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Rice Urges China to be Firm with North Korea; Change in Iraq Strategy?

Aired October 20, 2006 - 10:00   ET

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

TONY HARRIS, CNN ANCHOR: You are in the CNN NEWSROOM.
Good morning, everyone.

I'm Tony Harris.

HEIDI COLLINS, CNN ANCHOR: And I'm Heidi Collins.

For the next three hours, watch everything happen live on this Friday, the 20th of October.

Here's what's on the run-down.

The secretary of state pressing China to be firm with North Korea. Condoleezza Rice talks with our correspondent, Zain Verjee.

HARRIS: American troops in Iraq up against a wall. Reports today indicate a change in war strategy may be coming.

COLLINS: And a stingray spike in the heart -- an 81-year-old Florida man hangs on today.

We'll have an update right here in THE NEWSROOM.

HARRIS: Is once enough for North Korea?

According to a South Korean news agcy report, North Korea's leader is waving off any notion of additional nuclear tests. The report comes with Secretary of State Condoleezza Rice in Beijing. She's meeting with Chinese leaders about their nuclear neighbor.

CNN's Zain Verjee is the only television correspondent traveling with Secretary Rice.

And Zane joins us via broadband from Beijing -- Zane, good morning.

ZAIN VERJEE, CNN CORRESPONDENT: Good morning to you, Tony.

U.S. Secretary of State Condoleezza Rice told me a little over an hour ago a lot more detail about a conversation between a top level Chinese delegation that went to North Korea and met with Kim Jong Il.

The message essentially was come back to the six party talks.

(BEGIN VIDEO CLIP) CONDOLEEZZA RICE, SECRETARY OF STATE: I think the message was not unlike the one that the Chinese have been delivering publicly, that Resolution 1718 must be observed and China will observe it. The Chinese, obviously, wanted to send a message to the North that they had engaged in very serious behavior that China did not support. They also want very much to try and get a return to the diplomatic path and to the six party talks.

(END VIDEO CLIP)

VERJEE: Secretary Rice also said that the U.S. did not receive any specific proposal from North Korea, no specific message from Kim Jong Il to Washington.

I asked her also whether, in her conversations with the Chinese, that they had agreed or agreed to consider, at least, cutting off food aid, fuel aid to North Korea -- they depend on it for their survival -- as well as cutting off financial benefits, too, to North Korea.

She essentially was not specific in answering that, but said look, China just has to live up to the obligations of U.N. Security Council Resolution 1718.

I asked her, too, if North Korea tests a nuclear device again, what more can the United States do? What more can the international community do than it's already doing?

And she said there are ways in which broader trade restrictions can be inflicted, but it would only deepen North Korea's isolation.

Finally, I asked her if the crisis could be resolved with Kim Jong Il in power in North Korea. She said yes, it could be. And I said will you go to Pyongyang and intervene at a top level try to and move things forward and she said no -- Tony.

HARRIS: And, Zane, the talks with China, it appears we have reached that critical moment of the trip. Remind us again of why these talks with China are so important.

VERJEE: That's exactly right, Tony.

China is really being seen as the critical country here and really key to moving anything forward and the only ones that can persuade North Korea to come back to the table.

The reason is, is because they provide a lifeline to North Korea. They give them most of their food, they give them most of their fuel. So if China were to turn off that tap, North Korea would really, really hurt.

The Chinese are really angry, also, that North Korea basically ignored their warnings and said look -- well, the Chinese said look, don't test. And they went ahead and did it anyway.

But the question is, even though there may be an attitude change against North Korea or toward North Korea in China, will is translate to hard policy?

The Chinese are worried if they squeeze North Korea too hard, the regime could collapse, they'll put North Korea in a corner, and that dog may bite -- Tony.

HARRIS: CNN's Zain Verjee in Beijing for us.

Zane, thank you.

And a little later this morning, we will talk to the man who negotiated the 1994 agreed framework with North Korea, former Ambassador Robert Gallucci.

COLLINS: The sharp rise of violence in Iraq -- the spike may spark a new strategy.

CNN's Jamie McIntyre explains.

(BEGIN VIDEO TAPE)

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT (voice-over): On a day when President Bush was sounding determined...

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will fight, we will stay and we will win in Iraq.

MCINTYRE: ... his chief military spokesman in Baghdad was sounding discouraged.

