Daily Court Transcripts
May 02, 2000
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201
1 VOLUME 2
2 PAGES 201 - 382
3 UNITED STATES DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
5 BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
6 CLINTON REILLY, )
)
7 PLAINTIFF, )
)
8 VS. ) NO. C 00-0119 VRW
)
9 THE HEARST CORPORATION, )
ET AL., )
10 )
DEFENDANTS. )
11
____________________________)
SAN FRANCISCO, CALIFORNIA
12 TUESDAY, MAY 2, 2000
13 TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
14 FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
15 SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
16 ANGELINA ALIOTO-GRACE
ATTORNEYS AT LAW
17
SHULMAN, WALCOTT & SHULMAN, P.A.
18 121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
19 BY: DANIEL R. SHULMAN
JAMES HILBERT
20 ATTORNEYS AT LAW
21 (APPEARANCES CONTINUED ON FOLLOWING PAGE)
22 REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
23 OFFICIAL REPORTERS, USDC
24 COMPUTERIZED TRANSCRIPTION BY ECLIPSE
25
202
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 ATTORNEYS AT LAW
17
18
19
20
21
22
23
24
25
203
1 I N D E X
2
3
PLAINTIFF'S WITNESSES PAGE VOL.
4
5 SIAS, JOHN
DIRECT EXAMINATION BY MR. ALIOTO 210 2
6 CROSS-EXAMINATION BY MR. ROSCH 354 2
CROSS-EXAMINATION BY MR. HALLING 360 2
7 REDIRECT EXAMINATION BY MR. ALIOTO 365 2
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
204
1 I N D E X
2
E X H I B I T S
3
PLAINTIFF'S EXHIBITS
W/DRAWN IDEN EVID VOL.
4 1 209 2
3 THROUGH 6 209 2
5 8 THROUGH 11 209 2
15 THROUGH 16 209 2
6 18 209 2
20 THROUGH 31 209 2
7 33 THROUGH 36 209 2
45 THROUGH 46 209 2
8 48 209 2
50 THROUGH 52 209 2
9 55 THROUGH 58 209 2
62 209 2
10 64 209 2
66 THROUGH 75
209 2
11 79 THROUGH 81 209 2
84 THROUGH 88 209 2
12 91 THROUGH 95 209 2
99 THROUGH 106 209 2
13 110 THROUGH 114 209 2
115 249 2
14 116 249 2
117 254 2
15 120 AND 131 305 2
125 209 2
16 127 THROUGH 128 209 2
132 THROUGH 133 209 2
17
DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
18 C-300 THROUGH C-336 209 2
C-338 THROUGH C-347 209 2
19 H-1017 THROUGH H-1019 209 2
H-1021 209 2
20 H-1024 209 2
H-1027 209 2
21 H-1031 209 2
H-1033 209 2
22 H-1036 THROUGH H-1038 209 2
H-1044 209 2
23 H-900 THROUGH H-918 209 2
H-920 THROUGH H-937 209 2
24 H-941 THROUGH H-947 209 2
H-949 THROUGH H-953 209 2
25 H-955 THROUGH H-967 209 2
H-974 THROUGH H-982 209 2
205
1
1 TUESDAY, MAY 2, 2000 8:35 A.M.
2 THE CLERK: CALLING CIVIL 2000-119, CLINTON RILEY
3 VS. THE HEARST CORPORATION AND THE CHRONICLE PUBLISHING
4 COMPANY, ET AL.
5 MR. HALLING: YOUR HONOR, WE LEFT OFF WITH
6 MR. ALIOTO COMPLETING HIS EXAMINATION OF MR. WHITE.
7 WE MAY CALL THE HIM IN OUR CASE, BUT WE HAVE NO
8 QUESTIONS OF MR. WHITE AT THIS TIME. AND I UNDERSTAND THAT
9 MR. BALABANIAN AND MR. ROSCH DON'T HAVE QUESTIONS, EITHER.
10 MR. HOCKETT: THAT IS CORRECT, YOUR HONOR.
11 THE COURT: VERY WELL. THEN, MR. ALIOTO, YOU MAY
12 CALL YOUR NEXT WITNESS.
13 MR. ALIOTO: THANK YOU, YOUR HONOR.
14 WE DO HAVE SOME ADDITIONAL EXHIBITS THAT WE WOULD
15 LIKE TO PUT IN FIRST, IF WE MIGHT, YOUR HONOR.
16 THE COURT: VERY WELL. MR. SHULMAN?
17 MR. SHULMAN: YOUR HONOR, WHAT WE WOULD LIKE TO DO
18 IS JUST READ INTO THE RECORD, AS TEDIOUS AS IT MAY BE, THE
19 NUMBERS OF THE EXHIBITS THAT THE PARTIES HAVE AGREED TO, JUST
20 SO IT IS IN THE RECORD.
21 MR. NEVINS: THIS IS TOM NEVINS, AND I AM READING
22 INTO THE RECORD ALL OF THE EXHIBITS THAT ARE ADMITTED OR MAY BE
23 ADMITTED BY STIPULATION OF THE PARTIES: PLAINTIFF'S EXHIBIT 1,
24 3, 4, 5, 6, 8, 9, 10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,
25 26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45, 46, 48, 50, 51, 52,
206
1 55, 56, 57, 58, 62, 64, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75,
2 79, 80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94, 95, 99, 100.
3 PLAINTIFF'S 101, 102, 103 --
4 THE COURT: YOU SAID "101."
5 MR. NEVINS: OKAY. 104 AND 1 -- I'M SORRY, YOUR
6 HONOR?
7 THE COURT: YOU ARE ADMITTING BY STIPULATION 101?
8 MR. NEVINS: WELL, THESE, AS I UNDERSTAND IT FROM
9 EXIN'S COUNSEL, MODIFY REDACTED VERSIONS OF THE FOLLOWING
10 EXHIBITS THAT ARE TO BE ADMITTED BY STIPULATION.
11 MR. SHULMAN: YES. WE AGREED LAST NIGHT ON THE
12 REDACTIONS THAT THEY ASKED FOR IN THOSE EXHIBITS, TAKING OUT
13 CERTAIN NUMBERS, SO THAT THOSE EXHIBITS WHICH ARE 101 THROUGH
14 106 MAY BE RECEIVED AS REDACTED.
15 MR. HIXSON: YOUR HONOR, WE HAVE GIVEN THE REDACTED
16 COPIES --
17 THE COURT: LET'S SEE. WE BEGAN YESTERDAY BY
18 RESERVING 101 THROUGH 105 AND THEN 107 THROUGH 109. NOW DO I
19 UNDERSTAND THAT YOU HAVE REDACTED THOSE AND ARE NOW OFFERING
20 REDACTED VERSIONS OF THESE EXHIBITS?
21 MR. SHULMAN: 101 THROUGH 106, YOUR HONOR, THOSE
22 EXHIBITS.
23 THE COURT: 101 THROUGH 106 ARE ALL ADMITTED?
24 MR. SHULMAN: RIGHT.
25 THE COURT: AS REDACTED?
207
1 MR. SHULMAN: RIGHT.
2 MR. NEVINS: OKAY.
3 MR. HIXSON: WE HAVE REDACTED COPIES TO PROVIDE TO
4 THE COURT AND TO THE CLERK. WE HAVE GIVEN THEM TO THE OTHER
5 PARTIES.
6 THE COURT: ALL RIGHT. THAT'S THROUGH AND INCLUDING
7 106, CORRECT?
8 MR. SHULMAN: RIGHT.
9 THE COURT: ALL RIGHT.
10 MR. NEVINS: OKAY. THEN 110 THROUGH 114, INCLUSIVE,
11 125, 127, 128, 132 AND 133.
12 THEN EXHIBITS H-900.
13 THE COURT: H-900?
14 MR. NEVINS: -900 THROUGH H-930.
15 MR. SHULMAN: NO. I'M SORRY. THAT'S THROUGH 918.
16 MR. NEVINS: OKAY. I -- LET ME JUST READ THEM INTO
17 THE RECORD. THAT'S TEDIOUS BUT WE GET IT RIGHT.
18 THE COURT: IT CERTAINLY IS.
19 MR. NEVINS: OKAY.
20 H-900, 901, 902, 903, 904, 905, 906, 907, 908, 909,
21 910 --
22 THE COURT: LET'S SEE. 907, 908?
23 MR. NEVINS: 909.
24 THE COURT: RIGHT.
25 MR. NEVINS: 910, 911, 912, 913, 914, 915, 916, 917,
208
1 918. 920 THROUGH 924, 925 THROUGH 933.
2 THE COURT: WHY NOT JUST . . .
3 MR. NEVINS: 934, 935.
4 THE COURT: LET'S SEE. 925 THROUGH 933.
5 MR. NEVINS: 934, 935, 936, 937, 941 THROUGH 944,
6 945, 946, 947, 949 THROUGH 953, 955 THROUGH 962, 963 THROUGH
7 967, 974 THROUGH 979, 980, 981, 982, 1017, 1018, 1019, 1021,
8 1024, 1027, 1031, 1033, 1036, 1037, 1038, 1044.
9 CHRONICLE EXHIBITS C-300 THROUGH 336 AND C-338
10 THROUGH 347.
11 AND THAT'S IT.
12 MR. SHULMAN: YOUR HONOR, WE ALSO HAVE STIPULATED TO
13 THE ADMISSIBILITY OF THE -- ALL EXIN EXHIBITS ON THEIR LIST
14 EXCEPT FOR EXHIBITS 84, 111 --
15 THE COURT: JUST A MINUTE. SO IT WOULD BE X-84?
16 MR. SHULMAN: YES. ACTUALLY, THAT WOULD BE EXIN
17 EXHIBITS 1 THROUGH 83.
18 MR. NEVINS: BEFORE WE MOVE ON TO THESE, YOUR HONOR,
19 I HAVEN'T HAD A CHANCE TO LOOK AT THE EXIN EXHIBITS. COULD I
20 MOVE ALL OF THE STIPULATED EXHIBITS INTO EVIDENCE AT THIS
21 POINT, YOUR HONOR, THAT I HAVE READ ON THAT LIST?
22 THE COURT: VERY WISE.
23 I GATHER THERE IS NO OBJECTION.
24 MR. SHULMAN: RIGHT, RIGHT. WELL, THAT MEANS WE
25 SHOULD WAIT ON EXIN UNTIL YOU HAVE HAD A CHANCE TO LOOK?
209
1 MR. NEVINS: YES.
2 MR. HALLING: THE STIPULATED EXHIBITS ARE ALL
3 RECEIVED, YOUR HONOR?
4 THE COURT: YES. I WON'T REPEAT THEM.
5 (PLAINTIFF'S EXHIBITS 1, 3, 4, 5, 6, 8, 9,
6 10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,
7 26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45,
8
46, 48, 50, 51, 52, 55, 56, 57, 58, 62, 64,
9 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 79,
10 80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94,
11 95, 99, 100, 101 - 106, 110 - 114, 125,
12 127, 128, 132 AND 133)
13 RECEIVED IN EVIDENCE)
14 (DEFENDANT'S EXHIBITS H-900 - H-918, H-920
15
- H-924, H-925 - H-933, 934, 935, 936, 937,
16 941 THROUGH 944, 945, 946, 947, 949 THROUGH
17 953, 955 THROUGH 962, 963 THROUGH 967, 974
18 THROUGH 979, 980, 981, 982, 1017, 1018,
19 1019, 1021, 1024, 1027, 1031, 1033, 1036,
20 1037, 1038, 1044
21 RECEIVED IN EVIDENCE)
22 (DEFENDANT'S EXHIBITS C-300 THROUGH 336 AND
23 C-338 THROUGH 347
24 RECEIVED IN EVIDENCE)
25
210
1 THE COURT: ALL RIGHT. NOW ARE WE READY FOR A
2 WITNESS?
3 MR. ALIOTO?
4 MR. ALIOTO: THANK YOU, YOUR HONOR.
5 MAY IT PLEASE YOUR HONOR, THE PLAINTIFFS WOULD CALL
6 TO THE STAND MR. JOHN B. SIAS.
7 THE CLERK: THANK YOU. PLEASE RAISE YOUR RIGHT HAND
8 TO BE SWORN.
9 JOHN B. SIAS,
10 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
11 TESTIFIED AS FOLLOWS:
12 THE CLERK: THANK YOU. PLEASE BE SEATED.
13 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST FOR
14 THE RECORD.
15 THE WITNESS: JOHN B., AS IN BOY, SIAS, S-I-A-S.
16 DIRECT EXAMINATION
17 BY MR. ALIOTO:
18 Q. MR. SIAS, YOU ARE PRESENTLY THE CHAIRMAN OF THE BOARD, THE
19 CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE
20 PUBLISHING COMPANY; IS THAT RIGHT?
21 A. YES, SIR.
22 Q. AND YOU BECAME -- AND YOU BEGAN TO WORK FOR THE CHRONICLE
23 PUBLISHING COMPANY IN 1993; IS THAT CORRECT?
24 A. APRIL 1993.
25 Q. AND YOU BECAME THE CHAIRMAN OF THE BOARD OF THE CHRONICLE
211
SIAS - DIRECT / ALIOTO
1 PUBLISHING COMPANY IN 1995; IS THAT CORRECT?
2 A. YES, SIR.
3 Q. AND THE CHAIRMAN OF THE BOARD OR CHAIRWOMAN OF THE BOARD
4 BEFORE YOU WAS MS. NAN MCEVOY; IS THAT RIGHT?
5 A. NAN T. MCEVOY.
6 Q. AND MS. MCEVOY IS THE GRANDDAUGHTER OF THE FOUNDER OF THE
7 CHRONICLE PUBLISHING COMPANY; IS THAT RIGHT?
8 A. YES, SIR.
9 Q. ONE OF THEM?
10 A. YES, SIR.
11 Q. WHEN YOU BECAME -- WHEN YOU CAME TO THE CHRONICLE
12 PUBLISHING COMPANY, YOU FAMILIARIZED YOURSELF, DID YOU NOT,
13 WITH THE JOA?
14 A. NO, I DID NOT.
15 Q. DID YOU EVER READ THE --
16 A. I HAD A CURSORY INSPECTION OF IT AND RELIED ON MR. RON
17 INGRAM FOR INTERPRETATIONS AS WE PROGRESSED. RON INGRAM IS THE
18 CHIEF LEGAL COUNSEL FOR THE CHRONICLE PUBLISHING COMPANY.
19 Q. WELL, HAVE YOU EVER READ IT?
20 A. ABSOLUTELY NOT. I HAVE READ PORTIONS OF IT AS HE WOULD
21 HIGHLIGHT IT.
22 Q. OKAY. SO FROM THE TIME THAT YOU BECAME THE CHIEF
23 EXECUTIVE OFFICER AND THE PRESIDENT IN 1993 AND THEN AS THE
24 CHAIRMAN IN 1995, YOU NEVER READ THE JOA ALL THE WAY THROUGH;
25 IS THAT CORRECT?
212
SIAS - DIRECT / ALIOTO
1 A. THAT IS CORRECT.
2 Q. DID YOU FILE AN AFFIDAVIT IN THIS CASE?
3 A. IN WHAT CASE, SIR?
4 Q. THIS CASE.
5 A. YES, I BELIEVE I DID.
6 Q. ALL RIGHT. LET ME HAND YOU -- I WANT TO SHOW YOU YOUR
7 AFFIDAVIT AND ASK YOU WHETHER OR NOT -- IT IS EXHIBIT 50.
8 EXHIBIT 50, FOR THE RECORD, IS THE DECLARATION OF
9 JOHN B. SIAS IN SUPPORT OF OPPOSITION OF DEFENDANT THE
10 CHRONICLE PUBLISHING COMPANY TO THE PLAINTIFF'S MOTION FOR
11 PRELIMINARY INJUNCTION.
12 IS THIS YOUR SIGNATURE ON THE THIRD PAGE?
13 A. YES, IT IS.
14 Q. OKAY. AND THIS IS IN FACT THE DECLARATION THAT YOU FILED
15 IN THIS CASE?
16 A. YES.
17 Q. NOW, FROM TIME TO TIME IN YOUR AFFIDAVIT YOU MADE
18 REFERENCE TO THE JOA, DID YOU NOT?
19 A. I SEE ONE REFERENCE, TWO -- YES, I SEE TWO THAT I CAN FIND
20 HERE. MAYBE THERE ARE THREE.
21 Q. ALL RIGHT. AND THE ANSWER, I GUESS, TO THE QUESTION IS,
22 YES, YOU DID REFER TO THE JOA IN YOUR AFFIDAVIT, DID YOU NOT?
23 A. I DID. BUT YOU REFERRED TO IT FROM TIME TO TIME, AND I
24 WANTED TO BE SPECIFIC.
25 Q. OKAY. AND WHEN YOU REFERRED TO CERTAIN PROVISIONS OF THE
213
SIAS - DIRECT / ALIOTO
1 JOA, DID YOU READ THOSE PROVISIONS?
2 A. I HAD THIS DECLARATION PREPARED FOR ME AND I DID NOT READ
3 EACH OF THOSE PROVISIONS, ALTHOUGH I WAS FAMILIAR WITH THEM
4 FROM CONVERSATIONS OVER THE YEARS WITH OUR CHIEF COUNSEL.
5 Q. WELL, IF YOU GO TO PAGE 2 -- FIRST OF ALL, WHEN YOU FILED
6 THIS AFFIDAVIT, YOU KNEW THAT YOU WERE FILING IT UNDER OATH,
7 DID YOU NOT?
8 A. YES.
9 Q. AND YOU ALSO STATED IN THIS AFFIDAVIT ON PAGE 1 -- ON THE
10 SECOND SENTENCE OF PAGE 1, YOU STATED, QUOTE:
11 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
12 FACTS SET FORTH IN THIS DECLARATION UNLESS
13 OTHERWISE INDICATED."
14 YOU STATED THAT, DID YOU NOT?
15 A. YES, I DID.
16 Q. IF YOU WILL GO TO PAGE 2 UNDER PARAGRAPH 3, PARAGRAPH 3 IN
17 THE FIRST SENTENCE STATES, QUOTE:
18 "ONLY HEARST HAS THE ABILITY TO BUY THE
19 CHRONICLE WITHOUT ASSUMING THE CHRONICLE'S
20 OBLIGATIONS UNDER THE JOA TO SUBSIDIZE THE
21 EXAMINER."
22 DO YOU SEE THAT?
23 A. I DO.
24 Q. IS THERE A STATEMENT OR ANY REFERENCE WHATSOEVER IN THE
25 JOA THAT THE CHRONICLE HAS AN OBLIGATION TO SUBSIDIZE THE
214
SIAS - DIRECT / ALIOTO
1 EXAMINER?
2 A. NOT TO MY KNOWLEDGE.
3 Q. SO WHEN YOU STATED THIS WITH REGARD -- WHEN YOU STATED
4 THIS IN YOUR AFFIDAVIT, IT WASN'T TRUE, WAS IT?
5 A. MR. ALIOTO--
6 Q. SIR, IT WASN'T TRUE, WAS IT?
7 A. I WOULD SAY THAT --
8 Q. IT WASN'T TRUE, WAS IT, SIR?
9 A. I AM NOT GOING TO ANSWER THAT UNTIL I CAN .
. .
