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Quest Means Business
Berkshire Hathaway Buys $1.1 Billion Apple Stake; Berkshire May Fund Bid for Yahoo; U.S. Stocks Rally on Energy and Tech Shares; Apple CEO Goes on Tour of China; China Leads the Way with Drones; Trump: Brexit Would Not Hurt UK-US Trade; Clinton: Bill Clinton to Help Revitalize Economy; US Officials: Venezuela Faces Imminent Crisis; Goldman Sachs Raises Oil Price Outlook; Premier League Victory Party for Leicester; Security Boss: Bomb Scare was My Fault; New Atlanta Arena to Take Public Funds; Juarez Struggles to Fix Its Violent Image; Massive Global Scam Shut Down in the US.
Aired May 16, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] PAULA NEWTON, CNN ANCHOR: Well, that rally kind of came out of nowhere. The DOW up sharply as trading now comes to a close on Wall
Street. The last time I looked up about 177 points. It seems that the stories that we're about to cover here in the next few minutes are what's
driving the market and that's Apple and oil. Speaking of Apple, it got that Buffet bump. The oracle of Omaha reveals the company's stake, from a
state of emergency toward a state of collapse. Venezuela's president threatens to seize factories and one of the biggest cons in history is
being shut down by the U.S. government. I'm Paula Newton and this is QUEST MEANS BUSINESS.
Tonight, Apple gets the Buffett bump. Warren Buffett's, Berkshire Hathaway has revealed the first investment in Apple. It paid more than a billion
dollars for the stock. The news triggered a rally that returned Apple to its position as the most valuable company in the world. Now Wall Street
has beat up on Apple so far this year, though. Take a look here. Its stock down 11% and dipped to a 52-week low last week. But remember, the
oracle of Omaha's advice -- be fearful when others are greedy. And greedy when others are fearful. Berkshire bought Apple as an average price of
$109 a share and well below the all-time high of about $133. Until a recent investment in IBM Buffett avoided the tech sector. Berkshire's
biggest holdings in companies like Kraft, Heinz, Coca-Cola and American Express. And Buffett taking the opposite view of fellow investor Carl
Icahn whose firm recently sold its stake in Apple over concerns of competition in China and there are certainly some startling concerns there.
Gene Munster is managing director at Piper Jaffray. He joins us now from Minneapolis. In terms of Warren Buffett and the company taking a bite of
Apple here, why and why now?
GENE MUNSTER, MANAGING DIRECTOR, PIPER JAFFRAY: I think it's symbolic of what investors have been thinking about Apple for past six months and
reason is that this is a different story. It's not the high growth story. And typically Warren Buffett doesn't invest, as you mentioned, in kind of
high growth, more speculative tech names. I think he probably sees that this is just a fabric of how we engage in the internet is with the mobile
devices and feels that given the valuation, and given the new growth profile then it more better fits his investment style.
NEWTON: And yet, there's so many people betting against Apple right now. And you know one of the problems happens to be a lot of cash that they have
on the books, $150 billion and counting. What are they doing with that cash? There's so many people, you know who they are, betting against Apple
right now. Why would his company get in when they have been reluctant to go near this sphere right now?
MUNSTER: Well, I think the reason is that they've got an established business. The renewal rates with the iPhone are exceptionally high. Kind
of 90% plus and he probably went back and looked at that. Was able to build some sort of a cash flow model that shows that they even though the
growth isn't what it has been they can add some more in the order of $20 billion to $30 billion a year in cash to the balance sheet. And I think
that looking at it from that perspective gives him some time for Apple to figure out kind of what their next big moves are longer term. We are
starting to see them dabble with some investments last week outside of areas they typically have, and he probably even though he wasn't aware of
that when he made his investment is probably encouraged by some of this.
NEWTON: You know, some of the looming problems for Apple include China. It is definitely the biggest market in the world upcoming for Apple, and
yet, it seems that the Chinese government still battles what they're going to be doing. It's been shutting down some of the businesses there. You
know, when you look at that scenario, could that not throw off Apple completely here?
MUNSTER: It could. If China right now is called about 15% of their total business. Its historically has been the fastest growing segment of their
business and it's just been a rough road for Apple in the last six months. And you see Tim Cook in China right now probably trying to build some
interest not only with the public, but starting to work with hardware and the manufacturing side and also the carriers to try to drum up more
support. And so, this is going to be a big x-factor in the story, how China plays out. Most analysts like myself aren't expecting a rebound any
time soon and so I think that's properly reflected in the street estimates.
[16:05:00] NEWTON: yes, which leads more to a mystery as to why Berkshire Hathaway is in now. You know, he hasn't commented on it yet. Do you think
the cash on the books has a lot to do with it though right now, and the fact that he perhaps is an activist investor can give them a little bit of
a boost to say, look, something's got to be done with the cash on the books?
MUNSTER: I think so. And I think that, you know, if you back out the cash which is one way that some investors look at valuation, the stock is one of
the cheapest tech stocks with one of the best growth opportunities over the next few years. And so I'm sure he's looking at that. There's been a
subtle change in terms of what invest like Warren Buffett are looking for in terms of what Apple can do with all that cash. Over the past couple of
years, it's buybacks and dividends and Apple's been aggressive at that. But going forward there might be a slight shift where investors may want
Apple to buy different things and invest more like a venture capitalist to try to build some of the road work for the next decade. So I think you may
see Warren Buffett kind of weigh in on those conversations.
