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iPhone to Announce Plans for Faulty Phones; Pressure Tests Continue on BP Well; Goldman Sachs Making Reparations

Aired July 16, 2010 - 13:00   ET

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

T.J. HOLMES, CNN ANCHOR: Tony, good to see you as always kind sir.

Hello to you all. I am the aforementioned T.J. Holmes, sitting in today for Ali Velshi. Going to be with you for the next couple of hours. Got a lot of stuff going on, on the rundown the next couple of hours, including something we're expecting at any moment, a big announcement from Apple at their headquarters. This is taking place right now. They're going to explain how they plan to fix that brand- new, hot-selling and faulty iPhone.

Wall Street is keeping a close eye on this as well. We'll take you there live.

Also, New Orleans, four policemen awaiting trial in a post- Katrina murder case. They're facing a federal judge today, their freedom on the line.

Also a big idea. A new idea to tell you about today. It's kind of taking off literally. An amazing in-flight game lets your brain waves make all the moves? You've got to see this to believe this.

But again, we are keeping a close eye right now on what's happening in Cupertino, California. Press conference taking place, expected to start right now. Now, oftentimes we love to show you live press conferences, live events that take place. We cannot show you this one, because Apple says we could not.

But what's happening, they're expected to tell people, some reporters they've gathered in the room, exactly what they plan to do to fix the problem with their new iPhone, this iPhone 4, as you know, that's out right now. This is a live picture of their headquarters out there in Cupertino, California. This is in the South Bay in the Bay Area there.

We're also keeping an eye on stocks, because this company, Apple, does have the power to move markets. Now, they have had this iPhone 4 out for not long, about a month now. Well, you'd think as many as they've sold, experts say up to 8 million of these new iPhones they've sold. You would think that would mean the company stock would go up.

Well, the opposite has happened. It has gone down about 7 to 8 percent since the launch of the iPhone 4. Well, why is that? Because there is a problem. A faulty antenna, which Apple has now finally admitted, there is an issue: you hold it a certain way, and you don't get good reception.

So how are they going to fix this? Some people say a recall is out of the question; it would cost the company too much money. So exactly what are they going to do? A lot of people say there's a simple fix. All you have to do is put this little bumper over the top; it solves the problem. We don't know exactly what Apple's going to do, but we're expecting to hear at any moment. When we get that result, we'll let you know.

But again, we'd like to show it to you live from inside, but Apple has some restrictions; said we can't do that.

Well, a lot of consumers out there have an idea about what Apple should do. Take a listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I think that they should do whatever they can do to make people happy.

UNIDENTIFIED MALE: What do you think that should be?

UNIDENTIFIED FEMALE: Whatever they can do, whether it's the bumper, something that, you know, that's going to help -- that people are not going to get disconnected or maybe -- I mean, I don't think people are going to want a recall, because people are not -- not going to want to drop off their phones for a while for any kind of repair. But I think that they should do whatever they can to help to make people happy. It's -- you know, it's Apple.

(END VIDEO CLIP)

HOLMES: And again, that live picture you're seeing there is from outside the Apple headquarters in Cupertino, California. We can't show you what's happening inside live because of the restriction from Apple. But still, they are right now supposed to be giving people, the reporters gathered inside, what their fix is going to be.

Now even if you do not own an iPhone, again this is important, because this company literally has the power to move markets. We have seen this happen before. So depending on what the news is, and if the street likes it, it can have an effect on this Friday on the stock market. We will keep an eye on all of that.

Also when the announcement takes place, we expect to get it here in the next 15, 20 minutes, some kind of news out of there, we'll bring it right to you. And also, we'll be checking in with one of our tech experts, Katie Linendoll. She is standing by to tell us what all of this is going to mean. There she is, getting her stuff, getting her stuff together. She's keeping an eye on everything happening. Katie, we will talk to you here in just a moment.

Meanwhile, want to move forward here to another story still keeping an eye on. And that is day 88 of this Gulf oil disaster. Can we show that live picture? Do we have that thing teed up? These live pictures you have been seeing for past couple of days a lot different from what had used -- been used to seeing.

What's wrong with this picture? Actually, it's what's right with this picture. And that is the fact that there is no oil coming out of that well. The first time in months we have seen this happen.

Now, the integrity test, please know just because there's no oil coming out doesn't mean we are out of the woodworks with this well, at least. These integrity tests continue right now; going to go on at least for the next 24 hours, we're told. The well is holding so far. That is great, great news, yes. But you should know, and the president wants you to know, it is too early to start celebrating.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The key here right now is for us to make decisions based on science, based on what's best for the people of the Gulf, not based on PR, not based on politics.

And that's part of the reason why I wanted to speak this morning, because I know that there were a lot of reports coming out in the media that seemed to indicate, well, maybe this thing is done. We won't be done until we actually know that we've killed the well and that we have a permanent solution in place. We're moving in that direction, but I don't want us to get too far ahead of ourselves.

