The NewsHour with Jim Lehrer; March 2, 2007

I'm Jim Lehrer. Today's news, Laura Walter Reed-Trouble, Shields and Brooks, Port Pollution, and Insider Trading, Altonite on the Newshower. Thank you, Laura. Thank you. Thank you.

Thank you. Thank you. Good evening, I'm Jim Lehrer.

On the Newshower tonight, the news of this Friday, then an update on top-level firings over the Walter Reed Military Hospital problems. The weekly analysis of Mark Shields and David Brooks, a Newshower report about air pollution in America's ports, and an inside story of an insider trading scheme on Wall Street. Major funding for the Newshower with Jim Lehrer is provided by Somewhere west of Shenyang, a teenager stopping for dinner, which is why the soybean harvest west of Peoria is not stopping, and a soybean processor is not stopping, and a ship's captain on the west coast is stopping, but just for a while, somewhere west of Shenyang, a teenager stopping for dinner, a dinner rich in soy protein, and ADM, we like the idea of be no stopping him now,

ADM, resourceful by nature. And by Chevron, Pacific Life, the Atlantic Philanthropies, the National Science Foundation, and with the continuing support of these institutions and foundations. And this program was made possible by the Corporation for Public Broadcasting, and by contributions to your PBS station from viewers like you. Thank you. Secretary of the Army Francis Harvey resigned today. It was the latest fallout over problems at Walter Reed Army Medical Center in Washington. Defense Secretary Gates announced it, a day after Harvey fired the commanding general at Walter Reed. The Associated Press reported Gates was angered that Harvey chose a replacement who'd been criticized in the scandal.

Later today, the Army announced Major General Eric Schumacher will be the new commander at Walter Reed. In another move, President Bush ordered a full review at all military and veteran's hospitals. The White House released his Saturday radio address with the formal announcement. Some of our troops at Walter Reed have experienced bureaucratic delays in living conditions that are less than they deserve. This is unacceptable to me. It is unacceptable to our country, and it's not going to continue. Walter Reed has a long tradition of outstanding medical service. In my administration, we'll ensure that the soldiers recovering there are treated with the dignity and respect they have earned. A bipartisan commission will do the review. We'll have the full statement by Secretary Gates and more on this story right after the news summary. U.S. commanders in Iraq announced the deaths of three more Americans today, two soldiers and one U.S. Marine, and in Baghdad, car bombings killed 11 Iraqis after relative calm in the last couple of days.

10 of the victims died in a blast in Sutter City, a heavily Shiite part of the city. 17 others were wounded in that attack. Also today, the bodies of 14 Iraqi police officers were found northeast of Baghdad. A Sunni group claimed it kidnapped those officers. Tornado victims across the South and Midwest counted the deaths and damage today. At least 20 people were killed on Thursday. Tornado struck Missouri early in the morning, Alabama in the afternoon, and Georgia last night as a large violent weather system crossed the country. NewsHour correspondent Kwame Holman narrates our report. At least nine of the dead were in southwestern Georgia, where the destruction was evident this morning. One of the twisters took aim at this three-story hospital and a power station in the town of America. What we're seeing here is millions upon millions of dollars right here in America, so this commercial damage.

10 plus million dollars is easy, probably higher. In Alabama, another tornado hit Enterprise High School. For Rick. Governor Bob Riley toured the wreckage there today. We've got great community here. They're all stringing together. Officials now say eight students died at the school down from initial reports. If you walk through this building, I truly am amazed that we didn't have more loss of life. Late yesterday, rescue workers pulled victims from the near demolished building. In this particular hallway, which is right in the very center of the building, which you might think would have been one of the safer points in the facility. From what I am aware of, at this point, the walls caved in around the students who were killed. Just before the storm hit, school officials had planned to dismiss students early due to tornado warnings. It was so scary. It just went and was fine everywhere to bring this line everywhere. I got hit with a door in my arm and it was really scary.

At his briefing, the governor defended the school's decision to keep students in the building. They were probably more protected in that hallway than they would have been at home or in a mobile home. And in Missouri, a seven-year-old girl was killed Thursday when a tornado ripped through her family's motor home. In Washington, President Bush offered condolences to the victims' families. The president will travel to Georgia and Alabama tomorrow to tour the damage. Snowstorms caused major disruptions again today across the plains and Midwest. Heavy snow and strong winds created white-out conditions throughout North Dakota and Iowa. And hundreds of flights were canceled at the Minneapolis St. Paul International Airport. The weather was blamed for at least six deaths. A chartered bus carrying a college baseball team plunged off a highway overpass in Atlanta today. Six people were killed, including four players from Bluffton University in Ohio. The bus driver and his wife also died.

At least 29 other players and coaches were injured. Police said they know what happened, but not why. Just before North Side Drive, the bus took the HOV exit, continuing up to North Side Drive, failed to stop at the end of that ramp for cause or reasons unknown at this time. Apparently took a bit of a right turn in an attempt to negotiate it, failed to do it successfully. Three of the injured players were listed in critical condition today. The team had been on the way to Florida to play its first games of the season. The Environmental Protection Agency announced a new plan today to cut diesel exhaust from trains and ships. The proposed rules aimed to reduce pollution causing particles by 90 percent. Admissions of nitrogen oxides that formed small would be reduced 80 percent. The regulations would begin in 2008 and take full effect over the next 10 years. Astronaut Lisa Noak was charged with attempted kidnapping today.

