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CNN Newsnight Aaron Brown

Arrest of Prime Suspect in Daniel Pearl Case; Ken Lay Invokes Fifth Amendment

Aired February 12, 2002 - 22:00   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
AARON BROWN, CNN ANCHOR: Good evening again. I'm Aaron Brown. We are in Washington again tonight and if things seem a bit harried, there is a reason. We just finished an interview and I do mean just finished an interview with the president over at Blair House.

This is what we call in the business a "crash." Everyone involved, two producers and editors working around the corner trying to get the interview on the air tonight.

President Musharraf's story is an interesting one. "TIME" magazine wrote that he has the toughest job in the world. Maybe so. He put his country on the U.S. side in the early days after September 11 amid much concern that his country men and women might not be so eager to be associated with United States and with a war on neighboring Afghanistan.

But the president, a former general who took office in a coup, has not wavered. He is in Washington tonight to meet with President Bush, and while it is a wee bit crass to put it this way, he is looking for something in return for his support: Economic and military help, and will likely get something before he leaves the country.

But to leave it at that doesn't do justice to President Musharraf, or to history. He took a bold step. It has certainly made a difference in the war effort, made it safer for Americans to wage that war, made it safer, and for that alone he deserves thanks. The interview, if those producers get cracking, comes up a little later in the program.

Before that, a lot to cover tonight, starting with the whip around the latest, the latest on the terror alert put out about 25 hours ago now. Deborah Feyerick is here in Washington. Deborah, headline please.

DEBORAH FEYERICK, CNN CORRESPONDENT: Aaron, the FBI has the date today, February 12 or soon after, but where and what kind of attack could it be. The day's winding down, did the FBI's warning pay off putting suspects on the run? Aaron.

BROWN: Back with you, Deborah, shortly. We assume that one of the things that will come up when the president and President Musharraf meet is the case of the missing journalist Danny Pearl. Ben Wedeman has been working that story from the beginning in Karachi. Ben, the headline from you tonight.

BEN WEDEMAN, CNN CORRESPONDENT: Yes, Aaron, the Pakistani police have arrested a key suspect in the kidnapping of "Wall Street Journal" reporter Daniel Pearl. They are now hoping that with the key suspect in their hands and in Karachi, they may be soon be able to win the release of the kidnapped American journalist -- Aaron.

BROWN: Ben, thank you. Next to the Hague in the Netherlands, the start of the war crimes trial against the former Serb leader Slobodan Milosevic. Christiane Amanpour is there -- Christiane, a headline please.

CHRISTIANE AMANPOUR, CNN CORRESPONDENT: Well, the 1990s saw the worst bloodshed in Europe since World War II and now the man that this tribunal holds responsible for masterminding that bloodshed is on trial in the most important war crimes trial since Neuremburg.

BROWN: Christiane, thank you very much and we end the whip in Washington on Capitol Hill. Jonathan Karl covered Ken Lay's appearance today before a Senate panel today. Jon, the headline please.

JONATHAN KARL, CNN CORRESPONDENT: Well, Aaron, a subpoena meant that Ken Lay had no choice but to show up here on Capitol Hill. And once here he did more than just take the Fifth Amendment. He also for the first time briefly addressed what the collapse of his company has done to the lives of his former employees.

BROWN: Jon, thank you. Back to you, all of you in a moment. A lot of other things on the menu tonight

The latest on the Cleveland stock broker story. We'll meet one man who says Frank Gruttadauria stole millions of dollars from him. An interesting story too about something we haven't talked much about in a while: Anthrax, and how the post office is protecting against it.

Strange things are happening to some of the mail. Guess that's not such a surprise when you irradiate something. CNN's Jeanne Meserve a little bit later. And we'll look at the first big controversy since the those Winter Olympic games began. Yes, the pairs figure skating, who deserved the gold. We're delighted you are not watching but we try and keep you up to date or at least 24 hours later anyway.

All of that coming up. But we begin with the serious business of terrorism and the latest terror alert that was put out about this time last night. This is one of those odd stories where, at least part of you is happy that there is nothing to report, there were no terrorist attacks today, but things happened. We got confirmation of what pushed the U.S. to issuing the warning in the first place, threads of information stretching from Guantanamo all the way to Afghanistan. The details now from CNN's Deborah Feyerick.

(BEGIN VIDEOTAPE)

FEYERICK (voice-over): Another warning and another threat. JOHN ASHCROFT, ATTORNEY GENERAL: I warrant to encourage all law enforcement officials and frankly all Americans everywhere to be on the highest state-of-alert in regard to these individuals.

FEYERICK: This time, names and a date -- sometime around February 12. The FBI thinking an attack could take place in the United States, or against U.S. interests in Yemen.

