The NewsHour with Jim Lehrer

RAY SUAREZ: Good evening. I'm Ray Suarez. Jim Lehrer is on vacation. On the NewsHour tonight: Fighting AIDS in Africa-- a look at the message President Bush is bringing along on his trip; then, excerpts from Secretary Powell's defense today of the administration's rationale for war with Iraq; a report from Montana on plans to conduct bioterrorism research there; and the impact of Microsoft's decision to eliminate stock options as employee compensation.

NEWS SUMMARY

RAY SUAREZ: Two more American soldiers were killed overnight in Iraq. One was fatally shot about 15 miles south of Baghdad. The other was killed in a grenade attack on his convoy, northeast of Baghdad. President Bush acknowledged today U.S. troops are in a dangerous situation. He spoke during a visit to Botswana, the latest stop on his African trip.

PRESIDENT GEORGE W. BUSH: There's no question we've got a security issue in Iraq, and we're just going to have to deal with it person by person. We're going to have to remain tough. We're making steady progress. A free Iraq will mean a peaceful world. And it's very important for us to stay the course, and we will stay the course.

RAY SUAREZ: The president's policy in Iraq drew fire today from a Democratic presidential contender. Senator John Kerry of Massachusetts said he has no regrets about voting to authorize the use of force, but said it's now clear the U.S. went to war without a "thorough plan" for winning the peace.

SEN. JOHN KERRY: It's time for the president to tell the truth: That we lack sufficient forces to do the job of reconstruction in Iraq, and withdraw in a reasonable period; to tell the truth that America should not go it alone, that international support to share the burden is as critical now as it should have been in the months leading up to the war.

RAY SUAREZ: The man who commanded the war in Iraq said today the U.S. force there could be held at the current level, 148,000 troops, at least until the end of the year. And General Tommy Franks told a House hearing that U.S. Forces could be there for several more years.

GEN. TOMMY FRANKS: We want to be there for as long as it takes to have the Iraqis being able to operate with a form of governance that respects human rights as well as neighbors, but we don't want to be there a day longer than that. And so, sir, I anticipate that we will be involved in Iraq in the future and, sir, I don't know whether that means two years or four years. I just don't know.

RAY SUAREZ: The General also said 19 countries have forces in Iraq; 19 more are preparing to send troops; and, he said, 11 other nations are discussing whether to join the effort. President Bush pledged today the U.S. would stand with Botswana in fighting AIDS. That country has the highest infection rate in the world. The president called AIDS "the deadliest enemy Africa has ever faced." He's proposed $15 billion over five years to fight the disease in Africa and the Caribbean. He's asked for $2 billion in the first year. We'll have more on this story in a moment. Some U.S. industries could start cutting jobs because of higher natural gas prices. That warning came today from Federal Reserve Chairman Alan Greenspan. He said there's no end in sight to tight supplies and sharply higher prices. But at a Senate hearing, he also said there's no sign that energy firms deliberately caused the price spike.

ALAN GREENSPAN: Manipulation is a very difficult thing to ferret out. I can say this: That you don't need to avert to manipulation to understand what's going on. And I would suspect that a vast amount of people who try to manipulate these markets indeed fail.

RAY SUAREZ: Greenspan said expanding imports of foreign gas could partially ease the current shortage of gas. On Wall Street today, the Dow Jones Industrial Average lost 120 points to close at 9036. The NASDAQ fell more than 31 points to close under 1716. That's it for the News Summary tonight. Now it's on to: AIDS in Africa; intelligence reports on Iraq; a bioterrorism lab in Montana; and saying "no" to stock options.

FOCUS - AIDS IN AFRICA

RAY SUAREZ: Health correspondent Susan Dentzer begins our focus on President Bush and AIDS in Africa. Our health unit is a partnership with the Henry J. Kaiser Family Foundation.

SUSAN DENTZER: The president arrived today in Botswana, a country that he saluted as one of Africa's robust democracies. He especially praised Botswana's president, Festus Mogae, for spearheading this small nation's effort to fight the AIDS pandemic.

PRESIDENT GEORGE W. BUSH: Botswana, as a result of the president's leadership, has really been on the forefront of dealing with this serious problem by, first and foremost, admitting that there is a problem, and then by working to put a strategy in place to prevent and treat and to provide help for those who suffer.

SUSAN DENTZER: Nearly two in five adults in this country of 1.6 million people are infected with HIV-- That's the highest proportion in any country in the world. The total number infected here is estimated at 330,000. That's small by the standards of far-larger countries like South Africa, where an estimated five million are living with HIV. But the prevalence of infection still poses a nearly intolerable burden here. Botswana is also prosperous by African standards, with per capita Gross Domestic Product about ten times that of south Africa. So, recently, it became the first African country to adopt the goal of making so-called anti-retroviral drugs available to all citizens who need them. Now several thousand Botswanans with HIV or AIDS are undergoing such treatment. That's still a fraction of those who need it, however, so a push is underway to expand treatment further. President Mogae noted today that Botswana's AIDS-fighting efforts have benefited from a unique public-private partnership.

