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CNN LOU DOBBS MONEYLINE
Saddam's Half-Brothers Captured in Baghdad; Still No Weapons of Mass Destruction Found in Iraq; North Korea Agrees to Multilateral Talks
Aired April 17, 2003 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Arthel, thank you very much. And good evening everyone. Coalition forces today scored another big success in the hunt for former Saddam Hussein regime leaders. They captured one of Saddam Hussein's half brothers.
There are new details tonight of what may be Saddam Hussein's last hiding place. Jim Clancy reports from Baghdad.
(BEGIN VIDEOTAPE)
JIM CLANCY, CNN CORRESPONDENT (voice over): U.S. troops captured Barzan al Tikriti, Saddam Hussein's half brother and the former head of Iraqi intelligence, Thursday.
BRIGADIER GENERAL VINCENT E. BROOKS, U.S. ARMY: Barzan is a half brother of Saddam Hussein and an advisor to the former regime leader with extensive knowledge of the regime's inner workings.
CLANCY: Clearly, the U.S. hopes Barzan will prove a valuable asset in both the search for Saddam and hidden weapons of mass destruction.
Meantime, more evidence of the regime's final days emerged on television. This relatively modest home in a residential area of north Baghdad is described as the last known residence of Saddam Hussein as his forces crumbled under a U.S. onslaught last week. The Arab news network, Al Jazeera, broadcast video of the sparsely furnished flat. The yellow and green striped sofa and other backdrops were said to be where the Iraqi dictator held his last meetings.
Another room shows an Iraqi flag, plastic chairs, and a table around which Saddam was shown on television meeting with his two sons and other top regime members. This may have also been the safe house where the Iraqi leader videotaped his last message to a nation slipping from his grasp.
CLANCY (on camera): It's unclear how many resources the U.S. can devote to tracking down the former leader and his top aides. At the same time, it tries to tackle security and organize a new regime. On that latter front, there are many unanswered questions.
CLANCY (voice over:) One of those at the center of the controversy is Mohammed Ali Zubeidi (ph), a member of the London based Iraqi National Congress, who announced he had been designated interim governor of Baghdad.
"This is a great honor that I meet with you", said Zubeidi in front of the cameras, adding, "I tell you Iraq has been liberated, and Iraq is for the Iraqis". The questions turned to whether he was an outsider being foisted on the capitol by the U.S. One of his aides tried to intervene.
UNIDENTIFIED MALE: They will see you as having been put there by the Americans.
CLANCY: Even U.S. officials distance themselves from the returned exile's assertion he was the man now in charge of the capital. An assertion his supporters have been making for the last week in public appearances.
Many ordinary Iraqis want the help of the U.S. in rebuilding Iraq and reestablishing security, but are abundantly clear they reject outsiders, even some of those in the exile groups.
While it takes no convincing from anyone that they're better off without Saddam Hussein, many Iraqis will take a lot of convincing, indeed, before they trust outsiders perceived as hand-picked in Washington.
Jim Clancy, CNN, Baghdad.
(END VIDEOTAPE)
DOBBS: The Pentagon has recruited 10 former United Nations weapons inspectors to help find weapons of mass destruction in Iraq. The United States is preparing to send about 1,000 scientists, technicians, and intelligence experts to Iraq to look for those weapons. Senior Pentagon correspondent Jamie McIntyre has the report.
(BEGIN VIDEOTAPE)
JAMIE MCINTYRE, CNN CORRESPONDENT (voice over): So far, none of the suspicious material discovered by U.S. troops has turned out to be a weapon of mass destruction. Drums of suspect chemicals turned out to be pesticides. Rockets that initially showed traces of nerve gas turned out to be false positives. Pentagon officials admit it looks less and less likely that U.S. troops will simply stumble on a smoking gun.
DONALD RUMSFELD, SECRETARY OF STATE: It is not like a treasure hunt where you just run around looking everywhere, hoping you find something. I just don't think that's going to happen. The inspectors didn't find anything, and I doubt that we will. But we will do is find the people who will tell us.
MCINTYRE: The Pentagon says it planned all along to dispatch a 1,000-person survey group to hunt for the banned weapons. Sources say the team now assembling in Iraq is made up of private contractors and civilian scientists but is also heavy on U.S. Government intelligence analysts, who can exploit recently acquired documents and help interrogate captured regime leaders, such as Barzan Ibrahim Hassan al Tikriti, just nabbed in a raid by U.S. troops.
HANS BLIX, CHIEF UN WEAPONS INSPECTOR: They have one advantage which we did not have. When they speak to people, the people will not be scared to say what they really believe and they know, whereas when we were there, you had a big secret police that could scare anybody.
MCINTYRE: The UN's chief weapons inspector argues since his inspectors did not rubber stamp the U.S. report on Iraqi weapons before the war, they would have more credibility now. But the Pentagon counters it will employ careful crime scene procedures to document a chain of custody.