10 THE COURT: MR. SIAS, THE QUESTION IS PENDING.
11 PLEASE ANSWER.
12 THE WITNESS: THE WORD "SUBSIDIZE" IS --
13 MR. ALIOTO: I MOVE TO STRIKE, YOUR HONOR, AND I
14 REQUEST A MOTION TO --
15 THE COURT: LET'S HEAR THE ANSWER.
16 THE WITNESS: THE WORD "SUBSIDIZED" IS NOT IN THE
17 JOA, THE TERMS OF THE -- TO MY KNOWLEDGE.
18 THE COURT: I THINK THE QUESTION, MR. SIAS, IS
19 WHETHER OR NOT THE STATEMENT IN THE FIRST SENTENCE OF
20 PARAGRAPH 3 IS TRUE OR NOT TRUE.
21 THE WITNESS: I GUESS IT'S NOT TRUE.
22 BY MR. ALIOTO:
23 Q. NOW, WITH REGARD TO THE JOA ITSELF AND YOUR UNDERSTANDING,
24 IN 1999 STATE FOR US WHAT THE REVENUES WERE COMING INTO THE SAN
25 FRANCISCO NEWSPAPER AGENCY FROM BOTH THE CHRONICLE AND THE
215
SIAS - DIRECT / ALIOTO
1 EXAMINER.
2 A. WOULD YOU PLEASE REPEAT THE QUESTION?
3 Q. WHAT WERE THE -- ALL RIGHT. LET ME START IT OVER.
4 YOU UNDERSTAND UNDER THE JOA THAT THE INCOME COMING
5 FROM THE CHRONICLE AND THE EXAMINER GOES INTO THE SAN FRANCISCO
6 NEWSPAPER AGENCY?
7 A. YES.
8 Q. AND THAT REVENUE COMES FROM ADVERTISING AND IT COMES FROM
9 CIRCULATION; IS THAT RIGHT?
10 A. THAT IS CORRECT.
11 Q. AND IN 1999, APPROXIMATELY HOW MUCH WAS THAT?
12 A. THE COMBINED CIRCULATION AND ADVERTISING REVENUE --
13 Q. OF BOTH PAPERS COMING INTO THE SAN FRANCISCO NEWSPAPER
14 AGENCY, HOW MUCH WAS THAT?
15 A. IT WAS APPROXIMATELY $444 MILLION.
16 MR. ALIOTO: OKAY. MAY I USE THE EASEL, YOUR HONOR?
17 THE COURT: VERY WELL.
18 BY MR. ALIOTO:
19 Q. OKAY. SO APPROXIMATELY THIS WOULD -- WE ARE JUST GOING TO
20 USE THIS. THIS WAS IN 19 --
21 A. '99.
22 Q. 1999. SO I AM GOING TO PUT ON THE LEFT-HAND SIDE OF THE
23 EASEL -- NEXT TO WHERE WE HAVE "SAN FRANCISCO NEWSPAPER
24 AGENCY," I WILL PUT '99 AND THEN IT WAS APPROXIMATELY 400 AND
25 HOW MUCH?
216
SIAS - DIRECT / ALIOTO
1 A. 400 --
2 Q. APPROXIMATELY.
3 A. $44 MILLION.
4 Q. 444. I WON'T PUT THE "MILLION." 444.
5 OKAY. NOW, OF THE 444, HOW MUCH OF THAT MONEY WAS
6 ATTRIBUTABLE TO REVENUE COMING IN FROM THE SAN FRANCISCO
7 EXAMINER?
8 A. I DO NOT KNOW.
9 Q. HOW MUCH OF THIS MONEY THAT CAME IN OF THE 444 -- HOW MUCH
10 OF IT WAS REVENUE THAT CAME IN FROM ADVERTISING AND CIRCULATION
11 FROM THE SAN FRANCISCO CHRONICLE?
12 A. I DO NOT KNOW.
13 Q. WHAT WAS THE APPROXIMATE COST THAT WAS DEDUCTED BY THE SAN
14 FRANCISCO NEWSPAPER AGENCY PRIOR TO GETTING THE NET EXCESS
15 FIGURE, DO YOU KNOW, APPROXIMATELY?
16 A. YES, I DO. IT WAS APPROXIMATELY $300 MILLION.
17 Q. OKAY. LET'S PUT THAT. MINUS $300 MILLION.
18 HOW MUCH OF THE $300 MILLION IN EXPENSES OF THE SAN
19 FRANCISCO NEWSPAPER AGENCY WAS ATTRIBUTABLE TO THE SAN
20 FRANCISCO CHRONICLE?
21 A. I CANNOT SAY. THAT CALCULATION WAS NOT DONE.
22 Q. HOW MUCH OF THE 300 MILLION IN EXPENSES WAS ATTRIBUTABLE
23 TO THE SAN FRANCISCO EXAMINER?
24 A. THOSE CALCULATIONS HAVE NOT BEEN PERFORMED. I DO NOT
25 KNOW.
217
SIAS - DIRECT / ALIOTO
1 Q. HAVE YOU EVER KNOWN THEM?
2 A. THEY'RE NOT IN THE FORM OF THE QUESTION YOU ARE ASKING.
3 Q. ALL RIGHT. NOW, IF WE DEDUCT THIS, THIS LEAVES
4 $144 MILLION.
5 NOW, THEN, THIS $144 MILLION WOULD BE CHARACTERIZED
6 AS NET EXCESSIVE, IS THAT -- NET EXCESS. IS THAT RIGHT?
7 A. YOU ARE CORRECT. I AM -- THE EXPENSES -- THE NET EXCESS
8 WAS 57 MILLION. I WAS LOW IN THE EXPENSES. THE NET EXCESS
9 LAST YEAR WAS APPROXIMATELY $115 MILLION.
10 Q. 115.
11 A. YES.
12 Q. OKAY. SO --
13 A. SO I AM LOW -- THE REVENUE FIGURE IS CORRECT. I WAS LOW
14 IN THE EXPENSES.
15 Q. SO THE EXPENSES MAY HAVE BEEN APPROXIMATELY
$330 MILLION?
16 A. YES, SIR. YES, SIR.
17 Q. SO THAT LEFT A NET EXCESS OF $114 MILLION?
18 A. ABOUT THAT, BETWEEN 114 AND 115.
19 Q. OKAY. AND THEN THAT WAS DIVIDED 50/50 BETWEEN THE
20 CHRONICLE AND THE EXAMINER?
21 A. YES.
22 Q. SO THAT THE CHRONICLE WOULD GET 57 AND THE EXAMINER WOULD
23 GET 57, CORRECT?
24 A. YES.
25 Q. OKAY. NOW, SINCE YOU -- IN THIS INSTANCE.
218
SIAS - DIRECT / ALIOTO
1 AND THEN AFTER YOU GOT THE 57, EACH OF YOU GOT THE
2 57, THEN YOU WOULD TAKE OUT YOUR EDITORIAL EXPENSES, CORRECT?
3 A. EDITORIAL AND -- EDITORIAL AND PROMOTION EXPENSES.
4 Q. OKAY. AND THEN THAT WOULD LEAVE YOU WITH A PROFIT OR AT
5 LEAST A CASH FLOW FIGURE?
6 A. YES, SIR.
7 Q. AND WHAT WAS IT IN 1999?
8 A. THE CASH FLOW WAS APPROXIMATELY $18 MILLION.
9 Q. OKAY. ALL RIGHT. SO YOUR EXPENSES WERE ABOUT 40 -- ABOUT
10 $40 MILLION IN EDITORIAL?
11 A. EDITORIAL, A LITTLE LESS THAN THAT, 38 -- EDITORIAL AND
12 PROMOTION EXPENSES.
13 Q. AND PROMOTION, ABOUT 38, SAY?
14 A. OR 38 AND A HALF.
15 Q. ALL RIGHT. SOMETHING LIKE THAT. OKAY.
16 THE COURT: IS THE $18 MILLION BEFORE DEPRECIATION,
17 TAXES, INTEREST?
18 THE WITNESS: YES, SIR, IT IS, AND I CAN GIVE YOU
19 THE FREE CASH FLOW AND THE OPERATING EARNINGS IF MR. ALIOTO
20 WANTS IT.
21 THE COURT: OKAY.
22 BY MR. ALIOTO:
23 Q. OKAY NOW --
24 THE COURT: SO THE 18 MILLION WOULD BE THE EBITDA
25 FIGURE?
219
SIAS - DIRECT / ALIOTO
1 THE WITNESS: YES, SIR.
2 BY MR. ALIOTO:
3 Q. DO YOU KNOW WHAT THE EDITORIAL COSTS OF THE EXAMINER ARE?
4 A. SINCE I HAVE JUST BEEN EXPOSED AS A PERJURER, I AM GOING
5 TO BE VERY TECHNICAL ON MY ANSWER. AND BECAUSE I WAS IN THE
6 COURTROOM YESTERDAY, I HEARD WHAT THEY WERE. OTHER THAN THAT,
7 I WOULD NOT HAVE ANY REASON TO KNOW WITH ANY PRECISION WHAT THE
8 EXAMINER'S EDITORIAL COSTS ARE.
9 THE COURT: I DON'T THINK YOU MEANT THAT ANSWER
10 LITERALLY, DID YOU?
11 THE WITNESS: WELL . . .
12 THE COURT: THE CHARACTERIZATION.
13 THE WITNESS: THANK YOU, SIR.
14 THE COURT: ALL RIGHT.
15 BY MR. ALIOTO:
16 Q. ALL RIGHT. NOW, SINCE YOU DO NOT KNOW HOW MUCH OF THE
17 $444 MILLION IN THE REVENUE THAT GOES INTO THE SAN FRANCISCO
18 NEWSPAPER AGENCY IS ATTRIBUTABLE TO THE SAN FRANCISCO EXAMINER
19 AND SINCE YOU DO NOT KNOW HOW MUCH OF THE $330 MILLION IN
20 EXPENSES ARE ATTRIBUTABLE TO THE EXAMINER, THEN YOU DON'T KNOW
21 WHETHER THE EXAMINER WAS MAKING MONEY OR NOT, DO YOU, ON ITS
22 OWN?
23 A. THAT IS CORRECT.
24 Q. NONETHELESS, IN YOUR AFFIDAVIT YOU REPRESENTED TO THIS
25 COURT, DID YOU NOT, THAT IF IN FACT THE COURT WERE TO GRANT THE
220
SIAS - DIRECT / ALIOTO
1 INJUNCTION YOU STATE AT PAGE 1, BEGINNING ON PARAGRAPH 2 -- THE
2 LAST SENTENCE OF THAT PARAGRAPH, AND IT BEGINS AND IT STATES,
3 QUOTE, "THE EFFECT OF AN INJUNCTION" -- DO YOU SEE THAT?
4 A. YES, SIR.
5 Q. QUOTE:
6 "THE EFFECT OF AN INJUNCTION WOULD BE TO
7 REQUIRE CPC TO CONTINUE TO SUBSIDIZE THE NEWS
8 AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE
9 TERM OF THE INJUNCTION."
10 DO YOU SEE THAT?
11 A. YES, SIR.
12 Q. AND WHEN YOU SAID "SUBSIDIZE THE NEWS AND EDITORIAL
13 OUTPUT," YOU MEANT THAT YOU HAD TO TAKE -- THAT YOU WERE
14 SUPPORTING THEM; IS THAT RIGHT? THAT'S WHAT YOU MEANT, ISN'T
15 IT?
16 A. I MEANT WHAT THIS SAYS.
17 Q. ISN'T THAT WHAT YOU MEANT, THAT YOU WERE -- THAT YOU WERE
18 SUPPORTING THE EXAMINER?
19 A. IT'S VERY CLEAR WHAT IT SAYS. WE BELIEVE THAT THE
20 CHRONICLE, BY VIRTUE OF ITS SIZE, IS SUBSIDIZING THE EXAMINER.
21 Q. YOU DIDN'T SAY THAT IN YOUR AFFIDAVIT, DID YOU?
22 AS A MATTER OF FACT, YOU SAID IN YOUR AFFIDAVIT,
23 QUOTE:
24 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
25 FACTS SET FORTH IN THIS DECLARATION UNLESS
221
SIAS - DIRECT / ALIOTO
1 OTHERWISE INDICATED."
2 AND IT ISN'T OTHERWISE INDICATED IN THAT SENTENCE
3 THAT I JUST READ, IS IT?
4 MR. ROSCH: I OBJECT, YOUR HONOR. IT SUGGESTS THAT
5 IT'S INCONSISTENT, AND THERE IS NOTHING INCONSISTENT AT ALL
6 WITH THE ANSWER.
7 MR. ALIOTO: I THINK THAT'S FOR THE TRIER OF FACT,
8 YOUR HONOR.
9 THE COURT: THIS IS CROSS-EXAMINATION. OBJECTION
10 OVERRULED.
11 BY MR. ALIOTO:
12 Q. YOU DIDN'T SAY OTHERWISE IN THAT SENTENCE, DID YOU, THAT
13 THIS WAS YOUR BELIEF OR THIS IS WHAT YOU THINK ONLY BECAUSE
14 THERE IS A LARGER CIRCULATION OF THE CHRONICLE. YOU DIDN'T SAY
15 THAT, DID YOU?
16 A. NO. WE MADE THE DECLARATIVE STATEMENT.
17 Q. OKAY. SO THAT YOU WANTED TO INDICATE TO THE COURT, DID
18 YOU NOT, THAT IF THE COURT GRANTED THE INJUNCTION, THE
19 TEMPORARY OR THE PRELIMINARY INJUNCTION, THAT DURING THAT TIME
20 PERIOD YOU WOULD BE SUPPORTING THE EXAMINER. THAT'S WHAT YOU
21 WANTED THE COURT TO BELIEVE; ISN'T THAT TRUE?
22 A. YES.
23 Q. BUT, IN FACT, YOU KNEW THAT THAT WASN'T TRUE BECAUSE YOU
24 KNEW THAT YOU DIDN'T KNOW WHETHER OR NOT YOU WERE SUBSIDIZING
25 THEM OR NOT; ISN'T THAT TRUE?
222
SIAS - DIRECT / ALIOTO
1 A. WE . . .
2 Q. ISN'T THAT TRUE?
3 MR. ROSCH: YOUR HONOR, I THINK THE WITNESS IS
4 ENTITLED TO EXPLAIN AN ANSWER. HE DOESN'T HAVE TO JUST SAY
5 "YES" OR "NO."
6 MR. ALIOTO: HE HAS TO GIVE AN ANSWER, YOUR HONOR.
7 I HAVE NO OBJECTION TO AN EXPLANATION AFTER.
8 THE COURT: YOU HAVE TO GIVE AN ANSWER, MR. ROSCH.
9 MAY WE HAVE THE QUESTION REREAD, PLEASE, YOUR HONOR?
10 THE WITNESS: ANY RATIONAL --
11 MR. ALIOTO: EXCUSE ME, SIR.
12 THE WITNESS: I ONLY HAVE TO GIVE AN ANSWER "YES" OR
13 "NO"?
14 MR. ALIOTO: WE ARE GOING TO READ THE QUESTION TO
15 YOU. I WOULD LIKE YOU TO ANSWER THE QUESTION TO YOU AFTER.
16 MR. ROSCH: YOUR HONOR, DO YOU WANT THE WITNESS TO
17 SIMPLY ANSWER "YES" OR "NO" WITHOUT EXPLAINING?
18 THE COURT: LET'S HAVE THE QUESTION PUT TO THE
19 WITNESS.
20 LET ME ALSO HAVE A MOMENT WITH THE REPORTER.
21 (RECORD READ AS FOLLOWS: "BUT, IN FACT, YOU
22 KNEW THAT THAT WASN'T TRUE BECAUSE YOU KNEW THAT
23 YOU DIDN'T KNOW WHETHER OR NOT YOU WERE
24 SUBSIDIZING THEM OR NOT; ISN'T THAT TRUE?")
25 THE WITNESS: THE TERM "NO" --
223
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. CAN YOU ANSWER THE QUESTION?
