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LOU DOBBS TONIGHT

Hostage Claims; Bodies Recovered; China's Energy Assault; Phoenix Airport Security; Veterans Budget Woes

Aired June 30, 2005 - 18:00   ET

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


LOU DOBBS, CNN ANCHOR: And good evening, everybody. China's energy assault. China declaring its bid for Unocal as simply a commercial transaction. The Chinese government doesn't want you to know it's the Chinese government that would be buying Unocal. We'll have the full report for you.
Outrage tonight over this country's failure to prepare for a possible pandemic of avian flu. Millions of Americans could be at risk.

And the Mexican government faces new charges of racism, this time over a set of postage stamps just weeks after Mexico's president was asked to apologize for offensive comments about African-Americans.

We begin tonight with accusations that Iran's new president-elect may have helped take Americans hostage in Tehran a quarter century ago. At least five former American hostages now say the Iranian president-elect, Mahmoud Ahmadinejad, took part in the seizure of the U.S. embassy. Iranian officials are denying those claims, but the White House says it is taking those allegations seriously.

Andrea Koppel reports.

(BEGIN VIDEOTAPE)

ANDREA KOPPEL, CNN STATE DEPT. CORRESPONDENT (voice-over): Mahmoud Ahmadinejad had just won Iran's recent presidential election when former hostage Dan Sharer says he saw the president-elect's photograph in his local newspaper and flashed back 25 years.

DAN SHARER, FMR. HOSTAGE: It was a recent picture. But he still looked like a man, take 20 years off of him, he was there.

KOPPEL: There is Tehran in 1979, when militant students swept up in Iran's Islamic revolution, seized the U.S. embassy, and held 52 Americans, including Dan Sharer, hostage for 444 days. Another former hostage, William Daugherty, says he's 99 percent sure Ahmadinejad was one of his captors.

WILLIAM DAUGHERTY, FMR. HOSTAGE: I remember seeing him acting in a supervisory or leadership capacity.

KOPPEL: But other former American hostages contacted by CNN say they aren't so sure.

Much of the controversy surrounds these photographs from 1979. The one on the left confirmed to be then 23-year-old Ahmedinejad. The one on the right of a hostage-taker.

A known ultra-conservative and follower of Iran's supreme leader, Ahmadinejad has detailed much of his past on his own Web site, even listing his membership in a radical student group back in the '70s, some of whose members seized the American embassy. But one of the former student leaders of the hostage-taking told CNN Ahmadinejad was not involved, and close associates of the president-elect, as well as the Iranian government, have also reportedly denied the allegations.

(END VIDEOTAPE)

KOPPEL: And I've spoken to several experts today who just don't get it. They don't understand why the president-elect would deny his involvement in the Iranian hostage-taking if, in fact, he had done it, Lou. And the reason they say is that in Iran, involvement is far from being something to be ashamed of. It's considered a badge of honor -- Lou.

DOBBS: And Andrea, what a lot of other people may not get is why the United States government, the CIA and the White House would not already know whether or not he was a hostage-taker?

KOPPEL: I'll tell you, Lou, until quite literally about a week ago, Ahmadinejad was not a big player. He was clearly the dark horse candidate out of a field of seven presidential candidates. And to be honest, most people really weren't paying a lot of attention to him. And there were a number of hostage-takers, and they still don't know if he was one of them.

DOBBS: Perhaps greater notice will be taken with a greater number of people in Iran now given all that is transpiring. Thank you very much. Andrea Koppel from the State Department.

The White House says the former hostages' claims raise many questions about the Iranian president-elect. National Security Adviser Stephen Hadley said the United States has now launched an investigation into those allegations.

Dana Bash reports from the White House -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Lou, from the president on down here at the White House, they say they are taking those allegations very seriously. In fact, U.S. officials here and around the government have been ordered to try to get to the bottom of it, to try to figure out if they are actually true.

And in an interview with foreign journalists earlier today, President Bush said that he has no information, but he acknowledged that many questions have been raised on this. And he does hope and he says he intends to get to the bottom of whether or not the Iranian president was actually a captor of U.S. hostages about 26 years ago.

National Security Adviser Stephen Hadley told reporters earlier today, actually, that the administration -- that the U.S., I should say -- has been following the career of Mahmoud Ahmadinejad, who, of course, was the former mayor of Tehran for some time. But he was careful to say they do not yet have all the facts.

(BEGIN VIDEO CLIP)

STEPHEN HADLEY, NATIONAL SECURITY ADVISER: We're looking into this report. Obviously one of the things you do when you get a report like this is look back and see what you have in the files, and that's the process that's going on now.

(END VIDEO CLIP)

BASH: Now, while some U.S. officials are digging in, looking at photographs, looking at old footage and other things, other officials here privately are looking at a long list, Lou, of what ifs. What if it's true?

For example, what would happen if this is true, how would the U.S. deal with it? One official put it this way: he said that this has potential political, diplomatic and policy ramifications that could be unprecedented when you look at whether the U.S. would take legal action against him. And also, a very important issue of trying to get Iran to stop its nuclear program.

