UPDATE: War Of Words Heats Up Over Reilly/MediaNews/Hearst Settlement

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By: Mark Fitzgerald and Jennifer Saba

There are a lot of unsettled feelings this weekend about the settlement that ended San Francisco businessman Clint Reilly’s lawsuit alleging MediaNews Group and Hearst Corp., publisher of the San Francisco Chronicle, were trying to monopolize the Bay Area newspaper market.

Friday, MediaNews Group President Jody Lodovic accused Reilly attorney Joe Alioto of misrepresenting terms of the settlement — and said the Denver-based chain was “strongly considering” suing him for breaching confidentiality terms of the agreement.

Saturday, an angry Alioto fired back, telling E&P that it’s MediaNews that is spinning the agreement for its own internal political reasons.

“I want to be very clear that I’m very upset about how Dean (MediaNews CEO William Dean Singleton) and Lodovic have reacted about that,” Alioto said. ” Any effort by Jody to sue — I hope he does, because then I’ll end up with his MediaNews stock, I can promise that.”

The brouhaha began with comments Alioto made to E&P Wednesday, on the day the settlement was announced. Alioto said the settlement would preserve smaller MediaNews-owned dailies in the Bay Area that he said were otherwise “headed for the graveyard.”

“The Oakland Tribune, the Fremont Argus, San Mateo (County Times), (The Daily Review in) Hayward, Novato (Marin Independent Journal) — all of those papers were heading for the graveyard,” Alioto told E&P Wednesday. “There was pretty strong evidence those papers were going to go out. By reason of our agreement, I think, they’ll stay alive, at least for three years.”

Friday, Lodovic called that “the most absurd comment I’ve every heard in my life.”

He added, “The bottom line is there’s no basis for him to comment on the viability of these newspapers in the Bay Area.”

Saturday, Alioto repeated his argument that the settlement was key to the survival of the smaller papers. The original goal of the lawsuit was to unwind the sales and trades among The McClatchy Co., Hearst and MediaNews that gave MediaNews ownership of two big former Knight Ridder Bay Area dailies, the San Jose Mercury News and the Contra Costa Times. Joining those two papers with other MediaNews Bay Area dailies was fundamental to keeping the smaller papers competitive, Alioto said.

?I wasn?t trying to suggest, and I wouldn?t try to suggest, those papers are going to be closed up,? Alioto said. ?The very reason we stopped where we did was (so) … that couldn?t happen.?

Lodovic said Alioto also had “overstated the things that Reilly gets, and he keeps saying things that are not in the settlement.”

Alioto said his comments were completely appropriate under terms of the settlement allowing ?general? discussion of the agreement.

?There?s no question,? he said, ?that Mr. Reilly and I myself did not make any misrepresentations at all. Period. And we didn?t and we wouldn?t. They had told us there wouldn?t be any more discussion. As far as I?m concerned, they opened it up.?

MediaNews, citing Alioto?s remarks at a news conference earlier in the week, on Friday released parts of the settlement agreement, and appended statements asserting that ?nothing in the settlement terms deviates from normal policies already in existence.?

Baloney, Alioto said Saturday: “The notion that they’re trying to suggest, that there’s nothing new here is absolutely a joke.”

Here are the claims and counter-claims about the key elements of the settlement:

Newspaper editorial board participation

Lodovic said Alioto is wrong — and in breach of the confidentiality terms of the agreement — to say that Reilly has the right to sit on the editorial board any California Newspaper Partnership (CNP) newspaper he chooses.

Reilly cannot sit on the editorial board any paper he chooses, Lodovic said, only on a paper whose editor agrees it is okay. Similarly, while the settlement allows Reilly to “recommend” a private citizens to sit on the editorial boards of every CNP paper, the editors do not necessarily have to pick the recommended candidate, and can appoint someone else, he said.

Counters Alioto: “Clint Reilly will be on any editorial board he wants to be on.”

The settlement “technically requires” the approval of editors, as a practical matter Reilly will be accepted by whatever paper he chooses, Alioto said. As far as recommending private citizens for the editorial board of the rest of CNP, Alioto said: “Each citizen, however, that he recommends, the editors can decide whether he wants that person. He can keep (recommending) them until (the editors) pick one.”

Providing space for Reilly’s “personal copy” in all CNP papers

“This is paid space,” Lodovic said. “(Alioto’s) running around telling everyone (Reilly’s) getting it for free. We haven’t got any terms for it yet, but it’s paid space.” The settlement terms amount to preferential positioning once a week for advertising, Lodovic said.

“It’s free — let’s make that real clear,” Alioto said Saturday. “They’re using this language to confuse you. We are absolutely not negotiating over terms.”

