IT'S JULY 2002 . Florence Fang, the matriarch of San Francisco's most talked-about publishing family, descends from her eighth-floor office at the San Francisco Examiner, the paper she took control of almost two years earlier. She heads for the desk of eye patch-wearing columnist Warren Hinckle, who made his reputation working for Ramparts, the left-leaning 1960's magazine, but now writes political screeds more in line with the Fangs' conservatism.

Fang, who is 68, is tiny and often silent in public. She has a beautiful, expansive face, but an eerie, even icy, composure. Those who know her well say the dignified appearance cloaks a vicious temper she doesn't hesitate to direct at her sons. She's not above throwing things when angry.

Assistant managing editor Jim Mohr and at least one other employee hear Fang yelling through the bars of the jail-cell gate Hinckle has installed across his office doorway.

"Why isn't the mayor taking my phone calls?" she demands, referring to Willie Brown, her family's most visible political ally. Hinckle mumbles that perhaps the mayor is otherwise occupied. Fang continues on a tirade, ranting about how the mayor bowed out of MCing Bay to Breakers, the local footrace sponsored by the Examiner, and even chose her rival, Rose Pak, to help host Hu Jintao, a high-ranking official from China who has since become president.

"We got the Examiner to be Willie's paper," she says with obvious pain. "I wanted it to be Willie's newspaper."

When the news broke in March 2000 that the Fang family was taking over the Examiner from Hearst Corp. – mollifying the U.S. Justice Department's antitrust concerns about Hearst's purchase of the San Francisco Chronicle – many people wondered what, exactly, the Fangs were up to.

It was, to put it mildly, an odd deal. The Fangs paid exactly $100 for the name, Web site, news racks, and archives of the onetime flagship of the Hearst empire, the self-proclaimed "Monarch of the Dailies." And Hearst agreed to reimburse them up to $66.7 million for running the paper through July 2003. The transaction almost certainly wouldn't have happened without the backroom wrangling of key local politicians, including Brown and Sen. Dianne Feinstein.

Still, it had the potential to spawn another daily paper for San Francisco, a place that for many years has been without the kind of comprehensive, stimulating newspaper residents say they want. It could have restored daily newspaper competition in the city for the first time since the Chron and Ex merged business operations in 1965. And it could have created the first successful Asian American-owned big-city daily in the United States.

But there was a major obstacle: some members of the family, it turned out, were more interested in making money and expanding their political clout than in establishing a strong newspaper that might live beyond the subsidy.

It's hardly news that the Examiner has had problems – numerous local and national media accounts have chronicled the paper's bungled start-up and relentless personnel issues. But interviews with 28 former employees and a review of more than 3,000 pages of internal company papers, related legal documents, and government records show the news accounts so far haven't come close to conveying the turmoil at Sixth and Market.

In short, Florence Fang probably shouldn't have been wasting any time fretting about the mayor's failure to return her phone calls. She had much bigger problems to worry about.

By 2002 the Examiner, which was supposed to elevate the family to new spheres of power and influence – if not wealth – was a disaster. Journalistically, the paper had been almost entirely discounted, despite the fact that its scrappy local coverage sometimes eclipsed the Chronicle's. Editors had cycled through and more than 35 newsroom staffers had quit or been fired. Half a dozen company executives had left on terrible – and sometimes expensive – terms. Advertising was spotty at best, the paper had no credible circulation figures, and hardly anyone in town believed it was going to survive when the Hearst cash ran out.

Also, the Fangs were using the paper as a family piggy bank.

In 2001 alone the Examiner paid more than $1 million in salaries to family members. Even more was spent on the Fangs and their friends, including $7,500 on business suits for Examiner president James Fang and $1.3 million in rent to family members for the paper's office space. Money from Hearst, which was meant to be used exclusively on the Ex, was also augmenting other Fang-owned enterprises.

Meanwhile, the Fangs turned the paper into a political pamphlet for their allies. At one point, James Fang even distributed a list of eight public officials whom staffers were forbidden to criticize in print – including the mayor, the district attorney, the police chief, and local representatives to Congress (See "The Untouchables," page 20). Edicts such as this, which run contrary to accepted journalistic ethics, decimated newsroom morale.

