The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I`m Jim Lehrer.

On the NewsHour tonight: the news of this Tuesday; then, a report on the closing arguments in the Libby trial from Carol Leonnig of the Washington Post; analysis of the proposed merger between Sirius and XM satellite radio; a Paul Solman look at the Whole Foods grocery chain; and the latest on the rift between the worldwide Anglican Church and American Episcopalians.

(BREAK)

JIM LEHRER: The two sides in the CIA leak case made closing arguments to the jury today. Lewis "Scooter" Libby, the vice president`s former chief of staff, is accused of perjury and obstruction.

Prosecutors argued today Libby lied about when he learned about Valerie Plame, a CIA officer. The defense said it was all a matter of conflicting memories, not criminal acts. The case is expected to go to the jury tomorrow, and we`ll have more on this story right after the news summary.

A federal appeals court in Washington ruled against detainees at Guantanamo Bay, Cuba, today. The 2-1 ruling said the foreign-born prisoners may not challenge their detention in U.S. courts; that finding backed a key provision of a new law passed last year. Attorneys for the detainees plan to appeal to the U.S. Supreme Court.

Iran offered today to halt its nuclear works so long as Western nations do the same. The offer came the day before a UN deadline. The Security Council has demanded Iran stop enriching uranium or face additional economic sanctions.

Today, Iranian President Ahmadinejad addressed the UN in a speech to a crowd of thousands in a northern city.

MAHMOUD AHMADINEJAD, President of Iran (through translator): There is no problem with your demand that we close our nuclear fuel production and nuclear cycle factories before negotiating with us, but what we say is, if justice is to be performed, you must close your nuclear fuel cycle facilities, too.

JIM LEHRER: Later, White House spokesman Tony Snow said that`s not a serious offer. He said it`s up to the Iranians to comply with UN demands.

A suicide bomber killed at least seven Iraqis today at a funeral in Baghdad. At least 20 others died in violence in and around the city. And one U.S. soldier was killed in combat.

And in eastern Afghanistan today, a suicide bomber wounded seven NATO troops at a hospital ceremony. The attacker dressed as a doctor.

Israel warned Palestinian President Abbas today against sharing power with Hamas. The Israelis said they will not discuss any final peace accord until Hamas recognizes Israel and gives up violence.

The warning came as U.S. Secretary of State Rice traveled to Amman, Jordan. She met with King Abdullah and officials from other Arab states. The king urged the United States to broker an agreement between the Israelis and Palestinians.

New Orleans marked the climax of Mardi Gras today with renewed celebration. It came amid the ongoing struggle to rebuild from Hurricane Katrina.

Crowds at the Fat Tuesday parades and parties were much larger than last year. Thousands of revelers filled Bourbon Street, just blocks away from wrecked neighborhoods. Mardi Gras ends at midnight when the Christian period of Lent begins.

The U.S. Supreme Court today threw out damages against cigarette maker Philip Morris worth nearly $80 million. A smoker`s widow in Oregon won the punitive damages, but by a 5-4 vote the high court said jurors should have been told they had to limit the punishment to this one case. The court did not rule on the size of the award as the company wanted.

On Wall Street today, the Dow Jones Industrial Average gained 19 points to close at 12,786. The Nasdaq rose more than 16 points to close at 2,513.

And that`s it for the news summary tonight. Now: closing arguments in the Libby trial; the satellite radio merger; Whole Foods; and disharmony among Anglicans.

(BREAK)

JIM LEHRER: Ray Suarez handles our coverage of the Libby trial.

RAY SUAREZ: The jury in the federal perjury trial of Lewis "Scooter" Libby, Vice President`s Cheney`s former chief of staff, spent the entire day hearing final arguments.

The charges against Libby stem from the investigation into who blew the cover of CIA agent Valerie Plame, the wife of Ambassador Joseph Wilson. Wilson openly refuted the Bush administration`s intelligence in the run-up to the war in Iraq. The investigation didn`t result in criminal charges connected to the leak itself.

Instead, the special prosecutor in the case, Patrick Fitzgerald, charged Libby with lying to the grand jury and obstructing the investigation of the Plame leak. Libby originally told the grand jury it was NBC`s Tim Russert who first revealed Plame`s identity to him during a conversation on July 10, 2003, but later said a search of his notes reminded him it was Vice President Cheney who had been the first, one month earlier.

But taking the stand at Libby`s trial two weeks ago, Russert, who arrived on crutches, maintained he and Libby never discussed Plame during their 2003 conversation.

Former Press Secretary Ari Fleischer was one of several White House officials who testified they did discuss Plame with Libby, which Libby says he simply doesn`t recall. Jurors will begin deliberating at this Washington, D.C., federal courthouse tomorrow.

Joining us now is Carol Leonnig, who has been covering the trial for the Washington Post.

Carol, welcome back. The prosecutors got to make their final arguments first. What did they tell the jury?

CAROL LEONNIG, The Washington Post: The prosecutors got two bites at the apple actually, Ray. They got to sum up their case and then come back with a rebuttal, as is the tradition in federal court.

What they essentially said was that Scooter Libby intentionally, deliberately lied. Special counsel -- I`m sorry, Special Prosecutor Patrick Fitzgerald said that Libby had told a dumb lie and got caught. And it was an implausible lie to conceal his role in leaking Valerie Plame`s identity to the press.