TOM RIDGE, HOMELAND SECURITY DIRECTOR: The fact that there is a date February 12, isn't as important as the notion that the terrorists will act when they think the time is right for them to act.

FEYERICK: On the FBI Web site, 13 pictures, a list of 17 men agents want to find. At the top of the list, the alleged point man Fawaz Yahya al-Rabeei (ph) . Al-Rabeei has more than a dozen known aliases. Most, different spellings or variations of his name.

One that stands-out, Furqan the Chechen. Al-Rabeei is about 22 years old. The FBI believes he's a Yemeni national, born in Saudi Arabia. Saudi Arabia is the country where 15 of the 19 suspected September hijackers came from. The attorney general says al-Rabeei may have ties to the al Qaeda terror network. Officials say American forces are holding one of al Rabeei's brothers in custody in Afghanistan.

The FBI wants to find some of al-Rabeei's friends who could be involved in the possible attack. What do they share in common? they're between 24 and 34 years old. Almost all are from Yemen, with several born in Saudi Arabia. The FBI warns the men are considered extremely dangerous.

UNIDENTIFIED MALE: Getting these names out, identifying individuals gives us a better chance of trying to interrupt some of these potential terrorist actions.

(END VIDEOTAPE)

FEYERICK: And where did the names come from? Well Guantanamo Bay, Cuba, a detainee in U.S. custody there told investigators about the plot. They followed up with another man being held in Afghanistan who pointed to al Rabeei. And there is certainly a sigh of relief. Tonight seems to be ending quietly. The president's spokesman saying the country is much safer because those pictures are now out at airports, train and bus stations. And even the threat details were vague, the homeland security director says the best defense is to get them first thereby stopping a potential attack -- Aaron.

BROWN: Do we know if the people are in the country?

FEYERICK: No idea. As a matter of fact, they don't know if this guy al Rabeei is alive or dead. His passport doesn't seem to have registered on any official lists. But he may have entered using an alias, so no clue as to where he is or where his friends are.

BROWN: And one of the problems in these interrogations the detainees is that we don't know if they are actually telling the truth.

FEYERICK: We don't. Essentially they could be telling investigators or interrogators anything they want, so therefore maybe the interrogators will cut them a sweeter deal than they would if they had no information to offer up. It happens all the time.

BROWN: Deborah Feyerick thank you very much on the terror alert.

A quick update on a story we brought you last night. It's about a man held in Britain, who the U.S. believes was a key player in the September 11 plot. A British judge today granted bail to Lot-fi Raissi (ph) . That after U.S. officials said they wouldn't try to extradite him on terrorism charges, but on lesser charges instead. Raissi was freed. He did have to give up his passport. Was told not to leave the country.

It has been nearly three weeks now since Daniel Pearl of the "Wall Street Journal" disappeared while working a story in Karachi, Pakistan. As I said, I sat down with Pakistan's president just a while ago and here is a bit of what President Musharraf had to say about developments in the case.

(BEGIN VIDEOTAPE)

PERVEZ MUSHARRAF, PRESIDENT OF PAKISTAN: The investigation is proceding very well, I would say. We are closing in on his captors and I think there is hope. We have closed in on the prime suspects on the people who have been issuing the e-mails and the photographs. Therefore we think the possibility of success is there.

BROWN: Do you, sir, feel any -- do you feel more optimistic than you did several days ago or less optimistic, that he will be found alive?

MUSHARRAF: More optimistic, certainly, because we are closing in. We have got all the key suspects, and the only people left are those who really have him.

(END VIDEOTAPE)

BROWN: President Musharraf on the Daniel Pearl investigation. Our interview covered a lot of territory. We will get to that later. We don't want to leave the Pearl case just yet because there were major developments today after an awful lot of silence it seemed.

Ben Wedeman has been covering the story for us. We go back to Karachi. Ben, good evening to you.

WEDEMAN: Good evening. Pakistani police are have arrested the man they describe as the ringleader in the kidnapping of "Wall Street Journal" reporter Daniel Pearl and that man as been brought to Karachi. On mid-Tuesday the Pakistani police arrested British born and educated Ahmed Omar Sheikh Saeed, more commonly known as Sheikh Omar Saeed in the northeastern Pakistani city of Lahore. The police say in fact that he surrendered without a struggle and he was found in a house with his wife and young child. The Pakistanis have been describing Mr. Sayeed as the ring leader in the kidnapping, and of course, Mr. Sayeed was the focus of an intense nationwide manhunt. According to senior police sources, the 28-year-old Islamic militant in the course of preliminary interrogations, said that Mr. Pearl is alive and is in Karachi but despite this early revelation, the senior police officer here in Karachi said that Sheikh Omar Sayeed could be a tough nut to crack.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: My own professional assessment is that he is not an ordinary person. I am referring to Sheikh Omar, he is not an ordinary person. He is the one who -- who is highly educated, and he is the one who is, I would feel maybe a hard nut to crack. So, I don't think it will be very easy to break him straightaway. It will take time, I feel, to -- before we can get all the details about Daniel from his interrogation.

