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THE SITUATION ROOM

Study: Prostate Exams Unneeded; Jobs Bill Fight Gets More Personal; Boehner "Disappointed" by Obama; The GOP Race without Sarah Palin; Wall Street Protests Spread to Main Street; Interview With Senator Bernie Sanders; Bilking the U.S. Army Corps of Engineers; Jobs Bill Fight Gets More Personal

Aired October 6, 2011 - 17:00   ET

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


WOLF BLITZER, HOST: And you're in THE SITUATION ROOM.

Happening now, President Obama is pointing fingers and naming names. This hour, his bully pulpit offensive against the Republicans blocking his jobs bill -- will it only add, though, to the gridlock?

Plus, anti-Wall Street protests are spreading across the United States. And some liberal politicians are hopping on the bandwagon. I'll ask Senator Bernie Sanders about the political impact of all that anger on the stump right now.

And the presidential race without Sarah Palin -- we're taking a closer look at what her supporters and the Republican candidates may do now that she's taken herself out of the running.

We want to welcome our viewers in the United States and around the world.

Breaking news, political headlines and Jeanne Moos all straight ahead.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

But we begin with an exclusive report about prostate cancer screening that could directly affect your life or the life of the man you love. CNN has now learned that a stunning and confusing new recommendation is in the works.

Let's bring in our senior medical correspondent, Elizabeth Cohen -- all right, Elizabeth, give us the background.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: All right, Wolf. I was on your show two years ago and we talked about the mammogram recommendations, that women in their 40s don't need mammograms. That same group, the U.S. Preventive Services Task Force, we are told, is poised on next week to say that they think that men should not get prostate cancer screening, that PSA test, at all. They say that the test does more harm than good.

Now, this is according to a source that is privy to the tax force's deliberation and a report that CNN obtained. It is a draft report. There is a chance that it could change by Monday, when it's due to be released -- Wolf.

BLITZER: But I know a lot of men -- and I'm sure you do, as well -- everybody knows men who did have that PSA test. They discovered that there was cancer. They had treatment and they're alive right now. So -- so what does this say about them?

COHEN: Right, this decision is going to be very hard to explain to those men.

But here's the situation with prostate cancer, Wolf.

Some prostate cancers are fast growing. You want to catch them and treat them. But there are many more prostate cancers that are going to be slow. So you catch them and they'll never kill the man, but you do give the man treatment. And that treatment can make him impotent or incontinent or the treatment could even kill him.

So that's the problem here, is that medical science can't discern between these different kinds of tumors. So some men get this treatment and they actually would have been fine without it, but the treatment hurts them.

BLITZER: Now, this is the same group, as you point out, that recommended against mammogram screening for women in their 40s. They got a lot of backlash for that, as well, didn't they?

COHEN: They certainly did. And, you know what, Wolf, I'm expecting something similar in this situation. We already talked to someone at a prostate cancer foundation, a man who had prostate cancer. He said that this proposed recommendation is a tremendous mistake. Those are the words that he used.

BLITZER: So bottom line, should men 40, 50, 60 years old, should they be screened? Should they take these PSA blood tests or no?

COHEN: You know what, Wolf, this is a very difficult decision that every man has to make with his doctor, because, on the one hand, you might catch a fast growing cancer. On the other, you might catch a slow growing cancer and feel compelled to treat it and be hurt by the treatment.

But I want to give you these numbers, Wolf, because I think they're important. If you test men, you've got a less than 1 percent chance of finding one of these harmful cancers. You're 47 times more likely to find one of the smaller cancers where, again, you really would have been better off not knowing about it at all. So odds are, you're going to find one of the cancers you really, in many ways, don't want to find.

BLITZER: It's going to cause a lot of confusion out there and a lot of doctors are going to wonder what they should be doing.

We'll continue to follow this story with you, Elizabeth.

Thanks very much.

COHEN: Thanks.

BLITZER: Let's go to the White House right now, where President Obama is due to meet this hour with Senate Democrats after a new public push for his jobs bill. It was the main focus of his news conference over at the White House earlier in the day.

And he sent a very tough message to Republicans, setting the stage for an expected showdown in the Senate next week.

Let's go to our White House correspondent, Dan Lothian, for more -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: It was, indeed, a hard push. The president pointing fingers at members of Congress but specifically at Republicans, saying that this is not a game, that now is not the time for political gridlock.

The president believes that his jobs plan will lead to a lot of jobs for men and women across the country. And now he is supporting a new plan by Senate Democrats to pay for it all.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): It wasn't a full throated endorsement of the surtax on millionaires to pay for his jobs bill, but it was as close to as President Obama got.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The approach that the Senate is taking I'm comfortable with.

LOTHIAN: The president used a big part of his roughly one hour press conference to lean on Congress to pass the jobs bill, singling out Republicans for often saying no to his proposals.

