|
 |
LOU DOBBS MONEYLINE
Dow Declines 12.74 to 9907.26; Nasdaq Declines 22.79 to 1911.24
Aired February 1, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Friday, February 1. Sitting in for Lou Dobbs, Kitty Pilgrim.
KITTY PILGRIM, HOST: Good evening everyone. Tonight, the White House is calling for pension plan reform. President Bush unveiling a package of proposals to protect workers' retirement savings. Now this move, a direct result of the collapse of Enron and the devastating loss of millions of dollars in employee retirement money.
Kelly Wallace joins us from the White House with more -- Kelly.
KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Good evening, Kitty. Well, what we saw President Bush do today is show that his administration is responding very quickly to the collapse of Enron and to make the case that the president and Republicans are trying to protect workers and to prevent what happened with Enron from ever happening again.
And so we saw the president traveling to West Virginia this afternoon to talk with fellow Republicans at a Republican retreat. And there, the president unveiled his proposal. His ideas include making sure that Americans can diversify their 401(k)s and pension plans after three years. Mr. Bush also says executives should be barred from selling the company stock during so-called blackout periods, when employees are barred from doing so. The president said it's time to level the playing field.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: To ensure that blackout periods are fair, the plan will ensure that company executives be bound by the same blackout restrictions they impose on their workers.
(APPLAUSE)
It's OK for the sailor. It ought to be OK for the captain.
(END VIDEO CLIP)
WALLACE: And now taking a look at Mr. Bush's four-point plan, No. 1 again, he wants to give Americans a greater freedom to diversify. Again, he's also calling for parity between senior corporate executives and rank and file workers. The president also wants to give Americans better information about pensions, also giving workers a 30-day notice before any blackout period when they can't sell their stock; and also expanding access to investment advice.
Now, Kitty, the big question really throughout the day is would any of these proposals have prevented Enron employees from losing most of their life savings. The answer is probably not very much because according to an analysis done for CNN and reported by my colleague, Brooks Jackson, Enron employees were able to move 89 percent of their Enron 401(k) stock really at almost all periods of time except for that blackout period in the fall. And so a lot of workers' rights activists say while Mr. Bush's plan is a good first step, they say much more needs to be done and they're calling for new laws to place restrictions on just how much of a stock, of the employee's company stock that employee can hold.
Let me switch it back to you, Kitty. It is an unbelievably windy night here at the White House. Back to you.
PILGRIM: We can see that. Thanks a lot.
WALLACE: Sure.
PILGRIM: Kelly Wallace at the White House.
Well, it will be up to Congress to decide whether the president's pension reform package lives or dies. And to find out what kind of support the plan has, let's go to Kate Snow on Capitol Hill -- Kate.
KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Well, Kitty, in general terms, there's a lot of support here on Capitol Hill for pension reform or 401(k) reform particularly again because of the Enron collapse. There has been a lot of new momentum there. And the key thing that most of the ideas have in common or these bills is that they would make it more flexible for employees to be able to move stock around or be able to get out of their company stock. And they would also provide more information to the employees.
But then there are differences from there on out. Republicans tend to support a bill similar to what the president is proposing. One bill in particular in the House has one extra provision in it that the president doesn't have, actually, and that is to allow people to take pre-tax income and use that toward a financial planner or someone that would give them advice on their 401(k) plan.
Separately from what Republicans want, Democrats are saying that the Bush plan doesn't go far enough. And here is some of their ideas. There is one bill pending in the Senate right now and it would call for a limit, a 20-percent limit, on the amount of an employer's stock that a person could keep in their 401(k). For example, myself as an employee of AOL Time Warner, I would only be able to have up to 20 percent in AOL Time Warner stock in my 401(k). Another bill -- rather, that same bill calls for a change in corporate tax incentives. Those are incentives that currently give corporations incentive to match company -- employers -- employee's contribution with employer's stock. It would change or reduce those incentives so that there is not so much incentive for companies to use matching stock.
And then, there is a separate bill that goes even further. It provides a 10-percent limit on employer's stock in anybody's 401(k) plan, going even further toward limiting the amount that a person could have in their 401(k) just for their employer's company. All of these, again, ideas that are driven very much by Enron. These are going to be up for much debate next week when there are nine hearings, Kitty, scheduled here on Capitol Hill. About four of them will deal with this very issue, retirement savings. The others will deal with the investigation into Enron and importantly, Kenneth Lay, the former CEO of Enron. We expect him here on Monday morning bright and early, 9:30. He is appearing before the Senate and the next day before the House. And we've heard from colleagues and associates of Lay that he will be very open. He is willing to testify. He wants to tell his story -- Kitty.
PILGRIM: Kate, a blizzard of legislation being proposed and you're going to need a scorecard to keep up with it. Kate Snow reporting from Capitol Hill.
Well, workers at Enron and Global Crossing were prevented from selling their company's stock even as the share prices were plunging. That lockdown occurred because the companies were changing administrators of their pension plans. The move was legal, but the timing was questionable. And that practice is now facing increasing scrutiny on Capitol Hill.
(BEGIN VIDEOTAPE)
(voice-over): Owning a piece of the company store used to be considered a perk. Now for some employees of bankrupt companies, a liability. At issue, the lockdown period, a duration of time where employees are restricted from making changes to their 401(k) plans.
