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PAULA ZAHN NOW

Clinton and Obama Helped or Hurt By Iraq War Funding Votes?; New Iran Hostage Crisis Brewing?

Aired May 25, 2007 - 20:00   ET

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


KYRA PHILLIPS, CNN ANCHOR: And thanks for joining us. Paula is off.
Here's what we're bringing out in the open.

Tonight: Have Senators Hillary Clinton and Barack Obama hurt or helped their runs for the White House by voting no on the money for the war in Iraq?

Plus: Is Iran up to its old tricks again and taking Americans hostage?

And a shocking new trend in the war on drugs -- is there a secret indoor pot farm in your neighborhood?

There are new developments tonight in a story we have been following for months. Just a little bit ago, after visiting wounded U.S. troops at a military hospital, President Bush signed the compromise that provides another $100 billion for the wars in Iraq and Afghanistan.

Also tonight, Senators Hillary Clinton and Barack Obama are taking a lot of heat for voting against that war money. And the question that's out in the open is whether they have helped or crippled their campaigns.

Our search for answers begins with congressional correspondent Dana Bash.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): On the campaign trail in Iowa, Hillary Clinton was already defending her vote against funding troops in Iraq.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: The best thing we can do for our troops right now is to get them out of the middle of this sectarian civil war in Iraq.

(APPLAUSE)

BASH: So was her main Democratic opponent, Barack Obama.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: It is time to bring this war to a close. BASH: Both were reacting to the rapid-fire Republican criticism of their no-votes on the war funding bill. John McCain called the votes the "height of irresponsibility."

Mitt Romney said, Clinton and Obama's votes "serve as a glaring example of an unrealistic and inexperienced world view."

It's all political fallout from this late-night drama. Seventeen minutes into the war funding vote, nearly every senator had voted, but no sign of Hillary Clinton and Barack Obama, the two everyone was waiting for. Finally, Senator Obama entered the chamber.

UNIDENTIFIED MALE: Mr. Obama. Mr. Obama, no.

BASH: Fifty-nine seconds later, so did Senator Clinton.

UNIDENTIFIED MALE: Mrs. Clinton. Mrs. Clinton, no.

BASH: By voting against funding the war, both presidential candidates, for the first time, stood exactly where many Democratic primary voters want them. Cutting off funding is something both had vowed not to do.

(BEGIN VIDEO CLIP, JANUARY 20, 2007)

CLINTON: I am not prepared to vote to cut funding to American troops.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, APRIL 11, 2007)

OBAMA: Democrats aren't interested in playing chicken with the troops. And we're absolutely committed to making sure that the troops have the equipment they need.

(END VIDEO CLIP)

(END VIDEOTAPE)

BASH: So, both senators have clearly changed their positions on this issue, whether or not to use money for the troops in order to try to stop the war.

This is something that no doubt will help them with Democrats in the primary -- in the primary season. They're obviously staunchly anti-war. That's probably the main reason why these senators voted this way.

But the open question, Kyra, is how this is going to affect them in the general election. What they're both banking on is that opposition to the war -- public support for the war has -- has lowered so much, opposition has gone up so much, that it simply won't make a difference, whether they're Democrats, Republicans, or independents voting.

PHILLIPS: All right, Dana, stay right there.

I want to bring in another member of the best political team in television, our chief national correspondent, John King.

John, who are the winners and the losers here?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, Kyra, a crystal ball, you would need to say who are the winners in the long term. As Dana just noted, how this plays out in a general election remains to be seen, even whether Mrs. Clinton or Senator Obama would be on the ticket for the Democrats.

But the winners in the short term are the anti-war activists in the Democratic Party, who have essentially said, Iraq is the litmus test for us. You oppose the war, you get down in the middle of the road, if you have to, to stop President Bush from prosecuting this war. If you are not with, we will be against you.

They are the immediate winners. How it plays out in the long term, who knows? But no question about it, Senator Clinton and Obama are looking left, seeing the anti-war movement dominating the primary campaign, and they're paying attention.

PHILLIPS: Dana, this got really ugly really fast. What's this war of words really all about?

BASH: Really ugly really fast.

Well, it's -- it's obviously about the number-one political issue in the country now, and definitely into 2008.

But, Kyra, what was most interesting is that these aren't just a war of words, you know, between Democrats or between Republicans, because, remember, it's May 2007. All of these candidates still have to secure their nominations.

It was crossing party lines. We saw some really tough rhetoric from John McCain, attacking Barack Obama, Barack Obama attacking him right back. These are people who may not be facing each other at all in the general election. It's unclear.

But they are playing to their specific bases, if you will, especially John McCain and Mitt Romney on the Republican side, trying to make it clear to Republican -- to Republican primary voters that they're not going to stand for that, that they are tough when it comes to what they call the war on terrorism.

PHILLIPS: Now, there's this poll that was released last night. It records the number of Americans who are pessimistic about the war.

Take a look at this. Sixty-one percent of Americans are against the action in Iraq now. You look at Clinton, Obama, McCain -- these are the presidential hopefuls that so many people are following right now -- Clinton and Obama voting against this, McCain voting for it.

