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THE SITUATION ROOM

Wildfires Rage Across Oklahoma, Texas; New Information About NSA Domestic Spying Program Emerges; New Concerns for Bird Flu; A Child's Welfare Endangered in Long Island; Military Chaplain Returns from Iraq to Crawford

Aired December 29, 2005 - 17:00   ET

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


ALI VELSHI, CNN ANCHOR: It's just after 5:00 p.m. in Washington, and you're in THE SITUATION ROOM, where news and information from around the world arrive at one place at the same time.
Happening now, it's 4:00 p.m. in Oklahoma and in Texas. Lives have been lost, almost 200 homes are already gone, and now there are new wildfires raging.

In Baghdad, it's 1:00 a.m. She has her papers, now she's waiting for a flight. The rush is on to get Baby Noor to the United States for surgery that could save her life.

And it's 5:00 p.m. in Long Island, where police find a drunken toddler and a drunken baby-sitter. One has recovered, the other is charged with child endangerment.

I'm Ali Velshi. You're in THE SITUATION ROOM.

We're following developments in Oklahoma, where wildfires are kicking up again this afternoon. Two large fires are eating up grassland east of Oklahoma City, threatening homes and lives.

Army helicopters are helping fight the flames, dropping bucket after bucket of water. We've been watching those. But they've are battling wind gusts that are fanning the fires. Making matters worse, the grass there is tinder dry. They've barely had any rain at all in the last two months, and conditions could hardly be worst.

Let's check in with our severe weather expert, meteorologist Chad Myers. He's live at the CNN Weather Center. And we're watching those winds kick up, Chad.

CHAD MYERS, CNN METEOROLOGIST: We are. About 20 miles per hour now, and we know that that's really the threshold where the sparks fly from one spot in the fire forward to another spot in the fire.

The pictures there of the Chinook -- and I've been watching them all day -- it's like trying to shovel a blizzard with a spoon. I mean, these guys have been working so hard trying to keep these fires down. But Oklahoma City has had one quarter of one inch of rain in two months. That's it. This is so dry out there, there's just no stopping these fires until the winds die off. And that happens after sunset. That's still about an hour and a half a away, Ali. VELSHI: And we're looking at a live picture from our affiliate KOCO in Oklahoma County, where the camera is relatively close to that ground line, where you're seeing that fire and how it's spreading. This is east of Oklahoma City?

MYERS: East of Oklahoma City. Spencer Jones out there. The two fires -- there are actually two that have run up about two miles, a half a mile wide, but not getting up to the I-44 right now.

The road that you can see on one of those helicopters, that's actually Britton Road. You take Britton Road far enough west, you actually run into all the TV station where I used to work.

But now we'll switch over to the other map: 18 miles per hour in Oklahoma City, 22 miles per hour up in Kingfisher, 20 over in El Reno. And even down to Norman now, winds are 17 miles per hour. But the gusts are the problem. Gusts have been coming up now to about 25 miles per hour. When a gust comes through, it grabs the spark, throws the sparks ahead, and then causes more fires. And the firefighters can't catch up, because the one that they just had a handle on, now there's another one a quarter mile up the field.

VELSHI: We have reports of firefighters who are dousing properties where the fire hasn't reached yet, to try and dry it up. Now, you've been talking about that, right behind, I-44. And you're thinking that hopefully as that fire heads up that way, that might be a natural fire break. At 20 miles an hour winds, is that still a possibility?

MYERS: Yeah, it still is. And they're going to try Britton Road, they're going to try every paved road from here on out. They don't want it to go any farther, because the farther they get to the north, the more homes are involved, and the more structure -- that's all they're really doing right now, is really structure protection, trying to keep the structures from the fires, away from them at least a little bit. But we've already -- I've already seen at least three homes now to be burned just in the past hour and 45 minutes.

VELSHI: All right, our meteorologist, our weather expert, severe weather expert, Chad Myers, is at the Weather Center, and we'll continue to check in with him. Chad, thank you so much.

Here in THE SITUATION ROOM, we're plugged into almost everything happening online.

Our Internet reporter, Jacki Schechner, is checking this situation out online. Jacki?

JACKI SCHECHNER, CNN INTERNET REPORTER: Ali, I just wanted to show you some satellite imagery we've been able to find online. You can take a look at how big those fire plumes are, you can see right there in the area.

Now, if I can switch over to another image that we found, you can see close up this one from NOAA, the smoke plumes and the fires. You can see the plumes coming off here, there in the Oklahoma area, and then again down here in Texas. Also, it mentions that there is a blowing of dust in that area.

Now, if we switch over to the Norman, Oklahoma, page on the National Weather Service forecast, this fire weather update -- let me show you right here. Now, this was in red, sort of a warning system the other day. Now it's saying that they're monitoring the actual fires themselves.

Let's click on that and show you how bad this is. Again, up at the top, you can see no relief in sight. Page after page after page of this.

And I'll tell you, as we're going through and we're monitoring these things, it goes down to tonight and then to the hazardous weather outlook. It says it's going to continue January 1 through Tuesday, January 3. So we'll keep an eye on this.

