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US Justice Department Sues Apple Over E-Book Prices; E-Book Pricing Evolution; Greek Elections Called; European Markets Rebound from Tuesday's Heavy Losses; US Market Bounces Back; Liquidity and Growth; European Currencies Up Slightly; Nokia Warns of Q1, Q2 Losses; The Myanmar Security Exchange; Interview with Samer Majali; Interview with Bill Marriott and Arne Sorenson; Foreign Corrupt Practices Act

Aired April 11, 2012 - 14:00:00   ET


RICHARD QUEST, HOST: There's a worm in the Apple that's now in the book. Apple is being sued over e-book pricing.

Nokia is knocked. Shares fall after a profit warning.

And better than a bus pass. Gulf Air lowers its fares for pensioners.

I'm Richard Quest. I mean business.

Good evening. Apple is being sued over the price of e-books. It's one of several companies that the US attorney general says is now fixing the price of electronic books. If you join me over in the library -- well, the super screen, which is in the library, because the super screen is the library. You get the idea.

Here is our book, and it will show exactly what we are talking about. This si the litigation against Apple and others, and this is what it seems to be about. The others named by the Department of Justice includes MacMillan, it includes Penguin.

The suit is likely to stem from the launch of the iPad in 2010. Back then, Apple reached a deal with five publishers to release books on its iBookstore. Now, the deal that they did put it in contradiction with another deal known as agency pricing, which put them in the market at $12.99. Apple takes a 30 percent cut of that.

Meanwhile, however, Amazon's Kindle was forcing publishers to sell most of the books at $9.99. The European Commission is holding a similar investigation, and it comes a day after Apple's market value hit $600 billion.


ERIC HOLDER, US ATTORNEY GENERAL: It sends a clear message that the department's anti-trust division continues to be open for business and that we will not hesitate to do what is necessary to protect American consumers.


QUEST: So, there we have a situation. Amazon's at $9.99, the market price is at $12.99, Apple's taking a 30 percent cut, and you can see that all of the various parties that are involved. Dan Simon is in Cupertino, California, the home of Apple, and with more on the story.

It's a small part, in a way, of the Apple empire and what the iPad and what's available. But this could turn in to be a very big deal for them.

DAN SIMON, CNN SILICON VALLEY CORRESPONDENT: Well, it could. When Steve Jobs was alive, he took a sympathetic view towards publishers, and he wanted to figure out a way for them to make some more money.

And I think the way to approach this story, Richard, is to kind of go back in time and look at how e-books have evolved. You talked about it just a second ago, but Amazon, obviously they ruled e-books for a long time, and they were selling those books at a cheap price, at about $10.

And then all of a sudden, the iPad comes along, and the publishers want to figure out how they can make more money. So, Apple lets the publishers set their own prices for the e-books. It goes up a few dollars. They make more money.

But then, the publishers do something. They go back to Amazon and say, "This is the deal that we have with Apple. We're going to demand the same type of pricing structure from you." So what that meant is that the prices went up on Amazon, they went up across the board for everyone selling e-books, and so it hurt the consumer, and that's why the Department of Justice filed the lawsuit.

QUEST: Dan in Cupertino. We thank you for that part of the story, giving us the overview on this. Now, let's talk more about in detail, will we now see a cut in the price of electronic books? Joining me from Washington is Mark Cooper, research director for the Consumer Federation of America.

The disparate -- we heard, though -- you probably also heard -- Dan Simon in California. So, we have Amazon at a lower price. Apple comes in at a higher price, and then the publishers force Amazon to raise their prices.

I can see how the consumer is disadvantaged. What I can't just see yet is what is the objectionable behavior?

MARK COOPER, CONSUMER FEDERATION OF AMERICA: Well, the objectionable behavior is multifold. It was a conspiracy. The publishers talked together. If you read the complaint, they talked together, they plotted together.

Apple offered them -- became the ring leader at executing a joint strategy to raise the price of books. Apple took a bigger cut than Amazon did, the publishers increased their rate of profit on e-books, and the consumer paid. So, all of that is fundamentally antithetical to the anti- trust laws.

But it's even more to it than that. This is a key moment. E- distribution, digital distribution is spreading rapidly. It delivers tremendous benefits --

QUEST: Right.

COOPER: -- to the economy, to consumers, and these folks saw it as a competitor threat to their incumbent business model. They wanted to gain control of e-distribution to dampen competition. So, it's a -- it's a big deal.

QUEST: Right, so the likes of Amazon, in some senses, should have held firm and should not have buckled under the protestations that were coming from publishers?

COOPER: Well, the publishers had tried hard to get Apple -- Amazon to change its pricing. They had failed individually. But now, they present Amazon with a united front. They would withhold all their books if they -- and it constituted about half of the books Amazon sold --

QUEST: All right.

