The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight a summary of today's news, excerpts from a Pentagon briefing on some unintended consequences in Afghanistan, a Newsmaker interview with Senate Majority Leader Tom Daschle, a report on health care for the uninsured, and two perspectives on what fell from Enron onto the accounting profession. NEWS SUMMARY JIM LEHRER: The U.S. military today defended a missile strike in eastern Afghanistan. It happened one week ago. A remote-controlled plane operated by the CIA targeted and killed an unknown number of people. The "Washington Post" reported today the victims were peasants, not members of al-Qaida, but a Pentagon spokesman said they'd been involved in "something untoward." Separately, Defense Secretary Rumsfeld ordered an inquiry into reports U.S. troops beat Afghan prisoners. They were captured by mistake in a raid last month, north of Kandahar. They were released last week. We'll have more on this in a few minutes. Thousands of Iranians protested in Tehran today. They condemned President Bush for declaring Iran part of an "axis of evil" with Iraq and North Korea. We have a report from Nicole Clements of Associated Press Television News.NICOLE CLEMENTS: The anti-U.S. rally drew support from both hard- liners and reformists. Tehran's streets were awash in color as people marched to the square carrying thousands of balloons, effigies of Uncle Sam, and placards that read "Death to America." During a speech to thousands of people gathered at the square, President Mohammad Khatami labeled the U.S. charges an insult. Khatami appeared to blame U.S. foreign policy for the September 11 attacks. The President, who in the past has called for unofficial dialogue with the Americans, says the rally's size was a sign of Iran's resolve. Over the past few days, Iranian newspapers, state-run radio, and television have all been urging participation in the rally. Monday's demonstration is the final day of festivities called the "Ten-Day Dawn," celebrating the 1979 revolution, which swept the U.S.-backed shah from power. JIM LEHRER: In Washington, a State Department spokesman said the United States would welcome talks with Iran. But he said the Islamic government must address concerns about supporting terrorism and developing weapons of mass destruction. The former chairman of Enron, Kenneth Lay, will not answer questions before Congress this week. His spokeswoman said last night he will exercise his constitutional right not to testify. Lay had been subpoenaed to appear tomorrow before a Senate committee and again Thursday before a House Subcommittee. In another development, the Labor Department will try to place independent trustees in charge of Enron's retirement plans. Thousands of employees lost their savings in those plans last year. At the winter Olympics in Salt Lake City today, Americans swept the medals in the men's snowboarding half-pipe event today. Ross Powers of Vermont won the gold. Norway and U.S. Germany won gold in the men's and women's biathlon events today, and Italy won the men's single luge. Video of the competition was not available due to the Olympics television contract. That's it for the News Summary tonight. Now it's on to: Mistakes in Afghanistan; Senator Daschle; health care for the uninsured; and Enron and accounting. FOCUS - MILITARY MISTAKES? JIM LEHRER: Gwen Ifill has the Afghanistan story. GWEN IFILL: The Pentagon's search- and-destroy hunt for what remains of Afghanistan's al-Qaida network, has focused repeatedly on the eastern mountain region of Zhawar Kili. Located just inside the Pakistani border, Zhawar is among the suspected hideouts for Osama bin Laden's remaining loyalists. A week ago, an unmanned CIA surveillance plane fired a missile that killed several men in the region. But today's "Washington Post" said the plane hit the wrong people and quoted local residents' insisting that the attack killed "peasants gathering scrap metal," not bin laden or his lieutenants. U.S. Military officials in Afghanistan will not confirm the reports. SPOKESMAN: I can say that the forces have found significant evidence that will be turned in for analysis. I can also say that the mission has gone extremely well. It was conducted in harsh terrain, under difficult weather conditions and is proceeding on schedule. GWEN IFILL: Later today at the Pentagon, Rear Admiral John Stufflebeem said the investigation into the attack is continuing. REAR ADMIRAL JOHN STUFFLEBEEM: The anecdotal reports of what I hear of what has been recovered from that site to date include things like weapons and ammunition, include things like communications systems, or at least things that would give you the impression that there may have been communication devices, documents in English having to do, like, with applications for credit cards, possibly, or maybe for airline schedules. So the intelligence that was garnered to be able to facilitate the strike, the initial indications afterwards would seem to say that these are not peasant people up there farming. GWEN IFILL: The "Post" article also says that a Post reporter on the scene was stopped and held at gunpoint by a U.S. military commander. "This is an ongoing military operation," the officer is reported as saying. "If you go further, you will be shot." Stufflebeem also would not confirm or deny the substance of that report. REPORTER: Are officers actually authorized to threaten the use of deadly force against reporters under that circumstance? REAR ADMIRAL JOHN STUFFLEBEEM: To believe that a U.S. American serviceman would knowingly threaten-- especially with deadly force-- another American is hard for me to accept. I also have to put myself on the ground of that military commander of that particular exploitation, and if someone presents himself and... There's no way for us to know, but he may not know that that was a "Washington Post" reporter. He just may know that somebody wants access into the site and he's denying it. GWEN IFILL: U.S. forces have been linked to, or accused of, several battlefield mistakes in recent weeks. Late last month in the village of Uruzgan north of Kandahar, a U.S. raid killed 21 Afghan soldiers. But local officials said the soldiers were allies working with the United States, not enemies. The CIA is reportedly paying reparations to their families. After that raid, the Americans took 27 prisoners. Four of those men, released them last week, now say