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Quest Means Business
Libor Scandal Trader Jailed for 14 Years; US Stocks Tumble; Athens Exchange Reopens, Stocks Plunge; Record Contraction for Greek Manufacturing; European Shares Shrug Off Greek Woes; Obama Unveils Clean Energy Plan
Aired August 03, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: The bell is ringing at the start of a new week, the Dow is off the best part of 100 points. A busy day on Wall Street,
we'll have all the details. Let's see if they got the new gavel, which they replaced.
(GAVEL POUNDS)
QUEST: Yes, that's definitely a new gavel, and it was a very wimpy one for the end of trading on Monday, it is the 3rd of August.
Tonight, he's the greedy ringmaster. A London trader gets 14 years in prison for fixing libor.
Some markets finally reopen in Athens, and traders may have wished they had stayed shut.
And the United States of Arrears. Puerto Rico is now officially in default.
I'm Richard Quest. I mean business.
Good evening. The so-called ringmaster in the libor rigging scandal has been handed one of the toughest prison sentence in financial history.
Libor, the London Inter-Bank Offered Rate. And now, the former London trader, Tom Hayes, has been given 14 years in jail for illegally
manipulating the bank lending rate.
This is Hayes. He is the first person to be convicted by a jury since the scandal broke of fixing libor. Eleven others are still awaiting trial.
But as for Hayes himself, he's been described as shy and reserved, far from the brash, fast-talking stereotype. He was nicknamed Rainman by
colleagues. He was recently diagnosed with Asperger's syndrome.
So, who is Tom Hayes? Friends knew him as Tommy Chocolate for preferring hot chocolate over beer on a late night out. The prosecution,
though, painted a very different picture of the man. They called him a dishonest individual motivated by greed. And during his sentence, the
judge described Hayes as a gambler who lacked integrity.
Hayes's lawyers arguing that he was more Austin Powers than James Bond, and claimed that libor rigging was simply common practice in the
industry. Common practice it may have been, but the size and depth of it has most certainly given cause for concern.
I'm joined now by Ralph Silva, the director of SBR Network, former investment banker, now lives in Toronto. So, first of all, before we get
to his sentence, the gerrymandering and fixing of libor was one of the most egregious acts in the financial markets, would you agree?
RALPH SILVA, DIRECTOR, SBR NETWORK: I would totally agree, and that's why it's very important that we got a criminal prosecution off of this
particular case. It's the biggest issue, it caused the greatest grief in the financial services industry. And by that measure, it's the best
process that we have to get that trust back with the customer base.
QUEST: Of course, Hayes may have sent some extremely colorful e-mails looking for a libor rate on a particular date to make more money, but it
takes two to libor fix, doesn't it?
SILVA: It certainly does, and I think that -- I like to call this sort of a group of people in the forest and there's a black -- an angry
black bear after you. You don't have to run the fastest, you just have to run faster than the slowest guy. And Tom, I think, was the slowest guy.
I hope that he doesn't become the scapegoat to this, because there's a lot of other people who were involved in this, and I hope that the
prosecutors go after them as well, and not just let Tom be the one that takes up the entire burden of this.
QUEST: Fourteen years is a long time, but then, the acts were pretty awful. But when we look at the totality of prosecutions for insider
trading or for miscreant acts post-recession, there haven't been many of them.
You have Raj Rajajaratnam, which -- who got 11 years. You've got Jeffrey Skilling. You've got a handful of them. But you've really got to
go back to Boesky and Milken before you really see big, long sentences.
SILVA: That's right. And the reason for that is that the prosecutions are incredibly complex. We're looking at multi jurisdictions,
we're looking at business laws, we're looking at tax laws, and we're looking at dozens of regulators. It's incredibly complex to get these
guys.
And the prosecutors -- and I give them credit for actually going after these -- but the prosecutors simply don't have the resources nor, I have to
be honest, the talent to go after these guys --
QUEST: All right --
SILVA: -- and I hope that they start going after these guys, because they can get a lot of these guys in jail if they do.
QUEST: So, we've got -- Hayes is gone. There's libor. We've still got some prosecutions for foreign exchange fixing. Is it your feeling that
this fixing is gone? Is stopped?
[16:05:02] SILVA: Yes. In this particular area -- and I think we've got to be clear with that. There are a lot of other areas of financial
services that still have the possibility of having this type of thing happening, and we do have to address those, but in this particular area, it
has stopped.
They're scared. And the operations within the banks have changed themselves. So, they're not willing to do it, and the operations
themselves are watching these bankers with such close -- with such myopic vision that they can't do anything.
QUEST: Ralph Silva, joining us from Toronto. Thank you, sir.
Wall Street had a busy session, and the stocks were very sharply down at the close. In fact, besides that little tinge of green at the
beginning, everything else was lower. The low point of the day came just after lunch. And when all was said and done, the Dow was off 91 points at
the close.
