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THE SITUATION ROOM

U.S. Military Clears Troops in March Civilian Deaths in Ishaqi; Settlement In Case Of Nuclear Scientist; Iranian President Standing Firm On His Country's Right To Develop Nuclear Energy; Increased Activity by Taliban Insurgents in Afghanistan; Home Depot Shareholders Protest Fat Salaries; Judge Rules Against Scooter Libby's Defense Team; RFK Jr.: GOP Stole 2004 Ohio Presidential Vote

Aired June 2, 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: And to our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time.
Standing by, CNN reporters across the United States and around the world to bring you today's top stories.

Happening now, breaking news of the military. The U.S. military clearing some troops in the deaths of Iraqi civilians. Meanwhile, there are other disturbing accusations of murder, mayhem and misconduct.

It's 1:00 a.m. right now in Iraq, where new investigations of military misconduct join the ongoing probe of an alleged massacre of innocent Iraqis by U.S. Marines in Haditha.

And it's 12:30 a.m. in Tehran. One day after six world powers offer Iran a deal, the Iranian president responds. But is it a flat rejection of the offer?

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

Right now, the U.S. military is trying to find out if the truth is as awful as the stories. Four investigations into alleged military misconduct in Iraq happening. Just minutes ago we learned that the U.S. military has formally cleared troops in an incident near Balad that might have left 11 Iraqi civilians dead.

And at a base in California prosecutors say Marines are likely to be charged, though, with murder after an incident west of Baghdad. A probe into the killing of a pregnant woman and another female in Samarra and the ongoing probe into an alleged Marine massacre in Haditha.

We're covering all these investigations methodically. Let's begin with our senior Pentagon correspondent, Jamie McIntyre.

The news that you reported moments ago here in THE SITUATION ROOM, Jamie, for our viewers just tuning in, update them on what the Pentagon has decided.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, you know, Wolf, the Pentagon was reacting to charges in the last 24 hours about a second incident, another incident in which it was alleged that 11 civilians were killed in a town north of Baghdad. And Pentagon officials now telling CNN that U.S. troops have been cleared of any misconduct in that March 15th incident in the town of Ishaqi, north of Baghdad.

The investigation concluded that U.S. troops followed the normal procedures in escalating the level of force as they came under attack while attacking a suspected al Qaeda target, a place where U.S. troops were targeting known enemy forces and were taking heavy fire. Eventually they called in air support from an AC-130 gun ship, which ended up destroying part of the building.

The U.S. military does not dispute that civilians were killed there. They say four civilians were killed, including two women and a child. But they say they were because they were at the location of a legitimate military target. Again, the Army's criminal investigation division has looked into this incident and insists that there's no further reason to probe into it because there's no evidence of misconduct on the part of U.S. forces.

Meanwhile, in the Haditha incident, in which we're still awaiting the results of an investigation and expected charges, CNN has talked to, for the first time, a major, a Marine major who was the one in charge of paying compensation to some of the victims of that. You may recall CNN reported $38,000 in payments were made to relatives of 15 victims. Again, not a recognition of any fault, but a recognition that they had been killed and that they were civilians.

Major Dana Hyatt talked to CNN, and while not talking about the payments, he did say that Haditha was a very dangerous place during the time he was there.

(BEGIN VIDEO CLIP)

MAJ. DANA HYATT, U.S. MARINE CORPS.: You can be going down the street and all of a sudden something blows up right down the road. Or going down the street and, you know, you get a call on the radio saying, hold up because somebody just told us that there's probably a bomb up the road. And sure enough, there was. And so it's something that you need to be constantly aware of, but not -- not trigger happy like you're shooting at everything that moves.

(END VIDEO CLIP)

MCINTYRE: Marine Major Dana Hyatt talking to CNN for the first time about what happened in Haditha. He wanted to make the point, by the way, that security in the Haditha area was much improved because of the things that the Marines did. Children were able to go to school, people were able to go to jobs, voting was able to take place. And he was very proud of that.

And by the way, he's now getting out of the Marine Corps. He's going to be a teacher. He teaches the fifth grade in Connecticut -- Wolf. BLITZER: Any indication when the Haditha investigation is going to be wrapped up, as apparently they wrapped up this other investigation that you've been telling us about?

MCINTYRE: Well, that investigation had been done some time ago, which is why we could report the results of it so quickly. The criminal probe into Haditha is not going to end at any particular point. What we'll start to see is people being charged based on the investigation, and then I'm told the investigation will remain open incase new evidence is developed in the course of military court- martials -- Wolf.

BLITZER: And as far as this investigation that we've been reporting that's been wrapped up days ago or weeks ago, whenever, but we're only learning about it today, the reason this has come up, is it because, what, the BBC reported -- had some video of what happened there and all of a sudden it became a big issue over the past 24 hours?

