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CAMPBELL BROWN: NO BIAS, NO BULL

Madoff Pleads Guilty; Obama Meets With Business Leaders

Aired March 12, 2009 - 20:00   ET

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


CAMPBELL BROWN, CNN ANCHOR: Hi there, everybody.

He is disgraced, he is hated, and now he is done. At this moment, Bernie Madoff is out of his penthouse and spending the first night for possibly the rest of his life behind bars.

Bullet point number one tonight: Madoff told the judge he was sorry and ashamed as he pled guilty to the 11 felony counts he faced after stealing what could add up to tens of billions of dollars. Madoff had a lot to say in court. But, like investigators, we want to know two things about his vast scheme. Billions are missing. Where is the money and who else was in on it?

We will have more on that.

Bullet point number two tonight: President Obama reaches out to court American business on a week where suddenly finally we can report that the economic news is improving. For the third day in a row, stocks climbed up, the best day in two weeks.

As for President Obama, he urged everybody to take a deep breath, don't overreact to either the good news or the bad news.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We live in such a rapid-fire, information-rich environment that people's attention spans go like this.

And that makes for volatility in confidence, all right? A smidgen of good news, and suddenly everything's doing great. A little bit of bad news, "Oh, we're -- we're down in the dumps," and I am obviously an object of this constantly varying assessment. I'm the object in chief of this varying assessment.

(LAUGHTER)

(END VIDEO CLIP)

BROWN: We're taking a NO BIAS, NO BULL look at the other positive economic news we're finding, and we will look at the effect that the president is having on all of this. We will also be joined by two of best political minds around. Bill Bennett and James Carville are going to be with us tonight.

And bullet point number three: the girl whose letter to President Obama earned herself a seat next to first lady Michelle Obama during the president's Capitol Hill speech last month. You will remember she was asking for help to save her school from literally falling apart.

Well, you would guess, with new friends like the Obamas, the problem might be solved, right? Note quite. We have got NO BIAS, NO BULL look at who and what is getting in the way.

And bullet point number four tonight: the first lady -- speaking of the first lady, well, today Mrs. Obama hit the road to keep her commitment toward helping military families. She has a powerful message she shared today for their troops, for their loved ones.

We're going to have much, much more on the first lady coming up a little bit later in the show.

First, though, we're going to start with the good news on your money. And it's coming from several fronts. Let's start with today's big climb on Wall Street.

Chief business correspondent Ali Velshi joining me now.

Welcome relief. Ali, show us the numbers.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: I think you're not supposed to be talking to me right now, Campbell, because you never actually come to me on good news.

But I have got good news for you. Let me show you what's going on. This market has been very strong this week. Let me show you what happened. Monday, down 1.2 percent, which is not bad, given the types of markets we have had. Tuesday, look at the, 5.8 percent higher. Wednesday, the market was up 3.9 percent. But, still, we were worried people would take their money and sell out once they had made a little bit of it back.

Today, 3.5 percent higher, which means people are staying in this market. Now, this is still the effort to establish a bottom to this market, but, in four days, this market is up 8.2 percent.

In some years, that would be considered a good return for an entire year, four days, and this market is up 8.2 percent. Doesn't mean it's going to stay going up, but there is a piece of news that's driving this, particularly today, and it's a piece of news I have always counted on, because America is dependent on consumer spending.

And I knew back in late 2007 when the economy was going down, because consumer spending had started to weaken. For the month of February, for the second month in a row, retail sales are showing positive signs. They're still actually down a little smidge, but that's because of the big decline in auto sales.

We always take auto sales out of the calculation to figure out what is going on, because auto sales really skew it one way or the other. Look at when you take out auto sales what happens. Gasoline, up 3.4 percent. That's not because people bought more gasoline. It's because the price of gas went up. So don't even worry about that.

But look at this. Clothing and accessories up 2.8 percent in February, compared to the February before, electronics up 1.2 percent. Health and personal care products, well, that's not so much an indication of the indicator, but it's up about 0.6 percent.

So, the bottom line is for the second month in a row -- we saw this in January and we saw it again in February -- Americans are actually spending a little bit and the only thing that that can mean is that they are feeling a little bit better about the future. To be buying clothing and electronics and appliances in this kind of an economy is a good sign, not a trend, but a good sign, Campbell.

BROWN: All right, not a trend yet. We will keep watching it. Ali Velshi for us tonight -- Ali, thanks. I know you're sticking around.

A lot more to talk about with Ali a little bit later.

But we move now to the man who stole much, who hurt so many. Tonight, he's in jail, Bernie Madoff finally in jail. His next stop, prison, and chances are he will never leave, but the damage is obviously done.

Madoff took sole responsibility for the elaborate Ponzi scheme that may have claimed as much as $64 billion from thousands of people all over the world.

Our Joe Johns has been following the story, and he's starting us off tonight -- Joe.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Campbell, off to jail for Bernie Madoff, but not much closure the victims who trusted him the guy and gave him their money.

