The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. Leading the news this Tuesday, ethnic fighting in Soviet Azerbaijan worsened as troops tried to restore order and AT&T said its long distance service was back after yesterday's failure. We'll have details in our News Summary in a moment. Judy Woodruff is in New York tonight. Judy.

MS. WOODRUFF: After the News Summary, the turmoil in Azerbaijan and Armenia is our lead focus [FOCUS - ETHNIC VIOLENCE]. We get two perspectives from Shireen Hunter, a senior fellow at the Center for Strategic & International Studies, a native of Azerbaijan, and Ronald Suny, a professor at the University of Michigan and of Armenia descent. Then [FOCUS - ROMANIA - SPY STORY] inside the Ceausescu regime in Romania, a conversation with Ion Mihai Pacepa, a defector who wrote a book about his experiences as the top spy for the hated dictator who was executed last month, and [UPDATE - COMMODITIES PROBE] Elizabeth Brackett reports on the struggles to restore stability to the Chicago Commodities Markets. NEWS SUMMARY

MR. LEHRER: The fighting continued in Soviet Azerbaijan today. Eleven thousand more Soviet troops were brought in to stop the violence between the Azerbajanis and Armenians in an area called Nagorno-Karabakh. The death toll rose to 56. We have a report from Moscow by Tim Yuert of Independent Television News.

MR. YUERT: Despite a state of emergency and the presence of extra troops and KGB security police, there's been no lessening of tension in Nagorno-Karabakh. Soldiers are facing an increasingly hostile local population and one officer told Soviet TV that gunfire was the only way to restore order. Troops displayed weapons that they captured but most of the arms used by Azerbajanis and Armenians were seized from the military in the first place. In many areas, troops simply can't move. Roads have been blocked by hundreds of cars and lorries and bridges destroyed. Local people see no end to the violence. "We can't avoid bloodshed," said one man. Declared another, "It'll never be solved peacefully." In Moscow, Armenians demonstrated at Central Committee headquarters and emotions were high. "We're being raped," a woman shouted, "save us, save us". Foreign ministry spokesman Gennady Gerasimov tried to play down talk of civil war.

GENNADY GERASIMOV, Soviet Spokesman: It's national strife, national strife.

MR. YUERT: Maybe it's a war because there are two sovereign republics almost at war with each other now.

MR. GERASIMOV: I agree, almost at war.

MR. LEHRER: In Washington, White House Spokesman Marlin Fitzwater said the United States did not oppose the use of Soviet troops in Azerbaijan. He said, "We understand the need to restore order." There were also peaceful protests along the Azerbaijan border with Iran. Tehran Radio said 5,000 Soviet Moslems had gathered Monday at the river which forms the border between those two countries. They called for an end to travel restrictions with Iran. We'll have more on this story right after the News Summary. Judy.

MS. WOODRUFF: AT&T said today that its long distance phone service was operating normally. That was a change from yesterday when for nine hours the company was unable to connect millions of long distance calls throughout its nationwide system. The problem was traced to a faulty computer program that helped switch calls. At a news conference this morning, AT&T's chairman, Robert Allen, was asked if a deliberately planted computer virus or sabotage was suspected.

ROBERT ALLEN, Chairman, AT&T: It does not act like a computer virus based on what we know about it today. It was a process, it was a condition which spread throughout the network, ironically as part of our own redundancy system in spreading messages that communicate with other parts of the network, but it does not act like a virus or something that was put into the network by some unauthorized person.

MS. WOODRUFF: Allen went on to say that the company plans to offer its customers a one day discount on long distance calls to make up for the service disruption. AT&T controls about 70 percent of the long distance market. Its major competitors, MCI Communications and U.S. Sprint, reported no problems.

MR. LEHRER: The Supreme Court today agreed to decide an important child abuse issue. Children are now permitted to testify against child abuse defendants from behind screens or on closed circuit television. The court said it would hear two cases in which that right has been challenged on grounds the Constitution guarantees the right to face an accuser. A ruling is expected by July.

MS. WOODRUFF: Starting today, the 90,000 people who run the nation's rail system will be subjected to mandatory random testing for drugs and alcohol. The government program takes effect after passing court challenges from unions representing federal and railroad workers. Also, efforts for drug testing in the private work place got a boost in Congress today. Senators Orrin Hatch, Republican of Utah, and David Boren, Democrat of Oklahoma, introduced legislation setting federal standards for such tests. The plan was also endorsed by former Surgeon General Dr. C. Everett Koop. Speaking at a Capitol Hill press conference, Hatch said the legislation did not make testing mandatory and it would protect workers from potential abuses by employers.

