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Blackwater Immunity?; Tropical Storm Watch; Gap & Sweatshops; A Safer Iraq?

Aired October 30, 2007 - 10:00   ET

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

T.J. HOLMES, CNN ANCHOR: Well, good morning to you all. I'm T.J. Holmes sitting in now for Heidi Collins and Tony Harris. Stay informed all day here in the CNN NEWSROOM. Here's what's on the rundown for this Tuesday, October 30th.
First, a child dies from a staph infection. Is the hospital that released him to blame? Happening this hour, the boy's mother reveals what she's going to do now.

And also, they fought to stay alive. Now they're fighting back tears. Survivors from a beach house fire express their grief.

And, is this a joke? A congressman wants you to pay for a mule museum. We are keeping them honest and you are in the CNN NEWSROOM.

Well, new controversy this morning over Blackwater bodyguards in Iraq. Iraq says the U.S. contractors gunned down civilians in cold blood. Allegations Blackwater denies. Today CNN has learned that the State Department has promised limited immunity and that is stirring outrage. CNN's State Department correspondent Zain Verjee keeping them honest here.

And, Zain, who granted this so-called immunity?

ZAIN VERJEE, CNN CORRESPONDENT: Well, T.J., according to U.S. officials, the State Department's diplomatic security investigators granted the immunity. And diplomatic security is kind of like the police. They do protection, investigation, law enforcement. That's the kind of arm they are operating from the State Department.

The limited use immunity legally means that basically they promised Blackwater guards that they would not be criminally charged for anything they said as long as their statements were true. Now it's not really clear when it was done or how it was explained to the guards.

The State Department is really fight back hard here. A senior State Department official, who is not authorized to speak about this on the record, says that what happened was not immunity. Diplomatic security, the official says, does not have that right or ability. They have not taken any actions that will inhibit prosecutors. The official added, too, that anyone who breaks rules has got to be held accountable and that this is a gross distortion to say that anyone at the State Department is trying to shield Blackwater.

T.J. HOLMES: All right. And, Zain, is it clear here what authority the State Department does have to grant this kind of immunity?

VERJEE: Well, legally, the State Department's diplomatic security doesn't have the power or the authority to make decisions like that. That's something that's usually done in consultation with federal prosecutors. And the situation right now will be in the hands of the Justice Department no matter what the State Department is saying they will be doing the investigation and the FBI will be looking into it, as well.

U.S. officials, too, have said that this immunity deal, if indeed that's what it is, does not necessarily mean that guards will never be prosecuted. But what it does do is that it really complicates the efforts to bring criminal charges in the case.

HOLMES: All right. And does the secretary of state, does she have to get involved in something like this, Condoleezza Rice? Does she have to sign off on it?

VERJEE: Well, the State Department spokesman, Sean McCormack, says that whatever arrangements were made were not sanctioned by the senior management of the State Department. So it really doesn't appear that Secretary Rice signed off or was aware of this.

Another spokesman added, though, that working level diplomatic security folks on the ground pretty much follow the procedures they had to and they would have had to have been cleared by Washington. And the official added, too, that Secretary Rice isn't informed of every single detail.

T.J.

HOLMES: All right. State Department correspondent Zain Verjee.

Zain, thank you so much.

Want to take a closer look now at Blackwater USA. The North Carolina-based contractor has about 1,000 armed men in Iraq. They performed duties once reserved for soldiers, such as guarding convoys, protecting officials. Since 2001, Blackwater has won more than a billion dollars in contracts from the U.S. government. Contractors can make more than $30,000 in a single month.

Well, happening right now, the family of the 12-year-old boy whose death is blamed on the MRSA staph infection taking the first step towards suing the hospital that released him. You're taking a look here at a press conference we're expecting to happen at any moment here now. Omar Rivera died earlier this month, two days after a New York hospital gave him allergy medicine and sent him home. CNN's Allan Chernoff at this news conference right now. We'll hear from him shortly after this gets underway. Expecting to hear from the family of the victim.

Well, frantic 911 calls from witnesses to a tragedy. This morning we're hearing from people who saw that North Carolina beach house on fire and tried to save lives. Take a listen to this.

(BEGIN VIDEO CLIP)

DISPATCHER: Brunswick County 911.

CALLER: Yes, ma'am. There's a fire.

DISPATCHER: Yes, sir. Are you the one that I talked to?

CALLER: Yes, ma'am.

DISPATCHER: You said it in Scotland, right?

CALLER: Number one, Scotland Street.

DISPATCHER: Yes, we've got help on the way, sir. You said that there were people inside the house?

CALLER: Yes, ma'am. That is correct.

DISPATCHER: Are they still inside?

CALLER: I think so.

DISPATCHER: OK. You don't know how many people or anything?

CALLER: I do not.