The main thing those victims got today was a carefully lawyered statement to the court that explained how Madoff pulled off one of the biggest con jobs in history.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): What may very well be the final steps of freedom for perhaps the most despised man in America. Bernie Madoff entered a federal court in Manhattan today and pleaded guilty to the greatest investor fraud in U.S. history.

Standing before the judge and with his back to the victims, the 70-year-old former Nasdaq chairman confessed to stealing $64.8 billion from at least 4,800 investors around the world.

"I operated a Ponzi scheme," he said. "I'm here today to accept responsibility for my crimes. I realized that my arrest and this day would inevitably come."

Before pleading guilty to the 11 charges against him, Madoff detailed a decades-long swindle that scammed celebrities, universities, charities, and ordinary people. All trusted him with their money. In return, this is what he now admits he did. "I never invested these funds in the securities, as I had promised," Madoff said. "Instead, those funds were deposited in a bank account at Chase Manhattan Bank. When clients wished to receive the profits they believed they had earned, I used the money in the Chase Manhattan Bank account that belonged to them or other clients to pay the requested funds."

In court, he admitted to lying to the clients and to the SEC, which, despite several investigations, found no evidence of wrongdoing. Madoff also defended his trading firm, run by his brother and sons, calling the company "legitimate, profitable and successful in all respects."

As for all the lives he destroyed, "I am painfully aware that I have deeply hurt many, many people," Madoff offered. "I cannot adequately express how sorry I am for what I have done."

Madoff will likely never go to his $7 million penthouse again. After the plea, bail was revoked. He was handcuffed and through an underground passage escorted to his new home, a jail. It overlooks the court and sits just blocks away from where he built his house of cards.

Madoff will be confined to a small cinder block cell like this one. He will be sentenced in June and faces up to 150 years in prison, which will satisfy some victims.

CYNTHIA FRIEDMAN, MADOFF VICTIM: I think he should rot in hell. He's evil. He's evil. He's way up there with all the evil people in the world.

(END VIDEOTAPE)

BROWN: Joe, you mentioned 150 years being the maximum here. I mean, what is he really going to get? How much time is he really going to serve?

JOHNS: Well, the judge can take into account the enormity of the crime, and it is pretty enormous. The judge can do anything, certainly, but the thinking is out there that he will probably spend the rest of his life in jail. And he's 70 years old now, Campbell.

BROWN: Joe Johns for us tonight -- Joe, thanks.

Joining us now, Alexandra Penney, who is one of the many victims Madoff crushed. And she now blogs about how she has been coping on TheDailyBeast.com. And here with me in New York, senior legal analyst Jeffrey Toobin, and once again Ali Velshi joining us as well.

Alexandra, I know you have called him a sociopath, a terrorist. What's going through your mind today?

ALEXANDRA PENNEY, MADOFF FRAUD VICTIM: Well, I was very relieved, as many -- all of the victims were, that he is going to be in jail. We all think it's the tip of the iceberg. There's so many co- conspirators. Just mentioning Chase Manhattan Bank, for instance, if $64 billion went through Chase Manhattan, that's fairly noticeable.

So, what I and other victims have been talking about is, who are the others who were involved in this? I think we all need to know, because our system is so broken.

You mentioned the SEC, Campbell. We expected protection from the SEC. We expect protection for our money. And our confidence is gone, as President Obama said at the top of the hour. Madoff is in prison, but there are many, many more people that are involved in this.

BROWN: Yes.

Well, Jeff, what about that? Are we going to see other people prosecuted?

JEFFREY TOOBIN, CNN SENIOR ANALYST: There were two very interesting disclosures in Madoff's statement to the judge.

One was, as Alexandra Penney just said, Chase Manhattan Bank apparently had all this money going through it. Where were they? You're supposed to report suspicious transactions. So I think Chase is going to have to some questions to answer.

The other thing that was even more interesting is, he said, his business was corrupt, the management side, but the advise -- the other business run by his brother and sons completely pure as the driven snow, but he also said that 4 cents a share went from the corrupt business to the other business.

BROWN: To the other business.

TOOBIN: How could the people not know where that money came from?

So that was, I thought, very incriminating evidence towards the brother and son.

BROWN: So, does he have to cooperate, though, for them to be able to prosecute, especially those people around him, those people closest to him?

TOOBIN: No, he doesn't have to cooperate. He doesn't have a plea agreement.

But the government is going to have access to all the e-mails at the company, all the records of the company. They're going to interview anyone who's ever worked there, so they can build a case without Bernie Madoff.

Also, they could put Madoff in the grand jury, force him to testify, see what he says. He may not say anything useful, but there are a lot of avenues still open to the government. BROWN: Alexandra, you're in Palm Beach tonight, because you're trying to sell the house that you had hoped to retire in. How hard has this been for you personally?

PENNEY: Well, it's been like a train wreck for all of us.

And we are just kind of emerging from the wreck. My life has been turned completely upside down. I'm an artist. I do write also, but my passion is my art. Now I can't do any of that. I have to leave my studio. I have this tiny little 700 square foot house down here. That's obviously for sale.

(CROSSTALK)

BROWN: Do you think you're going to get any money back?