SEN. ORRIN HATCH, [R] Utah: It will end discriminatory practices, protect employees' privacy rights, and ensure medical and scientific integrity in conducting such tests. The bill provides guidance for employers who choose to implement drug free work place programs, and this legislation makes it clear that employers have the right to drug test their employees as part of a drug free work place program. This will eliminate the risk of unwarranted legal challenges, and contradictory state and local regulations, and judicial decisions.

MS. WOODRUFF: A major bank accused of laundering millions of dollars in Colombian drug money agreed to a last minute plea bargain today. The Luxembourg-based Bank of Credit & Commerce International and eight of its former officers were due to go on trial in Florida on Thursday in the case. It was expected to shed new light on the dealings of Panama's Manuel Noriega, who was a client of the bank. But the bank's attorneys threatened to reveal Noriega's ties to U.S. intelligence agencies if he was brought into the case. To avoid that, prosecutors agreed to reduce the criminal charges in return for the bank's help in providing information on the other defendants. As part of the guilty plea, the bank will also forfeit $14 million in frozen accounts to the U.S. Government.

MR. LEHRER: There was an unusual military seminar in Vienna, Austria, today. Thirty-five nations, including the United States and the Soviet Union were represented. The meetings will last three weeks and are designed to build trust and confidence among military leaders from all sides. The U.S. delegation was led by Gen. Colin Powell, Chairman of the U.S. Joint Chiefs of Staff. He said he welcomed recent moves by the Warsaw Pact to reduce its force levels. He said there was also nothing sacrosanct about the number of American troops stationed in Europe.

MS. WOODRUFF: Back in this country, an earthquake shook the Northern Coast of California today. The quake struck just after 12 Noon Pacific Time and registered 5.1 on the Richter Scale. It was centered about 50 miles South of Ureka and there were no immediate reports of injuries or major damages. An official said today's tremor was not related to the major earthquake that struck the San Francisco Bay area last October. That's it for our News Summary. Just ahead, the crisis in Azerbaijan and Armenia, secrets of the Ceausescu regime and restoring confidence in the Chicago Commodity Markets. FOCUS - ETHNIC VIOLENCE

MS. WOODRUFF: First tonight the violence that has flared up again between Armenians and Azerbaijanis the Soviet Union. We'll get two perspectives on the fighting which has led President Gorbachev to send in the military and declare a state of emergency but first a word about the turbulent history of the region which is at the source of today's troubles. Armenia and Azerbaijan sit side by side in the Southern part of the Soviet Union. Azerbaijan is about three times the size of Armenia, the smallest of the Soviet Republics. But Armenia was not always so small. At its height in the First Century B.C. Armenia was the strongest state in the Near East extending to the shores of the Black, Caspian and Mediterranean Seas and it included parts of Azerbaijan. Because of their strategic location the two Republics were constantly in the middle of rivalries. A battle ground for peoples and tribes for centuries. In 1920 the Region was invaded by the Soviet Union. The Eastern part of Armenia was made in to a Soviet Republic. The Northern part of Azerbaijan was also annexed and made a Republic. And the Nagorno-Karabakh an area dominated by ethnic Armenians was left inside Azerbaijan. Claimed by both groups this disputed territory has been at the root of the current unrest. The Armenians of Nagorno-Karabakh, like Armenians elsewhere, are Christian. Azerbaijanis are Shiite Moslems with close ties to Azerbaijanis in neighboring Iran. The Armenians dominate Nagorno-Karabakh not only in numbers but in economically as well. Demands by Armenians to annex Nagorno-Karabakh triggered clashes between the two ethnic groups two years ago but it wasn't until months later that Soviet TV carried pictures of the violence and destruction in which scores of people were killed. In the latest flare up this past weekend official Tass reports said 34 people were killed in Bekah, the capital of Azerbaijan when mobs broke away from this rally and rampaged through the streets attacking Armenians living there. Yesterday President Gorbachev declared a state of emergency and sent in troops to parts of Azerbaijan. Foreign reporters have not been allowed in to the disputed areas. So Westerners have had to depend on Soviet TV for news.

SOVIET REPORTER: A group of Azerbajanis from outside the area came in and attacked this Armenian Village. They wanted to burn the farm. The Armenians put up a fight. Guns were used including hunting rifles even sub machine guns. Fighting went on for an hour and a half and four Azerbaijanis were killed.

MS. WOODRUFF: Today Official reports say the death toll has risen to at least 50 with many more injured and Soviet Officials have portrayed the violence there as verging on civil war. Now two views of the conflict in Azerbaijan. Shireen Hunter is an Azerbaijan national by birth but served in the diplomatic service of Iran from 1966 to 1979. She is now a Senior Fellow at the Center for Strategic and International Studies a Washington D.C. think tank. And Ronald Suny of Armenian dissent is a Professor of Soviet and Armenian History at the University of Michigan in Ann Arbor. He joins us from Public Station WTVS Detroit. Ms. Hunter is this civil war, is it accurate to call it that?

