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Rove and CIA Leak; Security Shakeup; Duncan Hunter Interview; Evan Bayh Interview; Illegal Immigration

Aired July 13, 2005 - 18:00   ET


LOU DOBBS, CNN ANCHOR: Good evening, everybody.
Tonight, outrage on Capitol Hill. The first congressional hearing on China's attempt to take over one of our most important energy companies. The powerful chairman of the House Armed Services Committee is my guest.

Also, new concerns tonight about the vulnerability of this country's chemical plants to terrorist attack, attacks that could have catastrophic consequences. We'll have a special report.

Chief Justice William Rehnquist is in the hospital tonight suffering from a fever. We'll have the very latest on his condition.

And NASA has scrubbed the launch of the Shuttle Discovery because of a last-minute technical problem. When will the shuttle blast off? We'll have a live report for you from the Kennedy Space Center.

Our top story tonight is the refusal of the Bush White House to answer questions about the role, if any, of Karl Rove in the leak of a CIA agent's identity. President Bush today broke his silence on the issue, but President Bush limited his comments to saying he cannot say anything that would prejudge the investigation into that leak. President Bush did not use the opportunity to give Rove an unequivocal and public statement of support.

Dana Bash reports.


DANA BASH, CNN WHITE HOUSE CORRESPONDENT (voice-over): There was Karl Rove, right behind his boss, waiting for the inevitable questions about his alleged role in outing a covert CIA agent. Two queries, no answer.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We're in the midst of an ongoing investigation. And I will be more than happy to comment further once the investigation is completed.

BASH: Some GOP advisers were surprised the president did not offer his closest adviser and friend a vote of confidence.

The White House insisted he wasn't hedging his bets, he wasn't asked.

SCOT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: Every person who works here at the White House, including Karl Rove, has the confidence of the president.

BASH: But this president doesn't wait for specific questions when he has something to say. The current tight-lipped strategy is a remarkable shift. Mr. Bush showed no hesitation earlier in the investigation, including this exchange in September 2003.

QUESTION: Yesterday we were told that Karl Rove had no role in it. Have you talked to Karl and do you have confidence in him?

BUSH: Yes. Listen, I know nobody -- I don't know of anybody in my administration who leaked classified information. If somebody did leak classified information, I'd like to know it. And we'll take the appropriate action.

BASH: But with "Time" magazine's Matt Cooper now testifying he and Rove discussed the issue...

MATT COOPER, REPORTER, "TIME": We worked out this waiver agreement with Karl Rove's attorney last week.

BASH: ... the White House is pulling back, letting the Republican National Committee distribute talking points to allies in Congress.

REP. DEBORAH PRYCE (R), OHIO: I think what the Democrats are doing with Karl Rove is just another politically motivated part of their agenda.

BASH: Top Bush aides insist they're not distracted by all this, but it drowned out what the president wanted to talk about.

BUSH: OMB is going to announce that the 2005 deficit is $94 billion less than previously expected.

BASH: And Rove questions are following administration figures around the world. The first lady faced one in Africa. The secretary of State as she traveled home from Asia.

MIKE FELDMAN, FMR. CLINTON OFFICIAL: Most of the administration's public -- public faces are out there trying to change the subject. But when -- when an issue is this red hot, and when it remains unresolved, it's very difficult to do so.


BASH: And even Bush loyalists admit what they do know about this investigation pales in comparison to what they do not. That is the source of this newfound caution coming from the White House. And as one said, at the end of the day, the bottom line is, no matter how powerful Karl Rove is, defending their guy here does mean protecting the president, period -- Lou.

DOBBS: Dana, thank you very much. Dana Bash reporting from the White House.

Seven Democratic members of the House Intelligence Committee, including ranking member Jane Harman, tonight signed a letter that urges President Bush to revoke Karl Rove's security clearance. Rove has been at the center of this controversy since it was revealed he discussed the case with at least one reporter.

President Bush tonight wished Chief Justice William Rehnquist a speedy recovery after Rehnquist went to the hospital suffering from a fever. Rehnquist is in Virginia Hospital Center in Arlington tonight. He is there for observation and tests. He was admitted last night.

There is no word on how serious his condition or when he will be released. The chief justice has been suffering from thyroid cancer since last October. There's been intense speculation that Rehnquist will announce his retirement from the Supreme Court soon.

A major security shakeup in the country today to bolster our defenses against radical Islamist terrorism. Homeland Security Secretary Michael Chertoff said his plan includes new measures to protect U.S. mass transit systems. Chertoff also acknowledged the United States must improve border security and enforce our immigration laws more effectively.

Kelli Arena reports.


KELLI ARENA, CNN JUSTICE DEPT. CORRESPONDENT (voice-over): Homeland Secretary Michael Chertoff says the attacks in London are jarring reminders of the threat Americans face.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: Together we gather once again in the shadow of a despicable act of terrorism.

ARENA: After an extensive review, he laid out his plan to make the homeland more secure.