MCINTYRE: That's right. Some of the people presented -- some -- local Iraqis from a Sunni group presented the BBC with images that they said contradicted the U.S. military's official version of events. That raised questions about what happened there.

The U.S. military went back, took a look at what it's done, and is referring us to its previous investigation. They say this incident was thoroughly investigated and that the evidence did not support misconduct.

And they point out, by the way, that that's not the case in Haditha, where they are finding evidence and they're following those leads. So they say when the evidence points to misconduct they do follow it up.

BLITZER: Jamie, thank you very much.

Jamie McIntyre at the Pentagon.

Meanwhile, there's another investigation looking into whether or not several Marines killed an Iraqi civilian west of Baghdad in April.

Our Sumi Das is joining us from Camp Pendleton in California, a Marine base out there.

What's the latest, Sumi?

SUMI DAS, CNN CORRESPONDENT: Thanks very much, Wolf.

Well, three years of combat have done little to diminish support for the war in this town of Oceanside, California. But even here, where Marines are local heroes, memories of the Vietnam War have come creeping back for some.

(BEGIN VIDEOTAPE)

DAS (voice-over): U.S. Marines under fire, on the battlefield and off. Amid allegations of murder and dereliction of duty in Iraq, some who live around Camp Pendleton say the investigations are tarnishing the corps' honor.

UNIDENTIFIED FEMALE: It made me think back to the Vietnam War and the scandals there. I think that they probably, unfortunately, in my mind, probably are guilty, but I've also never been to war, and I can't imagine what that's like, and the anger and the frustration for them. And the fear.

DAS: Joshua Rodriguez is nearing the end of his four-year service with the Marines. He says there's been a rush to judgment of the Marines who allegedly killed Iraqi civilians in Haditha, but also sees the parallels with Vietnam.

JOSHUA RODRIGUEZ, U.S. MARINE CORPS: My dad's a veteran, so he'd always tell me he don't want the same thing that happened to him happen to me. You know, coming back in shock, because here he comes off the plane, serving three tours in Vietnam, the first thing that happens, he gets spit in his face.

DAS: Still, many civilians say they realize the pressures of combat Marines must endure.

UNIDENTIFIED FEMALE: This wasn't an act of crime against us. This was an act of war. And in war there's casualties.

(END VIDEOTAPE)

DAS: Military prosecutors will likely file charges of murder, conspiracy, and kidnapping against several Marines from the 3rd Battalion, 5th Regiment. They are here in a brig at Camp Pendleton. Those charges are likely to be filed within the next few days -- Wolf.

BLITZER: All right, Sumi. Thank you very much.

Sumi Das reporting from Camp Pendleton.

U.S. commanders in Iraq also are taking these allegations very seriously.

(BEGIN VIDEO CLIP)

BRIG. GEN. DONALD CAMPBELL, CHIEF OF STAFF, MULTINATIONAL CORPS, IRAQ: The credibility of our coalition forces is too valuable a commodity to squander needlessly. And every incident and allegation, no matter how small, strikes a blow against that credibility.

(END VIDEO CLIP)

BLITZER: At a news conference in Baghdad, the commanders outlined the so-called core values training, their planning for U.S. troops. It's actually an update to training they've already received, and the Pentagon has released that training package.

Our Internet reporter, Abbi Tatton, is standing by with a closer look -- Abbi. ABBI TATTON, CNN INTERNET REPORTER: Wolf, these are the training materials that all U.S. troops in Iraq will be going through in the next 30 days. The two to four-hour course is designed to help troops understand the importance of acting in an ethically, legally and morally correct manner at all times.

It goes through some of the basics of Iraqi Arab cultural values. It goes on to stress that the Iraqi people share our values, with excerpts there from the Iraqi constitution.

Then, in a later part of the training materials, acts inconsistent with common values: assault, detainee or prisoner abuse, war crimes, and theft.

Later on, there are situations, scenarios for discussion points. The U.S. military has said repeatedly that improper or unethical conduct is very rare.

And we've posted parts of these training materials at CNN.com/situationreport -- Wolf.

BLITZER: Thank you, Abbi, for that.

Let's go up to New York. Jack Cafferty is standing by with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: As members of the House and Senate try to reconcile an immigration bill, here's something they might want to think about. The number of legal immigrants coming into this country will increase by 20 million over the next 10 years if the Senate's version -- that's the amnesty version of the bill -- becomes law. That's according to a government report.

The report says it will cost taxpayers more than $50 billion for the new guest worker program, plus the cost of welfare, Social Security, and health care payments. These costs would be offset by $66 billion in tax revenue from the guest worker program, along with fees the immigrants would have to pay.

