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AMERICAN MORNING

Governor Spitzer Sex Scandal; No Dream Ticket for the Democrats; Gas and Oil: Record-Breaking High

Aired March 11, 2008 - 06:00   ET

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


JOHN ROBERTS, CNN ANCHOR: Unbelievable surprise what had happened yesterday afternoon and more of this morning. New York's governor is under growing pressure to quit over the sex scandal that's just rocked the state and the nation.
Eliot Spitzer led a nine-year crusade to clean up New York, taking on Wall Street bigwigs and Mafia wiseguys, but his future as governor is on the line now that he has been linked to a prostitution ring that was recently busted by the Feds. A source says Spitzer is client number nine, who according to an unsealed federal complaint, arranged for an escort to travel from New York City to the Mayflower Hotel in Washington, meeting with her in this room, room 871, the photo courtesy of "The D.C. Examiner." And then the irony of ironies, we're learning that the money trail may have led to the so-called sheriff of Wall Street's alleged dirty deeds.

We're covering all angles of this developing story. This morning our legal analyst Sunny Hostin will be in in just a moment to share her expertise. First, though, Jason Carroll here with brand new details of the investigation. Good morning.

JASON CARROLL, CNN CORRESPONDENT: Good morning to you, John. You know, this is an incredibly embarrassing time for the governor and his family. Prosecutors still have not commented on their case against Spitzer. A source close to the investigation says Spitzer's lawyers may be questioned about how he allegedly paid for the encounter.

(BEGIN VIDEOTAPE)

GOV. ELIOT SPITZER (D), NEW YORK: I will support the constitution of the United States --

CARROLL (voice-over): It was one of his proudest moments, January 2007, Eliot Spitzer stood with his wife at his side as he was sworn in as New York's 54th governor. A little more than a year later, Spitzer's wife Silda was at his side again for the most shameful moment of Spitzer's political career.

SPITZER: I have acted in a way that violates my obligations to my family and that violates my or any sense of right and wrong.

CARROLL: Spitzer read a prepared statement answering no questions about allegations he was involved in a prostitution ring.

SPITZER: I apologize first and most importantly to my family. I apologize to the public whom I promised better.

CARROLL: The affidavit alleges the prostitution ring operated under the name of Emperors Club VIP. Source with knowledge of the investigation says Spitzer is called client number nine in the court document. The document states client number nine arranged for a prostitute named Kristen, and traveled from New York City to Washington, D.C. Client nine said he would pay for everything, train tickets, cab fair from the hotel and back, mini bar or room service, travel time and hotel.

When asked about payment, client nine said yes, same as in the past. No question about it. According to a source with knowledge of the investigation, the two met at the Mayflower Hotel in Washington. And when client nine wanted a reminder of what Kristen looked like, he was told she was American, petite, very pretty brunette, 5 feet 5 inches, and 105 pounds. That encounter took about two hours on February 13th, the day before Valentine's Day.

When her coworker asked if client nine "would ask to you do things that you may not think were safe," Kristen replied, "I have a way with dealing with that. I'd be like listen, dude, do you really want the sex?" The investigation is based on electronic communications, e-mails and bank records.

(END VIDEOTAPE)

CARROLL: Already, calls for Spitzer's resignation are coming in from a number of politicians. The Republican Governor's Association says Spitzer should submit his resignation immediately.

ROBERTS: You know, this is a real tragedy for his family, his wife and his three daughters. But finding sympathy for him is difficult to come by this morning.

CARROLL: Very difficult and I think a lot of people are going to be saying this is the man who put himself out there, who's being the ethics guy, and now he's having to face this.

ROBERTS: Unbelievable story. Jason Carroll for us this morning. Jason, thanks. We'll see you in a little while -- Kiran.

CARROLL: All right.

KIRAN CHETRY, CNN ANCHOR: And as we said, he made his bones tracking down dirty money on Wall Street. According to "The New York Times" which first broke the story yesterday, it was Eliot Spitzer's own suspicious money transactions that ended up blowing this case wide open. The paper says it all started in a three-story IRS office across the street from a Dunkin' Donuts on Long Island. That's where investigators got their hands on some questionable bank transactions.

Before long, they found out Governor Spitzer was withdrawing thousands of dollars that ended up in the bank accounts of Shell companies. According to "The Times" report investigators thought bribery, perhaps corruption, maybe even illegal campaign finance, but they never thought it had to do with paying for sex. That is until the IRS joined forces with the FBI and dug a little bit deeper.

CNN is working to confirm all of the allegations in this "Times" story, but our legal analyst Sunny Hostin has also been following this and looking into this. As we talk more about how it all came about, again, it appears that at least, according to some of the reporting, that it was the bank that originally alerted the Feds or the authorities that something's not right about these transactions.

SUNNY HOSTIN, AMERICAN MORNING LEGAL ANALYST: Sure, and that's common, Kiran. There are reporting requirements that banks must follow and the IRS investigators are incredible, and they routinely look at these types of bank accounts, types of transactions, and that is really how it started. Everybody's sort of talking about this February 13th just last month, rendezvous that Spitzer had with this prostitute. But that is not when this criminal investigation began. This criminal investigation began as an IRS investigation well over a year ago. And they started sort of following the money, following the money, and it led to Spitzer.

