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(generated from captions) case. In fact, Dick Cheney has

had nearly identical views on

executive supremacy across the President's war-making

authority since the days of

Gerald Ford. He was against

the War Powers Act which gives congressional oversight to

the's deployment of troops. He

was against the new law created

in the 1970s that restricted

the use of electronic

surveillance in the United

States to a special

intelligence court that would

issue warrants. He did not

think that was necessary. He

was against the Freedom of

Information Act or at least its

expansion in the 1970s and what

you didn't know at the time was

he took all these positions

because Gerald Ford his

president did not. He was a

loyal chief of staff and there

wasn't a peep about it. Among

developed the Bush the competing voices that

Administration's policies

post-September 11 how much

weight did Cheney's voice

carry? Cheney forged a close

alliance and, in fact, he'd had

that alliance since the days of

Nixon with Donald Rumsfeld and

the Cheney-Rumsfeld access just

controlled decision-making at

all the staff and Cabinet level

meetings. What went to the, ultimately the President

decided but Cheney rolled over

Colin Powell, he rolled over

Condi Rice and he again had the

dominant role in not only

advising the President but in

shaping the options that went

to the. One of the things that

Cheney has learned over the

years as a good bureaucratic

infighter is sometimes you can

have just as much impact by

killing an idea that you don't

like as by promoting an idea

you do like. Given the

atmosphere of uncertainty

immediately after September 11,

terrorists would perhaps strike the fear and anxiety that

again, possibly in an even more

devastating fashion, isn't it

understandable and even

justifiable that Dick Cheney

would not want to be involving

every two-bit player in every

agency in Washington in

decisions that had to be made

quickly and without any

leaks? Look, there is a very

strong plausible case to be

made on his behalf. He is not

I think, there's no Ed that he

is looking personally to

grandise himself. He believes

strongly that there is mortal

threat that it became manifest

on September 11, that it could

be worse next time. As you

say, decisions have to be made

much more quickly. He

understands that bureaucracies

are slow and tend to water

things down or to take another

metaphor, they agree only on

the least common denominator and do it slowly and he

believed the President had to

act with dispatch, he had to

take bold action and so he

simply didn't tell the

Secretary of State or the

national security adviser some

of the things he was doing

because he didn't have time to

wait, in his mind. America's

reputation has obviously

suffered around the world because of the way the Bush

Administration has prosecuted

the war on terror, particularly

the disaster that Iraq has

turned into. Has that caused

Cheney's influence within the

administration to wane at all

over the years? It's hard to

know because it depends on the

relationship with the. You can

tell yourself a story in which

the President doesn't rely upon

him as much anymore. Colin

Powell who was in the end a

weak adversary for Cheney has

been replaced by Condi Rice who

does have the President's ear,

in which the costs and

consequences of some of

Cheney's advice especially on

Iraq have become more and more evident. But I wouldn't count

him out. He is the most

effective bureaucratic player

I've ever seen in Washington.

He still has the President's

ear and he very much has the

power to block reversals, of

course, that others are

advocating and so, for example,

the President says, "I'd really

like to close Guantanamo Bay,"

