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ERIN BURNETT OUTFRONT
Facebook Lawsuit; Education Reform
Aired May 23, 2012 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ERIN BURNETT, HOST: OUTFRONT next, Facebook sued, yes, it's had a tough week, but were investors deceived? We'll see if it adds up.
And potentially toxic garbage from half way around the world, from Japan, from Fukushima washing ashore in the United States, we sent a reporter OUTFRONT.
And my childhood sweetheart, a man that all of you know. He's OUTFRONT tonight.
I'm Erin Burnett and OUTFRONT tonight vultures dive bombing the carcass. It's just an image. It makes me think of the field growing up, a dead deer, entrails everywhere, buzzards coming in with their ugly little red gobbles. That's what it looks like for Facebook. At least three lawsuits filed in connection to the Facebook IPO.
Plus investigations by the Securities and Exchange Commission and the Massachusetts secretary of the commonwealth and of course, public embarrassment. Headlines like these on the front pages, the best one today went to "CNN MONEY", "Oh Zuck". Bumpy start just got a little worse. Inside Facebook's fumble was from "The Wall Street Journal" and "The Washington Post" called it a debacle. Here's where the stock closed today, at $32 a share. Down $10 from where it opened on IPO morning at 42.
That means it's lost a quarter of its value since it opened. That is pretty stunning. And you say how? How could one of the most anticipated offerings in American history, and the biggest in terms of size in this country's history and the -- one of the most anticipated in history and the biggest in terms of size in this country's history, one that was supposed to invigorate and once again make the stock market a place for regular people to play go so wrong?
As everyone in this country is now aware, Facebook's numbers don't appear to add up. There are two things that are crucial to know, to see if the billions in dollars of cases against Facebook and its bankers are going to hold up. One, Facebook amended its offering to the public, and it did this saying it was struggling to make money in mobile devices, where more and more people are accessing their Facebook accounts.
Now, this caused some analysts to slash their estimates of Facebook and how much money the company could earn. Now, the second thing, Morgan Stanley, the bank responsible for pricing the IPO along with Facebook management, made the decision to increase the price and the size of the offering, and this was not a small decision. They increased the price by 52 percent from the original bottom of the range and the size by 25 percent.
This is stunning. And they did it after Facebook had said it wasn't earning as much money. Just in case I'm not clear here, they increased the price of something just when the world learned it wasn't as valuable as it seemed the day before. That's pretty incredible. Now, what people familiar with the situation at Facebook tell me that there was so much demand that they did price it right that they're sure they did it right. That the blame is on NASDAQ, which completely blew the opening of the stock.
Now that may be true. But the question is was there fraud? Was there something illegal? That could cost Facebook and those big banks billions and billions of dollars. One lawsuit says yes, and I have it here today. Facebook shareholders filing a class action lawsuit against Mark Zuckerberg and his top management team and also the underwriters of Facebook's IPO, five banks are also named as defendants, including the one in charge.
And that name there to look at is Morgan Stanley. All the others being sued, but ultimately the one that was responsible is the lead, and that's Morgan. Investors claim they've lost more than $2.5 billion since Friday thanks to misleading information. John Avlon and Paul Callan are OUTFRONT tonight and good to have both of you with us.
So Paul, let me start with you. As an attorney you've read through this case. I've talked to a lot of SEC attorneys today. I've actually talked to the SEC about some of these very specific allegations. Do you think this case has merit? Basically it's saying look Facebook, they changed this. It was a very material thing to say look, we can't make money in mobile and it's the future. We haven't yet. They amended it. That was given to everybody. But then, Morgan Stanley and the banks said look, this is really going to hurt how much this company can earn and not everybody who was buying the IPO was made aware of that -- fraud?
PAUL CALLAN, CNN LEGAL CONTRIBUTOR: Well, it's a close question. I mean if you believe every allegation and the complaint, yes, it does make out you know a claim of fraud. But I think we have to step back a little bit and say also that every time there's a public offering on a company like this, the class action lawyers swarm around it and file lawsuits because the legal fees that are collected in a case like this are staggering, multi-multi-millions of dollars in fees for the lawyers, so there's a lot of incentive to sue. You almost always see suits. We've got to see what the discovery reveals in this case and we've really got to see more details to know if there is a case here.
BURNETT: All right and let me bring in Robert Weiser now, the lawyer representing plaintiffs in the lawsuit that I was holding up here, the one -- so let me just ask you, sir, what is it exactly are you alleging that happened here that's wrong? Facebook did file that amendment that was available to everybody. And the investment banks, at least as far as all my conversations with SEC attorneys and the SEC today abided by the law.
