LOU DOBBS MONEYLINE
Dow Declines 130.50 to 10,501.85; Nasdaq Declines 35.09 to 1,862.03
Aired March 13, 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.
LOU DOBBS, CNN ANCHOR: Tonight, stock prices decline on Wall Street as investor confidence weakens after a weaker than expected report on the economy.
Two of Salomon Smith Barney's best known names differ on telecom. "New York Times" columnist Gretchen Morganson joins us. She was the first to report on the in-house split.
And a split in the accounting industry. Andersen is on the brink of indictment and the head of the nation's CPA association joins us.
Doctors are fleeing the state of Nevada, creating a critical shortage. We'll tell you why.
And we'll have a live report from Jerusalem where the fighting continues. We'll also look at the economic impact of the violence and the prospects for peace.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Wednesday, March 13. Here now, Lou Dobbs.
DOBBS: Good evening everyone.
Late today, an angry and defiant President Bush held a news conference. The president invited questions on a broad range of subjects. Foremost on his agenda, however, the vote on his judicial nominee Thomas Pickering. White House correspondent Kelly Wallace reports -- Kelly.
KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Hello to you, Lou. A good way to describe it. Tough talk from President Bush on domestic and international issues. Concerning Judge Pickering, the president saying the judge has a good record when it comes to civil rights issues and called on the United States Senate to confirm his nomination.
A large number of questions, though, at this, the president's first formal news conference of the year, on international subjects, including Iraq. Vice President Cheney currently in the Middle East meeting with U.S. allies. Many Arab allies concerned that military action against Iraq would be destabilizing to the region. The president seeming to calm some U.S. allies, saying the administration definitely planning to talk with them, but also saying that this administration is definitely going to deal with Saddam Hussein.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is a nation run by a man who is willing to kill his own people by using chemical weapons, a man who won't let inspectors into the country, a man who's obviously got something to hide. And he is a problem. And we're going to deal with him. But the first stage is to consult with our allies and friends. And that's exactly what we're doing.
(END VIDEO CLIP)
WALLACE: On another subject, Osama bin Laden. You know, the president rarely mentions the suspected terrorist in any of his speeches. Asked about that, the president said he's not really concerned about bin Laden. And he said if bin Laden is still alive, he said he just does not pose the same threat he once posed.
(BEGIN VIDEO CLIP)
BUSH: In my heart, I know the man's on the run, if he's alive at all. And I -- you know, who knows if he's hiding in some cave or not. We haven't heard from him in a long time. And the idea of focusing on one person is really -- indicates to me people don't understand the scope of the mission. Terror is bigger than one person. And he's just -- he's -- he's a person who's now been marginalized.
(END VIDEO CLIP)
WALLACE: And, Lou, of course, many other subjects covered, including the Middle East. President Bush did not condemn Israeli Prime Minister Sharon's decision to send thousands of troops into Ramallah. But he also said that that situation is "not helpful" in creating the conditions for peace. And he also said if he did not believe his U.S. envoy, retired Marine Corps General Anthony Zinni, could not make progress, well then he would not dispatch him to the region. As you know, Lou, Zinni to be in the region in the next day or two. Back to you.
DOBBS: And on his judicial nominee, Thomas Pickering, Kelly, what are the prospects for him?
WALLACE: Well, we do know senior administration officials are telling CNN the president working the phones, trying to reach out to at least one Democratic senator on the Senate Judiciary Committee to vote for Pickering's nomination. Still, White House officials are not all that optimistic if the vote goes ahead as scheduled tomorrow.
At this point and time, it looks like it will be 10 Democrats against the nomination, nine Republicans in favor. And as you know, Lou, Senate Majority Leader Tom Daschle has said if it can't get out of the committee, he will not bring it to the floor. Clearly, the pressure is on. The White House putting on the pressure but not really optimistic it will work -- Lou.
DOBBS: Thank you. Kelly Wallace reporting from the White House. An update on a story we reported to you here on CNN first last night. As we reported to you yesterday, six months to the day after two hijacked planes flew into the World Trade Center, a Florida flight school received word from the Immigration and Naturalization Service that student visas for two of those hijackers had been renewed. President Bush is angry with the Immigration and Naturalization Service, and he wants something done.
(BEGIN VIDEO CLIP)
BUSH: The INS needs to be reformed. And it's one of the reasons why I called for the separation of the paperwork side of the INS from the enforcement side. And obviously the paperwork side needs a lot of work. It's inexcusable. And so we've got to reform the INS and we've got to push hard to do so. This is an interesting wake-up call for those who run the INS.
(END VIDEO CLIP)
DOBBS: Attorney General John Ashcroft has called for a full investigation. The attorney general said people will be held responsible.
In the Middle East tonight, the West Bank town of Ramallah is a battlefield. Thousands of Israeli soldiers and tanks invaded the town and have taken control. The U.S. state department strongly condemns the Israeli occupation of Ramallah and is demanding that Israel get out before U.S. special envoy Anthony Zinni arrives tomorrow.
