Daily Court Transcripts
May 05, 2000
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VOLUME 5
PAGES 825 - 1082
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
FRIDAY, MAY 5, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
826
1
2 APPEARANCES: (CONTINUED)
3 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
4 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
5 THOMAS D. NEVINS
ATTORNEYS AT LAW
6
BAKER & HOSTETLER LLP
7 1050 CONNECTICUT AVE., N.W.
SUITE 1100
8 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
9 ATTORNEY AT LAW
10 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
11 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
12 BY: PETER K. HUSTON
J. THOMAS ROSCH
13 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
14
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
15 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
16 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
17 THOMAS S. HIXSON
ATTORNEYS AT LAW
18
19
20
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24
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827
1 I N D E X
2
3 PLAINTIFF'S WITNESSES PAGE VOL.
4 ASHER, JAMES
DIRECT EXAMINATION (RESUMED) BY MR. ALIOTO 830 5
5 CROSS-EXAMINATION BY MR. HALLING 929 5
REDIRECT EXAMINATION BY MR. ALIOTO 975 5
6
OSBORN, THAMAS
7 DIRECT EXAMINATION BY MR. SHULMAN 1005 5
CROSS-EXAMINATION BY MR. ROSCH 1031 5
8 CROSS-EXAMINATION BY MR. HOCKETT 1040 5
REDIRECT EXAMINATION BY MR. SHULMAN 1053 5
9
INGRAM, LAWRENCE L.
10 DIRECT EXAMINATION BY MR. SHULMAN 1057 5
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828
1 I N D E X
3 E X H I B I T S
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PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
5
89 911 5
6 165 1020 5
7 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
8 H-1181 948 5
H-1182 965 5
9 H-940 970 5
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829
1 FRIDAY - MAY 5, 2000 8:40 A.M.
2
3 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY
4 VERSUS THE HEARST CORPORATION, ET AL., FOR CONTINUED TRIAL.
5 COUNSEL, YOUR APPEARANCES FOR THE RECORD, PLEASE.
6 MR. ALIOTO: JOSEPH M. ALIOTO FOR THE PLAINTIFF.
7 THE COURT: VERY WELL. GOOD MORNING.
8 MR. HALLING: GARY HALLING FOR THE HEARST
9 CORPORATION.
10 MR. ROSCH: TOM ROSCH FOR THE CHRONICLE PUBLISHING
11 COMPANY.
12 MR. HOCKETT: CHRISTOPHER HOCKETT FOR INTERVENOR
13 EXIN LLC.
14 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
15 MR. ASHER IS COMING TO THE WITNESS STAND TO CONTINUE HIS
16 TESTIMONY.
17 JAMES ASHER,
18 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN PREVIOUSLY
19 DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:
20 THE COURT: YOU UNDERSTAND, MR. ASHER, THAT THE OATH
21 YOU TOOK YESTERDAY APPLIES TO THIS TESTIMONY AS WELL?
22 THE WITNESS: YES, I DO.
23 THE COURT: MR. ALIOTO, YOU MAY PROCEED.
24 MR. ALIOTO: THANK YOU, YOUR HONOR.
25 MAY IT PLEASE THE COURT, IF I MAY APPROACH THE WITNESS, YOUR
830
ASHER - DIRECT / ALIOTO
1 HONOR.
2 THE COURT: YES.
3 DIRECT EXAMINATION (RESUMED)
4 BY MR. ALIOTO:
5 Q. LET ME HAND YOU A COPY OF YOUR AFFIDAVIT, WHICH IS EXHIBIT
6 51, THAT YOU IDENTIFIED YESTERDAY. AND SPECIFICALLY I WANT TO
7 DIRECT YOUR ATTENTION TO PAGE 1, PARAGRAPH 3, AGAIN, AND
8 THERE'S A CERTAIN PORTION GOING DOWN TO LINE 24. NOW, THAT
9 SENTENCE STATES, QUOTE:
10 "THE COSTS TO PUBLISH THE EXAMINER CURRENTLY
11 EXCEED THE REVENUES IT CONTRIBUTES TO THE JOA BY
12 MILLIONS OF DOLLARS ANNUALLY."
13 DO YOU SEE THAT?
14 A. YES, I DO.
15 Q. AND YOU MADE THAT STATEMENT UNDER OATH; CORRECT?
16 A. YES, I DID.
17 Q. NOW, JUST SO THAT WE'RE CLEAR ABOUT THAT --
18 MR. ALIOTO: IF I MAY USE THE EASEL, YOUR HONOR.
19 THE COURT: YOU MAY.
20 MR. ALIOTO: OKAY.
21 Q. PUTTING ON THE TOP THE -- NOT WITH THIS -- PUTTING ON THE
22 TOP "EXAMINER," OF THE EASEL, ON ONE SIDE AND THEN "CHRON" OR
23 "CHRONICLE" ON THE OTHER SIDE. THEIR INCOME COMES FROM
24 ADVERTISING AND CIRCULATION. THAT PART IS CORRECT; RIGHT?
25 A. YES.
831
ASHER - DIRECT / ALIOTO
1 Q. AND THAT ADVERTISING AND CIRCULATION GOES INTO THE SAN
2 FRANCISCO NEWSPAPER AGENCY; CORRECT?
3 A. YES.
4 Q. AND THEN THE SAN FRANCISCO NEWSPAPER AGENCY DEDUCTS FROM
5 THAT THE COSTS FOR GENERATING THAT ADVERTISING AND CIRCULATION
6 AND THEN GIVES THE SO-CALLED EXCESS TO BOTH THE EXAMINER AND
7 THE CHRONICLE; CORRECT?
8 A. THAT'S CORRECT.
9 Q. AND IT'S AT THAT TIME THAT THEY DO -- THEY DEDUCT THEIR
10 COSTS FOR EDITORIAL AND OTHER COSTS, AND THEN WHATEVER IS LEFT
11 OVER IS PROFIT; IS THAT RIGHT?
12 A. THAT'S CORRECT.
13 Q. OKAY. NOW, THIS ADVERTISING, EITHER FROM THE EXAMINER OR
14 FROM THE CHRONICLE, APPROXIMATELY 99 PERCENT OF THAT IS JOINT
15 ADVERTISING; ISN'T THAT RIGHT?
16 A. THAT IS CORRECT.
17 Q. SO WHEN IT'S JOINT ADVERTISING, IT MEANS THAT IT'S BEING
18 ADVERTISED OR THE ADVERTISERS ARE PAYING FOR BOTH; IS THAT
19 RIGHT?
20 A. THAT IS CORRECT.
21 Q. ALL RIGHT. WHEN THAT IS PUT INTO THE JOA, ISN'T IT
22 CORRECT THAT THERE IS NO WAY THAT YOU CAN DETERMINE HOW MUCH OF
23 THAT, THAT IS PUT IN THE JOA, IS THE EXAMINER'S?
24 A. I THINK THERE ARE A NUMBER OF WAYS THAT YOU COULD
25 APPROXIMATE WHAT REVENUE WOULD BE ATTRIBUTABLE -- THE
832
ASHER - DIRECT / ALIOTO
1 CONTRIBUTION OF REVENUE FROM THE TWO PAPERS TO THAT AGGREGATE
2 JOINT RATE.
3 Q. OKAY. I'LL GET TO THAT IN ONE MINUTE.
4 NOW, IN ADDITION TO THE ADVERTISING, GENERAL
5 ADVERTISING, YOU HEARD THE TESTIMONY BY MR. SIAS THAT
6 APPROXIMATELY 40 PERCENT OF THE ADVERTISING INCOME PER WEEK IS
7 FROM THE SUNDAY PAPER; RIGHT?
8 A. THAT IS RIGHT.
9 Q. AND THAT'S GENERALLY THE EXAMINER; ISN'T IT?
10 A. NO.
11 Q. OKAY. IT'S BOTH; CORRECT?
12 A. THE SUNDAY PAPER IS A JOINT PAPER.
13 Q. OKAY. NOW, I WANTED TO READ A QUESTION AND AN ANSWER THAT
14 WAS GIVEN BY MR. WHITE IN HIS DEPOSITION TO YOU.
15 MR. ALIOTO: YOUR HONOR, I BELIEVE THE COPY OF MR.
16 WHITE'S DEPOSITION IS BEFORE THE COURT, THE ORIGINAL.
17 THE COURT: THIS IS HIS --
18 MR. ALIOTO: DEPOSITION.
19 THE COURT: -- DEPOSITION IN THIS CASE?
20 MR. ALIOTO: YES, YOUR HONOR.
21 THE COURT: RATHER THAN THE DEPOSITION BEFORE THE
22 DEPARTMENT OF JUSTICE?
23 MR. ALIOTO: YES, SIR. MORE ACCURATELY, IF IT
24 PLEASE THE COURT, THIS IS THE DEPOSITION OF TIMOTHY O. WHITE
25 TAKEN ON MONDAY, APRIL 24, 2000.
833
ASHER - DIRECT / ALIOTO
1 THE COURT: YES, SIR.
2 BY MR. ALIOTO:
3 Q. AND AT PAGE 99 --
4 MR. HALLING: WHAT ARE YOU PLANNING TO READ?
5 MR. ALIOTO: FROM MR. WHITE'S DEPOSITION.
6 MR. HALLING: WHAT PAGE AND LINE?
7 MR. ALIOTO: I WAS ABOUT TO SAY IT.
8 I'LL GIVE A COPY TO THE WITNESS, YOUR HONOR.
9 THE COURT: VERY WELL.
10 BY MR. ALIOTO:
11 Q. HERE'S A COPY OF MR. WHITE'S DEPOSITION. I DIRECT YOUR
12 ATTENTION TO PAGE 99. PAGE 99 OF MR. WHITE'S DEPOSITION HE
13 GAVE THIS ANSWER TO THIS QUESTION BEGINNING ON LINE 12,
14 QUESTION --
15 MR. HALLING: MR. ALIOTO, CAN YOU PLEASE TELL ME
16 WHAT LINES YOU INTEND TO READ?
17 MR. ALIOTO: I JUST SAID LINE 12.
18 MR. HALLING: WHERE DOES IT END?
19 MR. ALIOTO: OH. FROM LINE 12 TO LINE 17, OR ANY
20 FURTHER PART THAT YOU WOULD LIKE ME TO READ.
21 "Q. HOW MUCH OF THE REVENUE THAT YOU PUT
22 INTO THE POT," HERE (INDICATING), JOA, "HOW MUCH
23 OF THE REVENUE THAT YOU PUT INTO THE POT, THE
24 400 MILLION OR SO, HOW MUCH OF THAT WAS
25 ATTRIBUTABLE TO THE EXAMINER?
834
ASHER - DIRECT / ALIOTO
1 "THE WITNESS: THERE'S NO WAY TO TELL."
2 Q. DO YOU AGREE WITH THAT TESTIMONY FROM THE PUBLISHER --
3 MR. HALLING: THERE WAS AN OBJECTION TO THE QUESTION
4 IN THE TRANSCRIPT.
5 MR. ALIOTO: OKAY. OBJECTION BY MR. HALLING --
6 THE COURT: I THINK THE OBJECTION WOULD HAVE BEEN
7 OVERRULED, MR. HALLING.
8 MR. HALLING: THANK YOU.
9 BY MR. ALIOTO:
10 Q. OKAY. LET ME READ IT AGAIN SO YOU HAVE IT IN CONTEXT.
11 THIS IS FROM MR. WHITE, PUBLISHER OF THE EXAMINER:
12 "Q. OKAY. HOW MUCH OF THE REVENUE THAT YOU
13 PUT INTO THE POT, THE 400 MILLION OR SO, HOW
14 MUCH OF THAT WAS ATTRIBUTABLE TO THE EXAMINER?
15 "A. THERE'S NO WAY TO TELL."
16 DO YOU DISAGREE WITH THAT TESTIMONY BY THE PUBLISHER
17 OF THE EXAMINER?
18 A. YES, I DO, WITH ALL DUE RESPECT TO MR. --
19 Q. THANK YOU.
20 A. IF I COULD EXPLAIN.
21 MR. ALIOTO: I'D LIKE TO READ FROM MR. FALK'S
22 DEPOSITION. I'LL HAND TO THE COURT THE ORIGINAL, WHICH IS
23 UNDER SEAL. I ASK THAT THE SEAL BE BROKEN ON MR. FALK'S
24 DEPOSITION.
25 AND IF I MAY APPROACH THE WITNESS WITH A COPY OF
835
ASHER - DIRECT / ALIOTO
1 MR. FALK'S DEPOSITION.
2 THE COURT: WELL, YOU MAY. GO RIGHT AHEAD.
3 AS YOU DO THAT, LET'S SEE, MR. FALK IS?
4 MR. ALIOTO: LET ME IDENTIFY HIM, YOUR HONOR. HE
5 IS --
6 THE WITNESS: MR. FALK IS THE PRESIDENT OF THE SAN
7 FRANCISCO NEWSPAPER --
8 MR. ALIOTO: -- IS THE PRESIDENT AND THE CHIEF
9 EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY.
10 THE COURT: NOW, THE AGENCY IS NOT A PARTY TO THE
11 LAWSUIT.
12 MR. ALIOTO: THE AGENCY IS NOT A PARTY TO THE
13 LAWSUIT, BUT IN THIS CASE BOTH THE PARTIES WHO ARE THE
14 DEFENDANTS OWN THE SAN FRANCISCO NEWSPAPER AGENCY, AND THE SAN
15 FRANCISCO NEWSPAPER AGENCY IS THE COMPANY THAT DOES THE
16 FUNCTIONS OF WHAT ANOTHER COMPANY WOULD ORDINARILY DO ITSELF;
17 BUT BECAUSE OF THE JOA, THIS IS THE COMPANY THAT DOES IT.
18 THE COURT: DOES THAT FACT BRING MR. FALK WITHIN THE
19 AMBIT OF RULE 32?
20 MR. ALIOTO: I BELIEVE THAT IT DOES, YOUR HONOR.
21 MR. HALLING: YOUR HONOR, IT'S A SEPARATE
22 CORPORATION. IT'S A SEPARATE PERSON. THE SAN FRANCISCO
23 NEWSPAPER PRINTING COMPANY, INCORPORATED, BOTH PARTIES OWN
24 50 PERCENT OF THE STOCK, BUT SFNA HAS NOT BEEN MADE A PARTY
25 HERE.
836
ASHER - DIRECT / ALIOTO
1 THE COURT: WELL, WE PROBABLY DON'T HAVE TO ANSWER
2 THE QUESTION. MR. ALIOTO MAY PROPERLY, IT SEEMS TO ME, READ
3 WHATEVER STATEMENT MR. FALK MADE IN HIS DEPOSITION AND CAN ASK
4 THE WITNESS WHETHER OR NOT THE WITNESS AGREES OR DISAGREES WITH
5 THE STATEMENT. THAT WOULD SEEM TO ME TO BE AN APPROPRIATE WAY
6 TO PROCEED.
7 MR. ALIOTO: VERY GOOD. THANK YOU, YOUR HONOR.
8 Q. I WOULD BE READING FROM THE DEPOSITION OF MR. FALK.
9 THE COURT: THE TESTIMONY OF MR. FALK, HOWEVER, MAY
10 NOT BE CHARGEABLE AGAINST THE PARTIES HERE.
11 MR. ALIOTO: I WOULD READ FROM THE TESTIMONY GIVEN
12 BY MR. STEVEN B. FALK ON FRIDAY, APRIL 28, 2000. MR. FALK
13 IDENTIFIES HIMSELF AT PAGE 6 OF HIS DEPOSITION AS THE PRESIDENT
14 AND THE CHIEF EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER
15 AGENCY.
16 Q. I DIRECT YOUR ATTENTION, SIR, TO PAGE 26 OF MR. FALK'S
17 DEPOSITION AND IN PARTICULAR THE QUESTION --
18 A. EXCUSE ME. SORRY. WHAT PAGE WAS THAT?
19 Q. 26. AND IN PARTICULAR THE QUESTION BEGINNING ON PAGE 2 --
20 ON PAGE 26, LINE 2, TO THE ANSWER ON PAGE -- ON LINE 4 WHICH
21 READS AS FOLLOWS, QUOTE:
22 "Q. ARE YOU ABLE TO SAY HOW MUCH OF THE
23 REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED
24 TO ANOTHER?
25 "A. NO."
837
ASHER - DIRECT / ALIOTO
1 DO YOU --
2 MR. HALLING: CAN YOU READ THE NEXT QUESTION AND
3 ANSWER?
4 MR. ALIOTO: I CAN READ THE NEXT ONE AS WELL.
5 "Q. ARE YOU ABLE TO SAY HOW MUCH IS
6 ATTRIBUTABLE TO THE EXPENSES, HOW MUCH OF THE
7 EXPENSES ARE ATTRIBUTABLE, HOW MUCH OF THE
8 EXPENSES IS ATTRIBUTABLE TO ONE PAPER AS
9 DISTINGUISHED FROM ANOTHER?
10 "A. IT'S DIFFICULT TO DO."