(END VIDEO CLIP)

HOLMES: All right. As the president said, don't want to get too far ahead of ourselves. But still a lot of people optimistic right now. Still going to be another 24 hours or so of this integrity testing.

I want to bring in our David Mattingly, keeping an eye on this story for us from New Orleans.

David, hello to you once again. And again, let's reiterate here, we're not out of the woods yet but it says a lot and means a lot that here we are about 24 hours into the integrity testing, not a major problem yet.

DAVID MATTINGLY, CNN CORRESPONDENT: That's right, T.J. And it was very good of you to put it in the way that you did, what's wrong with this picture when we look down there at bottom of the ocean. Right now the answer is there's nothing wrong with that picture. It is -- there was no oil coming out of the Gulf of Mexico. It is picture perfect. And that's the picture we have been looking for for so long in the disaster.

But that's only in the here and now. Those pressure tests are going on, and based on the technical briefing we got this morning from BP, things are going as they had expected. So, so far, so good, everything as expected, no surprises, and no oil leaks. So that's very good news right now.

They've got the ROVs positioned on the ocean floor. They're actually looking beneath all their equipment down there, looking at the ocean floor, looking for the possibility of any oil seeping up through the ground in that area. That would tell them there might be a leak in that well. They've also got ROVs running sonar looking for the same thing.

So they're moving ahead very cautiously, but they're being very careful at the way they're looking around and taking each step very deliberately as they go along.

We heard this morning that they passed the threshold of 6,000 pounds per square inch. And that was very important, because if they were able to build up the pressure through 6,000 pounds per square inch, that tells them that that well at least has a minimal amount of integrity.

And now they're going to try and keep pushing ever closer to that 8,000-plus psi mark. And when they get up to that, if they're able to get up to that, that tells them that this well is in great shape, and they'll be able to do anything they want to with it.

So right now, one small step at a time as that pressure continues to go up. They're going to keep evaluating it after every six-hour period to see where they stand and what might be happening down there.

And of course, after all this is over, they've got to do that seismic testing. Sort of like consider it some sort of an MRI of Mother Earth. They're going to be looking at what that seismic reading brings back to them to tell them if there is any leaking outside of the well. So after they get the all-clear from that, that's when they're going to be able to say, "We're finally breathing that sigh of relief that we've been holding in for the last 88 days."

HOLMES: David, you said there if they get up to that 8,000 psi. They can essentially, like you said three, be able to determine that they can do whatever they want to do with it. What will they want to do with it? Do they want to leave well enough alone, just leave it capped, or do they want to start putting in those hoses again and start siphoning that oil up?

MATTINGLY: They're going to consider their options. They've been so concerned about that well because of the explosion. They all along have been thinking there's got to be some damage to that well bore. They just couldn't see it; they just couldn't find it with the materials they had at hand.

So as they do this pressure test, that's when they're finally going to get those answers that they've been looking for about what sort of shape this well is in.

So right now the most likely scenario that Admiral Thad Allen is talking about is, once they give this well a clean bill of health, then they're going to go back to producing oil. With this new cap, they'll be able to catch all the oil that's coming out of there. There will be no more oil leaking into the Gulf of Mexico, because it will all be going to the surface to the ships that are up there.

But this cap will also give them the opportunity to create a temporary stop to that oil just in case a hurricane comes through. So at the very least, if this cap is working and if the well is healthy, as they hope it is, then they'll be able to make this hurricane-proof and they'll be able to continue catching that oil on the surface.

HOLMES: Well, David, like you said, a lot of "ifs" still but a lot of positive news out of there; a lot of people optimistic.

David Mattingly for us in New Orleans. We appreciate you, as always. Thank you so much.

Coming up, the science of the BP oil well cap and its integrity test can be overwhelming. We're going to give you a breakdown from an acclaimed scientist on what exactly is happening in the Gulf. Stay here.

(COMMERCIAL BREAK)

HOLMES: All right. nTalking oil wells. We're talking caps, integrity tests. We're talking seismic tests. Engineering terms can be a little overwhelming, trying to understand exactly what's happening. Well, today an acclaimed theoretical physicist broke this all down for us on "American Morning."

So listen now to how New York City University professor Dr. Michio Kaku (ph) explains what is happening right now in the Gulf.

(BEGIN VIDEOTAPE)

DR. MICHIO KAKU, THEORETICAL PHYSICIST: Well, this weekend, take your champagne bottles out if the pressure holds. Think of a fire hydrant. Bottle it up very rapidly. You could burst a pipe. It will over pressurize, burst a pipe, and then the thing starts all over again. That's the nightmare scenario.

So watch for any sudden drop in pressure, indicating a new leak has sprung. And that's why they're monitoring the ground looking for oil leaks coming out.

KIRAN CHETRY, CNN ANCHOR: Where they have robotic submersibles and sonar equipment down there, as well.

KAKU: That's right. And that can cause irreversible damage. That's the worst-case scenario. Pressure backs up, a pipe bursts, and it starts all over again.

