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Your Money
Tyco Case Ruled Mistrial; Senators Outperform Everyone Else In Stock Market
Aired April 04, 2004 - 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.
(BEGIN VIDEOTAPE)
Announcer: From New York City America's financial capitol. This is IN THE MONEY.
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JACK CAFFERTY, HOST: Welcome to IN THE MONEY. I'm Jack Cafferty. Coming up on today's program:
Disorder in the court: It only took one juror to throw the Tyco trial into an uproar. We'll look at what, if anything, is wrong with the jury system, and how to fix it.
Plus, a stake in the diamond business: See what it takes to buy your own baseball team. (UNINTELLIGIBLE) the diamonds on the ball field. We checked the price tag, payback. Talking minor league teams here, it's a very hot business idea these days.
And how the Hill beats the Street regularly: A bunch of Senators put money on stocks and whipped Wall Street by a mile. The whipped corporate insiders by a mile. Let's see what's behind the senators' winning streak. Shall we?
Joining me today, a couple of the IN THE MONEY veterans around these parts, CNN correspondent, Christine Romans, "Fortune" magazine editor-at-large Andy Serwer. One of the great stories of the past week, had to be this sudden 180 done by the White House on whether or not they were going to allow national security adviser Condoleezza Rice to appear under oath and in public before the September 11 Commission.
CHRISTINE ROMANS, CNN CORRESPONDENT: This just got too big.
CAFFERTY: What up with that?
ROMANS: This just got too big for the White House not to let it -- not to change course, because everyone was talking about this and watching Condoleezza Rice on every news network, giving her side of the story. Finally they had to capitulate.
ANDY SERWER, "FORTUNE" MAGAZINE: Well, I didn't understand that to begin with. I mean she can go on "60 Minutes," but can't testify? I mean, it seems like "60 Minutes" is kind of an open forum where you'd probably want to tell the truth because you can get caught in a lie. So, why not testify? The other thing, Jack, I think more broadly is, boy, the American people really want the light of day in this process as much as possible. I don't think it's a partisan thing, I just think people want everything out.
CAFFERTY: I agree to a point, but I think there was a little partisanship behind it.
SERWER: Oh...
CAFFERTY: I think John Kerry would have turned this thing into a campaign commercial in a heartbeat if they held firm to their position and refused to let her do it.
ROMANS: This whole 9/11 thing, though -- the 9/11 Commission thing -- you know, it's a lot of rewriting history. But, let's be honest. No one had the imagination for September 11th before it happened and that's why we are where we are right now, and all of this -- you know, hemming and hawing, who's going to give a speech about...
SERWER: That we could have prevented it, I think that's probably a stretch.
CAFFERTY: That maybe a stretch, but then somebody said once, you can't know anything about where you're going unless you understand where you've come back.
SERWER: That's right.
CAFFERTY: And so, maybe that's worth looking at this thing. That's not for us to decide.
SERWER: Good.
CAFFERTY: Those a lot bigger issues than we're capable of.
The jury system is supposed to ensure that you will be judged fairly by your peers. And it works just fine, if you're under the assumption that your peers, a bunch of daytime TV watchers who don't get out too much and never check the news too closely. Disputes over jurors have shaken up two big trials recently, involving Martha Stewart and former Tyco CEO Dennis Kozlowski. And with that in mind, we wanted to take a look at the jury systems, see whether or not it might need an overhaul.
Joining us from Washington, D.C., Paul Rosenzweig of the Heritage Foundation, a senior research fellow at the Center for Legal and Judicial Studies.
Nice to have you with us. Thanks for joining us.
PAUL ROSENZWIEG, HERITAGE FOUNDATION: Thanks for having me.
CAFFERTY: Is it broken?
ROSENZWIEG: Well, I don't know if it's broken, but it's certainly in an odd position. I mean, you're absolutely right, that the only way to get on a jury right now is to be retired or a government worker who can take leave from the job, or somebody who doesn't read the newspapers at all and has no knowledge about what's happening in the world. It's a long change.
CAFFERTY: With all due respect, they didn't have any trouble dragging me down and putting me on a jury. I served less than a year ago over there in Newark, New Jersey.
I don't know, at least in some states, I think, haven't they changed the law now where you can no longer get exemptions and they can pretty much take a cross-section of everybody? I mean, lawyers, doctors, firemen, everybody -- people that used to be able to be exempt from jury duty no longer can duck out on it?
ROSENZWIEG: That's right, there's no legal exemption, but what really happens, of course, is that the lawyers, like me, are intent upon trying to find the most malleable jurors that they can. They'll exclude you...
CAFFERTY: That's you, Jack!
ROSENZWIEG: And -- well, they'll exclude you, if they can, and also people like you probably have learned a lot of the tricks on how to avoid service, if you want to. Just say you know a lawyer, have strong opinions about the law and they'll get rid of you in a heartbeat.
SERWER: Well I know where you're coming from, but isn't it true in the overwhelming majority of cases, there are no problems at all. We only hear about these jury problems when you get a very a high- profile case, with a lot of expensive lawyers looking for any way to weasel out of a verdict that they can?
ROSENZWIEG: Oh, I agree completely. I mean, by and large, jurors are the salt of earth and they really understand what's happening. In fact, I kind of take it the other way. I think the right answer is we take the first 12 people that we get who don't know...
SERWER: Just walk in the door.
ROSENZWIEG: Yeah, well, who don't know -- randomly selected, so they don't know the victim -- you know, the defendant, or something particular about the case. But, we need to get past this whole idea of -- you know, trying to sift people and mold juries and -- you know, the whole business of jury consultants is just really disturbing.
ROMANS: Let's talk about juror No. 4, I mean she is really an amazing piece of work. Lands herself on the front page of newspapers, she did or did not give the OK sign to the defense, she's got a legal background. What about juror No. 4? I mean, somebody who's got a background in the law, and maybe is a very, very outspoken person -- should she have been on that jury in the first place?
ROSENZWIEG: Well, in my view, yes. I mean, I know most people don't agree, but lawyers are people, too, you know? Yeah, seriously we're -- the jury system should be a cross- section of the entire community. Not a selected group that is whittled down to find the least common denominator or exclude anybody who might have an independent thought. It's not just lawyers, it's anybody who has opinions, strong opinions, they're part of the community as well, and they ought to be on the jury, if they don't know the case itself and if they say that they can put aside their opinions and hear case on the facts.
CAFFERTY: What's caused this sudden explosion in -- in fussing around over the fine details of getting a jury seated? I'm thinking of Mark Geragos out there in California on the Scott Peterson thing. I mean, he's going to try every state in the union to get this seated, and keep moving and for a change ever venue. The fact of the matter is, we live in an age of mass media, a high-profile a case like the Peterson case gets a lot of coverage in the news and you're not probably going to ever be able to find 12 people who aren't locked away in some institution who haven't heard of the Scott Peterson case. How come we can't overlook or at least accept that fact and go ahead and make allowance for it and put people in a jury and get these things under way?
ROSENZWIEG: Oh, I agree with you completely and the answer is that the jury selection system is operating under an old set of rules that come from a time where there was no mass media. That come from a time where you could anticipate finding people who hadn't been exposed to the facts of the case and so we had a rule that exposure was kind of a disqualification. But now, in the post-O.J. -- you know, post- Scott Peterson timeframe, everybody is exposed to the news in increasingly rapid cycles and it's just not realistic, plus, it's not really important. I mean, everybody knows about the Scott Peterson case, because they've heard it from you, but nobody really know what's to think about the case. We all hear a bunch of talking heads talking about it.
CAFFERTY: Sure.
ROSENZWIEG: The real case is in the courts.
CAFFERTY: There you go. Paul, we got to leave it there. Paul Rosenzwieg, of the Heritage Foundation, thanks for being on the program, and I appreciate the tips on how to get out of jury service.
ROSENZWIEG: You bet, yeah.
CAFFERTY: Thanks a lot.
ROSENZWIEG: Thanks for having me.
CAFFERTY: Coming up next on IN THE MONEY as we continue:
A team of your own: We'll tell you what it takes to put your money in play on the baseball field.
And later, they sure can pick 'em: Find out about a study that says, surprise, surprise. Senators do better on Wall Street than ordinary investors.
Plus, a virtual education: Get the word on a college where playing video games is not a problem, it's an actual course. Go figure.
(BEGIN VIDEOTAPE)
ANNOUNCER: Competitors across the globe wish they could fill the shoes of Nike. This year the industry leader in the apparel category. The company sells its products throughout the U.S. and in about 200 other countries. And even though Nike ranks as the world's number one shoemaker these days, variety is the name of the game. The company now sells everything from yoga apparel to hockey gear to golf equipment. However, Nike has been slow to break into the world of non-team sports, such as skateboarding, where consumers are typically anti-swoosh. Nevertheless, Wall Street seems impressed by Nike's efforts. The stock has nearly doubled in the past year.