What's going on? Paul La Monica is --
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: Thank you.
QUEST: Good to see you. First of all, before we get to that, 14 years. Long time for price -- for libor fixing.
LA MONICA: Oh, without question, it is a very stiff sentence, but many, I think, would argue that it's probably relevant and valid given the
severity of the crime.
QUEST: So, what happened today?
LA MONICA: It was not a pretty start to August. It could have been a lot worse. We saw from the chart, the Dow was down 200 at one point. It
was mostly energy companies again, Exxon and Chevron, plunging along with oil.
QUEST: Why? Because oil price is down?
LA MONICA: Oil prices were down more than 3 percent, so it was a notable drop. People are worried about the health of the global economy.
We had weak manufacturing data, not just from the United States, but also China. That is kind of a double-whammy. If you have China slowing down
even more than we were already fearing, that's very bad news for commodities.
QUEST: Right, but here -- back with these oil companies. Here we have the conundrum. The oil companies are down because of the falling
price. The oil companies make up quite a big part of the Dow Jones, therefore, it's reflected. But actually, that falling oil prices is good
for the US economy.
LA MONICA: That is definitely true, and you did see some other companies the Dow that were up today. Disney, which is going to report
results tomorrow, that stock's at an all-time high, and I think a lot of people are still visiting the theme parks partly because fuel prices are so
low. It's easy to fly there, it's easy to drive to Disneyland, so that's a stock that's a direct beneficiary, I think, of lower gas prices.
But you had in addition today some tech companies, Apple and IBM, both of them were down. People, I think, are just starting to worry that maybe
IBM, it's a slow growth company, we know that they have many problems. With Apple, there's still this lingering fear that maybe its best days
could be behind it --
(CROSSTALK)
QUEST: Hang on!
LA MONICA: -- iPhone sales were a little slower.
QUEST: Hang on! Hang on!
LA MONICA: I'm not saying I believe that. I'm just saying what's out there.
QUEST: Ooh. Really?
LA MONICA: I don't believe its best days are behind. I'm just --
QUEST: It just had record -- I'm just taking a --
LA MONICA: No, no, no, I'm not saying --
QUEST: -- I'm just looking at you today.
LA MONICA: -- I'm looking for one moment that Apple is doomed or peaking at all.
QUEST: Right.
LA MONICA: There are some on Wall Street that are starting to suspect that. They're probably wrong.
QUEST: And they're the same people who thought it was done a few years ago and missed out on that money, and the same people who didn't
realize Google was going to go to wherever it is today at the price.
LA MONICA: Google is now one of the most valuable companies in the world. People doubted that one as well. So, yes, people always think that
a lot of these tech companies, particularly the ones that spend a lot of money, maybe they're making a mistake, they're spending too much money,
it's not going to be worth it.
Apple, Facebook, Google, you can even argue Amazon with its history of losses, but they just reported a profit in its most recent quarter. They
all have proven the doubters wrong.
QUEST: Good. Paul, thank you. Some day, I want you to come and talk to me about whether or not all that money that Facebook paid for WhatsApp
is justified.
LA MONICA: That would be -- that's going to be a very interesting question. It's too early to say. Instagram, definitely they got a steal.
QUEST: We'll talk about it in the future. Thank you.
LA MONICA: Thank you.
QUEST: The bloodletting on Wall Street was nothing compared to what happened on the Athens Stock Exchange. Investors expressed their
displeasure, and there are signs the underlying economy has suffered damage as well. We'll talk about that in a moment. QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
[16:10:39] QUEST: The Athens Stock Exchange opened for business again, and investors have made clear they're not terribly happy at the way
things went. Look at how it closed. It was -- well, look. That's a lot better than it was at the open. It closed down 16.2 percent, which is 129
off the index at 668.
Now, this is not extraordinary and it's not surprising, bearing in mind what was happening, and particularly bearing in mind the banks. But
the picture, the close was down 16 percent, but the picture was even bleaker at the beginning of the day. Then, shares were down 22 percent.
Let's follow the day, as you see.
It opens down. That's the important bit. It opens down, and then you get this marginal recovery towards the session. The banks were the worst
affected of the shares, the four biggest lenders, they were down 30 percent, which is the limit down, so of course, trading was halted there
for what happened, 22 percent, off 16 at the close.
Today's moves reflect a pent-up demand of trade from an historic month. Now, bear in mind, you've got June the 28th, that's when the banks
and the stock exchange were first closed. It was followed by the IMF default. So, through all of this period, there is no trading taking place.
Then you've got the referendum that took place, and that referendum decided no, but that no turned into a yes. Again, the market remains
closed throughout that whole week when you had the shenanigans of the government, the new cabinet, and then heading off to Brussels.