they were beaten by the Americans soldiers. Again, Pentagon officials won't comment until a formal investigation is completed. Also in question: A U.S. attack near Gardez, killing what local witnesses say were people attending a wedding celebration, and a deadly missile attack on a convoy near Khost. The interim Afghan leader Hamid Karzai says the victims were on their way to his inauguration. Pentagon officials say the targets were legitimate, the attacks successful. But Rear Admiral Stufflebeem said the Afghan war has entered a more difficult phase. REAR ADMIRAL JOHN STUFFLEBEEM: It is more difficult to develop targets now than it was, certainly, in the beginning where the targets were just so openly visible. The Taliban has vanished. Al-Qaida have vanished. We are constantly-- and I do mean constantly-- chasing reports from all over the country as to a pocket of al-Qaida here, a sighting of Taliban there. And we are working exceptionally hard-- I think it's fair to use the big "e" word in that case. It's a shadow war. These are shadowy people who don't want to be found. REPORTER: How do you sort that out? How do you sort it out? How do you know you're not being played off of one warlord? REAR ADMIRAL JOHN STUFFLEBEEM: Because you don't ever rely on that one piece of information anymore. If that one guy is going to tell you one thing, "thank you very much. I appreciate having that information." I'm going to go to others. I'm going to try to keep building this thing until I get a mosaic, if I can put it together, and look for other indicators. GWEN IFILL: And, Stufflebeem said, there is still no sign of bin laden, dead or alive. REAR ADMIRAL JOHN STUFFLEBEEM: It's impossible to answer the question. I understand the desire to want to know what we know about Osama bin Laden, but we don't know. The best thing to say about Osama bin Laden is that there is not yet enough indicators that tell us that he has died to believe that he is dead and, therefore, we make an assumption that he is alive and we don't know where he is. But we are looking for him and would intend to find him. GWEN IFILL: Investigations, he said again, continue. NEWSMAKER JIM LEHRER: Now to the Senate Majority Leader, Democrat Tom Daschle of South Dakota. I talked to him late this afternoon from the Capitol. JIM LEHRER: Senator Daschle, welcome. SEN. TOM DASCHLE: Thank you. JIM LEHRER: Senator Conrad and other Democrats have been comparing President Bush's budget proposal to Enron's accounting practices. What is that all about? SEN. TOM DASCHLE: Well, I think the similarity, Jim, is really pretty simple. What we saw with Enron was the use of retirement funds for purposes other than retirement to the point where all of the Enron employees lost virtually all of their life savings. What we're seeing in the budget right now is the use of Social Security moneys much like we used to do - a trillion and a half dollars over the next ten years of Social Security and Medicare dollars that will be used for other purposes, robbing really the trust funds of what we're going to need when the baby boomers retire, holding them accountable in ways that I think is very irresponsible. So I think that's really the issue. There is a parallel there, and I think Senator Conrad is right to raise it. JIM LEHRER: But what would the Democrats do differently with that money? SEN. TOM DASCHLE: Well, obviously under the Clinton Administration we didn't use Social Security dollars. For the last three years we have not used one dollar of Social Security. In fact, you recall all of the budget debates we had with regard to lock boxes, people saying we should lock up every dollar of the trust fund. In fact, if you go onto the White House web page, the President - President Bush has a statement there that we're not going to use a dollar of your Social Security Trust Fund money, and yet that's exactly what this Administration is doing. $1 1/2 trillion of Social Security money will be used under this budget. JIM LEHRER: But what would you Democrats do with that money? You would not touch it at all to pay down the debt; you would just leave it there? SEN. TOM DASCHLE: Well, what we would do-what we were planning to do is to pay down the debt so the money would be there for Social Security down the road. That was the original idea behind what the Clinton Administration proposed and what most Democrats, in fact, what most Republicans as well said was the way we ought to ensure the viability of the Social Security and Medicare trust funds in the future. JIM LEHRER: But of course the world has changed. We now have the war in Afghanistan, the war against terrorism, homeland defense. The President and his folks say this is the only way we can do this right now. Do you have another way of doing it, in other words, paying for increases in defense spending and homeland security, and do all of these other things without using the Social Security funds? SEN. TOM DASCHLE: Well, I would say two things to that, Jim: First of all, I would say that, you know, for the most part the CBO will tell you that 45 percent of the reason we're in the deficit over the next ten years is the tax cut, and the tax cut is what allowed us - are what caused the problem to a large extent - almost half of the deficit is caused by the tax cut over a 10 year period. The second thing is if you're digging a hole, the first thing to do is to quit digging. What we've got to do is not pass additional tax cuts. The President has proposed a permanent tax cut that will cost us $600 billion in the next 10 years, $4 trillion over the next - the 10 years following that just as the baby boomers are retiring. So that at the very least we shouldn't make these tax cuts permanent, and thereby exacerbate the problem of the deficit even further. JIM LEHRER: Do you want to repeal the present tax cuts? SEN. TOM DASCHLE: No. What I want to do is find ways to assure that we don't use Social Security trust funds and Medicare trust funds for purposes other than Social Security. We don't have the votes to repeal the tax cuts. The President said over his dead body will we deal with any tax cut repeal in the coming months and so that's not an issue that I think even ought to be on the table. The President's made it clear; he's got the votes. That's not something that's going to happen. So let's look at things we can do. It seems to me one of the things we should do is not make these tax cuts permanent