CHETRY: Now, could this happen to the -- could this happen to the average Joe? I mean, you and I making transactions, or is it because he is a public servant and in a high position that it set up warning bells?

HOSTIN: Well, look, it could happen to anyone, and they're not just -- they were not just looking for Eliot Spitzer. They were looking at this sort of interesting bank transactions, and it could happen to anyone. But when they found out that it was sort of this high-ranking government official, when it was Spitzer, they did have to go to the attorney general to get permission to continue investigating that, something that prosecutors always do. They went to the attorney general and then after that they got the wire tap.

CHETRY: Right.

HOSTIN: So this is really a complicated investigation but it could happen to anyone, and it happened to him this time.

CHETRY: What does it boil down to, though? Because now, as they start looking at what charges are going to come out of this prostitution ring, does the John typically face charges?

HOSTIN: Absolutely.

CHETRY: Does the John typically go to jail for it?

HOSTIN: Absolutely. And again, this is a different type of case, this is a federal case. What he is being accused of really is going from New York, paying for someone to go from New York to the District of Columbia, and that makes it a federal crime because --

CHETRY: Something called the man act that we're probably going to hear a lot about.

HOSTIN: You are going to be hearing a lot about it. If this was something where he took a prostitute to a New York hotel, I think maybe the Manhattan D.A.'s office would be dealing with this. But once you start to talk about moving someone interstate for the purpose of prostitution, very, very different.

CHETRY: All right. Sunny is going to be joining us in just a couple of minutes as well. We're going to break down some of these phone conversations that took place within this affidavit. You have a look at it, and we're going to talk more about that as well coming up in just a couple of minutes. Sunny, thanks.

HOSTIN: Thanks.

ROBERTS: The editorial pages are also weighing in this morning. Most of them suggesting that Governor Eliot Spitzer has got to go. That includes an editorial in today's "New York Times" which writes, "He did not just betray his family in a private matter. He betrayed the public, and it is hard to see how he will recover from this mess and go on to lead the reformist agenda on which he was elected."

An editorial in the "Wall Street Journal" writes, "The stupendously deluded belief that the sitting governor of New York had purchased the services of prostitutes was merely the last act of a man unable to admit either the existence of, or the need for, limits."

This brings to mind another tri-state area governor who was involved in a sex scandal back in 2004 in New Jersey. Governor Jim McGreevey resigned after admitting having an affair with a male political aide. McGreevey also publicly declared himself a "gay American." His ex-wife Dina Matos McGreevey told Larry King last night, she actually told John King on "LARRY KING LIVE" last night, that she knows all too well how Spitzer's wife is feeling.

(BEGIN VIDEO CLIP)

DINA MATOS MCGREEVEY, FORMER NEW JERSEY FIRST LADY: My heart just broke for her because I know exactly how she's feeling. It's always difficult to learn that, you know, the person you love has betrayed your trust, but it's, you know, hundreds -- that the difficulty is increased tremendously when you have to face it in such a public manner. And, you know, she's ridiculed and shamed in front of, you know, virtually the entire world.

(END VIDEO CLIP)

ROBERTS: The Spitzer scandal is also making its way to the national campaign trail. Democratic presidential candidate and New York Senator Hillary Clinton sidestepped questions about Spitzer's political future, while campaigning in Pennsylvania.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D-NY), PRESIDENTIAL CANDIDATE: I don't have any comment on that, but I obviously am sending, you know, my best wishes and thoughts to the governor and to his family. Let's wait and see what comes out over the next days. But right now, I don't have any comment, and I think that it's appropriate just to wish his family well and we'll wait and see how things develop. (END VIDEO CLIP)

ROBERTS: Spitzer is a Clinton supporter, also a superdelegate, a position that he would lose if he resigned the governorship -- Kiran.

CHETRY: And again, as we said, we're going to have much more on this coming up, including new details on exactly what was in that affidavit.

But, meanwhile, we turn now to the race for the White House. Election officials in Mississippi say they are expecting to see a higher than normal turnout for today's primary. The polls open at 8:00 Eastern. There are 33 total delegates up for grabs for the Democrats. And today is also significant because it could be the last time that Mississippi holds an open primary.

Right now, voters registered in any party can vote in either primary. Barack Obama leads Hillary Clinton by 115 delegates. They're campaigning today in Pennsylvania ahead of the primary there, and that's April 2nd. And that is considered the next big one; 158 delegates are at stake in Pennsylvania.

The latest war of words between Hillary Clinton and Barack Obama centers around hints that she would take him on as her running mate as the so-called dream ticket, certainly a big attraction for Democratic voters. How realistic? That's still up in the air. Barack Obama actually shot down the idea while campaigning in Mississippi. Take a listen.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I don't know how somebody who is in second place is offering the vice presidency to the person who is in first place.

(END VIDEO CLIP)

CHETRY: The Obama campaign also says it finds it somewhat amusing that Clinton suggests Obama's not ready to lead but at the same time has enough experience to be just a heartbeat away from the presidency.

Well, our Alina Cho is here with some other stories new this morning. And most of us probably missed this on this shift, but a spectacular launch.

ALINA CHO, CNN CORRESPONDENT: That's right. I've actually been to a nighttime launch, and it is incredible. The entire sky lights up. Good morning, guys. Good morning, everybody.

