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Business as Usual on Wall Street?; Who Owns Your Texts?

Aired April 20, 2010 - 20:00   ET



Goldman Sachs came roaring back today with the kind of profits that even most Wall Street insiders did not see coming. The first now up to its eyeballs in an SEC fraud investigation announced today that it doubled its first-quarter profits. Goldman earned a whopping $3.3 billion in just three months, which has a lot of people asking tonight, with all this talk about financial reform, are we right back to business as usual?

And that leads us to a theme running through much of tonight's show, blurred lines. The line between Washington and Wall Street is so blurred that in many cases it's basically a revolving door.

The most recent example, President Obama's former White House counsel Greg Craig now advising Goldman. The firm, its employees the second biggest donor also to President Obama's campaign. We're going to talk than tonight.

Also, the Supreme Court considering a case of blurred lines between work and your private life. Who owns the personal texts that you send on a company phone, you or your boss? Do you have as much privacy as you think you have?

And a fascinating story tonight. Are some doctors blurring the lines between legal and illegal drugs? Drugs like LSD and ecstasy used as miracle cures for some patients with PTSD and depression. And Dr. Sanjay Gupta is going to be with us to tell us all about that.

A lot of good stuff to talk about tonight.

But we're going to begin with your cheat sheet on today's top stories, our "Mash-Up."

And our number-one international story, nearly a week of global air travel chaos finally may be coming to an end. Europe's busiest airports began to reopen today. But a stunning 95,000 flights have been canceled since that volcano in Iceland erupted last week. So, it still could take weeks to get everybody where they want to go.


UNIDENTIFIED FEMALE: Tonight the first flight into Heathrow Airport for six days touched down, a British Airways flight from Vancouver.

LISA SYLVESTER, CNN CORRESPONDENT: More than half of European flights were cleared to fly for the first time today.

UNIDENTIFIED MALE: It was a brief glimpse of what used to be normal. But the new normal is being determined by the volcano in Iceland, and its latest spurt of activity sent a new cloud of ash toward Europe.

UNIDENTIFIED MALE: For now, the wind has shifted, moving the ash elsewhere.

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: South of the volcano, east of the volcano, the farm owners, the landowners, the people who live here are suffering. Their properties are getting destroyed because of these ash storms.


BROWN: And a word to the wise for hopeful travelers. The volcano that started all the trouble is still rumbling.

The big domestic story tonight, a serious new health warning has lawmakers sounding alarm bells, and the culprit, salt. A new report says Americans take in more than twice as much sodium as we need, and now the FDA is feeling pressure to impose strict limits. Take a look.


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Most of the sodium in your diet doesn't come from your saltshaker. It's in processed foods and restaurant meals.

UNIDENTIFIED FEMALE: We're supposed to have no more than 2,300 milligrams of salt, about a teaspoon a day. But look at what we eat. One of KFC's new sandwiches has more than half the sodium we're supposed to eat all day. This Asian chicken crunch salad has more than a day's worth of salt. And this chicken parm, well over the daily recommended amount.

UNIDENTIFIED FEMALE: Chef Bobby Flay says a mandatory reduction could be tough to swallow.

UNIDENTIFIED FEMALE: It's going to be hard for me to hold my hand back in the salt bin when I think that it's going to be important to my customers.


BROWN: The AMA says 150,000 lives a year could be saved by just halving the sodium levels in prepared foods.

And our top political story tonight, the growing protest over don't ask, don't tell. Six people in uniform, including openly gay Iraq war vet, Lieutenant Dan Choi, were arrested today after chaining themselves to the White House fence. And just last night, President Obama was heckled again and again by protesters during a fund-raiser out in L.A.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: She's passionate about fighting for California's families. She is -- we are doing -- we are going to do that.

Hey, hold on a second. Hold on a second.

We are going to do that.

AUDIENCE: Yes, we can!

OBAMA: So...

AUDIENCE: Yes, we can!

OBAMA: ... let's...

AUDIENCE: Yes, we can!

OBAMA: What the young man was talking about was, we need to repeal don't ask don't tell, which I agree with, and which we have begun to do.


OBAMA: It would make more sense to holler that at the people who oppose it.



BROWN: The Pentagon right now is in the midst of a yearlong review of the impact of ending don't ask, don't tell.

And the story getting a lot of buzz tonight, teens and texting. A new story finds that a third of teens send more than 100 texts every day. Two-thirds say they're more likely to text than talk to their friends.

At school these days, the cell phone is now as common as the backpack.

Do you know of anyone who doesn't have a cell phone?


UNIDENTIFIED MALE: In fact, four of five teens admit to sleeping with or having their cell phone near their bed.

When you go to sleep at night, where is your cell phone?

UNIDENTIFIED MALE: My cell phone is right beside me.



BRIAN WILLIAMS, HOST, "NBC NIGHTLY NEWS": The Pew Research Center says half the teenagers it surveyed send 50 text messages a day. Girls between the ages of 14 and 17 average 100 or more.

UNIDENTIFIED MALE: Sixteen-year-old Annie Levitz (ph) sent about 4,000 per month. She now has carpal tunnel syndrome and needs surgery.