OBAMA: The question, then, is, will Congress do something?

If Congress does something, then I can't Congress a do-nothing Congress. If Congress does nothing, then it's not a matter of me running against them. I think the American people will run them out of town.

LOTHIAN: With an economy going in reverse after showing signs earlier this year of moving forward, the president blamed Europe, a tsunami, high gas prices and the debt ceiling fight for the stark outlook.

OBAMA: There is no doubt that the economy is weaker now than it was at the beginning of the year.

LOTHIAN: He said ideas Republicans are backing won't create the immediate jolt the sagging job market needs. And he challenged reporters to measure his plan against what his critics are offering.

OBAMA: Go ask the Republicans what their jobs plan, is if they're opposed to the American Jobs Act. And have it scored, have it assessed by the same independent economists that have assessed our -- our jobs plan. LOTHIAN: Later, while honoring the NCAA women's basketball champions in the Rose Garden, the president joked that the coach's practice of throwing candy to fans might sweeten his hand on the Hill.

OBAMA: I'm going to try that.

(LAUGHTER)

OBAMA: Do you think that's going to work, if I go into House of Representatives and just throw candy around?

(END VIDEO TAPE)

LOTHIAN: The president says that all of this boils down to pretty simple math, that there needs to be quick action now, especially on his jobs bill. If not, then there will be serious consequences and there will be significant problems than we're currently seeing -- Wolf.

BLITZER: Dan, tell our viewers what the president said when he was asked about all those Occupy Wall Street protests underway.

LOTHIAN: Well, the president said that that shows the frustration of a lot of Americans, that despite the meltdown that we saw on Wall Street, that there's still Republicans out there, specifically some of the presidential Republican candidates, who believe that there shouldn't be a crackdown on some of these abusive practices.

The president pointing out that a lot of people understand that a lot of people are not playing by the rules and that Wall Street is one example of that.

BLITZER: Dan Lothian, thanks very much.

Dan is over at the White House.

Let's get to some Republican reaction now to the president's finger- pointing.

Our Congressional correspondent, Kate Bolduan, is joining us with more on this part of the story -- Kate.

KATE BOLDUAN, CNN CORRESPONDENT: Hey there, Wolf.

Well, certainly, Senate Democratic leaders, according to aides, were happy to get the president's endorsement when he said he was comfortable with the changes they would like to make and how they would like to pay for the president's jobs plan, the so-called millionaire's surtax, a 5.6 percent surtax on income over a million dollars.

But that surtax and the president's continued demands that Congress pass his plan now certainly doesn't seem to be changing any opinions -- many opinions, especially among Republicans.

Listen here. (BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Nothing has disappointed me more than what's happened over the last five weeks, to watch the president of the United States give up on governing, give up on leading and spend full-time campaigning. We're on the Hill legislating.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: So the real goal for the Democrats, as far as I can tell, it's entirely political. They're arguing for a permanent tax hike to pay for a temporary stimulus. They're essentially admitting they're not particularly interested in creating jobs, because proposing a partisan tax hike 13 months before an election won't create one single job.

(END VIDEO CLIP)

KEILAR: So as you can -- as you can see there, Republicans are accusing Democrats and the president of doing nothing more than playing politics with this jobs fight and this so-called millionaires surtax is doing nothing to win over more support on that side of the aisle.

No surprise, Republicans are steadfastly against tax increases. Susan Collins, a Republican who does often cross party lines, so an important voice in this fight, today, Wolf, that she called the millionaires surtax pretty obviously a political ploy rather than a serious offer.

And that's not the only problem that this jobs -- jobs plan is facing. Some of the president's own Democrats, his own party, still do not seem persuaded, centrists like -- centrist Democrats like Senator Ben Nelson and Independent Joe Lieberman. They said today that they would oppose the millionaires surtax.

So the bottom line, the president's statement today that he's going to continue hammering Congress, especially Republicans, to pass his jobs plan and the inclusion of the surtax may help to unify the majority of Democrats, but it sure doesn't seem to be doing anything to change the -- increase the chances that the jobs bill will move -- make any moves in Congress -- Wolf.

BLITZER: That's a fair point.

All right, thanks very much, Kate, for that.

President Obama also spoke today about the U.S. relationship with Pakistan, which has been getting more and more tense since the death of the Osama bin Laden.

Today, Pakistan's information ministry says the doctor suspected of trying to help the CIA target bin Laden will be charged with treason. A U.S. official tells CNN the Obama administration has repeatedly asked Pakistan to release the Pakistani doctor.

Here's the president speaking earlier today. (BEGIN VIDEO CLIP)

OBAMA: We've still got more work to do. And there is no doubt that there's some connections that the Pakistani military and intelligence services have with certain individuals that we find trouble. And I've said that publicly. And I've said it privately to Pakistani officials, as well.

