Appendix — United States v. Marine Bancorporation, Inc.
Supreme Court brief1974
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Supreme Gost of the Batted State
OCTOBER TERM, 1973
No. 73-38
UNITED STATES OF AMERICA,
Appellant,
—.—
_ MARINE BAN CORPORATION, THE NATIONAL BANK OF
COMMERCE OF SEATTLE, WASHINGTON TRUST BANK,
AND JAMES E. SMITH, COMPTROLLER
OF THE CURRENCY
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
*
INDEX
Docket Entries
Complaint by the United States filed October 22, 1971 9
Defendants’ Answer to the Complaint filed November 22,
1971
Intervenor’s Answer to the Complaint filed December 8, 1971..
Defendants’ Answers to Plaintiff’s Interrogatories:
No. 5(A)(2), (3)
7 AA A
No. 23
No. 80
No. 38
No. 34
No. 40
No. 48
No. 53
832888888 * 2
ii INDEX
Page
Plaintiff's Answers to Intervenor’s Interrogatories (Set.
No. 1):
BING SIN seascape essence 91
No. 15 91
No. 16 92
—B—AT AAA 92
Deposition of Robert F. Buck taken August 16, 1972 93
Buck Deposition Exhibit 1... 1514
Buck Deposition Exhibit ½· 1516
Buck Deposition Exhibit 3“ 1576
Buck Deposition Exhibit 4* 1407
Buck Deposition Exhibit 5 132
Buck Deposition Exhibit 6* 1358
Buck Deposition Exhibit 7 136
'
Deposition of Maxwell Carlson taken August 16, 1972 137 |
Carlson Deposition Exhibit 1 152
Carlson Deposition Exhibit 2* 1273
Carlson Deposition Exhibit 3 154
Deposition of Ralph J. Stowell taken August 16, 1972 157
Stowell Deposition Exhibit 1“ 1432
Stowell Deposition Exhibit 2“ 1433
Stowell Deposition Exhibit 3“ 1393
Stowell Deposition Exhibit 4“ 1284
Deposition of Frank A. Abersfeller taken August 17, 1972... 195 |
Abersfeller Deposition Exhibit 1 236
Abersfeller Deposition Exhibit 2* 1391
Abersfeller Deposition Exhibit 3 239
Abersfeller Deposition Exhibit 4 240
Abersfeller Deposition Exhibit 5 1279
Deposition of Andrew Price, Jr. taken August 17, 1972 242
Price Deposition Exhibit 1-1* 1430
Price Deposition Exhibit 1-2* 1429
Price Deposition Exhibit 1-3* 1428
Price Deposition Exhibit 144·l . 1427
Price Deposition Exhibit 1-5* 1426
Price Deposition Exhibit 1-6* 1425
Price Deposition Exhibit 1-7* 1424
Price Deposition Exhibit 1-8* ... 1423
Price Deposition Exhibit 1-ůůᷣ᷑ꝛ⸗:m 1422
Price Deposition Exhibit 1-10* 1421
Price Deposition Exhibit 1-111 1420
* Deposition Exhibits which correspond to Government Exhibits
are reproduced in the category of Government Exhibits.
INDEX iii
Page
Deposition of Andrew Price, Jr. taken August 17, 1972—Con-
tinued
Price Deposition Exhibit 1-12* 1419
Price Deposition Exhibit 1-13* 1418
Price Deposition Exhibit 1-14* 1417
Price Deposition Exhibit 1-15* 1416
Price Deposition Exhibit 1-16* 1415
Price Deposition Exhibit 1-17* ; 1414
Price Deposition Exhibit 1-18 327
Price Deposition Exhibit 1-19“ 14¹3
Price Deposition Exhibit 1-20“ 1412
Price Deposition Exhibit 1-21“ 1411
Price Deposition Exhibit 1-22“ 1410
Price Deposition Exhibit 1-23* 1409
Price Deposition Exhibit 1-24* ; 1406
Price Deposition Exhibit 1-25* 1404
Price Deposition Exhibit 1-26* ........... 1403
Price Deposition Exhibit 1-27“ 1402
Price Deposition Exhibit 1-28 * 1401
Price Deposition Exhibit 1-29 * 1400
Price Deposition Exhibit 1-30 ˙ 1399
Price Deposition Exhibit 1-31“ 1398
Price Deposition Exhibit 1-32* 1397
Price Deposition Exhibit 1-33 ˙* 1396
Price Deposition Exhibit 1-34 1395
Price Deposition Exhibit 1-35“ 1393
Price Deposition Exhibit 1-36* 1394
Price Deposition Exhibit 1-37“ 1392
Price Deposition Exhibit 1-38* 1391
Price Deposition Exhibit 1-39“ 1389
Price Deposition Exhibit 1-40“ 1390
Price Deposition Exhibit 2“ 1433
Price Deposition Exhibit 3“ 1432
Price Deposition Exhibit 4“ 1593
Price Deposition Exhibit 5“ 1650
Price Deposition Exhibit 6“ 1514
Price Deposition Exhibit 77“ 1573
z „ OB ssid oti rte 329
Price Deposition Exhibit 9* . 1856
Price Deposition Exhibit 10“ 1358
Price Deposition Exhibit 11* 1357
Deposition of Dean W. Loney taken August 18, 1972 331
Loney Deposition Exhibit 1* 5 1514
Loney Deposition Exhibit 2“ 1573
Pretrial Order and attached Exhibits A through H, filed
January 8, 1973
* Deposition Exhibits which correspond to Government Exhibits
are reproduced in the category of Government Exhibits.
iv INDEX
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 8, 1978:
Appearances a
Transcript of the proceedings
Testimony of Robert E. Smith
—direct—[50]
—voir dire—[57]
further direct—[61]
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 9, 1973:
Appearan ces
Testimony of Robert E. Smith (resumed)
—direct—[117] — —
Testimony of Warren P. Cooley
direct [1931
—CTOSS— [209 )J
Testimony of Michael Marston
direct [2151
—cross—[264]
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 10, 1973:
Appearances r
Testimony of Charles F. Haywood
direct [3291727
Testimony of Maxwell Carlson
direct [459 —
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 11, 1973:
Appearances
Testimony of Joseph C. ee
—direct—[485]
—cross—[555]
—redirect—[574] ..
Page
596
INDEX v
Page
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 11, 1973: Continued
Testimony of Richard G. Bennett
—direct—[622] 804
—cross—[633] 810
redirect [645] 818
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 12, 1973:
Appearances 820
Testimony of Betty Bruckner
—direct—[654] 822
—cross—[656] 824
—redirect—[662] 828
Testimony of William F. Barrett
—direct—[663] 828
—cross—[672] 834
I Testimony of Leroy Johnson
—direct—[684] 841
—cross—[687] 843
_ Testimony of Maxwell Carlson (resumed)
—direct—[692] 846
—eross—[718——f———.———.——g̈k.—————————— 860
redirect [749] 881
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 15, 1973:
Appearances . 883
Testimony of Raymond A. Hanson
—direct—[756] 884
—cross—([761] 887
—redirect—[773] 893
Testimony of Neil Degerstrom
—direct—[774] 894
—cross—[779] — 897
Testimony of E.D. McCarthy
—direct—[780] 897
—cross—[785] 900
—redirect—[788] ‘ 902
Testimony of Arden Jacklin
—direct—[789] 903
—cross—[793] 905
redirect [7977 U en 908
Testimony of R. Neil Williams —
direct [798] — 908
—cross—[802] 911
*
vi INDEX
Page
Transcript of proceedings held before the Hon.) William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 15, 1973:—Continued
Testimony of Leonard Maxey
C —— ——ůůů 912
—cross—[805] 913
—redirect—[807] = 914
Testimony of Merton L. Howard
direct [808] 915
—cross—[811] 917
Testimony of Philip H. Stanton
—direct—[814] 918
—cross—[846] 937
—redirect—[861] 945
Testimony of T. Robert Faragher
—direct—[867] 948
—cross—[911] 974
Transcript of proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 16, 1973:
Appearances — 1007
Testimony of H. Joe Selby
rn . 1008
—cross—[979] 1013
—redirect—[1018] 1036
Testimony of Nevins D. Baxter
—direct—[1031] 1043
--cross—[1066] — 1063
Testimony of Robert K. Hurni
direct [1132] 1102
Transcript of procedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 17, 1973:
Appearances 1115
Transcript of the proceedings 1116
Government Exhibits:
GX A-1 1148
GX A-2 1149
GX A-3 1150
GX A-4 ; — 1152
GX A-5 1153
GX A- 1154
GX A- 7 1155
c “—Q—Q—Q—Q—U—U—U—U—A ———— — —'— 1156
INDEX ix
Page
GX H-13 1388
GX H-14 1886
GX H-15 1341
GX I-1-a 1346
GX 1-1-5 | 1347
GX I-l< 1848
GX I-2 1349
GX 1 1350
GX 14. | 1353
GX I-4-b 1854
GX I 4c &. 1855
GX I-44 1856
GX 14. 1857
GX 1-6 1858
GX 1-8-4 1862
GX 1-65 | 1363
GX I-7 1864
GX I-8-a 1365
GX I-8-b 1366
GX I-9-a 1367
GX I-9-b 1368
GX I-10-0 1870
G 1-10 1871
GX I-ll-a 1872
GX I-11-b 1878
GX I-ll< 1374
GX 1-11-4 1875
GX 1-11. 1876
GX I-11-f 1877
GX-J-1 1378
GX J-2 1879
GX J-8 1380
GX J-4 1381
GX J+ 1882
GX J-7 1383
GX J-8 1884
6X J-9 1885
GX J io i 1386
GX 4-11 1387
GX J-12 1388
GX 4.18 1889
GX J-14 1390
GX J. is 1891
GX 4.16 1892
GX 717 1398
GX J-18 1894
GX J-19 1895
CCCP ² A 1396
GX J-21 1897
GX J-22 1898
GX J-23 .
GX J-24
GX J-25
GX J-26
GX J-27
GX J-28
GX J-29
GX J-30
GX J-31
GX J-32
GX J-33
GX J-34
GX J-35
GX J-36
GX J-37
GX J-38
GX J-39
GX J-40
GX J-41
GX J-42
GX J-43
GX J-44
GX J-45
GX J-46
GX J-47
GX J-48
Gx J-49
GX J-50
GX J-51
GX J-52
GX J-53
GX J-54
GX K-1
GX K-2
GX K-3
GX K-4
GX K-5
GX K-
GX K-7-a
GX K-7-b
GX K-7-<
GX K-
GX K-9
GX K-10
GX K-ll-a
GX R- 11
GX K-12
GX K-13
GX K-14
xii
GX K-48-b
GX K-49-a
GX K-49-b
GX K-50
INDEX
GX K-5l-a
GX K-61-b
GX K-5l<
GX K-51-d
GX K-52
GX K-53-a
GX K-53-b
GX K-54-a
GX K-54-b
GX K-55-a
GX K-55-b
GX K-55-c
GX K-56
GX K-57-a
GX K-57-b
GX K-58
GX K-59
GX K-60
GX K-61
GX K-62
GX K-63
GX K-64
GX K-65
GX K-66
GX K-67
GX K-68
GX K-69
GX K-70
GX K-71 ...
GX K-72-a
GX K-72-b
GX K-72-b-1
GX K-73
GX K-74-a
GX K-74-b
GX K-74-c
GX K-75
GX K-76
GX K-77
GX K-78
GX K-79-a
GX K-79-b
GX K-79-c
GX K-80
1541
1547
1551
1570
15783
1576
1579
1591
1592
1593
1607
1608
1612
1613
1615
1616
1617
1618
1634
1650
1666
GX K-81
GX K-82 1668
GX K-83 1669
GX K-84-a 1678
GX K-84-b 1679
GX K-85-a 1680
GX K-85-b 1681
GX K-85-c 1682
GX K-86 1683
GX K-87-a 1684
GX K-87-b 1685
GX K-88 1686
GX K-89 1688
GX K-90 1690
GX K-91 1691
GX K-92 1692
GX K-93 1694
GX K-94 1695
GX LI 1697
c 1747
GX M-1 1753
GX M- 2 1758
Gx N 1769
GX O-1 1820
Gx 0-2 1821
Gx 0-3 1822
Gx 0-4 1823
GX 0-5 . 1824
Gx 0-6 1825
GX 0-7 1826
Gx 0-8 1827
Gx 0-9 1828
GX O-11 1829
GX 0-19 1830
GX 0-20 1831
Defense Exhibits :
Dx 1 1832
DX 2 1833
Dx 3 1834
DX 4 1835
DX 5 1836
DX 6 1837
DR 7 9 1838
DX 9 1839
DX 10* 1840
DX 11 1841
„Colors are not shown on this map in the Appendix. They are
shown on the map in the record certified to this Court.
xiv INDEX
DX 12
DX 18
DX 14
DX 15
DX 16
DX 17
DX 18
DX 19
aE a RENE I eNO UE
DX 21
DX 22
DX 23
DX 24
DX 25
DX 26 8
DX 27 ae
JJ... ͤ v eee
Dx 29 eee eee
J...... —„T
DX 31 :
DX 32
...... 00000000
J...... cece ets
DX 35
DX 36
DX. 37
DX 38
DX 39 ta eee 8
DX 40
DX 41
ET aE een
DX 43
DX 44
DX 45
DX 46 7
UN a eae ee
...... M
Dx 49 —
DX 50
DX 51
DX 52
Intervenor’s Exhibits:
Exhibit L to Intervenor’s Exhibit 5000
Exhibit (1) to Intervenor’s Exhibit 500
Transcript of Proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on January 31, 1973 at Tacoma,
Washington
1847
1849
1851
1857
1859
1861
1862
1863
1864
1865
1866
1867
1868
1870
1871
1873
1875
1877
1879
1881
1883
1891
1899
1900
1901
1902
1904
1905
1908
1911
1912
1913
1914
1915
1916
1918
1920
INDEX
Findings of Fact and Conclusions of Law filed January 31,
1973
Transcript of Proceedings held before the Hon. William N.
Goodwin, United States District Judge for the Western
District of Washington, on February 22, 1973 at Las
Vegas, Nevada
Notice of Appeal to the Supreme Court by the United States
dated March 30, 1978
Order of the Supreme Court noting probable jurisdiction,
dated October 15, 1973
1932
1953
1970
—
555
[193] AFTERNOON SESSION
1:30 o’clock p.m.
THE COURT: All right, you may proceed.
MR. VERVEER: Your Honor, at this time we would
like to call Mr. Warren P. Cooley as our next witness.
WARREN P. COOLEY,
called as a witness on behalf of Plaintiff, being first
duly sworn, was examined and testified as follows:
DIRECT EXAMINATION
BY MR. VERVEER:
Q Would you please state your name?
| A Warren P. Cooley. I live at 714 West Sandaval
Place, Thousand Oaks, California.
MR. VERVEER: Your Honor, we have a resume of
Mr. Cooley’s professional qualifications.
THE COURT: I am reading them.
MR. VERVEER: We would like to have the resume
inserted into the record at this time, your Honor.
(Resumé here)
THE COURT: All right.
Q (By Mr. Verveer) For whom do you work?
A Economic Research Associates, 1100 Glenden Ave-
nue, Los Angeles, California.
[194] Q What is Economies Research Associates?
A Economic Research Associates is a for-profit man-
agement consulting organization which conducts market
and economic feasibility studies in such areas as recrea-
tion, tourism, land use and real estate economics, eco-
nomic analysis for communities, and corporate planning.
Q What are your responsibilities with ERA?
A My staff title is senior associate, and I work in
two basic areas, in the area of recreation, tourism, and
economics, for which I am directly responsible for winter
resort studies that we get involved in, and also public
recreation areas and facility studies in which we are
556
involved. In addition, I do a bulk of the work in world
fairs and international expositions, and I am also the
manager of comprehensive health planning, for Eco-
nomics Research Associates.
Q What is recreation and tourism economics?
A Well, recreation and tourism economics in our firm
deals with market and economie feasibility studies for
basically leisure-oriented attractions and industries, and
it is broken down into sub categories, world affairs and
expositions would be included in that general heading,
winter resort areas, public parks and recreation fa-
cilities, public sporting stadiums and [195] arenas, those
are basically the areas that are involved.
Does your firm have any background in preparing
studies and making projections for international exposi-
tions and world fairs?
A Yes, since 1960 we have prepared studies for all
or major parts of each of the world’s fairs that have
been held in North America. For the Century 21 Fair
in Seattle we were the market and economic consultant.
Then for both the New York World’s Fair in 1964 and
1965 and Expo ’67 in Montreal in 1967, we conducted
studies for the monorail transportation system. We were
the market and economic consultants for HemisFair in
San Antonio in 1968, and we were one of the market
and economic consultants for the proposed Philadelphia
bicentennial celebration which was to take place in 1976,
and we have also been the market and economic consult-
ant for the Expo 74 in Spokane.
[196] Q Have you ever worked in any of these
studies?
A Yes, I was involved as part of the team that did
the work, some of the work for the bicentennial exposition
which was to be held in Philadelphia, responsible for
the work done on the 1974 Spokane Exposition.
Q Are you the author of the report on the Spokane
Exposition in 1974?
A Les, I was.
Q Is Government Exhibit N for identification that
report?
A Yes, it is.