UNIDENTIFIED FEMALE: I started like losing feeling in my hands and they would go numb. And I would be going to pick up dishes and things and they would just fall out of my hands.


BROWN: The Pew study also found that most schools only allow texting outside of class.

And that brings us to the "Punchline" tonight, courtesy of Stephen Colbert, with a guest appearance by our own Ali Velshi, Colbert having a little fun with the Goldman Sachs story. Take a look.


STEPHEN COLBERT, HOST, "THE COLBERT REPORT": What exactly did the feds accuse Goldman of doing here? Ali Velshi, CNN's business reporter from our raceless, hairless future, explains.


ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Wall Street investment firm Goldman Sachs is accused of selling mortgage-backed securities that were essentially set up to lose money.

COLBERT: What's the problem?


COLBERT: There is nothing illegal about selling customers a product designed to fail. The Chicago Cubs do it every year.


COLBERT: Are they going to jail? No, I do not think that they are.



BROWN: Stephen Colbert, everybody.

And that is the "Mash-Up."

Coming up, Goldman Sachs firing back today. Even with fraud charges hanging over its head, profits are soaring again. Can the Wall Street giant beat the rap?

Right after the break.


BROWN: Back to business tonight for Wall Street powerhouse Goldman Sachs. The company shot back at those SEC fraud allegations on a conference call today. The charges rattled Wall Street, but not Goldman's bottom line. The firm announced a staggering $3.3 billion profit, almost double last year, pay there also soaring, up 17 percent, among the highest on Wall Street, all this news just days before President Obama, of course, goes to New York, or comes to New York, pushing a financial reform plan to rein in the banks.

And joining me Right now to talk about all of this is Suzy Welch, who is a columnist for "BusinessWeek," also author of "10-10-10: A Life-Transforming Idea," also with us, "Vanity Fair" writer Vicky Ward, who is the author of "Devil's Casino," and with me as well, CNN's Christine Romans.

Welcome to everybody.

Let me start with you, Christine, because I want you to bring us up to speed on this sort of what you called a remarkable conference call that happened today between Goldman Sachs and reporters, investors. There was a lot of pushback on their front. Tell us what happened on the call.

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, what happened was here is Goldman Sachs ready to talk about a $3.5 billion profit in the quarter, and all anybody wanted to talk about was an SEC charge of fraud.

The company saying that it is going to vigorously defend itself, basically batting down all of the SEC's charges one by one. But there was someone on the call, Campbell, who said, look, your global reputation problem, what does this mean? How are you going to recover from this?

And the company basically said, well, look at our results. We made $3.5 billion. Our clients don't think we have a problem. And that's the most important thing to us, our clients.

The company is still kind of vintage Goldman Sachs, going to fight forward, going to...



ROMANS: Well, going to circle the wagons and fight the SEC.


BROWN: Was anybody buying it? Or... ROMANS: No. There was a lot of pushback, especially from reporters. There were two different conference calls. They were more than an hour each. Reporters really pushed back. A couple of the analysts kept really digging into this particular -- particular investment that is at the center of all this, and really wanted to find out and get to the bottom of it.

They also wanted to know, are there more of these investigations looming that we don't know about? And Goldman Sachs would give no indication that there were. Lloyd Blankfein, the CEO, wasn't on this call. And basically he just acknowledged the lawsuit in a statement saying that -- thanking their clients for their business and for a good quarter.

BROWN: So, yes, there is a massive P.R. problem here, the arrogance that you were referring to there, Vicky.

But, Suzy, let me ask you first. I think, to the average people out there, they just -- I'm not talking about Wall Street insiders. But it's hard to wrap your arms, your head around the fact that most of America is still really struggling right now. And they are, you know, announcing these earnings that are staggering.

SUZY WELCH, "BUSINESSWEEK": Was there was a worse day to announce huge, staggeringly great earnings than today for Goldman Sachs?

And yet I don't think Goldman Sachs thinks that. I think those of us who are in the business of looking at what it looks like to the outside world system, geez, what a dichotomy. They're talking about how rich they are again on this day.


BROWN: So, why? They just don't get it? Is it...

WELCH: It's not that they don't get it. It's that they care about their shareholders and their clients. And they don't care about what their reputation is on Main Street. That's -- they're not working for Main Street.

And they sincerely believe they didn't do anything wrong. When it gets down to it, they have got -- they believe they have an excellent case. They're going to prevail in a court of law. They don't think they have anything to apologize for. They're doing what they promised to do. They're making tons of money. And that's what their shareholders want. That's what their employees want. That's what the customers want. And so, they feel defiant.

BROWN: And, Vicky, they're also circling the wagons. You have done some reporting on this. They're basically telling everybody inside, hey, time to zip it, no talking to reporters or anybody else.


WARD: ... a number of ex-Goldman employees who were in danger of sort of writing columns or going on TV, and they were called up and told, now, you will play fair.

And one person said to me, it's not quite Big Brother from "1984," but it's -- it was little brother. It was sort of, we won't be doing business with your new firm unless you treat us nicely, so, a little bit threatening.