Well, it probably happened while you were sleeping, a rare overnight launch of the space shuttle "Endeavour."

(BEGIN VIDEO CLIP)

ANNOUNCER: Four, three, two, one, zero, and liftoff of "Endeavour," going where East and West do meet, at the International Space Station.

(END VIDEO CLIP)

CHO: And there you have it. The seven-member crew roared into orbit at 2:28 exactly this morning. The astronauts, of course, are headed to the International Space Station to drop off a storage module and a two-armed robot that actually has the dexterity of human hands, meant to decrease the number of spacewalks needed. The nighttime launch, by the way, is the 30th overall but only the second since the space shuttle "Columbia" disaster.

Well, Congress is vowing to get drugs out of our drinking water. The Senate plans to hold a hearing next month after a bombshell investigation by "The Associated Press" we first told but yesterday. According to that report, water used by some 41 million Americans may contain drugs like antibiotics, sex hormones and other dangerous medicines that are flushed down our toilets. The AP investigation found the medications have gotten into the water supply of at least 24 metropolitan areas.

To Iraq now, and one of the deadliest days for U.S. troops in more than eight months. The U.S. military says a suicide bomber killed five soldiers in a Baghdad shopping district yesterday. Three more soldiers and their interpreter were killed by a roadside bomb in Diyala. That's a major insurgent front north of Baghdad.

A new deep sea tsunami detection system is in place now. The final two sensors were installed off the Solomon Islands in the South Pacific. U.S. officials say those buoys will help detect tsunamis faster and provide even earlier warnings to coastal communities. The White House agreed to beef up the detection system after that massive 2004 tsunami in the Indian Ocean that killed more than 200,000 people.

And along with gluttony and greed, the Vatican is releasing what it calls a list of new modern sins. Take a look. Some of the new evils now include ecological offenses and what the Catholic church calls an era of "unstoppable globalization," Some others -- drugs, pollution, genetic manipulation and the imbalance between rich and poor, just a few of the other new official social sins.

And, guys, apparently they did a study 10 years ago that said 50 percent of Italians don't go to confession anymore, and that number has been steadily decreasing. So I think the church is saying if you're not going and confess your sins, we're going to bring sins to you...

CHETRY: Wow.

CHO: ... and tell you what's wrong, so there you have it.

CHETRY: Thanks so much, Alina.

CHO: You bet.

CHETRY: We'll see you in a couple of minutes. ROBERTS: Well, his reputation is ruined and he could lose his job. Could the next stop for Eliot Spitzer be prison? We'll ask our legal analyst Sunny Hostin if jail time is in the governor's future. That's ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

ROBERTS: Sixteen minutes after the hour. Our Rob Marciano at the weather update desk this morning tracking extreme weather across the country. What do we got on tap today, Rob?

ROB MARCIANO, CNN METEOROLOGIST: Well, we'll start with all the action going on in New York State. I figure we start off with the Big Apple, a few flurries floating around the tri-state area. Here it is on the radar scope. Not a whole lot of action to speak of. As a matter of fact, temperatures at some point today will get well above the freezing mark. But right now, we're hovering at that level so some of this moisture could very well be falling in the form of some snow.

No accumulation expected and today we should probably see temps get up in the 70s. All right. A little disturbance that rolled through Texas last night. It brought some couple tornadoes across the southeast Texas coastline. A funnel cloud reported at Hobby International or Hobby Airport, and two inches reported of rain at Lake Charles. But now, obviously, the rainfall has moved off to the east. This is beginning to fall apart but nonetheless, rainfall and some thunderstorms developing across the eastern parts of Louisiana, southern Mississippi and in through Alabama, it'll all continue to fall apart as it heads towards the southeast.

Not falling apart is a big-time storm across the northwest. Big waves expected to roll into the Oregon and Washington coastline today; 22 to 26-footers, a high surf warning in effect through this afternoon. We'll see gusty winds as well, but most of the winds will head to British Columbia. You may remember over the weekend two teenagers lost their lives because of trying to surf in some of these big waves. And this time of the year, John, people head out to the coast and just to storm watch and these big waves can certainly sneak up on you and for that reason, heavy surf warning in effect. Now, about 300 miles off the coastline, buoys reported 30-foot waves. So a big storm out there in the pacific. Back up to you.

ROBERTS: And, of course, as we saw over the weekend as well, Rob, some people who don't have a lot of experience get out there and try those waves on surfboard and can get sucked under or sucked out to sea by those riptides. And so, they've got to be careful about that as well.

MARCIANO: It is dangerous business.

ROBERTS: Rob, thanks. We'll check back in with you soon.

MARCIANO: Yes. You got it.

ROBERTS: Kiran? CHETRY: Well, it started out as a routine tax investigation. According to "The New York Times," it ended up as an investigation into a prostitution ring involving the governor of New York. Now, if these allegations are proven to be true, could Eliot Spitzer end up in prison? AMERICAN MORNING legal analyst Sunny Hostin is with us now to talk more about it.

First, let's talk about how all this came about. This was looking into suspicious financial transactions...

HOSTIN: Right.

CHETRY: ... that had really nothing to do with any salacious sex sting. How did it evolve?