11 Q. NOW, WITH REGARD TO HIS TESTIMONY ABOUT THE REVENUE, WHICH
12 IS IN YOUR AFFIDAVIT WHERE HE SAYS, "ARE YOU ABLE TO SAY HOW
13 MUCH OF THE REVENUE IS ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO
14 ANOTHER," ANSWER, "NO," DO YOU DISAGREE WITH THAT TESTIMONY?
15 A. I AGREE THAT IT IS DIFFICULT TO PRECISELY QUANTIFY THE
16 REVENUE AND EXPENSES THAT ARE ALLOCABLE TO THE TWO NEWSPAPERS.
17 I DO BELIEVE, HOWEVER, THAT IT IS POSSIBLE TO REALISTICALLY
18 ASSESS THE MAXIMUM REVENUE THAT COULD BE ATTRIBUTABLE TO THE
19 EXAMINER; AND FOR PURPOSES, THEN, OF DECIDING WHETHER REVENUES
20 OF THE EXAMINER EXCEED ITS EXPENSES INSIDE THE JOA, ONCE YOU
21 KNOW THE MAXIMUM REVENUE, IT'S POSSIBLE TO PROCEED WITH A
22 CALCULATION.
23 MR. ALIOTO: I MOVE TO STRIKE THE WITNESS'
24 TESTIMONY, YOUR HONOR, AS BEING NONRESPONSIVE TO THE QUESTION
25 WHICH IS WHETHER OR NOT HE DISAGREES WITH THE TESTIMONY OF
838
ASHER - DIRECT / ALIOTO
1 MR. FALK, THE CHIEF EXECUTIVE OFFICER AND PRESIDENT OF SAN
2 FRANCISCO NEWSPAPER AGENCY, THAT WITH REGARD TO REVENUES,
3 QUOTE, "ARE YOU ABLE TO SAY HOW MUCH OF THE REVENUE IS
4 ATTRIBUTABLE TO ONE PAPER AS OPPOSED TO ANOTHER," ANSWER, "NO,"
5 HE WOULD EITHER AGREE WITH THAT OR DISAGREE WITH IT, YOUR
6 HONOR.
7 THE COURT: WELL, TECHNICALLY YOU'RE CORRECT. THE
8 ANSWER WAS NOT RESPONSIVE. THE WITNESS PROVIDED THE
9 EXPLANATION FIRST. NOW LET'S GET THE ANSWER TO THE QUESTION.
10 THE WITNESS: I DISAGREE.
11 THE COURT: THE MOTION TO STRIKE WILL BE DENIED.
12 MR. ALIOTO: NOW I WOULD LIKE TO READ FROM THE
13 DEPOSITION OF MR. SIAS. MR. SIAS HAS BEEN IDENTIFIED AND
14 ALREADY TESTIFIED AS THE CHAIRMAN OF THE BOARD, THE CHIEF
15 EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE.
16 MAY I APPROACH THE WITNESS WITH MR. SIAS'
17 DEPOSITION, YOUR HONOR?
18 THE COURT: YES, YOU MAY.
19 BY MR. ALIOTO:
20 Q. LET ME SHOW YOU A COPY OF THE DEPOSITION OF MR. SIAS WHICH
21 WAS TAKEN ON FRIDAY, APRIL 21, 2000. I RESPECTFULLY DIRECT
22 YOUR ATTENTION TO PAGE 56 AND IN PARTICULAR THE QUESTION THAT
23 BEGINS ON LINE 19 AND GOES TO 22.
24 MR. HALLING: MR. ALIOTO, DO YOU HAVE ANOTHER COPY?
25 I GOT IT. THANK YOU.
839
ASHER - DIRECT / ALIOTO
1 WHAT PAGE?
2 MR. ALIOTO: PAGE 56 BEGINNING LINE 19 TO 22:
3 "Q. THE REVENUE THAT COMES INTO THE SAN
4 FRANCISCO NEWSPAPER AGENCY, DO YOU KNOW WHAT
5 PORTION IS ATTRIBUTABLE JUST TO THE EXAMINER?
6 "A. NO."
7 DO YOU DISAGREE WITH THE TESTIMONY OF MR. SIAS?
8 A. I WOULD HAVE NO BASIS FOR AGREEING OR DISAGREEING BECAUSE
9 THIS QUESTION AND ANSWER RELATES TO HIS STATE OF MIND AND
10 KNOWLEDGE, HIS PERSONAL STATE OF MIND AND KNOWLEDGE.
11 Q. OKAY. ISN'T IT ALSO CORRECT, SIR -- YESTERDAY YOU
12 IDENTIFIED A SO-CALLED INCREMENTAL COST STUDY. DO YOU REMEMBER
13 THAT?
14 A. YES, I DID.
15 Q. AND I BELIEVE THAT YOU SAID THAT ONE OF THE BASES FOR YOUR
16 STATEMENT IN YOUR AFFIDAVIT TO THIS COURT WITH REGARD TO THE
17 REVENUES THAT IS CONTRIBUTED TO THE JOA BY THE EXAMINER, THAT
18 YOU RELIED UPON THE SO-CALLED INCREMENTAL COST STUDY; IS THAT
19 RIGHT?
20 A. YES.
21 Q. NOW, IT'S TRUE, ISN'T IT, AND IT IS -- IT IS A FACT, IS IT
22 NOT, THAT THAT INCREMENTAL COST STUDY DOESN'T REALLY ALLOCATE
23 REVENUES TO EITHER PARTY? THAT'S THE MORE ACCURATE STATEMENT;
24 ISN'T THAT CORRECT?
25 A. THAT IS CORRECT. THE INCREMENTAL STUDY ASKS THE QUESTION:
840
ASHER - DIRECT / ALIOTO
1 WOULD THE JOA BE BETTER OFF IF THE EXAMINER WERE CLOSED THAN BY
2 CONTINUING ITS PUBLICATION?
3 Q. OKAY. SO THE STUDY THAT YOU RELIED ON YESTERDAY, YOU KNOW
4 THAT YOU TESTIFIED IN YOUR DEPOSITION THAT THAT STUDY DOESN'T
5 REALLY ALLOCATE REVENUES, THAT MEANS COMING INTO THE JOA, IT
6 DOES NOT ALLOCATE REVENUES TO EITHER PAPER; CORRECT?
7 A. THAT IS CORRECT.
8 Q. OKAY.
9 THE COURT: LET'S SEE, WHAT EXHIBIT NUMBER IS THIS?
10 MR. ALIOTO: THIS IS FROM THE DEPOSITION THAT I AM
11 READING, YOUR HONOR.
12 THE COURT: BUT IS THAT STUDY IN EVIDENCE?
13 MR. ALIOTO: I DON'T KNOW IF IT IS OR NOT, YOUR
14 HONOR.
15 MR. HALLING: YES, IT IS, YOUR HONOR.
16 MR. SHULMAN: YES, IT IS.
17 THE COURT: WHAT EXHIBIT NUMBER IS THAT?
18 MR. HALLING: 903 I'M TOLD.
19 THE COURT: THANK YOU.
20 BY MR. ALIOTO:
21 Q. SO THE TESTIMONY THAT YOU GAVE YESTERDAY TO JUSTIFY YOUR
22 STATEMENT IN THE -- AS JUSTIFICATION FOR THE STATEMENT IN YOUR
23 AFFIDAVIT WITH REGARD TO THE INCREMENTAL STUDY, THE FACT OF THE
24 MATTER IS THAT THAT STUDY DOES NOT ALLOCATE REVENUES TO EITHER
25 THE EXAMINER OR THE CHRONICLE, THAT PART IS TRUE; IS THAT NOT
841
ASHER - DIRECT / ALIOTO
1 RIGHT?
2 A. AS I HAVE SAID, THAT STUDY DOES NOT ALLOCATE REVENUES.
3 WHAT IT DOES IS DO AN ECONOMIC ANALYSIS TO ANALYZE WHETHER THE
4 JOA WOULD BE BETTER OFF BY CLOSING THE EXAMINER RATHER THAN
5 CONTINUING IT, WHICH IS A DIFFERENT WAY OF ASKING THE QUESTION:
6 DOES THE REVENUES CONTRIBUTION TO THE JOA EXCEED ITS COSTS TO
7 THE JOA?
8 Q. OKAY. NOW, IN ORDER TO MAKE YOUR STATEMENT IN YOUR
9 AFFIDAVIT, WHICH WE HAVE UP HERE ON THE SCREEN, IT STATED,
10 QUOTE, "THE COSTS TO PUBLISH THE EXAMINER CURRENTLY EXCEED THE
11 REVENUES IT CONTRIBUTES TO THE JOA BY MILLIONS OF DOLLARS
12 ANNUALLY," THE ONLY WAY YOU COULD KNOW THAT IS TO KNOW THE
13 REVENUES THAT THE EXAMINER CONTRIBUTES TO THE JOA; CORRECT?
14 A. THAT IS NOT CORRECT.
15 Q. EVEN THOUGH IT SAYS, "CURRENTLY EXCEED THE REVENUES IT
16 CONTRIBUTES TO THE JOA"? EVEN THOUGH THAT'S WHAT YOU SAID TO
17 THIS COURT, YOU'RE SAYING NOW THAT THAT IS NOT WHAT YOU MEANT?
18 A. I MEANT EXACTLY WHAT THIS DECLARATION SAYS.
19 Q. DO YOU STICK WITH YOUR STATEMENT THAT YOU GAVE UNDER OATH
20 TO THIS COURT THAT THE COSTS TO PUBLISH THE EXAMINER CURRENTLY
21 EXCEED THE REVENUES IT CONTRIBUTES TO THE JOA BY MILLIONS OF
22 DOLLARS ANNUALLY?
23 A. I ABSOLUTELY STICK TO IT.
24 Q. NOW, IT'S TRUE, IS IT NOT, THAT WITH REGARD TO THE COSTS
25 ALSO FROM THE SAN FRANCISCO NEWSPAPER AGENCY, THAT YOU CAN'T
842
ASHER - DIRECT / ALIOTO
1 DETERMINE THOSE EITHER?
2 A. I DO NOT AGREE WITH THAT STATEMENT.
3 Q. NOW, THIS ANALYSIS THAT YOU MADE THAT YOU SAY THAT YOU
4 RELIED ON FOR THIS STATEMENT -- FIRST OF ALL, YOU ACKNOWLEDGE,
5 DO YOU NOT, THAT YOUR TESTIMONY WITH REGARD TO THE ABILITY TO
6 DETERMINE THE REVENUES THAT THE EXAMINER CONTRIBUTES TO THE JOA
7 IS CONTRARY TO THE TESTIMONY OF MR. WHITE AND MR. FALK --
8 A. I DON'T --
9 Q. -- AND MR. SIAS?
10 A. I DON'T BELIEVE IT'S CONTRARY. I WOULD AGREE THAT IT IS
11 NOT POSSIBLE TO PRECISELY QUANTIFY THE REVENUE AND THE EXPENSES
12 THAT ARE EITHER ALLOCABLE OR ATTRIBUTABLE FROM AN ACCOUNTING
13 PERSPECTIVE OR ON THE BASIS OF AN INCREMENTAL COST STUDY. BUT
14 I DO BELIEVE, I DO BELIEVE THAT IT IS POSSIBLE TO APPROXIMATE
15 THOSE REVENUES AND EXPENSES WITH SUFFICIENT PRECISION TO BE
16 ABLE TO -- TO ENABLE ME TO MAKE THE STATEMENT THAT I MADE IN MY
17 DECLARATION.
18 AND, THEREFORE, I BELIEVE THAT THE QUESTIONS THAT
19 HAVE BEEN ASKED TO THE PREVIOUS WITNESSES THAT YOU REFERRED TO
20 COULD BE READ AS ASKING DO THEY KNOW DOWN TO THE DOLLAR.
21 MR. ALIOTO: YOUR HONOR, I OBJECT TO THIS AND MOVE
22 TO STRIKE THAT AS NOT BEING RESPONSIVE TO THE ANSWER -- TO THE
23 QUESTION.
24 THE COURT: WELL, HAVE YOU FINISHED YOUR ANSWER,
25 MR. ASHER?
843
ASHER - DIRECT / ALIOTO
1 THE WITNESS: I COULD CONTINUE, BUT PERHAPS I SHOULD
2 STOP.
3 THE COURT: WELL, THAT'S UP TO YOU, SIR.
4 THE WITNESS: I WAS GOING TO SAY, THEN, TO FINISH
5 IT, THAT AT LEAST I READ THE QUESTIONS THAT YOU REFERRED TO, OR
6 A FAIR READING OF THEM COULD BE DID THEY KNOW WITH PRECISION
7 THE AMOUNT OF REVENUES AND EXPENSES; AND I WOULD AGREE THAT
8 WITH PRECISION, THEY DID NOT KNOW THEM.
9 YOU DID NOT ASK THEM, I BELIEVE, ANY OF THEM: WAS
10 IT POSSIBLE TO COME TO A CONCLUSION WHETHER OR NOT THE REVENUES
11 OF THE EXAMINER EXCEED OR DON'T EXCEED ITS COSTS? SO I BELIEVE
12 MY TESTIMONY IS COMPLETELY CONSISTENT WITH THE OTHER TESTIMONY
13 THAT YOU HAVE REFERRED TO.
14 THE COURT: ALL RIGHT. NOW I THINK YOU'VE ANSWERED
15 THE QUESTION.
16 THE WITNESS: YES, I HAVE.
17 THE COURT: ALL RIGHT. LET'S MOVE ON.
18 BY MR. ALIOTO:
19 Q. IS IT ALSO NOT CORRECT THAT THE SO-CALLED STUDY THAT YOU
20 SAID THAT YOU RELIED ON FOR THIS STATEMENT THAT YOU MADE IN
21 YOUR AFFIDAVIT, IS IT NOT ALSO CORRECT THAT THAT PARTICULAR
22 STUDY WAS MADE AFTER THE AGREEMENT BETWEEN THE CHRONICLE AND
23 THE EXAMINER -- AND HEARST?
24 A. YES, I BELIEVE IT WAS.
25 Q. AND IT WAS MADE AFTER FOR THE PURPOSE OF GIVING IT TO THE
844
ASHER - DIRECT / ALIOTO
1 DEPARTMENT OF JUSTICE TO ATTEMPT TO JUSTIFY THE SHUTTING DOWN
2 OF THE EXAMINER; ISN'T THAT RIGHT?
3 A. IT WAS ACTUALLY MADE IN --
4 Q. IS THAT RIGHT?
5 A. IT IS NOT CORRECT.
6 Q. OKAY.
7 A. IT WAS MADE IN RESPONSE TO THE FOOTNOTE BY THE DEPARTMENT
8 OF JUSTICE IN THE HAWAII CASE IN WHICH THEY STATED THAT THE
9 CLOSING OF THE NEWSPAPER INSIDE THE JOA WHOSE INCREMENTAL COSTS
10 EXCEED ITS INCREMENTAL REVENUES WOULD RAISE NO ANTITRUST
11 ISSUES.
12 SO IN RESPONSE TO THAT MOST RECENT STATEMENT OF THE
13 POSITION OF THE DEPARTMENT OF JUSTICE, IT STRUCK US THAT IT
14 WOULD BE QUITE RESPONSIVE IN THE CONTEXT OF ANSWERING THE
15 SECOND REQUEST TO DO THAT ANALYSIS.
16 Q. OKAY. NOW, WHAT THE JUSTIFICATION OR ATTEMPTED
17 JUSTIFICATION WAS FOR SUBMITTING THOSE DOCUMENTS TO THE
18 DEPARTMENT OF JUSTICE WAS WHETHER OR NOT IT WOULD BE -- YOU
19 WOULD BE REQUIRED TO TRY TO SELL THE PAPER; IS THAT RIGHT?
20 A. YES.
21 Q. AND WHEN YOU SUBMITTED IT, YOU WANTED TO SUBMIT IT -- OR
22 IT WAS SUBMITTED TO THE DEPARTMENT OF JUSTICE ON THE HOPE THAT
23 YOU WOULDN'T EVEN HAVE TO TRY TO SELL THE PAPER; IS THAT RIGHT?
24 A. I BELIEVE I'VE ANSWERED WHY WE PREPARED IT AND SUBMITTED
25 IT.
845
ASHER - DIRECT / ALIOTO
1 Q. AND, AS A MATTER OF FACT, THE DEPARTMENT OF JUSTICE SAYS
2 YOU HAVE TO AT LEAST SELL THE PAPER; ISN'T THAT RIGHT?
3 A. THAT IS NOT CORRECT. THE JUSTICE DEPARTMENT, THEY'VE MADE
4 NO FINAL DETERMINATION OTHER THAN THE PRESS RELEASE THAT WAS
5 ISSUED APPROVING THIS TRANSACTION.
6 Q. IN ANY EVENT, THEY REJECTED THE COST STUDIES THAT YOU SENT
7 THEM FOR THE PURPOSE FOR WHICH YOU SENT THEM; ISN'T THAT TRUE?
8 A. THEY DID NOT.
9 Q. YESTERDAY WE WERE TALKING ABOUT EXHIBIT 35. EXHIBIT 35 IS
10 THE ASSETS PURCHASE AGREEMENT BETWEEN THE HEARST CORPORATION
11 AND THE EXIN LLC OR THE FANG FAMILY. LET ME --
12 MR. ALIOTO: IF I MAY APPROACH THE WITNESS, YOUR
13 HONOR.
14 THE COURT: YES, YOU MAY.
15 BY MR. ALIOTO:
16 Q. THIS IS, IN FACT, EXHIBIT 35 THAT I GAVE YOU YESTERDAY AND
17 IT IS THE AGREEMENT DATED MARCH 16, 2000. AND THIS IS THE
18 AGREEMENT BETWEEN YOURSELF AND -- "YOURSELF" MEANING HEARST
19 CORPORATION -- AND EXIN LLC; IS THAT RIGHT?
20 A. (WITNESS EXAMINES DOCUMENT.) YES.
21 Q. OKAY. THERE WAS JUST ONE -- TWO PARTS THAT I WANT TO
22 DIRECT YOUR ATTENTION TO. FIRST, IF YOU WILL GO TO PAGE 5 AND
23 WE WERE SPEAKING YESTERDAY OF ITEM NUMBER 1.4 UNDER
24 "CONSIDERATION."