John, how is this going to play out? Could you see more flip- flopping, like Hillary Clinton?

KING: Well, there is no question that the Democratic candidates have decided that this is the sentiment of the country, and they are betting on the fact that this remains the sentiment of the country, staunchly opposed to the war in Iraq, not only Democrats. To get into the 60s, you have to have independents and Republicans also opposing the war now.

Senator McCain's campaign is essentially saying: Eat your peas, Americans. I know you don't want the troops there. I wish they weren't there either. But we broke it. We need to fix it, even if we have to send more troops.

That is Senator McCain's message right now. It is a very risky political message, but he says that has been his position all along, and he is going to be consistent.

If Senator McCain is the Republican nominee, and you have a Democrat who is staunchly opposed to the war and says, get out as soon as possible, there will be a very clear choice next November. And, if those poll numbers hold like that, the Democrats would be favored in the election.

PHILLIPS: John King, Dana Bash, thank you so much.

Senator Clinton's Iraq vote isn't the only thing that will have people talking. The list of gossipy tell-all books about her, well, they seem to be getting longer by the day.

Two of the newest are by respected journalists. And, as a result of their digging, there's a distinctive whiff of scandal in the air, and it's creating lots of buzz today.

So, what's inside the new Hillary books?

Here's Carol Costello.

(BEGIN VIDEOTAPE)

(CHEERING AND APPLAUSE)

CLINTON: Whoa!

CAROL COSTELLO, CNN CORRESPONDENT (voice-over): Hillary Clinton, whether she wins the Democratic nomination or not, is a political star. Love her or hate her, Clinton is the stuff bestsellers are made of.

There are -- count them -- three new books about Senator Clinton vying to make a splash: one, "Her Way: The Hopes and Ambitions of Hillary Rodham Clinton," by "New York Times" reporters Jeff Gerth and Don Van Natta; two, "The Extreme Makeover of Hillary (Rodham) Clinton" by Bay Buchanan; and, three, "A Woman in Charge: The Life of Hillary Rodham Clinton," written by famed Watergate reporter Carl Bernstein.

He calls Clinton of the most interesting figures in recent American history, and says he answer the question, what is her character?

Peter Baker is one of the few reporters to get his hands on Bernstein's book. Today, in "The Washington Post," he and a colleague write, the account is not unsympathetic, but includes some damning observations.

PETER BAKER, "THE WASHINGTON POST": Well, there are a lot of things in the book that jump out at you.

COSTELLO: Like Bernstein's assertion Bill Clinton wanted to divorce Hillary Clinton in 1989, because he was in love with another woman.

BAKER: When Bill Clinton is thinking about divorce back in this period prior to his presidency, he's consulting with other governors about what divorce meant to their careers politically.

COSTELLO: The Clinton camp wouldn't comment on specific allegations in the book, but calls Bernstein's and others "nothing more than cash for rehash."

Ultimately, there was no divorce. But, according to Bernstein's book, there were continuing problems for the Clintons. A source close to the book says both Clintons went to great lengths to keep the lid on his infidelities, even hiring lawyers to make sure women stayed quiet about the affairs, hoping Bill Clinton's run for president would change things.

BAKER: Running for office, running for the White House would be a good thing, because, you know, in the White House, surrounded by all of the press corps and the Secret Service and so forth, you know, and the majesty of the office, that these would, you know, discourage her husband from the kind of philandering that he had done in Arkansas.

COSTELLO: As we all know, it didn't.

Bernstein's book also quotes former associates, like Mark Fabiani, a former Clinton White House counsel. He defended the Clintons in the Whitewater scandal.

Fabiani is quoted as saying, "When I say there was a serious fear she would be indicted, I can't overstate that." He also said, Clinton was "so tortured by the way she had been treated, that she would do anything to get out of the situation."

In the meantime, the Clinton camp says, another book about the Clintons' personal life, adding, "Is it possible to be quoted yawning?"

(on camera): We did talk to a source close to Bernstein's book, who confirmed all of the information in "The Washington Post" story. The book itself will be sent to all journalists on Tuesday, and it will hit the bookstores in June.

Carol Costello, CNN, New York.

(END VIDEOTAPE)

PHILLIPS: Now let's turn to tonight's "Out in the Open" panel, Republican strategist Leslie Sanchez, also Tara Setmayer, communications director for Republican Congressman Dana Rohrabacher of California, and Keith Boykin, former Clinton White House aide and host of "BET"'s "My Two Cents."

Keith, I want to start with you.

Two books out. "The Washington Post"'s front-page story today describes Hillary like this: "a complicated, sometimes compromised figure, who tolerated Bill Clinton's brazen infidelity, pursued her policy and political goals with methodical drive, and occasionally skirted along the edge of truth along the way."

You worked in the Clinton White House. Is any of this correct about Hillary Clinton?

KEITH BOYKIN, HOST, "MY TWO CENTS": Well, you know, yes, she's ambitious. Yes, she's ambitious, just like most politicians are.

You know, the good news for Hillary Clinton, though, is that she's a known product. Everybody knows who she is. They know what her issues are.

PHILLIPS: Did she skirt the truth?

(LAUGHTER)

PHILLIPS: Did she skirt along the edge of the truth along the way?

