Return to Transcripts main page
Quest Means Business
Dow Down Over 200 Points; Finance Ministers of the World Unite to Halt ISIS Money Machine. Aired 4-5p ET
Aired December 17, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
[Bell ringing]
RICHARD QUEST, HOST: A reversal of fortunes. The Dow Jones off 1.5%, down more than 200 points. The complete reversal from what we saw yesterday
after the Fed rate rise, and the gavel is it. Trading comes to an end. We'll get to the reasons why the market is off so sharply on Thursday,
December the 17th.
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST: Tonight finance ministers of the world they're uniting to halt the ISIS money machine.
The French and Spanish ministers you'll hear on this program.
Jose Mourinho is singing the blues as Chelsea ditched their manager.
And Christine Lagarde on trial the head of the IMF has old battles to fight in France.
(END VIDEO CLIP)
QUEST: I'm Richard Quest, we have an hour together, and I mean business.
(MUSIC PLAYING)
QUEST: Good evening. Today the world united to choke off ISIS' finances. In the last half hour the United Nations unanimously adopted a resolution
targeting the group's funding.
(BEGIN VIDEO CLIP)
QUEST: The motion brought together countries like the United States and Russia usually on the opposite sides of the bargaining table. Speaking a
few moments ago, United States Treasury Secretary, Jack Lew said this agreement was just the beginning in the fight against ISIS.
JACK LEW, U.S. TREASURY SECRETARY: This resolution is a critical step, but the real test will be determined by the actions we each take after
adoption. We need meaningful implementation, coordination and enforcement from each country represented here and many others.
(END VIDEO CLIP)
QUEST: Now the importance of today's meeting is it's the first time in history that the Security Council had met at the finance minister's level.
Normally its foreign ministers and its U.N. Ambassadors, but it's an indication of the seriousness of the position when it comes to ISIS money
that they came together.
ISIS is the richest terrorism organization in history. It levies taxes at every turn and wherever you look, ISIS manages to create money. 360 odd
million in taxes, and that may double in 2015. But where does the money come from in taxes? 8 million civilians who are living in ISIS territory.
Fees on students, businesses taking over. One ventures to use the phrase taxes, it's more like extortion.
Then you have the revenue from oil. $500 million it's estimated. And that comes from 50,000 barrels a day. ISIS sells oil on the black market,
including to its own enemies. Air strikes and low oil prices have cut into that revenue, but the interesting part of these two criteria, taxes and
oil, this is what distinguishes ISIS from other terrorist organizations. Because ISISs has territory, territory with oil, that gives it revenues
from two seemingly more conventional and traditional sources of income.
Then you get to the usual ones that you find with terrorist organizations, bank looting, up to $1 billion. It's taken over banks within its territory.
And of course the only thing about banking looking is once the money has been looted, you can't get any more. Whereas with these you can continue to
squeeze and squeeze and squeeze.
And then the absolute usual one, kidnapping, extortion, even in some cases drugs and prostitution, which is between 20 to $45 million in 2015. Now, to
cut off these sources, the idea of the United Nations is to create a sanctions regime. It's to strengthen the existing rules and regulations.
It's to identify and prosecute funders of middle men and it's to coordinate efforts among the nations. It's all designed to stop this from reaching
ISIS, from reaching the terror in the streets of the world.
Before the resolution was passed, I was joined by the French Finance Minister, Michel Sapin, I asked him, ISIS operates as a state and
conventional methods will not be good enough to stamp out this sort of money.
(BEGIN VIDEO CLIP)
MICHEL SAPIN, FRENCH FINANCE MINISTER: (As translated) This is the characteristic of Daesh. You are absolutely right. It has constituted a
form of state. This is not a real state, but they control a vast territory, a rich territory with oil resources, with agricultural resources, with
populations that are forced to contribute. There is only one solution, to hit Daesh and to make Daesh disappear from Syria and Iraq. There are two
sources of income that enable Daesh to get funds from the outside and we have the responsibility to cut them off.
[16:05:09]
QUEST: Nobody is openly buying their oil or transferring money through the global banking system officially, so how do you aim to get to the big sums?
SAPIN: (As translated) I feel that for those large sums of money things are already settled. We can quickly track important amounts that can be
exchanged between the outside and Daesh. I think we have covered it with the international banking system. I think that everything is clear cut and
we can prevent Daesh from receiving large amounts of money from the outside. That leaves two things, oil. Oil is sold outside of Syria and
Iraq. If this is the case, the decision we will make this afternoon is to hit those who are active in this oil trafficking and to freeze their
assets. The other aspect is the trafficking of works of art that have been taken by Daesh and sold outside their territory.