MAJOR GENERAL WILLIAM CALDWELL, U.S. ARMY SPOKESMAN, COALITION FORCES IN IRAQ: The violence is indeed disheartening.

MCINTYRE: What's disheartening, Major General William Caldwell noted, is that attacks are up 22 percent in the past three weeks; that Operation Together Forward, the joint U.S.-Iraqi effort to secure Baghdad, has, in his words, not met overall expectations; and that now, the U.S. and Iraqi government must figure out "how to refocus the effort."

CALDWELL: We're taking a lot of time to go back and look at the whole Baghdad security plan. We're asking ourselves if the conditions under which it was first devised and planned still exist today or have the conditions changed and, therefore, a modification to the plan needs to be made.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: Yes, the White House listens to the generals, but I would caution you against saying it's not working, because that's not their view.

MCINTYRE: The White House was quick to downplay the sober assessment from the military, insisting it amounted to routine adjustments.

SNOW: Tactics change all the time. Generals talk about changing tactics all the time. It happens regularly. It is nothing new in a time of war. MCINTYRE: Baghdad is not the only problem city. In Ramadi Wednesday, some 60 gunmen, believed to be members of Al Qaeda in Iraq, were seen carrying banners to announce the city was joining an Islamic state.

In Balad, north of Baghdad, at least 95 Sunnis and Shia we're killed in five days of revenge attacks that began Friday.

And in the usually calmer north, Mosul and Kirkuk have also seen a significant increase in violence in recent days.

While the U.S. military expected casualties to go up with the Baghdad offensive in the holy month of Ramadan, at this pace, October will surpass the high of 137 deaths the U.S. suffered back in November of 2004.

Still, the White House dismissed as a lot of hooey the idea that the recommendations from an independent Iraq Study Group would result in a major course correction, such as dividing up Iraq.

SNOW: Yes, partition -- non-starter.

MCINTYRE: What about a phased withdrawal?

SNOW: No, you withdraw when you win. Phased withdrawal is a way of saying, regardless of what the conditions are on the ground, we're going to get out of Dodge.

MCINTYRE (on camera): The one thing the White House did not rule out is an infusion of additional troops in the future, again repeating that U.S. commanders will get what they need.

Jamie McIntyre, CNN, the Pentagon.

(END VIDEO TAPE)

COLLINS: It was all a hoax, but the FBI and NFL are not amused. Homeland Security officials say a threat against NFL stadiums was a writing duel on the Web, a competition that got out of hand. They say two men were trying to see who could come up with the scarier threat. The Web site posting warned of a dirty bomb attack against seven NFL stadiums this Sunday.

Law enforcement officials say a 20-year-old Milwaukee man admitted posting the fake threat to one-up a cyber buddy in Texas. No decision yet on whether charges will be filed.

HARRIS: In custody today, a Kentucky mother and her boyfriend, accused of kidnapping the woman's infant son. Police say Renee Terrell and Christopher Luttrell were captured last night outside St. Louis. They had been on the run-for four days. Police believe they kidnapped Terrell's baby from a social worker, who was later found dead. The social worker had taken the baby to visit his mother. The 9-month-old is said to be in good condition this morning.

COLLINS: A 4-month-old Florida infant is safe this morning. The teenager suspected of taking her going through psychiatric testing. Police in Fort Lauderdale say the 15-year-old picked the baby up from a sitter without permission. An amber alert was issued Wednesday. The teen and infant were found yesterday at a bus station. She is facing charges of interfering with the custody of a child.

Chad Myers, joining us now with some more weather that's happening.

HARRIS: Yes.

COLLINS: We've been following a couple of different things along the Southeast.

Is that still what we're talking about today?

It looks like it. No, the Northeast.

CHAD MYERS, CNN METEOROLOGIST: Yes, it's the same front. The rain has just moved away.

(WEATHER REPORT)

COLLINS: Mark Foley claims a priest abused him when he was a teenager. Now, the priest is respond. We'll have a live report from the Mediterranean island the priest calls home. That's coming up in THE NEWSROOM.

HARRIS: Struck deep in the heart -- the victim of a stingray attack recovering from emergency surgery. That story in THE NEWSROOM.

COLLINS: Live fire training for the Coast Guard -- a battle brewing on the Great Lakes. See it in THE NEWSROOM, coming up.

