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Middle East Expert Thinks U.S. Can Buy Security in Iraq; Is Economic Boost an One Hit Wonder?

Aired November 01, 2003 - 11:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, paying for peace. We're going to talk to a Middle East expert who says the U.S. can buy security in Iraq by putting tribal leaders on Washington's payroll.
Plus, mother's little helper. Drugs like Ritalin are making jittery kids calm down and shape up. We'll look at whether too many kids are taking too many pills.

And Tyco a go go. Jurors at the fraud trial of former Tyco boss Dennis Kozlowski get a look at the main man in full swing. We'll find out the party tape, what it means to the court case. Some say it could be devastating.

Joining me today are IN THE MONEY regulars, CNN correspondent Susan Lisovicz and "Fortune" magazine editor-at-large, Andy Serwer. Good to have you both with us.

7.2 percent GDP. Given credit by most of the economists that I read in the newspaper, the tax cuts that President Bush put through and record low interest rates. The Democrats who are running for president are all, in one form or another, talking about rolling back the tax cuts. Could be a tough spot they're in.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE" MAGAZINE: Well, one thing to note, also, is that consumer spending just came out, and now it's down for September. I mean, can you say blip, one-time blip? And I really think that's true, and I think even the Bush administration is suggesting that the next quarter, we're not going to see growth like that.

SUSAN LISOVICZ, CNN CORRESPONDENT: I think the president would be wise to prepare everyone that this may be a one-hit wonder. But one of the things that is lacking, still, jobs.

CAFFERTY: Right.

LISOVICZ: Just this week we had Sony, we had EDS, we had Duke Energy all laying off people, thousands of people. The unemployment rate is still at 6 percent. So there's no way that the economy can be charging full ahead if we don't bring down the unemployment.

CAFFERTY: Consumer spending down a little, but you looked at the report on the GDP, Andy. Business spending is starting to improve a little bit.

SERWER: Right. Well, that would be a real positive, Jack, because of course that has been weak for months and quarters and quarters. So if that's really picking up, that's the real thing. But as Susan said, the key is...

LISOVICZ: Jobs.

CAFFERTY: Jobs.

SERWER: J-O-B-S.

CAFFERTY: Jobs, jobs, jobs. OK.

SERWER: Yes.

CAFFERTY: Bringing peace to Iraq has been looking tougher than ever this week, starting with a wave of car bomb attacks on Monday, the start of Ramadan. And the violence hasn't let up since. Targets include aid organizations, U.S. troops and, of course, the Iraqis who work alongside them.

Ben Wedeman joins us now from Baghdad with an overview on what has been a very tough week for the Bush administration and for American forces on the ground.

Ben, the Red Cross and the U.N. deciding to pull a lot of their people out of that area has to be tough news, I would think, for the administration. Doesn't it?

BEN WEDEMAN, CNN CAIRO BUREAU CHIEF: Well, it's been a very tough week for the administration, for a lot of people, including ordinary Iraqis, more than 30 of whom were killed in this wave of deadly car bombings that occurred on Sunday. Now, in addition to all these international organizations who say they're temporarily pulling out their staff from Baghdad, you've had a real spike in the number of attacks against coalition forces, now running on average 33 a day.

Now, this very grim week followed a brief period in which things actually seemed to be getting better in Baghdad. We saw the coalition opening up a major bridge over the Tigris River that had been closed since April. We saw them lifting an overnight curfew that had been in place also since April when the old regime fell. We saw markets full of people buying goods for the Islamic holy month of Ramadan. Now, that brief period now seems a long time ago, with Baghdad now on high alert and bracing for a new wave of attacks.

CAFFERTY: Thank you, Ben. Ben Wedeman, joining us from Baghdad.

Using force to bring security toy Iraq is a dangerous business. Our next guest thinks there's a better way. Find some key tribal leaders and start cutting paychecks. Amatzia Baram is a senior fellow at the United States Institute of Peace in Washington, D.C. Also a professor of Middle East history at the University of Haifa.

Welcome to the broadcast. Nice to have you with us. AMATZIA BARAM, U.S. INSTITUTE OF PEACE: It's my pleasure.

CAFFERTY: This sounds like what they used to do in Chicago during prohibition, pay protection money. Is that what you're advocating here? Buy a little labor peace by buying off some of the bosses?

BARAM: You can call it protection, you can call it hiring a tribe. It's a traditional approach in Iraq.

I'll just say one sentence before that. The coalition's achievement so far are very impressive on three level: infrastructure, governments and crime. Very impressive. In one area still there needs to be quick improvement, and that's on terrorism or counterterrorism.

CAFFERTY: Tell me how this would work, Professor. If you hired some of these Sunni tribal chieftains along the border with Syria, how would it work?

BARAM: Very simple. The principle is simple; the application is complicated, as always.

You approach the most important sheik in a certain area. You know he has influence all over. You know he knows everything. He knows everybody.

And you tell him, look, I am going to hire you for this particular section, either border or road or whatever. None of your tribe with your own guards, which we can help you with salaries, you will make sure that none -- nobody from your tribe will attack us or will allow infiltration, and nobody else will be allowed to infiltrate into your area and create havoc in your area.

If you do our bidding, we'll do for you a lot. And you know you can do a lot.

LISOVICZ: Amatzia, this is Susan Lisovicz here. That sounds like it makes sense. And, of course, acknowledging the culture and history of Iraq makes a lot of sense.

But the way I understand it, there are 10 large tribal federations in central Iraq. Hundreds of subgroups. Each with its own sheik.

Is this really possible? Or is this more like the five families of New York? Talking about Mafia, Jack was talking about Chicago. We're talking about New York, where you'd have Mafia families fighting each other. Doesn't that create yet another problem?

BARAM: Well, first of all, Susan, these tribes are not exactly fighting each other, but you can create competition between the tribes. Yes, it's possible. It's been done. It can be done again.

I am not criticizing the coalition for not having done it on a large scale. Until now, they were busy with really important issues. And they managed very well, but now is the time to do that. And you can approach each tribe at the time, each sheik, in each area, who have to identify the right place, the right person and then you have a lot of -- you need information and then you generate information.

And you can do it, Susan. It can be done. It should be done. Now is the time to start doing it.

SERWER: Mr. Baram, I want to pick up on something you said, but first I want to point out, you know, just to reiterate what Susan was saying. I mean, there's so many different groups. There are 600,000 Christians in Iraq out of a population of 22 million.

To me, this sounds like it might be very divisive. But I want to ask you about what you said about how the coalition is doing a good job on crime. Gee, that sounds different from everything we've heard. I thought the crime was terrible there?

BARAM: No. Crime has gone down substantially since about three, four months ago. Terrible at first. Much better now. But terrorism is threatening to undermine all the achievement.

And so now, that's the top priority. And now it is. But my suggestion to deal with the tribes is just an additional layer to what already is being done: a lot of policemen.

There are about, 65,000 policemen in the new army. People already in uniform, working, paid. You can call that protection as well. But that's protection. That's really a state system.

The tribal system is a parallel system that should co-exist with the state system, as long as you need them. You can hire a tribe. You cannot buy one. But at least I would suggest, why not hiring them?

LISOVICZ: OK. And so, Amatzia, why are you so particularly keen on hiring Sunni tribes? Because they're only 15 percent of the population, and in particular, you worried about the Syria-Iraq border. Why is that?

BARAM: That's correct, Susan. I would say you can hire a few Shiite tribes to monitor the border between Iran and Iraq. That's not a bad idea.

But the most pressing problem now, Susan, is the infiltration of al Qaeda-type people, suicidal. They think they go to heaven. They are being hire or helped by Saddam's people.

You have a devastating coalition between suicidal al Qaeda-type, if you wish, people, Arabs, not Iraqis, mostly, and Saddam's people. It is all coming now through the Sunni Arab triangle, mostly between Syria and Iraq, to a small extent, Saudi Arabia. To a small extent, Jordan.

So I would say, the people who blow up buildings in Baghdad and create tremendous havoc and a lot of sense of desolation, these people are coming with help from the Sunni Arab population. So you have to deal with it. You have to create for them.

You can offer them a lot of perks, a lot of them. Including, by the way, very easy access to the top official in Baghdad, which is very important now. We don't have enough of that. And in exchange, you want their cooperation.

They know everything; they can do everything for you. It's not easy. You have to approach them properly, but my feeling is, that's the time to do it. Until now, I agree, the coalition is very important.

CAFFERTY: Mr. Baram, I appreciate you joining us. We're going to have to leave it there. Thank you so much for being on the program.