In spite of all of the unorthodox, ethically dubious, and questionably legal practices, money was still tight. Florence fired her son Ted – and installed herself as publisher – when she found out how much money he'd spent on the Ex during its first year. And as the paper's finances grew increasingly bleak, she offered her Hillsborough home as collateral on a loan.

"I don't see how anybody in America could squander $66 million that fast," Mohr, who worked at the Examiner for more than a year, told us.

Politics unusual

Florence Fang came to the Bay Area from Taiwan with her new husband, John, in 1960. Originally from Shanghai, John had studied journalism at UC Berkeley during an earlier stint in the United States. He opened Grant Printing and set about producing guides to Chinatown for English-speaking tourists, then became publisher of the Young China Daily, a Chinese-language paper funded by Taiwan's ruling political party, the Kuomintang. In 1979, John started Asian Week, a free English-language paper for the city's growing Asian American population. Using the profits, in the 1980s he bought the Independent, then a neighborhood paper published out of West Portal, and expanded it into a free citywide paper full of grocery store advertisements and delivered to homes three times a week. He also purchased a group of community papers on the peninsula.

As Fang expanded his businesses, he forged friendships with public officials. And though he was a committed Republican, he became close with liberals including now-senator Dianne Feinstein and John Burton, president pro tem of the California State Senate. He also cultivated a relationship with Jack Davis, the ostentatious political consultant famous for his brilliant strategizing and flamboyant lifestyle.

"It was an odd couple to be sure," Davis told us. "A Shanghai-born Chinese man and an openly gay man. But the friendship grew and flourished. When I was in town, we had lunch about once a week. I think I was the only non-Chinese American hand to carry his casket to its final resting place." Rep. Nancy Pelosi was one of the speakers at John's 1992 funeral.

With the death of John, whom Davis described as "the moral compass of the family," his businesses – and political relationships – were left in the hands of his widow and their three sons.

Florence Fang, who had worked as a United Parcel Service clerk when the Fangs first came to the United States, became a quiet political force. For a time she had breakfast with Mayor Brown on a weekly basis. She served on the first President Bush's Small Business Advisory Council and was recently named a woman of the year by Lieutenant Governor Cruz Bustamante.

Despite the recognition, she took pains to avoid the media. But people who'd once considered her reserved and mild mannered began to see a more ruthless side – and a pronounced interest in fame and status.

Many of the family's political aspirations were pinned to eldest son James, who is brash, sometimes to the point of arrogance. He worked on several of consultant Davis's campaigns and in 1990 narrowly won a seat on the BART Board of Directors, a rare Republican victory in San Francisco. James, an attorney, is married to the daughter of a high-ranking Communist Party official in Shanghai.

Douglas, the youngest son, has been involved in the Fang businesses but has stayed very much in the background. Described as withdrawn, quiet, even misanthropic, Douglas became more active in the family's enterprises after the acquisition of the Examiner.

Middle son Ted – who is reedy, polished, and openly gay – became the public face of the family newspapers. Now 40, he had always demonstrated more interest in journalism than his brothers did and was made editor and publisher of the Independent in spring 1987, just four years after he dropped out of UC Berkeley (years later he was caught on the witness stand during a civil trial claiming that he graduated, when he was actually four units short).

With the sly Ted at the helm, the Independent beefed up its community news coverage and established a reputation for heavy-handed partisanship. If the Fangs were pushing a candidate or issue, they threw everything into it. The paper is widely credited with helping Frank Jordan get elected mayor in 1991, after a collection of vitriolic Hinckle-penned attack pieces on his opponent Art Agnos was distributed throughout the city. District Attorney Terence Hallinan was once another Fang favorite. In 1999, while Ted was an advisor to his campaign, the Independent attacked his opponents with abandon. But the alliance disintegrated last year when, in the public rift between Hallinan and Brown, the Fangs took Brown's side. The Independent has also recently slammed Sups. Gerardo Sandoval and Jake McGoldrick.

The Fangs don't just use the pages of their papers to forge friendships with public officials. They have donated significant amounts of money to politicians they support, and at least encouraged employees to contribute.