The president says that he doesn't support negotiating with terrorists, so would he still continue to support European negotiations with Iran to get their -- to stop their nuclear program? The president's going to go to the G8 next week. If this isn't solved, this could add a new wrinkle to those meetings -- Lou.

DOBBS: Dana, within the context of all of this -- and I understand the furor -- it's easy not to understand why the national security adviser would not know, why it would be necessary to look at files, because it has been a runoff between the president-elect and Rafsanjani, two men, presumably, who would be deeply investigated by our intelligence services. Secondly, whether or not he was involved in the hostage-taking from the Iranian revolutionary guard sprang the current Iranian government.

The contest over whether or not Iran will be a nuclear power, being named as a member of the axis of evil by President Bush. Surely this would not be material to the difficulties that already exist between our two countries.

BASH: Well, certainly it should be material, absolutely. And actually, Stephen Hadley was pressed on the issue of why they don't have this information at the ready since this is the new president of a country that, as you mentioned, the president has named a member of the axis of evil.

But as Andrea mentioned, this election was a surprise within Iran, certainly here in the United States. But clearly, Stephen Hadley made it sound like they have been following this guy for some time and that they do have files. It's just a question of digging through them, going back and getting all aspects of the U.S. government to try to figure out exactly what's going on here and whether or not he really was involved. DOBBS: Not to put too fine a point on it, Dana, Stephen Hadley, I think, could be fairly -- stated to be sounding as if this all were a matter of clerical functions rather than intelligence functions. Dana Bash, thank you, from the White House.

In the global war on radical Islamist terror, the Pentagon today said the military has found the bodies of all 16 Special Operations troops killed in a Chinook helicopter crash in Afghanistan. Officials said the helicopter was hit by an enemy rocket-propelled grenade.

Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): In the remote mountains of eastern Afghanistan the remains of all 16 servicemen onboard the Chinook helicopter have now been recovered. Officials confirm it was shot down by insurgent rocket fire.

Two days later, there is still fighting between coalition and insurgent forces. And senior Pentagon officials say they do not know the fate of all the troops on the ground at the time of the crash.

(on camera): Is everyone accounted for?

LT. GEN. JAMES CONWAY, DIRECTOR OF OPERATIONS, JOINT CHIEFS: It is an ongoing operation in that context, and we don't have full accountability, nor will we until such time as the operation is complete.

STARR: It's an unusual statement when a general says from a podium, "We don't have full accountability." Is there any way you can further clarify what you mean?

CONWAY: No.

STARR: Lee Russell's brother, Army Staff Sergeant Mike Russell, is among those who died on the helicopter. They last spoke on Memorial Day Weekend.

LEE RUSSELL, BROTHER OF SOLDIER: My kids talked to him. I told him to be careful, told him to be safe, and that we were proud of him and we'd see him when he got back.

STARR: Mike Russell is survived by a wife and two children.

(on camera): U.S. military officials say they will say nothing else about the troops still fighting in the mountains until everyone is accounted for.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: China has launched an unprecedented public relations campaign in this country, trying to win support for its unprecedented takeover bid for one of our largest energy companies. Chinese officials want you to believe that this is a simple commercial enterprise that would be buying Unocal, not a derivative directly of the Chinese government.

Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): The Chinese tell Washington, don't stand in the way of our quest to buy your oil company. China's foreign ministry spokesman: "This is a normal commercial activity. The relevant people should not make a fuss over this."

Another Chinese official at an oil conference in New Orleans: "The Chinese government will not pay a penny for this project. The government has made it clear this is totally a business activity of the company."

Wrong. China National Offshore Oil Corp is 70 percent owned by the government. And analysts say the Chinese government is providing $13 billion for the purchase.

PATRICK MULLOY, U.S.-CHINA SEC. REVIEW COMMISSION: They're operating off finances being provided by the government. And for them to claim this is a purely commercial transaction I think is -- is not correct. Secondly, I wonder if an American oil company could buy CNOOC.

ROMANS: No need to wonder. The Chinese will not allow foreign majority ownership, let alone outright ownership of its energy and commodities assets.

ChevronTexaco has its own deal to buy Unocal. Chevron says China's bid for Unocal is anything but a bona fide commercial activity. At least $10 a share comes from low or interest-free loans from the communist government. Without these subsidies, the company would not be able to make a ecompetive bid.

So then how does China define a normal commercial activity anyway? It manipulates its currency to give its exports a 33 percent price advantage. It has strict capital controls.

Make money in China, and you'll have a tough time pulling your money out. To say nothing of rampant Chinese pirating of American intellectual property, and using American-made technology to censor what its citizens learn and read over the Internet. For all these reasons, doing business with the communist government of China is anything but a normal commercial activity.

MULLOY: This country better get its act together and understand that other countries have national strategies to compete in the global economy and we have none.

(END VIDEOTAPE) ROMANS: And not only is there no strategy here, the U.S. government has not directly responded to these Chinese overtures to buy what many say is an important energy asset -- Lou.

