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QUEST MEANS BUSINESS

Markets Close at Record Highs; Former French President Sarkozy Arrested; Interview with Manhattan's DA; Taking on Amazon

Aired July 1, 2014 - 16:00:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: A very wimpy gavel from New York's bravest. But the

market has closed tonight. It's closed at a record. It was the Fire Department of New York that rang the closing bell tonight on Tuesday. It

is July the first. Claims of peddling influence -- former French President Sarkozy in custody and under interrogation. Fraud on a unique scale --

we'll talk about that tonight with Manhattan's district attorney who tells me why BNP's punishment fits the crime. And taking on - taking on Amazon.

Publishers and authors unite against the internet giant. I'm Richard Quest - I mean business.

Good evening. Before we go any further and talk on our main story, let me just update you and show you how the market has closed tonight. It is a

record (RINGS BELL) - up 129 points at 16,955, it was off the highs of the day, so there was an intra-day high which wasn't maintained. But 17,000

inches ever closer - that's about eight points more than the previous all- time high. We'll talk about it with Alison Kosik in just a moment.

We start though with an unprecedented situation in France. The former French President Nicolas Sarkozy is in police custody for questioning. The

inquiry is looking into influence peddling. The issue is whether Mr. Sarkozy used his position to obtain information about a legal investigation

into his campaign finances. On Monday, Sarkozy's lawyer and two senior magistrates were arrested. The investigation could threaten any hopes he

had of returning to high office. Christian Malard, when we need to understand these issues, we turn to you in the French capital. Just help

me understand, is he - has he been arrested? When we say he's being held in custody, what does that mean?

CHRISTIAN MALARD, INTERNATIONAL DIPLOMATIC CONSULTANT: He's detained. He has been detained at the moment while I'm speaking to you, Richard - for 14

hours. And being into custody at the Ante Correction Office of the French Police in the near suburbs of Paris means that probably in the coming

hours, when we see the evolution of the situation, the screws are tightening around Sarkozy with his person lawyer and one of the top

magistrate who are going to be presented to the judge in the coming hours. Which definitely means that Sarkozy is in bad shape and he could stay into

custody 48 hours. So let's say - 34 more hours before being put under exam.

QUEST: Right, now is he being held in some sort of hostel? Is he being held in a jail? What sort of circumstances will the former -

MALARD: No - no, no.

QUEST: -- president be in -

MALARD: He's not - he's in an office of the French Police - of the Ante Correction Office of the French Police. He's not in a jail, but he can

stay there and spend the overnight which might be the case. If things would have been easy for him, probably he would have been freed tonight.

But, as I said, the screws are tightening around him, there are serious allegations according to which he might have been financed -- having his

personal presidential campaign financed in an illegal way by late leader of Libya, Gaddafi, and some other affairs. So it really smells bad for

Sarkozy tonight. And as you said when you started the news tonight, Richard, it's an unprecedented move -

QUEST: OK.

MALARD: Against a former French president in -

QUEST: Now -

MALARD: French political history.

QUEST: Now, Christian, I'm not asking you to say whether it's true or not. I'm asking you to tell me is there decent evidence? Is there a prima facie

case? Does this - is this political or is there something smelly?

MALARD: It might be serious affair concerning Sarkozy but at the same time, there are many coincidences which might make think that it's

political, because all kinds of stories like that - affairs like that - come at a time when everybody's talking about Sarkozy's return to politics,

Sarkozy's dreaming of being back for the 19 - for the 2017 campaign three years from now. And he's the man to be beaten by Hollande.

QUEST: Right.

MALARD: Hollande is really fearing Sarkozy's return.

QUEST: Christian, I need to make sure that as this progresses in the future, you'll be helping us understand it as always. Thank you for

joining us tonight.

MALARD: It's only a start, it's only a start I guess.

QUEST: Then we'll be talking to you many more times. Good night in Paris.

MALARD: Thank you.

QUEST: Now, it's been a record-breaking day for the Dow Jones Industrials - tantalizingly close. Come over and join me at the Super Screen, and I'll

show you exactly what I mean. Grab a pen. Now look, we got up to here - we got up to there, but as you can see takes us very close to the 17,000.

But it couldn't just hold the mark and it drifted out back down towards the closing at 16,956. Alison Kosik joins me now. Alison, this is fascinating

because it's our old friend the psychologically important barrier that - you know - you look at the numbers, you think surely it could just power on

through.

ALISON KOSIK, BUSINESS CORRESPONDENT FOR CNN BASED IN NEW YORK: It very well could. You know, if I had a crystal ball, I could tell you when it's

going to happen. You know, I talked with a couple traders today and they said it's not a question of if but when the Dow will hit that 17,000 mark.

And today it was close but no cigar. It was nice to see you on your tippy toes pointing to that number, Richard. You know, what was the trigger

today to get stocks even this high? Part of it was low volume. You know, not a lot of people in the game today. As you know, that causes

exaggerated moves. We did get some hard numbers though - car sales numbers for June came in pretty good so you pile -

QUEST: Right.