(END VIDEO CLIP)

BLITZER: Even after the president praised Pakistan for some of its cooperation, he went on to say the administration is constantly evaluating Pakistan's cooperation with the United States.

We're also watching all those anti-Wall Street protests spreading to Main Street. I'll ask Democratic Senator -- of Independent Senator, I should say -- Bernie Sanders about that. I'll also get his reaction to a Republican claim that jobless Americans have only themselves to blame.

And the Sarah Palin build-up and now let down -- who will her supporters turn to now that she's announced she's not running for president?

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: Here is yet another sign of our very troubled times. Almost half of Americans, 48.5 percent, live in a household that gets some kind of government aid. That's a record high, according to Census data for the first quarter of 2010. It's up from about 44 percent of the population in 2008.

Back in 1983, it was less than 30 percent.

Here's how it breaks down. More than 34 percent of Americans live in a household that gets either food stamps, subsidized housing, cash welfare or Medicaid applications -- or Medicaid. Applications for these programs are up nearly 50 percent in the last decade.

More than 14 percent live in homes where someone is on Medicare and 16 percent live in homes getting Social Security.

But that's only half the story. As unemployment hovers above 9 percent, 46 million Americans live below the poverty line. And as more people turn to government assistance, there are fewer and fewer people actually paying the taxes needed to support all these programs.

It's estimated that more than 46 percent of households will pay no federal income tax this year. Last year, 45 percent of households paid no federal income tax.

It doesn't take a math genius to figure out this is unsustainable.

With fewer than half of Americans paying federal taxes and just about half living in a family that gets government aid, the country is circling the drain. It's no wonder the crowds protesting around the United States keep getting bigger and bigger with every passing day.

Here's the question. How long can we go on with almost half of Americans living in households that get government assistance?

Go to CNN.com/Caffertyfile. Post a comment on my blog or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.

WOLF BLITZER, CNN ANCHOR: Jack, thank you.

Sarah Palin says she still thinks she can make a difference in the coming election year even though she's now officially decided not to run for president. The former Alaska governor revealed her plans last night, ending a long flirtation with the 2012 White House bid.

CNN's Joe Johns is here, he's watching the story unfold.

So what does it mean for the Republicans who are running for president, Joe?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Well, Wolf, this is obviously a disappointment for her supporters, but now that Sarah Palin has said she isn't running for president, it will be up to Republicans already in the race to try to connect with Palin's people. And in that way, Palin could still be a factor even though she's not on the campaign trail.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Governor Sarah Palin.

JOHNS (voice-over): Honestly, this might have been one of the biggest build-ups to nothing in modern politics. Sarah Palin got her on movie. She got her own tour bus. And then she went on the road allowing speculation to build that she might run all the way up until last night.

Still was anybody really surprised that she didn't run? The answer just a little bit. Diehards in places like Iowa, for example, held out for months supporting anyone else hoping Palin might just get in the race. Now they're looking for somewhere else to go.

BRENDAN STEINHAUSER, TEA PARTY EXPRESS: You may see them go to Rick Perry, you may see them go to Herman Cain. You may see them go to Michele Bachmann or Ron Paul. It's really hard to tell. I don't think they'll go in one block as it were. I think you'll see people choose different candidates over time.

JOHNS: Tea partiers and social conservatives we talked to said the guy with the most to lose with Palin not in the race is Mitt Romney because he looked stronger with more social conservatives all vying for the same group of votes.

The other question still on the table is about who Palin might eventually endorse. In the last midterm elections, Palin's endorsement meant a lot to conservatives running for high office. Think of Nikki Haley, elected governor in South Carolina.

Ford O'Connell worked in the McCain-Palin campaign and thinks Palin's blessing could be a big help for any of the Republicans in the race right now.

FORD O'CONNELL, REPUBLICAN STRATEGIST: I think right now she's an open book with giving her endorsement, but if I had to guess, you know, who she would be more closely aligned with, that would be Texas Governor Rick Perry.

JOHNS: But it's not certain at all that Palin's endorsement power will extend all the way into next November.

Scott Conroy, author of "Sarah from Alaska", says her pop icon status will stick around, but she may have hurt herself politically by not running for president. Even though polls showed it would have been an uphill climb for her to get the nomination.

SCOTT CONROY, REALCLEAR POLITICS: Her endorsement is going to be a big story when it happens, but I don't think it will carry the same weight as it did in 2010. Again in 2010, she was a potential presidential candidate. At that time, a lot of people assumed she would be a very viable force in the national scene herself. And that's a big reason why her endorsement carried so much weight.

(END VIDEOTAPE)

JOHNS: So Sarah Palin, the popular culture icon, is more than just with us. She's embedded in the culture. She is, though, hoping to keep her political presence, too.

Not so clear tonight, Wolf, whether she's going to have a decisive role, though, in picking the Republican nominee.

