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Aired June 21, 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, HOST: Tonight, thousands of people in Arizona are preparing to evacuate their homes. Two major wildfires are threatening to become a giant inferno. We'll be going live to eastern Arizona for the very latest.

The FBI warns that terrorists may try to use fuel trucks to attack targets in the United States and overseas.

The war in Afghanistan appears to be all but over. British and Canadian troops are withdrawing. So why are U.S. troops still there? We'll have a special report for you.

And the crisis of confidence on the part of investors deepens on Wall Street. Stock prices tumble for a fifth consecutive week. We'll have complete market coverage for you.

ANNOUNCER: This is Lou Dobbs' MONEYLINE for Friday, June 21. Here now, Lou Dobbs.

DOBBS: Good evening.

Tonight, two wildfires are raging out of control in Arizona. Firefighters are afraid they may come together into a raging inferno that would span 300,000 acres. One official tonight says, "We are not very much in control. Nature is in control."

The so-called Rodeo Fire near Show Low, Arizona, has grown to 120,000 acres, but it's just eight miles from a 5,000-acre blaze in Chediski, Arizona. The concern tonight: heavy winds that could push those fires together.

Bill Delaney is in Show Low, Arizona, and joins us now with the very latest -- Bill.

BILL DELANEY, CNN CORRESPONDENT: Well, thank you, Lou.

As you were saying, fire officials here have been saying all day that the conditions here are a recipe for disaster. Those high winds buffeting us and anyone in the vicinity of that fire at 40 to 50 miles an hour, amid, of course, the severe drought here, and amid, also, the bone-dry timber, and there's an infinite amount of it in the national forests near here, all creating a situation in which, as you said, 120,000 acres have already gone up in smoke. Look at some of that smoke, Lou. It's behind me here, a wall of it. These are clouds of smoke that go as high as 30,000 feet in the air, all part of this enormous Rodeo Fire.

Five thousand people have already evacuated that region. It's several miles from here. It's about as close as they'll let us get. In the town of Show Low, where I am, thousands more, as many as 15,000 in this immediate area, have not evacuated yet but have been warned that they may have to evacuate on very short notice. That's why many here have already packed up and gassed up their automobiles.

Now the nightmare scenario that you alluded to at the top of the broadcast, Lou, is very real. As you said, fire officials fear -- and they say there's an 80-percent chance of it, as you said -- that a smaller fire to the west of here could merge with the big Rodeo Fire, creating the potential for the -- by far the biggest fire ever in Arizona, a real nightmare scenario, as one fire official described.

(BEGIN VIDEO CLIP)

JIM PAXON, SHOW LOW FIRE DEPARTMENT: The Chediski is eight miles from the Rodeo. We also pulled up the NASA Web site and looked at satellite photos. If you look at the smoke plumes that were taken on time-lapse photography, the Chediski fire is being drawn into the Rodeo Fire smoke plume. There's an 80-percent chance that the two fires will burn together in the next three days.

(END VIDEO CLIP)

DELANEY: How did it all happen, Lou? Well, fire officials and law-enforcement officials believe somebody set this fire, and law- enforcement officials are looking into that, trying to figure out just what the scenario was -- Lou.

DOBBS: Bill, the forecast for tonight, heavy winds. Are there enough firefighters here to even begin to think about bringing these blazes under control?

DELANEY: That's a very important question. Fire officials here are saying that, at the moment, they still expect to build the 600 or so firefighters that they have to more than a thousand. They expect they will ultimately have enough.

But they are very concerned, nonetheless, because of all the fires, and there are at least 16 major fires burning in the West now that are sapping the resources of the fire service. They're also very concerned simply not just at getting bodies but at getting experienced firefighters to fight this spectacular blaze -- Lou.

DOBBS: Bill, thank you very much.

Bill Delaney.

Wildfires continue to burn as well tonight in Colorado, but, there, firefighters are making progress. Cooler, calmer weather is helping their efforts to contain the Hayman fire. That is the largest fire in the State of Colorado. It has scorched more than 137,000 acres. Ninety-five structures, 79 homes have also been destroyed by that fire.

Hot, windy, dry conditions are forecast to continue through the weekend.

The fire in Durango, Colorado, has grown to nearly 60,000 acres because of a firestorm that erupted overnight. More than 1,700 homes were evacuated. Thirteen hundred firefighters are fighting the blaze.

The FBI tonight is checking a man's claim that he overheard a telephone conversation about a July 4th attack on Las Vegas. Michael Hamden, a Lebanese-born American, says last Saturday he overheard a discussion of a bomb plot against the city of Las Vegas.

(BEGIN VIDEO CLIP)

MICHAEL HAMDEN, INTERCEPTED CELL PHONE CALL: When they're talking about gambling and corruption and others, why, it's Las Vegas. And also, when they say, "We are going to hit them on the day of freedom," you know the freedom for us, for all Americans is the Independence Day, is the 4th of July.

(END VIDEO CLIP)

DOBBS: Hamden says he called the FBI twice, but the FBI did not return his calls until Tuesday after he provided the information to local media. The FBI says it's too early to assess the accuracy of Hamden's report and says it plans to give him a polygraph.