Lockdown periods are common when companies change retirement administrators. Twenty-four thousand retirement plans did so last year, about seven percent. Lockdowns can last for a few days to a few months. There is no law to regulate how long a lockdown can last. The U.S. Labor Department is investigating if Enron's lockdown was legitimate or time to prevent employees from bailing out of the stock. A billion-dollar Enron employee lawsuit in U.S. bankruptcy court has some merit, according to some legal experts.
BRIAN O'HARE, PATTERSON, BELKNAP: We all know that Enron put in a blackout period. And blackout periods are fairly common. In fact, a survey indicates about 75 percent of employers have had blackout periods. But if Enron put that blackout period knowing that their stock was in trouble or going down, that would be a fiduciary problem.
PILGRIM: President Bush is calling on companies to give 30 days notice of a lockdown and take responsibility for employee investments during the blackout period. Also, the president is suggesting employees be allowed to sell stock after three years. Some companies that match employee contributions with stock don't allow employees to sell until retirement. At Enron, 58 percent of 401(k) assets were in Enron stock, a far cry from the standard investment advice that cautions against anything more than five percent of portfolios held in any one stock. Legislative reform also tackles this issue.
KAREN FRIEDMAN, PENSION RIGHTS CENTER: One type of legislation that is out there is the Boxer/Corzine legislation that would basically restrict how much of employees' money could be put into employer's stock at a 401(k) plan.
(END VIDEOTAPE)
PILGRIM (on camera): Now some investors insist they can manage very well without extra rules, choosing how much and when to hold the company stock. Well, lawmakers are trying to put in protections so that employees are not prevented from exercising their best judgment.
Well, Tom Donahue says we should not rush into changing accounting rules because there is no overwhelming national interest in doing so. Tom Donahue is the president and CEO of the United States Chamber of Commerce. And thanks very much for joining us.
TOM DONAHUE, PRESIDENT & CEO, U.S. CHAMBER OF COMMERCE: Glad to be here.
PILGRIM: You know, with the outcry going on on Capitol Hill about changing the accounting rules, you have taken a pretty tough position to defend. We're going to ask you to defend it at this point.
DONAHUE: Well, I've taken a very clear position, that what Enron did, whether it's illegal or not, is clearly unethical in their broad behavior. And it makes me mad and it makes the business community mad. And what we ought to do is have a clear investigation, punish those people that were wrong and then look to see if we need changes in the law, not the other way around.
And I think the same is true in the accounting business. We have 500,000 professionals, five major firms. Each of them has 2,000 audits. We may have some errors here, but let's first see what's working and let's then see if we need some changes. The speed limit outside may be 20 miles an hour. If somebody gets drunk and speeds down the road and has an accident, we put them in jail. We don't change the speed limit.
PILGRIM: Nevertheless, many people suggest that we may have loopholes that allowed Enron to do things legally that may be detrimental to the interest of employees. Shouldn't they be aggressively challenged?
DONAHUE: I think we should investigate what happened. I think we should punish people if they broke the rules and the law, and then we should evaluate whether the law for the 999 companies in the top 1,000 is working and decide whether it needs real change.
Now I happen to think what the president put out today, the administration, Secretary Chao, to help on the matter of employee stock option plans and employee 401(k)s is very smart. I think those are things that we've been pushing for. In fact, the Labor Department just a few months ago changed the law so that people could provide financial advice. And I think the president's idea that if the little guys can't sell, the big guys can't sell either, I think that's -- we'll support that.
PILGRIM: Some companies are very hesitant to give investment advice to their employees because they fell that if the market turns south, they will be responsible for leading people into the wrong investments. How do you walk that fine line?
DONAHUE: Well, this proposal, and the one we recently got through the Labor Department, takes care of that problem. All the company does is pay for an independent financial adviser and takes no responsibility for what they're doing.
We can fix these problems. The first thing we need to do is look at all the people that are living by the law. The second thing we need to do is that 42 million Americans are in 401(k) plans, and most of them work, including yours.
PILGRIM: One of the things that we've learned from this whole issue is that many people are reluctant to bail out of their company stock. They're very loyal to their company. They love working for their company. They want the stock, and they don't want limits on how much of the company stock that they can own.
Now, that may not be the best investment decision. How do you feel about the Boxer-Corzine bill? It seeks to limit the company stock to 20 percent in an employee's account.
DONAHUE: One of the reasons so many people have stayed loyal to the stock is so many people have made so much money in their 401(k) plans, and on their company stock. I mean, over the last seven or eight years, people have made fortunes. So they didn't want to bail out.
Now, we may need some refinement, but what Boxer and Corzine wants to do is throw in the baby out with the wash water. These are not mandatory plans. These are plans often added to pensions.
PILGRIM: 401(k)s are a perk, correct?
DONAHUE: Right. And if you create the rules in a way that the company can't legitimately and easily encourage the 401(k) plan, they just won't do it. What Boxer and Corzine wants to do is political, it's punitive, and the only thing you can know if you ever pass that bill, you won't have that many people in 401(k) plans.
PILGRIM: It is not an easy issue. You're certainly taking a controversial position, and we thank you very much for being with us tonight.
DONAHUE: Thank you, but just one point: This is not a controversial position. We want to punish the guilty, and reward the people that are helping the employees and making this economy go.
PILGRIM: Fair enough, Mr. Donahue. We take that point. Thanks very much. DONAHUE: Thank you very much.
PILGRIM: Tom Donahue, U.S. Chamber of Commerce.
