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CNN LOU DOBBS MONEYLINE
North Korea Admits to Having Nuclear Weapons Development Program; Witness in Sniper Shooting Admits to Lying to Police
Aired October 17, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
DONALD RUMSFELD, SECRETARY OF DEFENSE: I believe they have a small number of nuclear weapons.
LOU DOBBS, HOST (voice-over): A shocking revelation, North Korea not only has a nuclear weapons program, but may also have nuclear bombs. The White House will try to use diplomacy to force North Korea to disarm.
GEORGE TENET, CIA DIRECTOR: The threat environment we find ourselves in today is as bad as it was last summer, the summer before 9/11. It is serious, they are reconstituted, coming after us.
DOBBS: A chilling warning from the head of the Central Intelligence Agency. George Tenet also defended his agency before a critical committee today.
There is still more confusion than clues as the search for the sniper continues in suburban Washington.
And Wall Street, again, changed directions, reversing yesterday's losses. Strong earnings news helped push major stock indexes higher.
(END VIDEOTAPE)
ANNOUNCER: From the Anderson School at UCLA, this is a special edition of LOU DOBBS MONEYLINE for Thursday, October 17. Here now, Lou Dobbs.
DOBBS: Good evening. Tonight, we're broadcasting live from the Anderson School at UCLA. California Governor Gray Davis will be my guest tonight. California is the first state ever to reach a trillion-dollar economy. We'll be talking about this economy, the state's energy crisis, and a bitter gubernatorial race.
Also tonight, Enron's stunning collapse sparked not only a crisis of confidence among investors, but also raised the level of distrust surrounding corporate America. We'll tell you what the nation's business schools are doing to try to restore ethical behavior in corporate America.
We'll also, find out what's on the minds of the students here tonight. They'll help -- they'll help us give some sense of that. We'll be talking about with them and hear their questions.
And first, the Bush administration today responded publicly for the first time to the information that it's known for the past two weeks. That North Korea has been secretly developing nuclear weapons. That revelation could complicate the Bush administration's foreign policy agenda. President Bush labeled North Korea part of the Axis of Evil more than eight months ago. Mr. Bush also included Iraq in that same Axis of Evil.
Senior White House correspondent John King joins me now from the White House with the story -- John.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Lou, good evening to you.
It is note worthy that as the administration discussed this dramatic, startling confession from North Korea today, President Bush himself said nothing. That is part a deliberative attempt by the administration to take a low-key approach for now. The president traveling on a political trip in Florida.
One aide said, though, the president finds this admission by North Korea sobering and troubling. U.S. officials says North Korea has one or two nuclear weapons based on plutonium and has been developing since the late 1990s more nuclear weapons using highly- enriched geranium.
Some saying the fact that North Korea has confessed to this is perhaps a good sign. North Korea of late has tried to open up in its relations with Japan, in its relations with South Korea. So some, perhaps, North Korea opening up to the world.
Secretary of Defense Rumsfeld today made clear, he disagrees.
(BEGIN VIDEO CLIP)
RUMSFELD: I don't think there's anyway in the world anyone could say it's a good sign, that when they were called and confronted and told that we have evidence, that they're violating all four of these agreements by engaging in a highly-enriched geranium route development program for additional nuclear weapons -- I don't see how anyone can say that that's a good sign.
(END VIDEO CLIP)
KING: The urgent focus now is on diplomacy. A high-level Bush administration team arrived in Beijing today. It will move on to Tokyo and Seoul. Then on to Moscow and key European capitals.
The administration hoping for dramatic international pressure. And China is a key player to get North Korea to agree to scrap its nuclear weapons program and let nuclear inspectors into the country of a period beginning soon but then for years, to verify that this has happened.
U.S. officials say diplomacy is the option right now. No one discussing any military confrontation, they make a key distinction here between North Korea and Iraq. But, Lou, unhappiness on Capitol Hill tonight. Some key lawmakers say they wished the administration had told them about North Korea's confession before they voted on that resolution authorizing the president to use force against Iraq.
DOBBS: John, is there any indication as to what they would have done differently had they been aware of this information?
KING: No, but there are some lawmakers who say perhaps they would have -- perhaps they would have wanted to put the debate off even further. Remember, one part of the debate is that the administration was focusing on Iraq too soon, it should be more focused on al Qaeda.
But one common complaint from Congress to this administration is the administration shares information when they wants to because this disclosure is now coming out so close to the Iraq debate. Lawmakers are saying they would have liked it for that debate.
The broader question is, how forthcoming was this administration? What the administration's answer is: that this was such a stunning development to them that North Korea acknowledged its program, that they had to come back, have a series of high-level meetings about how to proceed. And at that point, they say they did tell Congress as quickly as they could.
DOBBS: John, thank you very much. Senior White House correspondent John King.
The United States has nearly 40,000 troops stationed in South Korea. Those troops, along with almost 700,000, South Korean servicemen, protect South Korea from a possible invasion from North Korea.
Kitty Pilgrim reports.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN FINANCIAL CORRESPONDENT (voice-over): It's considered one of the most dangerous borders in the world since the Korean War for nearly half a century. Thirty-seven thousand U.S. troops face more than a million North Korean troops across a desolate border, a deterrent to North Korean attack. Is the North Korean admission of a nuclear weapons a threat to those troops? Experts say no.
