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Issue Number One

State Department Press Conference on Passport Security Breaches; Cost of Sending Kids to College; Richardson Endorses Obama

Aired March 21, 2008 - 12:02   ET

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

ALI VELSHI, CO-HOST: A big endorsement in the race for the White House.
We're going to show you where the open jobs are and one of the hottest new job trends.

And we'll take you inside what the California attorney general calls the worst mortgage fraud he's ever seen.

ISSUE #1 is the economy. ISSUE #1 starts right now.

Hello, everyone. I'm Ali Velshi, and this is ISSUE #1.

Gerri Willis will be along in just a minute.

The economy is issue #1 on the campaign trail, and today a major development in the fight for the Democratic nomination. Just 30 minutes from now, New Mexico Governor Bill Richardson will take the stage in Portland, Oregon, and throw his support behind Senator Barack Obama. Richardson is the only Hispanic governor in the United States, and his support could mean a great deal to Senator Obama.

CNN correspondent Jessica Yellin right now live in Indianapolis with the latest on this.

Hello, Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Ali.

Well, a source close to Bill Richardson tells CNN that it was Barack Obama's speech on race earlier this week that was what really pushed Bill Richardson, the governor of New Mexico, to make this endorsement at this time. As you know, and as we've been reporting, Richardson has been courted aggressively by both the Clintons and by Barack Obama and his surrogates ever since Richardson left the race in January. But the way he described his decision had a lot to do with his feeling that he said Hispanics have been discriminated against.

Minority groups here, especially immigrants, have been victimized by the divisions in this country. And he really felt that he was inspired by that speech and that Barack Obama can unify the country. He also said in a statement that he believes this is the time for Democrats to unite, and rather than fight out a primary for time, try to focus on taking on John McCain.

Now, of course it's great news for Barack Obama not just because he gets one more superdelegate, but also because this could stem the wave of bad news that's been hitting and buffering his campaign in recent weeks. The big question is, could it also trigger other uncommitted superdelegates to follow Richardson's lead?

Now, Senator Clinton has issued a statement saying she respects Richardson, but it's really up to the voters, not the superdelegates to decide this race -- Ali.

VELSHI: All right, Jessica. Thanks very much. Another day and another big twist in this campaign.

Thank you.

GERRI WILLIS, CO-HOST: You will, of course, see the Obama/Richardson rally live right here on CNN. An endorsement of Senator Obama from Governor Bill Richardson would come at a critical time in the primary season.

Pennsylvania is the next major carrot in this campaign. CNN's senior political analyst Bill Schneider, part of the best political team in television, is live in Philadelphia.

Now, Bill, I know you've got some new polls on the economy for us, but first I want to talk to you about what an endorsement by Governor Bill Richardson would mean to Senator Barack Obama.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, it means a great deal in part because Bill Richardson was a member of Bill Clinton's cabinet. He was the ambassador to the United Nations for Bill Clinton. He was the energy secretary under Bill Clinton. So he was part of the Clinton administration, and here he is endorsing Clinton's rival, Barack Obama.

He is a superdelegate, as Jessica indicated, and he could have some influence with Latino voters, although in the remaining eight primaries, none of those states has a large population of Latinos except Puerto Rico. And Bill Richardson is of Mexican-American descent.

WILLIS: Interesting stuff.

You know, the economy is issue #1 on the campaign trail. Let's talk about how Americans feel about the economy. What are the latest numbers?

SCHNEIDER: The latest numbers are interesting because they show that Americans have a very negative view of economic conditions today.

Seventy-five percent of Americans describe them as poor. But they are hopeful. In fact, optimistic about the future.

What do they think economic conditions will be a year from now? Only 38 percent say they'll be poor. Sixty-eight percent think they'll be pretty good. So optimism seems to reign supreme even at a very bad time.

WILLIS: Well, let's hope they're right, Bill. Thank you for that.

VELSHI: Well, many of us have received that phone call at night or that letter in the mail promising that more money can be pulled out of our homes through new loans. In California, prosecutors say some mortgage promises robbed perhaps thousands of people in an alleged scheme.

CNN's Thelma Gutierrez joins us live from San Fernando Valley, California.

Hello, Thelma.

THELMA GUTIERREZ, CNN CORRESPONDENT: Hi there, Ali.

Well, the California attorney general says that that mortgage scam was operated right here out of the San Fernando Valley by a 25- year-old who used telemarketers to cold-call potential victims.

(BEGIN VIDEOTAPE)

GUTIERREZ (voice over): Ronald and Tracylyn Sharrit were living the American dream. They owned their own home, raised six kids. Now the Sharrits are in financial quicksand after what the California attorney general calls one of the worst mortgage scams he's seen.

