Terminal Condition

With the Examiner near death, an insider says the Fangs had 10 million reasons to run it on the cheap

Antitrust attorney Joe Alioto saw the train wreck coming at the San Francisco Examiner a long time ago.

Alioto's client, wealthy political operative and real estate investor Clint Reilly, sued in 2000 in an effort to prevent the Hearst Corp. from selling the paper to the politically connected Fang family, which owns a string of lackluster newspapers in San Francisco and San Mateo County. After trial testimony revealed that Hearst had "horse-traded" favorable coverage to Mayor Willie Brown in return for his blessing of the sale, a federal judge branded it "malodorous" but allowed the deal to go through. To assuage the U.S. Justice Department's antitrust concerns, Hearst gave the Fangs a $66 million subsidy to help ensure the paper stayed afloat until it found its legs as a serious competitor to the Chronicle.

But Alioto says the deal also contained a multimillion-dollar incentive for the Fangs to run the paper in the cheapest, least professional way possible.

"The first $16.7 million [of the subsidy] had to be spent getting the Examiner up and going in the first year," says Alioto. "After that, Hearst was to reimburse the Fangs for up to $25 million a year in expenses. But contractually, the Fangs only had to spend about $15 million a year on the newspaper. The extra $10 million could then be split between Hearst and the Fangs. Hearst wouldn't have to pay $5 million; the Fangs pocketed $5 million.

"The deal," says the lawyer, "was a fake. The $66 million was simply a payment to survive for three years and then drop out."

And now, after just more than two years of publishing, the Exappears to be in its death throes. Two weeks ago, the Fangs laid off most of the staff, handing them a miserly eight days of severance pay. But if Alioto's information is correct, the Fangs are walking away with as much as $10 million that they didn't sink into the paper.

Ex-Examiner columnist Debbie Morse backs Alioto. "If the Fangs came in under budget, they got to keep one half of the money," she says. Repeated calls to Publisher Florence Fang and her son James, who recently merged the gutted Ex with their Independent newspaper, did not elicit a response.

The Ex's second denouement did more than disappoint the city's newspaper readers. It left in its wake a score of professionally crushed young journalists who didn't realize when they were hired that the paper had to be run in a disorganized, low-overhead manner in order for the Fangs to reap their windfall.

The Ex's fate was presaged in its very first issue under Fang ownership in late November 2000.

"I still get the shakes thinking about it," says one former newsie. "I filed my story and went home. The next day I came to work [but] there were no papers in the racks. I wondered, 'What the hell is going on, where are the papers?' I saw [then-Executive Editor] Marty Steffens walking into the elevator with a bundle of papers. She looked pale, shaky. She wouldn't give me a paper.

"In the newsroom, I saw it: typos everywhere, the main story jumped to nowhere. It got worse: There was a photo of a happy, waving Mayor Willie Brown in the middle of the front page; the photo is blurry, pixelated. 'What the fuck are the editors thinking?' I thought. After what everybody has said about political influence-peddling, there is Willie, smiling and waving -- it was devastating."

The cascade of typos and other screw-ups in the "Fangxaminer" entertained press critics for months. Editors and managers came and went. The paper did not really improve until Florence Fang fired its publisher, Ted Fang, another son. Last year, she transformed it into an interesting tabloid format. That may have improved the Fangs' chances of selling off the Examiner name, but it came too late to save the paper.

Ex-Features Editor Leslie Katz was one of the 40 staffers laid off (15 editors, reporters, and photographers remain). "From the start you could tell that the financial situation was not good," she says. "There were not enough readers, hardly any ads. The news content was not strong enough. Reporters were inexperienced, couldn't get a handle on what to cover."

Other former employees, who want to remain anonymous, tell of an initially chaotic workplace in which twentysomething writers and editors struggled -- without guidance from seasoned managers -- to put out a respectable newspaper, with big dollops of investigative journalism and coverage of city politics.

"Right off the bat, there was no infrastructure in place," says one ex-reporter. "There was no city editor, no assigning editor, no planning; it was all up to us, and I was worried. There were no fax machines, no e-mail, no working elevators. [Managing Editor] Bob Porterfield spent hours each day chain-smoking and prowling the roof, complaining about how he couldn't get anything done.

"On Thanksgiving Day, nobody showed up to work, not even the editors."

One day in the newsroom, the former employee continues, "I saw this enormous guy wearing sweat pants, a too-small 49ers T-shirt circa 1983, boat shoes, no socks -- and I wondered, 'Who let this homeless person in?' And it turns out to be Dave Burgin, the new chief editor.

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