Return to Transcripts main page
CNN Newsnight Aaron Brown
Congress Gets Stood Up by Ken Lay
Aired February 04, 2002 - 22:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, NEWSNIGHT ANCHOR: I'm Wolf Blitzer. I'm in for Aaron Brown. Congress got stood up today and a group of spurned legislators did not take it well at all. We're talking about Enron and it's former Chairman Ken Lay, who decided yesterday that he wouldn't appear before a Senate Committee investigating the company's collapse.
His lawyer said the hearings would be prosecutorial in tone, prompting one aid on the Hill to say this: "What was he expecting? A debutante ball?" The outrage went far beyond Washington, however. Some out of work Enron employees had to cancel so-called "watch Kenny" get togethers this morning, one of them saying: "Why not just come out and tell the truth and get it over with?" Lay probably wanted a choice in the matter because when legislators get spurned, they can get their revenge. In a word "subpoena."
A lot on Enron tonight, and so we begin our whip around the world on Capitol Hill with Kate Snow. Kate, the headline.
KATE SNOW, CNN CORRESPONDENT: Well, Wolf, the Senators certainly as you mentioned were none too pleased about Ken Lay not showing up here today for his appearance. They came out strongly with some strong words, not only about Ken Lay, but about some other folks as well. We'll get to that later.
Meantime, a House panel went ahead with their scheduled hearing, and they heard from their key witness, a man by the name of William Powers, the author of a report that came out over the weekend criticizing Enron and its structure, talking about the internal structure as what might be described as a bit of a house of cards. Wolf.
BLITZER: All right, Kate, we'll be back to you. Meanwhile, the Bush budget plan was also released today and David Ensor is looking at one part of it that's always been shrouded in secrecy. David, the headline from you.
DAVID ENSOR, CNN CORRESPONDENT: Well, that's right, Wolf. The part that's always been shrouded in secrecy and still is this time, is the intelligence budget of the United States. We're told there's a hefty increase for intelligence in the wake of September 11th, but how big is a secret.
We'll look, however, at some of the areas that the Bush Administration is proposing to increase the money and attention in the intelligence area, and explain why some in Washington believe that a little less secrecy might lead to a better intelligence effort in the War on Terrorism. Wolf.
BLITZER: David, I'll be looking forward to that. And now on to Guantanamo Bay, ready to once again take on more detainees. Our Bob Franken is already there. Bob, what's your headline?
BOB FRANKEN, CNN CORRESPONDENT: Well, about a week and a half ago, they put up a no vacancy sign here. They had maxed out of the number of detainees. They ran out of available cells, those now famous outdoor cells. Well, they've added about 160 of them, and now they're waiting to fill them with new detainees. We'll have the report in a moment.
BLITZER: All right, Bob Franken, he's at the U.S. Naval Base at Guantanamo Bay. I'll be back with all of our correspondents in just a moment. Also, this note, still coming up on NEWSNIGHT, a town hall meeting for families who lost loved ones on September 11th, a very painful and complicated topic, how to value a human life.
And in our Segment 7, Shakespeare performed about 6,000 miles away from the Globe Theater, all that to come. We begin though with Ken Lay, the man of the hour and when the hour arrived, the man who wasn't there.
Earlier tonight, the Harvard Law Professor Alan Dershowitz told me Ken Lay would have to be crazy to appear without criminal immunity before an unfriendly Senate Committee, but if his reception promised to be hostile before he turned down a Congressional invitation, what to make of things now.
We have a series of reports, beginning on the Hill with CNN's Kate Snow and the no-show.
(BEGIN VIDEOTAPE)
SNOW (voice over): Former Enron CEO Kenneth Lay snubbed a Senate Subcommittee angering lawmakers and prompting new criticism, not only of Enron, but the Bush White House.
SENATOR FRITZ HOLLINGS (D) SOUTH CAROLINA: I've never seen a better example of cash-and-carry government than this Bush Administration, and Enron.
SNOW: Citing Enron's ties to a host of administration officials, Hollings called for a special prosecutor to look into Enron and a subpoena to force Lay to appear on Capitol Hill next week.
The White House dismissed the comments as a partisan attack, calling it disappointing that, "some are more interested in reading off partisan Democrat attack memos and repeating unfounded and unsubstantiated allegations."
Later, the Justice Department weighed in, saying there was no reason to appoint a special counsel because no conflict of interest exists. Lay's decision to avoid Congress came Sunday after his lawyers said lawmakers made inflammatory statements on the talk shows.
SENATOR BYRON DORGAN (D) NORTH DAKOTA: There's nothing that would excuse Mr. Lay's decision not to appear before Congress. He was simply looking for a door. The fact is on Saturday evening when the Powers Commission Report became available, it was quite clear that that report provided a devastating look into that corporation.
SNOW: That report, released Saturday, commissioned by Enron's board and authored by William Powers.
WILLIAM POWERS, SPECIAL INVESTIGATIVE COMMITTEE: There was a fundamental default in the leadership of the management, and leadership and management begin at the top, with the Chairman and CEO Ken Lay.
