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THE SITUATION ROOM

Daring Raid in Colombian Jungle: Three Americans now Free; Castro's Daughter Champions for Gay Rights; Interview with David Axelrod; Bulldozer Attach in Jerusalem; Fugitive Hedge Fund Manager Turns Self In

Aired July 2, 2008 - 17:00   ET

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


JOHN ROBERTS, CNN ANCHOR: You're in THE SITUATION ROOM. Happening now, a five-year nightmare finally over after for three American hostages, freed after a five-year ordeal. There is new information coming in right now about the dramatic rescue.
Also, a construction vehicle becomes a deadly weapon in the hands of a man police describe as a terrorist. Details of a horrifying rampage.

And a blunt warning from America's top officer, the U.S. military cannot handle an attack on Iran. Wolf Blitzer is off today. I'm John Roberts. You're in THE SITUATION ROOM.

And we begin with breaking news. The news that three American families have been waiting to hear for more than five years. Their loved ones held hostage by a brutal Colombian terrorist group have been rescued along with former presidential candidate Ingrid Betancourt. CNN's Brian Todd joins us again live.

Brian, what's the latest that you're hearing on this rescue?

BRIAN TODD, CNN CORRESPONDENT: Well, John, this is seen as a severe blow to one of the world's oldest and most powerful rebel groups, at the same time, Colombian citizens rejoicing that one of the country's most popular politicians is coming home.

(BEGIN VIDEOTAPE)

TODD (voice-over): The last time we saw Ingrid Betancourt, she looked emaciated, a video released late last year showed the former Colombian president candidate in captivity in the jungle.

JUAN CARLOS LECOMPTE, BETANCOURT'S HUSBAND: She can die anytime, I mean, because she's right now very weak. We are right now in emergency. We cannot wait any longer, more months or more years. We can wait only weeks or days.

TODD: Other hostages who had been released said she had been in poor health when they saw her. And her husband was worried. Now news that she has been rescued. Betancourt's captors for more than six years, the Revolutionary Armed Forces of Colombia, or FARC, at war for decades with the Colombian government. FARC held about 750 hostages, including three American contractors who the Colombian government says were also rescued with Betancourt. One of them, Marc Gonsalves, was reported to have developed hepatitis while in captivity. The others, Thomas Howes and Keith Stansell. The only word the world had from the three men who had been captured in 2003 came in proof of life videos like this one made by a Colombian journalist.

KEITH STANSELL, FREED FARC HOSTAGE: And when I feel like sometimes not going on, I think in my mind of my 11-year-old son, and I'm sorry, Ty (ph), for missing your birthday, and my 14-year-old daughter, Lauren.

TODD: Keith Stansell's daughter, Lauren, talked to CNN last year when she and her brother still weren't sure they'd ever see their father again.

LAUREN STANSELL: He has missed a lot. And there's so much to catch up on. But initially I just want to see him, I just want to hug him, I just want to hold him. I don't want to worry about catching up anything or telling him anything. I just want to hold my dad. I just want to be with him.

(END VIDEOTAPE)

TODD: And why were Betancourt and these Americans held for so long? Well, they had been seen as a key bargaining chip for that Revolutionary Armed Forces of Colombia, known as the FARC.

Also, the point that the American government and the Colombian government, but especially the American government in this case, the long-standing policy of not negotiating with what are called terrorist groups.

The FARC was designated as one of those. That kept these men in captivity. That was a big bone of contention between these families of the Americans and the State Department for a long time -- John.

ROBERTS: The FARC now a few chips lighter today. Brian Todd for us, from Washington, Brian, thanks.

For more on the Revolutionary Armed Forces of Colombia, otherwise, as Brian said, the FARC, we're joined now by Juan Carlos Lopez of our sister network CNN EN ESPANOL.

Well, Carlos, pretty coincidental that John McCain happens to be there on the same day that this rescue was announced. And you spoke with him today?

JUAN CARLOS LOPEZ, CNN EN ESPANOL ANCHOR: Yes, we spoke with him, we spoke with him about FARC, and we spoke about the process. And one of the questions was on what the future held for the process with this rebel group, a group that came out in the '60s as the remnants of a peasant militia, it evolved into a guerrilla. And after the end of the Cold War, found financing in drug trafficking. So they were pretty powerful.

And now they have lost their main hostages. They have lost their leaders.

ROBERTS: And what did McCain say about it today when you spoke with him?

LOPEZ: He said he had spoken to President Alvaro Uribe about it. This is what he said in our interview this morning.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We, of course, specifically spoke of the three Americans that are still being held captive by the FARC. The government is making every effort not only to free the Americans, but also tragic stories like Ingrid Betancourt, and so many other tragic stories who -- of people who are being held hostage by this very cruel and inhumane organization.

(END VIDEO CLIP)

LOPEZ: And, John, the U.S. has invested millions of dollars in the drug war, and part of that money has gone to fighting FARC. And Senator McCain had said that it was important to keep on helping Colombia fight FARC because they are a destabilizing force in that country.

ROBERTS: Juan Carlos Lopez, from CNN EN ESPANOL. Thanks, Juan Carlos.