and I think he does want to

close it and Cheney is off on

the side saying, "Yes, but what

are you planning to do with all

these people?" More than a

year has passed since the

President said that. In that

year there was additional

construction at the naval

prison there. So even though Robert Gates and Condoleezza

Rice are urging President Bush

to close Guantanamo Bay,

more weight at the Cheney's voice still carries

moment? Let's just say that

Cheney understands that

delaying action sometimes is

decisive. He has said, "Fine,

you want to close it, we've got

to solve the following five

problems first and where are

your solutions?" The answer is

it's not that easy. What do you

think will be Cheney's

legacy? Well, the efforts to

expand presidential power

clearly are going to be high on

the list and in this the

results are quite mixed. He

managed to make room for the

president to do extraordinary

things with respect to

detainees, with respect to dops

surveillance, in the early

years. And he then had to

defend those actions in court

and three times the US Supreme

Court has dealt him quite

severe blows to the theories

under which he did that and

there are people who are I'd

lonlically sympathic to chain

-- I'd lodgically sympathic who

believe in a strong presidency

who say by overreaching he may

have brought about such a

reversal that the presidency in

some ways more weakened than it

was before. We're a little

early in the political cycle at

the moment to be talking about

running mates for the

successful presidential

nominees. But once we get to

that point is it likely that future vice-presidents will

follow the model set by Cheney,

or are we likely to see a

return to a more conventional

approach? It depends a lot on

the president. I'm quite sure

that many future

vice-presidents will inspire to

a level of influence and impact

that Dick Cheney has had. I

will note that most

vice-presidents come to that

job with continuing political

ambitions of their own. Dick

Cheney is not running for

president, never going to run

for president and having a

vice-president who has his own

political agenda and ambitions

creates a certain distance to the president himself because

the president has to worry, "Is

he doing this for me, or is he

going to distance himself to

get away from the blame or

claim credit for something?"

Especially late in a term this

becomes an issue. Barton

Gellman, thank you for joining Lateline. Thanks for having me.

Rising floodwaters are moving

into more towns in Victoria's

south-east following a torrent

of rain that's fallen since

Tuesday night. More than 2,000

homes in the Gippsland region

are without power and some

residents have had to be

winched to safety by

helicopter. Helen Brown

reports. The waters rose too

fast for about 30 residents of

two small towns who had to be

lifted to safety. Major rivers

in the State's north-east burst

their banks after rainfalls of

up to 320 millimetres. With

water spilling over onto prime

grazing country. My mother, my

stepfather and my little sister are getting picked up at the

moment as we speak so hopefully

they're all OK. The Victorian

Premier decided to see

first-hand what was happening. Probably the worst

flood we've seen for the last

37 years and equivalent to the

floods that were around in the

1970s. Previously depleted

lakes and dams are filling

fast. And as the surplus water

moves downstream, other towns

are tonight preparing for the

impact. The water's rising.

The water's coming. The main

highway between Sale and

Bairnsdale has been cut off and

the banks of the Traralgon

Creek have broken. Scores of

people had earlier been

evacuated from caravan parks. A

lot of people live in that

caravan park. Their homes will

be ruined. Extra emergency

crews are being pulled in from

other parts of the State. We're

on heightened alert pulling

more crews from north-east

Victoria down into Gippsland to

bolster numbers. Falls of more

than 300 millimetres have been

recorded, with an average fall

of about 200. This is certainly

one of the most significant

storm and flood events that

we've had for quite some time.

Easterly lows are not common at

this time of year. It's

unusual. While the rain has

eased since yesterday, high

winds are expected to keep

everyone on edge. This evening

and overnight when those winds

pick up again, winds could be

damaging. The water we're

seeing is somewhat ironic. In

summer Gippsland residents were

facing drought and scorching

fires. They're coming from all

angles with fires and now

floods and also the storm

activity. A lot of trees

coming down. Well, what an

amazing change there has been

in the landscape across

Victoria. The wild weather was

also felt to the north of

Melbourne where a 30 metre tall

free crashed onto a house

killing a male occupant. The

State Government's considering

providing funds to residents

affected by the floods and

local council s needing help to

repair infrastructure.

That's all from us for

tonight. Now it's over to

'Lateline Business' with Emma

Alberici. Thanks very much,

Leigh. Tonight - going once,

going twice - the auction for

Coles ends before the hammer

comes down as the last of the

private equity groups walks away. What it says about the price is yes, potentially you

are seeing the price being too

high. The fact that other

consortium members can't match

that price with cash. The

regulator rebuffed, ASIC loses

its case of insider trading

against the world's biggest

bank. The court has been

realistic. It's looked at the

particular claims. The Australian pharmaceutical

industry rules out an alliance

with supermarkets. Our

wholesale business, our

pharmacy distribution business

would be decimated overnight

because those pharmacists that

procure their product from us

would seek an alternative

channel. First to the markets,

and after an overnight bounce

on Wall Street, Australian

shares followed suite. The All

Ordinaries picked up 80 points.

Bargain hunters swamped the

market and the ASX200 gained

more than 1% N Japan the Nikkei

rose for the first time in four

days. The Hang Seng closed 1%

higher and in London, stronger

based metal and oil prices have

so far also pushed that market

higher. The Australian

securities and investments

commission today suffered

another blow in its efforts to

clamp down on insider trading.