HOSTIN: My understanding is that as you just mentioned, it was a typical investigation that IRS investigators conduct. They saw some suspicious transactions going from Eliot Spitzer's account into a Shell account, called a QAT account and had several names, and they started looking around. They thought this was a public corruption case actually, which would have sort of been the type of thing that you would expect. I don't think anyone expected this type of bombshell. I don't think anyone expected that Governor Spitzer was a client of a prostitution ring, an international prostitution ring, by the way.

CHETRY: In the complaint, we have the entire file there on it.

HOSTIN: Right. It's lengthy.

CHETRY: It is, because it mentions more than one person. This involves 10 different alleged Johns and this client number nine is who the reporting says is Governor Spitzer. In it, it says, "Client nine will be paying for everything -- train tickets, cab fare from the hotel and back, mini bar or room service, travel time and hotel." So this is part of what is being alleged between client nine and Kristen, who is the prostitute in this situation.

HOSTIN: Yes.

CHETRY: Why does this stick out in your head?

HOSTIN: This is the problem, Kiran. The man targets transporting individuals with the intent of that individual engaged in prostitution, and what client number nine did here is client number nine decided he was going to pay not only for her transportation in Washington, D.C., let's say, from the train station to the hotel, but from New York to D.C., and that makes it interstate trafficking and that makes it a federal crime.

Governor Spitzer would be in a much different place had he taken a prostitute. It would have still been illegal, more likely a misdemeanor, if he would have taken a prostitute to somewhere in New York. The Manhattan D.A.'s office would have been prosecuting that and quite frankly, having -- because he worked there, he may not have even been charged. Now, we're talking about the southern district of New York. The U.S. attorney there is Michael Garcia. He's a Bush appointee. Bottom line is he's facing federal charges in my view now, by the southern district of New York.

CHETRY: The other possible charges, something known as structuring. This is also something that you rarely hear about as it relates to money. How is it? What is this?

HOSTIN: That's true. Well, structuring is an IRS offense. And it's -- the IRS prohibits someone from evading the record-keeping requirements. And what we're learning is that Governor Spitzer was trying to hide the fact that he was paying upwards of, you know, thousands of dollars for prostitutes, and he was moving his money around. We don't know yet if he was using any governmental funds or anything like that. There are no allegations of that. But what we do know is he was attempting to hide the fact that he was paying for prostitutes.

CHETRY: There seems to be a recklessness about this and that this was all just out there, I mean in text messages, e-mails and apparently these recorded phone calls. In one of them, apparently client number nine is recorded saying, "yep, same thing as in the past," talking about not only that this happened before, but then also something about a credit for the future so that cash doesn't have to be transacted every single time. How damaging is that?

HOSTIN: It is so damaging, Kiran. It's just unbelievable. I think everyone is shocked. People are saying that folks on Wall Street were doing the River Dance last night when they found out that this was happening. But he -- this was not the only time, this February 13th, that we're hearing about. This apparently was not the only time that he hired a prostitute. He had past conduct and was considering future conduct, talked about credit, paid the woman, I think, over $2,000 for this sort of future credit so that he wouldn't have to deal with this money transferring.

And so, you're not only looking at the intent or the acts in the past but the intent to do it in the future. It's extremely damaging. We know he hired Paul Weiss, which is a wonderful law firm, a very large law firm. My guess is that he hired a lawyer that used to be at the southern district of New York, someone that knows how to navigate the federal government and knows how to navigate that particular office. We're going to hear a lot from his lawyers, I think, in the future. And I hate to say this, but I do think that we're going to see Governor Spitzer facing some criminal charges.

CHETRY: Still hasn't happened yet and the resignation still hasn't happened at this point. So we're going to continue to follow the story. Sunny Hostin, thank you.

HOSTIN: Thank you.

CHETRY: John?

ROBERTS: If Governor Spitzer resigns, his lieutenant governor, David Paterson, would take office. Under New York state law Lieutenant Governor Paterson would automatically become governor for the rest of Spitzer's term which ends December 31st, 2010. There is no provision for a special election in New York State. Paterson, by the way, is legally blind and would be the first African-American governor of New York, only the fourth in U.S. history.

As oil hits a new high, drivers are leaving $3 a gallon gasoline in the dust. But when might we see $4 a gallon. We'll have a look at that.

Plus, get behind and push. How a ship ended up here, ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

CHETRY: "Hot Shot" now. A ship thrown slightly, I guess, you could say, off course in France. Maritime officials say that high winds grounded this 300-foot Dutch cargo liner as it was approaching port. It was empty at the time and pollution wasn't a problem.

Well, if you've got a "Hot Shot," send it to us. Head to our Web site, CNN.com/am and follow the "Hot Shot" link.

ROBERTS: Well, the price of oil keeps rocketing higher and higher, above $108 a barrel now. Ali Velshi has rolled out the barrel again here in the studio and is with us "MINDING OUR BUSINESS." Can I tell this? I didn't actually know that was real.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Oh, yes, yes. That's a real barrel. That's a real oil barrel and I have to say --

ROBERTS: I thought it was a graphic behind you.

VELSHI: No, no. This is --

ROBERTS: Wow!

CHETRY: I've gotten so used to seeing him walking down the hallway with it strapped to his back.

(CROSSTALK)

VELSHI: No, no. I turned this around.