BARAM: You are most welcome.

CAFFERTY: Amatzia Baram, senior fellow at the United States Institute of Peace and professor of Middle East history at the University of Haifa.

Coming up on IN THE MONEY: the one that got away. We're going to talk with an author who says Bill Clinton blew several chances to stop Osama bin Laden long before September 11th.

Plus, shake your moneymaker. Former Tyco boss Dennis Kozlowski partied down, helped by company cash. We'll show you the tape of his wife's birthday party in Sardinia. That is, front row center at his fraud trial.

Plus, take a chill pill. More and more kids in this country are being given drugs to make them calm down and focus. See whether prescribing a pill is taking the easy way out.

(COMMERCIAL BREAK)

LISOVICZ: The September 11th attacks left a lot of Americans wondering why Washington didn't do more to stop Osama bin Laden before that terrible day. Our next guest argues that the terrorist leader turned into a worldwide threat because the Clinton administration failed to shut him down. He says the former president had plenty of chances to put bin Laden out of business and didn't.

Richard Miniter is the author of "Losing bin Laden: How Bill Clinton's Failures Unleashed Global Terror." He's also a senior fellow at the Center for a New Europe.

Welcome.

RICHARD MINITER, AUTHOR, "LOSING BIN LADEN": Thank you.

LISOVICZ: At the heart of your book is a very damning accusation that the Clinton administration failed in 1996 to respond to the government of Sudan to hand Osama bin Laden over. Now, that's something that senior members of the Clinton administration vehemently deny. How do you -- how can you prove that? MINITER: Well, that's a great question. First of all, in my book "Losing bin Laden," I document 12 chances that Clinton had to kill or capture Osama bin Laden. We're only talking about perhaps the most heartbreaking one, the offer from the government of Sudan.

The government of Sudan made this offer repeatedly, first on February 5, 1996, then in a perfunctory meeting on March 3, 1996 in Washington -- Roslyn, Virginia, anyway. And then finally to the CIA on March 8, 1996.

I've talked to all those people in those meetings, both on the Sunni side and on the American side. Some Clinton administration officials who were not in the administration at the time of this offer say that I'm only relying on the Sudanese. But, in fact, I talked to the Americans. Ambassador Tim Carney (ph), who President Clinton appointed and sent to Sudan as a U.S. ambassador has confirmed these offers.

David Shinn, the State Department's director of East African Affairs confirms that relations were starting to improve with Sudan, that they could have worked with Sudan. And certainly we know that the Sudanese had real solid reasons for wanting bin Laden out of their country.

First of all, bin Laden was the source of the sanctions on their country from both the United Nations and the United States. Second of all, bin Laden had allied himself with the rival to the president of the country and against the president of Sudan. So the president had his own selfish reasons for wanting to help the U.S.

And finally, the Sudanese had arrested and turned over the infamous and international terrorist, Carlos the Jackal. They could repeat the same scenario, only this time with Osama bin Laden. But unfortunately, presidential politics got in the way of the Clinton administration taking that approach.

SERWER: Richard, I'm sorry to jump in here. But I have to ask, how much of this is really partisan history on your part? I mean, after all, you are an editorial wrier for "The Wall Street Journal." That's a conservative bastion. And I've heard plenty of pundits suggest that the Clinton administration did try to pursue bin Laden and, in fact, alerted the Bush administration and they didn't pick up the ball.

So where do you come out on that?

MINITER: Well, first of all, I'm not a writer of partisan history. I'm an award-winning investigative journalist. My work has also appeared in "The New York Times" and "The Washington Post," "The Atlantic Monthly," "Readers Digest," and "The New Republic," which is frankly not a bastion of conservatism.

So I dispute the premise of your question, first of all. But second of all, my book looks at the history of the first phase of the war on terror between Clinton and bin Laden. The second phase is the Bush phase, and that's the subject of my next book. And I'll be as tough and fair with Bush as I have been with Clinton.

Finally, in my book, "Losing bin Laden," I devoted an entire chapter to a great Clinton success which the media has ignored, and that is preventing the millennium plots of 1999, potentially saving tens of thousands of American lives.

So I'm documenting history here. Most of my sources are top Clinton administration officials, and I take them at their word. Some of these people were very, very good at their jobs and they were frustrated they weren't able to do more.

CAFFERTY: Jack Cafferty here. Let me jump in just for a second and ask you -- you mentioned you're working on a story about President Bush and his relationship to the bin Laden threat. There was a briefing on the part of the outgoing Clinton administration, briefing the incoming Bush administration about Osama bin Laden. How did President Bush treat that threat, and what can you tell us that maybe we don't already know about the way President Bush approached this threat that was out there when he took office?

MINITER: Well, first of all, I think the White House is denying that President Clinton in his exit interview did talk about bin Laden. I think the White House's story is that Clinton spent his time lobbying the incoming president for various domestic programs. So there's clearly a disagreement here. I wasn't in the room and haven't found a reliable source. So we just don't know if the Clinton contention is true or if the Bush contention is true.

That said, there were a lot of people who were held over from the Clinton years to the Bush years to fight terror. One was a guy named Richard Clark, who was Clinton's counterterrorism czar. He stayed on in the National Security Council under Bush, and he says that there was a plan in the works to retaliate against bin Laden, to take out his various training camps.

We know of at least seven training camps at the time in Afghanistan, and that that plan was slowly working its way through the Bush bureaucracy but they had trouble getting people confirmed. Remember, the Senate changed hands with Jim Jeffords. That slowed down the confirmation of a lot of Bush people.

A lot of -- the assistant secretary of defense, for example, didn't come in until the end of August 2001. The FBI director not confirmed until a week before September 11, 2001. So there were a lot of empty desks there and a lot of decisions made on autopilot.

CAFFERTY: I've got one last question, and we have no time. But it almost doesn't matter at this point who may have dropped the ball or not on this thing, he's still out there. What has to be done to get him? Is he getable, and why haven't we got him?

MINITER: Well, first of all, I do think we need to look back and learn the lessons of history, because we've got to learn from our mistakes or we're going to repeat them. Second of all, the best intelligence is bin Laden is in Baluchistan (ph). That's the eastern strip of Pakistan. The Bush administration needs to lean much harder on the Pakistanis for more cooperation. Right now, U.S. troops are being killed in Afghanistan by mortars operated by al Qaeda inside the Pakistani border just on the other side. We need some more help from the Pakistanis.

Bush has to learn to get tough with our so-called ally, Pakistan, and get their cooperation and help. Without their help of Pakistan, it's simply impossible for us to get bin Laden and I'll have to write a second book called "Losing bin Laden: The Bush Story."

SERWER: All right. Richard Miniter, we look forward to having you back perhaps for that. Richard Miniter, author of "Losing bin Laden: How Bill Clinton's Failures Unleashed Global Terror."

Up next on IN THE MONEY: smoking the competition. Tobacco giant R.J. Reynolds goes out for cigarettes and comes back with a deal for a rival.

And later, how to stop a brainstorm with more and more American kids on behavior-changing drugs. We'll look at whether the pill binge has gone too far.

Also ahead, Tyco's party boss. See the company's former CEO at play. And find out what the video means for his fraud trial.

(COMMERCIAL BREAK)

SERWER: Another big story this week was the decision by R.J. Reynolds Tobacco to buy British American Tobacco's U.S. cigarette businesses for $3 billion. The deal would give R.J. 32 percent of the U.S. cigarette market and get the company closer to the number one cigarette maker, Philip Morris.

Like the market in general, RJR Tobacco shares are having a pretty good year, and they're near a 52-week high. That makes RJR Tobacco our stock of the week.

So what do you think, though, guys? Why would any company, even a tobacco company, want to buy a tobacco business?

CAFFERTY: The future is not particularly look rosy. I mean, the more information we get about what cigarettes do to you, it would seem to follow that eventually everybody might stop smoking. I don't know.

LISOVICZ: And combine the -- they have to combine forces. Apparently the strategy here -- I mean, between limits on advertising, the fact that fewer Americans are smoking, the fact that litigation has not stopped, despite that landmark settlement, the need to combine force is clearly at work here.

SERWER: That's really the issue, to me. I mean, you keep hearing tobacco people saying eventually the litigation is going to stop. They've been saying this for a decade now and it hasn't stopped. In fact, you can suggest it's getting worse.

LISOVICZ: It is the U.S., after all.

SERWER: Well, that's true. But, I mean, there's reasons for this.

The other thing that's really interesting to me is that you'll remember 15 years was when we had barbarians (ph) at the gate. RJR was taken over. The value of that deal, $25 billion.