SNOW: Powers did appear before Congress, describing Enron's outside partnerships set up, he said, as hedges, outside parties meant to cover potential losses. But unlike the way it's usually done, Enron had a stake in those partnerships, and was essentially hedging with itself.
POWERS: Within Enron, the checks and balances simply broke down.
SNOW: Powers was measured and cautious in his answers, but lawmakers wanted more, asking whether Ken Lay should have written a memo telling employees that everything would be all right.
UNIDENTIFIED MALE: Do you believe in August 21 of 2000, 2001 excuse me, that the prospects for the company had never been better, based upon your - in retrospect right now?
POWERS: No, I think they had been better. I don't think that was accurate.
UNIDENTIFIED MALE: All right.
(END VIDEOTAPE)
SNOW: And, Wolf, late word tonight that House investigators looking to reach out to Ken Lay and see how they might go about subpoenaing him, which of course is the next step if they want for force Ken Lay to testify. We're told they reached out to Ken Lay's lawyers and his lawyers came back with the response, they're not exactly sure where Ken Lay is tonight. Wolf.
BLITZER: Kate, that sounds sort of ominous. It may be nothing, but is there anything we can make of that, his lawyers not knowing where he is tonight?
SNOW: No, we can't because we don't know if they simply, you know, haven't been in touch with him today or if this is something more ominous. I can tell you that he has the option of, if he's subpoenaed, of coming here and taking the Fifth. You remember David Duncan of Andersen did that a couple of weeks back. So it's possible he could come and take the Fifth. There are a lot of scenarios that could play out from here on out, Wolf. BLITZER: And, is there a sense that they would make him do that publicly, take the Fifth? It's pretty humiliating for anybody to have to go before a Congressional committee and take the Fifth and refuse to answer questions.
SNOW: Yes. My sense is they would, and the reason is because today you saw some of those Senators speaking in the piece there. The Senators were not happy with him not showing up here today. They were incensed that he had said through his lawyers for a month that he would be here and then he doesn't show up. So my sense is that they would force him now to come here, even if it's to say "I plead the Fifth and I'm not going to answer any questions." Wolf.
BLITZER: Kate Snow on Capitol Hill, thanks very much for that report. And one quick note before we move on, early tonight Ken Lay resigned from Enron's Board of Directors, cutting his last formal connection to the company. Now let's get back to Congress and why Ken Lay chose to take the public relations stint instead of testifying. It may simply come down to this, very careful lawyering. More on that angle now from CNN's Allan Dodds Frank.
(BEGIN VIDEOTAPE)
ALLAN DODDS FRANK, CNN CORRESPONDENT (voice over): Before he cancelled, Enron's former CEO Kenneth Lay claimed he had been looking forward to a meaningful reasoned question and answer session with Congress, and Senators were still acting disappointed that Lay would not talk.
SENATOR BYRON DORGAN (F) NORTH DAKOTA: He should never have expected it would ever be a walk in the park to appear before a Congressional committee.
FRANK: But some legal experts say Lay and Earl Silbert his high- powered defense lawyer, simply outmaneuvered Congress, while rushing the special investigating committee set up by Enron's board.
That committee, led by University of Texas Law Professor William Powers, scrambled to produce a 212-page report in anticipation of Lay's Congressional appearance.
PROFESSOR WILLIAM POWERS, ENRON'S SPECIAL COMMITTEE CHAIRMAN: There was a fundamental default in the leadership of the management, and leadership and management begin at the top with the Chairman and CEO Ken Lay.
FRANK: One securities law expert said Lay's defense lawyer smoked out the company's evidence without jeopardizing Lay.
MARVIN PICKHOTZ, FORMER ASSISTANT DIRECTOR SEC ENFORCEMENT: What he's going to have is a roadmap of which way they're coming and what their theories are going to be and he will have time to prepare without having stated his position before he may have to state it in a courtroom.
FRANK: The report, made public over the weekend, produced a Texas-sized tale of greed and hubris. It outlined how several Enron employees made tens of millions of dollars in off-the-book partnerships at the corporation's expense.
The report said: "Individually and collectively, Enron's management failed to carry out its substantive responsibility for ensuring that the transactions were fair to Enron, which in many cases they were not."
One official who may prosecute was not surprised by Lay's no-show tactic.
RICHARD BLUMENTHAL, ATTORNEY GENERAL, CONNECTICUT: He could have sued his lawyers for malpractice if they had permitted him to answer questions that clearly could be used against him in a criminal prosecution, and let's make no mistake about it, there will be criminal prosecutions in the Enron/Arthur Andersen matter.
(END VIDEOTAPE)
FRANK (on camera): Congress is still being told that Jeffrey Skilling, the man who succeeded Lay as CEO, will testify later this week. But many legal experts believe that in the end, almost every Enron executive will have to be subpoenaed, and even then, will take the Fifth Amendment before Congress. Wolf.
BLITZER: Allan, why was there anyone who really believed that Ken Lay would testify openly this morning on the Hill without being granted immunity in exchange for that testimony?