CHETRY: Yes. Exactly. It goes everywhere with him.

ROBERTS: It's like the monkey on his back.

CHETRY: Yes.

VELSHI: I really should have spent some money putting some oil into this when I first got this a few years ago. It should have been worth a lot more money.

Oil is trading higher than this, $108.21. This is yesterday's intraday high. Just moments ago, in fact, not only is it real, but these are magnetic numbers. And I actually haven't had time to change the numbers to go higher. It was $108.37 just a few minutes ago. Now, that's affecting the price of gas.

Guess what? Yesterday, we said we were just about at a record for gas prices. Well, we're there now. According to AAA, which surveys gas stations every day around the country, gas prices are now $3.227. $3.227, that is the record that was set last May 24th. According to other surveys and there are several that sort of track the price of gas, we're already way past that. So we are now paying the highest prices that we have paid for gasoline. These are the highest prices that oil has ever traded at.

Adjusted for inflation or not adjusted for inflation, it's one of the things that are affecting markets right now. At the moment, right now, we're looking for futures for stock markets opening a little bit higher. But take a look at what happened yesterday. Another down day for stock markets. The Dow was down 1.3 percent. The Nasdaq almost two percent. The S&P down 1.5 percent. The U.S. dollar down again, and we're one week away from what we are expecting to be a Federal Reserve interest rate cut, and you can expect the dollar to go down ahead of that, and when that happens again.

So all in all, not great news for you right now. I'll tell you more about that interest rate cut the next time I'm back and how it might affect your --

ROBERTS: Can I do something here?

VELSHI: Yes.

ROBERTS: Can I like -- a little bit of wishful thinking here, is that possible?

VELSHI: Well -- yes. That wasn't too long ago. This could have been anytime within the last year.

CHETRY: I feel like I'm on "The Price is Right," Ali.

VELSHI: Yes. Guess the price of oil. If you've been away, if you've been on a long vacation, you would have missed the fact.

(CROSSTALK)

ROBERTS: Can we retire -- can we retire the one?

VELSHI: There are a lot of people, as you know, who think that this is what the price of oil should be.

CHETRY: Right.

ROBERTS: Or even less. Yes.

VELSHI: Sixty dollars, $80 or even less. As low as 60, a lot of smart economists -- but again, the economists aren't buying the oil.

ROBERTS: Here's your one back. VELSHI: And as a result --

ROBERTS: Don't put it back!

VELSHI: There are some people who think -- but Goldman Sachs, by the way,...

ROBERTS: No.

VELSHI: ... think $150 to $200 is where the price of oil could go. I'm just the messenger. Don't shoot the messenger.

CHETRY: All right. We won't. Thanks. Good luck with the barrel on your back.

VELSHI: Yes, thanks.

CHETRY: Well, the story has been rattling the political world for sure. New York Governor Eliot Spitzer now linked to a prostitution ring. And this morning, many people are waiting any announcement from the governor's office. He spoke briefly yesterday. Here's a look at the video of this press conference he held, spoke for only about a minute, didn't mention anything about resignation. He apologized to his family and the people of New York but did not discuss his political future and ignored the calls screamed out by reporters as he was leaving "are you going to resign?"

It brings us to this morning's "Quick Vote" question. Do you think that Governor Spitzer should resign? Cast your vote, CNN.com/am. We'll have a first tally of the votes later this hour. I mean, it may seem like a no-brainer, but there are others who have weathered political scandal as it relates to sex and scandal.

ROBERTS: Right. James Carville last night said he wants to see what else is behind this. You know, perhaps there's political retribution at work here. Other people not being so generous.

CHETRY: Well, we want to know what you think. So go ahead and weigh in, CNN.com/am. We'll give you a tally coming up in a few minutes.

Meanwhile Eliot Spitzer was called clean as a whistle, a take no prisoners prosecutor, the scourge of Wall Street. Coming up in just a few minutes on AMERICAN MORNING, a look at why this scandal scrapes the height of hypocrisy, the cases that catapulted Eliot Spitzer to the governor's mansion.

And also, some changes could lead to you spending less time sitting at the gate next time you fly. Do you believe it? Well, we'll talk about it coming up on AMERICAN MORNING.

(COMMERCIAL BREAK)

JOHN ROBERTS, CNN ANCHOR: Picture this morning of the Hudson River, of the George Washington Bridge. Last week, it was light at this time but now since we jump ahead to Daylight Savings, we still get a little bit of darkness, which hopefully as the sun starts to come further north it will abate.

KIRAN CHETRY, CNN ANCHOR: It's so nice, though, to have it be light at nighttime. You know, around 6:30, 7:00.

ROBERTS: It is. But it's also nice to have a light this time of the morning too. 36 degrees right now, going up to 48 and partly cloudy here in New York City, where there is absolutely huge news this morning.

CHETRY: Yes, absolutely. And we're probably going to see more developments throughout the morning. We're on top of all of this today. This sex scandal that could bring down New York's governor.

This morning's "New York Times" revealing a little bit more about how Eliot Spitzer's financial transactions led prosecutors to his case. He's accused of visiting a prostitute at a Washington, D.C. hotel. Governor Spitzer addressed the press and said that he betrayed his family, didn't exactly elaborate.