UNIDENTIFIED MALE: And you mentioned you might be able to bring the champagne bottles out, but they still have to drill these relief wells. And that's a complicated process. And it's also hitting another bull's-eye in some respects. How confident should Americans be that this crisis is coming to an end, do you think?

KAKU: In the sense that it's a one-two punch: first we cap the top, then we choke the bottom. That's how you kill this monster. So far we have success in capping the top, and in a few weeks we'll know whether we can choke the bottom.

So remember we never get it on the first try.

UNIDENTIFIED MALE: Right.

KAKU: We're drilling three miles under the surface of the water. We're trying to hit a dinner plate from that distance. You never make it on the first try. It's like winning the lottery.

UNIDENTIFIED MALE: Right.

KAKU: You go in, you miss, you fill it up with concrete. You drill again. You miss, you fill it up with concrete. That could go on for weeks.

(END VIDEOTAPE)

HOLMES: That's a theoretical physicist. He knows what he's talking about. And he put in very simple terms exactly what's happening 5,000 feet below the surface of the water.

And again, there is reason to be optimistic right now. We are watching it closely here.

Also, you remember that Wall Street giant that cost investors billions? Well, now they are paying up. I'll explain after the break.

(COMMERCIAL BREAK)

HOLMES: Well, $550 million. That is what Goldman Sachs has to pay after charges of fraud. That is the biggest penalty we have ever seen on Wall Street.

But Alison, please help me understand. Some people saying the biggest ever might not be big enough. And Alison Kosik I'm talking about, on Wall Street for us today. Hello to you.

ALISON KOSIK, CNN CORRESPONDENT: Hi, T.J.

You said it. You know, Goldman Sachs is going to be signing that check over to the SEC for $550 million. You know, talk to traders here on Wall Street and they say it's just a drop in the bucket for this firm. They say in the first quarter, Goldman Sachs made $550 million in 14 days. But still, it is the largest penalty a company has ever paid to the SEC

Regulators had charged Goldman with fraud for not disclosing certain conflicts of interest regarding a risky subprime mortgage- related investment.

Now besides paying this hefty fine, T.J., Goldman is going to have to change some of the way it does some business. It's going to have to expand its role of the internal committee responsible for approving sales of risky investments.

And any time that it puts out any marketing materials, its legal or compliance department will have to review these materials. Now, keep in mind, though, this settlement does not cover Fabrice Tourre. Remember him? He was one of the VPs at Goldman, the only individual that's charged in this case. And the SEC says it is still going to continue its case against him. We all know that name. He was the Fabulous -- Fabulous Fab with those e-mails that we heard, very personal e-mails that he wrote to his ex-girlfriends and to his colleagues there at Goldman -- T.J.

HOLMES: Yes. Fabulous.

Alison, when you talk about some of the reaction, some people think, hey, it's just a drop in the bucket for this company, but outside of that, what do they think about Wall Street? What do they think about one of their own, if you will, this Goldman Sachs, a celebrated company, having to pay this big fine?

KOSIK: Well, you know, it's funny because word kind of leaked out a half hour before trading ended yesterday, and we saw shares of Goldman jump about 8 percent. Right now they're up a little over 2 percent. That's despite this huge sell-off we're in the middle of for the market overall.

Now, back to Goldman, investors had thought that the settlement would have cost Goldman more than $1 billion. And that's why you're seeing Goldman as one of the stand-out stocks today, because there's that kind of relief that the penalty wasn't as much as it could have been.

But even more important than the financial penalty here is that this settlement, you know, it gets rid of this huge PR problem for Goldman Sachs that's really been hanging on the company and hanging over the stock.

Now also Goldman is reporting its second quarter earnings next week, and we're hearing that analysts are expecting a plunge in its earnings if you compare them to a year ago -- T.J.

HOLMES: They're paying a big fine, but they are able to at least put this behind them and move on.

One more thing...

KOSIK: Yes.

HOLMES: ... before we move on from you. What's going to happen with Apple today? We're waiting to hear this announcement about this iPhone. But again, this is a company that does have the power to move some markets. What are people standing by for?

KOSIK: It really does. We haven't seen much movement in Apple shares right now. They're only down a fraction. But overall, it's really been a rough going for this stock lately. It's down more than 7 percent since the iPhone 4 was released last month. You can see how much the stock has taken a hit there.

You know, earnings are due next week, which could rescue it from this recent huge problem about the iPhone 4 that's sort of hanging over Apple right now. Its profits are expected to double more than a year ago. No big surprise there. I mean, think about it: in three days they sold 1.7 million of these phones. So people, you know -- people still want to buy these things, even with all the problems that these phones are having.

You know, and it's thanks to big sales of the iPhone that we're seeing -- that we're probably going to see profits rise for Apple. Steve Jobs is saying that in the event today that 3 million iPhone 4s have sold so far since they came out about three weeks ago. So something to keep in mind there.

