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CNN LIVE SUNDAY

Inside the World of a Security Contractor in Iraq; Tornado Touches Down in Wisconsin; New York Subway Terror Plot Thwarted

Aired June 18, 2006 - 17:00   ET

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

FREDRICKA WHITFIELD, CNN ANCHOR: As an offensive is launched in Ramadi, the search continues for two missing U.S. soldiers, are they being held captive? And our other big story, an alleged plot to gas New York's subway, how close was it to being a reality. Plus this.
(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: To sound crude, our job is basically to be a bullet sponge.

(END VIDEO CLIP)

WHITFIELD: Inside the violent world of a security contractor in Iraq. It's an exclusive story you will only see on CNN.

Hello and welcome to CNN LIVE SUNDAY, I'm Fredricka Whitfield. Here's what's happening now in the news.

The U.S. military continues to scour Baghdad for two missing American soldiers. Iraqi police say masked gunmen were spotted abducting the soldiers. The latest developments on our top story straight ahead.

New York City's subway system was an al Qaeda target for poison gas. That's according to a "Time" magazine article and a soon-to-be- released book.

New York officials confirm they knew about the alleged plan, reportedly called off by Ayman al-Zawahiri.

In southern Afghanistan, Operation Mountain Thrust is under way. The mission includes 10,000 coalition troops hunting down Taliban insurgents. Ninety insurgents have reportedly been killed so far.

The U.S. and Japan up the ante in the political poker match with North Korea. Some suspect Pyongyang (ph) is bluffing about a new long range missile capable of hitting U.S. targets. Japan says they will react immediately if a test-fired missile comes their way. A White House spokesman says the U.S. has multiple options for such a scenario.

And the Vietnam memorial wall has an unusually floral look this Father's Day, more than 1,000 roses adorn it in honor of the fighting dads who died in that conflict.

First this hour, the two missing U.S. soldiers in Iraq may be alive. That's the word from Iraqi police who tell CNN the troops were abducted by masked gunman. We get the latest now from CNN's Cal Perry.

(BEGIN VIDEOTAPE)

CAL PERRY, CNN CORRESPONDENT (voice-over): This is the scene of a coalition checkpoint in Yusufiya where one U.S. soldier was found dead and two others went missing.

MAJ. GEN. WILLIAM CALDWELL, U.S. MILITARY SPOKESMAN: A coalition force soldier was killed and two others are currently listed as duty status and whereabouts unknown after a security element came under attack at a traffic control point south of Yusufiya.

PERRY: Yusufiya, a town 30 miles to the south of Baghdad, lies within what the military calls the triangle of death. Police in the town say that witnesses have told them four masked gunman seized the two soldiers. An official at the Pentagon tells CNN that a vehicle was found abandoned with blood in the back, foot prints matching those from military issue boots leading away from the truck. It all started at 8:00 p.m. local time on Friday when a unit near to the coalition check point reported taking small-arms fire and explosions. They called in a quick reaction force.

CALDWELL: Coalition forces and Iraqi security forces initiated a search operation within minutes to determine the status of these soldiers. And we are currently using every means at our disposal on the ground, in the air and in the water to find them.

PERRY: Major General Caldwell took the weekend to remember another U.S. soldier, Sgt. Matt Maupin. The U.S. military list him as missing captured. Caldwell added at the end of his taped message that the U.S. military will never stop looking for any of its soldiers until their status is determined definitively. Cal Perry, CNN Baghdad.

(END VIDEOTAPE)

WHITFIELD: And in our last hour, we talked with CNN military analyst, retired U.S. Army Brigadier General David Grange. We asked him who might have carried out such an abduction.

(BEGIN VIDEO CLIP)

BRIG. GEN. DAVID GRANGE, U.S. ARMY (RET): The insurgent groups, they do want to make a statement that they still can reach out and touch people. But I think that it doesn't necessarily mean it's al Qaeda. It could be the kidnappers for ransom, for anything. I mean, this is a country that is grabbing people for many different reasons is a big business. So it doesn't necessarily mean it's al Qaeda.

(END VIDEO CLIP)

WHITFIELD: So what is the White House saying about the missing soldiers and the search to find them? White House correspondent Elaine Quijano joins us now with the very latest. Elaine.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, Fredricka, the White House certainly is aware of these latest news accounts out of Iraq, but for now officials say that those on the ground are still trying to sort out the details.

