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LOU DOBBS MONEYLINE
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Aired January 23, 2002 - 18:00 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: Tonight on LOU DOBBS MONEYLINE: The latest on the Enron scandal. And accounting oversight board votes itself out of existence. We'll hear from an accounting group on how that affects plans to clean up the industry's image. Boeing CEO Phil Condit tells us why he's optimistic about his company's future despite a 79 percent plunge in profits.
A leading economist tells us why he feels the recession is over and why the recovery has begun.
American Taliban John Walker returns home and the Pentagon stops sending detainees to Cuba. General David Grange joins us.
This is LOU DOBBS MONEYLINE for January 23. Sitting in for Lou Dobbs, Kathleen Hays.
KATHLEEN HAYS, CNN ANCHOR: Good evening, here are the latest developments in the Enron scandal. Enron today postponed a meeting with employees because of what the company called a media frenzy. The SEC's accounting oversight board, all five members, quit. And David Duncan, the fired Andersen auditor, wants immunity before he tells Congress what he knows about document shredding. Tim O'Brien is in Washington tonight with more.
Tim, what can you tell us on the latest developments?
TIM O'BRIEN, CNN CORRESPONDENT: Well, the developments are breaking out all over. Amid reports that Enron was continuing to destroy documents as late as last week, a federal judge in Houston conducted a hearing. As we speak, he is about to rule on to best protect those documents.
Lawyers for investors and former employees are urging they be placed in custody of a court-appointed trustee. Again, we are expecting a ruling within minutes. Meanwhile, there were other developments on a number of other fronts today.
(BEGIN VIDEOTAPE)
(voice-over): Enron employees were supposed to get a briefing today about their future with the company, but it was canceled. CEO Kenneth Lay, explaining to employees in an e-mail, we don't want to subject you to the media frenzy that would certainly surround such a meeting, so we have decided to postpone it.
Employees were told the meetings would be rescheduled for another time. On the political front, questions linger about Enron's possible influence on the president's energy program. Senate Majority Leader Tom Daschle, joined the chorus of Democrats calling on Dick Cheney, who chaired the president's energy task force, to explain his meetings with Enron executives.
SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: I think we all have to be very forthcoming here and I think it's important in this case that the vice president, like everybody else, provide the information required.
O'BRIEN: To date, there has been no evidence that anyone in the administration acted improperly in the Enron collapse. In fact, some of Enron's most important beneficiaries have also lost money. Texas Senator Phil Gramm and his wife, Dr. Wendy Gramm, say they lost around $686,000 in the Enron demise. Enron had showered the senator, a champion of deregulation, with campaign contributions. And Dr. Gramm, an economist, serves on Enron's board of directors. Her deferred compensation was lost when Enron declared bankruptcy.
And finally, reverberations from last week's recommendation by Harvey Pitt, the chairman of the Securities and Exchange Commission, for a new regulatory agency to oversee the accounting profession.
(END VIDEOTAPE)
That didn't sit well with the public oversight board, a five- member commission that already oversees ethics and disciplinary issues. All five members have resigned, saying Pitt's new agency would render their work irrelevant. Pitt has now written back, urging the members to reconsider, saying his proposals would in fact strengthen the oversight board, not weaken it -- Kathleen.
HAYS: Tim, in regards to Harvey Pitt's role in proposing a new kind of oversight board, is there any talk in Washington that maybe Mr. Pitt has been too close to some of the big players, the big 5 accounting firms are his clients, the AICPA, the association of accountants, one of his clients, what's the talk down there on that?
O'BRIEN: Well not only those, also he represented Arthur Andersen when he was in private practice before joining the Securities and Exchange Commission. Some Democrats say that's a conflict of interest and he should recuse himself. Legally it really isn't, because you can't identify the views expressed by a lawyer on behalf of a client with the lawyer himself.
Harvey Pitt is the first to say he has another client now, it is the United States America and there is no conflict. However, he has indicated that he will step back from the investigation. The SEC ordered the investigation, he's in charge of the SEC but he is not going to participate in the probe.
HAYS: OK, Tim, thanks for the report. Starting tomorrow, Congress gets down and dirty on the Enron scandal. Several committees begin their investigations into the biggest corporate collapse ever. Allan Chernoff reports on the battle for witnesses before a subcommittee of the House Energy and Commerce Committee.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): A behind-the- scenes struggle between David Duncan, the fired Andersen Partner, who oversaw the Enron audit and the subcommittee on oversight and investigation.
Subcommittee chair, James Greenwood:
REP. JAMES GREENWOOD (R), PENNSYLVANIA: We subpoenaed him. He still doesn't want to come. He wants immunity. We are not going to grant him immunity. He wants to take the 5th, and we are telling him to come in tomorrow. If you want to take the 5th Amendment that's your constitution right, but do it at the hearing, and if you don't do it we reserve the right to cite you for contempt of Congress.
CHERNOFF: A source close to Duncan says he will appear and simply will invoke the 5th Amendment protection against self- incrimination.
His attorney had argued to the subcommittee that "Mr. Duncan has not yet had access to all the documents necessary for him to prepare for a formal hearing."
REP. BILLY TAUZIN (R), LOUISIANA: I think he needs to be there to explain why he was willing to give us 4.5 hours of testimony and wouldn't go public with the same testimony. But, he has his rights, and we'll respect his rights.