DISPATCHER: All right. Well, we got the fire department on the way, OK. How bad is it?

CALLER: It's pretty engulfed right now.

DISPATCHER: It is pretty engulfed? OK, sir, we've got help on the way.

(END VIDEO CLIP)

HOLMES: Yes, pretty engulfed it was. And today family and friends are mourning the seven college students who died in that fire. Also this morning, a young student who made it through that fatal beach house fire is talking about how he got out alive.

(BEGIN VIDEO CLIP)

FREDERICK "TRIP" WYLIE, FIRE SURVIVOR: I pulled the blinds off the window and just kicked in the window and, I mean, it was the only option, you know, I really had was to, you know, jump out.

(END VIDEO CLIP)

HOLMES: Well, the owner of the house that burned down whose daughter survived says simply, "we are living a nightmare."

Charges expected this morning in a death of a woman who answered a Craig's List ad. Minnesota police tell CNN, the suspect is 19 years old with no history of violence. They say he lives just blocks from where they found the body of Katherine Olson. Police believes he placed the nanny ad. Still no word on the motive here, though. Police are working closely with Craig's List. Hundreds are expected to attend a funeral for Olson tomorrow.

Tropical Storm Noel on the move this morning. Already causing deaths and massive damage in the Dominican Republic and Haiti. Take a look at this here. This is from one of our i-Reporters. This is cell phone video. Dr. Jose Contreras showing and telling us about flooding and mud slides in the central part of that country.

You can hear that strength on this video here. You can see it, as well, the strength of the storm from the i-Report pictures. Again, this one's from another one of our i-Reporters, a viewer, Bill Regan. Heavy rains battling the coast near the capital of Santo Domingo. So far 11 deaths in the Dominican Republic are blamed on the storm. And our Jacqui Jeras keeping an eye on this for us from our hurricane center.

Jacqui, hello. At first it was just a matter of trying to get the name right. And, boy, we know who Noel is now.

JACQUI JERAS, CNN METEOROLOGIST: Yes, we sure do, unfortunately. So do folks in the Dominican Republic.

You know, the storm made landfall in Haiti, but all of the wet weather went into the Dominican Republic. And there you can see there's still showers and thundershowers moving over the area. They've had as much as 10 to 20 inches. Loss of life, unfortunately. And most of that due to all of that rain and mudslide. You know, when you have a higher elevation, it enhances it lift in the storm system and makes the rainfall all that much heavier as it moves down the mountains, unfortunately.

And I want to kind of show you that on our Google Earth animation. And this will help to explain the differences in terrain. Here you can see where the storm is now. It's way over here by Cuba and all of those spaghetti lines, as we call them, our computer model forecast as to where the storm has been heading.

Now let's go ahead and zoom in to the Dominican Republic. And it's a very mountainous area. There you can see it. The elevation, it goes up to almost 10,000 feet. That's why the rain was so heavy here.

Now people who live in the Bahamas, where the storm is forecast to be going, possibly right over Andros (ph) Island. Look at the differences in elevations. It is extremely flat and I think it's only about 200 feet the highest elevation in the entire Bahamas Island chain. So it will be definitely a different impact.

We also think this storm should be picking up a little forward speed. So we think rainfall totals will be more like five to 10 inches in the area.

Also I want you to know that one of the computer models here bringing it right over southern Florida. So we could get a possible hit, possibly even just skirting by. Most likely scenario brings it over into the northwestern Bahamas, however. Of course, we'll keep a very close eye on Noel. Should get at its closest approach to Florida, T.J. That will happen overnight Halloween. So tomorrow night and into early Thursday morning.

HOLMES: All right. We appreciate you keeping an eye on it. Trying to figure out where this thing is going. Computer models got it all over the place right there.

JERAS: A little bit. A little bit.

HOLMES: A little bit.

Jacqui, thank you so much. We'll see you again here shortly.

Well, clothes, child workers and a big controversy today. A popular clothing chain calling accusations of a sweatshop an isolated incident. CNN's Brian Todd keeping them honest.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT, (voice over): Kids as young as 10 toiling in a back alley sweatshop in India's teeming capital. Some say they work 16 hours a day for no money. They're stitching together blouses. The labels clearly visible -- Gap -- one of America's most popular brands.

MARKA HANSEN, PRESIDENT, GAP NORTH AMERICA: It's absolute horror. You know, it's just -- it's sickening.

TODD: That reaction from the president of Gap North America to an investigative report by Dan McDougall of the British newspaper "The Observer." In this sweatshop in New Delhi, McDougall photographed hallways soiled with excrement from a flooded toilet and asked these boys how they were punished if they didn't work.

DAN MCDOUGALL, "THE OBSERVER": Well, one of the boys in particular said that he had an oily rag stuffed in his mouth because he tried to escape. And also, you know, it's quite common for the children working in sweatshops generally to be, you know, to be beaten or to be treated badly. And this was no exception.