PRESIDENT FESTUS MOGAE, Botswana: We are collaborating with our own private sector, the foundations in the united states-- the Bill and Melinda Gates Foundation, the MERCK corporation foundation-- for providing us with anti- retrovirals, and also with assistance for mounting of our prevention campaign.

SUSAN DENTZER: Under that partnership, the Gates Foundation and MERCK are providing $100 million over five years for treatment and prevention initiatives. Pharmaceutical giant MERCK has also donated two anti-retroviral drugs that it produces, Stocrin and Crixivan. All these efforts appear to be paying off, for example, in a slowdown of the rate of new infections here. That makes Botswana one of several bright spots in sub-Saharan Africa, where about 30 million are living with HIV or AIDS. To strengthen their AIDS- fighting efforts, 14 nations in Africa and the Caribbean have been targeted for funding through the AIDS initiative that President Bush unveiled earlier this year. It's still uncertain how much money congress will appropriate toward that effort. But yesterday, during his visit to South Africa, President Bush said the U.S. Was eager to hear from African nations about how best to put the money to work.

PRESIDENT GEORGE W. BUSH: We need a common-sense strategy to make sure that the money is well-spent. And the definition of well-spent means lives are saved, which means good treatment programs, good prevention programs, good programs to develop health infrastructures in remote parts of different countries, so that we can actually get anti- retroviral drugs to those who need help.

SUSAN DENTZER: Among the issues members of the Bush Administration raised with the government of South African President Thabo Mbeki is expanding access to anti- retroviral drugs. Unlike Botswana, South Africa hasn't yet committed to getting drugs to all who need them. The president's next stop is Uganda. That's another nation that, like Botswana, has made substantial inroads into fighting AIDS.

RAY SUAREZ: More now on the challenges faced in Botswana, South Africa, and the rest of the continent. We get three perspectives. Caesar Lekoa is Botswana's ambassador to the U.S. Dr. Mamphela Ramphele is originally from South Africa, and a managing director for health and education at the World Bank. And Josh Ruxin is a professor of public health at Columbia University, and a coordinator on the U.N. Millennium Project taskforce focused on HIV and AIDS. He's worked extensively on the African continent, and recently returned from Rwanda.

Well, Mr. Ambassador, just a few moments ago we saw President Bush with your President Mogae, promising a partner with Botswana in the fight against AIDS, and eventually funding as well. Does this give you what you need to continue the fight?

CAESAR LEKOA: Yes, it does. In Botswana, we think HIV/AIDS is a big problem, and that really... at least speaking for Botswana, it will be very, very difficult for the country to deal with the problem on its own. We need all the friends that we can get, including the United States. So any assistance promised or pledged by the president is welcome.

RAY SUAREZ: Professor Ruxin, does the bush initiative really change the prognosis, or does it call attention in a way that hadn't been before?

JOSH RUXIN: Absolutely, Ray. For the past few years, we have been dreaming of hundreds of millions of dollars to combat this virus in the world. Today we're now talking about billions of dollars, so that's a great step forward. However, it's important to point out that it's still a small fraction of what would be needed, which would be in excess of $10 billion a year.

RAY SUAREZ: And Dr. Ramphele, in the way these things work in the world community, does a country like the United States putting down its marker, so to speak, on an issue like this one help create consensus, help create coalitions?

DR. MAMPHELA RAMPHELE: It certainly does. And I think it's particularly exciting coming at the back of the Abuja conference last year. We must remember it was African leaders, convened by the surgeon general of the United Nations, who made a commitment that they would like to tackle this issue. They want to ban the silence that had been allowing this epidemic to grow. And now, with partners coming to support African leaders to tackle this epidemic, I'm very encouraged.

RAY SUAREZ: Professor Ruxin, looking over the continent as a whole, give us the state of the epidemic right now.

JOSH RUXIN: Well, Ray, I think it's pretty much a catastrophe, I'm sad to report right now, with 30 million HIV-Infected, and those 30 million infections having occurred during the past seven years. We're still very much behind the epidemic, whether in Botswana or in other countries. But I think Botswana really does offer some rays of hope. They've got 6,000 people on antiretroviral drugs. They're demonstrating with a good public healthcare system that you actually can treat people and you can avert death and allow people to live healthy lives. When you look at poorer countries like Rwanda, where I recently was, you find that there's enormous political leadership. People are really coming together, but the finances are not necessarily yet in place, which is why the Bush proposal is so promising right now, though I would like to emphasize that dollars are not enough. You can't clean up a puddle with a dollar bill. And you really do have to focus on health infrastructure and capacity and training. This is a fight and an effort that is going to take many decades before we overcome it.

RAY SUAREZ: Well, Mr. Ambassador, you just heard the professor cite Botswana as a positive example because now 6,000 people are on drug treatment. But even that 6,000 is only a small percentage of your overall infected population. How do you get to where you need to be?