KOSIK: -- that on with pretty good numbers for May. And that was really just enough to get stocks up this high, obviously not to the 17,000 mark

just yet.

QUEST: Would you care to have a guess when it might go through 17,000, Ms. Kosik?

KOSIK: My guess - my most educated guess - would be if not tomorrow, obviously, then I would definitely think Thursday if a good jobs number

comes in. We are getting the U.S. government jobs report -

QUEST: Right.

KOSIK: -- Thursday. And although the market closes early, 1 o'clock eastern time we shall see if the - if the Dow can push its way to 17,000

then.

QUEST: Seventeen thousand Alison Kosik says Thursday. I think it'll try and do it tomorrow. Many thanks to you, Alison Kosik. Now, Dubai's market

found its fettle again today after a month of brutal losses. It started the new quarter with a rally. Look at how Dubai - very - see this was a -

it's almost - it's almost an emer - well it is an emerging market, but it's a rollercoaster of a market. It's almost a casino the way it just drops

and then goes back up and then drops and then it goes back up again. Highly volatile. The index was dropped more than 5 percent at one point.

It ended up 3 percent. Our emerging market editor, John Defterios, looking at the reasons for why we have this rollercoaster of a market.

(BEGIN VIDEOCLIP)

JOHN DEFTERIOS, CNN'S EMERGING MARKETS EDITOR AND ANCHOR OF "GLOBAL EXCHANGE" SHOW: The month of June was one of the nastiest on record and

the worst performance in five and a half years. From beginning to end, the loss was 22 percent, putting this volatile exchange into bear market

territory. This is a bad start for Dubai in its first official month as an emerging market after reclassification by MSCI. The index broke through

the 5,000 level at the start of June, but intense selling took the index below 4,000 before today's slight recovery. Some suggest a casino-like

culture has set in. The real danger, fund managers say, is that nascent investors have borrowed to buy property stocks and they had to sell their

holdings to cover losses. One property stock in particular triggered the market route - Arabtec has projects all over this region. The former CEO

was forced to resign after it was found he accumulated 28 percent of the company's stock. Arabtec said it is now conducting an internal review.

The June sell up has brought Dubai's red hot property market back into focus. Residential real estate values climbed 33 percent year on year in

the first quarter. The UAE is expected to grow some 5 percent overall this year based on massive spending, but some feel this property market, like

the stock market before the correction, may be overheating. John Defterios, CNN Abu Dhabi.

QUEST: The European markets rose as the second half of the year got off to a solid start. Eurozone PMI, unemployment numbers all suggest a very

fragile European recovery is continuing. That of course will keep interest rates low, it might lead to some further loosening by the ECB. As a

result, all the major markets in Europe did show gains of more than half a percentage point.

Still to come on "Quest Means Business" - you're going to hear from the Manhattan district attorney on that multi-billion-dollar BNP Paribas fine.

Why was it so big? And was it in proportion? "Quest Means Business." (RINGS BELL).

(COMMERCIAL BREAK)

QUEST: Bizarre you might say. The market's up 3.6 percent for BNP Paribas shares. At the same time is a record fine for France's largest bank. So

why are investors showing such optimism. Look at the number again - it's up 3.6 percent. Well, the bank has been fined nearly $9 billion for

violating U.S. sanctions. Manhattan's district attorney Cyrus Vance joined me in the studio a short time ago.

(BEGIN VIDEOCLIP)

CYRUS VANCE, JR., MANHATTAN DISTRICT ATTORNEY: We have clear rules that govern what money can come in from what countries and what can't. That -

it's not - it's not a secret to the international banking community, it was not a secret to BNP. In fact, the whole - the dramatic point here was that

the bank as they've admitted knew about the sanctions, sought to repay them by many complex schemes and in doing so, moved billions and billions of

dollars cleared through New York City, through the New York state banking system that was linked to rogue regimes like Sudan and the like.

So, the point is if you believe as we do that a goal of sanctions is to eliminate movement of money between terrorist regimes, to make sure that we

do everything to combat humanitarian violations, then they have to be enforced, and that's all that was done in this case.

QUEST: So what's really happening is a ratcheting up because miscreants have been up to breaking sanctions for some time. But we've never seen

these sort of punishments before.

VANCE: Richard, the reason that this case was unique was that the conduct extended over many years, the dollar volume that went through New York and

was cleared, was extraordinarily high. And that the acknowledged deceits and attempt to fool the American and New York -

QUEST: That's what's got you, hasn't it? That's what's got you.

VANCE: Well, that's what got them.

QUEST: It is a legitimate thing for you to take into account in deciding what to do or what sanction to put forward. But you do take into account

the systemic effect on the global financial system?

VANCE: I think -

QUEST: Because you can't be blinking (ph) to that, can you?

VANCE: I think it's appropriate. First of all, prosecutors have to assess whether there should be a acceptance of criminal responsibility and then

what fine is appropriate is a subsequent discussion. But ultimately it's the prosecutors working with the regulators to make sure that there is a

manageable exit from imposition of a fine of this size.

