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QUEST MEANS BUSINESS
LVMH Luxury Deal; Room with A View; The Price We Pay; Star Spangled Scammers; Bankers' Bonuses Spark Controversy, Again; Barclays' CEO Opts To Take $10.5 M Bonus; CNN Launches Ambitious Investigative Series On Global Human Trafficking
Aired March 7, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Bigger bonuses? Well, Bob's your uncle, Barclays chief exec becomes Britain's best paid bank boss.
The perfect combination, LVMH buys big, with Burberry (ph), the chief exec, you hear from tonight.
And the price of freedom: CNN's year-long look a modern-day slavery starts tonight.
I'm Richard Quest. We have an hour together, on this new week, and I mean business.
Tonight, Britain's best paid banker receives a diamond-plated bonus. It is, of course, Bob Diamond, the head of Barclays. And he's getting $10.5 million. He won't see a penny of it for some time yet. Part of the payout is thanks for running BarCap, Barclays Capital, the investment banking unit which he lead until the end of last year.
The award is less than what everyone thought it would be and it is the first time in three years that Mr. Diamond accepted his bonus. When I spoke to him in Davos, in January, Bob Diamond told me it was time to stop being ashamed of claiming his dues.
(BEGIN VIDEO CLIP)
BOB DIAMOND, CEO, BARCLAYS CAPITAL: All banks made mistakes. We made mistakes and I made mistakes. But today what is important is jobs and economic growth. What is important today is to pass the mantle to the private sector and get economic growth and job creation going. And I think the time for remorse should be over.
(END VIDEO CLIP)
QUEST: Bob Diamond's massive pay out is composed entirely of shares. Part of the stock, around $2.9 million, must be held for at least, six months. The other $7.6 million is a deferred incentive dependent on performance. As well as the bonus, Mr. Diamond will also see his base salary quadruple this year to 2.2 million, from around $405,000 last year. Now that might seem a lot to thee and me, in banking terms, it is fairly modest. And when you think about it, he's running an extremely profitable enterprise, as now the chief executive. And perhaps, to that extent, deserves the remuneration.
The bankers' bonuses to compare these-these men think so-Jamie Diamond is the head of JP Morgan Chase, and he picked up $17.4 million. It was restricted stock. In other words this deferred payment system that the G20 is not pretty much insisting. The bank made $17.4 billion. Goldman Sachs chief, Lloyd Blankfein, he got $12.6 million in shares, and his firm made $8.3 billion.
But don't forget with Lloyd Blankfein, of course, there was an enormous amount of controversy over Goldman Sachs. And they ended up in some scandal.
HSBC's Stuart Gulliver, new in the job, will get $8.4 million, also in shares conforming to G20, and correct practice. The bank earned $13.2 billion in 2010. You and I talked about those numbers just last week. And in fact, HSBC, extremely profitable but their profits slightly disappointed.
Now, Bob Diamond wasn't even the best paid exec in his own firm. There were two others who got even more; one got $17.5 million. That is good money, if we only knew who it was.
I spoke to David Buik from BGC Partners. And I asked David whichever way you look at it, it is a lot of money at a time when the emphasis is on restraint. So it is a slap in the face to the rest of us.
DAVID BUIK, BGC PARTNERS: No. I don't think so. In isolation the sum of 6.4 million pounds seems a little on the vulgar side. But when you consider that Bob Diamond has been a Barclays now for 12 years and responsible for driving Barclays Capital, which at minimum has contributed 40 percent of Barclays profits in during that period.
And the fact that he waived his bonus in 2008 and 2009, and that Barclays last year made 3.6 billion pounds-and this year 6.2 billion pounds. And the fact that Barclays has never asked for any direct capital to be injected from the government; though it did avail itself of the facility from the Bank of England, as did every other bank. I think the request and what he's been granted by the board of directors is entirely appropriate and fair.
QUEST: But if we then look at the other people on the list, under the new regulations, the Merlin Project regulations, one person at Barclays got 10.9 million pounds. Now, we don't know the facts and we don't know the details. But for anyone in this environment, to be paid 11 million pounds is a lot of money, by any standards.
BUIK: First and foremost, I suspect that there are more than 20 percent of it-well, let's answer your question first.
Is it a gargantuan sum of money? Yes, of course, it is. But I suspect no more than 20 percent of it has been in cash, because that was the unwritten rule that was agreed amongst all the management and the board of directors for all these banks. And secondly, I think we need to have a little bit more meat on the bone to find out what that individual actually contributed towards Barclays profits, for Barclays Capital's profits, before we tear him, or shred him from limb to limb.
QUEST: I'm not suggesting we adopt, if you like, a purely communist or socialist approach on this matter.
BUIK: Oh, no.
QUEST: But, David, is there not a point upon which, whatever the circumstances, we are-or the public or the people are entitled to say, enough?