and exacerbate the problem. JIM LEHRER: But if I understand you correctly then, that is the only Democratic program, just to not pass more tax cuts? SEN. TOM DASCHLE: Well, no. I think that there's a lot of things. I was pointing out - you asked what should we do and obviously there's an array of things that have to be done that I think ought to be examined more carefully. We haven't made any final decisions with regard to the allocation of defense money, the allocation of homeland security dollars - how we're looking to spend the discretionary, domestic money that the President's proposed in his budget. So there's a lot out there that we're going to be looking at. But clearly the $600 billion item that I think is one of the issues ought to be raised, ought to be debated, and hopefully ought to be avoided as one way of even making the situation worse. JIM LEHRER: Do you support the President's proposal that some - that what you call discretionary domestic spending beyond defense, beyond homeland security, either be capped or cut? SEN. TOM DASCHLE: Well, the President is cutting very dramatically - JIM LEHRER: Do you support that? SEN. TOM DASCHLE: No, we don't. We don't support that. We don't support the cut in childcare, the cut in job training, the cut in education, and some of the programs that they'd make. So there's a number of cuts that we're very concerned about and ones that we'll be talking about during the budget debate. JIM LEHRER: But how do you have it all, Senator? How do you oppose him on not cutting domestic programs, at the same time support him on defense and on homeland security and not go to Social Security? How are you Democrats going to handle all of this if you had - if you did have the votes? Let's say you did have the votes. What would you do? SEN. TOM DASCHLE: Well, Jim, I think you have to find offsets. That's what we were trying to do -- in all of the budgets that the Clinton Administration proposed -- when they proposed additional spending, they proposed the offsets to pay for them. I'll give you a good example. This week we're going to be taking up the energy bill. The House passed a $34 billion energy cut in taxes for their - as part of their energy plan. We're going to support an $18 billion cut in energy taxes, but it's going to be offset. We'll have the necessary offsets, including a custom user fee as one of the ways to offset that $18 billion cost. That's the responsible thing to do. That's how we ought to be addressing additional expenditures in this deficit. Let's find the offsets. Let's ensure that we don't dig the hole deeper, and that is the difference between Democratic and Republican philosophies on this year's budget. JIM LEHRER: Speaking of difference of philosophies, Mitch Daniels, the President's budget chief, said on this program a few days ago that really what you Democrats want is to raise taxes, that's really - when it's all said and done in order to do all the things that you want done, taxes are going to have to be raised. SEN. TOM DASCHLE: That is the age old - I mean age-old Republican mantra: that Democrats want to raise taxes. You'll hear it as long as you and I are in this business. Nothing could be farther from the truth. What we want is responsibility. What we want is to ensure that the fiscal discipline we showed over the last three years can be maintained. This is an irresponsible way to approach our fiscal management. To simply say we ought to go out there and provide more tax cuts without offsets is what got us into the trouble in the 1980s, and we've got a $4 trillion debt now to show for it. We don't want to go back to those bad old days, and we're hoping that we can find ways to avoid it. JIM LEHRER: Your use of the word "irresponsible" - are you saying the President is going about this in an irresponsible way? SEN. TOM DASCHLE: Well, I'm saying that the budget in many respects is irresponsible budgetarily. I'm not going to make any personal accusations here, but we can do better than this. We have to find ways to do better than this so we don't do what we did in the 1980's - rack up debt that we will be condemned to pay back for decades to come. The problem is this time we won't have those decades because baby boomers are retiring within the next 10 years. We had 20 years to worry about that in the 1980s. JIM LEHRER: But, in a word, you can do all of these things and not rack up debt and not raise taxes too? SEN. TOM DASCHLE: Well, you can't answer that question. This is complicated clearly - JIM LEHRER: Sure. SEN. TOM DASCHLE: -- but we've got to find ways to address these problems. They're not going to go away simply because we ignore them. We raised the questions. We want to work with our Democratic and Republican colleagues to ensure that we solve these questions before we, again, condemn this country to another 20 years of debt and fiscal irresponsibility that we can't afford. JIM LEHRER: Another subject, Senator. Was the President right to label Iran, Iraq, and North Korea as being an axis of evil? SEN. TOM DASCHLE: I don't think so. I think that it's important for us to look at each of these countries, Jim, as threats to this country clearly, as problems that we've got to address clearly, but I think we've got to be very careful with the rhetoric of that kind. You've already seen the moderates in Iran scramble to draw distance between us and them, and I think we've got to be very careful with how we approach all three countries. He's right in calling attention to the danger they pose to the United States. He's right in calling for strategies. I would hope we could do it multilaterally and not unilaterally because I think that's where we get into trouble. JIM LEHRER: Iraq seems to be the place where there might be the most imminent action, if any, coming. Do you think the case has been made for the United States to take action, military action against Iraq? SEN. TOM DASCHLE: I don't think it has right now. We have to be very concerned. And we want to avoid at all costs the terror of 9/11. If they're building weapons of mass destruction, we've got to deal with it. But I don't think the case has yet been made. We still have a major job to do with phase one of the war on terror. We still haven't found bin Laden. We still haven't found Mohammed Omar - we haven't found a lot of those in al-Qaida around the world that have to be found in order to deal with that level of terror, so I think