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Texas Supreme Court Ruling in Polygamy Case; Obama Weighs Iraq Visit; New York Governor Orders Same-Sex Marriages Recognized

Aired May 29, 2008 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: To our viewers, you're in THE SITUATION ROOM.
Happening now, after a challenge from John McCain, Barack Obama weighs a trip to Iraq. It's been nearly two-and-a-half years since his only visit there.

Would he learn anything new, though, if went?

We'll get a reality check from CNN's Michael Ware. He's in Baghdad. He's been there for five years.

An American businessman testifies he gave Ehud Olmert envelopes stuffed with lots of cash. Now, the Israeli prime minister is under growing pressure to resign. There is a new challenge today from his own inner circle.

And the actress Sharon Stone feels the fallout after suggesting China's earthquake tragedy was bad "karma" brought on by its actions in Tibet.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

But we want to begin with some breaking news out of Texas right now, where the state supreme court is due to rule any moment now in the case of those children taken from a polygamist ranch.

CNN's David Mattingly is on the scene outside the courthouse for us.

All right, set the stage -- David. Tell us what's going on.

DAVID MATTINGLY, CNN CORRESPONDENT: Wolf, we're expecting that ruling from the state supreme court any minute now. What that's going to tell us is the next chapter, where this massive case is going.

The state was arguing before the supreme court that their ruling earlier should stand, that they had every right to take all 400 plus of those children out of that ranch because of what they considered to be a prevalent practice in which young girls were raised and taught that it was OK to marry adult men.

And for that reason, the state took all those children into custody. But an appeals court last week overturned that decision, saying that wasn't right, the state didn't have the right to do that, that the state should have considered physical evidence and individual cases for each and every one of those children.

The state supreme court has been looking at this and that's the ruling we're expected to see shortly.

Will the original decision to take all 400 of these children stand or will the state supreme court go along with the appeals court, saying that these children should be allowed to go home or somewhere in between?

We're about to find out shortly -- Wolf.

BLITZER: It's been, what, as you say, nearly two months since these nearly 400 -- or approximately 400 children have been separated from their parents?

MATTINGLY: That massive raid happened in early April. It shocked everybody, including the Texas State Child Protection Service workers who went in there. They weren't prepared at all, they say, for what they found. They found a lot of young mothers -- a lot of women who apparently had given birth as minors.

So, again, very sensational. A huge case back when this happened. And this is just the latest step to see where this massive case is about to go.

BLITZER: So this is the Texas Supreme Court.

Is there any appeal beyond this?

MATTINGLY: It is possible that this could go to the U.S. Supreme Court. But the state supreme court may have the final ruling here. But, again, we're waiting to see exactly what that state high court ruling is going to be.

BLITZER: And I take it that ruling is coming in very, very soon. The ruling is...

MATTINGLY: Wolf, hold on just a...

BLITZER: Yes, go ahead.

MATTINGLY: Wolf, I'm being told what the ruling is. Tell me...

UNIDENTIFIED MALE: (INAUDIBLE).

MATTINGLY: What?

OK.

UNIDENTIFIED MALE: The motion has been denied. (INAUDIBLE).

MATTINGLY: OK. There are two judges who have denied the motion what -- and that means what?

Tell me what that means.

UNIDENTIFIED MALE: (INAUDIBLE).

MATTINGLY: That means that the appeal is denied and that the children would be going back to their parents, Wolf. So a huge turnaround in this case.

BLITZER: And that means the authorities -- the Texas authorities now have to begin this process of making sure these 400 children are reunited with their parents, their mothers. I guess that's going to be easier said than done. It's not going to be all that easy, given what's happened over these two months.

MATTINGLY: State officials have all along been saying that in itself will be hugely problematic, because they have yet to determine actually who the biological parents are for some of these children. They haven't had the DNA results come back that was taken several weeks ago. So the state, again, having a huge task ahead of it.

We'll see where this ruling takes us and get more specifics for you a little bit later.

BLITZER: All right, David.

Thanks very much.

David Mattingly watching this story for us.

It looks -- unless there's some other final appeal -- it looks like those 400 children are going to be reunited with their parents, unless the authorities -- the Texas authorities -- can find a way to appeal this decision by the Texas Supreme Court.

All right. We'll stay on top of this story and continue to watch it for you.

All right. A lot of prodding by John McCain. Barack Obama is now talking about a possible -- a possible trip to Iraq at some point before the November election. The Republican National Committee notes that it's been, what, 872 days -- and they're being very specific about this -- since the Democratic candidate's last visit.

CNN's Brian Todd is walking into THE SITUATION ROOM right now -- Brian, you've been watching this story for us.

What would the value of such a visit by Barack Obama -- presumably a very short visit to Iraq -- actually be?

BRIAN TODD, CNN CORRESPONDENT: Well, ostensibly, Wolf, at the outset, it would be to get the clearest possible view of security on the ground before making critical decisions as president on U.S. troop presence in Iraq. But there are a lot of questions today about the high level visits to Iraq taken by many officials and whether they really bring any clarity at all.

