Return to Transcripts main page


Phone Hacking Scandal; Facebook Teams Up With Skype

Aired July 6, 2011 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Deplorable and unacceptable, the first words from Rupert Murdoch on the U.K. phone hacking scandal. Tonight, the actor Hugh Grant tells me it is time to clean up the press.


HUGH GRANT, ACTOR: What we need is a big public inquiry in to all of the methods and the whole culture of tabloid press in the country.


And president of Tweets, in this hour Obama's first-ever Twitter town hall.

I'm Richard Quest. We have an hour together-oh, I mean business!

Good evening.

Rupert Murdoch, head of News Corp, is calling allegations of phone hackings at one of his newspapers, deplorable and unacceptable. Mr. Murdoch has been speaking out about the growing stench surrounding the lynchpin of his media empire, the "News Of The World". Tonight advertisers and political allies alike are deserting the tabloid in disgust.

Mr. Murdoch says his company, News International, must-"Our company must fully and proactively cooperate with the police in all investigations"

He went further, "We are committed to addressing these issues fully and have taken a number of important steps," prevent them happening again.

However, the head is standing by Rebekah Brooks, who is the News International executive at the center of the scandal. The furor prompted an emergency debate in the U.K. houses of parliament. Dan Rivers joins me now from West Minister.

Look, the gist, as I understand it is everybody says this is disgusting. It is awful. It is horrific. So, Dan, what are they going to do about it?

DAN RIVERS, CNN INTERNATIONAL CORRESPONDENT: Well, that is the million-dollar question. Are we looking at some sort of increased regulation for the press? There is, in this country, the Press Complaints Commission, but that has been variously described to me down here as a sort of paper tiger that is unable to do anything. It has no statutory powers to intervene in any way. It is paid for by the papers themselves. So, if anything it is the press regulating itself. It is just not working. And this is an example of that.

We have had this big three-hour emergency debate in the house of commons behind me. And all of the parties have been rushing to condemn News International and "News Of The World". It is such a massive shift in its fortunes, because all of this happened, they had, you know the were part of the political establishment, in a way. They claimed to win elections for parties, by who they backed, at the newspaper. Now, though, everyone is lining up to condemn them, including the Prime Minister David Cameron.


DAVID CAMERON, PRIME MINISTER OF GREAT BRITAIN: What this government is doing it making sure that the fact that the public, and I, feel so appalled by what has happened. Murder victims, terrorists victims, who have had their phones hacked, is quite disgraceful. That is why it is important there is a full police investigation with all the powers that they need. That is why it is important. We have those inquiries to get to the bottom of what went wrong and the lessons that need to be learned. And

that is why we also need to inquire how we improve the ethics and morals of the press in this country and make sure they improve in the future. That is what needs to be done. That is what this government is doing. And we don't have to take lectures from him about it.


RIVERS: The leader of the opposition, Ed Miliband, went further, though, calling for Rebekah Brooks, the chief executive of News International, to consider her position. It was quite notable that David Cameron didn't go far. He is good friends with Rebekah Brooks; who is embattled now, clinging on to her job. She still enjoys the confidence of Rupert Murdoch, her boss. But how long can that continue when companies are pulling their advertising from the "News Of The World", Richard?

QUEST: Dan Rivers, who is at Westminster this evening. Dan, many thanks.

Now, the publications concerned, well, first of all, you have the "News Of The World". But there is a lot more to Rupert Murdoch's U.K. empire. For example, one of the top selling quality papers, "The Times" is also News Corp. "The Sunday Times", which is the top selling newspaper on Sunday's quality newspapers. And Britain's best-selling daily newspaper is "The Sun". So, with all this vast stable of titles, you can see what you have here is effectively a money making machine on a grand scale. How significant is it then, if this title, well, gets hit hard in the advertising.

Jim Boulden is here, with that side of what the advertisers have been saying. You know, Ford and what did. What about the rest?

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Well, let's look at some that have decided not yet to pull ads. T-Mobile, for one, has said it is reviewing the decision but so far it has not changing its relationship with the "News Of The World" for now; also not changing relationship, EasyJet, Orange, Tesco, and Procter & Gamble.