QUEST: Nobody's gone to jail. And people will continually say, `Well, who gets hurt by this?' Nine billion dollars, the shareholders get hurt -

it'll wipe out earnings and they might put a bit of pressure. But surely - in this sort of case, -- and I've read the description - somebody needs to

hear the click of the lock behind them.

VANCE: Well, in the course of our investigation, we have been looking obviously at what individuals made what decisions at what time. I can tell

you that our investigation in New York is continuing. We have an extended period of statute of limitations. We feel that the first sanction against

the bank is appropriate and our investigation will continue. But you mentioned the shareholders, Richard -

QUEST: Right. (Inaudible).

VANCE: -- one question must be asked as this is the seventh investigation that our office has been involved with the federal partners since 2009 -

involving foreign bank sanctions. And ultimately we are asked why is it appropriate for prosecutors to take these actions. And I think actually we

feel that we are doing our job. I think the question is whether managements and the financial institutions are doing theirs -

QUEST: Answer that question, answer it.

VANCE: -- and in the sense that those who've acknowledged that they have violated - knowingly violated - American law in order to move money related

to sanction entities, then that's, you know, that's a crime.

QUEST: You would like to see shareholders getting stricter with management on these issues. I think we can agree on that.

VANCE: Ultimately I think it is the shareholders who have the power to make sure that management is abiding by the laws that the companies are

finding themselves embroiled in, in their dealings with the United States.

(END VIDEOCLIP)

QUEST: To get the shareholders, for one New Jersey man, this is a major land lock and a personal struggle that's lasted the best part of two

decades. Bear with me and I'll tell you his story. In 1995, Steven Flathaus'20-year-old daughter Alisa was murdered in an attack on a bus in

Gaza. Stephen, whose story was first reported by the New York Times, at the time blamed Iran for financing the attack and he sued the Iranians. A

U.S. judge ruled that Iran should pay him $250 million in compensation, a sum that's never been paid. But Stephen also looked at a charity called

the Alavi Foundation. This is a document he pulled from New York state records. And Stephen claimed Alavi was a front for the Iranian government,

and consequently because he saw the connection between Alavi and the Iranians, he sought compensation from them.

The U.S. attorney Preet Bharara's office decided to take up the case. Investigators dealing with Credit Suisse and Lloyd's bank who noticed that

Alavi was using these banks and stripping out references. Alavi had to forfeit holdings including this building on Fifth Avenue in New York. So

how did BNP Paribas get involved? Well, in 2009, while Lloyd's and Credit Suisse were still undergoing investigations, a whistleblower approached the

Manhattan D.A.'s office, accusing BNP of doing business with Iran. And it was that tipoff that ultimately led to the charges against the French bank,

the enormous fine -- $9 billion - and our discussion with the district attorney today. Stephen Flatow is with me now. Have I just about put it

right there?

STEPHEN FLATOW, FATHER OF TERRORISM VICTIM: Hundred percent.

QUEST: You're too kind, sir, you're too kind. Are you - you must be quite extraordinarily surprised that your litigation mushroomed into a catalog of

events which fundamentally not only took in Credit Suisse and Lloyd's but a $9 billion fine for BNP.

FLATOW: We feel 100 percent vindicated. When we identified the Alavi Foundation as a front for the Iranian government in 1998/1999, the U.S.

government stepped all over us in court. And we basically lost our lawsuit at that point in time. Fifteen years later, up turns Preet Bharara saying

they are related, they are controlled, I want the building.

QUEST: Right. But you not only have proved the case of dealing with Iran, but you got them all in - I mean - because of your case, sanctions on

Sudan, Darfur, the whole lot's in here now.

FLATOW: Terror is supported by money. And the money has to get from point A to point B to point C. And these banks are in the middle. They have -

they have blood on their hands as far as I'm concerned. In our case in 1998, we demonstrated to the bank how money flowed around the world through

different bank accounts to Islamic Jihad, and paid the bomber who murdered my daughter and seven others that day in April 1995.

QUEST: So when you see this result - the best part of $10 billion - BNP can't do dollar clearing for the next year. Is it revenge? Is it

retribution? Is it - it's justice, but how would you describe it?

FLATOW: Unfortunately, it doesn't affect the main culprit here, and that's the government of Iran. They are still the number one state sponsor of

terrorism in the world.

QUEST: So does it do good then - what good do you think it does - to somebody - let's face it. You know, we've learned from Libor, we've

learned from mortgages, we've learned from the Foreign Exchange dealings that the banks are almost morally bankrupt when it comes to these issues.

FLATOW: The problem is that no single individual - individuals is actually held accountable. You can collect $9 billion from Paribas, but its stock

is going to go up as you said before. But not one single individual has been called to the docket in the United States or in any other country as

far as I know.

QUEST: So would you say ultimately that until somebody's locked up, until somebody hears the click -- and I asked the district attorney this in my

interview - that nothing really changes?