25 MR. ALIOTO: AND IF I MAY APPROACH THE EASEL, YOUR
846
ASHER - DIRECT / ALIOTO
1 HONOR.
2 THE COURT: YES, YOU MAY.
3 BY MR. ALIOTO:
4 Q. YESTERDAY WE HAD THE -- WE WERE GOING OVER THE SUBSIDIES
5 AND WE DIDN'T DO THE FIRST YEAR. NOW, IN THE FIRST YEAR
6 INSTEAD OF A SUBSIDY OF $25 MILLION -- UP TO $25 MILLION, THE
7 SUBSIDY WAS UP TO $16 MILLION; CORRECT?
8 A. THAT WAS THE CASH SUBSIDY IN THE FIRST YEAR, YES.
9 Q. OKAY. AND THE REASON FOR THAT IS THAT THE FIRST FOUR
10 MONTHS WERE SUPPOSED TO BE OPERATED UNDER THE JOA; IS THAT
11 RIGHT?
12 A. NO.
13 Q. IT WAS OPERATED UNDER -- IT WOULD STILL BE OPERATED BY
14 HEARST?
15 A. IN ADDITION TO THE ASSET PURCHASE AGREEMENT, THERE WAS A
16 TRANSITION SERVICES AGREEMENT UNDER WHICH HEARST AGREED TO
17 ABSORB ALL OF THE COSTS OF -- AND EXPENSES TO PUBLISH THE
18 EXAMINER IN SUBSTANTIALLY THE SAME MANNER AS IT IS CURRENTLY
19 BEING PRODUCED AND TO RETAIN ALL REVENUE THAT WAS GENERATED.
20 Q. FOR FOUR MONTHS?
21 A. FOR FOUR MONTHS.
22 Q. FOR FOUR MONTHS. SO THAT'S WHY THE 16 IS LESS THAN THE
23 25 MILLION IN THE SECOND AND THIRD YEAR?
24 A. THAT'S A PRORATED AMOUNT OF THE ANNUAL AMOUNT OF
25 25 MILLION.
847
ASHER - DIRECT / ALIOTO
1 Q. OKAY. NOW, THE PRORATED AMOUNT OF THE AMOUNT THAT MUST BE
2 SPENT ON THE PAPER FOR REIMBURSEMENT THAT THEY WOULD HAVE TO DO
3 IN THE FIRST YEAR WOULD BE $10 MILLION; IS THAT RIGHT?
4 A. (WITNESS EXAMINES DOCUMENT.) YES.
5 Q. IF YOU'LL LOOK AT PAGE 6. THANK YOU.
6 ALL RIGHT. SO THAT THE REMAINDER, IF THEY JUST
7 SPENT $10 MILLION ON THE FIRST YEAR, THEN THE REMAINDER THAT
8 WOULD -- THAT THEY COULD GO UP TO IS $6 MILLION NOT SPENT;
9 CORRECT?
10 A. (WITNESS EXAMINES DOCUMENT.) WELL, THAT IS --
11 Q. CORRECT?
12 A. THAT IS CORRECT, YES.
13 Q. AND THAT $6 MILLION, IF THEY ONLY SPENT UP TO -- IF THEY
14 ONLY SPENT THE $10 MILLION IN THAT YEAR, THAT $6 MILLION, THEY
15 WOULD GET HALF OF IT, WHICH IS $3 MILLION; IS THAT RIGHT?
16 A. THAT IS CORRECT.
17 Q. SO EVEN IN THE FIRST YEAR THEY COULD GET $3 MILLION CASH
18 WITHOUT ANY STRINGS WHATSOEVER IF THEY SPENT JUST $10 MILLION;
19 IS THAT RIGHT?
20 A. THAT IS CORRECT.
21 Q. NOW, ALSO DID YOU EVER COMPARE THESE NUMBERS, THE
22 $3 MILLION IN THE FIRST YEAR, THE 10 MILLION IN THE SECOND YEAR
23 POTENTIAL AND THE THIRD YEAR $10 MILLION POTENTIAL -- I MEAN,
24 5 MILLION IN THE SECOND YEAR AND 5 MILLION IN THE THIRD YEAR,
25 DID YOU EVER ANALYZE THOSE IN TERMS OF WHAT THE PAN ASIAN GROUP
848
ASHER - DIRECT / ALIOTO
1 WAS ACTUALLY MAKING IN YEARS BEFORE THAT?
2 A. I HAVE NO KNOWLEDGE OF THEIR PROFITS.
3 Q. SO YOU DON'T KNOW WHETHER OR NOT, FOR EXAMPLE, IN THIS
4 FIRST YEAR THIS $3 MILLION IS THREE TIMES AS MUCH AS THEY'VE
5 EVER MADE IN ONE YEAR?
6 A. I'VE SAID I HAVE NO KNOWLEDGE OF THEIR PROFITS.
7 Q. AND YOU KNEW WHEN YOU DID THIS DEAL THAT THIS WAS AN
8 ENTICEMENT TO THESE PEOPLE --
9 A. NO --
10 Q. -- NOT TO SPEND FULL AMOUNT OF THIS MONEY ON THIS PAPER
11 BUT INSTEAD TO TAKE THE CASH; ISN'T THAT RIGHT?
12 A. THAT IS NOT RIGHT. ACTUALLY THE REASON FOR THIS ENTIRE
13 CONCEPT WAS TO MAKE SURE FROM OUR PERSPECTIVE THAT OUR SUBSIDY
14 WAS BEING SPENT EFFICIENTLY. AND IF I COULD EXPLAIN, YOU HAVE
15 NOT POINTED OUT THE OTHER INCENTIVE UNDER THIS AGREEMENT, WHICH
16 IS THAT THE FANG FAMILY OR THE PAN-ASIA AFFILIATE HERE RETAINS
17 ALL OF THE REVENUE, 100 PERCENT OF THE REVENUE GENERATED BY THE
18 EXAMINER DURING THIS ENTIRE SUBSIDY PERIOD. THAT IS QUITE
19 DIFFERENT FROM THE PROPOSAL, FOR EXAMPLE, THAT YOUR CLIENT
20 MADE.
21 SO UNDER THIS AGREEMENT, AS LONG AS THE EXPENDITURE
22 OF 1 DOLLAR GENERATES AS LITTLE AS 50 CENTS OF REVENUE, THE
23 INCENTIVE WILL BE TO SPEND THAT DOLLAR. SO I DO NOT AGREE AT
24 ALL WITH YOUR CHARACTERIZATION OF THE INCENTIVES UNDER THIS
25 AGREEMENT. YOU'VE ONLY TAKEN ONE PART OF IT. YOU HAVE NOT
849
ASHER - DIRECT / ALIOTO
1 TAKEN THE TOTALITY OF IT.
2 MR. ALIOTO: I MOVE TO STRIKE THE TESTIMONY, YOUR
3 HONOR, AFTER THE ANSWER WAS GIVEN AS BEING NONRESPONSIVE TO THE
4 QUESTION.
5 THE COURT: MOTION DENIED.
6 BY MR. ALIOTO:
7 Q. YOU ALSO POINT OUT HERE THAT THERE'S GOING TO BE A
8 2 MILLION-DOLLAR ADVANCE ON THE $16 MILLION; IS THAT RIGHT? OR
9 IS IT THE 2 MILLION ON -- STRIKE THAT.
10 YOU ALSO POINT OUT IN THE -- ON PAGE 5 THAT THERE
11 WILL BE A 2 MILLION-DOLLAR ADVANCE.
12 A. THAT IS CORRECT.
13 Q. AND THAT $2 MILLION WILL THEN BE DEDUCTED FROM THE THIRD
14 YEAR; CORRECT?
15 A. YES. IT WAS DESIGNED TO PROVIDE THE INITIAL WORKING
16 CAPITAL THAT WOULD BE REQUIRED TO CONTINUE THE OPERATIONS OF
17 THE PAPER.
18 Q. ALL RIGHT. AND THEN YOU ALSO STATED THAT WITH REGARD TO
19 THE COSTS THAT YOU WOULD -- THAT WOULD BE REIMBURSED, THAT
20 THOSE COSTS WOULD INCLUDE UP TO $500,000 PER YEAR IN THE
21 AGGREGATE FOR COMPENSATION AND PERQUISITES TO MR. TED FANG FOR
22 BONE FIDE SERVICES RENDERED TO THE EXAMINER AND FOR DIRECTORS'
23 FEES FOR OTHER FANG FAMILY MEMBERS AND REIMBURSABLE COSTS MAY
24 INCLUDE COMPENSATION, AND IT GOES ON.
25 A. I BELIEVE YOU HAVE MISREAD THE AGREEMENT. IT DOES NOT SAY
850
ASHER - DIRECT / ALIOTO
1 THAT THE COSTS WILL INCLUDE. IT SAYS THAT THE REIMBURSABLE
2 COSTS MAY NOT INCLUDE COMPENSATION OF THE SORT THAT YOU
3 DESCRIBED IN EXCESS OF THIS AMOUNT. SO IT IS A LIMITATION NOT
4 A REQUIREMENT TO SPEND IT.
5 Q. ACTUALLY I JUST READ IT, AND IT SAYS THE REIMBURSABLE
6 COSTS MAY INCLUDE -- EXCUSE ME --
7 A. THAT IS WHAT I SAID.
8 Q. EXCUSE ME A MINUTE.
9 MR. ALIOTO: AGAIN, I MOVE TO STRIKE THE LAST ANSWER
10 AS BEING NONRESPONSIVE TO THE QUESTION, YOUR HONOR.
11 THE COURT: WELL, YOU CAN CERTAINLY FOLLOWUP WITH A
12 FURTHER QUESTION.
13 MR. ALIOTO: OKAY.
14 THE COURT: I'M NOT SURE WE HAD A GOOD FIT WITH THE
15 ANSWER AND THE QUESTION, BUT --
16 MR. ALIOTO: VERY GOOD, YOUR HONOR.
17 THE COURT: -- YOU CAN PURSUE THE MATTER IF YOU
18 DESIRE TO.
19 MR. ALIOTO: OKAY.
20 Q. IT STATES, QUOTE:
21 "REIMBURSABLE COSTS MAY INCLUDE UP TO
22 $500,000," ET CETERA.
23 IS THAT RIGHT?
24 A. YES.
25 Q. OKAY. NOW, DO YOU KNOW WHAT THE -- DO YOU KNOW THAT THE
851
ASHER - DIRECT / ALIOTO
1 SALARY FOR THE PUBLISHER OF THE EXAMINER, MR. WHITE, WAS
2 APPROXIMATELY $300,000?
3 A. NO, I DON'T KNOW HIS EXACT SALARY.
4 Q. DO YOU KNOW THAT THE SALARY FOR THE PUBLISHER OR THE CHIEF
5 EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY IS
6 APPROXIMATELY $375,000?
7 A. I DON'T KNOW THEIR EXACT SALARIES. BUT YOU'RE SAYING
8 "SALARY." DOES THAT INCLUDE BONUS OR JUST THE ANNUAL SALARY?