Well, Monday, Lou Dobbs will have a special edition of MONEYLINE from Washington, and that's when the focus of the Enron scandal is shifting. Among Lou's many guests will be Harvey Pitt, the chairman of the Securities and Exchange Commission, and he'll be testifying before Congress. And we'll also ask him about the proposed changes in accounting rules.
In other news tonight, there are conflicting reports about the fate of kidnapped journalist Daniel Pearl. In the fourth e-mail sent to news organizations in the past week, one group claims to have killed him. Police in Pakistan say someone called the U.S. embassy in Islamabad demanding $2 million for his release.
Today Louis Farrakhan, the leader of the Nation of Islam, joined the appeals calling for Pearl's immediate release. President Bush said the U.S. government is doing everything it can to rescue the journalist.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We are working with the Pakistani government to chase down any leads possible. For example, we're trying to follow the trail of the e-mails that have been sent, with the sole purpose of saving this man, of finding him and rescuing him.
(END VIDEO CLIP)
PILGRIM: The State Department tonight says it's reviewing the latest e-mail, but has not yet verified if it is from the kidnappers.
Well, President Bush is sending Deputy Treasury Secretary Kenneth Dam to India and Pakistan to help secure the safety of Daniel Pearl. Also on the agenda, to diffuse the tension between India and Pakistan, and also to freeze terrorist funds. Kenneth Dam joins us now before he flies out tonight.
And thank you so much. I know that just before you take a trip of that duration, it's quite a burden to come and join us here tonight, but we very much appreciate it, Mr. Dam.
KENNETH DAM, DEPUTY TREASURY SECRETARY: Pleasure to be here. Pleasure to be here.
PILGRIM: Let's start with Mr. Pearl.
DAM: Yes.
PILGRIM: What's your assessment of what the administration is doing, and what more can be done to help this journalist?
DAM: Well, as you just said, we don't really know what's going on exactly. We're following every lead and we're working very closely with the Pakistani authorities. We hope very much that we can reach resolution which brings him back safely to his family, and we're working hard on it.
PILGRIM: There are certain rules with dealing with terrorists, and some of them are pretty harsh -- not to negotiate with terrorists, things like that. Are you in any way limited in what you can do to help him?
DAM: I think that what we can do to help is work very closely with the Pakistani authorities, which we're doing, and use every other resource at our disposal to try to locate him.
PILGRIM: Let's move to the tension in Kashmir, which very much has the attention of everyone in the world. The potential for this to be a big world problem, a global problem is enormous. What's your assessment of the current situation? It does seem to be deescalating a bit from a few weeks back.
DAM: Well, I hope that's true. I think the main thing is that the two parties need to talk to each other, need to have a sustained dialogue at a high level, and that is really the road to maintaining the peace.
PILGRIM: Why a treasury official to come bring this up? We've had many high level visits to the region. Why particularly would treasury have some influence on these two countries?
DAM: Well, first of all, I'm going to be dealing with two other issues, economic growth -- there's a great deal of poverty in both countries. We're convinced that the only path to dealing with this poverty is through economic growth.
And then, of course, the financial war on terrorism. Now, that is relevant to the Kashmir problems, because there has been a good deal of terrorism and alleged terrorism in the area.
PILGRIM: What have we done to dry up the funds for terrorists, and what more can be done, in your opinion? Are you going to suggest new initiatives?
DAM: Not particularly on this trip, but we've already been talking publicly about new initiatives. First of all, we've been blocking accounts, and there's about 80 million worldwide that's been blocked. We've been disrupting funds.
I think the next step, taking it to a new level, we need the use the information we're acquiring -- and actually, we've acquired a lot in Afghanistan, many, many documents and hard drives and so forth -- to find the terrorists themselves, not just to block their funds. And then we need to work on problems like the problems of charities and how we can successfully deal with that question, and other more structural problems.
PILGRIM: How comfortable are you with the coordination between the Treasury Department and the governments of India and Pakistan, or do you think there should be another level that you can interact with and coordinate your data basis? Is there something more that can be done on the information sharing front?
DAM: Well, that's what I want to talk about. I want to talk about how we can work together. We've been working together quite well and I'm quite satisfied with the cooperation, with the steps that have been taken to block funds and so forth. But after all, it's in their region, they know a lot about the problems there, and that's what I want to talk about.
PILGRIM: Certainly terrorism is one big issue, but growth is another big issue in the region, and they say that lack of growth breeds terrorism. There's this supposed causal relationship between the two things. Are you confident that you can talk growth with these countries, and set them on a course that might be preferable?
DAM: Well absolutely, I can talk with them. Now, what they do -- of course, they are sovereign nations. And there are many things to talk about. There are questions of their educational system, which is a part of economic development. Beyond that, questions of opening markets to world trade, deregulation, and then macroeconomic stability. So there are many, many things to talk about.
PILGRIM: You have a lot on your agenda. And we wish you the best of success. Very important region. Kenneth Dam, deputy treasury secretary, thanks very much for joining us.
DAM: Thank you.
PILGRIM: Last night on this program, we reported a warning of a possible terrorist threat to the country's nuclear power plants. The nuclear industry dismissed the warning as, quote, "not credible," end quote. But that is not what government officials are saying. Steve Young has this follow-up report.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice-over): The advisory from the Nuclear Regulatory Commission warned of a possible al Qaeda plot to hijack an airliner and crash it into a U.S. nuclear power plant yet to be selected. A source at one of the nuclear power plants tells MONEYLINE that January 23 advisory has not been withdrawn, but the Nuclear Energy Institute says it's not credible.