CAESAR LEKOA: I think, like the professor says, we recognize that it is a drop in the ocean, but still that it is a good start. The government's intention is to expand in the first place the physical infrastructure in terms of upgrading and improving facilities in the existing hospitals, and secondly and most importantly, building human resource capacity. That is the main constraint for the government. But we think that once we get some of these things in place, we'll be able to move the program much faster than it is at the moment.

RAY SUAREZ: As a result of all the things you're doing in Botswana, will your countrymen and women who are not HIV- positive be anymore likely to see doctors regularly, to get drugs for other illnesses regularly? Is this lifting the entire public health system in effect, this crisis?

CAESAR LEKOA: It is I think because especially with the launching of the IRV Program whereas in the past there was no need in the view of the people that were being encouraged to go for testing, there was no need to go and test, because one was going to die anyway. With the launching of the -- or the introduction of the anti-retroviral drugs itgives us a hope and a reason for testing. So we see a lot of encouraging signs in terms of the response to the testing, because then they know that there will then be a remedy, and at least the affected... infected people could live normal lives.

RAY SUAREZ: Well, Dr. Ramphele, Botswana is being held up as an example. It's small. Its caseload is relatively small. And it's also a single-language, largely single-ethnic-group state, as opposed to South Africa, which is big, multilingual, multi-ethnic, and has many times more cases. How does this make your job tougher, and what is South Africa doing?

DR. MAMPHELA RAMPHELE: I believe that both Botswana and other countries in Africa offer both the challenge and the opportunities. You've talked about Botswana. In South Africa, we have an interesting situation-- sad in that the problem of HIV/AIDS is two decades old in South Africa. All governments up to date have really not taken off at the level in terms of attacking this fight that they could have. And there is something about South Africa which I think is important to highlight, which is the depth of research, the depth of the health system in South Africa, the depth of the civil society in South Africa, the private sector. So South Africa, in an interesting way, is turning this adversity into an opportunity for people to work together at different levels, so even though the national program could be better, could be stronger, many more provinces now have got a comprehensive package ranging from awareness creation right through to treatment, and the results are very encouraging.

RAY SUAREZ: So you can make up for some of the time lost in that slow start?

DR. MAMPHELA RAMPHELE: It's unfortunate that you can't make up for the people who have died unnecessarily, but what I do feel very encouraged by is that we are now making up for lost time for those who are still alive. We have cases in Kailasa, one of the poorest townships, where people who are HIV-positive and giving up hope last year are now up and walking because of the interventions by a combination of the provincial administration and civil society; people are becoming willing to come forth for testing, to actually go on to treatment, and keep with it. The fear that was there for resistance among poor people because there would be unreliable intake in their treatment has actually proven not to be the case. People, once they're given hope, hang on to it.

RAY SUAREZ: Professor Ruxin, during the week that the president's in Africa, we're seeing countries where the HIV Infection rate is well into the double digits at some breathtaking levels, but also seeing some countries like Senegal with only a 2 percent infection rate, Uganda with an 8 percent infection rate. How do we understand the differences between these two countries? What's different about the countries where they've managed to keep the infection rate fairly low?

JOSH RUXIN: Well, Uganda previously did have a rather high infection rate, and a couple of things happened. Firstly, they implemented a pretty comprehensive prevention and treatment program. And we should note that you have to have those two together. When people know that they'll have access to treatment, they're more likely to go in to be tested. They're more likely to be open to listening to prevention messages. But, unfortunately, in Uganda, a lot of people had to die before that program was put fully in place. I think that if there were any one characteristic you could look to, it would be transparency in the government and an enormous level of political leadership in places like Senegal and Uganda.

RAY SUAREZ: And I guess that doesn't bode well, you might say, for the people who unfortunately live in countries where the government is going through some turmoil now?

JOSH RUXIN: Well, I think when we look at countries like South Africa, for example, which according to one documentary maker is in a state of denial right now, at least as far as the president and the minister of health are concerned regarding the AIDS crisis there, we see some very worrying signs. And when you run your hand around the world, I think you see similar signs in places like China and India. And of course, there are always leaders who are ready to step forward and take on the fight. But we don't have enough leaders who are really willing to push this to the very top of the agenda.

RAY SUAREZ: Well, Mr. Ambassador, how an African experiences the medical system, how an African experiences treatment once he or she realizes they're infected, is quite different from what somebody in Toronto or Chicago might face. Should the ambition be, for those who are HIV positive, to receive treatment that is more similar to that received in other places in the world, or to find an African solution that, given the much smaller budgets, the much smaller public health systems, does the best you can with what you've got?

CAESAR LEKOA: Well, I think, given the resource constraints of African countries-- at least talking about my country-- I think we could do with not necessarily inferior drugs in terms of quality, but drugs that are reduced in cost. How we arrive at the formula of reduced cost is something else, but I think to provide affordability, at least in my country, we could do with cheaper drugs.

RAY SUAREZ: And aren't you getting cheaper drugs as part of the program that Botswana is one of the pilot, the pioneers in developing?

CAESAR LEKOA: Yes, we are, through the partnership with MERCK and Bill and Melinda Gates.

