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Aired January 18, 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.

SUSAN FREIDMAN, CO-HOST: Welcome to CNN NEWSROOM. I'm Susan Freidman.

MICHAEL MCMANUS, CO-HOST: And I'm Michael McManus.

The Justice Department has released new videotape and photos of five suspected terrorists and is asking for help in finding them. The FBI says the videotape was found in Afghanistan and may indicate that the suspects were planning future terrorist attacks.

FREIDMAN: Turning now to the Enron debacle, on Thursday, the energy company fired their accounting firm, Arthur Andersen, another blow in the continually unfolding corporate collapse.

Joel Hochmuth walks us through this week's events.

(BEGIN VIDEOTAPE)

JOEL HOCHMUTH, CNN CORRESPONDENT (voice-over): The growing fallout from the largest bankruptcy in U.S. history dominated the headlines this week. Sunday, top administration officials hit the talk show circuit to defend their decision not to tell the public or their president about the looming crisis.

Treasury Secretary Paul O'Neill received two phone calls last fall from Enron's chairman informing him of the company's problems. The Bush administration chose to do nothing.

PAUL O'NEILL, U.S. TREASURY SECRETARY: Companies come and go. It's part of -- 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 decision. That's the way the system works.

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.

HOCHMUTH: While the president and the public may have been in the dark about the looming crisis, information released Monday indicated top officials at Enron certainly weren't. Congressional investigators uncovered a letter from an Enron finance executive to Chief Executive Ken Lay written in August, two months before Enron admitted its profits had been inflated. According to the letter, "It sure looks to the layman on the street that we are hiding losses in a related company..." "I am incredibly nervous that we will implode in a wave of accounting scandals..." "There are probably one or two disgruntled 'redeployed' employees who know enough about the 'funny' accounting to get us in trouble..."

Speaking of accounting, the whole debacle was quickly tarnishing the image of Enron's accounting firm, Arthur Andersen. Congressional investigators say a lawyer at the firm gave the OK for employees to destroy documents related to Enron audits and that some of those documents were destroyed after a government inquiry had begun but before subpoenas were served.

ALAN ANDERSON, AMERICAN INST. OF CPAS: If the records were certainly subject to a subpoena and they are destroyed after the subpoena was rendered, that would be more than unusual, that would be illegal.

HOCHMUTH: Tuesday, the ax fell on David Duncan, the Andersen partner in charge of the Enron audit. He was fired. Three other partners were placed on leave. According to his attorney, "Mr. Duncan is cooperating with all investigations of this matter. He did nothing wrong. He properly followed the instructions of an Andersen in-house lawyer in handling documents."

None of this, of course, was playing well on Wall Street. There the crisis from Enron was going from bad to worse. The New York Stock Exchange suspended trading on Enron shares and moved to delist the stock altogether. A stock that was worth more than $81 a share just a year ago had fallen to less than a buck.

WILLIAM LERACH, MILBERG WEISS: And there's always some sort of a market available for a delisted stock whether it's over the counter, under the counter, pink sheets. All the delisting really does is prove that the stock is essentially worthless.

HOCHMUTH: Finally Wednesday came more damaging revelations about Enron's accounting firm, Arthur Andersen. Congressional investigators say Andersen officials knew about the misgivings disclosed Monday that the Enron finance executive had about Enron's accounting practices way back in August. Andersen stood by Enron's financial reports until November. Andersen's troubles culminated Thursday with Enron's announcement it was firing the accounting firm.

The auditing debacle raises questions, not just about Andersen's practices, but about the accounting industry in general.

For more on that, we go to Allan Chernoff.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Damage control is now the operative phrase not only for Andersen, but also for the entire accounting industry. The Securities and Exchange Commission is trying to avoid a crisis of confidence in financial standards. SEC Chair Harvey Pitt is working with top accountants to develop a new system for overseeing auditors.

JOSHUA RONEN, NEW YORK UNIVERSITY: I would think that the confidence would have been shaken to a larger extent and it would not be restored without some drastic reform.

CHERNOFF: In full page newspaper ads, Andersen promised it will soon announce ``comprehensive changes in our practices and policies."