(BEGIN VIDEOTAPE)

TODD (voice-over): Determined not to be drawn into what his campaign calls a political stunt, Barack Obama declined John McCain's offer to go on a joint visit to Iraq.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: They're going to try to come up with the worst. But I think American people are going to be a lot more interested in whether or not we're focused on the problems.

TODD: Responding to a McCain challenge to at least go to Iraq, Obama says he's considering it. He's been once to McCain's eight visits and the Republican believes that means Obama is not as qualified to make sound judgments about America's troop presence.

But would a visit change Obama's perception of security on the ground?

On one of his trips, McCain walked through a Baghdad marketplace and commented about how safe it was. But he had a heavy security cordon.

Marvin Ott has been to conflict zones more than a dozen times as a key Senate aide. He says because of Obama's high profile, security would be almost overwhelming and Obama's view heavily influenced by his hosts -- the U.S. military.

MARVIN OTT, FORMER SENATE AIDE: That means if you're Barack Obama, is you're going to be meeting people in highly set-piece sorts of encounters. You're going to be getting the party line.

TODD: Ott says some congressmen and their aides have been to push hard and break away from their security umbrella, talk to real people on the ground and get more blunt assessments. Obama, he says, couldn't do that.

But Ott and Republican Congressman Chris Shays, who's been to Iraq 20 times, say there's still value in going.

REP. CHRISTOPHER SHAYS (R), CONNECTICUT: They can bring the Iraqi politicians to talk with you. You can question them. Then he can go out and see our troops in forward positions. And he could then meet with the Iraqi troops that serve side by side with the Americans.

(END VIDEOTAPE)

TODD: Now, Chris Shays and others say that you can get a lot out of just talking with these people, even if it's confined to the Green Zone. You can hear firsthand accounts, read their eyes, read their body language. Just smelling the air on the ground helps, they say. Shays says Obama needs to go to Iraq two or three times to get a more accurate picture there -- Wolf.

BLITZER: And, Brian, these trips would not be privately funded?

TODD: None of them are. Ott and Shays tell us that they're underwritten by Congress and the State Department. In other words, that's code for you and me the taxpayers -- Wolf.

BLITZER: All right. Brian, thanks very much.

TODD: Sure.

BLITZER: And joining us now, our correspondent in Baghdad, Michael Ware -- Michael, what do you make of this to-do that's going on here, whether or not Barack Obama should actually go to Baghdad, see what's going on?

Senator McCain saying, you know, he should go over there and talk to Iraqis, talk to U.S. military and diplomatic leadership over there.

What's your sense of this -- this whole uproar?

MICHAEL WARE, CNN CORRESPONDENT: Well, to me, honestly, Wolf, it seems like a bit of a storm in a teacup. I mean I have to say from the outset, I'll give respect to any U.S. decision-maker who wants to come and see at least what it is they can see, no matter how narrow that prism is.

However, I'll issue a word of caution, too. I mean Senator McCain has been here, what, more than half a dozen times. And we've seen him get assessments of Iraq terribly wrong. So I wouldn't be hanging my hat on the fact that your opponent has only been here once.

And let's not forget what do American officials get to see?

Well, they get to see the rooftops of a lot of Iraqi houses as they chopper over them or across vast expanses of desert. They get to see rooms in the inside of U.S. bases in the Green Zone, both of which are divorced from reality. And they'll get inundated with military briefings.

Now, in these briefings, in the past, officials have been told the insurgency was in its death throes, there was no civil war, that Iranian influence wasn't that big a problem, that Al Qaeda had been defeated. I mean, you really aren't going to get much of a real picture. It's almost by definition impossible.

And General Petraeus, the commander in the war here, doesn't pull any punches. So you almost could gain as much from having a private chat with him when he was last on Capitol Hill.

Nonetheless, I say, respect to anyone who wants to come here and try. But, really, don't raise your expectations -- Wolf.

BLITZER: You've been there now what for some five years.

What would a U.S. leader -- a major senator or presidential candidate or a president, for that matter, really need to do to go over to Iraq and get a sense -- a real understanding and appreciation of what's going on?

A, how long would they have to stay, and how would they be able to do it? WARE: Well, obviously it can be very, very difficult. And I guess, in many ways, they've got to rely on their deputies and lieutenants, because any answer you get is not going to be one without a filter. They're going to be -- they're going to be shaped in one way or another.

Any Iraqi official you talk to is going to play the same old game. They're going to tell the Americans what they think the Americans want to hear. And American commanders have to impress, as well. I mean and they'll give as frank an assessment as they can. But so often we've seen, even the American commanders have made miscalculations during this war. And let's not forget, I mean, the strictures of a U.S. official coming here, they're such a grand target.

Now, let's compare that to the visit of the Iranian president, Ahmadinejad. He announces a visit weeks in advance. He didn't come in secret. He drove from the airport, didn't chopper. He stayed outside the Green Zone overnight and he walked the streets of Baghdad. And he didn't have 100 American troops around him, like Senator McCain.