(COMMERCIAL BREAK)

COLLINS: Mark Foley as an altar boy. He claims a priest abused him when he was a young teenager. Now, that priest is telling his side of the story.

(BEGIN VIDEO CLIP)

FATHER MERCIECA: Once and maybe I touched him or so, you know? But I didn't -- it's -- it's not (UNINTELLIGIBLE) than that. It's not something you call, I mean, rape or penetration or anything like that, you know? It was just fondling.

(END VIDEO CLIP)

COLLINS: The priest lives on the Mediterranean island of Gozo.

Alessio Vinci is there for CNN today -- Alessio, what is the reaction from people of that island to this news story?

ALESSIO VINCI, CNN CORRESPONDENT: Hello, Heidi.

Well, first we started with the residence of Father Anthony Mercieca and this morning we spent several hours out there. We briefly met his lawyer, who basically told us in no uncertain terms that he was not going to speak to the media, the press, anymore, and then also a housekeeper who came in and out of the house several times also refused to talk to us.

So we are having really, a hard time trying to speak to Father Anthony himself now that he has given that long interview yesterday to the U.S. -- the "Sarasota Herald-Tribune."

That said, we spoke to many people in the areas surrounding his house and we're getting two sets of reactions. On the one side, we are hearing from people who are basically surprised and know very little about him. After all, he only moved back to this island only two years after, after he retired from the priesthood in Miami. And so they pretty much don't know very much about him.

On the other side, we're hearing people -- from people that he actually has an active -- I mean he has an activity here. He's holding several masses throughout the week. And one shopkeeper, who actually refused to give us her name because she said that she could get in trouble just to speak to the media about a case sensitive like this, she said that her son, her 11-year-old son knows the priest very well and she was shocked to hear that the priest not only is involved in a sex abuse scandal, but he's also admitted to what has been described as inappropriate behavior.

So on the one side, we have people here who are, if you want, shocked. And on the other side, very few people who know him. They seem to know his brother, who is actually a priest on this island, as well.

COLLINS: Wow!

That's very interesting, he's holding mass there.

VINCI: Yes.

COLLINS: All right, Alessio Vinci, the fact that.

We'll check back should anything change.

In stories yesterday about the priest who admits he fondled former U.S. Congressman Mark Foley, CNN and other news organizations published an incorrect photograph showing another employee of the diocese. CNN profoundly regrets our error.

HARRIS: Do little, do nothing -- that's how some are describing the 109th Congress. From corruption to incompetence, the list of missteps is long.

CNN's Congressional correspondent Joe Johns with the top 10 complaints.

(BEGIN VIDEO TAPE)

JOE JOHNS, CNN CORRESPONDENT (voice-over): Number ten -- all pay, no work. Every member of the House of Representatives makes at least $165,000 a year. So far, they have spent only 94 days in session. That's almost $1,800 a day. Nice work if you can get it.

Nine -- what illegal immigrants? Wasn't immigration reform supposed to be about the most important issue this year? And what did they do about it? They voted to build a fence.

Eight -- what are you wearing? The skanky way Florida Republican Mark Foley is reported to have talked to former congressional pages in electronic messages. And when he got caught, like a real a profile in courage, he announced he was gay, abused as a teenager by an unnamed priest, checked into alcohol rehab and left his colleagues to sort out the mess.

REP. DENNIS HASTERT (R-IL), SPEAKER OF THE HOUSE: And he deceived me, too.

JOHNS: Seven -- oh, say can you thieve? Duke Cunningham, the former fighter jock turned jailbird, once seemed like a poster child for patriotism, until it turned out the California Republican was on the take and getting paid with just about everything but the stars and stripes.

Six -- the booze made me do it. The congressional pilgrimage to rehab that featured some household names this year, including Foley, Ohio Republican Bob Ney -- more about his later -- and Rhode Island Democrat Patrick Kennedy. People wished them well, but were left wondering if rehab isn't just an easy way out.

Five -- addicted to pork. The Congress is going to have to face it, it's addicted to pork -- bridges to nowhere, a museum to honor the folks responsible for the New Orleans levees that failed, emergency money for non emergencies, and at the end a record deficit.

SEN. GEORGE ALLEN (R), VIRGINIA: The fellow over here with the yellow shirt...

