Return to Transcripts main page


Salmonella Source Identified as Being from Mexico; Obama's Grand Overseas Tour; High Cost of Illegal Immigration; Food Industry Fights Regulations

Aired July 25, 2008 - 19:00   ET


Tonight a breakthrough in the search for the source of the nationwide salmonella outbreak. The government finally admitting the source is Mexico.

Also Senator Obama's presidential-style tour of Europe continues as middle class Americans wait for new ideas to solve our economic crisis.

And Governor Arnold Schwarzenegger of California prepares to slash the pay of state workers but refuses to cut spending on a massive welfare program for illegal aliens. We'll have all of that, all of the day's news, much more straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Friday, July 25th. Live from New York, sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Good evening, everybody.

A stunning new development tonight in the investigation into the nationwide salmonella outbreak. The federal government finally admitting what we've been reporting here for weeks on this broadcast that the source of this outbreak is jalapenos from Mexico. The government says almost 1,300 people have become ill. The actual total of sick people may be as high as 30 to 40,000.

Now our Louise Schiavone has led the reporting on this outbreak right from the beginning and Louise joins us now from Washington with the very latest -- Louise.


A break in the case as you say and all clear for domestic produce in the investigation of a historic salmonella outbreak. The U.S. Food and Drug Administration is advising consumers that jalapeno and serrano peppers grown in the United States are not connected with the current Salmonella Saint Paul outbreak.

However, FDA continues to advise consumers to avoid raw jalapeno peppers and the food that contains them if they've been grown, harvested or packed in Mexico -- that official statement from the FDA. Now North Carolina specialty pepper farmer Randy Bailey received an official heads up from his state's agriculture department. A major East Coast grower and distributor, Bailey told LOU DOBBS TONIGHT quote, "right now our morale is way up because we can ship our product now. We are concerned about the after effects as far as sales, it's irritating, said Bailey, how much this cost us about $150,000 in revenues," end quote.

Kitty, farmers and distributors who have been in constant contact with LOU DOBBS TONIGHT since this outbreak became known have watched powerlessly as the FDA put the brakes on the tomato industry at the height of the late spring early summer season. At the Perishable Pundit, a Web site widely read across the fresh food industry, editor Jim Prevor told LOU DOBBS TONIGHT quote, "next week there are three hearings that are going to be focusing on this case. They would have been attacked mercilessly for destroying the American pepper industry just as they injured the tomato farmers when there's no evidence the American pepper industry was ever implicated," end quote.

The government still won't pull back from earlier statements that tomatoes were implicated in the outbreak. Prevor charging quote, "the FDA is really trying to protect its reputation. They will do anything to avoid saying that they were wrong. This is a real problem because there's no accountability," end quote.

And an interesting development, late today, the Mexican Embassy, Kitty, reached out to us here at LOU DOBBS TONIGHT clearly unhappy with the FDA's statement. Telling us quote -- and this is from the Embassy of Mexico -- "the Embassy of Mexico considers the FDA announcement regarding the alleged Mexican origin of the U.S. Salmonella outbreak that is now associated with jalapeno peppers is premature. Mexico strongly urges the FDA to abstain from making any further public comment implicating Mexican produce in this outbreak until it has completed its investigation", end quote.

So, Kitty, the CDC meanwhile is hopeful there's been a slow down in an outbreak which began in April, sickening upwards of 1,300 people, the most recent case registered on July 10th -- Kitty.

PILGRIM: April to July. It's unbelievable that this has been going on this long. Louise, you've been leading the coverage of the story since the very beginning. And from early on, the FDA has tried to stop you from saying that the salmonella could have come from Mexico. I would like to, Louise, if you would let us play for our viewers part of the story that you did for LOU DOBBS TONIGHT on July 3rd.


SCHIAVONE (voice-over): LOU DOBBS TONIGHT has learned that the focus of the investigation into the nation's salmonella outbreak is turning to the Mexican border. Sources familiar with the investigation say the Food and Drug Administration has alerted growers and the brokers who handle their products that as of Monday inspectors will stop shipments from Mexico to the U.S. of ingredients common to Mexican cuisine. Former Health and Human Services Secretary Tommy Thompson says he's been informed of the plan and it's a straightforward process. TOMMY THOMPSON, FORMER HEALTH & HUMAN SERVICES SECY.: At the border what they do is they take samples of these and they send them to their laboratories. And the laboratories examine them for any possible evidence of any salmonella or E. coli and then they make a determination.

SCHIAVONE: Thompson and others tell LOU DOBBS TONIGHT that the FDA's expanded probe includes the following products: cilantro, jalapeno peppers, serrano peppers, scallions, and bulb onions.


PILGRIM: Louise, the FDA contacted you about that report, didn't they?

SCHIAVONE: Well Kitty that report ran on the eve of the Fourth of July and that story was a story that we broke. As a result, other news organizations picked it up and quoted the CNN report about these particular products. On that weekend, the FDA food czar, David Acheson, called our offices in Atlanta asking that we pull that story back because he charged that we were saying that those products were going to be banned when as you can see from that report we never said that those products were going to be banned.