Yesterday, Israel launched a powerful attack deep inside Palestinian towns and refugee camps. Since then, dozens of Palestinians have been killed and the chance of a ceasefire appears increasingly unlikely. Michael Holmes now from Jerusalem with the report -- Michael.
MICHAEL HOLMES, CNN CORRESPONDENT: Hello, Lou. Yes, as you just heard Kelly Wallace say there, U.S. President George W. Bush describing those incursions as not particularly helpful. Well, they go on.
Israeli tanks are now in the center of Ramallah. They've moved further into the heart of that city of 200,000 people, and there they remain. Sporadic shooting continuing this evening in Ramallah. The violence goes on, spent bullet cartridges littering the streets. Of course, in recent days, as you mentioned, Lou, we've been witnessing the biggest Israeli offensive in the last two decades.
Want to put into perspective. Let's remember, 150 Palestinians have died and dozens of Israelis too in just the first half of this month, less than 14 days. Now, among the casualties in Ramallah today, two Palestinian security officers, one Israeli military officer. Also, a journalist, a 42-year-old Italian freelance photographer was killed, six or seven bullets to the chest. His colleagues claim they came from the Israeli side. Israel says it regrets the death. However, they're not admitting to anything. They say an investigation is under way. Raffaele Ciriello, colleagues say that say he was working with Palestinian gunmen at the time he was shot. Also, two other journalists wounded in Ramallah in separate incidents today. This was the first death, however, in the 17 months of this current Intifada.
More recently, just a couple of hours ago, an Israeli settler was stabbed and seriously wounded just north of the West Bank near a settlement. And also, a Palestinian gunman shot dead in Gaza. I can also fell you just a slight rift in the Israeli cabinet today. The defense minister wanting to pull troops out of Ramallah before Anthony Zinni gets here. Ariel Sharon, apparently we're told by sources, angrily rejecting that suggestion. And it was all papered over afterwards. But apparently, it was quite the scene inside the Israeli cabinet. As you said, Anthony Zinni gets here tomorrow. No sign of any reduction in violence though, Lou.
DOBBS: Michael, as you know, and as we've just reported, the U.S. state department is demanding that those troops leave Ramallah before Zinni arrives in the area. Your suggesting not only that Sharon is opposed to that, but that there's no sign of any withdrawal tonight?
HOLMES: Well, just looking, no, there is no sign of any withdrawal tonight, Lou. It's just after 1:00 a.m. here in Jerusalem. Anthony Zinni is due to arrive somewhere around mid-afternoon today, Jerusalem time. It's about 14 hours, 15 hours from now. Certainly no sign of any withdrawal. And Israeli government spokesmen we spoke to just a couple of hours ago said there would be no withdrawal until what they called their operation to dismantle the infrastructure of terrorism in Ramallah is complete. They say it is not yet complete -- Lou.
DOBBS: OK. Michael Holmes from Jerusalem. Thank you very much.
Vice President Cheney today saying Israel and the Palestinians share the responsibility for ending violence in the Middle East. In Sharm El-Sheikh today, the vice president and Egyptian President Hosni Mubarak also discussed Iraq. Mubarak told the vice president that diplomatic channels should be exhausted before taking action.
(BEGIN VIDEO CLIP)
HOSNI MUBARAK, PRESIDENT, EGYPT: It's easy to believe that every possible effort should be exerted to implement the U.N. (ph) Security Council resolution without inflicting more suffering on the Iraqi people. On the other hand, it is of vital importance to maintain the sovereignty and territorial integrity of Iraq. This is a must for preserving regional stability.
(END VIDEO CLIP)
DOBBS: Mubarak's words appear to have been an attempt to preempt the vice president's case for possible U.S.-led military action against Iraq. The vice president is in Cairo tonight. He departs tomorrow for Yemen, continuing his 12-nation tour.
A United Nations resolution calling for a region where two states, Israel and Palestine, live side by side is being greeted cautiously by both Israelis and Palestinians. The unprecedented resolution introduced by the United States also calls for an immediate cease-fire. A top Palestinian official called the measure "rare" and "remarkable." Israel reacted favorably to the cease-fire, but says Palestinian statehood must be negotiated.
President Bush tonight said the United States troops are performing brilliantly in rooting out Osama bin Laden's fighters. Meanwhile, there are new details about the Navy SEAL who fell to his death at the beginning of Operation Anaconda about two weeks ago. Barbara Starr joins me now from the Pentagon with the story -- Barbara.
BARBARA STARR, CNN CORRESPONDENT: Hi, Lou. Well, for the first time we are learning some specific details of the death of Petty Officer Neil Roberts. As you'll remember, he was the Navy SEAL who fell from his helicopter as that helicopter came under gunfire in the very opening hours of Operation Anaconda. He has now been awarded the Bronze Star posthumously, and that citation contains some graphic details of what happened to the petty officer.
Let's just read a few words from it. The citation says: "Roberts was thrown from the ramp of the helicopter, falling onto the al Qaeda- infested mountain top just feet below. He immediately maneuvered to make contact with rescue forces and establish a defensive position. But surrounded by overwhelming enemy forces, with superior firepower, Petty Officer Roberts died on the battlefield from fatal combat wounds."