(BEGIN VIDEO CLIP)

GOV. ELIOT SPITZER (D), NEW YORK: I have acted in a way that violates my obligations to my family and that violates my or any sense of right and wrong. I apologize first and most importantly to my family. I apologize to the public, whom I promised better.

(END VIDEO CLIP)

CHETRY: Jason Carroll joins now with more on the case. First of all, when we talk more about what's in this affidavit, is Eliot Spitzer specifically named?

JASON CARROLL, CNN CORRESPONDENT: No, he's not directly named in this 47-page affidavit, nor has he been charged but a source with knowledge of the investigation says he is identified as client number nine. And there are a lot of details about how this client number nine ordered this prostitute, arranged for the prostitute to travel from New York City and come down to Washington, D.C.

In fact, client nine said this is a quote from the affidavit, saying he would be paying for everything. Train tickets, cab fare from the hotel, back and forth, mini bar, or room service, travel time, and hotel. So a lot of details emerging about client number nine.

CHETRY: And fascinating, because if he does faced charges, it could be about that transport, the train tickets from New York to...

CARROLL: It's very important.

CHETRY: ...To D.C. under what's known as the man act transporting people for sexual reasons. The other question is whether or not this was a one-time thing, and the affidavit seems to put some light on that as well.

CARROLL: Right. It does seem to suggest the affidavit that client number nine had used this service before. And in fact, at one point, client number nine says to one of the representatives, hey, I have a $400 or $500 credit that I would like to use in some way toward this next encounter.

And also, client number nine needed a reminder of what Kristen looked like. And there was a description in the affidavit. I have it right here. Basically, the young woman is described as being American, petite, very pretty brunette, 5'5", and 105 pounds.

CHETRY: Now, you have covered New York politics for awhile. And this came as a huge shock yesterday, really a bombshell when people first heard about it. Still, though, no real sense of what's next, both in terms of criminally and politically for Eliot Spitzer.

CARROLL: Right. And again, he has not been charged at this point but a source close to the investigation says that there is a possibility that prosecutors are obviously going to want to talk to Spitzer's lawyers. Again, there have been many, many calls for Spitzer's resignation. You know, with this appearance of hypocrisy. This was the ethics guy.

CHETRY: Right.

CARROLL: And now he's caught up in this terrible scandal.

CHETRY: Jason Carroll reporting for us this morning. Thank you.

John?

ROBERTS: So how do the Feds find out about an evening with client nine? According to the "New York Times," which first broke the story yesterday, it was Eliot Spitzer's own suspicious transactions that blew the case wide open.

The paper says it all started in a three-story IRS office, across the street from a Dunkin' Donuts on Long Island. That's where investigators got their hands on questionable bank transactions. Before long, they found out that Governor Spitzer was withdrawing thousands of dollars that ended up in the bank accounts of fake companies.

According to "The Times" report, investigators thought bribery, maybe corruption, perhaps illegal campaign finance. They never thought that he was paying for sex, until the IRS joined forces with the FBI and dug deeper. CNN is working to confirm the allegations in "The Times" story.

Kiran?

CHETRY: Well, here's a look at some of the cases that put Eliot Spitzer in the national spotlight. It was back in 2002, that 10 Wall Street firms agreed to multimillion-dollar penalties to resolve charges that they put out bogus stock ratings. The investigation turned up an infamous e-mail from an analyst at Merrill Lynch calling one of the best-rated stocks. The firm's best rated stocks, quote "a piece of junk." Former New York Stock Exchange boss Richard Grasso was also ordered to pay back part of a huge compensation package when he stepped down. And also MetLife and more than 20 other insurance companies ended up paying billions of dollars to settle charges that they paid insurance brokers to send their clients away.

ROBERTS: Now to our other big story this morning. The Mississippi primaries. Polls opened about 90 minutes from now. 33 delegates are at stake for the Democrats, 36 on the Republican side. Though Senator John McCain is already their presumptive nominee because he went over the 1,191 needed to clinch.

Both are open primaries. Meaning that any voter can vote in any primary regardless of the party in which they are registered. The candidates are watching Mississippi, but they are doing it from Pennsylvania. The next delegate-rich state, six weeks from now, and shaping up to be a big battleground. Since last fall, more than 65,000 new Democrats have registered ahead of that April 22nd primary.

CNN's Suzanne Malveaux is following the race for us this morning. She is live in Scranton, Pennsylvania.

Suzanne, Hillary Clinton has given Mississippi a pass. What's the reason? Is it expected to be a blowout there?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, John, it's expected that Senator Barack Obama is likely going to do very well there. There are 33 delegates at stake. It's expected that more than 50 percent of the Democratic electorate is African-American that he will do well there.

But I have to say, Senator Clinton didn't give up Mississippi. She was there last week. We saw the Former President Bill Clinton, her husband there, Chelsea. All of them, making sure that they did spend some time in that state, because that's a very least. They do want to take it in some of those delegates away.

Every delegate, as you know, counts. But you bring up a very good point and they are already leaping forward, looking ahead to Pennsylvania, 158 delegates. That is the big prize obviously.

John, this is the paper this morning. It's exactly what Hillary Clinton wanted. "Homecoming for Hillary." She started yesterday in Scranton, Pennsylvania. That's the hometown of her great grandparents.