557
Q What is the title of the report and when was it
formally presented? :
A Well, it was Plan and—Plan and Feasibility of
Spokane Ecology Exposition. It was formally
presented on September 16, 1970.
Q Your Honor, I think that this would be an ap-
propriate time for any voir dire.
THE COURT: Do you have any voir dire, Mr.
Moen?
MR. MOEN: No voir dire at this time.
THE COURT: All right, we will wait until cross-
examination, is that right, Mr. Moen?
MR. MOEN: All right.
THE COURT: Was this report presented to Mr.
Lindsay?
THE WITNESS: Yes, sir.
[197] THE COURT: Do you know who Mr. Lindsay
is, counsel?
MR. VERVEER: No, sir, I don’t.
THE COURT: Well, he’s in the banking business
at Spokane, a competitor of the banks over there now.
He is I think in the Lincoln Building, isn’t it, Lincoln
Savings & Loan.
MR. VERVEER: Is he a mutual savings banker?
THE COURT: Right next to the courthouse.
MR. VERVEER: Well, in that case we would con-
tend he is not a competitor, your Honor.
THE COURT: All right.
MR. VERVEER: What is EXPO 74?
THE WITNESS: EXPO 74 is a world exposition to
be held in Spokane in 1974 from May 1st through October
the 81st and it is a concept which incorporates educa-
tion and recreation into one attraction which has a pro-
jected entertainment appeal to 4.6 million persons.
ni 3 Mr. Verveer) Where will EXPO 74 be lo-
ea
A The site is in the area which includes Havermale
and Crystal Island and downtown Spokane and the Spo-
kane River as well as the north and south banks of the
river. It extends from approximately Trent to Division
* and the site itself, excluding parking, roughly is
acres.
558
[198]. Q What would be the major attractions of the
exposition?
A e major attractions will be exhibits which will
tell a story around an environmental theme and there
will be rides and amusements and on-site entertainment
as well as planned entertainment to take place in the
area or in areas throughout the community, and visitors’
services and facilities such as beverage outlets, merchan-
dise spots and so forth.
Q Who are the major exhibitors at the Fair?
A At this point, the international exhibitors who plan
to participate are the Soviet Union, Japan, Iran, Korea,
Mexico and Canada. As for domestice industrial parties,
I understand that over the weekend, it was announced
that Ford will participate in Expo 74, and I understand
that negotiations are under way are other domestic ex-
hibitors.
THE COURT: Well, would General Motors, do you
think, come in now that Ford has come in?
THE WITNESS: I would hope so.
THE COURT: Very well.
Q (By Mr. Verveer) Describe how EXPO 74 has
come about.
A Well, in the spring of 1970 there was to be a
regional fair and the group that we had did study for
it was the Spokane Centennial and they had a number
of goals and some of the goals—one of them was to
sponsor [199] and to hold events which would have to do
with the redevelopment of the site which was previously
described, which would be a reason for the removing of
the railroads and redeveloping that site. So we were
retained to conduct a study as to this regional fair idea
with this goal that they had and I was assigned the
task to study this. And early in this one of our con-
clusions was that the regional fair concept really wasn’t
sufficient in scope that would attract the total facilities
to be developed to support or to achieve a greater de-
velopment of that island area. So our recommendation
was that a World Fair be held in Spokane to achieve
what we thought would be the redevelopment of that
island area there.
559
THE COURT: The island area that you’re speaking
of, that is where the old Great Northern depot was?
THE WITNESS: That was the depot and the tracks.
THE COURT: And then since AMTRAC came in
and eliminated competition they left Spokane with that
unsightly group of railroad tracks there, is that right?
THE WITNESS: That’s right.
{200} THE COURT: Go ahead, you were talking
about a concept that you first decided that it wouldn’t
—the overall plan wouldn’t attract enough people because
it wasn’t broad enough in scope. Isn’t that what you
were saying?
THE WITNESS: Our recommendation was to expand
_ the scope from a regional fair to a world’s fair. That
was adopted by the Board of Directors of the Spokane
Centennial Commission and that specific concept is the
thrust of the Government Exhibit N, which was previ-
ously referred to.
Q (By Mr. Verveer) What did your study, Govern-
ment Exhibit N for identification, consist of?
A Well, it consists of six basic parts, the first is a
description in loose terms of the concept which was—
this is to be—was proposed and to be an environmental
oriented exposition. Based on this concept, the market
analysis was undertaken and attendance projected.
The basis of this analysis and attendance projection,
utilized in defining the market was the vast amount of
previous experience we have of the operating experience
of other expositions and similar events. We relied on
census population figures for current population, state
projections for population projections, tourism studies,
which were done by Battelle Northwest [201] and the
State of Washington. Then derived from these attend-
ance projections were what we call project planning para-
meters, which are basically sizing criteria telling you
how many people will be there on design day—again a
term we have devised, which is the day that you design
all the facilities in the exposition for, the number of
people that will do different types of things so that you
. can begin to form a development plan. From that we did
—
prepare a development program and prepare preliminary
cost projections for the exposition.
Another portion of the study was to project revenues
and expenses during the construction and operation of
the exposition. A further item was an evaluation of the
economic impact and residual benefits of the Exposition
on the Spokane area, and then we did zero in on one
residual benefit and looked at it in some detail, which
was what impact would a convention center have on the
economy of the Spokane area.
What are the anticipated major direct economic
benefits to Spokane of Expo 74?
A The direct benefits measured were basically three
in nature. The first one would be new jobs and payroll,
and we defined payroll because we are interested in pre-
cisely what this is likely to do in the local [202] econ-
omy. So we further refined new payroll to payroll ex-
pended in the area, new payroll expended in the Spokane
area. So we eliminated those people who would live there
during the week and then drive home during the week-
ends. We didn’t count on them spending money on the
weekends when they weren’t there, for example.
Our projection is that the total expenditures during
construction and operation will generate 1300 new jobs
and new income expended in the local economy of about
13.5 million dollars.
In addition, there will be materials, supplies, and serv-
ices that will be required or purchased during the con-
struction and operation of the Exposition projected to
amount to another 14.3 million dollars. And a third
item would be off-site visitor expenditures and these are
expenditures which would be made in the local economy
by visitors to the Exposition that wouldn’t have been
made had the Exposition not been there. These are the
off-site expenditures in nature dealing with off-site ac-
commodations, food and beverage off-site, miscellaneous
retail purchases off site, and we projected this at 10
million dollars.
So the total direct economic benefit that we project
for being derived from the Exposition is [203] about
37.8 million dollars. There are a lot of areas in off-site
560
— —
561
visitor expenditures, for example, that we didn’t attempt
to project—the amount of money that would be expended
for gasoline by those people who would be in the area.
So it is conservative to the extent that we didn’t evaluate
those factors.
Q Would these expenditures have any further effect
on the local economy?
A Yes, it is our projection, and I think conservatively
so, that that money is going to turn over three times in
the economy before it finally exits and goes to outlying
areas and it doesn’t have any effect. There is the origi-
nal expenditure by the visitor for the services that he
buys, that’s a turnover of one, then that person he buys
services from has to pay his help and buy services and
supplies and that money turns over, so we feel that a
turnover rate of three is conservative, but that is the
rate that was applied to the direct economic impact to
—applying that to the direct economic impact, and we
come up with a total economic impact of approximately
112 million dollars in the local economy.
Are any residual benefits anticipated?
A The residual benefits again are three in nature.
There is the first benefit, that is the redevelopment of
[204] the island areas. The Exposition site is in direct
conformance with the Spokane River front plan, which
is a plan to redevelop the river for a ten or twelve mile
stretch, the heart of which exists in downtown Spokane.
So that would be accomplished through the Exposition.
The State of Washington is building a seven and a
half million dollar performing arts convention center
complex, which is their contribution to the Exposition,
and that will remain and have a long-term lasting impact
on the community.
Thirdly, the US government has approved in concept
and appropriated funds for the development of an eleven
and a half million dollar pavilion of their own, and after
the Exposition, this pavilion will be converted to a tour-
ism center, ecology education center, outdoor recreation
center and these types of uses.
So those are the three basic residual benefits that
would be derived, quantitative benefits that would be
derived.
Q Do any of these residual benefits have any impor-
tant economic applications?
A They all do, I am sure. The only one we measured
in our report was the convention center, and we projected
that the existence of the convention center [205] will
enable Spokane to attract an additional 40 conventions a
year from what they are currently attracting, and the
effect—the direct economic impact of this will be new
money into the community of about 1.8 million dollars a
year, and when you apply the multiplier of three again,
you come up with a total economic impact of 5.4 million
dollars.
Q Has there been any work on a supplemental or an
amended study since it was initially presented?
A We have continued since our original study in 1970
to work for the Exposition. Subsequent to the original
feasibility study, we did an in-depth financial analysis
updated financial analysis, and we incorporated some new
developments, cost figures which had been prepared
through a master plan that they had done subsequent to
our original study. And then in January of 1972, it
would have heen a year ago now, we were placed on a
monthly retainer by the Exposition to function as a day-
to-day market and economic consultant. So we have had
a continuing relationship with them since the original
study and I have continued to be that person involved
and responsible for this work, and we did—an interest-
ing note, we did recently undertake an attendance update.
We had to look at the Exposition in rather loose terms
initially because it wasn’t well [206] defined in terms of
what it would be. Well now, now it is very well defined
and it will take place, so we undertook an attendance
update in which we increased our potential attendance
projections from 4.6 to 5.1 million. However, because of
the physical capacity in Spokane of hotel and motel rooms
and projecting the number of rooms that are likely to
be built by 1974, it appears that the capacity of the area
won’t enable the Exposition to attract any more than
about 4.6 million. So we are still holding to that origi-
nal projection.
[207] Q How do present expenditures coincide with
the expenditures which you have projected in your study?
A In our original study we projected that there would
be roughly forty million dollars expended for the Expo-
sition. To this point in time our definite commitments
of approximately thirty-five million dollars which have
been made, which are composed of seven and a half mil-
lion dollars from the State of Washington, eleven and a
half million dollars from the Federal Government, 5.5
million dollars from the City of Spokane. The EXPO 74
Corporation will spend at least seven and a half million
dollars in the Exposition. There is a current request in
the Washington legislature for four million more dollars,
and I won’t project how that will come out.
THE COURT: You are a diplomat.
A (Continuing) Add all of those, without the new
request from the Washington legislature, there is 32
million dollars definitely committed, and that doesn’t ac-
count for independent exhibit complexes which would be
constructed, the ride and amusement complexes are not
included in there, so it appears that our 40 million dollar
projection will be achieved in terms of expenditure for
the Exposition, physical expenditure.
Where in your study can your conclusions be found,
the [208] conclusion on the direct economic benefits?
A All of Section 7 deals with the economic benefits
that we have talked about, that I have talked about with
you today, and they are summarized on page 17. Now
the convention center—
THE COURT: When you say Section 7 do you mean
that numeral 2, Section 7?
THE WITNESS: Turn to Roman Numeral VII.
THE COURT: All right, I see.
THE WITNESS: And then -17. And then in the
back of the report there is an appendix Section A which
deals with the convention center, and Table A-8 sum-
marizes the projected economic impact of the convention
center.
7
564
THE COURT: On that Section VII-17 which is titled
New Money Brought Into the Economy?
THE WITNESS: Yes.
THE COURT: All right, go ahead.
Q (By Mr, Verveer) What has been your firm’s
experience in/preparing its projections in events similar
to EXPO 74 as to the actual attendance and gross reve-
nue figures?
A Fortunately, a high percentage of the time we have
been conservative. We attempt to be, whenever we have
a choice to make we attempt to be on the conservative
side, and I think that the fact that we have stayed in
business [209] as long as we have and have continued
to be retained for these events and attractions is a good
track record that we have done that.
For example, Century 21, we were only two or three
per cent off on our attendance projections, and we were
30% low in our gross revenue projections. In EXPO 67,
we were about 30% low on attendance projections and
only 9% off on revenue projections, and HemisFair, we
were 1% high on the revenue projections. So I guess if
you look at what is a good figure to use, if you look at
all of the recreation attractions that we have done studies
for, as to attendance and gross revenues, there is a range
of 10 to 15 per cent that we are typically on the con-
servative side.
MR. VERVEER: I have no further questions.
THE COURT: Do you have any questions of this
witness, Mr. Moen?
MR. MOEN: Yes, I think I might ask him a few
questions.
CROSS-EXAMINATION
BY MR. MOEN:
Q Mr. Cooley, over what period of time will this
money be spent?
A Well, it was projected in the original study that it
[210] would be expended over basically a three-year time
period, four-year time period, 71, 72, 73, and ’74. Under
565
no circumstance will it be expended after, will the eco-
nomic impact that I indicated previously be expended
beyond 1974, that is when the Exposition ends, with the
exception of the convention center, which has a long term
residual benefit of 5.5 million dollars.
Q In your study did you make any projection with
respect to population growth?
A Yes.
THE COURT: I was going to ask that. Go ahead.
Q (By Mr. Moen) And what did you discover?
A Well, we divide our market areas in terms of zero
to 50-mile radius, 51 to 100 mile radius, and categorized
it into those kind of market areas, and I would have to
refer,—we projected a growth in all instances, and the
Spokane area itself, projected growth was for a conserva-
tive study growth rate.
Q Did you make any studies with respect to unem-
ployment existing in Spokane? ö
A That was really not a major part of our study,
however we did look at unemployment when we were
evaluating the new job potential in the area.
Q What is the economic base of Spokane?
A What is the economic base of Spokane?
[211] Q Yes.
A It would be conjecture on my part.
Q Will EXPO 74 add anything to the economic base
of Spokane?
A Well, it certainly adds new money into the econ-
omy, which filters down into the tourism and services
industry.
Isn't that a very temporary sort of thing?
A That is true, except I go back to the long term
impact, those activities, those facilities which create a
long term impact.
Q What type of an impact is going to be created over
the long term growth?
A Expenditures, speaking directly for the convention
center, the expenditures for overnight accommodations—
Q_ Isn’t it mostly a matter of developing the motels?
A No, there would not need to be new motels.
566
Q Wouldn’t that be a natural outgrowth of EXPO
74?
A I will say that that is directly dependent upon a
long term load that could be supported in the area.
Q Isn’t the whole purpose of the thing mainly a tour-
ist attraction?
A Define what you mean by tourist attraction.
Q Well, I mean drawing power, a drawing card for
people to come in and visit Spokane?
[2121 A Well, the basis of support for the Exposition
itself, more than 50% of the vistors will be residents
who reside within roughly a 200-mile radius of the Expo-
sition. About 60% of the total vistor days will be gen-
erated by those who reside there. It does exist, one 6f
the benefits will be an attraction to the area for a six-
month time period of vistors who would not normally
come to that particular area. But the benefit in terms
of the Exposition itself, I did not quantify that as a long
term benefit, I don’t envision that as a long term benefit,
as I envision the redevelopment activities which have
taken place and the residual benefits added to the com-
munity as being the long term benefits of the Exposition.
Q Isn’t the long term benefit the beautification of
oe Isn’t it to make it a more pleasant place to
ve
A Well, I would guess that that would be one of the
things, yes.
Q Have you made a study as to what the effect would
be on the banking industry?
[2131 A No.
Q Are you familiar with the report filed by the Fed-
eral Deposit Insurance Corporation for 1966, 1968 and
1970 showing the growth and total commercial bank de-
posits in the San Antonio, Texas area?
A No.
I have no further questions.
a 3 COURT: Mr. Hartman, do you have any ques-
ons
MR. HARTMAN: I have a couple of questions, your
Honor.
567
THE COURT: All right, I don’t want you to under-
rate him. I think you know what my feelings are. I
think that he has been a fine witness, giving good an-
swers as to what would happen to Spokane. I would like
to see Spokane do real well as a result of this. I don’t
want you to tear him down.
MR. HARTMAN: Very well, your Honor. Well,
what did you receive your Bachelor of Science degree in?
THE WITNESS: Bachelor of Science degree was one
specializing in recreation and education and—
Q How about economics, did you have any courses in
economics?
1214 A I had courses in ecomonics but no specializa-
tion in economics.
Q Statistical work, have you had any statistical work?
A Graduate work in statistics.
Q What was that in statistics?
A Well, in park administration programs.
Q What kind of work would be involved in park ad-
ministration or recreational administration programs?
A Very typical standard statistical courses and analy-
sis from the standpoint of administration and all of those
other theoretical things that we don’t use in our business
anyway. These processes of business judgment or ori-
ented type of business we don’t use. These and other
theories about economics and those types of things, per-
centiles and theories.
THE COURT: Well, I think you’ve accomplished a
great deal of things. You’d better quit.
MR. HARTMAN: Yes. The only thing is, your
Honor, I would have objection to this document going
into evidence, Plaintiff’s Exhibit No. N.
THE COURT: Well, it really may not be pertinent,
but I'd like to read it so I am going to admit it. You
understand that I am assigned both to the Western and
the Eastern Districts of Washington?
MR. HARTMAN: Right, your Honor.
12151 THE COURT: I like the Eastern District and
I like to read good things about the Eastern District.
MR. HARTMAN: Yes, your Honor.
568
MR. VERVEER: Your Honor, at this time the gov-
ernment would move for acceptance into evidence of Gov-
ernment’s Exhibit No. N.
THE COURT: Well, I’ve already admitted it before
you moved, I guess—all right- Have you any more ques-
tions of this witness?