QUEST: Can you get to those people who are buying Daesh's or ISIS' oil? Can you get to them? Do you know who they are?
SAPIN: (As translated) According to the information I have been given, this is a local kind of traffic with the people of Syria and Iraq. It could also
be oil trafficked to neighboring countries. It's limited territory but it's still too much. That is why Turkey as a state, as a government will have to
tomorrow, after the adoption of the resolution, firmly attack all trafficking, large and small.
QUEST: And as you put pressure on this oil revenue, where do you - where do you hit hardest?
SAPIN: (As translated) The best method is to hit the source of the oil, the well, or the transportation of the oil. This is what the allies are doing
today. It's a military action, of course. This is the best way to make sure there isn't any production of oil and no trafficking.
QUEST: I want to look now at further down the train, further down the line, to the terrorists, to the individuals who commit the atrocities such as the
awfulness we saw in your capital. Here you have another tricky task, don't you. It's about monitoring prepaid credit cards, phone numbers. It's about
watching smaller sums of money.
SAPIN: (As translated) We have to cut all funds from Daesh, but we also have to block other funding, small sums of money that help terrorists in
France and all around the world. These and other means, you're talking about prepaid cards. I have them in my pocket. I have two here. This one
was in Belgium, this one was in France. This one was bought anonymously. This one was also anonymously so you could transfer up to 2500 Euros
without anyone knowing who sends it and who gets it. This is how some of the expenses by the terrorists were paid for by those who slaughtered
people in the Bataclan club in Paris. so this card can be useful and we shouldn't attack the card itself but we should fight the anonymous
character of this card and everyone should declare their identity when they buy the card.
(END VIDEO CLIP)
QUEST: That's the Finance Minister of France, Michel Sapin. Richard Haas is the President of the Council of Foreign Relations. He says terrorism is
not the sort of thing that can be eliminated or eradicated. He joins me from New York.
Good to see you, sir. They're going to try and cut off the money, which of course is a - I mean we're talking about large sums of money. And at the
United Nations Security Council it makes for a great resolution. One wonders about the efficacy of such an attempt.
RICHARD HAAS, PRESIDENT, COUNCIL OF FOREIGN RELATIONS: Yes, in a different context, Woody Allen said 80% of life is showing up. Well in this context,
90% of life is implementing a resolution. So the resolution is essentially a statement of intent. It sets certain norms and rules. The real question,
though, both the willingness and ability to enforce it and I think there's real questions in Iraq, in Syria, in Turkey and some other countries.
QUEST: But - now you talk about this enforcement within those countries. When you have Russia accusing Turkey of buying the oil and you have
President Erdogan basically offended and affronted at such a suggestion, who is buying this oil?
HAAS: From what I can tell, most of it is being bought in Syria and its part of -- part and parcel of a larger Syrian policy. Bashar al Assad has
often tolerated ISIS because what he wants to do is make it a stark choice between himself and ISIS and then is counting on the world coming to him as
the lesser of the evils.
So one thing the Russians could use fully do is put an awful lot more pressure on their good friend, Mr. Assad. Because right now his oil
purchases from what I can tell are the largest. I think Turkey is also a problem, in which case we ought to go after oil tankers or anything else
with drones or cruise missiles or aircraft or what have you.
QUEST: But the difference of course with ISIS as I was alluding to earlier, is that it does have these quasi or seemingly legitimate revenue sources,
because it has territory. The ability to tax, albeit at draconian rates, the ability to have oil revenues, and yet so many months, a year or so
after - or two years after ISIS became a factor and a force, we are still - - we still haven't bled that dry.
[16:10:17]
HAAS: You're absolutely right. Bleeding it dry may be too high of a bar, but we could certainly do more than we're doing. With the Iraqis it means
helping them monitor their own banking system. The problem there is not just in areas that ISIS controls but it's areas just outside that control
and whether people are moving across borders. You can physically raise the priority of oil-related targets for your air missions and I think that's
happened. That's happened recently. One can look at sanctions, going after again the Syrians or the Turks conceivably if they're going to allow
certain things to happen.
QUEST: Forgive the naivety of this next question, we're a business program and we tend to deal in more simple matters of markets and profits. But ---
HAAS: -- Yeah, yeah, yeah.
QUEST: But when I get to this situation and i listen to you talking and I hear the complexity of an Iraq with an Iran, with a Syria, with a Russia,
with a Turkish element, with a coalition that involves the United States, France, Britain, all bombing away, I start to wonder, is the situation too
complex to actually defeat is?
