LOS ANGELES - The trial over a New Jersey bank's libel lawsuit against a monthly newsletter for municipal bond investors opened this week with testimony claiming that the newsletter lied about the bank's certificate of deposit college investment product.
Peter A. Roberts, chairman of Princeton, N.J.-based College Savings Bank, told the jury he was "shocked, distressed, [and] concerned" about an article published in the Oct. 1, 1991, issue of the Palm Springs-based California Municipal Bond Advisor, published by Zane B. Mann.
The article derided the bank's "CollegeSure CD," concluding that the CD is "an investment for the intellectually impaired."
"The article was out-and-out lying and [was] calling us crooks," Roberts testified Tuesday on the opening day of testimony in the case being heard before Los Angeles County Superior Court Judge David A. Workman. A jury was selected Monday.
Six witnesses, including California Treasurer Kathleen Brown, are expected to testify. Brown's appearance, on behalf of Mann, is scheduled Friday.
In an opening statement, Mann's attorney, Richard S.E. Johns of Kipperman & Johns, said he would present evidence showing "that the bank was not harmed al all" by the article.
In addition, Johns said Mann "believes in those opinions" contained in the article. "They were based upon Mr. Mann's reading the bank's own [promotional] materials, and applying to that material years and years of experience in dealing with investments, including municipal bonds," Johns said.
Roberts, who filed the libel suit against Mann in February 1992, testified that the bank's "reputation was damaged" because of the article. The bank "lost customers, perspective customers' deposits, and profits," he said.
Roberts said the article "suggests the bank engages in fraud and is disreputable," and thereby "tainted the [certificate of deposit] product and the bank." News reports stemming from the article prompted "inquiries" from regulatory agencies including the Federal Deposit Insurance Corp., the state of New Jersey, "and, indirectly, the [Securities and Exchange Commission]," Roberts said.
To counter negative publicity generated by the article, Roberts said the banks' advertising budget was increased to $350,000 from $100,000 in the fiscal year that ended July 31, 1992. The extra advertising was needed because, "to counterbalance Mann, we had to maintain a higher profile," Roberts said.
Roberts said that $300,000 was spent on advertising in the fiscal year ended this past July. He said 50% of the budget, or $150,000, was "spent to counteract Mann."
Testimony yesterday morning focused on controversy over the merits of college savings zero coupon bonds and the CollegeSure CDs. About 20 states, including California, have sold the zero coupon college savers bonds. Roberts and Brown, the state treasurer, have sparred previously over the relative merits of the two instruments.
Roberts testified that he believes investing in zero coupon bonds for college savings purposes is an "unsafe and unsound practice."
Under cross examination, Roberts acknowledged that - while he was a general partner at Lazard Freres & Co. from 1982 to 1987 - he played a leading role in the invention of zero coupon bonds.
The trial continued yesterday afternoon. Mann also is expected to take the witness stand on his own behalf.
In a news release last month, the Newsletter Publishers Association, an international trade association, sided with Mann in the libel action.
James Sinkinson, president of the association, said in a written statement that his group "believes the article at issue is fully protected by the First Amendment and applicable state law."
Sinkinson said such libel suits could "chill free discussion and debate," especially by small publishers who "attempt to disseminate frank - and sometimes critical - information and opinion" about commercial interests.