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American Morning

An Inside Look at Hurricane Katrina; Enron Founder Ken Lay, Former CEO Jeff Skilling Go on Trial Monday in Houston

Aired January 27, 2006 - 09:32   ET

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

SOLEDAD O'BRIEN, CNN ANCHOR: We have a remarkable inside look at Hurricane Katrina to share with you this morning. We want to tell you about a shrimp boat captain and his crew. Have you seen these pictures here? They've witnessed Katrina's wrath firsthand as the storm was barreling into Louisiana's coast. Not only did they ride out Katrina's 120-mile-an-hour winds, they also managed to capture it on videotape.
Let's get right to CNN's Sean Callebs. He's in New Orleans this morning. He's got their story.

Hey, Sean, Good morning again.

SEAN CALLEBS, CNN CORRESPONDENT: Good morning to you, Soledad.

Over the past five months, we've showed you a lot of pictures of the aftermath, really how the Louisiana area, the coastal area of Mississippi, just how it was punished by the storm.

But think back, it's hard to remember just how violent that storm was until you take a look at the pictures those guys took out on the shrimp boat. At the same time, they're really frightening and amazing.

(BEGIN VIDEOTAPE)

SEAN CALLEBS, CNN CORRESPONDENT (voice-over): Never before seen pictures of Hurricane Katrina's fury. It's the way Kent Frelich and his crew of three saw it, riding out the hurricane aboard a shrimp boat in southeast Louisiana, near the town of Empire.

(On camera): The full fury of Katrina hit in the wee hours, about the time the 39-year-old remembered he had a video camera on board.

KENT FRELICH, BOAT CAPTAIN: And this is debris coming down the canal. It's kind of hard to see in the dark, but you can see big pieces of debris coming down the canal as the water's coming in.

CALLEBS: At this point, (unintelligible) losing their house?

FRELICH: Oh yes.

CALLEBS (voice-over): Others that night were moored near Frelich, including a small boat that he saw sink. He thought the two men on board had surely drowned, until daylight. FRELICH: This is when we realized they were alive. Right here. There -- that's them. They were on that boat and they made their way up to the top of the ice machine and that's where they spent the storm.

CALLEBS: Then, exhausted and covered in diesel fuel, the two swam and crawled toward Frelich's boat.

FRELICH: These are the guys making their way back to the boat. They were on that ice machine, and he's just in debris -- that's debris that's piled up against the boat.

CALLEBS: Both men survived. Later, a different rescue operation.

FRELICH: And this is -- that's a dog on top of my forklift. He made it.

CALLEBS: The dog is now called Empire.

About an hour later, calm from the eye of the storm gave way to strong westerly winds.

FRELICH: You can hear the ropes cracking actually in the background. See the waves coming in?

CALLEBS: But the crew knew they'd weathered the storm.

FRELICH: We had then been the worst and we knew we had it made at this point.

CALLEBS: Hours later, when the rain stopped, the crew couldn't believe the widespread devastation. At this point, they were running on adrenaline. Awake for nearly 40 hours. Frelich knew he had a great story, a videotape; but most importantly, he was still alive.

(END VIDEOTAPE)

CALLEBS: Really amazing pictures. And Frelich says the toughest part about everything was after the storm came through, they lost communication with his family. For four days, they didn't know if he was alive or dead, and they knew how bad that storm was. And to be perfectly clear, these weren't a couple of cowboys or reckless individuals who rode this storm out. They've done it before, and they've took great care. The knew exactly what they were doing. They had tied that boat off with 32 different lines, and they gave it enough slack so as the water went up a full 25 feet they could ride it out.

And one final thing, those two guys that crawled through that muck, those amazing images. They said as soon as they got on the boat, they got cleaned up, got something to eat and they went right to sleep. Frelich calls them true warriors -- Soledad.

S. O'BRIEN: Sean Callebs with a great story. Thanks, Sean -- Miles. MILES O'BRIEN, CNN ANCHOR: It's now been four years since the Enron bubble burst, spilling red ink on retirement nest eggs all throughout the land. And now for the main event. In the pursuit of those accused of robbing average people of their hopes of the future, company founder Ken Lay, former CEO Jeff Skilling go on trial Monday in Houston.