CHERNOFF: According to Andersen it was Duncan who ordered employees at the Houston office to shred and delete Enron-related documents. Duncan has told congressional investigators he was only following company orders, in the form of a memo reminding the engagement team of our documentation and retention policy, written by Andersen attorney Nancy Temple. She will testify.
Of particular interest to the subcommittee, an October 23 Andersen e-mail addressed to David Duncan and other executives discussing a conference call agenda which included the SEC, legal representation, and response to SEC.
Andersen says Duncan had directed the document disposal at a meeting on October 23. Andersen's chief executive, Joseph Berardino, who testified before Congress in December, fought off the subcommittee's request. Instead, the Chicago headquarters is sending executive Dorsey Baskin, who oversees the firm's policy on audit and work papers.
(END VIDEOTAPE) A demoted Andersen executive Michael Odom also is scheduled to testify before the subcommittee. Now, on the Senate side, Senator Lieberman's Governmental Affairs Committee will be looking into the question of what Washington might have done to protect investors and businesses from the Enron fallout -- Kathleen.
HAYS: Thanks Allan. I'm sure you are going to be a very busy man tomorrow.
Now its official. The budget surplus is gone and deficits are back. The White House today projecting budget deficits until the year 2005. That includes a $106 billion shortfall this year. It also assumes the passage of an economic stimulus package, and a big boost in spending on defense and homeland security.
Kelly Wallace is at the White House with more. Hi, Kelly. What do you have for us tonight?
KELLY WALLACE, CNN CORRESPONDENT: Well hello there, Kathleen. You could say the numbers likely to kick off what is most certainly going to be a budget battle between President Bush and Democrats in the Congress, because as the federal government returns to deficits, there's less money to spend on federal programs, so there's likely to be a big debate over the money should go.
Aides say President Bush will call tomorrow for an increase of at least $12 to 13 billion dollars more to fund what's called homeland security, protecting the U.S. from a future terrorist attack. This afternoon, we saw the president say where else he wants the money to go.
He was giving his speech to the Reserve Officers Association in Washington, and he said his budget which he will unveil to lawmakers in February will call for more than $48 billion increase in new defense spending, 38 billion to pay for another pay raise for the military, and more weapons, 10 billion to go to a reserve fund, to fund any military campaign that expands beyond Afghanistan.
Mr. Bush said this is the largest increase in military spending in the last 20 years. He said the money is vital to insure the men and the women in the U.S. military will achieve a victory in the international war against terror.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Tools of modern warfare are effective. They are expensive. But in order to win the war against terror, they are essential. Buying these tools may put a strain on the budget, but we will not cut corners when it comes to the defense of our great land.
(END VIDEO CLIP)
WALLACE: And Kathleen, as you mentioned right at the top, White House budget director Mitch Daniels saying today, taking into account defense spending, money for homeland security and other issues, and less than 1 percent in economic growth this year, the White House projecting a deficit of $106 billion this year. Deficits in 2003 and 2004. No surplus until 2005.
The nonpartisan Congressional Budget Office projecting deficits this year and next. So you can also expect the blame game to heat up. The White House saying the return to deficits due to the recession and also the September 11 attacks. Some Democrats pointing to last year's trillion dollar plus tax cut as part of the reason. Kathleen, back to you.
HAYS: OK, thanks, Kelly Wallace at the White House.
With Congress back in session, economic stimulus, the recession and Enron are shaping up as the biggest items on the congressional agenda. Jonathan Karl joins us with more from Capitol Hill. Hi, Jon.
JONATHAN KARL, CNN CORRESPONDENT: Hey, Kathleen. And Congress is picking up right where it left off last year, the question of economic stimulus, what they can do to get the economy going.
Right now the Republicans as we speak are over in the Capitol building, meeting, on the Senate side, trying to think about how to respond to Senator Tom Daschle's latest gamut.
Daschle has put on the table a possible proposal on economic stimulus that boils down to this: He says Democrats would give up much of the spending that was in the Democratic stimulus plan last year, in exchange for the Republicans giving up many of the tax cuts they had in their proposal.
What you are left with, basically, is this: Extend unemployment benefits, also rebate checks for low-income taxpayers who did not get tax rebate checks last year, and the third item would be some modest tax breaks to encourage companies to invest in new equipment. Making the case for that, Daschle came out today and used a new verb, perhaps a new addition to the English language. The verb is "to "Enron." He was criticizing the Republicans, talking about deficits, and then he used the verb "to Enron."
This is what he had to say.
(BEGIN VIDEO CLIP)
DASCHLE: I don't want to Enron the people of the United States. I don't want to see them holding the bag at the end of the day just like Enron employees have held the bag. I don't want to destroy their Social Security system. I don't want to destroy their Medicare system. I don't want to destroy their ultimate ability to look with confidence at their retirement.
(END VIDEO CLIP)
KARL: So, you see a sign that while the Democrats are saying they don't want to politicize the upcoming Enron hearings, clearly Democrats see the potential to try to talk about Republican economics as a kind of Enronomics, which is another term we have heard used by Democrats up here on Capitol Hill.
And also, Kathleen, at the top of the show, you heard Tim O'Brien talk about how Senator Phil Gramm's wife, Wendy Gramm who is on the Enron board, lost some 600,000 in her 401(k) when the Enron stock went south.