COOPER: -- if Amazon did not agree to the price increase. So, it was -- is with a concerted, collaborative action, collusion, that drove the price of books up. And I think it was worth a couple hundred million dollars last year, and it could have grown to billions as e-book become dominant. That's why it's so important to stop -- nip it in the bud right now.

QUEST: Right. Now, corporate lawyers galore in all those publishers, in Amazon, in Apple. They must know the anti-trust law. They know the rules on racketeering. They know the rules of collusion. So, they have an argument that basically says, "We didn't break the law."

COOPER: Well, the evidence that's cited in the complaint with meetings and e-mails suggest they did break the law. One of the things they're going to try and mount is an efficiency defense claiming that keeping the bookstores in existence is the more efficient way to go.

That's -- you can make that defense under the anti-trust laws. In this case, it's ludicrous. Digital distribution is much more efficient, and the publishers were afraid that it would undermine their key position.

Actually, one of the publishers talks about being disintermediated, digital disintermediation, in which the middle man gets squeezed out. And that's what they were afraid of.

QUEST: We'll talk more about this, and you'll help us understand the machinations of this case, which one thing is for certain, it will last some time. Many thanks for joining us.

If there's one things the markets didn't need today, it was more uncertainty. And now, the next Greek government's is anyone's guess on the day that elections have been called. We'll be speaking to a Greek cabinet member who's also standing for reelection.


QUEST: After the break.


QUEST: Greece will go to the polls on May the 6th in a snap election that will decide not just its new parliament, also, though, the future of the bailout program. The Greek prime minister, Lucas Papademos, has met the Greek president and asked him to dissolve Parliament.

This vote will mark the end of his coalition that's governed since November, a technocrat coalition. Support for Greece's two main political parties has collapsed in recent weeks. The ruling PASOK Party is still behind in the opinion polls, and a member of the cabinet from that party is the tourism minister, Pavlos Yeroulanos, who joins us now, live from Athens.

Minister, good to see you. So, now the voters have a chance to wreak their own wrath on the politicians. Those of you who have signed up to austerity, the voters now have a chance to give their view. Why will you not all be drummed out?

PAVLOS YEROULANOS, GREEK TOURISM MINISTER: Well, for starters, I think the wrath is about politics in general and the way they have been run for several years. It's not only for what has happened in the past few years, which has been an economic crisis that was coming in from way in the past

So, I believe that this is the time to fight, this is the time to explain to people what has been happening the past years, and this is the time to make a commitment for the future ahead.

QUEST: All right, talk about the future ahead, because you're going into an election in your constituency where -- in your party where you've got to convince people that there is hope, there is growth, there is the possibility of a turnaround when all most people in Greece can see is somewhat despair at the moment.

YEROULANOS: There is hope and there is a lot of growth to be had. What we are trying to say and what I think is important to be said right now is that the Greek economy is on a much better footing than it was two years ago in terms of changes that have been made that will allow growth in the future.

We are -- what we've done in our ministry, for example, is focus on the core economies of Greece, tourism and culture, and produce conditions for growth, and I think that's what we will be seeing in the years ahead. The question is how this is going to happen.

QUEST: Is there a danger, though, that the parties that have signed up to the austerity measures, those parties that also had to sign on before the second bailout was agreed, that you are sidetracked by votes to minority parties that have not signed up and are determined to trouble- make.

YEROULANOS: Well, actually, the measures that were taken were severe, and they were severe because the Greek economy was heading into the wrong direction. Things had to turn around quickly.

Now, a lot of small parties have seen this as an opportunity to raise the flag of anti-measures, for example, without actually proposing something as an alternative. We --

QUEST: But you'll agree --

YEROULANOS: -- we know very well that the --

QUEST: Let me interrupt you there. Forgive me, interrupting you, but you'll agree, a serious possibility and risk is that those minority parties get a sufficient foothold to call into question the support of the second bailout.

YEROULANOS: That's true, but don't think for one reason that just because the -- these parties are saying one thing today, they won't do something different tomorrow.

Some people in these parties know very well that the return to the drachma would be devastating to the Greek middle class, that the country would stop being able to pay salaries and pensions, and that would create a huge havoc.

They know very well that, although their rhetoric is combative, the reality is quite different, and they will have to deal with the situation they have in hand.

QUEST: Minister, you are facing the electorate for the first time as a voting member. In a sentence or two, what will your message be to people who say the pain is simply too great?

YEROULANOS: This is the time that politics matters, and politics matter because they can produce change. Right now, we saw the end of one era, and what we need to present is the beginning of a new one. And to do that, we need to invest in everything that Greece is great at. We know what that is. It's a matter of working together and facing up to that challenge.

QUEST: Minister, we'll talk more about this during the election campaign. May even see you down in Greece to come and see you campaigning. Many thanks, indeed. Tourism minister joining me from Greece.