A high-level FBI source told CNN the threat "could not be verified, substantiated or dismissed." At the White House, a spokesman for the Office of Homeland Security chose a different word. "That information is uncorroborated," he said. He added that even if the warning in question can be discounted, "the continuing threat is still real" of a terrorist power plant attack.
The FBI says the most recent warning turns out to be a repeat of one a month old. The recycled warning came from a foreign country. The FBI admits it should have flagged it as a duplicate, but didn't.
In any case, the nuclear power industry says not to worry about the vulnerability of nuclear power plants. It cites this 1988 test conducted by the Sandia National Laboratory. A jet fighter on a rocket sled was crashed into a concrete wall at 484 miles an hour. The wall was barely dented two inches.
RALPH BEEDLE, NUCLEAR ENERGY INSTITUTE: That's an actual test, it was done by Sandia National Lab. It does, in fact, speak for itself.
YOUNG: But the laboratory says the procedure was designed to test the crush behavior of the plane, not the survivability of the wall. The relatively small plane was filled with water, not fuel, and unlike the three- to five-foot walls that surround nuclear reactors, the test wall was 12-feet thick, rode on a cushion of air and was thrust backward six feet.
(END VIDEOTAPE)
(on camera): The Nuclear Control Institute, which takes the terrorist threat very seriously, proposes that military personnel with ground to air missile batteries guard all 62 nuclear power plant sites. But technology consultant Rick Doherty says military officers have told him they question whether sufficient military personnel could be found willing to shoot down an incoming hijacked airliner full of civilians -- Kitty.
PILGRIM: The defense of these installations seems particularly well suited to the military. Have they always been this hesitant to do this?
YOUNG: One of the points that Doherty makes is that during the Cold War, there was a larger army and it was easier to find people with the right psychological profile to go down to the bottom of those silos, missile silos, and fire something, you know, thousands of miles away with the result not so obvious to them.
PILGRIM: It's hard to contemplate that scenario. Thanks very much, Steve Young.
Still to come tonight, Amtrak says it's reaching the end of the line. And we'll tell you how the railroad plans to stay in business.
A wild winter storm moves eastward. And we'll have the very latest information.
And if you think Enron's collapse is an isolated incident and can't happen again, we'll hear from someone who says, think again.
ANNOUNCER: Next, Kitty talks with economist Paul Krugman.
(COMMERCIAL BREAK)
PILGRIM: The Enron scandal, missing journalist Daniel Pearl, the axis of evil. Well, President Bush has a lot to deal with these days. And joining us now with his perspective on all of that is former presidential candidate Pat Buchanan. And thanks very much for joining us. PAT BUCHANAN, CHAIRMAN, AMERICAN CAUSE: Thank you, Kitty.
PILGRIM: Pat, let's start with the proposals that we saw on the axis of evil and the potential that we have new targets in this war against terrorism. What's your reaction to that?
BUCHANAN: The president made a bad mistake in singling out these countries now and almost threatening them directly with war. First, he does not have the authority to go to war against any of these three countries because none have been proven to be involved in September 11.
Secondly, we do not have the military power on the ground right now to defeat any of these three countries, including the weakest, Iran. And third, it's obvious saying that you never telegraph a punch before you are going to throw it. And I think the president has given these people, first, an incentive to move as fast as they can to build weapons of mass destruction by threatening them. I think he was doing very well, Kitty, and I think he made a mistake by going overboard, over the top, if you will. In my criticism of the president's rhetoric, it's becoming hubristic and triumphalist.
PILGRIM: Well, Pat, wouldn't -- others would argue that it's fair warning. Shouldn't they be given fair warning and a chance to change?
BUCHANAN: Well -- but everybody knows that the United States has this capacity. Why would you get up on national television, for example, with North Korea, which you've eliminated the diplomatic card automatically and you've threatened them before you're ready to do anything. These are thuggish regimes. They're hostile regimes. And they are regimes which, in many cases, we detest. But I just don't believe that the president benefited the United States at all by, in effect, saying we are going to attack these three regimes or we may very well attack them when he's not prepared to do any of that.
PILGRIM: So it is your estimation that we're not militarily prepared? There are many who would argue with you that we are very well prepared for this?
BUCHANAN: No. You can't -- you don't have to armed forces to, first of all, to invade Iraq and places. And Iraq is a weak country. Iran is stronger. We don't have any forces in place to invade Iran. You could attack them from the air, but I don't know what that would accomplish.
You attack North Korea and they've got 10,000 or 20,000 artillery pieces on the DMZ plus Scud missiles and they'll be raining down on Seoul, Korea, which is 35 miles from the DMZ and on those 38,000 American troops. How exactly do we plan to attack North Korea? If they do have nuclear weapons now, they're dispersed. I thought that decision had been made five or six years ago and we're going down the diplomatic track working back and forth. Why close that track off by threatening them? It did not make sense to me. And as I say, the president has got himself now out there defending this and everyone is arguing about this when the whole country was behind his approach, take down al Qaeda wherever they are.
PILGRIM: Nevertheless, he's been giving us basic hints of this all through the war on terrorism. It's not really new material. Pat...
BUCHANAN: But, you know, he did -- go ahead.
PILGRIM: I have to switch just for a second because I really would like to talk to you about Daniel Pearl, the journalist who is being held captive. Now we are very short on confirmed details about his whereabouts and who is holding him at this point. But should this come to a sad end, what should the U.S. response be?
