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Lou Dobbs Moneyline
Dow Advances 65.11 to 9,796.07; Nasdaq Advances 20.20 to 1,942.58
Aired January 24, 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.
ANNOUNCER: Tonight on Lou Dobbs MONEYLINE, a key player in the Enron accounting scandal refuses to tell Congress what he knows.
DAVID DUNCAN, ANDERSEN PARTNER: I respectfully decline to answer the question based on the protection afforded me under the United States Constitution.
ANNOUNCER: Senator Carl Levin joins us. We'll have the latest on American Taliban, John Walker, and his appearance in court today.
Alan Greenspan thinks the economy is improving, but says there are still risks.
Wall Street, like the news, the major averages all ending the day higher.
This is Lou Dobbs MONEYLINE for Thursday, January 24th. Sitting in for Lou Dobbs, Jan Hopkins.
JAN HOPKINS, MONEYLINE CORRESPONDENT: Good evening everyone. Tonight, these developments in the unfolding Enron scandal, Congress wraps up its first day of hearings into the company's collapse. Kenneth Lay resigns as Enron's CEO. Campaign finance reform gets a boost on Capitol Hill.
We begin with a report on the hearings in the House; lawmakers looking into the destruction of evidence relating to Enron's monumental collapse. Allan Chernoff has the report from Washington.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice over): David Duncan, the fired Andersen partner who led the Enron audit, invoking his Fifth Amendment right against self-incrimination.
DUNCAN: On the advice of my counsel, I respectfully decline to answer the question based on the protection afforded me under the Constitution of the United States.
CHERNOFF: Even after Duncan left, he remained a focus of the hearing. Andersen executives putting the blame for document disposal on Duncan.
UNIDENTIFIED MALE: And we rely on the engagement partner to make that judgment, to make the judgment of what to do.
CHERNOFF: "But why" asked Congressman Billy Tauzin "would an accountant be responsible for a legal decision?"
REPRESENTATIVE CHRIS JOHN (D) LOUISIANA: If all of your policies are to let accountants decide when it's legal to destroy documents in a pending investigation, an awful lot of people are going to be in trouble down the road, not just in this case.
CHERNOFF: Committee members repeatedly scolded Andersen, portraying a major accounting firm that could see no evil, hear no evil, after an October 23rd meeting in Houston that led to document shredding.
UNIDENTIFIED MALE: It is perplexing to me that no one in the highest management of Arthur Andersen had any indication of this meeting.
UNIDENTIFIED MALE: I agree that the action that took place on October 23rd and the subsequent elimination of e-mails and destruction of documents is an action that is totally inappropriate.
CHERNOFF: Singled out for tough questioning, Nancy Temple, the Andersen lawyer who waited until November 9th to send a memo explicitly telling employees to retain all Enron-related documents, several weeks after the SEC began investigating Enron's financials.
NANCY TEMPLE, ATTORNEY FOR ANDERSEN: I never counseled any destruction or shredding of documents, and I only wish that someone had raised the questions so that we could have consulted and address the situation.
(END VIDEOTAPE)
CHERNOFF (on camera): The hearing did very little to uncover new details about documents destruction at Andersen. However, it did leave the impression of a big five accounting firm with major gaps in oversight, gaps that executives say they will now fill.
On the Senate side of the Hill, former SEC Commissioner Arthur Levitt said accountants have compromised their independence by serving as both auditors and consultant for the same clients. Jan, not a very good day for accountants here in Washington, back to you.
HOPKINS: Thanks. Allan Chernoff in Washington. And even before Enron declared bankruptcy, there were questions about the company's ties to the Bush Administration, specifically connections to Vice President Dick Cheney and what influence Enron may have had in forming energy policy. Now Congressional Democrats are pressing for answers, and Tim O'Brien has the story.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice over): The White House energy taskforce, chaired by Vice President Dick Cheney, acknowledges at least five private meetings with executives of Enron, but declines to give any further details of who specifically the meetings were with, or what was said.
Two ranking Democrats, Henry Waxman of California and John Dingell of Michigan last April asked the General Accounting Office, the investigative arm of Congress, to force disclosure to no avail.
Today, they pressed their case on the op-end pages of two leading newspapers, Dingell writing in the New York Times: "The Administration must get over the notion that the public will tolerate secrecy in the way this government makes policy decisions."
And Waxman in the Washington Post went further, accusing the White House of, "blunt personal attacks to discredit me and make other Democrats nervous about investigating Enron's influence on White House policies." And, says Waxman, the Vice President is stonewalling.
REPRESENTATIVE HENRY WAXMAN (D) CALIFORNIA: It's dangerous because no Executive Branch, no White House should be able to operate in secrecy without accountability, and that's what this White House is trying to do.
O'BRIEN: Citing separation of powers, the administration argues it should not have to provide any information to Congress, absent a showing of wrongdoing, and there has been none.
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: If you have any information, any evidence you would like to bring forward about potential wrongdoing, we will do our best to track it down for you. But other than that, I liken it to a fishing expedition.
O'BRIEN: Four Democratic Senators, each of whom heads a separate investigation into Enron's collapse, have now joined Waxman and Dingell in urging the General Accounting Office to compel Cheney and his taskforce to disclose who they spoke with and what influence they may have had.
(END VIDEOTAPE)
O'BRIEN (on camera): The GAO is expected to decide in the next week, whether to take the White House to court. Amid a dozen other investigations already in the works, that would be the frosting on the cake, all three branches of government, embroiled in a dispute over who said what to whom and why. Jan.