The FBI today advised local law-enforcement agencies to be on alert for terrorists who might try to use fuel trucks to attack American targets. No specific targets are mentioned in the FBI advisory, but the agency says intelligence does suggest the targeting of fuel depots or Jewish schools or synagogues. The FBI says the advisory is based on uncorroborated information and was distributed out of what the FBI called "an abundance of caution."

U.S. Army helicopters are helping in the search for a radical Islamist leader in the Philippines who may have been killed in a firefight. The search for Abu Sabaya is taking place in the southern part of the Philippines. He is the leader of the Abu Sayyaf terrorist organization.

Sabaya and two other members of his group tonight are thought to have been killed in a firefight. They were on a boat that was intercepted by Filipino special forces.

U.S. troops have been in the Philippines since February training the Filipino army. About 1,400 U.S. soldiers are in the area.

Britain and Canada have decided to withdraw from Afghanistan. Most of their troops have been withdrawn. But the United States is keeping 7,000 soldiers there. Critics argue that the country would fall apart if those troops were pulled out. Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): U.S. troops in Afghanistan haven't seen combat with large numbers of al Qaeda since Operation Anaconda in March. Remaining al Qaeda went on the run.

Recent arrests in Morocco, Pakistan, and other countries underscore just how much the al Qaeda is everywhere but Afghanistan. No bombs have been dropped for weeks, and there is no visible enemy to shoot at.

What exactly is the U.S. military doing now in Afghanistan? British and Canadian troops are already returning home. Is the war inside Afghanistan really over?

Combat has given way to another priority: training the Afghan national army to take over the country's long-term security. But analysts warn that the Bush administration is facing the same challenge as the Clinton White House in Bosnia and Kosovo. When is a country secure enough that U.S. troops can go home?

In Afghanistan, that could be months away. If troops left now?

IVO DAALDER, BROOKINGS INSTITUTION: The warlords that are still in control of large parts of this country will start to fight for control directly with each other. So Afghanistan will descend into chaos.

STARR: More than 7,000 U.S. troops are in Afghanistan and another 50,000 spread out in neighboring countries. The U.S. believes they have made it tougher for al Qaeda to return.

COL. ROGER KING, U.S. ARMY SPOKESMAN: If the al Qaeda try to come back in that area, they better bring their pickaxes and air hammers because they're going to have to dig new places to work from.

STARR: But with allied troops pulling out to go home, the U.S. may find a long road ahead, more work for U.S. troops, and an enemy that is harder to find.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: Israeli troops today say they made a mistake when they opened fire on a crowd in the West Bank town of Jenin. In that attack, four Palestinians were killed. Israeli Defense Forces say they fired two tank shells trying to disperse a crowd violating an Israeli imposed curfew. The Palestinians say they thought the curfew had been lifted.

Just before dawn, Israeli tanks and bulldozers reentered the town of Nablus from three different directions. There were no reports of resistance. Israel's Cabinet gave troops the green light to stay as long as is necessary.

Well, my guest tonight compares Palestinian suicide bombers with Nazis. He says Yasser Arafat should be no longer the Palestinian leader. Former Israeli Prime Minister Benjamin Netanyahu joins me now.

BENJAMIN NETANYAHU, FORMER ISRAELI PRIME MINISTER: Good to see you.

DOBBS: Let's begin first with the fire on that crowd by Israeli Defense Forces, firing tank shells into an unarmed crowd. How could such a thing happen?

NETANYAHU: It happens in every conflict, in every armed conflict situation, that you have these regrettable and tragic accidents, but at least Israel acknowledges such a mistake and apologizes for it. That is not the case with the deliberate attack on innocent people and children.

Two days ago, I landed in the United States. I picked up the phone and talked to my son. A girl -- a 10-year-old girl in an adjoining class of his didn't make it to school because she was blown to bits in a bus, and two of my secretaries were almost blown to bits because that bus exploded 100 yards from my office.

That wasn't an accident. That was a deliberate act of suicidal terrorism that Yasser Arafat calls heroic. He doesn't apologize for it. He calls for more and more and more.

DOBBS: There's no excuse, I don't think, on the part of -- in anyone's mind in any civilized society in this world for acts of terrorism against innocents.

But, at the same time, these acts which put Israeli Defense Forces firing defense -- firing tank shells into unarmed crowds -- that rises to a level of a mistake that is abhorrent. It is -- an apology hardly seems sufficient.

NETANYAHU: Well, I think -- I think it's tragic because, obviously, people died, and they weren't intended to die, and they shouldn't have, and this happens. Friendly fire often kills our own people and has killed American people as well. It shouldn't happen, but it does.

But it's a world of difference between these unintended civilian casualties that were incurred as well in Afghanistan by American action that didn't want to hurt civilians, unintentionally, obviously, but it did, and this is one of those cases.

We, unfortunately, do not face that. We face the deliberate slaughter -- the daily slaughter of the innocents. In American terms, by now, 25,000 Israelis -- innocent Israelis have been slaughtered.