HOLMES: All right. Keep in mind and keep an eye on, as well. Alison Kosik, we appreciate you.

KOSIK: You got it.

HOLMES: Thanks so much. And again we are keeping an eye on what's happening out there at Apple right now.

"YOUR $$$$$," you can see this every weekend, Saturday and Sunday. On Saturdays you can see it at 1 p.m. Eastern, Sunday 3 p.m. Eastern with our Ali Velshi and our Christine Romans.

Want to take a look now at some of the stories making headlines today.

President Obama says, yes, this is a good first step, but the oil crisis is a long way from being over. Before leaving for a weekend trip to Maine with his family, the president said only time will tell whether that cap that's keeping the oil from flowing will hold up until a permanent solution is in place.

Also BP plans a second seismic run today to check for a breach in that oil well. The oil stopped gushing yesterday for the first time since the April 20th rig explosion. BP and government officials scrutinizing data from these integrity tests. They're doing it in six-hour intervals.

Also, a senior Democratic source says this guy, that's the man who's expected to replace the late Senator Robert Byrd. This guy's name is Carte Goodwin. West Virginia Governor Joe Manchin will make an official announcement sometime in the next hour. Goodwin served as Manchin's general counsel for four years.

Well, Steve Jobs is in Cupertino, California, right now at the company's headquarters, the Apple headquarters. He is talking to a group of reporters gathered, telling them about how they plan on fixing the problem with the iPhone 4. We'll tell you if he has made it official yet right after the break.

(COMMERCIAL BREAK)

HOLMES: Al right. It's happening right now, as we speak. But we are waiting for it to become official, the official fix from Steve Jobs with the new iPhone 4. That iPhone has been out less than a month still, and they have sold millions of them. Sold 1 1/2 million, little over that, in the first three days these things came out.

But there is a problem with it, and the company has admitted there is an antenna issue. If you hold it a certain way, this will sometimes cause you to lose your signal. It can drop a call. The company has finally admitted that, yes, in fact -- it took them a while to do so. But yes, this is a problem. They're looking for a way to fix it.

Steve Jobs on stage right now; presentation started about 20 minutes ago. And he's telling a small group of select -- select reporters who were invited to this thing how they plan on fixing it. We weren't allowed to have a camera so we could broadcast to you live.

But even if you don't have one of iPhones -- but judging by their sales you probably do have one. But even if you don't, this is important, because Wall Street is watching this. This company is a behemoth, and it has the potential to move markets, depending on what the fix is and if Wall Street and if consumers like the fix. The company's stock has actually gone down since the iPhone 4 came out and since all these problems cropped up.

Let's talk to our tech expert. Katie Linendoll joins us now from New York.

Katie, I know you are keeping, and it's OK if you want to take your eyes off of me for a second and keep looking at that screen because we were not able to be live inside, so we have to depend on bloggers and others who are keeping and eye on it.

KATIE LINENDOLL, CNN CORRESPONDENT: Right.

HOLMS: But from what I can tell and what some of the notes I've been seeing, Steve Jobs sounds a little defensive.

LINENDOLL: He is a little defensive. You know, but first things first. This is refreshing that Apple is finally coming out and addressing the antenna situation. It's not blaming it on users, saying you're completely holding the phone wrong. Obviously, we know here now that there is an issue.

And I like the fact that they are being a bit humble: "We're not perfect. The phones aren't perfect, but we want to make our users happen." This is huge in the Apple world. This is a brand that has extreme brand loyalty and brand recognition. They're admitting that they screwed up on their algorithms, and a new patch should make it more accurate.

But I think here we need to reflect on the fact that we knew there wasn't going to be a large recall. It would be about $1.5 billion to recall all these phones. Monetarily and logistically, it would be nearly impossible.

However, we do need to keep in mind this is as much a tech segment as it is a customer service and a PR segment. He has to give us an answer about how he's going to make these users happy. Now, we're hearing from "Consumer Reports" that putting on a $30 bumper is the solution in terms of fixing the antenna. We haven't seen anything come out yet that's saying they are going to give people a bumper, but for Apple this would be a quick-fix solution and a Band- Aid on a much bigger problem.

HOLMES: All right. But still, you said -- I had that line in front of me, too. That line he's talking about a new patch should be more accurate, but still, he seems...

LINENDOLL: Yes.

HOLMES: ... seems to be keeping us all in suspense and waiting to tell us exactly what their solution is. At first a lot of people are upset with him, because he told people just hold the phone differently.

LINENDOLL: Right. And what's confusing to me is I don't understand what kind of patch they're going to offer. But the patch is a software issue. What we're seeing here with the iPhone 4 is a hardware issue. The antenna wraps all the way around the phone, and then there's that sweet spot. You hit that sweet spot, that's how calls are being dropped. This isn't an anomaly. We're seeing this with far too many users. This isn't just something that's going on in the tech world. We're seeing lots of different phones being dropped.