RUMSFELD: Now that will not stop certain countries and certain types of people from claiming, inaccurately, that it was planted.
(END VIDEOTAPE)
CLANCY: The U.S. remains outwardly confident that finding Iraq's banned arsenal is just a matter of time. But as each day passes without solid evidence, the credibility of the U.S. Government is increasingly questioned by its critics around the world. Lou?
DOBBS: Jamie, thank you very much. Jamie McIntyre, our senior Pentagon correspondent.
The coalition is sending hundreds more troops to Mosul in northern Iraq after at least 10 Iraqis were killed in fighting with U.S. forces. Between 200 and 300 troops will form the reinforcements. They're in the city at the moment. Fighting began Tuesday when gunmen opened fire at Americans in the city center during a protest by Iraqi civilians.
Three U.S. soldiers who gave their lives for this country in Iraq were buried today. Marine Lance Corporal Patrick Nixon told his family that if he was killed in Iraq, he wanted to be buried at Arlington National Cemetery. Today, the 21-year-old Nixon's wishes were honored.
Air Force Major Gregory Stone was also buried at Arlington today. Major Stone, of Boise, Idaho, died in a grenade attack on March 25.
In Vermont, 40-year-old Army helicopter pilot Eric Halberson (ph) very son was buried in his hometown of Bennington. Halberson (ph) is the second Vermont native killed in Iraq to be buried this week.
Coming up next here, Jay Garner is straight spoken, a patient man with a can-do attitude. The retired general will need all of those characteristics, and perhaps more, as he heads up Iraq's interim government David Mattingly will have the report for us.
And just who looted Baghdad's national museum? It turns out it was probably an inside job. We'll tell you why.
And from looting in Baghdad to questionable trades on the New York Stock Exchange. We'll have a report and New York Stock Exchange chairman Richard Grasso is my guest. Stay with us.
(COMMERCIAL BREAK)
DOBBS: About 30 experts on ancient Iraq met in Paris today to discuss the looting of the Iraqi national museum in Baghdad. They said a fact-finding mission should be sent to Baghdad immediately to assess the damages. These experts said there was simple vandalism and that organized thefts planned before the fall of Saddam Hussein. They said the looting was probably commissioned by dishonest art collectors.
Well, meanwhile, FBI director Robert Mueller today said he'll send agents to Iraq to help investigate the looting. Mueller also offered assurances that FBI agents are doing whatever they can to help secure Iraq. Kelli Arena has the report.
(BEGIN VIDEOTAPE)
KELLI ARENA, CNN JUSTICE CORRESPONDENT (voice over): Helping to deflect criticism the U.S. Military did not do enough to protect Iraq's antiquities, FBI Director Robert Mueller says his agents are making an all-out effort to recover stolen art treasures.
ROBERT MUELLER, FBI DIRECTOR: These steps include sending FBI agents to Iraq to assist with criminal investigations; issuing Interpol alerts to all member nations regarding the potential sale of stolen Iraqi art and artifacts on both the open and the black markets; and then assisting with the recovery of any such stolen items.
ARENA: There are also 25 FBI agents on the ground in Iraq going through documents obtained from locations such as the Ansar al-Islam terrorist camp, looking for leads about future threats to the United States. Agents are also interrogating Iraqi prisoners.
The FBI also called attention to the role it played before the war in helping gather intelligence. Agents interviewed 10,000 Iraqis and Iraqi-Americans living in the United States.
MUELLER: As a result of these interviews, approximately 250 reports were provided to the United States Military to assist in locating weapons production and storage facilities, underground bunkers, fiberoptic networks, and Iraqi detention and interrogation facilities.
ARENA: Mueller says the interviews went well, resulting in only two official complaints from the Iraqi community. But some Arab- American groups say some Iraqis felt profiled.
NIHAD AWAD, COUNCIL ON AMERICAN-ISLAMIC RELATIONS: Ethnic profiling, religious profiling never served our country, and I'm afraid it will hinder the efforts of the government to build relations with the community like the Islam community.
ARENA: That relationship is very important because of the unique help Muslim and Arab-Americans give the FBI in its fight against terror.
(END VIDEOTAPE) ARENA (on camera): And on the terror front, officials say Al Qaeda remains a potent threat, but they're also growing increasingly concerned about the Lebanon based group, Hezbollah. Lou?
DOBBS: Kelli, thank you very much. Kelli Arena, our justice correspondent in Washington.
Still ahead here, California's Bechtel win as multimillion dollar reconstruction contract in Iraq. Former secretary of state George Shultz, a member of Bechtel's board, will be talking about that.
We will be talking about Syria and the Middle East and the Bush Doctrine.
Also tonight, Russia opposed the war against Saddam Hussein. Now a leading Russian company is fighting for a piece of Iraq's oil market and their oil fields. Bill Tucker will have the report.
