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LOU DOBBS TONIGHT

First Man Charged in Oil-for-Food Scandal; Rice Faces Tough Questions on Iraq

Aired January 18, 2005 - 18:00   ET

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


(BEGIN VIDEOTAPE)
LOU DOBBS, HOST (voice-over): Someone is lying. Are American commandos inside Iran carrying out secret missions? Or are they not, as the Pentagon says? Investigative journalist Seymour Hersh says the United States is preparing for possible air strikes against Iran. Seymour Hersh is our guest.

An outrageous demand from a top Mexican government official that threatens what's left of the integrity of our borders. Incredibly, our homeland security secretary has no problem with it at all.

TOM RIDGE, HOMELAND SECURITY SECRETARY: I like (UNINTELLIGIBLE).

DOBBS: The first conviction in the escalating oil-for-food scandal at the United Nations. Will this scandal bring down Secretary-General Kofi Annan?

JOHN ASHCROFT, ATTORNEY GENERAL: The Justice Department continues its interest in seeing to it that justice is done in this arena.

DOBBS: Fighting terrorism. President Bush says the United States must improve its intelligence capabilities. I'll be talking with a U.S. senator about his plan to improve intelligence.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Tuesday, January 18. Here now for an hour of news, debate and opinion is Lou Dobbs.

DOBBS: Good evening.

The U.S. Justice Department has announced the first criminal conviction in multi-billion-dollar United Nations oil-for-food scandal.

An Iraqi-American has pleaded guilty to charges that he illegally received payments from Iraq to act as its agent in the United States. The Justice Department announcement comes as U.N. Secretary-General Kofi Annan struggles to defend the United Nations from rising questions about the organization's integrity.

Senior United Nations correspondent Richard Roth records.

(BEGIN VIDEOTAPE) RICHARD ROTH, CNN CORRESPONDENT (voice-over): This is Samir Vincent as a young man in college. The now 64-year-old Iraqi-American citizen may turn out to be a small fish in the oil-for-food scandal, but he will be remembered as the first person charged and convicted in connection with the massive fraud.

More important is that Vincent, according to the U.S. government, is going to cooperate in the Justice Department investigation of the $60 billion humanitarian program.

Appearing in federal court in New York, Vincent pleaded guilty to four criminal counts, including conspiring to act as an unregistered agent for a foreign government. The U.S. says he took payments from the Iraqi government, perhaps as much as $5 million. He also made false statements on his income tax returns.

The Justice Department says Vincent lobbied former high level Clinton and Bush administration officials for Saddam Hussein's government inside the U.S.

ASHCROFT: Vincent has also admitted to lobbying officials of the United States government and the United Nations to repeal sanctions against Iraq and to support the oil-for-food program.

ROTH: The oil-for-food program was used as a cash cow by Saddam. The Security Council allowed Iraq to decide which businesses would get to sign deals with Baghdad. That opening allowed Saddam to enforce secret kickbacks on companies selected, opening the door to huge profits.

Vincent was trying to protect the oil-for-food program, and at the same time push for removal of sanctions, which would permit Iraq to buy and sell anything it wanted.

DAVID KELLEY, U.S. ATTORNEY: All in all, he received millions from the Iraqi regime for acting on their behalf. Other money, as he's admitted to, went to other people here in the United States, and in fact, money that was funneled, he believes, to United Nations official.

ROTH: The U.N. says it is checking its records to see who Vincent might have met with. The spokesman said the U.N. remains committed to getting to the bottom of the oil-for-food story.

The incoming U.S. secretary of state called oil-for-food a scandal. Condoleezza Rice said Saddam Hussein played the international community like a violin.

CONDOLEEZZA RICE, SECRETARY OF STATE NOMINEE: We've got to get to the bottom of what happened here, and those who were responsible I think should be held accountable.

ROTH: The next shoe to drop, an interim report from the U.N.'s investigator, Paul Volcker, later this month.

(END VIDEOTAPE) ROTH: Now, the Volcker people say they're interested in talking to Samir Vincent. They've been unable to. They hope that today's developments will permit that.

And also, Lou, in court today, Vincent said in his appearance he got several hundred thousand dollars from Iraq to use in New York. He says, a lot was given to him, but the rest was given to others, one of whom, quote, "I identified was a United Nations official." But again no word yet on names that anybody that Vincent was talking about or Ashcroft was talking about today -- Lou.

DOBBS: Richard, quickly, if I may, a question, and that is simply when will we have the Paul Volcker report? Has a date certain been set?

ROTH: January 31 for the interim report. Not clear yet if U.N. officials will be cleared or not cleared. It may take another report months down the road.

DOBBS: Thank you very much, Richard Roth.

ROTH: Secretary of State nominee Condoleezza Rice today declared the United States will be able to leave Iraq only when the Iraqis themselves can fight terrorists.

