The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, a summary of the news; the differing Iraq inspections approaches of the UN and the U.S., as seen by Jeane Kirkpatrick and William Maynes; Paul Solman's look at corporate CEO's continues with the spotlight on their lives as superstars; an update of the legal challenge to the new campaign finance reform law.

NEWS SUMMARY

JIM LEHRER: President Bush voiced new doubts today about UN inspections in Iraq. He said Monday the early signs were not encouraging, but yesterday, UN Secretary-General Annan said Iraqi cooperation had been good, so far. Today, Mr. Bush said it's not about inspectors. He said Saddam Hussein had repeatedly ignored UN demands to disarm in the past. And he said: "That doesn't appear to be somebody who is that anxious to comply." We'll have more on this in just a moment. Iraq's vice president today charged the weapons inspectors are actually spies. He said, "Their work is to spy to serve the CIA and Mossad," referring to the Israeli intelligence service; he complained about yesterday's inspection of a presidential palace. Earlier an Iraqi general said the UN Teams went to the palace hoping to cause a confrontation.

GEN. HOSSAM MOHAMMED AMIN: We consider the entry of the presidential sides as unjustified and really unnecessary, because both sides are very well-known as the palaces of people and their doors, their gates are open for the people. This means that it is impossible that you could keep any weapons of mass destruction in such a site.

JIM LEHRER: Today the inspection teams checked out an Iraqi nuclear complex in a former chemical weapons plant. That site once produced deadly agents including mustard gas and various kinds of nerve gas. An earlier inspection team demolished the plant in the late 1990s. Iraq has until Sunday to submit a document to the UN declaring any chemical, biological, and nuclear programs. The U.S. has warned it must be credible and complete but in Brussels, Belgium today Deputy Defense Secretary Paul Wolfowitz said the document by itself would not trigger a war.

PAUL WOLFOWITZ: This is a judgment that the President of the United States will have to make this judgment and I'm quite sure he is not going to make it simply on the basis of one single piece of information. He's going to make it, I think, based not only on the pattern of information, but also close consultation particularly with our allies but indeed with the international community.

JIM LEHRER: Wolfowitz also said the U.S. is ready to invest millions of dollars to upgrade key military bases in Turkey. They could be used in a war with Iraq. Turkey's foreign minister said Tuesday his country would allow U.S. forces to use the bases if the UN approved military action. But the Turkish government said later he was speaking only of possibilities. North Korea refused today to allow inspections of its nuclear weapons program. Last week, the UN nuclear monitoring agency urged the North to abandon the program and open all sites to inspectors. Today, the Communist state said that appeal was extremely unilateral. North Korea admitted having a nuclear program in October, in violation of an agreement with the United States. Indonesian police have arrested another key suspect in the October nightclub bombing in Bali. A raid last night nabbed the operations chief of a radical Islamic group linked to al-Qaida. In all, 28 people have now been arrested in connection with the bombing. More than 180 people, mostly Australian and other foreign tourists, were killed in the blast. The new U.S. campaign finance reform law faced its first court test today in Washington. A special panel of federal Judges heard the challenge. The law bans national political parties from raising unregulated soft money. It also bans interest groups from airing commercials that mention federal candidates close to an election. Republicans, labor unions, civil liberties groups, and others said it violates free speech rights.

MARK RACICOT: The bottom line is that we're talking about the political process in this country, the ability to associate freely, the ability to make certain state's rights aren't invaded -- the ability to have equal treatment for all organizations. The fact of the matter is different entities are treated differently by this law and in the end it still doesn't address the problem at hand.

JIM LEHRER: Democratic Senator Russ Feingold of Wisconsin helped write the law. He said supporters made the case it would clean up politics.

SEN. RUSS FEINGOLD: On the side of the United States and the law and the defendants was a very clear and specific presentation with evidence of the corrupting influence soft money has on our system -- the testimony of distinguished former Senators from both parties saying they know and they saw the effect of unlimited contributions on our democracy.

