Jury to determine whether publisher of muni newsletter libeled N.J. bank.

LOS ANGELES -- A jury yesterday began deliberating whether a New Jersey bank was libeled by an article in a Palm Springs, Calif.-based monthly newsletter for municipal bond investors.

The deliberations began after attorneys gave closing arguments, climaxing a weeklong trial in Los Angeles County Superior Court.

At issue is whether Zane B. Mann. publisher of California Municipal Bond Advisor, libeled Princeton, N.J.-based College Savings Bank when he published an Oct. 1, 1991, article deriding the bank's "CollegeSure" certificates of deposit product.

If the jury decides the article libeled the bank, it must then determine if the bank deserves to be awarded special or punitive damages.

Last Friday, in a court session without the jury present, Judge David A. Workman established the legal framework of the jury deliberations.

Workman ruled that College Savings Bank is a limited public figure, a legal distinction that places a higher burden of proof on the bank to recover damages than if it were a private figure.

The ruling means that even if the jury finds that defamation occurred, the bank cannot recover damages unless the jury believes the defamatory statements were made with actual malice -- knowledge that they were false with reckless disregard for the truth.

Attorneys for College Savings Bank on Friday argued against categorizing the bank as a public figure, but Workman said the bank voluntarily injected itself into the public debate over the merits of college saver zero coupon bonds versus CollegeSure CDs.

Workman said he reasoned that Peter A. Roberts. the bank's chief executive. chose to step into the limelight when he bought advertisements in Newsweek and other national magazines lambasting college saver zero coupon bonds.

Roberts "creates the controversy in the ad and thereby [his bank] becomes a limited purpose public official," Workman said.

"It was the aggressive advertising of the plaintiff [Roberts]" that placed the bank in the eye of public debate over zero coupon bonds. Workman said. "Didn't he thrust himself into this? He led the attack. did he not?" Workman said.

Attorneys said Workman also ruled that two paragraphs in the newsletter article were "defamatory per se."

However, the ruling means that even if the paragraphs are erroneous, the bank cannot recover damages unless the jury concludes that Mann knew the paragraphs were false and published them with reckless disregard for the truth.

The two paragraphs ruled "defamatory per se" are:

* "The ad, and brochures we subsequently received, were filled with bogus statements about ~guaranteed' yields, blatant misrepresentations about tax liability, complete with misleading graphs and charts using distorted methodology."

* "If similar material were to be distributed by a licensed securities dealer or a mutual fund group, the SEC could be expected in their office the next day with a restraining order and a hefty fine. The New Jersey banking commissioner must be very tolerant."

In closing arguments yesterday morning, Richard S.E. Johns, an attorney with Kipperman & Johns who represented Mann in the case, told the jury it would have the final word in how to respond to the court's instructions that the two statements are "defamatory on their face."

"The court is saying the natural and probable affect [of the statements] on the average reader is to defame the plaintiff," Johns said. "But it is up to the jury to determine that defamation [occurred] and whether any damages" were suffered by the bank.

Johns said the case is not about "who is right. It is about the right to express an opinion over a matter of great public concern."

Johns said freedom of speech and expression means that sometimes people can make a mistake. They can be wrong. Mr. Mann has a right to be wrong. and the bank must prove Mr. Mann knew these statements [in the article] were factually false."

In closing arguments on behalf of College Savings Bank Monday afternoon, Michael Toumanoff. a partner with Hufstedler, Kaus & Ettinger. argued that bank officials are not saving the bank can "never be criticized. But news people can't say anything they want."

Drawing on an analogy, Toumanoff said a restaurant critic can review a restaurant and report that the food is lousy. But a critic "can't say the restaurant violates the health laws and should be closed down" unless the critic first investigates the situation.

Toumanoff said that in the preparation of the newsletter article, Mann never did any research. He never called the bank or the FDIC. He didn't check with anybody."

During the trial Mann said the opinions in the article were his own and the facts on which they were based came from the Newsweek advertisement and a standard information package available to all potential bank customers.

Toumanoff said Mann did not make any efforts to verify facts in the article because Mann "didn't want to confirm" his own doubts that the article was false.

"If he checked, he might have had to change his story," Toumanoff said. But Mann "was irritated" by the bank's CollegeSure CD. "He wanted to write an article that would slam the bank. That's what he did," Toumanoff said.

As a result, the published article asserted that the bank "is too good to be true," Toumanoff said. He said the implication of the article was that College Savings Bank officials "are crooks -- this is a scam." But Toumanoff said "the bank is for real. It is not a scam."

Toumanoff also faulted Mann for obtaining the bank's promotional materials in June 1991 and waiting until Oct. 1 of that year to publish the article.

"If he thought [the bank] was a scam or phony, he should have called the law [and] shut them down," Toumanoff said. "He knew it wasn't [a scam] which is why he didn't call anybody. Mr. Mann crossed the line of allowable criticism."

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