FRANK: I'm not convinced that anybody really did, but if they did, it may have been this notion that people in Texas like to take big risks and that Ken Lay was going to be a big guy and take the chance that he could present his case on Capitol Hill. But no lawyer I talked to thought it made any sense at all, as Alan Dershowitz told you earlier.
BLITZER: Yes, I spoke on Friday though with Senator Byron Dorgan, who was chairing that committee hearing, and he said he was pretty convinced that Ken Lay was going to show up. There had been extensive discussions with the attorney's representing Ken Lay and he fully expected that at 9:30 this morning he would be there, but clearly he was not. Allan Dodds Frank, thanks for that report.
And there's something of a feeding frenzy going on here on Capitol Hill in Washington. More than half a dozen Senate and House committees are set to hold hearings on Enron.
Our first guest tonight sits on one of them and today introduced legislation aimed at barring accounting firms from also consulting the companies they audit. Congressman Gary Ackerman, he's a Democrat of New York. He joins me here live tonight. Congressman, thanks for joining us.
REPRESENTATIVE GARY ACKERMAN (D) NEW YORK: Thank you.
BLITZER: Did you ever expect that Ken Lay would testify before any Congressional committee without receiving immunity?
ACKERMAN: Well, I was surprised, but that's what he and his lawyers indicated. They said they didn't have to be subpoenaed. They wanted to come down and cooperate, and they'd come down and talk to the committees. It was kind of a bombshell last night, unless he was just playing rope-a-dope just to, you know, put this thing off. Now he's going to have to be subpoenaed.
BLITZER: So he's subpoenaed. Then what happens? He'll show up. He'll take the Fifth. He won't answer any questions. What do you do then?
ACKERMAN: Well, he's not - I would doubt very much that he or anybody else at a high level is going to be granted immunity to testify before Congress, and you know, one might want to guess that some people a little bit lower down in the feeding chain might be granted immunity to blow the whistle and present the full story.
BLITZER: What you're trying to do in terms of the legislation you want enacted is more aimed at Arthur Andersen, the accounting firm, rather than Enron per se.
ACKERMAN: Yes, it's generic so it's intended for all, you know, accounting firms and it basically prevents a firm that's doing the audit and certifying that the books are kosher from doing the consulting with the firm and cooking the books with them through their consulting arm.
BLITZER: So what do you think was going on in terms of the two arms of Arthur Andersen right now?
ACKERMAN: Well, you know, it would appear that the arm of Arthur Andersen that was doing the consulting and helping them to cook up all of these schemes and partnerships was telling them that it was very, very legal to do so and so they were like the inside auditors and they were also the outside auditors, and the inside auditors knew that they were getting $1 million a week and just didn't want to blow the whistle on themselves.
It's having the wolf, if you will, guard the chicken coop and you wake up in the morning and you see a bunch of feathers in there and you try to figure out what happened.
BLITZER: Is this an isolated incident in the world of accounting, auditing, consulting? Or, do you think it's more wide range?
ACKERMAN: This is the $64 trillion question right now, and the whole economy is, you know, hinges on the answer to that, whether there's transparency in the business of finance in America or not, because these accounting firms, you know, what's to prevent them from doing this so many times? I mean this raises thievery to a world- class level, and any guy from Brooklyn, you know, knows a (inaudible) scheme or three-card Monte game on the corner when you see one, and that's what was going on here.
BLITZER: Well, you know, I'm from Buffalo. I'm not from Brooklyn, so.
ACKERMAN: I'm from Brooklyn.
BLITZER: So because you saw the stock market today. It took a big hit just on the assumption that maybe some of these weird accounting schemes are more prevalent than we might have thought.
ACKERMAN: Well, if you have one of America's corporate giants that's being audited and certified that the audit is right by a prestigious, one of the largest in the world, you know, auditing firm, people say gee, you know, where else is my money that it might be unsafe? Is this going on? I think people are starting to get a little bit nervous, and we got to get some reassurances to the public, but first we have to find out if those reassurances are justified.
BLITZER: But just to be on the fair side to Arthur Andersen, there's no suggestion that what they were doing in having two arms, an auditing arm and a consulting arm, that that was illegal or anything.
ACKERMAN: Well, if it was, we wouldn't need the law if it was already in place. But certainly -
BLITZER: But do you suspect they were engaged in criminal wrongdoing?
ACKERMAN: I think there are enough smart people here that should have figured out what was going on, and shame on them if they didn't. When you have the auditing firm and you have the executives of a major corporation and you have all of the oversight agencies involved, and nobody's blowing the whistle here, one of the other things it points to is the other issue and that is campaign finance reform, because there's a lot of money being pumped out there, and there's a lot of people that it will take the equivalent of the Fifth Amendment even if they're not called and we're seeing that now.
BLITZER: From both parties, just to be on the fair side.
ACKERMAN: From both parties, absolutely.
BLITZER: But the CEO of Arthur Andersen, he's been very open. He's been very much out there. He's not taking the Fifth Amendment or anything like that.