Well, another little bit of news on Senator Gramm. Senator Gramm tells CNN that he will recuse himself from all matters directly related to the investigation of Enron here in Congress. Gramm is saying that he will continue to talk about issues related to Enron, such as pension reform and changes in the rules that govern accounting companies. But he will recuse himself in anything directly related to the investigation of Enron given that his wife, Wendy Gramm, is on their board -- Kathleen.
HAYS: Thanks for the report, John, and for the new verb "Enron." Jonathan Karl on Capitol Hill.
Still to come tonight, we'll tell you why your safe deposit box may not be as safe as you think it is, and why it may not be insured.
The nation's mayors are concerned with keeping our cities safe. We'll tell you how homeland security chief Tom Ridge plans to help.
And Boeing's profits are down. The year ahead looks bleak. And yet the company's CEO is optimistic. He'll tell us why.
ANNOUNCER: Next, Kathleen talks with Phil Condit, CEO of Boeing.
(COMMERCIAL BREAK)
HAYS: Boeing's profits came in on target today, but the company said future sales won't be as strong. For the most recent quarter, revenues were ahead of expectations: up 7 percent. Boeing said the fallout from the terrorist attacks on America cut profits by 79 percent, or more than $600 million.
But the slowdown in the commercial jet business will hit sales this year. As a result, Boeing will continue to cut up to 18,000 jobs by the middle of this year.
Earlier today, I spoke with Boeing's CEO Phil Condit, and first asked him to give us his outlook for the business.
(BEGIN VIDEO CLIP)
PHIL CONDIT, CHMN & CEO, BOEING: Commercial will clearly be down, strongly impacted by September 11. Space and communications, strongly up. Really good results there. Growing business. Boeing commercial -- the commercial credit side of the business, growing significantly, up about $2 billion in portfolio this year. It will be up about that much next year.
Military aircraft, growing slowly but very profitable. So, it's the balance of the company that's the real story. HAYS: Let's take a look at the commercial part of the business first. It's also my understanding that you have said now that you're going to delay the development of the sonic cruiser. This is so important to Boeing. It's the leaner and meaner jet that will compete with the Airbus jumbo jet, 250 seater versus about 600 for Airbus. If you delay it, what will it mean for company? How will it play out in terms of a time schedule?
CONDIT: The thing that we've always done with every airplane development is time it to our customers. They're the ones that set the schedule, not us. So for example, triple 7, that was driven by airlines, the net result was we ended up with a great airplane that the airplanes wanted. That's our intention on Sonic Cruiser.
The events of September 11 will clearly push it back as they begin to recover. Then we'll be aggressive in terms of moving forward on that program.
HAYS: Speaking in terms of delivering what your customers were ordering, a lot of airline CEOs we've talked to on MONEYLINE recently, say they're deferring aircraft orders. A report from Lehman Brothers noting record numbers of grounded planes due to low traffic and canceled flights. That's got to be sort of like excess inventory of planes. What does that mean for your business going ahead, Phil?
CONDIT: That's in the way we look forward in the business. That's in the numbers we put out there for guidance. If you go back to 1991, Gulf War, a lot of airplanes in the desert were using that as part of the way we think about this. This one is clearly bigger. The impact was larger. But also, the company is lot more diverse, so much more able to take care of it.
HAYS: Got a couple of new orders, it looks like, in the pipeline, from a 15 billion order from Emerit Air. Another one from Ireland's Ryan Air, one of Europe's biggest, biggest carriers. You've seen some pick up in growth overseas.
CONDIT: It's going to be selective. We're not in the announcing stage of those yet. But we're getting there. Asia, relatively strong. Europe, strong in spots, particularly internal traffic. North Atlantic traffic, quite weak as would you expect. So, there are going to be places where traffic does pick up -- low cost carriers in particular are doing relatively well in this time period, Southwestern United States as an example.
HAYS: You mentioned the military business, it looks like one of your military orders is creating a little controversy, a defense authorization bill passed by Congress, has endorsed or allowed the Air Force to spend about $20 billion on 100 modified 767 jetliners from Boeing. Airbus is complaining. They say they could deliver these at a better price. There are some critics in Congress who say that maybe this is too high a price tag, especially when they could buy the same planes for less. How do you answer the critics, Phil?
CONDIT: Well, the real key here is what does the U.S. Air Force want and need? That's what in the end is going to set what the price is. They have first a very aging fleet of tankers. And the tankers are critical to the mission. They need them. So they're going to need tankers. Now do you do just the tanking job with them? Do you add cargo capability? Do you add some electronic capability?
That's a decision the Air Force will have to make and that's what will end up setting the base. For Airbus to come out and say we can do it cheaper without knowing what the specification is, is crazy. We have a great product. We are going to work with the Air Force and deliver them a great product.
HAYS: Another kind of controversial order, wondering what you have to say about the "Washington Report" story; the U.S. delivered a Boeing 767 to the Chinese government that was bugged. Were you surprised by that?
CONDIT: Yes. Just like everybody else. You know exactly as much about this as I do.
HAYS: How hard would it be to install a bug in a plane like that?
CONDIT: I don't know. I never installed a bug in a airplane.
HAYS: OK, well, maybe that's a new line of business for you, Phil.
Thank you very much for joining us.
CONDIT: You bet, thanks a lot.
HAYS: Phil Condit, Chairman and CEO of Boeing.
