Family's Climb to the Top Earns Enemies

by Paul Kozakiewicz

The actions of the politically-influential Fang family culminated in the acquisition of the 135-year-old SF Examiner, the flagship of the Hearst Corporation, in March 2000.

But the road to financial success ­ money laundering, alleged fraud and perjury, dirty campaign tactics and journalistic character assassinations of political opponents ­ has created a long trail of enemies and investigations by governmental agencies.

One ex-employee of a Fang Family Enterprise who did not want to be identified, is considering filing a civil RICO lawsuit against the family, claiming the actions taken by the Fangs amount to a continuing effort to defraud the public, government agencies and the family's employees and advertisers.

"I believe they have been running a criminal enterprise for at least seven years," the ex-employee, who had access to inside Fang family information, said.

A civil RICO lawsuit claims certain actions constitute organized crime and it is filed by an individual; a criminal RICO suit is usually initiated by the US Department of Justice.

The Fang family ­ patriarch Florence Fang and her three sons, James, Ted and Douglas ­ has amassed a small fortune in real estate, totalling more than $24 million.

In March 2000 Florence Fang bought the SF Examiner from the Hearst Corporation for $100, with the Hearst Corporation providing her up to $66 million over 32 months to run the paper. The entire family is getting income from the Examiner.

But time is running out on the $66 million subsidy, leaving the Examiner in a huge financial hole that the newspaper will have to climb out of if it is going to continue publishing, according to documents obtained by the Richmond Review.

According to ExIn's 2001 income statement, the Examiner lost $22 million last year. ExIn is the corporation that was created to publish the newspaper.

Less than two months after taking over the Examiner, the Fang family moved to protect its assets by restructuring many of the family's businesses, reorganizing them as Limited Liability Corporations (LLC).

The Examiner is also involved in a bitter dispute with organized labor.

Employees at the Examiner's graphics department voted to form a union in February 2002 but the Fangs have not "acted in good faith," union representatives say, and failed to negotiate a contract with the legally-sanctioned union.

Because of the family's political connections, the family has benefited. The editorial content of the Fang family's three San Francisco publications, the SF Examiner, SF Independent and Asian Week, is often used to praise the virtues of political allies and to bash enemies.

Two San Francisco mayors, Frank Jordan and Willie Brown, approved low-interest loans totaling $1.1 million in federal funds for equipment and property improvements.

The family also controls the bulk of the city's lucrative advertising contract, which has almost tripled in cost to the city's general fund. In 1994 when the Hearst-owned Examiner last had the contract, the city's cost for legal advertising was $230,000. After the passage of Prop. J in 1994, it climbed to $1.1 million with the Independent as the only bidder. There has not been any competitive bidding for the contract since 1997.

The Fang family has also been accused of treating employees and delivery drivers harshly, including the firing of employees at the Examiner for voting to unionize.

Telephone calls seeking comment to Florence Fang and Darrell Salomon, the Fang family's attorney, were not returned.

Florence Fang, the 69-year-old matriarch of the family, is the primary mover and shaker in the family's financial empire. In the last three decades she and family members have been involved in the formation or operation of more than 30 corporations or foundations.

Fang took over control of most of the Fang Family Enterprises after her husband, John Fang, died April 27, 1992 at St. Francis Hospital, reportedly because of internal bleeding caused by an undetected cut that occurred during hip surgery.

John Fang, born in 1925, fled the Japanese occupation of Shanghai in the 1930s and followed the Koumingtang government to its base in Chungking, where he intended to help rebuild China after the war.

But when the Communists took control of China in 1949, Fang moved to Taiwan. After a brief stay, he immigrated to the United States in the early 1950s, where he worked as a printer in several cities before settling in San Francisco in 1952. He married Florence in Taiwan in 1960 and the couple moved to San Francisco.

The City reportedly spent some $150,000 to provide about 200 police officers for a motorcade for Fang's funeral procession.

Two of the Fang's sons, James and Douglas, are still involved in the operation of the family's businesses.

Ted Fang, who was the Examiner's editor when the family took over the Examiner Nov. 22, 2000, was fired by Florence for overseeing start-up costs at the Examiner that were millions of dollars over budget .

David Burgin, a former editor at the Fang-owned Examiner, told the Chicago Tribune on March 12 that the Examiner spent $30 million ­ $14 million more than the Hearst subsidy covered during the time period.

An internal audit conducted by Andersen accounting firm for the Hearst Corporation, however, reported that the Fangs were reimbursed $8 million that they went over budget in the initial seven-month-long subsidy year.

Jack Davis, a political consultant and Fang family friend, told the Chicago Tribune that more than money was responsible for Ted's firing ­ Florence has issues with her son being gay.

When the Examiner launched under the Fang family banner, Ted openly proclaimed he was gay in a high-profile way, a fact that did not sit to well with his mother.

"Florence knows her son is gay, but I don't think she really understands what that means," Davis said.

Fang had the legal right to fire her son because she is the sole decision-maker at the SF Examiner, due to the fact that she is the only stockholder at ExIn with Class-A voting stock.

Fang, a Republican, was appointed to serve on the U.S. Small Business Administration by U.S. President George Bush and she was given the nod to serve on the city's Small Business Commission by Dianne Feinstein in the early 1980s.

Chinese Government says Fang Took Money

After being delayed for years, Chinese officials were told in January 2000 that the statute of limitations had expired for filing a legal action against Florence Fang for allegedly defrauding a county in China of $130,000.

In 1992 government officials in Wenjiang County, located in central China, say they gave the money to Fang for a 10 percent stake in the Fang-family-owned Grand Palace Restaurant in Chinatown, according to a story published in the Wall Street Journal June 21, 2000.