DOBBS: It is remarkable that this administration, this government has failed to directly respond to what is a bald -- bold attempt by the Chinese government to buy technology, rare minerals and rare earth, proprietary assets of this company. And this administration doesn't want to respond.

At least you refer to intellectual property theft, which is rampant in China. The attorney general addressed that today and did so in rather aggressive terms.

ROMANS: He did. He talked about an international campaign to eradicate intellectual property incursions. But Lou, he mentioned an awful lot of countries, Portugal, Denmark, all kinds of law enforcement cooperating. Not a word about China. And, of course, by all accounts, China is the number one violator of intellectual property rights.

DOBBS: I'm shocked that this administration didn't mention China. Strange beyond belief. Christine Romans, thank you for that excellent report.

ROMANS: You're welcome.

DOBBS: When we continue here, Mexico steps into yet another stunning racial mess. This time over a series of tasteless, offensive postage stamps. Will Mexico apologize this time?

Stay tuned.

A pitiful response against a terrifying disease. Congress is told we haven't even begun to prepare for a possible bird flu pandemic that could kill tens of millions of people around the world if it is unleashed.

And "TIME" magazine versus "The New York Times," two media giants on a collision course over a key freedom of the press case. Is "TIME" caving in to the courts to keep a reporter out of jail? Is this a matter of principle or is it simply an abridgement of your right to know?

Stay with us.

(COMMERCIAL BREAK)

DOBBS: New warnings tonight about the deadly bird flu that is spreading across Asia. Health experts in this country today warned Congress that a global pandemic could kill millions of Americans. The bird flu has now killed 39 people in Vietnam, and health officials say China has simply lied about the size of the outbreak in that country.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A Chinese cover- up of global magnitude. Bird flu killed 5,000 birds in China, five times more than the Chinese initially admitted. It's a pandemic nightmare. The current outbreak of avian flu in China is not in farm- raised poultry but in migratory birds and could spread rapidly.

DR. JULIE HALL, WORLD HEALTH ORGANIZATION: In August and September, there is a massive migration of these birds to the west and to the south.

PILGRIM: And the world is totally unprepared.

LAURIE GARRETT, AUTHOR, "THE COMING PLAGUE" Governments around the world have not taken this problem seriously. They've ignored warnings from the scientific community that have been coming forward for years.

This virus first appeared in Hong Kong in 1997. And here we are 2005, and we're scrambling madly. This is crazy. Totally crazy.

PILGRIM: Avian flu jumps species and has so far killed half the people infected with the disease. Vietnam today reported the death of a man in Hanoi from avian flu, the 39th mortality for that country. There's no idea how he contracted the bird flu. World health officials are baffled.

This flu is only an air flight away. That was the concern at hearings in Washington.

REP. TOM DAVIS (R), VIRGINIA: A pandemic could move around the world in the same amount of time it takes to it fly from New York to Tokyo.

PILGRIM: Experts say it could affect many more people than the 1918 Spanish flu pandemic that killed as many as 100 million people. That flu traveled by steamship, not by air.

Dr. Anthony Fauci of the National Institutes of Health called on American pharmaceutical companies to start producing flu vaccines immediately.

DR. ANTHONY FAUCI, NATIONAL INSTITUTES OF HEALTH: What we do need is American companies making vaccine on American soil. What we need is to have a greater commitment on the part of our own industrial partners here in the United States.

PILGRIM: And countries like China can't hold back on information.

(END VIDEOTAPE)

PILGRIM: Any country that with holds information, even for a few days, can put the entire world at risk. Now, there's some experimental work to try to make a vaccine against the avian flu, but scientists think the virus could be changing rapidly, and that's why the entire world is at risk -- Lou.

DOBBS: And this country, obviously, should be listening. And it is -- it is reassuring that Congress is listening now to Dr. Anthony Fauci, because what he's saying, putting American companies into the fight against this deadly disease, now.

PILGRIM: These hearings were chilling today when you saw the evidence.

DOBBS: Kitty, thank you very much. Kitty Pilgrim.

That brings us to the subject of our poll. Is our government, in your opinion, doing enough to protect Americans from a possible avian flu pandemic, yes or no? Cast your vote at loudobbs.com. We'll have the results later in the program.

Turning now to yet another astounding act of insensitivity on the part of the government of Mexico. Just weeks after Mexico's president's ignorant comments about African-Americans workers, his government is at it again. At issue are postage stamps that are tasteless and racially offensive. And as seems to be the case always, the Mexican government refuses to acknowledge the offensiveness of its actions.

Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The Mexican government doesn't understand the controversy sparked by these stamps, images of a comic book character, Memin Pinguin. The American government, on the other hand, does.

HADLEY: Our position is that there's no place for this kind of thing. It's wholly inappropriate. And we've made that clear.