NEWTON: It is interesting that he wants a piece of the action here and it's something that we'll continue to follow. Thanks so much for your
perspective. And we will now be telling you more about Berkshire Hathaway and its place in the market. We learned Monday that Berkshire could get
involved in a takeover bid for the core assets of Yahoo. Now it's quite a tech turn around for Buffett whose desk looked like this as recently as
2012 when he gave CNN's Poppy Harlow a tour of his office. She noticed the preference for pen and paper.
(BEGIN VIDEO CLIP)
POPPY HARLOW, CNN CORRESPONDENT (voice-over): No fancy flat screen TV. Just an old tube.
WARREN BUFFET, BERKSHIRE HATHAWAY: No. No computer.
HARLOW (voice-over): That means no e-mail. Perhaps a secret to Buffett's success.
(END VIDEO CLIP)
NEWTON: Incredible when you take a look at that office. Paul La Monica joins me now. Paul, when you look at this kind of a move, is it a very
complicated move now into Yahoo? He has commented on that and said it has a lot to do with this perhaps as a financial play. Please explain.
PAUL LA MONICA, CNN CORRESPONDENT: Yeah. I think that there's a big difference here between what Berkshire Hathaway just announced, actually
investing in Apple, buying a big position in that company, and then possibly helping Dan Gilbert from Quicken Loans finance a possible takeover
of Yahoo. I think, you know, Buffett does recognize that there is value in the Yahoo brand name. It is important to remember that Berkshire Hathaway
for the first time streamed its annual meeting live via Yahoo Finance a few weeks ago and there must be some familiarity factor there with the company.
But, you know, Berkshire has been more aggressive in the past couple of years partnering with the big hedge fund 3G on some deals, as well. Kraft,
Heinz. I think this just shows the continued evolution of Warren Buffett and his investment strategy.
NEWTON: Yes, and that's a really insightful point, because at first you might scratch your head and say they're not like the investments of prior.
But as you said, he's adapting, isn't he? Because this is a tough market. And if you play Yahoo, right you could really see a lot of value from that.
LA MONICA: Yeah. I think that there are some people who feel that Yahoo Has been maybe overly beaten up, that is criticism of Marissa Mayer may be
just a tad overdone and unfair. That there are, obviously, still value in some of the brands. Did Yahoo overpay for Tumblr? Yes, undoubtedly. But
now you have a company that potentially its core business could still be a formidable competitor to a Google and a Facebook if they have the right
things done and the right management team in place. So it's going to be interesting to see how that shakes out. I still think Verizon because of
their ownership of AOL is the most likely winner of Yahoo and can't underestimate Buffett obviously.
NEWTON: Yeah, that's going to be one of the headliners to go in the next few months. See were that company lands. Now in the meantime I just said
at the top of the show, the DOW, S&P 500 and NASDAQ all soared about 1% this session. Look at the numbers, Paul, from the DOW. We know that Apple
and obviously oil stocks on that oil rally had something to do with it. You know, I looked at the Home Depot results today and made my eyes water.
When's going on? We had been trying to know that, look, this wasn't going to be a good earnings season and many cases that's come to fruition but,
you know, I kind of feel like there's fear and loathing still out there about this market even as it continues to climb.
LA MONICA: Yeah. Definitely. I think there are investors who are concerned, particularly with regards to retail. We had several retailers
report lousy results last week and that is concerning because the U.S. economy is driven by consumer spending. We all know that. Without
consumer spending a lot, it's going to be difficult to imagine how the economy can power ahead over the next few months and without that you're
not going to have strong earnings growth either. The Apple news today definitely coming out of the blue and helped lift the stock market and oil
as you mentioned, Paula, with Goldman lifting the price target, albeit a couple of bucks higher and maybe only for the near term. that also brings
a little bit more confidence about the stock market going forward, because oil had been beaten so much over the past year and an and a half.
[16:10:00] It's finally nice to see some good news about where oil prices are going. Even though the bad news is may hurt consumers who have gotten
used to low gas prices.
NEWTON: the oil story has definitely been a bit counter intuitive and we'll continue to watch that price. We will talk about it later on the
show. Paul, thanks so much for hashing some of this out with us, appreciate it.
LA MONICA: Thank you.
NEWTON: As we told you before, we were talking about Apple and China. Now with slowing sales, cyber security concerns and unfriendly regulatory
climate. China is presenting a challenge for Apple. CEO Tim Cook is currently in Beijing on a goodwill tour of sorts. Cook has predicted that
China will one day surpass the U.S. as the company's top market. Last week Apple invested a billion in China's version of Uber. This morning, he
tweeted that he tried out the service for himself. Now, all this week we'll be looking at the growing tech scene in China. Chinese businesses
very much leading the field when it comes to drones. Andrew Stevens sent us this report from China's Silicon Valley Chensin.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN MONEY ASIA PACIFIC EDITOR: In the world of tech innovation, China, many would argue, is a follower. But there's one field
where it is undeniably a leader, drones. We've come to the home of the world's biggest commercial drone developer. DJI to find out what's the
next big thing in an industry where literally the sky is the limit.