JIM LEHRER: The Judges are likely to rule early next year. We'll have more on this story later in the program tonight. The U.S. Supreme Court heard arguments today on whether federal racketeering laws can be used against abortion protesters. Abortion rights groups said it's a needed step to crack down on violent protests. But anti-abortion advocates and others warned the stiff penalties would jeopardize the rights of anyone who wants to demonstrate for any cause. A ruling is expected by next summer. On Wall Street today, the Dow Jones Industrial Average fell five points, closing under 8738. The NASDAQ lost more than 18 points, to close at 1430. That's it for the News Summary tonight. Now it's on to Kirkpatrick and Maynes on the Iraq inspections, corporate CEO's as superstars, and campaign finance reform goes to court.

FOCUS INSPECTING IRAQ

JIM LEHRER: The U.S., the UN, and inspecting Iraq. Gwen Ifill has the story.

GWEN IFILL: For five days, United Nations weapons inspectors have been searching for evidence that Iraq possesses weapons of mass destruction. They've hunted inside a former chemical arms factory, a nuclear research facility, and even one of Saddam Hussein's presidential palaces. After a four-year hiatus, inspections resumed last week in response to UN Demands, but the United Nations and the Bush administration appear to have parted ways on how to assess what comes next. President Bush has stated repeatedly that he does not believe Saddam Hussein is to be trusted.

PRESIDENT GEORGE W. BUSH: In the inspections process, the United States will be making one judgment: Has Saddam Hussein changed his behavior of the last 11 years? Has he decided to cooperate willingly and comply completely, or has he not? So far, the signs are not encouraging. A regime that fires upon American and British pilots is not taking the path of compliance. A regime that sends letters filled with protests and falsehoods is not taking the path of compliance.

GWEN IFILL: While UN Secretary General Kofi Annan said he is willing to believe the Iraqis are cooperating.

KOFI ANNAN: First of all, let me say that I've not seen any formal report from the inspectors. It has only been a week, and obviously the cooperation seems to be good, but this is not a one-week wonder. They have to sustain the cooperation and effort and perform. And we will have to wait for the report of the inspectors. I think, as far as the president's comments are concerned, the president speaks very clearly and frankly. I think he made himself very clear, and I don't have to interpret him.

GWEN IFILL: Secretary of State Colin Powell is also more upbeat. Although he stopped short of saying the inspections are working, he told reporters Tuesday that they are "off to a pretty good start." Today, President Bush was asked about Secretary General Annan's comments.

PRESIDENT GEORGE W. BUSH: We've been at this, what, five days. This is after 11 years of deceit and defiance. And the issue, again, is not hide-and-seek. The issue is whether or not Saddam Hussein will... will disarm. And soon he'll be making a declaration of whether he has any weapons. For years he said he didn't have any weapons, and now we'll see whether or not he does. And if he does, we expect them to be completely destroyed and a full accounting. And I remind our citizens that the UN Security Council voted overwhelmingly 15-0 for this approach we've taken. Our NATO allies have joined us, and we all expect Saddam Hussein to disarm.

GWEN IFILL: A key deadline comes Sunday when Iraq must provide a detailed list of all of its weapons of mass destruction. Iraqi officials have said they will give that declaration to inspectors in Baghdad late Saturday. It will arrive in New York late Sunday, but that deadline, administration officials suggested today, would be the beginning, not the end, of the inspections process.

GWEN IFILL: Here to shed some light on how the United Nations and the United States assess the success of these new inspections, are Charles William Maynes, Assistant Secretary of State during the Carter Administration-- he's now the President of the Eurasia Foundation, a non-profit group promoting free markets and democracy in Central Asia; and Jeane Kirkpatrick-- she was U.S. Ambassador to the United Nations during the Reagan administration. She's now a senior fellow and director of foreign and defense policy studies at the American Enterprise Institute, a research organization.

Ambassador Kirkpatrick, the President has been talking tough. We heard him say this week that he won't accept Saddam Hussein playing hide and seek. We heard him say the signs are not encouraging as he talks about what's happening with the inspections so far. What is it the White House is attempting to accomplish with this type of talk?

JEANE KIRKPATRICK: I think that talk counted for first of all by the President's personal style, which he has repeatedly given somewhat tough talk, I think. I think we have heard that a lot of times. Think it's also given to remind or to restate to the United Nations and in general and Iraq in particular that he's very serious and the United States very serious and they should be very serious too.