VELSHI: OK. Jacki, thanks so much. And as Jacki pointed out, Texas has also been hit hard by wildfires. Today Texas Governor Rick Perry saw the damage for himself. He toured some of the affected area.

Almost 200 homes have been damaged or destroyed. Three people have been killed by the fires in Texas. Governor Perry announced this afternoon that he is sending National Guard troops to help. He said the impact is devastating and that danger isn't over yet.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R), TEXAS: We are at as high a level of opportunity for wildfires as you can have. You've got low humidity, you have tremendous winds, particularly out of the west and south. And you've got a substantial amount of fuel. And that fuel is tinderbox dry.

(END VIDEO CLIP)

VELSHI: All right.

For more on this, we're joined on the phone by Robert Cluck. He is the mayor of Arlington, Texas, where several homes were destroyed by fires. And as you can see, Arlington is right next to Dallas.

Mayor Cluck, thank you for joining us. Is the worst over for Arlington? Or are you still on high alert because of the dry conditions there?

MAYOR ROBERT CLUCK, ARLINGTON, TEXAS: No, we're definitely on high alert. And we're very much anticipating this weekend of having another outbreak. The humidity will be down again. The wind speed, we think, will be in the 20s to 30s. So there's no reason to expect that we're out of it yet

VELSHI: And I should tell our viewers, as we're listening to you, we're watching the active pictures of the fires that are burning and the efforts to quell those fires in Oklahoma, obviously northeast of where you are. But tell us what happened in Arlington, because we hear about these fires. They don't have the same visual impact of full forest fires that are raging, but this is very serious.

CLUCK: Yes, these three huge fires came through Arlington, blew through here simultaneously last Tuesday, destroyed five homes, five mobile homes, did not kill or injure anybody severely, but came within a second of impacting an entire development here in Arlington, about 100 homes. The firefighters took a stand and were able to ward that off, but it was a very, very close call.

VELSHI: And on the right of our viewers' screens, you can see those are pictures from Arlington, Texas. Mayor, what can you tell the folks right now in Oklahoma County who are trying to protect property at this point?

We saw pictures earlier of people hosing down their homes, their properties. We know firefighters are hosing down roads and properties. At this point, it's about protecting things.

CLUCK: Yes, that's exactly correct. And we're advising our citizens to keep their grass short, to water their lawns. But we have a lot of tender vegetation around that could blow at any moment. And when it blows, it's like a bomb. It goes off and goes -- it's more rapid than you could run away from it.

VELSHI: It's interesting you say that, because our severe weather expert, Meteorologist Chad Myers, said the same thing, that it's unbelievable to see how quickly things go up.

Our thoughts are with you, Mayor Cluck, and with Arlington. Stay safe.

CLUCK: OK. Thank you.

VELSHI: Robert Cluck is the mayor of Arlington, Texas. We will keep an eye on the grass fires in Oklahoma and the developments in Texas.

Now, in other news, the National Security Agency is under fresh scrutiny this afternoon. It's admitting that its Web site planted files known as cookies on the computers of people who accessed it, allowing the agency to track their Internet activity. This follows recent revelations that we've spoken about that the agency has been engaged in domestic eavesdropping of American citizens.

CNN's Brian Todd has been following the details of these new privacy concerns. Brian?

BRIAN TODD, CNN CORRESPONDENT: Ali, we spoke to a privacy activist named Daniel Brandt. He did not want to be interviewed on camera or over the phone, but he told us earlier this week he contacted the National Security Agency to let the agency know they were using those so-called cookies you spoke of on their Web site against government regulations.

Now, cookies are pieces of software that are used to track the preferences of people who visit a Web site, but they can only be used to monitor your surfing on that Web site unless a third party cookies is put in place. Contacted by CNN, an NSA spokesman said the agency never used third-party cookies.

But it is against government regulations for a federal agency to track people surfing with cookies that do not shut down when you exit a Web site. And Brandt said the agency did not shut those cookies down until this past Tuesday after he contacted them.

Brandt (ph) and other privacy activists don't believe the agency jeopardized anyone's privacy. But one activist voiced a broader concern.

(BEGIN VIDEO CLIP)

ARI SCHWARTZ, CENTER FOR DEMOCRACY AND TECHNOLOGY: They don't seem to have a privacy team in place that can deal with even the most basic privacy issues, let alone the more difficult issues that they're facing every day now with the president giving them so much authority.

(END VIDEO CLIP)

TODD: I just spoke to an NSA spokesman just moments ago who said they actually do have Web teams in place to deal with those very issues or else they wouldn't have been able to disable those cookies in the first place.

Earlier, we got this statement from the NSA: "After being tipped to the issue, we immediately disabled the cookies. The software program used cookies for session management and not to collect personal user data".

Ali.

VELSHI: It continues to be an interesting story, and you all are just ruining my day with all this talk about cookies, because I've never really spoken so much about them in the course of a marathon newscast. But this is what I think of as a cookie.

Jacki Schechner, our Internet reporter who follows these things, is here to tell me that I can continue to suffer because this isn't what we're talking about, Jacki.

SCHECHNER: No, the only thing dangerous about those cookies are the calories, Ali.

What we're talking about here are actually not software but text files that end up on your computer, and they tell sites that you go to, where you've been, what your preferences are. They feed data back to the Web site that you've been checking out.