CHERTOFF: DHS will concentrate first and foremost, most relentlessly, on addressing threats that pose catastrophic consequences.

ARENA: As a result, a higher priority will be placed on preventing and responding to a nuclear or biological attack. Without offering details, he said his department would step up detection systems on the nation's rails, subways and buses, but conceded that not all possible targets can be protected.

RICHARD FALKENRATH, CNN SECURITY ANALYST: The only rational thing for a cabinet secretary to do in his position is to select those scenarios, which, if they happened would be most destructive to America.

ARENA: Another major priority, border security. Chertoff says he will commit more workers and funds for better technology. Chertoff talked about better screening of airline passengers and a retooling of the terror watch list. He also said first-time visitors to the U.S. would have to have prints taken of all 10 fingers.

Local homeland officials say they like what they heard, but are waiting for the fine print.

CARLO BOCCIA, BOSTON HOMELAND SECURITY DIRECTOR: When I see these programs in action, then I'll be able to say, hey, no, we didn't get enough here, or we didn't adjust this program far enough, we need to do more of that. It's really too early to tell.

ARENA: About 80 percent of what Chertoff proposed can be accomplished under his existing authority, but the rest requires congressional approval.


ARENA: Homeland officials say that the most important changes is the elimination of several layers of bureaucracy, giving Chertoff more direct responsibility. And Lou, you might be interested to know that the next time you travel into Washington Reagan Airport you will no longer have to sit there for 30 minutes after landing because Chertoff announced that he's lifting that requirement, saying it's no longer necessary.

DOBBS: There are a host of requirements that, of course, have frustrated the traveling public, and it is always good to see the bureaucracy at least begin to respond. And unfortunately, four years after September 11, almost, there remain extraordinarily vulnerabilities in this country to potential terrorist attacks.

Kelli Arena, thank you, reporting from Washington.

Nearly four years after September 11, the nation's major chemical plants remain highly vulnerable to terrorist attacks. More than 100 of those facilities are near urban population centers, but security improvements have been slow, partly because the chemical industry itself is resisting any change.

Lisa Sylvester reports.


LISA SYLVESTER, CNN CORRESPONDENT (voice-over): A sign reads, "Private property, no trespassing." But look closely. There's also a gaping hole in this fence at a chemical plant.

The Congressional Research Service has identified more than 100 chemical facilities nationwide near major urban centers that, if attacked, the result would be catastrophic. One facility is in northern New Jersey. Twelve million people live within a 14-mile radius of the plant that stores lethal chlorine gas.

REP. ED MARKEY (D), MASSACHUSETTS: There are nightclubs in New York City that are harder to get into than chemical facilities across the United States.

SYLVESTER: Congress is considering mandating security upgrades. At a Senate hearing today, the question wasn't whether there should be legislation, but how far it should go. SEN. FRANK LAUTENBERG (D), NEW JERSEY: In view of the devastating attack in London last weekend, it's clear that we can't let up our guard.

SYLVESTER: The American Chemistry Council says its members have spent $2 billion in security upgrades since 9/11, and it welcomes new standards for the entire industry. But the Chemistry Council is resisting calls for mandatory use of safer chemicals to be enforced by the Department of Homeland Security.

MATTHEW BARMASSE, SYNTHETIC ORGANIC CHEM. MAN. ASSN.: I think the department's expertise is going to be in the area of security, and not chemistry. And it's going to be very difficult for security experts to have the expertise to understand how to regulate what goes on in a process.

SYLVESTER: Critics say self-policing since the 9/11 attacks has not worked well for all chemical companies. If it had, it wouldn't be so easy to just walk onto a chemical plant, a prime terrorist target.


SYLVESTER: The United Steel Workers International Union recently did a survey of chemical plant workers, and only 3 percent thought the facilities were doing an excellent job of preventing sabotage, 97 percent thought security had fallen short of that mark -- Lou.

DOBBS: Lisa Sylvester. Thank you.

Turning now to the war in Iraq, a deadly attack today on Iraqi children in Baghdad. A suicide bomber exploded a vehicle next to Iraqi children who were collecting candy from American troops. One American soldier, 26 Iraqis among those killed. Three American soldiers were wounded.

In Britain, police hunting radical Islamist terrorists today stepped up their search of homes in the northern city of Leeds and other towns in the area. Three of the four suspected suicide bombers who carried out the radical Islamist terrorist attacks in London were from Leeds. More than 50 people killed in those attacks, 700 Londoners wounded.

Still ahead here tonight, NASA scrubs the launch of the Shuttle Discovery. We'll tell you why and when NASA plans to reschedule the launch. A live report coming up from the Kennedy Space Center.

And red storm: our national security at risk. Alarming testimony today on Capitol Hill about China's efforts to take over one of our biggest energy companies. The powerful chairman of the House Armed Services Committee is our guest here next.


DOBBS: NASA today scrubbed the launch of the Shuttle Discovery less than three hours before it was scheduled to blast off from the Kennedy Space Center. Officials said a faulty fuel-tank sensor is to blame. The shuttle mission was to be the first since the Columbia disaster more than two years ago.