3 THE COURT: WELL, LET HIM ANSWER THE QUESTION,
4 MR. ALIOTO.
5 THE WITNESS: COMMON SENSE LOGIC ON THESE TWO
6 NEWSPAPERS AND THEIR RELATIVE SIZE WHEN THE ADVERTISING CAME
7 IN -- AND CIRCULATION REVENUE CAUSES US TO SAY -- INFER THAT
8 THE EXAMINER IS BEING SUBSIDIZED BY THE CHRONICLE. BUT I GUESS
9 YOU CAN SAY I DON'T KNOW THAT FROM A COST ACCOUNTING STUDY OF
10 BREAKDOWN OF THE REVENUE SOURCES.
11 THE COURT: YOUR ANSWER IS THAT YOU KNOW THIS BY
12 VIRTUE OF YOUR COMMON SENSE AND YOUR EXPERIENCE IN THE
13 NEWSPAPER BUSINESS AND YOUR FAMILIARITY WITH THE MARKET EVEN
14 THOUGH YOU DID NOT HAVE THE FIGURES DIRECTLY BEFORE YOU?
15 THE WITNESS: YES, SIR.
16 THE COURT: IS THAT FAIR?
17 THE WITNESS: YES, SIR.
18 THE COURT: ALL RIGHT.
19 BY MR. ALIOTO:
20 Q. SO, IN OTHER WORDS, YOU ARE SAYING THAT THIS WAS AN
21 ASSUMPTION THAT YOU WERE MAKING; IS THAT IT?
22 MR. ROSCH: OBJECTION, YOUR HONOR. THAT MISSTATES
23 HIS JUST PRIOR TESTIMONY.
24 THE COURT: COUNSEL IS ENTITLED TO FOLLOW UP.
25 OBJECTION OVERRULED.
224
SIAS - DIRECT / ALIOTO
1 THE WITNESS: I AM EXPLAINING MY REASON FOR
2 HESITATING TO ANSWER "YES" OR "NO." I AM GIVING SOME
3 BACKGROUND ON IT.
4 AND, AGAIN, WITH THE LOGIC AND EXPERIENCE AND
5 INFERENCE BASED UPON THE SIZE OF THE TWO NEWSPAPERS AND THE
6 RATE STRUCTURE, ONE CAN MAKE A VERY LOGICAL INFERENCE THAT THE
7 EXAMINER IS BEING SUBSIDIZED.
8 DO I KNOW THAT AS A RESULT OF A COST ACCOUNTING
9 BREAKDOWN OF THE TWO NEWSPAPERS' COST IN REVENUE? AND THE
10 ANSWER IS, NO, WE HAVE NOT HAD SUCH A BREAKDOWN OR ANALYSIS.
11 Q. NOW, THE SECOND SENTENCE OF PARAGRAPH 1 STATED, QUOTE --
12 YOU STATED UNDER OATH, QUOTE:
13 "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE
14 FACTS SET FORTH IN THIS DECLARATION UNLESS
15 OTHERWISE INDICATED."
16 YOU DID NOT IN THIS AFFIDAVIT OTHERWISE INDICATE,
17 DID YOU, THAT YOUR STATEMENTS ABOUT SUBSIDIZING THE EXAMINER
18 WERE A MATTER OF YOUR LOGICAL INFERENCES FROM OTHER FACTS OTHER
19 THAN YOUR PERSONAL KNOWLEDGE, DID YOU? YOU DIDN'T SAY THAT,
20 DID YOU?
21 A. NO, I DID NOT.
22 Q. NOW, AS A MATTER OF FACT, YOU KNOW AND ARE AWARE, AREN'T
23 YOU, THAT A STUDY WAS DONE ON YOUR BEHALF WHICH SHOWED -- WHICH
24 SHOWED THAT THE HEARST CORPORATION WITH AN INDEPENDENT
25 NEWSPAPER WITH LESS THAN ONE QUARTER OF THE REVENUES OF THE SAN
225
SIAS - DIRECT / ALIOTO
1 FRANCISCO CHRONICLE COULD MAKE A PROFIT. CORRECT?
2 A. WELL, WILL YOU PLEASE LET ME SEE THE STUDY? WE HAVE HAD A
3 LOT OF STUDIES DONE, SOME OF WHICH WERE DONE INTERNALLY, SOME
4 OF WHICH WERE DONE EXTERNALLY. AND THEY ALL WERE NOT AGREED TO
5 OR THEY WERE ALL JUST THAT, STUDIES. SO IF I MAY SEE THE
6 EXHIBIT, I CAN GIVE YOU A PRECISE ANSWER AS TO WHETHER I KNOW
7 IT.
8 Q. DO YOU KNOW MR. JAFFE? HAVE YOU EVER HEARD OF MR. JAFFE?
9 A. YES, I HAVE. MR. MARTIN JAFFE IS CURRENTLY THE CHIEF
10 FINANCIAL OFFICER. HE WAS OF THE CHRONICLE CORPORATION AND HE
11 WAS HEAD OF ACCOUNTING AND LONG-TERM PLANNING ANALYSIS. AND HE
12 DID A NUMBER OF MODELS FOR US OVER THE YEARS ON OUR BUSINESSES.
13 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
14
15
16
17
18
19
20
21
22
23
24
25
226
SIAS - DIRECT / ALIOTO
1 Q. AND ONE OF THE CALCULATIONS THAT MR. JAFFE MADE WAS THAT
2 HEARST COULD ACHIEVE A HIGH SUCCESS IN THE YEAR 2006 AFTER THE
3 JOA AND INDEPENDENT WITH LESS THAN ONE QUARTER THE REVENUES OF
4 THE SAN FRANCISCO CHRONICLE; CORRECT?
5 A. I'M NOT -- NO, I DON'T THINK HE SAID A HIGH DEGREE. THERE
6 WAS SOME -- HE HAD A MODEL WITH DIFFERENT LEVELS OF SUCCESS OR
7 NONSUCCESS BY HEARST. HE HAD A NUMBER AT THE TIME. BUT THE
8 MODEL TO WHICH YOU REFER IS BASED UPON ASSUMPTIONS WHICH ARE SO
9 AT ODDS WITH THE SITUATION THAT -- IN THE REAL WORLD THAT WE
10 DID NOT GIVE IT ANY GREAT CREDENCE.
11 Q. MR. JAFFE AGAIN IS THE CHIEF FINANCIAL OFFICER OF --
12 A. HE IS NOW.
13 Q. AND HE DID CERTAIN CALCULATIONS FOR YOU; DIDN'T HE?
14 A. HE DID A LOT OF THEM.
15 Q. ONE OF THE CALCULATIONS HE DID WAS WHETHER OR NOT THE
16 HEARST WOULD BE PROFITABLE, THE HEARST CORPORATION PAPER, THE
17 EXAMINER, WOULD BE PROFITABLE AFTER THE JOA? HE MADE THAT
18 STUDY; DIDN'T HE?
19 A. HE MADE A NUMBER OF STUDIES INCLUDING THAT ONE,
20 MR. ALIOTO. HE ALSO MADE A NUMBER IN WHICH IT SHOWED THE
21 HEARST CORPORATION WOULD NOT BE SUCCESSFUL.
22 Q. AND IN --
23 A. BUT WE DO SCENARIOS FOR PLANNING PURPOSES ON THE EXTREMES.
24 Q. AND IN ONE OF THOSE STUDIES HE CALCULATED, DID HE NOT,
25 THAT THE EXAMINER COULD, IN FACT, BE QUITE PROFITABLE EVEN WITH
227
SIAS - DIRECT / ALIOTO
1 ONLY ONE FOURTH -- ONE QUARTER OF THE REVENUE OF THE CHRONICLE;
2 CORRECT? HE DID THAT; DIDN'T HE?
3 A. HE DID IT. THE ASSUMPTIONS UNDER WHICH HE DID IT WERE
4 NOT -- AGAIN, THEY WERE UNREALISTIC BASED UPON EXISTING
5 INFORMATION AND PROBABLE OUTCOME. THEY WERE VERY, VERY
6 UNREALISTIC AND WE DID NOT GIVE GREAT CREDENCE TO THEM.
7 Q. AND ONE COULD CONFER -- ONE COULD INFER -- ISN'T IT
8 CORRECT THAT ONE COULD INFER FROM THAT CALCULATION THAT, IN
9 FACT, THE EXAMINER COULD BE PROFITABLE EVEN THOUGH IT ONLY HAD
10 ONE QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?
11 A. I DON'T KNOW WHO "ONE" IS. THIS "ONE" (INDICATING) DIDN'T
12 INFER THAT NOR DID MY ASSOCIATES AT THE CHRONICLE.
13 Q. YOU DID NOT INFER THAT FROM THE CALCULATION THAT WAS MADE?
14 A. ABSOLUTELY NOT. AS I TOLD YOU, WE DO A NUMBER OF ANALYSES
15 AND INCLUDING ONES ON THE EXTREMES; AND JUST WHAT WOULD BE THE
16 CASE -- AND, FRANKLY, WHEN MARTIN DID THAT, MY AND SOME OTHER
17 REACTIONS WAS THAT THIS WAS TOTALLY UNREALISTIC BASED ON THE
18 ASSUMPTIONS HE USED.
19 Q. MAYBE YOU THINK IT MAY HAVE BEEN UNREALISTIC OR NOT, BUT
20 THE QUESTION WAS, FROM HIS CALCULATION, DIDN'T YOU IN FACT
21 INFER FROM HIS CALCULATION THAT, IN FACT, THE EXAMINER COULD BE
22 A SUCCESS WITH ONE QUARTER OF THE REVENUE OF THE CHRONICLE?
23 A. I DID NOT.
24 Q. I'D LIKE TO -- YOUR DEPOSITION WAS TAKEN BY THE UNITED
25 STATES GOVERNMENT IN THIS MATTER; WAS IT NOT?
228
SIAS - DIRECT / ALIOTO
1 A. IT WAS.
2 Q. AND THAT DEPOSITION WAS TAKEN ON DECEMBER 10, 1999?
3 A. YES, SIR.
4 Q. YOU WERE UNDER OATH AT THE TIME; WERE YOU NOT?
5 A. I WAS.
6 Q. I WOULD LIKE TO DIRECT YOUR ATTENTION, AND I WILL DIRECT
7 YOUR ATTENTION AND THE ATTENTION OF YOUR COUNSEL BEGINNING ON
8 PAGE 288.
9 THE COURT: DO YOU HAVE A COPY FOR THE COURT?
10 MR. ALIOTO: YOUR HONOR, I ONLY HAVE ONE COPY OF THE
11 EXHIBIT. I WILL PASS IT TO THE COURT.
12 MR. SHULMAN: GAYLE HAS IT.
13 MR. ALIOTO: DO YOU HAVE ANOTHER ONE OF THE
14 GOVERNMENT'S? NO, THIS IS THE GOVERNMENT.
15 PAGE 288, AND I WILL GO TO PAGE 289, LINE 5, AND I
16 WILL READ ANYTHING ELSE THAT COUNSEL WOULD WANT ME TO READ.
17 MAY I APPROACH --
18 MR. ROSCH: WOULD YOU PLEASE READ THROUGH LINE 11,
19 PLEASE?
20 MR. ALIOTO: I WILL.
21 MAY I APPROACH THE WITNESS?
22 THE COURT: VERY WELL. YOU'RE READING FROM THE TOP
23 OF 288?
24 MR. ALIOTO: 288 BEGINNING LINE 20, YOUR HONOR.
25 THE COURT: THANK YOU.
229
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. THIS IS PAGE 288, LINE 20. AT THE TIME YOU GAVE THIS
3 DEPOSITION, YOU WERE UNDER OATH; WERE YOU NOT, SIR? WERE YOU
4 UNDER OATH AT THE TIME, SIR?
5 A. YES, I WAS.
6 Q. "Q. OKAY. THEREFORE MR. JAFFE
7 CALCULATED THAT HEARST COULD ACHIEVE HIGH
8 SUCCESS IN THE YEAR 2006 WITH LESS THAN ONE
9 QUARTER THE REVENUES OF THE SAN FRANCISCO
10 CHRONICLE; IS THAT RIGHT?
11 "A. HE CALCULATED WITH," QUOTE, "'HIGH
12 SUCCESS' THAT THEY WOULD GENERATE 12 MILLION
13 EBITDA.
14 "Q. AND THEY WOULD NEED LESS THAN ONE
15 QUARTER OF THE REVENUE OF THE SAN FRANCISCO
16 CHRONICLE TO ACHIEVE THAT HIGH SUCCESS; ISN'T
17 THAT RIGHT?
18 "A. THAT'S WHAT ONE COULD INFER FROM THIS
19 CALCULATION.
20 "Q. DID YOU QUESTION THOSE CALCULATIONS
21 THAT HE CAME UP WITH?
22 "A. I DID NOT SPEND A GREAT DEAL OF TIME
23 DISCUSSING THESE FIGURES BECAUSE OF OUR BELIEF
24 THAT IT WAS SO IMPROBABLE THAT HEARST WOULD END
25 UP PUBLISHING IN 2006 A MORNING EXAMINER."
230
SIAS - DIRECT / ALIOTO
1 NOW, WHEN YOU MADE THE STATEMENT AT LINE 4, QUOTE,
2 "THAT'S WHAT ONE COULD INFER FROM THIS CALCULATION," DID YOU
3 MEAN SOMEONE OTHER THAN YOURSELF?
4 A. I'M NOT SURE WHO I MEANT.
5 Q. IT COULD HAVE BEEN YOU; RIGHT?
6 A. IT COULD HAVE BEEN ME.
7 Q. SO YOU WERE ONE PERSON WHO COULD, IN FACT, INFER FROM THIS
8 THAT THE EXAMINER COULD FUNCTION AT ONE -- PROFITABLY AT ONE
9 QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?
10 A. I SAID COULD, ONE COULD, NOT ONE DID INFER THAT.
11 Q. NOW, WHAT YOU JUST TOLD THE COURT IN EXPLANATION OF YOUR
12 AFFIDAVIT WAS THAT IT WAS A LOGICAL INFERENCE THAT BECAUSE THE
13 CHRONICLE HAD FOUR TIMES THE AMOUNT OF THE REVENUE, THAT THAT
14 MEANT THAT THE EXAMINER HAD TO BE SUBSIDIZED; ISN'T THAT RIGHT?
15 ISN'T THAT WHAT YOU JUST SAID?
16 A. I THINK SO.
17 Q. OKAY. AND THAT WAS CONTRARY TO WHAT YOU KNEW THAT
18 MR. JAFFE HAD DONE AND THAT YOU INFERRED WOULD BE CORRECT;
19 ISN'T THAT RIGHT?
20 A. I'M NOT SURE I CAN -- DO YOU WANT TO GO THROUGH THAT
21 AGAIN? I'M SORRY, BUT YOU --
22 THE COURT: ALL RIGHT.
23 BY MR. ALIOTO:
24 Q. NEVER MIND. I'LL JUST ASK YOU ONE MORE QUESTION AND THEN
25 I'LL GET OFF YOUR AFFIDAVIT.
231
SIAS - DIRECT / ALIOTO
1 THIS STATEMENT, THIS STATEMENT THAT, QUOTE, "THE
2 EFFECT OF AN INJUNCTION WOULD BE TO REQUIRE CPC TO CONTINUE TO
3 SUBSIDIZE THE NEWS AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE
4 TERM OF THE INJUNCTION," THAT STATEMENT IS SIMPLY NOT A TRUE
5 STATEMENT; ISN'T THAT CORRECT? THAT'S A FALSE STATEMENT; ISN'T
6 IT?
7 A. I DON'T BELIEVE IT IS. THE SUBSIDIZE -- THE TERM
8 "SUBSIDY" IS AN ADJECTIVE AND -- WELL, NO, IT'S A NOUN.
9 Q. IT'S A VERB ACTUALLY; ISN'T IT?
10 A. OKAY, THANK YOU.
11 (LAUGHTER)
12 A. "SUBSIDIZE" IS A VERB. "SUBSIDY" I THINK WOULD BE A NOUN,
13 BUT THAT'S WHAT --
14 Q. ALL I'M SAYING, SIR, IS, THE POINT IS THAT YOU WERE TRYING
15 TO INDICATE TO THE COURT IN YOUR SWORN AFFIDAVIT, LISTING
16 YOURSELF AS THE CHIEF EXECUTIVE OFFICER AND AS THE PRESIDENT OF
17 THE CHRONICLE CORPORATION, YOU WERE TRYING TO INDICATE THAT THE
18 EXAMINER WAS LOSING MONEY AND YOU WERE SUPPORTING THE EXAMINER
19 AND YOU DIDN'T WANT TO DO IT ANY MORE AND THIS INJUNCTION WOULD
20 MAKE YOU CONTINUE TO DO IT? THAT'S WHAT YOU WERE TRYING TO
21 TELL THE COURT; RIGHT?
22 A. I BELIEVE THAT'S CORRECT.
23 Q. AND YOU KNOW THAT THAT'S NOT TRUE BECAUSE YOU HAVEN'T GOT
24 THE SLIGHTEST IDEA WHETHER THAT'S TRUE OR NOT; CORRECT?
25 A. NO, SIR. I DO NOT KNOW THAT THAT IS NOT TRUE, BUT NEITHER
232
SIAS - DIRECT / ALIOTO
1 CAN I GIVE YOU A COST ACCOUNTING BREAKDOWN OF THE AGENCY'S
2 OPERATION BETWEEN THE CHRONICLE AND THE EXAMINER THAT WOULD
3 CAUSE ME TO BE ABLE TO SAY WITH ASSURETY THAT THAT IS, INDEED,
4 CORRECT OR BASED UPON A CAREFUL COST ACCOUNTING ANALYSIS.
5 MR. ALIOTO: EXCUSE ME, YOUR HONOR.
6
(PAUSE IN PROCEEDINGS.)
7 MR. ALIOTO: MAY I HAVE MR. SIAS' DEPOSITION,
8 PLEASE.
9 Q. YOUR DEPOSITION WAS TAKEN IN THIS CASE; WAS IT NOT?
10 A. YES, SIR.
11 Q. LET ME HAND YOU -- AND YOUR DEPOSITION WAS TAKEN ON
12 APRIL 21, 2000; IS THAT RIGHT?
13 A. IT WAS TAKEN IN YOUR OFFICES AND IF THAT'S THE DATE THAT I
14 WAS THERE, THEN IT'S CORRECT. I'D HAVE TO GO BACK AND LOOK AT
15 A CALENDAR.
16 Q. OKAY.
17 MR. ALIOTO: WE WOULD HAND THE ORIGINAL CONFIDENTIAL
18 DEPOSITION TO THE COURT IN SEAL AND ASK THAT IT BE UNSEALED.
19 AND IF I MAY HAND THE DEPOSITION TO THE WITNESS.
20 THE COURT: YOU MAY.
21 (PAUSE IN PROCEEDINGS.)