MR. VERVEER: No, your Honor.
MR. MOEN: No further questions.
MR. HARTMAN: No more questions, your Honor.
THE COURT: Well, this wouldn’t be pertinent I
guess, in the case so I won't ask it, so you can be excused.
(Witness excused)
MICHAEL MARSTON,
called on behalf of the plaintiff, having been first duly
sworn, testified as follows:
DIRECT EXAMINATION
BY MR. HOFFMAN:
Q I have a copy of Mr. Marston’s resume that I
would like to have distributed and inserted into the rec-
ord at this time.
(Insert resume.)
THE COURT: Do you have any other witnesses
[216] after this one? And the reason I ask is that Mr.
Silverman is not going to get a turn.
MR. HOFFMAN: Before I begin with Mr. Marston’s
interrogation I would like to inform the Court first that
plaintiff withdraws its exhibits No. 0-12, through 0-18
inclusive.
THE COURT: Well, what do those relate to, counsel.
I'd just like to know.
MR. HOFFMAN: Those are exhibits comparing Spo-
kane County with certain other areas of the State of
Washington in various ways.
THF COURT: Is there any objection to his with-
drawing them, Mr. Moen?
569
MR. MOEN: No objection, your Honor.
MR. HARTMAN: No objection, your Honor.
THE COURT: All right, your motion that they will
be withdrawn is granted but they are just for identifi-
cation as of now?
MR. HOFFMAN: Yes.
THE COURT: You never offered them so you don’t
have to withdraw them—
MR. HOFFMAN: Just to inform the parties I’d like
to withdraw Plaintiff’s Exhibits Nos. 0-20, 21, 22, 23.
THE COURT: You're not offering those?
[217] MR. HOFFMAN: Right, and I think, your
Honor, before I begin with Mr. Marston’s interrogation
or examination I’d like to inquire of defendants’ counsel
whether they have found any mathematical mistakes in
the statistical exhibits, Exhibit No. O.
MR. JOHNSTON: We would have to have our peo-
ple who examined these to be able to tell.
MR. MOEN: There are a number of mistakes, your
Honor. I don’t know if I could identify them by exhibit
number but I can assure counsel that we will find out
what they are and tell him.
THE COURT: Well, I’ll tell you what you do, coun-
sel, if it comes up and there is a claim that you made a
mistake why I’ll give you an opportunity to rehabilitate
by calling another witness if you wish.
MR. HOFFMAN: Well, we’d like the opportunity and
would appreciate an opportunity to cure any mistakes if
there are any.
THE COURT: [I'll grant that if there's any question
about that. All right—
MR. HOFFMAN: Now, would you restate your name?
THE WITNESS: Michael Marston.
Q Where do you live?
A I live at 1730 Laverd, Berkeley, California.
Q Mr. Marston, what is your occupation?
12181 A I’m a partner in an economic consulting firm
known as Keyser-Marston and Associates.
Q When was this firm organized?
A This firm opened business on Tuesday of last week,
the 2nd of January, 1973 and prior to that time I had
570
been executive vice-president of the Urban Economics
Division, Larry Smith and Company Incorporated and
vice-president of Larry Smith and Company Incorporated
for nine years. That firm, which is a nationwide economic
and real estate consulting firm which has offices in, five
offices in this country and two in Canada and three affili-
ated offices in Europe.
Q. How long were you with Larry Smith and Com-
any?
A It would have been nine years on the 20th of this
month.
Q Would you give us some examples of the kind of
work that you did when you were with Larry Smith?
A Well, when I was with Larry Smith as shown on
the resume I’ve had major analytical and supervisory ex-
perience in community development type of economic base
studies and we had very large projects that I secured
for the company; for example, in a city in the southwest
and it was on a nationwide bid competition where our
budget was three-quarters of a million dollars and our
work program was specifically to identify the [219] eco-
nomic base for this immediate area and the region, and
how this regionally related to the idea of strengths and
weaknesses within the economy and opportunities for
capitalizing on the strengths and so forth.
Q Is that—well, do you call that a base study?
A Yes, that’s a term, base study is a very loose term
that covers a multitude of sins. Simply, it is our main
thrust to create a process which helps communities or
regions solve economic problems or at least minimizes
their negative impact. Well, for example, we made an
economic base study of the Genessee Lake region which
was a 12-county region in New York State to identify
strengths and weaknesses. We did analytical research but
we do not do pure analytical research for research sake.
Q Did you participate in a project for the State of
Idaho?
A Yes, I have.
Q Would you describe what that involved?
A Well, we were selected and I was the principal in
charge on a competitive basis to identify the impact of the
571
relocation of the Lewiston Hill portion of US Highway
95 and the impact that that would have on the City of
Lewiston, Idaho and adjacent areas. We started [220]
this study in 1970 and had to look at a full range of land
uses from retail to industrial to port development to grain
shipments. I think at this point is when I first became
aware of the term—inland empire. State of Idaho officials
were concerned about the impact of expenditures from
within the state that were lost to Washintgon State and
particularly Pullman and Spokane.
THE COURT: That hill you speak of, that comes
from Uniontown to Lewiston, is that what you are talk-
ing about?
THE WITNESS: Yes, your Honor, that’s right.
Q Did you do work for the Seattle-First National
Bank?
A Yes, our firm was retained to estimate the financial
feasibility of building a new headquarters office build-
ing. The basic thrust of the assignment was how much
market there would be to justify or as large a building as
could be supported by the market from the point of view
of good planning. I was personally responsible for all
analytical efforts on that project. That building has since
been built following, as I understand it, quite specifically
our recommendation and has been successfully occupied.
THE COURT: I didn’t quite get that last part [221]
of your answer. Do you mean the percentage of occu-
pancy is in accordance with your predictions, is that what
you mean?
THE WITNESS: Right. It is a little hazy. I did that
work in 1966.
THE COURT: It's a new Sea-First Building in Seat-
tle that you’re talking about?
THE WITNESS: Right.
MR. HOFFMAN: Will you speak a little louder.
We're having a little trouble over here hearing you.
THE WITNESS: Well, I am having a little trouble.
I have a minor cold.
THE COURT: Do you want to turn on the micro-
phone, Mr. Hanson?
572
MR. HOFFMAN: Now, Mr. Marston, will you de-
scribe your educational background?
THE WITNESS: I did my undergraduate work at
the University of California at Berkeley with a liberal
arts background with strong emphasis in economics at
the undergraduate level and I did my graduate work at
the University of London in the London School of Eco-
nomics where I was a graduate research scholar from
1961 to 1963. I received a degree, an MA, a Master's
degree and I graduated from the University of California
in 1959.
[222] Q Well, I think this would be a good time for
voir dire, your Honor.
THE COURT: Well, do you have any voir dire, Mr.
Moen?
MR. MOEN: No, I do not. I would save that for
cross-examination.
THE COURT: All right.
Q (By Mr. Hoffman) Have you made any analysis
of the growth potential of the Spokane metropolitan area?
A Yes, I have.
Q What factors did you include in your analysis?
A I think we considered all the factors and by that I
mean we intended to get as much data as was available
specifically to cross check information, and to get this in-
formation we'd try and get four and five different data
sources and cross check one against the other so that
we had as solid a data basis as possible in this case which
—In other words, we studied the factors and evaluated
labor force and employment characteristics, past popula-
tion growth trends, Spokane construction activities and
compared them with Idaho, the general vicinity and other
cities that I have personally been involved in, and am
familiar with the terms of others who have unique prob-
lems or opportunities.
[223] We also, I think, it would be fair to say have eval-
uated the Spokane’s influence as related to the geographic
area that it might have domination in and different types
of degrees within—
Q Now how did you prepare your analysis?
A As I summarized briefly before we separated the
available statistical data and studied the available statisti-
578
cal reports and I personally visited Spokane and I inter-
viewed knowledgeable persons based on their—and based
on this broad section of data we made projections as to
the future employment and population levels. I think a
key element that we did was evaluating the past trends to
understand this and what would be the factors and what
the problems and probabilities of the forces that would be
dominating the future of the economy.
Q Would you explain why you chose these factors to
make this analysis?
A I think a straightforward answer would be that
growth is generated by people and jobs. Except in specific
situations. People follow the jobs and specifically the jobs
have to be available for the people to move into the area
to have the area grow in population or maintain its vital-
ity. There are some exceptions to this such as retirement
communities, places such as [224] Palm Springs would
be an example. In certain areas in Florida where the
people themselves move, bringing outside people into the
area and this then creates jobs and services. In other
areas, I think that the primary emphasis on population
relates to jobs. Then the other factor I mentioned was
construction activity. We picked construction activity be-
cause we feel that construction is a sign of vitality and
people are vitally interested in the future and make com-
mitments for 20 to 30 years’ duration.
[225] Q Turning now to Spokane’s employment char-
acteristics, would you tell us about past trends in employ-
ment and the economy of Spokane?
A Yes. As shown in our exhibit, I think that just an
overview, the past trends in employment are shown really
over—we picked 1950 to 1972, that time frame for the
majority of our analysis. The data base was good, it was
comparable, and I think forms on an annual basis by
major employment categories the backbone of our analysis
related to labor force and employment by major categories
in Spokane.
MR. JOHNSTON: He is referring to an exhibit now?
Q (By Mr. Hoffman) You are referring to a table
entitled Labor Force and Employment by Major Cate-
gories, which the plaintiff has denominated as Exhibit 0-3.
574
A That's the one I thought we were going to discuss.
I’m just giving you a general background, yes, and that’s
a table which we have specifically compiled to give us an
insight into employment.
Q Well, let’s go back a minute, and if you would,
would you give us a little historical background on the
economy in Spokane?
A Well, I think that it flows from the analysis that if
you synthesize an analysis and focus it, you could say
[226] that Spokane has really gone through four cycles
of—I wouldn’t use the word “growth”, change, let me say.
Since 1950, we picked 1950 because before that we had
World War II in the 40s and the depression of the 30s,
and we think that’s a solid representative data base, a
22-year period.
We would categorize, I think, just to give an overview
which would be useful, and we could probably get into the
specifics later, a period of expansion over the time from
1950 to 1956 period, we call this a period of growth and
expansion, then we would call from 56 to 63 a period of
recession, then we would say that over the 63 to 67
period we had a period of recovery. Then from 1967 to
present we have a new period of expansion. So we are
looking probably at four periods that have occurred over
the last twenty-two years, and we are currently in a
period of expansion.
Q Now I will direct your attention to Plaintiff’s Ex-
hibit marked for identification O-3 and O-4, Government’s
exhibits, did you prepare these exhibits?
A Yes, I did.
Py SO aan you explain the significance of the contents
0 ?
A I think that Exhibit O-3 assembles the data in a
form [227] that can be evaluated to show some of the
dominant trends that occurred within the Spokane metro-
politan area. For example, I won't cover all the cate-
gories. I think I have a couple of them which point out
agricu’ture, which has declined since 1950 from 4.7 thou-
sand to 2.4, 2,400 people, it’s almost half of what it was
in the 22-year period before. That’s fairly standard, that
is occurring nationwide, on a nationwide basis. Agricul-
ture is becoming less labor intensive and more intensively
575
mechanized, and the smaller farms are going out of
business.
Probably one of the most—more significant categories
here is manufacturing of primary metals. That has had
a great swing in employment. This is primarily related
to the aluminum industry and has been one of the pri-
mary reasons for the four cycles.
I sumnfarized this in overview form previously. So
basically we go through this data based on a category by
year basis to provide us with conclusions as to the major
forces that work within the economy, and we tabulate this
with other data and reports that we have and experience
in other areas.
The unemployment rate I think is another significant
variable here that has fluctuated over the time frame
fairly dramatically.
228] THE COURT: One of the most significant in-
creases is in an area where the taxpayers are unhappy
and that’s in government, isn’t that right?
THE WITNESS: Yes, your Honor, that is typical na-
tionwide.
THE COURT: I understand that, but that has even
reached Spokane, is that true?
THE WITNESS: Yes.
THE COURT: When you come to court nowadays
with four lawyers, you used to come to court with one
lawyer. All right, go ahead.
THE WITNESS: It might be helpful at this point to
note that typically the growth categories nationwide are
the services, government, trade, and in some cases manu-
facturing. But basically we are service-oriented. Some
people say it is a mature society.
The government surprisingly in California, some of the
major growth is at the state level rather than the federal
level.
THE COURT: There is another area there too that
relates to services, does that mean tourists, doesn’t it?
THE WITNESS: Yes, your Honor, everything, hotels,
restaurants.
THE COURTS: Hotels, and much more tourism than
[229] there was in the 50s? .
576
THE WITNESS: Les, and that’s what many commu-
nities have not recognized as being a major growth area.
People tend to think of the service industry as being some-
thing peripheral, and they keep trying to develop their
economy in many communities by going after basic manu-
facturing plants.
THE COURT: Frankly, those are the only two areas
where there has been any dramatic change in Spokane,
isn’t that right?
THE WITNESS: Yes.
THE COURT: Tourism and the government?
THE WITNESS: Yes, your Honor.
Q (By Mr. Hoffman) Would you explain why you
used figures covering Spokane, would you define the
Spokane SMSA for us?
A This is a standard metropolitan statistical area,
this one was used by the Bureau of Census, and most
economists want to define an area where data is collected
on a nationwide basis in detail. The SMSA is the basic
unit of measurement of the changes in the ten-year census
for most large metropolitan areas.
Some metropolitan areas will have as many as three
SMSAs. For example, the Bay Area has a five-county
SMSA, that includes San Francisco, and that’s [230]
really the heart of San Francisco and the related suburbs,
and then there is one om the south, San Jose, which oper-
ates somewhat more independently than the other one, the
five-county area, and there is one to the north, that’s a
two-county area.
I use this because I think it is important to understand
that the SMSA is the basic unit of measurement, and in
bigger areas that can be subdivided. But here we have
used the SMSA which is coextensive with the county and
it provides a very good base for evaluation trends on a
comparable basis for many years, particularly using a
ten-year census for forty or fifty years.
There are other areas that we referred to in the re-
port that I think are probably worth touching on, so
there won't be confusion. There's the city limits of Spo-
kane, typically these are not at all valid for doing any
in- d »pth evaluation of past trends or projections in the
577
future, city limits change their policies of annexation or
de-annexation and the growth occurs typically outside of
the city limits. So that is really just sort of an historically
interesting situation, the city limits, but they are not valid
analytically.
Then there is an urbanized area in Spokane, that there
are some analytical problems with.
The urbanized area hasn’t changed and [231] there has
been growth outside it into what has been referred to as
the rural area.
Q Are you referring to a table and graphs covering
the population growth in Spokane, in metropolitan Spo-
kane from 1950 to 1970?
A Yes, I was using that for the nomenclature.
MR. HOFFMAN: I just wanted to make sure that
those were government exhibits—
THE COURT: Actually he has been testifying using
that first Exhibit O-1 and O-3, also, as I understand it,
is that true? I had to read O-1 and O-3 while he was
testifying and I was trying to listen at the same time.
THE WITNESS: I apologize for the confusion.
THE COURT: No, that is fine.
THE WITNESS: I was using the terms as they came
up, and if you don’t spell them out they are confusing.
THE COURT: That is fine, I have followed your
testimony, I am sure.
Q (By Mr. Hoffman) Does the mix, shall we say, of
the employment. category of Spokane have any signifi-
cance?
A It is not exactly clear to me what you mean by the
question.
THE COURT: You are talking about—
[2832] MR. HOFFMAN: The various proportion of em-
ploment in different categories,
THE COURT: Are you talking about the employ-
ment in the variety of areas of endeavor over there, agri-
culture, manufacturing, mining, that type of thing, is
that the idea?
MR. HOFFMAN: That is right, your Honor.
THE COURT: All right, go ahead.
578
A Yes, you are referring to the different categories of
employment, the major ones on the table which is Exhibit
0-3, and the different categories I mentioned. Agriculture
is declining and I think that overall it can be said, looking
over the 22-year period, that in 1972 the economy is more
diversified than it was in 1950, it is less dependent upon
the declining industries such as agriculture. I noted that
while agricultural employment dropped by half, it in-
creased from 84,000 in the total civilian force to 118,000,
and at the same time the primary metals, the category
that created problems in the economy previously, is al-
most constant with the 1950 level of 3,700, it is now 3,800.
THE COURT: Are you talking about the Trentwood
plant? The aluminum company at Trentwood?
THE WITNESS: Yes, the Kaiser plant.
A (Continuing) So the pie has gotten bigger, and
some of [233] more volatile elements become smaller pieces
of the pie, so therefore the economy is less susceptible to
disruption currently than it was during the decade of the
1950s.
THE COURT: Let me ask you about that agriculture
situation. When you talk about employm̃ent in agriculture,
are you referring to farm labor or things such as labora-
tories that handle the examination of
thing?
THE WITNESS: No, your Honor, the people whose
primary occupation was on the farm.
THE COURT: And that is partially as a result of
larger areas under one ownership and that type of thing?
THE WITNESS: Yes, your Honor, and mechanization.
Particularly in this area there is very heavy investment
in farming equipment.
THE COURT: Yow are talking about the cost of
combines?
THE WITNESS: Yes.
Q (By Mr. Hoffman) I notice on Exhibit O-3 that
you used actual raw numbers and not percentages. Did
you have any reason for that?