JOHNS: Four -- the macaca moment. Senator George Allen of Virginia called a guy of Indian decent who was shadowing him macaca, then claimed he didn't know what it meant. Well, it means monkey.

Three -- throwing in the towel. Texas Republican Tom DeLay -- he was the House majority leader -- got indicted in Texas in a case that was far from watertight, denied wrongdoing and then up and quit. What's up with that? The Capitol's tough guy, "The Hammer," gave up before fighting it out in court.

Two -- frostbite, the case of the cold, hard cash. The feds said they videotaped Louisiana Democrat Bill Jefferson accepting $100,000 then found 90 grand in his freezer. They claim they're investigating several allegedly shady deals. He hasn't been charged with anything and says he hasn't done anything wrong.

And the winner is -- number one on the list of dubious accomplishments of the 109th Congress -- Jack Abramoff and Bob Ney, the corrupt couple, the lobbyist and the mayor of Capitol Hill, united by guilty pleas, things of value exchanged for official acts, plus a passion for golf, meals, tickets to sporting events and power.

Jack is out of the lobbying game, but Ney is still a congressman, still cashing paychecks until his colleagues throw him out. At $1,800 a day, who can blame him? A tip of the fedora to old Jack, Bob and a session that many would sooner forget.

(END VIDEO TAPE)

HARRIS: Joe Johns, part of the best political team on television. His report first aired on CNN's election special, "Broken Government."

Join Jack Cafferty tonight at 11:00 Eastern for an encore presentation only on CNN.

COLLINS: At the end of this long tail, a tale of survival. An 81-year-old man -- look at that tail -- recovering this morning after being hit in the heart by a stingray barb. We told you about this yesterday. The man was in a boat Wednesday when the stingray, yes, jumped in. He was stabbed when he tried to toss out the renegade ray.

Doctors removed the barb from his heart safely. They describe the victim as a very tough gentleman.

You think?

HARRIS: Lucky.

COLLINS: And lucky, too, yes.

HARRIS: (UNINTELLIGIBLE).

COLLINS: Look at that thing! Ouch!

HARRIS: (UNINTELLIGIBLE).

We are Minding Your Business this morning.

Andy Serwer here now with a preview -- Andy, good morning.

ANDY SERWER, "FORTUNE" MAGAZINE: Good morning to you, Tony.

Dow 12,000 celebrating the stock market breaking through records.

But where do we go from here and what does it mean?

We'll get to that coming up in THE NEWSROOM.

(COMMERCIAL BREAK)

HARRIS: The Dow has finally held on above 12,000.

Andy Serwer is Minding Your Business this morning -- Andy, where do we go from here?

SERWER: Well, that is the $64,000 question, Tony, you know. And when you get some enthusiasm going in the stock market, a lot of times that momentum carries you forward and you continue to make new gains.

But let's take a look back and look at some of the milestones, the history of milestones, as it were, on Wall Street.

First of all, going all the way back to 1972 -- I was but a lad.

HARRIS: Yes.

SERWER: Dow, 1,000. Then 2,000 in 1985. I think I was listening to some Duran Duran at that point. And then, you know, we get into the '90s, the interesting thing here as we scroll through is that between 1995 and 1999, the Dow went from 4,000 to 11,000. So that just really gives you an indication of just how great those late '90s were.

That would be like the Dow going from 12,000 to about 30,000 today in that same sort of four year period.

HARRIS: Wow!

SERWER: So you can see how much ground we've gained during that period in the late '90s.

HARRIS: Hungry like a wolf, huh?

SERWER: Yes.

HARRIS: All right, so, Andy, how does the Dow tend to do after crossing these thousand point barriers?

SERWER: Well, you know, actually, the market usually keeps on ticking, Tony. And it's interesting, I think it's -- we've got it exactly here -- nine out of the last 11 times that we crossed a thousand point threshold like this, the market was up over the next year. So, you know, it sort of feeds on itself. You get some optimism going and then more investors jump in the market and send stocks higher.

HARRIS: So, Andy, this was odd. The milestone actually occurred on the anniversary of another sort of, well, key market event.

SERWER: Yes, the exact day 19 years later from the crash of 1987. You know, the stock market is a lot like baseball. You know how the Elias Sports Bureau, they go nuts on statistics?

HARRIS: Yes.