The study fails to take into account the almost one million people who enter the country legally under the current law. That would boost the 10-year total estimate of new immigrants to 30 million the next 10 years. The report leaves out those who would cross the border illegally, and there would be a bunch of them despite new technology meant to stop them.

Remember we did this in 1986, gave amnesty to illegal aliens who were already here. Nobody knows for sure, but according to a study done by Bear Stearns, there are 20 million illegal aliens in this country right now. So obviously amnesty doesn't work.

Here's the question: Can the U.S. afford the Senate's immigration bill, which could increase the population by 20 million legal immigrants in the next decade?

E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile.

BLITZER: Thanks, Jack.

Jack Cafferty in New York.

Up ahead, new developments in the CIA leak case involving the vice president's former chief of staff, Lewis "Scooter" Libby. We're going to have the latest details for you. That's coming up.

Also, he was once suspected by the government of spying. Now there's a major new development in his case as well, the nuclear scientist Wen Ho Lee. We'll have the latest.

And Iran's president standing firm on his country's nuclear program. But what's his real goal? We'll show you what may really be behind the standoff between Tehran and the West.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: There are new developments in the case of a nuclear scientist once suspected by the U.S. government of spying but later cleared. Our Justice correspondent, Kelli Arena, is joining us from the CNN Center in Atlanta with the latest details -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, the government has agreed to pay that former government scientist, Wen Ho Lee, $895,000. Now, Lee sued the Justice Department, the FBI, and the Energy Department, claiming that officials anonymously leaked damaging information about him to the press during an investigation back in 1999. Now, that investigation was in connection with files that were allegedly missing from the Los Alamos nuclear research facility.

Lee was later cleared of espionage charges. Lee won't get any of that money, though, for his personal use. It will be used for legal costs.

Now, separately, Lee also reached an agreement with five reporters that he sued for refusing to identify their confidential sources. Now, in that settlement, Lee will get $750,000. And that money he can use as he wants.

In a joint statement, the news organizations employing those reporters said that they reached a settlement to protect confidential sources, to protect their journalists from further sanctions and possible imprisonment, and to protect their news organizations from potential exposure. There was also a statement released by Lee's lawyer, and in it he said that he hopes the agreement sends a strong message that government officials and journalists must and should act responsibly.

And Wolf, there was no comment from the government.

BLITZER: Those five news organizations, correct me if I'm wrong, one of those news organizations is CNN, is that right? ARENA: Well, CNN was not a part of the payment, Wolf, although one of the reporters, Pierre Thomas (ph), who currently works with ABC, was working with CNN at the time. So CNN was a party to the suit, but did not end up paying part of that $750,000. That was paid by ABC.

BLITZER: All of the money comes from the other news organizations, not from CNN?

ARENA: That's correct.

BLITZER: The $750,000.

ARENA: That's right.

BLITZER: OK. Thanks very much for that. Appreciate it very much.

Zain Verjee is joining us here in Washington with a closer look at some other stories making news -- Zain.

ZAIN VERJEE, CNN ANCHOR: Wolf, the Coast Guard says a pilot and co-pilot were killed when a Lear jet crashed in Long Island on Tuesday -- excuse me, today. Three other people who were on the aircraft were rescued and are hospitalized with minor injuries.

The plane had taken off from Atlantic City International Airport, and it was going to Groton-New London airport in Connecticut when it went down in heavy fog. Now, it's not clear yet exactly what caused the crash.

Injured CBS correspondent Kimberly Dozier is off a respirator and she's breathing on her own. Doctors in Germany operated on her legs today. Dozier was severely injured in a bomb explosion in Baghdad on Monday that killed her two colleagues. CBS News says Dozier has been able to talk to family members, and she could be flown back to the U.S. on Sunday.

Fire crews in northern Arizona are trying to make sure a 1,500- acre wildfire does not engulf a residential community. About 30 homes south of Sedona remain evacuated since the fire erupted yesterday. Flames destroyed five buildings, but the blaze has now moved past most of the area. Fire officials say evacuees may be able to return home tomorrow -- Wolf.

BLITZER: Zain, thank you very much.

Coming up in THE SITUATION ROOM, new overtures from the West, but Iran refusing to budge on its nuclear program. At least so far. Is there more to this standoff than meets the eye?

Plus, he's the top U.S. commander in Afghanistan, and he talks one on one with our Pentagon correspondent, Barbara Starr, about the Taliban insurgency. Barbara is on the ground in Afghanistan with General Eikenberry.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Iran's president is standing firm on his country's right to develop nuclear energy, and so far he's not responding directly to the latest incentives from the West to give up Iran's nuclear program. But as the tension in this nuclear showdown increases, there are new questions about the ultimate goals of both sides.

