The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, a summary of today's news, excerpts from the House debate on changing the campaign finance system, a look at the collapse of a company called Global Crossing, a report on the war crimes trial of Slobodan Milosevic, and a Newsmaker interview with President Musharraf of Pakistan. NEWS SUMMARY JIM LEHRER: The House today passed a campaign finance reform bill, then it began debating amendments that could make or break that legislation. Overall, the bill would ban donations of unregulated soft money to national political parties. The new rules would not take effect until after the elections this fall. At the White House President Bush voiced concern about that provision. PRESIDENT GEORGE W. BUSH: I want to sign any bill that improves the system. And it seems like to me if they get a bill out of the House of Representatives that improves the system, it ought to be in effect immediately. But we'll see what comes my way, and I, I would like at it very carefully and give it a good look.JIM LEHRER: We'll have more on this in a few minutes. In Afghanistan today, gunmen opened fire outside a U.S. Army base near Kandahar. The U.S. troops returned fire and detained seven people. There were no casualties. North of Kabul an American soldier was killed today in an accident involving heavy equipment at the Bagram Air Field. Last night eight U.S. soldiers were injured when their transport plane crashed in a remote part of Afghanistan. The military said there was no indication hostile fire was involved. In all, twenty U.S. troops and one CIA officer have died in connection with the Afghan war. 76 troops have been wounded. Only two of the deaths were due to enemy fire. A governor in southern Afghanistan said today a U.S. air raid killed at least a dozen children in October. He said the Taliban used them as human shields. Villagers said there were no Taliban present. A U.S. military spokesman said the attack targeted a leadership compound. The American who fought with the Taliban pleaded not guilty today to a ten-count federal indictment. John Walker Lindh is charged with conspiring to kill Americans and aiding the al-Qaida network, among other things. If convicted, he could face life imprisonment. There's a hearing Friday in Alexandria, Virginia, to set a trial date. Pakistani President Musharraf said today he is "reasonably sure" Daniel Pearl is still alive. He's the "Wall Street Journal" reporter kidnapped in Pakistan three weeks ago. Musharraf met with President Bush at the White House. He said the kidnapping could be a backlash to a crackdown on Islamic militants. PRESIDENT PERVEZ MUSHARRAF: I expected a certain degree of fallout of these steps, but however, I would like to say we are not deterred. These kind of things were expected and we will meet this challenge and try to resolve whatever negative influences it creates in our society. I very much hope that with all our efforts and the combined efforts of all the intelligence agencies in Pakistan, we will be able to get Mr. Pearl released. JIM LEHRER: We'll talk with President Musharraf later in the program. Slobodan Milosevic today accused the UN War Crimes Tribunal of staging a lynching. The former Yugoslav leader spoke briefly after prosecutors finished outlining their case against him at the Hague. They alleged he was responsible for thousands of deaths during three Balkan wars in the 1990s. Milosevic will present his formal statement tomorrow. On the Enron story, federal regulators will investigate whether the energy company and others manipulated power markets in California last year. The head of the Federal Energy Regulatory Commission announced that today. A ten-fold spike in electricity and natural gas prices helped cause blackouts across California a year ago. Enron has denied wrongdoing. The Senate passed a farm bill today. It authorized $45 billion over the next five years, an increase of more than 25%. The bill would increase subsidies for grain and cotton, but limit how much any one farm could receive. New subsidies would go to honey, wool, lentils and other commodities. The bill also restores food stamps to many legal immigrants. It must now be reconciled with a House version. At the winter Olympics in Salt Lake City today, the head of the International Skating Union confirmed there were unspecified allegations about the judging in the pairs figure skating. A Russian couple beat two Canadians Monday night, touching off widespread criticism. In today's competition, Germany, Norway and Switzerland won gold medals in the biathlon and ski jumping. American Bogi Miller won the silver in the men's combined skiing. As always, television contracts prevent us from showing you video of those events. And that's it for the News Summary tonight. Now it's on to the House debate on campaign finance reform, the story of Global Crossing, Milosevic in the dock, and President Musharraf of Pakistan. FOCUS - MONEY POLITICS JIM LEHRER: Kwame Holman has the political money story. KWAME HOLMAN: In a House office building early this morning, Democrats came together in hopes a united front would win a final victory for the main campaign finance bill most Democrats have supported for years-- most Democrats, but not all. REP. BART STUPAK: In the past I haven't supported it, despite my Democratic Party being in favor of it because I didn't think it was fair. But this has come much closer to fairness. I think it has matured over the couple of years here. I think we got a pretty good bill. KWAME HOLMAN: House Republicans generally have opposed the bill known as Shays-Meehan. After their strategy session, they were prepared to stop Shays-Meehan and its ban on so- called soft money political donations by any means available. REP. TOM REYNOLDS: There's people of both parties that don't want to see the destruction of our national parties, and that's what this bill does. KWAME HOLMAN: Meanwhile, leaders of the campaign overhaul effort from both parties met in a room in the Capitol on the way to what was expected to be long hours of