Close to 300 mayors from around the nation converged on Washington today. The purpose? To discuss homeland security and how to pay for it. At today's meeting homeland security director Tom Ridge outlined a multi-billion dollar plan to beef up the nation's security by focusing resources at the local level.
(BEGIN VIDEO CLIP)
TOM RIDGE, DIRECTOR, OFFICE OF HOMELAND SECURITY: This unprecedented support that I'm talking to you about in this year's budget is not a one year and out initiative. This is a major investment. We want to empower cities and states to build upon their first response capability, then we want to help you sustain it in the future.
(END VIDEO CLIP)
HAYES: The president will meet with the delegation tomorrow, where he'll give more details of the homeland security budget.
Just ahead, the latest developments in the war on terrorism, including captured Taliban fighter John Walker returning to the United States tonight.
Also, how vulnerable are the nation's nuclear weapons plants to a terrorist attack? We'll have a special report.
And in the wake of Enron's collapse, we'll hear from the head of an accounting group on plans to police the industry. Stay with us.
ANNOUNCER: Coming up, Kathleen talks with Barry Melancon, president and CEO of the American Institute of Certified Public Accountants.
(COMMERCIAL BREAK)
HAYES: The accounting industry's reputation has been devastated by the Enron scandal. The SEC has proposed a new panel to police the industry, that decision has been applauded by the American Institute of Certified Public Accountants. The group's president and CEO, Barry Melancon, joins us now. Welcome.
BARRY MELANCON, PRES. & CEO, CPAS: Hi, Kathleen.
HAYES: I think it's interesting that Charles Boucher who was head of the public oversight board that resigned in protest today, says there's plenty of oversight. What has been lacking in overseeing the accounting industry is the power to discipline. The power to demand records. What do you think of his statement?
MELANCON: Well, in actuality what Chairman Pitt is proposed is a process where discipline is addressed, Kathleen. And in fact moves from the oversight to public participation. And obviously public participation is a higher order of participation than public oversight, and so the activities that Chairman Pitt proposed is moving us to new area which a majority of non-auditors, people who are not in the profession would actually be involved in the decision-making process over discipline and quality control.
HAYES: But in fact the public oversight board was not comprised of people in the accounting profession. And let me come back to that question, is there something that Mr. Pitt has proposed that is going to put teeth in this new oversight board? So again, you'd think it would be very important to be able to demand to see certain records and have the threat of some kind of punishment from this board hanging over auditors if they don't do their job.
MELANCON: Well, what Chairman Pitt has proposed is a process by which a disciplinary board -- or in monitoring quality control. If someone was found to be deficient in the quality they were doing, they would actually lose the rights to be able to audit public companies, that's pretty significant teeth.
HAYES: What about the basic conflict of interest, this -- also this does not seem to be addressed by Mr. Pitt's proposal, at least not so far. Many of the large accounting firms do audits of companies, they also have another part that has consulting contracts where they advise the very managers that the other part of the firm is auditing. Is that problem going to be addressed by Harvey Pitt's proposal?
MELANCON: Well, in actuality, former Chairman Arthur Levitt adopted a rule at the end of his term that addressed that issue very directly. It outlawed or made by rule the inability to do certain services, it's severely limited other services and it created a total aspect of transparency and disclosure if services were performed outside of the audit. But I might add, that's sort of an easy issue to address from the standpoint it sounds good. But even if we had an outright ban, which is a very complicated point, this is very complicated issue, Enron, and that outright ban itself would not prevent the reoccurrence of Enron.
HAYES: But it might prevent a conflict of interest in these firms. This is an issue that most every kind of accounting professor seems to bring up when they're asked about it.
MELANCON: In actuality there are over 300,000 CPAs in this country, and I think if you talk to small business people, business managers, they turn to their CPA's for things other than just audits. And it's just part of the profession for over a hundred years. And it's been a critical element in the profession being part of the fiber, if you will, of the success of the American economy. Doing things like taxes, doing things like general advisory on whether someone should lease or buy, financial services are all part of what CPAs, men and women throughout this country who are doing things every day, and yet those same men and women do a very good job of drawing the line and in fact are drawing the line today.
HAYES: Thank you very much, Barry Melancon for joining us.
MELANCON: Thank you.
HAYES: On Wall Street, stocks higher today. Better than expected results from Exxon-Mobil and Dupont lifting blue chips, but technology stocks were the market standouts. The Nasdaq rebounding from two month lows to close 39 points higher. Bullish calls in the chip business helping there. The Dow closed up 17 points to 9,730. In the broader market, the S&P 500 rose eight points. For a closer look at the day's activity, we're joined by Christine Romans at the New York Stock Exchange and Greg Clarkin at the Nasdaq, going to begin with Christine.
Hi, Christine. What kind of day was it?
CHRISTINE ROMANS, CNN CORRESPONDENT: It was a tough day. A hard won victory for the bulls because we're wading through all of these earnings reports. Four Dow components out today and if there's a thread that could be woven through them it's that the fourth quarter was really tough. The first half of the year could be lackluster, and maybe the second half of next year, might start to see some improvement. When you look at these names, you're right, we got some help from some of them, namely Caterpillar Dupont and Exxon-Mobil up nicely, but Boeing pulling back here. Profits pull backs for all of them except for Caterpillar -- profit flat there. Meanwhile, other movers including ALCOA, strength in general in mineral stocks today.