TODD: McDougall also reports these children slept on floors and on the roof.

HANSEN: And it's deeply, deeply disturbing to all of us. So I feel violated and I feel very, very upset and angry with our vendor and the subcontractor who made this very, very, very unwise decision.

TODD: Marka Hansen says Gap's contract with that subcontractor is terminated. That the company is investigating all its facilities in that region. And that these clothes will be destroyed. Industry observers say Gap actually has a good track record working against child labor. But should westerners be shocked at these practices when they demand lower prices for high quality goods? ZAMA COURSEN-NEFF, HUMAN RIGHTS WATCH: Allegations like this are nothing new. And consumers should be shocked if they're purchasing garments that have the hand print of small children on them. But at the same time, it doesn't really cost that much more for consumers to purchase quality garments that are also made in compliance with fair labor standards.

TODD: But that tide won't be turned easily. The U.N. says child labor accounts for about 20 percent of India's gross national product.

An official at the Indian embassy told us his government does go after companies that force children to work, but he said he could not comment on this specific case.

Brian Todd, CNN, Washington.

(END VIDEOTAPE)

HOLMES: Well, The Gap declined an offer to appear on this show. A spokesperson says they have nothing to add from what you saw in the report. The company said it will be monitoring that situation in India.

Well, a drug resistant germ, a 12-year-old boy dies. Could his death have been prevented? We're watching a live news conference here in the NEWSROOM.

(COMMERCIAL BREAK)

HOLMES: An assault on the ATM. A burglar taking out his frustration on the machine before taking it out the door. And, yes, we got it all on tape.

(COMMERCIAL BREAK)

HOLMES: Take you here to a live press conference out of New York about that deadly superbug. A middle school student died. Now his mother, flanked by her attorneys, talking about legal action they're taking now against the hospital that originally released him. Let's listen in.

UNIDENTIFIED MALE: Mrs. Rivera has been understandably overwhelmed, she's grief stricken but she does understand the public's concern about what -- about MRSA and what Omar passed away from.

So she is here for three reasons. One is to raise public consciousness about what the symptoms and signs are of MRSA. Two is to reassure everybody that she is healthy, everybody in her building is healthy. She works for the board of education at a high school in the Bronx. Everybody there is healthy. So she just wants to reassure the public that everybody around her, her family, her friends, are healthy. And she wanted everybody to know that. And, third, she wanted to ask our health care system, particularly in urban areas, pay closer attention to our young people when they present with these kinds of symptoms so that nobody else has to suffer and go through what Mrs. Rivera has gone through, and that is the loss of a child. And with that, you know, we are bringing an action against the New York City Health and Hospitals Corporation, and Kings (ph) County Hospital. But really Mrs. Rivera is here to answer all of your questions. She's tired. She asks that after this news conference that you all respect her privacy, let her grieve with her family alone, but she does understand the public interest and so to that end she's here to answer, as best as she can, your questions.

Her first language is not English. To that end, Miss Pagona (ph), from my office, is here to interpret, if necessary. But she does speak English and with that we'll take questions.

QUESTION: Can we get her closer to the mike, Mrs. Rivera, because you need to be closer to the mike.

QUESTION: Maybe she can just begin -- maybe you could just begin, please, by telling us why you're here, why you're bringing this suit and your complaint about the hospital.

AILEEN RIVERA, MOTHER OF STAPH VICTIM: The first thing, I want to (INAUDIBLE) for my son. My son was a healthy kid. My son never suffered (ph). People are (INAUDIBLE) especially my respect put in use (ph). Everybody back (ph) somewhat different story that I really didn't know. Then go to my building, then go different (INAUDIBLE). Nobody know until I talk. After everybody (INAUDIBLE) here, my attorney can (INAUDIBLE) to speak. Everybody can ask me any question. I'm here.

QUESTION: What is your main complaint now against the hospital? What happened?

RIVERA: I don't want my son suffer like -- I don't want nobody suffer like my son. I take my son to the hospital. They didn't do nothing. My son don't have no disease. My son don't have no infection. I want to respect my son memory, my family (INAUDIBLE). I want to . . .

QUESTION: I'm sorry. Can you tell us what was -- what symptoms he had? What was wrong with him? And what you thought when you went to the doctor?

RIVERA: I want to know my son, the (INAUDIBLE) there was a holiday. The second day, sorry, my son go to school. He was OK. Wednesday, my son when he come home from school, in the evening, my son, I thought my son was suffering a little pain in the back. A little sore. I take my son Thursday to the doctor. Dr. Arigiana (ph). Hota Arigiana (ph). My regular doctor. He give me some antibiotic because my son go to the doctor with 103 fever. He gave me some Motrin and gave me some Amoxicillin (ph).