legislative in-fighting on the House floor. REP. RICHARD GEPHARDT: I do not think this helps either political party. It does help the American people. It puts politics back into the hands of individual Americans and takes it away from the wealthy, well-heeled special interests. KWAME HOLMAN: As soon as members got to the floor, Republicans wasted no time challenging Shays-Meehan. They charged last-minute changes made to the bill didn't meet the requirements of the so-called "discharge petition" that forced Republican leaders to bring the bill up for a vote. SPOKESMAN: Does the bill as presented under the rule comply with the dictates of the discharge petition, or are we operating under a substitute version? SPOKESMAN: We are operating under the terms of House Resolution 344. SPOKESMAN: Further inquiry. SPOKESMAN: A motion to adjourn has been offered. It is not debatable. The question occurs on the motion to adjourn -- KWAME HOLMAN: The House did not adjourn and the campaign finance principals settled into a spirited back and forth. Massachusetts Democrat Martin Meehan, half of the Shays-Meehan bill's sponsorship, had a prediction on his bill. REP. MARTY MEEHAN: We're going to debate it until 3:00 AM if we need to, and we're going to win in the end. KWAME HOLMAN: In accordance with rules agreed to last night, the House would consider Shays- Meehan and two other campaign overhaul bills. The first was offered by Majority Leader Dick Armey on behalf of the Republican leadership. REP. DICK ARMEY: Mr. Chairman, in light of the days debate that I anticipate will feature a great deal of self-flagellation and tacit indictment of one another, let me state at the outset that I am not now, never have been, nor ever will be corrupted by contributions to my campaign in soft or hard money. At least do us the courtesy of giving us the benefit of the doubt with respect to the suspicion that we're not total idiots. SPOKESPERSON: Will my friend yield? REP. DICK ARMEY: You're either for a ban on soft money or you're not. No, I have no time to yield. You're either for a ban on soft money now or you're not. You're either for tricks and gimmicks, exceptions and loopholes, or you're not. If you're for a real ban now, vote for Armey. KWAME HOLMAN: Armey called his plan "Ban it All, Ban it Now." It would end all soft money contributions-- the unregulated unlimited donations now given to the political parties by corporations, unions and individuals. But the Armey bill would go further and ban such contributions to private advocacy groups involved in federal elections. Georgia Republican John Linder faced off with Michigan Democrat Sander Levin over the Republican alternative. REP. JOHN LINDER: This bill was essentially introduced in March of last year. Both parties raised about the same amount of soft money, about $245 million in the last cycle. And we should ban it all. And those who don't want to ban it all don't want to ban it. If you want simply to curb some soft money but not all, support Shays-Meehan. If you want to simply marginally reduce corporate, union, and special-interest loopholes, support Shays-Meehan. If you want to nibble around the edges of this debate year after year after year, then Shays- Meehan is the bill for you. But if you want a complete and total ban on every dollar of soft money involved in federal election advocacy today, then join me and Dick Armey and support this substitute. Join us. Ban it all, ban it now. REP. SANDER LEVIN: What we are seeing here are tactics to obscure the issue. Shays-Meehan does not nibble around the edges of soft money. It is absurd to talk that way. What it tries to do is to preserve the democratic processes of registration in getting out the vote. And what does the Armey amendment do? What it essentially says is no one can use even their own funds to help register people or get them out to vote, whether its the NAACP, or the NRA, or anybody else. Nobody can use any of their own treasury money. It's anti-democratic. What it is, is a smokescreen, and we can see through it. KWAME HOLMAN: Around lunchtime, the Armey plan went down, with 44 Republicans joining almost all Democrats to defeat it. The next campaign overhaul plan was offered by Ohio Republican Bob Ney. Last summer he proposed capping soft money rather than eliminating it. Today, he dropped that idea and proposed an earlier, more restrictive version of Shays- Meehan, which the authors changed last summer in order to attract votes. REP. BOB NEY: Well, the substitute I offer today is the bill that this House has passed previously. I offer it not because I think it's really a good bill and not because I really want to particularly see it passed. On the contrary, I think this is a bad piece of legislation. We're not playing games anymore. As some have said, we're now shooting with real bullets. The legislation that passes this House is very likely to reach the President's desk and become law. Given that, I think it is important to give members the opportunity to enact legislation that they previously supported on this floor. KWAME HOLMAN: But members disagreed with Ney and voted down his idea. As it became increasingly clear Shays-Meehan would be the bill of the day, members focused their attention there. REP. LINDSEY GRAHAM: If there is a bill in Congress that affects the every day American somebody can spend $10 million to either party and you'll never convince me that doesn't affect the quality of legislation. I'm ready and willing to do something about it even if I have to argue and disagree with the people I hold dear personally and professionally. I think Americas needs to change the way we conduct our campaigns. And I'm willing to pay a price for making my friends mad at me. REP. JOHN DOOLITTLE: I just want to say the disastrous present law we have was given to us by the same liberals who are now bringing to us an updated version in the Shays-Meehan bill. This law was rammed through in 1974 by liberal Democrats on the far left of the think tanks to try and take advantage of Republicans through the law and make it harder for them to campaign. It worked. It took them 20 additional years before we won the House of Representatives as a result of that law. If this disastrous bill passes today unamended, I suspect we'll have another 20 years in the trenches before we ever come back. KWAME HOLMAN: The vote on the Shays Meehan ban on political soft money ended late this afternoon. 