We said that there was suspicion of these imports at the border and that samples would be taken at the border, as indeed they have been, and traffic at the border has been slowed as a result of that as we reported with excellent sourcing -- Kitty.

PILGRIM: Louise, accurate reporting, excellent job.

Thank you very much -- Louise Schiavone.

SCHIAVONE: Thank you, Kitty.

PILGRIM: Well, country of origin labeling rules. Let's talk about that. It's could have helped track the source of this outbreak had they existed, but now after years of waiting for country of origin labeling, the government will publish those rules by next Wednesday. The law, however, will not actually take effect until the end of September. But that is five years after the country of origin labeling rules first became law. That was in 2003.

Now, this delay is a result of strong opposition from the food industry and special interest groups. A recent consumer reports poll showed that fully 92 percent of Americans favor labeling the source of our imported food. Now, we will have much more on the impact of the salmonella outbreak and the role of lobbyists on our food industry a little bit later in the broadcast.

Let's turn now to the presidential election. Senator Obama tonight is in London. Now on the last stage of his eight-day tour of Europe and the Middle East. Obama today telling CNN that America needs the help of its allies to defeat terrorism and solve economic problems in this country. Candy Crowley, who is now in London interviewed Obama today. Candy, what were the significant points in your interview with Senator Obama?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, I thought there were a couple of interesting things. One is about what he would like from Europe in so far as Afghanistan is concerned. He said, listen, we can't do this on the cheap. We need help from European allies. I thought the other thing that was really interesting was I talked to him and I said, listen, if you look at this trip, the real question is, you're a month away from your convention, you are three months away from the actual election, and you're sitting over here in Berlin. Why that? So take a listen to this conversation.


CROWLEY: What's the message to Americans? Because they're sitting back and going, what is my foreclosure on my house, the gas prices have to do with him giving a speech in Berlin? Does it -- I mean -- they don't see any relationship.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Well, it's very specific. If we have more NATO troops in Afghanistan, then that's potentially fewer American troops over the long term, which means that we're spending fewer billions of dollars, which means we can invest those billions of dollars and making sure that we're providing tax cuts to middle class families who are struggling with higher gas prices.

If we've got serious commitments from Europeans to deal with these energy issues in the same ways that we need to deal with them, that will have an impact on our economy, issues of trade, issues of the economy. All of these issues are now connected in this globalized economy. And so -- but I also wouldn't underestimate the degree to which people in Ohio or people in Michigan or people in Missouri recognize that our long-term safety and our long-term security is going to depend on how we can interact with key allies.

And, you know, it's amazing how often I get questions from people about when are we going to be able to reassert respect in the world? And that's part of the message that we're sending here.


CROWLEY: As you know, Kitty, Obama has been walking a pretty fine line here. His critics back in the United States say he is looking pretty presumptuous over there, crossing that line from wanting to be seen on the international stage to acting as though he's already president. I told him about John McCain's comment that it looked like he was on a premature victory lap. And he said, listen, John McCain has been in Colombia, he's been in Canada, he's been in Mexico, he has been over in the Mideast talking to the very same people that Obama talked to, so he didn't see anything wrong with it. And I said, well, you got a lot more attention. And he smiled and said, yes, I did -- Kitty.

PILGRIM: You know, Candy, he's drawing this line between foreign policy, spending fewer billion dollars there, and being able to do things economically in the United States. This was really the first time he'd ever really made that connection. Do you believe it was in response to criticism that he's not focusing on economic difficulties here in the United States during this trip?

CROWLEY: Well, you know, certainly they are aware that they were risks coming over here. They'd been planning this trip for a while. And even at the beginning of the primary campaign, they didn't expect it to last this long. And as you know, it started off about the war and then it moved into the economy. So they are sensitive to looking as though they're talking about something totally off the mark from what voters are interested in.

But as you can see, he does believe that if Europe is a better partner, if those relationships can be healed, that they can take over some of the monetary burden. On the other hand, he also says that some of those troops that he wants to bring home from Iraq also he needs to send some to Afghanistan. So the savings may not be as big as to be able to help with all of the problems that we're talking about back home.

PILGRIM: Exactly. Thanks very much, Candy Crowley. Thanks, Candy.

Well Senator McCain today angrily blasted Obama for his plan to withdraw our combat troops from Iraq. CNN's Wolf Blitzer asked McCain whether he still believes that Senator Obama is prepared to lose the war in Iraq to win the presidential election.


WOLF BLITZER, CNN ANCHOR: Now you also made a very serious charge against Senator Obama. You've repeated it, you say you standby it that he would rather lose a war to win a political campaign. Raising questions about you know his motives. Joe Klein writing in "TIME" magazine says this is the ninth presidential campaign I've covered. I can't remember a more scurrilous statement by a major party candidate.

It smacks of desperation. Those are pretty strong words from Joe Klein whom you obviously know. But tell us, what are you charging? What are you accusing Obama of doing?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I am accusing -- I am stating the facts. And the facts are that I don't question Senator Obama's patriotism. I'm sure that he's a very patriotic American. I question his judgment because he lacks experience and knowledge. And I question his judgment.

