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CNN Student News

Aired July 24, 2002 - 04:00   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.
ANNOUNCER: You're watching CNN STUDENT NEWS seen in schools around the world because learning never stops and neither does the news.

SHELLEY WALCOTT, CO-HOST: CNN STUDENT NEWS kicks things off with a congressional investigation of Enron. We cover that in our "Lead Story."

MICHAEL MCMANUS, CO-HOST: We leave Capitol Hill and land in a South African rose garden. Take the tour in "Chronicle."

WALCOTT: Africa is still on the agenda in "Perspectives" as we witness the rebirth of an important African organization.

MCMANUS: On a lighter note, Student Bureau has your summer movie guide.

WALCOTT: It's Wednesday, July 24. Thanks for joining us at CNN STUDENT NEWS. I'm Shelley Walcott.

MCMANUS: And I'm Michael McManus.

Another roller-coaster ride on Wall Street puts investors on edge again.

WALCOTT: After falling Monday to its lowest close in almost four years, the Dow managed to work its way up slightly yesterday but then fell again. It closed at just over 7,700.

Two of the biggest drags on the Dow this week have been Citigroup and J.P. Morgan Chase. Senate investigators say the financial giants made deals that helped Enron conceal its debts. Senators are now grilling officials with those two investment firms, but is the Capitol Hill investigation into Enron's questionable accounting an exercise in hypocrisy?

Coming up, CNN's Jonathan Karl examines the U.S. government's own questionable bookkeeping. But first, we go to Tim O'Brien for the latest on the Senate hearing.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice over): As Enron was facing financial ruin, Citigroup and JPMorgan Chase played a huge role in making the energy giant look healthy. Here's how.

The banks would agree to buy natural gas or other commodities from Enron and pay in advance. The gas would be sold, but only on paper, never delivered. The banks would sell it back to Enron for a large fee and what amounted to interest. Enron would list the transaction as a trade. But, to Senators, it was a loan in disguise, designed solely to conceal up to $5 billion in Enron's mounting debt.

SEN. CARL LEVIN (D), MICHIGAN: And this disguised debt contributed significantly to the Enron meltdown and the huge loss to Enron's shareholders.

O'BRIEN: Executives at JPMorgan Chase defended the prepayment transactions as both legal and not an uncommon trading practice.

UNIDENTIFIED MALE: We believe that we acted in accordance with law, in accordance with gap.

O'BRIEN: But the committee uncovered an interoffice e-mail showing Chase understood the real purpose was to hide debt. "Enron loves these deals as they are able to hide funded debt from their equity analysts because that, (at the very least), book it as deferred revenue or, better yet, bury it in their trading liabilities."

LEVIN: Are you embarrassed by that?

UNIDENTIFIED MALE: I'm confused by it.

LEVIN: You're not embarrassed by this? Let me just say this. If I were Chase, I'd be embarrassed. I'd be ashamed of that e-mail.

O'BRIEN: Although Enron listed the prepayment transactions as trades on its balance sheets, it considered them as debts on its tax returns, deductible as business expenses.

Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT (voice-over): There's been no shortage of congressional outrage over shady corporate accounting.

SEN. CHRIS DODD (D), CONNECTICUT: This wasn't just cooking the books. This was marinating them, sauteeing them and garnishing them. This was a recipe for financial disaster.

REP. BILLY TAUZIN (R), LOUISIANA: This is not accounting 101. This is fraud 101.

KARL: All that tough talk obscures a basic fact: Congress' own accounting practices look eerily like the schemes used by Enron and WorldCom. REP. MICHAEL OXLEY (R), OHIO: It appears now that senior WorldCom executives deliberately hid almost $4 billion in expenses, disguising its true performance.

KARL: But Congress has perfected the art of understating expenses, sometimes not counting them at all. For example, last year Congress approved a $15 billion bail-out of the Railroad Workers Pension Fund, but not a dime of that money was counted on the ballot sheet -- a trick not even WorldCom can pull off.