A Federal Court judge in Sydney

said the corporate regulator's

case against the world's

biggest bank Citigroup had not

been proven. Andrew Robertson

reports. Justice Peter

Jacobson's dismissal of insider

trader charges against

Citigroup disappointed and new

ASIC boss who's publicly made

insider trading one of his key

targets but Tony D'Alosio

defended ASIC's court

action. The court in the

process has clarified important

aspects of the insider trader

law. For example on the

operation of Chinese wharves

and the passing of sensitive

operation. They will assist

ASIC in pursuing other insider

trading action. The case

stepped from trading in Patrick

Corporation shares on Friday 9

August 2005 when it was also

acting as an adviser to Toll

Holdings. Toll made a takeover

bid for Patrick on Monday, 22

August. Citigroup claimed it

had what's known as a Chinese

wall, which prevented

information from those advising

Toll leaking to its share

traders. The case hinged on

whether Citigroup trader Andrew Manchee was aware of the


When the buying of Patrick

shares was discovered, Andrew

Manchee was taken outside by

his boss and told the stop. He

returned to his desk and

started selling.

Duncan Fairweather, who

represents investment banks

like Citigroup, welcomes the

decision because he says the

industry was concerned a win

for ASIC would have led to

restrictions on banks trading

in shares on their own behalf

. It's important that the

investment banks that operate

here are able to do so in

accordance with global

practices and to be able to

compete effectively for capital

on a global basis. Despite

dismissing the insider trading

charges, justice Jacobsen was

concerned people on both sides

of Citigroup's Chinese wall had

spoken to each other, even if

pertinent information had not

been exchanged. Professor Michael Adams is

head of business law at the

University of western Sydney

and agrees with Justice

Jacobsen's assessment. My issue

is one of human nature. People

like to talk to each other. A

big deal is going down, a

transaction of some sort, you

want to share the good news

with colleagues. At what point is the information sufficient

for you to make a decision to

recommend an investment. It was

the first test of new

legislation on managing

conflicts of interest, the

judge ruling there was no

conflict because Citigroup had

no fiduciary obligation or

special relationship to Toll

Holdings. Toll, having signed

that away when it hired

Citigroup as an adviser. The

court has been realistic, it's

looked at the particular claim.

Toll is a sophisticated body.

It's not just a retail

investor, this is a big

corporation with lots of

professional advisers and as

such, they would be in a

position to know what are the

legal consequences. Citigroup

executives refused to be

interviewed today but said they

were naturally delighted with

the outcome. The sale of the

Coles group today became a

one-horse race with Wesfarmers

almost certain to become the

retailer's new owner. The only

other three private equity

groups left in the auction

process confirmed today they

would not proceed with an offer

before the Saturday deadline.

Wesfarmers will now likely be

forced into a position of

making a bid for Coles at a

price that's 33 cents lower

than today's closing price.

But analysts aren't concerned,

given the purchase will propel

Wesfarmers to number six on the

table of the country's biggest

companies. Brigid Glanville

reports. While these customers

are happy to purchase Coles

products , the same can't be

said for those in business.

Another private equity group

today pulled out of the race to

buy Coles. Perhaps as the due

diligence process did run its

course the business looked more

and more complex. There would

be difficulties in separating

parts of the business from other parts. Texas Pacific

Group, Blackstone and Carlisle

are the original three from the

six private equity firms

interested in Coles. Leaders

of the original consortium

Kohlberg Kravis Roberts,

withdrew a few weeks ago. Coles

has gone all out to Private

Kovko equity into the bid,

they've given them every

concession including a $10

million expense reimbursement

and come up with nothing from

private equity. It does

suggest there are some problems

that will be continuing. Texas Pacific Group wasn't talking to

the media today, but Coles said

in a statement that: The structure could mean anything

from just selling one or two

pieces of Coles to

restructuring the bid in terms

of making a separate structure,

maybe part debt, part

equity. So is the price of

Coles simply too high? What it

says about the price is yes, potentially you are seeing the

price too high. The fact that

other consortium members can't

match that price with cash as

is indicated by the fact that

they've removed themselves from the bidding process indicate s

that it is potentially a very

full price being paid for a

business that is deteriorating

at the moment. It's still believed Coles rival Woolworths

will make a bid on Saturday for

businesses Officeworks and

Target but not if Wesfarmers

can help it. Wesfarmers wants

Coles supermarket aisles to be

as busy as those in its

hardware aisles. Its offer

remains on the table. They're

in the box seat and the chance

of them being successful is

very high. For them going

forward is certainly a major

company move. It will make

retail through this acquisition

and Bunnings the major part of their business going

forward. And it seems investors

like the idea of Wesfarmers

buying Coles. Wesfarmers'

