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Aired January 15, 2002 - 04:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Seen in classrooms the world over, this is CNN NEWSROOM.

MICHAEL MCMANUS, CO-HOST: Welcome to CNN NEWSROOM. I'm Michael McManus.

SUSAN FREIDMAN, CO-HOST: And I'm Susan Freidman.

The U.S. assault on the Afghan region known as Zawar Kili is letting up but only after three straight days of heavy bombing. The target has been a vast al Qaeda training complex near the Afghan- Pakistani border. That includes 30 to 40 acres of underground tunnels. At one point the bombing was so powerful explosions could be felt more than six miles away.

MCMANUS: Meanwhile in the U.S., a corporate war is heating up. The Arthur Andersen accounting firm is being called to account for the destruction of thousands of Enron related documents, e-mails and files. Enron, as we told you about, is the giant energy corporation that filed for bankruptcy last month leaving thousands of people without jobs and without their retirement savings. Enron workers could have sold their stocks, but many say they were mislead by the company when the price started to plunge.

CNN's Brooks Jackson will have more on that in a minute, but first, Tim O'Brien brings us up to date on the investigation.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): A lawyer representing Enron shareholders said top execs, from CEO Kenneth Lay on down, knew of the company's pending collapse in plenty of time to cash in their stock, leaving shareholders holding an empty bag.

WILLIAM LERACH, SHAREHOLDER'S ATTORNEY: Let's be direct here, these books were cooked by Lay, Fastow, Skilling and the other top executives, who put hundreds of millions of dollars in their pockets while the employees of Enron were victimized and hundreds of thousands of other investors lost billions of dollars.

O'BRIEN: In a statement, Enron's attorney, Bob Bennett, said "I am unaware of any evidence that supports the allegation there was improper selling by members of the board or senior management. In many instances, the sale for the stock was pre-planned according to a strict timetable."

The Arthur Andersen consulting firm has also issued a statement responding to a "Time" magazine report that an internal company memo instructed employees to destroy Enron-related documents, a possible obstruction of justice. The company said, "We acknowledge that there were internal communications that raise questions. Until we know more, it would be inappropriate to comment further."

Meanwhile, the Center for Public Integrity, a Washington-based public interest group, today reported that 14 high or mid-level officials in the Bush administration hold or held Enron stock. But the center's director said neither that nor the huge campaign contribution Enron made to Bush and key congressional candidates is suspicious.

CHARLES LEWIS, CENTER FOR PUBLIC INTEGRITY: The business community in general and the energy industry in particular has traditionally supported Republicans two-to-one or three-to-one, in terms of campaign contributions, for ideological reasons, because of deregulation and the role of government in general.

O'BRIEN: The immediate focus of all these investigations will surely be the actions or inactions of top officials at Enron and Arthur Andersen. But these inquiries will be sprawling and it's still early.

Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Who's to blame for Enron employees losing their savings? Here's how some employees told it last month.

ROBERT VIGH, ENRON EMPLOYEE: The employees had no choice to ride the stock into the ground.

JACKSON: But the truth is more complicated.

(on camera): In fact, Enron employees had a choice. They could have sold nearly all the Enron stock in their retirement funds last year at $80 or $70 or $50 or $30. Nothing prevented them.

(voice-over): A year ago, 62 percent of Enron's 401(k) funds were invested in Enron stock, $1.3 billion dollars, way more than investors advisers say is prudent. But 89 percent of the stock had been bought by Enron employees voluntarily with their own salary deductions and could be sold. Only 11 percent had restrictions on being sold because it had been given by Enron as a match to employee contributions.

(on camera): Back then, the stock looked like a world beater. January 25th, as it was trading at over $81 dollars, Enron raced its estimate of earnings for the year. But markets took a dimmer view. Enron's stock price slid to $70, $60, $50 and lower. Why didn't the employees sell? An attorney suing Enron says they were misled.