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(COMMERCIAL BREAK)
SERWER: You need major league money to buy a major league baseball team, and that probably rules out those that haven't made our first billion yet. But, even mere mortals can pick up a ball club as long as we think a little smaller and with spring training coming to a close, we're going to find out how it's done. Russell Pearlman has the skinny on that. He's the senior writer at "SmartMoney" magazine.
Welcome Russell.
RUSSELL PEARLMAN, "SMARTMONEY" MAZAGINE: Hi, thanks for having me.
SERWER: So, we're taking about minor league teams, here. Is it really true that a wealthy person, you got to be pretty well off, can get together with a bunch of people and buy one ever these teams?
Yeah. The going rate these days for a minor league baseball teams can be upwards of $10 million for a triple A team, and even those are hard to find because most of the major league teams own their triple A affiliates. But now, even double A's go for seven-and- a-half million dollars and single A teams go for $5 million.
SERWER: That's still a lot of money.
ROMANS: Well, there's three of us here, together we can put together, right guys? We could buy something out in the Midwest.
SERWER: With a big loan from Uncle Jack.
ROMANS: You know, absolutely. You know, refurbish a little town maybe something along the river, but you've got to watch every single penny -- don't you? Because, a lot of people who do this end up losing a lot of money? PEARLMAN: Yeah, this is certainly not a business to put down the money and then decide to sit in the bleachers the next summer and not worry about things. To make money in minor league baseball you really have to hustle. You have to be able to sell advertising, you've got to sell luxury boxes, if you have them, or just put fannies in seats. It's a really difficult, pretty low-margin business. One of the owners equates it to the grocery business, which is only about one to two percent margins. That's not far off from the norm.
CAFFERTY: Is there anything lower than single A?
PEARLMAN: There's rookie league, but...
CAFFERTY: How scruffy is the baseball when you get down around that single A situation?
PEARLMAN: It's a little bit better than if I suited up, but, you know...
CAFFERTY: Let's hope.
PEARLMAN: People just go for the entertainment value. They go just to see America's pastime and just enjoy a couple hours in the sunshine.
CAFFERTY: Well, you know, we were kidding around here, but there's something very pleasant about watching a minor league baseball game, as opposed to fighting your way through the traffic in the south Bronx, or out in Queens to get to either Yankee Stadium or Shea Stadium.
I saw an average breakdown for four tickets to a regular season Yankee game, if you get a couple of hot dogs and a Coors, it's like $200 or some ridiculous amount of money. They got the Newark Bears out there in Newark, New Jersey, go there on a summer evening, no problem getting a good seat, the hot dogs taste as good, and you can do the whole thing for a heck of a lot less money. But, is it a kind of business, if I'm looking to get into a --you know, business for myself, is this the kind of business I ought to look into getting into?
PEARLMAN: Well, as one of the owners told us, it's not the place to put your money. There's less risky higher-return businesses to go in. But, it's certainly something if you have the money and you want to be willing to work at it and you love baseball. Sure, it's a great place to go get some investors together and ultimately -- you know, you can, after all the hot dogs are sold -- you know, you can watch and look at your park and say -- hey, you know what? This is mine. I'm making people very happy sitting and watching a game.
SERWER: Hey Russell, the mayor of Corpus Christi, Texas, came up to visit me the other day and was complaining to me about minor league baseball teams. He was saying they came to town and basically, sort of, left with some bills that they didn't pay? Now, they're getting a new team in, Nolan Ryan's kid's bringing in a new team in, they hope this is going to be very successful. It looks like a better operation. But, don't a lot of these times -- a lot of times these teams actually kind of mess up some of the town's finances?
PEARLMAN: Yeah. Unfortunately if you're not a particularly good owner you can lose a lot money and there's about 175 teams affiliated with minor league baseball, umbrella organization, and usually about 20 to 30 a year move and unfortunately, there's some owners who decide not to pay their bills.
CAFFERTY: Well...
PEARLMAN: You know, just like any business, unfortunately.
ROMANS: You know, Russell, somebody's out there has to be making money. I mean, the Iowa Cubs, for example. There are some teams that -- you know, always pack 'em in and seem to be doing well. Right?
PEARLMAN: Yeah. I mean, we asked a couple of owners to give us their income statements and the owner of the San Angelo Colts, which is an independent team in lovely west Texas showed us their income statement and they clear about a million dollars -- I'm sorry, they have about a million dollars in income each year, and they clear about $76,000 of that. So, you know...
ROMANS: You've got to love this to do it.
PEARLMAN: Yeah, I mean, yeah. It's an eight percent return. It's not great. I mean, certainly the stock market has an average of about eight percent return over the last 50 years, and certainly a lot risky and a lot less work. But, you know what? You don't go in for the return. You go in because you love the game, like being outside. You like being close to your fans and close to your customers. I mean, the people that we trailed for this story, one worked at Leo Burnett advertising Agency for a long time and the other in magazine publishing. So, they certainly have an affinity for customers.
ROMANS: All right, Russell Pearlman, "SmartMoney" magazine. Thanks for joining us.
PEARLMAN: Thanks for having me.
ROMANS: Time for us to go feed the cash cow.
Coming up right after the break, a pickle for Heinz: See how the company is handling a tricking political connection.
Also ahead, street savvy: Find out why some senators played Wall Street better than the pros.
And the neighborhood playground: Find out what a new study says about having a casino within easy driving distance.
(COMMERCIAL BREAK)
ROMANS: Let's look at the week's top stories in our "Money Minute." OPEC agreed to cut production even as crude oil prices hover near 13-year highs. But, there are questions about the impact of the cut since OPEC is thought to be pumping out considerably more crude than its quotas call for already. And gas prices in the U.S. did ease off a bit this week after setting several records the week before.
Eli Lilly steps it up it campaign to stop the sale of Canadian drugs in the U.S. The drug maker is requiring Canadian internet pharmacies to prove they're ordering drugs for the Canadian market only.
And, things may be getting too real for reality show star, Donald Trump. The Donald's hotel and casino resort business is dealing with a mountain of debt and stiff competition from other gaming companies in Atlantic City. Now Trump may need a financial bailout or concessions from bond holders to save the company from bankruptcy.
SERWER: All right. Thank you, Christine.
Some of the most vigorous campaigning right now isn't going on in the presidential race. It's going on in the boardroom at H.J. Heinz. That's because the ketchup and pickle giant wants to distance itself from any possible connection to John Kerry's run for president. Some conservative groups have been trying to launch a boycott against Heinz products because Theresa Heinz in an heiress to part of the Heinz family fortune and John Kerry's wife, as well. Now, the company has sent out letters to radio and TV talk show across the country announcing that Heinz is not sending money to John Kerry, who's the democratic presidential nominee, of course.
But, that's about as controversial as it gets for Heinz, which over the last year has been a relatively rock-solid performance, steady market performer, as well. H.J. Heinz is our stock of the week.
You know, I'm going to a big public service for this Pittsburgh company, they have nothing to do with John Kerry. I mean, they really don't have anything to do -- it's just ketchup, it's red, you put it on hamburgers and french fries.
ROMANS: And it's also green and purple. That was the biggest (UNINTELLIGIBLE).
SERWER: That flopped. And that flopped.
CAFFERTY: And she, despite being an heiress to the Heinz fortune has nothing to do with running the company. She's not on the board, she doesn't have a job there, she doesn't work in the warehouse, she doesn't do any of that stuff.
ROMANS: And she's actually more Kerry than Heinz these days, isn't she now? Isn't she Theresa Heinz-Kerry, before that she was just Theresa Heinz?
SERWER: That's right, I mean she is connected to the foundation and there is that one connection, that was about, I thing, four percent of the foundation plus her holdings. But, again, nothing to do with the company. This company was run by Tony O'Reilly, the great Irishman for many, many years now turned it over to a guy named William Johnson, who by the way, is the son of Tiger Johnson, the coach of the Cincinnati Bengal's. Is that American enough for you? I mean that's pretty American. Right? I mean, red, white and blue -- you know, I mean, it's not a liberal democratic conspiracy.
CAFFERTY: He probably got the contract to put the ketchup on the hot dogs out there where the Bangles play.
SERWER: Well, except the Steelers in the home town, it's all a big mess.
CAFFERTY: So do you buy the stock? This is one of those stocks that is pretty, like you said, rock-solid, it performs year in and year out, unless the American consumer quits eating ketchup, they're probably going to be around?
SERWER: Yeah, I mean, this stock has been mediocre one over the years, Jack. And food stocks get hot every once in a while. Yeah, it hasn't done that well. But I mean, it's just like you're suggesting, over time, I guess it's probably a good thing to own. Why not? Right?
ROMANS: All right, a little ketchup on the bun, I guess.
CAFFERTY: There you go.
SERWER: All right, we're going to take a break, but coming up:
U.S. senators get a nice Capitol Hill office and a six-year term and the may also be getting a leg up on the stock market. We'll check the results in an interesting study.
And, betting on black may leave a lot of people in the red. We'll look at the possible connection between casinos and personal bankruptcy. Stay tuned.