39 Republicans joined 200 Democrats and one independent to approve the bill. FOCUS - ROUGH CROSSING JIM LEHRER: Now, the rise and fall of the company called Global Crossing. Spencer Michels begins. SPENCER MICHELS: While the collapse of Enron has captured the attention of the country, another troubled corporate giant has also gone bankrupt-- the fiber optic firm Global Crossing. And now, as with Enron, there are questions about its bookkeeping practices, and why top executives walked away with hundreds of millions of dollars while other stockholders suffered heavy losses. Two weeks ago the $22 billion company filed the fourth largest corporate bankruptcy ever in America. Global Crossing made its fortunate in fiber optics, the technology that lets a thin strand of glass carry huge amounts of data or 30,000 phone calls at the same time. Fiber optic networks make up the backbone of the Internet, allowing images like this movie trailer to be transmitted at high speeds. In the late-'90s, Global Crossing raced to live up to its name, laying fiber optic cables around the world. Its network stretches 100,000 miles. Parts of it are under the Atlantic and Pacific Oceans. But the fiber optics industry crashed in late 2000, when investors dumped the stocks and many companies went under. Global Crossing employees and other shareholders lost more than $450 million in stock. But in the three years before the collapse, executives sold a total of $1.3 bill Global Crossing stock. Company Founder and Chairman Gary Winnick made $730 million. CEO John Legere, who served for just two years, received $15 million in compensation. This week, both the FBI and the Securities and Exchange Commission have been investigating whether Global Crossing improperly inflated its revenues. Like Enron, there are reports of employees raising concerns about deceptive bookkeeping as early as last summer; and like Enron, Global Crossing used Arthur Andersen as its auditor. That raised some questions in Congress last week, when Andersen's CEO testified on Enron's problems. SPOKESMAN: You have the great distinction of being the auditor on the largest bankruptcy in history, and now the fourth largest bankruptcy in history. And I actually think that this committee should start looking into things other than just Enron. SPOKESMAN: Congressman, with respect, Global Crossing stock has been coming down for months and months and months because its business was not succeeding. The prices for its product came down precipitously. And I think what we need to do-- and you know this well, I'm sure-- is we need to distinguish between a business failure-- and there will be business failures in this country-- and an auditing failure. SPENCER MICHELS: Global Crossing has yet another similarity with Enron: Strong political ties. Its shareholders include former President George Bush, who received $80,000 in stock for speaking at the company in 1998; and former Democratic National Committee Chairman Terry McAuliffe-- he made $18 million selling company stock in 1999. In the last election, Global Crossing gave $2.9 million to the Democratic and Republican Parties and their candidates, making it 23rd on the list of top donors. JIM LEHRER: Gwen Ifill has more. GWEN IFILL: And joining us to discuss Global Crossing and the remarkable resemblance its successes and failures bear to the Enron experience, are Rob Frieden, Professor of Telecommunications at Penn State University; and Susan Kalla, senior telecom analyst at Friedman, Billings and Ramsey, a brokerage firm based on the East Coast. Welcome, so, Rob Frieden, what caused the fiber optic industry to collapse? That is the basic underlying question here. ROB FRIEDEN: Yes, well, I think the first point emphasize is that we have a glut of fiber optic capacity in various ocean regions and there is a lot of cable capacity that has not yet been activated but as well needs to be used before we get out of this glut. GWEN IFILL: Susan Kalla, we just heard Joseph from Arthur Andersen say the business was not succeeding, and that was what the problem was at Global Crossing. Is that what happened? SUSAN KALLA: Well, I believe after the Telecom Act was rewritten in 1996, there was a lot of euphoria in the business. It was when the Internet was just taking off and so much money flowed into the business, so much capital from Wall Street. $500 billion flowed into the business between 1997 and 1999. And with all of this money, an array of different competitors start to build out global networks, in a race to be the first one to finish and they started finishing them out, finishing out their global networks in the early 2000. And when those networks were lit, suddenly there was way more capacity than anyone could anticipate using. And the prices started to just plummet. And in 2000, in the year 2000, prices for transatlantic minutes of use declined by 60%. And in 2001, prices in the wholesale market declined 90%. GWEN IFILL: Now, Professor Frieden that is interesting, that's how the business part of this failed. Was there anything -- is there anything to be learned from what we learned from Enron about the way managers there managed the business, which also brought it to the brink, or brought it to bankruptcy? ROB FRIEDEN: Yes, there was a real gold rush mentality and a real emphasize on doing deals and the excitement of swapping capacity and the press releases that would herald multimillion dollar -- hundred dollars million dollar deals. GWEN IFILL: I have to interrupt you. You said swapping capacity. What is that exactly? ROB FRIEDEN: Well, typically a company is going to have an investment in a submarine cable in one ocean region, it may want to develop a one stop shop offering