ELI GOTTESDIENER, ATTORNEY: While they physically and legally had the power to sell their shares, they were being exhorted by the company "Don't sell shares. Don't be a sucker. Stick with Enron. We're going to go right back up to the 90 bucks a share we were at."

JACKSON (voice-over): And employees believed it.

CHARLES PRESTWOOD, ENRON RETIREE: They said, "Well, you could have moved in -- you could have rolled out of that, rolled it into something else." But who wants to get off a winning horse?

JACKSON (on camera): But it wasn't a winning horse anymore. By October 16th, the stock was already down to below $34 dollars. That's when Enron reported it had actually lost money in the third quarter, the date many say was the start of the bad news. Employees still had several days to sell before a lock down on their 401(k)s, when Enron changed the administrator of the plan. The lock down effectively began at the close of the market Friday, October 26th. On that, the last day they could have sold, the stock price closed at $15.40. During the lock down, on November 8th, Enron restated earnings and announced another $600 million in losses. And by the time the 401(k)s were unfrozen November 12th and employees could sell again, the stock was down to barely down to $9 a share. That still left weeks for them to sell before December 2nd, when Enron filed for bankruptcy and the stock dropped to 40 cents. Enron's critics say the law needs changing.

GOTTESDIENER: Employees definitely have some responsibility. But listen, the deck is stacked against them. You've got a bad law that puts "the sky is the limit" limit on employer stock.

JACKSON (voice-over): And that's where corporate lobbyists want to leave the limit, though even they say employees should never invest too heavily in a single stock.

EDWARD FERRIGNO, 401(K) COUN. OF AMERICA: We think they need to think long and hard about is that the right course. But we think it's their decisions to make. We don't think that the government should by making the decision.

JACKSON (on camera): Enron employees had the freedom to choose, but for many that freedom led to a roller coaster ride to disaster.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

MCMANUS: If the government learns that a major company is failing, should it intervene or at least warn stockholders? Does it even have the right to do that?

CNN's Peter Viles looks at those questions and how they apply to the Enron case.

(BEGIN VIDEOTAPE) PETER VILES, CNN CORRESPONDENT (voice-over): A new angle to the Enron fiasco: Why didn't the Bush administration try to save the company? The short answer? It's not the government's job to save failing companies.

PAUL O'NEILL, TREASURY SECRETARY: Companies come and go. It's part -- part of -- part of the genius of capitalism is people get to make good decisions or bad decisions and they get to pay the consequence or to enjoy the fruits of their decisions. That's the way the system works.

VILES: Democrats seized on the remark, anxious to portray administration as uncaring.

SEN. JOE LIEBERMAN (D), CONNECTICUT: You know, I might expect a secretary of the treasury in the 18th century to have said what Paul O'Neill said this morning, but not one in the 22nd century.

VILES: The government does intervene on very rare occasions. Congress bailed out Chrysler with $1.2 billion in loans in 1980. The New York Fed brought banks together to buy out Long Term Capital Management, but no government money was involved. And Congress approved $15 billion for the airlines last September. So why isn't Enron next on the list? Well, here's what it would have taken.

MICHAEL MOSCOW, PRES., CEO, FED BANK OF CHICAGO: If you had had worries that the entire energy market might have really had a meltdown which could have had cascading effects on the economy, the financial markets, et cetera, then I think it would have -- the Treasury Department would have very much been compelled to go in and get involved.

VILES: But Paul O'Neill didn't see that as a risk. Enron, it now appears, was not all that crucial to the economy.

CHARLES GABRIEL, PRUDENTIAL FINANCIAL: In terms of the impact on the overall economy, I don't see it as a significant impact.

VILES: As for shareholders and 401(k) investors, the government is not in the business of protecting them from losses. And if it was, it would have much bigger rescue missions now than Enron, such as Cisco Systems, still a viable company, but investors have lost $399 billion on the stock. Lucent Technologies, $216 billion in investor losses. AT&T, $93 billion in losses. Enron's loss, roughly $70 billion, are painful but hardly unprecedented.

