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CNN INSIDE POLITICS

Sacramento Sheriff Discusses Soltys' Arrest; Bush Faces Grim Economic News; White House Enacts Environmental Policies

Aired August 30, 2001 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: This is INSIDE POLITICS. I'm Judy Woodruff in Washington. President Bush returns to the White House and faces more gloomy economic news.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: I'm Bob Franken in Modesto, California. I'll have an update on Gary Condit's media strategy just hours before members of his staff appear on CNN.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: I'm Kelly Wallace at a very windy White House where the Bush administration reached a deal with some of its biggest critics.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I'm Bill Schneider in Washington. I'll look at what the president did on his summer vacation and the message he sent to the country.

ANNOUNCER: Now Judy Woodruff takes you INSIDE POLITICS.

WOODRUFF: Thank you for joining us. And before we get underway, we want to tell you that just moments from now, we expect a news conference to get underway in Sacramento County with the county sheriff's department there on the arrest of the Ukrainian immigrant, Nikolay Soltys, accused in the murder of five people. We're going to bring that to you live, and we will go to it just as soon as it gets underway.

For now, back to INSIDE POLITICS. In the words of one Wall Street analyst, quote, "There's a lot of feeling of gloom and doom out there." And here is his evidence: The Dow Jones Industrial Average fell 171 points, closing below 10,000 today for the first time since April. Once again, discouraging economic data helped drag the market lower. The U.S. Commerce Department reports consumer spending rose just one-tenth of a percent during July. That was the slowest pace in nine months.

Here in Washington, that latest economic numbers may provide more fuel for President Bush's budget battles with Congress. Mr. Bush returned to the White House today after spending most of this month, as we've seen, at his ranch in Texas. And for now, let's bring in CNN's Major Garrett at the White House.

Major, how is the president now in light of these new -- this new information we're getting on the economy, on the markets and the rest of it, how is the White House and the president planning to frame their arguments when it comes to the budget?

I'm sorry. I'm just told that the Sacramento news conference with the Sacramento sheriff's department is getting underway. Let's go there now.

SHERIFF LOU BLANAS, SACRAMENTO COUNTY POLICE DEPARTMENT: Thank you, Sergeant Lewis. Presently, the status of the investigation is the suspect is in our homicide bureau presently being interviewed by our investigating detectives. As you know, this morning at quarter to 8:00, we arrested the suspect at his mother's residence hiding in the backyard under a desk. We took him into custody without incident. We were on a 24-hour watch of his residence, actually three residences, and hoping for the best. And the best turned out; we managed to find him and arrest him.

UNIDENTIFIED MALE: You guys needed to do this before the press conference. We need to hear the sheriff.

BLANAS: Before we get into questions and answers, I'd like to introduce Valentin Kalinovskiy, a member of the Ukrainian community and also a minister in that community.

VALENTIN KALINOVSKIY, UKRAINIAN MINISTER: My name is Valentin Kalinovskiy, V-A-L-E-N-T-I-N K-A-L-I-N-O-V-S-K-I-Y.

UNIDENTIFIED MALE: Can you speak a little louder, please?

Valentin Kalinovskiy, V-A-L-E-N-T-I-N-, K-A-L-I-N-O-V-S-K-I-Y. I'm the church secretary of the Bethany Islamic Missionary Church, and we are very glad to hear this news, and we're very happy that this already ended. And we give special recognition to the Slavic community for helping to capture Nikolay, and also a special recognition to the sheriff's department, especially to Lou Blanas for doing their job very good and very quick. We appreciate it very much. And thank you very much, everybody.

BLANAS: Do you have any questions for...

QUESTION: Sheriff, do you have a better idea now how the suspect has spent the last 10 days?

BLANAS: Well, we are still interviewing the suspect, and I've got to tell you, at the request of the district attorney, they do not want us to talk about the interview that's going on right now. And they do not want us to release a 911 tape. By the way, the 911 tape is in Ukrainian and very difficult to understand, but at the request of the district attorney, we are obliging her and not releasing any of that.

QUESTION: Can you say at least whether he's confessed to anything or not?

BLANAS: I'm saying that we are interviewing him. And the interview is going well.

QUESTION: Do you have any better idea what the motive may have been behind this?

BLANAS: We are interviewing him, and we're not, at the request of the district attorney, again -- as you know, this is going to be a very high-profile case here in Sacramento, and the district attorney has requested that we do not divulge the motive at this point.

QUESTION: How long has he been interviewed?

QUESTION: Can you tell us what kind of condition he's been in?

BLANAS: Well, he's pretty tired, pretty run down. He has clothing underneath the clothing he had on. And it appears that he's been living outside for some time, and he's pretty tired.

QUESTION: Have you been able to determine whether or not he had any help or assistance while he was on the lam?