of capacity throughout the globe. Global Cross is one of the companies that had capacity in a lot of ocean regions but still companies typically want to calibrate their inventory and that means that Global Crossing may have wanted to swap some of its Atlantic capacity for Pacific capacity. GWEN IFILL: Whether, indeed, that actually existed or not in terms of in a business sense. ROB FRIEDEN: Yes, and further to this point about a gold rush mentality, and the emphasis on the deal, the real question got down to how do you go about booking this investment? How do you go about declaring present revenues as opposed to future revenue? Many of these cables have a useable life of tens of years. And a deal might provide for a cash payment, but then you have to sort of advertise or spread that payment over the life of the cable. A press release might herald $100 million investment or purchase of capacity but it might be ten million dollars in each of ten years. GWEN IFILL: Miss Kalla, let's talk some more about this gold rush mentality. There were reports of $10 million signing bonuses and $3 million severance packages for people who weren't even leaving the company. Was this aggressively -- were they being aggressively optimistic about the potential for net gain here or were they bordering on fraud? SUSAN KALLA: Well, that's for the courts to decide. It's -- what they tried to do was to build out the networks as quickly as they possibly could and then put on revenues as quickly as they possibly could. And for -- some of the allegations surround how they booked those revenues; if the revenues for a long-term contract, a 20-year contract were booked, they would sometimes take the entire amount up front. And the, they put the revenues on the operating performance and they put the expenses on the balance sheet if they did a swap then they counted those expenses as capital improvements. So if they did a swap, they would in essence just give you the revenue side and because there was no expenses associated with them, sometimes they would flow straight down to the profitability line. And it looked like greater profits than possibly should have if you were using a more conservative accounting mechanism. GWEN IFILL: Now, we have heard, continue with you Miss Kalla, about Kenneth Lay at Enron putting a face on that, the management of that company. What about Gary Winnick? Tell us about him. SUSAN KALLA: Well, Gary Winnick was new to the telecom industry. I've spent a long time in telecomm and didn't know him until he entered into the business in 1997. So he was brand new, and he was actually from the banking community and the telecom industry is a very highly technical business. It's -- the sales are very large. It's a very capital-intensive business. It's in fact a very difficult business to become profitable in. It's a very difficult business to make a sale in. Some of the telecom organizations I've worked for, it takes two to three years to close a deal for 40 million dollars. GWEN IFILL: And was that not happening with the Global Crossing, it wasn't taking that long? SUSAN KALLA: Gary was able to close deals much faster. He was able to increase sales by $500 million in one year, another $500 million in another year and then a couple of billion in one year. And he was able to do that in a one-year period. That was very unusual. GWEN IFILL: Professor Frieden, we know it was unusual, but do we what whether what he was doing or what any of his deputies were doing was illegal? ROB FRIEDEN: Well, I would say the thing to emphasize is they first executed on a business plan to develop an infrastructure globally and the real question gets down to when is that capacity going to get used up and quite frankly, they failed to generate enough present revenue to make the business a going concern, but in the longer run the capacity is going to be consumed right here on the Penn State Campus, we have students who are clamoring for more bandwidth. Admittedly, they may be not paying for it at a market price, but it is going to take a lot more than just e-mail type applications, and here at Penn State the students are sending files, video files and music files. If indeed we are a sort of hot bed or test bed, the future looks very, very good indeed for slowly but surely consuming this capacity. GWEN IFILL: Well, Global Crossing was not a slowly but surely business, was it? ROB FRIEDEN: No, and they were very much encouraged to borrow money. They were making great progress. But quite frankly in the short-term they weren't generating enough money and there was such a downturn in the price of this capacity that they ultimately couldn't pay the debt that they amassed. GWEN IFILL: Miss Kalla, this isn't just about Global Crossing is it? The entire fiber optic industry is struggling with the challenges which you've laid out, what does it take for them to recover, or is it just as the professor said just waiting for the demand to meet the supply? SUSAN KALLA: Well, the bottleneck in the whole network is really now at the local end. It's to the home and to the business. Only about o 10% of office buildings are connected to fiber optics. Most offices, small businesses, and residences are connected still by copper. That is a very slow, speed transmission service compared with what fiber optic can bring. So in the local area you have very narrow pipes but in the long distance area where it's a competitive business there is huge pipes. So as soon as you can blow through the local pipes, you'll be able to access the long distance pipe and you'll fill it up. GWEN IFILL: Were the accounting and other practices at Global Crossing apparently engaged in, is that widespread in the fiber optic industry, can we expect to hear of over Global Crossings in the coming months? SUSAN KALLA: It's very common in the beginning of a network build for carriers to get together and to agree to some kind of division of labor. So each different carrier that's involved in the business builds out one segment of a fiber optic ring that goes nationally or globally. That is very