DOBBS: Those forces in Jenin because Prime Minister Sharon has determined that there will be a land -- land taken for every terrorist act against Israel and Israelis. It is seemingly a land-for-lives policy that...

NETANYAHU: I don't think so. I don't think so. I think -- I think that's perhaps interpretation, which, I think, is false. I think what Israel is doing right now is something else.

We don't want to keep Jenin or Ramallah -- at least I don't -- I don't think anybody in Israel does -- at least not in the mainstream of Israeli politics, but what we have is that these towns are being used to launch these attacks.

We just had 30 innocent Israelis, including a family, yesterday -- a family -- a mother and three of her children -- slaughtered by these killers.

Where do these killers come from? From Jenin, from Ramallah, and so on. So what we are doing right now is to go in and clean up those nests. But, as soon as we clean them up, we'll leave. We don't intend to stay there. We don't want to stay there.

DOBBS: But, by my count at least, Israeli Defense Forces have been in Jenin three times in the last two months.

NETANYAHU: Well, let's suppose it -- let's just suppose that in a neighboring country, unnamed, adjoining the United States, or in a neighboring region, you would have terrorists coming out and murdering hundreds of Americans.

What would you do? You'd send your army there, just as you sent it thousands of miles away to Afghanistan, and they're still in Afghanistan.

And, by the way, I don't condemn them for being there. They're still there because there's still a threat of terrorism.

DOBBS: There's a threat of terrorism around the world. The United States is engaged against it. The -- and you, Israel, is engaged certainly against terrorism by the Hezbollah, the Hamas, Al Aqsa.

NETANYAHU: You name it.

DOBBS: You name it. What is, in your judgment, the plan to end this, to bring it to a resolution because -- you talked about the children, the family killed, and our hearts go out to them. The hearts of the world go out to them. In Jenin, young children, 8 years old, dying. The bloodbath has to end at some point. It's a cycle that has gone on...

NETANYAHU: It's not a cycle because here is the way it is. If the Palestinians lay down their arms, the violence ceases. If Israel lays down its arms, Israel is destroyed. They'll just destroy all of us.

I compare them to a Nazi mentality, but they don't have the wherewithal of the Nazis. They'll just kill as many as they can. If they had bigger bombs, they'd blow up an entire city, if they could, including the United States, and I think there isn't a parallel between terrorists with a dictatorial mentality that seek to blow up our free societies, who hate our freedoms --

Look at the way they described Las Vegas as a -- you know, the city of sin that has to be blown up. I mean, this is insane, and this kind of attitude that attacks the United States, attacks Israel, attacks other free societies is something that we cannot countenance.

And the question is how do you stop it. I think we stop it by defeating the regimes. I've always said that, that the way to fight terrorism is not to fight the terrorists. Well, you also fight the terrorists. But it's to get at the regime that harbors the terrorists, that allows them to do their awful deeds.

DOBBS: Which regimes?

NETANYAHU: Well, you've taken care of one, Afghanistan. I suspect the United States is going to take on another terrorist regime and possibly another after that.

We are faced with one main regime, which is Yasser Arafat's terror regime. Arafat can issue condemnations to CNN all day long for these attacks, but he has -- he glorifies these killers. He calls them heroes. He has museums for them. He has suicide kindergarten camps for 3-year-olds.

This is madness, and as long as he's there...

DOBBS: It goes beyond that. There are other Arab states who either directly or implicitly support the funding of those suicide attacks.

NETANYAHU: There is Saudi Arabia that has funded Taliban and al Qaeda up to the middle '90s. They now fund Palestinian suicidal terrorism. This is true.

And I think -- I think President Bush at one time said that countries will be held to a standard. I think the worst offenders are those that actually harbor terrorists and allow the terrorists to proceed from their territory. They have to be dismantled. They have to be knocked out.

The other offenders on funding and other things have to be sanctioned. They have to be given sanctions.

DOBBS: The president will be coming forward with a major statement on his Middle East policy to resolve the Israeli/Palestinian conflict. Fundamental to that, we are told, is the settlement of an interim Palestinian state. What are your hopes for success in what the president is about to put forward?

NETANYAHU: I wish it would solve the problem, but I think, right now, after a campaign that has murdered hundreds of Israelis, if Arafat understands that he gets a prize, a state, then it will be, I think, the ultimate reward for terrorism. That is definitely not the intention of President Bush, and I think intentions should be also connected to results, and that would be the result.

I think, frankly, as long as Arafat is there, we're not going to get any Palestinian leadership with whom we can make peace, and, when we do have such a leadership, after Arafat is gone, then I think that that Palestinian leadership should govern the Palestinians.

We don't want to govern -- I don't want to govern a single Palestinian, but I wouldn't want him to have certain sovereign powers that can destroy the State of Israel. Their self-determination does not require that they make, for example, military pacts with Iran or have an air force or an army that could threaten our existence.

So I'd like the Palestinians to have self-government, absent those sovereign powers that could destroy the Jewish state, and I think that's an equitable arrangement, and I hope -- I hope that is what will happen. I don't think rewarding Arafat with a state today in the midst of terror is going to achieve that. I think it's going to actually push it back.

