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THE SITUATION ROOM

National Security Concerns Over Proposed Business Deal With Dubai-Based Company; Mexican Miners Trapped Underground

Aired February 20, 2006 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: It's 5:00 p.m. in Washington, and you're in THE SITUATION ROOM, where news and information from around the world arrived at one place at the same time.
Happening now, bipartisan outrage. A business deal is under way that gives an Arab country control of six major American ports. And many are saying the deal is really a sale on national security.

In Mexico, every second and every breath counts. Sixty-five miners are trapped a mile under ground. A desperate search is under way right now. But with time and oxygen running out, one loved one says, "We're here waiting for a miracle."

And it could be music to your ears. If you recently bought certain CDs from Sony Music, you may now be entitled to a cash settlement. We're going to have details.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

This CNN "Security Watch." It's the kind of global big business deal that happens all the time. But this one is making headlines, mixing concerns over security with accusations of bigotry. A company from the United Arab Emirates is buying a British company in a deal that puts the Arab firm in charge of six major U.S. ports.

Our Dana Bash is standing by at the White House. We'll get to her shortly.

But let's go to the Port of Baltimore, where our Brian Todd begins our coverage -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, according to Maryland's governor, this port handled more than eight million tons of cargo last year. Some security experts worry this new deal will add a whole new layer of vulnerability to all that volume.

(BEGIN VIDEOTAPE)

TODD (voice over): A massive container ship pulls into the Dundalk terminal at the Port of Baltimore, one of more than 2,000 vessels that will likely pass through the facility this year. Baltimore's mayor now believes his port is entering a new period of vulnerability.

MAYOR MARTIN O'MALLEY (D), BALTIMORE: At a time of terrorist threat, when for years we've been saying that our ports are vulnerable, we should not be surrendering any American port to a foreign government, let alone to the United Arab Emirates with their background.

TODD: Baltimore, along with the ports of New York, New Jersey, Philadelphia, Miami and New Orleans, may soon have much of their operations taken over by a company called Dubai Ports World, a firm essentially under the control of the ruling family of the United Arab Emirates. A panel within the U.S. Treasury Department approved the deal.

Homeland Security Secretary Michael Chertoff spoke to Wolf Blitzer on the feasibility of having six major American ports outsourced to an Arab company.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: You can be sure that any transaction that goes forward is going to be carefully reviewed and is also going to be carefully subject to the expertise of the Coast Guard and Customs and Border Protection.

TODD: The Department of Homeland Security will screen cargo at the ports and handle other security measures. But physical protection of the terminals themselves will be handled by the operator, a company based in a country that, according to the 9/11 Commission, was home to two 9/11 hijackers and was a major financial base for al Qaeda.

CNN security analyst Clark Kent Ervin worries about that connection to a port system where only a small percentage of cargo is opened and physically inspected.

CLARK KENT ERVIN, CNN SECURITY ANALYST: All the experts agree that probably the easiest, and therefore the likeliest way, for a weapon of mass destruction to make its way in to the United States would be through a port.

(END VIDEOTAPE)

TODD: Now, the company that's about to take control of this port is trying to reduce some of those security concerns. Contacted by CNN, an official with Dubai Ports World said, "We intend to maintain or enhance current security arrangements."

It's also worth noting that the foreign minister of the United Arab Emirates told The Associated Press that his government has worked very closely with the United States to combat terrorism both before and after 9/11 -- Wolf.

BLITZER: Brian Todd, in the Port of Baltimore.

Thank you, Brian.

This is all the result of Dubai Ports World buying the British company Peninsular and Oriental Steam Navigation, known as P&O. It's put out a statement in response to the controversy saying -- and I'm quoting now -- "P&O is itself a foreign-owned terminal operator that has long worked with U.S. government officials in charge of security at the ports to meet all U.S. government standards, as do other foreign companies that currently operate ports in the United States. We are confident that the DP World purchase will ensure that our operations will continue to meet all relevant standards in the U.S. through ongoing collaborations between DPW, P&O and port security officials throughout the world, including the U.K. and Australia."

The White House said it learned of the controversy only when some members of Congress on both sides of the aisle started complaining about the deal, but the Bush administration says it was "done by the book."

Let's go to the White House. Our correspondent Dana Bash has more -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, on that point, White House officials say that it was not and is not an issue for President Bush to deal with. Why? Because they say there is a very specific process in place, a committee of 12 agencies that reviews issues like this, transactions like this.

And it is based on one issue and one issue only, they say, that they allow this to go through, and that is it national security, whether or not it is OK in terms of the safety of the American people to let transactions like this go through. Since they determined that it was, this did not go to the president's desk.

Now, senior officials here at the White House and across the administration have been making the point that, because of that, what is important is to keep a long-standing tradition of free and open markets. That is something that Michael Chertoff, the homeland security secretary, said yesterday on "LATE EDITION."

(BEGIN VIDEO CLIP)

CHERTOFF: Congress is welcome to look at this and can get classified briefings. You know, we have to balance the paramount urgency of security against the fact that we still want to have a robust global trading system.