Today, RJR has a value of $4 billion. Now, of course, they did sell Kraft for $18 billion two years ago, but basically, the company's worth a little bit less today than it was 15 years ago.

LISOVICZ: And, you know, these are companies, by the way, BAT and RJR, with some very well-known names: Winston, Camel, Kool, Lucky Strikes. I mean, very well-known names. But the point is, is that there are fewer people smoking and there's cheaper competition.

People who are smoking aren't going for the brand names. So that's yet another problem.

CAFFERTY: Yes. But the piece of the market that's available out there, perhaps they're trying to get a little bigger slice of whatever the shrinking pie is. And by adding these brands, they'll be better able to compete with Philip Morris.

SERWER: And you know what kills me, though, pun intended, is the fact they're doing their own anti-tobacco advertising on the air. I mean, that, to me, is just ludicrous. I can't understand that. That is not money well spent by anybody, if you ask me.

CAFFERTY: Coming up: generation Rx. More kids on anti- depressants than ever before. We'll try to find out the real reasons why.

Plus, we'll take a closer look to the bash that may smash all of ex-Tyco CEO Dennis Kozlowski's hopes of staying out of those funny little orange jumpsuits they wear in the joint.

Back after this.

(COMMERCIAL BREAK)

CAFFERTY: According to the Surgeon General, one of every five American children suffers from emotional problems. And these days, more and more are being treated not with therapy, but with pills. Throughout the '90s, the number of kids on mood-altering drugs like Prozac and Ritalin doubled and, in some cases, tripled.

Joining us to talk about the risks and rewards of this trend is the author of "Should I Medicate My Child" and "Running on Ritalin." Lawrence Diller is a behavioral pediatrician. He joins today from San Francisco, California.

Doctor, it's nice to you have you with us. Thanks for joining us.

DR. LAWRENCE DILLER, BEHAVIORAL PEDIATRICIAN: Hello.

CAFFERTY: One of the reasons I assume that these drugs are so often prescribed is because they work. And, in fact, for millions of adult Americans, have worked exceedingly well. What's wrong with giving them to kids, if anything?

DILLER: Well, first of all, we're not sure really whether they work long term. And I think what we're seeing here -- this is coming from a physician, by the way, who prescribes these drugs every day. So I'm not anti-drug, but I'm very, very worried about what we're seeing here.

And I think what we've got here is a very busy materialistic society. We've got a situation where our demands on children have been ratcheted up in the last 20 years, where children 5 years old have to learn to read, and everyone's expected to go to college. Our discipline with children has gone down the toilet within the last 20, 30 years, and we have a trend that's really been manipulated by the drug industry, aided and abetted by the researchers in American psychiatry. I'm afraid that's my opinion, even as I every day prescribe to children.

CAFFERTY: Well, you certainly don't have to apologize for it. But you did suggested at the top of the interview, when I said a lot of people take these and swear by them, you said you're not so sure they work long term. If you're not so sure you work long term, why would you agree to write prescriptions for them at all?

DILLER: People are desperate. The parents of these children are desperate. They often don't have any good alternatives, especially by the time they get to me.

But then when I explored it a little bit more closely, the school has done very little in an organized fashion, sometimes with the parents here, to help these children. And just my visit to the school to sit down with the teachers and get the parents at the same table can make a whale of difference in terms of helping the kid without medicine, but that doesn't happen very often, unfortunately.

That's not the option offered to the parent who's desperate. In that case, we do give them the medications and they least help on the short term for some children.

LISOVICZ: You know, Dr. Diller, let's face it. I mean, we are a quick fix society. We want medical service, we want drugs, we want them now. It's something that is just part of our culture, unfortunately. And there's lots of new therapies out there.

But when you look at these national sales figures for antidepressants, the explosion growing nearly 75 percent from 1998 to 2002, does it have anything also to do with the direct-to-consumer advertising? We saw that three-decade ban eased.

DILLER: Yes. I mean, the drug companies wouldn't be doing it if it doesn't work. And I would say, nearly every day I have a parent who I already know come in with the request for a specific medication. It was happening initially in non-psychiatric drugs. Now it's happening in a big way with psychiatric drugs.

And really, what the drug companies are doing is influencing the way we see children and the way we see their behavior problems. We're the only country in the world, I can tell you this, that operates this way with our children's behavior and emotional problems.

SERWER: Dr. Diller, I was recently reading the autobiography of Sam Walton. He was the founder of Wal-Mart. He was very hyperactive, going all over the place, running like crazy.

And a friend of mine said, "Do you know what they'd do that that guy today? They'd give hin Ritalin." Is there a danger that we're medicating some of these (UNINTELLIGIBLE) kids who might in fact be geniuses, Einsteins, Bill Gates, Larry Ellisons, Steve Jobbs? I mean, the entrepreneurs and real creators in our society?

DILLER: Well, on the short term, the road for these kids is pretty bumpy. And medication, again, could make sense. But I have confidence in the long term.

Many of these children after high school or beyond will find niches. And a lot of the kids who are deemed as troublemakers find a niche for themselves. Half the guys behind your camera over there were probably ADHD-type of kids and such.

But the other concern is we're using medications. And here I'm not talking about the Ritalin type of rugs. They've been around 65 years.

But the Prozacs, the Respiratols (ph), the Depicodes (ph), they've been using them for three to five years. And we have no long- term data, but people are desperate. So they take the drugs from the M.D.s, again, fueled by the marketing by the drug companies.

LISOVICZ: Dr. Diller, we're almost out of time. Just very quickly, though, there's all this new therapy, and these are very young people, children. Their brains aren't fully developed, I've read, until they're 30 years old. Isn't this a dangerous experiment, giving new drugs to children?

DILLER: I think for the individual kid and family, they're in desperate shape sometimes. They will take these drugs. But rather for your viewers, this is a major public health problem.

This is a marker on our society, as far as I can tell, that really needs addressing at the highest levels. There's a president's commission on bioethics. They've taken it up. I'd like to see some focus placed domestically on this issue of huge increase in psychiatric drugs in children.

SERWER: All right. Joining us from San Francisco, Dr. Lawrence Diller, a behavioral pediatrician and author of "Running on Ritalin." Thanks very much.

Coming up on IN THE MONEY, high times and hard cash. Former Tyco boss Dennis Kozlowski helped bankroll a private party with company money. And what a part it was. See what that tape means for his fraud trial.

And Napster is back and this time it's legal. Find out whether the new Napster is snoozing or cruising.

(COMMERCIAL BREAK)

CAFFERTY: Former Tyco boss Dennis Kozlowski knew how to make money. And a videotape shown this week at his fraud trial suggests that Kozlowski knew how to spend it, too.

It shows buff guys in spandex shorts, ladies in peek-a-boo togas all at a birthday party for Kozlowski's wife on the Italian island of Sardinia. And that's just the stuff we can show you.

For a look at how the party tape played at the trial, let's bring in a Jacob Zamansky from Los Angeles. He's a securities lawyer at the law firm of Zamansky and Associates.

Welcome, back, Jake.

JACOB ZAMANSKY, SECURITIES ATTORNEY: Thank you.

SERWER: You're welcome. I want to ask you -- you know, this tape is great theater. We love watching. We'll play it ad nauseam. But how effective really is this in terms of the trial?

ZAMANSKY: This is very effective. This is an over-the-top symbol of the corporate greed and arrogance which took place in the 1990s. I think it's going to be devastating for the jury. If they say a picture's worth 1,000 words, this video tells it all.

CAFFERTY: I understand that attorneys, Jake, are very reluctant to criticize judges, but there was some degree of argument over this tape and the fact that it wound up being edited. If the purpose of allowing the tape in to begin with is as a glaring example of corporate greed and excess, why do you suppose the judge would turn around and order certain scenes, which certainly imply greed and excess, edited out of the tape and then let part of the tape be seen by the jury?

I mean, to me, it's like half a loaf. Either you put the tape in, and say here's what they did on the company dole, or you say, no, you can't show it. How do they decide where to go on this thing?

ZAMANSKY: Sure. The judge has a balancing act. He wants the prosecution to have the ability to put on its case, but they have to balance it against the defendant's rights to a fair trial. So what the judge did was edit, made a PG-13 version of the tape.

There were certain lewd scenes, like vodka pouring out of a statues private parts, which probably were unnecessary to show the greed and arrogance. So I think the judge did the right balancing act. The jury will get the message.

