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London Bombings Anniversary; North Korea Threat Talks; Sadr City Raid; New York Tunnel Bomb Plot

Aired July 07, 2006 - 06:00   ET

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

MILES O'BRIEN, CNN ANCHOR: Good morning to you, Friday, July 7. I'm Miles O'Brien.
CAROL COSTELLO, CNN ANCHOR: Happy Friday to you. I'm Carol Costello in for Soledad.

Here's a look at what's happening this morning.

O'BRIEN: The FBI has uncovered an intricate terror plot to blow up New York City's Holland Tunnel and try to flood lower Manhattan. The report, according to today's "New York Daily News," one of the alleged conspirators said to be under arrest in Beirut.

Today marks the first anniversary of the London transit bombings. Early this morning at the station where the suicide bombers entered the subway, a wreath laying ceremony at the moment that the bombs went off killing 52.

COSTELLO: In Beijing, a top U.S. diplomat is huddling with Chinese officials trying to build a united front against North Korea's missile tests. Under Secretary of State Christopher Hill heads to Seoul, South Korea later.

President Bush also on the road today, he is in Chicago for a GOP fund raiser. He will also promote his economic agenda and hold a news conference at 11:00 Eastern.

O'BRIEN: New Jersey could be back open for business. Lawmakers voting as early as today on a budget compromise. The deal struck yesterday, ending a six-day government shutdown. In the deal, state sales taxes would go up from 6 to 7 percent.

In space, the astronauts aboard the Discovery and space station doing some not-so-heavy lifting today. They'll use robot arms to attach a cargo hauler to the station. The container holds about 5,000 pounds of supplies and equipment to be offloaded onto the station.

COSTELLO: And several brushfires burning in southern California this morning just west of Los Angeles. Westlake Village, that's what it's called. There's a 100-plus-acre fire burning in a canyon there. No homes threatened right now.

And in Colton, California, firefighters are making progress against a 450-acre fire. Full containment is expected today. And hopefully they'll have some help from Mother Nature.

Let's check in with -- Chad.

CHAD MYERS, CNN METEOROLOGIST: Hi, good morning, Carol. What are you eating, by the way? I saw you before the show eating some food there. What were you having?

COSTELLO: A delicious bran muffin.

MYERS: There you go -- Miles.

O'BRIEN: I'm a Grape Nuts guy. Grape Nuts and bananas with yogurt.

MYERS: I've only had coffee so far, but I'll try to catch up.

Good morning, everybody.

(WEATHER REPORT)

Back to you guys.

O'BRIEN: All right, thank you, Chad.

A CNN "Security Watch" for you now. Word of a terrorist plot to blow up New York's Holland Tunnel. The "New York Daily News" is citing the FBI this morning. The Holland Tunnel a main artery into lower Manhattan from New Jersey. "The News" says terrorists wanted to blow up the tunnel with the hope of flooding Manhattan's financial district. Of course that's the site of the World Trade Center.

One man has been arrested in Beirut and counterterrorism forces are hunting suspects around the world. The plotters allegedly were promised aid by Abu Musab al-Zarqawi, the al Qaeda in Iraq terrorist killed by U.S. forces last month. Sources say the terrorists planned to hit other tunnels and subways.

This story is developing. We'll get you more as it comes out.

The New York area's transit system getting a boost now from the Department of Homeland Security, meanwhile. The Tristate area, New York, New Jersey and Connecticut, will get more than $53 million in security grants for mass transit. That's a $10 million bump over last year. The Washington area also gets an increase to just over $14 million -- Carol.

COSTELLO: Heightened security in London this morning on the one- year anniversary of the terror bombings there. Fifty-two people died in those suicide attacks. Flowers being placed at several Underground stations this morning and at the site of the bus bombing near Tavistock Square.

CNN's chief international correspondent Christiane Amanpour has more from King's Cross station.

