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American Morning

Former Enron CEO Ken Lay Surrenders to Federal Authorities

Aired July 08, 2004 - 08:00   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.


BILL HEMMER, CNN ANCHOR: Good morning.
Prosecutors investigating the Enron collapse get to the top. Former CEO Ken Lay now in the hands of authorities.

Violence in Iraq claiming the lives of more U.S. soldiers. Four killed today when insurgents attacked the military headquarters in Samara.

And the man whose story shocked America in the 1960s -- a soldier crossing over to North Korea. Will he finally leave that country?

All those stories now on AMERICAN MORNING.

ANNOUNCER: From the CNN broadcast center in New York, this is AMERICAN MORNING with Bill Hemmer and Soledad O'Brien.

HEMMER: Good morning, everyone.

Welcome.

Heidi Collins working for Soledad throughout the week here.

Good to have you.

HEIDI COLLINS, CNN ANCHOR: Thanks.

HEMMER: You liked that yellow jersey comment (UNINTELLIGIBLE).

COLLINS: That was really very good. One of your best.

HEMMER: Thanks.

The Tour de Lance continues.

In a moment here on AMERICAN MORNING, former Enron CEO Ken Lay surrendering to federal authorities; in fact, just about an hour ago, a day after he was indicted by a grand jury in Houston. He's at a federal courthouse now, where we expect the indictment against him to be unsealed. Much more on this story still developing in a moment here.

COLLINS: All right, we are also looking at Senator John Edwards this morning, on the campaign trail with John Kerry, of course. We're going to take a more in depth look at his career as a trial lawyer to see if it could actually pose a problem for him as a candidate.

HEMMER: All right, Jack, what's on your mind -- good morning.

JACK CAFFERTY, CNN CORRESPONDENT: Not a lot. Anything else?

HEMMER: This hour?

COLLINS: Well, there you go.

CAFFERTY: Coming up in the "Cafferty File" in less than an hour, we'll tell you which American food North Korea's Kim Jong Il has introduced to his countrymen. The fact that he is making an effort to feed them anything is newsworthy.

And the Japanese may have figured out a way to know where your kids are all the time, even if they're out of your sight.

COLLINS: Interesting tease there.

HEMMER: The kids love that, I'm certain.

COLLINS: I like it.

CAFFERTY: They didn't have any yellow suits, right?

COLLINS: You would be able to see them anywhere, wouldn't you?

HEMMER: You would love that.

COLLINS: Yes.

HEMMER: You look great.

COLLINS: Thank you.

HEMMER: Let's get to Houston right now. A developing story at this hour. Federal prosecutors now have the jewel, they say, in the crown of their Enron investigation. The company's former chairman, Ken Lay, surrendering to authorities earlier today in Houston. Criminal charges likely to be made public a bit later this morning.

Jen Rogers today shows us how the government worked its way up the Enron ladder.

(BEGIN VIDEOTAPE)

JEN ROGERS, CNN CORRESPONDENT (voice-over): The indictment against Lay comes after a two and a half year investigation into Enron's collapse. In classic prosecutorial fashion, the Enron task force has worked its way up the corporate ladder. Starting small and cutting deals with lower level executives, the government then moved in to the executive suite, charging former CFO Andrew Fastow, who has pled guilty and is cooperating with the government; next, one time CEO Jeffrey Skilling, who has pled not guilty. Now, the man at the top of what was once the nation's largest company is finally on deck for the government.

TOM AJEMME, SECURITIES LAWYER: The strategy right now is to finally make use of all of the good witnesses that the government has cut deals with, from Andy Fastow on down. These people have pledged their cooperation to the government and now the government's going to use these people to come in and turn the evidence over on Ken Lay.

ROGERS: Ken Lay, who was once one of the most powerful executives in corporate America, with key political connections, has always maintained he did nothing illegal. In a statement late Wednesday, released through a spokeswoman, Lay said simply: "I have been advised that I have been indicted. I will surrender in the morning. I have done nothing wrong and the indictment is not justified."

The Justice Department had no comment Wednesday. The exact charges Lay faces are not yet known. The indictment, which remains under seal, is expected to be made public on Thursday, when Lay himself will appear at federal court in Houston.

Jen Rogers, CNN Financial News, Houston.

(END VIDEOTAPE)

HEMMER: Let's continue the story now with Robert Bryce, an investigative reporter who has covered the Enron case from the beginning.

He's the author of "Pipe Dreams: Greed, Ego and The Death of Enron."

Robert Bryce is in San Diego.

Good morning, Robert.

Thanks for your time today.

ROBERT BRYCE, AUTHOR, "PIPE DREAMS": Good morning, Bill.

HEMMER: What charges do you expect in this case?

BRYCE: Well, that's, I mean that's the real question. My hunch is that the prosecutors are going to focus on the time frame after August of 2001, when Jeff Skilling left the company. That's when Ken Lay was forced to take back the job of CEO and I think when the prosecutors are clearly going to be looking at everything that Lay said, particularly with regard to the company's financial health. Because if you recall, about that time the company's Dabhol project in India, in which they had invested about a billion dollars, was not running. In fact, it had been shut down. The Indian government wasn't paying Enron for any of the power that had been generated there.

And, further, their stock was in -- was starting to slide and that was starting to trigger many of these off balance sheet partnership deals that they had that was going to force Enron to come up with a lot of cash.

So that's my guess. So it's -- if the other indictments are any guide, it's going to be wire fraud, securities fraud, mail fraud, the things that the prosecutors think will be easy to present to a jury.

HEMMER: We have heard from many legal analysts, including our own Jeffrey Toobin -- how difficult will it be in this case to get a conviction, as many contend?

BRYCE: Well, you know, Ken Lay sold $187 million worth of Enron stock. So, I mean, clearly, he can afford the best criminal lawyers in the world. And he's hired many of them already. So, you know, I think it's going to be a challenge for the Department of Justice. That said, I think that it's clear the Department of Justice was under tremendous pressure to indict Ken Lay. I mean he's the big fish here. And they've been gunning for him for now for two years. And I think that for the Bush administration, this is, politically, this is a very positive thing for them, because they can say now, look, he may be our friend, but we're tough on corporate crime and we're even indicting Ken Lay.

HEMMER: Can he use as a defense, Robert, can he say I was the CEO, I was unaware, you can't blame me?

BRYCE: Well, it seems to me, you know, he has two excuses -- one, I'm stupid, or I'm a crook. Maybe the third one is I'm a stupid crook. You know, I don't know. I think that he's clearly going to say they left me out of the loop. But for me that doesn't wash.