LISOVICZ: But Jacob, all and all, even though the videotape is clearly extravagant or it shows an extravagant party, it's embarrassing for the defendants, Mark Swartz and Dennis Kozlowski are accused of ripping off $600 million from Tyco. This party was $2 million. So really, on a purely legal basis, does that prove the case for the prosecution?

ZAMANSKY: This video illustrates exactly what the prosecution is trying to prove, that Mr. Kozlowski used Tyco shareholders' money as his personal piggy bank. This is not his money. It's that are the shareholders.

I did a little math. There were 70 people there. This comes out to about $35,000 a person. Well, there's a lot of Tyco shareholders that don't make that in a year. So I think it's a very vivid explanation of what happened there, and I think it's wrong.

SERWER: Jake, let me ask you to take a step back. I mean, you've done some litigation in this area, obviously corporate greed, litigating against Henry Blogen (ph) of Merrill Lynch. Where do you think we stand now in the course of history in terms of going after the corporate crooks of the 1990s?

ZAMANSKY: I think the government is trying to do the best they can to put some of these people on trial, to make them pay for what they've done. I talked to investors all over the country and they're outraged by the greed. They want to see some heads roll.

So we're going to see trial after trial. We're going to hopefully see Bernie Ebbers and WorldCom, Martha Stewart and some of these other people who just treated the shareholders' money as their own. That's wrong and it's got to be stopped. People have to be made examples out of.

CAFFERTY: What about the fact that in some of these cases it's the state's attorneys general that are getting tough with corporate criminals and the federal regulatory agencies charged with policing the industry are sort of sitting back taking their cues from guys like Elliott Spitzer and the fellow in Massachusetts who went after the mutual funds?

ZAMANSKY: That's the problem. The Feds were asleep at the wheel. They were doing nothing, and then Spitzer and the state stepped in.

They ought to be commended, because if it weren't for Spitzer and the states, we would have no enforcement action. People look to the government to stop the excesses, to stop fraud. And the only one who carried the ball was Spitzer and some private lawyers, such as the cases that I brought, to show what went on Wall Street.

So they need to be commended. The Feds need to get into the act.

CAFFERTY: Jacob Zamansky joining us from Los Angeles. He is a securities lawyer with Zamansky and Associates. Good to have you back with us, Jake. Thank you.

ZAMANSKY: Thank you very much.

CAFFERTY: All right.

Just ahead; it was once forbidden fruit. But now Napster is legit. We talk to Web master Allen Wastler about whether the music downloading service has what it takes.

And you can find out if you have what it takes to get your email read on our air. Now, there's a sign of some accomplishment in your life. You can send us your thoughts at inthemoney@cnn.com.

Back after this.

(COMMERCIAL BREAK)

CAFFERTY: Napster is back. And this time you don't have to worry about getting busted if you use the music downloading service. But just because it's gone straight doesn't necessarily mean that Napster doesn't have its share of problems.

Money.com's Allen Wastler here now with more on that, and the fun side of the week, which of course would relate to that back and alien thing going on at the Tyco trial. But we'll get to that in a minute.

What about Napster? What, they're back, they're legit? Does it work?

ALLEN WASTLER, MONEY.COM: They're back, they're legit and they've got some -- it does work. I actually downloaded it a couple days ago. I've listening to tunes in the office, all in the name of journalistic research.

CAFFERTY: Of course.

WASTLER: Of course. You know, I've been blasting the Stones and having a good time. And it's a very compatible service. I found it easy to find the bands, most of the bands that I want.

But, remember, people are coming to this. They're saying, Napster, lots of songs and it's all for free, right, dude? Well, if you're coming to it now, there's not quite as many songs. About half a million.

They used to have literally millions and you got to pay for it. Only 99 cents a song. That ain't so bad. But if you're used to getting it for free, you see a lot of tooth gnashing.

And I cruised a lot of the boards and the chatrooms just to say what people were saying. There was a lot of, "Oh, Napster used to be free. I'll just go to Kaza (ph) and everything."

CAFFERTY: Yes. There are some other services out there where you can still rip them off.

(CROSSTALK)

SERWER: So, what do you think, Allen? I mean, is this really going to get traction, as we used to say, in the dot-com (UNINTELLIGIBLE)? Napster and Apple and everything else like that?

WASTLER: Yes. You've got all the services. Napster has done something stupidly smart. You sort of wonder, why didn't people think of that before?

They're going to come out with a pre-paid card that they're going to sell in various retail chains. OK? Like about 14,000 stores.

CAFFERTY: Like a phone card.

WASTLER: Yes, exactly. So what happens is, if you're a kid, maybe 14, 15, you don't have a credit card, which these services need...

CAFFERTY: There you go.

WASTLER: You but that card. It gets activated at the store. And you can go download your music. Or, Mr. Cafferty, if you decide you want to give your daughters maybe a selection of music for Christmas or whatnot, you can buy a bunch of the cards.

CAFFERTY: It's a great idea, actually, because I don't know what to buy them. Right? I mean...

LISOVICZ: But Allen, you're talking about a service that used to rip off music. And can't other Napster-like services like Apple rip off this idea?

WASTLER: You know, I'm just waiting for iTunes and Rhapsody and Music Match (ph) all to come out with their family plans and cards. OK? Napster has the name behind it, and it's first to the punch. So maybe that gives them a little bit of an edge.

But, you know, they still have this problem of not enough songs. That's the payment side. But the songs, I mean, millions and millions. And the trick is, all of these services have the same problem. They've made deals with the big record companies.

CAFFERTY: Sure.

WASTLER: Lots of libraries. But what if you want a band like, I want Flash in the Pan. Longtime band.

CAFFERTY: Oh, yes. Me, too.

LISOVICZ: Right. I remember them.

WASTLER: They only did it with a small, independent label. And those labels aren't there. So...

CAFFERTY: On to one of the allegedly, one of the big corporate weasels of our time, and that would be Dennis Kozlowski down there at the Tyco trial. And the judge allowed that the jury could see some of these tape of this birthday party he threw for his wife.

Now, the judge says you could not see the ice carving of Michelangelo with vodka coming out of his situation. But you could see some of the other excesses, if you will, that went on at this thing. And that leads us, of course, to the fun site of the day.

WASTLER: That's right. And in honor of this party, I'm like togas? Well, dude, it should have been a full, out toga party, right?

And it's listed in badfads.com. Toga parties were one of those bad fads. So you sort of wonder, why did Kozlowski go for that?

SERWER: Because he's tacky?

WASTLER: I guess so. I mean, there's the living proof. And he wasn't even doing it right.

If you go back to the granddaddy of toga parties, "Animal House"...

SERWER: "Animal House" Is the thing. That's the bible.

WASTLER: That's the way you do it. And you know the judge cut some other scenes out of there that were sort of reminiscent of that. But, yes.

CAFFERTY: Yes. There were no scenes, however, of the John Belushi thing, where he punched his cheeks in "Animal House" and pretended to be a certain skin condition.

Enough of that. Thank you, Allen. Good to see you, my friend.

Coming up: it's not a $2 million party in Sardinia, but reading your emails every week can still get pretty wild here at IN THE MONEY. Oh, man. Who wrote that?

We'll look at some of them in a minute. Stick around.

(COMMERCIAL BREAK)

CAFFERTY: Time now to take a look at some of the answers to the email question of the week. We asked whether gun makers should be held in any way responsible for the violent acts committed by people that use their products, guns. There was no controversy on this. Each and every one of you said basically the same thing, no, the manufacturers should not be held accountable. But some of you said it better than others.

For example, Scott wrote this: "Yes, gun makers should be shielded from frivolous lawsuits. Only if the gun is defective should the manufacturer be held responsible."

Donnie in Colorado said, "Congress should spend its time finding ways to keep guns out of the hands of criminals and the mentally ill."

And Richard from Alabama wrote: "As a former gun dealer, I can tell you that nothing does more to sell guns on the legitimate and black markets than laws passed to restrict gun sales or gun makers. The only solution, watch your butt. It's a dangerous world out there."

That takes us to this week's question of the week: Would you ever give your kids prescription psychoactive drugs? You can email your answers to inthemoney@cnn.com. We'll read some of them next week.

You can also send your answers to us by visiting our new IN THE MONEY show page. The Web page address is on the bottom of your screen right now: http://money.cnn.com/ontv/inthemoney.

Thanks for -- I don't think I did that right, but it doesn't matter. Thank you for joining us for this edition of IN THE MONEY. Those of you who know better will figure it out on your own.

