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Strauss-Kahn's Lawyers Try to Work Out Bail Conditions; Who Will Succeed Strauss-Kahn at IMF?

Aired May 20, 2011 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Good evening. I'm Richard Quest. Glad you are with us for this final edition of QUEST MEANS BUSINESS of the week.

And tonight, Dominique Strauss-Kahn's defense lawyers are working to meet his bail conditions and get him out of jail. They have returned to court in this hour, where they will work our additional measures for his release.

Now, these are the latest pictures from Rikers Island, or outside the complex of Rikers Island, at the moment where he is being held. The-so far we understand that $1 million in cash and a $5 million bond has been paid to the judge, or to the court. He's already surrendered his travel documents. And arrangements are in place for the home detention with electronic tagging.

But apparently there are some other issues which still need to be put before the court. And that is what they are going to be back in court, about 10 minutes from now.

One side note that was announced from the International Monetary Fund, because he resigned, Dominique Strauss-Kahn will get a severance payment of a quarter of a million, separation payment. And of course, as a former MD of the IMF, what is being described as a modest annual pension.

The resignation now heats up the battle to who will take over from Strauss-Kahn. Now, hinting for support for an IMF shake up, the OECD Secretary-General Angel Gurria said that a European IMF head is a tradition, it is not a rule. He says, everyone who has been discussed will make excellent candidates and that several of them aren't Europeans.

Tim Geithner, the U.S. Treasury secretary got involved. Put out another statement today. And reading between the lines there is a possibility of a non-European head.

Geithner said, "We are consulting broadly with the fund's shareholders from emerging markets, as well as advanced economies."

And there we go, "We are prepared to support a candidate with the requisite, deep experience and leadership qualities."

When you hear that phrase, you know that you are moving toward the name Christine Lagarde. And in fact, that is the name that is just about everywhere. Even Mr. Gurria, of the OECD said, "Christine Lagarde would make a formidable candidate."

Who is?-well you know who Christine Lagarde is. She is a friend of this program and has appeared on it many times. But we need to know, what are her credentials for being managing director of the IMF.


JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): In 2009 "Forbes" magazine ranked her the 17th most powerful woman on the planet. The same year "The Financial Times" labeled her the best finance minister in Europe. She is the French woman who once ran a large American law firm, and the lawyer who runs an even larger French economy. And yet, Christine Lagarde, who shepherded tough economic reforms was recently ranked France's sixth most popular political figure.

So, how does the former synchronized swimming champion manage it? A friend and fellow lawyer says it is combination of personality and competence.

DOMINIQUE BORDE, FRENCH LAWYER: One, she is someone who listens to people. Two, she is very human. She is very just, high ethics, which are important, because I think in the end it is always ethical people who really lead others.

BITTERMANN: The author of a recently book about Lagarde says many people don't know that she is a devout Catholic, who tells herself constantly to keep smiling. It has, he believes, carried her through some tough situation. But Cyrille Lechevre also says that Lagarde, at age 55, after a divorce and a separation and long periods away from her two sons, now has some regrets.

CYRILLE LECHEVRE, AUTHOR, "CHRISTINE LAGARDE": She sacrificed a lot of things for her career. And this is something, when you speak with her, she doesn't think-she doesn't feel very good with this. Now, when she looks back she has the feeling that she missed something.

BITTERMANN: But in her public life she has missed little. She has widely credited for working around the clock to head off the financial crisis of 2008, something that put her in a recent documentary on the financial meltdown, called, "Inside Job".

CHARLES FERGUSON, PRODUCER, "INSIDE JOB": When were you first told that Lehman, in fact, was going to go bankrupt?


FERGUSON: After the fact? Wow. OK. And what was your reaction when you learned of it?

LAGARDE: Holy cow!

BITTERMANN: For her involvement back then and in the subsequent European debt problems. She has won the confidence of many of the leaders of the planet, some of whom now support her candidacy for director of the International Monetary Fund. A job at which, many in France believe, she would excel.

Christine Lagarde is really able, when people are around the table, like lawyers, you know? People that have the feeling that they are really important. She always manages to get consensus. And she doesn't stand in front of the others. She always builds a consensus.

