CNN IN THE MONEY
North and South Korea Skirmish at Border; Where Does Kim Jong Il Get His Money?; Gender Discrimination on Wall Street; Will Investors Profit When Citigroup's Weill Steps Down? The Financial Cost of Capital Punishment; Mutual Fund Strategies.
Aired July 19, 2003 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, HOST: I'm Jack Cafferty. Welcome to the program on today's edition of IN THE MONEY.
A recipe for doomsday, North Korea saying this week it has enough plutonium to make another six nuclear bombs. We'll find out more about the threat and where it might lead.
Plus bulls, bears, and wolves. We'll look at sexual harassment on Wall Street and how women in business are fighting to stamp it out. An update on the boom boom room.
And banking on Citigroup with CEO Sandy Weill getting ready to clear out his desk. We'll look at whether the change could pay off for you as an investor.
Our IN THE MONEY regulars all together here on the set today, Susan Lisovicz, financial correspondent for CNN, Andy Serwer, editor- at-large, "Fortune" magazine, and I slept much better last night when I found out that the recession was over. I am so relieved.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: And how did you know that the recession was over, Jack? Was it the rising unemployment rate?
ANDY SERWER, EDITOR-IN-CHIEF, "FORTUNE" MAGAZINE: (UNINTELLIGIBLE) that have this very complicated formula, and they said the -- this is what killed me. Not only they say it's over, they say it ended in November 2001. When did the next one begin, December 2001?
CAFFERTY: It's got to be a job to have. You only get a recession about once every eight or nine years, and your job is to say it started, and then when it's over, you say it's over. And then for seven, eight, nine years, I guess you just go...
SERWER: So everyone who got laid off after November 2001 -- it's your own fault. You can't blame it on the economy, right? According to these guys.
LISOVICZ: It may be an example of how Washington works. This is an agency based in Washington. CAFFERTY: A prime example of what the taxpayers are paying for down there. All right, well, it's over anyway, whether you believe that or not. Chalk one up for North Korea. In its campaign to grab U. S. attention, for a while this week, Pyongyang managed to look like even bigger trouble than Baghdad by delivering a nuclear threat and fighting a gun battle, a real one, with troops along the DMZ between North and South Korea.
Senior Pentagon correspondent, Jamie McIntyre, is in Washington with more. Those were real bullets, weren't they, Jamie?
JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Yes, but they say they don't think it was a real serious situation. What happened was -- in that border dispute was some shots were heard coming from the North Korean side. The South Korean army responded with a volley of machine gunfire, and then there was no response from the North.
It's very difficult to figure out what's actually going on in the minds of the North Koreans. But as you said, they did -- they have told the United States now that they have reprocessed enough of those fuel rods from their Pyongyang nuclear reactor to produce as many as six new nuclear weapons.
That raises the big question for the Bush administration, do you negotiate with North Korea? The administration is not in the mood to give any concessions at all or really do much in the way of negotiation, and that has former defense secretary, William Perry, worried that the United States might be drifting toward war. Now Perry, you might remember, although it was ready to go to war in 1994 with North Korea over the nuclear arsenal that they were developing at that time, and he told CNN this week that North Korea might be willing -- ready to test a nuclear weapon as early as this year, and that leaves the U. S., he says with some unpalatable choices.
(BEGIN VIDEO CLIP)
WILLIAM PERRY, FORMER U. S. DEFENSE SECRETARY: We can simply accept a nuclear program with many nuclear weapons in North Korea and the possibility they will sell them to other people, and I think that's unacceptable. Second alternative is to go to war with them to stop this, change the regime. And when you consider how horrible that war could be, that's unacceptable. That leaves you to the third alternative, the only reason we are willing -- we should be willing to negotiate with the North Koreans is because the other two alternatives are so terrible.
(END VIDEO CLIP)
MCINTYRE: Well, the Bush administration insists there's another alternative, and that's real economic pressure on the regime in North Korea, which could be close to collapse, and keeping the emphasize on the diplomatic front, but it's hard to see exactly where this one is going, Jack.
CAFFERTY: Your guest, Jamie, suggested that you negotiate with North Korea because the other two options are unacceptable. To me, that sounds more like blackmail than negotiation. MCINTYRE: Well, Perry's argument is that you have to first demand a freeze, a verifiable freeze, in North Korea's nuclear weapons program, essentially what he calls "coercive diplomacy." That would be backed up by essentially an iron fist. And as I said, Perry was ready to go to war in 1994, drawing up war plans to take out that nuclear reactor at Pyongyang and reinforce the United States forces there with tens of thousands of additional troops, so he's Casper Milquetoast.