FLATOW: Correct.

QUEST: Sir, you got $25 million eventually by one means or another -

FLATOW: Yes.

QUEST: What did you do with it?

FLATOW: Spent it --

QUEST: Well, obviously -

FLATOW: -- on charitable -

QUEST: -- I was hoping you might tell me on what good you spent it.

FLATOW: -- Well, we established a scholarship fund in Alisa's memory that assists students to study in Israel. We've supported educational

institution and hospitals in Israel here in the United States. And I'm still working every day. Nothing has really changed other than the battle

to get justice for Alisa. It still continues as we saw in today's "Times."

QUEST: Sir, thank you for coming in. I appreciate it. I really appreciate it. Thank you. And we will be back in a moment. "Quest Means

Business." Good evening tonight.

(COMMERCIAL BREAK)

QUEST: That is an extraordinary story. Tinder you will be well familiar with - or some of you may be - it's the sort of online meeting, dating,

pick up, one-night stand - whatever you want to call it. The company behind the popular app is being now sued for sexual harassment and

discrimination. And it's being sued by one of the people who founded it. Join me at the Super Screen for a super story that really is quite

remarkable. Now, bear with me, bear with me while we tell you this story in some detail.

Now, here we've got to do first of all. These are the various participants that we are talking about. Let's start with Whitney Wolfe. Now, Whitney

Wolfe is the former vice president of marketing, and she has filed a lawsuit against the company. OK? So far so good.

She says that senior executives openly insulted and belittled her. So that's her lawsuit against Tinder. Wolfe says her fellow executive,

Justine Mateen was verbally controlling and abusive. He called her words that, frankly, I'm not going to say on family television when you and I are

together for our nightly conversation on business and economics. But you can imagine they're not the sort of words you might use in polite company.

It doesn't really matter. The fact is he used these words after their relationship had soured. Mateen was suspended pending an internal

investigation.

Now throw into the mix the CEO Sean Rad. Rad alleged witness in the case. Wolfe says he and Mateen told her they were removing her from the title of

co-founder. She says she was told having a female founder made the company look like a joke. Are you with this so far? It's complicated, it's nasty,

Rad rejected an offer to resign in exchange - you get the idea. This is an unholy mess and it goes to the very heart of issues in these companies.

Tinder's not the first of the (inaudible) company to be criticized for being male-dominated - Google, Facebook, Yahoo - all admitted half their

workforces are overwhelmingly male. Vivek Wadhwa is the former executive president of the startup Seer Technologies. He gave it all up and is now

writing a book called "Innovating Women" - out in September. Vivek joins me know from Stanford University. I've tried as best I can to give an

overview of what is a real messy situation. But you believe best sums up this male-dominated, sexist, some would say arrogant culture of Silicon

Valley.

VIVEK WADHWA, FORMER CHIEF TECH OFFICER, SEER TECHNOLOGIES: Robert, I hear these stories practically every other day from women - that they're left

out of the ecosystem. You know, the technology industry grew up like a voice saying that they were building computers, they were taking

microchips, putting them together, constructing computers. Then they were writing software. It became in a voice saying that was fine when it was

only boys using it. Now the vast majority of social media users are women. We have average human beings now using technology. Silicon Valley

companies go public and they want to break millions - sorry - billions of dollars in from the general public. They still they can get away with this

childish frat boy behavior. The fact is, they can't. It's time for Silicon Valley to grow up right now.

QUEST: But how did this frat mentality begin? I mean, I understand it's a male-dominated environment, but Wall Street's a male-dominated environment,

and yet, there's a frat mentality there but women have risen and there have been sexual harassment. But this is something new. We would've expected a

different culture by a new technology, a new social environment.

WADHWA: Robert, Wall Street isn't that much better. I've bought in Wall Street. Trust me, --

QUEST: Right.

WADHWA: -- it's also a frat boys' club within the investment banks. The problem is it's the same investment bankers who came here and became

venture capitalists. If you look at the boards - you know, I raised this issue about Twitter going public in October. I did an interview with the

"The New York Times" saying something is serious wrong over here. You know, the Silicon Valley mafia - it's outrageous that they have not one

woman on the board or - you know - the investment team --

QUEST: But where -

WADHWA: -- one token woman on the management team.

QUEST: -- but where did it - listen to me - where's it gone wrong and how do put it right?

WADHWA: OK, we put it right by talking about it. The fact that you and I are talking about it is a good thing because Silicon Valley is embarrassed

to death. Google, Facebook, LinkedIn, Yahoo all came clean. They said, `Look, here are our data. We know we've done wrong in the past. We're

going to fix it.' Google is now spending $50 million on educating young girls and bringing them into Google to encourage them, inspire them to

become computer programmers.

QUEST: Right.

WADHWA: So these companies are growing up, they're getting it. So change is happening for the better.

QUEST: Thank you very much for joining us, sir. Much appreciate it. We'll talk more about it.

WADHWA: Thank you.