It is a different word from some of the banks. This is Halifax Bank's last ad in "News Of The World". Now it is owned by Lloyd's Group and Lloyd's has said that it will cancel its ad in this Sunday's newspaper. Also, Virgin Holidays, this paper is full of holidays. Virgin Holidays has said it will pull its classified ads in this Sunday's paper; also, not placing ads, the Co-op Bank, Renault, Vauxhall and Mitsubishi.

Now, as Richard said, Ford U.K. was the first to cancel its ad. And that came within 24 hours of these recent accusations. Now even in this age of social media, one analyst told me that was very quick.


STEVE CHELIOTIS, THE CENTRE FOR BRAND ANALYSIS: Well, it is actually very unusual for advertiser to pull their advertising form something. Sometimes they might make a statement, saying they disagree with the performance, or the actions of the brand they are involved with, whether it is a personality, a place, an organization. But they really, actually pulled their sponsorship or pulled their advertising. So, I think that alone, is an indication of the severity of this story and the impact that it might have on both "News Of The World" and News International, more generally.


BOULDEN: Now that is advertisers. Of course, these papers sell, millions and millions of people read them every Sunday. So we asked a few people if they are going to stop buying "News Of The World" or any of the Murdoch newspapers.


UNIDENTIFIED MALE: I think it is pretty important, but the allegations are only allegations aren't they, until they are proven. Yet no one can really say, can they? So, I think that, you know, my daily reading would not be really be affected by it right now.

UNIDENTIFIED MALE: That is not right, is it? But that wouldn't stop me reading the papers.

UNIDENTIFIED MALE: Those people could loose their jobs, you know? So, because I say it is well over, I think there is a limit beyond which you shouldn't go and I think they did.

UNIDENTIFIED MALE: I probably would never buy the "News Of The World" unless it had a groundbreaking story. Because what they did was massively unethical and not right. And I think they should honestly be prosecuted as far as they possibly can be.

UNIDENTIFIED MALE: I guess the people who don't buy it don't buy it already. And it won't really affect that. I think the people who buy it will keep on buying it whatever.

UNIDENTIFIED MALE: People forget about it in time. But I'm thinking the short-term it is going to affect advertising, it is going to affect readership. That's just my opinion, though.


BOULDEN: So this newspaper, the "News Of The World" on Sunday gets some 2.6 million in circulation. But they say 7.5 million readers get this, read this newspaper every Sunday.

Now, we're talking about ads being taken out of the "News Of The World", but interestingly, I've talked to a number of people and they say, well, those ads can be move to "The Sunday Times", so it is not necessarily going to harm News International in the long term. And one person said to me, look, frankly, these advertisers need this mass audience from these big mass newspapers. So they don't see any long-term damage for News International, Richard.

QUEST: Jim, many thanks, indeed.

Let's talk about this aspect of the advertising. And few executives understand the advertisers like Sir Martin Sorrel, the chief exec of WPP.

Martin, is on the line now from Sun Valley, in Idaho.

Martin, would you, if you were advising some of your clients, tell them it is time to pull or temporarily pull their adverts from the "News Of The World"?

MARTIN SORREL, CEO, WPP: Well, obviously, Richard, I wish I did know as much as you credit me with knowing. But, obviously, this is having an impact amongst consumers and I think a number of advertisers are responding to the reaction that they have had from their Google connections, or their Facebook, or Twitter feeds. And they are reacting to that.

It does seem that there is a little bit of a frenzy being whipped up, certainly in the short-term, in reaction to these events. And we really don't know, to be fair, we don't know what exactly happened, who was responsible for it. And clearly there will be a full investigation both within side New International and outside, of the events.

So I think it is a little bit premature for some of this action, but it is being driven by the catalyst of social media. We see the impact of social media not just in this situation, but in other situations, too. They don't create a change, but they certainly act as a catalyst and accelerate it.

And on the question about advice, you (AUDIO GAP). Our clients, and clients in general, will respond to the reaction from their customers or their consumers. And I think that is what we are seeing.

QUEST: Right.

SORREL: As to the long-term impact, that is, you have to look at that obviously over a longer period of time. And we'll see whether it has any longer term impact or not.

QUEST: Let's just talk about that aspect, which is fascinating. Because what is happening now and throughout your industry and indeed our industry and most industries the affect of this social media, to escalate and to accelerate reactions is what is now driving decisions?