For example what you search for on Yahoo!, your computer can keep track of that. Also, on Amazon, if you have certain preferences, your password, for example, can be kept track of there. These bring up all sorts of privacy concerns, which is why we're so concerned and focused on them.

When you can go into your computer and take a look at what cookies look like, this is it. They're not very exciting. They are actually just text files.

But we took a look at something like this at Expedia, and you take a look at the details. Now, I didn't go on Expedia on this computer since the beginning of November, if you can see this. But this cookie in particular does not expire until the end of the year on the 31st at 7:00 p.m.

Ali.

VELSHI: I often have been told to clear out all of my cookies. You know, you have that option. When you do that, does it leave your computer?

SCHECHNER: I'm sorry, say that again?

VELSHI: Can you get rid of the cookies from your computer on your own?

SCHECHNER: You can. There are ways that you can clear out the cookies. It's actually multi-step processes.

I want to show you two Web sites that you can go to that will help you do this. One is howstuffworks.com. Go to the cookies section. It will tell you how to work through that process.

The other one is cookiecentral.com, with a whole frequently asked questions section. And that will detail how to do this for you because I just don't have that kind of time.

Ali.

VELSHI: Thanks, Jacki. You guys are killing me with all this cookie talk.

Kimberly Osias joins us now with a closer look at some other stories making news. Kimberly?

KIMBERLY OSIAS, CNN ANCHOR: Thanks, Ali. The U.S. military says the number of Guantanamo Bay prisoners participating in a five-month hunger strike has increased significantly since Christmas Day. A spokesman says 46 more detainees joined the strike Sunday. That means 84 of the some 500 terrorism suspects are now refusing to eat. Lawyers say the strike began in August when the military refused to bring the facility in line with the Geneva Conventions.

Indianapolis Colts head coach Tony Dungy is back with his team today. Last week his oldest son, 18-year-old James Dungy, was found dead in his Tampa, Florida, apartment of an apparent suicide. The elder Dungy met briefly with his players and staff to thank them for their support. He'll be back at practice and is expected on the sidelines for Sunday's season finale against Arizona

Well, they did it in New York. Now it could happen in London. Union leaders representing British rail workers refused to talk to officials of the London Underground today. The snub increases the likelihood of a disruptive subway strike on New Year's Eve. Unless some agreement is reached, two 24-hour walkouts are scheduled -- one at noon Saturday, the second on January 8.

A missing backup tape loaded with sensitive information with sensitive data on two million mortgage customers has been found. Shipping company DHL reportedly returned the tape this week to ABN- AMRO Mortgage Group, which is part of Chicago-based LaSalle Bank Corp. The original air bill was missing. The company says it's unlikely the data was compromised, which is good, but it's urging affected customers to monitor their credit activity just in case.

Ali.

VELSHI: Kimberly, thanks very much. We're going to take a little break. You're welcome to come in here and share my cookie with me.

OSIAS: Some. It looks delicious.

VELSHI: Yes. And it's going to be good. All right. We're going to take a break.

Up ahead, an unconditional -- unconventional (INAUDIBLE) war on terror. We'll show what you U.S. troops in Afghanistan are doing. This is a CNN exclusive. Stay tuned for that.

Also, she's captured worldwide attention. Now a seriously ill Iraqi baby is about to undertake a journey that could save her life.

And it's a new military machine, but is it worth the high price? How about some doors on that thing? The controversy behind the Growler.

(COMMERCIAL BREAK)

VELSHI: Turning now to a CNN exclusive, U.S. troops are in Afghanistan battling terrorism by trying to spread goodwill.

Our Becky Diamond went on patrol with U.S. troops alongside a dangerous road today. She's got the story from Gardez, Afghanistan. Becky?

(BEGIN VIDEOTAPE)

BECKY DIAMOND, CNN CORRESPONDENT: U.S. soldiers in Afghanistan fighting the war on terror block by block. There's a very dangerous road that travels by Gardez, the town I'm in, through the mountains and into Pakistan. And this road has been the site of many insurgent attacks. And it's along this road that the U.S. military hopes to win the loyalty of local villagers who reside by this road. And they're doing this through a combination of deeds and dollars.

I went out with a U.S. patrol this morning, a provincial reconstruction team that reached out to village elders and found a site where the U.S. military is donating $5,000 to build an irrigation system, hoping that by bettering the circumstance stances of this village, the villagers will then repel any possible criminal or terrorism activity.

Ali, back to you.

(END VIDEOTAPE)

VELSHI: Becky Diamond in Gardez, Afghanistan.

Well, take a look at this. It looks like an old Jeep. And there's a reason why. But it's a lot more expensive. Will it do the job? Well, meet the Marines' new vehicle, the Growler.

Let's go live to our senior Pentagon growler, Jamie McIntyre. What -- look at that. How much is that thing?

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Ali, I mean, in the way only the military can, they actually -- the technical name for this is the Internally Transportable Vehicle.

VELSHI: OK.

