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Quest Means Business
AT&T Admits It Messed Up In Hiring Michael Cohen, Donald Trump Targets Foreign Free Loaders To Bring Down The Cost Of Pharmaceuticals, SpaceX Has Launched Its Newest Rocket, Europe Calls For A New Deal On Iran, A 19-Year-Old Woman In Sudan Has Been Sentenced To Death For Killing The Man She Was Supposed To Marry; Palestinian Officials: One Killed, 450 Injured in Gaza; France: Europe Must Assert its Economic Sovereignty; Two British Nationals Abducted in the DRC; Trump Meets Automakers to Roll Back Emissions Standards; U.S. Drivers Suffer Summer Pain at the Pumps; Bank of America: Oil on Track to Hit $100 a Barrel. Aired: 4-5p ET
Aired May 11, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street. The Coast Guard -- Military Spouse Appreciation Day -- is ringing the closing bell.
Good day for the Dow, it's up 90. Oh, yes, yes, yes. Well, done, sir. A strong Coast Guard hitting the gavel that brought trading to a close on
Friday, the 11th of May.
Tonight, a big mistake, AT&T admits it messed up in hiring Michael Cohen. Donald Trump targets foreign free loaders to bring down the cost of
pharmaceuticals, and as Europe calls for a new deal on Iran, Israel's former Prime Minister will join me in the seat.
I am Richard Quest, the end of the week, still live from the world's financial capital in New York City, with a plus for the market, I mean
business.
Good evening, tonight, AT&T's Chief Executive admits his company made a big mistake. Randall Stephenson says, "Hiring President Trump's fixer -- "
Michael Cohen is seen here, " -- as a political consultant was a serious misjudgment and a failure of the vetting process."
Cohen is now under Federal investigation. Now, AT&T, of course is trying to buy Time Warner, our parent company and if the numbers are right, they
paid Cohen, $600,000.00. At least, that's what we believe.
Randall Stephenson insists that AT&T's actions were unwise, not illegal. He announced AT&T's chief lobbyist, Bob Quinn will retire as a result.
CNN's senior media correspondent, Brian Stelter is here. What was the mistake?
BRIAN STELTER, SENIOR MEDIA CORRESPONDENT, CNN: They say, the mistake was getting in a business with Cohen, a man who is now under Federal
investigation. If the goal was to gain insight to the Trump administration, that's what AT&T says, I guess, it didn't work because
Trump's Justice Department still went ahead and sued against the AT&T-Time Warner deal last November.
If the goal was to somehow influence or convince the government not to sue again, I guess that didn't work because the lawsuit is pending and a month
from now, a judge will rule and we'll know if the deal is going to be allowed to go forward or not.
QUEST: But Randall Stephenson is saying, "We made a mistake."
STELTER: Yes.
QUEST: I mean, he's not saying it's a mistake to hire lobbyists or consultants because only in the earlier e-mail, he basically said everybody
does it.
STELTER: Right.
QUEST: So, what he's saying is, it was a mistake to hire risk consultants.
STELTER: Yes, this particular person, a personal lawyer of the President. It certainly is a strange situation to see a multinational company hiring
the President's personal lawyer, someone who has real estate experience, but no experience in telecom law, and I think Stephenson is also saying,
this has been embarrassing to the company. It has done damage to the reputation of AT&T, it has been days of bad press about it, so he is saying
it was a mistake for that reason as well.
QUEST: Two points though, firstly, this is not likely to influence the good judge sitting in the AT&T-Time Warner-Justice Department case, is it?
STELTER: Correct.
QUEST: That will be based on factual antitrust law.
STELTER: Correct.
QUEST: So, that won't have any effect?
STELTER: Yes, that's right. The judge -- this will not be a part of the judge's ruling as far as we can tell. This is really a matter for the
court of public opinion. We also know Mueller -- Robert Mueller knew about these payments six months ago. AT&T says it has not heard from Mueller in
almost six months, so it appears that matter is closed.
But this is embarrassing to the company, like it's also embarrassing to Novartis and Columbus Nova and the others who went into business with
Cohen.
QUEST: Okay, but in the White House briefing a short while ago, Sarah Sanders makes the point, while clearly it shows the independence of the
whole process because the Trump White House -- or Justice Department went - - in fact, have a listen to what she said. She said it better than I can.
(START VIDEO CLIP)
SARAH SANDERS, WHITE HOUSE PRESS SECRETARY: I think that this further proves that the President is not going to be influenced by special
interest. This is actually the definition of draining the swamp, something the President talked about repeatedly during the campaign, and for anything
beyond that, I would direct you to the President's outside counsel.
(END VIDEO CLIP)
QUEST: That's the point, isn't it? I mean, she's right. If they thought they were buying influence or something else, they certainly got a bad
deal.
STELTER: Well, let me add a caveat to that. Michael Cohen recently had dinner with the President at Mar-a-Lago, other Trump confidants, people
that are in his orbit, they are frequently talking to the President, visiting with the President, whether you're a Fox news host or the owner of
the "National Enquirer," whether you're someone like Corey Lewandowski who has been selling his influence, I think we should be skeptical about the
idea of the President, he is not listening to folks who are selling influence.
QUEST: But hang on a second, Brian, we are men and women of the world on "Quest Means Business."
STELTER: Yes, we are.
QUEST: We know how the world operates in that sense, so lobbying per se is endemic, and the truth is, it depends on -- I mean, we all lobby at some
point on an issue that we believe is important to us, or we have people --
[16:05:14]
QUEST: -- to enter and lobby for us.