BLANAS: We're still examining that. I think it was mentioned earlier that it looked like he had a couple days' growth of beard, or at least three or four days. That is one of the considerations we're talking -- issues that we're talking to him about. And the this time, I don't have the particulars on exactly where he's been. I do know one thing: It is our feeling that there was never a green Explorer.

QUESTION: Sheriff, since...

QUESTION: Why do you say that?

QUESTION: Sheriff, since the family is the one that called, are they subject to receiving the reward money?

BLANAS: Well, we don't know that. The family is going to be here at 4:00, and we're going to -- they'd like to come down and talk to the press. They are very relieved and excited over the fact that he is in custody. So we will have another press conference at 4:00 with the family of the victims.

QUESTION: How come you say there's no green car?

BLANAS: We're understanding that through information that we're developing, that he was probably on foot most of the time in the last 10 days that he was at large.

QUESTION: You were saying -- you think he was in one place or was he moving around? Or how did he stay where he was?

BLANAS: Well, he had to be moving around, because from where he dropped the car off to where we initially or finally arrested him, it's about -- probably about 12 miles. So as you know, we have -- Sacramento is blessed with the fact that we have a lot of beltways and green parkways, and conceivably, he could have been hiding in there. I don't know exactly where, and we're still going through the process of examining that.

QUESTION: Have you found a camp or anything like that? BLANAS: Not at this point. We did find a sleeping bag with him and a nap sack, so to speak, and that's about it. That was in the backyard.

QUESTION: Did he have any other clothing, one additional layer of clothing or multiple layers of clothing?

BLANAS: Well, he had a T-shirt under a T-shirt.

QUESTION: Have you determined if the knife in the bag was one that he may have used in these crimes?

BLANAS: The knife in the bag, and the reason I didn't bring it down here to show it to you is we still have some witnesses to talk to in this case. I mean, you know, we've got a suspect that's been identified, but we still have to go through all the process to make sure our investigation holds true. But it's our feeling from our homicide investigators that the weapon that we found in the bag is consistent with the murder weapon.

QUESTION: Did it have any blood on it?

BLANAS: I did not find that out. I'm not going to get into that?

QUESTION: Sheriff, how was Soltys (OFF-MIKE) in the backyard of his mother's home? I mean, it was under 24-hour surveillance. Can you talk about that?

BLANAS: Well, you know, we had six officers out there in graveyard guarding the residence or watching the residence. We had a surveillance on the family because it was our feeling that he would make contact with his mother. We felt it was a good likelihood that he would make contact with his mother. So we had a 24-hour surveillance on the mother.

The mother was staying at the bottom address, and, you know, at night, there's so many ways to get into that backyard, you can't cover every inch. But we felt the fact that we had an alarm system in there, a panic alarm system that we installed, and also issued cellular phones with a simple press of the button, and it would dial 911.

QUESTION: What happened with the panic alarm? We're being told...

WOODRUFF: The sheriff of Sacramento County, California talking with reporters about today's arrest of Ukrainian immigrant, Nikolay Soltys, who has been accused in the death of murder of six of his family members, including his own 3-year-old son. We heard the sheriff saying that Soltys is now being questioned. And also, we heard him say that the knife they found in his bag when they arrested him at his mother's home in the Sacramento area, that knife is consistent, he said, with the murder weapon. Those murders taking place 10 days ago. And now we're back to the story we've been covering here in Washington: the economy and the effect that today's more gloomy economic news will have on the president's plans to push through his programs and get the kind of federal spending that he wants. For that let's go to the White House to CNN correspondent, Major Garrett.

Major, how is the White House viewing this gloomy economic news, and how is it going to affect their hope to get the kind of budget they want?

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Well, Judy, this White House understands that this president is going to be judged on economic performance. Every president is. And this president is acutely aware of that, having watched what happened to his father, who was perceived as being indifferent or out of touch on the economy.

This Bush White House is going to do everything it can in the next few weeks to show the president is in touch and understanding that the economy is a worry not only here in Washington and here at the White House, but a concern and a worry to Americans across the country. Here's some pictures that sort of illustrate this outreach.

Last Sunday, the president was meeting with steelworkers at a picnic in Pittsburgh, Pennsylvania. This Labor Day, he will meet with union workers in Green Bay, Wisconsin and in Detroit, Michigan. Union workers, pictures of the president meeting with average ordinary American, telling them as he will this Monday on Labor Day that he is also concerned about the economy, that he understands their anxiety.

And what he wants to frame the budget debate coming in the next few weeks is a debate not so much about budget numbers, but the future of the U.S. economy. And he will make two strenuous points. One, the economy needed the tax cut that the president signed, and what it does not need is a repeal of the tax cut. And the other thing that would threaten economic growth is overspending. Now even some congressional Republicans are sort of worrying about how well that message is going to sell, because, in fact, the president has spending priorities of his own: education, defense top the list.