ACKERMAN: Well, he may be one of the people who are out of the loop. You know, everybody wasn't involved in this thing, but there is certainly enough people who would have had to have known, who are involved in the partnerships, who benefited by all this money. We're talking about millions and millions of dollars going into people's pockets.
You know, the sad thing and we're going to hear from that at the hearings as well, the average people who put in a whole life's worth of work, working for the company, thinking that their 401 (k) plan was going to fulfill their dreams upon retirement and people made major investments, to see all of that just go up in smoke and reappearing in the pockets of the people who were telling them everything was good while enriching themselves by unloading the stock.
BLITZER: All right. Democratic Congressman Gary Ackerman of Brooklyn, thanks for joining us. And, in just a moment, more room at the GITMO Inn. Also tonight, tracking down what could be thousands of al Qaeda agents and trying to cut through the confusion surrounding the whereabouts of Danny Pearl. NEWSNIGHT from Washington on CNN.
(COMMERCIAL BREAK)
BLITZER: Still no sign of Wall Street Journal reporter Danny Pearl. No word if he's dead or alive. In fact, no word at all since last Wednesday.
Today Pearl's editor, Paul Steiger, issued an appeal to the people who claim to be holding him:
"I have not heard from you for several days" he writes "and want to begin a dialogue that will address your concerns and bring about Danny's safe release." Steiger goes on: "Since your last e-mail, I have received numerous e-mails from people they are holding Danny. Because of these claims, it has become difficult for me know that I am communicating with the people holding Danny. These individuals have caused a great deal of confusion."
To clear things up, Paul Steiger offered to open up another line of communication with the kidnappers. Danny Pearl has been missing since January 23rd. Pakistani authorities say they've never heard of the group claiming to hold him, and the search goes on.
Half a world away, the detainees at Guantanamo Bay are getting ready for company. Flights are about to begin again into the newly expanded Camp X-Ray. So it's back to CNN's Bob Franken. He's just outside the base. He joins us now live. Bob.
FRANKEN: Well, Wolf, for a while as we mentioned earlier, they ran out of room. There were 158 detainees here, 160 of those now famous cells, infamous I suppose, the ones that are really outdoor cells exposed to the elements, surrounded by chain link fence. They've been widely criticized.
Criticized or not, they have now built 162 more of them. They're now at capacity 320 cells at Camp X-Ray and now that they have completed that, they're waiting to try and fill those cells.
We're told in the next few days, the flights from Kandahar will resume, more detainees to be put into those cells. They can even double up if necessary, waiting for Congress to make the necessary appropriation, at which time they're going to build a modular prison.
It's going to be a pre-fab prison, air-conditioned. It's going to be quite the maximum security facility. Of course, the question then becomes, what do they do with the detainees, and there's really no answer to that.
There, of course, is the constant question whether there will be military tribunals here at Guantanamo Bay, which was called by the Secretary of Defense, the least worst place to at least hold the detainees. But there are some severe limitations on facilities here, particularly if they allow press coverage of these military tribunals.
Of course, we have not gotten the definitive word that there will be tribunals, but at the moment, the issue is having the detainees, keeping them in their cells, making sure they don't escape, which seems to be the paramount issue here, and at the same time fending off world criticism that they're not being treated appropriately. Wolf.
BLITZER: Is it still the procedure to put one prisoner, one detainee per cell or are they doubling up?
FRANKEN: They're not doubling up yet, and the officials here, particularly those with the security expertise, don't particularly want to, because one thing it would do is probably make the detainees angrier than they already are, and of course, they don't really have quite a disposition, a very friendly disposition to the United States.
BLITZER: We're told, Bob, that they can get outside of those cells and have some exercise. How do they do that and guarantee the security of the U.S. military personnel who are watching them?
FRANKEN: Well there's a rule of thumb, two security people at least always accompany an individual detainee. There are very strict procedures. These are highly trained security people. They are constantly supported by people on the outside with very heavy weapons, dogs, et cetera, et cetera.
So they do not treat them very gently at all. There's always an effort to make sure the detainees realize that it is hopeless to try anything. That is always what is going on. In effect, and I hate to use this analogy, it's almost a case of the security people in proving that they're the Alpha and the detainees are going to have to do what they're told.
BLITZER: And finally, Bob, is there any bottom line number, the maximum capacity that they're thinking of in terms of the number of detainees that could show up at Guantanamo Bay?
FRANKEN: Well, that's been a moving number. The potential maximum at Camp X-Ray, which as you know is a temporary facility, would be 640, if they doubled up on each of the cells.
At the moment, the last number we heard from people here is that when they construct a more permanent building, they're talking about 1,0000, but for a while they were talking 2,000. Now they're talking 1,000. The first thing they're going to have to decide is what they're going to do with whatever the number is, once that number gets here.
BLITZER: And Bob Franken who's at Guantanamo Bay, thank you very much. Here's a sobering notion. To hold all the al Qaeda fighters, President Bush says they're still out there. It would take about, get this, 500 Camp X-Ray. That's if they're found. Easier said than done. Here's CNN's Sheila Macvicar.
