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U.S. District Judge Martin Jenkins was offered a compromise Thursday during a hearing on whether to close next week’s criminal trial of a former McKesson Corp. executive accused of securities fraud. The compromise, proposed by a lawyer for the health care-services giant, would exclude the public from testimony involving McKesson’s internal investigation into a 1999 accounting scandal, but allow plaintiff attorneys limited access when witnesses discuss the probe. The scandal triggered $9 billion in investor losses at the San Francisco-based firm, one of the nation’s largest. Jenkins kept his inclinations to himself, giving no clear sign whether he would accept the compromise in McKesson’s effort to close portions of the trial of former Chief Financial Officer Richard Hawkins. Opening statements in Hawkins’ bench trial are scheduled for Monday morning before Jenkins. At issue is an internal investigation conducted by Skadden, Arps, Slate, Meagher & Flom after McKesson acknowledged improperly recording revenues following a 1999 merger with HBO & Co., an Atlanta-based software maker. The announcement led to a 48 percent one-day plunge in McKesson’s stock price. Federal regulators later launched criminal probes, and plaintiff attorneys filed lawsuits in state and federal court. Last month, McKesson moved to close portions of Hawkins’ trial so that the internal audit, which it argues is protected by attorney-client privilege, does not become public. Plaintiff attorneys, some of whom have already obtained the report pursuant to state court action, and members of the media asked Jenkins to keep the entire trial public. Karl Olson, of Levy, Ram & Olson, argued on behalf of The Recorder, the San Francisco Chronicle, Bloomberg News and the Associated Press. Olson told Jenkins that the First Amendment trumps attorney-client privilege, so the public and media should be allowed to hear all testimony. Other judges, including Jenkins, have already ruled that McKesson waived its attorney-client privilege. That ruling is on appeal at the Ninth Circuit U.S. Court of Appeals. But James Lyons, a partner in Skadden’s San Francisco office representing McKesson, disagreed with Olson and asked Jenkins to protect his firm’s work product. He also offered the compromise: Exclude the media and public from the courtroom but allow plaintiff attorneys to get transcripts or maybe even attend the closed proceedings. Besides discussing the interplay between the First Amendment, the right to a fair trial and attorney-client privilege, lawyers and Jenkins also talked about the practical problems of closing only portions of a normally open criminal trial. “The interests I have to weigh with respect to closing a court proceeding are nightmarish,” the judge said. Lyons said he sympathized with the court. Jenkins could rule as early as today. The case is U.S. v. Hawkins, 04-0106.

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