I'm not prepared to see the sacrifice of so many brave young Americans lost because Senator Obama just views this war as another political issue, which he can change positions. And everybody knows that he was able to obtain the nomination of his party by appealing to the far left and committing to a course of action that I believe was -- I know was wrong because he said the surge would not work. He said it wouldn't succeed. No rational observer in Iraq today believes that the surge did not succeed. So he just treats it as another political issue because he doesn't understand and he doesn't have the knowledge and the background to make the kind of judgments that are necessary.


PILGRIM: Well Senator McCain today had his own photo op with an international leader. McCain met with the Dalai Lama in Aspen, Colorado. Now McCain blasted communist China for misrepresenting the Dalai Lama's call for basic rights for his people in Tibet.

Still to come, outrage after California Governor Schwarzenegger prepares to cut the pay of 200,000 state workers while spending billions of dollars on illegal aliens and more on Mexico's role in the nationwide salmonella outbreak and the impact on our food industry. Stay with us.


PILGRIM: California Governor Arnold Schwarzenegger tonight is threatening to slash the pay of 200,000 state employees. Now Schwarzenegger is blaming everything for the cash crunch. What he doesn't want to talk about is what some say is one of the biggest culprits, the billions of dollars the state spends on services for illegal alien aliens.

Casey Wian has our report.


CASEY WIAN, CNN CORRESPONDENT (voice-over): California's public employee unions are furious over Governor Arnold Schwarzenegger's threat to cut their member salaries to minimum wage because the state legislature has failed to deliver a budget.

YVONNE WALKER, PRES., SEIU LOCAL 1000: This isn't going to balance the budget. As a matter of fact, it's going to cause additional problems. It's not going to make it better. It's going to make it worse.

WIAN: California's budget is a month late and projected to be $17 billion in the red. Schwarzenegger plans to slash paychecks of 200,000 state employees to the federal minimum of $6.55 an hour, $1.45 below California's minimum wage. Union leaders say it is political gamesmanship.

UNIDENTIFIED MALE: We don't like being played with. We're taxpayers, we work for a living.

WIAN: Colorado Congressman Tom Tancredo wrote Schwarzenegger a letter this week with this proposed solution. "The available data suggests that California could save several billion dollars by reducing the amount spent providing services to illegal aliens residing in the state." A 2004 study by the Federation for American Immigration Reform, which favors restrictions on all immigration, found California spent nearly $11 billion a year on education, healthcare, and law enforcement for illegal aliens.

RICK OLTMAN, CALIFORNIA FOR POP. STABILIZATION: If we really want to balance the budget and we can eliminate these costs from the budget, the taxpayer will be served and we'll also be dealing with the illegal immigration problem.

WIAN: Governor Schwarzenegger has always rejected the idea that illegal aliens are to blame for the state's deficit. And his spokesman responded to Tancredo's letter with this statement. "If the Colorado congressman is truly concerned about California's budget, he should focus his energy in Washington so the federal government starts reimbursing California for all the illegal immigrants in our prison system."


WIAN: Tancredo has tried to reduce federal reimbursements to state and local governments that have sanctuary policies protecting illegal aliens from deportation. His letter to Schwarzenegger suggests working to end those policies would also help balance California's budget, Kitty.

PILGRIM: Thanks very much, Casey Wian. Thanks, Casey.

Well the cost of illegal immigration to local communities across the country is staggering. The Federation for American Immigration Reform estimates that the cost from just three areas educating children in public schools, emergency room medical services, and incarceration amount to about $36 billion a year. Now, those costs are expected to grow to $64 billion in 2010 and they could be as high as $106 billion by the year 2020.

Up next, the FDA finally reveals the source of the salmonella outbreak. It has made thousands sick. Why did it take so long? It might have something to do with lobbyists. We'll have a special report.

And outrage over tax havens for the wealthiest Americans. We'll tell you who is helping billionaires evade taxes so you can shoulder the burden. Stay with us.


PILGRIM: Coming up, a massive oil spill in New Orleans causes chaos across the entire nation and damages our economy. We'll have a live report from New Orleans next.


PILGRIM: As we reported earlier, new developments tonight into the investigation into this country's salmonella outbreak. The FDA's finally admitting what we have reported for weeks. The source of the contamination is Mexico. And tonight, more evidence of the impact of lobbying on our food safety.

The industry has pressured the Bush administration to limit a food...


PILGRIM: They claim it's too expensive. Now a tracking system could have helped trace the source of the salmonella outbreak sooner. And as Bill Tucker reports, the industry is still fighting efforts to track our food.


BILL TUCKER, CNN CORRESPONDENT (voice-over): The millions of dollars spent lobbying against regulation has come back to bite the food industry.

PATTY LOVERA, FOOD & WATER WATCH: They don't like regulation. And historically, they fight them. They have successfully managed to not have a system imposed on them.

TUCKER: Instead, industry and trade groups have created their own individual sets of voluntary standards and regulations while states have created others. The result, many standards and no transparent system capable of tracking the flow of food in the food chain, but now Congress says it means business.

SEN. SHERROD BROWN (D), OHIO: Voluntary guidelines for the industry don't work because the industry does as little as they can get away with. But I think now we're seeing that this doesn't -- these voluntary rules don't work and this patch work of rules doesn't -- that doesn't work either.