Look, he was the one who took to the Enron board many of the off balance sheet partnerships that Andy Fastow was touting. He was the one who hired Andy Fastow for that job. He was also the one that put Jeff Skilling in the job of president at Enron. So the failure of Enron is Ken Lay's fault. And, you know, once the indictment is unsealed, it's going to be very interesting to see exactly where the prosecutors are focusing their fire, because I think Ken Lay knows a lot more about what was going on than what he has been saying.

HEMMER: Yesterday in a statement, quoting now: "I have done nothing wrong and the indictment is not justified," the words from Ken Lay.

We all sit back and watch now.

Robert, thanks.

Robert Bryce in San Diego.

BRYCE: Thanks, Bill.

HEMMER: You've got it -- Heidi.

COLLINS: Senators John Kerry and John Edwards' Democratic barnstorming tour makes campaign stops today in Florida and New York. Since Edwards joined the ticket, business groups have mobilized to highlight his past career as a North Carolina trial lawyer.

Congressional correspondent Joe Johns has our report.

(BEGIN VIDEOTAPE) JOE JOHNS, CNN CORRESPONDENT (voice-over): Before he was a running mate, a senator or even a candidate, John Edwards was an enormously successful trial lawyer. Michael Dayton spent years tracking his work.

MICHAEL DAYTON, EDITOR, "NORTH CAROLINA LAWYERS WEEKLY": In a typical year, he would have four or five verdicts or settlements over a million dollars. In another year he might have eight.

JOHNS: The best known Edwards case, little Valerie Lakey of Raleigh. Five years old at the time, she won $31 million for catastrophic intentional injuries when she sat down on a swimming pool drain with a defective cover. The Griffins of Charlotte got $23 million after their daughter Bailey was born with severe brain damage.

In the '90s, Edwards reported 42 verdicts and settlements totaling $174.6 million for people claiming medical malpractice, personal injury, malfunctioning product. The Edwards key -- endless preparation, often horrific facts and a way with words.

DAYTON: He had an incredible skill to personalize the case to make you understand what were we talking here...

JOHNS: Edwards is proud of his trial lawyer days and argues he was looking out for the little guy.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: I beat 'em, and then I beat 'em again, and I beat 'em again and I beat 'em again and I'm proud of those fights, proud of winning those fights on behalf of you and families just like yours.

JOHNS: But his critics, like Republican North Carolina gubernatorial candidate Bill Cobey, say it's about frivolous lawsuits, not the little guy.

BILL COBEY (R), NORTH CAROLINA GOVERNOR CANDIDATE: Nothing could be further from the truth. He's looking out for his pocketbook and he's made millions upon millions upon millions of dollars. And this is a case of where you've got to follow the money.

JOHNS: And more than a third of Edwards' campaign contributions have come from lawyers.

President Bush has argued for years that too many lawsuits, or the threat of them, drive companies out of business and drive up the cost of insurance.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That what we want is quality health care, not rich trial lawyers.

JOHNS: One of the most potent charges against trial lawyers is how much they get paid. On a contingency basis, 35 to 40 percent of the award. But many argue it's not about the money.

RUFUS EDMISTEN, FORMER NORTH CAROLINA ATTORNEY GENERAL: I've never met a plaintiff yet who lost an arm or who had a horrible injury that wouldn't go back and trade all they got for having a healthy body.

JOHNS (on camera): The war over trial lawyers has been going on for years here in North Carolina and across the country. Now, with the highest stakes in politics, Edwards will have to argue another case.

Joe Johns, CNN, Raleigh, North Carolina.

(END VIDEOTAPE)

COLLINS: And in just a few moments, we are going to be speaking with the Washington correspondent of the "Charlotte Observer," Tim Funk. He's been covering John Edwards for about a year and a half or so. We'll be talking to him.

HEMMER: About 10 minutes now past the hour, Heidi.

The "New Republic" magazine is reporting on Bush administration pressure for what it calls a July surprise. That magazine reports the administration has put pressure on Pakistan to kill or capture Osama bin Laden or another "high value target" and to do so before the presidential election of November.

Last night, Aaron talked with Peter Beinart, the editor of the "New Republic," and asked him specifically about the sources of the allegation in that article.

(BEGIN VIDEOTAPE)

AARON BROWN, HOST: Let's start with the allegation itself. Have I basically laid it out correctly?

PETER BEINART, EDITOR, "THE NEW REPUBLIC": That's right. Our story by Spencer Ackerman and John Judis and a Pakistani journalist named Massoud Ansari quotes four Pakistani officials, all people in a position to know, saying that they have been receiving pressure from Bush administration officials to deliver Osama bin Laden or another high value al Qaeda target like his deputy Ayman al-Zawahiri before the November election.

And, one of those sources, a very senior person, said that -- specifically said that they want those -- they want that capture in the last days of July during the Democratic Convention.

BROWN: All right, let's talk about sourcing here because obviously the allegation itself is explosive. It's reminiscent of the talk of the October surprise during the Iranian hostage crisis. Some of the sources, most of the sources in fact are unnamed, correct?

BEINART: Yes.

BROWN: What sort of jobs do they have?

BEINART: They are people in the Pakistani Intelligence Service, people who are well known within Pakistan as having relations with American officials and people who would be in a position to know this information. We don't claim that this story, by any means, closes the book on this.

We would hope that other people would pursue this story and do further reporting on it but we think when you have four Pakistani officials in positions in the government who are saying, who all say virtually the same thing that they've been receiving this pressure, pressure that they did not receive in 2002 and 2003, all pressure that they link to the election, in their words, we think it's a story that deserves to be told.

BROWN: Who is the pressure coming from?

BEINART: The pressure is coming from Bush administration officials. We don't know who in particular has been pressuring, although we do know that a number of high level Bush administration officials from George Tenet to others at the CIA to Colin Powell to others at the State Department have, in fact, visited Pakistan recently and applied an increased amount of pressure to Pakistan to go into the tribal areas and try to hunt down and capture bin Laden or Zawahiri or perhaps former Taliban leader Mullah Omar.

BROWN: All right. I want to deal with the tribal areas and where it is believed bin Laden and his folks are hiding in a second. Just one more question on the sourcing on this.

The Pakistani Intelligence Service, and at least two of the sources in this story come from there, that's a very complicated organization that has some allegiance to extremist Islamic groups, has sometimes questionable allegiance to President Musharraf himself. What is their motivation, do you think, in talking right now?

BEINART: Well, that's a good question. I'm not sure honestly I know what their motivation is. I think that it's true that the Pakistani intelligence is a complex web of people with a lot of different allegiances but I think they -- one potential reason they're talking is that it's a very difficult business for Pakistan to go into these tribal areas and try to hunt down bin Laden.

As you know, these are areas where the Pakistani military has essentially not had any presence for decades and decades and decades. There is a certain amount of resentment.