22 BY MR. ALIOTO:
23 Q. NOW, IT IS CORRECT, IS IT NOT, SIR, THAT YOU CANNOT SAY
24 WHETHER THE EXAMINER IS A FAILING NEWSPAPER OR NOT?
25 MR. HALLING: YOUR HONOR, I OBJECT TO THE QUESTION
233
SIAS - DIRECT / ALIOTO
1 TO THE EXTENT IT'S TRYING TO ELICIT A LEGAL OPINION.
2 THE COURT: IS THAT YOUR OBJECTION, MR. ROSCH?
3 MR. ROSCH: I'LL JOIN IN IT TO THAT EXTENT, YOUR
4 HONOR.
5 THE COURT: PERHAPS YOU CAN CLARIFY THE QUESTION,
6 MR. ALIOTO.
7 BY MR. ALIOTO:
8 Q. ISN'T IT CORRECT THAT YOU TESTIFIED THAT YOU CAN'T SAY
9 WHETHER IT'S A FAILING NEWSPAPER OR NOT, THE EXAMINER?
10 THE COURT: THAT'S NOT MUCH OF A CLARIFICATION.
11 MR. ALIOTO: I'M TRYING TO USE THE EXACT WORDS OF
12 HIS TESTIMONY, YOUR HONOR.
13 MR. ROSCH: THAT'S THE PROBLEM, YOUR HONOR.
14 MR. ALIOTO: THAT'S HIS OPINION, YOUR HONOR. HE'S
15 THE CHIEF EXECUTIVE OFFICER. I THINK THE STATEMENT --
16 MR. ROSCH: HE'S ALSO NOT A LAWYER.
17 THE COURT: WHAT PAGE ARE YOU REFERRING TO?
18 MR. ALIOTO: PAGE 57, LINE 6, YOUR HONOR.
19 MR. ROSCH: WELL, YOUR HONOR, ACTUALLY THERE IS AN
20 OBJECTION AS OF -- IN THE RECORD IN THAT RESPECT RIGHT THEN ON
21 THE SAME GROUND.
22 THE COURT: THE OBJECTION WILL BE OVERRULED. YOU
23 MAY ANSWER.
24 BY MR. ALIOTO:
25 Q. YOU TESTIFIED, DIDN'T YOU, THAT YOU COULDN'T SAY WHETHER
234
SIAS - DIRECT / ALIOTO
1 THE EXAMINER IS A FAILING NEWSPAPER OR NOT; ISN'T THAT TRUE?
2 A. THAT'S CORRECT. IN THIS TESTIMONY I SAID BECAUSE I DON'T
3 KEEP THE HEARST BOOKS.
4 Q. YOU JUST DON'T KNOW; CORRECT?
5 A. I DO NOT KNOW.
6 Q. AND IT WOULD BE WRONG FOR YOU TO SUGGEST TO ANYBODY THAT
7 YOU DID KNOW; WOULDN'T IT?
8 A. NO, THAT'S NOT -- I DON'T KNOW WHETHER IT'S WRONG.
9 Q. IT WOULD BE WRONG FOR YOU TO SWEAR UNDER OATH THAT YOU
10 KNEW WHEN YOU DIDN'T; WOULDN'T IT?
11 A. WHAT IS IT I'M SWEARING UNDER OATH THAT I KNOW?
12 Q. I WANT TO DIRECT YOUR ATTENTION TO 1996. AT THAT TIME YOU
13 HAD DISCUSSIONS WITH MR. BENNACK; DID YOU NOT?
14 A. YES.
15 Q. AND AT THAT TIME YOU WERE HAVING DISCUSSIONS WITH
16 MR. BENNACK, WHAT YOU WERE DISCUSSING WITH HIM IS UNDER WHAT
17 CONDITIONS THE HEARST CORPORATION WANTED IN ORDER TO CLOSE DOWN
18 THE EXAMINER; IS THAT RIGHT?
19 A. THAT WOULD BE CORRECT.
20 Q. AND YOU WENT AND VISITED WITH MR. BENNACK IN NEW YORK TO
21 FIND OUT WHAT THE CONDITIONS WOULD BE FOR THEM TO CLOSE DOWN
22 THE EXAMINER; IS THAT TRUE?
23 A. YES.
24 Q. AND ONE OF THE THINGS THAT YOU WANTED TO NEGOTIATE WITH
25 THE EXAMINER
-- WITH THE HEARST CORPORATION IS THAT IF THE
235
SIAS - DIRECT / ALIOTO
1 EXAMINER SIMPLY CLOSED DOWN, YOU WOULD NONETHELESS PAY THE
2 HEARST CORPORATION, CONTINUE TO PAY THE HEARST CORPORATION
3 THEIR 50-50 SHARE; IS THAT RIGHT?
4 A. I'M NOT SURE THAT'S RIGHT BECAUSE THERE WERE NEGOTIATIONS
5 AND DISCUSSIONS REGARDING THE EXAMINER AND THE CHRONICLE THAT
6 WENT ON OVER A PERIOD OF YEARS BEFORE I GOT THERE AND AFTER I
7 GOT THERE. SO I'M -- YOU'RE -- YOU'RE ASKING ME TO SAY IS IT
8 RIGHT IN THAT PARTICULAR NEGOTIATION.
9 Q. ALL RIGHT. FORGET THAT PARTICULAR NEGOTIATION.
10 A. BUT LET ME ADD ONE THING.
11 Q. ALL RIGHT.
12 A. IN THE TALK -- YOU MENTIONED CLOSING DOWN THE EXAMINER.
13 IN ANY OF THE TALKS THAT WERE EVER HELD WITH THE HEARST
14 CORPORATION IN DISCUSSIONS OF RESOLUTION OF THE JOA WHICH WOULD
15 ENTAIL THE EXAMINER EITHER CLOSING OR FIRST BEING OFFERED FOR
16 SALE, THAT WAS ALWAYS A PREMISE THAT WAS PRESENT.
17 Q. WHAT WAS A PREMISE?
18 A. THAT THE EXAMINER WOULD BE OFFERED FOR SALE BEFORE IT
19 WOULD BE CONSIDERED FOR CLOSING DOWN.
20 Q. DID YOU HAVE DISCUSSIONS WITH MR. BENNACK THAT IF HE
21 CLOSED DOWN THE EXAMINER, YOU WOULD ENTER INTO A DEAL WITH HIM
22 THAT WOULD GIVE A CERTAIN PERCENTAGE OF THE REVENUE TO MR. --
23 TO THE HEARST CORPORATION, A CERTAIN PERCENTAGE UP TO THE -- UP
24 TO THE DATE OF THE END OF THE JOA AND A DIFFERENT PERCENTAGE
25 FROM THAT DATE IN PERPETUITY?
236
SIAS - DIRECT / ALIOTO
1 A. WE HAD DISCUSSIONS WITH A NUMBER OF SCENARIOS, AND THE ONE
2 THAT YOU'RE REFERRING TO I'M NOT SURE WHETHER IT WAS IN '96 OR
3 '97; BUT THERE WAS A RESPONSE FROM THE HEARST CORPORATION TO A
4 PROPOSAL THE CHRONICLE HAD MADE, AND I BELIEVE IT WAS IN 1997,
5 THAT THE EXAMINER BE CLOSED OR SOLD AND ALL TERMS OF THE JOA
6 WOULD STAY IN FORCE THROUGH THE END OF THE CURRENT TERM,
7 SEPTEMBER 12, 2005.
8 AT THAT TIME THE CHRONICLE WOULD NEGOTIATE WITH
9 HEARST ON THE VALUE OF HEARST'S REMAINING ASSETS IN THE
10 NEWSPAPER AGENCY, AND THERE WAS NO PROPOSAL FROM THE CHRONICLE
11 THAT HEARST GET AN ONGOING INTEREST IN THE CHRONICLE BEYOND
12 2005.
13 HEARST AT OUR REQUEST RESPONDED. I BELIEVE
14 MR. BENNACK SENT A LETTER IN APRIL OF 1998 WITH HIS TERMS AND
15 CONDITIONS UNDER WHICH THEY WOULD CONSIDER DOING SUCH A THING;
16 AND THAT INCLUDED A 27 AND A HALF PERCENT INTEREST IN THE
17 CHRONICLE FROM SEPTEMBER 12TH, 2005, GOING FORWARD, AND I
18 FORGET -- 50 YEARS OR INFINITY, WHICHEVER -- IF YOU PUT A
19 TIMETABLE ON THE 50 YEARS, I GUESS IT WOULD MAKE A LOT OF
20 LAWYERS WORK FIGURING OUT HOW YOU WERE GOING TO GET TO RANGE.
21 SO I FORGET WHETHER IT WAS 50 OR INFINITY, BUT IT WAS A
22 LONG-TERM EXTENSION IN WHICH THE HEARST CORPORATION WOULD HAVE
23 OBTAINED A CARRIED INTEREST IN THE CHRONICLE.
24 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
25 THE COURT: BUT UNDER THAT SCENARIO, THE EXAMINER
237
SIAS - DIRECT / ALIOTO
1 WOULD EITHER BE SOLD OR CLOSED; IS THAT CORRECT?
2 THE WITNESS: YES, SIR. IT WOULD -- THAT IS
3 CORRECT, FROM THE TIME THAT SUCH AN AGREEMENT MIGHT HAVE BEEN
4 REACHED, AND THIS WAS -- I WONDER, YOUR HONOR, IF I MIGHT MAKE
5 A COMMENT THAT MIGHT SHED A LITTLE -- WELL, MAYBE I'LL --
6 THE COURT: I THINK YOU HAVE A VERY ABLE LAWYER.
7 HE'LL BRING OUT ANY OF THE FACTS THAT HE THINKS ARE RELEVANT.
8 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
9 THE COURT: YES, YOU MAY.
10 BY MR. ALIOTO:
11 Q. LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE AS
12 EXHIBIT 115. IT'S A DOCUMENT DATED APRIL 5, 1996. IT IS FROM
13 YOU TO MS. PATRICIA TOBIN. THERE ARE COPIES TO MR. RON INGRAM
14 AND ALAN NICHOLS. ATTACHED TO IT IS A CONFIDENTIAL MEMORANDUM
15 TO PATRICIA TOBIN ALSO FROM YOU, THREE PAGES.
16 DID YOU, SIR, PREPARE THIS DOCUMENT AND CAUSE IT TO
17 BE SENT ON OR ABOUT THE DATE INDICATED TO MS. TOBIN?
18 A. (WITNESS EXAMINES DOCUMENT.) YES, I DID.
19 THE COURT: WHAT EXHIBIT NUMBER IS THIS, MR. ALIOTO?
20 MR. ALIOTO: PARDON ME?
21 THE COURT: I'M SORRY. WHAT EXHIBIT NUMBER IS THIS?
22 MR. ALIOTO: 115, YOUR HONOR.
23 THE COURT: THANK YOU.
24 BY MR. ALIOTO:
25 Q. IDENTIFY FOR THE RECORD, PLEASE, WHO MS. PATRICIA TOBIN
238
SIAS - DIRECT / ALIOTO
1 IS.
2 A. MS. PATRICIA TOBIN CURRENTLY IS A SHAREHOLDER OF THE
3 CHRONICLE CORPORATION AND A DIRECTOR OF THE CHRONICLE
4 CORPORATION AND WAS A DIRECTOR AT THE TIME OF THIS MEMORANDUM.
5 Q. OKAY. YOU STATE --
6 A. SHE WAS ALSO A MEMBER OF A NEGOTIATING COMMITTEE THAT WE
7 HAD OF DIRECTORS TO REVIEW OUR DISCUSSIONS WITH THE HEARST
8 CORPORATION.
9 Q. YOU STATE, QUOTE:
10 "ATTACHED IS A SUMMATION OF THE PRESENT
11 CONDITION OF DISCUSSIONS WITH THE HEARST
12 CORPORATION."
13 THE NEXT PARAGRAPH YOU STATE:
14 "VIC GANZI SPOKE WITH RON INGRAM ON APRIL 2
15 AND IS PRESUMABLY DRAFTING SOME DEFINITIVE
16 HEARST POSITIONS ON THIS SUBJECT."
17 NEXT PARAGRAPH:
18 "PER OUR PHONE DISCUSSION, KEEPING THIS OUT
19 OF THE MEDIA AT THIS POINT IN TIME IS IN THE
20 BEST INTEREST OF ALL PARTIES."
21 FIRST OF ALL, MR. VIC GANZI, MR. VIC GANZI IS THE
22 EXECUTIVE VICE PRESIDENT OR WAS AT THE TIME THE EXECUTIVE VICE
23 PRESIDENT OF THE HEARST CORPORATION; IS THAT CORRECT?
24 A. YES, SIR.
25 Q. AND MR. RON INGRAM, MR. RON INGRAM WAS THE GENERAL COUNSEL
239
SIAS - DIRECT / ALIOTO
1 OF THE CHRONICLE PUBLISHING COMPANY; IS THAT CORRECT?
2 A. YES, SIR.
3 Q. AND THIS WAS SUPPOSED TO REFLECT SOME OF THE DRAFTING BY
4 THESE TWO GENTLEMEN; IS THAT CORRECT?
5 A. YES, SIR.
6 Q. AND WHEN YOU HAD REFERENCE TO KEEPING THIS OUT OF THE
7 MEDIA AT THIS POINT, DID YOU MEAN KEEPING IT OUT OF THE
8 CHRONICLE AND THE EXAMINER?
9 A. I HAD --
10 Q. DID YOU MEAN KEEPING IT OUT OF THE CHRONICLE AND THE
11 EXAMINER?
12 A. I MEANT KEEPING IT OUT OF ALL THE MEDIA.
13 Q. INCLUDING THE CHRONICLE AND THE EXAMINER?
14 A. IT WOULD INCLUDE THE CHRONICLE AND THE EXAMINER. YOU MAY
15 RECALL THAT THE SAN JOSE MERCURY NEWS WAS RUNNING AT THIS TIME
16 STORIES SAYING THAT A DEAL WAS IMMINENT AND IT WAS VERY
17 DISRUPTIVE TO EMPLOYEES, AND WHAT HAVE YOU, AND A DEAL WASN'T
18 IMMINENT.
19 THE COURT: YOU MEAN YOU CAN'T ALWAYS BELIEVE WHAT
20 YOU READ IN THE NEWSPAPERS?
21 (LAUGHTER)
22 THE WITNESS: WELL....
23 (LAUGHTER)
24 THE COURT: ALL RIGHT.
25
240
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. ALL RIGHT. IF YOU WILL GO TO THE NEXT PAGE.
3 A. I BEG YOUR PARDON?
4 Q. IF YOU WILL GO TO THE NEXT PAGE.
5 A. YES.
6 Q. THE NEXT PAGE IS THE FIRST PAGE OF THE MEMORANDUM AND IT
7 IS ALSO DATED APRIL 5, 1996, AND THIS DOCUMENT -- DID YOU
8 PREPARE THIS DOCUMENT?
9 A. (WITNESS EXAMINES DOCUMENT.) I BELIEVE I DID. IT WOULD
10 HAVE BEEN SOME INPUT FROM PROBABLY NICHOLS OR RON INGRAM IN IT.
11 Q. OKAY. YOU BEGIN BY SAYING, QUOTE:
12 "WE ARE LISTING HERE WITH SOME OF THE MAJOR
13 NEGOTIATING POSITIONS CURRENTLY BEING DISCUSSED
14 WITH HEARST IN CONNECTION WITH ONGOING ATTEMPTS
15 TO RESOLVE THE JOA."
16 THE NEXT PARAGRAPH, QUOTE:
17 "A TERM OF THE AGREEMENT WOULD BE IN
18 PERPETUITY."
19 YOU GO ON, QUOTE:
20 "THIS IS LARGELY A RESULT OF THERE NOT BEING
21 MUCH DIFFERENCE IN SHARING PERCENTAGES BETWEEN
22 50 YEARS AND PERPETUITY."
23 DO YOU SEE THAT?
24 A. YES.
25 Q. SO WAS THIS PARTICULAR PART AT LEAST AGREED BY BOTH
241
SIAS - DIRECT / ALIOTO
1 PARTIES THAT WHATEVER, IF THERE WERE AN AGREEMENT, IT WOULD BE
2 IN PERPETUITY?
3 A. NO, SIR, NOTHING IN THIS MEMORANDUM WAS AGREED TO BY
4 EITHER PARTY. WE WERE TALKING AND DISCUSSING THE POSITIONS
5 WHICH APPEARED LIKELY TO BE WITHIN THE RANGE OF REASONABILITY
6 IN WHICH PERHAPS AN AGREEMENT COULD BE REACHED, BUT THERE WAS
7 ABSOLUTELY NO FINALITY IN ANY OF THIS.
8 Q. GOING TO THE SENTENCE AFTER THE NEXT, BEGINNING "SHARING
9 PERCENTAGES," DO YOU SEE THAT?
10 A. YES, SIR.
11 Q. OKAY.
12 "SHARING PERCENTAGES ARE NOT FINALIZED BUT
13 IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER
14 POINTS, A 66 PERCENT CHRONICLE, 34 PERCENT
15 HEARST SHARING WOULD BE APPROVED BY HEARST."
16 DO YOU SEE THAT?
17 A. UH-HUH.
18 Q. HOW DID YOU KNOW THAT A 66 CHRONICLE, 34 PERCENT HEARST
19 SHARING WOULD BE APPROVED BY HEARST?
20 A. I DIDN'T KNOW IT. I WAS, AGAIN, USING SOME EXPERIENCE, OR
21 WHAT HAVE YOU, BASED UPON COMMENTS THAT WERE MADE BY THE HEARST
22 CORPORATION IN THESE MEETINGS THAT APPEARED TO BE WITHIN THE
23 RANGE OF WHICH THEY WOULD GO. WE HAD STARTED OUT PROPOSING 80
24 CHRONICLE, 20 HEARST, AND MR. BENNACK WAS QUITE -- QUITE
25 COLORFUL IN DISREGARDING THAT.
242
SIAS - DIRECT / ALIOTO
1 BUT THERE I WANT TO EMPHASIZE --
2 Q. DID HE THEN COME TO 66 PERCENT?
3 A. NO. AS A MATTER OF FACT, I BELIEVE CHRONICLE HAD
4 TRANSFERRED, USING AGAIN SOME OF THESE MANY PROJECTIONS, THAT A
5 50 PERCENT FOR THE BALANCE OF THE JOA, 50-50 SHARING, AND THEN
6 GOING TO 25.8 IN THE FUTURE WOULD BE VERY CLOSE TO 66-34
7 STARTING AT THE TIME THESE DISCUSSIONS WERE TAKING PLACE.
8 Q. OKAY.
9 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR?