Well, that's going to be the White House message. Not a green eye shade, not a numbers fight with Congress but one about economic growth and maintaining or at least reinvigorating economic growth in this country, because that, they believe will put the president in the best shape not only to deal with the budget this fall, but congressional Republicans as they approach the reelection season in 2002 -- Judy.

WOODRUFF: Well, Major, among other things, are they counting on this tax rebate that taxpayers are receiving across the country right now to be spent in a way that will be seen as boosting consumer spending and consumer confidence for that matter?

GARRETT: Absolutely. And we had consumer spending numbers that came out about July. And those numbers were not as impressive as some economists had hoped. What the Bush White House and many other economists say is, look, that tax cut is being filtered through the economy just now in the months of August and September. That's when the fullest effects will be felt. Plus, the Bush administration is also heartened by the fact that energy costs have gone down this summer. The energy crisis the administration had feared never materialized. Also, interest rate cuts they believe will begin to filter through in a more noticeable way in the latter months of this year.

So the White House is very hopeful. And believe me, Judy, it's a hope. No one here is for sure what's going to happen, but it is a hope that the tax cut, combined with the interest rate cuts and the lower energy prices, will combine at the end of this third quarter and in the fourth quarter to at least show some hope of economic growth. And that growth will be continued through 2002 and will get this president and congressional Republicans out of the squeeze they're in right now.

WOODRUFF: All right, Major Garrett reporting from the White House. Stay with us. We're going to have the latest on Gary Condit and more after this break. This is INSIDE POLITICS.

ANNOUNCER: An unusual alliance to protect endangered animals. We'll ask interior secretary Gale Norton about the administration's new deal with environmental groups. Also ahead...

(BEGIN VIDEO CLIP)

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): This is the summer that put tiny Crawford, Texas on the map. And there are unmistakable signs of change.

(END VIDEO CLIP)

ANNOUNCER: ... John King sends a final postcard from the site of the president's August vacation.

Live from Washington, there is more of INSIDE POLITICS with Judy Woodruff straight ahead.

(COMMERCIAL BREAK)

WOODRUFF: As you've no doubt noticed, the Bush administration is taking considerable heat from environmentalists. But now the two sides have found something to agree on: a plan to protect 29 endangered plants and animals around the country.

Our White House correspondent Kelly Wallace has more on the significance of this deal and how it may affect the president's environmental image -- Kelly.

WALLACE: Well, Judy, the Interior Department considers this one of its most significant achievements of the year and something the Clinton administration could not accomplish. And while Bush aides say that the agreement was not based on politics but on finding middle ground, some observers believe politics may have played a bit of a role here.

(BEGIN VIDEOTAPE)

WALLACE (voice-over): The deal means protections for endangered species, such as the island fox found off the coast of southern California, Florida's big cypress fox squirrel, and 27 other animals and plants sliding toward extinction. In exchange, four environmental groups drop their lawsuits against the federal government, and the Bush White House gets lukewarm praise from one of its harshest critics: the Sierra Club.

ALLEN MATTISON, SIERRA CLUB: This is certainly a step in the right direction.

WALLACE: Bush aides say the agreement is not politically motivated and that the administration has the best interest of the environment in mind. But it does come as Mr. Bush steps up efforts to improve his environmental image showing his love of the outdoors on his Texas ranch and talking up his push to prevent forest fires.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I know there's some in our country that want to just, you know, let the forests fall apart. We're not going to let that happen in this administration.

WALLACE: But environmentalists are skeptical, especially as they await the administration's decision expected next month whether to tighten restrictions on air pollution from power plants.

MATTISON: I think President Bush is trying to hang a green veil to hide a cesspool of polluter giveaways.

WALLACE: Still, political observers say the president does have a problem with sagging approval of his handling of the environment.

STUART ROTHENBERG, ROTHENBERG POLITICAL REPORT: I think clearly, the bottom line of this is politics. The administration knows they're weak on the environment, they've been on the defensive. And even the president acknowledges they've made mistakes in that area, at least in how the issue has been presented to the American public.

(END VIDEOTAPE)

WALLACE: And some analysts say there is a reason for concern with most voters favoring Democrats over the president and congressional Republicans when it comes to handling the environment, an issue that could play somewhat of a role in the 2002 and 2004 elections -- Judy.

WOODRUFF: All right, Kelly Wallace at the White House.

And we are now joined by Interior Secretary Gale Norton, who played a key role in coming up with this endangered species agreement.

Madame Secretary, I know you were listening to Kelly Wallace's report. How much was politics a part of this decision?

GALE NORTON, U.S. INTERIOR SECRETARY: Well, this actually is something that has concerned us for a long time and a problem that we've been working to solve. We want to be sure that in our endangered species listing programs that we have science and the biology and the needs of the species helping us prioritize instead of just the accidents of court deadlines. And we found common ground with the people who've been involved in litigation, that all of us really want to see us deal with the needs of some of the species that have some emergency situations.

