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QUEST MEANS BUSINESS

North and South Korea Commit to Era of No War; Grassley Proposes Private Hearing for Kavanaugh Accuser; British Prime Minister Tries to Smooth Way for Brexit. Aired 3-4p ET

Aired September 19, 2018 - 15:00   ET

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


STEPHANIE SY, CORRESPONDENT, CNN: We are into the last hour of trade on Wall Street. It is Wednesday, September the 19th. Here's what's driving

the day's stock markets. Shrugging off the trade war. They could close at record highs this hour. Tech shares are lagging though as the EU looks

into Amazon's data use; and yet, there's nothing but green in the cannabis sector as weed stocks just can't stop growing. I'm Stephanie Sy. This is

"Quest Means Business."

Tonight, the EU opens up a new front in its war with the US tech giants after dealing major blows to both Apple and Google. EU Competition

Commissioner, Margrethe Vestager is adding Amazon to her antitrust hit list. Shares in Amazon are falling at this hour, down 26 points. Brussels

says its investigating whether the company uses data from smaller third party sellers to gain an edge over its competitors.

In a press conference earlier, Vestager explained the case against Amazon.

(BEGIN VIDEO CLIP)

MARGRETHE VESTAGER, EU COMPETITION COMMISSIONER: The question here is about the data, because if you as Amazon gets the data from smaller

merchants that you host, which can be, of course, completely legitimate because you can improve your service to these smaller merchants, well, do

you then also use these data to do your own calculations as what is the new big thing, what is it that people want, what kind of offers do they like to

receive, what makes them buy things?

(END VIDEO CLIP)

SY: This is just the latest example of the European Union's crusade to rein in Amazon and its Silicon Valley rivals. Last year Amazon was ordered

to pay almost $300 million in unpaid taxes after the EU Commission found it benefited from an illegal arrangement with Luxembourg.

In July, Google was hit with a record $5 billion fine for breaking antitrust laws with its Android operating system. Facebook was fined $122

million for misleading European officials about its takeover of messaging service WhatsApp and just this week, Apple ponied up $14 billion in unpaid

taxes to Ireland after the EU complained.

Scott Galloway is a professor of marketing at NYU Stern, and an author of "The Four" which is about these big tech companies. Scott, it's a pleasure

to have you with us. Let's start with this new probe. It's Amazon - how significant is the investigation and what does it portend?

SCOTT GALLOWAY, PROFESSOR OF MARKETING, NYU STERN: So, it's another point in a line that is essentially showing that the war against big tech will

breakout where all the major conflicts of the 20th Century broke out, and it's going to break out in continental Europe.

There was more action in any given quarter in the last two years against big tech in Europe than there is in the US. So this is just again another

data point showing that, quite frankly, the EU is fed up with American big tech.

SY: The World War II analogy is ...

GALLOWAY: It's too much.

SY: Yes, maybe a little hyperbolic, but today Amazon did become the third largest digital advertiser. I mean, still way behind Facebook and Google

and yet that targeted advertising is largely dependent on data, so how much of a threat to its advertising business is a potential probe into where it

gets its data?

GALLOWAY: Well, you see, you bring up a great point. So Amazon - Morgan Stanley predicted that Amazon would be $4.5 billion in advertising this

year. Our analysis shows they are going to do over $11 billion, or put it another way, Amazon might do as much in advertising this year as Twitter,

SnapChat and Instagram combined. This is Amazon.

Amazon in two years may be one of the five largest media companies in the world and this is what happens when you have an invasive species unlike any

other company in history can grow to become the most valuable company in the world, which it will be in the next 60 days without ever having to

achieve meaningful profitability, meaning, they can reinvest 100 cents on the dollar back in any business.

It is almost impossible to compete with Amazon. I personally don't believe these fines. I think they're a gnat on the windshield of a tractor-trailer

truck. When Google got fined $5 billion, that day was announced, the stock went up.

SY: That is the question. How to deal with the outsized power of these tech companies? Now, you bring up the fact that they're becoming a media

company and of course, we had AT&T/Time Warner merger which included CNN and part of what the judge said in his ruling was looking at the outsized

power of these companies in the digital advertising space, so you see that response.

[15:05:09]

SY: But is regulation the right strategy? Are fines the right strategy? Is any of that going to make a difference when you consider how large the

market capitalization of these four or five companies are?

GALLOWAY: So when you have a company like Google at $100 billion in cash and you're fined 5billion, what you're effectively telling Google to do is

to continue to break the law. If you had a parking meter in front of your house that costs $100.00 an hour, but the ticket was $0.25, you would

continue to break the law and that's what we've been telling these companies to do. With fines, it might sound large in dollar terms, but in

terms of impact, aren't that large.

You ask what we should do? I believe regulation has unintended consequences. I think GDPR has actually emboldened and strengthened these

companies' position. I believe that the future to oxygenate the marketplace is to break these guys up. I think Antitrust action is the way

to go.