GERRY BROWN, CALIFORNIA ATTORNEY GENERAL: This is just outright theft. Instead of using shotguns, they're using documentation.

GUTIERREZ: California fraud investigators say a group of young successful mortgage brokers and escrow agents ran Lifetime Financial and several other companies. The CEO, 25-year-old Eric Pony (ph).

TRACYLYN SHARRIT, HOMEOWNER: It's too late to stop it now.

GUTIERREZ: The Sharrits say their ordeal began two years ago with a phone call telling them they could refinance at a low fixed rate.

SHARRIT: They can get us a rate as low as 6.34 percent interest rate fixed for 30 years.

GUTIERREZ (on camera): When you heard that?

SHARRIT: I thought it was a really good deal.

GUTIERREZ (voice over): The Sharrits went to sign the loan and said they walked away because it wasn't what they were promised.

SHARRIT: That evening we got a phone call from Eric Pony (ph), who wanted to come to our home, all the way from L.A., to come to our home and make nice-nice and bring better documents.

GUTIERREZ: But again, they say Eric Pony's (ph) loan wasn't fixed or low interest. The Sharrits discovered somehow the loan went through, a loan they say they never signed. SHARRIT: It was a 40-year loan, amortized starting at 9.5 percent interest with two balloon riders and a prepay penalty of 20 percent. Why would we do that to ourselves?

GUTIERREZ: How did the loan go through?

SHARRIT: My signature showed up later in the loan documents as "Tracy Sharritt." My name is Tracylyn. My name is spelled with one "T," not two "Ts.". They misspelled my name.

GUTIERREZ: Sharrit says her name was forged on notarized documents.

LARRY ROBERTS, DEPUTY DISTRICT ATTORNEY, SAN FERNANDO COUNTY: They created documents that were simply false, and they'd submit them to the escrow company and the escrow company would submit it process it and submit it to the lender.

SHARRIT: It just rolls into this big financial mess that you almost feel like you're breathing under water.

GUTIERREZ: The Sharrits' payments nearly doubled. Their son Matt, who's fighting in Afghanistan, helped out.

SHARRIT: I have a son who is in a war zone who's more worried about his parents right now than he is about what's around the corner for him.

GUTIERREZ (on camera): While the Sharrits were struggling to make their house payments, investigators say Eric Pony (ph) was living the high life, right here behind these gates.

(voice over): It all came to an end this week. The state seized all of Pony's (ph) assets, including Ferraris, a Bentley, and 13 different properties. Prosecutors told the Sharrits Lifetime Financial processed thousands of loans.

SHARRIT: Not just our family, but seniors and single mothers with children. It could happen to anybody.

GUTIERREZ: Pony (ph), his sister Paulette (ph) and four others are now in custody, charged with 47 felonies, including conspiracy, grand theft, and forgery. During their arraignment, each of the defendants pleaded not guilty to the charges.

(END VIDEOTAPE)

GUTIERREZ: Now, how were these people caught? Well, the D.A. says they picked on the wrong person. Tracylyn Sharrit is the president of a Rotary Club. She has connections with law enforcement, with attorneys. She hired an attorney, started digging through the paperwork, and then when she found out what she found out, she turned it all over to the D.A.-- Ali.

VELSHI: Thelma, what a complicated scheme. Thanks for telling us about it. Thelma Gutierrez.

WILLIS: Coming up, we're going to show you where the jobs are right now.

VELSHI: Plus, we want to answer your questions. So send us an e-mail. The e-mail address, issue1@cnn.com.

(COMMERCIAL BREAK)

WILLIS: As the presidential race heats up, a new buzzword has emerged on the campaign trail -- green-collar job.

VELSHI: Will somebody tell me what a green-collar job is, and if they're any good, how I can find one?

We've got Jim Acosta in here to explain what's going on.

Jim, green-collar jobs -- what, where, how?

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Want some coffee?

UNIDENTIFIED MALE: Yes.

JIM ACOSTA, CNN CORRESPONDENT (voice over): After 34 years working in Toledo, Ohio's automotive industry, John Morris (ph) was laid off and left to fend for himself's in a bleak job market.

UNIDENTIFIED MALE: Being that I was in automotive, there just was nothing out there.

ACOSTA: But to his surprise, his skills on the assembly line actually came in handy, landing him a job as a safety engineer at Xunlight, a startup company that makes solar energy panels.

UNIDENTIFIED MALE: I'm a green-collar worker now. It was very exciting for me to be able to start on the ground floor of a new type development.

UNIDENTIFIED MALE: Our modules are lightweight and they're flexible.

ACOSTA: The company's president and CEO, Xunming Deng believes Toledo is a good place to grow his company, in part because of the availability of skilled factory workers like John Morris.