BOYKIN: Well, I'm not saying yes to that, because, you know, politicians are always kind of manipulating the truth.

But Hillary Clinton is no different from any other politician. Like I said, the good news for her is that she's a known product. But the bad news for her is that I think she's being judged by a double standard, because she's a woman.

PHILLIPS: Wait a minute. You just said, though, she's not like -- she's like all the other politicians.

(CROSSTALK)

(LAUGHTER)

BOYKIN: Well, you know, I don't want to -- I don't want to overplay the hand.

(LAUGHTER)

BOYKIN: I'm not saying that she's lying. Of course she -- of course she's not lying.

But, you know, all politicians are masters at spin. And I don't think she's any different from that. The problem is, because she's a woman, she's judged differently. They try to say that she's manipulative, that she's methodical, all these things that, if a man does it, nobody complains about it.

PHILLIPS: Tara, Tara, what do you...

(CROSSTALK)

PHILLIPS: Tara, I mean, here's a woman. A lot of people wonder, OK, her husband was sleeping with the intern, or sexual relations, in the White House. She had political motive. She knew exactly what she was doing, because she had plans to run for president or run for the Senate.

TARA SETMAYER, COMMUNICATIONS DIRECTORS FOR CONGRESSMAN DANA ROHRABACHER: Well, I mean, it's obvious.

And I think that it's disturbing to me that we should just accept the fact that, well, all politicians do it; they're all liars; so, let's not hold Hillary Clinton to a high standard.

(LAUGHTER)

SETMAYER: She's supposed -- she's running for the highest office in the world.

PHILLIPS: Right.

SETMAYER: OK? Leader of the free world. We should not excuse away her indiscretions, her sins, the fact that she's not honest. These are all qualities that I would hope the American people would use as -- to consider their president of the United States.

(CROSSTALK)

SETMAYER: Now, the argument for -- that she's a woman, and this is -- the only reason why she's being attacked is because she's a woman, I think, for certain elements, that these -- that the books like this will create a dialogue again about, is America really ready for a woman president?

Now -- but I don't it's fair to say she's being attacked, because, Hillary Clinton, if anyone, you have to admire her ability to -- to be tough and assert herself. And -- and, as a woman, if anyone could do it, it would be her. But I don't think it's fair to now claim the victim role.

I don't -- I think that's just an excuse and it's a way to deflect from some of her larger indiscretions, which are troubling.

(CROSSTALK)

PHILLIPS: Leslie, three new books -- you know, three books out about this woman now. Does this -- is this proving that, hey, the Republicans are worried about this woman?

(LAUGHTER)

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: It wasn't Republicans that wrote all of these books. I mean, that would be the first thing I would say.

And, if she's upset that these types of books come out, she had to be upset every day for the last 12 years. This is nothing new. And the reason there have -- has been a decade of investigation of her is, no one knows which personality is real.

And I have to say, I like to hear my counterpart, you know, the euphemism that she's ambitious. I would call it much more conniving, contrived.

I mean, people are trying to say, is this somebody who really relishes her role as a housewife and a -- when she takes down housewives that bake recipes, and, then, the next minute, she's sharing recipes with them?

Does she want to defend her husband or does she want to control him? Does she want to, you know, be known by her maiden name, or does she want to relinquish that?

I don't really think -- and -- and, most importantly, her Iraq vote -- she supports Iraq, the authorization of it. And, then, just this week, she decides she wants to defund the troops and abandon our soldiers.

(CROSSTALK)

SANCHEZ: She has to make up who she is.

PHILLIPS: And, on that note...

(CROSSTALK)

PHILLIPS: ... now, also, there's a lot of investigative issues that are coming out, too.

One of the books, Keith, mentions that Hillary Clinton didn't even read the national intelligence estimate about Iraq's weapons program before voting to authorize the Iraq war in 2002.

If that is true, do you want a presidential candidate who's not doing her homework?

BOYKIN: Well, George Bush -- I hate to use the -- the other- candidates-do-the-same-thing standard, but George Bush didn't pay attention to the -- the August -- August 2001 warning about Osama bin Laden about to attack the United States.

(CROSSTALK)

BOYKIN: I mean, for God's sake, this is all about political grandstanding on the part of the Republicans.

And I know the Republicans didn't write the books, of course.

(LAUGHTER)

BOYKIN: But the Republicans are behind this, just like everyone else, because they want to use a double standard.

SANCHEZ: The Republicans are behind Carl Bernstein.

(CROSSTALK)

BOYKIN: It's about a double standard for women vs. -- a woman candidate vs. a male candidate. I hate to be the guy who has to be the one to say that.

(CROSSTALK)

PHILLIPS: He's got three women here.

(CROSSTALK)

BOYKIN: I know.

(CROSSTALK)

(LAUGHTER)

PHILLIPS: Look, I want all of you to -- I want all of you to stay right where you are. We're going keep talking about this. Obviously, we have got a lot more to talk about it.

As well, we have an exclusive and deeply disturbing story to bring out into the open tonight, in addition to this conversation. This, however, concerns an American woman being held in one of Iran's most notorious prisons.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (through translator): There was a dirty carpet on the floor, no pillow, and there were only two blankets provided. All the measures that have been taken against her are illegal.