And new information linking Syria to international terrorism. We'll have that story, all of the details and much more still ahead. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Italian investigators have found a link between Syria and radical Islamist terrorists recently operating in northern Iraq. Italian authorities told Reuters that wire taps have revealed radical Islamists recruited dozens of people in Italy and Germany and sent them to Syria for training. Investigators say those trainees then joined radical Islamist terrorist group Ansar al-Islam in northern Iraq. The group's base was destroyed by coalition and Kurdish forces in the war.
Syria today said it wants to rid the entire Middle East of weapons of mass destruction. However, Syria's foreign minister said Syria will not allow weapons inspectors. Syria has previously said it would only allow weapons inspections if they also took place in all other Middle Eastern states, including Israel.
In an interview tonight on the news hour with Jim Lehrer, Secretary of State Colin Powell pressured Syria to reconsider.
(BEGIN VIDEO CLIP)
POWELL: We believe Syria is developing weapons of mass destruction, and we're concerned about especially their chemical weapons program.
I think what highlighted it at this particular point in time, however, is the changed situation in the region. We have been successful in Iraq. There's a new dynamic in that part of the world, and we wanted to point out strongly to the Syrians that this is a time for you take another look at your policy.
(END VIDEO CLIP)
DOBBS: Secretary Powell says he hopes to travel to Syria to meet with the President Bashar Assad in the not too distant future.
Secretary of State Powell also welcomed this weekend's talks on North Korea's nuclear program, but the secretary doubts the issues will be resolved quickly. Still, North Korea's willingness to at least participate in multilateral talks is a major policy shift for that country from just weeks ago. Kitty pilgrim has the report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice over): Playing it tough with North Korea worked. North Korea gave in to U.S. demands, signaling it would begin multilateral talks as early as next week.
President Bush held a tough line saying he'd like to settle nuclear differences peacefully, but he did not rule out a military option.
Secretary Powell pointed out this week that military success in Iraq may have changed North Korea's thinking.
POWELL: We will lay out clearly the concerns we have with respect to their nuclear weapons development programs and other weapons of mass destruction, Their proliferation activities, their missile programs, and all of the other issues that I think they are familiar with.
PILGRIM: And Defense Secretary Rumsfeld again objected to North Korea's arms sales around the world.
RUMSFELD: It has a pattern, a history of selling ballistic missile technologies and almost everything else it has for hard currency to almost any country in the world that would want it.
Some say it's the most dangerous impasse in the world, the two countries refusing to speak directly.
Intelligence sources say North Korea has enough plutonium for two nuclear bombs and has activated a facility at Yongbyon. Russia and China had been staying out of it. Both countries refused to endorse sanctions against North Korea or get involved in multilateral talks. China blocked discussion at the UN Security Council just last week.
But today, Russia endorsed the three-way talks planned for Beijing, and China suddenly is willing to host the talks
ROBERT DUJARRIC, THE HUDSON INSTITUTE: We'll have to see exactly what China does. If it just hosts it, it's essentially serving its interests by showing that it's making contribution to peace and stability in the region. What will be really revolutionary if the Chinese were very active in this.
(END VIDEOTAPE)
PILGRIM: South Korea has not been included in the talks, but U.S. officials are pushing for Japan, South Korea, and Russia to eventually get involved in pressuring North Korea to curtail its nuclear ambitions. Lou?
DOBBS: Kitty, thank you very much.
Coming up next, the United States today awarded a multimillion dollar contract to rebuild Iraq to California's contractor Bechtel. We'll be joined by director of Bechtel, the distinguished former secretary of state George Shultz.
Also, more evidence of the brutality of Saddam Hussein's regime uncovered in northern Iraq. We'll have more on a mass grave found near Kirkuk.
And Russia's largest oil company says a multibillion dollar contract it signed with Saddam Hussein's Iraq is still valid in this new Iraq. Bill Tucker will have a special report on how Lukoil is planning to defend itself. That and more still ahead. Stay with us.
(COMMERCIAL BREAK)
DOBBS: U.S. Combat troops in Baghdad faced a different kind of challenge when they became zoo keepers. Iraqi soldiers abandoned the zoo as coalition forces entered the city. The Iraqis left behind starving animals that have been unfed and untended for days. Others had been released.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I think it was just their state of helplessness. I mean, here they are caged up, they have no water, they have no food, nor do they have any way to get any water or food. And, I mean, I just don't think it was something we could have turned our back on.
(END VIDEO CLIP)
DOBBS: Returning from the zoo now to the broader city of Baghdad, U.S. troops and a team of Iraqi engineers have restored power to parts of Baghdad now. Two electrical substations were restarted today. That provides intermittent power to the capital city. Fifteen hospitals are now open, and the United States has just delivered 17 tons of medical supplies
Russia, of course, opposed the U.S.-led war against Saddam Hussein. Russia was a vocal critic of the action of the United Nations, as you know. Now, Russia's largest oil company says it has the right to explore Iraq's oil fields. Lukoil, known as Getty Oil in the United States, says contracts signed by Saddam Hussein, in its opinion, are still valid. Bill Tucker reports.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice over): The fighting is just winding down, an interim government yet to be formed, and Lukoil wants its West Kurda oil field, an oil field that it says it owns because of the contracts signed with the regime of Saddam Hussein. It's a 23-year development deal with estimated reserves of eight billion barrels. Lukoil and Russia have a lot at stake.