STELTER: Indeed, indeed, but I think -- there's two things about this story. One, it's like a flashlight in a dark corner that's kind of ugly
that you usually don't see. We all know it happens, but we don't see the gory details. And number two, Michael Cohen is not your ordinary fixer or
first of all, they say he wasn't lobbyist at all.
He was the personal lawyer who apparently has some pretty ugly things in his past, enough for the Feds to raid his home. So, let's see what he's
got hiding?
QUEST: Good to see you.
STELTER: All right, good to see you.
QUEST: Have a good weekend.
STELTER: You, too. Thanks.
QUEST: Now, let's talk more about this whole business of lobbying, because as I point out, it is a widespread, what some would say "cancer" on the
system, others would say a necessary part of the system.
Well, Cohen shopped himself around to potential clients. Now, some TV pundits and politicians seem to be outraged though, as one expert once put
it, "shocked."
(END VIDEO CLIP)
UNIDENTIFIED MALE: How can they close me up? On what grounds?
UNIDENTIFIED MALE: I am shocked -- shocked to find that gambling is going on in here.
UNIDENTIFIED MALE: Your winnings, sir.
UNIDENTIFIED MALE: Oh, thank you very much. Everybody out at once.
(END VIDEO CLIP)
QUEST: And that exactly makes the point. Shocked, shocked that gambling is going on in here. It appears that Washington insiders who are "shocked"
about lobbying are doing exactly what Clause Rains was doing in "Casa Blanca" acting and playing it up.
There's a whole street devoted to lobbying in Washington, it's called "K Street." It's the home of the lobbying industry and in the K Street
casino, these are the high rollers. Ten organizations that have combined $4.5 billion on lobbyists over the last 20 years, and just look at them:
Realtors, AMA -- medical association, the older elder generation from AARP, Boeing for example.
CNN's political commentator, Doug Heye has worked in the Bush administration joins me now. Everybody knows it goes on, so what's the
problem here?
DOUG HEYE, POLITICAL COMMENTATOR, CNN: I think the only problem here is; A, that it's Michael Cohen, and obviously, he is being investigated and is
in legal jeopardy, which is part of the problem.
The other thing that is surprising to me is the amount of money that he was receiving for this. You know, Richard, if I can take you back a year and a
half ago, you would see so many lobbying shops that were gaining new clients, having their clients up their monthly contracts, or just extend
contracts because there was so much uncertainty about what the Trump administration would mean.
Lobbying has been -- the lobbying industry has done extremely well under Donald Trump because of that certainty, so it's no surprise that people
like Michael Cohen or Corey Lewandowski were getting a lot of contracts. The numbers are really eye-popping.
QUEST: But, Doug, we all know it goes on. Explain the process, because there's a lot of rules about how you can lobby, who you can lobby, if
you've been in government, when you can go into lobbying. What are we talking about here? Are we talking about sort of arranging to have lunches
and briefings. I mean, the idea of handing over brown paper envelopes of cash is something that's not allowed. So, what are talking about?
HEYE: Sure, most -- first and foremost, we are talking about fundraising for members of Congress and political candidates and then working with, not
only those members, but their staffs and staffs are critically important.
So, if you're representing say, Boeing, a friend of mine does lobbying for Boeing, he will organize meetings with members of the Armed Services
Committee or the Appropriations Committee and introduce company executives to them, one at a time to talk about priorities that Boeing may have. It
happens all day every day.
QUEST: Look at these numbers on the screen. Columbus Nova paid half a million, Korea Aerospace paid $150,000.00. Novartis, $1.2 million and
AT&T, $600,000.00. Now you say that these numbers are higher than one might have expected for somebody like Michael Cohen.
HEYE: Sure. Michael Cohen -- and he was very upfront about this, had one relationship that mattered, it was a relationship with the President, not
with DOJ, not with Speaker Ryan or whomever. One relationship with the President. But what we saw, in one case, he was paid more than a million
dollars just to have one meeting.
That is a whole lot of money for one meeting that ultimately wasn't terribly successful, and I think, Richard, it also demonstrates, we hear so
often the President talk about draining the swamp. This shows that not only is the swamp alive and well, but it is really thriving under Trump and
there's no better example of that than the Trump Hotel where you pretty much have to put hip waders on because lobbyists go to the Trump Hotel
every night of every week in the hopes that they will not only be seen, but that they will see key administration officials there and they can lobby in
there or just be seen, let them know, remind them that they are a friend of the administration as we know.
The people that Donald Trump likes the best are the people that are nice to him.
QUEST: And finally, Doug, I mean, this is a tough-y. The lobby -- we're not talking here about bribery are we? Or are we?
HEYE: No, no. Not at all. Basically, we're talking about donating to a member of Congress -- a senator or the President's reelection campaign.
It's not money that they get personally, it's money that they raised to spend on their campaign and then spend how they choose, but there are also
legal limits on how that money can be spent.
QUEST: Good to see you --
[16:10:16]
QUEST: -- Doug, and by the way, before we go though. The pharmaceutical industry is one of the largest lobbyists, isn't it?
HEYE: Absolutely, and as we know, healthcare is one-sixth of the American economy, so it stands to reason that they are going to spend a lot of
money. Look at Obamacare, a lot of money was spent lobbying that on a member by member basis on Capitol Hill.
QUEST: Good, look at this chart. Thank you, Doug, we'll say thank you to in a minute -- we go back to that chart, which we can just see on the
screen for a moment. So, there you have, the AMA medicals, you've got hospital associations, pharmaceuticals and Blue Cross Blue Shield and the
elderly with AARP.