HAAS: I don't think it's too complex to make progress. I think, though, you've got to be realistic about both the scale or the rate of progress and
what your end result is.
(BEGIN VIDEO CLIP)
HAAS: I get nervous when people talk about eliminating it, but is it possible to gradually make progress both on the ground militarily and
dealing with such things as terror financing? Absolutely.
(END VIDEO CLIP)
HAAS: But we've just got to be realistic. We don't want to set ourselves up for failure or defeat here. Sure, we can and we should make more progress
than we are.
QUEST: And Richard, we hope you'll come back and help us through the minefield of these issues in the future, sir.
HAAS: Happy to.
QUEST: Thank you.
The markets, the global markets rallied. U.S. Stocks seem to be having a Fed hangover. I mean -
(BEGIN VIDEO CLIP)
QUEST: Look at what happened. Here's how the Dow fared. We opened up with just a tinge of green at the beginning of the session and then we go down
and we go down. And I mean, you know, call me (inaudible) a point or two but we're almost -- I think we are actually off the worst point of the day,
1.4%, 253.
It was dragged down by energy and metal stocks, falling oil prices. Investors worried about the strengthening of the dollar. This was how New
York traded. But of course European markets had seen the best of the New York session and hadn't had time for pause and rethought. So you saw in
Asia and in Europe, look at the Xetra Dax, that was rocketing up of 2.5%.
Back to the Dow Jones, CNN's Paul La Monica is here.
(END VIDEO CLIP)
QUEST: Paul, what happened today that caused a 205-point gain yesterday to evaporate?
PAUL LA MONICA, CNN MONEY CORRESPONDENT: First off, the Fed didn't do anything at all yesterday that surprised everyone but people were still
happy because we got what we expected, the rate hike finally. Yellen saying everything would be gradual.
Now today you have the negative results of those rate hikes that are coming. The dollar is likely to strengthen. The dollar went up today.
(BEGIN VIDEO CLIP)
LA MONICA: Oil went back down. Gold hit a 2009 low. You have all the negatives and then don't forget all those worries about junk bonds that
were starting to percolate last week and early this week that seemed to go away yesterday, they're back. The junk bond ETS took a big hit today as
well.
QUEST: So, in a word, what's the new normal? Yesterday's rise, today's fall or two days' volatility.
LA MONICA: Yes, volatility is the new normal. If you look at December, I think they have only one day without a triple-digit point swing in the Dow
so far. This isn't going to go away any time soon.
QUEST: And on that, happy Christmas.
LA MONICA: Merry Christmas.
QUEST: Jose Mourinho isn't special anymore. Chelsea sacked their manager.
(BEGIN VIDEO CLIP)
QUEST: We'll take a look at the perils of managing a top football club where you can literally can go from hero to zero in the course of a season.
"Quest Means Business."
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
[16:16:55]
QUEST: From the self-described special one to the newly created sacked one. Jose Mourinho has been removed as the manager of Chelsea Football Club for
the second time and here's why.
(BEGIN VIDEO CLIP)
QUEST: Seven months ago, Mourinho was comfortably leading Chelsea to the English Premier League title. They lost only three out of 38 games. That's
quite an achievement if you look at those numbers. Flash forward to today and they have already lost three times as many games as in the entire last
season, which leaves them one point above the relegation zone. One point above it.
It's the team's worst start to the season since the late 1970s. There appears to be a patent when it comes to Mourinho. If you look at his
managerial history, you'll see for yourself , when he first led Chelsea, Mourinho won two English premier league titles.
Now he then fell out with the owner Roman Abramovich and left the club, so he eventually lands a job at Real Madrid where he wins more trophies in his
second season. In the third season he fell out with the players and the owner and he left Real Madrid.
That brings us to his return to Chelsea. Similar story. You've got the hero's welcome. He's won the title in the second season. And then in the
third season he was sacked.
CNN world sport's Christina McFarlane is live outside Chelsea's stadium at Stanford Bridge.
(END VIDEO CLIP)
QUEST: So, we -- I don't understand. How can he -- I mean is it him? Is it the team? He wins last year and this year is an absolute dog's breakfast.
What's gone wrong? Is it him, is it the team?
CHRISTINA MACFARLANE, CNN WORLD SPORT: Yes, that's absolutely right, Richard.
(BEGIN VIDEO CLIP)
MACFARLANE: And after everything you've just outlined there, his long and illustrious history with the club, the fact that he is still considered
still today to be one of the greatest managers of his generation, for him to be sacked so remarkably today and really is just an astonishing day in
the club's history and in Jose Mourinho's managerial career.
