The NewsHour with Jim Lehrer

RAY SUAREZ: Good evening. I'm Ray Suarez. Jim Lehrer is away. On the NewsHour tonight: A summary of today's news, the markets continue to give investors that sinking feeling, Congress continues to debate new rules for corporations and their accountants, the President gets new questions about old business, and the African nation of Chad invests new oil money in building the country, and former Vietnam War correspondent Jack Lawrence talks about his new book.

NEWS SUMMARY

RAY SUAREZ: It was an up and down day on Wall Street amid ongoing concerns about corporate scandals. Early on, the Dow Jones Industrial Average was down 200 points. Later, it rebounded to finish with a loss of just under 12 points, closing at 8801. Its still down nearly 580 points for the week. The NASDAQ Index gained 28 today, to finish at 1374. We'll have more on the market's ride, in a moment. It was widely reported today that President Bush took two low-interest loans from a company he served as a director in the 1980s. They totaled $180,000. This week, the President urged an end to such loans, to help prevent corporate misdeeds. A White House spokesman said Mr. Bush did not profit from the loans he received. The spokesman said executives at other companies had abused the practice. We'll have more on this story later in the program. Wholesale prices edged up in June for the first time in three months. The Labor Department reported today the Producer Price Index rose 0.1% last month. Higher prices for gasoline, cars, and trucks led the way. The proposal to create a new Homeland Security Department ran into resistance today. The House Transportation Committee voted to block the Coast Guard and the Federal Emergency Management Agency from being transferred to the Department. Committee members said the agencies might end up neglecting their non-terrorism functions. Earlier, four cabinet secretaries urged a special House committee not to resist change. They said combining 22 existing agencies under one department was the right thing to do. Also today, there were new reports that up to 5,000 people linked or sympathetic to al-Qaida could be in the United States. Leaders of the Senate intelligence committee said the exact numbers were unclear.

SEN. BOB GRAHAM: For a period of five or six years, when the training camps were in operation in Afghanistan there was an average of 5,000 to 6,000 people trained per year. Those people are somewhere. And there is no expectation other than that some of them are in the United States.

RAY SUAREZ: Graham also said other groups, such as Hezbollah, could have operatives in the U.S. A federal judge in New York City ruled today material witnesses may be detained in grand jury investigations. The decision involves people confined in the days after September 11, but not charged with a criminal offense. Another judge in the same district had ruled earlier that such confinement was unconstitutional. That case has gone to a federal appeals court. President Bush's Council on Bioethics has rejected a ban on cloning human embryos for research. In a report today, ten of the eighteen advisers supported a four-year moratorium to allow further public debate. All agreed on the need to ban cloning for actual reproduction. The President favors a ban on all human cloning, and the House has voted to take that step. The Senate has yet to act. That's it for the News Summary tonight. Now it's on to stock market jitters, better bookkeeping, the President as businessman, sharing the wealth in Africa, and a conversation about covering the Vietnam War.

FOCUS SINKING STOCKS

RAY SUAREZ: There was little to cheer about on Wall Street today. The Dow Jones Industrials again traded lower, and the tech heavy NASDAQ posted a small gain, but continues to trade near five-year lows. So what's driving down the numbers? We put that to Lynn Stout, professor of securities regulation at the UCLA School of Law; Eric McKissack, vice chairman of Ariel Capital Management, a mutual fund and institutional investment firm; and Frank Werner, associate professor of finance at the Fordham Business Schools.

And, Frank Warner, let's start with you. What is driving the market down?

FRANK WERNER: Ray, I think what we're seeing is the confluence of two things: First of all, we have the burst ofthe dot-com bubble, which is really running its course at the moment. Investors are seeing that the stocks that they thought were valuable didn't have the legs underneath them. And it's carrying over to many other things. In addition, we're seeing some very specific events right now that are worsening the market. One is the events of 9/11, the terrorist attack and what followed on, and that's raised a lot of fears in people's minds. We only have to look at last week, at the excitement on July 5 after nothing significant happened on July 4, and we had a huge rally on the 5th; beyond that, of course, the accounting scandals. Investors are losing faith in companies and starting to reassess whether or not these companies can earn money in the future; if they've not earned the money they've claimed in the past, perhaps the future doesn't hold as much as investors thought it did.

RAY SUAREZ: Lynn Stout, are we finished?

LYNN STOUT: I think generally what we've got is a situation where investors have had a wild ride, you know, it was great when we were going up. Now suddenly we find ourselves back down to where we were five years ago. And I think a lot of it has to do with the fact that investors have woken up, and they now have more realistic expectations for the future. For all of the factors that have already been discussed, they all come together in a single lesson for investors, which just is that corporations are not going to be earning as much money as they thought they would.

RAY SUAREZ: But with those expectations that you've talked about, there's been a couple of weeks where good news comes out, a very good economic number for an important indicator in the economy, consumer sales, income, spending, and the market goes down anyway. Why?

LYNN STOUT: Part of it is I think we have to recognize that investors learn from experience; you know, the latest fad in finance theory is what's called behavioral finance and all that really does is recognize that, you know, people are learning animals. Essentially what investors have seen is that stocks can go down as well as up. That lesson is starting to sink in. And it's taking away their taste for but thing a lot of money into corporate equities. That kind of learning process history shows, can go on for a long time.