Speaking at her confirmation hearing, a hearing that is all but assuring her successful confirmation, Rice said she cannot give Congress a timetable for U.S. disengagement from Iraq.

Our congressional correspondent Ed Henry reports.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CORRESPONDENT (voice-over): Some of the sharpest questioning of Condoleezza Rice came from John Kerry, who hoped to spend this week getting ready for his inauguration and putting the finishing touches on a Kerry cabinet. Instead the former Democratic presidential nominee was grilling President Bush's pick for secretary of state about Iraq.

SEN. JOHN KERRY (D), MASSACHUSETTS: The current policy is growing the insurgency, not diminishing it. We went in to rescue Iraq from Saddam Hussein. Now I think we have to rescue our policy from ourselves.

HENRY: Rice stood her ground, saying the world is better off with Saddam out of power, but she tried to strike a conciliatory tone by acknowledging mistakes.

RICE: This was never going to be easy. It was always going to have ups and downs. I'm sure that we have made multiple, many decisions, some of which were good, some of which might not have been good.

HENRY: The hearing grew even more tense when Democrat Barbara Boxer charged that Rice's loyalty to Bush led to her hype the threat from Hussein in the build-up to war in Iraq.

SEN. BARBARA BOXER (D), CALIFORNIA: This is my personal view that your loyalty to the mission you were given to sell this war overwhelmed your respect for the truth.

HENRY: Rice bristled at the allegation.

RICE: I have to say that I have never, ever lost respect for the truth in the service of anything. I really hope that you will refrain from impugning my integrity.

HENRY: Rice said the administration is determined to force Iran and North Korea to abandon their nuclear ambitions and vowed to confront major issues like peace in the Middle East.

RICE: America and the free world are once again engaged in a long-term struggle against an ideology of hatred and terror and hopelessness, and we must confront these challenges with the same vision and the same courage and the same boldness that dominated our post-world war period.

(END VIDEOTAPE)

HENRY: This hearing was supposed to wrap up at 5 p.m. Eastern Standard Time. But you can see that Condoleezza Rice behind me is still testifying, taking questions from lawmakers from both parties.

In fact there were so many questions that the committee has announced that she will be back tomorrow morning at 9 a.m. for more questions. And then after that, there will be a committee vote.

And as you mentioned, Lou, it's very likely she's going to be confirmed. She'll be pushed through the committee tomorrow. And the full vote by the Senate could come as early as Thursday, the same day that the president is inaugurated -- Lou.

DOBBS: Ed, this has been a grueling day for, certainly, the president's nominee to be secretary of state. Has there been any -- any surprise, any news, if you will, from this long day of interrogatories?

HENRY: Very little new information, frankly. On Iran, she was asked about the Sy Hersh article that has gotten so much attention. She did not directly address it, but said that obviously Iran is a nation that the entire world community wants to push back on, make sure that they do not get nuclear weapons.

On Iraq, she said a lot of what we've expected, about how she believes that Saddam Hussein being out of power is a good thing for the world.

One issue that was interesting that popped up a lot was the issue of trade. Condoleezza Rice said that this administration wants to use trade as an instrument for democracy around the world, especially in the Middle East, but Democratic senator Paul Sarbanes was very upset, shot back that with a record trade deficit right now, over $600 billion, that he does not think the administration's trade policy is working -- Lou.

DOBBS: Trade and its linkage to foreign policy separated some time ago, obviously in sore need, in the minds of many, in being rejoined as a matter of policy on the part of this country.

Ed Henry, thank you very much.

President Bush today acknowledged that the United States does need to improve its intelligence-gathering in the global war on terror.

President Bush sat down with our senior White House correspondent, John King, and said the biggest challenge is to enhance our human intelligence capabilities. John King has the report -- John.

JOHN KING, CNN CORRESPONDENT: Lou, that statement came up when I asked the president what he considered the greatest vulnerability to the United States.

I asked him, I said, some would say it's port security in this country. Others say it might be border security. His own secretary of health and human services has says he's surprised that no one has attacked, by using terrorism, the food supply system here in the United States.

But the president answered quickly. He said human intelligence. He said the United States government must do a better job getting into the minds and the mail and other communications of the enemy, as the president put it. That part of a conversation that dealt quite a bit with the war on terror and the war in Iraq.

Another question I put to the president was, now that we have seen the insurgency in Iraq, the violence threatening the elections in Iraq, was it not a mistake, a failure either of intelligence or in planning not to send in more troops? And was it not also a mistake for senior officials in this administration to say those American troops would be greeted as liberators?

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think what you've just described is what normally happens in war, is that some things happen that you don't expect, and some things you expect don't happen. And for example, I can remember the briefings I had on what to do with mass refugee movements, or hunger, or you know, what you would expect as a result of military action, which did not take place.

What did take place was a very swift defeat of Saddam's army, which allowed some Baathists to head to the hills, and then let them live to fight another day, and that's what we're dealing with.