9 Q. DO YOU KNOW EITHER ONE OF THEM?
10 A. NO, I DON'T.
11 Q. OKAY. YOU ALSO STATE HERE, ALSO ON PAGE 6, THAT YOU WOULD
12 BE REIMBURSING THE PAN ASIAN GROUP OF UP TO -- TO THEIR
13 ATTORNEYS OF UP TO $200,000 FOR THE NEGOTIATION OF THE DEAL,
14 AND THEN IT ALSO SAYS, QUOTE -- WELL, LET'S STOP WITH THE
15 200,000. UP TO THE $200,000 FOR JUST NEGOTIATING THIS
16 ARRANGEMENT; CORRECT?
17 A. I BELIEVE THE $200,000 REFERS TO BOTH ATTORNEYS AND THE
18 FIRM MENTIONED HERE IS AN ACCOUNTING FIRM. AND, AGAIN, WHAT
19 THIS SAYS IS THAT IF THE BUYER CHOOSES TO ASK THAT THESE -- UP
20 TO THIS AMOUNT BE INCLUDED IN THE REIMBURSABLE EXPENSES, WE
21 WILL DO SO.
22 Q. AND THEN ALSO IT GOES ON TO SAY, QUOTE:
23 "... AMOUNTS ACTUALLY PAID BY THE BUYER TO
24 DEFEND OR SETTLE ANY ACTION OR PROCEEDING
25 COMMENCED OR THREATENED BY ANY GOVERNMENTAL BODY
852
ASHER - DIRECT / ALIOTO
1 OR OTHER PERSON CHALLENGING THE TRANSACTIONS
2 CONTEMPLATED BY THIS AGREEMENT."
3 DO YOU SEE THAT?
4 A. YES, I DO.
5 Q. SO YOU'VE AGREED TO PAY FOR THE ATTORNEYS' FEES, IF THEY
6 ASK YOU TO, TO PAY FOR THE ATTORNEYS' FEES NOT ONLY TO DO THIS
7 TRANSACTION BUT ALSO THE ATTORNEYS' FEES THAT THEY WOULD EXPEND
8 IN DEFENDING THIS VERY CASE; IS THAT RIGHT?
9 A. THAT IS CORRECT.
10 Q. NOW I WOULD LIKE TO SHOW YOU WHAT IS IN EVIDENCE, I
11 BELIEVE, AS EXHIBIT 16.
12 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
13 THE COURT: YES.
14 BY MR. ALIOTO:
15 Q. EXHIBIT 16 IN EVIDENCE IS A DOCUMENT HEADNOTED, QUOTE,
16 "RESPONSE TO INTERROGATORY SPECIFICATIONS CONTAINED IN REQUESTS
17 FOR ADDITIONAL INFORMATION AND DOCUMENTARY MATERIAL ISSUED TO
18 THE HEARST CORPORATION ON OCTOBER 15, 1999," AND IT HAS ANSWERS
19 GIVEN BY THE HEARST CORPORATION.
20 I'D LIKE YOU TO LOOK AT THAT AND, FIRST OF ALL,
21 ADVISE US WHETHER OR NOT YOU'VE SEEN THAT DOCUMENT BEFORE.
22 A. (WITNESS EXAMINES DOCUMENT.) YES, I HAVE.
23 Q. DID YOU PARTICIPATE AT ALL IN THE PREPARATION OF THIS
24 DOCUMENT THAT WAS SUBMITTED TO THE GOVERNMENT?
25 A. YES, I DID.
853
ASHER - DIRECT / ALIOTO
1 Q. I'D LIKE TO DIRECT YOUR ATTENTION FIRST TO PAGE -- TO
2 SPECIFICATION NUMBER 13 ON PAGE 19, THE FIRST PARAGRAPH,
3 BEGINNING ON LINE 19 AND GOING TO LINE 23 READS AS FOLLOWS,
4 QUOTE:
5 "HEARST DOES NOT BELIEVE THAT ENTRY INTO THE
6 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE
7 RELEVANT AREA IN DIRECT COMPETITION WITH THE
8 COMBINED SAN FRANCISCO CHRONICLE AND EXAMINER
9 NEWSPAPERS (OR THE CHRONICLE ALONE) IS EITHER
10 ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS
11 BEHAVIOR," END OF QUOTE.
12 DO YOU SEE THAT?
13 A. YES, I DO.
14 Q. DO YOU AGREE WITH THAT STATEMENT?
15 A. YES, I DO.
16 Q. DID YOU AGREE WITH THAT STATEMENT AT THE TIME THAT YOU
17 WERE NEGOTIATING WITH THE FANG FAMILY?
18 A. YES, I -- YES, I DO OR DID.
19 Q. DID YOU ADVISE THE FANG FAMILY, MR. TED FANG OR ANYONE
20 ELSE IN THAT FAMILY, OF YOUR BELIEF THAT IT WAS NOT
21 ECONOMICALLY FEASIBLE TO GET INTO BUSINESS AGAINST THE
22 CHRONICLE? DID YOU ADVISE THEM OF THAT?
23 A. NO, I DID NOT.
24 Q. DID YOU ADVISE THE FANG FAMILY, OR MR. TED FANG OR ANYONE
25 IN THEIR FAMILY, OF THE HEARST BELIEF THAT IT WAS NOT RATIONAL
854
ASHER - DIRECT / ALIOTO
1 BUSINESS BEHAVIOR FOR THEM TO GET INTO THE BUSINESS AGAINST THE
2 CHRONICLE?
3 A. MR. ALIOTO, THAT IS NOT WHAT THIS SAYS.
4 Q. DID YOU ADVISE THEM OF THAT?
5 A. SO WE'RE NOT TALKING ABOUT THIS DOCUMENT ANYMORE?
6 Q. DID YOU ADVISE THEM OF THAT?
7 THE COURT: I THINK IT'S A FAIR QUESTION, MR. ASHER.
8 DID YOU ADVISE THE FANG FAMILY OF THE SUBSTANCE OF WHAT YOU
9 RESPONDED TO THE GOVERNMENT IN SPECIFICATION 13?
10 THE WITNESS: THE SUBSTANCE OF WHAT I RESPONDED TO
11 THE SPECIFICATION 13 I BELIEVE I DID ADVISE THEM, YES.
12 BY MR. ALIOTO:
13 Q. MY QUESTION WILL BE: DID YOU ADVISE ANYONE IN THE FANG
14 FAMILY, MR. TED FANG OR ANYONE ELSE, OR DID ANYONE TO YOUR
15 KNOWLEDGE IN THE HEARST CORPORATION ADVISE ANYONE IN THE FANG
16 FAMILY, OF THE HEARST BELIEF THAT IT WAS IRRATIONAL BUSINESS
17 BEHAVIOR FOR THEM TO ATTEMPT TO GET INTO THE BUSINESS AGAINST
18 THE CHRONICLE?
19 A. I ADVISED THEM --
20 Q. DID YOU ADVISE THEM OF THAT?
21 A. MY DIFFICULTY IN ANSWERING YOUR QUESTION IS THE PHRASE
22 "GET INTO THE BUSINESS OF" THAT WAS COMPETING WITH THE
23 CHRONICLE. I DID ADVISE THEM THAT IT WOULD BE IRRATIONAL,
24 UNFEASIBLE TO ENGAGE IN DIRECT COMPETITION AS A METROPOLITAN
25 DAILY NEWSPAPER THROUGHOUT THE BAY AREA, WHICH IS WHAT THIS
855
ASHER - DIRECT / ALIOTO
1 STATEMENT SAYS, IN COMPETITION WITH THE CHRONICLE. THAT I
2 FULLY BELIEVE AND I AM SURE I TOLD EVERYONE I DEALT WITH THAT.
3 Q. I'LL ASK YOU ONCE MORE, THEN I'LL QUIT ON IT.
4 A. OKAY.
5 Q. OKAY. DID YOU ADVISE ANYONE IN THE FANG FAMILY, MR. TED
6 FANG OR ANYONE ELSE, OF THE HEARSTS' BELIEF THAT ENTRY INTO THE
7 METROPOLITAN DAILY NEWSPAPER BUSINESS IN DIRECT COMPETITION
8 WITH THE CHRONICLE WAS IRRATIONAL BUSINESS BEHAVIOR? DID YOU
9 TELL THEM THAT?
10 A. I BELIEVE I MADE THAT CLEAR THAT IT WAS MY VIEW.
11 Q. SO YOU THINK YOU DID TELL THEM THAT?
12 A. I BELIEVE SO.
13 Q. BY THE WAY, YOU SAID "IN THE RELEVANT AREA." WHAT WAS THE
14 RELEVANT AREA HERE? YOU SAID THAT IT WAS THE BAY AREA; IS THAT
15 WHAT YOU SAID?
16 A. I BELIEVE, IF YOU LOOK AT THE SPECIFICATIONS FROM THE
17 DEPARTMENT OF JUSTICE WHICH DEFINE MANY OF THE TERMS, IN FACT
18 ASK ALL THE QUESTIONS THAT THIS IS RESPONDING TO, I BELIEVE THE
19 DEFINITION OF "RELEVANT AREA" IS THE ENTIRE BAY AREA. IT IS
20 NOT LIMITED TO THE CITY AND COUNTY OF SAN FRANCISCO.
21 Q. OKAY. SO THEN IF YOU'LL -- I DIRECT YOUR ATTENTION TO
22 PAGE 4 AND YOUR ANSWER IN SPECIFICATION NUMBER 2.
23 SPECIFICATION NUMBER 2 BY THE GOVERNMENT STATED AS FOLLOWS ON
24 PAGE 4 OF EXHIBIT 16, QUOTE:
25 "LIST EACH DAILY NEWSPAPER WHICH HAS ANY
856
ASHER - DIRECT / ALIOTO
1 CIRCULATION IN OR ADVERTISING REVENUE FROM THE
2 RELEVANT AREA AND STATE FOR EACH THE NAME OF THE
3 MANAGING EDITOR," ET CETERA.
4 IN RESPONSE TO SPECIFICATION NUMBER 2 THE HEARST
5 CORPORATION ANSWERED:
6 "SAN FRANCISCO CHRONICLE, SAN FRANCISCO
7 EXAMINER AND THE SUNDAY EXAMINER AND CHRONICLE."
8 DO YOU SEE THAT?
9 A. I SEE THAT.
10 Q. THEY MENTION NO OTHERS; CORRECT?
11 A. I SEE THAT, YES.
12 Q. SO WHEN IT REFERRED TO THE RELEVANT AREA, YOU UNDERSTOOD
13 IT TO MEAN SAN FRANCISCO; CORRECT?
14 A. AT LEAST FOR PURPOSES OF SPECIFICATION 13 THAT WAS MY
15 UNDERSTANDING. I'D HAVE TO GO BACK AND LOOK AT THE QUESTION
16 AND THE DEFINITIONS FOR SPECIFICATION 2 HERE. I DON'T KNOW. I
17 DON'T RECALL.
18 Q. SO YOU RETRACT THE TESTIMONY YOU JUST GAVE ABOUT FIVE
19 MINUTES AGO THAT THE RELEVANT AREA, ACCORDING TO THE
20 GOVERNMENT, WAS THE WHOLE BAY AREA? YOU RETRACT THAT; DON'T
21 YOU?
22 A. I DO NOT IN THE CONTEXT OF SPECIFICATION 13 AT ALL. THAT
23 WAS MY UNDERSTANDING.
24 Q. THEN DOES THAT MEAN THAT IN ANSWERING RESPONSE TO NUMBER
25 2 THAT YOU GAVE THE GOVERNMENT INADEQUATE INFORMATION?
857
ASHER - DIRECT / ALIOTO
1 A. I DON'T BELIEVE SO.
2 Q. I DIRECT YOUR ATTENTION TO PAGE 20 AND IN PARTICULAR
3 BEGINNING ON LINE 14, AGAIN OF EXHIBIT 16, WHICH IS THE ANSWERS
4 GIVEN BY THE HEARST CORPORATION TO THE UNITED STATES GOVERNMENT
5 INTERROGATORIES. AND BEGINNING ON PAGE 20, LINE 14, YOU STATE
6 OR HEARST STATES AS FOLLOWS, QUOTE:
7 "TO BE FULLY COMPETITIVE, A COMPETING
8 NEWSPAPER WOULD NEED TO HAVE APPROXIMATELY THE
9 SAME CIRCULATION AS THE SAN FRANCISCO
10 CHRONICLE -- 475,000 DAILY AND 590,000 SUNDAY.
11 THE MINIMUM DAILY AVERAGE CIRCULATION REQUIRED
12 TO MAINTAIN A 40 PERCENT MARKET SHARE IN THE
13 RELEVANT AREA WOULD BE APPROXIMATELY 300,000
14 DAILY AND 400,000 SUNDAY. SURVIVAL IS NOT
15 LIKELY BELOW THE 40 PERCENT SHARE RELATIVE TO
16 THE CHRONICLE."
17 DO YOU SEE THAT?
18 A. YES, I DO.
19 Q. DO YOU AGREE WITH THAT?
20 A. YES, I DO.
21 Q. DID YOU AGREE WITH IT AT THE TIME THAT YOU WERE
22 NEGOTIATING WITH THE MEMBERS OF THE FANG FAMILY?
23 A. YES, I DID.
24 Q. DID YOU TELL THEM THAT?
25 A. NO.
858
ASHER - DIRECT / ALIOTO
1 Q. LINE 19, QUOTE:
2 "ASSUMING THESE MINIMUM LEVELS OF
3 DISTRIBUTION, MODERN ERA PRINTING FACILITIES
4 WITH FOUR PRESSES EACH MADE UP OF 10 PRESS UNITS
5 AND A FOLDER CAPABLE OF PRINTING AT OVER TWICE
6 THE SPEED OF EXISTING AGENCY PRESSES WOULD BE
7 THE MINIMUM REQUIRED PRESS FIGURE. AT THE
8 CHRONICLE CIRCULATION LEVELS, SEVEN 10 UNIT
9 PRESSES WOULD BE NEEDED."
10 DID YOU BELIEVE THAT?
11 A. I WAS SATISFIED WITH THE ACCURACY OF THIS, YES.
12 Q. DID YOU BELIEVE IT AT THE PRESENT TIME THAT YOU NEGOTIATED
13 WITH THE MEMBERS OF THE FANG FAMILY?
14 A. YES.
15 Q. DID YOU TELL THEM THAT?
16 A. I DID NOT BECAUSE THEY DO NOT INTEND TO PUT OUT A
17 METROPOLITAN DAILY NEWSPAPER IN DIRECT COMPETITION WITH THE
18 CHRONICLE. WHAT IS BEING DESCRIBED HERE ON PAGE 20 IS WHAT
19 WOULD BE NECESSARY TO DO THAT, AND THAT IS NOT WHAT THE FANG
20 FAMILY IS DOING.
21 MR. ALIOTO: MAY I SEE THAT, PLEASE? MAY I JUST
22 HAVE THE FIRST PART OF THE LAST ANSWER READ, YOUR HONOR?
23 THE COURT: THE WITNESS STATED:
24 "I DID NOT BECAUSE THEY DO NOT INTEND TO PUT
25 OUT A METROPOLITAN DAILY NEWSPAPER IN DIRECT
859
ASHER - DIRECT / ALIOTO
1 COMPETITION WITH THE CHRONICLE."
2 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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24
25
860
ASHER - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. HOW DO YOU KNOW THAT?
3 A. BASED ON MY DISCUSSIONS DURING THE COURSE OF THE
4 NEGOTIATIONS.
5 Q. SO YOU WERE ADVISED, AS I UNDERSTAND IT NOW -- YOU WERE
6 ADVISED AND YOU UNDERSTOOD DURING YOUR CONVERSATIONS WITH THE
7 MEMBERS OF THE FANG FAMILY THAT THEY DID NOT INTEND TO PUT OUT
8 A METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
9 CHRONICLE. IS THAT YOUR TESTIMONY?
10 A. THAT IS CORRECT.
11 PERHAPS I SHOULD EXPLAIN WHAT A METROPOLITAN DAILY
12 NEWSPAPER IS.
13 Q. AND THAT WAS TOLD TO YOU BY SOME MEMBER OF THE FANG
14 FAMILY?
15 A. IT WAS TOLD TO ME BY HAVING THEM DESCRIBE THE NATURE OF
16 THE PRODUCT THAT THEY PLANNED TO PUT OUT, WHICH WAS A PRODUCT
17 FOCUSED ON THE CITY AND -- PRINCIPALLY THE CITY AND, LET'S SAY,
18 COUNTY OF SAN FRANCISCO. AND THAT IS NOT A METROPOLITAN DAILY
19 NEWSPAPER.
20 Q. AGAIN, THE QUESTION IS: AND THEY TOLD YOU THAT? THEY
21 TOLD YOU THAT THEY DID NOT INTEND TO PUT OUT A METROPOLITAN
22 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE? DID THEY
23 TELL YOU THAT?
24 A. NO. WHAT THEY TOLD ME IS WHAT THEY DID INTEND TO DO.
25 THEY DIDN'T TELL ME WHAT THEY DIDN'T INTEND TO DO.
861
ASHER - DIRECT / ALIOTO
1 Q. DID YOU ADVISE THE FEDERAL GOVERNMENT THAT YOU UNDERSTOOD
2 AND KNEW THAT THE AGREEMENT WITH THE EXIN GROUP, PAN ASIAN
3 GROUP, THAT THEY DID NOT INTEND TO PUT OUT A METROPOLITAN
4 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE? DID YOU
5 TELL THE GOVERNMENT THAT?
6 A. WE DID NOT.
7 Q. AND YOU KNOW THAT WHEN THE GOVERNMENT ISSUED ITS PRESS
8 RELEASE THAT IT SAID FOR THE FIRST TIME IN 35 YEARS THE PEOPLE
9 OF SAN FRANCISCO ARE GOING TO HAVE TWO COMPETING NEWSPAPERS --
10 TWO COMPETING DAILY NEWSPAPERS?
11 A. YES, I AM AWARE OF THAT.
12 Q. YOU DON'T THINK THAT YOU MISLED THE GOVERNMENT?
13 A. NOT AT ALL. THE GOVERNMENT FULLY QUESTIONED MR. FANG
14 DIRECTLY ABOUT HIS PURPOSES AND THE TYPE OF PRODUCT THAT HE
15 PLANNED TO PUT OUT. SO I AM SURE THE DEPARTMENT OF JUSTICE
16 KNEW EXACTLY WHAT PRODUCT WAS GOING TO BE PRODUCED BEFORE THEY
17 ISSUED THAT PRESS RELEASE.
18 Q. SO THAT WE ARE CLEAR, IF THIS ARRANGEMENT IS NOT STOPPED
19 AND IF IT GOES FORWARD AND HEARST CORPORATION IS ALLOWED TO BUY
20 THE CHRONICLE, THE PEOPLE OF SAN FRANCISCO NEED TO KNOW THAT
21 THERE WILL NOT BE A METROPOLITAN -- ANOTHER METROPOLITAN DAILY
22 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE.
23 YOU AGREE WITH THAT, DON'T YOU?
24 A. I DON'T THINK --
25 Q. THEY SHOULD KNOW THAT?
862
ASHER - DIRECT / ALIOTO
1 A. I AM NOT SURE I HAVE A VIEW OF WHAT THE PEOPLE OF SAN
2 FRANCISCO SHOULD KNOW. I WILL LEAVE THAT TO YOU.
3 Q. HAS THE HEARST CORPORATION REPRESENTED TO ANYONE IN THE
4 PUBLIC THAT BY REASON OF THIS ARRANGEMENT THAT NOW THERE WILL
5 BE A COMPETING NEWSPAPER, COMPETING DAILY METROPOLITAN
6 NEWSPAPER, COMPETING WITH THE CHRONICLE? DID THE HEARST
7 CORPORATION EVER ISSUE SUCH A STATEMENT?
8 A. NOT TO MY KNOWLEDGE.
9 Q. DID THE HEARST CORPORATION EVER ISSUE ANY STATEMENT,
10 PUBLIC STATEMENT, TO ANYONE AFTER THE AGREEMENT WITH THE PAN
11 ASIAN GROUP THAT THIS DID NOT MEAN THAT THERE WOULD BE A
12 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
13 CHRONICLE?
14 A. I'M SORRY. I THINK I GOT LOST IN THE NEGATIVES AND SO ON.
15 COULD YOU REPEAT THAT QUESTION?
16 Q. DID THE HEARST CORPORATION EVER ADVISE ANYONE, PUBLICLY,
17 THAT AFTER THE AGREEMENT WITH THE FANG GROUP THAT THAT DID
18 NOT -- THAT THERE WAS NOT GOING TO BE A MAJOR -- A DAILY
19 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
20 CHRONICLE?
21 A. NOT TO MY KNOWLEDGE.
22 Q. I DIRECT YOUR ATTENTION TO PAGE 23.
23 BY THE WAY, WITH REGARD TO THE PRESS -- PRESSES THAT
24 WE JUST WENT OVER BEFORE YOUR STATEMENT ABOUT NO INTENTION OF A
25 METROPOLITAN NEWSPAPER IN DIRECT COMPETITION WITH THE
863
ASHER - DIRECT / ALIOTO
1 CHRONICLE, YOU WERE TALKING ABOUT ITEM NUMBER 4 ON PAGE 20 OF
2 YOUR ANSWERS TO THE GOVERNMENT ABOUT 10 PRESS UNITS AND THAT
3 BEING A MINIMUM.
4 DO YOU REMEMBER THAT?
5 A. I SEE IT HERE, YES.
6 Q. OKAY. NOW, AS A MATTER OF FACT, DO YOU HAVE ANY NOTION AS
7 TO HOW MUCH 10 PRESS UNITS WOULD COST OR ANY NUMBER OF THEM?
8 A. AS I SIT HERE RIGHT NOW, I DON'T HAVE A NOTION, NO.
9 Q. NOW, IN YOUR AGREEMENT WITH THE EXIN, OR THE FANG GROUP,
10 YOU LIMITED THEM TO CAPITAL EXPENDITURES OF $3.3 MILLION A
11 YEAR, DIDN'T YOU?
12 A. NO, WE DID NOT IMPOSE ANY LIMITATION WHATSOEVER ON THE
13 AMOUNT OF CAPITAL EXPENDITURES THAT COULD BE MADE BY THE FANG
14 FAMILY. ALL WE SAID WAS THE REIMBURSABLE COSTS THAT WE WOULD
15 PAY FOR COULD NOT INCLUDE MORE THAN $3.3 MILLION OF CAPITAL
16 EXPENDITURES. THEY WERE FREE TO SPEND AS MUCH AS THEY WANTED
17 ON CAPITAL EXPENDITURES.
18 Q. SO YOU PUT A RESTRICTION ON THE SO-CALLED REIMBURSABLE
19 COSTS OF $3.3 MILLION FOR CAPITAL, CORRECT?
20 A. THAT IS CORRECT.
21 Q. AND YOU UNDERSTOOD, DID YOU NOT, THAT IF THEY WERE UNABLE
22 TO GET MONEY ELSEWHERE, THAT THAT $3.3 MILLION WOULD BE
23 INSUFFICIENT TO BE ABLE TO BUY THE NECESSARY EQUIPMENT TO PUT
24 OUT A PAPER IN COMPETITION WITH THE CHRONICLE?
25 A. NO, I DID NOT. BECAUSE THEY HAVE THEIR OWN PRINTING
864
ASHER - DIRECT / ALIOTO
1 CAPACITY.
2 Q. EVEN WITH THEIR PRINTING CAPACITY, YOU KNEW THAT THAT
3 AMOUNT WAS INSUFFICIENT TO BE ABLE -- FOR THEM, UNLESS THEY GOT
4 MONEY ELSEWHERE, IT WOULD BE INSUFFICIENT FOR THEM TO BE ABLE
5 TO GET THE NECESSARY EQUIPMENT TO PUT OUT A COMPETING PAPER
6 WITH THE CHRONICLE?
7 A. NO, I DID NOT KNOW THAT.
8 Q. GO TO PAGE 23. PAGE 23 -- PAGE 23 BEGINS WITH REGARD
9 TO -- YOU STATE AS FOLLOWS, QUOTE -- AND THESE ARE THE ANSWERS
10 TO THE GOVERNMENT FROM THE INTERROGATORIES.
11 I SHOULD GIVE A DATE, YOUR HONOR, AND I FORGOT TO DO
12 THAT. I APOLOGIZE. THESE WERE FILED ON OR ABOUT NOVEMBER 12,
13 1999.