(voice-over): They're futuristic flagship store in Chensin is a monument to just how far and how fast drones are developing. In December 2012, the
company launched its breakthrough Phantom 1 drone without a camera. Just 3 1/2 years and 3 models later, the phantom 4 drone can produce this. High
definition video, live streamed on to your smartphone or tablet from a distance of up to 5 kilometers. And users will tell you, it's simple to
operate. DJI leads the pack with an estimated 70% of the world's commercial drone market currently worth just over $3 billion. Within five
years, that could explode to $27 billion. Say market experts.
MICHAEL PERRY, DJI STRATEGIC PARTNERSHIPS: We're very excited about the future. And think we'll continue our monumental growth.
STEVENS (voice-over): Michael Perry heads up strategic partnerships for DJI.
(on camera): Michael, ten years' time, what do you think that drone's going to look like?
PERRY: Well, I think there's a wide variety of possibilities and the form will follow the function. It depends on how people start incorporating it
into their daily lives. But overall, we hope to see units that are lighter, smaller, easier for people to use.
STEVENS (voice-over): Quantum leaps in drone technology may now be a thing of the past. Camera and navigation systems will continue to improve
although already some of the industrial drones can fly to within centimeters of their target. Battery life is being extended and sensors
are already being built in so drones automatically dodge objects both on the ground and in the air. The real breakthroughs now are what the
technology will be used for.
PERRY: One of the most exciting ones for us recently was we saw a team of whale researchers use our systems to fly over whale pods and collect their
snot so that they can do advanced analytics to determine their health.
STEVENS (voice-over): Those researchers' the Ocean Alliance call it the "snot bot," a drone that gathers mucus from a blowing whale. And just one
out of the box application. DJI has developed a model that can accurately spray crops in difficult to reach areas. It's also talking to Europe's
biggest emergency response network about how to use drones in search and rescue, firefighting and surveillance. The options, say Perry, are
limitless.
PERRY: We've put the technology out there. And what's been really exciting is the creativity and the innovation that people bring to their
platforms. There are a million different use cases.
STEVENS (voice-over): DJI, their challenge is to continue making drones easier to use so that the next generation can be captured all over again by
the wonder of flight. Andrew Stevens, CNN, Chensin, China.
(END VIDEOTAPE)
NEWTON: Now there's much more on China's tech revolution on our website. CNNmoney.com/Chinatech, for more about Apple's big investment in Didi
Chuxing.
Now, Donald Trump says the Brexit vote is a decision for the people of Britain, but he disagrees with President Obama on what it would mean for
trade talks with the UK.
[16:15:00] (COMMERCIAL BREAK)
NEWTON: Donald Trump says a Brexit would not put Britain at a disadvantage in terms of trade negotiations with the United States. President Obama
previously said if Britain votes to leave the EU it would go to the back of the queue in negotiating future trade deals. Now in an interview of ITV
Trump said he'd treat Britain much differently.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You become president, and we have come out of European union, what would your view be about where Britain should sit in priority
terms with trade deals with the United States?
DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: I don't think they'll be hurt at all. They have to make their own deal. Britain's been
a great ally.
UNIDENTIFIED MALE: Back of the queue? Front of the queue?
TRUMP: Britain's been such an ally that they went into things that they shouldn't have gone into. Like as an example going into Iraq. Okay? With
me, they'll always be treated fantastically well.
UNIDENTIFIED MALE: Would we be in front of the queue with a Donald Trump administration?
TRUMP: well, I don't want to say front or anything else. I mean, I'm going to treat everybody fairly. But wouldn't make a difference to me
whether they were in the EU or not.
UNIDENTIFIED MALE: We wouldn't be back of the queue and trade?
TRUMP: You would certainly not be back of the queue. That I can tell you.
(END VIDEO CLIP)
NEWTON: David Gergen has advised a number of U.S. presidents, from Richard Nixon to Bill Clinton. He joins me now from Cambridge, Massachusetts.
David, OK, I'm scratching my head over this one and I'll tell you why. Look. Regardless of whether or not Donald Trump said that just to be
contrarian to what President Obama said, and let's face the facts, President Obama kind of took a little bit of license with that. Back of
the queue is probably not entirely accurate. Trump has said again and again trade is not exactly a priority of his. He wants to dismantle trade
agreements, not put more together.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, that's right. But he also thinks, you know, he has certain nations and singled out, particularly
Mexico and China, as essentially cutting deals with us to the disadvantage of Americans. But he's not opposed all trade agreements or all trade
relationships. Clearly, you know, he wants to maintain a strong relationship with Great Britain. What I find interesting is in the old
days, you know, American politicians, president, a candidate, wouldn't wander into the middle of essentially a vote that was being taken in
Britain or any other European country. and now both of our -- both president Obama and now candidate Trump are wading right into the middle of
that. Fur is flying. David Cameron is ticked off at Trump. I imagine the former mayor of London is cheering him on.
NEWTON: That's interesting, right? Those politicians weighing in on Brexit and the election campaign. You have David Cameron refusing to
apologize for essentially calling Donald Trump stupid in terms of his comments being stupid and the --
GERGEN: Absolutely. You got the mayor of London, new mayor of London, going after Trump. They've been a number of people around the world who,
in fact, have made very disparaging comments about him. Don't want him in certain places in Latin America. You have had a big debate in the
parliament of Britain, whether he'd be welcomed there. It's a bizarre world, which has never seen these kind of conversations.