Police in Orlando, Florida arrested her at an airport parking lot nearly a month ago. They said she tried to abduct another woman in a romantic dispute involving another astronaut. Noak was not charged with attempted murder as the police initially recommended. Wall Street took another hit today over economy jitters. The Dow Jones Industrial Average lost 120 points to close at 12,114. The Nasdaq fell 36 points to close at 2368. For the week, the Dow lost 4 percent. The Nasdaq fell nearly 6 percent. And that's it for the new summary tonight. Now the widening fallout over Walter Reed. Shields and Brooks polluted air near ports and an insider trading case. The fallout continued big time today from the Walter Reed story. Late this afternoon, Defense Secretary Gates made two announcements at the Pentagon.

Here is what he said. First, earlier today, Secretary of the Army, Dr. Fran Harvey offered his resignation. I have accepted his resignation. Under Secretary of the Army, Pete Karen will act, serve as acting secretary until a new secretary is in place. I thank Dr. Harvey for his distinguished service to the department and to the nation. Second, later today, the Army will name a new permanent commander for the Walter Reed Army Medical Center. This flagship institution must have its new leadership in place as quickly as possible. I am disappointed that some in the Army have not adequately appreciated the seriousness of the situation pertaining to outpatient care at Walter Reed. Some have shown too much defensiveness and have not shown enough focus on digging into and addressing the problems. Also, I am concerned that some do not properly understand the need to communicate to the wounded and their families.

That we have no higher priority than their care. And that addressing their concerns about the quality of their outpatient experience is critically important. Our wounded soldiers and their families have sacrificed much, and they deserve the best we can offer. Finally, I want to reaffirm my confidence in the staff at Walter Reed and their professionalism and dedication to providing caring treatment. From what I have learned, the problems at Walter Reed appear to be problems of leadership. The Walter Reed doctors, nurses and other staff are among the best and the most caring in the world. They deserve our continued deepest thanks and strongest support. Thank you. Judy Wood, who has more on the story. The last two days have seen the resignation of the Army's top civilian leader and the replacement of the commander of the Walter Reed Army Medical Center. For more on who in the military knew about conditions at Walter Reed and the treatment of wounded troops, we turned to two reporters who have covered this story.

Dana Priest of the Washington Post and Mark Benjamin, National Correspondent for Salon.com. Thank you both for being with us. Dana, to you first, there are already reports that Secretary Gates did this, did that made this replacement today. Because he was displeased that it was General Kevin Kiley, the Army Surgeon General, who would have been temporarily in charge of Walter Reed. What are you hearing? Well, I think that's correct. General Waitman, the commander at Walter Reed, was relieved. But many people are critical, not so much of Waitman, but of the Surgeon General, Kiley, who was commander at Walter Reed up until I think it was June of 2004. And then lived on post as the Army Surgeon General after that, and was seen as someone who knew about problems there from veterans groups, from patients, from families, really didn't do much about it. Added to that is, although the Secretary Gates was, what took part in the relieving Waitman of command, he apparently did not know that the Army had decided to replace him even temporarily with Kiley.

Someone, if you listen carefully today at what the Secretary said, he said he was disappointed with people who seemed defensive. I think he was speaking directly about General Kiley, who they've decided they will wait until after their investigation is complete to see what actions they may take against him. But even beyond that, Judy, I think the message here is that the White House is now involved, because the Army Secretary is ultimately appointed by the President. He's the civilian leader of the Army, so they really are making a statement that goes beyond the military command and beyond the military world. But I guess my first question is, if there were still so many questions about how General Kiley had handled this over the last few years, why was he named even a temporary head at Walter Reed? This was an Army decision, and as Secretary Gates hinted today, perhaps the Army isn't listening, and they're too defensive, and people other than him have told me, you know, this is part of the problem with the Army is that it is insular and when attacked, it closes up, and I don't think that's what he wants to have happen in this case.

Added to that, though, is a political dynamic. The Democrats have really stepped up their attacks on this issue. They have two high-profile committee hearings scheduled next week. The first on Monday will actually be held at Walter Reed, and will include some of the soldiers we talked to. The second one will be on the Hill and the Armed Services Committee. So I think that's part of their reaction is trying to get out ahead of what is now in part a political story. Mark Benjamin, you were writing separate stories about the treatment of returning wounded soldiers as long ago as the fall of 2003. You wrote again in 2005, 2006. Just briefly, tell us the thrust of those stories.