BLITZER: I suspect we'll see her. She won't be silent all that lot.

JOHNS: That's for sure.

BLITZER: Thanks very much for that.

Gabrielle Giffords returned to Washington today, but this time politics had nothing to do with her visit. We'll tell you what's going on.

And a rat infested pirate ship poses a problem for the Alaskan coast guard, but where most people see a problem, one senator sees an opportunity.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now including Congresswoman Gabrielle Giffords' return to Washington.

What happened? LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf. Well, Giffords is making her second trip to Washington since being shot in the head in January. Giffords made the trip today to be with her husband at his retirement ceremony from the U.S. Navy. Mark Kelly became an NASA astronaut back in 1996 and made four trips as pilot and commander of the space shuttle.

And the head of the Energy Department's controversial loan program is leaving government. Jonathan Silver is joining Third Way, a left- leaning think tank. Silver oversaw a loan program that supported dozens of projects. One of those was Solyndra, the solar company whose bankruptcy could cost American taxpayers hundreds of millions of dollars. According to the Energy Department, Silver's departure was announced back in July before Solyndra's chapter 11 filing.

Be brave and go out in the streets. That call was in a new audio message reportedly from Moammar Gadhafi. The former Libyan leader is urging his supporters to protest against the new government, the National Transitional Council. Gadhafi also questioned the NTC's legitimacy. Gadhafi has not been seen in public in months and his whereabouts remain unknown.

So what is the best way to send a message to pirates to stay away from the United States? Well, how about this? Blowing up their ship. Senator Mark Begich wants the Coast Guard to sink a renegade fishing vessel last month. The boat was using drift nets which been killing endangered whales and turtles. The boat, though, appears to be infested with rats so it can't be brought into Alaska ports. So it's a real dilemma just out there. They don't know really what to do with it. Begich kind of out there suggestion but his suggestion is to just blow up the ship.

BLITZER: Let it sink. All right. Thanks very much, Lisa.

We're seeing some liberal politicians embrace the so-called Occupy Wall Street movement out there. I'll ask Senator Bernie Sanders for his take on the spreading protest and their political impact.

And stand by to hear how four defendants allegedly stole millions of dollars from the U.S. Army Corp. of Engineers and American taxpayers.

(COMMERCIAL BREAK)

BLITZER: Protests against Wall Street are spreading today to a number of major U.S. cities including right here in the nation's capital. President Obama says the demonstrations are expressing the frustration that so many Americans feel right now about the economy, jobs and the fallout from the financial crisis.

Democrats are trying to harness the anger of the growing Occupy Wall Street movement that some see as sort of a left-wing answer to the Tea Party.

Joining us now, Senator Bernie Sanders of Vermont. He's an independent who caucuses with the Democrats. Senator, thanks very much for coming in. Let me get right to this Occupy Wall Street demonstration that's going on around the country right now. What do you think about this?

SEN. BERNIE SANDERS (I), VERMONT: Well, I applaud them. I think the president is right. They are speaking to the real anger and frustration that millions of Americans feel at a time when the middle class is collapsing, poverty is increasing, the people on top are doing phenomenally well, and the people, Wolf, who caused this damn recession in the first place, the folks on Wall Street, because of their greed and illegal behavior, you know what their punishment has been? They're now making more money than they ever made before.

So what the demonstrators are saying, there's something wrong with that picture and they're exactly correct.

BLITZER: Because the president at the news conference today was asked about all the Wall Street bankers in 2008, 2009. You say illegal activity. No one, as far as I know, has gone to jail let alone even been charged with any illegal activity in causing this crisis.

Do you know of anyone who's been charged with the crime?

SANDERS: Well, I think there is some investigations. And I think -- you know, hopefully, they will lead to criminal charges, but what I think the average American is saying if a kid smokes marijuana, that kid could end up in jail. These people, because of their activity, destroyed the economy. Millions of people lost their jobs, their homes, their life savings, and now they're making more than they ever did before.

So I applaud what the folks, the Wall Street demonstrators are talking about, but now what we've got to do is put some meat on that bone. We have to come up with some specific ideas in terms of how you deal with Wall Street.

I'll give you one example, Wolf. Many people don't know this. The sixth largest financial institutions in this country have assets the equivalent of 60 percent of the GDP of the United States of America. Sixty percent of our GDP. Some $7 trillion.

In my view, everything being equal, they will once again, because of their reckless activity, come back before Congress in a too-big-to- fail situation. They will need to be bailed out again. In my view, we have got to break up these financial institutions right now, bring some competition to the financial industry.

Furthermore, you have large banks, Bank of America, the others. They're charging interest rates on people's credit cards of 25 or 30 percent. That's called usury. We've got to regulate interest rates and demand that the Fed take that kind of action.

So we need some real specific Wall Street reform which protects the American people.