(END VIDEO CLIP)

PHILLIPS: And she isn't the only one.

Next: Why is Iran jailing Americans? Are they really hostages?

Also: the results of a special CNN investigation, profits from slot machines on military bases, are they worth the risk of addicting even one soldier?

And guess what's growing inside some quiet suburban homes? High- tech pot farms. How many are in your neighborhood?

(COMMERCIAL BREAK) PHILLIPS: Another story that's out in the open tonight: a black businessman who says Latinos are better workers than blacks. Does that make him a racist? We will have that a little later.

A lot of Americans, including President Bush, think of Iran as a major part of the axis of evil. And something that's out in the open tonight reinforces that view.

Iran is holding some American citizens against their will. And the numbers, well, they keep growing. Is this the start of a new hostage crisis?

We asked our Aneesh Raman, who is the only Western network correspondent in Tehran, to find out.

(BEGIN VIDEOTAPE)

ANEESH RAMAN, CNN CORRESPONDENT: Kyra, his name is Ali Shakeri, a California businessman and, according to Human Rights Watch, the latest American to go missing in Iran.

(voice-over): In what's become a disturbing trend, at least five Americans are now allegedly being held in Iran.

Robert Levinson, missing since early March, is feared to be in Iranian custody, though the government here denies it.

Journalist Parnaz Azima had her passport taken in January and now cannot leave the country.

Two other Americans, including Kian Tajbakhsh, have reportedly been detained.

And then there is Haleh Esfandiari, recently imprisoned on suspicion of working to undermine the regime.

Few people in Iran will talk to us about her.

But Sadegh Zibakalam, a professor at Tehran University, did.

SADEGH ZIBAKALAM, PROFESSOR, TEHRAN UNIVERSITY: I really can't understand, I cannot visualize, I cannot imagine how on earth she could have been described as someone that was involved in some plot, in some conspiracy against the Islamic state.

RAMAN: Zibakalam, who met Esfandiari twice at academic conferences, says, she didn't just like Iran; she loved it. But, now, in Iran, Esfandiari is being interrogated and is being represented by Nobel Peace laureate and Iranian human rights lawyer Shirin Ebadi, who herself has been jailed in Iran.

SHIRIN EBADI, NOBEL PEACE LAUREATE (through translator): I have been imprisoned in that cell. So have my two other colleagues who are representing Haleh. This is a small room with cement walls and no windows. There is a fluorescent light that's on 24 hours. RAMAN: The arrests are, analysts suggest, part of something bigger. It was here in Iraq in January that five Iranians were taken into U.S. military custody. The U.S. calls them nationals and claims they came to foment violence.

Iran, though, says they are diplomats and is demanding their release. The detention of Americans, Zibakalam suggests, is meant to send this message to the U. S.

ZIBAKALAM: You haven't charged them. You haven't said what they were against. You haven't done -- you haven't said anything that -- what was the wrong thing that they were doing? You're saying that you are investigating, you are investigating, you are investigating.

RAMAN: But caught in the middle is at least one person who was trying to bring the two countries together. That, says Zibakalam, is what Esfandiari wants.

ZIBAKALAM: She was somehow sympathetic towards the Islamic (INAUDIBLE), saying that, oh, well, we have these radicals.

We have the same radicals back in Washington. But there are so many moderate, so many well-educated Iranians within the Islamic regime, and we must hope.

RAMAN: But, as Esfandiari sits in prison, such hope may be now fading away.

(on camera): The U.S. and Iran are set to talk next week in Iraq, but both sides so far say they do not plan to raise this issue -- Kyra.

(END VIDEOTAPE)

PHILLIPS: Aneesh Raman in Tehran.

Now I want to turn to a friend of Haleh Esfandiari, one of the American women now being held in Iran. Henri Barkey has known her for more than a decade, and is co-chair of the committee that is trying to win her freedom.

Henri, you talk about Haleh's husband every day. When was the last time that the family actually heard from her? And what did she tell them?

HENRI BARKEY, FRIEND OF U.S. WOMAN DETAINED IN IRAN: Well, her husband hasn't heard from her since she -- she was put into -- in prison. The only person who has heard from her is her 93-year-old mother, who lives in Tehran.

And, even then, the phone calls are extremely short. I mean, to give you an example, she called her mother yesterday, and the phone call was less than a minute. She didn't even have time to -- literally, to say anything.

So, we don't really know her condition. She -- yesterday, apparently, even in that less-than-one-minute phone call, her mother thought that she was quite despondent.

So, we -- her husband hasn't heard anything. And we have only very tenuous information on her.

PHILLIPS: Well, Henri, he wrote an article that was -- came out in "The L.A. Times."

And it says: "I have every reason to assume the worst, that she is subject to blindfolding, solitary confinement, and harsh, even brutal, interrogation, calculated to extract a false confession."

Why is her husband assuming the worst?

BARKEY: Because this what they have done in the past.

I mean, this not the first time they have tried to go after intellectuals. And they want intellectuals to essentially fess up that they have been working for -- to the -- for the overthrow of the Iranian government.