And in a pretty dramatic courtroom moment, he pointed up to his screen in the courtroom and said, "Here are the nine people whose recollections contradict Scooter Libby, and there`s no coincidence that they all remember him intensely focused on this woman, and he says he doesn`t remember."

RAY SUAREZ: Well, the defense certainly had to push back against a story like that. What was their version of the facts placed in evidence during the trial?

CAROL LEONNIG: Well, the defense had two attorneys, as you know, Ted Wells and Bill Jeffress, arguing that there were so many people in this case that had slightly different recollections that they couldn`t be -- that these witnesses for the government couldn`t be viewed as just making innocent mistakes, but Mr. Libby was viewed as making a malevolent lie or telling a deliberate lie.

They pointed out that there were lots of contradictions. For example, the one they were most interested in was that in which Washington Post reporter Walter Pincus said that former White House Press Secretary Ari Fleischer told him about Plame after a lunch that Fleischer had had with Libby and learned this information.

Fleischer had told the grand jury he did not tell Walter Pincus this information, and the defense picked that and several other instances to say, "Hey, there are a lot of people that had flawed memories."

They also argued that there was no motive for Libby to lie, that he just wanted his name cleared. He hadn`t done anything wrong, except make faulty statements to the grand jury because he had a bad memory. He was an overwhelmed guy, and it boiled down to something that simple.

RAY SUAREZ: Give me a brief description of how the rebuttal phase works. People who watch courtroom dramas on television are familiar with that dramatic final argument. Then the other side gets up to say, "Well, not exactly"?

CAROL LEONNIG: Yes. It`s an advantage the government has in putting on its case, an advantage that, you know, is supposed to be contrasted with the fact that the government has a very high burden. They have to prove beyond a reasonable doubt in this case that Scooter Libby intentionally, deliberately lied about his conversations with Matt Cooper, about his conversations with Tim Russert, and about his conversations with Judy Miller of the New York Times.

So it`s a high burden. And in the rebuttal, in this instance, you had Prosecutor Peter Zeidenberg make the summary of the case. You had the two defense attorneys for Libby come on, and then the rebuttal was sort of the Patrick Fitzgerald show, which seemed fitting, since he`s the special counsel who brought this case, was appointed in 2003 to take on a case that Attorney General Ashcroft thought he had a conflict of interest in handling.

RAY SUAREZ: Looking back over the case culminating in today, was there any witnesses` testimony that was really used very heavily by either the prosecution or the defense, out of that star-studded list of people from political and journalistic circles in Washington?

CAROL LEONNIG: Well, it was clear -- I mean, at least today you could tell that the testimony that the defense most wanted to rip to shreds was that of NBC`s Tim Russert. Remember, he`s a pivotal star witness for the prosecution.

Libby has said he learned this information almost as if it were new about Valerie Plame from Tim Russert. And Tim Russert took the stand, and firmly and calmly said, "I couldn`t have told Scooter Libby that. I didn`t tell him that. It was impossible. I didn`t know who Valerie Plame was. And I didn`t know she worked at the CIA until four days later when I read it in the Washington Post."

RAY SUAREZ: And on the part of the prosecution, was there some place that they were pointing the jury`s attention to?

CAROL LEONNIG: Definitely, they were also keen and focused in on Russert`s testimony. But in the rebuttal, Fitzgerald was a fast-moving kind of missile. He wanted to make sure that the jury got to hear once again every single person who had contradicted Libby.

And so he went through the panoply, from a secretary of state official, to a CIA official, to a low-level CIA briefer, to the vice president`s counsel at the time, David Addington, to a communications director at the time for Cheney, Cathy Martin.

He went just bullet by bullet, each one. Here`s what they said; here`s how it doesn`t square with what Libby said. Libby says it wasn`t that important to him about Plame and about Wilson`s wife, it wasn`t that important to him in this volatile time in the summer of 2003. And Fitzgerald hit each one and said, "You see how each of them saw Libby as being agitated, focused, keenly interested in this subject? Now, what do you believe, jury?"

RAY SUAREZ: Well, what kind of burden does the prosecution have when it comes to proving perjury? What do they have to demonstrate to the jury actually happened that overwhelms Libby`s argument that it was just bad memory, a flawed recollection of the events?

CAROL LEONNIG: You know, I`ve talked to a lot of prosecutors about this in the courthouse and beyond in other places. And they say that a perjury case is one of the most difficult, because, how do you exactly get into someone`s mind, except with circumstantial evidence that surrounds them and all of their actions?

The burden is very high. You have to show that there was an intention to commit a crime, there was an intention to lie, there was a plot. And with the obstruction of justice charge, there`s the additional claim that, when they were lying, they knew they wanted to stop this probe. They wanted to confuse investigators.

Now, I have to say that Fitzgerald made a pretty compelling claim today that, you know, kind of a "CSI" moment, when he said, you know, the defense says there`s no science here. There`s no proof. There`s no clear evidence of that intent, that part that`s in Libby`s mind.

And he said, "Well, let`s look at all these documents." And he said, "These are the fingerprints." When you this note with Libby`s handwritten memo to himself about Wilson and Wilson`s wife, when you see the vice president writing to himself, "Did Wilson get sent by his wife on a junket?" Here are the fingerprints, jury, that you should use to tell yourself this was really important to them. He couldn`t have forgotten this, And the vice president`s office and his chief deputy were on a mission to try to rebut the claims of a very potent war critic.