BUIK: Richard, if you look upon it as an entirely domestic issue, that can be governed and run by the British government or by British banks, or the British public, of course you are right. These figures are astronomical by anybody's standards. But the fact remains we live in a global environment. And the fact remains that the British government, together with the Bank of England and the FSA, have been hell bent on agreeing global regulations. So, three years down the line, nothing officially has happened. By the time they agree global regulation I will have been pushing up daisies for 10 years. It is high time they got on and agreed on regulatory issues, internally, so that we can get on, know what the rules of engagement are, and then we can gauge things and judge things from there on. But at the moment, this is very much an international and global business. And therefore, those people at the very top of that business have to be paid something remotely pari passu to their peers in the United States of America and Europe.
QUEST: That is David Buik at BGC Partners. All of which will make you wonder where the best place is to be a banker, particularly if you want to make money, Hong Kong, New York, or London. Well, in London, first of all HSBC has just squashed rumors that it is going to move its headquarters to Asia, but it will get execs a better deal. But in London, for example, Project Merlin is the agreement between the big banks and the Treasury in the Bank of England. The bank levy is expected to raise $4 billion. The chancellor has said that there has been no repeat of the 50 percent bonus tax levy that was introduced by Alistair Darling and the previous labor administration.
But it is still-the object is still the same. Take most of your bonus in some form of deferred compensation. Which is exactly the same thing that you would expect in New York, but there the top execs have to wait three years to get half their bonus and greater disclosure. All that, of course, in the Dodd-Franks Act, which of course had an enormous effect on the way bonuses and bankers were treated.
Hong Kong is following standard G20, which also requires bankers to wait three years, for 40 percent to 60 percent of their bonus.
Whichever way you look at it the numbers may still be astronomical, $10, $12, $14 million, even in the low millions, but in all cases, now the method is to make people wait for at least two or three years.
So far almost no one has put a claw back provision. If the bank makes a loss you have to pay back your bonus amount.
When we come back in just a moment, we start a year-long journey together it is a year's worth of special coverage as CNN investigates the modern world of slavery. We're calling it the "Freedom Project". It starts after the break on QUEST MEANS BUSINESS.
QUEST: Today CNN, on QUEST MEANS BUSINESS, we are launching an ambitious undertaking. We're calling it the "CNN Freedom Project", a year- long initiative that is aimed at raising awareness about modern-day slavery. We'll be using CNN's global reach and all our resources. And we're going to be pressing for change.
So where does QUEST MEANS BUSINESS fit into the coverage. We're going to be looking at the often hidden issue of slavery and trafficking along the global supply chain. We're also going to be considering the issues of where it still exists. What companies can do to tackle, and how they are going to sniff it out. What are they doing about it? From consumers, to management, to distributors, to suppliers, it is a serious problem in the corporate world and in any global economy.
Multinationals make sure and must make sure every office in every country is following the required standards. If they are not pro-active it can be almost impossible to know slaves are being used in their own company, somewhere along the chain.
So where it exits, tracking it down, and the companies taking action, over the next 12 months. We will also be looking at the people trafficking as a business in itself, one that requires a serious coordinated effort from police forces across the world.
CNN's Dan Rivers saw how they are working against it. And we should- I do warn you-this piece contains adult content.
(POLICE BANGING DOWN A DOOR)
DAN RIVERS, CNN INTERNATIONAL CORRESPONDENT (voice over): This is the front line of Romania's battle against sex trafficking. These police videos have never been aired before. The U.N. describes Romania as a global hot spot for sex slave traders.
We've come here to investigate two of them. A father and son, Bogdan and Marius Nejloveanu, who lured women from Romania to the U.K. and then sold them for sex. The Nejloveanu network began in Alexandria, in southern Romania. They trafficked young women to work as prostitutes in Madrid, but it didn't take long for them to move onto Britain for bigger business in the brothels of Manchester.
I'd already investigated the seedy massage parlors in Manchester where the girls were forced to work 12 hours a day by the Nejloveanus. The police there said it was the worst such case they had ever dealt with.
DETECTIVE MIKE SANDERSON, MANCHESTER POLICE: I can only describe the exploitation of these girls as appalling. It's appalling. They've absolutely raped and abused them, themselves.
RIVERS: Now I'm in Romania to find out more about the Nejloveanus and the sex trafficking underworld they inhabited. I start in the village of Besescue (ph) were Bogdan Nejloveanu's mother insists he did nothing wrong.
UNIDENTIFIED FEMALE (translations on screen): He is innocent. My son is in prison for nothing.
RIVERS: But the Romania police disagree. Stefan Florea helped to catch the Nejloveanus and said Marius lured girls abroad with repeated lies.
STEFAN FLOREA, ALEXANDRIA POLICE: He said the world is yours. I love you. I want to marry you. And when he and those girls go to Spain, he forced them to prostitution.
RIVERS (on camera): We spoke to one of the 11 young women who was trafficked across Europe by Marius and Bogdan. She lived at the end of this road in abject poverty. One of the most harrowing things, though, is that she was pushed into the arms of the traffickers by her own relatives.