(BEGIN VIDEOTAPE)

QUIJANO (voice over): At a time when the Bush administration is trying to highlight progress in Iraq, the spotlight this weekend was on the status of two American soldiers missing since Friday. Iraqi police tell CNN they believe at least four or five masked gunman seized the soldiers. White House spokesman Tony Snow said the U.S. is still trying to determine what happened.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: We are still trying to ascertain the whereabouts. Obviously, there's a vigorous effort to try to locate them and bring them back safely.

QUIJANO: Meantime against a backdrop of the upcoming congressional elections, Republicans and Democrats are seeking to frame the debate over setting a time frame for U.S. troop reductions in Iraq.

REP. JOHN MURTHA (D) PENNSYLVANIA: I expect significant troop withdrawal. They are trying to find a way to do this. The trouble is it keeps getting worse and they don't want to admit they made a mistake.

QUIJANO: In an op ed piece, Democratic Senators Dianne Feinstein and Christopher Dodd wrote that the time had come for a quote, phased redeployment to finally begin.

SEN. DIANNE FEINSTEIN (D) CALIFORNIA: A timetable, some goals, some discussion with the Congress by the administration. The president might not have wanted to have done that early on, but three years and three months, and a bogging down, I think, suggests that the time has come for some discussion as to where we go from here.

SEN. PAT ROBERTS (R) KANSAS: Why would you give an opportunity for the terrorists to simply rejoice and simply wait us out? If you set a timetable, what message does that say in terms of American resolve? I think -- over there it's a battle of wills.

QUIJANO: And White House spokesman Tony Snow says the president understands how a war can wear on a nation. At the same time though Snow says that Mr. Bush will not conduct the Iraq war based on polls. Fredricka.

WHITFIELD: Elaine at the White House, thanks so much. CNN will keep you updated on the search for those missing U.S. soldiers.

Meantime, U.S. military officials in Iraq say they are getting closer to ousting the strong insurgent presence in Ramadi. U.S. and Iraqi troops took control of a (INAUDIBLE) Ramadi neighborhood last night. Officials say it completes their strategic isolation of the volatile city.

(BEGIN VIDEO CLIP) CAPT. MIKE McCLUSKER, U.S. ARMY: Terrorists have had what we would call freedom of maneuver, freedom of movement and they have gone uncontested for a while. So I would say that they are used to being able to operate freely in the area alluded to (ph).

COL. SEAN MacFARLAND, U.S. ARMY: One piece at a time, going to take back parts of Ramadi that the insurgents have been able to gain the upper hand.

(END VIDEO CLIP)

WHITFIELD: Commanders are optimistic they are making a big difference in the area but they also say Ramadi won't be fully secured until a stable city government is established.

In our CNN security watch today, a terror plot targeting the subways of New York. We are learning new details about an alleged plan to unleash lethal gas on unsuspecting commuters. It was reportedly called off by al Qaeda's second in command three years ago. It's outlined in a new book coming out Tuesday by journalist Ron Suskind. New York officials took the plot very seriously.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER (D) NEW YORK: The reports did come from a serious source. There are, sometimes, sources that they take less seriously than others. This came from a serious source. However, they were unable to corroborate that source. In other words, the second step after you get information about this, is try to corroborate it elsewhere from other intelligence contacts. They were not able to corroborate it. But it was taken seriously by both New York City, NYPD, as well as the Federal government and a whole variety of steps were taken. There is not a belief that this is still pending right now.

(END VIDEO CLIP)

WHITFIELD: Earlier today our Wolf Blitzer asked the chairman of the Senate Intelligence Committee about how he learned about the plot.

(BEGIN VIDEO CLIP)

SEN. PAT ROBERTS (R) CHMN, INTELLIGENCE COMM: We had a briefing. It points up once again the value of the terrorist surveillance program, the NSA program that's been in the news so much. We are able to detect and deter and stop such attacks and we were very, very fortunate that that did not happen.

(END VIDEO CLIP)

WHITFIELD: And stay tuned to CNN day and night for the most reliable news about your security. Still ahead on CNN SUNDAY twisters hit parts of the Midwest this weekend. We'll get the latest on what's ahead coming up in the weather.

And in 10 minutes, a CNN exclusive on the role private contractors play in the U.S. fight for Iraq.

(BEGIN VIDEO CLIP)

UNIDENTIFIED SOLDIER: Hi. I'm Vincent Brown. I'm stationed here in (INAUDIBLE) Iraq. I want to wish my dad, Terry Moffett (ph) happy Father's Day in (INAUDIBLE) Idaho. I love you. Thank you.

