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Lou Dobbs Moneyline
Enron Destroys Significant Documents
Aired January 10, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. there. And again, extremely tight security, and some nervousness, even, about the transport of these very dangerous detainees -- Lou.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Thursday, January 10. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening. The Enron debacle is taking on ominous and disturbing dimensions. It has already resulted in the largest corporate bankruptcy in history, the loss of thousands of jobs, and the loss of billions of dollars in investments. Today, Enron's accounting firm, Andersen, disclosed that it had destroyed a significant number of documents in recent months, something the Securities and Exchange Commission is calling, quote, "extremely serious".
Also today, Attorney General John Ashcroft and a top aide recused themselves from the criminal investigation of Enron. For the latest, we head to the White House, where senior White House correspondent John King is following the story -- John.
JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Lou, good evening. Not only dramatic developments today indicating how the investigations are expanding, but also how the political ramifications of the Enron situation are stretching across Washington and deep within the Bush White House.
You mentioned the attorney general, John Ashcroft. He and his chief of staff announcing today they will recuse themselves from this relatively new, two-week-old federal criminal investigation into whether Enron defrauded its employees and its shareholders. The reason why: John Ashcroft was a Republican senator last year, seeking re-election. He received $60,000 in contributions from Enron and top company officials. So he is stepping aside.
Here at the White House, the president announced two additional investigations. These government reviews to determine if the government needs to do more, new disclosure laws to require companies to tell their shareholders and their employees those invested in 401(k) plans, especially when their finances are deteriorating. But, of course, because of the political connections of Enron CEO Ken Lay, the president was also asked whether perhaps this long-time friend of the Bush family received any special treatment.
(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I have never discussed with Mr. Lay the financial problems of the company. The last time that I saw Mr. Lay was at my mother's fundraising event for literacy in Houston. That would have been last spring.
(END VIDEO CLIP)
KING: Now, Enron filed for bankruptcy in early December. We learned today that CEO Ken Lay did call two members of the Bush cabinet. In late October, he called Commerce Secretary Don Evans and the Treasury secretary, Paul O'Neill. We're told he called Secretary O'Neill a second time, a short time later, in early November. In those conversations, we are told Ken Lay said the company was at risk of not being able to meet its obligations and asked for help securing, boosting up Enron's bond rating. We're also told that Secretaries O'Neill and Evans conducted a quick review, spoke to each other and decided there was nothing the government could or should do. Top Bush administration officials saying tonight perhaps they should have disclosed word of those conversations a bit earlier. But the White House press secretary, Ari Fleischer, saying in the end, any investigation will show this administration did absolutely nothing wrong.
(BEGIN VIDEO CLIP)
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: What's important here in the president's opinion is that this needs to be investigated from a criminal point of view to determine what went wrong with Enron as well as from the Department of Labor to protect the pensioners who worked for Enron, the employees of Enron. But in addition, it's very important to look at policies to make certain this doesn't happen to anybody else.
(END VIDEO CLIP)
KING: Again, the administration saying any investigation will prove that when a major friend, a contributor of this president asks for help, the answer was no. But Democrats say they still want more information on any contacts between Enron, CEO Ken Lay and other top officials with the president, with the vice president and anyone else, senior officials of this administration. So as the investigations continue, so, Lou, too will the political fallout.
DOBBS: John, thank you very much. And we will be talking with Treasury Secretary Paul O'Neill here in this broadcast, perhaps Commerce Secretary Don Evans as well as these events are unfolding and the investigation of the collapse of Enron.
For more now on the criminal investigation of Enron what it could mean for its audit firm, Andersen, we turn to CNN's Susan Candiotti -- Susan.
SUSAN CANDIOTTI, CNN CORRESPONDENT: Good evening, Lou.
With the recusal of the attorney general and his chief of staff, the Justice Department's Enron investigation will now be overseen by Deputy Attorney General Larry Thompson. The Washington-based task force includes prosecutors based in Enron's hometown, Houston, as well as San Francisco and New York, home to the Stock Exchange and Security Exchange Commission.
National investigations like Enron's are rare because justice doesn't usually focus on a single company, but an industry like big tobacco. And the timing is critical when justice is concentrating so many of its resources on the 9/11 investigation and still unsolved anthrax attacks.
And tonight, a disturbing disclosure from Arthur Andersen, which did accounting and consulting work for Enron. The company admitting it has gotten rid of documents that could be critical to the Enron investigation. Once more, the firm says it doesn't know exactly how many documents are gone, but calls the number significant, a revelation that has the SEC hopping mad.
Here's part of Arthur Andersen's statement: In recent months, documents including electronic files related to the Enron engagement were disposed of or deleted. Millions of documents related to Enron still exist and the firm has successfully retrieved some of the electronic files.