(Voice over): She didn't want to go on camera but the authorities did give us video testimony of other women from this area in similar cases, which graphically describe the shear terror endured by victims.
UNIDENTIFIED FEMALE (through translator): I saw one of them removing the eye of the girl because she wasn't make enough money. Another time I saw them cutting woman's leg with a knife and putting salt on it. We were all afraid to run away or tell the police.
RIVERS: The police in Romania say there are many cases like the Nejloveanus and some are much, much worse. They helped me get rare access to one of Romania's maximum security prisons to speak to the most notorious trafficker in the country.
Armand Chilnack (ph) got a 22-year sentence related to human trafficking. He was found guilty of killing Maria Buju, a 26-year-old he bought, beat, and left to die in a cellar.
UNIDENTIFIED MALE: I paid $50 and then I took to my home. I have a fight with her, I hit her, I sleep with her, and next morning she don't wake up. I know what I did was wrong.
Chilnack (ph) is just one of the 609 people investigated for human trafficking by Romanian police in the first six months of last year. The sex slave trade is vast and profitable and its victims are often the most vulnerable in society. The Nejloveanus, like many traffickers, exploited women with mental disabilities, from broken homes, and forced them into a world which scared them forever. Dan Rivers, CNN, Romania.
QUEST: Now, it is not a problem that is specific to one country, or indeed, one continent. It affects both the developed and the developing world. However, if you look at it, and you join me over in the library, we can pull some strands together, which will show exactly the way in which it can be put together.
You have what are might be called the source countries. This is where the trafficking begins. As you heard in Dan Rivers' report there, Romania, poor, war-torn, ethnic divisions. All these reasons might be ways in which source countries can actually come, Nepal, Nigeria, Guatemala, are examples. Then you have the transit countries, because you have got to get from A to B to C. And these are the temporary stopping points on the victims' journeys. It is people in these areas, like Mexico, Israel, for example. They perhaps are the potential moments when people involved, or the trafficking victims can be spotted and rescued. By the time you get to the destination countries, well, typically affluent nations, the U.K., Germany, large parts of the European Union. By the time you get there, it is probably too late. These are places where, of course, also will be on the road.
So, as we move on let's talk to two of our correspondents. Russia and Nairobi, in Kenya, both could be considered all three kinds of countries, and it is there that we find Matthew Chance, in Moscow and David McKenzie, Nairobi.
Matthew, I want to begin with you. And the exodus from Russian, of Russians, both tourists and business people, but this is something different isn't it? How much play is it getting in Russia?
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it is a huge issue, Richard, to be honest in Russia. Because, you know, talking about source countries, particularly after the collapse of the Soviet Union in the early 1990s.
There are countless examples of young women who were lured by the prospect of lucrative job in the West, in Europe and the United States and the Middle East only to find themselves kind of sucked in to the sex industry and unable to escape. And so there are plenty of stories and plenty of organizations of people trying to rescue women like that.
But it is interesting, you mention, it is also a destination country, there is a bombing sex industry here in Russia. And it drags in people from the region and from around the world as well, Richard.
QUEST: David, David McKenzie in Nairobi, where would you say a country like Kenya, and the African countries, fits into this. A more source, or more destination, or do you get a lot of transit?
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: It is a lot of transit, Richard, because Kenya is such a hub for movement out of the airport, just down the road, out of the Mombasa port. But I have to say it is also a source country. This ultimately, as repugnant as it sounds, is a business; a $9 billion, $10 billion business. And you have Kenyans who are trying to find, the pull factors, the economic pull factors, trying to find better jobs out there, often as domestic workers, often women lured by the promises of good jobs in the Middle Eastern countries, particularly, the UEA and in Saudi Arabia.
But it is also the push factors, the economic situation here in Kenya, the lack of jobs, the low standard of living with many people. So it is a transit country, people coming in from Ethiopia, from Tanzania, particularly for the sex trade. But also it is an economic situation. People think they are going to get jobs but they end up getting stuck.
QUEST: So, David, is there a feeling in country, that this is such a serious issue that it needs to be rigorously dealt with, or perhaps, is there a societal acceptance of what is taking place?
MCKENZIE: It is a very good question. In fact, Richard, it is a combination. There are some instances, in fact, many instances when family members are the ones who suggest people go and work. Now, there are organized traffickers here in Kenya. You can even, Richard, open up the classifieds in a newspaper, and see right here. "Opportunities in Dubai", "Opportunities in Riyadh". So, it is really out in the open. The problem really lies with the governments; the governments of say, Saudi Arabia, coming up with a real system to avoid this problem coming up. When they get there they're passports are taken, they get no money.
MCKENZIE: Obviously, economic migration is one of the tenants of a free market economy. But when it is abused like this, something is clearly wrong.