UNIDENTIFIED SOLDIER: This is gunnery Sgt. Crystal Henderson, stationed with the regimental combat team five in Fallujah, Iraq. I want to wish my father, Allen Henderson in (INAUDIBLE) Idaho, a happy Father's Day, and my parents, Linda and Allen Henderson a happy 25th anniversary. I love you, I miss you and I'll be home soon.

(COMMERCIAL BREAK)

WHITFIELD: A live look at central park right there in New York City. It is sizzling today in more than one way. Jacqui Jeras, boy, we really mean it, don't we, in the 90s today?

JACQUI JERAS, CNN METEOROLOGIST: Yeah, very warm in the northeast. Warmest temperatures of the year so far, kind of welcome in parts of the northeast, because it's been really kind of a cool overall spring as we are approaching summer which is what, just a couple of days away, believe the 21st. One problem with that Fredricka if you didn't notice in that picture, let's go ahead and take a look. We got a couple of pictures out of New York City and you can really see in a couple of these, you can see the haze just kind of lingering in the air.

So one problem when we get high pressure set up offshore like that, the air gets very stagnant. So there's an air stagnation advisory in effect for the New York City area, also parts of interior New York state extending on up into the New Hampshire area, so the air quality is not very good. You really don't want to breathe this stuff in for very long today if you don't have to. The hours between 3:00 and 6:00, so you still at least have a good hour to go before you want to spend a lot of time outside. You want to do most of your work before sun-up and sundown. These temperatures are going to stay a little bit on the warm side the next couple of days. New York City was feeling like 92. That's the heat index with the humidity in there as well. Temperatures tomorrow could be just a little cooler, Boston in on the action at 92 degrees. We've got 95 down here in Washington, DC, very unhealthy air today in Bridgeport, Connecticut. You can see the temperatures very warm also across the southern tier of the country, Phoenix at 107, 94 degrees in Dallas.

As we approach tomorrow, a little weather disturbance today that's a little bit across the great lakes, it's heading down towards the Gulf coast. That's going to head into your neighborhood and we could get some showers and thunder storms and a little bit more cloudiness so that's going to bring your temperatures down a little bit in New York, average high by the way, 80 degrees. Your forecast tomorrow in terms of air quality, several big cities under what we call code red. That's Boston, Philadelphia, into the northeast and then Dallas, Texas and Denver, Colorado, meaning, again you doesn't want to spend a lot of time outside if you don't to have to, especially between 3:00 and 6:00. Young people, also the elderly, particularly vulnerable if you have respiratory problems.

We had a lot of action yesterday in terms of severe weather across parts of the nation's mid section. We've got some video we want to show you out of Kansas. This was in Butler County yesterday, a nice rope tornado there, one of three reports across the country. Today we've got a little bit of severe weather to talk about as well. We had some funnel clouds reported into Dane (ph) County Wisconsin. That was just to the east of the Madison area. Those storms now moving up Lake Michigan and just some spotty showers and thunderstorms there. We do have a severe thunderstorm watch with a threat of damaging winds and some large hail pushing on through southern parts of Illinois right now into southern Indiana and into western Kentucky. That will be ongoing through tonight and also some strong thunderstorms have been pushing through Memphis, producing some very heavy rainfall, one to two inches an hour here, so some flash flooding going on across the Memphis area, so use a lot of caution if you are heading out here for tonight. You don't want to drive through any of that standing water.

Forecast for tomorrow after Father's Day, back to reality Fredricka, back to work tomorrow. We are going to see some much needed rain across parts of the east. But keep in mind this is going to be spotty. There's going to be a 30 or 40 percent chance of getting that rain shower where you want it, Fred at your house.

WHITFIELD: Well, at least it didn't rain on their parade on Father's day in many of those places. All right, thanks a lot, a little relief, that's how we'll look at it tomorrow, looking good tomorrow. All right, Jacqui, thanks so much.

Well, the French did it first. Are the British next in ground breaking face transplant surgeries? A London hospital is considering a request by a plastic surgeon to perform partial face transplants on four patients. The hospital says it will make a decision on Wednesday.

A message to President Bush from hundreds of ground zero workers and members of Congress. They say more Federal funds to help first responders who got sick from the toxic dust that filled the air when the World Trade Center towers fell. During a rally yesterday at ground zero, they said victims need better treatment and constant medical checkups.

Louisville, Kentucky is hosting a sports competition this weekend where all 1200 participants are transplant recipients. The competitors, ages do vary from three to 83. Events include swimming, tennis and basketball.