Now, I will tell you why I am pointing out this because the President says that drug lobby is getting rich, as ordinary Americans suffer. No doubt
because of lobbying to some extent. The President has unveiled a plan he says will bring down the cost and put patients first.
He cuts out middlemen, ending monopolies and getting foreign governments to pay more, so that American patients, can and possibly will pay less.
(START VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: When foreign governments extort unreasonably low prices from US drug makers, Americans have to pay
more to subsidize the enormous cost of research and development. In some cases, medicine that costs a few dollars in a foreign country costs
hundreds of dollars in America for the same pill with the same ingredients in the same package, made in the same plant and that is unacceptable.
We can look at some of the countries, their medicine is a tiny fraction what the medicine costs in the USA. It's unfair, and it is ridiculous, and
it's not going to happen any longer.
(END VIDEO CLIP)
QUEST: The numbers from the OECD completely bear out the President's claim. Americans spend more on pharmaceuticals than anyone else in the
world, $1,100.00 per person per year. Donald Trump says, he will put pressure on America's trade partners to end what he calls the freeloading.
Look at that number, the next one is Canada at $800.00; and if you look at the UK, down at $500.00.
Bob Hugin served as Chief Executive of one of the country's largest pharmaceutical companies, Celgene, now running to be the next US Senator
from the state of New Jersey. Good to see you, sir.
BOB HUGIN, FORMER CEO OF CELGENE: Thanks for having me.
QUEST: The President is right.
HUGIN: I think we will -- I am sort of refreshed by the President actually now looking for a holistic substantial, thoughtful review of the whole drug
pricing process and distribution.
QUEST: No, he's not looking for that. He's looking to just cut the costs, but the issue is, how do you get foreign governments to get their companies
or the drug companies to charge more in their country.
I mean, do you strong arm them? Do you threaten tariffs like he'd done before?
HUGIN: I think you have to do a lot of different things, but enforcing trade is the first thing. We have trade agreements with a lot of these
countries. They are to make sure trade is free, free trade is good for Americans, but fair trade is what we've got to have and I don't think we've
had fair trade in a lot of these areas.
QUEST: But how do you get foreign countries to increase the price of pharmaceuticals?
HUGIN: I think let's be careful to understand it. The US government doesn't pay a lot more in some cases than foreign countries. Medicaid for
example, the government pays about 40% of the list. Medicare Part D, which is one of the great success stories in the US, the government pays about
65% of the list in the US.
The big issue that we have is, it's too expensive for the patient. We have this ridiculous unaffordable process that we put people out there that
look, the price get higher and rebates don't get passed to the patient. We've got to reform this system, and I will tell you, I am for the first
time encouraged, 50-point triumph to say, "Let's look at the whole system here."
QUEST: Yes, but the moment you start looking at the whole system, you will get bogged down and in the same way that's happened with healthcare, every
single time, you know this as well as I do, the drug companies --
(CROSSTALK)
HUGIN: We need a really big change now. We need change.
QUEST: Oh, come on.
HUGIN: I'm serious.
QUEST: You're a former CEO.
HUGIN: Former, yes.
QUEST: Of a drug company who suddenly arrived on the road to Damascus and the scales have fallen from your eyes.
HUGIN: No, no. I think we've always done these incremental little changes. The system is broken, we've got to fix it and in reward, the
patient -- make sure the patient is at the center, but reward the innovators. It's going to be good for companies if we have transparency
and clarity and pay for value, pay for performance. That's what we should be billing the drugs.
We're going to have a better system if we do that.
QUEST: So, last week for my bad chest, which you can hear, I had to get some antibiotics, and I saw what the cost said. It said, you know, the
cost is $900.00. Your insurance is paying this much, and I save this much, and I paid $55.00 or whatever it was.
If the $900.00 that the insurance company has to pay. How do you get that down to the same weight even around our economic differentials, let's say
for example in Egypt that pharmaceuticals cost only 65 --
(CROSSTALK)
HUGIN: I think for the most part, we --
[16:15:16]
HUGIN: -- should have GDP pricing, right? If a country is wealthier, we expect to pay for more for things, and so -- and remember, in Europe, I
think about 16% of the healthcare cost of pharmaceuticals, in the US, it's about 12%, and that percentage is state steady for a pretty long time in
the US. We've got a lot to do here, but I have to tell you, Richard, we have a chance finally to address these issues and have real change.
We want the winners to win. We don't want the me-to's and the have-been, yesterday's stories living off the system. We don't have enough money. We
ought to pay the winners, they are the people that are really making difference in patients' lives. That's the change we need.
QUEST: So, as you're going -- looking to run for the Senate and as you look at the system, with your experience as a CEO of a --
HUGIN: And a former Marine, and a former financial person -- I've got a lot of experience in my life.
QUEST: Excellent, then you'll be a good person to ask this question on. Fundamentally, drug companies have to pay for the future supply line of
pharmaceuticals out of the existing money that's coming in.
HUGIN: Yes, they pay 100% for the research out of the revenues of the company.
QUEST: Are you saying to me that's there's no price gouging?
HUGIN: I say, there have been mistakes made, I am sure, at every part of the system. So, anybody that doesn't think there have been mistakes made
in the system would be naive to say that. But for the most part, we need to invest in the future.
The underlying economic stability of our system is will be terribly damaged if we don't deal with Alzheimer's, cancer, and metabolic disease, disease
of the elderly. We have major issues in healthcare.