The Treasury Department is also prodding for change. Treasury Undersecretary Peter Fisher Wednesday said new rules should be written if loopholes were used to help Enron. And he reiterated his call for better financial disclosure: ``While developments in our capital markets, corporate finance and risk management are racing along at 100 revolutions per minute, the evolution of our accounting and disclosure regime crawls along at 10 RPM, and the gap between them is forever widening. If I sound a little frustrated, I am."

Beyond the question of disclosure, another hot issue: whether accountants should be permitted to engage in consulting for clients.

IRA SORKIN, FORMER N.Y. SEC ADMINISTRATOR: If there's a suspicion that the financial statements of publicly traded corporations are not accurate or misleading, that could have a very serious impact on the entire financial market structure.

CHERNOFF (on camera): Money managers and accounting experts agree nothing less than the integrity of the nation's financial markets is at stake because after all, when investors buy a stock, they do so with the belief that the company's financial statements are accurate.

Allan Chernoff, CNN Financial News, New York.

(END VIDEOTAPE)

FREIDMAN: Another story we've been following closely is U.S. Secretary of State Colin Powell's whirlwind trip through Central Asia. Today he meets with the Prime Minister of India. He arrived yesterday in New Delhi where he met with India's External Affairs Minister Jaswant Singh. The two discussed ongoing tensions between India and Pakistan and the efforts being made to resolve them.

(BEGIN VIDEO CLIP)

JASWANT SINGH, INDIAN EXTERNAL AFFAIRS MINISTER: Of course I'm (UNINTELLIGIBLE) and shall continue to take further steps, but I have to see action on the ground.

We have welcomed what General Musharraf said on a speech on the 12th of January. It was largely addressed to reforming society and polity within Pakistan. And I said then and I repeat because we mean it, we wish the people of Pakistan well. And I also wish that all the statements and the announcement that General Pervez Musharraf has met, really do translate themselves into action because that will, in terms of management of external affairs, contribute greatly to the benefit of the international community in its fight against terrorism. And we would cooperate and welcome fully the General Pervez Musharraf in that regard. And as soon as we see demonstration of it on the ground, we will respond adequately and fully be assured of that.

(END VIDEO CLIP)

FREIDMAN: India and Pakistan amassed hundreds of thousands of troops on their frontier since the December attack on the Indian parliament. Nevertheless, Mr. Powell says the Indian-Pakistani standoff doesn't seem as dangerous as it did around New Year's, and he's praising Pakistan for vowing to curb Islamic militants as demanded by India.

CNN's Ash-har Quraishi reports on those efforts.

(BEGIN VIDEOTAPE)

ASH-HAR QURAISHI, CNN CORRESPONDENT (voice-over): The crackdown on extremist organizations in Pakistan is in full force days after President Pervez Musharraf announced a ban on groups involved in sectarian violence and militancy in Kashmir.

Since Saturday, almost 2,000 suspected extremists have been arrested. The offices of groups like the Jaish-i-Mohammed have been padlocked and sealed by police. India accused Jaish of carrying out the December 13 attack on the parliament building in New Delhi.

Right now, suspected extremists are being held in prisons all around the country, but some of those arrested are saying that they've been falsely accused.

JAVED ALI, DETAINEE (through translator): The people behind these extremist groups have run away. The government cannot find them so they are arresting us, but we are not extremists. I don't even know anyone in these groups.

QURAISHI (on camera): Hard-line groups not on the list of banned organizations say they're also being targeted in the nationwide sweep. Members of the religious party Jamiat-e-Ulema Islami, or JUI, have been arrested and their religious schools raided. This, even though the organization has not been outlawed by the government.

(voice-over): JUI spokesman, Riaz Durrani, is himself on the run and spoke to us on the condition we not disclose his location.

RIAZ DURRANI, JAMIAT-E-ULEMA ISLAMI (through translator): Our secretary general has been arrested. Our members are being arrested every day. My own house has been raided. I don't understand what the objective is. Is the government trying to derail stability in Pakistan?