QUEST: OK, Matthew, finally, to yourself. Because obviously, QUEST MEANS BUSINESS over the next year, we are going to be looking at the commercial, the economic, and if you like the way in which business plays into this. We know Russia, with its vast natural resources, has money literally sloshing about.
CHANCE: Absolutely. And one of the big problems of course, is that the people that bring in these migrant workers, particularly the sex workers as well, but one of the bigger issues perhaps is the issue of migrant workers coming in to work on farms, and in the construction business. That is very much tied up with big business. The skyscrapers that are being erected around the capital, and other cities across Russia. The big building projects, we're talking about big money. The billions of dollars often involved. So the people who bring in the migrant workers are often very connected with local officials and, you know, the corruption is such that it makes you know, fighting the battle against human trafficking and modern slavery, in that sense, all the more difficult.
QUEST: David McKenzie, thank you for staying up late tonight to talk us. Same to you, Matthew Chance, who is in Moscow, our correspondents.
And you will want to find out more about this new initiative. And this is where you find out about it. It is our "Freedom Project" special web site, CNN.com/Freedom, where you can access extensive resources, including reports that I did on Interpol, which you saw last week, which is the largest policing agency and how they are fighting trafficking. Also, take a stand and participate in our iReport, Freedom Project, CNN.com/Freedom.
As we continue tonight, "Future Cities", we are in the Eternal City of Rome, and I'll show you why no emperor or invading army could be more dangerous than the weight of its ancient heritage.
(DESK BELL CHIMES)
QUEST: Tonight, back to the future, and to Rome. La dolce vitae and the piazza, the bara barini (ph), we are going to Marcus, Caesar and the Colosseum, yet the city of civilization is being overwhelmed by the weight of its own heritage. Not to mention Romans love of their cars.
How do you modernize a living, breathing, museum, that is also a capital city of a G8 country. The old and the new, in Rome they are finding a way to make it a "Future City".
QUEST (voice over): Rome, the Eternal City; 2,000 years ago this was the heart of civilization, a pioneer of city life. Today the Italian capital can seem more famous for what remains of its glory days than its modern innovations.
The need to preserve its antiquities has made it difficult for Rome to bridge the gap between past and present.
(On camera): One problem is that many Romans don't see any need for modernizing. After all, why change a winning recipe. Especially when the pasta tastes this good and the buildings have been around that long. The reality is, though, for any modern 21st century doing nothing simply isn't an option; a bit like letting this go cold.
(Voice over): Change maybe on the horizon, though. Rome is currently the only city bidding to host the 2020 Olympic Games, with the IOC's decision just two years away. Rome's mayor is optimistic, the city's Olympic ambitions will fuel its drive for change.
GIOVANNI ALEMANNO, MAYOR OF ROME, ITALY (translation on screen): There is a challenge with modernization. We must innovate our transport system because moving around Rom is difficult.
QUEST: Official figures reveal Rome has nearly as many vehicles as inhabitants. In a cit with narrow streets, this leads to severe congestion.
TOM RANKIN, ARCHITECT, STUDIO ROME: You take your average Roman and tell him to get from point A to point B, even if they could walk it in 10 minutes, they'll probably be willing to drive it in an hour, through traffic, just so they can be with their car.
QUEST: This reluctance to ditch cars is partly because the city has a lack of public transport. Bus, tram, and metro services only account for around a quarter of all journeys made. In other European capitals, like London and Paris, that number is twice as high.
ALLEMANNO (translation on screen): The problem in Rome is the limited underground system. We have a few kilometers compared to hundreds of miles in London, Paris and all major European cities. This is due to the discovery of important archeological finds when digging underground.
QUEST: Beneath Rome there are layers upon layers of precious artifacts, accumulated over the centuries. Dig downwards and you are likely to uncover important historic relics. Currently Rome has two functional metro lines The new Line C, crossing through the city's historical center is under construction, but is often delayed. Line C's route had to be altered when the remains of an ancient Roman school were discovered along the designated path.
ROBERTO CECCHI, COMMISSIONER OF ARCHEOLOGY, ROME (translation onscreen): We read great statements in the press about our (UNINTELLIGIBLE) but as soon as there is a problem archeology becomes "damaging to the city". Archeology is an opportunity. We must blend the old with the new.
QUEST: Adapting the new to the old it all takes time. So 3D digital imaging is now helping speed up the process of building around these archeological sites. Developed in Italy, this technology reduces the time to spend on site.
If archeologists and engineers must tread carefully, one man has a far more radical solution to protect Rome's historic center.
Antonio Tamburrino is a private consultant to the city. He hopes to rid Rome's center of cars altogether. Such a plan would include the construction of a circle line, with bus-tram hybrids connecting Rome's landmarks. These so-called Phileas vehicles are guided by tiny magnets buried only centimeters under the road's surface.
ANTONIO TAMBURRINO, TRANSPORT CONSULTANT: If we succeed to eliminate completely the traffic on the surface, we'll succeed also in having an autobahn (ph) environment of maximum quality.
QUEST: Tamburrino's plan could be approved by the mayor in the coming months.