RAY SUAREZ: Eric McKissack

LYNN STOUT: And take a long time.

RAY SUAREZ: ...Maybe you can give me a little of the mechanics of what we see happening. Are people getting out of stocks and staying out, getting in at lower values? When we see the indexes declining like this day after day after day, what actually is happening underneath that's driving that? Who's getting in and who's getting out?

ERIC McKISSACK: Well, there are obviously more sellers in the marketplace these days, and there's a lot less appetite for investing in the equity markets, and it's such a complex equation nowadays because we have so players in the marketplace. We ve got individual investors who can vote through their direct investments as well as through their 401k plans; we've got institutional investors who run mutual funds, as well as run portfolios for pension funds and the like, and we've got hedge funds and short sellers who have an interest in profiting from the downside. And we've got global investors who have perceived the U.S. markets as a good place to invest in the past, but may be less confident, as we've seen by the weakness of the dollar. So all of these factors are coming together at a time that has been described earlier with a crisis of confidence in our markets and the confidence in the numbers that are being reported, in the leadership of our corporations, and all of these things have created a classic bear market for us.

RAY SUAREZ: Do large investors behave differently from small ones at a time like this?

ERIC McKISSACK: Well, in theory we're supposed to be taking; that is, the professional investor is supposed to be taking a longer view, assuming that is the goal and purpose of what their customers are looking for, their clients are looking for. But you've got all different points of view in the marketplace. You've got people who are traders taking very short-term day positions, and you've got short sellers, and then you've got many institutional investors the vast majority who are looking a little longer. But our horizons have gotten shorter in recent years. Because the market has been so volatile, many investors who used to look multiyear, often look six to twelve months and they think of that as long term. And we've seen the market be so volatile that certainly the professional investor is probably feeling just as skittish as many individual investors at this time.

RAY SUAREZ: Frank Warner, let's talk a little bit about how you know that this extra value that people keep talking about as part of the bubble has been wrung out? How do you know when the sponge is dry and it's safe to go back in?

FRANK WERNER: It's very difficult to know that, Ray, because the numbers that we're getting from corporate America are coming under suspicion. If the numbers could be trusted, and we had a sense of corporate earnings and believed them, then we could start taking a look at the relationship of stock prices to corporate earnings and make some judgment as to whether or not that relationship is rational. Stock prices should be a present value of the future-- today's worth of what companies are going to generate in the future. But not knowing what companies are going to generate in the future is making it very difficult to know whether those stock prices, those present values, are making sense. I think this is a particular situation where it's going to be more difficult to know where that bottom is than it might have been in the past where we had better numbers, more trustworthy numbers from companies.

RAY SUAREZ: But does that cloud of suspicion that you're talking about put companies that haven't been cooking the books under that same shadow; in an artificial way, pulling them down along with everybody else?

FRANK WERNER: I think it does. I think, unfortunately, this is going to be an environment where companies are guilty until proven innocent. They're going to be associated with other companies. And we see evidence already that some very solid companies are going out of their way to convince investors that they've done nothing wrong. General Electric comes to mind. Jeff Immelt is going the extra mile to make a point about how solid his accounting is, when you wouldn't expect that under normal circumstances.

RAY SUAREZ: And Lynn Stout, how do you keep this kind of cycle from becoming self-perpetuating, bad news feeding on bad news until there's a destruction of value that really isn't warranted by the real underlying economy?

LYNN STOUT: Well, it's a very difficult problem. One of the lessons that history teaches is that it's better to move too quickly than to wait until it's too late. We do see some signs coming from the Congress, some rhetoric from the President, that there may be some effort to make reforms in the market that are very psychologically important in terms of reassuring investors that at least for the future, they can rely on corporations to tell them the truth. But the question rises: Are investors going to believe in those reforms? Are they going to think that Congress and the President have credibility in light of all the scandals that have been unearthed in the last couple of years? It's a very difficult situation for the investor. I mean, interestingly enough, in many ways, the door was opened for systematic problems with fraud five or ten years ago. The courts have developed a number of doctrines over the past couple of decades that have made it much harder for investors to sue for fraud, and as a result, made it much easier for corporate executives to commit fraud. Congress has aided and abetted that by changing the securities laws several times, in a way that make it harder for investors to sue. The SEC has suffered under a reduced budget, and in a lot of ways, the chickens are really coming home to roost now. But the question is: What is it going to take to convince investors that that problem, which has been years in the making, is going to go away overnight?

RAY SUAREZ: And Eric McKissack, if regular people at home reading the business pages, perhaps calling their broker, maybe going online or checking their company s 401-American materials, are having a tough time figuring out whether to trust companies, is it any easier for the pro? If there's a perception that auditing documents are not for real, if there's a suspicion that corporate reports aren't telling the truth, how do people like you move ahead?