SERWER: They do that with the stock market, too. But I'm here to tell you, that is a coincidence, and meaningless, at that. There is nothing to that.

I will tell you, a lot of people used to be scared of October, that this was a bad month. Obviously, it's not a bad month, at least so far this year. A lot of hedge funds are in the stock market right now buying up stocks, moving out of energy and commodities and into stocks. That's one reason why we've seen the stock market go higher. So it doesn't look like we have an October hex this year.

HARRIS: So merely a coincidence.

SERWER: Just a coincidence, Tony.

HARRIS: Don't read too much into that.

SERWER: That's it.

HARRIS: All right, Andy.

See you a little later in the hour.

SERWER: All right, we'll do that.

HARRIS: OK.

COLLINS: Condoleezza Rice in China. The secretary of state keeps the pressure on North Korea. The latest on efforts to break the nuclear stalemate in THE NEWSROOM.

HARRIS: Protests against Israel morph into protests against America. Iranians take to the streets.

And live fire training for the Coast Guard. A battle brewing on the Great Lakes. See it straight ahead in THE NEWSROOM.

(COMMERCIAL BREAK)

HARRIS: Anti-Israel, anti-American -- tens of thousands of people fill the streets of the Iranian capital for Jerusalem Day. President Mahmood Ahmadinejad addressed the crowd, calling Israeli leaders a group of terrorists and threatening any country that supports the Jewish state. He also took aim at the U.N. Security Council, calling its decisions illegitimate. He says the world body is dominated by the U.S. and Britain. This comes as the U.N. considers sanctions on Iran over its nuclear program.

Meanwhile, Israel has its own harsh words for Iran, vowing Iran will have a "price to pay" if it does not back down from its nuclear ambitions.

COLLINS: And speaking of ambition, if I may make a really lame transition.

HARRIS: A nice segue.

COLLINS: Yesterday, you know how this worked out -- we're listening to the opening bell, of course, this morning, at the New York Stock Exchange.

But yesterday it finally broke that record. The Dow close -- now, this is different than the interday close that we always talk about.

HARRIS: Yes.

COLLINS: But it closed beyond 12,000. I think the number was 12,011, something like that.

So, of course, we will continue to watch this exciting story.

It took a long time to get here, too, from 11,000, so we'll be watching it.

(MARKET REPORT)

COLLINS: The U.S. and China try to break the nuclear stalemate with North Korea. Secretary of State Condoleezza Rice meeting her Chinese counterpart today to discuss the crisis. She also sat down with our Zain Verjee, the only television correspondent traveling with the secretary.

In an exclusive interview, Rice challenged the perception the U.S. does not talk with North Korea.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECY. OF STATE: If they have anything that they want to say to us, if they really do want to talk to us, they're doing it. Chris Hill has had multiple discussions with his North Korean counterpart, one on one, with no other countries at the table. He's had dinner with them, all in the context of the six-party talks. This is just an excuse. What the north wants is to have a negotiation with the United States so that when they ignore the terms of the agreement, they can say, well, after all that was with the United States.

What is troubling to the north is that for the first time they're having to face the collective will of China, Russia, Japan, South Korea, and now with resolution 1718, the entire international system.

(END VIDEO CLIP)

COLLINS: We are also following a report North Korea may be ready to stop its nuclear tests. According to a South Korean news agency, leader Kim Jong-Il told a Chinese envoy he has no plans to carry out more tests.

Protecting Baghdad from the outside, U.S. forces aim to keep insurgents from moving in.

CNN's Arwa Damon is with the troops.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN CORRESPONDENT (voice-over): The morning wakeup call comes early at this house. But who really needs a wake-up call when you sleep on the roof? there are no showers here, just whatever fits in your backpack, whatever you can do to soothe feet that will be pounded all day. It's a far cry from the relative luxury of Baghdad, just 14 miles away. These soldiers are well past being used to the sounds of war. This explosion at least was controlled.

A strange sound, a toddler crying, his legs weak from a calcium deficiency. The troops don't have much, but the company medic doles out what he can. This simple scene actually carries great significance for these troops. This man feels safe enough to come to the Americans for help. Even though he risks being seen by insurgents. It's one more Iraqi who may carry back the message that these men are here to help, and here to stay for a while. These soldiers, from the 10th Mountain Division, believe people back home have no idea what they go through. While America sleeps, they drag ditches, looking for wires that could trigger homemade bombs.