MCINTYRE: But it's basically -- I mean, you look at it, it looks kind of like a golf cart on steroids. It does have an eye-popping price tag, $100,000 for this little vehicle. And critics are saying, in a time when U.S. troops are facing a threat from powerful roadside bombs and suicide ambushes, why would they spend this much money on a vehicle that, if you look at it, doesn't seem to provide that much protection?

Well, the Marine Corps says the critics don't understand exactly how this vehicle would be used.

First of all, it's a stand-off vehicle. It's going to be used to carry mortars and ammunition, guns, things that, by the way, the Marines would probably have to carry by hand or not have if they didn't have this vehicle. And the main thing is, it's got to fit into the new V-22 Osprey, which is basically a helicopter-plane combination.

It has a cargo hold, the Osprey, that's only five foot wide, five foot high. And so in order to get this Growler, which commercially sells for maybe $7,000, $14,000 into there, they had to make all kinds of modifications. They had to make it narrower, they had to make it so it wasn't top heavy, so it would fit into the new V-22.

They had to make it much more reliable. They added, you know, blast-resistant shields underneath, blast-resistant seats, special tires that can't be shot at. You add all that stuff up...

VELSHI: It's the obvious.

MCINTYRE: ... it gets to be $100,000. They claim it's going to be great for what the Marines are using it for. And it's not designed to be a front line vehicle, but it does have enough -- it gives the Marines more options to be able to move around the battlefield, get more stuff where they need to get it, and get away if they have to.

VELSHI: All right. You know, Jamie, when you and I get tired of this business, we should start a customization shop, because that seems to be where the money is.

MCINTYRE: Not as easy as it looks to make one of these vehicles.

VELSHI: Yes, no kidding. It probably is fairly sophisticated, even though it looks like a Vietnam-era Jeep.

Jamie, good to see you. Senior Pentagon Correspondent Jamie McIntyre at the Pentagon.

Coming up, should Saddam Hussein be freed? Well, his lawyer reportedly sent a letter to President Bush saying it would be a good move. We'll tell you why when we come back.

And is Baby Noor any closer to getting the surgery that could save her life? We'll have an exclusive update on the rescue mission being mounted by the U.S. military and a lot of concerned American citizens.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: Turning to Iraq now, international observers have been invited to get a firsthand look at the post-election process, including an examination of complaints about the voting. Now, this happens as top Shiite and Kurdish leaders held talks on setting up a coalition government. The largest Sunni faction has said it will participate.

In the latest violence, a suicide bomber killed four policemen and wounded five others at a checkpoint in Baghdad. Now, there's sectarian slaughter south of Baghdad as well, where assailants broke into a house and killed 11 members of a Shiite family by slitting their throats.

And free Saddam Hussein, that's a message from the former dictator's lawyer, one of them, at least. The Reuters News Agency says that he wrote a letter to President Bush saying such a move would help end Iraq's problems and earn the friendship of Arabs.

Update now in our exclusive coverage of Baby Noor, the Iraqi infant that was found by U.S. troops who is in urgent need of a treatment for her spina bifida. The baby and her family are at Camp Victory, which is near Baghdad, and that's where we go now to CNN cameraman Joe Duran.

He's embedded with U.S. forces there. He joins us now by phone. We have a bit of a delay on the phone, but I know he's there.

Joe, what's the latest on Baby Noor's situation and travel plans?

JOE DURAN, CNN PHOTOGRAPHER: Well, Ali, it is 1:30 in the morning here at Camp Victory in western Baghdad, and Baby Noor is now sleeping and resting before that hopeful long journey to Kuwait. And then on to Atlanta, possibly later today. She is doing well considering her illness, and is under the care of military physicians here at the base. She has been sleeping a good part of the day. We do not know exactly what time she will depart along with her grandmother and father, but it will be some time, they say, mid morning.

They are still waiting for the visa. We understand she will travel on a U.S. military flight from here to Kuwait, and then on a commercial flight to Atlanta.

As you know, Baby Noor was found almost three weeks ago by the Company Charlie Army medic Jason Donnelly (ph) when they were doing what is called a knock-and-search operation of the family's home. As the soldiers entered the house, the grandmother told them that their baby was sick, and the medic Donnelly (ph) looked at the baby Noor and took it upon himself to notify his commanders.

The baby was diagnosed by doctors with a severe form of spina bifida and needs the operation that will be performed in the United States. From that day they found -- from the day they found her, there has been, like, this relentless effort by the platoon from Gainesville, Georgia, to evacuate and give this baby the medical care she desperately needs.

Company Commander Tony Fornier (ph) has been heading this huge effort to save her. She was born, as I said, with this Spina Bifida and she is now three months old. And the longer she is without that proper medical care, the less her chances of survival -- Ali.

VELSHI: Joe, thanks so much. We'll keep checking in with to you see when Baby Noor gets on that flight and makes her way to the United States for the treatment that so many Americans have been following closely here on CNN.

Joe Duran is a photojournalist at Camp Victory outside of Baghdad.

Now, our top story this hour are those grass fires in Oklahoma County, in the area just east of Oklahoma City. You're looking at some of those pictures right now. That is a military Chinook helicopter carrying water. There you can see the fire line, heavy smoke, grass fires. It is scorched earth over there, and that is allowing the fires to spread.