RAY SUAREZ: Well, given what you just said, and with so much concentration on what Libby knew, what he thought, what he believed had happened, how come he never took the stand?

CAROL LEONNIG: Well, I have to say there are so many people who have argued they`re innocent and their lawyers have urged them not to take the stand and testify on their own behalf.

It`s a really complicated question for any defense attorney. And I smile because, throughout this case, the judge has felt strongly that the defense was telling him they were going to put Libby on the stand, they were going to put Libby on the stand. And he got really angry about this last week when he started to hear back-pedaling about that.

However, it`s a long, respected tradition in our criminal justice system. You don`t have to take the stand. And if you`re a defense attorney, you can see potential risks. Even if your client is innocent, there are risks to being cross-examined, especially by someone as laser- like as Mr. Fitzgerald.

RAY SUAREZ: And quickly, Carol, before we go, what kind of penalties does Scooter Libby face on these counts?

CAROL LEONNIG: Well, it really depends to a degree on two factors. There`s sort of a ballpark range that could go anywhere from a year-and-a- half to three years under those sentencing guidelines.

Many people talk about the sort of maximum statutory prison term, and that usually doesn`t have any correlation to reality. But the factors that go into this is, what the prosecutor recommends, did he think the obstruction -- does he want to tell the judge that he thought the obstruction of justice charge was a serious one, that got in the way of something very important in the criminal justice system?

And it also depends to a degree on what the judge believes. In this case, the presiding judge has a reputation as being very clear, commonsense, no-bones-about-it kind of judge. But he`s also called by many in the defense bar a long-ball hitter. He attaches long penalties.

RAY SUAREZ: Well, it`s in the jury`s hands now. Carol Leonnig, thanks for being with us.

CAROL LEONNIG: Thank you, Ray.

(BREAK)

JIM LEHRER: Now, the proposed merger between the nation`s two satellite radio companies. Gwen Ifill has our Media Unit story.

GWEN IFILL: They were rivals, pioneers of a new technology that promised to give consumers an entirely new way to listen to the radio. But now Sirius and XM, the nation`s two satellite radio providers, want to get out of the ring and combine forces instead.

The proposed $13 billion deal would combine their separate slates of music, sports and entertainment channels. Subscribers now pay $12.95 a month to get a diet of shock jocks, talk show hosts, and targeted music programming, much of the time built into new cars.

XM and Sirius have a combined subscriber base of 13 million, but together have lost about $6 billion as subscriber growth has slowed. But each has spent eye-popping amounts of money to hire stars like Howard Stern and Oprah Winfrey.

HOWARD STERN, RADIO HOST: And let me tell you what`s been happening since the last show.

GWEN IFILL: Stern brought his raunchy variety show to Sirius two years ago, enticed by a cash-, stock- and incentive-laden package worth nearly $800 million. Sirius also paid the National Football League $230 million over seven years for radio rights to its games.

Similarly, XM has agreed to pay Winfrey $55 million over three years for her services and shelled out $650 million over 11 years to carry Major League Baseball.

The merger must first win approval from both the Justice Department antitrust regulators and the Federal Communications Commission. Meanwhile, some consumer groups and broadcasters have already said they will oppose the deal.

It should be noted that the NewsHour is also carried on XM Radio.

Here to help explain the merger and its implications for the industry and for consumers is Josh Bernoff, media and technology analyst at Forrester Research, a technology and market research company.

So, Mr. Bernoff, what is the upside and what is the downside of a deal like this?

JOSH BERNOFF, Forrester Research: Well, for the companies, the upside is pretty simple: They`ll be able to get rid of competition. They`ll be able to move forward with all of the car companies at once and will be able to just pursue reducing costs.

The downside -- there`s some downside here for consumers who will have less choices. And, of course, there is an upside for consumers, which is that there`s likely to be only one receiver in the future, which will be able to get either/or both services.

GWEN IFILL: You know, one of the things that the companies have been saying who have been advocating this merger is that the universe is different than when satellite radio first began. They are now competing against people in an on-demand world, with iPods and music over your cell phone. Is that part of what changed the business model for satellite radio?

JOSH BERNOFF: Well, I think what`s changed here is a lot simpler. It`s just a question of, how many people are likely to sign up for a service like this, a subscription service that will cost you $10 bucks or so a month?

Certainly, one way to look at it is -- the most liberal way to look at it is that everything competes with everything else. And for that reason, merging these two similar companies means they`ll still have to compete with iPods, and Internet radio, and high-definition terrestrial radio and so on.

But, in general, all of these media forms compete with each other anyway. And that may or may not be what the relevant question is here.

GWEN IFILL: And what about the potential for duplicated programming? For a lot of people, Opie and Anthony, the shock jocks on one satellite radio, is not so different from what you hear with Howard Stern.

JOSH BERNOFF: Well, actually one of the challenges here and one of the benefits for consumers, if this merger goes through, is that you now have to choose. It`s as if one cable company carried CBS and the other carried NBC, only, in this case, one company has the NFL on it and the other one has baseball, one has Howard Stern, and the other has Opie and Anthony.

So now those companies are competing on the basis of having different content. I think that consumers have found both the high level of sound quality and the number of choices to be fairly similar. And they may actually be choosing at this point based on either what comes standard with the car or whether there`s some specific kind of content, like Howard Stern, that they really want.

GWEN IFILL: Whether you want baseball or football, for instance?