PENNEY: Well, you know, it's -- I have gotten so many different answers. All of us are supposedly entitled to $500,000 in insurance money for fraud.

And some people have said -- I had a savings account. I had an IRA, because every cent I ever earned or saved was with him. So, it's all gone. BROWN: Right.

PENNEY: And, so, we don't know whether we will get $500,000 or $100,000 or nothing. I'm certainly hoping that we will.

BROWN: Right.

Let me have Ali address that, because no one really knows where this money is.

VELSHI: Right.

(CROSSTALK)

BROWN: What do you think? Do they have a chance of getting it back?

VELSHI: By his accounting, it was $65 billion. But we don't whether he was calculating that had been earned that was never real.

But they found less than $1 billion. So, the $500,000 she's talking about is from SIPC. That's a government program that some people will be insured under. And then there's less than $1 billion that has been found.

But I spoke to some securities attorneys today who deal with this sort of thing, and they are sort of describing the kinds of forensics that are involved in this sort of thing. So, the question now is, where did the money go and are there pots of money elsewhere around the world that they might be able in order to give maybe back to people?

What happens is there are typically in cases like this maybe that go to payouts. Their own investments, they take the money that they have got, the person who perpetrated a crime like this, and invest it.

One of the lawyers I talked to said don't overestimate -- or underestimate how much people like this spend on lifestyle, because when you're spending somebody else's money, you just are not worrying about how you spend on travel and jewelry and things like that. So, some of that money is gone there.

Other people are given jobs to do things. You hire a lot more people to do things when you're spending other people's money. There's probably real estate around the world that the SEC is going to be looking into.

And of course we do know that in this specific instance gifts were given to people and sent away in the form of jewelry and things like that.

But I think what the SEC is going to want to know, and what people like Alexandra are going to want to know, are there stashes of money in accounts in different parts of the world that we can get?

And one thing he did say is that when there is money that goes around the world, when people are defrauding a system, those governments tend to be very helpful in getting it out, because nobody wants to be seen as a haven for criminals right now.

BROWN: Yes.

TOOBIN: But the sad truth is, in cases like this, the money tends to just float away and there's not as much of a pot as you think there would be.

(CROSSTALK)

BROWN: Alexandra, I know this is going to be tough for you. Many thanks to for joining us tonight. We really appreciate it. And best of luck to you in trying to get through this.

PENNEY: Thanks, Campbell. Thanks.

BROWN: And to Jeff and Ali, as always, thanks, guys.

Michelle Obama is on her first official trip outside of Washington. She's giving a very personal touch to our troops and their families. We will talk about that.

And remember the girl who sat next to Mrs. Obama during the president's big speech to Congress? She wanted help for her century- old crumbling school back home in South Carolina. Well, now help is available, but it may not get there. We will explain.

(COMMERCIAL BREAK)

BROWN: As always, we are "Cutting Through The Bull."

And while Bernie Madoff will never walk the streets again, there is still a lot of explaining to do, not just by Madoff and his family, but at the Securities and Exchange Commission, whose bungling of the investigation likely cost Madoff's victims even more money.

Just yesterday, the new SEC chairman, Mary Shapiro, told a congressional panel that rewards might be a good way to help bring in leads, the details of which are often ready to go, thanks to whistle- blowers.

Well, gee, you think? The SEC wouldn't have had to shell out a dime when Harry Markopolos tried to deliver the Madoff corruption probe on a silver platter starting four years ago.

Listen to what he told CBS' "60 Minutes" recently, as he detailed his repeated attempts to get the SEC's attention.

(BEGIN VIDEO CLIP, "60 MINUTES")

HARRY MARKOPOLOS, INDEPENDENT FINANCIAL FRAUD INVESTIGATOR: It took me five minutes to know that it was a fraud. It took me another almost four hours of mathematical modeling to prove that it was a fraud. All the SEC had to do was pick up the phone. They never did.

(END VIDEO CLIP)

BROWN: Markopolos, as we all know by now, was ignored until it was too late. And the latest guess by investigators puts the amount of stolen assets as high as $64 billion.

To be fair, Shapiro didn't take over until January. And she's right to try and get funding to hire more staff from the current dismally low number of 400 investigators keeping an eye on more than 10,000 investment advisers, any of whom could be the next Madoff.

But a bigger team and big paydays for tipsters will only be a waste of time and money if the SEC continues to ignore those with the proof and, more importantly, the courage needed to come forward and point out what so many missed, evil greed and flat-out financial rape committed by the likes of Bernie Madoff.

Remember, the rage among victims goes beyond one man's personal web of deceit.

(BEGIN VIDEO CLIP)

LORETTA WEINBERG, MADOFF VICTIM: I don't think one needs a master's degree in investigation techniques to figure out that the first thing you would do is find out, did he make buys? Did he make sells? What's going on here?

The fact that our own government failed us, especially as somebody who's an elected official, makes me almost even angrier than I am at Bernie Madoff.

(END VIDEO CLIP)

BROWN: As Madoff spends the first night of the rest of his life behind bars, his victims may have some cause to celebrate. The SEC certainly does not. Let us hope the investigation that now is under way into its own catastrophic blunders will produce real results.