Having said that, I felt today the people that I spoke to from Goldman were a little less defiant than they were on Friday, when the charges first came out. Today, they were like, look, if there is, if this immoral issue should become a debate sort of legal, a legal matter, well, sure, let's talk about it with the government.

What they didn't appreciate was being ambushed. But today they were sort of saying to me, we're prepared to talk about it, but we don't like being ambushed. So, there was a slight difference in the tone.

BROWN: So, let me take this a little more big picture here, which is all of this is playing out in the context of the president trying to push this massive financial reform regulation bill, which would, we should be clear, I think, in no way prevent what allegedly happened at Goldman.


BROWN: But what you're also hearing from a lot of people is that it doesn't even address sort of the systemic problems that caused this whole crisis in the first place, beginning with Lehman.

And Eliot Spitzer was on the show last night, and he talked about this directly. Let me just play this sound bite.


ELIOT SPITZER (D), FORMER NEW YORK GOVERNOR: Do they need to go further than they have? Absolutely. Do they need -- the biggest issue, four letters, TBTF, too big to fail.

These institutions that are too big to fail that have now explicit federal guarantees behind them, so they can borrow, and there's an asymmetry. When they lose money, it's on our shoulders as taxpayers, if they go bust. If they make money, they keep it and give it to themselves as bonuses. That asymmetry creates a desire for risk that is dangerous. That is what got us here in the first place.


BROWN: So, Suzy, Washington is completely laser-beam focused on this bill, getting it done. And there is a Democrat saying it doesn't even address the too-big-to-fail issue.

What is the point then?


I think what is happening is that, in the political realm, they want to put a period at the end of this sentence. There was this gigantic financial meltdown. Who did it? Well, fingers are pointing this way. They're pointing that way. It is like "Murder on the Orient Express." Every single person is guilty.

The SEC, where was it when all of this was going on. And now what has happened is, we have an administration that is saying, if we pass this bill, we have found the culprits. We're putting a period on the end of the sentence. It won't happen again, because when you're scared and you don't understand what happened, nobody on -- a typical person doesn't understand, even people who are trained in economics don't understand what happened.


BROWN: ... hope Washington would at least come up with something that attempted to address I think the real problem.


WARD: Well, you had the hearings today with Dick Fuld. It was -- if you didn't know what was going on, it would have sounded like double Dutch.

I actually think the most interesting person to listen to on this is actually Mary Schapiro, because she can talk honestly about the failings of the SEC, because she wasn't in charge of it when...

BROWN: At the time.

WARD: Yes. And she made a very good point about the reform bill, which is that the legislation over too big to fail must be worded very, very, very carefully so that it doesn't endorse too big to fail. And that's the critical issue, isn't it?

That's what everyone is arguing about.

BROWN: All right.

WELCH: This is a great point, in that will the bill actually create a situation where if this happens again, there is an orderly reorganization? That's an open question.

BROWN: All right. Guys, thank you very much to Vicky and Christine.

I know Suzy Welch is going to stay with us. We're going to talk about also the revolving door between Wall Street and Washington, nothing new here. But nobody does it better, frankly, than Goldman Sachs.


BROWN: And coming up, we are going to name some names on that front, right after this.

(COMMERCIAL BREAK) BROWN: A lot of jaws dropped last night when Goldman Sachs announced that they had hired former White House lawyer Greg Craig only a few days after the SEC's lawsuit against the bank was filed, the revolving door between Wall Street and Washington alive and well, and no better example than Goldman Sachs.

Lisa Sylvester is in Washington for us tonight to give us kind of a rundown of all the players.

What have you got there, Lisa?

SYLVESTER: Hi there, Campbell.

Well, you know what? There is no question Goldman Sachs has a lot of friends in high places. And a number of big-time players have swung through the door between Washington and Goldman Sachs.

First, there are the former Goldman CEOs. Henry Paulson left to become President Bush's treasury secretary. Jon Corzine, another former Goldman CEO, became a U.S. senator and later New Jersey governor. Robert Rubin also ran Goldman. He left to become treasury secretary under President Clinton, then went back to Wall Street to work for Citigroup, and he was an economic adviser to Barack Obama during his 2008 presidential campaign, and is a mentor of Mr. Obama's current top economic aides.

And then there are more Goldman alums who are currently in high positions in Washington. Representative Jim Himes currently sits on the House Financial Services Committee overseeing financial companies. Himes is a former Goldman vice president.

Gary Gensler is the current chairman of the U.S. Commodities Futures Trading Commission. His office, in fact, is expected to have a big hand in the future regulation oft derivatives market, a Goldman Sachs alum.

And many people will recognize this man, Neel Kashkari. He was the point man on TARP funds, helping dole out some 700 billion taxpayer dollars to Wall Street. He also came to the federal government, you guessed it, from Goldman Sachs.

Couple other names we should mention, Josh Bolten. He was President Bush's chief of staff, another person who has clocked time at Goldman Sachs, nearly six years. And the latest to pass through the revolving door, Gregory Craig, President Obama's former White House counsel, as you mentioned, Campbell, now serving as an adviser to Goldman Sachs.

