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American Morning

New Jersey Looks into Gas Station Price Gouging; Tricky Insurance Issues After Hurricane Damage

Aired September 28, 2005 - 08:30   ET

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

MILES O'BRIEN, CNN ANCHOR: Live pictures there of New York City. Another beautiful day here in New York. Where in the world is Soledad O'Brien today? Let's take a look using our Google Earth satellite imagery, zoom in on the Big Easy, the Crescent City of New Orleans. The southeastern quadrant is where we're headed, St. Bernard Parish, which is, we have been saying, 99 to 100 percent devastation.
This is the place where she is. The subdivision she's been talking about. You see the levee along the top portion of your screen kind of diagonal across. You see where the pointer is. And in that subdivision, as you see in all of the subdivisions, you see lots of mud, you see lots of houses leveled, and you see many houses that are standing. You might say, that's OK. But you take one look inside and you realize there's just nothing -- Soledad.

SOLEDAD O'BRIEN, CNN ANCHOR: Yes, there's not a whole heck of a lot. And the levee that you're looking at there, I can show you right here, it's right back there. It runs right along here, and here is the canal below us. And, Jay, if you come up a little bit I can give everybody a pretty good sense of how close we are to the water. I mean, from this guy's backyard here, and you can see this house just blown up. I mean, just brick remains. But from this backyard, you're really just, you know, a few yards down the hill, and that is where the water is, and that is where the big problem is. Of course, on the other side as well. This is a waterway.

As we walk down this way a little bit, look at the power of this water. Look at the force. Show them this bridge, Jay, and you can see, I mean, it just took it out.

The weird thing that we've been noticing here, and you know from our reports over the last couple of days, about traipsing through the thick mud, sometimes 18 inches to two feet deep. Look at this, there's no mud. The mud, to some degree, has kind of been blasted right off. The people's homes, if we walk over here, and then see this foundation, as we walk around back porches or even a foundation here, they're not sitting in any mud.

Further down, this way, down St. Marie Street, they are dealing with mud issues. But here, they've got nothing. They have this little powdery dust, and of course they've literally got nothing because there's nothing left of their home. I mean, this scene, pipes sticking up, hot water heaters and bathtubs being the only thing that remains is kind of typical. If you look down this way, down Florida Street and see what was six homes and is now just six foundations. We're going to continue our reports here from St. Bernard Parish this morning. First, though, let's get back to Carol. She's got a look at some of the other stories making news.

Good morning again, Carol.

CAROL COSTELLO, CNN ANCHOR: I do, Soledad. A developing story now in the news. A brush fire burning in Porter Ranch, California. That's just north of Los Angeles. Take a look. We just got these pictures in. Firefighters are said to be on the scene here. These are live pictures, I should tell you. As you can see, it's a pretty extensive fire. And we would imagine many firefighters are now on the scene, and you can see the flashing lights there on the road nearby.

When we get more information on this story, of course, we'll pass it along to you.

Well, Louisiana Governor Kathleen Blanco is set to testify before a Senate panel today. Her testimony coming one day after the former FEMA chief, Michael Brown, said Louisiana's response to Katrina was dysfunctional. Blanco will go before a different committee, though, than the one that grilled brown.

A female suicide bomber has killed at least five people in Tal Afar, Iraq. That's near the Syrian border. There are reports the woman was disguised as a man, and apparently trying to force her way into a police recruitment center. U.S. and Iraqi troops launched a series of military operations in Tal Afar this month.

House Majority Leader Tom DeLay could face charges in connection with his political organization back in Texas. At issue, whether DeLay and his associates used corporate donations for illegal purposes. A Texas grand jury is set to wrap up its investigation today. DeLay insists he committed no crimes and says the Democratic district attorney is pursuing the case for political reasons.

And Anna Nicole Smith is heading to the U.S. Supreme Court, the highest court in the land. The former Playboy model is seeking $88.6 million from the estate of her late husband, J. Howard Marshall. An appeals court last year ruled that Marshall's son was his only heir. Of course Smith wants that ruling overturned. The Supreme Court is likely to hear the appeal in January.