Sean Callebs now reports from the Kennedy Space Center -- Sean.

SEAN CALLEBS, CNN CORRESPONDENT: Well, Lou, you're exactly right. NASA pinpointing it to some kind of problem with one of the hydrogen fuel sensors in the external fuel tank, but exactly where and exactly how the problem is affecting, it's very difficult to say.

Let's take you live out to the launch pad, and you can see just an absolutely wonderful evening here. And think about it, NASA was very concerned about the weather throughout the day, saying there was a 60 percent chance that foul weather could keep Discovery on the pad.

Right now they are taking the 500,000 gallons-plus out of the external fuel tank. They are concerned the problem could be with the fuel sensor inside the tank, it could be with the cable leading to Discovery, or something within Discovery itself. They won't know for a few days.

If you want to see the face of disappointment, look at these astronauts. Most of them had already been strapped in. The launch was scrubbed just two-and-a-half hours before scheduled liftoff. The big question now, when will the Discovery go up? It could be several days.


WAYNE HALE, DEP. SHUTTLE PROGRAM MANAGER: We did a little review of the absolute best case kind of scenario and decided that we would not in any conceivable way be ready to launch before Saturday. So that's probably the very best case scenario. And we're going to go where the technical data leads us until we solve this problem and get to a safe posture to go fly.


CALLEBS: Well, the problem-solving has already begun. They're trying to do some troubleshooting. They hope to begin as early as about a half an hour from now, but it clearly could go on into the week.

NASA says if there is one positive aspect of all of this, it's the change in mindset in the past two-and-a-half years since the Columbia disaster. NASA really came together as one. And once this problem was cleared, it only took about five minutes to make the decision to say, we're going to have to scrap the flight today.

The astronauts are still here. They're out of their suits at this time, but they are going to hang around for a couple of days, Lou, and hope, hope, the shuttle could go up as early as Saturday.

Back to you.

DOBBS: As you report, Sean, Commander Eileen Collins and her crew of Discovery obviously frustrated and disappointed, but I'm sure eager to get this mission under way. Sean Callebs from the Kennedy Space Center. Thank you. Tropical Storm Emily is gaining strength in the Caribbean tonight. It could pose a threat to this country next week.

Emily is now heading toward Barbados and the Windward Islands. It now has winds approaching 60 miles an hour and could become a hurricane as early as tomorrow. The latest storm projections show Emily approaching Haiti and Cuba by this weekend and possibly, possibly turning toward the United States.

When we continue, a disgraced executive is heading for prison. He may spend the rest of his life behind bars. We'll have the latest on the sentencing of Bernard Ebbers.

And a student loan racket. A massive taxpayer giveaway to banks, not to students. Is Congress finally ready to turn off the spigot for your tax dollars?

China's power grab for U.S. oil company Unocal. Congress hears the case against a deal, a deal that would greatly compromise U.S. national security. We'll have a special report, and we'll be joined by the powerful chairman of the House Armed Services Committee.

Those stories and more, coming right up.


DOBBS: Tonight, Congress is finally taking steps to shut down a massive college loan racket and a taxpayer rip-off that benefits banks, not college students. The banking industry has exploited a major loophole in the government-backed student loan program. The cost to American taxpayers, more than $1 billion.

Kitty Pilgrim reports.


KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A government- subsidized college loan giveaway, billions of dollars. It sounds great. The only hitch is, the money doesn't go to the students, it goes to the banks.

A legal loophole allows some banks to pocket up to $1 billion off of student loans. And despite years of complaints, the government still hasn't shut it down.

REP. CHRIS VAN HOLLEN (D), MARYLAND: This has been long overdue in coming. There are lots of people who are making lots of money through this loan scam, as I think it is. It's a real scheme that has bilked taxpayers out of billions of dollars at the expense of students.

PILGRIM: Here's how the abuse works. Students now pay an average 5 to 6 percent interest on their student loans to certain banks, but those banks charge the government 9.5 percent interest on those loans. Banks can pocket the difference and actually use income from those loans to make new loans that also get 9.5 percent subsidy. It's called recycling the loans. Congress has closed some of the loopholes, but not all.

ROBERT SHIREMAN, INST. FOR COLLEGE ACCESS & SUCCESS: In the 1970s, when this particular loophole began, the government was creating a long list of incentives so that banks and states and colleges would get involved in student loans. It would make sense to use that money to help the students who most need help.

PILGRIM: Senator Ted Kennedy's been trying to get the loopholes closed for years.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: The secretary of Education has given the assurance that she strongly supports eliminating the program for the future, but we -- every day we let this program go on, it costs the American students some $3 million a day. And what that means in terms of the number of children that could receive additional kind of help and assistance is enormously important.


PILGRIM: The Education and Work Force Committee and Congressman (INAUDIBLE) marked up this bill. This legislation is planned to be included in the Higher Education Reauthorization Act, which will be voted on after the August recess -- Lou.