According to campaign finance disclosures, Fang family members and employees donated at least $13,422 to Brown's 1995 mayoral campaign. Grant Printing loaned an additional $6,406.

The Fangs have also gotten their share of money from the city, including $1.1 million in low-interest loans for small businesses and approximately $1 million a year to print the city's legal notices in the Independent. In fact, the Fangs backed a 1994 voter initiative, Proposition J, which established criteria for the legal-notices contract that favor free, minority-owned publications printed in San Francisco, virtually guaranteeing the contract to the Independent.

That campaign was run, of course, by Davis, who remained closely involved with the Fangs after John Fang's death.

A close political advisor to the mayor, Davis received at least $322,500 from Fang companies in 1998 through 2001, according to schedules of contractor payments. Reports filed with the city's Ethics Commission do not show him doing any lobbying work for the Fangs, and when we asked Davis why he was paid and if he continues to be, he said only, "That's between me and the Fangs and the IRS."

Former staffers say Davis stopped by the Examiner office on occasion, though he told us, "At one point in time I was very active in the affairs of the Fang family. My role has lessened and lessened."

Despite their extensive connections, the Fang family still rouses plenty of criticism, though much of it is whispered rather than shouted.

Rose Pak, a community activist and fundraiser in Chinatown who has been feuding with Florence Fang for years, is one of the few people willing to publicly criticize them: "I don't think [Florence] is respected by anyone in the [Chinese American] community. They don't have any credibility. People who say nice things about them are either on their payroll or in their papers."

"I saw a pattern of cronyism, nepotism, and mistrust of outsiders – anyone outside the inner circle of advisors," Pam Fisher, who worked as features editor at the Fangs' San Mateo Independent and briefly as the Examiner's film critic, told us in a written statement. "To understand why the Ex really went down, you've got to grasp the fervor of the Fangs' fierce clannishness."

'Buying' the Examiner

When Hearst announced in 1999 its plan to purchase the Chronicle and shut down its own Examiner, which was run in partnership with the Chron, it set off a political firestorm. Public officials, other papers (including the Bay Guardian), and community leaders strongly opposed the plan, which would have left the Chron with a monopoly on the local daily newspaper market.

Clint Reilly, the real estate investor and former campaign consultant who ran for mayor in 1999, sued to stop the sale. "I was concerned about there being one editorial voice in the city," he told us recently.

Thanks in part to community pressure, the U.S. Justice Department refused to sign off on the closure of the Examiner and ordered Hearst to sell the paper. At first nobody expressed much interest in buying the afternoon paper – it was, by most accounts, financially solvent only because it shared ad revenue with the morning Chron.

Then, in one of the more remarkable moments in newspaper history, Hearst announced a deal with the Fang family: the Fangs would get the Examiner, plus $66.7 million over three years to make up for the loss of some ad revenue from the Chron. The subsidy was supposed to help establish the Ex as a real, competitive paper.

Reilly, no fan of the Fangs, persisted with his suit after the Hearst-Fang deal was announced, arguing that the deal was designed to fail. "Given [the Fangs'] track record at the Independent – the way they used it to prosecute their political agenda – I guess I felt what the subsidy was doing was giving them $66 million to attack whomever they wanted to. It wasn't going to be permanent," he told us.

When the case went to trial, Hearst executives acknowledged they only signed the deal with the Fangs in order to gain Justice Department approval of their plan to buy the Chronicle. ("It was a price we were willing to pay," Hearst attorney Gary Halling said.) Also, the Fangs had promised to use their connections to help get Justice to approve the Chron purchase.

There was a lot of evidence that some San Francisco politicians intervened to make sure their friends, the Fangs, wound up with the paper. Feinstein, for instance, set up a lunch to introduce Examiner publisher Timothy White to Florence Fang. But that was overshadowed by revelations about another lunch, at which White had offered Mayor Brown positive editorial coverage if he would just get behind Hearst's plan to kill the Ex. White himself described this as "horse-trading."

As embarrassing as the incident was for Hearst, it served as a distraction from other, possibly stranger facts. Like how neither the Justice Department nor Hearst followed up on Reilly's offer to take over the Ex, even though he'd originally requested a smaller subsidy than the Fangs. Ted Fang met with Justice officials at least five times and had lengthy negotiations with Hearst.