Well, the SEC's enforcement chief, Steven Cutler, not happy, issuing this response: Destruction of documents is obviously an extremely serious matter. Documents are an essential ingredient in our investigations. The destruction of documents by Arthur Andersen will not deter us from pursuit of our investigation and will be included within the scope of our investigation.
Now Arthur Andersen says it has told not only the SEC, but the Justice Department and the congressional committees investigating Enron. During congressional testimony last month, Arthur Andersen's chief auditor said he warned Enron it was involved in, quote, "possible illegal acts for allegedly withholding information from its own auditors". Now Enron denied that charge.
And this night, we also have late word for you, Lou, that tonight a spokesman for Congressman Billy Tauzin of the House Energy and Commerce Committee is saying that given the disclosures by Andersen about destruction of documents, he says that the company should be prosecuted if those documents were destroyed intentionally -- Lou.
DOBBS: Susan, thank you. Congressman Billy Tauzin, who has been involved in this investigation on the onset, saying that anyone who did this through negligence at Andersen should be fired, anyone who did it intentionally should be prosecuted. Susan, thank you very much. Susan Candiotti from Washington.
The fallout from the collapse of Enron is far reaching of course. Yet another example: Enron has 3,500 subsidiaries; 34 of them already have filed for bankruptcy protection. I want to turn, if I may now, to Allan Chernoff, who is following this investigation. Just how did we get here, in your judgment? How has this been spiraling so quickly? ALLAN CHERNOFF, CNN CORRESPONDENT: Well, Lou, the latest item in terms of these lost documents, apparently it all started with investigators from Billy Tauzin's committee. Four of them went down to Houston, were looking for the documents yesterday. And they were told at the Andersen offices there was a problem. And earlier today, they were informed that in fact, potentially thousands of documents, primarily electronic, they believe...
DOBBS: Congressman Tauzin's committee, staff committee.
CHERNOFF: Precisely.
DOBBS: Committee staff rather was informed, and then came the statement and the disclosure from Andersen. Now the statement from Andersen, Allan, is intriguing for a number of reasons. And I'd like to read, and I apologize to our audience for not having this up on the screen.
But the firm says, "individuals in the firm involved with the Enron engagement disposed of a significant but undetermined number of electronic and paper documents." This appears at least to me to be the suggestion that there's some separation between the individuals of the firm and the firm itself, which is unique amongst professional services firms.
CHERNOFF: Yes. And, Lou, the people from the House Commerce and Energy Committee are saying that the deletions of these documents occurred in September, October and November when there already was some heat on Enron.
DOBBS: And the firm, the audit firm of Enron, Andersen, has retained former U.S. Senator John Danforth, as you know, to conduct an immediate and comprehensive review of Andersen's record management policy. But it goes on here to say that they're also looking to him to look for what they termed, "remedial and disciplinary actions within the firm". You're take on what that would mean?
CHERNOFF: Well, clearly they're looking for some people to blame. We don't know the full story just yet. And the investigators from the House committee are actually planning to meet with the partner in charge of the audit of Enron next Wednesday.
DOBBS: And the next steps in Washington, in terms of Capitol Hill?
CHERNOFF: We have got a lot of investigations ongoing right now, at least four, five separate investigations on Capitol Hill. And we have got also the Treasury secretary leading a number of policy reviews under direction of the president.
DOBBS: And, of course, a bankruptcy proceeding about to get underway in New York City, undetermined as yet as to whether it will be in Houston, which is the desire of many of the creditors, or New York City. What is the latest there?
CHERNOFF: That is still being battled. And today, there was a meeting, in fact, reviewing bids for energy, for the Enron trading business. The judge, Arthur Gonzalez, tomorrow in bankruptcy court may actually approve one of the bids for that business.
DOBBS: And Dynegy, the punitive white knight for Enron in the early stages and later a litigant against Enron, reaching a settlement on the pipeline. Where does that stand?
CHERNOFF: Right. They have actually gone ahead. They're going to be able to go ahead and purchase the pipeline business from Enron that they wanted.
DOBBS: OK. Allan, thank you. Allan Chernoff following this story as are we all and appreciate your diligence on it. Thank you.
Well, a reminder once again, we will have much more on this developing story tonight. We will be talking with Treasury Secretary Paul O'Neill about this and a number of other issues as well.
We want to turn now to the war against terrorism, and report to you that the first wave of al Qaeda and Taliban prisoners have been flown out of Kandahar. But despite an extremely high level of security, gunfire was heard, flares were seen, as the C-17 transport aircraft sped down the runway. That aircraft took off without incident. No U.S. servicepeople were injured. A Marine spokesman says some people penetrated the outer perimeter. They were not identified, but presumably they're al Qaeda or Taliban, but they are no longer there after some search for them by the military.
Twenty al Qaeda and Taliban prisoners are being flown to the U.S. naval base as expected, Guantanamo Bay Cuba their destination. That journey covers about 8,000 miles and is expected to take about 20 hours to complete.