(END VIDEO CLIP)

BASH: Now, the charge that we have heard from Democrats and from Republicans, maybe even especially from a few Republicans, is that regardless of the process, that what you see here is a tone deaf -- politically tone deaf White House to the issues raised in this process and in this transaction.

Now, what the White House is saying today, Dan Bartlett, the president's counselor, said to CNN, he thinks it's actually a political plus that perhaps they are not involved in politics of people who decide this. He said that it should be comforting that politics weren't -- wasn't interjected into the decisions made, because he said that that's who you want making these decisions, people who are focused on security, not necessarily politics.

It's important to note, Wolf, what we heard from Brian and others across the administration today, making a critical point, they say, is that this particular company, this UAE company, is not in charge of security. It is not being outsourced to them.

Still, they are certainly involved, but the DHS, the Department of Homeland Security, is still in charge of security at these ports.

BLITZER: Dana Bash.

Thanks very much.

And to our viewers, stay tuned to CNN day and night for the most reliable news about your security.

Let's go to a developing story in Mexico we're watching. A desperate search diminishing hopes and dwindling oxygen supply. Dozens of miners are trapped deep in the ground for more hours than their oxygen tanks contained air.

Let's get some details. CNN's Morgan Neill is joining us from the scene in San Juan de Sabinas.

What is the latest, Morgan?

MORGAN NEILL, CNN CORRESPONDENT: Wolf, here at the entrance to the mine, family members have gathered all day, much like they did all day yesterday, and they're waiting for just that, any new information from authorities on what's going on inside the mine.

Now, to their credit, authorities here, civil protection authorities, have been very good about keeping us up to date. The latest -- the latest we heard last four hours was that they have now gone in through the ventilation shaft for the first time and intend to reach those men trapped. They had gone earlier through a shaft used by miners to enter through the cargo shaft. Now, for the first time, the ventilation shaft.

They are also cautioning, however, that we should not expect quick progress, that this is very dangerous work. The risks of (INAUDIBLE) are simply great.

Now, having been down there for that long, with only an estimated six hours' worth of oxygen, hopes here for some sort of miracle finish, for someone to emerge alive, have faded very rapidly, at least today -- Wolf.

BLITZER: Morgan Neill on the scene of this devastating story.

Thank you very much, Morgan, for that.

Let's go back to New York right now. Jack Cafferty once again standing by.

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: How are you doing, Wolf?

Clear plastic sheeting, Duct tape, Rex the Cartoon Mountain Lion, and now, while the federal government is busy improving the sale of the control of the company that operates U.S. port facilities to...

BLITZER: His microphone is garbled or something. But I'm going to have our audio people work on it. We're going to fix it and then we're going to come back.

But let me take a quick commercial, we'll get the audio working. When we come back, we'll move on with Jack Cafferty. He'll have "The Cafferty File."

But also coming up, tough questions for the United States in Iraq. As controversy breaks out over the control of the country's fledgling security forces, why it could be a lose-lose situation for Washington.

And Google versus the government. New developments in the standoff over millions of Internet searches, possibly including yours.

And this note. Coming up in our 7:00 p.m. Eastern hour, my exclusive interview with former president Jimmy Carter, the man who helped broker the Camp David Peace Accords. He speaks out on the latest crisis brewing in the Middle East.

(COMMERCIAL BREAK)

BLITZER: Let's go right back to Jack Cafferty in New York, once again with "The Cafferty File."

Good audio this time.

CAFFERTY: You know, pictures and sound were not meant to fly through the air, Wolf. This is all magic and we're toying with the fates.

Anyway, as we were saying, clear plastic sheeting and Duct tape, and then you add Rex, the Cartoon Mountain Lion, and now, while the federal government is busy approving the control of U.S. port facilities and the selling of those to an Arab country, the Department of Homeland Security has yet another plan to keep our country safe: School Bus Watch.

Six hundred thousand school bus drivers will be trained to learn how to spot potential terrorists. School bus drivers. These are mostly retirees, mothers with young children, school employees who also double as mechanics or janitors or classroom aides.

This must have Osama bin Laden absolutely terrified. School Bus Watch.

One former Homeland Security official says the program needs strong oversight -- we've seen enough of that bus -- so that the bus drivers don't start thinking of themselves as undercover agents.

School Bus Watch is part of Highway Watch, which is a program we spent $50 million on since the year 2003. So you can sleep well tonight, America. The Department of Homeland Security has us covered. School Bus Watch. The question is this: Are school bus drivers good partners in the war on terror? CaffertyFile@cnn.com -- Wolf.

BLITZER: Almost all of them very nice guys and gals, those school bus drivers. I want you to know that, Jack.

CAFFERTY: Well, I haven't been on one in a while, but I'm sure you're right. And, you know, maybe this is the answer. This could be -- this could be the answer to defeating global terrorism, School Bus Watch.

BLITZER: Jack Cafferty.