A Yes, it has been our experience that the actual num-
bers of people employed in jobs is the most valid indicator
[234] to compare what has happened on a numerical basis,
eat, that sort of
—
579
the number of people who have gotten jobs or lost jobs by
category. The old expression that numbers don’t lie, that
people lie with the numbers applies to percentages. You
can make the percentages prove anything you want. It is
something you have to be very, very careful with. I have
seen distortions where you take a percentage of a very
small base, you have a community growing by 1,000 per
cent, but it really amounts to 15 people. So we are very
careful of percentages, we use those as a cross check, but
we use the numerical growth as the basic analytical units.
Re | Would you describe the Government Exhibit marked
A Yes, in essence I prepared that graphic illustration
to show the employment change over the 1950 to 1972 time
frame based on that Exhibit O-3. Here we start to get
a feel for the periods of growth and decline. The top line
shows the total labor force with the dots, as you can see
there, and the bottom line total employment, so the width
of the line measures in a generalized way the unemploy-
ment. The top of the line shows the growth in the labor
force, and the bottom of the line the growth in jobs. It
shows, as you can see, starting out with about 80,000 in
terms employed people in 1950, 84,000 in terms of labor
force, increasing to [235] 118,000 in terms of labor force
currently, and 108,600 in terms of jobs. It is an S-shaped
curve which indicates a volatility in the economy. If you
see one of those you have to try to understand what created
the problem.
THE COURT: That bears out what you previously
told - relative to the period of growth and recession, does
it not
THE WITNESS: Yes, your Honor.
THE COURT: All right, go ahead.
Q (By Mr. Hoffman) I would now like to direct your
attention to Government’s Exhibit marked for identifica-
tion O-5. Did you prepare this exhibit?
A Yes, I did.
Q Would you explain what this exhibit shows?
A I think this exhibit really summarizes the period
that we discussed, and the underlying causes of the growth
and decline by periods. For example, in summary, the
—
580
period of expansion, 1950 to 1956, as you look at the bot-
tom of the table, there was an average annual increase of
2,430 people in the civilian labor force, the total employ-
ment increased 2,470. In other words, there were more
jobs than people coming into the area, so some of the un-
employment dropped. The major reason for that was
growth in primary metals, 470 jobs per [236] year; trade,
630; services, 280; government 550; and miscellaneous 270.
Contract construction played an important part. So that
was the period of expansion and probably one would expect
the population to grow with that magnitude of jobs being
created.
Then Spokane went into a period of recession over the
1956 to 1962 time span. The highlights of this are quite
dramatic, total employment went from increasing 2,470 per
year in the previous period to decreasing by 800 per year,
very dramatic. In the drop, you can see looking under the
manufacturing category, lumber declined, that was the
main cause, one of the main causes, and that has been hap-
pening all over the West, I think, and then the primary
metals trade.
Then we go into a period of recovery as shown under the
category 1963 to 1967. In this period of recovery, agri-
culture is declining but the rate of decline in the other
categories such as primary metals has actually stopped
declining and is now growing by a hundred jobs a year.
Trade has stopped declining and has grown dramatically
by 580 jobs a year. Services have grown very damati-
cally, 720 jobs per year. It is the fastest growing category
in all categories. So we go from a net loss of 800 jobs
per year to an increase on an average annual basis of 2100
jobs per vear.
237] THE COURT: This is annual average increase?
THE WITNESS: Yes, your Honor.
A (Continuing) So that is a period of strong re
covery. It would vary by year, but it just illustrates the
changes most accurately by putting the years together
on this basis. Then we get a period of expansion. Starting
in 1967, the growth rate is accelerating, we see that the
agricultural loss in jobs has dropped to 20 from 180 pre-
viously, we are still losing in primary metals, there is a
581
little turnaround there, but it is significant to note that
that does not impede,—we went from an increase of 100
jobs a year to a loss of 120 jobs a year, but the total econ-
omy still kept growing at a faster rate, significantly faster
rate over the 1967 to 72 time frame, than the 1963 to
1967. What that is showing is that the economy is bounc-
ing back.
So then we average it over 22 years, both the ups and
the downs, and even with the dramatic period of recession
we still have an average annual growth rate in terms of
number of jobs, as 1330 jobs per year for the 22-year
period, and a total civilian labor force per year of 1540.
This tells us that Spokane did not dry up and blow away
over this hard time period, but continued to expand over the
total time frame despite a [238] period of severe decline,
one of the most severe I have seen in the West.
Q I would now like to direct your attention to Gov-
ernment’s Exhibit marked for identification O-6 and O-7.
Did you prepare these exhibits?
A Yes, I did.
Q Would you explain the methodology used in making
the projections that these exhibits show?
A Yes, in essence the methodology was the technical
term referred to as a linear regression, which means look-
ing at the past trends, understanding what they were
doing, and projecting on an alternative basis appropriate
past trends.
Q Why did you select the linear regression method?
A I think that given the data base, and the purpose
of the analysis, this is the most appropriate analytical
technique.
Q And your projections go from 1972 to 1985. Would
you explain why you used that time period to confine your
projections to?
A Yes, that time frame is, the long and the short of it
is that it is not too long and it is not too short. We think
it is a meaningful projection that will be appropriate
for Spokane, that if you carry any projection too far it
really gets very, very “iffy”, like the [239] year 2000.
Typically, we recommend that our projections have to be
reviewed every five years. We would like an alternative
582
basis of projection, because then combining that with an
understanding of the forces at work, one can evaluate on a
yearly basis what has occurred and how that would in-
fluence the projection. We feel that this is a good valid pro-
jection time frame in that the forces at work over the past
twenty-two years, 1950 to 1972, we think will apply in
varying degrees related to the assumptions given for each
projection over the 1972 to 1985 period. We feel quite
confident that there won’t be any major changes that would
invalidate projections over this time frame that are not
in evidence now in the economy.
[240] Q Would you explain the sets of conditions and
underlying assumptions in the exhibit that you referred to
just a moment ago?
A Yes. As shown in Exhibit O-7, the low projection
takes the one thousand three hundred thirty jobs that we
discussed previously, that is, the average annual growth
over the total 22-year period from 1950 to 1972, which in-
cluded a period of expansion, a period of recession, a period
of recovery and expansion and said if all of these factors
occur, in essence that allows for another recession, we are
not saying there will be one, but if it did happen, then the
economy would still grow to a total of 125,900 jobs by the
year 1985. This is the most conservative basis for projec-
tion, and then the medium range projection takes two time
frames that we evaluated in the past, two trends, a period
of recovery and a period of expansion and it says this is
the valid ten-year basis that the—a lot of the factors that
caused the recession do not exist to the extent that they did
previously in the 50’s and, therefore, the basis for a med-
ium range projection is using the last ten years, and that
would give us a growth of 1940 jobs a year or a total labor
force of 134,000 by 1985.
The high range projection, which is the last alternative
future is based on a set of [241] conditions which in essence
says Spokane is in a period of expansion. A lot of factors
that really have not been quantifiable such as the momen-
tum developed from Expo, the benefits of that, the boost
that it gives to the community, the new development in
the downtown, the whole range of factors will make this
period of expansion continue and perhaps accelerate.
583
When I was talking with different people in the com-
munity, such as King Cole last week, every one had a
tremendous feeling of confidence and that really they felt
that things were much better now than they were two years
ago, and this hasn’t shown up statistically yet in any sig-
nificant way. The high projection would say the good times
will continue and by 1985 there will be 139,000 jobs.
So that is the basic alternative future that could occur
over the 1972 to 1985 time frame.
Q And the graph, which is Exhibit O-7, is just a—
THE COURT: That is the graph form—that’s just
what he said.
THE WITNESS: Yes, your Honor.
THE COURT: I have looked at the graph, and just
because I closed it doesn’t mean I didn’t look at it. I
read the figures there too before he téstified, [242] counsel.
All right.
Q (By Mr. Hoffman) Would you tell us which pro-
jection you considered the most reliable?
A I think given the occurrence of a recession in the
past and the factors that have occurred over the 1950
to 72 time frame, that we would recommend a conserva-
tive approach and, therefore, we have used in our analysis
the low projection, which would indicate the rate of growth
that could occur even if another recession occurred over the
72 to ’85 time frame, and we recommend this because it
could happen. We think that we don’t have really signifi-
cant data since the 70 census, and this is one trouble with
just having a census every ten years to thoroughly docu-
ment the extent of the expansion that has occurred since
70. So given that situation, it is our recommendation that
to avoid the surprises, let’s plug them in and use the low
projection as a basis for planning for the future, and by
surprises I mean negative things that could occur that we
might omit at this time because there is still a fair amount
of employment in the aluminum industry, which has its
problems and so forth.
THE COURT: Aren’t they right now trying to put
another pot line in, and they are having some problems
with the ecology people?
584
12431 THE WITNESS: Yes, your Honor, I have heard
that secondhand, and that is an example of the fact that
there are a lot of movements that might try and restrict
basic industry, ecology and environmental movements.
Perhaps the jobs won’t grow as fast as they are cur-
rently, in the future.
Q (By Mr. Hoffman) Your low projection takes
the possibility of such factors into account?
A Totally, I think. Looking at the numbers, we are
projecting a growth of 1330 jobs as opposed to a cur-
rent rate of 2320, so we are projecting 1000 less just
for the reasons I outlined and which we have discussed.
Q We have made some slight reference to this be-
fore, but I would like you to explain, if you would, why
you use the employment figures for the Spokane SMSA,
that is, Spokane county?
A The employment is, we feel, the most valid means
of projecting population growth because the people have
to eat to live and to eat to live they have to work, and
typically, you have something like thirty—36 percent
of the population base employed. So if you create the
jobs, in general the people will come. If the jobs dry
up or decrease, the people move elsewhere.
One example of that might be—there is some evidence
to indicate that people are moving or have [244] moved
in the last few years from Seattle to Spokane just be-
cause things are a little better despite a relatively high
unemployment rate in Spokane compared with the rest
of the country. You just may be able to get jobs more
readily in Spokane than Seattle. I can’t quantify that,
but it is this level of expectation which is a human factor.
Q I think that we may have gotten off on a tangent
here. My question was, why you used employment figures
for the SMSA.
A As opposed to some other geographic area, is that
what you are referring to?
That's right. Well, maybe I'd better ask you first
whether or not the projections that you made as to the
Spokane SMSA are generally applicable to the future
increase in employment in the metropolitan Spokane
area?
585
A The answer to that is yes, for the reasons we have
discussed previously. The SMSA figures are the most
reliable and comprehensive, the area is big enough to
absorb future growth within its geographic boundaries.
We think the SMSA accurately refleets the future growth
potentials and opportunities, the SMSA regional figures
in Spokane.
Q Is the percentage of population and employment
and growth in the metropolitan Spokane area as com-
pared to [245] the SMSA relevant to that?
A I am not sure I understand your question.
MR. HOFFMAN: Did the reporter get that?
THE REPORTER: Yes.
(Last question read by the reporter.)
THE COURT: That is hardly a question, that’s a
statement. Can you turn it into a question and answer
it?
THE WITNESS: I think so. You are saying that the
SMSA is the valid area, is that your question that you’re
asking me?
Q (By Mr. Hoffman) I previously asked you whether
or not you could generalize from the SMSA figures as to
future employment levels in the metropolitan Spokane
and I believe you answered affirmatively?
A Yes, I can.
Q I then asked whether or not the proportion of
people in employment in the county, that’s in the metro-
politian Spokane area, helped you make that draw that
conclusion?
A I think—
Q The proportion of the people in metropolitan Spo-
kane.
A I think that I understand what the question is
now. Really the question is are there a significant num-
ber of people who do not live in the metropolitan area
who live in the county, [246] subject to different eco-
nomic forces which could create a problem, and the an-
swer is no, that the majority of the people who live in
the county, which is the SMSA, live within the urbanized
area of Spokane. That is a valid—very valid unit be-
586
cause the city and the SMSA really work together as
most of them do, and there is nothing unusual or unique
to this SMSA or the employment population characteris-
ties of it.
Q I would like to turn to the subject of population,
and I direct your attention to Government’s Exhibit
marked for identification O-1 and O-2.
THE COURT: Haven't we gone over that, counsel?
MR. HOFFMAN: Only definitionally, your Honor.
I don’t think that we discussed the substance of it.
THE COURT: I thought we had, but perhaps I am
in error. Of course, I am way down to 0-23, and that’s
an analysis of the population and growth in the Inland
Empire, Yakima, Walla Walla which, of course—
MR. HOFFMAN: If your Honor will recall, that is
one of the exhibits we have withdrawn.
THE COURT: That’s right, but I did read it any-
way.
It is 3:00 o’clock, maybe we can take a brief break
now, or a seventh inning stretch, and come back in in
about 10 minutes.
[247] (Court reconvened at 3:20 o’clock p.m.)
MR. HOFFMAN: All right, I believe that we were
on the subject of population and I would like again to
direct your attention to Plaintiff’s Exhibit No.—excuse
me, Government’s Exhibit for identification Nos. O-1 and
0-2, did you prepare these exhibits?
THE WITNESS: Yes, I did.
Q Would you explain what they show?
A Exhibit O-1 shows the growth of population over
the 1950 and 1970 time frame for the four areas we dis-
cussed previously in the Spokane SMSA, the basis used
in evaluation, the metropolitan area, the rural area out-
side the city limits and—
Q You mean the urbanized area?
A The urbanized area, yes, excuse me. We see an
annual change on a numerical basis on the bottom of
the page. We put in percentage change as a secondary
means of identifying change—
Q Would you look at that again. On that point, I
thought the percentages meant something else.
587
A Well, the percentages are relating the numbers to
the numbers above and they go into another area. That
is what is meant to say here. They’re not percentage
increases, they are percentage changes. That is probably
the word that is right. For example, it is [248] not
valid to use the Spokane urbanized area as opposed to
the SMSA because in 1950 to 1960, that time frame,
the urbanized area’s percentage of the SMSA was 90
percent. But in 1960 to 1970, in that time frame, it
was only 30 percent and the reason for that is that
much of the change, which in this case was growth,
occurred in other areas outside of the urbanized area,
but within the SMSA, the urbanized area defined in
1950.
Q By the census?
A Right. So the SMSA is the only really valid unit
of measurement in looking for growth levels and the
numbers shown on Exhibit No. O-1 are translated into
the graph shown as Exhibit No. O-2 which illustrate
I think the rate of growth for each of the areas, the
general magnitude of growth.
Q How do the trends noted in the exhibit compare
with the trends in employment that you testified to
earlier?
A They generally corroborate them and here is the
growth in jobs and here is the rate of growth in em-
ployment and you can see—
Q Do you mean in population?
A Excuse me, in 1950 to 1955 the high rate of growth
in the county and that’s of course the period of expansion
in jobs. And then things slowed down in [249] em-
ploment in the later part of the 1950’s and then in the
early 1960’s slowed down in population.
Q Now would you turn to Plaintiff's Exhibit No.,
excuse me, again, Government’s Exhibit marked for
identification as O-8 and 0-9. Did you prepare these
exhibits?
A Yes, I did.
Q Would you explain what Exhibit O-8 shows?
A Exhibit O-8 shows five alternative sets of popula-
tion projections keyed to five sets of conditions that we
found in existence over the 1950 and 1972 time frame
and we projected on the basis of each of these sets of
conditions to take a look at the projections as a basis
for selecting the projection that we will use for plan-
ning purposes. Our recommended projections one through
three are based on employment which is, as I said earlier,
in our judgment most meaningful indicator of the in-
crease in population and job opportunities and in es-
sence, we have projected, one based on a high projec-
tion of employment, that is, the rate of employment that
is occurring over the 1967 to 1972 time frame.
Projection number two is based on the rate of em-
ployment projection that was the rate of employment
that occurred from 1962 to 1972, within that time frame,
and projection number three is based on the rate of .
[250] employment growth that is occurring over 1950
to 1972 time frame and to each of these we apply the
population relationship to job relationship, using the 1970
census as our base, in other words, in 1970 there are
104,600 jobs, 287,487 people which gives us 36.4 per-
cent employment to population ratio, which is in line
with other areas we worked on and we use that to
project the population based on employment.
The projections number four and number five are
projections of population based upon past trends and
we use the actual—well, we checked our employment and
our employment growth as it related to the past trends
and how would that compare with it if we did that;
how would you compare that with employment or the
employment trend. We don’t think this is as valid and we
feel that projection. Number three—we would recom-
mend it as a planning projection to be used subsequently
in projection number three is based on low employment,
a low employment projection which is employment growth
over the 1950 to 1972 growth period.
e ls your projection number three as shown in Plain-
tiff's Exhibit, excuse me, Government’s Exhibit marked
for identification O-10, is that there?
[2511 A Yes. —
Q Very briefly, and I don't want to keep repeating
this, but I would like to have you mention it for the
Yes, as you can. have
population shown fr 960 through 1972, that is using
the census and then tinue the trend over 1972 to
1985 time-range, combine it. on one time table so you
can look at the rates of growth, and see the consistency
over a 85-year time frame. The population levels grow
at approximately 3600 people per year, so that by 1985
there about 385,900 people. The rate of growth at our
projection level is lower than the past trends which
have occurred over the 1950 to 1972 time frame, and
although the line is straight over the 1972 to 1985 time
frame, we anticipate that by 1985, if you look at the
graph: you will probably see slight curves, this is an
average annual basis, but that is our projection that
we in our judgment feel is a valid and conservative
means of estimating future population growth for Spo-
kane and the metropolitan statistical area.