BITTERMANN: Consensus building is no doubt a valuable skill at an organization like the International Monetary Fund, but the first consensus Lagarde is going to have to build there is one of the IMF's board of governors, for common agreement that they should once again turn to France for their director.

Jim Bittermann, CNN, Paris.


QUEST: All right. Not so fast, Mr. Bittermann. There are other candidates out there. The former Turkish minister says he is out of the race. He said he has not been and will not be a candidate. Good-bye to you.


The former South African finance minister, Trevor Manuel, has the backing of his current finance minister, Pravin Gordhan. No word from Mr. Manuel, who has-again is a giant in international economics for the way he stewarded the South African economy. But he's not European, in case you hadn't noticed. And that, of course, would break the rule-well, it would break the tradition.

Finally, Gordon Brown, the former British chancellor, and prime minister, speaking to CNN earlier in South Africa, funnily enough. He wouldn't address directly a potential candidacy, but he did set out what his agenda would be if he got it.


GORDON BROWN, FMR. BRITISH CHANCELLOR: I'm more interested, to be honest, in talking about the agenda for the future, than the in about personalities or candidates. I'm not really wanting to get into that. I think the agenda for the future is very important because we are moving out the of the, if you like, the crisis period, when we were having to deal with the situation, the IMF was, the international institutions were, the G20 was. Having to deal with the situation where we were trying to prevent a recession becoming a depression, that was a success, to prevent there being a 1930s depression.

But we have not got new challenges. And really people must focus on this as they consider the future of the international institutions. One is financial stability, which is a global problem. Another is the lack of growth in certain areas and very, very high levels of youth unemployment, which really do worry me. Egypt, Tunisia, right across the Middle East and North Africa, this is a festering problem of economic discontent.


QUEST: Gordon Brown on the issues and he wouldn't enjoy the support, we believe, of the British prime minister or the British government, so that could scupper his attempts. Now, world leaders there will have plenty of opportunity to discuss the replacement next week. You don't often get a week like this in the international calendar, that will allow so much discussion.

First of all, you have President Obama, who is visiting Ireland, and a state visit to the United Kingdom. So lots of opportunity for a Obama and David Cameron and others to talk about it. The G8, well, then you have got, also the OECD ministerial meeting that takes place in Paris. Then you've got the G8 in Deauville, in France, and that goes-so in a week, which is chock-a-block with meetings, they will be all the right people in the right place to create a stitch up.

CNN John Defterios, is-oh, come on, John.


JOHN DEFTERIOS, CNN SENIOR INTERNATIONAL CORRESPONDENT: We can get down to business very quickly, is the way we can look at it, right?

I'm calling it the IMF perfect storm. And I'll tell you why. Let's see if we can take our pilot graphic here. This is one reason why I think this is going to move this process along rather quickly. You do need face time with each other. It is not a phone-to-phone conversation, but face- to-face conversation. You have two job openings, Richard. You do have the first job as managing director and then at the end of August, if we stick to that timetable for John Lipsky, he leaves the job. So theoretically this could work out to be a very easy equation to follow-and solve. That is you have a European take the top slot and you can have an emerging market person take the second slot.

QUEST: Right.

DEFTERIOS: And let's give credit where credit is due for Dominique Strauss-Kahn. It is much more difficult to get this job because they have to have a very good resume. He elevated the job the last few years, in that role. And then the European argument that has been put forward by Mr. Barroso, on the program, and Mr. Von Rompuy, and that is we'd like to have a European because we have to get through the debt crisis because it is quite severe. The Greeks are downgraded again today.

QUEST: Correct.

DEFTERIOS: We have a record on the 10-year bond, of 16.75 percent.

QUEST: John.

DEFTERIOS: Now you can interrupt.


QUEST: The train is leaving the station, isn't it?

DEFTERIOS: It is leaving the station.

QUEST: And who is on board, who is driving it?

DEFTERIOS: Well, I think we should not downplay the fact that Mrs. Lagarde has very good relations with Chancellor Merkel, and she is driving the boat, right now-or the captain, of the boat in Europe. The other thing we should note here. A the OECD meeting, that is taking place in Paris.

QUEST: Right.

