Return to Transcripts main page

Your Money

Is Living In California Foolish; Party Could Send Tyco CEO Kozlowski To Jail; Many Companies Cutting Back On Health Coverage

Aired November 03, 2003 - 15:00   ET

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

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


ANNOUNCER: From New York City, America's financial capitol, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up today's edition of IN THE MONEY: On dangerous ground, Americans keep building on land that burns about every ten years, or has floods, or has earthquakes. We'll look at whether it's safe thinking or maybe just dumb.

Plus, Dr. Who? Companies cutting back on the only perk that makes a lot of jobs worth going to: Health insurance. See what that could mean for your body and your wallet.

And business casual: Tyco's former CEO rips off the coat and tie and parties down at a situation in Sardinia that was juiced with company cash. Find out how those pictures of Kozlowski's birthday party for his wife might affect his fraud trial. Could be the thing that sends him to the slam.

Joining me today, two of our IN THE MONEY regulars, CNN correspondent, Susan Lisovicz, and "Fortune" magazine editor at large, Andy Serwer.

The Christmas decorations are already confronting you. If you walk into the door of a store, it's not even -- we're not even close to thanksgiving. Not even -- we were just out of October here, last week. But, a lot of question marks on this economy and perhaps the retail season will give us some more clues as to whether or not the recovery's a real deal or not, huh?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, you know, we're going ahead here, the stock market's done very well. October was a great month, up five or six percent, there. The stock Market's up 17 or 18 percent year to date. You know, it presages, perpahps, a recovery. Everyone wants to know: Was the third quarter GDP number for real, and we're about to find out, coming into this Christmas season.

SUSAN LISOVICZ, CNN CORRESPONDENT: And, if you look into that GDP report, which is important because it's the broadest measure, broadest look of the economy, you saw that consumers continued to spend feverishly, as well as businesses. So, it certainly sets things on an optimistic -- on an optimistic level and you've seen businesses increase their spending and consumer confidence also, we got those readings last week, and those were high, as well.

CAFFERTY: The consumer spending though, was fueled in large part by the tax cut which is a temporary situation. The last consumer spending numbers that came out last Friday suggested that's down again now, but real estate continues very strong. And Andy, the idea that business investment and spending is starting to maybe pick up, that's -- those are the legs that the economy needs to make a long term run.

SERWER: But, I think everyone wants to know, Jack, is this baby for real? I mean, CEOs want to know it, people on the street want to know it, and one place you're not feeling it is in the job market. You tell people about a recovery who are losing the jobs, you've seen that all over the place, so -- you know, it ain't really real yet, until the job market gets better.

LISOVICZ: But, when you see businesses ramp up spending, sometimes that's a precursor to them hiring and you see businesses increase their spending.

SERWER: A precursor. I like that. It's a precursor.

CAFFERTY: That's an IN THE MONEY term.

SERWER: Yeah.

CAFFERTY: The word for this week, boys and girls is: precursor.

SERWER: Precursor.

CAFFERTY: All right. It's the latest flair-up of an old problem, serious stuff, here. Wildfires sweeping across Southern California. All week, we've seen the horrible pictures of homes burning to the ground. Miguel Marquez joins us now from Running Springs, California, with the latest on this terrible situation.

Miguel, nice to have you with us. What can you tell us?

MIGUEL MARQUEZ, CNN CORRESPONDENT: Well, I can tell you that the fire, they hope, are getting it under control here and the insurance claims are going to probably be mounting up here, pretty quickly. We spend our days up here in the San Bernardino National Forest and we spend our nights in San Bernardino, itself, the city, and it is becoming an insurance haven with companies moving in. Adjusters all over town, setting up shop in hotels, here. Lot of insurance companies going to be taking hits on this one. The biggest, probably, will be Allstate, Farmer's Insurance also will be taking a hit on this, State Farm, Nationwide Financial Services, Safeco, and USAA. But, by far probably, Allstate will probably feeling the bite the most.

Insurance claims on this fire, so far, are sort of wildly different. The low end about $500 million, and about a billion-and-a- quarter up on the top end. The reason that there's such a wide swing in the difference between how much it might cost because so far, there's just been a trickle of claims. A lot of the homes are summer homes, people may not know if their home is destroyed, yet. And, insurance companies are just getting set up in the communities surrounding the affected areas. Damage assessments are also hard to begin, so far, because there are still trees in the neighborhoods, there are still power lines down, still fairly dangerous to get in there for homeowners or adjusters to start figure out how much all this is going costs, but some money forthcoming. Congress, the House and Senate, are already promising a half billion dollars to help California recover and it's citizens recover from these devastating fires. And, there's even more economic figures on that. Aside from all of the insurance claims and all of the lost productivity and all the business losses, Governor Davis is saying that it could cost as much as $2 billion to suppress and put these fires out and then do a cleanup after that -- Jack.