After the second day was Friday, I take my son to the King's County because I don't see my son was getting better. When I go to the King's County, the first thing they give my son Benadryl. They leave my son like three to four hours in the admission room. The second day it was Saturday. My son was doing a little OK. I tell to the doctor I didn't want (INAUDIBLE) he said, no, everything is OK. Everything is OK. Saturday my son (INAUDIBLE) and take a shower. Sunday, my son pass away.

QUESTION: What did they tell you the problem was with your son?

RIVERA: Nothing. They don't tell me nothing. They (INAUDIBLE) OK. The doctor don't tell me nothing. In the emergency room, they don't do nothing. The only thing they say in the reaction to the Motrin. They give me some Benadryl. He took two Benadryl in the emergency room in King's County. The doctor (INAUDIBLE), is this OK. The (INAUDIBLE) told me my son is OK. That's (INAUDIBLE). They don't do nothing else.

QUESTION: What do you think about what they did? What should they have done while your son was at the hospital?

RIVERA: They're supposed to (INAUDIBLE) my son (INAUDIBLE), right? They don't do nothing like I explain to you. They don't do nothing and explain to me everything my son has. My son don't have no rash. My son don't have no infection. My son don't have nothing. Only a little sore in the back. That's it.

HOLMES: And we've just listening to Aileen Rivera talk about her son and the shape he was in when she took him to the hospital. And hearing there that they told her nothing. Didn't tell her what was wrong with her son and, sure enough, a couple days later, her son, Omar, 12-year-old, died of a staph infection. That drug resistant staph infection we've been hearing so much about.

But now she's there, flanked by her attorneys in New York, taking legal action against the hospital, against the New York hospital system that runs it hospital. Not exactly sure what they're seeking right now, but are taking legal action for their in action, as they see it, in identifying what was wrong with her son, 12-year-old Omar Rivera, you're seeing there on the right side of your screen, who she says was a healthy young boy.

She say she's also here because she wants no one else to suffer like her son did and also wants to respect the memory of her son. Our Allan Chernoff is at that press conference. He was the first reporter. You heard his voice to ask a question there. He is listening in and asking questions, as well. We'll be checking in with him. He's monitoring this.

And also, if you want to continue to listen to this press conference, you can go to cnn.com. It is still streaming live there. You can watch the rest of it, watch the whole thing in its entirely.

And, of course, we've been hearing a lot about this germ. This MRSA bug in the past few weeks. But it's really not anything new. An estimated 90,000 Americans get the most dangerous form of it every single year. Most cases relatively mild but it can be deadly as we know. MRSA is resistant to many Penicillin antibiotics but can often be treated with other drugs. It used to be found mostly in hospitals but cases are also appearing in schools, gyms and elsewhere.

Well, civilian deaths down in Iraq. Same with U.S. troops. Has Iraq turned the corner on violence? That story ahead. (COMMERCIAL BREAK)

HOLMES: Let's take a look at the big board. The Dow down, as you see there, about 46 point this morning. All eyes and ears on this chitchat. The federal policy makers are about to have over the next couple of days. A rate cut is expected by many. But a lot of folks, of course, keeping an eye on what the Fed will decide to do. A lot of concern still about the mortgage crisis. Also the credit crunch. So right now down 46 points. We'll keep an eye on this. Our Susan Lisovicz is going to be along, as well. Nasdaq down as well, today, by about five points. Not to severe. But, still, a lot of people just holding steady waiting to see what the Fed is going to do.

Well, fewer deaths in Iraq. Some feeling safer. But will it last? More now from CNN senior international correspondent Nic Robertson.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN CORRESPONDENT, (voice over): Pictures of the dead plaster the walls. Bullet holes pockmark the streets, puncture the school gates. Baghdad's Fadal (ph) neighborhood has had its rough. Passions run high. Restaurant worker Terry Ahmad (ph) angrily shows damage he says was caused by Iraq's Shia-dominated police.

But the mood in the tiny Sunni ghetto, that until recently was overrun by al Qaeda, is changing. Killings are down.

"The improvement in the situation is real and done by the heroes of our neighborhood," Ahmad Alubadi (ph), a music store owner, explains. "They kicked out al Qaeda. Now people feel more comfortable."

And it's not just in the Fadal neighborhood. Some of the most dangerous parts of the country are now far less deadly than they were a few months ago. Both U.S. and Iraqi casualties are down.

The U.S. death toll in October is the lowest since March 2006. Iraqi security forces, the lowest since February '06. Roadside bombings down 60 percent according to the U.S. military. Statistically, the country hasn't been this secure in two years. So how did it happen?

HOSHYAR ZEBARI, IRAQI FOREIGN MINISTER: First, the surge actually was very instrumental. Secondly, there was a change of tactic.