And also, yes, he's being evasive, and he's being defensive. He's also putting the onus on a lot of other smart phones, saying they also have antenna problems.

So is it humbling that they came out and admitted that there is something wrong with the situation? Absolutely. Have they given a fix yet? No, but we're still following it very closely.

HOLMES: And they're handling this very delicately. And like you mentioned earlier, there's a big PR aspect to this.

LINENDOLL: Yes.

HOLMES: And does this have a lot to do -- I mean, as popular as this iPhone is, is Apple starting to feel some pressure from these other competitors who are coming out with smarter, sleeker and cooler phones day by day?

LINENDOLL: That's a great point. No, absolutely. There is tons of pressures from other brands. We're looking at the HTC Evo. We're looking at the Droid X, the Incredible. Now, we're demanding so much more from our smart phones. There's so much more we expect out of it.

But I've got to say, something that hasn't been talked about. You know, here's the iPhone, jam-packed with all these amazing features, but it can't fundamentally make a call. This thing can make pancakes for me all day, but if I'm losing calls, what's the point here? Nobody talked about how amazing it is, but yet the core messaging, the core fundamental of the phone to make calls is the problem. HOLMES: And you know, I think that's something that "Consumer Reports" talked about, and that was a big deal.

LINENDOLL: Yes.

HOLMES: "Consumer Reports," a lot of people certainly consider that...

LINENDOLL: Yes.

HOLMES: Really the Holy Grail when it comes to endorsing products in this country. They could not recommend it, even though they said it was one of the coolest phones ever made. But they couldn't recommend it because, like you said, to the fundamental: you can't make a phone call.

LINENDOLL: Right. No, and I think this is the icing on the cake. When we saw "Consumer Reports" come out just a few days ago and say they couldn't recommend the iPhone 4, that was the bottom line. And Apple really had to follow suit. Because the average consumer views "Consumer Reports" as a very reliable source. If they're saying that there's an antenna issue, we have a problem.

But also not that "Consumer Reports" said a bumper solves the issue. I don't understand why handing out a $30 bumper, which probably costs pennies to make, isn't a viable solution here.

HOLMES: All right. Well, we are standing by. Katie, you stand by for us, as well. And again, to our audience, we are waiting to hear. This is going on right now as we speak, but we can't show it to you live because of Apple's restrictions. That's fine.

But we are able to follow it online, at least, what Steve Jobs is saying. And he has yet to say exactly what they are going to do to fix the problem for the millions of people who do have iPhone 4s in their hands right now. When we get the answer we'll bring it along to you and also let you know how Wall Street reacts to the news.

Meanwhile, we have somebody who is vowing to stay on his job until the job is done. We're talking about actor Sean Penn. Still working to help the homeless and those people suffering in Haiti. Stay with us.

(COMMERCIAL BREAK)

HOLMES: Six months now after Haiti's devastating earthquake, the situation remains dire. People are still homeless, still desperate for medical care. Doctors and hospitals running out of money despite billions pledged to the relief effort. This weekend a special edition of Sanjay Gupta M.D. Looks into where the money has gone. And Sean Penn, who is running one of Haiti's biggest makeshift camps showing our Dr. Gupta around and explains how this all works.

(BEGIN VIDEOTAPE) DR SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (on camera): Well what happens? You get a call saying, look we have a kid who is dying, please help us?

SEAN PENN, ACTOR,: Yes. We've got that little -- don't know if you saw little four-wheeler we've got. That little mule. That functions as our ambulance for those who can't come up to our hospital by themselves.

We have people down here that work with us through the night. Our doctors will give an original diagnosis. If it is something treatable in our hospital, it is a class 3 hospital. If we have the capacity to deal with it, then we'll deal with it there.

But the more serious cases have to be transports constantly

GUPTA: You haven't been able to find basic antibiotics.

PENN: Yes, no it's been a struggle and as you know and it's been a struggle for some of the major hospitals. There is an incredible blood shortage here. Immunization is still nowhere near an acceptable level throughout the country.

GUPTA: As you might imagine, a lot of babies have been born in this camp.

PENN: Usually have it posted. Hey, do we have the baby number posted anywhere?

UNIDENTIFIED MALE: Yes.

PENN: Where is that?

GUPTA: 123?. That's says baby meter.

UNIDENTIFIED FEMALE: This baby is 9 months old. Has chronic hydrocephalus.

GUPTA: They'll know this but this third ventricle is very big. So you know the traditional thinking has been to put in a shent (ph) but I don't think that I would actually do what's called a third ventriculostomy (ph). And just open up because then. there is no foreign body in the brain.

UNIDENTIFIED FEMALE OK

GUPTA: Because then the child doesn't need follow-up.

(END VIDEOTAPE)

HOLMES: And you can see much more, special edition of "Sanjay Gupta M.D". Saturday morning, 7:30 eastern, 4:30 pacific.