Q I now would like to direct your attention to Gov-
ernment’s Exhibit for identification marked O-11 en-
titled [252] Construction Activity, Housing Units Au-
— . Spokane SMSA. Did you prepare this exhibit?
es.
Q Would you explain the significance of its contents?
A Well, the Construction Activity is a secondary in-
dicator, as are most other economic activities of vitality.
We think it is fairly significant to look at the number
of housing units authorized within the Spokane SMSA
over the 1962 to 1972 time frame, and although we have
data only through August, we see the rate of growth, both
of what’s good and what is bad, what is strong and what
is weak, and as you can see, the rate of development has
increased dramatically in recent years, and in 1971 there
are 4,000 units, and in 1972 only through August there
were over 3,000 units. There are many reasons for this,
the availability of money, mortgage lending, and so forth,
that I think one of the primary reasons for the develop-
ment of residential units is demand, that the units
. couldn’t be built unless people were there to either rent
590
them or purchase them, so this indicates I think a vitality,
a confidence in the future, people are making commit-
ments on a long term basis, new residential units typi-
cally last at a 30-year or more life, so I think this is an
expression of confidence in the future.
12533 Q Would you state your conclusion as to the
growth prospects of the Spokane metropolitan area?
A I think in conclusion the economy has experienced
ups and downs, it went through a very difficult time in
the period of the 1950s, during the recession, that was
also I think accompanied in the early 1960s by somewhat
of a philosophical attitude of concern. There are two
elements of growth, one is the hard data, the projections
we make, and the second is the vitality and the mental
attitude of the people. Taking the first level, in terms of
economic data, the trends are positive. It is going to
be a steady growth even if another major recession
occurs, which we don’t see or have any indication that
it will, that there will still be steady growth over the
projection time frame of 1972 to 1985. I think as im-
portant, but non-quantifiable, is an attitude, a positive
attitude of growth and dynamics as evidenced by the
Spokane World’s Fair, the amount of construction that
is going on downtown; one individual quoted to me when
I was in Spokane last week that on a per capita basis
Spokane has the highest per cent of investment of any
downtown in the country, in terms of the number of
people. So things look very, very good. On a psycho-
logical basis, and again that is not quantifiable, [254] but
I think our overall conclusion is that there is vitality
and there will be growth in the future.
Are you familiar with the various urban areas in
the State of Washington?
A In general, yes.
Based on your knowledge of these urban areas,
how would you compare Spokane and characterize its
importance in relation to these other urban areas?
A Well, I would say that clearly Seattle is the domi-
nant area, definitely on the Coast, we have a region
that includes Seattle, Everett, and Tacoma, an economic
reason that is a dominant region in the Northwest, and
591
Seattle is No. 1, and interestingly Spokane is No. 2,
like Avis, you might say, but it is a strong No. 2. The®
distance from Seattle is such that it is independent;;
it doesn’t have the vitality of the Seattle economic region,,
but it is a healthy region and an important region.
Which region are you referring to?
A I am referring to Spokane. I think it is healthy
and important, and having a geographic distance so thatt
it has a large base of support, as I recall it is a short’
300 miles from Seattle, and I would say it is the No. 22
city, the statistics as far as population show that, and!
if you combine into one region Seattle, Tacoma and!
Everett, [255] which I think is valid to do, just ass
we do in the Bay area, where we combine nine counties
in the San Francisco Bay area, this is the No. 2 economic:
region in the state.
Q Would you describe Spokane’s relationship with)
any other areas, geographic areas?
THE COURT: Are you talking about Western Mon--
tana, and Coeur d’Alene, Southern British Columbia,
that sort of thing? Is that what you are going to talk“
about?
THE WITNESS: Yes.
THE COURT: All right, go ahead.
A As I say, I first became aware of Spokane’s eco--
nomic influence in what is called the Inland Empire®
when I was working for the State of Idaho on this im--
pact study which we discussed earlier, U. S. Highway’
95. Basically, there is a combination of population levels’
of different cities, so that Spokane is clearly so much)
bigger than any other city in the vicinity that it hass
dominated in the past, and in my judgment will continue®
to dominate the large region known as the Inland Em--
pire, which basically includes Western Washington—
THE COURT: You/mean Eastern Washington?
A (Continuing) I’m sorry, I mean Eastern Wash-
ington, Western Montana, and Northern Idaho, and you!
can put in [256] or leave out parts of Oregon, but II
think there is no question that given the size of Spokane®
compared with Lewiston, Clarkston and Coeur d’Alene®
—
592
and other eities within the Inland Empire, Spokane is
the dominant force in terms of trade and commerce.
[2571 Q Have you had an opportunity to read Gov-
ernment's Exhibit offered for identification L-1, which
is the economic brief submitted by the National Bank of
Commerce and Washington Trust Bank in support of
their application for permission to merge?
A Yes.
Q Would you care to comment on the contents of that
brief?
A I think in general I am in agreement with many
of the statements of economics contained therein. For
example, on page two is a statement that there is a natu-
ral division of the state into two principal and distinct
regions, the high Cascade Mountains form a substantial
barrier between the western third of the state and the
remaining area to the east.
THE COURT: I wouldn’t agree with that entirely,
I just don’t think that Yakima is closer to Spokane so
far as commercial enterprises is concerned than it is to
Seattle. Do you think that Spokane draws from Yakima
like Seattle?
THE WITNESS: I was one of the economists, my
partner and I, in the downtown revitalization of Yakima,
and we did that, that was in 65, 66, that’s seven or
eight years ago, I would have to refresh my memory,
but as I recall, there was a fair amount of [258] the
retail sector at least commuting from Yakima to Seattle,
people would drive into Seattle to purchase items.
THE COURT: It’s much more difficult to get to Spo-
kane, it’s further too, miles-wise, and it’s east of the
Cascades. So when you talk about the Inland Empire,
aren’t you talking about from, say Ritzville east rather
than from Ellensburg, for example, and Ellensburg is
east of the Cascades but you wouldn’t include Ellensburg
in the Spokane area.
THE WITNESS: I think probably the commercial
ties are closer to Seattle. The Inland Empire typically,
when we do a trade area study, we get percentages of
penetration, and it would decrease—that would be a
peripheral area of some influence, but it is perhaps pe-
593
ripheral in that area. There is a newspaper survey or
an audit, I think that you’re looking at something like
five percent or less penetration in terms of newspaper
circulation, that was one indicator.
Q (By Mr. Hoffman) I would like to get to that in
one moment. But very briefly, is there anything else that
you would just like to highlight from that brief that is
of particular interest?
A I think that the reference in general to the Inland
[259] Empire, I think there are different definitions of
it, and I would tend to use a more conservative one. The
brief refers to “the economic influence of the City of
Spokane reaches far beyond the borders of Spokane
County. The city has developed as the center of a re-
gional trade territory popularly known as the Inland
Empire, which encompasses portions of four states and
bounded by major mountain ranges.
“The Inland Empire extends from the Canadian border
down to the Blue Mountains in northern Oregon and
from the eastern slopes of the Cascades in Washington
to the western slopes of the Rockies in Montana. Thirty-
six counties are included in this area containing 1,156,-
000 people.”
The brief does go on to say that for the purpose of
this brief, the Spokane trade area is more narrowly
defined to include a region of only 27 counties in three
states with a total population of 819,955. 5
I think probably in terms of significance, your Honor,
I agree with the narrower definition but recognize there
is some influence in the larger areas in other words, some
influence in 36 counties, more influence in 27, and I think
that the last point that I feel is important is that Spo-
kane will continue to dominate this vast area, and as
the brief says, the [260] importance of the City of Spo-
kane, a vast area can be made clear from many types
of evidence, metropolitan newspaper circulation is domi-
nated by the Spokane dailies and then other points are
made about the dominance of Spokane that I think I am
in agreement with and confer with it.
Q I would like now to turn to Government’s Exhibit
594
marked for identification 19 and 20, 0-19 and 0-20. Were
these exhibits prepared by you?
A These exhibits are—I want to make sure they are
the same exhibits.
Q The table entitled “Actual Growth, Sunday distri-
bution, Spokesman Review Newspaper, 1972,” that’s 0-19,
and 0-20 is a map of the Inland Empire showing per-
centage of households which receive a Sunday newspaper.
A Les, these exhibits were prepared by us from data
prepared, as illustrated and as noted in the source, from
the ABC audit report to the audit bureau of circulation,
Chicago, Illinois, the Spokesman Review.
THE COURT: What we are talking about just a
minute ago is pretty dramatically illustrated, two per-
cent in Kittitas, that’s Ellensburg, and one percent in
Yakima.
THE WITNESS: I think that peripherally is maybe
being a little optimistic. There is, I think— [261] you
are right, that really Yakima is not meaningfully related
to Spokane on the basis of newspaper circulation.
THE COURT: All right.
Q (By Mr. Hoffman) Would you very briefly ex-
plain—you touched on it lightly before—but would you
explain very briefly the significance of the exhibit.
A I think the exhibit is a good indicator of the pene-
tration of the Spokane newspaper in the Inland Empire,
which is also a reflection of the penetration of Spokane
in many other lines, such as retail trade, commerce,
wholesale trade, distribution, and as you see from our
map, that this area had been classified into three cate-
gories of primary area, which includes the counties ad-
jacent to Spokane, and that is based on percent distribu-
tion.
You will note in this area the percentages all exceed
50 percent, in other words, the newspaper is distributed
to over 50 percent of the households located in those
counties, and then we have a secondary area, and in the
secondary area, the percentages of penetration range
from 23 percent to 46 percent. I think that is very mean-
ingful penetration. And then in the tertiary areas, the
percentages range from a low of one percent, which is
Yakima, which is really [262] not meaningful, to a high
595
of 15 percent in Douglas County, which is a substantial,
and I think this exhibit illustrates the Inland Empire
phically and the penetration varies by county.
MR. HOFFMAN: Your Honor, at this time the gov-
ernment moves that its exhibits marked for identification
0-1 through O-9 inclusive, O-11, O-19 and O-20 be ad-
mitted into evidence as well as Exhibit L-1 and L-2.
THE COURT: Any objection to that?
MR. JOHNSTON: Well, L-1 and L-2, I don’t believe
we have heard anything about that.
MR. HOFFMAN: Well, Mr. Marston just testified
to L-1, that’s the economic brief, and L-2 is the appendex
to LI.
MR. JOHNSTON: That is in the record, that was
put in by Mr. Hartman at the beginning of the case.
THE COURT: You don’t have to introduce it, that
is here is what he says. Is that right, Mr. Hartman?
MR. HARTMAN: That is in the application.
THE COURT: All right. In other words, it is a part
of the record, so—
MR. HOFFMAN: In any case, we would like to use
it as evidence in the case.
12631 THE COURT: All right, we will admit it in
evidence as well, being part of the record.
MR. TORRE: Just for clarification, I understood Mr.
Hartman introduced only the transcript. Did he intro-
duce the entire record?
MR. HARTMAN: That is the transcript and the ex-
hibits to the hearing.
MR. HOFFMAN: But not the application, it’s not
the application?
MR. MOEN: ‘Tile application is going to be offered
tomorrow.
THE COURT: It is in now, we won’t have to—we
will admit it. Go ahead.
(Government’s Exhibits O-1 through 0-9, 0-11, 0-19,
0-20, L-1 and L-2 for identification be admitted
into evidence. )
[264] MR. JOHNSTON: If the Court please, I might
say that in this group of exhibits that this witness has
gone through we didn’t have a chance to segregate these
596
due to the numbering system which has just been devised,
and the comments we had as to the relative accuracy do
not relate to these basic statistics in this old group.
THE COURT: Okay. All right, is there anything fur-
there from Mr. Marston?
MR. MOEN: With the Court’s permission I would like
to defer any cross-examination until Mr. Hartman has a
chance for cross-examination.
MR. HARTMAN: I just have a couple of questions,
your Honor.
CROSS-EXAMINATION
BY MR. HARTMAN:
THE COURT: As I understand it, Mr. Hartman, all
of his testimony goes to the projected growth of Spokane
County and the areas that are included in this SMSA,
I guess you called it, and that is all I get from it, just
the projected growth?
MR. HARTMAN: Yes, your Honor.
THE COURT: And the reasons why he thinks it will
grow as far as jobs and housing and the normal [265]
growth that he ascertained from previous census, et cetera,
and how he draws his conclusions and that’s about all it
is, isn’t that it?
MR. HARTMAN: Ves, that’s about it.
THE COURT: I don’t mean to say that’s about all it
is, I should say that’s what he testified to.
MR. HARTMAN: That’s it.
THE COURT: I don’t want to depreciate his testi-
mony, which I am not. All right, go ahead.
22 (By Mr. Hartman) Now, Mr. Marston, do you
* 2 expertise in the field of banking?
0 :
Q In making these studies and projections did you
= = banking factors into consideration?
o.
Q When you were hired by the plaintiff here, did they
indicate that this matter involved banking?
A Yes.
Q You were aware when you made these studies you
were aware of that?
597
A Yes.
Q Did you look at any of the factors which would
enable someone to reach a conclusion as regards to bank-
ing or banking economics?
[266] A No.
Q Did you testify as a witness for the plaintiff in the
United States vs. Idaho?
A Les, I did.
Q In the Idaho case?
A Yes.
Q Would you tell us what kind of testimony you gave
in that case and what it related to?
A I think the testimony related basically about to the
same factors, was the area—
THE COURT: How fast Twin Falls was growing, is
that it?
THE WITNESS: Was it growing, your Honor, I
think was it.
THE COURT: I just got through reading that case
just during the recess.
MR. HARTMAN: Very good, your Honor.
Q Now, would you say it is a fair statement, Mr.
Marston, that in spite of your conclusions and testimony
in this case the Court found that there were no economic
or financial or business conditions in Twin Falls to justify
the state or federal regulators to authorize another bank
in Twin Falls?
THE COURT: Well, just a minute, Counsel, that’s a
tough question because I don’t know if he [267] read the
opinion or not.
I did, I read it, and the Court found that the rate of
growth of Twin Falls was slow and that is the way I
recall the opinion and that’s the way I understood he
testified. Is that about it?
THE WITNESS: Yes, your Honor, that was it.
THE COURT: That’s what the Court found.
MR. HARTMAN: Well, I guess that’s all I have then.
THE COURT: Well, I mean insofar as his testimony
is concerned.
MR. HARTMAN: That’s correct, your Honor.
THE COURT: And the Court found that the rate of
growth was slow, there was nothing dramatic about it.
598
MR. HARTMAN: I think that makes my point, your
Honor.
THE COURT: You testified that the rate was slow?
THE WITNESS: Yes.
THE COURT: And the Court found that there wasn’t
any reason to allow a fifth bank to come into the area
because of the slow rate of growth and in the foreseeable
future there never would be a fifth bank.
[268] MR. HARTMAN: Well, that probably supports
Mr. Marston’s testimony and—
THE COURT: Oh, 1 don't know if I would put it
quite that way, I don't think that he was responsible for
the Court finding that a fifth bank would have come,
maybe he was responsible for that, maybe his testimony
was that the rate of growth was so slow that the Court
said, Well, under those circumstances you could never
have or wouldn't have another bank.“ Do you see what
I am getting at?
MR. HARTMAN: Yes, I do, your Honor.
THE COURT: I don’t want to put the blame on him
for the Court finding anything in that because I don’t
think that that would be appropriate, from the way I
read it I don’t know what his testimony was.
The Court in there did in that opinion remark about
that it didn’t credit certain of the experts and Mr.
Marston wasn’t one of them. True?
MR. HARTMAN: That's correct, your Honor.
THE COURT: He didn’t mention Marston, he did
mention a certain expert that he called but not Marston.
MR. HARTMAN: What did you say as to the rate of
Twin Falls growth in that case?
THE WITNESS: Well, I would have to review [269]
and refer to my notes in terms of specifics or something
that I haven’t with me.
Q (By Mr. Hartman) You don’t remember?
MR. HOFFMAN: I would have to object to that, your
Honor, as to the resolution of another fact case to the
growth of Twin Falls.
THE COURT: Well, I would conclude that the Court
found that the rate of growth was slow unless he is will-
ing to say he testified it was going to be fast, I don’t
599
think it would be material and I am sure he didn’t testify
to that. Did you?
THE WITNESS: Not to my knowledge.
THE COURT: Okay. Anything further?
MR. MOEN: No cross-examination.
THE COURT: Now, this witness can be excused then,
is that correct?
MR. HARTMAN: Tes, your Honor.
THE COURT: All right, he will be excused. And now
as far as other witnesses are concerned, is Mr. MacMur-
ray coming Thursday?
MR. TORRE: Tomorrow we will read the deposition
of the late W. Witherspoon in the record.
THE COURT: How are you fixed for witnesses, Mr.
Moen?
MR. MOEN: Well, I would hate to start off with one
[270] this afternoon, your Honor.
THE COURT: No, no, I mean tomorrow.
MR. MOEN: I think I could have a witness in the
morning, your Honor, we can get started in the morning.
THE COURT: All right. Do you think Mr. Mac-
Murray will take a full day?
MR. TORRE: It’s hard to say right at this moment,
but not a full day.