And on top of all of this, Campbell, there are more than 40 congressional staffers and federal agency employees who registered in 2009 to lobby on behalf of Goldman Sachs. That's according to an analysis by Public Citizen and the Center for Responsive Politics -- so, some very, very can cozy ties -- Campbell.

BROWN: All right. That was quite a list there, Lisa.


BROWN: Appreciate it, Lisa Sylvester.

And let me bring back Suzy Welch now and also Mark Halperin, who is editor at large and senior political analyst for "TIME" magazine.

So, Mark, Greg Craig, what was it, January when he left the White House? And a very short time later, here we -- like, how does this happen, I'm guessing a lot of people are saying right now.

MARK HALPERIN, CNN SENIOR POLITICAL ANALYST: Well, look, he is not lobbying. He's not a lobbyist. He is a lawyer, and he is a great lawyer.

BROWN: Right.

HALPERIN: And he's a well-connected lawyer, an experienced one. He could have had a client like this and did have clients like this before he was the president's counsel.

It's not great optics for the White House. But like all the people who Lisa talked about, as John King would say, people from Goldman Sachs are wicked smart. And people want them on their side. And in our free country, as long as he is obeying the rules, which he is, as long as he is not doing anything that violates the rules or laws of the country, I think Goldman Sachs is entitled to hire good lawyers like Greg Craig.

BROWN: But that doesn't mean necessarily, which some people may assume it does, you're getting instant access to the White House either. I mean, for one thing, Greg Craig didn't exactly leave on the best terms either, did he?

HALPERIN: Well, look, we don't know exactly what he is doing for them. Is he going to be in court representing them? Is he giving advice at the nexus of law and politics and public relations, which is what Craig is fantastic at?

BROWN: Right.

HALPERIN: He is certainly -- almost certainly doing the ladder.

But if he is -- he is not going to lobby the White House. As you said, he may not have much luck lobbying the White House. But his advice is invaluable, not just because he has a great legal mind, because he knows the players. He has worked on Capitol Hill. He has worked in the executive branch.

And that ability to give advice, not to lobby, but to give informed advice happens all the time. Again, politically, for the White House, it's not great, because right now they're trying to turn firms like Goldman Sachs into villains to help pass this legislation.

BROWN: And, Suzy, I think the bigger issue is, it's much bigger than Greg Craig, obviously, here, which is you have, on the one hand, people look at an example like this, look at that list that Lisa showed us and say basically there are 10 people who run the world, and I'm not one of them.


BROWN: And, at the same time, though, the issues that we're dealing with here are so complicated and so complex, and the people who do understand them are the people who work on Wall Street.

So, how do you get that intellect, at the same time, instill trust in the American people that you are actually able to regulate it and control this?

WELCH: You know, they may need to talk about it. The fact is the optics are bad, but maybe the practice isn't bad. As you say, these people know what they need to know and they know each other, which is important. They know how the business, how it all works.

And, so, maybe instead of sort of hoping that people aren't, you know, doubting them and not trusting them, they can come out and say, look, this is how it looks, but everything is aboveboard here, and just name the elephant in the room.

BROWN: You think that's going to work?


WELCH: It may be the only option. I don't know another one.

HALPERIN: I mean, of all the things, of all the problems that exist in America and the country, we should focus on the ones we can solve. You're never going to outlaw and nor do I think you should the ability for firms to hire good advisers.

And Greg Craig is a man of ethics and principle and intelligence, and I'm sure they're paying him a lot of money to get access to all of that.

BROWN: All right. Mark Halperin, I know you're sticking around. We're going to talk about the politics of all of this and a whole lot more in just a minute.

Suzy, good to see you. Thanks for being here.

As some of those closest to President Obama may be looking to leave the White House also, check out who is dropping hints just as the midterm campaigns kick into high gear. We're going to talk about that with Mark and a few others when we come back.


BROWN: Could team Obama be in for a shakeup? It wasn't too long ago some were wondering if White House Chief of Staff Rahm Emanuel's job was safe. Well, that speculation has certainly quieted down.

But Emanuel, a former congressman, appears to be dusting off his resume a little bit. Listen to what he shared with PBS' Charlie Rose last night. (BEGIN VIDEO CLIP)

RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: I hope Mayor Daley seeks reelection. I will work and support him if he seeks reelection.

But if Mayor Daley doesn't, one day, I would like to run for mayor of the city of Chicago. That's always been an aspiration of mine, even when I was in the House of Representatives.


BROWN: And Emanuel might not be the only member of the West Wing ready to jump ship as the midterms draw a little bit closer.

Mark Halperin is back. Also joining us is Jim Warren, Chicago columnist for the Chicago News Cooperative and "The New York Times."

Mark, let me start with you on this.

Welcome to both of you, let me say to Jim.

And, Mark, let me ask you first, when was the last time you saw a White House chief of staff sort of hinting at their future employment plans?

HALPERIN: It's pretty uncommon, because one of the jobs of chief of staff is to kind of be low-key and behind the scenes and take heat for the president, not express your own ambitions.