Thanks to our regular gang, CNN Financial correspondent Susan Lisovicz -- they're all laughing at me -- "Fortune" magazine editor- at-large, Andy Serwer. And Allen Wastler, managing editor of money.com.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Is Economic Boost an One Hit Wonder?>


Aired November 1, 2003 - 11:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, paying for peace. We're going to talk to a Middle East expert who says the U.S. can buy security in Iraq by putting tribal leaders on Washington's payroll.
Plus, mother's little helper. Drugs like Ritalin are making jittery kids calm down and shape up. We'll look at whether too many kids are taking too many pills.

And Tyco a go go. Jurors at the fraud trial of former Tyco boss Dennis Kozlowski get a look at the main man in full swing. We'll find out the party tape, what it means to the court case. Some say it could be devastating.

Joining me today are IN THE MONEY regulars, CNN correspondent Susan Lisovicz and "Fortune" magazine editor-at-large, Andy Serwer. Good to have you both with us.

7.2 percent GDP. Given credit by most of the economists that I read in the newspaper, the tax cuts that President Bush put through and record low interest rates. The Democrats who are running for president are all, in one form or another, talking about rolling back the tax cuts. Could be a tough spot they're in.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE" MAGAZINE: Well, one thing to note, also, is that consumer spending just came out, and now it's down for September. I mean, can you say blip, one-time blip? And I really think that's true, and I think even the Bush administration is suggesting that the next quarter, we're not going to see growth like that.

SUSAN LISOVICZ, CNN CORRESPONDENT: I think the president would be wise to prepare everyone that this may be a one-hit wonder. But one of the things that is lacking, still, jobs.

CAFFERTY: Right.

LISOVICZ: Just this week we had Sony, we had EDS, we had Duke Energy all laying off people, thousands of people. The unemployment rate is still at 6 percent. So there's no way that the economy can be charging full ahead if we don't bring down the unemployment.

CAFFERTY: Consumer spending down a little, but you looked at the report on the GDP, Andy. Business spending is starting to improve a little bit.

SERWER: Right. Well, that would be a real positive, Jack, because of course that has been weak for months and quarters and quarters. So if that's really picking up, that's the real thing. But as Susan said, the key is...

LISOVICZ: Jobs.

CAFFERTY: Jobs.

SERWER: J-O-B-S.

CAFFERTY: Jobs, jobs, jobs. OK.

SERWER: Yes.

CAFFERTY: Bringing peace to Iraq has been looking tougher than ever this week, starting with a wave of car bomb attacks on Monday, the start of Ramadan. And the violence hasn't let up since. Targets include aid organizations, U.S. troops and, of course, the Iraqis who work alongside them.

Ben Wedeman joins us now from Baghdad with an overview on what has been a very tough week for the Bush administration and for American forces on the ground.

Ben, the Red Cross and the U.N. deciding to pull a lot of their people out of that area has to be tough news, I would think, for the administration. Doesn't it?

BEN WEDEMAN, CNN CAIRO BUREAU CHIEF: Well, it's been a very tough week for the administration, for a lot of people, including ordinary Iraqis, more than 30 of whom were killed in this wave of deadly car bombings that occurred on Sunday. Now, in addition to all these international organizations who say they're temporarily pulling out their staff from Baghdad, you've had a real spike in the number of attacks against coalition forces, now running on average 33 a day.

Now, this very grim week followed a brief period in which things actually seemed to be getting better in Baghdad. We saw the coalition opening up a major bridge over the Tigris River that had been closed since April. We saw them lifting an overnight curfew that had been in place also since April when the old regime fell. We saw markets full of people buying goods for the Islamic holy month of Ramadan. Now, that brief period now seems a long time ago, with Baghdad now on high alert and bracing for a new wave of attacks.

CAFFERTY: Thank you, Ben. Ben Wedeman, joining us from Baghdad.

Using force to bring security toy Iraq is a dangerous business. Our next guest thinks there's a better way. Find some key tribal leaders and start cutting paychecks. Amatzia Baram is a senior fellow at the United States Institute of Peace in Washington, D.C. Also a professor of Middle East history at the University of Haifa.

Welcome to the broadcast. Nice to have you with us. AMATZIA BARAM, U.S. INSTITUTE OF PEACE: It's my pleasure.

CAFFERTY: This sounds like what they used to do in Chicago during prohibition, pay protection money. Is that what you're advocating here? Buy a little labor peace by buying off some of the bosses?

BARAM: You can call it protection, you can call it hiring a tribe. It's a traditional approach in Iraq.

I'll just say one sentence before that. The coalition's achievement so far are very impressive on three level: infrastructure, governments and crime. Very impressive. In one area still there needs to be quick improvement, and that's on terrorism or counterterrorism.

CAFFERTY: Tell me how this would work, Professor. If you hired some of these Sunni tribal chieftains along the border with Syria, how would it work?

BARAM: Very simple. The principle is simple; the application is complicated, as always.

You approach the most important sheik in a certain area. You know he has influence all over. You know he knows everything. He knows everybody.

And you tell him, look, I am going to hire you for this particular section, either border or road or whatever. None of your tribe with your own guards, which we can help you with salaries, you will make sure that none -- nobody from your tribe will attack us or will allow infiltration, and nobody else will be allowed to infiltrate into your area and create havoc in your area.

If you do our bidding, we'll do for you a lot. And you know you can do a lot.

LISOVICZ: Amatzia, this is Susan Lisovicz here. That sounds like it makes sense. And, of course, acknowledging the culture and history of Iraq makes a lot of sense.

But the way I understand it, there are 10 large tribal federations in central Iraq. Hundreds of subgroups. Each with its own sheik.

Is this really possible? Or is this more like the five families of New York? Talking about Mafia, Jack was talking about Chicago. We're talking about New York, where you'd have Mafia families fighting each other. Doesn't that create yet another problem?

BARAM: Well, first of all, Susan, these tribes are not exactly fighting each other, but you can create competition between the tribes. Yes, it's possible. It's been done. It can be done again.

I am not criticizing the coalition for not having done it on a large scale. Until now, they were busy with really important issues. And they managed very well, but now is the time to do that. And you can approach each tribe at the time, each sheik, in each area, who have to identify the right place, the right person and then you have a lot of -- you need information and then you generate information.

And you can do it, Susan. It can be done. It should be done. Now is the time to start doing it.

SERWER: Mr. Baram, I want to pick up on something you said, but first I want to point out, you know, just to reiterate what Susan was saying. I mean, there's so many different groups. There are 600,000 Christians in Iraq out of a population of 22 million.

To me, this sounds like it might be very divisive. But I want to ask you about what you said about how the coalition is doing a good job on crime. Gee, that sounds different from everything we've heard. I thought the crime was terrible there?

BARAM: No. Crime has gone down substantially since about three, four months ago. Terrible at first. Much better now. But terrorism is threatening to undermine all the achievement.

And so now, that's the top priority. And now it is. But my suggestion to deal with the tribes is just an additional layer to what already is being done: a lot of policemen.

There are about, 65,000 policemen in the new army. People already in uniform, working, paid. You can call that protection as well. But that's protection. That's really a state system.

The tribal system is a parallel system that should co-exist with the state system, as long as you need them. You can hire a tribe. You cannot buy one. But at least I would suggest, why not hiring them?

LISOVICZ: OK. And so, Amatzia, why are you so particularly keen on hiring Sunni tribes? Because they're only 15 percent of the population, and in particular, you worried about the Syria-Iraq border. Why is that?

BARAM: That's correct, Susan. I would say you can hire a few Shiite tribes to monitor the border between Iran and Iraq. That's not a bad idea.

But the most pressing problem now, Susan, is the infiltration of al Qaeda-type people, suicidal. They think they go to heaven. They are being hire or helped by Saddam's people.

You have a devastating coalition between suicidal al Qaeda-type, if you wish, people, Arabs, not Iraqis, mostly, and Saddam's people. It is all coming now through the Sunni Arab triangle, mostly between Syria and Iraq, to a small extent, Saudi Arabia. To a small extent, Jordan.

So I would say, the people who blow up buildings in Baghdad and create tremendous havoc and a lot of sense of desolation, these people are coming with help from the Sunni Arab population. So you have to deal with it. You have to create for them.

You can offer them a lot of perks, a lot of them. Including, by the way, very easy access to the top official in Baghdad, which is very important now. We don't have enough of that. And in exchange, you want their cooperation.

They know everything; they can do everything for you. It's not easy. You have to approach them properly, but my feeling is, that's the time to do it. Until now, I agree, the coalition is very important.

CAFFERTY: Mr. Baram, I appreciate you joining us. We're going to have to leave it there. Thank you so much for being on the program.

BARAM: You are most welcome.