THE COURT: I would think so. He’s in Alaska and
he is the former head of the—
MR. TORRE: (Interposing) Supervisor of Banking
in the State of Washington and now is in the same posi-
tion in the State of Alaska.
THE COURT: I know him personally and I just
didn’t think that he would take a full day, and the reason
I don’t think he would take a full day is he is a lawyer,
so he could take two days, but you mean his testimony
won’t take all day long?
MR. TORRE: Well, there is a transportation problem
between here and Alaska, two problems, in fact, and also
his position up there requires him to be there.
THE COURT: Lou can have him here Thursday.
Now, Mr. Moen?
[2711 Mr. Moen, in view of the fact that this is a court
trial you have no objection, do you, to going ahead and
putting on some testimony?
600
MR. MOEN: Not at all, your Honor.
THE COURT: And you can make whatever motions
when you rest, in any event take it, as you probably will,
but you don’t have any objection?
MR. MOEN: No, not at all, your Honor.
THE COURT: So I think—well, how long will Mr.
Witherspoon’s deposition take? It’s not too thick, is it?
MR. TORRE: No, your Honor, it’s quite thin.
THE COURT: All right. You will have some wit-
nesses so we can just go all day tomorrow, Mr. Moen,
and that will expedite the ultimate disposition of the
case. And do you want me to read Mr. Witherspoon’s
deposition before tomorrow?
MR. TORRE: Whatever you prefer, your Honor.
THE COURT: Lou can put it in the record by ques-
tion and answer but if I read it, then I’ll remember it
better than if I hear it the first time.
MR. TORRE: Well, if the defendant and the inter-
venor have no objection, we have no objection to that.
THE COURT: Then I will read it in the [272] in-
terim and of course every time a deposition is filed, why
they, that, under the Court rules, that permits me to read
it. All right, now, there is nothing further then tonight?
MR. MOEN: Nothing as far as the defendants are
concerned, or the intervenors are concerned, your Honor.
THE COURT: All right.
MR. TORRE: Nothing further as far as we are
concerned, your Honor.
THE COURT: While we are all here, were you in that
case, that Idaho case?
MR. TORRE: Yes, I was, your Honor.
THE COURT: I haven’t heard, of course, the testi-
mony of the defendants’ side, but this case seems to me to
be remarkably similar to the Idaho case save and except
for the fact that Spokane, the City of Spokane, is more
of a metropolitan area, is that the distinction?
MR. TORRE: Well, it is larger, and in the Idaho case
there was another kicker in it, in that, was that the
government alleged there was an elimination of existing
competition in an eight-county area. This was narrowed
down in trial to the Jonston area.
601
THE COURT: I read that, yes, but other than [273]
that factor the distinction I see is the Spokane metro-
politan area as contrasted to the City of Twin Falls, a
25,000 population city, is that it?
MR. TORRE: There is quite a difference of magni-
tude in the market areas and in importance in the state.
THE COURT: All right, then. If there is nothing fur-
there we will recess until tomorrow morning at 9:30. Is
that satisfactory or do you want to start earlier?
MR. MOEN: No, 9:30 sounds good to me, your Honor.
9:30 is just fine. .
MR. TORRE: That is just fine, your Honor.
THE COURT: Very well, we'll recess until 9:30 in
the morning.
(Court recessed until 9:30 A. M., January 10, 1972.)
[274] REPORTERS’ CERTIFICATE
WE, W. L. Mayrand, Gerald J. Popelka, and Paul C.
Tveten, official court reporters for the United States Dis-
trict Court, for the Western District of Washington, do
hereby certify that the annexed and foregoing is a full,
true and correct transcript of proceedings had in the
above-entitled and numbered cause, on the date herein be-
fore set forth, and we do further certify that the same has
been prepared by us, or under our direction.
—
[275] UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
Filed in the United States District Court,
Western District of Washington, June 22, 1973,
Edgar Scofield, Clerk, by M., Deputy]
No. 237—71C2
UNITED STATES OF AMERICA, PLAINTIFF
vs. s
MARINE BANCORPORATION; THE NATIONAL BANK OF
COMMERCE OF SEATTLE, ET AL, DEFENDANTS
TRANSCRIPT OF PROCEEDINGS held in the above-
entitled and numbered cause in the above-entitled Court
before the Honorable WILLIAM N. GOODWIN, United
States District Judge, on Wednesday, January 10, 1973,
at the United States Courthouse, Tacoma, Washington.
VOLUME III
276] APPEARANCES
RICHARD J. TORRE,
ALLAN S. HOFFMAN,
PHILIP L. VERVEER, and
RONALD SILVERMAN, Attorneys, Antitrust Divi-
sion, Department of Justice, appearing for and on behalf
of Plaintiff;
JAMES WILLIAM JOHNSTON and
R. A. MOEN (of Graham, McCord, Dunn, Moen, John-
ston & Rosenquist), and
DANIEL M. GRIBBON, and
CHARLES LISTER, (of Covington & Burling), ap-
pearing for and on behalf of Defendants;
JON HARTMAN and
THOMAS McLACHLEN, appearing for and on behalf
of Intervenor.
608
277 PROCEEDINGS
(The Court convened at 9:50; everybody is present.)
MR. VERVEER: Your Honor, the government at this
time would like to read into the record the deposition of
the late W. W. With
THE COURT: All right.
MR. VERVEER: The deposition was taken Septem-
ber 8, 1972, in Spokane.
THE COURT: Is there any objection to this?
MR. MOEN: Not at this time. I intend to object to
certain questions when we get into it.
THE COURT: All right. I was going to say if there
wasn’t any objection, we could shortcut this. I have read
the deposition, and I gather that the purpose of the gov-
ernment introducing it into evidence is to show that banks
can acquire other banks under sponsorship, and in the
last part of the deposition, that Mr. Witherspoon said
he wouldn't try to move into Seattle and Tacoma under
the same circumstances as he would if he were going to
go into Othello or something of that sort. Is that the idea?
MR. MOEN: Our position is to the extent that the
procedure used and described by Mr. Witherspoon 278]
in his depsition is concerned, as to the extent that it is
illegal, ft is not binding on the National Bank of Com- .
merce in any way, and if there is a violation of the
statute, why, it doesn’t provide a means of entry for
Commerce.
THE COURT: Go ahead, put it in then.
MR. VERVEER: Your Honor, we don’t have any
great desire to read this into the record. We would like
4 have it in the record at this point if that is accept-
e.
THE COURT: I am going to let it go in for whatever
it is worth.
MR. MOEN: If our objection can be noted in the rec-
ord at this time, I see no reason to read the whole
deposition.
THE COURT: I don’t think so either because I have
read it, and as you can see, I didn’t detail it paragraph
604
by paragraph, but that is the import of it. Isn’t that it,
what I have just said?
MR. MOEN: That’s right, as long as we preserve our
position, there is no reason to read it.
THE COURT: All right, go ahead. You offer it and
I will admit it into evidence.
MR. VERVEER: At this time we would like to offer
Mr. Witherspoon’s deposition.
2791 THE COURT: I noticed, of course, you cross-
examined him at the time.
MR. MOEN: That’s correct, your Honor. We just
didn’t note our objections at that time, but they were to
be preserved until trial, but as long as it is understood
that we have the objections—
THE COURT: You have your objections. The point
of your objection is that if the Old National engaged in
a practice that was in violation of the law, that doesn’t
mean necessarily that N B of C would engage in a similar
activity, is that the point?
MR. MOEN: That’s correct, your Honor, and to the
extent that whatever way they od construe the statute,
it has no—
THE COURT: - No binding effect on you.
MR. MOEN: No binding effect on the National Bank
of Commerce.
THE COURT: All right.
(The deposition of W. W. Witherspoon was read as
follows:)
[280] “W. W. WITHERSPOON,
called as a witness on behalf of Plaintiff, being first duly
sworn, was examined and testified as follows:
EXAMINATION
“BY MR. VERVEER:
Would you please state your name and address for
the record?
a es Ws Witherspoon, 1821 Upper Terrace Road,
Spokane, Washington.
——
605
Q What is your profession, Mr. Witherspoon?
A Iam an attorney and also a banker.
Q With whom are you a banker?
A I am chairman of the board of Washington Banc-
shares, Inc. and chairman of the board of the Old Na-
tional Bank of Washington.
Q And what is Washington Bancshares, Incorporated?
A It is a registered bank holding company.
What banks does it control?
A The Old National Bank of Washington and First
National Bank in Spokane.
Q Mr. Witherspoon, how has your health been re-
cently?
A It has been poor.
Q Are you under a doctor’s care?
A I am.
Would it be difficult for you to travel to Tacoma,
[281] “Washington for a trial in October?
A It could be difficult for me to do so.
Q Do you expect to be hospitalized in the near future?
A I will be entering the hospital this coming Sunday.
Has a physician advised you to attempt to get away
— = Pacific Northwest area for a vacation?
0.
Q Has the Old National Bank ever sponsored or as-
sisted in the creation of new banks?
A It has assisted in the creation of new banks.
Q What banks were they?
A Walla Walla National Bank, Bank of Richland,
Tri-Cities National Bank, Pasco, a national bank at
Othello, I can’t give you the correct name at the moment,
and National Bank of Kennewick, Washington.
Q To the best of your recollection would the bank in
Othello have been named the Othello National Bank?
A Yes, I believe that is correct.
And the bank in Kennewick named the Kennewick
National Bank?
A I think that is correct.
Q Could you describe what type of assistance was
given to the new banks?
A Well, it varied from bank to bank.
—
606
Q Could I ask you with respect to the Walla Walla
[282] “National Bank what type of assistance was ren-
dered?
A In the case of the Walla Walla National Bank the
people who were forming it were not able to raise suffi-
cient capital funds, and I assisted in that manner by
obtaining a couple of Spokane people who did make
substantial investments.
Q Was there any further assistance beyond that in
the case of the Walla Walla National Bank?
A Very little other than what any bank would render
to a correspondent bank. I might say that we would like
to have assisted in cases where we were not permitted to.
Q In the case of the Walla Walla National Bank?
A That is correct.
Q What assistance was rendered to the Tri-Cities Na-
tional Bank in Pasco, Washington?
A We assisted in their obtaining a manager. We as-
sisted in the formation of that bank in that we encour-
aged people to start a bank in that case.
Q And representatives of the Old National Bank ac-
tually actively sought out individuals and encouraged
them to do it?
A That is correct.
Did any officers of the Old National Bank own stock
in the Tri-Cities National Bank in Pasco?
A Mr. DeWitt Wallace owned stock in the Tri-Cities
[283] “National Bank. He was president of the Old Na-
tional Bank at that time.
Do you recall the approximate percentage of stock
in the Tri-Cities National Bank which Mr. Wallace
owned?
A I do not.
Q What assistance was rendered to the Othello Na-
tional Bank?
A In. the case of the Othello National Bank, there were
people in the community who desired to form a bank,
came to a manager of our Tri-Cities’ branch, and asked
for assistance.
What assistance was then rendered to them?
A Rendered? Mr. Wallace discussed the matter with
Mr. Saxon who was then comptroller of the currency, an
607
application having previously been filed by this group. Mr.
Saxon took the position that a charter would be granted
provided that they could demonstrate a need for another
bank in the community and that adequate financing and
good management would be provided. With this the Old
National continued to help them in the formation of their
bank. I believe again that Mr. Wallace made a stock
investment. We did assist some of these stockholders by
loaning them money with which to buy stock and taking
stock as security, perhaps with other security than stock.
’ [284] “Q What assistance was rendered in the case of
the Kennewick National Bank?
A In the case of the Kennewick National Bank again
the people who were interested in forming the bank came
to Mr. Wallace, and as for assistance, the matter of
whether or not a charter would be available was discussed
with Mr. Saxon on the very same trip that the Othello
one was discussed. In that particular case there was a
difficulty in obtaining proper management. We had at-
tempted to line up management for them from outside
sources, had not been successful when it came time to
move ahead. So we gave a leave of absence to a man who
had been a manager of our Pomeroy, Washington branch,
and he managed the Kennewick bank.
Could I ask you to repeat? You said you gave a
leave of absence to the man at the Pomeroy branch?
A That is correct.
Q What assistance was rendered in the case of the
bank of Richland?
A At the start there were two groups that were out
to form banks in Richland, and we heard about it. We
were able to get the two groups together. One of the
groups had already filed an application for a state charter.
We were able to get the two groups together and pro-
ceeded with the formation of a bank. And again [285]
“I believe Mr. Wallace made a stock investment in that
one. I am not entirely sure of that. Again I do know
that we did loan money to some of the original share
holders.
Q Would it be a correct summary to state that in the
case of the Tri-Cities National Bank the Old National
Bank approached individuals to serve as organizers and in
the other four cases, the prospective organizers approached
the Old National Bank?
MR. HARTMAN: I will object to the form of that
question.
Q (By Mr. Verveer) Mr. Witherspoon, could I ask
you to recapitulate who approached whom in the case of
the five banks that we have discussed?
A The Walla Walla bank, we were approached by an
attorney from Walla Walla who wanted to get a bank
started. In the Tri-Cities National Bank at Pasco we
went to individuals in that area to interest them in
forming a bank. In the case of Richland, we obtained
information that two groups were each trying to get bank
charters. A member of one of the groups was a director
of the Tri-Cities National Bank, and we got the informa-
tion from that source. We made the move then to try to
get the groups together and to form a bank which would
be a correspondent of the Old National. In the case of
[286] “Othello, the group who were attempting to form a
bank and who had made an application for a national
charter approached our manager—manager of our Tri-
Cities’ branch. In the case of Kennewick, the group who
were forming a bank approached us.
Q Mr. Witherspoon, why did the Old National Bank
assist in the formation of these five banks?
A We assisted in the formation of these banks, first
of all, to have a correspondent and with the hope and
belief that we would be able to acquire them in the fu-
ture and make branches of the Old National there.
Q Has the Old National Bank in fact been able to ac-
quire these five banks?
A It has.
Q Are the branch ~~ which these banking offices
now have become profitable branches?
A That is a rather difficult question in that it is most
difficult to determine the net profit of individual offices in
our branch system. I would say that in some cases we
have recovered the premium that was paid and are in the
black in that respect, and that in other cases we have not
as yet fully recovered the premium paid.
Q Was there an understanding between Old National
609
Bank and the organizers of these new banks that Old
National [287] “Bank would eventually acquire them at
the time that the charters were granted?
A There was an understanding between the Old Na-
tional Bank and some of the original shareholders of those
banks that the Old National would acquire them.
Q Im the cases where there was such an understand-
ing did these shareholders control the requisite percentage
of stock to assure control to Old National?
A Yes, they did.
Q Was the understanding between Old National Bank
and these shareholders formal or informal in nature?
A To the best of my recollection there was no written
understanding with respect to the Walla Walla National
Bank, but there was a formal understanding with each of
the others.
Q Mr. Witherspoon, what did the formal understand-
ing in the case of the other four banks entail?
A It was an agreement in each case which provided
that within five years from the formation of the bank the
Old National Bank would make application to the comp-
troller for permission to acquire that bank and establish a
branch at its location, that the shareholders who joined
in that agreement would vote in favor of such a transac-
tion, that the price which would be paid would be either
a net—the fair value of the assets [288] “less liabilities
at the time of takeover plus a premium equal to four per-
cent on deposits, or the shareholders’ original investment
plus interest at eight percent per annum compounded an-
nually, whichever was the greater.
Was the comptroller of the currency informed by
the Old National Bank of its activities with respect to
the assistance to the new banks?
A Not in the case of the Walla Walla National Bank.
The comptroller was informed in every other case, how-
ever.
Q Was he informed of the intention of the Old Na-
tional Bank eventually to acquire the assisted banks?
A Yes, he was. I might state, just to clarify this, in
the case of the bank of Richland, which was a state bank,
the comptroller was not informed of it until after that
610
bank had been formed, but he then was informed of it.
In all other cases he was informed of it before the or-
ganization of the bank.
Q Did the comptroller of the currency raise any ob-
jection to the Old National Bank’s efforts to establish
branches by this means?
A Hedid not. As a matter of fact, in the case of the
Tri-Cities National Bank, the suggestion that we form
the bank was made by the Chief Deputy Comptroller in
[289] “the presence of—who was Lew Jennings at the
time in the presence of Ray Gidney, which was the comp-
troller of the currency, and Mr. Gidney approved that we
should do it.
Q In connection with these activities involving assist-
ance and eventual acquisition by the Old National Bank,
did the law firm of which you are a senior partner pro-
vide legal advice to Washington Bancshares and the Old
National Bank?
A It did.
Did your firm advise Washington Bancshares or the
Old National Bank that there was anything illegal or
improper about this method of establishing branches
under either state or federal law?
A It did not.
Q Did you, as the chairman of the board of Washing-
ton Bancshares, ever have any fear that the holding
company would be in danger of forfeiting its charter
under the state holding company law as a result of the
agreements which you have told us about involving the
controlling shareholders of the various banks?
A No, I did not.
Q Mr. Witherspoon, what is the percentage, approxi-
mate percentage, of stock ownership that Washington
Bancshares has in its two banking subsidiaries?
[290] “A Oh, 98 percent of the stock of the Old Na-
tional Bank and 99 percent of the stock of the First Na-
tional Bank at this time.
Q And at the time that these activities which you
have described were taking place, what was the owner-
ship, approximately?