DEFTERIOS: Six of the members outside the G8 are going to be there. So this is going to move, I think, very, very quickly, in that time frame, despite what we are hearing from the emerging market countries.

QUEST: Is Tim Geithner, he says, we are broadly consulting with emerging markets. But then he says, we're looking for someone with a requisite, deep experience, leadership qualities, who can come out with broad support among the fund's membership.

DEFTERIOS: And she's got very good relations on one side of the Atlantic. And I go back to this point, with her relations with Mr. Merkel. The first female German chancellor, and perhaps, the first female managing director of the IMF.

QUEST: Many thanks. You are being far more circumspect than myself.



QUEST: (UNINTELLIGIBLE) John and myself,

John has written an excellent-

DEFTERIOS: The first time you have said excellent about one of my blogs. I appreciate that.

QUEST: They're always good. They're always good. I just refuse to-

DEFTERIOS: This is an "excellent" message (ph).

QUEST: Well, I just refused to give you the satisfaction.


Anyway, it is an op-ed on Strauss-Kahn's job. John says those who cannot tick all the boxes, need not apply. Log on to Facebook page, read it and submit your name and tell us what qualities either you think you have, to run the IMF. Or the crucial quality, that really needs to be done. See it at Best one-best one will win a mug.

Strauss-Kahn's lawyers are returning to court. We'll have pictures from Rikers Island, that is where they are expecting to see him a few hours' time, if all goes well in the bell.



QUEST: Hello, I'm Richard Quest. Welcome back.

Lawyers are returning to court before Dominique Strauss-Kahn walks out of jail on bail. These are live pictures of New York's Rikers Island, where the former head of the IMF is being held, accused, of course, of sexual assault and attempted rape.

The judge has, apparently, received both a cash payment and the insurance bond. The court scheduled another hearing any minute now to discuss "additional parameters," is the phrase that's being used. Those additional parameters before he is released.

Let's try and get some insight into what those parameters might be. Richard Roth has been following the events in New York. Richard's with me, now. Any idea what "additional parameters" means, Richard?

RICHARD ROTH, CNN SENIOR UN CORRESPONDENT: Well, based upon what the -- what we do know, the judge having signed the $1 million cash bail provision and the $5 million in property and other collateral, that leaves the travel documents which, presumably, have been easily handed over as requested by the court.

That leaves the terms of the home detention, the house arrest, the electronic monitoring provision. That could be what they're indeed discussing in a court hearing that is supposed to begin right now.

For Dominique Strauss-Kahn, the wait probably is interminable. There aren't exactly many high finance people sitting in cells at Rikers Island. And he had been in isolation there.

He was dressed better for this Thursday court hearing, blowing a kiss to his wife. And his wife and daughter left the court with no comment.

There could be an issue about the -- where he was going to stay. Reportedly by some media outlets, it was going to be an east side Manhattan apartment building. Some tenants are saying they didn't want him there.

Under the provisions of the arraignment with the judge, there was going to be a guard, there was going to be electronic monitoring, a whole set of provisions, done by the security company that reportedly had done all of this for Bernie Madoff's home arrest status.

So, it's probably about where is he going to stay and to make sure he doesn't flee.

QUEST: Richard, there is a veritable -- I mean, your comment there about how some tenants don't want him and the co-ops and condos and all these things -- there's a veritable circus coming into town, here, isn't there?

ROTH: Yes, there is. And the Madoff circus, which I fortunately didn't have to stand outside in the very cold weather for, was there.

This brings in more international journalists. The heavy French media contingent that I saw at court yesterday and maybe today. There will be a circus atmosphere, but if this trial -- if there is indeed a trial, it's a year away, the circus tends to go, leave town, and the tent moves --

QUEST: Right.

ROTH: -- and sometimes comes back. It becomes more of the lawyers digging up information.

QUEST: OK, but how realistic is it? Because as I read the documents from the court, this idea that he will stay indoors for perhaps up to a year or how many months. That's in itself -- it may be -- it may be provisions to get him bail, but it's almost cruel and unusual in its own right.

ROTH: I know. Maybe there'll be some softening after six months if he really was kept in these conditions. I mean, I don't want to make a bad analogy. We've seen overseas someone was able to stay in a compound for years.

