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Thursday, February 7, 2008

What the Controller Saw

Posted By on Thu, Feb 7, 2008 at 6:42 PM

Plus: Puffy Gets Lippy

By Andy Van De Voorde

Guardian controller Sandy Lange came prepared for a general discussion about the Weekly’s alleged predatory pricing conspiracy when she took the stand Thursday.

It was the specifics that tripped her up.

The numbers cruncher, who did a stint in the U.S. Navy and supervised the construction of cardboard boxes in South Dakota before bringing her financial acumen to the Guardian, told the jury about a series of charts she had made to track what the Guardian claims is a Weekly scheme to drive it out of business by snatching away its customers with below-cost ad prices.

She brought her “Costs Per Ad Page” chart.

She brought her “Display Revenue Per Page” chart.

She brought her “Alternative Weekly Market Share” chart.

And she brought her own “Profit and Loss” charts for both the Guardian and the Weekly.

But Lange left out one thing.

Where are the customers, who could testify about the lure of the Weekly’s low-low siren song?

It’s already been reported that the Guardian does not plan to call a single customer to the stand, despite the fact that its case rests entirely on the claim that hundreds of Bay Area business owners betrayed it by flocking to the less expensive Weekly.

Lange herself is the last Guardian witness who could possibly have firsthand knowledge of customer transactions.

Yet even she brought up just one “lost” customer Thursday under questioning from Guardian attorney Ralph C. Alldredge.

And what a customer it was.

Perhaps because she wasn’t in court when former Guardian ad boss Jody Colley testified last week, Lange didn’t realize that this jury already has a history with B&W Brake.

The auto shop’s name made quite an impression last week when Weekly attorney Ivo Labar cross-examined Colley.

Colley had cited B&W as an example of a customer lost to the Weekly’s screaming deals, but under questioning from Labar it became clear that the Guardian’s own records belied the claim.

Not only did those records show that B&W had advertised with the Guardian for years — and continued to do so — they also contained unflattering information about the Guardian’s customer service.

“Jesus, we messed up again,” a Guardian ad rep wrote on September 19, 2005. “[The shop owner] wants a full-page in next year’s Best of the Bay for all of our mess-ups.”

Labar asked: Might the Guardian’s “mess-ups” be an example of why the customer chose to also advertise with the Weekly? Colley told him she “didn’t remember” if she’d ever reviewed B&W’s entry in the Guardian’s internal database that tracks advertising accounts.

By contrast, Lange’s memory on the subject was clear. She told Labar outright she hadn’t bothered to check the Guardian’s database about B&W -- or anyone else she’d identified as among 128 specific examples of alleged Weekly wrongdoing.

Instead, she told the court, she had input reams of names, prices, and dates into a computer and then asked it to spit out a statistical analysis.

Talking to actual people simply wasn’t necessary.

It’s a theme that’s been central to the Guardian’s case thus far: The sheer scope of the Weekly’s wrongdoing makes it impossible to base a damage claim on individual examples. Better, the Guardian has argued, to throw out an array of statistical patterns and then encourage a jury to connect the dots.

Earlier in the day, in an apparent attempt to convince the jury to trust the Guardian’s own math in its own lawsuit, Alldredge had asked Lange if she felt the data she input was generally accurate.

“We did pretty good,” she said.

She must have realized otherwise when Labar began walking her through her own list in alphabetical order.

Let’s start with the Abbey Tavern, Labar suggested. Lange’s report said the Weekly engaged in three transactions with the bar between March and May 2005, selling ads for between $14 and $16 an inch.

But on September 8, 2004, six months before Abbey did any business at all with the Weekly, the Guardian was selling it ads for just $9.63 an inch.

“That’s well below the amount the Weekly later sold advertising to the Abbey Tavern for, isn’t it?” Labar asked.

“Yes, sir,” the former sailor replied.

Labar drew a smile from one of the jurors when he asked his next question. Noting that the bar’s ad buys from the Weekly coincided with St. Patrick’s Day, he asked, “Isn’t it more likely that this Irish bar was trying to advertise in more publications on St. Paddy’s Day?”