14 YOU STATE AS FOLLOWS, QUOTE:
15 "IF AN ENTRANT DID NOT UTILIZE EXISTING
16 PRINTING FACILITIES, THE COST OF A NEW PRINTING
17 PLANT AND EQUIPMENT, ASSUMING A NEWSPAPER OF
18 300,000 CIRCULATION DAILY, 400,000 SUNDAY, IS
19 ESTIMATED AS FOLLOWS:"
20 THIS IS GIVEN TO THE GOVERNMENT -- "CAPITAL COSTS."
21 FIRST OF ALL, THE TOTAL CAPITAL COSTS SHOWN HERE ARE
22 $210 MILLION.
23 DO YOU SEE THAT ON LINE 12?
24 A. YES, I DO.
25 Q. OF WHICH APPROXIMATELY $100 MILLION IS FOR 40 UNITS OF
865
ASHER - DIRECT / ALIOTO
1 PRESS EQUIPMENT, MEANING THAT 10 UNITS WOULD BE $25 MILLION,
2 CORRECT?
3 A. I SUPPOSE IF THEY WERE ALL IDENTICAL, YES.
4 Q. CLEARLY, THIS AMOUNT, THE $210 MILLION, OR EVEN ANY -- OR
5 EVEN SOME PART OF THE PRESS EQUIPMENT, IS GREATER THAN WHAT YOU
6 WERE AGREEING TO SUBSIDIZE THE FANG FAMILY FOR, CORRECT?
7 A. I WOULD AGREE WITH THAT.
8 Q. SO THAT YOU KNEW WHEN YOU AGREED TO THIS THAT THERE WAS NO
9 CHANCE OF THIS PAPER BEING COMPETITIVE -- "THIS PAPER," MEANING
10 THE PAPER PUT OUT BY THE FANG FAMILY -- BEING COMPETITIVE TO
11 THE CHRONICLE?
12 A. I DID NOT KNOW THAT AT ALL. I THOUGHT WE WERE TALKING
13 ABOUT PRINTING PRESSES.
14 Q. YOU ALSO UNDERSTOOD, IF YOU WILL GO DOWN ON THAT PAGE, 23,
15 IT STATES: "RECOVERABLE COSTS."
16 AND IT HAS CERTAIN COSTS AFTER EACH ONE OF THESE --
17 RECOVERABLE COSTS OF $71 MILLION.
18 DO YOU SEE THAT?
19 A. YES.
20 Q. OKAY. THAT MEANS THAT IF SOMEONE WERE ABLE TO DO THIS AND
21 IT DIDN'T WORK OUT, THEY WOULD AT LEAST BE ABLE -- OUT OF THE
22 $210 MILLION, THEY WOULD BE ABLE TO GET $71 MILLION BACK
23 SOMEHOW -- SALE, SALVAGE, WHATEVER, CORRECT?
24 A. CORRECT.
25 Q. THE SUBCOSTS, OR THE ONES THAT THEY CAN COMPLETELY FORGET
866
ASHER - DIRECT / ALIOTO
1 ABOUT, THAT ARE GONE FOREVER, WOULD BE ABOUT $138 MILLION,
2 CORRECT?
3 A. CORRECT.
4 Q. YOU KNEW THIS AT THE TIME THAT YOU WERE NEGOTIATING WITH
5 THE FANG FAMILY, DID YOU NOT?
6 A. YES, I DID.
7 Q. IF YOU GO TO THE NEXT PAGE, PAGE 24. IN PAGE 24 IT
8 STATES, QUOTE:
9 "IN ADDITION IT SHOULD BE NOTED THAT ANNUAL
10 OPERATING EXPENSES BASED ON THE 1998 INLAND COST
11 STUDY FOR A NEWSPAPER OF 300,000 CIRCULATION
12 DAILY AND 400,000 SUNDAY IS $172,751,000."
13 DO YOU SEE THAT?
14 A. I DO.
15 Q. THOSE OPERATING EXPENSES ARE IN ADDITION TO THESE CAPITAL
16 EXPENSES THAT WE JUST WENT OVER, CORRECT?
17 A. CORRECT.
18 Q. SO EACH YEAR IT WOULD COST -- YOU UNDERSTOOD IT WOULD COST
19 APPROXIMATELY $172 MILLION IN ADDITION TO THE CAPITAL JUST TO
20 RUN THE THING?
21 A. IF WE ARE -- REMEMBER, WE ARE STILL TALKING ABOUT A
22 METROPOLITAN DAILY NEWSPAPER, WHICH, AMONG OTHER THINGS, HAS
23 ENORMOUSLY HIGH CIRCULATION AND DISTRIBUTION EXPENSE. SO THIS
24 IS NOT -- AGAIN, AS I HAVE SAID -- THE PRODUCT THAT THE . . . I
25 WILL STOP.
867
ASHER - DIRECT / ALIOTO
1 Q. AND IT WAS NEVER THE INTENTION OF THE HEARST CORPORATION
2 TO DO ANYTHING TO ENSURE THAT THERE WOULD BE ANY PAPER THAT
3 COULD POSSIBLY COMPETE AGAINST ITS CHRONICLE IF IT BOUGHT THE
4 CHRONICLE, CORRECT?
5 A. IN FACT, I THINK -- NO, THAT'S NOT CORRECT.
6 Q. THAT'S NOT CORRECT?
7 A. IN FACT, I THINK WE HAVE GONE TO THE EXTRAORDINARY STEP OF
8 ACTUALLY PROVIDING A SUBSIDY SO THAT THAT COMPETITION COULD
9 OCCUR AT LEAST TO SOME EXTENT IN THE CITY AND COUNTY OF SAN
10 FRANCISCO.
11 Q. WHEN YOU MET WITH THE FANG FAMILY, DID YOU TELL THEM IN
12 SUM OR OF YOUR BELIEF THAT THE OPERATION WOULD COST AT LEAST
13 $172 MILLION -- OPERATING EXPENSES ALONE. DID YOU TELL THEM
14 THAT?
15 A. WE DID NOT DISCUSS THE OPERATING EXPENSES FOR A
16 METROPOLITAN DAILY NEWSPAPER WHATSOEVER IN OUR DISCUSSIONS.
17 Q. NOW, YOU KNEW, DID YOU NOT -- I WANT TO GO BACK TO
18 EXHIBIT 100.
19 MAY I APPROACH THE WITNESS, YOUR HONOR?
20 THE COURT: YES, YOU MAY.
21 BY MR. ALIOTO:
22 Q. I SHOW YOU EXHIBIT 100 THAT WE WENT OVER BRIEFLY
23 YESTERDAY. EXHIBIT 100 IS A MEMO TO FILE BY YOU, DATED
24 DECEMBER 14, 1999, AND THE SUBJECT WAS SAN FRANCISCO, AND THIS
25 WAS YOUR MEETING WITH MR. BALABANIAN ABOUT THE -- THE FANG
868
ASHER - DIRECT / ALIOTO
1 FAMILY.
2 NOW, IF YOU WILL GO TO THE BOTTOM OF THE PAGE -- WE
3 WENT OVER THIS YESTERDAY. BUT AT THAT TIME MR. BALABANIAN
4 STATED, QUOTE:
5 "HIS PROPOSAL WHICH HE STATED WAS NEGOTIABLE
6 WAS THAT HEARST WOULD PAY 35 MILLION A YEAR
7 THROUGH THE END OF THE EXISTING TERM OF THE
8 JOA."
9 DO YOU SEE THAT?
10 A. YES, I DO.
11 Q. AND YOU UNDERSTOOD THAT THAT, THROUGH THE TERM, THAT WOULD
12 BE APPROXIMATELY $210 MILLION. YOU UNDERSTOOD THAT, RIGHT?
13 A. YES, I DID.
14 Q. AND YOU UNDERSTOOD THAT IF YOU GAVE A SUBSIDY IN THAT
15 RANGE THAT THAT MIGHT IN FACT CREATE A METROPOLITAN NEWSPAPER
16 THAT WOULD BE ABLE TO BE IN DIRECT COMPETITION WITH THE
17 CHRONICLE, MAYBE?
18 A. NO. I AM NOT SURE THERE IS ANY AMOUNT THAT WOULD
19 ACCOMPLISH THAT.
20 Q. YOU MEAN TO TELL ME WHEN YOU SAY YOU ARE NOT SURE OF ANY
21 AMOUNT YOU ARE JUST GOING TO GIVE THIS MONEY AWAY? IS THAT
22 WHAT YOU ARE SAYING?
23 A. GIVE WHAT MONEY AWAY?
24 Q. WELL, YOU ARE SAYING -- YOU SAID JUST NOW -- JUST NOW YOU
25 SAID, "I DON'T THINK IT COULD BE ACCOMPLISHED FOR ANY AMOUNT."
869
ASHER - DIRECT / ALIOTO
1 A. THE --
2 Q. SO DOES THAT MEAN YOU ARE JUST GIVING THIS MONEY AWAY?
3 A. I BELIEVE YOUR QUESTION TO ME WAS DID I KNOW THAT
4 $210 MILLION WOULD BE ENOUGH TO ESTABLISH A COMPETING
5 METROPOLITAN DAILY NEWSPAPER. AT LEAST THAT'S HOW I UNDERSTOOD
6 YOUR QUESTION. AND WHEN I ANSWERED I DIDN'T BELIEVE THERE WAS
7 ANY AMOUNT THAT WOULD DO THAT, THAT'S WHAT I WAS REFERRING TO.
8 I WAS NOT REFERRING TO WHAT YOU HAVE ON THE EASEL.
9 Q. OKAY. SO SINCE YOU KNEW THAT -- OR YOU BELIEVED THAT
10 THERE WASN'T ANY AMOUNT THAT COULD CREATE A METROPOLITAN
11 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE, THEN THAT
12 MEANS THAT GIVING THIS MONEY AWAY WAS JUST SOME KIND OF SHOW TO
13 PRETEND THAT MAYBE THERE MIGHT BE SOMETHING THAT YOU COULD AT
14 LEAST SAY LOOKS LIKE SOME KIND OF COMPETITION; IS THAT IT?
15 A. I RESENT THE IMPLICATION OF AN ADDED -- WELL, EXCUSE ME.
16 I WILL TRY TO COMPOSE MYSELF.
17 THE COURT: ALL RIGHT. JUST ANSWER THE QUESTION.
18 THE WITNESS: NO, I DO NOT AGREE WITH ANYTHING THAT
19 YOU JUST SAID.
20 BY MR. ALIOTO:
21 Q. DO YOU THINK THAT YOU ARE JUST THROWING THIS MONEY AWAY?
22 THIS 16 MILLION, 25 MILLION, 25 MILLION, DO YOU THINK YOU ARE
23 THROWING IT AWAY?
24 THE COURT: ISN'T THAT ARGUMENTATIVE, MR. ALIOTO?
25 MR. ALIOTO: IT IS. THANK YOU, YOUR HONOR. I'M
870
ASHER - DIRECT / ALIOTO
1 SORRY. I WILL WITHDRAW IT.
2 BY MR. ALIOTO:
3 Q. OKAY. I WOULD LIKE TO DIRECT YOUR ATTENTION TO PAGE 28,
4 PAGE 28, AGAIN, OF EXHIBIT 16. IT STATES AS FOLLOWS, BEGINNING
5 ON LINE 22 UNDER "FINANCIAL PLANS." IT FIRST HAS THE
6 "PERSONNEL" ON THAT PAGE, BUT THEN BEGINNING ON LINE 21, I'M
7 SORRY, "FINANCIAL PLANS," QUOTE:
8 "THE FOLLOWING PLANS WERE DEVELOPED AS AN
9 ALTERNATIVE IN THE EVENT THAT NO BUYER CAME
10 FORWARD TO ACQUIRE THE EXAMINER. FINANCIAL
11 INFORMATION IS CONTAINED IN ATTACHMENT."
12 THEN IT HAS "CIRCULATION:"
13 "AFTER ACQUISITION OF THE CHRONICLE, THE
14 PAID CIRCULATION IS EXPECTED TO BE APPROXIMATELY
15 509,000 DAILY AND 585,000 SUNDAY. CURRENTLY,
16 THE CHRONICLE AND EXAMINER DAILY READERSHIP
17 DUPLICATION IS SIGNIFICANT AND IT IS EXPECTED
18 THAT APPROXIMATELY 60 PERCENT OF THE EXAMINER
19 CIRCULATION WILL NOT BE ADDED TO THE CHRONICLE.
20 SUNDAY CIRCULATION IS PROJECTED TO DECLINE
21 SLIGHTLY BY APPROXIMATELY 14,000 COPIES. TOTAL
22 CIRCULATION REVENUE IS PROJECTED TO DECLINE IN
23 THE FIRST YEAR BY APPROXIMATELY $4.8 MILLION."
24 DO YOU SEE THAT?
25 A. YES, I DO.
871
ASHER - DIRECT / ALIOTO
1 Q. OKAY. NOW, THIS WAS AN EFFORT, WAS IT NOT, TO -- THIS IS
2 THE STATEMENT WHERE YOU SAY THIS IS CONTINGENT UPON WHAT YOU
3 DESCRIBE AS "NO BUYER CAME FORWARD TO ACQUIRE THE EXAMINER."
4 THAT'S WHAT THIS WAS ABOUT, CORRECT?
5 A. YES, IT WAS.
6 Q. AND THIS WAS THE JUSTIFICATION IF THE EXAMINER JUST WERE
7 FOLDED INTO THE CHRONICLE, CORRECT?
8 A. I DON'T THINK IT WAS A JUSTIFICATION. IT WAS JUST A
9 DESCRIPTION OF WHAT WE THOUGHT WOULD HAPPEN IF THAT OCCURRED.
10 Q. NOW, ALSO THERE HAS BEEN A LISTING OF THE NUMBER OF
11 PERSONS THAT WOULD BE REQUIRED TO RUN A NEWSPAPER, A MAJOR
12 METROPOLITAN NEWSPAPER, IN COMPETITION WITH THE CHRONICLE. BUT
13 WE WON'T GO OVER THAT NOW BECAUSE, AS I UNDERSTAND YOUR
14 TESTIMONY NOW, IT IS THE POSITION OF HEARST THAT THEY NEVER
15 INTENDED THAT ANYTHING THEY DID WITH ANY POTENTIAL BUYER OF THE
16 EXAMINER WOULD BE TO PUT THE -- WOULD BE TO MAKE A METROPOLITAN
17 NEWSPAPER IN DIRECT COMPETITION WITH THE CHRONICLE; IS THAT
18 RIGHT?
19 A. THAT IS CORRECT.
20 Q. MR. REILLY ALSO MADE A PROPOSAL TO YOU; IS THAT CORRECT?
21 A. YES.
22 Q. IS IT CORRECT THAT AFTER THREE DAYS -- THREE DAYS AFTER HE
23 MADE THE PROPOSAL YOU ENTERED INTO AN EXCLUSIVE AGREEMENT WITH
24 THE INDEPENDENT, WITH THE FANG FAMILY?
25 A. WELL, I BELIEVE HIS FIRST PROPOSAL WAS MADE WEEKS BEFORE
872
ASHER - DIRECT / ALIOTO
1 THAT.
2 Q. DID YOU ADVISE MR. REILLY THAT -- THAT YOU HAD ENTERED
3 INTO AN EXCLUSIVE THREE DAYS AFTER HE GAVE HIS LAST PROPOSAL TO
4 YOU?
5 A. NO.
6 Q. YOU SAID YESTERDAY THAT THE OFFER OF THE, QUOTE,
7 "EXTENSIVE POLITICAL CONSIDERATIONS" -- OR WAIT A MINUTE. I
8 BETTER GET THAT RIGHT.
9 YOU SAID YESTERDAY THAT WHEN IT WAS OFFERED TO YOU
10 BY THE FANG FAMILY THAT IF YOU REACHED AN AGREEMENT WITH THEM
11 THEY WOULD USE THEIR, QUOTE, "EXTENSIVE POLITICAL CONNECTIONS,"
12 END OF QUOTE, TO ASSIST US TO COMPLETING OUR PURCHASE OF THE
13 CHRONICLE. YOU SAID THAT THAT WAS A CONSIDERATION FOR YOU,
14 CORRECT?
15 A. I JUST WANT TO BE SURE I'M -- YOU'RE --
16 Q. DO YOU HAVE EXHIBIT 100 IN FRONT OF YOU?
17 A. YOU ARE REFERRING TO EXHIBIT 100 AND THE STATEMENT THAT I
18 SUMMARIZED TO OUR FILES THAT MR. BALABANIAN MADE TO ME IN OUR
19 MEETING IN DECEMBER --
20 Q. CORRECT.
21 A. -- OF 1999?
22 Q. RIGHT. CORRECT. AND NUMBER 4 SAYS, QUOTE:
23 "ASSUMING WE REACHED AGREEMENT ON ALL
24 MATTERS, THE FANGS WOULD USE THEIR EXTENSIVE
25 POLITICAL CONNECTIONS TO ASSIST US IN COMPLETING
873
ASHER - DIRECT / ALIOTO
1 OUR PURCHASE OF THE CHRONICLE."
2 DO YOU SEE THAT?
3 A. I DO.
4 Q. OKAY. AND THEN YESTERDAY YOU SAID THAT THAT WAS A
5 CONSIDERATION OF YOURS.
6 A. I BELIEVE I SAID IT WAS A MINOR CONSIDERATION.
7 Q. WELL, IN YOUR DEPOSITION YOU SAID, QUOTE:
8 "I SUPPOSE IT WAS A CONSIDERATION, YES."