So he tried, Lou, to hold off the enemy forces approaching his helicopter, but he could not. And there are still reports that Petty Officer Roberts was, in fact, briefly captured by al Qaeda forces on the ground, and actually executed.
Now, 12 days after Operation Anaconda began, the Pentagon does feel it has some specific results. And of course, the main one is they say they estimate they have killed 800 al Qaeda fighters in this region of eastern Afghanistan. What that means, they believe here at the Pentagon, is they have basically taken out the ground forces remaining of the al Qaeda and Taliban, the forces that could pose a threat to the interim government. They basically believe now that the bulk of that is gone, although there are still other al Qaeda pockets, smaller ones, across the country.
They also believe that they have killed some Chechen and some Uzbek fighters who were with the al Qaeda up in those mountains, that possibly reducing the threat of those people moving back to Chechnya or to Uzbekistan and posing a threat there.
But U.S. forces are still keeping a very close eye on possible escape routes from this area. And, of course, they are already conducting reconnaissance missions against other al Qaeda pockets. We are to expect more military action in the days ahead, we are told.
Lou, one other thing we are also told that U.S. forces are collecting DNA samples from some of those dead fighters up in those mountains. They want to collect the DNA to help establish an identity database of who exactly might have been killed -- Lou.
DOBBS: Barbara, Operation Anaconda began badly for the United States, because of bad intelligence about the strength of force amongst the Taliban and the al Qaeda. Is there reason to believe on the part of the Pentagon now that they have a better set of intelligence analyses on those pockets of resistance, as you've just described them?
STARR: Well, officials tell us here that they are going to take their time. They're going to take a very close look at these pockets, try and determine who is in them, how to approach them, how to deal with them.
The one thing that they feel they might have miscalculated on in Operation Anaconda is not realizing that the al Qaeda had really captured some of these high ground positions, had very fixed mortar sites on the U.S. forces as they came in in those opening hours at the lower altitudes. It put the U.S. forces at some considerable risk in those opening hours. But they felt they dealt with it. So they think they know what they're facing when they go into these other pockets -- Lou.
DOBBS: Barbara, thank you very much. Barbara Starr reporting from the Pentagon.
Coming up next here, Andersen on the brink. Politicians stepping up the pressure. The Justice Department threatening a death sentence against the accounting firm.
A very public difference of opinion over the prospects for WorldCom. A look at one of Wall Street's biggest brokerages that is not speaking with one voice.
And an exodus of doctors threatens the health care of an entire state's population. Tonight, a report on why medical professionals in one state are packing it in and packing their bags. Stay with us.
DOBBS: The number of potential buyers of Andersen today shrank by one. Competing big five firm Ernst & Young today rejected Andersen as a potential merger partner, citing the Enron connection. Meanwhile, Andersen is working against tomorrow's deadline in which to reach a settlement with the Justice Department to resolve possible criminal charges. But like many things in Washington, politics is the leading event. Tim O'Brien reports.
TIM O'BRIEN, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The Justice Department is focusing on the destruction of Enron-related documents. The anticipated charge: Obstruction of justice. But who do you charge? David Duncan, the company's lead Enron auditor who ordered much of the shredding in Houston? On Capitol Hill, where Duncan invoked his Fifth Amendment right not to testify, some lawmakers suggested he might be a scapegoat for higher-ups. What about company lawyer Nancy Temple, who, as Enron was collapsing, sent out a curious e-mail from headquarters in Chicago to Duncan and other employees, reminding them of the company's document retention policy? Save what is important, destroy everything else. Andersen attorneys would like to limit the charges to alleged misconduct in Houston. The government is reportedly looking toward Chicago for a broader indictment against the entire firm, which securities law experts say could be a death knell for Arthur Andersen.
PROF. JOHN COFFEE, COLUMBIA UNIVERSITY LAW SCHOOL: A professional services firm can lose its license, and the SEC has a rule that says anyone convicted of a felony cannot appear or practice before the SEC. And that's the entire business of Arthur Andersen, certifying financial statements to the SEC.
O'BRIEN: The SEC could grant an exemption, but that might create a political problem for the SEC Chairman Harvey Pitt who represented Arthur Andersen while an attorney in private practice. And any case involving Enron can be fraught with political considerations.
NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Enron has such a large public and political component that you have to believe the Justice Department has moved with an iron fist and moved much more rapidly to defuse some of the political pressure.
O'BRIEN: It is not unusual for the Justice Department to file charges against both a corporation and its employees. For the company, any fines would be inconsequential compared to the resulting problems with the Securities and Exchange Commission and the loss of reputation, the stigma of being convicted of a felony -- Lou.
DOBBS: And, Tim, as you point out, that could be a death sentence for Andersen. And while it is not unusual to file against both individuals and the firm, it is highly unusual -- this is the only case I know of in which there would be a discussion of an indictment against a firm that reported itself, and it's -- the case of the wrongdoing at Andersen. Isn't that correct?