STAFF SGT. ANDREW WALLACE, U.S. ARMY: These canals, we run across, an area like this right here, would be great for concealment for a command wire. It's a real thin wire and in they run it through right here they could place a bomb on this road right here.

DAMON: Travel would be a lot quicker if the company could take the roads, but the insurgents routinely put bombs there, so the troops take to the stinking canals instead.

Before they arrived two weeks ago, U.S. commanders say this area was a sanctuary for well-financed insurgents of al Qaeda in Iraq.

This farmer says security is better since they got here, though he's puzzled why U.S. troops would try to jump a ditch when the dry road is only a few steps away.

(on camera): After patrolling for four hours, jumping across canals, walking through mud and now soaking wet, these troops are not even going to get a shower when they return back to their base.

(voice-over): Operating out here is tough, but, say commanders, vital because denying easy insurgent movement in this area helps protect Baghdad.

It's hard to keep a smile when you smell like a toilet, but for these troops, it's all just part of the mission.

Out here, success sometimes means taking the slippery slope.

Arwa Damon, CNN, near Yusafiya (ph) Iraq.

(END VIDEOTAPE)

(WEATHER REPORT)

COLLINS: Making waves on the great lakes -- probably not as warm there, of course. The Coast Guard, though, training with real ammo now. The government says it's vital to national security. But boaters just aren't on board.

CNN homeland security correspondent Jeanne Meserve explains.

(BEGIN VIDEOTAPE) JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: A battle rages on the Great Lakes. Not with machine guns, but about them. For more than 200 years, the Coast Guard has conducted gunnery exercises on water. After 9/11, it put machine guns on some of its small boats to help with homeland security. Hitting a target in this environment requires a lot of practice.

UNIDENTIFIED MALE: We have compensate for the boat going up and also the swells in front of you at your target.

MESERVE: So the Coast Guard wants 34 permanent live fire training zones on the Great Lakes. Each would be closed to boaters about ten hours a year while the Coast Guard shoots. But it has created such a ruckus the Coast Guard has had to cease firing.

Even in the lakeside community of Grand Haven, Michigan, known as Coast Guard City, USA, the zones are controversial. A public meeting on the issue drew more than 100 people.

UNIDENTIFIED MALE: I'm a salmon fisherman and I troll out there. And I'm out there all summer long and I really don't want to get hit with a stray bullet.

UNIDENTIFIED MALE: (INAUDIBLE) is firing weapons at position...

MESERVE: The Coast Guard notifies boaters by radio wherever it trains. It stops firing if any vessel strays too close. But then, there is spent ammunition. A study commissioned by the Coast Guard says it will not hurt the environment. But not everyone buys that.

JAMES CLIFT, MICHIGAN ENVIRONMENTAL COUNCIL: If you add up all the rounds -- and it's hundreds of thousands of rounds a year -- that adds up to 7,000 pounds of lead into the environment, where all of Michigan businesses put together discharge about 4,000 pounds of lead into our waterways.

MESERVE: However, the very loudest objections to the permanent firing zones come from the other side of the lakes -- Canada -- whose government is concerned about the environment and safety.

Mike Bradley, mayor of Sarnia, Ontario, says permanent training zones are part of an unjustified militarization of the U.S./Canada border.

MAYOR MIKE BRADLEY, SARNIA, ONTARIO: I think it really shows a contempt for what was at one point the longest unattended border in the world. We no longer are.

UNIDENTIFIED MALE: We can all sit around and pine for days gone by, but that's not going to defend American citizens from a threat.

MESERVE: The Coast Guard says bridges essential to U.S.-Canadian trade, power plants and other structures all need protection.

(on camera): The Coast Guard will not resume live fire exercises until the public's concerns have been heard and considered. But the suspension is having an impact.

REAR ADM. JOHN E. CROWLEY, JR., U.S. COAST GUARD: Today, we have Coast Guardsmen who are not fully prepared for all risks, all threats, all hazards, to be ready all the time.

MESERVE: Because they haven't been allowed to do this?

CROWLEY: They are not certified and trained today.

MESERVE (voice-over): The Coast Guard says the live fire exercises are a matter of national security. But for some citizens here, where there has never been a terrorist attack, that seems a distant concern.