We will be right back.

(COMMERCIAL BREAK)

BROWN: President Obama delivered a remarkably upbeat economic message today, a real departure from the doomsday scenarios we have been hearing a lot of lately.

The president told a group of top business leaders he's not trying to change the way America works and fully plans to get out of their way once the economy recovers. Listen.

(BEGIN VIDEO CLIP)

OBAMA: This is the most dynamic economy on Earth, and our capacity is undiminished.

We've got the same smart folks and engineers and scientists. We've still got the hardest-working workers on Earth. We've got the best universities. We've got all kinds of innovations. And you know what? We've also got a whole bunch of potential customers out there.

As bad as the housing market has been, you're starting to see inventories decline, and there is a young family out there right now who's going to be thinking about buying a home. And if we can get them credit, they're going to buy that home. And if they buy that home, then that construction worker, maybe he comes in and remodels the kitchen. And that means that he can buy the computer for his kid at school, and we're off to the races.

So I am very confident about our long-term prospects.

(END VIDEO CLIP)

BROWN: Pretty rosy view there from the president.

A little earlier, I asked two CNN contributors, Democratic consultant James Carville, and former Reagan Cabinet Secretary Bill Bennett, if they think the president is sending the right message.

(BEGIN VIDEOTAPE)

BROWN: Bill, you heard the president. He had a very positive message today. Does he have his head in the sand, or is there something to be positive about?

BILL BENNETT, CNN CONTRIBUTOR: He's got his head somewhere.

No, I like the optimism. I like the forward-looking character of his style. But I don't understand the argument -- $7.3 trillion, all this spending -- we know he likes to spend money. But the centerpiece is the economy. And what is the plan? We haven't heard Geithner. What is the plan? Well, this was the guy they sacrificed everything for to get. And he seems to me to be missing in action. So, I don't get it. I get the rosy message. But it seems to me this poll of economists today came down pretty hard on Barack Obama, saying this is not going to work.

I just don't think, when everyone's cutting back, for government to be spending all this money makes any sense at all.

JAMES CARVILLE, CNN POLITICAL ANALYST: Well, clearly, what they're doing is -- he's right -- people are cutting back and businesses are cutting back. And there's a lack of demand in the country.

And typically -- but even people like Marty Feldstein, who's a renowned economist, agree that the government has to come in and spend money at a time like this. This is hardly something new or hardly radical.

BROWN: Let me play both of you just a little more of what the president had to say. Listen.

(BEGIN VIDEO CLIP)

OBAMA: I don't like the idea of spending more government money nor am I interested in expanding government's role. I have always been a strong believer in the power of the free market. It has been and will remain the very engine of America's progress, the source of a prosperity that has gone unmatched in human history.

I believe that jobs are best created not by government, but by businesses and entrepreneurs like you who are willing to take risks on a good idea.

(END VIDEO CLIP)

BROWN: How do you reconcile what he's saying here? He's talking about reducing government and at the same time overseeing a massive expansion of government.

(CROSSTALK)

CARVILLE: Well, I guess it's evident that we're losing 600,000 jobs a month and that businesses aren't hiring people now.

And what he's saying makes eminent sense to me. It would be great if you were out there and you were -- we were in an expansionary cycle, and businesses were hiring people, and people were out there spending money, and they were creating demand, that you wouldn't have to do this.

The reason that he's doing this -- and he said -- and I'm sure the president feels like, gee, I would rather not be doing this. I would rather pay down the debt, or I would rather use the money for something else, but he can't, because we have a collapse of demand.

BENNETT: Look, Europe has tried this. I don't think it's working very well in Europe.

But I got to say, I don't believe him, frankly, when he says: I don't want to spend a lot of money and I don't want to expand government.

Can anybody in their right mind really believe that?

(END VIDEOTAPE)

BROWN: We're going to have more with Bill Bennett and James Carville about the Republican leader who's under attack right now. That's when we come back.

(COMMERCIAL BREAK)

BROWN: Every day seems to bring a new crisis for the new Republican Party chairman, Michael Steele.

Well, tonight, he's trying to put out a firestorm that he started by talking about abortion. In an interview with "GQ" magazine, Steele called abortion -- quote -- "an individual choice." He also said each state should decide whether or not to allow it.

Well, today, Steele put out a statement saying -- quote -- "I am pro-life, always have been, always will be."

But that isn't stopping some of the party's most prominent social conservatives from jumping all over him. Former presidential candidate Mike Huckabee says, "For Chairman Steele to even infer that taking a life is totally left up to the individual is not only a reversal of Republican policy and principle, but it's a violation of the most basic of human rights."

Earlier, I asked Bill Bennett, a strong supporter of the GOP chairman, and Democratic strategist James Carville if Steele has any chance of hanging on to his job.

(BEGIN VIDEOTAPE)

BENNETT: He says that women have a choice today. They do. That's the law. That's the state of the law. He also reiterated his strong support for pro-life and said, at the end of that statement, that he wishes that Roe v. Wade would be overturned and you could send it back to the states, which I think is what most conservatives ought to happen.