But will Romans leave the comfort of their cars, in any event?
FABIO NUSSIO, ROME MOBILITY AGENCY: The roman citizens are the citizens of the capital of the ancient world. So they have inside this period to adapt to the changes. They adapted to imitation (ph). They adapted to the beauty.
QUEST: As the saying goes, Rome wasn't built in a day and neither will it rush to revamp its city center, that said, with the purpose of bringing the Olympic Flame to Rome in 2020, city officials hope there will be a swift return to the future.
(END VIDEO TAPE)
QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
World powers are moving to stop the bloodshed in Libya. Diplomatic sources say the Western powers are outlining a possible U.N. Security Council resolution on a no fly zone that would stop military airstrikes like this one on rebel-held Ras Lanuf earlier today. And NATO said it's begun round the clock surveillance flights as it considers options for dealing with the violence.
A new government is taking shape in Egypt. Cabinet members have been sworn in in Cairo. The ceremony was broadcast on state television. The new prime minister, Essam Sharaf, was appointed last week. And today, he called on Egyptian youth to contribute to the new government.
The U.S. Defense secretary has apologized directly to the Afghan president for the deaths of nine Afghan children in NATO airstrikes last week. Robert Gates is on an unannounced visit to Afghanistan, his 13th trip there since taking office. He told U.S. troops he thinks about them every day.
The corruption trial against the former French president, Jacques Chirac, which begin today, may soon be delayed on a legal technicality. He's accused of embezzling public money to pay people working for his party when he was the mayor of Paris. The former president is denying any wrongdoing and the judge will rule on Tuesday on a constitutional challenge.
Two of the world's major luxury houses announced they're coming together. LVMH, Louis Vuitton Moet Hennessy, announced on Sunday night, that it was taking a majority stake in Bulgari, the Italian company. LVMH's founder, Bernard Arnault, is calling it the perfect combination. Bulgari will take on responsibility for LVMH's watches and jewelry divisions. The Bulgari family has agreed to hand over its majority stake.
And in turn, they will become the second largest family shareholder in LVMH. It's the latest move by LVMH to acquire stakes in luxury competitors. Interestingly, not only this, but LVMH also has a 20 percent stake in Hermes. Hermes has decided, of course, it wants nothing to do with LVMH and has put in place a sort of poison pill from the family owners.
A little earlier, I spoke to Bulgari's chief exec, Francesco Trapani, and I needed to know if being the latest company in the LVMH conglomerate, well, frankly, one amongst any, was he in danger of getting lost?
FRANCESCO TRAPANI, CEO, BULGARI GROUP: To prosper in the next years in the -- in the luxury industry, I think you have to have, on one side, the know-how of the luxury business. So creativity, innovation, attention to detail, service to the time zone and so forth. But in addition to that, you need scale. So finance and organization on a global basis, because the market is becoming more competitive, geographically more dispersed. In the past, we were operating the mature markets. Today, to market for the future are, you know, greater China, Russia, the Middle East, South America. So these two things are very important.
Then, with my family, we were thinking of doing something on a larger scale. And so we have decided to join forces with this big group that, in our opinion, has the two ingredients. They understand very well details of the luxury business, but they have scale and they wanted to join forces.
QUEST: The luxury industry, at one and the same time, it gets hit by recessions at the -- in the middle of it, if you like. But right at the top, right at the uber, ultra luxury, it seems to carry on regardless of the wider economic situation, doesn't it?
TRAPANI: We saw a strong turn back in the last -- over six months or so. Before that, things were going very, very well.
QUEST: And, finally, what will you bring, do you think, you personally?
What will you bring to the LVMH family?
TRAPANI: Well, I think -- I hope, at least, a great deal of enthusiasm and, you know, a long experience in the luxury business, particularly with jewelry and -- and watches. So I hope that I will be able to help them in -- in growing in the jewelry and watch division.
Basically, LVMH is a big company that in each domain is trying to have a stronger leadership. It didn't have this leadership in -- in jewelry and watches. Now, with the acquisition of the Woolery brand (ph) in this area, they were -- they are much stronger. And I hope that my -- my job, my work will allow them to really become a leader.
(END VIDEO TAPE)
QUEST: That was Bulgari's chief exec, Francesco Trapani, talking to me.
Staying with that luxury theme, because if it's luxury hotels then you're after, Starwood's W hotel brand has opened a new flagship -- a new flagship hotel in London's Leicester Square, which is interesting, because it's considered a milestone in the chain's global expansion.
The W chain has been in many other cities around the world, but not London. It's all part of chief executive -- or President Frits van Paasschen's take on how to build the Starwood brand through a variety of different hotels.
The core question, why has it taken W so long to find London?
FRITS VAN PAASSCHEN, PRESIDENT AND CEO, STARWOOD WORLDWIDE: The W brand is about 13 years old. It started very much as a New York phenomenon and then, over the last few years, has become a global brand.