To find out how to get yourself and your family in better shape watch "Fit Nation," Dr. Sanjay Gupta's fascinating new special. "Fit Nation" airs tonight at 7:00 Eastern.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Last minute preparations for one of the most dangerous jobs on earth private military contractor in Iraq.

(END VIDEO CLIP)

WHITFIELD: Protection for hire in a war zone. It's a growing business, your tax dollars are helping to fund but who is the watchdog for this multi-billion industry?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: To put it more bluntly, the owner of a circus faces more regulation and inspection than the owner of a private military firm.

(END VIDEO CLIP)

WHITFIELD: An exclusive CNN report coming up in about three minutes.

(COMMERCIAL BREAK)

WHITFIELD: Coalition forces aren't the only troops in Iraq. There's also a virtual army you may know nothing about. Most experts estimate that there are more than 25,000 nonmilitary men and women helping to secure and rebuild Iraq. Some would call them mercenaries, but they call themselves private contractors. For the rest of the hour, in an exclusive report you will only see on CNN, senior international correspondent Nic Robertson explores the business, their dangerous missions, and the question of just who is in charge of these hired guns.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN CORRESPONDENT (voice-over): Last minute preparations for one of the most dangerous jobs on earth, private military contractor in Iraq.

GONZO, PRIVATE SECURITY CONTRACTOR: I'm a (INAUDIBLE) commander. Basically, I drive the truck. I set the lead pace for the convoy. My call sign (ph) is Gonzo.

ROBERTSON: The moments before the mission are loaded. Bravado.

GONZO: This is Mr. GQ. He's our babe magnet.

MR. GQ, PRIVATE SECURITY CONTRACTOR: The military doesn't even like to go where we are going.

ROBERTSON: And a sobering dose of reality.

GONZO: (INAUDIBLE) three reasons for being. We all gotta be over here for a reason, mine is so that I can provide a better life for my wife and kids.

ROBERTSON: Amy (INAUDIBLE) is there when Gonzo leaves. I wanted to find out how this gutsy industry works and Amy will show me. She runs the Baghdad end of a small military contracting business and has agreed to open the door to CNN so long as we agree not to disclose the name of her company. AMY CLARK, PRIVATE SECURITY CONTRACTOR: The biggest thing I think about is that is my team going to get wiped out tonight.

ROBERTSON: What Clark doesn't know is that in less than three weeks, they will be hit hard in an attack and she will close down operations. When we meet Clark, she's running a tight-knit outfit, struggling to find a niche, competing against the titans of the industry, where contractors fill a void left by U.S. and Iraqi troops.

CLARK: I call it outsourcing conflict and a lot has been outsourced and where you've got a military where the assets and the personnel are strained thin, private contractors have had to step in and fill the void and it's unprecedented like in no other conflict.

ROBERTSON: He's a Brit, right?

CLARK: Yeah, he's British, but he's great.

ROBERTSON: Industry insiders estimate the total value of logistic Gulf security contracts in the multi-billion dollar range.

CLARK: The front lines are the logistical supply lines. That's where a lot of the IEDs are being focused. They are focusing on the major supply route.

ROBERTSON: And that's where Clark has found space in the market, on the front lines. Her employees put their lives on the line protecting among other things, drivers and trucks full of gravel destined for U.S. Army bases. In a 150-mile journey, the gravel's value can soar six times its original cost and the cost has proven substantial in lives too. As one of the industry's giants, Blackwater learned when four employees were brutally murdered in Fallujah in March 2004. Most of the companies operating in Iraq don't want journalists around, but Blackwater did allow us exclusive access to its U.S. It's uncanny. I'm driving around North Carolina and seeing contractors in SUVs. It's like I'm back in Baghdad again.

The company has never let a TV crew in like this before. Blackwater Vice President Chris Taylor escorts us around. The one thing he won't talk about is what happened in Fallujah because of pending lawsuits brought by families.

He shows us police officers shooting on a practice range. On mock ships, Blackwater trains sailors in force protection after the bombing of the "USS Cole" in 2000. Would be private military contractors train to defeat insurgents.

CHRIS TAYLOR, VP, BLACKWATER USA: What we're on right now is the country's largest tactical driving track.

ROBERTSON: 2.6 miles custom built. Training here matches daily realities in Baghdad.

TAYLOR: We're going to do a little slalom work here. Again, imagine that you're -- you've been attacked and now you're weaving in and out of traffic to get your principal off the X, to get to the safe zone.

ROBERTSON: Blackwater is the brain child of camera-shy, multimillionaire Eric Prince. After 9/11, business boomed. They just built a brand-new headquarters. See the gun barrels on the doors.