SY: Do you think there is a real risk of that now? I know that the US Attorney General Jeff Sessions is having a meeting with states Attorneys

General next week to discuss this very topic. We're starting to hear that word antitrust. We're even starting to hear the word "monopoly" associated

with some of these companies. Is that a growing regulatory risk for these mega tech companies? Could you actually see them getting broken up?

GALLOWAY: I used to think there was no way because Amazon has 88 full-time lobbyists in DC. We in the US, I would suffer a little bit from what I

call this gross idolatry of innovators and billionaires. We see them as our heroes. But I do think there is a movement afoot.

Now, whether it happens out of DC, I would say most likely no. I think the pushback is going to come out of Brussels and possibly a red state where an

Attorney General in that state sees that the brightest blue line path to the governor's mansion is to make an argument against these tech companies.

And quite frankly, probably haven't been good.

Have they been good for California? Yes. New York? Yes. Has it been good for Kansas? What's happened to the ad agencies, the retailers, the

businesses in those states? I think a lot of these red states have decided, "You know what? Big tech, we've been net losers here." So I

don't think it is going to come out of DC. It might. The DOJ should absolutely do its job. They're called to restraint the acquisition of this

company was ridiculous in comparison to the power of these other companies.

So I actually believe, there is a nonzero probability now that the DOJ or the FTC or state AG might go after these companies and accuse them of

anticompetitive behavior and propose antitrust and breaking up a business solution.

SY: It's an interesting paradox because you have Amazon yet to announce the second location for its headquarters and you have, you know, local

mayors and governors courting Amazon at the same time you see it coming under increasing potential antitrust scrutiny and other bad headlines

following it as well.

Do you see public opinion changing at all toward the power of these big tech companies while at the same time we're also dependent on them?

GALLOWAY: Oh, the worm is absolutely turned. Two years ago, the only argument was most who was more Christ-like are going to be the next

president among those CEOs. But really the weaponization of the Facebook platform by the GRU of the Russian government changed everything. And now

comes ...

SY: The analytical ...

GALLOWAY: ... citizens are starting to feel a lot more wary about these storms, but you brought up an interesting point. The competition to be the

host of the next HQ and regulation are linked, Stephanie, because the next headquarters for Amazon will be Washington, DC, the metro area and the

reason why - and it was always going to be DC is one, the Bezos have a home there and a CEO always gets to pick where the company's second headquarters

are going to be and so the only thing standing in between Amazon's valuation of $1 trillion and $2 trillion is regulation and no one is going

to regulate the individual that throws out the first pitch at the 2019 opening game of the Washington nationals which will be Jeff Bezos.

This competition was a ruse to transfer wealth from fire departments and school departments to the shareholders of Amazon. It was always going to

be DC. This has been a terrible abuse of the Commonwealth.

SY: And how many lobbyists does Amazon have in DC right now?

GALLOWAY: Last check, 88 full-time lobbyists in DC.

SY: Scott Galloway. We're going to see if you're right on that.

GALLOWAY: We'll see, right? It's going to be embarrassing if they announce to pick Indianapolis this afternoon.

SY: Well, DC could certainly use the jobs. Scott, thank you so much.

GALLOWAY: Thank you.

SY: Let's turn to Europe and the massive money laundering case that's shaking the financial world. The CEO of Danske Bank is out. A new report

from the firm details its employees' failure to conduct basic due diligence on customers and managers' failure to heed warning signs.

The tentacles of the investigation and the alleged wrongdoing spreading. Regulators in the United States, Denmark and Estonia are all probing Danske

Bank's operations and the probes center on the bank's tiny subsidiary in Estonia. Lax controls there allowed for more than $230 billion, they came

from thousands of suspicious customers outside Estonia and that dollar amount is nearly twice what was previously reported. The bank is alleged

to have become a conduit for money coming from Russia and former Soviet states.

[15:10:12]

SYL The allegations are linked with fraud cases exposed by Bill Browder and his former lawyer, Sergei Magnitsky who was murdered in a Russian

prison. Bill Browder himself was kicked out of Russia. He has since filed several criminal complaints over Danske Bank's behavior. Bill is the CEO

Hermitage Capital Management, and author of "Red Notice," which is all about his experience in Russia and he joins me now from London.

Bill, it's great to have you with us with all these developments happening. First of all, describe for our viewers, if you will, what your interest is

in this investigation and why you have filed or planning to file a criminal complaint against Danske bank in Denmark? What are you accusing the bank

of?

BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Well, so it all comes back to the murder of my lawyer, Sergei Magnitsky. Sergei Magnitsky was a

Russian lawyer who worked for me in Russia. He uncovered $230 million government corruption scheme. He exposed it and in retaliation, he was

arrested, tortured and killed eight and a half years ago at the age of 37 leaving a wife and two children.