CAFFERTY: There you go. Senior Pentagon correspondent Jamie McIntyre from Washington. Thank you.
SERWER: North Koreans have been coping with desperate poverty for years, except the North Koreans at the highest levels of government. We wanted to know where the so-called "Dear Leader," Kim Jong Il, gets his cash, so we asked a "Wall Street Journal" reporter who has been covering that question, Jay Solomon, who joins us from Los Angeles. Jay, nice to have you with us.
JAY SOLOMON, REPORTER, "THE WALL STREET JOURNAL": Thank you.
SERWER: So what about this question? Where does Dear Leader get his money from?
SOLOMON: We wanted to find out the same question, and we found out that about 30 years ago, when Kim Jong Il was sort of anointed to take over power from his father, he set up a secret slush fund within the Communist Party called "Division 39." And since that time, he really sort of raped the country's wealth, whether it was gold or magnesium or some of the agriculture products North Korea trades with China, he basically included that inside this slush fund and used that money to power his rise, which, you know, he officially came to power in 1998.
As the economy has sort of deteriorated in North Korea, a lot of the illicit activities that you read about in North Korea, whether it's narcotics trafficking, counterfeit dollar production, or even missile sales or weapons sales, this also seem to come under Division 39 and directly into Kim Jong Il's slush fund. So, his money comes from a lot of different sources, but a lot of them are illicit.
CAFFERTY: You know, there have been several options talked about on how to deal with what is perceived as the nuclear blackmailing of the United States by Kim Jong Il and his North Korean government. Is this Division 39 you are talking about vulnerable? Could it be attacked? Could the assets be seized? Would there be some way to move against it in the way that the assets, for example, of Al Qaeda or Saddam Hussein have been attacked by the outside world in years past?
SOLOMON: Well, certainly, and it seems like it's moving in that direction. A lot of money has come into North Korean from Japan. There is a huge ex-patriot North Korean community that has funded Kim Jong Il.
We can already see the Japanese starting to tighten the screws. China, Makow, and parts of Europe also have been key tools -- or key vehicles for Division 39 for Kim Jong Il to raise money. The question is how far does the Bush administration push things?
We have talked to regulators in Austria, who know where, you know, where Kim Jong Il is banking links lay, but they can't really move against this unless there are formal, you know, sanctions against North Korea through the United Nations.. So that's the question the Bush administration is going to have to sort of face. And it's going to need Japan, China, and Russia to sort of work in league with the U. S., and that's going to be a tough, tough thing to bring about.
LISOVICZ: And one of the really tough things about Division 39 and how it works, according to your articles and your sources, is that it increasingly is engaged in illicit trade, heroin, other drugs, whereas it used to actually deal with real governments, legitimate governments, and companies. And that's a problem in trying to track it all down.
SOLOMON: No, it is. But I think if you look over what's been happening over the last, you know, four or five months, you can see the U. S. working with Australia and Japan have really started to try to crack down, particularly on the narcotics trade. There was a huge bust in Australia. A North Korean ship off the coast of Australia was captured moving about $200 million worth of heroin, or something like that.
So, I think its is difficult, and you are going to need the Chinese to work in league with the U. S, but it's going in that direction. Counterfeit dollar operations, as well, are starting -- have been cracked down moving out of Makow, and I think that's the direction.
People say, you know, is there going to be a war? Is there going to be a deal? I think the Bush administration really is moving to try to cut off the financial base of North Korea, which Division 39 would be a central part of that.
SERWER: Hey, Jay, what about the name "Division 39?" I mean, it sounds like a British techno rock band. What does that mean, and is there any way to blockade North Korea? Or is that not possible?
SOLOMON: Well, the first question -- Division 39 -- Kim Jong Il has palaces, secret offices all over North Korea. Defectors will tell you these tales and, you know, the Stalinist type state -- he's got sort of stealth secret numbers for each place that he moves. Division 39 is one of them. There's another, Division 35, which is a lot of the intelligence operations. So, it's very Orwellian, but that's how that state really runs.
A blockade would be very difficult, but it does seem like the Bush administration has at least Japan and Australia on board. I think everyone agrees that China and Russia, which share borders with North Korea, are going to be key. Certainly, the Chinese have been very tough on narcotics. I don't think they are going to be too excited about North Koreans moving drugs to their country.
But I think on the weapons -- you know, people say if they are really moving fissile material, you can move it in a backpack. That's is what's going to be very difficult.