ERIC McKISSACK: Well, we move ahead, ultimately, on belief and faith in the system that is in place, recognizing that there are some concerns and valid issues that need to be addressed through changes in regulation and communication from companies. And we're seeing at least some signs of that coming our way. That said, we as long-term investors have to take a long- term view. And fortunately for us, that's how we look at the market, we try to take a longer view. We recognize that the kind of extraordinary events that we've seen over the last year are going to take some time for the markets to grope with, whether it's 9/11, the "geoterrorism" that still is a risk overhanging, and now corporate governance and concerns about accounting fraud. All of that is a big mouthful to swallow. But what we try to do in our work, and what we think investors should do, is take the longer view, look at their... the types of investments they have in terms of the risk profile, the weightings that they have in different kinds of things, and make sure that the weightings are reflective of their risks profile. Now, anyone who has equity exposure has been feeling a lot of pain, but if you're investing for retirement or for things that are longer in the future, even with a protracted, extended period, there's still some time to make it up. That doesn't mean that you should go out and be a hero. There was a motto a few years ago that you go buy on the dip and you'd be back in shape in no time flat. We're not in that kind of environment anymore. This is not a time to speculate or gamble on the market. Instead, it's... but it's still a time to be an investor and to look at your weightings. Fixed income is still... bonds have still been doing pretty well, and maybe some people will be more comfortable adjusting their weightings accordingly. But equities have still been the best place over the long term.

RAY SUAREZ: Lynn Stout, do you share Eric McKissack's optimism that, in the long view this is all going to work out/

LYNN STOUT: Yes, I do. In the long run, the stock market is a terrific investment, historically the best investment. On the other hand, you know, as economists say, in the long run, we're all dead. So the question becomes: How long is the long run? If we're talking about weak performance for a few quarters, that's one thing. If we're talking about weak performance for a few years, that's quite another. And I think, you know, I wouldn't want to be asked to predict which it's going to be, but history does suggest that when you get situations where investors lose confidence in the market, it can take a long time to fix that problem. After the crash of '29, markets didn't get back to prior levels for almost two decades.

RAY SUAREZ: Guests, thanks a lot for helping us out tonight.

UPDATE BETTER BOOKKEEPING

RAY SUAREZ: The current business scandals continued to push Congress this week. Kwame Holman reports on the Senate debate.

KWAME HOLMAN: A midsummer Senate debate on accounting reform legislation normally is not something that would generate a lot of public interest. But against the backdrop of high-profile corporate scandals and a plunging stock market, people are paying attention.

SEN. PAUL WELLSTONE: These corporate insider scandals are threatening the economic security of families all across Minnesota, North Dakota, New Jersey, Maryland, and all across the country. I mean, it s heartbreaking. You have people who have taken their savings and put them into stock. This is what was going to be their resources to help send their kids to college or to meet other family needs. The value of that has eroded.

KWAME HOLMAN: The bill to reform the practices of the accounting industry was brought to the Senate floor this week by Banking Committee Chairman Paul Sarbanes, and it looked like it could trigger a partisan pillow fight. But when President Bush used strong words on Wall Street against those who would manipulate the corporate system for personal gain, the Senate responded yesterday with a series of unanimous votes on amendments adding punch to the Sarbanes bill.

SEN. TOM DASCHLE: I think that the Sarbanes bill is going to pass by a large margin. If the votes yesterday are any indication of the strong bipartisan support for the efforts that are represented in this legislation, I think you're going to see a strong vote. I wouldn't be surprised if it were a unanimous vote.

KWAME HOLMAN: The major addition to the Sarbanes bill yesterday was a series of criminal penalties designed by Judiciary Committee Chairman Patrick Leahy. The Leahy amendment creates new prohibitions against deceiving shareholders and tacks on a ten- year jail term for doing so. It requires all audit documents be preserved for five years, and adds a five-year jail term for violating that provision. The amendment also toughens penalties for destroying documents related to fraud investigations, and creates whistleblower protection for employees who aid in such investigations.

SEN. PATRICK LEAHY: I wrote legislation that is going to punish criminals. I wrote legislation that will preserve the evidence of fraud and protect victims. But I've got to tell you, Mr. President, as one who's prosecuted people, I know nothing focuses their attention more than knowing they're going to go to jail. Suddenly that overlooked ethics course when they were getting their MBA, or that overlooked ethics course in the accounting school or law school... they are going to start looking at it again. If they think because they can walk away with this, they will go to jail, they are going to go to jail. It is not going to be a complacent board of directors they will deal with. It's going to be big bubba in the cell next door. That is what they have to worry about.

KWAME HOLMAN: Phil Gramm, the ranking Republican on the Banking Committee, issued a warning along with his support for the Leahy amendment.

SEN. PHIL GRAMM: I have to say that I think we have sort of reached the point where a lot of debate on this issue is more about the next election than it is about corporate integrity. I wonder if the debate has not reached the point where we are hurting equity values by making people fear not only the disease, but the absurd prescription of the doctor that might come from the government. And I think the sooner we can finish this bill and go to conference and come out with a final product so that people know with certainty what the new rules are and how we are going to go about them, I think everybody will benefit.

KWAME HOLMAN: Still, Kentucky Republican Mitch McConnell has lengthened the debate, insisting corporate regulations and penalties be extended to other professions. Yesterday he tried to hold labor officials liable for the accuracy of their union's financial statements. Today he tried to set new standards for personal injury attorneys.