One might hypothesize that one reason for them talking is that there is significant resentment within the Pakistani government after the increased pressure they're facing from the U.S. to go into these tribal areas where they're facing very, very difficult firefights with a population that is not very supportive of the Pakistani government.

BROWN: Well, and on this point we can attest to some resentment from our own experience over there within the Pakistani government on the pressure that the Americans put on them. It is for the Pakistani government a very complicated question. They have a population that is not unsupportive of Osama bin Laden in many respects and they have an area that in their view could break out in civil war.

BEINART: That's exactly right. I think one of the reasons this is -- the increased incursion into those tribal areas in recent months under American pressure and, according to some, with American involvement have been so controversial in Pakistan is because of the threat that they pose a threat to civil war that they perhaps pose a threat to President Pervez Musharraf's government because there has been a -- there has been a kind of de facto understanding in Pakistan for many, many decades that the central government essentially leaves these very lawless tribal areas alone and that compact has now been violated under American pressure.

BROWN: Does the administration flat out deny the story?

BEINART: The administration has a denial in the story and I would encourage people to read it for itself and to parse the words but, yes, it's a denial.

BROWN: Is it, let me just try it one more time, is it a flat out, this is absolutely untrue denial or is it more hedged than that?

BEINART: The way I read it, it is somewhat hedged. It could have been a stronger denial. Others might read it differently.

BROWN: Listen, you're putting this on the Web site and putting it in the magazine. You're obviously extremely confident in the story. You're a sophisticated political guy. You understand the stakes here. Do you have any second thoughts about putting the story out there?

BEINART: No, knowing these reporters that we're working with, you know, knowing that we have this source from four people, even though as you said they're not on the record, we feel comfortable about this.

The story is written in a very careful way. We did not oversell the story but we felt that we had enough information to put this out there and as part of the public debate.

(END VIDEOTAPE)

HEMMER: A spokesperson for the NSC, the National Security Council, denies the allegation and says it is simply not true -- Heidi.

COLLINS: Eleven minutes past the hour now.

Time for a look at some of today's other news with Daryn Kagan -- hello once again, Daryn.

DARYN KAGAN, CNN ANCHOR: Heidi, good morning.

At least four American soldiers have been killed in a mortar attack in Iraq. The National Guard headquarters in Samara just north of Baghdad was targeted. One Iraqi guard was also killed in the attack. One other U.S. soldier is unaccounted for.

There are conflicting reports this morning on the whereabouts of U.S. Marine Corporal Wassef Ali Hassoun. Sources close to Hassoun's family say they have apparently received word from the missing Marine telling them he was safe in Lebanon. A man claiming to be Hassoun also called the U.S. Embassy in Beirut. There are also reports that the U.S. military is investigating whether his disappearance was a hoax.

CNN has learned that a Filipino driver based out of Qatar was abducted as he drove through Baghdad. In a videotaped statement, an Islamic militant group claiming to kidnap the man and threaten to kill him unless the Philippines withdraws its forces from Iraq. Government officials, meanwhile, in the Philippines are discussing the situation today.

Here in the U.S. in New Mexico, a 14-year-old boy is facing charges in connection with the murder of three family members. The bodies of the teen's father, stepmother and stepsister were all uncovered at a ranch that is owned by ABC newsman Sam Donaldson. The father had managed the Donaldson ranch and it was Sam Donaldson himself who stumbled upon the crime scene.

That is the headlines for now.

I'll be back in a half hour.

For now, back to Heidi.

COLLINS: Yes, a terrible story there.

All right, Daryn, thanks so much for that.

In the two days since John Edwards was named to the Democratic ticket, he's already become a lightning rod for both political parties.

Tim Funk knows John Kerry's new running mate better than most, though. He's spent the last year and a half covering Senator John Edwards as Washington correspondent for the "Charlotte Observer."

Mr. Funk, good morning to you and thanks for joining us this morning.

TIM FUNK, WASHINGTON CORRESPONDENT, "CHARLOTTE OBSERVER": Good morning.

COLLINS: I know you're traveling with the Democratic duo and you're joining us from Clearwater, Florida this morning.

Want to begin with John Edwards and the fact that he's a little bit of a controversial figure in his home state of North Carolina.

How so? Why do people feel a little bit of resentment toward him there?

FUNK: Well, I think, you know, he was elected in 1999 and for a while he was very involved in North Carolina issues. Hurricane Floyd hit and he worked night and day to get more relief for the state. He even, at one point, threatened to shut down the federal government if they didn't give more money to North Carolina. But by 2000, he was on Al Gore's short list for vice president. He was named "People" magazine's sexiest politician alive. And I think shortly after that, he decided, you know, that he would mount the national stage. And I think a lot of people, including some Democrats, felt that North Carolina was sort of in his rearview mirror and that he was thinking more about, you know, his personal ambition than the needs of the state.

Now, that's not an opinion everybody has, but that's -- you'll still hear that a little bit in North Carolina, although this week, I have to say, there's a lot of home state pride down there. There hasn't been a North Carolinian on the ticket for 140 years. So...

COLLINS: Yes, I would imagine both sides are feeling a little bit differently about that, obviously.

But, you know, you have written that when Edwards was sworn into the Senate in January of '99, he was the only one of the senators that had absolutely no government experience.

FUNK: Right.

COLLINS: That made him 100th among the 100 senators, the very least seniority.

How does he go from that to the vice presidential running mate here?

FUNK: Well, he was pretty lucky. I mean the minute he walked into the Senate chamber, the Senate chamber had been turned into a courtroom. Bill Clinton's impeachment trial was about to take place. And here's a guy that's fresh from the courtroom. He's a trial attorney, a celebrated trial attorney.

So the Democratic leadership said, hey, we can use this guy. So they put him on the committee to oversee the deposing of Monica Lewinsky and others. And then he -- they sort of called on him to give the big speech behind closed doors calling for the acquittal of Bill Clinton.

So right away he made a splash...

COLLINS: He did pretty well at that, didn't he? Yes.

FUNK: He did. People still talk about it. Senator Ted Kennedy still talks about that moment that he heard that speech.

COLLINS: But, you know, he has been criticized for being green and not having very much political experience. We've heard mostly about foreign policy in specific.

Is that accurate, in your mind?

FUNK: Well, he's on the Senate Intelligence Committee so I think he has some experience. The Democrats will say that he has more experience now than George Bush had when George Bush ran for president. So I think you're going to hear that debated all year.

I think John Edwards would say, and he said -- I've even asked him myself -- that people in America are more interested in life experience, that they don't want just Washington experience. So that's his answer for that, I think.

COLLINS: All right, quickly, before we go, as you saw in the piece of Joe Johns right before this, he was a trial lawyer.