WOODRUFF: Any pressure from the White House to get this done?

NORTON: Not at all. This is something that is part of ongoing responsibilities for doing the job to take care of endangered species.

WOODRUFF: Explain for us, Secretary Norton, what this accomplishes and what does it avoid. What would have happened if you hadn't reached this agreement?

NORTON: We had the problem of so much of our activities in listing new species to be on the endangered species list being driven by court orders. And those, you know do...

WOODRUFF: Because outside groups were suing the government to say, you must do something to protect this species?

NORTON: And they certainly have the right to do that. But the concern was that some other species were falling through the cracks that had really serious needs. And so this allows us to go forward with emergency consideration for some species that everyone agrees need to be put on the top priority list.

WOODRUFF: There were a number of people commenting in reaction who said they were surprised that this happened, given the fact that you came into the administration with many environmentalists skeptical about you, and how much you really cared about their issues. What do you say to those people today?

NORTON: I've always felt that we could find common ground. And there are a lot of areas that we do have agreements on environmental issues and by being willing to sit down and work with people to find solutions to those things we can. And I think this is an example of that.

WOODRUFF: So if I were to ask you: Have you moderated some or have they moderated some, what would the answer be?

NORTON: Well, I think we've all continued with our existing goals of trying to use the Endangered Species Act to help threatened and endangered species and to recover the species. There were some disagreements in the courts about how exactly that should be done, but we've been able to put those disagreement aside and work on the end result.

WOODRUFF: Let me quote to you something from one of the leaders of the National Association Of Home Builders who said he's disappointed that the administration, while coming to this agreement, didn't do anything about reforming the Endangered Species Act itself. He said the Fish and Wildlife Service hasn't been working on the fundamental flaws of the act and how to make it better. What do you say to that?

NORTON: There are a lot of things that can be done without getting into the conflicts of the Endangered Species Act and whether that should be changed to try to encourage cooperation on endangered species. We have a program that basically will work with landowners, with farmers and ranchers and so forth to enhance habitat on their property to provide some incentives for them to do that, so that we have people with a positive attitude toward having endangered species on their property instead of the great fear that often strikes people today.

WOODRUFF: Bottom line, are endangered species today in a more protected state as a result of this agreement, or is this just a holding pattern?

NORTON: Well, this is a short-term action that allows us to deal with some emergency situations. We still want to work on some things that for the long run will get us toward a more cooperative approach on endangered species and toward really trying to help us recover species.

WOODRUFF: And let me just finally ask you again about the politics of this. You heard in Kelly Wallace's report some in the environmental movement, even analysts like Stuart Rothenberg we just heard saying the administration has at the very least a perception problem in the environmental community. Where is that going? Do you think it's gotten any better? Is the administration aware of it?

NORTON: I think today's action is an example of the way in which we want to work with people to show that a cooperative approach, that sitting down with people to find common ground is something that really can work in environmental issues. And I think people are going to continue to see that kind of a positive approach have an impact.

WOODRUFF: All right, the words of the interior secretary herself, Gale Norton. Thank you very much.

NORTON: Thank you.

WOODRUFF: We appreciate it. Good to see you.

NORTON: Good to see you.

WOODRUFF: All right. And INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Now we turn to Congressman Gary Condit's political fortunes. Condit is preparing to face his colleagues again when Congress reconvenes next week after his widely criticized round of media interviews. Meantime, some members of Condit's staff are preparing for their turn before the cameras when they appear on CNN's "LARRY KING LIVE" this evening.

Our Bob Franken is outside Condit's office in Modesto, California; our Kate Snow is here with me on Capitol Hill. And Bob, to you first. What is the media strategy here? We've had a succession of interviews. What's it all adding up to?

FRANKEN: Well, it's adding up to the congressman looking for some surrogates in the hope that they can do a better job on television than he's done. And the reviews on Chad Condit, who appeared on "Larry King Live" Monday night, suggests that the son was better than the father at doing television interviews, that he was very effective, seemed more relaxed. Of course, the stakes aren't quite as high for him.

So, in any case, the thing that's interesting is that you have a congressman -- and there are lots and lots of people speculating that he's trying to decide between resigning and not running for reelection. You have a congressman who still is out there fighting, leaving an impression -- and all of this is impression -- that before he makes any decision about his political future, he wants to fight every way he can.

Now tonight, he's going to be presenting members of his staff. For the most part, they've been quite reclusive, unwilling really to be involved in any sort of public discussion. Of course, many people criticize the congressman for sending his staff out to lie about his relationship with Chandra Levy, a relationship that he's never admitted publicly, by the way, that police sources say he did admit to investigators.

Among staff members who will be participating in the interview is Mike Dayton, who is the person who heads the Washington office of Congressman Condit, and the person who drove the congressman the night that his apartment was searched at his invitation, drove him a few hours before to a place near his apartment in Alexandria, Virginia, where a watch box was thrown away, according to sources, a watch box that contained a gift from a former staffer who has since told investigators she too had an affair with the congressman -- Judy.