(on camera): There's more. A lot more. Congress classified money for the 2000 census sues as emergency spending. Of course, the census is not an emergency. It has been done every 10 years since the dawn of the republic, but the move enabled Congress to keep $4.5 billion off the books.

(voice-over): And Congress was able to wipe $2.3 billion in cost off the 2001 budget by simply paying military employees a day early. That's because it moved the big payday from the first day of fiscal year 2001 to the last day of 2000. And this sort of thing is nothing new.

TIM PENNY, FORMER MEMBER OF CONGRESS: That kind of gimmickry, that kind of smoke and mirrors was part and parcel of the way we did budgeting all during the 1980's.

KARL: In fact, back in 1985 David Stockman, Reagan's budget director said: "We have increasingly resorted to squaring the circle with accounting gimmicks, evasions, half-truths and downright dishonesty in our budget numbers. If the SEC had jurisdiction over the executive and legislative branches, many of us would be in jail.

SEN. PETER FITZGERALD (R), ILLINOIS: I'd say you were a carnival barker, except that wouldn't be fair to carnival barkers. A carney will at least tell you up front that he's running a shell game.

KARL: Enron's alleged crime was using accounting gimmicks to conceal its debts, which is exactly what Congress does, but with much bigger numbers.

DAVID WALKER, GENERAL ACCOUNTING OFFICE: What you won't find in the U.S. government's financial statements is you won't find shown as a liability the amount that the U.S. government owes to the trust funds of Social Security and Medicare.

KARL: If you counted all the money Congress owes future retirees, he's the true size of the federal debt is several trillion dollars higher, but don't look for the true debt to show up on the debt clock any time soon. Like most federal laws, the corporate accountability law won't apply to Congress.

Jonathan Karl, CNN, Capitol Hill.

(END VIDEOTAPE)

WALCOTT: There's even more to the Enron story. For the latest, including a backgrounder on the history of the company, head to our Web site, CNNSTUDENTNEWS.com.

We'll have more from the world of business later in "Focus," but we turn now to "Headlines" and a papal visit to Canada. Pope John Paul II is in Toronto to preside over World Youth Day celebrations.

CNN's Frank Buckley covered the Pope's arrival. Here's a portion of our coverage.

(BEGIN VIDEOTAPE)

FRANK BUCKLEY, CNN CORRESPONDENT: It really was -- quite surprising to see the pope moving down that stairway, considering the concerns about the pope's health, the 82-year-old pontiff suffering from the symptoms of Parkinson's disease. We're told by church officials to not expect this moment. We were told that the pope would, in fact, deplane from behind the aircraft, would come down a scissors truck and would then eventually appear at the front of the aircraft, on the platform on which he is wheeled into the hanger. Instead, he came down those stairs on his own power, surprising everyone here. He then later spoke to a group of about 500 hundred guests at a hanger at the international airport, a group that included the prime minister, Jean Chretien.

(BEGIN VIDEO CLIP)

POPE JOHN PAUL II: Too many lives begin and end without joy, without hope. That is one of the principal reasons for the World Youth Day.

(END VIDEO CLIP)

BUCKLEY: After making his remarks, the pope then boarded a helicopter to be helicoptered to Strawberry Island, the retreat that is in the "cottage country" area of just north of Ontario. We're told that he actually requested a flyover of the location we're at, Exhibition Place. He, in fact, did do that and is now enjoying his vacation.

(END VIDEOTAPE)

MCMANUS: WorldCom, Enron, Arthur Andersen, in a matter of months, all of these mighty giants have fallen and many former employees are blaming none other than those at the top. Now as companies change their ways, many are beginning to look for a new type of chief executive.

Here's Jim Boulden with more.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT (voice-over): It's not a cartoon you would have found funny just a few months ago, but CEO is a dirty word these days. And so going underground, for now anyway, is the larger-than-life executive.