TUCKER: The Mexican embassy in Washington, D.C. says the stamp is just a cartoon character from a comic book who's been around since the 1940s, and that "The commemorative postage stamp is not intended to be interpreted on a racial basis." They also add they've never been upset about Speedy Gonzalez.

Civil rights activists say there is no comparison, and are united in their response.

MARC MORIAL, PRESIDENT NATIONAL URBAN LEAGUE: The fact of the matter is that these stereotypic caricatures remind all of us of the awful stereotypic caricatures which were common in the U.S. South in the early part of the 20th century. So I hope and urge the Mexican government to discontinue distribution and publication of that stamp.

TUCKER: It was just last month that Mexico's president made the remark that Mexican migrants do work that not even blacks want to do, a remark that President Fox eventually apologized for. This latest incident calls into question the sincerity of that apology. REV. AL SHARPTON, NATIONAL ACTION NETWORK: This is contrition. This is saying that we respect and regard the African-Americans community by making them look like sambos on a stamp? I think that, if anything, this has gone over the line.

(END VIDEOTAPE)

TUCKER: And at present, Lou, there are no plans to withdraw the stamps.

DOBBS: And Reverend Al Sharpton obviously disappointed that an apology was not offered by the Vicente Fox when he met with the Mexican president, and now obviously more than just a little angry.

TUCKER: Yes.

DOBBS: As he should be. Bill Tucker, thank you.

Still ahead here, Italy versus the CIA over the so-called Italian job. New charges tonight that Rome is not coming clean in a daring U.S. operation against a suspected radical Islamist terrorist. We'll have that story.

And a violent settler revolt on the Gaza Strip. Israeli hard- liners vow to stay put. And the Israeli military vows they will not.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: New developments tonight in an escalating dispute between the United States and Italy over a covert CIA operation on Italian soil two years ago. An operation that has resulted in the past week in charges against 13 CIA agents by an Italian judge.

CNN sources have confirmed that the CIA did obtain the approval of intelligence officers of Italy before capturing a radical Islamist terror suspect. That contradicts assertions by the Italian government, that says it was not informed.

David Ensor reports.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): Knowledgeable U.S. sources confirmed to CNN that the CIA obtained the approval of Italian intelligence counterparts before capturing Hassan Mustafa Osama Nasr (ph) in Milan and rendering him to Egypt, his country of origin. At the White House, the president's national security adviser declined comment, so did officials at the CIA.

"The Washington Post" first reported the CIA station chief got approval from his counterpart in Italy. That despite speeches in the Italian parliament, where officials said Prime Minister Berlusconi's government knew nothing. REUEL GERECHT, FMR. CIA OFFICER: The notion that Berlusconi's -- the Italian prime minister -- people were not briefed well in advance is, I think -- has zero chance of being true.

ENSOR: Rendition is an extraordinarily sensitive subject for intelligence agencies, yet when he was director of Central Intelligence, George Tenet confirmed publicly that the CIA has forcibly moved a number of individuals from one country to their country of origin. It's been done about a hundred times, sources confirm.

(END VIDEOTAPE)

ENSOR: The president has said, "We operate within the law and we send people to countries where they say they are not going to torture the people." Of course, whether those countries keep their word, that's another matter -- Lou.

DOBBS: David, thank you very much for the report. David Ensor from Washington.

"TIME" magazine tonight is being accused of caving in to the courts in an important press freedom case. In a surprise announcement, "TIME" magazine has agreed to hand over the confidential notes of reporter Matthew Cooper. Cooper has repeatedly refused to reveal his confidential sources, sources for an article he wrote about the naming of the secret CIA operative. "TIME's" editor-in-chief, Norman Pearlstine, said that he hopes today's action will sway the judge and keep Cooper out of jail.

(BEGIN VIDEO CLIP)

NORMAN PEARLSTINE, EDITOR-IN-CHIEF, TIME INC.: It's up to Matt and Judge Hogan (ph). I don't decide whether Matt gets jail time or not.

If Matt chooses to withhold the confidentiality of his sources, then a decision will have to be made by the judge. My own view is that by turning over this information, we obviate the need for Matt to even testify, let alone be incarcerated. But I can't speak for Judge Hogan (ph).

(END VIDEO CLIP)

DOBBS: And possibly that would extend to "New York Times" reporter Judith Miller as well should that material be handed over by "TIME" magazine and the case rendered effectively moot.

Judith Miller faces jail time as well for not handing over her records in this case, and "The New York Times," despite the fact that Norm Pearlstine, the editor-in-chief of "TIME" magazine, maintains that the Supreme Court decision means the company has no choice, blasted "TIME's" decision today.

"The Times" saying in a statement, "We are deeply disappointed by Time Incorporated's decision to deliver the subpoenaed records. Our focus is now on our own reporter, Judith Miller, and in supporting her during this difficult time."

Still ahead here, Israeli troops versus Israelis in Gaza. A violent crackdown against die-hard settlers fighting to stay in their homes.

And General David Grange will be here. We'll be discuss the rising violence in Afghanistan, and of course, in Iraq.