(WEATHER REPORT)

M. O'BRIEN: Since Hurricane Katrina, there have been claims of price gouging at gas stations around the country. New Jersey is now suing some oil companies and gas stations. It's the first state to take some legal action in response of rising gas prices. The New Jersey Attorney General Peter Harvey is joining me now to talk a little bit about this. New Jersey is maybe the only state which has a particular law. And why don't you explain what the law is here, first of all?

PETER C. HARVEY, NEW JERSEY ATTY. GEN.: Yes, the Motor Fuels Act under New Jersey law allows a gas station owner to change the price of gasoline once in a 24-hour period. Some of these stations were changing the prices as much as three or four times in a single day.

M. O'BRIEN: All right. And in other states, this probably can happen. You've got legal teeth here, so you filed suit. Tell us where you got your evidence.

HARVEY: Well, we sent about 85 inspectors, some from the state, some from county organizations, we sent them out to view gas stations, and as they looked at these gas stations, they saw the prices going up multiple times a day, then asked the station owners to provide books and records, which they're required to do under the law, justifying the price changes. They didn't have the records, they didn't keep them, and they didn't make them available to the inspectors.

M. O'BRIEN: And they justified the price changes based on what?

HARVEY: Well, some didn't know the law existed. Others justified it based upon what they claimed were the prices being charged to them by wholesalers and market forces, but some of these prices were artificially inflated.

M. O'BRIEN: Well, what kind of award do you seek on behalf of the people of New Jersey?

HARVEY: Well, the first thing we want to do is stop it, stop the stations to do it. Secondly, send notice to the stations that maybe are considering doing this not to do it in the future. The other thing is, of course, restitution, where we can reimburse consumers.

M. O'BRIEN: So you may find a way to get money back into people's pockets, potentially?

HARVEY: True. That's always the goal.

M. O'BRIEN: All right, let's just share you with you a little bit of what the oil companies are saying in response to all of this. Sunoco is one of them. I think there were four companies?

HARVEY: Well, there are three primary large ones and smaller independents. Sunoco, Hess and a group of Shell station.

M. O'BRIEN: All right, Sunoco's response: "Sunoco's petroleum products are priced competitively and fairly, based on the prevailing market." That's from Gerald Davis, Sunoco's spokesman.

Hess' response, essentially they say, "We made several small increases throughout the day." I think they just sort of plead guilty there. "But Hess was not aware that its pricing practice violating any New Jersey statutes." Is that a defense, that they weren't aware?

HARVEY: We don't think it is. Ignorance of the law is certainly no excuse. But, again, we're going to try to work with these manufacturers and retailers to make sure that we give restitution to the consumer. The goal here is to protect consumers.

M. O'BRIEN: Here's the thing. And I think a lot of people here -- we've been talking about this on the crew frequently about this. Stuff that is bought and paid for, in the ground at the station. We run a little news event about a hurricane or hurricane impending, and they go right out to the sign and raise the price for gasoline that's already been purchased.

HARVEY: That's why we characterize it as artificial inflation. You have just put your finger exactly on the problem here. A lot of this gas is in storage tanks bought at a much less price, and yet customers were facing multiple price increases in a single day. It was not market driven; it was really artificially driven.

M. O'BRIEN: Of course the flip side of this would be, it's a free market. Supply and demand, whatever price may prevail, and if it's too high, people will drive on by to the next gas station.

HARVEY: Well, that theory is sound except when you deal with the essential goods and services. We have regulated services in this country, like electricity and water. The reason we do that is because these are essential goods and services that we can't do without. Gas is like that. And if one gas station owner does it, everybody on the street. So you're going to have to drive a long time and a long distance to find somebody who has a better price.

M. O'BRIEN: And burn a lot of expensive gas along the way.

HARVEY: Exactly.

M. O'BRIEN: Phone numbers, I think we put them on the screen. There they are. If you're a New Jersey resident, you feel like you want to be become a part of this, or also report potential price gouging, those are the numbers to call.