Thanks very much.

Other news we're following, the United States ambassador to Iraq is pressuring Iraqis to get their house in order or else. The ambassador, Zalmay Khalilzad, issued a harsh warning to Iraqi officials today.

Let's get some details now from CNN's Aneesh Raman. He's joining us from Baghdad -- Aneesh.

ANEESH RAMAN, CNN CORRESPONDENT: Wolf, as the new Iraqi government continues to form, some strong words tonight from the U.S. about who should be in charge.

(BEGIN VIDEOTAPE)

RAMAN (voice over): From the U.S. ambassador to Iraq a blunt threat over who should lead the country's security forces.

ZALMAY KHALILZAD, U.S. AMBASSADOR TO IRAQ: The United States is investing billions of dollars into these forces. We're not going to invest resources of the American people to build forces run by people who are sectarian.

RAMAN: People, many say, like the current interior minister, Bayan Jabr, who has long been the target of intense criticism for abuse of mainly Sunni detainees at the hands of largely Shia security forces discovered last year by U.S. forces in a Baghdad bunker, and for his own alleged ties to the country's largest Shia militia, the Badr organization. All charges he denies, but all reasons why, if unresolved, the issue could place the United States in an unenviable position either funding security force that may do more harm than good to the country, or choosing not to, instead keeping U.S. troops here longer than desired and undermining the effort to get Iraqis to stand on their own.

KHALILZAD: We regard Iraq's success to be our success. And as I have said before, god forbid Iraq's failure will be also ours.

(END VIDEOTAPE)

RAMAN: And so any reduction now in U.S. troops seems heavily contingent on who gets Iraq's top security post -- Wolf. BLITZER: Aneesh Raman in Baghdad.

Thanks, Aneesh.

Let's go back to Zain at the CNN Center in Atlanta with a closer look at other stories making news.

Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, Wolf.

It's been a deadly day in Iraq, where insurgent attacks included a suicide bombing on a minibus in Baghdad that killed 12 people and injured 15. Twenty people were wounded when a homemade bomb went off near a group of day laborers in Baghdad.

An IED also killed an American soldier near Karbala, bringing the total number of U.S. service members killed since the start of the war to 2,276.

New protests over cartoons mocking the Muslim Prophet Mohammed. Hundreds of students took part in this demonstration in Jalalabad, Afghanistan. They shouted, "Death to Denmark!" That's the country where the cartoons were first published last year. They also chanted "Death to America," and they chanted as well support for Osama bin Laden.

Iranian's supreme leader, Ayatollah Khamenei, is encouraging Muslim countries to help financially support Palestinians. Khamenei met with leaders of Hamas, the militant group now leading the Palestinian government.

Both the United States and Israel consider Hamas a terror group and they're actively discouraging financial support. So is the European Union. The United States and Europe are the two largest donors to the Palestinians.

The issue is among those taking center stage as Secretary of State Condoleezza Rice visits Egypt, Saudi Arabia and the United Arab Emirates. Egyptian state media report that the government wants to give Hamas time and not rush to judgment. Rice will also be addressing concerns over Iran's nuclear program -- Wolf.

BLITZER: Zain, thanks.

What's it going to take to protect your children online? The Justice Department now wants to craft a law and is requesting that Google hand over millions of search terms, but Google is refusing to roll over.

Our Internet reporter, Abbi Tatton, once again with details -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, Google, in a legal brief, has slammed the federal government. What it's saying is that not only would turning over this data to the Department of Justice reveal Google trade secrets, but it also goes on to say in this legal brief that the request is so uninformed as to be nonsensical.

It says what the government is asking for is not going to get them anywhere. And it demonstrates by showing a Web page such as this one.

In the Web address is the word "porn," but it doesn't lead you to a porn site. It's actually a PBS site that shows you anti-porn organizations. Google is saying what the government's asking for isn't going to help them in this case.

Now, some major search engines, MSN and Yahoo!, have complied to some extent with the government's request.

The Google hearing is set for March 13 -- Wolf.

BLITZER: Abbi, thanks very much.

Coming up, an Arab company in charge of American ports. Is it a valid security concern? We'll talk about it in our "Strategy Session."

And coming up in our 7:00 p.m. Eastern hour, my exclusive interview with former president Jimmy Carter. He'll answer questions on the new Palestinian government, Iran's nuclear program, lots more. He's here in THE SITUATION ROOM.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: In today's "Strategy Session," a deal giving a Dubai- based company management of six major U.S. ports has set off a political firestorm. Is it an issue of security or more of a political blunder?

Plus, is there any lasting fallout from Dick Cheney's hunting accident?

Joining us now, our CNN political analyst, Democratic strategist James Carville, former Republican congressman J.C. Watts.

Senator Graham, Lindsey Graham, Republican, South Carolina, was on TV yesterday. He said this of this port deal. He said, "It's unbelievably tone deaf politically at this point in our history, four years after 9/11, to entertain the idea of turning port security over to a company based in the United Arab Emirates."