ROBERT WEISER, ATTORNEY FOR PLAINTIFFS SUING FACEBOOK: Well, good evening. And thank you for the opportunity to address these very serious allegations. With respect to the allegations in the complaint, I think Mr. Callan hit it on the head. It will be very interesting to see what the discovery reveals in the case. And I would like to correct an important point of law that perhaps you or maybe some of the viewers haven't grasped, and that is we don't have to prove fraud to succeed in this case.
And that's a critical distinction in the law that comes up specifically in connection with an initial public offering or a secondary offering of stock. If the plaintiffs can demonstrate that there was one material misstatement or omission in any of the offering documents, they're entitled to receive monetary damages.
BURNETT: So what was -- what was left out?
WEISER: So --
BURNETT: So OK, so -- but let me just ask you what was left out because they did file an amendment talking about this mobile issue. A few days later, the banks that were underwriting it, they're not allowed to publish research. They did tell some of their clients they think this will affect the earnings. That wasn't made available to everybody. But BITG (ph) research -- I'm holding a research report here, available to everybody, you can log on, get a password, you don't have to pay for it -- says the exact same thing posted after the S1 (ph). This is a problem. We would only buy it at 31.50 a share evaluates the whole thing. So it seems to me the information was available to everybody. The concern on Wall Street was.
WEISER: Well, the question is when is the information available to everybody and what were the specific representations made in the offering document itself? Because that is the document that investors are allowed to rely -- rely upon as a matter of law. And it's interesting, because now there are lots of stories circulating around regarding either everything from financial blogs to analyst reports, questioning the value of the -- questioning Facebook's valuation and where a good entry (ph) point is for investors. But where were the representations in the offering document? Where were the disclosures regarding certain select Morgan Stanley or JPMorgan or Goldman Sachs clients? Where were the disclosures that certain privileged clients of those banks --
BURNETT: Well, that's what I'm trying --
WEISER: -- perhaps made aware --
BURNETT: OK, but I mean and this is something -- and maybe you're going for a broader change in the law because my understanding of the way the law is, is if one of the banks is the underwriter and you're a research analyst that works for that bank, you are not allowed to publish anything when your investment bank is underwriting an IPO. That's the law. So when you have a view on the stock, all you can do is talk to people on the phone. BTIG (ph) was not involved and they put all this in a research report, which was available to everybody so -- and it's in the prospectus, right? I mean the S1 (ph), revised S1 (ph) about the ad issue in mobile devices, so I'm just trying to understand where there really is -- people are pissed off, I get it, I would be, too. I mean but that's different than having Facebook paying billions of dollars.
WEISER: Right and understand that to the extent that a lot of the media over the past few days has made the point that the offering was bungled in some manner either because it was oversubscribed or it wasn't priced appropriately. And it is important to understand that that is not our claim.
WEISER: And to the extent that Morgan Stanley or any of the other underwriters were negligent, that is not an actionable claim under the securities laws. So I would agree with you that in that -- to the extent that there were tactical decisions that were made in connection with the underwriting process and if those decisions were made in good faith, they're not actionable. We are -- specifically, you're right. We are specifically challenging the statements regarding trends in the company's business, the company's historical earnings --
WEISER: -- likely future earnings and there really are two different issues here. Just to be perfectly clear. And I talked about this somewhere else earlier today. That there really are two prongs. One is the specific representations or omissions in connection with the offering document.
BURNETT: OK. Right.
WEISER: And then you've got the regulation, the Reg FD issue, which is indeed a completely separate issue.
WEISER: And in some ways, those reports based on what's out there in the public domain right now are actually more troubling, at least from my own perspective.
WEISER: In that the reason why you have that rule -- that rule is the product, the Sarbanes-Oxley --
WEISER: -- the early 2000 frauds, and it really is an example of Wall Street, the worst part of Wall Street doing business in the same old tired ways --
WEISER: -- that hurt investors, hurt consumers. And my personal opinion is that Reg FD has actually been effective --
BURNETT: All right, I want -- OK --
WEISER: -- and has served as an effective deterrent.
BURNETT: All right, well thank you very much. I just want to hit pause right there because I want to bring Paul and John back in. And Paul, it's an interesting point what he raises. And for those out there, Reg FD, what this is supposed to do is not have an analyst at a Wall Street bank say all kinds of rosy wonderful things about an underwriting that they think is a pig or other things, if you remember what happened 10 years ago, while their investment bank is trying to sell it. So actually what you saw here was Morgan Stanley research saying oh we don't like this thing. Bankers are trying to sell it and now it's being called a conflict of interest or something --
CALLAN: But you know when ordinary people look at this, OK, this is a company that was founded in a Harvard dorm room, right? I don't know, what, 10 years ago, a very short period of time.