Second on Lange’s list was Alpha Bar. The controller’s document claimed the bar conducted 25 transactions with the Weekly in 2004 and 2005. All 25, Lange said, were “below cost,” according to the Guardian’s methodology, at rates ranging from $13 to $19 per inch.

The Guardian sold Alpha only two ads, which by Lange’s logic meant her paper had been robbed 23 times. During those two transactions, it pocketed a whopping $48 per inch, according to her chart, collecting a handsome $936 in one transaction.

Again, Lange admitted, she had not bothered to check the Guardian’s own internal database for specific information about Alpha.

However, Labar had — and he informed the jury that the $936 transaction claimed by Lange actually was a sale for $336 because the Guardian had waived a $600 color free. That meant the actual inch rate was dramatically lower.

“So this is another error in the spreadsheet, isn’t it?” the attorney asked.

“Unfortunately, it is,” Lange replied.

Next on the hit parade: Aneu, next to which Lange had added the notation “lost in ’07.”

“But the Guardian stopped selling advertising to this client because the owner died, right?” Labar asked.

“I didn’t know that,” answered Lange.

“And you didn’t know that because you didn’t talk to the ad rep handling the account, right?” he continued.

“That’s true,” she said.

The Guardian’s case wouldn’t have been any stronger if the customer had lived.

The paper’s own database, Labar pointed out, contained a note indicating that the Guardian once gave Aneu a free ad “because we messed up their entry” and also gave Aneu significant discounts almost a year after it had stopped advertising in the Weekly.

Labar then moved to the Art of Living Foundation, a customer Lange’s data showed had purchased three ads with the Weekly and three with the Guardian over a four-year period.

Again, the Guardian’s own internal data cast things in a different light. Both the Weekly and the Guardian were selling the foundation ads at $16 per inch, which, Lange admitted, was below cost for both parties according to her own standards.

Labar then told Lange that the Art of Living Foundation is a nonprofit.

She said she hadn’t realized that.

“Did you investigate whether the rates were given to this customer because they were a nonprofit?” he asked.

Lange replied in the negative.

And the show went on.

There was Bimbo’s nightclub in North Beach. It did 400 transactions with the Weekly over a six-year period, and even more business with the Guardian, but still made Lange’s list of customers whose business the Guardian lost in full or in part owing to the Weekly. The Guardian had given it discounted rates a grand total of twice.

(Strange as that may seem, it is part of the Guardian’s argument: that even customers whose business it never lost constitute a hardship because it would have been able to charge them more if not for the Weekly.)

“Do you have any information at all that the Guardian had to give those discounts because of the Weekly?” Labar wondered.


Then there was Body Tonic. The yoga shop did business with the Weekly between 1999 and 2005, and also pulled a four-year hitch with the Guardian. According to Lange’s records, the Guardian gave Body Tonic discounts on 30 of 67 transactions. The implication was that it did so grudgingly just to keep up with the Weekly.

But wasn’t it true, Labar asked, that while the Weekly sold Body Tonic ads at $20 an inch, the Guardian gave it a rate of just $11 an inch?

That was because the customer paid partly with “trade,” Lange said, meaning freebies for Guardian employees.

“But you’ve made no allowance for the Weekly doing trade [in the report], have you?” Labar asked.

Lange admitted she hadn’t.

Trade or no trade, it quickly became evident that Body Tonic had issues with the Guardian that went beyond price.

“Did they leave the Guardian because Body Tonic’s ads in the Guardian yielded lousy results?” asked Labar.

“I have no knowledge of that,” Lange said.

Labar did. Unlike the Guardian controller, he had bothered to read the Guardian’s internal notes on the customer.

“Roger [at Body Tonic] has this notion in his head that the Guardian yielded lousy results,” wrote a Guardian ad rep in December 2004. “I told him it was because the ad was ugly, and he agreed.”

Ugly, too, was the dig the salesperson then took at the Weekly.

“The Weekly offered some B.S. e-mail (spam) marketing campaign that Roger really liked,” wrote the rep. “Will follow up of course, but right now I’m too damn mad.”