common. The questions that have arised are after the networks were mostly built out, 80 to 90% built out, the swaps continued. There is some question as to whether those, those swaps were necessary or those purchases of additional capacity were necessary. And that is really a function of what the carrier was trying to bid out, what kind of contract they had, what kind of service levels they were guaranteeing. So that is going to take some time to sort out. GWEN IFILL: Professor Frieden, if one is a share holder of Global Crossing or of Enron for that matter and you have seen the stock price drop from $60 to 7 cents now -- what happens to that money? Is there any way if a company goes into bankruptcy protection that that money or that investment is retrievable? ROB FRIEDEN: I'm not saying when the shareholders who are very much at the bottom of the totem pole are going to be able to recoup much of anything. There are secured instrument holders who have a higher priority in terms of recouping what revenues Global Crossing and other companies in bankruptcy are going to generate. I think when Global Crossing is liquidated at pennies on the dollar, perhaps the acquiring company is going to have a successful going concern but the shareholders themselves aren't going to be able to hang in there and aren't legally entitled to acquire the upside that in the longer run is going to possibly be generated. GWEN IFILL: Okay. Thank you very much Rob Frieden and Susan Kalla, thank you very much for joining us. SUSAN KALLA: Thank you. ROB FRIEDEN: Thank you. JIM LEHRER: Still to come on the NewsHour tonight, the Milosevic trial and the President of Pakistan. FOCUS - MILOSEVIC ON TRIAL JIM LEHRER: Day two of the genocide trial of Slobodan Milosevic. We have a report from Gaby Rado of Independent Television News. GABY RADO : This trial always promised surprises and a clashes of wills between Slobodan Milosevic and the judges, and so it turned out. With just half an hour to go before the end of this afternoon's session, the former President of Yugoslavia disdainfully challenged both the legality of the War Crimes Tribunal, and the even- handedness of the men sitting in judgment on him. SPOKESMAN: Mr. Milosevic, it's now your opportunity to address the chamber. SLOBODAN MILOSEVIC (Translated): I challenge the very legality of this tribunal, because it was not set up on the basis of the law. The Security Council could not transfer the right that it does not have to this tribunal, and therefore, this tribunal does not have the competence to try. GABY RADO: Without pausing, the man charged with violating the human rights of hundreds of thousands of people in the Balkans then claimed his own rights had been violated when he was arrested and extradited to the Hague. SLOBODAN MILOSEVIC (Translated ): You were duty bound to call a hearing with respect to the unlawful arrest that took place on my... Over my person, and with respect to the fact that I was brought here on the basis of a crime having been committed. The prosecution has orchestrated a media campaign that is being waged and organized. It is a parallel trial through the media, which along with this unlawful tribunal, are there to play the role of a parallel lynch process. SPOKESMAN: I'm going to interrupt you. GABY RADO: At that stage, the British judge, Richard May, cut off Mr. Milosevic's microphone to ask a question. Later he dismissed the former President's complaints. RICHARD MAY: Mr. Milosevic, you indicated earlier that you wanted to make your submissions tomorrow. That's apparently not the case, because you wanted to address us today. But the matters on which you are choosing to address us are matters upon which we have already ruled. As you would know, if you had taken the trouble to read our decisions, you had the right of appeal; you did not take it. The matters, therefore, have all been dealt with; and your views about the tribunal are now completely irrelevant as far as these proceedings are concerned. SLOBODAN MILOSEVIC ( Translated ): I'll just begin... RICHARD MAY: Prosecutor, there is one matter... GABY RADO: Mr. Milosevic was cut off for a second time just as he appeared to be continuing. GABY RADO: Earlier, the prosecution showed the court ITN footage of one of the notorious detention camps for Muslims in northern Bosnia. It was intended to demonstrate that there was a criminal enterprise led by Slobodan Milosevic to rid areas of former Yugoslavia of non-Serbs. SPOKESMAN: This case is about persecution in many forms of civilians on a widespread and systematic scale. GABY RADO: The prosecution ended its opening statement by detailing a number of atrocities committed against ethnic Albanians in Kosovo. Highlighted was the massacre of more than 40 members of the Berisha family in a cafe at Suha Reka. SPOKESMAN: Not everyone was killed outright. The few who survived lived to provide the evidence you will hear or read about during this case. GABY RADO: The murders and the subsequent cover-up were the subject of a report on Monday night's Channel 4 news. WOMAN (Translated ): They started shooting at us with whatever they could lay their hands on in the cafe where we were: Guns, grenades. My children were there with me. I had my little son with me. He was hurt, so I jumped on top of him. My other two children were further away. GABY RADO: Witnesses with similar harrowing experiences will confront the former Yugoslav leader in the months to come. So Slobodan Milosevic is due to start his response to the charges against him tomorrow. His main arguments are likely to be political ones. He will claim that the West knew and approved of what he'll say were his attempts to stop the breakup of Yugoslavia in the '90s, and he'll say that his war in Kosovo was a fight against terrorism. NEWSMAKER JIM LEHRER: And now to our Newsmaker interview with the president of Pakistan, Pervez Musharraf. He joins us from Blair House here in Washington. JIM LEHRER: Mr. President, welcome. PRESIDENT PERVEZ MUSHARRAF: Thank you. JIM LEHRER: Earlier today here in Washington you said that you