The Brussels deal takes place roughly there, and that brief few days after that with parliamentary approval, and eventually, the banks reopen.
But for another two weeks, you've got an idea of just how awful the stock exchange closure had been overall.
Socrates Lazaridis is the chief exec of the Hellenic Exchange Group, which runs the stock exchange. He told me that bearing in mind all of
this, and bearing in mind what happened over there, he told me stability, he hoped, would come soon.
(BEGIN VIDEOTAPE)
SOCRATES LAZARIDIS, CEO, HELLENIC EXCHANGE GROUP: The anticipation was that today we will have the -- let's say a day where the pressure of a
one-month closed stock exchange depicting the prices of the stocks, and especially the banks. And as you have seen, all four banks were closed at
the limit down while the rest of the market has reacted from the beginning of the day.
QUEST: How long do you think it will take the markets to, if you like, stabilize or to correct?
LAZARIDIS: The most crucial is what you indirectly have mentioned, when the banks will be stabilized, as the banks are covering an important
part of the capitalization. Today, their losses were accounting for more than 58 percent of the total losses of the market capitalization.
I hope that the rest of the economy -- the rest of the market has been stabilized and tomorrow will be OK.
QUEST: The problem, of course, in the very short term is that all those companies on the market that will have been affected -- I'm talking
about general corporations, not banks -- they will have been affected by the economy, which of course, was very seriously hit by the fact the
banking sector was closed. Look at the -- the economic numbers have still to feed through.
LAZARIDIS: You are right. But on the other hand, the stock market, there are big anticipation, and I believe that the private sector in Greece
has a future, and a very good future, and especially the difficulties that they will have faced. They are bringing more effort and more -- a harder
effort in order to go better.
[16:14:56] On the other hand, I must mention that we have -- we are calculating two new indices, one for exporting companies, and one with the
companies with -- specific fundamentals. And this new individual fundamentals has dropped this day only 3.5 percent, while the exporting
activity index was just at 10 points below.
QUEST: Finally, you'd bet you'd never thought you'd ever have to preside over a market that would be closed for a month.
LAZARIDIS: You are right. I never believed that the market would be closed in one month. And now I must say that I'm happy that today the
market has had a daily value of 65 million with only 8 percent participation of the banks, because during the previous six months, banks
there were dominating more than 50 percent of the average trading value, and the average trading value was 100 million euros.
(END VIDEOTAPE)
QUEST: That month of closures we're talking about and the uncertainty hit Greek factories very hard. Manufacturing output saw it's biggest
monthly loss ever. Look at that. The PMI, just look at that sharp fall that took place.
Factory owners reported a fall in orders, along with the difficulty in getting credit and raw materials, and then paying for it afterwards.
Employment suffered, and activity in the rest of the eurozone was broadly positive. Shows just how bad the situation is.
Nicholas Economides is the professor at New York University Stern Business School. He joins me now from San Francisco. Sir, thank you. The
--
NICHOLAS ECONOMIDES, PROFESSOR, NEW YORK UNIVERSITY STERN BUSINESS SCHOOL: Hello.
QUEST: These numbers are pretty awful, and in many ways, more serious than today's stock market fall, because these numbers have to feed through
to the bigger, wider economy.
ECONOMIDES: I think that's correct. I think that there is a recession that is getting deeper in Greece, and the -- Greece needs the
agreement with the Europeans as fast as possible. And it needs the money from the Europeans, the loan from the Europeans, as well as the
recapitalization of the banks.
The reason why the banks are the worst performing stocks right now is because the shareholders are going to lose a lot of their value once the
banks get recapitalized. Still, the banks need to be recapitalized as soon as possible.
QUEST: Right. Now, there's talk that the negotiations for the third bailout have been stalled by logistical and security issues, but the Greeks
hope to be able to have a deal in place by August the 20th, when the next tranche of money has to be paid. Is that realistic, to get a major third
bailout done in that time?
ECONOMIDES: I think it's very hard, it's very hard. We're talking about only two weeks and a few days. But at the same time, if there is
good will on all sides, it can happen, even if it's not the final, final, final deal. There's not more I can say on that.
QUEST: Right, but -- well, there is something we can put into the context, because if taking today's PMI number, if we take today's PMI
number and we look at a recession of 4 percent, clearly any bailout has to have some very negative economic underpinnings.
ECONOMIDES: Yes. I think the bailout that is being discussed might be insufficient. The economy is doing much worse than when the framework
of agreement was agreed, so people have to look at it very carefully.
At the same time, the technical details are there. People can be -- at least agree on that. And then see what's the appropriate size of the
bailout.
And finally, there is the issue of the IMF. The IMF has to sign on to that bailout, which it hasn't yet, because the IMF insists --
QUEST: All right.
ECONOMIDES: -- on a debt reduction.