(COMMERCIAL BREAK)
CAFFERTY: You may think corporate executives get the sweetest deals when it comes to investing in the stock market, that's the wrong answer. A new studies says the biggest winners when it comes to investing are some of our elected leaders. Joining us with details on the story is Alan Ziobrowski of Georgia State University Robinson's School of Business, joins us today from Atlanta, Georgia.
So, let's see, the United States Senate outperformed the average investor by about 12 percent a year.
ALAN ZIOBROWKSI, GEORGIA STATE UNIVERSITY: That's right.
CAFFERTY: That's not insignificant. Why does that happen?
ZIOBROWSKI: The study does not go into the notion of whether or not -- how they obtained their gains, but I don't think one needs to use their imagination too far to realized that there's privileged information the rest of us just don't have.
CAFFERTY: You are suggesting they would take advantage of this information in order to acquire personal gain?
SERWER: Jack is shocked.
CAFFERTY: Shocking.
ZIOBROWSKI: As crazy as that sounds, I think that's what we are suggesting.
ROMANS: It could be just that they are smarter than the average public, maybe.
CAFFERTY: I doubt that.
ZIOBROWSKI: That's very difficult to argue because one of the things we do in this test is to benchmark our results against corporate executives who trade stock of their own companies. And nobody could know more before their companies than these guys do, and senators outperform them. It's hard to argue that they're that smart.
SERWER: I read your report and some Senate disclosure forms. I think what you have done is raised a lot of interesting questions. When you look at science of this it's not a slam dunk, is it?
You look at the disclosure forms it can be a family member who trades, also your time period is not that long.
And so are you really certain that this would hold up to statistical scrutiny?
ZIOBROWSKI: Yes, we really are. I guess the key issue is it's not so much of a question of how long but how many data points. We looked at some 6,000 transactions. So, with a population that large, it's clear to do some statistical analysis that are pretty strong.
CAFFERTY: What about the regulatory agencies that are designed to oversee the levelness of the playing field?
If members of the Senate can outperform the rest of the investing community by 12 percent based on information they have that the rest of us don't, why doesn't the SEC know about this, do something about it?
Or is this just one of those little perks that goes along with being inside the beltway?
ZIOBROWSKI: I guess technically the answer to that question is if you have to ask the SEC. But the truth of the matter, as far as we can determine there is no law against this. If they pick up some information in the course of their normal business dealings, there is nothing that says they can't trade stocks.
ROMANS: It's not necessarily a surprise. We were joking but how we were shocked that they outperform the rest of the market. But remember Hillary Clinton and the cattle futures, as long as there has been power and prestige in Washington, there have been people have been able to get something extra out of it, after all they are not paid very much money. ZIOBROWSKI: That's true. One of the examples we give in the papers, if of course, the famous LBJ example of his media company and what he did with the SEC. So, this is something that has been going on for a long time.
SERWER: When you look at the Senate disclosure forms, it shows that a senator would own a security and then not own it anymore. Sell it.
They don't have the date of sale during the year, though, do they?
ZIOBROWSKI: Yes, they put in -- they have to declare the day and again roughly the amount and the name of the company they bought. So, we have the exact date they made the transaction.
SERWER: But it's difficult for you to have gotten this information. The disclosure here is not what it should be, don't you think?
ZIOBROWSKI: It's horrible. And it's also intimidating because when you request to see these forms, and to get a copy, you have to give your name, and you have to give your organization, a lot of other things which certainly makes you wonder if the issue is public disclosure why are they asking you for all that information if you want to look at the forms.
SERWER: You are just a taxpayer, right?
ZIOBROWSKI: That's right.
ROMANS: If I were running for Congress, you would think I wouldn't want to get nailed, you know, making more money than anybody else on some kind of an inside tip or anything. You'd think that senators and congressmen in this country would be squeaky clean, wouldn't you?
ZIOBROWSKI: I guess that's the presumption. But, again, history would say otherwise. Certainly, there have been a number of people -- the LBJ case is a classic example of where that does not hold.
LISOVICZ: Did not mean to put you on the spot about the integrity of the elected officials in this country.
Alan Ziobrowski, thank you so much for joining us today.
ZIOBROWSKI: Thank you.
ROMANS: When IN THE MONEY continues, holding them and folding them.
Do more casinos mean more bankruptcies?
And playing video games in class will get new trouble but not at USC.
We'll explain just ahead.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: In the music industry he is known as the ear. Clive Davis founder and CEO of J Records is the driving force behind many successful artists, including Whitney Houston, Carlos Santana and Alicia Keys.
CLIVE DAVIS, CEO, J RECORDS: The key to the business is really success ratio. So, you've got to be very careful before you sign an artist, before you take on a that kind of responsibility. So often you find those throwing 10 up against the wall, bragging about the one that is successful.
UNIDENTIFIED MALE: Recently the more than 36-year music veteran was named chairman and CEO of BMJ America, but again was back on top at Arista Records after being ousted four years ago.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
SERWER: All right if the new study is right people are more likely to gamble until it hurts if there's a casino down the road. Researchers found counties with legalized gambling have twice as many personal bankruptcies as counties that don't. That runs contrary to other surveys and to claims from the gaming industry.
Alexandria Marks covered this story for "Christian Science Monitor" where she's a staff writer and she joins us now.
Welcome, Alexandria.
ALEXANDRIA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.
SERWER: Explain to us your story.
MARKS: Well, it's kind of interesting that there's been this long brewing controversy about what social impacts having gambling in a county have. And people who are in the gaming industry, AKA the gambling industry, they try to call themselves the gaming industry to get away from all the connotations with gambling. But they say, look, you know there is no tie. You can have, you know, casinos, you can have lots of video lotteries, but you won't find a direct tie with personal bankruptcies. On the other hand there are a lot of anti- gambling activists and also researchers who say that is not the case. If you look at the actual data and go county by county, you find that personal bankruptcies in counties that have casinos are 100 percent higher. At the same time what's interesting is that business bankruptcies are 35 percent lower.
You know, Alexandria, for me, I grew up in the quad cities, in Iowa, Illinois, and Mississippi River, in 1989 they started riverboat gambling. And it used to be before 1989 you'd drive into town and there was a big bill board with Buffalo Bill, and it said welcome QCA home Of buffalo Bill. Now it says welcome to the QCA do you have a gambling problem? And it has Gamble Anon or whatever on the bottom.
Is this because people are gambling their money away or because boats and casinos bring in lower-wage jobs and you've got people working around the clock, and it just sort tears apart the fiber of the community?
MARKS: That's one of the key issues. They figure about 125 Americans gamble. About 80 percent of them have no problem at all. It's entertainment, they go out. About 7.5 million have a serious gambling problem. You know, they are compulsive gamblers. Another 15 million are at risk for that kind of problem. When a casino comes to town, the problems which maybe latent, suddenly begin to manifest themselves. So that you do have -- it does have an economic impact. At the same time it brings in jobs, a lot of cities require these casinos to buy all their goods from local vendors. So, it can have a positive economic effect at the same time. So it's really hard to tell.
I mean, the crime rate is another thing I get a charge out of in terms of this debate, but the people who are in favor of casinos will say, look, you bring a casino in, your crime rate goes down and it does. But the actual amount of crime goes up. But because when you are doing the crime rate you calculate visitors into the city, it brings the actual rate down.
Does that make sense? You have a casino, you have all these people come into the county. So it's one of those debates, and personal bankruptcy is another thing, it's very hard to pin down. That's what is going on. A lot of researchers are saying let's find out for sure what impact it has. And so this study of Creighton University, they looked at counties in 1990 that did not have casinos, and then -- and compared them with counties that did, and then did the same snapshot in 1999. And I thought the findings were pretty stunning.
CAFFERTY: What are they going to do about this?
People are gamble whether it's on horses or dogs or a dice game at the corner or whatever.
MARKS: The Internet now.
CAFFERTY: Not everybody who drinks becomes an alcoholic, but some people do. Not everybody who smokes gets lung cancer, but some people do. Not everyone who gambles declares bankruptcy.
Is there a solution here or is this just a social debate without an answer?
MARKS: Well, you know, obviously, you know, the sign you see in the Quad Cities when you walk in -- when drive into the cities, do you have a gambling problem?
There's an effort under way within the gaming industry itself to promote responsible gambling. And a lot of state governments, when they sanctioned casino gambling, they will also have a certain percentage of resources that will go towards like Gambling Anonymous -- not Gambling Anonymous, but programs to help problem gamblers. So, that goes on. It's an issue of personal responsibility, but also there's sort of larger social issue. When that story ran, I got e- mails from people, thank you. Everybody says they're great. You know, casinos are great for the local economy, but my grandmother sat at the slot machines and gambled away. There's a lot of heartache that you can't just measure. That's out there, too.
Is there a solution? I don't know.