On the witness stand Ted acknowledged that a Fang-owned Examiner would be smaller in circulation and scope than the Hearst-run Ex but said the paper would move to morning publication and provide a true daily alternative to the Chronicle. The paper would be less politically charged than the Independent, he said.

Federal judge Vaughn Walker eventually approved both newspaper transfers, but he had harsh words for the "malodorous" Fang deal and said the Justice Department's actions appeared to be "political favoritism masquerading as law enforcement."

120 days

At first it seemed as if the Fang family did in fact want to build a paper that could pose a challenge to the Chronicle. They set up a corporation, called ExIn, to publish the paper. To run the newsroom, they hired Marty Steffens, a former editor at the Los Angeles Times, who then recruited almost 30 writers from journalism schools and daily papers across the country. On the business end, the family hired a number of well-regarded – and well-paid – newspaper executives.

General manager Bob McCray and chief financial officer Tammy Bailey signed on in September 2000. But the new executives had no office space in which to produce the Examiner, nowhere to print it, and no arrangement to get the paper to print it on. They had only 120 days until the paper's launch – and Ted, the publisher, had gone to Europe for three weeks of vacation.

"There were signs of cash-flow problems from the first month," former Fang employee Fisher told us. "The second payroll bounced, and managing editor Bob Porterfield scrambled to buy toilet paper and supplies for the newsroom. Just days before launch, new reporters showed up to find desks without computers."

She continued, "The Indy was put together with spit and chicken wire, and it usually worked – we only put out seven zoned editions twice a week. But the Ex was a daily."

The Examiner that debuted Nov. 22, 2000, surprised even those who had predicted a disaster. It wasn't available anywhere until noon, and then only at select news racks. The lead story jumped to a full-page ad. There were typos everywhere. All of the photographs were horribly blurry. Advertisements for Examiner classifieds had blank space where there were supposed to be price comparisons, not exactly reassuring potential advertisers.

And yet family members acted as if everything was just fine. "On launch day, Ted blithely breezed into the newsroom as cameras rolled, popping a magnum of champagne as reporters wept over the pixilated front page and mangled type," Fisher told us.

"The paper has developed such a reputation for missteps," the New York Times reported Dec. 18, 2000, "that it has become sport in the city's cafes, not to mention San Francisco's other newspapers, to pick up The Examiner and play spot the mistakes. Some days, the game has been almost too easy."

The gaffes were blamed on faulty software, though many people point out in retrospect that it would've been wise to do a test run. But if production problems didn't bother the Fangs, reporting critical of their cronies did. On Dec. 7, 2000, the Examiner ran a story by Lucia Hwang, who had been hired away from the Bay Guardian, detailing the soft money going to support supervisorial candidates allied with Mayor Brown. It appeared on the front page, under an enormous headline: "Soft Sway: $1M in Soft Money Funding Runoffs to Keep the Mayor's Machine Intact."

"James Fang descended on the newsroom shouting," Fisher recounted. "Hinckle squared off against editor Marty Steffens. Ted seemed uncertain of how to keep peace between the serious journalists he'd hired and the family alliance.... [The reporters'] ire at the shabby product and Fang-family meddling on hard news stories genuinely surprised him. At the Indy no one ever challenged a Fang."

Less than a month after the paper's launch, Steffens stepped down. David Burgin, who'd been the Examiner's editor in the mid '80s and had a reputation for feistiness in print and in person, was already signed up to take over. "Ted said something to me in the beginning that I really sort of fell in love with," Burgin told us. "He said he wanted me to teach him how to be the editor." Burgin said his small staff "accomplished a hell of a lot. And I was proud of them and a little proud of myself for helping get it out of them."

While Burgin's Examiner wasn't about to win any prizes for consistency, the paper frequently beat the Chronicle on local political stories, and it had a gritty city feel that some people couldn't resist, even if they detested the conservative-for-San Francisco political perspective. The paper ran some stories that got a fair amount of local attention – including a long series about crime and grime on Market Street that Burgin said really pissed off the mayor: "He couldn't stand it. He screamed at the Fangs all day long about it. One day at Moose's [restaurant], he said to me, 'Clean up Market yet, Burgin?' "

That period of relatively solid journalism didn't last long.