QUEST: Debt reduction, briefly in a sentence, are they going --
(CROSSTALK)
ECONOMIDES: Well, in a sentence --
QUEST: Are they going to get debt reduction? Because without real debt reduction, everything else is meaningless.
ECONOMIDES: I think Greece is going to get a very deep debt restructuring and a movement of the maturities of the debt all the way down
to 100 years. That is what it's going to get. It won't get a haircut on the nominal value.
QUEST: That was short and we look forward to you, sir, being back -- when you're back in New York to come in and join me here and help us
understand what's happening. We appreciate it, sir. Good to see you.
ECONOMIDES: Thank you.
QUEST: Outside of Greece, European markets mostly ended the day in the green.
(RINGS BELL)
[16:20:00] QUEST: They were helped by stronger results from Commerzbank, HSBC, and Heineken. The FTSE was the only major index that
closed down, but hardly much.
An historic moment in the fight against climate change. President Obama has unveiled an ambitious clean energy plan, and it's got tough
opposition towards it. His senior advisor tells us about how they're going to get it through in a moment.
(COMMERCIAL BREAK)
QUEST: Barack Obama is calling it the single most important step America's ever taken in the fight against global climate change. Now, the
president has unveiled the final version of his ambitious plan -- it is ambitious -- to tackle greenhouse gas emissions from coal fired power
stations. He has to sell his clean energy plan to the American public.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I don't want to fool you. This is going to be hard, dealing with climate change in its
entirety. It's challenging. No single action -- no single country will change the warming of the planet on its own.
But today, with America leading the way, countries representing 70 percent of the carbon pollution from the world's energy sector have
announced plans to cut their greenhouse gas emissions. In December, with America leading the way, we have a chance to put in place one of the most
ambitious international climate agreements in human history.
And it's easy to be cynical and to say climate change is the kind of challenge, it's just too big for humanity to solve. I am absolutely
convinced that's wrong.
(END VIDEO CLIP)
QUEST: The new climate bill will force power plants to reduce their emissions, and because of that, it's ignited a firestorm of smoke amongst
US corporations. Major businesses for and against their measure have voiced their views.
Let's start with those that are for. You end up with vast corporate powerhouse, like eBay, General Mills, and Nestle. They all wrote in
support of the bill. They claim that the new measures most certainly will help stimulate job growth and boost the economy. So far, so good.
On the other side, those that are against it, and you end up, it's much stauncher opposition from the major American utilities.
Representatives from all -- from oil and gas industries say their measures will send bills skyrocketing and could cost thousands of Americans their
jobs.
You may say not surprising that maybe some newer industries or those less responsive to power say yes, those that are in the power industry,
particularly the American Coalition for Clean Air and coal industry say no.
Brian Deese is an assistant to President Barack Obama. He's a senior advisor on climate issues and energy, and he joins me now from the White
House. Good evening, sir. Thank you for joining us.
BRIAN DEESE, SENIOR ADVISOR TO US PRESIDENT BARACK OBAMA: Happy to be here.
QUEST: So, let's not debate climate change per se, because A, it's not going to get us very far, and B, I don't think you'll change your mind
anyway. Let's just talk about this particular bill, or this particular action by the president and the stiff opposition that it's going to face.
The Republicans basically say it ain't going to happen. How's he going to do it?
[16:25:06] DEESE: Well, the good news is that we have solid legal authority under the Clean Air Act to put this measure in place, so we're
going to move forward. We're going to set national limits on the amount of carbon pollution that can be put into the air, and those will set state
limits. And states will have a chance to construct their own plans, using ample flexibilities in the law, for how they can comply as well.
So, we're going to move forward with that process. That process starts in earnest today. And we're confident that we're going to see
states across the country employing innovative and creative ways to make this work in ways that work for their consumers --
QUEST: Right.
DEESE: -- their businesses, and the economy.
QUEST: The lawyers are going to have a field day, aren't they? I mean, the reality is, those states that are opposing this -- and there are
many -- are going to litigate you all the way to the top.
DEESE: Well, look, there's no question that there will be lawsuits brought. As the president made the case powerfully today, every time we
have tried to take action to protect our air, protect our water in common sense ways, there has been a well-funded opposition against.
But we've shown in the US that we can do this. We cleaned up smog, we cleaned up the impact of acid rain, and we're going to prevail in this push
as well. And I think when the dust settles, what you're going to see is in states across the country, with different energy mixes --
QUEST: Right.
DEESE: -- people looking at this and seeing that it is actually a pragmatic approach, and there are ways to comply that work for their
citizens.
QUEST: How do you prevent this from becoming a major football. Maybe you don't prevent it becoming a major football in the 2016 campaign. How
do you prevent it from getting stymied.
DEESE: Well, look, we're very focused on implementation right now. And we've got a solid window of time here to work with states to get this
plan in place. As we've said, we have the authority to do that, and we're going to push forward --
QUEST: Right.