And this essentially helps build up this paranoia the Iranian regime has about the rest of the world, specifically the United States, trying to overthrow the regime. I mean, really, this is really about intimidating anybody who does any work on Iran. It is about intimidating -- intimidating institutions like the Wilson Center, intimidating scholars, dual nationals, like Haleh, who are both Iranian and American, to work on Iran.

PHILLIPS: And -- and you mention that Haleh, she is a scholar. Did she write anything, lecture about anything, become an activist in any way that might have triggered the Iranian -- Iranian government to -- to hold her there?

BARKEY: Absolutely not.

I mean, Haleh's job at the Wilson Center was twofold. She was a researcher, an academic, and she wrote books, mostly on the rights of women in the Middle East as a whole, not just Iran. And, as also the head of the Middle East program at the Wilson Center, her job was to do programming.

She invited people from different parts of the Middle East to give talks. Any subject in the Middle East, from the Abkhazia conflict, to Iran, to, certainly, the war in Iraq was topics that were discussed and seminars in big conferences, et cetera.

I mean, I, before joining the Wilson Center this semester, on leave, I came and gave talks there. So...

PHILLIPS: Do you think you're going to be able to get her released?

BARKEY: Look, I hope we will be able to. I mean, we're trying very hard. And I hope that friendly governments in Europe and elsewhere in the Middle East will tell the Iranians that a 67-year-old grandmother is not about to overthrow the Iranian regime. The Iranian regime should feel a little bit more self-confident than worry about a 67-year-old grandmother.

PHILLIPS: Henri Barkey, we -- we will follow the case. Thank you.

BARKEY: Thank you.

PHILLIPS: We're going bring a big gamble out in the open next.

Did you know military posts have slot machines, and that they can lead to tragedy?

(BEGIN VIDEO CLIP)

CARRIE WALSH, AARON WALSH'S WIDOW: The military has this culture of -- of taking care of their own. But it seems like, when it comes to this, they just -- you know, they profited from his addiction, and then threw him away.

(END VIDEO CLIP)

PHILLIPS: Out in the open next: the story of a soldier who gambled away his family, his career, and, ultimately, his life.

And later: a man who says he would gladly hire more blacks, but Latinos work harder. Is he right or racist?

(COMMERCIAL BREAK)

PHILLIPS: Out in the open tonight, something you have probably never heard about: Soldiers who are risking their lives can gamble and lose everything, without ever leaving their military base.

The Pentagon is running a casino operation right on overseas bases, and raking in more than $100 million a year.

In a special CNN investigation, Drew Griffin shows us the tragedy of an Army helicopter pilot trapped by a gambling addiction that turned deadly.

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN CORRESPONDENT (voice over): She never saw it coming. Carrie Walsh's husband was an Apache helicopter pilot for the Army. But, years ago, Aaron Walsh started playing the slot machines on military posts. He became a gambling addict. At 34, with his life in a tailspin, Aaron Walsh walked into the Maine woods, put a gun to his head, and killed himself.

CARRIE WALSH, AARON WALSH'S WIDOW: The military has this culture of -- of taking care of their own. But it seems like, when it comes to this, they just -- you know, they profited from his addiction, and then threw him away.

GRIFFIN: The military has operated slot machines at overseas posts since the 1980s. The Army alone has 3,000 of them. And they bring $130 million in revenue every year. CNN could not get updated figures from the Air Force or Navy, which run their own gaming operations. The Department of Defense would not allow CNN to take any pictures of them, but this photo appeared in "Stars and Stripes" just last year.

After years of study, University of Illinois Business professor John Kindt says the profits on these machines are huge.

JOHN KINDT, PROFESSOR, UNIVERSITY OF ILLINOIS SCHOOL OF BUSINESS: It's all about the buck. And -- and, in our military, it should be about service to our country. It shouldn't be about exploiting our service personnel, and putting their families and their children at risk.

GRIFFIN (on camera): The Pentagon's response to those charges have been by e-mail and phone calls, no interviews. But we were told the Department of Defense needs the revenue from gambling operations to finance it's overseas morale, welfare and recreation programs.

(voice-over): The slot machine money goes to things like bowling alleys and concerts, even to attract businesses, like Starbucks, to overseas posts, things that make living overseas more enjoyable for members of the military.

Undersecretary of Defense Leslye Arsht, in a statement to CNN, said: "Gambling on bases and posts provides a controlled alternative to unmonitored post-station gambling venues, and offers a higher payment percentage, making it more entertainment oriented than that found at typical casinos."

Kindt says the military's gambling operations were reviewed by Congress seven years ago, what Congress got, he said, was this --

PROF. JOHN KINDT, UNIV. OF ILLINOIS: A 13-page report, a real whitewash by the military. Now why would they be doing that? It's because there is something that they don't want the public to know, there's something they don't want Congress to know.

GRIFFIN: The report dismissed the notion that the slot machines fed gambling addictions among the troops. The military did run an addictive gambler's treatment program at Camp Pendleton, and for a time Aaron Walsh was sent there, but he went AWOL.