XUNMING DENG, PRESIDENT & CEO, XUNLIGHT: There are some venture capitalists that say that we've got to move to California to grow a successful startup. But there other venture capitalists that come over and say -- the say, "Xunming, this is such a wonderful place because you have all these highly-trained workers."

(END VIDEOTAPE) VELSHI: Hey, we've got breaking news. We just want to break into that and go down to the State Department, where Sean McCormack is speaking about the passport breaches that we heard about this morning.

Let's listen in.

(JOINED IN PROGRESS)

QUESTION: Did she apologized to Senator Clinton? Do you expect her to apologize also to Senator McCain?

Secondly, have you expanded your investigation to include not merely the remaining presidential candidates, but, indeed, all of the other presidential candidates who may have dropped off and whose privacy may also have been violated?

SEAN MCCORMACK, ASST. SECY. OF STATE FOR PUBLIC AFFAIRS: Right.

Secretary Rice expressed the same sentiments to Senator Clinton, and I would expect that she would say the same thing to Senator McCain: We're sorry that this happened and sorry -- and that we take a very serious look.

We're going to do a full investigation and that investigation is going to be led by our inspector general here in the Department of State. Our acting inspector general is going to be supervising the investigation.

The direct lead on the investigation is going to be led by our director of the Investigations Branch. This is somebody who has just recently retired from the U.S. Secret Service as a special agent, who has years and years of experience in investigative work.

The secretary has made it clear, through Pat Kennedy, to them that this is top priority. There's nothing else that's more important than make sure go through and do this investigation.

Now, you bring up a good point. They are going to take a look at these particular unauthorized accesses that we have talked about now in the case of these three presidential candidates, but they're also going to take a look at whether or not there are any systemic issues that need to be addressed.

And in the course of doing that, if they come across any other incidents, of course they are going to report those. And if there's any action that needs to be taken as a result of any information that they may uncover in the course of their investigation, absolutely they are going to act on it.

And one other thing that's important to note: The secretary has made the commitment that once we're completed with this investigation the results of the investigation are going to be handed over and made available to all of our oversight committees up on the Hill, and that includes Congressman Waxman's committee.

So we are in the mode here of being as transparent and open as we possibly can.

I think the secretary expressed everybody's sentiment here. Of course you're mad and irritated if somebody's looking at your personal information. I think any American can relate to that.

And I have to tell you that we take very seriously the trust that is put in us in safeguarding American citizens' personal data. There's a trust relationship there when somebody hands over a passport application or any other sort of application to the U.S. government. We take that trust very seriously.

And we try to put in place sophisticated and elaborate safeguards to make sure that if people break the rules -- and we don't want to see them break the rules -- but if people break the rules, that that's detected and that we can act to punish those people.

And that holds not only for notable personalities, such as presidential candidates or any other notable people in American society, but for every citizen.

The controls may be a little bit different, and I'm not going to get into how we monitor the activities and access to these people's files, because to do so would really only be to -- would only serve to tip people off to how we monitor the accesses.

But it's an important point because I know a lot of people are watching this story and interested in this story, and I understand why.

But people should know that our vigilance applies not just to VIPs, notable personalities. The same kind of vigilance applies to every other passport application that we handle.

QUESTION: Can I follow up? Just, I didn't understand one thing.

You said you're going to take a systemic -- you're going to take a look to see if there is a systemic issue.

I mean, are you going to specifically look at both all the other presidential candidates and, indeed, all the people that you designate as high-profile people to make sure that this hasn't happened to them?

And then the other thing is, this morning you said, and last night in the call, you said the system worked. Do you believe that the system worked when the system was not able to prevent the multiple accesses -- unauthorized accesses to one presidential candidates and now the access -- unauthorized access to two others?

Do you still feel like the system worked?

MCCORMACK: Yes, I do feel like the system worked. And we do feel like the system worked, but the system isn't perfect.

And what you do in these kinds of circumstances is you learn.

And what we have learned here is that, for some reason, there was -- people at the working level did the right things.

They confronted these employees who had accessed these files in an unauthorized way and they took action. That was the right thing to do and that's by the book.

What didn't happen is that that information didn't rise up to senior management levels so that we could be made aware of it. That should have happened.

And Pat Kennedy, who is our undersecretary of management, has made it clear to everybody involved in this process that he expects that to happen. If there are any future such incidences -- and we all hope that there aren't -- that he expects -- and frankly, the secretary expects -- that senior level management is going to be made aware of these things.

And why is that important? That's important so that people in positions of management responsibility in this department can take steps that they deem prudent and that they deem right to make sure that you don't have those kinds of multiple incidences.

And it's a fair question to ask: Well, if senior management had been notified and you had somebody in a position more senior in the management structure notified of this, could they have taken a decision to perhaps put additional safeguards in place? The answer is yes.