Coming to London, for us, is a great rite of passage and we would have loved to be here earlier, but London is not an easy market to open a new -- a new hotel and to find exactly the right location. And we wanted to come in in a place exactly like this.
QUEST: How dies it fit into the total Starwood range, from the Regis at the top, with chandeliers and large flower arrangements right the way down?
VAN PAASSCHEN: That's right. Well, you have -- you have St. Regis with a butler to W, which is certainly not your father's definition of luxury, to a brand like Sheraton, which might appeal to a more mainstream business traveler or a brand like Westin, which, in our view, captures that need for travelers to have a sense of feeling renewed and rested and better when they leave the hotel than when they arrive.
QUEST: Do you get to a point where you've got too many brands and you're actually cannibalizing within them?
VAN PAASSCHEN: We're not there yet. We like the fact that we have a portfolio of what we call distinctive and compelling brands, that each of those brands might appeal to a different type of travelers, or, in many cases, even the same traveler on a different kind of trip.
QUEST: So isn't the danger that you over promise and under deliver?
VAN PAASSCHEN: No. In a way, in fact, it's the other way around. The more hotels that we add, the more demand we create. People we to come and see what W is doing in London, because this hotel is unmistakably London, but it's also unmistakably W.
QUEST: Now, you, like every CEO I meet, is going to tell me it's China, it's Asia, it's emerging markets.
How you capitalize into that?
VAN PAASSCHEN: If 70 percent of the world's economic growth will come from emerging markets, it shouldn't be a surprise that 70 percent of the hotels that we're going to open are, in fact, in emerging markets.
So you take a market like China. We have 70 hotels open today, which makes us the largest high end player in that market, and another 85 that are under construction.
And we believe that, over time, the Chinese market, for the brands that we have, will be at least as large as the U.S., where we have 450 hotels today.
QUEST: But where is the profitability?
Because you may have all these hotels and, of course, if you look at the developed markets, Europe and the United States, where you still have the bulk of the hotels, they are not going to the profitable ones in the future.
VAN PAASSCHEN: First of all, in a market like this -- take London, for example, arrivals into Heathrow for the latest couple of months are up 3 or 4 percent. Most of that is being driven by Chinese travelers. So the outbound travelers from emerging markets is a huge opportunity for our owners and developers in Europe and the United States.
QUEST: You came from Coors and before that Nike. It's fascinating, because you're not -- you know, if I cut your right leg off, I don't find hotelier, be mine guest right the way through. You're a marketing man?
VAN PAASSCHEN: I'm a very -- I'm a global brand guy, I think, if you had to put a headline on it. But at the same time, the four presidents of our regions around the world, among them, have 110 years of lodging experience. It's finding that balance that's important.
(END VIDEO TAPE)
QUEST: The branding man takes over at the top of Starwood. And the W is now open.
Hollywood politics, fatherhood and "The Adjustment Bureau" are the focus of discussion when the actor, Matt Damon, appears on "PIERS MORGAN TONIGHT." He will appear at around 15 minutes from now, immediately after QUEST MEANS BUSINESS.
Now, everything has changed, the words of one company reeling from the soaring cost of cotton -- raw material prices on the rise and what it means to you.
QUEST: The stock markets across Europe are closed. And tonight, they are in the red. Stocks, as you can tell, were all -- well, just off a .25 percent, .75 in Paris and .25 in the (INAUDIBLE).
They added to their losses that investors got. Again, they were very about oil prices and what that might do to the glo -- global recovery.
Shares of Barclay's also contributed, particularly in the London market. Barclay's was down 1.5 percent.
It's difficult to see exactly why, bearing in mind, it can't just be on the back of diamonds.
Now, on the cause of the anxiety, well, NYMEX oil for April delivery is up 71 cents, at $105.12. Crude pulled back from its session highs of $106.95.
And in Athens, the government is furious after -- these are live pictures -- after Moody's Investor Service cut its ratings on Greece's sovereign debt.
Well, when it comes to rising prices, it's not only oil that's making inflation watchers cringe. The cost of other raw materials, such as cotton, is also on the rise. That has an impact in the price we pay, as we continue to look at how supply and demand impacts the bottom line.
Maggie Lake visited a company in the state of New Jersey for a closer look.
DAN LETZT, CO-OWNER, LES TOUT PETITS: Here's a -- here's a fabric to give you an idea.
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT (voice-over): Danny Letzt and his team at Les Tout Petits have been manufacturing up to the minute children's fashions at their New Jersey facility for over 25 years. They always thought they could count on relatively stable prices for cotton. But this past year, everything has changed.
LETZT: Some of it is -- to be honest with you, some of it is crazy because how would you like to go to a gas station, as you're pulling in, it says $3 a gallon and as they're filling it up, it went up -- it went up 15 cents more?
LAKE (on camera): So that's how quickly prices are moving?
LETZT: That's -- in some cases, yes.
LAKE: Have you ever seen...