According to Xu Wenjum, head of development for Wenjiang County, Fang went to China to discuss the deal, supposedly the first of many, with the mayor of Wenjiang and a Communist Party boss. Wenjum said the "famous" American woman was showing pictures of herself with President Bush and Chinese President Jiang Zemin.

The Chinese officials said they wired Fang the money, in good faith, without a contract because they said they trusted her.

A five-person delegation from China that came to the United States to see Fang shortly after the money was wired, according to the Journal, was surprised when they were put up at the home of a friend, who charged the Chinese visitors for driving them around in his beat-up automobile. Instead of getting a signed contract, the Chinese officials were offered a deal for a 51 percent stake in the restaurant.

When Fang went to China the next month, she was accompanied by the wife of a provincial vice governor, given a police escort and named a "senior advisor" to Wenjiang County. Fang reportedly offered to sell the Chinese officials up to 70 percent of the restaurant and offered to trade for county-owned factories in lieu of cash. Nothing came of the offer.

In January 2000 Wenjiang County Manager Wenjum tried again to get the county's money back. He was told the restaurant had been sublet and that it was losing money. Fang offered him $4,000 for the county's 10 percent stake. Because the statute of limitations had expired, the county was left without legal recourse.

"Our government trusted you," Xu said. "You have no right to take our money."

At the time, Fang was negotiating with Wenjiang officials for varying degrees of Grand Palace ownership, which she valued at $1.3 million, the restaurant was losing money. The business, which consisted of the restaurant's name and supplies, did not own any real estate and was losing about $1 million a year, according to tax returns given to Chinese officials.

Fang told the Journal her attorneys have advised her not to comment about the case.

Fangs Anger Landlord, Contractor

When the Fang family took over the SF Examiner from the Hearst Corporation in late 2000, they moved the newspaper's operations into the family-owned Fang Warfield Building at 988 Market St.

One firm that was hired to renovate the building was AMEC Construction Management. When construction was completed the firm, which included several small subcontractors, sued the Fangs and had a mechanics lien slapped on the building Feb. 20, 2001 because the Fangs had not paid some $1.5 million for work that was performed at the site.

When AMEC sued, the Fang family countersued, claiming AMEC had overstepped the terms of its contract by hiring subcontractors, performed shoddy work and overbilled for its services.

One of the companies that performed work at the Fang-Warfield Building was Granite Excavation & Demolition, Inc.

According to the firm's owner, Joe Cassidy, Granite was owed $66,000 for doing interior demolition work and that the Fangs failure to pay them was causing the small firm a financial hardship.

"We worked at night carrying stuff out of the building by hand," Cassidy told the Bay Guardian in its Sept. 26 issue. "The Fangs owe us $66,000. That's a lot of money for our small company."

Timothy McInerney, Granite's attorney, threatened to subpoena financial records to show the Fang family's wealth and the income and operating expenses of the Examiner.

The Fangs eventually paid some, if not all, of the contractors that were owed money.

The Fangs were also sued by Fricke-Parks Press Inc. in 2000 when Jerry Diaz, sales manager for the printing company, went to work for Fang-family-owned Grant Printing.

Fricke-Parks claimed Diaz took trade secrets and client lists over to Grant, allowing Grant to steal its business.

Fricke-Parks also claimed the $66 million subsidy Hearst was giving to the Fang family for the Examiner was being used to undercut Fricke-Parks' printing prices and economically damage the company.

The Hearst subsidy payments are supposed to be used for Examiner expenses only, not for use by any other Fang Family Enterprise, according to the terms of the agreement between the Hearst Corporation and the Fang family.

Salomon denied Fricke-Parks' claim in an Oct. 19, 2000 Examiner news story.

"We have done nothing wrong," he said. "We neither have nor need any Fricke-Parks trade secrets.

The Hearst Corporation reportedly settled the case by paying $250,000 to the printing company. Calls to the Hearst Corporation were not returned.

James Fang Admits to Money Laundering Charges

James Fang, an elected member of the Bay Area Rapid Transit (BART) board of directors, has been involved in numerous family dealings.

Fang admitted to money laundering charges in 1995 and paid the maximum fine that could be levied by the state's Fair Political Practices Commission (FPPC).

According to the commission, Fang took four unsigned cashier's checks, valued at $500 each, from the Hoy-Sun Ning Yung Benevolent Association. Fang and other family members signed the checks and presented them to Frank Jordan's election campaign in December 1991 while claiming credit for the donations.

"This matter ... carries a maximum penalty of $8,000. In view of the circumstances described, enforcement of the maximum penalty is justified," the commission concluded.

Marc Chamot, an independent contractor who was responsible for delivering the Independent, says he and other driver-contractors took cash from Fang-family employees for writing checks to politicians and causes the family supported.

According to a June 28, 2000 story in the San Jose Mercury News, Chamot funnelled $7,400 of the Fang family's money into the campaign to pass Prop. J, the measure that gave the Fang family a good chance of attaining the lucrative contract for publishing the city's public notices.

Fang's political connections often serve his family's goals.

Just after the location for a new BART station in Millbrae was chosen, Florence Fang, through the Yick Tsun Society, purchased a building with mostly medical offices at 1828 El Camino Real in Burlingame, a half block from where the new station will be located.

In June 1999 the SF Airport Commission approved a deal to give the Fangs $1 million over the course of a five-year lease to rent space at the building.

On Fang's Statement of Economic Interests filed with the FPPC, he claims his salary at the Examiner is less than $10,000 a year. But according to Examiner payroll records, Fang earned $34,615 during the last quarter of 2001 and has a base salary at the Examiner of $161,000 a year.