JAMES LILLEY, FRM. U.S. AMBASSADOR TO S. KOREA: If they ever used nukes, we still got our retaliation which they understand very clearly from World War -- from the Korean War. And we blew their country to bits with aircraft. If they ever even considered using those nukes, their country would be obliterated.
PILGRIM: North Korea is the world's most militaristic state, devoting a third to the economy to its military, while millions of its people have starved over the past decade from famine. Hundreds of millions of dollars in aid has poured in from the United States, South Korea and China, among other countries.
The United States also sends $100 million a year in fuel to North Korea, half of their heating oil. And its helping them develop nuclear power plants, part in the deal in which North Korea agreed to cap their nuclear weapons program, a deal that they now admit to violating.
HENRY SOKOLSKI, EXEC. DIR., NONPROLIFERATION POLICY ED. CTR.: If they want to come clean, they demonstrate how they can do that, then we ought to listen. And we ought to be willing to continue talk to with them.
PILGRIM: No one knows why North Korea admitted to their nuclear weapons program, but some speculate, it could be a form of additional economic blackmail.
ELIZABETH ECONOMY, ASIAN STUDIES EXPERT: The economic explanation is more a blackmail explanation. In other words, We want more assistance, in return, we will not continue to develop our nuclear program.
(END VIDEOTAPE)
PILGRIM: Now, a high-level U.S. delegation has arrived in China to talk about North Korea. U.S. officials have told CNN one short- term option could be to end the fuel assistant program. In addition, pressure's being put on all governments to examine any sale of technology to North Korea -- Lou.
DOBBS: Kitty, thank you very much. Kitty Pilgrim.
It is time for our nightly question, our "MONEYLINE Poll." But first here are the results of last night's question, which was: should gambling on the Internet be banned? Twenty-four percent of you said yes, 67 percent voted for freedom of the Internet -- voted no.
Now, tonight's question: should the Bush administration have publicly revealed the North Korean nuclear program when it learned of it two weeks ago? You can cast you vote at cnn.com/moneyline. We'll have the results later for you in the broadcast.
A key witness in the hunt for the Washington, D.C. area sniper may have lied to law enforcement authorities. The man claimed to see a cream-colored van with a faulty tail light near Monday's shooting outside a Home Depot in Virginia. Now that witness tells police, he was not in the parking lot at the time of shooting.
Kathleen Koch has been following the story, and joins me now from Montgomery County, Maryland -- Kathleen.
KATHLEEN KOCH, CNN CORRESPONDENT: Lou, this was one of the most frustrating briefings since the sniper shootings began some two weeks ago, because basically what we thought were facts turned out not to be facts, and people who we thought were witnesses turned out not to be witnesses. It had to be very frustrating experience clearly for the police on this investigation as well. Now, apparently this witness who you mentioned, said he had seen this cream-colored van with the broken taillight -- this is the same witness apparently who told police he had seen the shooter shoulder a gun, an AK-74. And these -- but what happened was police went back and said -- asked this witness about other details that he should have known if he was actually in the parking lot at time of shooting.
Sources involved in the investigation say that finally last night, he confessed to police that instead he had actually been inside the Home Depot. And authorities are considering pressing charges.
Also, police said they erred in telling us, the reporters yesterday, that there was actually another witness who had seen the killer shoulder a gun. Still, they don't believe that all of this incorrect information in any way hurts their search for the killer that night, despite the fact this the search was clearly focusing on light-colored vans.
(BEGIN VIDEO CLIP)
LT. AMY LUBAS, FAIRFAX COUNTY POLICE: It's one of these situations where it would have been better if it didn't happen, but did it cripple the investigation? No. Officers were still looking for vehicles that may have been suspicious and people that may have been suspicious and things like that.
(END VIDEO CLIP)
KOCH: Police say that they are still looking for vans in connection with the shooting Friday. That was the shooting in Massaponax, Virginia at the gas station. They released the composite on Tuesday of a Chevy -- white Chevy Astro van and then a Ford Econoline van. And they say that those composite photos, those composite graphics do still apply.
But now, they say they are not looking for any van in relation to the shooting on Monday. Very tough now, because police have had to go back to the scene now, in Fairfax County, VA and Falls Church, combing over different areas now, not searching in the garage, now searching on the other side of Route 50, searching in the median of the highway, and all of this after we have had our Nor'easter blow through, which clearly could have destroyed some of the evidence that may have been there -- back to you.
DOBBS: Kathleen, a very troubling development. Thank you very much, Kathleen Koch, reporting from Montgomery County.
The head of the CIA today said the al Qaeda is now regrouping, and it plans to strike U.S. targets at both home and abroad. CIA director George Tenet told a congressional committee today the threat of terrorism is just as high now as it was before last September 11.
National Security Correspondent David Ensor reports from Washington -- David.
DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Well, Lou, this is very striking language from the CIA director, who was in front of Congress today. In the summer before the September 11 attack, George Tenet was offering similar warnings. The question is, will people listen this time? It seems more likely.
(BEGIN VIDEO CLIP)
TENET: More sighs of relief, we are in this for a long time. We have to get about the business of protecting the country with the private sector, the chiefs of police, the state and locals now, because the threat environment we find ourselves in today is as bad as it was last summer, the summer before 9/11. It is serious. They have reconstituted. They're coming after us. They want to execute attacks. You see it in Bali, you see it in Kuwait. They plan in multiple theaters of operation. They intend to strike this homeland again, and we better get about the business of putting the right structure in place as fast as we can.
