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LOU DOBBS TONIGHT

Martha Stewart Demands a Retrial; Republican Congressman Accused of Abuse of Power

Aired January 29, 2004 - 18:00   ET

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

(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN ANCHOR (voice-over): Tonight, Democratic presidential candidates prepare to face off in a debate, but the Dean campaign suffers from growing financial problems and the abrupt departure of a top staff member.

In "Exporting America," a small community in Tennessee pays a terrible price after the town's biggest employer ships more than 1,000 jobs overseas.

UNIDENTIFIED MALE: Instant economic devastation for our community.

PILGRIM: In the Martha Stewart trial, the court proceedings come to a sudden halt. Stewart's attorneys demand a mistrial. Our senior legal analyst Jeffrey Toobin will give us his assessment.

And a powerful Republican congressman, Billy Tauzin, faces charges of abuse of power and conflict of interests for considering a job with one of Washington's most influential lobby groups.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, January 29. Sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, Democratic presidential candidates are one hour away from their first debate since the New Hampshire primary. They will face off in South Carolina, one of the seven states holding primaries and caucuses next Tuesday. Front-runner John Kerry today won an endorsement of an influential congressman.

And Kelly Wallace reports from Greenville, South Carolina -- Kelly.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Well, Kitty, John Kerry heads into tonight's debate as the clear front-runner. And he and his aides know, this means he could face attack from some of his Democratic opponents.

As to what his strategy would be said, a top adviser I talked to a short time ago said, the same strategy he has been using all along, that he will take nothing for granted, that he will try and focus on issues such as health care and the economy, but, if attacked, he will defend his record.

John Kerry facing a number of challenges, though. No. 1, he is trying to prove that he can win here in the South, not just in Iowa and in New Hampshire. And on that note, he got a major boost today winning an endorsement from Congressman Jim Clyburn of South Carolina, the state's most popular African-American lawmaker. And Kerry's advisers hope that Clyburn's backing will help the Massachusetts senator appeal to African-Americans, who could represent up to 50 percent of those turning out to vote on Tuesday.

And late today, word of another major endorsement, Democratic sources telling CNN that Michigan Governor Jennifer Granholm expected to endorse John Kerry as early as tomorrow -- Kitty.

PILGRIM: All right, thanks very much, Kelly Wallace.

Well, Howard Dean will take part in tonight's debate in Greenville, but he spent much of the day in Michigan. That state does not hold its caucuses until February 7. And Dean says he does not need to win any of the states holding contests on Tuesday to keep his campaign alive.

Candy Crowley reports.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): Five days until South Carolina, Delaware, Missouri, Arizona, New Mexico, North Dakota and Oklahoma. So Howard Dean is headed to Michigan?

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: The election is not going to be decided by pundits, and it's not going to be decided by polls. It's going to be decided by you.

CROWLEY: Down but defiant, Dean is taking the road less traveled but not the one he wanted. Faced with the possibility of getting blanked Tuesday, he is looking elsewhere to keep hope alive and resources intact.

DEAN: We're going to have to win eventually. But the question was, do we have to win on February 3? Of course we want to, but we don't have to. What we've got to do is amass as many delegates as we can. That's what we're going to try to do.

CROWLEY: Michigan and Washington hold caucuses a week from Saturday. Both have more delegates at stake than any of the Tuesday states. Dean, who's high-flying, well-funded campaign is down to its last couple of million, may not even put ads up in the Tuesday states, saving his resources where there is a chance of victory and a large cache of delegates.

(END VIDEOTAPE) CROWLEY: Now, the good thing is, every once in a while, the road less traveled does meet with some major thoroughfares. Dean went from Michigan here to South Carolina, where he will participate in tonight's debate.

Aides say that he will focus again on the differences between himself and his primary rivals, John Edwards and John Kerry, and that he will also bring up that he was the first one to stand against the war and try to persuade the audience and the voters here that they were late to the game -- Kitty.

PILGRIM: All right, thanks very much, Candy Crowley.

Well, Howard Dean was the Democratic's most successful fund raiser last year. He raised more than $40 million. Now he's running short of money.

Louise Schiavone reports from Washington.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Howard Dean's war chest, once loaded with Internet contributions, is suddenly near empty. Democratic media strategist Bill Carrick quipped, it could be one of the worst dot-com busts in event history.

BILL CARRICK, DEMOCRATIC MEDIA STRATEGIST: It's just such an extraordinary thing to have raised $40 million. And then, on the flip side, it's so extraordinary that the money is now gone.

SCHIAVONE: Going into January, Dean led the Democratic pack with $41 million, compared to John Kerry's $28.5 million, Wesley Clark's $14.5 million, and John Edwards, who had raised $20 million by mid January. Now Dean is asking hundreds on his staff to go two weeks without pay.

EVAN TRACEY, CAMPAIGN MEDIA ANALYSIS GROUP: Timing is everything. The Dean sort of media frenzy, you know, probably peeked too early. Again, it really didn't leave him anywhere to go when he didn't meet his expectations in Iowa.