SHIREEN HUNTER, Political Scientist: Well it seems to me that the situation is deteriorating to the point that it can become a civil war. At any rate at this point it is a rather serious national strife.

MS. WOODRUFF: And Mr. Suny the same question. Do you think that falls in the same classification?

RONALD SUNY, Historian: A civil war is always a war between one people. If you consider all Soviet people to be members of one country then it is a civil war but I have heard people from the Region say that in fact this is a national war between two different nations. So it is a matter of how you look at it. It is certainly extraordinarily serious and whatever way you conceive of it is war.

MS. WOODRUFF: Professor Suny what caused this latest flare up? What triggered this last outburst?

MR. SUNY: In part it all began two years ago with the Armenian demonstrations in Nagorno-Karabakh. For 60 years in that region the Armenian majority lived by Azerbaijani rule. It felt oppressed, back word, kept down and finally with glasnost and perestroika they began to react. In the last year Armenians have claimed the region and the Azerbaijanis have answered by blockading the Armenian Republic preventing fuel, food and building materials from going into Armenia to rebuild that country after the devastating earthquake of 1988. Armenians were recently dismayed when the Soviet Government gave Azerbaijan Sovereignty again over Nagorno- Karabakh after a period of direct rule from Moscow and the Armenians then claimed through their Parliament that Nagorno- Karabakh was simply a part of the Armenian Republic. That act seems to then have provoked this recent wave of violence in Azerbaijan.

MS. WOODRUFF: Would you agree with that interpretation Ms. Hunter?

MS. HUNTER: Well I think that certainly as far as the recent developments are concerned that is the accurate description of what has happened but it seems to me that the history of that area goes much longer and much deeper than 1920. In the difficulties back to 1828 when the areas who formed at time part of the Persian Empire were ceded to the Czarist Russia by the treaty of Tut Man Chi. Karabakh territorially of course would make part of Azerbaijan. Of course, in those days these areas were not really divided in to the kind of national entities and so on. The situation was much more bled. I think that what has happened is that in the last few decades the Armenian population in Karabakh has indeed swelled up and obviously they have probably felt oppressed by the Azerbaijani rule. On the other hand I think that there is some ground for the Azerbaijanis feeling that that particular territory was part of the Azerbaijani area so they find themselves feeling that they just can not accept a mere declaration of annexation by the Armenians. In other words I am saying the roots of the conflict go much deeper rather than simply the Soviet rule.

MS. WOODRUFF: Is there something about the two people's Professor Suny that is just so deep and so profound in the difference that it is going to be very difficult to resolve this? I guess what I am asking is, is there a solution that you see on the horizon or is it just unresolvable?

MR. SUNY: This conflict is very deep and it goes back to largely the 19th Century when the Azerbaijanis were a lesser developed people than the Armenians who tended to in that region anyway to live in the City of Bekah. There is both an ethno religious context and flavor to this dispute. There is also a social class aspect. Armenians were better off they were the middle class in Bachu. They were heavily invested in the oil industry. The Azerbaijanis were poor generally either living in villages or in the lower echelon of the working class. So among Azerbaijanis for a long time before the Soviet period various kinds of feelings of social inferiority and grievances manifested themselves and there were riots and clashes in 1905 and 1918. That feeling has apparently continued through the Soviet period even though in this period Azerbaijanis dominate the Republic. I do believe eventually there will be a solution. These people may have many differences but they have also co-existed for many Centuries. Since the 11th Century when Turks first came in to this region and their culture is in many ways in terms of their life style, their foods are similar. There are instances of intermarriage. The solution. I think. eventually and it will be a hard one for both nations to accept is a referendum in Nagorno-Karabakh and eventually partition of that region. The majority of the region 80 percent of it being Armenia would have to go to Armenia and part of it and including by the way the historic cultural city of Susha an Armenian City where my own grandfather was born would probably go to Azerbaijan.

MS. WOODRUFF: Okay before we talk about the specifics of a solution. Ms. Hunter would you agree that there are some things that the Armenians and the Azerbaijanis have in common and from those things a solution might be found?

MS. HUNTER: Well, I frankly, if I may be permitted just a personal note here. I was born in Iranian Azerbaijan and I grew up with also a significant Armenian Community. I personally and people that I knew had always had very good and cordial relations with Armenians. So I believe that there can be a solution to this. The way I, however, visualize the situation and the intensity of feelings that has been expressed from both sides. I see this more as an expression of the Azerbaijani frustration probably over more Russian Soviet rule and the whole situation has sort of become the focus of this deep rooted frustrations. They are trying to reassert, I think, that their ethnic identity, their national identity, their religious identity. For example today the Azerbaijanis changed the historic name of Ganji, which is the birth place of their one and only famous Poet. The Russians had renamed that City Karabakh. So I think that we may witness a very difficult period when all these ethnic and religious. Professor Suny did not mention that there is also a religious dimension unfortunately to this Moslem versus Christian but I frankly do believe that hopefully if the cooler heads prevail after a difficult period I do not see any valid reason why theAzerbaijanis and the Armenians can not live peacefully as peaceful neighbors.