It's not going to be a one-room studio small apartment, the type I might live in. There's going to be a series of rooms and it's Manhattan. Look, he'll be glad he's not sitting in Rikers Island, if that is indeed the -- what happens here.

QUEST: Richard, well, you and I over the months ahead I have little doubt we'll talk a great deal more about this. Have a good weekend. Richard Roth in New York.

Facing dual price turbulence and an airline is also trying to fly the environmental path. An exclusive interview with Lufthansa's new chief executive on going green to keep down costs.


QUEST: Lufthansa has a new chief executive and a new plan to improve fuel efficiency. The airline announced this week it's using less fuel per passenger than ever before and introducing more efficient aircraft to its fleet.

The new chief of the German flag carrier is Christoph Franz, and he gave me an exclusive first interview. On the line from Berlin, I asked him if trying to be eco-friendly really meant cutting costs.


CHRISTOPH FRANZ, CEO, LUFTHANSA: We are always looking for improving efficiency, cutting costs, maintaining our financial balance. That's, I think, the normal part of the business.

But we are also aware that being accepted as a means of transport which is also taking up its environmental responsibility towards climate change, towards noise emission, et cetera, these are elements which help to create customer loyalty.

QUEST: Let's talk about what you want to do with the Lufthansa group. You have this disparate group of airlines that are working extremely well, and you did -- and your predecessor did a remarkable job of integrating it into what is one of the most powerful groups -- airline groups in the world.

What do you want to do with Swiss, Austrian, JetBlue, BMI, all the different bits of the Lufthansa group?

FRANZ: I think the process of integrating this into a high-performing group is still underway. The first important step was to make the change of ownership happen, and the second step, obviously, is to create synergies by a common approach to the markets by providing seamless travel for our customers within the group.

This needs substantial changes in our IT system, for example. It needs changes with regards to the question, do we use one or more than one loyalty program in the group?

QUEST: But do you envision adding any more to the group before 2014?

FRANZ: I could imagine that there are changes happening, but our prime focus at this point in time, given also the difficult environment for aviation, particularly in Europe, we have to make sure that those companies who have joined recently are successfully turned around before we can extend our view of maybe additional companies joining the Lufthansa Airline group.

QUEST: Finally, let's just talk briefly. I mean, you are Lufthansa the airline itself, based in Germany, which is the fastest-growing of the EU economies. So, a very strong position for the largest part of the Lufthansa group. I assume we will see that in your results.

FRANZ: We have indicated and we maintain this forecast that we hopefully will be able to improve our operating results of the Lufthansa group despite the rise in fuel prices, despite the crisis in North Africa, in the Middle East, and also with regard to our Japanese operations, which are very substantial.

But we see that there is a substantial demand towards other long-haul destinations, like the Americas, and we also see a strong growth in demand in Europe. But it comes at a price, and this price is low yield, particularly here in Europe.

So we have to struggle, but we are very confident that we will nevertheless make a step forward also in the year 2011.


QUEST: That's the chief executive of Lufthansa, Christoph Franz, who also, incidentally, said to me that they were going to be introducing fully-flat beds on their new 747-8 inter-continentals when they're introduced next year.

Which, of course, is something that regular passengers on Lufthansa, business passengers, of course, have been looking forward to.

Now, finally --


QUEST: That's how the stocks are trading in New York, just off 41 points, a gloomy outlook for several major retailers, which all took the edge off the market, 12,564. Linkedin, which listed yesterday as trading at $95 a share. A reminder --


QUEST: -- where you can tell me at CNN -- at, tell me your application to run the IMF. What would make you run the Fund and, more importantly, if you didn't actually, what is the single most important -- single most important attribute that somebody needs.

That is QUEST MEANS BUSINESS for tonight and, indeed, for this week. I'm Richard Quest in London. Whatever you're up to in the days ahead --


QUEST: -- I hope it's profitable. Thank you for being with us.


ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow here in the Sandton business district of Johannesburg.

Now, a huge chunk of China's business in Africa is done right here in South Africa. Last year, trade between the two countries totaled $20 billion US.