ROBERT WALKER, FORMER U.S. CONGRESSMAN: Particularly if you're a front-runner, you run into a crisis. And I think they did in Iowa. The question is how you handle it. And it appears as though their problem is that they have run out of money now. And that makes it very difficult to handle the crisis.

SCHIAVONE: Where did the money go? The Dean campaign spent aggressively on advertising in nine states, almost $9 million through the third week of this month, compared to the current front-runner, John Kerry, who spent roughly $5 million. Most costly, says Gephardt's former adviser, has been Dean's staff and organizational overhead, which, so far, appears to have soaked around $30 million.

(END VIDEOTAPE) SCHIAVONE: Kitty, Dean's campaign says that, over the past few days, thousands of supporters have been contributing an average of $59 each. But it's not clear that these new contributions will add up to a victory next Tuesday -- Kitty.

PILGRIM: All right, thanks very much, Louise Schiavone.

Well, President Bush has plenty of money for his campaign. Today, he went to New Hampshire to defend his handling of the economy and the war in Iraq.

Senior White House correspondent John King traveled with the president. And he reports from Merrimack, New Hampshire.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: The White House and the Republican Party launched a calculated offensive today against the Democrats and against the Democratic front-runner of the moment, Senator John Kerry of Massachusetts, on the two issues viewed as critical in the coming presidential campaign, the economy and national security.

The president dealt with the economy during a stop here in Merrimack, New Hampshire, just days after the Democrats moved out of this state to continue their primary fight, the president coming into a state he narrowly carried in the last campaign making the case that the economy is beginning to recover and that the Democrats would stop the recovery by raising taxes. Now, all of the major Democrats have said they would repeal some or all of the 10-year Bush tax cuts. The president says that would be a devastating mistake.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We need to keep this money in the hands of the people of America. Listen, the government has got plenty of money. And it needs to stay focused and principled. We need to be wise with the taxpayers' money. But it turns out, when you're trying to keep your economy going, the best way to do so is not through government spending, but it's through the spending of thousands of individuals across our economic spectrum.

KING: The Bush-Cheney campaign is not ready to say just yet that they believe Senator Kerry has the nomination locked up. But they believe it is increasingly likely the Massachusetts Democrat could be the Democratic nominee.

So, back in Washington, the Republican National Committee Chairman Ed Gillespie launching a broad offensive, saying, if you look at Senator Kerry's voting record in the United States Senate, in his view and in the view of the Bush-Cheney campaign, Senator Kerry is not ready to lead the United States in a post-9/11 world.

ED GILLESPIE, REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: He voted for the use of force in Iraq, then later tried to say it was a vote to threaten the use of force, and then ultimately declared himself an anti-war candidate. Ladies and gentlemen, John Kerry's record of service in our military is honorable, but his long record in the Senate is one of advocating policies that would weaken our national security.

KING: The attacks on Senator Kerry's national security record will continue tomorrow in Washington. Ken Mehlman, the manager of the Bush-Cheney campaign, will deliver a speech saying that Senator Kerry has voted against every significant weapons programs now being used by the U.S. military in Afghanistan, Iraq, and the broader war on terrorism.

The Bush White House has said for months that, at some point, it would decide to get more aggressive in confronting the Democrats. Circle this date on the calendar as the day the effort began.

John King, CNN, Merrimack, New Hampshire.

(END VIDEOTAPE)

PILGRIM: Howard Dean's funding problems are just one issue that we will discuss tonight with Ron Brownstein. And Ron is a political columnist with "The Los Angeles Times" and a CNN political analyst. And he joins me from Greenville, South Carolina.

Nice to see you, Ron.

RON BROWNSTEIN, CNN POLITICAL ANALYST: The place to be.

(LAUGHTER)

PILGRIM: This business about Dean and the money, how serious is this? What is your assessment?

BROWNSTEIN: Serious.

First of all, who would have thought that Howard Dean would ever have anything in common with John Connally. But John Connally, the conservative Texas governor, is the only candidate since 1980 in either party to raise the most money in the year before and then not win his party's nomination. He did that as a Republican in 1980.

What has happened to Dean is that he tried to run a national campaign from the outset. He built organizations and he spent a lot of money on television, not only in Iowa and in New Hampshire, but states down the road, these states that are voting on February 3, as well as Michigan, Wisconsin, Washington, places like that.

What he is finding is, his early spending is sort of crumbling, the value of it is crumbling to him, as he reels from the results in Iowa and New Hampshire. And the campaign suddenly is low on cash just when it needs it most.

PILGRIM: Well, he has also decided not to do any TV ads in the seven states that the contest is on February 3. This is an enormous handicap, is it not?

BROWNSTEIN: Right.

Look, they are telling their supporters to brace for the possibility,, even the likelihood, that they will be shut out on February 3. They want to try to make more of a stand in some of the states that follow, Michigan and Washington and Wisconsin, where they have put a lot of effort and they believe they have a lot of support. It's a very dangerous situation for him. And may be that he has no other choice, though.

PILGRIM: Let's talk about the debate in South Carolina. Is it an exercise in beating Kerry at this point?

BROWNSTEIN: Look, I think these candidates do need to develop an argument against John Kerry.