CNN's Brian Todd is standing by. He's got the latest details -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, those goals mean nothing less than a key balance of power in the Middle East, possibly involving nuclear weapons as this standoff takes another dramatic turn.

(BEGIN VIDEOTAPE)

TODD (voice-over): Iran's defiant president hits back, saying his country's not about to stop its pursuit of nuclear technology. "Pressures to make us give up our rights will be in vain."

But is Mahmoud Ahmadinejad flatly rejecting the latest offer from the U.S. and five other world powers, an offer of negotiations and significant incentives, but only if Tehran gives up its nuclear fuel manufacturing program? Ahmadinejad didn't mention the overture. And White House officials are cautious about reading too much into the Iranian's latest salvo.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: This is a negotiation. And I would expect people, I would expect Iran to try to take some negotiating positions in advance.

TODD: On the line for Iran, likely economic reward if it suspends its nuclear program and sits down to talk. Tougher economic sanctions with a possible military option on the table if it doesn't.

In an interview with CNN's David Ensor, the U.S. secretary of state says a definitive answer from Tehran must come soon.

CONDOLEEZZA RICE, SECRETARY OF STATE: We can't wait for months while Iran, again, says on the one hand maybe they're interested in negotiating, on the other hand maybe they're not.

TODD: Time always a crucial element with Iran, because observers believe the regime is playing for it while it pursues what some U.S. officials believe is its ultimate goal, a nuclear weapon.

From the top U.S. intelligence official, a stark assessment of when that might happen.

UNIDENTIFIED MALE: Sometime between the beginning of the next decade and the middle of the next decade they might be in a position to have a nuclear weapon. TODD: Iran denies wanting a nuclear weapon, and some analysts believe the regime will never go that far, fearing it will trigger a nuclear buildup among its Middle East rivals. But one Iran scholar who now works for an energy company in the region disagrees.

ROB SOBHANI, IRAN SCHOLAR: But the end game for the Iranian regime is the acquisition of a nuclear weapon. Nothing will detract them from that goal, including sanctions.

(END VIDEOTAPE)

TODD: The end game for the U.S., according to analysts, regime change in Tehran. But getting there carries huge military risks. Military action would be costly and deadly, they say, and could turn the Iranian people against the U.S. Sanctions, on the other hand, would be drawn out, possibly compromised, but could also turn the Iranian people against their own regime -- Wolf.

BLITZER: Brian, thank you very much.

Brian Todd.

Coming up, what happened in Ohio in 2004? There are some scathing allegations of electoral fraud there during the last presidential election. And one writer says they might have changed the outcome of the race. I'll speak live with the author of that new article, Robert F. Kennedy, Jr., and with Terry Holt, a former top Bush-Cheney campaign spokesman. They'll be here in THE SITUATION ROOM.

And there are new developments in the CIA leak case and Lewis "Scooter" Libby's fight to clear his name. He's just lost a key argument his attorneys had hoped to win.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. I'm Wolf Blitzer in Washington.

It's been largely overshadowed by the war in Iraq, but the U.S. mission in Afghanistan has been back in the spotlight lately, largely because of increased activity by Taliban insurgents.

CNN's Pentagon correspondent Barbara Starr is in Afghanistan. She caught up with the General in charge of U.S. troops there -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, the top U.S. military commander in Afghanistan is a man always on the move.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN CORRESPONDENT (voice-over): When Lieutenant General Karl Eikenberry goes walking through the City of Khowst in eastern Afghanistan, he attracts a huge crowd. Everyone wants to know who is the big man in the American military uniform.

Look closely. Eikenberry has no armored vest, no helmet, no weapon. His security is discrete.

LT. GEN. KARL EIKENBERRY, U.S. ARMY: How are you doing?

UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)

STARR: This three star commander is now facing a changing situation in Afghanistan. In many places, like here in the highly conservative area of Khowst, once an al Qaeda stronghold, there is relative peace.

EIKENBERRY: How is the -- how's the security?

UNIDENTIFIED MALE (through translator): Thanks to god, everything is OK. The security situation is very good in Khowst Province.

STARR: But in some areas, the Taliban are back, especially in rural areas, where the new government is almost non-existent and U.S. military forces have not yet, after four-and-a-half years, conducted significant operations.

(on camera): What's the part of the country that concerns you the most right now?

EIKENBERRY: Taliban influence in some of these districts in the south, in Helmand Province, in Kandahar Province, in Uruzgan Province. It's in some of those areas, Barbara, that there is more Taliban influence and presence than there was last year at this time.

STARR (voice-over): But even as he plans operations against a resurgent Taliban, this general, who is on his second tour of duty in Afghanistan, says it is reconstruction, aid and jobs for Afghans that will defeat the Taliban, and not U.S. military power.