CALLAN: Now they have 443 million subscribers worldwide and -- but does anybody really think that it's not a risky investment? I mean is there somebody out there who's buying it for $38 a share who isn't rolling the dice that maybe it's going to double or triple or quadruple? Are they relying on these papers? All this lawsuit is, is an attempt to use these federal regulations to generate really a lot of legal fees in the end.
BURNETT: And I mean you know buying Facebook, anyone would have done it, did know it was risky, right? I mean it was going public at a price that really valued the company at 26 times its revenue. Google went public for reference everybody at 10 times, so it was very expensive. Nonetheless, the performance of this has taken the bloom off the rose. Anyone who was hoping this would get the little guy back in the market, John --
JOHN AVLON, CNN CONTRIBUTOR: Sure.
BURNETT: -- believing again, this is a rigged system.
AVLON: And that's the larger point I think is that people do feel like look, this is high finance. We hoped for some transparency. Is the system rigged against the little guy? But a lawsuit like this, making the case that (INAUDIBLE) for a class action lawsuit seems more a symptom of a lawsuit happy culture than a reflection of actually any real damages, but the overall reputation of the market is a place where the little guy can play and succeed and invest --
AVLON: -- rather than the system being rigged against him that's a different thing. That's not legally actionable --
AVLON: -- but it is an issue of perception and it could metastasize --
BURNETT: It is and that's my issue with it. You can look through this and say the perception and go through the rules and say it doesn't add up but then there is that problem. You want everybody to feel they can participate and this was supposed to be one of those Democratic IPOs and it obviously was not.
All right next, Mitt Romney calling the civil rights issue of our time -- we're going to tell you what it is. And by the way, just in case you were wondering, it's not gay marriage and tonight, the tipping point, war or peace with Iran? Will the country cave or walk? There are crucial talks going on right now in Baghdad. And we've obtained an e-mail exchange between George Zimmerman and the police chief of Sanford, Florida.
BURNETT: Our second story OUTFRONT Mitt Romney coming out with what he says is the civil rights issue of our time. No, no, not what you're thinking. Whatever it is, I bet it's not what you're thinking. It's education. It's education. Something, who is going to fight with you on that? All right, well here's what he's saying. He's defending choice for parents taking on teachers unions for what he says are the wrong priorities. He says education is the civil rights issue of our era.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I'm going to give the parents of every low-income and special needs student the chance to choose where their child goes to school. For the first time in history, federal education funds will be linked to the student so that parents can send their child to any public or charter school of their choice.
(END VIDEO CLIP)
BURNETT: John Avlon, Reihan Salam and Jamal Simmons are here. Reihan, he didn't in the advance text -- in the advance text he called for vouchers. When he actually spoke, he didn't use the word "voucher", which is sort of a word that people have a passionate feeling about whether they kind of have thought it through or not, just one of those words. How's it going to fly?
REIHAN SALAM, CNN CONTRIBUTOR: Well I think the basic thing is that you've also seen this in President Obama's "Race to the Top" proposal. The idea is use federal money as leverage to get structural reform. So one idea is lift caps on charter schools and one really important thing Mitt Romney said is let's be sure the digital learning options aren't prohibited. You have a lot of unions at the local level that are saying hey, we want to fight virtual charters and other things that are giving more parents more nontraditional choices --
BURNETT: What do you mean virtual? A regular kid can get online classes? SALAM: Yes, absolutely. There are states like Florida where the Florida Virtual School is offering a ton of supplementary classes. It's expensive to offer AP classes or languages that --
BURNETT: So these are supplementary not instead --
SALAM: Well and actually in some cases instead of as well, but the idea is allow them to do both of those things --
SALAM: -- and allow that option to expand.
SALAM: Hey, for some kids that's going to be the right option. Not all obviously but for some --
BURNETT: Right. Supplemental though could be really --
SALAM: Oh absolutely --
BURNETT: And John, you also think that this voucher concept can work?
AVLON: Yes, I think this is a bold proposal by the Romney campaign. Too often in terms of policy, we've been very clear about what Mitt Romney is against, but this is a very bold policy in terms of what he's for, school choice, backing it hard. Politically it's a winner too because the Democrats are backed in.
AVLON: President Obama has a pretty good record on some issues like merit pay for teachers, but there's no way a Democrat can back school choice at the federal level. Mitt Romney just did. It's going to move a very important debate forward in this country.
BURNETT: Jamal, so vouchers obviously would be the operative word. But when you look at some of the other things Mitt Romney is for, charter schools, more accountability for teachers, school report cards. That's what President Obama wants, too. So really, are they all that different?
JAMAL SIMMONS, DEMOCRATIC STRATEGIST: You know they're not all that different, except in one respect. And I'm glad Mitt Romney recognizes this challenge, because it is a huge challenge. It's a challenge that we face. It is the civil rights issue of our time. The problem is Mitt Romney's plan actually doesn't do what he says because it doesn't have any sticks in it. It's all carrots. There are no sticks. What happens to the schools that are left behind?