One thing was very clear in New Hampshire. If you don't give people a reason to vote against the front-runner, you know what? They are going to vote for the front-runner. The candidates really failed to make an effective argument against John Kerry in New Hampshire. And the momentum from Iowa carried him right through to victory.

They're in the same position tonight. If they can't begin to define a reason for voters to move away from John Kerry, they are at a risk of him virtually running the table, if not sweeping all the states on February 3. So I do think this is a very important evening for them. They have got to begin to develop a meaningful contrast against him. After really planning throughout 2003 to run a campaign against Howard Dean, all of a sudden, they have got to find a way to run one against John Kerry.

PILGRIM: Also, John Edwards, born in South Carolina, does he really need this state or can he have sort of mediocre showing?

BROWNSTEIN: No, it's do or die, and he said so.

If John Edwards can't beat John Kerry here, it's not really clear where he is going to do it. He has spent heavily here. He has spent a lot of time here. He has argued that he is a candidate best suited for the South. Look, the stakes here are very high, not only for John Edwards himself, but for the entire field.

It's not good news for anyone else other than John Kerry if John Kerry, in fact, wins here. It would give him a very powerful symbol to show that he has appeal across the party. Really, Wesley Clark and Howard Dean have a stake in John Edwards winning here, as John Edwards does in Wesley Clark beating Kerry in Oklahoma. It isn't good for anybody if Kerry sweeps the field, sweeps the board on Tuesday. It will make it very hard for anyone else going forward.

PILGRIM: Well, a very interesting night to come. Thanks for joining us tonight, Ron Brownstein. Thanks, Ron.

BROWNSTEIN: Thanks to you. OK.

PILGRIM: Still to come, an explosion in Afghanistan kills seven American soldiers. Jamie McIntyre will report from the Pentagon.

Plus, National Security Adviser Condoleezza Rice today defended the war on Iraq. Democratic Senator Carl Levin will give me his judgment on the failure to find weapons of mass destruction in Iraq.

In "Exporting America," the terrible cost to one American community of cutthroat competition from cheap labor markets overseas.

And Californians are outraged by Wal-Mart's plans to build dozens of new stores in state -- that story and a great deal more.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: In "Exporting America" tonight, a small rural town that has been devastated by American trade policies. The people of Celina, Tennessee, have experienced firsthand the cost of free trade.

And, as Bill Tucker reports, they have some tough questions for the lawmakers in Washington.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Twelve hundred people once worked in this Oshkosh plant in Celina, Tennessee. Now only 15 do. The town's streets, once full, are empty, shops closed and locked, the jobs sent out of the country to Mexico and Honduras. The laid-off workers left behind are struggling.

JANICE ASBERRY, LAID-OFF WORKER: I can't pay my health insurance, because I have to pay my rent.

TUCKER: And there's a lot of uncertainty.

LINDA SCOTT, LAID-OFF WORKER: I work for altogether 29 years and a half. And then, here I am. I started work when I was 17. And here I am 55, no job.

TUCKER: In its defense, Oshkosh says it faces a harsh reality of its own when it comes to competing with companies that pay its workers $1 an hour.

KEN MASTERS, FORMER OSHKOSH VICE PRESIDENT OF MANUFACTURING: It's either you play the game or you compete with them and the rules that are set before you or you just have to get out of the business. That's plain and simple.

TUCKER: Today, the unemployment in Celina is 15.5 percent. And per capita income has fallen to $13,000.

LUKE COLLINS, COUNTY EXECUTIVE, CLAY COUNTY, TENNESSEE: I feel like our leaders in Washington either do away with NAFTA and preferred trade status with China or they need to do something to address these communities that have been left behind. I know the president has an initiative, No Child Left Behind. I wish he'd get another initiative, no community left behind.

TUCKER: Clay County, though, is not sitting around waiting for that initiative. (on camera): While this is a story about a town abandoned by American companies in search of cheap foreign labor, this is also a story about a town that is fighting to get back up on its feet.

(voice-over): The county has posted a Web site and the Chamber of Commerce is aggressively selling the county to outsiders.

RANDALL KILLMAN, EXECUTIVE DIRECTOR, CLAY CITY CHAMBER OF COMMERCE: We're trying to be very aggressive about whatever it takes to try to promote Clay County and try to bring those jobs back.

TUCKER: The biggest success story may be the most surprising, a call center that handles billing for hospitals. Health care management resources just expanded to Celina and now employs 120 people. The jobs don't pay as much as the factory jobs, but they do carry benefits. And the company couldn't be more pleased with the experience.

DENNIS SWARTZ, PRESIDENT, HEALTH CARE MANAGEMENT RESOURCES: Great work ethic. I put these people up against anybody anywhere. And my goal in life is really to set up a third center, a fourth center, a fifth center in areas just like this.

TUCKER: And that's great news, but the people of Celina say they are still wondering why American policy is encouraging companies to export jobs, at the expense of American workers.

Bill Tucker, CNN, Celina, Tennessee.