RAY SUAREZ: But I guess the money isn't there quite yet, Dr. Ramphele, to make that access to cheaper drugs universal?

DR. MAMPHELA RAMPHELE: I think the question of cost of drugs is both money as well as the extent to which the pharmaceutical industry works in partnership with the rest of us. The World Bank, for example has committed in Africa a billion dollars for multi- country assistance to countries that are poorer than Botswana. And that money is to cover everything from awareness creation up to anti-retro viral. And I believe that the availability of that kind of money coming alongside the strengthening of health systems, the building of the capacity of people to actually tackle this, is going to create a larger market. And over time, there will be a reduction in the cost of drugs. But we also have to remember that there is a place for generic drugs. We have seen in the case of Brazil which has, in fact, developed a local generic drug industry that has helped them to sustain coverage of their populations with antiretroviral drugs, so they are a multiplicity of opportunities that we have. We also have the world trust fund that is bringing cash and grant money on to the scene. In the case of countries like Botswana, Swaziland and others that don't qualify for World Bank grants and cheaper credits, we are working in partnership with we are working in partnership with the Global Trust Fund to be able to complement their cash with our implementation and other support, so that we can in every country at the end of the next five or ten years, really in a much stronger position than they are right now in terms of their health systems, the human capabilities, and, of course, healthier people.

RAY SUAREZ: Guests, thank you all very much.

UPDATE - DEFENDING CLAIMS

RAY SUAREZ: Still to come on the NewsHour, tonight: Defending the reasons for war with Iraq; bioterrorism research in Montana; and dropping stock options at Microsoft.

RAY SUAREZ: Now, the reasons for war. On Monday, White House aides said the president's state of the union message in January should not have contained this sentence: "The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa." The intelligence underlying that claim has been discredited. That issue dominated Secretary of State Powell's news conference today in Pretoria, South Africa. He defended the manner in which the administration presented intelligence about Iraq's weapons of mass destruction. Here are some excerpts.

JOHN COCHRAN, ABC: Mr. Secretary, regarding that erroneous report last January that Saddam Hussein tried to buy uranium in Niger, does the administration owe Americans and, in fact, the world an apology for making that statement? And should the administration beat congress to the punch by making a detailed investigation and a detailed explanation of how something so important and so wrong got into a presidential address?

COLIN POWELL: I think this is very overwrought and overblown and overdrawn. Intelligence reports flow in from all over. Sometimes they are your... result of your own intelligence agencies at work; sometimes you get information from very capable foreign intelligence services. And you get the information, you analyze it. Sometimes it holds up. Sometimes it does not hold up. It's a moving train. And you keep trying to establish what is right and what is wrong. Very often it never comes out quite that clean. You have to make judgments. And at the time of the president's state of the union address, a judgment was made that that was an appropriate statement for the president to make. It was no effort or attempt on the part of the president or anyone else in the administration to mislead or to deceive the American people. The president was presenting what seemed to be a reasonable statement at that time, and it didn't talk to Niger; it talked specifically about efforts to acquire uranium from nations that had it in Africa. Subsequently, when we looked at it more thoroughly and when-- I think it's, oh, a week or two later-- when I made my presentation to the United Nations, and we really went through every single thing we knew about all of the various issues with respect to weapons of mass destruction, we did not believe that it was appropriate to use that example anymore. It was not standing the test of time. And so I didn't use it, and we haven't used it since. But to think that somehow we went out of our way to insert this single sentence into the state of union address for the purpose of deceiving and misleading the American people is an overdrawn, overblown, overwrought conclusion.

REPORTER: Mr. Secretary, I believe you mentioned that the president, in the state of the union, didn't mention Niger; he mentioned Africa.

COLIN POWELL: Correct.

REPORTER: Do you think the other intelligence that was involved, has it stood the test of time? The Niger didn't. Did the other intelligence that went into that, did it stand?

COLIN POWELL: I think so. The definitive presentation of our intelligence case, frankly, was the presentation I made on the 5th of February. I spent an enormous amount of time with many of my colleagues and with a large part of the top leadership of the CIA, as well as a lot of the working- level analysts of the CIA, closeted in Langley-- in CIA headquarters-- for four days and three nights, or it might be four weeks and three months. It felt like it. And we were there well into the night, until midnight, 1:00, every morning, going over everything. We had lots and lots of information. The challenge was to get it down to that which was absolutely supportable and we were confident of. There were a lot of items of information that I could have used if I'd had three hours or three days. And there were other items of information that were pretty good, but maybe we didn't have a second, third, fourth source on, so let's not lead with that. And the case I put down on the 5th of February, for an hour and 20 minutes, roughly, on terrorism, on weapons of mass destruction, and on the human rights case, a short section at the end, we stand behind. And the credibility of the United States was at stake when that presentation was put forward. And so it stood the test of time. It stood the test of time a couple of weeks ago when-- if you'll go back to the presentation on nuclear capability and weapons-- I said that they had the brainpower. I said they had the infrastructure, and they've never lost the intention, and they have hidden components of their program. And so I think as you let the team that's out there looking at the stuff continue to look, continue to interview people, continue to pore through all the documents that we have, I think the case will no longer be in doubt.