And a frightening security breach at Phoenix International Airport today. A wild car chase, a stolen pickup. Planes trying to take off. Dramatic pictures next.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Violence in Gaza today between militant Israeli settlers and Israeli soldiers. The clash is the worst since Israel announced it was pulling out of the Gaza.

Guy Raz has the report.

(BEGIN VIDEOTAPE)

GUY RAZ, CNN CORRESPONDENT (voice-over): A fortress no more. The Israeli police commando forcibly removed hard-line squatters from this abandoned hotel. Until Thursday, it was a settler stronghold, occupied by 150 of the most die-hard Israeli nationalists.

The Gaza settlements are now a closed military zone.

MARK REGEV, ISRAELI FOREIGN MINISTRY: Which means that people who have no reason to be there will not be allowed to come in.

RAZ: The army is preparing the ground to evacuate all the settlers from this occupied strip of land in six weeks' time, but the settlers' most ardent supporters won't relent, raising fists against the soldiers sent to pull them out.

MAJOR SHARON FEINGOLD, ISRAELI ARMY SPOKESPERSON: What has been happening in Gaza in the last few days is extremely disturbing, and we are monitoring the situation very closely.

RAZ: This Palestinian man in Gaza was left in critical condition after a right-wing lynch mob attacked him. Israel security minister vows to track down those who took part in the attack. The prime minister saying these nationalists are engaged in a reign of terror.

ARIEL SHARON, ISRAELI PRIME MINISTER (through translator): We will treat those who commit these acts with a strong hand.

RAZ: Meanwhile, the Israeli army remains on high alert, after a series of clashes with fighters from the militant Lebanese militia, Hezbollah. On Wednesday, Hezbollah launched a barrage of rockets and gunfire at an Israeli military outpost on the Israel-Lebanon-Syria border. (on camera): With less than six weeks to go before Israel plans to withdraw from Gaza, the government is now bracing for a long, hot summer of violence.

Guy Raz, CNN, Jerusalem.

(END VIDEOTAPE)

DOBBS: Accusations that Iran's hard-line president-elect may have helped take Americans hostages 25 years ago raising new concerns about U.S. policy toward Iran. The United States says Iran is trying to develop nuclear weapons, and Iran says it will proceed despite U.S. objections.

Joining me now, General David Grange. General, let me start with the issue of the Iranian president-elect. You were in charge of the security for the extraction base should the hostage rescue mission not have been aborted. Your sense of just how important that this man took part in the hostage-taking?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, Lou, I'm not sure if he did or not. The indications are that he did. But this mix of possible nuclear weapons, mix of support to terrorist organizations like the Hezbollah, an extremist group running the country, and now this latter being put in that mix is very dangerous, obviously, for the whole region.

DOBBS: It is dangerous, but already even without this new -- these new allegations against the president-elect, the relationship between the United States and Iran is simply a tinderbox, isn't it?

GRANGE: It is. And, you know, without careful diplomacy, there's a chance of conflict obviously in the future with Iran. Iran is definitely a threat to the area.

DOBBS: And the United States engaged obviously with Iraq, and, at best right now in terms of the insurgency, it is a stalemate over the course of the past six months. The insurgency neither diminished nor strengthened. Can the United States -- does the United States have the capacity to extend its political will in that region, given what is happening in Iraq?

GRANGE: Well, given what's happening in Iraq, the commitments also in Afghanistan, it's quite a commitment. Standing by for possible conflict in places, or in the proximity of Iran, it's tough with the size force we have. We could defeat anyone, there's no doubt in my mind. The problem is, to sustain the force capable to take on those -- those things for, let's say, the next decade. And it's hard to man a force right now with the recruiting challenges throughout the -- throughout our country.

DOBBS: There is no sign, as you're well aware, that the Army's recruiting efforts are being any more successful this month than last. In fact, since the beginning of the year, extraordinary shortfalls in recruiting. The president, his speech, you listened to it. Did he say what you wanted to hear to assure success in Iraq? GRANGE: Lou, the stuff that the president put out, the items in his speech to the American people, I did appreciate it. I did like it. I support it. However, these kind of things have to be done constantly. The people have to understand the reason why. The issues on how long are we going to be there. You know, historically most counterinsurgencies have taken over a decade to accomplish. I mean, we need to lay it out, it's going to take a while. And Americans are going to be part of that mix until you can train up a proficient police and military force, the Iraqi army, and that takes years to do as well, as history shows.

DOBBS: Are you satisfied with the leadership that our men and women in uniform are receiving from the Pentagon? These outstanding young warriors in Iraq? And to hear generals from the Pentagon testifying before Congress, saying things like, we still have not met our procurement reform goals, while we do not have sufficient body armor, while we do not have sufficient ammunition, while we do not have so-called up-armored humvees?

GRANGE: I do, Lou. Because I know the people. And I do believe in them, because I know it's not just the military that's responsible for this. But it's a call of national service for all leadership, administration, military and Congress, in order to make this happen. And I would like to see a better call of service from all involved to accomplish this mission, because it's going to take the entire country to do so.