QURAISHI: But government officials maintain that the bulk of those arrested by police are in fact tied to the banned groups. TASNEEM NOORANI, PAKISTANI INTERIOR SECRETARY: They have evidence that those people are members of the banned groups. And obviously those people will not show them certificates (ph) of being members, but the administration knows that they are members. And barring a few cases, there are no mistakes.

QURAISHI: In the past, India has accused Pakistan of only cosmetically cracking down on these groups, saying that the government detains people only to release them soon after. For its part, the Pakistani government insists it's not bowing to pressure from its neighbor. Islamabad says it will prosecute detainees who are tied to extremism but it will release those it has no evidence against.

Ash-har Quraishi, CNN, Islamabad, Pakistan.

(END VIDEOTAPE)

FREIDMAN: On his way from Pakistan to India, Secretary of State Colin Powell made a quick stop in Afghanistan where he met with interim government leader Hamid Karzai. Powell pledged continued U.S. support for the post-Taliban government.

CNN's Andrea Koppel has been traveling with the Secretary of State and has more on that visit.

(BEGIN VIDEOTAPE)

ANDREA KOPPEL, CNN CORRESPONDENT (voice-over): Their meeting may have been brief, but for the ministers of Afghanistan's new interim government, the message behind Secretary Powell's visit was unmistakable -- this is the beginning of a new page in U.S.-Afghan history.

COLIN POWELL, SECRETARY OF STATE: This is a time of challenge for the Afghan people, but it is also a time of hope and we are determined to work with the chairman and with the other authorities in Afghanistan to make sure that hope is realized in a better life for all of the Afghan people.

KOPPEL: After 23 years of war, that's an awfully tall order. After all, this is a country in need of everything -- food, housing, schools, health care, electricity. As you can see, even here in the palace of the former Afghan king...

HAMID KARZAI, AFGHAN INTERIM GOVERNMENT CHAIRMAN: What happened to our lights?

KOPPEL: ... lights are not guaranteed. Just one of many problems facing the head of this new interim government, Hamid Karzai, who told reporters his immediate challenge in the months to come is getting an infusion of cash, not printing more local currency.

KARZAI: We have great ability to print as much money as you want. That's part of the problem.

KOPPEL: So, too, is ensuring that all future money donated to rebuild Afghanistan, a feudal society with a long history of corruption, doesn't end up in someone's pocket, an assurance Hamid Karzai was quick to make.

KARZAI: Be sure that warlordism is over in Afghanistan. You may not see the signs, ma'am, but it's over.

KOPPEL (on camera): And while Secretary Powell said rooting out al Qaeda and the Taliban continues to be a top U.S. priority, another priority is helping Afghanistan rebuild. With that in mind, from Kabul, Powell travels later this week to Tokyo, Japan for an international donors conference on Afghan reconstruction. No one knows exactly how much money will be needed, but the early estimates range anywhere from $8 to $45 billion.

(voice-over): Before leaving Kabul, Powell paid a quick visit to the newly reopened U.S. Embassy, the first secretary of state to stand on the embassy's steps in 25 years.

POWELL: We are back in business. We are here to stay. We are committed to the future of this country.

KOPPEL: A promise Afghanistan is counting on the U.S. to keep.

Andrea Koppel, CNN, Kabul, Afghanistan.

(END VIDEOTAPE)

MCMANUS: The war against terrorism suspects tops our "War News" today. At the top of the show, we told you that on Thursday the U.S. Justice Department released videotape and still images of five suspected al Qaeda members believed to be planning future attacks. U.S. Attorney General Ashcroft is asking for the public's help in catching these suspects.

(BEGIN VIDEO CLIP)

JOHN ASHCROFT, U.S. ATTORNEY GENERAL: And whether or not the attack would be imminent or not is something we can't determine. But we know that the right time to release these is in advance of any attack, if there is to be an attack, not subsequent to an attack, and to try and enlist the people of the -- of this great nation.

(END VIDEO CLIP)

MCMANUS: Ashcroft said information about the five has been given to police agencies around the world.

Meanwhile, in Guantanamo Bay, Cuba, the U.S. military reports that detainees have been treated fairly. The prisoners, for the most part, have been calm, but it's the calm of the camp that is sometimes the most unnerving.