One of the reasons I am running is, I have been involved in the hospital industry 11 years, biotech for 20 years, we need people who are going to
bring a broad-based perspective to solve these problems, not on the edges. Really, fundamental changes is what we need in our system.
QUEST: So, what about retiring?
HUGIN: No, absolutely not. I am going every day. I have a long life. We are going to live a long time. We are going to be working on this every
day. Thanks for having me, Richard.
QUEST: Good to see you, Bob. Thank you. Now, let's get to space to Cape Canaveral, where SpaceX has launched its newest rocket. It's the Falcon 9,
block five. SpaceX hopes this rocket will someday carry astronauts to space.
It is designed to be used 10 times or more. The older generation of rockets could only be used twice. Well, the landing is crucial as well,
and the first stage booster is due to touchdown on a drone ship in the Atlantic. It's very impressive when it happens, and we will show you if
and when it happens in our time.
As we continue tonight on "Quest Means Business," the former Israeli Prime Minister, Ehud Barak, he says Donald Trump's Iran decision has only made
the world more uncertain.
And President wants to control of auto emission standards that's setting it up for a fight with the most popular state in the United States. But the
truth, it could be one of the largest countries in the world if it was an independent state -- California.
[16:10:00]
QUEST: Europe is seen as desperately trying to rescue the Iran deal following the United States' departure. Germany now admits they've got
their work cut out for them. Angela Merkel says it will be difficult to keep the Iran deal alive, now that the world's biggest economic power has
abandoned it.
(START VIDEO CLIP)
ANGELA MERKEL, CHANCELLOR OF GERMANY: (Through an interpreter). Referring to how we can keep this agreement alive without a great economic power, we
have to talk with Iran and we hope it is possible, but there are many factors playing a role and we cannot pretend we are stronger than we are.
(END VIDEO CLIP)
QUEST: While talking to Iran might be somewhat difficult, Iran's Foreign Minister says he will embark in a round of international diplomacy to try
to repair the damage. Tehran has warned, it is also prepared to restart its nuclear program on an industrial scale if the deal falls completely
apart.
And so to my next guest who believes the President's decision has made the world more uncertain. I am joined in the C suite by Ehud Barak. This is
the book. He is the former Israeli Prime Minister and author of a new memoire, "My Country, My Life." I returned from Israel yesterday where I
found views very much divided on this between those who said it had made it better, and therefore, those who said it has made it worse. Your view,
Prime Minister?
EHUD BARAK, FORMER PRIME MINISTER OF ISRAEL: Look, first of all, it's milk that's already been spilled. It doesn't matter once the President decided,
it's a part of new reality. It could be easily treated in different way by taking the issues which are not treated by the agreement, namely missiles,
insurgency and terror and mix together with the European demand to open a new round of negotiation about the new issues.
Once he pulled out of the agreement, that's a problem. Think of Kim Jong- un. He is going to meet with the President next month. He will argue at the moment of crisis that comes in any negotiation, what makes sense to
make a deal -- sign a deal with the American President if his successor can wake up some morning and cancel it.
The whole world is working under the assumption that agreements are supposed to be respected.
QUEST: But Netanyahu didn't like the deal and there are many in Israel that thought like this.
BARAK: I didn't like it as well. I saw that it was a bad deal. I was more hawkish on even attacking Iran than Netanyahu was. But once Obama
signed it, it changed the reality. We have to come to live with reality, not with wishful thinking.
QUEST: So, when you see the latest overnight or the last couple of days' violence, you see the Iranian backed firing missiles across. You see the
Israelis returning fire against the quant forces, was this inevitable and is that as a result of this?
BARAK: No, it's clearly not true. In fact, it started several months ago, itself in just a few weeks ago, and the determination of Israel to put an
end to the Iranian attempt to settle in Syria. It has nothing to do with the agreement, but you know --
(CROSSTALK)
QUEST: But clearly, clearly, the lack of agreement or the failure of the agreement such it is has created a new uncertainty that reins issues about
Israel attacking or at least taking out Iranian nuclear or military facilities.
BARAK: Time will tell. If the Iranians will --
(CROSSTALK)
QUEST: Would you be in favor --
BARAK: Look, it all depends on the concrete details. If the Iranians will start again the nuclear program, we have to consider how to block it
whether by Israeli operation or -- and, but it doesn't matter because the Iranians, through the best of my judgment, they will now get cautious as
the inspector will order again -- they will be more cautious because they are afraid, I suspect that with Pompeo on one side, Bolton on the other
side, the President might be waiting for the slightest mistake and might launch an attack on their nuclear arsenal.
QUEST: Right, and --
(CROSSTALK)
BARAK: There is fear.
QUEST: If the President does do that, he will have an ally in Bibi Netanyahu.
BARAK: Israel is always, will be against Iran and we are -- I believe that we have moved our readiness to take risks in order to block them for moving
forward.
QUEST: So, you have a situation whereby Iran could be heading towards some form of nuclear arsenal if it decides to go against the deal. Saudi has
already said, the moment Iran gets one, we are going there as well. Israel has an undeclared nuclear power, so there's already some there. It's
starting to look extremely dangerous in the neighborhood.
BARAK: Yes, it's the reason why we insist all along the way that Iran should be blocked from turning military nuclear -- it's clear, not just
Saudi Arabia, Turkey and Egypt, the whole Middle East will turn nuclear --
[16:25:16]
BARAK: -- that's why it's so important to block them.
(CROSSTALK)
QUEST: So, the President is making it worse.