9 DO YOU REMEMBER THAT?
10 A. I DON'T REMEMBER SPECIFICALLY IN MY DEPOSITION. I BELIEVE
11 YOU WERE ASKING ME ABOUT MY TESTIMONY YESTERDAY.
12 Q. OKAY. WELL, THERE IS NO --
13 A. THAT I DO REMEMBER.
14 Q. THERE WERE NO QUALIFICATIONS ON YOUR TESTIMONY IN YOUR
15 DEPOSITION, WERE THERE?
16 A. AH.
17 Q. ALL RIGHT. LET ME SHOW IT TO YOU. I HAND YOU --
18 MAY I APPROACH THE WITNESS, YOUR HONOR?
19 THE COURT: YOU MAY.
20 BY MR. ALIOTO:
21 Q. I HAND YOU WHAT IS YOUR DEPOSITION, TAKEN ON TUESDAY,
22 APRIL 18, 2000. DIRECTING YOUR ATTENTION TO PAGE 98. TO PUT
23 IT INTO CONTEXT LET'S BEGIN ON -- I GUESS, ON PAGE 96, LINE 22:
24 "Q. DO THE FANGS HAVE POLITICAL
25 CONNECTIONS?
874
ASHER - DIRECT / ALIOTO
1 "A. I DON'T KNOW.
2 "Q. DO YOU THINK THEY DO?
3 "A. I DON'T KNOW IF THEY HAVE POLITICAL
4 CONNECTIONS.
5 "Q. DID YOU EVER TALK TO THEM ABOUT THAT?
6 "A. NO.
7 "Q. DID THEY EVER SAY THAT THEY WERE GOING
8 TO USE THEIR POLITICAL CONNECTIONS TO HELP YOU
9 ACQUIRE THE CHRONICLE?
10 "A. IN THE CONTEXT OF DECIDING UPON WHICH
11 PARTY THAT WE WOULD SELL THE EXAMINER TO, THEY
12 DID MAKE THE ARGUMENT THAT THEY THOUGHT THAT A
13 SALE TO THEM WOULD ASSIST IN RESOLUTION OF
14 ISSUES THAT HAD BEEN RAISED BY LOCAL
15 GOVERNMENTAL AUTHORITIES.
16 "Q. WHO MADE THAT ARGUMENT?
17 "A. I BELIEVE THEIR COUNSEL MADE IT TO ME,
18 ALTHOUGH I JUST DON'T RECALL EXACTLY."
19 GOING DOWN TO PAGE 98:
20 "Q. WAS THAT A CONSIDERATION TO YOU WHEN
21 DECIDING TO WHOM TO SELL THE PAPER?
22 "A. I SUPPOSE IT WAS A CONSIDERATION, YES."
23 DID YOU GIVE THOSE ANSWERS TO THOSE QUESTIONS?
24 A. YES, I DID.
25 Q. AND YOU WERE UNDER OATH, WERE YOU NOT?
875
ASHER - DIRECT / ALIOTO
1 A. YES, I WAS.
2 Q. AND THOSE ANSWERS ARE TRUE, ARE THEY NOT?
3 A. YES.
4 THE COURT: TELL ME WHEN YOU REACH A CONVENIENT
5 BREAKING POINT.
6 MR. ALIOTO: NOW IS FINE, YOUR HONOR.
7 THE COURT: ALL RIGHT. FINE. WHY DON'T WE TAKE
8 UNTIL 10:00 O'CLOCK AND WE WILL RESUME WITH FURTHER TESTIMONY
9 BY MR. ASHER.
10 (RECESS TAKEN AT 9:45 A.M.)
11 (PROCEEDINGS RESUMED AT 10:05 A.M.)
12 THE CLERK: PLEASE REMAIN SEATED. COME TO ORDER.
13 THIS COURT IS NOW IN SESSION.
14 THE COURT: MR. ALIOTO, DO YOU WISH TO CONTINUE YOUR
15 EXAMINATION OF MR. ASHER?
16 MR. ALIOTO: I DO, YOUR HONOR. THANK YOU.
17 BY MR. ALIOTO:
18 Q. MAY IT PLEASE YOUR HONOR.
19 I WOULD LIKE TO DIRECT YOUR ATTENTION TO YOUR
20 DEPOSITION AT PAGE 58. AND WITH REGARD TO YOUR ANSWER AT PAGE
21 58 ON LINE 8, I WANT TO READ THIS ANSWER AND THEN ASK YOU
22 WHETHER OR NOT YOU GAVE IT UNDER OATH DURING YOUR DEPOSITION.
23 THE COURT: IS THAT TRANSCRIPT --
24 MR. ALIOTO: IT IS PAGE 58, YOUR HONOR.
25 THE COURT: HAS THAT BEEN SUBMITTED TO THE COURT?
876
ASHER - DIRECT / ALIOTO
1 MR. ALIOTO: YOU DO HAVE THE ASHER --
2 MR. SHULMAN: (INDICATING).
3 MR. ALIOTO: OH, NO, YOU DON'T. I DIDN'T REALIZE
4 THAT. I'M SORRY.
5 IT'S SEALED SO WE REQUEST THAT IT BE UNSEALED.
6 THE COURT: PAGE?
7 MR. ALIOTO: PAGE 58 OF IT, PLEASE, YOUR HONOR, AND
8 THE ANSWER BEGINS ON LINE 8.
9 BY MR. ALIOTO:
10 Q. FIRST OF ALL, LET ME JUST SAY AS THE PREDICATE, THIS
11 MORNING I READ TO YOU EXCERPTS FROM THE TESTIMONY OF MR. WHITE,
12 MR. SIAS AND MR. FALK.
13 MR. FALK, YOU UNDERSTAND, IS IN CHARGE OF OPERATIONS
14 FOR THE SAN FRANCISCO NEWSPAPER AGENCY, CORRECT?
15 A. MR. FALK, YES.
16 Q. AND YOU UNDERSTOOD THAT MR. SIAS WAS IN CHARGE OF, AMONG
17 OTHER THINGS, THE OPERATIONS OF THE CHRONICLE?
18 A. AT THE EDITORIAL LEVEL, YES.
19 Q. AND MR. WHITE THE SAME; IS THAT NOT SO?
20 A. HE IS THE PUBLISHER, YES.
21 Q. AND YOU, YOU HAVE HAD NO -- AND THIS WAS IN RELATIONSHIP
22 TO YOUR AFFIDAVIT THAT YOU FILED WITH REGARD TO THE REVENUES.
23 AND YOU HAVE NO EXPERTISE, DO YOU, IN THE
24 OPERATIONAL LEVEL?
25 A. THAT IS CORRECT.
877
ASHER - DIRECT / ALIOTO
1 Q. AND YOU SAID SO AT PAGE 58 IN YOUR ANSWER TO -- BEGINNING
2 AT LINE 8, AS FOLLOWS:
3 "A. WELL, I THINK MY ANSWER STANDS. I
4 DON'T HAVE THE REQUISITE EXPERTISE TO MAKE THIS
5 TYPE OF -- MY KNOWLEDGE IS PUTTING TRANSACTIONS
6 TOGETHER. I DO NOT HAVE THE DETAILED KNOWLEDGE
7 AT THE OPERATIONAL LEVEL."
8 YOU GAVE THAT ANSWER UNDER OATH, DID YOU NOT?
9 A. I DID.
10 Q. AND IT'S A TRUE ANSWER?
11 A. YES, IT IS.
12 Q. AND NOW I WANT TO DIRECT YOUR ATTENTION ALSO TO PAGE 173
13 OF YOUR DEPOSITION. AND ON PAGE 173 IN PARTICULAR, LINE 7, AND
14 READING THAT ANSWER, BEGINNING AT LINE 7, STATES AS FOLLOWS,
15 QUOTE:
16 "A. I HAVE STATED BEFORE THAT MY AREA OF
17 EXPERTISE DOES NOT EXTEND TO THE DETAILS OF
18 OPERATIONS OF THE NEWSPAPER."
19 AND THEN IT GOES ON.
20 THAT IS TESTIMONY THAT YOU GAVE, IS IT NOT?
21 MR. HALLING: CAN YOU FINISH, PLEASE, READING THE
22 ANSWER?
23 MR. ALIOTO: YES. I CAN READ THE WHOLE THING:
24 "A. I HAVE STATED BEFORE THAT MY AREA OF
25 EXPERTISE DOES NOT EXTEND TO THE DETAILS OF
878
ASHER - DIRECT / ALIOTO
1 OPERATIONS OF THE NEWSPAPER. MY BELIEF ON THE
2 VIABILITY OF THE EXAMINER IS -- WOULD BE BASED
3 OR IS BASED MORE ON THE SALES PROCESS. AT THIS
4 TIME THE SALES PROCESS -- AND IT CONTINUED
5 THROUGH THE END OF THE SALES PROCESS -- THE
6 MARKET WAS TELLING ME THAT NO ONE WAS INTERESTED
7 IN BUYING THE EXAMINER WITHOUT A SUBSTANTIAL
8 CASH SUBSIDY."
9 DID YOU GIVE THAT ANSWER?
10 A. YES, I DID.
11 Q. AND THAT ANSWER WAS TRUE AND UNDER OATH?
12 A. YES, IT WAS.
13 Q. OKAY. AND WITH REGARD -- SO THAT YOUR PARTICULAR
14 EXPERTISE WAS IN THE SALE PROCESS, MEANING, THE SALE OF THE
15 EXAMINER -- TRANSACTION PROCESS?
16 A. THAT IS CORRECT.
17 MR. ALIOTO: YOUR HONOR, I ALSO WISH TO READ CERTAIN
18 PORTIONS FROM THE MEMORANDUM THAT WAS FILED BY THE DEFENDANTS
19 IN THIS CASE IN OPPOSITION -- IT'S THE OPPOSITION OF DEFENDANT
20 THE HEARST CORPORATION TO THE PLAINTIFF'S MOTION FOR A
21 PRELIMINARY INJUNCTION.
22 THE COURT: VERY WELL.
23 MR. ALIOTO: THE FIRST READING WOULD BE FROM PAGE 1
24 IN THE INTRODUCTION, BEGINNING ON LINE 13, QUOTE:
25 "PAN ASIA INTENDS TO MOVE THE EXAMINER TO
879
ASHER - DIRECT / ALIOTO
1 MORNING PUBLICATION AND OPERATE IT AS A
2 FREE-STANDING DAILY NEWSPAPER IN DIRECT
3 COMPETITION WITH THE CHRONICLE."
4 DO YOU BELIEVE THAT THAT'S AN ACCURATE STATEMENT?
5 A. YES, I DO.
6 Q. DID YOU READ THIS AT THE TIME THAT THIS MEMORANDUM WAS
7 FILED?
8 A. YES.
9 Q. SO THAT -- AND YOU KNEW THAT IT WAS BEING REPRESENTED TO
10 THE COURT THAT PAN ASIA INTENDS TO MOVE THE EXAMINER TO MORNING
11 PUBLICATION AND OPERATE IT AS A FREE-STANDING DAILY NEWSPAPER
12 IN DIRECT COMPETITION WITH THE CHRONICLE?
13 A. THAT WAS OUR UNDERSTANDING OF THE FANG FAMILY'S INTENT.
14 NOTE THAT THE WORD "METROPOLITAN" IS NOT IN THAT SENTENCE.
15 Q. WELL, THEN, LET ME -- LET ME SKIP TO PAGE 5 WHERE
16 "METROPOLITAN" IS IN THE SENTENCE, PAGE 5, BEGINNING AT LINE
17 19. IT WAS STATED TO THE COURT, QUOTE -- BY THE HEARST
18 CORPORATION:
19 "ALSO PAN ASIA CLAIMS THE NEW EXAMINER WILL
20 BE THE FIRST MAJOR ASIAN AMERICAN OWNED
21 METROPOLITAN DAILY IN THE UNITED STATES."
22 YOU READ THAT AT THE TIME, DID YOU NOT?
23 A. YES.
24 Q. AND YOU KNEW IT WAS BEING REPRESENTED -- THIS WAS BEING
25 REPRESENTED TO THE COURT, CORRECT?
880
ASHER - DIRECT / ALIOTO
1 A. AS A CLAIM MADE BY THAT -- BY THE PARTY WHO MADE IT, YES.
2 Q. ALSO ON PAGE 5 IT WAS REPRESENTED TO THE COURT, AS
3 FOLLOWS, BEGINNING ON LINE 3, QUOTE:
4 "PAN ASIA HAS ANNOUNCED THAT IT INTENDS TO
5 PUBLISH THE EXAMINER AS A REGULAR SUBSCRIPTION
6 BASED PAID DAILY NEWSPAPER AND SWITCH THE
7 EXAMINER TO MORNING PUBLICATION TO COMPLETE
8 DIRECTLY WITH THE CHRONICLE. "
9 DID YOU BELIEVE THAT THAT WAS A FALSE STATEMENT
10 BEING MADE TO THE COURT?
11 A. I BELIEVE -- WE BELIEVED THAT THAT WAS AN ACCURATE
12 STATEMENT OF PAN ASIA'S INTENT.
13 Q. LINE 21, YOU REPRESENTED TO THE COURT AS FOLLOWS:
14 "HEARST'S PURCHASE OF THE CHRONICLE AND PAN
15 ASIA'S ACQUISITION OF THE EXAMINER WILL
16 DRAMATICALLY INCREASE BOTH LOCAL AND REGIONAL
17 DAILY NEWSPAPER COMPETITION IN THE SAN FRANCISCO
18 AREA FOR THE BENEFIT OF CONSUMERS, INCLUDING
19 MR. REILLY."
20 YOU BELIEVED THAT THAT STATEMENT THAT WAS MADE TO
21 THE COURT WAS A TRUE STATEMENT?
22 A. YES.
23 Q. AND ON PAGE 23 OF THE MEMORANDUM IN THE CONCLUSION
24 PORTION, THE FOLLOWING STATEMENT WAS MADE -- WAS REPRESENTED TO
25 THE COURT, QUOTE:
881
ASHER - DIRECT / ALIOTO
1 "THE ACQUISITION OF THE EXAMINER BY PAN ASIA
2 WILL FURTHER THE GOALS OF THE ANTITRUST LAWS BY
3 ESTABLISHING ECONOMICALLY COMPETITIVE DAILY
4 NEWSPAPERS IN SAN FRANCISCO FOR THE FIRST TIME
5 IN 35 YEARS."
6 DID YOU BELIEVE THAT THAT WAS A TRUE STATEMENT THAT
7 WAS BEING MADE TO THE COURT?
8 A. YES.
9 Q. THE TESTIMONY YOU GAVE BEFORE THE RECESS THAT YOU
10 UNDERSTOOD THAT THEY DID NOT INTEND TO HAVE -- THEY DID NOT
11 INTEND TO PUT OUT A METROPOLITAN NEWSPAPER IN DIRECT
12 COMPETITION WITH THE CHRONICLE, THAT WAS NOT REPRESENTED TO THE
13 COURT, WAS IT?
14 LET ME DO IT THIS WAY BECAUSE I HAVE, AS I
15 UNDERSTAND -- I WILL REPRESENT TO YOU THAT THIS IS THE ACTUAL
16 QUOTE FROM THE TESTIMONY OF ABOUT 20 MINUTES AGO ON --
17 APPARENTLY ON PAGE 33 OF THE PRELIMINARY RECORDING OF THE
18 TRANSCRIPT, YOUR HONOR. I KNOW IT'S NOT OFFICIAL BUT THIS IS
19 WHAT WE HAVE.
20 ABOUT 20 MINUTES AGO OR SO YOU STATED, QUOTE:
21 "THEY, "IN REFERENCE TO THE PAN ASIAN GROUP,
22 QUOTE, "THEY DO NOT INTEND TO PUT OUT A
23 METROPOLITAN DAILY NEWSPAPER IN DIRECT
24 COMPETITION WITH THE CHRONICLE."
25 YOU ARE AWARE, ARE YOU NOT, THAT THAT REPRESENTATION
882
ASHER - DIRECT / ALIOTO
1 WAS NOT MADE TO THIS COURT IN THE OPPOSITION TO THE PRELIMINARY
2 INJUNCTION?
3 A. I BELIEVE THAT'S CORRECT. I DON'T BELIEVE WE DISCUSSED
4 WHAT PAN ASIA DID NOT INTENT TO DO. I THINK WE DISCUSSED WHAT
5 THEY INTENDED TO DO.
6 Q. I WILL LET OTHERS THINK ABOUT THAT ONE.
7 I WANT TO DIRECT YOUR ATTENTION TO EXHIBIT NUMBER
8 71.