SORREL: Yes, and I think it is power to the people. Certainly, consumer reaction is now extremely fast; faster than any of us could countenance a few years ago. I mean, the fundamental point is, if for example, revolution in Tunisia, or in Syria, or Egypt, is not caused by new media. It is wrong to call these the Facebook revolution. They have been accelerated by them and things move at light speed, virtually at light speed now, and we are seeing that in the context of this current controversy over the "News Of The World".

But, again, to be fair we don't know what the facts are as yet. And we are not sure as to what exactly happened. And we have to wait and see the result of that. But in the short term, many clients are responding to the pressure that is exerted by these social networks.

QUEST: Right, Martin, many thanks indeed. Sir Martin Sorrel joining us on the line.

SORREL: Thank you.

QUEST: Good to talk to you, as always.

"News Of The World" is Britain's biggest selling tabloid newspaper and I've already showed you some of the titles, well, the four major titles that there are in the U.K. Join me at the super screen and you will see the actual size and scale of the Murdoch mega media empire.

Let's begin in Mr. Murdoch's home country of birth, it will become clear, as we move forward. More than 150 brands, he has "The Australian", which is a national newspaper. First national Australian newspaper. "The Courier Mail", "The Sunday Mail", a lot of other things like the Brisbane, in Adelaide, "Adelaide Now". Lots of newspapers around there. He also has some sporting teams. He has the Brisbane Broncos, a share in that. And a share in the national rugby franchises, too.

So, Australia was the leaping ground, through which he then went elsewhere. And it was to the U.K., that he really made his big international play. Four national newspapers that we just shown you, the "News Of The World", the "Sunday Times", "The Times" and "The Sun"; 37 percent of the market share. But this BSkyB is interesting. BSkyB, he has a minority ownership in Sky News and BSkyB, which is not-well, I say minority, nearly 30 percent. But he is now about to buy the entire entity if the British government allows that to go ahead.

In Europe, a bit more of a fickle fail (ph). Sky Italia, a majority stake in FOX Turkey, all of TV 5 Terrestrial in Riga, in Latvia.

It is in the United States, where you really need to think about what is happening. First of all, 20th Century Fox, the movie company, a power house of profits for him. Then the FOX TV network, including FOX News Channel. Now, to get the FOX TV network, Murdoch actually adopted U.S. citizenship, because you have to be a U.S. citizen to own a terrestrial television network. In the newspapers, "The Wall Street Journal" is his last big buy, and a profitable good one at that; and "The New York Post", which he has owned for some years.

So, putting it together, you get an idea of this vast empire across the world. Shares in News Corp went down sharply in New York. Here is how they are trading right now. Fall of 5 percent. Shareholders are nervous about the impact of the scandal and the effect it will have to get control of BSkyB, as I mentioned a moment ago. Shares down 2 percent in London.


After the break, later in the program, Hugh Grant, who says he has been the victim of phone hacking and he is speaking out on the scandal. QUEST MEANS BUSINESS.

Now from one social network to another Mark Zuckerberg promised us awesome. So how awesome was Facebook's new announcement? We'll explain after the break.


QUEST: President Obama, at this hour, is facing a town hall meeting like never before. The president is taking question via Twitter. Users have been asking the president about jobs and the economy using the hash tag, #askobama. Now, many of the big names are also getting involved. Top Republicans, like Mitt Romney and John Boehner have Tweeted to call the president out on his economic policies.

Obama is replying verbally, as you can see. He is also taking questions in person; 140 guests there. Guests? Yes, one guest for every character you can fit on Twitter. And 27 percent of the questions are about jobs. Not Steve Jobs, jobs as in jobs in the economy.

Mark Zuckerberg promised it would be awesome. Well, Facebook has announced it is tying up with Skype, for a new video chat service. Maggie Lake is in New York.

Maggie, does this rise to your barometer of awesomeness?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Not my barometer, Richard. But maybe some people's and here is why. They were dropping that word quite a bit at the press conference, too. And they were quite enthusiastic. The big sort of piece of this announcement, the big news coming out that there is a partnership with Skype where now, within your Facebook account, you can video chat using Skype. And Mark Zuckerberg and his team that were doing demos, during this presser-which was closed to most of us, even though we had an editorial presence there, not our cameras, we should point out-was how this was. That you didn't have to have individual Skype accounts. That even people without a lot of technical expertise, like a grandfather he bumped into on the way to work in the morning, could sort of instantaneously Skype. Listen to what he had to say.