(END VIDEO CLIP)
ENSOR: So, striking and worrying language there from the chief intelligence officer of the United States. He was in front of the Congress because the Joint Intelligence Committee is trying to figure out whether there were mistakes made before 9/11, and whether there are corrections that need to be made. There was some fairly blunt discussion of whether or not Mr. Tenet has held accountable those in the CIA who failed to put two of the future hijackers on a watch list to be kept out of the United States, even though they knew they had attended a terrorist summit. Here is part of that exchange.
(BEGIN VIDEO CLIP)
SEN. RICHARD SHELBY (R), ALABAMA: Has anyone in the CIA or the FBI been held accountable for the failures thus far for September the 11th or the events leading up to it? Director Tenet.
TENET: No, and there's a reason.
SHELBY: What's the reason?
TENET: We are in the middle of a war.
SHELBY: Oh...
(CROSSTALK)
TENET: We are in the middle of the war, sir.
SHELBY: That is not much of an excuse, Director Tenet, let me tell you something...
TENET: Sir -- listen.
SHELBY: No, wait a minute.
TENET: It is my judgment to make.
SHELBY: Well, I know, it is your opinion.
(END VIDEO CLIP)
ENSOR: So a sharp exchange there between Director Tenet and Senator Shelby of Alabama who is one of his critics, and in fact has called for his resignation. Tenet, however, strongly defended the work of the intelligence committee prior to 9/11, and since 9/11, and said that he believes the best that can be done is being done, but he warned, there are going to be more attacks -- Lou.
DOBBS: David, thank you very much. David Ensor reporting from Washington.
Well more terrorism in the Philippines today. Two bomb explosions killed six people and wounded nearly 150 others. Military officials immediately blamed Abu Sayyaf, that is a radical Islamist organization linked to the al Qaeda terrorist network. Those bombs went off in a crowding shopping center in Zamboanga City. Five other suspected bombs were found and diffused. The dead included two policemen and four shoppers. Police say there are similarities between today's attack and the explosion that killed a U.S. Special Forces soldier in the same area two weeks ago.
In the Middle East, Israeli tanks today rolled into action. Six Palestinians and more than 50 others wounded. The tanks opened fire at buildings in the Rafah refugee camp. The Israelis said gunmen armed with machine guns and rocket-propelled grenades attacked an army bulldozer.
Doctors said the dead Palestinians included two children. Eyewitnesses said many of the Palestinians were hit while still inside their homes.
DOBBS: Turning now to Wall Street, stocks soared again today, thanks to several strong earnings reports, led principally by IBM. The Dow Jones industrial average shot up 239 points, the Nasdaq gained 40. The S&P 500 up 19.
Christine Romans will be here later with more on the market, and this big rally, and we will also have results for you from Microsoft, released after the market closed today.
Coming up next here, we'll be joined by Bruce Willison, who is the dean of the Anderson School here at UCLA, and Professor David Lewin, a corporate governance professor. He will join us as well, and we'll be talking about ethics and governance and we will meet and we will talk with several -- well, we will be talking and meeting with lots of the people who -- prestige and prestigious business school, the students of the Anderson School here. We'll hear their thoughts on a number of issues, including the possibility of war against Iraq and, of course, these corporate scandals. We will also be joined by the governor of this state, Gray Davis, who's running a tough race for re-election. Not against his opponent, but against his own record. Stay with us.
(COMMERCIAL BREAK) DOBBS: Welcome back to UCLA, as we broadcast from Los Angeles, California. More specifically, the Anderson School of Business. The recent wave of corporate scandals has highlighted the disconnect too often found between ethics and business in this country. UCLA's Anderson School is not only one of the nation's most prestigious schools, it has created a course devoted entirely to business ethics. I am now joined by the school's dean, Bruce Willison -- Bruce, good to be with you here at your own domicile.
BRUCE WILLISON, DEAN, ANDERSON SCHOOL OF BUSINESS: Welcome.
DOBBS: And I am also here with Professor David Lewin, he is an expert in executive compensation and corporate governance -- professor, good to have you here.
DAVID LEWIN, PROFESSOR, ANDERSON SCHOOL OF BUSINESS: Thank you.
DOBBS: And first of all, thank you for your hospitality here.
WILLISON: Welcome to the Anderson School.
DOBBS: Thank you. Why did you make the decision to create a new course on ethics?
WILLISON: Well, ethics in a business organization is always about leadership, and we are in the business of training world-class leaders here. We've done it in a two-pronged way. We have always had a couple of electives that were very practically oriented. What are some examples of dilemmas that have been faced by managers, and how have they tried to solve those? What are some of the governance issues and crisis management? What we have added this time is more a philosophical approach. We actually are Having one of our political science faculty members, who is an ethicist, teach this course.
DOBBS: First, I can't help but think now we have moved from politics and ethics to business and ethics. We have challenges in both arenas.
WILLISON: Well, and I think it's the same playground in terms of the morality that's involved, and I think it really is applicable wherever you go. But I think the real key for us is, ethic -- ethical problems don't come neatly wrapped or labeled that way when a manager is faced with them. They are part a marketing question, a finance question, and whatever. What are we doing and what Professor Lewin can talk too, we are really emphasizing ethics in our core courses, where we are really kind of address these generic problems.