Here's our Bob Franken.

(BEGIN VIDEOTAPE) BOB FRANKEN, CNN NATIONAL CORRESPONDENT (voice over): Reporters were kept over 100 yards away from Camp X-Ray, but the cameras could see from a distance the telltale orange jumpsuits of the detainees, through the many layers of prison fence.

The International Red Cross officials are supposed to see the detainees close up and talk to them, amid charges their treatment is less than humane.

URS BOEGLI, SENIOR ICRC WASHINGTON, D.C.: We will look at treatment and conditions and we will share (UNINTELLIGIBLE) part with the press. We will share our findings confidentially with the (UNINTELLIGIBLE) authorities.

BRIGADIER GENERAL MICHAEL LEHNERT, U.S. MARINES CHIEF OF SECURITY: I want to reemphasize something. We are committed to treating the detainees in a humane manner, consistent with international laws.

FRANKEN: But the effort to provide humane treatment, even the medical treatment, is superceded by one other concern, security.

CAPTAIN AL SHIMKUS, U.S. NAVY MEDICAL DIRECTOR: Two MPs with the provider, as he's being examined. There are more in the camp protecting the medical camp as a whole, and the detainees are brought in singularly.

FRANKEN: Still, another 30 arrive. The population is now 110. Each detainee spends almost all of his day in these outdoor cubicles, 8 X 8 feet. The military revised the previous description of 8 X 6. Critics have been calling them cages, even kennels.

Still, according to the guards, even minor incidents have been few and far between.

MARC COUDRIET, GUNNERY SERGEANT, PRISON GUARD: They've been very cooperative. A couple incidences have occurred, minor outbursts. It's mainly due to them being scared.

FRANKEN: But even here, the prisoners seem to settle into their routine, barely reacting to their captors, even though some of the guards are women.

PFC TINA COSTA, U.S. ARMY PRISON GUARD: Before they got here, I thought that the detainees would be a lot more intense than they actually were. They were actually a lot calmer than I expected them to be, and I did expect to get treated extremely differently, but it's been the complete opposite.

FRANKEN: By the end of the month, there will be 320 cells here. Officers say they could put two in each if they have to.

COLONEL TERRY CARRICO, U.S. ARMY HEAD OF PRISON SECURITY: I don't think these are very nice people. They're bad individuals, and we have developed a system of positive control, multi-layered security, as we can point out to you, to insure that we maintain the control of the detainees and to insure that nobody escapes from Camp X-Ray.

COSTA: Sometimes I'll be standing -- you know do my guard, and I look around and like, wow, what's going through their minds? Sometimes I wonder if they regret their decisions and sometimes I wonder if they even care.

FRANKEN (on camera): By all accounts, the calm adds to the tension. As one security person put it about the constant potential for trouble, you're always thinking what if.

Bob Franken, CNN, outside Camp X-Ray, Guantanamo Bay, Cuba.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

ANNOUNCER: Patricia Katrencik from Bethel Park, Pennsylvania asks: What's the difference between a war and a holy war?

AKBAR AHMED, CHAIR OF ISLAMIC STUDIES, AMERICAN UNIVERSITY: Patricia, that's a very good question. It's asked a lot in the media. War is simply war, and in Islam there is no war which is an aggressive war. So a Muslim cannot commit acts of aggression.

A holy war is simply a reaction, a defensive war. So if someone is attacked, his children, his family are threatened, he must then fight to defend them. He cannot be involved in an act of aggression in any case. That is very clear.

And jihad, which means war, in the mass media in the west, in fact, is only a word for striving -- striving to improve yourselves to elevate ourselves to the divine mission for which we have been created. It does not mean an act of physical violence.

(END VIDEOTAPE)

MCMANUS: You might remember the story we brought you on the tourism minister of Kashmir. He wasn't too busy, and neither is Afghanistan's. Years of civil war and Taliban rule have taken their toll on Afghan citizens and it's all but decimated the tourism industry.

Our Michael Holmes paid a visit to the tourism office to see what kind of rebuilding they will have to do.

