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CNN Sunday Morning

Interview With Michael Weisskopf

Aired August 11, 2002 - 07:08   ET

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

FREDRICKA WHITFIELD, CNN ANCHOR: Despite the tougher corporate corporation law or corruption, rather, law, some wronged investors are looking for a way to punish wayward, but still wealthy company executives and they may find it in the courts. Joining us now with more, Michael Weisskopf of "Time" Magazine.
Good morning, Michael.

MICHAEL WEISSKOPF, "TIME" MAGAZINE: Good morning.

WHITFIELD: Well is it plausible that investors can get revenge from these invest -- from these executives who have cooked the books and walked away with wealth?

WEISSKOPF: I say good luck to them. There's a reason why these corporate chiefs end up riding off into the sunset in corporate jets, and that is they're very well protected against any kind of seizure. There are laws in states like Florida and Texas, which permit them to build huge homes where they can dump all kinds of money without the threat of seizure. As a matter of fact, the General Accounting Office, an arm of Congress, recently looked at how much of the -- what percentage of the $3 billion in fines and penalties exacted against these people have reaped and it was only 14 percent.

WHITFIELD: And so Michael, when you have companies such as WorldCom, who filed for bankruptcy, that's the company's way in which to protect itself from perhaps any lawsuits or anybody trying ...

WEISSKOPF: Right.

WHITFIELD: ... to seize money, but does that mean it would automatically protect the executives? I see what you're saying, that a lot of them are able to put a lot of that money into real estate, but outside of that, would bankruptcy of a company help an executive?

WEISSKOPF: The shareholders' lawyers, litigators, traditionally go after the deep pockets and the corporation itself and there's a reason for it. It's easier to get the money. There are insurance policies often covering top executives. However, there are all kinds of loopholes including one that provides no money if the executive committed some type of fraud.

WHITFIELD: Now are investors by pursuing these lawsuits or going to courts also essentially saying that they don't trust the Bush administration or even lawmakers to do enough to try and punish these executives? WEISSKOPF: It's not so much directed at any one set of politicians or regulators. It's just a kind of desperate need to replenish all the losses anywhere they can. What's happened, though, in recent weeks is these visages on TV of chief executives living in mansions along beaches in Boca Raton and places like that, usually acquiring three or four places around the world to absorb their huge profits and income, and this -- all this does is sort of rub it in the eye of investors, and they'd like revenge in that fashion. However, realistically when you talk to these litigators, it's very hard to go after that kind of money.

WHITFIELD: And a lot of these company employees who are rather angry at their executives, how are they going about -- I guess they're figuring power in numbers when they go about pursuing such a lawsuit.

WEISSKOPF: That's right. These are generally class actions, meaning there is usually one defendant or rather one plaintiff, somebody pressing the case, representing the class of employees who have been affected either through loss of their 401(k)s or their jobs.

WHITFIELD: All right, let's talk about Martha Stewart. In this week's "Time" Magazine you have an article talking about the state of affairs of Martha Stewart with her Omnimedia stock falling some 65 percent since all of this started. Is the new sort of tightening around her, does it look like they have a -- they're strengthen -- able to strengthen their case against her in terms of obstruction of justice and insider trading?

WEISSKOPF: The prosecutors in this case, and this is a case that is being fought out in many forms, but at the Justice Department and the FBI, there is now an effort to enlist the support of a key friend of hers, who was with her on the day of the sale, a woman by the name of Pasternak and that's how that -- where that area is developing. Then there is in the congressional arena, where she is being seen increasingly as uncooperative and all that does is ends up uniting even desperate forces in Congress who go after her stronger. The latest concern is, according to a spokesman for the House investigators, that she sandbagged them by providing a set of information that kept on evolving.

WHITFIELD: Right and that seems to be the problem also of her broker, right, as well as his assistant that the stories keep changing. That these stories keep changing, doesn't that only make everyone look a lot more suspicious?

WEISSKOPF: Indeed it does. It also frustrates the investigators. Now the FBI, we write this week, has told -- spoken twice to Ms. Stewart and members of the congressional panel looking into her want to speak to her also, particularly because they believe her story keeps on changing with an effort to obscure the reality.

WHITFIELD: Now she has been asked to, I guess, produce the stock loss records, and she has by a certain date at the end of this month to do so, before lawmakers decide that they indeed want to subpoena her. WEISSKOPF: Right. That's correct. If she doesn't provide them, she'll be certain to get a subpoena including for the records. Even so, there are enough inconsistencies in the story that Billy Tauzin who heads the House Commerce Committee panel is thinking of bringing her in. This is something that sits very poorly with her lawyers, who have told the committee that it would be very difficult for her and hurt her public image if she is subpoenaed because she made -- she confronts a kind of Hobson's choice. Other -- either she speaks openly and takes the risk of contradicting herself, which has its own legal problems, or she takes the Fifth Amendment against self-incrimination. That, of course, is her legal right, but it also deepens public concerns about her and her corporation.

WHITFIELD: All right Michael Weisskopf, thank you very much, of "Time" Magazine ...

WEISSKOPF: A pleasure.

WHITFIELD: ... appreciate it. Thanks for joining us this morning.

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