I think what I uncovered starting in 2003 is that the system that the military uses to care for outpatients. Now, one of the things that the military does very well is if you lose a limb, you're an amputee, that inpatient care is excellent. The outpatient care, that system is overloaded and the system to compensate those soldiers for their wounds is very complicated and very adversarial. So essentially, what we have is what Dana found at Walter Reed, and what I also reported at Walter Reed in 2005 and 2006, is a symptom of that problem. But I've also written the same story from Fort Stewart, Georgia. I've written the same story at Fort Knox. So the system is broken, and that's what you see. And you went to military officials when you wrote your stories for reaction. What were they saying? How did they explain it? I think that the military public affairs officials probably have not handled this as well as perhaps they wish they could have. And I think it's almost similar to the way that Kylie has sort of responded very defensively when the Washington Post came out with their articles on Walter Reed. To put it simply, in some cases, the military officials have simply told me there's not a problem here. All is well at Walter Reed.

What about beyond public affairs officials? Were you able to get to any of the generals, or even the civilian leadership of the military? Certainly. And there are widespread concern among healthcare providers who are obviously wonderful professionals, and some generals who believe that this system is badly broken and are ashamed and angry that it's not serving troops from Iraq and Afghanistan better than it is. Dan, how much of the, there are a lot of references of the last few days to icebergs, and we're only seeing the tip of the eye. How much of this story are we seeing and understanding at this point? Well, Walter Reed really is just a small part of it. It happens to be a very sensational part because it's right under their nose here in Washington, which actually points to another issue. If you were to ask members of Congress and their staffs, have you been ever approached by soldiers having problems, I would bet you that nearly every member and certainly the members who have large army hospitals in their districts have all been flooded, flooded with complaints about soldiers and their outpatient care. And they never got traction on that. Why is that? Why is it that an administration who pledged to treat soldiers properly and the Republican-controlled Congress that did the same really never took on this issue seriously?

In that sense, it's not quite an open secret because it's a complicated situation. Everybody has an anecdote to tell and you have to dig a little deeper to make sure that the anecdote is representative of a broken system. But there was one hearing in the House in February 2005, and not very many people paid attention to it. There was some little spark of aftermath, but it didn't go anywhere. And why is that? To me, it's because it was not a priority even of the members of Congress who are now claiming that this is top on their list. Well, that's my question. I mean, what took so long? I mean, clearly the influence of your newspaper, the influence of your and your colleagues reporting had a lot to do with this. Well, but we also have a two-party system now, in a sense. And I'm not being critical or not. I'm just saying that now you have a debate that you really didn't have. You have an opposition party close to a presidential election who can take this story and make it force it to be heard in another forum, which is on Capitol Hill. And that is exactly what they're doing. Whether the Republicans decided to downplay it because it was a Republican administration, I don't know.

But that is a new dynamic in this town that can't be ignored. Mark Benjamin, do you know anything? How much do we know? I should put it that way about General Eric Schumacher, who's been named the new head of Walter Reed. Well, it remains to be seen. I mean, what we do know is that he's inheriting a very, very difficult situation. And I wonder, the most interesting thing about him taking that job is, as we're discussing, is that the problem is not just Walter Reed. So the person that's put in charge of Walter Reed is important. But these people report to civilian leaders at the Department of Defense. The Assistant Secretary of Defense for Health Affairs, there's people that are in charge of readiness and personnel. Those people set the policy. And the policy has led to a very broken system. So these, you know, it's interesting that who's going to take over Walter Reed. But I think it will be even more interesting to see what happens with these investigations that are going on. Well, and we've also, we haven't mentioned it just now. But a few days ago, we reported that the Assistant Secretary of Defense for Health Affairs, Dr. William Wingenwater, is being replaced. And Danick, can you add anything to that about why that's happened and who that replacement is?

Well, again, I do think that it's concern that's being felt now. Obviously, there's division over the war that is enabling or freeing up other people to be more critical than they perhaps would have been in the beginning. So I do think the White House and the administration of Rawls trying to get, trying to control this. It's spreading like wildfire. You notice in the President's announcement of a commission, he's not just announcing a commission that will look at Walter Reed. And it's not just going to look at outpatient care. It's going to look at soup to nuts, veterans, soldiers, treatments. And that will get them into the worst kept secret of decades, which is the state of veterans administration hospitals. So that is a story that's been out there and reporters have picked that at it now and again. But if they're really going to start to unravel that and to look at it, they're going to have that as the iceberg. And we'll see whether they really make good on their word to do that or not. I asked both of you just quickly, if you had a chance to pose questions to Army officials, civilian officials, the Pentagon, what are just some of the questions you would want answers to?

I would like to know exactly why this system is broken. I mean, it is so bad in so many places this outpatient system. It almost seems like it couldn't be a mistake. It is certainly saving the Pentagon a lot of money to have these people, you know, send out of the hospital without proper compensation. I would like to know more about how this came about. And I hope that's one of things these investigations will show. How did we arrive at a place where I could be writing essentially the same story for four years straight about soldiers at outpatient, outpatient, excuse me, soldiers and a number of different locations having this problem. And nobody seems to do anything about it. How could it go on for so long? And Dan, what would you want to know? Well, you know, the root of so much that we cover is money. And the question is, why isn't this funded to the extent that it needs to be funded? The veterans administration hospitals, for instance, are always put in the supplemental budget. They're never part of the main budget, same with some of the issues that we're affecting Walter Reed. So what are they trying to do with that money shell game in a way? They're trying not to own up to the fact that this is a costly thing to do right.