(BEGIN VIDEOTAPE)
SHIELA MACVICAR, CNN CORRESPONDENT (voice over): The mountain fortresses of Tora Bora have proved empty. The U.S. administration has now had to acknowledge that the leadership of al Qaeda has escaped American surveillance, and slipped away.
ADBUL BARI AL ATWAN, EDITOR AL QUDS: Until now, we don't know the whereabouts of Osama bin Laden. We don't know what happened to Ayman al-Zawahiri, the military brain behind al Qaeda. We don't know what happened to even the families of Osama bin Laden and others. Until now, nobody of those people were caught.
MACVICAR: After weeks of bombardment and targeted air strikes, only one senior al Qaeda leader is confirmed dead, Osama bin Laden's military chief, Mohammed Atef, killed near Kabul in November.
At Guantanamo Bay, only one senior al Qaeda figure is in custody, the man who ran some of the training camps in Afghanistan. Intelligence sources tell CNN that at least some of al Qaeda's leaders are confirmed to have crossed over the borders of Afghanistan, some into Pakistan, a few north into Tajikistan towards Chechnya, and still others westwards to Iran, seeking sanctuary in geographic blind spots.
No place is more sensitive than Iran, and since mid-January, the U.S. administration has publicly accused Tehran of harboring al Qaeda leaders. CNN has learned there is conflicting intelligence about the whereabouts of al Qaeda's operations chief, Abu Zabeda (ph). Terrorism experts believe he is now the military commander.
Some intelligence reports put Abu Zabeda and his deputy in Tehran; however, U.S. officials say Abu Zabeda is not in Iran, but in a different country, which they declined to name.
MACVICAR (on camera): Iran is known to have arrested and to be holding in custody about a dozen al Qaeda members wanted for questioning by the United States. Iran has refused to hand them over, saying they will instead be returned to their home countries, Saudi Arabia, Kuwait, and Yemen.
MACVICAR (voice over): When U.S. relations with Iran seemed to have been thrust back into deep freeze, analysts say President Bush may have closed the door to further cooperation with those factions in Iran which had been helpful to the U.S., creating another geographic blind spot. Sheila Macvicar, CNN, London.
(END VIDEOTAPE)
BLITZER: And coming up next on NEWSNIGHT, how much is one life, one death worth? A question that's even hard to pose and even harder to answer. The families speak out.
(COMMERCIAL BREAK)
BLITZER: Welcome back. There was probably no way this could be done without some people getting upset. We're talking about the compensation for the families who lost someone on September 11th, and it comes down to one question. How do you value a human life?
There was a town hall meeting tonight in Staten Island for the families to talk about it, to do some venting, talk about the compensation issue in general. It's an enormously complex and very emotional matter. Hillary Lane has been covering the story for us. She joins us now, live from Staten Island. Hillary, give us the flavor. What happened there tonight?
HILLARY LANE, CNN CORRESPONDENT: Well, this room for more than two hours tonight, was filled with families who have lost fathers and sons, mothers and daughters, wives and husbands. Now if you add to that picture, the man who was supposed to put a value on those lives, you are bound to have confrontation.
This is one of ten or so forums that Ken Feinberg, the Special Master appointed to oversee this Victims Compensation Fund, has held around the area, and it was very angry. It was very emotional, and it was very straightforward.
Many of the questions that came from the members of the audience were very personal. One woman, who received quite a bit of support from the other families, is a widow who is pregnant and already the mother of two, and she was asking why is she only receiving $137,800 from this fund, when the formula said she would have received $1.5 million. But then they take away life insurance and 401 (k) and Social Security benefits, and other deductions. Her question, why shouldn't she sue?
Now, Ken Feinberg, the special master, said he's working to reduce the number of deductions, possibly leave the families with more money in their pockets. But that didn't leave many of these families feeling any less angry.
(BEGIN VIDEO CLIPS)
UNIDENTIFIED MAN: I lost a wife, I lost a niece. I'm of Italian descent. I would like to make a suggestion to you. The word is "sotto voce." It's to speak softly. You have an arrogance about you that is so painful, you can't possibly believe.
UNIDENTIFIED WOMAN: I've also heard you say that you couldn't put yourselves in our shoes. I think if you could feel our pain for one hour your tone and your mannerisms would be so drastically different than what they are.
(END VIDEO CLIPS)
LANE: So certainly a very difficult job, and a lot of emotions at play here.
All said, when Mr. Feinberg explained the formula, it didn't seem as complex as many had believed. But still, many of these families walked away not feeling much better.
Back to you. BLITZER: Hillary, was there any, any of those families who seemed satisfied with the money that this victims' compensation fund would provide them, ready to accept it and forego any lawsuits, for example, against the airlines?
LANE: Well, I have not spoken personally to any, although Mr. Feinberg did say that a number of families had signed on. I believe the number he gave was 500, and that's up quite a bit from a couple of weeks ago.
So there are some people saying they know this is the best they're going to get. And Mr. Feinberg himself continued to say this is the only game in town, suing the airlines is a dead end.