So it's going to be extraordinarily difficult for them to ever get a real picture. Perhaps, for example some other people -- I'd be more than willing. I'd challenge either candidate who comes here to sit down and give me 20 minutes. And I speak to the insurgents, I speak to the militias, I speak to the Iranians and I speak to the Iraqi officials in their private moments.

Let's have a shot at it -- Wolf.

BLITZER: Maybe they'll just do that.

Michael, thanks very much.

WARE: Thank you, Wolf.

BLITZER: Let's go from Michael Ware to Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Former White House Press Secretary Scott McClellan is talking now. Everybody but the White House is listening. McClellan strongly defended his memoir, highly critical of the Bush administration, in a television interview this morning.

McClellan said the president decided to go to war against Iraq shortly after 9/11. He said Mr. Bush did not review all the evidence before making that decision and instead relied on his gut.

That's a comfort, isn't it?

McClellan said he became disillusioned with the administration once he realized he was being used as a pawn in a much larger political game. He said the president and his aides operated in "a permanent campaign culture" -- his words -- which caused them to ignore the facts leading up to the war once those facts didn't fit their picture and advance their political agenda. McClellan says the tipping point for him was the CIA leak case, particularly when he found out it was President Bush himself who had secretly declassified parts of an intelligence report about Iraq, enabling "Scooter" Libby to then leak classified information that bolstered the administration's case for war to the news media.

These are damning revelations in light of Bush's repeatedly condemning the selective release of secret intelligence information.

Remember when he did that?

McClellan says the low point of his job was being ordered to tell the press that Karl Rove and "Scooter" Libby were not involved in leaking CIA operative Valerie Plame's identity to the press. A criminal investigation later revealed that they were.

Critics call McClellan a turncoat, a sell-out, a disgruntled former employee. The White House has called his book puzzling and sad. And some former colleagues want to know why McClellan never voiced any of these doubts earlier. His former deputy, Trent Duffy, says McClellan owes his whole career to President Bush and yet he's "stabbing him in the back and dancing on his political grave for cash."

Scott McClellan will be a guest in THE SITUATION ROOM tomorrow.

Here's the question: What would you ask Scott McClellan?

Go to CNN.com/caffertyfile. You can post a comment on my blog -- Wolf.

BLITZER: I'll be interested in those suggested questions, Jack.

Thanks very much.

CAFFERTY: There you go. I'm trying to help you.

BLITZER: Appreciate it.

And so what do you want to ask Scott McClellan?

You can also do this. Go to iReport.com/situationroom and you can submit your own video questions. We're going to try to play some of those questions to Scott McClellan tomorrow when he's here in THE SITUATION ROOM. You can do that if you'd like.

A critical decision this weekend that could reshape the Democratic race for the White House or not. We'll talk about that and more with the top Barack Obama strategist, David Axelrod. He's here in THE SITUATION ROOM.

Also, you're going to find out how New York's governor is now using a gay marriage loophole to extend recognition to same-sex couples in the Empire State.

Plus, Sharon Stone forced to apologize for a remark she made about China's killer quake. But it might be too late. We'll show you why.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: I want to get back to that major Texas Supreme Court decision that says the state had no right to take those approximately 400 children from their parents at a polygamist ranch out in Texas.

Let's go back to David Mattingly. He's outside the courthouse.

You've had a chance, David, to digest this ruling from the Texas Supreme Court and get reaction from authorities. I assume they're going to start the process of reuniting these children with their mothers.

MATTINGLY: That, in itself, will be problematic, Wolf. The state all along has been saying that they cannot match the actual child to its biological parent in a lot of cases. So a lot of steps still need to be made before these children are allowed to go home.

Reading from the majority opinion here, the high court in Texas said, "On the record before us, the removal of the children was not warranted."

That is a complete slap-down to the lower court and the state authorities here, who had argued that they had the authority to go in there and take all 400 plus of these children into state custody because of what they viewed as practices of abuse there at the YFZ Ranch.

Now, there are some caveats here. The state court here in Texas has decided -- the supreme court has decided that the lower court here in San Angelo, which had made that original ruling, still has some decisions to make. The court here can still decide the children have to go home, but there can be some conditions. They can limit to where the children can go to a specific geographical area. They can also decide, possibly, that any alleged perpetrators of this abuse may be removed from the home, but not the children.

So, still, several conditions can be placed on this removal. It doesn't appear that the children can just go home and to their parents right away. There's still a lot to process and a lot for the courts -- the lower courts still to do to decide how they're going to send those kids back home -- Wolf.

BLITZER: And have we heard anything from authorities who took these kids from that polygamist ranch, whether or not they're going to appeal further this decision?

I know it's already been resolved by the Texas Supreme Court. But I assume they could go to a federal court and try to -- and try to overturn this.