BLITZER: Do you want to share with us who's being investigated right now for criminal activity on Wall Street?

SANDERS: Well, I think -- no, I think something has been in the front pages of the papers, so I have nothing more than that.

BLITZER: Is the Obama administration MIA when it comes to all these problems? Because it's been in business now for almost three years.

SANDERS: If you're asking me, do I believe there should have been a thorough Wall Street investigation, that there should have been prosecutions two or three years ago, the answer is absolutely. If you're asking me, has the Obama administration been bringing on board financial advisers who are too close to Wall Street? Absolutely.

So, you know, I think we should have been much more aggressive in going after Wall Street. I'll give you another example.

We found out -- I got a provision in Dodd-Frank which showed that during the financial crisis, the Fed provided $16 trillion on a revolving basis of low-interest loans to every large financial institutions in America central banks all over the world, many large corporations. Right now, in America, you have small businesses desperately in need of affordable capital. They can't find it.

Why is not the Fed responding to the needs of American small businesspeople who want to expand, who want to grow jobs, in the same -- with the same sense of urgency that they responded to Wall Street in their moment of crisis?

BLITZER: The president's jobs bill, it's going to come up next week in the Senate. You're a senator. But a lot of people are suggesting, why is the president proposing legislation that he knows is not going to even pass -- forget about the House of Representatives, but even some of your fellow Democrats, if you will? And I know you're an Independent, but even some Democrats say they can't vote for the president's plan.

SANDERS: Well, I'm not so sure that that's the case. I think what the president has got to do and what the media has got to do is appreciate the urgency of the moment. And we don't.

The reality is, unemployment in America today, Wolf, is not nine percent. Real unemployment, including those who have given up looking for work and are working part time, and they want to work full time, is 16 percent. Twenty-five million Americans.

What the president has got to do is come up with a bold jobs program. I would go further than he did. I would put more emphasis on rebuilding our crumbling infrastructure, transforming our energy system.

But the president has got to say to the American people, we need to create millions and millions of jobs. And if any Republican out there does not want to support job creation, you've got to hold that person politically accountable. That is the issue of the moment.

Sixteen percent unemployment, young people getting out of high school, getting out of college can't find jobs. Older workers seeing their wages go down. We need to rebuild this economy.

BLITZER: I want you to listen, Senator Sanders, to Republican presidential candidate Herman Cain speaking out today. Listen to this.

(BEGIN VIDEO CLIP)

HERMAN CAIN (R), PRESIDENTIAL CANDIDATE: If you are envious of somebody that happens to be rich, that you call a fat cat, go and get rich instead of expecting them to walk outside of the office and write you a check. That's not the way America works. Work for it.

(END VIDEO CLIP)

BLITZER: All right. You want to respond to Mr. Cain?

SANDERS: Yes. I think Mr. Cain got it wrong.

That's exactly how America works. Historically, what we have said is, especially in a moment when the wealthiest people are becoming wealthier, when we have the most unequal distribution of income and wealth, what we have historically done is say yes, to the wealthiest people in this country, you're going to have to pay more in taxes, and especially at this moment when the real effective tax rate for the very rich is the lowest that it has been in decades. Of course they are going to have to contribute to help us get this economy moving and create the millions of jobs that we desperately need.

BLITZER: One final question before I let you go. Did President Obama do the right thing in ordering the killing of an American citizen, Anwar al-Awlaki?

SANDERS: That's a long discussion. Probably longer than the amount of time than we now have.

BLITZER: Go ahead. Give me 30 seconds.

SANDERS: Well, the answer is that I -- you know, I think that when you have an American citizen killed by the United States government, it raises some real questions. On the other hand, when you have somebody who's a terrorist and at war with the United States, that's the other side of that equation.

BLITZER: Senator Sanders, thanks very much for coming in, as usual.

SANDERS: Thank you.

BLITZER: Prosecutors are describing a brazen scheme. You're going to find out how four men allegedly defrauded the U.S. Army Corps of Engineers to the tune of $20 million.

And something you didn't know about Steve Jobs, even after all the tributes. Following his death from cancer.

(COMMERCIAL BREAK) BLITZER: Politicians like to talk about waste, fraud and abuse in government. Now prosecutors have set their sights on four men who they say carried out one of the most audacious schemes in history. They're accused of bilking the U.S. Army Corps of Engineers out of $20 million.

Brian Todd is investigating for us.

Brian, what's going on?

BRIAN TODD, CNN CORRESPONDENT: Wolf, we were in court today, picked up some extraordinary detail on this case.

Those four men were ordered held without bond. One prosecutor told me this is one of the largest, if not the largest, government contracting scandal in U.S. history.

(BEGIN VIDEOTAPE)

TODD (voice-over): A beautiful upscale House in Washington suburbs. Hope you like it, because you may have paid for it. That's according to an indictment filed against four defendants in a massive alleged fraud scheme.