A Well, at that time I believe it was approximately
611
two-thirds of the Old National Bank and 74 percent of
the First National Bank.
Q Is the Washington—
A It was less than two-thirds of the Old National
Bank at that time, 60, 62 percent, something like that.
Q Is Washington Bancshares, Incorporated a Wash-
ington corporation?
A It is.
Q Where did the manager of the Tri-Cities National
Bank come from?
A He was Mr. Wallace’s son-in-law. He had been
running a small bank at Endicott, Washington.
Q Mr. Witherspoon, to your knowledge was the Old
National Bank the first bank in the State of Washington
to assist other banks in the manner you have described?
A I have to answer that it is just general knowledge
and it’s done by other banks in the past, with my not
having any proof at all.
[291] “Q Based on your beliefs and without any evi-
dence of it, what other banks were engaged in activities
similar to those which you have described?
MR. MOEN: I am going to object to it as repetitious.
He’s already answered the question. He said he didn’t
know, didn’t have any particular knowledge of it.
MR. VERVEER: We will note the objection and ask
Mr. Witherspoon to answer the question.
MR. MOEN: He’s already answered the question.
(By Mr. Verveer) Mr. Witherspoon, I will attempt
to te the question. Based on simple belief and not
on firsthand knowledge, what other banking organiza-
tions in the State of Washintgon have been involved in
activities similar to those which you have described?
MR. MOEN: Same objection.
A Want me to answer?
Q Please.
A Seattle-First National Bank, National Bank of
Commerce, Peoples National Bank.
Q Again based on your belief, could I ask what as-
sisted banks were involved in the case of Seattle-First
National Bank?
A A bank at Kennewick which subsequently was
612
branched, a north Spokane bank which subsequently was
acquired [292] “and branched. I know no others.
Q Based on your belief, what assisted banks were in-
volved with the National Bank of Commerce?
A The bank at Pomeroy, Washington.
Q And again based on your belief, what banks were
assisted by Peoples National Bank?
A The bank of Vancouver.
MR. VERVEER: We have no further questions.
(A short recess was taken)
EXAMINATION
BY MR. JOHNSTON:
Q Mr. Witherspoon, as I recall it, counsel asked you
a question that was worded roughly as follows: In your
opinion was this method of establishing branches legal or
was it proper. Now, I am not quite clear as to what
counsel meant by this method. What did you understand
him to mean?
A I understood him to ask me whether I had had any
concern as an officer of Washington Bancshares as to the
possibility of our charter being put in danger by using
this method of getting banks started, and future acquisi-
tion.
Q In other words then, you didn’t understand him to
mean that what you did was a method of establishing a
branch from the inception? .
[2938] “A No.
Q And is that what you did?
A No. We assisted in the formation of a bank which
we hoped to be able to take over.
Q And circumstances later developed so that you did
take them over?
A That is correct.
Q Now, counsel also asked you, Mr. Witherspoon, if
you had informed the comptroller, and there again I
wasn’t quite clear as to what information he—you said
that you had informed the comptroller, and I wasn’t quite
clear as to what you had informed the comptroller in
that connection. Can you elaborate on that?
613
A Merely the fact that we were assisting in getting
a bank started with the hope that we would be able
to acquire it in the future.
Q In other words, you didn’t inform the comptroller
that this was simply a method of—this is just a proce-
dure to acquire a branch?
A Not in that term, no.
Q Well, do you think that the information that you
gave the comptroller would have been susceptible to that
interpretation, that this was simply a device to acquire
a branch for Old National Bank?
A Mr. Johnston, I don’t know just quite how the
comptroller [294] “would take it. I did explain that in
the second transaction we had that this method was sug-
gested by a chief deputy comptroller and approved by the
comptroller, and in subsequent transactions we informed
the comptroller that we were working on assisting in the
formation of a bank which we hoped to be able to take
over in the future. That is about all that was said to
him.
Q I see. He understood that you had your eye on the
thing—
A Right.
Q —at the very least?
A Yes.
Q Was the comptroller advised of these agreements
that you say you had with the stockholders, do you know,
do you remember?
A Not that I know of, no.
Q Mr. Witherspoon, we know, of course, that each
one_of these new banks involved here were in relatively
small communities, at least as compared with metropoli-
tan areas. Would you feel that the procedure that was
followed by the Old National Bank would give much hope
of ending up as a branch of a bank if the locale were a
metropolitan area such as Spokane?
MR. TORRE: Is that your question?
[295] MR. JOHNSTON: Ves. :
MR. TORRE: Could you repeat the question before
he answers?
(The previous question was read back by the court
reporter.)
614
Q (By Mr. Johnston) Go ahead and answer.
A Well, it could be possible to establish a branch in
that manner, I would think.
Well, Mr. Witherspoon, this wasn’t exactly the
question I intended. The feasibility of it—let’s assume
for the sake of the question it would be possible. What
would be your judgment as to its feasibility?
MR. TORRE: Object to the form of the question as
being vague. Could you rephrase it? Just as feasibility
in what respect?
Q (By Mr. Johnston) Feasibility: in all respects that
a banker would make a judgment with respect to a pro-
cedure of this kind?
A I would answer that, Mr. Johnston, by saying that
we wouldn’t consider trying to use that method in getting
into Tacoma or Seattle.
Q Now, Mr. Witherspoon, you have testified as to your
impression as to the character of certain acquisitions that
have been made by other banks in the state. Do you have
any direct knowledge of the circumstances, I [296] “mean,
the circumstances of those acquisitions other that, as you
said, your general knowledge that you testified it was
predominant?
A. No, I do not.
Q You have never examined any files on these—
A I have not.
Q I see, so that your testimony in that respect is
simply an understanding—a rumor is the wrong word,
but maybe you could supply one that would be better?
A Well, just the feeling among the fraternity, the
banking fraternity, that that is what has happened or
what is happening.
see. Now, Mr. Witherspoon, you have been in the
banking business for a long time in the state, and I as-
sume you are familiar in at least a general way with
the track record of the National Bank of Commerce as
a competitor in the various areas that it’s entered in the
State of Washington, are you not?
A I am, yes.
Q Would you give your impression of the National
Bank’s activities in that regard?
615
MR. TORRE: I will object on the ground that it’s
beyond the scope of direct. Go ahead and let him answer
the question.
MR. JOHNSTON: Okay.
[297] “A Yes, we are in direct competition with Na-
tional Bank of Commerce in several different communi-
ties. They are a very strong competitor, as strong as any
bank in the state.
Q (By Mr. Johnston) Would you feel that on the
basis of your knowledge of their track record it would be
your view that they would be a strong competitor if they
were to enter Spokane as a result of this merger?
A Iam sure they would be a strong competitor.
MR. JOHNSTON: That is all the questions I have.
MR. HARTMAN: Intervenor has no questions.
MR. VERVEER: We have a couple of matters we
would like to go into very briefly.
EXAMINATION
BY MR. VERVEER:
In the five communities, Mr. Witherspoon, in which
you have described the assistance Old National Bank
rendered to new banks, would Old National Bank have
rendered that assistance if they could have established de
novo branches in these communities?
A Well, that answer to that is no.
Q How did the Old National Bank get into the Seattle
banking market?
A By acquisition of the Northwest Bank. .
Q How large was the Northwest Bank at the time of
that [298] “acquisition?
A Its deposits were around thirteen and a half mil-
on.
And how many offices did it have?
A Two.
Q About when was it chartered?
A It had been chartered roughly seven years before
we took it over.
Was Northwest Bank a state bank?
A It was.
i
616
I believe in answer to a question that Mr. Johnston
just asked you, you suggested that you would not go into
Tacoma or Seattle by means of assisting with a bank
formation and later attempting to acquire it?
A (Nods yes.)
Q Would your answer remain the same if there were
— other means available to get into those banking mar-
ets?
A Yes, I believe it would.
MR. VERVEER: Okay, we have no further questions.
MR. MOEN: Nothing further.”
(Deposition concluded. )
MR. VERVEER: Your Honor, the government sub-
mits that Mr. Witherspoon’s deposition raises the issue of
the possibility of sponsorship of the bank. In that con-
nection, the government would like to [299] offer docu-
mentary evidence which we have denominated Exhibit
H. Your Honor, the government offers Exhibit H-1.
THE COURT: Let's see what Exhibit H is all about
here. H-1.
MR. VERVEER: Your Honor, this is the decision of
the Comptroller of the Currency on the application of
Peoples National Bank to acquire the Bank of Vancouver
National Association. It is dated—
MR. MOEN: The defendant will object to the entry
of this exhibit on the grounds that it has nothing to do
with the issues in this particular case.
THE COURT: Let's go into this and see what the
purpose of it is. Is the purpose to show the Comptroller
of the Currency would approve an application by N B of
C to acquire a bank that is in existence in Spokane? Is
that the point of it?
MR. VERVEER: Your Honor, the material in this
exhibit is offered to show variously that the sponsorship
of banks is an established practice in the State of Wash-
ington; that the regulatory authorities are aware of that
practice, and for example, specifically to Exhibit H-1, that
in this case Mr. William B. Camp, Comptroller of the
—
e
617
Currency, did not refrain from approving a merger of
the bank which he stated was [300] sponsored by the ap-
plicant for the merger.
THE COURT: Assume for the sake of the argument
that he would approve an application of the National
Bank of Commerce to acquire a bank in Spokane, what
bearing does that have on the question of whether or
not this proposed merger is pro or anti-competitive?
MR. VERVEER: Your Honor— .
THE COURT: That is the issue before me, and that,
in my judgment, would have no bearing on whether or not
this merger is pro or anti-competitive, the fact that he
might approve an application if they wanted to—sought
to acquire another bank. I don’t see any—
MR. VERVEER: Your Honor, the government agrees
that the issue before the Court is the instant merger and
none other.
THE COURT: That’s right.
MR. VERVEER: However, according to our theory,
in order for there to be even potential competition, there
must be alternative means of entry available to the Na-
tional Bank of Commerce into the Spokane metropolitan
area, We have introduced— .
THE COURT: I am just saying, suppose there is,
what does that have to do with whether or not this
merger is pro or anti-competitive. If I would assume
[301] for the sake of the argument here and the decision
in this case that they could go over there and buy Ameri-
can Commercial, if they wanted to pay what your witness
called a premium, and my understanding of a premium
price means that you pay the highest and the best and
maybe a little extra premium, you know what that word
means, but suppose they could, what difference would
that make so far as the issue here is concerned, which
is whether or not this merger is pro or anti-competitive?
That is the point I am making.
MR. VERVEER: Only this, your Honor, that in terms
of our theory of potential competition, there must be some
possibility that the National Bank of Commerce can get
into the Spokane market by some means other than ac-
quiring Washington Trust Bank.
618
THE COURT: I understand that your theory is that
it would be better that they went in the other way.
MR. VERVEER: And the defendants, your Honor,
deny that there is any other possibility available to them.
THE COURT: Even if they do deny it, my point is
this proposed merger either anti-competitive or pro-com-
petitive—or assuming that it is anti-competitive, then we
go to the next step, whether or not does it serve a need in
the community that outweighs any [302] anti-competitive
effect that it may have, and that is the issue, and then we
get into this. This is peripheral at best because—I will
accept the proposition that they could get in over there
for the purposes of decision in this case in some other
way, but I still say that it makes no difference so far
as I am concerned if they get an ultimate decision here
whether or not this proposed merger is anti-competitive
or pro-competitive if they could get in there another way
because if they got in another way, you say they would
be pro-competitive. But suppose that I should find that
getting in this way is pro-competitive, what difference
does it make? That is the point I am trying to make.
1303] MR. VERVEER: Yes, your Honor, it is our
position that it would be impossible for the Court to find
that this merger was anti-competitive under the theory
of potential competition, unless they could get into Spo-
kane by some other means.
THE COURT: Well, all right.
MR. VERVEER: Would you care to stipulate to that,
Mr. Hartman?
MR. HARTMAN: Would you say that again?
THE COURT: All right, say it again.
MR. VERVEER: The Government’s theory is that it
would be impossible for the Court to decide that the in-
stant merger is anti-competitive under our theory of po-
tential competition, unless potential competition can be-
come actual, that is, unless N B of C can get into Spo-
kane by some means other than the instant merger.
MR. MOEN: The defendant will not stipulate to any
theory of the Justice Department, because they change
their theory every time they have another antitrust case.
THE COURT: Well, maybe we are making a whole
619
lot of nothing out of this, as far as this exhibit is con-
cerned, in that the activities of the Comptroller’s office
with regard to other applications for acquisition may
show or may not show that this bank [304] could acquire
a bank over there, I don’t know, but I take it that the
Comptroller makes his decision in each individual case
based on the facts of that case, that the probative value
of this in any area isn’t of any great moment. I just feel
that I could even assume for the sake of your argument
that they could get in there eventually some other way,
either by starting their own bank, or acquiring another,
but I just don’t think that is going to be critical to the
question that is before me, or questions. That is the way
I feel about it. So for that reason I will just admit it
over their objection and let it sit in the record for what-
ever it is worth. That will conclude this.
MR. VERVEER: All right, your Honor.
I would point out that we have fifteen documents which
represent either decisions or advisory reports from fed-
eral regulatory agencies, and each and every one in some
way makes reference to the practice of sponsorship of
small banks by larger banks, and in each case there was
ultimate acquisition.
THE COURT: This will be off the record.
(Discussion off the record.)
MR. VERVEER: Your Honor, Mr. Moen just raised
a question of what we mean by sponsorship.
THE COURT: Well, I understand, and I don’t [805]
want to go into that.
MR. VERVEER: Your Honor, the government now
would like to offer documentary Exhibit I.
THE COURT: What is that?
MR. VERVEER: It also makes reference to bank
sponsorship, and it consists of some letters produced by
the Comptroller of the Currency in response to a Rule 34
request, also some materials produced by defendants in
response to a Rule 34 request. Exhibits I-1-A through C
merely show, your Honor, that in the case of the Kenne
wick National Bank, a bank which we contend was a
sponsored bank, blind carbon copies of reports of condition
.
620
following the bank examiner’s examination of the bank
were sent to the president of the Old National Bank of
Washington, and from this we submit that the Court
might infer—
MR. HARTMAN: What is wrong with that?
MR. VERVEER: Is it eustomary for your National
Bank examiners to send reports of examinations to other
banks?
MR. HARTMAN: It is customary for our National
Bank examiners to be concerned with the condition of
that National bank. It just relates to the condition of the
National bank, and I see nothing wrong with it.
[806] MR. VERVEER: Isn't the condition of National
banks regarded as something that is extremely confiden-
tial by the office of the Comptroller of the Currency? ??
MR. HARTMAN: It is regarded as extremely impor-
tant by the office of the Comptroller of the Currency.
MR. VERVEER: Why, Mr. Hartman, would Mr.
Leaf, who was at the time regional administrator of Na-
tional banks send a blind carbon copy of this report to
the Old National Bank?
MR. HARTMAN: I don’t know, he may have been
looking for help from the Old National Bank. Was that
Kennewick?
MR. VERVEER: Yes, it is.
THE COURT: He probably knew they had an invest-
ment there of some character and wanted to see that that
bank got into proper shape. But you can discuss the mat-
ter back and forth for quite a while if you wish. Do you
have anything further you want to say to each other
now?
MR. VERVEER: No, your Honor.
MR. HARTMAN: No, your Honor.
THE COURT: All right, let's go on with it then.
MR. JOHNSTON: I would like to make a comment
[307] on these, your Honor.
THE COURT: You mean you want to make objection
to it?
MR. JOHNSTON: Yes. I would like to make a formal
objection.
Your Honor, in the case of Exhibit H that was just
presented here, it at least had a semblance of an exhibit
_
621
here. But these papers, whatever, they deal with mat-
ters involving other banks with which the defendant in
this action had no connection whatever, and they purport
to be letters that are written here by authors who are not
before the Court, there is no possible basis for the admis-
sion of these exhibits into the record on any basis, no
foundation has been laid for them. And as I remarked
earlier in the trial, your Honor, we are happy to have
you look at this, in fact we are glad to have you look at
this sort of thing, but we hate to have papers of this
kind, with no foundation or basis for their entry into
this case before we even get to the question of relevancy,
a part of the record here.
[308] MR. VERVEER: We submit, your Honor, that
Mr. Witherspoon’s depsition provides the foundation for
the entry of this evidence regarding sponsorship. Now, if
the defendant would like to make a specific objection to
any given document we would be happy to respond to
that.
MR. JOHNSTON: It is not referred to in Mr. With-
erspoon’s deposition, your Honor, they are not referred
to, and for the sake of preserving a record here we would
certainly like to have this record clean, and with docu-
ments of this character in it it can’t be a clean record.
THE COURT: Well, I suppose I have the wrong
tendency, and that is to admit everything and then make
a decision on it with regard to a lot of it. That’s about
the way I generally proceed in a court case.
If it has probative value, it may or may not, I am
ready to express myself with regard to the Comptroller’s
approval of other banks’ acquisitions around the state,
and so in effect I just can’t see what the determinative
value is here.
MR. JOHNSTON: If I may make a suggestion, your
Honor, and that is that your Honor further consider these
to see if your Honor feels in its determination of this
case, if there is any use or [309] purpose in these docu-
ments, and if your Honor does, well, then, rule whether or
not they are admissible to take care of the record.
THE COURT: Do you want me to read them all?