And Pat Kennedy is looking at ways in which -- in particular for the three individuals in this case, Senators Clinton, Obama and McCain, who have had their files accessed in an unauthorized manner -- looking at how we can put in place safeguards so that there is a positive control at a senior management level for anybody who wants to do work on those files.

Now, in doing that, we want to make sure that we can do our job and we can do the work that we've been assigned to do. So that's one thing we are going to take a look at system-wide.

We have already made it very clear we expect information to flow up, which didn't happen in these cases. We expect it to happen in the future. The secretary expects it to happen in the future.

And the inspector general will take a look at any issues -- any other issues that might be identified in the course of their work.

As for your other question about other individuals, let me get back to you. I'm not aware that we have done any other searches.

But let me take that question. We'll get back to you.

QUESTION: Sean, why did it take extra time to discover the breaches of Senators Clinton and McCain? Why wasn't that -- why didn't that come up yesterday in the same search?

MCCORMACK: Well, it's worth going back and doing the timeline here. And it gets -- it plays off the point I just made. And that is, the information didn't flow up.

Frankly, we should have known about these unauthorized accesses when they happened, senior management of the department.

Why? So we could have taken some steps to address it.

But it's worth going through the timeline of this particular story.

We first became aware of questions related to these unauthorized accesses yesterday afternoon when a reporter e-mailed me to ask about it. I inquired of Pat Kennedy. He delved into the issue, found the information.

As soon as we realized that there were these unauthorized accesses for Senator Obama's passport files, collected the information, we briefed the secretary, we briefed Senator Obama's staff, all before we ever replied to the reporter.

Then replied to the reporter and then we all talked to the rest of you, as the questions came in.

While we were doing that yesterday afternoon, we did ask ourselves the question: "Were there potentially -- since there were these accesses and interest in Senator Obama, presidential candidate, were there any unauthorized accesses of the other remaining presidential candidates?"

So we immediately took steps to search the records. It takes some time. We started that process yesterday. We got the answer this morning.

Before I talked about those unauthorized accesses in public with you, we wanted to make sure we briefed the staffs. We briefed the staffs. And the secretary also wanted the opportunity to first reach out, as appropriate, to each of the senators. So that's why it took time.

QUESTION: But given -- given...

(CROSSTALK)

QUESTION: ... about McCain and...

MCCORMACK: No, I did not.

QUESTION: But given the fact that it involved one staff member in two of the -- two of the cases, how could that information not -- and we understand there was disciplinary action taken -- have could that not have come to light last night?

MCCORMACK: I can't tell you. You know, I can't tell you.

It could be as simple as one of those things somebody asks you a direct question about one thing and they gave you the direct answer about the one thing that you wanted to know about. I don't know the answer to it.

The fact of the matter is we did discover it. And with respect to that person, we are -- I can assure you that person's going to be at the top of the list of the inspector general when they talk to people, and we are currently reviewing our options with respect to that person.

QUESTION: Is that person one of the two people who was dismissed?

MCCORMACK: No. No. Currently employed by the contractor.

QUESTION: There is something I didn't understand. These people, what did they have access to exactly? Was it only the renewal -- application for renewal of the passport or was it something else, traces of past trips, for example?

MCCORMACK: Their passport files.

Now, what is in a passport file will vary from individual to individual, and I don't know what is in each of these passport files, and certainly I wouldn't talk about it without the expressed authorization of any of these individuals. That holds true whether you're a senator or an average American citizen.

People can get a sense for what is in a passport application. At a minimum, what's in a passport file is your passport application, whether it's your original or your renewal. And you can take a look at -- anybody, any citizen can take a look at it, it's on our Web site if they go to pptform.state.gov, and you can take a look what's on there.

Just so people can see, this is what one looks like.

MCCORMACK: And it has several parts. The instructions here. It has a lot of basic data: your name, your date of birth, your mailing address, contact information, information about your parents, emergency contact information, basic biographical data.

But, you know, and I'm not going to run through every single thing that's on there, but people can take a look at it. And it's basically the same for you.

(CROSSTALK)

MCCORMACK: What's that?

QUESTION: It could be more?

MCCORMACK: In a passport file?

QUESTION: No, in the file. Yes.

MCCORMACK: In the file? Yes. It could be. I don't know and I'm certainly not going to speculate. And, for our purposes, it actually -- and I know it's important to the individuals -- but for our purposes, it doesn't matter what's in the file. It's the fact that the file was accessed in an unauthorized manner that is the problem.

And I also would like to take just one step back just to give you a little bit of context here, as well.

I don't have exact numbers for you, but every single year there's probably a handful of cases where you have unauthorized access to passport data. And I'll try to do a little bit more research and get you some specific numbers.