Two of them worked for the Army Corps of Engineers, a government agency. Prosecutors say the four men schemed to file inflated bills for federal contracting services.

(on camera): How brazen do you believe this was?

RONALD MACHEN, U.S. ATTORNEY: I've been a prosecutor for a while now, and this is one of the most staggering violations of public trust that we've seen.

TODD: Lead government prosecutor Ronald Machen says the defendants defrauded taxpayers of about $20 million. In their indictment, prosecutors say the two Army Corps of Engineers officials, Kerry Khan and Michael Alexander, agreed with an employee at contractor Eyak Technology to funnel government business to Eyak.

In return, prosecutors say, Eyak Tech overbilled the Army Corps of Engineers by $20 million over a four-year period. The government says that money was divided between Alexander, Lee Khan, his father, Kerry Khan, and Harold Babb, an official with Eyak Technologies.

Prosecutors say Lee Khan set up shell companies to launder the money stolen by his father. All four have pleaded not guilty.

Jeffrey Jacobovitz is a lawyer for Harold Babb.

JEFFREY JACOBOVITZ, ATTORNEY FOR ACCUSED CONTRACTOR: We've heard one side of the story. We've heard the government's version of the facts. And generally, obviously, there are two sides to the story.

TODD: Prosecutors say these alleged schemers weren't exactly subtle with their money, purchasing several expensive sports cars, high-end watches, first-class plane tickets, and 16 properties.

(on camera): Prosecutors say this expensive house in the Washington suburbs belonged to defendant Kerry Khan. They say Khan, whose salary with the Army Corps of Engineers, ranged from between $84,000 and $110,000 a year, wrote one check for a down payment on this house for more than $300,000.

(voice-over): Eyak Tech did not have to compete with other bidders thanks to special rules for native Alaskan companies, rules which critics say make fraud easier.

SEN. CLAIRE MCCASKILL (D), CONTRACTING OVERSIGHT COMMITTEE: This is the kind of stuff that happens when you allow giant no-bid contracts to very tiny companies that then hire somebody on the back end to actually do the work.

(END VIDEOTAPE)

TODD: Defenders of those special rules argue that they bring contracting jobs to disadvantaged Indian tribes who were treated badly in the past.

Now, as for this case, one prosecutor told me there was a breakdown of internal control at the Army Corps of Engineers that allowed all of this to happen. Spokespeople for the Corps and for Eyak Tech say they take the allegations seriously, they don't tolerate this kind of conduct, and they are cooperating with investigators -- Wolf.

BLITZER: Tell our viewers, Brian, about the incredible family intrigue in this case as well.

TODD: It is unreal. Prosecutors say of that father and son duo who were involved in this, the father has another son who's now in prison for drug trafficking. Prosecutors say that son heard about what was going on, he told his father and brother, if you don't pay me a certain amount of money, I'm going to go to the feds with this. They say then the son who is allegedly involved in this, Lee Khan, threatened to kill the brother who they say was trying to extort them -- his own brother.

This is a government document, the prosecution document. Here's a quote quoting a phone conversation between Lee Khan and his father.

He tells his father, "If anything like that happens, you are losing a son, because I will kill that m-f-r myself. He says if he makes an f- ing peep, he's going down. If I have to find somebody locked up to f- ing shank him in there, he's going down."

He's talking about killing his own brother. One of his defense attorneys said you can't judge him by that, it was heat of the moment, they may have been some ill-chosen words.

BLITZER: Wow. Ill-chosen, I should say.

TODD: I would say so.

BLITZER: Thanks very much, Brian, for that. Stay on top of this story for us.

TODD: Sure.

BLITZER: It's another one of those days when the American people hear what their elected leaders are saying and are wondering, where are the grownups?

Listen to the sparring between President Obama and the House Speaker, John Boehner, over the jobs bill.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), HOUSE SPEAKER: I can't tell you how dangerous our situation our economy is in and how dangerous the situation in Europe is. And yet, the president, some 14 months before the election, throws in the towel and decides he's going to spend all of his time out campaigning. We're legislating, he's campaigning.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And the reason I keep going around the country talking about this jobs bill is because people really need help right now. Our economy really needs a jolt right now. This is not a game. This is not the time for the usual political gridlock.

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BLITZER: Let's bring in our chief political analyst, Gloria Borger. She's here.

Is it fair to say this isn't so much about the jobs bill right now, but all of these politicians getting into campaign 2012 already?

GLORIA BORGER, CNN SR. POLITICAL ANALYST: You think so? I think so.

You know, on with one hand, you have the president pushing a jobs bill that he knows very well has absolutely no chance of passage. You have Republicans pushing a series of measures such as deregulation, which they know the Democrats are never going to buy onto.