So let's say that every child is able to leave and go to a new school. What happens to the kids who are left? You've got to be able to turn those schools around. And if you turn those schools around, you need people who can go into those schools and really make a difference. And so I was talking to my brother today who is a middle school principal in Washington where they're doing a lot of school reform. He says the problem is you don't have enough teachers and principals who are prepared to go into these high-risk high-crime, low-performing schools and be able to really make a difference.
You need better -- you need better supply. So he's really -- if I were Mitt Romney and the Republicans, I would focus more on getting more kids out of these education schools, out of college who can go in there and make them fight.
BURNETT: Well you got to pay them more. Reihan, you got to be able to fire the people who aren't good.
SALAM: Well look, you have to have different schools pursuing different strategies, but I would say unlike Jamal that the big difference between President Obama's strategy and Mitt Romney's strategy is the one thing that President Obama did with "Race to the Top" is have administrative guidelines that say that you need buy-in from union locals for us to like your proposal at the state level. So the states that actually did win that "Race to the Top" money were states that got 100 percent buy-in from teachers unions and guess what, those are not necessarily going to be the most transformative approaches to education and --
SALAM: -- and also to improve the supply of really high quality schools.
SIMMONS: Yes but Reihan you do need to have -- look, teachers unions are there for a reason and they know education -- teachers know education. And it's OK if you've got teachers unions that want to participate. So what you did was you got teachers unions to buy into reform proposals --
SALAM: One hundred percent?
SIMMONS: Let me finish -- let me finish my sentence.
SALAM: Of course.
SIMMONS: Instead of having -- instead of having a Wisconsin situation where teachers and the reformers are fighting each other, you've got everybody on the same page.
SALAM: In states like Colorado, New Jersey, and Louisiana, where in Louisiana you have tremendous dramatic gains among kids and the local teachers unions did not support the reform proposals that delivered those dramatic educational gains. Jamal, I get where you're coming from, but the thing is that a lot of these union locals are very resistant to reforms that have been demonstrated to work.
BURNETT: All right --
SIMMONS: But why fight when you don't have to?
BURNETT: We're going to --
SALAM: Well, you have to. Sorry.
BURNETT: This is an issue I think you do have to -- whatever side you're on, you sure as heck got to fight.
UNIDENTIFIED MALE: That's right.
BURNETT: Like Chris Christie anybody, OK.
Ahead an alarming discovery in the waters off this country's coast. We sent a reporter OUTFRONT to find out what is washing up and we're getting ready for our very special mysterious guest, just looking at his picture.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Is that rain?
SIRI: Yes it appears to be raining.
UNIDENTIFIED FEMALE: (INAUDIBLE) let's get tomato soup delivered.
SIRI: I found a number of restaurants (INAUDIBLE) mentioned tomato soup and that deliver.
UNIDENTIFIED FEMALE: Good because I don't want to put on real shoes.
(END VIDEO CLIP)
BURNETT: That's Zooey Deschanel promoting SIRI, the voice of Apple's latest (INAUDIBLE) phone and you may know SIRI. You know she's supposed to give you the weather report and you know you say hey, I'm looking for a detour and she tells you one or I don't know. You know I'm looking to find a date and she tells you what bar to go to.
Anyway, she's really bad at it, though, actually my nieces report. But anyway it works well in the ad. Supposedly she also dictates text messages. Now IBM though has a real problem with that specific feature. So you say the text and it dictates it because the problem is when you say the text SIRI sends it off somewhere to get transcribed. All of the data gets funneled to a center sort of like this one in Maiden (ph), North Carolina. This is an Apple data center and IBM says this is a big problem. It's a big security issue and let me tell you why. Because of this, IBM is one of several companies that has embraced the whole BYOD trend.
And what that means is bring your own device. So it used to be that when you got a job at a company, you got a BlackBerry. You got a beloved. That was the way it worked. But that's not so true anymore. BlackBerry has been losing fans and employers -- employees want to use their iAndroid (ph) or iPhones at work, so if you have a BYOD policy at your job you can. Remember Bob Iger at Disney. It was one of the first companies to do it. Now because it's a big security companies -- risk for companies, you know they say you can't get this app or you can't download this, they have a big problem -- they have a big problem with you doing that -- sorry -- there you go.
You got to wipe it remotely. There's all kinds of problems you have on these devices when you do that, so that brings me to our number tonight, 75. This is pretty incredible. It's the percentage of companies that allow people to bring their own devices to work. If you work at one of those companies, your employer, like IBM is going to be really worried about SIRI. What are you telling SIRI to text? Is it salacious or inappropriate?