SERWER: I want to talk to you about the statistics. I'm always on the lookout for these things. You have to dig very deeply. I'm familiar with the Foxwoods Casino, Mashantucket Pequot up there Connecticut. I don't have a problem by the way. I just want to make that clear.
MARKS: How familiar are you?
SERWER: It's a depressed area. You're talking about a part of Connecticut, not a lot of jobs at all. The casino is like on the shining hill there, they created a lot of wealth for the Indian tribe. The surrounding area is still poor, OK.
I'm wondering, aren't these casinos in poor rural areas where there might be a lot of bankruptcies any way? Have you really delved into this?
MARKS: That's one of the things the people in the gaming industry, AKA gambling industry, will argue is that if you look at these communities that they had higher rates of bankruptcy even before the casinos came in. Some of the studies done try to account for that. And still found increased rates of personal bankruptcies. So, you know, that is a factor. There are many variables that deal -- that are a result that cause these personal bankruptcies. A lot of the of people in the gaming industry, will also say, look it's the credit card companies. It's easy credit (UNINTELLIGIBLE).
If you 7-year-old, you know is on some mailing list, he could easy get an advertisement for credit. Easy credit, less stigma having to do with -- it used to be declaring personal bankruptcy was just scandalous. Now there's less social stigma while business bankruptcies which are a small percentage of the bankruptcies in the United States, they went from 63,000 a year to about 37,000 a year in the decade of the '90s, personal bankruptcies soared from 770,000 to 1.2 million. So, there's something going on. A lot of people say, look, during that same decade you had this huge expansion of casino gambling. But it's obviously complicated social phenomenon.
SERWER: All right, Alexandria, we will have to leave it at that. Thank you. Obviously, a huge business. Alexandria Marks, staff writer for "Christian Science Monitor."
Time for us to make the ad sales department happy. After the break, how to get credit for a jiggling a joy stick. Find out about a college where you can do your homework while playing video games. Oh, come on. Here's another reason to get in front of the computer, send us an e-mail and tell what's on your mind. Our address is inthemoney@cnn.com.
First though Susan Lisovicz, makes a cameo appearance for this week's edition of MONEY AND FAMILY.
(BEGIN VIDEO CLIP)
SUSAN LISOVICZ, CNN CORRESPONDENT: April 15th is right around the corner. If you have not filed your taxes, yet you may want to get started now. The IRS recently came out with a list of ways to avoid problems during tax time by following a few simple rules, you could save yourself both time and money.
Your first tip is to avoid procrastination. Don't put the taxes off until the last minute. The more of a rush you are in to get them done the more likely you are to make mistakes. Second, organize your tax records by making files for your records and receipts you can save yourself some hassle. Start now by filing last year's income statements, deductions or tax credit items. 3rd, if you have Internet access, visit the IRS online at irs.gov. You can easily access tax forms, publications and instructions on filing your return and check out legal information and frequently ask questions about filing your taxes.
Next week more tips to make tax time a little less taxing. I'm Susan Lisovicz for "Money and Family."
(END VIDEO CLIP)
SERWER: This is the kind of news parents sending their kids to college want to hear. A leading video game company is donating millions of dollars to the University of California, yes, that USC, so it can create a masters program in video game programming. Unbelievable.
Joining us now for more on this latest innovation, can we call that an American education, is our Webmaster Allen Wastler.
ALLEN WASTLER, MONEY.COM: Working on my graduate degree in video games. Yes, majoring in "Grand Theft Auto".
SERWER: Wow. "Grand Theft Auto" is amazing.
WASTLER: With a minor in -- it sounds crazy at first, OK? Video games, you are going to college to studio video games. But Electronic Arts one of the bigger names in the business feels it is worth plowing 8 million dollars into the thing. When you look at the money involved, it makes sense. Video games last year, they took in about $10 billion. So, comparison's sake, let's see. How much did movies take in domestically, about $10 billion. Think about all the film schools out there.
SERWER: At USC.
(CROSSTALK)
ROMANS: Does Electronic Arts have trouble finding good programmers?
Is that why they are doing it.
WASTLER: They are ramping up and trying to get more and more titles. And part of the business is throw a bunch of titles and see what sticks. A successful title will make $200 million for "Grand Theft Auto" franchise the latest installment. That's like a mega hit move, some are not going to do so well. So, you want to have enough developers, programmers and coders throwing that kind of stuff in there.
ROMANS: Not as frivolous as it looks.
SERWER: EA is very successful company too.
WASTLER: It gets very complicated quick very quick. Video games, now the big thing is you want to be able to respond to what do you and you don't want have predictable -- if I go that way, he will shoot me if I go this way, I will bump into that. You want some sort of unpredictability. It takes complicated programming to get that into a computer program where it is acting like a human being.
SERWER: Kind of like this show, Jack, unpredictability.
CAFFERTY: Who knows where else the applications for those ideas could be down the road either. I mean, somebody could come up with some new idea's and technology for video games and it could be applied to (UNINTELLIGIBLE).
WASTLER: A lot of it goes -- they are working now on hardware in video games where you connect it to your body and you sort of play like that.
SERWER: You know what I saw that was really cool, everyone complains how it makes everybody a couch potato. They had a bike, a stationary bike where pedaling like this and you were in the game. So you were exercising while you were in the game, which I thought was cool.
CAFFERTY: Let's get this over to something I can understand, dogs.
WASTLER: Dogs were in the news this week. The University of Wisconsin situation, we spent a lot of time watching the dog go around. Studying this week how people pick dogs. Well, an old favor of yours, Jack, people who look like their dogs.
CAFFERTY: This is hilarious.
(CROSSTALK)
WASTLER: So close it's kind of scary.
CAFFERTY: It is scary.
SERWER: Holy smoke look at those.
ROMANS: Have you ever watched people walking their dogs in Manhattan and you can't believe how they look like their dogs.
SERWER: And they grow to look like their dogs as they get older. They grow to like each other. Jack, let's get your dog on the show.
CAFFERTY: Well, my dog is a funny looking old yellow terrier. More hair than I do.
(CROSSTALK)
CAFFERTY: Any ways, that is a fun site. I have been on it. Check it out. Thanks Allen.
We are headed into the home stretch on IN THE MONEY. Up next, we'll get your thoughts on how the government it treating wounded veterans. Most of you don't think they are doing enough. You can tell us what you think about just about anything. You can e-mail us at inthemoney@cnn.com. Jake Novak (ph), one of our producers will actually answer your mail. And if you don't like his response on the e-mail, he'll come out to your house and discuss the issue with you in person. We'll be back after this.
(COMMERCIAL BREAK)
CAFFERTY: Time to check the answers to our question about whether the government is doing enough for our wounded veterans.
Tom wrote this, "No! Our vets need better, care, longer recuperation time and more money. When this administration won't allow the caskets of our dead troops from Iraq to be shown on TV you see how it really feels about the armed forces." I'm not sure that is exactly accurate. I think they may not want to have those pictures on television. I'm not sure their feelings about the armed forces have anything to do with that.
Any ways, James wrote this, "The government is not doing enough. But I'm sure if everyone serving in Congress was forced to do real military service than things would be done quite differently." Touche.
And Sarah wrote, "Of course we're not doing enough, but hey, if we won't even fess up to how much more money this war will cost us, then we're not admit how many people are getting hurt in it."
Our e-mail question for this week has to do with the jury system. Does the American jury system need fixing?
You can let us know how you think you would go about repairing it, if in fact, it's in need of repair. Send us your answers to inthemoney@cnn.com. Check out our show page on the Web at money.com/inthemoney. That's where you will find the address for the fun site of the week and other interesting little notes about this program.
(CROSSTALK)
WASTLER: Maybe juror number four will write in and answer the question.
CAFFERTY: What a shame that is. Maybe she's right, and maybe the other 11 are wrong. But what a shame that is. How much it cost the taxpayers to try that case. They are going to have to do it again.
SERWER: You can blame the prosecution too. I don't think that was a slam dunk the way they presented it. They went on and on and on. They made perhaps more complicated than it should have been.
ROMANS: For six months, the other 11 jurors, 12 juror altogether and the alternates I guess. Six months of their lives, now the whole thing all for nothing.
CAFFERTY: You know what the worst part of all is?
We will get so tired of seeing juror number four when she makes herself public, and starts...
ROMANS: And you've heard how the bookers of every major media organization is out there trying like crazy...
SERWER: A reality show! With juror number four.
(CROSSTALK)
CAFFERTY: All right. Well, we'll have to find out whether they will put that thing on trial again.
What do you think?
SERWER: Retry it definitely.
(CROSSTALK)
CAFFERTY: Thank you for joining us for this edition of IN THE MONEY. Thanks to our regular gang, CNN correspondent Christine Romans, "Fortune" magazine editor at large, Andy Serwer, Money.com managing editor, Allen Wastler.
Join us next week, Saturday 1:00 Easter, Sunday at 3:00. Or you can catch Andy and me all week long on "AMERICAN MORNING" starting at 7:00 Eastern tome. Until the next time we get together, thanks for joining us and enjoy the rest of your weekend.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired April 4, 2004 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
Announcer: From New York City America's financial capitol. This is IN THE MONEY.