I've been on a mission to get justice for Sergei Magnitsky which has led me to look for who got the benefit of the $230 million crime that he exposed

and was killed over. We've been investigating it, my team and I, for the last eight and a half years, and we've discovered that a lot of that money

flowed to Danske Bank's Estonian branch. And my interest in this whole story is that I don't want anybody who is involved in the laundering of the

funds that killed Sergei Magnitsky to get away with it and so, I and my team have filed criminal complaints in Denmark, in Estonia which has led to

the opening of a criminal case, and the criminal complaints that we filed has metastasized into this big discovery, and now, we are effectively

facing the largest money laundering scandal in the history of Europe through Danske Bank.

SY: So it is still a question exactly how much of those funds that went through Estonia were considered suspicious transactions. I know that you

have said it is $8.3 billion. Bill, what proof do you have of that and do you have evidence trying that back to specific individuals and entities in

Russia that you've been looking at related to the death of Mr. Magnitsky?

BROWDER: Yes, so in addition to the criminal complaints we filed in Estonia and in Denmark, we filed criminal complaints in about 26 countries

and there are now 15 live money laundering investigations connected to the murder of Sergei Magnitsky in the money laundering of that case, and from

those criminal investigations, and particularly one in France, we've been able to get documents from a subset, not the whole account, but a subset of

the Danske Bank transactions and from that subset, we've determined that $8.8 billion of suspicious transactions went through Danske Bank and it

went through Danske Bank on its way to other countries including the United Kingdom where I am right now, France, Germany, Spain and other places.

And as a result of those transfers, there are cases open to those countries looking into the purchases of houses, of chartering of yachts, private

planes, et cetera.

SY: What else do you want to know with regard to Danske's Estonia branch's role in all of this and do you believe that this was just a lack of due

diligence and understanding who their clients were and where the money was coming from or are you alleging further malfeasance?

BROWDER: Well, in the report that came out today from Danske Bank itself, from its own internal lawyers showed that in 2007, Danske Bank was warned

by the Russian Central Bank that money going through this Estonian subsidiary was from the proceeds of crime. And so with this whole - the

whole problem started in 2007 or at least became - the bank became aware in 2007, but they carried on for eight years and according to these numbers,

$234 billion flowed through the bank after they were made aware that this was bad money coming from Russia.

So this was not just a failure to do due diligence. There were a lot of people profiting from this and those people didn't want the flows to stop.

SY: So the CEO, Thomas Borgen has resigned, Bill. What else do you think should happen from here?

BROWDER: We've asked the Estonian and the Danish prosecutors to investigate the CEO, the people around him and the employees that were

responsible for these transfer for - to see what their criminal liability is. I don't know what he knew or what he didn't know, but that's for the

law enforcement agencies to determine.

SY: Bill Browder, thank you so much for joining us with your insights on this case. We'll continue to follow the developments, of course.

[15:15:16]

SY: Later in the program, we're going to be talking about another corruption scandal, the 1MDB saga in Malaysia. I'll speak to the authors

of a new book about the investor they're calling "A Modern Gatsby." Stocks are surging and investors have reefer madness. We'll explain why one

marijuana company's shares are up 50%.

It's the final hour of trading on Wall Street and the Dow is up 160 points. It is now at its highest level since January. The S&P 500 is two-tenths of

one percent away from its record high and that's thanks to a mix of relief about the trade war and rising treasury yields which are lifting financial

shares.

The chief equity strategist at Goldman Sachs says stock market returns will be slowing down soon. Peter Oppenheimer spoke to Richard at the end of

last week and says things can't stay like this forever.

(BEGIN VIDEO CLIP)

PETER OPPENHEIMER, CHIEF EQUITY STRATEGIST, GOLDMAN SACHS: Within equities a really important driver of that bull market has been technology and why

we're still optimistic about technology, we don't really see the margins in that sector rising in the way that they have, so with the absence of that

being a stronger driver than we've seen in the past and without lower interest rates pushing valuations yet higher still, we're likely to see

relatively low profit growth and lower returns overall.

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: In that case, where do you go? What does one do? Anybody watching tonight, he's got this top chap here

who's had global strategist of equities, this man must know what the strategy should be for the next year or so, what does an ordinary investor

do faced with the information that we are putting before them tonight?

OPPENHEIMER: I think one thing to say is that having some kind of balance and diversified approach always makes sense. Cash rates, interest rates

have picked up particularly in the US and it makes some sense to have some money in cash to counter balance perhaps money in stock markets as an

example, but the main thing that this is really saying is one should be prepared for a time when the returns available in financial assets,

including stock markets are just lower than we've enjoyed in recent years.

[15:20:08]

OPPENHEIMER: Within stock markets, there will be tactical opportunities, rebound we think is plausible, for example, in emerging markets where we've

seen a big selloff recently. We think good quality companies that are reinvesting for future growth or companies that are restructuring and

generating good cash flows and decent dividend yields all make sense as well. And I think it is prudent to expect that just buying and holding

indices, equity markets overall is likely to generate lower returns than people have been used to in the period of the last few years where

valuations have gone up a lot on the back of falling interest rates and the liquidity boost of quantitative easing which is beginning to come to an

end.