QUEST: You're welcome to come back and talk more about it. Now, as Amazon tightens its grip on the publishing world, some of America's best-known

authors and publishers are crying foul. After the break, the sound of the swelling chorus of disapproval. It's "Quest Means Business" live from New

York.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN and on this network, the news always comes

first. Thousands of mourners have turned out for the joint funeral of three Israeli teenagers today. Israel blames Hamas abducting and killing

them. Their bodies were found on Monday in the West Bank. A short time ago, Israel's prime minister promised a forceful attack against Hamas.

Ukraine's president says he's determined to rid the country of terrorists and insurgents. Government forces have resumed military operations against

pro-Russian separatists in eastern Ukraine after a ten-day ceasefire.

Iraq's new parliament ended its first session in disarray. Dozens of Sunni and Kurdish lawmakers walked out and didn't return. The speaker was forced

to postpone the session until next week. Iraqi politicians have been urged to come together in the face of a threat from ISIS militants.

There were two big upsets at Wimbledon today. Spain's Rafael Nadal was knocked out by a teenager. Nineteen-year-old Australian Nick Kyrgios is

ranked 144th and beat the world number one in four sets. On another court, Serena Williams has been forced to withdraw from a doubles match after

falling ill. She struggled through three games before calling it quits.

And to the World Cup - Argentina on their way to the quarter finals after a 1-nil win over Switzerland. Angel di Maria scored the winning goal in

extra time. Belgium and the United States are playing right now for the last points in the quarter finals, and it's nil-nil 31 minutes into the

first half. (RINGS BELL).

The battle lines in the world's biggest publishing war are to be drawn tonight. Authors, agents and publishers are holding a summit at the New

York Public Library where they're to talk about Amazon, and its seemingly unbreakable domination of the book sales market.

The giant publishing company Hachette is being punished for not cutting the price of its e-books as demanded by Amazon. Now, Amazon as you'll be aware

- we've talked about it on this program a few times - is delaying delivery of Hachette books, it's not putting them on order, it's refusing to do all

sorts of things. Basically making it just about impossible to give buyers a chance to order Hachette books ahead of their release. A few weeks ago,

Amazon said, "We are not optimistic this will be resolved soon." In other words, that threw down the gauntlet if words were needed.

The blockbuster novelist James Patterson whose books are published by Hachette has warned it's the beginning of a monopoly, and fellow Hachette

author Malcolm Gladwell who wrote the "Outliers" summed it up by saying, "It's heartbreaking when your partner turns on you." Bob Kohn who's he

founder of eMusic.com and also an attorney is going to be at tonight's big debate. So, when you think that Amazon has 90 percent of the book market

globally, do they really care about some do-gooders getting together to talk?

(BEGIN VIDEOCLIP)

BOB KOHN, ATTORNEY, EMUSIC FOUNDER: They're not showing up and it's unfortunate that they're not showing up to the meeting to express their

point of view, to have an open debate as to what's going on.

QUEST: What would you like to see happen here?

KOHN: I'd just like to see an open discussion to show why books are different than fruits and vegetables and toilet paper and the other things

Amazon is selling. Because what happens is that without compensating the authors for books, if you don't do that, books aren't going to be created.

Amazon has the market power to drive the price of e-books down to zero.

QUEST: Your argument is an interesting one. But, frankly, it's no different than the farmer who says without a proper price, we're not going

to grow oranges, we're not going to grow avocados.

KOHN: It's very different from the farm because the farmer in the long- term can't sell below the cost of growing the fruits and vegetables. In the e-book market, it's completely different. Congress was given the power

to promote books - promote writings - that basically create a copyright law and they did not have to have the power to promote fruits and vegetables.

Without copyrights, authors don't get compensated.

QUEST: You're in a situation now where one major publisher, Hachette, has gone head-to-head with Amazon, --

KOHN: Right.

QUEST: -- and, frankly, very few have rallied to their support.

KOHN: I would disagree that very few has rallied to their support.

QUEST: Well, Amazon is only taking it out on Hachette.

KOHN: Well -

QUEST: What about all the others? Why aren't they all heaping more -

KOHN: -- they should be. Hachette's only the first one. Not only are they going to go after the other publishers, but self-published authors

right now are going and putting their books on Amazon. If Amazon gets rid of the major publishers and the independent publishers, then they can

target the self-published -

QUEST: Who are the biggest publishers in the country?

KOHN: The largest are Penguin Random House -

QUEST: Right.

KOHN: -- Hachette -

QUEST: Right.

KOHN: MacMillan, Simon & Schuster -

(CROSS TALK)

QUEST: So until those all come together and say to Amazon, `Stop it, we're not going to let this happen -

KOHN: -- the -

QUEST: -- it ain't going to happen.

KOHN: Yes, but they did that two years ago and, guess what? I mean, basically the U.S. government -- the Department of Justice saw - yes, they

saw -

QUEST: That's not what they did. They did a much more - they did a might tighter collusion on pricing than no.