BUCHANAN: Well, I hope it doesn't come to a sad end. This is a brave journalist over there and it would be an act of cold-blooded, brutal murder of an innocent man who is clearly doing his job and is not any CIA agent. If it comes to this, the United States should use its good offices and find our allies over there and go find the people that did this and do away with them.
PILGRIM: I agree with you and we're all praying daily for this. Let's move on to immigration. And I defer to your expertise on this. You have just -- you have a book, "The Death of West" which is a demographic study. President Bush has a proposal to change the review system on immigration, speed it up is sort of the simplistic way of describing it. What's your reaction to that?
BUCHANAN: Well, thank you for giving me an opportunity to commend the president. He's doing the right thing. Look, the homeland security, border security, is part and parcel of homeland security. He's streamlining the process of those who have already been ordered deported their appeal, so to move them much faster.
That is a small, brief step in the right direction to get folks out of the country who don't belong here and who have been ordered to leave. And so I commend the president. Frankly, I think he could move faster on this. Kitty, there's 250,000 people in this country who are not only illegal, many committed felonies, but who have been ordered deported and simply disappear into the population. You cannot fight a war on terrorism with open borders and with this kind of lax attitude toward people wandering around this country who do not belong here.
PILGRIM: All right. Pat, we have to keep it at that. Thanks very much for joining us this evening, Pat Buchanan.
BUCHANAN: Thanks for inviting me over.
PILGRIM: The city of Houston has suffered huge job losses recently. Compaq Computer, Continental Airlines. But the thousands laid off at Enron raised sympathies and the support of the community to a new level. Fred Katayama has the story from Houston.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Enron's employees who are down and out of a job are getting a spiritual lift. The Reverend Al Sharpton has flown in to conduct a town hall meeting at a local church.
Secretary Kathy Bass was laid off with 4,000 others just three days into her medical leave. She can't afford health insurance and she doesn't qualify for jobless benefits.
KATHY BASS, FORMER ENRON EMPLOYEE: But I just felt like I needed to come here to get some spiritual guidance to help lift me up.
KATAYAMA: She got it.
UNIDENTIFIED MALE: Fighting for the workers, over at Enron.
KATAYAMA: From houses of worship to the halls of knowledge, the Houston community has come out to support former Enron workers, whose company has filed for bankruptcy. Their retirement funds have shriveled along with the company's stock. Many have been denied severance packages and bonuses. The community is not only offering prayers, but also help in finding sources of pay.
UNIDENTIFIED MALE: All the energy companies in Houston have told me they have had an influx of Enron applicants.
KATAYAMA: Rice University's business school gave free seminars for alumni fired from Enron just one week after the mass layoffs. It offered advice on job hunting.
PETER YERUKI, RICE UNIVERSITY: They were one of our major employers. They had been coming here not only recruiting and hiring students, by supporting us in all sorts of ways, with supporting student activities, funding things like scholarships and so on. So it hit us hard.
KATAYAMA: Ten percent of those who attended the seminars have since found employment.
Christopher Lovisone came for help. Enron rescinded its $140,000 job offer to him a week after the company filed for bankruptcy.
CHRISTOPHER LOVISONE, RICE UNIVERSITY: They're very helpful, John and Peter and the rest of the people in the center always give us good job leads.
UNIDENTIFIED MALE: I want to see that one.
KATAYAMA: When Tony Huong (ph) was laid off at Enron on Black Monday, he hooked up with a few former colleagues and Lesley Plotkin who works for a local networking organization, Techxans. Working on Internet time, they set up a job networking Web site called EnronX.org by the next day. Techxans is footing a $4,500 cost of hosting the site. Four ex-Enron employees are volunteering their time to run it.
LESLEY PLOTKIN, TECHXANS ORGANIZATION: It's a way for companies to post job opportunities that are out there. It's a way for law firms that are currently suing Enron to post their information so these Enron employees know who to turn to. It's a way for health insurance companies to post their information and hook them up.
KATAYAMA: Back at the church, those who lost their jobs say they haven't lost faith in themselves.
UNIDENTIFIED PARTICIPANT: We are victims today. We will be victors tomorrow.
KATAYAMA: Debora Whitehead, who says she developed Bells Palsy from the stress of being fired, is also looking behind the clouds.
DEBORA WHITEHEAD: I am so glad I came because just hearing the words and the blessings that was given to all the ex-Enron employees was very uplifting to me.
(END VIDEOTAPE)
KATAYAMA (on camera): Enron's auditor Arthur Andersen received visitors today, lawyers from Enron representing Enron's pension funds. They combed through Andersen's offices basically here, checking to see how securely Andersen was storing its documents, data, computer hardware, and other materials relevant to the Enron probe.
What they found was a Houston police officer guarding the site 24 hours a day, seven days a week, and Enron - not Enron but Arthur Andersen employees are not allowed anywhere near the site. One lawyer we spoke to said he was satisfied by the level of security Andersen was providing. Kitty.
PILGRIM: All right, thanks very much, Fred Katayama reporting from Houston. Thanks, Fred.
More revelations today about possible connections between Enron and U.S. Government officials who helped set energy policy. Now these revelations come from an interview which will air on "Now With Bill Moyers" which will air tonight on PBS.
The footage was taped last spring for a frontline "New York Times" co-production by investigative journalist Lowell Bergman (ph). Tim O'Brien has the report from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT: Enron and its former CEO Kenneth Lay made huge contributions to both Democrats and Republicans, and it did at least appear to help them obtain entry, including face-to-face meetings with Vice President Dick Cheney, who heads the President's task force on energy.