A horrifying sight in a city that has seen more horror than most of us could imagine. A Palestinian man commandeered a massive construction vehicle and went on a deadly rampage down one of Jerusalem's busiest streets. CNN's Ben Wedeman there and has the very latest for us now -- Ben.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN SR. JERUSALEM CORRESPONDENT: John, the attack took place just before noon, on this road, Jaffa Road. Of course, now it has been completely cleaned up and it's back to normal.

It took place just outside our office. And this is one of the busiest streets in Jerusalem.

(voice-over): Police shot the driver at point blank range, ending a short but bloody rampage. The driver, identified as 31-year- old Hussam Dwayat, a Palestinian resident of East Jerusalem, had careened the bulldozer down Jaffa Road, one of Jerusalem's busiest streets packed with drivers and pedestrians.

(on camera): This was the first vehicle that was hit when the bulldozer came down the road. The driver of this car immediately killed. Then this car was hit. Then it continued down the road. This is Jaffa Road, one of the busiest roads in Jerusalem at a very busy time of day.

(voice-over): He hit two buses, turning one on its side, and then smashed into more cars. "He got to the car in front of me and he stopped and moved to the side," recalls eyewitness Hanan Ilmanam (ph). "We jumped out of our car and went to the car that was squashed. I saw a woman and a baby in a chair. The woman was killed. The baby was injured, but survived.

Wounded lay on the pavement. Ambulances wailed. Pandemonium reigned. Jerusalem police say three people were killed in addition to the bulldozer driver, and more than 40 wounded. This is the first such incident in Jerusalem since last March when a gunman, also from East Jerusalem, killed eight students in a yeshiva, or religious school.

Police and officials were quick to describe Wednesday's incident as a terror attack.

UNIDENTIFIED MALE: The policeman and few of the civilians here in Jerusalem activated against that terrorist in a huge bravery. They couldn't stop the terror attack. But thank God they succeeded to stop him from continuing killing and injuring more and more people.

WEDEMAN: Police, who have taken the man's family members in for questioning, are describing the incident as unplanned and spontaneous. Whatever his motives, the result is the same. A normally bustling street suddenly turned into a scene of bloodshed and pain.

(on camera): And the next step is for the Israeli investigators to find out whether this man, the driver of the bulldozer, had any affiliations with Palestinian militant organizations -- John.

ROBERTS: Ben Wedeman for us in the Jaffa Road in Jerusalem. This horrific incident was captured on video from a number of different angles. And it's all posted online. Let's bring in our Internet report, Abbi Tatton.

Abbi, what does the video show?

ABBI TATTON, CNN INTERNET REPORTER: John, it's shaky amateur video. But let's take you through it. It starts off with onlookers close by to this construction vehicle. But quickly there goes chaotic, as somebody is trying to capture this scene right here. It looks like debris falling. And you can see people fleeing as well. In a couple of seconds you'll see that vehicle come back into the view.

There it is there on the left. Then heading down this road. Fewer people around at this point. And then veering off to the left into its target. It's hard to tell from this amateur video what those targets are. This was posted on infolive.tv, a site that brings news reports from Jerusalem, identified as coming from a mobile phone -- John.

ROBERTS: Abbi Tatton for us with that. Abbi, thanks so much.

Jack Cafferty is with us here in New York. And he has got the "Cafferty File." Hey, Jack.

JACK CAFFERTY, CNN ANCHOR: Don't you wonder who this guy is that was driving that vehicle? I mean, beyond the fact he's a, quote, "Palestinian."

ROBERTS: There were plenty of other people who were working with him, I'd like to know, did he have any problems, was he mentally unstable?

CAFFERTY: Did he get fired recently?

ROBERTS: Divorced, disgruntled?

CAFFERTY: Yes. We don't know any of that yet.

ROBERTS: Typically we hear those sort of things, but in this case we haven't.

CAFFERTY: Just that he's a Palestinian and it was a terrorist attack.

The U.S. dollar, in case you hadn't noticed, ain't what it used to be. In fact, the dollar has been declining in value for six years now against other major currencies. And if you look around, it's hard not to see the signs. There are hordes of vacationing Europeans who are picking up bargains in the U.S. New York City is full of Europeans.

While Americans traveling overseas are continually hit with sticker shock. Canadians, John, flock here for shopping, bargains, bargains everywhere, instead of the way it used to be. It used to be the opposite. A Belgian company trying a hostile takeover of Anheuser-Busch, the largest brewer in the United States. If that deal goes through, and it might, it could be the first of many foreign takeovers of American companies.

While everything made in the U.S. is so much cheaper to foreigners, Americans have to pay more for imported goods. And while most of us are grappling with additional things like rising food and energy costs, oil is bought and sold in dollars. The devalued dollar makes gasoline more expensive for Americans.

Some even suggest the continued decline of the dollar could one day lead to it being replaced by the euro as the so-called primary reserve currency. There are stores right here in New York City today that accept euros as payment.

Meanwhile, the message from Washington doesn't seem to change much. President Bush often talked about his support for a strong dollar. Just last week he said, quote: "We're strong dollar people in this administration."

Really, Mr. President? You've presided over the most precipitous drop in the value of our currency in the nation's history. Here's the question. How concerned are you about the sharp decline in the value of the U.S. dollar? Go to cnn.com/caffertyfile, post a comment on my blog. They used to call it the almighty dollar. It's not anymore.