(on camera): It would be a cliche to say that businesses file for bankruptcy every day in this country. It would also be a massive understatement because about 100 businesses file every day. Now the government does keep track of those filing, but it very rarely intervenes beforehand.

Peter Viles, CNN Financial News, New York.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

ANNOUNCER: Amy Shuckhart from Tempe, Arizona asks: What is being done to root out terrorist cells already in place in the United States?

AMBASSADOR L. PAUL BREMER III, FORMER AMBASSADOR FOR COUNTERINTELLIGENCE: Amy, I think one of the most important things the FBI and other law enforcement agencies are doing right now is trying to track down any terrorists who are left in the United States. And although the FBI has arrested hundreds of suspected terrorists now or people who might be able to bring information, they really have arrested very few known terrorists.

So I think we have to assume that we still have terrorist groups. There are groups on which have been active in the United States over the last 10 years, and this is going to be a very long process I think. The hopeful piece of news is that the president signed into law a new bill which gives the FBI and law enforcement agencies extended abilities to really try to find out who these people are and bring them to justice.

(END VIDEOTAPE)

FREIDMAN: There are now 50 al Qaeda and Taliban detainees at the U.S. Navy base at Guantanamo Bay, Cuba. The second group left Kandahar under heavy guard in southern Afghanistan on a C-17 cargo plane Sunday. Pentagon spokeswoman Victoria Clarke says the detainees are receiving very humane treatment.

(BEGIN VIDEO CLIP)

VICTORIA CLARKE, PENTAGON SPOKESWOMAN: Each day, the detainees are given three culturally appropriate meals. They have daily opportunities to shower, exercise and receive medical attention. So in keeping with and accordance with the Geneva Convention, they are receiving very humane treatment. And we expect representatives from the ICRC to visit with them later this week.

(END VIDEO CLIP)

FREIDMAN: The Pentagon is pondering whether to scale back the combat air patrols that have been in the skies over the United States since the September 11 attacks. Military officials say keeping the planes in the air all the time simply may not be realistic.

In a separate matter, commercial airlines are scrambling to come up with measures that will meet the government's approval for screening all checked baggage.

CNN's Kathleen Koch reports on some of the alternatives airlines are considering.

(BEGIN VIDEOTAPE)

KATHLEEN KOCH, CNN CORRESPONDENT (voice-over): In a perfect world, all checked luggage would be screened by million-dollar explosive-detection machines. But only 161 are available, and thousands needed to check the 3.5 million bags airlines handle everyday.

So in the new aviation security law, Congress gave airlines what some call flexibility, others too much leeway. One option, they can bag match, and assure no luggage goes on the plane unless the passenger who checked it is onboard. Airlines warn that can cause massive delays if they are forced to remove bags every time a passenger misses a connection or is bumped from an overbooked flight. Critics, including flight attendants, insist bag matching alone won't work.

PAT FRIEND, NATL. ASSN. OF FLIGHT ATTENDANTS: Because have you to allow for possibility of a suicide bomber, someone who doesn't care if they're on the airplane and it blows up.

KOCH: Another alternative, manual searches. Airlines say that is time consuming, and raises problems of theft or breakage of passenger belongings.

Option three, bomb sniffing dogs, but security experts warn the tedious work could lead to inattention.

CATHAL FLYNN, FMR. FAA SECURITY CHIEF: We haven't used dogs for repetitive task of screening or sniffing hundreds and thousands of bags going on our in or out.

KOCH: Finally, the loophole clause, other approved means or technology. It is unclear what that includes. Some airlines say they will rely mostly on bag matching. Others like Southwest Airlines are still pushing for more time to meet the requirements. The budget carrier uses numbered cards instead of boarding passes, so it can't track passengers well enough to do bag matching. Families of September 11th victims say there should be no extensions.

STEPHEN PUSH: This is the standards that the airlines have to be held to. If they can't implement the procedures by deadline, then that airline should be shut down until they can do it.

