE IT WAS THE 19TH.
2272
FANG - CROSS / ALIOTO
1 MR. SHULMAN: APRIL 19TH.
2 MR. ALIOTO: I'M SORRY. I WAS RIGHT.
3 Q. WHEN YOUR DEPOSITION WAS TAKEN ON APRIL 19TH, YOU WERE
4 SUPPOSED TO BRING WITH YOU, WERE YOU NOT, ALL BUSINESS PLANS
5 AND PROJECTIONS, REPORTS AND EVALUATIONS AND ANY AND ALL NOTES
6 AND MEMORANDA RELATING TO ALL NEGOTIATIONS WITH THE HEARST
7 CORPORATION AND/OR THE CHRONICLE PUBLISHING COMPANY. THAT
8 INCLUDES ALL BALANCE SHEETS, INCOME STATEMENTS, OTHER FINANCIAL
9 RECORDS SHOWING THE FINANCIAL ABILITY RESOURCES TO MAKE THE
10 EXAMINER A VIABLE, DAILY NEWSPAPER IN COMPETITION WITH THE
11 CHRONICLE.
12 OKAY. YOU UNDERSTOOD THAT; RIGHT?
13 A. YES, SIR.
14 Q. NOW, THESE DOCUMENTS, WERE THEY PREPARED JUST THE WEEK
15 BEFORE THE TRIAL?
16 A. THEY WERE IN PROCESS DURING THAT TIME.
17 Q. AND DURING THE COURSE OF YOUR DEPOSITION, DID YOU ADVISE
18 ANYBODY THAT YOU WERE IN THE PROCESS OF MAKING THESE DOCUMENTS,
19 THESE REVENUE PROJECTIONS AND BUDGETS?
20 A. I DON'T RECALL.
21 Q. I WANT TO DIRECT YOUR ATTENTION TO D, ITEM D. AND IN ITEM
22 D IT STATES:
23 "YEAR ONE RETAIL ADVERTISING RATES ARE BASED
24 ON $22 PER COLUMN INCH."
25 DO YOU SEE THAT?
2273
FANG - CROSS / ALIOTO
1 A. YES, SIR.
2 Q. AND YOU REMEMBER YOU WERE QUESTIONED ABOUT THAT?
3 A. YES, SIR.
4 Q. AND YOU SAY:
5 "THIS RATE IS VERY LOW AND COMPETITIVE FOR A
6 DAILY NEWSPAPER WITH 45,000 PAID CIRCULATION."
7 DO YOU SEE THAT?
8 A. YES, SIR.
9 Q. SO THIS IS BASED UPON A PAPER, A DAILY NEWSPAPER WITH
10 45,000 PAID CIRCULATION?
11 A. YES, SIR.
12 Q. AND YOU JUST TESTIFIED, DID YOU NOT, THAT IF IT'S UNDER
13 50,000, THIS IS GOING TO BE A DISASTER; RIGHT?