ROBERTS: I remember used to vacation in the Thousand Islands in my sailboat back in the 1980s. And we would go to Clayton or Alexander Bay for dime-a-draft night at Fat Lenny's, and give them a 20 and they would rip it in half and say, there you go, there's your change.

CAFFERTY: Isn't that wild.

ROBERTS: Yes, it's a completely different world now.

CAFFERTY: Yes. The Canadian dollar used to be 65 cents to the American dollar. Now it's the other -- it's exactly reversed.

ROBERTS: Yes. The joke in Canada was, another day, another 65 cents.

CAFFERTY: There you go.

(LAUGHTER)

ROBERTS: Jack, thanks.

Here are some of the stories that we're working on for you. Mexican police caught on tape, apparently brutalizing a suspect.

And new developments in the case of a woman who collapsed and was left to die on the floor of a hospital.

Also, an attack on Iran too much for the U.S. military. Will Israel heed the warning from America's top military officer?

He allegedly faked his suicide to avoid prison. Now it's all over for a fugitive financier.

And a fortune gone to the dogs. New information on the real size of Leona Helmsley's incredible bequest.

(COMMERCIAL BREAK)

ROBERTS: Lots of talk lately of a military strike against Iran. Now a clear warning from the top American military officer. CNN senior Pentagon correspondent Jamie McIntyre joins us live.

Jamie, what's Admiral Mike Mullen saying about all this?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, John, a candid admission from America's top military officer that the United States right now really isn't up for another war.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): While Admiral Mike Mullen won't say what message he delivered in recent meetings with Israel's top generals, the warning to Israel seemed clear. Don't drag the U.S. into war by launching a preemptive attack on Iran's nuclear facilities. ADM. MIKE MULLEN, JOINT CHIEFS CHAIRMAN: This is a very unstable part of the world, and I don't need it to be more unstable.

MCINTYRE: Privately, U.S. military officials say there is some concern Israel might feel compelled to strike before the end of the year. In New York, Iran's foreign minister dismissed the war talk as a psychological ploy.

MANOUCHEHR MOTTAKI, IRANIAN FOREIGN MINISTER (through translator): Following repeated defeats in the Middle East, we do not believe that the United States is in a position to impose another war on American taxpayers.

MCINTYRE: With U.S. forces tied down in Iraq and Afghanistan, Admiral Mullen appeared to be on the same page.

MULLEN: Opening up a third front right now would be extremely stressful on us.

MCINTYRE: While Mullen stresses diplomacy, he concedes Israel is operating on a shorter timeline. For one thing, Israel fears Iran is closer to getting a nuclear bomb than the U.S. does. And it's concerned that Iran is about to upgrade its air defenses with new Russian SA-20 missiles. That would make air strikes more difficult for the Israeli air force, which lacks the stealth bombers and cruise missiles in the vast U.S. arsenal.

Mullen also conceded Iran could make good on its threat to disrupt shipping in the Persian Gulf, but insisted the U.S. military could keep the vital Strait of Hormuz open to keep oil flowing to the world.

As for Israel, its public statements have mirrored the U.S. position, refusing to take the military option off the table while insisting no strike is imminent.

YITZHAK HERZOG, ISRAELI SOCIAL AFFAIRS MINISTER: If you don't adhere to the carrot and the stick diplomacy that we have initiated, we are also ready for military conflict.

(END VIDEOTAPE)

MCINTYRE: Ironically, the bellicose rhetoric comes as there seems to be a little bit of crack in Iran's hard line position. Tehran is indicating it may be willing to suspend the enrichment of uranium while it negotiates with European governments. And like the U.S., Iran is indicating that it would prefer to settle its differences through diplomatic means -- John.

ROBERTS: Jamie, of course, in 1981, Israel successfully went into Iraq and destroyed the Osirak nuclear facility. But a lot of time has passed since then. Iran has upgraded its air defenses and as you said, going to upgrade them again. Does anybody there at the Pentagon believe that Israel would be capable of carrying out a successful raid there? MCINTYRE: Well, they could carry out a raid. They certainly have the ability to do that. It wouldn't be as easy, and the results would be -- you know, the ramifications of that are really questionable. I mean, the real concern here is that if Israel takes unilateral action, it would undoubtedly drag the United States into a conflict with Iran, as well a conflict that wouldn't be entirely of the U.S. making.

ROBERTS: Jamie McIntyre at the Pentagon for us. Jamie, thanks so much.

It's not quite an international incident, but a Japanese television commercial featuring a monkey is causing outrage here in the United States among supporters of Senator Barack Obama and others.

CNN's Kyung Lah reports from Tokyo.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN CORRESPONDENT (voice-over): The mobile phone commercial begins with a crowd rallying behind an inspirational speaker. Supporters hold signs that read "change." The company, EMOBILE, says it's a nod at the worldwide popularity of U.S. presidential candidate Barack Obama.

But here's the problem, the speaker at the podium is a monkey.

KALEB JAMES, U.S. CITIZEN LIVING IN JAPAN: It just makes me go, oh, come on, guys, come on.

LAH: This group of mostly African-Americans who live in Japan could not believe what they were seeing on Japanese TV.

JAMES: I don't think that anybody who deals on a world level doesn't understand the correlation between monkey and black men, how they've been used historically as a symbol to dehumanize, says we're subhuman people.