WOODRUFF: All right, Bob.

And now, let's turn to Kate Snow here at the Capitol.

Kate, while all that's been going on, the California state legislature has been working hard based on the latest census to come up with new district lines in the state of California. What's happening with regard to Condit's district?

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Right. And most states do that every 10 years. They take another look at the congressional lines. California, of course, one of the most complicated because they have so many districts in that state. We understand the state assembly and the state Senate are working on their maps. And I'm told by sources that they will likely be out by Saturday at this point.

I'm also told by sources that they may now just have one single plan, and everyone, essentially Democrats in control of both the Senate and the assembly in California, would agree to that plan sort of ahead of time before they even vote on it. What it will look like? We don't know exactly, but we do know from the state senator who's been somewhat in charge of this effort that he believes they're going to move the line on the northern part of Gary Condit's district.

They're going to add in some more Democrats from a nearby town called Stockton. Those would be likely Democratic voters, mainly Hispanic, largely Hispanic, and people, we should point out, that don't know Gary Condit all that well; they've never voted for Gary Condit before. And so the way this is being seen is that it may hurt Gary Condit because these are voters that will only know of him through television, through his relationship with Chandra Levy. The state Democratic chairman, Judy, tells me that these plans were under way well before Chandra Levy and this case came up. They were always thinking about bolstering that district, because it is a very swing district right now.

But he also points out that given everything that has happened, it's going to be a tough race for Gary Condit, and he may even face a primary challenge before he even gets to a general election if he chooses to stay in.

WOODRUFF: From another Democrat.

SNOW: Right.

WOODRUFF: All right. Kate Snow here at the Capitol and Bob Franken out in Modesto, thanks to you both.

In these programming notes, as we did note earlier, Congressman Gary Condit's top aide Mike Dayton and four other members of his staff will be the guests tonight on "LARRY KING LIVE." That's at 9:00 p.m. Eastern. And they will be followed by a "CNN TONIGHT" special report: The political future of Gary Condit. That's at 10:00 p.m. Eastern.

A presidential holiday deep in the heart of Texas. Bill Schneider on Mr. Bush's working vacation, and whether it worked out as he had planned.

(COMMERCIAL BREAK)

WOODRUFF: President Bush returned to Washington today, ending his 26-day summer vacation. At times, it seemed the president was working more than playing. Here to tell us what that was all about, our senior political analyst, Bill Schneider -- Bill.

SCHNEIDER: Well, you remember President Clinton liked to play golf, but Dick Morris advised the president that his target constituency, that was under 40 males, preferred to go camping, so off Clinton went to Wyoming.

Now, President Bush also used his 26-day, quote, "working vacation," to send a political message, but was it the message that he intended to send?

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): President Bush called it his "home to the heartland" tour.

BUSH: I have been on what they call a "working vacation." I've been at our place in Crawford, Texas, and then I've been traveling out of the place to go to what I call a heartland tour.

SCHNEIDER: The idea was to say, "this president is not in a Washington bunker, he's out there with real people." Of course, it didn't always work out the way it was supposed to.

BUSH: You know where I'm from?

UNIDENTIFIED MALE: Washington, D.C.!

BUSH: That's right, right now. But guess where I was raised?

SCHNEIDER: Part of the idea was to show a contrast with Bill Clinton. Clinton was totally driven by politics. Bush's message? I'm not like that.

BUSH: The good thing about democracy, if people like the decisions you make, they let you stay. And if they don't, they'll send me back to Crawford. Isn't all that bad a deal, by the way.

SCHNEIDER: This president has a life.

BUSH: I love the nature. I love to get in the pickup truck with my dogs and, you know, as the sun is setting, go look for game.

SCHNEIDER: Clinton never owned a home. This president has roots.

BUSH: We find it really relaxing to sit on the porch with buddies and just shoot the breeze.

SCHNEIDER: Clinton was also a striver. He liked to vacation on Martha's Vineyard, which is sort of a summer camp for strivers, rubbing elbows with the rich and famous.

No one has ever called George W. Bush a striver. That's a problem. The opposite of a striver is a slacker. Texas is slacker heaven. When word got out that President Bush was taking a month-long vacation, polls showed most voters resented it -- I don't get a month off.

He became the target of late-night jokes.

(BEGIN VIDEO CLIP, "THE DAILY SHOW")

JON STEWART, HOST: I'm on vacation! I've got an eight-iron to break in.

(END VIDEO CLIP)

SCHNEIDER: So President Bush had to adjust the message.

BUSH: So, it's just like I moved my office from the Oval Office right out here to Crawford.