How do you think that's going to resonate with voters?

FUNK: Well, I think the business community is going -- it's going to energize the business community to do everything they can to defeat the Kerry-Edwards ticket, because they blame trial lawyers for, you know, high insurance premiums. But I think that the rest of the country doesn't have that low opinion, I think, of trial lawyers. They think that they're, you know, in their working for people who have been injured, children who have been injured, you know, by faulty products or by medical malpractice.

So they've used that against him before in 1998 when he ran and it didn't work. So I'm not sure it will work this time.

COLLINS: All right, Tim Funk, we certainly appreciate your time this morning.

Thanks so much, from Florida.

FUNK: Thank you.

COLLINS: John Kerry and his wife Teresa Heinz Kerry will join Larry King tonight for their first sit down interview since Senator Kerry named John Edwards his running mate. Again, CNN's "Larry King Live" is at 9:00 p.m. Eastern.

HEMMER: Seventeen minutes past the hour now.

An emotional family reunion scheduled for tomorrow involving a suspected Army deserter, his wife and their daughters.

Atika Shubert has more this morning.

(BEGIN VIDEOTAPE)

ATIKA SHUBERT, CNN CORRESPONDENT (voice-over): Charles Robert Jenkins was on patrol with a U.S. Army unit near Korea's demilitarized zone in 1965 when he vanished. The Army says he deserted and defected to North Korea. His friends and family in America say he was abducted by the North and brainwashed.

Jenkins starred in this North Korea propaganda film playing a menacing American villain. He married Hitomi Soga, a Japanese woman kidnapped in 1978 on Pyongyang's orders, one of at least 18 Japanese nationals abducted as part of North Korea's espionage strategy. They have two daughters, Mika and Belinda. In 2002, North Korean leader Kim Jong Il allowed Japanese abductees like Soga to return home. But her family has not joined her, fearing Japan would hand Jenkins over to U.S. authorities. He has good reason to worry.

COLIN POWELL, SECRETARY OF STATE: Sergeant Jenkins, of course, is a deserter from the United States Army and those charges remain outstanding on him.

SHUBERT: Japan supports Soga's decision not to return to North Korea. Jenkins and their daughters remain in Pyongyang. But the Japanese government is brokering a family reunion Friday in Indonesia, a country with no extradition treaty with the U.S. and outside North Korea's influence.

HITOMI SOGA, JENKINS WIFE (through translator): I wish with all my heart to live in Japan with all my family together.

SHUBERT (on camera): Jenkins must decide if he wants to try to live in Japan, as his wife wishes, but where he faces possible arrest and extradition to the U.S. for deserting his military post 40 years ago.

Atika Schubert, CNN, Tokyo.

(END VIDEOTAPE)

HEMMER: Also, one other addition on that story. Jenkins' mother-in-law also kidnapped by North Korean agents in 1978. She has not been heard from since that time -- Heidi.

COLLINS: Severe thunderstorms tore across Maryland yesterday. So much rain fell so quickly it spawned flash floods in the Baltimore area, stranding drivers and washing away cars.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I have no idea where my car is. It's terrible. We went to look out over here. It was half way up. And then I came back and it's completely gone. It's not anywhere. It floated away. This is unbelievable. A brand new black BMW.

(END VIDEO CLIP)

COLLINS: Ouch. Some parked cars were completely submerged underwater in parts of Baltimore. No injuries, though, reported.

(WEATHER REPORT)

HEMMER: In a moment here, it looks like Bill Cosby is putting his money where his mouth is. The "Cafferty File" checks in on that in a moment.

COLLINS: Also ahead, a training exercise turns out to be a lot rougher than expected for one police officer. HEMMER: Need some motivation to get checked for cancer? How about throwing a party? Sanjay explains that when our coverage continues, in a moment.

(COMMERCIAL BREAK)

COLLINS: Jack Cafferty now and the much anticipated "Cafferty File."

CAFFERTY: By whom? Much anticipated by whom?

COLLINS: Everyone in the entire world.

CAFFERTY: Yes. Actually, we start with a kind of a serious story, but it's a good one. Bill Cosby is paying the college tuition for a couple of black high school graduates who support themselves. Cosby was all over the headlines recently for critical comments about the black community. He arranged college tours for these kids. Both Loren Wilder and Jimmy Hester will be attending Hampton University in Virginia. The teens said that they were impressed by Cosby's generosity. I have no idea who that is. Cosby said it was refreshing to find two -- that's Ray Charles -- to find two young men with such positive values.

Last week, we told you about North Korea's leader, Kim Jong Il, and his expensive taste in food. The little twerp likes lobster and cognac and caviar and the rest of the country gets like nothing to eat. Well, now he's introduced hamburgers to North Korea. This is, of course, according to the state run media. There are some of them now, the hamburgers. The official translation from Korean for hamburger is double bread with meat. The government built a hamburger plant where officials will monitor the mass production of the hamburgers. There's no truth to the rumor that the hamburgers will be made from those who disagree with the way Kim Jong Il is running the country.

It's an interesting twist, too. The communist country calls Coca-Cola "the cesspool water of American capitalism."

The Japanese have come up with a new way to keep an eye on their kids. Well, not an eye, really. It's a software company which has developed a chip that's embedded into student I.D. cards. Students scan the cards when they enter school and their arrival and departure time are recorded. It's also noted if they don't show up at all. All this information is then e-mailed to the parents on their cell phones or computers. The system goes on sale in August. What a clever idea.

HEMMER: You think?

COLLINS: It's kind of like a chip that you can put on your dog in case your dog runs away.

CAFFERTY: Or if you're sending your dog to school.

HEMMER: Sure.

COLLINS: Some people do.

CAFFERTY: You know, on a serious note, somebody suggested -- and this is probably not a bad idea. I don't know what the drawback is. What if American troops had these things somewhere on them? If they were captured, you'd know immediately where they were taken, where they, you know, I don't know. I mean...

COLLINS: Yes, and then what if the enemy got a hold of the information of where they were, as well?

CAFFERTY: Well, if the enemy captured them, they know where they were.

COLLINS: No, I mean before that, in order to capture them.

CAFFERTY: Oh, I see, if they could find -- if they could read the chips on them...

COLLINS: Exactly.

CAFFERTY: Maybe that's why they don't do it.

COLLINS: You're probably right.

CAFFERTY: Much anticipated, huh? I don't think so.

HEMMER: At least by the two of us.

In a moment here, the...

COLLINS: Try again later.

HEMMER: ... the gloves are off. The presidential campaigns kicking into high gear. Our political analyst, who says team Kerry- Edwards could make team Bush-Cheney look stale. Is that the case? We'll check it out in a moment when we continue.