There's also a great deal of wind, and that's making the sparks -- it's blowing the sparks to other areas and spreading this fire quite a bit.

Now, what's happened is we're not seeing any fires right now in the areas of Texas that were hard hit earlier in the week, but Texas is still on alert. And the governor of Texas, Rick Perry, earlier mentioned that they are sending in the National Guard to help out those who have been affected.

We'll stay on that story in Texas and in Oklahoma.

Coming up, Israel in the crosshairs. Has al Qaeda turned its sights on a new target?

And later, in our 7:00 p.m. Eastern hour, former FBI Director Louis Freeh on America's security and his rocky relationship with Bill Clinton.

(COMMERCIAL BREAK)

VELSHI: Here's a look at some of the "Hot Shots" coming in from the Associated Press. These are pictures likely to be in your newspapers tomorrow.

In Yemen, residents gather at the side of -- the landslide that crushed 30 homes. Twenty bodies have been recovered. And many people are feared dead.

Holdenville, Oklahoma, as Francis Jo Tiger (ph) looks out at where the rubble of her home -- looks at the rubble of her home where her brother Kelly died trying to protect it from the flames. Grassfires have destroyed dozens of homes in Texas and Oklahoma. We're following that right now live.

In New York, practice makes perfect. Here's a picture of confetti falling on Times Square in a test run for Saturday night's New Year's Eve celebration. You would think, after all these years, they would had gotten that right.

And, Connecticut, the Hartford Magnet Middle School marching band puts on a very special performance outside the home of a staff member who is battling breast cancer.

Those are today's "Hot Shots." They are pictures worth a thousand words.

Well, is al Qaeda opening a new front? In a stunning statement, the group's Iraqi faction claims that it fired the rockets that were launched in Lebanon, which fell on northern Israel this week.

Let's go live to CNN's Guy Raz in Jerusalem. Guy, this is an interesting development, if it's true.

GUY RAZ, CNN CORRESPONDENT: Well, Ali, Israeli intelligence officials are treating this claim with some skepticism, in large part because it seems highly unlikely that a virulently anti-Shiite group like al Qaeda, which -- whose members generally adhere to the Salafist strain of Islam, could have operated freely in south Lebanon, which is Shiite country, an area pretty much under the control of the Iranian- backed Shiite militia Hezbollah.

But it go -- it should be noted that Israeli intelligence officials are monitoring that statement, because if, in fact, it was al Qaeda that managed to launch those missiles, it would be the first time that al Qaeda managed to carry out such a large-scale attack on Israel.

Ali. VELSHI: Guy, is -- would there be any difference in how Israel would treat attacks from -- from across the border in Lebanon, whether it's from al Qaeda or otherwise?

RAZ: Well, by and large, the Israeli government tends to hold the Lebanese government responsible for any attacks emanating from Lebanon into Israel, essentially, Israel saying that the Lebanese is responsible for all action that takes place on its territory.

Now the Lebanese government has said it will launch an investigation to find out what happened. Now, Israel did carry out air strikes against a Palestinian militant base in southern Lebanon two nights ago, in the wake of those attacks. The Lebanese government had condemned it, but, ultimately, Israel says whatever comes out of Lebanon, the Lebanese government is indeed responsible for it.

Ali.

VELSHI: Guy, what about the suicide attempt we -- the suicide attack we saw in the West Bank? Between these attacks into Lebanon and suicide attacks, are we -- are we seeing a resurgence of violence in that area?

RAZ: Well, it's not clear.

In -- in terms of that suicide bombing, Israel officials are saying it could have been much, much worse. In fact, just yesterday, Israeli military intelligence set up a temporary roadblock in the West Bank city of Tulkarem, after receiving a tip that a suicide bomber was on his way into Israel.

Well, that bomber appeared to approach that terminal today. Soldiers asked him to remove his coat, when the bomb detonated, killing one soldier and two Palestinians, and wounding several others, both Israelis and Palestinians. And it appears as if the militant Palestinian group Islamic Jihad has taken responsibility for that attack. And we understand that the bomber himself was a member of the Palestinian police force.

Ali.

VELSHI: Guy Raz in Jerusalem, thanks very much for joining us.

Well, still to come, do you have that achy, fevery, "I don't feel good" feeling? Well, if you do, you're not alone. We will get a look at how this flu season is shaping up.

And, later, he took the helm of the Clinton FBI. And he took a lot of heat. Now he's talking about the state of security then and now. Wolf goes one on the one with former FBI Director Louis Freeh at 7:00 Eastern. You don't want to miss that.

You are in THE SITUATION ROOM.

(COMMERCIAL BREAK) VELSHI: Well, it was an effort to get the economy rolling again after 9/11, but now a new report says that many of the government's loans that were meant to help small businesses affected by the terror attacks went to businesses that weren't affected at all.

CNN's Gary Nurenberg is here with the details. Gary?

GARY NURENBERG, CNN CORRESPONDENT: Ali, this is the STAR program.

STAR stands for Supplemental Terrorist Activity Relief, and it was passed by Congress to help businesses hurt by the attacks on 9/11 and the resulting disruption of the economy.

But the Associated Press reports, some of the loans went to a dog boutique in Utah, a perfume shop in the Virgin Islands, and more than 100 Dunkin' Donuts and Subway Sandwich shops across the country.