SEN. MITCH McCONNELL: We ought to set standards for corporate attorneys, I favor that. And we ought to set standards for personal injury lawyers, as well. Corporations and corporate attorneys do not have a monopoly on misconduct. We are doing a real disservice to the American public, if during this important debate on professional misconduct we turn a blind eye to abuses in our society that have been piling up way before long before Enron, WorldCom and Global Crossing.

KWAME HOLMAN: But bill sponsor Paul Sarbanes questioned why McConnell chose to bring up his amendments now.

SEN. PAUL SARBANES: Now, this is, of course, the second second-degree of McConnell amendment that we've had to deal with on this legislation, and it... I hope the Senator from Kentucky doesn't view this as a kind of a fair hunting game to bring forth at each step along the way here, whenever there's an opening for a second-degree amendment, whatever sort of pet project he's been harboring in his office for whatever period of time.

SEN. MITCH McCONNELL: As I listen carefully to my friend from Maryland, he is straining here to think of a good argument against this worthwhile amendment. It's been my experience over the years in the Senate, when we start arguing about... when we start saying there's been no committee action or there have been no hearings, we're having a hard time thinking of a good argument against the proposal on the merits.

KWAME HOLMAN: Nevertheless, both of McConnell's efforts were cast aside by a majority of Senators. Still, by early this evening, the Senate still had 58 Democratic and 36 Republican amendments to dispose of, assuring that the Senate debate on legislation to reform accounting procedures will go into next week.

RAY SUAREZ: Still to come on the NewsHour tonight: The President as businessman, an African nation shares its wealth, and a conversation about covering the War in Vietnam.

FOCUS OLD BUSINESS

RAY SUAREZ: Suarez: Now, raising anew some old business of the President's. Gwen Ifill has that.

GWEN IFILL: Even as the President was putting the White House stamp this week on proposals to avoid future corporate scandals, he was also answering questions about his own past, especially his history as a businessman.

In 1986, Mr. Bush sold his own struggling firm, Spectrum 7 Energy, to Harken Energy, a Texas-based oil services company. He received 212,000 shares of stock, a consulting deal, and a seat on Harken's board and audit committee.

In June 1990, Mr. Bush sold the shares of Harken stock for $4 apiece, or close to $850,000. Eight days later, the company reported a higher than expected second quarter loss of $23.2 million.

When that news was made public, the company's stock, which by then was $3 a share, fell to $2.37 a share.

Mr. Bush filed an intention to sell his stock, called Form 144, with the SEC, as required by law ... but he didn't file another document -- known as Form 4 which stated he sold the stock, until eight months later.

At his press conference Monday, Mr. Bush was asked about his dealings with Harken, and why that form was late.

PRESIDENT GEORGE W. BUSH: You know, the important document was the 144, the intention to sell. That was the important document. I think you got a copy of it. if you don't, we'll be glad to get you one -- that showed the intention to sell. As to why the Form 4 was late, I still haven't figured it out completely. But nevertheless, the SEC fully looked into the matter; they looked at all aspects of it, and they did so in a very thorough way. And the people that looked it said there is no case.

GWEN IFILL: Today new questions were raised about loans Mr. Bush obtained from the company while he served on its board.

In the late 1980s, he got two low-interest loans, totaling $180,000, at a favorable interest rate of 5% loans.

In his Wall Street speech Tuesday, Mr. Bush said such loans should now be banned.

PRESIDENT GEORGE W. BUSH: I challenge compensation committees to put an end to all company loans to corporate officers.

GWEN IFILL: A White House spokeswoman said, Mr. Bush's loans were "entirely appropriate and fully disclosed," and that the President did not profit from the loans.

GWEN IFILL: Now for an explanation of what exactly happened at Harken Energy, we turn to Donald Langevoort, Professor of Law at the Georgetown University Law Center, and a former counsel at the Securities & Exchange Commission.

Let's start by talking about these loans. How unusual was it for a member of a board of directors to receive a loan like this?

DONALD LANGEVOORT: Not unusual at all, especially by the late 1980s and early 1990 s, loans to help directors buy stock was pretty common place, to get stock into friendly hands and to motivate the directors.

GWEN IFILL: So incentive for executives to take loans like this is what?

DONALD LANGEVOORT: Strong incentive by the company to get their executives to buy stock. And many executives don't have the cash, so they need a loan

GWEN IFILL: So the point was to get executives to take the stock and remain loyal to the company. And for the executives, it was just an easy loan?

DONALD LANGEVOORT: Sure, it was an easy loan. But again, you can be motivated when you have even an easy loan.

GWEN IFILL: Now, this loan was about $180,000. We have heard of much... more amazingly sized loans, like the $400 million to Bernard Ebbers of WorldCom. Is that more unusual?

DONALD LANGEVOORT: Very much so. There has been a progression in the 1990 s, from the time we're talking about with respect to Mr. Bush, to the scandals that have broken recently. More and more executives have been willing to put their hands in the corporate till and say," this is my money. I need it for my portfolio whatever else." So today we're seeing a level that we didn t see 12 years ago.

GWEN IFILL: And were these loans scrutinized in the same way 12 years ago that they would be today?

DONALD LANGEVOORT: I doubt it. For a variety of reasons, the amounts in question the fact that the stock market was going up for a variety of reasons it was a little bit under the radar screen.