CAFFERTY: Amatzia Baram, senior fellow at the United States Institute of Peace and professor of Middle East history at the University of Haifa.

Coming up on IN THE MONEY: the one that got away. We're going to talk with an author who says Bill Clinton blew several chances to stop Osama bin Laden long before September 11th.

Plus, shake your moneymaker. Former Tyco boss Dennis Kozlowski partied down, helped by company cash. We'll show you the tape of his wife's birthday party in Sardinia. That is, front row center at his fraud trial.

Plus, take a chill pill. More and more kids in this country are being given drugs to make them calm down and focus. See whether prescribing a pill is taking the easy way out.

(COMMERCIAL BREAK)

LISOVICZ: The September 11th attacks left a lot of Americans wondering why Washington didn't do more to stop Osama bin Laden before that terrible day. Our next guest argues that the terrorist leader turned into a worldwide threat because the Clinton administration failed to shut him down. He says the former president had plenty of chances to put bin Laden out of business and didn't.

Richard Miniter is the author of "Losing bin Laden: How Bill Clinton's Failures Unleashed Global Terror." He's also a senior fellow at the Center for a New Europe.

Welcome.

RICHARD MINITER, AUTHOR, "LOSING BIN LADEN": Thank you.

LISOVICZ: At the heart of your book is a very damning accusation that the Clinton administration failed in 1996 to respond to the government of Sudan to hand Osama bin Laden over. Now, that's something that senior members of the Clinton administration vehemently deny. How do you -- how can you prove that? MINITER: Well, that's a great question. First of all, in my book "Losing bin Laden," I document 12 chances that Clinton had to kill or capture Osama bin Laden. We're only talking about perhaps the most heartbreaking one, the offer from the government of Sudan.

The government of Sudan made this offer repeatedly, first on February 5, 1996, then in a perfunctory meeting on March 3, 1996 in Washington -- Roslyn, Virginia, anyway. And then finally to the CIA on March 8, 1996.

I've talked to all those people in those meetings, both on the Sunni side and on the American side. Some Clinton administration officials who were not in the administration at the time of this offer say that I'm only relying on the Sudanese. But, in fact, I talked to the Americans. Ambassador Tim Carney (ph), who President Clinton appointed and sent to Sudan as a U.S. ambassador has confirmed these offers.

David Shinn, the State Department's director of East African Affairs confirms that relations were starting to improve with Sudan, that they could have worked with Sudan. And certainly we know that the Sudanese had real solid reasons for wanting bin Laden out of their country.

First of all, bin Laden was the source of the sanctions on their country from both the United Nations and the United States. Second of all, bin Laden had allied himself with the rival to the president of the country and against the president of Sudan. So the president had his own selfish reasons for wanting to help the U.S.

And finally, the Sudanese had arrested and turned over the infamous and international terrorist, Carlos the Jackal. They could repeat the same scenario, only this time with Osama bin Laden. But unfortunately, presidential politics got in the way of the Clinton administration taking that approach.

SERWER: Richard, I'm sorry to jump in here. But I have to ask, how much of this is really partisan history on your part? I mean, after all, you are an editorial wrier for "The Wall Street Journal." That's a conservative bastion. And I've heard plenty of pundits suggest that the Clinton administration did try to pursue bin Laden and, in fact, alerted the Bush administration and they didn't pick up the ball.

So where do you come out on that?

MINITER: Well, first of all, I'm not a writer of partisan history. I'm an award-winning investigative journalist. My work has also appeared in "The New York Times" and "The Washington Post," "The Atlantic Monthly," "Readers Digest," and "The New Republic," which is frankly not a bastion of conservatism.

So I dispute the premise of your question, first of all. But second of all, my book looks at the history of the first phase of the war on terror between Clinton and bin Laden. The second phase is the Bush phase, and that's the subject of my next book. And I'll be as tough and fair with Bush as I have been with Clinton.

Finally, in my book, "Losing bin Laden," I devoted an entire chapter to a great Clinton success which the media has ignored, and that is preventing the millennium plots of 1999, potentially saving tens of thousands of American lives.

So I'm documenting history here. Most of my sources are top Clinton administration officials, and I take them at their word. Some of these people were very, very good at their jobs and they were frustrated they weren't able to do more.

CAFFERTY: Jack Cafferty here. Let me jump in just for a second and ask you -- you mentioned you're working on a story about President Bush and his relationship to the bin Laden threat. There was a briefing on the part of the outgoing Clinton administration, briefing the incoming Bush administration about Osama bin Laden. How did President Bush treat that threat, and what can you tell us that maybe we don't already know about the way President Bush approached this threat that was out there when he took office?

MINITER: Well, first of all, I think the White House is denying that President Clinton in his exit interview did talk about bin Laden. I think the White House's story is that Clinton spent his time lobbying the incoming president for various domestic programs. So there's clearly a disagreement here. I wasn't in the room and haven't found a reliable source. So we just don't know if the Clinton contention is true or if the Bush contention is true.

That said, there were a lot of people who were held over from the Clinton years to the Bush years to fight terror. One was a guy named Richard Clark, who was Clinton's counterterrorism czar. He stayed on in the National Security Council under Bush, and he says that there was a plan in the works to retaliate against bin Laden, to take out his various training camps.

We know of at least seven training camps at the time in Afghanistan, and that that plan was slowly working its way through the Bush bureaucracy but they had trouble getting people confirmed. Remember, the Senate changed hands with Jim Jeffords. That slowed down the confirmation of a lot of Bush people.

A lot of -- the assistant secretary of defense, for example, didn't come in until the end of August 2001. The FBI director not confirmed until a week before September 11, 2001. So there were a lot of empty desks there and a lot of decisions made on autopilot.

CAFFERTY: I've got one last question, and we have no time. But it almost doesn't matter at this point who may have dropped the ball or not on this thing, he's still out there. What has to be done to get him? Is he getable, and why haven't we got him?

MINITER: Well, first of all, I do think we need to look back and learn the lessons of history, because we've got to learn from our mistakes or we're going to repeat them. Second of all, the best intelligence is bin Laden is in Baluchistan (ph). That's the eastern strip of Pakistan. The Bush administration needs to lean much harder on the Pakistanis for more cooperation. Right now, U.S. troops are being killed in Afghanistan by mortars operated by al Qaeda inside the Pakistani border just on the other side. We need some more help from the Pakistanis.

Bush has to learn to get tough with our so-called ally, Pakistan, and get their cooperation and help. Without their help of Pakistan, it's simply impossible for us to get bin Laden and I'll have to write a second book called "Losing bin Laden: The Bush Story."

SERWER: All right. Richard Miniter, we look forward to having you back perhaps for that. Richard Miniter, author of "Losing bin Laden: How Bill Clinton's Failures Unleashed Global Terror."

Up next on IN THE MONEY: smoking the competition. Tobacco giant R.J. Reynolds goes out for cigarettes and comes back with a deal for a rival.

And later, how to stop a brainstorm with more and more American kids on behavior-changing drugs. We'll look at whether the pill binge has gone too far.

Also ahead, Tyco's party boss. See the company's former CEO at play. And find out what the video means for his fraud trial.

(COMMERCIAL BREAK)

SERWER: Another big story this week was the decision by R.J. Reynolds Tobacco to buy British American Tobacco's U.S. cigarette businesses for $3 billion. The deal would give R.J. 32 percent of the U.S. cigarette market and get the company closer to the number one cigarette maker, Philip Morris.

Like the market in general, RJR Tobacco shares are having a pretty good year, and they're near a 52-week high. That makes RJR Tobacco our stock of the week.

So what do you think, though, guys? Why would any company, even a tobacco company, want to buy a tobacco business?

CAFFERTY: The future is not particularly look rosy. I mean, the more information we get about what cigarettes do to you, it would seem to follow that eventually everybody might stop smoking. I don't know.

LISOVICZ: And combine the -- they have to combine forces. Apparently the strategy here -- I mean, between limits on advertising, the fact that fewer Americans are smoking, the fact that litigation has not stopped, despite that landmark settlement, the need to combine force is clearly at work here.

SERWER: That's really the issue, to me. I mean, you keep hearing tobacco people saying eventually the litigation is going to stop. They've been saying this for a decade now and it hasn't stopped. In fact, you can suggest it's getting worse.

LISOVICZ: It is the U.S., after all.

SERWER: Well, that's true. But, I mean, there's reasons for this.

The other thing that's really interesting to me is that you'll remember 15 years was when we had barbarians (ph) at the gate. RJR was taken over. The value of that deal, $25 billion.