(END VIDEOTAPE)

PILGRIM: Labor Secretary Elaine Chao has promised jobs, jobs, jobs to Americans. But, tonight, she has taken that mission to an unusual place, Iraq. Secretary Chao today toured a women's center in Hillah, Iraq. Yesterday, she opened an employment and training center in Baghdad. The topic of American jobs did not come up on the trip.

Now, here in America jobs remain a major topic of concern for workers across every sector of the economy. In California, grocery workers have been on the picket line for almost four months. One objection, Wal-Mart plans to build 40 new grocery superstores.

Casey Wian reports tonight on some Californians who say to Wal- Mart, not in our backyard.

(BEGIN VIDEOTAPE)

KAREN PEJI, HOMEOWNER: I should have been notified by my builder.

CASEY WIAN, CNN CORRESPONDENT (voice-over): Karen Peji's kitchen is the war room in a long-shot battle against the world's largest retailer. Like many Americans, Peji and her neighbors shop at Wal- Mart, but they don't want one in their Hemet, California, backyard.

And the plans for a supersized Wal-Mart here are almost literally in their backyard.

PEJI: This is my development. The hours, the trash, the oil changes, the mechanical work that is so close to our homes and our children, the air quality, the rodents, the noise, the delivery truck times that will be coming right along here right where these white trucks are.

WIAN: Sixty miles away, the developer of an old landfill proposed another Wal-Mart supercenter. A more ideal location? The city council said no.

ROGER HERNANDEZ, WEST COVINA, CALIFORNIA COUNCILMAN: There's people here that have livelihoods that are dependent on good-paying jobs. Wal-Mart presents a risk to those good-paying jobs.

WIAN: While Wal-Mart sees opportunity in California, opposition is growing. Alameda County passed a law to keep the supercenter format out. Wal-Mart is suing.

Los Angeles is also studying the issues. Wal-Mart paid the Los Angeles Economic Development Corporation $65,000 to study the economic impact of superstores. Not surprisingly, the report concluded that low prices trump concerns over job quality.

GREGORY FREEMAN, L.A. COUNTY ECONOMIC DEVELOPMENT CORPORATION: If you want to look at sort of a social impact, if you're a low-income family and you're spending -- the largest item in your budget most likely, after housing, is food. And if somebody can lower the cost of that food for you, then you're going to be helping literally hundreds of thousands of people.

WIAN: The study found that supercenter wages are from $2.5 to $3.5 an hour lower than those of unionized grocery workers.

(on camera): And that's a big factor in California's four-month- old supermarket strike and lockout. Supermarket chains are trying to hold down costs in an effort to compete against the Wal-Mart supercenters that will soon open in their backyards.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: Well, that brings us to the topic of tonight's poll question. Do you want a Wal-Mart in your neighborhood, yes or no? Cast your vote at CNN.com/Lou. And we will bring you the results later in the show.

Coming up next, a deadly explosion in Afghanistan. We'll have the latest on what that means for American forces there.

And a powerful Republican congressman is now at the center of a growing controversy. It involves the pharmaceutical industry, Medicare's prescription drug benefits and $1 million salary.

Plus, the case against Martha Stewart. A federal judge stops the trial just before the government's star witness was to take the stand.

(COMMERCIAL BREAK)

PILGRIM: It was a deadly day for American troops in Afghanistan. Seven soldiers were killed in an explosion at a weapons dump about 60 miles from the capital, Kabul.

Senior Pentagon correspondent Jamie McIntyre is live at the Pentagon with the latest on that -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Kitty, at this hour, the U.S. military is saying that the circumstances surrounding that explosion remain unclear.

We do know that seven U.S. soldiers from the combined forces command in Afghanistan were killed. One is missing. And three U.S. soldiers and an interpreter were injured after the explosion that happened about 3:00 today. It happened around a weapons cache where the soldiers were working, about west of Ghazni in Afghanistan. The explosion occurred. The military is saying that it is not clear if the blast was accidental or whether it was triggered deliberately.

An investigation is under way, but, again, seven U.S. soldiers killed in that incident. There have been a number of attacks against U.S. forces in recent days, including a number of suicide attacks. And the military has seen a regrouping of some Taliban forces in some areas in Afghanistan.

Of course, the U.S. is gearing up for another offensive in the spring to try to root out the remains of those Taliban resistance and renew the search for Osama bin Laden -- Kitty.

PILGRIM: Jamie McIntyre at the Pentagon, thank you.

More violence in the Middle East today. A suicide bomber killed at least 10 people in Jerusalem. Nearly 50 other people were wounded. The attack came on the same day Israel and the Lebanese group Hezbollah completed a major prisoner exchange.

Matthew Chance reports from Jerusalem.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): Another day of bloodshed in this conflict, another bus bomb in the heart of Jerusalem. Police say this city alone has endured 28 suicide bomb attempts in 3 1/2 years. Some have been thwarted, not this time.

GIL KLEIMAN, ISRAELI POLICE: This suicide bombing was very powerful. We found parts of the roof on the bus in homes in the area, a roof of a private home. And our forensic team has had to sweep living rooms and bedrooms of homes in the area because of body parts and body fragments that were thrown into those homes.