But with increased trade comes increased competition and, like many other places in the world, cheap Chinese imports are threatening the local textile industry, as Nkepile Mabuse now reports.


NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): At first glance, this rural village in KwaZulu-Natal near South Africa's east coast appears far removed from global events and their ramifications.


MABUSE: But the impact of China's growth is being felt even in this remote corner of Africa.

Cindy Mkhaliphi is one of many facing possible job cuts in South Africa's embattled clothing manufacturing industry. The only employed person in her family of seven, she makes $34 a week ironing clothes.

CINDY MKHALIPHI, FACTORY WORKER (through translator): "We earn very little," she tells me, "but at least I can buy a pack of maze meal, some chicken pieces, and a bus ticket. It's better than not earning anything at all."

MAPUSE: In a country with a staggering 36 percent unemployment rate, she's still one of the lucky ones. But that might not be for long.

ALEX LIU, FACTORY OWNER: They are not reaching the target we set.

MABUSE: Her boss, Alex Liu, says he's struggling to compete with Chinese imports. Ironically, he and about 45 or so members of the Chinese Chamber of Commerce and Industry, which he heads, came to South Africa a decade ago to explore its business opportunities. Now, he says, many of them are battling to stay afloat.

The South Africa government expects them to pay a machinist in a factory like this at least $68 per week. But he argues that some are not producing fast enough for him to make that money back.

LIU: Her target is at 70 pieces per hour, but if she's reaching her target --

MABUSE (on camera): She's doing 75 at the moment, yes.

LIU: Yes.


LIU: And another one, another you can see is 60, but she's only achieving 50, 35, 50, 35, 50, 40.

MABUSE: So you're argument is that they cannot be paid the same --

LIU: The same, yes.

MABUSE: -- minimum wage.

LIU: Yes.

MABUSE (voice-over): So, Liu and others pay workers less than half the minimum wage, saying they cannot give them more and remain in business.

LIU: Some of our members are really considering to close down here and then relocate their factories to other neighboring countries like Lesotho or Swaziland.

MABUSE (on camera): Where they can pay workers less.

LIU: Yes.

MABUSE (voice-over): In neighboring Lesotho, the minimum wage is $32 per week. In South Africa, manufacturers are either trimming their workforce or closing down.

MABUSE (on camera): According to the clothing and textile workers union, in the last three years, more than 18,000 people lost their jobs in the sector. With employers like Liu calling for a lower minimum wage, the South African government finds itself in a situation where it's desperately trying to create jobs, but unable to guarantee what it considers decent pay.

ROB DAVIES, SOUTH AFRICAN MINISTER OF TRADE AND INDUSTRY: China is also a source of major opportunity.

MABUSE (voice-over): Trade and Industry minister Rob Davies says China may be shrinking the local clothing sector, but South Africa and the continent at large benefit from its huge mining investments.

DAVIES: China and the industrialization of China's what is propelling the mineral boom, and it's one of the major areas in which Africa is experiencing a growth surge.

MABUSE: A growth story of some major gains and significant losses, too. Nkepile Mabuse, CNN, KwaZulu-Natal, South Africa.


CURNOW: Let's take a look at some more numbers. Now, trade between South Africa and China increased by 43 percent in the past five years. South Africa imported $1 billion worth of Chinese textiles, and China has imported $6 billion worth of South African minerals and mineral products.

So, just how attractive is this mineral-rich continent to other foreign investors? We break down a new study on South Africa's growing appeal.


CURNOW: With an abundance of natural resources and a growing young population, many believe that Africa has a lot of potential. But who's investing and why? Well, a new Ernst & Young survey explores the attractiveness of doing business in Africa.

I recently sat down with their Africa head, Ajen Sita, to talk about the perceptions surrounding doing business on the continent.


AJEN SITA, CEO, ERNST & YOUNG AFRICA: The key findings we got was Africa's seen as an attractive investment destination. And we saw that in three categories.

One is Africans themselves, naturally, are very optimistic about the future of the continent, both short, medium, and long term, followed by other emerging markets of the world. And lastly, by the developed economies of the world.

Then, we looked at it relative to foreign direct investment, and that's where we saw a concerning trend. And the concerning trend there is, Africa only gets about four and a half percent of global foreign direct investment flows.