But the facts and the figures don't lie, Richard.
(END VIDEO CLIP)
MACFARLANE: Nine losses in 16 games and the club's worst-ever start to a premier league season. But ultimately where his downfall came is that he
lost the respect and the faith of his players. It's a fact that was confirmed just a few minutes ago by the technical director of this club,
Michael Emenalo.
(BEGIN VIDEO CLIP)
MACFARLANE: He said that the palpable breakdown between the manager and the players left the club with little choice but to sack their manager. And
when you lose the faith of the players, you lose everything, Richard.
QUEST: All right, but hang on. Regular viewers of Quest Means Business know that what I know about football you can write on a postage stamp. But I do
know something about managerial and CEOs, and those sort of things. You don't go from hero to zero overnight.
So, Christina, what did he do that was so successful last year that he didn't do this year? Why and how did he lose that trust?
[16:20:06]
(BEGIN VIDEO CLIP)
MACFARLANE: Well I think one of the key things, and it's the thing that most people are talking about is a factor in all of this, is the very first
game of this season, there was a huge amount of drama around the first game here at Stamford Bridge against Swansea because he had a major fallout with
the medical staff on his team. And in particular one doctor, Eva Cameiro, who it's said was meant to be very close to the players.
Now, the treatment of her from Jose Mourinho was said to be, well, astonishing because it was -- he called her naive and it was said that the
way that he treated her was unacceptable.
(END VIDEO CLIP)
MACFARLANE: So he was roundly criticized for that. Now, that started a chain of events for Jose Mourinho with some of the backroom staff here,
with the referees. After that there were so many spats with referees. Twice he was heavily fined for that and he had a suspended stadium ban as well
imposed.
So it was a chain of events that i think started with that game here at Stamford Bridge but as I say ultimately it was him losing the faith of the
players that have lost him this season and his job at the club.
QUEST: Absolutely fascinating. We thank you for staying late and doing duty for us tonight at Stamford. Thank you very much indeed, Christine
Macfarlane there.
Christine Lagarde is to face trial in France.
(BEGIN VIDEO CLIP)
QUEST: The head of the IMF has been ordered to court over an old legal battle. We'll discuss what it means for her and the organization.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Managing Director of the International Monetary Fund Christine Lagarde is to face trial over one of France's most high profile fraud
cases.
(BEGIN VIDEO CLIP)
QUEST: The Managing Director is accused of negligence in a court dispute between a French businessman, Bernard Tapie, and Credit Lyonnais in 2007.
At the time, the bank was state owned, Lagarde was the finance minister. The current French finance minister told me Christine Lagarde should be
able to remain in charge of the IMF.
SAPIN: (As translated) You're presumed innocent until guilty. Today Christine Lagarde is presumed innocent. She will have to answer questions.
French justice will carry its work which is essential but Christine Lagarde should not be hampered in her duties as head of the International Monetary
Fund.
(END VIDEO CLIP)
QUEST: Joining me from Paris is Christian Mallard, the International Diplomatic Consultant we need to help us understand. First of all, explain
briefly when we say she's going to face trial, is this another of these French systems where the prosecutor or the judge questions them to see if
there's a further case to answer or is this a trial where the guilt or innocence at the end of it?
[16:2523]
CHRISTIAN MALLARD, INTERNATIONAL DIPLOMATIC CONSULTANT: No, it's the first case you mentioned, Richard, it's definitely. But the question is why are
we coming back again to this. It's an endless story in this country dating back, as you said, to 2008.
And right now we know she is presumed innocent, as the Secretary of Finance from France, Mr. Sapin said.
(BEGIN VIDEO CLIP)
MALLARD: It's great for her that the IMF still trusts her and she can stay in her position in Washington. But at the same time herself and her lawyer
don't understand why we come to this point. The case was dismissed last September, so everybody thought the case was over and still it's back. So
the question is, why is it back now in a very high tension part of the country.
(END VIDEO CLIP)
MALLARD: Right now we have high political, very tension politically between Monsieur Hollande, the right wing party as she's very close to Mr. Sarkozy.
Is it a political affair once more or not? This is one of the questions people wonder.
QUEST: Well, answer your own question, Christian, is this pure politics? Because I thought this case was over and done with, so there must be some
way that somebody has managed to resurrect it out of the dustbin.
MALLARD: Yes, you put the right question, Richard. As I said it's a very politically tensioned politics right now in France after the second round
of regional elections.