O'BRIEN: That is correct, Lou. And this is, of course, a most unusual case because of Enron, the high profile case, and it's politically charged. It's not so much Republican or Democrat as some people thought from the outset, but nobody wants to be seen as sitting back on this, rather to be seen as aggressively pursuing remedies.
DOBBS: In this case, the Justice Department, its prosecutorial vigor, if you will, against a firm really means the potential of costing 85,000 people their jobs.
O'BRIEN: That's exactly right. And it's not so much any fines resulting out of a criminal conviction. But really, there's a possibility that Arthur Andersen might just be out of business. Now it's highly likely the Securities and Exchange Commission has the power to issue a waiver, that it would issue some kind of waiver because there are companies all over the country, thousands of them, that use Arthur Andersen that overnight might have to look for another accounting firm.
DOBBS: That would be a waiver for the benefit of those firms, and it certainly wouldn't make those firms or their investors, shareholders happy.
O'BRIEN: A waiver for Arthur Andersen.
DOBBS: I understand a waiver. But nonetheless, all of those clients would be leaving?
O'BRIEN: That's right.
DOBBS: Is the Justice Department effectively, what we're hearing here, effectively being so extraordinarily vigorous in driving a firm to the brink of extinction because no one has the political courage to step up and say, enough?
O'BRIEN: You know, Lou, that's a great question. There's also a Securities and Exchange Commission investigation going on, more into Enron's accounting practices. That's a little bit on hold. But there is the real threat here that the Justice Department could drive this company into the ground.
We don't know exactly what's going on. There was talk that there could even be an announcement of an indictment today. Everything now is on hold. The assistant attorney general in charge of this is returning to Washington tomorrow from an overseas trip. Everything's on hold. We could find out in the next couple of days.
DOBBS: OK. Tim O'Brien, thank you very much for that excellent report.
More than three dozen clients have dropped Andersen as its auditor this year, but it's not just the clients who are distancing themselves from Andersen. The American Institute of CPAs has also pulled away. The industry this week launched a multi-million dollar advertising campaign. They hired a new lobbying firm to clean up the image and resist runaway reform in Washington.
Barry Melancon is president and CEO of the AICPA. He testified in front of the House Financial Services Committee today, and joins us from Washington. Barry, good to have you here.
BARRY MELANCON, PRES. & CEO, AICPA: Lou, good to see you again.
DOBBS: You have now hired a new lobbying firm, (UNINTELLIGIBLE) outfit in Washington. You've got a new campaign going, aimed at what?
MELANCON: Well, clearly there is some very important messages to get across. The campaign you talked about is an issue that I think has been lost in a lot of this, is the men and women, the 350,000 men and women in this profession who are doing the right thing every day and are sort of the fiber of the American economy, servicing large and small businesses, working in large and small firms. And we think it's very important for people to recognize that. People know individual CPAs. And knowing individual CPAs, they know the quality, the fiber of those individual people, and the good work that they do. And that's an important messages to get across. And from a congressional perspective, we laid out today a very robust proposal of reform that we can support, and we also talked very clearly with the Congress on the risk of unintended consequences of going too far.
DOBBS: You have appeared before Congress today. Give us your best sense of the mood of Congress and its direction, at least as represented by the questions from the House Financial Services Committee?
MELANCON: Well, obviously Congress is doing its job, being very concerned about this. I think it's very important to recognize that even without action, Congress has, in fact, acted. Congress is concerned with a whole myriad through hearings that you've reported on and others, and has caused corporate governance, the media, scrutiny in this whole process, and people, I think, are much more diligent in this whole area today. And that's probably a good thing.
And so, I think the mood in Congress is they recognize that people have made some modifications. And there are also those in Congress that are very concerned about, really, let's not do something that produces a worse result. Let's do something that will improve the situation. And I think the men and women of Congress are having very conscientious discussions about that.
DOBBS: And the Justice Department, on the brink of indicting Andersen, what's your reaction?
MELANCON: Well, obviously our position all along is that we think it's the best result is for Andersen to be a strong and vibrant firm. As you said in the previous piece, there are thousands of men and women who work at Andersen worldwide and do a great job.
But if Andersen were to have some difficulties, and they're obviously in a very difficult situation, our concern then as a profession is to make sure that we address the American public, the investing public, and assure them that this profession will step up to its responsibilities and find a way to meet the capacity issues and the auditing issues. And in that light, I have spoken personally with the leaders of the 20 largest firms, and they have all assured me that they are behind the efforts that will be necessary if the worst result is to occur. And hopefully that won't be the result.
DOBBS: Well, that's all well and good, Barry. But the fact of the matter is, what do you think of the idea of 85,000 of your professional colleagues -- because many of them are CPAs -- losing their jobs because of what a handful of people did?
MELANCON: Well, I think, again, in the previous report you talked about a fairly unprecedented issue here. And, you know, there is public policy issues. Is it right? Is it the appropriate answer for a firm to be totally impacted from that perspective when maybe if, in fact, it's only a few people that were involved. And if that is the case, under the assumption that it is just a handful, it seems to be a pretty aggressive result.