DEESE: -- over the next year. And I think you're going to see a lot of progress.
QUEST: Finally, internationally, the US has pretty -- whatever the truth may be, has a pretty dreadful reputation when it comes to dealing
with these environmental issues. It's seen as a laggard, not a leader. Does this change that equation?
DEESE: Well, I think that we have seen that caricature change in pretty substantial ways over the past year, and I think this plan will
reinforce it. The announcement between the US and China last year was historic, and it has led to momentum with the US engaging. We recently had
the Brazilians here at the White House, and we made historic announcements with them as well.
This plan reinforces the US's commitment to take on this issue seriously, and the president is absolutely committed, as you heard today,
to taking this to the global stage --
QUEST: Right.
DEESE: -- and trying to work on an international agreement as well.
QUEST: Sir, thank you for taking time. Busy day for you, we appreciate it, that you popped out of the White House --
DEESE: Happy to do it.
QUEST: -- to talk to us. Many thanks, indeed.
Now -- and as I say, we weren't debating the rights and wrongs of climate change. I'm sure many of you have got your thoughts on that, but
there's no point in arguing that when you're dealing with the White House climate advisor. He ain't going to change his mind.
There's no help coming for Puerto Rico to avoid default. We're going to talk to the island's lone representative in the US Congress. Default in
Puerto Rico.
[16:28:44] (COMMERCIAL BREAK)
[16:31:00] QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment when we'll be talking to Puerto Rico's only
representative in Washington as the territory official defaults on its debt.
And the ultimate accolade for the ultimate Frisbee. The sport has got Olympic approval. I'll speak to the president of the World's Flying Disc
Federation.
Before that, this is CNN and on this network the news always comes first. President Barack Obama says he's determined to defeat cynics who
say (AUDIO GAP) cannot tackle climate change. Mr. Obama's unveiled his clean power plan a few hours ago in Washington, putting new limits on
greenhouse gas emissions.
The President says the problem of climate change can be fixed.
(BEGIN VIDEOCLIP)
BARACK OBAMA, U.S. PRESIDENT: We can figure this stuff out as long as we're not lazy about it, as long as we don't take the path of least
resistance. Scientists, citizens, workers, entrepreneurs, together as Americans. We disrupt those stale old debates - upend old ways of
thinking.
(END VIDEOCLIP)
QUEST: The U.K. banker has been sentenced to 14 years in jail for his role in the trillion-dollar Libor rate reading scandal. The former UBS
trader Tom Hayes is the first person to be convicted of illegally manipulating international lending rates. The 11 other people are still
awaiting trial.
Stocks in Greece fell 16 percent on Monday. It was the first day of trading since the Athens exchange closed in late June. Bank shares (AUDIO
GAP) were the particularly hardest hit, falling 30 percent. The chief exec to the Athens Exchange of the Hellenic Stock Exchange told me he hopes
stability will come soon.
(BEGIN VIDEOCLIP)
SOCRATES (PH) LAZARIDIS, CEO, HELLENIC EXCHANGE GROUP: Today their losses were accounting for more than 58 percent of the total losses of the
market capitalization.
I hope that the rest of the econo - the rest of the market - has been stabilized and tomorrow will be OK.
(END VIDEOCLIP)
QUEST: The death penalty is still an option for the shooter in the 2012 Colorado movie theater massacre. James Holmes faces either death or
life without parole after his sentencing entered the third and final phase. He's already been found guilty of 24 counts of murder after he killed 12
people in the theater in Aurora.
Migrants made around 1,700 attempts to break into the U.K. from France overnight. According to the news agency citing a local police union, it's
part of the ongoing crisis that France and the U.K. are struggling to face as a wave of migrants is trying to reach Britain through the Channel
Tunnel.
German and British media claim thousands of blood test results have been leaked from a secret data base created by the International
Association of Athletic Federations.
A report that a third of medals in major track and field events over a decade were won by athletes who had suspicious doping results. The
International Olympic Committee has pledged zero tolerance if the allegations prove to be true.
The largest U.S. territory is now officially in default. Puerto Rico didn't pay $58 million in debts that was due at the close of business
today. It's the first default in the island's history. The commonwealth debt balance is as big as that of the state of New York whilst its economy
is some 17 times smaller.
Puerto Rico's governor says the island's economy is current (CLEARS THROAT) - excuse me - in a death spiral. Joining me on the line from San
Juan is Pedro Pierluisi, resident commissioner of Puerto Rico. That means he's the sole member of the U.S. Congress representing the territory.
[16:35:05] Commissioner, thank you for joining us, and Congressman. Thank you for joining us. The question --
PEDRO PIERLUISI, RESIDENT COMMISSIONER, PUERTO RICO: (Inaudible) you too.