Family ties

While reporters and editors worked hard to put out a decent paper, internal financial documents and interviews with former employees suggest the Fangs were working mainly to milk the Hearst subsidy for their family and its close allies. According to company documents for 2001 that we obtained, family members received lavish salaries.

In the antitrust trial that preceded the Fang takeover, Ted Fang testified that he would only make $150,000 a year working as the paper's publisher – and that he and his family combined would be limited to $500,000 a year. According to a company salary schedule, Ted's salary was $520,000 in 2001. James's salary was $150,000 (though that's not what he reported on the economic-interest statements he's required to file as a member of the BART board – see "Not-So-Full Disclosure," above). Douglas, who is the CFO, had a $216,000 salary. His wife, Angela, made $177,000 in 2001 just for organizing Bay to Breakers. Other records we obtained show slightly different salaries, so it may be that Ted made $40,000 less, or Angela $13,000 less, or that the differences were made up with checks from other Fang companies.

Florence, James, Ted, and Douglas Fang did not return repeated phone calls for this story. So we had a list of 41 written questions delivered by courier. They responded with a fax challenging our use of material from deposition transcripts. "Both Hearst and ExIn have been satisfied with the independently audited execution of the Hearst-ExIn asset purchase agreement," the April 25 letter, signed by attorney Darrell Salomon, continued. "I regret to say that it is apparent that you misunderstand both the meaning and the context of provisions of that agreement."

Fang family members also appear to have received raises the following year, according to company records for the first quarter of 2002. Bookkeepers were instructed to pay family members first, in case there was not enough money to cover the whole payroll.

Not that the payroll was only for employees. In a deposition taken June 11, 2002, in a contract arbitration for general manager McCray, former CFO Bailey said she'd been concerned the company had people on the payroll "who shouldn't be there."

"There were some contractors who weren't doing anything. We didn't know why we were paying them," Bailey said. "We had consulting services from various and sundry places that were charging us exorbitant amounts."

One of the employees Bailey raised concerns about was Tony Thompson, Ted's long-term romantic partner, whom former staffers say did very little, if any, work for the Examiner. A copy of a Sept. 10, 2001, e-mail addressed to Bailey from Ted instructed her to "please take Tony Thompson off the ExIn, LLC payroll. Also, increase my annual salary from ExIn, LLC by $70,000." Thompson at that time applied for unemployment benefits, according to a Sept. 17 notice from California's Employment Development Department.

Hinckle is not listed on the Examiner salary schedules we obtained. But according to documents, he is paid by other Fang companies – and through his election-time-only paper, the Argonaut (see "The 'Argonaut' Scam," page 22).

In July of 2000, with the San Francisco rental market peaking, Florence Fang bought the Fox Warfield Building, at Market and Sixth Streets. She paid $13 million for it, taking out a loan for $10.5 million. (The agreement with Hearst allows the Fangs to be reimbursed only $3.3 million for capital expenditures each year.) Though sources say the Fangs may have overpaid for the building and that now, in this bad economy, parts of it are empty, the investment may benefit the family regardless of what happens to the Examiner – it certainly had the potential to.

Also, according to internal company e-mails, Florence, who doesn't appear on salary schedules, collects rent for the office space used by the Examiner (as she does for property used by several Fang enterprises). According to a review done by Arthur Andersen (on behalf of Hearst) in September 2001, the Examiner paid $114,667 a month – or $1.37 million a year – to use four floors of the building, one of which was undergoing renovations. Forty percent of the building's annual property tax was also billed to the Examiner, according to the Andersen document. The Ex paid another $20,000 a month to hang a sign on the building's exterior.