BLITZER: Hillary Lane in Staten Island, thanks so much for that report.
And joining me now to talk about this entire debate over compensation is Ken Feinberg. He's in charge of the Federal Victims Compensation Fund. And Congressman Vito Fossella, he sponsored tonight's meeting in his home district of Staten Island and Brooklyn.
And let me get right to you, Ken Feinberg. What do you say about those people who accused you of being arrogant, they didn't like your tone in talking to them tonight?
KENNETH FEINBERG, SPECIAL MASTER, SEPTEMBER 11TH VICTIM COMPENSATION FUND: Well, I understand, I understand. I've been talking the last few weeks with families all up and down the East Coast dealing with this problem, and it's a very emotional problem. I don't take it personally. I understand where they're coming from. They're concerned, they're trying to value what they've lost. And hopefully together we'll wade through this and come up with a very decent and just plan.
BLITZER: Congressman Fossella, from -- based on what you heard tonight, from what the families said, what Ken Feinberg said, is there some common ground there, a way to resolve this issue that'll satisfy at least most of the families of the victims?
REP. VITO FOSSELLA (R), NEW YORK: We're going to try. I think right now, time is of the essence on some of these regulations that are currently being worked on. And I think where the discretion lies, or the flexibility lies, is perhaps modifying current noneconomic laws for pain and suffering and others.
Basically, this statuted fund was passed by Congress with the intent that provide an alternative, an expeditious alternative to litigation, and to provide families with some degree of certainty. A lot of families are questioning that right now, so I think if we were to carry out the intent of Congress, those regulations can be changed, again, noneconomic loss or other areas.
And we just encourage, as Mr. Feinberg heard this evening, we lost a lot of people on Staten Island, more so than we really care to talk about, lot of families are suffering still. But we're hopeful that the new permanent regulations address many of the concerns raised here tonight.
BLITZER: Could you clarify, Mr. Feinberg, one thing for us? What do you deduct from the bottom-line figure that the federal government will provide these families, that there's going to get a baseline, but do you deduct more than just the life insurance policies that they perhaps had? Do you also go on to deduct their -- the pensions, the 401(K)s, other benefits?
FEINBERG: Congress was pretty clear on this. Congress said you deduct not only life insurance, but you deduct pensions, you deduct Social Security disability, you can -- you deduct so -- other death benefit programs.
But we are now taking a look at the extent to which some of those offsets should not be deducted because of, for example, the victim himself or herself contributed.
But I want to say one thing about these deductions. You know, what Congress was really trying to do here was provide a safety net, to make sure that at the end of the day, everybody, every surviving family would end up with a certain amount, whether that money came from the federal taxpayer, whether it came from the victim's own life insurance, whether it came from the victim's own pension plan.
The real concern here of Congress, apparently, was to make sure that every family was provided for, whether through federal subsidy or their own life insurance or other investments.
BLITZER: Congressman Fossella, as you know, the legislation sailed through Congress. President Bush signed, signed it into law immediately. When, when the, when the -- when your audience out there, the people at Staten Island at your town meeting tonight, when they heard the explanations from Ken Feinberg that in effect saying he has to do what the law of the land is, what Congress mandated, the president signed it into law, were they satisfied with his explanation?
FOSSELLA: Well, I think Mr. Feinberg is (UNINTELLIGIBLE) -- is right in part in that some things are pretty straightforward and clear under the statute. But I think there are also areas, when it comes to the regulations, where there is some discretion.
And again, getting back to a lot of the suggestions that were made here this evening by some of the families affected, we're hopeful that he'll take those into account and modify at least some of the interim regulations.
I think, getting back to the main thrust of what the fund is all about, we really capped -- Congress capped the liability to some of the airlines, and as a result wanted to create this fund as an alternative for litigation, because basically they don't -- they really can't pursue this in a court of law.
So I think at the end of the day, what we try to achieve is to make these families as whole as possible under the fund, which is what Congress and the president wanted. And right now, as it's written, it's really not achieving that. But we're just hopeful that on a day- to-day basis, those regulations are changed to address the concerns.
BLITZER: Ken Feinberg, as you know, the -- one of the main criticism is that this legislation was simply designed to protect, to bail out the airline industry by preventing these families from suing them. What do you say to that argument?
FEINBERG: Well, there's two answers to that. First of all, Congress said, from what I read, that if they -- Congress hadn't bailed out the airlines, the airlines would have gone bankrupt anyway, and there would be no real claim that you could assert against the airlines in the bankruptcy court. You'd get 1 or 2 cents on the dollar. That's one answer.
The other answer, I must say, is, the idea of litigating here for seven or eight or nine years, hopefully getting a verdict, hopefully having it sustained on appeal, then paying your lawyer 40 percent of a fee, and then netting something at the end of the day while dragging through constantly remembering this horror of September 11, this is an alternative program, an alternative. Within 120 days of filing your claim, you will be paid a check, tax-free, by the taxpayer, by the Congress of the United States.
It is different from the tort system and should be evaluated as an alternative to the tort system.