Lay acknowledges providing the administration a wish list of who should sit on the Federal Energy Regulatory Commission, or FERK, the agency which oversees not just Enron, but the U.S. energy industry.
KENNETH LAY, FORMER CEO, ENRON: I brought a list. We certainly presented a list, and I think that was by way of letter. I mean as I recall, I signed a letter which, in fact, had some recommendations as to people we thought would be good FERK Commissioners.
O'BRIEN: At least two of those recommendations were followed, including the appointment of a new chairman, after the existing chairman Curtis Aber (ph) refused to go along with one of Lay's deregulation proposals. Lay said he could no longer support Aber, who was later outvoted and then resigned.
The interviews with Lay and Cheney were conducted last April, in the midst of California's energy crisis, and as the lights dimmed and the electricity prices soared, Lay was with the Vice President hand delivering a memorandum, urging Cheney not to impose price controls. The administration never did.
Senator Barbara Boxer, a California Democrat, says of the memo "this is the smoking gun" and has promised to confront Lay about it when he testifies before the Senate Commerce Committee Monday.
(END VIDEOTAPE)
O'BRIEN (on camera): Administration critics complain Enron's agenda appears to have become a blueprint for Cheney's Energy Task Force. But this isn't an administration long committed to deregulation, with deep roots against price controls. The hard part may be in proving they would have acted any differently, had they never even heard of Enron or Kenneth Lay. Kitty.
PILGRIM: All right, thanks very much, Tim O'Brien in Washington. Thanks, Tim.
The Enron collapse caught many people by surprise, but it may not be unique and it may not be the last. "New York Times" columnist Paul Krugman says, there are more Enrons out there just waiting to happen, and Paul Krugman joins us now.
Paul, thanks for joining us.
PAUL KRUGMAN, "NEW YORK TIMES" COLUMNIST: Good to be here.
PILGRIM: And I have to say you do get my attention when you say that this aggressive accounting is fairly commonplace. Let's fill our viewers in on your theory of this.
KRUGMAN: Let me make a confession. Ever since I started writing for the Times, I have been getting letters, memoranda from people saying lots of these big companies out there are phony, you know. Microsoft is a ponzi scheme, Cisco, you know. Did I look into them? No, I didn't because none of them as far as I remember mentioned Enron, but it just wasn't plausible.
Well now we know that a famous company, a darling of the media, can turn out to be basically a pyramid scheme, and I don't know if there's anything quite as bad as Enron out there. But there's a lot of evidence that people who follow these things have been pointing out that there is tremendous misstatement. A lot of the profits that we thought we had in the boom years of the late '90s were a losery. PILGRIM: Yes. You know it's a tough issue because the markets have been very jittery because any little number in the market will get a sell off, even if it's a legitimate bad number because people just don't know what's behind the numbers. When you violate trust -
KRUGMAN: Yes. I mean we have had - it's turned out that over the last five years or so, it has become commonplace for companies to do things that take real expenses off the books, take real debt off the books. In fact, you had to do it if you were a company, because -
PILGRIM: Many are perfectly legal, right?
KRUGMAN: Well that's the trouble. It's not even clear that anybody will go to jail at Enron when all is said and done. It may have been legal. The trouble is that we created an environment in which stake numbers were a necessity to do business and some may turn out to be really explosive.
It may turn out that - I particularly worry about what you might call the old new economy companies, the companies that people thought were highly profitable, but also we're supposed to have, you know, I can't single any out without risk of being in a lawsuit myself. But I think we should really watch for some time bombs there.
PILGRIM: Well now that you have everyone highly nervous about everything, do you think there's enough legislative initiative going on on Capitol Hill to actually correct this situation?
KRUGMAN: I think so far not much at all, and what we think we know now is that the best sanction is not so much the accounting laws as the threat of lawsuits from the private sector. And, it turns out that in 1995, legislation was passed that made those lawsuits much harder to bring.
PILGRIM: Do you think, and I've read the Private Securities Litigation Reform Act is what you're referring to.
KRUGMAN: Yes.
PILGRIM: In 1995. Do you think if we haven't had that, we would have had Enron?
KRUGMAN: I think we would have had something like it but not as bad. I think the Bull market, the bubble, the euphoria over technology probably made this kind of fraud fairly easy to happen regardless. But the biggest effect of sanction was removed just at the wrong moment.
PILGRIM: All right, a pleasure to talk to you tonight.
KRUGMAN: Thank you.
PILGRIM: Paul Krugman of the "New York Times". Thanks.
KRUGMAN: Thanks. PILGRIM: Still ahead, more signs the economy is coming out of recession, but there are some mixed signals tonight on the state of the job market. We'll have a report on that.
Worries over the strength of an economic rebound and corporate accounting methods weigh on stocks. We'll take a look at that.
And the Super Bowl of advertising is feeling the impact of the ad recession. Those stories and a lot more still to come. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: Some positive news for the economy today. The nation's unemployment rate dropped unexpectedly in January, and Kathleen Hays is here now with a closer look at today's report and what we can look forward to next week. Kathleen.
KATHLEEN HAYS, CNN CORRESPONDENT: Thanks, Kitty. Well, you know, it's very interesting more signs of good news that the recession is slowly ending and the economy is heading into recovery mode, although you know the signals are still somewhat mixed as economists say they often are at turning points.
In terms of the monthly change in employment, in payroll employment, we had a decline in January of 80,000 jobs, a net decline. That was more than expected but it was certainly less than 130,000 in December, much less than 448,000 in October right after the attacks, or even of 355,000 loss in November.