(END VIDEO CLIP)

WEDEMAN: Now, in the hours after Sayeed's arrest, Karachi police apparently carried out a series of raids in and around the city. Just to give you a bit of background on Sheikh Omar Sayeed, he is no stranger to kidnapping.

In 1994 he was arrested in India for involvement in the abduction of British and American tourists there. He spent five years in Indian prisons but was released as part of a deal to end the hijacking of an Indian Airlines flight diverted to Kandahar, Afghanistan.

Now, also according to intelligence sources, Mr. Sayeed does have close contacts with Osama bin Laden's al Qaeda network. Apparently he wired funds to two of the hijackers involved in the September 11 attacks on the United States -- Aaron.

BROWN: Ben, thank you for the update. Ben Wedeman in Karachi, where the story has played out for three weeks now.

With all the focus on the war against terror in Afghanistan it's easy to forget that there are still U.S. troops on the ground tonight trying to keep the peace in the Balkans, where war has occupied most of the last decade. While the search goes on for Osama bin Laden goes on, the main antagonist of the Balkan War, Slobodan Milosevic sits in a jail in the Netherlands. Today Milosevic went on trial there for war crimes. CNN's Christiane Amanpour now joins us with more -- Christiane.

AMANPOUR: Well, Aaron, most observers say this is the most important war crimes trial since the Nazis were prosecuted after World War II. This tribunal was set up mostly by U.S. help nearly ten years ago precisely for this moment: To bring to justice the masterminds of those Balkan Wars. Many skeptics never thought they would see this day, never thought they would see the key architects, those alleged to the be the key architects brought here to justice. But today they were proved wrong and now, a historic encounter is under way in the tribunals courtroom just behind me. (BEGIN VIDEOTAPE)

(voice-over): Not since Nuremberg have such a collection of grave crimes been tried in Europe, but it was with little flourish that the chief prosecutor opened the most important case this Yugoslav tribunal will ever conduct.

UNIDENTIFIED FEMALE: The chamber will now begin the trial of this man for the wrongs he is said to have done to the people of his own country and to his neighbors.

AMANPOUR: This man is Slobodan Milosevic, former president of Yugoslavia. The wrongs include 66 charges of crimes against humanity and genocide, of violating the Geneva Conventions and the laws and customs of war. And lest anyone forget, Del Ponte reminded the courtroom just what happened in Croatia, Bosnia and Kosovo during one entire blood-soaked decade.

UNIDENTIFIED FEMALE: The events themselves were notorious. And a new term, ethnic cleansing, came into common use in our language. Some of the incidents revealed an almost medieval savagery and a calculated cruelty that went far beyond the bounds of legitimate warfare.

UNIDENTIFIED MALE: Thousands died in the conflict in Croatia.

AMANPOUR: Her colleague, Geoffrey Nice, who will actually prosecute this case, used videotape documents and told individual stories of victims of Yugoslav and Serbian forces. In one case, in eastern Bosnia, a young woman fleeing with her baby to what she thought was safety. Instead...

UNIDENTIFIED MALE: They were burned alive and the baby's screams were heard for some two hours before it too succumbed. That is one crime to represent the thousands killed in the Bosnia conflict.

AMANPOUR: During an hour of excruciating detail, probably the first time Milosevic has ever had to listen to stories like these, for the first time, he looked uncomfortable.

Milosevic continues to reject the tribunal's jurisdiction, claiming the trial is a politically motivated conspiracy against him and all the Serbian people.

UNIDENTIFIED MALE: This is a trial not only about him, but about Serbian people, Serbian policy for the last 12 years.

AMANPOUR: But in court, Del Ponte roundly refuted that notion, insisting that she is not putting the Serbian people on trial, only their former leader.

The prosecution plans to prove that Milosevic had responsibility for the crimes committed while he was at helm of Yugoslavia's political, military and financial institutions. As well as scores of victims, they say high-level insider witnesses have agreed to testify against him. (END VIDEOTAPE)

For his part Milosevic is expect to portray himself as a victim defending his Serbian people against what he called terrorists, the separatists, he said, who were trying to destroy Yugoslavia.