DOBBS: It is remarkable that Congress -- and you have to put it squarely at the Republican leadership of this Congress -- it's a Republican Congress -- would tolerate this and to deny that money, in effect, for the students who need it, those seeking student loans.

PILGRIM: It is a big scandal. Everyone we spoke to today were outraged. They closed a few loopholes, and then the ones that are left open are exploited. And it's just...

DOBBS: And it speaks -- and it speaks to the power of the banking lobbyists in this country.

PILGRIM: It certainly does.

DOBBS: Who could better spend their time and taxpayer money. Kitty Pilgrim. Thank you.

Former WorldCom CEO Bernie Ebbers today was sentenced to 25 years in prison. In March, a jury found Ebbers guilty of overseeing an $11 billion accounting fraud, the largest fraud in American corporate history.

Today, the media swarmed around the disgraced former CEO as he left the federal courthouse in Manhattan. Ebbers orchestrated the biggest corporate fraud with some 20,000 WorldCom employees losing their jobs. Shareholders losing $180 billion from the company now called MCI filed for bankruptcy.

As the judge read out the sentence, Ebbers looked distraught, and had tears in his eyes. At age 63, 25 years could effectively mean a life sentence. Up next, red storm, the threat to our national security from China's bid to purchase Unocal. My guest is the powerful chairman of the House Armed Services Committee. He asserts this deal could be of utmost concern to American legislators.

And my guest, the author of a cover story in "BusinessWeek" magazine this week, suggesting clearly that marketing loans and bank accounts to illegal aliens is part of a legitimate business trend and opportunity for American business. We'll debate that here next.


DOBBS: Alarming testimony today on Capitol Hill about China's move to take over a major American oil company. The House Armed Services Committee held the first hearing on China's bid to buy California-based Unocal. That hearing raised serious questions about whether our economy and our national security would be at risk.

Christine Romans reports.


CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): On Capitol Hill, a barrage of warnings from a national security expert, former CIA Director James Woolsey.

JAMES WOOLSEY, FMR. CIA DIRECTOR: For anyone who believes that this is purely a commercial undertaking, unrelated to a national strategy of domination of energy markets and of the western Pacific, I would suggest that that view is extraordinarily naive.

ROMANS: Naive, and dangerous. Frank Gaffney served the Pentagon under Ronald Reagan.

FRANK GAFFNEY, CENTER FOR SECURITY POLICY: The object of China's strategy is inexorably to supplant the United States as the world's premier economic power, and if necessary, to defeat us militarily.

ROMANS: The panel heard chilling accounts of China's rapid military buildup, concerns that China would use Unocal's assets to leverage political control in Asia and Eastern Europe, and its growing need to secure oil to feed its combined military industrial machines.

RICHARD D'AMATO, U.S.-CHINA COMMISSION: It makes no rational sense to help China soak up more and more supply, pushing us toward an earlier energy train wreck in the foreseeable future.

ROMANS: Concerns one energy economist disputed.

JERRY TAYLOR, CATO INSTITUTE: I don't see any particular reason from an economic perspective to fear oil weapons or fear Chinese control of oil prices or the flow of oil. They're not taken seriously in academia, and I don't think they shouldn't be taken seriously by this committee.

REP. CURT WELDON (R), PENNSYLVANIA: If the gentleman were to have the briefings that we have over the growth of the Chinese navy, which will surpass our Navy in a matter of 10 years, he would understand that we have questions about where China is going and what their intent is.

WOOLSEY: China is the world's largest totalitarian dictatorship. And even to economists, there ought to be a difference between democracies and totalitarian dictatorships.

ROMANS: Harsh words for economists and for American companies.

GAFFNEY: We have American businesses convinced that shilling for Beijing will improve their prospects for a piece of the ever-elusive China market.

ROMANS: In fact, lobbying for China and selling it critical American technology.


ROMANS: Of course, the Unocal shareholders could reject this deal and choose to merge with Chevron. But China is trying very hard to make sure those shareholders won't say no. China apparently ready to raise its bid for Unocal -- Lou.

DOBBS: And even reports that there would be a special failed merger deal fund, $2.5 billion, whatever the number. It's extraordinary, the lengths to which the Chinese are going. A remarkable hearing today. And thank you for that excellent report.

ROMANS: You're welcome.

DOBBS: Christine Romans.

I'm joined now by the powerful chairman of that committee, the House Armed Services Committee, Congressman Duncan Hunter, from Washington.

Thanks for being here.


DOBBS: I have to say that in just those words within Christine Romans' report, that's a chilling, chilling analysis of what we're facing. What was your reaction?

HUNTER: Well, clearly, Lou, this acquisition of this major oil company by the Chinese is a strategic acquisition, just like the acquisition by the Chinese of these Sovremenny-class missile cruisers that they purchased from the Soviet Union which have one role, and that is, to kill American aircraft carriers.

