Cleaning Out the Swamp

Because my wife is from New Orleans, she and I occasionally compare politics, as practiced there and here. I think a bit of cross-cultural comparison could be helpful right now, because a few of our local notables have been behaving as if they were Louisianans, and that behavior is being misportrayed as roguishly San Franciscan, when it is something else entirely. To be sure, there is something entertaining about watching the publisher of a major daily newspaper admit, under oath, that he offered to trade favorable treatment in his paper's opinion pages to the mayor of a major American city, if that mayor would just quit making business life difficult for the daily. Even former Louisiana governor and periodic criminal defendant Edwin Edwards would be hard put to concoct a sleazier tale of business and politics.

But this proposed trade, which has earned Examiner Editor and Publisher Tim White a non-working trip to the Hearst woodshed, is not just the astonishing and entertaining breach of journalistic ethics that most news accounts focused on last week. It is a breach of journalistic ethics tied to the actions of -- or, at least, beliefs about the likely actions of -- a variety of powerful Northern California political players. I am not a lawyer. I did not eat lunch with Tim White and Willie Brown when they supposedly discussed trading kindly newspaper opinions for mayoral favors. So I cannot say with certainty that this proposed trade represented a piece of an extortion campaign that was directed against Hearst as it attempted to buy the San Francisco Chronicle, and that caused Hearst to offer to pay political allies of Mayor Brown $66 million in subsidies, if they would be so kind as to take over the San Francisco Examiner.

But generally available facts about the Hearst-Chroniclesaga make it reasonable to wonder whether something similar to extortion has occurred, and reasonable to call for the type of full-scale federal investigation with which the citizens and politicians of Louisiana have long-standing acquaintance. When our so-called leaders behave like swamp vermin, they ought to be treated as such.

The Hearst Corp.'s attempt to buy the San Francisco Chronicle and divest itself of the San Francisco Examiner has already entered the pantheon of great and nauseating San Francisco political stories. Many of you doubtless have been following the tale, day by day, as the trial of a lawsuit over a proposed sale of the Examiner, filed by businessman and former mayoral candidate Clint Reilly, plays out. Still, I think a proper explanation of why the White-Brown lunch represents something more important than a lapse in journalistic judgment requires that I lay out the basic background of the Chronicle-Examiner saga.

Last August, Hearst, publisher of the afternoon Examiner, agreed to pay $660 million to buy the larger morning Chronicle. Because antitrust law likely would prevent the firm from owning both papers, Hearst put the Examiner up for sale, first as a package of disjoint assets no one was foolish enough to seriously bid upon, and then a second time, in a more complete offering. Clearly, Hearst would have preferred to simply close the Examiner, which is only a tiny fraction of the Chronicle's size. But because the San Francisco dailies are currently published in a government-sanctioned noncompetitive arrangement known as a joint operating agreement, the disposition of the Examiner came under the scrutiny of the U.S. Justice Department's antitrust division. Through the end of last year, as Justice reviewed the proposed sale of the Chron and disposition of the Ex, a noisy campaign to "save" the Examiner was pursued, notably in the pages of the San Francisco Independent, a thrice-weekly "newspaper" thrown on stoops -- and then often into dustbins -- throughout the city. This campaign coincided, to a remarkable degree, with expressions of concern by local politicians, including Mayor Brown, about the fate of the Examiner, and the loss of editorial "voice" that would occur if it were simply closed.

The political dimension of the campaign against Hearst should not be underestimated. In a genuinely distinguished article published late last month, Chronicle writers William Carlsen and Reynolds Holding described what appears to have been a political campaign, conducted by elements of the Democratic establishment of Northern California, aimed at persuading Hearst to sell the Examiner to members of the Fang family, who own the Independentand are full-throated supporters of the aforementioned Democratic establishment.

The timeline of this campaign, as reported by Carlsen and Holding and amended with information that has subsequently come into the public record, lays out approximately this way:

Late in July, before Hearst's acquisition of the Chronicle had even been announced, Mayor Willie Brown meets with Tim White, then editor and publisher of the Examiner, and tells White that he really, really ought to consider settling a private lawsuit with the owners of the Independent. (A pleasant little quote from an e-mail White wrote memorializing this discussion: "Willie then reflected that it was really not smart for us to have something like this predatory pricing case 'hanging around' when we're trying to get something big done like an acquisition or merger. He observed that funny, undesired consequences often ripple from something like this, even if one thing has nothing directly to do with the other [emphasis mine].")

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.

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.

John Mecklin ( can be reached atSF Weekly, 185 Berry, Suite 3800, San Francisco, CA 94107.

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