Is he right, J.C.?

J.C. WATTS (R), FMR. U.S. CONGRESSMAN: Well, Wolf, he's got a good point. I think the administration -- you know, this week it's port security, last week it was Dick Cheney. You know, I don't know if it's a good decision or a bad decision, but it just kills the administration when they're not out there defining these things, letting the American people know what's going on.

You know, when you think security, you think Saudi Arabia. You know, what, 11 of the 19 terrorists, they were from Saudi Arabia.

BLITZER: Fourteen.

WATTS: Fourteen, and we're saying, OK, they're handling security. Now, that may be unfair, but the American people, they've got security on their mind. And again, I'm just not so sure that the administration is handling this the right way.

BLITZER: Two of the 9/11 hijackers, I believe, were from the United Arab Emirates, which is, in this particular case, 14 from Saudi Arabia.

Tom Ridge, the former secretary of Homeland Security, said this. I want you to listen, James.

(BEGIN VIDEO CLIP)

TOM RIDGE, FMR. HOMELAND SECURITY SECRETARY: I think the anxiety and concern that has been expressed by congressmen and senators and elsewhere is legitimate. The optics at this point don't look very good.

But I've also sat in on that similar process when we reviewed some other potential sales that could have an impact on America's security. And I do think that at some point in time you have to say to yourself, would Secretary Rumsfeld and Snow and Chertoff and Rice compromise American security? I don't think so.

(END VIDEO CLIP)

BLITZER: What do you think?

JAMES CARVILLE, CNN POLITICAL ANALYST: I think this is an excellent political opportunity for everybody. This is a political pinata. The Republicans -- it gives the Republicans a chance to say, look, we stood up to the president on this, the Democrats say the whole thing is sort of out of control, we're selling our ports off to boom, boom, boom.

So, the politics of this are pretty simple. And I suspect that the administration, in the end, are probably going to have to -- I don't know how you pull the deal down, because it was a British company that was doing it, and they sold it to a company based in Dubai, as I understand it. And they've been cooperating with us on some things in the war on terror, although the money transferred came through there and there's allegations, and I think pretty factual, that nuclear technology was transferred out of their port to Iran.

It's not a clear-cut thing. But the politics of this are clear and down the line.

BLITZER: Well, does the president need to step in right now and sort of reverse -- he can reverse this decision, I assume.

WATTS: Well, Wolf, again, I don't know if it's a good decision or a bad decision. I don't think any of us have seen a lot of the details about what's going on.

I saw the Homeland Security secretary say that, you know, he's going to be talking to the appropriate people and he has made some comments, but the American people don't know a whole lot about it. And when you allow James Carville and J.C. Watts and Wolf Blitzer to define this thing, as opposed to the administration being out there and talking about this, defining it, you know, we're going to use our imagination and we're going to say, OK, did they sell the ports as James said? And I don't think that happened.

But those types of things happen when you leave it to the imagination of politicians and activists.

CARVILLE: But Wolf -- but, you know, a guy sitting there is saying, you know, we've got six ports, these are the most vulnerable places that we have. Jeez, Americans can't run our own ports?

BLITZER: Well, apparently, the British company was doing it for years.

(CROSSTALK)

CARVILLE: Now it's on people's radar screen big time. I'm just saying, the politics of this are simple, and the politics of this are really good for the Republicans. It gives them a chance to say, look, you know, I vehemently disagreed with President Bush. And you can see it coming down the line.

It's going to be a hard one to sustain.

BLITZER: You know who came to President Bush's defense here in THE SITUATION ROOM in the past hour? The former president of the United States, Jimmy Carter, who doesn't often come to George W. Bush's deference. But listen to what he said.

(BEGIN VIDEO CLIP)

JAMES CARTER, FMR. PRESIDENT OF THE UNITED STATES: The overall threat to the United States and security, I don't think it exists. I'm sure the president has done a good job with his subordinates to make sure this is not a threat.

(END VIDEO CLIP)

BLITZER: He says it's not a threat and he thinks the president has done a good job in reviewing this deal.

CARVILLE: But he don't get no votes.

WATTS: And I -- and Wolf, I'm not saying that it's a threat. As I said earlier, I don't know if it's a good deal or a bad deal. But I know the appropriate people -- I'm assuming the appropriate people will scrutinize this thing.

Peter King, Homeland Security chairman in the House, you know, he talked about it. He's going to be looking at it. How do you hire people? How do you bring people on board?

So it will be scrutinized properly, I suspect. But again, I just think, you know, be out in front of these things, be proactive about these things. Don't let people like us define, sit on shows like this and define what we think it may or may not be.

CARVILLE: But in fairness, it's not us that's defining it. It's Lindsey Graham that's defining it. It's Peter King that's defining it.

It's every -- it's everybody that wants to show some distance. Like I say, the politics of this are pretty simple. They've got a huge mountain to overcome.

And I think it just kind of strikes people as kind of something fundamentally wrong when a company based in Dubai is running our six largest ports. That's a tough one to explain.