(COMMERCIAL BREAK)

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Aired July 8, 2004 - 08:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Good morning.
Prosecutors investigating the Enron collapse get to the top. Former CEO Ken Lay now in the hands of authorities.

Violence in Iraq claiming the lives of more U.S. soldiers. Four killed today when insurgents attacked the military headquarters in Samara.

And the man whose story shocked America in the 1960s -- a soldier crossing over to North Korea. Will he finally leave that country?

All those stories now on AMERICAN MORNING.

ANNOUNCER: From the CNN broadcast center in New York, this is AMERICAN MORNING with Bill Hemmer and Soledad O'Brien.

HEMMER: Good morning, everyone.

Welcome.

Heidi Collins working for Soledad throughout the week here.

Good to have you.

HEIDI COLLINS, CNN ANCHOR: Thanks.

HEMMER: You liked that yellow jersey comment (UNINTELLIGIBLE).

COLLINS: That was really very good. One of your best.

HEMMER: Thanks.

The Tour de Lance continues.

In a moment here on AMERICAN MORNING, former Enron CEO Ken Lay surrendering to federal authorities; in fact, just about an hour ago, a day after he was indicted by a grand jury in Houston. He's at a federal courthouse now, where we expect the indictment against him to be unsealed. Much more on this story still developing in a moment here.

COLLINS: All right, we are also looking at Senator John Edwards this morning, on the campaign trail with John Kerry, of course. We're going to take a more in depth look at his career as a trial lawyer to see if it could actually pose a problem for him as a candidate.

HEMMER: All right, Jack, what's on your mind -- good morning.

JACK CAFFERTY, CNN CORRESPONDENT: Not a lot. Anything else?

HEMMER: This hour?

COLLINS: Well, there you go.

CAFFERTY: Coming up in the "Cafferty File" in less than an hour, we'll tell you which American food North Korea's Kim Jong Il has introduced to his countrymen. The fact that he is making an effort to feed them anything is newsworthy.

And the Japanese may have figured out a way to know where your kids are all the time, even if they're out of your sight.

COLLINS: Interesting tease there.

HEMMER: The kids love that, I'm certain.

COLLINS: I like it.

CAFFERTY: They didn't have any yellow suits, right?

COLLINS: You would be able to see them anywhere, wouldn't you?

HEMMER: You would love that.

COLLINS: Yes.

HEMMER: You look great.

COLLINS: Thank you.

HEMMER: Let's get to Houston right now. A developing story at this hour. Federal prosecutors now have the jewel, they say, in the crown of their Enron investigation. The company's former chairman, Ken Lay, surrendering to authorities earlier today in Houston. Criminal charges likely to be made public a bit later this morning.

Jen Rogers today shows us how the government worked its way up the Enron ladder.

(BEGIN VIDEOTAPE)

JEN ROGERS, CNN CORRESPONDENT (voice-over): The indictment against Lay comes after a two and a half year investigation into Enron's collapse. In classic prosecutorial fashion, the Enron task force has worked its way up the corporate ladder. Starting small and cutting deals with lower level executives, the government then moved in to the executive suite, charging former CFO Andrew Fastow, who has pled guilty and is cooperating with the government; next, one time CEO Jeffrey Skilling, who has pled not guilty. Now, the man at the top of what was once the nation's largest company is finally on deck for the government.

TOM AJEMME, SECURITIES LAWYER: The strategy right now is to finally make use of all of the good witnesses that the government has cut deals with, from Andy Fastow on down. These people have pledged their cooperation to the government and now the government's going to use these people to come in and turn the evidence over on Ken Lay.

ROGERS: Ken Lay, who was once one of the most powerful executives in corporate America, with key political connections, has always maintained he did nothing illegal. In a statement late Wednesday, released through a spokeswoman, Lay said simply: "I have been advised that I have been indicted. I will surrender in the morning. I have done nothing wrong and the indictment is not justified."

The Justice Department had no comment Wednesday. The exact charges Lay faces are not yet known. The indictment, which remains under seal, is expected to be made public on Thursday, when Lay himself will appear at federal court in Houston.

Jen Rogers, CNN Financial News, Houston.

(END VIDEOTAPE)

HEMMER: Let's continue the story now with Robert Bryce, an investigative reporter who has covered the Enron case from the beginning.

He's the author of "Pipe Dreams: Greed, Ego and The Death of Enron."

Robert Bryce is in San Diego.

Good morning, Robert.

Thanks for your time today.

ROBERT BRYCE, AUTHOR, "PIPE DREAMS": Good morning, Bill.

HEMMER: What charges do you expect in this case?

BRYCE: Well, that's, I mean that's the real question. My hunch is that the prosecutors are going to focus on the time frame after August of 2001, when Jeff Skilling left the company. That's when Ken Lay was forced to take back the job of CEO and I think when the prosecutors are clearly going to be looking at everything that Lay said, particularly with regard to the company's financial health. Because if you recall, about that time the company's Dabhol project in India, in which they had invested about a billion dollars, was not running. In fact, it had been shut down. The Indian government wasn't paying Enron for any of the power that had been generated there.

And, further, their stock was in -- was starting to slide and that was starting to trigger many of these off balance sheet partnership deals that they had that was going to force Enron to come up with a lot of cash.

So that's my guess. So it's -- if the other indictments are any guide, it's going to be wire fraud, securities fraud, mail fraud, the things that the prosecutors think will be easy to present to a jury.

HEMMER: We have heard from many legal analysts, including our own Jeffrey Toobin -- how difficult will it be in this case to get a conviction, as many contend?

BRYCE: Well, you know, Ken Lay sold $187 million worth of Enron stock. So, I mean, clearly, he can afford the best criminal lawyers in the world. And he's hired many of them already. So, you know, I think it's going to be a challenge for the Department of Justice. That said, I think that it's clear the Department of Justice was under tremendous pressure to indict Ken Lay. I mean he's the big fish here. And they've been gunning for him for now for two years. And I think that for the Bush administration, this is, politically, this is a very positive thing for them, because they can say now, look, he may be our friend, but we're tough on corporate crime and we're even indicting Ken Lay.

HEMMER: Can he use as a defense, Robert, can he say I was the CEO, I was unaware, you can't blame me?

BRYCE: Well, it seems to me, you know, he has two excuses -- one, I'm stupid, or I'm a crook. Maybe the third one is I'm a stupid crook. You know, I don't know. I think that he's clearly going to say they left me out of the loop. But for me that doesn't wash.