SUZANNE MALVEAUX, CNN: Let's say the American people assume that the administration was not intending to mislead or misinform. Why doesn't the administration see it as an issue of credibility when it comes to the president's state of the union address? I mean, this is a statement of record. The president used this. He used the facts to make the case that Saddam Hussein was trying to build up his nuclear weapons arsenal and making a case for war to the American people. Why is this not an issue of credibility when it comes to the president delivering the state of the union address and using that misinformation?

COLIN POWELL: I think the president in the state of the union address had this sentence in there, and it talked about efforts on the part of Iraq to obtain uranium from sources in Africa. There was sufficient evidence floating around at that time that such a statement was not totally outrageous or not to be believed or not to be appropriately used. It's that once we used the statement, and after further analysis, and looking at other estimates we had, and other information that was coming in, it turned out that the basis upon which that statement was made didn't hold up, and we said so, and we've acknowledged it, and we've moved on.

REPORTER: Is there any concern, any...

COLIN POWELL: I'm not... I'm not troubled... I'm not troubled by this. I think the American people will put this in context, in perspective, and understand perfectly why the president felt it was necessary to undertake this military operation with a willing coalition in order to remove this tyrant from office, to make sure there are no more questions about weapons of mass destruction, because the regime that was determined to have them is gone. And we now have to focus on the future, and that is to build a better Iraq for the Iraqi people, and help them put in place a representative form of government that will make sure that there are never any more weapons of mass destruction in this country, and that it's a country that will live in peace with its neighbors. And we can chew on this sentence in the state of the union address forever, but I don't think it undercuts the president's credibility.

RAY SUAREZ: The secretary also said he was confident inspectors will eventually find weapons of mass destruction in Iraq.

FOCUS - RISKY RESEARCH

RAY SUAREZ: Now bioterrorism in Montana. Betty Ann Bowser reports from Hamilton, a town in western Montana.

CHUCK STRANAHAN: Flick. Follow it down. Follow it down. Concentrate on your fly.

BETTY ANN BOWSER: Chuck Stranahan has taught fishing in the bucolic Bitterroot Valley of Montana for nearly 20 years. He moved there in the 1980s because he loved the outdoors.

CHUCK STRANAHAN: Take a look around. You don't find this everywhere: Just a few minutes' drive from where you're working, and the easy pace of life and the beauty of the natural resources, I think, are what drew me here.

BETTY ANN BOWSER: And Connie Johnson moved to the valley to enjoy hiking, biking, and the quiet lifestyle.

CONNIE JOHNSON: We wanted to raise our children here in this community. This is a quiet place. It's, you know... we really enjoy our neighbors.

BETTY ANN BOWSER: So while they both moved to Montana for the same reasons, Johnson and Stranahan now find themselves on opposite sides of a debate that has divided the 3,700 people who live in this small town of Hamilton. It's all over what the federal government wants to do to this building, Rocky Mountain Laboratories. The National Institutes of Health, which own the lab, want to build an addition so government scientists can study some of the most deadly substances known to man, pathogens like anthrax and Ebola, things terrorists could weaponize and use to kill millions of people. The government wants to build the new lab in Hamilton because it already owns the necessary land there, and says to buy property elsewhere would be too expensive. And the government wants to do it soon, because of the threat posed by terrorists. Dr. Marshall Bloom is associate director of Rocky Mountain Labs.

DR. MARSHALL BLOOM, Rocky Mountain Laboratories: We have to know about these things. It's important to know about them for their own sake, and then it's also important for us to know about them so that we can find out what they aren't. If we have an outbreak of infectious diseases in the United States, we not only need to know what it is, we need to be able to rule out things like anthrax, monkey pox, smallpox, and things like that. The only way to do it is by doing basic research on these infections.

BETTY ANN BOWSER: The new lab, called a biosafety level four lab, would have the highest security of any type of federal research facility. Only at that level can scientists study deadly germs and viruses that can produce 50 percent to 90 percent death rates. The pathogens to be studied are so lethal that the labs will need to be sealed and pressurized to prevent pathogens from escaping, and workers will have to wear environmental spacesuits as they do in these other level four labs. The facility will be just six blocks from Connie Johnson's home, in a residential neighborhood near a middle school, so she's concerned about the safety of her two young sons.

CONNIE JOHNSON: You know, I just... I really think that to put this facility in residential Hamilton is completely inappropriate. I think there's... this is a big country. There's lots of places that are more secure-- military bases, bigger places with more equipped medical facilities if somethingshould happen. It's... it's in my backyard.

BETTY ANN BOWSER: Stranahan's fishing shop is also just blocks from where the new lab would be constructed, but he thinks the risk is worth it.

CHUCK STRANAHAN: I do feel that this is a time when, post-9/11, we have to recognize that America has changed. Our levels of security, previously enjoyed, are not the same as they were. I treat this very much the same as I would a high-security penal institution coming in. Everybody agrees we need more and better jails, let's say, but "not in my town." Sometimes the hometown needs to step up.

