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CNN Saturday Morning News

Reporter's Notebook

Aired July 13, 2002 - 09:38   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, CNN ANCHOR: Well, it was kind of the corporate greed week, I guess, in Washington. It's a full-scale DEFCON 1 political issue, I'd say. And you have a lot of opinions about this, most of them not very -- well, let's just say people are not forgiving corporate executives very easily at the moment.

White House correspondent Kelly Wallace is here to weigh in on the matter. Kelly, we appreciate you joining us. We'll give you a story about that in just a moment. Jack Otter is the senior editor at "Smart Money" magazine. Good to have you with us as well, Jack.

JACK OTTER, "SMART MONEY" MAGAZINE: Good to be here, Miles.

O'BRIEN: Now, Kelly, just quickly, Suzanne Malveaux can't get in the White House. Why not?

KELLY WALLACE, CNN SENIOR WHITE HOUSE CORRESPONDENT: A technical snafu. She's been waiting outside the White House since early this morning, a paperwork problem. So hopefully she will be inside momentarily, but I'm sitting in, while we wait.

O'BRIEN: Oh, well, number one, we appreciate it. Number two, I guess that's a reflection of the security that exists...

WALLACE: The security measures, yes.

O'BRIEN: ... (UNINTELLIGIBLE).

All right, let's get right to the e-mail, shall we? We have some good ones. This one comes in, and it's kind of long, let me just get right to it. "I wonder why some crafty lawyer hasn't filed a class action suit against these corporations and their CEOs on behalf of the American taxpayer. I am sure these companies receive some sort of government help, low-interest loans, et cetera. The assets of those CEOs should be immediately frozen and confiscated on behalf of the American taxpayer."

That's from Dawn Mercogliano in North Bergen, New Jersey. And Don, I'm sorry about that one.

Go ahead, let's see, Jack, why don't you take that?

OTTER: OK. Well, I can tell you one thing, and I'm sure they're right, you probably could find basis for a suit. But the bigger problem is that in a lot of cases, they didn't break any laws. Accounting standards have to be changed, and I'm sure Kelly has some insight on how those laws will be changed, whether it's by the government or an SEC regulation or by corporations themselves.

But a great example is what John McCain was talking about, which is the expensing of options, generally accepted accounting principles don't require options to be labeled as an expense. But anyone can tell you that they absolutely are an expense. Any responsible corporation would list them as such. Boeing, for instance, does. And I hope at some point options as well as many other things that cost companies money are actually listed as expenses.

And then we'll get some real accounting as to how much money these companies are actually making or losing.

O'BRIEN: All right. Let's get a phone call in. Thomas is in Oklahoma. Good morning, Thomas. Your question?

CALLER: Good morning. Well, my question was, I've heard lots of deals on the smallpox, and I've tried and tried and tried to call you, but I never get in till now.

O'BRIEN: All right, Thomas, Thomas, we're talking about corporate responsibility. Let's move on. We got another e-mail. Thomas obviously was calling in on a segment we did three weeks ago.

Let's get this one in. Gary is in Clearwater. "It appears that with the current White House administration we have, the fox watching the chicken coop, it also seems that this administration has their own history of corporate corruption and is denying it all. So how is confidence to be rebuilt when things stand as they do?" That's from Gary in Clearwater.

Let's -- give us your political assessment of this thing, Kelly.

WALLACE: Well, Gary, Miles, raises an interesting point. It really is a political difficulty facing the White House. When President Bush served as a corporate leader years ago, Vice President Cheney did as well, and Democrats this week have been saying that Mr. Bush and Mr. Cheney did not exactly practice what they are now preaching, when again they served on corporate boards or as heads of companies.

What the White House will say first off regarding the president, and lots of questions about a stock sale when he was on the board of this company called Harken Energy, they're saying there's no there there, that the Securities and Exchange Commission looked into this and took no action against the president.