DOBBS: Benjamin Netanyahu, thank you for being here.

NETANYAHU: Thank you.

DOBBS: Turning now to our nightly poll. In tonight's poll, we're going to ask a very straightforward question coming off of Barbara Starr's report on the number of troops remaining in Afghanistan after the British and the Canadians have departed. The question is: Do you think it is time for U.S. troops to leave Afghanistan? Please cast your vote at cnn.com/moneyline. That's cnn.com/moneyline. We will have the results of the poll later in the broadcast.

Still ahead here, the president is debating his options on the Middle East. Kitty Pilgrim will tell us what he said today about violence in the region.

The Securities and Exchange Commission looks like it's moving closer to Congress's view on how to reform the accounting industry.

And the jury has delivered its verdict in the Andersen trial, but it seems not all the jurors were paying attention.

That story and more still ahead. Stay with us.

(COMMERCIAL BREAK)

DOBBS: A sharp sell-off on Wall Street again. The markets capped off the fifth consecutive weekly decline, falling to new lows for the year.

Today's losses came on unusually high volume because it was triple witching day, the simultaneous exploration of index options and futures and stock options.

The Dow suffered its third consecutive triple-digit decline, falling 178 points. The Nasdaq down 24 points. The S&P 500 down just over 17 points. Jan Hopkins will have more on the market later.

The problems plaguing Wall Street have not been lost on the president. Speaking in Florida today, President Bush said the wave of corporate accounting scandals has definitely hurt investor confidence.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And I do think there is an overhang over the market of distrust. Listen, 95 percent -- a huge percentage of the business community are honest and reveal all their assets. Their compensation programs are balanced. But there are some bad apples.

(END VIDEO CLIP)

DOBBS: The president said he has confidence corporate America will be more responsible, and he has, he says, confidence in this economy.

Just hours before the president spoke, another major corporation became embroiled in a scandal. Federal criminal charges filed against a current Rite Aid executive and three former Rite Aid executives. Another former executive agreed to plead guilty and is cooperating with prosecutors.

Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The biggest earnings restatement in American history was not at Enron. It was at Rite Aid. One-point-six-billion dollars in bogus profits disappeared.

Now two-and-a-half years later, federal, criminal, and civil charges filed against four Rite Aid executives.

WAYNE CARLIN, REGIONAL DIRECTOR, SEC: For over two years, Rite Aid's senior management used every imaginable trick in the book to manipulate the company's financial results and to report fictional earnings to the unsuspecting investing public.

VILES: The indictment names three former executives and one still at Rite Aid and alleges massive accounting fraud, unauthorized loans to officers, lying to the SEC and to a grand jury, destroying evidence, and even witness tampering.

TOM MARINO, U.S. ATTORNEY: These charges underscore the simple truth that officers in publicly traded companies hold a public trust and must deal honestly and forthrightly with investors, vendors, regulators, and the public.

VILES: The accounting scandal sent Rite Aid's stock plummeting; $11 billion in market value was lost.

Among those charged, former CEO Martin Grass, fraud, conspiracy to obstruct justice, witness tampering. Former chief counsel Franklin Brown, hit with all of those charges. Also charged, former CFO Franklyn Bergonzi and a current vice president, Eric Sorkin, who was suspended by Rite Aid Friday morning. None have been arrested or arraigned yet.

In a statement, Grass said, quote, "I did not knowingly engage in any illegal acts, and I intend vigorously to defend the charges." Brown's lawyers put out a similar statement.

The SEC separately filed civil accounting fraud charges against the former executives and announced it had reached a settlement with the company itself and its new management. Prosecutors emphasizing that the new management at Rite Aid cooperated fully with their investigation.

(END VIDEOTAPE)

VILES: The timing of the indictments underscores how long it can take to bring these cases. Remember the criminal investigation began in late 1999, two-and-a-half years ago, and prosecutors for the last year have had a cooperating witness from within the company. It still took over a year with this cooperative witness to bring these indictments, Lou.

DOBBS: And the audit firm here?

VILES: KPMG, which -- it says clearly in the indictment KPMG was lied to and misled by the client. No charges against KPMG.

DOBBS: Thank you very much.

Peter Viles.

A new development tonight in the Martha Stewart story. Merrill Lynch placed Stewart's financial adviser Peter Bacanovic and his client, associate Douglas Faneuil, on administrative leave pending further investigation.

We've learned that Merrill Lynch uncovered information that shows a discrepancy in the reasons given for the selling of ImClone shares, saying it was not related to price targets. Both the U.S. attorney general for the Southern District of New York and the SEC are investigating this new information. Merrill Lynch says it's continuing to cooperate fully.

Corporate governance is the issue. Both the Bush administration and Congress now have proposals to strengthen the rules and to increase accountability. SEC Chairman Harvey Pitt spelled out his plan last night on this broadcast.

Now CNN has learned that the SEC will propose an even tougher set of rules that are much closer to what Congress is considering.

Tim O'Brien reports from Washington.