GWEN IFILL: Mr. Maynes on the other hand we have heard Kofi Annan speaking in a much more conciliatory tones talking very much about how he sounds as Colin Powell actually said, but it's off to a good start. Why are we hearing that tone coming from the Secretary General of the UN?

CHARLES WILLIAM MAYNES: Well, I listened very carefully and basically what the President said is Saddam Hussein is a recidivist he has for many years violated the resolutions of the UN and not cooperated with the inspections, and for that reason against that background he is suspicious and Kofi Annan has said we have had five days. It's gone well for five days but we have just started. I don't see such a huge contradiction between the two statements; I really don't. And then I think the President would be foolish -- quite honestly -- even if he thought we were off to a terrific start if he said stood up and said particularly to the American military, well, stand down; everything is going well. He has to be prepared for the possibility he may have to order a military campaign.

GWEN IFILL: Doesn't it sound to you like the White House is assuming the worst?

CHARLES WILLIAM MAYNES: Well, I'm just pointing out, that if you actually parse what was said, he said Mr. Saddam Hussein is a recidivist; he has for years violated the accords. I don't believe he is going to change And I. don't see that has necessarily inconsistent with Kofi Annan saying five days, it's only five days, we have to go ahead. The five days has been off to a good start. Now a lot of it how the headlines get presented but I submit to you there isn't that big necessarily a difference.

GWEN IFILL: Ambassador Kirkpatrick you hear them virtually saying the same thing?

JEANE KIRKPATRICK: Essentially. I think there are differences in personal style; the personal style of Kofi Annan is somewhat optimistic continually; that's the personal style of the UN Secretariat actually and has been for decades. And I don't think it has any great significance as a prediction. He hopes things will go well, actually. We all hope things will go well, you know. He would like things to go well, but he's not saying things will necessarily go well; the five days will necessarily continue.

GWEN IFILL: You were at the United Nations is it also the role of the Secretary General to be more conciliatory; is that his job because he represents more people?

JEANE KIRKPATRICK: No, I don't think so I think it's the job of the Secretary General to sort of keep things going and provide some leadership and to -- and encouragement if that's encouragement if you mean by that optimism. I think typically the style of the Secretariat generally and the Secretary General generally is somewhat optimistic and encouraging, sort of try and try again. We'll work this out. But I don't think it's very serious as prediction.

GWEN IFILL: To the extent that there is any distinction in the way they approach it even if they end up in the same place do you think it's a matter of personal style or a matter of an imperative that comes with the jobs that these two men hold?

CHARLES WILLIAM MAYNES: Well, in public policy where you stand is often where you sit and the Secretary General isn't in the business of promoting wars; he is in the position of trying to carry out the resolutions of the Security Council, which in this case asked him to carry out a thorough and professional search of Iraq for weapons of mass destruction. If he carries that out well, which I'm sure he is going to try, and if things go the way we hope they will, we will avoid a war. And certainly that is what he's trying to do and the tone of everything he says, I think, reinforces that. I don't think the two statements by the way are the same as was suggested. I just think that the President is talking about the past and saying that he looks at that and it's a very negative past and it makes him suspicious of the future and Kofi Annan isn't talking about the past but the five days of inspections and so far they have gone well. And he emphasizes that.

GWEN IFILL: Let's talk about the past as it applies to Kofi Annan for a second. Kofi Annan said after meeting with the President about the UN resolution that he understood that the President was engaged in a psychological game. He also said in 1998 when he went to negotiate return of the inspectors at the time that Saddam Hussein was someone he could do business with. Do those kinds of statements put him at odds with this White House?

JEANE KIRKPATRICK: I don't think so necessarily; I don't think they're that serious frankly. I mean, I don't mean to say what the Secretary General says isn't important or that he doesn't mean it but they're a manner of speaking. I don't think that they're substantive declarations putting at odds with the White House frankly.

GWEN IFILL: What do you think about that Mr. Maynes?

CHARLES WILLIAM MAYNES: Well, I think the statement doing business with Kofi Annan... with Saddam Hussein, I mean, was an unfortunate statement given what subsequently happened. I think it was made with the best will in the world but certainly that was an unfortunate statement. But I think that, again, the President is trying to prepare the way for possibly having to engage militarily and the Secretary General is try prepare the way for a professional set of inspections. And so there are different roles being played here and they can be commentary or there are people of course who want a war, regardless of what the inspections....