MARK ZUCKERBERG, CEO, FACEBOOK: It is not the case, like with traditional Skype, where those people have to have downloaded Skype before hand. So we think that this is awesome because we are using the best technology that is out there for doing video chat with the best social infrastructure that is out there in order to create some really cook new scenarios. So, turns out that that dude, who I walk by, will actually get to video chat with his grandson. So, that's cool.


LAKE: And that is going to be very appealing for people who either don't have an account, who aren't very-don't have a lot of expertise, who can sort of be bothered to figure it out. It makes it super easy. And I don't think that is something we can dismiss.

However, here is the problem. You can't group video chat. And I think a lot of people are disappointed about that. Because Google Plus, which is Google's most serious attempt to take on Facebook in the social networking world, has a feature called Hang (ph), which lets you video chat with 10 of your friends. And it has been getting a lot, a lot of positive, good buzz. People really excited about it. You can't do that yet. Anyway Zuckerberg did hint at the fact that they might have a service like that. But it wasn't clear that it would be free.

QUEST: All right.

LAKE: It might be premium. So, I think there is going to be, in the tech world, among some, some disappointment that you don't have a feature that sort of goes head to head right with that Google Plus.

QUEST: And Skype is now, or will be, owned by Microsoft. Microsoft is now in bed with Facebook. This is-Maggie, this is getting complicated.

LAKE: It is getting complicated. I don't know, maybe they finally did something right. We'll see. We don't know the financials, Richard, for that. But clearly people were critical for Microsoft. Said they over paid for Skype. If Skype is able to sort of get in with this platform with Facebook, especially if pay-for premium services, that could be a really nice source of revenue.


LAKE: It might be a decent move for Microsoft. But you're right. I mean, Microsoft is not competing in the social networking world, though. So maybe it makes a little bit of sense.

QUEST: I don't know. It seems to me, and I'm not plugging Skype, although I declare a conflict of interest, I do use it and use it frequently.

LAKE: Yes.

QUEST: But I have to say, it is not exactly the most complicated thing to use. I mean, of the great things of the world-you know?

LAKE: Well, I mean-

QUEST: Frankly.


QUEST: Facebook privacy issues are and settings are far more complicated than setting up Skype.

LAKE: Yes, well, this is the thing. But people don't want to leave an application to do something else. This is what it is all about now. You want it to happen all within the universe you are operating in. But interestingly, Richard, that while they were doing the live feed, on their Facebook page, everybody underneath commenting, was asking to get invited to Google Plus. And Mark Zuckerberg, getting a little testy during the press conference, when pressed about that; and he is participating in that, by the way, and has been checking out Google Plus. So you can see this is really going to gear up in this space anyway, to be Facebook versus Google. I mean, know what happened with mobile phones? Android just exploded. And you know Facebook is thinking about that.

QUEST: Beautifully, you would almost think we had planned this. Maggie Lake many thanks indeed, because I'm going to tell you the jostling at the top spot on phones. Google's Android software really outpacing the competition when it comes to smart phones.

Comscore Extend says it extended its market share lead. Increasing it by more than 5 percent-that is really impressive now-between February and May; almost 40 percent of smart phone users, 38 percent, 26 with Apple, RIM, that is of course, Blackberry, Research In Motion, at 24 percent. So, Android with its variety of machines and handset, now leading the way. They fell to a third, loosing more than a third of their market share.

Now, the markets. Let's try that again. The market-


Ah, that's better.

Up 29 points, we are just-we are tweetling (ph) around 12,600. And if I talk any longer, we might actually go above that, or not, as the case may be. The report that the European Union officials are pushing back against the main credit rating agencies. We'll talk about that in the future, of course.

As we continue today, Moody's and others, consider yourself warned. The guns have messages for the credit rating agency. We'll have that after the break.


QUEST: The issue of employment is a critical one. That was the declaration from Christine Lagarde in her first news conference as the new head of the IMF. In Washington Madam Lagarde stressed there is no time to waste as she confronts the challenges facing the fund, from jobs to the European debt crisis.


CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: You might be surprised that I am here so soon after my election. I though it was necessary to come back to D.C., very promptly, simply because there are many issues that need to be addressed. And those issues cannot wait for yet another summer holiday.