GWEN IFILL: The President in his speech the other day asked that these loans end, that these kinds of loans end and that's the question that the President accepted the kind of loans he's now calling for an end to. What... who has to do that? How does that work?

DONALD LANGEVOORT: Well, we could bar it by law, but we don't. It's never been illegal to extend a loan to an executive, as long as they are fully disclosed. The board of directors has is completely in charge and many companies around the country have already ended that practice.

GWEN IFILL: They have?

DONALD LANGEVOORT: They've declared they're not a bank anymore.

GWEN IFILL: Why?

DONALD LANGEVOORT: Partly to not create expectations among the executives that any time they need some more money, they ought to look first to the treasury.

GWEN IFILL: And why would a company now, under this just the edict of the President but not the enforcement power of the President do it?

DONALD LANGEVOORT: I'm not sure it's the President s speech at all. I think investors have gotten angry at a wide range of abuses, executive compensation, loans, self--dealing transactions and smart companies have discovered in the last few months, if not earlier, that they've got to position themselves as a little bit more attentive to their investor interests. So they stopped these.

GWEN IFILL: Do those loans affect a company's balance sheet?

DONALD LANGEVOORT: Sure. In the sense that they are risky sometimes, they're accounted for on the balance sheet, so they do move money in and out of the corporate treasury, that's usually reflected.

GWEN IFILL: Okay, let's talk about the other part of this, which is the President's role in buying and getting rid of Harken stock.

DONALD LANGEVOORT: Right.

GWEN IFILL: Did the... it seems that the major question here, the elephant in the room is whether there was insider trading involved in the President's decision to sell the stock certainly before it took a dive. What did the SEC investigate and what did they find?

DONALD LANGEVOORT: Well, we don't know all the details of the SEC investigation. In an insider trading investigation like this, what you want to know are a couple of things: Did the person, here Mr. Bush, know material nonpublic information, important confidential things in advance of selling? Now, as we look at the facts, we find some things that make this case not smell too bad, and a lot of investigators use a smell test to think about what to follow up on. In fact, although the stock price did go down a little bit after Mr. Bush sold. It also went back up fairly quickly. There was some good news, in other words, inside the company at the same time there were these questions about the financial condition. It looks like a reasonable person could have said, "This was a wash, I'm selling into a market that I don't know whether the stock's going to go up or down." That's not classic insider trading.

GWEN IFILL: If you are a member of a board of directors or an audit committee, would you typically have the kind of information, which would allow you to know whether the stock was going to go up, or whether something bad was about to happen with the company?

DONALD LANGEVOORT: It certainly should. That's the job of a member of the board of directors and certainly a member of the audit committee. Many of the reforms we're pushing today are designed to make people on the board of directors know even more.

GWEN IFILL: But you're saying that in order for the SEC to make a connection, there has to be something more than a bad smell?

DONALD LANGEVOORT: More than a... or a real bad smell, perhaps, is the way you look at it. Usually, in the kinds of cases the commission brings, you see a dramatic stock price increase or decrease right after the sale or the purchase.

GWEN IFILL: Like the Martha Stewart case with ImClone?

DONALD LANGEVOORT: Certainly that kind of situation, where the stock price tanks shortly after is the kind of thing that pushes the SEC forward. Where it's more ambiguous like this, often the SEC as a matter of discretion says," let's not push this one."

GWEN IFILL: Now, let's talk about these forms. It's interesting to see whether America will rise up over the question of filing forms on time. One is the Form 4, which is the form that was filed late. The other form, which the President just said in that opening piece was the Form 144, which, you know, he said was the more important form and had been filed on time. Is it the more important? How do those two...

DONALD LANGEVOORT: No, it's not the more important form at all. The one thing that having filed the 144 but not the 4 does indicate that he wasn't trying to cheat here; I mean if he was willing to disclose it in the intention to sell, there's no reason to believe he was trying to cover up anything. I'm willing to believe it was a good-faith mess-up perhaps by his lawyer. But it was a mess-up. The Form 4 is a very important form for securities disclosure purposes. We want to know what high-level people in all publicly traded companies are doing in the stock mark. Are they buying, or are they selling? If a lot of people at Harken or anywhere else are selling, investors ought to know that quickly. That's why we have a filing requirement, and when executives ignore that and don't file for four or five months too late, they're depriving investors of some important information.

GWEN IFILL: So in the end, whose responsibility is it to make sure that the form gets filed? First we heard lawyers, then we heard company officials and ultimately whose responsibility is it?

DONALD LANGEVOORT: It's the person in question -- it's Mr. Bush or any other executive -- certainly not the company.

GWEN IFILL: So does a failure to file a Form 4 all by itself trigger an SEC investigation?

DONALD LANGEVOORT: It can. In fact, ironically in 1990, the year we re talking about here, the SEC had gotten so upset with directors and officers not filing these forms on time, they went to Congress to get an increase in the penalties for violation of SEC rules. So the SEC can and has brought cases simply based on failure to file.

GWEN IFILL: Another interesting part of this is we as we were describing earlier, the President sold his $212,000 -- 212,000 shares of Harken Energy at a time apparently he received a cold call from a broker who bought these shares on behalf of someone, but we still don't know who bought them. Does it matter, or is it routine for us not to know?