CAFFERTY: Miguel, thank you very much. And, of course, California's a state already facing huge deficits. Miguel Marquez joining us from Running Springs, California.

Just like plastic surgery and traffic jams, wild fires very much a part of life in Southern California. That has not, however, stopped people from building deeper and deeper into what they call the hot zone, the area that's prone to these kinds of fires. For a look at whether we're perhaps pushing nature too far when we set up house in a risky place, joined by urban planning specialist, Robert Lang, who is the director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia.

Mr. Lang, nice to have you with us. Thanks for joining us.

ROBERT LANG, METROPOLITAN INSTITUTE: Thanks for having me.

CAFFERTY: The last series of serious fires in this part of California was ten years ago, but this part of the state has been burning periodically for thousands of years. Fires happen here, over and over and over, again. Not to seem cynical, but if you build your house in a flood plane, the chances are it's going to get wet. What about the regulations that allow for development like this, and the people that choose to live there?

LANG: Well, there's a lot of land pressure in Southern California. It seems like a lot of space if you get out at the airport and get in a plane and drive around, but if you look at it from satellite or you look at it from as urban planner, it's this small coastal shelf up against a deserts and there's actually a lot pressure to go to these kind of marginal places that, in the past, wouldn't have been developed. Some of these are summer homes, but a lot of these are kind of like the fringe of the metropolitan area, and in the East, you know, we have a fringe that's not as vulnerable to fire, but we're still doing the same thing in the East.

LISOVICZ: You know, Robert, it's a fascinating commentary on population growth, on housing prices, and the peculiarity of people in Southern California. It's a hostile area environmentally where people choose to live, but they make it more so according to your views, like for instance, opposing controlled burning because they're concerned it might lower their -- value of their property. In some cases, the residents themselves sort of exacerbated the conditions that caused these fires.

LANG: Yeah. And in some sense, the developers have, too. They put in a kind of cheep developer foliage that is not really well suited for the area and so, dries out, turns to brush, fuels the fire. Those kinds of things, you're going to have to reform, you can't control the weather, you can't control the land supply. But, we have to get better at doing more fireproofed houses.

SERWER: Robert, let me ask you a policy question, see if you want to take a shot at this, though. In terms of funding and giving aid to these people who lost their homes, who built their homes, perhaps in imprudent spots, should taxpayers from the rest of the country bail these people out.

LANG: Well, let me ask you this: I mean, I have my house in Alexandria, Virginia. It seemed like a very prudent spot. And then I have three trees go down in hurricane Isabel and we build along the coast, and I'm not just talking about the Barrier Islands -- you know, in the Carolinas which you're kind of asking for it. But, we're building in the Eastern cities and, you know, Southeastern cities and they're vulnerable and in a sense -- you know, some of this can't be helped. Parts of California are really literally out of land and if you want to shut down housing, in a region that is already housing constrained and already has economic problems and lose a pillar of economic development, that's going to be a tough thing to do.

CAFFERTY: What about the planners that don't provide for going up as opposed to going out? I mean, I don't know how many square miles the city of New York occupies, but I'll bet it's less than the city of Los Angeles and we got twice the number of people, here.

LANG: It's funny you say that, because Los Angeles, as an overall region, is actually denser built than is New York, believe it or not. New York's dense at the core, in Manhattan, but the edges wind up in Pike County, Pennsylvania. The edges of Los Angeles are these kind of dense subdivisions that you see on fire. Notice it's not one or two houses.

CAFFERTY: Right.

LANG: When you see the pictures, why building this dense, tiny lot subdivision right up to the edge? It's that they're out of land, and so Los Angeles actually just recently passed New York as a metropolitan area in overall density and what they'd have to do is essentially turn back to the built up parts of Los Angeles already, and rebuild them much denser and there's not a lot of will to do that.

CAFFERTY: Is that the only solution? What is the answer to this, besides not living in Southern California?

LANG: The solution is to get much better at fireproofing the houses -- housing and much more serious about fire prevention, but it would -- you'd be hard pressed not to build in some of the marginal areas.

LISOVICZ: Well, it certainly, a lot of food for thought after one of the worst epidemics -- worst disasters in California history. Robert Lang, director of Metropolitan Institute at Virginia Tech. Thanks so much for joining us. LANG: Thanks.

LISOVICZ: Up ahead, on IN THE MONEY shrinking the safety net. Wal-Mart is just one of the big companies cutting back on medical insurance for employees. Find out what that trend could mean for the health of your bank account.

Also, a bottle of good behavior: More kids than ever getting drugs to calm them down and perk them up. We'll look at whether that's the right prescription.