BARAK: No, but the -- everyone who supported the agreement basically said, you've got a post for 10 years, so why not to use this. Dispose then
prepare. We have to -- behind closed door to discuss what exactly defines a breakout, what should be done about it and when the military option
should be brought back to the table.
QUEST: I want to finish on a different note, in your book here, "My Country, My Life." Who is the greatest leader that you came across that --
the sort of leader that you sat in negotiations or you have met and you thought, I am learning, I am experiencing this person, man or woman is in a
league of their own. Who would it be?
BARAK: In my own mature life, I learned a lot from Yitzhak Rabin, and a lot from Yitzhak Shamir -- the two --
(CROSSTALK)
BARAK: Shamir was like a granite and kind of the most kind of cold nerve system that I ever met and he was -- his positions were not similar to
mine, like western -- many of his positions, but his character and his style in leadership was impressive and of course, Rabin was my mentor and
later on -- my Commander and my mentor; later on, my friend and the one who pulled me into politics, and I learned from him a lot all along my life.
QUEST: Good to see you, former Prime Minister. Thank you very much indeed. Thank you.
BARAK: Thank you.
QUEST: The book is out, Ehud Barak, "My Country, My Life." In "Quest Means Business." After the break, California versus the White House,
extraordinary battle. The President is trying to wrestle control of auto emission standards.
And if you can't stand smoke, Elon Musk suggests you go underground. He has built a tunnel beneath Los Angeles. Free demonstration rides, all
aboard.
Hello, I'm Richard Quest, there is more "Quest Means Business" in just a moment. We are seeing the amount increasing in oil at $100.00 a barrel by
the end of next year, and "Time Is Up" activists wants to hit the mute button and (inaudible) North Carolina today.
Now, the founder of the protest movement will join me on the program, as we continue this is CNN, and here on this network, the news always comes
first.
A 19-year-old woman in Sudan has been sentenced to death for killing the man she was supposed to marry.
Nora Hussein says she was raped by her husband as his relatives held her down. She says, when he tried to rape her again, she stabbed him. The
case has sparked worldwide outrage. She has two weeks to appeal against the sentence.
[16:30:00]
The death toll has risen in the Kenyan dam wall collapse, now 45 people are confirmed dead after a body of a child was found on Friday morning, dozens
of people are still missing. The police are looking into reports of the dam which is located on a commercial farm had been built illegally.
A week of protests on the Gaza border --
(CLEARS THROAT)
Excuse me, have turned violent once again. Palestinian Ministry of Health says one demonstrator died after being shot in the chest by Israeli
soldiers, 450 others were injured. Israeli army says protesters hurled rocks and set tires on fire.
France says Europe is working on a way to size that Donald Trump's threats of U.S. sanctions on any nation that continues to do business with Iran.
Finance Minister Bruno Le Maire says Europe is working on three specific proposals that would assert its economic sovereignty.
And two British nationals have been abducted after an incident at the National Park in the Democratic Republic of Congo happened at the Virunga
National Park in the border with Uganda. A female park ranger was wounded in the incident.
The British foreign office says it's in close contact with local authorities and it's supporting the families affected.
The chief executives of the major auto manufacturers including the heads of Ford, GM and Toyota have been summoned to the White House. They were there
on Friday. President Trump has urged them to build more cars in the United States.
He also wants their support in rolling back Obama-era fuel efficiency standards. It's going to set up a direct confrontation between Sacramento,
which is the state capital of California and Washington, which is the federal capital of the United States, and indeed the country's capital.
Tougher emissions rules were established in California to combat smoke. Now, those rules are followed by other states which includes here in New
York, Massachusetts, and arguably, the big Democratic states up in the northeast.
Myron Ebell; that Donald Trump's transition team for the Environmental Protection Agency told Paula Newton that California has no right to hold
consumers hostage.
(BEGIN VIDEO CLIP)
MYRON EBELL, DIRECTOR, GLOBAL WARMING & INTERNATIONAL ENVIRONMENTAL POLICY: This deal that the Obama administration struck with the automakers in
California put California in charge of deciding what kinds of cars and trucks Americans can buy.
The Trump administration is trying to undo that by following the law. And so I think there are -- this is all about consumer choice. California
wants to limit consumer choice, the Trump administration wants to expand it.
PAULA NEWTON, CNN: Well, California has an exemption, they've had an exemption for a while on this, so that's why they are doing that. And they
are now joined by a significant number of other states in the District of Columbia and fighting the EPA on this.
So my question to you is, I don't understand what you're getting at, we think even the emissions issue alone, American drivers want to pay less for
gas. The way to do that is with hyper fuel efficiency.
EBELL: Well, the problem with that is that you can't have a car that gets much better gas mileage without paying a whole lot more for that car. And
the fact is car prices have been going up, it's pricing regular people out of buying new cars.
And that isn't going to -- that doesn't help the auto industry, but it certainly doesn't help consumers who want -- you know, people have more
things that they want in a car than just what the gas mileage is.
The size, performance and costs matter. Cars are going up so much in price that you will never make it back in terms of better using less gas, better
fuel economy. So I think that the government has -- the federal government has made a huge mistake by letting California control national policy.
And this is actually contrary to the governing law passed in 1975, which says that the states are preempted from regulating fuel economy.
(END VIDEO CLIP)
QUEST: So whiles lawmakers argue about emissions, the fuel that creates those emissions is about to get more expensive. We'll explain.
(BEGIN VIDEOTAPE)
NEWTON (voice-over): American drivers are dreading their trips to the gas station again at this New York City Mobil station. Prices have soared to
more than $3.70 for a gallon of regular.