KOCH (on camera): Some airlines are doing bag screening trial runs, at least one seeing dozens of flights delayed. There is increasing concern that the new measures could lead to aviation gridlock.

Kathleen Koch, CNN, Reagan National Airport.

(END VIDEOTAPE)

FREIDMAN: For many Americans, going to the movies is probably a favorite thing to do on a Friday or Saturday night. But for the people in Afghanistan, a fun night out, once taken for granted, became illegal. During Taliban rule, theaters were closed, the projectors broken, motion pictures barred from being seen. Taliban rule is now over and so is the ban as Michael Holmes reports.

(BEGIN VIDEOTAPE) MICHAEL HOLMES, CNN CORRESPONDENT (voice over): Outside Cinema Park in downtown Kabul, the crowd gathers for a showing of "Attack." It's not a new release, far from it. The excitement is because the movie is showing at all.

Like many here, this is Nagi Bulla's (ph) first time at the cinema, ever.

NAGI BULLA (through translator): We have freedom now and we are happy about it.

HOLMES: In a scene to warm the heart of any movie studio boss, the rush for tickets is, well enthusiastic. Four hundred and fifty people come here three times a day. Every movie a sellout.

"Give me five. Give me ten" they shout thrusting fistfuls of Afghanis at the sole and very busy ticket seller. It looks like a lot of cash. It's not. A ticket may cost 5,000 Afghanis, but that's about 15 cents.

One sign of a still nervous city, everyone body searched before they buy raisins or Cokes or cigarettes, and then clamor literally into their seats. Our camera light was not welcome. The movie had begun.

Upstairs, proud projectionists once again apply their trade. Five years ago, these men were ordered out of here by the Taliban at a moment's notice.

UNIDENTIFIED MALE (through translator): The cinema was closed and the equipment broken.

HOLMES: A few miles away, a milestone performance at the battle scarred Kabul theater, an emotional moment, women in the cast, unthinkable a few short months ago, equally unthinkable any kind of performance.

UNIDENTIFIED MALE (through translator): I'm very happy I'm back in the theater. The theater was closed for six years because the Taliban kept the people away. Now we are back and we are happy.

HOLMES: Now to the outside observer, this building quite obviously is no West End or Broadway, but to Afghans this building is every bit as important as those hallowed places are to New Yorkers or Londoners.

Bombed during the Civil War of the early '90s, rebuilding banned under the Taliban, but as Kabul changes in so many ways, virtually everyday, the curtain rises and the show once again goes on.

UNIDENTIFIED MALE: As you see, this is a destroyed building and what these people wanted to show art, music and culture will not die in this country, and nobody can kill them.

HOLMES: Despite the ravages wrought upon this building, there is still very much a sense of what was before, and what perhaps might be to come. Michael Holmes, CNN, Kabul, Afghanistan.

(END VIDEOTAPE)

Teachers, make the most of CNN NEWSROOM with our free daily classroom guide to the program. There you'll find a run down of each day's show so you choose just the program segment that fits your lesson plan. Plus, there are discussion questions and activities, and the guide highlights key people, places and news terms. Each day find hot links to other online resources and previews of upcoming desk segments.

It's all at this web address where you can also sign up to have the guide automatically e-mailed directly to you each day. It's easy. It's free. It's your curriculum connection to the news. After all, the news never stops and neither does learning.

MCMANUS: More on films and what's to come as we turn to the mountainous region of Park City, Utah. Once a year it becomes a haven for budding filmmakers to show their work and hopefully sign a major deal with a major studio.

FREIDMAN: The festival is known for its fresh and creative works, but this year the reality of terror on American soil has taken over as popular subject matter for documentaries.

MCMANUS: That's right. These films capture the moods, thoughts and feelings of the many affected by the tragedy of September 11 as Paul Clinton reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: New Yorkers, also, are not good victims. You know, it's not our style.