And, actually, there's a lot of people in America who believe that. There are more people in America who believe there should be some restrictions on abortion than that there should be absolutely restrictions on abortion.

BROWN: But I don't have to tell you there are a lot of conservatives who want a constitutional amendment. They want to see this dealt with at the federal level, not at the state level.

BENNETT: Do you know there have been hundreds of human life amendments? They have never made it anywhere seriously.

There may be some day in the vast, unreachable aspects of the future when this could happen. It's not going to happen any time soon. The only way I think you can come to a reasonable compromise on this is to send it back to the states, in which case every state they will allow abortion in some circumstances, but states will vary.

In probably the most difficult issue in American politics, I think that is the best and most reasonable compromise.

BROWN: He's been criticized by Mike Huckabee...

BENNETT: I know.

BROWN: ... by his -- Ken Blackwell, his challenger. He...

BENNETT: But, Campbell, all these guys, I mean, I know...

(CROSSTALK)

BROWN: Should he remain chairman? I mean...

BENNETT: Sure. Sure.

Look, it's a tough job. The party's in bad shape. We just got routed. I have talked to more than three chairman in the past about this issue. When they make their debuts as chairman of the RNC, this is what people focus on. This is what people ask. There's always -- there's always this kind of difficulty.

But all those people you cite end up in the same place that Michael Steele ends up, which is, let's get this thing back to the states.

BROWN: James, you got a word on this?

CARVILLE: Can I chime in? Yes, I do.

I admire the secretary's loyalty, but this guy's done. Touch a king, kill a king. He touched Rush Limbaugh. He didn't kill Rush Limbaugh. He's done. It doesn't matter what he says on abortion. He's picked up the -- the -- the big deal in the Republican Party.

And, by the way...

(CROSSTALK)

BENNETT: Rush Limbaugh is not the king. Rush is not the king. He's my friend. He's your friend. He's not the king.

(CROSSTALK)

BROWN: OK.

CARVILLE: I know. I know.

He -- he -- I respect your loyalty, Mr. Secretary. I really do. But he's not going to make it.

(LAUGHTER)

BROWN: Quickly, quickly, James, in that same interview, I got to say Michael Steele said that conservative author Ann Coulter is "the Carville of the Republican Party." What did you take of that comment?

CARVILLE: Well, I don't take a whole lot of Michael Steele's judgment.

BENNETT: Thin (ph). They're both thin (ph).

CARVILLE: Look, I've been called -- I've been called a lot worse things than that and I'm accustomed to it. So what?

BROWN: James Carville and Bill Bennett for us tonight.

When we come back, imagine this, swimming in the Gulf of Mexico, suddenly, a 12-foot shark headed right for you. The whole thing caught on tape. Extraordinary video, right when we come back.

(COMMERCIAL BREAK)

BROWN: Michelle Obama made her first official trip outside of Washington today. We're going to have all the details for you in just a moment. First, though, Joe Johns here with "The Briefing" -- Joe.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Campbell, police in Amsterdam say they foiled a terror plot. Seven people were arrested today after an anonymous tip that an Ikea store or other stores in the southeast part of the city might be targeted by bombers.

There was a close call in space today. The crew of the International Space Station had been docked into their Soyuz escape craft for about 10 minutes when a small piece of orbiting space junk got too close for comfort. The piece of debris from an old rocket engine passed by harmlessly.

The tallest building in America is no longer the Sears Tower. That's because the 110-story building in Chicago is getting a new name. It will be remained the Willis Tower after the London-based insurance broker that's moving in this summer.

And a New Orleans man survived a two-hour deep sea fight with a shark. Take a look at these just released pictures.

Craig Clasen (ph) was hunting tuna with some friends in the Gulf of Mexico when the shark attacked last June. He and his friends survived. The shark did not. The divers will be guests on CNN's AMERICAN MORNING tomorrow. And I guess, Campbell, sometimes you get the shark and sometimes the shark gets to you.

BROWN: So, not that I would ever question the veracity of the story, Joe, but don't you think it's a little coincidental that just as the shark is attacking the guy, his friend happens to have his videotape rolling and records the whole thing for two hours. JOHNS: Yes. Yes, you're right. It does look a little fishy.

BROWN: I don't know.

JOHNS: It's a little fishy.

BROWN: Oh, good one.

JOHNS: Sorry.

BROWN: We will see what they say in the morning. Joe Johns for us tonight. Joe, thanks.

JOHNS: You bet.

BROWN: A teenager got the president's attention with her letter about a school that is literally falling apart. Her plea not only got her a seat next to Michelle Obama, while the president told Congress about her story. We went to South Carolina to take a look at her school and ask her what she thinks about the state's governor refusing to take money to fix it.

Also at the top of the hour, "LARRY KING LIVE" has even more on the Madoff fraud case and its many victims.

(COMMERCIAL BREAK)

BROWN: It seems like everybody's got their hand out these days, so when a governor says thanks but no thanks to doling out $700 billion in federal stimulus money, we take notice.