DOBBS: Is it politically impossible for you, as the man who leads the largest association of professional CPAs to stand up on his haunches and say to Congress and the Justice Department that what you're doing is extraordinary overreaction, and could cost thousands of innocent people their jobs?
MELANCON: Well, we said things along those lines to Congress today. We said today that we had to be very careful about the results of actions, the appearance of those actions. And obviously -- we gave out a four-part test. And one of those tests that we said is that does it ensure confidence in the markets in any proposal that you look at. And some things that can be done actually takes away from confidence, and that would be a bad decision.
DOBBS: OK. Barry, thank you very much for being with us.
MELANCON: Thank you, Lou.
DOBBS: Still ahead here, it looks as though the left hand doesn't know what the right hand is doing at Salomon Smith Barney. "New York Times" columnist Gretchen Morgensen will be here to tell us why there's a sharp disagreement about WorldCom at Salomon.
The Senate finally votes on whether to order a dramatic increase in the fuel efficiency of passenger cars in this country. We'll have a report for you on what happened and why, next.
And in their own words tonight, why one of Washington's top lawmakers is taking aim at the director of homeland security.
DOBBS: Stock prices today fell on Wall Street, following a weaker than expected retail sales report; $115 billion of market cap erased. Retail sales rose 0.3 percent last month, raising questions among some economists about the strength of recovery.
Also dragging the markets lower today, Intel. Intel shares fell 5 percent. That after JP Morgan slashed its profit forecast. Lucent extended yesterday's sell-off following its sales warning. And shares down another 13 percent, falling below $5 per share on extremely heavy volume. The Dow down 130 points today. The Nasdaq tumbled 35 points. The S&P 500 lost 1.27 on the day.
Despite today's sell-offs, Steve Galbraith of Morgan Stanley remains optimistic. He says the economy has clearly turned. He says the markets hit their lows back in September. He still says tech valuations remain, I'll say the word, problematic. Steve joins us here tonight.
Good to see you.
STEVE GALBRAITH, MORGAN STANLEY: Good seeing you, Lou.
DOBBS: You are basically saying the worst is over? GALBRAITH: Yes, I think at a lot of levels. I think for the market the lows in the market were achieved in September. So that was 20 percent ago, though. But I also think the economy is improving. And more importantly, corporate earnings are showing an uptick.
DOBBS: Corporate earnings are key here, are they not, to whatever happens in this market?
GALBRAITH: It's -- you know, people are all worried about history. They're worrying about what was. I think what we have to worry about is what is. And I think corporate earnings are the key and our guess is they're going to improve at a level of roughly 10, 11 percent this year, which isn't bad.
DOBBS: How about in this, the first quarter of the year?
GALBRAITH: The first quarter is going to be in, our view, the last down quarter of this cycle. And it will mark five consecutive quarters. So easy compares do not guarantee up earnings. So you will actually have probably a mild downtick in Q1 earnings. The economy will be growing, but I think that's it.
DOBBS: When you talk about easy compares, a lot of people, many investors have been counting on those easy comparisons against a year ago for some -- for some buoyancy, if you will.
GALBRAITH: Don't. To be blunt. Because roughly half the companies in the S&P 500 are lapping easy compares with even easier compares for next year.
GALBRAITH: So I don't think that in and of itself is a valid way of looking at an investment.
DOBBS: And how should people be approaching this market? It has considerable volatility. Obviously good things have happened since September 11 in terms of the market. What should they do?
GALBRAITH: Look, I think you still have to play a little bit of defense, particularly the next two weeks. It's been interesting you were talking about Andersen earlier. This is what's known as 10k season when companies report their final filings for last year and a lot of investors are worried they're going to get some incremental skeletons out over the next two weeks. My sense is the volatility is going to be with us for a little while longer. But ultimately what I want clients to be looking at and investors to be looking at is where is the earnings growth and that's where the stocks will move up, with the earnings.
DOBBS: Where is the earnings growth?
GALBRAITH: Right now it's really in two pockets. One is the traditional stable stuff. So health care companies that kind of sell product through thick and thin, regardless of the economy. So something like Pfizer will show earnings growth even in a recession. Conversely, Lou, one of the areas that's interesting are kind of the beaten up cyclicals that have been in recession basically for three or four years, things like Dow Chemical, Ford Motor Company, things like that. So you have kind of, again, a little bit of a barbell here.
DOBBS: And earnings, you're looking at somewhere as high as 15 percent on the year?
GALBRAITH: Probably double digit. I don't think we'll quite get to 15. We're going to leave the year with better than 15. So when we are looking at the fourth quarter, my guess is we will be looking at 20 percent earnings growth. But you're going to get sequential build through the year.
DOBBS: And the markets you see appreciating throughout this year how much?
GALBRAITH: I think we'll probably get not as much upside as we have in earnings. And that's what we're trying to get people patient on saying look I actually think the earnings are going to do a little better than the market.
DOBBS: Steve, great to have you here. Thank you very much.
GALBRAITH: Thanks for having me.
DOBBS: Steve Galbraith.