I don’t want to because I just don’t think they are going
to what the point is here, not that I am averse to thumb-
ing through them but I have a very poor eyesight and they
are hard to read. If you take a look at I-A, I don’t know
what kind of a copy you have, but I can’t read this kind
of material. Just take a look at it.
MR. VERVEER: Well, the government apologizes for
that, those are the copies we got from the Comptroller,
your Honor.
THE COURT: Well, I have lots of copies furnished
me of this character and they seem blurred and I am
getting old and my eyesight is not good and I have a
little trouble.
MR. VERVEER: Perhaps if we could point out to
the Court the relevance of portions with regard to the
relevant issues here—
THE COURT: Well, I can find it and I understand
the particular point that you are making here because
I already understand what you are driving at.
This first letter, for example, apparently [310] the
bank examiner found that the bank over there wasn’t in
too good shape.
MR. JOHNSTON: That’s the gist of the letter.
THE COURT: That’s what it says in so many words,
he didn’t like the way they were operating because maybe
the FDIC might have come into the picture and he didn’t
want that to happen.
MR. VERVEER: Yes—
THE COURT: (Continuing) I understand what you’re
driving at and I’ve already said that; and didn’t he, that
is Mr. Wallace, if that’s his name, already, or had a
little stock interest in that bank and that naturally if he
sent a blind carbon copy over to these stockholders or
bank loan agencies some of these charterers or incorpor-
ators, whatever you want to call them, if they would be
interested in knowing if this bank didn’t look like it was
in too bad shape and then maybe do something to
straighten it out, change of officers, and watch that they
are not making loans to people that don’t seem to be
able to pay and that kind of situation that probably
existed. That’s the point of it, I understand the point of
it.
623
MR. MOEN: However, it would not be relevant to
the issues in this case.
[311] THE COURT: Well, I have been trying to say
that for about ten minutes. I don’t know whether any-
body has heard that or not. If you want me to use the
microphone, I could use that mike, if you didn’t hear it.
MR. JOHNSTON: Well, the only thing, your Honor,
we wouldn’t like to have any appellate court feel that
your Honor was basing his decision on some of these
thi
THE COURT: Well, I think if they would read the
colloquy between counsel and the Court they could see and
get the impression, as far as I am concerned, that I am
not really impressed by these documents insofar as the is-
sues here are concerned.
All right, I'll admit them. Does that take care of that?
MR. VERVEER: Your Honor, just so the record is
clear, you have admitted Government’s Exhibit I for iden-
tification?
THE COURT: No. I is the one that contains the
material of the bank acquisitions—no, no, that was No.
F and No. I is the one that shows that the bank exam-
iners, or one of them at least, one of the bank examiners
found he didn’t like the way—like what he saw, put it
that way, at the time of examination [312] and—lI’ll ad-
mit that. And what else?
MR. VERVEER: We have another exhibit, your Hon-
or, Government’s Exhibit I-2.
THE COURT: What does that say?
MR. VERVEER: Well, it’s a letter that—
THE COURT: (Interposing) Well, it is going back
to talk to them about these three, Pullman, Pasco and
Richland?
MR. VERVEER: Yes, your Honor, and the govern-
ment would point out that it was two years before the
Tri-City National Bank in Pasco was merged into the
Old National Bank and before the Richland bank was
organized or opened for business, some sixteen months.
THE COURT: Well, let’s see, Mr. Saxton was a Comp-
troller under Presidents Johnson and Kennedy—now,
that’s another aspect of this that bears a little discussion.
I don’t know what the present Comptroller’s policy would
624
be under the new Republican regime. I know that the
Justice Department and the Comptroller’s office are
under the new—not new, but the Republican regime. All
right, for whatever it’s worth, it is in.
MR. MOEN: Over the defendant’s objection, your
Honor.
MR. VERVEER: 83 is a memorandum which shows
[313] that Mr. Cleveland, who is the Director of Market
Research for the National Bank of Commerce, and Mr,
Claeys who is the vice-president of the N B of C—vwell,
at any rate, I call your Honor’s attention to the bottom
paragraph of the first page, and this relates to the bank-
ing situation in the community of Albion and also at
Pullman, and I call your Honor’s attention to the portion
which states that it would be quite desirable for the
N B of C to help sponsor the new independent bank in
Pullman. This is the bottom paragraph.
Going on to the top paragraph of the second page, your
Honor, he says it is recommended that the N B of C
would consider the desirability of sponsoring a new bank
at Pullman and so forth.
THE COURT: All right.
This is off the record, Mr. Reporter.
(Discussion off the record.)
MR. VERVEER: Your Honor, document No. I-4-A
and I-4-B relate to the possibility of some interests of
the Washington Trust Bank, what interest the Washing-
ton Trust Bank might have in a new state unit bank in
the community of Pullman; and we don’t offer these to
show that the Bank of Pullman was sponsored by the
Washington Trust Bank but they are merely [314] of-
fered as examples of the sort of things that the National
Bank of Commerce does and it shows their awareness
and the sort of practices that take place.
THE COURT: Yov’re establishing the fact that the
N B of C is aware of what is going on?
MR. VERVEER: Yes, in terms of Bank sponsorship.
THE COURT: I don’t think you have to prove that.
I think you would find that—you have heard of the
phrase “take judicial notice”, and I can almost take
625
judicial notice of the fact that they are aware of what is
going on in Pullman. All right.
MR. VERVEER: All right, your Honor, we would
further state that they were aware of the sponsorship
and it is a practice that is an alternative means of entry.
Now going on to I-4-C and D, your Honor, these relate
to the possibility of—well, it relates to the community
of Pullman opening perhaps a new organization or a new
unit bank. I-4-D is the 4th paragraph; it’s down in the
memorandum—on this particular date, May, 1968, with
relation to Andrews of course the senior executive then
deals with the senior executive in N B of C and it relates
to forming a new unit bank in Pullman. And the next
paragraph [315] says, “I recommend that the N B of C
seek out sponsors for a unit bank in Pullman” and so
forth. Then on April, 1969, I-4 shows at the bottom para-
graph Mr. Price and Mr. Maxwell Carlson discussed the
matter, and this relates to testimony given here by
Professor Smith and Mr. Carlson encourages the idea
of co-sponsoring a bank in the Pullman area.
THE COURT: The president?
MR. VERVEER: Les, your Honor.
THE COURT: All right.
[316] MR. VERVEER: Yes, your Honor. The last
sentence, however, it says, In the near future”—this is
Andrew Price, “In the near future I will call our banking
friends in Spokane, Washington Trust Bank (Old Na-
tional Bank already has a bank in Pullman) to let them
know of our interest.”
Your Honor, the remainder of these documents are to
the same effect, they are internal memoranda of the Na-
tional Bank of Commerce, correspondence between the Na-
tional Bank of Commerce branch managers and officials.
gy COURT: Did the N B of C ever go into Pull-
man
MR. VERVEER: No, your Honor, they are not there.
THE COURT: All right.
626
MR. VERVEER: If your Honor would admit the
bulk of the remainder of Exhibit I—
THE COURT: All right, it’s in over Mr. Moen’s ob-
jection.
MR. MOEN: Over objection.
THE COURT: All right.
(Government’s Exhibit I for identification was re-
ceived in evidence)
MR. VERVEER: Your Honor, the government now
[817] refers to documentary Exhibits J and K for iden-
tification. We apologize for the shape of the document in
Exhibit J. However, counsel for N B of C have grac-
iously offered to try to reproduce these exhibits from
their files to get better copies of them so we could replace
the Court’s copy.
Your Honor, Exhibits J and K relate to the history of
the—the documentary history, as we have it, of the or-
ganization of the Columbia Center National Bank and
to a lesser extent its existence as a National bank. The
government contends that Columbia Center National
Bank was sponsored by the National Bank of Commerce.
That is important for this case, we believe, your Honor,
to show the National Bank of Commerce’s capability in
the area of sponsorship, to show that the reluctance to
do anything that might be regarded as sponsorship which
has developed since the filing of this lawsuit, was not
always historically true, and also, your Honor, to indi-
cate in a highly particularized way steps that a large
statewide bank can take to virtually guarantee that a
sponsored bank one day will be aequired by it. These
documents—
THE COURT: When was this bank started?
MR. VERVEER: This bank was—got its preliminary
charter approval, the preliminary approval [318] in June
of 1968, it was open for business, I believe, your Honor,
on July Ist or August Ist of 1969.
627
THE COURT: All right.
MR. VERVEER: Your Honor, these exhibits are
very bulky. We would be very happy to reduce the
Court’s burden by pointing out parts of the documents
that we think are relevant. If the Court would desire
that, I would be happy to proceed.
THE COURT: Whose files are these from? :
MR. VERVEER: Your Honor, these documents—al-
most all of these documents are from the files of the Na-
tional Bank of Commerce. Some of them are from the
files of the Columbia Center National Bank and were
produced by Mr. Dean W. Loney, Chairman of the Board
of the Columbia Center National Bank, pursuant to a
subpoena duces tecum.
The documents in Exhibit J are all documents from
the files of the National Bank of Commerce.
THE COURT: All right.
MR. VERVEER: All right, your Honor. If you
would like to refer to Exhibit K-1. K-1 is a copy of a
branch expansion committee meeting minutes dated Au-
gust, 1965. The N B of C officers were present and noted,
and the Court will notice that the Columbia Center—Co-
lumbia Shopping Center Tri-City [819] area is noted,
this is the first indication we have of their interest in
that area. At the time there was no bank there and no
apparent way for the National Bank of Commerce to
establish a de novo branch.
K-2 is a branch expansion committee meeting minutes
of November of 1965. Drawing the Court’s attention to
the paragraph marked “Columbia Center” in the middle
of the first page, particularly the sentence, “The sugges-
tion was made that we attempt to obtain the help of a
California bank in financing stock purchase in a new
bank by some of our friends so that we might control any
bank established with our blessings in the Center.”
K-3 is similarly a branch expansion committee meeting
minutes, December of 1965, and the second page, your
Honor, at the bottom there is the notation, “The Com-
mittee strongly favors a branch in Columbia Center, and
Mr. Stowell will pursue”, who is the executive vice-presi-
dent of N B of C, “with Mr. Allison and Mr. Sherwood,”
U
628
who are developers of the Center, “the manner in. which
the location will be established.”
K-4 is an internal memorandum from the N B of C
vice-president to Mr. Andrew Price, chairman of the
Board, providing a list of candidates for the unit bank
in the Kennewick-Richland area. All of [320] these men
who were candidates to head the unit bank are people as-
sociated with the N B of C.
K-5, your Honor, is an internal memorandum from
Lyle Beavers, at the time the vice-president and branch
manager of N B of C’s Kennewick branch, to Andrew
Price, in March of 1967. Mr. Beavers is presenting some
recommendations on the organizers—or prospective or-
ganizers of the bank. Towards the bottom of the page he
also is discussing the possibility of finding an agent for
the bank. There is a cross-reference in Exhibit J, your
Honor, to J-45.
K-6, your Honor—
THE COURT: I don’t want to go through these item
by item, counsel, because I think I get the drift of the
information just by reading the first items in here as to
the application on Mr. Loney’s part in the obtaining of
the charter for the Columbia Center and the fact that they
got help from-the N B of C, I think there isn’t any doubt
about that, that’s all the way through it. You can see
the lease they have with the people, you wouldn’t want me
to read all that, would you, that they have for this space,
and the contractors came in with a bid too high and they
a they wouldn’t accept that; all kinds of things in
ere.
MR. VERVEER: Right, your Honor, we were [321]
going to point out in the lease—there was only one para-
graph in each of their drafts of the lease that we want
to point out, that was the paragraph involving the rentals
whereby the rental by the King County Building Com-
pany, which is another Marine Bancorp subsidiary, to
the Columbia Center National Bank goes from $7200 a
year in each of the first three years and $30,000 a year
commencing with the fourth year, which was July Ist.
Your Honor, we would like to call the Court’s atten-
tion particularly to just a few of the subnumbered ex-
2 =
629
, hibits in Government’s Exhibit K. If you will bear with
this, I think we can conclude this quite promptly, your
Honor.
K-36 is a letter written by Robert F. Buck to Mr. Dean
Loney explaining the relationship between the Columbia
Center National Bank and the National Bank of Com-
merce. The letter was written for the purpose of at-
taching it to the charter application for the edification of
the Comptroller of the Currency.
THE COURT: As a matter of fact, when I thumbed
through this, I saw a letter in there from an officer of
the N B of C to Mr. Loney which had been drafted by
N B of C so that Loney would know how to make an
application. I mean this is all that type of thing. [322]
I have read it all—I mean I have thumbed through it all.
So I understand it. Do you want to offer it? I will admit
it.
MR. VERVEER: All right, your Honor, we offer
this exhibit, Government Exhibit K.
(Government Exhibit K for identification was
ceived in evidence) 3
MR. VERVEER: Government Exhibit J, your Honor,
this exhibit consists of internal memoranda of the Na-
tional Bank of Commerce relating to the Columbia Center
National Bank. If your Honor will read through it, you
will see that the National Bank of Commerce’s activities
with respect to the Columbia Center National Bank go
considerably beyond merely offering bank stock loans to
the organizer. If I can take one more moment of your
Honor’s time, I would like to point out one particular
page, your Honor, at page 20, we submit to you that the
memorandum dictated by Andrew Price August 15, 1968,
found at the bottom of that page demonstrates the real
purpose of N B C’s activities.
THE COURT: J-20?
MR. VERVEER: Yes, your Honor.
THE COURT: All right.
[3823] THE COURT: I don’t have any doubt that
N B of C as far as Columbia Center is concerned tried
to keep the stockholders friendly. If that is what ‘you
are trying to establish, I am satisfied of that from read-
——
630
ing it. I am satisfied of that, because there isn’t any
doubt about that but let me ask you a question, counsel, ~
in connection with that. Am I correct in assuming that
N B of C, Seattle-First, Pacifie National Bank of Wash-
ington, the Old National Bank of Spokane, the Peoples
National Banks, all are presently trying to go into new
areas that they think are fertile areas for banks, with
their branches. All of them have, have they not?
MR. VERVEER: Yes, they have. R
THE COURT: That isn’t just confined to this bank,
the National Bank of Commerce.
MR. VERVEER: Not at all, your Honor.
THE COURT: And they don’t go in there, do they,
just because they like the people in the community.
MR. VERVEER: Absolutely not.
THE COURT: This is a very competitive proposition
among all of these banks, they don’t want to see the
Seattle-First outdo them, so to speak, isn’t that the idea?
[824] MR. VERVEER: I believe so, your Honor.
THE COURT: Isn't that the conclusion that one could
draw, that they are very competitive, and that is why
they try to get into these areas? That is the way I feel
about it. But what.do you conclude from that, when you
start talking about pro and anti-competitive situations
between these banks?
MR. VERVEER: Well, your Honor, I suppose when
we talk about the competitive situation, we would have
to speak with reference to some defined market. In gen-
eral these banks, and particularly the larger banks in
the state, I suppose view themselves in terms, as being
interested in any attractive market in the state. And,
they are anxious to be there, because there are money-
™THE COURT: “1 —
OURT: But more than that, runni
all of this is kind of a competitive attitude. isn’t it?
They want to be competitive with the other banks.
MR. VERVEER: I think that is right, your Honor,
in the sense that they are all trying to get the same dol-
lars, so to speak.
THE COURT: That is what this proves, that they
are really competing, doesn’t it?
a
631
MR. VERVEER: It proves that they are trying to
gain entry into an area where they think they can [825]
make money. 1
THE COURT: I know, but doesn’t that prove that
they are really competing with each other? Otherwise,
they would just sit back and say go ahead, let the other
bank go in there and get all the gravy, if you want to use
that term, but that isn’t their attitude, and that isn’t the
way they have been operating, is it?
MR. VERVEER: As Professor Smith indicated, we
think it is more of a rivalrous activity, that the only dis-
tinction that I would want to draw in terms of that is—
HE COURT: Washington State and the University
of Washington are intense rivals in football, but I would
say they also competed this fall, and fortunately for
Washington State, they competed harder. But I think that
is a similar situation, these banks may be rivals, but
they are competitors, too.
MR. VERVEER: I guess, your Honor, the central
point of our case is that there are competitive and there
are anti-competitive means by which these banks can get
into new markets.
THE COURT: Well, the ultimate decision for me,
counsel, in this case is whether or not it is good for the
people, not particularly for the banks, but is [826] it
good for the people to have the National Bank of Com-
merce into the Spokane area. Isn’t that about the size
of it, when you talk about pro-competitive, and anti-
competitive, if it is anti-competitive then it is not good
— the people, and if it is pro-competitive, it is good for
em.
MR. VERVEER: I think that is absolutely right.
„ IHE COURT: All right, that is the way I look at
this case, and that is the purpose of the Antitrust Divi-
sion of the Justice Department, to be sure that some-
body doesn't get a monopoly, and then the people, as you
say, get gouged, and in this case, that is all I am con-
cerned with.
All right, is there anything further?
7
— —
MR. VERVEER: Just so that we are clear, your
Honor, Government’s Exhibit J has been admitted?
THE COURT: Yes, I have admitted that.
All right, now is there anything further that you have
that you want into the record?
MR. VERVEER: Yes, your Honor.
THE COURT: I should never have said that.
MR. VERVEER: Relating to this issue that we have
been discussing, t
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