(END VIDEO CLIP)

KING: Now the president clearly in upbeat spirits, although he also acknowledged, Lou, that a key priority in the second term has to be improving the image of the United States in the Arab and Muslim world. I asked him, well, hasn't the administration been at that since September 11. He said yes, but he says, as of now, the enemy is winning that debate -- Lou.

DOBBS: And let's hope it is only a debate that is won.

John, thank you very much.

And John's entire interview with the president will appear here on CNN later on "Paula Zahn Now." That's 8:00 p.m. Eastern, 5:00 p.m. Pacific right here on CNN.

In Iraq, four American troops were killed today in the escalating violence ahead of Iraq's elections January 30. Three of the troops were killed in Al Anbar Province west of Baghdad. Another soldier was killed by a roadside bomb in Baghdad.

Meanwhile, the government announced sweeping new security measures as insurgents launched new bomb attacks against political parties.

Jeff Koinange reports from Baghdad.

(BEGIN VIDEOTAPE)

JEFF KOINANGE, CNN CORRESPONDENT (voice-over): A suicide bomber blew himself up outside the entrance to the headquarters of the Supreme Council for the Revolution of Iraq, or SCIRI, the main Shia party here. One person was killed and nine others wounded.

And yet another hostage tape surfaces, this one released by a group calling itself the Islamic Resistance Movement. The voice on the tape claims the eight hostages being held are Chinese nationals working for a construction company. The group is demanding the Chinese government urge its citizens to, in their words, stop helping the Americans.

But, even as one group of hostages was being paraded, another hostage was being released. The Roman Catholic archbishop of troubled northern city of Mosul, Basile Georges Casmoussa, was released less than 24 hours after being kidnapped. The Vatican insists no ransom was paid, despite earlier reports the kidnappers has demanded as much as $200,000 for his release.

(on camera): The archbishop's release was a bit of good news among the seemingly endless violence. To curb this violence and more that's expected in the runup to the elections, the country's borders will be sealed for three days around the January 30 poll.

Jeff Koinange, CNN, Baghdad.

DOBBS: Still ahead here, a top Mexican government official makes an outrageous demand of the United States and what does the United States Homeland Security Secretary Tom Ridge do? He calls that official of the Mexican government his amigo. That story is next. And "Assault on the Middle Class," our special report this week. Tonight, why millions of Americans are more concerned about the cost of health care than their medical problems.

(COMMERCIAL BREAK)

DOBBS: The Mexican government has made yet another outrageous demand of the United States. A top Mexican government official told Homeland Security Secretary Tom Ridge Mexican workers have the right to work in the United States, to receive benefits and return to their home country. Mexico, in fact, is demanding the United States relax its immigration policy and standards.

Casey Wian has the report from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): It's the last scheduled meeting between U.S. Homeland Security Secretary Tom Ridge and Mexican Interior Secretary Santiago Creel before Ridge leaves office in two weeks.

TOM RIDGE, SECRETARY OF HOMELAND SECURITY: I like being his amigo.

WIAN: For advocates of tighter border controls, the chummy relationship can't end soon enough, as both officials continue to push for a freer flow of people and goods across the U.S. border with Mexico.

SANTIAGO CREEL, MEXICAN INTERIOR SECRETARY (through translator): The government of President Fox will continue to work with his American counterpart until we can come to a (UNINTELLIGIBLE) agreement. We have proposed as a government five central points.

WIAN: Those demands are what he calls the regularization of Mexican undocumented workers in the United States, a temporary worker program, an increase in the number of visas for Mexicans, better economic development of the border region and proper human rights for migrants.

Creel cited Arizona's Proposition 200, which prohibits illegal aliens from receiving state benefits, as incompatible with human rights.

Ridge has his own list, 11 examples of progress the two nations have made under their join border action plan. Most involve things like new technology, more vehicle lanes and expanded hours of operation to move traffic across the border faster.

Only three of the 11 dealt with stopping illegal aliens from sneaking into this country. Ridge embraces the idea of a guest worker program that would grant legal status to millions of illegal aliens already in the United States.

RIDGE: The president of the United States believes that with the help of the Congress, with their working together to create a temporary worker program, that will further enhance security and facilitate the integration of the economies of two great economic partners.

WIAN: But he acknowledges the idea remains a tough sell in Congress.

(END VIDEOTAPE)

WIAN: Secretary Ridge also seemed to search for common ground with opponents of the guest worker program, saying in his opinion there must be strong enforcement provisions, including sanctions against employers who hire illegal aliens outside of the program. He says the failure to do that is the reason the last mass legalization in 1986 failed to control illegal immigration -- Lou.

DOBBS: Well, that's certainly a contributing factor, as you point out, Casey, but hardly the whole story. The -- I take it the Homeland Security chief didn't mention perhaps controlling the nation's borders?

WIAN: No, he really -- he really didn't say much about that at all. He had a couple references to it, but most of the discussion was focused on trade and ways to facilitate more cross-border traffic faster -- Lou.

