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Fighting City Hall; First Subpoenaed in Stock Sale Probe
Aired October 13, 2005 - 13:33 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: It's a controversy as old as the Bill of Rights. Boiled down, the government can take property needed for public use. Americans are split on whether that's a good thing, but usually not those whose homes get caught in an eminent domain struggle.
CNN's Bill Tucker reports.
BILL TUCKER, CNN CORRESPONDENT (voice-over): From California to Connecticut, the power of eminent domain is being unleashed. According to the Institute for Justice, eminent domain is being invoked in nearly 100 cities in the name of public good.
One of those communities is Long Branch, New Jersey. The ocean front is being redeveloped, replacing neighborhoods with expensive condominiums, luxury hotels, spas, restaurants and shops, which might sound attractive unless you receive a letter like the one sent to Lori Ann Vendetti. She and her neighbors received letters they had 14 days to accept an offer from the city for their property or the city would take their property using eminent domain.
LORI ANN VENDETTI, PROPERTY OWNER: All of a sudden everyone wants to be in Long Branch, so we're not good enough to be here anymore.
TUCKER: Lori and her neighbors are fighting the city.
DANA BERLINER, SENIOR ATTORNEY, INSTITUTE FOR JUSTICE: Eminent domain abuse affects everyone, but it particularly affects working class and middle-class families, minorities and elderly communities.
TUCKER: A survey by Monmouth University found most New Jersey residents do support the use of eminent domain, but under strict circumstance. Eighty-eight percent support take vacant and rundown properties to build schools, 65 percent support take land away from developers to preserve open space, but just seven percent support taking low value homes to build high value homes and shopping centers. Developers feel differently.
DAVID BARRY, PRESIDENT, APPLIED DEVELOPMENT COMPANY: I think that the government must have the power of eminent domain to help private interests assemble properties, and to do positive developments that, in the opinions of those elected officials, are beneficial to the entire community.
TUCKER: And there are benefits. The mayor boasts that since starting the redevelopment property tax collections are up, the size of the police force has been expanded, and crime has dropped 65 percent. To longtime residents, those arguments seem pale.
ANNA DEFARIA, PROPERTY OWNER: I'll never buy a piece of property by ocean again. How much do you need? A million dollars you can't buy it for God's sakes anymore. And my husband fought for what? Freedom for liberty for everybody or the few selected people that are coming from New York to buy there?
TUCKER (on camera): Mrs. Defaria and her neighbors have hired an attorney and are seeking a stay of the condemnation proceedings until November, when the New Jersey state legislature convenes. That's because New Jersey is one of 37 states considering legislation which would redefine and limit the use of eminent domain.
Bill Tucker, CNN, Long Branch, New Jersey.
WHITFIELD: Conflict of interest? Senate Majority Leader Bill Frist is getting some unwanted attention from the Securities Exchange Commission. We'll sort it all out for you next.
WHITFIELD: It appears the Senate majority leader has some explaining to do. CNN has now confirmed that Tennessee Republican Bill Frist has been subpoenaed in connection with the federal stock trading investigation.
This story first came to public light throughout the pages of "The Washington Post" and the work of staff writer Carrie Johnson. Carrie joins us from Washington. Good to see you, Carrie. In a moment, I'll talk to you.
But first, let's go to Washington, as well, with our CNN congressional correspondent Ed Henry, who has the latest on where this investigation is going right now.
So the subpoena has taken place and Bill Frist has also been asked to hand over documents, right?
ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: That's right. Good afternoon, Fredricka.
In fact, a source close to the case is now confirming to CNN, that, in fact, as you mentioned, "The Washington Post" reported this morning, that in fact, Senator Frist has been subpoenaed to turn over documents in this case. The Securities and Exchange Commission trying to find out whether or not there was insider trading.
This is in connection with Senator Frist's July sale of stock in HCA right before the stock dropped sharply in price. This is, of course, the company, the hospital company, that was founded by Senator Frist's father.
As you mentioned as well, we're hearing the senator will be going in at some point for questioning. But that is obviously a regular part, a routine part, of any investigation of this sort. That's not unexpected that there would be a subpoena of documents and that he, at some point, would, in fact, be testifying; would, in fact -- I guess the more proper word would be talking to investigators at some point behind closed doors.
Now, in fact, we have a statement, as well, from Senator Frist's office. They say they're fully cooperating with the investigation. They're confident that, quote, "an examination of the facts will demonstrate that Senator Frist acted properly." And, in fact, what they're saying is that he had no insider information suggesting that the stock was going to drop, that he was simply selling the stock to clear out any potential conflicts of interest ahead of a potential presidential run in 2008.