(BEGIN VIDEOTAPE)

M. O'BRIEN: Was it really news to them? Ken Lay and Jeffrey Skilling, the men at the top of Enron, claim their underlings were cooking the books and they were clueless. The prosecutors say they knew full well the logo wasn't the only thing crooked at Enron. Their star witnesses: several top Enron executives who have pled guilty and will testify against their former bosses.

UNIDENTIFIED MALE: I'm feeling fine. I'm feeling fine. Ready to go. Ready to go.

M. O'BRIEN: The Enron scandal erupted in December 2001. The company was a high-flying Wall Street darling that used seemingly innovative schemes to trade energy. It became the seventh largest corporation in the country, but the company hid steep losses by keeping a separate set of books for subsidiaries, and eventually the financial house of cards fell down, leaving thousands jobless, and wiping out billions of dollars of 401(k) nest eggs.

JACK BERKMAN, SECURITIES ATTY.: You really have to send a signal -- that's it. This is the godfather. Really have to send a signal with Ken Lay.

M. O'BRIEN: In all, 16 former Enron executives have copped pleas, most recently and most ominously for Lay and Skilling, Enron's chief accountant, Richard Causey. He was scheduled to stand trial with them, but instead now will testify against them.

BERKMAN: This is about accounting and finance. And he is the chief accounting officer. You couldn't have a better star witness for the prosecution.

M. O'BRIEN: Another important witness, the former chief financial officer at Enron, Andy Fastow. Fastow pleaded guilty two years ago. He claims Lay and Skilling knew full well Enron was breaking the law.

DANIEL PETEROCELLI, ATTY. FOR JEFFREY SKILLING: Mr. Skilling is ready and his lawyers are trying to get ready. And finally, finally we're going to get into a courtroom and deal with some real facts and real evidence.

(END VIDEOTAPE)

M. O'BRIEN: Michael Ramsey is an attorney at law. He is representing Ken Lay. He joins us from Houston. And beside me here to help me with the questions is our own Andy Serwer, who knows quite a bit about Enron. Mr. Ramsey, good to have you with us.

MICHAEL RAMSEY, KEN LAY'S ATTY.: Thank you for inviting me.

M. O'BRIEN: This Enron flock, they're all singing like canaries. You've got 16 people have copped pleas, including Mr. Causey. That's going to be a tough set of witnesses to counteract. You're a good attorney, but what are you going to do about that?

RAMSEY: Well, I think that we can handle them once the jury understands what their motives are, and there's not a one of them that could finance the kind of litigation that they were faced with. All of them were threatened with sentences up to 30 or 40 years. They all had families. They didn't put money aside for defenses like this. And they end up getting into agreements with the government where lawyers working for the task force decide what is true and what is not true.

M. O'BRIEN: Wait a minute.

RAMSEY: It's very difficult for me to tell you what they are going to say because they all universally refuse to talk to the defense.

M. O'BRIEN: Well let me ask you this, do you think you may be able to convince a jury that all 16 of them are motivated by their own self-preservation here?

RAMSEY: I think some of them may tell the truth. The way the plea-bargain system works, is once they get in the hands of the government, they actually belong to the government, and the lawyers that are hired to work for the task force decide what is true and what is not true so far as their cooperation agreements are concerned. But some of them are stout-hearted people. Your promo said Rick Causey was going to testify in the case. That's the first I heard that.

ANDY SERWER, "FORTUNE" MAGAZINE: Let me -- well, we're going to find out whether he's going to actually testify or not, but let me ask...

RAMSEY: Yes, I'm going to be surprised. I think we're going to have a case that's largely about accounting allegations, where neither the -- where government is going to refuse to call either David Duncan, who was the chief engagement partner for Arthur Andersen, or Rick Causey, who was the chief accountant for Enron.

SERWER: Right, but let's be clear, Mr. Causey has jumped to the government's side, if you will.

I want to ask you something, though.

RAMSEY: Well, pardon me, sir, I don't agree with that.

SERWER: You don't agree with that?

RAMSEY: No. I think he pled guilty and cut his losses. He's largely broke. He's got a family that he has to factor into the equation, and it's a risky business trying criminal cases.

SERWER: OK. We'll find that out over the next several days, I would imagine. But doesn't your client have the same problem, in a sense, that Richard Nixon had, in a sense that either he's complicit in these problems or he was ignorant of them, and therefore irresponsible as chairman of the company?