And if we want to do that, you need to put it in the budget in a respectful way in which people can look at it and truth squad it and decide whether that's right or not. And then it will stay there long enough, not just be a year by year appropriation. Dan, a priest at the Washington Post, Mark Benjamin with salon.com to reporters who have made a huge difference in getting the story out there. Thank you both. Thank you, Judy. And coming up tonight, polluted ports insider trading and the analysis of shields and Brooks syndicated columnist Mark Shields, New York Times columnist David Brooks. David, what's your analysis of what's going on? You've heard what Dan just said and what Matt from salon.com just said. Well, I think first, Gates is doing a good job. You can imagine what just happened that the Army went into a defensive crouch. And some secretaries of defense, normally the previous one, they've gone along with that defensive crouch, but Gates seems impatient with it. And he seems to be firing people left and right.

So I'm out on 395 firing people as they drove by. So it is a sign of new leadership. The deeper question of what causes it, which Mark Benjamin and others were talking about. And what Dan, a priest was talking about, it seems to me there are a couple things that one can surmise. One is the accounting system in this government is totally screwed up on this as in so many other things. Priest was talking about the supplemental budget, not going in the real budget. We have so many gimmicks. It becomes hard to normally appreciate where the money is going, how accountable it is. The veteran's affairs has gotten a decent amount of money. 77% increase, as they'll quickly tell you. But how it's being accounted for, because it's all done with tricks and mirrors for budgetary reasons, it fuzzies up everything. And the second thing, which I think is underlies a lot of this, is that when they realize they're going to have a much bigger war on their hands than they thought. But I don't think anybody sat back and said, what are the downstream effects of this going to be? And the outpatient and the brain injuries and all that stuff was a downstream effect of surprisingly big war. Mark, some people suggested that Bob Gates is now done away with no fault government for a while in the United States. Is it that big a deal?

I give him credit. I mean, he has stepped up and said, the buck does stop here, and I want answers. And one of the people that did get fired, General Waitman, I thought gave us a view of what happened here. We're talking about tropes, wounded warriors, who are going up to 18 months in some cases in this limbo-like status that David's described. Before the determined weather, in fact, they can return to duty. Are there going to be discharged? And when the discharge, what kind of support and subsidy they will receive? And he explained one of the reasons why this case said in the past many of these people would have just been discharged. But they can't discharge them because they don't have enough troops. It's that simple. They don't have enough troops. They have in trouble Jim right now. They have in waivers on criminal records, on academic, non-achievement to get people into the military. They had to keep these people in the military. I mean, that's one of the, in addition to the bureaucratic maze that David's described and in confidence, there was an imperative here to keep people in uniform, not to let them return to civilian life.

That's an amazing statement about where we are as people. This General Whiteman put it very bluntly. He said, this is the longest war we have fought in this country without a draft. And it's true. And since the Revolutionary War, and it's, you know, it is a long, long time. David, let's not forget, Dan and Priest brought it up as well. The veterans affairs, Secretary Nicholson was on this program. And this is after the Bob Woodruff, the ABC documentary talking about serious brain injuries. And there's some problems there that need to be addressed. Right. People with not obvious parent injuries leading horrible lives because of what's happened to them. One of the things that strikes me is words like, football and snafu occur in wartime because unexpected things happen. Big bureaucracy is required to fight wars. Don't have to deal with them.

And you get these phenomenal errors. We got them in World War II. We've had them in this war. But you need a leadership that is always on the lookout for the snafu's. And I'm not sure we've had that kind of dynamic leadership that's always on the lookout. And Pete said it was a leadership problem. That's what Gates said. Gates said this was not a competency problem so much as a leadership problem. So the people, the people who were there know how to do their jobs and they do them well. It is a leadership problem, Jim. But I'd also add that this is a war unlike any war we've been through. One-third of one percent of Americans, those in uniform and their families, are the only ones making any sacrifice. The rest of us have been patrioticly asked to take tax cuts, serious tax cuts, to put a magnet, to support our troops' magnet on the back of an SUV. And kind of say, well, we're supporting our troops. And the reality is all of the sacrifice, all of the suffering being borne by them. But wouldn't then it follow, Mark, that if that's the case, a small number of people are doing the sacrifice, then a small number of people should get the attention.

Absolutely. Absolutely. Absolutely. Absolutely. They should. I mean, you know, goes without saying, they don't have any access, the kind of access at political action committees around town that other interests have. I mean, it's that point. I don't quite see it quite as the class conflict. War has unexpected things. This is an unexpected war. And then you get weird things that happen. For example, one of the good things that's happened in this war, people, if you survive the first couple minutes after something happens to you in Iraq, apparently you generally survive. But so we have fewer deaths, but more injuries. And because we're actually so good at battlefield medicine, we have these more injuries that are overbearing the system. And so the system doesn't adapt to those sorts of changes. And so there's a whole series of complexities that the system as of bureaucracy is just not going to adapt to. So that's why you do need a backbreaking leadership that's constantly asking, what is unexpected, where are we messing up?