Last night, we told you how Governor Mark Sanford of South Carolina is doing just that. And today, national political correspondent Jessica Yellin tells us how his decision is a huge disappointment for one little girl who captured the nation's attention when she called on Congress to save her crumbling school.

Jessica Yellin is following the money in Columbia, South Carolina.

(BEGIN VIDEOTAPE)

TY'SHEOMA BETHEA, DILLON STUDENT: The second floor shakes (ph) and they all --

JESSICA YELLIN, CNN NATL. POLITICAL CORRESPONDENT: Ty'Sheoma Bethea felt she had to speak up. Her school was crumbling and Congress was not going to approve money that could be used to rebuild it. She wrote a letter to lawmakers begging for help.

TY'SHEOMA BETHEA, DILLON STUDENT: I'd say that we're not quitters and we as students from Dillon can make a change and that we're just students trying to become lawyers, doctors, congressmen and also presidents.

YELLIN: The letter made its way to the Oval Office and brought an extraordinary invitation. The White House sat Ty'Sheoma right next to Michelle Obama at the president's address to Congress.

It seemed help was on the way. New stimulus money was coming from Washington and Ty'Sheoma thought her school, J.V. Martin, would finally be rebuilt.

Now, she doesn't know what to think. Her governor, Mark Sanford, just announced he won't use his share of the stimulus money on projects like rebuilding Ty'Sheoma's school.

GOV. MARK SANFORD (R), SOUTH CAROLINA: It's easy to fall in the trap of we need to fix this one school. The hat that I wear is to look as best I can and it will be imperfect, at the statement's entirety.

YELLIN: Taking a stand against government spending, Sanford says he'd only be willing to use the $700 million to pay down the state debt. That means Ty'Sheoma's community is left with its crumbling school.

She gave us a tour. It's astonishing. The auditorium has been condemned. They use the stage for storage.

BETHEA: It's been condemned for a while. And the walls are starting to peel off. The roof (ph) is starting to fall out of the ceiling.

YELLIN: She says the coach cancels basketball games when it rains.

UNIDENTIFIED FEMALE: The roof leaks and what if there's a small (INAUDIBLE) and it happens.

YELLIN: And the old trailers have walls so thin, the teacher has to pause whenever a train rolls by.

UNIDENTIFIED FEMALE: OK, the train is coming, so I have to stop.

YELLIN: That happens about five times a day.

(on camera): The school is in an area that's been called the corridor of shame, a stretch of highway with neighborhoods that are enormously poor and largely African-American. Some critics say that quite simply the state does not want to spend money educating black kids.

(voice-over): South Carolina Congressman James Clyburn is outraged the governor won't spend stimulus money in this community.

REP. JAMES CLYBURN (R), SOUTH CAROLINA: It is a slap in the face of the people who live in those counties. Now if the majority of the people who live in those counties happen to be African-American, it's a slap in their faces as well.

YELLIN: Sanford flatly rejects the charge.

SANFORD: Spending money that you don't have I think is a horrible idea.

YELLIN: His office points out state lawmakers could rebuild J.V. Martin with their own funds.

Ty'Sheoma says she just wants the squabbling to end.

BETHEA: I think that the politicians should be giving advice to me as a student instead of me giving advice to a politician. I'm just a little girl from Dillon.

(END VIDEOTAPE)

BROWN: Now, Jessica, you see the pictures of that school and it really is unbelievable. Do they have any chance of getting money from wherever in order to rebuild it?

YELLIN: Well, they do have a chance, Campbell. They tried to raise money locally by raising taxes, but because the economy collapsed, that effort hit a brick wall. So now, they have to hope that Washington will determine that the governor cannot legally use the stimulus money to pay down their debt. That is likely to happen. Then, though, state lawmakers would have to vote to overrule the governor's decision and spend the money. All of that, Campbell, would take some time and obviously, these people are looking for a solution now.

BROWN: No kidding. It's a pretty desperate situation there.

Jessica Yellin for us from South Carolina tonight. Jessica, thanks very much.

Michelle Obama on the road for the first time, playing a familiar role, a mom in chief.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Michelle Obama.

Yes.

UNIDENTIFIED CHILD: Michelle Obama.

OBAMA: You what? You know that Obama guy?

(END VIDEO CLIP)

BROWN: Pretty cute here, but the first lady's trip to Fort Bragg today gives a peek at her more serious agenda too. That when we come back.

(COMMERCIAL BREAK)

BROWN: First Lady Michelle Obama took her first official solo trip outside of Washington today. She traveled to Fort Bragg, North Carolina, beginning what she says will be one of her top priorities in the White House, her mission to help military families. (BEGIN VIDEOTAPE)

BROWN (voice-over): Doling out hand shakes and hugs, Michelle Obama got up close with soldiers and their families at Fort Bragg in North Carolina. And what a reception she got. From the base's "Iron Mike" dining facility --

FREDDIE WILLIAMS, MILITARY WIFE, FT. BRAGG: It was just wonderful to shake my president's wife's hands.

BROWN: To the base's Prager Child Development Center.