CHANCE: As forensic teams picked through the wreckage, a Palestinian militant group, the Al Aqsa Martyrs Brigade, says it carried out the attack. The bomber, a policeman from Bethlehem, had written that he wanted to avenge killings of Palestinians in Gaza. He carefully chose this packed commuter bus in the morning rush hour.

(on camera): It is a devastating scene. The bus is now being taken away, spread debris, the explosion, over a wide area, all this on a day when Palestinian prisoners were being released from Israel's jails.

(voice-over): Released as part of a controversial prisoner swap between Israel and the Lebanese Hezbollah militia.

In the Palestinian territories, there was jubilation, as hundreds were freed. Here and in Lebanon, Hezbollah's popularity is surging. In Israel, though, the mood is anxious and somber. The ceremony is for three soldiers captured and killed by Hezbollah in 2000. They've now been returned, along with an abducted Israeli businessman and reservist.

Israel's prime minister says the exchange should not be misinterpreted.

ARIEL SHARON, ISRAELI PRIME MINISTER (through translator): The Israeli government will not allow any enemy or any terrorist organization to turn kidnapping and the taking of captives as something that we will put up with.

CHANCE: Still, many Israelis believe the prisoner swap will strengthen militant groups. The tragic events of the day will have done little to ease their concern.

Matthew Chance, CNN, Jerusalem.

(END VIDEOTAPE)

PILGRIM: Coming up next, two cozy for Congress? One of the most influential drug lobbies in Washington makes an attractive offer to a powerful congressman. We'll have the report from Capitol Hill.

Plus, defending the war in Iraq. The White House responds to criticism of its prewar intelligence on Iraq. We'll talk to one of the critics.

And a sudden halt in the Martha Stewart trial today. We'll have a live report from the courthouse.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The White House tonight is defending its decision to go to war in Iraq. And that is despite prewar intelligence that many critics now say was wrong.

National Security Adviser Condoleezza Rice today acknowledged that there are differences between what the White House knew before the war and what U.S. forces found in Iraq. She said, it isn't a surprise and more investigation is needed in Iraq. And Rice's comments came after the former U.S. Head weapons hunter in Iraq, David Kay, called pre-war intelligence a failure.

In Britain, a second top BBC official resigned today. Director general Greg Dike apologized for the BBC errors in some of it's reporting about the run up to the war in Iraq. Yesterday, an independent inquiry strongly criticized the BBC and its management. That inquiry cleared the Blair government of misleading the British people about the threat in Iraq.

Well, earlier I talked to Senator Carl Levin the ranking Democrat on the Arms Services Committee about intelligence questions in Iraq. I began by asking for his reaction to the White House's claim that more time is needed to search for weapons of mass destruction?

(BEGIN VIDEOTAPE)

SEN. CARL LEVIN (D), INTELLIGENCE CMTE: I think what the administration is engaged in is denial and delay of a very important investigation as to how is it possible the intelligence was so far off but equally important how is it possible the administration spokes people could be so absolutely certain that there was biological weapons and in specific places. That there were chemical weapons of certain tonnage in specific places. That they had reconstituted their nuclear program and all the other certainties they expressed. How was that possible. What was the intelligence that was based on because many of those statements went beyond what the intelligence community was saying?

PILGRIM: Do you think there was pressure put on the intelligence community? certainly it was David Kay's he's impression that there wasn't.

LEVIN: I don't think it was explicit pressure but I think there probably was a desire to meet the administration's desire to try to justify and to support its decision to attack Iraq and to do so on a very urgent basis without taking the time to put together an international coalition which was much broader than the one that went in.

PILGRIM: Do you think we should have an internal review of the intelligence gathering practices?

What steps would you take, now, at this point?

LEVIN: Well, something that Dr. Kay said yesterday was really startling and I think will change the whole dynamic around here. What most Democrats have wanted was an outside independent commission to be appointed, take it out of the Congress, take it out of any politics and put it in the hands of an independent commission. That has been rejected now twice by votes of the United States Senate. And we're going to try that again because yesterday the Dr. Kay, who is the administration's appointee said there should be an outside investigation and that is critically important, it seems to me.

The Senate Intelligence Committee is about to finish their investigation.

PILGRIM: You do not think that's sufficient?

LEVIN: They are looking at half the picture. What the Intelligence Committee is not looking at the statements made by the policy makers, the administration and exaggerations with which they described the intelligence that they did get and that's off-limits. The Intelligence Committee said, no, we're going to let this investigation go up to the water's edge. We'll look at the CIA's shortfalls but we're not going to look at what the administration did with the intelligence that they got, that is a major failure. It means we're going to get only half the picture. The half we get may be very thorough. But I don't think it's acceptable to just simply take the decision makers here and the policy makers and the speech makers who made those extreme and excessive speeches to the American people off the hook. That should not be done on a partisan basis. We need an outside commission to look at the whole picture.

PILGRIM: What do you say to people this whole exercise and this whole debate is an exercise in election year politics.