(END VIDEOTAPE)
JACK CAFFERTY, HOST: Welcome to IN THE MONEY. I'm Jack Cafferty. Coming up on today's program:
Disorder in the court: It only took one juror to throw the Tyco trial into an uproar. We'll look at what, if anything, is wrong with the jury system, and how to fix it.
Plus, a stake in the diamond business: See what it takes to buy your own baseball team. (UNINTELLIGIBLE) the diamonds on the ball field. We checked the price tag, payback. Talking minor league teams here, it's a very hot business idea these days.
And how the Hill beats the Street regularly: A bunch of Senators put money on stocks and whipped Wall Street by a mile. The whipped corporate insiders by a mile. Let's see what's behind the senators' winning streak. Shall we?
Joining me today, a couple of the IN THE MONEY veterans around these parts, CNN correspondent, Christine Romans, "Fortune" magazine editor-at-large Andy Serwer. One of the great stories of the past week, had to be this sudden 180 done by the White House on whether or not they were going to allow national security adviser Condoleezza Rice to appear under oath and in public before the September 11 Commission.
CHRISTINE ROMANS, CNN CORRESPONDENT: This just got too big.
CAFFERTY: What up with that?
ROMANS: This just got too big for the White House not to let it -- not to change course, because everyone was talking about this and watching Condoleezza Rice on every news network, giving her side of the story. Finally they had to capitulate.
ANDY SERWER, "FORTUNE" MAGAZINE: Well, I didn't understand that to begin with. I mean she can go on "60 Minutes," but can't testify? I mean, it seems like "60 Minutes" is kind of an open forum where you'd probably want to tell the truth because you can get caught in a lie. So, why not testify? The other thing, Jack, I think more broadly is, boy, the American people really want the light of day in this process as much as possible. I don't think it's a partisan thing, I just think people want everything out.
CAFFERTY: I agree to a point, but I think there was a little partisanship behind it.
SERWER: Oh...
CAFFERTY: I think John Kerry would have turned this thing into a campaign commercial in a heartbeat if they held firm to their position and refused to let her do it.
ROMANS: This whole 9/11 thing, though -- the 9/11 Commission thing -- you know, it's a lot of rewriting history. But, let's be honest. No one had the imagination for September 11th before it happened and that's why we are where we are right now, and all of this -- you know, hemming and hawing, who's going to give a speech about...
SERWER: That we could have prevented it, I think that's probably a stretch.
CAFFERTY: That maybe a stretch, but then somebody said once, you can't know anything about where you're going unless you understand where you've come back.
SERWER: That's right.
CAFFERTY: And so, maybe that's worth looking at this thing. That's not for us to decide.
SERWER: Good.
CAFFERTY: Those a lot bigger issues than we're capable of.
The jury system is supposed to ensure that you will be judged fairly by your peers. And it works just fine, if you're under the assumption that your peers, a bunch of daytime TV watchers who don't get out too much and never check the news too closely. Disputes over jurors have shaken up two big trials recently, involving Martha Stewart and former Tyco CEO Dennis Kozlowski. And with that in mind, we wanted to take a look at the jury systems, see whether or not it might need an overhaul.
Joining us from Washington, D.C., Paul Rosenzweig of the Heritage Foundation, a senior research fellow at the Center for Legal and Judicial Studies.
Nice to have you with us. Thanks for joining us.
PAUL ROSENZWIEG, HERITAGE FOUNDATION: Thanks for having me.
CAFFERTY: Is it broken?
ROSENZWIEG: Well, I don't know if it's broken, but it's certainly in an odd position. I mean, you're absolutely right, that the only way to get on a jury right now is to be retired or a government worker who can take leave from the job, or somebody who doesn't read the newspapers at all and has no knowledge about what's happening in the world. It's a long change.
CAFFERTY: With all due respect, they didn't have any trouble dragging me down and putting me on a jury. I served less than a year ago over there in Newark, New Jersey.
I don't know, at least in some states, I think, haven't they changed the law now where you can no longer get exemptions and they can pretty much take a cross-section of everybody? I mean, lawyers, doctors, firemen, everybody -- people that used to be able to be exempt from jury duty no longer can duck out on it?
ROSENZWIEG: That's right, there's no legal exemption, but what really happens, of course, is that the lawyers, like me, are intent upon trying to find the most malleable jurors that they can. They'll exclude you...
CAFFERTY: That's you, Jack!
ROSENZWIEG: And -- well, they'll exclude you, if they can, and also people like you probably have learned a lot of the tricks on how to avoid service, if you want to. Just say you know a lawyer, have strong opinions about the law and they'll get rid of you in a heartbeat.
SERWER: Well I know where you're coming from, but isn't it true in the overwhelming majority of cases, there are no problems at all. We only hear about these jury problems when you get a very a high- profile case, with a lot of expensive lawyers looking for any way to weasel out of a verdict that they can?
ROSENZWIEG: Oh, I agree completely. I mean, by and large, jurors are the salt of earth and they really understand what's happening. In fact, I kind of take it the other way. I think the right answer is we take the first 12 people that we get who don't know...
SERWER: Just walk in the door.
ROSENZWIEG: Yeah, well, who don't know -- randomly selected, so they don't know the victim -- you know, the defendant, or something particular about the case. But, we need to get past this whole idea of -- you know, trying to sift people and mold juries and -- you know, the whole business of jury consultants is just really disturbing.
ROMANS: Let's talk about juror No. 4, I mean she is really an amazing piece of work. Lands herself on the front page of newspapers, she did or did not give the OK sign to the defense, she's got a legal background. What about juror No. 4? I mean, somebody who's got a background in the law, and maybe is a very, very outspoken person -- should she have been on that jury in the first place?
ROSENZWIEG: Well, in my view, yes. I mean, I know most people don't agree, but lawyers are people, too, you know? Yeah, seriously we're -- the jury system should be a cross- section of the entire community. Not a selected group that is whittled down to find the least common denominator or exclude anybody who might have an independent thought. It's not just lawyers, it's anybody who has opinions, strong opinions, they're part of the community as well, and they ought to be on the jury, if they don't know the case itself and if they say that they can put aside their opinions and hear case on the facts.
CAFFERTY: What's caused this sudden explosion in -- in fussing around over the fine details of getting a jury seated? I'm thinking of Mark Geragos out there in California on the Scott Peterson thing. I mean, he's going to try every state in the union to get this seated, and keep moving and for a change ever venue. The fact of the matter is, we live in an age of mass media, a high-profile a case like the Peterson case gets a lot of coverage in the news and you're not probably going to ever be able to find 12 people who aren't locked away in some institution who haven't heard of the Scott Peterson case. How come we can't overlook or at least accept that fact and go ahead and make allowance for it and put people in a jury and get these things under way?
ROSENZWIEG: Oh, I agree with you completely and the answer is that the jury selection system is operating under an old set of rules that come from a time where there was no mass media. That come from a time where you could anticipate finding people who hadn't been exposed to the facts of the case and so we had a rule that exposure was kind of a disqualification. But now, in the post-O.J. -- you know, post- Scott Peterson timeframe, everybody is exposed to the news in increasingly rapid cycles and it's just not realistic, plus, it's not really important. I mean, everybody knows about the Scott Peterson case, because they've heard it from you, but nobody really know what's to think about the case. We all hear a bunch of talking heads talking about it.
CAFFERTY: Sure.
ROSENZWIEG: The real case is in the courts.
CAFFERTY: There you go. Paul, we got to leave it there. Paul Rosenzwieg, of the Heritage Foundation, thanks for being on the program, and I appreciate the tips on how to get out of jury service.
ROSENZWIEG: You bet, yeah.
CAFFERTY: Thanks a lot.
ROSENZWIEG: Thanks for having me.
CAFFERTY: Coming up next on IN THE MONEY as we continue:
A team of your own: We'll tell you what it takes to put your money in play on the baseball field.
And later, they sure can pick 'em: Find out about a study that says, surprise, surprise. Senators do better on Wall Street than ordinary investors.
Plus, a virtual education: Get the word on a college where playing video games is not a problem, it's an actual course. Go figure.
(BEGIN VIDEOTAPE)
ANNOUNCER: Competitors across the globe wish they could fill the shoes of Nike. This year the industry leader in the apparel category. The company sells its products throughout the U.S. and in about 200 other countries. And even though Nike ranks as the world's number one shoemaker these days, variety is the name of the game. The company now sells everything from yoga apparel to hockey gear to golf equipment. However, Nike has been slow to break into the world of non-team sports, such as skateboarding, where consumers are typically anti-swoosh. Nevertheless, Wall Street seems impressed by Nike's efforts. The stock has nearly doubled in the past year.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
SERWER: You need major league money to buy a major league baseball team, and that probably rules out those that haven't made our first billion yet. But, even mere mortals can pick up a ball club as long as we think a little smaller and with spring training coming to a close, we're going to find out how it's done. Russell Pearlman has the skinny on that. He's the senior writer at "SmartMoney" magazine.