TAYLOR: Yes.

ROBERTSON: A nice touch.

TAYLOR: A little bit of the Blackwater motif.

ROBERTSON: Yes. And here it is as well, Blackwater. Wartime demands allowed them to expand. They're now the second largest employer in northeastern North Carolina.

TAYLOR: 8,000 square feet in the original building, 64,000 square feet here.

ROBERTSON: That's a big expansion.

TAYLOR: It's a rather big expansion, but it's needed. Certainly we've left room for growth.

ROBERTSON: Growth because Taylor believes Blackwater has a bright future.

TAYLOR: There's opportunities all over the world. Where we think that we can make a very big impact immediately is in peacekeeping operations.

ROBERTSON: The protection of innocents in Darfur, Sudan, is just one of the global hot issues the company says it is ready to tackle. It's so committed to expansion in new markets, Blackwater hired 30- year CIA veteran Cofer Black, who for years headed the U.S. hunt for Osama bin Laden.

COFER BLACK, VICE CHAIRMAN, BLACKWATER USA: My company could deploy a reasonably small force under the guidance and leadership of any established national authority and do a terrific job.

ROBERTSON: As vice chairman of Blackwater, he's using his global contacts to search out new lucrative contracts and not just in the realm of peacekeeping. The company is developing airships for surveillance in the aftermath of hurricane Katrina. Heavily armed Blackwater protection teams were among the first on the scene.

TAYLOR: If you notice, the hull is in a v-shape.

ROBERTSON: And frustrated by the high U.S. troop death toll from roadside bombs, Blackwater has built a prototype for an armored alternative to the Humvee. The company says it can assemble hundreds of battle-ready men, a small private army at a moment's notice.

BLACK: Those companies that limit themselves particularly to providing only security services will be increasingly challenged over time. ROBERTSON: Back in Baghdad, Amy Clark and Gonzo are about to find out how tough that challenge is, as things go wrong when a mission comes under attack.

CLARK: I would say this incident is something that is trying to squeeze us out of the business.

ROBERTSON: An incident that could spell the end of their dreams.

GONZO: Yeah, I'm mad, and I'm probably not going to be able to get a job now after I do this interview. But the world needs to know the truth.

ROBERTSON: When we come back, how this videotape raises questions about accountability in this multibillion industry.

(END VIDEOTAPE)

WHITFIELD: And so what are the rules of engagement and who polices private contractors working in Iraq? We'll show you an amateur videotape raising questions about some of their actions.

(COMMERCIAL BREAK)

WHITFIELD: Now in the news an al Qaeda plot targeting New York subways was called off for some unknown reason back in 2003, details are outlined in an upcoming book. New York officials took the plan seriously, so did the national intelligence community but it wasn't their only focus.

(BEGIN VIDEO CLIP)

JOHN MCLAUGHLIN, FORMER ACTING CIA DIRECTOR: The important thing I want to emphasize is this was important but it wasn't the center of our universe at this point. When you saw heightened security alerts they were a result of a variety of threats, a variety of reports. This was just one of many. What you see in this excerpt are a few frames from a much larger and more complex movie.

(END VIDEO CLIP)

WHITFIELD: New details about the state of missing U.S. soldiers in Iraq. Iraqi police tell CNN that a group of masked gunmen may have seized the Americans and took them away in separate cars.

(BEGIN VIDEO CLIP)

GRANGE: There's more effect psychologically to capture an American or high profile Iraqi than it is to kill them. And so that's the optimum choice of our enemy is to capture people.

(END VIDEO CLIP)

WHITFIELD: CNN will keep you updated on the search for those missing U.S. soldiers as it unfolds. U.S. and Iraqi troops say they have gained an important objective in securing the rest of the area around Ramadi. Overnight they took control of the suburb of Hamarra (ph). The military hopes it will allow them to isolate the militants and eventually weaken them.

More grim examples of the challenges that remain in securing Iraq. A series of attacks in Baquba and Mosul and left 13 Iraqis dead, most of them killed in drive-by shootings.

Before the break we showed you a side of the Iraq War that often doesn't make the news, the lives of independent security contractors risking it all. The industry says it fills the void left by U.S. and Iraqi troops, but critics say it's accountable to no one, a recent videotape raised serious red flags in Washington about the methods used by some of these contractors. Once again, here's Nic Robertson.

(BEGIN VIDEOTAPE)

ROBERTSON (voice-over): This was first released on an Internet Web site linked with employees of private military Aegis.