DOBBS: General David Grange, as always, we appreciate your insight.

Coming up next here, CAFTA's big secret. Why critics of this so- called free trade agreement say CAFTA will only add to this country's immigration crisis. That's right, immigration crisis.

And a shocking lapse in providing health care to our nation's veterans. Two members of Congress will be here to tell us how they're working to fill a $1 billion shortfall for the men and women who serve this country in uniform. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The controversial Central American Free Trade Agreement is expected to go before the full House of Representatives in July. President Bush says CAFTA will open up new markets for American companies. Critics say CAFTA will kill American jobs. They also point to 1,000 pages of international law that is included in the CAFTA agreement, 1,000 pages. The United States would have to follow those laws if CAFTA were to become law in this country. And there's a good reason why it should not.

Lisa Sylvester reports from Washington.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): CAFTA is much more than a trade agreement. If it passes, it would become the highest law of the land, determining rules from health care, to zoning, to immigration.

Current federal, state and local laws could be called into question.

LORI WALLACH, PUBLIC CITIZEN: Any violation of 1,000 pages of international law imposed on us is taken to an international tribunal, not U.S. courts, where if the U.S. does not conform its law, we face perpetual trade sanctions. It's a huge attack on our sovereignty and our democracy.

SYLVESTER: If a local community passed a law to limit urban sprawl, it could be challenged under CAFTA by a foreign investor who wants to build. States with buy American laws that give preference to local companies could be asked to reverse those laws. Even U.S. immigration laws and visa requirements could be considered a violation under CAFTA.

Any company wishing to come into the United States, and either start a business or complete a contract, can bring their employees in from the country of origin. Even if our visa system is -- or even if our visa quota is full.

SYLVESTER: The U.S. trade representative's office points to a side agreement to CAFTA that excludes immigration. But Congressman Tom Tancredo said the side agreements from the North American Free Trade Agreement with Mexico have not been worth the paper they're written on.

REP. TOM TANCREDO, (R) COLORADO: Scores of them have been ignored. Because they're not part of the agreement. That's why it's called a side agreement. And because they're not part of the agreement, they have no legal bearing.

SYLVESTER: Supporters of CAFTA say it will open up Central American markets to U.S. companies and lead to lower prices for consumers. But critics are urging lawmakers to look at the fine print, because they may be giving away far more than they're getting.

(END VIDEOTAPE)

SYLVESTER: 28 governors initially committed to CAFTA, but nine of those states withdrew their support because of the concerns they had with these non-trade issues included in CAFTA -- Lou.

DOBBS: Lisa, thank you very much. Lisa Sylvester reporting from Washington.

Well, it seems Vice President Dick Cheney isn't aware of those back-door immigration provisions in the CAFTA agreement. During a radio interview today, Vice President Cheney explained why he believes CAFTA would help solve another critical issue that faces this country, and is worthy of being our quote of the day. Vice President Cheney said, quote, "One of our big problems these days is illegal immigration. A certain amount of it is coming out of those Central American countries. The best way to counter that is to make certain that they have the opportunity to grow and develop their own economies, so they're folks will stay at home and can find decent jobs there instead of trying to come to the United States illegally."

Yes, CAFTA would let them come here, but not illegally.

Another example tonight of China's continued threat to our security, and quite simply, our way of life. My guest recently led a delegation of U.S. agricultural leaders to China. He says the huge potential of China's agricultural industry poses a threat to our economic and national security.

The Tom Nassif says it's time Washington had a wake-up call. He's the president and CEO of Western Growers, former deputy assistant secretary of state joining us from Los Angeles. Good to have you here.

TOM NASSIF, PRESIDENT, CEO WESTERN GROWERS: Nice to be with you, Lou.

DOBBS: What in -- did you see while in China that produced this kind of concern?

NASSIF: Well, it started just before I left for China, when I read a quote by the deputy governor of the Central Bank of China, who in discussing the balance of trade deficit that the United States has with China, about $162 billion, and the reevaluation of the currency said, there are certain industries the United States should not be involved in. And one of them is agricultural.

DOBBS: Well, according to the Chinese, and according to this administration and the one before it, the United States should not be in agriculture, it shouldn't be in automobile manufacturing, it shouldn't be in textiles, it shouldn't be in apparel, it shouldn't be in manufacturing at all, should it?

NASSIF: That seems to be the tune being sung out of China. But for my point of view, and I think from our industry's point of view, just like energy supply and our military sufficiency, a secure domestic food supply is a national security imperative. We can't let happen to our food supply what we've let happen to our energy supply.

DOBBS: Tom, as you look at what is required to feed 1.3 billion Chinese, 1 billion Indians, those represent large markets, of course, for U.S. agricultural interests in farmers. It is also important to those countries, and understandably so that they create their own agricultural base, and provide for themselves. Don't you agree?

NASSIF: No question about it. The -- China is a tremendous agricultural power. About 70 percent of all Chinese live in the rural areas. And most of the working force, about two-thirds of it is involved in agriculture.