But Rahm Emanuel is an unusual chief of staff. He was one of the to-ranking Democrats in the House. He has his own public persona, that, for a long time, he was more famous than Barack Obama. So, I don't think it's surprising that this chief of staff would express that, but it is -- it is unusual and striking. And, as he made clear, though, this is a job he has thought about for a while.

BROWN: So, what has kind of the reaction been in Obama -- Obama land internally?

HALPERIN: They're fine with it because they've know -- everyone in Obamaland has known Rahm for a long time. He didn't want this job. He took it reluctantly. I think that there's not a day that goes by where part of him doesn't want to be back in Chicago. People from New York and Washington think the second best job in politics after president is mayor of New York. People in Chicago realize the second best job, maybe the best job in the country is mayor of Chicago. No surprise that Rahm, a man of taste and ambition would like that position.

BROWN: So, Jim Warren, how is this playing in Chicago. Are Democrats there champing at the bit for mayor Rahm Emanuel?

JIM WARREN, COLUMNIST, "CHICAGO NEWS COOPERATIVE": No, I don't think folks are champing at the bit necessarily, and they're not quaking in their boots. I think there is so much ambiguity inherently in this whole proposition. And at the center of it all is a man named Richard M. Daley, longest serving, arguably the best, big city mayor of America, 68 years old, been in charge since 1989 when a young fellow named Rahm Emanuel pleaded with Bill Daley, brother of Richard Daley, to be the campaign director for that 1989 campaign, was turned down and became simply a fundraiser but has done very well as a result of those connections.

Does Daley run again next year? There's a bit of conventional wisdom that maybe if his wife who has inoperable breast cancer, something tragic happens with her, that he might not seek reelection. I think just the opposite. He's got nothing else in life really to do. He loves this job so much. So Rahm Emanuel I think has no possibility of running until maybe 2015, and then who knows, in a city particularly in which the traditional white base is declining, it's going to become -- and it is a majority black, Latino city. Latinos are going to be arguably the big looming political factor. And is there somebody from the African-American or Latino community come and, you know, serve as a, you know, a real precedent-setting candidate.

And when it comes to other jobs back here, Campbell, and he's definitely coming back.

BROWN: Right.

WARREN: He's renting out his house. He wants to send his kids to a particular public high school here.

BROWN: Those plans are in motion.

WARREN: His wife does not particularly like Washington, D.C. He is coming back here. But he can't run for governor because there's a governor's race now, so that's another four years off.

BROWN: Right.

WARREN: Obama's all-Senate seat is up now. That's another six years off. Dick Durbin is not going to be challenged by, when he ran for re-election by Rahm Emanuel.

BROWN: All right.

WARREN: There ain't much here.

BROWN: So let me ask you quickly, Mark, it isn't just Emanuel who is sort of hinting at this. You also had David Axelrod who said that, I think to "The New York Times" last month, that he, in his words, was not cut out for this town, talking about Washington. Are we going to see a few people who kind of have the blues post mid-term elections who are ready to get out?

HALPERIN: Well, I think you're right. The dividing line would be the midterms. But I suspect that after the midterms, either they'll keep control of Congress and they'll be invigorated to try to pass more of the president's agenda, or they'll lose control of Congress or at least what has it.

BROWN: And he'll say you can't abandon me. HALPERIN: And the president will say I need you now more than ever. So, you know, post-9/11, those senior jobs being (INAUDIBLE) have even more job lock than they used to. Particularly people like Rahm Emanuel, David Axelrod, these have relatively small circle around this president. So, you know, I'll be surprised if they go. But you never do know. And personal reasons weigh as much as professional ones I think.

BROWN: The hours are killer. It's burnout.

HALPERIN: Their hours are killers. And both David Axelrod and Rahm Emanuel, not just because of Manny's (ph) deli but lots of things that attract them to Chicago that they like to get back to.

BROWN: Right.

HALPERIN: Again, if they could go, if they didn't feel they needed to serve the president of the country for personal reasons, they would go in a Chicago minute.

BROWN: All right, Mark Halperin, Jim Warren also. Thanks, guys. I really appreciate it.

Coming up next, we're going to turn our attention to a story that could blow your mind. LSD, mushrooms, ecstasy, all being seriously considered for use as medicine. You're going to see why. Some studies being done right now in just a moment.


(BEGIN VIDEO CLIP) TIMOTHY LEARY, PSYCHEDELIC DRUG ADVOCATE: Whenever I go to a (INAUDIBLE), it's sold out. It's not because I'm that clever. It's because they gave me the good lines in the show. Turn on, tune in, drop out.


BROWN: So more than 40 years after Timothy Leary first uttered that famous phrase, the use of psychedelic drugs is being taken a lot more seriously. Not as a growing threat, but a way, rather, to treat those suffering from emotional and psychological problems.

CNN's Dan Simon went to the largest conference in decades, looking at the future of psychedelic science.


DAN SIMON, CNN CORRESPONDENT (voice-over): They're the drugs once associated with hippies in the 1960s. LSD, hallucinogenic mushrooms, once feared as a one-way ticket to insanity, now being discussed as real medicine to treat real problems.

RICK DOBLIN, PSYCHEDELIC DRUG EXPERT: Well, I am a firm believer. I've seen it work in many people.