9 MAY I APPROACH THE WITNESS, YOUR HONOR?
10 THE COURT: YES, YOU MAY.
11 BY MR. ALIOTO:
12 Q. EXHIBIT NUMBER 71 IN EVIDENCE IS A DOCUMENT DATED
13 SEPTEMBER 8, 1998. IT IS DIRECTED TO GEORGE IRISH. IT IS FROM
14 FRANK BENNACK, JR. AND THERE IS A CARBON COPY SHOWN AS GOING
15 TO YOU.
16 NOW, DID YOU RECEIVE A COPY OF THAT DOCUMENT ON OR
17 ABOUT THE DATE INDICATED FROM MR. FRANK BENNACK, THE CHIEF
18 EXECUTIVE OFFICER OF THE HEARST CORPORATION?
19 A. YES, I DID.
20 Q. I DIRECT YOUR ATTENTION TO THE LAST PARAGRAPH ON THE FIRST
21 PAGE. MR. BENNACK MAKES THE FOLLOWING STATEMENT. IT JUST
22 BEGINS ON THE VERY LAST THREE WORDS OF THAT PAGE, "I TOLD
23 HIM" -- ON THE VERY LAST THREE WORDS, IT SAYS, "I TOLD HIM,"
24 AND THEN WE GO TO THE LAST PAGE -- THIS IS IN REFERENCE TO
25 MR. SIAS:
883
ASHER - DIRECT / ALIOTO
1 "I TOLD HIM, HOWEVER, THAT WE WERE CERTAINLY
2 GOING TO TAKE THE STEPS WE BELIEVE NECESSARY TO
3 PREPARE OURSELVES FOR THE RESUMPTION OF A FULLY
4 COMPETITIVE SITUATION IN THE POST-2005 PERIOD."
5 DO YOU SEE THAT?
6 A. YES, I DO.
7 Q. AND MR. BENNACK, WHO WROTE THIS DOCUMENT, IS THE CHIEF
8 EXECUTIVE OFFICER OF THE HEARST CORPORATION, CORRECT?
9 A. THAT IS CORRECT.
10 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
884
ASHER - DIRECT / ALIOTO
1 Q. AND YOU UNDERSTOOD THAT HE WAS TALKING ABOUT WHAT HE TOLD
2 MR. SIAS, THE CHIEF EXECUTIVE OFFICER OF THE CHRONICLE;
3 CORRECT?
4 A. THAT IS CORRECT.
5 Q. AND SO YOU KNEW AND WERE AWARE, AT LEAST AS OF SEPTEMBER
6 8, 1998, THAT MR. BENNACK HAD TOLD MR. SIAS THAT THE HEARST
7 CORPORATION WAS GOING TO TAKE THE STEPS THAT WERE NECESSARY TO
8 PREPARE HEARST FOR THE RESUMPTION OF A FULLY-COMPETITIVE
9 SITUATION AFTER 2005? YOU KNEW THAT?
10 A. YES.
11 Q. AND YOU UNDERSTOOD WHEN YOU READ THIS THAT RESUMPTION OF A
12 FULLY-COMPETITIVE SITUATION MEANT THAT THE EXAMINER WOULD BE
13 COMPETING HEAD TO HEAD AGAINST THE CHRONICLE IN SAN FRANCISCO
14 AFTER 2005; IS THAT RIGHT?
15 A. I BELIEVE THAT THAT IS WHAT MR. BENNACK WOULD HAVE BEEN
16 REFERRING TO HERE, YES.
17 Q. AND YOU UNDERSTOOD TOO AT THAT TIME, DID YOU NOT -- OR YOU
18 UNDERSTOOD THAT THERE WAS -- STRIKE THAT.
19 AND IT IS CORRECT, IS IT NOT, THAT THE EXAMINER
20 SPECIFICALLY ADVISED THE CHRONICLE THAT THEY INTENDED TO GO TO
21 THE MORNING, PUBLISH THEIR PAPER IN THE MORNING?
22 A. YOU SAID THE EXAMINER ADVISED THEM?
23 Q. YES.
24 A. I DO RECALL A LETTER FROM MR. WHITE, SO --
25 Q. YES.
885
ASHER - DIRECT / ALIOTO
1 A. -- IF THAT'S THE LETTER YOU'RE REFERRING TO.
2 Q. IT IS.
3 A. I'M AWARE OF THAT LETTER, YES.
4 Q. OKAY. LET ME SHOW IT TO YOU.
5 MR. ALIOTO: MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: VERY WELL.
7 BY MR. ALIOTO:
8 Q. LET ME SHOW YOU WHAT IS EXHIBIT 72 IN EVIDENCE. EXHIBIT
9 72 IN EVIDENCE IS A DOCUMENT DATED APRIL 15, 1999. IT IS FROM
10 TIMOTHY O. WHITE, EDITOR AND PUBLISHER SAN FRANCISCO EXAMINER,
11 AND IT IS DIRECTED TO MR. SIAS AND IT SHOWS A BLIND COPY TO
12 YOU.
13 DID YOU RECEIVE A COPY OF THAT DOCUMENT ON OR ABOUT
14 THE DATE INDICATED FROM MR. WHITE?
15 A. (WITNESS EXAMINES DOCUMENT.) YES, I DID.
16 Q. AND DID YOU, IN FACT, DISCUSS THIS LETTER PRIOR TO THE
17 TIME THAT HE SENT IT TO MR. SIAS?
18 A. YES, I DID.
19 Q. AND YOU REVIEWED THE LETTER, DID YOU NOT, BEFORE IT WENT
20 TO MR. SIAS?
21 A. YES, I DID.
22 Q. I WANT TO DIRECT YOUR ATTENTION TO PAGE 2. IS IT
23 CORRECT -- YOU ARE, IN ADDITION TO YOUR OTHER DUTIES AND
24 RESPONSIBILITIES, YOU ARE AN ATTORNEY; ARE YOU NOT?
25 A. YES, I AM.
886
ASHER - DIRECT / ALIOTO
1 Q. ARE YOU CHIEF COUNSEL FOR THE EXAMINER -- FOR THE HEARST
2 CORPORATION?
3 A. NO, I AM NOT. I AM CHIEF --
4 Q. WHAT IS YOUR LEGAL TITLE?
5 A. MY LEGAL TITLE IS CHIEF LEGAL OFFICER.
6 Q. SO YOU ARE THE CHIEF LEGAL OFFICER OF THE HEARST
7 CORPORATION; IS THAT RIGHT?
8 A. YES.
9 Q. OKAY. FIRST OF ALL, LET ME START FROM THE FIRST PAGE. ON
10 THE FIRST PAGE IT STATES THAT THERE'S ACKNOWLEDGMENT, IT'S THE
11 FOURTH PARAGRAPH AND THE LAST SENTENCE OF THAT, THAT THERE'S AN
12 ACKNOWLEDGMENT THAT THE, QUOTE:
13 "CHRONICLE DOES NOT INTEND TO EXTEND THE
14 JOINT OPERATING AGREEMENT BEYOND
15 SEPTEMBER 2005."
16 DO YOU SEE THAT?
17 A. I DO.
18 Q. SO YOU HAD THAT INFORMATION OBVIOUSLY BEFORE THIS LETTER
19 WAS SENT?
20 A. YES.
21 Q. AND WHO WAS THE SOURCE OF THAT INFORMATION TO YOU?
22 A. I BELIEVE -- WELL, I BELIEVE MR. -- IT WAS A COMMUNICATION
23 THAT MR. SIAS MADE TO MR. BENNACK. I BELIEVE THAT WAS THE
24 BASIS OF MY UNDERSTANDING HERE.
25 Q. OKAY. SO YOU GOT THE INFORMATION FROM MR. BENNACK
887
ASHER - DIRECT / ALIOTO
1 HIMSELF?
2 A. OR PERHAPS I SAW A COPY OF THE LETTER. I'M NOT SURE
3 EXACTLY HOW I CAME TO UNDERSTAND THIS.
4 Q. OKAY. THEN SECOND, GOING TO THE NEXT PARAGRAPH AND THE
5 SECOND SENTENCE OF THE NEXT PARAGRAPH, IT BEGINS, "THE
6 CHRONICLE'S UNILATERAL EFFORT." DO YOU SEE THAT?
7 A. YES.
8 Q. IT STATES, QUOTE: THE CHRONICLE'S UNILATERAL EFFORT WAS
9 MADE DESPITE THE HARM THIS WOULD DO TO THE AGENCY'S REVENUE AND
10 PROFIT AND THE CLEARLY DISPROPORTIONATE HARM TO EXAMINER
11 CIRCULATION. AS INDICATED IN PRIOR LETTERS, WE BELIEVE THIS TO
12 BE IN VIOLATION OF ANTITRUST LAWS AND THE AGREEMENT,
13 PARTICULARLY SECTIONS 3.1 AND 4.4 PAREN SMALL A END OF PAREN
14 PERIOD."
15 NOW, THE REFERENCE -- DO YOU SEE THAT?
16 A. YES, I DO.
17 Q. IT'S ON THE TOP OF PAGE 2.
18 ALL RIGHT. AND DID YOU, IN FACT, BELIEVE THAT THE
19 CHRONICLE'S CONDUCT WITH REGARD TO THIS PARTICULAR MATTER WOULD
20 HARM THE EXAMINER?
21 A. YES, I BELIEVED IT COULD.
22 Q. AND DID YOU BELIEVE THAT THAT HARM WOULD BE -- DID YOU
23 BELIEVE THAT THAT HARM TO BE IN VIOLATION OF THE ANTITRUST LAWS
24 OF THE UNITED STATES?
25 A. I DID NOT HAVE AN INDEPENDENT BELIEF IN THIS RESPECT. I
888
ASHER - DIRECT / ALIOTO
1 WAS RELYING ON WHAT I UNDERSTOOD WAS AN ARGUMENT THAT WE COULD
2 MAKE BASED ON THE ANTITRUST LAWS.
3 Q. OKAY. AND THAT --
4 MR. ALIOTO: MAY I USE THE EASEL, YOUR HONOR?
5 THE COURT: YES, YOU MAY.
6 BY MR. ALIOTO:
7 Q. LET'S SEE WHAT WE'RE TALKING ABOUT HERE. THE JOA
8 AGREEMENT, THIS IS IN 1990 -- I FORGOT -- 1998 -- '99, I'M
9 SORRY, APRIL 15, 1999.
10 OKAY. I'M GOING TO DRAW A STRAIGHT LINE ACROSS THE
11 TOP OF THE EASEL AND THEN DRAW A HORIZONTAL -- A VERTICAL LINE,
12 AND THIS WILL BE 2005 I'LL PUT ABOVE THE VERTICAL LINE. AND
13 THEN I'LL DRAW ANOTHER VERTICAL LINE BACK TO THE LEFT, AND THIS
14 IS APRIL OF 1999.
15 THE IDEA WAS THAT YOU KNEW OR STATED IN THIS LETTER,
16 OR MR. WHITE DID, THAT IN 2005 THERE WAS GOING TO BE NO -- NO
17 MORE JOA; CORRECT? THAT'S WHAT YOU UNDERSTOOD?
18 A. YES.
19 Q. AND YOU UNDERSTOOD WHAT MR. BENNACK SAID IS THAT HE TOLD
20 MR. SIAS THAT COME 2005, THE EXAMINER IS GOING TO BE READY TO
21 COMPETE HEAD TO HEAD WITH THE CHRONICLE; CORRECT?
22 A. THAT -- YES, I UNDERSTOOD THAT WAS THE STATEMENT HE MADE
23 TO MR. SIAS, YES.
24 Q. OKAY. SO HERE IS THE EXAMINER. I'M PUTTING THIS ON THE
25 STRAIGHT LINE, AND THE CHRONICLE. I'M PUTTING THEM TOGETHER
889
ASHER - DIRECT / ALIOTO
1 BECAUSE OF THE JOA. NOW, THEY HAVE TO BEGIN PREPARATIONS
2 BEFORE 2005 TO START TO SEPARATE. THAT WAS THE IDEA; RIGHT?
3 A. THAT WAS WHAT IDEA, THE -- THAT WAS WHAT MR. BENNACK WAS
4 REFERRING TO IN HIS STATEMENT.
5 Q. RIGHT. GETTING READY FOR THE HEAD-TO-HEAD COMPETITION;
6 RIGHT?
7 A. I DON'T BELIEVE THAT'S QUITE WHAT IT SAYS, BUT IT SAYS WE
8 WERE INTENDING TO TAKE THE STEPS TO GET READY FOR THAT, YES.
9 Q. AND THEN AFTER 2005, THE IDEA WOULD BE THE EXAMINER AND
10 THE CHRONICLE AND THEY WOULD BE COMPETING AGAINST EACH OTHER
11 HEAD TO HEAD TO SEE WHO WINS THIS RACE; RIGHT?
12 A. I DON'T BELIEVE THAT'S WHAT THIS SENTENCE SAYS.
13 Q. NO. THAT'S WHAT MR. BENNACK SAID. WE JUST DID HIS
14 LETTER.
15 A. CORRECT. I MEANT TO REFER BACK TO MR. BENNACK'S
16 STATEMENT.
17 Q. YES. THAT'S WHAT HE SAID. HE SAID THAT --
18 A. HE SAID THAT WE CERTAINLY WERE GOING TO TAKE THE STEPS WE
19 BELIEVE NECESSARY TO PREPARE OURSELVES --
20 Q. CORRECT.
21 A. -- FOR THE RESUMPTION. SO --
22 Q. OF A FULLY-COMPETITIVE SITUATION IN POST-2005 PERIOD;
23 RIGHT?
24 A. THAT IS WHAT THIS SAYS, YES.
25 Q. OKAY. AND THEN THEY WERE GOING TO -- TO PREPARE
890
ASHER - DIRECT / ALIOTO
1 THEMSELVES TO GET READY TO COMPETE HEAD TO HEAD AFTER 2005; IS
2 THAT RIGHT?
3 A. THAT IS WHAT THE STATEMENT SAYS.
4 Q. OKAY. SO THE IDEA IN THIS LETTER OF APRIL 15TH WAS, WITH
5 REGARD TO THE ANTITRUST LAWS, THAT ANY EFFORT BY THE CHRONICLE
6 TO TRY TO STOP OR HARM THE EXAMINER BEFORE THEY GOT TO THE
7 STARTING LINE OF 2005, THAT THAT WOULD HARM THEM AND PUT THEM
8 IN A LESS ADVANTAGEOUS POSITION TO BE ABLE TO COMPETE AGAINST
9 THE CHRONICLE AFTER 2005. THAT WAS THE IDEA; RIGHT?
10 A. NO, I ACTUALLY DON'T KNOW WHAT THE SPECIFIC CONCEPT OR
11 IDEA MIGHT HAVE BEEN OR WHAT THE ARGUMENT MIGHT HAVE BEEN IN
12 RESPECT TO THE ANTITRUST LAWS. I REALLY DON'T KNOW WHAT IT
13 WAS.
14 Q. WELL, YOU'RE THE CHIEF LEGAL OFFICER FOR HEARST AND YOU
15 REVIEWED THIS LETTER AND YOU SAW IT BEFORE IT WENT OUT, AND IT
16 STATES ON THE FIRST PAGE TO MR. SIAS FROM MR. WHITE, QUOTE:
17 "THE CHRONICLE'S UNILATERAL EFFORT WAS MADE
18 DESPITE THE HARM THIS WOULD DO TO THE AGENCY'S
19 REVENUE AND PROFIT AND THE CLEARLY
20 DISPROPORTIONATE HARM TO EXAMINER CIRCULATION."
21 THAT, YOU UNDERSTOOD, WAS WITH REGARD TO THIS
22 PRE-2005 PERIOD; DIDN'T YOU?
23 A. YES.
24 Q. AND YOU UNDERSTOOD THAT THE ANTITRUST ALLEGATION WAS THAT
25 THIS WOULD VIOLATE THE ANTITRUST LAWS BECAUSE IT WOULD KIND
891
ASHER - DIRECT / ALIOTO
1 OF -- IT WOULD HARM OR HURT THE EXAMINER BEFORE 2005 AND
2 SOMEHOW INHIBIT THE ABILITY OF THE EXAMINER TO COMPETE AFTER
3 2005; ISN'T THAT RIGHT?