KOHN: Oh, no. No, they could've - the publishers - the book publishers - could've gotten into a war room, just like the music publishers have been

doing for the past 100 years and change the pricing model of the e-book which is what they did. There was nothing illegal about what the

publishers did.

QUEST: MacMillan, Random House, all these others could come out tomorrow with a statement saying, `We support Hachette. Amazon, stop it now.'

KOHN: Well the problems is -

QUEST: Aw! Aw!

KOHN: -- that under a consent decree, that makes it difficult for them to talk to each other.

QUEST: I didn't say to talk to each other. I say independently can come out.

KOHN: Oh, well, you know what? I think I'm hoping that Hachette stands firm and says, `Amazon, 30 percent is enough. Amazon is now collecting 30

percent for each e-book. You know, authors only get 25 percent.

QUEST: Divide and roll.

KOHN: Divide and roll.

QUEST: That's what's happening here with Amazon. They have managed to split everybody apart and they've taken off Hachette one at a time -

KOHN: That's right.

QUEST: -- or individually and that's going to be the downfall.

KOHN: And at the end of the day, the book publishers can exercise their own nuclear option if they pull all their books from Amazon, which they can

do. And they don't have to collude to do that. They can simply pull their books and if they do that, it's over.

(END VIDEOCLIP)

QUEST: It's over in more ways than one. The pound as we know it is about to change. Britain is giving its currency a high-tech facelift. We're

going to talk about that in a moment.

(COMMERCIAL BREAK)

QUEST: Aw. The pound sterling, the crinkle of the note. This is as strong as it's been in years, and now Britain's Royal Mint is taking steps

to make sure it remain strong. And I don't mean strong in the foreign exchanges - I'm talking about literally strong, both physically and against

the counterfeits. It's getting ready to give today's range of pound notes a new look and a new feel and using technology they hope will keep the

currency one step ahead of the forgers. Nina dos Santos has this week's "Future Finance."

(BEGIN VIDEOCLIP)

NINA DOS SANTOS, NEWS ANCHOR AND CORRESPONDENT BASED IN LONDON FOR CNN INTERNATIONAL: For more than 300 years, the Bank of England has been

printing bank notes. Now there's more cash in circulation than ever before. The challenge is how to keep ahead of the counterfeiters.

VICTORIA CLELAND, CHIEF CASHIER, BANK OF ENGLAND: This is the key part of a banknote says "I promise to pay" and people need to believe the bank will

always promise to pay, but they also need to believe that the notes they hold are genuine notes and not counterfeited notes.

DOS SANTOS: To crack the counterfeiters and ensure notes last longer, the Bank of England is following other countries like Australia and Canada -

moving away from paper to polymer.

CLELAND: So this is the current Bank of England design that printed on polymer. One of the key things you'll notice - this is actually a window

that you can look through which is a form of security feature. Another thing to notice about polymer, it is quite think and flexible. You can

still have some of the features of paper notes - for example, you've got the raised print across here which people like, so you can add some texture

to it. One of the advantages of polymer notes is that they will hold their shape a lot more and they're more durable.

DOS SANTOS: The bank reckons the polymer note will last two and a half times longer than paper. The five-pound notes will be the first to get the

polymer facelift in 2016, followed by the ten-pound note.

CLELAND: Polymer note is more expensive to produce initially, and there'll be some transition costs. But we've worked out that over a ten-year

period, if we move the five and the ten, we should save at least a 100 million pounds.

DOS SANTOS: It's not just British notes that are getting a money makeover, the Royal Mint has been casting coins for more than 1,100 years. A world

leader, it produces coins and metals for almost 60 countries, supplying around 15 percent of global demand. Technological advances over the

centuries have seen the minting process develop into a fine art.

GRAHAM DYER, CURATOR, ROYAL MINT MUSEUM: The turning point for us in this country comes shortly after the restoration of Charles II - the process is

mechanized. Coins are at last rounder, they're thicker. This enabled them to have a milled edge or etching (ph) around the edge. As we move from the

medieval style coinage to something which is distinctly modern in appearance to - this is if you add the high tech of the 17th century.

DOS SANTOS: The one-pound coin has been in circulation for 30 years. Mint authorities say that it's become increasingly vulnerable to counterfeiters.

They estimate 45 million pound coins or around 3 percent of the coins in circulation are forgeries.

ANDREW MILLS, DIRECTOR OF CIRCULATING COIN, ROYAL MINT: Up until now, there hasn't been a real definitive machine that readable security feature

for coinage.

DOS SANTOS: This is the Royal Mint's latest armor in the counterfeiting battle - Integrated Secure Identification Systems - which will be used in

the new one-pound coin set to be introduced in 2017.

MILLS: What we've been able to do is with our armor plating technology, is actually co-deposit an optically active ingredient - a tagger (ph) into the

material as we go through the plating process. And that material, that additive can actually be read at very high speed in a cash center or it

will be able to be read in a vending machine as well. We actually have some called a latent image. So one image says BOT for Bank of Tanzania and

the other image is actually the number 500. And, again, that's a really good way for the general public to check if their coins are actually

genuine and not counterfeit.