And, the CEO that partied an emperor: Former Tyco boss, Dennis Kozlowski, threw a megabash fueled by company money. See how the video evidence is shaking up his fraud trial.

(COMMERCIAL BREAK)

LISOVICZ: About 62 percent of American workers get medical insurance coverage from their employers. That number is down nearly 20 percent since the 1960s and it's not just the small businesses that are cutting back on coverage. Studies show one in three uninsured workers employed by companies with 500 or more employees. Many of those larger companies that aren't cutting workers are asking them to pay more for their coverage. Alexandra Marks is following this trend for the "Christian Science Monitor" and she joins us not.

Welcome.

ALEXANDRA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.

LISOVICZ: It's something we kind of all know about, but reading your research really brings it on home. You call it the "Wal-Mart affect" because Wal-Mart, the nation's largest private employer only offers catastrophic health insurance, that's amazing.

MARKS: They offer catastrophic, but they -- and there are a couple of preventive things like mammograms, that they will pay for. But, the reason is double digit increases in health insurance, third year in a row. 14 percent, this last year, is how much it -- health insurance went up. And companies just can't afford to pay it anymore. Particularly, large retailers that have low income employees. As a matter of fact, Wal-Mart prides itself on providing any insurance at all because a lot of large retailers with low income employees don't provide any..

CAFFERTY: We've got 40 million people give or take a few that have no health insurance.

MARKS: It's about 44, now.

CAFFERTY: 44.

MARKS: Another two million up last year.

CAFFERTY: If private companies are going to discontinue offering it because they can't afford it and you can't go out in the street and buy it, because as an individual you can't afford it, and the government has done virtually nothing to solve the problem, where's this thing going?

MARKS: Well, you know, it's really interesting; I think a lot depends on what congress does, if anything.

CAFFERTY: Yeah.

MARKS: Right now, employers are able to cut back because the economy, with the jobless recovery and actually, a lot of people aren't hiring because they can't pay for the benefits, but when the economy starts to come back and they've got to attract workers, you know, people who are optimistic say then they're going to start offering better insurance, but conservatives in congress want to offer tax -- tax breaks for individuals...

CAFFERTY: Right.

MARKS: ...so that they can buy, they also want to set up private medical savings accounts. They want to change the system. A lot of people in moderate to liberals say they're more interested in having government subside companies so that they can begin to pay -- so that they can continue providing good insurance. And then others, for particularly low wage workers, they want them to expand Medicaid like they did for children with SCHIP.

SERWER: But, I don't accept the outset, you're talking about the cost of healthcare going up so much, and that's really the problem from the company's standpoint. Why is that? I mean is it because we're making a lot of advances in healthcare, and isn't that a positive thing? I mean, where did this start?

MARKS: Well, it's a chicken and the egg thing. It gets -- it's all tied in together. I say that the American healthcare system is like a huge out of control Rube Goldberg Machine. The health insurance increases we're using a lot more medical care than we ever have before. We have a lot more elderly people. Something like 60 percent of the healthcare dollar is spent in the last month of life. Well...

SERWER: Wow.

MARKS: How do you choose -- how do you decide when's the last month of life. You know, rationing care is something Americans can't even tolerate. Increases in pharmaceutical advances has made, I guess -- one of the sharpest increases is in prescription drug costs, which you know that's another issue that's a little hot right now, so, but what happens is these costs cause health insurance costs to go up. Health insurance costs go up. Companies cannot afford it, they cut back. More people come -- become uninsured. When they become uninsured, they wait to go to the doctor until they're very sick...

SERWER: Yeah, sure.

MARKS: Then they go and causes more bad debt which gets passed on to those of us who do have insurance, which causes the insurance rates to go up. So, it's a vicious little cycle.

CAFFERTY: You mentioned congress and the future you said, in large part, depends on what congress does, if anything. I get a lot of mail on this American morning program on CNN, that we do, when we bring this subject up. And, a lot of our viewers on that program point out the fact that congress doesn't really have any incentive to address this problem, because they're not affected by it. Congress has a healthcare program that is second to none anywhere in the world. They don't pay for a damn thing down there, it's all covered for them, their families -- not a problem. If they were somehow pushed over into the private sector where the rest of us little people have to thrive, perhaps it would get their attention that there's a crying need out here.

Make them work at Wal-mart, that's what I say.

(CROSSTALK)

MARKS: Well...

CAFFERTY: You know, I mean, it's just -- it's almost obscene.

MARKS: Yeah.

CAFFERTY: The dichotomy that exists between our elected representatives, who are charged with dealing with this problem, are totally unaffected by it.