14 A. NO, SIR. IN FACT, THERE ARE MANY NEWSPAPERS IN THE BAY
15 AREA WITH SMALLER CIRCULATIONS THAT --
16 Q. DID YOU NOT --
17 A. THE HAYWARD DAILY REVIEW HAS A CIRCULATION OF 38,000. THE
18 SAN MATEO COUNTY TIMES HAS A CIRCULATION OF 35,000. THE MARIN
19 INDEPENDENT JOURNAL HAS A CIRCULATION OF 41,000.
20 I DO BELIEVE THAT THE EXAMINER WILL NEED TO HAVE A
21 CIRCULATION OF 50,000 OR MORE TO SURVIVE LONG-TERM IN THE SAN
22 FRANCISCO MARKET. HOWEVER, THESE ARE WORST CASE PROJECTIONS
23 AND WE FEEL THAT EVEN IF WE DROPPED SLIGHTLY BELOW THAT 50,000
24 CIRCULATION DOWN TO 45,000, THAT WE COULD STILL ATTRACT
25 ADVERTISING AT THESE RATES AND IN THESE QUANTITIES TO CONTINUE
2274
FANG - CROSS / ALIOTO
1 THE OPERATIONS OF THE EXAMINER AS A DAILY NEWSPAPER IN SAN
2 FRANCISCO.
3 Q. OKAY. SO IS IT NOT CORRECT, THEN, THAT THIS DOCUMENT THAT
4 WAS PREPARED SHORTLY AGO AFTER YOUR DEPOSITION, THAT THIS
5 DOCUMENT IS BASED UPON A DAILY NEWSPAPER WITH 45,000 PAID
6 CIRCULATION? IS THAT CORRECT?
7 A. NO, SIR.
8 Q. IT'S NOT CORRECT?
9 A. YES, SIR.
10 Q. WHEN IT'S STATED IN THIS DOCUMENT 45,000 PAID CIRCULATION,
11 THAT'S A MISSTATEMENT, A TYPOGRAPHICAL ERROR?
12 A. THAT IS FOR YEAR ONE, SIR; AND IF YOU LOOK WHEN YOU GET TO
13 YEAR SIX, WE ARE PROJECTING A CIRCULATION OF 68,000.
14 Q. OKAY. NOW I'M GOING TO READ THIS TO YOU AGAIN AND IF YOU
15 COULD JUST LET ME KNOW WHETHER YOU AGREE OR DISAGREE, THAT A
16 $50,000 CIRCULATION PAPER -- SORRY -- YES -- NOT DOLLAR -- "A
17 50,000 CIRCULATION PAPER WILL AUTOMATICALLY SPELL DOOM FOR THE
18 EXAMINER."DO YOU AGREE OR DISAGREE WITH THAT STATEMENT?
19 A. I DISAGREE WITH THAT SPECIFIC LANGUAGE.
20 Q. DO YOU THINK IT WILL BE DIFFICULT FOR THE EXAMINER TO
21 SURVIVE IF ITS CIRCULATION FALLS BELOW 50,000?
22 A. YES, I DO.
23 Q. YOU UNDERSTAND THAT THE -- YOU UNDERSTAND THAT THE SUNDAY
24 PAPER IS -- ACCOUNTS FOR APPROXIMATELY 30 TO 40 PERCENT OF THE
25 REVENUE OF THE NEWSPAPER?
2275
FANG - CROSS / ALIOTO
1 A. YES, I DO.
2 Q. AND YOU AGREE WITH THAT?
3 A. YES, I DO.
4 Q. DO YOU HAVE ANY PARTICIPATION IN THE SUNDAY PAPER --
5 A. YES, I DO.
6 Q. -- WITH THE EXAMINER -- I MEAN WITH THE CHRONICLE UNDER
7 YOUR ARRANGEMENT WITH HEARST?
8 A. NOW I'M CONFUSED BY YOUR QUESTION, SIR.
9 Q. DO YOU HAVE ANY PARTICIPATION IN THE SUNDAY PAPER WITH
10 HEARST UNDER YOUR AGREEMENT WITH HEARST?
11 A. YES, I DO.
12 Q. FOR HOW LONG?
13 A. IT'S NOT COUCHED IN TERMS OF A TIME PERIOD.
14 Q. ARE YOU OF THE VIEW THAT THE MOST IMPORTANT THING IS
15 PARTICIPATION IN THE SUNDAY PAPER, WHICH IS OPERATED BY THE
16 EXAMINER, AND THAT -- AND THAT PARTICIPATION IN THE SUNDAY
17 PAPER WOULD BE A VERY IMPORTANT ASSET FOR AN OFFER TO SELL?
18 A. YES, SIR.
19 Q. AND DID THEY OFFER TO SELL THE SUNDAY PAPER?
20 A. NOT IN ITS ENTIRETY, NO, SIR.
21 Q. ARE YOU SAYING THAT YOU'RE GOING TO JOINTLY PUBLISH THE
22 SUNDAY PAPER?
23 A. NOT AT ALL, SIR.
24 Q. STATE --
25 A. I DON'T THINK THE HEARSTS AND I CAN SURVIVE IN A
2276
FANG - CROSS / ALIOTO
1 RELATIONSHIP LIKE THAT.
2 Q. STATE YOUR PARTICIPATION IN THE SUNDAY PAPER.
3 A. WE ARE GETTING THE EXAMINER MAGAZINE. WE ARE GETTING
4 ACCESS TO ALL OF THE SUNDAY SUBSCRIBERS ON A NONEXCLUSIVE
5 BASIS. WE ARE GETTING THE OPPORTUNITY TO MAKE JOINT SALES
6 CALLS ON ALL OF THE ADVERTISERS WITH THE EXISTING NEWSPAPER
7 AGENCY STAFF. WE ARE GETTING ACCESS TO ALL OF THE EXISTING
8 NEWSPAPER AGENCY EMPLOYEES THAT SELL ADVERTISING. WE ARE
9 GETTING ACCESS TO ALL OF THE BOOKS AND RECORDS OF THE
10 ADVERTISERS THAT ADVERTISE IN THE SUNDAY PAPER. WE ARE GETTING
11 ACCESS TO ALL OF THE MARKETING STUDIES, READERSHIP STUDIES AND
12 ADVERTISING HISTORY OF THE SUNDAY ADVERTISERS AS WELL. AND, IN
13 ADDITION, WE ARE GETTING A SUBSTANTIAL REIMBURSEMENT.
14 Q. ARE YOU SAYING THAT YOU ARE -- THAT YOU AND THE NEW
15 CHRONICLE, OR SO-CALLED NEW CHRONICLE, THAT THERE'S GOING TO BE
16 JOINT SALES EFFORTS?
17 A. NO, SIR.
18 Q. I THOUGHT YOU JUST SAID THAT. OKAY.
19 A. THERE WILL BE AN OPPORTUNITY TO MAKE JOINT SALES CALLS
20 WHERE THE REPRESENTATIVE FROM THE HEARST-OWNED CHRONICLE AND MY
21 REPRESENTATIVE MARKETING THE NEW EXAMINER WILL GO TO
22 ADVERTISERS TO EXPLAIN TO THEM THAT THERE IS GOING TO BE A NEW
23 SITUATION IN SAN FRANCISCO WHERE THERE IS GOING TO BE
24 COMPETITION IN THE DAILY NEWSPAPER MARKET AND ADVERTISERS WILL
25 HAVE A CHOICE OF ADVERTISING EITHER IN THE NEW HEARST-OWNED
2277
FANG - CROSS / ALIOTO
1 CHRONICLE OR THE NEW EXAMINER, OR ADVERTISING IN BOTH.
2 Q. ARE YOU GOING TO BE GETTING ANY PART OF THE REVENUE -- DO
3 YOU HAVE ANY AGREEMENT WITH HEARST THAT YOU WOULD GET PART OF
4 THE REVENUE OF THE SUNDAY PAPER?
5 A. NOT DIRECTLY.
6 Q. ARE YOU OF THE VIEW THAT THE BEST CHANCES FOR THE EXAMINER
7 TO SUCCEED ON AN ONGOING BASIS AND CONTINUING IN THE FUTURE
8 WOULD BE WITH THE JOA?
9 A. I'M SORRY, COULD YOU REPEAT THAT QUESTION?
10 Q. YEAH. DO YOU BELIEVE THAT TO ENSURE THE BEST CHANCES FOR
11 THE EXAMINER TO SUCCEED ONGOING AND CONTINUING INTO THE FUTURE
12 WOULD BE IN THE JOA, WITH THE JOA CONTINUING?
13 A. YES, I DO.
14 Q. I WANT TO DIRECT YOUR ATTENTION TO PAGE 147 OF YOUR DOJ
15 DEPOSITION.
16 A. (WITNESS EXAMINES DOCUMENT.)
17 Q. NOW, THE JOA WAS SUPPOSED TO LAST -- WHEN YOU TOOK YOUR
18 DEPOSITION IN 1999 IN NOVEMBER, IT WAS SUPPOSED TO LAST UNTIL
19 2005, SOME -- UP TO 2005, SO FIVE OR SIX YEARS; CORRECT?