DOS SANTOS: Hard cash seems here to stay. It may not look much different on the face of it, but new layers of technology lurking under the surface

should ensure our notes and coins are protected and remain in mint condition for many years to come.

(END VIDEOCLIP)

QUEST: Now sterling's exchange rate against the dollar with a six-year high today, exactly one year after Mark Carney took over as governor of the

Bank of England. This is the way - (inaudible) - of this has to do with interest rate differentials, trends of the economy, but this shows exactly

this extraordinary growth from a year ago - 152 - to the point where it's now 171. It's not - you always got throughout the pound has appreciated by

5 and 1/2 percent in that time. The British economy strengthened, investor are expecting Carney to increase rates as well. You always have to ask the

question when you're talking about this. Is it pound weakness or dollar weakness and pound strength? Jim Boulden asks the questions.

(BEGIN VIDEOCLIP)

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: When Mark Carney was plucked from the Great White North to run the Bank of England, the Canadian was

touted by his new boss as -

GEORGE OSBORNE, U.K. FINANCE MINISTER: Quite simply the best, most experienced and most qualified person in the world to be the next governor

of the Bank of England.

Males: Hear, hear.

BOULDEN: The now 40-year-old Carney was seen as the steward of Canada's booming economy. A bit of magic Britain hoped to tap when he took over

July 1, 2013.

MARK CARNEY, GOVERNOR, THE BANK OF ENGLAND: This is a major challenge, it's a major opportunity. It's very important for the global economy that

the U.K. does well.

BOULDEN: A year on, his credential intact, the dapper Carney has turned a few heads.

ALAN CLARKE, SCOTIA BANK: I'm a big fan of what Carney's done in the first year at the Bank of England. It's a refreshing change in terms of

communications. We got a lot more information from the Bank of England.

BOULDEN: But with more transparency comes more comment to parse. Carney is accused of - well - confusion, giving mixed signals on when the first

interest rate rise will come. One politician said to his face that Carney was like an unreliable boyfriend - saying different things at different

times.

CARNEY: A blushing Carney was asked about that at a press conference last week. Um, the um -

(LAUGHTER)

CARNEY: -- the um - I don't know what you'd say about it actually. We're dedicated central bankers. What we're - what we're focused on is

faithfully delivering the mandates we have. So we provided all that guidance faithfully, consistently.

BOULDEN: The first major policy shift under Carney was the introduction of forward guidance, a kind of look at the future path of rate changes. It's

all the rage at central banks these days. But Carney's attempt at forward guidance involved a prediction - that unemployment in the U.K. would not

fall below 7 percent until 2016. It happened two and a 1/2 years quicker - earlier this year. So many now say rates will rise this year.

BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: Although Mark Carney has sent a number of confusing signals to investors and to markets, but given the

strength of the U.K. economy, given the lack of spare capacity in the U.K. economy which is no longer an issue I think, I think there's a very high

probability that the interest rates will start to increase later this year.

BOULDEN: But even flawed, forward guidance appears to have helped.

CLARKE: I think the forward guidance measure gave businesses and households a lot of confidence to spend, to hire, to invest given the

certainty that interest wouldn't go up immediately.

BOULDEN: How Carney manages interest rate rises? In part to cool the red hot London housing market, will go a long way to what marks he gets on his

second year report card. Jim Boulden, CNN London.

QUEST: Jenny Harrison who soon is to be heading to the United Kingdom, will probably need a few - a few of these yourself, Ms. Harrison. Ooh,

yes.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Oh yes, send me a few. Yes, thanks very much. Yes, and the weather. Well, in (inaudible)

actually, Richard, the first tropical storm of the Atlantic season has spawned already. It's off the coast of Florida, Tropical Storm Arthur -

that is its name. Right now in fact it just strengthened a little bit. We've got winds of 85 kilometers an hour. It hasn't been moving very far

at all in the last few hours. It's just been producing some very heavy amounts of rain - you can see it here on this 3D model. It's just really

impacting the Bahamas, but it will eventually of course begin to work its way along the east coast. And in fact, apart from sort of just brushing

with the coastline here in North Carolina, it is expected to stay off shore. Now the boxes have got a bit muddled up here as you can see, but

probably in about the next 48 hours, maybe 72, it is expected to actually strengthen to a minimum-strength Hurricane. There are some warnings in

place right now along these coastal areas. This is showing you the wind as it works its way along the east coast. It really does kind of run

parallel.

So, pretty rough of course in the seas and along those coastlines, but when it comes to the amount of rain - heavy at times, particularly heavy around

the core of the storm. So we will see some rain of course impacting these coastal areas, working its way through the Carolinas. But by far, the bulk

of the rain - that will stay over the open waters. You can see some pretty hefty accumulations in the next couple of days. But, again as I say,

beginning to come on shore, particularly as it gets closer to the Carolinas.