HARVEY: True. True.

M. O'BRIEN: Peter Harvey, attorney general for New Jersey, thank you for coming in -- Soledad.

HARVEY: Thank you for having me.

S. O'BRIEN: All right, Miles, thanks.

When you take a look at the damage you see home after home after home that's a total loss, you can sense the devastation to a community. But what if you're the local bank, and what if you hold the note on lots of the houses that had been damaged? And what if your survival is important because without you, your community cannot survive?

We take you now to a community called New Orleans East, and we talk to the local bank called Liberty Bank. Here is their story.

(BEGIN VIDEOTAPE)

S. O'BRIEN (voice-over): The premier branch of Liberty Bank, bad from the outside and much worse inside.

(on camera): I guess this is the new entrance. Wow. Wow. (voice-over): Alden McDonald started the Liberty Bank in 1972 when blacks in New Orleans were often denied loans from commercial banks. For 33 years he's been focused on the community, but New Orleans East neighborhood is empty, and in ruins and the community is gone. At his seven other branches around the city, it's the same story.

ALDEN MCDONALD, OWNER, LIBERTY BANK: This was devastating. You wouldn't think water had this much power.

S. O'BRIEN: Besides the damage to the building.

MCDONALD: Over there with the water.

S. O'BRIEN: There's the customers, now scattered and using branches in Jackson, Mississippi and Baton Rouge.

MCDONALD: The customers, you know, are walking in, they left without their checkbooks.

S. O'BRIEN (on camera): Of course. Their I.D., their ATM card.

MCDONALD: Their papers, the ATM cards, the whole bit, so we have to begin providing all of that.

S. O'BRIEN (voice-over): To help their customers get their lives back, they're offering no money-down loans for homes and financing for cars. The employees, 120 of them, are mostly gone.

MCDONALD: They are unable to come back for various reasons. Number one, the kids are in school; they don't want to disrupt them again. Number two, there's no housing in baton rouge. Number three, there's no housing here.

S. O'BRIEN: Even the massive vault is destroyed.

(on camera): Water line is up here.

MCDONALD: Right.

S. O'BRIEN: Seventy-five percent of people lost everything, because they're not waterproofed right?

MCDONALD: No, it's not waterproof.

S. O'BRIEN: So all of your valuable documents are gone?

MCDONALD: Valuable documents are in here.

S. O'BRIEN (voice-over): Mr. McDonald still holds out hope that it might not be a total loss.

MCDONALD: Probably it's going to come down. I guess I just haven't gotten to the point of realization yet.

S. O'BRIEN (on camera): Let's go see the documents. Is the back way open? You want to go that way or the front way?

(voice-over): We walk across the parking lot.

MCDONALD: This here was our operations center.

S. O'BRIEN: Look at the ceiling. Look at the mold on the ceiling. It's like hanging off the ceiling. The ceilings themselves are hanging and waterlogged and bowed, the insulation dragging and there's the smell of rot.

MCDONALD: It's like a bomb went off in here. Man, what the...

S. O'BRIEN (on camera): Wow, look how high the water was.

(voice-over): He's taking pictures, not for his insurance, but to his employees just how bad it is.

MCDONALD: Total mess, but we'll make it back.

S. O'BRIEN (on camera): You will?

MCDONALD: Yes.

(END VIDEOTAPE)

S. O'BRIEN: You know, bank needs money. And here is what Mr. McDonald thinks: If he can get some customers, whether it's an institution or just a customer who can deposit $100,000 into his bank, if he can get 100 of those, he's now got a base of $10 million out that he can loan out and get really back into business with.

And then he points to the neighborhood around him, and he says all that needs to be rebuilt. And those rebuilding, that's going to bring money, that's going to bring workers, and those workers are going to need to put their paychecks somewhere. That brings them right back to his bank. He's actually an incredibly positive gentleman, and you talk to him for a little bit, Miles, and you begin to think, you know, If anybody can make it work, he certainly can -- Miles.

M. O'BRIEN: It's always nice to hear that, you know, and you hope they're right.

Thank you, Soledad.