We are facing a turn around, which is very uneven, with countries leading the charge, and not those that were historically leading the charge. And others, advanced economies, that are lagging behind, in a way, given their status of development.


QUEST: Now, tonight, Europe is giving the rating agencies a stiff telling off and it may go further than talk. Jose Manuel Barroso, the commission president, has said there could be an anti-European bias. After Moody's downgraded Portuguese debt to junk status, Mr. Barroso, a former Portuguese prime minister, warned that European legislators would be looking at civil liability of rating agencies get it wrong when they judge the credit worthiness of euro countries.

He also told reporters Europe wants to get away from its reliance on a mainly U.S.-based rating company situation.


JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN UNION COMMISSION: Portugal's fulfillment of the conditions attached to the adjustment program will be assessed on a quarterly basis by the European Commission, the ECB, and IMF. In this context, and the absence of new facts on the Portuguese economy that could justify a new assessment, yesterday's decisions by one rating agency do not provide for more clarity. They rather another speculative element to the situation.


QUEST: Germany's Finance Minister Wolfgang Schauble was more blunt. He wants to break the part of the ratings agencies.


Join me in the library and you will see the situation. Portugal's downgrade sparked more than political anger. There was reaction in the bond markets. Portugal's 10-year yields, they were up roughly 12 percent for the first time, on Tuesday's downgrade. Portugal's bonds are now seen as dropping out of the main major bond indices. The markets eyeing possible further downgrades by Fitch. Portugal is now turning into the head of the storm. We have Greece with its refinancing debt issues, but now Portugal, perhaps, is also being targeted. France and Spain and Germany are big holders of Portuguese bonds.

The banks on Greece, have been meeting in France. Now they are trying to retune that private sector deal to rollover debt. The deal has to pass muster with the ratings agencies, without being labeled a default. It was held at the BNP Paribas Paris headquarters, which of course, is pretty much stuffed to the gills with Greek debt.

As for the new finance minister of France, it was a fact not wasted on his minister. Francois Baroin says Eurozone governments will take all necessary measures to prevent Greece from defaulting. The Greek package will be ready by September, he says. France's finance minister also supports Portugal following Moody's downgrade.

Uncertainty over the long-running debt crisis probably won't be enough to keep the European Central Bank from hiking its key lending rate. Many economists are predicting that inflation worries will push the ECB President Trichet to raise rates for the second time this year. We'll be watching that, along with the Bank of England, both due on Thursday.

Despite fears of an economic slowdown China raised rates for the third time this year. More proof Beijing is determined to tame inflation.

QUEST MEANS BUSINESS, when we come back, Hugh Grant on the press freedoms and the pieces (ph).



QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN and on this network the news always comes first.


QUEST: The actor Hugh Grant is calling for a full public inquiry into the tabloid phone hacking scandal and is launching a campaign tonight at the British House of Lords, which is called, "Hacked Off". Hugh Grant is himself a victim of phone hacking by the snoops. I joined him earlier and asked him why, even though he had been a victim of hacking, he is sticking his head above the parapet.


HUGH GRANT, ACTOR: It began with just a personal grievance, because I was a victim of phone hacking. And then I had this extraordinary piece of luck where I ran into an ex-features editor from the "News Of The World", itself. And there was an unlikely scenario where my car broke down, it is a long story.

But anyway he started boasting about hacking me, hacking everyone, all the dirty tricks of the "News Of The World". Their sinister relationship with the metropolitan police, their relationship with the prime minister, and I thought it was all both fascinating and utterly repulsive. And so subsequently I went back to see him, you know, from the pub in Dover. I dropped in for a pint and a chat. And bugged him, I bugged him back. I was wearing a wire and got him talking all the stuff again. And I published it all in a British paper, "The New Statesman".

And that was the beginning of my sort obsession with this, and my outrage. Because, you know, it is one thing for there to be a very bad newspaper in the country, but when you start to realize it is not one, it is all our tabloids, who have been shockingly out of control for a long time. And when you realize how much collusion there has been from the police and how much collusion there has been from our lawmakers, from our government, who need these tabloids, especially the Murdoch press, to get elected, you start to think, I'm not proud of my country anymore. This is not the democracy I thought I was proud of.