But to provide you a little bit of context as well -- and this is important the American people understand this -- is that last year we issued 18 million passports. And the way the system works, and part of the actual safeguard system that we have built in, and I'm not going to get into this, but essentially, for those 18 million passports, basically, people will have had to, in some way, shape or form, accessed people's information, when you add at all up, tens of millions of times for legitimate purposes.

So you have literally tens of millions of these individual, small, legitimate transactions when you're dealing with these passport issues, and we have a handful of cases every single year where it's unauthorized access.

I'll tell you -- that's not making excuses -- I'll tell you, one is too many.

But, you know, the important thing here is we do have a system in place to catch people who try to access these files in an unauthorized way and we think we do a pretty good job of catching them and disciplining them.

(CROSSTALK)

MCCORMACK: I asked the question of our Consular Affairs people, tell them to come out here and try to give you a little bit of context.

And, like I said, I'll try to get you the exact numbers.

And they told me -- I said, "Quantify it for me." They said, "It's a handful each year that we know about."

Now, of course, there's always the possibility that there are some that you don't know about. That always is a possibility.

But in terms of the people that are caught, the description was given to me was a handful.

QUESTION: OK. The reason I asked is we just learned of five in the last, you know, so it makes me wonder...

MCCORMACK: Maybe two handfuls. QUESTION: Maybe -- but maybe there are lots that are simply not captured, and you just don't know.

MCCORMACK: There is always a case you don't know what you don't know. But again, I'm going on the information that's been provided me when I asked that question. Let's all go down from right to left.

QUESTION: Can you talk about the system of flagging high-profile cases? Can you talk about that a little more generically, if not specifically, whether you are talking about presidential candidates only. Are you talking about rock star personalities? Are you talking about film stars? I'm not trying to be silly or funny here. There's an impression out there that people might have gone and accessed -- you gave us one yourself of the person who accessed Hillary Clinton's file.

MCCORMACK: Right.

QUESTION: So if somebody wanted to see their favorite film star, their favorite recording artist, could they do that?

MCCORMACK: If they have a passport file, theoretically, it's possible, yeah. People every day from people who are in the news, in a variety of different forum, whether they're on CBS news or "People" magazine or any other form of the media, all the way to people just applying for a trip to visit their relatives, should have the trust. Now is it possible that there could be access to those kind of files? Yeah, there could. And it's the Bureau of Consular Affairs that manages the program of applying, for lack of a better term, these flags to these kinds of files, files where you might reasonably expect that there is some form of temptation for whatever reason to look into their files. I don't -- I can look into this for you. I don't have a number, like a percentage of all the files that are flagged. Yeah, it could be. Anybody from politicians to movie stars to novelists to whomever.

QUESTION: And another question. Can you name the two companies or contractors that these people - that the three people worked for?

MCCORMACK: At this point we're not prepared to release the name of the contractors. There could be a point here at which we will. There's been a request from the Hill for that information, along with a lot of other information. So we'll take a look at that. At the moment, not prepared to provide that. But we'll take a look at it.

QUESTION: Why are you not naming the companies? It is a public contract.

MCCORMACK: Look, it is a legitimate question. We're taking a look at it. I think that at this point, we've just started an investigation. We want to err on the side of caution and allow investigators to get a start without some of the attention that comes with talking about the names of the contractors. We'll see. It's something that we're taking under advisement. But at this point in time we're not going to talk about it. QUESTION: Could you tell us what's the fate of this third person whose access, both Senator McCain's and Senator Obama's, why he has not been fired at this point, why the other two have and especially in light of the fact that has accessed two of them, why you can't --

MCCORMACK: I'm not going to play close to the lines in terms of personnel matters. But I'll just say that we are reviewing our options with respect to that individual's continued employment with the contractor working at the State Department. I can tell you that that individual no longer has access to this kind of information.

QUESTION: In the Clinton incident, it was a person that was in training. Do you think it's appropriate that somebody that's in training can go ahead and access the records of somebody as high- profile Senator Clinton, and also why is that person just admonished? Are they still working? Are they still able to continue on their job or --.

MCCORMACK: It was a person -- this was during the past summer when we were bringing in people who don't normally do passport work, so-called search to deal with the passport backlog. I don't have the specifics of the individual, but again when you're doing training, you need to be able to actually work with the system in order to do a good job and to do the job well. I can't speak to the specifics of the incident because I don't have them beyond what I've told you, that this was a training environment. It's inexplicable. Why when you're sitting in a classroom and somebody tells you, use your name, use your mother's name, use your father's name as part of this training exercise in order to access and work with a file and they choose to enter Senator Clinton's name. It's inexplicable. Why would somebody do that? I don't know why. The fact is, it was caught immediately; the person was admonished. I believe that they went on to continue their training without any further incident but I can check into that for you.