Join me in the library and you'll get a very good idea of the situation and just how -- how difficult it is. Bearing in mind yesterday we had such strong, heavy losses on the Euro bourses, and today, slight reversal. The Xetra DAX up 1 percent. The Milan index, down nearly 5 percent yesterday, now up over 1.5 percent

The stock markets are showing gains -- signs of life after one of the worst days on Tuesday. The rebound, it was because Spanish and Italian bond yields fell, and the ECB hinted that bond-buying was still an option.

Unfortunately, the addicted nature of the market to central bank money, they had a craving, and it looks like it's being met in terms of what they're being offered. The chief of market operations said the bank - - ECB -- could step in.

The safe havens, though, once again -- look at that -- wobbling off, the 10-year bond is now down at 1.77 percent, that's a record low at the auction. The average, it's weak, as you can imagine. Analysts say there's not enough value.

The Dow Jones, having lost more than 200 points, one of the worst sessions of 2012, now we are up over 109, a gain of nearly 1 percent, boosted by Alcoa's surprise Q1. The NASDAQ is also up around 1 percent.

Look at all these data -- all this data and factor it in as I talk to our next guest, David Bloom, the global head of FX strategy at HSBC.


QUEST: It is almost impossible, David, to know what's happening out there.

BLOOM: Well, I think you hit the nail on the head when you said we've got an addiction to liquidity. So, either we want growth or we want liquidity, and the problem is, we're in the doldrums in the moment, we've got neither.

QUEST: But that liquidity and that being -- LTRO, whether it's QE, whatever it is -- that liquidity is only being given because without it, the ship would start to sail backwards.

BLOOM: Yes. So, what we've thought we're getting was sustainable economic growth, but we found out that it's green shoots, weak roots. So what happened is, when the payroll number came out, it was worse than expected, but it wasn't bad enough that the Fed could reunite the QE touch blue touch paper, but it wasn't strong enough to say we've got growth.

So, either we want the liquidity from the central banks, or we want growth, and the moment, we've got neither. And every time the market sets back, we go back to the addiction for more liquidity.

QUEST: So, what do the markets want? All right, yes, the central banks can continue to plow money in. They can print money ad nauseum --

BLOOM: We want growth, baby. We want growth.

QUEST: Where are you going to get it from?

BLOOM: Well, this is the problem. So, when we can't get growth, we want liquidity.

QUEST: But where do you think growth should come from? We're going in circles here.

BLOOM: Exactly, and that's the problem, that we've got this -- we have not got a self-sustaining recovery at the moment, and that's the problem.

QUEST: Hang on.


QUEST: What would cause that self-sustaining recovery?

BLOOM: Well, I think you need confidence in the markets, you need us not to move from one crisis to another, where suddenly you get 30, 40 basis point moves in Spanish bond yields, where the market calms down and starts believing that things are going to hold together.

So, what happens is, you get a situation where we believe -- and then it breaks down very, very rapidly. And that's the situation we're in. The market and the world has no confidence in a self-sustaining recovery, and - -

QUEST: They have no confidence in politicians and policymakers to solve this.

BLOOM: But the policymakers have no confidence in markets, either. So, there's a mutual distrust now. So, if you go back to a Thatcher-Reagan world, they believed markets could sort it out. Politicians don't believe that anymore, and markets don't believe in politicians and politicians don't believe in markets. It's a breakdown.

QUEST: So, what's the biggest risk at the moment? Where should we -- we look --

BLOOM: The biggest risk is simple. Politics is the new economics --


QUEST: No, no -- what --

BLOOM: -- and the big political risk is the French presidential elections.

QUEST: All right. The French presidential elections are -- Hollande gets it and starts to unwind the fiscal compact. Is that your -- is that a -- what about the Greek elections?

BLOOM: You're making me scared just talking like that. Let's not air such thoughts. And then we've got -- I think Greece is yesterday's story. Now we're worried about Spain, we're worried about France.

And then we move into the US presidential election, which has had practically coverage yet, and their fiscal dynamics are in complete shambles as well. So this is the problem we're having and the effects.

Yesterday, we had this big move in bonds, big move in equities, and FX says, "I don't know what to do."

QUEST: In this environment -- and I'm not asking you to give specific investment advice, we'd have the regulators on us on both sides -- but what does one do? Where -- is it a flight to safety? I keep reading reports saying risk on, and then the next day, risk off, and risk on. Where is this?

BLOOM: Well, if you go risk on, risk off, you're in danger of losing out. So, what people are doing is they're buying a bit of everything.


BLOOM: And that way, you'll be certain to lose half your money, but keep the other half. So, you buy equities, you buy bonds. You buy commodities, you buy emerging markets. You just buy the whole gambit of --


QUEST: All right, so was I -- was I foolish to put more risk on?

BLOOM: Yes, absolutely. Because the problem is, do you have the guts and the stomach to hold that when it draws down? Because it will come back, but the problem is the drawdowns are so severe that people bail out and then they -- you look like an ass, is the word. Which is another word for a donkey, of course.