EIKENBERRY: It's about building schools. It's about building health clinics. It's about what has taken place in this city, right here in Khowst. It's about creating the conditions so that a civil society can begin to take shape.

STARR: But make no mistake, this military commander is determined the people of Afghanistan will have peace and his troops will keep after the Taliban until they are defeated.

(END VIDEOTAPE)

STARR: General Eikenberry likes to say, if you ask him whether he wants more troops, or money to build roads, he'll take the roads -- Wolf.

BLITZER: Barbara Starr on the ground for us in Afghanistan. Thanks for that excellent report.

Zain Verjee is here in Washington. She's taking a closer look at other important stories making news around the world -- Zain.

VERJEE: Wolf, Scotland Yard has arrested two men in an anti- terrorism raid on a house in East London. Police say one of the men was shot and injured. The injury's not life threatening. Authorities say they conducted the raid in response to specific intelligence, and they're not revealing details but they say the arrests are not linked to last July's deadly subway and bus bombings in London.

East Timor's embattled prime minister is rejecting calls for his resignation in the wake of days of violence in the tiny Asian nation. The country's defense and interior ministers resigned yesterday. Hospitals say clashes in East Timor's capital, Dili, have killed at least 30 people. Tens of thousands of others have fled the unrest. The violence broke out after the prime minister fired 600 soldiers back in March.

In Indonesia, villages are praying to their god to keep them safe. They're fearful a nearby mountain might erupt. The mountain's recently seen volcanic activity, and villagers are holding spiritual rituals, appealing to their creator to spare them.

And first lady Laura Bush tells the United Nations that countries have a moral obligation to inform citizens about how the AIDS virus is transmitted. A U.N. commission voted to recommend doubling the funding to fight AIDS but actually wasn't specific as to how that should be done. Fourteen million people worldwide are now infected with the virus that causes AIDS -- Wolf.

BLITZER: Thank you very much, Zain. Zain Verjee here in Washington.

And still to come, here in THE SITUATION ROOM, there are new developments in the CIA leak case. A judge has just ruled on a key argument Lewis "Scooter" Libby's lawyers say is critical to their case. We're standing by for details.

And the state of Ohio helped decide who won the 2004 presidential race. Now one author says there was much fraud there. I'll speak live with Robert F. Kennedy Jr., and Republican Terry Holt, a former top official with the Bush/Cheney campaign. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Here's as I look at some of the "Hot Shots" coming in from our friends at the Associated Press, pictures likely to be in your hometown newspapers tomorrow.

Arlington, Virginia, physical therapy for wounded vets. A soldier who lost his leg in Iraq rides a horse to rebuild core muscles and boost self-esteem.

Holyoke, Massachusetts, firefighters work the backside of a building during a three-alarm fire.

Alex, Oklahoma, investigators look over the wreckage of a small plane crash. The pilot somehow was able to walk away after the accident.

And in Paris, Venus Williams serves up a fierce return at the French Open. She won her third round match easily 7-6, 6-3.

Some of today's "Hot Shots", pictures often worth 1,000 words.

Ali Velshi is here in Washington today standing by with "The Bottom Line" -- Ali.

ALI VELSHI, CNN ANCHOR: Hey, Wolf.

Well, at least once a year, shareholders of companies have a chance to hear about how the company that they've invested in is doing, to ask questions, to vote on various resolutions, and to elect a board of directors.

Well, Home Depot held its annual shareholder meeting a little over a week ago, and they decided to try something different. How's this? None of the directors showed up to their own election.

Seems that they might have been dodging some controversy because a bunch of shareholders wanted to know why the CEO, Bob Nardelli, keeps earning the amount of money he earns while the stock of the company is lower today than when he took office.

Well, for his part, Bob Nardelli, the CEO, did show up. But he kind of has to, because he earned about $12 million last year without counting his options, but then he didn't take any questions. And that's probably because he knew a lot of those questions would be about his fat pay check.

So the board did get reelected, but about 30 percent of the votes were withheld. And that's kind of a protest. And it's a pretty sizable protest, because most boards get reelected with like 99 percent.

The good news in all of this is that it seems that Home Depot got the message loud and clear. The company says that next year it's going to return to taking questions and that the board members, indeed, are going to show up.

Thanks guys, they get about $130,000 a year to be board members.

In other news today, Wolf, we got an unemployment report today. The nation's jobless rate is now down to 4.6 percent. But there were far fewer jobs created in May than people expected. And that sent the markets all over the place. The Dow gave up about 12 points in the end, closing at 11,247. The NASDAQ ended the day pretty much even -- Wolf.

BLITZER: Ali, thank you very much.