Then, today, at this press conference, Wolf, the president bought on to Harry Reid's idea for a surtax on millionaires. If that's going to pass, it's going to be in an alternate universe, because it's not going to pass the United States Congress. So, obviously, everyone is laying down a marker right now.

BLITZER: But the president does -- he keeps saying -- and he certainly said it at the news conference -- and we covered it today -- he keeps saying the Republicans don't have a jobs bill themselves. If they came up with something reasonable, he's open to working with them.

BORGER: Well, what is a bill, Wolf? It's in the eye of beholder. The Republicans I talked to today say that's wrong, we absolutely have a plan. It may not be labeled as "the plan," although House Republicans say it is.

Take a listen to Senate Minority Mitch McConnell and what he had to say about that.

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SEN. MITCH MCCONNELL (R), MINORITY LEADER: Republicans are ready to act right away with Democrats on bipartisan job-creating legislation. On the three trade bills for instance, on regulatory reform, increasing American energy production, and tax reform, all those things would help the economy.

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BORGER: Tax reform is a long-term thing. Regulatory reform, not likely to happen.

What you might do is get some bipartisan trade bills here, but the question is, how much of that is going to create jobs immediately? That's what the public wants to see. They want to see that 9.1 percent rate going down.

BLITZER: So, is it possible that all this political gridlock in Washington is going to backfire against both of these political parties?

BORGER: It could, absolutely. And the problem is for the American public, is that each side sees polls that show them that they have the political advantage. Take a look at this.

The Democrats point to this poll. "Support or raising taxes on people making over a million dollars a year?" They've got 75 percent of the public with them.

And Republicans -- take a look at this poll -- they love it. Six out of 10 people disapprove of the way the president is handling the economy.

Combine that with Barack Obama's 43 percent general approval rating, Republicans say, look, if we continue along this path, we'll do fine. And the Democrats believe they have a winning populist message.

Who suffers? The public, because nothing will get done.

BLITZER: So far, nothing is happening right now.

BORGER: That's right.

BLITZER: All right. Thanks very much, Gloria, for that.

Jack Cafferty is asking, how long can we go on with almost half of Americans living in households that get federal government assistance?

And we're also learning more about the last few month of Steve Jobs' remarkable life.

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BLITZER: Let's check back with Jack for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: How long can we go on with almost half of Americans -- half -- living in households that get government assistance?

Troy in Kennesaw, Georgia, "Not much longer, Jack. A lot of people seem to think that government intervention in every phase of life from the cradle to the grave, if you will, is not a problem, and that the federal government is all the nicer for doing it."

"Unfortunately, there's little thing called the national debt that's steadily increasing each and every day. And we continue to spend money on everyone and everything."

"More wars? No problem. Federal money going overseas? No complaints here. Giving Social Security checks to dead people? Why not? We can always print more money, right?"

Matt on Facebook writes, "We're on a road that will eventually lead us to what Greece is experiencing."

Jeff writes, "It depends on how long and how successfully we can tax those who aren't getting government assistance."

Nick in Mammoth Lakes, California, says, "Why, until we run out of millionaires. No, seriously, jobs, jobs, jobs. I have to believe that people would rather work than get assistance and would rather have a higher-paying job than a lower-paying one. So, if we're going to give them assistance anyway, let's give them a job or put them in school."

David in Tampa writes, "As a punch line from Ron White joke goes, 'All the way to the scene of the crash." I fear things are going to get worse, a lot worse, before they get any better."

"Neither political party has any ideas of what needs to be done to alleviate our problems. America, an age of enlightenment, experiment gone terribly wrong, with no way to fix it. If I had the money, I'd move, except there's no place to move that isn't run by as big a bunch of screw-ups as we have in this country."

And Peg in New York writes, "Not much longer, Jack. Something's got to give, and it better not be the backs of the middle class."

If you want to read more on this topic, you will find it on my blog at CNN.com/caffertyfile or through our post on THE SITUATION ROOM'S Facebook page -- Wolf.

BLITZER: All right, Jack. Thank you.

Now that Steve Jobs has died of cancer, a highly-anticipated biography about the Apple co-founder will be published a month earlier. Jobs' legacy is also the focus of the new issue of "TIME" magazine.

Rick Stengel is managing editor of "TIME," a corporate cousin of CNN.

You actually had a chance to interview, you met with Steve Jobs, Rick. Tell us something about this individual that we might not know.

RICK STENGEL, MANAGING EDITOR, "TIME": Well, Wolf, he's a remarkable guy, and his intelligence is enormous. He has no -- I mean, he would say -- if he didn't like an idea, he would say to me, "Rick, that's stupid," or "That's dumb." He wouldn't say, "No, I don't like that very much."

He had very, very strong opinions about things. And as you saw from Walter's piece in the magazine, you were either a genius or you were an idiot in his book, and you could go back and forth within the same 15-minute time span.