Welcome Russell.
RUSSELL PEARLMAN, "SMARTMONEY" MAZAGINE: Hi, thanks for having me.
SERWER: So, we're taking about minor league teams, here. Is it really true that a wealthy person, you got to be pretty well off, can get together with a bunch of people and buy one ever these teams?
Yeah. The going rate these days for a minor league baseball teams can be upwards of $10 million for a triple A team, and even those are hard to find because most of the major league teams own their triple A affiliates. But now, even double A's go for seven-and- a-half million dollars and single A teams go for $5 million.
SERWER: That's still a lot of money.
ROMANS: Well, there's three of us here, together we can put together, right guys? We could buy something out in the Midwest.
SERWER: With a big loan from Uncle Jack.
ROMANS: You know, absolutely. You know, refurbish a little town maybe something along the river, but you've got to watch every single penny -- don't you? Because, a lot of people who do this end up losing a lot of money? PEARLMAN: Yeah, this is certainly not a business to put down the money and then decide to sit in the bleachers the next summer and not worry about things. To make money in minor league baseball you really have to hustle. You have to be able to sell advertising, you've got to sell luxury boxes, if you have them, or just put fannies in seats. It's a really difficult, pretty low-margin business. One of the owners equates it to the grocery business, which is only about one to two percent margins. That's not far off from the norm.
CAFFERTY: Is there anything lower than single A?
PEARLMAN: There's rookie league, but...
CAFFERTY: How scruffy is the baseball when you get down around that single A situation?
PEARLMAN: It's a little bit better than if I suited up, but, you know...
CAFFERTY: Let's hope.
PEARLMAN: People just go for the entertainment value. They go just to see America's pastime and just enjoy a couple hours in the sunshine.
CAFFERTY: Well, you know, we were kidding around here, but there's something very pleasant about watching a minor league baseball game, as opposed to fighting your way through the traffic in the south Bronx, or out in Queens to get to either Yankee Stadium or Shea Stadium.
I saw an average breakdown for four tickets to a regular season Yankee game, if you get a couple of hot dogs and a Coors, it's like $200 or some ridiculous amount of money. They got the Newark Bears out there in Newark, New Jersey, go there on a summer evening, no problem getting a good seat, the hot dogs taste as good, and you can do the whole thing for a heck of a lot less money. But, is it a kind of business, if I'm looking to get into a --you know, business for myself, is this the kind of business I ought to look into getting into?
PEARLMAN: Well, as one of the owners told us, it's not the place to put your money. There's less risky higher-return businesses to go in. But, it's certainly something if you have the money and you want to be willing to work at it and you love baseball. Sure, it's a great place to go get some investors together and ultimately -- you know, you can, after all the hot dogs are sold -- you know, you can watch and look at your park and say -- hey, you know what? This is mine. I'm making people very happy sitting and watching a game.
SERWER: Hey Russell, the mayor of Corpus Christi, Texas, came up to visit me the other day and was complaining to me about minor league baseball teams. He was saying they came to town and basically, sort of, left with some bills that they didn't pay? Now, they're getting a new team in, Nolan Ryan's kid's bringing in a new team in, they hope this is going to be very successful. It looks like a better operation. But, don't a lot of these times -- a lot of times these teams actually kind of mess up some of the town's finances?
PEARLMAN: Yeah. Unfortunately if you're not a particularly good owner you can lose a lot money and there's about 175 teams affiliated with minor league baseball, umbrella organization, and usually about 20 to 30 a year move and unfortunately, there's some owners who decide not to pay their bills.
CAFFERTY: Well...
PEARLMAN: You know, just like any business, unfortunately.
ROMANS: You know, Russell, somebody's out there has to be making money. I mean, the Iowa Cubs, for example. There are some teams that -- you know, always pack 'em in and seem to be doing well. Right?
PEARLMAN: Yeah. I mean, we asked a couple of owners to give us their income statements and the owner of the San Angelo Colts, which is an independent team in lovely west Texas showed us their income statement and they clear about a million dollars -- I'm sorry, they have about a million dollars in income each year, and they clear about $76,000 of that. So, you know...
ROMANS: You've got to love this to do it.
PEARLMAN: Yeah, I mean, yeah. It's an eight percent return. It's not great. I mean, certainly the stock market has an average of about eight percent return over the last 50 years, and certainly a lot risky and a lot less work. But, you know what? You don't go in for the return. You go in because you love the game, like being outside. You like being close to your fans and close to your customers. I mean, the people that we trailed for this story, one worked at Leo Burnett advertising Agency for a long time and the other in magazine publishing. So, they certainly have an affinity for customers.
ROMANS: All right, Russell Pearlman, "SmartMoney" magazine. Thanks for joining us.
PEARLMAN: Thanks for having me.
ROMANS: Time for us to go feed the cash cow.
Coming up right after the break, a pickle for Heinz: See how the company is handling a tricking political connection.
Also ahead, street savvy: Find out why some senators played Wall Street better than the pros.
And the neighborhood playground: Find out what a new study says about having a casino within easy driving distance.
(COMMERCIAL BREAK)
ROMANS: Let's look at the week's top stories in our "Money Minute." OPEC agreed to cut production even as crude oil prices hover near 13-year highs. But, there are questions about the impact of the cut since OPEC is thought to be pumping out considerably more crude than its quotas call for already. And gas prices in the U.S. did ease off a bit this week after setting several records the week before.
Eli Lilly steps it up it campaign to stop the sale of Canadian drugs in the U.S. The drug maker is requiring Canadian internet pharmacies to prove they're ordering drugs for the Canadian market only.
And, things may be getting too real for reality show star, Donald Trump. The Donald's hotel and casino resort business is dealing with a mountain of debt and stiff competition from other gaming companies in Atlantic City. Now Trump may need a financial bailout or concessions from bond holders to save the company from bankruptcy.
SERWER: All right. Thank you, Christine.
Some of the most vigorous campaigning right now isn't going on in the presidential race. It's going on in the boardroom at H.J. Heinz. That's because the ketchup and pickle giant wants to distance itself from any possible connection to John Kerry's run for president. Some conservative groups have been trying to launch a boycott against Heinz products because Theresa Heinz in an heiress to part of the Heinz family fortune and John Kerry's wife, as well. Now, the company has sent out letters to radio and TV talk show across the country announcing that Heinz is not sending money to John Kerry, who's the democratic presidential nominee, of course.
But, that's about as controversial as it gets for Heinz, which over the last year has been a relatively rock-solid performance, steady market performer, as well. H.J. Heinz is our stock of the week.
You know, I'm going to a big public service for this Pittsburgh company, they have nothing to do with John Kerry. I mean, they really don't have anything to do -- it's just ketchup, it's red, you put it on hamburgers and french fries.
ROMANS: And it's also green and purple. That was the biggest (UNINTELLIGIBLE).
SERWER: That flopped. And that flopped.
CAFFERTY: And she, despite being an heiress to the Heinz fortune has nothing to do with running the company. She's not on the board, she doesn't have a job there, she doesn't work in the warehouse, she doesn't do any of that stuff.
ROMANS: And she's actually more Kerry than Heinz these days, isn't she now? Isn't she Theresa Heinz-Kerry, before that she was just Theresa Heinz?
SERWER: That's right, I mean she is connected to the foundation and there is that one connection, that was about, I thing, four percent of the foundation plus her holdings. But, again, nothing to do with the company. This company was run by Tony O'Reilly, the great Irishman for many, many years now turned it over to a guy named William Johnson, who by the way, is the son of Tiger Johnson, the coach of the Cincinnati Bengal's. Is that American enough for you? I mean that's pretty American. Right? I mean, red, white and blue -- you know, I mean, it's not a liberal democratic conspiracy.
CAFFERTY: He probably got the contract to put the ketchup on the hot dogs out there where the Bangles play.
SERWER: Well, except the Steelers in the home town, it's all a big mess.
CAFFERTY: So do you buy the stock? This is one of those stocks that is pretty, like you said, rock-solid, it performs year in and year out, unless the American consumer quits eating ketchup, they're probably going to be around?
SERWER: Yeah, I mean, this stock has been mediocre one over the years, Jack. And food stocks get hot every once in a while. Yeah, it hasn't done that well. But I mean, it's just like you're suggesting, over time, I guess it's probably a good thing to own. Why not? Right?
ROMANS: All right, a little ketchup on the bun, I guess.
CAFFERTY: There you go.
SERWER: All right, we're going to take a break, but coming up:
U.S. senators get a nice Capitol Hill office and a six-year term and the may also be getting a leg up on the stock market. We'll check the results in an interesting study.
And, betting on black may leave a lot of people in the red. We'll look at the possible connection between casinos and personal bankruptcy. Stay tuned.