A new SBA study of the STAR program says most companies questioned about getting the loans were not hurt by the terrorist attacks and didn't even know they were getting money from a terrorism recovery program. The study sampled 59 recipients of the loans, and found only nine appeared to have qualified.

The bosses at the SBA put out a statement, saying the report does not prove the recipients were unqualified. What the report does conclude is that the SBA can't prove many of the recipients were qualified, even under the guidelines for the loan program, Ali, that were very flexible and meant to encourage far more yes's than no's.

VELSHI: Gary, how -- what -- what's the magnitude of this program? How big is this program?

NURENBERG: When it was done, $3.7 billion, 8,200 loans. And, when it was done, there was money that was left over and was transferred to other loan programs.

VELSHI: All right, Gary, good to talk to you. Thanks very much, Gary Nurenberg.

While we're on the topic of small business, if you are looking for a little extra money and you're a small business owner, even though it's almost -- almost the end of the year, it's not too late to save some money on your taxes.

Here are a few tips.

(BEGIN VIDEOTAPE)

DONNA LEVALLEY, TAX ATTORNEY, J.K. LASSER'S YOUR INCOME TAX: Small businesses have two moves to make. They can make deductible expenses by purchasing equipment, or they can set up a retirement plan. And if they're a calendar-year taxpayer, they have to do it by the 31st. Some of the expenses you might want to think about, in addition to your refurnishing an office or buying new office equipment, such as computer or faxes, are subscriptions, professional associations. Things that you have to re-up every year, make the expense now, and this way, you can get it deducted on your 2005 return. You can make an additional mortgage payment, an additional state and local income tax payment this year. And, this way, it will be -- your 2006 payment will be deductible on your 2005 tax return.

Fortunately, the IRS has a number of publications. And one of the areas that they're best is what they called listed property. So, if you're concerned if your property can't be expensed for -- in the first year or has to be depreciated, they have very long lists that will help you figure out where your property fits in.

One of the places that you are constantly coming up to the law is going to be how you spend and how you save your money when you go to take that deduction on your tax return. So, you sort of need to be aware of when you're doing and how you're doing things. But just remember, you have got until the 31st to make a move for this year's tax return. So, get it done.

(END VIDEOTAPE)

VELSHI: Donna LeValley is a tax attorney. And she is with J.K. Lasser's Your Income Tax.

One of the things for you those of you who are not small business owners, it's not a tax matter, but you can make one extra mortgage payment. And that means that that deduction goes into your 2005 tax return, as opposed to your 2006 tax return, something to look at before the end of the year.

Up next, he was over the limit and way under the legal age. How did a 2-year-old child wind up so seriously under the influence of alcohol?

And, later, his mission in Iraq, to minister to soldiers' souls, but now that he's back at home in Crawford, Texas, how does this chaplain reconcile faith and love with the hard realities of war?

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: Well, China has confirmed its seventh case of human bird flu infection, which is also its third human death from the virus. Chinese health officials revealed today that a 41-year-old factory worker died from avian flu last week. And, in Rumania, officials now confirm the presence of the deadly bird flu strain in suspected poultry in six villages east of Bucharest.

Now, it turned up last month, but confirmation took several weeks, because samples had to be sent to Britain for testing.

Well, how worried should we be here about an avian flu development here in the United States?

Joining us to talk about that, as well as good-old garden-variety flu season, is Dr. Anthony Fauci. He's the director of the National Institutes and Infectious Diseases. Dr. Fauci, good to see you again. DR. ANTHONY FAUCI, DIRECTOR, NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASE: Good to be here.

VELSHI: Here's the thing that we worry about with -- with China. And that is that we -- we have had reports of seven cases, three deaths. But when you look back to SARS, there was some discussion about China maybe not being as forthcoming in spreading the information early along.

Where are we, in terms of how much we trust the information we are getting out of China right now?

FAUCI: Well, we still have some skepticism about some things they say, but there's enough observation going on now from other parties to indicate that this likely is a good indication of what actually is going on.

It's not really substantially different than what we have been seeing over months and months in Southeast Asia and in Asia, namely, this smoldering issue of the H5N1 bird fly, that is very prevalent in chickens, and still killing millions of chickens and requiring the culling of chickens, at the same time, occasionally, if not rarely, jumping from the chicken to the human.

So, the new reports from China just indicate it's still smoldering along. There's no major changes in anything that is going on, except to say that it is still going on.

VELSHI: But it's not a jump from a human to a human yet.

FAUCI: No.

VELSHI: And that's the thing that has everybody worried.

FAUCI: Right.

VELSHI: What has to happen? So far, we have just not seen that.

What has to happen to make this a human-to-human infection, as opposed to a chicken- or poultry- or bird-to-human infection?

FAUCI: It happens extraordinarily rarely in two documented cases.

What we're really concerned about is the efficient continual spread, consistent spread from human to human. In order for that to happen, the virus has to change what we call molecularly. Its genes have to change a bit.

There are two major ways that that can happen. It either mutates to a form where it assumes the capability of efficiently going for human to human. It's not there, there -- now. It may never get there. But there's possibility, with the right constellation of mutations, it would happen.