BETTY ANN BOWSER: Mary Wulff was worried that most of the people of Hamilton would step up and accept the lab without question.

MARY WULFF, Coalition for a Safe Lab: It's a small community. It's a patriotic community. The people here pretty much go along with what the government says, and the people here probably wouldn't stand up against it.

BETTY ANN BOWSER: So she organized opposition groups and pushed the government to hold more and more public meetings, like this one, to explain the project. Despite the dialogue, Wulff and the others who oppose the lab still have one big, unresolved fear: What if a deadly pathogen got out into the community?

MATTHEW LEMAX: And now little bitty Hamilton, little picturesque Hamilton, the Bitterroot Valley, is facing a nightmare they have never seen before. How do you contain a nightmare? Ships do sink, and biosafety hazard level four containment areas do get breached. It happens. And that's just... and that's just too much. For this little community, it's too much.

SPOKESMAN: So we can actually see the organism along the membrane there?

BETTY ANN BOWSER: Dr. Tom Kindt, who directs NIH's internal infectious disease labs, says the federal government operates three other top security research labs around the country, and not one of them has ever contaminated a community.

DR. TOM KINDT, National Institutes of Health: I know of no example where this has happened. Now, one has to be totally honest and say in some rare cases, there have been lab workers who were infected. But we always were able to control that, because they knew what they were working on, they knew if there was the procedures that have to be used for working with these, and one could take measures immediately to prevent any further infection. No family member, no community member that I know of has ever been infected from a biocontainment lab.

BETTY ANN BOWSER: He also says it's riskier not to build the

DR. TOM KINDT: What we're doing will remove the terror from the agents of bioterrorism. What we're doing will make people very secure. We must have safe vaccines. We must have excellent drugs, and we must have the ability to diagnose any type of illness so that if an agent is introduced, we know it immediately.

BETTY ANN BOWSER: Veterinarian Dr. Linda Perry used to work at the lab when she was a research scientist. She thinks the possibility of an accident is very real, and worries how a small town with limited public facilities could handle an incident.

DR. LINDA PERRY, Veterinarian: We have a volunteer fire department. We have a very small police department. We have very few trained biohazard people. (Laughs) Our local hospital has been designated as the official site if there was an accident, and our local hospital doesn't even have an isolation room. It would require additional training by medical personnel to be able to prepare to handle an outbreak if it did occur. Where is the money for all this extra work going to come from? We don't have a big piggy bank here.

BETTY ANN BOWSER: Residents are also concerned that the facility could be the target of a terrorist attack. Government officials say no germs or viruses would escape alive if the lab was blown up. That doesn't comfort Connie Johnson.

CONNIE JOHNSON: You know, we, for a long time, thought, wow, we'll stay here for a long time and build up our garden and whatever, and we really like where we live right now. But now we're seriously considering moving if they put that there. And then, you know, are people going to want to buy our house... ( laughs ) ...with the... with them studying Ebola six blocks away? I don't know.

BETTY ANN BOWSER: Although not required to do so, NIH did an Environmental Impact Statement, or EIS, hoping to soothe the fears of Hamilton residents like Johnson. But the EIS did not address the risk of a deadly substance getting out into the community of Hamilton, saying that risk "cannot be effectively quantified." Jim Miller is an environmentalist who says the draft EIS doesn't justify construction of the new lab.

JIM MILLER, Friends of the Bitterroot: It's just grossly inadequate. It doesn't analyze the risks or impacts sufficiently, and it never considers the possibility that a biolevel four pathogen breach could occur and how our community would deal with that. We don't necessarily think that these things will happen, but there is a small chance that they would happen, and we thought that they should have been addressed, and since they weren't, it... we're very concerned. It sort of throws up a red flag that something's being forced onto the community here without a fair process.

BETTY ANN BOWSER: Recently, NIH officials held a hearing at Hamilton city hall where residents could make comments on the EIS. The tone and content was overwhelmingly against construction of the lab.

JOAN PERRY: I can tell you one thing: People back in Washington, D.C., Bethesda, Maryland, do not give a damn about people in Hamilton, Montana. (Applause) And there are only a few of us here, but they don't care about us. And I tell you, you're naive if you believe that they care about you. They don't.

BETTY ANN BOWSER: Hamilton's mayor and the city council want the new lab built.

MAYOR JOE PETRUSAITIS, City of Hamilton: The draft EIS study done for the level-four lab proposed to be built here supports the lab's future contribution to this mission. All concerns and questions have been answered. As one political barometer of Hamilton, I, as mayor, can faithfully embrace the EIS draft statement.

BETTY ANN BOWSER: Not only has the mayor embraced it, federal and state officials have expressed their support for the lab, too. Meanwhile, residents have until July 21 to register public comments, and NIH has not ruled out the possibility of another environmental impact statement.

FOCUS - STOCK OPTIONS

RAY SUAREZ: Now, a major American company makes a surprise change on the use of stock options. Our business correspondent Paul Solman of WGBH-Boston explains.