DONALD LANGEVOORT: It's very routine not to know. The broker... often buyers don't want their identities divulged and the securities laws rarely require that to be disclosed. So there's nothing terribly suspicious about that.

GWEN IFILL: Now, there's another piece of this, which is the Aloha transaction, as it's known which is a subsidiary of Harken, which sold... 80% of it was sold to some Harken insiders and it wasn't because Harken loaned these insiders some money, it wasn't counted as in the books as a loss as in a way it might have otherwise been. Is that in any way reminiscent of other kinds of stocks, swap, sales we've seen, different accounting practices?

DONALD LANGEVOORT: It's hard to know. Reminiscent perhaps in the sense that if you look at Enron, you see that transactions structured with insiders can often be used to manipulate the books and the financial reports. But the fact that it may be reminiscent enter isn't enough to get upset about it. It may be perfectly legitimate.

GWEN IFILL: Do we need to see these SEC files to find out what really happened?

DONALD LANGEVOORT: I would like to. I think it would clear the air. I'm willing to believe the president, that there is no there, there, as he said, but I think in light of his strong rhetoric, we ought to have whatever information is available.

GWEN IFILL: Professor Langevoort, thank you very much for joining us.

DONALD LANGEVOORT: Thank you.

FOCUS SHARING THE WEALTH

JIM LEHRER: Next, managing new riches to attack age old poverty in Africa.

Fred de Sam Lazaro reports from the north central African nation of Chad, on the edge of the Sahara Desert.

FRED DE SAM LAZARO: Among the world's poorest nations, Chad is just about the poorest. Its per capita income is 200 dollars a year, less than half Haiti s, for example. For years, rival warlords, some backed by neighboring Libya, have fought for control of this vast land-locked nation, which has survived largely through international development aid

All that could soon change. Chad is the site of one of Africa's largest building projects: a $3.7 billion pipeline that will vault the country of 7 million into the club of oil exporters

A consortium of oil companies, managed by Exxon Mobil is laying 650 miles of steel pipe. It will carry a quarter million barrels of oil a day from southern Chad, through neighboring Cameroon to the Atlantic. Andre Medoc is an executive with the Exxon Mobil, which is called Esso here

ANDRE MEDOC: Basically we hope and of course the Chad government administration and people hope that we can move from this project from basically the pre-industrial era to the 21st century.

FRED DE SAM LAZARO: The pipeline has presented Chad a unique opportunity to use its natural resources to benefit all its people. That has not often been the case in resource-rich nations in Africa

For example the oil industry in Chad's neighbor, Nigeria, has been plagued by environmental mishaps. There are widespread allegations of corruption. The oil companies have been criticized by human rights group and some non-governmental organizations for focusing solely on their profits ...as life for ordinary Nigerians became increasingly miserable. Nigeria's Gross National Product for example, has nose-dived to about a third of what it was 20 years ago.

Chad's president, Idriss Deby, says African governments and western donors share the blame

PRESIDENT IDRISS DEBY (Translated): We in Africa have over the last 30 years completely missed our development opportunities and, if, as the West has alleged, we are bad managers or corrupt, then we share responsibility with the West. If we are corrupt, then you are the corrupters. We were partners in responsibility.

FRED DE SAM LAZARO: But this time, in Chad, donor nations, Exxon Mobil and Chad's government vow things will be different.

To begin, the oil consortium asked the World Bank to come in as a moral guarantor, to insure that the project helps reduce poverty... Gregor Binkert is the bank's Chad director.

GREGOR BINKERT, World Bank: The oil companies of course have learned from some of their you could call them public relations disasters in other countries in which they were somehow implicated or government officials were implicated and it is a new way of thinking on their part

FRED DE SAM LAZARO: The World Bank itself has been criticized, by members of Congress among others, for financing questionable projects. So when it was invited to Chad, the bank invested millions to create democratic and transparent institutions, whose accounts, for example, can be publicly audited.

It also attached strings. Exxon had to sign on to an environmental protection plan. And the government had to pass a law setting priorities for spending its windfall... outlined by petroleum director Mahamat Hassane

MAHAMAT HASSANE, Petroleum Director: You know, in the law we have defined some sectors that we call the prior sector, the educational sector, health sector, environment sector, drinkable water sector and infrastructure.

FRED DE SAM LAZARO: A committee, drawn from government, the supreme court and civil society will allocate the money. And oil revenues will go directly to escrow accounts in Europe. It is an historic government concession, according Donald Norland, a former U.S. envoy to Chad

DONALD NORLAN, Former U.S. envoy to Chad: It is an infringement on the sovereignty of a newly independent African country. Can you imagine yourself having a major account in the bank but unable to write a check on that bank? Someone else is going to have to give you permission to get at your own money

FRED DE SAM LAZARO: Norland says worsening conditions left the government few options but to allow foreigners in to look over its shoulder

FRED DE SAM LAZARO: Chad's president, Deby, a former warlord who rose to power 10 years ago, is philosophical on the sovereignty issue

PRESIDENT IDRISS DEBY: The world has become a village. It s all a process of globalization and economics and politics and finance. We voluntarily entered into this agreement because we wanted to make sure the petroleum resources, the money from the petroleum is used for no other purpose than to combat the poverty of the Chadean people.