TUCKER: Clearly not. Four and a half years ago the Food and Drug Administration required some 400,000 food suppliers to register with the FDA. The announced goal was to create accountability and track ability in the food chain. Yet it still took four months to find and identify the source of the latest salmonella outbreak. Two years ago, lettuce and spinach contaminated with E. coli bacteria put more than 100 people in the hospital and killed three.


TUCKER: Senator Brown believes that there is now a strong enough bipartisan coalition to pass a set of regulations improving the traceability of food from farm to table, perhaps, he says, as soon as September. But history suggests that we shouldn't hold our breath. In the last few years, there have been a couple of dozen bills aimed at improving food safety, Kitty, none of which saw the light of day mainly because of heavy lobbying spending money spent by the food industry to keep it from happening.

PILGRIM: You know, Bill, it makes perfect sense to do it. We have the technology to do it. It would benefit the American consumer, and still you can't get it done because of special interests. TUCKER: It would benefit the industry. They lost hundreds of millions of dollars in this latest scandal. They've spent you know less than that lobbying against it, so the logic of the industry sort of escapes everyone now.

PILGRIM: Maybe it's going to occur to them that it actually might be beneficial. Thanks very much, Bill Tucker.

Well, the amount of money lobbyists spend buying influence in Washington has doubled in the last 10 years. In 1998, corporations, unions and other special interest groups spent $1.4 billion lobbying Congress and federal agencies. Now, in 2007, those special interests spent more than $2.8 billion.

The biggest spender when it comes to buying influence in Washington is who else but the U.S. Chamber of Commerce. In the last 10 years the Chamber of Commerce spent more than $380 million in lobbying. That's more than twice what the next biggest lobby group, the American Medical Association spent.

So that brings us to the subject of tonight's poll: Do you have any faith that the federal government has the ability to protect the American public from dangerous imported food?

Yes or no? Cast your vote at We'll bring you the results a little bit later in the broadcast.

We have time now for some e-mails and some of your thoughts. And John wrote to us from Florida. And he wrote, "Now we are warned not to eat Mexican jalapenos and we know tomatoes had nothing to do with the Salmonella outbreak. Do you think Mexico will be compensating our domestic tomato and produce industry for millions of dollars in losses? I don't think so."

Gary in Texas wrote to us, "The media in Obama's pocket, no, it couldn't be. How do you think he beat Hillary? What a shame that out of the country of 300 million people we're stuck with voting for these two phonies."

And Charles wrote to us from Texas and he said, "Lou, thank you for helping me find my way to Independent. It's time for Independents to make our voices of reason heard and our votes count."

We love hearing from you. Send us your thoughts,

Coming up, fury on Capitol Hill over foreign banks that provide tax havens for the wealthiest Americans, we'll have a special report.

Also Senators Obama and McCain blast each other on national security issues. And do Independent voters care? Well three of the top political analysts will join me. Stay with us.


ANNOUNCER: Lou Dobbs tonight continues. PILGRIM: Welcome back. Now, a recap of our top stories. The federal government, today, finally admitted what we've been reporting here for weeks. That the source of the nationwide salmonella outbreak is jalapenos from Mexico. Now, the government says almost 1,300 people have become ill. The actual total of sick people may be as high as 30,000 to 40,000.

Senator Obama, tonight, arrived in London on board his newly refurbished Boeing 757. London is his last stop of his presidential- style tour of Europe and the Middle East, a tour full of lofty redirect, but fairly short on specifics.

And Senator McCain, today, said that Obama policies would have led to defeat for both this country and in both Iraq and Afghanistan. Now, McCain saying he treats the war in Iraq "another political issue."

Cargo ships, tonight, are slowly making their way up the Mississippi River for the first time in three days. A 100-mile stretch of the river had been shut down because of a massive oil spill caused by a collision between a tanker and an oil barge. The estimated cost of the economy of that shutdown is quarter of a billion a day. Brian Todd has our report from New Orleans -- Brian.

BRIAN TODD, CNN NEWS CORRESPONDENT: Kitty, this oil spill has triggered a very difficult situation on this river. As you mentioned, a couple of ships have been allowed to pass by, but they don't get far before they have to be decontaminated. It is really a difficult situation, here. We're going to give you a sense of that. Our cameraman, Bill Starling, is going to pan down this wide sweep of the Mississippi.

Normally a lot of ship traffic is going up and down this stretch of the river, but as you can see, nothing is moving except for one or two clean-up boats in the water. A very difficult economic set back for the country. This stretch of the Mississippi serves 62 percent of the consumer spending population in the entire country, right now it's all frozen and it's all because one standard-sized barge collided with a tanker.


(voice over): One of the most expensive traffic jams you'll ever see. More than 200 commercial vessels are stuck in place or have to be diverted from the Mississippi River all because one small capsized barge is spilling 400,000 plus gallons of fuel. The head of the Port of New Orleans is fuming.

GARY LAGRANGE, PORT OF NEW ORLEANS: And the huge consequence is the judgmental effect of the U.S. economy is $275 million a day, as long as the lower Mississippi River and the Port of New Orleans is not open, somebody's got to move a little quicker.