BLITZER: I can't wait to read Walter Isaacson's new book on Steve Jobs. I know he's been working on it for a long time and he's got a great piece in the new issue of "TIME" magazine.

Tell our viewers what Steve Jobs was like in these final months, because Walter, as you know, spent a lot of time with him.

STENGEL: Well, Walter has a very moving passage at the end of Walter's piece that's in the magazine, and he was with Steve on what I assume turned out to be his deathbed. And Walter said to him, "You know, Steve, you're such a private person. You've kept so much to yourself. Why is it that now, in the last year or so, you've unburdened yourself to me?"

And Steve said, "You know, I haven't always been a great father. My children don't really know me the way they should, and I want them to know me through this book."

BLITZER: What happens to Apple now?

STENGEL: It's a good question. I mean, I think he -- one of the things about Steve Jobs is that he's one of the greatest businessmen ever, and certainly of all time.

And, yes, he was a person who was a perfectionist, he had his own vision. But he also cloned himself, in effect, into Apple. So, from Tim Cook to Johnny Ive, the great designer, they all have imbued in them Steve's vision of consumer products, of beauty, of simplicity as the basis of all design. So I think they're well-positioned to continue to innovate.

BLITZER: You had a different cover planned for this week. You guys moved very quickly. Just give us a little bit of the behind the scenes at "TIME" magazine to get a new cover story.

STENGEL: Yes, we closed our issue yesterday evening, probably 5:30, 6:00. And around 7:00, we heard that Steve had died.

And so we hadn't actually gone on press yet, and nobody anymore shouts, "Hold the presses!" but, in effect, that is what we did. And we remade the magazine, remade the cover.

The whole magazine is about Steve Jobs. In addition to Walter's piece, there's a great piece by Lev Grossman about Steve's history, and then Diana Walker, a long-time photographer of ours, who was a very close personal friend of Steve, there's intimate pictures of Steve and his family that people have never seen before.

BLITZER: I think our viewers are going to want to see it.

Rick, thanks very, very much.

STENGEL: Thank you, Wolf.

BLITZER: Apple's Steve Jobs certainly did change the world, and he enabled his fans to honor his memory in some of the oddest ways possible online. We have more on that story coming up.

And for years, Amanda Knox' father defended her. Erin Burnett, by the way, speaks to Amanda's father in our 7:00 p.m. Eastern hour for all of our viewers here in North America.

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BLITZER: Apple fans are saying goodbye to Steve Jobs as only they can, with an online farewell worthy of the king of Cupertino.

Here's CNN's Jeanne Moos.

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JEANNE MOOS, CNN CORRESPONDENT (voice-over): For young Steve Jobs --

JOBS: Look, I'm on television.

MOOS: -- it was his very first TV interview on KGO-TV.

JOBS: You need to tell me where the restroom is, too, because I'm deathly ill, actually, and ready to throw up at any moment.

MOOS: Now deathly ill really has been deathly, and admirers of Steve Jobs are left with the job of honoring him, be it on real apples or with designer Jonathan Mak's profile of Steve Jobs in the bite of the Apple logo, or the Wall Street protester who crossed out the "Steve" but continued to demonstrate for jobs, or the fan with the e-candle on an iPad at an Apple store.

(on camera): From the high-tech candle to the lowest of tech, the Post-It.

(voice-over): Goodbye to the last genius on Earth. So what if "genius" was spelled wrong. There's no spell check on "Post-Its."

A guy by the name of Mike Madis (ph), who once worked at Apple, posted photos of Steve Jobs making funny faces on a photo software app, even sticking out his tongue. Remind you of anyone, Einstein? At the latest iPhone introduction the day before Jobs died, his seat was left empty. And the morning of his death, this rainbow was snapped above Apple headquarters by a product design contractor.

Comedy shows made fun of all his iProducts.

UNIDENTIFIED MALE: I give you the iRaq.

MOOS: Laugh at the iRaq, but admire the iPod. iPod shuffles were left on a flower at an Apple store.

(on camera): Just before Steve Jobs' death became public, Sarah Palin announced that she would not run for president, while some even gave jobs credit for the timing of his death.

(voice-over): "In his final act of benevolent genius, Steve Jobs overshadowed Sarah Palin," tweeted a Palin critic.

While some are honored with an eternal flame, what's the equivalent for a cyber visionary. At the XKCD blog, this is the eternal flame for Steve Jobs, the spinning wheel that means you wait.

At an Apple store in New York City, even the apples had fruit flies paying their respects.

Jeanne Moos --

UNIDENTIFIED MALE: The iRaq!

MOOS: CNN --

JOBS: God.

MOOS: -- New York.

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BLITZER: A great man indeed.

All right. Thanks very much for watching.

I'm Wolf Blitzer in THE SITUATION ROOM.

The news continues next on CNN.