In other corporate news, Comverse Technology shares plunged 17 percent today. The telecom software company reported fourth quarter earnings in line with expectations. They warned, however, they expect first quarter results of a loss of six cents a share. First call estimates were 12 cents.
And having been fired by many of its clients in the wake of the Enron accounting scandal, Andersen turned around and did some firing of its own. Andersen dropped thestreet.com's auditing business. That after the company's CEO refused to disavow negative remarks made about Andersen by its co-founder James Kramer on television -- somewhere.
A major difference of opinion at Salomon Smith Barney. Institutional equity strategist Tobious Lefkovitz (ph) removed Worldcom from the recommended list for institutional clients for Salomon citing the regulatory inquiry and the competition in the telecom business. But Salomon Smith Barney's top telecom analyst Jack Grubman (ph) reiterated his optimism about Worldcom.
Columnist Gretchen Morgenson reported the in-house fight first in today's "New York Times" and joins us now. Gretchen, good to have you here.
GRETCHEN MORGENSON, "THE NEW YORK TIMES": Hi, Lou. How are you?
DOBBS: How could this happen? Salomon Smith Barney, one of the powerhouses, Grubman and Lefkovitz two of the best-known names in the firm. What happened?
MORGENSON: Actually it's about this SEC inquiry which is quite serious for Worldcom. And there's just a vast difference of opinion. And you had Tobious Lefkovitz coming out and saying, look, an SEC inquiry into broad issues involving accounting, involving the company's dealing with analysts even, is not something that is to toy with.
DOBBS: Even its relationship with other firms?
MORGENSON: Correct. So this is not something to mess with. We are exiting the stock. Now down in the telecom sector, Mr. Grubman said hold on, I don't think it's a big deal. These things are going out from the SEC constantly this year. Accounting is under scrutiny. I say reiterate buy, and the problem here is, Lou, that Mr. Grubman has a lot of egg on his face for having reiterated buy all the way down on a lot, a lot, a lot of telecom stocks.
DOBBS: And in the case of Worldcom it's about a 90 percent down, isn't it?
MORGENSON: Well, I haven't done the numbers. But, I mean, the stock is now down a little bit more today at 7 1/2 or so. When Mr. Lefkovitz put it on the recommended list last fall it was around 15. So it's down almost 50 percent from there. So we're not talking about a winner here under any circumstances. But it certainly was intriguing that you had this sort of food fight going on at Salomon.
DOBBS: Well, as you point out, the food fight is about some very rich food. Underwriting deals over a period of time. Salomon has done all of Worldcom's deals, right?
MORGENSON: Of the 16 debt deals that Worldcom did, Salomon was the lead manager on 13, and was comanager on the other three, so yes, they've been right up there in the very top. They also have underwritten a lot of other telecom shares.
That's why Mr. Grubman is such a powerhouse in telecom. But it also has put him in a difficult spot because with analysts under scrutiny, he has almost become the sort of whipping person for conflicts of interest because he's obviously working very closely with the investment banking department at the firm to lure the investment banking business into the firm at the same time that he's recommending the shares.
DOBBS: One has to believe, Gretchen, that Michael Carpenter is over there ready to pull his hair out.
MORGENSON: Oh, I don't know.
DOBBS: One has to believe.
DOBBS: Aghast the backdrop of the investigation of Worldcom, Grubman stepping up, I mean, this is not exactly, if you will politically correct, is it fair to say, given the vigor of Washington interest in analysts, the relationship with Wall Street, and telecom?
MORGENSON: I just think that Mr. Grubman doesn't really have a choice here, Lou. He's been so vehement about his buy recommendations on Worldcom, and all the telecom sector that I think he really just has no choice but to continue to come out and bang the table.
I just don't think that investors really, though, have given him a lot of credibility. I mean the stock continued to fall yesterday, in spite of his coming out and saying buy, buy, buy. I think, though, that he's lost a lot of credibility with investors. And so what Jack says doesn't necessarily drive the stock higher anymore.
DOBBS: Well, Jack Grubman known as one of Wall Street's most effective rainmakers. I think this probably demonstrates, wouldn't you say, that it's tough to be a rainmaker in a drought like we're experiencing in telecom?
MORGENSON: There's no doubt. But it does sort of add to the sense of unease among investors about whose side is he on.
DOBBS: And whose side is the firm on?
DOBBS: Gretchen, thank you very much. Gretchen Morganson, as always a terrific column.
MORGENSON: Thanks, Lou.
DOBBS: Still ahead here, the Senate votes on a proposal that could have altered the driving habits of millions. A report on the debate over fuel efficiency and just who needs it anyway.
Why hundreds of doctors are leaving one state to work in another. We'll tell you what it means for health care in that state and what it means is not good news.
And in their own words, the majority leader of the Senate has some strong things to say about the homeland security director.
DOBBS: The Senate today, thanks to the Michigan and Missouri contingents, rejected a proposal to raise the fuel efficiency of sports utility vehicles and cars by 50 percent. Instead, the Senate decided to give the federal government up to two years to develop targets for corporate average fuel economy, or CAFE standards for short. Kitty Pilgrim reports on our addiction to gas guzzlers.