SIMON: Rick Doblin imagines a day when patients will be able to go to their doctor's offices for their doses of LSD or ecstasy pills.

DOBLIN: I think eventually there will be psychedelic clinics regulated by FDA with the people who are especially trained to administer the psychedelics and people would come to them for medical purposes or for rights of passage in their life or personal growth.

SIMON: Doblin comes with credentials. He's got a PhD from Harvard in public policy and has spent years studying psychedelics.

(on camera): Proving that there is a convention for practically everything, researchers from around the world have come to San Jose, California, to talk about psychedelic drugs. Here at the Holiday Inn, they are sharing stories about those drugs and their hope that one day they will become a regular part of medicine.

(voice-over): Here at the conference, we found Sara Huntley, who says she was abused emotionally and physically as a child.

SARA HUNTLEY, USED MDMA: It made me feel worthless most of the time, and that I was a burden to that member of my family. And that I wasn't really worth that burden.

SIMON: She says the abuse stripped her of self-confidence. Then as a 17-year-old high school student, she started taking the drug ecstasy, scientifically known as MDMA.

(on camera): MDMA, or ecstasy, you see right here, was developed in the early 20th century as a possible appetite suppressant. Of course, today, people use it for its hallucinogenic effects users say can heighten their senses and lower their inhibitions.

HUNTLEY: It seems like the color contrast --

SIMON (voice-over): Now 23, Sara says MDMA helped get her life back.

HUNTLEY: Using MDMA helped ease my sense of fear and defensiveness.

DR. MICHAEL MITHOEFER, ADMINISTERS MDMA: They talk about being happy.

SIMON: Psychiatrist Michael Mithoefer has never examined Sara, but believes psychedelics hold tremendous promise. Through a study approved by the Food and Drug Administration, he's been administering MDMA to patients with post traumatic stress disorder.

(on camera): As a doctor, what made you think that psychedelics could be helpful?

MITHOEFER: Well, you know, we know that the treatment of PTSD involves revisiting the trauma in a therapeutic session. So our idea is that MDMA may bring people into kind of an optimal zone of arousal where they can connect with their feelings, but they aren't going to be overwhelmed by fear. SIMON (voice-over): For advocates, the key is matching the drug with the problem. Psilocybin, found in certain mushrooms, might be used to treat anxiety related to terminal illness. The same for LSD.

DOBLIN: It can vary according to what issues they're working with, how much denial they have. But we would like to have psychiatrists and psychotherapists have access to a whole tool chest of psychedelics that they can use at appropriate times.

SIMON: But some doctors question whether psychedelics are ever appropriate. Stanford psychiatrist David Spiegel says there is no scientific literature yet to back up any positive claims.

DR. DAVID SPIEGEL, STANFORD UNIVERSITY: The key issue in the treatments of this disorder is teaching people how to access their memories and feelings about the trauma in a controlled way. And psychedelics are anything but a controlled experience.

SIMON: For now, that's the mainstream medical consensus.

MITHOEFER: Maybe if you get your MDMA --

SIMON: But supporters here hope that over time, psychedelics will be seen less as a bad trip and more as legitimate medicine.


BROWN: And Dan Simon is joining me right now. I know these studies taking place. It's not like they're sort of being done in dingy living rooms. These are real government-approved studies, right, Dan?

SIMON: And the patients have been carefully prescreened, Campbell. And I asked Dr. Mithoefer who administers MDMA or ecstasy to patient, I asked, first of all, where do you get the drug? And he says it comes from a DEA-approved laboratory. It comes in powder form and then it's given to patients in the form of a capsule. But the bottom line here, what advocates say is that this really needs to adhere to strict science if they're going to get any sort of universal acceptance in the future, Campbell.

BROWN: All right, Dan Simon for us tonight. Dan, thanks.

We are going to look at who has really got the facts on their side in this debate. Dr. Sanjay Gupta dove into it for us, and he's going to join us right after the break. Stay with us.


BROWN: We're back, and we're talking about psychedelic drugs used for medicinal purposes. Is it really a breakthrough, or just an excuse to try to legalize LSD, ecstasy and more?

Let's turn to CNN chief medical correspondent Dr. Sanjay Gupta, and Dr. Stephen Ross, who is clinical director at the NYU Langone Center of Excellence on Addiction. Sanjay, give me your take on the science here. Some call it quack medicine. Where do you come down on all this?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: A couple things, Campbell. First of all, there have been some pretty significant studies out of big centers, NYU, Hopkins, UCLA, showing that some of the therapies that are being talked about here are safe. And then sort of the second step of this, this idea that you start to measure effectiveness in people who have overwhelming anxiety, depression, for whom conventional therapy simply hasn't worked. When they start using some of these medications, again, hallucinogenic medications, some early small studies have shown significant benefit.

BROWN: I know you also have some brain scan evidence that may back this up as well, right?

GUPTA: Right. They can actually do these tests, Campbell, called pet scans. These two areas of the brain have different functions. The parietal cortex sort of gives you a little bit of a sense of the world around you where the frontal medial cortex more is your judgment, a little bit of your personality. These two things get more connected as a result of taking these medications.