we've got to take first things first. The President hasn't called for any military action, and I think that's exactly right; we shouldn't be at this point. JIM LEHRER: Do you expect as Senate Majority Leader to be consulted before there would be military action against Iraq? SEN. TOM DASCHLE: Absolutely. I don't think there's any question that it's important for Congress to be full partners; we need to be involved not only in consultation but in the decision making, and I would hope that that would happen. JIM LEHRER: There have not been any preliminary conversations about this? SEN. TOM DASCHLE: There have not, no. JIM LEHRER: On Enron, there's been increasing criticism of the way Congress is going about these many investigations. It seems like every subcommittee and committee in the House and Senate is figuring out a way to hold a hearing. And the criticism is there's an awful lot of confusion, an awful lot of people fighting for the spotlight or whatever. What's your view of how you all are doing this? SEN. TOM DASCHLE: Well, Jim, I think we're doing quite well, frankly. And I think both the House and the Senate are taking their responsibilities very seriously. I think that it's important for those committees, the areas of expertise that are relevant here, have the hearings, to ask the right questions, try to find the answers, and try to identify the policies that will allow us to avoid this from happening again. That's what Congress does, and I think at least to date the American people are supportive and very appreciative. JIM LEHRER: Why did you all opt not to do the Watergate route or the Iran-Contra route, in other words, to put together a select committee to go - just one committee to do the whole nine yards? SEN. TOM DASCHLE: Well, in part, because I think the committees are doing the right things. They are doing what we need to, to get to the heart of what these issues are all about. We have specific areas of responsibility and expertise that I think are the strengths of the current committee's system. We want to weigh on those strengths and use those strengths in our effort to get the facts and make some decisions with regard to future public policy. I don't that any generic committee, any Watergate type committee at this point will allow us to do any better job. JIM LEHRER: Last week, Senator Robert Byrd and Treasury Secretary O'Neill exchanged some unusually harsh and some would suggest insulting words at a Senate hearing. What's going on there between these two men? SEN. TOM DASCHLE: Well, I think emotions are very high. I think that any time you get into some of these issues you have people that feel very strongly about their position, strongly about - in Senator Byrd's case - the institutions that he's here in part to protect. He feels strongly about the prerogatives of the United States Senate. I think the challenges to those responsibilities as Senators are challenges he takes very seriously and you saw that play itself out last week. JIM LEHRER: So you defend Senator Byrd and what he did? SEN. TOM DASCHLE: Absolutely. JIM LEHRER: And you think Secretary O'Neill was out of line? SEN. TOM DASCHLE: Well, I'll let others make that decision. I think he again expressed himself strongly, as is his right. He feels that there are certain things that ought to be changed, and he articulated those feelings last week. I don't know that there's a right and wrong. I just strongly believe that Senator Byrd was well within his right to express himself and to make sure that people understood his position. JIM LEHRER: Finally Senator, yesterday you said you were going to oppose the nomination of Federal District Judge Charles Pickering-he's been nominated to go to the Circuit Court of Appeals in New Orleans. He's from Mississippi; he's a close friend of Senator Lott - that you're going to oppose the nomination. Why? SEN. TOM DASCHLE: Well, because I don't think that Mr. Pickering is qualified at this point. I think that there are some very serious questions about his ability as well as his background that causes me concern, so while I certainly believe he has every right to be - to have his case heard, for a vote to be taken, unlike our Republican colleagues, who would sit on nominations for years, we're going to have a vote in committee, and if it reaches the floor on the floor, but when that vote is cast, I've made the decision to oppose his nomination. JIM LEHRER: And this has to do with what he has done as a federal district judge or what he did earlier as a state senator, or what? SEN. TOM DASCHLE: Well, I think a combination of things, Jim. I'll have a lot more to say about it as the nomination comes to the floor, if it does, but I believe that we can do better than that, and I've expressed myself in that regard. JIM LEHRER: All right. Senator Daschle, thank you very much. SEN. TOM DASCHLE: My pleasure. JIM LEHRER: And we hope to have the Senate Minority Leader, Republican Senator Lott of Mississippi, later this week. FOCUS - FILLING A NEED JIM LEHRER: Still to come on the NewsHour tonight: care for the uninsured and Enron's accounting angle. JIM LEHRER: Tomorrow the President and Congress will be asked to address the problem of the 40 million Americans without health insurance. The call will come from a coalition of the U.S. Chamber of Commerce and the AFL/CI.O. Susan Denzter of our health unit has been looking into a clinic that knows the problem all too well. Our unit is a partnership with the Henry J. Kaiser Foundation. SUSAN DENTZER: Just 20 miles from downtown Los Angeles Venice Beach is the heart of laid-back California funk. That's especially evident in life along the city's famed boardwalk. But just a few blocks from the beach, here at the Venice Family Clinic, it's a far different scene. (Speaking Spanish) SUSAN DENTZER: On a recent afternoon, pediatrician Norma Rosales showed Marle Comacho how to give asthma medication to her three-year-old son, Stephen. (Counting in Spanish) SUSAN DENTZER: Young Stephen Camacho is just one of 17,000 patients who frequent the Venice Family Clinic, the largest free medical care clinic in the United States. Founded by two local doctors in 1970 to pride health care for the poor, today it has grown into a $16 million a year operation with four separate sites. The vast majority of the clinic's patients are in working families, most are poor and most are without health insurance, like poet and part-time fencing