MS. WOODRUFF: Well obviously a solution is going to have a great deal to do with what the Soviet leadership wants. What do you see the options are at this point for Mikhail Gorbachev?

MS. HUNTER: Well I think that Mikhail Gorbachev is in a very difficult position. On the one hand obviously he has to do something to restore order even if eventually if the Republics start to go their own way. But on the other hand I also see that the military option may not be as effective as it used be say for example in the 19th century or during the early period of the Sovietization of that area. For one thing it seems to me that there is a greater will to resist. It seems to me that in the old days the sight of one Russian soldier would send all the Azerbajanis and Armenians and others trembling. Now we have had Soviet troops there and they are not reacting as positively.

MS. WOODRUFF: And so what does that mean?

MS. HUNTER: What that means is that they will really have to frankly have to find some way of figuring a different frame work for relationships between these Republics, the neighboring areas and with the Soviet Union itself. Can they figure out an acceptable way that can be acceptable to both parties and what role the military may play in this regard I think that probably they are grappling with that now in the Kremlin as well but my sense is that would be increasing nationalist fervor in the area and the puncturing of the myth of Soviet military invincibility in Afghanistan the mere show of Soviet Troops is not going to sufficient and the Russians if they want to push the Military option they may have to kill a lot of people and that would make things later on much more difficult for them.

MS. WOODRUFF: Do you agree with that analysis Professor Suny?

MR. SUNY: In general its true that the military option is a difficult one. It is really the last resort. Gorbachev and his comrades have in the last year resisted in using the military. They have been extremely tolerant ever since the terrible tragic event April 9th of last year in Georgia. And you saw just a few days ago weeks ago when Azerbaijanis were tearing down the guard posts along the Persian Border that in fact the Soviet troops stood by and watched. Now in fact that kind of restraint of military force nevertheless has not solved the problem in the region but allowed for even greater violence including this recent pagron that is going on in the Capital Bachu where Armenians have been doused with petrol and set a fire and really where there is the most horrible kinds of instances violence that we have seen in the Soviet Union so far.

MS. WOODRUFF: So you are saying the restraint on the part of the Soviets has made the Azerbaijanis feel freer?

MR. SUNY: Its given more leeway, more openness to the kind of militant nationalists that have acted in recent days. But I would say this that Mikhail Gorbachev in a way has what I would call a dangerous opportunity at hand. If he can bring order, however temporary to the region, and establish a new authority, a new renewed communist party in Azerbaijan then he would have shown that there are limits to which Soviet power can be pushed. Recently we all watched this crisis in Lithuania. It would have been, of course, incredibly inappropriate for Gorbachev interested as he was to prevent Lithuanian independence to have sent troops in to that area where the Lithuanians have acted very astutely politically and with out provocation. Here is an opportunity to atleast show that the Soviet State still has authority that the Army can act. Of course, I said a dangerous opportunity because if they fail then who knows what will happen next.

MS. WOODRUFF: And Ms. Hunter do you agree with the analysis that Gorbachev really his hands are tied? That if he does use troops there will be incredible bloodshed, if he doesn't who knows what the solution is for him?

MS. HUNTER: I think that Gorbachev has a very extremely difficult problem on his hands because the Azerbaijani Armenian strife is just the tip of the iceberg. The whole Soviet Asiatic Republics are full of ethnic problems and difficulties. The Russians have a difficult choice here. If they wanted to intervene on the part of the Armenians, the Christian Armenians, and then of course this would also put the rest of the Asiatic Moslems against the Russians and it may cause them more problem in other Turkic Republics. So I frankly think that the military option although it may be used I think that it is going to be a limited success and what ever success is going to be temporary. Nationalist feelings are up. They are not going to be quelled so easy.

MS. WOODRUFF: Shireen Hunter and Ronald Suny we thank you both for being with us. Jim.

MR. LEHRER: Still to come on the Newshour tonight a former Romanian Intelligence Official and problems at the Chicago Board of Trade. NEWS MAKER - ROMANIA - SPY STORY

MR. LEHRER: Next tonight a look inside pre revolution Romania. It comes from Ion Mihai Pacepa, the man who ran Nicolae Ceausescu's Foreign Intelligence Service. Pacepa traveled in high circles with Ceausescu. Here he is with Henry Kissinger during a Ceausescu visit to Pres. Carter in 1978. Pacepa also spent much time with Elana Ceausescu, the dictator's wife and No. 2 boss of the country. Here they are visiting with Mrs. Rosalyn Carter. Pacepa defected to the United States in 1978. Three years ago he published his memoirs which are full of stories of international spying and intimate personal details about the lives of top ranking Romanians and foreigners. He has Americanized his first name to Mike and now works as an engineer. He had left behind his daughter, Dana, until she flew out of Romania after the December revolution. He declined to do any broadcast interviews. I talked to him this afternoon. Mr. Pacepa, welcome.