Wal-Mart up for a second day on optimism because of K-Mart's bankruptcy. Coca-cola down because its biggest bottler announcing some accounting changes, you just say the words accounting changes on Wall Street, folks start to sell. And IBM down another $2.60, its losses for the week, Kathleen, more than $6 now. And it's a shortened week, a little bit of pessimism there, it reached a 52 week high recently. Watch Corning and Haliburton tomorrow, Halliburton warning after the bell. Also, Moody's cutting its debt, Kathleen.
HAYES: Thanks Christine Romans. Who would have thought accounting could of gotten so exciting. Thanks, Chris.
Chip stocks led the pace today. Increased orders for chip makers raising hopes this sector will recover quickly. Greg Clarkin has more on that from the Nasdaq market site. Hi, Greg.
GREG CLARKIN, CNN CORRESPONDENT: Hi, Kathleen. I tell you it was a pretty solid day for the Nasdaq. We saw real positive undercurrents, you had some good earnings reports after the close of trading yesterday. Some very bullish Wall Street research notes out this morning and a really Bullish call by J.P. Morgan on the chip company, specifically. They think a lot of the bad news in that business maybe in the marketplace already. We saw the chip stocks move nicely higher. And you could see by the big names, most of them bounced back with the exception of Microsoft which lost 72 cents on the day. Sun, Intel, Oracle, JDS Uniphase moving nicely higher.
And as for the movers, Biotechnology shares one of the big winners on the day. Shares of Amgen benefited from an upgrade over at Merril-Lynch, and this move by Amgen also coming ahead of their earnings report which was released after the close of trading today. On Novellus Systems and Applied Materials, two of the stocks, two of the companies that were upgraded by J.P. Morgan and the chip equipment business, both of those stocks benefited. Emulex, the storage company, coming out and beating earnings estimates, and that stock really soared on that. And then Siebel Systems, software company ahead of its earnings today. That stock was up better than two bucks at $34.80. So, Kathleen, the Nasdaq back up over 1900 in a fairly decent way, it's up 39 points at 1922. And we're looking at about a 2.1 percent gain. All the major sectors moving nicely higher today -- Kathleen.
HAYES: OK, Greg, thanks so much.
Despite today's rally, the markets have really lacked conviction lately. Investors still waiting for signs that corporate profits and the economy are going to keep improving.
With us tonight for a closer look at both, regular MONEYLINE contributor, Lakshman Achuthan, from the Economic Cycle Research Institute. Welcome Lakshman.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Thank you, Kathleen.
HAYES: And I under you have a rather exciting announcement for us tonight.
ACHUTHAN: We don't get to do this very often. Turning points just don't happen that quickly, but we are now calling for a recovery in the U.S. economy in early 2002. Most likely it's going to be sometime in this first quarter.
HAYES: Great.
ACHUTHAN: That is great, isn't it?
HAYES: Yes.
ACHUTHAN: It has taken a while.
HAYES: OK. So for those of us who are not so familiar with your index, have been watching other things. We have been watching jobless claims, new claims for unemployment benefits fall. We did see the stock market recover from the big drop after the September 11 attacks. Consumer spending has held up reasonably well. In your index, what are some of the key components right now that are signaling this turnaround in the economy?
ACHUTHAN: You see, that's just it. It's not just any one index -- indicator in the index. And it's not even any one index. The index is probably better than the leading indicator, like initial jobless claims. But even the index is fallible, so you need to see a larger ray of indexes.
And that is how we actually called the recession back in the fall, September of 2000. These were screaming that there was a lot of risk. By March of 2001, they said the recession was unavoidable. And in fact, in retrospect, we see that that's when it started.
Now we have the flip side, the mirror image, where these indicators are turning up in a pronounced, pervasive and persistent way. It's a directional call and we can get the timing fairly right here. It's unusual. It's going to be in the first quarter that the economy should bottom.
HAYS: January, Feb or March. We know that your indicator did call the previous -- the '90-'91 recession going in and then going out. But the worry, a weak, very anemic maybe -- not even a half- strength recovery. What you do you think about that, Lakshman?
ACHUTHAN: I think that that is a reasonable worry. But I wouldn't go so far as a double dip. You know, we've heard that word where we have a quarter of good activity and then we slip back into recession. I don't think so because the long leading index, it's not the widely followed weekly leading index, but the long leading index is at a two-year high in the growth rate. And this would tell us if there's dip down coming. So we're going to have a recovery. It's going to be a few quarters at least. Hopefully, it is one of the longer ones, but it will be anemic in the beginning, so the vulnerability remains until we get a little momentum going.
HAYS: OK, Lakshman, thank you so much for joining us and telling us that recovery is nye.
ACHUTHAN: Yes.
HAYS: Today, a federal judge in Houston held a hearing on whether to impound documents from Enron regarding the company's collapse. The hearing followed allegations that documents were being shredded by Enron employees as recently as last week.
Tim O'Brien has the latest on today's hearing. Hi, Tim.
O'BRIEN: Kind of a non-decision, Kathleen. Federal judge Melinda Harmon says she wants to let the lawyers work out the details of any solution. And the lawyers for the plaintiffs, representing investors and former employees, are said to be very close to agreement with the lawyers for Arthur Andersen.