QUESTION: Can I ask you about the DOJ part of this? This morning you said that the State Department had contacted the DOJ...

MCCORMACK: Right, the IG.

QUESTION: I'm sorry, the IG and you'll proceed together. Some of us were confused about what that actually meant. This is not a joint investigation of any kind.

MCCORMACK: No. No. And I know that people get, rightly so, very particular about terminology. I wouldn't characterize this as a joint investigation. I'll let the DOJ characterize their level and nature of involvement. We have invited them in to participate in the way that they see fit. Again, for the reasons that I talked about, as a hedge against any potential further action that might be required that would require the DOJ to take a look at whether or not they would take any action. Again, that's completely their call. It's just a way of ensuring that there is openness and transparency and that if there is any need for further action beyond just the IG investigation, that the Department of Justice would have the option of looking at what it is they would or would not do, having had access to all the information and how we did the investigation from the very beginning.

QUESTION: Sean, was this person -- can I follow up real quick on the question about the person from last summer? This person a PMF, was not a contractor?

MCCORMACK: That person is a State Department employee, not a contract employee. I don't know if they were a PMF. I'll see if we can, A, find that information and, B, see what we can say in public.

QUESTION: About these contractors, is it common practice to farm out this kind of work to these private companies or was is this just because of this recent backlog? Can you tell me how that works?

MCCORMACK: Sure. We have at the Department of State, as many, many other cabinet agencies do, we have contract relationships in order to help do some of our daily tasks. That's done for a variety of different reasons. Normally it is done because it is cost effective, being good stewards of the taxpayer dollar, while getting the job done in an effective way. Some of you guys asked earlier about how many -- what's the ratio of full-time U.S. government employees to contract employees in the office of passport services. As of this month, there are about 1,800 U.S. government employees working within the office of passport services as of this month. There are about 2,600 contract employees working within the office of passport services. Now these people -- the contract employees will do a range of activities, all the way from system design, working on the actual software systems that people use in order to manipulate these -- this data and to produce passports to data entry to customer service. So there is a wide variety of functions.

ALI VELSHI, CNN CORRESPONDENT: All right, on the left of your screen we're listening to Sean McCormack in Washington at the State Department about a remarkable story of the passport files of John McCain, Hillary Clinton and Barack Obama having been accessed by contractors and staff members, possibly for unauthorized reasons, but a story with more answers than questions. Zain Verjee, our State Department correspondent, joins us now to bring us up to speed on exactly what is going on here. Zain, this has all developed very quickly. We thought it was just Barack Obama. Then we found out Hillary Clinton as well. Then we find out John McCain as well. Somebody's been snooping through their passport files.

ZAIN VERJEE, CNN CORRESPONDENT: Exactly. It's continued to escalate. across the day and really sheds the State Department in a very poor light. It is clearly an embarrassing situation for them to have all three presidential candidates here have their records snooped into. What Sean McCormack said there was that Senator Clinton's file was actually snooped into by a trainee over at the passport office. That trainee he said just typed in the name and it was caught immediately that there was a breach and the situation was addressed. But remember back when there was the whole passport log? They brought in a whole bunch of new people and all that? Well, that's when this happened. That's one of the questions that's being raised, is you bring if all these contractors, but what kind of background checks are you doing here. What kind of access are they really having to these sorts of files? On Senator McCain, he said that one of the people who accessed Senator Obama's file also accessed Senator McCain's file and that person is still employed by the contractor here. So he's answering some pretty tough questions about that. Lastly, he said Secretary Rice had already spoken directly to Senator Obama and apologized, she said I'm sorry. She spoke to Senator Clinton as well and said I'm sorry and she's expected to speak to Senator McCain, too.

VELSHI: Zain, we are not clear yet on what they had in those files. Sean McCormack held us a passport application, but your file could be your passport application, could be other things, too?

VERJEE: Yeah. I mean everyone's file really varies is what Sean McCormack said. On speaking to State Department officials here familiar with files and those sorts of things, what they say is they're really generally pretty minimal basic information. If you've applied for a passport, there is a scanned copy of the application, your own passport photo, bio information, when you were born, emergency contact, Social Security numbers. So there is information there. There could be a lot more in those files that we don't know about, but that's why the questions are being raised and it's clearly a sensitive and volatile situation the State Department has to dig itself out of.

VELSHI: All right, Zain Verjee, our State Department correspondent is going to stay on that story. On the right side of your screen, you're looking at Portland, Oregon where New Mexico Governor Richardson is about to endorse Senator Barack Obama and throw his support behind him. We're going to take a quick break and we will continue this coverage in just a moment. You're watching CNN.