And, you know, interdicting North Korean ships at sea -- there are a lot of legal questions that need to be answered and, you know, the U. S. did, you know, commandeer a North Korean ship last year, and they ended up having to let it go. So, I think it sounds great maybe in theory, but it's going to be difficult for them to implement for many reasons.
CAFFERTY: Jay, did you get any sense during the research to put together your piece for "The Journal" why this punk, for want of a better word, is getting away what he's getting away with. This guy can't put a bowl of rice on the table of his own citizens. It is arguably the most closed, brutal, totalitarian government left on the face of the earth. He may have a few nuclear weapons.
Yes, he has a lot of conventional arms, but there seems to be this reluctance on the part of the world as large to grab this guy by the scruff of his neck and say, hey, this is nonsense. If you want aid from the international community, give it up. We are coming in to take a look. And if not, we are cutting you off from everything. Why won't the U. N., the International Atomic Energy Agency, and the countries that you have just talked about that have been mentioned as possible participants in multilateral negotiations along with the United States jump all over this guy?
SOLOMON: The geopolitics make it very difficult. The South Koreans, you know, while they -- there was concern about the human rights situation, you know, concerns about their brothers up in North Korea -- they don't really want to face a collapse of a North Korean state next year. It would bankrupt their economies. So, in the south, there is definitely a drift towards status quo, if they can do it.
Same with China. They are not too excited about, you know, a pro-U. S. North Korea or a unified Korean peninsula that is very pro- U. S. on its border, so they have also a sort of desire to keep the status quo in some ways, albeit neither of -- none of these countries want a nuclear-armed North Korea. So, I do think there is the geopolitics of it make it very, very difficult for the U. S. to get a sort of common stand.
Also, there's really almost no regime like North Korea. As long as Kim Jong Il -- I mean, if people describe -- you talk to defectors, if he can control Pyongyang, he can stay in power. He basically has the country so stratified that anyone who has been in any opposition, even if it was a generation before and it was their parents, they've been put in labor camps, or they are in remote areas outside of the capital. So, you basically need to split the elite inside North Korea, and to do that, things like Division 39 would need to be cut off because that allows him to basically buy off generals and the Communist Party people. So, I think it's a mixture of geopolitics and just how authoritarian that regime is.
CAFFERTY: All right, Jay. It doesn't look like it's going to go away any time soon either. Jay Solomon of "The Wall Street Journal." Thanks a lot for being with us. SOLOMON: Thank you.
CAFFERTY: We appreciate it. Coming up on IN THE MONEY as we continue, putting the "vice" in senior vice president. We'll hear from an author who says sexual harassment has been a problem on Wall Street for years. Find out about the women fighting to be seen as workers, as opposed to play things.
Plus a matter of life and debt. We will break the death penalty down to dollars and cents as we talk to best selling author and attorney Scott Turrow about whether he thinks capital punishment works.
Also ahead, making change as Citigroup's Sandy Weill prepares to step down as CEO. We will look at whether the company is a promising place to park your money. Stick around. More to come.
LISOVICZ: Wall Street culture can be as pumped up as it is buttoned down. Most of the time that's more about adrenaline than testosterone, but in some cases, female employees have charged that their brokerage houses look more like frat houses with women shut out and put down by the boys club.
Arbitration began this week in the matter on of a Wall Street star who alleges that she suffered gender discrimination while at Smith Barney. The firm denies that accusation from its former employee, Deborah McCran (ph). She joined the so-called boom boom room discrimination case against Smith Barney after leaving the company in 1999.
CAFFERTY: For more about that case and gender discrimination on Wall Street today, we are joined now from Stanford, Connecticut, by Susan Antilla. She's the author of "Tales From the Boom Boom Room," which is arguable one of the better Wall Street titles I have ever read. She is also an adjunct professor at New York University. Nice to have you with us, Susan. Thank you.
SUSAN ANTILLA, AUTHOR: It's a pleasure.
CAFFERTY: Are things any better than they were when the boom boom room splashed across the front pages a couple of years back?
ANTILLA: Well, Jack, I would say that the very blatant, you know, dirty pictures on the wall stuff is better, but I don't think the gender discrimination as far as salaries and things like that has gotten better at all.
CAFFERTY: Why not?
ANTILLA: Well, I think it's easy, first of all, in a recession, to forget about women and minorities and people who most recently have been promoted. And you have the excuse of saying that you have to cut back economically. And women, indeed have really suffered and lost many more jobs than men have in the past two years. LISOVICZ: Susan, I work on Wall Street, and I followed this case pretty closely. I'm a little confused, though, because wasn't the boom boom case actually settled and now arbitration begins? Can you explain this and why this case is so interesting to Wall Street and to many working women?