believe "Wall Street Journal" reporter Daniel Pearl is alive. What was that based on? PRESIDENT PERVEZ MUSHARRAF: Well, it was a guess. We, I can't be 100% sure of it. But since we have closed on, homed on, on all those people involved in the crime and it's only those who have kidnapped him who are left now, I thought that we are closing in on him. Other than that, I don't, can't be very sure about the final state. So it was just a guess. JIM LEHRER: It was a guess. There is no evidence -- concrete evidence that the man is still alive? PRESIDENT PERVEZ MUSHARRAF: Well, no. I wouldn't say that. JIM LEHRER: Some people are suggesting that this kidnapping was designed to embarrass you before and during your trip to Washington, to the United States. Do you agree with that? PRESIDENT PERVEZ MUSHARRAF: This is one of the possibilities. I say there are two possibilities. One is this. Because of my actions in the domestic area in Pakistan when I'm taking action against extremism and religious intolerance, there are people who are agitated and maybe this is one of the possibilities. But the other possibility is the intrusion of Mr. Pearl himself into areas where extremism or such extremist responses were possible. JIM LEHRER: You mean you think it maybe more designed to punish him for doing that rather than trying to embarrass you? PRESIDENT PERVEZ MUSHARRAF: Well, I can't be sure again. But these are the two possibilities. JIM LEHRER: One of the suggestions was also that they were trying to demonstrate -- in other words the people who took Mr. Pearl were trying to demonstrate that the government -- your government does not control all of Pakistan. What do you think about that theory? PRESIDENT PERVEZ MUSHARRAF: Well, we certainly control all of Pakistan. Whoever has perpetrated this act is in a very small minority. But they do create this nuisance. But there is no doubt that we are controlling the whole of Pakistan. This is a very ridiculous statement that is being made. JIM LEHRER: It's a nuisance rather than a serious challenge to you and your government, is that what you are saying? PRESIDENT PERVEZ MUSHARRAF: Well, it's... I mean the incident is definitely serious and the innocent reporter is involved and his life is in jeopardy. But I know that the extremists who get involved in such acts are in a minority. And we have initiated actions to curb them. JIM LEHRER: Were you satisfied with your meetings today with President Bush and other top U.S. officials? PRESIDENT PERVEZ MUSHARRAF: Yes, indeed. I was very satisfied. JIM LEHRER: You need some economic aid. Did you get assurances that you will, that that will be forthcoming? PRESIDENT PERVEZ MUSHARRAF: Yes, I have. We have spoken about debt forgiveness or debt write-off and also fiscal support and I'm reasonably sure or I'm very sure that these will are forthcoming. JIM LEHRER: The debt relief, the debt write off is $3 billion in total, is that correct? PRESIDENT PERVEZ MUSHARRAF: A part of it definitely. JIM LEHRER: Why is that so important to Pakistan? PRESIDENT PERVEZ MUSHARRAF: Well, we have launched an economic revival plan in Pakistan. And this economic revival plan has certain requirements. It needs -- the strategy we are following is to gain some space from our debt service obligations and within the space utilize all the funds available to us to invest in fast return development activity. And this is what we are doing and in this restructuring of our debt is essential and also getting fiscal support is essential. JIM LEHRER: Did you make that point to President Bush and others that you must have that if Pakistan is going to make an economic recovery? PRESIDENT PERVEZ MUSHARRAF: Yes, I, of course, I elaborated our requirements quite clearly. JIM LEHRER: Now, my understanding too is that you also want to buy some arms from the United States. What kind of reaction did you get to that request? PRESIDENT PERVEZ MUSHARRAF: It was a positive response. We have reached agreements on IMAC first of all. That is the training area and we are going to reestablish our contacts in that. And then there are a number of deals in the pipeline which, with the removal of the sanctions, will be initiated and we will see a breakthrough in that also. JIM LEHRER: What kinds of armament do you need and why do you need it? PRESIDENT PERVEZ MUSHARRAF: Well, the need of Pakistan are in relation to the deterrence that we desire against the threat that we face from the East and the needs are of course there are mainly in the air force side and that is what we are dealing. JIM LEHRER: You mean you are talking about the threat from India? PRESIDENT PERVEZ MUSHARRAF: Yes. JIM LEHRER: And you need what kind of planes, you need fighters or what, bombers, what kind of planes do you need? PRESIDENT PERVEZ MUSHARRAF: Well, I think it's, instead of getting involved in the expect specifics there are a lot of requirements. Yes. We definitely do require high-tech aircraft. JIM LEHRER: Is it your position that India is better equipped militarily than Pakistan? PRESIDENT PERVEZ MUSHARRAF: Yes, indeed. They are spending a lot of money. Far more than us. They've increased their budget in 1999-2000 -- 28%, and 2000-2001 by another 14%. They are importing weapons from all over the world. Therefore they are definitely much more equipped. JIM LEHRER: And so your argument to the United States officials today was you must help us arm in order to deter India from taking aggressive acts against Pakistan? PRESIDENT PERVEZ MUSHARRAF: Yes, we follow a strategy of deterrence; we are a smaller force but the deterrent strategy that we follow necessitates holding off certain quantum of equipment and certain quality of equipment and certain quantum and quality of force. That is what we aim at. And it is in this direction that we are following whatever negotiations we are carrying out in the defense field. JIM LEHRER: Now earlier today at the White House with your standing right next to him, President Bush said the answer to this is for you and your counterparts in India to sit down and start talking. Is he right