And when we mess up, which is always going to happen, how do we fix it? And that's what Gates finally seems to be off. Gates is, but if you accept the premise, David, that war demands equality of sacrifice. If you accept that, which is an American value up until this war. And you go to any college campus, and I challenge you, next time you ask, who is for all volunteer service? All the hands go up. Who's got a volunteer? No hands go up. I mean, that's what it is. I mean, you tell me it isn't class. It's class. It's an easier and larger point that we should have had a broader sacrifice, and that the president once we were going to war should have said we've got to change. No, I'm not disputing you on that. I'm not sure it's the most humane thing to this particular way. Well, it gives everybody that a sense that they're in it. I mean, this war, this has been a segregated war. This has been a segregated war in the sense that the people who are fighting it are the only ones. What about the continuing thing that both the reporters said that this news didn't just come, boom. You know, out of the sky here in the last two or three weeks, this has been reported on a consistent basis within the military.

And even within some elements of the press, and nobody cared. And to me, and I really wasn't aware of how much it had been reported in Salon. I wasn't aware until then. The priest had just said it, that it had been a hearing. And 2005. So, and I could, I can just as a journalist, there's a lot going on. Medical care, outpatient, that's kind of warring, there's a war going on. You're debating the surge. But then this is the power of the Washington Post. And for the New York Times and other big papers, they put it on the front page, and then it was on the current news week, and then it broke big. And that is actually one of the purposes of the media is to put things on the front page. And that really demonstrates it. And, but Gates, unless I missed something here, Bob Gates may be the first high-level federal official of any administration, who said publicly, when first, you know, when this thing, thank you, press, for giving us the bad news, that we didn't know about it before that. That's a new thing, too, is it not?

It is, it is, and it's the perfect response. And it was a tone-def response, I mean, Secretary Harvey sealed his fate by promoting Kevin Kylie to that position. I mean, General Kevin Kylie, who had been the, the epitome of defense of crouch in dealing with this, and, oh, no, let's blame the messenger, and that was the antithesis of Gates's approach. And his statement, say, how do you have any explain something like that? Or is there a, is there an explanation? Because every accuracy you've ever known does you do a defensive crouch when it talks, and they always have some argument to make, some body of evidence to say, well, there was this, there was that, we're not doing so badly here. And so they cling to that, the, the, excuse me, nature. But the exception is not that they do that, but you have a leader who does it. And what Gates said about the first, the initial press conference, and then just today, that when he said that some, I'm disappointed that some in the Army don't recognize the gravity, you can just imagine the reverberations through the Pentagon. So the head of any agency is usually captured by the agency, and he's not being right.

What about the Secretary of Veterans Affairs, Jim Nicholson? How is he faring in this so far? Well, I mean, he ought not to make any more public appearances. I mean, that statement, he made Judy that, you know, their infidental work. I mean, just, just as resonated all around town, in echoed to the point, you know, in fairness to Jim Nicholson, Walter Reed is an Army installation. That's right. That's right. And it's the same war, the same war. And the failure to provide the kind of care and prepare for it, in spite of the budget increases that have been mentioned, the dimensions of this, and to play down the seriousness of it. I mean, to say that there were several hundred brain injuries and wounds, rather than the thousands of post-traumatic disorders that people have suffered, and are now living with.

I mean, the story of a soldier paralyzed in a wheelchair, having to go half a mile to get his medicines. And it's just, it's incredible. David, what did you think of what Donna Priest said that also, we do now have divided government, and that there is tension and oversight that wasn't there before, and that is playing a part in this. It will, and it certainly will next week. But Tamia, I really think the media was the key. Because once it was on the front page of the Washington Post, then it exploded, and the Democrats subsequently said things, but they didn't have to, it exploded because of the Washington Post. I will say this, that in talking to people on the Hill, among people who have been long-time supporters of the military, and defenders of the military in the Congress, there's a sense of fury and betrayal at the treatment of the troops. I mean, they were, they blame themselves, in many cases for not being aware of, but they're absolutely furious that this has taken place. So this is, sure, the cameras that they, the microphones are there,

there's going to be hearings. But this has, I think, legs and an intensity that is going to carry it for a long time. The one area I'd like to see it, I think the numbers, the dollars that are paid in compensation, are insanely small to these people. If you look at a number, and you look at a middle-class lifestyle, it's just pathetic. And I hope in some of the hearings people address that issue as well. Is that going to be an issue? Should it be, you agree it should be an issue? I do agree it should be an issue. Listen, I mean, you saw the poor guy from South Carolina, for goodness sakes, who was wife had a quitter job and come up here and take care of him, essentially, in a custodial stay for 18 months. They denied him anything, said, no, no, you were, you were, you were, we charted before you came into the military. Yeah, and then remember the guy in the, in Bob Woodruff's piece on ABC, is the young soldier went home to Texas. Yes. And was worse off, because he couldn't be treated, because the VA didn't have a way to treat him at a facility that was close to his channel.