PHILIP MODIANO, CEO, PHILIP TECHNOLOGIES: You saw that in WorldCom and in Enron, the kind of Napoleonic (ph) drive just to be the biggest and best. One needs the drive. We've got to have the drive, but it's got to be tempered with ethics, with concern for the organization and that brings with it a certain style.

BOULDEN: A style executive consultants say that must be instilled in up-and-coming CEOs: listening to shareholders, taking employee welfare into account, sticking to corporate governance rules. The chief executive now a symbol of a company's credibility. All this learned, perhaps, in some sort of CEO school.

JOHN GILKES, DBM: I think now you'll start to see a new breed of chief executive who is going to be more trained to be a professional lifetime chief executive and maybe moving between companies more than they would have been required to previously.

BOULDEN: Meanwhile, current CEOs, like Cadbury Schweppes John Sunderland, are busy reassuring shareholders that a new breed of CEO is not needed everywhere. Cadbury says accounting tricks could not happen under current management.

JOHN SUNDERLAND, CEO, CADBURY SCHWEPPES: I think the integrity of our management team, which I sincerely believe in, combined with those values make for a corporate climate that, frankly, would just not allow that sort of thing to even -- to enter people's minds, let alone their patterns of behavior.

BOULDEN: But many CEOs say the pressure cooker of providing quarterly growth has made the job much more difficult.

Philip Modiano's company advises firms on how to pick a CEO, the top job that increasingly changes hands about every three years now.

MODIANO: I think possibly one of the good things that the recession in the stock market that we're seeing now and all of the changes, it's just possible we might see that kind of pressure come off a bit and a greater sophistication in the boards for something that's a bit deeper and longer lasting.

BOULDEN: But what isn't going to change for CEOs, their exposure to shareholders, to regulators, to the media, even if some don't like the celebrity status that can come with the job.

SUNDERLAND: No, it's not something which I regard as particularly healthy. I mean we're here to run the business, not to appear on your cameras.

BOULDEN (on camera): A profitable job indeed CEO, but getting more stressful all the time say those who hold the title. Still, they say it's a great job. And despite the recent turmoil, they don't think there'll be any problem finding new candidates willing to climb the career ladder to the top.

Jim Boulden, CNN, London.

(END VIDEOTAPE) MCMANUS: Well if you've had enough CEOs then stay tuned, I have some E-C-O news in our business report. I'll tell you about a Kenyan vacation getaway winning accolades with its eco-friendly construction.

But now over to Shelley with our first stop on our South African tour.

WALCOTT: That's right, Mike, South Africa has enjoyed a sea of change since apartheid was dissolved in 1991. The country has since enjoyed equal representation between blacks and whites and economic opportunities are blossoming.

Jean Davidson is proof. Once living in the infamous township of Soweto, she now resides on a spacious farm surrounded by beautiful flowers, flowers that are the roots of her success.

Paul Tilsley has her story.

(BEGIN VIDEOTAPE)

PAUL TILSLEY, CNN CORRESPONDENT (voice-over): Meet Jean Davidson, she's lady of the manor of everything she sees. Greenhouses covering five hectares, that's the equivalent of five soccer fields full of roses.

JEAN DAVIDSON, FARMER: My vision is to be one of the biggest rose growers in the country. I think it can be done. There's romance linked to a rose. To see your product making thousands and thousands of people happy, being given as a gesture of love, it really makes me feel so good to be able to contribute to us making families happy.

TILSLEY: Davidson may sound like a soft romantic, but she's used hard-nosed World Bank assistance and high-tech equipment to push herself forcefully to the position where annually she grows six-and-a- half million roses on her farm and exports over a million stems to Europe and the Middle East.

Davidson provides full time employment to 48. In a profoundly chauvinist industry, she gives the nod mostly to women who she claims have a special talent for farming and centers her ambition around African capability.

(on camera): After just three years in the business, Jean Davidson was named female farmer of the year. That in an industry traditionally dominated by farmers who are often old fashioned and almost always white.