20 A. I'M ACTUALLY A LITTLE BIT CONFUSED ABOUT THE TERMINATION
21 DATE OF THE JOINT OPERATING AGREEMENT. I HAVE HEARD TESTIMONY
22 HERE THAT IT EXPIRES IN SEPTEMBER OF 2005. I ALSO HEARD THAT
23 THE START DATE WAS JANUARY 1ST, SO THAT WOULD MAKE THE
24 TERMINATION DATE JANUARY 1ST. SO I'M NOT SURE THE EXACT TERM
25 OF THE JOINT OPERATING AGREEMENT.
2278
FANG - CROSS / ALIOTO
1 Q. DO YOU BELIEVE THAT IF IN THE ABSENCE OF THE JOA, IF
2 SOMEONE WERE TO TAKE OVER THE EXAMINER, THAT THEY WOULD NEED --
3 THAT THEY WOULD NEED AT LEAST TWO YEARS OF THE JOA CONTINUING
4 AS A MINIMUM?
5 A. I'M SORRY, ARE YOU TALKING ABOUT THE ABSENCE OF THE JOA OR
6 THE JOA CONTINUING FOR TWO YEARS?
7 Q. DO YOU BELIEVE THAT IF THERE WERE TO BE A SALE AND SOMEONE
8 WERE TO ATTEMPT TO TRY TO RUN THE EXAMINER, THAT THEY WOULD
9 NEED AT LEAST TWO YEARS OF THE JOA TO CONTINUE -- FOR THE JOA
10 TO CONTINUE FOR AT LEAST TWO YEARS AT A MINIMUM BEFORE YOU
11 COULD GET ON YOUR FEET AND START TO BE INDEPENDENT?
12 A. IT DEPENDS ON THE CIRCUMSTANCES, THE OTHER CIRCUMSTANCES
13 OF THE ENTIRE SALES AGREEMENT.
14 Q. OKAY. LET ME JUST DIRECT YOUR ATTENTION TO PAGE 147 OF
15 YOUR DOJ DEPOSITION, AND I'M GOING TO READ SOME TESTIMONY AND
16 ASK YOU A QUESTION ABOUT IT. BEGINNING ON LINE 2 IT STATES:
17 "Q. NOW, COULD YOU WORK WITH A SHORTER
18 TRANSITION PERIOD THAN FIVE YEARS?
19 "A. THE LONGER THE TRANSITION PERIOD, THE
20 BETTER.
21 "Q. COULD YOU WORK WITH SHORTER TRANSITION
22 PERIOD?
23 "A. POSSIBLY, YES, BUT I THINK THAT ONE TO
24 TWO YEARS. I THINK ONE YEAR WOULD BE TOO SHORT.
25 TWO YEARS WOULD BE ABOUT THE MINIMUM. ONE TO
2279
FANG - CROSS / ALIOTO
1 TWO YEARS WOULD BE THE MINIMUM TO DEVELOP THOSE
2 RELATIONSHIPS.
3 "Q. OKAY. WHY DO YOU FEEL THAT'S THE
4 MINIMUM TIME YOU WOULD NEED?
5 "A. BECAUSE YOU NEED TO DEVELOP THOSE
6 RELATIONSHIPS. YOU WOULD NEED TO TAKE THE TIME
7 TO DEVELOP A BUSINESS PLAN AND THEN TO
8 COMMUNICATE THE BUSINESS PLAN AND THEN TO
9 EDUCATE THE PUBLIC AND TO EDUCATE THE
10 ADVERTISERS, AND THAT WOULD TAKE PLACE OVER A
11 PERIOD OF TIME.
12 "FOR EXAMPLE, EVEN FOR MY NEWSPAPERS, THE
13 INDEPENDENT, WHEN WE CHANGED OUR NAMES IN SAN
14 MATEO COUNTY FROM WHAT THEY WERE BEFORE TO THE
15 INDEPENDENT, WE WAITED ABOUT FOUR OR FIVE YEARS
16 WHEN WE WERE RUNNING THOSE PAPERS TO GET PEOPLE
17 FAMILIAR WITH OUR MOTIVES OF OPERATING BEFORE WE
18 DECIDED TO PUT THE INDEPENDENT MASTHEAD ON THOSE
19 PAPERS. AND EVEN THEN WE TOOK ABOUT SIX MONTHS
20 ANNOUNCING TO THE PUBLIC THAT WE WERE GOING TO
21 DO THAT, AND PUTTING OUT SOME INSTITUTIONAL
22 ADVERTISING PREPARING THEM FOR THAT. AND WE
23 TOOK ABOUT SIX MONTHS JUST TO CHANGE THE NAMES
24 OF OUR PAPERS THAT WERE ALL THE SAME, JUST TO
25 CHANGE THE NAMES. WE TOOK ABOUT SIX MONTHS TO
2280
FANG - CROSS / ALIOTO
1 DO THE ADVERTISING ON THAT, MUCH LESS IF YOU
2 WANT TO EDUCATE THE PEOPLE THAT THEY'RE GOING TO
3 HAVE CHOICES IN THE NEWSPAPER INDUSTRY."
4 NOW, DID YOU GIVE THAT TESTIMONY?
5 A. I DID, SIR.
6 Q. AND IT'S TRUE AND UNDER OATH?
7 A. YES, IT IS TRUE UNDER THOSE CIRCUMSTANCES.
8 Q. OKAY. SO IT TOOK YOU SIX MONTHS JUST ON YOUR SAN MATEO
9 BUSINESS; RIGHT? AND EVEN THOUGH YOU DIDN'T CHANGE THE NAME,
10 IT TOOK YOU SIX MONTHS TO GET THE RELATIONSHIPS GOING SO THAT
11 YOU'D BE ABLE TO DO THAT; IS THAT RIGHT?