LEVIN: We should tact out of politics and put it in the hands of the independent commission and tell them to take whatever time they need. Don't report before the election, that's an artificial deadline. Make a thorough investigation here, because the purpose of looking backward is not just in order to place accountability and responsibility. The purpose is to avoid these kind of major intelligence failures in the future. This is a matter of war. We lost over 500 young men and women. We lost thousands to injuries. We cannot have these kind of massive short comings in our intelligence both in the intelligence material but also in the description of the intelligence in the future because the stakes are too high. So this is really an investment in American security for the future and that's the real reason to look back, as well as to try to assess responsibility here.

PILGRIM: All right. Thanks very much. Senator Carl Levin, thanks for joining us.

(END VIDEOTAPE)

PILGRIM: "Tonight's Thought" is on the principal that suffers most during conflict. "In time of war the first casualty is truth." Those words from radio news commentator Boake Carter.

Turning now to a controversy surrounding a high profile Congressman, a powerful Washington lobby, and a million dollars job offer. Congressman Billy Tauzin spoke publicly about whether or not he will leave Congress to run one of the country's most influential drug lobby. It's a lobby he is quite familiar with after his work on the Medicare prescription drug benefit.

Capital Hill correspondent, Joe Johns joins us live with the report.

JOE JOHNS, CAPITOL HILL CORRESPONDENT: Kitty, he didn't say much quite frankly. Congressman Tauzin, as you said, he's the chairman of the Commerce Committee. He's one of the chief architects of the drug plan for seniors that people talk so much about in the closing days of last year. It has come out over the last several days that he has been offered a job worth more than a million dollars with a large trade association Pharma. It is the trade association that represents pharmaceutical company, lobbies for pharmaceutical companies and Democrats, of course, and watchdog groups are being very critical of this. They are questioning, in fact, the timing of the discussions over the job and whether the timing occurred during the debate on Medicare, a spokesman for Tauzin says those discussions did not occur during the debate and wasn't approached during the debate.

CNN caught up with Billy Tauzin earlier today.

(BEGIN VIDEO CLIP)

QUESTION: What do you say to critics that say it's not appropriate?

REP. BILLY TAUZIN (R), LOUISIANA: I don't say anything. I decide my future, the folks of Louisiana will be the first to know not you. And I'll know that in time. Right now I'm just doing my job.

QUESTION: Nancy Pelosi said it's an abuse of power.

TAUZIN: Nancy Pelosi should be ashamed of herself. She knows better than that.

(END VIDEO CLIP)

JOHNS: Of course, this just an offer we're told that has been made to Billy Tauzin. He has not accepted it, however his spokesman tells CNN that he is looking over the deal because he's been sick over the last year, he's been hospitalized twice with a bleeding ulcer and would like to have a job with less stress.

Kitty, back to you.

PILGRIM: Thanks very much. Joe Johns on Capitol Hill.

The prescription drug benefits that Congress eventually added to Medicare will cost $140 billion more than what was estimated just two months ago. That's according to information CNN has learned today. Sources say the president's 2005 budget will project a 10-year price tag of $540 billion. The original estimate was $400 billion. A reminder now to vote in "Tonight's Poll" question, do you want a Wal- Mart in your neighborhood? Yes or no.

Cast your vote at cnn.com/lou and we'll share the results with you a lit bit later.

Coming up, "Grange on Point," the U.S. Army is already spread thin. Now there are plans for a new offensive overseas. We'll talk to U.S. Military analyst General David Grange. Also ahead...

GEORGE W. BUSH DOLL: I don't need to be subliminal about the differences between our views...

HOWARD DEAN DOLL: Yes!

PILGRIM: Just in case you haven't heard enough of Howard Dean's spirited screams in Iowa, we have just the thing for you when we return.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Now "Grange on Point."

PILGRIM: In "Grange on Point" tonight, the army plans a spring offensive against the Taliban and al Qaeda in Afghanistan. The offensive will be spearheaded by special operation forces already stretched fairly thin by the war in Iraq and the global war on terror.

General Grange joins me now from Chicago. Thanks for joining us.

What do you think about stretching forces this thin?

Is this advisable or is this necessary?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I believe, Kitty, that there's a spring offensive that's the thing to do. We have to go forward with the coalition forces to get to some of the sanctuaries where terrorists are hiding out like the al Qaeda and some of the Taliban leadership. They use borders to their advantage. They violate the sovereignty of borders and they use them at will. And there has to be some kind of strategy worked out with the country of Pakistan to get into some of these areas and special forces are the force of choice to do that in this type operation. So it will be demanding but it must be done.

PILGRIM: You know, the USA and Pakistan both deny or refuse to confirm the spring offensive. Is there a strategy in that, I guess not tipping your hand and how effective might this be?

GRAGNE: Very effective. I think what you'll see is an offensive both by conventional infantry forces in Afghanistan and special operating forces within Pakistan itself, with their permission, of course. Working side by side with the Pakistani military in order to get to some of these areas. But it's very similar to some of the situations that our forces encountered in Vietnam. Where enemy insurgents would cross the borders into North Vietnam or Laos or Cambodia. You can't fight that way with your hands tide in a situation like that. So they have to get across the border and get into some of the areas where Osama bin Laden is probably hiding.