And this important programming note for our viewers. Ali hosts "On the Story" this weekend and every weekend. The show takes our viewers behind the scenes with our CNN reporters as they cover the big stories of the week. You can always catch "On the Story" Saturday, 7 p.m. Eastern, Sundays replayed at 1 p.m. Eastern. Ali, "On the Story", this weekend. Don't miss it.

Also coming up here in THE SITUATION ROOM, new developments unfolding right now in the CIA leak case. A judge has just ruled that a key argument Lewis "Scooter" Libby's lawyer say is critical to their case.

And coming up in our 7 p.m. Eastern hour, some fighting words, as politicians put foot in mouth occasionally. We'll take a closer look at some of the latest verbal volleys and some of the most memorable. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There's a potentially significant new ruling in the CIA leak case involving Lewis "Scooter" Libby, the former chief of staff to the vice president, Dick Cheney.

Let's go straight to our Brian Todd. He's in the newsroom going through all the latest documents.

What are we picking up, Brian?

TODD: Wolf, these latest documents that were just filed this afternoon indicate a setback for Scooter Libby in court. Judge Reggie Walton has ruled essentially that Libby's defense team cannot have broad and detailed access to records about the trip that former U.S. Ambassador Joe Wilson took to Niger to find out more about Saddam Hussein's weapons purchasing program. About that trip, they wanted documents on that trip.

They wanted extensive documents on the role that Wilson's wife, former CIA agent Valerie Plame, had in sending him on that trip, if she had any role at all. They also wanted documents on Plame's employment history with the CIA. They wanted a lot of extensive detailed documents.

The judge rules just moments ago essentially, that Libby's defense team cannot have detailed documents on those issues. They can have what the judge called essentially broad or terse summaries of those documents, but the judge in his ruling wrote this line, quote, "This court will not permit it to become a forum for debating the accuracy of Ambassador Wilson's statements, the propriety of the Iraq war or related matters leading up to the war, as those events are not the basis for the charged offenses."

Now that's key here, because Libby is not charged with actually leaking Valerie Plame's identity. He is charged with lying to a grand jury and to investigators about how he knew about Valerie Plame's -- how he found out about Valerie Plame's identity and what he said to reporters about it. He has denied those charges.

But again his attorneys get a setback in court this afternoon. The judge ruling they can't have extensive documents on Wilson's trip to Niger, or the role of his wife, if she had any role in sending him on that trip, and also the role of his wife, the background of his wife at the CIA. The judge also making one line in the ruling here, saying that some of that information could compromise national security, Wolf.

BLITZER: Brian, it -- I think it says something also about the general attitude of this judge, which could be very detrimental to Scooter Libby's defense or at least how his lawyers are preparing for that defense.

TODD: Well, it does, in a certain way, because Libby's lawyers are essentially, they're asking for just a huge amount of documentation, and part of that is a strategy which some experts call gray mail, asking for a huge amount of documentation so that they can kind of throw the prosecution off balance a little bit.

And so the judge has, essentially, today voiced a proclivity not to give all the documents that the defense team wants.

But on the other hand the judge has ruled that some news organizations have to turn over their notes. "TIME" magazine in particular had until today, essentially, to turn over its notes from reporter Matt Cooper about his discussions with Scooter Libby.

BLITZER: Brian, thank you very much. Brian Todd following the story closely for us.

Other news, there are some explosive new allegations today that are being made about the 2004 presidential election, and they're coming from a member of one of America's most famous Democratic families.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Robert Kennedy Jr. charges that a concerted effort was made by high-level Republicans to steal the presidential vote in Ohio. It's new fuel in an already combustible partisan environment, with Republicans on the defensive, and Democrats hoping to reclaim control of Congress this fall.

In a lengthy article in the new edition of "Rolling Stone", Kennedy accuses Republicans of preventing more than 350,000 voters, most of them Democrats, from casting ballots or having their votes counted.

President Bush won Ohio by a little more than 100,000 votes over Senator John Kerry, putting him over the top in electoral votes and sealing his reelection. Kennedy accuses Republicans of getting that margin of victory by, among other things, purging tens of thousands of eligible voters from the rolls, creating long lines to keep Democrats from voting, and rigging the Ohio recount.

To back up his charges, Kennedy cites the early exit polls showing Kerry was winning Ohio. Kennedy contends exit polls are an exact science and, essentially, never wrong. But even pollsters dispute that.

Kennedy lays much of the blame on Ohio Secretary of State Ken Blackwell, who is now running for governor. Blackwell refused to respond to Kennedy's allegations, and he declined our offer to be interviewed. He's previously denied similar allegations, saying election glitches shouldn't cause the outcome to be questioned.