Look, he was the one who took to the Enron board many of the off balance sheet partnerships that Andy Fastow was touting. He was the one who hired Andy Fastow for that job. He was also the one that put Jeff Skilling in the job of president at Enron. So the failure of Enron is Ken Lay's fault. And, you know, once the indictment is unsealed, it's going to be very interesting to see exactly where the prosecutors are focusing their fire, because I think Ken Lay knows a lot more about what was going on than what he has been saying.

HEMMER: Yesterday in a statement, quoting now: "I have done nothing wrong and the indictment is not justified," the words from Ken Lay.

We all sit back and watch now.

Robert, thanks.

Robert Bryce in San Diego.

BRYCE: Thanks, Bill.

HEMMER: You've got it -- Heidi.

COLLINS: Senators John Kerry and John Edwards' Democratic barnstorming tour makes campaign stops today in Florida and New York. Since Edwards joined the ticket, business groups have mobilized to highlight his past career as a North Carolina trial lawyer.

Congressional correspondent Joe Johns has our report.

(BEGIN VIDEOTAPE) JOE JOHNS, CNN CORRESPONDENT (voice-over): Before he was a running mate, a senator or even a candidate, John Edwards was an enormously successful trial lawyer. Michael Dayton spent years tracking his work.

MICHAEL DAYTON, EDITOR, "NORTH CAROLINA LAWYERS WEEKLY": In a typical year, he would have four or five verdicts or settlements over a million dollars. In another year he might have eight.

JOHNS: The best known Edwards case, little Valerie Lakey of Raleigh. Five years old at the time, she won $31 million for catastrophic intentional injuries when she sat down on a swimming pool drain with a defective cover. The Griffins of Charlotte got $23 million after their daughter Bailey was born with severe brain damage.

In the '90s, Edwards reported 42 verdicts and settlements totaling $174.6 million for people claiming medical malpractice, personal injury, malfunctioning product. The Edwards key -- endless preparation, often horrific facts and a way with words.

DAYTON: He had an incredible skill to personalize the case to make you understand what were we talking here...

JOHNS: Edwards is proud of his trial lawyer days and argues he was looking out for the little guy.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: I beat 'em, and then I beat 'em again, and I beat 'em again and I beat 'em again and I'm proud of those fights, proud of winning those fights on behalf of you and families just like yours.

JOHNS: But his critics, like Republican North Carolina gubernatorial candidate Bill Cobey, say it's about frivolous lawsuits, not the little guy.

BILL COBEY (R), NORTH CAROLINA GOVERNOR CANDIDATE: Nothing could be further from the truth. He's looking out for his pocketbook and he's made millions upon millions upon millions of dollars. And this is a case of where you've got to follow the money.

JOHNS: And more than a third of Edwards' campaign contributions have come from lawyers.

President Bush has argued for years that too many lawsuits, or the threat of them, drive companies out of business and drive up the cost of insurance.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That what we want is quality health care, not rich trial lawyers.

JOHNS: One of the most potent charges against trial lawyers is how much they get paid. On a contingency basis, 35 to 40 percent of the award. But many argue it's not about the money.

RUFUS EDMISTEN, FORMER NORTH CAROLINA ATTORNEY GENERAL: I've never met a plaintiff yet who lost an arm or who had a horrible injury that wouldn't go back and trade all they got for having a healthy body.

JOHNS (on camera): The war over trial lawyers has been going on for years here in North Carolina and across the country. Now, with the highest stakes in politics, Edwards will have to argue another case.

Joe Johns, CNN, Raleigh, North Carolina.

(END VIDEOTAPE)

COLLINS: And in just a few moments, we are going to be speaking with the Washington correspondent of the "Charlotte Observer," Tim Funk. He's been covering John Edwards for about a year and a half or so. We'll be talking to him.

HEMMER: About 10 minutes now past the hour, Heidi.

The "New Republic" magazine is reporting on Bush administration pressure for what it calls a July surprise. That magazine reports the administration has put pressure on Pakistan to kill or capture Osama bin Laden or another "high value target" and to do so before the presidential election of November.

Last night, Aaron talked with Peter Beinart, the editor of the "New Republic," and asked him specifically about the sources of the allegation in that article.

(BEGIN VIDEOTAPE)

AARON BROWN, HOST: Let's start with the allegation itself. Have I basically laid it out correctly?

PETER BEINART, EDITOR, "THE NEW REPUBLIC": That's right. Our story by Spencer Ackerman and John Judis and a Pakistani journalist named Massoud Ansari quotes four Pakistani officials, all people in a position to know, saying that they have been receiving pressure from Bush administration officials to deliver Osama bin Laden or another high value al Qaeda target like his deputy Ayman al-Zawahiri before the November election.

And, one of those sources, a very senior person, said that -- specifically said that they want those -- they want that capture in the last days of July during the Democratic Convention.

BROWN: All right, let's talk about sourcing here because obviously the allegation itself is explosive. It's reminiscent of the talk of the October surprise during the Iranian hostage crisis. Some of the sources, most of the sources in fact are unnamed, correct?

BEINART: Yes.

BROWN: What sort of jobs do they have?

BEINART: They are people in the Pakistani Intelligence Service, people who are well known within Pakistan as having relations with American officials and people who would be in a position to know this information. We don't claim that this story, by any means, closes the book on this.

We would hope that other people would pursue this story and do further reporting on it but we think when you have four Pakistani officials in positions in the government who are saying, who all say virtually the same thing that they've been receiving this pressure, pressure that they did not receive in 2002 and 2003, all pressure that they link to the election, in their words, we think it's a story that deserves to be told.

BROWN: Who is the pressure coming from?

BEINART: The pressure is coming from Bush administration officials. We don't know who in particular has been pressuring, although we do know that a number of high level Bush administration officials from George Tenet to others at the CIA to Colin Powell to others at the State Department have, in fact, visited Pakistan recently and applied an increased amount of pressure to Pakistan to go into the tribal areas and try to hunt down and capture bin Laden or Zawahiri or perhaps former Taliban leader Mullah Omar.

BROWN: All right. I want to deal with the tribal areas and where it is believed bin Laden and his folks are hiding in a second. Just one more question on the sourcing on this.

The Pakistani Intelligence Service, and at least two of the sources in this story come from there, that's a very complicated organization that has some allegiance to extremist Islamic groups, has sometimes questionable allegiance to President Musharraf himself. What is their motivation, do you think, in talking right now?

BEINART: Well, that's a good question. I'm not sure honestly I know what their motivation is. I think that it's true that the Pakistani intelligence is a complex web of people with a lot of different allegiances but I think they -- one potential reason they're talking is that it's a very difficult business for Pakistan to go into these tribal areas and try to hunt down bin Laden.

As you know, these are areas where the Pakistani military has essentially not had any presence for decades and decades and decades. There is a certain amount of resentment.