ROBERTSON: The surge added 30,000 U.S. troops. Pushed them out of big bases into the community. The change in tactics, empower tribes of local militias was a huge reversal of U.S. policy in the face of limited options.

ZEBARI: This issue was one of a point of contention between us as Iraqis and American commanders for years.

ROBERTSON: Another big factor cutting the killings, the deadliest Shia militia, the Mehdi army, is holding a cease-fire declared by its leader, cleric Muqtada al-Sadr.

UNIDENTIFIED MALE, (through translator): Many Iraqis believe this decreased the death toll of American and Iraqi forces.

ROBERTSON: Despite the improving security, our analysts still ask we hide his identity fearing attacks for talking to us. Although he admits feeling safer than when we first met last year. But, he says, Iraqis fear if the lull isn't exploited, violence will escalate again.

UNIDENTIFIED MALE: The measurement should not be limited to military operations. It should also be accompanied by improvement in the economic situation and public services.

ROBERTSON: It's a pressure the government feels, too. They must reconcile their differences fast.

ZEBARI: We are in a race against time. We have to make the best use of time and proceed to step in before this achievement could evaporate.

ROBERTSON: In the Fadal ghetto, that translates into getting more Sunnis in the Shia dominated police. Just the type of compromise the government is failing to come up with.

ZEBARI: Once (INAUDIBLE), the government has to do a better job.

ROBERTSON: Otherwise it won't hold (INAUDIBLE).

ZEBARI: It won't hold.

ROBERTSON: And if the government doesn't hold, the lulling killings won't either.

Nic Robertson, CNN, Baghdad.

(END VIDEOTAPE)

HOLMES: Well, the news conference itself was fake, but it sure did produce some real headlines. We told you about this scandal. FEMA held a news conference over its handling over the southern California wildfire. The problem here is that those were FEMA staffers posing as reporters. Now the man who oversaw the blunder out of a job. FEMA says John Pat Philbin won't go work for the director of National Intelligence, as we the plan.

Also hear, burglary in progress. It's caught on tape. Police in Indiana taking a closer look at this tape this morning. You can see what they see and what we all see. A man in a mask trying to make off with an ATM. Police say it actually had little or no money in it and it probably won't take them long to make an arrest.

ANNOUNCER: Live in the CNN NEWSROOM, T.J. Holmes.

T.J. HOLMES, CNN ANCHOR: We have some new outrage this morning over last month's deadly shooting of Iraqi civilians. Hello, again to you, everybody, I'm T.J. Sitting in for Heidi and Tony right now. Well, sources familiar with the case say that the State Department has promised limited immunity to some of the Blackwater bodyguards that were involved in this. The Senior State Department official tells CNN that no such deal was offered. You may remember the story, the U.S. contractor says its workers came under attack in Baghdad and returned fire in self-defense. 17 Iraqi civilians were killed. Dozens wounded. Iraqi authorities have called the killings quote "Premeditated murder."

The FBI has been investigating the shootings and has refused to comment on the immunity reports but a short time ago, we learned that Iraq's Parliament is being stirred to action. It's drafting a new law that would require Security Company there to obey Iraqi laws with no possible immunity.

Welcome now to the mule capital of the world. Yes, the mule capital. Taxpayers, asked to pony up for a Mule Museum. We're keeping them honest.

(COMMERCIAL BREAK)

Well at 7:30 out on the West Coast and this is causing a traffic mess. Pretty much you can say any time feels like a traffic nightmare in the Los Angeles area but this is in L.A., the 405, I-405 where a big rig has crashed, you can see there into the center divide and it's causing a mess on the 405. Several lanes stopped, blocked in both directions on the 405. Don't exactly know why or how, what initiated this crash.

This picture here from KDLAR (ph), our affiliate giving us a better perspective of it. This is the video. Get a better perspective of the crash itself. The big rig crashed into the center divide. According to officials out there, it burst into flames. Not exactly sure of how long ago this happen, but not too long ago. But right now, they are certainly in the thick of a 7:30 out there, the morning commute. And this is causing a mess. We do understand that one person has been killed in this accident. Not sure if it was the driver of the big rig or not. But at least one person dead in the accident and of course the delays as you can imagine this morning. But we're keeping an eye on that story happening out there in Los Angeles right now.

Also, taxpayers getting a donkey kick to the wallet. Pet project this time, a mule museum. Our Drew Griffin is keeping them honest. He has a preview of this story from tonight's "ANDERSON COOPER 360" about a little town on the back side of California, Yosemite Valley.

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN CORRESPONDENT: And it is here you might say. Federal taxpayers are being turned into jack ass's.

BOB TANNER: They should consider themselves a mule capital of the world.

GRIFFIN: The county fairground in bishop, host the biggest mule festival in the United States every Memorial Day weekend. Bob Tanner says it's time you knew more about the mules.

TANNER: Now there's a lot of things that people don't know about mules.