(BEGIN VIDEOTAPE) TIM O'BRIEN, CNN CORRESPONDENT (voice-over): It wasn't in the reforms the SEC proposed Thursday, but Chairman Harvey Pitt says there should be no question the commission will address the potential conflicts that arise when auditors perform non-audit services for their audit clients.

The SEC will also propose rules aimed at preventing CEOs from using consulting contracts as leverage to get favorable audit reports. Instead, corporate audit committees will have the sole power to hire and fire auditors. The commission insists it can impose whatever reforms are necessary without any help from Congress.

REP. JOHN LAFALCE (D), NEW YORK: Where I would fault the SEC is not calling for legislation, for not admitting that it is necessary for Congress to give them greater authority.

O'BRIEN: Some political economists feel Pitt's tough stance could be motivated by election year politics.

GREG VALLIERE, SCHWAB WASHINGTON RESEARCH: Perhaps the most important factor is that this is an election year, and I think the SEC commissioner has to look tough. He has to show that the agency has some teeth.

O'BRIEN: Of course, it's Congress that runs for election, not the SEC, and, two years ago, when Pitt's predecessor Arthur Levitt suggested separating auditing from consulting services, some Republicans and Democrats threatened to cut the agency's funding.

(on camera): But that was long before Enron, which changed the landscape for everyone. Now everyone wants to have a say, but no one wants to be seen as weak in getting the much maligned accounting profession to clean up its act.

Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

DOBBS: Coming up next, as we've reported, stocks continue their downward spiral. We'll take a look at the decline. We'll be talking with three of the country's very best business editors.

We'll also have a special report for you on the growing friend in corporate America, bringing back retired executives to help in troubled times.

And a very near miss between earth and a giant asteroid. That story, a lot more coming up. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The president and his advisers continue to debate the timing and content of a major speech on the Middle East. He is expected to deliver that speech sometime in the next week. Yasser Arafat has also been talking about peace today. And Kitty Pilgrim has the story. (BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Palestinian leader Yasser Arafat said in an interview at his Ramallah headquarters that he would accept a Mideast peace plan put forward by the U.S. President Bill Clinton in December 2000. It was the result of three- way talks with Israeli Premier Ehud Barak in Camp David and later discussed at meetings in Egypt.

Under it, the Palestinians were to set up a state in 95 percent of the West Bank and all of Gaza, and would have sovereignty over the Arab parts of Jerusalem and other holy sites. It was a plan Arafat rejected at that time.

In response to Arafat's comments, the U.S. State Department said they welcomed the -- quote -- "positive remarks," but hammered home the point that stopping the violence is their top priority.

RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: We welcome especially calls to end violence and terrorists. But all this -- these remarks being positive in that sense, we still need to see the action that reinforces this message, the concrete action on the ground that actually stops the violence and terror.

PILGRIM: President Bush was also talking about proposing a plan for a Palestinian state this week in a high-profile speech. But those plans were put on hold by the continuation of the violence. Bush Friday said, I'll give the speech when I'm ready to give it, condemning the attack.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My current thinking is that there are obviously some in the Middle East who want to use violence to destroy any hopes of peace. And the world must do everything in its power to prevent the few from creating misery for the many.

(END VIDEOTAPE)

PILGRIM: So it's clear that plans are being talked about. But in the end, even the best of plans can be derailed by the violence -- Lou.

DOBBS: Or in this case, at least deferred. Kitty, thank you very much. Kitty Pilgrim.

A reminder now to please vote in our MONEYLINE poll this evening. Our question tonight: is it time for U.S. troops to leave Afghanistan, after the British and the Canadians have done so. Is it time for U.S. troops to leave Afghanistan? You can cast your vote at cnn.com/moneyline. We'll have the results for you coming up.

And coming up next, VHS tapes, you remember those. Well, they're facing extinction. One retailer has led the way to phase out the sale of videotapes. Others, sure to follow. We'll tell you why. And many retired executives are putting their golf clubs down and picking up the mantel of corporate leadership. We'll tell you why some companies are bringing back these executives in these troubled times. That report next.

And, a Houston jury found Andersen guilty of obstruction of justice. But some of the jurors may have been, well, sleeping on the job. Those stories and a lot more, still ahead. Stay with us.

(COMMERCIAL BREAK)

DOBBS: 1.3 trillion in market cap erased. And Jan Hopkins is here to bring us up to date on the market. And what a job you've got tonight.

JAN HOPKINS, CNN FINANCIAL CORRESPONDENT: That's right. Fifth week decline in a row. It's hard to believe that on Monday we had a 200 point rally. Because after four days of selling, the Dow closed the week down 2.3 percent. The Nasdaq down 4.2 percent for the week. The S&P 500 closing below 1,000, down almost 2 percent for the week.

On the New York Stock Exchange, Merck hit a 52-week low on reports of accounting questions. IBM continues to fall. Tyco lost ground on heavy selling pressure late in the day. And RJR, lower on a loss in court.

At the Nasdaq, Dell managed a slight gain on positive comments from Wall Street. But other tech heavyweights fell. Intel at a 52- week low. The Nasdaq is now very close to the lows that it hit in the aftermath of September 11.