ANTILLA: Sure. The case did settle in 1998, and what happened after that is women who qualified to be in the class, and there were 22,000 women who qualified, could opt to put in a claim for the case. And 1,900 women did choose to file claims. Only two women have actually gone to arbitration in the case. Most women just settled before getting to arbitration. Ms. McCran is the third woman to go to arbitration, and people are really paying attention to her case because she is such a high level woman. She made almost $1 million a year.
Smith Barney is saying, of course, well, we paid her so terrifically, what's the problem? And the problem, of course is paid her terrifically relative to what? There were men making more money than she at the same level, so people really are watching this to see how the arbitrators will end up ruling.
SERWER: Hey, Susan, do you think that Wall Street is a worse place to work for women than other industries? I tend to think it is. I have a theory. Let me run it by you. This --Wall Street is the only business in the United States where the line purpose is to make money. In other words, the steel business, you make steel, and then you get paid. This is a business where you are making money. And I think that tends attracts more Neanderthal-like guys. Do you agree with me?
ANTILLA: I may pass on that.
SERWER: Why are you passing? I mean, it is different. It is different, don't you think?
ANTILLA: It is a different place. I will agree with you on that. I certainly think that the combination of money and power on Wall Street makes it a very different place, and I will also agree with you that it's a very Neanderthal place compared to other industries. I think that the reason that it's more Neanderthal is the presence of mandatory arbitration on the Street.
I feel very strongly about that. It is the only industry in America that for many years required all licensed employees to go to industry run arbitration in the event of a dispute and cut off the nation's courts so that if someone like Ms. McCran had a problem, a civil rights problem, she had no right to go into a court room and file a complaint. So, the securities industry never was exposed to the embarrassment that other industries have been exposed to when there were cases of sexual harassment and sex discrimination, and that's a very big deal.
CAFFERTY: Some of the excesses, following up on what you are saying, that characterized the behavior of these houses during the internet boom of the late 1990s and the subsequent, for want of a better way to phrase it, slap of the wrist penalties that were handed out are to me symptomatic of the very kind of immunity almost from reality that these guys tend to enjoy. And I suppose it goes right across to the area we are talking about here, the way it treats its employees.
ANTILLA: Well, you know, that's a very good point, Jack, and I found that in researching "Tales From the Boom Boom Room," there was a real nexus between firms that were doing the wrong thing in terms of their customers. You know, I would look at some of these firms who had -- where I had big stacks of complaints that were filed with the Equal Employment Opportunity Commission, and I would look into their records with the Securities and Exchange Commission and the National Association of Securities Dealers and find that, indeed, customers had been complaining and complaining about them too. So, immorality was cutting across both places.
So you are right, there were problems both in terms of the way they were treating women and the way that they were treating their customer.
LISOVICZ: Can you give us some specifics for those folks who were not familiar with the some of the details from the boom boom room why it became so notorious for those of us who follow Wall Street pretty closely? And then, if you think really that kind of behavior still exists on a wide scale.
ANTILLA: Well, the boom boom room was a real place. It doesn't exist any more, but it was a real place. It was a party room in the basement on of the retail branch office of Salomon Smith Barney in Garden City, New York. And the guys set up this room where they could go down and have a drink. They had a plywood bar. They hung a toilet seat from the ceiling. They had a big garbage pail that they put a liner in, and they mixed drinks in it.
And what would happen --there were lots of problems in the office, not just down in the party room. You know, a woman once came back from going to a funeral during office hours, and she came into the room where they did their cold calling, the bullpen, and saw up on the blackboard somebody had written "Kathleen gives good head."
You know, they were just really constantly humiliated in this office. They were given names like "the Stepford wife" or "Playboy Bunny." They were just degraded all of the time, and I am giving you really the milder stuff because we are on TV, and I don't want the FTC to come in and take away your license.
CAFFERTY: I appreciate your holding back!
ANTILLA: So, you know, it was just constant degrading, and then there were the discrimination things, which were, you know, the guys would go off and do business on the golf course, and the women wouldn't be invited. Things like the women not getting accounts given out to them, and the men would get accounts. So, it just -- but it was a constant, you know, you walk into the office in the morning, and you are being put down all day long. So, that was what the boom boom room was. Women in other firms, though, I found in doing the research for the book -- and that was a three-year process -- what happened in Smith Barney's Garden City office was not unique. That was the interesting thing.
CAFFERTY: Susan, we have to leave it there. Thank you.
ANTILLA: Thank you.
CAFFERTY: I have enjoyed it. Nice to talk to you. Susan Antilla wrote, "Tales From the Boom Boom Room, Women Versus Wall Street."