instructor, Stephen Goldman. HEALTH PROFESSIONAL: Your good cholesterol is 37, which is a little low, but we can't do much to adjust that; that's just your genetics. And your bad cholesterol is 88, which is great. STEPHEN GOLDMAN: Really? I've had two hundred and something. HEALTH PROFESSIONAL: I'm telling you, it's great. SUSAN DENTZER: Goldman has been coming to the clinic for treatment of diabetes, hypertension, high cholesterol and depression for the past 15 years. STEPHEN GOLDMAN: This is my health insurance. This is what I call -- Otherwise I would have "die in the street health insurance." And I'm not much of an activist or advocate, but not this... This is literally life and death to lots of people or damn near it. SUSAN DENTZER: When to comes to the lack of health of health insurance, the events of September 11 and the economic slowdown have made a bad situation worse. There are roughly two million of uninsured people in Los Angeles County, where the clinic is located. That's the highest number of uninsured of any county in the nation and in a state that also has the highest rates of uninsured. Local health experts say that without places like the Venice Family Clinic, tens of thousands of people would go without even basic health care. Elizabeth Benson Forer is the clinic's chief financial officer. ELIZABETH BENSON FORER, CEO, Venice Family Clinic: September 11 impacted the area surrounding our clinic in many ways. We're very close to the Los Angeles Airport. Many people there lost their jobs. There was no parking on the premises for many months. We have many hotel workers in the neighborhood. We live close to the beach. And they have lost their jobs. Many of them have lost their health insurance, and so they are in the process of coming to us or will be coming to us. SUSAN DENTZER: One of them is 38- year-old Beatriz Samayoa, a single mother of three who came here 12 years ago from Guatemala. She was working at this elegant beachfront hotel in nearby Santa Monica until shortly after September 11, when tourism plummeted. With the hotel only half full, she was laid off. BEATRIZ SAMAYOA: They didn't give us notice. They didn't say we're going to cut people. They just call us into the office and... And tell us that there's no more work for us. SUSAN DENTZER: It was the first and only job Samayoa ever had that came with health insurance. BEATRIZ SAMAYOA: I didn't know how to pay my bills. That affected me emotionally -- affected my kids. SUSAN DENTZER: Samayoa seeing a mental health professional at clinic, who is helping her to cope with the stress and to find another job. Samayoa also depends on the clinic for health care for her three children. Two were born here, and as U.S. citizens, they have health insurance through the state's Medicaid program called Medical. But her eldest son, born in Guatemala is not eligible for coverage. So the free clinic is his only option. To Dr. Susan Fleischmann, the clinic's medical director, the situation demonstrates how the clinic fills the many gaps in America's health care system. DR. SUSAN FLEISCHMAN, Medical Director, Venice Family Clinic: In a single day, I'll see someone who is uninsured because they lost their job. I see someone who has Medicare and they come here because they can't pay for medications. We'll see someone who lost their Medicaid because they didn't fill out the right form, or they moved, or their address changed. We see all the people that fall through all the cracks. SUSAN DENTZER: Recently Dr. Fleischmann treated another patient who fit that bill-- 30- year-old Eric Moore. Agraduate of nearby UCLA, Moore was working for a web site, lainsider.Com until he was laid off after September 11. Not long after, he developed a pain in his leg. ERIC MOORE: After three days, I realized it wasn't a muscle cramp, but I was too afraid to go to the hospital because I didn't have medical insurance. I was afraid of a very large bill. Ironically, because I didn't go to the hospital, that probably made the situation much worse. SUSAN DENTZER: Then, while walking outside in early December, Eric collapsed on the pavement. ERIC MOORE: I collapsed from what I now know is a blood clot which became a pulmonary embolism, where the blood clot moved from the leg to the lung. It knocked me out. I almost died. SUSAN DENTZER: Taken first to the Venice Clinic, he was then transferred to Daniel Freeman Hospital, where he spent the next several days. The bill for his care there came to $14,000. ERIC MOORE: My mother put down a down payment for $2,000. I couldn't ask for anything more. But I still have a bill of $12,000 along with... That's more than my school loans. SUSAN DENTZER: Eric is now receiving free follow-up care at the Venice Clinic. That includes getting advice on losing weight and staying active and receiving blood thinning medication to lower his chances of another clot. HEALTH CARE PROFESSIONAL: This is your coumadin. You need to take three of them every day. Make sure no aspirin with that, and we'll adjust your dose when we see you. ERIC MOORE: Thank you very much. Bye. SUSAN DENTZER: The medications given to patients like Eric are donated to the clinic by large pharmaceutical companies. That's part of $8 million a year the clinic gets from private contributions. The rest of the clinic's annual budget, another $8 million, comes from a patchwork quilt of public sources, city, county, state, and federal governments. The clinic also depends on 500 private physicians. They donate their time alongside the clinic's small paid medical staff. DOCTOR: My Spanish is terrible, so I'm sorry. 