MAL ADAMS, U.S. CITIZEN LIVING IN JAPAN: They were totally inconsiderate of the cross-cultural faux pas that it represented.

PHILIP WOO, U.S. CITIZEN LIVING IN JAPAN: People's minds should be more open as world citizens.

LAH: But the ad has outraged this group and people in cyberspace, charges of a racist Japan, dehumanizing a U.S. presidential hopeful.

JAMES: Are you trying to tell me nobody, between its inception and the result, said, whoa, whoa, whoa, hey, guys.

UNIDENTIFIED MALE: Not really, actually, to be honest. But now, of course, we know.

LAH: The president of EMOBILE insists the firm simply had no idea. He points out the company's mascot is a monkey, an animal revered in Japan and used in previous EMOBILE ads.

UNIDENTIFIED MALE: When he saw the idea the first time, it's like, hey, this is actually your company's idea of the presidential election in the U.S. And they said, yes. But you know what, but that's how you make a presentation, how you make, you know, an impact. So we just -- we thought it was quite interesting.

LAH: We wondered if the Tokyo commuters would find it interesting. Some thought it was cute. But none made a connection to the U.S. presidential candidate.

But they should get it, says Temple University's director of Asian studies.

JEFFREY KINGSTON, TEMPLE UNIV., ASIAN STUDIES DIR.: Cluelessness really isn't an excuse. Really Japan has to understand that public discourse here is not just a domestic discourse, it's an international discourse.

LAH (on camera): There's not a lot of diversity here in Japan, 98.6 percent people of the people who live here are ethnically Japanese. The cell phone company says it has received no complaints from Japanese customers, but has still pulled the ad after a complaint from the group in our story and a call from CNN.

(voice-over): For one Japanese company, a crash course in cultural sensitivity as a possible world leader breaks barriers on a national and global scale.

Kyung Lah, CNN, Tokyo.

(END VIDEOTAPE)

ROBERTS: And we just got some breaking news in here to THE SITUATION ROOM. Apparently Senator John McCain was briefed on the upcoming mission by the Colombian government to rescue those hostages that had been held by the Revolutionary Forces in Colombia. Our Dana Bash is hot on this story, she has got the details for us.

Dana, what are you finding out?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, John. Well, this actually comes to us by way of our producer, traveling with Senator McCain, and that's Tasha D'Akides (ph). What she reports is that Senator McCain was in fact briefed by the president of Colombia, President Uribe, and also the foreign minister yesterday during their meeting yesterday in Cartagena.

And he was briefed actually before he came out and talked to reporters at a news conference last night. And what we're told is that he learned that the raid had been successfully completed as he took off from Colombia.

In fact, the aide -- an aide to Senator McCain learned about it by learning about it on his BlackBerry. That's how they find out that the raid that he had been briefed on beforehand was actually successful.

So the headline here is that Senator McCain was in Colombia, and was there at this perhaps interesting time in terms of a coincidence of a major international story. But he did know about it before the raid took place. He was briefed by the president of Colombia.

ROBERTS: I know that you're getting this relayed to you from Tasha D'Akides, but do you know if Senator McCain was briefed prior to yesterday, or if it was yesterday that he got that briefing? And let me also say, as you've been talking about that, Dana, that we do have some pictures of helicopters arriving from San Jose del Guaviare, taking off to Tolemaida with the rescued hostages. And there's our first picture.

So do we know, Dana, exactly when the briefing took place?

BASH: Well, the meeting was yesterday, the meeting that Senator McCain had with the president of Colombia was yesterday. And the information that we have is that that was in fact when Senator McCain was made aware of this raid, made aware that the raid was going to take place today. So apparently he had about 24 hours heads-up.

You know, as you can imagine, they are saying, John -- the people at least traveling with him are trying to make clear that this is something that proves that Senator McCain politically at least has some pretty good standing internationally. In fact, they're pretty careful, at least Senator McCain is, not to talk politics while he's on the international stage.

But as far as this report we're getting says, Senator Joe Lieberman, the independent from Connecticut, who is traveling with Senator McCain, he told reporters that it is a sign of confidence, a vote of confidence that the Colombian government, the senior Colombian officials decided to brief Senator McCain while he was there about this very important raid.

ROBERTS: All right. Dana Bash with the very latest on that for us from Washington. Dana, thanks.

Barack Obama and what critics say is a calculated dash to the political center. His chief strategist is here to respond.

And a massive discovery of gold, maybe the leprechauns had it right.

(COMMERCIAL BREAK)

ROBERTS: Let's check back in with our Carol Costello. She's monitoring stories incoming to THE SITUATION ROOM right now.

What have you got for us, Carol?

CAROL COSTELLO, CNN ANCHOR: Well, John, disturbing new details in the search for a missing Vermont teenager. Papers filed in federal court allege Brooke Bennett's uncle brought her to his home last Wednesday to have sex. The papers say another girl admitted to helping the uncle. That girl said she herself has been having sex with the uncle since she was 9 years old as part of a sex ring. The uncle and the girl's stepfather have been arrested on sexual assault charges in an unrelated case.

New York officials are vowing to make change to the Kings County Hospital psychiatric ward, this after shocking video of a woman dying in the Brooklyn hospital's emergency room. Surveillance video shows Esmin Green falling from her chair and writhing on her floor. Staff failed to help her for more than an hour. And when someone finally did get help, she had died. Six people have been fired in the investigation.