(BEGIN VIDEOTAPE)

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT (voice-over): It was all smiles from Prime Minister Blair, President Bush and world leaders gathered in Glenn Eagle, Scotland for the annual G-8 summit when at 8:52 a.m. a massive power surge hit the city's subway system. At first that's all anyone knew. But half an hour later, emergency services began rushing to the scene as news of explosions started coming in.

CLAIRE MOFFAT, METROPOLITAN POLICE: It's getting darker and darker, it's getting smokier and smokier as we get closer. But eventually we saw the train, and it didn't look like a train anymore.

AMANPOUR: It became clear that this was Britain's 9/11, three nearly simultaneous bomb attacks on the London Underground. Thirty minutes later, an explosion rips open a London bus. In all, 52 people were killed, plus the 4 bombers. Another 700 were wounded.

At 12:10 that day, a Web site linked to al Qaeda claims responsibility for carrying out -- quote -- "blessed raids in London." And soon, the worst fears are confirmed as security camera pictures of the bombers emerge.

Unlike in the United States, there has been no British equivalent of the 9/11 Commission to hold public hearings into what went wrong and to make recommendations on improving safety. British officials argue that such hearings would distract security agencies that are focused on preventing future attacks.

While this year has seen the biggest investigation ever conducted in Britain, with dozens charged and awaiting trial on terrorism offenses, police say there are still many unanswered questions.

PETER CLARKE, NATIONAL TERRORISM COORDINATOR: It's impossible to say whether we're more safe. The intelligence picture is concerning, it's very concerning. So I think it's very difficult to say whether we're more safe. I doubt, though, that we are less safe.

AMANPOUR: And one year on, a U.K. parliamentary panel concludes that despite some successes against al Qaeda, the threat it poses has not diminished. Indeed, they say, it may even have risen.

CLARKE: Two things which are particularly concerning about what we've learned since last year, it's these. One is that we're seeing British citizens prepared to kill their fellow countrymen. And the second thing is the youth, extreme youth for some of the people that we're seeing involved in what's going on. We've charged a young man of 16 with very serious offenses. That's massively worrying.

(END VIDEOTAPE)

AMANPOUR: You can probably hear behind me sirens. It's not a bad day today. In fact, today is one, as we have said, of commemoration and mourning. People are putting flowers, dignitaries have put flowers at King's Cross Station behind me and at the other locations where the bombs went off on the London Underground exactly a year ago and also in Tavistock Square, not far from here, where that bus was ripped apart. Londoners, as we have said, are so resilient. They were on the day of these explosions and they have remained so. Today, exactly a year later, we have been told by London Underground officials that there is no discernible drop-off in the traffic, that rush hour was as busy as ever underground and also on the bus system.

There are vigils today. There will be one for the families in Regent's Park, a big park not far from here, where the names of all the victims, the 52 people who were killed, will be read out -- Carol.

COSTELLO: Christiane Amanpour reporting live from London this morning, thanks.

O'BRIEN: A crucial meeting under way in China now with an eye toward easing tension over those North Korean missile tests. The U.S. point man on North Korea meeting with his Chinese counterpart. The U.S. pushing for sanctions to punish and hopefully rein in the North Koreans. The Chinese, thus far, unwilling to support that idea.

Beijing bureau chief Jaime FlorCruz on the phone now with more -- Jaime.

JAIME FLORCRUZ, CNN BEIJING BUREAU CHIEF: Miles, I'm here at the Beijing International Airport, and we just finished listening to Secretary Hill's wrapping up what his discussions with the Chinese. He says he has a better understanding now of the situation and that the Chinese are obviously not very happy with what happened.

He also says that no one here is offering any concessions to North Korea and that the only way is for North Korea to go back to the six-party talks. He also said that the Chinese had been in touch with North Korea and will continue to be in touch in the coming days.

Hill is on his way to Seoul and then on to Tokyo for more talks on North Korea -- Miles.

O'BRIEN: Jaime FlorCruz at the airport in Beijing, thank you very much.