QUEST: We'll leave that word just where it lies. Many thanks. Good to talk to you.

BLOOM: Thank you very much.

QUEST: Making common sense. There you are.

Now, coming up in a moment, a bad reception for Nokia, it's seeing red and its investors are spitting feathers. In a moment, I will explain.

We talk currencies. The euro is staging a mini bounce back -- don't get too excited -- up a third of a percent against the dollar. Swiss franc and British pound also similar. Those are the numbers, the pound's at 1.59. QUEST MEANS BUSINESS.



QUEST: It's always good to have a robust discussion on what's happening in economics. And now, turning to a story of one of the big companies in Europe that's having some problems. A five-year slide. Nokia's shares have fallen 14.5 percent. Today, investors disconnected from Nokia after it warned it would miss forecasts and post losses for the first two quarters.

Now, on top of that, some of Nokia's new flagship Lumia 900 phones have been shipped with a software glitch in the US. Affected customers are being a hundred bucks on their phone bills.

Look at the popularity, look at the issues, make your own judgment. Nokia's popularity has been waning for some time. It's been playing catch- up. It was late to the party on the touch screen. Its first touch-screen was launched in 2008, a year after the iPhone. The clunky Symbian software also looked old-fashioned when compared to competitors.

Then you get the former Microsoft man, Stephen Elop, who stepped in as the chief executive. He immediately said Symbian was a burning platform and the future handsets would run on Windows form Microsoft. When those next generation phones came along, they were met with favorable reviews. Even so, sales were weak.

You can see for yourself just how far Nokia share price has fallen. That tells the story from -- now obviously, a lot of that is just a normal market. But there's no recovery that's taken place, at least this part, and one might question when one would expect to start to see that upturn. The share prices down 88 percent from its highs in November 2007.

Our Jim Boulden spoke to Nokia's chief exec, Stephen Elop, at this year's Mobile World in February. He said Nokia's switch to Windows was very much the progress.


STEPHEN ELOP, CEO, NOKIA: We're right in the heart of transition, right in the middle of it, where you're transitioning and restructuring and making all of these big changes.

And yet, at the same time, you stand up at Mobile World Congress and say, "Look at what we're delivering. Look at the new products." You can see all of the activity behind us.

This is the strongest presence we've had at Mobile World Congress in years. The booth is jammed. Nokia is coming back strong with some great products, but we still have a lot of work to do, and we respect that.


QUEST: Nokia continues their tight competition in emerging markets. It's one of the factors hitting profits. At the Mobile World Congress, Elop explained Nokia's different strategy for those different regions.


ELOP: Significant portion of our business focused on emerging markets uses a different set of operating capabilities for the very low price point devices that we call mobile phones.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Tell me what it is that we can now see coming into the emerging markets from Nokia.

ELOP: What you can see -- and I have an example here in the Asha 302 is you can see devices that people might have called feature phones before, but they're getting smarter and smarter.

They're taking advantage of data plans to allow you to surf the web. You're able to download applications. You can connect this to your Microsoft Exchange server at work, if you wanted to, even on a very low price device.

This one is expected to retail for about 95 euros. And we introduced a couple of others today that were down at 60 euros. So the point being, very low-cost devices, very effective in helping people have their first internet experience, which is what we're focused on.

BOULDEN: And I heard before, pre-loaded so that people aren't having that problem of getting -- downloading what they may not be able to get in their country.

ELOP: That's right. We're going to start off, give you some applications right out of the box. We're really focused on that first-time experience with a smarter phone.

BOULDEN: Does that mean Nokia's migrating more towards low-end markets? Towards developing markets?

ELOP: We've always had a very strong position in emerging markets. So, just in the last couple of weeks, I've been in the Middle East, I've been in Africa, parts of Southeast Asia, where we have a very strong presence at the very lowest price points.

And of course, while that market is changing, it used to be just simple feature phones, but they have the same aspirations as anyone else and want to do more and more, so we're delivering more and more capability at those low price points.


QUEST: Stephen Elop talking to Jim Boulden.

As Myanmar announces it's going to set up a securities exchange, we're going to take a look inside its fledgling stock market. QUEST MEANS BUSINESS, when we return.


QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

This is CNN. And on this network, it's the news that always comes first.

Just hours ago, Syrian state media announced the military has completed its combat mission against what it calls terrorists. Syria says it is now in control of its land and will halt all military fighting.

Video posted online appears to show tanks patrolling Zabadani. The government says troops will main -- remain on alert for any attack by terrorist groups against civilians.

The tsunami alert that triggered widespread evacuations in Indian Ocean countries has now been called off. The watch was issued after two big earthquakes measuring 8.6 and 8.2 struck off Indonesia. So far, there are no reports of any deaths or damage.