That's some good news that in terms of the pluses in the job report, that the rate of job losses appears to be slowing. Also, this past month, the number of sectors adding jobs finally caught up with the number of sectors cutting jobs.
Until recently, there have been a lot more sectors losing jobs, so that's a small but a significant plus, according to the people I spoke to today. There are some minuses in the report. Hours worked fell. If the economy is getting better, you would think that actually you would keep the same number of workers, make them work longer. We didn't see it in January.
A drop in the unemployment rate from 5.8 percent to 5.6 percent was due to nearly, losing nearly a million workers in the labor force. That's not a good sign either.
Manufacturing shed another 89,000 workers. So we're not out of the woods yet, but again in January, a high-profile manufacturing survey of purchasing managers, suggests that the industrial sector is just about ready to start growing. That's good, and consumer sentiment improved in January.
Now in terms of the U.S. Government Bond Market, it does seem to be reflecting this sense of a shift in the economy toward recovery. The ten-year note, the benchmark government issue that is, yield now stuck around five percent. You can see that we're back to the level where the ten-year note was trading just before the September 11th attacks.
So the question is, where do we go from here. A lot of traders think we're maybe stuck in a trading range like the stock market. Next, we'll be looking at the jobless claims, things like that. The labor market is key, chain store sales.
And it's interesting, Kitty, but apparently this big loss of jobs in the labor force we saw is something has been observed at the end of past recessions. People don't know why. It's just something that's tended to happen. So this may be another kind of weird signal of the shift in the cycle from recession toward recovery.
PILGRIM: I hope you are right. Kathleen Hays, thanks very much for joining us. Stocks fell in reaction to those mixed economic reports. The Dow lost 12 points. The Nasdaq fell 22 points. The S&P ended eight points lower. And Christine Romans and Greg Clarkin are here now to wrap up the week on Wall Street.
It was an extremely event-filled week, wasn't it with Greenspan all the way down to earnings. Christine, what's your observation?
CHRISTINE ROMANS, CNN CORRESPONDENT: It was really volatile and a 12 point decline today is nothing much compared with the trajectory of this market this week.
But indeed very heavy volume in the middle of the week, when we saw those wild swings. Traders were saying participation was coming back in the market. That was something that they liked to see.
One of the only real consistencies though was, defense stocks, which have been adding to last month's gains. Next week, of course, Mr. Bush is going to unveil the details of his defense spending plans and Wall Street is expecting that to be good news for the defense contractors.
PILGRIM: So Wall Street anticipating that. Now Greg, it was a rumor-driven market. We also had a lot of hard data earnings, also.
GREG CLARKIN, CNN CORRESPONDENT: Exactly, Kitty. There was a lot of events for the market to digest this week. On the Nasdaq, I'll tell you it was a quiet week, down one and a half percent. I mean it lost 20 some odd points, so a very quiet week.
If you go back and look at a chart on the Nasdaq to maybe mid- November, you'll see a range, about 1,850 on the bottom, up to almost 2,100 on the topside. So it really has been incredibly range bound over the last few months.
PILGRIM: What's the highlight in terms of stocks that you observed this week that really got your attention?
CLARKIN: This week, hands down it's WorldCom. The stock was off about 22 - just over 21 percent on the week. You know, usually a company may have one to two rumors to deal with.
These guys had at least four or five that I can count off the top of my head, everything from the S&P taking it off the S&P 500, which both companies deny, to Bernie Edwards possibly having to sell some of his stock. He's the CEO of WorldCom. To meet the loan payment, a loan that was taken out to meet an earlier margin call. So they come out with earnings next week. Everybody's going to be anticipating what's said on that conference call.
PILGRIM: We're almost out of time, Christine, but you and I spoke earlier in the week about the rumor-driven market and is it being exacerbated by the Enron jitters?
ROMANS: It absolutely is. I mean, Tyco was the most actively traded stock every day this week, and set a one-day volume record of more than 186 million shares in one day. Remember when we used to trade all of that in the stock market?
HAYS: Quickly, the Super Bowl. How can we forget the Super Bowl? That's got a big influence on the stock and bond market, right? Because well the St. Louis Rams are favored to win, that's the National Football League team. If they win, that's good for stocks, right? That's the old saw, and if that happens, that's bad for bonds.
CLARKIN: All right.
PILGRIM: Kathleen, I'm glad you straightened me out, not only on the market but on the sports. Thanks very much, Kathleen Hays, Greg Clarkin, and Christine Romans.
Still to come tonight, after cleaning up its own accounting scandal, Waste Management is hit by the fall of Enron. We'll explain, and starting today, an extra charge on the price of your air ticket.
(COMMERCIAL BREAK)
PILGRIM: In other news tonight, UAL, United's parent company lost more than $2 billion last year. That was the worst year for any airline in history. In the fourth quarter, UAL burned through about $10 million each day.
Waste Management is warning it's fourth quarter earnings will fall below estimates. The company blames exposure to Enron's bankruptcy and the settlement of class action lawsuits. Now Waste Management faces its own accounting scandal with the same auditor as Enron, Arthur Andersen. Let's check Wall Street reaction and shares of UAL and Waste Management are lower.
In the fast food world, McDonald's is no longer the burger king. After 23 years at the top, it has been dethroned by Subway, which now has 150 more stores in this country than McDonald's. But in terms of profits, McDonald's is still the leader, generating sales eight times that of Subway.
