EXTRA! EXTRA! THE HEARST HASSLE BILLIONAIRE'S HEIRS OFF TO POORHOUSE? GRANDCHILDREN PRESS FIGHT TO ALTER WILL PRIVATE DISPUTE OVER NEWSPAPER MOGUL'S ESTATE FINALLY GOES PUBLIC.

Byline: Peter Hartlaub Daily News Staff Writer

It's the type of scandal William Randolph Hearst would have loved to splash with banner headlines in his California newspapers.

Media Mogul Reaches Out From Grave!

Will Willie's Will Get Sunk Like the Maine?

Billionaire Heirs Could End Up in Poorhouse!

Today, almost 47 years to the day after his death, four of Hearst's grandchildren have gone to Los Angeles Superior Court to battle the 13 trustees who run the Hearst Corp. and control the will. They claim the trustees are mismanaging the newspaper baron's multibillion-dollar legacy, and they want an account of how the corporation does business.

There's only one problem.

Before his death Aug. 14, 1951, Hearst tried to make sure no one questioned his will by specifying that anyone who contested it would be disinherited.

To make matters even more perplexing, the paper trail from the legal dispute is sealed from the public, as all related court documents have been since Patty Hearst's kidnapping by the Symbionese Liberation Army in 1974.

Last week, however, rumors and hearsay surrounding the spat finally went on the record at a hearing, where Judge Gary Klausner and attorneys discussed the case publicly for the first time.

Three members of the Hearst family - Joanne Castro, Deborah Hearst Gay and William R. Hearst II - filed the petition against the trustees earlier this year and were later joined by a fourth heir. Still, they represent only a fraction of the 35 beneficiaries of the will.

According to the dissident grandchildren's attorney, his clients know little about what the trustees are doing and do not receive a profit-and-loss statement from the company, which is run for the most part by nonfamily members.

``I have a few shares in the Bank of America, and I get a 60-page statement every year in the annual report,'' said John Sturgeon, attorney for three of the four Hearst heirs who are challenging the will. ``My clients get nothing.''

R. Wicks Stephens II, attorney for the trustees, pointed out that a similar petition filed by William R. Hearst II last year was turned down.

``I can assure you that the trustees are in all respects administering the trust properly,'' Stephens said. ``Any suggestion by anyone to the contrary is just patently false, and we are confident that the courts will agree with us.''

The grandchildren were not in court and could not be reached for comment.

Klausner seemed willing to unseal the files, quipping at last week's hearing that protective orders should be reconsidered ``every 20 years or so.''

With a pledge from the judge to consider opening the case for public consumption, Sturgeon indicated that the long-dead media mogul might be generating some more big headlines in the near future.

``Our view is that some sunlight here explaining the acts of the trustees would be very beneficial,'' he said. ``The public should know what is happening.''

Spoils of war

For the plaintiffs in the case, there's a lot more at stake than the proceeds of a few newspaper subscriptions.

When Forbes magazine ranked the world's richest people this summer, the Hearst family was tied for No. 41 with a net worth of $5.7 billion - wealthier than Rupert Murdoch, Ted Turner or Ross Perot.

It came from William Randolph Hearst's empire, which he started by taking over one of his father's failing newspapers - the San Francisco Examiner - and later adding the New York Journal and what would become the Los Angeles Herald-Examiner.

The Hearst Corp. still owns the historic downtown Los Angeles building that housed the Herald-Examiner, which went out of business in 1989.

Hearst virtually reinvented journalism, using large headlines and exaggeration to boost readership, stir debate and - as the legend goes - help start pathe Spanish-American War.

His supposed role in the war is repeated in history books.

``You furnish the pictures, I'll furnish the war,'' Hearst reportedly wired to a New York Journal artist who had found little action in the Gulf of Mexico.

Shortly thereafter, the battleship Maine sank at Havana. After inflated stories came out blaming the Spanish for the attack, Hearst's editorial demands for the use of military force against Spain were met, and the nation went to war in 1898.

Heirs in terror

Hearst seemed to love controversy, but not in his own life.

When he died in 1951, his 125-page will contained an in terrorem clause (Latin for ``in terror''), which calls for any heir who challenges the document to be disinherited.

It's a clause that's commonly used today. Frank Sinatra checked the in terrorem box when he made out his will.

Last week, after at least two postponements of the hearing, enough attorneys to field a hockey team crowded into probate court, hoping to find out whether the dissidents can go forward with their lawsuit.

``Our clients absolutely cannot jeopardize their life income from this . . . billion-dollar company,'' Sturgeon told the judge.

Stephens said his clients are doing their jobs properly, and asked the judge to deny the petition and throw the case out of court.

``The petition is a contest and should be denied safe harbor,'' Stephens said.

Klausner's ruling only complicated the issue.

The judge concluded that taken as a whole, the beneficiaries' five-part legal challenge defies the no-contest clause. But he said if one or more of the parts is ``dropped out,'' his ruling could change.

In the next few weeks, Sturgeon will file five separate motions, hoping to craft a lawsuit that will not put his clients at risk.

``The problem is that every time we do that, the trustees charge all of their attorneys fees back to the beneficiaries,'' Sturgeon said in court.

Klausner admitted the plaintiffs are ``between apa rock and a hard place'' until he issues a final ruling.

The judge pointed out that if the plaintiffs sue the trustees and win, there will be no violation of the no-contest clause. But if they sue and lose, they stand to lose their inheritance - an option that Sturgeon said isn't worth the risk.

Risky business

Challenges of in terrorem clauses are rarely successful, but the Hearst case is not unusual.

Southwestern University law professor Herbert Krimmel said no-contest clauses were almost impossible to challenge until 1990, when the state Legislature changed the rules, making room for good-faith attempts to clarify probate matters.

Now dissidents like the plaintiffs in the Hearst case can go to a judge and ask for a ``safe harbor'' ruling that says their challenge will not violate the no-contest clause.

Despite the risks, Krimmel said actions like the Hearst grandchildren have taken are ``not a rare occurrence at all,'' and that angry heirs ``get burned'' and lose their entire fortunes all the time.

Just two years ago, ``Star Trek'' creator Gene Roddenberry's daughter contested her father's will and lost in state court in a case that attorneys for the estate called one of the biggest disinheritances in American history.

Dawn Roddenberry stood to get 25 percent of her father's estate, including proceeds from the ``Star Trek'' TV and movie series and merchandising rights.

Krimmel was skeptical that the Hearst dissidents would be given safe harbor to challenge the will. He was particularly critical of the part of their petition that asks the judge to void the no-contest clause.

``It's a huge stretch,'' Krimmel said. ``My suspicion is that they will get slapped down for that one. . . . The only way you can get rid of the in terrorem clause is to knock down the will.''

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Photo: William Randolph Hearst