Other Ex expenditures listed in records we've obtained include $7,500 spent at Union Square boutique Wilkes-Bashford; according to one source, the dough bought suits for James Fang. Media consultant Ken Maley was paid $7,500 a month and did do quite a bit of public relations work for the paper. But he also did other, unrelated work for the family, according to an invoice we obtained. He spent time negotiating a deal to put part of a display wall the Fangs originally underwrote, in honor of John Fang, for the old Asian Art Museum, in Florence's home. He also worked on arrangements to place a statue commemorating Asian Americans on Angel Island and to possibly donate the Examiner's archives, which were part of the Hearst deal, to the state library in return for a large tax deduction. Maley confirmed he did the work but said neither of these last two projects was completed by the time he left.

ExIn also paid the $31,000 balance on a line of credit from a Las Vegas bank described in a Dec. 5, 2001, e-mail only as "Tony and Ted's Equity line."

The Fangs weren't so generous when it came to the entertainment of their employees. Florence arrived at the Ex's 2000 holiday party in a long dress of ivory silk, an enormous Examiner eagle beaded onto it. Employees, meanwhile, were treated to a cash bar.

Cashed out

In fact, the Fang family's free-spending ways appeared to have impoverished the paper. Employees describe how the Examiner always seemed to have very little cash on hand – and e-mails provided to us show consultants and attorneys were regularly pleading to have their bills paid.

On June 27, 2001, Bailey and general manager McCray met with Florence Fang and all three of her sons "to explain to the family why there was no more cash," according to Bailey's deposition. Bailey said that while advertising revenue was increasing, spending was way too high. She identified costs she was concerned about, including the building, for which the paper paid "awfully high" rent, legal fees, and "personnel in the payroll who shouldn't be there." The company had also lost $1 million on Bay to Breakers.

When she was deposed, Bailey said she did not know of any changes that were made as a result of the June meeting, other than Ted's partner, "who was not even an employee," being removed from the payroll.

In a July 3 memo consultant Tom Stultz, who was hired to help launch the paper, outlined what he would do if he was in Ted's shoes. "I would defer any payments due to me as the owner/operator," the memo stated. "While I cannot legally ask my employees to go without being paid on schedule, I for sure can limp along without my own income for a month or so to help in this crunch." There is no evidence the Fangs followed his advice. And, according to a company breakdown, the paper lost $4.1 million in the first half of 2001.

Over the next couple of months, it also lost several top execs, including Stultz and McCray. A few ended up in arbitration over their employment contracts and are legally bound not to speak about their time working for the Fangs, but their experiences are laid out in depositions taken as part of McCray's arbitration.

In McCray's own deposition, dated Dec. 19, 2001, and obtained from another source, McCray stated that while he was concerned about some of the paper's expenses, advertising revenues were climbing steadily: "I think we could have grown to where, within a year and a half, there was still a shot this thing could be viable at the end of the subsidy period."

However, McCray said Bailey had told him that the accounting books were irregular, that "there were things in the books that seemed out of whack." According to some of those records, however, the Examiner projected $11.7 million in total 2001 income but made only $5.8 million. The documents say the paper's expenses exceeded the year's subsidy by about $1 million, and that was even after Hearst agreed to give the paper a $2 million advance.

Just where did the money go? It's hard to tell. According to many former accounting and business staffers, the Examiner was financially entangled with many of the family's other businesses. According to records filed with the California secretary of state, the family controls at least 20 corporations, including 10 Bay Area publications, a couple of nonprofits, and several real estate ventures. And staffers and internal records attest that at least some subsidy money was spent on Fang companies including Grant Printing and the Independent.

Hearst agreed to pay the subsidy under Justice Department pressure, to help the Fangs build a competitive paper, not to help the family's other enterprises. Payments to the other companies are allowed, but only for expenses directly related to the publication of the Examiner. The agreement defines reimbursable costs as those "solely and directly relating to the publication of the Examiner," but allows money paid to "Affiliates of Buyer which reasonably relate to the publication of the Examiner."

But onetime staffers say payments to other companies, often described as rent or "storage fees," did not appear justified. One former accountant for the Fang companies said there was routinely no money in the business accounts right before a Hearst reimbursement was due. After the check from Hearst came in, accounts that belonged to Grant, the Independent, or Pan Asia Ventures Corporation (the company that owns Asian Week) were flush. Another source told us that in 2000, using subsidy money for the other properties was openly discussed.