Coming up next on IN THE MONEY, new boss, new chapter. Sandy Weill prepares to step down as CEO of Citigroup, and Charles Prince gets ready to move up. We will look at whether that's a plan that investors can profit from.
Also ahead, crime doesn't pay, but you do. Find out if capital punishment makes sense for taxpayers. We will talk with attorney and best selling author, Scott Turrow.
And the day to day danger zone. Commuting can be risky, and some companies are trying to ease anxiety about it. Find out how they a weaving a safety net for workers on the go so that if you don't make it in in the morning, they make a couple of bucks. Stay with us.
LISOVICZ: Let's take a look at the top stories from the past week in our "Money Minute." Fed Chairman Alan Greenspan told Congress he will work to keep interest rates low until the economy recovers. Greenspan added that he's still worried about the huge budget deficit but praised the Bush tax cuts for adding to household income.
Inflation seems to be holding steady. The latest government report shows consumer prices rose .02 percent in June, but if you take out food and energy costs, prices actually stayed the same.
And Oracle chief Larry Ellison is get a real salary again, sort of. Ellison has foregone any compensation from the software company since 2000, but this week the Oracle board announced it is giving Ellison 900,000 stock options priced at $12.60 each. There is only one problem though. Right now Oracle's shares are trading below that price, so those options are worthless so far. But if you weep at all, just keep in mind that Larry Ellison is still a billionaire.
SERWER: That's right, Susan. Citigroup also dominated the headlines this week. The big news was Sandy Weill announcing he will step down as CEO by end of the year. Weill will hand over the reins to Charles Prince, who has been running Citi global corporate investment banking business for the past year.
The banking investment powerhouse also announced it's boosting its dividend. Then it agreed to buy Sears and Roebuck's credit card division for about $3 billion. And during this past year, you can see Citicorp's shares have been riding a bit of a roller coaster, but they have been on a steady climb since the early spring. All this makes Citigroup our stock of the week.
So what do you think, guys? Sandy Weill, obviously hugely successful. Will he take the magic with him when he goes?
LISOVICZ: Well, you know, the stock was down sharply on the day. It was down -- it was also the day, however, when Citigroup was spending $3 billion to acquire Sears' credit card business, but the fact is he's an icon on Wall Street, and there's going to be a two guys running the show, a COO and a CEO, and you know, history shows us that those kind of things don't always work well.
CAFFERTY: There are other companies, too, that are just simply -- they're associated with the people who run them. GE was Jack Welch's company. Citigroup is Sandy Weill's company. When Jack Welch walked into a room to do a deal for General Electric, he got a different reception, I bet you, that Jeffrey Immelt gets, and the guy who is going to replace Sandy Weill is not going to get the same reception either. So, I don't what happens.
LISOVICZ: And he's a behind the scenes kind of guy. He's an exact opposite of Sandy Weill. But Sandy Weill is not leaving. He's going to chairman of the board until 2006, and people like him don't want to leave. I mean, think of Sumner Redstone. Is he about 80 right about now?
CAFFERTY: That's right, that's right.
LISOVICZ: And Sandy's a youngster at 70.
SERWER: Well, what's interesting, of course is there have been talks about succession at Citi for a long time. Sandy, you need to set up someone to come in and take your shoes. So, people I talked to said he's really sort of doing it without doing it. So, he gets the board and investors off his back. He puts two of his guys, Chuck Prince and Bob Willumstad, in right there, and he stays as chairman sort of pulling the strings. That's what a lot of people think.
LISOVICZ: But, you know, it's interesting because as much accolades as Sandy received on the conference call the other day, 30 minutes of verbal bouquets, according to our reporter who couldn't get his question in on about some of the scrutiny that Citigroup has come under recently. But the fact is that Citi is going to have some problems going ahead. I don't think it's a coincidence that Sandy made these changes now. Now two recent surveys showed that Citigroup had the worst board of directors, "Fortune" 500.
SERWER: It's a juggernaut. He is one of the biggest architects of Wall Street. In the history of the Street, it's $100 billion in revenues, trillion dollars in assets and, you know, it's one of those core American companies. I mean, it is just a Goliath.
CAFFERTY: And you look forward once or twice a year to Sandy Weill being in the news for doing a big deal that catches everybody's eye. SERWER: He's a deal maker.
CAFFERTY: Yes, I mean, he was good for the financial journalism community.
SERWER: That's right.
CAFFERTY: He was good copy.
LISOVICZ: He's not going away.
CAFFERTY: All right. More to come on IN THE MONEY. We are right after this break. We'll be back.