Under Secretary of State Christopher Hill's next stop is Seoul, South Korea, where they are playing down reports the North is prepping for another missile launch this morning. The North Koreans are asking for the South for military talks, but so far Seoul is rejecting that idea because of rising tension.

CNN's Sohn Jie-Ae live now from Seoul -- Jie-Ae.

SOHN JIE-AE, CNN CORRESPONDENT: Yes, Miles, South Korea is getting ready to welcome U.S. Assistant Secretary Christopher Hill; but it is also getting ready to welcome North Korean cabinet ministers next week. While it has rejected military talks, it said it will go ahead with cabinet ministerial talks next week.

Now in these talks, which are regularly scheduled talks, North Korea usually asks for food and fertilizer aid from South Korea and South Korea usually wants North Korea to give up its nuclear weapons program. And in this case, South Korea says to give up its nuclear -- its missile tests and come back to the negotiating table.

South Korea has not had much success so far. But South Korea is North Korea's main source of humanitarian aid and South Korea does provide North Korea with hundreds of thousands of tons of food and fertilizer every year to stem massive starvation in North Korea. So they hope that this time their leverage will work.

And just to be on the safe side, South Korea has also ordered its airlines to stay clear of the E.C., where North Korea fired their missiles, until at least next Tuesday -- Miles.

O'BRIEN: Sohn Jie-Ae in Seoul, thank you very much.

The North Korea crisis should be at the top of the agenda as President Bush holds a news conference in Chicago later this morning. Last night, he and the first lady gave an exclusive interview to Larry King at the White House. Larry asked him about the missile firings and how best to deal with the North Korean leader Kim Jong-Il.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If it headed to the United States, we've got a missile defense system that will defend our country.

LARRY KING, HOST: Do you then fear it more now?

BUSH: I think that's what he wants. I think he does want people to fear him.

My response to him and the response of our partners is to be that you know it's really important for you, the leader of North Korea, to make rational decisions, because the United States is not alone in making these demands. The demand, of course, is to give up his you know weapons programs in a verifiable fashion.

I think he'd love to have the United States sit down at the table alone with Kim Jong-Il. The problem is we tried that and it didn't work.

And I think the best way to solve this problem diplomatically is for there to be other nations around the table with us so that when he looks out, when he looks at the table or he looks at the world, he hears China and the United States speaking one voice or China, the United States, Russia, Japan and South Korea speaking with one voice.

I am into solving problems and I'm convinced the strategy we've got is the best way to solve this problem.

(END VIDEO CLIP)

O'BRIEN: Once again, the president with a news conference in Chicago today, 11:00 a.m. Eastern Time. And of course you'll see it here live on CNN -- Carol.

COSTELLO: Also happening in America this morning. Former Secretary of State Colin Powell leaving a Colorado hospital this morning. The 69-year-old Powell was apparently treated after feeling sick at a restaurant in Aspen. A police official says Powell told him it may have been a combination of altitude sickness and maybe something he ate.

Two Royal Family members from the South Pacific island nation of Tonga were killed near San Francisco when a teenager racing her car crashed into their SUV. The family was in the United States to discuss political reforms for their country.

In New York, a Bronx man is behind bars after stabbing a subway rider with a chainsaw. The victim is in stable condition this morning. He says it looks like the attacker was trying to cut right through him.

Lawmakers are getting a mixed reaction on just how strong the levees in New Orleans are. Government engineers told a House subcommittee Thursday the levees were safe enough for residents to rebuild in areas hard hit by Hurricane Katrina. But independent engineers were skeptical, saying those levees have yet to be tested.

Cincinnati Reds pitcher Brian Shackelford may be facing some legal trouble. Milwaukee police arrested Shackelford on sexual assault charges early Thursday after a game against the Brewers. He was released from jail with no charges filed. Shackelford is scheduled to meet with the Milwaukee County D.A.'s office in August.