The question for next week is whether that low will hold -- Lou.

DOBBS: Jan, thank you very much.

If you don't have a DVD player yet, you may want to consider one. Circuit City will soon stop selling videotapes altogether. They're selling DVDs. The company cites the growing demand for DVD players. They now account for about 1/3 of the market. Ninety-five percent of all U.S. homes have videotape players. But sales of those players have already been falling, and falling steadily.

A troubling footnote tonight to the Andersen trial. According to a published report in "Texas Lawyer," two of the jurors who found Andersen guilty of obstruction of justice slept during the trial. In fact, the jurors were so drowsy they weren't even sure who was involved in the trial.

One of the jurors believed that auditor David Duncan was the defendant. Another questioned whether NASA was involved. Fellow jurors were concerned enough to send two notes to Judge Melinda Harman. But because of a miscommunication, she never received those notes.

Andersen attorney Rusty Hardin has expressed alarm that the jurors' concerns never reached the judge. Most observers expect Andersen next week to appear before Judge Melinda Harman to request a new trial based on these and a number of other irregularities.

In the dot-com boom, youth was applauded, it was celebrated. But in troubled times, who are you going to call? Fred Katayama has the story.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Like the T-bird Ford has brought back from the museum, the automaker lured its former chief financial officer from retirement last month. Alan Gilmore resumed his old seat.

And last October, Ford hired as vice chairman Carl Reichardt, who had retired as Wells Fargo's CEO eight years ago. In this post dot- com, back-to-basics era, business is becoming an old timer's game.

CARL REICHARDT, VICE CHAIRMAN, FORD MOTOR: I kind of feel like a 45-year-old retired quarterback that's been asked to come back and put on some pants.

KATAYAMA: Former IBM financial whiz Lawrence Zimmerman grabbed his legal pads earlier this month, exiting retirement to take over the CFO helm at Xerox.

(on camera): From Honeywell to Kmart, American corporations are tapping the alumni pools in search of talent to fill the executive suites in boardrooms. And executives who retired prematurely are seeking new challenges.

(voice-over): Recruiter Dennis Carey gets lots of resumes from retirees.

DENNIS CAREY, VICE CHAIRMAN, SPENCER STUART: It used to be quite common for executives to retire at 65 or 68. But about five or six years ago, in the heyday of good times, many executives were exiting in their mid 50s. Some of these executives left and a little got bored, perhaps, playing golf every day.

KATAYAMA: Companies now want replacements with proven records, like Honeywell's Larry Bossidy.

YALE TAUBER, MERCER: They bring their reputation and their past accomplishments. They're the conquering hero. They're associated with better times. And that makes the employees happy, it makes the investors happy.

KATAYAMA: Amid the accounting scandals, companies want officers who can win over Wall Street. There are drawbacks, however. The veterans may lack fresh ideas. And a reappearance may hurt the morale of those who thought they were next in line for the corner office. Fred Katayama, CNN Financial News, New York.

(END VIDEOTAPE)

DOBBS: Coming up next, what will it take to stop the market's decline? What can we expect? I'll be talking with a group of editors and journalists who will have some answers for us, and certain perspective on what we can expect.

The color of money is changing. We'll tell you what's behind the government's plan on our new currency and a new color. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Our Friday panel of top business editors and journalists here to talk about the top stories of the week and what we can expect. First, Jim Ellis, who is chief of correspondence at "Business Week" magazine. And William Baldwin, who is editor of "Forbes." And Bill O'Neil, the founder and chairman of "Investor's Business Daily," joins us from Los Angeles.

Gentlemen, good to have you here. Bill, since you're up on the screen there, let me start with you. This market, for five weeks, continues to decline. The president talking about an overhang of distrust. What's going on?

WILLIAM O'NEIL, "INVESTOR'S BUSINESS DAILY": Well, this is the aftermath of the wild craze we had in '98 and '99. And the high-techs are still under pressure. You actually have a two-sided market.

The consumer stocks are doing very well. The national defense stocks are doing well. They're all -- most of those indexes are up for the year. But it's the high-tech thing that's heavy-weighted into the Nasdaq and some in the S&P 500, that's creating a lot of the problem.

DOBBS: Is it over?

O'NEIL: You could come on down and make some new lows, and maybe scare people and get more short selling. The call ratio could jump up. But I think people need to really learn to find out where the market has shifted.

It isn't going to the old leaders, it's going to new leaders. And, Lou, the other thing is that most people really don't have good systems or methods of investing. In other words, they don't realize that all stocks are speculative, all of them have risk, and they've got to protect themselves.

My rule is, if you buy a stock at $50 and it drops 8 percent below your cost, I don't want to stay with it. I want to cut my losses. And I think the people that have followed rules like that haven't had that much problem.

DOBBS: Sensible rule, Bill, as we would expect from you.

Let's turn to you, Bill, your thoughts. This market, the overhang of distrust, as the president talked about. We still are looking at high valuations and yet everyone on Wall Street seems to be talking as if there's some sort of a disconnect between the investor and the market, that's irrational.