GRIFFIN: Which apparently is why Republican Congressman Buck McKeon wants you to help pay for a museum to the mule to be build on this fairgrounds.

(END VIDEOTAPE)

HOLMES: A lot we don't know about mules. Did I hear that right, Drew?

GRIFFIN: You heard that right. You know, I got nothing against that guy for wanting a mule museum. I just don't know if the federal taxpayers really want to pay for the it, T.J.

HOLMES: OK. Who gets to approve these things because, you know, you hear mule museum and then with all ills we have in the world, it doesn't seem like that should be a priority.

GRIFFIN: You know, you just heard the president talking about those appropriation bills that he hasn't got. Well, that's where this earmarks. They are stuck in these appropriation bills. And each appropriation bill, this one, transportation housing and urban development has two committees. Republican and the Democrat. They supposedly scrutinize all these earmark projects. The mule museum made the scrutiny list which you know I'd like to see what didn't.

HOLMES: OK. We're laughing about this but how is that possible? Is he strong enough? This Congressman, did he lobby hard enough? He has enough power to get something through that?

GRIFFIN: We asked the head of the Republicans. So we sat down with John Boehner and began to ask him. Now, John Boehner doesn't take any earmarks. He tries to live by example. Tonight, you're going to hear his explanation of why he can't stop things like a mule museum. But you would think, if either of these parties was really serious about earmark reform, that they would get rid these pet projects which obviously are not necessary.

HOLMES: What happened to that? We heard all of that about earmark reforms. We're talking about mules and pork and everything. What happen?

GRIFFIN: In fact, Buck McKeon is a supporter of earmark reform. The guy that wants the mule museum just last month said taxpayers deserve to know how their money is being spent and who is spending it. For too long, he says Democrats have been filtering millions into their districts with little or no public attention. This is the same guy that now wants you to pay $50,000. And let's keep this money. It's not a lot of money. But this is seed money. There is no mule museum. This is just to find out about the possibility of eventually building a mule museum.

HOLMES: OK. We could all, I guess, have a little to learn about mules. We will learn a lot more about this mule museum from you this evening. We look forward to seeing that, Drew. Always good to you see. Can't wait to see this one tonight. Your tax dollars for a mule museum. See Drew's full report at 10:00 p.m. tonight at 360. It's keeping them honest. Yes, and that's only here on CNN.

Well, that holiday trip you plan on taking home, it could cost you a whole lot more.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Usually when demand is up, prices go up. So we think around Thanksgiving, we'll see prices start to go up, somewhat.

(END VIDEO CLIP)

HOLMES: Here we go again. Gas prices are expected to go up. How high, how long, details ahead.

(COMMERCIAL BREAK)

HOLMES: Well, chocolate Jesus, some say its art. Others say, it's just tasteless. We'll let you decide, coming up.

GERRI WILLIS, CNN CORRESPONDENT: Cut your electric bill by slaying those energy vampires. No, not that one. We're talking about home appliances that use energy even when they're turned off. Like the TV or stereo system. The phantom energy loads can add up to 20 percent to the amount your family pays each month for energy. The worst offenders, computer components like the printer and fax machine draw a lot of energy but it's the little things like the cell phone charger, your answering machine, and the clock on your microwave that really add up. Each home adds about 40 of these products that continually draw power without you knowing about it.

You could save hundreds of dollars a year by plugging these devices into power strips so you can shut them off at the touch after button. The downside having to reset that flashing clock when you plug back in. That's this week's saving money now. For more on saving money watch "OPEN HOUSE" every Saturday at 9:30 a.m. eastern, right here on CNN. And you can catch us on "HEADLINE NEWS" every Saturday and Sunday at 3:30 p.m. eastern time.

(COMMERCIAL BREAK)

HOLMES: Just want to pass along this word to you, just getting in from the White House. President Bush has tapped someone else to head up the Veterans Affairs and that person is Dr. James Peak. We're just getting from the White House, expecting official word and announcement from the president coming up in a little bit, a little after 1:00 eastern time. But, Mr. Peak, right now really has a long history of service in the military as medical services and also as an army now. He has really been doing this for the past 40 years or so. He retired in '04. He was the leading commanded and also, he served four years as an army surgeon general. The name again Dr. James Peake has been tapped to head up the Department Of Veterans Affairs. He will be replacing, of course, Jim Nickelson who steps out as the head of Veterans Affair. Again, President Bush expected to make that announcement around 1:00 Eastern Time. Our Elaine Quijano is at the White House. She will join us a little later and give us more on this gentleman. He has been tapped but Dr. James Peake is the name. A gentleman who will now -- the president has now tapped to head up Veterans Affairs. We'll stay on that for you again here from Elaine Quijano from the White House shortly.