HOPKINS: Tim O'Brien in Washington, thank you. Enron's huge political contributions have given a boost to campaign finance reform. Today, supporters of reform got the votes that they need to begin debating the issues in the House. Jonathan Karl has more from Washington. Jon.
JONATHAN KARL, CNN CORRESPONDENT: Well, Jan, this was a major development because the Republican leadership of the House had said that they would not hold a vote on the campaign finance question this year.
They had said that was not in the schedule. There was no need to do that because the issue had been talked about last year, but 218 members of the House, more than half the House, signed a petition demanding a vote on the floor of the House of Representatives on campaign finance reform.
That included 20 Republicans and five inner-party leadership and four people who signed today, at least one of them saying Enron was the direct reason why they got involved. And that was clearly the position of the lead Democratic sponsor of this bill, who said at the press conference announcing this victory for the campaign finance reform advocates, that it was largely because of Enron that it happened so soon.
(BEGIN VIDEOTAPE)
REPRESENTATIVE MARTY MEEHAN (D) MASSACHUSETTS: Check out today's Enron's hearing. The evidence is very much on our side. The soft money system needs to be banished and banished fast. With each hearing, with each new revelation the evidence becomes overwhelming. We must end the soft money system.
(END VIDEOTAPE)
KARL: A spokesman for Speaker of the House Dennis Hastert said that the Speaker will not stand in the way, that now that there are 218 signatures on that petition, there will be a vote on campaign finance reform.
But that's not the end of the road for those advocating a change in the system, because there will be a competing Republican bill that we voted on and there will be 20 amendments, many potential procedural hurdles for the advocates of campaign finance reform to get over before they can send a bill down to the President to sign. And one of the Republican, chief Republican advocates of the issue said that he knows that they still have an uphill battle ahead.
(BEGIN VIDEOTAPE)
REPRESENTATIVE CHRIS SHAYS (R) CONNECTICUT: We don't know if this bill is going to pass. We don't know if it's going to pass in the form that we want it to, to go to the Senate. We think it will, but we don't know. But that's really what the debate's going to be about.
(END VIDEOTAPE)
KARL: At the other end of Pennsylvania Avenue, President Bush has been no big fan of the kind of campaign finance reform advocated by people like Marty Meehan and Chris Shays, or the Senate version advocated by Russ Feingold and John McCain.
But the President's Press Secretary came out today and, although he didn't say that he would sign the bill, he also said that the President can't be counted on to veto the bill either.
(BEGIN VIDEOTAPE)
FLEISCHER: The President has made it very clear to Congress that they can not count on him to veto campaign finance reform, and I think in that process, it forced the debate to become a real one, and that's one of the reasons I think you've seen many Democrats really start to question whether or not they want campaign finance reform to eventually be sent to the President.
(END VIDEOTAPE)
KARL: One big thing talked about today was the $1.67 million in so-called soft money contributions that Enron gave to the political parties in the last Presidential cycle in the year 2000. That money, if this were to become law, would no longer be legal, that unregulated money that's given, not to candidates, not the $1,000 checks that's given to candidates, but the unlimited checks that go to political parties, if this were to become law, would no longer be legal. Jan.
HOPKINS: So, Jonathan, it's really the Enron contributions that have broken this log jam on campaign finance reform, right?
KARL: Well, before this scandal really became full blown this year, before Congress went on their holiday recess, campaign finance reform members had 214, 215 signatures committed to actually signing that petition.
But what really pushed them over the edge here was clearly the momentum driven by the Enron hearings and the Enron scandal. And, as a matter of fact, as this issue comes to the floor of the House, and we don't know exactly when that will be, it's expected it will be in the next few weeks though, clearly the fact that there will be Enron hearings going on all over Capitol Hill, will clearly be part of that dynamic here and the reformers here believe that that's going to be something that's going to push them over the top.
HOPKINS: Thanks, Jonathan Karl in Washington. And joining us now to talk about today's hearings into Enron's collapse, as well as campaign finance reform, is Senator Carl Levin, a Democrat from Michigan. Welcome, Senator. So, in the hearings that you took part in today, what did you learn?
SEN. CARL LEVIN (D), MICHIGAN: Well, we learned that the former head of the SEC thinks we've got to have an independent body that will do the enforcement of strict standards, relative to auditors, both in terms of setting accounting rules and in enforcing those rules, having subpoena power, being independent in terms of the source of funds.
They just can't be relied upon, the accountants, to regulate themselves. They need an outside force, an outside body to make sure that we don't have more Enrons. That was something we learned from Arthur Levitt, who is the former head of the SEC.
But you had a really bipartisan expression of real anguish at what has happened here, and a determination to do something about it, to bring the perpetrators to justice, to try to get some justice for the little folks who lost their life savings, lost their jobs and do justice against those fatter cats at the top who made out so well, and made out like bandits, while the employees of Enron were left holding the bag, and the stockholders were left holding the bag. HOPKINS: Your concern, I assume though, is that there not be other Enrons and that maybe Congress has to do something to make sure that that doesn't happen.
LEVIN: That's the principal concern is to close these loopholes which have existed too long. For instance, for a long time, we've been trying to get the SEC the power that they have asked for to try to stop the conflict of interest that exists when the auditors both do advising of corporations and then auditing their own advice.