DOBBS: Am I correct in noting that of the five items the interior minister brought forward there, all five would be the responsibility of the U.S. government, not the Mexican government?

WIAN: Absolutely. It's a very interesting point that you make. The Mexicans are demanding the U.S. government take actions, but it seems that the Mexicans are willing to offer very little in the way of action on their own, and the U.S. isn't demanding much of them on the other side.

DOBBS: Thank you very much.

Casey Wian.

That brings us to tonight's poll. The question tonight: Do you believe the Bush administration should inform Mexico's interior secretary that there is no right for Mexican citizens to work in this country? Yes or no. Cast your vote at loudobbs.com. We'll have the results for you later in the broadcast.

The moos liberal federal appeals court in the country has rejected a request to block Arizona's Proposition 200, the proposition that's so offends the Mexican government. That law bars illegal aliens from voting or receiving public benefits.

The Mexican-American Legal Defense and Education Fund petitioned the 9th Circuit Court of Appeals to stop enforcement of the law. A two-judge panel rejected the petition without ruling on or considering the constitutionality of the law. Proposition 200 in effect. The millions of illegal aliens in this country are adding to the tremendous strain on our health-care system. Emergency health care for illegals cost the United States more than $1 billion every year. In our special report, "Assault on the Middle Class," tonight, rapidly rising health-care costs have forced 45 million Americans to do without even basic health insurance.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Howard Staab, a Durham, North Carolina, carpenter made the difficult decision not to buy health insurance because of the high cost. So, when he found out he needed to replace a valve in his heart, he made another hard choice. He flew to India to have the surgery.

HOWARD STAAB, FLEW TO INDIA FOR SURGERY: It was excellent care. They kept so many doctors with us, and they were attentive.

SYLVESTER: To replace the valve at the Durham Regional Hospital in North Carolina would have cost at least $200,000. To have the surgery in India, including airfare, cost less than $10,000.

Howard Staab is part of a growing trend, medical tourism. One way middle-class workers are contending with rising health-care costs. U.S. insurance premiums have increased 36 percent in the last four years, and rates are rising three times faster than middle-class workers' wages.

RON POLLACK, FAMILIES USA: They have fewer services covered, they have to pay more in deductibles and copayments, and so, increasingly, working families are saying we simply can't afford this care.

SYLVESTER: But, while workers can save going overseas, there are risks. Howard had complications in India, blood clots and four mini strokes. His partner, Maggi, says his case highlights the need to bring U.S. health-care costs in line with the rest of the world.

MAGGI GRACE, HOWARD STAAB'S PARTNER: They're keeping their costs down to what it actually costs, instead of inflating them, which we know they do here, and I don't know the answer, but I think there's some way to come to some medium place.

SYLVESTER: Howard says, given the high cost of health care, if he has to have another surgery, he'll go back to India in a heartbeat.

(END VIDEOTAPE)

SYLVESTER: Proponents of health-care reform say one way to bring down costs is to make it easier for U.S. employers and the self- employed to band together to get a group purchasing discount. A similar system is already in place that allows the federal government to bargain for lower health-care prices for veterans -- Lou.

DOBBS: Lisa, thank you very much.

Lisa Sylvester.

Still to come here tonight, the battle against corporate crime. A second trial for former Tyco CEO Dennis Kozlowski started today, but this trial will be different, even uglier than the first.

And new charges that the United States is conducting secret missions in Iran. The Pentagon says no. Somebody's lying. Investigative journalist Seymour Hersh is our guest next.

(COMMERCIAL BREAK)

(BEGIN GRAPHIC)

Corporate Crime Watch Criminal Charges Since Enron Collapse Corporate America: 132 Enron: 23 Sent to Jail: 13 Days Since Enron's Collapse: 1,042

(END GRAPHIC)

DOBBS: Yes, the fight against corporate crime goes on in this country. New developments tonight. Prosecutors this week begin several trials against former executives at some now infamous companies.

Christine Romans is here with the report -- Christine.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Lou, we start with the case that came to symbolize greed in the corporate suite and an utter lack of supervision and oversight.

Today, the criminal trial of two former Tyco executives began again. Arriving in court in Lower Manhattan, former Tyco CEO Dennis Kozlowski and former Chief Financial Officer Mark Swartz. They're accused of looting Tyco of $600 million through stock sales and wild personal spending.

Now this case has already crumbled once, a mistrial in May. Experts now say prosecutors need to simplify the case, pare down the evidence of imperial CEO excess, less of the Sardinia $2 million birthday party tape and that $6,000 shower curtain paid for by -- with Tyco funds, and more on just how Kozlowski and Swartz allegedly stole all that money.

Also today, a smiling Bernie Ebbers arrived at court for a pretrial hearing this morning, and jury selection is expected to begin this week. Now he is the former WorldCom CEO charged in an accounting scandal that cost investors billions and resulted in the largest bankruptcy in American history.