Today, RJR has a value of $4 billion. Now, of course, they did sell Kraft for $18 billion two years ago, but basically, the company's worth a little bit less today than it was 15 years ago.

LISOVICZ: And, you know, these are companies, by the way, BAT and RJR, with some very well-known names: Winston, Camel, Kool, Lucky Strikes. I mean, very well-known names. But the point is, is that there are fewer people smoking and there's cheaper competition.

People who are smoking aren't going for the brand names. So that's yet another problem.

CAFFERTY: Yes. But the piece of the market that's available out there, perhaps they're trying to get a little bigger slice of whatever the shrinking pie is. And by adding these brands, they'll be better able to compete with Philip Morris.

SERWER: And you know what kills me, though, pun intended, is the fact they're doing their own anti-tobacco advertising on the air. I mean, that, to me, is just ludicrous. I can't understand that. That is not money well spent by anybody, if you ask me.

CAFFERTY: Coming up: generation Rx. More kids on anti- depressants than ever before. We'll try to find out the real reasons why.

Plus, we'll take a closer look to the bash that may smash all of ex-Tyco CEO Dennis Kozlowski's hopes of staying out of those funny little orange jumpsuits they wear in the joint.

Back after this.

(COMMERCIAL BREAK)

CAFFERTY: According to the Surgeon General, one of every five American children suffers from emotional problems. And these days, more and more are being treated not with therapy, but with pills. Throughout the '90s, the number of kids on mood-altering drugs like Prozac and Ritalin doubled and, in some cases, tripled.

Joining us to talk about the risks and rewards of this trend is the author of "Should I Medicate My Child" and "Running on Ritalin." Lawrence Diller is a behavioral pediatrician. He joins today from San Francisco, California.

Doctor, it's nice to you have you with us. Thanks for joining us.

DR. LAWRENCE DILLER, BEHAVIORAL PEDIATRICIAN: Hello.

CAFFERTY: One of the reasons I assume that these drugs are so often prescribed is because they work. And, in fact, for millions of adult Americans, have worked exceedingly well. What's wrong with giving them to kids, if anything?

DILLER: Well, first of all, we're not sure really whether they work long term. And I think what we're seeing here -- this is coming from a physician, by the way, who prescribes these drugs every day. So I'm not anti-drug, but I'm very, very worried about what we're seeing here.

And I think what we've got here is a very busy materialistic society. We've got a situation where our demands on children have been ratcheted up in the last 20 years, where children 5 years old have to learn to read, and everyone's expected to go to college. Our discipline with children has gone down the toilet within the last 20, 30 years, and we have a trend that's really been manipulated by the drug industry, aided and abetted by the researchers in American psychiatry. I'm afraid that's my opinion, even as I every day prescribe to children.

CAFFERTY: Well, you certainly don't have to apologize for it. But you did suggested at the top of the interview, when I said a lot of people take these and swear by them, you said you're not so sure they work long term. If you're not so sure you work long term, why would you agree to write prescriptions for them at all?

DILLER: People are desperate. The parents of these children are desperate. They often don't have any good alternatives, especially by the time they get to me.

But then when I explored it a little bit more closely, the school has done very little in an organized fashion, sometimes with the parents here, to help these children. And just my visit to the school to sit down with the teachers and get the parents at the same table can make a whale of difference in terms of helping the kid without medicine, but that doesn't happen very often, unfortunately.

That's not the option offered to the parent who's desperate. In that case, we do give them the medications and they least help on the short term for some children.

LISOVICZ: You know, Dr. Diller, let's face it. I mean, we are a quick fix society. We want medical service, we want drugs, we want them now. It's something that is just part of our culture, unfortunately. And there's lots of new therapies out there.

But when you look at these national sales figures for antidepressants, the explosion growing nearly 75 percent from 1998 to 2002, does it have anything also to do with the direct-to-consumer advertising? We saw that three-decade ban eased.

DILLER: Yes. I mean, the drug companies wouldn't be doing it if it doesn't work. And I would say, nearly every day I have a parent who I already know come in with the request for a specific medication. It was happening initially in non-psychiatric drugs. Now it's happening in a big way with psychiatric drugs.

And really, what the drug companies are doing is influencing the way we see children and the way we see their behavior problems. We're the only country in the world, I can tell you this, that operates this way with our children's behavior and emotional problems.

SERWER: Dr. Diller, I was recently reading the autobiography of Sam Walton. He was the founder of Wal-Mart. He was very hyperactive, going all over the place, running like crazy.

And a friend of mine said, "Do you know what they'd do that that guy today? They'd give hin Ritalin." Is there a danger that we're medicating some of these (UNINTELLIGIBLE) kids who might in fact be geniuses, Einsteins, Bill Gates, Larry Ellisons, Steve Jobbs? I mean, the entrepreneurs and real creators in our society?

DILLER: Well, on the short term, the road for these kids is pretty bumpy. And medication, again, could make sense. But I have confidence in the long term.

Many of these children after high school or beyond will find niches. And a lot of the kids who are deemed as troublemakers find a niche for themselves. Half the guys behind your camera over there were probably ADHD-type of kids and such.

But the other concern is we're using medications. And here I'm not talking about the Ritalin type of rugs. They've been around 65 years.

But the Prozacs, the Respiratols (ph), the Depicodes (ph), they've been using them for three to five years. And we have no long- term data, but people are desperate. So they take the drugs from the M.D.s, again, fueled by the marketing by the drug companies.

LISOVICZ: Dr. Diller, we're almost out of time. Just very quickly, though, there's all this new therapy, and these are very young people, children. Their brains aren't fully developed, I've read, until they're 30 years old. Isn't this a dangerous experiment, giving new drugs to children?

DILLER: I think for the individual kid and family, they're in desperate shape sometimes. They will take these drugs. But rather for your viewers, this is a major public health problem.

This is a marker on our society, as far as I can tell, that really needs addressing at the highest levels. There's a president's commission on bioethics. They've taken it up. I'd like to see some focus placed domestically on this issue of huge increase in psychiatric drugs in children.

SERWER: All right. Joining us from San Francisco, Dr. Lawrence Diller, a behavioral pediatrician and author of "Running on Ritalin." Thanks very much.

Coming up on IN THE MONEY, high times and hard cash. Former Tyco boss Dennis Kozlowski helped bankroll a private party with company money. And what a part it was. See what that tape means for his fraud trial.

And Napster is back and this time it's legal. Find out whether the new Napster is snoozing or cruising.

(COMMERCIAL BREAK)

CAFFERTY: Former Tyco boss Dennis Kozlowski knew how to make money. And a videotape shown this week at his fraud trial suggests that Kozlowski knew how to spend it, too.

It shows buff guys in spandex shorts, ladies in peek-a-boo togas all at a birthday party for Kozlowski's wife on the Italian island of Sardinia. And that's just the stuff we can show you.

For a look at how the party tape played at the trial, let's bring in a Jacob Zamansky from Los Angeles. He's a securities lawyer at the law firm of Zamansky and Associates.

Welcome, back, Jake.

JACOB ZAMANSKY, SECURITIES ATTORNEY: Thank you.

SERWER: You're welcome. I want to ask you -- you know, this tape is great theater. We love watching. We'll play it ad nauseam. But how effective really is this in terms of the trial?

ZAMANSKY: This is very effective. This is an over-the-top symbol of the corporate greed and arrogance which took place in the 1990s. I think it's going to be devastating for the jury. If they say a picture's worth 1,000 words, this video tells it all.

CAFFERTY: I understand that attorneys, Jake, are very reluctant to criticize judges, but there was some degree of argument over this tape and the fact that it wound up being edited. If the purpose of allowing the tape in to begin with is as a glaring example of corporate greed and excess, why do you suppose the judge would turn around and order certain scenes, which certainly imply greed and excess, edited out of the tape and then let part of the tape be seen by the jury?

I mean, to me, it's like half a loaf. Either you put the tape in, and say here's what they did on the company dole, or you say, no, you can't show it. How do they decide where to go on this thing?

ZAMANSKY: Sure. The judge has a balancing act. He wants the prosecution to have the ability to put on its case, but they have to balance it against the defendant's rights to a fair trial. So what the judge did was edit, made a PG-13 version of the tape.

There were certain lewd scenes, like vodka pouring out of a statues private parts, which probably were unnecessary to show the greed and arrogance. So I think the judge did the right balancing act. The jury will get the message.

LISOVICZ: But Jacob, all and all, even though the videotape is clearly extravagant or it shows an extravagant party, it's embarrassing for the defendants, Mark Swartz and Dennis Kozlowski are accused of ripping off $600 million from Tyco. This party was $2 million. So really, on a purely legal basis, does that prove the case for the prosecution?