LAKE: -- anything like this while you've been in business.
It's 100 percent cotton, garment...
LAKE (voice-over): So far in 2011, cotton futures have rallied more than 30 percent. Over the past year, futures have spiked more than 130 percent, driven by higher demand around the world and disappointing harvests.
(on camera): Give me an example of -- of what something -- something -- one of these fabrics we do have cost even, say, a year ago?
I mean do you -- can -- do you know how much...
LETZT: Oh, sure.
LAKE: -- it's -- what -- what's the change been like?
LETZT: It probably has gone up triple, not double, but tripled. Something that was 64 cents a pound is like $1.60, $1.80.
LAKE: How do you cope with that kind of increase in just one year?
A tripling of the...
LETZT: It's going to...
LAKE: -- of the...
LETZT: -- it's going to probably get worse.
LAKE (voice-over): For Letzt, much of the blame can be traced to China, which he says has virtually cornered the market for fabric manufacturing.
LETZT: There are no more manufacturers -- fabric manufacturers in New York/New Jersey, basically, because all of them went out of business because China made the prices so sweet.
Now that everyone is out, they're starting to raise and raise and if you want it...
LAKE (on camera): And you have no alternative?
You have nowhere else to go?
LETZT: Basically, yes.
LAKE: Oh my gosh.
UNIDENTIFIED FEMALE: This is like a really hot one.
LAKE (voice-over): Letzt has been able to shift production to more readily available synthetic fabrics and away from cotton to contain costs. He's also been able to hold the line on price hikes by managing inventory.
LETZT: We're smart enough to order fabric in advance. It could be two months before cutting it. At least we own it, because we don't want to disappoint our stores, because they need the merchandise.
LAKE (voice-over): But decades of expertise in controlling costs will only go so far. Letzt says the price of clothing for U.S. consumers is heading up if cotton and other fabric prices remain at current levels.
Maggie Lake, CNN, Ridgefield, New Jersey.
(END VIDEO TAPE)
QUEST: And the U.S. markets that are open and doing business this is where it stands, down 92 points. It's off -- it's well off the session lows for the day, 92.5, 12077, .75 of a percentage point.
But, frankly, I've -- well, I suppose some would argue that 12000 could be a bit rocky. But we've just got an hour and 10 before close of business today.
The weather forecast now.
Jenny Harrison at the World Weather Center.
Now, a wonderful, bright -- and, you know, Jenny, it was rather nice today in London.
JENNY HARRISON, CNN METEOROLOGIST: Oh, good. I'm glad to hear it. I heard you've had quite a nice weekend, didn't you?
HARRISON: Pretty good weather conditions.
QUEST: Hmmm, hmmm, hmmm.
HARRISON: A little bit cold, a little bit cold and (INAUDIBLE) not a great?
Well, at least you've not got all the snow that some parts have got, Richard.
Actually, I have to tell you, as well, when it comes to traveling, you shouldn't experience too many delays over the next couple of days.
But let me just show you where the weather really has been and will continue to be. It's all this portion here, the southeast of Europe and across into Turkey.
Now, I know you've got a bit of cloud across the Northwest. And that's where the winds are certainly fairly strong and will be over the next couple of days.
But look at the temperatures right now, because as that low worked its way eastward through the Mediterranean, so it filtered in behind some very, very cold air. And that cold air has plunged far to the west and to the south.
So three degrees in London right now; two in Berlin. Then you factor in the wind and it feels as if it is below freezing in London. And those temperatures, as well, right the way down into Central Italy -- six degrees in Rome right now and it feels like just a degree above freezing.
Now, it's all courtesy of this system, as I say, as it's moved eastwards. Some of the cold air has come behind. But as you quite rightly said, out toward the west, some nice sunshine and those fairly good, clear skies.
It does mean temperatures are going to dip low in the overnight hours, but actually rising quite nightly -- quite nicely in the daytime sunshine.
You can see all this snow really beginning to spread across much of Turkey. And it's fairly widespread. But, also, some pretty hefty accumulations.
Look at this, about another 25 centimeters across much of the country in the next 48 hours.
But as I say, when it comes to traveling, you've just got a few windy conditions across Northern Europe, Paris, you can see there also Frankfurt and Munich. But nothing that should really impact your travel by too much. So nothing to worry about there.
And, as I say, temperatures by day, when the sun does come out, it's about 12 degrees in Paris; 10 Celsius in London. And, in fact, beginning to retreat, that cold air, on Tuesday, pushing further toward the east. So a very mild seven in Berlin.
Now, it's been an improving picture suddenly throughout Sunday into Monday across the Northeast of the U.S. But you'll notice all of this beginning to accumulate across the Central Plains. And that is where the next line of thunderstorms will be firing up over the next 48 hours. And they're likely to be fairly strong ones. Again, you can see that line very, very clearly across the Southeast.