And like we have been mentioning, Steve jobs telling us what he's going to do about the problem with the iPhone 4. We have a solution. We have just found out from Steve Jobs. Everybody out there, if you bought one of those new iPhones, have a problem with reception, not going to be a recall. Instead you are going to get a free case. That is the solution. We just got this, Steve Jobs.

He was on stage talking to a small group of reporters who had been gathered. He had been -- the company had really gotten a lot of flack over the last several weeks because as soon as this iPhone 4 came out, people immediately started noting they were having problems with the antenna, some reception problems, some calls were even dropping.

Initially the company said just hold the phone a different way. We're talking about an antenna on the outside of this phone. For those that don't have one, I'll explain some of this but also why this is a grander issue for the company and also for markets, quite frankly. But essentially there is an antenna, you hold it a certain way, sometimes the phone can drop.

The company now admitting, yes, there is a problem. They discovered when you just simply have something between your finger and the phone, just somebody even recommended using duct tape. That can solve the problem. Something that simple, you can solve the problem of reception. So now Steve Jobs has come out and said, yes, there is a problem, we're sorry for it, this is going to be the fix -- we're going to give everybody a free case for the phone, a cover for it essentially.

So all the people out there, it's been 1.7 million phones sold in the first three days they were out. Some people out there estimate maybe up to 8 million of these phones have been sold. So a lot of them out there. Everyone is going to get a free case. Our Katie Linendoll is with me got a few more details here.

So a lot of people guessed this was going to be the solution. It seems like such a simple solution for what is such a complicated device. You're essentially just giving everybody an accessory to go along with it and it fixes the antenna issue. What are details about when people can get it?

LINNEDOLL: Yes. Absolutely. Solution here as you mentioned is to give everybody a free bumper. And it looks just like this. This is a quick fix, an easy Band-Aid for Apple. This is what we expect to happen.

They will be giving these out through September. And again think about this way this costs them pennies to make. What it does is it wraps around the exterior of the phone. Remember, that antenna is housed all the way around the phone. In that lower right corner. That's where we see those calls being dropped, when you hit that little button.

But I think this is important to recognize again this is as much about pr and as much about brand recognition for Apple and handling it customer service right as it is about the tech issues. We could have seen a recall which would cost them $1.5 billion. We knew that wasn't going to logistically happen. It would have been nearly impossible get those phone backs and then fix the software solution or the hardware solution rather when we don't really have a hardware solution at this point.

So according to Consumer Reports as one of the many sources that say in the usability test, this little bumper fixed the problem. This is what everybody's going to be getting their hands on. If you already purchased one, you'll be getting your money back. These run 29.99 I picked one up in the Apple store. And I think it is worth noting, nearly 3 million people have already picked up the iPhone 4.

People aren't running to the store to take this phone back. It is an incredible phone. Absolutely. Does it have its flaws, yes. Did they come out and admit they had their flaws, yes. We're finally acknowledging the situation, we're not putting the onus on people holding the phone wrong. And here, we put a Band-Aid on it. End of story.

HOLMES: All right.

LINNENDOLL: Probably not end of story actually. We're going to keep hearing more and more about it. This is not a dead issue.

HOLMES: To explain this a little more. Let me have that camera here. This iPhone 4, all right folks I got one of these things in my hand here. And it is very -- a complicated device but something simple. You see this little line on the side here of the phone. That's the issue. That's the point we are talking about. If you happen to hold your finger over top of that while there is no case on it, you can possibly be subject to losing some signal strength and possibly having your phone call dropped.

Something that simple, folks, on the side of the phone. So the fix is what's on this one, is to simply cover it. Put a little cover over it. Now if I still hold my finger in that same spot, because there is now some kind of a buffer, this bumper between my finger and that antenna, it is all good and that's the fix.

Now Katie, how much does this hurt or will it possibly hurt down the road, kind of the branding of this company that can make such a brilliant device but you can't make it so that I can just hold it without having to have a bumper over it?

LINNENDOLL: Right. For Apple, I mean we're seeing it in the stocks as well. This is huge. I mean we're talking about a brand that we see as innovative and a household name and we've come to expect a lot of them especially over these last three years. This was the biggest upgrade since the original iPhone we saw in 2007.

And unfortunately with a pitfall like this, it does take a hit in terms of branding. But I think it would be even a bigger hit if he didn't come out and address the issue. I think over the last few weeks we were kind of waiting for this moment to happen.

And yes, it is refreshing to finally see him come out and admit that there is something wrong here. I think as one of the individuals, 3 million that have purchased this phone, we just wanted an answer. We knew it was inconsistent in terms of people who were dropping calls and where their signal strength was and where they were calling from. But the end of the day all we wanted to do was hear it from Apple. And I think that makes a lot of users happy.

HOLMES: And there we go. All right Katie Linnendoll, we appreciate you being here and keeping an eye on everything that was happening and bringing it to us. Good to see you, as always. I know we're going to see you again down the road. Have a good weekend.

LINENDOLL: You, too.

HOLMES: We have the fix. We'll continue to follow it, see what happens with the markets possibly today. Also with Apple stock on this announcement.