NEWTON: David, just for -- you know, you have been really involved lot of these negotiations with allies and people that are probably difficult
allies. Is any of this going to matter depending on who they elect in the White House anyway?
[16:20:00] GERGEN: Think it matters some in tone, yes. But on the substance, I don't think it makes that much difference. The nation's
interests don't change just because the prime minister or president may change. The national interests are still very aligned with each other in
terms of Great Britain and United States. I don't care who's at number 10 or the White House, they'll try to get along well together. What it does
mean is the atmospherics do matter. When you want a favor from somebody, you want to lean on them for something, if you really don't have a good
friendship, it's hard.
That's no better example than the relationship of president Obama and Prime Minister Netanyahu of Israel. You know, they have a poisonous
relationship. They've never liked each other. One thinks the other's a bully. That's what Obama thinks of Netanyahu. Netanyahu thinks Obama is
too weak. And it really has slowed down. We're sort of at a point where nothing's going to happen on the U.S. -- Israeli Palestinian negotiations
until the next president comes along. In part because of this poisonous relationship. So it does matter. I think it matters more on the margins.
On the questions about when you lean on people for things. It does not matter when it comes to fundamentals.
NEWTON: I hear you. Trying to get tough things done there. To the Democratic campaign. Hillary Clinton saying, look, my husband Bill could
very well be the economic czar. She said he knows how to deal with these kinds of things. You advised Bill Clinton politically and in a substantial
way. Do you think it was a good idea, eastbound though she seems to have backed off now, saying, he's not can have a position in cabinet?
GERGEN: I think she sort of got carried away little bit. She's pretty careful to avoid this whole notion of two for the price of one and electing
both. She really wants to win this on her own. I think what she was trying to do is remind people that Clinton years were good years
economically. Lots of jobs created and strikingly in the Clinton years the group of people in the country who had the highest rate of income growth
were people at the bottom quadrant. And of course that's not happened much in the last 30 years. So she wants to remind people.
A lot of people who are voting this time around were not around. They weren't adults in the Clinton years and they don't remember the good times
and one of her important, you know, goals is to convince people that the Clinton years in fact were very positive in contrast to this. And she'll
bring that back. I think she went too far saying my husband will revitalize the economy. Frankly, this's what the president is supposed to
do.
NEWTON: yes, and he's not running for office. She's saying he won't have a cabinet position. So you do kind of wonder if she is elected --
GERGEN: Yeah. You know, they'll both be in there. She'll have them by her side no matter what. I think everybody expects that. What I don't
think is most people would imagine he would not have some sort of -- you wouldn't carve up the oval office and give him the economy. That's not
going to happen. Where I do think she may use him more as an emissary to a variety of foreign countries and not sure the secretary of state is going
to be the happiest person around working with Hillary if Bill, in fact, is various countries. There will be interesting things to work out.
NEWTON: A long way to go before we get there as we continue to fight on in this campaign.
GERGEN: Absolutely.
NEWTON: David Gergen, we'll talk to you again. Appreciate it.
U.S. intelligence officials meantime say they think Venezuela is at risk of an imminent and serious crisis. Now they are warning that it could even
trigger a revolt as severe shortages of food and power stoke unrest. Opponents of President Nicholas Maduro, were out on the streets of Caracas
on the weekend. On Friday, Mr. Maduro, extended a state of emergency for 60 more days. He also threatened that factories that have stopped
production would be taken away from their owners.
(BEGIN VIDEO CLIP)
NICOLAS MADURO, VENEZUELAN PRESIDENT (through translator): Comrades, I am ready to hand over communal power the factories that some conservative's
big weeks in this country stopped. And if the factory is a factory hands over to the people. But we're going to do it.
(END VIDEO CLIP)
NEWTON: Now, it's important to remind people that one of the reasons the factories are closed is because the owners of the factories say, they do
not have any of the materials they need to keep the factories going. Eric Farnsworth is vice president of the Americas Society and Council of the
Americas.
ERIC FARNSWORTH, VICE PRES., AMERICAS SOCIETY AND COUNCIL OF THE AMERICAS: You know, a lot of people, we heard the headlines in Venezuela week after
week and the people in Venezuela themselves suffering through a lot of the economic affects here. Do you see an end game at this point? When I say
end game, any insight that the government of Venezuela understands how serious this is and is willing to change tact in order to resolve some
issues?
[16:25:00] I think there are a lot of potential end games, but probably not many of them end in a good way. Part of the problem, in fact the main
problem, is that the government instead of changing its direction is actually doubling down on the course of action that it's already
implemented now for 17 years if you go back to when President Chavez first elected. It's a direction of the economy that systematically destroyed the
productive capacity of the state. It's certainly oil and energy is a part of that, but expropriating private sector companies, vilifying private
sector leaders, throwing opposition leaders in jail, now you're looking at inflation that some estimates would have as high as 700%. Basic goods
unavailable. Lines, people standing in line for hours to get basic goods if they're even available. This is a country in crisis and doesn't seem
the government has any willingness or desire to change course. So the endgame is in a positive one.