So just ahead, pay back on the price tag. Author and attorney Scott Turrow looks at capital punishment, whether it's working and how much it costs.
Later, losing money in order to make money. Find out whether you are paying too much for your mutual fund shares.
You are watching IN THE MONEY, and we shall return.
JACK CAFFERTY, HOST: No matter where you stand on the issue of capital punishment, it certainly appears the legal system is not working very well. For example, if you oppose executions, the number of people on death row recently cleared by DNA evidence probably alarms you. And if you support capital punishment, the endless appeals and other costs that states must cover before executing someone is also disturbing.
Joining us now to talk about the flaws in the capital punishment system is form prosecutor and best selling author, Scott Turow. Mr. Turow, nice to have you with us. You have a book coming out in October that deals with this very subject, and I would like to begin with the most startling revelation, I guess, at least to me, which was that it actually costs more to execute someone in this country than it does to leave them on death row for the rest of their lives. That flies in the face of conventional wisdom, I guess, but tell us how that works.
SCOTT TUROW, AUTHOR: Well, it's certainly counter intuitive, Jack. But the reality is that people like me, lawyers, add so much to the costs. And the cost of both incarcerating and maintaining a capital prosecution, which really involves two trials in one, about guilt and one about whether somebody deserves the death penalty, all end up multiplying the costs in a way that at the end of the day -- the state of Indiana, for example, just finished a study, and they figure that a capital prosecution through execution is about 35 percent more expensive than keeping somebody in prison throughout their lives.
SERWER: Scott, let me ask you sort of a philosophical question. That is, what is the point of the death penalty in society? Is it a deterrent? Is it revenge? Was it about economics? What do you think?
TUROW: Well, I don't think economics or deterrents work as arguments in favor of capital punishment. I think at the end of the day, the death penalty is a moral symbol. It's ultimate punishment for ultimate evil. It's meant to be a statement of values by our society that some behavior is so ghastly that there's no other way to respond it than by taking the life of the perpetrator.
LISOVICZ: And in your study, Scott, you found some interesting facts, for instance, that whites are much more likely to get the death penalty than black Americans in your state, in Illinois.
TUROW: This certainly wasn't my study. It was done by two eminent researchers, Mike Radelet and Glenn Pierce, who did it on behalf of the commission appointed by our former governor here, George Ryan, and I served on that commission.
But what the study showed were a number of disparities. One, as you mentioned, at least in Illinois, whites were 2.5 times more likely than blacks to be sentenced to death when convicted of first degree murder. On the other hand, the reason for that is that whites kill whites more often because we live in a segregated society. And you are 3.5 times more likely to get the death penalty if you kill somebody who is white than if you kill somebody who is black.
And another thing that factors in there is geographical disparity in the rural areas of this state, which are predominantly white. You are five times more likely to get the death penalty than in the city of Chicago.
CAFFERTY: A fairly recent phenomenon, Scott is the use of DNA evidence to clear people who wrongly have been sentenced to death and are sitting on death row awaiting execution for crimes of which they are innocent. Why couldn't the same DNA technology be used to hasten the demise of the people on death row who are guilty?
TUROW: Well, it has been at times, Jack. There have been cases where defendants having nothing to lose have demanded DNA testing on the eve of execution, and it's proven that they are guilty. So, there's no -- and I'm sure that DNA will, in the future, provide a powerful tool for prosecutors and police far more often than it will for defendants.
But the argument that's being made about DNA testing is simply, let's learn the truth. This is a remarkably accurate technology. It doesn't apply in all cases. It probably doesn't apply in most cases. But where some kind of genetic evidence is available, let's test it, at least if that's what the defendant wants or the prosecution, frankly.
SERWER: Sure. Right. Scott, we were talking before about this ultimate punishment. So what's your take on that? I mean, is there a place in society for this ultimate punishment? Is the death penalty warranted in your view ever?
TUROW: Well, I don't quarrel with the moral concept. I don't quarrel with those people who believe that for ultimate evil, there ought to be ultimate punishment.
But what slowly has occurred to me over the years, and I have had all kinds of positions on capital punishment, is that I don't think we will ever build a system that either decides who has committed an act of ultimate evil flawlessly, or even what ultimate evil is. I think we will always be deviled in these cases by cases of innocence and cases where there are just disparities, where you look at one case, and somebody sentenced to death, and the other case, somebody has gotten life in prison, and it seems the guy who has gotten life in prison committed the graver crime.
And if all we are involved in with capital punishment is important moral symbolism, then the justice system has to function with much more precision than I think it's capable of in order to make that moral statement again and again.