ION PACEPA, Former Intelligence Chief, Romania: Thank you.

MR. LEHRER: You've asked that we photograph you in a way that your face is unrecognizable. Explain why you've asked us to do that.

MR. PACEPA: In 1978, when I left Romania, I was sentenced to death in a two hour trial, probably very similar to Ceausescu's trial. Unfortunately, this sentence has not been cancelled yet. On the other hand, just a few months ago, Ceausescu's agents in the United States were offering $2 million for each piece of information about my whereabouts. According to my best knowledge, they are still here in this country.

MR. LEHRER: But your photograph has appeared and was in your book and was in newspapers, but you believe that as long as they don't get a really fresh look at you, then you'll be safer, is that right?

MR. PACEPA: Yes, I do believe that.

MR. LEHRER: And you think that even though Ceausescu is gone that there still may be people in Romania that want you killed?

MR. PACEPA: Well, my feeling is that Ceausescu is gone, but the system that kept Ceausescu in power for 24 years is unfortunately still in place. That's his personal army.

MR. LEHRER: You say they're still in place. What do you mean?

MR. PACEPA: Well, youknow, on December 25th, Ceausescu was executed, and after that, Romanian TV showed Ceausescu's lifestyle, Romanian TV showed Elana's jewelry, furs. It's very good. It's good for the world to know how a Communist dictator lived, but I would have expected that the new people going in there would have shown not only his lifestyle but his instruments who kept him in power for 24 years. I would have been very happy to see the electronic monitoring centers who permitted Ceausescu to know what more than half of the population of Romania thought, I would be very happy to see them opening their doors and saying, look, there they are, we are going to make them also a museum.

MR. LEHRER: Now these are electronic monitoring devices that monitored telephones and bugged rooms.

MR. PACEPA: Absolutely.

MR. LEHRER: And half the population was susceptible?

MR. PACEPA: Well, the day I left Romania, they were able to simultaneously monitor 100 microphones or telephone lines. Ceausescu's plan was to be able to monitor the whole population, population of Romania, until 1984.

MR. LEHRER: And what were they, what did they want to hear, what were they listening for?

MR. PACEPA: That's the way he kept his grip on power, knowing what was happening in every single office and every single apartment. You know, there was a big army of very little people, faceless people, who didn't know anything, they didn't do anything but listening and writing what was happening in the most intimate moments of the life of everybody. I know I was monitored 24 hours a day. I know Ceausescu's children were monitored 24 hours a day. I know his other relatives were monitored 24 hours a day. I know the army was, the leadership of the army, the leadership of his personal army, the Securitate, they were monitored 24 hours a day. It was an entirely different way of leading, if you want, very difficult for a normal man like you.

MR. LEHRER: Why did the people, it's hard to understand why the people put up with this. I mean, they must have known about it. They must have known that they were being monitored. They must have known that this man was a ruthless dictator. Why did they put up with it?

MR. PACEPA: Well, it's easy to say now, they did not. They did not. That was the most, one of the most -- part of Ceausescu's security forces, nobody knows. And I have to say that they were able to learn only very recently up to, I say up to January 1988, Romanian people knew Ceausescu only the way he was presented by the Romanian propaganda. It was, I do not want to leave the impression that I am going to self-promote my book, but in January 1988, Radio Free Europe started broadcasting excerpts from Red Horizons and - -

MR. LEHRER: Red Horizons is your book.

MR. PACEPA: Red Horizons was my book. And I would say that from that moment, the idol, the god was naked. And people could see that this guy was a drug dealer, that this man was an arms smuggler, that this guy was just a normal criminal, that he had a life of luxury paid for with this money.

MR. LEHRER: How luxurious was it?

MR. PACEPA: Well, very luxurious, what should I say.

MR. LEHRER: Give me an example of the way he ate and slept and rode and was entertained, I mean, if you use those as guide posts for luxury.

MR. PACEPA: I would say that my previous boast was paranoic, if you want, a paranoid fear for his personal life. His kitchen was somewhere 500 meter farther from his house, connected by a tunnel. There were 15, 16 people cooking for him there and one or two guys tasting every single piece of food. After that food was locked, sent through the tunnel into his dining room, unlocked, served. The dining room was shown on Romanian TV. Well, a tennis court, if you want with a huge table, two chairs.