NEWTON: And yet what they've been willing to do is pay their debt. I mean, some people thought they would be in default by the end of the year.
They are saying they won't be. And they look on track be able to pay that debt. I mean, what kind of effect does that have that in order to conserve
the foreign reserves that means they have to import less and import almost everything they need in that country. I mean, what do you think their end
game is there? Because clearly, they have a program that they want to stick to, and that means they're going to meet the international financial
obligations.
FARNSWORTH: I think the immediate end game is to play for time. And the reason why is because according to the constitution the opposition can put
in to place a recall referendum that if done by the end of this calendar year or early next year, will be force the president to step down and new
elections would be called. If he can resist until after the deadline, which is early next year then, in fact, even if a recall is put in place it
would -- the vice president would step in and take over and fill out the rest of the term. So, the immediate plan is to play for time. That's not
sustainable over the long term. But what they have been doing in order to try to make sure that they can pay those debts, is, for example,
renegotiate loans with China.
They have had a little bit of breathing space, because the price of oil, which is really their only commodity export at this point, has ticked up
recently and it may be going up a little bit further. So there's a little bit of breathing space there, but fundamentally these are unsustainable
issues. And the question is how much pain can the population of Venezuela take before they say, enough, and go to street and really try to force
change from a different perspective?
NEWTON: Many people have been asking that question and week after week things continue to get much worse there. We'll continue to check in with
you on this issue. Appreciate your time.
FARNSWORTH: Thanks very much.
NEWTON: Venezuela might be getting relief soon in the form of oil prices. Goldman Sachs those prices could hit $50 per barrel toward the end of the
year. Now the U.S. banks forecasts have previously quite bearish on oil. Goldman said production outages in Nigeria and Canada would support higher
prices. We've also seen production sputtering, as we said, in Venezuela. Brent crude touched a six-month high on Monday. Todd Colvin, of the
commodity trading firm for Ambrosino Brothers, joins me now from the Chicago Mercantile Exchange. I mean, is this a short lived rally? It
seems to be an open question at this point in time. Or have we hit the floor, the price floor, on oil and it's only up from here?
TODD COLVIN, SENIOR VICE PRESIDENT, AMBROSINO BROTHERS: Well, it's hard to say that we have hit the price floor, but certainly this has given oil
prices a boost and a new life. We have been talking about the oversupply of oil, whether it comes out of the Middle East, whether it comes from the
United States or whether it comes from the emerging markets for as long as I can remember, we just a few months ago or three, four months ago, we got
down to $30 a barrel. So there's definitely been a reversal here in oil prices and this adds fuel to it.
Now, it's one thing to mention is that Goldman Sachs' report while it does say there is going to be an increase in the short term, they do see prices
plateauing in the long term, as we see that balance come back into play. When we see whether production picks up in the Middle East or whether what
we've seen coming back into play, naturalize itself. We could see balance in the longer term. So this is a short-term trade for oil.
NEWTON: Balance is the key word there. What's hurting is volatility and we have seen bankruptcies at least in the United States up in the oil
companies. Do you think there's hope that when we can balance out the supply side that -- there's always volatility -- it's a commodity and
always will be, but we will not get the sharp swings perhaps starting in the last quarter of this year.
COLVIN: Well, we haven't had the swings in volatility and that's really not only what every trader wants but it's a good measure of where demand is
in the marketplace. Right now when you see volatility flat line and you kind of see us trade from 30 to 40 to 50 back to 40 and you really don't
see any hiccups or any pulse increases in the market. You have to ask yourself, well, the market's not concerned about us breaking out of a
range. Now we have broken out of that recent range, but do we get above 50 for a sustained period? I don't think so. Unless we see that small
percentage chance there's a global event that maybe changes production or increases demand that would push us there. But right now seems short term
$50 is a great target, maybe just above. But long term that seems to be the high.
[16:30:00] NEWTON: Still a lot of question marks around the price of oil and as we saw today propels a lot of what goes on in the market. Todd,
appreciate your insights there from Chicago.
COLVIN: Thank you.
NEWTON: The bomb scare that forced the Manchester United match to be postponed on Sunday could leave the club millions of pounds out of pocket.
We have that story up next.
(COMMERCIAL BREAK)
NEWTON: Hello, I'm Paula Newton. Coming up in the next half hour of QUEST MEANS BUSINESS, how one of the biggest cons in history was shut down after
a CNN Money investigation. And if you think your Monday was bad, try being the security boss who left a fake bomb inside Manchester United's stadium.
Before that, though, these are the top news headlines we're following on CNN this hour.
The U.S. and other members of the U.N. Security Council say they will work around an arms embargo in Libya and give weapons to the country's
internationally recognized government. Now world leaders say they hope it helps the government fight back against ISIS.
(BEGIN VIDEO CLIP)
JOHN KERRY, U.S. SECRETARY OF STATE: We will measure whatever requests there are for their legitimate arms requests with our call to all states to
improve the enforcement of the arms embargo itself, in order to prevent arms transfers from taking place to people outside of the GNA's authority.
(END VIDEO CLIP)
NEWTON: Iraq says it's launched a military operation to break the ISIS siege in Rutba of an important city on the road from Baghdad to Jordan's
capital Amman. Now tribal forces and coalition war planes are backing that assault.