JOSH BERNOFF: Yes.

GWEN IFILL: So if you -- the National Association of Broadcasters, which represents more conventional radio, among other things, have said that this is basically asking for government bailout of a poor business model, that they`ve paid too much for it, a lot of these -- the people they`ve put on the air, that they have been losing money, that, in fact, as you pointed out, the subscriber base is kind of soft. Is there anything to that?

JOSH BERNOFF: I think there`s definitely an argument to be made along those lines. I mean, in a start-up situation like this, where you`re starting a few years ago with zero subscribers, you have to get a lot of attention. And in fact, if you look at the costs that these companies bear, really the major costs are, number one, the amount of money that they paid for people like Howard Stern, which it`s hard to make a profit when you put that much money in.

And, second, the enormous amount of energy that they spend and money they have to spend winning over each subscriber. So if these businesses continue along the lines of how they`ve been going, they`re not going to make a profit.

So I think the terrestrial broadcasters are saying, "Look, if they really want to run a business here, then they have to run the business in such a way that they`re not spending so much for content and they`re not spending so much to win subscribers over," as opposed to just saying, "Look, we`ve spent ourselves into a corner. Now let`s let the two companies merge, even though we told the FCC we wouldn`t do that."

GWEN IFILL: For a lot of consumers who grew up not paying for radio, $12.95 a month seems like a lot anyway. The question is whether a merger like this is now going to drive that cost up even more.

JOSH BERNOFF: Well, the companies involved have said that, after the merger, they will create a series of tiers so that you`ll be able to have a higher- or a lower-priced service. But, you know, that`s an interesting question about why they couldn`t do that now if they had that as an idea.

I think the challenge here -- the real challenge is that, when we do consumer surveys, about 13 percent of consumers that don`t have satellite radio already say that they`re potentially interested in it. So there is a market there, but this is not like cable television that reaches a vast majority of consumers.

There are only a certain number of people who are willing to pay this money. Certainly, if there`s the possibility -- if the competition is removed, there`s the possibility of price increases. And, in any case, it doesn`t look like it`s going to become the kind of service that everyone gets, the way that they get, say, cable television service.

GWEN IFILL: The chairman of the Federal Communications Commission, Kevin Martin, has already said there`s a high hurdle that must be gotten over in order for this to be approved. Is this something which they have already started to consider, what the regulatory environment is for a change like this? Has the FCC ever acted on these kinds of cases before?

JOSH BERNOFF: Well, this kind of a case actually did come up in the television world. Dish Network, which is the service of EchoStar, EchoStar said that it would acquire DirecTV, the other major satellite service.

And what happened is that, after about a year of going back and forth about whether that would actually be in the best interests of consumers, whether it would reduce choices and so on, they had to abandon that merger because they weren`t able to get regulatory approval.

Given that this is yet another paid satellite service in a similar kind of market, I think that there has to be a lot of scrutiny given to this, on the basis that we already turned this down in television. Why does it make sense to approve this kind of a merger in radio?

GWEN IFILL: This merger has been rumored for at least a year. If for some reason after this has -- assuming that perhaps they have signaled, each company has signaled some weakness in seeking this merger, what happens if it doesn`t come through? If you`re a stockholder, do you think maybe this isn`t such a good bet after all?

JOSH BERNOFF: Well, we should say, first of all, in case there are any satellite radio subscribers listening, that regardless of whether the merger goes through or not, and regardless of whatever else might happen, that the services will continue. You`re not going to have your radio service suddenly stop working as a result of this.

But if the merger doesn`t go through, then these companies will have to make some adjustments as far as the amount of money that they pay for content and the way that they sign up subscribers. So I think you might see some readjustments made in the amounts that they`re -- the fees that they`re paying for things like baseball and basketball, just because you can`t continue to spend at that level if you`re not going to end up getting large numbers of subscribers.

GWEN IFILL: Josh Bernoff, thank you very much.

JOSH BERNOFF: Thanks.

(BREAK)

JIM LEHRER: Now, the Whole Foods story, as reported by NewsHour economics correspondent Paul Solman.

JOHN MACKEY, CEO, Whole Foods: We seduce the customer with produce...

PAUL SOLMAN, NewsHour Economics Correspondent: Fifty-three-year-old college dropout John Mackey, CEO of Whole Foods Market.

JOHN MACKEY: Well, people buy food first with their eyes. I mean, we`re visual, tactile people.

PAUL SOLMAN: What began as a single, organic grocery in Austin, Texas, in 1978 is now a national chain, with nearly 200 stores, $9 billion a year in sales. Vegetable seduction is how the Whole Foods experience begins.

JOHN MACKEY: Beauty is a very important part of pleasure and how we interpret a food experience will be. So, yes, beauty is very important. Here we`ve got California artichokes, Mexican red peppers...

PAUL SOLMAN: Handsome, fresh, natural, often organic food has made the chain highly profitable, helped spawn a $15 billion industry. Yet Whole Foods is so socially responsible, it won`t sell live lobsters unless they`re treated humanely. This one`s from a competitor.

JOHN MACKEY: Based on our research, lobsters have pain receptors and they`re capable of pain.

PAUL SOLMAN: In short, Whole Foods sees itself as an alternative model. Its stock, publicly traded; its loyalty to its stakeholders, customers, community and employees, instead of just the shareholders who invest.

First, the customers. Why shop here?