In her deposition Bailey said, "Before I even got there the Independent was in the hole terribly in terms of revenue and cash, and Ted wrote some checks which were later deemed as loans to the Independent." Bailey said the money wasn't paid back by the time she left the company and added that "the purpose of the [June 27] meeting was to discuss the cash flow problems, however, because of the Independent taking money from the Examiner, we discussed both companies and Grant Printing as well because they had taken 400 some odd thousand dollars."

"Mrs. Fang was pretty much shocked," Bailey explained in the deposition. "She was not aware that the Independent and Grant Printing had, you know, lapped up some of the money out of the Examiner, and she was not happy about that."

Internal company documents we obtained show that in the Examiner's first eight months at least $1.5 million was paid directly to other Fang companies. More than $1.2 million went to Independent Holdings and the Independent Newspaper Group.

Another $305,683 went from ExIn to Grant Printing, which did not print the paper at that time but did produce some special sections. Grant may also have benefited from equipment and newsprint bought by ExIn, say onetime staffers.

And according to several former employees, the Examiner's financial situation toward the end of 2001 cost Ted Fang his job as publisher.

In October 2001 he was fired by his mother, who has always controlled the company that owns the paper. In December, according to a draft of the contract, Ted was promised $1 million for his 37.5 percent share of the company. And, for acting through July 2003 as "senior advisor to the publications and business ventures operated or owned, in whole or in part, by Mrs. Florence Fang," he was to get $40,625 a month.

At the time of his settlement, Ted sent his brothers a memo explaining why he should get such a generous buyout. "If you would imagine just for a moment, the transition that I am going through – from running the whole operation to having my wings clipped dramatically – it is very traumatic for me, and creates a great deal of insecurity," it states. He has had no visible involvement in the companies since, though there are rumors he may someday resurface at the Independent.

"Florence told me Ted was a spoiled brat who spent money hand over fist," Burgin said. "I just about fell out of my turnip truck. My budget [for the editorial department] was less than $4 million. I thought, 'Woman, you are the one who's nuts.' "

Ted publicly threatened to sue Florence for a number of things, including job discrimination because he is HIV positive. Even in a family known for turmoil, this marked a new low. And according to other sources, James, who had once gotten into a fistfight with Ted in the Independent offices, has worked hard to patch things up between his brother and mother.

"I found Ted visionary and creative, willing to entertain new editorial approaches," Fisher told us. "He seems pulled in two directions: the path of his father, John, a bona fide journalist with a passion for social justice, and his mother, Florence – a power monger consumed with building a dynasty of money and influence. Those two forces warred within Ted and within the [Examiner] newsroom from the first week we opened the doors."

"For all the bad press Ted got, there was never a question in anybody's mind that he was a newspaperman," said Edith Alderette, who was a reporter at the Independent and, briefly, the Examiner. "Florence and James have so many other interests; [journalism] is not their first priority."

Content control

With Ted Fang gone, the situation in the newsroom just got worse.

"All of a sudden James is running everything, and I didn't know him at all," Burgin said. "Ted told me, 'Trust James.' But James couldn't pour piss out of a boot if instructions were written on the heel. So it was a downhill thing from there."

Burgin said he was on the verge of quitting when "James walks in with a list and tells me there are eight people we can't write about without the approval of him or his mother" (see "The Untouchables," page 20).

On the list: Brown, Hallinan, Feinstein, Burton, Pelosi, Sup. Gavin Newsom, former assessor Doris Ward, and former police chief Fred Lau.

We asked James M. Naughton, a former Philadelphia Inquirer editor who is now president of the Poynter Institute, a school for journalists, for his thoughts on this. "If you're going to publish a newspaper, you have to tell the truth about even people you admire or are associated with," he said. "Otherwise it isn't a newspaper, it's a political organ."

Burgin said that before he got a chance to resign, he was fired by Florence Fang, who read him a termination letter over the phone Jan. 10, 2001.

Mohr, the paper's assistant managing editor for more than a year, explained, "Shortly after Burgin was fired in January, there was a big change. James moved down to the sixth floor [newsroom] and was there to monitor us."