GWEN IFILL: Who are those people?

CHARLES WILLIAM MAYNES: Well, there are some people I think who believe that inspections can never work, you see this reflected in articles that appear in the American press by some people. They that I a country the size of Texas you would have to have hundreds of thousands of inspectors. I don't believe that's true. I think that's a false statement but there are some people who believe that. If you believe that, then the only thing to solve the problem is military force going in and taking over the country, changing the regime and therefore, you know, securing your objectives.

GWEN IFILL: Do you think this administration believes this?

CHARLES WILLIAM MAYNES: I think the President made clear when he gave his statement at the UN that he was opting fire different course. He did not mention regime change in the statement before the United Nations.

GWEN IFILL: Ambassador Kirkpatrick, the relationship between the United States and the United Nations has always been kind of checkered even prior to this administration. Is there a fundamental distress or conflict between American Presidents, American leadership and the United Nations?

JEANE KIRKPATRICK: I don't think. So I think, though, that American governments... and American administrations, all of them, let me say, more often than not have strong views about what their policies should be, what they want them to be and what they will accept from the Security Council or anyone else. And I think that that fact, the fact United States is the strongest country in the world and that we often take leadership roles in the UN as well as elsewhere, sometimes puts us in a kind of an apparent conflict, if you will, particularly with a Secretary General who seems to be trying to settle issues himself. It's not the role of the Secretary General, by the way, to settle issues or make decisions; it's the role of the Security Council to do that. When the Secretary General tries to do that, why that leads to kind of an impression of not serious conflict but an impression of unease.

GWEN IFILL: As long as we are talking about impressions, let me ask you the question I just asked Mr. Maynes. Is there an impression this administration is using the United Nations process as a pretext to undertake military action no matter what the inspections find?

JEANE KIRKPATRICK: I don't think that at all. I think that's not at all true. I think there is no justification for that suggestion if I may say so.

GWEN IFILL: Well, Secretary Powell, he has played an interesting role in this; he seemed to be out of the message loop temporarily yesterday when he was traveling in Colombia and said he thought things were off to a good start at the time that the President was saying otherwise. What do you think his role is in this?

CHARLES WILLIAM MAYNES: I think the achievement at the UN was extraordinary to get 15 votes and in particular get the Syrian vote for the resolution was a real triumph for the diplomacy of this administration. I think the secretary obviously played the key role in that. I have talked to people in the State Department who worked on this and they give all the credit to their boss. So he has a big stake in this resolution as does the administration in making it work. If the administration is seen as trying to twist this diplomatic victory in a way in effect to find a pretext for war, which I don't believe they will do or are trying to do, but if they did, they would not only lose support of all of our allies for any military intervention; there would be a huge disagreement inside the United States.

GWEN IFILL: You don't think Secretary Powell is out of step at all, do you agree with that?

JEANE KIRKPATRICK: I don't think Secretary Powell is out of step. Secretary Powell has spent his life in uniform, and he's a very disciplined military man and leader and I think he is a very... has a very important leadership role in the administration actually and with regard to foreign policy in the administration. I think he deserves a lot of the credit for the resolution. I also think by the way Prime Minister Tony Blair deserves credit for that too.

GWEN IFILL: Let's move beyond for a moment what's going on beyond the United Nations and the United States, a larger goal whatever it is the United States is trying to accomplish in Iraq with these inspections. Is there greater meaning that goes beyond whether we go to war or not or other meaning, something greater than war I suppose is there another way of interpreting what's at stake in these inspections?

CHARLES WILLIAM MAYNES: Well, I think that if the inspections fail, if they fail not because Saddam Hussein doesn't cooperate, but because either the UN does not do a good job or because major states like the United States reject a report, which, in fact, is a professional report, it will have enormous implications for the whole field of diplomacy and basically negotiation rule of law, treaties, and whether we deal with any of the issues by any means other than military force. So, I do I this there is tremendous freight that is connected with this issue. And part of the reason is that the entire world has supported this resolution. This is not a resolution that divides people. It's in effect the entire world against one country. If we can't do it in this case, it raises serious implications about what's possible in a whole range of other serious issues.