One might hypothesize that one reason for them talking is that there is significant resentment within the Pakistani government after the increased pressure they're facing from the U.S. to go into these tribal areas where they're facing very, very difficult firefights with a population that is not very supportive of the Pakistani government.

BROWN: Well, and on this point we can attest to some resentment from our own experience over there within the Pakistani government on the pressure that the Americans put on them. It is for the Pakistani government a very complicated question. They have a population that is not unsupportive of Osama bin Laden in many respects and they have an area that in their view could break out in civil war.

BEINART: That's exactly right. I think one of the reasons this is -- the increased incursion into those tribal areas in recent months under American pressure and, according to some, with American involvement have been so controversial in Pakistan is because of the threat that they pose a threat to civil war that they perhaps pose a threat to President Pervez Musharraf's government because there has been a -- there has been a kind of de facto understanding in Pakistan for many, many decades that the central government essentially leaves these very lawless tribal areas alone and that compact has now been violated under American pressure.

BROWN: Does the administration flat out deny the story?

BEINART: The administration has a denial in the story and I would encourage people to read it for itself and to parse the words but, yes, it's a denial.

BROWN: Is it, let me just try it one more time, is it a flat out, this is absolutely untrue denial or is it more hedged than that?

BEINART: The way I read it, it is somewhat hedged. It could have been a stronger denial. Others might read it differently.

BROWN: Listen, you're putting this on the Web site and putting it in the magazine. You're obviously extremely confident in the story. You're a sophisticated political guy. You understand the stakes here. Do you have any second thoughts about putting the story out there?

BEINART: No, knowing these reporters that we're working with, you know, knowing that we have this source from four people, even though as you said they're not on the record, we feel comfortable about this.

The story is written in a very careful way. We did not oversell the story but we felt that we had enough information to put this out there and as part of the public debate.

(END VIDEOTAPE)

HEMMER: A spokesperson for the NSC, the National Security Council, denies the allegation and says it is simply not true -- Heidi.

COLLINS: Eleven minutes past the hour now.

Time for a look at some of today's other news with Daryn Kagan -- hello once again, Daryn.

DARYN KAGAN, CNN ANCHOR: Heidi, good morning.

At least four American soldiers have been killed in a mortar attack in Iraq. The National Guard headquarters in Samara just north of Baghdad was targeted. One Iraqi guard was also killed in the attack. One other U.S. soldier is unaccounted for.

There are conflicting reports this morning on the whereabouts of U.S. Marine Corporal Wassef Ali Hassoun. Sources close to Hassoun's family say they have apparently received word from the missing Marine telling them he was safe in Lebanon. A man claiming to be Hassoun also called the U.S. Embassy in Beirut. There are also reports that the U.S. military is investigating whether his disappearance was a hoax.

CNN has learned that a Filipino driver based out of Qatar was abducted as he drove through Baghdad. In a videotaped statement, an Islamic militant group claiming to kidnap the man and threaten to kill him unless the Philippines withdraws its forces from Iraq. Government officials, meanwhile, in the Philippines are discussing the situation today.

Here in the U.S. in New Mexico, a 14-year-old boy is facing charges in connection with the murder of three family members. The bodies of the teen's father, stepmother and stepsister were all uncovered at a ranch that is owned by ABC newsman Sam Donaldson. The father had managed the Donaldson ranch and it was Sam Donaldson himself who stumbled upon the crime scene.

That is the headlines for now.

I'll be back in a half hour.

For now, back to Heidi.

COLLINS: Yes, a terrible story there.

All right, Daryn, thanks so much for that.

In the two days since John Edwards was named to the Democratic ticket, he's already become a lightning rod for both political parties.

Tim Funk knows John Kerry's new running mate better than most, though. He's spent the last year and a half covering Senator John Edwards as Washington correspondent for the "Charlotte Observer."

Mr. Funk, good morning to you and thanks for joining us this morning.

TIM FUNK, WASHINGTON CORRESPONDENT, "CHARLOTTE OBSERVER": Good morning.

COLLINS: I know you're traveling with the Democratic duo and you're joining us from Clearwater, Florida this morning.

Want to begin with John Edwards and the fact that he's a little bit of a controversial figure in his home state of North Carolina.

How so? Why do people feel a little bit of resentment toward him there?

FUNK: Well, I think, you know, he was elected in 1999 and for a while he was very involved in North Carolina issues. Hurricane Floyd hit and he worked night and day to get more relief for the state. He even, at one point, threatened to shut down the federal government if they didn't give more money to North Carolina. But by 2000, he was on Al Gore's short list for vice president. He was named "People" magazine's sexiest politician alive. And I think shortly after that, he decided, you know, that he would mount the national stage. And I think a lot of people, including some Democrats, felt that North Carolina was sort of in his rearview mirror and that he was thinking more about, you know, his personal ambition than the needs of the state.

Now, that's not an opinion everybody has, but that's -- you'll still hear that a little bit in North Carolina, although this week, I have to say, there's a lot of home state pride down there. There hasn't been a North Carolinian on the ticket for 140 years. So...

COLLINS: Yes, I would imagine both sides are feeling a little bit differently about that, obviously.

But, you know, you have written that when Edwards was sworn into the Senate in January of '99, he was the only one of the senators that had absolutely no government experience.

FUNK: Right.

COLLINS: That made him 100th among the 100 senators, the very least seniority.

How does he go from that to the vice presidential running mate here?

FUNK: Well, he was pretty lucky. I mean the minute he walked into the Senate chamber, the Senate chamber had been turned into a courtroom. Bill Clinton's impeachment trial was about to take place. And here's a guy that's fresh from the courtroom. He's a trial attorney, a celebrated trial attorney.

So the Democratic leadership said, hey, we can use this guy. So they put him on the committee to oversee the deposing of Monica Lewinsky and others. And then he -- they sort of called on him to give the big speech behind closed doors calling for the acquittal of Bill Clinton.

So right away he made a splash...

COLLINS: He did pretty well at that, didn't he? Yes.

FUNK: He did. People still talk about it. Senator Ted Kennedy still talks about that moment that he heard that speech.

COLLINS: But, you know, he has been criticized for being green and not having very much political experience. We've heard mostly about foreign policy in specific.

Is that accurate, in your mind?

FUNK: Well, he's on the Senate Intelligence Committee so I think he has some experience. The Democrats will say that he has more experience now than George Bush had when George Bush ran for president. So I think you're going to hear that debated all year.

I think John Edwards would say, and he said -- I've even asked him myself -- that people in America are more interested in life experience, that they don't want just Washington experience. So that's his answer for that, I think.

COLLINS: All right, quickly, before we go, as you saw in the piece of Joe Johns right before this, he was a trial lawyer.