The government wants to make sure you don't spend Fourth of July stuck on an airplane. So to relieve air traffic congestion, the military plans to open up air space for commercial air travel over the holiday. Air space off the East Coast from Maine to Florida will be freed up.

And beneath the green hills of Ireland may be a whole lot of gold. A mining company says it has found what may be the largest gold deposit ever found in Ireland or Britain, maybe more than 1 million ounces. With gold prices soaring, the find in the village of the north of Ireland could be worth as much as $300 million. Talk about striking gold -- John.

ROBERTS: Not bad. Pretty good. Carol, thanks so much.

You're in THE SITUATION ROOM, and happening now, after one month on the run, a millionaire fugitive gives himself up. Where has he been and what happens next?

Barack Obama's campaign facing questions and pressure from John McCain about pulling U.S. troops out of Iraq. Will he change course? The candidate's chief strategist talks to us this hour.

And free sex change operations in a communist nation. The woman behind Cuba's growing support of gay rights happens to be the president's daughter.

Wolf Blitzer is off today. I'm John Roberts. You're in THE SITUATION ROOM.

He faked his suicide to avoid going to prison, and spent a month on the run. But today fugitive hedge fund executive Samuel Israel has gave up and turned himself in. CNN's Dan Lothian joins us live.

Dan, where is Sam Israel right now? He's obviously not at the bottom of the river.

DAN LOTHIAN, CNN CORRESPONDENT: That's right, he's on his way to New York right now. He did turn himself in around 9:15 this morning, about 10 miles from where I am. We're in Springfield, Massachusetts. And this is where he faced an arraignment earlier this afternoon.

At the arraignment, he tried to get the judge to send him on to the Massachusetts prison where he was supposed to be serving that sentence. But the judge denied that request.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): Fugitive hedge fund swindler Samuel Israel III on his way back to New York after telling a judge that he is not a danger to the community, that he is not violent and he understood he would probably face additional charges.

Israel ended his run from the law by showing up at the Southwick Police Department in western Massachusetts, in less dramatic fashion than how he first disappeared.

UNIDENTIFIED MALE: He drove a scooter in, and turned himself in at our front lobby.

LOTHIAN: Authorities say Israel had been living in his RV at this campground in a neighboring community.

Anything suspicious about him?

JEAN GILBERT, CAMPER: No. Just quiet. Didn't say much about anything. He just was concerned about the dogs eating his power cord, that's all.

LOTHIAN: Israel was convicted of bilking investors out of more than $450 million through his Bayou Group hedge fund. He disappeared the day he was to turn himself in to start his 20-year jail sentence, a fugitive until this morning.

UNIDENTIFIED MALE: He was very cooperative. And very lucid. And was no problem whatsoever. He seemed physically fine and was coherent when he spoke to us.

LOTHIAN: Israel's car was found on a bridge north of New York City June 9th. Suicide is painless was written in dust on the windshield. His girlfriend, Deborah Ryan, was charged with aiding and abetting after police say she confessed to authorities that she gave him a ride back home after he stashed his getaway RV. Sources with the U.S. marshal's office tell CNN the agency had been in touch with Israel's mother frequently, urging her to encourage the fugitive son to turn himself in. Sources say Israel's mother was on the phone with him as he surrendered.

(END VIDEOTAPE)

LOTHIAN: The federal judge here in Springfield says that once he is back in New York, he has up to 10 days for his first court hearing. And one other thing, John, the U.S. attorney's office in New York announcing plans to restore $115 million in forfeited funds to some of Israel's victims. And of course, that's not everything, but it's a start.

JOHN ROBERTS, CNN ANCHOR: Wow. An elaborate ruse that eventually came unraveled.

Dan Lothian for us,. Dan thanks so much. Police have captured a man suspected of beating to death eight people in a two-state killing spree. His arrest came after patrons of a local bar recognized him from television reports.

CNN's Susan Roesgen reports for us.

SUSAN ROESGEN, CNN CORRESPONDENT: John, that's right, I'm here in Edwardsville, Illinois, where Nicholas Sheley had his first court appearance on one murder charge. He's suspected of seven others but the police arrested him as he was smoking a cigarette outside a bar not knowing that he was surrounded by cops.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Mr. Sheley do you have anything to say?

ROESGEN (voice-over): 28-year-old Nicholas Sheley didn't have anything to say as he was put into a squad car today in shackles. Sheley is suspected of killing eight people in two states, starting with the murder of a 93-year-old man in Sterling, Illinois. From there, he's accused of killing a man in Galesburg, then four people in Rock Falls, and two people in Festus, Missouri.

Detectives say Sheley is a known drug addict with a long history of felony convictions. They caught him outside this bar, where the owner recognized him right away and figured out how to get him outside where officers were swarming.

UNIDENTIFIED MALE: He wanted to smoke a cigarette. He asked to borrow my lighter, and I told him he had to go outside and smoke. He walked out the door. Within 30 seconds the police had him in custody. They did a great job.

(END VIDEOTAPE)

ROESGEN: And in fact, John, that bar turns out to be a local favorite, a local hangout for the cops here. And get this, John, while Nicholas Sheley was inside the bar, some of the local cops were going to that bar to pick up their food for their weekly bingo night back at the cop shop. So he was absolutely in the wrong place at the wrong time.