DOBBS: Professor, when you talk about corporate governance, about which you are an expert, you talk about some of issues that are confronting us, the accounting scandals, the fraud -- whether it be WorldCom or any number of any companies. What do you tell your students, who are smart, they are bright, they are engaged, they want a career in business. What do you tell them about how to do it right?
LEWIN: Well, that's an interesting question. We try to tell our students not the answer to a question. What we would necessarily choose to do is not necessarily what they would choose to do. What we try to do is to get them to appreciate the range of choices they have to make as future business leaders.
I'll give you an example of this. We know that the pay ratios between CEOs and average employees have risen from 101 in 1970 to -- if you buy the latest reports -- 450 to 501 in companies. And that doesn't account the backdoor perks.
Well, is that the kind of pay structure you would want for your company? Would you want your company's people to be paid like a golf tournament or a tennis tournament, where the first prize and second prize and third prize reads CEO, CLO, CFO get most of money, and most of players get very little money. There's an ethical issue there so far as a market issue.
DOBBS: Well it's an ethical issue that corporate America's certainly turned its back on. CEOs have been robbing many of the major companies in this country. They have basically taken pay, and in the most egregiously greedy fashion in the world, have reached in to their company's treasuries and said, I'm going to reward myself. And they've become celebrities in the same stroke.
LEWIN: That's right. It's the era of the celebrity CEO. However, the point that I would emphasize is, these are conscious choices that boards of directors and companies made -- especially in the last decade -- especially fueled by stock options. And if you sit back and think seriously about stock options, you are saying that your employees and your executives, who have the options, need to be subsidized, to buy the stock of their company.
DOBBS: Given the stock?
LEWIN: Why -- therefore, what does that say about their commitment, their loyalty, their interest in the company? And if you're going to subsidize your executives and employees, why not subsidize suppliers, customers, other shareholders?
DOBBS: (UNINTELLIGIBLE) what is your reaction of your students, again, among the brightest in the country, to what Professor Lewin is teaching or other professors. What the school was trying to do?
WILLISON: I think there's no question that our students are more serious now just in general because of economic situation. But, they're very much more attuned to the ethical issues. And, again, these dilemmas that face managers at all levels and types of organizations. And I think that the benefit will accrue to these students having gone through graduate school at a time when the awareness is so high.
DOBBS: In terms of stock options, expensive stock options, the conference board -- to its great credit, has come up with a blue- ribbon commission recommending a number of reforms. Do you think it is appropriate, necessary, perhaps even urgently so that corporate America extends stock options?
LEWIN: Well I think that's the right thing to do, because they are a real expense. Why treat them as a phantom accounting entity?
But, you know, Lou, there's a larger underlying issue. This leaves the setting of standards on financial statements still in the hands of private authorities. FASB is a private organization. Since the demand for certified balance sheets and profit and loss statements came out of Securities and Exchange Act of 1935, and since every corporation must be chartered by a state government, if we are serious about this, the rules should be set by publicly-appointed people not by a privately-run group.
And also, I would suggest to you that governments could operate such that firms would be rotated in their audits from year to year so they wouldn't know when they would be audited and you'd rotate the accounting firms that are doing the auditing.
DOBBS: Let me, Bruce, give you the last word here. "BusinessWeek" just lowered the rating for the Anderson School in its Top 20 Schools. You moved down a few points. Anything you want to say to "BusinessWeek?"
(LAUGHTER)
WILLISON: Well, we actually talked to our friend, the managing editor of "BusinessWeek" today to say we hadn't canceled our subscription.
DOBBS: (UNINTELLIGIBLE) glad hear that. Mark Morris.
WILLISON: Yes, it was Mark. You know, that morning, the "Economist" magazine actually ranked our school seventh in the world. And in the afternoon, "BusinessWeek" knocked us down a few of notches. The important thing is our student satisfaction is in the top ten, our faculty's intellectual capacity is considered in the top ten. And we can work hard on some of the other things that we need to do to reach out to our recruiters, but we're very fortunate to have an outstanding program here.
DOBBS: Perhaps the moral of that story, Bruce, is that when you get good news and bad news in the afternoon, maybe there is a legitimate basis for a half day work day?
WILLISON: Well that could be. I am not sure we teach that, but that could be.
LEWIN: Let me know when you find one.
DOBBS: Bruce, Professor Lewin, thank you very much, gentlemen.
WILLISON: Thanks, great to have you here, Lou.
DOBBS: Well in the time we've spent here on the UCLA campus, we've had a chance to talk with many of the students here. We've talked with them what the issues are that matter most of them from an attack on Iraq to concerns about an economy with a weak recovery. Their answers may surprise you.
Peter Viles has the story.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice-over): Some things never change on college campuses. But at UCLA this fall, it's back to the '70s, a heated debate about war.
UNIDENTIFIED FEMALE: The whole war.
UNIDENTIFIED MALE: The war right now. It's very, very heated on campus right now about what's going on with the war with Iraq, and a lot of students, all across the campus, probably most of them, disagree with Bush on sending troops into Iraq.
UNIDENTIFIED FEMALE: Before I saw some of the posters that were in favor of supporting the U.S. in Iraq, I thought it was completely anti-war sent amount this campus.