Moving on to money now. The Federal Reserve kicking off a two- day meeting on interest rates today. One issue is going to be discussed, the Housing Recession and a new survey that anchors little hope of a turn around. Susan Lisovicz at the New York stock exchange with the details. All eyes and ears on the FED right now. Hello there, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: That's right. Because, if you just focus on the housing sector, boy, it really is in deep trouble, T.J. The Housing Market yesterday hit bottom as you look at this most recent survey of home prices. A closely watched survey of home prices in 20 cities shows that prices fell nearly 4.5 percent in august when compared to the year before. The survey's author says, there is really no positive news in today's report. Home prices have now fallen every month this year, half of Florida surpassed Detroit as the worst performing city in August. Prices plunged more than 10 percent there.

This report comes just days after the National Association of Realtors says the median home price is now down to $211,000. The continuing decline of the housing market may be weighing on the minds of many Americans. New read on consumer confidence dropped this month the lowest level in two years. Consumers are also worried about their jobs. And this is worrisome because consumers' spending is engine of economic growth in the U.S.

T.J.?

HOLMES: Susan, I don't know if they do a lot on this in Vegas but I bet all bet would be on the FED making an interest rate cut. That seems to be what people think is pretty sure is going to happen.

LISOVICZ: You don't even have to go to Vegas. You can go to Wall Street and see what the Fed fund futures are saying. And they are saying that we will see relief tomorrow from the Federal Reserve board. Most anticipating a quarter point rate cut. T.J. more modest than the half a percentage point cut we got last month. But even that is not a sure thing. That's because with oil at record high levels, inflation is still likely to be a concern for the Fed. So, there is some nervousness in the market.

Certainly, another rate cut could help the housing market but the Chief Executive of Countrywide Financial and KB Homes says the government, they are calling on lawmakers to lift the limits on home loans that the government backs. Shares of countrywide are down nearly 4 percent and overall, the market is down as well. Weighing on the DOW, a 4 percent drop in shares in Proctor and Gamble, the company that makes Tide detergent and Crest toothpaste, says higher energy price will hurt profits in the current quarter. The DOW right now down 46 points or about a third of a percent. The NASDAQ is down just a couple of points. And I'll be back in the next hour and keep watching the numbers for you.

T.J.?

HOLMES: We know you will. Susan, thank you so much.

LISOVICZ: You're welcome.

HOLMES: Well, his child survived that beach house fire. But this father is still grieving.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We are so sorry for the others. The other family members that lost their children.

(END VIDEO CLIP)

HOLMES: That's an emotional story there from those who made it out alive. That's ahead.

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HOLMES: And as we just told you a moment ago we got word from the White House that President Bush has tapped Dr. James Peake to be his nominee to head up the Department of Veterans Affairs. I want to head now to the White House with our Elaine Quijano with more on who exactly this gentlemen is, Dr. Peake. Hello to you, Elaine.

ELAINE QUIJANO, WHITE HOUSE CORRESPONDENT: Good morning to you, T.J. That's right. Well, Lieutenant General James Peake retired from the U.S. army in September of 2004. His most recent post, of course, was the army Sergeant General and this is a position certainly that the White House has been hearing from Veterans groups. Most recently, hearing from democrats about the disposition of V.A. secretary. You recall it, it was more than three months ago that Jim Nicholson announced that he would be stepping down from that post of V.A. secretarian.

In that time, again, Veterans groups especially, had expressed concerns about the top position remaining unfilled. They said, that it was a sign they believe that the administration did not place a high priority on Veterans Affairs. Democrats, of course, on Capitol Hill themselves locked in a number of battles with this White House as we heard recently. On other issues, have also jumped on this issue, as well. In fact, it was just yesterday that four senators including Senate Majority Leader Harry Reid sign a letter and sent it to President Bush calling on him to make some sort of announcement about a nominee.

So White House Spokeswoman Dana Perino today asked about that, said she believe that the acting Secretary Gordon Mansfield was serving ably and now just getting word, T.J., again, that the president does plan to nominate Dr. James Peake to be his nominee for the position of Veterans Affairs Secretary.

T.J.?

HOLMES: And we are, Elaine, expecting to hear from the president himself in a little bit?

QUIJANO: Yes, you know what, we're waiting on details on that. Perhaps, something in the 11:00 hour here. We're not sure exactly. As soon as we get something more firm on that, we of course send it your way.

HOLMES: Elaine Quijano, of course, from the White House. Elaine, thank you so much.

Well Japan's Justice Minister has been spending the day trying to remove his foot from his mouth. He tells reporters, he has a friend of a friend who is an al Qaeda terrorist. A man involved in the deadly Bali bombing in 2002. The Justice Minister says the man traveled in and out of Japan several times. He later tried to clear up his comments saying, he didn't really know him. He says they have a mutual friend in a butterfly collecting club of all things. He was trying to use the story he says as an example of why Japan is implementing new fingerprint and photograph requirements for people entering the country.