BLITZER: All right.

WATTS: And it's tricky to make -- to make the dots, to connect the dots on that if you allow people to use their imagination about it.

BLITZER: You mentioned this week we're talking about port security, last week we were talking about Dick Cheney and his hunting accident. You're good friend, the former president of the United States, Bill Clinton, was on ABC earlier today, and he said this. Let me read it. Let me read it to our viewers.

"I didn't feel the need to get into the pile-on. I think the White House should have said something about it sooner, but I don't know what else there is to say here. I think that it's gotten a little more light than it would have because the administration has an enormous penchant for secrecy, for not telling anybody anything about anything."

CARVILLE: You know, I think one of the best points on this is our colleague, Candy Crowley, who in the green room said that she thinks that the vice president was just embarrassed. I mean, he prides himself as being a hunter and this kind of ultimate sense in hunting is to shoot somebody. That's not good.

And I think he was probably -- on a human level, the guy was not anxious to tell everybody that -- and look, it's over now. Mr. Whittington is OK. And, you know, now they're back to every other political disaster they have. I'm -- on a lot of levels, this didn't make all their problems in Iraq go away, it didn't make the prescription drug benefit go away, and now we've got the Dubai ports thing.

So it was a diversion, but...

BLITZER: I suspect we're over this. But one thing that the vice president is not over with, which is his job approval number. In this new "TIME" magazine poll, he's got 29 percent job approval. The president had, what, 39 or 40 percent. Twenty-nine percent, that's really low job approval.

WATTS: Well, it's not good. But again, Wolf, as I said, I think the administration allowed people like us to talk about this and define it and use our imagination about the shooting incident.

I do believe the -- the vice president was embarrassed. I think he was hurt, truly hurt, that his friend had been shot. I think he was torn apart by that. I believe everything that he said.

But, if the vice president of the United States shoots somebody, and people don't know what's going on, they use their imagination...

(CROSSTALK)

WATTS: ... and they start connecting the dots, trying to, you know, draw their own conclusions about it...

CARVILLE: But -- but -- but my...

(CROSSTALK)

WATTS: ... that's not -- that's not a good thing.

CARVILLE: My -- my -- my boss was right, former President Clinton.

He does -- he is a man known for secrecy. He doesn't -- in fact, he doesn't really run away from his reputation of secrecy. And, then, of course, when they got in trouble, I will say, yes, couldn't (INAUDIBLE) He went to FOX News and the Wyoming legislature.

(LAUGHTER)

CARVILLE: But I will -- I will let that go.

BLITZER: All right.

CARVILLE: But I'm sure he felt terrible as a human being in...

BLITZER: We will -- we will...

CARVILLE: ... about the whole thing.

BLITZER: We will leave it there, guys. Thanks very much.

James and J.C., see you soon.

Coming up, a former president in THE SITUATION ROOM on this Presidents Day -- Jimmy Carter, that would be -- about the elevation of a group considered a terrorist organization to lead the Palestinian Authority.

Also, in our exclusive interview, I will ask the -- the former president what he thinks about the deal to have this Arab company operate six ports in the United States -- 7:00 p.m. Eastern, my interview with Jimmy Carter, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: More now on our top -- our top stories -- the business deal that would give an Arab country control of six major American ports and the current political battle over Hamas.

Joining us now, a key member of the CNN Security Council, CNN world affairs analyst William Cohen. He's also former defense secretary. He's CEO of The Cohen Group -- chairman as well -- here in Washington.

Michael Chertoff, the secretary of Homeland Security, was on "LATE EDITION" yesterday...

WILLIAM COHEN, CNN WORLD AFFAIRS ANALYST: Right.

BLITZER: ... and he said this, in trying to explain why the administration approved this deal. Listen to this.

(BEGIN VIDEO CLIP, "LATE EDITION")

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: We have to balance the paramount urgency of security against the fact the we still want to have a robust global trading system.

(END VIDEO CLIP)

BLITZER: Now, you have been in -- in those inter-agency meetings...

COHEN: Right.

BLITZER: ... when you were the defense secretary. And you have to sign off on these deals.

Was this -- was this a wise conclusion that they came up with?

COHEN: First of all, when I was at the Defense Department, we took the CFIUS process very seriously.

We examined any case in which there was a foreign investment being made that would acquire U.S. assets that might pose a threat of any nature. So, we took it seriously then. I have to believe that the Bush administration is taking it very seriously now.

BLITZER: Especially after 9/11?

COHEN: Especially after 9/11, especially after President Bush's commitment that he's going to make this country safer than any other candidate that would challenge him on this issue.

So, I have to assume that they made a very thorough examination of this before signing off., Department of Defense, FBI, Department of Homeland Security, all others who would be -- Treasury -- who would be reviewing this.

So, I assume that has been done. But I think, also, the statement made by J.C. Watts earlier, that it's incumbent now upon the president of the United States to really take the lead on this and explain it to the American people, as to why it's in the best interests of the United States to allow this to go forward.