ZAMANSKY: This video illustrates exactly what the prosecution is trying to prove, that Mr. Kozlowski used Tyco shareholders' money as his personal piggy bank. This is not his money. It's that are the shareholders.

I did a little math. There were 70 people there. This comes out to about $35,000 a person. Well, there's a lot of Tyco shareholders that don't make that in a year. So I think it's a very vivid explanation of what happened there, and I think it's wrong.

SERWER: Jake, let me ask you to take a step back. I mean, you've done some litigation in this area, obviously corporate greed, litigating against Henry Blogen (ph) of Merrill Lynch. Where do you think we stand now in the course of history in terms of going after the corporate crooks of the 1990s?

ZAMANSKY: I think the government is trying to do the best they can to put some of these people on trial, to make them pay for what they've done. I talked to investors all over the country and they're outraged by the greed. They want to see some heads roll.

So we're going to see trial after trial. We're going to hopefully see Bernie Ebbers and WorldCom, Martha Stewart and some of these other people who just treated the shareholders' money as their own. That's wrong and it's got to be stopped. People have to be made examples out of.

CAFFERTY: What about the fact that in some of these cases it's the state's attorneys general that are getting tough with corporate criminals and the federal regulatory agencies charged with policing the industry are sort of sitting back taking their cues from guys like Elliott Spitzer and the fellow in Massachusetts who went after the mutual funds?

ZAMANSKY: That's the problem. The Feds were asleep at the wheel. They were doing nothing, and then Spitzer and the state stepped in.

They ought to be commended, because if it weren't for Spitzer and the states, we would have no enforcement action. People look to the government to stop the excesses, to stop fraud. And the only one who carried the ball was Spitzer and some private lawyers, such as the cases that I brought, to show what went on Wall Street.

So they need to be commended. The Feds need to get into the act.

CAFFERTY: Jacob Zamansky joining us from Los Angeles. He is a securities lawyer with Zamansky and Associates. Good to have you back with us, Jake. Thank you.

ZAMANSKY: Thank you very much.

CAFFERTY: All right.

Just ahead; it was once forbidden fruit. But now Napster is legit. We talk to Web master Allen Wastler about whether the music downloading service has what it takes.

And you can find out if you have what it takes to get your email read on our air. Now, there's a sign of some accomplishment in your life. You can send us your thoughts at inthemoney@cnn.com.

Back after this.

(COMMERCIAL BREAK)

CAFFERTY: Napster is back. And this time you don't have to worry about getting busted if you use the music downloading service. But just because it's gone straight doesn't necessarily mean that Napster doesn't have its share of problems.

Money.com's Allen Wastler here now with more on that, and the fun side of the week, which of course would relate to that back and alien thing going on at the Tyco trial. But we'll get to that in a minute.

What about Napster? What, they're back, they're legit? Does it work?

ALLEN WASTLER, MONEY.COM: They're back, they're legit and they've got some -- it does work. I actually downloaded it a couple days ago. I've listening to tunes in the office, all in the name of journalistic research.

CAFFERTY: Of course.

WASTLER: Of course. You know, I've been blasting the Stones and having a good time. And it's a very compatible service. I found it easy to find the bands, most of the bands that I want.

But, remember, people are coming to this. They're saying, Napster, lots of songs and it's all for free, right, dude? Well, if you're coming to it now, there's not quite as many songs. About half a million.

They used to have literally millions and you got to pay for it. Only 99 cents a song. That ain't so bad. But if you're used to getting it for free, you see a lot of tooth gnashing.

And I cruised a lot of the boards and the chatrooms just to say what people were saying. There was a lot of, "Oh, Napster used to be free. I'll just go to Kaza (ph) and everything."

CAFFERTY: Yes. There are some other services out there where you can still rip them off.

(CROSSTALK)

SERWER: So, what do you think, Allen? I mean, is this really going to get traction, as we used to say, in the dot-com (UNINTELLIGIBLE)? Napster and Apple and everything else like that?

WASTLER: Yes. You've got all the services. Napster has done something stupidly smart. You sort of wonder, why didn't people think of that before?

They're going to come out with a pre-paid card that they're going to sell in various retail chains. OK? Like about 14,000 stores.

CAFFERTY: Like a phone card.

WASTLER: Yes, exactly. So what happens is, if you're a kid, maybe 14, 15, you don't have a credit card, which these services need...

CAFFERTY: There you go.

WASTLER: You but that card. It gets activated at the store. And you can go download your music. Or, Mr. Cafferty, if you decide you want to give your daughters maybe a selection of music for Christmas or whatnot, you can buy a bunch of the cards.

CAFFERTY: It's a great idea, actually, because I don't know what to buy them. Right? I mean...

LISOVICZ: But Allen, you're talking about a service that used to rip off music. And can't other Napster-like services like Apple rip off this idea?

WASTLER: You know, I'm just waiting for iTunes and Rhapsody and Music Match (ph) all to come out with their family plans and cards. OK? Napster has the name behind it, and it's first to the punch. So maybe that gives them a little bit of an edge.

But, you know, they still have this problem of not enough songs. That's the payment side. But the songs, I mean, millions and millions. And the trick is, all of these services have the same problem. They've made deals with the big record companies.

CAFFERTY: Sure.

WASTLER: Lots of libraries. But what if you want a band like, I want Flash in the Pan. Longtime band.

CAFFERTY: Oh, yes. Me, too.

LISOVICZ: Right. I remember them.

WASTLER: They only did it with a small, independent label. And those labels aren't there. So...

CAFFERTY: On to one of the allegedly, one of the big corporate weasels of our time, and that would be Dennis Kozlowski down there at the Tyco trial. And the judge allowed that the jury could see some of these tape of this birthday party he threw for his wife.

Now, the judge says you could not see the ice carving of Michelangelo with vodka coming out of his situation. But you could see some of the other excesses, if you will, that went on at this thing. And that leads us, of course, to the fun site of the day.

WASTLER: That's right. And in honor of this party, I'm like togas? Well, dude, it should have been a full, out toga party, right?

And it's listed in badfads.com. Toga parties were one of those bad fads. So you sort of wonder, why did Kozlowski go for that?

SERWER: Because he's tacky?

WASTLER: I guess so. I mean, there's the living proof. And he wasn't even doing it right.

If you go back to the granddaddy of toga parties, "Animal House"...

SERWER: "Animal House" Is the thing. That's the bible.

WASTLER: That's the way you do it. And you know the judge cut some other scenes out of there that were sort of reminiscent of that. But, yes.

CAFFERTY: Yes. There were no scenes, however, of the John Belushi thing, where he punched his cheeks in "Animal House" and pretended to be a certain skin condition.

Enough of that. Thank you, Allen. Good to see you, my friend.

Coming up: it's not a $2 million party in Sardinia, but reading your emails every week can still get pretty wild here at IN THE MONEY. Oh, man. Who wrote that?

We'll look at some of them in a minute. Stick around.

(COMMERCIAL BREAK)

CAFFERTY: Time now to take a look at some of the answers to the email question of the week. We asked whether gun makers should be held in any way responsible for the violent acts committed by people that use their products, guns. There was no controversy on this. Each and every one of you said basically the same thing, no, the manufacturers should not be held accountable. But some of you said it better than others.

For example, Scott wrote this: "Yes, gun makers should be shielded from frivolous lawsuits. Only if the gun is defective should the manufacturer be held responsible."

Donnie in Colorado said, "Congress should spend its time finding ways to keep guns out of the hands of criminals and the mentally ill."

And Richard from Alabama wrote: "As a former gun dealer, I can tell you that nothing does more to sell guns on the legitimate and black markets than laws passed to restrict gun sales or gun makers. The only solution, watch your butt. It's a dangerous world out there."

That takes us to this week's question of the week: Would you ever give your kids prescription psychoactive drugs? You can email your answers to inthemoney@cnn.com. We'll read some of them next week.

You can also send your answers to us by visiting our new IN THE MONEY show page. The Web page address is on the bottom of your screen right now: http://money.cnn.com/ontv/inthemoney.

Thanks for -- I don't think I did that right, but it doesn't matter. Thank you for joining us for this edition of IN THE MONEY. Those of you who know better will figure it out on your own.

Thanks to our regular gang, CNN Financial correspondent Susan Lisovicz -- they're all laughing at me -- "Fortune" magazine editor- at-large, Andy Serwer. And Allen Wastler, managing editor of money.com.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






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