ROBERTS: But thankfully he picked the wrong place at the wrong time.

Susan Roesgen for us, thanks so much.

Some shocking videotapes have surfaced, they show disturbing tactics used by the Mexican government in its crackdown on drug cartel.

As CNN's Harris Whitbeck reports, Mexico will get hundreds of millions of dollars in U.S. anti-drug aid.

(BEGIN VIDEOTAPE) HARRIS WHITBECK, CNN CORRESPONDENT (voice-over): The video broadcast on Mexico's main newscast on Tuesday shows what looks like the inhumane treatment of a suspect by local police in the state of Leon. The heavyset uniformed police officer jumps up and down on a man who lies on the bed of a police pickup truck. Laughter can be heard on the video. The TV network says it was taken by a fellow police officer with a cell phone.

CARLOS TORNERO, LEON POLICE DEPARTMENT: A Leon police spokesman said the incident occurred several months ago and that the officers involved had disappeared.

WHITBECK: He called the actions reprehensible and said they did not reflect on the way the rest of the Leon police force treats detainees. But the Tuesday surfacing of a second set of videos on a national newspaper's website appears to show more questionable actions by Leon police. The pictures first obtained by the newspaper show Leon police officers being trained in extremely aggressive tactics by an English-speaking instructor. One clip shows police apparently squirting water up a man's nose.

In another, the instructor orders a trainee to roll around in his own vomit. Leon police say the videos are of a voluntary training exercise for officers to learn how to deal with high-stress situations. One Mexican lawmaker says too many questions are raised about the training objective.

JOSE ROSAS, PRI CONGRESSMAN: We can't be sure of their objective, he says. There are many doubts about what they are doing.

WHITBECK: Newspaper headlines screamed torture. State human rights commission said it was opening an investigation. This happens at a time when the country is debating human rights violations by its military and law enforcement officers. Mexico's national human rights commission has documented 634 cases of military abuse since the federal crackdown on drug cartels began last January.

(on camera): U.S. lawmakers tried to condition their recent aid package for Mexico's fight against drug cartels to improvements in the country's human rights record. Some of those conditions were lifted after intense protests by the Mexican government that the U.S. had no right to meddle in its affairs.

Harris Whitbeck, CNN, Mexico City.

(END VIDEOTAPE)

ROBERTS: The McCain campaign goes after Barack Obama, and his stance on Iraq. A top member of Obama's campaign joins us live to talk about that, and much more. That's ahead in THE SITUATION ROOM.

And later on, a major shakeup in John McCain's organization. Why the candidate made big changes.

(COMMERCIAL BREAK)

ROBERTS: Breaking news. You're looking at pictures of helicopters carrying hostages back from the Colombian jungle.

A daring commando raid earlier today that rescued Ingrid Betancourt, former presidential candidate who has been held hostage since February of 2002, as well as three Americans, Marc Gonsalves, Thomas Howes and Keith Stansel, who crashed in their aircraft back in 2003 on an anti-drug operation. All of them had been held by the revolutionary armed forces of Colombia, that brutal rebel group that the Uribe government has been fighting. So they're all back safe and sound now. Quite an operation.

We want to bring in David Axelrod. He is the chief strategist for the Obama campaign. A lot to talk with him about, including Iraq, Afghanistan.

First of all, David, I wanted to ask you about this rescue operation here. Senator John McCain was briefed on it yesterday. He said today, through a spokesperson, that this was a sign of confidence in his leadership, that President Uribe would brief him on this.

He has been on the record before saying that Senator Obama is unwilling to recognize the magnitude of the struggle that the Uribe government is up against when it deals with the FARC. And I'm wondering if you can comment on that?

DAVID AXELROD, OBAMA CAMPAIGN CHIEF STRATEGIST: That's not true. Senator Obama has been a strong supporter of plan Colombia. He's been very supportive of our efforts to support the Colombian government in their anti terrorist activities. He strongly supports what happened today. If Senator McCain said that, that's a misreading, a complete misreading of Senator Obama's history and statements on this subject.

As for the fact that he got a briefing, I think that was a function of the fact that he was there. But, you know, I guess everything becomes politics when you're running for president. Or apparently so.

ROBERTS: But Senator Obama does still oppose the Colombian free trade agreement, does he not?

AXELROD: Yes. But that's not linked to the anti-terrorism activities of the government. And the senator's been outspokenly supportive of those activities, both in terms of funding, and in supporting the right of the Colombian government to track these terrorists, even across their borders. So there's no ambiguity about his position on this.

ROBERTS: Let me turn to Iraq. It looks like we're seeing a little bit of a modification of Senator Obama's approach to troop withdrawals in Iraq. Susan Rice, foreign policy advisor recently said quote, "He will redeploy our forces responsibly at a rate that our commanders say is safe and sustainable."

David, to the best of my knowledge, he hasn't talked about consulting commanders on a withdrawal. Is this an indication that he may not stick with the original timetable that he's been talking about of 16 months to get all the forces out? AXELROD: John, with all due respect, on this, your knowledge doesn't extend far enough. The fact is that Senator Obama introduced a plan in the United States senate in January of 2007 that called for a phased withdrawal, with benchmarks for the Iraqi government to meet, that called for strategic pauses, based on the progress on these benchmarks, and advice on the commanders on the ground.