(BEGIN VIDEO CLIP) JOSHUA ROHEN, NYU STERN SCHOOL OF BUSINESS: It was an egregious case that involved a major accounting fraud, Certain journal entries that basically recorded as assets at least $4 billion of what would have been an expense. Now something as gigantic as that cannot be unknown.

(END VIDEO CLIP)

ROMANS: By the time it was all said and done, it was $11 billion in the end, and Ebbers' defense has signaled it will attack the credibility of the star witness, Scott Sullivan, a former top finance executive at WorldCom.

And today, Lou, the judge in this case said she will allow questions about Scott Sullivan's married life.

Also, prosecutors will have to proceed without any paper trail against Bernie Ebbers. He was a man who did not like to use e-mail, did not like to make written records. It makes it that much tougher for prosecutors.

DOBBS: Well, here we are more than three years later. What, 13 people have been sent off to jail. Of course, it's also fair to point out here Ebbers, they said, would not face charges because they didn't have that hard document. What can we expect?

ROMANS: We can expect some dirt in the courtroom, I think we can fairly say. We can expect a very tough grilling of just how reliable Scott Sullivan is. And only 13 in jail three years on.

DOBBS: All right. Christine, thank you very much.

Christine will be following those trials here for us.

Still ahead, Seymour Hersh defends his new article on secret missions in Iran. The Pentagon says that article is riddled with errors.

And "The China Syndrome," how the United States is punishing China for helping Iran build those missiles. That punishment includes, of course, about $150 billion in a trade deficit with China.

European leaders are boasting about Airbus's gigantic new aircraft, the world's biggest. There's just one part of the project they're not talking about. We'll be talking about it next.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Here now for more news, debate and opinion, Lou Dobbs.

DOBBS: In just a moment, I'll be talking with Pulitzer Prizewinning journalist Sy Hersh about his controversial article on the growing military threat posed by Iran and secret missions conducted by the United States in Iran.

But first, these stories:

A new study released today says a common test for detecting colon cancer fails to find cancerous growths 95 percent of the time. Researchers say the test, administered by doctors, is not as reliable as a test patients can take at home. Although that at-home test fails to find cancerous growths more than 75 percent of the time, researchers says it becomes more reliable over use each year.

Authorities in Oklahoma say at least one person has been killed. An Air Force training jet collided with a crop-dusting plane in mid air. Officials say the pilot of the crop duster was killed, while both aboard the jet ejected safely. The cause of that crash is now under investigation.

And bone-chilling Arctic temperatures tonight have settled over the Northeast and Midwest. Temperatures are well below normal in large parts of the country. With heavy winds, temperatures feel as cold as minus 20 in western New York and minus 45 in Upstate New York. The chill is being felt as far south as Florida, where Iowa -- where lows today were expected in the 20s and 30s. It's cold in Iowa, too, by the way. Three deaths are being blamed on the cold weather in Michigan as well.

The Bush administration has imposed penalties against several Chinese companies for helping Iran improve its ballistic missiles. American officials say Iran is trying nuclear warheads for those missiles. China says United States penalties are unjustified.

But nuclear experts say China is allowing its technology to move into the hands of terrorists.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): China is exporting dangerous technology to many countries around the globe. Iran is only the latest. Experts say it's reaching alarming levels.

RICHARD FISHER, INTL. ASSESSMENT AND STRATEGY CENTER: Well, China is a serial proliferator. Nuclear and missile technology to Pakistan, nuclear and missile and missile technology to Iran. And the real worry is that these countries don't really control who they in turn export to. So what we're seeing today, in all actuality, is Chinese nuclear bomb designs going to Pakistan, then being taken to Libya and nobody knows where else.

PILGRIM: The United States recently listed several Chinese companies on a government Web site, barring them from doing business with the United States for exporting technology to Iran.

PETER BROOKES, HERITAGE FOUNDATION: The State Department believes that is the most active state sponsor of terrorism in the world today.

Secondarily, Iran is pursuing a nuclear program and the CIA believes it's the country in the world most actively seeking weapons of mass destruction. In particular, nuclear weapons.

PILGRIM: Experts link technology from china to the hands of Pakistani scientist A.Q. Kahn, who they think sold plans to Libya and potentially other countries as well. The worry is the Chinese provided a very important component to the delivery of nuclear weapons.

ADAM SEGAL, COUNCIL ON FOREIGN RELATIONS: The Chinese are very good at missiles in short-range and medium-range missiles. They've expanded a number of short-range missiles they have across from Taiwan rapidly. And they've often been the choice of salesmen for sort of third-world countries looking for missiles.

(END VIDEOTAPE)

PILGRIM: Now, experts say the U.S. government should be expressing outrage in a loud, clear voice rather than simply listing Chinese companies on a Web site. The hesitancy to call out the Chinese issue stems from the need to have the Chinese cooperation on North Korea. But experts say that may be a mistake -- Lou.