Greece is to hold its general election on May the 6th. The prime minister, Lucas Papademos, has met the president and asked him to dissolve parliament. Mr. Papademos became prime minister in November and has spent five months pushing through the tough austerity package needed to secure the second international bailout.

The Chinese Communist Party says no one is above the law after the wife of party official, Bo Xilai was named as a murder suspect. Bo-Gu Xilai has been transferred to judicial authorities over the killing of the British businessman, Neil Heywood, in November. Her husband has been suspended from his party positions.

Some public transport in the Belgian capital of Brussels has started moving today after four days of paralysis. Drivers went on strike on Saturday after one of their number was beaten to death. Some train and tram lines are now running as a partial service, after the government promised to put extra police on public transport.

Myanmar has announced today that it is to set up a securities exchange with the assistance of Japan after years of sanctions. The country is keen to revive its economy and maybe through markets.

As CNN's Paula Hancocks now reports from Myanmar, at the moment, the financial infrastructure, perhaps creaky, certainly in its infancy.


PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: This is the Myanmar Security Exchange Center. And it's the closest that this country has to an actual stock market.

Now you can see, it's currently under refurbishment. But when it was open, this is how they would actually monitor all the world markets. This whiteboard was the way that they did that.

Now the -- the center itself was opened back in 1996. But at this point, they still only have two companies that are listed here, that's a forestry company and also a bank. Now they're hoping that this stock market will be fully functional by 2015.

So what you had to do if you wanted to buy stocks in either one of those shares, you had to physically come into this building. You hand over cash and then you're given a certificate. But we are being told that the demand by far outweighs supply, at this point, as the dividends, we're being told, are pretty good.

Business, though, is not what you'd call brisk. Sometimes two customers come in one month, then no one else for another two months.

But there are still many problems currently in Myanmar. For example, there are multiple exchange rates in the country. The official rate is around 7 kyat to 1 U.S. Dollar. But unofficially, it can be more than 100 times that level.

There are also strict government controls on banking. Myanmar has now asked the IMF, the International Monetary Fund, for advice on kick starting the economy.

One man behind that effort is chairman of the first private bank here in Myanmar.

SEIN MAUNG, CHAIRMAN, FIRST PRIVATE BANK: There are a lot of sectors, different sectors that U.S. Does not (inaudible) invest. (INAUDIBLE), for one mining resources for one. And even agriculture. So it's high time to start doing something, some (INAUDIBLE) work.

HANCOCKS: Local residents say that they have actually noticed more businessmen here in Yangon over the past year since these reforms have started to happen. Obviously, businesses around the world don't want to be left behind if and when these sanctions are lifted.

Paula Hancocks, CNN, Yangon, Myanmar.


QUEST: Earlier today, I received an e-mail from some friends who are holidaying in the Pacific, say that they were being evacuated from their hotels because of -- to higher ground because of a tsunami warning.

Well, warnings of that tsunami were canceled earlier today from Myanmar and other Indian Ocean countries. The region was on guard after two massive earthquakes struck off Indonesia's Aceh Province, according to the United States Geological Survey, the first one a magnitude of 8.6. The second got measured at 8.2.

So, the earthquake has happened. The tsunami warnings were given and then have now been withdrawn.

And we need to know from meteorologist Jennifer Delgado, at the World Weather Center, why is it so?

What -- well, why -- I mean not -- now, look, not for a moment...


QUEST: -- did I want a tsunami, but I'd like to know why there wasn't one.

DELGADO: Well, especially in comparison to the one back in 2004. You're probably wondering why we're seeing such really quiet conditions in comparison to what they experienced back then.

Well, let's talk a little bit more about the dynamics with it. Again, we did have two earthquakes, an 8.6, and then, after that, we had a very strong aftershock of 8.2.

That happened in the Indian Plate. Now, notice we have several plates across this region. But the one back in 2004, that one actually happened in the Burma Plate. And that was actually what you'd call a subduction zone, an area where we actually had the Australia Plate subduct underneath the Burma Plate.

The one that we had earlier today was a -- called a strike-slip. And this happened with the Indian Plate as well as the Australia Plate.

And what happens is when you have the slipping action, you don't get the height built with the waves like what you see with a subduction zone. When you're subducting, you're seeing the water rise. And that is what allows those waves to get bigger, as well as produce those tsunamis.

So that gives you a better idea of what actually caused that.

And I also want to point out to you, when you have a strike-slipping side by side, it's less likely to cause a destructive tsunami, much like what we saw today.

Let's go over to some other graphics on our Google Earth. And I want to point out to you, as we show the area over toward the west, we're looking at two buoys. And the buoys are what is used to bring back valuable information to let you know where a tsunami wave might propagate as you go through the time period following after an earthquake. And when you have one like an 8.6, of course, an 8.9, something like that very likely.

As we zoom into this one a bit for you, let's talk about the wave height that was measured. And if you notice, we go back in time, you see the waves. They seem to be a bit more consistent. But once we had that earthquake, notice how those waves have started to shorten up a bit.