BROWN: Dr. Ross, there have been studies on the drug Psilocybin, I think if I'm saying it right, which basically is the active ingredient in mushrooms, or magic mushrooms. Walk us through kind of what you're finding.

DR. STEPHEN ROSS, NEW YORK UNIVERSITY: So we're doing a small pilot trial at NYU looking at patients that have advance or terminal cancer and that are anxious or depressed or in pain. We're looking to recruit 32 people. So far we've treated three. It's a double blind study, it's placebo-controlled. Of the three people that we have treated so far, we've seen in all three of them a reduction in anxiety around death, diminished depression, and in some diminished pain, greater integration back into their families, back into their lives, living their lives more authentically, resolving unresolved conflicts.

BROWN: Three is a pretty small number.

ROSS: Well, that's why -- you know, this is subjective clinical assessment of our clinicians. We don't know anything until we have analyzed the data.

GUPTA: I do want to point out one thing that I think is important here when we're talking about this. All these studies, Dr. Ross's studies, other ones are done in a controlled setting. I mean, they're done in a doctor's office. They take the medication. They put an eye mask on. They sit on the couch. In an uncontrolled setting, there's some potential risks. I think Dr. Ross would agree. People are developing extreme anxiety as a result. They're developing some visual contortions or hallucinations.

BROWN: What do you think the research, the impact that research like this has on the drug war, because the stuff we are talking about is illegal, obviously. GUPTA: This isn't a first line therapy that people are talking about. Simple therapies or existing therapies have not worked. And these do seem to have some benefits. So I think it's going to probably argue for the medicinal use of these medications. I think we'll be talking about some of the same principles with regard to hallucinogenics as a potential medical benefit.

BROWN: Do you agree with that, Dr. Ross?

ROSS: There is definitely stigma that's been historically associated with these drugs. But in many ways they've been misclassified. They're classified as schedule 1 drugs, meaning high- addictive potential, no therapeutic utility. But they don't produce addictive syndromes. They certainly can be misused in uncontrolled setting. But in careful controlled laboratory settings under the right conditions, they can really induce positive changes.

BROWN: It's interesting stuff. Dr. Ross, it's nice to have you here. I really appreciate it.

ROSS: Thanks.

BROWN: And, Sanjay, as always, good to see you.

GUPTA: Thanks, Campbell.

BROWN: "LARRY KING LIVE" starts in just a few minutes. Larry, what do you have tonight?

LARRY KING, HOST, "LARRY KING LIVE": A good one tonight. Craig Robinson is with us, the author, basketball coach, and he happens to be First Lady Michelle Obama's brother. He'll let us in on how their parents raise two very successful kids and what he learned about the president from the way Barack played ball.

And comedian Sarah Silverman joins us with her unique brand of humor, sparing almost no one, including herself. Next, Campbell, on "LARRY KING LIVE."

BROWN: All right, Larry. We'll see you in a few minutes.

Coming up, texting, tweeting, and blogging at work. What happens when your boss gets a hold of your personal messages? The Supreme Court takes up the latest fight over the right of privacy, when we come back.


BROWN: Continuing tonight's theme of blurred lines, this one between your boss and your privacy. A police officer in California got into trouble using a city-issued pager to share some very personal thoughts. Did his superiors violate the officer's right to privacy when they read his messages? As CNN's David Mattingly reports, that is now up to the U.S. Supreme Court.

(BEGIN VIDEOTAPE) DAVID MATTINGLY, CNN CORRESPONDENT (voice-over): Instant messaging, texting, social networking, blogging, tweeting and e-mail. More and more people refuse to leave their personal digital lives behind, even when they're on the job.

NANCY FLYNN, THE EPOLICY INSTITUTE: There's s definitely been a blurring of the lines between traditional nine to five workdays, thanks to the electronic age, and particularly now that we have mobile technology.

MATTINGLY: And that doesn't stop when it's a company phone or a computer. The question is does your boss have a right to look at your personal messages?

The Supreme Court's taken up the case of a California cop. In 2002, he was using his police department pager for a lot of personal texting.

(on camera): Some of those text messages went to his estranged wife. Some went to his girlfriend. Some were sexually explicit. To his surprise, his supervisors looked at the messages after noticing he was going over his pager's monthly allotted limit. So the officer sued and won, claiming that he had an expectation of privacy, and that his department's policy was unclear.

DIETER DAMMEIER, OFFICER'S ATTORNEY: Part of the argument in the court was, hey, these guys are 24/7. They should be able to have these things monitored. Well, they are 24/7, but they're also human beings, and they should also have an expectation of privacy.

MATTINGLY (voice-over): Now, the city of Ontario, California, is pushing back, taking to it the Supreme Court. The argument that this is about public accountability is backed by groups like the National League of Cities.

LARS ETZKORN, NATIONAL LEAGUE OF CITIES: We in government have fiduciary responsibilities to taxpayers to make certain that their dollars are used as efficiently, as effectively as possible, and that's for public purpose, not for the private texting of employees.