Our Bill Hemmer is at Kandahar airport tonight, and he heard a tracer fire while the transport plane was taking off. He joins us now from Kandahar. Bill, if I may, I'd like to start with the Pentagon, which is now saying the gunfire that took place as the plane took off, that it actually took place later and that it was not directed at the aircraft. You were an eyewitness. What can you tell us?
BILL HEMMER, CNN CORRESPONDENT: Lou, we got those reports again when they came out about 35 minutes ago. This is what we saw. We saw the C-17 taxiing toward the runway. There was tracer fire then shot up at the north end of the runway on the far side. And again, as the C-17 turned around and started heading down that runway, tracer fire was seen again.
Here is the confusion and here is why this is significant. Why was the tracer fire ignited at that time? Did they perceive shots or were they simply responding to sensors that may have been tripped on the perimeter? The C-17, as you mentioned, Lou, took off without incident. But about 15 minutes after that, there was significant red tracers crisscrossing the runway here. And we also heard several M- 16s break out in a short exchange of gunfire. To what that was directed is not clear right now, but it did last several minutes. We were later told by the Marines that small arms were received here and also received by covert gunships circling overhead, two to be precise. Later, we were told by the Marines that snipers were detected and perceived around the perimeter. Special forces were sent out to extinguish that threat. Members of the 101st Airborne division, U.S. Marines, scrambling at that point to take their defensive positions here, many more scrambling inside the terminal building where we were located at the time.
Again, this lasted about three to three-and-a-half hours and we're not quite sure right now, Lou, as to whether or not that security breach continues at this point, or whether or not they'll be questions for the next shipment of detainees once that gets underway at sometime in the very near future, Lou.
DOBBS: You mentioned the two covert gunships. Presumably, they were dispatched in response to the perceived breach of the perimeter. Is that correct?
HEMMER: Yes, that is indeed correct, Lou. And they were flying around, based on our perception, for about two hours time. And we did notice also, at the time that the covert gunships were basically the only type of aircraft in the air, the airport was basically and essentially shut down, no flight operations, no lights were on as the security again was breached here, and they were taking no chances.
I should mention also prior to that, the first group of detainees, Lou, two groups of 10 taken out here. It seemed very orderly and very deliberate. Security was extremely tight. And the two groups were told recently all the detainees here taken out were clean shaven from head to toe, including the much coveted beard worn by many and all al Qaeda members here in Afghanistan.
Again, a C-17, especially equipped to take the detainees on that 20-hour flight to Guantanamo Bay, Cuba. But again, as I mentioned, this is a major security breach at this point. There will be many questions about how to handle this in the future. One source said it was a trial run of sorts to make sure the security measures implemented over the past four or five days here in Kandahar indeed were upheld. There will be many questions about that when the daylight comes up several hours from now, Lou.
DOBBS: One final question, Bill, the perimeter, presumably, manned by U.S. forces rather than Afghan. That would be my presumption. Is that a correct presumption?
HEMMER: Lou, at this point, here's our understanding: Two perimeters here in Kandahar, the interior and the exterior. The interior is guarded by the U.S. military and the other coalition forces. The exterior, we're told, is guarded by the OGs, the opposition groups, opposition groups of the Taliban and al Qaeda here in Kandahar. We are told the exterior perimeter is where the breach was determined and located, where those snipers apparently were firing again about nine hours ago here in Kandahar, Lou.
DOBBS: Bill, thank you very much. Bill Hemmer from Kandahar. Well, CNN has learned an that an advance team of 25 U.S. special forces has landed in the Philippines. And that number could grow to 100 special forces with hundreds of maintenance and other personnel in support. They are all part of a larger U.S. military effort that could eventually number as many as 500 troops to help the Philippine government fight Muslim terrorists tied to the al Qaeda. Experts calculate that hundreds of Muslim terrorists may be in the outlying islands of the Philippines, perhaps thousands. Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): U.S. officials say the total effort could number 500 U.S. troops, including special forces troops, will be involved in the effort to root out Muslim terrorists tied to al Qaeda.
DONALD RUMSFELD, SECRETARY OF DEFENSE: Some time back, I signed understandings that we would provide some training and assistance to the Philippine government.
PILGRIM: The current effort is part of a $4 billion military aid package approved after September 11 to provide advice, training and equipment to the Philippine forces.
MIKE VICKERS, CSIS: Helicopters, transport aircraft, patrol craft and trucks, and then a lot of stepped up training too by special forces and intelligence folks and also helicopter training for the Filipinos to give them an edge over the guerrillas. But I think the Filipino army will largely do the work themselves.
PILGRIM: The Philippines has a been a hotbed of terrorist activity. A particularly savage group, Abu Sayyaf, operates from the Philippine island of Mindinao. U.S. troops are being sent to the southern city of Zamboanga.