PAUL CLINTON, CNN CORRESPONDENT (voice-over): "From the Ashes" is one of five documentaries about September 11th screening at the Sundance Film Festival. Director Deborah Shaffer follows numerous artists who worked and lived in the shadows of the World Trade Center, showing how the tragedy affected them.

UNIDENTIFIED FEMALE: They run in the building when we're running out. I mean they had to know they were going to die.

CLINTON (on camera): The documentaries dealing with the 9-11 tragedies screening here at Sundance all approached the event from very different points of view, but none are meant to be the final word.

DEBORAH SHAFFER, "FROM THE ASHES" DIRECTOR: There's no way it could be definitive. It's four months since it happened. I mean I feel very unresolved about what it meant, why it happened, what our next move should be, how we should deal with it.

CLINTON (voice-over): Through a variety of images, the films captured the mood of New York and the spirit of its residents. JASON KLIOT, "THE SITE": I had a little mini videocamera in my bag and I pulled it out to film some of the site, and immediately started becoming obsessed with these faces, this sort of a soul opening up in people when they arrived at the site and started looking up and up in the air at something that wasn't there.

CLINTON: Etienne Sauret penetrated deep into the shattered landscape with his camera. He decided not to embellish his film with music.

ETIENNE SAURET, "THE FIRST 24 HOURS": You were working on a cemetery without tombstone, so that sets a particular atmosphere. That's why, in the film, we left all the sounds, all the natural sounds.

CLINTON: The Sundance program included the haunting images of a trade center victim who foresaw the threat of terrorism. And the emotional sound of people brought together to record a new version of "We Are Family", 11 days after the attack.

(SINGING, "WE ARE FAMILY")

CLINTON: Paul Clinton, CNN, Park City, Utah.

(END VIDEOTAPE)

MCMANUS: The theme of artistic reaction to September 11 continues in our next report.

CNN's Jeanne Moos has the story of a pickup truck as well as information about souvenir buildings, well, small enough to pick up.

(BEGIN VIDEO CLIP)

MOOS: First it was burned into our memory. Now it's been turned into art from macabre miniatures to a monument on wheels, a pickup truck with a paint job unlike any other.

CODY LENTZ, SON OF TRUCK OWNER: My dad's truck is, like, cool. I can't believe -- right when I saw it, I was like, "wow."

MOOS: It was 6-year-old Cody Lentz who inspired his father to get his Ford pickup painted.

TIM LENTZ, TRUCK OWNER: Our son's birthday was on 9/11. He came home from school very upset and crying, told me that his birthday was ruined.

C. LENTZ: I feel really bad what happened on my birthday.

MOOS: So Florida plant operator Tim Lentz dedicated these images to his son and others whose lives were affected by the attacks.

An automotive artist worked from news photographs depicting events ranging from the removal of the body of Fire Department Chaplain Father Judge, to President Bush's visit to Ground Zero. There's even an image of Flight 93 before it crashed into the Pennsylvania countryside. "The paint job stops traffic and pedestrians," says Tim's wife, Lisa.

LISA LENTZ: It's really comforting, and really cool.

T. LENTZ: I'll have the biggest, toughest looking guy just break down and cry when they read the back of that tailgate.

MOOS: The tailgate tells the story of Cody's spoiled 9/11 birthday.

C. LENTZ: I knew I was going to be on the back, but I didn't know there was reading on there. I'm like "whoa, that thing is awesome."

MOOS: The bill was likewise awesome.

T. LENTZ: 27,000 and change.

MOOS: If 27,000 is too steep, how about 95 bucks? That's what this miniature of the damaged twin towers sells for.

CONSTANTINE BOYM, BOYM PARTNERS, INCORPORATED: I wanted very much this building to be dignified.

MOOS: Constantine Boym is a New York designer who several years ago created a series of miniatures called "Buildings of Disaster." From the shack used as a hideout of the Unabomber, to the Federal Building in Oklahoma City.

The World Trade Center was included, based on the 1993 bombing. In the wake of September 11th, Boym updated the twin towers miniature, though at first he worried it might seem unseemly.