Frankly, I think a mistake is being made, in terms of where the focus ought to be. The focus is not so much on the security of the ports here, which is very important, but what is coming into the country before it ever arrives here?

By the time it gets to the United States, it's almost to late, if you're talking about a biological or a nuclear device being released in the United States. It's what takes place in the ports, from Singapore, Shanghai, all over the world, the major ports. And that's where we have to focus on the kind of security measures that are being taken, what goes into the cargo, how is it sealed, how is it tracked, and make all of those responsible for that before it ever arrives here.

It's important once it arrives. But, before it ever gets here, that's when we have to look at it.

BLITZER: And there's incredible concern about port security, because, by the Department of Homeland Security's own statistics, only 5 percent of -- or so of the cargo that comes in is actually physically inspected.

COHEN: It's virtually impossible, once the volume of cargo coming into the United States, on a daily basis, to say, we're going to now inspect it once it gets here.

You would tie up international traffic all the way across the world. It would be gridlocked. We would have a devastation of the world economy.

So, what we have to do is, yes, say, we have port measures and various prompt inspections, and unannounced inspections, other types of technological devices that would detect any kind of activity, be it nuclear or other biological cargo -- containing cargo.

But what we really have to do is to go, again, to the major ports of the world and say, we want you to put in place these kinds of procedures, or else your cargo is not going to be allowed into the United States. So, we have to move our perimeter of security way out on a global basis.

And that's where we have to keep the focus. And, again, I assume that this administration has been very scrutinizing, in terms of looking at this particular deal, before it went through.

And now it's up to the president to come forward and say, this is what we did. This is why we have done it. And we think the United States is -- is secure. And, if he doesn't do that, the politics will tend to override it. BLITZER: Let me pick your brain on Hamas.

Now that there is going to be a new Hamas prime minister of the Palestinian Authority, all this U.S. aid that has been going to the Palestinians, hundreds of millions of dollars, what do you think the U.S. should do with it now?

COHEN: I think the U.S. is taking the position -- the correct position -- that we will continue to fund the Palestinian Authority, until such time as the new government is formed.

At that point, in the event that Hamas fails to at least indicate, not only by word, but by deed -- I don't think anyone is going to accept the fact, if they were to declare tomorrow that they are going to accept Israel's right to exist, would believe that. But I think, by actions, as opposed to words, they start taking measures that show they're prepared to work with the Israelis, the United States and other members of the quartet, the United States, United Nations, Russia, and others, then I think we can move forward in a -- in a -- in a practical way.

Barring that, I think the money, very clearly, is going to be shut off. That will lead to a -- a great deal of hardship for the Palestinian people. And we will have to see how it all plays out. But they have the responsibility, at this particular point, to form a government that shows it's willing to work with the international community to promote peace, and not to radicalize it and try to destroy Israel.

BLITZER: Secretary Cohen, thanks very much for joining us.

Coming up in our 7:00 p.m. Eastern hour, on this Presidents Day, we will have more on all of these important topics, including my exclusive interview with former President Jimmy Carter. We will talk about the latest crises brewing in the Middle East, as well as what's going on with this port deal here in the United States. Once again, that's coming up, 7:00 p.m. Eastern, here in THE SITUATION ROOM.

And, still to come, have you bought some Sony C.D.s lately? You might be entitled to a refund. We are going to tell you what is happening on that front.

And we have been talking about that Dubai-based company and the deal concerning U.S. ports. But what is the United Arab Emirates' role in the war on terror? We have been looking into that as well.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: CNN "Security Watch" -- and more on our top story, the business buyout that would put an Arab company in charge of six major U.S. ports.

That firm, Dubai World Ports, is based in the United Arab Emirates, which has a mixed record as a key U.S. ally. Kelli Arena from our America Bureau joining us now live with details -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, you know, it sounds cliche to say that the world has changed since 9/11, but it has, especially when you're looking at relationships in the war on terror.

(BEGIN VIDEOTAPE)

ARENA (voice-over): The hijacker who steered a United Airlines flight into the World Trade Center's south tower, Marwan al-Shehhi, was one of two 9/11 hijackers born in the United Arab Emirates.

In fact, some of the hijackers traveled to the United States through the UAE to carry out their deadly plan. The FBI has said the money for 9/11 was transferred to the hijackers primarily through the UAE's banking system. Even after the attacks, the U.S. Treasury Department complained about a lack of cooperation in trying to track Osama bin Laden's bank accounts.

REP. PETER KING (R), NEW YORK: The United Arab Emirates, they're one of only three countries in the world that, prior to September 11, recognized the Taliban. In the days after 9/11, they were not overly supportive, as we were trying to track down terrorists' financial transactions.

What's more, U.S. officials have said the UAE was an important transfer point for shipments of smuggled nuclear components sent to Iran, North Korea and Libya by the Pakistani scientist A.Q. Khan.

Nonetheless, the Bush administration calls the UAE an ally in the war on terror. And counterterrorism officials say it is cooperating more and consistently since 9/11.