12 A. NO, SIR. I THINK YOU'RE MISREADING IT.
13 Q. WHEN YOU SAID IN YOUR TESTIMONY -- IN THE TESTIMONY I JUST
14 READ, WHERE YOU SAID YOU NEED TO TAKE THE TIME TO DEVELOP A
15 BUSINESS PLAN, DO YOU KNOW WHAT A BUSINESS PLAN IS?
16 A. I'VE HEARD DIFFERENT DEFINITIONS OF A BUSINESS PLAN.
17 Q. YOU DIDN'T PREPARE A BUSINESS PLAN IN THIS CASE, DID YOU,
18 FOR THE EXAMINER?
19 A. WELL, IN PREPARATION FOR MY DEPOSITION, MY ATTORNEYS
20 ADVISED ME OF THE LEGAL DEFINITION FOR A BUSINESS PLAN AND I
21 DID NOT --
22 Q. YOU DON'T HAVE TO TELL US -- YOU WANT TO SAY IT ANY WAY.
23 GO AHEAD.
24 A. -- AND I DID NOT PREPARE A BUSINESS PLAN ACCORDING TO
25 THOSE DEFINITIONS.
2281
FANG - CROSS / ALIOTO
1 Q. OKAY. SO THE ANSWER IS YOU DIDN'T PREPARE A BUSINESS
2 PLAN.
3 A. YES.
4 Q. OKAY. I WANT TO DIRECT YOUR ATTENTION TO 159.
5 NOW, YOU DID SOME EXPERIENCES -- NOW, YOU DID
6 SOME -- YOU HAD SOME PERSONAL EXPERIENCE IN NEGOTIATING WITH
7 HEARST PRIOR TO THE TIME YOU HAD YOUR DEPOSITION TAKEN BY THE
8 DOJ; CORRECT?
9 A. I'M SORRY, COULD YOU REPEAT THAT?
10 Q. YOU HAD SOME NEGOTIATIONS WITH HEARST BY THE TIME YOU TOOK
11 YOUR DEPOSITION -- BY THE TIME YOU TOOK YOUR DEPOSITION HERE --
12 A. YES.
13 Q. -- WITH THE DOJ?
14 A. WE HAD SOME BACK AND FORTH REGARDING MY DESIRE TO ACQUIRE
15 THE EXAMINER, YES.
16 Q. AND DID YOU FEEL THAT -- AND IT'S CORRECT, ISN'T IT, THAT
17 YOU DIDN'T FEEL THAT HEARST WAS TRULY SEEKING A QUALIFIED BUYER
18 THAT WOULD CONTINUE THE OPERATION OF THE EXAMINER AS A DAILY
19 PAPER IN THE SAN FRANCISCO BAY AREA; IS THAT TRUE?
20 A. AT THAT TIME IT WAS TRUE.
21 Q. OKAY. SO JUST SO WE'RE CLEAR, AT THE TIME YOU BELIEVED,
22 AND THIS IS AS OF NOVEMBER OF 1999, AT THAT TIME YOU BELIEVED
23 THAT HEARST WAS NOT TRULY SEEKING A QUALIFIED BUYER WHO WOULD
24 CONTINUE THE OPERATION OF THE EXAMINER AS A DAILY PAPER IN THE
25 SAN FRANCISCO BAY AREA; CORRECT?
2282
FANG - CROSS / ALIOTO
1 A. YES.
2 Q. ALL RIGHT. NOW, WITH REGARD TO THE TRANSITION --
3 TRANSITIONAL PERIOD, DO YOU BELIEVE AND WERE YOU OF THE OPINION
4 THAT EVEN IF THERE WERE A MORNING PAPER DURING THE TRANSITION,
5 THAT IT WOULD STILL TAKE AT LEAST THREE TO SIX MONTHS WOULD NOT
6 BE ENOUGH TIME TO DO A TRANSITION INTO THE NEWSPAPER INDUSTRY?
7 A. I'M CONFUSED BY YOUR QUESTION.
8 Q. ALL RIGHT. WELL, LET ME ASK -- LET ME DIRECT YOUR
9 ATTENTION TO PAGE 171 OF THE TESTIMONY YOU GAVE BEFORE THE DOJ.
10 AND, AGAIN, I'LL DIRECT YOUR ATTENTION TO LINE 4:
11 "Q. AND FROM YOUR EARLIER ANSWERS, IS IT
12 FAIR TO SAY THAT THAT KIND OF A TRANSITIONAL
13 PERIOD WOULD NOT BE ADEQUATE UNDER ANY
14 CIRCUMSTANCES TO GET A SECOND NEWSPAPER UP AND
15 RUNNING AS A VIABLE, COMPETITIVE ENTITY?
16 "A. THAT'S CORRECT. EVEN IF THEY WERE
17 TALKING ABOUT A MORNING TRANSITION SPOT OR HAD
18 OTHER TRANSITIONARY ASPECTS ADDED TO THIS, THREE
19 TO SIX MONTHS WOULD NOT BE ENOUGH TIME TO DO A
20 TRANSITION IN THE NEWSPAPER INDUSTRY."
21 DID YOU GIVE THAT TESTIMONY --
22 A. YES, I DID.
23 Q. -- UNDER OATH AND IT WAS TRUE?
24 A. IT WAS AND IS TRUE.
25 Q. IS IT FAIR TO SAY THAT YOU HAVE RECEIVED NO INFORMATION
2283
FANG - CROSS / ALIOTO
1 THAT WOULD ENABLE YOU TO MAKE ANY KIND OF REASONABLE PROJECTION
2 AS TO THE OPERATIONS OF THE EXAMINER AS A STAND-ALONE ENTITY?
3 A. I'M SORRY, CAN YOU REPEAT THAT QUESTION?