In settlement talks, Alioto said, MediaNews said editors would be upset about not controlling content in non-advertising space.

“They even said, we may even send you a bill — which we can throw away. Which is a joke. That’s the politics they’re dealing with,” Alioto said.

Future collaboration among Bay Area papers

The settlement calls for MediaNews to provide copies of the minutes for CNP management meetings and notice of any planned discussions of cooperative efforts with Hearst’s San Francisco Chronicle.

Lodovic responded to Alioto’s remarks who said on Wednesday, “If there’s any suggestion by anybody of any kind of discussion or cooperative effort (between companies), we will be immediately notified,” Alioto said. “Because, obviously, if they have that — we’ll just sue them again,” he added.

Lodovic stressed that MediaNews Group only must alert Reilly of any possible distribution or other cooperative efforts with the Chronicle should they occur, not seek out permission. And if any future strategies make sense, the companies will move forward. “Quite frankly him threatening to sue me again doesn’t scare me,” Lodovic added.

In its statement, MediaNews said it has no current plan to discuss cooperative efforts, and that ?no action would be contemplated unless it fully complies with the law.? That is not a change in policy, the company added.

Nonsense, Alioto countered: ?If it weren?t for Clint Reilly, the price-fixing agreement, the distribution agreements, would have gone forward. Competition would have been reduced to nothing for paid newspapers, period. Reilly alone is responsible for this.?

Alioto was referring to an agreement, disclosed to the Justice Department?s antitrust division and brought to public attention by the Reilly lawsuit, between Hearst and MediaNews to discuss possible cooperation on national advertising sales and Internet ventures.

The two sides disagree vehemently on the significance of the April 2006 document, which Lodovic Friday called ?the most benign agreement.? MediaNews and Hearst have said it was only an agreement to talk about cooperation, and far from an plan for implementation. A federal judge earlier this year blocked the collaboration outlined in the document.

In separate statements about the settlement, Hearst and MediaNews said they had decided before the lawsuit settlement to make ?certain changes? as a result of the Hart-Scott-Rodino review by the Justice Department.

?They say they were going to do it anyway — what a joke,? Alioto said. ?If they were going to do it anyway, why didn?t they do it before the court order??

The settlement aids MediaNews in continuing to offer diverse voices in the Bay Area, Alioto suggested.

?MediaNews lets its newspapers have great independence in what they say, and that is one of the great respects we have for them,? he said. ?they have independent editorial staffs, and they encourage that independence. And nothing we said was intended to deprecate that notion, or minimize it in the least.?

A full copy of MediaNews Group?s statement on the agreement follows below.

***

Following a press conference in San Francisco Wednesday morning, hosted by Clint Reilly and Joseph Alioto, announcing settlement of their litigation against MediaNews Group, Hearst and others, there appears to be some confusion on certain of the terms of settlement.

Below are the exact terms as lifted from the agreement:

Provisions Regarding McClatchy Acquisitions

In satisfaction of Reilly’s release of all claims concerning the McClatchy acquisitions, as set forth hereafter, MNG and CNP agree as follows:

A. A citizen will be appointed to each of the CNP San Francisco Bay Area daily newspaper editorial boards. Such citizens will be appointed to one-year terms, and can be recommended by Reilly subject to approval by the respective editorial boards. Such citizen representation shall continue for a minimum of three (3) years.

B. Reilly at his discretion will receive a one-quarter (1/4) page of paid space for personal copy, placement to be in the local section, in substantially the same place on the same day once a week, in each CNP San Francisco Bay Area newspaper for a period of three (3) years.

C. MNG will promptly provide Reilly, subject to an appropriate confidentiality agreement, for a period of three (3) years: (i) copies of the agendas and minutes of the CNP Management Committee meetings at such time as the CNP Management Committee members receive them; and (ii) notice of any planned discussion of cooperative efforts with the Chronicle or any other non-CNP San Francisco Bay Area paid daily newspaper.

Nothing in the settlement terms deviates from normal policies already in existence.

A. MediaNews encourages its newspapers to include citizens in their editorial board process, but leaves the choices for that representation to the local editorial boards, as this agreement does. We welcome recommendations from any reader or community leader, including Mr. Reilly.

B. MediaNews welcomes citizens … including Mr. Reilly … who wish to place paid space to sell products or express ideas. All citizens are invited to use paid space for any purpose they choose.

C. Our Bay Area newspapers currently have no plans to discuss cooperative efforts with the San Francisco Chronicle. If we do in the future, no action would be contemplated unless it fully complies with the law. That has always been our position in the past, and remains so today.

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