(BEGIN VIDEOTAPE)

MICHAEL HOLMES, CNN CORRESPONDENT (voice-over): The world has seen much of Afghanistan in recent months, but they haven't seen this, or this, or this.

ABDUL RAHMAN, AFGHAN MINISTER FOR TOURISM (through translator): I give this message to the tourists of the world, come to Afghanistan.

HOLMES: Being tourism minister in Afghanistan right now is a bit like being the minister for snow skiing in Jamaica. But Abdul Rahman is a determined man, and it must be said he has much to work with. This is a country rich in what it takes to attract a tourist. The raw materials are here, great beauty and immense potential. Bunda Khada (ph), just outside Kabul, the dam is empty, the resort ready for renovation.

In the markets, much to see, more to buy, tourists welcome anytime. On the Shamali Plain, devastation and beauty are tragic neighbors. This was the front line a few months ago, but bombs and rockets could not damage the splendor. There's just a lot of patching up to do, which brings us to an invitation.

RAHMAN (through translator): I want foreign companies to come and share with us in the rebuilding, to be our partner.

HOLMES: The government says the once bustling airport will be open to international flights soon. The sign pointing you towards Kabul's only major hotel will again mean something.

War has knocked the five stars off the Intercontinental Hotel quite literally. The manager says, however, the stars will return and the tourists too.

SHAR MOHAMMED, INTERCONTINENTAL HOTEL MANAGER: Of course there will be a lot of tourists. They will come. I'm sure they will come.

HOLMES (on camera): It may not be the preferred destination for five star travelers, but the government is certainly hoping that the more adventurous among you will make the journey.

Got a couple of travel tips for you. Don't expect margaritas and martinis. If you leave the city, pack one of these, a flack jacket, and mind your step.

(voice-over): The minister assures people, however, his country is getting safer by the day. And for Afghanistan, he says, the day those tourists arrive will mean more than just dollars.

RAHMAN (through translator): Our people will learn from the tourists and they will learn from our people and it'll have a positive effect on both sides.

HOLMES: Michael Holmes, CNN, Kabul.

(END VIDEOTAPE)

MCMANUS: We've heard a lot about how the September 11 attacks affected a great many people. Well, adults weren't the only ones affected.

FREIDMAN: And an upcoming episode of the WB's "7th Heaven" brings that point home.

CNN's Student Bureau's Lori Autdemorte has that.

(BEGIN VIDEOTAPE) LORI AUTDEMORTE, CNN STUDENT BUREAU (voice-over): "7th Heaven" may be a scripted TV show, but an upcoming episode will be about a problem that is real, young people who deal with discrimination in their communities.

MACKENZIE ROSMAN, RUTHIE CAMDEN, "7TH HEAVEN": We'll be safe here.

AUTDEMORTE: The character Ruthie, played by 12-year-old Mackenzie Rosman, has to defend a Muslim student who wants to go to her school. Since September 11, many Muslims have faced the backlash of the terrorist attack with discrimination, making this a real life problem.

ROSMAN: Yasmine was walking home from school when a couple of boys started following her. They were calling her names because she's Muslim and trying to scare her.

It was different because it had to do with basically the news of what was actually happening. Like the major headline news stuff, you know.

AUTDEMORTE: Students from a real Orange County middle school say the episode hits close to home.

STEVEN GARCIA, 8TH GRADER: One time I got a ride in my -- with my friend's mom in a -- in her SUV, and it was really weird because like she was just like kept on looking at me like -- back like. I'm like what do you -- what -- what's wrong? And she's like are you Islamic? I'm like why? And she's like you get out of the car if you are. And I'm like I'm Mexican.

BERGEN GAMER, 8TH GRADER: I have heard people say, oh yeah, it's just the Afghanistanis, you know just stupid stuff like that that are really -- it's really racial and it's not -- it's not very nice.

AUTDEMORTE: For the "Suspicion" episode, the creators wanted to address issues straight from the headlines and make the show as real as possible.