PILGRIM: Very difficult terrain for our troops and I go back to the Tora Bora situation where the troops were really challenged by the terrain.

Is this not extremely difficult and no guaranteed success on this, is there?

GRANGE: Well, there's not. A lot of helicopter problems with terrain at this altitude. The winter is tough, but foot soldiers of the United States military and some of the other coalition forces over there, especially the special operating forces, can handle this terrain. They're trained in it. They have been trained in high altitude, cold weather operations and I don't think there's going to be a problem with those type of forces. I would not want, for instance, a Ranger element coming after me at night in the middle of the winter in some of these mountain hideouts. I mean it's very dangerous for the bad guys.

PILGRIM: Glad to hear that. One more point. In testimony before the House Of representatives General Schumacher said 30,000 troops are needed sort of on a temporary emergency basis that's been signed off on by the Department of Defense today.

What do you make of this in is this an intelligence solution? Is this a short-term solution?

What's your assessment, General Grange?

GRANGE: Well, I think it's a little bit of a short-term solution. As the peeks and valleys that the secretary of defense has been talking about. And it does fix a situation that may be peeked out right now, a requirement for more forces, but it's not a long-term fix. I would think it would be more proper to go ahead and use these short-term fixes, in other words, keep people in the military past their end of time of service, to give time to buy some time during the surge until you put a long-term fix in place. And that means recruiting, training and then integrating more forces and make so of the services larger, especially the army in this case. It costs money, and it should be done without sacrificing other programs like training and modernization. But for the long term, and I think we're in it for the long term, you have to increase the size of the military, I believe.

PILGRIM: General David Grange, thank you very much.

Coming up, the testimony of a key witness in the Martha Stewart trial is post appointed and we'll tell you what that means for the prosecution's case.

And the government imposes more regulations to keep telemarketers at bay.

We'll be right back.

(COMMERCIAL BREAK)

PILGRIM: Now, a looking at news in brief. Starting today, the government says telemarketers must identify themselves when making sales calls. The new regulations will allow caller I.D. customers to see the company's name and number. The rules were established as part of the National Do Not Call Registry.

The head of Russia's space agency blasted U.S. plans for the manned mission to Mars. The official said the plans were unrealistic. And said the focus of space exploration should be completing the International Space Station.

And NASA named a day of remembrance to honor the astronauts killed in the Colombia, Challenger and the Apollo disaster. Flags will fly at half staff at NASA centers through Monday. The first anniversary of the Columbia tragedy.

A stunning decision today brought the Martha Stewart trial to an unexpected halt. The judge post appointed testimony by the government's star witness. And defense attorneys are calling for a mistrial.

Mary Snow is at the federal courthouse in Lower Manhattan and she joins us more with now -- More.

MARY SNOW, CNN CORRESPONDENT: Well, Kitty, the judge did not declare a mistrial but she did grant defense attorneys more time. And she postponed the testimony from star witness Doug Faneuil until next Thursday. Defense attorneys for Martha Stewart and her former stockbroker said government prosecutors handed over documents late last night that they should have received months ago. And it's of particular interest to Stewart's co-defendant Peter Bacanovic. The government is banking on star witness Faneuil to testify that Bacanovic, his former boss, instructed him to tell Martha Stewart about the Waksal selling their ImClone stock. This 11th hour document suggests that it was either Bacanovic or Waksal who told him to instruct Martha Stewart. Prosecutors say it's a case of failed memory that it comes from a former attorney for Faneuil who is now in his 80s. Still, legal experts say today's development could help Bacanovic's case. It's unclear the impact on Martha Stewart's case and they say it's an embarrassment for government prosecutors who now have to reshuffle the order of their witnesses. And this trial is expected to resume on Monday -- Kitty.

PILGRIM: All right. Thanks very much, Mary Snow.

Well, joining us now with more on today's development on how they are likely to play out as the trial goes forward is CNN senior legal analyst Jeffrey Toobin.

Jeff, What Does this mean?

Is this a major development?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: I think it's more of a hiccup than an embarrassment for the prosecutors. But it's not good. The trial will resume on Monday. The trial started last Tuesday. They've only heard two witness relatively minor witnesses, neither of whom even mentioned Martha Stewart's name in court. So, this is not off to a roaring start for prosecution and potentially this document could be of use particularly to Peter Bacanovic's lawyers in showing that the government's theory of how this tip went from Merrill Lynch didn't happen the way the government says it is.

PILGRIM: You have been following this in minute detail.

TOOBIN: Excruciating, horrible detail. Yes. PILGRIM: We turn to you for assessment. How is the government's case shaping up so far?

TOOBIN: It is really hard to tell. It is really pretty early. The only two witnesses have been a witness who talked about background on the Imclone company and why its stock went down on December 28. The next witness was from Merrill Lynch talking about policies of how you deal with -- how stock brokers are supposed to do their job. You really can't tell how the actual evidence has gone in. The one thing we can say is that it hasn't gone very smoothly.

PILGRIM: Sort it's sort of informational, if that's the point.