CAFFERTY: How much hypocrisy is involved in all of this? And I ask the question in the following context. The Supreme Court ruled -- I think it was in 1986 -- that capital punishment is not cruel and unusual, and the states had the option of reinstituting it. The state of New Jersey reinstituted capital punishment.
Ten or more years ago, I spent about four days down in the New Jersey State Prison in Trenton interviewing guys on death row who had been convicted of the most awful kind of crimes you can imagine. Bottom line is there's never been an execution in New Jersey since this was reinstituted. These guys are still it sitting there 20 years later, and a cottage industry has grown up around the hearings and appeals and defense, and all of the stuff that is associated with keeping these things alive year after year after year when anybody with an I. Q. over that of 85 could figure out they don't deserve to breathe another breath.
TUROW: Well, first, Jack, you have to accept the fact that not everybody agrees with the statement that you just made. More important, I don't think it's realistic to say we are going to have capital punishment. We are going to say ultimate punishment for ultimate evil without also expecting that the system that enforces that horrible sanction is going to demand the highest degree of certainty possible, both to make sure that rights have not been sacrificed and that we are truly executing the guilty.
So, its inherent in the system of capital punishment to have the elaborate appeals that, obviously, perplex everybody.
CAFFERTY: All right. The book coming out in October is called, "Ultimate Punishment, A Lawyer's Reflection on Dealing With the Death Penalty." And Scott if it's anywhere as good as your fiction books, I can't wait to get a hold of one. I enjoy your work very much. Thank you for being with us.
TUROW: You are kind. Thank you, I appreciate it.
CAFFERTY: Now it's time for this week's e-mail question. Should states consider the financial cost when prosecuting death penalty cases? Send your answers or comments on this or any other issue that might be tugging at your sleeve to email@example.com.
LISOVICZ: Still ahead on IN THE MONEY, easy street. Your company can't make your commute any shorter, but it might make the trip a little less stressful. We will tell you how firms are taking some of the worry out of getting to work.
First, though, Andy's got this week's edition of "Fortune Fundamentals."
SERWER: People sometimes ask me, I have got $3,000 to invest in the market, which stock should I buy? The answer could well be, no stock. Putting all $3,000 in a single stock, particularly if it's the only money you have in the market, might be a risky proposition because you will have all your eggs in one basket.
A simple way to diversify is to buy shares in a stock mutual fund. This type of fund invests in a group of stocks, so you indirectly own a basket of stocks, rather than just one. So, if a single stock in your mutual fund blows up, you won't get burned as badly as when you own just that one stock.
You can buy mutual funds directly from companies like Vanguard and Fidelity or from a broker like Merrill Lynch or Charles Schwab. Make sure you understand which stocks the fund invests in and pay close attention to the fees you have to pay.
LISOVICZ: Before the break, we talked about mutual funds and those fees you need to know about before investing in them. Now more investors are demanding changes to the fee structure, and they are getting some results. E*TRADE says it plans to give investors a 50 percent rebate on some mutual fund fees by the end of the year.
SERWER: One place you can go to learn everything you need to know about mutual funds and the fees they charge is morning star. Christine Benz, senior fund analyst at Morning Star, joins us now for insight. Christine, welcome.
CHRISTINE BENZ, SENIOR FUND ANALYST, MORNING STAR: Thanks. Nice to be here.
SERWER: What do you look for? Why don't you tick off some things, the most important things investors need to know about funds.
BENZ: Well, you hinted at expenses, and I think that will be a key factor, particularly if we are in for kind of a low-return environment on stocks and bonds over the next few years. So, I would say for stock funds, kind of a basic break point would be 1 percent or less. You typically don't want to be paying more.
And if you are looking at bond funds, you want to set the hurdle even lower. So, I would typically look for bond funds that charge less than .75 percent a year.
LISOVICZ: Christine, there was a disturbing story this week involving Morgan Stanley, yet another problem that investors have to deal with. Massachusetts and New York regulators looking into whether their brokers are really trying to promote their in-house mutual funds. There are just so many mutual funds in the universe these days. How much of a problem is that in your estimate?
BENZ: Well, that particular investigation is still ongoing. But I think it's definitely a consideration. I think investors can do well using a broker, and certainly some of these brokerage houses run decent funds, but any time your broker is putting you in a fund that is the so-called house brand, it's a good question to ask, are you receiving any special compensation for selling me this fund versus some other fund that's not run by your firm? So, I think that's a great question to ask your broker.
LISOVICZ: And is there a track record of comparing these in- house funds to other funds in general.