This video appears to show private military contractors in Iraq firing at civilian vehicles. Not only does this so-called trophy video appear to show Iraqis being shot at by contractors, but the video is callously set to Elvis music.

It appears to be a damning indictment at the outsourcing of war, but the U.S. investigation found no probable cause that a crime occurred.

U.S. Senator Charles Schumer was outraged about the video. We don't know if anyone.

SCHUMER: No one got out.

ROBERTSON: No one got out of that vehicle.

SCHUMER: Yes.

ROBERTSON: Especially when he learned it was possibly Aegis employees who shot the video. He has issues with the fledging British company. Awarded by the Pentagon, the largest single security contract for Iraq. Two-hundred ninety-three million dollars.

SCHUMER: Well, Aegis has had at best a checkered past. And if we want to show our best face to the Iraqis, hiring a company with a record that is hardly exemplary...

ROBERTSON: At the head of Aegis, this man, former British army officer, Tim Spicer, self-acclaimed unorthodox soldier in his 1999 autobiography.

And he has managed to survive allegations of scandal. In 1997, while head of a company called Sandline International, he was forced to appear before a commission of inquiry in Papua, New Guinea over allegations that included bribery connected to an alleged coup plot. He was not convicted and allowed to leave the country. Then just a year later, while working for the British government, Spicer's company Sandline International was accused of breaking a United Nation's arms embargo in Sierra Leone. The incident brought embarrassment to the British foreign office and thrust the issue of Western government's use of private military contractors into the spotlight.

UNIDENTIFIED MALE: And I've determined that there will be no hiding place for the facts.

ROBERTSON: When it came to Tim Spicer and his company, Senator Schumer believes the warning signs were there for the Pentagon to see.

SCHUMER: You combine the previous record and actions of Spicer and this video, and it just cries out for a real investigation.

ROBERTSON: Contractors are not just going places where the military won't. They're navigating territory where there is no rule book.

U.S. Air Force Colonel Ginny Johnson, a former military lawyer, found that out the hard way when she deployed to Iraq in July, 2004. She says she witnessed firsthand the problems of a lack of clear accountability. Assigned to the private contracting office in Baghdad, she worked alongside Aegis in the early months of reconstruction.

COL. GINNY JOHNSON, U.S. AIR FORCE (RET.): Aegis very much had the opinion that Aegis was in charge that they didn't seem to understand that they were a contractor to the United States, and to the United States taxpayers. That I didn't work for them. They worked for me.

ROBERTSON: The contract required Aegis to provide security for reconstruction projects.

JOHNSON: That reconstruction effort had to happen fast, and it had to happen furiously in the early days after we got in there. They didn't have enough vehicles initially. They didn't have enough staff.

ROBERTSON: Vital time lost, promises of reconstruction unfulfilled. The insurgency gained popularity, and Colonel Johnson says she had little leverage over Aegis.

JOHNSON: If I can't get my guys out to the field, I can't deliver on those promises. And it's our soldiers and our Marines that are on the ground every day to pay the price.

ROBERTSON: We asked Aegis to comment on Colonel Johnson's allegations about the company's performance in Iraq.

Tim Spicer, once keen to be seen and heard, turned down numerous requests to talk to us. As to the trophy video, Aegis has said previously it has launched an internal investigation. The results of that have not been made public. The U.S. military criminal investigation division looked into the video and said Aegis is a British company. And the alleged shooter in this case is South African.

The Army said it would share results with British and South African authorities, but that it was expected they would reach the same conclusion CID did as to the lack of probable cause that believed that a crime was committed.

Aegis ultimately sent us this e-mail. "We have no wish to respond. However, you might like to bear in mind that AEGIS has just had its contract in Iraq extended for the third year of its three year contract."

But in Washington, more concern is raised about the lack of accountability in the industry.

PETER SINGER, AUTHOR, "CORPORATE WARRIORS": I'm briefing a number of Senate staffers.

ROBERTSON: The trophy video is very much on the mind of academic Peter Singer. He's on his way to explain the ins and outs of the private military industry.

SINGER: Some kind of controversy pops up in the media, and then Congress get interested in it again.

ROBERTSON: And the controversy this time was?

SINGER: This time it's the Aegis video. I think Congress is really worried about tension between them and U.S. forces, and then also issues of accountability. What happens when a contractor does something potentially bad? How do we deal with it?

ROBERTSON: Right now, he says, there is no accountability. Private military contractors can quite literally get away with murder.