Because if it is, a lot of people might be able to read it. Still OUTFRONT in our second half, a major development in negotiations over Iran's nuclear program going on today, and potentially toxic materials from Fukushima are now finally over a year later washing ashore on the West Coast of the United States, so we sent a reporter OUTFRONT to investigate.
BURNETT: Welcome back to the second half of OUTFRONT. We start the second half of our show with stories we care about, where we focus on our reporting from the front lines.
Tonight, a video from al Qaeda urging members to commit what it calls electronic jihad. It calls for cyber attacks against government networks and things like the electric grid. Juan Zarate of CSIS tells says the real danger is elements of al Qaeda are adapting their inspiration and direction to tap into an existing pool who extremists who may find cyber attacks more dangerous or more convenient way of engaging in attacks that can kill a lot of people. A group of senators from both parties on the homeland security committee say the video underscores the need for cyber security standards in this country.
Now, CNN has obtained an e-mail written by George Zimmerman to Sanford Police Chief Bill Lee in September of last year. In it, he highlights the efforts of a volunteer that helped him with the neighborhood watch program at the retreat at Twin Lakes. He writes, "In the past, I have not had a positive perspective of Sanford Police Department, due primarily to the Sherman Ware incident."
The Sherman Ware incident he's referring to is a 2010 case in which a black homeless man was assaulted by a white Sanford police officer's son.
Our own legal analyst Paul Callan tells us that the defense will likely say this demonstrates a lack of racism in Zimmerman's ordinary life, at the time when he had no motive to lie. Well, new data showing oil supplies in the United States are at a 22-year high. The Energy Information Association's weekly reports shows that crude supplies rose to 382.5 million barrels. It's one of the reasons oil prices fell below $90 today.
Chris Jarvis of Caprock tells us part of the reason for the buildup in supply is refiners have cut back in production. A lot of you may say, what's going on? Why are prices at the pump not dropping as quickly? Well, they do take a lot longer to drop there. Gas stations don't like to do it.
Homeowners are taking advantage of record-low mortgage rates. The mortgage bankers association index, applications rose 3.8 percent last week. It was another record low for a 30-year fixed rate mortgage. We checked on other interest rates and came across this from Bankrate.com. They identified a group of high-yield checking accounts that they say paid 34 times more than the current national average for an interest checking out.
The yield was all of 2.05 percent. But that is really high in the current interest rate environment. You might have a certain number of debit card purchases and direct deposit.
Well, it's been 293 days since America lost its top credit rating. What are we doing to get it back? We've been obsessing about housing lately. And we've got more data today. New home sales rose more than 3 percent in the month of April.
And now our third OUTFRONT: hope fading fast for swift resolution over Iran's nuclear program. We said this week was a tipping point and it may be.
In Baghdad today, the second round of negotiations between Iran, the United States, and five other western countries unexpectedly spilled into another day. Reports are that neither side is budging.
Now, the United States and its allies want Iran to give up any uranium they have that's already been enriched. They want them to stop enriching. The real debate is enriching to what grade? Five percent? Three percent? No enrichment? Or maybe even as high as 20, weapons grade?
We also want Iran to dismantle a secret underground bunker in Fordow used to create nuclear material. In exchange, the West would ease sanctions that have severely damaged Iran's economy and in fact are scheduled to get much, much worse in just about a month. Will the impasse lead to military action?
OUTFRONT tonight, Art Keller, a former CIA spy, and Reuel Gerecht, a former Iranian specialist for the CIA.
You guys know more about this than anyone. So, Reuel, let me start with you. Will these talks succeed?
REUEL GERECHT, FORMER CIA SPECIALIST: In the short term, absolutely not. I mean, I think what they're feeling out and they've been doing that in preliminary meetings for a month is whether how far the Iranians are willing to go into stopping their enrichment program. And the Iranians are trying to figure out whether the West will essentially agree to allow them to keep their low enriched uranium, even thought that quantity is now up to over 13,000 pounds and could be converted into at least five nuclear weapons.
BURNETT: And so you're saying they could reach some sort of a deal where they say okay, we're going to stop, but as long as they keep that stuff, they would be able to start up and move quickly easily, right?
GERECHT: Not only just keep it. There's no sign the Iranians are willing to stop enriching to 3.5 to 5 percent, and as long as they continue to do that, they're amassing a quantity of uranium which can be fairly quickly converted into highly enriched uranium and bomb grade material.
BURNETT: Art, what are they doing right now? You are a spy, so what sort of intelligence do we really have?
I mean, I remember asking Prime Minister Netanyahu a month ago, how do you know hat Iran is doing -- and he gave an ominous pause and said oh, we know. But how do -- does Israel or the United States know?
GERECHT: I don't think we have --
BURNETT: Art, go ahead.