VILES: There had been rallies both supporting and opposing the Bush administration policy, and it's not clear how deep anti-war sentiment really is.
A recent non-scientific online poll by the "Daily Bruin" found 48.6 percent of students support an attack without U.N. support, 16.6 percent support an attack only if the U.N. approves it, and 34.8 percent oppose a U.S. attack.
Other big issues on this campus of 35,000 range from parking to sexual politics.
UNIDENTIFIED MALE: That's the biggest thing that splits liberals and conservatives on campus I think is the whole issue of gay marriage.
UNIDENTIFIED MALE: It's no parking.
VILES: And here is one a parent might like to hear.
UNIDENTIFIED FEMALE: I've been studying, so I haven't come out of my room. I don't know.
VILES: Studying really is a hot trend. John Sandbrook has been on the UCLA campus since the late '60s.
JOHN SANDBROOK, ASSISTANT PROVOST, UCLA: I think the primary emphasis of students today is really more on their academic performance than on any time in my 35 years at UCLA.
VILES: At the Anderson School of Business, there is anxiety about the weak job market.
UNIDENTIFIED FEMALE: A lot of us came back to school wishing we had offers from our summer jobs, but our companies that we worked for, have hiring freezes and no end in sight.
VILES: And in the season of corporate scandal, Andy Chen (ph) sees opportunity.
UNIDENTIFIED MALE: It's a really good time to be in school, because we're learning about the things that are going around with these companies, and we're learning about the accounting scandals and what actually caused these scandals. And how they did some of these things. So it's good time to learn the good and the bad.
(END VIDEOTAPE)
VILES: One development that has changed the nature of debate on campus is roughly 95 percent of the students on this campus are online on a university network. So some of campus debate and discussion that once took place at rallies and in at late-night bull sessions now takes place on the Internet on chat rooms -- Lou.
DOBBS: Very leading edge. But one might assume that there's late-night bull sessions that continue and the rallies as well?
VILES: That is one American institution that I hope is alive.
DOBBS: What's the most surprising that you heard from the students today?
VILES: Definitely what we heard from the administrator who said that these students are more focused on academics than any time in his 35 years on this campus. That surprised me. It's not the popular- culture vision of college life that you get today, but is quite apparent, the students are very focused. It's very competitive to get into schools like this one. People from around the world want to attend these schools. The students know they need decent grades to get in.
DOBBS: Decent?
VILES: Better than decent.
(LAUGHTER)
DOBBS: Well we're going to go talk to some of those students. And I want you to know, Peter Viles said this, who had decent grades that had got in here. And we're going to hear from all of students here at the Anderson School of Business from UCLA. Hear what they are thinking about, and get your -- get some impressions from them about life from the perspective of a UCLA Anderson School students. Stay with us.
(COMMERCIAL BREAK)
DOBBS: We're back with the students here at the Anderson School at UCLA, and a wonderful group of folks that we've had some time to spend some time with, and we wanted to give you an opportunity to tell us a bit about what is on your mind, what you see as the principle issues. Just raise your hand if you have got a question, any thoughts? We'll start over here.
UNIDENTIFIED MALE: Lou, my name is Jim Boatman (ph), I am from Pennsylvania originally, and I had a question for you and Governor Davis when you interview him. There's a lot in the news about ethics in business. But what about ethics in government? There is a lot of stories about him accepting campaign contributions from people who have legislation in front of the state government. I want to know if he even senses that that is a problem with the feeling of impropriety, with people thinking that it is unethical, even if it maybe isn't, but it looks that way.
DOBBS: Well, the governor is listening, and I will certainly relay your question. You are voting on November 5?
UNIDENTIFIED MALE: Yes.
DOBBS: I am sure that he will be glad to respond to that. Anybody else? Folks? I am sorry, let me get over here.
UNIDENTIFIED FEMALE: Hi, I am Annie Rogers, and I currently live in Santa Monica, California. My question was about ethics, and we talked a little bit about business schools' responsibility towards teaching its students, but what about the business school's responsibility to the business community at large? What can UCLA do to help turn things around?
DOBBS: Well, that's a terrific question, and ethics are obviously on the minds of everybody here, just as it is on investors, consumers, for all of us in this country. In one of the -- (AUDIO GAP) -- I don't know who did that one, but -- that's when we start talking about technical problems. The fact -- I will give you my opinion.
My opinion is business schools have the same responsibility as corporations themselves, and the business organizations -- whether it be the Business Roundtable, whether it be the U.S. Chamber of Commerce, whether it be the Conference Board. The Conference Board, to its great credit, has taken a leadership role, has called for significant reforms in corporate governance and financial reporting. I think to the shame, frankly, of the Business Roundtable, which represents the most prestigious CEOs, if you will, leading CEOs in this country, they have been quiet on the issue of reform.
And frankly, I think that you, as business students, ought to be focusing on what those leaders are doing. I think the business school here at Anderson, Bruce Willison is an outstanding dean. You, obviously, are part of an outstanding school. This school not only does so many good things in business, but also supports the Loeb Awards which are the Pulitzer prizes of business journalism in this country. Those are wonderful things, but I would love to hear from the deans of every business school on ethics and governance, on the issue of expensing stock options, on transparency and the integrity of the marketplace.