But again, in the meantime, there really aren't many delays to talk about as we go through Tuesday. It's a fairly quiet day. Those delays are really beginning to kick in later, toward the middle of the week. There could be some snow, though, in Denver, in the overnight hours. And you'll notice also across in Asia, just Taipei, really, seeing the strong winds there in Tuesday,
Meanwhile, the temperature is beginning to come up a little bit. Seventeen degrees in Atlanta on Tuesday. Eight Celsius, though, in Denver and 24 in Dallas -- and, Richard, it is that time of year again. I think I just really want to quickly show you this road, you know, you and I talk about this, we talked about it over the years, it's ongoing at the moment. Temperatures pretty cold. You might expect a topping close to freezing, getting very cold in the overnight hours.
But for the next few days, it should be dry and sunny. So I guess 1,800 kilometers and the sunny skies, it must be nice in some way.
QUEST: Well, thank you very much.
It's that time of the year again.
It will be very pleasant, I'm sure.
QUEST: Many thanks.
Jenny Harrison at the World Weather Center.
Now, the phones are ringing off the hook at the U.S. Embassy as if getting a green card was -- isn't complicated enough. There is a new and quite worrying scam that's turning the American dream into a foster nighttime. And the U.S. State Department is worried.
QUEST: It's a new and growing problem -- check your e-mails and suddenly the e-mail arrives that you've won the American green card lottery. All that stands between you and the dream is a fee that you have to send. The only problem is, it is a scam.
The U.S. Embassy in London says it's getting 100 calls a day because of e-mails like this one. They got. They've got the State Department's logo on the bottom of them and they look, to all intents and purposes, as if they are genuine. But they are not authentic at all. They're not authorized. They're cons persuading people to wire money to fraudsters, meaning people hoping to emigrate are handing over their cash for nothing.
Now, these sorts of green card lottery scams are not new. What makes this one different is that they are actually quoting named people at the U.S. Embassy. Involved are quite large -- at least 100 calls a day to the London building.
I spoke to Derwood Staeben, the consul-general at the U.S. Embassy here in London.
As I asked the consul if he was surprised at how many people were falling for this scam.
DERWOOD STAEBEN, U.S. CONSUL-GENERAL IN LONDON: It's the volume of -- of -- of inquiries and complaints that we're receiving that -- that led us to do this. And, of course, we want to educate the public as much as possible about all the types of scams. And this one, because of the -- the specifically creating a fictitious person allegedly at the U.S. Embassy, people think that it's real when it's not.
QUEST: So not only has it got a -- it has a name on it, it tells you -- it looks, to all intents and purposes, like -- it's got sufficient bureaucratic nonsense in it that you might think it's official?
STAEBEN: Well, it has the U.S. Department of State seal on it and it has enough information in there written in such a manner that it looks as if it's real.
QUEST: Why is it you're concerned, though, because, surely, anyone who hasn't applied for the green card lottery, as it's more popularly known, you know, if I haven't applied for it and I get an e-mail telling me I've won it, I'm hardly going to go and send you money or -- or maybe people are?
STAEBEN: Well, we believe that people are. In fact, the wording is very carefully put in there that says that you are randomly selected as a winner of the Diversity Visa Lottery.
So we believe that people actually are doing this and -- and, in fact, the people that sent us money may very well have been randomly selected in that sense.
QUEST: So the application comes in and -- or the -- the false application comes in, some send you the money, some way -- what do you tell people to do?
STAEBEN: Well, for those of us who have sent us the money, we're returning that money. But for the -- the -- the thousands of inquiries that we've gotten, we're informing them that this is a scam, please do not send money.
So I mean we're trying to educate the people. And we've received phone calls from all over the world, including Southeast Asia.
QUEST: Are you surprised, sometimes, at the gullibility of people, when they get these things?
STAEBEN: That's -- that's -- that's not my judgment to make. What we're trying to do is help people not lose money, because this is a criminal activity, real people are being hurt. They're sending money. They're losing money to these scammers. And we do not want in any way, obviously, to aid or assist these scammers in this criminal activity.
So we want to get this information and push it out to the public.
(END VIDEO TAPE)
QUEST: So if you have received an e-mail telling you to send money because you have won the green card lottery, the moral of the tale, don't.
A Profitable Moment next.
QUEST: Tonight's Profitable Moment.
There is nothing worse than people who prey on those who have hope. That's the nasty business of the hucksters who tell people with e-mails like this that they've won the U.S. green card lottery and all you need to do is send cash to get the visa.
Hundreds of people a week are calling the U.S. Embassy here in London saying they've received such demands. Some have sent money into the unknown.
The fact that the London embassy is so concerned about this tells us the scale of the problem.
Now, I've never been a huge fan of the so-called Diversity Visa Lottery, the green card lottery. I think citizenship by lottery is an unsavory affair. It creates false expectations, unrealistic hopes.
But that's not my business.
Those who prey on people's hopes will always find some victims. Let's hope after this warning, they are fewer and further apart.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"PIERS MORGAN TONIGHT" is after the headlines.