WHOLE FOODS SHOPPER: Because it has a lot of organic products. And, obviously, I`m pregnant.

PAUL SOLMAN: So you are.

WHOLE FOODS SHOPPER: Yes.

(LAUGHTER)

WHOLE FOODS SHOPPER: It has a large selection of organic foods and, like, meat and dairy that are not treated with antibiotics or hormones. And I want to try to get pure food for my baby.

PAUL SOLMAN: Then there`s the community outside these walls, to which Whole Foods donates fully 5 percent of its profits. As for the employees, around here, they`re team members.

WHOLE FOODS EMPLOYEE: So staffing is good for this evening...

PAUL SOLMAN: Average pay of more than $15 an hour, full health benefits, and a say in running things. New flavors at the gelato stand, for example.

JOHN MACKEY: Pineapple and basil?

WHOLE FOODS EMPLOYEE: Yes.

JOHN MACKEY: How do you come up with these unique kind of recipes?

PAUL SOLMAN: It seems to work. Though Whole Foods is America`s second-largest non-union retailer, it ranks fifth among Fortune magazine`s best 100 firms to work for.

JOHN MACKEY: Every one of our produce items is organized by type of growing method.

PAUL SOLMAN: Whole Foods executives have their salaries capped at 19 times the worker average. The CEO`s pay?

JOHN MACKEY: I just cut my pay to one dollar a year.

PAUL SOLMAN: And why exactly?

JOHN MACKEY: That`s kind of hard to explain in a way that is able to -- it`s the appropriate thing for me to do at this time in my life. I have enough money. I have enough money.

PAUL SOLMAN: So good values, good eats, public investors, which leads to the big question: Can they keep it all going if times get tough? Last year when growth slowed, the stock swooned, says market analyst Scott Van Winkle.

SCOTT VAN WINKLE, Market Analyst: Went into the year with comparable store sales growing at about 13 percent; you exited the year with those comparable store sales growing at about 7 percent. So you had a slowdown. With the expectations are as high as they were, and you see a slowdown in that sales momentum on a per-store basis, it`s affected the shares.

PAUL SOLMAN: Well, it`s affected them dramatically, right?

SCOTT VAN WINKLE: Oh, 40 percent decline in 2006.

PAUL SOLMAN: A 40 percent decline, making Whole Foods, long a glamour stock, one of last year`s dogs on Wall Street. What happened? Competition.

No surprise, says University of Texas economist Dan Hamermesh, who took us to his favorite grocer, Austin`s rival Central Market, part of the huge Texas chain H-E-B.

DANIEL HAMERMESH, Economist: If you look around this store, for example, you see all these yellow signs, and they`re all organic. These guys, if they`re big enough, can go to the same farms or develop other ones and essentially compete on the organic stuff, as well.

PAUL SOLMAN: Just like Whole Foods, Central Market offers natural, organic, prepared delicacies, fresh bakery, wine-tasting, consumer education, even the gelato bar.

But now, I mean, this is not upscale the way the Whole Foods Market down the road is.

DANIEL HAMERMESH: That`s correct. It`s also a lot cheaper, too.

PAUL SOLMAN: By contrast, Whole Foods is so pricey that it`s been called "Whole Paycheck."

WHOLE FOODS CUSTOMER: $213? I guess I owe you some more.

PAUL SOLMAN: Moreover, even Wal-Mart has now begun selling organic food. Competition is everywhere and, yet, John Mackey is philosophical about it.

JOHN MACKEY: Someone will come along and do it better than we do. I mean, that`s always what happens. No business stays on top in its niche forever. Everything has a life cycle. It has its day in the sun, and then it fades. And that will happen to Whole Foods, as well.

PAUL SOLMAN: And here`s how it might. If Whole Foods begins charging less to hold onto its customers, profits shrink, stock sinks, shareholders raise a stink.

Long-time business writer and editor Bo Burlingham admires companies like Whole Foods that balance an alternative culture with selling stock to investors.

BO BURLINGHAM, Author, "Small Giants": As long as you can continue to deliver the returns that you`ve promised these people when you took their money, they`ll be happy to let you work on your culture and have your culture any way you want to.

PAUL SOLMAN: Burlingham`s new book, however, "Small Giants," argues that it`s easier for small, private firms to retain their purpose than large public ones, when competition slows their growth and profits.

BO BURLINGHAM: And it`s at that point when you`ve got your investors over here saying, "Wait a minute. You should be spending your cash in order to maximize our return on investment. That`s what you promised us when we gave you our money." And you have your culture, and your employees, and your customers, and, you know, the people you`ve done good for in the past saying, "No, no, no, this is the soul of the company. You`ve got to spend it here." And that`s when problems develop.

PAUL SOLMAN: Indeed, this problem arose with our freelance cameraman, who asked Burlingham his prognosis for Whole Foods. We asked the cameraman to step in front of the lens, where he explained he bought Whole Food stock just last year.

YHEL HERZOG, Freelance Photographer: I`m one of those stockholders that owns Whole Foods. And I bought it about a year ago, and I really believe in what they do. I want to eat healthier. And I see all these new stores that they opened. And it feels like it`s growing.

But it started -- you know, probably picked up 5 percent or 10 percent in the first two months, and then it`s been going down, down, down. It`s like minus 30 percent now on my investment.

PAUL SOLMAN: Will you stick with it?

YHEL HERZOG: Probably another 5 percent, and then I`m going to sell, because I don`t want to lose everything.