TODD: The Coast Guard captain heading the recovery says he's got to put safety and security first, but admits... CAPT LINCOLN STROM, U.S. COAST GUARD: There's a lot of pressure. This is a major artery for the whole United States on goods and commodities.

TODD (on camera): That's the "Overseas New York," a big oil tarng tanker. It is the only ship, so far, allowed to move up the Mississippi River, but it didn't get far, it's being decontaminated right now. We're told it takes about three or four hours to decontaminate each vessel before it can move again.

But in the meantime, you've got more than 200 other vessels like this one, the "Seaboard Pride," a small container ship, it got stuck here when the oil spill happened and she's not going anywhere.

(voice over): Idle crew members take home video, a frustrated captain can't let us on the ship, he's using the time to fix the chain on his anchor. This is what they're waiting on. Crews all along the river waiting for booms to sweet the oil to the banks so they can mop it up by hand -- slow, grinding, low-tech work. Coast Guard Chief Petty Officer Steve Carleton takes us through the clean-up zone.

SR CHIEF PETTY OFFICER STEVE CARLETON, U.S. COAST GUARD: They actually will take them, put them on the surface of the water and work them across the surface, because the oil is floating up on the top, there. And when they get dirty, they'll bag them up and cart them off for disposal. But you can see, it's very labor-intensive.


TODD: And that's the reason why the ships can't move, right now. Their huge wakes actually spread the oil further away from where those crews are working. Those ships also drag the oil further upstream in places where it wasn't there before. So Kitty, you can tell this is a big problem and it's going to take a long time to clean it all up.

PILGRIM: Brian, there's been some tension among the officials in charge, there. Can you tell us more about that?

TODD: Well, I spoke to the captain in charge of cleaning up this operation, Captain Lincoln Stroh (ph), after the news conference that he held today, I said look, can you give us any sense of when traffic will open up kind of on mass on the river, any sense at all, any timetable? He said, look, I really can't do that. Maybe a few days. But he said, look, I'm getting pressure from all sides, here, calls even from as high as the White House level asking when is this going to resume? So, there's a lot at stake, here.

PILGRIM: Yeah, I'm sure there is. Thank you very much, Brian Todd. Thanks, Brian.

Gasoline prices today fell for the eighth straight day to a national average of $4.01 a gallon. That's still more than $1 more than the same time last year.

Now, higher fuel costs are also leading to higher utility bills. Natural gas prices have jumped the most, they're up 40 percent in the past year, the price of coal has doubled in the past 18 months.

Meanwhile, new home sales were down 33 percent from this time last year. And foreclosures, they continue to soar. A staggering 739,000 households received foreclosure notices in the second quarter of this year.

The Senate, today, cleared the final obstacle to passing a massive housing rescue bill. And that bill is now expected to pass as soon as tomorrow. The legislation is intended to help hundreds of thousands of homeowners avoid foreclosure by refinancing their mortgages. And bolster the mortgage giants, Freddie Mac and Fannie Mae. The White House now says president bush will find the bill. That's after threatening to veto it earlier.

There was outrage on Capitol Hill, today, over foreign banks providing tax havens for the wealthiest Americans. A Senate report accuses Swiss bank, UBS, and LGT Bank of Liechtenstein of helping American clients evade billions of dollars in taxes. And that leaves hard working American families to shoulder the burden. Lisa Sylvester reports.


LISA SYLVESTER, CNN NEWS CORRESPONDENT (voice over): One-hundred billion dollars is being hidden away in tax havens, according to the Senate Subcommittee on Investigations, wealthy Americans cheating the U.S. government and concealing their assets. The subcommittee received numerous documents from a whistle-blower who worked at the LGT Bank of Liechtenstein. Senator Carl Levin says this bank and UBS of Switzerland have worked with clients who evade millions in taxes. In the UBS Bank alone, 19,000 Americans have $18 billion worth of assets in undeclared offshore accounts.

SEN CARL LEVIN (D), MICHIGAN: Clearly, they're hiding the money going in with layer after layer of obfuscation and then the direction in terms of moving the money out layer upon layer of secrecy.

SYLVESTER: Steven Greenfield, a New York toy importer, was brought before the Senate subcommittee where he pleaded his Fifth Amendment right not to give self-incriminating information.

STEVEN GREENFIELD, TOY IMPORTER: Mr. Chairman, I respectfully assert my rights under the Fifth Amendment of the United States constitution and decline to answer.

SYLVESTER: Greenfield failed to comply with a congressional subpoena requiring his attendance last week. The family behind the Westfield group, one of the world's largest shopping center chains, also is being investigated. During a Senate hearing, Peter Lowy, who heads the company's U.S. division, also pleaded the Fifth. Lowy's lawyer, Bob Bennett (ph), tried to speak on his client's behalf and had a testy exchange with Senator Levin, the subcommittee chairman.

LEVIN: We all agree, we should be accurate, and if there's any inaccuracies, that should be under oath by your client and not by his lawyer, not by his lawyer trying to testify... BOB BENNETT, PETER LOWY'S ATTY: The error is made by a...