(COMMERCIAL BREAK)
CAFFERTY: You may think corporate executives get the sweetest deals when it comes to investing in the stock market, that's the wrong answer. A new studies says the biggest winners when it comes to investing are some of our elected leaders. Joining us with details on the story is Alan Ziobrowski of Georgia State University Robinson's School of Business, joins us today from Atlanta, Georgia.
So, let's see, the United States Senate outperformed the average investor by about 12 percent a year.
ALAN ZIOBROWKSI, GEORGIA STATE UNIVERSITY: That's right.
CAFFERTY: That's not insignificant. Why does that happen?
ZIOBROWSKI: The study does not go into the notion of whether or not -- how they obtained their gains, but I don't think one needs to use their imagination too far to realized that there's privileged information the rest of us just don't have.
CAFFERTY: You are suggesting they would take advantage of this information in order to acquire personal gain?
SERWER: Jack is shocked.
CAFFERTY: Shocking.
ZIOBROWSKI: As crazy as that sounds, I think that's what we are suggesting.
ROMANS: It could be just that they are smarter than the average public, maybe.
CAFFERTY: I doubt that.
ZIOBROWSKI: That's very difficult to argue because one of the things we do in this test is to benchmark our results against corporate executives who trade stock of their own companies. And nobody could know more before their companies than these guys do, and senators outperform them. It's hard to argue that they're that smart.
SERWER: I read your report and some Senate disclosure forms. I think what you have done is raised a lot of interesting questions. When you look at science of this it's not a slam dunk, is it?
You look at the disclosure forms it can be a family member who trades, also your time period is not that long.
And so are you really certain that this would hold up to statistical scrutiny?
ZIOBROWSKI: Yes, we really are. I guess the key issue is it's not so much of a question of how long but how many data points. We looked at some 6,000 transactions. So, with a population that large, it's clear to do some statistical analysis that are pretty strong.
CAFFERTY: What about the regulatory agencies that are designed to oversee the levelness of the playing field?
If members of the Senate can outperform the rest of the investing community by 12 percent based on information they have that the rest of us don't, why doesn't the SEC know about this, do something about it?
Or is this just one of those little perks that goes along with being inside the beltway?
ZIOBROWSKI: I guess technically the answer to that question is if you have to ask the SEC. But the truth of the matter, as far as we can determine there is no law against this. If they pick up some information in the course of their normal business dealings, there is nothing that says they can't trade stocks.
ROMANS: It's not necessarily a surprise. We were joking but how we were shocked that they outperform the rest of the market. But remember Hillary Clinton and the cattle futures, as long as there has been power and prestige in Washington, there have been people have been able to get something extra out of it, after all they are not paid very much money. ZIOBROWSKI: That's true. One of the examples we give in the papers, if of course, the famous LBJ example of his media company and what he did with the SEC. So, this is something that has been going on for a long time.
SERWER: When you look at the Senate disclosure forms, it shows that a senator would own a security and then not own it anymore. Sell it.
They don't have the date of sale during the year, though, do they?
ZIOBROWSKI: Yes, they put in -- they have to declare the day and again roughly the amount and the name of the company they bought. So, we have the exact date they made the transaction.
SERWER: But it's difficult for you to have gotten this information. The disclosure here is not what it should be, don't you think?
ZIOBROWSKI: It's horrible. And it's also intimidating because when you request to see these forms, and to get a copy, you have to give your name, and you have to give your organization, a lot of other things which certainly makes you wonder if the issue is public disclosure why are they asking you for all that information if you want to look at the forms.
SERWER: You are just a taxpayer, right?
ZIOBROWSKI: That's right.
ROMANS: If I were running for Congress, you would think I wouldn't want to get nailed, you know, making more money than anybody else on some kind of an inside tip or anything. You'd think that senators and congressmen in this country would be squeaky clean, wouldn't you?
ZIOBROWSKI: I guess that's the presumption. But, again, history would say otherwise. Certainly, there have been a number of people -- the LBJ case is a classic example of where that does not hold.
LISOVICZ: Did not mean to put you on the spot about the integrity of the elected officials in this country.
Alan Ziobrowski, thank you so much for joining us today.
ZIOBROWSKI: Thank you.
ROMANS: When IN THE MONEY continues, holding them and folding them.
Do more casinos mean more bankruptcies?
And playing video games in class will get new trouble but not at USC.
We'll explain just ahead.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: In the music industry he is known as the ear. Clive Davis founder and CEO of J Records is the driving force behind many successful artists, including Whitney Houston, Carlos Santana and Alicia Keys.
CLIVE DAVIS, CEO, J RECORDS: The key to the business is really success ratio. So, you've got to be very careful before you sign an artist, before you take on a that kind of responsibility. So often you find those throwing 10 up against the wall, bragging about the one that is successful.
UNIDENTIFIED MALE: Recently the more than 36-year music veteran was named chairman and CEO of BMJ America, but again was back on top at Arista Records after being ousted four years ago.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
SERWER: All right if the new study is right people are more likely to gamble until it hurts if there's a casino down the road. Researchers found counties with legalized gambling have twice as many personal bankruptcies as counties that don't. That runs contrary to other surveys and to claims from the gaming industry.
Alexandria Marks covered this story for "Christian Science Monitor" where she's a staff writer and she joins us now.
Welcome, Alexandria.
ALEXANDRIA MARKS, "CHRISTIAN SCIENCE MONITOR": Thank you.
SERWER: Explain to us your story.
MARKS: Well, it's kind of interesting that there's been this long brewing controversy about what social impacts having gambling in a county have. And people who are in the gaming industry, AKA the gambling industry, they try to call themselves the gaming industry to get away from all the connotations with gambling. But they say, look, you know there is no tie. You can have, you know, casinos, you can have lots of video lotteries, but you won't find a direct tie with personal bankruptcies. On the other hand there are a lot of anti- gambling activists and also researchers who say that is not the case. If you look at the actual data and go county by county, you find that personal bankruptcies in counties that have casinos are 100 percent higher. At the same time what's interesting is that business bankruptcies are 35 percent lower.
You know, Alexandria, for me, I grew up in the quad cities, in Iowa, Illinois, and Mississippi River, in 1989 they started riverboat gambling. And it used to be before 1989 you'd drive into town and there was a big bill board with Buffalo Bill, and it said welcome QCA home Of buffalo Bill. Now it says welcome to the QCA do you have a gambling problem? And it has Gamble Anon or whatever on the bottom.
Is this because people are gambling their money away or because boats and casinos bring in lower-wage jobs and you've got people working around the clock, and it just sort tears apart the fiber of the community?
MARKS: That's one of the key issues. They figure about 125 Americans gamble. About 80 percent of them have no problem at all. It's entertainment, they go out. About 7.5 million have a serious gambling problem. You know, they are compulsive gamblers. Another 15 million are at risk for that kind of problem. When a casino comes to town, the problems which maybe latent, suddenly begin to manifest themselves. So that you do have -- it does have an economic impact. At the same time it brings in jobs, a lot of cities require these casinos to buy all their goods from local vendors. So, it can have a positive economic effect at the same time. So it's really hard to tell.
I mean, the crime rate is another thing I get a charge out of in terms of this debate, but the people who are in favor of casinos will say, look, you bring a casino in, your crime rate goes down and it does. But the actual amount of crime goes up. But because when you are doing the crime rate you calculate visitors into the city, it brings the actual rate down.
Does that make sense? You have a casino, you have all these people come into the county. So it's one of those debates, and personal bankruptcy is another thing, it's very hard to pin down. That's what is going on. A lot of researchers are saying let's find out for sure what impact it has. And so this study of Creighton University, they looked at counties in 1990 that did not have casinos, and then -- and compared them with counties that did, and then did the same snapshot in 1999. And I thought the findings were pretty stunning.
CAFFERTY: What are they going to do about this?
People are gamble whether it's on horses or dogs or a dice game at the corner or whatever.
MARKS: The Internet now.
CAFFERTY: Not everybody who drinks becomes an alcoholic, but some people do. Not everybody who smokes gets lung cancer, but some people do. Not everyone who gambles declares bankruptcy.
Is there a solution here or is this just a social debate without an answer?
MARKS: Well, you know, obviously, you know, the sign you see in the Quad Cities when you walk in -- when drive into the cities, do you have a gambling problem?
There's an effort under way within the gaming industry itself to promote responsible gambling. And a lot of state governments, when they sanctioned casino gambling, they will also have a certain percentage of resources that will go towards like Gambling Anonymous -- not Gambling Anonymous, but programs to help problem gamblers. So, that goes on. It's an issue of personal responsibility, but also there's sort of larger social issue. When that story ran, I got e- mails from people, thank you. Everybody says they're great. You know, casinos are great for the local economy, but my grandmother sat at the slot machines and gambled away. There's a lot of heartache that you can't just measure. That's out there, too.
Is there a solution? I don't know.
SERWER: I want to talk to you about the statistics. I'm always on the lookout for these things. You have to dig very deeply. I'm familiar with the Foxwoods Casino, Mashantucket Pequot up there Connecticut. I don't have a problem by the way. I just want to make that clear.