But bigger concern, Miles, is over Vice President Cheney. He was the CEO of the Halliburton Energy Services Company, the SEC is investigating that company right now, looking at whether that company engaged in questionable accounting practices, including the time when the vice president was at the helm.

So it is a problem that could plague this White House. I'm told by a senior aide that they're going to have to ride the politics out.

But let's listen. We have a little clip of the vice president when he was the chief executive at Halliburton talking about the company's auditors, the Arthur Andersen Company.

(BEGIN VIDEO CLIP)

DICK CHENEY, CEO, HALLIBURTON ENERGY SERVICES COMPANY: I get good advice, if you will, from their people based upon how we're doing business and how we're operating, over and above just sort of the normal by-the-books auditing arrangement.

(END VIDEO CLIP)

WALLACE: And Miles, I can tell you, Democrats are pointing at things like that again to raise questions about how does this administration have the moral standing to move forward on the area of corporate responsibility. But the administration says that Democrats are simply playing politics, and distracting from the real issues at hand, Miles.

O'BRIEN: All right. Back to the phone lines we go. And on the phone, a special phone guest indeed, the dean of CNN College, Joe McCutcheon, out of Ellijay, Georgia. Joe, good morning to you, sir. Your question?

CALLER: Miles, you do a great job. Kelly, my question for you, with the market, it's really down and having trouble. Instead of creating a new bureaucracy, why don't they just enforce the rules they have now, and why doesn't the president cut the capital gains tax rate? That would energize millions of investors to get back in the stock market, cutting that capital gains tax rate?

O'BRIEN: Now, Kelly...

WALLACE: Well, (UNINTELLIGIBLE)...

O'BRIEN: ... Kelly, you know that's Joe's favorite subject is the capital gains tax, yes.

WALLACE: I know Joe loves talking about cutting that capital gains tax. We've heard him say it before. Look, this administration will certainly say you need to enforce the existing laws. But there seems to be a consensus, Democrats and Republicans, saying that more needs to be done. And Joe, you're raising a very good point, because one thing the administration has said is that there's been a real fall-off in revenues coming from tax receipts from capital gains and options and mutual funds due to what we're seeing in the market.

So it's a big concern on the part of this administration to try and boost consumer confidence. And I'm told the president will continue talking about the economy, trying to convey to consumers that he believes the fundamentals of the economy are strong, and encourage people to continue to invest in the market, Miles.

O'BRIEN: I'll tell you what, Jack, why don't you weigh in on Joe's question too on this issue of the capital gain tax, and whether that's something that...

OTTER: Sure, sure.

O'BRIEN: ... you know, seems like it has any traction right now.

OTTER: Well, I don't think so. The market lost 7.2 percent in one week. I don't see a whole lot of capital gains being made there, capital losses that are happening right now. During the Internet bubble, people were pouring way more money into stocks than they probably should have. And again, they weren't worried about the capital gains taxes on those 20 and 30 percent a year gain.

I think what needs to happen is that we need some accounting standards changed, and whether that's by audit committees of individual companies or whether it's by the SEC or whether it's by the president of the United States, I don't think that's so important as getting people to record honestly what they're making. And I think that's what's going to make some money for investors once we know what we're actually investing in.

O'BRIEN: All right, let's get back to the e-mail, shall we? This is -- gets us back to the political realm. Kaye Malo in Savannah has this. "The Democrats are chary to bring it up, but we -- it should be asked, what would the reaction be if then-President Clinton said," and we quote a hypothetical quote, "`We are going after the immoral perpetrators of office sex'?" -- Kelly.

WALLACE: Where do we go with that, Miles?

O'BRIEN: I leave it to you, Kelly.

WALLACE: Oh, you leave it to me. Let me, let me...

O'BRIEN: I guess -- no, the point is...

WALLACE: ... kind of...