Abu Sayyaf terrorists are notorious for beheading their captives. Two Americans, Martin Burnham and his wife, Gracia, were taken hostage along with another American and 17 Filipino guests of a resort last May. One of the Americans and four of the other captives were beheaded in June.
ADRIAN KARATNYCKY, PRESIDENT, FREEDOM HOUSE: But it is a fact that the founders of this group participated in the struggle in Afghanistan. Some of them have been closely linked to Libya. So they do have links to this broader network of states and movements that have enabled and supported international terrorism.
PILGRIM: Abu Sayyaf has undeniable ties to al Qaeda. And convicted terrorists have studied in the Philippines, including Mohamed Sadeek Odeh, who was convicted for helping in the 1998 bombings of the U.S. embassies in Kenya and Tanzania. Also Ramzi Yousef, the mastermind of the first World Trade Center bombing in 1993.
(END VIDEOTAPE) (on camera): The U.S. forces will set up a command center in the city of Zamboanga. And also expected, up to 10 helicopters and C-130 aircraft -- night flying equipment will give them an added advantage -- thousands of rifles and up to 100 motor vehicles. Lou, the troops have landed.
DOBBS: Kitty, thank you very much. Kitty Pilgrim.
Well, for more now on the U.S. military presence in the Philippines as well as the transport of the al Qaeda/Taliban fighters to Guantanamo and the continuing engagement in Afghanistan, I'm joined by Jamie McIntyre at the Pentagon -- Jamie.
JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, I think one of the key questions about these military trainers, special forces, going to the Philippines is exactly what they're going to be doing. And CNN has learned the mission guidance that they've been given allows for armed U.S. observers to travel with Philippine military to forward areas. Now that could potentially put them into a combat role even as the Pentagon says there are no plans to use them in direct combat. And the Philippine government says that such a use of troops would require special authorization from their Congress.
But when asked point blank today about what they -- whether they might be engaged in those kind of operations, Secretary Rumsfeld, following his well established policy, refused to speculate what they might do in the future.
And as for the detainees, the first flight is en route to Guantanamo Bay, Cuba. The United States is employing extraordinary security measures onboard the plane, keeping the detainees hooded, chained. They're not allowed to get up and go to the bathroom. They're given a bucket for that purpose. And the U.S. is extremely cautious about what these prisoners could do while they are in a confined airspace. They should arrive in Cuba by sometime tomorrow and begin to be processed there. And again, extremely tight security and some nervousness even about the transport of these very dangerous detainees -- Lou.
DOBBS: Jamie, thank you. Let me turn, if I may, to Bill Hemmer reporting from Kandahar, who says he heard and saw, of course, saw the tracer fire as the C-17 taking the al Qaeda and Taliban prisoners to Guantanamo Bay took off. The Pentagon, as I understand it, is not necessarily comfortable with that report, is that correct?
MCINTYRE: In any case like this they are trying to figure out exactly what happened. The report they got back to the U.S. central command, was that the major exchange of gunfire occurred after the plane had taken off and was apparently not directed at the aircraft, but directed at the base, testing the defenses or, you know, an assault there that coincided with the takeoff of the aircraft.
I don't think they are disputing anything Bill Hemmer saw, including some of that tracer fire early on. But they are just saying that at this point, as they go back and reassess, they don't think that what happened is an attempt to shoot at the aircraft, but rather an attempt to shoot at the U.S. forces that are at that base in Kandahar.
DOBBS: An indication, Jamie, there at the Pentagon, that there will be a further beefing up of the outer perimeter, which Bill Hemmer reported was at least momentarily breached?
MCINTYRE: Well, they have very tight security there already. So I'm not sure exactly what they'll be doing. But the have -- it just underscores, that this continues to be a war zone in a very dangerous place.
DOBBS: Jamie McIntyre, as always, thank you.
As I mentioned earlier. The first flight carrying the Taliban and al Qaeda prisoners from Kandahar are on their way to the U.S. Naval Base in Guantanamo Bay. The fact of the matter is CNN military analyst, General David Grange is here to assess, at least give us his assessment of the situation.
General, as always, good to have you here. It is interesting we have an eyewitness, one of the few incidents in which we have an eyewitness, a reporter on the ground and the Pentagon, at least in the initial stages wanting to, if you will, mold a somewhat different story. What's your reaction?
BRIGADIER GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, it depends where you're located at the incident site. A lot of people see different things.
DOBBS: Exactly.
GRANGE: Bill probably saw some tracer fire. Was the tracer fire red, was the tracer fire green? A lot of AK-47 fire is green tracers. So, it's really hard to say. And no one knows if the perimeter was even breached. It may have been just fire. The fire could have been outgoing.
I think it is too early to tell, and I think that the security forces there took appropriate action from the rehearsals that they have conducted, which all units do when they start an operation in an area, by firing mortar flairs, helicopters, launch and check the area net. So it seems very small. This is one of those incidents that happened almost every day in Vietnam.
