Mecklin

Cleaning Out the Swamp

Late in August, Mayor Brown calls the White House, sends a letter to U.S. Attorney General Janet Reno, and speaks with Reno, seeking an antitrust investigation of a proposed sale or closure of the Examiner.

Sometime in August, according to White's testimony in court, he fields a phone call from Warren Hinckle, an Independentcolumnist, who gives the phone to Jack Davis, a close political adviser of the mayor and friend of the Fangs, who, according to White, says, "I'll bet before this is over, there will be a lawsuit from an advertiser, a lawsuit from a subscriber, and a lawsuit from a competitor."

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 Examinerto 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 Examinerto 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 Chroniclebeyond its original early May expiration date. If the purchase agreement lapsed, Hearst feared it would lose out on its chance to buy the Chron.

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