QUEST: What do you now want from the authorities? You said you have no confidence in an investigation by News International or News Corp. I suspect you don't have a huge amount of confidence in the investigation by the metropolitan police. So what is it you now want?

GRANT: Well, the old police investigation is now widely regarded as having been a farce. You know, they dragged their feet. They were in the pocket of Murdoch. There is a new police investigation, which I have to say looks a little more vigorous. They came to see me. There is a criminal-a number of criminal cases going on against people at "News Of The World". It may center on senior executives. But it won't be enough. What we need is a big public inquiry into all the methods and into the whole culture tabloid press in this country. That is one thing.

And people can vote, very much, with their wallets. You know, they just don't have to buy these papers, especially the "News Of The World". And advertisers have to look themselves very hard in the mirror and say, do we want to be advertising in papers like "News Of The World"?

QUEST: Ford was the first company to come out and say they were withdrawing their advertising.

GRANT: Yeah.

QUEST: All the other advertisers, and I've got an entire list I can give you, they basically, they are still dancing around the question.

GRANT: Yeah, yeah.

QUEST: Well, we're looking at it. We're waiting for it. We're thinking about it. We may do it. What would you urge those advertisers to do?

GRANT: I think to do the right thing. If you look on the Internet there has been an enormous wave of goodwill towards Ford for having the courage, the spine, and the conscience to do what is right. And I think those other companies would enjoy a similar wave of goodwill if they did the same.

QUEST: They are just being weak at the moment? Or are they waiting to see which way the wind blows?

GRANT: I think that rather like the government, they are hoping to keep the whole slightly in the long grass. Maybe some other big news event will come up and, you know, the pressure will die down. That is why the job of unlikely people like me to keep the pressure up all the time. Because it is not going to come from the government and it is not really going to come from the opposition, who have a-they're squirming at them, because they like to have a cozy relationship with the Murdoch press as well. It is not going to come from politicians, it is certainly, not much, going to come from the police. So it is left to, as I say, a few unlikely souls, lie myself, who will be slaughtered for what we're doing.


QUEST: Yes, you will be won't you?


QUEST: You are expecting the full wrath of tabloid journalism against you?


QUEST: Even with all that that might imply for you?

GRANT: Yes. Yes, that will happen. In two forms, they'll dig up more dirt. And it is never difficult, especially with me. They'll--

QUEST: Which makes it even more interesting, that you put your head above the parapet.

GRANT: I feel strongly about it. You know, I feel really strongly and I think this moment, where the British public, and now, an international public has seen just how (EXPLETIVE DELETED) these people are, is the moment when I'm hoping more people will come out of their trench and say, this has got to stop.


QUEST: Hugh Grant talking to me earlier today.

In the last hour we have had a statement from Dominique Strauss-Kahn's attorneys, regarding the sexual abuse trial facing Mr. Strauss-Kahn. They confirmed the defense team had a productive discussion with prosecutors as the case teeters on the brink of collapse.


UNIDENTIFIED MALE: We had a constructive meeting. That is all we are gong to say. We are not going take any questions. We had a constructive meeting and we appreciate all of you coming down, but there is nothing more we can say.


QUEST: A constructive meeting is what they say, bearing in mind, there are two potential options at the moment-well, several options-but, one, dismissal of the charges, two, a plea bargain to, on a misdemeanor count, and three, everybody still goes to a full trial. Constructive meeting.

Trading in the wing for the ring. Tonight, a high-flying pilot shows us how he turned his hand to jewelry; it's "Breaking The Mold" of bling, next.


QUEST: Turning fake diamonds into real gold and I don't mean alchemy. It is the second career of Scott Thompson, the chief exec of the designer jewelry maker Carat. This week on "Breaking The Mold", the one-time pilot talks about why he dropped a high-flying career in one area to start another in an unrelated field. Thompson says it is all about believing in fantasy.


SCOTT THOMPSON, CEO, CARAT JEWELRY: Fantasy is the new reality. The jewelry itself, obviously, is fantasy as well. We are not selling reality. For a lot of people the reality is far too expensive.

You know costume jewelry is often sort of known but not talked about. It is all about the bling-bling and it has always been like that. If you ask any of my friends at the time, when I told them my plan, they told me I was pretty much crazy for thinking about doing such a thing. If it was fine jewelry, sure. It was cheap jewelry, but working specifically with synthetic stones, they though nobody was going to touch it.