LEVIN: Committee adjourned.

SYLVESTER: Bennett said his client did not deprive the IRS of what it was entitled to and added the money in question went to a charity, "these were charitable contributions, not one penny went to Lowy or his sons."


Senator Levin said the Senate panel asked the Lowy's the their attorneys what charities received the money and when, but he says they haven't answered those questions. Now on another note, UBS bank promised the Senate subcommittee that it will close its offshore American accounts and cooperate with the subcommittee -- Kitty.

PILGRIM: What a frustrating session, Lisa. Thanks much, Lisa Sylvester.

Well coming up, Senator Obama's overseas tour winding down. He's on his final stop in London. What impact will the trip have on his campaign?

Also, Senator McCain, in this country, took his case directly to the American people. How successful was McCain's week? Well, we'll discuss those questions and more, three of the top political analysts will join us. Stay with us.


PILGRIM: Joining me now are three of the best political analysts in the country. We're joined by James Taranto, editor of CNN contributor, "New York Daily News" columnist, Errol Louis, and Errol is also the host of "The Morning Show" show on WWRL in New York City. And CNN contributor, Democratic strategist, Robert Zimmerman, and he is also a Democratic national committeeman for New York.

Gentlemen, thanks for being with us. You know, we'll start with Senator Obama's tour, of course, who dominated the news this week, I wonder why. And James, your column was absolutely hysterical, that you can say it's a "dog bites man" is...

JAMES TARANTO, OPIONJOURNAL.COM: Thank you, it's very gracious of you to bring this up, because I was writing about something that happened on this network. The other day, Wolf Blitzer, on his show was having a discussion with a couple of strategists, one Democrat and one Republican on the question of whether the media are in the tank for Barack Obama. And then he interrupted this for a news flash that Barack Obama's plane had landed safely in Televiv.

Now, "plane lands safely" is kind of the archetypical non-news story, like "dog bites man" except that if Obama had been bitten by a dog, that actually would have been news. Obama's plane landing safely is literally an everyday occurrence. PILGRIM: All right, that's pretty harsh.

Errol, thoughts on Obama's trip.

ERROL LOUIS, NEW YORK DAILY NEWS: Well, look, it was a big success for him. He won every day if you break it into news cycles, he dominated the news. He, you know, there was some legitimate news value there, but over and above that there was clearly a fascination not only by the press, but by the public he was greeting overseas, so it was a great week for him politically. It doesn't necessarily translate into the votes he's going to need to win, but if -- you know, I talk with some people who are in the entourage and they said that the campaign aides were ecstatic, it was much better than they could have hoped.

PILGRIM: That's interesting. Robert, you know, McCain has said it's a premature victory lap. What have you to say to that?

ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: John McCain sounds a bit like a jilted lover. After all it was eight years ago he ran for president where he described the media as his base. And of course, both sides should take consolation in the fact knowing that the media fascination with Obama will wane at one point.

PILGRIM: But let me -- McCain dared him to go, challenged him to go, and now is complaining that that he's getting too much coverage.

ZIMMERMAN: Also, remember, Kitty too, a lot of the -- granted a lot of it was a fascination with Obama, but there was significant news made during his trip. All of a sudden the Bush administration announces time horizons following the theme Obama announced has talked about in terms of withdrawals. And Prime Minister Maliki announced informally his support for the Obama plan of phased withdrawal of troops.

PILGRIM: Although Maliki is facing elections and that does play very well into his position in the country.

ZIMMERMAN: There's no question. He's benefits from this whole series of events.

PILGRIM: Right, right, right.

TARANTO: Well, in defense of McCain, he didn't dare Obama to go to Berlin and speak to, depending on who you believe, 20,000 or 200,000 people. He dared him to go to Iraq and learn what's going on there. And, you know, I don't know if this Berlin thing is a political winner for him. And yes, he's fabulously popular in Germany. How many electoral votes does Germany have? Zero.?

ZIMMERMAN: Yeah. But how much...

TARANTO: Look, I think Obama -- I think it's great that he went, except I think he should have waited six months. This is the kind of thing a president does, it's not the kind of thing a candidate for president does. We, the voters, would like to have a chance to weigh in before Barack Obama speaks for our country.

ZIMMERMAN: Well, James, I don't think you have to worry about that. You're going to have your chance to speak out and no one's ever going to stop you, but however, it's important to note that what Barack Obama did, members of past presidential candidates have done historically. He did it, of course, at a very unique time and got tremendous response because we are at a moment right now where, I think, the world does want to work with the United States leader and I think Americans want to break away from the Bush "go it alone" approach to foreign policy. So, I think his appearance had a tremendous impact because of what it represents symbolically.

TARANTO: What happens if McCain is elected?

PILGRIM: Robert, you point out, you say that the trip made news, it also generated a little bit of controversy. Now, John McCain's saying that this is a whole exercise in winning a political battle and that Obama actually would rather lose a war than lose a political battle. Let's listen to the comment that-- Wolf Blitzer asked John McCain about this statement, today. So, let's listen.


JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I am stating the facts. And the facts are that I don't question Senator Obama's patriotis patriotism. I'm sure he's a very patriotic American. I question his judgment because he lacks experience and knowledge and I question his judgment. I'm not prepared to see the sacrifice of so many brave young Americans lost because Senator Obama just views this war as another political issue which he can change positions...


PILGRIM: Now, this is a serious charge.

ZIMMERMAN: It is, it is. One of the most outrageous charges I've ever heard a major nominee for president level against another. This wasn't stating the facts of John McCain now says, he essentially accused Barack Obama of treason. And it is -- John McCain is so much better than that and he has had such a more substantive career than to stoop to that level. It speaks to the desperation and lack of preparedness John McCain has to lead our country to level those kinds of charges.

LOUIS: The question I had after hearing that was, well, how does John McCain define victory? You know? I mean, it's 538, $539 billion spent, 30,000 wounded, plus 4,100 dead and counting. He's given statements that have led people to believe that he wants 20,000, 30,000 troops there in perpetuity, when do we win? And whatever he's got in mind, it's not necessarily what the public wants. And blaming Obama for that is not going to get him anywhere.

PILGRIM: Well, what was noted with the Obama comments was the just inability to credit the surge with great progress in Iraq.

TARANTO: Well, if Obama had had his way, we would have lost the war. It's very simple. And there are -- you know, ever since Vietnam, there has been a sense the sense that it's OK to lose a war. There we're people in this country who caused us to lose the war in Vietnam and...

ZIMMERMAN: And there isn't a Democrat or Republican in the Congress or any citizen in this country who would accept defeat or would tolerate losing a war. That has never been the issue.

TARANTO: That's exactly what Barack Obama was pushing for. He wanted to withdraw from Iraq. He was willing to settle for defeat.


ZIMMERMAN: That's the...

TARANTO: Sorry, that's just the way it is. Now, having said that...

ZIMMERMAN: Excuse, James, excuse me for speaking while you're interrupting, but if I could just make the point, this is not about making personal attacks against each other. It's about the fact this was a war that 2/3 of the American thought was a pointless, an ill- conceived war, that was fought under false pretenses, and we're all trying to find a way to best remove our troops so we can refocus on fighting terrorism.

TARANTO: Well, 2/3 think it's an ill-conceived war, now 2/3 thought it was a well-conceived war at the time that we made the decision, at the time that Congress, by bipartisan vote, went to go to war. But, look, it's very simple, if Obama had had his way, we would have lost the war. And I think...

LOUIS: When do...

ZIMMERMAN: What are you...

TARANTO: And I think -- but that said, I think the fact that we are now doing much better is going to work to his advantage because Iraq is much less of an issue.

LOUIS: When and how do we win the war?

TARANTO: We win the war by installing a stable government in Iraq and getting to the point where...

ZIMMERMAN: You know, both parties are really at fault, here. The Democrats by trying to make the case that the war was wrong, in fact that issue's already been settled, but that's not going to solve the problem. And the Republicans and John McCain by making the case that the surge is right. At the end of the day, those tactical debates are no longer relevant. The issue is how best to fight terrorism, how best to take on al Qaeda and how best to bring our efforts in Iraq to a conclusion, where the Iraqi government now is a $35 billion surplus.

PILGRIM: But, you know, Robert, you brought out this point that on the campaign trail you're seeing a convergence of ideology on Iraq, you're seeing, sort of, more or less, discussion of when to leave by almost every party at this point. It will not be such a contentious issue going forward, why make it such a drastic statement right now?

ZIMMERMAN: Well, that's why I can't understand, from the McCain campaign, when every survey show that the economy and the suffering of the middle class of this country is so pronounced and so severe, why he engages in these personal attacks. I truly don't understand.

PILGRIM: Last word.

TARANTO: We will still have troops in Iraq on January 20, 2013, regardless of who wins the election.

LOUIS: And if that's what victory is about, he should run on it. He should come out and say it, and we'll see what the voters think of it. Every indication is that that's not what the public wants.

PILGRIM: Thanks very much, gentlemen, always a lively discussion and well worth it. Thanks so much, James Taranto, Errol Louis and Robert Zimmerman, thank you.

Coming up at the top of the hour, the ELECTION CENTER with Campbell.

Campbell, what are you working on?


Hi, everybody. In just a few minutes we're going to hear more of CNN's exclusive interviews today with the presidential candidates. Also in the ELECTION CENTER tonight, Pastor Rick Warren, who is the author, as you may remember, of "The Purpose Driven Life," I'm going to ask him how he convinced Barack Obama and John McCain to make their first joint campaign appearance at his church.

Plus, talk of impeachment? It is pure stage craft. All that coming up in the ELECTION CENTER -- Kitty.

PILGRIM: We look forward to it, Campbell, thank you.

Still ahead, big companies cashing in on billions of federal dollars meant for small businesses. It's another example of your government at work. We'll have a special report.

Also later, "Heroes," it's our tribute to the men and women who serve this country in uniform. And tonight we introduce you to Captain Ivan Castro; he's the only blind officer serving in the Special Forces. Stay with us.