GWEN IFILL: Like North Korea as we just heard about?

CHARLES WILLIAM MAYNES: Like North Korea; that's right.

JEANE KIRKPATRICK: It has important implications for non-proliferation too and our efforts at nonproliferation and nuclear weapons and nuclear technology because there has been such a effort with regard to Iraq. And if we fail in Iraq, there is little reason to think we're ever going to succeed any place or in any country like North Korea for example.

GWEN IFILL: So the next few weeks will tell the tale?

JEANE KIRKPATRICK: And I think it's very important; this is a very important resolution, I think.

GWEN IFILL: Jeane Kirkpatrick and Bill Maynes, thank you very much for joining us.

JIM LEHRER: Still to come on the NewsHour tonight: charismatic CEO's and campaign finance reform on trial.

SERIES EXECUTIVE EXCESS?

JIM LEHRER: Now, we continue our series on CEO pay and performance. In our first two segments, our business correspondent Paul Solman of WGBH-Boston looked at the factors behind the tremendous hikes in executive pay. Tonight, the CEO as corporate superstar.

SPOKESMAN: Today we've arrived....

PAUL SOLMAN: The 2001 stock analysts meeting of Houston's then surging energy provider, El Paso -- with corporate gushing galore in modern business speak.

SPOKESMAN: Vision, value, people. Raised to the power of El Paso.

PAUL SOLMAN: Rakesh Khurana, a Harvard Business School professor deeply skeptical of the new language of business.

RAKESH KHURANA, Harvard Business School: We wanted our employees to work 24/7 and stopped calling them employees, they were partners, associate all sorts of euphemisms were brought in, and we started seeing implication terms about mission, values, vision as if they were sort of quasi-religious institutions.

PAUL SOLMAN: Quasi-religious institutions, says Khurana, with quasi-religious leaders running them: The new face of corporate culture in America.

RAKESH KHURANA: So interestingly we wanted our CEO'S to look more like people who would lead revival meetings.

PAUL SOLMAN: Khurana traces this trend in a new book "Searching for a Corporate Savior: The Irrational Quest for Charismatic CEO's" charismatic as in personally magnetic from the Greek charisma meaning "gift from God." Khurana starts in the 1970s.

RAKESH KHURANA: I believe the cultural marker for this is really Lee Iacocca.

LEE IACOCCA: We found out the hard way you stand still in the car business you get run over.

RAKESH KHURANA: When Lee Iacocca was appointed the outside CEO of Chrysler Corporation, he was seen as sort of single-handedly rescuing the company.

SPOKESMAN: Me, I'm in the car business

PAUL SOLMAN: It was image Khurana argues -- mostly TV image that helped turn Iacocca into icon at a time when the public began investing mover its own money and thus looking for business superheroes.

SPOKESMAN: One more thing, if you can find a better car, buy it.

RAKESH KHURANA: Many people often forget he had the assistance of a $2.1 billion federally guaranteed loan; however, he made every other CEO look positively bland standing next to him.

SPOKESMAN: The truth is we have got advantages over the Japanese in every car we make.

RAKESH KHURANA: In fact, there was call for him to run for President of the United States. Now, after that the notion that our CEO's should be leaders began being imported into organizations and there was a whole sort of leadership consulting industrial complex that grew up around this idea of Leaderships.

SPOKESMAN: Mr. Lee Iacocca.

PAUL SOLMAN: Another Iacocca legacy -- unprecedented CEO pay. Though he only took a dollar a year to start, by 1986 Lee Iacocca was making $20 million and had become America's most well compensated CEO. But that's nothing compared with the nine figure pay packages bestowed on today's CEO's like recently retired Jack Welch of GE, though of course Welch as any of us might, thinks he earned every penny.

JACK WELCH: GE did fantastic; he increased market share $250 billion over the time frame, became number one market cap in the world, most admired company for five years in a row, I gave it all I had.

PAUL SOLMAN: Even as GE Stocks sank Welch's bounty of benefits continued right in to retirement.

JACK WELCH: What I wanted was to have use of GE's plane and have use of GE's apartment.