DOBBS: It's a -- it's the possibility of that mistake that concerns a number of people watching the Sino-Korean relationship.

The fact is, the Chinese, if they do not find a vested interest in preventing nuclear weapons in the hands of the North Koreans, there's very little the United States foreign policy can do to influence that.

PILGRIM: Yes. Diplomacy aside, we should be calling the Chinese very loudly on their infractions against nuclear proliferation and we should be doing it right now and vocally. And that's what nuclear experts are telling us today.

DOBBS: And tying, without any question whatsoever, $150 billion in the trade deficit to our political largess as well.

Kitty Pilgrim, thank you. An excellent report.

The United States' response to the rising Iranian military threat is the focus of a new article by investigative journalist, Pulitzer Prize-winning journalist Seymour Hersh in "The New Yorker" magazine. Hersh reports the United States is conducting secret reconnaissance missions within Iraq (sic) to identify possible targets for air strikes and commando raids. The Pentagon called Hersh's article riddled with errors. But Hersh said he's confident the major points and facts of his story are absolutely correct.

Seymour Hersh joins us from Washington, D.C.

Sy, good to have you with us.

SEYMOUR HERSH, JOURNALIST: Glad to be here.

DOBBS: The -- the fact that the United States, first of all, is conducting missions in Iran -- to what degree does that surprise and alarm you personally? HERSH: Personally? Well, I wish my country would participate in the negotiations that have been going on with Europe. The E.U., the European Union and the French and the Germans and the Brits have been trying for a year and a half to calm down Iran, to give them goodies, carrots I guess you could call it, to give them some sort of increased trade, drop sanctions in return for Iran getting off the nuclear bug.

There's no question, by the way, Iran is definitely cheating on the proliferation treaty and definitely doing stuff.

DOBBS: I guess the first thing we should do is I'd like to first move to a first a quote from your article, if we could have that up so we could all take a look at that.

The -- Monday, January 17 -- "The war on terrorism would be expands and effectively placed under the Pentagon's control. The president has signed a series of findings and executive orders authorizing secret commando groups to carry out their missions and other special forces units to conduct covert operations against suspected terrorist targets in as many as 10 nations in the Middle East and Southeast Asia."

The -- obviously, the response of the Pentagon was that the article is riddled with errors and effectively deny the report. What -- what are we to make of this?

HERSH: Well, actually it's more of a personal attack on me, Lou, really. It's less a denial. In fact, they specifically don't deal with the allegations about covert activities. And I should say, the Pentagon never comments on such activities. But they did not say anything about those activities.

What's happened is there's been a tremendous shift between what operations that used to be done by the CIA, covert operations -- they've now been switched over to Rumsfeld and the pentagon. And normally you'd, `So what?' Well, there's one big difference. When the CIA does an operation like that, under the law, it must brief Congress. Congress must know. Legislation makes it clear the president has to sign a finding. The intelligence committees and other committees are put in the know.

When the Pentagon does it, it's a military operation that's authorized by the president as commander in chief. And as the military and the White House believe, there's no need to tell Congress. So we have operations ongoing now in countries where we may have an American ambassador and a CIA station chief, but they're not to know what's going on.

DOBBS: In this complex situation in which -- and I don't know to what degree you paid attention today to Condoleezza Rice's confirmation hearings -- but I was struck about the fact that she talked about the United States and Western civilization, if you will, being at wart with an ideology, when she was really talking about a system of religious beliefs and ideology called radical Islamist ideology, if you would. The fact is, it strikes me that we should not be surprised either, A, that the Pentagon would deny a report about missions that it would be -- if it were carrying them out. And, B, given that both the previous and current heads of the CIA have said it will be five years before they have effective covert intelligence operations, that by default it would move to the U.S. military.

Do you agree with that assessment, or did you think that's absolutely wrong-headed?

HERSH: Well, I'll tell you, we're all at a loss. We have a problem and we want to deal with it.

The only question -- the only thing I see is this administration, by going to Iraq when there really was no case, given that we were still chasing the Taliban and al Qaeda and bin Laden, to go to Iraq then was a mistake that I think has spread terrorism. So what I worry about is that the actions of this administration, in trying to stop something is actually spreading it. It's -- this is not a new thought, but I can tell you that Rumsfeld's thought is to be tough, to be very aggressive, to strike first without necessarily all the evidence. And whatever you can say about the CIA -- God knows I've been a critic of them -- one thing they do know is how to operate covertly overseas in such a way that we're not going to be embarrassed, we're not going to have -- my worry is...

DOBBS: Woah. Sy, Sy, Sy. Indeed you have been a critic, but I -- if you're not embarrassed, I will tell you point-blank I'm embarrassed that the CIA and our intelligence agencies could not determine reliably the presence or the lack of weapons of mass destruction in Iraq.