(END VIDEO CLIP)

SY: Growing marijuana plants takes light, water and nutrients. Growing marijuana stocks takes an approval from the Federal government and a lot of

optimism apparently from investors. Tilray shares are up 45%. They he seesawed wildly in the last ten minutes. Actually, shares were briefly

halted moments ago in fact due to the extreme volatility.

Today's surge though puts Tilray's market cap above $20 billion and that makes Tilray the most valuable marijuana company with a market cap on par

with American Airlines and Twitter. On Tuesday, Tilray revealed that the US Federal government will allow it to import cannabis for a clinical trial

in California. It's a small step toward the mass legalization that Tilray CEO told us is the key to growth.

(BEGIN VIDEO CLIP)

BRENDAN KENNEDY, CEO, TILRAY: We're seeing tremendous growth country after country is legalizing. We also see Canada will be the first G7 nation to

allow adult use sales. The first sale will take place in October this year, October 17th, and so we're very optimistic about our growth

opportunities this year as well as next year with Canada being the first adult use opportunity.

(END VIDEO CLIP)

SY: Alan Valdes knows all about marijuana stocks. He's the chairman of a Cannabis company, Diego Pellicer and a senior partner at Silver Bear

Capital. Alan, great to see you. Somebody just did the math for me and told me that if you had bought at the IPO price back in July for

$1,000.00, you put a $1,000.00 and you'd be a millionaire today.

ALAN VALDEZ, CHAIRMAN, DIEGO PELLICER: Yes, that's true. That's correct. Cannabis I think is going to have a great year this year and one of the

main reasons is, the President has this massive tax cuts here in America. He's got to make up for it somewhere. And in cannabis, it is a unique

industry. We know we have clients even though we haven't been legally able to market in many states. Nothing's open. It's not legal. But we know

there are tons of customers out there.

So the minute this goes legal, and we think this administration will legalize it because they need the tax revenue. It's all about the money.

We'll see what happens. That's going to lift all these cannabis stocks in the wings right through the roof.

SY: Okay, you clearly, Alan, share the fervor for Tilray and the cannabis companies whose stocks we're seeing explode today, but is there a concern

that some of this is just speculative fever? Tilray's market cap is in the billions now. Its grown by hundreds of percentage points from its IPO, but

it only has $28 million in sales. So do the fundamentals really back up this valuation in your view?

VALDES: No, not yet, but again, I think if you're getting into marijuana, into cannabis companies like Tilray are good to get involved in Diego, too,

but of course, I'm speaking of my own book here. But I think those are great companies to take a look at. I think, in the long run, look what

Coke is doing. Coke is thinking about infusing a drink with cannabis oil.

So, I think in the long run, you're going to see this industry grow and if you get in on the bottom floor, like some of these stocks are, it is a good

place to begin. Yes, the valuations are a little out of whack, of course, but again in the long run, I think, it's a good place to be.

SY: I think it's interesting that you believe the Trump administration is going to be for Federal legalization when we've heard the Attorney General

Jeff Sessions being really in the reverse of that and wanting to - earlier in the administration at least crack down on some of the states that had

gone for legalization. Do you think that because Jeff Sessions seems to be not on President Trump's good side right now that actually bodes well for

the marijuana industry?

VALDES: No question about it. I mean, he's been a thorn in our side, to be honest with you. But again, I think at the end of the day, Trump being

a businessman is going to have to get tax revenue somewhere and this is a great - California alone, over $1 billion in tax revenue once that goes

legal later on this year. So, I think overall, it's going to be a great year for cannabis and now's the time to get in.

SY: All right. Thank you, Alan Valdes. Good to see you.

VALDES: Thanks. Have a great day.

SY: You too.

[15:25:16]

SY: European investors seem unfazed by the potential fallout from the US- China trade war. It was a solid day of gains across the continent. In fact, in London, mining stocks helped lift the FTSE. Investors may be on

move, but the ahead of Daimler Trucks admits he's very worried about the current tariff battle.

Martin Daum says there are no winners in a trade war and he told our Anna Stewart that consumers will pay the price.

(BEGIN VIDEO TAPE)

MARTIN DAUM, HEAD OF DAIMLER TRUCKS: I mean, I'm really worried because we are truly a global company with a big footprint in nearly every major

economy employing everywhere thousands of people in each and every country, investing hundreds of millions of dollars in each and every

country and we depend on long-term stability in the globe and the free exchange of ideas, people, goods. We don't invest in each and every

country for each and every part. We ship parts back and forth around the globe for the benefits of all economies. And therefore, we are concerned.

The first fallout, at least, a significant increase in aluminum and we produce aluminum crafts in the United States. So, US trucks got more

expensive because of that tariff. I don't see any much sense on any trade war because at the end of the trade war, nobody wins. There will be no

winner. There will be potentially losers and big losers and we want win- win situations for everyone.