So I would love to see that kind of leadership from every business school in the country -- yes, sir?
UNIDENTIFIED MALE: Hi. I'm Daniel Grannop, originally from Bethesda, Maryland. And given that our rankings dropped slightly in the "Business Week" survey, I was wondering what you think, since you spend most of your time in New York, about the East Coast perception of the West Coast, and that with the dotcom fallout, and everything that has happened in the last year or so, if you think that the emphasis has gone back towards more companies that are on the East Coast, versus the tech boom, where it was folks on the West Coast?
DOBBS: Right. Well, New York City is, first of all, the financial capital of world, as you know. It is the media capital of the world, and as a result, has tremendous -- tremendous influence. It is also -- you may not know, the home of one sixth of the employment in this country. The companies headquartered there employ fully a sixth of all of the employees in the country who are hired by corporate America.
Do I think that there is an undue and sometimes imbalanced perspective because it is on the East Coast? Yes. That's one of reasons that we are out here on the West Coast, because it is important to us as journalists and those of us who report to not only the country but indeed to our international audience, to give that kind of perspective.
Yes, it's important about to have that West Coast perspective. Yes, I think there is a tilt there. But, again, the predominant population is on the Eastern part of this country, and, yes, the West Coast is going to get short-stripped, but you know, there are some tradeoffs here.
(LAUGHTER)
DOBBS: Yes, sir?
UNIDENTIFIED MALE: Hi, my name is Steve Moholivitz (ph), and I am from Simi Valley, California. I was just wondering, with this new focus on business ethics and its growing controversy, and already so, do you think that this will lead to more political changes, perhaps the revitalization of issues like campaign finance reform, and other issues where politics and business converge in the public forum?
DOBBS: Well, I think that's a great question, and on our broadcast, we focus on what we call the political economy, because the relationship between economics and politics is inextricable. Business and public policy whether it be taxation, whether it be regulation, whether it be consumer safety, or whether it be environmental regulation, market integrity, corporate governance, all come together, often the confluence of politics and public policy and commerce and business and markets.
So, yes, I think there is going to be significant changes as a result of everything that we have gone through. It's critical that we understand that relationship, so we focus on the ethics of politics as well as the ethics in business, and I would urge all of you here to look upon our economy as the political economy. The standards for both politics and economics and business, I think, should be the same, the highest.
I just don't believe there is any room for relativism in this -- this world is already complex enough. In terms of morality and ethics, I think relativism has had its day, and we really need to return to a world of nominative standards in which you and I would be very, very proud.
We are very proud to have the opportunity with you. We're going to come back and hear some more of your questions and thoughts right after this message. I want to say that we're talking with the great students of the Anderson School of Business here at UCLA. We'll continue in one moment. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Well, we want to remind you to cast your vote in our "MONEYLINE" poll tonight. The question: should the Bush administration have publicly revealed the North Korean nuclear weapons program when it learned of it two weeks ago?
You can vote at cnn.com/moneyline. We'll have the preliminary results coming up for you here in just a few minutes.
The gubernatorial election campaign in this state has failed to inspire many voters. Governor Gray Davis has been accused of bringing the state power blackouts and a record budget deficit. His Republican challenger, Bill Simon has suffered from a series of, at the very best description, missteps on the campaign trail.
Casey Wian has the story.
(BEGIN VIDEOTAPE)
GOV. GRAY DAVIS (D), CALIFORNIA: Well, let's get out and win!
CASEY WIAN, CNN CORRESPONDENT: Most Californians, offered a choice between incumbent Democratic governor Gray Davis and Republican challenger Bill Simon are likely to choose to stay home on election day. Polls show nearly two-thirds of California voters are not satisfied with the candidates.
MICHAEL SHIRES, PEPPERDINE UNIVERSITY: Governor Davis is vulnerable in this election because there's a sense that he wasn't the leader that Californians were looking for.
WIAN: Bill Simon, when he entered this race, was a beacon of hope for some, a man who was successful in the private sector. However, Bill Simon, in the course of his campaign has made many mistakes. He's created an environment where California voters do not necessarily trust him.
WIAN: Critics attack Davis for the mishandling the state's electricity crisis and the ensuing $24 billion budget deficit and the perception that his priority is fundraising, not governing.
Even supporters can't resist piling on.
The "Los Angeles Times" this week wrote, "Davis' obsessive pursuit of every last campaign dollar from special interests is unseemly, and the governor has been slow to grasp the lead on critical issues." And that was an editorial endorsing the candidate.
An op-ed piece in today's "New York Times" went even farther: "I don't know anybody, aside from a few compromised pols and Hollywood celebrities who will vote for Davis without holding his or her nose."
Despite that, Davis still leads Simon by roughly 7 percent in the latest independent poll. Simon's been dogged by links to business scandals and a recent TV ad falsely claiming to show a picture of Davis accepting an illegal contribution.
Democrats make up 45 percent of California's electorate. Thirty- five percent are Republicans, one reason the state's rapidly growing Latino population is largely Democratic.
Republicans are trying to change that with a growing number of Latino candidates including insurance commissioner candidate Gary Mendoza.
GARY MENDOZA (R), CANDIDATE, CALIF. INSURANCE COMM.: The Republican party needs to be as aggressive as possible reaching out to Latino voters, because if the Latino community becomes a core constituency to Republican party, the Republican party is the majority party for the next 100 years.