Now as well as that going on, it's not been a good start to the week with all the storms. Sunday, Monday - in fact on Monday - there were actually

over 500 storm reports, eight reported tornados. More of a threat again this Tuesday on into Wednesday. You can see these colors here - it's

showing you the warnings of course as the system works its way eastwards.

Now, not too bad at the airports at the moment, but expect to see the current delays really increase as these storms work their way across the

northeast. And this is actually going to be the steering influence for this tropical storm. So as the front comes through, it sweeps that storm

along. And it's really that that helps keep it offshore. Very warm day on Wednesday - 36 in Washington, D.C., 35 Celsius in Atlanta.

Meanwhile, it's been a pretty good day for Wimbledon. We've had some good, sunny skies, some good temperatures, and for the next few days as well. We

expect to seem temperatures actually on the increase - 17 degrees right now. Most of the play of course has come to an end, but for the next few

days, it stay fine and dry, getting pretty warm as well by the weekend. Richard.

QUEST: We thank you. Both Wimbledon, World Cup - you've kept yourself busy. Have a lovely trip to the U.K.

HARRISON: Thank you.

QUEST: Jenny Harrison at the World Weather Center. In under an hour, the field at the World will be narrowed once more, and we'll know the quarter

final lineup. Live pictures tonight from the stadium in Salvador in Brazil. And these are the team USA fans in Washington, D.C.'s Freedom

Plaza. And Belgium fans in a bar in San Francisco. Just a few more moments, we'll know who is going through. "Quest Means Business."

(COMMERCIAL BREAK)

QUEST: Ooh! We want to bring you the latest from the World Cup. Argentina's game against Switzerland a few hours ago ended in dramatic

style. A goal from Angel di Maria.

Announcer: Goal! Angel di Maria for Argentina!

QUEST: Switzerland came within a whisker of equalizing, it was a header from Dzemaili - bounced off the post. And that was the end of

Switzerland's World Cup dreams. The final score, Argentina 1, Switzerland nil. Argentina will play the winner of the U.S./Belgium game which is

currently underway - a tie, nil-nil at halftime.

Update - the Quest Footy 32 index. And show you exactly how it is progressing. Before we go further, let us delist those that no longer

exist, and you'll see this is where we are. Costa Rica still the most valuable one, we've delisted Algeria and Switzerland. There's Switzerland.

Let's delist Algeria as well. They can go.

And if we look at the United States, because U.S./Belgium playing at the moment, you'll see exactly - interesting. Because we've got a base value

of 186, confidence start for this particular lot, but a World Cup gain/loss of 0 because they've given away as many goals as they have scored. The

managers' top players have changed their flights until after the World Cup final is optimistic that the team will have more games to play. This is

where they stand at the moment. Now, Belgium has received government backing before the match. The prime minister if we go to Belgium - where

is Belgium? There's Belgium. The prime minister has told -- Elio Di Rupo - tweeted to U.S. President Barack Obama, "Hey, Barack Obama, I am betting

some great Belgium bears that our Red Devils will make it to the quarter finals, hashtag #comeonBelgium." The U.S. president has yet to respond.

So, let's get rid of those particular flags. Come and join me over at this, and you will see one of these two will be gone by the day's end.

Shasta Darlington is in the fun zone in Salvador this evening. Shasta, the mood?

SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: Richard, as you can probably imagine, I didn't hear the question. I'm here at the Fan Zone in Salvador.

(CROWD CHEERING) - USA! USA!

DARLINGTON: These are obviously the people that didn't get tickets to go into the stadium. Most American fans did. So what you're seeing are

Brazilian fans who are rooting for the United States, they're very popular here in Salvador. Just a couple of interesting points that you probably

already know - after Brazilians, Americans actually (inaudible) the most tickets. We've seen them (inaudible), they've been making a lot of noise,

and here you see they have a lot of Brazilian supporters.

QUEST: I'm guessing that this isn't the moment to ask Shasta Darlington an in-depth question about the Brazilian monetary policy in the forthcoming

six months. Shasta, good to see you. She can't hear a word I'm saying. I could say anything I like and she will smile beautifully regardless.

Shasta Darlington in Brazil at the moment. One of these flags will not survive by the end of the day. A "Profitable Moment" after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment." We always knew it was going to pick up steam. But it is actually quite gratifying to see that both in Brazil

and elsewhere, the mood of celebration about the World Cup really is now picking up steam. And that also includes here in the United States. A

variety of pictures - this is a fan bar in New York, we've also got fan bars in San Francisco, we've got them in Boston where people - that's

Washington, D.C., where they're watching the match. What it shows - I remember when the World Cup was actually played in the United States in the

1990s. It was a miserable affair, frankly. Nobody really got into the mood. Americans couldn't care less - that it was a lot of hoopla over

nothing.

Now for the first time, Americans in the U.S. seem to actually take the World Cup seriously and there is a shift. Will it last beyond the

tournament? And will they insist on calling it soccer while they want to have that other American football - which will eventually win out as the

name? And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) - it's

football not soccer! I'll see you tomorrow.

END