about that? PRESIDENT PERVEZ MUSHARRAF: Absolutely correct. Because the core issue between India and Pakistan -- the dispute over Kashmir -- needs to be resolved and all other issues resolved through a dialogue -- process of dialogue and that will address the root cause of all this arming and confrontation that we frequently have between the two countries. JIM LEHRER: Why is the dialogue not going on? PRESIDENT PERVEZ MUSHARRAF: It's not going on because of the rigidity and obstinacy of India? JIM LEHRER: It's all India's fault. PRESIDENT PERVEZ MUSHARRAF: Well, I think so. JIM LEHRER: You are willing to sit down and talk about a solution to the Kashmir problem? PRESIDENT PERVEZ MUSHARRAF: Yes, indeed. I've said it so many times. JIM LEHRER: And what do you think the problem is? What kind of answers are you getting from India what you make this proposal? PRESIDENT PERVEZ MUSHARRAF: They did, the Prime Minister Vajpayee did invite me to India one. I went in July to Agra -- and we negotiated going forward through the process of dialogue towards the resolution of the Kashmir dispute particularly. We arrived together at drafting a declaration, which recognized the centrality of Kashmir dispute and the necessity of addressing it in order to improve relations between Pakistan and India. But having drafted that declaration jointly, unfortunately the Indian government backed down later saying that the cabinet did not approve it although I didn't think that the cabinet was there at all in Agra. JIM LEHRER: Now Secretary of State Powell and others have said that before there can be really serious talks, both sides must move their troops away from the border. Was that -- did you discuss that with President Bush and did he ask to you do that or he or Secretary Powell or some other U.S. official to ask to you consider doing that? PRESIDENT PERVEZ MUSHARRAF: We did talk about that. Immediate requirement is to deescalate on the borders. The dangers of war must be reduced. So we need to deescalate but the escalation was done by the Indian forces. They moved to the borders and as a reaction to it we also moved the troops to the borders so it can't be one-sided. It has to be an agreement by both sides to deescalate and move the troops back. JIM LEHRER: Is there any reason to be optimistic that this kind of loggerhead situation you are in now with India is going to lesson anytime soon? Is there anything Secretary Powell could do or President Bush could do to make this thing work a little quicker and relieve the tension? PRESIDENT PERVEZ MUSHARRAF: Well, I did express my gratitude to President Bush for whatever he has done and doing and also particularly to Secretary Colin Powell for his personal diplomacy which has certainly facilitated reduction in the tension. But as I keep telling everyone, as long as the capability to undertake any kind of adventurism exists with the presence of the forces on the border, the situation remains explosive. I'm sure with the efforts of Secretary Powell and President Bush, a lot can be done to diffuse the situation. JIM LEHRER: But nothing is in the works as you and I are speaking now to reduction the tension, correct, between India and Pakistan themselves? PRESIDENT PERVEZ MUSHARRAF: Well, yes, we are not talking to each other, but we are talking to each other through Secretary Colin Powell probably. JIM LEHRER: But is that working, do you think? PRESIDENT PERVEZ MUSHARRAF: Yes, it has, it has to an extent as I said. It has worked to an extent -- diffuse the situation. The rhetoric from the Indians have certainly reduced and, but the force level has not reduced, so to that extent I think that the danger still exists. JIM LEHRER: If India were willing to reduce its forces, Pakistan would match it? PRESIDENT PERVEZ MUSHARRAF: Yes, yes, absolutely. JIM LEHRER: There was much speculation after September 11, Mr. President, that your siding with the United States against the Taliban in Afghanistan was going to cause you serious political problems in your own country. What has been the result? PRESIDENT PERVEZ MUSHARRAF: Well, yes, there was. There was a danger because there were conflicting views on the subject. But the overall effect of whatever we did was support by the masses. The vast majority of Pakistan thought whatever action I took and whatever decisions I took were correct. JIM LEHRER: Do you feel they are correct? Have you had any second thoughts about the positions you took? PRESIDENT PERVEZ MUSHARRAF: No, with hindsight now after so many months -- after four months having lapsed -- I think we took the right decision. There were principle decisions in our national interest. JIM LEHRER: You, of course have a military background. How do you feel about -- what is your assessment of the way the United States and the coalition has, has managed the war in Afghanistan? PRESIDENT PERVEZ MUSHARRAF: Well, I think purely from the military angle they managed it well. The results have been produced. The ultimate result of capture of Osama bin Laden still remains elusive, but overall, effect on ground of having political arrangement, conducive political arrangement is taking shape and to that extent to the benefit of Afghanistan, to the reconstruction and rehabilitation of Afghanistan, to having a stabilized political government functioning in Afghanistan, these are the successes of the military operation in Afghanistan. JIM LEHRER: Were you personally surprised it went so fast? PRESIDENT PERVEZ MUSHARRAF: No, I don't -- I wasn't really surprised. In the interview last time when I came to the United States I did say that it should not last that long. I knew that this result would be the natural outcome. JIM LEHRER: And you're comfortable being an ally of the United States in the war on terrorism generally? PRESIDENT PERVEZ MUSHARRAF: Yes, I am. JIM LEHRER: What do you make of President Bush's contention that Iran, Iraq and North Korea are part of an access of evil? PRESIDENT PERVEZ MUSHARRAF: I would reserve my comments on it. JIM LEHRER: So you don't endorse idea? PRESIDENT PERVEZ MUSHARRAF: Well, I