Jeanne Meserve, CNN, Grand Haven, Michigan.

(END VIDEOTAPE)

HARRIS: Still to come, a neighbor accused of molesting a child -- this is a horrible story. The father allegedly lashes out. Now the question, was it all a horrible and deadly mistake?

COLLINS: A priest disappears, accused of sex abuse. His bishop back home may take the fall for it. The story coming up right here in the NEWSROOM.

(COMMERCIAL BREAK)

HARRIS: In Connecticut, a strange twists not a murder case. It involves this man, Jonathan Edington, a father accused of killing a neighbor. He thought the man molested his 2-year-old daughter. Police now say there's no evidence to support the allegation. Edington has pleaded not guilty in the case. An attorney says the victim's family plans to file a wrongful death lawsuit.

COLLINS: The priest is a accused of sexual abuse, but the bishop may face justice first.

CNN's Jason Carroll now has the story.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT, AMERICAN MORNING (voice over): Daniel Walsh was appointed bishop of California's Santa Rosa Diocese six years ago. In large part his job was to restore trust in a church community rocked by sexual abuse. Church leaders and parishioners put their faith in Walsh because he'd been outspoken about the church's zero tolerance policy.

DEIRDRE FRONTCZAK, SPOKESWOMAN, SANTA ROSA DIOCESE: He's taken that charge very seriously and he wants to be responsible.

CARROLL: But now Walsh is the subject of an investigation that could lead to the first indictment of a U.S. Catholic bishop for failing to report an abusive priest. Walsh says that after the priest admitted molesting three boys, he did not notify authorities immediately.

MICHAEL MEADOWS, ATTORNEY: He didn't follow his own internal guidelines, much less the laws, which is why he finds himself the subject of a criminal investigation.

CARROLL: Mike Meadows is an attorney, representing seven men in a civil suit filed last week against the diocese, and the offending priest, Father Francisco Ochoa. The plaintiffs say Ochoa sexually abused them when they were children. One of his alleged victims, who requested anonymity, says Ochoa started molesting him when he was a nine-year-old altar boy.

UNIDENTIFIED MALE: One day he kind of started touching me. He told me it's normal, you know, just don't tell anybody.

CARROLL: In a letter to parishioners Walsh said that Ochoa admitted to him, last April, that he recently sexually abused a 12- year-old boy, and two other boys a decade ago.

(On camera): Walsh immediately put Ochoa on administrative leave and barred him from serving as a priest. What Walsh says he didn't do immediately is call the authorities, which is required by California state law.

(Voice over): The diocese's own charter says a report should be made immediately. Bishop Walsh waited three days. The Sonoma County sheriff's office believes Father Ochoa fled during that time and is now in Mexico.

MEADOWS: What reason could there have been for not reporting this immediately? It's not like he has to conduct an investigation. Ochoa came to him and said I've been abusing these boys. What more did he need to know?

CARROLL: Bishop Walsh declined an interview. But in that letter to parishioners he apologized and explained, quote, "I did not wait in order to allow Reverend Ochoa time to escape. I waited from an excess of caution. The sheriff's office says its investigation found this case is worthy of district attorney reviews. The D.A.'s office declined to say whether it has reached a decision to indict. Walsh says he's prepared to face the consequences if he's criminally charged.

FRONTCZAK: People say the man-made a mistake. There was not a malicious intent. Perhaps prosecution is a bit harsh.

CARROLL: One man of the cloth has escaped justice for now. Another waits to see if he'll be judged in a place governed by facts, not faith. Jason Carroll, CNN, Santa Rosa, California.

(END VIDEOTAPE)

HARRIS; A treasure in the donation bin, a goodwill story next. An American masterpiece, you can see it next in the NEWSROOM.

(COMMERCIAL BREAK) HARRIS: How about this, a gesture of goodwill reveals a gold mine. An anonymous donor dropped this painting off at a goodwill store in Portland, Oregon. Turns out it's a 1923 water color by American Impressionist Frank Weston Benson. Now the Goodwill store is $165,000 richer. That's what the painting went for at auction.

(BEGIN VIDEO CLIP)

MARK SANTOS, SANTOS GALLERY OWNER: This happens to be a mixed media. It's watercolor, dry point, a little ink, a little oil is thrown in. And it's all put together, and it creates a beautiful look. Once you hear a name and you recognize that it's a quality artwork, people are interested and have that kind of money, they're on it.