BRENDA HAMPTON, CREATOR, "7TH HEAVEN": Oh there's a creative license and it's to add some drama to the episode, but I do think that there are children who have the courage of their convictions and that it's not unrealistic that if you had a Ruthie in real life that she wouldn't do this. I think that she would.

ROSMAN: Well, I don't see why I have to do all this work to change me and my feelings when she just gets to stay the same mean old woman.

CATHERINE HICKS, ANNIE CAMDEN, "7TH HEAVEN": Me, I'm the same mean old woman.

AUTDEMORTE: Ruthie Camden has grown more feistier over the years on "7th Heaven." In the "Suspicion" episode, Ruthie Camden's Muslim friend is taunted by school bullies because of her ethnicity and religion. But Ruthie is not the only one who wants to protect a Muslim friend. Students in the real world do as well.

KRISTIN NEISH, 7TH GRADER: Because actually my friend, she is Muslim or she's -- she looks Muslim, and people think that she is and like they just look at her like very weirdly and just think that she's not right and she should be like put in jail and stuff and I don't think that's right at all.

AUTDEMORTE: So what does one do when faced with something not right? In Hollywood, they can do the right thing.

ROSMAN: I think that somebody who's really strong and really brave would do that but probably I don't know if very many people would do that.

AUTDEMORTE: But after teens watch the episode, there may be a few more students willing to take a stand.

CRISTINE DITLANGELO, 7TH GRADER: It gives the society a better output on actually what's going on because it's actually performed by stars and it -- more people pay attention to that than they would if it was a normal person doing it.

ROSMAN: I think that more people will kind of listen to their inner feeling and say, you know what, hey, I see something, I should do something about it instead of sitting on my butt, you know, not doing anything, and they'll stand up and do something.

AUTDEMORTE: For the (UNINTELLIGIBLE), the episode also teaches communication with those we don't know as well. So says Stephen Collins who plays Ruthie's dad on "7th Heaven."

STEPHEN COLLINS, ERIC CAMDEN, "7TH HEAVEN": I mean the hardest thing to do but the best thing to do when you're afraid of someone is to engage them and ask them questions. And 9 times out of 10 you'll find that you don't need to be afraid of those people. Usually when we're afraid of people based on race, it's because we don't know anything about that race, we've never been around that race so because they're foreign and different, we're scared.

HAMPTON: This is a Muslim girl and the closing moment of the show is very sweet. And I hope it'll encourage people to get to know their Muslim neighbors and to find something out about this religion.

COLLINS: And I think for parents and kids, you know, if you're afraid of someone, go up and talk to them.

AUTDEMORTE (on camera): In the episode, not even the entire Camden family working together can bring an end to racial and religious intolerance in their community. What the creators of the episode hope the Camden family can do is help to encourage more tolerance in your community.

Lori Autdemorte, CNN Student Bureau, Los Angeles.

(END VIDEOTAPE) FREIDMAN: "7th Heaven" airs Mondays from 8:00 to 9:00 p.m. Eastern on the WB. Although this episode focuses on discrimination against Muslim and Arab-Americans, we must not forget that discrimination in many forms occurs every day.

MCMANUS: You're right, Susan. And in light of this, on this coming Monday, January 21, the WB is offering a special online guide to help facilitate this very important discussion. The guide will feature background materials and classroom lessons on how to identify and stop prejudice and intolerance.

FREIDMAN: Please take note that we won't be here on Monday. We'll be off for Martin Luther King Day, a day set aside to commemorate a man who gave his life in the fight for equality for all people.

MCMANUS: And when we come back on Tuesday, we'll be just a little bit different. We'll have a brand new name. And that's beginning on January 22 CNN NEWSROOM and CNNfyi.com will be renamed CNN Student News! and CNNstudentnews.com.

FRIEDMAN: Our name will change and the format will change slightly, but you'll continue to see the same quality resources you've come to expect. In the next few months, we'll continue to fine-tune the format. We hope you like what you see.

MCMANUS: That's right. For more information or if you have questions, comments or of course, suggestions, please visit right here, CNNfyi.com, and the number right below it, 1-800-344-6219. And of course, be sure to keep watching.

I'm Michael McManus. See you on Tuesday.

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

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