HEARST TRIED TO BLUFF CHRONICLE OWNERS

By: Joel Davis Examiner Publisher Admits Horse Trading With City's Mayor



SAN FRANCISCO - The failing San Francisco Examiner used
smoke-and-mirrors techniques to try to bluff the rival San
Francisco Chronicle into favorable business negotiations,
Examiner Publisher and Editor Timothy White admitted in
federal court Monday.



White, testifying in a federal antitrust lawsuit seeking to
block the sale of the Examiner to the Fang family and the
Chronicle to Hearst, also testified that he offered San
Francisco Mayor Willie Brown positive editorial backing in
exchange for help getting the Hearst purchase of the
Chronicle approved.



Grilled for hours by Joseph M. Alioto, attorney for Clint
Reilly, the San Francisco real estate developer who filed
the suit, White said he came to the Examiner in January 1999
from a sister Hearst paper in Albany, N.Y., fully aware he
was steering a sinking ship.



?I was very much like a physician attending a dying patient,?
White told the court. ?You are going to throw everything
you've got into saving him, and are not going to say he's on

the way out.?



White said he believes the prospects for the Examiner's
survival once the paper's joint operating agreement (JOA) with

the Chronicle expires in 2005 are slim to none. ?I was facing
the possibility of extinction,? he said.



When Chronicle CEO John Sias wanted to halt a 1999
cross-promotion in which Examiner subscribers could get the
Chronicle for free and vice versa, White, who said the promotion
brought the Examiner much-needed subscribers and advertising
revenue, informed Sias that Hearst planned to play hardball.
This included possibly switching the Examiner to a morning
paper for head-to-head competition, using Hearst's considerable
resources for increased news-gathering, and forging advertising
alliances with other chains in the Bay Area, including Knight
Ridder and Gannett.



Alioto repeatedly pressed White about financial details. Under
the JOA, the Examiner and Chronicle - which split revenue 50-50 -
each make about $20 million a year in pre-tax profits, White
testified. But because the Chronicle has 80% of the circulation,
it keeps the Examiner afloat, White said, which is why he used
every tactic possible to try to convince Sias it was in the
Chronicle's best interest to continue working with the Examiner
under the JOA. ?As long as I've got [Sias] by my side I'm stealing
70% of his money,? White said.



White said he was not privy to Hearst's negotiations for its August
purchase of the Chronicle for $660 million. But he acknowledged that
the Examiner's ?in your face? tactics were designed to convince the
Chronicle ownership that the Examiner was only going to increase
competition. This would make holdouts nervous and more agreeable to
the idea of selling to Hearst. ?I didn't want Chronicle non-sellers
to see we were just blowing smoke,? White said.



Following the Chronicle sale to Hearst for $660 million last August,
White said he contacted lawmakers to help ensure the deal would be
approved. This included meetings with Fang family matriarch Florence
Fang, Sen. Diane Feinstein, and San Francisco Mayor Brown.



Brown indicated he would do what he could to help Hearst in exchange
for more favorable coverage in the Examiner, White said. There were
audible gasps in the courtroom - which was full of spectators from
the media - when White admitted he engaged in some ?horse trading?
by assuring Brown that Examiner editorials would be more favorable
to the mayor.



Reilly's legal team is to trying to prove that the Hearst sale of the
Examiner to the Fang family is a sham and that Hearst is paying the
Fangs a three-year, $66 million subsidy to run the paper into the
ground rather than reinvesting the money into a revitalized
Hearst-owned Examiner. Hearst is doing this, Reilly's lawyers contend,
so it can ultimately have a monopoly in San Francisco with the
Chronicle once the Fang-owned Examiner folds.



Near the end of testimony on Monday, Alioto pressed White to explain
why Hearst doesn't think it can succeed with the Examiner on the one
hand, but believes the Fangs will make the paper a success on the
other. ?If anybody is going to make it work, we figure the Fangs have
the best shot at it,? an exasperated White told the court. ?We
couldn't figure it out.?



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