BENZ: Well, I would say it kind of comes out in the wash. There aren't any great generalizations you can make. Some of these firms run decent funds, and some of their funds are lousy. I think you want to look at whatever track record your broker is thinking about putting you in. Look not just at how it's done in a year like this year, when the market has been rocking, also look back to the bear market and see how a fund did along funds that you -- along side funds that use a similar strategy.
CAFFERTY: You know, for years, Christine, the index funds did probably as well or better than most money managers, and certainly as well as or better than many of the specialized mutual funds. The mutual funds and the money managers charge a whole lot more money. Why shouldn't I just buy something like an S & P 500 index fund and just buy the stock market, take whatever my returns are? My expenses are less than one 1 percent in most cases in the index funds, down around 60, 60 basis points, maybe even a little less than that.
BENZ: You are after my own heart actually. I happen to think that indexing is a great way to go, a great low-fuss, low cost way to go, particularly for the core of your portfolio. You want to make sure you are really keeping a lid on what you are paying in costs. And an easy way to do that is with index fund. There are some active managers who have had a pretty convincing record of beating their benchmarks, but I do really like indexing as a strategy.
CAFFERTY: Christine, we have enjoyed your input here on IN THE MONEY. I appreciate you coming on, I am glad that I asked a question that went right after your heart.
BENZ: Thank you so much.
CAFFERTY: First time I have ever done that.
BENZ: My pleasure.
CAFFERTY: Christine Benz, senior fund analyst at Morning Star. Nice to have you with us.
Just ahead, your daily commute to work may drive you crazy, but it makes some employers nervous. Now, though, there's a new kind of insurance that covers you on the way to the office. That way if you don't get there, your boss makes a couple of dollars.
And here's your chance to tell us what's on your mind. You can e-mail us at firstname.lastname@example.org. (COMMERCIAL BREAK)
CAFFERTY: A lot of Americans face a daily commute that is long, hectic, even dangerous. And then, of course, there's the commute here in New York. But have no fear because out of the goodness of their hearts, the insurance companies are stepping in. They are now selling commuter insurance to a number of major employers so your boss can make a few dollars if you step in front of the crosstown bus on your way into the office in the morning. Ain't that nice? That will make you be careful when you are crossing the street, just to keep the extra change out of his pocket.
SERWER: This whole thing is a racket. I mean, the whole thing's a racket. You said it. The insurance companies -- the boss gets the money. It's a stupid idea. What if you drive to the beach on the way to work? Does that count? You are picking up your kids. The next thing, what people are going to ask for is to have employers pay for their toothpaste. It doesn't make any sense at all.
LISOVICZ: I think it actually makes sense. I mean, given all of these toys that the cars have now -- they have GPS. They have TV. You have your cell phone.
SERWER: That's your boss' fault?
LISOVICZ: I am just saying that people are doing all this -- they are multitasking when they're driving. It's dangerous.
CAFFERTY: And then, of course, then you have those women that put that makeup on while they are driving, huh?
Now take a look inside the e-mail bag. A number of you wrote in. I saw you one morning at 5:00. A number of you wrote in about our segment on the online pornography industry, including one viewer who says the pornographers have a big advantage when it comes to disputed credit card charges, and he's got a point. He writes, "I was defrauded by a porn site that charged my credit card for things I didn't buy." Yes, sure! "Now I can't pursue the matter in court because it would cost me my reputation in the community."
On our segment on declining interests in pro sports, Justin wrote to us about his reasons for tuning out. He says, "Teams no longer have loyalties to their communities. Team owners are constantly demanding new stadiums and luxury box suites for their corporate customers. If they don't get their new parks, they threaten to leave town. It's hard to root for a team that bad mouths your home town." Amen!
You can e-mail us your thoughts about today's program or whatever else may be on your mind. The address is email@example.com.
That is all for this edition of our little program here. As always I thank my buddies who help me do this every week, Susan Lisovicz, my colleague at CNN, Andy Serwer, my colleague at "AMERICAN MORNING" and also editor-at-large for "Fortune" magazine. And we will all be back tomorrow afternoon at 3:00 Eastern time.
The British Open is on early. So, watch the British Open early. Then you can watch our program in the afternoon. We got crushed when the U. S. Open was on a couple of weeks ago.
We will look tomorrow at how cash-strapped states plan to pay for national disasters like hurricane Claudette and whether the federal government is going to be able to bail them out if they cannot. Thanks for watching. We'll see you tomorrow.
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Jong Il Get His Money?; Gender Discrimination on Wall Street; Will Investors Profit When Citigroup's Weill Steps Down? The Financial Cost of Capital Punishment; Mutual Fund Strategies.>