TOOBIN: Information at this point and certainly there are going to be some jurors saying I thought this was a criminal case. This isn't sort of show and tell about how the stock market works and Douglas Faneuil is now not even -- not for another week -- that's a long time to hear the central witness in the case.

PILGRIM: Is this good for the defense?

TOOBIN: It is. I don't want to overstate. This is not the smoking gun of innocence. This is not something that's going to break the case wide open. The very fact that within this document the defense may not even be allowed to expose because the lawyer who heard it is resisting testifying but certainly the smoothness of the prosecution's case has been interrupted.

PILGRIM: Doug Faneuil, how do you think he will be on the stand now that it's pushed out another week or more?

TOOBIN: I'm going to give you a ringing I don't know. He could be really terrific. He's very critical against Peter Bacanovic. Interesting, in the opening statements, the Stewart lawyers suggested that Faneuil didn't really matter that much. That he -- this was a one-minute phone call between him and Martha Stewart. That's his only involvement vis-a-vis Martha Stewart. So I think he's really the critical witness against Bacanovic, not so much against Stewart.

PILGRIM: Can you imagine, one-minute phone call.

TOOBIN: It's the one minute that changed Martha Stewart's life -- isn't she happy about that?

PILGRIM: Jeff Toobin, thanks for sorting it out for us.

On Wall Street, blue chip stocks stabilized after yesterday's selloff. The Dow gained about 42 points and the Nasdaq fell nine points, the S&P added almost 6 and Christine Romans is here with "The Market" -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: It was another day of really heavy volume. Three days down in a row now for the Nasdaq. That hasn't happened since late last year. Investors concerned by evidence of what is being called a joyless recovery. From the Labor Department, benefits cost are far outstripping wage gains for American workers.

Benefit costs up 1.2 percent in the fourth quarter. Wages up less than half that. It's more evidence that the people who have jobs are working harder for less and employers still cautious on hiring. Help wanted advertising in American newspapers fell in the latest week and no fewer than 10 companies announced more job cuts today.

IBM cutting 250 computer services jobs and several companies announced plant closures and job cuts in industries from candle making to data storage to drug testing. 50 job cuts here or there may not be on Wall Street's radar, you really have to see a thousand job cuts for a stock to rally but Main Street is singing. Analysts say the economic recovery has been a boon for homeowners and stock investors but working-class wages are stagnant and workers' health insurance costs are rising rapidly -- Kitty.

PILGRIM: Thanks very much. Christine Romans. Coming up, we're going to show you some impressions that may make you scream. And we promise this is just about the last story about Howard Dean's scream, but it will make you laugh.

First, an update on the list of our companies our staff has confirmed to be exporting America. These are U.S. companies either sending American jobs overseas or choosing to employ cheap foreign labor instead of American workers. Tonight's additions include American Management Systems, En Pointe Technologies, Humana, Oshkosh B'Gosh, and VF Corporation. Please keep sending us the names of companies you know to be exporting America that are not already on our list and for a complete list log on to CNN.com/lou. We'll be right back.

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll question. 18 percent of you said you want a Wal-Mart in your neighborhood. However, 82 percent do not. Finally tonight, the Democratic candidates for president may have moved on from Iowa and New Hampshire but one moment from Iowa will not go away. Of course it's the infamous Howard Dean scream. As Jeanne Moos reports, it seems to be taking on a life all its own.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: If I hear it one more time -- I'll scream. Howard Dean not screaming, made the front page after New Hampshire. But a week of imitations took its toll. There was even cross pollination of Iraqi and American election jokes.

UNIDENTIFIED MALE, "THE DAILY SHOW," COMEDY CENTRAL: And we're going to go down to Baghdad!

MOOS: And it wasn't just professional comedians, weathermen got into the act.

UNIDENTIFIED MALE: We're going to go to Washington state, we'll be giving them the forecast! MOOS: Even an MC at a chicken wings-eating contest couldn't resist.

UNIDENTIFIED MALE: (UNINTELLIGIBLE)

MOOS: But Dean supporters have a bone to pick with the negative coverage.

UNIDENTIFIED MALE: Just for the record, I really enjoyed your speech in Iowa.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: So take that, CNN.

UNIDENTIFIED FEMALE: Exactly.

MOOS: At a Web site called Deangoesnuts.com, another Dean supporter has collected more than 50 musical remixes of the Iowa speech.

And look who's here. You can already buy the talking mean Dean doll at Herobuilders.com.

If you want to contribute to the Dean campaign, there's a Dean Scream store where you can buy everything from boxer shorts to thongs emblazoned with the scream even if no one can agree on how to spell the sound Dean made. Cartoonists have been having a field day stringing vowels together. Just think, you can have a talking Bush doll and a talking Dean doll exchanging gabs.

Unlike the president, the Dean doll seems to read the papers. Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

PILGRIM: That is our show for tonight. Thanks for being with us. Tomorrow, Joe Erwin, chairman of the South Carolina Democratic party will be our guest and we'll be joined by some of the country's top business editors or newsmakers.

For all of us here, good night from New York. "ANDERSON COOPER" is next.

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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