In this case, they are purchasing a major strategic acquisition with reserves all over the world, with production capability. And one thing you can bet about this Unocal purchase, once this is purchased by the communist Chinese government, these guys that think with stars in their eyes that somehow this is simply an economic purchase, that this is a piece of property which will be back on the market, are totally naive.

This will never be available. The reserves that -- and the assets and the production capability and the technology of Unocal will be owned by the communist Chinese government. And I'm convinced that they'll bid whatever it takes if the United States will allow them to buy this. They'll double their bid if they have to, because they don't need to make money. They have no shareholders to satisfy. They need this, because it's a strategic acquisition. Militaries run on oil, Lou. It's a finite resource. And I think it's a dangerous thing for us to allow the sale to take place.

DOBBS: It's a finite resource, as you say, Mr. Chairman. It is also becoming a scarce resource and a dear resource with oil now above $60 a barrel. The very idea that the Bush administration -- and I recognize you're an important part of the Republican House leadership, the chairman of a -- a powerful chairman of the house armed services committee.

But for this administration to basically take a libertarian Cato Institute view of hands-off and let the market work as it may, the suggestion that somehow this is free trade, and that despite the fact that the Chinese government owns 70 percent of this Chinese oil company, despite the fact that the Chinese government is putting out interest-free loans and subsidizing the deal, and despite the fact that China would never permit any foreign company to buy an energy asset or company in China, does not that boggle even your mind?

HUNTER: Well, this is going to be a tough one to swallow, Lou, if in fact we can't stop it. But we've made a recommendation, a letter signed by myself and Richard Pombo, chairman of the Interior Committee, to the president, asking that this committee on foreign investment in fact review this sale. And the president does have the power to stop this sale. And he hasn't said that he's not going to do it.

So, I'm optimistic that these facts, especially the tough facts that were laid out by the former head of the CIA, Jim Woolsey, as well as the other witnesses today, that those facts will bring this administration up short. And that they will understand that this is as important a part of national security as the weapon systems that we buy. So, I'm optimistic that Republicans will turn this thing around.

DOBBS; You know, when you have distinguished Americans like James Woolsey, Richard D'Amato, Frank Gaffney, geopolitical economic thinkers, working clearly in the national interests, testifying, it is, I think, remarkable that the administration is putting forward no one from Treasury, from Defense, from State, Commerce, from the National Security Council, to offer even a suggestion on the vision of the part of this administration for this nation's role in Asia and the way in which it will pursue political and economic and even military relationship with China in the years ahead.

HUNTER: Well clearly, there's a valley right now between Unocal and Chevron. If that sale takes place -- and I understand the board is going to meet on that sale, I believe, tomorrow...

DOBBS: Correct.

HUNTER: ...if that sale takes place, then this is a moot point. But clearly we need to have a policy. And the policy should be that important strategic assets, such as the nation's oil companies, which are just as important as those precious metals, like chromium and tantalum and titanium that we make our weapons systems with, that those assets are protected under a policy that reserves them for the United States, and for American interests.

This is the time when this administration has to understand that American interests include strategic interests like oil.

DOBBS: The rare earth properties that you're referring to in California owned by Unocal, important to national defense, as you said.

At the same time, there is a very important geopolitical strategy issue here that I wonder if it troubles you, as much as it certainly does me. And that is, that if China has the temerity to, despite the utter absurdity and contradictory position that it holds, denying foreign ownership of companies in its country, denying ownership of energy assets in its country, has the temerity to demand that the United States Congress allow this deal to go forward. And with the overall $700 billion in reserves it holds in our currency, that -- is this suggesting perhaps a test? Imagine what the test would be if it had to do with Taiwan?

HUNTER: You know, Lou, I think the Chinese have been deterred for years with respect to their Taiwan policy, because of the strength of the United States Navy, and our statement in the past, the clear message to China that we consider Taiwan to be an ally.

China right now is acquiring a series of levers. One lever was this acquisition of that piece of IBM, a very important part of their computer company. Another piece is all the money that they hold right now, this massive trade surplus. And another piece would be Unocal.

When they acquire this series of levers, I think at that point, the deterrence that we have over China to keep them from crossing those straits and try to take Taiwan evaporates. I think it'll get to the point where the tough old boys in the Politburo will decide that the United States is not going to act, and doesn't have the will to act.

And I think that the Chinese -- I think that the tough leadership despises the United States. I think they look at us as being people who are selfish, who will sell anything to anybody. In fact Lenin said that we would sell a rope with which the Communist world would hang us. I think the Chinese adhere to that philosophy as well.

DOBBS: Congressman Duncan Hunter, chairman of the Armed House Services Committee. Thank you.

As we've reported, China has an astounding $700 billion in U.S. currency in reserve. We wanted to show you just what China could do with that money if this administration and Congress decide to allow it to buy the U.S. strategic assets. $700 billion, for example, could buy all of this nation's top oil companies. They're worth an estimated $615 billion. Should they decide to distribute that money, they would still have enough money to buy defense contractors, Boeing and Lockheed Martin, for example worth a combined $81 billion. That would leave another $4 billion, enough to buy all of our major airlines, including United and American.