A woman walking into a room, and I thought, wow she has got a great pair of earrings on. Right? And she then sits next to me at dinner and I looked and they looked terrible. And I thought to myself, if I can make it good from afar and good close up, then we've really got a winning business.

The market seemed very sort of divided between very cheap, and very expensive. And I think at the end of the day we saw a gap in the middle of the market. I'm a bit more tongue in cheek. I don't take it too seriously. And I think that is behind our business as well. I mean, fine jewelry, a very expensive realms of the market, it is very serious jewelry. You have to have a very serious bank account to play in that space.

Well, I'm like every little boy. Most boys, I wanted to be like my dad. He was a pilot and so was my grandfather and most of my uncles. I got an entrepreneurial bug from my mother, that constantly nagged at me. That was probably what sort of made me break away from flying airplanes. I did love flying airplanes and when I get the chance I still do. But I enjoy the other challenges to do with business. I suppose the highs and the lows. I'm a high-low junkie.

I was just trying to throw a bit more color in here. You know, it is very yellow, and champagne?

When it come to entrepreneurs I think sometimes they have to ignore the noise around them. Risk doesn't seem like a factor a lot of the time. It is about the idea, the passion of actually achieving something that may seem quite impossible at the time. So it is almost like theater. It is like stage. We are producing a constant movie. But I think that is a lot to do with retailing now days. If you understand that you are creating fantasy. That is something that gets me excited at the end of the day.

I think most human beings, especially women, like things that sparkle. We are all magpies at the end of the day.


QUEST: Since it started in 2003, Carat has opened more than 20 stores worldwide. And has seven more planned by the end of the year.

Now, like most people, we like shiny things. We are all magpies, in the end of the day. Guillermo at the World Weather Center.

The only thing I want to sparkle this weekend, sir, is the weather round about-I'll let you have a bit of leeway, Italy and Florence where I'll be spending the weekend.


QUEST: It used to take years to get close to the president. These days it takes 140 characters, up to speed with the commander-in-Tweet, after this break.


QUEST: President Obama has been answering questions from the public on a live Tweeter. Twitter users are using the hash tag #askObama to put their questions to the president. And plenty of questions about the state of the U.S. economy.

If you come over here you will see the sort of thing we have been getting. Lots of-we have to be careful (UNINTELLIGIBLE). AskObama, uh, you get the idea. Readers voted, the U.S. needs to foster tech innovation. Why should the government guarantee the loans of people who will major in a useless thing like art history and sociology?

What should have Obama Tweeted with at first? These sort of questions. Lots and lots: When will Obama put an end to the security status of the TSA? You get the idea.

Nice that we design iPads in the U.S., now we need to manufacture iPads in the U.S.

You get the idea. A variety, hundreds and hundreds, thousands, of questions.

And look at this. You see, you get some questions from various political bodies. The GOP, Grand Ol' Party, the Republican, there also getting in. Along with lots of politicians, I can see. And some of my colleagues.

Dan Lothian is with me at the moment.

For goodness sake, Dan, how much of a gimmick is this?


DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, look, I mean, any time that the White House puts on an event like this, that is very controlled, where they can really focus on one issue. And this one being, you know, essentially jobs and the economy, then some people will call it a gimmick. But they'll also say, hey, listen it is a gimmick anytime the president goes and tours a factory, or a gimmick that anytime the president goes out and has any kind of backyard gathering, where he is answering questions from voters across the country.

So, some people may look at it as a gimmick, but the White House sees this as an opportunity for the president to really focus on his message, but also take a look at the audience here. We are talking Twitter, which typically skews towards younger voters. This is a key group that helped get the president elected in 2008. A lot of them have not been happy with how the administration has been going over the last two and a half years. So it will be a critical group for the re-election campaign, for the president to reach out to, if he wins in 2012.

QUEST: Dan, the debt ceiling remains the number one issue in many ways. And reaction to some of these questions, he says, he's not in favor of constitutional this, or that, but he still hopes to get it. Is there a feeling yet, at the White House and in Washington, of panic on this?

LOTHIAN: Well, look, I don't think that you hear panic. But there certainly is concern that this needs to get done now. You are right, there are a lot of things that have been talked about over the last couple of weeks. One of them has been, that maybe perhaps there will be some sort of short term agreement. Whereby they will have six to eight months to really hammer out a much bigger package. That is something that yesterday the president said is really not on the table.