HERSH: You know, Lou, one of the issues here that we have to be very careful about -- there were people in the CIA who were saying nay and they weren't listened to. It wasn't simply a question of everybody in every agency agreeing with the president and Rumsfeld that there were -- and Cheney that there were weapons there. The State Department's intelligence service said no. The Department of Energy's intelligence service said no. There was a lot -- and many people in the CIA also were also raising red flags.

DOBBS: You focus on another aspect, Sy, that I think most would find troubling in this country. And that is a diffusion of responsibility here, whether one looks at the intelligence operations, or whether one looks at the military operations. The neo-con forces, as you identify them and as others identify them within the Pentagon, carrying out intelligence operations that are contemporaneously military operations in preparation for what you've judged to be a military operation or strike against Iran.

The issue becomes what is the president's judgment here, what is that of Congress, where is the congressional oversight, whether we're talking about the CIA in intelligence operations or whether we're talking about the U.S. military intelligence operations.

Personally, constitutionally, one should be either (ph) the armed services committees or the intelligence committees or the appropriations committees providing that oversight. Why is that not occurring?

HERSH: I don't know.

I can tell you right now that the intelligence committees -- this I know first-hand -- they are not getting information about what the Pentagon is doing overseas, what this new wave of operations is doing, covert operations. And that is, we have American soldiers in the field -- "wiped clean" is the internal phrase for it. They're not carrying American passports. They could be journalists, they could be clerics, they could be tourists. If they're arrested they could be hung out as spies, executed. So an enormous risk without telling Congress about it.

DOBBS: That -- it is troubling, and within the complexity of the -- a global war a terror, or a global war against radical Islamist terror, as I think it should be properly styled -- it is a difficult, difficult assessment to decide the limits, really, of the -- and the energy that should be applied and to what you identify as black reconnaissance on the part of the military, to what degree we should be troubled by a lack of intelligence or an overaggressiveness. But you put your -- squarely the point forward: there should be oversight and it should be considerable, and certainly considerably greater oversight than has been exercised by the U.S. Congress for some time.

A lot of questions raised, as you put forward some answers on this very important issue.

We thank you very much, Sy Hersh, for being here and we look forward to talking to you soon.

HERSH: I'm glad to hear your comments too, Lou.

DOBBS: Thank you.

Europe today unveiled its new super-sized jumbo jetliner. It is the world's biggest airliner -- a lavish ceremony in southwest France. The massive A-380, as it is designated, is overweight, overbudget and yet to fly. But that didn't stop European leaders from claiming and hailing their victory over the United States in the global battle for supremacy in commercial aircraft orders, a victory that they have indeed won.

The German chancellor said the new aircraft is a credit to Old Europe -- are you listening Donald Rumsfeld? The Spanish prime minister said Europe is "unstoppable." However, there's absolutely no certainty that the A-380 will ever make money. That's despite billions of dollars of launch aid from European governments. That's right, subsidies from all of those governments. Imagine that.

Up next, a four-star intelligence overhaul, one leading senator's controversial proposal to further overhaul our national intelligence. He joins.

And why North Korea said it would be watching Condoleezza Rice's confirmation hearings very closely.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: My next guest is calling for the creation of a military intelligence command that would be headed by a four-star general. Senator Saxby Chambliss says the command would combine intelligence in the Army, Navy Air Force, Marines and other Pentagon units. He's a member of the Intelligence Committee, the Armed Services Committee and joins us from tonight from Capitol Hill.

Senator, good to have you here.

SEN. SAXBY CHAMBLISS (R), GEORGIA: Good to be with you, Lou, as always.

DOBBS: The -- the fact that we need a new leader for intelligence within the military component, which is about 80 percent of the total intelligence budget -- why do you see that as so critical at this point?

CHAMBLISS: Well, Lou, we're in the midst of trying to overhaul the intelligence community to try to do a better job of gathering, analyzing and disseminating this information that is so critically needed by the war fighter as well as by the CIA agent on the street. But most importantly, by the president of the United States.

And the way we do that is try to centralize all of the intelligence. While 80 percent of the budget is in the Pentagon or thereabouts of 80 percent, over half of the agencies within the 15- member intelligence community come from the Defense Department.

DOBBS: Right.

CHAMBLISS: And my idea is that if we're going to a new director of intelligence -- if we can centralize the agency and then go underneath that and centralize the Department of Defense and put one four-star commander in there, let him be responsible for making sure the intelligence is gathered and the right information coming out of the Department of Defense is given to the DNI, is given to the secretary of Defense, thereby getting it into the hands of the war- fighter a little quicker than we would otherwise.

DOBBS: The idea that the director of national intelligence -- as it's now called in the process of reforming the intelligence that you all passed last year -- the idea that that should be centralized within the Pentagon -- isn't it really centralized already with the secretary of Defense? And isn't it already a matter of accountability for the president of the United States? One begins to wonder about the role of the director of national intelligence, as you all have cast that role.

