Chron Ceo: Shutting Examiner Discussed

The Hearst Corp. and rival Chronicle Publishing Co. quietly discusse d several plans to avoid economically competing against each other, including one in which Hearst would shut its San Francisco Examiner in exchange for a share of the San Francisco Chronicle's profits "in perpetuity," a Chronicle executive has testified.

John B. Sias, president and chief executive officer of Chronicle Publishing, also testified Tuesday that consultants had said The Examiner could compete independently against the Chronicle. But Sias said he doubted the studies.

Sias was cross-examined during the second day of trial on developer and former mayoral candidate Clint Reilly's antitrust suit to block Hearst's $660 million purchase of the Chronicle.

Joseph M. Alioto, Reilly's attorney, said Tuesday he would seek an emergency restraining order barring Hearst from taking adverse action against any employee for testifying in the case.

Alioto cited Hearst's decision Tuesday to place Examiner publisher Timothy O. White on indefinite leave after White's testimony Monday that he had offered Mayor Willie Brown favorable editorials in return for Brown's support of Hearst's purchase of the Chroni

cle.

Alioto contended Hearst executives had known the substance of White's testimony for months, because White gave similar sworn statements to the U.S. Department of Justice, which was reviewing the proposed purchase.

"It's absurd that Hearst took this kind of action against White for saying something true that they knew about," Alioto said. "That puts a chilling effect on anyone else we might call to testify from Hearst or the Chronicle."

Asked earlier Tuesday whether White's comments on the stand were a surprise to Hearst Corp. officials, spokesman Paul Luthringer said, "I'm not going to comment on that."

White appeared in court Tuesday morning, but left soon after Hearst lawyers chose not to question him. They said they might question him later when they put on their defense. White was questioned Monday by Alioto.

Reilly claims Hearst's plan to purchase The Chronicle and sell its smaller afternoon Examiner to the Fang family will result in Hearst's having an illegal newspaper monopoly in San Francisco.

Hearst denies the claim, saying The Examiner is an economically failing business that could not survive outside its current profit-sharing agreement with the Chronicle, and that closing it or selling it, therefore, could not violate antitrust laws.

Alioto sought Tuesday to elicit testimony from Sias showing The Examiner was not a failing business, and that Hearst and Chronicle Publishing negotiated to avoid future economic competition with each other as rival morning papers.

Sias acknowledged that Martin Jaffe, Chronicle Publishing's chief financial officer, had done a study showing The Examiner could compete independently against the Chronicle with what Alioto called "a high degree of success." But Sias said, "We did not give it any credence. My reaction was this was totally unrealistic."

Alioto introduced a confidential April 6, 1996, memo from Sias to Patricia Tobin, a member of the Chronicle's board of directors, that discussed a deal in which Hearst would sell or close The Examiner in return for 34 percent of the Chronicle's profits "in perpetuity."

"In the ongoing discussion we are trying to get a sense of the final conditions under which Hearst would agree to close The Examiner," Sias noted in

the memo.

The Chronicle's owners were negotiating with Hearst because they were unhappy with the joint operating agreement, he testified.

Since 1965, The Examiner and the Chronicle have had the agreement to share printing, advertising and circulation. They split profits after joint costs, then each pays the cost of their separate editorial staffs.

Such agreements are an exception to antitrust laws, and are allowed by the Newspaper Preservation Act, which is meant to keep alive newspapers in danger of failing.

The Chronicle owners were displeased with the agreement because although their larger morning paper generated 80 percent of total revenue, they were required to share it evenly with The Examiner, Sias testified.

In 1997, they commissioned a Booz Allen study of their business options, Sias testified. The study said that if The Examiner independently competed against the Chronicle outside of the joint operating agreement, it would further reduce