We haven't yet heard from Milosevic, but we are likely to either today or tomorrow, once the prosecution as finished its opening statements -- Aaron.

BROWN: Christiane, Neuremburg was really a trial for history. Everyone knew what the outcome was going to be. Is the outcome here as certain?

AMANPOUR: Not certain, but when constantly pressed, the prosecutor insists that she does have the goods. She says she has documentary as well as taped evidence. She says that she has the witnesses, not just the victims of the crimes with which Milosevic is alleged to have committed, but also insider witnesses, high-level witnesses.

However, it is true these are exceptionally difficult crimes to prove, particularly that most serious crime under international law, genocide. She does feel the Kosovo indictment will be easier to prove because the evidence is newer and fresher and more abundant and the others may take more time, but she's confident.

BROWN: Christiane, thank you. Christiane Amanpour from the Milosevic trial. Coming up on NEWSNIGHT, Ken Lay, as I'm sure you have heard, takes the Fifth Amendment. You may not have heard the beating he took at the hands of legislators before that. From Washington, D.C. Tonight, this is NEWSNIGHT.

(COMMERCIAL BREAK)

BROWN: Well, it's fair to say it was quite a scene before the Senate Commerce Committee today, but not much of a surprise. Legislators have been sharpening their knives, or their tongues, for more than a week, waiting to confront former chairman of Enron, Ken Lay.

His attorney said today said, quote: "He -- Mr. Lay -- agonized, he truly did, over his decision to take the Fifth." We can't imagine what it might have been like just to sit there in silence while getting this fierce verbal assault Mr. Lay ran into today. Again, we're joined by congressional correspondent Jonathan Karl. Jonathan, quite a moment.

KARL: Quite a moment. And before actually taking the Fifth, Aaron, Ken Lay gave the Senate inquisitors something of a lesson on constitutional law. Quoting from a recent Supreme Court case, he said that one of the primary functions of the Fifth Amendment is to protect innocent men.

(BEGIN VIDEOTAPE) UNIDENTIFIED MALE: Do you swear that the testimony you give to this committee will be the truth, the whole truth, and nothing but the truth, so help you God?

KEN LAY, FORMER CHAIRMAN & CEO, ENRON: I do.

KARL (voice-over): As predicted, Ken Lay took the Fifth, but he said his silence does not mean he has anything to hide.

LAY: Mr. Chairman, I come here today with the profound sadness about what has happened to Enron, its current and former employees, retirees, shareholders and other stakeholders. I've also wanted to respond to the best of my knowledge and recollection to the questions you and your colleagues have about the collapse of Enron. I have, however, been instructed by my counsel not to testify.

KARL: But before leaving the hearing, Mr. Lay had to sit quietly while senator after senator berated him.

SEN. BARBARA BOXER (D), CALIFORNIA: Mr. Lay, I know you're not going to talk to the committee. You have a right not to. But I have a chance to talk to you, so that's what I'm going to do is talk to you.

SEN. PETER FITZGERALD (R), ILLINOIS: I'd say your were a carnival barker, except that wouldn't be fair to carnival barkers. A carney will at least tell you up front that he is running a shell game.

SEN. JOHN ENSIGN (R), NEVADA: It is, I think, deplorable, one, that either you didn't know what was going on, or two, that if you did know what was going on, how did you think that you could get away with it?

KARL: Mr. Lay sat stone-faced, his hands on his knees, making eye contact with each speaker as the committee took him to task. While Lay took a pass on testifying, an internal Enron document obtained by CNN suggests that Lay approved of at least one deal with one of the off the books partnerships blamed for Enron's demise. Lay has professed ignorance of the company's questionable accounting.

JEFFREY SKILLING, FORMER ENRON CEO: Enron Corporation was an enormous corporation.

KARL: There was also more fallout from last week's testimony from the former Enron CEO who didn't take the Fifth. Jeffrey Skilling's lawyer fired off an angry letter to the House committee he testified before, saying he was disappointed by the -- quote -- "baseless suggestions made by several congressmen who have implied Skilling committed perjury." The letter notes that Skilling is alone among senior Enron officials in answering Congress's questions.

(END VIDEOTAPE)

KARL (on camera): And late today, there was news that Sherron Watkins is on her way to Capitol Hill. Watkins is the Enron whistle blower that warned about the company's accounting practices way back in August of last year, many months before those practices became public. She will be testifying on Valentine's Day, Thursday, before the House Commerce Committee.

As for Ken Lay, you may have heard the last from him for a long time, but you are going to see him again this week because yet another House committee wants to bring him before the cameras. The world already knows, Aaron, that he is going to take the Fifth Amendment. The world already knows, they have already seen him take the Fifth Amendment, but they want him to do it again before the cameras on their side of the Capitol over there in the House.