There's a conflict of interest. The SEC has asked, has urged that that conflict, and then they've gotten pressure from too many people on the Hill to allow that to continue. We have stock options. Right now, the situation is that a stock option can be deducted on your income tax if you're a corporation.
On the other hand, you don't have to show it as an expense on your annual statements. And so, we have an unusual situation and because of those stock options, Enron and lots of other companies are able to show a much rosier picture than otherwise would really exist and does exist.
HOPKINS: Now you part of the group that asked the Vice President Dick Cheney to answer more questions about Enron's role in the energy policy, why do you need more answers from the Vice President?
LEVIN: Because the General Accounting Office, which is a bipartisan entity, wants to know about the meetings and the impact of those meetings on energy policy. There's a right of Congress to know.
The General Accounting Office is a bipartisan group. They've asked the Vice President to get that information, and after all, this is simply knowing who it was that the advisory group met with. This isn't asking what was the advice that somebody gave personally to the Vice President.
There is no privilege here. This is just simply a matter of information, which should be available to everybody as to who had the impact on that advisory group, and the most important point here is that a bipartisan General Accounting Office believes it has the power to get that information. So do I.
HOPKINS: What about campaign finance reform? Do you think that it's this case of Enron that's really pushing things forward, and will campaign finance reform pass?
LEVIN: Enron has produced at least this good result. It is a horror. It is a disaster for the employees, for stockholders. It has weakened credibility and confidence in our markets, in our capital markets, because you had auditors that were certifying things which were not accurate and were then shredding documents.
So we've had a real loss of confidence. There's a real lot of pain in this Enron situation for all of us and for our markets. But we now have at least positive result number one, and that is that we have enough signatures to get, force a vote in the House against the wishes of the Republican leadership there.
A bipartisan bill in the House is going to come to a vote, and I was glad to hear today that the President no longer is implying that he would veto it. I don't see how he could veto a bill that would finally close the soft money loophole, which allows for unregulated, unlimited contributions to political parties when the intent of the law is that there be limits on campaign contributions.
HOPKINS: One last question, have you ever accepted contributions from Enron?
LEVIN: No.
HOPKINS: Thank you, Senator Carl Levin. And coming up on MONEYLINE, the head of Enron steps down, less than a day after a special committee asks for his resignation. A look at who may be in line for his position.
And, a positive session for the markets, we'll head to Wall Street for a look at what encouraged the run up. And Gateway, out with quarterly results that beat Wall Street estimates. We'll take a look at the company's future with the Chairman and CEO. MONEYLINE will be right back.
(COMMERCIAL BREAK)
HOPKINS: Enron's embattled leader, Ken Lay, has quit. The Chief Executive stepping down as the scandal that engulfed his company continues to rattle Main Street, Wall Street, and Capitol Hill.
Chris Huntington looks at Ken Lay's career and the reaction of those who used to work for him.
(BEGIN VIDEOTAPE)
CHRIS HUNTINGTON, CNN CORRESPONDENT (voice over): For Enron employees, news of Kenneth Lay's resignation was just the latest gust in a storm of revelations.
UNIDENTIFIED FEMALE: It's just something, one after another you know, and it's been interesting working here.
UNIDENTIFIED FEMALE: It's very quite in there. It's very solemn.
UNIDENTIFIED MALE: Whatever happens will happen, and hopefully Enron will still survive.
HUNTINGTON: For Lay, stepping down was the ultimate admission of defeat. Back in the summer of 1992, Lay was on the rise, as Chairman of the host committee of the Republican National Convention in Houston, he was cementing his relationship with both George Bush's and building his reputation as a businessman on the national stage.
At the time, Enron was far from a household name, but it was well on its way to becoming the biggest marketer of natural gas and electricity in the United States.
A former naval officer with a doctorate in economics, Lay transformed a sleepy natural gas pipeline business into an online commodity-trading powerhouse. Under Lay, Enron seized the advantages of deregulation. It minted new businesses brokering power contracts and broadband data transmission. By 2000, Enron reported sales of more than $100 billion, ranking it seventh on the Fortune 500.
In a statement explaining his resignation, Lay said: "I want to see Enron survive, and for that to happen, we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hardworking employees."
KENNETH ECKSTEIN, RESTRUCTURING ATTORNEY, KRAMER LEVIN: A restructuring person for Enron is going to need to have recognized independence, integrity, and confidence in the marketplace, and experience and expertise in dealing with complex financial and restructuring issues.
(END VIDEOTAPE)
HUNTINGTON (on camera): Lawyers for Enron and the creditor's committee are in talks to sort out just who might take on that role, and they're not saying right now who they're considering. As for Kenneth Lay, while he's given up the reins at Enron, he has not severed all ties with the company, as he will stay on the Board of Directors. Christ Huntington, CNN Financial News, New York.
HOPKINS: You may not have to feel sorry for Ken Lay though. He may be leaving the company, as he says he loves, but he'll be leaving it a very wealthy man. Brooks Jackson joins us now from Washington to explain. Brooks.
BROOKS JACKSON, CNN CORRESPONDENT: Well, Jan, Ken Lay has bailed out but what a parachute he has. We took a look at Lay's employment contract with Enron, which is a public document filed with the Securities and Exchange Commission and it makes very interesting reading.