ROBERT EBEL, THE CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: They have been doing business in Iraq for quite some time. Iraq owes them between $7 and $8 billion for services performed, but not paid for. So, they have not only a stake in the oil future in Iraq, but they got a stake in debts that Iraq owes them.
TUCKER: Russia's largest state-owned oil company, its largest state-owned gas company, as well as Lukoil and several smaller private Russian companies, have a lot of deals for oil and gas in Iraq.
FLORENCE FEE, FORMER MOBIL EXECUTIVE IN RUSSIA: The symbolism of Russia's role and involvement in Iraq and in the Middle East having an important voice and role in the Middle East, so it's no surprise that they're vigorously defending this agreement.
TUCKER: Lukoil is threatening to halt its crude oil shipments from Iraq for up to eight years, if necessary.
JAMES PHILLIPS, THE HERITAGE FOUNDATION: This threatened legal action not only advances the interest of Lukoil, a private company, but also dovetails with Russia's national interest in maintaining high oil prices because Russia is one of the world's leading oil exporters.
(END VIDEOTAPE)
TUCKER: And higher prices, of course, for oil will mean higher prices at Getty's pumps and, Lou, it also means more money at the bottom line for Lukoil.
DOBBS: Well, it does if it works out Lukoil's way here. There's a lot of gray area and a lot to be contested.
TUCKER: It is, and ironically, there is a precedent here, and it's the communist government back in 1917 which, when it took over, declared all contracts of a prior government null and void. And it could happen to them here.
DOBBS: And some might argue it should.
Bill, thank you very much. Bill Tucker.
Still ahead, we'll have the latest headlines at this hour.
And the man charged with helping to build democracy in Iraq. (UNINTELLIGIBLE) with the Iraqi people. We'll have a report for you on the challenges ahead for retired General Jay Garner heading up the interim government.
Bechtel today awarded a multimillion dollar contract for reconstruction. Bechtel board member and the former distinguished secretary of state, George Shultz is my guest.
And I'll be talking with the New York Stock Exchange's chairman, Richard Grasso. We'll be talking about a lot of questions about the integrity of the board controversy surrounding some of the exchange's board members. Investigations into possible abuses of its trading system. Stay with us.
(COMMERCIAL BREAK)
(NEWS BREAK)
DOBBS: Arthel, thank you.
A shocking, grisly discovery in northern Iraq today. Nearly 1,600 unmarked graves have been found near Kirkuk. So far, no one has yet identified the victims. Some people say they're Kurdish civilians killed after an uprising against Saddam Hussein. Others say the bodies are soldiers who died in Iraq's war with Iran. American special forces are helping the locals investigate the grave site.
Bringing order and democracy to Iraq is obviously a monumental challenge. The man selected to run Iraq's interim government seems to have the right stuff to get it done.
David Mattingly reports on General Jay Garner.
(BEGIN VIDEOTAPE)
DAVID MATTINGLY, CNN CORRESPONDENT (voice-over): To some, it seems like an impossible job. Building a democracy out of a nation shattered by oppression, war, ethnic division, and a wave of lawlessness. And all eyes are now on Jay Garner, the man picked to oversee Iraq's new interim government.
GEN. JAY GARNER (RET.), RECON. & HUMANITARIAN ASST.: We have a chance, this moment in time, for the Iraqi people to bring democracy and the right way of life back to their people. And that's going to happen.
MATTINGLY: Known for his can-do personality and a wealth of patience, Garner will be calling upon all his skills to bring stability back to Iraq and win the trust of Iraqis. But some analysts believe that trust may be hard to come by.
DAVID ARMSTRONG, NATL. SECURITY NEWS SERVICE: They're going to view him possibly with a good degree of skepticism and alarm, possibly, and wonder whether we've have come as liberators or occupiers.
MATTINGLY: His resume is steeped in military experience. A retired 3 star general, who's military career began as an advisor in Vietnam. and led to key positions in the Pentagon. They included overseeing the development of Star Wars weapons technology and defending the poor performance of the Patriot Missile during the first Gulf War.
GARNER: I'm proud of the soldiers. I'm proud of that work force. I'm proud of the nation that gave it to us, and I'm proud of that piece of equipment.
MATTINGLY: But it was Garner's work at a humanitarian mission in 1991 that won him the most praise. Commanding Operation Provide Comfort, Garner brought food, shelter, and medical relief to Kurdish refugees in northern Iraq following the Gulf War.
UNIDENTIFIED FEMALE: In that position, he had to win the trust of a very diverse group of people and I think it gave him a good deal of skill in dealing with this same kind of situation.