KITTY PILGRIM, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Four-wheel drive, high torque, high octane driving machines. Americans can't get enough of them. The auto market is growing at about 2 percent a year, but demand for sport utilities is growing at 12 percent a year. In today's market, the consumer is king. And even Wall Street can't fault the auto companies.
DAVID BRADLEY, J.P. MORGAN CHASE: Nobody can sell those 40-mile- per-hour, 40-mile-per-gallon small cars. Nobody wants them. The consumers aren't buying them. So they produce them and they sit on the dealer lots.
PILGRIM: Fuel efficiency improved in the mid-'70s after the oil crisis, but by the 1990s mileage had crept up and plateaued at more than 20 miles per gallon.
ROB LIBERATORE, DAIMLER CHRYSLER: It's not that the consumer doesn't have the opportunity to buy cars that get high fuel economy. They do. It's just because of the price of gasoline here, they're not being propelled by natural economics to do so.
PILGRIM: Low gas prices create very little incentive for the consumer to switch tastes. Environmental groups are backing legislation that would force higher average miles per gallon. And scientists say the technology exists, but has to be legislated into the vehicle, like seatbelts and other features.
DAN LASHOF, NATURAL RESOURCES DEF. COUR.: We think it's definitely possible and is backed up by the findings of numerous reports is that you can make all car go farther on a gallon of gas. And that includes getting SUVs to about 40 miles per gallon, pick-up trucks to 33 miles per gallon.
PILGRIM (on camera): It's a tug-of-war between market forces and legislation, and each side does their share of throwing up their hands in exasperation. But one thing everyone seems able to agree on is that Americans must re-examine their gas guzzling habits.
Kitty Pilgrim, CNN Financial News, New York.
DOBBS: And in the interest of full disclosure, I have to confess I drive a gas guzzling truck and SUV. Still ahead here, doctors say they cannot afford to stay in one state, and they are moving somewhere else. We'll tell you what's going on and why, next.
And in their own words tonight, why there are simply no apologies from a senator who wants more fuel efficient SUVs and cars. Stay with us.
DOBBS: Sharp increases in medical malpractice insurance premiums are causing many of the nation's doctors to rethink their business. In some places, the situation is so critical that doctors and medical facilities are shutting down. One of the hardest-hit states is Nevada, where premiums have jumped four-fold. Casey Wian has the story from Las Vegas.
UNIDENTIFIED MALE: Hang in there. Sometimes it's tough.
CASEY WIAN, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Dr. Robert Weincek is a pediatric heart surgeon. After nearly 12 years saving children's lives, he's preparing to pull the plug on his practice.
DR. ROBERT WEINCEK, PEDIATRIC HEART SURGEON: Any child born in Nevada with a heart defect is going to have to go someplace else to get it fixed, because there won't be any physicians here to take care of them. Like any other business that gets hit with a business expense that they can't afford, they go under, and that's what we would end up doing.
WIAN: Weincek is part of an eight-doctor group facing a four- fold increase in malpractice premiums to $2 million a year when its policy expires in June. Doctors can't pass those added costs on to patients, because their fees are set by insurance companies and the government.
Clark County University's medical trauma center was also preparing to close for one twelve-hour shift this week. Two of its eight surgeons couldn't afford the malpractice premiums.
(on camera): If southern Nevada's only level one trauma center is forced to shut down, trauma patients would have to be air lifted hundreds of miles away to Phoenix, Los Angeles or Salt Lake City.
(voice-over): That threat has been avoided for now, because the county has classified the surgeons as part-time employees so they'll be covered under the hospital's policy. But most doctors, particularly in high-risk specialties such as trauma surgery or obstetrics, don't have that option.
DR. DALE CARRISON, EMERGENCY MEDICAL DIRECTOR: Our insurance went up 600 percent. We applied to every carrier in the state of Nevada, and only three would give us a quote at any price.
WIAN: Nevada's biggest malpractice insurance carrier, St. Paul, announced in December it was abandoning the business nationwide. That means 60 percent of the state's doctors must find new coverage.
BILL BRADLEY, NEVADA TRIAL LAWYERS ASSOCIATION: They undercut the market and sold insurance policies for very low values. The other companies couldn't compete, and the whole scheme behind this was to gather market share for this large malpractice company.
WIAN: When the economy soured, St. Paul's losses mounted. Nationwide, the company lost $1 billion on medical malpractice coverage last year. In Nevada, it paid nearly $2 in claims for every dollar collected in premiums. A St. Paul spokeswoman said: "When you're losing that much money, you have to stop the bleeding. We had to make the painful decision to exit the business."
Insurance companies and doctors blame multimillion dollar jury awards and lawsuit settlements for Nevada's malpractice insurance crisis. They want limits on jury awards. Others favor restrictions on insurance companies.
ERIN KENNY, CLARK COUNTY COMMISSIONER: If you want to continue to give us insurance for our houses, insurance for our cars, insurance for our health, then you better make available malpractice at a reasonable rate.
