LOS ANGELES -- The publisher of a newsletter for municipal bond investors being sued for libel told a jury this week that he never contacted a New Jersey bank to check facts before publishing an article that derided the bank's college savings investment product.
Zane B. Mann, publisher of California Municipal Bond Advisor, said promotional materials from Princeton, N.J.-based College Savings Bank provided the facts examined in the disputed article, while the opinions were his own.
In testimony Wednesday afternoon before a Los Angeles County Superior Court jury, Mann defended the Oct. 1, 1991, article in the Palm Springs, Calif.-based monthly newsletter, which focused on the bank's "CollegeSure" certificate of deposit, designed to help parents save for college.
College Savings Bank's attorney, Jerome H. Craig of Hufstedler, Kaus & Ettinger, emphasized to the jury that Mann "did no additional research, [and) did not call anyone at the bank to verify facts in the article."
Peter M. Roberts, chief executive of College Savings Bank, testified Tuesday that the newsletter article contained lies about the CollegeSure CD product and harmed the bank. As a result, Roberts said he filed a libel action against Mann in February 1992.
In his testimony, Mann acknowledged his writing style contains rhetorical hyperbole aimed at persuading and entertaining his subscribers. But under questioning by Craig, Mann stood by the truthfulness of the article.
Craig challenged one paragraph in the article that said College Savings Bank's advertising and brochures were filled with ... blatant misrepresentations about tax liability."
In response, Mann testified that the bank's promotional materials failed to explain relative tax liabilities between the bank's CollegeSure CD and U.S. government securities.
"CDs are subject to both state and federal income tax," Mann said. "U.S. securities are subject to federal tax but not to state income tax. For people in high income tax states, this distinction is an important consideration when investing."
Mann also defended a passage in the article which said the bank's advertising and brochures "were filled with ... bogus statements about 'guaranteed' yields."
Mann testified that the newsletter article characterized such a guarantee as "bogus" because no one knows how much a college education will cost in the future.
"For the bank to invest in U.S. securities producing sufficient income to pay a higher rate of interest, the bank can't guarantee that [yield] without knowing the future course of interest rates," Mann said.
Yesterday morning, Bradford Cornell, a finance professor on the faculty of the graduate management school at the University of California at Los Angeles, testified on behalf of College Savings Bank.
Cornell said "nothing I saw was bogus or false," when he reviewed the banks' print advertising and promotional brochures. "As far as I could tell, [the materials] were accurate and correct," he said.
The variable-rate CollegeSure CD is a "college inflation insurance product" to help parents hedge against inflation, Cornell said. Parents "really don't know what long-term inflation will be," he said.
In contrast, Cornell said parents who buy fixed-rate zero coupon college savings bonds "are gambling" that inflation will not rise. Because zero coupons lock in an interest rate to maturity, he said, "if inflation goes up, you're short."
For example, Cornell said, annual tuition, room, and board at Stanford University is about $20,000. When he enrolled there in 1965, it was only $1,575. Judge David A. Workman drew smiles when he said he also attended Stanford -- when tuition was $450 a year -- in 1955. "That's off the record," Workman said.
The trial continued yesterday afternoon.
State Treasurer Kathleen Brown, who has had a war of words with Roberts over the relative merits of CollegeSure CDs versus college savings zero coupon bonds, is expected to take the witness stand today on Mann's behalf