Downing street says British Prime Minister David Cameron would be willing to have a phone call with Donald Trump in order to clear the air over
Trump's plans to stop all Muslins entering the United States. Mr. Cameron has called Trump's comments on the subject stupid. Trump told British
television that Cameron's comments were rude. Did not bode well for British-American relations if he becomes president.
(BEGIN VIDEO CLIP)
TRUMP: It looks like we are not going to have a good relationship. Who knows? I hope to have a good relationship with him. But it sounds like
he's not willing to address the problem either. When it was brought up --
UNIDENTIFIED MALE: Would you like him to withdraw the particular comments of you're stupid, divisive and wrong on the views of Muslins?
TRUMP: Well, number one I'm not stupid. OK. I can tell you that right now. Just the opposite. Number two, in terms of divisive, I don't think
I'm a divisive person. I'm a unifier, unlike our president now. I'm a unifier.
(END VIDEO CLIP)
[16:35:00] NEWTON: Meantime, Trump's former rival, John Kasich, says he will not run for president as a third party candidate. In the first
interview since dropping out of the Republican race, Kasich told CNN's Anderson Cooper he received a phone call asking him to consider running.
Kasich said he thought the idea was silly.
Tens of thousands of people gathering to celebrate Leicester City's Premier League title, while the team paraded through Leicester on an open top bus
with that trophy. Look at that. Could they be more excited? Having been tipped for relegation at the start of the season, Leicester ended up
winning the league by a full 10 points. Look at that crowd. A lot to celebrate.
Now, the boss of the security firm which left a fake bomb at Manchester United Stadium tells CNN it was an honest mistake. He owned up to the
blunder after old Trafford had to be evacuated on Sunday minutes before the team's final match of the season was due to kick off. The rather too
realistic device had been left behind following an anti-terrorism training session. CNN World Sport, Don Riddell joins me now. I mean Don, when you
saw the headlines on this, who could believe it? In case people don't know how difficult it is to get those Manchester United tickets, all the
families, the fans that were looking forward to that game just to have it canceled.
DON RIDDELL, ANCHOR, CNN WORLD SPORT: Well, I suppose at the end of it all, Paula, we must just say thank goodness. Thank goodness this is all it
was. What an absolute fiasco it has turned out to be. The head of the security firm, Chris Reed, head of Security Search Management and Solutions
taking full and sole responsibility for his blunder. He's been given details of how he helped conduct the security exercise last Wednesday and
they hung these kind of 8-inch sort of mock-up pipe bombs in various places around the stadium. He thought he counted them all back into his bag.
It was his mistake and left one of these things hanging there. He says he's absolutely devastated at his lapse in working protocols, which is
resulted in people being disappointed, frightened and inconvenienced. And when we talk about inconvenience, let's talk about what this is going to
cost Manchester United is estimated in the region of $5.5 million. Because they've had to refund all of the fans who were at that game and they're all
going to be allowed to attend for free on Tuesday night.
NEWTON: Yeah. And the financial implications of that are huge. I mean, the club has got to be saying to themselves, I mean, how did this happen?
How can we stop it from happening again?
RIDDELL: Well, I'm sure that's exactly the question they're asking. I mean, it's very difficult, isn't it? They hired a private contractor to do
a very, very important job and all credit to Manchester United for taking safety and security so seriously. I guess this wasn't their fault. It's
one man who runs this firm saying, look, it's a fair caught. It was all down to me. He's taken responsibility for it. I'm not terribly sure what
else can happen after this point. But it's not just the fans of Manchester United that were inconvenienced. You talk about the police were involved
in the evacuation procedures. The military who had to come and take care of what they said was an incredibly life like-looking device. Think about
their inconvenience. The Mayor Tony Lloyd, the greater Manchester mayor and the man in charge of the policing in Manchester described this as
outrageous. He said it was a fiasco. Has detailed the inconvenience and all the amount of effort and time that's been wasted on behalf of the
authorities in greater Manchester and he's called for a full and urgent inquiry. I guess we can assume with Manchester United something like this
doesn't happen again. And as we say it's all down to the lapse of concentration and just one individual.
NEWTON: Yeah. You were right to point out that through all of this, all the authorities did the right thing in terms of making sure it was, indeed,
fake and that we should all be thankful for. Don, appreciate it.
RIDDELL: All right.
NEWTON: The NFL's Atlanta Falcons, meantime, are getting a new stadium and the designers say they've drawn on the Pantheon in Rome for inspiration.
Take a look at this. The Mercedes Benz stadium is being particularly paid for though, with public funds to the tune of hundreds of millions of
dollars. And not everyone in Atlanta is happy with that especially because the new stadium will replace the Georgia dome which is only 20 years old.
Now, the Falcons' owners Arthur Blank, who is also co-founder of Home Depot. He told me that while the stadium is of course lavish, prices
inside will be affordable for the average family.
(BEGIN VIDEOTAPE)
[16:40:00] ARTHUR BLANK, CEO, AMB GROUP: We think it's going to be the finest sports entertainment complex in the United States and other people
say throughout the world. We wanted to make sure that the fan experience, the inside of the stadium, matches the architecture design and the
construction of the exterior itself and the stadium. So we believe in listening and responding, and we know one of the great complaints across
America has been fan pricing, if you will. Food pricing. Value pricing for food and beverages and so we wanted to respond to that and make sure we
find a way to say thank you to the fans.