UNIDENTIFIED FEMALE: It was exciting. It was just a thrill. It was just something I will remember all my life.

MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Hey, guys.

BROWN: The first lady got a rock star reception pretty much at every stop, including a classroom full of preschoolers. She sat down with them to read "The Cat in the Hat," an Obama family favorite.

OBAMA: This is one of my favorite books. I have two little girls. They're not as little as you guys. They're 10 and 7. And when they were little, I used to read this to them.

UNIDENTIFIED CHILD: I know Sasha.

OBAMA: You know Sasha? You know Sasha?

UNIDENTIFIED CHILD: Sasha and Malia.

OBAMA: And Malia, yes, those are my little girls. Yes.

All right. The sun did not shine. It was too wet to play. So we sat in the house all that cold, cold wet day.

BROWN: Mrs. Obama also met behind closed doors with military families and Fort Bragg volunteers and spoke in nearby Fayetteville to organizations that support military families.

OBAMA: You have found ways to help strengthen families under great stress. You find ways to make life fun for children who wake up and go to sleep worried about their moms and dads. You found ways to celebrate life and provide hope to a new mom who's giving birth all alone. You found ways to comfort a parent when the grief is just too much to bear.

Fayetteville clearly does watch over those who watch over us. Thank you for your loyalty and your devotion.

(END VIDEOTAPE)

BROWN: To talk more about this, to talk about Michelle Obama and her mission as first lady, let's bring in right now Nia-Malika Henderson, White House reporter for Politico.com, Carl Sferazza Anthony, chief historian of National First Ladies' Library, and CNN political analyst Roland Martin joining us as well.

Nia, let me start with you on this. And Mrs. Obama has said that she wants to make helping military families her signature issue. But what does that mean? Beyond sort of these meet and greets like we saw today, what does that really mean?

NIA-MALIKE HENDERSON, POLITICO.COM: Well, I think what it means is, her trip down there today, as you said it was her first solo trip, she really wants to build a network of people she can listen to, listen to their stories, listen to the difficulties they're having, listening to what essentially what they need and make sure that matches up with the president's policies. And, of course, we've seen the president talk about making military families a top priority for his administration.

He's talking about raising pay. He's talked about expanding education and child care opportunities and counseling opportunities. And so that's what she was doing today, really just reaching out and listening.

BROWN: And her agenda not limited to this by any means. What do you think? Is there one specific initiative, one piece of policy that she intends to champion?

ROLAND MARTIN, CNN POLITICAL ANALYST: Well, she's made it clear that she is not going to have an office in the West Wing and not be the kind of first lady that Hillary Rodham Clinton was. But this clearly is --

BROWN: Mostly she initially (ph) --

MARTIN: Well, absolutely. But this clearly is the issue that is important to her because what it does, she brings attention to the issue.

Look, we've covered the news out. We've covered the stories of soldiers coming back killing their wives (ph). And so when she talks about the mental issues in terms of the awareness there in terms of what they go through, that does have an impact when the person you frankly are going home to every single night is the president of the United States. And so, therefore, when she comes back to the White House with these stories, he's hearing it then it has a direct impact on policy as well.

BROWN: Carl, I know you followed many first ladies and you believe that Michelle Obama's first few days really stand out in a pretty extraordinary way. How so?

CARL SFERAZZA ANTHONY, FIRST LADY BIOGRAPHER: Well, to me the one element of her early weeks of her tenure that are, you know, unprecedented is the way she reached out to the actual workers in the White House itself. The staff there, the butlers, the electricians, the people who clean and serve the food and invited them to a reception in the White House for them and their families, that's quite extraordinary. And I think an extension of that has been this ongoing tour she's made of the various federal departments where by and large the people who come to those and the auditoriums are, you know, the people who really make our government work, the people who process the papers and write the checks.

And I think, you know, all of this unfolds carefully and a little bit slowly because, of course, everyone wants to make sure that the time that they expend in doing this results in something that really helps. So I think for example, a visit with the military families, you know, very well put in your package there about that lining up with any policy that the administration will be proposing to help the families.

MARTIN: Campbell, she wants to be important because she is. This is not somebody who came to the White House already having a staff and use of those kinds of service things on those lines. And so her deal is really when she talked a lot during the campaign about her father being a worker, going to work every day, her mom as well, and so she's trying to say, I'm not only a first lady. I'm a regular mother, a regular wife just like anybody else and that's her style.

BROWN: And, Nia, you know, she knows she is under enormous scrutiny right now and people are writing editorials about her decision to wear a sleeveless dress at her husband's speech to Congress.

HENDERSON: Right.

BROWN: She's made some very conscious, strategic decisions to control her image, hasn't she? Tell us about that.

HENDERSON: She has. I mean, and every first lady is under enormous amounts of scrutiny and she probably is under a little bit more because she is the first African-American first lady.

One of the things in talking to her aides is that she's very aware of her position as a role model, especially for African-American women. And so, you know, having her there look glamorous, with her arms out, in some way sends a message to African-American women into the larger, you know, kind of culture that there are many different images of black women and so she really kind of works to undermine a lot of the stereotypes that are out there about black women and that's something that she thinks is very important.