WIAN: But for now, both parties are struggling to find leadership. So much so, that actor Arnold Schwarzenegger is now being taken seriously as a potential GOP candidate in 2006.
(END VIDEOTAPE)
WIAN: Adding to this election's voter apathy, there is a shortage of controversial ballot initiatives that have traditionally drawn Californians to the poll -- Lou?
DOBBS: They need an initiative to get all excited about this race?
WIAN: There's been a few controversial ones here over the years, and that's helped bring voter turnout out, and it's expected to be real low this year.
DOBBS: Terrific. Well, let's talk to the man who knows all about this. Governor Davis has appeared in a new campaign commercial. That commercial started running yesterday in fact. The governor told voters they may not agree with everything he's done, but he's asked them to accept at least the fact that he's doing the best he can for the state. And Governor Gray Davis joins me now.
Governor, good to have you here.
DAVIS: Lou, nice to see you. Welcome to California.
DOBBS: Well, thank you very much. And this campaign, "The Los Angeles Times" endorses you but frames it as a reluctant endorsement. How do you react to that? DAVIS: Well, these are difficult times. We had an energy crisis and now we have a $24 billion shortfall. But despite those, we're making progress. Test scores are up four years in a row. The FBI came out here a couple of months ago and said eight of the 10 safest cities in America are in California. And we've been able to provide health insurance for a million children who didn't have it when I took office. So despite some very significant challenges, we are making progress.
DOBBS: You mentioned that budget deficit. We should point out California is the first state in the union to achieve a trillion- dollar economy, to put that in some context. What are you going to do about that deficit? It's almost a foregone conclusion that you're going to have to raise taxes, isn't it?
DAVIS: Well, we've passed this budget without raising taxes and preserved our priorities. We did not cut public education. We did not raise fees at UCLA or CSU or the community colleges. In fact we provided 300,000 new scholarships. So we are able to preserve public safety, public education, vital programs for seniors and this health insurance program for children. Now other areas were cut. We ended up not raising taxes in this budget. We'll have to see what happens going down the road.
DOBBS: Going forward would it be your expectation that will be necessary?
DAVIS: Well, first of all, it takes a two-thirds vote to pass a budget in California. And so both parties have to participate. And we'll have to see what the numbers are in December and what the political consensus is. But I'm not going to be blinded by ideology. If people are willing to give me another chance for four years we'll do our best to keep California moving forward and to keep the ship moving in the right direction.
DOBBS: With just about three weeks to go, we should point out to our viewers, certainly everyone in the state of California knows this, that you have a double-digit lead over Bill Simon, your Republican opponent. But also at the same time, some serious issues are before you. Amongst the serious issues, the energy crisis, energy prices in this state remain high. You have been criticized, along with the rest of the California state government for not coming up with a solution. But at the same time, today a former Enron top trader admitted to manipulating energy prices in the state of California. And I want to say on a totally -- well, I don't want to get into the politics of this, but this, in point of fact, validates what you and your staff were saying at the onset of the energy crisis in this state. Now you can be criticized and reasonably so by a number of people for not doing all of the right things, but you certainly had that figured out before anybody else in the country..
DAVIS: Well, thank you, Lou. About a year ago I was saying that something is wrong. People are taking advantage of us. How much value can you add to an electron? And the wholesale price of electricity went up 400 percent from $7 billion to $28 billion. We did what we could do in this state. We built 16 plants, which accommodates four million new homes. In the 10 years that preceded me the two governors serving in that time, they only built enough new megawatts to accommodate a million homes. So we put a lot more capacity on-line. And we had tremendous conservation from the people of California. But at the end of the day, we had to get help and we finally did from the federal government to put in a price cap to hold down these wholesale prices of electricity that really drove one utility into bankruptcy and essentially made another one, Southern California Edison, financially unviable.
DOBBS: Governor, I want to turn to one of our students who asked me a question to pass on to you. And I thought instead we should give this gentlemen the opportunity to do it directly and to speak to the governor of the state of California.
Stephen (ph), you had a question for the governor?
UNIDENTIFIED MALE: Yes. Good afternoon, Governor Davis. And I'd like to say welcome to UCLA.
DAVIS: Thank you, Stephen. I grew up not too far from here.
UNIDENTIFIED MALE: Thank you. Firstly, I'd like to say that since the focus of this show today has been on business and business ethics, specifically, what do you think you would do to refocus the issue of corporate influence on politics, and getting the focus back from corporate influence on to democratic power and the power back to the state congress and session yourself and ensure us that corporations will not have such influence on the laws of our state and laws of our country?
DAVIS: That's a very good question. I am pleased to sign three bills to legislature, actually more than three, but three of note that deal with the corporate accountability, that require certain waiting period, if an accounting firm is a client, is working for a client. There's like a two-year waiting period before that accountant can go work for the client. We've also beefed up another number of reporting requirements for accounting firms. You know, accountants are really a public safeguard. And if you can't trust financial statements, there's no opportunity to invest with assurance that you are making the right judgment. Now...
DOBBS: And Stephen -- Governor, I'm sorry.
DAVIS: There are a number of things we did, but go ahead.
DOBBS: I'd like to follow up on your question, if I may, Stephen. Thank you very much.
You have been accused, as reported by "The Los Angeles Times" of having about 15 percent of your campaign contributions come from those people who you put on state commissions and boards.