The editorial pages of a number of American newspapers have recently run columns in favor of China's bid to buy Unocal -- columns and editorials. This week, the "Washington Post" said -- quote -- "many believe that Chinese acquisition of the small oil company could threaten U.S. energy security. But it makes no difference whether China buys its oil on the open market or from companies that it controls." No difference?

The "New York Times" editorial page said -- quote -- "Beijing's desire for Unocal is fueled in part by the company's natural gas reserves, most of which are in Asia. The United State cannot claim much of a national security threat from that." Really?

The "Wall Street Journal" recently ran an op-ed from the Chairman and CEO of CNOOC. The title, "Why Is America Worried?" In it, he calls the bid friendly, and says -- quote -- "I promise that we will continue Unocal's sales practice of selling all or substantially all U.S. oil and gas in U.S. markets. $18.5 billion comes with a promise and a pledge." That's terrific.

What all of those editorials fail to mention is the fact that no American company is permitted to buy a Chinese company in the energy sector. Nor did they mention that no American company can ever buy even a part of a Chinese oil company. Hardly a free and fair market, wouldn't you say?

That brings us to an important question, our poll tonight, do you believe the United States should allow the Chinese government to buy one of our biggest oil companies? Yes or no. Cast your vote, please, at We'll have the results coming right up.

Next here, much more on China's unfair trade practices. A Democratic senator who blasts the White House for failing to take on what he calls cheating China. Senator Evan Bayh is our guest.

Illegal aliens streaming across our broken borders. U.S. corporations, even U.S. business magazines, seem to think illegal aliens are nothing more than a hot, new consumer opportunity for corporate America.

Stay with us.


DOBBS: This nation's trade deficit with China continues to explode. The trade deficit with China jumped more than seven percent to almost $16 billion. The overall U.S. trade deficit in May, did fall slightly, but still topped $55 billion. The trade deficit for this year is easily on track to top last year's record of almost $618 billion. The expectation is it will reach $700 billion. Separately, the White House said the federal budget deficit this year, will be about $100 billion smaller than first projected. That deficit is still expected to top $330 billion.

This country's enormous trade deficit with China and the rest of the world is a cause of grave concern all around the country, and increasingly on Capitol Hill. Senator Evan Bayh, Democrat of Indiana, has blasted China for cheating on trade. I asked the senator earlier, what the United States should do.


SEN. EVAN BYAH (D), INDIANA: We need, first and foremost, a long- term strategy to grow our own economy. What is our competitive advantage going to be -- those things we can do smarter, quicker, more productively than anybody else. And we need to invest in those things -- research and development, education and training for our people, all that kind of thing.

But then secondly, Lou, when we do that, when our businesses and workers do the right thing, think smart, work hard, we can't afford to have the fruits of that labored investment taken away from them unfairly because other countries cheat.

You know, the world economy is not going to function very well if we buy from other countries when they have a competitive advantage, but they steal from us, when we have a competitive advantage. So, we've got to enforce the rules, too.

DOBBS: You are focusing on enforcing those rules. You are concerned about the theft of intellectual property; the manipulation of currencies; tying the Chinese yuan to the dollar. You're concerned about these trade policies. How likely is it that there could be any progress in this Congress with this administration?

BAYH: Candidly, Lou, I think probably not very likely. These problems have been in evidence for some years now and there simply has not been enough progress made.

I mean, the report from the Treasury earlier this year that you saw, they came out and still say, well, we don't think China's manipulating its currency. Well, if it wasn't so sad, it'd be funny. I mean, they're obviously manipulating their currency, everyone knows that.

It's about time we got serious about it and insisted that they take action with regard to some of these subsidies that take place, free rent, free electricity, those kinds of things. That's not a level playing field. And our workers and businesses have a right to expect more from their government, than to allow that kind of thing going on. But unfortunately, not much has been done about it, and as long as current management is in place, not much is likely to get done.

DOBBS: Hearings are beginning on Capitol Hill to review the CNOOC, the Chinese National Overseas Oil Company's bid for Unocal. This administration has said it's hypothetical. The committee that reviews foreign investment in this country saying they won't deal with it until there is a deal.

On its face, this is a travesty. China does not permit investment in its energy sector by foreign companies or countries and yet, demanding that the United States do so with one of its most important energy assets. What are your thoughts?

BAYH: Well, it's yet another example of how the playing field just is not level. And look, we can't be for protectionism, that doesn't work. But we do have to answer the question, what do we do when other countries seek an artificial advantage? And the answer to that has to be something other than nothing. But nothing is all too often what we've had.

So, I -- look, I think we need to do three things. First, we need to satisfy ourselves that this does not undermine the strategic national security interests of the United States. And this committee that you referred to that reviews these things, frankly, does not have a very good track record in this regard.

In my home state, a company call MagneQuench made 80 percent of the magnets that make the SMART bombs operate -- 80 percent. They allowed that company to be closed down and off-shored, when it was clearly related to our national security.