Ahead on AMERICAN MORNING, some hurricane victims are having trouble getting their insurance to pay for damage to their homes. We'll have some tips for you. There we go.

We're back. We're back with you. We'll have some tips to make sure the same thing doesn't happen to you if disaster strikes.

Now let's go to black.

(COMMERCIAL BREAK) M. O'BRIEN: All along the Gulf coast, homeowners are realizing their insurance probably doesn't cover flooding damage, and that is not the end of their troubles. Insurance companies are becoming increasingly aggressive in scrutinizing every detail of a claim. That's according to a report in the October 2005 issue of "Consumer Reports."

Money adviser joining us with tips on how to make sure your company actually pays your claims, honors your contract, is Lisa Lee Freeman, deputy editor of "Consumer Reports."

The insurance companies have had so many losses in recent years. I assume that's why they -- they have the green eye shade on, don't they?

LISA LEE FREEMAN, "CONSUMER REPORTS": Yes, they're getting really tough in paying claims. Part of it is also fraud. There is a lot of fraud. There have been huge settlements. People have sued to get money out of their insurance policy, so insurance companies are cracking down. And in many cases, they're actually dropping people or raising rates when people file for claims, so it's touchy right now.

M. O'BRIEN: All right. For those who have been affected by Katrina and Rita, they've already signed a deal with some insurance company.

FREEMAN: Right.

M. O'BRIEN: Let's talk about that situation first before we move into the thing about how to purchase insurance. What should they be doing right now?

FREEMAN: Well, right now, they should be looking at their policies very carefully.

M. O'BRIEN: If they can find them.

FREEMAN: If they can find them, which leads to one of the points I will make later on, which is make sure you store your policy somewhere in a safe place off site.

But basically they're not going to have too many options if they don't have flood insurance. Regular homeowners insurance only covers you for wind and rain damage. It will not cover you for this horrible flooding, mold. These are all separate policies that people have to realize.

But they may be able to get money from some of these lawsuits that are going on right now. And also they may be able to apply for government low-cost loans and grants.

M. O'BRIEN: OK, and it's no secret, of course, when you sign up for insurance, they don't cover flood damage. There's a federally backed flood insurance program which people would be aware of. And many mortgage companies, if you have a mortgage, would require you to have it. FREEMAN: Absolutely.

M. O'BRIEN: So hopefully those people will be OK.

FREEMAN: Yes.

M. O'BRIEN: Let's talk about how you're moving forward here, and for those of us who haven't been affected and are thinking about our policies and whether we're covered. How do you know you have a good carrier, somebody who is actually going to cut you a check?

FREEMAN: Well, that's a good question, and you should check out your carrier and make sure, number one, their financially secure, because if they're not, they may not have the money there when you're ready to file a claim. And you want to make sure they have a good reputation for paying claims. And a couple of ways you can do that is go to NAIC.org, which is the National Association of Insurance Commissioners Web site. They have information there about complaint data to see if your insurance company has a lot of complaints against it for not paying its claims.

Also consumerreports.org actually has a list of insurance companies that we rated based on consumer feedback on the claims process. If you're not a subscriber, you can get it at the library.

M. O'BRIEN: All right, for those of you who don't read a balance sheet very well, how do we know our company is solvent enough?

FREEMAN: Well, that's a good question. There are a few different sites out there where you can go to see if your insurance company is on solid financial ground, for example, moody.com (ph) and ambest.com and weissratings.com (ph)

M. O'BRIEN: All right. As you weight the cost of insurance, how do you know how much coverage you need?

FREEMAN: That's a very good question. And I think what you need to do is think about all of the different possibilities. You have to think worst-case scenario. Are you in an area that's prone to flooding? A good place to go to is the government site, floodsmart.com, and that could tell you whether you're in a floodplane. It will tell you how much premiums are for a flood- insurance policy, so you have to think about that.

If you have a lot of valuables in your house, very expensive jewelry, antiques, your regular insurance policy may not cover that. You may need a separate endorsement policy.