SINGER: What is the worst thing that company can do? Fire them. Oh, my gosh. They shot at civilians, you're fired. If you're talking about something that is a potential felony crime, you're talking something that if they were in the military, they'd be court-martialed for.

ROBERTSON: Singer says that of the 25,000 private military contractors in Iraq, none has been charged with a crime.

SINGER: Basically, you have a market that is effectively unregulated on the international level. To put it more bluntly, the owner of a circus faces more regulation an inspection than the owner of a private military firm.

ROBERTSON: For now in Baghdad, in the absence of clear rules and jurisdiction, Amy Clark says she has to continually improvise to keep her contract employees in line.

CLARK: No more foul language. Take them by the ear lobe, I know that sounds silly, they dragged them in that truck.

ROBERTSON: Her clients, Pakistani gravel truck drivers, have been complaining about language used by her security team.

CLARK: We did arrive Monday where we got hit by an IED. The drivers were wounded. And we pulled the drivers out. We save them. We get them out. You know, if we haven't done that, they would have died.

In the heat of the moment, they get more offended by vulgar language than they do by bullets dropping at their feet.

ROBERTSON: But there's no more time to complain. Upstairs in a briefing room, the next mission is being planned.

"TONY", PRIVATE CONTRACTOR: We start taking direct target to vehicles. We shoot the (expletive deleted) windows out. Then we just go (inaudible) rest of these.

ROBERTSON: The rule of thumb, when under attack, no rules, just survival. In the office later, the bad language is still being debated.

CLARK: To what that client perceives as a threat, they are gone, gone. There's no more reprimand. It's over.

ROBERTSON: But Amy Clark's problems can't stop there in what is, in effect, a lawless situation. She has to lay down the law to her security men.

CLARK: And because this whole area is gray, there's not really any type of law that we're held to. I've told them that I'm willing to stand by them in any situation. And if I'm going to stand by you, then I need to stand by you with a clear conscious.

ROBERTSON: Within three weeks, she would be doing just that.

(END VIDEOTAPE)

WHITFIELD: And find out what happens to this group of contractors when we come right back.

(COMMERCIAL BREAK)

WHITFIELD: We continue now with CNN's inside look at the private military contracting agencies. They claim they are doing jobs the military can't. Often they are in just as much dangers as the U.S. troops. Here now again is CNN's Nic Robertson.

(BEGIN VIDEOTAPE)

GONZO: I've lost several friends to IEDS, roadside bombs. I've been hit by an IED twice.

ROBERTSON (voice-over): This is Gonzo's second tour as a private military contractor in Iraq. He doesn't know if he'll survive. GONZO: Here is my MP-5, automatic weapon. Here's nine millimeter rounds.

ROBERTSON: So when he came back, he started a video diary. And after he shows me his video, he explains exactly why he's prepared to risk his life again.

GONZO: My wife and I are pretty frugal. My goal is pretty simple. I just want to be able to pay off a house and some property.

ROBERTSON: He can earn in three months what it would take him a year to earn back home. His motivation is high.

GONZO: I have two different insurance policies. You know, either way, it's a win-win situation for my wife and kids. OK. Right now, they're collecting a paycheck at home. If anything happens to me, God forbid, then they'll be taken care of.

ROBERTSON: A former combat engineer, he served in Gulf War I. Back home, he'd either be driving a truck or working as a carpenter.

GONZO: If we get ambushed and cut off, yes, then we're going to fight back. That's what we're paid to do, you know, to protect the client, to protect the asset. That's our job. To sound crude, our job basically is to be a bullet sponge.

ROBERTSON: Gonzo is exactly the sort of guy on which Amy Clark has built her small contracting operation. Ex military, over 30, married and most critically won't freeze up if called upon to shoot fast.

CLARK: We had an incident Monday where the retaliation was much more complex than anything we've had. And you know, one of these days, I'm going to have to -- instead of going to one family and talking about a funeral, I'll have to go to three or four families.

ROBERTSON: That day almost came. Just three weeks after our first interviews, Amy Clark's teams were hit in multiple IED roadside bomb ambushes. We went back to find out what happened.

CLARK: Two IEDs went off simultaneously, downing one of our security trucks and wounding two of our people. At that point, they took on heavy small arms fire from rooftop positions.

ROBERTSON: Gonzo was out with another team when he got the call his buddies had been hit.

GONZO: The blood in the backseat of the truck -- all the bone fragments and flesh pretty much told the tale. He got hit pretty bad.

GONZO: But the attacks that night were far from over.