SCHNEIDER: Crawford officially became "the Western White House." It's where President Bush gave his first televised speech directed to the American people, on stem cell research. He signed bills. He made appointments. He kept on top of world affairs. With all the news about the economy getting shaky, people need to see a president who's fully in charge.

In the end, President Bush decided not to break Richard Nixon's record for the longest presidential vacation in modern history.

(END VIDEOTAPE)

SCHNEIDER: Today's "Washington Post" quotes a Bush ally, Governor Tom Ridge, a Republican of Pennsylvania, as saying: "People know he didn't take a vacation from work. He just took a vacation from Washington." The president hopes that's what people know -- Judy.

WOODRUFF: All right, well, we're here in Washington, Bill.

SCHNEIDER: And it's lovely.

WOODRUFF: It is lovely. Thank you. Especially in late August.

SCHNEIDER: Exactly.

WOODRUFF: Thanks.

The British National Party, accused of being racist. Well, now, questions are being raised about that party's connections here in the United States. We'll have a live report.

(COMMERCIAL BREAK)

WOODRUFF: It's name: The British National Party. You may not have heard of it, but some say it's at the center of racial turmoil in Britain. And now, there are strong indications that money may have been illegally raised for the party here in the United States. CNN's Sheila MacVicar has been looking into the party's operations, both in this country and in Britain, and she joins us now in Atlanta. Hello, Sheila.

SHEILA MACVICAR, CNN CORRESPONDENT: Hello, Judy. The British National Party is on the extreme right wing of British politics. It's long been accused of being a racist party. But this story is really about the money, about money raised here in the United States to apparently fund the party's activities in the U.K.

(BEGIN VIDEOTAPE)

MACVICAR: Nick Griffin no longer talks about deporting all nonwhite people from the U.K. The British National Party leader now tries to sound just a little more conservative than some conservatives.

NICK GRIFFIN, BNP LEADER: Multiracial society isn't working.

MACVICAR: The party's faithful may have given up fascist salutes, but their leader has called the Holocaust a hoax. Mr. Griffin has a criminal conviction for inciting racial hatred.

GRIFFIN: This party is one and one.

MACVICAR: Under his leadership, the British National Party has grown.

GRIFFIN: We're not a racist party.

MACVICAR (on camera): You are an all-white party.

GRIFFIN: Yes.

MACVICAR: And that is a condition of membership, you must be white.

GRIFFIN: You must be of British or European descent, yes.

MACVICAR (voice-over): This summer, Britain's northern cities of Oldham and Burnley boiled with hatred and fear. Animosities between Asians and whites spilled onto the streets in a terrible outburst of violence.

GLYN FORD, ANTI-NAZI LEAGUE: There was racial tension about, and the BNP went in and aggravated that rather deliberately. And the, if you want, reap the results.

MACVICAR: The best ever results in a British general election for the BNP.

UNIDENTIFIED MALE: Griffin, Nicholas John, British National Party, 652.

(CHEERING AND APPLAUSE)

MACVICAR: In Oldham, while Nick Griffin lost, he did win 16 percent of the vote. Griffin mocked election officials as fearing more trouble. They would not let him or other candidates speak from the platform that night.

In a country where election campaigns are relatively cheap, just a few thousand pounds can make a big difference.

FORD: They've got a rather slick operation for an organization with not more than a thousand members, so they've got some fairly rich benefactors somewhere who are pumping resources into the BNP.

MACVICAR: Some of those benefactors are here in the United States. Operating from the Virginia suburbs of Washington, D.C., an organization called the American Friends of the British National Party.

In Montgomery, Alabama the southern poverty law center has spent more than a year investigating British National Party activities in the United States. It's conclusion...

MARK POTOK, SOUTHERN POVERTY LAW CENTER: This party is in the thick of some very ugly things in England, and that is what Americans are paying for.

MACVICAR: Meet British citizen Mark Cotterill. Since January 1999, he's organized meetings of the American Friends of the BNP.

POTOK: Mark Cotterill is a tried and true Neo-Fascist.

MACVICAR: Mark Cotterill calls himself a nationalist, but his associates are a who's who of American extremism. Former Ku Klux Klan leader David Duke, neo-Nazi William Pierce, author of "The Turner Diaries," the book that inspired Oklahoma City bomber Timothy McVeigh. And Don Black, owner of the first racial hate site on the Web.

MARK COTTERILL, AF/BNP: So can anybody put $100 in?

MACVICAR: Most importantly, Mark Cotterill raises money.

COTTERILL: Can anybody else put 75 in?

MACVICAR: Some of it, but not all, at meetings like this one videotaped by Cotterill's organization.

POTOK: Based on meetings, based on checks or donations they had actually talked about on their publications, and based on a case or two where we had actually seen a check, he had gotten a minimum of $85,000.

MACVICAR: Back in the U.K., no disagreement from party leader Nick Griffin.

(on camera): One organization estimates the American Friends of the British National Party has raised in excess of $85,000.