BOYM: When I received orders from people whose offices perished in the towers, something clicked in my mind.

MOOS: People who barely got out in time ordered the miniature. Boym is having trouble meeting demand, with part of the proceeds going to the September 11th fund. You could also purchase the Pentagon.

BOYM: In fact, we call it the "September 11th Memorial Set."

MOOS: From eerie miniatures to painted pickup, some folks seem driven to drive home a point.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

MCMANUS: As you can see, last year's tragic events have inspired artistic expressions by a variety of people. But for many New York area artists, the fallout of September 11 finds them struggling to regain their footing emotionally, financially and creatively.

Brian Palmer explains.

(BEGIN VIDEOTAPE)

BRIAN PALMER, CNN CORRESPONDENT, (voice-over): Artist Monika Bravo once had a studio in the World Trade Center.

(on camera): We're standing in the middle of one of your pieces. What is it?

MONIKA BRAVO, ARTIST: This is an interactive, an installation, and it's called "A-Maze," and it's just a virtual labyrinth.

PALMER, (voice-over): On September 10, the day before the attack, she shot these time-lapse views of New York City from a vantage point that disappeared hours later.

BRAVO: I taped for around seven hours, and that was the only thing I saved. Everything else I left in the studio.

PALMER: Bravo, who now works out of her Brooklyn apartment, got financial help from a variety of groups, from corporations like American Express to the Red Cross and the Lower Manhattan Cultural Council. Others have been less fortunate.

UNIDENTIFIED FEMALE: The sound of the plane hitting was so loud it shook my bones. As I bent over to hide from the flying debris, I knew instantly it had been terrorists, even before the first news crews arrived.

PALMER: Documentary filmmaker Beverly Peterson and her husband Farrell Brickhouse live and work a stone's throw from the Trade Center site. They were evacuated and stayed away for weeks, and are still trying to recover, financially and emotionally.

FARRELL BRICKHOUSE, PAINTER: It's kind of hard to sometimes, to talk about your own problems when people have lost so much, and we haven't lost anybody that we loved in that building.

PALMER: But they have lost the lifestyle, and livelihood, they spent years building in this downtown community, 10 years for Peterson, more than 25 for Brickhouse, a painter. Brickhouse marks each day he works on a calendar, with a dollop of paint.

BRICKHOUSE: Here's September 11, and since that point in time, you can see, there's just been no marks made.

UNIDENTIFIED FEMALE: If I don't make a documentary, I don't have anything to sell. There's nothing there.

PALMER: Peterson and Brickhouse are fighting the economic and emotional pressure, with the help of other artists and arts organizations like NYFA, the New York Foundation for the Arts, which has organized seminars and benefits to help artists.

TED BERGER, NY FOUNDATION FOR THE ARTS: You need institutions having exhibitions, which attract people to the city, but September 11 has demonstrated that we are really part of the emotional and spiritual core of the people of the city and the country.

PALMER: NYFA will also be giving out upwards of $5 million worth of small grants to individual artists and arts groups. Money from foundations and corporations, and artists themselves, organizing to support their own.

Brian Palmer, CNN, New York.

(END VIDEOTAPE)

FREIDMAN: The repercussions of September 11 continue to be felt in every area of life.

MCMANUS: Indeed they do.

Now on to some exciting news, there are changes afoot here on CNN NEWSROOM. Starting on January 22, CNN NEWSROOM and CNNfyi.com will be renamed CNN Student News and of course, cnnstudentnews.com.

FREIDMAN: Our name will change, but you will get the same great resources on the Web...

MCMANUS: That's right.

FREIDMAN: ... and on your TV. In the next few months, we will continue to fine-tune the format. We hope you like what you see.

MCMANUS: And for more info, head to CNNfyi.com or call the number right below Susan, right there at 800-344-6219, and be sure to stay tuned. We will see you tomorrow. I'm Michael McManus.

FREIDMAN: And I'm Susan Freidman. Have a great day.

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