(BEGIN VIDEO CLIP)
MALLARD: The tension is very high between the government, President Hollande and the right-wing traditional party of Mr. Sarkozy. Madam Lagarde
is considered as being a lieutenant of Sarkozy.
(END VIDEO CLIP)
MALLARD: And definitely the next 17 months are going to be tough in this country because it's on the way to the Presidential election, so definitely
the case is overdone and it might be a political affair. This is the feeling a lot of people have tonight.
QUEST: In a word, in a sentence, Christian Mallard, how worrying is it that politics can intervene to such an extent in the judiciary?
MALLARD: Well, it's what we are used to in France now. It's something new, which is happening for the last few months, years, recent years. It's
something new and people just wonder where we go this way and people think where there is real justice, if we have one real justice in this country.
QUEST: Christian Mallard, thank you, sir, making sense of it from the French judicial system and Christine Lagarde.
Now, as we continue, business on the move.
(BEGIN VIDEO CLIP)
(MUSIC PLAYING)
QUEST: We start with the United States and Cuba have agreed to resume commercial flights between the two countries. The first time in more than
half a century, United Airlines has already offered congratulations and says it hopes to start flights from its global gateways as soon as
possible.
Argentina's peso is floating freely. The government lifted currency controls. The peso as a result is now on clearance sale. It plunged 30% on
the news. The goal is to boost exports for Argentina as it continues.
There's a management shake-up at Apple. Jeff Williams needs new business cards. He's been named -- this is Jeff Williams, he's been named the Chief
Operating Officer. Effectively he is Cook's number two, whether it's iPads, iPhones, Macs or whatever, there is a new man helping to run the company,
and that is business on the move.
(END VIDEO CLIP)
(MUSIC PLAYING)
QUEST: As we continue our evening conversation, the United Nations unanimously adopted the resolution targeting ISIS financing.
(BEGIN VIDEO CLIP)
QUEST: Spain's Finance Minister insists it will be enforced and he addresses the forthcoming Spanish general election. He's on this program,
next.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
[16:32:43] QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when Spain's economy minister tells me there's
international unity in tackling the funding of ISIS. You'll hear him in just a moment.
And the man known as the pharmaceutical bro is arrested in New York on charges of fraud.
Before all of that, this is CNN and on this network the news always comes first.
The United Nations has unanimously adopted a resolution targeting ISIS funding. The terrorist group is estimated to have brought in $2 billion
last year.
Speaking a short time ago, the U.N. Secretary General Ban Ki-moon said it was essential to put up a united front.
(BEGIN VIDEOCLIP)
BAN KI-MOON, U.N. SECRETARY GENERAL: As Daesh and other terrorist groups disseminate their hateful propaganda and ratchet up murderous attacks, we
must join forces to prevent them from acquiring and deploying resources to do further harm.
(END VIDEOCLIP)
QUEST: President Obama has warned the terrorists they'll have no safe haven if they attack the United States.
The President told Americans they should feel safe from terror threats after he was visiting the National Counterterrorism Center in Virginia.
Instead, Mr. Obama urged the country to hold onto American values.
(BEGIN VIDEOCLIP)
BARACK OBAMA, U.S. PRESIDENT: We cannot give in to fear or change how we live our lives because that's what the terrorists want. That's the only
leverage that they have.
They can't defeat us on the battlefield but they can lead us to change in ways that would undermine what this country's all about. And that's what
we have to guard against.
We have to remind ourselves that when we stray - stay - true to our values, nothing can beat us.
(END VIDEOCLIP)
QUEST: Christine Lagarde the head of the International Monetary Fund is to appear in court for her alleged involvement in a high-profile fraud case.
Lagarde is accused of intervening in a French fraud case while she was French finance minister in 2007. She denies all wrongdoing and the IMF
says she has the continued support of the executive board.
The Russian President Vladimir Putin has criticized his Turkish counterpart speaking at his annual news conference.
[16:35:03] Mr. Putin says there is, in his words, "problem with the Turkish leadership" after a Russian warplane was shot down by a Turkish jet last
month.
He criticized Turkey for getting in touch with NATO before contacting Russia over the incident.
The Chelsea manager Jose Mourinho, has left the club by mutual consent. The team has lost nine of their 16 Premier League games so far this season.
A statement on Chelsea's official website says both parties agreed it was in their best interests to go separate ways.
We return now to our top story - the gathering of the world's finance officials vowing to stop ISIS' funding.
Luis de Guindos is Spain's economy minister. He joined me a short time ago and said the U.S. resolution that passed in the past hour will be enforced.