PAUL SOLMAN: Which highlights the main problem. Can Whole Foods sustain its unusual vision?

There are perhaps a few other reasons to wonder. Jo and John Dwyer run Angel Valley, an organic farm outside Austin that supplies Whole Foods, to the extent it can.

STEVE BRIDGES, Texas Organic Farmers and Gardeners Association: The demand is great, and the supply is small.

PAUL SOLMAN: Steve Bridges represents the organic farmers of Texas as a whole.

STEVE BRIDGES: There are not enough organic farmers in this country to supply all the grocery stores with organic food, so they`re going to have to source this organic food from somewhere else. And where is that going to come from? Other countries, even China.

You know, I was even in Whole Foods the other day and found a 50-pound bag of black beans, certified organic from China. And you have to wonder about the integrity of some of this imported organic food that`s coming from other countries that may not have as strong regulations as we do.

PAUL SOLMAN: In fact, local organic food only amounts to about 15 percent of the produce here. That number continues to grow, but Whole Foods has taken heat for creating the illusion of all local, with signs like these, to which the CEO replies....

JOHN MACKEY: We`re celebrating our local suppliers. If anything, we`re trying to promote them so that they`ll sell more of their products.

PAUL SOLMAN: But Mackey and Whole Foods may still wind up relying less on local and organics while facing more competition. So can they find new ways to distinguish the store from its rivals? One is animal compassion, a value in which Mackey, a near-vegan, believes.

JOHN MACKEY: Well, a vegan eats no animal products or doesn`t use animal products in any part of their life. I don`t have -- this is not a leather belt, for example.

PAUL SOLMAN: It`s non-leather.

JOHN MACKEY: It`s non-leather, right.

PAUL SOLMAN: What`s it made out of?

JOHN MACKEY: It`s made out of plastic. I say near-vegan, because I have my own chickens, and I eat eggs from those chickens because I know how those chickens are raised. They`re raised -- well, they`re living in a chicken utopia, actually.

PAUL SOLMAN: He doesn`t eat the chickens, mind you, just their eggs. Whole Foods will soon stock and push compassionately raised meat, chicken, beef and so on. It`s still working out the standards, but its approach to salmon suggests the goal: A life, while it lasts, as natural as possible.

JOHN MACKEY: A wild-caught salmon that`s out in the ocean is going to be much better exercised, it`s going to have a more diverse diet, probably with more life force in it than a farm-raised product.

PAUL SOLMAN: Now, wait a second. I`m with you all the way to life force. Why do I care if my salmon has life force in it?

JOHN MACKEY: If something is fresher, it`s going to be at a peak of nutritional value, expressing as much of its salmon nature as possible.

PAUL SOLMAN: Mackey is betting that consumers will care enough about the life force in their food to pay extra for it and keep Whole Foods in the swim. But if he`s so stoical about competition and so intent on better eating, isn`t he happy that he`s inspired a national movement, including now even Wal-Mart?

JOHN MACKEY: I`m happy that it`s fulfilling the greater mission of healthier food and healthier for the environment around to a bigger market space, not happy if it hurts Whole Foods. So there would be a mixed reaction to it.

PAUL SOLMAN: But if you think competition is inevitable, and that you`ll be superseded...

JOHN MACKEY: Absolutely.

PAUL SOLMAN: So then....

JOHN MACKEY: Well, that doesn`t mean it`s fun being superseded. I can be philosophical about it. And, hey, you know, I`m going to die some day. I can be philosophical about that, but not be, "Yes, baby, I can`t wait to die." I mean, it will still be something that I`m not looking forward to, but I recognize its inevitability.

PAUL SOLMAN: John Mackey and Whole Foods. It`s hard for even an economic realist not to wish them both a long and happy life, or at the very least longer and happier than any of the vittles they so vitally dispense.

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JIM LEHRER: And finally tonight, the conflict between the American Episcopal Church and the Worldwide Anglican Communion. Margaret Warner has that story.

MARGARET WARNER: The dispute within the world`s third-largest Christian denomination over same-sex unions and gay clergy escalated sharply yesterday.

Meeting in Tanzania, leaders of the Anglican Communion called on the U.S. Episcopal Church to state explicitly by September 30th that it will bar the blessing of same-sex unions and stop consecrating openly gay bishops. Otherwise, it risks further isolation from the 77-million-member Anglican Communion.

The Episcopal Church, with just 2.4 million members, is the small but affluent American branch of Anglicanism. In an eight-page communique, the Anglican bishop said, "The Episcopal Church has departed from the standard of teaching on human sexuality by consenting to the Episcopal election of a candidate living in a committed same-sex relationship and by permitting rights of blessing for same-sex unions."

The Episcopal Church does not officially endorse the blessing of homosexual unions, but some 10 percent of its 110 dioceses do perform same- sex blessings. The archbishop of Canterbury, Rowan Williams, said Episcopal priests should not be blessing rites that violate Anglican teaching.

THE MOST REV. ROWAN WILLIAMS, Archbishop of Canterbury: The teaching of the Anglican Church remains that homosexual activity is not compatible with scripture.

MARGARET WARNER: The gathering in Tanzania was the latest attempt to heal a long-simmering rift between the Episcopalian leadership and more conservative Anglicans over issues related to homosexuality. The tensions boiled over in 2003, when Gene Robinson, an openly gay man living with his partner, was elected bishop of New Hampshire.