QUEST: -- now, so, default has arrived. How on earth does Puerto Rico get out of this mess?
PIERLUISI: Well, the first thing that I have to say is that it's - it is very unfortunate that that payment was not made today. The funds were
available and it looks like it is a strategy to bring creditors to the table - to the negotiating table - and I had disagreed with the strategy.
Puerto Rico might be heavily indebted, but a lot of its debt is manageable, payable. You're actually - what you're - what you have to do
in Puerto Rico is to restructure debt at a couple of - at the level of -
QUEST: Right.
PIERLUISI: -- government-owned corporations like the Puerto Power Authority and the Puerto Rico Water and Sewer Authority. But we shouldn't
be failing to make payments, --
QUEST: Well -
PIERLUISI: -- particularly when we have the funds to make it.
QUEST: -- well, except, look, you know, I've got a bit of experience about this having just been in Athens for goodness knows how long.
Surely the only way to bring those creditors to the table is to threaten default or if you've got a huge debt pile, actually default.
PIERLUISI: Actually it doesn't work. That's not the way it should work in the case of Puerto Rico because Puerto Rico's not a sovereign
country. You cannot compare Puerto Rico to Greece. You're talking about 17, 18 different government entities that issued funds. A lot of them have
done so and have no financial difficulty in meeting their payment obligations.
The central government of Puerto Rico definitely has issued some funds and actually the bonds are manageable. So it's simplistic -
QUEST: Right.
PIERLUISI: -- to talk about Puerto Rico having $72 billion in debt and that's too much debt. It doesn't work that way. What we should do
though is to sit down and negotiate with creditors like we have been trying to do at the - for example - at the Puerto Rico Electric Power Authority,
finalize that negotiation -
QUEST: Right.
PIERLUISI: -- and use it as the model for other entities like our Water and Sewer Authority -
QUEST: OK, but -
PIERLUISI: -- that's what we should be doing.
QUEST: But if you do that, first of all you've got to hope the creditors are going to negotiate with you but also surely what really needs
to happen is - as we saw a few months ago - the government needs to be given the ability as indeed was Detroit, as indeed was Orange County, to go
bankrupt.
PIERLUISI: Well, I agree that Puerto Rico should be treated like a state for purposes of the Federal Bankruptcy Code. I have a bill pending
before Congress and there's a similar bill pending before the Senate - the U.S. Senate.
And basically the way Chapter 9 of the Bankruptcy Code works - it allows state legislative assemblies to determine which government entity
within each state -
QUEST: Right.
PIERLUISI: -- in the case of Puerto Rico would be within Puerto Rico can reorganize themselves under the protection of the bankruptcy code - of
the bankruptcy court. And that should be available to Puerto Rico. It wouldn't allow Puerto Rico, the central government, the commonwealth to be
(inaudible) -
QUEST: All right.
PIERLUISI: -- but it would allow, for example, the Puerto Rico Electric Power Authority, the Puerto Water and Sewer Authority to
reorganize themselves and it is a tool that would be helpful.
So I agree with you. We should have that access (ph).
QUEST: Sir, thank you for joining us. We'll talk more about this in the future. We appreciate you giving us time for joining us, Congressman,
much appreciated.
Now, busy day one way and another. So we need to look at what has been happening with business on the move. And we start with HSBC which is
getting rid of its unit in Brazil. It's selling the unit to Banco Bradesco. It's a cash deal worth $5.2 billion. HSBC is shifting the focus
to Asia instead.
Maps galore - Audi, BMW and Daimler are buying Nokia's mapping technology and the carmakers are paying $3.1 billion for Here Maps. Uber
offered $3 billion for all of this just a few months ago.
Meanwhile, profits are pouring in for Heineken. The Dutch brewer says brands in emerging markets Dos Equis are proving extremely popular.
They're even bubbling higher among younger drinkers in the United States. We'll be counting them all one by one. That's you're "Business on the
Move."
[16:40:05] As we continue on "Quest Means Business," the debris of potentially MH370, certainly the search expands. Investigators are
beginning to examine the aircraft component recovered last week.
(COMMERCIAL BREAK)
QUEST: Behind closed doors in Paris a short time ago, investigators met to start the work on seeing the crucial details for tests on Boeings
777 debris found on Reunion Island. The plane's flapper arrived at the laboratory in Toulouse over the weekend.
Salima Mohsin joins us now from Toulouse. What have we heard?
SALIMA MOHSIN, CNN CORRESPONDENT: Well, they're remaining very tight- lipped, Richard. As you can imagine, this is a very delicate and sensitive investigation, not least because of the 239 passengers onboard. Families -
they don't want to release any information until they have absolute confirmation that this is a part from MH370.
And of course, Richard, that this is potentially a criminal investigation. The four French nationals' families onboard that flight
have launched a case for manslaughter should hijacking or terrorism be involved which is why today's meeting behind closed doors was held at the
French prosecutor's office.