CLARK: They took three IEDs, one in the front and two in the rear. By this point, we were down one security truck.

ROBERTSON: Clark lost two men. Five more were wounded, including Tony, who'd given the security briefing only three weeks earlier.

But if her situation was bad enough then, Iraqi police, she said, were accusing her team of killing civilians. And then came a devastating blow. The U.S. military withdrew her license to operate near Falluja. Overnight, she says, she was closed down.

CLARK: I'm the type of person, I like to know exactly what the rules are, what the boundaries are. And if so, where do you violate those.

ROBERTSON: Gonzo and the others were given a week to find other jobs. Amy Clark's margins were so thin, she couldn't afford to keep them on.

GONZO: In 10 years tops there's going to be five majors players. And we all know who they are without even having to name them.

ROBERTSON: Clark is bitter. Insiders told her a bigger contractor has already picked up at least one of her jobs.

CLARK: But where's the transparency? I've gone above board to try to be transparent, offering myself and any of our contractors open for questioning by anybody in this particular arena. And no one has taken me up on it.

ROBERTSON: She's still awaiting an answer, she says. But on the question of the future of the company she was working for, she already knows that answer.

CLARK: If you fail here, no matter what the reasons are, it will be very difficult after this.

ROBERTSON: And that's something Gonzo's learning. He has yet to find another security job.

Nic Robertson, CNN, Baghdad.

(END VIDEOTAPE)

WHITFIELD: Fascinating series of reports, Carol Lin is here now to carry the baton into the rest of the evening for CNN Sunday.

CAROL LIN, CNN ANCHOR: Some original reporting coming up at 6:00. I will be talking with Major General Don Sheppard about how the nature of the search changes now for the missing American soldiers in Iraq. It is day three. They have some evidence of a truck with bloody boot prints, some eyewitness accounts that say that the soldiers were lead away by armed gunmen, so the possibility they could be alive.

And you know out in L.A. the fascination with car crashes and car chases. Believe it or not, there is a service that will send you an alert when there is a high-speed chase going on. There are people are obsessed with watching these things and the element of surprise. We have a piece coming up on that the service an the fascination with this from our terrific Ted Rowlands. WHITFIELD: All right. We will look forward to that. Thanks, Carol.

LIN: You got it!

WHITFIELD: Well, tornado trouble for the Upper Midwest. We will tell you where it touched down next. You are watching CNN, the most trusted name in news.

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WHITFIELD: This just in, a tornado has reportedly touched down in Hartford, Wisconsin near Milwaukee. This is video from our CNN affiliate WTMJ which reports downed trees, power lines along with ripped up roofs around southern Washington County. Again, this is Wisconsin where a tornado hit at about 2:35 Central Time.

CNN meteorologist Jacqui Jeras will have the latest on this at the top of the hour.

And now a look at other news around the world, Kazakhstan, the oil rich former Soviet republic launches its first ever television satellite. That happened just a few hours ago.

And World Cup soccer and Team USA's hopes are still alive after a 1-1 draw against Italy yesterday. The U.S. plays Ghana next. They must beat the Africans to have any hope of advancing to the second round.

And happy birthday to Sir Paul McCartney who turns 64 years old today. It's a milestone considering McCartney wrote the now famous song, "When I'm 64. The former Beatle front man recently separated from wife Heather Mills.

The alleged plot to attack New York's subway system. A new books says the city came close to another terror disaster.

And the search for two soldiers missing in Iraq. We will talk with a retired air force general about what the military could do to locate their men.

I'm Fredricka Whitfield. Carol Lin joins you in three minutes with all the day's top stories when CNN LIVE SUNDAY continues.

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UNIDENTIFIED MALE: Hi, my name is Lance Corporal Larry G. Patello (ph), Combat Logistics Battalion 7, Al-Asad, Iraq. I would like to give a wish out, Happy Father's Day to my dad, Donald Patello (ph), in Dryin (ph), Michigan. Happy Father's Day, dad.

UNIDENTIFIED MALE: Hi, this is Lance Corporal Robert Thompson (ph) from Al-Asad Iraq, I just want to say Happy Father's Day to Eric Thompson (ph) back home in Niles (ph), Michigan, thanks for your support, can't wait to see you. Love you, by. UNIDENTIFIED MALE: This is Lance Corporal Brian Weber (ph) in Al-Asad, Iraq. I would like to say Happy Father's Day to my father Glen Weber (ph) in Redford, Michigan. I'll see you soon dad. Oo-rah!

(END VIDEO CLIP)

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