GENE ROBINSON, Bishop of New Hampshire: I have it in my mind that the best way I can help gay and lesbian persons is by being a good bishop.

MARGARET WARNER: Church conservatives were further angered last year, when Katharine Jefferts Schori, who supports same-sex blessings, was elected as the U.S. church`s first female presiding bishop.

Yesterday, she did not say how the U.S. church would respond, but said, "There is awareness that these issues are of concern in many provinces of the communion."

At least two dozen of the roughly 7,200 Episcopal parishes in the U.S. have split off to place themselves under more conservative bishops in other countries. This Newport Beach, California, church joined the Anglican Church of Uganda. Others that have split, like the Truro Church in Fairfax City, Virginia, have made claims for ownership of church property.

Church leaders at the Tanzania meeting agreed to create a special new vicar to help oversee other U.S. Episcopal churches opposed to same-sex blessings and the consecration of gay bishops.

Late today, Bishop Jefferts Schori issued a statement saying, "What is being asked of both parties is a season of" what she called fasting, "from blessing same-sex unions and consecrating bishops in such unions on the one hand, and from transgressing traditional diocesan boundaries on the other."

For more on yesterday`s action and what it means for the U.S. Episcopal Church, we get two perspectives. They come from Canon Kendall Harmon, the chief theologian for the Episcopal Diocese of South Carolina, and Reverend Susan Russell, a priest at the All Saints Episcopal Church in Pasadena, California. She is also the president of Integrity USA, a group that advocates for gays and lesbians in the Anglican community.

And welcome to you both. Canon Harmon, beginning with you, how serious a challenge is this to the Episcopal Church in America?

KENDALL HARMON, Episcopal Diocese, South Carolina: Margaret, it couldn`t be more serious. The Episcopal Church was already given an ultimatum by the Anglican Communion in 2004 in the Windsor report. And there were three things asked of us.

And this meeting in Tanzania was a meeting to evaluate those three responses. And effectively what the leadership of the communion says is, "We`re going to give you one very last chance. You`re in the penalty box. And we have two things that we asked you to do that we don`t feel that you have done. And we`re giving you until September 30th to do it. And if you don`t do it, we don`t want to do this, but there`s going to be a further severing of our relationship with you as a communion."

So they`re asking the Episcopal Church, they`re imploring the Episcopal Church to do the right thing and to come back to teaching in accordance with scripture and Anglican history, and they`re doing it with a very short time frame.

And they`re also doing it with a significant amount of challenge to the structure of the Episcopal Church in the process, which one could argue is unprecedented in Anglican history. They`re making a lot of structural suggestions as to how things here should be different while this final seven-month process is going on.

MARGARET WARNER: Reverend Russell, do you see it as that serious a challenge, that really the American Episcopal Church is now, quote, "in the penalty box"?

REV. SUSAN RUSSELL, President, Integrity USA: I don`t know if I`d use that analogy, but I agree we are in a very serious time in the church. From my perspective, the American Episcopal Church has now been very strategically and very intentionally painted into a corner by those in the American church who have been advocating for a schism for many years.

And we`re now faced with what I would call a Sophie`s choice of having to choose our vision of the inclusive gospel over our inclusion in the communion. It`s a profoundly un-Anglican way to make decisions, given that historically we have been a people of God who have not required common belief in order to be in communion with each other.

So I think the greater challenge we face has much less to do with gay and lesbian people or bishops or blessings, but how we`re going to be church together. I think that is really under attack by the radical religious right, who is willing to split this church if they can`t recreate it in their own image.

MARGARET WARNER: Canon Harmon, why can`t different views of these two issues -- that is, whether to bless same-sex unions or allow priests who are in same-sex unions to become bishops -- why can`t both be accommodated in the Anglican Communion?

Is this rooted in faith? Is it a question of -- well, I don`t want to characterize what Reverend Russell said -- but is it more sort of political and cultural? What is the nub of the inability of different views on this issue, these two issues, to coexist?

KENDALL HARMON: Well, the difficulty here is that Anglicans believe in the importance of tolerating differences, but Anglicans also believe in boundaries. Otherwise you can`t have any community to discuss differences in.

And the crucial point to make here is, there`s different kinds of differences. And it`s interesting that this is the topic of debate here, because in the Windsor report this specific subject is addressed. And in one section -- it`s paragraph 89 -- what they say in there is, in the New Testament, there are certain kinds of differences that actually Christians can`t tolerate, because it`s not part of what it means to be a genuinely Christian community.

Two examples they use are sexual behavior and lawsuits of one Christian against another. And it`s interesting that, in this communique, both lawsuits and sexual behavior are things that the primates are talking about.

So the reason is because there are different kinds of differences, and the majority of the communion sees these differences as not the kind of differences that can be tolerated.

MARGARET WARNER: And yet, Reverend Russell, you said that you think the idea of not being able to tolerate these differences is somehow in conflict with what you said was the essential nature of the Anglican Communion. Explain what you meant.

REV. SUSAN RUSSELL: Well, absolutely. I mean, if we look at the historic roots of who we are as Anglicans, we have the same DNA. We come from the Church of England, which was formed out of the crucible of the English Reformation, and had at one point to decide whether it was going to be Catholic or whether it was going to be Protestant.

At a time when people were burned at the stake over such significant and foundational theological divide, the Anglican Church and the Church of England found a way to be both. And that`s the heritage we`ve carried up until now.