MATTINGLY: That is a possibility. But I was talking to state officials before this ruling came out over the past couple of days, as we were all waiting. They weren't even going to speculate on that. They were looking at this state supreme court ruling as possibly the final word in this case.

But, of course, nothing is final when it comes to a legal matter like this. If they're willing to fight, we'll see where they take this next.

BLITZER: We'll stay in close touch, David.

Thanks very much for updating our viewers.

This is an important story that we'll follow here in THE SITUATION ROOM.

Carol Costello is monitoring some other important stories incoming into THE SITUATION ROOM right now.

Carol, what's going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well, I have a little more information on that huge fire 12 miles outside of Boston. That fire -- well, they've just ordered the firefighters to leave the building, Wolf. As you can see, they're just letting this thing burn out. The building -- this condominium complex is totally gutted. We understand it was partially occupied. No reports of injuries, as of yet, that is. The interesting thing about this is back in 2007, this same complex, which was under construction, then caught on fire and was completely destroyed.

In other news tonight, its storms could deliver death and devastation, but are you ready?

The Atlantic hurricane season starts on Sunday. But according to a poll from the National Hurricane Survival Initiative, many people are not adequately prepared. The season is expected to see above normal activity. Many people are urged to stock up on food and water, devise family disaster plans and keep a full tank of gas for evacuation.

A new arrest in a massive mob sweep. Federal prosecutors say Nicholas "Little Nicky" Corozzo has turned himself in to face charges, including murder, illegal gambling and extortion. He's alleged to be a captain of the Gambino crime family and he's one of 62 people named in a February indictment that targeted alleged mob figures from New York to Sicily.

Well, this is pretty amazing. This monkey is operating a robotic arm with his brain. Researchers implanted censors in two animals and found they were able to mentally manipulate the arm to feed themselves. The success rate was as high as 78 percent. The technology may one day help paralyzed people operate prosthetic limbs.

That's pretty darned amazing.

Back to you -- Wolf.

BLITZER: It is amazing.

All right. Thanks very much, Carol, for that.

An American actress sparks outrage in China with this remark.

(BEGIN VIDEO CLIP)

SHARON STONE, ACTRESS: They were not being nice to the Dalai Lama, who's a good friend of mine. And then all this earthquake and all this stuff happened. And I thought, is that karma, when you're not nice, that bad things happen to you?

(END VIDEO CLIP)

BLITZER: Now there's tremendous backlash against Sharon Stone. We're going to show you what's going on.

Also, same-sex couples can't get married in New York, but gay couples will be able to be married in New York soon -- at least if the governor has his way. They'll be recognized, those marriages, in other states. We're going to show you what Governor Paterson is doing.

All that and a lot more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: New York State does not offer same-sex marriage, but it's now poised to recognize gay couples who legally marry in other states. Governor David Paterson is ordering all state agencies to revise their regulations to include those same-sex couples.

CNN's Jim Acosta is following this story for us.

What's going on and is the governor getting any backlash for his decision -- Jim?

JIM ACOSTA, CNN NATIONAL CORRESPONDENT: He is, Wolf. But it's another victory for same-sex marriage. First came California's State Supreme Court ruling two weeks ago that gays and lesbians could tie the knot. Today, it was New York's turn.

(BEGIN VIDEOTAPE)

UNIDENTIFIED CHILD: I know.

ACOSTA (voice-over): Amy Zimmerman and Tonya Wexler tied the knot in same-sex marriage-friendly Massachusetts four years ago. Now, all of a sudden, it appears their union will be recognized in the state where they actually live -- New York.

AMY ZIMMERMAN, WEXLER'S PARTNER: To be able to say to our kids, to have them know that our union is 100 percent secure and that they are protected and our family is protected, I think, means a lot to us.

ACOSTA: They can think New York Governor David Paterson, who, two weeks ago, directed state agencies to recognize same-sex marriages. Paterson argues New York law requires that he acknowledge legal marriages performed elsewhere. That includes, he says, lawful unions between gays and lesbians in other states and countries.

GOV. DAVID PATTERSON (D), NEW YORK: If I didn't take this action, I would leave this state open to lawsuits.

ACOSTA: The governor hinted his directive is a path other states could take, as long as they haven't passed laws outlawing same-sex marriage.

PATERSON: A number of states have passed defensive marriage acts. So, therefore, they have already acted on their own to deny that opportunity. New York is not one of those states.

ACOSTA: Opponents of same-sex marriages pounced, warning the issue could galvanize Evangelical voters in the fall.

TONY PERKINS, FAMILY RESEARCH COUNCIL: Marriage is one of the most fundamental institutions known to man. And if it can be tinkered with by a court or by politicians and simply 5,000 years of human history rejected and a new definition put in place, that causes concern, because what would be next?

ACOSTA: For Amy Zimmerman and Tonya Wexler, it's validation for a couple that's been together for 17 years and a family that now includes four children.

TANYA WEXLER, ZIMMERMAN'S PARTNER: And I can say to my 8-year- old, look, like it's fair now. We're married. And an 8-year-old, a 7- year-old, a 5-year-old -- all of which we have -- they know what fair means.