WILLIAM BALDWIN, "FORBES": Well, obviously this rash of criminality in the executive suite isn't helping the market. But I think the real problem is much more fundamental. For a decade in the '90s, we were brainwashed into thinking that stocks are always the place to be for a long-term investor. And maybe that's not true. Maybe people, after two years of bear markets, they're waking up to the fact that you can hold stocks for a long time and still get disappointing returns.

DOBBS: Do you agree with that, Jim?

JIM ELLIS, "BUSINESS WEEK" MAGAZINE: Oh, yes. I think that what happened during the '90s was, so many people got used to the idea of outsized returns, that we started thinking in terms of double-digit returns, long-term. That hasn't been the historical trend of the market. We're now making up for the excesses before.

But also right now, we've got a lot of stocks to the market. We're at war. We have the threat of terrorism. The dollar is weakening. Foreign investors are starting to say there are other places to invest rather than the United States. And we have sort of a long time before we're going to see strong profitability in the U.S..

So there's a lot of reasons the market is down right now.

DOBBS: So perhaps investors aren't being irrational at all in this environment. Let me turn to the other issue this week, which is, frankly, an economy that is being driven by a lust for reform, as well, a market that's being driven by a lust for reform.

We have two competing proposals. The Sarbanes proposal and, if you will, the Pitt plans. Which do you think is going to prevail? Will we see real reform here?

Let me begin with you, Jim.

ELLIS: Well, I think that we're already seeing that the Pitt proposal is sort of moving toward the Sarbanes plan. And what's happening now is, politically, it's very difficult to fight reform. They fought it a couple of years ago, but now it seems that something will actually happen.

It's just a question now of what's the degree. How much control will an outside auditing board have over the auditing profession? That seems to be the big difference between the plans.

BALDWIN: I think it's awfully hard to legislate ethical behavior, as much as you might want to try to do that. Also, let's not forget that we have some pretty tough laws in the books right now.

I didn't realize until this year that we had a law that said, basically, if one partner in a large accounting firm does something bad, 27,000 people have to lose their jobs. That's a pretty draconian law. We don't need any more draconian laws, except to please the politicians and their thirst for seeming to do something.

DOBBS: Bill O'Neil, your thoughts?

O'NEIL: Well, I think you -- when you have problems like this, you have to do something. And of course, the government doesn't always do exactly the right thing. But I think they're moving the right direction.

The real underlying problem, though, for investors, is they need to learn more about what they're doing. And rather than going on personal opinions and what somebody else is telling them, they need to learn on their own. And I mentioned about cutting losses.

And I think they spend their time finding something to buy and they have no idea what they're going to do after they get it. In other words, even if they made a profit, they don't have any selling rules of when to nail down a gain when they have it, while they've still got it.

(CROSSTALK)

O'NEIL: It's an educational thing.

DOBBS: Bill, I think we're about to add to the education of the (UNINTELLIGIBLE). Jim and Bill here want to...

ELLIS: I think there's a little more to it than that. I mean, even an investor who thinks he's doing the right thing in going through financials has not been well served in the last couple of years. I think what's happened is, if you can't believe the analysts, if you can't believe the transparency of the financial documents that are sort of core to our system, then I don't know if it's really the investor's fault, as much as it is the system that has a lot of holes in it. And people are driving trucks through those holes.

DOBBS: Amen.

BALDWIN: With all due respect to Bill O'Neil, I'm not sure the stop loss is going to save you from irrational exuberance. And by the way, it looks like a stop loss order might not save Martha Stewart from all of her troubles.

DOBBS: In terms of Martha Stewart, has she been fairly treated in the media? I mean, here's a woman who has, tangentially, if you will, been sucked into the vortex of this mess. And, I mean everybody -- people who don't even -- news publications that don't normally know what a stock is, suddenly are fixated on Martha Stewart.

BALDWIN: It's only 4,000 shares, penny ante for her. Maybe she deserves it because she's so famous.

ELLIS: But let's face it, her stock and trade is her celebrity. She basically sells her personality, her life. And therefore I think it is fair game to at least look at it.

Because there's a broader issue here, which is, did she get a better deal than the average person simply because of her personal relationship with the person who had insider trading data? And, given that he's already been charged with passing data to other people, I think it's fair for us to at least want to know more about the relationship.

DOBBS: Do you agree, Bill O'Neil? O'NEIL: I think the SEC has a record of finding insider trading and closing in pretty well on it. So that's one thing they've done over the years that's pretty good. And it always happens in a prolonged period like this, that you'll start looking for these things. And I guess that's good.

DOBBS: Good or not, it's where we are. And what a place we're in. Five consecutive weeks of declines, we're back to the lows of -- well, certainly approaching late September. So, gentlemen, we appreciate you being here.

It's good to talk with you, Jim. Bill O'Neil out in L.A., look forward to seeing you here in person soon. And we thank you greatly.

Coming up next, the Treasury is going to change the color of our money. We'll tell you why, next.

And the asteroid that was within 100,000 miles of Earth -- without astronomers noticing. That story coming right up. A lot more still ahead. Stay with us.