UNIDENTIFIED MALE: It's unbelievable, it's going up by crazy.
UNIDENTIFIED MALE: The last two, three months, we never seen a rise in the price is not good.
UNIDENTIFIED FEMALE: It is very frustrating, yes, and doesn't seem like there's anything we could do about it.
[16:35:00] NEWTON: In fact, the U.S. gas prices have risen about 60 cents a gallon since last Summer. They now average about $2.80 a gallon and the
pain may just be getting started.
KEITH STYRCULA, MANAGING DIRECTOR, STRUCTURED SOLUTIONS, CG CAPITAL MARKETS: Actually, they're ratcheting up another good 15 cent, 20 cents
this Summer, and could at 340 by the time full liberty rolling around.
NEWTON: Not good news for a Federal Reserve on the inflation watch. Serious inflation historically begins with spikes in energy.
STYRCULA: Well, I think the consumer can absorb another 30 cents, but then it starts -- the pain really starts at about 320 a gallon.
NEWTON: The reason for higher prices is a classic case of supply and demand. Consumers, businesses and manufacturers are guzzling more gas as
the U.S. economy strengthens. This time however, it will be hard to increase supply. OPEC is keeping a lid on production amid continued
uncertainty over the Iran nuclear deal.
And in the oil rich Permian Basin of Texas and New Mexico, pipelines are full, workers are scarce.
UNIDENTIFIED MALE: There's not enough skilled labor to manned the rigs, the pressure-pumping equipment and even drive the trucks that are hurling
out crude oil.
NEWTON: Frackers who say that the art of technology has allowed them to squeeze out profits from much cheaper crude are happy with today's oil
prices.
UNIDENTIFIED MALE: We believe our industry adds $60 to $70 a barrel will continue to be an economic engine for our U.S. economy. Higher oil prices
will damage demand.
NEWTON: Already American Airlines says its oil bill is up more than 20 percent this year. Other sectors of the economy like restaurants fear
higher gas could trigger a consumer pullback. Frackers say without their added supply, oil prices would be much higher across the globe right now.
As Americans hit the road for their Summer holidays, not even the frackers will be coming to their rescue. Paula Newton, Cnn, New York.
(END VIDEOTAPE)
QUEST: Now, when Bank of America Merrill Lynch bought out their latest report, they knew it was going to be a controversial, it's called a supply
shock from odd. Joining me is Francisco Blanch; he's the head of Global and Commodities at Merrill Lynch or Bank of America.
You had just predicted that -- and in fact, let me read it out to our viewers. "We introduced a full cost for 2019 of a $100 a barrel.
Although, we are concerned that this market dynamics could unfold over a shorter time frame."
You're basically saying it's a 77 at the moment -- you're basically saying it could go to a 100.
FRANCISCO BLANCH, HEAD, GLOBAL & COMMODITIES, MERRILL LYNCH: Yes, that's what I'm basically saying, oil is back, we have a supply shock going on
right now in Venezuela. The -- that's the main driver of the price.
We've also had an OPEC deal that has retained the house prepare a supply, right? And now we have sanctions on Iran which is one of the world's
largest exporters of the fuel. So effectively, if this happens in a period of weak demand, we'll be just fine, but actually it's also coming on the
back of raise strong global growth.
Is coming on the back of a robust consumption outlook not just here in the states, but also around the world, and Europe and China will have.
QUEST: So when you're down in the high 20s and low 30s --
BLANCH: Right --
QUEST: Two or three years ago, we knew that wasn't stable.
BLANCH: Right.
QUEST: And everybody thought that the sweet spot was between 50 and say 65.
BLANCH: Yes.
QUEST: If you're now pushing beyond 70, how dangerous is that for crimping economic growth?
BLANCH: Well, this price point 70, 75 is not going to kill growth, I don't think. But in commodities markets, we tend to move from episodes of supply
destruction to your point, prices are too low, we need to cut supply, producers have to reduce CAPEX to hey, we need curtail demand, and you know
how you curtail demand through pricing, and that typically means high prices.
QUEST: Right, but here, you've got a situation where OPEC, if prices fail to move up, they could increase, they could reverse some of their cutbacks.
Now, they have no incentive to do so because why would they? It's going to cost them their own money.
But they could. So there's an element of supply opportunity.
BLANCH: Right, there's a buffer which is why we're calling for $90 a barrel next year with the risk of going to a 100. And again, remember,
there're three things that could happen. The Soviets could come in and open the tabs, we have a little bit of a buffet there.
QUEST: Like dollars, a couple of dollars.
BLANCH: No, maybe a little bit more than that. But the Russians could also -- could also increase production a little bit, they have a bit of
buffet. And obviously, Trump could go out and release the strategic petroleum reserve.
So there's a strategic reserve in the U.S. that's sitting there that could be released. So those are the three elements that could tamper the price
appreciation. However, but remember that if supply is going down, because we're losing Venezuelan barrels and we are not (INAUDIBLE) Venezuela in ten
days, right?
So let's say that Venezuela continues to fall off a cliff in terms of production. It's down 30 percent year-in-year, right? So that could easily
climb. We are going to be biting into a spare capacity of Saudi and Russia.
QUEST: Can -- right. So that spare capacity will not be able to --
BLANCH: Right --
QUEST: Will not be able to bring down prices because it will be offset by Venezuela.
[16:40:00] But how much can U.S. Shell pick up the slack? Because the U.S. now the largest producer --
BLANCH: Yes, true --
QUEST: Effectively --
BLANCH: That's true --
QUEST: When prices go up, there's an economic incentive for Shell to expand and the rig count to go up.