PAUL SOLMAN: Plus a limo, tickets to high profile sporting events and a great deal more. Once these became public in his divorce case Welch gave them back to the company. Khurana, however, viewed such perks not just as the rewards of power but as symbols of it.

RAKESH KHURANA: In primitive societies much of the sort of notion of leadership began to be transferred into things like the scepters and the robes that the individuals wear --- you know -- the sort of mask that the shaman or the medicine man would wear. Now, in contemporary form some of our charismatic attribution comes from things like private airplanes, you know, Gulf stream 5, it comes from well tailored suits, it comes from that apartment overlooking Central Park.

PAUL SOLMAN: Jack Welch, meanwhile, is familiar with Khurana's whole charisma thesis.

JACK WELCH: Your job as a CEO is to give people the vision of where you are going.

PAUL SOLMAN: But how important is it for the success of your company that you have a powerful or at least persuasive public presentation?

JACK WELCH: Well, I think morale of the company is always important: highly energized, prouder to be part of it. Now, the negative side of that is a bad image publicly for the CEO and others, which ends up, which is what we're going through now.

PAUL SOLMAN: So charisma can help...

LEE IACOCCA: This handsome Town and Country; this dazzling convertible....

PAUL SOLMAN: Or backfire if CEO's abuse it; but in other case to former executive consultant gray crystal CEO charisma has become a commodity that PR people sell, that CEO's have an interest in buying.

GRAEF CRYSTAL: They come to believe their own flax that I am the cause of this marvelous performance I'm Jack Welch. A lot of Americans I actually think they actually believe that in 1991 Norman Schwarzkopf possibly with the aid his driver single-handedly kicked the crap out of the whole Iraqi army and they never really concentrated on the fact there were 500,000 troops not in back of the general leading the charge but in front of him.

PAUL SOLMAN: But General Schwarzkopf was the face Americans saw on TV during the Gulf War.

GENERAL NORMAN SCHWARZKOPF: We are absolutely doing more than we ever have and I think any nation has in the history of warfare.

PAUL SOLMAN: Just as they saw Jack Welch during the great market boom that followed. On the other hand says Welch...

JACK WELCH: I never once wanted interview or raised my hand, I didn't call you to come here. You called me.

PAUL SOLMAN: That's correct.

JACK WELCH: We resist 99.9% of all interviews. It happens to be when you're in a big company and your company is successful because of a lot of people, you end up getting your mug shot all the time. You end up on television all the time and then you're called a quote, charismatic CEO, out trying to do something. You're not trying to be charismatic. You're trying to motivate employees, you're trying to work internally, you are trying to improve processes, you are not trying to get publicity because half the time it's crappy. You'd like the mole to go away.

PAUL SOLMAN: You don't think you're being charismatic right now by the way?

JACK WELCH: I have no idea.

PAUL SOLMAN: Let's take a vote in the room.

JACK WELCH: I'm not trying to be I'm just talking to you about what this is about.

PAUL SOLMAN: Rakesh Khurana, however, emphasizes the CEO's increasingly active role in all of this -- even in the world of high tech.

RAKESH KHURANA: Where CEO's in the past used to be more anonymous, about as well known as their chauffeurs or dentist, CEO's now are expected to be in front of CNBC through the force of will and through the force of their personality be able to convey this continual optimism about the future. John Chambers was a example of that. Many people in "Fortune Magazine," for example, described him as a sort of Southern Baptist preacher in the way he communicated to his employees and to investors.

PAUL SOLMAN: That was in a May 2000 cover story when Cisco's stock was still soaring and we ourselves were witnessing John Chambers' evangelical zeal.

JOHN CHAMBERS: We're growing 30 to 50% per year and maintaining perhaps the best profits in history in the computer industry, and it comes down to empowerment, empowerment of the individual, empowerment of democracy, empowerment of creativity. And if we're going to be successful in the future, which I give us good odds that we will be, it will be because of how we used our own technology and the culture that we convey as far as empowerment of our employees and then sharing the success with our customers or our employees in ways that one has ever done before.