4 Q. IS IT TRUE THAT YOU RECEIVED NO INFORMATION THAT WOULD
5 ENABLE YOU TO MAKE ANY KIND OF A REASONABLE PROJECTION AS TO
6 THE OPERATIONS OF THE EXAMINER AS A STAND-ALONE ENTITY?
7 A. NO, THAT IS NOT TRUE.
8 Q. OKAY. LET ME DIRECT YOUR ATTENTION TO PAGE 179. AGAIN,
9 THIS IS YOUR TESTIMONY BEFORE THE DOJ:
10 "Q. IS IT FAIR TO SAY THAT YOU'VE RECEIVED
11 NO INFORMATION THAT WOULD ENABLE YOU TO MAKE ANY
12 KIND OF REASONABLE PROJECTION AS TO THE
13 OPERATIONS OF THE EXAMINER AS A STAND-ALONE
14 ENTITY?
15 "A. THAT'S CORRECT."
16 DO YOU SEE THAT?
17 A. YES, I DO.
18 Q. AND YOU GAVE THAT TESTIMONY AND IT WAS TRUE?
19 A. IT WAS TRUE AT THAT TIME, SIX MONTHS AGO.
20 Q. OKAY. SO SINCE THAT TIME YOU RECEIVED INFORMATION THAT
21 WOULD MAKE -- THAT WOULD ALLOW YOU TO DO THESE PROJECTIONS?
22 A. ABSOLUTELY.
23 Q. AND DID YOU RECEIVE THOSE AFTER OR BEFORE YOUR DEPOSITION
24 IN THIS CASE?
25 A. BEFORE MY DEPOSITIONS.
2284
FANG - CROSS / ALIOTO
1 (PAUSE IN PROCEEDINGS.)
2 BY MR. ALIOTO:
3 Q. AND DID YOU -- IF YOU HAD THAT INFORMATION BEFORE, THEN IS
4 IT CORRECT THAT YOU COULD MAKE A REASONABLE PROJECTION AT THE
5 TIME YOUR DEPOSITION WAS TAKEN?
6 A. I WAS IN THE PROCESS OF MAKING BUDGETS AND PROJECTIONS.
7 Q. OKAY. SO WHAT YOUR TESTIMONY IS, IS THAT YOU DIDN'T HAVE
8 THE -- YOU COULDN'T DO IT AT THE TIME YOUR DOJ DEPOSITION WAS
9 TAKEN AND YOU COULDN'T DO IT AT THE TIME YOUR DEPOSITION WAS
10 TAKEN IN THIS CASE, BUT WHETHER IT WAS TAKEN IN THIS CASE IT
11 WAS ONGOING; IS THAT IT?
12 A. NO, SIR. I COULD NOT DO IT AT THE TIME THAT THE
13 DEPOSITION WAS TAKEN BECAUSE AT THAT POINT IN TIME I FELT LIKE
14 THE HEARSTS WERE STONEWALLING ME AND NOT PROVIDING ME WITH ANY
15 INFORMATION.
16 LATER, AS WE GOT INTO THE NEGOTIATIONS, THEY THEN
17 PROVIDED MUCH MORE INFORMATION TO ME FROM WHICH I COULD BEGIN
18 MAKING PROJECTIONS.
19 Q. AND WHEN DID THEY GIVE IT TO YOU?
20 A. STARTING MAYBE IN FEBRUARY. IT STARTED TRICKLING IN MAYBE
21 IN ABOUT FEBRUARY OR SO, AND THEN GOT MORE AND MORE AS THE
22 NEGOTIATIONS BECAME CLOSER AND MORE INTENSE.
23 Q. NOW, YOU KNOW THAT -- AGAIN, YOU KNOW THAT THE SUBPOENA
24 THAT WAS SERVED ON YOU FOR YOUR DEPOSITION CALLED FOR YOU TO
25 PRESENT ALL YOUR BUSINESS PLANS AND PROJECTIONS. SO ARE YOU
2285
FANG - CROSS / ALIOTO
1 SAYING THAT AT THE TIME OF YOUR DEPOSITION YOU DIDN'T HAVE ANY
2 PROJECTIONS?
3 A. I AM NOT SURE. I BELIEVE WE TURNED OVER A NUMBER OF
4 OPERATIONAL BUDGETS FOR MY DEPOSITION, ALL OF WHICH YOU
5 RECEIVED AND WHICH MR. SHULMAN ASKED ME ABOUT DURING MY
6 DEPOSITION.
7 Q. WELL, WHEN YOU TALK ABOUT OPERATIONAL BUDGETS, YOU MEAN
8 THE ONES THAT WE WENT OVER FROM MR. STULTZ WHICH HE DESCRIBED
9 AS THE OPERATIONAL BUDGETS; IS THAT WHAT YOU'RE TALKING ABOUT?
10 A. I'M NOT SURE IF THOSE ARE ALL OF THEM. YES, THERE ARE
11 SOME THAT ARE WITH A BUDGET AS LOW AS 15 MILLION AND SOME WITH
12 A BUDGET AS HIGH AS 28 MILLION.
13 Q. WELL, YOU KNOW THAT WE WENT OVER THE ONE THAT WAS FOUR
14 DAYS BEFORE THE AGREEMENT AND MR. STULTZ DESCRIBED IT AS THE
15 OPERATIONAL BUDGET, AND WE JUST TOOK YOU OVER THAT AND THAT HAD
16 THE BUDGET OF THE 15 MILLION. REMEMBER? DO YOU REMEMBER THAT?
17 A. YES, SIR.
18 MR. ALIOTO: IF I MAY HAVE A MOMENT, YOUR HONOR.
19 THE COURT: YES, YOU MAY.
20 (PAUSE IN PROCEEDINGS.)