"The New York Times" profiled Aaron Walsh in the fall of 2005, he was alive, addicted to gambling, and homeless in Las Vegas. A few months after being forced to leave the military because of his addiction problems, Walsh turned up in Maine.

WALSH: Yes, he was really, really sad. He knew that he had lost everything, and that, you know, he'd messed up. And he believed that he was going to get better.

GRIFFIN (on camera): And you thought he was going to get better?

WALSH: Yeah. GRIFFIN: But even rural Maine couldn't protect Aaron Walsh from his own addiction. Just an hour north, here in Bangor, Maine was opening its first casino, the Hollywood Slots. And it's here, Carrie Walsh says, her husband would place his last bet, the one on his life.

WALSH: I think he had been doing really well staying away from it, and then I think that he went and had like a gambling binge, and then realized what he had done, and decided he wasn't ever going to get better.

GRIFFIN: Earlier this year, the Pentagon shut down its program at Camp Pendleton, the only in-patient facility for gambling addiction, leaving soldiers like Aaron Walsh to fend for themselves. Drew Griffin, CNN, Bangor, Maine.

(END VIDEOTAPE)

PHILLIPS: Tonight we're going to bring a black businessman's complaint out in the open. He says he would gladly hire more black workers, but there's a problem.

UNIDENTIFIED MALE: I just think it just became a lack of discipline.

UNIDENTIFIED MALE: Weren't as dedicated?

UNIDENTIFIED MALE: No, they weren't as dedicated.

PHILLIPS: Do Latinos really work harder than blacks, or is that pure racism? We'll debate it next.

Look at this, drug dealers are buying nice suburban homes and turning them into secret high-tech pot farms. Stay with it's for a story you'll want to see because your neighborhood may be next.

And you won't want to miss tonight's "Larry King Live" joining him exclusively tonight are "American Idol" winner Jordin Sparks, runner-up Blake Lewis, Sanjaya, and more.

(COMMERCIAL BREAK)

PHILLIPS: The next story we're bringing out in the open raises serious questions about racism and jobs. You're about to meet a businessman who admits he hires almost no blacks. In fact, all but a few of his workers are Latino. Now that may be surprising to many of you. But here's something that is surprising, the businessman happens to be black. Here's Dan Lothian.

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN CORRESPONDENT (voice over): Nikita Floyd --

NIKITA FLOYD, LANDSCAPE BUSINESS OWNER: All of these stone walls I built as well.

LOTHIAN: Started his Maryland landscaping business -- FLOYD: I'm thinking about doing all knockout roses across here.

FLOYD: -- with a mower, a rake, and a dream to recruit and hire black workers.

(on camera): When you first started, when Floyd first started in the late '80s, you had a lot of blacks who worked for your company, right?

FLOYD: Yes, sir.

LOTHIAN: And you no longer have a lot of blacks working for your company. What happened?

FLOYD: I just think -- it just became a lack of discipline.

LOTHIAN: Weren't as dedicated?

FLOYD: No, they weren't as dedicated.

LOTHIAN (voice over): Sharp criticism of the very people he had hoped would be the backbone of his company.

FLOYD: Hey, Santos --

But my if my team is not cooperating with me, if my team calls in, if my team have continuous excuses or reasons why they can't come to work, no project can get done.

LOTHIAN: That's what you were facing?

FLOYD: Yes. Yes.

LOTHIAN: So this black business owner, doesn't have a single black worker on any of his projects.

FLOYD: Sometimes hey, I do get a little lonely, I mean, I don't speak Spanish.

LOTHIAN: When blacks faded off the payroll, they were replaced by Latinos.

He says they are a readily available and dependable labor pool. About 40 immigrants from El Salvador now work for him during peak summer months.

FLOYD: They buy into the American dream and they just really come for a genuine purpose.

LOTHIAN (on camera): To work?

FLOYD: Yeah, to work. If one person won't show up, and another person will, eventually you're going to select that person.

Tell Santos to come here a minute.

LOTHIAN: Santos Medrano has been Floyd's right-hand man for nearly a dozen years, in what is now a $2.5 million a year business.

SANTOS MEDRANOS, LANDSCAPE FOREMAN: We are hard workers. We came to America, you know, to work. You know, make life more easy.

LOTHIAN: Floyd says he pays his Latino workers more than the minimum wage and offers them incentives.

(on camera): Would you hire blacks if they wanted a job?

FLOYD: Of course, yes. I mean, anybody who wants to work.

LOTHIAN: Do black young people out there not want to do this work?

FLOYD: For the most part.

LOTHIAN (voice over): His strong words about the work ethic of blacks he has employed is aimed, he says, at teaching discipline and motivating the next generation.

FLOYD: Everybody can't be a rapper or a basketball player. I understood why Oprah moved her school to Africa. Because of the kids, they just don't have the right zeal or the right attitude.

LOTHIAN: Floyd hopes that will change. And that blacks now missing on the landscape will return to his payroll, dedicated like these crews.

(On camera): To the African-American community, what do you have to say?

FLOYD: It's not where you start, it's where you finish.

LOTHIAN: Dan Lothian, CNN, Temple Hills, Maryland.

(END VIDEOTAPE)

PHILLIPS: Back to our out in the open panel. Leslie Sanchez, Tara Setmayer and Keith Boykin.