We saw the crest, as well as the trough of those waves and the amplitude that was produced showed the highest one that we saw was actually just over a meter. So that's why we're not hearing reports of widespread damage or any deaths coming out of it.

Let's go to some video here. This is going to show you how far and wide an earthquake affects the region. This coming out of Bangladesh. This is one of our iReporters.

Richard, look at this here. You're seeing this Coke bottle shaking. This was in Bangladesh. Keep in mind, this is 2,000 kilometers away from the epicenter that was not far away from Banda Aceh.

Now, let's go to the other video here. And, Richard, you remember this, back in 2004, when the deadly tsunami that happened on Boxing Day, and you remember how people actually ran out to the beach to look at the water when it receded?

You remember that, Richard?

Well, now, a lot of people have learned from their mistakes. Whenever you see an ocean receding, that means the water is receding and building that wave. And that means, it could come back and crash even higher right along those coastal areas.

QUEST: Fascinating stuff.

DELGADO: Yes, it really is.


DELGADO: I mean we've learned a lot from 2004. But once you see or you feel an earthquake, go to higher ground if you live around those areas, especially in the Pacific.

QUEST: All right, we thank you for that.

And tomorrow, we will, of course, get back to our normal diet...

DELGADO: Absolutely.

QUEST: -- of what's happening on the weather. But it was well worth taking a moment or two to explain the subductions and the things we did. It's all fascinating stuff.

When we come back in a moment, a lifetime of hospitality -- I've been hearing from the outgoing chief executive of Marriott Hotels.

And an airline discount. And before the wags start saying, I don't think I'm eligible, I'm not old enough, the CEO of Gulf Air after the program -- after the break.


QUEST: Some news to bring you on a developing story. You will, of course, be following the ongoing saga of the man shot in Florida, Tray -- Trayvon Martin's death.

Now, according to a senior law enforcement source familiar with the Trayvon Martin death investigation, George Zimmerman, the man involved, will be criminally charged, if he hasn't been already, according to sources that are -- that we are now reporting. Other sources say that the charges will happen as early as Wednesday, but they are not saying what charges the prosecutor would bring against Zimmerman.

We'll have more of that in the hours ahead.

And so we turn to our business traveler outlook and views, as our Business Traveler segment on QUEST MEANS BUSINESS.

Gulf Air today announced it is to offer discounted fares to senior citizens. The flag carrier of Bahrain is to offer a 15 percent discount to pensioners from the kingdom.

On the line now, Samer Majali, the chief executive of Gulf Air.

A quick question. I can hear viewers elsewhere saying any -- is anybody eligible for this 15 percent discount or do you have to be a resident/citizen of Bahrain?

SAMER MAJALI, CEO, GULF AIR: Well, Richard, nice to see you this evening.

Actually, at the moment, it's offered to discounted -- to senior citizens who are registered with the social insurance organization in Bahrain, because we can determine that they are old age pensioners and the fact that they're not working. And as you know, Gulf Air is a commercial carrier, the longest service -- serving carrier in the region.

But this is part of our sort of social responsibility that they can do...

QUEST: Right.

MAJALI: -- in terms of taking care of our older customers.

QUEST: Right. If it -- if it were successful, is this something you might consider, maybe not 15 percent, but having an OAPs discount, a bus pass discount for other passengers?

MAJALI: You mean on a global basis?

We might be swamped, but if there was a way just to make sure that obviously, they're -- they are old age pensioners and they are not working, we would look into it. But I think this is the first time that we considered this particular initiative. And we are trying it on -- on the local scale to start off with.

QUEST: Right. Samer, we need to talk one or two other matters. The finance minister and the -- the regulator responsible for Gulf Air in Bahrain says that the airline is safe and that there's no intentions of either closing it down or moving it on.

You must be struggling, obviously, with the political situation in Bahrain at the moment.

So how is it affecting your business?

MAJALI: Well, religion, obviously, we were -- all airlines in the region were affected by the general -- the general conditions in -- in the Arab world over this last 12 months. And, obviously, Gulf Air has been no exception.

But in spite of this, obviously, the government is -- comes out very strongly in terms of supporting the -- the national carrier and making sure that it continues to offer services.

This is an -- an island nation. And the importance of Gulf Air to the -- to the -- to the economy can't be understated.


MAJALI: And so, you know, his majesty, the king, the prime minister, have all showed -- and, obviously, the crown prince, all showed a lot of support for...

QUEST: Right.

MAJALI: -- Gulf Air...


MAJALI: -- to make sure that it continues flying.

QUEST: I need to ask you, finally, the F1 Grand Prix, the Gulf Air Grand Prix, is it your understanding that it will or will not take place in Bahrain?

It's the next one on the list.