BROWN: It's kind of a odd form of political theater, where everybody knows what is going to happen, but the drama has to play out anyway. Where is this going? Is it going anywhere in Congress? There's obviously a lot of criminal investigations going on.

KARL: Well, you know, they are hindered by the fact that so many people have taken the Fifth. You now have six central players in this drama who are not talking to Congress. But, Aaron, they are getting lots of documents up here. The committee that Lay was before has 41 boxes of documents they're going through. They're following the paper trail. They're going through everything. This thing is going to be dragging on for some months.

BROWN: Jon, thank you. Jonathan Karl on the Hill tonight and Enron.

Coming up on NEWSNIGHT, a lifetime of savings gone and you can't blame this one on Ken Lay or Enron. This is NEWSNIGHT from Washington.

(COMMERCIAL BREAK)

BROWN: A story now about someone who lost nearly all his savings, not an Enron story, this. It has to with that high-profile stockbroker in Cleveland. Frank Gruttadauria turned himself in over the weekend after he disappeared. His clients' money vanished as well, perhaps in the hundreds of millions of dollars, it disappeared.

Brian Cabell today met a man who says Gruttadauria stole from him hand over fist. This is the kind of story that makes you want to invest your money under a mattress.

(BEGIN VIDEOTAPE)

BRIAN CABELL, CNN CORRESPONDENT (voice-over): Bob Fazio, here on our left, has witnessed a remarkable disappearing act at over the last month or so. What his family thought was an $18 million stock and bond portfolio, that's what their fake account statement said, is actually worth only about $40,000. Only Fazio's stockbroker, Frank Gruttadauria, now in federal custody, knows what happened to the money.

UNIDENTIFIED MALE: You can tell that these are the phony statements, because they went to the... (CROSSTALK)

CABELL: Fazio, a real estate developer, first went to Gruttadauria, a family friend, in 1989.

BOB FAZIO, INVESTOR: I was not very astute when it comes to the stock market, especially at that time. And I just said, you know, just do a good job.

CABELL: It looked like a good job, investments in AOL, General Electric and Pfizer, among others. Returns were good, 15 percent a year or so, according to the fake statements. And Gruttadauria never pushed him. He was a family friend.

FAZIO: At the holidays, I would call or stop by his house. You know, our families would have dinner on occasion. You know, I would say that at one point, I would have, even until the other day, I would have considered him to -- if something happened to me, to watch after my family. It was that type of relationship.

CABELL: Fazio's 85-year-old father, Carl, who talked to Gruttadauria five days a week about his account, is especially hard hit. His retirement money is gone.

FAZIO: This man has hardly any income. And someone to be successful his whole life and then end up devastated at his age is just -- and the system, you know, I'm afraid, isn't going to be fast enough to have him enjoy his life.

CABELL: By "the system," he means Lehman Brothers, where Gruttadauria last worked. The Securities and Exchange Commission, which regulates brokerages, and the court system.

(on camera): Fazio family recently met with Lehman representatives about the apparent scam. A Lehman official told us the company will try to "make good" on the investors' losses, but exactly what "make good" means is uncertain at this time.

(voice-over): Fazio's attorney, Byron Krantz, thinks he knows precisely what Lehman Brothers must do.

BYRON KRANTZ, FAZIO FAMILY ATTORNEY: They have to stand up and say, We've made a mistake, we had a rogue broker. Our rogue broker hurt people. And we are going to stand up and be counted, and we are going to compensate the people to the amount of their damage.

CABELL: In other words, he says, make the Fazios' money reappear, turn their $40,000 portfolio back into $18 million.

Brian Cabell, CNN, Cleveland.

(END VIDEOTAPE)

BROWN: Coming up next on NEWSNIGHT, our talk with Pakistan's president ahead of his meeting with President Bush.

This is NEWSNIGHT on CNN.

(COMMERCIAL BREAK)

BROWN: It is one of the great ironies that then-candidate Bush early in the presidential campaign did not know the name of the president of Pakistan. It tells you an awful lot about where the United States' relationship was with Pakistan before the 11th of September.

The United States cared about Pakistan during the cold war, at least as part of a strategy, not because of any real affection for Pakistan, its government, or its people.

Since September 11th, Pakistan has been as important as any country to the president. Getting that country's government to allow U.S. planes to use Pakistani airplanes -- air space, rather, made fighting the war easier and safer.

But there are still old wounds in Pakistan about how the United States cut and run -- or ran -- after the cold war ended. And President Musharraf and I talked about that tonight.

Is there a feeling among people in Pakistan, in the government, in the military that when the cold war ended, the United States essentially abandoned Pakistan?