M. O'BRIEN: You know, and here's something. I have some friends who had a fire not too long ago and they were going to kind of reconstruct everything they owned. And they wished they had an inventory. I've always wanted to do that.

FREEMAN: Yes. That's another tip.

M. O'BRIEN: It's one of those things. FREEMAN: I know.

M. O'BRIEN: What's the best way to do that? Just take a video camera and spray the house...

FREEMAN: Well, here's what I do.

M. O'BRIEN: ... or do write it all down?

FREEMAN: Here's what I do. I went around the house with my digital camera and made a CD of all of my possessions. But the next step I'm going to be taking is write a very detailed list, going through every single room, writing down all of my possessions, including serial numbers, on appliances and electronics. So you have something to show. If everything goes missing -- as you've seen from the pictures and from Hurricane Katrina and Rita -- if everything's gone, this is your record of what was there. And it's proof to the insurance company. It will make the claims process go a lot more smoothly.

M. O'BRIEN: All right. It's move-in day for the O'Briens today. I think this might be a good day to do that. What do you think? As we unpack, we will be taking pictures.

FREEMAN: That's a great time to do it.

M. O'BRIEN: All right. Lisa Lee Freeman, deputy editor of "Consumer Reports." Thanks for dropping by.

FREEMAN: You're welcome.

M. O'BRIEN: Still to come on the program, casinos were vital to Mississippi's economy before Katrina hit, but now there's controversy over where to put them if they're rebuilt. Andy has that in "Minding Your Business," next on AMERICAN MORNING.

(COMMERCIAL BREAK)

M. O'BRIEN: In Biloxi, gambling is a big deal. And that's actually a big part of Mississippi's economy. Now the question is, how do you rebuild? And there's some sensibilities there they have to be careful of. Andy Serwer, here with that.

ANDY SERWER, "FORTUNE" COLUMNIST: Miles, good morning.

In fact, do you rebuild? Huge debate in the state of Mississippi. $189 million, the gambling industry was to bring into the state next year. But the casinos were nearly wrecked, I think is an appropriate way of putting it, in the wake of Hurricane Katrina. Yesterday, the state of mississippi legislature convened a special session to debate the future of this industry. Mississippi Governor Haley Barbour wants to move the casinos, rebuild them and move them off of the water. State law mandates they must be on the water to make them separate from the communities.

Haley Barbour says, listen, if we're going to have gaming in this state, why don't we move them inland, say 1,500 feet off the water? Now, religious leaders in the state, however, are saying this is a perfectly good time to get rid of gaming altogether in the state of Mississippi. And they're a powerful force in that state. So this is the debate we have right now, Miles. And I think, because of the big money, that there's no way they're going to turn this thing back.

M. O'BRIEN: Well, yes, the Bible Belt needing some greenbacks there, important greenbacks. But the one question I have is, moving them 1,500 feet off the shore still would have been an awful lot of damage to them.

SERWER: Yes, I mean, that's right. Why not put them in a very secure place? So that's a good point. Let's talk about the markets yesterday, Miles. A mixed session on Wall Street. This after -- you can see here, the Nasdaq down a little bit. It's a bit of a surprise that even the DOW and the S&P were up, because some consumer confidence numbers came out.

The biggest drop in September, the biggest drop in 15 years, for a month. Obviously, the shock of the hurricanes and higher energy prices having everything to do with that. And there's no word, of course, on whether this will affect consumer spending which is, obviously, a key to the overall economy. So we'll have to wait and see a little bit there. Futures higher this morning.

M. O'BRIEN: All right. Thank you, oh bearer of doom. I appreciate it.

SERWER: Every time, it seems.

M. O'BRIEN: Back with more in just a minute. Andy Serwer.

Soledad?

S. O'BRIEN: All right, Miles, thank.

You're looking here at a team, including an oceanographer who's come out, really, to measure the homes here. He's trying to get a sense of just how high the storm surge came into the homes and really what role man played in this disaster. We'll chat with him, just ahead on AMERICAN MORNING. Stay with us.

(COMMERCIAL BREAK)

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