O'BRIEN: Still to come on the program, word of a terror plot to blow up a major tunnel in New York City and flood the financial district. How real is the threat? We'll ask some experts.

COSTELLO: Plus, the U.S. military says a high-level insurgent leader is in custody following overnight raids. We're live in Baghdad.

O'BRIEN: And then, in case you missed it, Larry King with the president and the first lady. We have some excerpts for you. It was a fascinating interview.

COSTELLO: And Carrie Lee has some fascinating business headlines this morning.

CARRIE LEE, CNN CORRESPONDENT: Thank you.

The big June jobs report will set the tone for trading this Friday. Also, a huge win for big tobacco companies and a chip giant warns. We'll have those stories and more coming up on AMERICAN MORNING.

(COMMERCIAL BREAK)

O'BRIEN: Happening this morning.

Reports of a terror plot to bomb New York's Holland Tunnel and flood lower Manhattan. The "New York Daily News" reporting terrorist's goal was to flood the financial district, just like New Orleans after Hurricane Katrina.

London remembering the victims of last year's subway and bus bombings. One year ago today, suicide bombers attacked the city's transit system killing 52.

And in Beijing, a top U.S. diplomat huddling with Chinese officials, trying to build a united front against North Korea's missile testings. Under Secretary of State Christopher Hill later heads to South Korea.

Time for a check on the forecast now. Chad Myers at the Weather Center.

Chad, good morning.

MYERS: Good morning, Miles.

(WEATHER REPORT)

Back to you.

COSTELLO: Yes, and it's not like they have air conditioning there either.

MYERS: No.

COSTELLO: Yes.

Some major happenings in Iraq to tell you about right now, by the way. A major raid into Sadr City this morning netted a high-level insurgent leader. That's according to the U.S. military. During this raid as many as 40 militants were killed or wounded in gun battles with U.S. and Iraqi forces.

We want to know more, so let's head live to Baghdad now and Arwa Damon.

Hello, -- Arwa.

ARWA DAMON, CNN CORRESPONDENT: Good morning, Carol, that's right. Now this suspected insurgent is being accused, this according to a U.S. military statement, of planting roadside bombs, car bombs. Additionally, he is accused of being directly linked to the killing of two Iraqi Army soldiers in an effort to establish his status within this organization. The organization has not yet been named by the U.S. military.

But we are told, and it is known, that Sadr City is a Mehdi Militia stronghold. And this particular area of Sadr City where this raid took place, we're told by citizens who live there, is actually controlled by a well-known Mehdi Militia leader who is also known to be very dangerous.

In fact, according to the U.S. military statement, this suspected insurgent, who they have detained, was also running his own courts, if you will, courts in which he allegedly tries individuals who he believes to be enemies of his organization.

Now this was a raid that led to, as soon as the Iraqi Army forces arrived to this area supported by U.S. troops, a 43-minute gun battle erupted. And as you just said, 30 to 40 suspected insurgents killed or wounded -- Carol.

COSTELLO: Arwa Damon reporting live for us in Baghdad this morning, thank you.

O'BRIEN: On the anniversary of the London transit bombings, word of another terror plot aimed at commuters in another major city, in this case, New York City. The "New York Daily News" reporting a plot to blow up the Holland Tunnel, flooding lower Manhattan, potentially, or at least that was their goal.

Joining us now with more at the Holland Tunnel is Ken Rosato with our affiliate WABC.

Ken, what do we know?

KEN ROSATO, WABC-TV REPORTER: Good morning to you, and good morning, everyone.

A terrifying thought that, according to some officials, may very well have been in the works. As you say, this is a report published in today's "New York Daily News" that the FBI may have uncovered this alleged plot by jihadists that could have resulted in the bombing of New York's Holland Tunnel. That's the tunnel that connects Manhattan to New Jersey. And apparently their intention was to flood lower Manhattan ala Hurricane Katrina.