MARKS: Now, some of the democratic proposals -- you know, the presidential candidates, their idea is to give that kind of Cadillac system to everybody in the country. You find a way to do that. I mean it's -- but I have to say that the more and more constituents get up in arms about this, and you're finding now, some polls saying like 36 percent of Americans now, when you just ask off the top, what's your main problem -- what's your main concern, they say that health insurance costs are going to up. Well, if you take -- you know, that's like twice as many are worried about being a victim of terrorism and losing their jobs, it's -- this is now, becoming a real middle class concern and I believe, just like it did in the early 1990s, it's going to again -- you know, become a major political issue in the next year or so.

LISOVICZ: But, Alexandra is it true the U.S. is the only industrialized nation in the world that doesn't have universal healthcare coverage?

MARKS: It used to be the United States and South Africa, but South Africa they came up with...

LISOVICZ: With all its problems.

(CROSSTALK)

SERWER: But, how do we solve this problem, though Alex? I mean, how do we get out of this?

MARKS: Oh, if I knew that.

SERWER: Yeah well.

MARKS: Well, you now, there's lots and lots of proposals. You know, you're finding everybody agrees, all of the worst antagonists in the big fight in the early '90s have agreed that we have to find some way to cover the 44 million uninsured. And, that now -- but the question is how do you do it? And do you expand public programs like Medicare and Medicaid so that everybody has access to it? Do you subsidize businesses, do you create a system -- one of the ideas was called pay or play. That if a business didn't provide you health insurance, then they would have to pay into a fund that the government would provide you health insurance. So, there are all of these wonderful thoughtful ideas out there. The problem is that there's a lot of political stakeholders that don't want to give any -- you know that don't want to give up an inch, and we have a private insurance industry which is...

LISOVICZ: Thrives on it.

MARKS: ...and very powerful on Capitol Hill.

SERWER: Right. Right. All right, we're going to have to leave it at that, Alex.

Alex Marks, staff writer for the "Christian Science Monitor," thank you very much.

MARKS: My pleasure.

SERWER: OK.

Coming up, life styles of the rich and indicted. We'll take a closer look at that lavish party thrown by ex-Tyco CEO, Dennis Kozlowski and find out what it means for his fraud trial.

Plus, are kids more depressed or are drug companies doing a better job of marketing? We'll look at the growing number of America children on anti-depressants.

And, after being a thorn in the music industry's side for years, Napster is now siding with the profit-making crowd. We'll see if it can survive.

(COMMERCIAL BREAK)

LISOVICZ: Now our top stories in our "Money Minute." The U.S. economy is pickling up steam. The gross domestic product grew at a blistering pace in the third quarter to an annual rate of 7.2 percent. That's the strongest report since early 1984.

The news may be the evidence the fed has been waiting for to start pushing interest rates higher. Alan Greenspan and company decided to hold rates steady a few days before the GDP news came out.

The second largest U.S. bank could soon take the number one spot. Bank of America has agreed to buy Fleet Boston for $47 billion in stock. The combined assets could put Bank of America ahead of Citigroup. The deal still needs government approval.

And, the $100 million lawsuit against actress Rosie O'Donnell is underway. O'Donnell's former publisher says she broke her contract when she pulled out of here "Rosie" magazine deal last year. O'Donnell has filed a counter suit for $125 million claiming the publisher took too much control of the magazine named for her.

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 RJR 32 percent of the U.S. cigarette market and get them closer to the No. 1 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 does not particularly 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: Combined -- they have to combine forces, is 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 forces clearly at work, here.

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

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

SERWER: Well, that's true, but I mean, there's reasons for that. The other that's rally interesting to me is that -- you remember 15 years ago was when we had barbarians at the gate, which it was when RJR was taken over. The value of the 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 brand 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.

CAFFERTY: Yeah.

LISOVICZ: People who are smoking aren't going for the brand names, so that's yet another problem. CAFFERTY: 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 that they're doing their own anti-tobacco advertising on the air. I mean that to me is just ludicrous. I can't understand it. That is not money well spent by anybody, if you ask me.

CAFFERTY: Coming up, a 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 at the bash that may smash all of ex-Tyco CEO, Dennis Kozlowski, homes of staying out of those funny little orange jump suits 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.

Thank you for joining us for this edition of IN THE MONEY. Good to have you with us. My thanks, as always, to our regular panel, CNN financial correspondent, Susan Lisovicz, "Fortune" magazine editor-at- large, Andy Serwer and money.com managing editor Allen Wastler.

Join us next week, Saturday at 1:00, Sunday at 3:00 for another edition. And during the week you can watch Andy Serwer and me on that very fine little morning program, it's called "AMERICAN MORNING." It starts at 7:00 am Eastern time here on CNN. We'll see you somewhere down the road in the next 7 days.