NEWTON: If you don't get the Super Bowl in the next five years, will the stadium essentially have been a waste of money?
BLANK: Absolutely not.
NEWTON: Why not?
BLANK: We are bidding for the Super Bowl in 2019, '20, '21. We are ready have the National College Championship Game in 2018. We have the final
four in 2020. We have the college semifinal game in 2017. We have a number of other events already lined up. We're obviously would like to get
the capstone would be the Super Bowl and ideally fit into the slot of 2019, but we'd be appreciative of any of those years.
NEWTON: So, Mr. Blank, so from football to football, what they call football around the world --
BLANK: Soccer.
NEWTON: -- in terms of what this stadium might mean worldwide, do you think it will be more of a magnet for international events, including those
World Cup soccer football matches?
BLANK: We are hopeful that when FIFA decides or elects the opportunity for United States to host again that we'd have a chance to do that. The
stadium is designed to support international soccer matches. The lower bowl stadiums pull back so you have the full width of the field. You don't
have any site lines that are shortened and not appropriate. It's designed for soccer. Obviously, it meets the criteria for major league soccer, for
our Atlanta United franchise which will start playing next March. This stadium is designed for the National Football League, major league soccer
and any host any variety of events that come through Atlanta.
NEWTON: Mr. Blank, I don't want to get into the local politics of Atlanta, but worldwide seeing the one up man ship on all kinds of stadium around the
world. People ask when public funds are involved and in some way public funds are involved.
BLANK: Sure.
NEWTON: You and your investors might think it's a good investment but why is it good investment for communities, for cities?
BLANK: Well, I think in every case you have the look at the local particulars. In our case we've employed -- will be employing several
thousand folks, many of which are here locally. We have tried to make sure that the stadium becomes a focal piece for the redevelopment of the west
side of Atlanta which is where the birthplace of Martin Luther King, the home of the civil rights movement and we believe will be important in terms
of the future growth of that area. We think that's all part of the public support and obviously bringing all these national events and international
events to Atlanta will help the economy for not only downtown for the city, the region and really from the state.
(END VIDEOTAPE)
NEWTON: In Mexico, some people say it will take more than locking up El Chapo to make them feel safe. We'll take you to Juarez where the notorious
gangster is being held.
(COMMERCIAL BREAK)
[16:45:24] NEWTON: Mexican drug boss, El Chapo, spent the past week in a prison not far from the Mexico-U.S. border and you would think knowing he
was behind bars makes people feel safer. Some people in the city of Juarez say they're worried about a fresh wave of violence. Nick Valencia has
more.
(BEGIN VIDEOTAPE)
NICK VALENCIA, CNN CORRESPONDENT: Life goes on in Juarez, Mexico. Once desolate streets traded for a semblance of tranquility in a city just
across the river from El Paso, Texas.
Not so long ago infested with drug cartels and the violent peak, there were more than 3,000 people murdered in one year. Most of those deaths were
attributed to the war between the local Juarez cartel and the infamous Sinaloa Federation, popularly known for its leader Joaquin Guzman, aka El
Chapo. While life on the streets has changed in Juarez, with El Chapo's return, the bloody past seems very much present. His presence reimagined
the nightmares for many. Said, Sergio Velez, he lived through the violence brought to Juarez by El Chapo between 2009 and 2012. He said he still
mourns the death of a construction worker killed inside his business.
SERGIO VELEZ, BUSINESS OWNER (through translator): There are many people hurt by that war. There are many still mourning what happened during narco
war and they're still a very latent sense of insecurity bred by the delinquent group of El Chapo Guzman here in Ciudad Juarez.
VALENCIA (voice-over): Painful memories of Velez buried deep in the mind have been unlocked by the return of El Chapo. Even with the kingpin behind
bars some fear of a return of impunity for the cartel foot soldiers still in the city. However, the Mayor of Juarez tells CNN the drug lord's
transfer to Juarez had no impact or relevance on the daily life of most residents.
JAVIER GONZALEZ MOCKEN, MAYOR OF JUAREZ (through translator): Juarez now finds itself peaceful, working and dedicated to produce goods and services.
Juarez is dedicated to creating better life conditions for its residents.
VALENCIA (voice-over): There are obvious concerns that El Chapo will escape for a third time. There've also been questions about the
penitentiary's infrastructure. Is it capable of holding him? With the spotlight on Juarez for the moment, residents would prefer to discard the
unwanted attention and move on from its violent past. Nick Valencia, CNN, Atlanta.
(END VIDEOTAPE)
NEWTON: It's been called one of the biggest scams in history. Now the U.S. government is cracking down, a special CNN Money Investigation.
That's next.
(COMMERCIAL BREAK)
[16:50:10] NEWTON: We have a significant update on a story we first brought to you a few months ago. One of the biggest cons in history is
being shut down by the U.S. government. CNN Money's investigative reporters Blake Ellis and Melanie Hicken will join me in a moment, but
first a recap of their investigation.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE (voice-over): The elderly French psychic accused by the U.S. government of being the face of a more than $200 million mail
fraud scheme. Deval's face and name have been on millions of letters sent around the world promising good fortune for those who pay for psychic
guidance. We needed to speak with the woman herself. So we went to France. We called the closest people to her we could find.