DAVIS: I think it was 20 percent, but that's a quibble.
DOBBS: I was being conservative, Governor. You have been -- also it's been reported that many of your appointees have been significant contributors as well. How do you react to those kinds of charges?
DAVIS: Well, you know, we operate fully within the law, and I am pleased that I've signed over the last two years two very significant campaign reforms. Because of the bills I signed, people know within 24 hours who you have taken a contribution from, and they can make a judgment. My opponent is lending himself $10 million and saying he'll pay himself back after the election. That money will go directly in his pocket and voters won't have an opportunity to see whose contributions he's taking. So at least with me you know what I've done. It's all out there in front of you. You can vote for me or not. But money aside we have made progress on the schools. We've opened up the University of California to every high school. We got the regents to pass a resolution on my motion that the top 4 percent of every school now can get admitted to one of the UC campuses. We had about a hundred of our schools never sending anyone to a UC campus. So we've done a lot of positive things.
DOBBS: Indeed, Governor. But in terms of being within the law and within the regulations and terms of the way money has been raised in the state by you and your organization, do you believe, and we're here tonight in front of all these students here at UCLA, grappling with the issue of ethics. Is it sufficient, now, in your judgment, for us to simply obey the law? Is there not a higher standard perhaps we should all, certainly our political leaders, and you foremost among them, should be setting for the country and the state?
DAVIS: Well, I think we are. Because the laws I have signed make a sitting governor target. I knew I was -- I was in Vietnam 30 years ago. This is like calling artillery in on yourself, say, that every 24 hours you have to report who a contribution is coming from. I knew the focus would be on me, but I knew scrutiny was in the public interest. And I really believe that we have to come to terms with a larger issue, which is how can people of modest means compete with billionaires? I've run for office twice now and of my eight people in the race over two terms, four of them have been mega-millionaires. I might say, in terms of setting a personal example, for 10 years now, I've accepted less than my full salary. I've taken only 95 percent of my sally. So I sent $50,000 back into the Treasury, I did not have to.
DOBBS: I apologize. We're out of time. It's good to talk to you.
DAVIS: Welcome to California and thank you for being here.
DOBBS: Governor Gray Davis, we thank you.
DAVIS: Spend a little money while you're here.
DOBBS: Oh, don't you worry, we will indeed.
We want to turn to, again, to our venue here, the Anderson School at UCLA in Los Angeles, California, and we'll be right back.
(COMMERCIAL BREAK)
DOBBS: More volatility on Wall Street. Another -- another reversal in direction on Wall Street. Christine Romans joins me now with the story of today's rally -- Christine.
CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: Lou, 239 points on the Dow. In fact, in the past 30 days, all but five of those days, the Dow has moved triple-digits in one way or the other. After the bell, we heard from Microsoft, its revenue and profit grew. In particular, folks are zeroing in on the revenue numbers, 7.75 billion for the quarter. Also, it's got $40 billion in cash, the stock is up after hours.
During this session, it was IBM that drove this rally, up 11 percent today. Lou, this stock is up 33 percent in a week. One analyst said it was a nice earnings report, but this company has not turned the corner. Wall Street, at least today, was buying it. United Technologies, Kodak, Philip Morris, all with strong earnings news. Kodak actually reports next week, but it is said they will have a really strong quarter. Sears, though, very weak -- Lou.
DOBBS: All right, Christine. Thank you very much.
A former Enron trader today pleaded guilty to manipulating California's energy market to drive up electricity prices.
Timothy Belden is the former head of energy trading in Enron's Portland, Oregon office. On our Enron scoreboard now, 27 executives in all of America have been charged, and now, updating Enron, three people charged. The number of days since Enron collapsed, 319.
The preliminary results now of our MONEYLINE question: should the Bush administration have publicly revealed the North Korean nuclear weapons program when it learned of it two weeks ago? Eighty-one percent of you voted yes, 19 percent voted no.
"CROSSFIRE" begins in just a few minutes. Let's go to James Carville and Tucker Carlson in Washington to find out what is in store -- James.
JAMES CARVILLE, CO-HOST, "CROSSFIRE": Well, Sweet Lou, North Korea has the bomb, the sniper has an assault weapon, and we got guests to talk about this and all other things coming up, in particular, the election. But there are plenty of big stories moving out there, and "CROSSFIRE" is there with these stories.
TUCKER CARLSON, CO-HOST, "CROSSFIRE": Then we will have a trained sniper and former Delta Force operator on the show to tell us what the D.C. sniper might be thinking, and then finally, former Senator Frank Lautenberg was too afraid to join us. Instead, the man who will beat him in the New Jersey Senate race, Douglas Forrester, will be here to talk about the race, about New Jersey's Mafia problem, many other things -- it is going to be a great show, Lou.
DOBBS: Looking forward to it, Tucker. James, thank you very much, and Frank Lautenberg must have been talking with the Republican gubernatorial candidate here, Bill Simon who also declined our invitation tonight to join us along with Governor Davis. We'll be right back from UCLA next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: And that is MONEYLINE for this Thursday evening. Tomorrow night, we'll be in Hollywood, broadcasting from Hollywood. Among our guests, actor Kevin Spacey, "Variety's" Peter Bart. Please join us. For all of us here, good night from UCLA.
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