(END VIDEOTAPE)

ACOSTA: Governor Paterson is being accused by critics here in New York of using his executive powers to do an end run around state lawmakers. One leading Republican called it a constitutional question -- Wolf.

BLITZER: All right, Jim. Thank you.

More than 1,300 New York State laws will be affected, with major impact on laws governing insurance, inheritance and income tax. New York joins, by the way, Rhode Island, as the only two states that now recognize gay marriages while not offering them. Massachusetts and California are the only states where same-sex couples can currently marry legally. Connecticut, New Hampshire, New Jersey and Vermont offer civil unions, which offer nearly all the rights of marriage, along with Oregon's domestic partnerships.

Hawaii, Washington State and Washington, D.C. , as well as Maine, all offer limited rights to same-sex couples.

And to our viewers, you're in THE SITUATION ROOM. Happening now, an economy is gasping for air. That's how one analyst describes the picture painted by the latest growth numbers. The Commerce Department reports the gross domestic product grew just 9/10 of 1 percent in the first quarter.

Twenty former federal prosecutors have filed court documents siding with Congress in a subpoena fight against the White House. The House Judiciary Committee wants to force former presidential advisers Karl Rove and Harriet Miers to tell what they know about the firing of those U.S. attorneys, which some allege were politically motivated.

Barack Obama's doctor says the candidate is in excellent health. The campaign is releasing a medical summary, although not his actual records.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Hillary Clinton is in South Dakota, but her thoughts may very well be focused in on Puerto Rico. The island territory's Sunday primary may be her last chance to boost her popular vote total. And Clinton has been making an all-out push there.

Let's go live to CNN's Jessica Yellin. She's in San Juan watching this story for us.

So what does it feel like on the ground, Jessica, for the Clintons, as they -- as they try to wrap this things up in Puerto Rico?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, the Clintons, at least at their events, have huge, excited crowds behind them. And the most recent CNN Poll of Polls, which was compiled in early May, shows that Senator Clinton has a 55 percent majority here heading into the primary. It is an enviable lead that any politician would want in any circumstance. And there's a lot of enthusiasm on the ground for this vote in general.

I'll tell you, it's an important vote for two key reasons. One is because this is the first time Puerto Rico will hold a Democratic primary since 1980. So folks here know that their votes really will be significant in terms of the national picture. But the other reason is something you mentioned. If Senator Clinton gets a high enough percentage and if enough people turn out here, she could come out of Puerto Rico as the winner of the popular vote.

Yesterday her husband said, if she gets the popular vote, if she's that winner, then she is the popular choice of Democrats and he suggested that would create at least something of a problem for the Democratic Party. He said they're going to have to then figure out what to do. Something that they would like to say she has, the popular vote total -- Wolf.

BLITZER: They're hoping that'll influence those remaining undeclared super delegates to come out on her side. He's taking a very visible role, Bill Clinton, out in Puerto Rico, isn't he? YELLIN: He sure is Wolf. We were with him yesterday when he walked through old San Juan. The crowd was so large and excited we actually thought we might get crushed by them, my crew and me. He was campaigning aggressively here for her. His focus really was to turn out the vote for Sunday. Let's listen.

(BEGIN VIDEO CLIP)

WILLIAM JEFFERSON CLINTON, FORMER PRESIDENT OF THE UNITED STATES: Of course, as you know, because she's a senator from New York, she represents more Puerto Ricans than anyone in the world except someone who is elected here. Send the message back to the mainland on Sunday that Puerto Rico deserves to be considered and its potential is unlimited if only you had a genuine partner in the White House.

(END OF VIDEO CLIP)

YELLIN: So he had a whirlwind day yesterday. Chelsea Clinton was with him and Senator Clinton returns on Friday. She's supposed to be here for several months -- Wolf.

BLITZER: All right Jessica, thanks very much.

Jessica Yellin reporting for us from San Juan. Stay with CNN for up to the minute coverage of the Democratic Party's rules committee debates the status of Michigan and Florida. We're calling it decision day. Our live coverage begins Saturday morning, 9:00 a.m. Eastern on CNN and CNN.com. I'll be anchoring our coverage together with the best political team on television. Lots of news going to be happening on Saturday.

The Israeli Prime Minister Ehud Olmert is caught up in a spiraling corruption probe. At the heart of it an American businessman's testimony that he gave Olmert large sums of money. Olmert's top coalition partners already called on him to step down. The latest challenge, though, coming from within his inner circle.

CNN's Atika Shubert has more from Jerusalem -- Atika.

ATIKA SHUBERT, CNN CORRESPONDENT: Wolf, things are getting worse for Israel's prime minister. Now members of his own political party seem to be moving against him.