10 THE COURT: YES.
11 BY MR. ALIOTO:
12 Q. LET'S SEE IF WE CAN GET THESE STRAIGHT.
13 OKAY. WE HAD PREVIOUSLY DRAWN YESTERDAY -- WERE YOU
14 IN COURT YESTERDAY?
15 A. YES, SIR.
16 Q. WE HAD PREVIOUSLY DRAWN YESTERDAY THAT THE JOA COMMENCES
17 ON JANUARY -- COMMENCED ON JANUARY -- EFFECTIVE DATE JANUARY,
18 '65.
19 A. YES.
20 Q. IT WENT FOR THE 30 YEARS TO JANUARY, '95.
21 A. YES.
22 Q. AND THEN IT WAS EXTENDED BY HEARST TO 2005. YOU HEARD
23 THAT; RIGHT?
24 A. I DID.
25 Q. AND YOU UNDERSTAND THAT TO BE THE FACT; RIGHT?
243
SIAS - DIRECT / ALIOTO
1 A. I DO.
2 Q. AND THAT AFTER 2005, IF IT'S GOING TO BE EXTENDED TO 2015,
3 THAT WOULD BE ONLY UP TO THE CHRONICLE; CORRECT?
4 A. WE WOULD HAVE TO MAKE THAT DETERMINATION, I BELIEVE, THREE
5 YEARS PRIOR TO THE END OF THIS PRESENT TERM.
6 Q. SO YOU WOULD HAVE TO MAKE THAT DETERMINATION IN THE NEXT
7 YEAR, NEXT YEAR OR SO?
8 A. I THINK THE NEXT --
9 Q. TWO YEARS.
10 A. -- TWO YEARS OR SO.
11 Q. OKAY. NOW, THE ARRANGEMENT THAT YOU WERE TALKING ABOUT
12 WITH MR. BENNACK WOULD BE THAT -- AND THIS IS IN 19 -- THIS IS
13 IN 1996.
14 A. YES.
15 Q. OKAY. SO I'M GOING TO PUT THIS DOWN HERE. I'LL PUT
16 DOWN -- I'M NOT GOING TO PUT IT DOWN WITH THAT. I'LL PUT DOWN
17 1996.
18 OKAY. NOW, THE DEAL GOING FORWARD -- AND I'LL PUT A
19 LINE HERE FOR 2005.
20 NOW, THE IDEA WAS THAT WHEN YOU SAY THAT -- WHEN YOU
21 SAY THAT:
22 "SHARING PERCENTAGES ARE NOT FINALIZED BUT
23 IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER
24 POINTS A 66 PERCENT CHRONICLE, 34 PERCENT HEARST
25 SHARING WOULD BE APPROVED. HEARST'S PREVIOUS
244
SIAS - DIRECT / ALIOTO
1 PROPOSAL WAS FOR 50 PERCENT SHARING THROUGH THE
2 END OF THE CURRENT AGREEMENT WITH HEARST,
3 PERCENTAGE DROPPING TO 25 PERCENT FOR THE
4 FUTURE. CHRONICLE PROPOSED THE 66-34 WHICH
5 MATHEMATICALLY IS CLOSE TO AN AVERAGE OF THEIR
6 50/25.8 POST 2005 SHARING RATIO," DO YOU SEE
7 THAT?
8 A. YES.
9 Q. OKAY. SO THAT THE IDEA OF THE 66-34, THAT WOULD GO UP TO
10 2005?
11 A. NO. IT WAS 66-34 --
12 Q. SORRY.
13 A. -- WOULD START AT WHATEVER TIME AN AGREEMENT MIGHT HAVE
14 BEEN REACHED AND WOULD GO ON FOR THE TERM OF THIS REVISED
15 AGREEMENT, WHICH WOULD BE TO BE DETERMINED. AT THIS POINT
16 THERE WAS PERPETUITY. IT MIGHT BE 50 YEARS, WHATEVER IT WAS.
17 Q. ALL RIGHT. SO LET'S PUT THAT DOWN. THE CHRONICLE, THIS
18 IS WHAT YOU WERE SAYING, THE CHRONICLE 60-60 -- 66-34 AND THE
19 66 WOULD BE TO THE CHRONICLE, 34 TO HEARST; CORRECT?
20 A. YES, SIR.
21 Q. AND THAT DEAL WOULD GO IN PERPETUITY OR 50 YEARS; CORRECT?
22 A. YES.
23 Q. AND WHAT HEARST WAS SAYING WAS THAT THEY WANTED A 50-50
24 DEAL UNTIL THE END, 2005; IS THAT RIGHT?
25 A. YES. THEY WANTED TO CONTINUE THE PRESENT -- THE PRESENT
245
SIAS - DIRECT / ALIOTO
1 ARRANGEMENT AS CALLED FOR IN THE PRESENT JOINT OPERATING
2 AGREEMENT UNTIL THE CONCLUSION, WHICH IS SEPTEMBER 12TH, 2005.
3 Q. OKAY. SO THEY WANTED 50-50, SAME DEAL, 50-50, UNTIL 2005.
4 A. THAT'S RIGHT.
5 Q. AND THEN FROM 2005 THEY WOULD GO APPROXIMATELY 75-25?
6 A. YES, SIR.
7 Q. 75-25. AND AGAIN THAT WOULD BE IN PERPETUITY; CORRECT?
8 THAT WAS THE IDEA?
9 A. PERPETUITY OR 50 YEARS. LONG-TERM.
10 Q. PERPETUITY OR 50 YEARS, OKAY.
11 THE COURT: AND WHAT WOULD BE THE SITUATION WITH THE
12 EXAMINER UNDER BOTH OF THOSE SCENARIOS?
13 THE WITNESS: THE EXAMINER WOULD HAVE BEEN
14 PRESUMABLY PUT UP FOR SALE. MR. BENNACK WAS ALWAYS VERY
15 EMPHATIC THAT THEY WOULD PUT THE EXAMINER UP FOR SALE ON THIS
16 KIND OF A MATTER; AND IF THEY WERE UNABLE TO FIND A BUYER, THEN
17 THEY WOULD CLOSE IT.
18 THE COURT: IT WOULD BE CLOSED PRIOR TO SEPTEMBER,
19 2005, AND --
20 THE WITNESS: YES.
21 THE COURT: -- YET HEARST WOULD CONTINUE TO RECEIVE
22 50 PERCENT OF THE NET EXCESS OF THE --
23 THE WITNESS: YES.
24 THE COURT: -- OF THE AGENCY AGREEMENT?
25 THE WITNESS: ALL TERMS OF THE JOA WILL CONTINUE IN
246
SIAS - DIRECT / ALIOTO
1 PLACE.
2 THE COURT: OKAY.
3 MR. ALIOTO: THANK YOU, YOUR HONOR.
4 THE WITNESS: THERE WERE OTHER ELEMENTS --
5 BY MR. ALIOTO:
6 Q. NOW, IF YOU GO TO THE LAST PAGE --
7 A. IF I MIGHT, THIS IS -- THERE ARE A NUMBER OF OTHER
8 ELEMENTS THAT ARE PART OF THE JOA, NOT THE LEAST OF WHICH WAS
9 THE SUNDAY NEWSPAPER IS LARGELY PRODUCED BY THE HEARST
10 CORPORATION AS A RESULT OF THEIR TAKING THE EVENING SLOT. AND
11 SO THE SUNDAY NEWSPAPER, THE COST OF IT, THE EDITORIAL COSTS OF
12 IT ARE BORNE BY HEARST. THE ONLY SECTIONS OF IT ARE THE
13 DATEBOOK AND THE TELEVISION BOOK AND A SMALL CHRONICLE SECTION
14 THAT ARE IN THAT PAPER. BUT ALL THE LIVE NEWS SECTIONS ARE
15 PRODUCED BY HEARST WITH ATTENDANT EDITORIAL EXPENSES.
16 AND THE ISSUE OF WHETHER HEARST WOULD BE -- SINCE
17 THEY WOULD BE RELIEVED OF THAT RESPONSIBILITY, WHETHER THEY
18 WOULD BE PREPARED TO GIVE CHRONICLE SOME MONEY TO PAY FOR THOSE
19 EXTRA EDITORIAL EXPENSES.
20 THE COURT: THAT WAS, I GATHER, A POINT OF
21 NEGOTIATION?
22 THE WITNESS: ABSOLUTELY.
23 THE COURT: OKAY.
24 THE WITNESS: ALONG WITH MANY OTHERS THAT WE WILL
25 NOT BURDEN YOU WITH.
247
SIAS - DIRECT / ALIOTO
1 THE COURT: ALL RIGHT.
2 BY MR. ALIOTO:
3 Q. BUT IN ADDITION TO THOSE COSTS, THE FACT OF THE MATTER IS
4 THAT THE SUNDAY PAPER WAS RESPONSIBLE FOR 30 TO 40 PERCENT OF
5 THE TOTAL ADVERTISING VOLUME PER WEEK; ISN'T THAT RIGHT?
6 A. YES, SIR.
7 Q. NOW, IF YOU'LL GO TO THE THIRD PAGE --
8 A. AND ABOUT 80 PERCENT OF ITS CIRCULATION IS CHRONICLE.
9 Q. IF YOU GO TO THE THIRD PAGE AND IF YOU LOOK AT THE
10 SECOND-TO-THE-LAST PARAGRAPH, IT STATES, QUOTE:
11 "THESE ARE PRESENT ELEMENTS ON THE STATUS OF
12 DISCUSSIONS. THEY ARE SUBJECT TO CHANGES. IN
13 THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A
14 SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST
15 WOULD AGREE TO CLOSE THE EXAMINER," END OF
16 QUOTE.
17 DO YOU SEE THAT?
18 A. JUST GIVE ME A MOMENT, PLEASE.
19 Q. IT'S THE SECOND-TO-LAST PARAGRAPH ON THE LAST PAGE.
20 THE COURT: ON THE LAST PAGE?
21 MR. ALIOTO: THE VERY LAST PAGE, YES, SIR.
22 THE WITNESS: (WITNESS EXAMINES DOCUMENT.)
23 BY MR. ALIOTO:
24 Q. IT BEGINS, "THESE ARE PRESENT ELEMENTS."
25 A. OKAY. I'M NOT ON THE RIGHT ONE.
248
SIAS - DIRECT / ALIOTO
1 (WITNESS EXAMINES DOCUMENT.) YES. ALL RIGHT, I'M
2 THERE.
3 Q. OKAY. IT SAYS, QUOTE:
4 "THESE ARE PRESENT ELEMENTS ON THE STATUS OF
5 DISCUSSIONS. THEY ARE SUBJECT TO CHANGES. IN
6 THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A
7 SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST
8 WOULD AGREE TO CLOSE THE EXAMINER."
9 DO YOU SEE THAT?
10 A. YES.
11 Q. NOW, LET ME SHOW YOU --
12 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
13 HONOR.
14 MR. ROSCH: EXCUSE ME, YOUR HONOR, THAT IS NOT AN
15 EXHIBIT THAT'S BEEN ADMITTED INTO EVIDENCE AND I'D LIKE OFFER
16 THAT IT BE ADMITTED.
17 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT IS
18 MARKED FOR IDENTIFICATION AS EXHIBIT 115. I DID THINK IT WAS
19 IN EVIDENCE.
20 THE COURT: NO OBJECTION, I GATHER.
21 MR. ROSCH: NO. I'M THE ONE THAT'S MOVING IT, YOUR
22 HONOR.
23 MR. ALIOTO: OKAY. THEN I DON'T HAVE AN OBJECTION
24 TO HIM PUTTING IT IN.
25 THE COURT: ALL RIGHT. I THOUGHT MR. ALIOTO WAS
249
SIAS - DIRECT / ALIOTO
1 OFFERING IT, BUT 115 WILL BE ADMITTED.
2 (PLAINTIFF'S EXHIBIT 115
3 RECEIVED IN EVIDENCE)
4 BY MR. ALIOTO:
5 Q. NOW, LET ME SHOW YOU AN EXHIBIT WHICH IS MARKED AS
6 EXHIBIT 116 IN EVIDENCE, I BELIEVE.
7 THE COURT: 116?
8 MR. ALIOTO: YES.
9 Q. 116 IS A DOCUMENT DATED MAY 7, 1996. IT IS FROM
10 MR. RONALD INGRAM, GENERAL COUNSEL. IT IS TO VICTOR GANZI.
11 MR. SHULMAN: IT'S NOT IN.
12 MR. ROSCH: IT'S NOT IN, YOUR HONOR, BUT WE'LL -- WE
13 HAVE NO OBJECTION TO ITS BEING MADE --
14 THE COURT: VERY WELL. 116 WILL BE ADMITTED.
15 (PLAINTIFF'S EXHIBIT 116
16 RECEIVED IN EVIDENCE)
17 BY MR. ALIOTO:
18 Q. LET ME SHOW YOU THIS DOCUMENT AND ASK YOU WHETHER OR NOT
19 YOU RECEIVED A COPY OF IT SOMETIME IN OR ABOUT MAY 7, 1996.
20 A. (WITNESS EXAMINES DOCUMENT.) THE REASON I'M TAKING SOME
21 TIME IS THAT THERE IS NOT A MARKED COPY TO ME, AND MY MEMORY --
22 I WANT TO BE VERY CAREFUL BEFORE I --
23 Q. ALL RIGHT. THEN LET ME JUST ASK YOU --
24 A. I THINK THAT -- I THINK THAT I PROBABLY WOULD HAVE SEEN
25 EITHER A DRAFT OF THIS OR SOME PORTION THEREOF, BUT I CANNOT --
250
SIAS - DIRECT / ALIOTO
1 THE COURT: YOU CAN'T PIN IT DOWN IN YOUR MIND; IS
2 THAT IT?
3 THE WITNESS: NO, SIR.
4 BY MR. ALIOTO:
5 Q. OKAY. WELL, DOES IT ACCORD WITH YOUR RECOLLECTION THAT
6 SOMETIME AT OR ABOUT MAY OF 19 --
7 A. I SAW SOME VARIATION OF THIS, BUT THIS ITERATION IS
8 UNCLEAR TO ME.
9 Q. ALL RIGHT. WAS THERE AN EFFORT TO PUT -- WELL, FIRST OF
10 ALL, THERE WAS SUPPOSED TO HAVE BEEN A PARTNERSHIP AND THE
11 PARTNERSHIP WAS SUPPOSED TO HAVE PERPETUAL -- WELL, LET ME READ
12 FROM IT AND ASK YOU IF IT ACCORDS WITH YOUR RECOLLECTION.
13 UNDER THE JOA PROPOSAL -- AND, AGAIN, THIS IS THE
14 DOCUMENT FROM MR. RONALD INGRAM, THE GENERAL COUNSEL OF THE
15 CHRONICLE PUBLISHING COMPANY, DIRECTED TO MR. VICTOR GANZI,
16 EXECUTIVE VICE PRESIDENT OF THE HEARST CORPORATION. AND UNDER
17 "ORGANIZATION" IT STATES, QUOTE:
18 "CHRONICLE AND HEARST WILL FORM A CALIFORNIA
19 GENERAL PARTNERSHIP. THE PARTNERSHIP WILL HAVE
20 A PERPETUAL LIFE. PROFITS, LOSSES AND
21 DISTRIBUTIONS WILL BE ALLOCATED 66 PERCENT TO
22 CHRONICLE, 34 PERCENT TO HEARST."
23 NOW, THAT ACCORDS WITH YOUR RECOLLECTION OF ONE OF
24 THE --
25 A. YES, SIR.
251
SIAS - DIRECT / ALIOTO
1 Q. ALL RIGHT. AND THEN ALSO DOES IT ACCORD WITH YOUR
2 RECOLLECTION THAT THERE WAS TO BE INSERTED IN THIS AGREEMENT A
3 60-MILE CONCEPT; IN OTHER WORDS, THAT ON A FIRST RIGHT OF
4 REFUSAL THERE COULD BE -- NO PARTNER COULD COMPETE WITH THE
5 PARTNERSHIP WITHIN A 60-MILE RADIUS?
6 A. (WITNESS EXAMINES DOCUMENT.) I BELIEVE THAT THERE IS SUCH
7 A PROHIBITION IN THE CURRENT JOA.
8 Q. IN THE JOA.
9 A. AND THERE WOULD BE -- AND I DO RECALL THAT THERE WOULD BE
10 A CONTINUING OF THAT IN THIS.
11 Q. AND THE IDEA OF THAT IS, IS THAT NO OWNER
-- IN THIS
12 INSTANCE THE PARTNER, BUT IN THE JOA NEITHER THE CHRONICLE NOR
13 THE EXAMINER, NOR IF THEY SOLD TO SOMEONE ELSE COULD THEY BE IN
14 COMPETITION WITH THE JOA WITHIN 60 MILES; IS THAT RIGHT?
15 A. I THINK IT'S CONFINED TO THE DAILY NEWSPAPER.
16 Q. TO DAILY NEWSPAPERS WITHIN 60 MILES; CORRECT?
17 A. I THINK THAT IS CORRECT.
18 Q. AND THE EFFECT OF THAT WOULD BE, WOULD IT NOT, TO EXCLUDE
19 KNIGHT RIDDER AS BEING A POTENTIAL MEMBER OF THE JOA?
20 A. I SUPPOSE THAT IS CORRECT IF -- AS LONG AS KNIGHT RIDDER
21 OWNS NEWSPAPERS WITHIN A 60-MILE RADIUS.
22 MR. ROSCH: YOUR HONOR, INSOFAR AS IT'S ASKING FOR A
23 LEGAL CONCLUSION, I WOULD ASK -- I WILL OBJECT AND ASK THAT THE
24 ANSWER BE STRICKEN.
25 THE COURT: I'LL UNDERSTAND THE ANSWER TO BE
252
SIAS - DIRECT / ALIOTO
1 OTHERWISE.
2 YOU MAY PROCEED, MR. ALIOTO.
3 BY MR. ALIOTO:
4 Q. AND IT WOULD ALSO EXCLUDE THE SINGLETON GROUP OR ANY OF
5 THEM FROM BEING A MEMBER OF THE JOA OR -- YES, BEING A MEMBER
6 OF THE JOA, PURCHASING ONE OF THE PAPERS; CORRECT?
7 A. I'M NOT SURE OF THAT.
8 Q. DO YOU KNOW WHO SINGLETON IS?
9 A. OF COURSE.
10 Q. DOES HE HAVE --
11 A. YES, I DO. HE'S THE PRESIDENT OF THE MEDIA GENERAL GROUP.
12 Q. AND THAT IS A GROUP OF NEWSPAPERS; IS THAT CORRECT?
13 A. YES, SIR.
14 Q. SOME OF THEM ARE WITHIN 60 MILES OF SAN FRANCISCO?
15 A. IT'S THE ALAMEDA NEWSPAPER GROUP, THE OAKLAND TRIBUNE.
16 Q. THEREFORE, SINGLETON COULD NOT PURCHASE EITHER THE
17 EXAMINER OR THE CHRONICLE, COULD IT, AND MAINTAIN ITS PAPERS IN
18 ALAMEDA ACCORDING TO THE JOA; IS THAT RIGHT?
19 A. I WILL --
20 THE COURT: THIS CALLS FOR THE UNDERSTANDING OF THE
21 WITNESS.
22 MR. ALIOTO: YES.
23 Q. YOU UNDERSTOOD AS THE CHAIRMAN OF THE BOARD AND THE CHIEF
24 EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE PUBLISHING
25 COMPANY THAT NEITHER KNIGHT RIDDER NOR SINGLETON COULD PURCHASE
253
SIAS - DIRECT / ALIOTO
1 EITHER THE CHRONICLE OR THE EXAMINER AS A MEMBER OF THE JO --
2 AND BECOME -- AND HAVING ANYTHING TO DO WITH THE JOA; CORRECT?
3 A. MY UNDERSTANDING WOULD HAVE BEEN -- THAT IS CORRECT,
4 BUT --
5 Q. THANK YOU.
6 THE COURT: WHEN YOU'RE READY TO MOVE ON TO A NEW
7 TOPIC, WHY, JUST LET ME KNOW.
8 MR. ALIOTO: PARDON ME, YOUR HONOR?
9 THE COURT: WHEN YOU'RE READY TO MOVE ON TO A NEW
10 TOPIC, LET ME KNOW.
11 MR. ALIOTO: VERY GOOD, YOUR HONOR. AT THE COURT'S
12 CONVENIENCE.
13 THE COURT: IT'S YOURS.
14 MR. ALIOTO: VERY GOOD.
15 THE COURT: WHY DON'T WE TAKE, LADIES AND GENTLEMEN,
16 UNTIL FIVE MINUTES AFTER THE HOUR, AND WE'LL RESUME WITH
17 FURTHER ACTION OF THIS WITNESS.
18 (RECESS TAKEN AT 9:50 A.M.)
19 (PROCEEDINGS RESUMED AT 10:10 A.M.)
20 THE COURT: VERY WELL, MR. ALIOTO, YOU MAY RESUME
21 YOUR EXAMINATION OF THIS WITNESS.
22 MR. ALIOTO: THANK YOU, YOUR HONOR.
23 MAY I APPROACH THE WITNESS, YOUR HONOR?
24 THE COURT: YES, YOU MAY.
25
254
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. LET ME SHOW YOU EXHIBIT 117 IN EVIDENCE. EXHIBIT 117 IN
3 EVIDENCE IS DATED JUNE 5, 1997. IT'S DIRECTED TO THE DIRECTORS
4 CHRONICLE PUBLISHING COMPANY, RE THE JOA, AND FROM YOU. AND
5 THEN ENCLOSED
-- WITH CARBONS TO MR. INGRAM AND MR. NICHOLS.
6 AND ENCLOSED IS THE JOA PROPOSAL SIMILAR TO THE ONE IN 116.
7 SO IF YOU TAKE A LOOK AT 117, IS THAT, IN FACT, THE
8 DOCUMENT -- IS THAT, IN FACT, YOUR COVER OF THE SAME JOA
9 PROPOSAL THAT YOU SENT TO THE DIRECTORS OF THE CHRONICLE
10 PUBLISHING COMPANY?
11 A. (WITNESS EXAMINES DOCUMENT.) YES.
12 Q. AND YOU SENT THAT ON OR ABOUT THE DATE INDICATED, JUNE 5,
13 1997?
14 A. YES.
15 MR. ALIOTO: WE WOULD OFFER INTO EVIDENCE WHAT IS
16 MARKED FOR IDENTIFICATION ONLY APPARENTLY AS EXHIBIT 117, YOUR
17 HONOR.
18 MR. ROSCH: NO OBJECTION, YOUR HONOR.
19 THE COURT: VERY WELL. ADMITTED BY STIPULATION,
20 117.
21 (PLAINTIFF'S EXHIBIT 117
22 RECEIVED IN EVIDENCE)
23 BY MR. ALIOTO:
24 Q. NOW, IN THE FIRST PARAGRAPH, DIRECTING YOUR ATTENTION TO
25 THE FIRST PARAGRAPH, AND THIS GOING TO THE DIRECTORS, YOU
255
SIAS - DIRECT / ALIOTO
1 STATE, QUOTE:
2 "YOU WILL FIND ENCLOSED A DRAFT OF THE MAY,
3 1996, JOA PROPOSAL BY CHRONICLE TO HEARST."
4 THEN IN THE NEXT SENTENCE YOU SAY, QUOTE:
5 "SHORTLY THEREAFTER, HEARST WAS ADVISED THE
6 CHRONICLE SHAREHOLDERS WERE NOT INTERESTED IN
7 FURTHER DISCUSSIONS."
8 DO YOU SEE THAT?
9 A. YES, SIR.
10 Q. SO YOU'RE SENDING THEM THE PROPOSAL THAT WAS BEING WORKED
11 ON BY MR. INGRAM AND BY MR. -- BY BOTH HEARST AND CHRONICLE BUT
12 APPARENTLY CHRONICLE SHAREHOLDERS SAID THEY WEREN'T INTERESTED
13 PERIOD; IS THAT IT?
14 A. YES. I WOULD POINT OUT THAT 116 WAS IN MAY OF 1996.
15 Q. YES.
16 A. AND THIS MEMORANDUM IS IN MAY OF -- JUNE OF 1997.
17 Q. YES.
18 A. AT THE CHRONICLE SHAREHOLDERS MEETING IN APRIL OF 1997,
19 THE STATUS OR THE PRESENT SITUATION AS IT REGARDS DISCUSSIONS
20 WITH HEARST AND JOA WAS A MATTER OF INTEREST. AND I REVIEWED
21 WITH THE SHAREHOLDERS A NUMBER OF THE ELEMENTS THAT ARE
22 CONTAINED IN HERE. IT WAS APPARENT THAT THE CHRONICLE
23 SHAREHOLDERS TO A PERSON WERE NOT IN FAVOR OF DOING ANYTHING AT
24 THAT TIME FOR VARIOUS REASONS, BUT THEY WERE NOT. WE DID NOT
25 TAKE A FORMAL VOTE, BUT WE -- BUT I -- IT WAS VERY CLEAR THAT
256
SIAS - DIRECT / ALIOTO
1 THEY DID NOT WANT MANAGEMENT TO PURSUE ANY FURTHER DISCUSSIONS
2 AT THAT TIME.
3 Q. NOW, YOU ALSO STATE HERE THAT -- IN PARAGRAPH THREE, ALSO
4 TO THE DIRECTORS, YOU STATE, QUOTE, AND THIS IS AFTER YOU'VE
5 GONE THROUGH WHAT THE DIFFERENT ARRANGEMENTS WERE, THE
6 SPLITTING ARRANGEMENTS WITH HEARST, YOU STATE, QUOTE:
7 "THE BOOZ ALLEN WORK HAS SUGGESTED THAT THE
8 CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN
9 AGAIN PURSUING A JOA RESOLUTION."
10 DO YOU SEE THAT?
11 A. YES, SIR.
12 Q. AND ONE OF THE INTERESTS OF THE BOOZ ALLEN THAT SUGGESTED
13 THAT THE CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN AGAIN
14 PURSUING A JOA RESOLUTION WAS BECAUSE BOOZ ALLEN MADE A REPORT
15 THAT WOULD TEND TO SHOW WHAT THE HEARST CORPORATION WOULD BE
16 ABLE TO DO IF IT COMPETED HEAD TO HEAD AGAINST THE CHRONICLE
17 AFTER THE JOA; CORRECT?
18 A. THAT IS WITHIN VERY NARROW LIMITATIONS. MAY I GIVE A
19 LITTLE MORE DESCRIPTION OF THE BOOZ ALLEN WORK?
20 Q. YES, YOU MAY. YOU CAN GIVE ANY EXPLANATION YOU WANT AT
21 ANY TIME, MR. SIAS, BUT JUST ANSWER MY QUESTION FIRST AND THEN
22 IF YOU WANT TO EXPLAIN IT, FEEL FREE TO DO SO.
23 A. ALL RIGHT. RESTATE THE QUESTION WHAT YOU SAY THE BOOZ
24 ALLEN REPORT
--
25 Q. OKAY. ONE OF THE STATEMENTS IN BOOZ ALLEN THAT THE
257
SIAS - DIRECT / ALIOTO
1 CHRONICLE SHAREHOLDERS -- THAT WAS SHOWN TO THE CHRONICLE
2 SHAREHOLDERS WAS THAT THEY MADE AN ANALYSIS OF WHAT THE HEARST
3 CORPORATION MIGHT BE ABLE TO DO, THE EXAMINER, IN HEAD-TO-HEAD
4 COMPETITION WITH THE CHRONICLE AFTER THE -- AFTER 2005?
5 A. YES. ONE OF THEM WAS.
6 Q. AND ONE OF THOSE -- AND THAT WAS THAT SHOWED
-- OR THE
7 ANALYSIS --
8 A. ONE OF THEM WAS.
9 Q. OKAY. AND THAT ONE THAT SHOWED THAT IF HEARST, THE
10 EXAMINER, COMPETED HEAD TO HEAD WITH THE CHRONICLE AFTER 2005,
11 IT SHOWED THAT THE CHRONICLE WOULD OBVIOUSLY RECEIVE LESS
12 PROFITS THAN IT OTHERWISE WOULD IF THE EXAMINER WERE SHUT DOWN;
13 CORRECT?
14 A. THAT WAS A LONG QUESTION AND I DON'T WANT TO --
15 Q. THE ONE THAT SHOWED -- THE ONE THAT SHOWED THAT WHAT MIGHT
16 HAPPEN IF THE EXAMINER WAS HEAD-TO-HEAD --
17 A. YES.
18 Q. -- COMPETITION WITH THE CHRONICLE AFTER 2005, THAT THE
19 PROFITS OF THE CHRONICLE WOULD BE LESS THAN IF THERE WERE NO
20 EXAMINER.
21 A. THAT IS ONE OF THEIR SCENARIOS.
22 MAY I PLEASE GIVE THE COURT A DESCRIPTION OF THE
23 BOOZ ALLEN ASSIGNMENT? BECAUSE THE INFERENCE HERE IS SOMEHOW
24 THAT BOOZ ALLEN WAS BROUGHT IN SIMPLY TO EVALUATE THE
25 CHRONICLE, AND I --
258
SIAS - DIRECT / ALIOTO
1 Q. YOU WANTED TO MAKE AN EXPLANATION ABOUT BOOZ ALLEN, IS
2 THAT WHAT YOU WANT?
3 A. YES.
4 Q. OKAY. IF YOU START TO TALK ABOUT HEARSAY, I'M GOING TO
5 INTERRUPT YOU, OTHERWISE GO AHEAD AND SAY WHATEVER YOU WANT.
6 THE COURT: WELL, LET'S HEAR WHAT THE ANSWER IS. GO
7 AHEAD, MR. SIAS.
8 THE WITNESS: THE BOOZ ALLEN FIRM WAS RETAINED BY
9 CHRONICLE SHAREHOLDERS AT A TIME TO EVALUATE THE COMPANY'S
10 PROSPECTS AND WHAT POTENTIAL EVALUATIONS THEY MIGHT HAVE AND
11 WHAT COURSES OF ACTIONS THEY MIGHT PURSUE TO GET THEM INTO THE
12 21ST CENTURY.