ART KELLER, FORMER CIA SPY: I'm sorry. We really know through a combination of factors. Of course, to the extent that you can, you get inspectors to look at the facilities that are publicly declared. That tells you something. And really, you get most of your information by watching what falls into a program.
In if same way astronomers figure out what's going on inside a black hole by seeing what materials fall into it. That's kind of the way you map out what's going on in any kind of black weapons program. You do try and recruit human spies, but honestly, Iranian nuclear physicists do not grow on trees.
So most of the information you get, you get from a combination of inspection, signals intelligence and other forms of intelligence.
But we do have a fairly good read on what they're doing simply because nuclear weapons require industrial scale facilities.
KELLER: And those are pretty hard to hide.
BURNETT: Right. So the other question then would be in terms of how far they're going with enrichment. I mean, this is a real problem.
I don't really understand how it's going to get resolved, because Iran says they will never stop enriching. The U.S. appears to allow them to enrich to, say, 5 percent, which could be used for medical uses. Israel has said categorically they will not allow Iran to enrich at all.
Does that just mean that if they keep enriching Israel will strike? Or will Israel be called out on a big bluff?
KELLER: Well --
GERECHT: I'm sorry.
KELLER: It would certainly be difficult for Israel to strike Iran's nuclear facilities in the same way that in the past they've struck Iraq's and more recently, Syria's. So it is a much harder nut for Israel to crack, and they have to know that. They may be talking tough solely to get as many concessions as possible.
It is concerning, the 20 percent level. I think Reuel is correct. It really allows them to leapfrog ahead from the moment they decide, OK, we're going to go for the bomb, which means withdrawal from the Nuclear Proliferation Treaty and close facilities from inspection.
If you have a big stockpile of 20 percent, you get there much faster in a matter of a month or a few months.
If you only have a stockpile of 5 percent, then that timetable is greatly enlarged. And so, that's a safety factor that I'm sure we're going to be pushing for if we don't push for complete cessation of enrichment.
BURNETT: All right. We'll see what will happen. If they have the courage, Israel is so worried that the West may not. Talks continue into a second day. It was supposed to just be one day. So, we'll see if that's a breakthrough or a sign of a big fail.
Fourth story OUTFRONT. A festering mass of potentially toxic garbage floating towards this country has set off major alarm bells. Parts of buildings, cars and other wreckage have been coming across the Pacific Ocean ever since Fukushima, and now are washing up on American beaches. It's all debris from the tsunami that slammed Japan just over a year ago.
Casey Wian is there in Yakutat, Alaska, where people are not only worried about what they see coming ashore. As you can see, it's shocking. But they're more scared about what they can't see.
CASEY WIAN, CNN CORRESPONDENT (voice-over): A large haul of black cod and a smaller catch of rock fish arrive at Alaska's Yakutat Seafood Company. Here it's processed and shipped all over the United States. But nearby, the sea is delivering a potentially toxic threat.
One and a half million tons of debris from last year's Japanese tsunami has begun washing ashore. Locals say their greatest fear is of the unknown contaminants it may contain.
GREG INDRELAND, OWNER YAKUTAT SEAFOOD: There's always concerns. Is it going to be a few buoys? Is it going to be oil, petroleum, boats, houses? I've always been one of those guys that's like you deal with reality as it approaches.
WIAN: But others are worried about the threat of toxic materials, even radiation contaminating Alaskan fish.
BILL LUCEY, YAKUTAT SALMON BOARD: I tested a lot of these with the Geiger counter and none of them have been hot. No radiation whatsoever. Otherwise, I wouldn't be doing it.
WIAN: Government and university scientists say it's highly unlikely radiation will be present in tsunami debris. One reason, most of it was already at sea before the Fukushima reactor leak. Still, other toxins may be present in waters that provide 90 percent of the nation's wild salmon.
CHRIS PALLISTER, GULF OF ALASKA KEEPER: Cleanser, that's not something you'd want to dump in here your salmon spawning area.
WIAN: The Yakutat Tlingit Tribe has been fishing these waters for centuries.
ALEX JAMES, TLINGIT TRIBE FISHERMAN: There's a king (INAUDIBLE).
WIAN: Four hundred of Yakutat's 650 residents are Tlingit. They are pleading for federal help to clean up the tsunami debris.
VICTORIA DEMMERT, TLINGIT TRIBE PRESIDENT: We have to get it off the beaches because if it begins to disintegrate there, the birds will eat it and so will the fish. It will affect us. We're subsistence people. And whatever happens in the air or ground or sea will end up in our bodies.
DAVE STONE, YAKUTAT MAYOR: Everyone likes to go and have a nice salmon steak. Well, this is where it's coming from. That's why they should invest to keep our waterways open so we can catch this fish.