(BEGIN VIDEOCLIP)
LUIS DE GUINDOS, SPANISH ECONOMY MINISTER: I think that this is a very important step and it's a clear indication that everybody's committed in
the fight against the financing of terrorism.
Afterwards we'll have to take steps we'll have to implement.
In Spain we have experience in the fighting of terrorism because we suffered terrorism for decades as you know, and we have experience of how
you have to deal with the financing and the funding of terrorism.
And I think that, you know, international cooperation is going to be key and I think that this is indication that we are going (ph) to get from
today's agreement.
QUEST: With that, would you be in favor of some version of sanction on the downside for those countries that either don't implement properly or
continue or seem to continue to be lax?
DE GUINDOS: Well, that could be, you know, a possibility but, you know, this is a binding agreement. And now, you know, the most important thing
over the - perhaps you know the most you know binding element is that, you know, the recent international pressure in order to implement the measures.
So my personal impression is that everybody is going to fight to implement, we are going to have, you know, a very strict system of peer review and,
well, and you have the political will and the binding of the resolution that we (inaudible) today.
But I think that peer review is going to work over the next few months.
(END VIDEOCLIP)
QUEST: CNN Money's Jose Pagliery has been tracking ISIS funding and joins me now from the United Nations.
Where is this money going - coming - from? I mean, I heard them talking about money from oil sales, money to extort (inaudible) things, but is it
going into the global banking system?
Is it being - if I'm buying - if I'm buying Iraq, if I'm buying ISIS oil, am I paying in cash or am I doing a transfer?
JOSE PAGLIERY, CNN MONEY CORRESPONDENT: That's a fantastic question because that gets right at the heart of this, right?
So we this historic meeting of finance ministers from all around the world here at the U.N. where they actually all agree that they've got to do
something about ISIS.
But the trick here is that they're not actually cutting off the main sources of funding. So they talked about oil, right? Oil apparently this
year brought in some $500 million to ISIS.
Locking them out of the financial system won't really stop that. In fact, the bombing campaign that the U.S.-led coalition is doing now is doing a
lot more to stop that.
What this meeting was about was trying to lock them out of the financial system so that when they have these hundreds of millions of dollars, they
can't park them in banks and move them around the world.
But, again, what's interesting here is that this meeting doesn't get at the heart of it. What powers ISIS is its land - taxing the 8 million people
who live there.
And so far this meeting does little to change that.
QUEST: Except - well hang on - except if they're taxing the 8 million people and I'm guessing they don't publish tax rates in quite the same way
that the IRS or HMLC -
PAGLIERY: Sure.
QUEST: -- might do it, but if they're taxing people, that money does have to get into some form of banking system otherwise you've got -
PAGLIERY: That's true.
QUEST: -- large amounts of cash sitting in the - sitting in the - basement (inaudible).
PAGLIERY: True, but here's the thing - they do have large amounts of cash sitting around. There are at least 90 banks in Iraq that are held in ISIS-
controlled territory, OK?
And so they do have banks in that territory, they are able to hold on to this money. What this resolution does is it's a first real jab at stopping
them from moving that money elsewhere.
But it's important to note, -- I've talked to a lot of terrorism experts, military scholars that say ISIS is not al-Qaeda.
This method worked very well with al-Qaeda because al-Qaeda had relied on outside donors sending money into their operation.
ISIS actually has a lot of that money from within. So the more interesting parts here actually are - one aspect in this resolution is intelligence-
sharing.
So there's a call for the U.S. and Russia, France, the U.K. to share financial intelligence amongst each other. And that might actually prevent
terrorist attacks in the future.
[16:40:06] One thing that was brought up by France's finance minister was that the attacks on November 13th in Paris were largely financed through
prepaid cards --
QUEST: Right.
PAGLIERY: -- and so he said this can't be anonymous anymore. We've got to really drill down on this, and so there is some space there for countries
to start figuring out who's buying these cards and actually tracking the money.
QUEST: Well, yes in fact he said on this program early on today.
But that raises a very naughty problem of how you get rid of the anonymous element of say prepaid cards or telephones or telephone accounts or pay-as-
you-go accounts - whatever you like to do.
But you don't grind the entire financial system to a halt.
PAGLIERY: Sure, sure. Look, another aspect of this now is actually calling an end to oil smuggling. And so going after the actual middlemen
and the traders in Turkey, in Syria, in Iraq, in Lebanon that are facilitating this oil trade.
What's going to be interesting here is whether or not these are just empty words, empty promises, or if Turkey will more aggressively go after the
black market within its territory as well as the neighbors as well.