The plan now is to allow the plaintiff's lawyers and their experts total access to all records which are being kept in four secure locations: Houston, San Francisco, Chicago and New York. Attorneys for Andersen have already promised, of course, no more documents would be shredded, no computer files deleted.
The plaintiff's lawyers will have all the ordinary rights of discovery if they don't get what they want or have any suspicions documents are being withheld or destroyed. Their remedy would be to go back to court. That's the latest from the federal court in Houston announced moments ago -- Kathleen.
HAYS: Thanks so much for the update, Tim.
And coming up next, we'll tell you something you may not have known about safety deposit boxes: They're not insured. We'll also have the latest on John Walker as the American Taliban returns home to face trial. And nuclear weapons plant employees raise a red flag about safety. We'll have that report and more.
(COMMERCIAL BREAK)
HAYS: John Walker has landed on American soil. The plane carrying 20-year-old John Walker touched down at Dulles Airport in Virginia a short time ago. Walker is scheduled to appear in a U.S. district court in Alexandria tomorrow morning. John Walker fought alongside the Taliban in Afghanistan and faces four criminal charges, including conspiring to kill U.S. nationals abroad.
For more on the charges facing John Walker and the high-level security that is expected in his incarceration, I'm joined by Jonathan Aiken outside the U.S. district court in Alexandria, Virginia -- Jonathan.
JONATHAN AIKEN, CNN CORRESPONDENT: Hi, Kathleen. It's going to be tight security here at the U.S. federal courthouse in Alexandria, Virginia when John Walker not only heads to an appearance tonight, but as he heads to a facility not far away from this courthouse.
I also want to give you fair warning. You're about to hear a very noisy street sweeper pass by our position. So if I shout, I'll make myself understood. John Walker, as he arrived in Washington at Dulles Airport under FBI custody, he will continue to be under FBI custody and in their care until he makes his first appearance in the federal courthouse behind me tomorrow morning at 9:00 a.m. Eastern time. And that will be for a brief appearance.
He'll be spending the night, presumably, in the Alexandria City Detention Center which is just adjacent to the courthouse and to my right. It's an area -- it's a location that is already holding about 150 federal prisoners, including Zacarias Moussaoui, the first man to be indicted in relation to the events of 9/11.
Now, the first appearance tomorrow morning is going to be a short one. It will take place in the courtroom of federal judge magistrate Curtis Sewell. It is going to be a relatively brief affair. The charges will be read, Walker will be asked if he understood them, there will be questions of legal representation, bail and bond to be discussed. And then probably a day will be set for an arraignment or another court appearance, presumably within the next three to 10 days.
Let's recap those charges for you. Walker faces four of them, and if convicted, he could face life in prison. The charges: conspiracy to kill U.S. nationals abroad. He also faces two counts of providing material support or resources to terrorists, and yet another count of engaging in transactions with the Taliban.
The attorney general, John Ashcroft, issued a written statement just a short time ago in which he said, and I want to quote from it here, "Our American system of justice will allow Walker the rights and due process that the terrorists he fought side by side with sought and still seek to destroy".
And as I mentioned, Kathleen, security is going to be tight outside the courthouse through the day as Walker makes this first appearance. The head of the U.S. Marshals here at the courthouse telling us that his people are ready for all contingencies, both inside and outside the courtroom.
(BEGIN VIDEO CLIP)
JOHN HACKMAN, U.S. MARSHALS SERVICE: Well, we're trying to prepare for our every kind of contingency that we possibly could deal with, whether it be a threat from protesters that may show up. It might be something from citizens that might not particularly care for Mr. Walker. There's a multitude of threats that we're preparing for.
(END VIDEO CLIP)
AIKEN: And two quick developments from here, Kathleen. Just to let you know that the family of John Walker is going to be issuing a written statement shortly. We anticipate that. We're also told that Walker is being transported to the courthouse by chopper. And that helicopter has, in fact, left Dulles heading toward this area. Back to you.
HAYS: Thanks, Jonathan Aiken outside the U.S. district court in Alexandria, Virginia.
FBI Director Robert Mueller arrived at Kandahar today. Mueller met with his agents who have been involved in interrogating Taliban and al Qaeda prisoners. Mueller says information gained from those interviews has helped prevent terrorist attacks against U.S. interests, but he did not give any details. Hundreds of al Qaeda and Taliban fighters are in custody at the Kandahar airport.
The U.S. government formally doubled the anthrax reward money to $2.5 million today. The original reward was half that amount. Officials also plan to distribute about 500,000 flyers to people in New Jersey and Pennsylvania. The fliers will show copies of anthrax letters sent to senators and New York media outlets. Law enforcement officials hope someone might recognize the envelopes and/or handwriting on them.
The Pentagon has temporarily suspended the transfer of additional al Qaeda and Taliban detainees to Cuba until new facilities can be built. Jamie McIntyre is at the Pentagon with more -- Jamie.
JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Kathleen, the Pentagon says that for now, the transfer of detainees from Afghanistan to the facility at Guantanamo Bay, Cuba has been put on hold, essentially, because the facility has reached its capacity.
Now the U.S. is building new holding areas and expect by next week that they'll be able to accept at least 60 more detainees. They're about 158 there now. The U.S. insists though that this suspension is not part of any review of the policy despite some criticism internationally of the treatment of the detainees. The Pentagon again insisting that the prisoners are getting all the treatment that they should be getting under the Geneva Convention, even though they are not considered by the United States prisoners of war. They are given food, medicine, medical attention, prayer rugs, and also visits from the Red Cross.