ANNA STEWART, CORRESPONDENT, CNN: I think that the tariffs on aluminum and steel have increased you costs, are you passing that cost on to the

consumer or are you having to absorb that?

DAUM: I mean, for 2018, we have to absorb it because we are basically sold out for the years so you can't increase pricing in mid-year, but in the

next year, we will pass it on and I think, at least that our competitors are seeing the same increase in raw material cost, so the general, the

pricing of trucks will go up. The prices of trucks go up, the prices of - the cost of transportation goes up and that will have then the prices on

the shelves for the consumers ultimately and it is a very good example of how trade wars ultimately harm the consumer in each and every country the

most.

(BEGIN VIDEO TAPE)

SY: Corruption allegations are flying, a luxury yacht is seized and investigators are keen to find billions of dollars that seemed to have

disappeared. We'll take you inside the scandal that's gripping the whole of Malaysia.

(COMMERCIAL BREAK)

[15:30:00] SY: Hello, I'm Stephanie Sy, coming up on the next half hour of QUEST MEANS BUSINESS, he dated super models and sailed a $250 million

yacht. Now, one Malaysian investor is on the run.

And U.S. sports fans are finally getting a taste of the gambling world, I'll speak to the CEO of DraftKings. First, these are the top news

headlines we're following on CNN this hour.

A tenuous step towards peace as the leaders of North and South Korea commit to an era of no war during a three-day summit. The North says it will

close a key missile test facility and potentially destroy its primary nuclear complex that only if the U.S. agrees to corresponding measures.

U.S. Senate Judiciary Chair Chuck Grassley is offering alternatives to hear Christine Blasey Ford testify. Ford accuses Supreme Court nominee Brett

Kavanaugh of assaulting her as a teenager. She said she won't come before the Senate Committee publicly without an FBI probe into her claims.

Grassley is offering a closed section or public or private interviews. British Prime Minister Theresa May is in Austria to discuss Brexit with

other European leaders. Mrs. May says her Chequers plan is the only credible plan on the table. European Council President Donald Tusk says a

deal on Northern Ireland's land border is a key obstacle to Britain's orderly exit from the European Union next March.

The EU's Competition Commissioner is launching an investigation into Amazon. Brussels claims the company may be unfairly gleaning information

from smaller retailers to boost its own sales and predict new trends. Shares on Amazon are falling on the news.

A spectacular fall from grace for the man who once run Malaysia's government. Former Prime Minister Najib Razak was arrested earlier today

in a corruption scandal. Billions of dollars and state money have gone missing from the 1Malaysia Development Berhad or 1MDB fund which Razak

created.

Investigators say more than $600 million from that fund found its way into his personal bank account. Najib had previously been charged with multiple

counts of corruption and money laundering over the scandal. He denies any wrongdoing.

And the 1MDB scandal continues to shock and captivate Malaysia. A new book tells the story of one man at the center of the scandal Jho Low has been

described as a modern-day gatsby. Here he is on the right there with Alicia Keys, here he is again with the super model Gigi Hadid and here's

his yacht in the Cayman Islands where the quarter of a billion dollars are now in the hands of authorities.

The book is called "Billion Dollar Whale", the author is Tom Wright and Bradley Hope join me now. Guys, this book is juicy. And I was reading a

description of an extravagant birthday party that this guy Jho Low threw for himself in Vegas in the midst of the financial crisis.

A long list of rappers and Hollywood actors, it was like reading a chapter from "Crazy Rich Asians".

TOM WRIGHT, AUTHOR: Yes, exactly --

SY: Except this is real and he allegedly stole all this money?

WRIGHT: He did, I mean, we -- that's the prologue of our book you're referring to, his 2012 birthday party which Robin Lee described as possibly

the biggest private party that anyone has ever thrown. But the money, he had taken it from a Malaysian sovereign wealth fund that he run from behind

the scenes.

SY: So Bradley, $6 billion is what was allegedly funding his lifestyle. How did he get there? Was this an elaborate scheme or a simple theft?

BRADLEY HOPE, AUTHOR: Well, he had the -- working with the Malaysian Prime Minister, he helped create his own sovereign wealth fund which he run from

behind the scenes, and with the help of Goldman Sachs, they buried all this money, and he arranged all these deals where the money was kind of siphoned

into the side.

And that's where billions of dollars he basically took control of, and used to fund this crazy lifestyle to do big deals, he was almost about to buy

Arriba from Adidas in 2015, that got scuppered because the FBI started investigating him. So it's -- that's how he pulled it off.

[15:35:00] SY: What is just remarkable is the amount of famous people that you name in this book. Everyone from rap stars to Leonardo DiCaprio,

he allegedly helped fund the film "Wolf of Wall Street", so this was a midst of a financial crisis, how did he get away with this for so long with

nobody noticing or asking who this guy was?