QUEST: Jose, thank you. Keep a watch on this, come back when there's more to report.
When we come back in just a moment, Shkreli's arrest. It's nothing to do with the drug company that he bought, instead it's all about the potential
for a giant Ponzi scheme.
We'll tell you what that scheme was, or alleged to have been, in a moment. "Quest Means Business" (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: The pharmaceutical executive who was widely criticized for raising the price of a drug used to treat AIDS by 5,000 percent has posted a bail
of $5 million.
He is of course Martin Shkreli. He was indicted on Thursday by federal prosecutors in New York on criminal charges.
Authorities alleged misused millions former (ph) dollars from a company he used to run called Retrophin. U.S. Attorney Robert Capers alleges that
Shkreli and an accomplice essentially ran a Ponzi scheme.
The alleged accomplice was an attorney who worked with him at Retrophin.
(BEGIN VIDEOCLIP)
ROBERT CAPERS, U.S. ATTORNEY: These charges in today's indictment highlight the brazenness and the breadth of Shkreli's schemes and the
outrageous web of lies and deceit weaved by both defendants, Shkreli and Greebel.
[16:45:00] Shkreli, as Retrophin's chief executive officer, was entrusted with protecting both Retrophin and its shareholders' assets.
Instead, he abused that power and used the public company's assets to pay off his own personal debts.
(END VIDEOCLIP)
QUEST: Claire Sebastian is here. What did he do, Claire?
CLAIRE SEBASTIAN, CNN PRODUCER: Well there are a number of things, it's a very complicated case. But essentially he's accused of running what they
call a Ponzi-like scheme.
He - basically he - lost a lot of money on a hedge fund and he proceeded to lie to the investors who he lost it to - he proceeded to lure more
investors in allegedly according to this complaint and then use their money to pay off the old investors.
And so we have this cycle, Richard, that starts -
QUEST: Classic Ponzi.
SEBASTIAN: Classic Ponzi scheme. But the real wild cards here in this case, Richard, is that it then involved a public company
He founded a company called Retrophin, a biotech company, in 2011. It went public in 2013. He is accused of using funds from that public company to
finance this Ponzi scheme to pay off all debt - to pay disgruntled investors.
He disguised though, according to the complaint, as a consulting fee -
QUEST: Right.
SEBASTIAN: -- various other creative ways to disguise them.
QUEST: How much of this - because I can hear people say well hold on, Shkreli's the one who jacked up the (drug) from this company -
SEBASTIAN: During Ponzi -
QUEST: -- during pharmaceuticals. This is just payback from what he did over Turing Pharmaceuticals. Is there a connection between what he did in
Turing Pharmaceuticals and this complaint?
SEBASTIAN: There don't seem to be, the only connection is this is way everyone cared so much about this story. That's why there's so much
tension on this.
But this actually predates that. This covered a period of five years up to the present day. They've been investigating this since around 2012 since
he was CEO of Retrophin. He was actually ousted by that company last year.
So, yes, that does make him a - he's a very colorful character, people are interested in him.
He's only 32, he's a fan of hip-hop, you know, he paid $2 million for a single copy of Wu-Tang Clan album. The U.S. attorney today saying that he
doesn't know where he got that money from.
He did post bail at $5 million though so, you know, he was backed up by his father and his brother in that. But this is why this is such an
interesting case, because this character is so interesting.
He has 27,000 followers on Twitter. That went up to 29,000 over the course of today. He has never shied away from the notoriety that surrounded the
Turing Pharmaceuticals scandal and he -
QUEST: He's in it up to his neck now.
SEBASTIAN: He really is. But he was, I mean, he was posting - he likes to post long videos live streaming his life on YouTube. He posted the last
one just yesterday, just hours before he was arrested.
QUEST: Claire Sebastian. You've got your work cut out for you in the days and weeks ahead as that moves on.
As we continue, the extraordinary story from Brazil - WhatsApp was banned and then it was unbanned. And we'll tell you what the banning was all
about after you've had a moment to ponder life as we "Make, Create, Innovate."
(COMMERCIAL BREAK)
[16:50:25] QUEST: A judge in Brazil has ordered that the messaging app WhatsApp be restored. That was after another judge blocked it on legal
grounds.
WhatsApp, blocked for 48 hours early on Thursday, and you may want to know the reasons why.
The judge - the first judge - said it had failed to respond to a court order relating to a criminal investigation. Facebook's chief exec Mark
Zuckerberg called it a sad day for Brazil after WhatsApp was blocked.