(AUDIO GAP) there where Malaysian authorities - of course the United States NTSB, French authorities and an addition over the weekend, Richard -
Chinese officials decided to join.
Of course China had the majority of passengers onboard flight MH370 which was heading from Kuala Lumpur to Beijing.
QUEST: Right.
MOHSIN: They are remaining tight-lipped of course. That flapper was delivered under lock and key in a sealed box to that lab at the VGA.
QUEST: We don't have any idea of - I mean, they say they're going to start the analysis and - I mean, Wednesday was the day I heard where
they're going to make any such announcements. Is there a real risk that they will be able to determine it's from a 777 but not from that 777?
MOHSIN: Yes, this is the question and it's so debatable with every expert I'm speaking to here. Of course they have confirmed it from a 777
over the weekend. The Malaysian Transport Ministry said that they've managed to confirm that.
They didn't say that it was from MH 370 because they're waiting for all these authorities and bodies that are working on the investigation to
be in that laboratory and the same time before they open that sealed box, likely to be filmed of course I'm sure you know from previous
investigations as well that's the way it's done.
Now, what they're saying is they have two numbers that could potentially identify and link it to not just the aircraft but that
particular flight. But as you know, the parts are often exchanged and it just depends on how well those have been logged.
[16:45:02] And of course they also know that it has marine life on it -- those barnacles that were identified when it first came ashore. So that
should at least inform them of how long this piece has been in the sea potentially because that marine life can be -
QUEST: Right.
MOHSIN: -- scientifically tested and analyzed. But there is a lot of concern about whether they can definitively say it's from MH370, Richard.
QUEST: Keep watching. Let us know when there's more to report. Thank you.
Families of those onboard obviously their waiting has been agonizing. CNN's Will Ripley now in Beijing,
(BEGIN VIDEOCLIP)
(PEOPLE EXPRESSING ANGER)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Anger is growing for the families of Malaysian Airlines flight MH370. Demanding this meeting
with Chinese transport officials. "You just say whatever you want," she says.
More than 500 days on they're tired of crying, tired of waiting, waiting that's not over. Even if debris suspected to be from the missing
plane offers new clues.
STEVE WANG, SON OF MH370 PASSENGER: Just that it is from MH370 but it doesn't mean there's anything more. You know, you still cannot help you to
find the plane and it still cannot help you find the truth about what happened and why.
(MUSIC PLAYS)
RIPLEY: Steve Wang hasn't spoken his mother's name since the day she and 238 others disappeared. Wang keeps her photo private along with her
last message asking her to bring her coat to the airport.
Do you still listen to the voicemail she left you?
WANG: Sometimes. Sometimes.
RIPLEY: When did you listen to it last?
WANG: Wednesday evening.
RIPLEY: You listened to it on Wednesday when you heard about the debris.
WANG: Yes.
RIPLEY: New evidence washing ashore on Reunion Island forces families to face a new wave of agony.
ZHANG MEILING, MOTHER OF MH370 PASSENGER, INTERPRETED BY RIPLEY: (CRYING) I feel so sorry for my two grandsons. What have they done wrong?
RIPLEY: -- asks Zhang Meiling. China's one child policy allowed Zhang and her husband just one daughter who was flying home with their only
son-in-law --
MEILING, INTERPRETED BY RIPLEY: Not a minute has passed without me thinking of them -
RIPLEY: -- she says. Zhang says she wants to try getting information at the Malaysian Airlines office. Police detained her for eight hours.
More than 150 Chinese were on MH370. China's Communist Party discourages families from gathering and protesting as they did after the
plane vanished. The assistance center in Beijing closed.
What do you need?
WANG: The truth.
RIPLEY: Wang says the discovery of suspected MH370 debris doesn't bring closure.
WANG: I think the only closure will come at a time when they find the plane and find everybody and find the truth.
RIPLEY: His biggest fear? The search will slow, the spotlight will fade and the families of 239 people will be left as they are today - still
waiting. Will Ripley, CNN Beijing.
(END VIDEOCLIP)
QUEST: Because the news never stops, neither do we. This is CNN.
(COMMERCIAL BREAK)
QUEST: Ha ha - caught it! How about one of these? And back again. The International Olympic Committee has gathered 128 times and never before
has it recognized a sport like this.
It's the ultimate Frisbee. It's the game with flying discs, there's a huge cult following and it has no referee. It's also hard to lose half the
studio.
I spoke to Robert Rauch, the president of the World Flying Disc and asked him if he expected that the IOC would embrace this as a sport.
(BEGIN VIDEOCLIP)
ROBERT RAUCH, PRESIDENT, WORLD FLYING DISC FEDERATION: Absolutely, as culmination of four years of work going back to our initial application
back in 2012, our provisional recognition in May of 2013 and now the permanent recognition by the International Olympic Committee. I'm really
excited to see that.