WRIGHT: I think, well, billion dollar well shows is that if you've got enough money, you can buy you way into any place in the world. I mean, he

got to Leonardo DiCaprio by offering $400 million in some financing, she dated Miranda Kerr, you know, she had made $7 million a year before she met

Jho Low.

But you know, that's not enough alone for super yachts or to throw, you know, champagne-drenched parties. So Jho Low was really the guy who knew

how to use money to enjoy kinds of crazy high society.

SY: Yes, you talk a little bit about the Golden Sachs nexus. And there's one person that you name in particular who had a relationship with Jho Low.

What's his situation right now?

HOPE: Yes, one of the key bankers from Goldman Sachs is called Tim Leissner, he was married to Kimora Lee Simmons. He was the banker that

kind of helped set up all of the deals for this 1MDB fund and earned Goldman Sachs a huge profit, 600 million or so on deals that normally would

have earned Goldman Sachs maybe a million dollars or so or less.

So he is now in -- the last we've heard from them, he was in clean talks with the U.S. government or the Department of Justice to talk about what he

knows about this case and what Goldman Sachs knew and exactly that's there all the way up to the top.

SY: So there continues to be a potential for illegal exposure for Goldman --

WRIGHT: For Goldman, yes, well, I mean, there's two things here. One is the preliminary investigation with his buddy he was referring to and Tim

Leissner, some previous talks that he'll probably admit to some kind of wrongdoing. And there's also of course -- there could be something to a

hefty fine under the bank's Secrecy Act.

Because there were huge red flags in this that they were raising money for this sovereign wealth fund that Jho Low ran, including a request to put $3

billion into his Swiss bank account which was -- which highly unusual. Goldman's own lawyers on the deal, the plaintiffs(ph) said that perhaps

they shouldn't do it and they went ahead and did it anyway.

So those are the kind of things regulators are going to be looking at.

SY: All right, where is Jho Low now, we know that the former Prime Minister of Malaysia has been arrested, there's a new regime, and I believe

there's an arrest warrant now for him. What do we know about his whereabouts?

HOPE: The best we know is that he's in China, and he has some measure of protection from the Chinese government. He -- we reported in the Wall

Street Journal that he's told people that he has worked with Chinese intelligence. And so far, sort of the subjects are some tensed discussions

between the two countries, Malaysia and China say you know, where exactly is Jho Low?

Are they going to turn him over?

SY: Does he still have the money?

HOPE: It appears from all we can see, he still has a lot of money.

SY: Tom, what do you want people to take away from this book. I mean, I feel like there's a very interesting message that I got from it as far as

how wealth works in this world, as far as access is, you know, what do you want people to walk away from?

WRIGHT: Well, first of all, it's not didactic, I think it's a great true crime thriller, and I want people to enjoy reading it. But also, we have a

chapter called "White-Collar Crime", very late on, and I think what's important here is that you cannot, you know, conduct white-collar crime and

get away with it.

There should be some repercussions for the banks and for the enablers of Jho Low. It wasn't just a corrupter in Malaysia that did this, he was

enabled by, you know, the global financial system.

SY: Tom Wright and Bradley Hope, good luck with the book, thanks so much for being with us.

HOPE: Thank you.

SY: Making artificial intelligence more fair. IBM says it's got a tool for that. I'll be talking to one of their top AI people just ahead.

[15:40:00] (COMMERCIAL BREAK)

SY: The scale of the agricultural impact from Hurricane Florence is just becoming clear in the Carolinas. U.S. officials saying nearly 3.5 million

poultry birds were lost in the storm, but barreled through parts of the southeastern U.S. a few days ago.

President Donald Trump is praising the recovery effort, he met with emergency workers earlier today during a visit to the flood zone.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The job you've done has been --

UNIDENTIFIED MALE: Yes --

TRUMP: Incredible. They're talking about it all over the world and we want to keep it going that way because some of the hard work is now. We've

gone through a very dangerous work and still dangerous, but some of the hard work is taking place right now.

(END VIDEO CLIP)

SY: The death toll from Florence is now 36. The storm broken into -- remnants has moved that of the area leaving behind massive destruction and

new threats from flooding. Moody's estimates the damage could top $22 billion. Belfor which specializes in restoration and repair says it had

hundreds of people on the ground during the hurricane.

CEO Sheldon Yellen echoed Mr. Trump's praise for the rescuers when he spoke to my colleague Bianna Golodryga.

(BEGIN VIDEO CLIP)

SHELDON YELLEN, CHIEF EXECUTIVE OFFICER, BELFOR: I think the authorities have done an amazing job. The communication has been very good on the

ground level. The utility crews that are out there are in huge numbers. I think the preparation for this storm has been terrific. I really do.

And I think that for the most part, people are listening to the instructions that are being given. Every once in a while, you hear of a

story that there has to be in the media rescue attempt to -- and what we're hearing back and what our own people on the ground are seeing is that these

rescues are being handled -- they're being handled in a terrific way.

And I really do think the authorities have done a terrific job in this scenario. I really do.