MAJALI: Everybody in Bahrain is getting ready for the Formula 1. We are all gearing up for this. It's in 10 days time. And the -- the whole country is abuzz with -- with this particular event. The hotels are filling up. Our -- our seats are filling up. And we -- we're -- we're very sure that it's going to be a great show this year.

QUEST: Samer Majali on -- from -- the CEO of Gulf Air.

Get -- I'm -- I'm a bit young yet for your -- for me bus pass on your plane, but don't worry, I'll be there eventually, hobbling down on foot.

MAJALI: I didn't -- I didn't want to do the -- I didn't want to start that with you, but...


MAJALI: -- well, it's offered to you any time you want.


Thank you very much.


For this month's Business Traveler, I met one senior citizen who would qualify, at least on age grounds alone, and will now have more time for travel in the future. Perhaps he doesn't need to take advantage of OAP discounts.

He's aged 80. He's Bill Marriott and he's stepping down from the company he developed into the Marriott global brand of hotels.

I went to their headquarters to meet him and meet the man not only Bill Marriott, but the man charged with carrying on the business.



QUEST (voice-over): Today is Bill Marriott's 80th birthday. Has been in the hospitality business for 55 years and is now stepping down as the chief executive of Marriott, handing over the mantle to the chief financial officer, Arne Sorenson.

I met Bill Marriott at the company's headquarters, where he reflected on a lifetime's work and those who have been along for the ride.

BILL MARRIOTT, CEO AND CHAIRMAN, MARRIOTT INCORPORATED: What did you say when I told you I was going to become executive chairman and this got too big and too complex for me?

PHYLLIS HESTER, BILL MARRIOTT'S EXECUTIVE ASSISTANT: Oh, I said you created it, it's all your fault.


QUEST: The Marriott story begins in 1927, when the American entrepreneur, J.W. Marriott, opened his root beer stand in Washington, DC. Three decades later, he opened his first hotel.

MARRIOTT: Here's my dad and mom.

QUEST: Right.

MARRIOTT: Their first hotel. He built the biggest motor hotel in the world. And when he opened it, it didn't do very well.

I had just joined the company out of the Navy. I'd been in the company six months. I says why don't you let me take a hand at running this thing?

He said, you don't know anything about the hotel business. I said, that's right, I don't, but neither does anybody else around here, so I can't do any worse than we're doing.

So we got the second hotel opened in Washington and the third hotel opened later. And all of a sudden, I figured out we'd make more money in the hotel business than we ever would in the restaurant business.

QUEST: What's the one thing that has surprised you most?

MARRIOTT: The fact that we could grow from one hotel to 3,700 hotels. That really shocked me. I thought, you know, it took us seven years to build five hotels. And I thought, well, maybe we'll get to 10 or 15.

QUEST: And at what point did you look over your shoulder and think, whoo, well, where did that all come from?

MARRIOTT: Every day.


QUEST (voice-over): The rapid growth was achieved with a formula that has come to define today's hotel industry -- many brands all under one umbrella.

MARRIOTT: 1981, we have a lot of big box hotels, big city hotels. Somebody said, you know, we're going to run out of great locations where we can build these big hotels. We've got to do something to grow the company. And let's go and build a hotel for the businessman.

We did a million dollars worth of research. We asked our customers, what do you want in a hotel?

They said a better room at a lower price. I said to our people, are you kidding me?

You mean we spent a million dollars to find out people want a better room at a lower price?

So we built one. We built a 150-room courtyard in downtown -- in -- in the suburbs of Atlanta.

QUEST: And then on it goes from the -- the Courtyard, the Fairfield, to -- and then you add in Ritz Carlton?

MARRIOTT: That's right. Yes. We have 18 different brands.

QUEST: Too many?

MARRIOTT: No, we -- we keep adding. We just added A.C. Hotels in Europe. If we find another niche for a -- a brand, we'll -- we'll develop another brand.

QUEST (voice-over): The job of creating that next brand falls on the company's new CEO, Arne Sorenson. His task is to keep the Marriott giant moving with the times.

ARNE SORENSON, PRESIDENT AND CEO ELECT, MARRIOTT INTERNATIONAL: And what we see as the future of the core Marriott full service hotel is a place that obviously provides a great night's sleep, it provides a comfortable room, but it also provides public space which can welcome people and which can invite them to re-inhabit the lobby.

Customers are saying it's no longer enough for me to have a great night's sleep in a big room and in a clean room. I want my senses excited in some way.

I spend a lot of time on growth and that includes significantly emerging markets. So compared to five years ago, I would go to Asia maybe once a year. I now go four times a year.

QUEST: Can a U.S. corporation, a -- I'm going to -- I'm going to go further, a conservative, traditional U.S. corporation, make it in these new emerging markets?

SORENSON: Absolutely.

QUEST: Don't you end up failing to understand these new emerging markets?

SORENSON: We will do nothing without local partners, which will help protect us from that risk. So today, we have about 60 hotels in China. Every one but one are owned by Chinese partners.