RAMSEY: Well, the legend of Enron is the different from the reality of Enron. The legend has it, as the promo said, that there was a house of cards, that it was rife with accounting irregularities and improprieties, and that's just not the truth of it. Once we get in the courtroom, in the four corners of the courtroom, we're going to demonstrate that.

M. O'BRIEN: Let me ask you this, what about this courtroom? Houston, Texas, this is a city so affected by Enron, so many thousands of people there who lost their retirement, savings as a result of all this, encouraged by Ken Lay, and Jeff Skilling and others to invest all their money in Enron stock. Can you really get a fair trial there?

RAMSEY: Well, getting a fair trial is a matter of picking a brave jury in a case like this, not only one that's impartial, but one that's ready to -- or brave enough to return an unpopular verdict. And that's what we've got to look for here.

Yes, the answer is, it's very troubling. It's the only troubling thing I see about the case is the ability to get a fair, impartial or brave jury.

SERWER: Quick last question -- 200 million pages of documents -- is obfuscation going to be part of your strategy? Or inevitably will it be part of your strategy for Mr. Lay?

RAMSEY: Well, absolutely not. The 200 million pages of documents -- the government has a burden of proof. They get to go first and they get to layout the case. I, frankly, don't know exactly how they intend to do that. It is a complex case, but complexity has a way of simplifying itself under the pressures of trial.

M. O'BRIEN: Michael Ramsey, attorney for Ken Lay. We'll be seeing a lot of him as time goes on here. Thanks for your time, sir.

RAMSEY: OK, appreciate being asked.

(COMMERCIAL BREAK)

M. O'BRIEN: In Alabama, a woman acts on her gut instinct and it leads to the arrest of a sex offender. Traci Lee Dean saw a 3-year- old girl in a convenience store.

You see that blotted out image in the right-mid part of the screen. We want to protect this little girl's identity. But if you could see her face, it was evidently apparent something was not quite right.

(BEGIN VIDEO CLIP)

TRACI LEE DEAN, HELPED SAVE 3-YEAR-OLD GIRL: Just when I said hi to her, it was just that connection when she said hi back, which I still -- the only thing that really concerned me she was alone. So when she went around the store and came back to me, you know, I asked her, does your mommy work here? Because I thought surely her mom must work here if she's alone in the store. She seems like she comes in here a lot or something, and that's when the man from across the room, you know, said, "Elizabeth," and he walked over and said, "Are you trying to find a new mommy?" and those words just stuck.

M. O'BRIEN: That was...

DEAN: It wasn't a warm -- it wasn't a statement that seemed warm or friendly. She seemed tense. He seemed tense, and I was just middle.

(END VIDEO CLIP)

M. O'BRIEN: Well, there's a lot more to this story than we really have time to tell you. But Dean, she was haunted by that blank look in the girl's eyes and the way that man acted around her, and she took action, and she followed up on it. We're talking days of persuading phone call after phone call, met with deaf ears. Finally convinced police to check out the store's surveillance tape, and that was just by happenstance she came in there, there was a detective there that actually took some action. It eventually led to the arrest of two people now accused of sexually abusing the girl and a teenage boy. It's unclear who this parents -- who this girl's parents are. So there's all kinds of questions that remain here.

But the girl is safe now, and that's the important thing through all of that, because -- and she just did not take no for an answer, you know. Amazing story.

S. O'BRIEN: There are reports that this little girl, I think she is three, right, a 3-year-old girl, multiply raped and a 17-year-old boy, and both terrorized and traumatized. This is such a disturbing story, and that woman is a rock star for doing that.

M. O'BRIEN: Yes.

S. O'BRIEN: I mean, you know, she did it, and she did it single- handedly.

(MARKET REPORT)

S. O'BRIEN: Ahead on A.M. Pop, we've got all the buzz from Sundance, from Jennifer Aniston's new "Friends With Money," to Katie Holmes missing sex scene. Plus, Justin Timberlake's big debut. Is he the new Sundance kid? That's all ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

S. O'BRIEN: In A.M. Pop this morning, the big final weekend at the Sundance Film Festival. A handful of movies making noise there, likely to be coming to a theater near you.

M. O'BRIEN: The trend seems to be small movies with big names attached. Bradley Jacobs, our big name here, "US Weekly" is here with the buzzworthy ones.

And we want to start off with this one that apparently -- they're getting standing ovations for this "Little Miss Sunshine." Tell us about that one.