DAVIDSON: It is very difficult because I think there is a mindset of the people who were in this business before. And what I find is that it's more of a clan (ph) that tends to keep to themselves. It is a bit difficult to, you know, to get in there and access certain things.

TILSLEY (voice-over): But access, particularly to foreign markets, is one thing Davidson has wedged firmly open. Her message to women who wish to similarly succeed. DAVIDSON: The message there is it can be done. As women in Africa, we have been tilling the land. It is time that we did that on a commercial basis. And I think we have -- you know flowers in particular do need a woman's touch because it's quite a delicate product. And if there's anyone who can do that, I think it is women and women are (UNINTELLIGIBLE) and definitely do that.

TILSLEY: Davidson's fame has spread so far that these potential women farmers traveled from another country, Vasutu (ph), to hear her words of business wisdom.

In Magaliesburg, Jean Davidson is quietly but proudly walking the talk for African feminism.

Paul Tilsley, "INSIDE AFRICA", Magaliesburg, South Africa.

(END VIDEOTAPE)

ANNOUNCER: Exploring our world, here now is CNN STUDENT NEWS "Perspectives."

MCMANUS: A new chapter in African development opens with the birth of the African Union. It replaces the Organization of African Unity and is aimed at lifting the continent out of poverty. The transition from the OAU to the AU took place earlier this month at a summit in Durban, South Africa.

CNN's Charlayne Hunter-Gault has the story.

(BEGIN VIDEOTAPE)

CHARLAYNE HUNTER-GAULT, CNN JOHANNESBURG BUREAU CHIEF (voice- over): They came from all over the continent, the old, the new, the controversial, those in conflict, the desperate leaders who sought common ground under one tent, the organization of African Unity. Hearing this anthem for the last time, to say goodbye to the organization that had represented them in their struggles against colonialism, racism, apartheid.

THABO MBEKI, PRESIDENT OF SOUTH AFRICA: As with many other things African, from the very beginning of its life the OAU was dismissed by our detractors as an organization that was destined to fail. Its time it convened, its critics predicted that it would end in disarray and collapse. Nevertheless, the OAU proved our critics wrong.

HUNTER-GAULT: Mbeki, who becomes the first chairman of the African Union, the organization replacing the OAU, said the occasion represented not the death of the OAU but its further evolution to meet the demands of a changing world. The African Union is expected to be a more robust organization with greater emphasis on good fiscal and political governance and more willingness to intervene than its predecessor when human or political rights are abused.

Much effort has gone in to smoothing over differences among leaders, not least, Libya's military ruler Moamar Ghadaffi who first conceived the idea of an African Union and who, it is widely believed, had hoped to become its first chairman. He got a prime spot on the program and may be asked to join the steering body of NEPAD, the project aimed at promoting good governance and accountability which Ghadaffi recently labeled a tool of colonialists.

Talk of it ruffled the feathers of some leaders as well as observers.

JOHN STREMLAU, WITWATERSLAND UNIVERSITY: His own rule of authoritarianism makes a mockery of the values of a New Partnership for African Development. It's been a real political challenge for South Africa and other NEPAD leaders to keep him within the tent but not have him drive the process.

HUNTER-GAULT (on camera): It will be accompanied by great fanfare and celebration of a new Africa taking control of its destiny, but one that will require great political will and iron stamina, in the words of Kofi Annan. It will also require great patience and time to learn to do business in a way that's never been done on the African continent.

Charlayne Hunter-Gault, CNN, Durban, South Africa.

(END VIDEOTAPE)

MCMANUS: All week in "Perspectives" we've been featuring reports from Africa. We've learned about the continent's problems, including poverty, the AIDS epidemic and the rising number of orphans. Now today the story of a very special project that could help improve life for one community. Now it's an innovative blend of business, culture and the environment.

CNN International's "INSIDE AFRICA" filed this report.