QUEST: OK, I -- I promised I would leave this, at some point, to ask this question.

You do take on the mantle of the name, even though Marriott is not your last name. That's an awesome responsibility.

SORENSON: The job is an awesome responsibility. I have said for years to friends, pity the person who tries to follow Bill Marriott. He's been in -- he's an icon of the industry. He's an enormous teacher and mentor to me. I've got to do the best I can to be true to the Marriott culture, which is powerfully driven by that family and is about the way we do business, but not pretend to be somebody who I'm not.



QUEST: A U.S. law is becoming more prominent and it could have an impact on companies around the world. It is the United States Foreign Corrupt Practices Act, the FCPA. The subject of talks in Washington and the renewed focus as allegations of hone -- of phone hacking continue to dog News Corp. Some believe the law could lead to bigger problems for the company in the United States.

Felicia Taylor is at the New York Stock Exchange with more -- the Foreign Corrupt Practices Act puts the fear of God into every American and international firm. It's now matched, to a certain extent, by the UK's Bribery Act.

But the FCPA is...


QUEST: -- is still something that you really don't want to come up proper against.

TAYLOR: No, no, no. This costs millions of dollars. And, frankly, when it comes to News Corp, the FBI just told us today that it is aware of the allegations against News Corp and is looking into them.

So preliminary investigations have already begun by -- by U.S. officials. Prosecution under the FCPA could put Rupert Murdoch's media empire in great danger, costing the company millions of dollars and even possible jail time for some of its executives.

It brings the scandal to the United States, where News Corp's headquarters are based, right here in New York, all because of a little known law that has become big business for U.S. government.


TAYLOR (voice-over): It's a U.S. law that has investigated some of the biggest names in international business -- Siemens, Daimler, Johnson & Johnson, and dozens more.

The Department of Justice admits this has become a focus for the current administration and it has widened its net to new companies -- Goldman Sachs, Walmart and Avon are just three of the firms currently under investigation.

LANNY BREUER, ASSISTANT U.S. ATTORNEY GENERAL: What's happened over the last three years, is we've made enforcement of the FCPA one of our priorities, as we've done with all kinds of bribery and corruption statutes. And so we've been bringing cases against both American companies and foreign companies that are bribing foreign officials. And we've been holding both companies and executives accountable for such bribery.

QUEST: Attorney Brad Simon has been defending clients for years who have been accused of bribery under the Foreign Corrupt Practices Act. In some countries, that's the normal course of business.

BRAD SIMON, DEFENSE ATTORNEY: And you cannot do business in Nigeria without making payments. That's a sad fact of life. And if you want projects to be built that will have a benefit to -- for the people, like refineries and -- and plants that will bring some level of modernity to the country, you have to -- it's the only way to get business done.

TAYLOR: He says the law is dangerously broad and should be changed.

SIMON: The reach has become quite, in my opinion, excessive. You know, it's a little hard to explain to a client who's never heard of the FCPA who does business in a faraway land like Nigeria that you have violated the -- a United States statute and you may go to jail in the United States.

And they -- and they say well, what's this all about?

TAYLOR: Since 2008, the U.S. government has taken in more than $2.5 billion and that doesn't include any penalties levied by the Securities and Exchange Commission.

MICHAEL MUKASEY, DEBEVOISE & PLIMPTON LLP: It's a profit center for the government, so they want to -- they want to keep it as a profit center. But that's not fair. I think all the business community wants is a little bit of clarity about what the law really requires and an opportunity to defend. And I think this would really serve the government's interests, as well.

TAYLOR: The U.S. Chamber of Commerce wants to issue new guidelines that would give companies a better understanding of the law, but continue to do business in other countries. But in the near-term, companies would rather pay the fines and avoid trial.

SIMON: The government has the upper hand because the penalties are so severe, nobody -- very few people want to take the risk. (END VIDEO TAPE)

TAYLOR: So it's really only in the last few years that the FCPA has come to the forefront and been in the headlines. But, again, its cost -- it's meant millions, if not billions of dollars, rather, in fines.

News Corp has reportedly hired a top legal team to defend itself against any violations of the FCPA and has been cooperating with investigators' requests for information, which will make -- will make a major difference in how much they will be fined, if, indeed, they are found to be in violation -- Richard.

QUEST: Many thanks, indeed,

Felicia Taylor is in New York.

We thank you for that.

I will have a Profitable Moment after the break.


QUEST: Tonight's Profitable Moment.

I'm talking an unhealthy interest in Gulf Air's new discount for senior citizens. Now, I don't classify and qualify as an old age pensioner, at least not just yet. I may be 50. I still have some years to go before Mr. Majali will give me a ticket.

However, I do applaud the originality of the idea. Anything that gets people onto the planes, that creates more interest, can only be a good thing. And I'll take advantage when I'm 60.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.