So she is really trying to lay down the roots there. Set roots and say look, I'm moving forward here. I'm going to be here for the next six weeks or so, trying to make sure that I get your vote.

John?

ROBERTS: A lot of the talk of the campaign trail yesterday was over this idea of a dream team. Let's listen to what Hillary Clinton and Barack Obama said about it yesterday.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Obviously, Democrats have to make a choice, and I'm looking forward to getting the nomination, and it's premature to talk about whoever might be on whose ticket. But I believe I am ready to serve on day one.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: You can't say that he's not ready on day one unless he's willing to be your vice president, then he'd be willing to, then he's ready on day one.

(END VIDEO CLIP)

ROBERTS: What about that whole idea, Suzanne, that she's saying Barack Obama is not ready to lead. But last week, she was talking about this idea -- well, maybe he could be my vice president, which means that he'd be a heartbeat away from the presidency and if you want to pick a candidate who can step right in there. He's trying to disarm her, is he not?

MALVEAUX: Sure.

ROBERTS: In trying to get by this idea that people who are sitting on the fence are swing voters might look at Hillary Clinton and talking about a dream team and say, hey, well, if I vote for her, I get two for one.

MALVEAUX: Well, they kind of got caught up in that yesterday -- the Clinton campaign, because obviously, it's the strategy that they're putting out there; appealing to voters that if you vote for me, for Hillary Clinton, you get two for one, Barack Obama.

But they were put on the spot, because they essentially asked the campaign, Howard Wolfson, her campaign communications director. How is this possible that you put him out there and that he can be commander-in-chief, a heartbeat away from the presidency here, but not ready for primetime, not ready to be commander-in-chief?

They couldn't really quite explain that. They said that she would pick somebody who would be ready before the convention in August. And that somehow there would be some period where they would determine that. Couldn't answer the question, got a little caught up in the whole thing, so we heard Hillary Clinton essentially pulling back saying, well it's all too premature but we obviously heard her discuss this earlier in the week as well as her husband. So no more talk of VP for now.

ROBERTS: Any little advantage that these campaigns could possibly try to get. Suzanne Malveaux for us this morning in Pennsylvania. Suzanne, thanks very much.

And remember, stay with CNN for the best coverage of the primaries. We're going to have up to the minute results from Mississippi on CNN's Election Center tonight starting at 8:00 Eastern.

And I know you're looking forward to that.

CHETRY: Absolutely.

You know, we were just talking about the high price of oil and just -- in the past couple of minutes here, the news just in that oil has reached yet another new high.

ROBERTS: I shouldn't have played around with these numbers.

CHETRY: Exactly. We're hearing that oil is coming in now at $109 a barrel. And this is after the dollar hit a fresh all-time low against the Euro. Ali Velshi is analyzing all of this information for us. He's going to tell us what it means for us. Coming up, he's going to be joining us in just a minute. Stick with us. AMERICAN MORNING will be right back.

(COMMERCIAL BREAK)

ROBERTS: 45 minutes after the hour. A couple of minutes ago, I was messing with the numbers on Ali's oil barrel. Apparently, I shouldn't have done that. It was bad karma. The price of oil jumped yet again just in the last 15 minutes.

ALI VELSHI, CNN CORRESPONDENT: No one other than me has ever touched these numbers. And then, you started peeling them off and let me tell you what happened while you're gone. $108.21 was the inter- day high yesterday. Now let me show you what's happened since you were messing with the numbers. This has happened in the last 20 minutes or so.

CHETRY: You know, what's shocking, Ali, is you talked about this before. You said what if oil is just going to keep going up by $1 or more a day? There's 365 days in a year.

VELSHI: There's 365 days in a year. I mean, it doesn't seem like this big of a deal. But when you think of this everyday, it's got to stop. This pace can't continue of oil going up.

CHETRY: A month ago, we were making a big deal about it crossing $100 a barrel.

VELSHI: Yes. And this affects people because it's heating oil and of course, heating oil is you buy in bunches but of course gasoline, and the diesel that's used in trucks that take your goods to the store, the diesel that's used in farm equipment. I mean, there's just no way that this doesn't affect you. You could live in Manhattan and say I don't drive and it doesn't really affect me. This affects everybody.

My cab driver this morning was complaining to me about the fact that he was stopped in an intersection. He was pulled over. He said, I can't afford to drive the streets now looking for fares early in the morning. I just have to wait until someone comes to me. So this is a big problem. We've seen gas prices hitting a record high right now. $3.227, which was the highest price we've ever paid for gas, last May. We now have that number.

Other surveys show gas prices higher than that. We do have Goldman Sachs saying that right now, the only thing saving the price of oil is the fact that there is a slowdown in the United States. And gas consumption has actually decreased. If we start to turn around and the economy gets stronger and people get back in their trucks and start consuming more gasoline, they're talking about gas prices going get higher from here.

ROBERTS: You got to figure another way the price for a gallon of gasoline, where people are going to leave the car parked a little more.

VELSHI: Or buy...

ROBERTS: Discretionary travel will be cut down. How much of this is pegged to the falling dollar. How much of this is pegged to speculation.

VELSHI: There are three things. There is demand, there is speculation. There are people who are actually transferring their investments into oil on the bet that it goes higher. And there is the fact that as the dollar falls, the oil price becomes a hedge for people to invest in. The lower price, the lower dollar causes the price of oil to go up so it's all very tied in.