21 BY MR. ALIOTO:
22 Q. YOU HAD POSSESSION OF CERTAIN PROPERTY IN THE SAN MATEO
23 AREA IN ORDER TO PRINT YOUR PENINSULA EDITIONS; DID YOU NOT?
24 MR. BALABANIAN: OBJECTION, RELEVANCE.
25 THE COURT: WHAT IS THE RELEVANCE OF THIS,
2286
FANG - CROSS / ALIOTO
1 MR. ALIOTO?
2 MR. ALIOTO: IT GOES TO SHOW THE PARTICULAR
3 FINANCIAL POSITION OF THE INDIVIDUALS AT THAT TIME, WHICH IS IN
4 THE FALL OF LAST YEAR, THE ABILITY TO BE ABLE TO RESPOND TO ANY
5 ADDITIONAL CASH OUTLAYS THAT WOULD BE NECESSARY IN ORDER TO
6 KEEP THE PAPER GOING IF THAT, IN FACT, WERE THE CASE.
7 MR. BALABANIAN: THE COURT ALREADY RULED THAT OUT OF
8 BOUNDS IN A TELEPHONE CONFERENCE. WE WERE TOLD WE DID NOT HAVE
9 TO -- THE ISSUE OF PERSONAL RESOURCES WAS NOT IN THE CASE.
10 MR. ALIOTO: NO, THAT'S A DIFFERENT ISSUE, YOUR
11 HONOR.
12 MR. BALABANIAN: IT SOUNDS TO ME LIKE IT'S THE SAME.
13 SAME OBJECTION.
14 MR. ALIOTO: WELL, THEN, LET ME REFRAME THE
15 QUESTION.
16 Q. IT IS CORRECT, IS IT NOT, THAT WHETHER THE -- THAT NEITHER
17 YOU NOR ANY MEMBER OF YOUR FAMILY INTEND TO PUT ANY MONEY INTO
18 THE SO-CALLED NEW EXAMINER?
19 A. THAT IS CORRECT.
20 MR. ALIOTO: THAT'S ALL, YOUR HONOR. THANK YOU.
21 THE COURT: VERY WELL.
22 MR. BALABANIAN: NO REDIRECT, YOUR HONOR.
23 THE COURT: WELL, NO REDIRECT. MR. HALLING?
24 MR. HALLING: NO, YOUR HONOR.
25 THE COURT: FINE. THEN THANK YOU, MR. FANG, FOR
2287
1 YOUR TESTIMONY, SIR. YOU MAY STEP DOWN.
2 (WITNESS EXCUSED.)
3 THE COURT: VERY WELL. MR. ALIOTO, I ASSUME NO
4 REBUTTAL WITNESSES.
5 MR. ALIOTO: NO, YOUR HONOR.
6 THE COURT: ALL PARTIES REST?
7 MR. BALABANIAN: YES, YOUR HONOR.
8 MR. HALLING: YES, YOUR HONOR.
9 MR. ROSCH: YES, YOUR HONOR.
10 MR. ALIOTO: YES, SIR.
11 THE COURT: ALL RIGHT. WELL, THAT THEN COMPLETES
12 THE PRESENTATION OF THE EVIDENCE IN THE CASE. WE HAVE SOME
13 MATTERS TO DISCUSS. I ASSUME THE DEFENDANTS ARE RENEWING ALL
14 OUTSTANDING MOTIONS. MR. HALLING?
15 MR. HALLING: YES, SIR.
16 MR. ROSCH: YES, YOUR HONOR.
17 THE COURT: I'M GOING TO ACCEPT MR. ROSCH'S
18 INVITATION A FEW DAYS AGO AND ASK IF THE FOLLOWING SCHEDULE FOR
19 POSTTRIAL SUBMISSIONS IS WORKABLE FROM YOUR RESPECTIVE POINTS
20 OF VIEW. THESE ARE DESIGNED, OBVIOUSLY, IN ORDER TO TRY TO GET
21 TO THE COURT MATERIALS THAT ARE NECESSARY IN ORDER TO MAKE A
22 DECISION IN THE CASE AND BRING THE CASE TO A CONCLUSION AS
23 RAPIDLY AS POSSIBLE.
24 IS IT POSSIBLE TO REQUEST THE PARTIES TO SUBMIT
25 PROPOSED FINDINGS AND CONCLUSIONS BY FRIDAY THE 19TH, THAT IS
2288
1 THIS FRIDAY?
2 MR. ROSCH: YES, YOUR HONOR.
3 MR. HALLING: YES, YOUR HONOR.
4 MR. BALABANIAN: YES, YOUR HONOR.
5 THE COURT: MR. ALIOTO?
6 MR. ALIOTO: MAY WE AT LEAST HAVE UNTIL THE WEEKEND,
7 YOUR HONOR, SO THAT WE WOULD FILE THEM BY MONDAY?
8 THE COURT: WELL, WHAT I HAVE IN MIND IS
9 SUBMITTING -- HAVING YOU SUBMIT PROPOSED FINDINGS -- PROPOSED
10 FINDINGS, NOT NECESSARILY CONCLUSIONS, BUT PROPOSED FINDINGS BY
11 THIS FRIDAY. THEN ALLOW SOME ADDITIONAL TIME FOR BRIEFING ON
12 LEGAL ISSUES AND YOU COULD SUBMIT WITH THOSE BRIEFS PROPOSED
13 CONCLUSIONS OF LAW. I'D VERY MUCH LIKE TO HAVE THOSE, IF AT
14 ALL POSSIBLE, BY WEDNESDAY THE 24TH EARLY IN THE MORNING.
15 MR. ROSCH: THAT'S FINE WITH US, YOUR HONOR.
16 MR. HALLING: THAT'S FINE WITH US, YOUR HONOR.
17 MR. BALABANIAN: AND US.
18 THE COURT: THEN CAN WE SET THE MATTER DOWN FOR
19 ARGUMENT ON THE 31ST OF MAY? THAT WOULD BE THE FOLLOWING
20 WEDNESDAY.
21 MR. ROSCH: THAT'S FINE WITH US, YOUR HONOR.
22 MR. HALLING: THAT'S FINE WITH US AS WELL.
23 MR. BALABANIAN: WE --
24 THE COURT: ALL RIGHT. IS THAT DOABLE, MR. ALIOTO?
25 (PAUSE IN PROCEEDINGS.)