And there's a noteworthy skeptic about allegations that the Ohio vote was stolen. Senator John Kerry has cited irregularities in the Ohio vote, but he says if he had firm evidence the election was rigged or stolen, he would have taken legal action.

(END VIDEOTAPE)

BLITZER: And a Democratic National Committee study of the Ohio vote found significant problems but concluded they did not -- repeat not -- constitute fraud.

Joining us now from New York to talk about these allegations is the author of the article, Robert F. Kennedy Jr., and here in Washington is Terry Holt. He was the press secretary for the 2004 Bush/Cheney campaign.

Thanks to both of you for joining us.

Why are you reviving these allegations, Robert Kennedy, right now, given the fact that they've been so thoroughly reviewed over the past 2 1/2 years and people have concluded that there's no hard evidence of fraud?

ROBERT F. KENNEDY, "ROLLING STONE" CONTRIBUTOR: Well, first of all, there hasn't been that conclusion.

Second of all, there's a lot of new evidence. There's the analysis that was done, not just of the 350,000 votes -- Democratic voters -- mainly Democratic voters that were denied the opportunity to vote, or whose votes weren't counted. But also the 80,000 votes from 12 rural counties in Ohio that were shifted from John Kerry to George Bush, which by themselves would have given Kerry the margin of victory in Ohio.

Plus, there's six other counties where there are high indications of ballot box, that thousands of people lost their votes.

BLITZER: Let me interrupt for a second. I read your long piece in "Rolling Stone". It was very, very long and detailed. I didn't see one individual, though, who says, "You know what? I participated in a massive conspiracy of fraud."

I didn't see any hard evidence that there was someone, and if you're going to talk about a massive fraud, you have to have somebody, presumably, that's going to come forward and say, "You know what? I was involved in this campaign."

KENNEDY: Well, that's not true, Wolf. The people from -- the executives from the Triad Company, which is the vendor for one of the -- for the big voting machine that tabulated more than half the votes in Ohio, has admitted that they fixed the recount. And that they fixed it with county boards of elections in half a dozen counties, at least.

Every single county where Triad -- and you know, there's an example of a -- of a high-level official who participated in a massive fraud, that prevented the recount that would have given Kerry the victory in Ohio.

BLITZER: Let me let Terry Holt respond to that -- Terry.

TERRY HOLT, FORMER BUSH/CHENEY PRESS SECRETARY: Well, first, let's establish, Wolf, that an exhaustive bipartisan study of all 88 counties in Ohio was conducted after the election. And Republicans and Democrats in Ohio, those people most directly affected by this controversy, have agreed that there was no significant or even insignificant fraud that occurred in the election.

I think that, in fact, I'm going to stand Mr. Kennedy's story on its head a little bit. Because I think what was engaged in the last election, a massive effort to flood the polls with new voter registrations, with new absentee ballots, with new ballots of the provisional variety that.

The Democratic Party was such a sour and poisonous taste in its mouth after the Florida election really engaged in an extensive effort to really flood the ballot box, to stuff the ballot box. And so all over the country, not just in Ohio, but in Las Vegas, and in Miami, and other states, there were new voter registrations coming in with the names like Freddy Krueger. Michael Jordan and George Foreman were registered to vote in Ohio.

BLITZER: All right -- let's let Robert Kennedy -- What Terry Holt is saying is just the opposite of what you're saying, is that the Democrats were participating in some phony business in Ohio and other states.

KENNEDY: Well, that's a strong -- and the people that the Republican Party -- I want to say this. This should not be a partisan issue, Wolf. This should be -- people should be outraged about this.

Read the facts in my article. There has been no bipartisan commission, but -- including Democrats that have said there was no hanky-panky or shenanigans in Ohio. That's simply wrong to say that.

There's been complaints. There's been a congressional committee that's been out in Ohio and found massive -- found massive evidence of fraud. The fraud is not something that's been secret. It's been -- it's been exposed to the press for the long time.

There's two issues here. No. 1, why hasn't the national press covered this event? There's no -- there is no legitimate dispute. That there was a massive concerted deliberate effort by high level Republican Party officials to fix the election in Ohio. And the press has not covered this issue.

BLITZER: All right. I'm going -- I'm going to let --

KENNEDY: All my article does...

BLITZER: Hold on. We did cover John Conyers, Congressman John Conyers' report on this. Christopher Hitchens article in "Vanity Fair". All that was covered.

Senator John Kerry himself says in your article in "Rolling Stone", he says this: "Can I tell you to a certainty that it made the difference in the election? I can't. There's no way for me to do that. If I could have done that, then obviously I would have found some legal recourse."

And the Democratic Party has been relatively silent on this issue, as well, Robert Kennedy.