Keith, I want to start with you. You're a black business owner as well. Do blacks have a bad work ethic, like Nikita Floyd is saying?

KEITH BOYKIN, HOST, BET'S "MY TWO CENTS": Some people do, some people don't. You can't make a generalization as this guy is doing.

The problem is when people go and look for a job, they want to be judged based on who they are as an individual. Not based on who the last person was of their race, or their gender, or whatever. What he's doing is wrong. It's clearly racist on his part, I think.

PHILLIPS: Tara, your father owns a landscaping business. Does he hire blacks or Hispanics?

TARA SETMAYER, COMM. DIR. FOR REP. DANA ROHRBACHER: He hires the people who are most qualified and legal to work in this country. I think that the -- this is an interesting discussion. Is this gentleman going to have to go for sensitivity training now because of what he's saying about the work ethic for blacks? It's a double standard in that area.

But actually, in our case, we have a homeless program. And we try to give jobs to men who are struggling with substance abuse, and to get their lives back on track. And we give them jobs because my step father is a man of integrity, he would rather hire legal citizens that are willing to work as opposed to illegal immigrants, which is a different issue, not what we're focusing on here. But, you know, that's who he's going to give the jobs to.

But the work ethic issue I think strikes to the heart of a certain low level of expectation that the black community has accepted for so long, which is now manifesting into a problem, where we can't find individuals -- you have people who have feelings like this black business owner. It's good for him, but he's been this successful, but this is very indicative of a greater problem in the black community that we really need to address. And that's a low level of expectation.

PHILLIPS: All right, let's talk about that in a second.

But Leslie, you're Hispanic. I know your father picked cotton, right? You said you cleaned houses. Is there something different about the Latino work ethic than the black work ethic?

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: I wouldn't say that. I mean you're talking about a stereotype, is a stereotype, is a stereotype. I can find African-Americans, Asian-Americans that work hard, Hispanic-Americans. The bigger issue that this -- these are the immigrant population you're talking about. And they've always come here to live the American dream. And in this case the latest chapter is Hispanics.

Do Hispanics work hard? Hispanics that I know, yes. But look at what is a desirable job. If you come from a country where there's no stable employment, you don't get consistent pay. These folks are making $10 an hour, plus additional perks, that's a very high value job. And for any one of those workers he has, that steps out, there's 20 other people, probably immigrants, waiting to get that job. And that may not be an incentive to someone who always thought there's opportunity in this country.

BOYKIN: Leslie makes an excellent point, too, because the fact you're play paying somebody just over the minimum wage, and don't give them benefits, which was the case when this guy first started offering these jobs to blacks -- who would want to take a job like that, where you don't get a lot of money and you don't get a lot of benefits? So there's a lot of disincentives for people to take these jobs.

We have to be careful about the language we're trying to use. No, I'm not trying to create the thought police out there. But when Vicente Fox, the Mexican president, last year said Mexicans were doing the jobs blacks didn't want to do, he got into a lot of criticism because he was making a stereotypical generalization. And the most important thing we have to learn about this, is not to stereotype. People have the right to be judged on their individual merits.

PHILLIPS: Sure, Tara, though, brings up the point about an issue, though, in the black community, you went to Harvard, you went to Dartmouth. You knew immediately what you wanted to do. You wanted a good education, you're very successful. So, Nikita Floyd is saying, no, the black workers just don't have that work ethic. They don't think like that. I mean, how is that make you -- why are you different from -- ?

BOYKIN: I have hired black workers who do have that work ethic. And of course, there are people out there who have that work ethic. I know people because I've worked with them. Because he hasn't had that experience, I'm sad because that's not the representation of everyone out there. And we need to be careful not to make generalizations.

(CROSS TALK)

SETMAYER I don't think it's fair to call him a racist, or say he's betraying his own.

This is not about black or white, it's about green. It's about the bottom line. He's a capitalist, we're not a socialist country here. If these people aren't ones who are offering the most bang for the buck then he is turning to those who will. That's why he's a successful business owner. I think the discussion, the premise of the discussion is a -- is not fair.

(CROSS TALK)

PHILLIPS: Larry King awaits us. I'm sorry. Tara Setmayer, Keith Boykin, Leslie Sanchez, a wonderful discussion. Always great to see you guys.

"Larry King Live" is coming up in just a few minutes.

Larry, who is going to be with you tonight?

LARRY KING, HOST, LARRY KING LIVE: Kyra we have coming up, we've got the new "American Idol" just crowned on Wednesday. Here with us tonight, Jordin Sparks, plus, runner up Blake Lewis and Sanjaya -- and the eight other finalists, together again. They're going to tell-all, primetime exclusive at the top of the hour on "Larry King Live". Going to be a lot of fun, Kyra.

PHILLIPS: Now, you were dancing with the stars. Are you going to sing with the American idols?

KING: No.

PHILLIPS: All right, Larry, we'll see you at 9:00. Darn it.

KING: Not my speed.

PHILLIPS: See you in a little bit.

You won't believe what's going on inside some very nice suburban homes.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Every inch of the house, of the living quarters had been converted into a basically a marijuana grow.