Now these published reports say that authorities in Beirut arrested one alleged suspect in recent months and that they know who a second suspect is but they're still looking for him. It's thought the plot would have included using a vehicle packed with explosives to blow a hole in the Holland Tunnel with the assumption that water would then have come gushing into the financial district in lower Manhattan, bringing the city to a halt.

Now according to the New York Police Department, they apparently were aware of this. The good news is good intelligence worked, an arrest has been made and another possible plot may have been thwarted.

And according to some officials, they said that should somebody actually attempt this, that water would not come gushing into lower Manhattan simply because the water level of the Hudson River adjacent to Manhattan is simply too low for that. Nonetheless, they're glad no one has given this a try.

That's it from here. We're live in lower Manhattan outside of the Holland Tunnel. Ken Rosato for CNN.

Back to you, -- Miles.

O'BRIEN: Ken Rosato with our affiliate WABC.

Stay with CNN day and night for the most reliable news about your security -- Carol.

COSTELLO: A big victory for big tobacco, a judge relieving the industry of a $145 billion verdict. Carrie Lee will tell us why. She has the business headlines. That's next on AMERICAN MORNING.

(COMMERCIAL BREAK)

O'BRIEN: There's a big jobs report due out today and that should move the markets.

Carrie Lee is to tell us which way it's going to go. You know, right?

LEE: That's the question, Miles. You know it's kind of a contradictory thing here, because if the report is too strong, well then people may think the Fed is more likely to keep raising interest rates and that could put a damper on stocks.

But the June jobs report expected to show we added about 160,000 new jobs. The unemployment rate expected to hold steady at 4.6 percent. The report comes out at 8:30 Eastern, and that is going to be the front and center thing people are watching today on Wall Street.

Meanwhile, we are coming off of some decent gains yesterday. The Dow up about 73 points, Nasdaq up slightly. Before it, the jobs report this morning, it is looking like a flat start; but that could very well change in about two hours.

Yesterday, the Dow also getting a boost from big tobacco stocks. A big win here. A Florida Supreme Court has relieved these companies of paying $145 billion in punitive damages. This is that big case that it goes back about 10 years, basically executives saying that misleading, some say, the dangers of smoking.

Philip Morris' company, parent company, Altria, one of the Dow, really soared as soon as this decision came out yesterday, as high as 7.5 percent during the session, ending higher by 6 percent. R.J. Reynolds' parent up about 4 percent.

Now one thing that could keep a lid on stocks today, particularly tech stocks, AMD. Advanced Micro Devices, the big chip company, warning that second quarter sales will miss the Wall Street estimate. And, obviously, that's not a good thing. Perhaps could set a negative precedent for the second quarter profit reporting season. We'll see.

O'BRIEN: All right, thank you very much, -- Carrie.

LEE: OK. Sure.

O'BRIEN: Have a good day.

COSTELLO: This morning's top stories straight ahead, including a report of a terrorist plot to bomb New York City's Holland Tunnel and flood the financial district. We've got more details for you.

And it's been one year since London's terror attacks. We're live for events paying tribute to those victims.

Stay with us on AMERICAN MORNING.

(COMMERCIAL BREAK)

COSTELLO: Happening this morning.

The "New York Daily News" is reporting an alleged plot to bomb Manhattan's Holland Tunnel and flood the city. The newspaper says U.S. officials think terrorists wanted to drown the financial district just like New Orleans after Hurricane Katrina.

London is remembering the victims of last year's subway and bus bombings. One year ago today, suicide bombers attacked the city's transit system. Fifty-two people killed.

And a top U.S. diplomat is in Beijing today trying to build a united front against North Korea's missile tests. Under Secretary of State Christopher Hill later heads to South Korea.

O'BRIEN: CNN "Security Watch" for you now. A report in the "New York Daily News" this morning citing sources at the FBI that they have been working on a terror plot that was targeting the Holland Tunnel. The goal to bomb the Holland Tunnel, flood the tunnel, and according to the terrorists, or to the FBI in interviewing the terrorists, flood the financial district, lower Manhattan.

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