'S why I have Rosa. What brings her here? SUSAN DENTZER: One is Dr. Ami Oren. An Israeli migr he's a full- time lung specialist at UCLA's hospital. He donates a number of hours at the clinic. He says part of the motivation is the patients are so appreciative. DR. AMI OREN, Volunteer Physician, Venice Family Clinic: Patients here are more cooperate active in many ways. They are very grateful. And it's easier for me to have patients do things that are very difficult, such as getting off drugs, smoking cessation-- much easier than I find elsewhere. SUSAN DENTZER: The clinic's high profile fund-raising efforts include an annual art festival featuring the work of the many prominent artists who live nearby. What's more, the proximity of Hollywood attracts celebrities like Dudley Moore. And recently television personality Larry King came by with his wife, Shawn, to help patients with heart disease. LARRY KING: We're very impressed, as Shawn said, with this place and we're happy to do this, so here it is. ( Applause ) SUSAN DENTZER: King says that he received care from a free clinic as a child after his father died. LARRY KING: I had to go to a New York free clinic where they examined my eyes and New York City through this clinic, gave me my first pair of glasses. I never forgot that. I was humiliated, but at the same time, thankful. I don't think anybody is entitled to more health care that another person. That's what a free clinic does; it welcomes you through the door. They did me. We owe it back. SUSAN DENTZER: For all the support behind it, the clinic is now having to gear up to fight threatened cutbacks in state and federal funding over the next several years. A yawning state budget gives portends possible cuts in Medi-Cal. ELZIABETH BENSON FORER: At a time when we're not economically stable, with families who are fighting to keep a job or find a job and really need health care, it's the worst time to cut this funding. (Speaking Spanish ) SUSAN DENTZER: As part of campaign the clinic is asking patients to fill out post cards and send them to elected officials to let them know how much the clinic's services are needed. Some experts say that having more places like the clinic would offer a solution to the problem of roughly 40 million Americans without health insurance. But ask clinic officials about that and you'll get a surprising response: No. ELIZABETH BENSON FORER: We're here because there is no other way to solve this problem right now. We're a band-aid; we're not the solution. DR. SUSAN FLEISCHMAN, Medical Director, Venice Family Clinic: I would really love to the clinic didn't need to exist. It was started as a stopgap measure. We never dreamt of growing this big. And our goal is not to be so successful that we grow and grow, because I don't want to see that kind of need. If everyone had insurance and everyone had access that went along with that insurance, I would be very happy to shut the doors and go out and find another job. SUSAN DENTZER: Until that day comes, the doors of the Venice Clinic are likely to stay wide open to serve those who need it. FOCUS - TAKING ACCOUNT JIM LEHRER: Now, Enron's fallout for the accounting industry. We have two views: Ray Suarez recorded the first on Friday. RAY SUAREZ: A key issue in the collapse of Enron has been the role of its accounting firm, Arthur Andersen. Recently the five biggest accounting companies, including Andersen, announced they would address the conflict of interest issue and change certain industry practices. Deloitte and Touche, of the so- called "big five," was the last to sign on. Its CEO Jim Copeland joins me now. RAY SUAREZ: Let's begin by getting an idea of what structural changes have been proposed and what you're agreeing to do. JIM COPELAND, CEO, Deloitte & Touche: Ray, actually, we decided to separate Deloitte Consulting. We're going to put a plan of separation in place that should be completed around the end of May, and then we'll move as quickly as we can to execute that plan after that, at that point. RAY SUAREZ: Now, you're at the top of the pyramid of both companies at the moment. When that's spun off, that new company will have a whole separate management structure? JIM COPELAND: Yeah, actually, today Deloitte consulting has its own separate board of directors and separate management, but we do meet at the top at Deloitte Touche Tohmatsu, our global organization. RAY SUAREZ: So why is this considered a good idea? Why was it recommended to the big five? JIM COPELAND: Well, we don't think it's a good idea. We believe that the entire scope of services, issue related to auditor independence at least for our firm, is really an issue of appearance rather than a real independence issue. But the market has moved, and the market believes that there will be regulations that will require separation of accounting and auditing services for the same client. And so we can no longer allow our clients to be in a dilemma of having to choose between the best auditing firm in the world and the best consulting firm in the world. We want them to be able to choose thebest of both worlds. RAY SUAREZ: Now, you mention that that's, in your view, an appearance question. JIM COPELAND: RAY SUAREZ: A lot has been written in recent weeks about people jumping between the companies, after being supposedly a rigorous and disinterested observer of a company, then ending up a staff member of that company; of companies spending large amounts of money, both getting their books checked, and then spending money with the same company to get advice on taxes and running its business. Is this more than appearance? JIM COPELAND: I think people confuse independence with integrity and ethics. If you... If you think about the independence of an auditing firm, we're only independent by definition of the Securities and Exchange Commission. We are dependent on our... We are financially dependent on our clients. We're paid by our clients to do auditing work or to do a number of other things. So we are not independent... Independent except by the definition of the commission. So it's always seemed a strange argument to me that people would wonder why we should be paid for consulting services and at the same time not have the same questions about being paid for our auditing services. The fact is that independence and integrity are really two different issues, and if a professional is faced with a decision to do the right thing, even when it costs them, that's the price of being a professional. That's what being a professional is all about is doing the right thing, even when there are powerful influences to do something else. RAY SUAREZ: Now, you've mentioned that, for business reasons, you'd rather not take this step. Is this just part of the fallout from Enron and its problems? JIM COPELAND: It appears that it is. And the unfortunate part about it is that, in some ways, it will make it more difficult to do high-quality audits rather than easier. RAY SUAREZ: If you follow the stock markets, there seem to be a lot of other companies now who are restating profits for 2001, who are reopening examinations of their books. Have you had clients contact Deloitte Touche and say, "Let's take another look at 2001"? JIM COPELAND: I would say that all of our audit committees are