WIAN: And keep these fish safe to eat.
BURNETT: And Casey is live in Alaska tonight.
Casey, how does the debris actually get into the food chain?
WIAN: Erin, there are several ways. But one of the ways they're most worried about right now is Styrofoam buoys and other things like that are breaking up into little tiny pieces, they're eaten by small fish, which then think they're full. So, they don't get nutrients they need. They can get sick and die off -- or they ultimately get eaten by bigger fish that we catching and eat -- Erin.
BURNETT: All right. Casey Wian, thanks very much. And OUTFRONT next, our mystery guest, one of my childhood sweethearts.
BURNETT: We're back with tonight's "Outer Circle," where we reach out to our sources around the world.
And tonight, we go to northern Afghanistan, where more than 120 girls were imprisoned in their school. Attackers used an unknown type of spray at the school which resulted in fainting, dizziness, vomiting. The latest in a string of poisoning incidents targeting girls schools in Afghanistan.
Nick Paton Walsh is in Kabul tonight and I asked him if the Taliban is behind this attack.
(BEGIN VIDEO CLIP)
NICK PATON WALSH, CNN INTERNATIONAL CORRESPONDENT: Erin, it should point out the Taliban have not claimed responsibility for this. Afghan officials are presuming it was them, although there are many different extremist groups across Afghanistan who might choose to target women in this way. Many extremists consider the idea of women getting education to be abhorrent.
I should point out the Taliban themselves advocate religious education, and therefore, yes, target Afghan children who got go to government-run schools. We're seeing these attacks occur reasonably frequently in Afghanistan. It paints a really bleak picture future for the future of the country's education system, indisputably an area of progress over the last 10 years and NATO troops start to leave -- Erin.
(END VIDEO CLIP)
BURNETT: Thanks to Nick.
And now, let's check in with Anderson Cooper with a look at what's coming up on "A.C. 360".
ANDERSON COOPER, HOST, "A.C. 360": Yes, Erin. Certainly, we've been reporting and we're keeping them honest. We covered extensively in this program a veterans that's raised tens of millions of dollars. That's their seal, the DVNF, Disabled Veterans National Foundation. They've raised $56 million over three years, not a penny has gone directly to help any vets.
Now our reporting is actually leading to results. An investigation launched now on Capitol Hill by the Senate. We'll have details on that.
Also, a pastor preaching in North Carolina saying the gays and lesbians -- queers in his words -- should be put behind an electrified fence until they die off. He also slammed President Obama for supporting gay marriage.
Now some church members are defending their pastor. You'll hear a reaction from -- also from a gay member of that church community.
And some shocking details and newly released court documents in the Florida A&M hazing case. Defendants claim the drummer who was killed allegedly after hazing incident actually asked to be hazed. His parents say it doesn't sound like him.
Those stories and tonight's "Ridiculist" at the top of the hour, Erin.
BURNETT: All right, Anderson, coming up in just a few moments.
And now, our fifth story OUTFRONT.
(BEGIN VIDEO CLIP)
BURNETT: When I was little, we would watch the news hour and we would watch Dan Rather. So at the end of Dan Rather, I was probably 6, I would go at the end of the night and give Dan Rather a kiss good night on the screen. They found out at school, and then this girl -- I won't say her name, because I'm sure she's very nice grown-up. She outed me about it and it was one of the most humiliating moments of my life.
(END VIDEO CLIP)
BURNETT: And tonight, Dan Rather is here with me. And I was saying -- Dan, I remember literally when you were on the screen and I would walk over, and it is such an honor for me.
DAN RATHER, TV ANCHOR: Well, I'm sorry, we didn't have feel (ph) television on that time.
BURNETT: I mean, it really was. You were a part of my daily life. So it is just incredible to have you here.
RATHER: Well, thank you.
BURNETT: Eleven presidential elections, and that's what you've covered. And here we are and covering one where it seems that the ads are so petty and so childish. The conversation is so simplistic at a time of such seriousness.
Is this just because all of us think, oh, this is the most important time than we have ever seen, or is this the worst?
RATHER: No, there's been bad ones, but this is by far the worst so far. I think that the fact that were so debates during the Republican primary contributed to it.
But , I hope I'm wrong about this, but I think by the time we finish with this campaign, not only it will be $3 billion presidential campaign, $3 billion. But it will be ugly enough to choke a buzzard before we get through with it. Both sides are going to be very ugly, unless I'm surprised. I hope it won't be bad, I don't think so.
BURNETT: And I like you have a buzzard reference. That's the second on this show, which I'm going to take as good only for the show.
All right. I want to just play, I know obviously you have heard this, but Cory Booker saying what I thought came from the heart. He obviously since backtracked from it, what he said on "Meet and Press" -- and here it is.