PAUL SOLMAN: Noweven at the height of the high tech boom this sounded a tad extravagant but the aura around Chambers was such that few were willing to doubt him publicly until of course Cisco's stock swooned. Exactly one year after "Fortune Magazine" asked if he was the best CEO ever, a reversal of fortune had John Chambers being fingered for the fall.

RAKESH KHURANA: As a society we sort of all agree CEO's were the main corporate performance; that if a firm was doing well, it was because of the CEO and if a firm was doing poorly, it was because of the CEO

PAUL SOLMAN: In other words, we all played a role in creating the charismatic CEO: The leader who may have a gift from God or has just come to see himself as God's gift.

JIM LEHRER: In tomorrow night's conclusion to this series Paul Solman has an extended interview with former General Electric CEO Jack Welch.

FOCUS ARGUING REFORM

JIM LEHRER: Now, the first legal challenge for the new campaign finance law, and to Margaret Warner.

MARGARET WARNER: Does the latest attempt to reform campaign finance practices pass constitutional muster? That was the issue in a federal district court in Washington today, as supporters and opponents squared off over the McCain-Feingold campaign finance law that took effect November 6. That law bans national political party committees from raising so-called soft money, the unlimited contributions from corporations, unions, and others that the parties used to spend on non-candidate-specific activities like issue ads, get out the vote drives, and operating costs. The law also prohibits interest groups from airing political ads mentioning federal candidates close to election time. For more on today's hearing, we turn to a reporter who was in the courtroom, Neil Lewis of the "New York Times."

Welcome back, Neil.

NEIL LEWIS: Thank you, Margaret.

MARGARET WARNER: Set the scene for us today, this is an unusual proceeding with some strange bedfellows on either side.

NEIL LEWIS: Indeed. Quite an extraordinary proceeding because it's a special three Judge panel provided for in the law that allows an expedited argument that will go quickly to the Supreme Court early next year. So of the strange alliances and lineups you have first of all perhaps the most striking is that the law is being challenged by the Republican National Committee and its most vocal opponent in the Senate, Senator Mitch McConnell -- Republican of Kentucky. The principal defender of the law is the Bush administration. At the same time others challenging the law you have on the side the American Civil Liberties Unions, which contends it's a violation of free speech by limiting spending and the Supreme Court once found and may still find that spending money many n political campaigns is the equivalent of free speech -- the ACLU; the National Rifle Association. On the other side you have officials on the ACLU who disagree, so it scrambled traditional alliances.

MARGARET WARNER: And also very high-powered lawyers.

NEIL LEWIS: Indeed. Among them you have on opposite sides today two former solicitors general -- Seth Waxman, arguing in favor of the law; he was a solicitor general -- the chief government attorney before the Supreme Court -- the Clinton administration; on the other side arguing the case in chief was Ken Starr who is back in for him a very comfortable environment after a very difficult stint as the independent Whitewater prosecutor. He clearly was quite confident today to be happy back in the environment. We know he was kind assailed during his tenure as a Whitewater prosecutor and he's very intensively involved in sort of reputation rehabilitation now after that.

MARGARET WARNER: All right, now, Starr's team, the opponents went first. What were the basic arguments they made?

NEIL LEWIS: The opponents of the law have two basic arguments one of the first amendment, that it's an infringement upon free speech to limit campaign contributions. When people give money to candidates or parties, they are expressing their views and to limit would be to limit their constitutional rights to free speech. The other is it was an improper extension of Congress of its power over states, because many of the provisions in the McCain-Feingold law influence state races, because many of the contests are coordinated between state committees and the federal committee so, states now have to comply with this. That was their second argument. But the first amendment is the principal point of attack for the opponents of the law.

MARGARET WARNER: Then the supporters went second, since the opponents have brought the suits. So the supporters went on this afternoon and what was their basic thrust?

NEIL LEWIS: The supporters of the law said two things, this is within Congress's power to prevent and limit corruption. And they provided many powerful examples of what to most of us is intuitive knowledge that people who donate money in political campaigns do so because they want something usually. Only a small percentage may just want to support the democratic process and provide compelling examples -- an affidavit from Zell Miller Senator -- Democrat from Georgia who described campaign fund-raising process he has to go through, he goes into a room an aide hands a memo, be chatty and call this up person agribusiness, remind him you're on the agriculture committee, call up the person in the banking business and remind him you're on the banking committee. Other example that Roger Willen who was representing Senators McCain and Feingold, gave was a memo that was written for a lobbyist from Pharma, which is the trade organization for the pharmaceutical industry, on how it talk to, of all people, Senator McConnell, and it said, the memo said tell him what you're after and remind him that the trade association has been very generous to these two Republican political campaign committees, one of which Mr. McConnell is chairman of.