GEN. PERVEZ MUSHARRAF, PRESIDENT OF PAKISTAN: Well, I think, yes. Yes, there was, there is, in the people of Pakistan. They did feel a sense of abandonment because after the cold war, really with the United States disengagement from Afghanistan and also from Pakistan, we were left alone to fend for the over 3 million refugees which came into Pakistan, and also the fratricide and all the infighting within Afghanistan made an impact on us, fallout on Pakistan.

We were alone facing all this. So therefore, the sense of abandonment suffered by the people of Pakistan.

BROWN: And that feeling still exists? Is there still resentment today?

MUSHARRAF: To an extent, yes.

BROWN: And what does it take to overcome that resentment? What does the American government have to do to overcome that feeling?

MUSHARRAF: Well, I think it will take a little bit of time, and action on ground. Whatever is happening, I think we are moving on the correct lines, where people see that this relationship has a permanence, that the assistance the United States is giving to us, the support that the United States is giving to us in all areas, are visible to the people of Pakistan. And they've seen the support we got, for example, in the economic restructuring that we got through the Paris Club and the PRG (UNINTELLIGIBLE) that we got, which has been appreciated, certainly.

Now more acts of cooperation and support to Pakistan will keep changing the attitudes gradually.

BROWN: One question about the decision immediately after September 11. At what -- was there a point very soon after when you realized, before anyone asked anything of you, but when you realized that you were going to have to make a very difficult decision? And did you know then what the decision would be?

MUSHARRAF: Well, basic decision was to be a part of the coalition to fight terrorism. Now, this, Pakistan itself has been a victim of terrorism. So this was not such a big decision to be a part of the coalition to fight terrorism. Maybe the most difficult -- more difficult part was subsequently, when we entered into operations in Afghanistan.

BROWN: And whether you would get support in the country for that?

MUSHARRAF: Yes, we did take a stand on that. We took a decision to allow use of our air space and give logistic support and cooperate on intelligence and information exchanges. That was a decision which was more difficult. But I think the whole majority of Pakistanis did understand.

BROWN: You said today, and I know you've said this before, you laid out four steps that you think must happen for there to be any sort of lasting peace in Kashmir and any sort of lasting peace between you and the Indian government. What role do the Americans play in that?

MUSHARRAF: What role can they play?

BROWN: Yes.

MUSHARRAF: Well, I think they can play a very important role. I think I personally feel the United States is the only country which can play a role in this. And it's very important, because I personally feel this kind of escalation that happened now, the tension and the move of the forces to the borders by Indians, followed by us, can happen any time.

And when we talk of Kashmir, I think we've seen that bilateralism between India and Pakistan has failed miserably. They don't talk to us. And at the same time, when we go around into different countries or the United Nations, they say, You are violating the SIMLA (ph) Accord, which says that we have to solve problems bilaterally.

So I think this is a gimmick. I think this word "bilateralism" is being misused. I am for mediation or some facilitation. And the country which can do it is the United States.

BROWN: And the only country, in your mind, that can do it, is the United States?

MUSHARRAF: I think so. I think at the moment the only country, I can safely say that. BROWN: And do you believe, as we sit here tonight, the American government agrees with that, that it needs to play a more active role in trying to solve this terribly dangerous moment between two nuclear powers?

MUSHARRAF: Yes, the dangerous moment, of course, is the tension and escalation and confrontation at the moment.

BROWN: Yes.

MUSHARRAF: So the immediate action required is deescalation and reduction in tension. But the longer-term action required is the initiation of a process of dialogue on Kashmir and all other issues, and moving forward on the Kashmir dispute.

BROWN: Do you think that there'll come a day in your lifetime when you won't be worried about that?

MUSHARRAF: Well, I am an optimist. I think that's very much a possibility, especially if the United States gets involved.

BROWN: Is this a particularly dangerous moment, or has the most dangerous moment of this current conflict passed? Has -- have the two sides stepped back a bit?

MUSHARRAF: No. I think the seeds of danger exist very much. They remain unchanged, because the capability of initiating any adventurism exists. Once the capability exists, the intentions can change overnight.

BROWN: I know there's a view among many people around the world that Americans don't necessarily understand much beyond their own borders. For Americans watching, why should they care about Kashmir and why should they care about any of this?

MUSHARRAF: I think it's a serious issue. The two countries are nuclear powers, India and Pakistan. And then there is strategic issues, geostrategic issues in the South Asian region. The Gulf (UNINTELLIGIBLE). Pakistan is in a region where -- which is extremely turbulent, I would say, Central Asia in the north, and the Gulf, in its present form, Iran (UNINTELLIGIBLE), these are region -- this is a region where everyone's eyes are focused at it.