shares rose 3% closing above

$44. Coles is down 1% to

$16.14, well below the bidding

price. For us as an investor

we're looking for the higher

price. Whether that's through an alternative investment

structure which TPG's talking

about or through a structure

proposed by Wesfarmers which

may have script for script

rollover tax benefits for

investors. Coles first

supermarket opened almost 100

years ago in Melbourne and was

once a powerful retailer. On

Saturday, that will go down in

retail history when the final bids will be delivered to the

Coles board. For all the other action on the Australian stock

market a short time ago I spoke

to stockbroker Marcus Padley.

The market rebounded today

after yesterday's heavy

selloff, were there any

standouts? It's across the

market today. The standout was

the market being up 81 points

having fallen 124 yesterday.

The features were few and far

between, industrials and

resources pretty much matched

each other. There were a

couple of stocks notable, one

was consolidated minerals which

got bid for by Territory

Resources up 5%. Another one

was Coates Hire telling us they

have had bids and they're going

to open a data room for the

bidders. The 'Financial

Review' says there are four

bidders bidding for them.

There was a broker out with

eresearch this week saying

Telstra was worth $3.75. It's

currently $4.67. We saw

Foster's down against the trend

on the back of a large tax bill

from the ATO which the market

knew about. One broker says

will knock money off their

valuation. The other feature

was Woodside up 3% on the back

of an oil price rise. We saw a

good performance across the

board from financials, in

particular the banks. And that

was perhaps on reduced worries

about the US credit

markets. There's been so much

speculation about the Future

Fund, have you had any

confirmation that they've

actually been in the market as

buyers or sellers? I think the

whole of yesterday's 124.4

which was clearly judging from

today overdone was probably

kicked off by not worries about

the FMOC, not worries about the

subprime mortgage market and

not kicked off by some

technical factor like the All

Ordinaries dropping below or

the ASX200 dropping below its

200-day moving average. It was

just the fact somebody did a

whole bunch of selling particularly in the futures market. And the feeling is

that the Future Fund if it was

the Future Fund has been buying

the market over the past week

held it up in the face of a

300-point fall on the Dow Jones

and yesterday the futures

market detected their buying

had gone and everybody just

dumped the futures and that

took the market with it. I

think that's all that's gone

on. We've basically seen a big

buyer in the market over the

past week be it the Future Fund

or someone else and they

appeared to have disappeared

and the market overdid it

yesterday. Marcus Padley, thank

you very much. Thank you,

Emma. For a quick look at the other major movers on the

market today:

A law firm backed by a US

presidential candidate Rudy

Giuliani has lost its

last-minute bid to buy the

failed WA mining company Sons

of Gwalia. It has instead been

sold to a private-based equity

group. Creditors can expect a

return of between 12 and 20

cents in the dollar. Frances

Bell reports. Three years

after Sons of Gwalia collapsed

shareholders and creditors met

to decide the company's

fate. I'm a small shareholder

and an aggrieved shareholder

and I have supported the

concept of hanging in there.

There is a lot of people have

lost a hell of a lot of money. Most supported selling

the company's remaining assets

to West Australian mines to a

consortium led by a private

equity group Reserve Capital

Fund. But the vote was

deadlocked when institutional

investors backed a competing

bed by Rudy Giuliani. The

administrator used its casting

vote and chose RCF. It's

confusing as to why they waited

till the 11th hour to put an

alternative there. It will give

a return of 12 cent in the

dollar but the 4,000 creditors

owed $50 or less will be

offered 20 cents in the dollar.