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DOBBS: Now the results of tonight's MONEYLINE Quick Vote. Is it time for U.S. troops to leave Afghanistan? Twenty-eight percent of you said yes. Seventy-two percent said no.

"CROSSFIRE" begins in a few minutes and that's always a yes. We go to Bob Novak and Paul Begala to tell us all about it -- Paul.

PAUL BEGALA, "CROSSFIRE": Well, Lou, Washington is still trying to figure out the politics of the Supreme Court decision yesterday, which banned execution for the retarded. We'll have the former governor of Virginia who signed that death warrant for the retarded man that the Supreme Court overturned yesterday, and fight it out.

ROBERT NOVAK, "CROSSFIRE": And, Lou, we'll talk about the warnings about the 4th of July coming up. Is that a real warning about Las Vegas?

And, on a lighter note, we'll end with a political potpourri and we'll have a little debate between Dick Gephardt and Dennis Hastert. Gephardt saying that democracy is in danger in the House, and Hastert wondering whether Dick Gephardt had some bad bean soup.

DOBBS: Elegantly put, Bob, as always. Thank you very much.

Exactly a week ago, an asteroid the size of a football field narrowly missed earth. Astronomers say they did not see it until after it had already passed the planet. The asteroid came as close as 75,000 miles.

The moon is 250,000 miles away. It's the biggest rock to get so close to the earth in decades. Scientists say this asteroid could have flattened hundreds of square miles of the planet's surface had it crashed into earth. For the second time in seven years, the government is overhauling currency in order to deter counterfeiting. The Federal Reserve and the U.S. Treasury will use subtle, multiple-color backgrounds behind the standard green and black engraving on all $20, $50, and $100 bills.

The exact hues have not yet been revealed. But people will be able to determine the bill's denomination by its color. Now, in 1996, portraits on the currency were enlarged -- the watermark added, an advanced color shifting ink was used, strands were added. That was the first major redesign of the currency since 1928. And six years ago, they said they did all of that to deter counterfeiting.

Still ahead, the "Dobbs Report." Tonight, a few thoughts on investors' continuing mistrust of corporate America. We'll have your thoughts as well. Stay with us.

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DOBBS: The president today acknowledged there is what he called an overhang of distrust over the market. The president also mentioned fear of terrorism and uncertainty about the economy as factors in the market's decline.

In my opinion, President Bush correctly focused on the most important factor: distrust of corporate America. With the market at its lowest levels of the year, it's critical that the administration invigorate its investigations and prosecutions of criminals.

For a time, this will only add to the market's problems. But for only a short time. The SEC, under Chairman Harvey Pitt, is stepping up its investigations and enforcement actions. And in the case of Rite Aid today, the SEC is going to court to recover the cash compensation of executives who have been charged with crimes.

And it's beginning to appear as if parts of the Justice Department, at least, are learning proportionality in their prosecutions. At least in the instance of U.S. Attorney Tom Marino, who filed the charges against the former Rite Aid top executives, which include, by the way, three charges of conspiring to obstruct justice.

Marino said today, these charges underscore the simple truth that officers in publicly-traded companies hold a public trust. Marino went after the bad guys and it appears that he got them. Every prosecutor of corporate crime should follow Marino's example, whether at the state or federal level. The sooner they do, the sooner we can expect this overhang of distrust to lift.

Now let's take a look at your thoughts. When it comes to the situation in the Middle East, Mike Stern says there's an option other than violence. Saying: "If the oil-rich Gulf countries truly cared about the plight of the Palestinians, they would have made infrastructure and housing investments in the Palestinian populated areas." Roberta Woods,on a less weighty subject, writes to say: "I admire your wonderful program and I'm disappointed that Lou Dobbs would demonstrate bad grammar to the public, asking 'who do you trust?' I would be grateful if the press would set a good example for us."

Well, you are absolutely right, Roberta. And I apologize. We made an editorial decision to be more conversational. We won't take such a shortcut in the future. Because we heard from a lot of people besides you, Roberta.

Send us your thoughts. E-mail us, moneyline@cnn.com. As always, please include your name and address.

Those were your words. Now "In Their Words."

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There are some bad apples. And the business world must clean up its act. The people have got to have confidence as to whether or not the assets and liabilities are good numbers. They got to have confidence that the leadership has got the shareholder and employee in mind when they make decisions.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

JIM PAXON, SHOW LOW FIRE DEPT: It's going to burn up a lot more timber. We're looking at a 300,000-acre fire. It also will complicate things, just for the logistics. It's going to be 100 miles around this fire on the fire line alone.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

RON VIZBECK, DISTRICT RANGER: We've done a pretty good job of containing a lot of line the last day or so. And primarily on the east side of the fire, where most of the houses are, which is the direction the fire wants to move in. And hopefully by today we'll have most of those lines in on that.

But we're going to get tested tomorrow again. We've got forecasts for high winds and low humidity again. So I would expect this fire is going to want to get up and go on us again.

(END VIDEO CLIP)

DOBBS: That's MONEYLINE for this Friday evening. We thank you for being with us. We hope you have a great weekend. For all of us here, good night from New York City.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



 
 
 
 


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