MATTINGLY: Garner's critics, however, are becoming increasingly vocal. There is a stomp Jay Garner website. And some groups protesting the war are alarmed by a job he held in the private sector, heading a defense company that develops missile systems.
UNIDENTIFIED FEMALE: He's the wrong man and it's the wrong model. It should be the United Nations and not the United States that guides Iraq to democracy.
MATTINGLY: Garner's first meeting of former Iraqi leaders in the ancient city of (UNINTELLIGIBLE) was preceded by loud street demonstrations by Shiite Muslims in nearby Nasiriya. In a recent print interview, Garner acknowledged the challenges at hand. And said democracy begins with tension and discord. Two things Iraq already seems to have in abundance.
David Mattingly, CNN.
(END VIDEOTAPE)
DOBBS: And as if Jay Garner didn't have enough troubles, the Europeans are weighing in. The European Union today saying the United Nations must play a central role in rebuilding Iraq, all part of a statement issued at the end of a two-day European Union summit in Greece. That statement was drafted by coalition members Britain and Spain, as well as France and Germany, which both opposed the war. The United States said the United Nations will play a vital but limited role in post-war Iraq.
The government today awarded Bechtel a $34 million contract to rebuild Iraq. The contract could be worth up to $680 million, pending Congressional approval.
Joining me now is former secretary of state, George Shultz. He's a fellow at the Hoover Institute, a member of the board of Bechtel, a distinguished public service career. Good to have you with us.
GEORGE SHULTZ, FELLOW, HOOVER INST.: Thank you.
DOBBS: Let's begin with what is if I may, a concerning amount of contention around the interests and motives of Syria right now.
How concerned are you?
How concerned should we all be?
SHULTZ: I think we should all be concerned. It's part of the war on terrorism. And this is a war against terrorists and against states that harbor terrorists, and which have weapons that can be used by terrorists to create devastation. And Syria, for a long time, has fitted that bill. DOBBS: The Syrians have said that they are against weapons of mass destruction, but will not permit weapons inspections. The secretary of state, Colin Powell, today said that that isn't good enough.
What option do you believe we have here?
SHULTZ: Well, they must get some message from watching Iraq. And I think I watched the interview that you showed and Colin Powell said he planned to go to Syria. So I think he'll have a heart-to- heart talk and point out the facts of life to Mr. Assad.
DOBBS: Are you hopeful that from this first that we can see a significant and fairly rapid improvement in the lives of the Iraqis, and at the same time change profoundly as the Bush administration has said it wants to do, change profoundly the Middle East and U.S. policy therein?
SHULTZ: We certainly have a chance, and life is difficult in the Middle East to get things accomplished. But already, a lot has been done to help the people of Iraq. They've gotten rid of Saddam Hussein, and the process of putting things back together again on a much better basis is well under way. And I thought the initial effort of General Garner to get Iraqis together and start the process of forming a transition authority of some sort, that seemed like a very promising step. The sooner the governance of Iraq can get into the hands of Iraqis, the better off everyone's going to be.
DOBBS: As you know, the united -- the European Union, Kofi Annan at the United Nations has said that there should be a -- more than a vital role, a central role, for the United Nations and the European Union in the reconstruction of Iraq.
What is your thinking on those assertions?
SHULTZ: Well, we want to include the U.N. where it can be useful, but I don't think that the U.N. at this point should be called on to step in and take over and run things.
DOBBS: And Bechtel today, in part of that reconstruction effort, awarded a contract, as you know, there's been some controversy, Halliburton, a company formerly run by, when he was CEO, Vice President Dick Cheney. A lot of people are making much of the fact that Bechtel is being awarded this contract.
Is there some way in which they should be properly concerned?
SHULTZ: Well, somebody needs to be awarded these contracts, because there's a lot of work to be done. And I think people want to see that there is a process that's competitive and transparent. I'm not a part of this process. I don't have a managerial role in Bechtel, but as I understand it, Bechtel was invited to bid, did so, process is transparent, competitive, will continue to be so and that's the way it should proceed. Actually, from the standpoint of the people of Iraq, it's a good thing, because Bechtel, by its track record will do an excellent job. DOBBS: Bechtel, obviously, has a great deal of experience in the region to say the very least. Another contract issue that has come up, and that is, of course, the French-owned company that is bidding for about $8 billion worth of business from the Department of Energy on the Yucca Mountain project.
Given all that is transpired between France and Germany and the United States, do you think it's appropriate to award a contract that large at this point to a country that has been in object opposition to the interests of the United States for so long?
SHULTZ: Well, I'm not intimately -- I'm not really familiar with it. I know a little bit about it. There is a very exacting, competitive process through which you go in order to award contracts. And Bechtel is managing that process on behalf of the Department of Energy. And just all stands, I don't know at this point.
DOBBS: George Shultz, as always, it is great to have you with us.
SHULTZ: Thank you.
DOBBS: Coming up next here, we'll be talking about a sharp reduction in the number of SARS cases in the United States. We'll tell you why that occurred on one single day.