The final two things, Lou. They've got to give more than lip service to enforcing the intellectual property laws. We've been -- they've been talking the talk. We've got to insist that they walk the walk.

And finally, there have been some disturbing reports, I know you're aware of, that the bid by the Chinese company is being subsidized through low-interest loans by their government. That's not a level playing field.

DOBBS: Senator, as you well know, not only are the loans being subsidized, but CNOOC itself is 70 percent owned by the Chinese government itself. It is extraordinary that there would be any debate about whether or not this is a deal between enterprises, as the Chinese have been quick to describe it.

Senator, there is a broad feeling amongst those close to you and many of us not so close, that you're interested in running for president in 2008. Are you?

BAYH: Lou, I'm flattered you ask. Yes, I'm interested, but I haven't made a final decision yet. I guess we'll have to save that for another program.

DOBBS: Well, we will reserve that time to further explore that. Senator Bayh, thanks for being here.

BAYH: Thank you, Lou.


DOBBS: A reminder now to vote in our poll: Do you believe the United States should allow the Chinese government to buy one of our biggest oil companies? Yes or no. Cast your votes at We'll have the results coming up in just a few minutes.

And coming up at the top of the hour here on CNN, ANDERSON COOPER 360. Anderson joins us now to tell us what's up -- Anderson?

ANDERSON COOPER, HOST, "ANDERSON COOPER 360": Lou, thanks very much.

Yes. Coming up in about 15 minutes, new developments out of Aruba. Is the main suspect in the disappearance of Alabama teen, Natalee Holloway, about to be released? A judge in Aruba tomorrow is going to decide.

And in another strange twist, the two brothers who were jailed a few weeks ago as suspects, then let go, well now they might be rearrested. Meanwhile, of course, the search for Natalee goes on. The private search team today thought they'd actually found a grave in the remote part of the island. We'll have all the details at the top of the hour --Lou?

DOBBS: Thank you, Anderson. Looking forward to it.

The identity crisis, hitting Social Security. Millions of Social Security numbers don't belong to legitimate taxpayers. I wonder who they belong to. We'll find out next.

Also, "BusinessWeek" magazine says illegal aliens are a hot new consumer market; a big opportunity for corporate America. A mind- boggling choice of words on its cover: Embracing illegals. I'll be talking with the author of that cover story here next.

Stay with us.


DOBBS: A somewhat shocking example, tonight, of just how illegal aliens can easily obtain U.S. identity documents. Two people tonight are under arrest in Virginia for selling valid state drivers' licenses to illegal aliens. Dozens of illegal aliens buying those licenses, paying as much as $3,500 each. Federal agents said the head of the operation -- an employee at the Virginia State Department of Motor Vehicles. Those agents say he processed the applications for the illegal aliens while at work.

Yet another serious security breach for the Virginia DMV. Most of the September 11th terrorists were able to obtain valid Virginia drivers' licenses and valid state identification cards.

Meanwhile, the Social Security Administration is benefiting from acts of fraud. Companies paying billions of dollars to Social Security over the years, to fake Social Security accounts and many of those companies appear to be turning a blind eye as they hire illegal aliens with those phony Social Security numbers.

Bill Tucker reports.


BILL TUCKER, CNN CORRESPONDENT (voice-over): There are billions of dollars in the Social Security fund that belong to no one. It's money paid by employers and employees to invalid Social Security numbers. In 2002, that added up to about $7 billion, representing roughly $56 billion in wages. A close look at the numbers suggest a willful intent on the part of a few employers to exploit the system.

REP. CLAY SHAW (R), FLORIDA: The Social Security Committee, which I chaired last year, we were finding that there were just literally hundreds upon hundreds of thousands of mismatches of Social Security numbers. In fact, we found one employer, by himself, had like 33,000 mismatches in one year.

TUCKER: Thirty-three thousand, four hundred and forty-eight W-2 forms with inaccurate Social Security numbers, to be exact. A recent study by the Government Accountability Office found that just two- tenths of a percent of employers were responsible for a third of all reports in the earnings suspense file, which is where the money from incorrect Social Security numbers is held.

And almost half of the employers contributing are just from five industry groups -- construction, restaurant and bars, agriculture, business service organizations, and health service providers. The study's findings have outraged some businessmen who can't understand why the names haven't been turned over to the Department of Homeland Security for investigation.

MATTHEW REINDL, STYLECRAFT INTERIORS: That's crazy. I mean, I don't know why it's not going to the Department of Homeland Security and the laws are enforced. Why aren't the government picking up these people and enforcing the law and fining the employers?

TUCKER: Reindl's emotion is fueled by the fact that he pays twice as much for his workers, as his competitors that hire illegal aliens. He has an ally in Congress in James Sensenbrenner, who chairs the House Judiciary Committee.


TUCKER: Incredibly, the IRS, Department of Homeland Security and the Social Security Administration don't share records or coordinate their efforts to enforce the law. Sensenbrenner wants the GAO to facilitate the sharing by turning over the company names to DHS. He would also like to see the names of companies who report more than 100 inaccurate W-2s in a year made public, Lou.