BROWN: The person who drove me over here, sir, is Pakistani, and he said about you, you're the first leader of his country that he's been proud of in his life. And I thought, what a great compliment that is.

MUSHARRAF: I'm honored.

BROWN: Thought I'd pass that along to you.

MUSHARRAF: I am honored, I'm flattered.

BROWN: It's nice to meet you. Thank you for your time.

MUSHARRAF: Thank you very much.

BROWN: Thank you.

The president of Pakistan. Perhaps you don't need to be reminded, but this is a nuclear power, as is India, which is reason enough for all of us to care.

Coming up on NEWSNIGHT, the first Olympic outrage of these Olympic Games. Who didn't get the gold last night? We'll take a look when we come back.

(COMMERCIAL BREAK)

BROWN: Try though we might to avoid this stuff, we just can't. Two papers summed up the mood in Canada today with the same one-word headline: "Robbed."

In case you haven't guessed, we're talking about -- and I think you have, haven't you? -- we're talking about the decision to give the Russian figure skating pair the gold medal last night. They stumbled a bit, the Canadian pair did not. A reader from another Canadian paper had this suggestion. Quote, "Canada should hire Tonya Harding to talk to the judges who cheated Jamie Sale and David Pelletier."

International Skating Union is looking into this decision. So are we, so to speak. Tonight we'll talk with Steve Tustin, who's the sports editor at "The Toronto Star," and in Salt Lake City, Brian Cazeneuve, who covers the Olympics year round for "Sports Illustrated."

Nice to talk to both of you.

Steve, let me start here. Was there any other story that mattered in Canada today?

STEVE TUSTIN, SPORTS EDITOR, "THE TORONTO STAR": Absolutely not, Aaron, this is anybody's talking about, right from last night after it was all over. And this morning, when I came to work this morning, I was riding up in the elevator, that's all people were talking about. There was actually a woman who was crying because she was so upset, believe it or not.

It's a very -- it's an issue that's made everybody angry, and not confused, certainly, but angry and bitter, I think, about what happened.

BROWN: Was there a buildup to it, or was it just the event and the way it was handled last night that seemed to cause all this emotional reaction?

TUSTIN: I think the buildup was the fact that, you know, Jamie Sale and David Pelletier are the world champions. They'd won nine international competitions in a row, were favored to win, and of course people were rooting for them. They went in last night, were second going into the final night of the skate, and then skated what everybody thought was a brilliant skate, flawless, and everybody assumed they were going to win. And I think people were just -- were shocked that they didn't win.

BROWN: Brian, I think you -- did you see the performances last night? Were you watching last night?

BRIAN CAZENEUVE, COLUMNIST, "SPORTS ILLUSTRATED," "OLYMPIC DAILY": Yes, I was there.

BROWN: And was there any doubt...

CAZENEUVE: It was a...

BROWN: Go ahead.

CAZENEUVE: Go ahead.

BROWN: I was going to say, was there any doubt...

CAZENEUVE: But it was a very, very difficult decision that they -- the judges reached last year when they awarded the gold medal to the Canadians on Canadian soil. I think this time around, it was -- it appeared to be a much easier decision, because the Canadians skated a very clean program. The Russians had several bobbles. And in the end, it looked as if clearly Sale and Pelletier were going to walk off with the gold medal.

Ferezhnya (ph) and Sakaralidze (ph) did not have their best performance. They had bobbles, they had some artistic gaffes. And it looked like a silver medal performance. And I think there was shock in the audience when the decision was reached. Unfortunately for the Russian pair, they received only a smattering of applause when they went out to get their medals, and the Canadians received a rousing ovation.

BROWN: Yes. Well, it's certainly not the Russian skaters' fault.

Is it interesting to look at how the judging broke down, which judges ended up in which camp? Brian?

CAZENEUVE: Well, sometimes people -- people like to bring out conspiracy theories. I'm not one of those. I think the judging was five to four, so it was very close. There were suggestions that a French judge who voted for the Russians might have done so because there's a French ice dance team that performs later in the competition with a good chance to win a gold medal.

I don't necessarily think that's the case. There are a lot of judges who have not so much a nationalistic bias but an aesthetic bias towards classical programs, which the Europeans and particularly the Russians are famous for. They've won 11 straight Olympics in pairs skating. And a lot of people will look at a Russian pair and another pair that has perhaps a jazzier, livelier number and say, You know what? We know the Russians are supposed to be better.

And so perhaps that might enter their thinking. I don't think that you can look at national biases when you want to try to create conspiracy theories.