13 IT'S A PRIVATELY-HELD MEDIA COMPANY S CORP., AND A
14 NUMBER OF THE SHAREHOLDERS WERE CONCERNED THAT MOST OF THEIR
15 WEALTH IS TIED UP IN SHARES OF CHRONICLE CORPORATION COMPRISED
16 OF EIGHT DIFFERENT BUSINESSES AND THEY WANTED A LOOK-SEE AT
17 WHAT POTENTIAL ALTERNATIVES THEY MIGHT HAVE.
18 SO INCLUDED IN THAT OVERALL ASSIGNMENT WAS A LOOK AT
19 INDIVIDUAL COMPONENTS, INCLUDING THE CHRONICLE, AND IT WAS IN
20 THAT CONTEXT THAT THE STUDY TO WHICH YOU REFER WAS INCLUDED.
21 Q. OKAY. AND WHAT THEY SHOWED, ONE OF THE THINGS THAT IT
22 SHOWED IS THAT IF THE EXAMINER COMPETED HEAD TO HEAD WITH THE
23 CHRONICLE AFTER THE JOA, THAT THAT WOULD REDUCE THE PROFIT OF
24 THE CHRONICLE?
25 A. THAT WAS ONE OF THEIR SCENARIOS. WE DID NOT AGREE WITH
259
SIAS - DIRECT / ALIOTO
1 IT.
2 Q. THAT WAS ONE OF THE THINGS THAT WAS GIVEN TO THE CHRONICLE
3 SHAREHOLDERS; IS THAT CORRECT?
4 A. IT WAS GIVEN TO THE CHRONICLE SHAREHOLDERS, BUT I WANT TO
5 MAKE IT CLEAR THAT IT WAS NOT AGREED TO. THERE WERE A LOT OF
6 THINGS GIVEN TO THEM.
7 Q. WELL, YOU GAVE IT TO THEM FOR THEIR INFORMATION SO THEY
8 COULD MAKE CERTAIN JUDGMENTS WITH REGARD TO WHETHER CONTINUING
9 THE JOA OR NOT; CORRECT?
10 A. AN ENTIRE REPORT INCLUDED IN WHICH WAS THIS PARTICULAR
11 REFERENCE TO THE CHRONICLE.
12 Q. ONE OF THE THINGS YOU WANTED THEM TO KNOW IS THAT IF THERE
13 WERE HEAD-TO-HEAD COMPETITION WITH THE EXAMINER, IF THERE WERE
14 A NEWSPAPER WAR, THAT THAT MIGHT RESULT IN LESS PROFITS FOR
15 THEM AND THEY SHOULD THINK ABOUT THAT; RIGHT?
16 A. I DON'T KNOW THAT THAT'S RIGHT.
17 THE COURT: YOU SAID THAT IS RIGHT?
18 THE WITNESS: I SAID I DO NOT KNOW THAT THAT IS
19 CORRECT.
20 THE COURT: I SEE.
21 BY MR. ALIOTO:
22 Q. YOU'RE NOT SURE WHETHER IT IS OR IT ISN'T?
23 A. YES. BECAUSE WANTED THEM TO KNOW -- YOU'RE FRAMING
24 THINGS -- THIS
-- AGAIN, THE BOOZ ALLEN STUDY WAS MUCH MORE
25 COMPREHENSIVE. IT WAS -- WE DID NOT AGREE. THIS DID NOT GET A
260
SIAS - DIRECT / ALIOTO
1 RINGING MANAGEMENT ENDORSEMENT THAT YOU SHOULD DO THIS AND
2 THAT. SO TO SAY THAT WHAT YOU HAVE JUST FRAMED AS A QUESTION,
3 I DON'T KNOW THAT IT'S CORRECT. I DON'T KNOW THAT IT'S
4 INCORRECT, BUT I CERTAINLY AM NOT PREPARED TO SAY, "YES, THAT'S
5 RIGHT, AND THAT'S WHAT WE WANTED TO DO."
6 Q. YOU ALSO SAY IN THE VERY LAST PARAGRAPH OF THIS DOCUMENT,
7 YOU STATE THAT:
8 "THE WRITER, RON INGRAM AND ALAN NICHOLS,
9 WILL BE PLEASED TO ANSWER YOUR QUESTIONS. IT IS
10 VERY IMPORTANT THAT YOU TREAT THIS INFORMATION
11 AS CONFIDENTIAL TO BE DISCUSSED ONLY WITH
12 CHRONICLE SHAREHOLDERS OR THEIR
13 REPRESENTATIVES."
14 DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. AND YOU HAVE UNDERLINED "CONFIDENTIAL." DO YOU SEE THAT?
17 A. YES, SIR.
18 Q. OKAY. NOW, YOU WANT TO MAINTAIN IT AS CONFIDENTIAL EVEN
19 THOUGH THE CHRONICLE SHAREHOLDERS TURNED DOWN THE OFFER;
20 CORRECT?
21 A. YES.
22 Q. SO IT WAS A MATTER IN THE PAST; WAS IT NOT? IT WASN'T
23 SOMETHING BEING DISCUSSED AS A POTENTIAL HAPPENING; CORRECT?
24 A. I'M NOT --
25 Q. THE VERY LAST SENTENCE, SIR.
261
SIAS - DIRECT / ALIOTO
1 A. I'M TRYING TO DETERMINE WHETHER THIS IS REFERRING TO THE
2 WHOLE BOOZ ALLEN STUDY OR ONLY WITH CHRONICLE SHAREHOLDERS AND
3 THEIR REPRESENTATIVES.
4 WE DID WANT TO KEEP RUMORS, AND WHAT HAVE YOU, DOWN
5 TO BOTH COMPANIES ARE PRIVATELY HELD. AND THE RUMORS FUELED BY
6 PRESS AND OTHER MEDIA REPORTS ABOUT POSSIBLE DEALS WERE QUITE
7 DISRUPTIVE OF THE STAFF WHO WERE UNDERSTANDABLY NERVOUS ABOUT
8 WHAT WOULD HAPPEN, ET CETERA, TO THEM AND TO THEIR JOB, HOW
9 WOULD THEY BE CHANGED, AND I CAN GO ON AND ON.
10 SO SINCE THERE HAD BEEN NO FIRM DEAL, THERE WAS
11 CERTAINLY NO LEGAL REQUIREMENT THAT WE DO SO, AND WE HAD IN THE
12 PAST SOME CHRONICLE SHAREHOLDERS WHO CHOSE TO TALK AND THERE
13 WAS NOTHING WE COULD DO TO STOP THEM, BUT IT WASN'T IN THEIR
14 BEST INTEREST TO HAVE THIS KIND OF CONFIDENTIAL DISCUSSIONS
15 AIRED, IF YOU WILL, IN THE MEDIA.
16 Q. INCLUDING THE CHRONICLE AND THE EXAMINER?
17 A. YES, INCLUDING THE CHRONICLE AND THE EXAMINER.
18 Q. NOW, THESE ARE NOT CONFIDENTIAL, ONGOING DISCUSSIONS,
19 HOWEVER, WITH HEARST. THE CHRONICLE SHAREHOLDERS ALREADY CAME
20 TO A DECISION THAT THEY'RE SIMPLY NOT INTERESTED IN FURTHER
21 DISCUSSIONS; CORRECT?
22 A. THEY DID, BUT THE TIMEFRAME WHICH THEY DID IT, THE BOOZ
23 ALLEN STUDY, WHICH WAS BEING COMPLETED, ENTAILED AN INTERVIEW
24 WITH ALL CHRONICLE SHAREHOLDERS -- OR ALL BUT TWO OR THREE, AND
25 IN THE PROCESS OF THIS AND THEN THEY REGISTERED THEIR REPORT, A
262
SIAS - DIRECT / ALIOTO
1 MAJORITY OF CHRONICLE SHAREHOLDERS INDICATED A WILLINGNESS TO
2 CONSIDER SEVERAL THINGS, ONE OF WHICH WAS PERHAPS TO OPEN
3 RENEGOTIATIONS BUT THE MOST FUNDAMENTAL WAS TO KEEP THE COMPANY
4 GOING AS IT WAS AT THAT TIME.
5 Q. WELL, THE MODEL THAT WAS BEING USED, WAS IT NOT, IN THOSE
6 DISCUSSIONS WAS BASED UPON HEARST'S EXPERIENCE IN SAN ANTONIO
7 WHERE THE HEARST CORPORATION CLOSED THE HEARST-OWNED NEWSPAPER,
8 THE LIGHT, AFTER BUYING THE SAN ANTONIO EXPRESS NEWS? ISN'T
9 THAT CORRECT? DON'T LOOK AT THAT.
10 A. WELL, OKAY.
11 ONE OF THE ORIGINAL MODELS -- THERE WERE MODELS
12 FLYING ALL OVER. NOT MODEL PLANES, BUT MODEL -- FINANCIAL
13 MODELS OF VARIOUS SCENARIOS; AND THE FIRST -- WHEN I FIRST
14 ARRIVED ON THE SCENE, THE MODEL WAS BASED UPON A HEARST
15 EXPERIENCE IN SAN ANTONIO WHERE TWO SEPARATE NEWSPAPERS
16 OPERATED, AND
--
17 Q. AND THAT'S A SITUATION IN WHICH HEARST --
18 THE COURT: LET THE WITNESS FINISH HIS ANSWER.
19 THE WITNESS: THE SAN ANTONIO LIGHT WAS OWNED BY
20 HEARST AND THE EXPRESS NEWS BY RUPERT MURDOCH. THE HEARST
21 CORPORATION BOUGHT THE EXPRESS NEWS. THEY OFFERED, I BELIEVE,
22 THE LIGHT FOR SALE AND THEY CLOSED IT AND THEN THEY COMBINED
23 THE CIRCULATION.
24 BUT THERE WERE TWO SEPARATE NEWSPAPERS. THERE WAS
25 NOT A JOA. AND THE EXPERIENCE THERE WAS THAT, AS I RECALL, THE
263
SIAS - DIRECT / ALIOTO
1 COMBINED NEWSPAPERS' REVENUES THEY GOT 91 PERCENT OF THE
2 REVENUES THAT THE COMBINED NEWSPAPERS HAD PRIOR TO THE PURCHASE
3 OF THE EXPRESS NEWS AND 82 OR 83 PERCENT OF THE EXPENSES. AND
4 A MODEL THEN WAS BASED IN SAN FRANCISCO IF THAT WERE TO HAPPEN,
5 AND ONE OF THE NEWSPAPERS WERE CLOSED, I.E., THE EXAMINER, OR
6 SOLD, HOW MUCH REVENUE AND HOW MUCH EXPENSE WOULD BE ENTAILED.
7 AND THAT WAS THE BASE FROM WHICH THE MODEL THEN WAS BUILT TO
8 GOING FORWARD.
9 BY MR. ALIOTO:
10 Q. AND EVEN THOUGH THE DISCUSSIONS HAD CONCLUDED
--
11 THE COURT: LET ME SEE, LET ME SEE, THIS IS I ASSUME
12 A HEARST MODEL, A MODEL THAT THEY DEVELOPED FOR THEIR OWN
13 PLANNING PURPOSES?
14 THE WITNESS: I BELIEVE THAT IS CORRECT, YOUR HONOR.
15 I'M -- IT WAS THERE AND IT WAS -- WE GRAFTED ON AND STARTED
16 DOING THINGS, BUT I BELIEVE IT WAS THEIR MODEL. THEY HAD THE
17 INFORMATION. WE WOULD NOT HAVE HAD THAT INFORMATION.
18 THE COURT: I UNDERSTAND. THEY HAD THAT
19 INFORMATION. THEY EVIDENTLY RELATED THAT INFORMATION TO YOU OR
20 YOUR CONSULTANTS AND THEN YOU FOR YOUR OWN PLANNING PURPOSES
21 USED THAT TO
--
22 THE WITNESS: SHARED IT.
23 BY MR. ALIOTO:
24 Q. OKAY. BUT THE SCENARIO WAS ONE IN WHICH HEARST -- IN
25 WHICH HEARST CLOSED ITS OWN NEWSPAPER AND THEN BOUGHT THE
264
SIAS - DIRECT / ALIOTO
1 COMPETING NEWSPAPER IN SAN ANTONIO; CORRECT?
2 A. THAT IS CORRECT. I BELIEVE THAT THEY OFFERED THE LIGHT
3 FOR SALE.
4 Q. AND ONE OF THE REASONS THAT YOU DIDN'T WANT THIS TO BE
5 MADE PUBLIC, EVEN THOUGH THE CHRONICLE SHAREHOLDERS ALREADY
6 TOLD YOU THAT THEY HAD NO FURTHER INTEREST IN DISCUSSING THIS
7 WITH HEARST, WAS BECAUSE YOU FELT THAT NEWSPAPER REPORTERS IN
8 THE CHRONICLE, EXAMINER OR OTHERWISE, MAY SEE THE ANALOGY WITH
9 SAN ANTONIO IN WHICH HEARST SHUT DOWN ITS PAPER AND BOUGHT THE
10 OTHER PAPER; RIGHT?
11 A. NO, I DON'T THINK THAT WAS ONE OF THE REASONS, ALTHOUGH AS
12 A MATTER OF EXPERIENCE, BEFORE -- JUST BEFORE I GOT TO THE
13 CHRONICLE, THIS SAN ANTONIO EXPERIENCE HAD TAKEN PLACE AND THE
14 NEWSROOMS OF BOTH NEWSPAPERS WERE FILLED WITH RUMORS BACK AND
15 FORTH OF WHAT WAS GOING ON. THAT WAS BEFORE I GOT THERE.
16 BUT IT IS A FACT THAT THERE WAS A GREAT DEAL OF
17 RUMORING GOING ON AS TO -- WHAT THE HECK, YOU HAVE INTELLIGENT
18 ENERGETIC PEOPLE AND THEY'RE IN THE NEWS BUSINESS, SO THEY ARE
19 SPECULATING, AND WHAT HAVE YOU. AND THERE WAS GREAT INTEREST
20 AT THAT TIME IN WHAT MIGHT HAPPEN IN SAN FRANCISCO SINCE THE
21 HEARST CORPORATION WAS OPERATING IN BOTH MARKETS.
22 Q. AND WHEN YOU SAY THERE WERE RUMORS AT THAT TIME, YOU FELT
23 THAT IF THIS INFORMATION GOT OUT, THOSE RUMORS WOULD HAVE BEEN
24 VERIFIED; IS THAT RIGHT?
25 A. I DON'T KNOW. NO, I DON'T KNOW THAT THE RUMORS VERIFIED
265
SIAS - DIRECT / ALIOTO
1 AT THE TIME THIS LETTER, THAT BOOZ ALLEN STUDY, AND SO FORTH.
2 THAT WAS FOUR YEARS LATER, THREE AND A HALF YEARS LATER.
3 I EXPLAINED MY INTEREST IN HAVING THE MEDIA
4 ATTENTION NOT FUELED BY OUR SHAREHOLDERS TALKING WITH THE MEDIA
5 BECAUSE IT WAS VERY DISRUPTIVE OF THE PROCESS.
6 AND THE SAN JOSE MERCURY NEWS RAN A STORY IN APRIL,
7 EITHER LATE APRIL OR MAY OF I BELIEVE IT WAS '97, IN WHICH THEY
8 SAID THAT A DEAL TO CLOSE THE EXAMINER AND THE CHRONICLE WAS
9 DUE WITHIN 10 DAYS OR LESS. AND THAT IS VERY DISRUPTIVE; AND,
10 IN FACT, IT WAS INCORRECT. AND LATER THE SAN JOSE MERCURY NEWS
11 PRINTED AN APOLOGY. I THINK IT WAS ABOUT THREE YEARS LATER.
12 (LAUGHTER)
13 Q. AT THE TIME OF THE RUMORS, DID YOU DENY THAT THERE WERE
14 ANY DISCUSSIONS GOING ON IN THE NEWSPAPER?
15 A. I DON'T COMMENT TO THE MEDIA ON MATTERS OF THIS NATURE.
16 (LAUGHTER)
17 Q. LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE I BELIEVE
18 AS 85. EXHIBIT 85 IS A DOCUMENT DIRECTED TO MR. FRANK BENNACK
19 DATED OCTOBER 24, 1997, FROM YOU.
20 DID YOU, SIR, WRITE THAT DOCUMENT OR CAUSE THAT
21 DOCUMENT TO BE PREPARED AND SENT TO MR. BENNACK ON OR ABOUT
22 THAT DATE?
23 A. YES, SIR.
24 MR. ALIOTO: IT'S IN EVIDENCE; ISN'T IT?
25 MR. SHULMAN: (NODS HEAD.)
266
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. OKAY. THE DOCUMENT IS IN EVIDENCE. I WANT TO DIRECT YOUR
3 ATTENTION TO THE SECOND PARAGRAPH AND YOU STATE, QUOTE:
4 "CHRONICLE'S SHAREHOLDERS HAVE DECIDED TO
5 KEEP THE COMPANY INTACT AND UNDER THEIR
6 EXCLUSIVE OWNERSHIP FOR THE LONG TERM AND
7 COORDINATED ESTATE-PLANNING ACTIONS ARE BEING
8 UNDERTAKEN BY THEM TO ASSURE THIS RESULT. THEY
9 HAVE DECIDED AGAINST TRANSFERRING PARTIAL
10 OWNERSHIP IN ANY OF ITS PROPERTIES TO ANYONE
11 ELSE. THEY HAVE ALSO DECIDED NOT TO EXTEND OUR
12 JOINT NEWSPAPER OPERATIONS BEYOND SEPTEMBER 12,
13 2005, EXPIRATION DATE OF OUR JOINT OPERATING
14 AGREEMENT."
15 THESE ARE THE STATEMENTS THAT YOU WROTE TO
16 MR. BENNACK ON OR ABOUT THIS DATE; CORRECT?
17 A. YES, SIR.
18 Q. SO THAT AS OF THIS DATE, OCTOBER 24, 1997, THE CHRONICLE
19 SHAREHOLDERS DID NOT WANT TO CONTINUE ANY FURTHER NEGOTIATION
20 WITH HEARST; CORRECT?
21 A. THAT IS CORRECT.
22 Q. AND NOT ONLY THAT, BUT THEY INTENDED NOT TO EXTEND THE
23 JOA; CORRECT?
24 A. YES.
25 Q. ALL RIGHT. NOW, THEN YOU STATE IN -- IF YOU GO DOWN TWO
267
SIAS - DIRECT / ALIOTO
1 PARAGRAPHS, IT BEGINS, "IF HEARST," YOU STATE TO MR. BENNACK,
2 QUOTE:
3 "IF HEARST CONSIDERED CLOSING THE EXAMINER,
4 CHRONICLE WOULD GIVE ITS APPROVAL TO SUCH ACTION
5 AND WOULD TAKE ON THE RESPONSIBILITY OF PUTTING
6 OUT THE ENTIRE SUNDAY PAPER, SPLITTING EQUALLY
7 WITH HEARST ITS INCREMENTAL EDITORIAL COSTS OF
8 DOING SO."
9 DO YOU SEE THAT?
10 A. YES, SIR.
11 Q. NOW, IF HEARST IN FACT CLOSED THE EXAMINER AND THE
12 CHRONICLE TOOK OVER THE SUNDAY PAPER, WAS IT GOING TO SPLIT ANY
13 REVENUE WITH HEARST?
14 A. LATER ON THIS LETTER COVERS THAT, MR. ALIOTO.
15 Q. GO AHEAD.
16 THE COURT: COULD YOU POINT WHERE THAT SUBJECT IS
17 DISCUSSED, MR. SIAS?
18 THE WITNESS: ALL RIGHT, LET ME....
19 BY MR. ALIOTO:
20 Q. GO TO PAGE 2 AND THE SECOND-TO-LAST PARAGRAPH.
21 A. (WITNESS EXAMINES DOCUMENT.) YES. "HEARST WOULD
22 CONTINUE"
--
23 Q. QUOTE:
24 "HEARST WOULD CONTINUE TO HONOR SFNP,"