Democrats say that if he really cared about a potential conflict of interest, he should have sold the stock a long time ago, as Democrats had been urging. I can tell you, some Republicans privately saying they think this dooms his potential presidential chances in 2008. But Senator Frist , at least advisers close to him, say, obviously 2008, a long time a away. They feel he'll be exonerated -- Fredricka.
WHITFIELD: And so Ed, is Bill Frist or his office responding in any way that perhaps it was a conflict of interest in the first place, as you mentioned some Democrats are saying, to even have the stock?
HENRY: Well what they say now is that, clearly, there have been enough questions about it that it was a potential conflict. They wanted to clear that in advance of a presidential run. And, in fact, they have produced e-mails showing that back in April of this year, before this stock was dropped and before he was selling it, that among his advisers, they were debating the fact that they had to just get rid of this stock. It was an issue they didn't need.
But, you're right it raises some charges of hypocrisy, potentially, as well, for Senator Frist because, again, for years, he had maintained it was not a conflict of interest. And now that he's under investigation, he clearly thinks that he has to get rid of, you know -- of this whole cloud. But, again, people close to Frist maintain that he was just trying to -- in advance of a presidential run -- not have this issue out there. Obviously, the irony being that now the issue has exploded.
WHITFIELD: All right. Ed Henry, in the shadows of "Capitol Hill." Thanks so much. Now on to Carrie Johnson, who helped get this ball rolling with "The Washington Post." Let's talk about what is at issue here. At the heart of the matter, is it the timing of the selling of this stock and that's where we have this insider trading investigation now blossoming? CARRIE JOHNSON, "THE WASHINGTON POST": Hi, Fredricka. Yes. What the SEC wants to know, what federal securities regulators want to know, what Bill Frist knew. What kind of conversations he had, what kind of e-mails he exchanged, if any, with insiders at HCA before he directed his trustee to sell HCA stock. He started that process in April, as Frist advisers now say. But the sales weren't made until July 1 and July 8 of this year. Within a week of that period of time, HCA had disclosed some earnings problems, and the stock price plummeted in value.
WHITFIELD: Well, Carrie, is it presumed that of course there would be some sort of conversation, since his brother is also helping to run HCA and that perhaps, just simply as family members, they would have dialogue about how this company is going, since it is a family business?
JOHNSON: Well, the senator's brother and his father founded the company in 1968. His brother had been chairman at one time. He remains a member of the board of directors, but he doesn't have day- to-day management responsibility at HCA. It would not be unusual for the senator, of course, to be talking with his brother. But it would break the law if his brother or any other HCA insider shared information with Frist that was not made available to the public about the company's performance.
WHITFIELD: Besides the selling of the stock, the timing of the selling of the stock, what have your sources told you about what investigators think they have?
JOHNSON: It's at a very early stage at this point, the investigation is. The Securities and Exchange Commission, five members of the commission have voted to give the staff subpoena power. The staff, we reported today, has exercised that power. They need to now sift through all sorts of business records -- phone bills, e- mails, other documents -- to figure out whether there are unusual patterns of conversations between Frist and others. And, as Ed said, the next step is then to call in the senator and other people at HCA to provide some testimony about what they knew.
WHITFIELD: And as far as you know, Bill Frist has cooperatively handed over all those documents that do include any kind of phone conversation, documentations of any personal transactions, et cetera?
JOHNSON: Frist's people tell us that they are cooperating with the investigation. It's unclear to me whether all of the materials the agency is seeking have been provided, to date. But Frist advisers and his defense lawyers say they will be fully cooperative.
WHITFIELD: All right, and what's the next step for this, as they then pore over these documents that have been handed over?
JOHNSON: Obviously, it's in the best interest of regulators and the lawmaker for this investigation to proceed as quickly as possible. But insider trading cases are not always fast-moving investigations. And so we will -- I will -- I imagine that investigators will be taking some time to pore over the documentareral (ph) records, and then within a matter of weeks, perhaps, calling in people to give testimony.
WHITFIELD: Carrie Johnson with "The Washington Post," thanks so much.
JOHNSON: Thank you.
WHITFIELD: The fast and the fit. CNN's Dr. Sanjay Gupta takes a closer look at how G-forces affect a race car driver's heart as we preview his series, "Driven to Extremes." That's next on LIVE FROM.
WHITFIELD: Back live now in B control. They are fast and furious on the track, and the physical demands of NASCAR racing has more drivers focusing on fitness off the track.
Our senior medical correspondent Dr. Sanjay Gupta continues to gives us a sneak peek at his special "DRIVEN TO EXTREMES."
DR. SANJAY GUPTA, CNN SR. MEDICAL CORRESPONDENT (voice over): Even if he's not driving, Carl Edwards likes to keep his heart racing with a mix of cardio and weights, seven days a week.