DOBBS: General, we have an axiom in the newscraft -- always go with your person in the field. I believe the military has a similar axiom, so it is interesting and the good news is that no one, certainly, was injured in what did transpire.
General, let's turn to the Philippines; 100 U.S. troops, special forces, arriving there. The first elements of a force estimated to rise to as many as 500. How effective could such a small force be in a significant struggle against terrorism?
GRANGE: What we have in the Philippines is you have terrorist organizations, (UNINTELLIGIBLE) al Qaeda and probably some other organizations that again are in a guerrilla force environment. In other words, you have a counter-insurgency effort going on with the Filipino government against an insurgency to the south.
So you have fighters like the Taliban, very similar, with the terrorist nucleus within that. So what they have to do is conduct a counter terrorist training to assist the Filipino Army taking down this insurgency. That will involve -- and it doesn't involve a lot, but some special forces trainers to teach some advance techniques in this, as well as some other support and aviation units to help train and support the Filipino Army to do this counter-insurgency.
DOBBS: General, would it surprise you to learn that the U.S. military has had a presence in the Philippines before today's announcements of the arrival of U.S. Special Forces?
GRANGE: Not at all. I would think they've been there. And any -- any day of the year. Seriously. Any day of the year, you have -- I would say in over 70 countries, special ops forces, doing normal training with our allies.
DOBBS: I just wanted you to make the point if you would, General, and as you always do, the fact is that we have a significant number of special operations, elements at work around the world, but particularly in certain parts of Asia. Do you expect this to hold at 500 or do you see a more sizable commitment in the Philippines?
GRANGE: I guess it depends if this is going to be maybe truly the next major operation. You know, limited operations will take place for sure. Mainly by the Filipino Army I would believe. It may be unilateral hostage rescue or direct assaults by American forces with the permission, of course, of the Filipino government if that is necessary.
It could grow bigger. It's pretty big area down there, jungle fighting usually consumes quite a lot of troops.
DOBBS: General, thank you very much. General David Grange.
GRANGE: Thank you, Lou.
DOBBS: Coming up next, we will have more for you on tonight's developing story on the criminal investigation into Enron. We'll be joined by Treasury Secretary Paul O'Neill to discuss this and a number of other issues. We'll be taking an inside look at the corrupt world of money laundering from what you might consider an unusual source. Stay with us. (COMMERCIAL BREAK)
DOBBS: The world of money laundering, corruption and the role played by big corporations is the subject of a new novel by Stephen Cannell. Cannell knows this material very well. He is the creator of more than 40 television crime series, such as "The Rockford Files" and "The A-Team." And he's one of the most prolific writers in television, a very astute businessman as well.
Through his production company Cannell still owns the rights to 1,000 hours of television series and movies. His new book is called "The Viking Funeral." Is a fictional account of a group of rogue LAPD officers, but Cannell's research is based some very real cases. And we are going to be turning to him in just a moment, I'm told, to discuss that book and what we have learned about the war on drugs and its relationship to the against terrorism.
Stephen Cannell are you there? OK, I'm told he's not there, and I want to apologize. Let's turn to the latest developments in the war against terrorism.
Tracer fire, as you heard Bill Hemmer report earlier in this broadcast, heard today as the first plane carrying Taliban and al Qaeda prisoners took off from Kandahar, Afghanistan. Small arms fire followed. Marines at the airport returned fire. Two Cobra gunships were launched in retaliation. There are no reports of any American injuries; 20 al Qaeda Taliban prisoners are being flown to the U.S. Naval Base on Guantanamo Bay Cuba, a trip expected to take about 20 hours.
CNN has learned that 25 special forces soldiers on the ground in the Philippines. They will be there to help train Philippine troops to hunt down Muslim rebels tied to al Qaeda terrorist network. Sources now till CNN that they expect the U.S. deployment to expand to more than 500 troops in the next few months.
President Bush is demanding that Palestinian Leader Yasser Arafat renounce terrorism. President Bush's words come one day after U.S. officials said there is now credible evidence that Arafat's Palestinian authority was involved in an arms shipment intercepted by Israel.
As we mentioned, Treasury Secretary Paul O'Neil is joining us. He is at the center of the war against terrorism, searching out, freezing terrorist assets around the world. He is also helping to manage the fallout from an economy in recession and now involved in the Enron disaster and its investigation.
There is word tonight that the entire U.S. attorney's office in Houston has recused itself from the Enron investigation. Treasury Secretary Paul O'Neill joins me now.
Mr. Secretary, good to have you here.
PAUL O'NEILL, U.S. TREASURY SECRETARY: Nice to be with you, Lou.
DOBBS: These are extraordinary developments in terms of Enron: the attorney general recusing himself, the president now for the first time having to deal with the issue from the White House; the reports of your conversations between Ken Lay, twice, once in October, once in November; and then his calls also to Commerce Secretary Evans as well as subsequent conversation between the two of you. If I may, sir, I'd just like to ask you what you and the commerce secretary discussed and what your decision was?