FRED DE SAM LAZARO: People in the path of the oil pipeline are being offered compensation by Exxon or ESSO. They can choose 1000 U.S. dollars in local currency, or they can opt for kind compensation and that would come from the ESSO catalog, which features everything from bicycles to sewing machines to fruit trees.

Absent banks or legal forms payment, payment is made in cash, and recorded on camera

The process is fraught with complication and there s been especially strong criticism of programs that compensate communities near the pipeline

In a country where two out of three people can t read or write many villagers complained that the school they were promised is behind schedule. They also pleaded for a well; three of four Chadeans lack access to safe water.

Company officials also are deluged by job seekers. Exxon Mobil has been criticized for not employing enough local people, for flying in most supplies from Europe instead of seeking local partners. Michael Didama is editor of the French language weekly, Le Temps .

MICHAEL DIDAMA: I have seen the schools and dispensaries that they've built. They're just buildings, they're inadequate. They have to come into a community in a way that they're really integrated and do something that's useful in the society rather than just these token things.

FRED DE SAM LAZARO: Exxon Mobil's Medoc says the problem is understandable, but the people have unrealistic expectations

ANDRE MEDOC: In the village here they don't have a water well, they don't have a school, they don't have a dispensary, they don't have anything. So the expectations are very high in terms for example of employment also. Everybody would like to have a job on this project. And we need to explain to them that our role is to produce the oil that we have discovered in Chad. And we are not trying to substitute ourselves for the government.

FRED DE SAM LAZARO: But the government's own role has been questioned. Editor Didama cited an example from two years ago, when the government received a 25 million dollar advance or bonus from the oil consortium.

MICHAEL DIDAMA (translated): The government used the money to purchase arms. It could have used the money for many other things. We haven't got electricity, we don't have health services, we don't have schools. There s no differences between what has happened in Nigeria and Angol and what s going to happen here.

FRED DE SAM LAZARO: But others, like U.S. Ambassador Christopher Goldthwaite note the government did yield to pressure from western donors

CHRISTOPHER GOLDTHWAIT: We, the WorldCom and others intervened, and focused attention on it the government froze the remainder of it. Certainly the fact that this occurred, the fact that that money disappeared before people knew what was happening, that does raise a red flag

PRESIDENT IDRISS DEBY (translated): Let me tell you one thing! I'm a nationalist. I love my country...I don't answer to anyone except the people of Chad who elected me

FRED DE SAM LAZARO: President Deby angrily defends his actions. The advance money was not part of the World Bank agreement, he notes, and was used for a legitimate

national need

PRESIDENT IDRISS DEBY: At the time, my country was facing a rebellion from the north. We took just $3 million from this bonus to face the threat, because I am

not going to let our institutions be threatened. I need to have peace and stability to make this project a reality

DONALD NORLAND: Deby regards this as his project; he desperately wants it to succeed. He wants this to be the Deby legacy.

FRED DE SAM LAZARO: Former Ambassador Norland says if successful, the project s benefits could be far reaching and even help the war on terrorism.

DONALD NORLAND: I see a successful anti-terrorism program as requiring a long-term dimension, and I see this project as being a marvelous opportunity to raise standards of living of the people in a part of the world that risks one day maybe not next year maybe not the year after but one day it could descend into the same kind of a swamp that we find in parts of the world where there are foot soldiers being conditioned to take over and use violent means, anarchic means perhaps too, to change governments and to conduct jihads against enemies.

FRED DE SAM LAZARO: Chad s first oil revenues will begin flowing early in 2003.

CONVERSATION

RAY SUAREZ: Finally tonight: Another conversation about a new book, and to media correspondent Terence Smith.

TERENCE SMITH: The book is "The Cat from Hue: A Vietnam War Story." The author is John Laurence, who did three tours of duty in Vietnam as a correspondent for CBS news. In his 30-year broadcasting career, he has covered 15 wars and revolutions for CBS and for ABC News, as well as reporting and documentaries on politics and culture from his base in London. Jack Laurence, welcome.

JOHN LAURENCE: Thank you.

TERENCE SMITH: Explain the title, the cat metaphor.

JOHN LAURENCE: The cat was actually a small, starving, orphaned, homeless kitten I met in hue when it was about eight weeks old and I was 27 or 28 years old, and near the end of my tour. And we started a relationship in a bombed out house that was during the 20th day of the Battle of Hue, when the Marines retook it from the north Vietnamese during the Tet Offensive.

TERENCE SMITH: Right, in 1968.

That's right. It was the single worst battle of the war. There were over 10,000 people killed in that battle. And how the kitten survived, and turned out to be a Vietcong cat-- he's the symbol for the resistance for the other side-- was really a miracle.

TERENCE SMITH: You were just 25 when you went to Vietnam for the first time.

JOHN LAURENCE: Yes.

TERENCE SMITH: ...In 1965. What was your mindset at that time, as far as the war went?

JOHN LAURENCE: The only research I took with me from New York on the long flight to Saigon was David Halberstam's new book, "The Making of a Quagmire." And so that was my mindset. I believed that, as Halberstam concluded, it was worth being in Vietnam; the country was worth saving; the sending of troops-- as President Johnson had ordered 50,000 initially, 500,000 within a few years-- was a noble cause, to save that little country from the civil war it was engaged in with the North.