David has praised, and rightly so, the Washington Post, for doing it. But Bob Woodruff of ABC, on that special, he did the other night, deserves the highest praise, because it was the first 20 or 25 minutes about him and his own experience, and his own family. He's devoted the last 35 minutes that show to the treatment of the soldiers. I mean, it was not about him, and I give him great credit for that. Yeah. And the other thing that he's going to continue, this part of the story. Absolutely. Forever. Yeah. Yeah. Thank you both very much. Now the health and environmental problems caused by air pollution at America's ports. Saugan-Zalison, KCET Los Angeles, as our report. With their sea air and ocean breezes, coastal communities are often seen as healthy alternatives to smoggy cities. But in towns with big ports, breathing can be risky.

Ports spew out a toxic brew of contaminants, making them major sources of air pollution. That's the case at the neighboring ports of Los Angeles and Long Beach. Together, they make up the largest and busiest harbor facility in the United States. And one of the worst polluters in Southern California, according to Sam Atwood, with the region's air quality management district. The smog-forming emissions from the ports are greater than those emissions from all 6 million passenger vehicles here in Southern California. That gives you an idea of the magnitude. On an average day, the ports emit some 10,000 tons of air pollutants. Most of the emissions come from ships. Heavy trucks and locomotives that haul cargo to and from the ports also pump out pollutants. Air monitoring stations and communities adjacent to the ports record dangerous levels of nitrogen oxide, as well as find soot and sulfur oxides.

The chemicals cause high rates of heart and lung problems among dock workers and area residents, according to public health experts. One affected neighborhood is Wilmington, a largely Latino and immigrant community right next to the port of Los Angeles. At Wilmington's Public Health Care Center, physicians such as Dr. Shipra Bonsal, treat and track respiratory illnesses among the community's residents. 6-year-old Jonathan Garcia is one of the clinics many asthma patients. We're finding that the rates of asthma in the Wilmington community are actually one and a half times that of asthma in Los Angeles County as a whole. Bonsal is an environmental scientist and activist who took up medicine after studying the health effects of air pollution generated by ports. This new research is starting to show that products of combustion tend microns in diameter or smaller. Can bypass the lungs' natural defenses and lodge themselves deeply into the lungs causing irritation and inflammation.

And that while we have known for a while that they can actually cause, that they can exacerbate asthma, we now are gaining evidence that they may actually be causing asthma. Jonathan's father, Juan Garcia, says he and his wife have tried to protect their son from port-related pollution. But what can we do? At night, we close all the windows to the house so we can keep out the smell from outside. Other residents decided to take collective action. As we begin to discuss port air pollution, we realize that almost every family that I knew here in Wilmington had children, adults who had asthma or some respiratory health problem. Five years ago, Jesse Marquez and other activists started organizing house meetings and protests. Along with environmentalists, they filed lawsuits and fought for legislation to clean up the city-owned ports. Eventually, the courts sided with the environmentalists, and the policymakers relented.

Well, good afternoon, everybody. Today's an historic moment. Recently, with Los Angeles Mayor Antonio Villaragosa commending them, officials from both ports adopted a five-year plan to slash pollutant levels. It is said to be the most ambitious environmental program of any port in the world. Its highlights include requiring vessels visiting the ports to use cleaner burning fuels, equipping births with electric terminals so ships can plug in for power instead of running their engines. Helping drivers finance the replacement of aging and dirty diesel trucks with clean vehicles, and replacing cargo handling vehicles and port locomotives with equipment that uses cleaner fuels and state-of-the-art exhaust treatment technologies. The primary goal is to cut emissions from all ports sources by 50%. Gerald D. Nads, Executive Director of the Port of Los Angeles, says requirements set by the ports will force global changes in the shipping industry. I do think that we're setting a trend in changing the maritime industry internationally,

and that what happens here will benefit those other port communities because if the ships are cleaner come in here, they're likely going to be cleaner going to other cities in the United States. The new rules adopted by port officials go further than current federal and international guidelines, and apply to both US and foreign ships. Foreign flag vessels account for about 95% of the big commercial ships in US ports. The action Nads concedes takes the ports into new legal waters. I guess we're sticking our neck out and we're trying to do some things that people will question whether we, as ports, have the regulatory authority, and they may question it through litigation. And, you know, as far as I'm concerned, if people want to sue us for trying to clean up the air, that's not a bad position to be in, because that means we're trying to do something. The Environmental Protection Agency, which Nads says should be doing more to help clean up America's ports, do not respond to our interview requests.

The EPA's position is that it prefers that the international body that regulates shipping adopts stronger air emissions rules, but if it doesn't, the agency has promised to take up the issue of pollution from foreign flag vessels sometime this year. The other contentious question for the ports anti-pollution plan is, who will pay for it? Industry says that implementing stringent rules would be costly and would drive business away. It may be too ambitious for the industrial sector that is involved here. Gary Tobin, president of the Los Angeles Chamber of Commerce, says the costs need to be shared. If, in fact, you implement every regulation call for and you implement it right away, the amount of burden to businesses could be so significant that they would not make the improvements. What would they do? They wouldn't be able to operate at the ports, and those jobs would go somewhere else. Others worry the burden of greening the ports will fall too heavily on taxpayers.