BLANCH: That's absolutely correct. So I mean, I'm not saying within two or three years, we will be able to -- we should be able to solve this
problem, right? I'm not saying we can't, we probably will. The question is the timing, the tempo, right.
So we've had a massive shrinkage in investment, companies have pledged to be disciplined on their spending --
QUEST: Right --
BLANCH: And now you have to tell them, hey, don't be so disciplined, just start investing and produce oil. So that requires a higher price, that's
all I'm saying. Prices are signals and we now need the signals to accelerate U.S. supply growth.
QUEST: Finally, I'm looking here at your forecast of brent crude here. You still got as if 17 for the forecast or one of the forecasts.
BLANCH: Right, so we think the average price for its U.S. --
QUEST: Right --
BLANCH: Be around 70, around 75 for next year. The high point will probably be 90. So there's levers, but let me tell you, if the Iran
sanctions are going to play in a harsh way --
QUEST: OK --
BLANCH: And we lose supply, that's going to be a big problem.
QUEST: You are being provocative with your $100 a barrel, good on you, sir, thank you --
BLANCH: Thank you --
QUEST: Very much indeed --
BLANCH: Yes, good to see you --
QUEST: Thank you very much indeed. Now, as we continue after the break, Asia's telecom sector is huge, it's vast, and yet, what's normally got to
do with it. Joining me, chief executive of Telenor, sir, good to see you - -
SIGVE BREKKE, CHIEF EXECUTIVE OFFICER, TELENOR GROUP: Good to see you.
QUEST: Please, come and join me over --
BREKKE: OK --
QUEST: In the C-Suite while we get with the grips with what you're doing in Asia.
(COMMERCIAL BREAK)
QUEST: Fascinating company, welcome QUEST MEANS BUSINESS. Now, Telenor, Asia's telecom sector is a brutally competitive market. Fascinating, they
sometimes go -- Norway's Telenor took a bold, but it expanded way beyond its home turf.
Now, nine out of ten Telenor customers have nothing to do with Norway, probably they've never been there or will never will. Those customers are
in Asia. Sigve Brekke is the Telenor president and chief executive, good to see you sir.
BREKKE: Thanks for having me.
QUEST: The reality is the tail is wagging the dog. The rest of your company based out of Singapore, based in Asia, based in Bangladesh is far
bigger than the homegrown (INAUDIBLE) company in Norway.
BREKKE: Yes, that's true, and you know, the reason for that is Laurie(ph), Laurie Care countries, you were very -- earlier utter developing the mobile
technology, weigh the 4G, 3G and even 2G. And I think also earlier on, took a bet and a bet was that sooner or later even a customer in a remote
village in Bangladesh will be able to afford mobile services.
So the debt rule stand to bring down the costs, take the business model with that from Laurie(ph) and into these world markets. And that's the
title --
QUEST: It has been so -- it is so brutally competitive. I mean, Europe is just about mature in this very good expansion one imagines that you could
look at that. Asia is starting to get to that same level.
[16:45:00] You take the U.S. where you've got T-Mobile and Sprint coming together, and you've got AT&T trying to buy ourselves. What do you make of
it?
BREKKE: Well, when it comes to consultation, I think --
QUEST: Yes --
BREKKE: That scale is going to matter more in the future than it has been in the past. And as you rightly said, this market is maybe probably going
to be consolidated, indefinitely consolidated, China is going to three players, they probably had almost 200 mobile operators in Europe.
And this is one of the main issues that the industry in Europe has in our discussions with the EU competitive, laying competition. Now, authorities
that we need to allow consultation. We need to allow scale to be built for us to be able to invest into the 5D and new technology.
QUEST: How do you allow consolidation and I assume because Telenor is such a large company, you would be an acquirer more likely than an acquired
since you have a very deep pocket and a very strong balance sheet in that sense.
How do you allow consolidation without it becoming anti-competitive. I mean, let's face it, Telco, the mobile networks in Europe had to be
dragged, kicking and screaming on things like roaming agreements.
BREKKE: Well, I think all the markets we operate, there's quite a strict regulations when it comes to anti-competition. Even in markets like
Bangladesh, where we have 67 million customers.
So what we know best is actually to compete, we love competition. We like to be there and after do a little bit different than others, we are
connecting 170 million customers to our network every day, our services every day.
QUEST: Do you think it's a bit peculiar the small Telco out of Norway which has vast resources because of the sovereign from the Norway, such a
wealthy country in its own right. It has a 170 odd million customers across Europe, who never even go anywhere near Norway.
BREKKE: I'll like to see if it'll probably go back, because this is coming from no natural resources, only pure technology and pure economics(ph).
And it was with that we went out here into the big borough(ph).
But what they're doing in Asia is more than connectivity. We are also running banking services, health insurance services, agricultural services,
all the basis of connecting the millions among customers.
QUEST: And as you move into all these other areas, taking advantage of your own connectivity. How careful do you have to be that you don't bring
the house down around your ears, that you don't take stand, that you stick to your knitting and that you aren't tempted to become arrogantly too big.
BREKKE: Well, the late -- last market, we went into Myanmar, and then because if you can go into Myanmar or not, we looked at that as a
standalone business, not because we were in the neighboring markets because we want to make money in that market alone.
And that has been a great success since we entered that market in four years ago. And that is what we are looking at. We don't play along the
strategic (INAUDIBLE) know that. We look at where can we make money and where can we -- or for national and like which resources.