looking to us in this environment, saying, you know, "What do we need to do to be sure that what happened at Enron doesn't happen in our shop?" And that's the right question to be asking. You know, are the controls in place, are we having the right kind of communications, is the right kind of information being brought forward? So this is, I think... Actually, a positive aftermath of Enron is that audit committees are taking their jobs extraordinarily seriously right now and... As are auditing firms. RAY SUAREZ: One of the big topics of discussion already in the hearings, and something that may continue to be so, are these various side businesses that were begun by Enron. Is this a common practice and are your auditors running across it in many other businesses? JIM COPELAND: Well, special purpose entities have been used by thousands of companies for many years. They have a legitimate purpose when they're properly constructed. They're intended to make the use of a company's capital more efficient and effective, and they can be entirely legitimate. On the other hand, it's like anything else: If you abuse the idea, then you get an awfully bad result, and that seems to have been at least part of what happened at Enron. RAY SUAREZ: Well, from what you've read, what you've followed with that extra eye of a professional, have you seen some chapters inthis story that have just, you know, put you off your cornflakes, made you blanch? Made you wonder what was going on over there? JIM COPELAND: Obviously, this is a terrible tragedy. I mean, people have lost their life savings. They have... Thousands of people out of work, and I'll have to say that hundreds of thousands of people in our profession have suffered collateral damage to their reputation as a result of what's happened at Enron. RAY SUAREZ: Well, describe that collateral damage for me. JIM COPELAND: Well, sure. I mean, I've always been proud of what I do and I believe all of our people are proud of what we do and, in times past, I would say that people in our profession have been highly respected. There's some tarnish now on that, as a result of Enron and what's happened there, and that's not really fair. I mean, these people are going to work every day, working hard -- 300,000 of them in the United States doing between 15,000 and 17,000 audits a year that are never challenged, that aren't restated, there aren't problems with them-- and yet these people are being tarred, to some extent, with the same brush. RAY SUAREZ: Well, with the new atmosphere of second glance and higher scrutiny, might there be some other Enrons out there? JIM COPELAND: I would be surprised if we have anything in the pipeline, so to speak, of the size and scale and scope of Enron. I would really be surprised at that. But I do believe that there is a danger that in the process of trying to create reform that we address only some of the cosmetic or perception issues that are out there and convince ourselves that we have... That we've really had meaningful reform. And then there's some risk that the reputation of the capital market's even further damaged by the next incident-- probably not on the size and scale of Enron. At least, I hope not. RAY SUAREZ: Jim Copeland of Deloitte Touche. Thanks a lot for being with us. JIM COPELAND: My pleasure. JIM LEHRER: Margaret Warner has accounting conversation number two. MARGARET WARNER: For that I'm joined by Richard Breeden, former chairman of the Securities and Exchange Commission from 1989 to 1993. He then spent three years as a senior partner at the accounting firm Coopers & Lybrand. He now heads his own firm, which specializes in strategic consulting and corporate turnarounds. He also serves on the boards and audit committees of two publicly traded companies. MARGARET WARNER: Welcome Mr. Breeden. RICHARD BREEDEN, Former Chairman, Securities & Exchange Commission: Thank you, Margaret. MARGARET WARNER: You're reaction to the step that Deloitte Touche and other firms have taken separating the consulting from the accounting businesses. Do you agree with Mr. Copeland that it's just an appearance fix? RICHARD BREEDEN: I'd agree that appearance is a large portion of the debate that we're seeing right now, but appearances are very important -- as important, perhaps, as realities. It's critical that the public and investors all across this country believe that they can trust audits. When they get an unqualified opinion from an auditor on a company's financial statements and they invest their children's college education fund or their own retirement moneys or other investment funds in that company, they want to know that the auditor has not allowed anything else to get in the way of getting to the truth, getting the numbers accurate, and then telling the ultimate user of those financials: The investor. MARGARET WARNER: What about the point that Mr. Copeland made which is - he said, look, accounting firms aren't independent because we depend on the fees paid by the clients whose books we review. In other words, is there any reason to think that had Enron not been a consulting client for Andersen that Andersen wouldn't have cared just as equally about holding on to t auditing business? RICHARD BREEDEN: I think Mr. Copeland is entirely right about that. That is a part of this puzzle that doing away with consulting doesn't solve. There is still the fact that Arthur Andersen was receiving something north of $25 million each and every year in perpetuity unless they got fired. But typically, audits may last as long as 20 years, on average. So it's a long period of time in which the auditing firm and the client have a relationship. The size of that fee and the duration of the relationship mean that, sure, it's very important to the auditors to keep the client happy. Part of their job is client service. And they want to do a good job because of course most companies are honest and they need their auditor to help them do a good job disclosing their financials properly. So getting rid of consulting doesn't eliminate some of the pressures and as Mr. Copeland said we have to depend the integrity of auditing firms and their personnel. MARGARET WARNER: All the publicly traded companies in the country, by law, as I understand it, have to have an outside audit every year. RICHARD BREEDEN: Yes, that's right. MARGARET WARNER: What percentage, do you think, of all these companies and their auditors have the conflicting situation