QUEST: Right.

LOTHIAN: The other issue you brought up is the Section IV of the 14th Amendment, whereby the president could essentially ignore what is going on up there on Capitol Hill, and just continue borrowing money. And again, the president, he didn't completely knock that down in one of the questions that was asked this afternoon. But certainly he gave the impression that is not something that he would consider.

QUEST: All right.

LOTHIAN: So, really it comes down to getting this deal done. And there is a sense of urgency here at the White House because, as they have pointed out, if you are not able to borrow money it would be catastrophic not only for the overall economy, but set back some of the progress that has already been made.

QUEST: Finally, I don't know whether you Tweet-I'm going up and down the Twitter list and I don't know whether you have Tweeted a question. Dan, if you had to Tweet a question what would it be? Have you been finally honing your 140 characters for the president?

LOTHIAN: Well, you know, the president did not stick to the 140 characters in his answers. So I don't know that I would have to stick to that. You know, that is a very good question. I don't know what I would ask the president, but perhaps it would be, you know, can I have a one-on- one interview with you to discuss a whole host of questions that I have for you. That is something that he has not yet agreed to do. So that is perhaps the question I would throw at him.

QUEST: And anyway, as one of our sterling White House team, you get sit there and raise your hand and ask the questions anyway. You get freebie.

LOTHIAN: That's right.

QUEST: As part of your job. Put your Twittering away.


QUEST: All right. Many thanks, indeed, Dan Lothian joining us from the White House.

Now, today is far from the most important date in the president's calendar. The most pressing questions are about this date: It is August 2, that we have alluded to, in that it is the debt ceiling, when the country would have start to have to make decisions on where to pay. Would it pay certain-or not pay, so it didn't default on debt.

Senators should be on the beach right now. They are at work, giving up Independence Day holiday to thrash out the deal. Neither side appears to be giving an inch.


SEN. HARRY REID, (D) SENATE MAJORITY LEADER: Will we be the kind of country that protects tax breaks and give aways for the richest people and corporations, while sacrificing senior and the middle class? That is the America my Republican colleagues have proposed. Those priorities are simply backwards.

SEN. MITCH MCCONNELL, (R) MINORITY LEADER: We don't think it is absolutist to oppose more stimulus spending. We don't think it is maximalist to oppose $100s of billions of tax hikes in the middle of a job crisis. We have a better term for it, common sense.


QUEST: Maximalist, minimalist, common sense, you know it must be the politics in Washington.

This is the way the markets are reacting. Look at that, since you and I started talking earlier this evening, we have had a bit of a rally going on. We are now over 12,600, comfortably over it, 12,628. It is a gain of about 0.5 a percent, which coming after the July the Fourth holiday, and bearing in mind the worries there are over the debt ceiling, it is somewhat remarkable.

We'll have the "Profitable Moment" after the break.


QUEST: These are the newspapers that form the backbone of Rupert Murdoch's empire, certainly, in the U.K. "The Sun", Britain's best-selling daily newspaper; "The Times", the top selling quality newspaper, "The Sunday Times", the biggest selling quality Sunday newspaper in Britain. And this one, the "News Of The World", the newspaper that is behind the current scandal. Here in the U.K., the phone hacking allegations from the "News Of The World" have been a familiar fixture for many years. But until now it is a tabloid story scandal, salacious details of celebrities, footballers, members of parliament, all grubby, somewhere inside, taken by cloak and dagger. Controversial yes, far from earth shattering, but the case has moved on to a completely different level.

It has gone beyond water cooler gossip, or even the ethics of journalism. It has become a fundamental question of civil liberties in this country. Something about the latest allegations of hacking dead girl's phones and parents of those killed in bomb blasts have struck a cord. The advertisers are complaining. Share prices are falling. The shock waves are spreading far and wide. Even Rupert Murdoch is now stirred into commenting, saying unequivocally the allegations are unacceptable and deplorable. But he hasn't hung out to dry Rebekah Brooks, the head of News International. Even if the company faces do not change, their practices surely will.

What start in the corridors of newspapers will end in the corridors of power.

And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. I think you for your time and your company. And as always, whatever you are up to in the hours ahead.


I do hope it is profitable. Piers is after the headlines.