It's Wayne for ordinary

shareholders who face losing

all of their money until a

Supreme Court ruling gave them

the same rights as

creditors. It's the difference

between having zero and $18

million. Today's deal doesn't

end the battle to recover

losses from the company's

collapse. Creditors have

mounted a $660 million law suit against the company's former

directors and its auditor

Ernst&Young for their role in

the failure of the miner. That

may not be resolved for another

five years. Australian Pharmaceutical Industries today

reported a full-year net loss

of $11 million. It's been a

shocking 12 months for the

country's biggest

pharmaceutical wholesaler which

also owns retail prides, Priceline, Price Attack and

House. I spoke to chief

executive Stephen Roche earlier

this evening. Stephen Roche,

welcome to the program. In

December last year you

described the company's first

half result as terrible. How

do you sum up today's

announcement? I actually think

today's announcement could be

best described this way. We've

demonstrated some clear

management credibility and some

momentum towards putting API

back on track. A $14 million

profit for the same period last

year and today you report a net

loss. You can't be happy about

that? Let me just separate the

issues. There's no doubt that from a shareholder perspective

they had be very disappointed

with the last 12 months. But I

think it's also fair to say

that my role has only been one

of nine months. So from a

first-half performance I inherited operationally I

actually think that we've

demonstrated clearly an

improved performance in the

second half. Still not

necessarily at the value that

shareholders should see over a

full-year period. But we're

confident of returning

shareholder value and improving

on that in the next 12

months. Your shares ended the

day a cent below what Sygna was

willing to pay to take the

company over six months ago.

Sigma management say they're

still keen to talk. Any

interest in selling to them? I

think the best way to answer

that question Emma is that

there's been no dialogue and I

understand that Elmo

particularly is very keen to

say things about the topic. Nothing normally has been

provided. No talks, but any

interest on your part? We see

better value than that price

that Sigma offered before.

There's clearly some support

from the board with management

about the momentum we're generating and the strength

that API has in putting itself

back on track. Have you had any

other approaches since the

Sigma bid, perhaps from private

equity? Well, the short answer

is no. Washington Pattison your

shareholder said it would

consider offers for its shareholding, that puts the

company in play, doesn't it? In

fairness to our major shareholder they've been

consistent in that message for

some months and even prior to

the Sigma process that we went

through. Clearly they're

looking for two things. They

are an investment house. They

have to protect the interests

of their shareholders but also

nothing's been formally put to

them to actually consider. So

in fairness to Rob Milner and

WSHP, they've answered the

question quite correctly. Is

the company up for sale? No.

We have broad support behind

the strategy and the momentum

that we've achieved to date and we're looking forward to

executing that and restoring shareholder value in the

short-term. What's the

short-term? We clearly see an

improved performance over the

next 12 months as a

minimum. Woolworths and Coles

have made no secret of their

desire to enter the pharmacy

retailing business, could API

and a supermarket be a good

fit? I think that's highly unlikely only from the

perspective that if a grocer,

whether it be Woolworths or

Coles entered into a

partnership with pharmacy, the

customer base that of the

pharmacist would leave

overnight so I struggle to see

the value that amalgamation

would actually drive. So I

actually have a view that there

is not a good fit with that

particular hypothetical. Do you

mean customers would be given

away, or pharmacists? Pharmacists would

not see any real need to align

to an enterprise that included

as they would perceive it one

of their emerging competitors.

That would drive them clearly

into one of our competitors

whether it be Symbion or Sigma

currently. In our pharmacy

business the customer is a

pharmacist. So our wholesale

business, our pharmacy

distribution business would be

decimated overnight because

those pharmacists that procure

their product from us would

seek an alternative

channel. Pharmacists like supermarkets are business people, too, they care about

profits. Why would it

necessarily follow that they

would refuse to buy from a supermarket-backed group that

could afford them better prices

than they might be able to get

elsewhere? Well the question

is, wh what does a supermarket

provide in terms of

profitability? We provide

product at a price. Now that

product can be supplied by our

other competitors with some

ease, frankly. So the

relationship is one of product,

service and overarching length

and breadth of that

relationship. So if they saw

that there was then an

amalgamation with Coles or

Woolworths and API I can tell you their clear reaction would

be to move to one of our

exhorts very quickly. But your

own company's retail division

continues to roll out its

Priceline pharmacy model about

ho or 50 a year. You can't

expect Coles or Woolworths will

allow you to encroach into

their territory? We already

operate 150 Priceline corporate

stores in this country as a

retailer. So we do compete

with Coles and Woolworths

directly in that fashion and

form. What we're doing with

Priceline pharmacy is actually

creating a franchise model for

pharmacists to participate in a

health and beauty franchise

which gives them some strept in

an emerging competitive

environment. So -- some

strength. We already compete

with Coles and Woolworths.