GRIFFIN: Yes.

MACVICAR: Donations, $10,000 at a time. Six-thousand, $16,000. Have you seen that kind of money here in the U.K.?

GRIFFIN: We've seen some very useful donations, yes.

MACVICAR (voice-over): But the sum raised may be a lot more than that useful $85,000. This man is a donor and knows a lot about Mark Cotterill and his operations.

UNIDENTIFIED MALE: The big money is raised behind the scenes and dispersed from behind the scenes.

MACVICAR (on camera): Do you think that the total raised for the British National Party here in the United States, over $100,000?

UNIDENTIFIED MALE: Yes, not quite touching on 200 for the time period you mentioned. MACVICAR: Since he came to Washington, Mark Cotterill has done everything that Nick Griffin and the BNP could have asked of him. He's brought together some of the most extreme elements of the American right wing. He's made friends with wealthy donors. He's won support for his party.

But one thing Mark Cotterill never did was register his activities with the American government.

(voice-over): The foreign agents registration act, FARA, demands that people raising money for foreign political parties register with the U.S. Justice Department. It's a felony not to. But look through their extensive files, and you won't find the names of the American Friends of the British National Party or Mark Cotterill.

BILL SHINGLETON, CENTER FOR RESPONSIVE POLITICS: And the people Mujahideen are an organization of Iran, which is actually a terrorist organization, has registered under FARA. And so it's very unusual for someone not to do it, and obviously, that leads to all sorts of questions about why they would not do it.

MACVICAR: One reason perhaps: the kind of information you'd have to tell the government, lists of meetings, of donors, even those who gave just $50.

(on camera): If you were someone looking at this, you could get a picture of who's giving money?

UNIDENTIFIED FEMALE: Yes.

MACVICAR: Invited by Mark Cotterill to his apartment, we found he knew about the law, had the paperwork right there. And he told us two years ago he'd even been to the Justice Department.

COTTERILL: I went down to find out where I stood.

MACVICAR (on camera): You told them you were an American representative, an American-based representative of a foreign political party?

COTTERILL: That's correct.

MACVICAR: That you were raising money on behalf of that foreign political party and the Department of Justice, and you didn't need to register?

COTTERILL: That is correct.

POTOK: In the opinion of all of our lawyers here make perfectly crystal clear that in fact, Mark Cotterill is in violation of the foreign agents registration act. And we certainly expect that the Department of Justice will act on it.

MACVICAR: That may not be the end of legal problems for Mark Cotterill or the British National Party. Their legal problems may go all the way back to the United Kingdom. British electoral law now restricts foreign donations from individuals to under 200 pounds, that's about $280. And British electoral law demands that political parties register all larger donations they receive on a weekly basis during an election campaign.

UNIDENTIFIED MALE: Mr. Nick Griffin.

(APPLAUSE)

MACVICAR: Here's Nick Griffin speaking to an American audience in May in Port Lee, New Jersey, on one of Mark Cotterills' own videotapes.

GRIFFIN: Perhaps there's one or two people here who have lots and lots of money. If so, that's great, and please, can we have some of it?

MACVICAR: Just days after the British election was called, Mr. Griffin had embarked on a fund-raising tour of the United States.

(on camera): It's very clear that there was money raised on behalf of the party on that trip, correct?

COTTERILL: Yes, people gave Nick Griffin checks to take back, yes.

MACVICAR: Did you use American-raised funds in this last election?

GRIFFIN: Yes, certainly, but only a few thousand pounds.

MACVICAR (voice-over): Check the registers of the British Electoral Commission, and there are no records of any donations during the election campaign when Mr. Griffin was in the United States. And as for compliance with the 200-pound foreign donation limit, this donor says he witnessed Mark Cotterill's strategy to get much larger cash donations to Britain.

UNIDENTIFIED MALE: Mr. Cotterill will convene a meeting of maybe 10 or 12 attendees.

MACVICAR (on camera): These are people he knows?

UNIDENTIFIED MALE: People he knows, yes. And he will dole out money to them and they will then write a check in the equivalent amount.

MACVICAR: That sounds an awful lot like money laundering.

UNIDENTIFIED MALE: It could be called that.

MACVICAR (voice-over): Mark Cotterill showed us his ledgers. He denies ever receiving large donations, cash or check, or being involved in money laundering.

(on camera): Was there ever an instance when you gave people cash and asked them to write checks to the BNP in exchange for that cash?

COTTERILL: No, never.

MACVICAR (voice-over): He told us he'd held only three fund- raising meetings a year, but the group's own publication detailed 12 meetings, and the Southern Poverty Law Center says it has documented 20 meetings in just over two years.

All of this could mean an investigation by the UK electoral commission.

CHRISTOPHER WELFORD, UK ELECTORAL COMMISSION: If we were aware of the situation, we would, in accordance with the act, investigate. The act gives us powers of both civil and criminal enforcement.