BLITZER: Ken Feinberg and Vito Fossella, thanks to both of you for helping us understand a little bit more, very painful, wrenching issue, one that I'm sure is going to be out there for some time to come, and I know that Mr. Feinberg's planning on releasing his guidelines, his final regulations, in the next few weeks. We'll be watching that as well.
Thanks to both of you.
And just ahead here on NEWSNIGHT, the war on terror meets the war on drugs.
(COMMERCIAL BREAK)
JAN HOPKINS, CNN FINANCIAL NEWS: I'm Jan Hopkins with this MONEYLINE update. A crisis of confidence on Wall Street sparking a severe sell-off, $295 billion of market value erased. Tyco and Global Crossing fueling investor concerns about corporate accounting. The Dow plunging 220 points, the Nasdaq tumbling 55.
Watch MONEYLINE weeknights at 7:00 p.m Eastern on CNN.
(COMMERCIAL BREAK)
BLITZER: Welcome back.
Plenty of surprises in last night's Super Bowl, and we're not even talking about the game. The White House debuted two commercials in a new antidrug campaign. The message is intriguing. When you do drugs, you're supporting terrorism. Joining us now to talk about it is John Walters. He's head of the White House Office of the National Drug Control Policy. Mr. Walters, thanks for joining us.
And I want to play for our viewers one of those commercials that you had last night. Let's watch it.
(BEGIN VIDEO CLIP, ANTIDRUG PUBLIC SERVICE ANNOUNCEMENT)
UNIDENTIFIED ACTOR: (UNINTELLIGIBLE)?
UNIDENTIFIED ACTOR: (UNINTELLIGIBLE).
(END VIDEO CLIP)
BLITZER: Well, that's a pretty powerful message. But what -- tell us the theory behind it.
JOHN WALTERS, DRUG CZAR: Well, we did more extensive market research on these ads than any we had before. There was initial indication that these were a powerful message for young people. We tested these more extensively than the 200 other ads that have gone before this in the ad campaign that's funded by the federal government.
And we ended up finding that they not only were important for young people, saying it affected their attitudes toward using drugs, but parents said that made this, this topic made it easier for them to talk to young people. And we know if parents get involved, that's our maximum effect of message enforced by parents.
And the Super Bowl then gave us an opportunity to reach the widest possible audience across all socioeconomic lines and with maximum participation of parents in the room when they saw it together.
BLITZER: Who came up with the concept, though, to link September 11, in effect, terrorism, to the war on drugs?
WALTERS: There were some creative people that managed this program in my office that then worked with advertising campaign for various kinds of creative concepts. This was also heavily vetted inside the federal government and outside for the factual content. Our goal is to provide factual information. There's a Web site associated with this, lessons that are going into classrooms. Over 8 million kids will be touched by those. There are print ads and other material.
So our goal is to provide this information so Americans young and old make better choices.
BLITZER: These public service announcements, they're very expensive not only to create but to purchase that time during a Super Bowl, that's not cheapest, as we all know. How do you know that they really work, that they -- that the kids out there, the audience, the target audience, get the point? WALTERS: Well, we did, as I said, we've tested these more extensively in focus groups, in around the country, than any other ad. We know these works in changing attitudes. What we then, we then know is that the attitudinal change that has in the past affected behavior substantially. We'll know in the next, in the next six months to a year how much they affect behavior.
It's a small part of what we do, it's $180 million program, which is expensive, but it's a small part of what the federal government and others spend on prevention. And it'll be buttressed by what we do in treatment as well as what we do on the enforcement side.
So compared to the $66 billion Americans spend on drugs and $166 billion it estimated the drug problem costs us, this is a very well- leveraged operation.
BLITZER: So the few million you spent last night was worth it.
WALTERS: We think so.
BLITZER: And when you look at immediate, the immediate period, (UNINTELLIGIBLE) you going to be during a lot more of these specific commercials?
WALTERS: We're doing -- this sequence will run for the next four to six weeks with one exception during the Olympics. We have some special ads that are geared to the Olympics using American Olympic competitors. But with that exception, this will be the part of the campaign people see in print and on the media for the next several weeks.
BLITZER: All right. John Walters, good, good work, good luck...
WALTERS: Thank you.
BLITZER: ... appreciate it.
WALTERS: Thank you.
BLITZER: Thank you very much. Hope you succeed.
WALTERS: Thanks, so do we.
BLITZER: And next on NEWSNIGHT, what you won't find in President Bush's budget, even though we spend tens of billions of dollars every year on it. Stay with us.
(COMMERCIAL BREAK)
BLITZER: The White House released its budget blueprint today, all four volumes of it, calling for $2.1 trillion in spending for the next fiscal year.
The budget calls for an increase of $48 billion in defense spending, the biggest jump in decades. Thirty-eight billion dollars would go to homeland defense, almost double what it was -- what was spent in the previous year. Spending on domestic programs would grow very little.
All told, the White House is seeing a deficit of more than $100 billion.
Budget is always required reading here in Washington as the parties start drawing up their battle lines. But there's one big part of the budget that you can't read about, it's off-limits, and some think it's time, it's time for a change.