Given the optimism, the confidence in Africa and its potential, that four and a half percent is about $100 billion, is not enough.

CURNOW: It's negligible, isn't it?

SITA: It is negligible when we look at it relative to the other emerging markets of the world.

CURNOW: So, all of this optimism, basically you're saying, is hype.

SITA: Oh, I think there's real opportunity. What needs to happen, though, is Africa needs to be able to tell that story more effectively.

You know, there's an interesting expression in Africa. The hunter has a storyteller that the lion doesn't. And Africa is in the same position. It needs a storyteller.

It is filled with abundant competitive advantage, whether it's the billion people population, whether it's the natural resources, the agriculture stakes, which has an opportunity to provide food security for the rest of the world.

But we don't see enough of that story or enough of that proposition to the rest of the world.

CURNOW: So, when you polled 500 companies from around the world, what were the major concerns that, say, somebody in Africa had about doing business in Africa? And conversely, somebody sitting in London, perhaps?

SITA: Well, I think the biggest concern for any investor that's not on the confident -- continent is understanding how to navigate this large continent, 50-plus countries, different regulations. So, the level of understanding about the continent is really poor. That's a gap that we as an organization are trying to fold with research studies like this.

The other barriers to investment that these people told us about were primarily the level of political instability in the continent, the lack of infrastructure, the levels of corruption. These are the factors that worried foreign investors.

But what was interesting, these are the risks. But when you look at it relative to the rewards that are there for investment in Africa, it seems like the rewards to match the higher level of risk. So, we're getting better than average returns for the level of risk.

CURNOW: So, are you saying that people, if they're not in now, have missed the boat? Or the chance is now?

SITA: I think the chance is now. There are really two opportunities here. When looked at from an emerging market point of view, Africa offers resources to fuel their own growth.

If you look at it from a developed economy perspective, Africa offers a large consumer market to feed their products and services.

So, I think it's Africa's time now, as our survey says. Africa needs to tell that story and investors need to understand the opportunities and how to navigate that.

CURNOW: But that disconnect is still there. I mean, it's going to take a lot of work to tray and -- to try and bridge that. I mean, do you really think that there is going to be this sort of extraordinary growth and investment, particularly that's the optimism suggests might happen.

SITS: Well, the data is there to back it up already, when I say that 7 of the 10 fastest-growing economies of the world are in Africa.

CURNOW: But the investment is not there.

SITA: It's not following it at that level. That's the issue.


SITA: So, clearly it -- what we need to do is educate the world more. What we need is African governments to get together and articulate an Africa investment proposition. There's too much complexity, and I think that complexity needs to be simplified.

CURNOW: For Ernst & Young, working in Africa in 30 countries, what are the biggest challenges you face as a company? Is it skills?

SITA: The real issue, sometimes, is the challenge of visas and work permits and never getting the complexity of regulations to get people into countries.

CURNOW: But in terms of African skills, in terms of African accountants, is there something that you are concerned about, that there is not enough -- the education systems are not generating enough people who can be an accountant at Ernst & Young?

SITA: There's a significant shortage of chartered accountants. There are enormous programs at school levels, at university levels, to grow the numbers of qualified chartered accountants.

And these are people that are needed to -- if we're going to strengthen financial reporting, governance, ethical business practices in this country and all across the continent. So, investment in education is critical.


CURNOW: Ajen Sita, there, from Ernst & Young. Now, we're going to continue that discussion online. Go to

For now, though, let's check what's trending this week.

China plans to upgrade a major road in Zambia, which could increase trade with the country's Great Lakes neighbors. The state-owned Chinese Bank will lend Zambia $180 million to improve the route in Zambia's northern province.

Troubles continue for Zimbabwe's national air carrier after the country's aviation authority grounded Air Zimbabwe domestic flights.

This comes after the International Air Transport Association suspended the airline, forcing the cancellation of its popular Harare to London nonstop service.

Air Zimbabwe continues to battle unpaid debt and rising fuel costs to keep its aging fleet in the air.

That's it for this week's show. I'm Robyn Curnow here in Johannesburg. Thanks for watching.