MR. LEHRER: One at each end.

MR. PACEPA: A king and a queen.

MR. LEHRER: A king and a queen. Did the people of Romania not know that he lived this way?

MR. PACEPA: No, they did not know.

MR. LEHRER: How could they not have noticed?

MR. PACEPA: Because he was surrounded by his personal army who did not allow anybody to poke his nose into his personal life, because he was surrounded by an army of Romanian journalists who did exactly what they were told to do. No media was allowed to set foot into his palace or into his palaces.

MR. LEHRER: Well, there were people like you and other people who did his bidding, did what he wanted. Why did you all do it?

MR. PACEPA: Well, for a period of time, I myself, thought he was doing something good for that country. In 1965, '66, '67, he came to power, he sounded good. He sounded that he would make a difference. He sounded like he wanted to make Romania, a poor country, into an industrial country, that he wanted to give the Romanian people a different standard of living. It took a while until I understood and it took a while until other people understood that over the years Ceausescu started considering his country his personal property and he treated Romania as a personal property.

MR. LEHRER: What was his attitude toward the people of Romania?

MR. PACEPA: The people were numbers, nothing but numbers.

MR. LEHRER: How does a man go about arriving at that attitude towards his people?

MR. PACEPA: In my view, Ceausescu was a Marxist Hitler. He played the nationalist court. His 2000 years of national continuity of the Romanian people, it's very similar to Hitler's 1000 year -- he had Hitler's movies into his house and he watched Hitler's movies and he tried to learn Hitler's way of touching people, Hitler's charisma. For instance, one of these movies was Hitler's speech, the speech he made in 1936, at the opening of the Olympic games of Berlin, he was fascinated. He saw all these masses on the stadium mobilized by Hitler. That's what he wanted to do. And he did.

MR. LEHRER: Did he have a grand design? Hitler had a grand design. He wanted to take over Europe. What did Ceausescu have in mind?

MR. PACEPA: Well, Ceausescu wanted to build the whole Romania as a monument for himself. He wanted to be recalled by history as a president who doubled the population during his reign and his abortion law was one of the measures; everybody should have four children. He wanted to build a water way from his native town up to the Black Sea as a monument to his dynasty, what he started. He built the first part of his waterway from Danube to the Black Sea, and according to the United States Congress reports, the quantity of earth excavated for this part is higher than the quantity of earth excavated for both the Panama and the Canal Suez. I don't know if it is exactly accurate but that is what the United States documents, Congress documents say.

MR. LEHRER: When it came time for the revolution to come and the people finally revolved against Ceausescu and he had the secret police in place, he had all of his mechanisms in place against the people and yet he could not escape, he got caught. What happened, do you think? I know you weren't there, but what is your speculation as to what happened?

MR. PACEPA: In my view, the Romanian revolution of 1989 was a revolution started by the media and one TV -- it was-- and I don't know how to emphasize, there were the radio voice of America who eventually presented Ceausescu naked as he was and gave the Romanian people a chance to see that the god was not a god.

MR. LEHRER: But why couldn't he get out of there? Didn't he have an escape plan to go somewhere?

MR. PACEPA: He did have an escape plan but it was too late. During the night of December 21st, Radio Free Europe and Radio Voice of America broadcasted over and over a tape, a small tape, people facing tanks. I know this from daughter who just came here and she said, daddy, it was something unbelievable, women, men, saying, soldiers, we are men, we are women as you are. We didn't, we were not able to eat for two days, we do not have weapons, don't shoot. Then the machine guns and a silence. Well, next morning Ceausescu, believing that he was still a Hitler, that he would be able to put his hand on the masses, he ordered that people from the whole Bucharest be gathered in front of his palace. He wanted a big demonstration and he started making a speech. People who over the night heard these tapes started yelling, "Ceausescu, killer, Ceausescu, killer!". At that moment, the TV cameras were focused on Ceausescu's face.

MR. LEHRER: We ran those here. We had those.

MR. PACEPA: He puzzled. He went one step back. His eyes were looking for help. They stopped. It was too late. Ceausescu blinked. They ran to his palace, they took over his office, they threw his books away and that was the end of the dynasty.

MR. LEHRER: And all of his preparations were not enough.

MR. PACEPA: You know, he had like any other Communist leader, he had some plans for defending himself in case of a coup against him. They were sophisticated. They were elaborate, but everything fell down in front of the power of these TV cameras.

MR. LEHRER: Finally let me ask you this. Do you believe that Ceausescu was just an aberration, a one time shot, or do you think Romania has put him and his type behind it now? I mean, do you look forward to the future of your country?

MR. PACEPA: I'd be very happy to see a free Romania. I mean, to think that my native country would be a normal country, but unfortunately, I have some doubt. Because of Ceausescu's private army, because of Ceausescu's --

MR. LEHRER: His what?