Also, allegations of misconduct and illegal behavior at the New York Stock Exchange.
From the trading floor to the board room, Peter Viles will have our special report. We'll be joined by the New York Stock Exchange's chairman, Richard Grasso.
And the former head of scandal-ridden Health South is asking for access to millions of dollars in frozen assets.
Jan Hopkins will have a special report on the luxurious life style of one Richard Scrushy.
And a key FBI informant from China has turned out to be a double agent. Charles Feldman will have the story of love, money, more love, deceit. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The number of SARS cases in this country dropped significantly today. U.S. Health officials changed the way in which they classify who has Severe Acute Respiratory Syndrome. The reason, to be consistent with other countries. The reclassification reduced the number of suspected SARS cases from 208 to 35. Of these 35, 33 had recently traveled to Asia. The CDC's previous definition of SARS included people with only mild flu-like symptoms.
The stock market today finished what is a holiday shortened week with a solid gain.
Christine Romans, joins us now and has more on the market -- Christine.
CHRISTINE ROMANS, NEW YORK STOCK EXCHANGE CORRESPONDENT: A decent week for stocks, Lou. And you had financial services transportation stocks leading the market. The market Nasdaq up 5 percent. The S&P 500 up 1 percent, Dow up 5 percent. Almost half of the Dow stocks have reported results showing first quarter profit growth of 12 percent, revenue up 5 percent year over year. A third of the S&P 500 companies have reported profit. They're up almost 9 percent, revenue up more than 5 percent. Steady progress, Lou, and next week is another big earnings week.
DOBBS: Absolutely. And we have seen pretty much a flat performance in this market so earnings are at least starting to help those prices?
ROMANS: At least starting to.
DOBBS: Christine, thank you very much.
The New York Stock Exchange today confirmed it is investigating trading practices at several specialist firms, one suspended a floor specialist this week. It comes as the New York Stock Exchange has a considerable number of problems on its board of directors, a number of the board's members and would-be members have been hit by scandal.
Peter Viles reports.
(BEGIN VIDEOTAPE)
PETER VILES, CNNfn CORRESPONDENT (voice-over): Perhaps the most famous symbol of capitalism on the planet, the New York Stock Exchange has some people problems. The exchange says it is investigating "trading practices" at several specialist firms, raising concerns of front running when specialists place their own trades ahead of customer trades, and forcing the floor specialists to defend their profession.
LINDA JAY, TRADER, LABRANCHE & CO.: I will say every specialist on this floor strives for price improvement for the customers.
VILES: The probe comes after Fleet this week suspended a specialist David Finerdy (ph), in what called quote, "an internal fleet matter."
The NYSE has a bigger problem, its board has been a source of turmoil and controversy. Citigroup chairman Sandy Weil withdrew his own nomination to serve on that board only after Eliot Spitzer, fresh off a long investigation of Citigroup, threatened to campaign against Weil's nomination.
PROF. CHARLES ELSON, UNIVERSITY OF DELAWARE: It was certain, given what happened to attract great controversy, particularly as it was a slot where he was going to represent the public shareholders. The same public shareholders who were apparently, according to the attorney general of New York damaged in the scandal. It didn't make a lot of sense. VILES: Board controversy continued this week. Board member Ken Langone's investment bank Invemed accused by NASD of inflating commissions on hot IPOS. Invemed strongly deny the charges.
Last year, there were a slew of resignations.
Michael Carpenter quit after being demoted at Salomon Smith Barney. Jean Marie Messier also quit his job at Vivendi, and so did Martha Stewart, quit because she didn't want her legal problems to cast shadow on the big board.
(END VIDEOTAPE)
VILES: There is some pressure on this issue FCC. The new chairman, Bill Donaldson recently sent a letter to all of the exchanges warning them to reexamine their own governance policy -- Lou.
DOBBS: Bill Donaldson, former chairman of the New York Stock Exchange, a pretty good sense of timing.
VILES: Sure does.
DOBBS: Pete, thank you very much, Peter Viles.
Joining me now is the chairman and chief executive officer of the New York Stock Exchange, Richard Grasso, who joins us from the exchange itself.
Dick, good to have you with us. I know you've got your hand full right now. You've got a lot of problems there.
Why are these issues breaking right now for your organization?
RICHARD GRASSO, CHMN, NEW YORK STOCK EXCHANGE: Lou, first thanks for inviting me. There are a set of issues and challenges, without question. Let me first address the front part of Peter's report. And let me say very clearly and unambiguously, while we have not brought any charges against any individual or any specialist firm, we have a massive surveillance program, Lou, which each and every day electronically monitors every transaction on the board. And let me say clearly to you and your viewers, any specialist on the floor of the stock exchange who would put his or her interests in front of the customer orders coming to this market is going to have a career changing experience. It is unacceptable. We have zero tolerance for it. They'll be out of the business.