WIAN: The Nevada Medical Association estimates 10 percent of the state's doctors will leave by summer without malpractice insurance relief. The state insurance commissioner promises a remedy by early April. Meanwhile, Dr. Weincik's (ph) house is for sale and he's looking for jobs out of state.
Casey Wian, CNN Financial News, Las Vegas, Nevada.
DOBBS: "WOLF BLITZER REPORTS" begins in just a few minutes. Let's go to Wolf in Washington to find out what's ahead -- Wolf.
WOLF BLITZER, CNN ANCHOR: Thank you very much, Lou.
President Bush used some of his strongest language to date in blasting Iraqi leader Saddam Hussein. Is Mr. Bush preparing to target Iraq? And how much of a real threat does Saddam Hussein represent? I'll ask the former head of the Iraqi nuclear program, Khidhir Hamza, and former Pentagon official Lawrence Korb. Also, we'll go to Baghdad to see what Saddam Hussein is up to nowadays. It's also right at the top of the hour -- Lou.
DOBBS: Looking forward to it, Wolf. Thank you very much.
While much of the country enjoyed unseasonably warm temperatures this winter, cold weather gripped Arizona. That cold spell has crippled Arizona's lettuce crop, causing a nationwide lettuce shortage. A simple case of supply and demand at work driving prices to the highest level in a decade and a half. Markets in northern California have seen lettuce prices increase more than four times. Jumping from $12 to nearly $50 a carton. A single head of lettuce costing as much as $3.
Coming up next here, in their own words. Our new segment on what newsmakers are saying today. Also, we'll take a look at your thoughts, your e-mails, next.
DOBBS: Now let's take a look at your thoughts, often provocative. And Mike Sparks writing in to offer very provocative thoughts. Writing to say, "Please do a story on legendary X-1 pilot Chalmers Goodlin, who has plans to build safer jet airliners that would save our industry by restoring public confidence in air travel."
Now for those of you who don't know, and I was among those who didn't, Slick Goodlin was the pioneering test pilot for Bell Labs in the 1940s, and made 26 flights in the X-1. Captain Chuck Yeager flew that plane in 1947. Yeager became the first man to fly faster than the speed of sound. Since then, Slick Goodlin has become a tireless advocate of air safety. Goodlin has pointed to the revolutionary designs of Vincent Brunelli as a blueprint for building a safer airliner.
Eighty years ago, Brunelli proposed the lifting body type aircraft as opposed to the conventional tube and wing design that we know today. Goodlin says this basic design would improve survivability rates dramatically. He says it would save tens of thousands of lives. And he says this design is much safer than conventional aircraft because the fuel tanks are positioned away from the engines and away from the passengers. The main fuselage is also much stronger.
In point of fact, the Brunelli plan is now on the drawing board. Boeing sees some possibilities. This design is the basis for the blended wing design now being explored by Boeing's Phantom Works. Boeing is working on this type of aircraft for the military. One day, it could be used for civilian passenger service.
And we want to thank you, Mike Sparks for writing in to tell us about Chalmers "Slick" Goodlin. Now we have another hero to put up there with Chuck Yeager.
We always love hearing from you. Let us hear from you at firstname.lastname@example.org. And as always, please include your name and address.
Tonight's "In Their Words" segment covers topics ranging from the U.N. resolution for a Palestinian state to some sharp criticism of Tom Ridge's homeland security office.
KOFI ANNAN, U.N. SECRETARY-GENERAL: I am convinced that this vision is shared by the great majority of people on both sides, and indeed, by the whole world. I strongly urge both sides and their leaders to heed the council's demand for immediate cessation of violence, and has called on them to incorporate and implement in the Tenet and Mitchell plans with the aim of resuming negotiations on political settlement.
TONY BLAIR, BRITISH PRIME MINISTER: There is no alternative but to start from two fixed points of principle in that process, the right of Israel to exist securely and I believe that that should be accepted, not just by the Palestinians, but by all the Arab world. And secondly, that there should be a viable Palestinian state. And that should also be accepted by Israel and by the international community.
DASCHLE: I don't know that anybody can say with any real confidence how good a job he is doing or the office is doing because we have such little information. I'm going to assume -- I'm going to certainly give Mr. Ridge and the administration the benefit of the doubt here because I, No. 1, I think it's important that until we have cause to be concerned, that we do that. But I have to say, there is a chasm here that has to be changed, and there has to be a better appreciation of what this office is doing, what the mission is, and what the lines of communication will be in the future.
SEN. JOHN KERRY (D), MASSACHUSETTS: I will stand up anywhere in this country and defend the rectitude of what we attempted to do, and decry the lies that suggest that everybody in America has to get into some little purple-eater or whatever people called it. When Ford Motor Company itself is promoting an SUV with all the power you want and all the room you want, and it uses half the gasoline, there it is. The car of the future.
DOBBS: And that's MONEYLINE for this Wednesday evening. Thanks for being with us. I'm Lou Dobbs. Good night from New York City. "WOLF BLITZER REPORTS" begins right now.
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