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The owners of the San Francisco Examiner have been hit with a barrage of lawsuits by construction contractors who claim they are owed $1.5 million. On May 1, AMEC Construction Management Inc. filed a lawsuit in San Francisco Superior Court against ExIn LLC, Florence Fang, and her sons James and Douglas, alleging that they owe the contractor $1 million. A half-dozen of AMEC's subcontractors claim they are owed another half-million dollars for unpaid work.
"We were brought in to do interior demolition work," says plaintiff Joe Cassidy of Granite Excavation & Demolition Inc. "We worked at night carrying stuff out of the building by hand. The Fangs owe us $66,000. That's a lot of money for our small company."
Apparently, it's a lot of money for the Fang family, too.
AMEC's lawsuit alleges that ExIn, the private partnership that owns and operates the Examiner, hired the huge construction company last August to design and remodel its headquarters building at 988 Market St. for $2.9 million. ExIn paid AMEC $1.9 million and owes a balance of $1 million, according to the lawsuit.
Meanwhile, Florence, James, and Doug Fang have filed a counter lawsuit alleging that AMEC was not hired to do general contracting, only design work; that the construction work was deficient; that AMEC overbilled for its services; and that AMEC was not authorized to hire subcontractors.
Granite's attorney, Timothy L. McInerney, says he plans to subpoena financial records that could reveal details of the Fang family wealth, as well as the income and operating expenses of the Examiner.
The general partner of ExIn is Ted Fang, who is the publisher of the San Francisco Independent and the Examiner. ExIn was created in March 2000 to own and operate the Examiner after the paper's previous owner, the Hearst Corp., bought the San Francisco Chronicle and sold the Examiner to ExIn to avoid antitrust problems. Hearst is subsidizing the operation of the Examiner until 2003. The media giant is paying ExIn $66 million in installments based on a formula that reimburses ExIn for the cost of producing the Examiner, plus a profit. After three years, the subsidy will end and the Examiner will have to sink or swim on its own.
The so-called Fangxaminer's finances are inextricably linked to the finances of the Fang family.
The Examiner is housed in the Fang Warfield Building at Market and Sixth streets, a crusty neighborhood dominated by junkies, prostitutes, and porn shops. Fox-Warfield LLC sold most of the eight-story building to Florence Fang, James Fang, and Doug Fang on Sept. 20, 2000. (In July, Florence assumed sole ownership.) Public records at the Assessor-Recorder Office show that the Fangs borrowed $10 million from United Commercial Bank in September, apparently to finance the building purchase. The loan is secured by the Fang Warfield Building and also the Independent's office building on Evans Avenue in Bayview-Hunters Point.
When a building changes owners, its property value must, by law, be reassessed, usually at the amount of the purchase price. The Fang Warfield Building was reassessed in January at $7,963,000. Li Chou, chief appraiser for the assessor-recorder, explained that she departed from the standard practice of assessing at purchase price because the building was in "poor condition" and parts of it were under construction. It appears that the Fangs paid a great deal more for the building than it was actually worth.
And that was before San Francisco's super-tight office rental market collapsed in the spring.
The Hearst Corp. and Ted Fang did not return repeated telephone calls seeking comment on the financial viability of the Examiner. Other Fang-run newspaper enterprises have experienced financial difficulties in the past, however. Public records on file with the Mayor's Office of Community Development show that, between 1996 and 1998, the city loaned the Fang-owned Independent Newspaper Group and Grant Printing Inc. $1,050,000 to buy printing machinery and to stimulate the hiring of "minority" workers at the Fangs' printing plant in Bayview-Hunters Point. (In 1999, investigators from the U.S. Department of Housing and Urban Development complained in a letter to the city that there was no documentation in the loan file to show how the money was spent, nor any proof that the required number of minority, low-income workers had been hired). The city approved the loan (which has been repaid in full) after Ted Fang submitted letters from three separate banks that declined to loan him money to buy the printing machinery, as proof of his need for a loan. One bank wrote that Fang's corporate financial statements "were unable to satisfy our cash flow and net worth requirements."
If AMEC and its subcontractors prevail in their lawsuits, the Examiner's owners could be forced to sell the Fang Warfield Building to pay the money owed to the contractors. Such financial perils may be one reason why the Independent began running a house ad soliciting donations so that it can continue to "guarantee weekly delivery" of the free newspaper to 400,000 San Francisco houses.
"Even if you can't afford a $20 contribution, any support you can give will be greatly appreciated," the Independent's ad pleads. As a special inducement, those who give more than $20 will receive a half-year subscription to the Examiner -- for free.