(BEGIN VIDEOTAPE)

GADIS IGURIGA (ph), CNN CORRESPONDENT (voice-over): It's a lodge that's eco-friendly located in Southern Kenya. The faster (ph) experiments with the idea of the local Maasai community gradually buying out the owner.

RANKA OLE MASIAAYA, COMMUNITY LIASON, SHOMPOLE: That is more than any other project like this in Kenya because all the other projects we find the land has either been leased or bought but there's no partnership between an investor and the local community. This is the first one.

IGURIGA (ph): The Maasai have already bought 30 percent of the lodge in nine months by reinvesting money from part of the profits, and by providing the labor force and selling to the lodge eco-friendly building materials.

JOHANN DU TON, CAMP MANAGER, SHOMPOLE: We got the roots from a swamp near the area here and it's all cut by the Maasai women. This roof would last almost, probably, about 10, 12 years. The furniture also is made from other dead wood that we get from around here. Also again all fig. A lot of people don't use fig as it is a soft wood, but we found a very good use for it with all our furniture.

IGURIGA (ph): It has unusual features such as a growing tree as part of the bathroom wall, but it's not all about design.

AMANDA MITCHELL, OFFICE MANAGER, SHOMPOLE PROJECT: You know this is a project for creating awareness about business, about commerce for the Maasai so they learn to do things themselves. We -- it's giving a fishing rod and not giving a fish, that's the idea.

IGURIGA (ph): The lodge open its doors to its first clients and already.

"There's been a big difference," this woman says. "Since before many people were idle, only the rich could afford good things. You couldn't ask for help from your neighbors. But since the camp was built, even if you're not employed there, your child is and you benefit that way.

The wildlife around it is increasing since there's less poaching. And for the Maasai...

"When they hear a wild animal has attacked someone or a lion has killed a cow," says the local chief, "they report it instead of gunning up to kill it. They're beginning to see there are more gains because the animals have started coexisting with human beings."

It will take up to 15 years just to see how successful the Shompole Ecotourism Project will be. But the Maasai here are already learning to milk the profits from this potential cash cow.

Gadis Iguriga (ph) for "INSIDE AFRICA."

(END VIDEOTAPE)

WALCOTT: Well summer is in full swing and you know what that means, Mike?

MCMANUS: Is that swimming with the sharks?

WALCOTT: Oh yes.

MCMANUS: Just kidding. It's blockbuster season and the movie studios are serving up a little something for every taste this year.

Our Student Bureau has a review of what's happening on the big screen. And in turns, Jennifer Errico and Laquinto Dixon (ph) worked on this report.

WALCOTT: Check it out.

MCMANUS: Take a look.

(BEGIN VIDEOTAPE)

JENNIFER ERRICO, CNN STUDENT BUREAU (voice-over): Get in line because it's movie time. From comedies to action-packed thrills, this year's summer movies are offering lots of diversions for the young at heart, including "Men In Black II, which puts man against alien against dogs. Lil' Bow Wow portrays Calvin Cambridge in the summer movie "Like Mike." Cambridge uses the power of his shoes to be like Mike and save his team in the movie named after basketball great Michael Jordan.

LIL' BOW WOW, ACTOR: Sister Theresa (ph), do you know anything about these shoes right here?

SISTER THERESA: Well, the guy who dropped them off said they used to belong to some famous basketball player when he was a kid.

LIL' BOW WOW: One day I get these pair of shoes and slip these shoes on and tell me the great Michael Jordan played in them. Put them on and it -- and it helps me play better than what I already could play.

ERRICO: And while talent might be in the shoes for Lil' Bow Wow, in the movie Juanaman (ph), it's in the dress.

MIGUEL NUNESS (ph): I'm here.

ERRICO: Miguel Nuness stars as an NBA star who finds action on the women's basketball team.

UNIDENTIFIED FEMALE: The movie Juanaman was very funny and exciting to watch.

UNIDENTIFIED MALE: (INAUDIBLE) storm.