25 THAT'S SAN FRANCISCO NEWSPAPER, "AND WOULD HAVE
268
SIAS - DIRECT / ALIOTO
1 FULL PARTICIPATION ON SFNP'S BOARD OF DIRECTORS
2 UNTIL SEPTEMBER 12, 2005"; CORRECT?
3 A. YES, SIR.
4 Q. OKAY. NOW, THE IDEA THERE WAS THAT YOU ARE TELLING --
5 YOU'RE TELLING HEARST, YOU'RE TELLING MR. BENNACK, THAT, NUMBER
6 ONE, CHRONICLE SHAREHOLDERS DON'T WANT TO HAVE ANYTHING MORE TO
7 DO WITH ANY KIND OF DEAL WITH HEARST; AND, SECOND, WE'RE NOT
8 GOING PAST THE JOA OF 2005, THAT'S GOING TO BE IT, FROM THEN ON
9 EVERYONE IS ON THEIR OWN; CORRECT?
10 A. (WITNESS NODS HEAD.)
11 Q. AND THEN YOU WERE ALSO TELLING THEM THAT IF HEARST CLOSED,
12 YOU'D STILL PAY THEM 50 PERCENT; CORRECT? IF HEARST CLOSED THE
13 EXAMINER, YOU'D STILL PAY THEM 50 PERCENT UNTIL 2005?
14 A. THE CONSEQUENCES OF WHAT WE WOULD DO WOULD BE THAT THEY
15 WOULD HAVE 50 PERCENT OF THE REVENUE. THE CONSEQUENCES. BUT
16 WHAT WE SAID WAS THEY WOULD CONTINUE TO OWN THE -- THEIR HALF
17 OF THE JOA FOR THE REMAINING TERMS OF THE JOA.
18 Q. EVEN THOUGH THEY DIDN'T HAVE A PAPER?
19 A. EVEN THOUGH THEY DIDN'T HAVE A PAPER.
20 Q. SO THAT --
21 MR. ALIOTO: IF I MAY USE THE EASEL, YOUR HONOR.
22 THE COURT: VERY WELL.
23 BY MR. ALIOTO:
24 Q. SO THAT WHAT YOU WERE SAYING -- SO THAT WHAT YOU WERE
25 SAYING IS THAT EVEN THOUGH THERE WOULD NO LONGER BE A SAN
269
SIAS - DIRECT / ALIOTO
1 FRANCISCO EXAMINER AND ALL THE REVENUE WOULD BE COMING IN FROM
2 THE SAN FRANCISCO CHRONICLE INTO THE SAN FRANCISCO NEWSPAPER --
3 A. AGENCY.
4 Q. -- AGENCY, YOU'RE SAYING YOU'LL STILL PAY THE HEARST
5 CORPORATION EVEN THOUGH THEY NO LONGER HAVE A PAPER; CORRECT?
6 A. THAT'S CORRECT.
7 Q. AND THAT WAS IN -- THAT WAS TO ENTICE THEM, WAS IT NOT, TO
8 CLOSE THE EXAMINER?
9 MR. ROSCH: OBJECTION, YOUR HONOR. I THINK IT
10 MISSTATES THE DOCUMENT, WHICH SPEAKS IN TERMS OF --
11 THE COURT: OBJECTION OVERRULED.
12 YOU MAY ANSWER.
13 THE WITNESS: "ENTICE" IS AN INTERESTING WORD. I
14 DON'T KNOW THAT I WOULD USE THAT, BUT THIS WAS TO LET THE
15 HEARST CORPORATION KNOW WHAT WE WOULD DO IF THEY DECIDED TO
16 STOP PUBLISHING THE EXAMINER OR OFFER IT FOR SALE.
17 BY MR. ALIOTO:
18 Q. SO THEN YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT --
19 WELL, WAIT A MINUTE. YOU DON'T SAY HERE ABOUT -- YOU
20 ANTICIPATE -- STRIKE THAT. LET ME BEGIN AGAIN.
21 YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT,
22 THAT YOU MIGHT HAVE A MONOPOLY IN THE MARKET; ISN'T THAT RIGHT?
23 A. MR. ALIOTO, WHEN YOU USE THE TERM "MONOPOLY," I'M NOT AN
24 ATTORNEY, OBVIOUSLY THE CASE, BUT IT HAS WIDE-RANGING
25 IMPLICATIONS. I DO NOT BELIEVE THERE ARE MANY MEDIA MONOPOLIES
270
SIAS - DIRECT / ALIOTO
1 OF ANY KIND LEFT IN TODAY'S FRAGMENTED MEDIA MARKETPLACE. SO
2 I'M NOT PREPARED TO SAY THAT THERE WOULD BE A MONOPOLY.
3 Q. YOU BELIEVED, DID YOU NOT, THAT YOU WOULD BE THE ONLY
4 DAILY NEWSPAPER IN SAN FRANCISCO IF THE EXAMINER -- IF HEARST
5 AGREED TO SHUT DOWN OR CLOSE THE EXAMINER; CORRECT?
6 A. WE WOULD BE THE ONLY DAILY NEWSPAPER PUBLISHED IN SAN
7 FRANCISCO. THERE ARE A NUMBER OF OTHER DAILY NEWSPAPERS THAT
8 CIRCULATE IN THE CITY.
9 Q. AND YOU BELIEVED THAT YOU WOULD BE SO POWERFUL AND STRONG
10 THAT YOU WOULD BE ABLE TO SPLIT 50-50 WITH HEARST EVEN THOUGH
11 THEY DIDN'T HAVE A PAPER IN THE MARKET; CORRECT?
12 A. ONCE AGAIN, YOU'RE --
13 Q. IS THAT CORRECT?
14 A. NO. THOSE ARE YOUR WORDS, NOT MINE.
15 Q. I'M ASKING YOU IF IT'S CORRECT, THAT YOU BELIEVED --
16 A. ALL I'M SAYING -- I'M NOT PREPARED TO SAY THAT YOUR
17 PHRASEOLOGY IS CORRECT. YOU'RE IMPUTING MOTIVES TO ME AND SO
18 FORTH. SO, NO.
19 WHAT I DO KNOW IS THAT IF THEY HAD DONE THAT, WE
20 WOULD HAVE ENJOYED A MORE PROFITABLE POSITION AND WE WOULD HAVE
21 BEEN IN A POSITION TO PUT OUT A MUCH STRONGER NEWSPAPER THAN IS
22 CURRENTLY THE CASE UNDER THE JOINT OPERATING AGREEMENT; AND
23 WE'RE VERY CONCERNED WITH OUR EDITORIAL FRANCHISE, THE HEART OF
24 THE BUSINESS, AND THAT IS THE HEART OF THIS PRESENT JOINT
25 OPERATING AGREEMENT.
271
SIAS - DIRECT / ALIOTO
1 THE CHRONICLE IS THE CORE BUSINESS, AND WE ARE NOT
2 DOING AS WELL IN THE CIRCULATION AREA AS WE SHOULD; AND I
3 WANTED MORE RESOURCES GOING INTO OUR PRODUCT TO MAKE IT A
4 STRONGER, MORE COMPETITIVE PRODUCT IN THE GREATER MEDIA
5 ENVIRONMENT THAT EXISTS IN THIS MARKET, THE GREATER -- AND I
6 MEAN THE GREATER BAY AREA.
7 Q. AND YOU BELIEVED THAT ONE OF THE THINGS YOU CERTAINLY
8 COULD DO IF YOU WERE THE ONLY DAILY NEWSPAPER IN SAN FRANCISCO
9 IS THAT WHAT YOU COULD DO IS IF YOU WANTED TO RAISE YOUR RATES
10 FOR ADVERTISING, YOU COULD DO THAT; COULDN'T YOU?
11 A. NOW, ONCE AGAIN, WE'RE GETTING INTO WIDE-RANGING THINGS
12 WHERE RATES GO UP AND THEY GO DOWN. I DON'T KNOW WHAT WE WOULD
13 HAVE DONE WITH RATES.
14 Q. WELL, YOU SAID THAT YOU WOULD BE MORE PROFITABLE IF THE
15 EXAMINER SHUT DOWN; CORRECT?
16 A. YES.
17 Q. BUT YOU'RE STILL GIVING THEM 50 PERCENT OF THE BUSINESS;
18 AREN'T YOU?
19 A. THAT'S CORRECT.
20 Q. YOU STILL WOULD MAKE MORE PROFIT WITH THEM OUT OF THE
21 MARKET; IS THAT RIGHT? IS THAT WHAT YOU'RE SAYING?
22 A. I'M SAYING THAT WE WOULD HAVE -- I DIDN'T SAY THAT IN THIS
23 LETTER, SO YOU
--
24 Q. I'M ASKING YOU, SIR. YOU SAID THAT YOU WANTED THEM -- YOU
25 SAID IF THEY SHUT DOWN, IF THEY SHUT DOWN THEIR NEWSPAPER,
272
SIAS - DIRECT / ALIOTO
1 YOU'RE STILL GOING TO SHARE WITH THEM 50-50; CORRECT?
2 A. WE'RE STILL GOING TO CONTINUE THE JOA AND ITS TERMS, YES.
3 Q. BUT YOU SAID THAT IF THEY DID SHUT DOWN, THE SAN FRANCISCO
4 CHRONICLE WOULD BE MORE PROFITABLE.
5 A. IT WOULD.
6 Q. YOU JUST SAID THAT.
7 A. I DID, YOU'RE RIGHT.
8 Q. OKAY. AND IT WOULD BE MORE PROFITABLE EVEN THOUGH YOU'RE
9 SHARING 50-50 WITH THE EXAMINER?
10 A. YES, SIR.
11 Q. SO THE WAY IT WOULD BE MORE PROFITABLE IS YOU'D UP YOUR
12 RATES; ISN'T THAT TRUE?
13 A. I DON'T THINK YOU'VE BEEN IN THE NEWSPAPER BUSINESS.
14 Q. I DIDN'T ASK WHETHER I WAS IN THE NEWSPAPER BUSINESS. I
15 SAID ISN'T THAT TRUE.
16 (LAUGHTER)
17 Q. ISN'T THAT TRUE?
18 A. IT'S NOT CORRECT. IT IS NOT CORRECT.
19 Q. DESPITE THE NERVOUS LAUGHTER, ISN'T THAT TRUE?
20 A. IT IS NOT CORRECT. IT IS NOT CORRECT.
21 THE COURT: ALL RIGHT. ALL RIGHT.
22 THE WITNESS: THE EXPENSES WOULD GO DOWN.
23 THE COURT: WHAT ABOUT THE SUNDAY NEWSPAPER UNDER
24 THIS SCENARIO? HEARST PUTS OUT, AS YOU POINTED OUT, THE BULK
25 OF THE SUNDAY NEWSPAPER. UNDER THIS SCENARIO, WHO WOULD BEAR
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SIAS - DIRECT / ALIOTO
1 THE COSTS OF THE EDITORIAL PRODUCT THAT WAS PUT OUT ON SUNDAY?
2 IS THAT COVERED IN THIS LETTER?
3 THE WITNESS: YES, SIR, AND THERE IS A -- THANK YOU
4 FOR ASKING.
5 HALF OF THE INCREMENTAL EDITORIAL COST OF PUTTING
6 OUT A SUNDAY PAPER WOULD HAVE BEEN BORNE BY HEARST AND HALF BY
7 THE CHRONICLE.
8 AND ONE OF THE GREAT PROBLEMS WITH OUR JOA IS
9 MR. ALIOTO HAS REFERRED TO THE FACT THAT SOMETHING LIKE
10 40 PERCENT OF THE COMBINED REVENUE FOR THE NEWSPAPERS COMES
11 FROM THE SUNDAY NEWSPAPER; AND IN SAN FRANCISCO, UNLIKE OTHER
12 MARKETS, THE SUNDAY PAPER IS NOT SUBSTANTIALLY HIGHER IN
13 CIRCULATION THAN THE DAILY, COMBINED DAILY CIRCULATION.
14 AND ONE OF THE POTENTIAL REASONS IS THAT THERE IS A
15 LARGE DISCONNECT FOR ABOUT 80 PERCENT OF THE COMBINED
16 CIRCULATION ON SUNDAY IN THAT ALL OF THE LIVE SECTIONS ARE
17 PRODUCED BY THE EXAMINER SO THAT CHRONICLE READERS DO NOT GET
18 THEIR REGULAR COLUMNISTS, THEY DO NOT GET THEIR STYLE OF
19 WRITING, THEY DO NOT GET THEIR REGULAR SECTIONS.
20 AND I'M NOT -- THIS IS NOT SAID IN A PEJORATIVE
21 SENSE AT ALL. IT'S SIMPLY A DISCONNECT OF A VERY IMPORTANT
22 PART OF THE MARKET, AND ONE THAT WE WOULD VERY DEFINITELY FEEL
23 WOULD BE IN THE LONG-TERM INTEREST OF THE NEWSPAPER THAT WE
24 WOULD PUBLISH, NAMELY THE CHRONICLE.
25
274
SIAS - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. YOU -- LET ME SHOW YOU -- IF I MAY APPROACH THE WITNESS,
3 YOUR HONOR.
4 THE COURT: BEFORE YOU DO THAT, LET ME FOLLOW UP ON
5 THAT, MR. SIAS.
6 DID YOU EVER HAVE ANY DISCUSSIONS WITH THE HEARST
7 CORPORATION ABOUT THIS DISCONNECT?
8 THE WITNESS: YES, WE DID, BUT UNDERSTANDABLY HEARST
9 WAS VERY RELUCTANT. THIS WAS -- THEY GOT THIS BECAUSE THEY GOT
10 AFFLICTED WITH THE EVENING FIELD, AND EVENING PAPERS WITH THE
11 CHANGE IN LIFESTYLE IN THE LAST 30 YEARS HAVE BEEN A VERY,
12 ALMOST AN IMPOSSIBLE POSITION. AND THEY WERE NOT GOING TO GIVE
13 UP THAT LEVERAGE THAT THEY HAD WITH THAT SUNDAY PAPER, AND --
14 THE COURT: SO THERE WAS NO APPROACH TO THEM
--
15 THE WITNESS: WE NEVER HAD ANY DETAILED DISCUSSIONS.
16 IT WAS JUST THAT THAT WAS THEIR RESPONSIBILITY AND THEY DID A
17 NUMBER OF THINGS TO TRY TO MAKE THE SUNDAY PAPER STRONG, AND SO
18 FORTH.
19 THE CHRONICLE, I MIGHT ADD, MY ATTITUDE TOWARD THIS
20 SITUATION IS THAT WE WERE PARTNERS WITH THE HEARST CORPORATION
21 FOR THE TERMS OF THIS AGREEMENT, AND I DON'T THINK THERE'S
22 ANYTHING THAT ANYONE WILL EVER FIND THAT I ACTED ANY OTHER WAY.
23 INCLUDED IN THAT WE TURNED OVER THE NEW YORK TIMES
24 SERVICE, WHICH WAS THE CHRONICLE'S, TO HEARST TO USE ON SUNDAY
25 TO HELP BOLSTER THEIR PAPER. AND THERE ARE OTHER THINGS. AND
275
SIAS - DIRECT / ALIOTO
1 HEARST INCREASED AND TOTALLY REVAMPED THEIR MAGAZINE ABOUT FOUR
2 YEARS AGO TO VERY GOOD ADVANTAGE.
3 BUT YOU CAN'T ESCAPE THE ISSUE THERE. THE HEARST OR
4 THE EXAMINER DOESN'T REALLY HAVE BUREAUS OUT IN THE SUBURBS,
5 AND THE CHRONICLE -- AND OUR CIRCULATION IS REGIONAL. WE'RE IN
6 SIX COUNTIES PRETTY GOOD SIZED, AND ALL OF THESE THINGS COMBINE
7 TO MAKE A PROBLEM FOR BOTH COMPANIES.
8 THE COURT: BUT THERE WAS NO -- I GATHER THERE WAS
9 NO SERIOUS DISCUSSION WITH HEARST CORRECTING THIS DISCONNECT
10 PROBLEM, AS YOU CHARACTERIZE IT, IN ORDER TO IMPROVE THE
11 EDITORIAL PRODUCT AND PRESUMABLY GENERATE GREATER REVENUES FOR
12 THE COMBINED ENTITY, NO SERIOUS DISCUSSIONS?
13 THE WITNESS: NO, THERE WAS NOT.
14 THE COURT: ALL RIGHT. EXCUSE THE INTERRUPTION,
15 MR. ALIOTO.
16 MR. ALIOTO: YOUR HONOR. THANK YOU, YOUR HONOR.
17 Q. LET ME HAND YOU -- IF I MAY APPROACH THE WITNESS, YOUR
18 HONOR.
19 THE COURT: VERY WELL.
20 BY MR. ALIOTO:
21 Q. LET ME HAND YOU WHAT IS PLAINTIFF'S EXHIBIT 5 IN EVIDENCE.
22 PLAINTIFF'S EXHIBIT 5 IN EVIDENCE IS A PRESENTATION. IT IS
23 ENTITLED "PROJECT GOLDEN." IT'S DATED MAY 4, 1999, AND THIS IS
24 IN FACT A PRESENTATION PREPARED WITH REGARD TO THE CHRONICLE
25 AND THE EXAMINER.
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SIAS - DIRECT / ALIOTO
1 PROJECT GOLDEN BEING WHAT?
2 A. PROJECT GOLDEN WAS THE STUDY DONE BY DONALDSON, LUFKIN,
3 JENRETTE, AN INVESTMENT BANKING FIRM HIRED BY CHRONICLE
4 CORPORATION TO EVALUATE THE PROSPECTS OF THE CORPORATION AND
5 MANY BUSINESSES AND WHAT TO DO ABOUT THEM OR WHAT POTENTIAL
6 COURSES OF ACTION CHRONICLE SHAREHOLDERS MIGHT TAKE.
7 Q. AND THIS EXHIBIT 5 IS, IN FACT, A COPY OF PROJECT GOLDEN,
8 IS IT NOT, OF THE MAY --
9 A. YES.
10 Q. -- 1999? CORRECT?
11 A. YES.
12 Q. AND ONE OF THE ITEMS THAT WAS BEING DISCUSSED AT THIS TIME
13 AND ONE OF THE OBLIGATIONS OF DONALDSON, LUFKIN, WAS TO GIVE
14 SOME KIND OF COMPARISON AS TO WHAT WOULD HAPPEN IF THE EXAMINER
15 DROPPED OUT OR IF THE EXAMINER AND THE CHRONICLE COMPETED HEAD
16 TO HEAD AFTER THE JOA; CORRECT?
17 A. NOT QUITE. THEIR ASSIGNMENT WAS TO EVALUATE THE POTENTIAL
18 PRICES THEY COULD GET FOR OUR BUSINESSES, EACH OF THE
19 BUSINESSES, AND TO GIVE THE CHRONICLE SHAREHOLDERS THEIR
20 ASSESSMENT OF WHAT THEIR CAPACITY WOULD BE TO GET THAT KIND OF
21 MONEY FOR EACH ONE OF THESE THINGS. SO OUT OF THAT THEY DID
22 SOME ANALYSES AND INCLUDING THE ONE TO WHICH YOU REFER.
23 Q. OKAY. WE'LL GET TO THAT IN ONE MINUTE, BUT YOU REMINDED
24 ME OF SOMETHING.
25 YOU SAID PREVIOUSLY THAT 30 TO 40 PERCENT OF THE
277
SIAS - DIRECT / ALIOTO
1 TOTAL ADVERTISING VOLUME PER WEEK IS IN THE SUNDAY NEWSPAPER;
2 CORRECT?
3 A. I DIDN'T SAY 30. YOU DID EARLIER, BUT 40 PERCENT IS --
4 Q. 40 PERCENT?
5 A. I THINK 40 PERCENT NOW IS, OF THE ADVERTISING VOLUME AND
6 PROBABLY A LITTLE HIGHER, IS RUNNING ON SUNDAY.
7 Q. ON SUNDAY, OKAY.
8 SO WOULD YOU SAY THAT A PAPER NEEDS THE SUNDAY PAPER
9 TO MAKE IT IN SAN FRANCISCO, A DAILY NEWSPAPER?
10 A. NOT NECESSARILY.
11 Q. YOU SHARED IN THE BUSINESS OF THE SUNDAY PAPER, DID YOU
12