END

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





Kozlowski To Jail; Many Companies Cutting Back On Health Coverage>


Aired November 3, 2003 - 15:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: From New York City, America's financial capitol, this is IN THE MONEY.
JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up today's edition of IN THE MONEY: On dangerous ground, Americans keep building on land that burns about every ten years, or has floods, or has earthquakes. We'll look at whether it's safe thinking or maybe just dumb.

Plus, Dr. Who? Companies cutting back on the only perk that makes a lot of jobs worth going to: Health insurance. See what that could mean for your body and your wallet.

And business casual: Tyco's former CEO rips off the coat and tie and parties down at a situation in Sardinia that was juiced with company cash. Find out how those pictures of Kozlowski's birthday party for his wife might affect his fraud trial. Could be the thing that sends him to the slam.

Joining me today, two of our IN THE MONEY regulars, CNN correspondent, Susan Lisovicz, and "Fortune" magazine editor at large, Andy Serwer.

The Christmas decorations are already confronting you. If you walk into the door of a store, it's not even -- we're not even close to thanksgiving. Not even -- we were just out of October here, last week. But, a lot of question marks on this economy and perhaps the retail season will give us some more clues as to whether or not the recovery's a real deal or not, huh?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, you know, we're going ahead here, the stock market's done very well. October was a great month, up five or six percent, there. The stock Market's up 17 or 18 percent year to date. You know, it presages, perpahps, a recovery. Everyone wants to know: Was the third quarter GDP number for real, and we're about to find out, coming into this Christmas season.

SUSAN LISOVICZ, CNN CORRESPONDENT: And, if you look into that GDP report, which is important because it's the broadest measure, broadest look of the economy, you saw that consumers continued to spend feverishly, as well as businesses. So, it certainly sets things on an optimistic -- on an optimistic level and you've seen businesses increase their spending and consumer confidence also, we got those readings last week, and those were high, as well.

CAFFERTY: The consumer spending though, was fueled in large part by the tax cut which is a temporary situation. The last consumer spending numbers that came out last Friday suggested that's down again now, but real estate continues very strong. And Andy, the idea that business investment and spending is starting to maybe pick up, that's -- those are the legs that the economy needs to make a long term run.

SERWER: But, I think everyone wants to know, Jack, is this baby for real? I mean, CEOs want to know it, people on the street want to know it, and one place you're not feeling it is in the job market. You tell people about a recovery who are losing the jobs, you've seen that all over the place, so -- you know, it ain't really real yet, until the job market gets better.

LISOVICZ: But, when you see businesses ramp up spending, sometimes that's a precursor to them hiring and you see businesses increase their spending.

SERWER: A precursor. I like that. It's a precursor.

CAFFERTY: That's an IN THE MONEY term.

SERWER: Yeah.

CAFFERTY: The word for this week, boys and girls is: precursor.

SERWER: Precursor.

CAFFERTY: All right. It's the latest flair-up of an old problem, serious stuff, here. Wildfires sweeping across Southern California. All week, we've seen the horrible pictures of homes burning to the ground. Miguel Marquez joins us now from Running Springs, California, with the latest on this terrible situation.

Miguel, nice to have you with us. What can you tell us?

MIGUEL MARQUEZ, CNN CORRESPONDENT: Well, I can tell you that the fire, they hope, are getting it under control here and the insurance claims are going to probably be mounting up here, pretty quickly. We spend our days up here in the San Bernardino National Forest and we spend our nights in San Bernardino, itself, the city, and it is becoming an insurance haven with companies moving in. Adjusters all over town, setting up shop in hotels, here. Lot of insurance companies going to be taking hits on this one. The biggest, probably, will be Allstate, Farmer's Insurance also will be taking a hit on this, State Farm, Nationwide Financial Services, Safeco, and USAA. But, by far probably, Allstate will probably feeling the bite the most.

Insurance claims on this fire, so far, are sort of wildly different. The low end about $500 million, and about a billion-and-a- quarter up on the top end. The reason that there's such a wide swing in the difference between how much it might cost because so far, there's just been a trickle of claims. A lot of the homes are summer homes, people may not know if their home is destroyed, yet. And, insurance companies are just getting set up in the communities surrounding the affected areas. Damage assessments are also hard to begin, so far, because there are still trees in the neighborhoods, there are still power lines down, still fairly dangerous to get in there for homeowners or adjusters to start figure out how much all this is going costs, but some money forthcoming. Congress, the House and Senate, are already promising a half billion dollars to help California recover and it's citizens recover from these devastating fires. And, there's even more economic figures on that. Aside from all of the insurance claims and all of the lost productivity and all the business losses, Governor Davis is saying that it could cost as much as $2 billion to suppress and put these fires out and then do a cleanup after that -- Jack.