The fact is, the American church does hold a minority opinion on the blessing of same-sex unions and the full inclusion of all the baptized in the body of Christ. We know we maintain a minority opinion, but we maintain that that minority opinion is a leadership opinion, in much the same way that we`ve held a minority opinion on whether or not women should be bishops or women should be priests.

Historically, the rest of the communion has come along on that issue. We believe that lives lived in holiness, and fidelity, and mutual respect transcends the orientation of the people involved in the relationship. We believe God blesses those relationships, and so should the church.

MARGARET WARNER: Canon Harmon?

KENDALL HARMON: Well, the crucial difference here is, there are allowances for differences, like Susan said, but the heart of Anglicanism is: In essentials, unity; in non-essentials, liberty; and in all things, charity.

And the problem is, there`s a unity and an intolerance for difference in essentials, and a liberty about non-essentials. And in Anglicanism, there`s always been this historic weakness, which is, what`s the difference between non-essentials and essentials? And who gets to decide.

MARGARET WARNER: Let me...

KENDALL HARMON: But part of what`s happening, I think people need to realize, is the United States church is trying very hard to unilaterally make this decision in such a way that it affects the rest of the communion. And in a communion which has 70 million to 80 million people, for 2.3 million to 2.4 million maybe, to unilaterally do that, when they`ve been warned not to, is incredibly detrimental to the family.

REV. SUSAN RUSSELL: Now, Kendall...

MARGARET WARNER: May I ask you, Reverend Russell -- let me ask you, just as a practical matter, speaking of deciding, there`s little more than seven months away before this deadline. How will the Episcopal Church of the U.S. go about making this decision, how to respond?

REV. SUSAN RUSSELL: Well, that`s a very important question, but I do want to respond quickly to the idea that we are acting unilaterally. The American church has never asked the Church of Nigeria or Uganda or Rwanda or any of our other Anglican brother and sister churches to come along with us on our vision for where the church should be.

All we`ve asked to have is our understandings of holy scripture and how we live that out respected.

As far as the charge to the church right now, basically we`ve been given an assignment we cannot complete. The reality is, in the American church, our bishops do not speak for us, unlike many other churches in the wider communion, say, Nigeria, for example, where the primate is empowered to speak for his church.

In the American church, we make decisions at our general convention, with laity, clergy and bishops all in consultation. To ask us to make a decision of this magnitude for the whole church, on a time frame that only allows our bishops to meet, really sets us up for failure.

They`ve given us a line in the sand that I don`t believe we should cross and I don`t believe we can cross, not and be held to the authenticity of our integrity and our leadership in the American church.

Again, I believe it`s part of a strategic political move to paint us into a corner, where we have no choice but to choose the gospel or choose the institutional church.

MARGARET WARNER: Let me ask you both...

REV. SUSAN RUSSELL: I`m choosing the gospel. And I think -- I know my congregation, All Saints Pasadena, is going to make that choice, as well.

MARGARET WARNER: So are you saying, if the bishops choose to, as Bishop Jefferts Schori suggested late this afternoon, a season of fasting - - she seemed to be suggesting a moratorium on these activities. Are you suggesting then that churches like yours would break away?

REV. SUSAN RUSSELL: I certainly think that`s a possibility we would entertain. But I would also suggest that -- and I just had a chance to read the presiding bishop`s statement.

If we`re going to ask the church to fast for a season and bear each other`s burdens, then perhaps we should fast from all ordinations and from all marriages. The two essential sacraments in the church are baptism and holy communion.

MARGARET WARNER: Let me get Canon Harmon`s response...

REV. SUSAN RUSSELL: If we can fast from the rest and let the heterosexual community bear the burden, as well, that would be truly bearing each other`s burdens.

MARGARET WARNER: And, Canon Harmon, how do you interpret what the bishop said? And what do you think the consequences of that are?

KENDALL HARMON: Well, let me make these two quick points. Seven months is a short deadline. And I think Susan and I agree on this. I think actually, pastorally, it would be a mistake for the bishops to do this.

The whole church needs to speak, and this is a vital time. You can call a special general convention, and I think we need to give real thought to that because it`s such an important moment.

But can I also point out, we already had an ultimatum, Margaret. We had an ultimatum in 2004, and we had two years to do this. And we didn`t do what we were asked to do.

And we really should already be under significant discipline, but the international leadership is being very, very patient. They`re not backing us into the corner. They`re trying lovingly to give us one last chance because they don`t want us to go.

MARGARET WARNER: All right, Canon Kendall Harmon and Reverend Susan Russell, thank you both.

REV. SUSAN RUSSELL: Thank you.

KENDALL HARMON: Thank you.

(BREAK)

JIM LEHRER: And, again, the major developments of this day.

The two sides in the CIA leak case made their closing arguments. Lewis "Scooter" Libby, the vice president`s former chief of staff, is accused of perjury and obstruction.

A federal appeals court ruled detainees at Guantanamo Bay, Cuba, may not challenge their status in U.S. courts.

And Iran offered to halt its nuclear work, so long as Western nations do the same.

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JIM LEHRER: And, once again, to our honor roll of American service personnel killed in Iraq and Afghanistan. We add them as their deaths are made official and photographs become available. Here in silence are 10 more.

We`ll see you online and again here tomorrow evening. I`m Jim Lehrer. Thank you, and good night.