You should know that we have many, many environmental programs in place and operational. To tout some of the highlights of the Clean Air program, port executives recently hosted a harbor tour for community activists, environmentalists, and local officials. The advocates want business to pay its fair share of the plans estimated $2 billion cost. Rafael Pizato is with the Coalition for Clean Air. They really should be some money from the industrialists and from the shippers and the businesses that make money off of the ports. So we're asking them also to pay part of the bill of cleaning up the ports. Don't put it all on the public. Environmental groups favor a $30 to $60 fee on every cargo container unloaded. That's similar to a state bill vetoed last year by Governor Arnold Schwarzenegger at the urging of business. We want to make sure that whatever fees are assessed to the carriers don't make us be non-competitive with other ports around the country that are already expanding their capacity.

The ports officials hope costs will be covered by a combination of government funds, tariffs, bonds, and fees. The ports might also not renew valuable leases if shipping companies and terminal operators don't meet pollution control standards. And finally tonight, the breakup of an insider trading ring on Wall Street. Margaret Warner has that story. Federal investigators announced multiple arrests and indictments yesterday in an insider trading scheme that was notable in both its scope and complexity. The case goes back six years involving more than a dozen people, more than $15 million in illicit profits, and includes employees of four of Wall Street's biggest institutions. UBS, Bear Stearns, Morgan Stanley, and Bank of America.

To tell us the story and the impact of all this are Jenny Anderson, who's covering the story for the New York Times, and John Coffee, Professor of Securities Law at Columbia Law School. For the record, he has advised Wall Street firms, stock exchanges, and regulators, but has never been connected with this case or any participant. Welcome both of you. Thanks for joining us. Jenny first described to us how this whole scheme worked. There was one young figure at the center of it at the beginning of it. A young hedge fund manager at Bear Stearns named Eric Franklin. How did it operate? Well, if we think about it from Eric Franklin's point of view, we've got a trader who's trying to get an edge. He's trying to get ahead in the markets, and he's looking for information that no one else has. Material, non-public information. And he gets it from two different ways, two different streams of information. One of them comes from UBS, from a friend of his, a man named Mr. Gutenberg, who works in the research department at UBS.

He knows when stocks are going to be upgraded or downgraded. And when those stocks are upgraded or downgraded, there's an impact on the stock, and upgrade will likely push the stock higher in a downgrade the stock lower. He tips off his friend, Mr. Franklin, allegedly, as these cases outline, that there will be upgrades and downgrades in hundreds of stocks, and Mr. Franklin trades on that information quickly in and out of the stocks, and makes instantaneous profits. The other one was a little bit more of an old-fashioned insider trading back to the days in Boseky and Dennis Levine, where you had at Morgan Stanley, which is a major investment bank that does a lot of merger's and acquisitions. There was a compliance lawyer named Randy Colotta, who allegedly decided that she wanted in on some of the actions. She wanted to make some money. So she and her husband asked a friend to do some trading on information about pending merger's and acquisitions. She had this information as a compliance officer. She gave it to the trader. He made money, and they split the profits.

Through some of the people involved in that, trickle down, made it to Eric Franklin as well. So he was able to trade on information about upgrades and downgrades as well as information about pending mergers and acquisitions. Explain also how they, what methods they use to escape detection for at least five years. Well, they, again, some very tried and true old-fashioned ways. They met in the Oyster Bar, and they hatched this plan. They met in pre-arranged places to exchange cash. But they also acquired disposable cell phones, and they texted one another with special codes as to which stocks would go up and down. And they developed their own language to convey the information to one another. Professor Coffey, the SEC described this as the biggest insider trading case or illicit trading case since the days of Ivan Bosky in the 80s. How do you explain the fact that this kind of thing is still going on? And do you think it's just as pervasive as it was then? I don't think it's just as pervasive as it was then.

I do think that deterrence works, but you should understand that there has not been a significant conspiracy like this or significant prosecutions in maybe 20 years. You have a whole new generation. It's entered Wall Street since the time of Ivan Bosky, Michael Milken, and Drexel. The young players who've come in haven't learned the lesson that they said their older generation saw, and they see immense profits. Also, this evolved a hedge fund. Hedge funds today are under great competitive pressure to maintain extraordinarily high returns so they can charge extraordinarily high fees to their clients. Those firms will offer potentially a great deal of money to people who possess material non-public information. There's been speculation for some time that hedge funds were doing this. This is the first time that a hedge fund has gotten caught with its hand and the cookie jar, and there may be other examples like this out there that have not been caught. And how do you explain the fact that it went undetected for so long? Well, that's what's so serious here.

This is not like the typical insider trading conspiracy, which is usually a one-shot conspiracy of marginal low-ranking employees. It's even about high-ranking, sensitive Wall Street professionals who were in exactly the wrong place to be corrupted. A compliance officer is the equivalent of your counterintelligence officer. This is a little bit like a senior officer at the CIA being caught selling information to Osama bin Laden. So people at high levels and sensitive positions were corrupted. They were able to hide because they were professionals and they were in charge of the counterintelligence. And they were dealing with professionals themselves, hedge funds that didn't trade in manners that immediately alerted the market computers, which usually pick up the unusual trading activity of small individuals. Jenny, there is a lot more computerized, at least oversight of these trades. How much has the system changed since the 80s and does it make it easier or harder to get away with something like this? A lot has changed and a lot has stayed the same. The value of the information has absolutely stayed the same.