CAFFERTY: Miguel, thank you very much. And, of course, California's a state already facing huge deficits. Miguel Marquez joining us from Running Springs, California.

Just like plastic surgery and traffic jams, wild fires very much a part of life in Southern California. That has not, however, stopped people from building deeper and deeper into what they call the hot zone, the area that's prone to these kinds of fires. For a look at whether we're perhaps pushing nature too far when we set up house in a risky place, joined by urban planning specialist, Robert Lang, who is the director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia.

Mr. Lang, nice to have you with us. Thanks for joining us.

ROBERT LANG, METROPOLITAN INSTITUTE: Thanks for having me.

CAFFERTY: The last series of serious fires in this part of California was ten years ago, but this part of the state has been burning periodically for thousands of years. Fires happen here, over and over and over, again. Not to seem cynical, but if you build your house in a flood plane, the chances are it's going to get wet. What about the regulations that allow for development like this, and the people that choose to live there?

LANG: Well, there's a lot of land pressure in Southern California. It seems like a lot of space if you get out at the airport and get in a plane and drive around, but if you look at it from satellite or you look at it from as urban planner, it's this small coastal shelf up against a deserts and there's actually a lot pressure to go to these kind of marginal places that, in the past, wouldn't have been developed. Some of these are summer homes, but a lot of these are kind of like the fringe of the metropolitan area, and in the East, you know, we have a fringe that's not as vulnerable to fire, but we're still doing the same thing in the East.

LISOVICZ: You know, Robert, it's a fascinating commentary on population growth, on housing prices, and the peculiarity of people in Southern California. It's a hostile area environmentally where people choose to live, but they make it more so according to your views, like for instance, opposing controlled burning because they're concerned it might lower their -- value of their property. In some cases, the residents themselves sort of exacerbated the conditions that caused these fires.

LANG: Yeah. And in some sense, the developers have, too. They put in a kind of cheep developer foliage that is not really well suited for the area and so, dries out, turns to brush, fuels the fire. Those kinds of things, you're going to have to reform, you can't control the weather, you can't control the land supply. But, we have to get better at doing more fireproofed houses.

SERWER: Robert, let me ask you a policy question, see if you want to take a shot at this, though. In terms of funding and giving aid to these people who lost their homes, who built their homes, perhaps in imprudent spots, should taxpayers from the rest of the country bail these people out.

LANG: Well, let me ask you this: I mean, I have my house in Alexandria, Virginia. It seemed like a very prudent spot. And then I have three trees go down in hurricane Isabel and we build along the coast, and I'm not just talking about the Barrier Islands -- you know, in the Carolinas which you're kind of asking for it. But, we're building in the Eastern cities and, you know, Southeastern cities and they're vulnerable and in a sense -- you know, some of this can't be helped. Parts of California are really literally out of land and if you want to shut down housing, in a region that is already housing constrained and already has economic problems and lose a pillar of economic development, that's going to be a tough thing to do.

CAFFERTY: What about the planners that don't provide for going up as opposed to going out? I mean, I don't know how many square miles the city of New York occupies, but I'll bet it's less than the city of Los Angeles and we got twice the number of people, here.

LANG: It's funny you say that, because Los Angeles, as an overall region, is actually denser built than is New York, believe it or not. New York's dense at the core, in Manhattan, but the edges wind up in Pike County, Pennsylvania. The edges of Los Angeles are these kind of dense subdivisions that you see on fire. Notice it's not one or two houses.

CAFFERTY: Right.

LANG: When you see the pictures, why building this dense, tiny lot subdivision right up to the edge? It's that they're out of land, and so Los Angeles actually just recently passed New York as a metropolitan area in overall density and what they'd have to do is essentially turn back to the built up parts of Los Angeles already, and rebuild them much denser and there's not a lot of will to do that.

CAFFERTY: Is that the only solution? What is the answer to this, besides not living in Southern California?

LANG: The solution is to get much better at fireproofing the houses -- housing and much more serious about fire prevention, but it would -- you'd be hard pressed not to build in some of the marginal areas.

LISOVICZ: Well, it certainly, a lot of food for thought after one of the worst epidemics -- worst disasters in California history. Robert Lang, director of Metropolitan Institute at Virginia Tech. Thanks so much for joining us. LANG: Thanks.

LISOVICZ: Up ahead, on IN THE MONEY shrinking the safety net. Wal-Mart is just one of the big companies cutting back on medical insurance for employees. Find out what that trend could mean for the health of your bank account.

Also, a bottle of good behavior: More kids than ever getting drugs to calm them down and perk them up. We'll look at whether that's the right prescription.