QUEST: Nothing wrong with that, nothing wrong with making money.
BREKKE: It isn't.
QUEST: Good to see you sir. Thank you very much indeed. And extend to a week of stocks in Europe, FTSE saw the greatest gains, healthcare stocks
were dragged on the market ahead of President Trump's speech on pharmaceuticals.
You can see go up and two down, the Dow ended very slightly, higher if you look, and there's one little bit of hiccup in the early afternoon, not
going to be the pharmaceutical announcement, but it soon recovered.
Symantec stock fell a whopping 33 percent, the companies revealed its audit committees investigating the cybersecurity company, that will do it for
you. Fifty thousand available, it follows concerns raised by a fall-back employing.
As we continue, Spotify takes a stand against hateful content and has distant itself from the controversial singer R. Kelly. I'll talk to one of
the campaigners who helped make it happen. It's QUEST MEANS BUSINESS, I'll be right back.
[16:50:00] (COMMERCIAL BREAK)
QUEST: More than 25 years, the singer R. Kelly has scored a succession of hit songs, even a sexual misconduct allegations have continued to mount
against him. Now, pardon the band, he may be facing the music.
Campaigners from the Time's Up were admittedly calling for his concert in North Carolina tonight to be canceled. It comes amid a campaign which aims
to pressure record labels taking companies and streaming services to cut ties with R. Kelly.
Spotify for instance says they will no longer promote the singer's songs. It's part of a crackdown about what they call describers hateful content.
Kenyette Barnes is the co-founder of the Mute R. Kelly campaign joins me now. Good to see you, thank you for taking the time.
The core of your campaign is what? What is it you want at the end of the day?
KENYETTE BARNES, CO-FOUNDER, MUTE R. KELLY CAMPAIGN: We want accountability. R. Kelly has in over two decade-history of sexual
inappropriate behavior involving disadvantaged young black women and girls, primarily African-Americans from very poor backgrounds and now inner cities
who are aspiring performers and we want accountability and we want to have a financial impact on his career.
QUEST: The man has been acquitted of certain offences --
BARNES: Yes --
QUEST: And has not been charged with any others despite several investigations. So as you and I speak, there are allegations and many
befuddled, but the man has not been convicted of anything.
The man is -- we are around at the moment of allegation.
BARNES: And neither was George Zimmerman in the United States, neither was Kevin Spacey, neither was Harvey Weinstein and what we saw is that these
allegations actually resulted and some significant impacts on their career and we're trying to do the same as R. Kelly.
QUEST: So the -- when his -- when his -- when R. Kelly's side put out a statement to stop what he's described as the public lynching of the singer,
you retaliated by saying, it is him who has been, you are not being lynched, in fact, it is you who have caused the sexual lynching.
BARNES: Yes.
QUEST: What is -- why do you say that?
BARNES: First of all, lynching is one of the darkest histories in an American culture especially as it relates to race relations. And for R.
Kelly to use such a horrible metaphor when people are simply trying to hold him accountable is a (INAUDIBLE).
And that statement speaks to the very reality that we wouldn't be talking about R. Kelly, we wouldn't be spending our time --
QUEST: That's right --
BARNES: There wouldn't be activism around the country if he had not done the things that he's now being held accountable for.
QUEST: Why do you think there hasn't been the extent of backlash against him. There has been to a certain, let's look at Spotify, no doubt.
BARNES: Yes.
QUEST: But there are certainly -- I think you'd agree, there's been nothing like the outpouring of backlash against him, that there was say,
against those that mentioned, Spacey, Weinstein and others.
Who almost immediately lost contract jobs at honors --
BARNES: Right --
QUEST: Withdrawn and revoked. Why?
BARNES: Well, to be clear, there's one, I mean, ten times, there's $1.2 million in lost revenue in nine months. So I want to be clear that in your
R. Kelly campaign has had a significant impact in his career.
But the cultural reason behind it is simply this. His victims are poor black girls in the United States and we don't view poor black girls in the
United States as credible witness of sexual assault.
Especially when we're talking about an entertainer who has a degree of powering influence.
[16:55:00] So I think the combination of all of those speaks strictly to why it took so long, but I do want to be clear right now, we have 10
concerts canceled in the last nine months.
Seven acts of protests including one tonight in Greensboro, North Carolina. So to say that there hasn't been impact, I think is a little disingenuous,
and especially with the new support from Time's Up and Me Too --
QUEST: Right --
BARNES: And Spotify, and now most recently Pandora pulling him from their streaming services.
QUEST: Good to have you on the program, thank you very much, tweeting --
BARNES: Thank you for having me --
QUEST: Please come back again so we can --
BARNES: Absolutely, thank you.
QUEST: And we will take a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. The extraordinary payments made to Michael Cohen from top companies like Novartis and AT&T really does show
the depth of the lobbying industry. But that's nothing new.
We've known for decades that it's lobbying, and it is not just in Washington, it happens in Brussels of course, vast lobbying, it happens in
Asia, it happens all over the world.
Vast lobbying on legitimate causes. The problem here is buying access. Buying the knowledge that somebody knows the president, but let's be men
and women of the world, we know that that's the way it works.
The issue is merely how you prevent, address and how you prevent from miscreant behavior. That's what really has come out of the whole Michael
Cohen revelations. And remember, all this from an administration whose main point was to drain the swamp.
It seems the only swamp that they managed to drain was somewhere else. And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York.
Whatever you're up to in the hours ahead, I hope it's profitable. I will be in London with you next week at the royal wedding.
(COMMERCIAL BREAK)
END