It says Lay gets severance benefits, even if he quits on his own, as long as it's "for good reason." And what a deal, it calls for a lump sum payment for each of the three full calendar years left on Lay's contract equal to his $1.3 million base salary in year 2000, plus his $3.9 million bonus received in 2000 for the prior year's performance, and the $15 million long-term value of stock options granted in 2000.
That's over $20 million a year multiplied by three years, $60.6 million. Now will Lay actually get that? Probably not. Bankruptcy lawyers tell us Lay, most likely, would end up as just another unsecured creditor to the bankrupt Enron, and would go to the back of the line for payment.
But Lay remains on the board of Enron, so he's in a better negotiating position than outsiders. An Enron spokesman said today, Lay's severance is "still being determined." Besides any severance, however, Lay remains entitled to a very generous executive pension.
According to a proxy statement Enron filed last May, Lay would have received an estimated $475,000 a year for life had he stayed with the company to age 65. It's not clear how much that pension will be reduced due to Lay's early departure, but he's in no danger of becoming homeless. Jan.
HOPKINS: Thanks, Brooks Jackson in Washington. And coming up on MONEYLINE, the American Taliban makes his first appearance in court. We'll bring you details. Plus, positive comments from the Fed Chairman on Capitol Hill today, and that fueled a rally on Wall Street. We'll hear from a leading economist on the state of our economy.
ANNOUNCER: Next, Jan talks with Bruce Steinberg, Chief Economist at Merrill Lynch.
(COMMERCIAL BREAK)
HOPKINS: On Wall Street today, stocks moved higher after Federal Reserve Chairman Alan Greenspan said the economy is beginning to stabilize. Some better than expected quarterly results also lifting the markets. The Dow gaining 65 points, the Nasdaq adding 20. The S&P 500 up nearly four.
Christine Romans is at the New York Stock Exchange and Greg Clarkin at the Nasdaq Market Site. Christine, first.
CHRISTINE ROMANS, CNN CORRESPONDENT: Jan, a second up day and better volume. That's important the bulls say. Take a look at the most active list. Tyco on top of it again today, losing another 73 cents, folks there fretting over its plan to break into four pieces.
The battled Kmart though adds about three pennies. Now look at EMC and Nokia. These two were good drivers for the overall mood today. EMC had a loss in the quarter, but it was smaller than expected, and it said it's cost cutting is ahead of schedule.
Nokia had Christmas sales of cell phones that helped it beat estimates for its quarter. That company also sticking to its growth targets. Look at Halliburton, this one up 24 percent. It's fourth quarter met expectations. It rallied here with this whole group. It's interesting about this one too, because it warned on its entire year for 2002. Also there was a Moody's downgrade of this one yesterday, but analysts said near 15 year lows, all of that bad news was already baked into that stock.
Taking a look at some of the Dow movers, you can see one of the reasons that Greenspan could be seen on the street here. These are the kinds of stocks that are expected to fare well and fare first when the economy starts to turn. Dupont was up.
A lot of analyst upgrades here. Eastman Kodak beating the street's expectations. Honeywell, 3M and United Technologies all up strongly, five reasons here why the Dow was in positive territory throughout the day.
The mood from the floor, the final word from the floor is that finally things are favoring the bulls here, but not by very much, Jan.
HOPKINS: Thanks, Christine Romans at the New York Stock Exchange. The Nasdaq gained more than a percent, advancing issues beating declining issues by a four to three margin. Greg Clarkin is at the Nasdaq with what's behind the rally, and this is the second day in a row, right Greg?
GREG CLARKIN, CNN CORRESPONDENT: Exactly, Jan. We've had two pretty good back-to-back robust sessions for the technology stocks, and really we saw another batch of positive earnings reports, no big blockbuster report. But still more companies have been coming out beating earnings estimates by a penny or two and sounding fairly confident, fairly positive tone on their conference call.
If you take a look at the big name tech stocks, they all posted gains today, some of them small, Sun Microsystems up nine cents. Oracle, Microsoft, Cisco and Intel all gaining, but you did have some nice percentage gains among the movers.
Starting with the shares of Siebel Systems, this is one of those companies a lot of folks pointed to today as a catalyst, a software company topping earnings estimates easily, and also again sounding a confident tone on their conference call. The stock was up better than two bucks.
Activision, this is a videogame software company that came in and blew away earnings estimates, and that stock gained really sharply. On the downside though, Bio Technology stocks, Amgen, the biggest biotech company in the world comes in a penny short of expectations, also didn't offer any kind of guidance. That dragged down the whole group. Amgen, Biogen were losers on the day.
But Amazon.com now, back on Tuesday when the company posted their first ever profit, that stock is up 38 percent since then. It gained again today. It's now trading over $14 a share, and this for a stock that at the close of trading last Friday was trading around $10 and change. So, Amazon posting real big numbers over the last couple of days. Jan, back to you.
HOPKINS: Thanks, Greg Clarkin at the Nasdaq. Allan Greenspan was on Capitol Hill today. He told the Senate Budget Committee, the economy is at a turning point. Mr. Greenspan also threw cold water on a burning issue in Washington, the need for a stimulus package.
But the state of the economy wasn't the only topic the Fed Chairman touched on today. Kathleen Hays reports.
(BEGIN VIDEOTAPE)
KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): Allan Greenspan was cautiously optimistic on the U.S. economy when he testified to the Senate Budget Committee on Thursday, a subtle shift from a speech two weeks ago when he said it was too soon to say if an economic recovery is taking hold.
ALLAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: There have been signs recently that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm.
HAYS: But when pressed by a long-time critic to say if he thinks the recovery is underway, Greenspan said it looks like the economy is turning. Beyond that, it's still too early to tell.
GREENSPAN: Anyone who thinks they can state with great conviction at this particular point has not been in the forecasting business as long as I have.
HAYS: As President Bush and Congressional Democrats continue to wrangle over a fiscal stimulus package, Greenspan was non-committal, saying the economy will probably recover without one, but if Congress does pass one, it will not hurt the long-term budget outlook.
The Enron accounting scandal was the subject of another high profile hearing in Washington on Thursday, a topic so hot even the Fed Chairman was asked to comment on it.
GREENSPAN: We are increasingly getting firms which are conceptual, and Enron being a classic case, whose value depends increasingly on reputation and trust. And if you breach that, that value goes away very rapidly.
(END VIDEOTAPE)
HAYS (on camera): Greenspan said Enron's collapse would not harm the U.S. economy and he said lower mortgage rates and falling energy prices are giving consumers a boost. Both of these are factors the Fed is expected to consider when it meets to set interest rate policy next week. Kathleen Hays, CNN Financial News, New York.
HOPKINS: Joining us to see if Wall Street shares Greenspan's view that the economy is getting better is Bruce Steinberg. He's Chief Economist at Merrill Lynch. So Bruce, you're in the forecasting business. Is the economy improving?
BRUCE STEINBERG, MERRILL LYNCH: The economy is beginning to improve. Recovery may not be here this moment, but it's pretty imminent and the economy is going to start to grow again in the current quarter.
HOPKINS: So what are the signs that you see?
STEINBERG: Well, we're going to have, as Greenspan noted, a very pronounced turn in the inventory cycle. We liquidated so much inventory in the last quarter that it's really pretty inevitable that we're going to get a big plus from that source in the first quarter, and as a result of that, we're probably going to get up GDP in this quarter.
The signs that we should see there, signs that the industrial sector is beginning to firm, because that's the first area that benefits from a turn in the inventory cycle, and we should also see the job market begin to stabilize. We've had initial unemployment claims decline for three weeks in a row now, so perhaps that's also happening.
HOPKINS: Now the Federal Reserve does meet next week. Is it likely to lower rates or leave rates alone at this point?
STEINBERG: I think, given Greenspan's remarks today, the Fed is on hold. They're going to probably retain an easing bias, but they're not going to cut rates. And in all likelihood, they're pretty much done right now. I would suspect that this is it, one and three- quarters percent on the Fed funds rate. It's as low as they're going to have to go.
HOPKINS: Today the markets liked what the Fed Chairman had to say, both the bond market and the stock market. Is that likely to be the interpretation, as things get better? Will the stock market do better and the bond market do better?
STEINBERG: You know, both the stock and bond markets have priced in a pretty strong recovery. Greenspan doesn't seem so sure that we're going to get a strong recovery. I think the recovery will be a lot stronger than the consensus forecast is right now. If you get that strong recovery, the stock market will continue to improve. The bond market will probably deteriorate a little bit, but since it's already anticipated this, maybe not so much.
HOPKINS: So in terms of refinancing mortgages and buying houses, will interest rates, mortgage rates stay about where they are, or are they about to head up?
STEINBERG: I don't think that mortgage rates, interest rates in general are going to head up that much, probably bond yields and mortgage rates will be a little bit higher at the end of the year than they are right now, but not too much higher.
On the other hand, we've seen the low on interest rates.
HOPKINS: Bruce Steinberg, Chief Economist at Merrill Lynch, thanks for joining us. And just ahead tonight, the personal computer business coming out of a tough quarter and facing an uncertain future. We'll have Gateway's earnings and talk with the company's CEO.
One of the nation's biggest food companies, accused of smuggling illegal aliens. We'll have more on that story.
HOPKINS: Just ahead tonight, the personal computer business coming out of a tough quarter and facing an uncertain future. We'll have Gateway's earnings and talk with the company's CEO.
One of the nation's biggest food companies accused of smuggling illegal aliens. We'll have more on that story.
And John Walker today facing charges of aiding and abetting terrorism. We'll have the latest on his court appearance and the war on terrorism.
ANNOUNCER: Next, Jan speaks with former defense secretary William Cohen.
(COMMERCIAL BREAK)
HOPKINS: The only known American to fight for the Taliban appeared in federal court in Alexandria, Virginia today. John Walker Lindh said that he understood the four criminal charges brought against him, including conspiring to kill Americans abroad. If convicted, Walker could face life in prison.
For more on Walker's court appearance, we're joined by Susan Candiotti. She was inside the courtroom in Alexandria, Virginia today -- Susan.
SUSAN CANDIOTTI, CNN CORRESPONDENT: Hello, Jan.
Walking into court, John Walker Lindh appeared unassuming, a tall, thin 20-year-old. But according to the government, he is anything but. The Justice Department says he chose to join terrorists. Walker Lindh was brought to court before dawn under heavy security in a motorcade and he did have the chance to meet with his parents for about 20 minutes before the hearing began with an FBI agent present. He also met privately with his lawyers.
During his first appearance in court, he heard the charges against him, the possible penalties and accepted the legal team hired by his parents. Walker Lindh looks nothing like he did in December. Beard and long hair are gone, replaced by a close shaven look. His lawyers charge the government denied him access to a lawyer after his capture in Afghanistan and before he made a statement to the FBI.