Amtrak is threatening to end its unprofitable long distance service in October. The passenger railroad service wants $1.2 billion from Congress to continue those runs. Meanwhile, Amtrak is slashing 1,000 job and reducing its capital improvement plan as it struggles for survival. The company lost more than $1 billion last year, the most in its 30-year history.
Passengers traveling by air will be paying more for security. Starting today, airlines are adding an extra $2.50 for each leg of their flight, with the maximum of $10 per trip. Now the fee is expected to raise about $900 million a year. That money will pay for security equipment and salaries of Federalized airport security workers.
Just ahead on MONEYLINE, why the Super Bowl's much-anticipated ads almost didn't show up on game day. And, a powerful winter storm moves across the west, delivering snow and freezing ice. We'll be right back.
(COMMERCIAL BREAK)
PILGRIM: Even the nation's most watched TV event is feeling the pinch of the slumping advertising market. Now just yesterday, FOX finally finished selling out commercial time for this Sunday's Super Bowl. Many advertisers are looking for more cost-effective ways to spend their money. Susan Lisovicz has the report.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice over): There are celebrities, there are special effects, and there is skin. Madison Avenue is working feverishly to outdo itself in the so-called Super Bowl of advertising, but Fox had to work hard to get those advertisers to commit.
Even with the nation's best-watched event, an estimated 130 million people will tune in. Ads for Super Bowl XXXVI have been a tough sell. The economic recession is just one reason why. EDS says it raised crowd awareness by 50 percent with its running of the squirrels Super Bowl spot last year. But its opting for the Salt Lake City Olympics this year, which begin just five days after the Super Bowl.
DOM UZZI, SENIOR VICE PRESIDENT, ADVERTISING EDS: The reason was really strategic in nature, in that we felt we have a much larger story to tell this year in that we're moving into the next phase of our advertising.
LISOVICZ: And with prices at $600,000 per 30 seconds, Olympic commercials are a fraction of the cost of the average $1.9 million price tag for Super Bowl.
UNIDENTIFIED FEMALE: The Super Bowl advertiser is looking for big name recognition, a one-day event, a major, major kind of a splash. The Olympic advertiser is looking for something that builds a little more over the long run. They'll use those rings throughout the entire year.
LISOVICZ (ON CAMERA): Edie Ann Amrose (ph) says competition from the Olympics, as well as scaled-back Super Bowl programming, which translates into fewer commercials, will hurt FOX' third quarter results. It expects an operating loss of $15 to $20 million. LISOVICZ (voice over): But FOX says it expects Super Bowl revenue to bring in $200 million. One advertiser contributing to that sum is Levi's.
ROBERT HANSON, PRESIDENT, LEVI'S: Advertisers have to look for opportunities to engage with the American public in a way which is about an event, about delivering appointment television or appointment media events. The Super Bowl is that, and when you look at it on a return on investment basis, it absolutely delivers.
LISOVICZ: Anheuser Busch has purchased five minutes of Super Bowl airtime and one of its agencies says there are no regrets.
BOB SCARPELLI, CHAIRMAN, DOB CHICAGO: The guys we're trying to reach are watching women's figure skating. I don't know. They could be.
LISOVICZ: Susan Lisovicz, CNN Financial News, New York.
PILGRIM: "WOLF BLITZER REPORTS" begins in a few minutes, and for a preview, let's go to Wolf in Washington. Wolf.
WOLF BLITZER, "WOLF BLITZER REPORTS": Thank you very much, Kitty. We'll try to sort out the conflicting reports about the fate of Wall Street Journal reporter Daniel Pearl. Is he still alive?
We'll also get White House reaction to the interview with Osama bin Laden we aired last night. And we'll talk with Saudi Arabia's former intelligence chief, Prince Turki al-Faisal and ask him about his meetings with Osama bin Laden and Mullah Mohammed Omar. It's all at the top of the hour. Kitty, have a great weekend.
PILGRIM: You too, Wolf. Coming up next, the latest on that wild winter storm.
(COMMERCIAL BREAK)
ANNOUNCER: Monday on Lou Dobbs MONEYLINE, former Enron Chief Executive Kenneth Lay prepares to testify. SEC Chairman Harvey Pitt is our guest. We bring you the very latest on the Enron investigation, live from Washington, Monday on Lou Dobbs MONEYLINE.
(COMMERCIAL BREAK)
PILGRIM: Well coming up next week, we have a lot going on. Quarterly earnings results are due from Cisco Systems, Pepsi and WorldCom. President Bush will present his 2002 budget to Congress, and the star on Capitol Hill Monday is former Enron Chief Executive Ken Lay, testifying about his company's collapse.
MONEYLINE will be in Washington, D.C. on Monday to cover that story, and the Securities and Exchange Commission Chairman Harvey Pitt will be our guest. Tune in to MONEYLINE weekend edition with Rhonda Schaffler, also.
Now the deadly winter storm, which has been battering the Midwest today, swept east into New York and New England. In New York, blasts of snow forced schools and businesses to close. Freezing rain snapped power lines, leaving thousands without power.
More than 100,000 people are still without power in Kansas City, which was hit with a major ice storm, but flights did resume today at Kansas City International Airport, and service is also back to normal at Chicago's O'Hare and Midway Airports. At least 15 people are believed to have been killed as a result of the storms.
That is MONEYLINE for this Friday evening. Thank you for joining us. I'm Kitty Pilgrim in for Lou Dobbs. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
|
|
|
|
|