PAUL SOLMAN: Stock options: They helped fuel the high-flying high-tech market of the 1990s. But since its fall, they've become controversial. So this week, when giant Microsoft announced it would stop awarding stock options to employees, and would change its accounting for them in past years, it was big news in corporate America. But before we discuss it, we take you back several years to the first few minutes of a report we did on options in their heyday.

PAUL SOLMAN: At San Francisco airport, Silicon Valley salesman Jason Beacon about to meet in an executive lounge with two of California's hottest high-tech headhunters, who let us sit in on the meeting.

SPOKESMAN: Let's talk about money. Last year, 1999, your W-2 was?

JASON BEACON: 230.

SPOKESMAN: 230. Where do you think you'll end up this year?

JASON BEACON: ... I'm really shooting for probably upwards of 300, on up. So, going to set the benchmark this year, so I'm looking to kind of take it up a notch next year.

SPOKESMAN: Keep raising the bar.

JASON BEACON: Definitely.

SPOKESMAN: Perfect.

PAUL SOLMAN: Bob Silver and Howard Lee had been hired by a bay area startup planning an IPO, an Initial Public Offering of its stock on the open market. The main pitch to 30-year-old Jason: A pay package including options to buy that stock for a song.

SPOKESMAN: And we're talking about something in the neighborhood of 15,000 shares of pre-IPO stock, somewhere in the two dollar range, as a price of options. And, of course, it's too early to tell where our company's going to be when they IPO, okay? But if all we did was compare them...

PAUL SOLMAN: In short, if this new company does as well as some similar startups, Jason's 15,000 shares, at two dollars a share, would be worth more than $2 million; the difference between the option price and the expected market price. Jason will have to wait a while, because options to buy stock at an artificially low price can't be exercised and cashed in right away, but eventually, he figures, he could be rich.

JASON BEACON: And that's really what I'm looking for because, you know, a $200,000 to $300,000 a year income is probably great and definitely secure. I think you can all have a great life, but, you know, if we all kind of want to get to the point of retiring early, or earlier, then it just comes down to equity. You've got to own something.

PAUL SOLMAN: You got to own; that's the new mantra of the new economy, which you see in northern California everywhere you look. The dot-coms seem have taken over here, creating enormous wealth. Stock options have spread that wealth throughout the high-tech labor force. At the beginning of the 1990's about a million American workers had stock options in their companies; today the number is nearly 10 million. The main argument for options is that they motivate employees to work harder, smarter, more efficiently, so as to make their company more valuable, its stock price higher, at which point they can exercise their options at the old low price, re-sell them at the new one, and cash in big time.

PAUL SOLMAN: Joining me now to bring the story up to date is Robert Merton, who teaches at the Harvard Business School and was awarded the Nobel Prize in economics for a way of setting a price on options.

Professor Merton welcome.

PAUL SOLMAN: If options were such a great way to attract top talent, why is Microsoft now stopping giving options?

ROBERT MERTON: Well, Microsoft has the largest employee stock option plan in the world, and its cancellation of that program to replace it with restricted stock as the form of grant attempt to create that same incentive or motivation for employees to help grow the company and the value of the company's stock.

PAUL SOLMAN: Restricted stock, so this is stock I get if I'm an employee in one of these companies, instead of the stock option, restricted, what does that mean?

ROBERT MERTON: Restricted stock is just like the regular stock that we see traded, Microsoft in this case trades on NASDAQ, except that you can't either buy or sell it - you can't sell it for a period of time, typically four or five years,and your rights to it, your ownership to it is delayed until the end of what's called a vesting period in which, again, about four or five years. But after that happens, the stock is yours and you own it just the same as any other investor in the company stock.

PAUL SOLMAN: Okay. So you get stock instead of options, but why not give options any more, I mean, why did they change?

ROBERT MERTON: I think you want to look at it first from the point of view of the employees, and since for the same size grant, a share of stock is worth more than an option on a share of stock --

PAUL SOLMAN: Because it's going to - you can sell it -

ROBERT MERTON: And with the option you actually have to pay something to get stock, whereas, when you get the stock, you don't pay anything extra, so the stock sells for more than the option.

PAUL SOLMAN: When you say pay, you mean that's the exercise price?

ROBERT MERTON: Yes.

PAUL SOLMAN: You pay the price but the stock is higher, you make the difference?

ROBERT MERTON: Exactly.

PAUL SOLMAN: That's the option. With the stock you've just got the stock.

ROBERT MERTON: Exactly.

PAUL SOLMAN: So why stop the option, because the option is getting all these terrifically talented people to these companies?

ROBERT MERTON: The - although the amount of option -- shares you get with a restricted stock, because the stock is worth more, will be fewer than you get with options, it's also less risky. If you get an option at a particular exercise price, if the stock of the company does not appreciate going forward, at the end of the time when the option expires, you have something that has no value.

