Tobacco Documents Online

C3'7093 s4 ~

1 Sande lman 3'03 2 THE GIITI;ESS . R.eceat your :uestion. 3 'SR. JCHNSTC'1: Read it oack. 4 (Previous cuestion so read.) 5 A There should have been apayment to cur company 6 by Lorillard for completion of artwor'.c and mec::anica,s. 7 MR. GLASS : Excuse me. 8 TIiE7 WIT"1LSS : I am not answerin-g? 9 ,rtR, GLASS ; He want s t o know how you 10 computed the number. He knows the reason `'or it. 11 He wants to know the comoutation. 12 A it YaS our clear estimate frCm 'last perfor.^.!a..ce, 13 services and exoerience with Lorillar :, that tt{ s 14 was the amount of money we would have received for 15 co'ilolet' on of the work. 16. ~ Who made the esti mate? 17 A Cur company. 13 Q Who in your compa ny? 19 A -Cur oroduction people. Z0 Q Who? I need na~me s . 21 A Sta n Sigman, head of p rodl,lction ; myself, :~4.^.da Z-7 ~einz; our accountant, Aar on ?ere!. 03'7C rt .;9 S ZZ 3 ~ Were any of these cor ;utations reduced to 24 „ writin'~1-? 25 A Reduced to writing?

1 Sandel:nan 3 ~ L' 2 ~ Rignt. r 3 A ves, of course. 4 ~ Have you retained any of those co^-putat{ons? 5 A Iwould assume so. 6 MR. JOR~1S"'01: ~ wish to call for 7 their production. s MR. GLASS: We wiil suJmit the:n. 9 MR, JOh.'~ISmON : We will break now 10 and resume at 1:30. 11 (Whereupon , at 12:20 p.m. a lun_ ~ c.'^..on 17 recess was taken. ) 13 14 15 16 17 000 18 19 20 21 22 23 24 25 r

1 Sandelman 323 2 the witness produced for Lorillard. 3 Q Can you tell me any slo,ans that you devised, 4 your company devised, which Lorillard aparocriated? 5 A Not at this time. 6 Q Let me hand you a cooy of what has creviouslv 7 . ~ been marked as Lxhibit 4. 8 'rlould you turn to the last page of that docu- 9 ment, sir, and tell me how you comcuted the fiSure 10 $13,670 as the amount to bill Lorlylard to prepare 11 camera-ready art work for all crcmctional ^aterials for 12 the Kent Shopping Bag Sweepstakes? 13 A .•.re estimated our cost for completion; we based 14 our cost on the completion of finis:.ed art:,orl; and 15 Iinished copy and finished materials, typc=raohy, 16 Uhoto~raphs, illustrations, photography. 17 MR. GLASS: Off the record. 18 (Discussion off the record.) 19 A ?ased upon our costs. 20 MR. GLASS: Excuse me. 1 think that in 21 the interest of the examination, in -Icin-- through 22 my oaoers 1 found a copy of t::e Kent adverti se- 23 ment with res-cect to the ShcDpyn~ Sa5 Sweepsta:ties; 24 so if you want to use it, you may. 03709387 I don't know if you have seen it or not ;

1 Sandeyman 324 2 I think y have ziven vou a cccv. 3 MR. JCH`ISmO_`,1. No, - haven't seen this. 4 MR. GLP.SS : It •,~ras in my discovery ,,~ `~` s 5 u ~ l ~ 6 Off the record. 7 (Discussion off the recor d.) 8 MR, JOHNSTON: On the record. 9 Ihile we were o"`' the recor~' ?Glass 10 located amon~-- his oaoers some i iterature which 11 contains, inter alia, a reduced dup,icate of the 1. Kent Shoppina 3ao- Sweecsta'.Kes ::romotion and 13 other materials. 14 We will have xeroxes --ade and ;-iarrc 13 this in due course. 16 ~ _r 'r'he w itness is .^.o,.~ e x am; ~ :~ '. _ ~he docu- 17 mnent in que st ion . 18 In any eve.^. t-- 19 MR. GLASS : ~ am sorry , _ dn' t 7ean 20 t d o i;,-ess. 21 ~ Did you retain any w:^i tten materia, relatin~ ..D 2? to your calculation of t^is t, 3,",'~ 23 A Yes. 03"1(1~~:~~h 24 Q Have you preserved that 7ateria;? op 25 A I am sure we have.

Sandelman • 3•2S 2 'fl R. J0E:IN STT1. Tt has not 'ceen 3 produced to us; T call for its nroduct'_on. 4 MR. GLASS. Exc,.:se ~e. '•lhat exhibit i c t ? `' 5 err n- - o are we re 6 .•TR, JOH`dSmO'1 : Ri,71ht no,,,r ;.re are 7 talkin~ about the invoice, the last na;e on g Exhibit 4. 9 0 Do you have any reason to believe, Sandel- 10 man, that your costs for preoarin; the camera-ready 11 artwork used by Kent in connection with its promotion 12 would nave been sionificantl:~ dif~'ere: t than the 13 costs ac tually incurred by Kent in cor.nec tion w'_th the 14 presentation o."L' the artwork which it used? 15 A Your auestion is unable `'or r.;e--= a:7 unab, e to 16 answer your ~uestion, because of tre way you word i t. 17 Kent didn't steal our rinished art,.rcrk. :Cent l ' h 18 emse ves. .-~ t stole our idea and did the artrror 19 ',''e seek to recover the dama;~es o_ the lost ar t- 20 work that aas never oiVen to us, by o`' the 21 ori.zrinal idea .vhich was ~resented to :Cent . 22 IQ Is it the basis ol' your test4,7ony that Kent 23 did their artwor'.~c themselves? 24 0 A I,just looked at the ad. 03'7095 ~7- 9 25 t,?R . GLASS : 'rlhen he says--excuse me.