And, the CEO that partied an emperor: Former Tyco boss, Dennis Kozlowski, threw a megabash fueled by company money. See how the video evidence is shaking up his fraud trial.

(COMMERCIAL BREAK)

LISOVICZ: About 62 percent of American workers get medical insurance coverage from their employers. That number is down nearly 20 percent since the 1960s and it's not just the small businesses that are cutting back on coverage. Studies show one in three uninsured workers employed by companies with 500 or more employees. Many of those larger companies that aren't cutting workers are asking them to pay more for their coverage. Alexandra Marks is following this trend for the "Christian Science Monitor" and she joins us not.

Welcome.

ALEXANDRA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.

LISOVICZ: It's something we kind of all know about, but reading your research really brings it on home. You call it the "Wal-Mart affect" because Wal-Mart, the nation's largest private employer only offers catastrophic health insurance, that's amazing.

MARKS: They offer catastrophic, but they -- and there are a couple of preventive things like mammograms, that they will pay for. But, the reason is double digit increases in health insurance, third year in a row. 14 percent, this last year, is how much it -- health insurance went up. And companies just can't afford to pay it anymore. Particularly, large retailers that have low income employees. As a matter of fact, Wal-Mart prides itself on providing any insurance at all because a lot of large retailers with low income employees don't provide any..

CAFFERTY: We've got 40 million people give or take a few that have no health insurance.

MARKS: It's about 44, now.

CAFFERTY: 44.

MARKS: Another two million up last year.

CAFFERTY: If private companies are going to discontinue offering it because they can't afford it and you can't go out in the street and buy it, because as an individual you can't afford it, and the government has done virtually nothing to solve the problem, where's this thing going?

MARKS: Well, you know, it's really interesting; I think a lot depends on what congress does, if anything.

CAFFERTY: Yeah.

MARKS: Right now, employers are able to cut back because the economy, with the jobless recovery and actually, a lot of people aren't hiring because they can't pay for the benefits, but when the economy starts to come back and they've got to attract workers, you know, people who are optimistic say then they're going to start offering better insurance, but conservatives in congress want to offer tax -- tax breaks for individuals...

CAFFERTY: Right.

MARKS: ...so that they can buy, they also want to set up private medical savings accounts. They want to change the system. A lot of people in moderate to liberals say they're more interested in having government subside companies so that they can begin to pay -- so that they can continue providing good insurance. And then others, for particularly low wage workers, they want them to expand Medicaid like they did for children with SCHIP.

SERWER: But, I don't accept the outset, you're talking about the cost of healthcare going up so much, and that's really the problem from the company's standpoint. Why is that? I mean is it because we're making a lot of advances in healthcare, and isn't that a positive thing? I mean, where did this start?

MARKS: Well, it's a chicken and the egg thing. It gets -- it's all tied in together. I say that the American healthcare system is like a huge out of control Rube Goldberg Machine. The health insurance increases we're using a lot more medical care than we ever have before. We have a lot more elderly people. Something like 60 percent of the healthcare dollar is spent in the last month of life. Well...

SERWER: Wow.

MARKS: How do you choose -- how do you decide when's the last month of life. You know, rationing care is something Americans can't even tolerate. Increases in pharmaceutical advances has made, I guess -- one of the sharpest increases is in prescription drug costs, which you know that's another issue that's a little hot right now, so, but what happens is these costs cause health insurance costs to go up. Health insurance costs go up. Companies cannot afford it, they cut back. More people come -- become uninsured. When they become uninsured, they wait to go to the doctor until they're very sick...

SERWER: Yeah, sure.

MARKS: Then they go and causes more bad debt which gets passed on to those of us who do have insurance, which causes the insurance rates to go up. So, it's a vicious little cycle.

CAFFERTY: You mentioned congress and the future you said, in large part, depends on what congress does, if anything. I get a lot of mail on this American morning program on CNN, that we do, when we bring this subject up. And, a lot of our viewers on that program point out the fact that congress doesn't really have any incentive to address this problem, because they're not affected by it. Congress has a healthcare program that is second to none anywhere in the world. They don't pay for a damn thing down there, it's all covered for them, their families -- not a problem. If they were somehow pushed over into the private sector where the rest of us little people have to thrive, perhaps it would get their attention that there's a crying need out here.

Make them work at Wal-mart, that's what I say.

(CROSSTALK)

MARKS: Well...

CAFFERTY: You know, I mean, it's just -- it's almost obscene.

MARKS: Yeah.

CAFFERTY: The dichotomy that exists between our elected representatives, who are charged with dealing with this problem, are totally unaffected by it.