wouldn't like to comment on it. These are his personal views. I wouldn't like to comment on them. JIM LEHRER: As you probably know since you've been here in the United States, that there is mounting discussion about the possibility of military action against Iraq. Would you support that if there was evidence that they were building weapons of mass destruction and were unwilling to let inspectors in, you know what the argument is... PRESIDENT PERVEZ MUSHARRAF: I think I would prefer, I would very much prefer keeping my focus on Pakistan and to the problems in our region. We are too overloaded with problems internally and in our region to be considering or thinking of, about supporting or opposing whatever happens elsewhere. JIM LEHRER: Your crackdown on as you mentioned earlier -- it has been widely reported here in the United States -- your crackdown on the Islamic militants in your country, is this going to continue? PRESIDENT PERVEZ MUSHARRAF: Yes, it will. Because I've launched -- I want to remove, I want to clean the domestic environment from extremism, religious intolerance militancy, and as long as anybody is violating whatever we want to do, we'll keep moving against them. JIM LEHRER: Now you have promised elections are coming in October. They are still going to come in October. Correct? PRESIDENT PERVEZ MUSHARRAF: Sorry? JIM LEHRER: Presidential elections in Pakistan still set for October? PRESIDENT PERVEZ MUSHARRAF: Yes...not presidential elections. JIM LEHRER: Yes. PRESIDENT PERVEZ MUSHARRAF: Elections will be in October. JIM LEHRER: Elections will be in October. PRESIDENT PERVEZ MUSHARRAF: -- the national and provincial assemblies. JIM LEHRER: Yes. How do you see your future in terms of those elections and in terms of the future government of Pakistan? PRESIDENT PERVEZ MUSHARRAF: Well, I see a role for myself because ultimately, we want to ensure that the reforms and restructuring that we are doing, there is continuity and sustainability in those. We want to ensure that there is, that that national interest is kept supreme as opposed to personal and political interests as in this past decade by the previously, by the previous governments. And we also want to ensure checks and balances in the functioning of the leadership in Pakistan. So to that extent I think I have a role to play. JIM LEHRER: And you have said that you believe that Islam and democracy can thrive together in Pakistan. Do you believe that? PRESIDENT PERVEZ MUSHARRAF: Yes, indeed. They are not violative of each other. They certainly, Islam is very democratic and I don't think there is any contradiction in Islam and democracy functioning together in any part of the world. JIM LEHRER: But Pakistan would be a secular state along what, the Turkish - the Turkey pattern? Do you have a pattern in mind in a country about which you might be interested in modeling Pakistan and its future after? PRESIDENT PERVEZ MUSHARRAF: No, no, we are modeling it in accordance with our own environment, in accordance with the dictates of Pakistani environment, a homegrown environment, and let me say that the founders of Pakistan, our forefathers, the founder of Pakistan, Quaid-i-Azam Mohammad Ali Jinnah, saw Pakistan as a progressive, dynamic, moderate Islamic state. Nobody, no leadership in Pakistan can change that from Islamic state to a secular state. We are Islamic. We are an Islamic state. However that does not at all mean that it is a theocratic state. The misperception in the West probably is that Islamic state means a theocratic state. There is no room for theocracy in Islam. Therefore that is an Islamic state which has, which has equal which gives equal rights and status to minorities in the country and all people in the country. JIM LEHRER: All right. Mr. President, again welcome to the United States. And thank you very much. PRESIDENT PERVEZ MUSHARRAF: Thank you very much. FINALLY JIM LEHRER: And finally tonight, a poem about the Olympics. Here's NewsHour contributor former Poet Laureate Robert Pinsky. ROBERT PINSKY: Here is the English poet William Wordsworth writing about winter sports -- ice skating -- early in the 19th century. The passage is in the first book of Wordsworth's poem "The Prelude." It was a time of rapture! Clear and loud The village clock tolled six,--I wheeled about, Proud and exulting like an untired horse That cares not for his home. All shod with steel, We hissed along the polished ice in games Confederate, imitative of the chase And woodland pleasures,--the resounding horn, The pack loud chiming, and the hunted hare. So through the darkness and the cold we flew, And not a voice was idle; with the din Smitten, the precipices rang aloud; The leafless trees and every icy crag Tinkled like iron; while far distant hills Into the tumult sent an alien sound Of melancholy not unnoticed, while the stars Eastward were sparkling clear, and in the west The orange sky of evening died away. Not seldom from the uproar I retired Into a silent bay, or sportively Glanced sideway, leaving the tumultuous throng, To cut across the reflex of a star That fled, and, flying still before me, gleamed Upon the glassy plain; and oftentimes, When we had given our bodies to the wind, And all the shadowy banks on either side Came sweeping through the darkness, spinning still The rapid line of motion, then at once Have I, reclining back upon my heels, Stopped short; yet still the solitary cliffs Wheeled by me--even as if the earth had rolled With visible motion her diurnal round! RECAP JIM LEHRER: Again, the major developments of this day: The House passed a campaign finance reform bill and began debating a series of amendments. Gunmen fired on the U.S. Army base near Kandahar, Afghanistan. There were no casualties. And on a visit to Washington Pakistani President Musharraf said he was reasonably sure a kidnapped "Wall Street Journal" reporter was still alive but as we just heard on the NewsHour this evening he acknowledged there was no hard evidence on Daniel Pearl's fate. We'll see you online, and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.