(BEGIN VIDEO CLIP)
CORY BOOKER, MAYOR OF NEWARK: This kind of stuff is nauseating to me on both sides. It's nauseating to the American public. Enough is enough, stop attacking private equity, stop attacking Jeremiah Wright. This stuff has got to stop.
(END VIDEO CLIP)
BURNETT: Nauseating and he said it with such passion.
But it really -- what is it -- I mean, what do you think it is? Is it super PACs like so many people want to blame it on?
RATHER: Well, I think there's two things with Cory Booker whom I know him, but I know of him and respect him and the job he's done as mayor has been terrific. I think two things at play here.
One, I think he really believes it, because Cory Booker, he came from this world -- a part of his world, financial world, he knows what it is. But the second is, no one can duck or dodge around this. He gets a lot of campaign contributions from the same people who are being, if you will, criticized in the Romney camp.
RATHER: But not only that, he gets funds from them to do good work in his city. So he's a guy on a tight rope. He's bowed back a little bit, which doesn't surprise me, but he's not the only one who knows of the financial world, but he says be careful of criticizing these people, criticize them when they really need it, but be careful not to make it a blanket criticism.
BURNETT: All of this leads to what's the truth. And a lot of the ads that we've seen in politics is frustrating. I mean, there's blatant lies in them. There's blatant obfuscation.
In your book, you write about what's happening in the media, I'm curious about what you think about it, the polemics of the media. The fact that there's a way right now to surround yourself in life hearing only what you want to hear, and only points of view that you agree with, and only facts that support your point of view, and never being challenged.
And I'm wondering whether you think we the media are partly responsible for the ugliness in Congress, in the campaign. RATHER: I do. Those of us in the media have some very important place -- we've lost our guts, if you like the metaphor. I think we need a spine transplant. When people lie, when it's an outright lie, they need to be held accountable for that and the press as the world's watch dog should hold them accountable. But we're too often afraid to do so. We're a little afraid to make anybody uncomfortable, much less deal in controversy.
A lot of it stems from what I call the corporatization of the media, huge, international conglomerates who need a lot of things out of Washington, it contribute to campaigns. They do affect news coverage.
RATHER: Instead of deep digging investigative reporting, it's much easier to report on Paris Hilton or some celebrity. That's what I call the trivialization of news and we're all have a lot to answer for it.
BURNETT: And we're all going to fight it. In your book, "Rather Outspoken," you also talk about the incident, the incident of the National Guard report and George W. Bush's service, you give your side of the story.
BURNETT: You stand by that report to this day?
RATHER: I do stand by it because the core of the report is true, it's undeniable, and President Bush by the way has never denied it. Number one, he got into the National Guard under the influence of his father to make sure he didn't have to go to Vietnam. And that's the truth. It was the young George Bush and he's done other things in his life. But that's the truth.
Secondarily, he disappeared for a year. Nobody in the military service can disappear for a year and not be held accountable for it. That was the gut of the story. It was a gut check for us because the story was attacked on all fronts.
RATHER: But those two things are true, they were true then, and they're true now.
BURNETT: All right. Well, Dan Rather, thank you very much. My hero of journalism, and it's a pleasure for men and I hope my mother is watching tonight.
RATHER: Well, tell your mom I appreciate it. Thank you, Erin. Thank you so much.
BURNETT: All right. Thanks to Dan Rather.
And still OUTFRONT, millions turn out for the first day of Egypt's historic elections. Well, what role will extremism play? I'll show you something I obtained from an eighth grade textbook in Cairo that has me really worried.
BURNETT: So voters streamed to polling stations in Egypt today. They had the opportunity to freely choose a president for the first time. So there's a lot of questions surrounding the vote, including what role will Muslim extremism play?
It's a crucial question because a couple of weeks ago, I met with some Egyptian friends of mine. Their daughter attends in Cairo. She's in the eighth grade. And this is the page she ripped out of her eighth grade social studies textbook.
The page was part of a history lesson about a battle, and at the bottom of the page, are lessons students are supposed to lose by the battle. Among them, Muslims win by the strength of their faith not by the strength of their numbers, and then the line you see highlighted in pink by my friends' daughter.
Translated into English, it reads, quote, "Treason and treachery are key attributes of Jewish people."
Just to say it again, this is the current textbook for eighth graders in schools of Cairo, approved by the ministry of education, this is not a joke. This is not a relic. Now, my friend's daughter said she didn't want to go back to that school. She wanted to quit altogether and that was powerful. The kids know what's wrong and are willing to stand up for it.
What's at stake in the Egyptian elections and across the Arab world right now is freedom for religion, for women, for entrepreneurs. This election matters for all of us. This textbook is something I certainly will never forget.
Thanks so much for watching. "A.C. 360" starts now.