BROWN: All right.

ANTHONY: And, Campbell --

BROWN: Yes, quickly. Go ahead.

ANTHONY: No, I was going to say, and sort of the beauty of that too is over time as we see them, they are president and first lady and not Barack and Michelle. And in that, suddenly everyone comes to, I think, break down some stereotypes.

BROWN: All right. To Carl, to Nia and Roland, of course, thanks, guys, appreciate it.

HENDERSON: Thanks, Campbell.

ANTHONY: Thank you.

BROWN: In tonight's "Political Daily Briefing," more details on Bristol Palin's breakup. We know you're waiting for them. Why she's not marrying the father of her infant son and possible hard feelings between Levi Johnston's family and the Palins. That story when we come back.

(COMMERCIAL BREAK)

BROWN: Time for our "Political Daily Briefing." Tonight, we've got history, adventure, even romance, or at least the details of a breakup.

Our Randi Kaye is here with it all. And let's start with President Obama, Randi. He took some time out today to honor his favorite commander in chief, right?

RANDI KAYE, CNN CORRESPONDENT: Yes, and we all know who that is. That is absolutely right. The "Land of Lincolner" was on hand at Fort McNair's National Defense University to honor the 16th president where an auditorium at the college was being named Abraham Lincoln Hall.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Historians taught in our schools and his name is synonymous with freedom. You and I live in the union that he saved, and we inherited the progress that he made possible. Yet, despite this far reaching legacy, it is still, to quote the man himself, all together fitting and proper, that we should set aside this ground and dedicate this hall in his memory.

(END VIDEO CLIP)

KAYE: After his remarks, the president unveiled a portrait of Lincoln, along with a plaque. There were about 900 uniformed and civilian personnel in attendance there.

BROWN: And speaking of heroes, I know, a new comic book company is hoping to cash in on sort of the female force right now, right?

KAYE: Yes.

BROWN: What's going on here?

KAYE: Everybody is always looking to make a buck. It's a bird, it's a plane, it's a Palin? Yes, that's right.

Comic book company Bluewater Productions has rolled out a series of comics featuring Secretary of State Hillary Clinton and Alaska Governor Sarah Palin. They're calling the line the "Female Force" series. Bluewater says the comic books have already sold out, and people are lining up for the release of this one -- the Michelle Obama and the Caroline Kennedy versions. Interesting reading, I'm sure.

BROWN: Yes, completely.

KAYE: If you like comic books.

BROWN: And speaking of Palin, let's get to the gossip. We reported the big split yesterday between Bristol Palin and Levi Johnston.

KAYE: This is still big news.

BROWN: You have new details even.

KAYE: I do -- breaking details. They are still broken up. Yes, they are if that's what you're wondering. But the question is, did Bristol see it coming?

According to an "Associated Press" interview with Levi Johnston, the two parted ways two and a half months after having baby Tripp back in December. But on February 17th, less than two months after Tripp's birth, Bristol sat down for an interview where she said Levi is "a really hands on dad. Eventually we'd like to get married. We're focusing on, like, getting through school and just getting an education and stuff."

Now the break-up was first reported by "Star" magazine who quoted Levi's sister saying, "Bristol made it impossible," that's a quote, "for her brother to see his son." Bristol later issued a statement saying, "Unfortunately, my family has seen many people say and do many things to 'cash in' on the Palin name."

Now the two had talked about a possible summer wedding, you may recall. Clearly, that is no longer in the cards. So don't expect any invitation.

BROWN: Yes. I don't think I was getting one anyway.

Randi Kaye for us tonight. As always, Randi, thanks.

KAYE: Sure.

BROWN: Tonight, Oprah Winfrey took her show, use her show to send a message to Rihanna and other young women like her.

(BEGIN VIDEO CLIP)

OPRAH WINFREY, TV HOST: I've said many times, love does not hurt. It doesn't hurt.

(END VIDEO CLIP)

BROWN: More from Oprah, Rihanna and Chris Brown, latest details including also your reaction. We'll talk about that when we come back.

(COMMERCIAL BREAK) BROWN: So we are learning tonight that singers Chris Brown and Rihanna have recorded a new song together. This is just a few days after he was formally charged with beating her up. This case has struck a real cord with us and with our viewers.

Today, Oprah Winfrey devoted her whole show to the issue of relationship violence. She and her guest, including Tyra Banks who talked about being abused herself, sent a very clear message for Rihanna and others like her. Don't go back, get help.

(BEGIN VIDEO CLIP)

TYRA BANKS, TV HOST: I stayed because I felt like if I left and he didn't change and didn't treat me how I felt I deserved to be treated, I was a failure. I wasn't even in love with him.

And one day, I was at his house and I walked to the mirror in his bathroom. He wasn't there. I walked to the mirror in the bathroom and I had this moment with myself. And out loud I looked in that mirror --

(END VIDEO CLIP)

BROWN: And that's going to have to do it for us tonight. We are out of time. Apologies for that.

Thanks for watching.

"LARRY KING LIVE starts right now.

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