UNIDENTIFIED FEMALE: They are the most dangerous waves on the planet.

ERRICO: "Blue Crush" also features women in action. Kate Bosworth stars in this teen movie about a girl's determination to hang with the big boys and catch the ultimate rush.

UNIDENTIFIED FEMALE: I think that it shows that females can do as much as males can.

UNIDENTIFIED MALE: You've been surfing for real?

KATE BOSWORTH, ACTOR: You know it.

ERRICO: Or watch this, a comedy about another change in attitude called "Mr. Deeds." This movie shows how money can change everything but not everyone.

STEVE IRWIN, CROCODILE HUNTER: Oh no! Oh crikey! Duck!

ERRICO: The man who made his mark on the Animal Planet is now saving crocodiles in the movies.

IRWIN: Hey, hey, hey, hey, hey, hey. Hey, Terri, I got him.

ERRICO: "Crocodile Hunter: Collision Course" promises both laughs and adventures.

IRWIN: That crocodile nearly got me, Suey (ph).

ERRICO: Continuing the realm of summer adventure, a computer generated Scooby Doo struts on to the big screen with the rest of the gang. And this time they must stop whatever is turning guests at a spooky island resort into zombies.

SHAGGY: Say hello to grandma.

UNIDENTIFIED MALE: I like Shaggy. He's always really funny and he's always hungry.

UNIDENTIFIED MALE: I like -- I like Velma.

UNIDENTIFIED FEMALE: It was still kiddy enough so that I can take her to go see and we really enjoyed it. So we were on the edge of our seats the whole time.

ERRICO: Like "Scooby Doo," the animated "Lilo & Stitch" features a loveable cartoon.

UNIDENTIFIED MALE: You sure it's a dog?

UNIDENTIFIED FEMALE: I think it might be a Koala.

ERRICO: This Walt Disney film is about a young girl and her strange pet. The duo's crazy antics will keep the audience in stitches.

UNIDENTIFIED MALE: A ton (ph) that won't -- friendship is better than life (ph).

BLOSSOM: Ready.

BUBBLES: Ready.

BUTTERCUP: Ready.

ERRICO: The summer also offers children the "Powerpuff Girls."

ANNOUNCER: Blossom, Bubbles and Buttercup.

ERRICO: And "Stuart Little 2."

UNIDENTIFIED MALE: Are you two still friends or can I eat him?

UNIDENTIFIED MALE: Please.

UNIDENTIFIED MALE: How could you be eating at a time like this?

ERRICO: "Spy Kids 2" gives one more for the record books on kid heroes.

UNIDENTIFIED MALE: Die (ph) so.

UNIDENTIFIED FEMALE: Everything is automated.

ANNOUNCER: Now picking your nose.

UNIDENTIFIED FEMALE: Little brother.

ERRICO (on camera): Exhibit Relations reports that so far this summer's movies for kids have grossed over $577 million. Other kid oriented movies include "Hey Arnold" and "Country Bears."

This is Jennifer Errico, CNN Student Bureau, Atlanta.

(END VIDEOTAPE)

MCMANUS: And our stay in Africa lasts until Friday. Tomorrow we go on safari.

And, Shelley, you want to be on the lookout for gorillas and crocodiles.

WALCOTT: Ooh! Well if you're looking for tamer activities, we'll return to the topic of movies.

And, Mike, did you know that most of the time what film characters wear, drink and drive is no accident?

MCMANUS: That's right. It's called product placement and Student Bureau is going to tell us about it tomorrow.

And as a bonus for all you film buffs, next week, Shelley, all week long we're "Going Hollywood."

WALCOTT: All right. We'll hit Grauman's Theater, have a sit- down with Harrison Ford and visit a celebrity cemetery online.

MCMANUS: Spooky. But that is all next week. For now, we are out of here. Take care.

WALCOTT: See you tomorrow.

MCMANUS: Bye.

WALCOTT: Bye-bye.

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