KENNEDY: Well, you know what, Wolf? You're right about that. And I think that's a big problem, that the Democrats backed down too easy on this.

John Kerry has said to me that at the -- at -- during the time -- during the narrow window of time when he had an opportunity to protest this election, he didn't do it, because his attorneys told him that at that point, they didn't have the facts that they needed to make the case.

John has looked at the facts that I produced in this article and particularly the issue about the 12 counties, rural counties where the votes were shifted from Kerry, where 80,000 votes were shifted from Kerry to Bush, and said that his opinion has changed as a result of that.

BLITZER: All right. Terry -- let me let Terry Holt weigh in, as well. Go ahead and respond.

HOLT: Well, I would just say that there was a very smart observation that was made in the very beginning of the article. And that is that American elections are a messy patchwork, county by county, state by state rules and regulations.

And as an example in Florida, in the 2000 election, 66 out of 67 counties in Florida were controlled by the Democratic Party and it resulted in a messy recount, 37 days.

And so our votes are involved in a complex process. But by flooding the ballot box with new invalid registrations, if any political entity is diluting the value of the -- of the honest vote that takes place. And so, our -- our system needs to protect the legal votes from the illegal votes so that those votes count real and like they should.

BLITZER: We have to leave it there. "Was the 2004 Election Stolen?" That's the provocative title of the article. You can read it in "Rolling Stone". Robert Kennedy, Terry Holt, thanks very much for coming in.

HOLT: Thanks, Wolf.

BLITZER: Up next, can the U.S. afford the Senate's immigration bill? Jack Cafferty is back.

(COMMERCIAL BREAK) BLITZER: You're back in THE SITUATION ROOM. And so is Jack Cafferty.

Hi, Jack.

CAFFERTY: That's pretty cheesy. Looks like the camera's going into a broom closet. Well, come to think of it.

The number of legal immigrants coming to this country will increase by almost 20 million over the next 10 years if the Senate's version of the bill becomes law. The question is, can we afford all those extra folks?

Chris in Coplay, Pennsylvania: "Afford it? Are you kidding? We can't afford to maintain our basic human services now in the southwest region of the United States, due to the care and education of those entering the country illegally."

B. in Shelbiana, Kentucky: "No, we should spend as much as needed to remove all illegal immigrants, period. And, close the border. Anything else is just political hogwash."

Mary in Texas: "The American people can't afford the immigration bill that was passed by the Senate. Those senators who do not live near the border don't have any idea how illegals affect the lower/middle class citizens. Those states should have to pay special taxes to send to the border states to help pay for education, criminal justice, health, social services, et cetera, that are all caused by the illegals."

Paul writes, "Yes, the U.S. can absorb them. They're already here. That's why you and I can get things done cheaply like cutting the lawn and cleaning up from the snow. My only concern is that if they become legal, the cost of living is going to go up."

Florence writes from Kansas, "A better question is can the American legal middle class afford to support them? And the answer is no. Nor do we want to."

Yesterday on this program, we did a story about a judge in Nebraska who sentenced a convicted sex offender to probation instead of prison, because she thought he was too short to survive in jail. And that prompted this letter from Alex: "If a physical abnormality disqualifies an individual from going to jail, I just have one question. Why isn't Jack Cafferty robbing banks? I mean that dude looks like a basset hound in a wind tunnel."

BLITZER: A fan of yours.

CAFFERTY: That's my friend Alex.

BLITZER: See you in an hour or two. Thank you very much.

How often does your local hospital perform heart surgery? And what's the cost of a hip replacement? Tracking down actual costs has always been extremely difficult. But now Medicare, the country's largest purchaser of health care, is making some major disclosures online.

Let's bring in our Internet reporter, Abbi Tatton -- Abbi.

TATTON: Wolf, 30 of the most common procedures and what Medicare actually pays for them, they're all out there online now. Some of the most common procedures here like heart valve operations, blood vessel surgery.

And it goes into detail about the cost. Hip replacement, for example. The actual cost on average around the country, about $37,000. Medicare pays, on average, about $11,000, although it breaks it down by county, and you can see what Medicare actually covers in a county varies widely.

There are some limits to the site. The prices are not specific to hospitals, and it doesn't tell you how much the patients actually end up paying. But there is information about how -- how many of these operations each hospital actually performs. Medicare says the data helps consumers become more informed about their health -- Wolf.

BLITZER: Abbi, thank you very much for that.

We're here in THE SITUATION ROOM weekday afternoons 4 to 6 p.m. Eastern. Back in one hour at 7 p.m. Eastern. Lots more coming up. Till then, thanks very much for joining us. I'm Wolf Blitzer in THE SITUATION ROOM. "LOU DOBBS TONIGHT" starts right now, and Lou's standing by -- Lou.

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

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