where the auditing, the accounting firm is also doing consulting? RICHARD BREEDEN: I don't know of any numbers to say how many. It's certainly common that audit clients have some level of consulting. For example, your auditor does the financial statements for you and also may provide tax services for you, help you prepare your tax returns. Technically, doing the tax work is not an audit. It's consulting, but most people would think of that as consulting that's closely related to the audit, that's very much tied into it. Consulting on the funding of employee benefit plans and other things are perhaps closer to an audit than going off and building somebody a $100 million computer software system. MARGARET WARNER: You're going to testify on the Hill tomorrow. The accounting firms made it pretty clear that by doing this step voluntarily, they hope that will do it, that they won't have to do it. What would be your recommendation on that point, whether there needs to be a law on this? RICHARD BREEDEN: Well, voluntary action is good and I applaud all the firms for responding in this area. Mr. Copeland made one very important point that I think all investors need to remember, and that is that the auditing profession is composed of hundreds of thousands of men and women across this country. In my three years at Coopers, if I learned anything, it is that those people work hard. And they are people of enormously high standards of integrity and they want to do to right. They want to get to right. We shouldn't allow the mistakes that have happened to be pushed under the rug but, on the other hand, we can't lose our sense of perspective here. MARGARET WARNER: But I mean are you saying there should be legislation or there shouldn't? RICHARD BREEDEN: Well, I think in this area legislation would probably prevent backsliding and Congress may decide that that is an important step to take. MARGARET WARNER: Now is the problem just with the accountants or is there anything wrong with the very standards and principles that are applied... That are supposed to be applied? I'm particularly thinking of the way the accounting is done for these off-the-books partnerships. I mean was any of the deception or misleading nature of the Enron statements, was that perfectly legal even if it was misleading? RICHARD BREEDEN: Well, that's the judgment that the ultimately some of the investigations that the SEC and the Justice Department may decide. Accounting principles of America are set by something called the Financial Accounting Standards Board. It's a private sector group. The government... Neither Congress nor the SEC sets accounting principles. The cookbook of what generally accepted accounting principles consist of is set in the private sector and then the SEC requires people to use it and provides some discipline. Over the last couple decades, those standards have gotten immensely complex. The complexity of the standards gives too much room for mischief in their application, particularly in the hands of companies that are pushing the edge of envelope very hard. MARGARET WARNER: You mentioned earlier, and also Ray did in his interview, the sort of resolving do problem that there is now between the firm... the companies and the firms that are their accountants where an accountant will go to the firm and vice versa. Do you think that should be stopped? RICHARD BREEDEN: I actually am in favor of some form of a legislative cooling- off period. Everyone in public service has that when they leave, and I think this is a healthy discipline. Both Lincoln Savings, the Charlie Keating failure back in the savings and loan days, and Enron one characteristic has been that a huge number of people brought over from the auditing form to the company. Again, it maybe makes the relationship a little too cozy. No one should say that people shouldn't have good job opportunities in the private sector but a year or two cooling is probably a good thing. MARGARET WARNER: What else would you recommend to restore investors' faith that financial statements they rely on are, in fact, honest? RICHARD BREEDEN: Well, we have a huge stake as a country in that perception. Investors need to know they can invest and investing is never without risk. There will always be companies that commit frauds that auditors, no matter how good, don't detect. And people have to be aware of that. That's the importance of diversification and doing as much homework as you can. But we need to know that the auditors will really leave no stone unturned in trying to get it right. We need more comprehensive disclosure of things like SPE's, which are, as Mr. Copeland says, they are legitimate devices, but there's no law that says you can't disclose what is in your SPE instead of keeping it hidden under a tarp somewhere. So more comprehensive disclosure is a big thing, a faster disclosure, and trying to make sure that everybody involved in the process is holding high standards of ethics and integrity. Things like when executives are selling stock, we discovered in Enron and Global Crossing, that there's a couple of loopholes that nobody intended that have allowed executives to sell the stock back to the company and not tell the market about that for a long period of time. That's a simple fix and it's something we should do. Fixing the accounting and disclosure system, there's no magic bullet that will fix it. It's a delicate balance, a little bit like a Swiss watch. We have to work carefully to look at the problems that have happened, not be complacent about them. Make changes to speed up the flow of information and make sure it's accurate, but at the same time not get carried away with wrecking what is still the best auditing and disclosure system in the world. MARGARET WARNER: Richard Breeden, thanks so much. RECAP JIM LEHRER: Again, the major developments of this day: The U.S. military defended a missile strike last week in Afghanistan. The "Washington Post" said the victims were not members of al-Qaida, but a Pentagon spokesman said they had been doing "something untoward." In Tehran, thousands of Iranians protested against President Bush for labeling Iran part of an "axis of evil." And Senate Majority Leader Daschle said he thinks the President was wrong to use that label. On the NewsHour this evening, he said: "You've got to be careful with rhetoric of that kind." We'll see you online, and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.