MARKS: Now, some of the democratic proposals -- you know, the presidential candidates, their idea is to give that kind of Cadillac system to everybody in the country. You find a way to do that. I mean it's -- but I have to say that the more and more constituents get up in arms about this, and you're finding now, some polls saying like 36 percent of Americans now, when you just ask off the top, what's your main problem -- what's your main concern, they say that health insurance costs are going to up. Well, if you take -- you know, that's like twice as many are worried about being a victim of terrorism and losing their jobs, it's -- this is now, becoming a real middle class concern and I believe, just like it did in the early 1990s, it's going to again -- you know, become a major political issue in the next year or so.

LISOVICZ: But, Alexandra is it true the U.S. is the only industrialized nation in the world that doesn't have universal healthcare coverage?

MARKS: It used to be the United States and South Africa, but South Africa they came up with...

LISOVICZ: With all its problems.

(CROSSTALK)

SERWER: But, how do we solve this problem, though Alex? I mean, how do we get out of this?

MARKS: Oh, if I knew that.

SERWER: Yeah well.

MARKS: Well, you now, there's lots and lots of proposals. You know, you're finding everybody agrees, all of the worst antagonists in the big fight in the early '90s have agreed that we have to find some way to cover the 44 million uninsured. And, that now -- but the question is how do you do it? And do you expand public programs like Medicare and Medicaid so that everybody has access to it? Do you subsidize businesses, do you create a system -- one of the ideas was called pay or play. That if a business didn't provide you health insurance, then they would have to pay into a fund that the government would provide you health insurance. So, there are all of these wonderful thoughtful ideas out there. The problem is that there's a lot of political stakeholders that don't want to give any -- you know that don't want to give up an inch, and we have a private insurance industry which is...

LISOVICZ: Thrives on it.

MARKS: ...and very powerful on Capitol Hill.

SERWER: Right. Right. All right, we're going to have to leave it at that, Alex.

Alex Marks, staff writer for the "Christian Science Monitor," thank you very much.

MARKS: My pleasure.

SERWER: OK.

Coming up, life styles of the rich and indicted. We'll take a closer look at that lavish party thrown by ex-Tyco CEO, Dennis Kozlowski and find out what it means for his fraud trial.

Plus, are kids more depressed or are drug companies doing a better job of marketing? We'll look at the growing number of America children on anti-depressants.

And, after being a thorn in the music industry's side for years, Napster is now siding with the profit-making crowd. We'll see if it can survive.

(COMMERCIAL BREAK)

LISOVICZ: Now our top stories in our "Money Minute." The U.S. economy is pickling up steam. The gross domestic product grew at a blistering pace in the third quarter to an annual rate of 7.2 percent. That's the strongest report since early 1984.

The news may be the evidence the fed has been waiting for to start pushing interest rates higher. Alan Greenspan and company decided to hold rates steady a few days before the GDP news came out.

The second largest U.S. bank could soon take the number one spot. Bank of America has agreed to buy Fleet Boston for $47 billion in stock. The combined assets could put Bank of America ahead of Citigroup. The deal still needs government approval.

And, the $100 million lawsuit against actress Rosie O'Donnell is underway. O'Donnell's former publisher says she broke her contract when she pulled out of here "Rosie" magazine deal last year. O'Donnell has filed a counter suit for $125 million claiming the publisher took too much control of the magazine named for her.

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 RJR 32 percent of the U.S. cigarette market and get them closer to the No. 1 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 does not particularly 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: Combined -- they have to combine forces, is 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 forces clearly at work, here.

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

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

SERWER: Well, that's true, but I mean, there's reasons for that. The other that's rally interesting to me is that -- you remember 15 years ago was when we had barbarians at the gate, which it was when RJR was taken over. The value of the 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 brand 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.

CAFFERTY: Yeah.

LISOVICZ: People who are smoking aren't going for the brand names, so that's yet another problem. CAFFERTY: 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 that they're doing their own anti-tobacco advertising on the air. I mean that to me is just ludicrous. I can't understand it. That is not money well spent by anybody, if you ask me.

CAFFERTY: Coming up, a 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 at the bash that may smash all of ex-Tyco CEO, Dennis Kozlowski, homes of staying out of those funny little orange jump suits 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.

Thank you for joining us for this edition of IN THE MONEY. Good to have you with us. My thanks, as always, to our regular panel, CNN financial correspondent, Susan Lisovicz, "Fortune" magazine editor-at- large, Andy Serwer and money.com managing editor Allen Wastler.

Join us next week, Saturday at 1:00, Sunday at 3:00 for another edition. And during the week you can watch Andy Serwer and me on that very fine little morning program, it's called "AMERICAN MORNING." It starts at 7:00 am Eastern time here on CNN. We'll see you somewhere down the road in the next 7 days.

END

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





Kozlowski To Jail; Many Companies Cutting Back On Health Coverage>