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Very late in August, Brown, White, and Examiner Executive Editor Phil Bronstein consume the now-infamous lunch, where White, by his own court testimony, agrees to "horse trade" favorable treatment of Mayor Brown in the Examiner's editorial pages for Brown's general aid -- or at least diminished opposition -- to Hearst's bid for the Chronicle.
Over the ensuing months, a host of prominent politicos seek meetings with White to discuss, or at least hover around in some general way, the fate of the Chronicle and Examiner. Early this year, for example, Brown sets up a meeting among White, the mayor, City Attorney Louise Renne, and U.S. Rep. Nancy Pelosi. Shortly thereafter, U.S. Sen. Dianne Feinstein lunches with White and Florence Fang, matriarch of the Fang family, which owns the Independent.
Throughout this period, the Independent continues a vituperative campaign against Hearst's plans for the Chronicle and Examiner, as the paper's owners privately maneuver to buy the Examiner, with the advice of local investment guru and political powerhouse Warren Hellman.
Throughout the process, according to an unidentified Hearst executive quoted by Carlsen and Holding, Hearst management is "amazed" at just how much the Fangs and Davis seem to know about the Justice Department's review of Hearst's proposed purchase of the Chronicle.
And as the discussing and hovering and meetings continue, the Justice Department's review never seems to reach a conclusion.
Hearst announces plans to "sell" the Examiner to a Fang-owned company in March. From an outside perspective, this looks like perhaps the strangest sale in the history of media mergers and acquisitions. In the proposed deal, the Fangs agree to pay Hearst $100 -- that's right, a lone C-note -- and to receive, from Hearst, a potential $66 million subsidy, paid over a period of just less than three years, to help them run the Examiner in supposed competition with a Hearst-owned Chronicle. Out of context, the deal is simply absurd.
In the context of the campaign of political posture and intimidation Hearst faced, however, the deal begins to make a sick sort of sense. Hearst could not be sure whether the mayor, other political players, or their allies had some kind of "in" with the Justice Department or other government agencies that might hold up the Chronicle purchase. Assuming such an "in" did not exist would be an act of faith; the mayor and his various allies were doing just about everything possible to suggest they did, indeed, have a connection to, or influence over, the Justice Department antitrust review, and that the way to make sure that influence was not exercised involved Hearst "selling" the Examiner to the Fangs. In the face of this campaign, Hearst, to its everlasting shame, decided to cut a deal, and to pay the Fangs to "buy" the Ex.
The Hearst executives who agreed to the deal deserve to eventually find themselves in the circle of hell reserved for journalists who betray their craft.
But the politicians and hangers-on who helped create the campaign that apparently pushed Hearst into the ridiculous "sale" of the Examiner to the Fangs deserve something, too: a long, painful, detailed federal investigation of each and every contact among those players and anyone in the U.S. Justice Department's antitrust division.
There is at least the appearance, here, of the possible misuse of government power for the purposes of extortion of private business. The people who must live with the government officials and newspapers involved in this sordid affair deserve a reliable accounting of just what happened. They also deserve appropriate action, if what happened traversed the bounds of law.
Last week, I watched some of the trial of Clint Reilly's lawsuit over the proposed sale of the Examiner to a Fang family business known as ExIn LLC. The federal judge presiding over the antitrust case, Vaughn Walker, seems to be having difficulty understanding why Hearst would agree to pay tens of millions of dollars to help someone else run the Examiner in competition with a Hearst-owned Chronicle. Under questioning by Walker, James Asher, chief legal officer for Hearst, described the decision to make a deal with the Fangs as a matter of practical business calculation. Hearst feared that legal action by "some level" of government -- even if the legal action was unlikely to succeed in the end -- could delay the purchase of the Chronicle beyond its original early May expiration date. If the purchase agreement lapsed, Hearst feared it would lose out on its chance to buy the Chron.
Asher described this decision as similar to those many businesses often make. In some respects, he is correct. Many businesses weigh the possibility of litigation when making decisions.
But no company should be required to pay tens of millions of dollars in an atmosphere of implicit threat of devastating government action -- an atmosphere that government officials and their close associates create -- simply to be allowed to carry out a legal business transaction.
Judge Walker has a daunting task. He must untangle the disgusting web of sleazy political and business behavior revealed by Clint Reilly's lawsuit, and determine whether it violates antitrust laws. It is quite possible that the judge will find plenty of disgusting behavior, and no antitrust violations. There is, after all, a long history showing that the smaller of two daily newspapers in a given metropolitan market inevitably winds up closing its doors. And if the Examiner is, indeed, inevitably headed toward failure, Hearst should be legally free to close it -- or, for that matter, to give it, and $66 million, away.
But antitrust violations and extortion are different legal concepts. Reilly's lawsuit is an act of courage that has revealed much about the intertwining of the media and the government in San Francisco. But it is a private lawsuit that must, as a matter of law, focus on antitrust concerns.
The public interest requires that it be established, by credible investigating agencies, whether government officials in San Francisco and/or their allies have engaged in an illegitimate $66 million squeeze play in regard to Hearst, the acquisition of the Chronicle, and the sale of the Examiner. Clearly, this means the Justice Department must investigate the actions of its own antitrust division in this matter, and determine whether California political actors were able to exercise unwarranted, and perhaps even unlawful, influence on Justice. For credibility's sake, the proper congressional committee may also need to investigate the murky circumstances surrounding this proposed acquisition and sale, and to determine whether the unhealthy political vapors of the bayou have wafted north and west and infected the governing classes of San Francisco.