(BEGIN VIDEO CLIP)
JAMES BROSNAHAN, DEFENSE ATTORNEY: He began requesting a lawyer almost immediately, which would have been December 2 or 3. For 54 days, he was held in communicado.
JOHN ASHCROFT, ATTORNEY GENERAL: John Walker chose to join terrorists who wanted to kill Americans. And he chose to waive his right to an attorney, both orally and in writing before his statement to the FBI. Mr. Walker will be held responsible in the courtroom for his choices.
(END VIDEO CLIP)
CANDIOTTI: His next court appearance is scheduled for a couple of weeks from now. That will be a bond hearing. However, it is expected that he'll be indicted by a grand jury before then -- Jan.
HOPKINS: Thanks, Susan Candiotti.
The Pentagon says that a special forces soldier was injured during a raid on two Taliban compounds. The mission took place north of Kandahar. The Pentagon says a firefight broke out as commandos search the two sites.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, SECRETARY OF DEFENSE: There are a lot more of these pockets. We are going to pursue them. We are pursuing them now. We pursue them alone. We pursue them with coalition forces. We pursue them with Afghan forces. And we're going to keep at them until we get them.
(END VIDEO CLIP)
HOPKINS: Twenty-seven Taliban fighters were captured in that raid. The Pentagon says it is still trying to sort out whether any Taliban leaders are among them.
There are now close to 300 detainees in U.S. custody in Afghanistan. Most of them are being held at the Kandahar airport and that's where we join Martin Savidge -- Martin.
MARTIN SAVIDGE, CNN CORRESPONDENT: Jan, we continue to learn more information regarding that firefight/battle that took place a little over 24 hours ago. And from what we are learning, it was a significant confrontation, perhaps one of the more significant that has occurred in some time that we are aware of. We should underline that there is a lot of special forces action that is continuing almost around the clock here.
It took place about 60 miles north of the Kandahar airport. It involved U.S. special forces, coalition forces as well as friendly Afghan forces. They came across what is believed to be two compounds that was (AUDIO GAP) and al Qaeda forces.
And then there was the engagement, and it appears that it was a heavy firefight. When all was said and done, we are told, as you mentioned, there were about 27 al Qaeda prisoners that were taken. They have been transported here to the Kandahar airport. There were also casualties that were taken on the part of the Taliban and al Qaeda. We're told anywhere from a dozen to perhaps 15 were killed.
As you mentioned, one U.S. special forces soldier was also wounded in that confrontation. He was shot in the ankle. He was treated on the scene with basic medical care, then he was brought to the Kandahar airport. It was deemed that due to the fact that it was sort of a specialized wound, he needed better care. He was moved out of here to a specialized treatment area to an unnamed medical facility in the theater of operation. His name has not been released because they are still working on notifying the family.
What this all goes to prove is that despite the fact that military forces continued to move and gain further control here in Afghanistan, it is still potentially a very dangerous place and there is still the obvious potential for U.S. casualties -- Jan.
HOPKINS: Thanks, Martin Savidge, at Kandahar airport.
Joining us now for his analysis of the latest developments in the war on terrorism is former defense secretary William Cohen. So, how many other holdouts are there, do you think, in Afghanistan?
WILLIAM COHEN, CHAIRMAN & CEO, THE COHEN GROUP: I don't think anyone can tell you right now. There are so many pockets, as the secretary of defense, Rumsfeld, has indicated, caves, other types of compounds that are spread throughout the country that's going to take some time to find all of them, if in fact we can find all of them. It's a very difficult phase of the campaign right now.
HOPKINS: And very dangerous, as Martin Savidge was saying.
COHEN: It's very dangerous because we're looking at it through the -- if you were to use business terms from a macro point of view or a micro point of view, we're now at the micro stage, going from cave to cave or from sight to sight. That's the most dangerous, certainly to our troops right now.
HOPKINS: The president has asked for a defense budget with an increase of $48 billion compared to the last budget. And we have a deficit now instead of a surplus. So is he likely to get this kind of increase for the defense budget?
COHEN: I think he's likely to get a good portion of it. Perhaps not all of it, but I would suspect that most of the members, Democrats and Republicans alike, are going to want to support increase in defense spending in order to have higher pay raises for our troops and take care of our families, invest in new technologies, transform the current state of the military into this new century of ours. So that's going to take additional funding.
I suspect there may be some controversy over the funding of the national missile defense system, in terms of whether we can afford that as well on top of all of the other things that need to be done. But I think he will get most of it.
HOPKINS: And this does not include the extra spending for homeland defense. That's another $38 billion.
COHEN: That's a separate budget. That's not in the defense budget itself. And so there is going to be considerable spending. I think, again, most of the American people will say, "Do whatever is necessary in order to protect us, our homeland, and invest substantially in making sure that we have the finest military in the world."
We are relying right now on technologies that were developed back in the '60s and the '70s. Much of that equipment is aging, and so it has got to be replaced. I think the American people will generally support significant increases, both at the military level in the defense budget and also in the homeland security.
HOPKINS: Well, we were at a cycle when defense spending was going to increase anyway, but as a result of all this terrorism attacks around the world, then that's that much greater for defense spending needs basically, right?