2289
1 MR. ALIOTO: THE COURT IS ASKING FOR THE FINDINGS BY
2 FRIDAY AFTERNOON?
3 THE COURT: CORRECT.
4 MR. ALIOTO: I ASSUME THAT THE COURT -- WELL, DOES
5 THE COURT WANT RECORD CITATIONS ALSO?
6 THE COURT: I DON'T THINK THAT'S NECESSARY.
7 MR. ALIOTO: OKAY.
8 THE COURT: I DON'T THINK THAT'S NECESSARY.
9 MR. ALIOTO: THEN THAT HELPS A LITTLE BIT, YES.
10 THE COURT: WE HAVE A COMPLETE TRANSCRIPT. I'M NOT
11 GOING TO FORECLOSE YOU FROM PROVIDING REFERENCE CITATIONS.
12 MR. ALIOTO: YES, OKAY.
13 THE COURT: BUT WE HAVE A TRANSCRIPT ALREADY
14 PREPARED. WE HAVE THE EXHIBITS AND ALTHOUGH IT'S A LARGE
15 NUMBER, IT'S A FAIRLY MANAGEABLE VOLUME OF EXHIBITS.
16 YOU MAY VERY WELL WISH TO MAKE RECORD CITATIONS, BUT
17 I'M NOT GOING TO REQUIRE THEM. THAT SHOULD EASE YOUR BURDEN
18 SOMEWHAT.
19 MR. ALIOTO: YES.
20 THE COURT: DOES THAT HELP?
21 MR. ALIOTO: YES, SIR.
22 THE COURT: ALL RIGHT. IT HELPS.
23 AND THEN PROPOSED CONCLUSIONS AND MEMORANDA OF LAW
24 ON THE 24TH, THE 24TH, THAT'S A WEEK FROM THIS COMING
25 WEDNESDAY.
2290
1 MR. HALLING: YOUR HONOR, IS THERE A TIME ON THE
2 24TH YOU'D LIKE THOSE?
3 THE COURT: WELL, IT MAYBE A LITTLE UNREASONABLE TO
4 ASK FOR YOU TO FILE THEM BY 9:00 O'CLOCK IN THE MORNING, BUT
5 THAT'S WHAT I'D LIKE. CAN YOU DO THAT?
6 MR. ALIOTO: YES, SIR.
7 THE COURT: ALL RIGHT, FINE.
8 AND THEN LET'S SET ARGUMENT FOR WEDNESDAY THE 31ST
9 OF MAY AT -- LET ME TAKE A LOOK AT MY SCHEDULE.
10 (PAUSE IN PROCEEDINGS.)