(END VIDEO CLIP)

HARRIS: So the lingering question, did the donor know the value of the painting? No one seems to know.

(BUSINESS HEADLINES)

HARRIS: Well, we have a developing story we want to bring you the very latest information on. It is in the southern Iraqi city of Amara. T.J. Holmes is following the latest developments on this story from the NEWSROOM for us.

T.J., Good morning.

T.J. HOLMES, CNN CORRESPONDENT: Yes, guys, we're going to be following this one for quite some time probably today. We want to take you right to these pictures we have for you. But Amara is the location we're talking about here. You can see it's right there on the Iraq-Iran border. This is the Shiite dominated South, near the border there.

But fighting has broken out between police, Iraqi police and also the Mehdi Army. This is the name of a militia we've heard quite a bit in insurgent fighting throughout this war in Iraq. But this is the army that is loyal to the cleric Muqtada al Sadr, who wields a lot of power in the Shiite south. But what has happened here is that -- there are reports from hospital officials and also witnesses that this Mehdi Army has taken over, completely taken over the town of Amara.

Again, this is in the Shiite south. Two police stations, at least, have come under attack in the past couple of days. You see there some of the fighting. The fire, at least, and what's happening there. But have taken over now this city. But, again, the fighting at two police stations in the past couple of days. And now, according to witnesses and hospital officials, the Mehdi Army, this militia, has taken over the city.

At least 16 people, according to hospital officials, have been killed in fighting there in the past couple of days, as well as 90 people have been injured. You're just getting this video in, we're bringing it to you now. But this is going to be something we're going be following for the next several hours and probably next several days.

HARRIS: Well, T.J., stay with us on this because this is -- this is an important story because, Heidi and T.J., as you both know, there has been a lot of talk going on for, what, years now as to exactly what to do about these militias, and in particular this Mehdi Army that is operating in this predominantly Shiite area south of the city of Baghdad.

And one of the questions that we're going to be asking when we get Arwa Damon up is, you know, is this fighting, this new fighting that we're seeing in this new video -- and let's go back to that -- is this from an operation by the security forces to begin to take on the Mehdi Army? Or is this some other kind of skirmish that is going on that we still have yet to determine?

COLLINS: And particularly interesting, too, because just two months ago, which is not very long ago, the British forces handed over this city, this area, to the Iraqi police. So, as they try to defend themselves from attacks just like this, as the Shia militia here -- again, important to mention Muqtada al Sadr, which we haven't really heard a lot about him lately. But important to remind people exactly who he is. This is a very popular Shiite cleric who is in charge of, obviously, this Mehdi Army here. People have followed this man.

HARRIS: Yes.

COLLINS: And it is interesting to see that this is now turning out as it is. We see once again here at least 16 people killed and many, many more injured in fights just like that.

HARRIS: And the coalition -- T.J., you know this as well -- the coalition has wanted to go into this area and to root out these militias and has been tough with the government of Prime Minister Nouri al-Maliki to do something about the militias.

HOLMES: This is...

HARRIS: Yes, go ahead, T.J.

HOLMES: This is something they've been trying to work on it. And, again, we've been talking about this for some time now. And you mentioned Muqtada al Sadr. He just -- just a short time ago, just the other day, I believe it was, met with the prime minister of Iraq. And they've been all -- they've been for a while now trying to force some kind of compromise, trying to get this under control, trying to get it worked out. And it's unclear now if the Mehdi Army operating in this city of Amara is under his direction, so to speak, or exactly what happened here.

And this was apparently sparked by the killing of a chief of police of intelligence there in the Maysan province, sparked all this fighting. So it's unclear exactly who is in charge of this Mehdi Army, who they're taking their orders from.

HARRIS: Another reason why this is important, that meeting that you just mentioned, T.J., is because Nouri al-Maliki, as recently as a few days ago, in an interview with "USA Today," was asked about this question of cracking down on the Mehdi Army, on that militia that pretty much rules, governs, Amara, Sadr City and a few of the other cities that we're talking about this morning. And his response was, look, we are talking about 5 percent of the population of, say, Sadr City, of Amara, involved in these militias. And to go in with the major offensive into those cities would essentially destroy the city. And why would you destroy an entire city for 5 percent of the troublemakers?

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