COHEN: Well, what happened on September 11, I think is clear, that it shattered any illusions that we were somehow, by virtue of our superpower status, insulated and immune from the kind of asymmetrical attacks that can be launched against the United States with the threat of biological warfare, cyber warfare. All of these threats that are out there have to be addressed and it's going to take substantial sums. I think the American people are aware of that and will support that.
HOPKINS: The upcoming trial of John Walker Lindh, do you support the idea that it's in a civilian court rather than a military court?
COHEN: I certainly can support that. I didn't really pass judgment on whether it should be military or civilian. But now that he is in the criminal justice system, I think we have to take care and not overblow the preliminary stages of this particular case to turn it into a soap opera.
He is going to raise issues of adequacy of counsel, of the waving of counsel. He is going to raise issues through his attorneys about pre-trial publicity. All of this publicity to date, if it continues to be focused on with the kind of intensity we have seen in so many other cases in the past, could very well undermine the process itself. So we have to take care on that. He's presumed to be innocent. There may be other charges forthcoming, but he should be presumed innocent at this point until proven guilty.
But we should, if we can, and I may be simply whistling in the wind on this, I would hope that we would exercise some restraint in the kind of coverage that will be preceding his trial.
HOPKINS: I want to ask you about something completely different, which is Enron. You were a senator in a former life. And on one of the committees that's now doing investigations, do you think there was anything that could have been done before all of this happened to make sure it didn't happen?
COHEN: Well, it's interesting. I think Congress obviously has a responsibility to investigate what went wrong and why it went wrong and what regulations were in place that were efficient.
It also has to take a look at itself. Some self-examination certainly is warranted here in terms of what proposed regulations came forth from the accounting standards board that were revisited by Congress, that elements within the private sector said it would be too strenuous and too adverse to the economic interests of this country? And what might have been done had those regulations that were proposed by the board gone into effect? So I think Congress has a role to oversee what should have taken place, but also what it might have done in the past to have prevented this.
HOPKINS: Thanks very much. William Cohen, former defense secretary and also a former senator, and now the head of the Cohen Group. Thanks for joining us.
COHEN: Thank you.
HOPKINS: Still ahead tonight, the nation's biggest meats and poultry company defending itself in court. We'll tell you why this case is drawing a lot of attention.
And Gateway Computer tonight reports earnings and gives its outlook for the computer business.
(COMMERCIAL BREAK)
HOPKINS: One of the biggest food companies in the country, Tyson Foods, today plead not guilty to charges that it violated immigration laws. The government says that Tyson broke the law by smuggling illegal aliens into the country to work in its factories. Kitty Pilgrim takes a look at why this case is drawing so much attention.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Working in a chicken plant is not a pleasant job. Unions once dominated the industry and pay was good. But now, starting salaries typically run $7 to $8 an hour, and finding people to work in the plant is not easy. Plants typically run six days a week.
DAVID NELSON, CS FIRST BOSTON: We can't have one of these plants shut down. You've got livestock or poultry coming in. It's a constant stream and there's a lot of pressure on these companies to make sure they have enough employees to deal with all their volume.
PILGRIM: Federal prosecutors say Tyson managers in 15 plants hired illegal workers and have charged the company with, quote, "corporate conspiracy". Tyson says no more than five plants were involved, calling it an "isolated incident", quote, "and the managers acted outside of company policy."
This case is drawing attention because many employers face the sticky issue of documentation. According to the 2000 Census, the number of illegal immigrants in the United States more than doubled in the 1990s, probably to 7 or 8 million. Nearly half come from Mexico.
Tyson puts all credentials through a special government database to check authenticity after an employee is hired. The credentials supplied by the illegal workers, although forged, did pass that database check. Employees have rules they must follow in checking documentation, but they also can't go too far, or they are accused of discrimination.
CARLA FELDMAN, LOEB & LOEB: If someone is going to come and they are going to swear under their I-9 form, section one, that they are authorized to work in the United States, the employer, so long as the documents that they are provided with appear to be genuine, the law doesn't impose any further obligation.
(END VIDEOTAPE)
PILGRIM (on camera): Now for Tyson, the number one company in both beef and poultry, it could mean substantial fines. However, analysts point out that the legal issues have not hurt the stock -- Jan -- and in fact, this case will not even take place until the summer. HOPKINS: Thanks, Kitty.
WOLF BLITZER REPORTS begins in a few minutes. For a preview, let's go to Wolf in Washington.
WOLF BLITZER, CNN ANCHOR: Thank you very much, Jan. Taliban American John Walker Lindh makes his first appearance in court. We'll hear what he, his parents, his lawyer and federal prosecutors had to say. We'll also have new and exclusive information about al Qaeda documents found in Afghanistan. How close were they to getting to a nuclear bomb? All that and Senate intelligence committee chairman Bob Graham and former NATO commander Wesley Clark. It's all next -- Jan.
HOPKINS: Thanks, Wolf.
Coming up next on MONEYLINE, some surprising evidence that the glass ceiling is still intact.
(COMMERCIAL BREAK)
HOPKINS: Tomorrow quarterly results are due from mobile phone maker Ericsson, a defense contractor, Lockheed Martin. We'll also get a look at the U.S. housing market with existing home sales for the month of December.
And President Bush speaks on homeland security. He will be visiting Coast Guard Cutter in Portland, Maine.
In tonight's corporate news, German drug maker Bayer debuted at the New York Stock Exchange ringing the opening bell. The aspirin maker has come under scrutiny lately for its cholesterol drug Baycal (ph). Bayer pulled the drug after it was linked to more than 100 deaths. Shares of Bayer gaining more than a dollar on the first day of trading.