MARKS: How familiar are you?
SERWER: It's a depressed area. You're talking about a part of Connecticut, not a lot of jobs at all. The casino is like on the shining hill there, they created a lot of wealth for the Indian tribe. The surrounding area is still poor, OK.
I'm wondering, aren't these casinos in poor rural areas where there might be a lot of bankruptcies any way? Have you really delved into this?
MARKS: That's one of the things the people in the gaming industry, AKA gambling industry, will argue is that if you look at these communities that they had higher rates of bankruptcy even before the casinos came in. Some of the studies done try to account for that. And still found increased rates of personal bankruptcies. So, you know, that is a factor. There are many variables that deal -- that are a result that cause these personal bankruptcies. A lot of the of people in the gaming industry, will also say, look it's the credit card companies. It's easy credit (UNINTELLIGIBLE).
If you 7-year-old, you know is on some mailing list, he could easy get an advertisement for credit. Easy credit, less stigma having to do with -- it used to be declaring personal bankruptcy was just scandalous. Now there's less social stigma while business bankruptcies which are a small percentage of the bankruptcies in the United States, they went from 63,000 a year to about 37,000 a year in the decade of the '90s, personal bankruptcies soared from 770,000 to 1.2 million. So, there's something going on. A lot of people say, look, during that same decade you had this huge expansion of casino gambling. But it's obviously complicated social phenomenon.
SERWER: All right, Alexandria, we will have to leave it at that. Thank you. Obviously, a huge business. Alexandria Marks, staff writer for "Christian Science Monitor."
Time for us to make the ad sales department happy. After the break, how to get credit for a jiggling a joy stick. Find out about a college where you can do your homework while playing video games. Oh, come on. Here's another reason to get in front of the computer, send us an e-mail and tell what's on your mind. Our address is inthemoney@cnn.com.
First though Susan Lisovicz, makes a cameo appearance for this week's edition of MONEY AND FAMILY.
(BEGIN VIDEO CLIP)
SUSAN LISOVICZ, CNN CORRESPONDENT: April 15th is right around the corner. If you have not filed your taxes, yet you may want to get started now. The IRS recently came out with a list of ways to avoid problems during tax time by following a few simple rules, you could save yourself both time and money.
Your first tip is to avoid procrastination. Don't put the taxes off until the last minute. The more of a rush you are in to get them done the more likely you are to make mistakes. Second, organize your tax records by making files for your records and receipts you can save yourself some hassle. Start now by filing last year's income statements, deductions or tax credit items. 3rd, if you have Internet access, visit the IRS online at irs.gov. You can easily access tax forms, publications and instructions on filing your return and check out legal information and frequently ask questions about filing your taxes.
Next week more tips to make tax time a little less taxing. I'm Susan Lisovicz for "Money and Family."
(END VIDEO CLIP)
SERWER: This is the kind of news parents sending their kids to college want to hear. A leading video game company is donating millions of dollars to the University of California, yes, that USC, so it can create a masters program in video game programming. Unbelievable.
Joining us now for more on this latest innovation, can we call that an American education, is our Webmaster Allen Wastler.
ALLEN WASTLER, MONEY.COM: Working on my graduate degree in video games. Yes, majoring in "Grand Theft Auto".
SERWER: Wow. "Grand Theft Auto" is amazing.
WASTLER: With a minor in -- it sounds crazy at first, OK? Video games, you are going to college to studio video games. But Electronic Arts one of the bigger names in the business feels it is worth plowing 8 million dollars into the thing. When you look at the money involved, it makes sense. Video games last year, they took in about $10 billion. So, comparison's sake, let's see. How much did movies take in domestically, about $10 billion. Think about all the film schools out there.
SERWER: At USC.
(CROSSTALK)
ROMANS: Does Electronic Arts have trouble finding good programmers?
Is that why they are doing it.
WASTLER: They are ramping up and trying to get more and more titles. And part of the business is throw a bunch of titles and see what sticks. A successful title will make $200 million for "Grand Theft Auto" franchise the latest installment. That's like a mega hit move, some are not going to do so well. So, you want to have enough developers, programmers and coders throwing that kind of stuff in there.
ROMANS: Not as frivolous as it looks.
SERWER: EA is very successful company too.
WASTLER: It gets very complicated quick very quick. Video games, now the big thing is you want to be able to respond to what do you and you don't want have predictable -- if I go that way, he will shoot me if I go this way, I will bump into that. You want some sort of unpredictability. It takes complicated programming to get that into a computer program where it is acting like a human being.
SERWER: Kind of like this show, Jack, unpredictability.
CAFFERTY: Who knows where else the applications for those ideas could be down the road either. I mean, somebody could come up with some new idea's and technology for video games and it could be applied to (UNINTELLIGIBLE).
WASTLER: A lot of it goes -- they are working now on hardware in video games where you connect it to your body and you sort of play like that.
SERWER: You know what I saw that was really cool, everyone complains how it makes everybody a couch potato. They had a bike, a stationary bike where pedaling like this and you were in the game. So you were exercising while you were in the game, which I thought was cool.
CAFFERTY: Let's get this over to something I can understand, dogs.
WASTLER: Dogs were in the news this week. The University of Wisconsin situation, we spent a lot of time watching the dog go around. Studying this week how people pick dogs. Well, an old favor of yours, Jack, people who look like their dogs.
CAFFERTY: This is hilarious.
(CROSSTALK)
WASTLER: So close it's kind of scary.
CAFFERTY: It is scary.
SERWER: Holy smoke look at those.
ROMANS: Have you ever watched people walking their dogs in Manhattan and you can't believe how they look like their dogs.
SERWER: And they grow to look like their dogs as they get older. They grow to like each other. Jack, let's get your dog on the show.
CAFFERTY: Well, my dog is a funny looking old yellow terrier. More hair than I do.
(CROSSTALK)
CAFFERTY: Any ways, that is a fun site. I have been on it. Check it out. Thanks Allen.
We are headed into the home stretch on IN THE MONEY. Up next, we'll get your thoughts on how the government it treating wounded veterans. Most of you don't think they are doing enough. You can tell us what you think about just about anything. You can e-mail us at inthemoney@cnn.com. Jake Novak (ph), one of our producers will actually answer your mail. And if you don't like his response on the e-mail, he'll come out to your house and discuss the issue with you in person. We'll be back after this.
(COMMERCIAL BREAK)
CAFFERTY: Time to check the answers to our question about whether the government is doing enough for our wounded veterans.
Tom wrote this, "No! Our vets need better, care, longer recuperation time and more money. When this administration won't allow the caskets of our dead troops from Iraq to be shown on TV you see how it really feels about the armed forces." I'm not sure that is exactly accurate. I think they may not want to have those pictures on television. I'm not sure their feelings about the armed forces have anything to do with that.
Any ways, James wrote this, "The government is not doing enough. But I'm sure if everyone serving in Congress was forced to do real military service than things would be done quite differently." Touche.
And Sarah wrote, "Of course we're not doing enough, but hey, if we won't even fess up to how much more money this war will cost us, then we're not admit how many people are getting hurt in it."
Our e-mail question for this week has to do with the jury system. Does the American jury system need fixing?
You can let us know how you think you would go about repairing it, if in fact, it's in need of repair. Send us your answers to inthemoney@cnn.com. Check out our show page on the Web at money.com/inthemoney. That's where you will find the address for the fun site of the week and other interesting little notes about this program.
(CROSSTALK)
WASTLER: Maybe juror number four will write in and answer the question.
CAFFERTY: What a shame that is. Maybe she's right, and maybe the other 11 are wrong. But what a shame that is. How much it cost the taxpayers to try that case. They are going to have to do it again.
SERWER: You can blame the prosecution too. I don't think that was a slam dunk the way they presented it. They went on and on and on. They made perhaps more complicated than it should have been.
ROMANS: For six months, the other 11 jurors, 12 juror altogether and the alternates I guess. Six months of their lives, now the whole thing all for nothing.
CAFFERTY: You know what the worst part of all is?
We will get so tired of seeing juror number four when she makes herself public, and starts...
ROMANS: And you've heard how the bookers of every major media organization is out there trying like crazy...
SERWER: A reality show! With juror number four.
(CROSSTALK)
CAFFERTY: All right. Well, we'll have to find out whether they will put that thing on trial again.
What do you think?
SERWER: Retry it definitely.
(CROSSTALK)
CAFFERTY: Thank you for joining us for this edition of IN THE MONEY. Thanks to our regular gang, CNN correspondent Christine Romans, "Fortune" magazine editor at large, Andy Serwer, Money.com managing editor, Allen Wastler.
Join us next week, Saturday 1:00 Easter, Sunday at 3:00. Or you can catch Andy and me all week long on "AMERICAN MORNING" starting at 7:00 Eastern tome. Until the next time we get together, thanks for joining us and enjoy the rest of your weekend.
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