O'NEILL: Well, as you say, Lou, I had -- my first call from Ken Lay was for him to give me a heads-up that they were struggling and to offer the president of his company to speak with the undersecretary for domestic finance to understand the positions that they had to make so that we could make sure that we were taking care of our responsibility which is to make sure that the U.S. capital markets work. And that was the purpose of Ken's call to me, to let me know that we were welcome to have access to information so we could understand what they were doing and understand the possible exposure for the world's capital markets.
The second call to me was -- I've forgotten exactly when, but Ken called me to tell me that they were in discussions with Dynegy. And it was an information only call. And subsequent to that, Don Evans called me to tell me that he'd had a call from Ken and that Ken had told him that their -- rating agencies were looking at them and there was a real concern that if the rating agencies downgraded them, that that could had effectively scuttle the deal with Dynegy. And I went down...
DOBBS: Which it subsequently did.
O'NEILL: Excuse me?
DOBBS: Which it subsequently did.
O'NEILL: That's right. And when Don called me, and we talked about it, we agreed there wasn't anything within our responsibilities that required us to do anything. And that was the end of it.
DOBBS: Were you asked at anytime by Ken Lay to do anything specific?
O'NEILL: I was not. Absolutely not.
DOBBS: An extraordinary statement today, the president said that he had not discussed the financial problems of Enron with Ken Lay. And I would like to ask you at any point have you discussed the financial problems of Enron with Ken Lay over the course of your tenure as Treasury secretary?
O'NEILL: Well, the only contact I had with Ken on the subject of Enron was the two times that he called me that have been reported. And I must tell you, I thought it was business as usual. I mean, as secretary of the Treasury with the responsibility for the U.S. capital markets and our position in world capital markets, I get calls every day from the big players in the world. Enron was the biggest trader of energy in the world. And so I was not surprised at all that I would get a call saying, hey, we've got a problem over here and you should know about it.
DOBBS: Although, you were, I'm sure, aware that on November 2, the auditor, head of the auditing firm Andersen had said to the finance committee, the Financial Institutions Committee, that in fact they had said that there were criminal violations as a result of their own early investigation, would that be correct?
O'NEILL: I have no idea. You're telling me something I don't know.
DOBBS: You were not aware then? O'NEILL: Absolutely not.
DOBBS: Mr. Secretary, at this point, the SEC has an investigation, the Justice Department, the Labor Department, is there a significant and large role for the Treasury Department in the investigation of Enron here?
O'NEILL: No, I don't think so at all. Today the president asked me to do two different things, one, to head a committee that includes Don Evans, the secretary of commerce, and Elaine Chao at the Labor Department, to look at the Enron case and to other bankruptcy cases, to pay special attention to the question of whether we need to amend the rules that govern pension plans and 401(k) plans to provide a greater degree of assurance to the individuals who have a stake in pension plans and 401(k) plans. And this is driven by the president's concern about the individual employees.
He's seen stories on television about people who lost all of the money that they had accumulated in 401(k) plans, that represented their life savings. And the president said to me, we need to see if there's something we need to do. This is really a -- this is a tragic circumstance for these individuals. And so you should have a committee, include Elaine Chao because of her Labor Department responsibility, and Don Evans, and let's see if there's something we need to do so that we learn from this. If there is a weakness in our rules, let's fix the rules.
And the second committee the president asked me to convene is a standing committee, that's the president's economic committee. It includes myself, and Alan Greenspan, the head the Commodities Future Trading Corporation, and Harvey Pitt at the SEC. And the charge the president has given us there is to look at the Enron case and other cases and see if in this ever more complicated world we need to adjust the disclosure rules so that shareholders, employees, have all the information that they need to make intelligent e decisions.
So this is not about Enron. This is about making sure that the rules and regulations that govern the way our economic system works are worthy of the conditions that we're dealing with these days to assure first and foremost that individuals are not hurt because of a weakness in the rules.
DOBBS: Mr. Secretary, you are certainly taking the long view when you say this is not about Enron and I understand I believe the implications to what you're saying, but for the foreseeable future, it will definitely be about Enron in the way in which thousands of employees lost their 401(k)s, pensions, bond funds, and the investors in them lost a considerable amount of money. And so would you rate this as a significant and large task you have to assure protection for investors and employees in the years ahead?
O'NEILL: Well, I don't know. I think I was asked this question earlier today and I said this, I'm one who believes before you do prescription, you do analysis.
DOBBS: Right. O'NEILL: If you think about this in a medical metaphor, you wouldn't want the doctor to start cutting your arms and legs off before he figured out what was wrong with you. And so I don't know what we should do. I have a clear idea what the president asked me to do and we will do it.