Boeing landing a deal valued at more than 9$ billion at a time when its orders have been plunging. Europe's largest low-fare airline buying 100 737s from Boeing over the next eight years. Budget airlines expanding their fleets as cost conscious travelers look for bargains.
American Home Products reporting a 17 percent jump in profits. AHP also announcing it is changing its name to Wyeth, the name of its pharmaceutical subsidiary. The change will be effective in March. Shares will trade under the symbol WYE.
Computer maker Gateway released quarterly results after the closing bell earning more than $5 million, that is 2 cents a share. But revenue fell more than 50 percent and the company says it expects to post operating losses for the next few quarters. The company also said it will cut 15 percent of its work force, more than 2,200 jobs and it plans to close 19 stores.
Joining us now from San Francisco is Gateway's chairman and chief executive Ted Waitt. Welcome, Ted, and congratulations. You got a profit, a profit that you promised, but it seems like it is a mixed bag. You are expecting losses for the next few quarters. You lost a billion dollars this year.
How healthy is the PC market?
TED WAITT, CHMN. & CEO, GATEWAY: We feel pretty good about the PC market, and Gateway's chances of succeeding in it. We did make a profit in the fourth quarter. The majority of our losses last year were restructuring charges as we really got the company ready for growth. We cut our costs significantly, we improved our balance sheet. We have well over a billion dollars in cash right now, so we are very focused on profit in the fourth quarter but we didn't feel it was sustainable. It wasn't the right thing to do for our customers or for our employees.
So now we are extremely focused on growth. We are going to get more competitive than ever in the PC space, and continue to expand our digital solution.
HOPKINS: Now, you're closing a number of stores and laying off some workers. Did this strategy to open retail stores backfire? Did it now work?
WAITT: No, I wouldn't say that. The last chapter on Gateway Country has definitely not been written. We still feel Gateway Country, in local presence in markets is one of our biggest assets. We can do a better job leveraging that and probably the best way to leverage that is through great deals on personal computers and whole array of digital solutions that the 12,000 people with Gateway can provide.
So, we definitely don't feel bad about Gateway Country and our retail presence, and are completely committed to it. We did close a few stores that were just in the wrong locations. The just weren't going to prove out. But we still have well over 270 stores throughout the country.
HOPKINS: How are you going to complete with Dell? On price?
WAITT: We are going to complete on value, good old fashioned value, more so that price. We are doing some things right now where we have leading-edge technology products like our 700 XL that has everything. It is the most advanced personal computer ever sold, all at a tremendous price, all the way down to a $599 personal computer with a CDRW.
So, we are competing at every price point, leading in value. We are also competing on service. We improved our customer satisfaction last year to record levels. Now we're ready to do it with more customers.
HOPKINS: And you are doing a lot more advertising. We are going to see a lot more of you and the cow, right?
WAITT: Not sure about me and the cow. You are going to see a little bit more of ne and the cow. We kind of want the cow to take over. But we are going to invest in the Gateway brand and if we're going to more competitive on price, we have to spend money to tell people about it.
HOPKINS: But I have a question: If you're in the market to buy a P.C., which in fact I just did, if you look at your stock prices come down a lot and the fact that you lost a billion dollars last year, isn't a PC a potential customer, concerned whether your company will be around?
WAITT: I think they could be. And we have heard that from some customers. And I think some of our competitors are trying to make a bigger deal out of it than it is. We have $1.2 billion in cash. Our balance sheet right now is far more liquid and healthy than it was a year ago.
We basically went through all of our assets and basically have a tremendous balance sheet right not that I'm quite proud of. We have the ability, with our business model, to provide great values for quite some time, not be profitable, but still be cash flow positive. We don't see ourselves ever dipping below billion dollars in cash. We are going to be around for a long, long time taking care of a lot of customers.
HOPKINS: Have you found the environment is more difficult given what's happened with Enron and Kmart and other companies?
WAITT: I wouldn't say that that attributes anything to the environment being more difficult. You know, the economy has been difficult, but we do know when you offer a tremendous value on a product, you know, a great product at a great price, that people buy it.
PCs do tremendous things right now. We have got solutions capabilities beyond that. We are going to be doing a lot of exciting things around the Olympics. We installed all the PCs and servers for the Olympics.
So we think we're in a good position regardless of what the economy does to grow our business.
HOPKINS: What about merger partners? You're talking to anybody?
WAITT: We're not looking at any mergers right now. We're just very focused on our employees, very focused on our customers, and really focused on the marketplace and growing and succeeding in the marketplace. And we are going to do that by doing a great job for our customers.
HOPKINS: Thanks. Ted Waitt, chairman and CEO of Gateway. Thanks for joining us.
The pay gap between men and women is widening. A congressional study found a growing difference in salaries between male and female managers in most industries between 1995 and 2000. In some industries the difference is even greater.
For example, in the entertainment industry, women managers earned 62 cents for every dollar earned by a male manager. That's down from 83 cents in 1995. Women managers did better in some fields, for example, in education women earned 91 cents for every dollar earned by a man -- five cents higher than in 95. Women make up about half the work-force, but only about 12 percent of managers.
And that is MONEYLINE for this Thursday evening. Thanks for joining us. I'm Jan Hopkins sitting in for Lou Dobbs. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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