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Moneyline Interview: Loral CEO Bernard Schwartz Tells His Side Of The Missile Technology Controversy

Aired May 20, 1998 - 7:00 p.m. ET

This is a rush transcript. This copy may not be in its final form and may be updated.

DOBBS: Loral facing serious questions in Washington. Now that scrutiny is creating concern as well on Wall Street. Loral is still a market standout. The stock is up 25 percent in price this year, but it has already fallen 15 percent in this week alone as the China controversy and Loral have hit the news.

Joining me now to answer the questions surrounding Loral and his role as a major Democratic contributor, the company's chairman and chief executive officer, Bernard Schwartz.

Bernard, good to have you with us.


DOBBS: Let me ask you at the outset. The campaign contributions that you made to the Democratic Party -- were they intended in any way to influence Clinton administration policy?

SCHWARTZ: Not at all. Lou, I've been a Democrat all my life, and I've been a contributor to candidates of Democratic persuasion -- sometimes Republican -- all my life. I'm a political activist. I consider it a responsibility and, frankly, I consider it a privilege to be a part of it.

DOBBS: Now you know better than anyone just how sensitive this issue has become. The speaker of the House calling for an investigation. The Justice Department investigating it. Much of this before the grand jury. Can you say to us tonight whether or not Loral in any way exported technology that would not be in the national interest, i.e. would be helpful to the Chinese missile program?

SCHWARTZ: Yes, I can say categorically that Loral did not violate the export control rules, neither the letter or the spirit. Everything we do is under license. We've been in this business -- the space business -- defense business for over 25 years. We know the rules, and we follow them.

DOBBS: Why then did the Pentagon find that the export of such technology was not in the national interest?

SCHWARTZ: I don't know that they did that. No allegations have been made. No accusations about Loral people -- wrongdoing has been made. So I don't know how to defend that question.

DOBBS: Well, let me -- in May of 1997, the Pentagon found that scientists from both Hughes and Loral had turned over expertise that significantly improved the reliability of China's nuclear missiles and that national security had been harmed, and that promoted then the criminal investigation.

SCHWARTZ: Lou, we have not seen that report. We've heard that report in the press, but like so many other things, that may have been a misstatement in the media. I can tell you that we have not seen that. No allegations, as I say, have been made. We have been cooperating totally with the government agencies here. It's in our best interest, and it's the proper thing to do.

DOBBS: Well, now we're going to take just a moment, and then we will come back to you, if you'll be patient.


DOBBS: And we ask for your patience as well. MONEYLINE and Bernard Schwartz will continue in just a moment. Stay with us.


DOBBS: We continue now with Bernard Schwartz. Bernard, let me ask you this. The launch vehicle itself that Loral is accused of and along with Hughes of exporting sensitive technology to China. Was in point of fact that a Loral product?

SCHWARTZ: No. The launch vehicle was the (OFF-MIKE) was just a Chinese products. We built the satellite for Intersat (ph) -- and our customer was Infosat (ph) and they engaged (OFF-MIKE) for our vehicle to launch the satellite.

DOBBS: So they made the decision and the choice and paid for the launch on long March?

SCHWARTZ: Exactly so.

DOBBS: And at this point, your stock has been hammered significantly. What can you do. What do you plan to do to center your company and to write the focuses as I am sure you would see it?

SCHWARTZ: Well, the focus of the company, it's exactly where it should be. We are on the job. The people are on the job. As we speak, I am engaged here in management meetings for our entire company. We will cooperate with the government in every way possible so that they have the information to determine whether the policy is right or not or any wrongdoing was done. I think we're going to come out all right on this. We will continue to work the company as we always have. We are still very optimistic about things and I think that eventually values will be restored.

DOBBS: Now, the House today moved to sharply constrain technology trade with China. Speaker Gingrich has launched his own investigation. By the way, has he contacted you?

SCHWARTZ: No, he has not.

DOBBS: Or anyone in his office?


DOBBS: At this point, how significant would it be to the interests of Loral and to the American satellite industry in particular. Should you be denied access to the Chinese launch vehicles?

SCHWARTZ: Well, I'd like to remind you that the aerospace industry is very important to the U.S. economy. U.S. industry is the leader in this technology and the services connected with satellites. Loral is one third of that industry. We represent a very large component of that to the degree that Congress or the government changes its export policy but excludes export to China. It would apply to the whole industry. It would not impact our business plan to a very great degree. I think that would be a serious step and I don't anticipate that happening, however.

DOBBS: Well, at this point, this controversy has risen at but perhaps certainly one of the most inopportune moments for your company and for the industry because of the technology transfer issues with China. There is the geopolitical escalation in terms of potential nuclear arms race between China, Pakistan and India and at the same time, campaign finance investigations continuing in Washington. How do you plan to manage Loral through this?

SCHWARTZ: Just as I always have done. I have been in this business for over 25 years. I think most people know that I focus on the company. For me, it's the main attraction. I don't think that we're going to get involved to any great degree here. But we will cooperate with the government. And as far as the political contribution issue is concerned, this comes under the heading, Lou, I think of no good deed goes unpunished. I don't think there is anything here for me to be concerned about.

DOBBS: OK, Bernard Schwartz, as always, a pleasure to have you with us here on MONEYLINE.

SCHWARTZ: Thank you.

In Other News

Thursday, May 21, 1998

Chinese Aerospace Official Denies Giving To Dems
Senate Signals Disapproval Of Liability Cap For Tobacco Industry
Oregon Primary Results
Clinton Seals U.S. Approval Of NATO Expansion
Prominent Donor Testifies Before Lewinsky Grand Jury

The 'Inside Politics' Interview: Rep. Chris Cox

Moneyline Interview: Loral CEO Bernard Schwartz

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