JOHN MCLAUGHLIN, CNN NATIONAL SECURITY ADVISER: It's rare to find a country that has been cooperative in -- in three different arenas, the pursuit of terrorism, the pursuit of their money, and helpful also on proliferation of weapons.

ARENA: In 2002, it was the UAE who caught and extradited al Qaeda's leader in the Gulf, described as the mastermind of the attack on the USS Cole.

(END VIDEOTAPE)

ARENA: Counterterrorism officials say that, relatively speaking, the UAE has a realistic understanding of the terrorism problem, and has made a commitment to help deal with it, more so than some of its neighbors in the region -- Wolf.

BLITZER: Kelli, thanks very much.

Lou Dobbs getting ready for his show that begins right at the top of the hour.

Lou, I think I know what you're working on.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": We will be working precisely on this issue, the very important issue of national security, an issue that the Bush administration has apparently decided is not relevant in the case of the United Arab Emirates and six of our major ports, as you have been reporting.

We will be talking with Senator Robert Menendez, who is going to introduce legislation to block this move. We will also tonight, Wolf, be telling you why President Bush feels he needs to consult with Mexican President Vicente Fox about our own border security.

And, as you know, Wolf, today is Presidents Day. Members of Congress have given themselves not just a day off, but a week off. Imagine that. Tonight, we are going to tell you exactly how much time Congress actually spends in Washington and how much of that time they spend actually working.

We will have that and a great deal more coming up at the top of the hour. We hope you will be with us -- Wolf.

BLITZER: Let me pick your brain for a moment.

I know you have got to get ready for your show, Lou. But the -- the administration, the Department of Homeland Security, insists that this firm, this Dubai-based firm, is not going to be in charge of security. The Coast Guard, the Department of Homeland Security, will be in charge of security. They're just going to operate these ports.

DOBBS: Yes.

They're just going to operate them, Wolf. That's right. The -- that means that they will be responsible for physical security of the terminals, the ports themselves. It means also that a country -- a country that is in control of this company, D.P., the Arab Emirates, will have a vast influence over our ports.

Questions arise -- why would the United States government approve this deal? Why are there no U.S. companies involved in this deal? Why is this administration that has left our borders absolutely unprotected, why do they find it necessary to turn over operation of these ports?

The United States Congress is asking these questions, the United States Senate. And we have been asking them since we reported this story one week ago today.

BLITZER: I know you guys have been ahead of the curve on this story.

I didn't know that this Dubai firm bought a British firm, which was really operating at these six major U.S. ports.

DOBBS: That's right.

BLITZER: They spent billions of dollars to buy this British firm.

DOBBS: Yes.

BLITZER: Did you know that the Brits were -- were running our ports?

DOBBS: Yes. These -- part of these ports, yes.

The Pennsylvanian -- the Peninsular and Oriental -- the old P&O, British Company -- absolutely. And, in point of fact, a number of our ports are still in this country, at least another half-dozen, are being operated by foreign companies.

And this is focusing on an absolute gap in our national security. Only 4 percent of the cargo that is coming into this country is being inspected by Homeland Security.

Homeland Security, I will tell you, Wolf, we will establish tonight, is basically a bad joke being perpetrated on the American people. When millions of illegal aliens are crossing our borders, when this department finds that it can rationalize in the name of free trade, which is exactly -- when Michael Chertoff was talking to you, that was his rationalization for doing this deal. It's absolutely insane.

BLITZER: Lou Dobbs is going to have a lot more on this story coming up right at the top of the hour. Lou will be watching.

DOBBS: Great.

BLITZER: Thank you very much.

And coming up here in THE SITUATION ROOM, you might be eligible to get some really cool free music from Sony. Our online sleuths are looking into that.

And, in our 7:00 p.m. Eastern hour, an extended exclusive conversation with Former President Jimmy Carter. He weighs in on Hamas, the Iran nuclear issue, Arab ownership of some U.S. ports, lots more -- on this Presidents Day, Jimmy Carter here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Zain at the CNN Center in Atlanta for a closer look at other stories making news.

Hi, Zain.

VERJEE: Hi, Wolf.

There's both hope and despair in the Philippines. Sounds of scratching and rhythmic tapping have been picked up by some really sophisticated listening gear at the site of a school buried under tons of mud. Rescue crews have been at work since a massive mudslide hit the area on Friday. Authorities say that the death toll is expected to climb as high as 1,000 people.

About 200 U.S. troops are involved in the rescue operation in the Philippines. They're also supplying medicine, clean water and blankets. The Philippine government has established a no-fly zone over the rescue area because of fears that the downwash of helicopters might cause more mudslides.

Also, communist gorillas in the area say that they won't fire on U.S. troops, so long as they don't stray out of the rescue zone.

British historian David Irving has been sentenced to three years in prison for denying the Holocaust. The Austrian court's verdict is a surprise, basically because Irving has pleaded guilty. And everyone was expecting a suspended sentence. Irving admitted denying, in 1989, that Nazi Germany had killed millions of Jews during World War II.