(COMMERCIAL BREAK)

VELSHI: We are looking at pictures of Portland, Oregon, where New Mexico Governor Bill Richardson is about to appear to endorse Senator Barack Obama in his nomination bid. We'll be covering that live.

But first back to issue number one, Gerri Willis.

GERRI WILLIS, CNN CORRESPONDENT: While issue number one is the economy, expense number one for those who have paid off their mortgage is usually college tuition. A new poll out shows that 42 percent of parents worry about being able to afford the college bill for their children. Thirty five percent say they are somewhat confident they can. Allan Chernoff joins us now with a look at the ever-rising cost of sending kids off to college. Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Gerri, I'm certainly worried about this, especially since I have twins. This is one of the most daunting aspects of being a parent, the prospect of paying for college education. With the stock market so volatile, it is getting especially worrisome for parents.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Eric Horowitz, a divorced single dad, already carries a heavy load paying for daughter Elizabeth to attend private high school. She's a junior and before long, dad will be paying college tuition.

ERIC HOROWITZ, FATHER: It's sort of like I feel how am I going to make it. I sort of calculate it, it's four years, how am I going to get all four of the years through and hopefully she won't go to graduate school.

CHERNOFF: $32,000 is now the average for tuition, room and board at a four-year private college. Eric, a self-employed executive coach, has been saving what he can. With college tuition fast approaching, he recently shifted some of his assets out of the stock market into cash hoping to protect his money.

HOROWITZ: I think the stock market's always risky. I say you always bet on yourself first. So first put your money into yourself, into your children.

CHERNOFF: Mutual fund giant T. Rowe Price says it's been seeing parents pulling back on college savings as the stock market has struggled this year.

UNIDENTIFIED MALE: New accounts actually for 2008 are down about 20 percent, which is a pretty significant drop.

CHERNOFF: Financial adviser Tom Henski tells clients to save every year, ideally in accounts like so-called 529 plans that accumulate tax-free if the money is spent for college.

UNIDENTIFIED MALE: What's going to make the difference is putting that money away on a regular basis, investing it the right way with a long-term approach.

CHERNOFF: Though parents with children heading to college should reduce exposure to the stock market, advisers say, because their college bills are about to come due. Money in the stock market, they argue, is primarily for the long-term.

(END VIDEOTAPE)

CHERNOFF: Eric says he has not saved nearly enough to pay for college. His plan is to set aside as much of his annual earnings to pay for his daughter's tuition and if he doesn't have enough, he'll just have to take out loans. Gerri, unfortunately that's what so many of us have to do.

WILLIS: Allan, I know this is a particular concern of yours, thanks for that. Ali?

VELSHI: Thanks, Gerri.

You're watching issue number one here on CNN, issue number one is the economy. It's the biggest issue out there but you know what, the actual election is a bit of an issue, too which is why you're looking at a stage in Portland, Oregon where we are expecting to hear from Barack Obama. We also are awaiting news of New Mexico Governor Bill Richardson endorsing Barack Obama today. We will stay live with that and with issue number one. Stay with us; you're watching CNN.

(COMMERCIAL BREAK)

VELSHI: You are looking at a live shot of Portland, Oregon where we are expecting to hear from Senator Barack Obama, a campaign rally. We are also awaiting news of New Mexico Governor Bill Richardson endorsing Barack Obama in this campaign. So we're staying live with that. But you are watching issue number one. Issue number one is the economy and how it affects your life, your wallet. Let's go over to Gerri Willis at the help desk. Gerri.

WILLIS: Hi there Ali. It is time now for the help desk, time to hear from you. Let's get right to your e-mails. For that we turn to the CNN money team, today, Eric Schurenburg, the managing editor of "Money" magazine, CNN business correspondent Stephanie Elam and senior correspondent Allan Chernoff. Welcome to all of you. Let's get right to those e-mails. Number one for Bill of Florida, the government never gives us something for nothing. No kidding. So the question is this -- will the stimulus checks we receive be taxable as income next year? Stephanie.

STEPHANIE ELAM, CNN CORRESPONDENT: They will not be taxable. This is one of those things though. There is a catch, so just so you know Bill, you do have to file a 2007 tax return. If you don't file that, then you will not be able to get that check in May. So even if you're not expecting to have to pay anything, still make sure you file by April 15th so you can get your check back and no taxes.

WILLIS: All right, guys. Let's wrap it up here for just a second. We want to go to Brianna and Don in Atlanta. Take it away.

DOM LEMON, CNN CORRESPONDENT: Thank you for that Gerri. We want to get you to -- I'm Don Lemon here with Brianna Keilar at the CNN world headquarters in Atlanta. We're going to start the CNN NEWSROOM just a little bit early Brianna because of this endorsement.