Remember, Facebook bought WhatsApp for $19 billion. Sad day for Brazil in 2014.
WhatsApp's rivals (inaudible) Telegram announced on Twitter it got a million new Brazilian users overnight after WhatsApp was banned.
However, a few hours ago a second judge in Brazil ruled that WhatsApp should be allowed to continue operating. WhatsApp is now back online.
Our technology correspondent Samuel Burke. This is a very rum business. Why were they banned in the first place?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: We don't have what you're looking for is what this comes down to.
A judge said I want some information about somebody involved in a case that I'm looking at who used WhatsApp. Send me the messages and WhatsApp didn't
comply because they don't have the messages.
It's as if you asked me for $500 from my wallet - demanding $500 from my wallet - but I don't have $500. I don't have anything in my wallet,
Richard.
QUEST: Well hang on a second. So the judge then bans WhatsApp and the second judge unbans it. Why does the second judge unban it?
BURKE: He unbanned it because he said it's not fair to public - to punish the 100 million people who uses WhatsApp -
(CROSS TALK)
QUEST: Ah, hang on. Now you're getting to the point, young man. Now - so he unbanned it, not because he suddenly had sympathy with WhatsApp's
position -
BURKE: Exactly. He's not sympathetic to the fact that WhatsApp uses end- to-end encryption. That means if you send a message to me, only the sender and only the receiver see the message - nobody else.
You can knock on the door of WhatsApp all you want, this new style of encryption makes it so that they don't even have the keys to get in the
door even if you keep on knocking.
QUEST: Right. But then the question rises, I mean, as I understand it there were other issues in this case as to whether WhatsApp appeared in
court, whether they complied with the order, whether they took part in the case.
BURKE: That's right. WhatsApp didn't comply and it looks like they maybe should have come forth and made it clear that we just don't have this type
of material.
Once the message is sent, we don't have anything to do with it. But this is a tune that we're hearing over and over again from tech companies.
`Sorry, we just don't have it,' even though a government desperately wants the information.
QUEST: Right. And this is exactly what the New York attorney general who was on this program talking about when it comes to Smartphones where Apple
or Android can't even access the phone even if they want to because they don't have the key.
BURKE: The apps are locked up, the phones where the messages are sent to are locked up and they just can't get in. Richard, this is all a result of
NSA spying, the revelations from Edward Snowden, the leaks, the hack of Sony.
People responded and consumers said we want protection and now these tech companies have given them the protection and the pendulum has swung from
one side all the way to the other.
QUEST: OK, but then you've got to ask the question at what point does - I mean, we know that President Obama has put forth policies I mean we know
the Europeans.
At what point does the pendulum have to find its equilibrium back again?
Because arguably it's now too much of a cheater's charter.
BURKE: I think no matter what your opinion is - where that pendulum should be - I think it's too late. I think they can change the laws. What
experts are telling me is we see them trying to change the laws, but they can just move the servers to a different country, to a different place.
I think that encryption is here to stay, and interestingly we saw a lot of reporting today that even on the phones of the Paris attackers' messages
that were encrypted and unencrypted - well it didn't matter. The authorities didn't get to them in time unfortunately.
QUEST: Samuel Burke with that. Don't even think about it - you're too young.
We will look at the markets and how they are trading (RINGS BELL). Let's look and see how they traded. The markets they were down some 253 points.
But an extraordinary reversal in just 24 hours. Up 205 on the day the Fed moves. But then down 253.
[16:55:02] It was the dollar, it's questions of commodities, it's lower oil prices, all of which pushed the market sharp, sharply lower.
We'll have a "Profitable Moment" after the break. This is "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." So at the United Nations, the finance ministers of the Security Council met for the first time in
history.
And the goal which the successfully completed was to pass a resolution designed to tighten up on the financing and funding for ISIS.
It's easy to pass the resolution and much has been made of the fact that Russia and the U.S. were on the same side. They always have been, frankly,
when it's come to fighting ISIS.
It's much more difficult to actually implement that, and (inaudible) that's what you heard on this program from Sapin of France and from de Guindos
from Spain.
It means that they have to go after the money. But going after the money is not as simple as just normally trying to get assets seized, companies
and those sorts of things.
Instead, you're talking about the shadow banking system, you're talking about moving small amounts of money, you're talking about prepaid credit
cards, you're talking about normal telegraphic means of transfer.
And that's why doing something about ISIS funding, even though we're talking about hundreds of millions of dollars involved, it's going to be
much more difficult than passing a resolution at the United Nations.
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.
We'll do it again tomorrow.
END