CARL EDWARDS, NASCAR DRIVER: No place like Bristol. I know we've gone for like 250 laps before without stopping. And that is intense. I mean, you're breathing heavy, your heart's beating, and it's the same as going on a long run or a bicycle ride or something like that. It's hard core.
GUPTA: How hardcore? Well, a study found racecar drivers on an oval track like NASCAR's sustained heart rates of 120 to 150 beats per minute, about the same level as a serious marathon runner for about the same length of time.
Research into car racing also shows that aerobic and resistance training helps drivers handle the G-forces. One of the pioneers of this fitness boom, Edwards' team and mentor, Mark Martin. He began working out seriously in 1988. Martin, who wrote the book "NASCAR for Dummies," says there are three benefits: drivers suffer fewer injuries because their muscles protect their bones and internal organs, the drivers are better able to handle the intense heat in the car, 120 degrees or hotter, because they start with a lower pulse, a strong upper body helps a driver steer better when the car is not handling well.
Fitness routines and special diets now abound among NASCAR drivers.
UNIDENTIFIED MALE: As I get older, I find I need to do more things to stay in shape.
UNIDENTIFIED MALE: Light weights and reps, a lot of reps, so that I can have some strength and some muscle mass for a crash or impact. UNIDENTIFIED MALE: I run a marathon in January. I'm planning to run another marathon this summer -- or this winter some time.
GUPTA: Of course not all drivers have joined in the fitness craze.
UNIDENTIFIED MALE: Channel up, channel down. Volume up, volume down. That's about the extent of my fitness routine.
GUPTA: In the long run, Edwards is convinced being fit will have him in victory lane more often, jumping for joy.
Dr. Sanjay Gupta, CNN, reporting.
O'BRIEN: And don't miss our upcoming primetime NASCAR special, "DRIVEN TO EXTREMES," with Dr. Sanjay Gupta. That airs this Sunday night at 10:00 right here on CNN. LIVE FROM's final lap is up next.
WHITFIELD: Outsourcing, it's a boom for U.S. companies, A bust for American workers. But how could outsourcing help you? One man tried it. CNN's Anderson Cooper has details.
A.J. JACOBS, EDITOR-IN-CHIEF, "ESQUIRE" MAGAZINE: I kind of felt left out, because I don't have a big corporation. So I decided to send what I could overseas, which is my life. So I decided to outsource every one of my daily tasks to a team in Bangalore, India.
COOPER (voice-over): A.J. Jacobs, editor-in-chief at "Esquire" magazine, was surprised at how much of his life he could outsource to two women in India.
JACOBS: I call them my remote executive assistants.
HONEY K. BALANI, REMOTE EXECUTIVE ASSISTANT FOR JACOBS: Good morning, A.J. This is Honey. How are you doing today?
JACOBS: One was named Honey, who is fantastic. She did the "Esquire" work. Honey is so good for my ego, she kept calling me a great family man and a wonderful editor. I mean, you know, what's not to like?
Then I also had Asha, who was dealing with my personal life. And she was also wonderful, a little shyer.
COOPER: Asha and Honey did it all. They wrote his e-mails, answered his phones. They even called his parents and argued with his wife.
JACOBS: I outsourced my marital bickering. Julie was angry because I forget to get cash at the ATM. Originally, I wanted Asha to apologize, but also to point out that Julie forgets stuff all the time, as well.
And Asha was much more diplomatic than I could ever have been. She actually sent hugging teddy bears to Julie.
Hello, Asha. It's A.J. Jacobs.
ASHA, REMOTE EXECUTIVE ASSISTANT FOR JACOBS: Hi, Mr. Jacobs.
JACOBS: At one point I asked Asha to call about my cell phone plan. I'm not sure about this, but I think that she called and the call is routed to New Jersey and then probably back to someone in Bangalore. So she was probably talking to someone in the next cubicle.
COOPER: There were some things his Indian assistants were better at than others.
JACOBS: I outsourced my parenting duties. I had Asha order some toys for Jasper. And she got a chicken dance Elmo. Jasper just loves it. It's driving me nuts.
COOPER: A.J. found that even every day angst can be sent to what Lou Dobbs would call "low-cost overseas labor markets."
JACOBS: If I had Honey pretend that it's a day worry for me about all my business dealings, and that was a great load off my shoulders.
COOPER: Sadly, A.J. didn't use the saved time all that wisely.
JACOBS: I actually saved hours, probably a couple of days of my life. I know I should have spent that reading Tolstoy or Melville, but instead I just watched bad reality television.
COOPER: So what's the moral of this story? Well, A.J. outsourced that, as well, in this case, to Honey.
JACOBS: She came up with a good one, which was, "Outsourcing implies growth for America in all fields."
COOPER: Anderson Cooper, CNN, New York.
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