11 THE COURT: ALL RIGHT. THE 31ST OF MAY, WEDNESDAY,
12 AT 9:30 A.M. FOR ARGUMENT.
13 AS I THINK YOU KNOW, WE'RE STARTING A CRIMINAL TRIAL
14 TOMORROW MORNING. WE ANTICIPATE THAT THE EVIDENCE IN THAT CASE
15 SHOULD BE COMPLETED BY THE 31ST, AND SO THERE SHOULD NOT BE A
16 CONFLICT WITH THAT DATE. THERE IS A POSSIBILITY THAT THE JURY
17 MAY BE DELIBERATING IN THAT CASE AND CONSEQUENTLY WE MAY HAVE
18 TO INTERRUPT THE PROCEEDINGS HERE TO TAKE QUESTIONS FROM THE
19 JURY OR A VERDICT, BUT WE SHOULD BE ABLE SAFELY TO SET THE 31ST
20 OF MAY FOR CLOSING ARGUMENTS, AND I'LL GIVE YOU AS MUCH TIME AS
21 YOU THINK YOU REASONABLY NEED TO ARGUE THE CASE.
22 LET'S JUST TAKE A MOMENT BEFORE WE ADJOURN AND
23 DISCUSS MATTERS. WE HAVE TWO CONTRACTS HERE THAT WE HAVE TO
24 ANALYZE. FIRST OBVIOUSLY THE HEARST-CHRONICLE CONTRACT NEEDS
25 TO BE ANALYZED FROM THE POINT OF VIEW OF THE PROVISIONS OF LAW
2291
1 THAT HAVE BEEN PLED AND THEN THE HEARST-FANG CONTRACT.
2 IN THINKING ABOUT YOUR RESPECTIVE POSITIONS, I THINK
3 IT'S IMPORTANT FOR YOU TO BEAR IN MIND THAT IT SEEMS TO ME
4 THOSE CONTRACTS RAISE DIFFERENT ISSUES AND THE OUTCOME OF ONE
5 DOES NOT NECESSARILY DETERMINE THE OUTCOME ON THE OTHER, AS I
6 SE IT. IF YOUR POSITION IS CONTRARY, YOU OBVIOUSLY CAN TAKE
7 THAT POSITION.
8 BUT IT SEEMS TO ME THAT IT'S POSSIBLE THAT THE
9 CHRONICLE-HEARST CONTRACT COULD WITHSTAND ANTITRUST SCRUTINY
10 BUT NOT THE HEARST-FANG CONTRACT, ALTHOUGH IT IS, OF COURSE,
11 POSSIBLE THAT BOTH FAIL. BUT I THINK IT IMPORTANT IN YOUR
12 ANALYSIS TO CONSIDER BOTH POSSIBILITIES AND TO GIVE THE COURT
13 YOUR VIEWS ON THE LAW WITH RESPECT TO BOTH AND WHAT ARE THE
14 PRINCIPLES THAT MAY BE DETERMINATIVE OF WHETHER ONE OR BOTH
15 FAIL OR PASS ANTITRUST SCRUTINY.
16 SO AS YOU GO FORWARD IN PREPARING YOUR FINDINGS AND
17 CONCLUSIONS, I THINK IT IMPORTANT FOR YOU TO LOOK AT THESE TWO
18 CONTRACTS SEPARATELY AND TO ANALYZE THEM BOTH FROM AN ANTITRUST
19 POINT OF VIEW SEPARATE FROM THE OTHER.
20 I WILL ALSO BE MOST INTERESTED IN ANY SUGGESTIONS
21 ABOUT RELIEF WHICH THOSE CONCLUSIONS MAY LEAD YOU TO. NOW IN
22 THIS MATTER BECAUSE IT ARISES UNDER SECTION 16, THE COURT IS
23 SITTING AS A COURT OF EQUITY AND HAS BROAD POWER TO FASHION
24 CRITICAL RELIEF THAT WILL ACHIEVE THE OBJECTIVES WHICH NEED TO
25 BE ACHIEVED.
2292
1 THE QUESTION TO YOU IS WHAT EQUITABLE DOCTRINES
2 INFORM THE COURT WITH RESPECT TO THE RELIEF THAT IS APPROPRIATE
3 HERE AND ARE THE POSSIBLE MEASURES OF RELIEF THAT CAN BE
4 AFFORDED INDEPENDENT OF A DETERMINATION THAT A VIOLATION OF
5 EITHER SECTION 1 OR SECTION 2 OF THE SHERMAN ACT HAS OCCURRED.
6 THAT HASN'T SPECIFICALLY BEEN PLED, BUT I ASSUME IN
7 VIEW OF THE WAY THAT THE CASE HAS PROCEEDED AS RAPIDLY AS IT
8 HAS THAT TO THE EXTENT THERE ARE BASES FOR RELIEF THAT WERE NOT
9 PLED IN THE INITIAL CLAIM, THAT THE PLAINTIFF WILL MOVE TO
10 CONFORM PLEADINGS TO THE PROOF THAT HAS BEEN SHOWN AT TRIAL.
11 AND SO I'LL BE INTERESTED IN GETTING YOUR VIEWS WITH RESPECT TO
12 ANY RELIEF THAT SHOULD BE APPLIED BY THE COURT INDEPENDENT OF
13 ANY CLAIMS THAT HAVE BEEN EXPRESSLY ALLEGED IN THE PLEADINGS TO
14 DATE.
15 I MAY HAVE A FEW OTHER THOUGHTS THAT ARE ON MY MIND
16 IN THE NEXT COUPLE OF DAYS AS I THINK ABOUT THINGS; AND IF I
17 DO, WE'LL SEND YOU A FAX AND GET YOUR VIEWS.
18 ALL RIGHT. COUNSEL, DO YOU HAVE ANYTHING ELSE THAT
19 YOU WISH TO TAKE UP?
20 MR. ALIOTO: NO, SIR.
21 MR. HALLING: NO, YOUR HONOR.
22 MR. BALABANIAN: NO, YOUR HONOR.
23 MR. ROSCH: NO, YOUR HONOR.
24 THE COURT: VERY WELL. COUNSEL, LET ME COMMEND YOU
25 ALL FOR A CASE THAT HAS BEEN EXTREMELY WELL TRIED. YOU HAVE
2293
1 TRIED THIS CASE UNDER GREAT PRESSURE. THE COMPLAINT WAS FILED
2 ON THE 11TH OF JANUARY AND DIDN'T ACTUALLY -- THE PROCEEDINGS
3 DIDN'T ACTUALLY GET UNDERWAY IN ANY SERIOUS FASHION UNTIL
4 SOMETIME THEREAFTER AND YOU COMPLETED A VERY SUBSTANTIAL AMOUNT
5 OF DISCOVERY IN A HIGHLY PROFESSIONAL WAY WITH VERY FEW
6 DISPUTES AS TO DISCOVERY MATTERS. IN FACT, I ONLY REMEMBER ONE
7 OF ANY CONSEQUENCE, AND YOU DID THAT EFFICIENTLY AND
8 APPROPRIATELY IN A HIGHLY PROFESSIONAL MANNER, AND THE
9 PRESENTATIONS THAT HAVE BEEN MADE ON BOTH SIDES OF THE CASE
10 HAVE BEEN SIMPLY OUTSTANDING.
11 SO YOU DEMONSTRATED THAT WE DON'T NEED TO TAKE AS
12 LONG WITH THESE CASES AS WE TYPICALLY DO; AND, SECONDLY, THAT
13 THEY CAN BE EXTREMELY WELL TRIED. BUT DESPITE A FEW MOMENTS OF
14 LEVITY ALONG THE WAY, IT'S BEEN A SERIOUS PROCEEDING AND YOU
15 TREATED IT IN A HIGHLY PROFESSIONAL MANNER, AND THAT'S BEEN
16 VERY HELPFUL TO THE COURT AND I APPRECIATE THAT.
17 SO I GIVE YOU MY CONGRATULATIONS ON A JOB WELL DONE.
18 MR. BALABANIAN: THANK YOU, YOUR HONOR.
19 MR. ALIOTO: THANK YOU.
20 MR. ROSCH: THANK YOU.
21 THE COURT: ALL RIGHT. I WILL SEE YOU THEN ON THE
22 31ST OF MAY AND WE'LL RECEIVE THOSE SUBMISSIONS IN THE TIMES
23 INDICATED.
24 ANYTHING FURTHER?
25 MR. ALIOTO: NO, SIR.
2294
1 MR. HALLING: NO. THANK YOU.
2 THE COURT: ALL RIGHT. THANK YOU.
3 (WHEREUPON PROCEEDINGS ADJOURNED AT 4:45 P.M.)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
previous /