As you probably know, Lou, that almost every rebellion in the history of China was caused by dissatisfaction in the rural areas among the farmers. So they are tremendous political force, and the government has decided it's going to need to prop them up in order to keep them happy while manufacturing industry flourishes and wages flourish in the economies of the major cities. DOBBS: Tom, do you think the United States should be self- sufficient in terms of agriculture?

NASSIF: Unquestionably so. Once you start diminishing your supply and your ability to feed yourself, you give that to other countries. And once those countries have control of that food supply, they can certainly leverage it against their foreign policy interests, just as has happened with energy using the energy supply to the United States from foreign governments to leverage foreign policy in oil producing regions.

DOBBS: Then help me out here, Tom. We should be self- sufficient, and provide for our own food stuffs, our own agricultural base, but at the same time, agricultural interests in this country are exploiting illegal aliens, illegal immigration, and are not self- sufficient and are not dealing with that issue straightforwardly. When are we going to get honest -- intellectually honest and talk about the values that should be determinant as we make these very important large public policy decisions? Whether it's in terms of agriculture, immigration, or any other industry?

NASSIF: As you recall from our last conversation, Lou, on immigration, we believe that the illegal work force in the United States, as far as foreign workers are concerned, should be here only. That we should not have an illegal work force. They should be adequately paid. That they should have housing and health insurance which most of the members of Western growers do now utilize.

Once we lose a foreign work force, and hopefully that will be a legal foreign work force, we not only lose millions of jobs, we lose 3.5 times that amount in jobs that are created in America.

DOBBS: Now, I'm talking to you about illegal work forces.

NASSIF: That's what I say, we've been working very difficulty and very strenuously to pass the AG jobs bill to try to help us create a law...

DOBBS: But that's an amnesty bill as you know. Tom, it's basically to give an estimated 2.5 million illegal aliens citizenship.

NASSIF: The idea is not to give people citizenship, the idea is to take illegal workers and make sure that they're legal by saying there...

DOBBS: But here's my idea for you, Tom...

NASSIF: ...in doing what's necessary for the law.

DOBBS: Here's my idea for you. If you're going to be concerned about American agriculture, as for you and every one of us should be, why can't we be consistent, intellectually honest and talk about what we're doing in this country and the policies that will be straightforward and transparent and deal with the issues as they come instead of playing political games? NASSIF: I agree with you. We should be intellectually honest. And we have stood up and said there are too many illegal aliens in this country and in our work force. Let's pass laws from keep that from happening.

DOBBS: Tom Nassif, it's always good to have you here.

NASSIF: Thank you, Lou. Nice to be with you again.

DOBBS: Look forward to talking to you again.

Coming up at the top of the hour "ANDERSON COOPER 360." Anderson, what's happening?

ANDERSON COOPER, CNN ANCHOR: Lou, thanks very much. Yes, coming up on 360, new details emerging out of Aruba in the case of Natalee Holloway. There are new allegations that Paul Van der Sloot, the father of the lead suspect in the case, coached his son on Aruban law and told him, quote, "if there's no body, there's no case." Natalee Holloway's parents are outraged, as you might imagine. We'll bring the full story.

Also, we're going to continue to explore scientology and Tom Cruise and their opposition to psychiatry and antidepressants.

We'll also speak with Grammy winning singer Shawn Colvin about her battle with depression.

All the angles, Lou, next.

DOBBS: Look forward to it, Anderson. Thanks.

A $1 billion budget short fall with the Department of Veterans Affairs. My guest, one Republican, one Democrat, one in Congress, one in the Senate. We'll be talking about what went wrong and what they're doing to fix it.

And a wild car chase in Phoenix, Arizona on a busy street, on a busy airport. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight: Congress scrambling to address a $1 billion budget short-fall at the V.A. Yesterday, the Senate voted unanimously to give the V.A. an extra $1.5 billion to address the medical needs of our veterans.

Tonight, the House is preparing to vote on an emergency spending bill of its own. Joining me now, to talk about the V.A. funding short fall and crisis, Congressman Steve Buyer, who is the chairman of the House Committee on Veteran Affairs; Senator Patty Murray, a member of the Senate Committee on Veterans Affairs. Good to have you both here.

REP. STEVE BUYER (R), VETERANS AFFAIRS CMTE. CHMN: Thank you.

DOBBS: Let me start out with you, Congressman Buyer, and I understand that you do have a vote coming up here shortly, so we appreciate your time. What's going to be the outcome here? Are we going to see the money appropriated?

BUYER: It will happen. It is not an emergency spending. We do have -- this will be a straight supplemental appropriation for which we have offsets. So, it's not an emergency.

And this came about through our House Committee Oversight, and discovered this, and the administration had proposed some work-around solutions. We began to examine it and were uncomfortable and I was pleased today, that the secretary came before the committee and asked for a supplemental appropriation in the amount of $975 million.