Meanwhile, the U.S. is continuing to question these detainees, and apparently has gotten some intelligence from a man questioned in Afghanistan identified as the leader of training for al Qaeda and also a right-hand man of Osama bin Laden, who apparently revealed information about a plot to truck bomb the U.S. embassy in Yemen, and which resulted in that embassy being closed and security being tightened last week. The U.S. cannot confirm the credibility of that report but deemed it to be credible enough to take the action of putting the embassy on a much higher state of alert in Yemen -- Kathleen.
HAYS: Thanks, Jamie McIntyre, reporting from the Pentagon.
Now for more on the war against terrorism, including John Walker's arrival in the United States, I'm joined by retired General David Grange. General, thanks so much for joining me tonight.
RETIRED GENERAL DAVID GRANGE, CNN MILITARY ANALYST: Good evening, Kathleen.
HAYS: Sir, I'd like to start by asking you about U.S. actions in the Philippines. We are involved there more and more as the war in terrorism is -- has to be tracked on a global scale. Is there a danger of this becoming another Vietnam? GRANGE: Well, there's always a danger of something like that happening, but I think it's a little different situation. The Philippines, of course, is not bordered like south Vietnam was by north Vietnam, Laos or Cambodia. It's a series of islands, and that gives you some advantage when you are doing counterguerrilla or counterterrorist operations.
Of course, there is some type of outside support I'm sure, and there's local sympathy from the Muslim-dominated area where they are going to be hunting down these terrorists. But I think that we've learned from Vietnam and I believe the way this is being set up, that it won't be another Vietnam.
HAYS: What is the most difficult part of this mission?
GRANGE: Well, you're in a jungle environment. It's easy to hide. It's jungles, mountains and then, again, the local people support many of the terrorists -- the terrorist organization down there. Now that organization, though it states that it's for the revolution to establish a Muslim state in the southern part of the Philippines, actually it's a criminal organization more than a revolutionary organization that kidnaps, extortion, car bombings, assassinations. So I think some of the public populous, from what I've read, the populous in that area has waned somewhat. But it's still will be difficult because the way they can blend in to the country side.
HAYS: Sir, turning to Afghanistan, U.S. Army now replacing the Marine Corp there. Is the mission changing? What is their challenge going to be now that we're shifting forces a bit.
GRANGE: I believe with the Army there replacing the Marine Corps -- could have been actually the other way around. Nowadays on these operations, the joint capabilities are very good throughout our armed forces.
But I think now it signifies that we're going to have a sustained operation. We'll be there for a while. They'll secure the airfield. They'll secure the detainees there before they ship to Guantanamo Bay. And they'll have the capability. They have it there now and they will continue to build it up of conducting operations from humanitarian assistance all the way up to combat. And with the 101st Airborne Division Units, in this case, it's the 187th -- it's a regiment of the 187th Airborne -- they have the reach because of the type of helicopters, the Apache gunships, the Chinook and Black Hawk helicopters, to go long distances throughout Afghanistan to take care of business, if need be.
HAYS: John Walker back on United States soil. What should we be watching for there?
GRANGE: Well, again, it's turned over to the Department of Justice, tried as an American citizen, so he's not in the same category as the detainees in Guantanamo Bay. He has some severe charges against him. You know, if he would have not cooperated, my view if he would not have cooperated with the Taliban -- or the al Qaeda they would have killed him over there. So it's going to be interesting how it turns out.
HAYS: Indeed. Thank you so much for joining us, Brigadier General David Grange.
GRANGE: My pleasure.
HAYS: Since the September 11 attacks against America, safety has been a major issue. But how safe are nuclear weapons plants from attacks by terrorists? According to plant employees, not very. They say suicidal terrorists could easily get their hands on enough weapons-grade material to make so-called dirty bombs. Steve Young has more on this story.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice-over): Lawrence Livermore Lab in California, Rocky Flats in the Denver suburbs and the Los Alamos Lab in New Mexico: Because of security problems, they're all potential targets for terrorists willing to die in order to cause nuclear carnage. This according to whistle blowers who currently work at the weapons facilities or used to. The threat's serious according to a senior member of the House Energy and Commerce Committee.
REP. EDWARD MARKEY (D), MASSACHUSETTS: We have been able to identify the technical materials that are presently in the hands of al Qaeda and the clear intent of al Qaeda, if they could gain access to the plutonium and uranium necessary to construct nuclear weapons, that they would use them.
YOUNG: The Rocky Flats plant no longer makes weapons, but more than enough plutonium to fashion hundreds of nuclear weapons is still on hand. A program manager says a suicidal band of al Qaeda terrorists could kill the guards, obtain plutonium and set off the equivalent of a small nuclear weapons explosion.
He says at one point, plutonium was stored in a room with gypsum walls and a single padlock. He says that Rocky Flats' vulnerability has been fixed, but there are others equally alarming he can't discuss. A former member of Lawrence Livermore's SWAT team, who was fired, says guards wouldn't be able to cope with terrorists using biochemical weapons.
MATTHEW ZIPOLT, FORMER LAWRENCE LIVERMORE EMPLOYEE: Officers are not being afforded the proper equipment, training and safeguards to ensure success.