BROWN: That's a really interesting answer. Steve, let me give you the last, the last word here. It does seem to me that in every Olympics I can remember, there is a moment like this. I think it was Seoul where a Korean fighter won a very controversial decision.

TUSTIN: Yes.

BROWN: Some of this stuff is inherently subjective, and some of the reaction is inherently nationalistic. Do you think this passes in a day or so, or will this linger and hurt for a while?

TUSTIN: Oh, I think this is going to linger and hurt for a while, because figure skating's very, very popular here, and I think that there's been suspicions building about judges, particularly in the ice dancing, which, of course, is rife with questionable decisions and some nationalistic judging. And I think, yes, this is going to hurt people here for a long time, definitely.

BROWN: Do you have a copy of the paper...

TUSTIN: I do.

BROWN: ... today's or tomorrow's?

TUSTIN: I do, I have a copy of the paper today. There's the sports section and the front page. And I will say, just to give you the indication, Aaron, of just how widespread this is here, there's a Crosby, Stills, and Nash and Young concert here tonight. And at the concert, Steven Stills held up a sign that said, "Jamie and David, you was robbed." So there you go.

BROWN: Well, there you go too. Thanks for joining us tonight, it's nice to talk about this stuff, it's only sport.

I'm sure they're not agreeing with that in Canada, but such is so.

Ahead on Segment Seven tonight, anthrax revisited, a story more strange than scary. We'll be right back.

(COMMERCIAL BREAK)

BROWN: Last time I said the word "anthrax" on this program was the third of January. We keep track of this. It turned out to be a hoax. Anthrax hasn't made anyone sick since fall.

But the post office isn't taking any chances. They're irradiating some mail in the Washington area, and people are getting a very different surprise when they open it up.

Segment Seven tonight from Jeanne Meserve.

(BEGIN VIDEOTAPE)

JEANNE MESERVE, CNN CORRESPONDENT (voice-over): A white pearl turns gray when subjected to irradiation like that now used on some U.S. mail. A blue sapphire after irradiation is orange.

GENE DEL POLITO, ASSOCIATION FOR POSTAL COMMERCE: Irradiation most definitely is not the answer to our problems.

MESERVE: The bombardment of mail with electron beams was begun after the anthrax attacks on selected mail to Washington ZIP codes which include Capitol Hill, the White House, federal agencies, and a small number of homes.

It kills anthrax spores, but it turns out that irradiation and the heat it generates does a lot more than that.

At the National Archives, where they restore old documents, like this original of the Monroe Doctrine, new publications are arriving prematurely aged.

UNIDENTIFIED WOMAN: And it's very brittle. And if we were to flick the -- turn this, we'd probably see it break off again, which it just now did.

MESERVE: At the Smithsonian Libraries, a collection of damaged items.

UNIDENTIFIED WOMAN: I don't like to open it very often because it smells horrible.

MESERVE: This is, or was, a photograph in a plastic sleeve. This is a floppy disk.

UNIDENTIFIED WOMAN: OK, maybe there is still data on this disk. But there's no way to get it out.

MESERVE: Journals arrived with pages fused together, CDs were warped. So the Smithsonian, concerned about its collections, took action.

ELIZA GILLIGAN, SMITHSONIAN INSTITUTION: We decided that we would go around the Postal Service and secure postals post box in a non government ZIP code.

MESERVE: A report by a manufacturer of irradiation equipment lists other potential problems. It's likely many pharmaceuticals will show a reduction in their efficacy and/or stability, and irradiation will expose unprocessed photographic film.

And then there are the health complaints of people handling irradiated mail -- one of them, a member of Congress.

REP. BILLY TAUZIN (R), LOUISIANA: And whether it was a coincident or not, I had an awful night. I mean, awful headaches, and really strange feelings.

DEBORAH WILLHITE, SENIOR VICE PRESIDENT, U.S. POSTAL SERVICE: I, you know, put my head down in it, I've handled it with my hands, I...

MESERVE: Deborah Willhite says she has not gotten ill. WILLHITE: So far there's been no medical or scientific evidence found that irradiated mail contains anything toxic that would make anyone feel sick.

MESERVE (on camera): The Postal Service says wider use of irradiation is still its plan, though no additional anthrax letters have been found.

DEL POLITO: The Postal Service has a very, very hard time of saying, We overreacted, or, It was not necessary. And that's really the dilemma that they're in.

MESERVE (voice-over): Indeed, as evidence of problems has mounted, the timetable for deploying irradiation equipment has slipped, and some experts now believe it will never happen.

Jeanne Meserve, CNN, Washington.

(END VIDEOTAPE)

BROWN: That's all. We'll see you tomorrow. Good night.

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