(END VIDEO CLIP)

PHILLIPS: That's right, he said marijuana. Could there be a secret multi-million dollar pot house just down the street from you?

(COMMERCIAL BREAK)

PHILLIPS: A shocking new growth industry is flourishing in suburbs from California to Florida. And tonight we're bringing it out in the open. You may find this hard to believe but authorities now say they're seeing pot farms moving indoors and into America's suburbs in a big way.

That means it's possible that a house may be in your neighborhood and right next door. It's part of a multi-million dollar marijuana industry. Ted Rowlands investigates suburbs going to pot.

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT (voice over): From the outside there doesn't seem to be anything unusual about this house, or this one. Neighbors had no idea.

UNIDENTIFIED FEMALE: It's shocking actually.

ROWLANDS: These and dozens of other suburban homes, police say, were sophisticated, secret indoor pot farms.

CAPT. DENNIS WERNER, LOS ANGELES COUNTY POLICE: There could literally be hundreds more of these in unsuspecting neighborhoods.

ROWLANDS: Los Angeles County Sheriff's Captain Dennis Werner says criminals are moving the operations from the field, inside, where they can control the environment. Instead of just one annual harvest outside, they can now get up to six, plus the potency and, therefore, price, is much higher with indoor crops like these.

In fact, believe it or not, this house was set up to generate millions a year in profits.

WERNER: Every inch of the house, of the living quarters, had been converted into basically marijuana grow.

ROWLANDS: Walls were knocked down and replaced with timed lighting and water systems, a ventilation system put in, even the electricity into the home had been bypassed to steal power and hide usage levels that could raise suspicion.

WERNER: They removed the drywall below the meter, and they tapped into the main electrical lines. ROWLANDS: And 2,100 plants were found growing in this house, each, according to investigators, could easily produce a pound of high-grade marijuana annually. That means this house alone could potentially generate more than $5 million of pot a year.

FEMALE SINGER: Little boxes --

ROWLANDS: Growing marijuana in suburbia is nothing new. It's the premise of the quirky Showtime drama "Weeds" where a housewife grows and deals pot.

UNIDENTIFIED FEMALE: I'm just getting started.

SARA POLEN, SPECIAL AGENT, DEA: We've seen them in Michigan, New York City, down in Florida, so really it is sort of across the board.

ROWLANDS: DEA Special Agent Sarah Polen says a rise in suburban pot houses may be tied to increased border security, forcing operations originally in Mexico and Canada to move to the United States. She also says quiet, relatively crime-free neighborhoods are perfect for organized crime rings to hide from law enforcement and from other criminals.

(on camera): These are expensive homes. Why do it here?

POLEN: What we're seeing is that typically when the individuals purchase these homes, they are purchasing them with no money down. These are typically newer neighborhoods, where a lot of neighbors don't know one another.

ROWLANDS: Most pot house bust busts are from tips or fires caused by makeshift wiring. Investigators say once they have one house it leads them to others. In northern California, federal investigators used real estate records and other documents to uncover a string of about 50 pot houses, tied to an Asian crime organization.

UNIDENTIFIED MALE: We heard a lot of drilling go on. They painted the windows in the garage and stuff, you know. They were never here.

ROWLANDS: Investigators say they suspect hundreds, if not thousands of suburban homes are currently being used to grow pot, bringing in millions of dollars of revenue for drug dealers, and a new element of crime to suburbia. Ted Rowlands, CNN, Los Angeles.

(END VIDEOTAPE)

PHILLIPS: And one more thing, indoor pot farmers often use tons of liquid fertilizer, polluting suburban homes with dangerous chemicals.

Homes going to pot aren't the only problem in the U.S. housing industry. Out in the open, next in our "Biz Break", some bad news about home prices, and how they're selling.

(COMMERCIAL BREAK) PHILLIPS: Time to take a quick "Biz Break". On Wall Street, the Dow gained 66 points. Nasdaq is up 19, S&P rose 8. Oil prices also rose by a dollar to settle at $65.20. Dealers say the increase is linked to fears about low gas supplies in the U.S. and tensions now with Iran.

The National Association of Realtors says sales of existing homes fell more than expected last month to the slowest pace in four years. In addition, the supply of homes for sale surged in April to a record total of more than 4 million.

More troubling news about the diabetes drug Avandia. Today the FDA said it's preliminary research shows the drug may increase the risk of heart attacks. The Cleveland Clinic study, released Monday, also showed similar findings.

Well, for most people Memorial Day weekend means cookouts, an down time, but it's also a day to honor the men and women in our Armed Forces. Here's something you can do to help support wounded service members and their families.

The Fisher House Foundation has set up homes around the country where the families of our wounded troops can stay while their loved ones are getting specialized treatment.

To help these military families, with the transportation costs by donating your frequent flyer miles to fisherhouse.org. If you turn them into hero miles this weekend, participating airlines will match your contribution.

We're just minutes away from a "Larry King Live" primetime exclusive. Tonight Larry is joined by the new "American Idol" winner Jordan Sparks and runner up Blake Lewis, plus Sanjaya, Lakisha, and Melinda Doolittle, and more finalists. All at the top of the hour.

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

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