Here's CNN's national security correspondent, David Ensor.
(BEGIN VIDEOTAPE)
DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): They make up a generous ladling of the federal alphabet soup in Washington, the CIA, spies and analysts, the NSA, the eavesdroppers, the NRO, the spy satellite jocks, and there are more.
How many people work for U.S. intelligence? Can't say, it's classified. How much more money is there in the new Bush budget for intelligence post-9/11? Sorry, that's classified too.
ROBERT STEELE, AUTHOR, "ON INTELLIGENCE: SPIES AND SECRECY IN AN OPEN WORLD": Intelligence is now too important to be relegated to a secret back room in the federal bureaucracy.
ENSOR: Actually, the intelligence budget was made public for two years, more than $26 billion in 1997 and '98. But since then, Central Intelligence director George Tenant has put the lid back on. The government still won't even say what the intelligence budget was back in 1947 under President Truman.
HENRY KELLY, PRESIDENT, FEDERATION OF AMERICAN SCIENTISTS: One of the things we're hoping to illustrate from this is how absurd the classification system is. You know, there are things which have to be legitimately protected, but surely the 1947 budget isn't one of them.
ENSOR: What is not a secret is that the new Bush budget includes billions more for intelligence, more money, officials say, to hire spies, analysts, eavesdroppers, to train them and teach them languages, more for the unmanned by armed Predator drones the CIA has found so useful in Afghanistan, more money for satellites and sensors to watch Iran and Iraq's missile and mass destruction weapons programs, and much more, sources say, for CIA covert action teams like the one agency officer Mike Spann was part of when he died in Mazar-e Sharif.
Are the right choices being made? You have to trust us, say officials. Not everyone does.
STEELE: The tradeoffs are not being made, and they're not being made in part because the secrecy prevents the people from seeing that their taxpayer dollars are not being wisely spent.
(END VIDEOTAPE) ENSOR: That the U.S. needs more and better intelligence is debated by almost no one since September 11. Whether its general priorities should be openly debated or secretly decided, that is a matter of debate. And whether U.S. intelligence is growing in capability as well as size, well, we Americans without security clearances can only hope and trust that is so, Wolf.
BLITZER: OK, David Ensor, thanks for that good report.
And next here on NEWSNIGHT, part Shakespeare, part Zulu. That's Segment Seven. Stay with us.
(COMMERCIAL BREAK)
BLITZER: Finally from us tonight, all the world's a stage. We think about that line from "As You Like It" when we think about this story about a theater grip staging "Julius Caesar" Zulu-style. The story comes to us from Charlayne Hunter-Gault in Johannesberg.
(BEGIN VIDEOTAPE)
CHARLAYNE HUNTER-GAULT, CNN CORRESPONDENT (voice-over): Recognize this character? Of course you don't. But here's another clue. OK, no more clues. Try Shakespeare's Julius Caesar -- only transported to Africa, he becomes Sezar, like no other Caesar, and being praised in death by Marc Antony like no other.
YAEL FARBER, DIRECTOR, "SEZAR": It was an exceptionally rich process. The iambic pentameter and Elizabethan verse is so deep and rich in its poetry when it's actually released by an actor and company who understand what they're saying.
HUNTER-GAULT: Not that they always did.
UNIDENTIFIED WOMAN: I did Shakespeare at school. That's 100-old years ago. And...
HUNTER-GAULT: I can see that.
UNIDENTIFIED WOMAN: And I didn't understand anything that I was reading. Constantly you have to go to the dictionary, you lose concentration. Now, I do it in my own language sometimes, and it's so beautiful, the poetry in the language, the flow of the language. Now I know that Shakespeare write in 10 syllables.
You have, ungentle Brutus, stole from my bed. (speaks in African language)
HUNTER-GAULT: And why did they change the name to Sezar?
FARBER: Because most importantly, we changed the title so that we could earn it. And that's really what it's about, it's about, say, yes, this is a European or Western story, but we're going to tell it our way. And with an African sensibility.
Not just managing Shakespeare, but actually grabbing it by the throat, and wringing every drop out of it and carrying it with such conviction.
HUNTER-GAULT (on camera): All the actors who are on this stage are big-time television stars with big-time followings, and they're hoping that they will be able to lure some of them back to inner-city theaters like this one that were closed at the end of apartheid and open doors to young people who may be struggling as they once did to understand Shakespeare.
Charlayne Hunter-Gault at the Market Theater, Johannesberg, South Africa.
(END VIDEOTAPE)
BLITZER: Nice theater. I've been there myself in Johannesberg. Thank you very much, Charlayne.
And that's all the time we have on NEWSNIGHT tonight. This note, Aaron will be back tomorrow.
Thanks very much for watching. I'll see you twice tomorrow at both 5:00 and 7:00 p.m. Eastern. On one of those programs, we'll speak to an American journalist who himself was once held hostage, kidnapped, many, many years ago. We'll talk to him about the fate of Danny Pearl.
Until then, I'm Wolf Blitzer in Washington.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