The way in which people have to convey it to one another really hasn't changed. You don't want to send an email because emails can be subpoenaed if you talk on the phone. It's going to be much easier to say that conversation never took place. It's why insider trading is so hard to catch because usually it's one person who has to turn on the other. As Professor Coffey pointed out, computers pick up on this stuff, but that's the first step. Then the regulators go in and say, explain to me why you bought this Microsoft stock. And a hedge fund trader can say, because I thought it was a great stock. And it's going to be very hard for the SEC or whatever the regulatory body is to disprove that, unless there is really hard information about where that material nonpublic information was coming from. So again, a lot has changed. There is more program trading, computerized trading, but that's really not the heart of this. The heart of this is still going to be individuals out there to get an edge, trying to cover their tracks and trying to get information in person on the telephone in the most undetectable way as possible.

But I would say one thing that has changed significantly is the volume of trades that goes on, the types of products that are traded today, the amount of trading, and the types of players. Again, as Professor Coffey pointed out, eight, nine thousand hedge funds today controlling $1.4 trillion. Everyone looking to get an edge. There's a lot of concern that there is such a strong incentive to try to get ahead, that insider trading will be more pervasive and will be more rampant. So Professor Coffey, what should Americans take away from this if, by some accounts, when a 50% of adult Americans are now in the market, mostly through their retirement funds. Back in the early 80s, figures I've saw it was just about 20%. Are we, are they being played for patsies in this system? Are they really just two tiers and the insiders are always favored? Well, I think, of course, most insiders are honest, and I think most Wall Street investment banking firms are also honest, and I think some of these firms were the victim of this behavior.

It was their confidential business information that was being stolen by these defendants, or at least allegedly stolen. What has changed is this new actor, the hedge fund. It will trade not in tens of thousands or hundreds of thousands of dollars as individuals might trade. It will trade in hundreds of millions on some occasion, not in this case, but possibly in others. And because it trades so frequently that even if an investigator comes in and tells us why did you do this, you can say, listen, on that particular day, I traded 500 million dollars of securities. I made 50 to 60 different bets on individual stocks, and this was just one of 60 bets that look right to me. That's very hard to break that down, whereas it's much easier. If an individual for the first time in his life makes a $50,000 trade. So it's harder to penetrate the hedge fund that is playing tough. And Jenny, very briefly, what are people in Wall Street saying to you about how pervasive they think this practice is? Oh, that's a very, it's a very split issue. A lot of people think would agree with Professor Coffee. Most of the market is, most people are trying to do the right thing, and most people are terrified.

They're not going to risk their entire career to make a quick and easy buck. But there is a lot of evidence that there is incredible information leakage, another term that's used for insider trading, perhaps a kinder phrase for insider trading. We've been analyzed quite a bit of data ahead of merger's acquisitions, looking at aberrant trading, and it's pervasive. There is frequently unusual trading ahead of the announcement of deals, and that indicates that something's going on. Information is getting out into the marketplace. All right, Jenny Anderson of the New York Times and Professor John Coffee of Columbia. Thank you both. Thank you. And again, the other major developments of this day, Army Secretary Francis Harvey resigned over problems at Walter Reed Army Medical Center. The Army announced a new Commanding General at Walter Reed. And six people died when a chartered bus carrying a college baseball team plunged off a highway overpass in Atlanta. And once again, to our honor role of American service personnel killed in Iraq and Afghanistan,

we add them as their deaths are made official and photographs become available. Here in silence are 11 more. Thank you. Washington, we can be seen later this evening on most PBS stations.

We'll see you online and again here Monday evening. Have a nice weekend. I'm Jim Lara. Thank you and good night. Major funding for the new hour with Jim Lara is provided by. In navigating towards retirement, there are many courses you can take, and Pacific Life can help you reach your goals. With over 135 years of experience, Pacific Life offers a wide range of financial solutions. Approach the future with confidence. Pacific Life, the power to help you succeed. We've discovered the world's most powerful energy.

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Thank you. Good evening, I'm Jim Lehrer. On the news hour tonight, the news of this Friday,

then an update on top-level firings over the Walter Reed Military Hospital problems. The weekly analysis of Mark Shields and David Brooks, a news hour report about air pollution in America's ports, and an inside story of an insider trading scheme on Wall Street. Major funding for the news hour with Jim Lehrer is provided by. Somewhere west of Shenyang, a teenager stopping for dinner, which is why the soybean harvest west of Peoria is not stopping, and a soybean processor is not stopping, and a ship's captain on the west coast is stopping, but just for a while. Somewhere west of Shenyang, a teenager stopping for dinner, a dinner rich in soy protein. And by Chevron, Pacific Life, the Atlantic Philanthropies, the National Science Foundation,

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