Wasn’t it true that in 2004 advertisers were asking for more than just traditional print ads from newspapers? Labar asked.

“I have no knowledge of that,” Lange responded.

Lange’s testimony for the day ended on a similar note, when Labar asked her about a sushi restaurant called Midori. Didn’t her own report show the Weekly’s rate ranging from as low as $10.50 per inch and as high as $20.67 per inch and the Guardian charging just $7 per inch?

Maybe so, said Lange, but, again, the customer paid part of its bill in trade.

Grinning, Labar suggested it was unlikely trade alone would account for such a low rate.

“That’s a lot of sushi, isn’t it?” he said, as jurors laughed.

And the attorney had one more observation: the fact that Lange had written the word “morons” next to the Midori line.

“Is that a reflection of [Guardian salespeople] selling ads for $7 an inch?” he asked.

The jury left the room smiling.

Less jovial was an early-morning discussion between Alldredge and Lange about the Guardian’s purchase of a $5 million office building in 2002. The subject has been a sore spot with the Guardian since Kerr brought it up during his cross-examination of Brugmann, and the hurt feelings haven’t been contained to the courthouse.

Guardian executive editor Tim Redmond, whose blog posts on the trial have referred to this blogger as “nasty,” “giddy,” humorless, and an “out-of-town hitman” — partly because The Snitch reported he had worn a puffy jacket onto the witness stand — struck again yesterday, with a post in which he suggested your faithful courthouse correspondent is also naïve.

“Van De Voorde bought into the entire line,” he wrote, referring to Kerr’s line of questioning.

After providing a lengthy defense of Brugmann’s purity and honor, Redmond noted that I could have found the backstory on the building purchase on my own Web site, and referred readers to a February 2005 article by former Weekly editor John Mecklin.

The Snitch agrees; more people should read Mecklin’s piece.


Because even a cursory reading makes it clear Mecklin was as skeptical of the arrangement as Kerr was. That’s probably one reason he titled it “Reason to Question” and went on to describe Brugmann’s already-filed lawsuit as “warmed-up jabbering.”

Alldredge seemed as preoccupied as Redmond with the building brouhaha Thursday, despite the fact it has nothing to do with whether the Weekly engaged in illegal pricing.

Lange told Alldredge that the building purchase benefited the Guardian because its rent ended up being lower than it would have been if the paper had stayed in its old digs. In fact, she claimed, the paper has actually saved about $650,000 in rent over the past five years — a godsend given its dire circumstances.

That all may be true, but if Lange and Brugmann’s argument is right — that buying a $5 million building at a time when the paper was laying off employees was actually a stroke of genius — it in no way contradicts Kerr’s point that the deal had the effect of funneling rent payments that used to go to a third party to Brugmann and Dibble.

The couple may choose to plow the cash back into the Guardian if they wish, but it is their limited liability corporation, not the Guardian, that owns equity in the structure. So if they truly are the real estate wizards Lange and Redmond say they are — and the building really was appraised at $7.2 million last year, as she testified — then Brugmann and Dibble, who have been poor-mouthing the jury since the first day of the trial about their financial hardships, would appear to be a bit more flush than they’ve let on.

Perhaps they should hire some reporters with that $2 million in equity — or at least alert their creditors.

After all, Lange told Alldredge on Thursday that the Guardian “changed its printer so we could save money on our print bills.”

She neglected to mention that some of those print bills are overdue.

Brugmann admitted in his deposition testimony that the Guardian still owes printer and daily newspaper mogul Dean Singleton hundreds of thousands of dollars, and once was into him for more than half a million bucks.

Last we heard, Singleton takes checks.

The trial resumes Friday morning at 8:30 at the courthouse on McAllister. Because of yet another last-minute change of direction on the part of the Guardian’s attorneys, Weekly publisher Josh Fromson and New Times executive editor Michael Lacey apparently will not be called as part of the Guardian’s case. Both will testify as part of the Weekly’s case, which should begin tomorrow morning.

The Guardian actually has one more witness: certified public accountant Clifford Kupperberg. He will testify out of order during the Weekly’s case because of a scheduling conflict.

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Tom Walsh


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