MARGARET WARNER: How do the Judges, three Judges as you said, how active were me questioning the lawyers for the two sides and what, how did they respond?

NEIL LEWIS: Well, the chief Judge of the three Judge panel, one appeals court Judge and two district court Judges the chief Judge of the panel Karen Henderson remarked after hearing both sides initially on the issue of soft money said you're like two ships passing in the night. The plaintiffs the people attacking the law want to talk about freedom of expression and people supporting the law just want to talk about the corruption. You would please address each other's points. So the lawyer for defending the lawyers said okay well, it is a First Amendment right to have people who don't have the wherewithal to make donations have their voice heard but immediately went back to examples of corruption. Similarly, the other side stuck to its things.

MARGARET WARNER: So they really didn't engage on each other's argument despite the prodding from the Judge?

NEIL LEWIS: I don't think they did. I think they both played their strongest hands and lightly dealt with the other side's arguments.

MARGARET WARNER: How about the other Judges?

NEIL LEWIS: Well, Judge Henderson as well as one of the other Judges -- Judge Leon, and they're both Republican appointees, seemed quite skeptical of the supporters of the law a bit more sympathetic to the challengers on the First Amendment argument. For example, Judge Leon challenged the lawyers who supported the law repeatedly saying, well, we keep saying this creates the appearance of corruption but how about actual corruption, can you show actual corruption? And the lawyer said, well, it's inherently corrupt than a influence this is and we have had all these examples anecdotal examples, he said do you have any empirical evidence, he was skeptical, Judge Henderson was skeptical and the third Judge also a district court Judge in Washington was a little more opaque in her views as I gleaned from her questions.

MARGARET WARNER: Did either side contend this that law would take special interest money out of politics

NEIL LEWIS: Well they did in different ways. The people challenging the law said it would only take political party special interest out but in fact, special interest which is am elastic term as you know Margaret, things like the NRA or abortion rights or opponents, those are more readily what they by of special interest not bound under the law the same way political parties are. So Bobby Burchfield the lawyer for the republican national committee argued it sends the money underground. You wouldn't see who donated the heavy amounts of money as you can now to the party. They would donate to these special interest groups and you wouldn't know what it was. That was his attempt to deal with that.

MARGARET WARNER: And the other side? Did they deal with that issue?

NEIL LEWIS: Well, their general argument is that by reducing large contributions by acting on the contribution side you are reducing the influence of money and their argument remember is, everyone knows, people give money to get access. People give money to get access to press their points, lobbyists press their points about their what they feel on issues. Bills they want stopped, amendments they want stopped, amendments proposed. And as I said they provided these numerous rather rich examples of people going in and saying, hey I want to talk to you about this bill. But remember we were very generous to you and very generous to your party and committee.

MARGARET WARNER: And how quickly do you think this three-Judge panel will rule?

NEIL LEWIS: Well they asked about it. Judge Henderson asked Ken Starr his opinion and in response to Henderson and Starr sort of agreed they'll work quickly through the holidays and probably issue a ruling by the end of January. They need that to get it quickly to the Supreme Court, under the law it t goes quickly to the Supreme Court so the Supreme Court can put on its calendar this year and decide by spring. This is a case most lawyers expect to produce a new landmark ruling on the limits of free expression.

MARGARET WARNER: All right, well, Neil Lewis, thank you so much.

NEIL LEWIS: Thank you, Margaret.

RECAP

JIM LEHRER: Again, the major developments of the day: President Bush voiced fresh doubts about UN Inspections in Iraq. He said Saddam Hussein isn't likely to comply. Iraq's vice president charged the inspectors are spying for the United States and Israel, and as we just heard, the new campaign finance reform law faced its first court test before a panel of federal judges in Washington. We'll see you online, and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.