As to the governance issues, Lou, we've had some challenges. I think we've named some very excellent new directors that are coming aboard. And quite rightly, in Peter's report, he talked about Attorney General Spitzer's taking exception to the nomination of Sandy Weil, which was withdrawn by sandy quite quickly, to be substituted by Bill McDonough, which I think the general was very proud and support of. As we both know, Lou, the McDonough nomination was not to happen simply because he's heard a higher call. He'll become chairman of the Public Company Accounting Oversight Board. The stock exchange's boards loss is America's gain.
DOBBS: Indeed, I couldn't agree with you more about Bill McDonough. He would be an asset for any board in any capacity. But you were talking about the compliance system at the New York Stock Exchange, the specialists now under investigation. Those at LaBranche and Fleet, was that investigation necessitated by your own compliance system or by an internal investigation?
GRASSO: Absolutely, Lou, we have a very comprehensive program. One third of my employee colleagues here at the exchange, some 560 individuals, men and women, are dedicated to our regulatory apparatus. Everything that is conducted here, every order which arrives, is electronically finger printed. We have a comprehensive look each day at the quality of the market, at the depth of the market, at spreads and most importantly asking ourselves the question, are customers coming first?
Anything less than that happening, Lou, is unacceptable.
DOBBS: So those investigations began as a result of the New York Stock exchange's own compliance procedures?
GRASSO: Absolutely, Lou.
DOBBS: And you know, there are -- you're a man who is picking up some critics rather quickly with these -- some people are calling you tone deaf suddenly, a man who has had a brilliant ear for years, the appointment of Sandy Weil, the problems with Computer Associates, the problems with Martha Stewart. Now, Ken Langone's Invemed. Dick, these are starting to be cumulative.
How concerned are you about that and what are you going to do to, if you will, adjust the pitch?
GRASSO: Well, Lou, you have to remember that yes, we're the greatest equities market in the world, but we're not perfect. There are going to always be challenges and hopefully the public will respond very positively to the initiatives that they will see, whether it's in the governance area, where we will hold ourselves to the same highest standards in the world that we hold our companies to or whether it's in surveillance and the prosecutorial arm of the exchange, which says very simply this is a marketplace built on serving 85 million investors in this country. That's our franchise. Anyone who doesn't do that correctly will be out of the business.
DOBBS: I assume you plan to stay in the business?
Am I correct?
GRASSO: Lou, you know, my...
DOBBS: Let me ask this question.
GRASSO: My predecessor -- I have to answer that question, Lou. My predecessor three times ago left at age 77, Lou. And as threatening as this may sound to my young colleagues that gives me better than two decades yet to go.
DOBBS: Well, I'm sure there are a few of them around you that might be a little more concerned. I suspect there's always some applause. But I want to get to the very -- and I want to -- we have to wrap this up very quickly. But with these issues breaking right now, after all that this country has gone through, since the Enron scandal broke, don't you think it's time to do something very special at the New York Stock Exchange and just simply move in whatever direction you have to to eliminate even the appearance of a problem?
GRASSO: That's exactly what we're doing, Lou, and I'm committed to absolutely enjoying the same level of public confidence that this institution has enjoyed for the last 211 years.
DOBBS: Dick Grasso, a lot of people will be holding you to that. We appreciate you taking the time to join us.
GRASSO: Thanks for inviting me, Lou.
DOBBS: Today is the 500th day since Enron collapsed and the corporate corruption scandal broke. Over that period of time, 47 corporate executives have been charged with crimes, 7 Enron executives have been charged. Five hundred days later, no one has served a single day in jail.
Of those 47 executives, nine are from Health South. The SEC charges those executives at the healthcare service giant conspired in an almost $1.5 billion accounting fraud. The former CEO, who has yet to face criminal charges, is in court now arguing for access to his multimillion dollar fortune.
Jan Hopkins has the story.
(BEGIN VIDEOTAPE)
JAN HOPKINS, CNNfn CORRESPONDENT (voice-over): Former Health South CEO Richard Scrushy has been spending his days going to court in Birmingham. He has told the court he needs $10 million to help maintain his lifestyle. His accountant says last year his living expenses totaled nearly $300 million.
Scrushy has four homes, included this one in Birmingham. The homes have no mortgages and are worth $22 million. He also has at least 10 boats, more than 30 cars and two planes.
The government claims the assets are ill-gotten gains from an elaborate fraud to cook the books at Health South. The government says Scrushy told Health South accountants to make up numbers to match what Wall Street wanted.
ALICE MARTIN, U.S. ATTORNEY: Here's the number and you figure it out to -- you go talk to the auditors and deceive them and you go fix up invoices to cover it up.
HOPKINS: Scrushy's lawyer says he's innocent.
THOMAS SIOBLOM, SCRUSHY'S ATTORNEY: Mr. Scrushy, for the first time in his whole life, found out about this March 17, 2003.
HOPKINS: So far, nine former Health South executives have pleaded guilty to accounting fraud. The SEC has filed civil charges against Scrushy and a grand jury is considering criminal charges.