QUEST: Does this mean it will become an Olympic sport and be part of the Games?
RAUCH: Well, that's certainly our aspiration, but the process of being recognized is separate from actually making it onto the Olympic
program. We are now one of 35 sports which has been recognized by the IOC but is not yet on the program.
Those sports include some very familiar sports like American football, baseball/soft ball, cricket, squash -
QUEST: Right, --
RAUCH: -- so it's not -
QUEST: -- but what I'm thinking when you have sports like beach volleyball which have been recognized and made it, I'm wondering what is
the - what has to happen for you to make it into the Games?
RAUCH: There's two different paths as of right now and things have changed a bit just as of last December. The first path is the traditional
path of meeting of the minimum 75-country requirement -
QUEST: Right.
RAUCH: -- and being able to politic and get your way onto the permanent program. That's a complex process. There's many, many sports
who have been in line for a long time looking to do that.
The second - there were a variety of changes made through the Olympic agenda 2020 that was put forward by President Thomas Bach who's the new
president of the IOC in the last couple of years.
And they're looking to find ways to make sure that the Olympic Game program is interesting to today's youth and meets issues like gender
equality and the like. So it's under - these that I think is our best shot to get in.
QUEST: I have a question. Convince me, sir, because I have a disc in my hand - convince in 30 seconds - I can't even carry it - that this is
worthy of the Olympics. Thirty seconds starting now.
RAUCH: Very good. There's 7 and 1/2 million people who play ultimate today around the world. It's a sport that attracts youth. We have a lot
of kids at university and younger who are playing the sport and want to see it played.
The game is exciting, it's fast-moving, it's played on a pitch about the size of a football field and there's non-stop action.
Finally, the Frisbee is fun to watch. It floats in the air very different from a ball and there's a lot that can be done by a great
thrower. It's very athletic and exciting to today's television audience.
(BEGIN VIDEOCLIP)
(CRASHING SOUND)
QUEST: Sorry!
It's a beach fit for a king, specifically a French beach and the king of course is the Saudi king. The preparations made for his arrival caused
an uproar and now the monarch has gone. Hala Gorani has our report.
(BEGIN VIDEOCLIP)
HALA GORANI, CNN ANCHOR, "THE WORLD RIGHT NOW": It was expected to be a three-week vacation. But after just eight days in the French Riviera,
King Salman of Saudi Arabia and hundreds of his entourage have moved on.
The king's arrival little more than a week ago caused uproar in Vallauris which lies between Cannes and Antibes on the French Riviera.
It's a destination home to many exclusive resorts and marinas and it's also where the Saudi king Salman owns a villa.
But ahead of the Saudi king's arrival last months, workers started sealing off the strip of public beach in front of his villa. They began
installing a gate to block a tunnel providing the only access and even started work on an elevator linking the villa to the beach.
Outraged, 150,000 locals signed a petition against the closure of the beach. However, not everyone was unhappy. Some welcomed the arrival of
the wealthy royal and his 1,000-strong entourage.
ANDRIBE MILLON, MARKET TRACKER, VIA INTERPRETER: I think that for the town of Cannes' economy, it's a good thing because it brings lots of
people.
MICHEL CHEVILLON, HOTEL INDUSTRY ASSOCIATION, VIA INTERPRETER: Thanks to the arrival at the end of July of these Middle Eastern clients, we can
expect a 15 to 20 percent increase in business compared to last year.
[16:55:00] GORANI: The economic boost might have been shorter than expected. On Sunday, the king flew from Nice to Tangiers in Morocco and on
Monday the public beach at Vallauris was open to the public once more. Hala Gorani, CNN London.
(END VIDEOCLIP)
QUEST: And we will have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." In the U.K., a man is starting a prison sentence of 14 years for rigging Libor -- the London Interbank
Offered Rate, the benchmark interest rate by which so many of the car loans, mortgages, house payments, -- you name it - all set by Libor.
The fiddling and scheming that went on to fiddle Libor was nothing short of a disgrace. Now the first person has actually been sent to
prison. Nobody who read any of the evidence could fail to be horrified by what they heard as drunken traders made deals with each other to try and
rig the market. It was a disgrace.
But as you heard on this program tonight, the bigger disgrace perhaps would be if only one man ever goes to prison for it - it takes two to tango
and it takes two to fiddle a market. And what we discovered with Libor and with Forex which is still to come to trial, is that in all these cases,
there were plenty of people who were more than happy to do the dastardly deed.
All in all, we have been given an insight into the sort of terrible behavior that led to financial crises. Integrity's still got a long way to
go before it returns to the markets. But at least today, one man has realized what it means to be on the wrong side.
And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope
it's profitable.
I'll see you tomorrow.
END