DOBBS: And Senator Murray: Last night, a vote of 96-0 in the Senate to provide $1.5 billion. You tried four times to provide emergency funding there. What was your reaction?

SEN. PATTY MURRAY (D), WASHINGTON: Well, I think I join all my colleagues in the Senate, Republicans and Democrats alike, at being very frustrated at the V.A. not giving us accurate numbers for the last several months; finally coming forward now and telling us, astonishingly, they are $1 billion or more short just for this year. And next year, probably over $2 billion - $2.5 billion.

We know we need to provide the funds. No one wants to turn away anyone, who served this country, at our health care facilities. So, we worked together, Senator Craig, a Republican, and myself and others in the Senate, to make sure we've got the funds and emergency supplemental to put this forward. And Senator Craig and I are going to continue this effort, along with everyone else in the Senate, to get it done.

DOBBS: Senator and Congressman, let me just go to a letter that Jim Nicholson, the head of the V.A. Department, sent to Senator Kaye Bailey Hutchison focusing on this very issue. He sent this on April 5th, it read, in part: I can assure you the V.A. does not need emergency supplemental funds in fiscal year 2005 to provide the timely, quality service that is always our goal.

BUYER: Right.

DOBBS: Two months later, in your committee, you discover that there is a short fall.

BUYER: Yes.

DOBBS: How in the world did that happen?

BUYER: Well, they do a -- they conduct what's called a mid-year review and when they did that, they began to look at their finances and found out that they have a serious problem. And when I looked at this, Lou, I discovered that the health modeling that's used to forecast for their budgets -- they contract with a private firm, Milliman (ph), who provides actual expertise for many of the private firms in the country and we stressed that model.

So, the '05 budget was put together with 2002 data. When you look at that, we weren't even in the Iraq war in 2002.

DOBBS: Right.

BUYER: So, they were bad assumptions. The forecast, the data was wrong and the variance now is very real.

MURRAY: And you know what...

DOBBS: Senator Murray, Secretary Nicholson testified before you. What's the explanation here from your perspective?

MURRAY: Well, first of all, let me say: At the exact time he wrote that letter, I was out on the floor of the Senate asking the Senate to approve and additional $1.9 billion, because I saw what was coming. I was on the ground talking to our veteran's facilities. I was looking at the V.A.'s own data. I knew they were not taking into account our returning veterans, our returning soldiers from Iraq and Afghanistan and they had not accounted for the fact that health care costs, as we all know, have increased dramatically.

So, you know, we looked at the figures. We knew it was there. And I really have to say to the V.A.: They need to be honest with us about this part of the cost of war. And I'll tell you, that's been very frustrating to us in the Senate.

DOBBS: But the Senate is dealing with this..

MURRAY: Absolutely.

DOBBS: And thanks to you, Senator Murray and Congressman Buyer...

BUYER: This will pass tonight.

DOBBS: It will pass tonight?

BUYER: Yes.

DOBBS: Our men and women in uniform, our veterans will be better cared for. Thanks for your diligence...

BUYER: Thanks for your service, too, Lou.

MURRAY: That's right. And, Lou, let me just say this is not a Republican or Democrat issue. This is an American issue. We are going to get this done.

DOBBS: And we should be dealing with far more of these issues as American issues, as I know you would agree, rather than Republican and Democrat.

We thank you both, Democrat and Republican, for dealing with this support.

BUYER: All right. Thank you, Lou.

DOBBS: Thank you, both.

Still ahead: The results of tonight's poll, a preview of what's ahead tomorrow. Plus: Where this Phoenix, Arizona, ended: Somewhere you probably wouldn't expect

The story is next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: A Phoenix man is in police custody tonight, after leading law enforcement officers on a wild car chase. That chase ended in what most would consider a very unusual and dangerous place: The Phoenix airport.

The suspect, Damian Holmes (ph), was allegedly driving a stolen truck. He drove, the allegedly stolen truck onto the runways and around jetliners and even through a fence at the airport. Officers did fire shots, but that was not enough to stop the suspect. Police followed closely behind; they eventually caught the man.

You're going to have to take our word -- there it is. It's ending at the airport. We never like to end these chases with out resolution and there it is. Thank you.

Taking a look now at some of your thoughts: Nancy Long in Ocala, Florida: When President Bush began touting the concept of an ownership society, he neglected to mention the owners would be China.

And, Patriot Boyd, in Houston, Texas: I must've fallen off the turnip truck somewhere along the way, because I thought Communism was a bad thing.

And, Roy Hefler, in Mace, Arizona: If a Chinese company can put up $18 billion for an American oil company, why should the U.S. import/export bank even consider a loan to the Chinese for nuclear plants? Dumb and dumber.

We couldn't agree more. Send us you thoughts at LouDobbs@CNN.com

The results of tonight's poll: 97% of you say you do not believe our government is doing enough to Americans from a possible avian flu pandemic.

Thanks for being with us, here tonight. Please join us here tomorrow. For all of us, good night, from New York.

"Anderson Cooper 360" starts right now -- Anderson?

END

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