(BEGIN VIDEOTAPE)

SHUBERT (voice-over): Pressure is increasing by the hour on Prime Minister Ehud Olmert. The latest and most significant voice yet calling for a fresh start, his popular deputy and foreign minister (INAUDIBLE). Arrival of Olmert, she is likely to replace him if he steps down. She didn't directly call for his resignation, though she made it clear that the party needs new leadership.

TSIPI LIVNI, ISRAELI FOREIGN MINISTER: I think that already now Kadima needs to prepare for every possible scenario, including elections. I'm a big believer in primaries. I think its right to share most of the public in the decision who will be the leadership. SHUBERT: That was immediately followed by a statement from defense minister and key coalition partner, Ehud Barak.

EHUD BARAK, ISRAELI DEFENSE MINISTER: The dye has been cast and we should prepare for elections.

SHUBERT: A political showdown looms all because of this man, Morris Talanski, a Jewish American businessman from Long Island. He testified in Israeli court on Tuesday that he gave Olmert at least $150,000 in cash stuffed envelopes to cover campaign funds, but also first-class tickets and luxury hotel rooms. Talanski says he did not expect anything in return, but was simply enamored of Olmert as a visionary leader.

He broke down in tears several times during his testimony. Olmert says he has done nothing wrong, but will resign if indicted. A newspaper poll showed 70 percent of Israelis want the prime minister to resign now. And, yet, still no word from Ehud Olmert himself.

(END OF VIDEOTAPE)

SHUBERT: The prime minister's office says its business as usual. They released a schedule of his events next week, including a trip to the United States and a meeting with President Bush. Israelis are left to wonder, will Olmert resign or will it take more to force him out -- Wolf?

BLITZER: Atika in Jerusalem, thank you. Watching the story that seems to be changing very rapidly.

New questions about allegations of drug use by President Bush before he entered politics. We're going to show you what's in that new tell-all book by his former White House press secretary. The issue, cocaine.

Also, a tremendous backlash against the actress Sharon Stone right now, this in the aftermath of the Chinese earthquake. You'll hear what she said that has sparked an international outrage. Stay with us.

(COMMERCIAL BREAK)

BLITZER: The scathing new tell-all book by the former White House press secretary Scott McClellan is prompting a new look at old allegations of cocaine use by President Bush before he entered politics. CNN's Brian Todd is looking at this story for us. McClellan revised this issue which has long been dormant, three pages in his books he talks about it. What's going on?

TODD: He does Wolf.

It's a little bit startling. In one section of McClellan's book he writes about being on the campaign trail with then Texas Governor Bush during Mr. Bush's first campaign for president. Now at one point McClellan claims that he briefed Mr. Bush that questions were coming up in the media about whether Bush had used cocaine in his earlier years. McClellan says he was then in a hotel room with George W. Bush when Bush took a call from a supporter.

The quote from the book is this, quoting Mr. Bush, "The media won't let go of these ridiculous cocaine rumors," I heard Bush say. "You know the truth is I honestly don't remember whether I tried it or not. We had some pretty wild parties back in the day and I just don't remember."

McClellan then writes, that comment struck him. That he remembers thinking to himself, how could someone simply not remember whether or not they had used an illegal substance like cocaine. Then he writes, quote, "In the years to come as I worked closely with President Bush I would come to believe that sometimes he convinces himself to believe what suits his needs at the moment."

Now when we called the White House for comment on that, they referred us to Logan Walters, Mr. Bush's personal aide as governor and then as president. Walters was with McClellan and Bush at that time. But McClellan says in the book that Walters was not in the room when Mr. Bush spoke to that supporter about cocaine use. Still, Walters tells us he has a hard time believing Mr. Bush said that. Walters says he was with Bush 98 percent of the time during those days and he never heard him say anything like that even to close aides Karen Hughes and Karl Rove, much less to supporters.

Walters also disputes McClellan's assessment that Mr. Bush convinces himself to believe what suits his needs. He says that's inconsistent with the man he knows, that Mr. Bush does not engage in self-deception, Wolf. Interestingly just one of many bombshells in Scott McClellan's book. Yes the cocaine issue comes up again after many years.

BLITZER: I'm going to ask Scott McClellan tomorrow when I interview him why all of a sudden he decided to revive this issue which as I said earlier was dormant for such a long time.

Brian, thanks very much.

What do you want to ask Scott McClellan? As I said I'll be interviewing him tomorrow here in THE SITUATION ROOM. You can go to ireport.com/situationroom to submit your own video questions for Scott McClellan. We're going to try to get some of those video questions to him tomorrow when he comes here to THE SITUATION ROOM.

John McCain may have split from the televangelist John Hagee, but McCain supporter Senator Joe Lieberman continues to embrace the controversial pastor. That's got Lieberman's former party gnashing its collective teeth. Carol Costello is working the story for us.

All right, tell us about this story, Carol. What's going on?

COSTELLO: Well you know Wolf, some Democrats are calling Senator Lieberman a trader, a turncoat. Yes, they are aware he changed his party affiliation to independent but they always thought he'd remain loyal to the Democratic Party. Now they're not so sure.