The other possibility is if you take a human influenza virus that we know can easily spread from person to person. If it co-infects either a person or an animal, like a pig, with the bird flu, there may be an exchange or re-assortment of genes, which will allow the resulting virus to have the virulence or seriousness of the bird flu, with the capability of spreading from person to person.

VELSHI: And...

FAUCI: So, they are really molecular jumping around or molecular mutations.

VELSHI: Well, we have got -- we have got lots of regular flu.

FAUCI: Right.

VELSHI: And, in fact, right now, we're seeing in this country..

FAUCI: Yes.

VELSHI: ... lots of regular flu. And one thing that every American knows, and I'm sure everybody in the world knows, is how quickly that spreads.

FAUCI: Right.

VELSHI: Is it that different from what we would see if we had a human-to-human strain of bird flu? Because the -- the numbers we talk about...

FAUCI: Right.

VELSHI: ... in terms of infection, seem huge.

FAUCI: Well, certainly, if -- if -- if a bird flu -- and -- and we hope this never happens. And it might not ever happen -- it's unlikely, actually, even though the risk is enough that we need to prepare for it.

If the bird flu assumes the capability of efficiently going from human to human, it might very well act in that capability, similar to a seasonal flu. The only problem is that there would be no immunity in the general population against bird flu. So, unlike what we're seeing now with seasonal flu, where, even though we're entering full-blown into the flu season, most of the people, to a greater or lesser extent, have had some prior exposure to a similar virus, which is the reason why, when you have the highly predictable seasonal flu, it's extremely unlikely that it will be a public health catastrophe.

VELSHI: We have become accustomed to taking some care of ourselves, or at least consciously not doing so in preparation for regular flu.

FAUCI: Right.

VELSHI: Michael Leavitt, the secretary of the U.S. Department of Health and Human Services, said that "Any state, any community, or, for that matter, any citizen that failed to prepare, assuming the federal government can take care of them during a pandemic, will be tragically wrong."

FAUCI: Right.

VELSHI: Take him at his word. What are you supposed to do to prepare?

FAUCI: Well, you know, right now, it's a question of just planning your family issues, about how would you involve if the child gets sick? You don't send the child to school. If you're sick, and you're a working person, you don't go to work, typical public health, fundamental, low-tech measures. Avoid...

VELSHI: Like we saw in...

(CROSSTALK)

VELSHI: ... SARS, almost.

FAUCI: Exactly. Wash your hands. If you're coughing, cover your face, your nose and your mouth. When you shake hands, be careful. Wash your hands frequently, things like that. They're really low-tech and they're common sense.

VELSHI: I know, from talking to you before, you're not alarmist.

FAUCI: Right.

VELSHI: You work in a business where that can be very dangerous.

FAUCI: Right.

VELSHI: What's the worst-case scenario, if bird flu arrives on U.S. shores?

FAUCI: Well, the worst-case scenario is if you had a highly virulent strain that would kill a percent of people that would be disturbing.

Right now, it's virulent, but it doesn't have the capability of going from human to human. So, the worst-case scenario is that it does assume that capability.

The thing we have to emphasize is that we, as preparers, as public health people, should assume the worst-case scenario. The general public should not, because that just instills a lot of unnecessary fear and panic. Leave it up to the people that have to develop the vaccines, gets the drug stockpiled, do those sorts of things. Let us assume the worst-case scenario, even though, quite frankly, it's unlikely that the worst-case scenario will occur. But you have to be prepared for it.

VELSHI: Good advice. Thank you, Dr. Fauci.

FAUCI: Quite welcome.

VELSHI: Dr. Anthony Fauci is the director of the National Institute of Allergy and Infectious Diseases.

Well, sheriff's deputies on Long Island uncovered what they say is a very unusual case of child endangerment, a toddler who was drunk.

CNN's Kimberly Osias has the details. Kimberly?

OSIAS: Well, Ali, this is really a remarkable story. The child, a 2-year-old little boy, is fine now and, fortunately, back at home. But the man who was babysitting he and his sister at the time is facing some serious charges.

(BEGIN VIDEOTAPE)

OSIAS (voice-over): This little 2-year-old boy is a bouncing toddler once again. But he was in very different shape when sheriff's deputies found him on Tuesday.

VINCENT SPADAFORA, SUFFOLK COUNTY, NEW YORK, SHERIFF'S DEPARTMENT: Had difficultly standing up -- his eyes were glassy and bloodshot. And his face was caked with mucus.

OSIAS: The deputies were near the toddler's home on an unrelated case involving some neighbors. One of them noticed, through a window, Juan Reyes, allegedly passed out, and two small children unsupervised. The deputies say it was hard to get Reyes' attention.

CHRISTOPHER BROCKMEYER, SUFFOLK COUNTY, NEW YORK, SHERIFF'S DEPARTMENT: It took numerous knocks on the window. In fact, I was banging on the window to try to roust him.

SPADAFORA: He was pretty much incoherent, because he was highly intoxicated.

OSIAS: Reyes had been asked to babysit the 2- and 3-year-old children, while their parents were at the hospital for the birth of another child. It's not clear whether he gave the toddler the liquor or if the child simply got hold of an open bottle. The father, Jose Gomez, says he has no idea Reyes would get drunk.