BRIANNA KEILAR, CNN CORRESPONDENT: This is a campaign rally that you are looking at going on in Portland, Oregon, this crowd here awaiting Barack Obama to appear. There you see the man of the hour. This is New Mexico Governor Bill Richardson.

LEMON: Complete with a beard.

KEILAR: That's right. We are awaiting official news from him that he is going to be endorsing Barack Obama.

LEMON: This is a key endorsement for Barack Obama, especially when it comes to Hispanic Americans. It was seem that this and of course the experience question that's becoming his Achilles heels. He had not gained much traction when it came to Hispanic voters and this possibly may help him out. Of course, New Mexico governor dropped out January 10th and there has been some concern about who he might endorse, whether it be Hillary Clinton or Barack Obama.

KEILAR: That's right. Both campaigns have been seriously lobbying Bill Richardson. This is also really important for super delegates as well, because Bill Richardson is a super delegate, one of nearly 800 super delegates, Democratic party officials, who their input is going to be very significant. So maybe more important for super delegates and sort of influencing them than just the regular average voter.

LEMON: Absolutely and of course the other endorsement that everyone's concerned about or worried about, is who he's going to endorse, is the other senator who's been in question, who dropped out of the presidential race as well, John Edwards. So Right now Bill Richardson who is a governor who is now about to endorse Barack Obama. Let's listen.

GOV. BILL RICHARDSON (D) NEW MEXICO: My friends, earlier this week an extraordinary American gave a historic speech. Senator Barack Obama addressed the issue of race with the eloquence and sincerity and optimism that we have come to expect of him. He didn't evade the tough issues to soothe us with comforting half-truths.

Rather, he inspired us by reminding us of the awesome potential reciting in our own responsibility. Senator Obama could have given a safer speech. He is, after all, well ahead in the delegates count for our party nomination. He could have waited for the controversy over the deplorable remarks of Reverend Wright to subside, as it surely would have.

Instead, Senator Obama showed us once again what kind of leader he is. He spoke to us -- he spoke to us as adults. He spoke to us as adults. He asked us to ponder the reign of our racially divide past, to rise above it and to seize the opportunity to carry forward as many patriots of all races who struggled and died to bring us together. Senator Obama reminded us that cynicism is not realism and that hope is not folly. He called upon us not just a dream about a less racially divided America, but also to do the hard work needed to build such an America. He asked every American to see the reality and the pain of other Americans so that together we can rise above that which has divided us. He appealed to the best in us.

As a Hispanic American, I was particularly touched by his words. [ speaking Spanish ] I've been troubled. I've been troubled by the demonization of immigrants, specifically Hispanics, by too many in this country. Hate crimes -- hate crimes against Hispanics are rising as a direct result that now in tough economic times, people look for scapegoats and I fear that people will continue to exploit our racial differences and place them on others not like them.

We all know the real culprit, the disastrous economic policies of the Bush administration. Senator Obama has started a discussion in this country that is long overdue and rejects the politics of pitting race against race. He understands that clearly by only bringing people together and by bridging our differences can we succeed together as Americans. His words are one of a courageous, thoughtful leader who understands that a house divided against itself cannot stand. And, after eight years of George W. Bush, we desperately need that kind of leader.

Our national security and our global standing have been gravely damaged by the divided partnership of recent years. We need a president who can bring us together as a nation so that we can face global challenges and repair the damage done in the last eight years. Barack, I am convinced that Barack Obama will make the historic and vital investment into clean and renewable energy to help create green jobs and fight global warming.

Barack knows that the safety and future of every American child requires that we restore our shared sense of national purpose so that we can work together to rebuild our alliances and rehabilitate our image in a dangerous world. By uniting our nation, we can reverse America's global decline. We must restore our international reputation, our influence and our capacity to lead others. America must become the beacon for the world again.

We need a foreign policy based upon American ideals, and not the mere ideology of a president, a foreign policy of diplomacy and respect for international human rights. We prospered and prevailed in the cold war because both our enemies and friends knew that containment of the Soviet Union and the promotion of democratic values was not a Democratic or a Republican policy. It was an American policy, the very essence of what America was.

Senator Obama understands the importance of realism, the principle of bipartisanship in foreign policy. He opposed the Iraq war from the beginning because he knew that despite what the administration claimed, that this war would not be easy. He also opposed the war because he saw the president's rush to employ military force and to do so without the support of our allies. And he saw the war also when it also became a terrible source of partisan political division and a catastrophic distraction from the war that had united against the real threat posed by al Qaeda.

Now I trust him to do what is long overdue -- end the Iraq war and bring our troops home. I know Senator Obama quite well. I got to know him when I chaired that last Democratic National Convention where he gave that wonderful keynote address.

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