(BEGIN VIDEOTAPE) SEN. JOE LIEBERMAN (I), CONNECTICUT: McCain is not an ordinary candidate.

COSTELLO (voice-over): Senator Joe Lieberman is really good at driving Democrats crazy. The latest poke in the eye? Lieberman's support for Pastor John Hagee.

An evangelist the Democratic National Committee calls radical. A man who once blamed the sins of New Orleans for Hurricane Katrina, even John McCain a Republican eventually refused Hagee's endorsement.

But Lieberman, a one time Democrat turned Independent is standing by his man saying, "I believe that Pastor Hagee has made comments that are deeply unacceptable and hurtful. I also believe he has devoted much of his life to fighting anti-Semitism." It's enough to make a liberal Democrat's blood boil. Progressive radio talker Stephanie Miller.

STEPHANIE MILLER: He's one of my favorite Republicans but not really as a Democrat.

COSTELLO: Lieberman is one of Miller's favorite targets. His endorsement of Republican John McCain for president is especially maddening to Miller.

LIEBERMAN: Make John McCain the next president of the United States.

COSTELLO: Her radio show often parodies the McCain Lieberman friendship as some kind of wacky love affair.

UNIDENTIFIED MALE: Oh, John. My guiding light. In you I see my salvation and my loyalty to you is deep and mighty. You know I'd follow you to the ends of the earth, greasing up your bearings and running interference for you when you get out of the sorts.

COSTELLO: Lieberman so strongly supports the presumptive Republican nominee, he would be willing to speak at the Republican National Convention. Does anyone even remember Lieberman was Al Gore's pick for V.P.? Well, all of this may make some Democrats bitter. Analysts say ever since Lieberman switched his party affiliation to independent he's had a ball.

UNIDENTIFIED MALE: Any politician who can actually speak his mind, say what he really believes, not have to cater to a particular constituencies, particularly party constituencies, has to feel just remarkably, happily free.

COSTELLO: Which is why Lieberman can extend political capital to support someone Democrats dislike like Pastor Hagee.

DAVID BROG, CHRISTIANS UNITED FOR ISRAEL: Joe Lieberman has always been independent. I think he's always decided on the merits. I, for one, wish more of our politicians were like that. People who have had an opportunity to really meet John Hagee and really get to know him, they'll have a much easier time looking beyond a comment or two and Joe Lieberman had that opportunity.

(END VIDEOTAPE)

COSTELLO: If you take a look at Lieberman's voting record he does lean Republican on the war which is why he supports John McCain. But on most issues he still leans to the Democratic side. The problem is, only that one issue, the war, is resonating with Democrats now -- Wolf.

BLITZER: Thanks very much Carol for that report.

An American actress sparking outrage in China with this remark.

(BEGIN VIDEO CLIP)

STONE: They're not being nice to the Dalai Lama who's a good friend of mine. And then all this earthquake and all this stuff happened and I thought, is that karma, when you're not nice that the bad things happen to you?

(END VIDEO CLIP)

BLITZER: Now there's tremendous backlash against Sharon Stone. We're going to show you what's going on.

Barack Obama's health. The Democratic candidate releases a statement from his doctor a week after John McCain opens up reams of documents.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The actress Sharon Stone is feeling the heat for a comment she made hinting that China's earthquake tragedy was a matter of karma or fate bought on by its actions in Tibet. The reaction in China, outrage.

CNN's John Vause has the story from Beijing.

(BEGIN VIDEOTAPE)

JOHN VAUSE, CNN CORRESPONDENT (voice-over): Sharon Stone is perhaps best known for the movie "Basic Instinct." But now in China she's infamous for this.

STONE: They're not being nice to the Dalai Lama who's a good friend of mine. And then all this earthquake and all this stuff happened, and I thought, is that karma when you're not nice that the bad things happen to you?

VAUSE: The 50-year-old actress made those comments last week at the Cannes Film Festival by suggesting China's crackdown in Tibet earlier this year was responsible for an earthquake which has killed tens of thousands. She sparked outrage here, especially on the Internet. Sharon Stone is retarded, posted one blogger. If she had basic compassion, she wouldn't have said those things says this woman. It's very irresponsible, says this man. She needs to apologize.

Fashion house Christian Dior, which has widely used Stone's image for years, is now in damage control, telling CNN the actress has been dropped from their advertising in China. The company's Shanghai headquarters issued this statement. "We absolutely disagree with her hasty comment and we are also deeply sorry about them."

China's government noted that apology, but added --

QIN GANG, CHINESE FOREIGN MINISTRY: We've also noticed that -- what's her name? Sharon Stone? She should do more to promote understanding and friendship between nations.

VAUSE: And one of China's biggest cinema chains says it'll no longer show her movies.

(on camera): Sharon Stone has since said sorry for her comments. But with four feature films due to release in the next two years, the actress may have alienated more than a billion potential moviegoers. And perhaps that's karma as well.

John Vause, CNN, Beijing.