PAUL SOLMAN: I see. So if it's $27 - today is Microsoft's price - something like that - and the exercise price is 27 bucks and it never goes beyond 27 bucks -

ROBERT MERTON: That's right. The options will be worthless at the end, whereas, if you'd been given restricted stock, at the end of the restriction period it would be worth whatever Microsoft's stock is worth, so if it's still 27 five years from now, your stock would be worth 27.

PAUL SOLMAN: So is that why Microsoft did this because it has all these employees who have options? I read today some people have options at a $119 a share for Microsoft, and it's at $27, so it's - God knows how long it will be before it gets to that price, right, if ever, and therefore, they simply don't get anything, no benefit at all, so is that why they changed?

ROBERT MERTON: It seems that one of the key reasons was they did focus groups and interviews with their employees and talked to them about alternative ways of providing these incentives and the employees truly are very, very unhappy with the decline of the last three years in general in the market, and what we see at Microsoft is repeated over and over again at any number of companies, both high tech and even out of that sector, and so now employees have learned the down side of having the leverage of option, and when things don't appreciate, they see their options way underwater, by that I mean selling with an exercise price much higher than the current stock price, and so probably they have no sense of what it's worth -- many of them think it's worth nothing, and as a result of that experience, they're quite unhappy. The feeling here was that by offering them something that's more tangible in sense of the restricted stock and importantly something where they can see the value of it every day because a stock trades, Microsoft's stock trades, you can look at it on the screen and say, well, my stock's worth 27 or 28 or 24,but the options that were granted, of the kind that were granted, are not traded, and so even though they may have value, the employee may not ascribe the appropriate amount of value to it.

PAUL SOLMAN: I took down - Steven Balmer, the CEO of Microsoft, the quote -- and I think it helped with the stability and predictability of the compensation, which actually will be helpful in attracting and retaining personnel. So in this environment, as opposed to what we saw in the year 2000, in this environment you want people - they want predictable, they want stable, whereas in the old days they were -

ROBERT MERTON: Yes, it is less risky but it should be said that while on the down side the restricted stock will be less risky, it's also true that if Microsoft does very well over the next many years, some people will probably look back and say I wish I'd had the options because clearly with more options or more shares, that the stock would do really very, very well, you would have been better off with the old program.

PAUL SOLMAN: And why did they give less stock than they used to give options, why will Microsoft be giving less stocks than options?

ROBERT MERTON: Well, because the amount of the grant, the value of what they give employees can't change that dramatically from what they have done in the past. And if the value of the options is let's say a third or significantly less, than the value of the corresponding number of shares, to give the same value, they have to give shares on a fewer number of restricted stock shares.

PAUL SOLMAN: I see, it's just to keep it even. Now Microsoft is also restating its earnings the past year to account for option grants. Why is it doing that?

ROBERT MERTON: The - it isn't required to do this but this is a reflection of a controversy which has been going on now for a good year and then dates back much earlier in time over whether options should be expensed or not.

PAUL SOLMAN: That is whether or not they should be deducted from the profits of the company, the value of the options, right?

ROBERT MERTON: That's right. The value at the time of grant as any other form of compensation, like paying the wages, deducted from earnings as an expense.

PAUL SOLMAN: Something of value, so let's say that cost us something, therefore, we should deduct it from profits. People weren't doing that. Microsoft is now going to retroactively.

ROBERT MERTON: Retroactively. The controversy on not doing that, which has been led principally by the high-tech industry, has been dealt a blow with this, I think because in doing this, in Microsoft going back, restating its earnings to reflect what the expensing of those options, in a sense it's essentially endorsing the expensing of options. Of course Microsoft is a bellwether as the lead firm, the largest certainly in the tech industry, that's quite significant.

PAUL SOLMAN: Do you think... do you suppose that other companies are now going to follow suit because Microsoft is, as you say, a bellwether?

ROBERT MERTON: I think the pressure will be on them to do that. I think another reason why they may, which was Microsoft I think gave this, was that the valuation of restricted stock because we can see the value every day in the marketplace, is a lot simpler than valuing the old options, which don't trade in the marketplace directly. And as a result they may feel that by using restricted stock they'll have a more accurate estimate in the accounting of the expense of their employee compensation costs.

PAUL SOLMAN: Going forward.

ROBERT MERTON: Going forward.

PAUL SOLMAN: And that's an appeal for lots of people and certainly in this environment.

ROBERT MERTON: Yes.

PAUL SOLMAN: Well, thank you very much, Professor Merton, nice to see you.

ROBERT MERTON: Okay.

RECAP

RAY SUAREZ: Again, the major developments of this day: Two more American soldiers were killed overnight in Iraq. In response, President Bush said there's a "security issue" in Iraq but, he said, the U.S. must "remain tough." And the man who commanded the war, General Tommy Franks, said U.S. forces might have to stay in Iraq two to four more years.

RAY SUAREZ: We close again with our honor roll of American service personnel killed in Iraq. We add names when the deaths are official, and photographs become available. Here, in silence, is one more.

RAY SUAREZ: We'll see you online and again here tomorrow evening. I'm Ray Suarez. Thanks and good night.