Well, we turn now to a controversy in New York. (INAUDIBLE) now, chocolate Jesus making a return. CNN's Gary Tuchman takes a look.

GARY TUCHMAN, CNN CORRESPONDENT: Is it freedom of artistic expression? Disrespect of religion, or both?

COSIMO CAVALLARO, ARTIST: I'm doing it because I find this beautiful. That's it.

TUCHMAN: Artist Cosimo Cavallaro at this New York City gallery with his wife Sara has created a life-size Jesus Christ made out of 200 pounds of dark chocolate. It's anatomically correct and without a loin cloth.

CAVALLARO: This was basically a whole month viewing of the body of Jesus lying on pillow pastry. Because, I give people pastries when they come to my house. You know, I mean, it's nothing negative when you offer somebody some nice sweets or chocolate, whatever.

TUCHMAN: This project has been resurrected not in the divine way after pressure led another gallery to cancel this past Easter. A different chocolate Jesus sculpt by Cavallaro was to be shown in a ground floor window during holy week.

KIERA MCCAFFREY, THE CATHOLIC LEAGUE: They are saying, we are taking a devout Christian image, the Crucified Christ and we're making him into chocolate with genitals exposed. They are digging the knights and Christian on this to try to pretend otherwise is absurd. They're doing it at the holiest time.

TUCHMAN: Before the gallery cancelled, Cavallaro said they were getting dozens of threats.

SARAH CAVALLARO, ARTIST' WIFE: I was getting calls that they were going to kill Cosimo and do horrible things. They were describing how they were going to kill him.

TUCHMAN: The Catholic artist ended up storing his creation but rodents got to it.

CAVALLARO: They started nibbling at the face and hands and feet.

TUCHMAN: The mice?

CAVALLARO: Yes.

TUCHMAN: So, he sculpted a new one which was dripping a bit during our visit to the gallery. It is surrounded by eight smaller chocolate saints including St. Michael, Francis, (INAUDIBLE), and the Virgin Mary. The message is said to be one of healing. The director of the gallery admits he was a bit anxious about taking this on.

RONALD SOSINSKI, THE PROPOSITION GALLERY: It's a very different point of view than saying having a nude Jesus Christ in the window on a Good Friday. So, I was very nervous at first but now that the show was up, I'm very happy with it. I think it makes a different very point and I'm a little calmer.

TUCHMAN: Cosimo Cavallaro acknowledges even some of his relatives have been uneasy.

CAVALLARO: For the most part, all of them were embarrassed because I embarrassed the family. You know, how could you do something so disgraceful to the church.

TUCHMAN: The Catholic League agrees it is disgraceful.

UNIDENTIFIED FEMALE: I understand, the original was eaten by mice which is probably a fitting end to it.

TUCHMAN: But perhaps a little less disgraceful this time around.

MCCAFFREY: The intent seems different. It's not to throws it to people's faces. You know on days like Good Friday. This isn't happening then. So, yes, it's less after problem.

TUCHMAN: Cosimo Cavallaro, offers no apologies.

CAVALLARO: I'm religious. Am I religious to the point where I'm not open minded? No.

TUCHMAN: For his next project, Cavallaro says he is planning a sculpture symbolizing the last super. You can have faith, it won't be conventional. Gary Tuchman, CNN, New York.

(END VIDEOTAPE)

HOLMES: You are with CNN and you are informed. Hello there, everybody, I'm T.J. Holmes sitting in right now for Tony Harris and Heidi Collins. Developments keep coming in to the CNN NEWSROOM on this Tuesday, October 30th. Here's what we have on the run down.

Just in, no immunity offers the Blackwater guards in the killing of Iraqi. A State Department source contradicts an earlier report.

Also, a mother pleading for justice. Her son's death from a Staph infection or the hospital to blame? A live report for you this hour. Also, frantic phone call when a beach house goes up in flames. You will hear the 911 tape. You are in the NEWSROOM.

Well, at first here. We do want to pass along that word we're getting from the White House that President Bush has, in fact, tapped someone to be the next head of the Department of Veterans Affairs. That name is Dr. James Peake. He is the first and you're seeing his pictures there. The one that the president will nominate. This is a retired lieutenant general, James Peake, 63 years old. Expecting to hear from the president at sometime this afternoon waiting on details from that. Maybe get the official announcement from the president himself. We do have word now that that will happen at 1:00.

This man is retired Lieutenant General from the armor, retired in 2004. He was a leading commander in several posts. He also served as U.S. Army Sergeant General for a time. But again, he will be the person that is now tapped by the president to head up the Department of Veterans Affairs replacing Jim Nicholson who stepped down some months ago. We'll stay on top of that story. When the president does speak, you can certainly be guaranteed, you can hear it here on CNN.

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