In May 2002, just two months after the Examiner relaunched as a tabloid, it ran a mildly critical story about the mayor's attempts to fire a civil servant. According to Mohr, James Fang invited him and Zoran Basich – a longtime Fang employee who had been chosen to replace Burgin as executive editor – out to lunch at Original Joe's. "He said to us, 'Look, we can't pick on our friends. They helped us get the newspaper.' I asked, 'You're saying hands off the mayor?' and he answered, 'No, but if we hurt the mayor, we won't have anyone to help us.' "

"It was clear from the conversation how the newspaper was going to be run," added Mohr, who said James instructed them that any news item having to do with China had to be cleared with him or his mother, explaining, "I do business over there." Stories about the Israeli-Palestinian conflict were also to get clearance.

"They're concerned about advertisers, and they don't want to offend them," Mohr said.

"To insist that all stories be vetted by the owners in this day and age is very unusual," Naughton said. "And certainly smacks of censorship."

Alex Brown had been a reporter at the Examiner for just over a year when James Fang called him into his office to discuss a story Brown had just finished writing about the BART board, on which James serves. "He said he wanted his quotes in, that he wanted his position [on the vote] to be clear. I said, 'Your position is clear,' " Brown told us. Later that night Brown got a call from an editor who said James's quote had been added to the story. His complaints went unheeded, and he resigned the following morning. "I just couldn't take another paycheck from them after that," Brown said.

"In a good news organization you try to avoid a conflict of interest," Naughton told us, adding that if James is going to remain on the BART board, he should take no position on how the paper covers it. "News organizations have one thing to sell when it comes down to it, and that's credibility. [This] might be one of the reasons that the Examiner is not a viable, thriving enterprise."

Many employees say they had signed on to work on something that had potential to be historic, and ended up feeling the that owners had no real interest in the paper. Those who worked closely with James and Florence have few good things to say about the experience.

"I hated working for them," another former Examiner writer said. "You work your ass off, and no one gives a shit."

Deadline

It's well known that the Fangs are motivated by money and politics – that they use their newspapers to build friendships with politicians, their political connections to make more money, and their money to strengthen their political ties.

The Examiner deal provided more opportunities for that. The Fang family could have built up its political muscle and maybe even turned the free money from Hearst into more money.

The deal also presented an opportunity for the family members to make themselves into something else – the esteemed Asian American owners of one of the country's only nonchain daily papers. It could have been, to repeat a phrase used by the Fangs themselves, the 21st century's first daily newspaper.

Instead the paper could close any day. In February, 40 editorial staffers were summarily fired, home delivery was canceled, and the Examiner went to free distribution from news racks only. "I thought they should have gone tabloid and free right off the bat, and I told them so," Burgin said. "But they waited too long, they waited too goddamn long."

The paper is wasting away and sharing even more content with the Independent newspapers and Asian Week. Top guns including in-house counsel Salomon and executive editor Basich are leaving. It's rumored the Fangs won't be able to keep the paper going past September but are nonetheless refusing to talk to possible buyers. And gossip of a consortium effort to buy the paper, possibly involving Reilly, seems thin anyway.

There's no guarantee the Examiner could have survived. While $66.7 million is a lot of cash, it's not necessarily enough to build a newspaper from scratch. Still, there are many people who believe the Fangs blew a shot at making history.

In his deposition, original general manager McCray said, "The paper could have made it. It makes me ill that we didn't give it its best shot, and all this happened."

"They've run it into the ground, and we're all scratching our heads," Florence Fang rival Pak said. "After $66 million? What did they do with it except give themselves big, fat salaries?"

The contract with Hearst set up an incentive not to spend all of the subsidy money – whatever remained each year would be split 50-50 between Hearst and the Fangs. There's been speculation that the Fangs have tried to run the paper on the cheap and pocket the remaining money. But according to documents and interviews, they spent every last penny of the subsidy. Whatever money they got out of the arrangement, they got through salaries, purchases, or infusions to their other companies, not through the incentive to be frugal.

And a search of public records shows Florence in the past three years has mortgaged or remortgaged much of her property. Many people predict the family's other operations might even fall into the financial hole created by the Examiner.

The Fangs, in trying to increase their wealth and status, risked everything – and lost at least a little. Which leaves Hearst the only winner in all of this.