O'BRIEN: ... is this going to be an issue that is going to harm both parties, and really Washington in general, because, after all, corporations and the political process are inextricably linked, and that occurs on both sides of the aisle.

WALLACE: Well, I can tell you, the Democrats are a little concerned. They do not want to sort of overplay their hand, and also be accused of doing what they believe the Republicans did during the Clinton administration, and bashed President Clinton and his top aides on a variety of issues.

So the Democrats are really walking a fine line, trying to raise questions, again, about the president and the vice president's conduct as corporate leaders, but at the same time, trying to say to the American people, We are trying to do more on the economy than the Republicans.

The Republicans, for their part, are also again walking a fine line. You know, they have -- many have been against any more regulation when it comes to businesses, when it comes to auditing standards for the accounting industry. But now, I mean, everybody's for it, and everybody seems to be reacting to the loss of consumer confidence and concerns about the economy and how that could play out in the November elections, Miles.

O'BRIEN: Let's go back to the phone lines. Steve is in Texas. Good morning, Steve.

CALLER: Good morning.

O'BRIEN: Your question?

CALLER: My question is for probably anyone who can answer it, it's relatively easy. For the companies that are cooking the books, why isn't this considered just basically fraud to begin with?

O'BRIEN: Jack?

OTTER: Well, I think the main reason is that in -- well, it certainly is considered fraud, in some cases, I'd better not name names, but, I mean, we know a lot of the headlines. And I think some of those executives certainly will be sued in civil court, possibly taken to criminal court. And some of them might very well to go jail.

I mean, I will bring up Kozlowski. He is accused of dodging sales tax. Leona Helmsley was accused of tax dodging, and she spent some time in jail. So it very well could happen.

In other cases, it's not so clear that it actually was out-and- out fraud. In some cases they used existing loopholes to do what they did, and those are what need to be closed.

O'BRIEN: (UNINTELLIGIBLE)...

OTTER: I think I can also say, though, I hope this doesn't become too much of a partisan issue, because, I mean, Democrats and Republicans can each be accused of doing things badly in the past, obviously, and now let's hope they can move beyond that and just come up with some sensible things, and not overregulate. I mean, the other problem is that we could go too far in the wrong direction.

O'BRIEN: Kelly, what do you think the chances are that this will become a partisan issue in Washington?

WALLACE: Well, it's already become somewhat of a partisan issue. But Jack, I think, raises a great point, which is that, you know, Democrats can sort of look in their closets, how many Democrats have received contributions from these major corporations? Were Democrats also stepping back and saying, No, no, no, we don't want to do more regulation, we want to step back and let corporate America run as it's doing?

So again, it is a bit partisan right now. What we're likely to see is some type of measure come out of the Senate next week, then go quickly to a conference committee. I think it's fair to say lawmakers working in lightning speed to get something done to try again to boost consumer confidence.

O'BRIEN: And on that note, we will conclude yet another edition of Reporter's Notebook. Kelly Wallace, thank you for doing some pinch-hitting for the...

WALLACE: Well, we're sorry Suzanne could not be here. And if the White House is watching, we're mad at you.

O'BRIEN: Yeah, out in the cold, Suzanne Malveaux...

WALLACE: Not fair.

O'BRIEN: ... we're not going to see if there's any -- well, we wont' go grassy knoll here just yet, will we?

WALLACE: No, we won't, OK.

O'BRIEN: We'll wait. All right. Jack Otter, we appreciate your insights as well, Jack Otter (UNINTELLIGIBLE)...

OTTER: Absolutely. I want to tell you that I got into CNN's building very quickly with no problems at all.

O'BRIEN: Yes, right. Jack Otter's with "Smart Money" magazine. And we're glad you got through. Hopefully there was a little security there. Anyway, (UNINTELLIGIBLE)...

OTTER: There was.

WALLACE: Yes, we hope so.

O'BRIEN: All right. Take care, and we'll see you again soon, we hope.

OTTER: Absolutely.

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