(END OF VIDEOTAPE)

BLITZER: We're continuing to follow those two breaking stories that we've been working. The first a decision from the Texas supreme court. It could clear the way to send hundreds of those children back to a polygamist sect's ranch. We're watching the story. We'll go there live.

Federal regulators want to know if oil prices are being manipulated. Could that be why crude costs more than twice the price of a year ago? There's a new federal investigation under way right now. We're only learning about the details. It's actually been going on for six months.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to Jack for "The Cafferty File" -- Jack.

CAFFERTY: Wolf, the question this hour is what would you ask Scott McClellan, he's the author of that explosive memoir of what went on in the White House in the runup to the Iraq war. He'll also be a guest on this program tomorrow.

Kathy writes from Missouri: "would you testify under oath in an impeachment hearing against President Bush, Vice President Cheney, on what was going on in the lead up to the invasion of Iraq?"

Tom in Tucson writes: "My question would be, many have said that you weren't fit for the job of press secretary when you were in that job. What seemed to get you there was your rock solid loyalty to the man sitting in the oval office. What was the price tag for selling out your only friends in politics?"

Jinpa in Texas: "Not yet having read your book, Mr. McClellan, can you elaborate with more detail just what role vice president Dick Cheney played in the deceptive practices of which you speak in your book. Is he as shifty, cold and underhanded as he appears to those of us on the outside?"

Shelley in Ohio writes: "Since you knew the information about Iraq and WMD was false, don't you feel it was your obligation to the American people to speak up? After all, the American people were the ones paying your paycheck, not George Bush. I feel you ought to take the proceeds from your book and give them to the U.S. troops who have PTSD and other mental illnesses due to their service in the Iraq war."

Frank in Florida writes: "Would you help put some of these people in jail?"

Jake in New Jersey says: "Sure why not speak up before? Save a couple hundred thousand lives from displacement, distress or destruction when you could hold out till now, make a couple hundred thousand dollars instead. Ah, the American way."

And Robert writes: "Scott, do you have a bodyguard?"

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there among hundreds of others. Got a lot of good questions on the blog if you're looking for ideas for that interview tomorrow Wolf.

BLITZER: I'm going to go through that blog later to get some good ideas for the interview. Thank you. Jack will be back shortly.

He's releasing a medical summary, but not all of his medical records. You're going to find out what we're learning about Senator Barack Obama's health.

Plus, more than 100 countries are agreeing to ban them. Not the United States. You're going to find out why the U.S. is isolated when it comes to cluster bombs. Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: More than 100 countries are agreeing to ban them but not the United States. Why is the U.S. isolated when it comes to the issue of cluster bombs? Let's go live to our senior Pentagon correspondent Jamie McIntyre.

Jamie, what's behind the U.S. reluctance right now to go ahead with this international ban?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Wolf, the Pentagon says it's sympathetic to the humanitarian concerns but the bottom line is they believe that cluster bombs save American lives by killing more of its enemies. (BEGIN VIDEOTAPE)

MCINTYRE (voice-over): U.S. military argues when it comes to taking out a concentration of enemy troops or disabling air defense radars or crippling a line of aircraft on a runway there's nothing that gets the job done better than a cluster bomb. Instead of one big bomb the cluster bomb unit contains dozens or even hundreds of bomblets. Each the size of a grenade.

Tiny parachutes scatter the mini bombs and when they all go off they send shards of shrapnel over an area the size of a football field. The problem is, they don't always all go off. In the past the dud rate, that is the number of bomblets that fail to explode on impact, has been anywhere between three and 16 percent, posing a grave hazard to anyone, especially children, who finds them later.

IVAN OELRICH, FED. OF AMERICAN SCIENTISTS: We just can't tolerate that. It ruins the purpose for which we're -- we are using military force in the first place, typically, is that we want to defeat a military but not to harm the civilians.

MCINTYRE: While even America's closest ally Britain is among the 111 countries signing on to the new cluster bomb ban hammered out in Dublin, the U.S. is clinging to the controversial munitions citing military necessity. The Pentagon's answer is not to outlaw cluster bombs but to improve them.

The newest American cluster bombs supposedly have a 99 percent detonation rate. The federation of American scientists supports a global ban but says if the U.S. doesn't it can always make the unexploded bomblets even safer.

OELRICH: For example, make the sub munitions out of material that once it's exposed to air, could rapidly deteriorate.

MCINTYRE: The U.S. is calling for better cluster bombs along with stricter international agreements on how they can be used to minimize the threat to innocence.

(END OF VIDEOTAPE)

MCINTYRE: The U.S. also argues that in talking about the threat from unexploded munitions 95 percent of the injuries happen from other kinds of unexploded munitions, not cluster bombs. Still, the U.S. is increasingly isolated, it's now in the company of Russia, China, Israel, India and Pakistan, as the countries that aren't taking part in that treaty to ban cluster bombs -- Wolf.

BLITZER: Jamie, thank you.

To our viewers, you're in THE SITUATION ROOM.

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