1 Sande lman 326 2 ~ Can you state of your own knowled.e that N 3 the art:yor'_~c used in connection saith the actual Kent outside an t d b m: th .} y y e co D one promotion was no 5 Lorili ard? 6 A We submitted our layouts and ideas, not finished 7 artwork. another "1o he is askin GLASS MR 3 ~ . : , 9 auestion. Listen to the cuestion, please. 10 mHi "IITrdESS . ~,lil1 you ask it a little 11 bit louder, please? 1' MR. JOHNS':'0~1: `'e s . 13 a Do you know that the actual art,.,!ork used 14 by ~ent ~,,ras not prepared by some outs _de co~: ^any? 15 %1R. GLASS: Off the record. 16 (Discussion off the recor:.) 17 A Do you understand the ter-~ano' o;~:,; of our busir.ess, 18 which apparently you don't understand. 19 Artwork is the name given to f'_nished art•Nor'," 20 ready for camera, cr camera-ready art. :,le don't sub- 21 ayouts , ideas, strate?ies and ~' t that . ;,le submit , 22 wr i t e u^ s. 037 09.59 0 23 I" the '_dea is then accep ed ~ 1 , :^der cort tract we 24 are c-iven the job of finishing, `_'or wh{ ch we c^.ar ~e 25 r addit ionally .

Sandelman 327 I understand that, sir. There was some finished artwork in connec- tion with the promotion that Kent :id ; riPub? A '' e s . Q Somebody did it. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 „ 23 24 A Yes. Q It wasn't Kent itself who prepared the camera-ready artwork? A No, they designated somebody else to do it. Q My auestion is, do you have any reason to be?ieve that the costs to Kent to hire this third party to prepare that camera-ready artwork would have bee.nn significantly different from the costs which you would have encountered in preparin; the artwork? A I have no way of knowing that. Q Does this $13,670 represent the amount that you would have billed Kent had you done the artwork on this oromotion which Kent wanted to have done? A Yes. Q I believe you testified earlier that your ;ross profit factor was 20 per cent; is that correct? Our aroduction, yes. ~ ~ 03'7C9".~1 Q Therefore, it is not your clai:n that you r lost $13,000 'n Drofit as a result of not doing this 25 `

1 Sandelman 323 2 artwork; is that correct? 3 ress 20 oer cent on A Producin-- materials we 7 1 q4 sales. We make a hi?her prorit on in-house artwork 5 and labor. 6 c~ ,+ Jhat is your profit percenta--e on the in- 7 house artwork and labor? 8 A It varies, I can't answer you. 9 Q But in any event, the $13,000 ci-7ure repre- 10 sents your billing, not your profit; is that correct? 11 A That is probably what we would have billed, yes. 12 Q ',,'nat material-- 13 A Under contract they were obli--ated to -7ive us that 14 15 16 art,,rork, not the production. ~ What material would be available to you which could be used to determine •,,rhat your profit percenta~ze would have been 'rlith resoect to the preDara- 17 19 19 ticn of this camera-ready artwoz^'.~? A Since the major{tY of the $13,000 clalm is `'or in- 20 house labor, we would have very little materlals to 21 purchase other than the salaries of the i.^.-house labor. 22 Q Please answer my question. 23 A I thought I,just did, sir. 03'709392 24 '~y question was what materials could be 25 ' consulted to determine what your o oss pro `,t would

1 Sandelman 332 2 Q Please answer my auestion. 3 A And that our prices are naturally competitive, 4 and are still competitive because the printer is 5 still working for Lorillard. 6 Q Is it your testi:nony then that the actual 7 production costs would have been in the ne; g-_^.borhood 8 of tl00,00a? 9 A In excess of $100,000. 10 11) How did you reach this curiously precise 11 figure of $29,960? , n I' think it represents the profit made from the 13 nrooosed materials that we would have oroduce^ for 14 Lorillard each and every time we di : a oromotion. 15 Q I understand that is your c1al~ . I am askin; 16 17 18 19 if you can tell me exactly how you came up wi th this figure, down to the $10 mark. A We estimated our cost for producln_, te e sales promotion media that they would normally buy on a ZO ~iven pro~^otion, the percenta-.e of profit that •,re 21 would normally charge them, and the resu'_t ca.:e to 2 ? 23 Do you azree t:.at i f ^ er.t ac t ual,y inc urred 24 expenses in connection with this-- 52Q c60. , , , 03'7U9;,93 r 25 A Can you talk louder, sir?