MATTINGLY: This case focuses on employees who have public jobs and use electronic devices that are paid for with tax dollars. But the private sector is watching closely. Eighty-three percent of companies surveyed by the ePolicy Institute restrict personal use of company e-mail. Sixty-two percent restrict personal use of company cell phones. Forty-three percent restrict visits to social networking sites. And 25 percent ban blogging on company time.

JENNIFER GRANICK, ELECTRONIC FRONTIER FOUNDATION: If we're having rules about how to protect the privacy of our personal communications, it just has to take into account the modern reality that we are all both doing personal and professional stuff at the same time.

MATTINGLY: And in spite of restrictions, 89 percent of employees still send personal e-mail. Forty-two percent still send personal instant messages. And every new device, every new service provokes the same old question. Where do you draw the line between privacy and accountability?


BROWN: And David Mattingly is joining us right now. And it does sound, David, like the law is having a hard time sort of keeping up with the changes in technology, I guess.

MATTINGLY: That's right. You look at this case. It has its roots back in 2002. Imagine all the changes that have happened since then. And look at the next generation of workers that are coming up. Already they're texting 50 to 100 times a day, and these habits are going to conflict when they get into these companies that have these restrictive rules.

BROWN: All right, David Mattingly for us tonight. David, thanks.

I want to bring in Jeff Toobin, our own Jeff Toobin, CNN senior analyst, right now. I don't know a single solitary soul who hasn't sent at least one personal message from a work computer, right?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, no one knows does. I mean, every -- no one knows a person.

BROWN: So how does this affect all of us, workers all across America?

TOOBIN: It's really hard because the technical legal answer at least now is that if you use a work computer, if you use a work cell phone, a work BlackBerry, the chances are your employer is going to have access to it. Interestingly, if you talk on the phone, if you use your office phone, your employer doesn't have the right to listen to your phone calls if it's personal because the rules are different.

BROWN: Right.

TOOBIN: But in fact, the rules should be more similar because people are just as attracted to electronic communication as they are to their phone.

BROWN: If not more so these days. This was the other really interesting thing, I thought, which gave us a little insight into maybe how out of touch maybe our Supreme Court justices are when it comes to dealing with technology. This is from oral arguments yesterday.

Justice Scalia asked, quote, "Can you print these things out? Could Quon print these spicy conversations out and circulate them among his buddies? And then Chief Justice Roberts asked, "Maybe everybody else knows this, but what is the difference between the pager and the e-mail?"

How much, seriously though, do you think the lack of knowledge could affect the ruling? TOOBIN: Well, you know, most of the justices are, to use a legal term, geezers. I mean, they don't know about any of this stuff. But you know what, I have to give them credit. David Souter, who retired last year, was the technophobe of all time. Didn't have a cell phone. Didn't use a computer. Wrote his opinions by hand. But he wrote the court's best opinion on file sharing on the Internet, you know, Grokster, Napster, all that stuff. So they are capable of educating themselves. And this is one area where it's fortunate they have law clerks who are in their 20s.

BROWN: Yes, I was going to say.

TOOBIN: And sort of part of the contemporary world. Yes.

All right. It will be a fascinating case to watch. Jeff Toobin, thanks as always.

TOOBIN: You're keeping it. Just keep that for business.

BROWN: Yes, it's personal. All right.

"LARRY KING LIVE" starts in just a few minutes. But up next, Apple's disappearing mystery phone, the one left at a bar. It wasn't a tip, when we come back.


BROWN: Finally, tonight, Apple is getting its phone back. For the past couple of days, just about everybody has been buzzing and blogging about the next generation iPhone left at a bar and where it wound up. Well, mystery solved, we think.


UNIDENTIFIED FEMALE: A guy walked into a bar. Yes, I'm talking about 27-year-old Apple engineer Gray Powell having a few beers, celebrating his birthday. So what does he do? He leaves this next generation iPhone right there at the bar.

UNIDENTIFIED FEMALE: Jason Chen is the blogger who got his hands on the device.

UNIDENTIFIED FEMALE: But weren't you a little skeptical that it was a fake?

JASON CHEN, FOUND DEVICE: Oh, totally. But once I actually opened it up, I was totally convinced that it was by Apple.

UNIDENTIFIED MALE: Can you imagine rolling into work after you left the phone at the bar?

UNIDENTIFIED MALE: How mad is Steve Jobs right now?

UNIDENTIFIED MALE: The brand Apple is meticulously built and crafted and controlled. I don't know what Steve Jobs does when he loses control. ELISABETH HASSELBECK, "THE VIEW": There is suspicion, though, that this was left on purpose as a way of, you know, sort of grassroots hype (ph).

UNIDENTIFIED MALE: Late last night, Apple sent "Gizmodo" a letter requesting the return of their property. "Gizmodo" complied and returned the phone. Their only request, go easy on the guy who lost it.


BROWN: So no word yet on what will happen to the Apple employee who lost the phone, but he definitely has a huge Facebook following.

So what do you think? Was this just an accident or a giant publicity stunt? We want to hear from you. Drop us a line at

And that's it for now. You can follow me any time on Twitter. Thanks for joining me tonight.

"LARRY KING LIVE" starts right now.