DOBBS: Mr. Secretary, I have no doubt. We want to go to your colleague in the cabinet immediately after this short break. We're going to be talking with Commerce Secretary Don Evans next. Stay with us.
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DOBBS: The world of money laundering, corruption and the role played by big corporations is the subject of a new novel by Stephen Cannell and Shane Sculley. A character that Stephen Cannell created is one of my very favorites, so it is good to have you here.
STEPHEN CANNELL, AUTHOR, "THE VIKING FUNERAL": Nice to be here.
DOBBS: Some of our audience may be wondering why you and I are talking about this. And the reason is, one of the earliest questions I was asked, as matter of fact, in the state of Texas, after September 11, if we're being so successful in this war on terrorism, why in the world weren't we so successful in the war against drugs? Your book begins to suggest some answers to that.
CANNELL: Yeah, I think we're being very lazy about some aspects of law enforcement, and if we don't prosecute these cases, you know, we aren't going to be able to shut down a good portion of the drug business.
You know that interdiction takes about 10 percent of what comes across the border, our best guess.
DOBBS: Our best guess.
CANNELL: So, what does that tell us? That means that if we are going to hit these guys, way you are going to hit them is by getting their laundries. And if you don't shut these laundries down then they continue to profit from their drug business and they continue to set- up new businesses and expand.
And we have in our grasp here, I think, the opportunity to shut down some of these big laundries.
DOBBS: How much time did you spend researching the book?
CANNELL: Quite a bit. I started with some custom officials. Worked very closely with a guy named Bill Gately (ph) , who was the ASACK in L.A. that was involve with this. He told me that there's a thing called the parallel market where Fortune 500 companies are basically using their product to launder Colombian drug cash. It has been going on for years and years.
DOBBS: Using certain countries, Caribbean countries, principly, as the duty-free air.
CANNELL: That's right. The duty-free companies broker these deals between the drug dealers and the cigarette companies. The cigarettes go to an island, somewhere in the Caribbean, a duty-free zone and then it is smuggled into Columbia.
DOBBS: What is the total size of the cigarette market in Columbia?
CANNELL: They believe that the market is about $10 million.
DOBBS: And they spend -- U.S. companies -- spend in advertising, how much a year?
CANNELL: Well, over 30.
DOBBS: Now there is a $10 million market. They are spending 30 million, and what do you think the value of the entire enterprise is?
CANNELL: I think there may be as much as a billion dollar illegal market in Columbia.
DOBBS: Just in Columbia?
CANNELL: Yes. And this advertising money is being spent to basically promote that billion dollar market.
DOBBS: You don't name names, you don't name specific tobacco company, would you like to venture forth tonight?
CANNELL: No, I mean, I will tell you what, if you go on the Internet and you punch out the black market peso exchange, and -- with any descent search engine you will get 50 stories that will name them for you -- the idea is that what I'm trying to do with this novel, this is work of fiction -- but it is based on fact -- I'm trying to do is put some heat on this idea that there is a way that we can attack drug dealers without manning these borders and trying to shut down the importation of narcotics.
DOBBS: And in my opinion, you've done just that. And as always, anytime you have Shane Sculley, I am going to read it. The fact is, what I was pointing out in terms of naming names, the lawsuits that would result are probably sufficiently bothersome that it wouldn't be...
CANNELL: Well, that is probably where we are headed. You're right.
DOBBS: All right. Stephen Cannell as always, good to see you.
CANNELL: Thank you.
DOBBS: Still ahead here, with the telecom business in the midst of the worst slump ever, we will be talking with the chief executive officer of Sprint. William Esrey will be talking about new products and plaguing problems. Stay with us.
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DOBBS: On Wall Street, stock prices finishing generally lower despite new signs pointing toward economic recovery. Blue Chips falling for the fourth straight session, the Dow down 26 points today. The Nasdaq gained two points however. And the S&P 500 up a point on the day.
A much anticipated advancement in telecom: the third generation technology 3G, providing higher data speed and capacity for the mobile phones of Sprint. Sprint today announcing the new product at its consumer electronics show, announcing that they will offer the 3G next generation applications and services this summer, the first to do so.
CEO William Esrey joins me now from Las Vegas to talk about the product, his company and the prospects.
Bill, good to have you here.
WILLIAM ESREY, CHMN & CEO, SPRINT: Lou, always a pleasure to be with you.
DOBBS: You've stolen the march on your competitors with the introduction of the next, if you will, generation of CDMA. How will you maintain the advantage?
ESREY: We're going to convert our entire nationwide network in the middle of the year to this third generation technology. We are fortunate that we have the frequency and we have the technology that enables us to get there. It is going to be very hard for our competitors that are frequency shy and don't have the technology that allows a graceful migration to third generation.
So, we have an advantage. It is not often you get a distinctive advantage and we are going to be working hard to keep that advantage for a long time into the future.