He's always said that he would listen to the advice of commanders on the ground, that that would factor into his thinking. He's also always said that we had to be as careful getting out of Iraq as we were careless getting in. So he's been very consistent on this point.

The person who really has to answer the question is Senator McCain, who has yet to offer any plan for how he would extricate us from this engagement in Iraq. Even as Admiral Mullen says, we are so overcommitted in Iraq, that it's affecting our ability to do what we need to do in Afghanistan, which is where Osama bin Laden and the al Qaeda terrorists are, in Afghanistan and Pakistan.

So, Senator Obama has been very, very consistent on this. We need to shift or focus to the people who attacked us, who killed American citizens and who have regenerated themselves while we were distracted on this other mission.

ROBERTS: David, of course, I do recall many, many times that the senator has said we need to get out of Iraq carefully. But the point that has been raised and the question that has been asked and I would like to ask it again, if the commanders on the ground said we have to stop, we have to take a pause, however long that pause may be, would he be open to that, or would he want to continue the withdrawals?

AXELROD: I think he will take the advice, not just the advice of the commanders on the ground, but his general assessment of conditions on the ground in calibrating that withdrawal. He said he thought we could get one to two brigades out a month. But he's not whetted to that in the face of events. No president would be. And he's always said that he's never said that this withdrawal would be without any possibility of alteration based on events on the ground. That would not be a prudent thing to do for any president.

ROBERTS: Let me ask you if I could --

AXELROD: On the other hand, John, let me just say one other thing. It's also imprudent to say that we'll be there in perpetuity, and that is what Senator McCain is saying. What we need is a careful, responsible plan to move our troops out, to shift responsibility to the Iraqi government. It's about time that they accept that responsibility, reach the political accommodations they have refused or failed to meet to this point. And that's been Senator Obama's position for years.

ROBERTS: David, we're running out of time here, but I did want to ask you about the recent meeting that Senator Obama had with former General Colin Powell, what was that all about and do you think that you might be able to win Powell's endorsement? AXELROD: Well I don't want to comment on that. That's really up to General Powell. But General Powell obviously is a repository of enormous wisdom and insight into our situation around the world, into the condition of our military. Which, as you know, has been greatly strained. And to so many issues that the next president's going to have to deal with. Senator Obama has had periodic conversations with him, respects him greatly.

They have a good relationship. I hope he continues to be a great resource. Because anyone would like to tap into that positive experience and knowledge.

ROBERTS: David Axelrod, the chief strategist of the Obama Campaign. Thanks for being with us today. It's good to see you.

AXELROD: Good John, have a good holiday.

ROBERTS: All right, you too.

ROBERTS: Enemies of the state no more. The woman behind Cuba's growing openness on gay rights. Believe it or not, she is closely related to Fidel Castro.

Michelle Obama one on one in a CNN exclusive. We sit down with the potential first lady. How she feels about the race, her family and some of the conflicts of being in a campaign.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

ROBERTS: Cuba may lack economic and political freedoms, but when it comes to gay rights, the communist nation may be ahead of even California. CNN's Shasta Darlington talked to President Raul Castro's daughter, a champion of Cuba's growing support for gay rights -- Shasta.

SHASTA DARLINGTON, CNN CORRESPONDENT: John, the outspoken niece of Fidel Castro is now the president's daughter. And her outbursts are helping bring about change on the island.

(BEGIN VIDEOTAPE)

Mariela Castro has a faithful following in Cuba. But not the following you would expect the president's daughter to have. Many of her fans are transvestites. Thanks to Castro's work as director of the national center for sexual education, gay and trans sexual rights are a topic of national debate.

MARIELA CASTRO, NATIONAL CENTER FOR SEXUAL EDUCATION: What we want is dialog and understanding, she says, and above all respect for people's sexual orientation and gender identity.

DARLINGTON: Cuba's health ministry recently authorized free sex change operations and Castro is also pushing the government to legalize homosexual unions. This in a country that once sent homosexuals to labor camps. Castro believes her prominent family ties have had little to do with her successes.

CASTRO: "The only advantage is that the person who is now president is also my papa. And I can talk to him. But don't think I can talk to him a lot."

DARLINGTON: She says work is a forbidden topic at Sunday's family gatherings. Castro says she has to submit all of her proposals in writing just like everyone else. But President Raul Castro has offered a bit of fatherly advice.

CASTRO: He's saying there are things you can't push for too much.,. she says. They don't work out and then they take a lot longer to be accepted by society.

DARLINGTON: The younger Castro knows that well. She's already facing backlash over her work. There was harsh reaction from the Catholic Church and from citizens who have written into the communist party to complain. Which means gay unions won't be legalized for at least another year, she predicts. Approval was initially expected this month. Castro says she sees the same pattern of cautious change being carried out on the national stage.

(on camera): Since taking office in February, Raul Castro has launched farm reforms and lifted unpopular restrictions on things like cell phones.

(voice-over): Many Cubans say those changes don't go far enough.

(END VIDEOTAPE)

DARLINGTON: Progress is slower than Castro had hoped. But analysts say her work is actually helping cast Cuba in a more tolerant light at a time when her father is slowly introducing changes on the political stage -- John.