MR. PACEPA: His private army.

MR. LEHRER: I see, private army.

MR. PACEPA: Because of the Securitate, because of all these millions of microphones, because of this army of little faceless men, who didn't do anything but write down whatever people in Romania did, or because of all this, there was no opposition, there was no Lech Walesa, there was nobody able to step in during that first moment of political vacuum. The only ones who were there ready to step in were also Communists, people with some experience. These people who were persecuted by Ceausescu before, fired by Ceausescu, they stepped in. They took the power. They led the revolution, if you want, up to a certain point. They did a good job. I mean, they got rid of this sick man. The problem is there was too much blood in Romania to change a man for another man. My view is that we should change the system who created Ceausescu, the system who kept Ceausescu in power, the system that any time would create another Ceausescu and at any time could repeat what, these 24 dramatic years in Romanian history.

MR. LEHRER: Mr. Pacepa, thank you very much for being with us.

MR. PACEPA: You're very welcome. UPDATE - COMMODITIES PROBE

MS. WOODRUFF: Next tonight an update on the Chicago Commodities Markets which last year were rocked by an FBI investigation, charges of fraud and an ongoing series of indictments. One of the markets, the Chicago Board of Trade, today is holding its first election for chairman since news of the investigation became public. The main campaign issue has been whether to sell the Board's downtown building, but outsiders say there's a bigger problem, restoring the public confidence in the markets. Elizabeth Brackett reports.

MS. BRACKETT: The Chicago Board of Trade has long stood at the foot of Chicago's LaSalle Street as a symbol of the free market system at its best, but developments here over the past year have shown that system at its worst. A year ago, Chicago's Commodities Exchanges were stunned by the news that an undercover FBI operation had led to the indictment of 46 traders both here at the Board of Trade and the Mercantile Exchange. Last week another shot came with the filing of this court document in which traders were heard bragging to FBI agents about cheating their customers and making illegal trades. This new information has again raised the question for the public are the markets honest. To the outsider, this is chaos. But to the traders and brokers in the trading pits in Chicago, it's business as usual, the way they've bought and sold commodities and futures contracts for 141 years. All this frantic shouting and waving is part of an arcane bidding system called "open outcry". This system was one of the reasons why former Sen. Thomas Eagleton resigned from the board of the Chicago Mercantile Exchange last November. He says the exchanges stick with the old method for one reason, it's easier to cheat.

THOMAS EAGLETON, Former Member, Chicago Board Of Trade: That's the principal source of illegality in Chicago. That's when the deals are made. That's when things can't be checked or traced, because it's all done verbally and with gestures and scratches and winks, and that's what has to be changed if you're going to have honest exchanges in Chicago.

MS. BRACKETT: How can brokers take advantage of the open outcry system to cheat their customers? Steve Senderowitz, a Chicago lawyer specializing in commodities fraud explains.

STEVE SENDEROWITZ, Commodities Lawyer: If the order is given to a broker let's say at 11 o'clock, it reaches the floor at 11:02, it gets into the pit at 11:03, and the broker can fill the order by 11:05, where between 11:03 and 11:05, the price can change. It can change many times. The allegations that are being reported are that the broker purposely gave the customer the worst price during that crucial period of time where he had several prices available to him.

MS. BRACKETT: That time gap in reporting trades could be eliminated through instantaneous computerized tracking of trades, Eagleton says. In his resignation letter, Eagleton stressed that exchange decisions were made by insiders for insiders and not in the public interest.

MR. EAGLETON: By and large, the board of governors, the Chicago Mercantile Exchange, is an assemblage of multi-millionaires who've come up the hard way and then got into these futures entries and have made millions and millions and millions of dollars and want to keep it the way it is, either for themselves to continue their businesses or to hand off to their offspring.

MS. BRACKETT: Though the exchange declined to answer Eagleton's charges on camera, it did respond in a letter to its members last November. The MERC claims that Eagleton's mere presence on the board invalidates his charge of insiders conspiring together. "Would an institution intent on protecting itself from public scrutiny invite a former Senator to sit on its board?" the MERC asks. Whether board members at the MERC keep their millions may not seem to matter to most Americans, but whether the markets are honestly run does have a surprisingly broad impact. Sen. Patrick Leahy's Agriculture Committee oversees the exchanges.

SEN. PATRICK LEAHY, Chairman, Agriculture Committee: I think it matters a great deal because just about everything that we buy or are involved with in this country is going to be affected by where the prices go on those markets. And to the extent that the money is taken out of the markets and taken to people's personal profits in an illegal or improper way, then somebody's being hurt, and usually it's all of us as consumers.

MS. BRACKETT: Producers need honest markets as well. The Chicago exchanges set prices for farmers' crops all over the world. Dan Kelley is a farmer in Central Illinois.