MACVICAR: Just days after we visited Mark Cotterill, he sent out this e-mail, resigning as head of the American Friends of the BNP for what he said were "personal and political reasons." He did not elaborate.

(END VIDEOTAPE)

MACVICAR: Judy, the Southern Poverty Law Center, of course, as we said, has sent that letter to Attorney General Ashcroft and they have yet to have any response -- Judy?

WOODRUFF: Well, Sheila, given all that, what is, if anything, the Justice Department doing about all this?

MACVICAR: Well, we submitted some questions to the Justice Department a couple of days ago. They promised to get back us to yesterday. We've called them, I think, three times today, and they've not responded to any of our calls. We just don't know at this point what the Justice Department is doing about it. But it seems that not only is there the prospect of an investigation here, but also the prospect of an investigation in the U.K.

WOODRUFF: All right, Sheila MacVicar. And we know that you will continue to follow this story. Thanks very much.

MACVICAR: Thank you.

WOODRUFF: It's so tiny it has only one stop light, and now the reporters and camera crews are pulling out. Will the town President Bush calls home ever be the same again? We'll hear from John King in a moment.

(COMMERCIAL BREAK)

WOODRUFF: All good things come to an end, including President Bush's vacation. Much of the time he was away from Washington, the president was home on the range in Crawford, Texas. Our John King, now, with a look at what has changed in that small town, and what hasn't.

(BEGIN VIDEOTAPE) KING (voice-over): This is the summer that put tiny Crawford, Texas, on the map. And there are unmistakable signs of change. Crawford never had a gift shop before, for example, but its most famous resident is a big draw.

The Brown Bag opened three months ago and is fast becoming a favorite of those looking for proof they visited the town the president calls home.

UNIDENTIFIED FEMALE: You are going to have to tell me, because it's got either the Washington cancellation or the Crawford...

UNIDENTIFIED FEMALE: We want Crawford.

KING: Kathy Nagel prides herself on stocking up for the locals, too, gifts for birthdays and special events, tastes of Texas that have nothing to do with the president.

UNIDENTIFIED FEMALE: We've got Prickly Pear Jelly, which doesn't grow all over the United States, but that's a special little treat.

KING: But she knows who made all this possible and thinks she can answer the question asked by so many who have never passed through.

(on camera): What do you say to people, including our bosses sometimes, who say, what does the president see in this place of Crawford, Texas? Why would he spend the summer in a place so hot?

(LAUGHTER)

KATHY NAGEL, OWNER, THE BROWN BAG: Hot it is, but it's got special qualities, and I know some of you all have had the opportunity to go out on the ranch and see how beautiful it is, even though it is dry now. The land is really pretty, and I think it offers a great change of pace from Washington, D.C.

People wave when you drive by, and you know each other personally and there's just that small-town touch.

KING (voice-over): You won't see the president behind the wheel in Washington, or wielding a chain saw.

BUSH: I will miss Crawford, but I know I will be back here, and I think people have not got -- are beginning to realize that this is our home and I'm one of these guys who likes -- I'm a homebody. I like my home. I like my own bedroom. I like hanging out with my family and friends here.

KING: There's not much fancy in the place Mr. Bush calls home to the Western White House, one stoplight, a small stretch of storefronts, many of them vacant.

STAN NAGEL, OWNER, THE BROWN BAG: It's still -- when you go up and down the streets, reminds me of my childhood. It hasn't changed much. KING: The coffee station is combination gas station, restaurant and souvenir stand, a place where Dallas and Houston don't seem so far away anymore.

JENNIFER BARDIN, WAITRESS, THE COFFEE STATION: Yesterday, we had lots of people. A big group people. They were from Switzerland, Ireland and Britain. They went on tour at the White House and then they drove all the way down here just so they could try to see the president. It was pretty neat.

KING: So different all of a sudden, yet so much the same -- still a place where a little girl matters as much as the president, or more. Ranessa Grant needs a kidney transplant. Around here, enough said.

LOTTE BOSTICK, BAKE SALE ORGANIZER: We have had a full table full of things from -- I'm going to cry -- but it was full of baked goods, that all sold, and then it was full again. Everybody just pitches in and helps.

KING: Being a good neighbor is a point of pride here. And Crawford was home of the first Baptist church long before the first family came to town. So as much as some things have changed, the locals vow that others never will.

John King, CNN, Crawford, Texas.

(END VIDEOTAPE)

WOODRUFF: It's not really that different from Washington. We have a small town here, and it gets really hot in the summer. Just kidding. We will be right back.

(COMMERCIAL BREAK)

WOODRUFF: That's all the time we have for this edition of INSIDE POLITICS. But, of course, you can go online all the time at CNN's allpolitics.com, AOL keyword, CNN. Our e-mail address is: INSIDEPOLITICS@CNN.com. I'm Judy Woodruff.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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