JOSE GOMEZ, FATHER: I don't see never he did drink in the morning.

UNIDENTIFIED MALE: Oh, so you didn't know he was drinking?

GOMEZ: No. He not drink in the morning.

OSIAS: Gomez was shocked when his 2-year-old showed up at the very same hospital where his wife was giving birth. The child had a blood alcohol level exceeding .09, legally drunk under New York state law. Reyes was arrested. And the other child, who didn't drink any alcohol, was taken into temporary protective custody.

BROCKMEYER: God only knows what would have happened had we not been there.

(END VIDEOTAPE) OSIAS: We contacted Reyes' attorney, but he wouldn't comment on the case. Reyes is charged with two counts of endangering a child's welfare. And he's being held on $10,000 bail. He is due back, Ali, in court next week.

VELSHI: Unbelievable story. Kimberly, thank you -- Kimberly Osias.

Coming up next, he's a chaplain and Iraq war veteran and practically a neighbor of President Bush, and he has a unique perspective on what the fight over Iraq is all about -- his story next in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: Well, Crawford, Texas is something of a crossroads in America's debate about Iraq.

As the president's hometown, many residents are strong supporters of him and of the war. But it has also been the setting for anti-war protests. Now, into that emotional mix, add military -- a military chaplain who has returned from Iraq.

Our White House correspondent Dana Bash is in Crawford, Texas, with more on that. Dana?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, Ali.

Well, you know, just like cities large and small all across America, Guardsmen and reservists from the president's hometown of Crawford have been called up to serve in Iraq. And one is a leader in this community. His name is Pastor Kent Berry. We got to know him before he left for Iraq. And we visited him since he came back and is trying to readjust to Crawford life.

(BEGIN VIDEOTAPE)

BASH (voice-over): Down the road from the president's ranch, Pastor Kent Berry unlocks the door to his Crawford church and turns on the lights.

REVEREND KENT BERRY, TEXAS NATIONAL GUARD: Feels very good to -- yes, indeed. Good to be home.

BASH: He's preparing to preach for the first time since returning last month from Iraq. Being from the president's hometown makes Berry's story unique. Dealing with the tough transition from war does not.

K. BERRY: First it's kind of a postpartum thing, you know, that you go through. Either part of you is still very much a part of the people and the work and everything that goes on.

BASH: There, ministering to troops meant frequent travel on treacherous Iraqi roads, preparing every day to die. K. BERRY: I would do things like clip my nails, you know, my toe nails and make sure I had clean clothes on. If you get killed or if you get hurt, you know, they're going to deal with whatever is left.

BASH: Now he's reconnecting with the family we followed since before his National Guard unit deployed 18 months ago, and watched him try to stay engaged from afar.

K. BERRY: Are you still going with the same guy that you were going with last week?

BETHANY BERRY, DAUGHTER: Yes.

BASH: And saw daughter Bethany quietly join in when the war debate came to Crawford this summer, holding a sign in her dad's honor to counter Cindy Sheehan's anti-war protests. Now that he's back, she says war left its mark.

B. BERRY: Dad's a little bit different. He's more quiet, more serious.

BASH: His famous neighbors sent a few letters of encouragement. Being from the Bush's Texas town gave him notoriety.

(on camera): How about a sense of responsibility?

K. BERRY: Oh, yes, in the sense that I hopefully will not say anything particularly just outward -- stupid, you know.

(LAUGHTER)

BASH (voice-over): Berry left for Iraq feeling matter of fact about his mission, but returns supportive and proud.

(on camera): So, your message is going to be, I'm back from Iraq and there's hope?

K. BERRY: Yes, absolutely.

BASH: But chaplains are not in the business of justifying war, he says, so he will find his message in scripture.

K. BERRY: Ecclesiastes, where there is truly a time for everything. We go through phases and we have our experiences. But, at the end of the road, we have every reason to be hopeful.

(END VIDEOTAPE)

BASH: And, Ali, the pastor is going to give that sermon to his Crawford congregants, the first since he's been home from Iraq, this coming Sunday, New Year's Day.

Ali.

VELSHI: Dana Bash, live in Crawford, Texas -- thank you, Dana. Let's show you some live pictures of Oklahoma County, just east of Oklahoma City, where those grass fires we have been following all day have now engulfed what appears to be a -- a building on a farm. There appear to be perhaps animal pens at the bottom of that screen that -- that have been engulfed by the fire.

We will continue to following this story, both on THE SITUATION ROOM at our 7:00 edition and on LOU DOBBS TONIGHT.

We are here every weekday afternoon, from 4:00 to 6:00 p.m. Eastern. We are back on the air at 7:00 p.m. Eastern, just one hour from now.

We will update you on the fire in -- in THE SITUATION ROOM at 7:00 -- plus, Wolf's one-on-one interview with former FBI Director Louis Freeh.

Until then, I'm Ali Velshi in THE SITUATION ROOM.

My good friend Christine Romans, filling in for Lou Dobbs tonight, she is standing by in New York. Christine?

CHRISTINE ROMANS, CNN ANCHOR: Thank you, Ali.

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