DOBBS: So the threshold here is: If you hire 100 illegal aliens, then we'll start taking note of it.

TUCKER: It's better than what you're getting now, Lou. DOBBS: Yes. This is so sad, that one has to either laugh or cry. And let's at least chuckle a bit I guess. I don't know. It's an amazing story. Bill Tucker, thank you.

Well, U.S. companies, corporate America, breaking the law by hiring illegal aliens. They're also profiting from the broken borders crisis by selling to illegal aliens. Companies are marketing home loans, credit cards and insurance to illegal aliens and "BusinessWeek" magazine, the largest business magazine, with its new title, "Embracing Illegals," writes that this is part of what it sees as a legitimate business trend and market opportunity.

The magazine's cover story this week is called astoundingly "Embracing Illegals," calling illegal aliens -quote -- "a hot new market in the making," and continues, "aliens are a lucrative demographic target... an untapped engine of growth... an under-served population hungry to taste more of America's rich consumer life."

Joining me now from Atlanta, the author of the "BusinessWeek" cover story, correspondent Brian Grow. Good to have you here, Brian.


DOBBS: I have to believe that you're getting quite a reaction to this cover. It is -- "Embracing Illegals," -- it's sort of sending a strong message, at least from your editorial board, that what's good for business is good for America, isn't it?

GROW: Well, actually, this is a story about what's happening in the marketplace. And we're looking at companies who are themselves embracing illegals. Companies are doing what companies do, they're following the money.

And it's easy to see why, Lou. The conservative estimate of the population of illegals in the U.S. is about 11 million. That's equivalent to the population of Greece. The high-end estimate runs about 20 million. That's equivalent to the population of Australia. So simply put, companies are going after a largely untapped market.

DOBBS: Largely untapped, except for they're tapped pretty heavily in a way, Brian. And I'm sort of struck -- and I understand it wasn't the focus of your story, but in point of fact, the five industry groups that Bill Tucker reported on, with phony Social Security numbers, each of those industries is exploiting cheap labor. They're exploiting illegal aliens.

George Borjas, professor at Harvard University, has estimated the cost to American workers -- and by the way, the Pew Hispanic Center has pointed out that most of those workers who are being hurt by illegal immigration are Hispanic themselves. I didn't see a lot of note taken in terms of this broader social costs, the cost to the taxpayer. I understand individual employers exploiting labor that's illegal would benefit, but society's paying a tremendous cost for this.

GROW: Well, this is a story, as we say, about selling to illegal immigrants. And the fact is, that companies are taking advantage of government policies that in a sense, make that possible. For example, as we point out very clearly, many of the banks are accepting the Mexican matricular consular...

DOBBS: Right.

GROW: Which is a document that the U.S. Treasury has acknowledged can be accepted. In addition, mortgage lenders are using the ITIN, Individual Tax I.D. number, issued by the IRS. So in a sense, this shows how our immigration policy really is a split personality.

On the one hand, we recognize the need to secure our borders, as you have pointed out, rightly. On the other hand, we have government policies that'll essentially allow companies to sell to the illegal immigrant population. And really, there's nothing illegal about doing that.

DOBBS: Well actually, there may be, Brian. In point of fact, using those tax numbers is probably, I think, pretty clearly in point of fact, a violation of both the comptroller of the currency, perhaps the federal banking laws and certainly the Homeland Security.

But that's -- you know, there's so much here that is wrong. And I take your point. But the truth is, that corporate America and business is taking advantage of a government that is dysfunctional and not following current law, nor enforcing the law and that's the real shame. And these companies, whatever else they are, they're breaking the law when they hire them.

Brian, we thank you. "Embracing Illegals." I would recommend it to you. It's quite a read and it's well reported.

Brian Grow, thanks for being here.

DOBBS: Still ahead, the results of tonight's poll; a preview of what's coming up tomorrow.

Stay with us.


DOBBS: Now the results of our poll tonight: 93 percent of you say the United States should not allow the Chinese government to buy one of our biggest oil companies. Seven percent you say yes, they should.

And finally tonight, we continue to track the number of days the Pulitzer-Prize-winning "New York Times" reporter, Judith Miller, has now spent in jail: now going into her eighth day; seven days fully in jail. She's been in prison because she refused to reveal her confidential sources to a grand jury in the Valerie Plame CIA leak case -- a story which, by the way, she never even wrote about; nor did the "New York Times" publish, of course.

Thanks for being with us here tonight. Please join us here tomorrow. The battle over the future of the Supreme Court. Senate Judiciary Chairman Arlen Specter and ranking Democrat, Patrick Leahy, two senators who will play critical roles in the future of the next justice, will be my guest.

And the investigation into the White House CIA leak has now taken longer than Watergate. One Watergate figure, Chuck Colson, will join us with his perspective.

Please join us. Good night from New York.

ANDERSON COOPER 360 starts right now -- Anderson?



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