How do you think that's going to resonate with voters?

FUNK: Well, I think the business community is going -- it's going to energize the business community to do everything they can to defeat the Kerry-Edwards ticket, because they blame trial lawyers for, you know, high insurance premiums. But I think that the rest of the country doesn't have that low opinion, I think, of trial lawyers. They think that they're, you know, in their working for people who have been injured, children who have been injured, you know, by faulty products or by medical malpractice.

So they've used that against him before in 1998 when he ran and it didn't work. So I'm not sure it will work this time.

COLLINS: All right, Tim Funk, we certainly appreciate your time this morning.

Thanks so much, from Florida.

FUNK: Thank you.

COLLINS: John Kerry and his wife Teresa Heinz Kerry will join Larry King tonight for their first sit down interview since Senator Kerry named John Edwards his running mate. Again, CNN's "Larry King Live" is at 9:00 p.m. Eastern.

HEMMER: Seventeen minutes past the hour now.

An emotional family reunion scheduled for tomorrow involving a suspected Army deserter, his wife and their daughters.

Atika Shubert has more this morning.

(BEGIN VIDEOTAPE)

ATIKA SHUBERT, CNN CORRESPONDENT (voice-over): Charles Robert Jenkins was on patrol with a U.S. Army unit near Korea's demilitarized zone in 1965 when he vanished. The Army says he deserted and defected to North Korea. His friends and family in America say he was abducted by the North and brainwashed.

Jenkins starred in this North Korea propaganda film playing a menacing American villain. He married Hitomi Soga, a Japanese woman kidnapped in 1978 on Pyongyang's orders, one of at least 18 Japanese nationals abducted as part of North Korea's espionage strategy. They have two daughters, Mika and Belinda. In 2002, North Korean leader Kim Jong Il allowed Japanese abductees like Soga to return home. But her family has not joined her, fearing Japan would hand Jenkins over to U.S. authorities. He has good reason to worry.

COLIN POWELL, SECRETARY OF STATE: Sergeant Jenkins, of course, is a deserter from the United States Army and those charges remain outstanding on him.

SHUBERT: Japan supports Soga's decision not to return to North Korea. Jenkins and their daughters remain in Pyongyang. But the Japanese government is brokering a family reunion Friday in Indonesia, a country with no extradition treaty with the U.S. and outside North Korea's influence.

HITOMI SOGA, JENKINS WIFE (through translator): I wish with all my heart to live in Japan with all my family together.

SHUBERT (on camera): Jenkins must decide if he wants to try to live in Japan, as his wife wishes, but where he faces possible arrest and extradition to the U.S. for deserting his military post 40 years ago.

Atika Schubert, CNN, Tokyo.

(END VIDEOTAPE)

HEMMER: Also, one other addition on that story. Jenkins' mother-in-law also kidnapped by North Korean agents in 1978. She has not been heard from since that time -- Heidi.

COLLINS: Severe thunderstorms tore across Maryland yesterday. So much rain fell so quickly it spawned flash floods in the Baltimore area, stranding drivers and washing away cars.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I have no idea where my car is. It's terrible. We went to look out over here. It was half way up. And then I came back and it's completely gone. It's not anywhere. It floated away. This is unbelievable. A brand new black BMW.

(END VIDEO CLIP)

COLLINS: Ouch. Some parked cars were completely submerged underwater in parts of Baltimore. No injuries, though, reported.

(WEATHER REPORT)

HEMMER: In a moment here, it looks like Bill Cosby is putting his money where his mouth is. The "Cafferty File" checks in on that in a moment.

COLLINS: Also ahead, a training exercise turns out to be a lot rougher than expected for one police officer. HEMMER: Need some motivation to get checked for cancer? How about throwing a party? Sanjay explains that when our coverage continues, in a moment.

(COMMERCIAL BREAK)

COLLINS: Jack Cafferty now and the much anticipated "Cafferty File."

CAFFERTY: By whom? Much anticipated by whom?

COLLINS: Everyone in the entire world.

CAFFERTY: Yes. Actually, we start with a kind of a serious story, but it's a good one. Bill Cosby is paying the college tuition for a couple of black high school graduates who support themselves. Cosby was all over the headlines recently for critical comments about the black community. He arranged college tours for these kids. Both Loren Wilder and Jimmy Hester will be attending Hampton University in Virginia. The teens said that they were impressed by Cosby's generosity. I have no idea who that is. Cosby said it was refreshing to find two -- that's Ray Charles -- to find two young men with such positive values.

Last week, we told you about North Korea's leader, Kim Jong Il, and his expensive taste in food. The little twerp likes lobster and cognac and caviar and the rest of the country gets like nothing to eat. Well, now he's introduced hamburgers to North Korea. This is, of course, according to the state run media. There are some of them now, the hamburgers. The official translation from Korean for hamburger is double bread with meat. The government built a hamburger plant where officials will monitor the mass production of the hamburgers. There's no truth to the rumor that the hamburgers will be made from those who disagree with the way Kim Jong Il is running the country.

It's an interesting twist, too. The communist country calls Coca-Cola "the cesspool water of American capitalism."

The Japanese have come up with a new way to keep an eye on their kids. Well, not an eye, really. It's a software company which has developed a chip that's embedded into student I.D. cards. Students scan the cards when they enter school and their arrival and departure time are recorded. It's also noted if they don't show up at all. All this information is then e-mailed to the parents on their cell phones or computers. The system goes on sale in August. What a clever idea.

HEMMER: You think?

COLLINS: It's kind of like a chip that you can put on your dog in case your dog runs away.

CAFFERTY: Or if you're sending your dog to school.

HEMMER: Sure.

COLLINS: Some people do.

CAFFERTY: You know, on a serious note, somebody suggested -- and this is probably not a bad idea. I don't know what the drawback is. What if American troops had these things somewhere on them? If they were captured, you'd know immediately where they were taken, where they, you know, I don't know. I mean...

COLLINS: Yes, and then what if the enemy got a hold of the information of where they were, as well?

CAFFERTY: Well, if the enemy captured them, they know where they were.

COLLINS: No, I mean before that, in order to capture them.

CAFFERTY: Oh, I see, if they could find -- if they could read the chips on them...

COLLINS: Exactly.

CAFFERTY: Maybe that's why they don't do it.

COLLINS: You're probably right.

CAFFERTY: Much anticipated, huh? I don't think so.

HEMMER: At least by the two of us.

In a moment here, the...

COLLINS: Try again later.

HEMMER: ... the gloves are off. The presidential campaigns kicking into high gear. Our political analyst, who says team Kerry- Edwards could make team Bush-Cheney look stale. Is that the case? We'll check it out in a moment when we continue.

(COMMERCIAL BREAK)

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