YOUNG: The Department of Energy says the charges are based on old data and are false and misleading. It adds that, quote, "Some try to create a climate of fear grossly disproportionate to the risks to the public."
(END VIDEOTAPE)
(on camera): Congressman Markey says an unclassified version of a report being prepared on security at D.O.E. weapons facilities should be made available to the public -- Kathleen. HAYS: I guess that's a little bit better than trust the government, isn't it?
YOUNG: Absolutely.
HAYS: Thank you, Steve Young.
Coming up next, putting valuables in a safe deposit box may not be safe as you think. We'll tell you why. And, all that glitters is not gold, not for Mariah Carey, as she splits with her record label.
(COMMERCIAL BREAK)
HAYS: JP Morgan Chase is facing a class-action lawsuit over safe deposit boxes. The suit was filed on behalf of customers whose valuables were destroyed in the September 11 attacks. Many Americans think their safe deposit boxes are burglarproof, fireproof and waterproof. But they are not. Fred Katayama has the story.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Sherri Bethelmy placed her antique family jewels in a safe deposit box two years ago. Holding her heirloom, the Chase Manhattan Bank branch in New York's World Trade Center.
SHERRI BETHELMY, PLAINTIFF: I assumed that the vault, wherever they put the boxes, would be in a very safe, secure place, that they couldn't get stolen, they couldn't burn up in a fire, they wouldn't be destroyed.
KATAYAMA: But her safe deposit box did not live up to its name after 9/11. Half of the contents were missing. What remained was charred by fire.
BETHELMY: They were pearls.
KATAYAMA: They look like bb's now.
BETHELMY: And now they look like bb's and they're cracked.
KATAYAMA: She and two other victims sued the bank for negligence.
DAVID WOLLMUTH, BETHELMY'S ATTORNEY: If the vault area and the safety deposit boxes within the vault had been able to withstand that fire, then our clients would not have had any loss.
KATAYAMA: Chase would not comment. Safe deposit boxes are a popular marketing tool for banks. Americans use more than 30 million of them.
(on camera): What many customers don't realize is that safe deposit boxes aren't all that safe against the forces of nature. They're not fireproof or fire resistant. The vaults encasing them provide about one or two hours protection from a typical fire, but they're not certified for fire resistance either.
(voice-over): And they do not protect against floods. In St. Louis, floodwaters destroyed an antique violin stored in a local bank's safe deposit box. A jury awarded $315,000 in damages seven years ago. Vault manufacturers say fighting burglary, not nature, is the priority.
RANDY BENORF, DIEBOLD: The design characteristics and any testing and certification don't cover fire or flood.
KATAYAMA: Why is that?
BENORF: Just that it's a fairly rare occurrence and therefore not something that is generally thought to be worth building into certification.
KATAYAMA: What's more, banks do not insure items in the boxes. Lawyers for the plaintiffs contend Chase's lease agreement is vague. As required by New York state law, it says that the contents put in the box, "may not be fully protected against loss under the insurance coverage maintained by the bank."
A source close to the situation says given the extraordinary circumstances of 9/11, Chase will try to compensate uninsured victims. But money can't buy memories for Sherri Bethelmy, whose damage beads make her pearl for her family's past.
BETHELMY: My first reaction was to cry. It was to tear up, was to immediately recall how these looked on my mother and how they look now.
KATAYAMA: Fred Katayama, CNN Financial News, New York.
(END VIDEOTAPE)
HAYS: WOLF BLITZER REPORTS begins in a few minutes. For a preview, let's go now to Wolf in Washington -- Wolf.
WOLF BLITZER, CNN ANCHOR: Thank you very much, Kathleen. Taliban American John Walker has now landed in the United States. We'll have a live report from our Susan Candiotti. We'll also go live to our Jane Araf in Baghdad. Is Saddam Hussein the next U.S. target? Should he be? We'll have a good old fashion debate. It's all at the top of the hour -- Kathleen.
HAYS: Thanks, Wolf.
Well coming up next, the chairman of the Federal Reserve heads to the Hill. We bring you a preview.
(COMMERCIAL BREAK)
HAYS: Tomorrow, Fed Chairman Alan Greenspan testifies before the Senate Budget Committee on the state of the economy. Quarterly results are due from Dow components Eastman Kodak, McDonald's and SBC Communications, as well as JDS-Uniphase, Starbucks and Eli Lilly. Congressional hearings on Enron begin tomorrow. The Senate Governmental Affairs Committee holds hearings on regulatory agency failure in the collapse of Enron. The House holds hearings on the shredding of documents.
In corporate news tonight, Procter & Gamble is cutting 1,400 jobs at Clairol, which it acquired recently for nearly $5 billion. Pfizer's profits rose 21 percent to more than $2 billion, thanks to strong sales of its cholesterol drug Lipitor and its blockbuster sex drug, Viagra.
And Mariah Carey and Virgin Records are parting company after just one album. Virgin parent EMI will pay Carey $28 million to get out of their current contract, a four-album deal worth more than $80 million. The record company turned sour on Carey after her first album for the label, "Glitter", flopped and after the movie "Glitter" bombed.
And that is MONEYLINE for this Wednesday evening. Thanks so much for joining us. I'm Kathleen Hays in for Lou Dobbs. Good night from New York. WOLF BLITZER REPORTS begins right now.
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