CHAMBLISS: Well, we're still -- the director of national intelligence is still evolving, really, Lou, and while we've got a definition in that bill, from a practical standpoint, it's going to continue to move down the road and his powers are going to continue to increase or decrease.

What we've got to make sure of is that, as we're reforming the intelligence community, that we do a better job of what we're doing now. We can certainly do a better job than what we were doing pre- September 11. And from an organizational standpoint, if we don't do that, then we fail.

So it's important that we continue to look at the direction in which the director of national intelligence should move.

DOBBS: I'd like, if I may, Senator, move also to the -- really, the extant issue -- my previous guest here, Pulitzer Prize-winning journalist Seymour Hersh reporting that there were secret missions under way in Iran, and that -- both of us discussing the issue of a lack of oversight on the part of the Unites States Senate, the United States House of Representatives.

Do you accept that as a true statement, first of all, that there is insufficient oversight on the part of Congress? And secondly, why would this be permitted to continue on the part of the leadership of the House and the Senate? And what can be done to heighten it? All of this very much predicated on the answer to the first part of that question.

CHAMBLISS: Well, first of all, Sy Hersh is an excellent journalist. And I have not read his article -- I've skimmed over it and intend to read it a little more thoroughly.

But the fact of the matter is that he points out a critical deficiency that not only the 9/11 commission came up with, but virtually ever other commission has stated. And that is that Congress has got to point a finger at itself as a part of the deficiencies that exist in the intelligence community. We have not done the oversight that we needed to do.

Now, a part of that has been that sometimes we get a little pushback from the intel community when we ask stuff, the hard and tough questions. But we've got to do a better job of it, and as a part of reorganizing the community, Congress has got to reorganize itself. I've already discussed with Chairman Pat Robertson -- I will in more detail -- about the possibility of setting up subcommittees in the Senate Intelligence Committee, for example.

There are just a number of things that we can do better and we got to spend more time in the oversight business.

DOBBS: Senator Chambliss, we thank you for being here. We appreciate it. We wish you good luck.

CHAMBLISS: Thanks, Lou.

DOBBS: Well, there is outrage tonight over the flood of illegal aliens into this country. We'll share some of your thoughts next.

And the winner of the first "Survivor," the television series -- you remember -- and one of the first stars of reality television -- faces years in prison.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Taking a look now at your thoughts on the invasion of illegal aliens into this country.

Richard Chapman of Newman, Georgia, wrote to say: "Lou, as I sadly look around our country every day at the increasing number of illegal aliens, I wonder why our government leaders will not lift a finger to stop this outrageous flood of illegal entry into our country. I wonder why our leaders want to reward those who enter our country illegal by giving them legal status. I believe all Americans wonder, as I do, what will become of our country if our borders are left open to all who want to skirt our laws and sneak into our country under a cloak of darkness."

Feliciano Garcia of Lubbock, Texas: "Although I am Hispanic, I feel that using illegal workers to fill the labor pool should be seen as treason. Any employer who willfully and knowingly hires illegal workers should be subject to severe criminal penalties. It is time for the U.S. Hispanic community speak out against corporate America and small-business owners who exploit these workers and drive wages down, thus driving our standard of living down to poverty wages."

Brian Wilson in Canoga Park, California: "It's interesting how the federal government cries about Social Security needing reform at the same time wasting tremendous taxpayer dollars by ignoring the massive influx of illegal immigration and pork-barrel spending."

We love to hear from you. Send us your e-mails at loudobbs@CNN.com.

Well, surviving in Rhode Island is proving to be more difficult than surviving on a remote tropical island for the first winner of the reality show "Survivor." Richard Hatch has been charged with filing a false income-tax return, completely devoid of his million-dollar jackpot from the show's first season, apparently. Hatch was also charged with not reporting more than $300,000 he earned from a Boston radio station. Hatch could face up to five years in prison and half a million dollars in fines.

Now that's reality.

We were hoping to speak with Congressman Curt Weldon tonight. He led a delegation that has just returned from North Korea. Unfortunately, he is unable to join us tonight, caught in traffic. And we are sure traffic will improve tomorrow and Congressman Weldon will be with us here tomorrow, again traffic permitting. We apologize.

Still ahead, the results of our poll tonight and we'll have a preview of what's ahead tomorrow. Please stay with us.

(COMMERCIAL BREAK) DOBBS: The results now of tonight's poll: 96 percent of you say the Bush administration should inform Mexico's interior secretary that there is no right for a Mexican citizens to work in this country, despite what Tom Ridge's amigo said. Four percent of you do not agree.

Thanks for being with us here tonight. Please join us tomorrow.

A bold plan to raise the benefits for military families who lose a loved one in combat. We'll be talking with one of the senators behind that proposal.

And cheap imported goods from China: not just a threat to our economy, but a threat to our very health and lives. We'll have that special report for you here tomorrow evening. Please be with us.

For all of us here, good night from New York. "ANDERSON COOPER 360" 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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