PILGRIM: Alarming new evidence, tonight, of widespread fraud in a federal government program designed to give money to small businesses. Now, federal investigators say the Small Business Administration awarded contracts to businesses falsely claiming to be located in economically distressed areas. The agency even gave small business contracts to some of the country's biggest companies. Carrie Lee has our report.


CARRIE LEE, CNN NEWS CORRESPONDENT (voice over): Two government reports this month find the small business administration awarded hundreds of millions of dollars to undeserving companies over the last two years. The SBA agrees with the findings.

FAY OTT, SBA: We don't dispute their numbers at all. We've taken a number of steps and a number of issues to address the challenges facing many of our programs.

LEE: The Government Accountability Office concludes the SBA's HUBZone program, for businesses in economically distressed areas, is "vulnerable to fraud and abuse," because information is rarely verified. The inspector general for the Department of the Interior reports corporate giants like Home Depot and John Deere were counted as small businesses, because of "data entry mistakes, reliance on incorrect data, and a failure on the part of contracting officials to verify business size." Those mistakes also helped the SBA towards its goals.

LLOYD CHAPMAN, AMERICAN SMALL BUSINESS LEAGUE: It's not miscoding, it's intentional, and in many cases, it's outright federal contracting fraud, so, I think the Bush administration has completely fabricated and falsified the government's compliance with the congressionally mandated 23 percent small business contracting goal.

LEE: The SBA admits it fell short of the 23 percent goal last year. Investigations on these big businesses getting SBA contracts began in 2002.


Now, any large firm that misrepresents itself as a small business to win a contract is guilty of felony. The Department of the Interior refers any suspicious activity to the inspector general, but DOI and SBA sources, Kitty, tell us that there haven't been any prosecutions for misrepresentations. So meanwhile, all of this money's being awarded to companies that don't deserve it, and sometimes those companies misrepresenting themselves, but not getting in trouble for it at all.

PILGRIM: It's hard to see how some of these companies can represent themselves as small businesses, they're a household names.

LEE: Right, and you know, in the GOA, the GAO made up four fake companies who blatantly not following the rules, and they still were awarding the certificates that they needed.

PILGRIM: Destroys your faith. It really does destroy your faith in the effectiveness of this government. Thank you very much, Carrie Lee. Up next, we have "Heroes," and tonight the remarkable story of Captain Ivan Castro, he's a wounded Green Beret, he's determined to serve his country despite his disability. Stay with us.


PILGRIM: And now "Heroes," it's our tribute to the brave men and women who serve this country in uniform. Tonight, we introduce you to Army Captain Ivan Castro. The 18-year army veteran, Green Beret, was blinded by a mortar explosion in Iraq two years ago. But, Captain Castro is determined not to let that stop him from serving his country, and helping his fellow soldiers. Rusty Dornin has his story.


ARMY CPTN IRAN CASTRO, U.S. ARMY SPECIAL FORCES: We're all drafting, one behind another...

RUSTY DORNIN, CNN NEWS CORRESPONDENT (voice over): Whether it's teaching a spin class to injured soldiers, skiing for the first time, or running a marathon, Green Beret Captain Ivan Castro is always up for a challenge, all the more impressive because Castro was blinded nearly two years ago by a mortar explosion in Iraq.

CAPT. IVAN CASTRO, U.S. ARMY SPECIAL FORCES: At no point in time did it ever cross my mind that I was going to get out, you know, medically retired. I was going to fight to stay in and show everybody that I was capable of being productive.

DORNIN: He's now the executive officer of his company, the only blind officer serving in the Special Forces. And while Castro can't lead a special ops mission, there's plenty of other work.

COL. FREDERICK DUMMAR, U.S. ARMY SPECIAL FORCES: That doesn't mean as in the case of Ivan, that one, he can't help train those soldiers to do those missions, because he has a tremendous amount of language capability and a tremendous amount of knowledge of Special Forces tactics. So he can assist in the training.

DORNIN: A former drill sergeant, Castro helped supply troops in the field --

UNIDENTIFIED FEMALE: ... air force base.


DORNIN: -- and watches out for family members here at home.

It helped that Castro worked here at Fort Bragg eight years before he lost his sight. He already knew his way around. At home, as at work, Castro wants to be independent. Technology helps, even to pick out his clothes.

UNIDENTIFIED MALE: Dark blue with gray sides (ph).

DORNIN: His wife, Evelyn, says she was surprised the Army encouraged Castro to remain on active duty.

EVELYN CASTRO, WIFE: I did not think that they would actually go all the way and allow him to continue to show his leadership skills. I didn't think they would have that kind of mindset. So, I was proven wrong.

I. CASTRO: The minute I walk out this door, I put on my head gear and put that cane in my hand and I'm walking down the sidewalk. People just stop and stare. So every day I'm proving myself.

DORNIN: Rusty Dornin, CNN, Fort Bragg.


PILGRIM: A remarkable man. We wish him well.

There are only two other blind officers on active duty in the U.S. Army. Eye injuries are the third most common injury in Iraq.

Tonight's poll results -- 96 percent of you have no faith that the federal government has the ability to protect the American public from dangerous food imports.

Thanks for being with us tonight. Good night from New York.

The "ELECTION CENTER" with Campbell Brown starts right now -- Campbell.