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It wouldn’t be the San Francisco Hearst antitrust suit without one more twist. U.S. District Judge Vaughn Walker made public on August 14 two extraordinary missives exchanged between himself and Assistant Attorney General Joel Klein, head of the government’s antitrust division. Last week, Klein asked the Northern District of California judge to amend his opinion in Reilly v. Hearst, 00-0119. Walker delivered a series of body blows to the Justice Department in that July 27 screed, calling the government’s review of the sale of the San Francisco Chronicle to Hearst Corp., which owns the competing San Francisco Examiner, the product of cronyism. On Aug. 10, Klein wrote a letter to Walker to say the judge hit below the belt. “I am personally familiar with the department’s investigation and can assure the court that it was not affected by Mayor [Willie] Brown’s communications or by any political, personal or other extralegal considerations,” Klein wrote. “For this reason . . . we request that the court revise the Reilly opinion to remove the unwarranted statements concerning the department.” This latest part of the case began when Gerald Connell, a Hearst attorney at the Washington, D.C., office of Baker & Hostetler, remarked during closing arguments that government antitrust lawyers told Hearst it would be sued if it did not sell the Examiner. The newspaper was eventually given to Ted Fang, along with a subsidy of up to $66 million. Fang publishes a local free newspaper and is a powerful ally of Brown. Walker later ordered Connell to explain his statements, from which Connell backpedaled slightly. Then, Walker turned to the Justice Department for an explanation. Twice, Walker asked the government to intervene in the suit or provide the reasoning behind its course of investigation into the sale of the Chronicle. Each time, the government declined, though Mark Botti, an assistant chief in the antitrust division, did send along short replies to Walker’s questions. Those communications delayed Walker’s ruling in the suit. When the ruling was finally released, Walker intimated that he felt the Justice Department, at the urging of Brown and other local politicians, used its investigation to force the hand of Hearst Corp. to sell its Examiner to a friend of the mayor’s. It is that idea that prompted the now-famous “malodorous” description of the Fang deal. Walker’s suggestions brought the Aug. 10 letter from Klein. Walker returned the volley, then released both letters to the public, revealing a rare spat between a top-ranking Justice Department lawyer and a sitting federal judge. “The department routinely receives unsolicited expressions of concern from elected officials and other concerned citizens. But such communications do not determine the outcome of our investigations; only the law and the facts do,” Klein wrote. Klein then detailed the facts and law according to the Justice Department, saying the antitrust issues involved in the dissolution of two newspapers’ joint operating agreement when one competitor buys another are more complicated than Walker fathomed. In return, Walker wrote: “With respect to the substance of your letter, I believe you have misread portions of the decision. But the court should not address these issues in ex parte correspondence.” Klein also called Walker’s allegations about his department not only wrong, but unfair. “The department was not a party in this case and had no notice or opportunity to refute the allegations,” Klein wrote. An irate-sounding Walker pointed out that he twice asked the Justice Department to intervene in the suit, and in fact invited it to do so again. “Although the case is now closed, I would entertain the department’s motion to intervene to seek reopening of the case and reconsideration or amendment of the findings,” Walker wrote. But both the plaintiff, Clint Reilly, and Hearst have signed off on any further litigation. In return, the Reilly camp walked away with $2.5 million in attorneys fees, despite losing the suit. Hearst sought the deal to prevent Reilly from pursuing further litigation. “This case has been decided. It now has been closed. We think it should remain that way,” said Gary Halling, a Hearst attorney at San Francisco’s Sheppard, Mullin, Richter & Hampton. The Justice Department has not said if it will pursue the matter further or ask to intervene. But Klein has received Walker’s reply. “We’re reviewing it,” a Justice Department spokesperson said.

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