BRADLEY JACOBS, "US WEEKLY": "Little Miss Sunshine" stars Steve Carell. That's the beginning and the end of this story. Steve Carell is one of the biggest stars that emerged in 2005, of course. "The 40- Year-Old Virgin" brought back the great R-rated comedy, and that's exactly what "Little Miss Sunshine" is. It's about a dysfunctional family that takes a road trip to take their 7-year-old daughter to a, like, beauty pageant of some kind, but it's really R-rated. Allen Arkin is in it. He plays a heroin-toting grandfather, who drops the f-word a bunch of times.

M. O'BRIEN: Family values.

JACOBS: Yes, it got huge amounts of attention. Huge amounts of attention at Sundance. They had a bidding war through the night that ended at 8:00 a.m., with a reported $10 million sale. So there's a lot of intrigue about this film.

M. O'BRIEN: So there a director to watch here. Who is the director?

JACOBS: It's got a few stars, but it's really a Steve Carell story.

S. O'BRIEN: "Friends With Money," which kind of seems like a ripoff. I mean, when you're talking about Jennifer Aniston, I was sort of surprised. You know, she did "Friends," and now she's doing a movie "Friends with Money."

M. O'BRIEN: It's a different f-word. It' a good f-word.

JACOBS: I think we can find an f-word in every movie we talk about this morning. "Friends With Money," it's sort of like "Friends," only they're in their 40. Jen Aniston plays the only single friend in a group of eight. The other women in it are Fran McDormand, Joan Cusack, Katherine Keaner (ph), who's a good friend of Jennifer Aniston's in real life. And actually it was really good. It of course got a huge standing ovation, mostly I think because Jennifer Aniston was there in the audience. Since she's the celeb story of the year, everyone was so excited to see her.

I have been to Sundance four times now. I have never seen more media there. They literally were not letting media into the event anymore because there were so many camera crews, paparazzi, reporters like me. It was just insane, all for Jennifer Aniston.

S. O'BRIEN: Because, of course, the whole Angelina Jolie and Brad Pitt. JACOBS: Right, it was her first public appearance since the news broke that Angelina is pregnant with Brad Pitt's child. So there was just a lot of curiosity about how Jennifer would handle it, and you know what, she handled it well.

S. O'BRIEN: Total sidebar -- she's been handling it so well. That's been a tough year for her, I think.

M. O'BRIEN: Let's talk about...

S. O'BRIEN: Moving on.

M. O'BRIEN: "Alpha Dog," Justin Timberlake. Tell us about that one.

JACOBS: "Alpha Dog" is the movie premiering tonight. It's the closing night movie of the festival.

M. O'BRIEN: That's a big deal, right?

JACOBS: Yes, it's a big deal. Opening night movie was "Friends with Money and the last one is "Alpha Dog." It stars Justin Timberlake. Now you know Justin has been a pop star for a long time now, but he really wants to be an actor, and he actually has three movies in the can, three movies that he shot and completed. This is the first one that is going to come out, coming out in February, February 24. It's about -- it's based on a true-life story about a teenage suburban drug dealer named Jesse James Hollywood. And Justin Timberlake plays his good friend. And together they kidnap a younger brother of a rival of theirs. It's sort of an aggressive story, but none of the reviews have come out yet because it's not premiering until tonight. We'll know more later on this movie.

But again, it's really about Justin and Justin possibly transitioning over into film.

S. O'BRIEN: Yes, this will be an important night for him certainly, and the rest of his career.

JACOBS: And Cameron was there, also. See you'll see a lot of...

S. O'BRIEN: They're on again. I'm so relieved to hear that.

Bradley, thank you.

M. O'BRIEN: Quickly, quickly, we've got another f-word -- Favors. A little sway. You've brought us examples of swag, right?

JACOBS: I did. I brought you guys -- Swag is the story of the festival. So -- and it's not all fabulous stuff, but I have to say my -- Miles, this is for you.

M. O'BRIEN: This is for research; I'm not keeping this stuff.

JACOBS: Soledad, something for you.

S. O'BRIEN: Thank you.

What is it?

S. O'BRIEN: Anti-aging treatment!

(LAUGHTER)

S. O'BRIEN: Bradley, thank you so much. We'll talk later.

Back in a moment, guys.

Anti-aging treatment?

(COMMERCIAL BREAK)

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