BIANNA GOLODRYGA, CNN: And lastly, you know, people focus on costs and not human costs, but financial costs at the end, right? That's not the primary

issue of concern, but it is a big issue nonetheless. How given that we're going to be seeing more and more of these types of storms and their

ramifications.

How can you better prepare? How can we better prepare ourselves to not end up with such a huge financial costs when it comes to the clean up and

rebuilding efforts.

YELLEN: Well, I think again, you know, when you talk about costs, there's so many different shading factors, but one of the issues that all property

owners are facing is coverage issues. So if you have coverage for wind- driven rain on a normal (INAUDIBLE) policy, that's one type of coverage.

But a lot of people in flood zones don't have flood coverage. People need to be aware of this in advance for these storms, and flood coverage is

available through the private sector and or through national flood programs.

So the coverage is available and these insurance companies are very well capable of insuring the properties and the reinsurance that's laid off is

all in place. But people have to take these measures in advance under consideration.

For those people that are under insured, there are federal programs for loans, that's what FEMA administers. But the real efforts that go into

restoring a community is a private insurance, federal assistance, FEMA's assistance and the overall good of the communities pulling together because

I've seen over 34 years of doing this.

[15:45:00] The enormous positive effect of communities pulling together, neighbor helping neighbor, person helping person, one at a time all

contribute to pulling these communities back to where they need to be.

GOLODRYGA: Yes.

(END VIDEO CLIP)

SY: IBM has launched a new tool, it wants to help AI users spot hidden biases in algorithms. Dario Gil is IBM's vice president of AI, he joins me

now in the C-suite. Dario, this is such an interesting topic to me, especially because AI seems to be pervasive in our workplace, in our lives

right now.

Can you start by just explaining what do you mean when you say AI bias?

DARIO GIL, CHIEF OPERATING OFFICER, IBM RESEARCH & VICE PRESIDENT OF AI: AI bias, yes, so one of the reasons why we're hearing about AI so much is

because the recent advances that we have made with, you know, metal works, make prediction accuracy, you know, very good.

The problem is it's a black box. So when we go and we have a data set that we give examples to these known network to train it, let's say we're going

to do our credit scoring to assign whether somebody should get a mortgage or not.

So we give past examples, and I give us a prediction. But you know, in the training of the example, did somebody use bias data? And therefore, for

example, if we use historical data from past approvals. And maybe in the past, we weren't given credit or approvals to women as an example.

SY: Or to minorities.

GIL: Or to minorities. Well, if we use naively sort of pass data to just alternative example, we're going to create a system that is bias. So what

we have released in our trust and transparency toolbox is the ability to be able to check for your data that you use to train, the mission learning

models and see if it's bias and also for the models themselves.

And also to provide expendability(ph). Why did he make that prediction? Give me some explanation for how it works?

SY: Is it easy to understand, you know, you talk about the black box and I want to get there. You know, there's a belief that, I think that there are

not a lot of AI experts that understand how algorithms, how machine- learning, how all of that stuff works.

But there's an understanding that programmers behind it use data that might be bias and the programmers themselves might be bias. So how

understandable I guess is this toolkit for these companies to be able to really understand what's going into the decisions that they're allowing AI

to potentially make?

GIL: That's right, and that's the major advance of the new service we've released on the IBM cloud because what you can do is two components of it.

One is this bias checking of the data itself and the models. The second component, what you alluded to is explain it to me in a way I can

understand it.

Not by telling me, oh, he has a billion weight, here are some numbers, and you're like what does this mean?

SY: Yes --

GIL: Give me --

SY: And that keeps it a black box.

GIL: That keeps it as a black box, exactly right. So this is about be able to give me an explanation with language that I can just read of

saying, oh, you know, this prediction is using these variables more, you know, these class of variables and so on.

And it gives you an understanding for which variables are more important, the consequences of using those variables and the prediction that's in the

credit scoring or on hiring in HR or on medical recommendation. So that human and the whole person we all are to understand why is it behaving the

way it does, and that's a major advance.

SY: And obviously, your company hopes that what this leads to is less of a fear of the technology, more mass deployment of AI and I know IBM is active

in that. On that point, I want to ask you a broader question about competition in the AI sphere.

I know that China is also very advanced when it comes to artificial intelligence technology. How far ahead is it when it comes to a China-U.S.

comparison?

GIL: Well, AI, I mean, is arguably the most important technology in the world today. So it's not surprising that at every level, whether you're

talking about the educational level and students wanting to learn about AI at the business level, using AI and creating AI for competitive advantage

and at the national level, right?

There's national strategies to advance AI, and we're seeing that. So China is an exemplar of making those investments --

SY: A national strategy --

GIL: A national strategy, but we're seeing that, you know, broadly, not just in China, of course in the United States. If you look at United

States or Canada are major power houses in terms of AI innovation and advances and so on. But it's undoubtedly the case that China has made it,

that's one of their top strategic priorities.