He told the court that he changed his mind in 1991, after reading the personal files of chief Holocaust architect Adolf Eichmann. But the chief judge says he just doesn't buy it. He called Irving's change of heart mere lip service.

The 67-year-old Irving says that he's shocked by the verdict, and he immediately appealed. In Austria and Germany, the crime of denying the Holocaust is punishable by up to 10 years in jail -- Wolf.

BLITZER: Thanks, Zain, very much -- Zain Verjee reporting.

Music fans of the Dave Matthews Band, Neil Diamond, Ray Charles and nearly 100 other Sony artists may be entitled to a cash settlement and some free music.

Our Internet reporter, Jacki Schechner, has the story -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Did you buy Neil Diamond's "12 Songs"? Or maybe you have got Clay Aiken's Christmas album.

Well, if so, you may have also gotten some anti-piracy software that carries some security and privacy concerns. How do you know if the disk you have got has got it? Well, perhaps it has got content protection on the spine of the jewel case, or it's got this thing in the corner.

It's a "compatible with" box. It's got some details. Now, EFF is helping to lead the charge against Sony Music. They have agreed to a settlement to get this action fixed up. You can go to the Web site. It will tell you how to file a claim. In some cases, you get money. In some cases, you get free music.

And the good news, Wolf, is, you have got until the end of the year to get this taken care of.

BLITZER: Good news for a lot of our viewers out there.

Thanks very much, Jacki, for that. Up next, are school bus drivers good partners in the war on terror? It's a question that Jack Cafferty has been asking. He's going through your e-mail. He will read some of them when we come back.

(COMMERCIAL BREAK)

BLITZER: Let's check right back with Jack in New York with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: All right. We can sleep well tonight, because the Department of Homeland Security has another plan to keep our country safe, school bus watch.

They want to train 600,000 school bus drivers to learn how to spot potential terrorists. So, the question is, are school bus drivers good partners in the war on terror?

Janice in Kansas City, Kansas: "For the school bus watch to work, the terrorists will have to be here already. I guess that's the job of port security, to make sure they get in. This is proof the administration has, indeed, lost its mind."

Jon in Pittsburgh writes: "School bus drivers spend a lot of time out and about. And, as long as they aren't looking for terrorists so hard that they forget the kids, I think it's a good idea. I mean, why not?"

Fred in San Diego: "A school bus driver could be a good aide in the fight against terrorism. They generally are equipped with cell phones or radios. They can report suspicious activities. They run the same routes every day, and may notice something amiss, such as a vehicle parked on a bridge or near a tunnel. They're another set of eyes and ears."

Roger in Atlanta writes: "As a leader of a group of very dedicated, professional bus drivers, it's clear to me that they already have more than enough to do without taking on another inane, unfunded government mandate. For the security of us all, please turn Homeland Security upside down, shake it out, and start all over again."

Cindy in Fort Pierce, Florida: "Seriously? What about watching traffic, trains, and ducking flying tennis shoes? We are welcoming the UAE into our ports and putting bus drivers in black suits and shades? Does this strike anyone else as a tad bizarre?"

And Russ in Hubbardton, Vermont: "As a former school bus driver, I had, out of 24 kids, 23 terrorists. I'm glad the federal government is finally doing something about it."

(LAUGHTER)

BLITZER: I think Russ has got a point there.

(LAUGHTER) BLITZER: You know, Zain Verjee is back in THE SITUATION ROOM, after two weeks working on "AMERICAN MORNING."

(LAUGHTER)

BLITZER: We are thrilled, Zain, that...

CAFFERTY: It wasn't...

BLITZER: ... you're back.

CAFFERTY: It wasn't two weeks. It was -- she wasn't here for three or four days before she ever...

VERJEE: I...

CAFFERTY: ... started on "AMERICAN MORNING."

VERJEE: I thought I would...

CAFFERTY: The last time she was here was the day after Thanksgiving.

(LAUGHTER)

VERJEE: I thought I would just swing into work today. I thought I would just do a little work and say hello.

VERJEE: You know, I...

(CROSSTALK)

CAFFERTY: ... come by to get your paycheck.

VERJEE: ... actually -- I actually met Jack, Wolf.

We had burgers. He was very charming, looked taller and -- and much more slender than I thought.

But we had -- we had fun together. He ate my fries, though.

(LAUGHTER)

BLITZER: All right, guys.

VERJEE: I wasn't very happy.

BLITZER: See you both at 7:00.

We have much more coming up...

CAFFERTY: Yes.

BLITZER: ... here in THE SITUATION ROOM.

Please be sure to join us at 7:00 p.m. Eastern -- also, my exclusive interview with former President Jimmy Carter on this Presidents Day. We will speak about the Palestinian government, Iran's nuclear program, lots more.

I'm Wolf Blitzer in Washington.

"LOU DOBBS TONIGHT" starts right now.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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