The bottom line in the point you're trying to get at, I think is that this is not the fundamental price for oil like it would be for gold or something else where there's a supply-demand relationship. This is -- a lot of this is speculation. Bottom line, though, is you have to pay. It doesn't matter what the reason is.

CHETRY: Exactly. All right, Ali Velshi, thank you.

VELSHI: Don't touch the barrel anymore. See what happens?

ROBERTS: It was when you put the one in front of the eight.

VELSHI: That might be it. Yes.

CHETRY: Hands off.

ROBERTS: Some trader looked at that, Ali Velshi is calling for $108 a barrel.

VELSHI: There we go.

(CROSSTALK)

CHETRY: Yes. $109 will seem like a bargain. Thanks, Ali.

Well, in an effort to ease travel delays, the Federal government is cutting the number of flights out of New Jersey's Newark Airport. During peak hours now, Newark will be limited to 83 flights per hour. Similar limits were placed on New York areas. Other two airports, La Guardia and JFK because backups there, starting to spread in New York. Actually, of course, affects other parts of the country as we've seen when we talk about these delays. Forty-eight minutes past the hour now. Rob Marciano joins us to talk more about weather this morning. At least, hopefully, you have some good news.

(WEATHER REPORT)

ROBERTS: Ten minutes now to the top of the hour. Still to come. Our Veronica de la Cruz goes online to check out the criminal complaint that implicates New York's Governor Spitzer. His alleged conversations with an escort agency, ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

ROBERTS: Six minutes now to the top of the hour. The governor of New York, Eliot Spitzer, under fire today for his alleged involvement in a prostitution ring. Our Veronica de la Cruz has been looking through the affidavit and joins us now with some of the highlights available online.

Good morning to you.

VERONICA DE LA CRUZ, CNN CORRESPONDENT: Good morning to you.

ROBERTS: Lengthy document.

DE LA CRUZ: It is. Forty-seven pages and of course, this is all over the blogs as well, John. You know, we've been scouring the web and I want to show you what else we found this morning. The affidavit, also pictures from the hotel room. You know, the guys who do the Yeas and Nays blogs on the examiner.com.

They claim to have gotten inside Room 871 at the Mayflower Hotel in Washington, D.C. The snappiest photos we're looking at right now. This is where Governor Eliot Spitzer allegedly met with a prostitute. Now, the bloggers wrote on their site that they, quote, "got inside the room," John, of where yet another politician foolishly stained his career. So that's online at examiner.com. Again, it's the Yeas and Nays blog.

And then on our own Web site, cnn.com, we have a link to the entire criminal complaint. The document detailing Spitzer, AKA Client Number Nine. His whole conversation with the escort agency and according to the complaint, we're going to take a look, Client Nine told Lewis, the booking agent for the club, that he made a reservation at the hotel and had paid for it in his name.

Client Nine says there would be a key waiting for her and at that one point, Lewis, again, that booking agent, asked Client Nine whether he could give "Kristen" "Extra Funds" at this appointment in order to avoid payment issues in the future.

Lewis said she didn't want a model accepting funds for a future appointment, but that she was going to make an exception. That way deposit could be made so that he would have a credit.

So after the alleged meeting with Spitzer and the prostitute, Kristen, called the agency to report back on her appointment. And according to this criminal complain, she said that she thought it went very well. She told the agency she collected $4,300 and as for Client Nine, she had this to say. "I don't think he's difficult. I mean, it's just kind of like, whatever. I'm here for a purpose."

Again, you can find the entire 47-page criminal complaint, John, online at cnn.com, as well as all of the transcripts for that wiretap phone call. So there is a lot available online at cnn.com. Lots of video interactive. Also, there is a time line of the entire event.

ROBERTS: The big legal point here is this idea that he gave her a train ticket, brought her down from New York, interstate trafficking in women for what they call immoral purposes.

DE LA CRUZ: Yes.

ROBERTS: Potential violation of Federal Law.

DE LA CRUZ: Right. And you know, yesterday, during a press conference we got maybe like a 90-second statement from Spitzer. Not a lot of detail. But then, you turn to the web and there it is. There's a lot online, John.

ROBERTS: It certainly is. Veronica, thanks for pointing it out to us.

Kiran?

DE LA CRUZ: Of course.

CHETRY: Well, he didn't register as Client Nine at the hotel. He didn't register as Eliot Spitzer either. The governor's reported alias and why it may have a friend a little upset, that's ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

CHETRY: The accused.

(BEGIN VIDEO CLIP)

GOV. ELIOT SPITZER (D), NEW YORK: I have acted in a way that violates my obligations to my family.

(END VIDEO CLIP)

CHETRY: The case against Governor Eliot Spitzer. This morning, new details of the sex sting, the money trail, the wiretaps and how long he'll stay in office.

Plus early bird.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Three, two, one, zero, and liftoff of "Endeavour." (END VIDEO CLIP)

CHETRY: A majestic early morning launch, lighting up the sky on this AMERICAN MORNING.

I want to stay up for that, but I fell asleep.

ROBERTS: (INAUDIBLE).

CHETRY: Exactly. I bet you a lot of people are feeling that way this morning.

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