We're not aggravating them

anymore than what we are now.

We're bridging our two

heritages. One is that our pharmacist heritage with our distribution business and

secondly our retail expertise

with the acquisition of new

price retailer that API

procured in 24-hour. Stephen

Roche, thank you very much for joining Lateline

Business. Thank you, Emma. --

procured in 2004. Today's stock

market bounce puts the

finishing touches on the fourth consecutive year of spectacular

growth. While einvestors

remain upbeat, concerns about

the United States' subprime

mortgage market continue to

weigh on global stocks. Neal

Woolrich has our report. The

Australian market has gained

another 23% this financial

year, exceeding all but the

most optimistic

expectations. Companies are in this great spot with the

economy tracking along quite

nicely and fuelling corporate

profit and those corporate

profits keep growing and,

therefore, the share prices

will go along with that

corporate profit. Woolworths is

the best of the market leaders

but Telstra has surprised most

beating even the big miners and

banks. Some of the lesser

lights have posted even better

results with Fortescue metals

more than trebling in value

while Lleyton's and JP hi-fi

doubled in price. Carl Daffy

is expecting strong growth to

continue and says the next

round of reports will be

crucial. The indications are

we'll have solid results

through this reporting season

simply because we've had a lack of profit downgrades or

warnings. You haven't had

management of various companies

coming out and trying to temper

some analysts' forecasts. That

bodes very well indeed. But

there was some hiccups along

the way. Among the stocks to

head backwards were:

Local investors were

unsettled by a series of

corrections in China. I think

it was a little blip. Everyone

was trying to see how far and

how extensive it would be. It

was a peeloff. Greenspan came

out in the US and said there

was going to be a peeloff. They corrected themselves very

quickly. But in recent weeks a

bigger threat has emerged. The

health of the United States'

subprime mortgage market.

Investors are now worried that

too much money has been lent to

brothers with poor credit

records. Analysts warn once

risk is properly factored in

the cost of debt could rise and

push asset prices down. What

we're looking for is if the

debt markets and the capital

markets generally can return to

pricing for risk on a gradual

basis that will certainly

soften the contraction in asset

values and the downgrade risk

to the market. But the longer

current conditions continue,

the greater the downgrade

risks. But Paul Draffin is not

calling an end to the global

boom in cheap and readily-available credit just

yet. If the subprime issues

turn out to be an isolated

incident, global economic

fundamentals are strong, so

that is supportive of a

continuation of the current

cycle. Really if the subprime

issues are isolated then we can

see this current cycle continue

for some time yet. Local

analysts remain optimistic, but

the movement of funds away from

riskier investments is likely

to cloud the immediate

horizon. Certainly a bit of volume till ti. That's

happening at the moment. We're

tracking the US and the bond

rates seem to be impacting a

lot on the US. They seem to be

getting themselves together and

I think the Australian stock

market can look forward to an optimistic positioning

throughout. A study by KPMG

shows local merger and

acquisition activity more than

doubled this financial year to

$115 billion. But if the price

of debt does rise that could

make takeovers less attractive

and put the brakes on one of

the local market's recent

driving forces. Now to

tomorrow's business diary. On

a quiet day on the domestic

front the Reserve Bank releases

financial aggregates for May.

Overseas one of the key

measures of US inflation the

core PCE deflator is out.

A look at what's making news

in the business sections of

tomorrow's newspapers. And the

'Australian' says today's Federal Court ruling has

further damaged ASIC's

reputation. The 'Age' agrees,

leading with the same story.

And the 'Australian Financial

Review' says TPG's withdrawal

may force the board of the

Coles group to break up the

company. That's all for

tonight. London's FTSE 100 is

up. The Dow Futures down

again, indicating a weaker

session again on the physical

market. I'll be back on

Monday. But in the meantime if

you want to review tonight's

program you can visit our

website. You can watch the

entire program online or

download it as a vodcast. If

you'd like to email us, the

address is on the screen. I'm

Emma Alberici. Goodnight. Closed Captions by CSI