Meanwhile. A lot of money and a lot of money with seeds and a lot of people were arrested having to do with illegally betting on the World Cup? We got details coming your way in "Globe Trekking" that's next.

(COMMERCIAL BREAK)

HOLMES: Time for us to go "Globe Trekking" now. Our "Globe Trekking" today takes us to Asia for a World Cup story though. And since it is a World Cup story, we just use any excuse to show this dog gone octopus again. What's this thing's name? It was Paul. You see it here.

Now look it actually won, you remember this thing. Because it was accurately predicting all the games. I think it was 9-0 in all the games it predicted. Yes, in fact it predicted that Spain would win.

You are seeing it here. It got a mock trophy, a mock World Cup trophy for all of its efforts. Well congratulations to that thing. Well if you were betting the way that that octopus was picking, you'd have come out in a pretty good spot.

However, some people were betting that police say should not have been betting. This story takes us actually to Asia. The point of all this there was a huge gambling bust. And we talking about a lot of money here. The countries where the raids were conducted were China, Malaysia, Singapore and Thailand. Police in all of those countries arrested some 5,000 people, confiscated about $10 million as all being a part of some illegal gambling ring.

They said there were dens here gambling dens that handled $155 million in bets. That's a lot of money. Now Interpol is saying this was coordinated because of a month-long operation they did. And of course the month they pick it do this was the month of the World Cup, while this was going on.

So a lot of money, a lot of bets and just a chance to throw in Paul, the German octopus one more time. Moving on. We don't mind showing it so much anymore, the live picture from 5,000 feet below the surface of the water. That's good news, folks. Because the live pictures now, you're not seeing any oil. We're on day 88 and maybe finally there is good news that hope on the horizon in the oil disaster. Stay here.

(COMMERCIAL BREAK)

HOLMES: Taking a look at some of the stories making headlines. And this just in to us, coming to us from the Associated Press. The American sprinters who were stripped of their 2,000 Olympic relay medals won an appeal today to have their medals returned.

The court of arbitration in Geneva, Switzerland ruled in favor of the U.S. women today. They were originally forced to give up the medals because their teammate, Marion Jones, admitted to doping.

Also the oil flow has stopped at the site of the Deepwater Horizon well. But the president says we shouldn't get ahead of ourselves here. He says is still work that needs to be done. BP still watching pressures on that well closely, carrying out tests to see if they can keep the new cap in place until a permanent fix is complete.

Also we are not perfect. That's what Apple founder Steve Jobs said just a short time ago about the antenna issues with the new iPhone 4. But, while he says the problems were broken out of proportion, he also says Apple will give customers three covers for their iPhone 4s thought September which has been solve to solve the pesky little antenna problem.

Science fiction close to reality. Talking about mind control. Actually making things happen just by thinking about it. I'm thinking about that camera moving. Look, it's what's happening right now. I'll tell you how I'm doing it after the break.

(COMMERCIAL BREAK)

HOLMES: Have you seen the story this week that had a lot of people scratching their heads, a lot of people fascinating about it. While some digging around was going on at the World Trade Center site, they found an old ship. What in the world was it doing there? How did it get there. Our Mary Snow is investigating for us.

(BEGIN VIDEOTAPE)

MARY SNOW, CNN CORRESPONDENT( voice over): At the construction site at ground zero, a rare find, remnants of a ship dating back to the 18th century. We were allowed to climb down 25 feet to the site and see firsthand what archaeologists stumbled upon Thursday.

MOLLY MCDONANLD ARCAEOLOGIST: Two curb (ph) timbers that were pulled up by a backhoe. And immediately thought that looks like a ship timber. So we stopped the backhoe and started excavating with shovels and uncovered a portion of this hull and since then have uncovered the rest of it.

SNOW: And what we can see is believed to be half of a ship. Marine historian Norman Brouwer was brought in to take a look.

NORMAN BROUWER, M,ARINE HISTORIAN: It appears to be an ocean- going vessel, and probably sometime in the 1700s, heavily built, very solid frames close together.

SNOW: One mystery, the circular structure that Brouwer says may have been used a fireplace. And anchor was also recovered

SNOW (on camera): How significant is this find?

MCDONALD: I think it remains to be seen what this ship really is, but it's pretty significant. It's pretty exciting. There haven't been that many ships found in Manhattan. It was something where ships are occasionally used as part of land-filling. So it probably was part of filling in this land. So it's not unheard of.

SNOW (voice over): Because of the history here, archaeologists have been monitoring the construction site. The wildlife conservation society shows just how much of lower Manhattan was under water hundreds of years ago in its Manahatta (ph) project. Compare that to now.

ELIZABETH MEADE, ARCHAEOLOGIST: But mostly it just tells us about the landfill structure of this particular area and how they were reusing things like old boats to build out the land. The shoreline was originally at Greenwich street, about a block that way.