TERENCE SMITH: A noble cause when you first went there. What did you think at the end of the third tour?

JOHN LAURENCE: I was against the war on every count. In the time I was there, I saw that, "a," it was going to be impossible to achieve a successful result against the North Vietnamese and the Vietcong; "b," that the amount of devastation and destruction and killing that we were causing in Vietnam outweighed the circumstances that might come with a more peaceful solution to just let the Vietnamese settle it themselves. So I went from being a hawk to a dove in five years.

TERENCE SMITH: You went back in 1982.

JOHN LAURENCE: I did.

TERENCE SMITH: ...To Vietnam. And in fact there's a passage in the book where you describe a very difficult night as all of the memories come back in Saigon. Would you read it for us?

JOHN LAURENCE: Yes, surely. You get paranoid when you don't sleep enough and you're in a place that has a lot of... of terrifying memories, and so this paragraph in the book, which is on page 837-- we're getting near the end-- described this. It really was, in some ways, my message to all the Vietnam veterans, civilian or military, who still had the same problems I did after the war.

"Sometime before dawn and the deepest despair, working its way up from unconscious depths and running beside the accelerating depression, a conscious flash cut through the gloom-- a bulletin from beyond, a psychic antidote suggesting itself among memories of war madness, a secret to sanity for such moments. The thought was not profound or even particularly enlightened, offering only a small consolation for those of us who had put it on the line in Vietnam. It suggested that those who came here and got away alive, who made it through the bad times and the good, are stronger than they may think by having survived it; maybe also wise with the knowledge that nothing ever, anywhere, would be as hard. It was another way of saying that having survived the war, I could survive this night. I held on to the thought, nurtured it, invoked it every time the fear was strong, used it to fight the madness, and eventually it got me through."

TERENCE SMITH: You know, the writing of this book,which I know took years, must have been something of a catharsis in itself.

JOHN LAURENCE: It was. I'm 62 years old now. I was in my 20s when the war was happening. I was seeing a very small corner of the war each time we went out into the field, and it was so traumatic and disturbing, it made my world be turned upside down, that I couldn't assimilate the horror of it at the time. And it got buried somewhere in my unconscious, and that affected the way that I felt and thought in the rest of my life. But being a mature human being and being able to put these incidents in the context of the bigger picture, I was able to see that it all actually did make sense, but that I had to write the book to make sense of it.

TERENCE SMITH: Right, right. Let's put it in that context, and even the context of today. When you look back on it-- you, this hawk turned dove-- and you look back at it with the advantage of hindsight, what lessons from Vietnam... what should we draw from it?

JOHN LAURENCE: Well, many of the lessons of Vietnam have already been implemented, whether they were intended or not. The reorganization of the military, for example. It's now an all-volunteer army and marine corps and the rest of the services. It's perhaps much more professional. The training methods are much more realistic. I met someone in the Gulf War, after it was over, say that fighting the Iraqi tanks was not as difficult as some of the training exercises that they had gone through beforehand. We are rotating units in Afghanistan today, rather than individuals. That's a lesson from the Vietnam War. But... and there are many others. But maybe the most profound is that the U.S. Government and military are no longer willing to accept casualties the way they were during the Vietnam War, so that all of the casualties since Vietnam are fewer than, for example... all the casualties from all the wars the United States has fought overseas since Vietnam are fewer than those who were lost from the state of Connecticut in the Vietnam War: 612.

TERENCE SMITH: And for people in your profession, our profession, journalists-- what should they draw from Vietnam -- because it's the template for so much coverage of wars after that?

JOHN LAURENCE: Well, all that has changed so much now. It's so much more difficult to get out and cover a story, say, for example in Afghanistan or anywhere the U.S. Military is. And that's a real dilemma because, as citizens, we need to know as much as we can within the limits of secrecy and security that the military sets. But without being censored for the sake of being censored, not to learn the mistakes that are being made. The longer the wars go on, the more necessary it becomes to see them as they are happening.

TERENCE SMITH: And that reluctance on the part of the military, you see as an outgrowth of Vietnam?

JOHN LAURENCE: Yes, yes, and also its own security needs, and those have to be respected. You can't have 500 reporters chasing 7,000 troops. You can have 500 reporters trying to get stories when you have 500,000 troops over a great big area, as was the case, as you know, Terry, in Vietnam. But it's a different set of circumstances in Afghanistan. I don't degree that Afghanistan is like Vietnam, as some have been quoted as saying. Afghanistan is exactly like Afghanistan.

TERENCE SMITH: Jack Laurence, thanks very much.

JOHN LAURENCE: Thank you, Mr. Smith.

RECAP

RAY SUAREZ: Again, the major developments of the day: The Dow Jones Industrial Average fell 200 points, before recovering to finish with a loss of just a dozen points. The NASDAQ Index gained 28. And a White House spokesman defended President Bush's acceptance of low-interest loans from a company he served as a director back in the 1980s. The President now favors an end to such loans. We'll see you online, and again here tomorrow evening with Shields and Brooks, among others. I'm Ray Suarez. Thanks and good night.