Scrushy and his lawyers say he needs access to his money in order to prepare a defense.
Scrushy's name is everywhere in Birmingham: on buildings, libraries, colleges and even parkways. Over the years, he's been quite generous. Now he needs the court's approval to pay his pledges to charity and his image is tarnished.
(on camera): Not only is the government after Scrushy's assets -- so are angry shareholder. They're trying to recover some of the $12 billion they lost when Health South's stock imploded from $30 a share down to pennies.
Jan Hopkins, CNN, New York.
(END VIDEOTAPE)
DOBBS: Still ahead, giving U.S. state secrets to China. What was the FBI thinking when it said a double agent was doing something extraordinary for two decades? Charles Feldman will have the report when we continue.
Stay with us.
(COMMERCIAL BREAK)
DOBBS: Katrina Leung was supposed to be a key informer for the FBI. Instead, federal prosecutors say she's a double agent for the Chinese government, funneling vital U.S. secrets through some 2,000 contacts in China.
Charles Feldman reports.
(BEGIN VIDEOTAPE)
CHARLES FELDMAN, CNN CORRESPONDENT (voice-over): She was everywhere. At this 1997 banquet in Los Angeles, in honor of the president of China.
KATRINA LEUNG, SUSPECTED CHINESE DOUBLE AGENT: You ready for the surprises? Then you better be quiet.
FELDMAN: ...reportedly at a controversy Democratic Party fundraiser attended by Al Gore, with former L.A. Mayor Richard Riordan at the handover of Hong Kong to China.
Tuesday, 49-year-old Katrina Leung showed up in federal court in L.A., where she was denied bail on espionage related charges.
JANET LEVINE, LEUNG ATTORNEY: This is a complex case. The facts of this case take place over a period of 20-some years. FELDMAN: he facts of the case, of course, depend upon whom you listen to. The only thing not in dispute is that Leung, a prominent Chinese-American and political activist, was hired by the FBI some 20 years ago to spy on Chinese officials.
She was paid nearly $2 million for her work over two decades.
(on camera): But federal prosecutors claim Leung was actually a double agent, making off with top secret documents from her FBI handler, a married agent she was allegedly having an affair with for almost the entire time.
She too is married.
(voice-over): They've both been arrested. The former FBI agent for gross negligence, for leaving the documents in easy reach. She, for turning over the material to Chinese intelligence agents.
And prosecutors say Leung also had a sexual relationship with a second FBI agent who has since retired. He has not been charged.
U.S. government sources tell CNN that Leung allegedly compromised a major nuclear espionage case by giving Chinese officials the names of two FBI agents and also apparently tipped off the Chinese government that the U.S. had planted listening devices on a Boeing 767 used by the president of China.
Leung's lawyers claim anything she gave the Chinese was disinformation the FBI wanted her to give them.
Beyond any doubt is that Katrina Leung was a woman to be reckoned with.
REP. DAVID DREIER (R), CALIFORNIA: I would describe her as a strong, dynamic, intelligent, hard-working, energetic individual who was very encouraging and supportive of me and people with whom I share a political philosophy.
FELDMAN: Congressman David Dreier is one of many national and regional politician whose has received donations from Leung.
DREIER: If the reports we've gotten are true, it is despicable and horrifying.
FELDMAN: A full damage assessment has yet to be made, and the investigation is continuing.
Although the FBI L.A. field office denies it, sources say a current FBI agent here is being investigated in connection with the Leung case.
Charles Feldman, CNN, Los Angeles.
(END VIDEOTAPE)
DOBBS: When we continue, we'll take a look at your e-mail. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Now, your e-mail.
Lewis Krieger of Louisiana writes, "Your show, Mr. Dobbs, is the very best news show on television. There's no question about that. It's all at once classy, intelligent and fair and it's the only one we watch in this family."
Thanks. As you might suspect, I like the Krieger family a lot.
Marie Mackey of Michigan wrote to say, "I will never listen to you and your slanted Bush reasoning for a "bully" war. You should not be in a position of giving the news when so biased."
Well, believe it or not, Marie, even some liberals supported the president and the troops in this war.
Retired Commander "Sharkey" Ward of the Royal Navy writes from Grenada to say, "My biggest pleasure has been watching you! Even handed, astute, wary of exaggeration and, something that many broadcasters do not have, a well developed but courteous sense of humor."
Thanks, commander.
And Willy Clarkson of Colorado writes, "Your obvious bias for Republicans in this war are very disgusting. You're not acting as an unbiased journalist. Your lack of listening to the United Nations and its role was proof of that."
You're right, Willy. I'm not unbiased. I've supported the president, the Congress, the troops in this war. As for the U.N., I think they do very good work when it comes to humanitarian aid. It's when they try to do other than that I have a problem.
Paula Zahn is coming up next. She'll be followed by Larry King.
I'm Lou Dobbs. For all us here in New York, thanks for being with us.
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