DAN KELLEY, Farmer: As a corn and soybean producer, the prices that I receive for my grain that I sell through, that I produce and sell through the winter months and into the summer, those prices are based on Chicago Board of Trade prices. So those prices directly affect my net income and maybe it will pay my expenses.

MS. BRACKETT: And some farmers agree with Eagleton, that the markets are not being run in their best interest. One organization, the American Agriculture Movement, took its anger to the door of the Board of Trade.

FARMER: We wanted to deliver some beans in there because we understand you folks have a problem making delivery on your contracts; you don't honor your contracts.

MS. BRACKETT: And the organization went to the courts, claiming that insider price manipulation cost soybean farmers hundreds of millions of dollars. Critics say confidence in the markets is often determined by how well the exchanges respond to crises like the FBI indictments. The exchanges maintained that they acted quickly when the first accusations came from the FBI. Dr. Susan Phillips, one of the Mercantile Exchange's public board members.

SUSAN PHILLIPS, Mercantile Exchange Board: Shortly after the sting operation, the news about the sting, that was when the MERC created a special committee that had both some inside people and some outside people to look at. Really, it was a complete review of trading regulations, and that was done before there was much nature known of any of the kinds of allegations.

MS. BRACKETT: Thomas Eagleton, who served on that special committee, maintains that the MERC's first reaction was one of self-protection, not investigation.

MR. EAGLETON: The reaction from Mr. Salzman, the lawyer for the Chicago Mercantile Exchange, is the first thing we've got to do is to have our system so that no more FBI agents can come on the floor of the exchange, not a reaction of cleaning up our act. The reaction was keep the FBI out and bizarre to say the least.

MS. BRACKETT: Eagleton's charges and the FBI indictment raise the questions of whether the exchanges can continue to regulate themselves or whether more and tougher government regulation is needed. Les Rosenthal, who used to be chairman of the Board of Trade and is running for that position again, says the exchanges do very well in regulating themselves.

LES ROSENTHAL, Chicago Board of Trade: I absolutely think that self-regulation is working. I know that that is a common approach on people in the industry but I don't think that it's presented strongly enough to the outside and to the public. I don't think, for instance, ifyou would have contact with the users of the market, I don't think the users, themselves, are as upset with what they see happening in the business.

MS. BRACKETT: Not everyone on the exchanges agree that self- regulation works. Susan Phillips was the top government regulator when she chaired the Commodities Futures Commission from 1982 to 1987. She found that low budgets always made it difficult for the government to adequately oversee the exchanges.

SUSAN PHILLIPS: We requested increases every time. The markets were expanding. The period of time that I was there, the market increased many fold, and so certainly we were trying to keep up with things, but nobody in Washington was getting a great deal of money throughout the '80s.

SEN. LEAHY: If we look for a way not to face up to the tough questions, then the American public will lose confidence in these markets.

MS. BRACKETT: Sen. Leahy's Agriculture Committee has written new legislation that would strengthen the Commodities Futures Trading Commission and crack down on the exchanges. The bill awaits final action this spring.

SEN. LEAHY: The CFTC was described, I believe, by Sen. Eagleton as a stupid pygmy. There are a lot of members of Congress, both Republican and Democrat, who feel that is so. It is true they have not had adequate staff, they have not been able to be adequately aggressive. We'll give them the tools and the legislation to be aggressive. Then we're going to look to the White House to appoint members of that commission who are both knowledgeable and very very aggressive.

MS. BRACKETT: But Securities Lawyer Thomas Russo who wrote many of the original CFTC rules regarding futures trading says legislation will never be enough.

THOMAS RUSSO, Securities Lawyers: There are lots of traders who make more money in a year than the CFTC has in their budget, so I find it hard to believe that that kind of staff is going to be able to do a job in a world that has grown like topsy over the past decade.

MS. BRACKETT: Sen. Leahy takes a "wait and see" attitude towards open outcry, hoping the tighter audit trails called for by the new legislation will be enough. Not a chance, says Sen. Eagleton.

MR. EAGLETON: You cannot have a fully successful audit trail without doing away with open outcry. A few people get together over in a corner of that pit and cannot be seen by the live investigator and cut their little deal and execute it verbally. That part of the system cannot be checked as long as open outcry remains.

MS. WOODRUFF: The exchanges will fight hard to keep open outcry which they maintain is essential to allowing the markets to react quickly, and the exchanges will fight to restore public confidence. But with more indictments predicted, that may be the toughest job of all. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, ethnic violence in the Soviet Union worsened, army troops attempted to restore order in Azerbaijan, and AT&T said it fixed a computer problem that knocked out its long distance service yesterday. Good night, Judy.

MS. WOODRUFF: Good night, Jim. That's our Newshour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.