ROBERTS: Shasta Darlington for us. Shasta, thanks.

Time now to check back in with Jack Cafferty. He's got "The Cafferty File" for us.

Hey, Jack.

JACK CAFFERTY, CNN ANCHOR: John, the question this hour is: How concerned are you about the sharp decline in the value of the U.S. dollar?

Rory writes from South Carolina: "It breaks my heart that none of the candidates or so-called leaders is talking about our federal budget deficit and the huge private debt that is also at historic highs. Obviously the dollar is falling in value. It shouldn't come as a surprise. Our way of life is not sustainable. It's going to change one way or another."

Robert in Virginia: "As a banker very concerned about the decline and value of the U.S. dollar. The huge budget and trade deficits, combined with the Iraq war, high gasoline and food costs and the growing economic power of China all point to a declining U.S. economy that's out of control. We're quickly losing the ability to control our own destiny."

Doug writes: "I'm a 44-year-old defense industry worker and for the first time in my life, I lie awake in bed worrying about our financial future in this country and the future of the dollar."

Pugas in Arizona: "More concerned in the decline of American values than the decline of the dollar. Some pain might do us some good. It could help our character as a people. Let us think longer term and prepare for the future, whatever that might bring."

Becky writes: "I'm very concerned. I'm a junior in college, I've just returned from studying abroad in Europe. I could not believe how bad the dollar was. The exchange rate just emptied out my bank account.

Denny weighs in with this: "For the majority of Americans, the lower value of the dollar is not a problem. Because of high gas prices, most of us don't have a dollar left."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile, look for yours there among hundreds of others.

ROBERTS: This is a strong dollar policy. What does a weak dollar policy look like?

CAFFERTY: I don't want to know and neither do you.

ROBERTS: All right Jack thanks so much. We'll see you next hour for the panel. And I know you're looking forward to it.

CAFFERTY: I am.

ROBERTS: One on one with Michelle Obama as she talks exclusively to CNN about her role as a candidate's wife and a mother.

Plus, a billionaire's bequest. A fortune goes to the dogs.

(COMMERCIAL BREAK)

ROBERTS: The tabloids dubbed her the queen of mean. But the late real estate tycoon Leona Helmsley had a big soft spot for dogs. So big that she reportedly directed that her multibillion dollar fortune go toward canine care. CNN's Carol Costello joins us live.

Carol, just how much money are we talking about here?

CAROL COSTELLO, CNN CORRESPONDENT: Oh, about 8 billion. Yes, I said $8 billion. What is it about dogs anyway? Just think how many squeaky toys 8 billion dollars can buy. The question is, should it?

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Dogs, they're cute, cuddly and able to melt the heart of a woman who inspired a TV movie called "The Queen of Mean."

UNIDENTIFIED FEMALE: That's because I never found anybody who could mean it.

COSTELLO: The movie was bout Helmsley's journey to prison for tax evasion after uttering the line, only the little people pay taxes. Yet according to "The New York Times," Helmsley not only left $12 million to her dog Trouble, but up to $8 billion to provide for the welfare of all dogs. Eight billion. That's more than Nicaragua's gross domestic product.

STEHPANIE SHANE, HUMANE SOCITY OF U.S.: Animals are part of our family. People care about them and they want to make sure that the giving and the kindness that they practiced in their lives continues after their death.

COSTELLO: Many of "The New York Times" readers agreed. This man wrote, "So what if the queen of mean detested everybody except her husband, Harry? In this world the fact she loved animals, especially dogs made her in the end a truly beautiful human being.

Still, "The Times" also reports, when Helmsley signed her will in 2003, part of her fortune was to be given to poor people. But a year later, she deleted that goal and ordered to give her entire trust to the dogs. That tidbit riled up radar online. "Joke's on you, stupid poor people.

But seriously, it said, why doesn't anyone leave any money for the feral cats that infest New York City? Why is it always the stupid dogs?" But one psychiatrist says it's not about dogs, it's about Helmsley's desire to control the people who are close to her and her inability to do it.

DR. GAIL SALTZ, PSYCHIATRIST: I think it cannot escape people that to have such an incredible fortune and give none of it to your family, must be some expression of anger.

COSTELLO: While Doctor Saltz finds that sad, organizations like the Humane Society find Helmsley's gift a godsend for the 6 million animals who are abandoned every year.

(END VIDEOTAPE)

COSTELLO: Now just because Helmsley willed her trust to the dogs of America, doesn't mean all of it will actually go to the dogs. Remember, a judge recently reduced trouble's $12 million inheritance to $2 million because the 9-year-old Maltese just didn't need all that money -- John.

ROBERTS: Still an awful lot in milk bones though.

Carol Costello for us. Carol, thanks.

Happening now, breaking news. Hostages held for years finally are free. New reaction coming in about the rescue of three Americans, a Colombian political figure and 11 others. Late word that John McCain knew about the raid in advance.

Plus, a CNN brand-new interview with Michelle Obama. The woman who could be America's next first lady opens up about her family.

And why Barack Obama may be in a box on plans for a trip to Iraq? All that and the best political team on television.

Wolf Blitzer is off today. I'm John Roberts. You're in THE SITUATION ROOM.

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