4 A. NO. I BELIEVE I SAID I DON'T KNOW WHAT THE ANTITRUST
5 THEORY WOULD HAVE BEEN.
6 Q. WELL, AS THE CHIEF LEGAL OFFICER OF THE HEARST
7 CORPORATION, WHEN YOU HAVE THIS LETTER THAT YOU ARE SENDING
8 FROM THE EDITOR AND PUBLISHER OF THE EXAMINER TO THE
9 PRESIDENT/CHIEF EXECUTIVE OFFICER OF THE CHRONICLE, THERE'S AN
10 ALLEGATION OF ANTITRUST LAW VIOLATION, ISN'T IT YOUR DUTY AND
11 RESPONSIBILITY AND OBLIGATION TO FIND OUT WHAT THEY'RE TALKING
12 ABOUT?
13 A. I DON'T BELIEVE SO. I RELIED ON THE FACT THAT THIS WAS
14 REVIEWED BY MANY PEOPLE, INCLUDING THOSE WHO HAD EXPERTISE. SO
15 I DIDN'T -- AS I SAY, I DON'T KNOW WHAT THE ANTITRUST THEORY
16 COULD HAVE BEEN.
17 Q. OKAY. AT ANY RATE, YOU DIDN'T BELIEVE, DID YOU, THAT YOU
18 WERE SENDING A LETTER OUT OR A LETTER WAS GOING OUT BY THE
19 EDITOR AND THE PUBLISHER OF THE EXAMINER TO THE CEO OF THE
20 CHRONICLE THAT WAS INCORRECT?
21 A. I DON'T BELIEVE THAT WE WERE -- NO, I DON'T BELIEVE WE
22 WERE SAYING THINGS THAT WERE INCORRECT.
23 Q. YEAH. YOU WEREN'T -- YOU BELIEVED THAT THIS STATEMENT
24 THAT WAS BEING GIVEN TO MR. SIAS WAS TRUE; DIDN'T YOU?
25 A. IF I COULD EXPLAIN --
892
ASHER - DIRECT / ALIOTO
1 Q. WELL, FIRST TELL ME WHETHER YOU BELIEVED IT WAS TRUE; THEN
2 IF YOU WANT AN EXPLANATION, YOU CAN DO THAT TOO.
3 A. I BELIEVE IT WAS A TRUE STATEMENT OF OUR BELIEF. IT SAYS
4 "WE BELIEVE." IT IS MADE IN THE CONTEXT OF AT LEAST WHAT I
5 REGARDED AS A NEGOTIATION PROCESS THAT HAD BEEN GOING ON FOR A
6 LONG TIME.
7 Q. AS THE CHIEF LEGAL COUNSEL OF THE HEARST CORPORATION, YOU
8 DID NOT BELIEVE THAT THIS WAS MAKING A FRIVOLOUS CHARGE; DID
9 YOU?
10 A. NO.
11 Q. BECAUSE IF YOU DID THINK IT WAS A FRIVOLOUS CHARGE, THAT
12 WOULD BE UNETHICAL, WOULDN'T IT, FOR A LAWYER?
13 A. WELL, IF A LAWYER --
14 Q. WOULDN'T IT?
15 A. IF A LAWYER MADE A FRIVOLOUS CHARGE, YES, I DO BELIEVE
16 THAT WOULD BE UNETHICAL.
17 Q. AND THEN WHEN YOU REVIEWED THIS AS CHIEF LEGAL COUNSEL AND
18 YOU KNEW IT WAS GOING OUT TO THE HEAD OR -- AND YOU KNEW IT WAS
19 GOING OUT TO THE CHIEF EXECUTIVE OFFICER OF THE CHRONICLE, YOU
20 KNEW AND BELIEVED THAT THIS WAS NOT A FRIVOLOUS CHARGE;
21 CORRECT?
22 A. AS I HAVE STATED --
23 Q. DID YOU THINK IT WAS A FRIVOLOUS CHARGE?
24 A. I DID NOT THINK IT WAS A FRIVOLOUS CHARGE, THAT IS
25 CORRECT.
893
ASHER - DIRECT / ALIOTO
1 Q. THANK YOU.
2 IF YOU'LL GO TO THE BOTTOM OF THE PAGE. ON THE
3 BOTTOM OF THE PAGE IT STATES IN PARAGRAPH -- FULL PARAGRAPH --
4 IT'S THE SECOND FULL PARAGRAPH -- I'M SORRY, THIRD FULL
5 PARAGRAPH, IT BEGINS, "ACCORDINGLY." THIS IS AFTER THE DEATH
6 WARRANT FOR A MAJOR METROPOLITAN DAILY NEWSPAPER IN THE
7 AFTERNOON.
8 WELL, LET ME ASK YOU ABOUT THAT. IT STATES IN THE
9 THIRD PARAGRAPH, ABOUT THREE LINES DOWN:
10 "WE NOW KNOW THAT PUBLISHING IN THE P.M.
11 CYCLE IS A DEATH WARRANT FOR A MAJOR
12 METROPOLITAN DAILY NEWSPAPER."
13 DO YOU SEE THAT?
14 A. YES, I DO.
15 Q. I WANT TO ASK YOU, ARE YOU FAMILIAR WITH THE SITUATION IN
16 SEATTLE?
17 A. GENERALLY, YES.
18 Q. HEARST HAS A NEWSPAPER IN SEATTLE; IS THAT TRUE?
19 A. YES.
20 Q. HEARST HAS A NEWSPAPER -- HAD THE MORNING NEWSPAPER;
21 CORRECT?
22 A. YES.
23 Q. AND THERE WAS AN AFTERNOON NEWSPAPER; WASN'T THERE?
24 A. YES.
25 Q. AND THE AFTERNOON NEWSPAPER, WAS IT MORE -- DID IT HAVE
894
ASHER - DIRECT / ALIOTO
1 MORE CIRCULATION THAN THE HEARST MORNING PAPER?
2 A. I DON'T RECALL THE RELEVANT CIRCULATION -- THE COMPARATIVE
3 CIRCULATION.
4 Q. AND DID THE HEARST CORPORATION ASK THE AFTERNOON PAPER TO
5 ENTER INTO A JOA WITH IT?
6 A. I BELIEVE SO, BUT I DON'T -- I DON'T RECALL THE HISTORY OF
7 THE CREATION OF THAT JOA.
8 Q. YOU AT LEAST KNOW, DO YOU NOT, THAT HEARST WAS UNWILLING
9 TO CONTINUE COMPETITION EVEN THOUGH THE COMPETITION WAS IN THE
10 AFTERNOON IN SEATTLE; CORRECT?
11 A. WELL, MY UNDERSTANDING IS --
12 Q. DO YOU KNOW THAT?
13 A. NO. MY UNDERSTANDING IS THAT THE PAPERS ARE OPERATING
14 INSIDE OF -- INSIDE OF A JOA.
15 Q. IT GOES ON TO SAY, QUOTE:
16 "ACCORDINGLY, WE HEREBY FORMALLY REQUEST
17 YOUR CONCURRENCE IN OUR MOVING THE EXAMINER
18 EXPEDITIOUSLY TO THE A.M. CYCLE ALONGSIDE THE
19 CHRONICLE."
20 DO YOU SEE THAT?
21 A. YES, I DO.
22 Q. WAS THAT A TRUE STATEMENT?
23 A. WELL, THE STATEMENT WAS MADE HERE.
24 Q. I KNOW THE STATEMENT WAS MADE. DID HEARST MEAN IT?
25 A. DID WE MEAN IT?
895
ASHER - DIRECT / ALIOTO
1 Q. YES.
2 A. WE MEANT IT AS A REQUEST, WHICH IS WHAT IT SAYS HERE.
3 Q. YOU MEANT -- DID YOU MEAN AND INTEND THAT YOU WANTED TO GO
4 IN THE MORNING ALONGSIDE THE CHRONICLE OR WAS THAT A BLUFF?
5 A. WHAT WE WERE DOING HERE, AND MAYBE I SHOULD EXPLAIN SOME
6 OF THE BACKGROUND, BUT I BELIEVE IT'S ACTUALLY -- THE TESTIMONY
7 HERE EXPLAINS IT. WE OWNED ONE HALF OF THE PRINTING ASSETS.
8 WE OWNED THEM. WE PAID FOR THEM AND WE OWNED THEM. THE
9 CHRONICLE OWNED THE OTHER HALF. ALL OF THE PRINTING ASSETS,
10 HOWEVER, WERE NECESSARY TO PUT OUT THE CHRONICLE ON ITS CYCLE.
11 IF YOU LOOK AT THIS LETTER, IT MAKES A VARIETY OF
12 POINTS BECAUSE OUR MAJOR LEVERAGE IN OUR NEGOTIATIONS WITH THE
13 CHRONICLE RELATED TO THOSE PRINTING ASSETS.
14 SO, AND I BELIEVE IT'S REFERRED TO IN THIS LETTER,
15 WE TALK ABOUT THE FACT THAT WE'RE GOING TO REVIEW THE NEEDS
16 THAT WE WOULD HAVE FOR PRINTING ASSETS AT THE END OF THE JOA.
17 WE WERE GOING TO REVIEW THOSE, AND WE WANTED TO LAY THE
18 FOUNDATION THAT WE WERE GOING TO REVIEW THOSE IN THE CONTEXT OF
19 A MORNING PAPER BECAUSE ON THE --
20 Q. OF WHAT?
21 A. IN THE CONTEXT OF A MORNING PAPER.
22 Q. MORNING PAPER.
23 A. SO WE SAY TO THEM WE'D LIKE TO MOVE TO THE MORNING, AND
24 THEN WE POINT OUT THAT WE'RE GOING TO BE REVIEWING OUR NEEDS.
25 AND THE COMBINED MESSAGE TO THE CHRONICLE THAT WE WERE TRYING
896
ASHER - DIRECT / ALIOTO
1 TO CONVEY HERE IS THAT WHEN IT COMES TO THE DIVISION OF ASSETS
2 AT THE END OF THE JOA, WE'RE GOING TO WANT OUR FULL FAIR SHARE
3 AND NOT MERELY THE SHARE THAT WOULD BE ALLOCABLE TO AN
4 AFTERNOON PAPER.
5 SO YOU HAVE TO LOOK AT THE WHOLE LETTER HERE TO
6 UNDERSTAND WHAT'S GOING ON. IN FACT, YOU HAVE TO LOOK AT THE
7 WHOLE SEQUENCE OF LETTERS TO REALLY UNDERSTAND.
8 Q. OKAY. MY QUESTION TO YOU, AGAIN, IF YOU WILL LISTEN TO
9 THE QUESTION AND TRY TO ANSWER IT, IS: WHEN YOU MADE THIS --
10 WHEN THIS STATEMENT WAS MADE IN THIS LETTER, WHICH YOU REVIEWED
11 AND YOU AT THE TIME WERE THE CHIEF LEGAL OFFICER OF THE HEARST
12 CORPORATION, SO FAR AS YOU KNOW, DID THE HEARST CORPORATION
13 MEAN AND INTEND TO GO TO THE MORNING CYCLE ALONGSIDE THE
14 CHRONICLE OR WAS IT A BLUFF?
15 A. I DON'T THINK IT WAS EITHER OF THOSE.
16 Q. SO YOU DIDN'T MEAN IT AND IT WASN'T A BLUFF; IS THAT THE
17 TESTIMONY?
18 A. I BELIEVE MY TESTIMONY IS, TO BE CLEAR ON THIS --
19 Q. IT'S NOT CLEAR. I ASKED YOU --
20 MR. HALLING: OBJECTION, ARGUMENTATIVE AND HE
21 INTERRUPTED THE WITNESS.
22 THE COURT: WELL, OBJECTION OVERRULED. IT'S
23 CROSS-EXAMINATION.
24 PROCEED, MR. ALIOTO.
25 THE WITNESS: WE MEANT --
897
ASHER - DIRECT / ALIOTO
1 BY MR. ALIOTO:
2 Q. MR. ASHER --
3 A. WE MEANT --
4 Q. -- YOU EITHER MEANT IT OR IT WAS A BLUFF OR IT WAS JUST AN
5 OUTRIGHT LIE.
6 A. ALL RIGHT. IF YOU'RE GIVING ME THOSE CHOICES, WE MEANT
7 IT.
8 Q. NOW, YOU ALSO SAY THAT IF YOU GO IN THE MORNING, IT'S
9 GOING TO IMPROVE THE PROFIT OF BOTH PAPERS; CORRECT?
10 A. THAT WAS OUR ARGUMENT, YES.
11 Q. SO THAT IF THE EXAMINER WENT IN THE MORNING HEAD TO HEAD
12 WITH THE CHRONICLE, YOU BELIEVED THAT BOTH -- THAT THE
13 PROFITABILITY OF BOTH PAPERS WOULD BE IMPROVED; IS THAT RIGHT?
14 A. MY ONLY --
15 Q. IS THAT RIGHT?
16 A. IT IS CORRECT. HOWEVER, I WOULD POINT OUT THAT INSIDE THE
17 JOA THERE'S NO SUCH THING AS GOING HEAD TO HEAD. BUT, YES, IT
18 IS CORRECT WE ARGUED PRINCIPALLY BECAUSE OF THE COST SAVINGS OF
19 HAVING A SECOND PRINTING CYCLE AND A SECOND DISTRIBUTION CYCLE
20 THAT THERE WOULD BE INCREASED PROFITABILITY BY GOING TO THE
21 MORNING, NOT BECAUSE OF COMPETITION BUT BECAUSE OF COST
22 SAVINGS.
23 Q. NOW, YOU UNDERSTOOD ALSO THAT YOU HAD -- THE EXAMINER HAD
24 THE RIGHT, IF IT WANTED TO, TO SET ANY PRICE IT WANTED TO;
25 CORRECT? UNDER THE JOA YOU UNDERSTOOD THAT?
898
ASHER - DIRECT / ALIOTO
1 A. ANY PRICE FOR WHAT?
2 Q. YOU UNDERSTOOD THAT THE EXAMINER HAD THE RIGHT UNDER THE
3 JOA TO SET THE RATES FOR CIRCULATION AND FOR ADVERTISING;
4 CORRECT?
5 A. FOR ITS STAND-ALONE ADVERTISING AND CIRCULATION IT HAD THE
6 RIGHT UNDER THE AGREEMENT TO DO SO, YES.
7 Q. THERE'S NO STAND-ALONE ANYTHING IN THE JOA; IS THERE?
8 THEY HAD THE RIGHT AND THE RESPONSIBILITY TO SET THE PRICE FOR
9 THEIR AD RATES AND THEIR CIRCULATION UNDER THE JOA; ISN'T THAT
10 TRUE?
11 A. THE JOA AGREEMENT HAS PROVISIONS TO THAT EFFECT. BUT AS
12 YOU JUST SAID, THERE IS NO STAND-ALONE ADVERTISING; AND AS TO
13 JOINT ADVERTISING, THERE'S ONLY ONE WAY TO SET THAT RATE, AND
14 THAT IS FOR BOTH PARTIES TO AGREE ON IT.
15 Q. NOW, WHEN YOU WERE GOING TO GO IN THE MORNING AND YOU
16 BELIEVED THAT THIS WOULD IMPROVE THE PROFITABILITY OF BOTH THE
17 CHRONICLE AND THE EXAMINER, DID YOU INTEND TO COMPETE AGAINST
18 THE CHRONICLE ON RATES?
19 A. NO.
20 Q. DID YOU INTEND TO COMPETE AGAINST THE CHRONICLE ON
21 ADVERTISING PRICES?
22 A. NO. THERE IS NO COMPETITION INSIDE THE JOA.
23 Q. DID YOU INTEND TO COMPETE AGAINST THE CHRONICLE FOR STREET
24 SALES?
25 A. NO.
899
ASHER - DIRECT / ALIOTO
1 Q. IN TALKING ABOUT STREET SALES YOU KNOW YESTERDAY THAT THE
2 CHRONICLE REDUCED ITS STREET PRICE IN SAN FRANCISCO FROM 50
3 CENTS TO 25 CENTS? YOU KNOW THAT; RIGHT?
4 A. YES.
5 Q. AS A MATTER OF FACT, WHEN I POINTED THAT OUT TO YOU
6 YESTERDAY, YOU TESTIFIED YESTERDAY AFTERNOON AT PAGE 801, YOU
7 SAY, QUOTE, "IT SHOWS THERE'S SOME COMPETITION," END OF QUOTE.
8 A. THAT'S CORRECT, FROM THE SAN JOSE MERCURY NEWS, WHICH HAD
9 ANNOUNCED -- WHICH HAS ANNOUNCED THAT IT IS COMING INTO THE
10 CITY OF SAN FRANCISCO WITH A 25-CENT NEWSPAPER. THAT'S WHY
11 THAT RATE WAS CHANGED.
12 Q. OKAY. SO WHEN YOU SAY, "IT SHOWS THERE'S SOME
13 COMPETITION," WHEN YOU SAID THAT YESTERDAY, YOU WEREN'T
14 REFERRING TO THE CHRONICLE, YOU WERE REFERRING TO --
15 A. I WAS REFERRING --
16 Q. -- THE SAN JOSE MERCURY NEWS?
17 A. I WAS REFERRING TO THE REAL COMPETITION THAT EXISTS
18 BETWEEN THE CHRONICLE AND THE EXAMINER TODAY ON THE ONE HAND
19 AND THE SAN JOSE MERCURY NEWS ON THE OTHER. THAT'S WHAT I WAS
20 REFERRING TO.
21 Q. AND YOU KNOW THAT YOUR OWN PAPER, THE SAN FRANCISCO
22 EXAMINER, WENT ORIGINALLY FROM 50 CENTS TO 25 CENTS UNDER
23 MR. WILLIAM HEARST THE THIRD?
24 A. I'LL HAVE TO CONFESS THAT MY KNOWLEDGE IN THAT RESPECT
25 IS -- DOESN'T GO BACK THAT FAR.
900
ASHER - DIRECT / ALIOTO
1 Q. WELL, YOU KNEW THAT -- YOU KNEW OR UNDERSTOOD, DIDN'T YOU,
2 THAT THEY LOWERED THE PRICE IN ORDER TO TRY TO INCREASE THEIR