SY: And because it's made it a priority, has it advanced technologically further than the U.S. for example?

GIL: Well, what I would say is that we're seeing the application of it, it's a very broad use, but we're also seeing that in the United States.

And I would say at the forefronts of advances in AI, the United States also remains extraordinarily competitive, right, in making many of the seminal

advances.

[15:50:00] You know, things are happening in China as well. But I would not say that we're in a situation where we're not at the forefront of

leading in AI.

SY: Dario Gil; Vice President of AI at IBM, such an interesting topic, thank you so much for coming in.

GIL: Thank you for having me here.

SY: Coming up, Supreme Court ruling sparks a sports-betting gold rush in the U.S., I'll ask the CEO of DraftKings, how he's cashing in.

(COMMERCIAL BREAK)

SY: More parts of the United States are looking to get on board the sports betting bandwagon. Lawmakers in Washington D.C. have introduced a bill

that will let people bet on games. While it's legal in many countries around the world, it's only allowed in a handful of U.S. states.

Jason Robins is the CEO of DraftKings; a site for betting and fantasy sports. Jason, thank you so much for being with us. Since the Supreme

Court ruling that lifted the ban on sports betting, you've opened up an actual sports betting establishment in New Jersey.

So talk about its popularity and its profits.

JASON ROBINS, CHIEF EXECUTIVE OFFICER, DRAFTKINGS: Well, we were the first to get a mobile app in market, and that launched on August 1st, so it's

still very early. But I can tell you that every number we thought when we projected were shattering. It's just unbelievable how much demand and how

much excitement there is over sports betting.

And you know, a lot of people I think are enjoying -- it's a good time of year, so a lot of people enjoying college sports, you know, the NFL being

the -- you know, those are the two most popular betting sports in America and both just started, I think the timing couldn't have been better.

SY: Yes, and I read that it took 38 days to reach 1 million sports bets since you launched the online sports book in New Jersey on August 1st. As

you mentioned, the NFL season has gotten underway, you usually see a spike in bets of course during American football season. Are you happy so far

with the metrics you're seeing?

ROBINS: The growth since NFL started has been unbelievable. So you just mentioned, it took us 38 days to get to our millionth bet. About 15 days

later, this Sunday, we are going to hit our 2 millionth bet. So in less than half the time it took to get to the first one.

And overall, the products is growing, but it's really the NFL season starting that's making a take-off, and you know, we've had some days where

we were processing hundred thousand-plus bets in a day.

SY: What about any new products and innovation? Did you introduce anything new going into the NFL season this year?

ROBINS: Well, our focus this year is to make sure that we have a product that everybody thought was the best in market.

[15:55:00] We've been working for about a year on it, we actually -- you know, no pun intended, we made a bet that the Supreme Court was going to

rule away, they did and started investing back in June of 2017, so we are well-prepared and I inc. the product we brought to the market, it has a lot

of features that, maybe over in Europe and more mature markets are more common place but are pretty new and pretty exciting for bettors in the U.S.

Who having being exposed to legal markets really ever, and you know, in Nevada, even I think the online and mobile market isn't nearly as advanced

as is in Europe. So it's an exciting time.

SY: Do you see any hurdles? Are you making a bet that this is going to be legalized throughout the land in the U.S. and what does the future for the

company look like?

ROBINS: Well, the good thing for us is we still have a very exciting and growing fantasy sports business. And I mean, this is sort of like, you

know, a bonus on top and obviously we're hopeful and will be, you know, doing our best to try to get as many laws passed and sensible regulations

in place as possible that allows for more states to do sports betting.

But from our perspective, there's really no rush, we continue to have a lot of growth in our daily fantasy sports business and we think a lot of rooms

left to innovate there, and obviously we'd like to see sports betting go, but you know, I think overtime it's inevitable. So it's really more

question of when, not if, and we'll be patient and hopefully it will happen sooner rather than later.

SY: All right, Jason Robins; CEO of DraftKings, pleasure to have you on, thank you.

ROBINS: Thanks for having me.

SY: We'll have a final check on the markets as we approach the closing bell in just a moment.

(COMMERCIAL BREAK)

SY: Time for our final check of the markets. The Dow is holding on to its gains in the final moments of trading as you can see here. But shares of

that cannabis company Tilray, see sign wildly, they have swung between gains of 93 percent and 9 percent in the last hour.

They're up about 40 percent as you can see and at the moment. Tech stocks were among the biggest losers on the Dow, Microsoft and Cisco both

finishing near the bottom of the pile. Financial shares were the big winners with Goldman Sachs and JPMorgan each up around 3 percent.

And that's it for QUEST MEANS BUSINESS, I'm Stephanie Sy, the closing bell is ringing on Wall Street, it happened to be ringing and the CEO of Hertz

celebrating its 100th anniversary.

(BELL RINGING)

And she is one of the few women, Kathryn Marinello is, who heads a Fortune 500 company. That's QUEST MEANS BUSINESS, "THE LEAD" is next.

END