SNOW (on camera): SO where we're standing now at one point was just the Hudson river?

MEADE: The Hudson river, yes.

SNOW (voice over): The site is just south of where the World Trade Center towers once stood. This rare relic hidden for more than 200 years.

MEADE: This is the kind of thing that archaeologists are always hoping to find and very rarely actually do.

(END VIDEOTAPE)

SNOW: And T.J., as you might imagine, the remnants of this wooden ship are very fragile, very Brittle. The big challenge now is recovering it. Workers are continuing to excavate it, analyze pieces of it. The hope is that pieces will wind up in a museum. T.J.?

HOLMES: In a museum. And I heard you ask a question in there. Put it in perspective for us, just how big of a deal is this and how giddy are scientists that they've actually found this thing?

SNOW: Giddy is a good word to describe it. They're very excited about this. The last time they found a ship like this was more than 30 years ago in lower Manhattan. They know that these ships have been used for land-filling as that one archaeologist had mentioned. So they knew there had been a precedent. But they were very excited about this. Because it's very rare they find them. HOLMES: New York, you never know what you'll find around every corner, but you don't what you're going to find in the ground either. Mary Snow, we appreciate you as always thanks so much. Good to see you.

Again, we are talking about mind control, the technology now exists. You can just think it and it happens. We'll be talking about it in the "Big Idea". That's next.

(COMMERCIAL BREAK)

HOLMES: It is our "Big Idea" for today. Always have some innovative, creative ideas. Today we've got one you really want to see. Let's bring in Trevor Coleman, CEO of a company called InterAxon. And what they do is just phenomenal You all have found a way to help people use their minds and make things happen.

Let me start at the beginning here. I guess how are you able to do that? We want to let people know you have the phone up to your ear to make sure you can hear us OK and we can hear you. You tell us, how are you all able to get people just with their minds to make things happen?

TREOVER COLEMAN, CEO INTERAXON: Well your brain is fundamentally an electrical organ. So as nerves are passing signals around they're generating electrical current. And using something like an antenna, we can place one on the forehead and we can actually read the electrical field that's being generated by your brain.

Now just like in the world around us, there's hundreds of radio stations being broadcast all the time. And if you use a sensitive antenna and you tune it to the right frequency, you can pick up the volume from one of the radio station and music comes out. Well with your brain, your brain has some radio stations just like that where if you analyze a certain frequency bandwidth, the amount of energy in that will tell us how concentrated someone is or how relaxed they are.

HOLMES: Now your company InterAxon, what have you been able to come up with? What kind of products essentially that you can get people to control with their minds?

COLEMAN: Well, we're just actually beginning development on our first product. We've created a whole suite of demonstration applications and applications for clients, custom applications.

Most recently we created an in flight entertainment system where people can play four different games just using their brain. And we demonstrated that at the On the Wings of Innovation conference in Windsor earlier this year.

We've also created a levitating chair where a person can sit in this chair and using their brain waves lift themselves up to the ceiling. We made a brain wave controlled spot (ph ) car.

We just try to make the funnest and coolest things we can because it helps us learn a lot more about the interaction and the different types of things that are possible with the technology.

HOLMES: You talked about radio waves and frequencies. You said your brain has one to tap into. To use this type of technology, do you have to wear some kind of an antenna or helmet or headset or something?

COLEMAN: Yes. What we have -- I have one right here, actually. It's a headset. You can see it's got a little arm on the front. I'll put the phone down and put it on for just a second. As you can see there, it touches the forehead right there. That's what actually reads the brain waves.

HOLMES: How far could we take this? You talked about simpler applications, or some more personalized applications for certain clients. How widespread could you take this? Could we see one day where we're controlling just about everything in our house, the television, changing the channel or whatever it may be.

COLEMAN: That's our dream. Certainly that sort of technology is a number of years away. But we definitely believe this is a technology that could become an integral part of people's everyday lives. You can imagine the homes that can understand how you're feeling and change the lights or the music to match your mood or your iPod could develop a play list, if you're in a bad mood, it knows to play some up tempo music.

HOLMES: Yes it could read moods. That's a separate thing I was going to ask you about next. You also have technology that literally you don't have to tell it what to do. It can read what kind of mood you're in and pick something you might like.

COLEMAN: Again, this is very early stages. But there is work that's being done where people are able to affect different emotions so you can tell if someone is happy, sad or frustrated. We're hoping as that goes forward to be able to build the software to interpret those moods and to understand what kind of responses would be appropriate. So this is the kind of direction that we'd like to go with.

HOLMES: Well Trevor, this is some cool stuff, fascinating stuff, science fiction a lot of people would say. It's clearly a reality that we're moving closer to. Trevor Coleman, we appreciate you so much. Thank you so much. Good luck down the road. You have a good weekend.

COLEMAN: Thanks very much and if people want to check out more, they can go to our website it's www.interaxon.ca. And thanks for having me.

HOLMES: Thanks so much, buddy.

COLEMAN: Bye-bye.