DOBBS: Now in the -- in terms of the addition of new customers, some analysts are a little disappointed by a relatively small shortfall in new customers and in the third quarter. What's the fourth quarter look like for you?
ESREY: We haven't announced fourth quarter. Actually, we had a huge gain -- gain in the third quarter. We surprised people on the upside. Fourth quarter we will be announcing in a few days, and as you know, under the rules of the SEC, I'll have wait 'til then to make the announcement.
DOBBS: Oh, I was just talking about the sign-ups of new customers. I wasn't talking about earnings, Bill.
ESREY: Well, that's one that is akin to the other.
DOBBS: Your stock, like the stocks of so many companies, in particular, telecom companies, languishing here. Tremendous overcapacity in telecom in general. How long is it going to take to you work through the period?
ESREY: It's been a tough time for the whole industry. I think it is going to be sometime particularly on the wire line side. On the wireless side there isn't that. There's lot of competitors but there really isn't overcapacity.
I think most of the wireless companies are struggling to keep up with the demand of the marketplace. But on the wireline side there is a lot of capacity, it is already being absorbed, but it is not going to go away tomorrow.
DOBBS: OK, Bill Esrey, congratulations, thanks for being here and good luck in managing through what I know will be another tough year. Thanks.
ESREY: Thanks, Lou.
DOBBS: Bill Esrey.
Just ahead, we will take a look at your thoughts, including an answer to a question troubling many investors: Is this market overvalued? Stay with us.
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DOBBS: Now taking a look at your thoughts. Jim Davies writing in from Mexico says: "When I accentuate the positive, I'm doing viewers a disservice." His beef? That we are ignoring the high valuation of the market.
Jim writes: "The P/E level of the markets now is about double the historical norm. This might he understandable if we are in a boom economy, but we are not. We are still trying to find our way back from an incredible equity bubble, yet irrational exuberance remains in tact."
Based on the latest quarter, on an as-reported basis, it's true. The S&P 500 is trading around 40 times earnings, that's more than double the long term average. But simply putting those numbers side- by-side distorts the whole picture. As Professor Jeremy Siegel, professor of finance at the Wharton School points out, the historical average is skewed by very bad episodes in the economy, like double- digit inflation and severe recessions. And That pulled valuations down.
The professor's conclusion, you cannot use today's recessionary earnings when determining the future profit potential of companies. They're simply not out of line, he says, with the favorable economic conditions being built now.
Gordon Travis in Kalamazoo, Michigan writes in to say an economic stimulus package will only serve to stimulate the economies of other countries, saying, "isn't there something we can do to boost our own manufacturing sector? I am a displaced steel worker and it is painful to see the influx of foreign goods flooding our markets."
Buy American means more now than ever before, and unfortunately, Gordon, you have analyzed the situation precisely as it is. The manufacturing sector dwindling to its smallest level ever.
On to the government's special fund set up to help the families of those killed on September 11 and the growing outrage that we're receiving as what's being viewed by some as apparent greed by some a few of those families.
Barb Harris writes in to say, "I don't want to minimize the tragedy of that day, but tell me, how much the survivors families in Oklahoma City received."
Will Simpson in New York, writing in to say, "While our hearts are broken, and the loss of so many is a national tragedy, we have lost our perspective. Such a major commitment to create a special class of victims to be supported by the federal government is unsound and ill-conceived."
Please send us your thoughts. Our address: Moneyline@cnn.com. Please include you name and address.
"WOLF BLITZER REPORTS" begins in just a few minutes. Let's go to Wolf now to find out what's in store -- Wolf.
WOLF BLITZER, HOST, WOLF BLITZER REPORTS: Thank you very much, Lou. The U.S. military is sending troops to a second far away country in the war against terrorism. We will go live to the Pentagon for details. Also, U.S. Marines at the Kandahar base come under hostile fire. Our Bill Hemmer is right there. And in our CNN WAR ROOM discussion, what are the new dangers facing American forces. All that and much more at the top of the hour -- Lou.
DOBBS: Wolf, thanks, we are looking forward to it.
Coming up next here, some reports that may move at least in part, some part of the markets tomorrow. Stay with us.
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DOBBS: Tomorrow, on the economy, the Producer Price Index for December will be reported. Federal Reserve Chairman Alan Greenspan will be talking before business leaders in San Francisco. He will be talking about the prospects of the economy. Talking in some detail for the first time in point of fact, since October of last year.
Ford is announcing its restructuring, and reportedly those plans include as many as 20,000 layoffs.
And the Enron investigation is accelerating. Enron is expected to announce a winning bid for its trading operations. The judge in that case also deciding where the bankruptcy proceedings will be held and of course Congress continuing its investigation, set tomorrow to send out subpoenas to various parties, as many as 50 subpoenas expected to be issued tomorrow. For tonight that's MONEYLINE. Thank you for being with us. I'm Lou Dobbs. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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