UNIDENTIFIED FEMALE: Hello.
UNIDENTIFIED MALE: And when we spoke with Duval's sister she seemed shocked to hear about these letters.
JULIA JONES, CNN RESEARCHER: I mean, she was appalled. She was like, I can't believe that they're doing this. And when I said, look, they're
sending letters. They say, I have great visions for you and then ask for money. She's like, that's a scam.
UNIDENTIFIED FEMALE: She said that?
JONES: She said that's a scam.
MELANIE HICKEN, CNN MONEY INVESTIGATIVE REPORTER: So Maria Duval's sister called the litters a scam.
JONES: A scam.
UNIDENTIFIED FEMALE (voice-over): We talked to so many people. Her family members, her gardener. Her business manager. Even the man who installed
her pool. But Maria Duval remained as elusive as ever. We were told Duval herself wouldn't speak with us. But he had to try anyway.
JONES: Hello? Bonjour.
UNIDENTIFIED FEMALE (voice-over): As quickly as the gate opened, it closed.
(END VIDEOTAPE)
NEWTON: Blake Ellis and Melanie Hicken join me now and I think it's important to try to point out this is not just in the United States. In
France, you're talking $200 million, a 20-year scam. A dozen countries at least. Blake, to you first, is this the end of it?
BLAKE ELLIS, CNN MONEY INVESTIGATIVE REPORTER: Sadly, it is not the end of this. It's a big step in the right direction. Because the U.S.
government's action shuts down the scam in the United States. But as you just mentioned, this is a hugely international scam. We have seen the
Maria Duval letters popping up in more than a dozen countries all over the world. So while this is great news for U.S. victims, it does nothing to
stop that from continuing elsewhere all over the world. And another thing to point out is that none of the defendants have had any financial
penalties at this point and most of the victims who have lost a collective $200 million from this scam won't be receiving any of that money back at
this point.
NEWTON: Wow. So absolutely no compensation after all of that. Blake, you know, the U.S. government had tried to shut this down in 2004. This is 12
years later. What took so long? Clearly, they knew that this was possibly a scam.
ELLIS: Yeah. I mean, has been one of the longest running scams in history. And the U.S. Postal Inspection Service tried to shut it down in
2004 and the companies involved just kept sending out letters. They just ignored the order from the government and just continued sending out these
Maria Duval letters. This time around the Justice Department has gotten involved, so it's a lot more of a serious case. and they seem very
confident that the letters are going to stop, but we'll definitely have to wait and see what happens.
NEWTON: Melanie, what do you think the odds are that we will ever hear from Ms. Duval?
HICKEN: So, you know, we as you saw in that video, we went all the way to France to try to speak with Maria Duval. We heard that she's very ill.
From a number of people. And we were actually able to speak with her son, who told us that his mother had signed a contract many years ago selling
the rights to her name. And that he claims she has nothing to do with this scam anymore. But something interesting of note is she did sign this
settlement agreement with the U.S. officials. So people running this scam seem to somehow be able to get in touch with Maria Duval and she is really
a living, breathing woman. So, you know, we're going to keep trying. We would love to speak with Maria Duval. So, but who knows? It's still a
mystery for a lot of people.
NEWTON: Okay. Melanie, before I let you go, investigations are an important part of what we do here at CNN Money, and you're looking into the
world of modeling. And last week we aired a story about the surprising labor practices and when's most shocking to you, Melanie, going through
that investigation?
HICKEN: So, yes. Our current investigation called "RUNWAY INJUSTICE" is looking at the modeling industry. And what we found is that models, while
it's a seemingly glamorous profession, they're actually treated in a way that very few other workers are treated in large part because of a complete
lack of regulation of the industry. And we've released a five-part series on CNNmoney.com. And today's story focused on one of the most horrifying
things we found which is the scams that target models and their families.
[16:55:24] And one of the worst stories we heard was a criminal case down in Florida where young models were so desperate for work that they were
duped into going to auditions, where they ended up being drugged and then raped on camera. So it was an absolutely horrible case and we've heard
from a lot of people that many models have been targeted for scams just like that one.
NEWTON: Well, important investigations that both of you working on. We thank you for bringing them to us and we'll continue to check in.
Appreciate it.
Now, it's just a few days since we learned Twitter had blocked U.S. spy agencies from buying data about Twitter users. Now the spies at Britain's
GCHQ have set up their own Twitter account.
(COMMERCIAL BREAK)
NEWTON: Twitter-sphere has a new member, British spy agency GCHQ. Yes, a spy agency hits the center where the UK security services do the
eavesdropping and now it says it's on Twitter to further the public engagement. Now one thing that's interesting about this is that we can see
who GCHQ is following. Or any rate who it's following on Twitter. Now they include news out jets, government agencies and Britain's most famous
spy, James Bond. For the record he is a fictional character. This is GCHQ's first tweet, though, "Hello world." It's a double entendre
containing a nod to computer coding with a program of the same name. The agency received a friendly welcome of America's CIA back in 2014. The CIA
joined Twitter by saying, "We can neither confirm nor deny that this is our first tweet." And apparently, they have a sense of humor. That's it for
QUEST MEANS BUSINESS today. I'm Paula Newton. I'll see you right back here tomorrow.
END
